10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2001

OR

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-11303

SYNBIOTICS CORPORATION

(Exact name of registrant as specified in its charter)

California	95-3737816
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

11011 Via Frontera
San Diego, California	92127
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (858) 451-3771

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   x    No  ¨

        As of August 3, 2001, 9,610,979 shares of Common Stock were outstanding.

SYNBIOTICS CORPORATION

INDEX

		Page
Part I
Item 1.	Financial Statements:
	Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)— Three and six months ended June 30, 2001 and 2000	1
	Condensed Consolidated Balance Sheet—June 30, 2001 and December 31, 2000	2
	Condensed Consolidated Statement of Cash Flows—Six months ended June 30, 2001      and 2000	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Part II
Item 1.	Legal Proceedings	16
Item 2.	Changes in Securities	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
Item 5.	Other Information	16
Item 6.	Exhibits and Reports on Form 8-K	16

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements

SYNBIOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
	2001		2000		2001		2000
Revenues:
Net sales	$7,195,000		$8,562,000		$15,157,000		$17,735,000
License fees	908,000		61,000		969,000		122,000
Royalties	2,000		2,000		4,000		4,000
	8,105,000		8,625,000		16,130,000		17,861,000
Operating expenses:
Cost of sales	3,252,000		3,684,000		6,460,000		8,663,000
Research and development	399,000		538,000		905,000		1,085,000
Selling and marketing	1,492,000		2,582,000		3,056,000		5,089,000
General and administrative	1,596,000		1,966,000		3,192,000		3,693,000
	6,739,000		8,770,000		13,613,000		18,530,000
Income (loss) from operations	1,366,000		(145,000	)	2,517,000		(669,000	)
Other income (expense):
Interest, net	(232,000	)	(273,000	)	(526,000	)	(605,000	)
Income (loss) before income taxes	1,134,000		(418,000	)	1,991,000		(1,274,000	)
Provision for income taxes	23,000		373,000		51,000		351,000
Income (loss) before extraordinary item	1,111,000		(791,000	)	1,940,000		(1,625,000	)
Early extinguishment of debt, net of tax			(583,000	)			(583,000	)
Net income (loss)	1,111,000		(1,374,000	)	1,940,000		(2,208,000	)
Translation adjustment	(86,000	)	314,000		(571,000	)	206,000
Comprehensive income (loss)	$1,025,000		$(1,060,000	)	$  1,369,000		$  (2,002,000	)
Basic and diluted income (loss) per share:
Income (loss) from continuing operations	$          0.11		$        (0.09	)	$            0.19		$          (0.18	)
Early extinguishment of debt, net of tax			(0.06	)			(0.06	)
Net income (loss)	$          0.11		$        (0.15	)	$            0.19		$          (0.24	)

See accompanying notes to condensed consolidated financial statements.

SYNBIOTICS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

	June 30, 2001		December 31, 2000
	(unaudited)		(audited)
ASSETS
Current assets:
Cash and equivalents	$  1,275,000		$      951,000
Accounts receivable	3,715,000		3,490,000
Inventories	5,095,000		5,273,000
Other current assets	969,000		911,000
	11,054,000		10,625,000
Property and equipment, net	1,750,000		1,983,000
Goodwill	12,523,000		13,161,000
Deferred tax assets	109,000		122,000
Deferred debt issuance costs	20,000		33,000
Investment in W3 held for sale			2,713,000
Other assets	2,987,000		3,565,000
	$28,443,000		$32,202,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$  5,765,000		$  6,296,000
Current portion of long-term debt	7,832,000		8,432,000
Deferred revenue			242,000
Other current liabilities	600,000		1,000,000
	14,197,000		15,970,000
Long-term debt			2,813,000
Deferred revenue			727,000
Other liabilities	1,731,000		1,668,000
	1,731,000		5,208,000
Mandatorily redeemable common stock	3,107,000		3,027,000
Non-mandatorily redeemable common stock and other shareholders’ equity:
Common stock, no par value, 24,800,000 shares authorized, 9,003,000 and                8,752,000 shares issued and outstanding at June 30, 2001 and                December 31, 2000	40,286,000		40,164,000
Common stock warrants	1,035,000		1,035,000
Accumulated other comprehensive loss	(1,656,000	)	(1,085,000	)
Accumulated deficit	(30,257,000	)	(32,117,000	)
Total non-mandatorily redeemable common stock and other                          shareholders’ equity	9,408,000		7,997,000
	$28,443,000		$32,202,000

See accompanying notes to condensed consolidated financial statements.

SYNBIOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
	2001		2000
Cash flows from operating activities:
Net income (loss)	$1,940,000		$(2,208,000	)
Adjustments to reconcile net income (loss) to net cash provided by (used for)                operating activities:
Depreciation and amortization	1,149,000		1,101,000
Early extinguishment of debt			937,000
Changes in assets and liabilities (net of acquisitions and dispositions):
Accounts receivable	(401,000	)	(740,000	)
Inventories	46,000		(1,362,000	)
Deferred taxes	(8,000	)	(22,000	)
Other assets	(120,000	)	211,000
Accounts payable and accrued expenses	(244,000	)	133,000
Deferred revenue	(969,000	)	(121,000	)
Other liabilities	(332,000	)	61,000
Net cash provided by (used for) operating activities	1,061,000		(2,010,000	)
Cash flows from investing activities:
Acquisition of property and equipment	(97,000	)	(374,000	)
Proceeds from sale of investment in W3 held for sale	9,000
Proceeds from sale of securities available for sale			2,127,000
Acquisition of KPL poultry product line			(3,554,000	)
Net cash used for investing activities	(88,000	)	(1,801,000	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			10,000,000
Payments of long-term debt	(600,000	)	(7,450,000	)
Proceeds from issuance of common stock, net			136,000
Net cash (used for) provided by financing activities	(600,000	)	2,686,000
Net increase (decrease) in cash and equivalents	373,000		(1,125,000	)
Effect of exchange rates on cash	(49,000	)	206,000
Cash and equivalents—beginning of period	951,000		2,260,000
Cash and equivalents—end of period	$1,275,000		$1,341,000

See accompanying notes to condensed consolidated financial statements.

SYNBIOTICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Interim Financial Statements:

        The accompanying condensed consolidated balance sheet as of June 30, 2001 and the condensed consolidated statements of operations and comprehensive (loss) income and of cash flows for the three and six months ended June 30, 2001 and 2000 have been prepared by Synbiotics Corporation (the “Company”) and have not been audited. The condensed consolidated financial statements of the Company include the accounts of its wholly-owned subsidiary Synbiotics Europe SAS. All significant intercompany transactions and accounts have been eliminated in consolidation. These financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial position, results of operations and cash flows for all periods presented. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2000. Interim operating results are not necessarily indicative of operating results for the full year.

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

        Certain prior period amounts have been reclassified to conform to the current period presentation.

Note 2—Assignment of Distribution Agreement:

        On June 1, 2001, the Company assigned its feline leukemia vaccine distribution agreement with Intervet, Inc. to Merial Limited, Merial S.A.S. and Merial, Inc. (collectively “Merial”). In exchange, Merial waived its right to sell to the Company 621,000 shares of the Company’s common stock at $5.00 per share (the “Put Right”). Merial also agreed to allow the Company to pay accrued royalties totalling $613,000 under a separate agreement ($175,000 of which was due in May 2001 and the remainder was due in October 2001) in ten monthly installments of $61,300 which began in July 2001. If the Company fails to meet its royalty payment obligation, the Put Right will revert to Merial. When the final royalty payment has been made in April 2002, and the Put Right is extinguished, the Company will reclassify the mandatorily redeemable common stock to equity.

        In March 1999, the Company amended its U.S. feline leukem a virus vaccine supply agreement with Merial, and the Company received $1,453,000 which it was recognizing as license fee revenue ratably over the remaining life of the supply agreement. As the Company has assigned its distribution agreement with Intervet, Inc. to Merial, the Company has no further contractual obligations under the supply agreement and recognized, in June 2001, the remaining $868,000 of deferred license fee revenue.

Note 3—Inventories:

        Inventories consist of the following:

	June 30, 2001	December 31, 2000
	(unaudited)	(audited)
Inventories:
Raw materials	$2,353,000	$2,293,000
Work in process	286,000	409,000
Finished goods	2,456,000	2,571,000
	$5,095,000	$5,273,000

SYNBIOTICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4—Income (Loss) per Share:

        The following is a reconciliation of net income (loss) and share amounts used in the computations of income (loss) per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2001		2000		2001		2000
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Basic and diluted net income (loss) used:
Income (loss) from continuing operations	$1,111,000		$  (791,000	)	$1,940,000		$(1,625,000	)
Less accretion of mandatorily redeemable common                stock	(46,000	)	(33,000	)	(79,000	)	(65,000	)
Income (loss) from continuing operations used in                computing basic income (loss) from continuing                operations per share	1,065,000		(824,000	)	1,861,000		(1,690,000	)
Early extinguishment of debt, net of tax			(583,000	)			(583,000	)
Net income (loss) used in computing basic and                diluted net income (loss) per share	$1,065,000		$(1,407,000	)	$1,861,000		$(2,273,000	)
Shares used:
Weighted average common shares outstanding used                in computing basic income (loss) per share	9,624,000		9,369,000		9,624,000		9,312,000
Weighted average options and warrants to purchase                common stock as determined by the treasury                method	235,000				236,000
Shares used in computing diluted income (loss) per                share	9,859,000		9,369,000		9,860,000		9,312,000

        Weighted average options and warrants to purchase common stock as determined by the application of the treasury method and weighted average shares of common stock issuable upon assumed conversion of debt totalling 1,245,000 and 1,291,000 shares have been excluded from the shares used in computing diluted net income (loss) per share for the three and six months ended June 30, 2000 as their effect is anti-dilutive. In addition, warrants to purchase 250,000 shares of common stock at $2.00 per share have been excluded from the shares used in computing diluted net income (loss) per share for the three and six months ended June 30, 2001, and warrants to purchase 265,000 shares of common stock at $4.54 per share have been excluded from the shares used in computing diluted net income (loss) per share for the three and six months ended June 30, 2000, as their exercise price is higher than the weighted average market price for those periods. In addition the effect of the warrants to purchase 265,000 shares of common stock at $4.54 per share was anti-dilutive for the three and six months ended June 30, 2000.

Note 5—Segment Information and Significant Customers:

        The Company has determined that it has only one reportable segment based on the fact that all of its net sales are from its animal health products. Although the Company sells diagnostic, vaccine and instrument products, it does not base its business decision making on a product category basis.

SYNBIOTICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

        The following are revenues for the Company’s diagnostic, vaccine and instrument products:

	Three Months Ended June 30,		Six Months Ended June 30,
	2001	2000	2001	2000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Diagnostics	$6,795,000	$6,473,000	$14,082,000	$13,028,000
Vaccines	34,000	1,464,000	276,000	3,503,000
Instruments	366,000	625,000	799,000	1,204,000
Other revenues	910,000	63,000	973,000	126,000
	$8,105,000	$8,625,000	$16,130,000	$17,861,000

       Other revenues for the three months ended June 30, 2001 consist primarily of deferred license fee revenues that were recognized in conjunction with the assignment of a distribution agreement (Note 2).

            The following are revenues and long-lived assets information by geographic area:

	Three Months Ended June 30,		Six Months Ended June 30,
	2001	2000	2001	2000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Revenues:
United States	$6,280,000	$6,340,000	$11,602,000	$12,851,000
France	411,000	854,000	1,095,000	2,146,000
Other foreign countries	1,414,000	1,431,000	3,433,000	2,864,000
	$8,105,000	$8,625,000	$16,130,000	$17,861,000

	June 30, 2001	December 31, 2000
	(unaudited)	(audited)
Long-lived assets:
United States	$12,721,000	$12,921,000
France	4,559,000	5,337,000
	$17,280,000	$18,258,000

        The Company had sales to one customer that totalled 11% and 10% of total revenues for the three and six months ended June 30, 2001, respectively. There were no sales to any one customer that totalled 10% or more of total revenues during the three and six months ended June 30, 2000.

Note 6—New Accounting Pronouncements:

        In July 2001, the Financial Accounting Standards Board (FASB) issued FASB Statements Nos. 141 and 142 (FAS 141 and FAS 142), Business Combinations and Goodwill and Other Intangible Assets. FAS 141 replaces APB 16 and eliminates pooling-of-interests accounting prospectively. It also provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. FAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Under FAS 142, goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. FAS 141 and FAS 142 are effective for all business combinations completed after June 30, 2001. Upon adoption of FAS 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under FAS 141 will be reclassified to goodwill. Companies are required to adopt FAS 142 for fiscal years beginning after December 15, 2001, but early adoption is permitted. The Company will adopt FAS 142 on January 1, 2002. In connection with the adoption of FAS 142, the Company will be required to perform a transitional goodwill impairment assessment. The Company has not yet determined the impact these standards will have on its results of operations and financial position.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

        The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q contains both historical financial information and forward-looking statements. Forward-looking statements are characterized by words such as “intend”, “plan”, “believe”, “will”, “would”, etc. Historical financial information may not be indicative of future financial performance. In fact, future financial performance may be materially different than the historical financial information presented herein. Moreover, the forward-looking statements about future business or future results of operations are subject to significant uncertainties and risks, including those detailed under the caption “Future Operating Results”, which could cause actual future results to differ materially from what is suggested by the forward-looking information.

    Results of Operations

        Our net sales for the second quarter of 2001 decreased by $1,367,000 or 16% from the second quarter of 2000. The decrease reflects a decrease in our sales of vaccine products of $1,430,000, an increase in our diagnostic product sales of $322,000 and a decrease in our instrument product sales of $259,000. The decrease in our vaccine sales is due solely to Intervet, Inc.’s (“Intervet”) inability to supply us with feline leukemia virus (“FeLV”) vaccine and our resulting decision on June 1, 2001 to exit the vaccine business. Our increase in diagnostic sales is primarily due to the poultry diagnostic product line we acquired in April 2000 and the non-recurrence of promotional programs that were in place during the second quarter of 2000 in the canine heartworm diagnostic market, offset by an increase in performance rebates paid to distributors during the second quarter of 2001. Our instrument product sales decreased primarily due to our decision in the fourth quarter of 2000 to scale back our instrument manufacturing operations.

        Our net sales for the six months ended June 30, 2001 decreased by $2,578,000 or 15% from the six months ended June 30, 2000. The decrease reflects a decrease in our sales of vaccine products of $3,227,000, an increase in our diagnostic product sales of $1,054,000 and a decrease in our instrument product sales of $405,000. The decrease in our vaccine sales is due solely to Intervet’s inability to supply us with FeLV vaccine and our resulting decision on June 1, 2001 to exit the vaccine business. Our increase in diagnostic sales is primarily due to the poultry diagnostic product line we acquired in April 2000 and the non-recurrence of promotional programs that were in place during 2000 in the canine heartworm diagnostic market, offset by an increase in performance rebates paid to distributors during 2001. Our instrument product sales decreased primarily due to our decision in the fourth quarter of 2000 to scale back our instrument manufacturing operations.

        On June 1, 2001, we assigned our FeLV vaccine distribution agreement with Intervet to Merial Limited, Merial S.A.S. and Merial, Inc. (collectively “Merial”). In exchange, Merial waived its right to sell back to us 621,000 shares of our common stock at $5.00 per share (the “Put Right”). Merial also agreed to allow us to pay accrued royalties totalling $613,000 under a separate agreement ($175,000 of which was due in May 2001 and the remainder was due in October 2001) in ten monthly installments of $61,300 beginning in July 2001. If we fail to meet this royalty payment obligation, the Put Right will revert to Merial. When the final royalty payment has been made in April 2002, and the Put Right is extinguished, we will reclassify the mandatorily redeemable common stock to equity. In addition, as we have no further contractual obligations under the supply agreement, we recognized in June 2001, the remaining $868,000 of deferred license fee revenue. Our vaccine sales totalled $4,968,000 and $6,013,000 during 2000 and 1999, respectively.

        Our cost of sales as a percentage of our net sales was 45% during the second quarter of 2001 compared to 43% during the second quarter of 2000 (i.e., our gross margin decreased to 55% from 57%). The lower gross margin is a result of the increased distributor rebates mentioned above. Our cost of sales as a percentage of our net sales was 43% during the six months ended June 30, 2001 compared to 49% during the six months ended June 30, 2000 (i.e., our gross margin increased to 57% from 51%). The higher gross margin is a direct result of these factors:

· the decreased vaccine sales which have historically had low margins;

· sales of the newly acquired poultry diagnostic products which have significantly higher margins;

· an offset due to the fact that a significant portion of our manufacturing costs are fixed costs; and

· an offset due to the increased distributor rebates during 2001.

        Among our major products, our DiroCHEK® canine heartworm diagnostic products are manufactured at our facilities, whereas our WITNESS®, VetRED® and the SCA 2000™ products are manufactured by third parties. In addition to affecting our gross margins, outsourcing of manufacturing renders us relatively more dependent on the third-party manufacturers.

        We are currently in the process of transferring the manufacturing of our poultry diagnostic products to our manufacturing facilities in San Diego, and we expect the transfer to be completed by the end of the first quarter of 2002. We believe that our gross margins on these products will improve as we will have more products to absorb our fixed manufacturing costs.

        Our research and development expenses during the second quarter of 2001 decreased by $139,000 or 26% from the second quarter of 2000, and decreased by $180,000 or 17% during the six months ended June 30, 2001 as compared to the six months ended June 30, 2000. The decreases are due primarily to the decrease in our instrument research and development effort in conjunction with the scaling back of our instrument manufacturing operations, and decreases in patent legal expenses commensurate with reduced patent filing activities. Our research and development expenses as a percentage of our net sales were 6% during the three and six months ended June 30, 2001 and 2000.

        Our selling and marketing expenses during the second quarter of 2001 decreased by $1,090,000 or 42% from the second quarter of 2000, and decreased by $2,033,000 or 40% during the six months ended June 30, 2001 as compared to the six months ended June 30, 2000. The decreases are due primarily to the disposition of W3COMMERCE (our Internet marketing services subsidiary) during the fourth quarter of 2000, the termination of our direct-to-veterinarian telemarketing group during the third quarter of 2000 and a concerted effort to reduce our print media advertising. Our selling and marketing expenses as a percentage of our net sales were 21% and 30% during the second quarter of 2001 and 2000, respectively, and were 20% and 29% during the six months ended June 30, 2001 and 2000, respectively.

        Our general and administrative expenses during the second quarter of 2001 decreased by $370,000 or 19% from the second quarter of 2000, and decreased by $501,000 or 14% during the six months ended June 30, 2001 as compared to the six months ended June 30, 2000. The decreases are due primarily to the decrease in our administrative expenses related to our instrument manufacturing operations as a result of the scale back of those operations, a decrease in legal expenses related to a decrease in the level of activity of our patent litigation with Heska Corporation (“Heska”) and a decrease in foreign currency transaction losses related to our intercompany balance with Synbiotics Europe (“SBIO-E”) as that balance has been decreasing. Our general and administrative expenses as a percentage of our net sales were 22% and 23% during the second quarter of 2001 and 2000, respectively, and were 21% during the six months ended June 30, 2001 and 2000.

        Our net interest expense during the second quarter of 2001 decreased by $41,000 or 15% from the second quarter of 2000, and decreased by $79,000 or 13% during the six months ended June 30, 2001 as compared to the six months ended June 30, 2000, due to decreases in the prime rate during the first and second quarters of 2001, as well as the fact that our $2,813,000 convertible note payable to W3COMMERCE was extinguished on January 1, 2001 in conjunction with our sale of 84% of our investment in W3COMMERCE.

        Our effective tax rate was 3% and 28% for the six months ended June 30, 2001 and 2000, respectively. As of December 31, 2000, we had established a deferred tax asset valuation allowance for all of our U.S. deferred tax assets. During the six months ended June 30, 2001, we utilized certain U.S. deferred tax assets (primarily net operating loss carryforwards) and we released a corresponding portion of our deferred tax valuation allowance, resulting in no deferred tax expense. In addition, due to our utilization of net operating loss carryforwards, our current tax expense represents alternative minimum taxes.

        In July 2001, the Financial Accounting Standards Board (FASB) issued FASB Statements Nos. 141 and 142 (FAS 141 and FAS 142), Business Combinations and Goodwill and Other Intangible Assets. FAS 141 replaces APB 16 and eliminates pooling-of-interests accounting prospectively. It also provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. FAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Under FAS 142, goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. FAS 141 and FAS 142 are effective for all business combinations completed after June 30, 2001. Upon adoption of FAS 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under FAS 141 will be reclassified to goodwill. Companies are required to adopt FAS 142 for fiscal years beginning after December 15, 2001, but early adoption is permitted. We will adopt FAS 142 on January 1, 2002. In connection with the adoption of FAS 142, we will be required to perform a transitional goodwill impairment assessment. We have not yet determined the impact these standards will have on our results of operations and financial position.

    Financial Condition and Liquidity

        We believe that our present capital resources, which included negative working capital of $3,143,000 at June 30, 2001, are insufficient to meet our working capital needs and service our debt for the next twelve months. Additionally, pursuant to our debt agreement with Imperial Bank, we are required to maintain certain financial ratios and levels of tangible net worth and we are also restricted in our ability to make capital expenditures or investments without Imperial Bank’s consent. As of June 30, 2001, we had outstanding principal balances on our Imperial Bank debt of $7,832,000. As of June 30, 2001, we were not in compliance with some of our financial covenants, and we had not obtained a waiver from Imperial Bank.

        We will need to raise additional capital within the next few months. We are currently exploring our options which include the sale of our animal health business, a merger or acquisition, debt restructuring, and the sale of additional equity. In addition, we are taking steps to eliminate cash drains; for example, in the fourth quarter of 2000 we divested W3COMMERCE and scaled back our instrument manufacturing operations, and we terminated our direct selling initiative in the third quarter of 2000.

        We restructured a $1,000,000 payment due to KPL in conjunction with our April 2000 acquisition of KPL’s poultry diagnostic product line by agreeing to pay $200,000 in April 2001 and to make eight monthly payments of $100,000 beginning in May 2001. As of June 30, 2001, we had a remaining balance of $600,000.

        Additionally, the 621,000 shares of our common stock which we issued to Merial in conjunction with the 1997 acquisition of SBIO-E were subject to a put provision which gave Merial the right, beginning on July 9, 2001, to sell all or any portion of its shares to us at a price of $5 per share, for a total of $3,107,000. In June 2001, in conjunction with the assignment to Merial of our FeLV vaccine distribution rights, Merial waived its rights under the put provision. However, if we fail to make certain royalty payments to Merial between July 2001 and April 2002, the rights under the put provision will revert to Merial and we would not have the funds necessary to buy back the shares.

        Our operations are seasonal due to the success of our canine heartworm diagnostic products. Our sales and profits tend to be concentrated in the first half of the year, as our distributors prepare for the heartworm season by purchasing diagnostic products for resale to veterinarians. The operations of SBIO-E have reduced our seasonality as sales of their large animal diagnostic products tend to occur evenly throughout the year. We believe that increased sales of our SCA 2000 instruments and supplies and our newly acquired poultry diagnostic products will also reduce our seasonality.

    Future Operating Results

        Our future operating results are subject to a number of factors, including:

We will need additional capital in the near future

        We will need to raise additional capital within the next few months. We are currently exploring our options which include the sale of our animal health business, a merger or acquisition, debt restructuring, and the sale of additional equity.

        As of June 30, 2001, we were not in compliance with covenants on $7,832,000 of indebtedness to Imperial Bank (see below). If Imperial Bank declares the loans to be in default, we will be unable to repay the loans. Also, we do not have the resources to repay the loans on their March 29, 2002 maturity date.

        We owed $1,000,000 to Kirkegaard & Perry Laboratories, Inc. (“KPL”), in conjunction with our April 2000 acquisition of their poultry diagnostic product line. We have restructured the payment schedule. Under the new schedule we paid $200,000 in April 2001, and we began making eight monthly payments of $100,000 beginning in May 2001. As of June 30, 2001, we had a remaining balance of $600,000.

        Additionally, the 621,000 shares of our common stock which we issued to Merial in conjunction with the 1997 acquisition of SBIO-E were subject to a put provision which gave Merial the right, beginning on July 9, 2001, to sell all or any portion of its shares to us at a price of $5 per share, for a total of $3,107,000. In June 2001, in conjunction with the assignment to Merial of our feline leukemia vaccine distribution rights, Merial waived its rights under the put provision. However, if we fail to make certain royalty payments to Merial between July 2001 and April 2002, the rights under the put provision will revert to Merial and we would not have the funds necessary to buy back the shares.

        In addition, we believe that we would need additional funds to finance us later in the fiscal year, during our traditional slow season and during the time for building inventory in anticipation of next year’s heartworm diagnostics selling season.

        We may also need to raise additional funds if our estimates of revenues, working capital and/or capital expenditure requirements change or prove inaccurate or in order for us to respond to unforeseen technological or marketing hurdles or to take advantage of unanticipated opportunities. Further, our future capital requirements will depend on many factors beyond our control or ability to accurately estimate, including continued scientific progress in our product and development programs, the cost of manufacturing scale-up, the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims, the cost involved in patent infringement litigation, competing technological and market developments, and the cost of establishing effective sales and marketing arrangements. Such funds may not be available at the time or times needed, or available on terms acceptable to us.

        Our independent auditors’ report, related to our financial statements as of and for the year ended December 31, 2000, has indicated that they have substantial doubt about our ability to continue as a going concern.

We are not in compliance with our bank loan covenants

        As of June 30, 2001, we were not in compliance with some of the financial covenants in our agreement with Imperial Bank, and we have not obtained waivers from the bank. We cannot assure you that we will be in compliance with the covenants in the future. Failure to be in compliance with the covenants places us in technical default of the debt agreement, and Imperial could demand repayment of the loans. We do not have and would not have the funds to repay the loans on short notice.

We may sell our primary business

        We have announced that we have engaged investment bankers to consider means of enhancing shareholder value, including the possible sale of our animal health business. There can be no assurance that our animal health business can be sold for a favorable price. Also, the uncertainties caused by this process may undermine our relationships with our customers, employees and suppliers.

The market in which we operate is intensely competitive, even with regard to our key canine heartworm diagnostic products, and many of our competitors are larger and more established

        The market for animal health care products is extremely competitive. Companies in the animal health care market compete to develop new products, to market and manufacture products efficiently, to implement effective research strategies, and to obtain regulatory approval. Our current competitors include significantly larger companies such as Pfizer Animal Health, Merial and IDEXX Laboratories. These companies are substantially larger and have greater financial, manufacturing, marketing, and research resources than we do. In addition, IDEXX Laboratories prohibits its distributors from selling competitors’ products, including ours. Further, additional competition could come from new entrants to the animal health care market. We cannot assure you that we will be able to compete successfully in the future or that competition will not harm our business.

        Our canine heartworm diagnostic products constituted 48% of our sales for the six months ended June 30, 2001. In addition to our historic competition with IDEXX Laboratories, the sales leader in this product category, our sales were substantially affected in 1999-2001 by a new heartworm product from Heska Corporation. We are suing Heska, claiming that its heartworm product infringes our patent.

We have a history of losses and an accumulated deficit

        We did not achieve profitability for the years ended December 31, 1998, 1999 and 2000, and we have had a history of annual losses. We have incurred a consolidated accumulated deficit of $30,257,000 at June 30, 2001. We may not achieve annual profitability again and if we are profitable in the future there can be no assurance that profitability can be sustained.

We rely on third party distributors for a substantial portion of our sales

        We have historically depended upon distributors for a large portion of our sales, and we may not have the ability to establish and maintain an adequate independent sales and marketing capability in any or all of our targeted markets. Distributor agreements render our sales exposed to the efforts of third parties who are not employees of Synbiotics and over whom we have no control. Their failure to generate significant sales of our products could materially harm our business. Reduction by these distributors of the quantity of our products which they distribute would materially harm our business. In addition, IDEXX Laboratories’ prohibition against its distributors carrying competitors’ products, including ours, has made, and could continue to make, some distributors unavailable to us. We adopted a similar policy in the second quarter of 1999, which caused some of our distributors to abandon our product line. We have rescinded this policy, and all but one of our former distributors are again selling our products.

Our direct selling strategy has been scaled back

        At the end of the third quarter of 2000, we refocused our sales and marketing efforts towards traditional animal health distribution and, as a result, we significantly reduced the headcount of our telesales force. Our 1999 foray toward direct selling to veterinarians, and our subsequent scale-back of that effort, may have created confusion in the market. Some effects of that confusion may persist.

There is an epidemic of foot-and-mouth disease in the United Kingdom

        Foot-and-mouth is a viral based disease that affects cloven-hoofed animals including cows, sheep and pigs. There is currently an epidemic of foot-and-mouth disease in the United Kingdom, with isolated outbreaks in France and the Netherlands. The virus is spread from animal to animal through direct contact, and can be carried through the air as well. There is no cure for this disease, and the only way to prevent the disease from spreading is to isolate and destroy the infected herds. We do not have a diagnostic test for foot-and-mouth disease, as the symptoms that the animal has the disease are readily evident. If the disease were to become significantly more widespread, and the total number of animals and number of transactions in animals were to decrease, our sales of diagnostic products for bovine and swine diseases (primarily sold outside of the United States), which totalled $4,130,000 and $5,200,000 in 2000 and 1999, respectively, could be adversely affected. In addition, shipments of canine diagnostic products that are made in our French facility that are imported, or will be imported, into the United States (diagnostic tests for canine Leishmania, canine Ehrlichia and canine pregnancy) have been delayed, and may be delayed in the future, as they are subject to regulatory inspection and release at the port of entry.

There is no assurance that acquired businesses can be successfully combined

        There can be no assurance that the anticipated benefits of the April 2000 acquisition of the poultry product line from KPL, or any other future acquisitions (collectively, the “Acquired Business”) will be realized. Acquisitions of businesses involve numerous risks, including difficulties in the assimilation of the operations, technologies and products of the Acquired Business, introduction of different distribution channels, potentially dilutive issuances of equity and/or increases in leverage and risk resulting from issuances of debt securities, the need to establish internally operating functions which had been previously provided pre-acquisition by a corporate parent, accounting charges, operating companies in different geographic locations with different cultures, the potential loss of key employees of the Acquired Business, the diversion of management’s attention from other business concerns and the risks of entering markets in which we have no or limited direct prior experience. In addition, there can be no assurance that the acquisitions will not have a material adverse effect upon our business, results of operations, financial condition or cash flows, particularly in the quarters immediately following the consummation of the acquisition, due to operational disruptions, unexpected expenses and accounting charges which may be associated with the integration of the Acquired Business and us, as well as operating and development expenses inherent in the Acquired Business itself as opposed to integration of the Acquired Business. We did not achieve the hoped-for benefits from some of our past acquisitions, such as W3COMMERCE (2000) and Prisma (1998).

We depend on key executives and personnel

        Our future success will depend, to a significant extent, on the ability of our management to operate effectively, both individually and as a group. Competition for qualified personnel in the animal health care products industry is intense, and we may not be successful in attracting and retaining such personnel. There are only a limited number of persons with the requisite skills to serve in those positions and it may become increasingly difficult to hire such persons. The loss of the services of any of our key personnel or the inability to attract or retain qualified personnel could harm our business.

We depend on third party manufacturers

        We contract for the manufacture of some of our products, including our Witness® and VetRED® diagnostic products, our poultry diagnostic products and our SCA 2000™ blood coagulation timing instrument. We also expect that some of our anticipated new products will be manufactured by third parties. In addition, some of the products manufactured for us by third parties, including Witness® and VetRED®, are licensed to us by their manufacturers. There are a number of risks associated with our dependence on third-party manufacturers including:

· reduced control over delivery schedules;

· quality assurance;

· manufacturing yields and costs;

· the potential lack of adequate capacity during periods of excess demand;

· limited warranties on products supplied to us; and

· increases in prices and the potential misappropriation of our intellectual property.

        If our third party manufacturers fail to supply us with an adequate number of finished products, our business would be significantly harmed. We have no long-term contracts or arrangements with any of our vendors that guarantee product availability, the continuation of particular payment terms or the extension of credit limits.

        If we encounter delays or difficulties in our relationships with our manufacturers, the resulting problems could have a material adverse effect on us.

        In June 2001, KPL instituted a recall of substantially all of our poultry diagnostic products that were manufactured by KPL due to a defective conjugate contained in the products. We are currently in the process of replacing the affected products held by our customers. The cost of this recall and the related replacement products is being born by KPL. However, until the recall and associated product replacement is completed, our sales of poultry diagnostic products could be materially adversely effected.

We rely on new and recent products

        We rely to a significant extent on new and recently developed products, and expect that we will need to continue to introduce new products to be successful in the future. There can be no assurance that we will obtain and maintain market acceptance of our products. There can be no assurance that future products will meet applicable regulatory standards, be capable of being produced in commercial quantities at acceptable cost or be successfully commercialized.

        There can be no assurance that new products can be manufactured at a cost or in quantities necessary to make them commercially viable. If we are unable to produce internally, or to contract for, a sufficient supply of our new products on acceptable terms, or if we should encounter delays or difficulties in our relationships with manufacturers, the introduction of new products would be delayed, which could have a material adverse effect on our business.

Our canine heartworm business is seasonal

        Our operations are seasonal due to the timing of sales of our canine heartworm diagnostic products. Our sales and profits tend to be concentrated in the first half of the year as our distributors prepare for the heartworm season by purchasing diagnostic products for resale to veterinarians. Our European operations have reduced our seasonality as sales of their large animal diagnostic products tend to occur evenly throughout the year. We believe that increased sales of our SCA 2000 instrument products and our newly acquired poultry diagnostic products would also reduce our seasonality.

Any failure to adequately establish or protect our proprietary rights may adversely affect us

        We rely on a combination of patent, copyright, and trademark laws, trade secrets, and confidentiality and other contractual provisions to protect our proprietary rights. These measures afford only limited protection. We currently have 11 issued U.S. patents and two pending patent applications. Our means of protecting our proprietary rights in the U.S. or abroad may not be adequate and competitors may independently develop similar technologies. Our future success will depend in part on our ability to protect our proprietary rights and the technologies used in our principal products. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use trade secrets or other information that we regard as proprietary. In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of the United States. Issued patents may not preserve our proprietary position. Even if they do, competitors or others may develop technologies similar to or superior to our own. If we do not enforce and protect our intellectual property, our business will be harmed. From time to time, third parties, including our competitors, have asserted patent, copyright, and other intellectual property rights to technologies that are important to us. We expect that we will increasingly be subject to infringement claims as the number of products and competitors in the animal health care market increases.

        The results of any litigated matter are inherently uncertain. In the event of an adverse result in any litigation with third parties that could arise in the future, we could be required to:

· pay substantial damages, including treble damages if we are held to have willfully infringed;

· cease the manufacture, use and sale of infringing products;

· expend significant resources to develop non-infringing technology; or

· obtain licenses to the infringing technology.

        Licenses may not be available from any third party that asserts intellectual property claims against us on commercially reasonable terms, or at all.

        Also, litigation is costly regardless of its outcome and can require significant management attention. For example, in 1997, Barnes-Jewish Hospital filed an action against us claiming that our canine heartworm diagnostic products infringe their patent. We settled this lawsuit, but there can be no assurance that we would be able to resolve similar incidents in the future. Our patent infringement litigation against Heska’s use of heartworm diagnostic technology is also expensive.

        Also, because our patents and patent applications cover novel diagnostic approaches:

· the patent coverage which we receive could be significantly narrower than the patent coverage we seek in our patent applications; and

· our patent positions involve complex legal and factual issues which can be hard for patent examiners or lawyers asserting patent coverage to successfully resolve.

        Because of this, our patent position could be vulnerable and our business could be materially harmed.

        The U.S. patent application system also exposes us to risks. In the United States, the first party to make a discovery is granted the right to patent it and patent applications are maintained in secrecy until the underlying patents issue. For these reasons, we can never know if we are the first to discover particular technologies. Therefore, we can never be certain that our technologies will be patented and we could become involved in lengthy, expensive, and distracting disputes concerning whether we were the first to make the disputed discovery. Any of these events would materially harm our business.

Our business is regulated by the United States and various foreign governments

        Our business is subject to substantial regulation by the United States government, most notably the United States Department of Agriculture, and the French government. In addition, our operations may be subject to future legislation and/or rules issued by domestic or foreign governmental agencies with regulatory authority relating to our business. There can be no assurance that we will continue to be in compliance with any of these regulations.

        For marketing outside the United States, we and our suppliers are subject to foreign regulatory requirements, which vary widely from country to country. There can be no assurance that we and our suppliers will meet and sustain compliance with any such requirements.

We use hazardous materials

        Our business requires that we store and use hazardous materials and chemicals, including radioactive compounds. Although we believe that our procedures for storing, handling, and disposing of these materials comply with the standards prescribed by local, state, and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. If any of these materials were mishandled, or if an accident with them occurred, the consequences could be extremely damaging and we could be held liable for them. Our liability for such an event would materially harm our business and could exceed all of our available resources for satisfying it.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

        Our market risk consists primarily of the potential for changes in interest rates and foreign currency exchange rates.

Interest Rate Risk

        The fair value of our debt at June 30, 2001 was $7,832,000, which has a variable interest rate based on the prime rate.

        A change in interest rates of five percentage points would have a material impact on our financial condition, results of operations and cash flows as it relates to our variable rate debt. In addition, if interest rates increased by five percentage points our ability to refinance our bank debt would be seriously compromised.

Foreign Currency Exchange Rate Risk

        Our foreign currency exchange rate risk relates to the operations of SBIO-E as it transacts business in Euros, its local currency. However, this risk is limited to our intercompany receivable from SBIO-E and the conversion of its financial statements into the U.S. dollar for consolidation. There is no foreign currency exchange rate risk related to SBIO-E’s transactions outside of the European Union as those transactions are denominated in Euros. Similarly, all of the foreign transactions of our U.S. operations are denominated in U.S. dollars. We do not hedge our cash flows on intercompany transactions, nor do we hold any other derivative securities or hedging instruments based on currency exchange rates. As a result, the effects of a 5% change in exchange rates would have a material impact on our financial condition, results of operations and cash flows, but only to the extent that it relates to the conversion of SBIO-E’s financial statements, including its intercompany payable, into the U.S. dollar for consolidation.

PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

Synbiotics Corporation v. Heska Corporation—United States District Court for the Southern District of California

        On November 12, 1998, we filed a lawsuit against Heska Corporation (“Heska”) claiming that Heska infringes a patent owned by us, which covers both our and Heska’s heartworm diagnostic products. On January 14, 1999, Heska filed a counterclaim against us seeking a declaratory judgment that our patent is invalid and unenforceable. We deny Heska’s allegations that our patent is invalid and unenforceable, and plan to vigorously defend our patent against the allegations. In the event that we were to lose our lawsuit against Heska, we believe our only direct liability would be our out-of-pocket legal expenses. Although Heska’s counterclaim does not include a claim for damages, if we were to lose on Heska’s counterclaim, we could face additional competition for our canine heartworm diagnostic products as other third parties would be able to manufacture products incorporating our patented technology. The lawsuit is scheduled for trial in February 2002.

    SE Technologies, Inc. vs. Synbiotics Corporation—San Diego County Superior Court

        On July 13, 2000, SE Technologies, Inc. (“SE”) filed a lawsuit against us alleging a breach of contract related to consulting services performed by SE in conjunction with the 1999 implementation of our enterprise resource planning system. The suit sought $188,000 plus interest and attorney fees. We settled the lawsuit on August 1, 2001 and we paid SE $35,000.

Item 2.    Changes in Securities

        None.

Item 3.    Defaults Upon Senior Securities

        None.

Item 4.    Submission of Matters to a Vote of Security Holders

        None.

Item 5.    Other Information

        On May 29, 2001, we were notified by Nasdaq that our common stock had been delisted from the Nasdaq National Market for failure to comply with Marketplace Rules 4450(a)(2), 4450(a)(3) and 4450(a)(5), requiring maintenance of a minimum market value of public float of $5,000,000, a minimum net tangible assets of $4,000,000 and a minimum bid price of $1 per share, respectively. Our common stock is now trading on the NASD over-the-counter bulletin board.

Item 6.    Exhibits and Reports on Form 8-K

        (a)  Exhibits

2.9.1	Letter Agreement between the Registrant and Kirkegaard & Perry Laboratories, Inc., dated April 23, 2001.
10.7.1	Amendment of Employment Agreement between the Registrant and Paul A. Rosinack, dated February 14, 2001†.
10.8	Employment Agreement between the Registrant and Michael K. Green, dated July 9, 1997†.

10.8.1	Amendment of Employment Agreement between the Registrant and Michael K. Green, dated February 14, 2001†.
10.9.1	Amendment of Employment Agreement between the Registrant and Francois Guillemin, dated February 14, 2001†.
10.10	Employment Agreement between the Registrant and Serge Leterme, dated August 1, 1998†.
10.10.1	Amendment of Employment Agreement between the Registrant and Serge Leterme, dated February 14, 2001†.
10.11	Employment Agreement between the Registrant and Robert Buchanan, dated April 24, 2000†.
10.11.1	Amendment of Employment Agreement between the Registrant and Robert Buchanan, dated February 14, 2001†.
10.76	Asset Sale and Assignment Agreement by and among the Registrant and Merial Limited, Merial S.A.S. and Merial, Inc., dated as of June 1, 2001.

† Management contract or compensatory plan or arrangement.

        (b)  Reports on Form 8-K

None.

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SYNBIOTICS CORPORATION

Date:    August 14, 2001

/s/    MICHAEL K. GREEN                 

Michael K. Green            

Senior Vice President and Chief Financial Officer

(signing both as a duly authorized officer and as

principal financial officer)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

EXHIBITS

TO

FORM 10-Q

UNDER

SECURITIES EXCHANGE ACT OF 1934

SYNBIOTICS CORPORATION

EXHIBIT INDEX

Exhibit No.	Exhibit
2.9.1	Letter Agreement between the Registrant and Kirkegaard & Perry Laboratories, Inc., dated April 23, 2001.
10.7.1	Amendment of Employment Agreement between the Registrant and Paul A. Rosinack, dated February 14, 2001†.
10.8	Employment Agreement between the Registrant and Michael K. Green, dated July 9, 1997†.
10.8.1	Amendment of Employment Agreement between the Registrant and Michael K. Green, dated February 14, 2001†.
10.9.1	Amendment of Employment Agreement between the Registrant and Francois Guillemin, dated February 14, 2001†.
10.10	Employment Agreement between the Registrant and Serge Leterme, dated August 1, 1998†.
10.10.1	Amendment of Employment Agreement between the Registrant and Serge Leterme, dated February 14, 2001†.
10.11	Employment Agreement between the Registrant and Robert Buchanan, dated April 24, 2000†.
10.11.1	Amendment of Employment Agreement between the Registrant and Robert Buchanan, dated February 14, 2001†.
10.76	Asset Sale and Assignment Agreement by and among the Registrant and Merial Limited, Merial S.A.S. and Merial, Inc., dated as of June 1, 2001.

† Management contract or compensatory plan or arrangement.

EX-2.9.1

                                                                   Exhibit 2.9.1
                                                                   -------------

April 23, 2001

Mr. Paul A. Rosinack
President
Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127-1702

Dear Paul:

         This letter agreement sets forth the parties' mutual understandings and
agreement regarding the modification of certain of the terms of (i) the Secured
Promissory Note, dated as of April 18, 2000, made by Synbiotics Corporation
("Synbiotics") and payable to the order of Kirkegaard & Perry Laboratories, Inc.
("KPL") in the original principal amount of $1,000,000 (the "Note"), (ii) the
Security Agreement dated as of April 18, 2000, between Synbiotics and KPL (the
"Security Agreement"), and (iii) certain other related documents.

         The parties hereby agree:

                (i)  to enter into that certain Amendment to Secured Promissory
                     Note in the form attached hereto as Exhibit A (the
                                                         ---------
                     "Amendment");


                (ii) that Synbiotics shall take all any and all actions
                     necessary or appropriate to protect and preserve the
                     Collateral and KPL's rights therein and to defend the
                     Collateral against any and all claims and demands of all
                     persons at any time claiming the same or any interest
                     therein adverse to KPL;

         Except as modified by this letter agreement and the Amendment, each of
the Note, the Security Agreement, the Manufacturing Agreement and the Royalty
Agreement remain in full force and effect and are hereby ratified, confirmed and
approved.

         Please acknowledge your acceptance and agreement to the terms and
conditions of this letter agreement by signing in the space indicated below.

Sincerely,

                                        KIRKEGAARD & PERRY LABORATORIES INC.

                                        By:  /s/ Albert Perry
                                             ------------------
                                        Name: Albert Perry
                                        Title:  President

ACKNOWLEDGE AND AGREED:

SYNBIOTICS CORPORATION

By:  /s/ Paul A. Rosinack
     ----------------------
Name:  Paul A. Rosinack
Title:  President & CEO


                      AMENDMENT TO SECURED PROMISSORY NOTE

           THIS AMENDMENT TO SECURED PROMISSORY NOTE (this "Amendment") is
entered into effective as of April 17, 2001, by Synbiotics Corporation, a
California corporation (the "Borrower").

           WHEREAS, Borrower and Kirkegaard & Perry Laboratories, Inc.
("Holder") entered into an Asset Purchase Agreement dated as of April 18, 2000,
pursuant to which Borrower purchased certain assets of Holder and as payment of
a portion of the purchase price for such assets, issued to Holder a Secured
Promissory Note, dated April 18, 2000, payable to the order of Holder in the
original principal amount of $1,000,000 (the "Note"); and

           WHEREAS, the Borrower and Holder desire to amend the Note to, among
other things, modify the payment terms of the Note, such modification to be
effective as of April 18, 2001.

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

           1. Defined Terms. For purposes of this Amendment, capitalized terms
not otherwise defined herein shall have the respective meanings set forth in the
Note (as amended hereby).

           2. Ratification of Obligations. Borrower hereby acknowledges,
ratifies and reaffirms all of its duties and obligations under the Note and the
Security Agreement, dated as of April 18, 2000, between Borrower and Holder (the
"Security Agreement"), including, but not limited to, the obligation to pay the
debt evidenced by the Note (the "Debt").

           3. Outstanding Balance. As of the date of this Amendment, the
outstanding principal balance of the Debt is $1,000,000.

           4. Payments. The payment schedule set forth in the first paragraph of
the Note is hereby amended in its entirety to read as follows:

           Said principal and interest due thereon shall be due and payable as
follows:

           Amount Due                 Payment Due Date
           ----------                 ----------------

           $200,000                   April 18, 2001

           $100,000                   Commencing May 18,
                                      2001 and each monthe
                                      thereafter until this
                                      Note is paid in full.

           5. Interest. A new second paragraph is added to Note which shall read
as follows:

                For the period commencing on April 18, 2001 until all sums due
           hereunder have been paid in full, interest will accrue on the unpaid
           principal balance outstanding from time to time at a fixed rate equal
           to 7.5% per annum and shall be payable in accordance with the payment
           schedule set forth above. Interest due hereunder shall be computed on
           the basis of a 360-day year and applied to the actual number of days
           elapsed.

           6. Accelerated Repayment. A new fifth paragraph is hereby added to
the Note which paragraph shall read as follows:

           "Upon the consummation of one or more financings by Borrower which
           results in aggregate gross proceeds to the Borrower of at least
           $3,000,000 after repayment of the Imperial Bank debt, the entire
           principal amount of this Note and all accrued but unpaid interest due
           thereon, shall become due and payable."


           "Upon the sale of all or substantially all of the equity interests in
           Borrower or all or substantially all of the assets of Borrower to a
           third party for consideration which is at least 35% in cash, the
           entire principal amount of this Note and all accrued but unpaid
           interest due thereon, shall become due and payable. In connection
           with such transaction, regardless of the cash percentage, Buyer shall
           assume all of the Borrower's obligations to the Security Agreement,
           Manufacturing Agreement, Royalty Agreement and all other obligations
           of Borrower to Holder."

           7. Security Interest. Borrower does hereby certify and confirm that
pursuant to the Security Agreement, Holder has a valid first priority lien on
the Collateral (as defined in the Security Agreement) for the full amount of the
Debt and interest now or hereafter owing thereon, and that there are no defenses
or offsets to said Security Agreement or the Note, and that all of the
provisions of the Note and the Security Agreement, except as modified herein or
by the letter agreement dated April 17, 2001, between Borrower and Holder (the
"Letter Agreement"), are unmodified and in full force and effect.

           8. Relationship of Parties. Borrower acknowledges and agrees that
Holder is not, has never been, and shall not be deemed a partner or joint
venturer of Borrower with respect to the Note, the Security Agreement and all
other agreements between Borrower and Holder, and that the relationship of
Holder to Borrower is, has always been, and shall continue to be strictly the
role of a secured creditor. Borrower hereby waives and relinquishes all claims,
demands, counterclaims and/or defenses alleging the existence of any
partnership, joint venture or other fiduciary relationship between Holder and
Borrower and Borrower holds Holder, its successors and assigns, harmless against
any and all losses, damages, penalties, fines forfeitures, legal fees and
related costs, judgments, and any other fees, costs and expenses that Holder may
sustain as a result of any such allegation by any person or entity whatsoever.

           9. Representations and Warranties. Borrower hereby represents and
warrants to and for the benefit of Holder that (i) Borrower is a California
corporation, duly organized and validly existing, and is in good standing in the
State of California and (ii) the execution, delivery and performance of this
Amendment has been duly authorized and properly executed and delivered and the
consent of any other person or entity to such execution, delivery and
performance required to render this Amendment a valid and binding agreement
enforceable in accordance with its terms has been obtained.

           10. Ratification. Except for the terms set forth herein and in the
Letter Agreement, all of the terms, covenants and conditions of the Note and the
Security Agreement shall remain in full force and effect and are hereby ratified
and confirmed. It is the express intention of the parties hereto that this
Amendment shall not constitute a novation of the Note or the Security Agreement.

           11. Binding Effect. All of the terms, covenant and conditions herein
contained are and shall be binding upon, and shall inure to the benefit of, the
parties hereto and their successors and assign.

           12. Severability. If any provision of the Note is invalid, illegal,
or unenforceable, then such provision shall be deemed severable from the rest of
the Note and the validity, legality, and enforceability of the remaining
provisions shall not in any way be affect or impaired thereby.

           13. Governing Law. This Amendment shall be construed in accordance
with the laws of the State of Maryland not including the choice of laws rules
thereof.

           14. Execution in Counterparts. This Amendment may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which taken together shall constitute one and the same instrument.


           IN WITNESS WHEREOF, the Borrower has caused this Amendment to Secured
Promissory Note to be duly executed and delivered in its name and on its behalf
as of the date first written above.

SYNBIOTICS CORPORATION

By:  /s/ Paul A. Rosinack
    ------------------------
Name:  Paul A. Rosinack
Title:  President & CEO

           The undersigned, sometimes referred to as the Holder in the foregoing
Amendment to Secured Promissory Note (the "Amendment), agrees to the amendment
of the Note (as defined in the Amendment) pursuant to the Amendment.

KIRKEGAARD & PERRY LABORATORIES, INC.

By:  /s/ Albert Perry
     ----------------------
Name:  Albert Perry
Its:  President
Date of Execution:  April 24, 2001

EX-10.7.1

                                                                  Exhibit 10.7.1
                                                                  --------------


                                  AMENDMENT OF
                              EMPLOYMENT AGREEMENT


           A. The Employment Agreement dated October 25, 1996 between Paul A.
Rosinack and Synbiotics Corporation is amended by adding thereto a new Section
6.3, to read in full as follows:

      6.3  Acquisition of Assets.
           ---------------------

           (a) Offer of Similar Job = No Severance Pay. If any company
               ---------------------------------------
("Acquirer") acquires at least a majority of EMPLOYER's assets in an acquisition
transaction outside the ordinary course of business, whether by asset purchase
or by a merger in which EMPLOYER does not survive (an "Asset Sale"), and
Acquirer offers to employ EMPLOYEE in a position not materially inferior to and
on terms and conditions not materially inferior to those called for by this
Agreement as of the time of the Asset Sale, then notwithstanding Section 6.2,
and whether or not EMPLOYEE accepts such offer, any termination of EMPLOYEE by
EMPLOYER upon or after the Asset Sale shall not entitle EMPLOYEE to any
severance pay whatever. The purpose of this provision is to ensure that if
EMPLOYEE has a chance to keep a similar job with Acquirer, then EMPLOYER should
not have to pay severance.

           (b) Job Offers Deemed Not Similar. For purposes of this Section 6.3,
               -----------------------------
an offer's terms and conditions are inferior if the offer requires a transfer to
outside of San Diego County, California or if the terms include severance
provisions materially inferior to those in Section 6.2 (or no severance
provisions at all). These are not the only ways in which an offer's terms and
conditions can be materially inferior. In addition, if Acquirer acquires
EMPLOYER by reverse triangular merger, resignation within 30 days after a
directive to transfer to outside of San Diego County, California shall be deemed
a termination without cause in connection with the acquisition.

           (c) Acceptance of Any Job = No Severance Pay. Also, if EMPLOYEE
               ----------------------------------------
accepts any position with Acquirer within six months after an Asset Sale, then
notwithstanding Section 6.2 and Section 6.3(a)-(b), any termination of EMPLOYEE
by EMPLOYER upon or after the Asset Sale shall not entitle EMPLOYEE to any
severance pay whatever; and EMPLOYEE shall refund to EMPLOYER any and all
severance pay which was previously paid.

           (d) No Similar Job Offer From Acquirer and Delayed Termination From
               ---------------------------------------------------------------
the Shell = Severance Pay. On the other hand, if after an Asset Sale Acquirer
- -------------------------
makes no such offer to EMPLOYEE (and even if EMPLOYEE remains employed by
EMPLOYER), then any termination of EMPLOYEE by EMPLOYER (other than for Cause)
upon or after the Asset Sale and


before the first anniversary of the Asset Sale shall be deemed to be "in
connection with an acquisition of EMPLOYER" for purposes of Section 6.2. If
Section 6.3(c) and 6.3(d) both apply, Section 6.3(c) shall govern.

                  (e)  Retention Plan.  Stay bonuses paid or payable under
                       --------------
any EMPLOYER retention plan are not "severance pay" for the purposes of this
Agreement.

           B. If EMPLOYEE has an outstanding loan from EMPLOYER which is
accelerated upon "the cessation of EMPLOYEE's employment with EMPLOYER," then

      (1) The loan shall not accelerate if EMPLOYEE accepts any Acquirer job
offer; but if EMPLOYEE's employment with Acquirer thereafter ceases, the loan
shall then accelerate.

      (2) The loan shall not accelerate if the only job offer by Acquirer to
EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a position not
materially inferior to and on terms and conditions not materially inferior to"
those in the Employment Agreement; provided that if EMPLOYEE accepts any job
with Acquirer, Section B(1) of this Amendment shall apply.

      If EMPLOYEE has an outstanding loan from EMPLOYER which is to be forgiven
in tranches "provided EMPLOYEE is then employed by EMPLOYER," then

      (3) The loan tranches shall continue to be forgiven if EMPLOYEE accepts
any Acquirer job offer and remains in Acquirer's employ at the time for
forgiveness.

      (4) The loan tranches shall continue to be forgiven if the only job offer
by Acquirer to EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a
position not materially inferior to and on terms and conditions not materially
inferior to" those in the Employment Agreement; provided that if EMPLOYEE
accepts any job with Acquirer, Section B(3) of this Amendment shall apply.

      If EMPLOYEE has an outstanding loan from EMPLOYER which is to be entirely
forgiven "if EMPLOYEE's employment with EMPLOYER ceases other than for Cause,"
then

      (5) The loan shall not be so forgiven if EMPLOYEE accepts any Acquirer job
offer, but if EMPLOYEE's employment with Acquirer thereafter ceases other than
for Cause the loan shall then be so forgiven.

      (6) The loan shall be so forgiven if the only job offer by Acquirer to
EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a position not
materially inferior to and on terms and conditions not materially inferior to"
those in the Employment Agreement; provided that if EMPLOYEE accepts any job
with Acquirer, Section B(5) of this Amendment shall apply.


                                       2


      (7) However, if EMPLOYEE accepts any position with Acquirer within six
months after an Asset Sale, then any forgiveness of the entire loan which
occurred between the date of the Asset Sale and the date of such acceptance
(inclusive) shall be "un-forgiven," and Section B(5) of this Amendment shall
apply.

      In addition, it is agreed that if Acquirer (or Synbiotics) transfers
EMPLOYEE to outside of San Diego County, California, or Lyon, France and
EMPLOYEE resigns within 30 days thereafter, for all purposes pertaining to any
such loan the cessation of employment shall be deemed a termination without
cause.

           C. Except as specifically set forth in this Amendment, the Employment
Agreement remains unchanged and in full force and effect.

         Dated:  February  14, 2001
                                                    /s/ Paul A. Rosinack
                                                    --------------------
                                                    PAUL A. ROSINACK

                                                    SYNBIOTICS CORPORATION

                                           By:      /s/ Kenneth M. Cohen
                                                    --------------------
                                                    KENNETH M. COHEN


                                       3

EX-10.8

                                                                    Exhibit 10.8
                                                                    ------------

                              EMPLOYMENT AGREEMENT
                              --------------------

      THIS AGREEMENT is made by and between Synbiotics Corporation, a California
corporation ("EMPLOYER"), and Michael K. Green ("EMPLOYEE") as of July 9, 1997.

                                    RECITALS:
                                    --------

      WHEREAS, EMPLOYER and EMPLOYEE wish to set forth in this Agreement the
terms and conditions under which EMPLOYEE is to be employed by EMPLOYER.

      NOW, THEREFORE, EMPLOYER and EMPLOYEE, in consideration of the mutual
promises set forth herein, agree as follows:

                                    ARTICLE 1
                                    ---------
                                TERM OF AGREEMENT
                                -----------------

      1.1 Term. The term of this Agreement shall commence on the date first
          ----
written above and shall continue until terminated pursuant to Article 6.

                                    ARTICLE 2
                                    ---------
                                EMPLOYMENT DUTIES
                                -----------------

      2.1 Title/Responsibilities. EMPLOYEE shall serve as an employee of
          ----------------------
EMPLOYER and hold the position of Vice President, Finance and Chief Financial
Officer of EMPLOYER, having the powers and responsibilities consistent with such
position and reporting to EMPLOYER's Chief Executive Officer, all subject to
ultimate direction and management of EMPLOYER's Board of Directors. EMPLOYEE
shall also perform all duties which from time to time are assigned to him by
EMPLOYER's Chief Executive Officer and/or Board of Directors, and shall provide
the Chief Executive Officer and/or Board with periodic reports upon request.
EMPLOYEE's job location shall be San Diego, California.

      2.2 Full Time Attention. EMPLOYEE shall perform his duties hereunder in a
          -------------------
diligent and professional manner and devote substantially all of his business
time and attention, best efforts, energy and skills to EMPLOYER during the time
he is employed hereunder as Vice President, Finance and Chief Financial Officer
of EMPLOYER. During the term of this Agreement EMPLOYEE shall not without the
express consent of EMPLOYER's Board of Directors serve or act as a shareholder
(except passive holdings of less than 1% of the stock), employee, agent,
consultant, officer, director, partner, representative or owner of any other
business entity, nor (if it would require more than an insubstantial amount of
business time or attention) of any nonprofit entity.

      2.3 Compliance with Rules. EMPLOYEE shall comply with all applicable
          ---------------------
governmental laws, rules and regulations and with all of EMPLOYER's policies,
rules and/or regulations applicable to all employees of EMPLOYER.

                                    ARTICLE 3
                                    ---------
                                  COMPENSATION
                                  ------------

      3.1 Base Salary. EMPLOYER shall pay semi-monthly to EMPLOYEE a salary of
          -----------
$140,000 per annum until such time or times as it may discretionarily be raised
(but not lowered) upon annual performance/salary review by EMPLOYER's Chief
Executive Officer (upon recommendation of its Compensation Committee.

                                      -1-


      3.2 Additional Compensation (Stock Option). In addition to the salary
          --------------------------------------
provided in Section 3.1, EMPLOYER hereby grants to EMPLOYEE as additional
compensation for Employee's services (but not for any capital-raising purposes
or in connection with any capital-raising activities), a non-qualified stock
option to purchase -0- shares of EMPLOYER Common Stock under EMPLOYER's 1995
Stock Option/Stock Issuance Plan, with an exercise price equal to the Fair
Market Value per share of EMPLOYER Common Stock on the date first written above,
such option to vest in sixteen equal quarterly installments. It is understood
that EMPLOYEE has previously been granted 80,000 stock options.

      3.3 Bonus. In addition to the salary provided in Section 3.1, EMPLOYEE
          -----
shall participate in any executive incentive bonus plan which EMPLOYEE may in
its discretion establish for 1998 and future years.

                                    ARTICLE 4
                                    ---------
                                 OTHER BENEFITS
                                 --------------

      4.1 Fringe Benefits. EMPLOYEE shall be entitled during the term of his
          ---------------
employment under this Agreement to all other fringe benefits made available from
time to time by EMPLOYER to its executives generally and/or its employees
generally, including without limitation participation in EMPLOYER's 401(k) plan
and group health insurance plan.

      4.2 Expenses. EMPLOYER shall reimburse EMPLOYEE, not less often than
          --------
monthly, for reasonable out-of-pocket business expenses incurred by EMPLOYEE in
the course of his duties hereunder upon submission by EMPLOYEE of appropriate
expense account reports and substantiating receipts.

      4.3 Vacation. EMPLOYEE shall be entitled to five (5) weeks paid vacation
          --------
per full year of service, in accordance with and subject to Employer's vacation
accrual plan and policies. EMPLOYEE acknowledges the "cap" on vacation accruals
set forth in such plan and policies.

                                    ARTICLE 5
                                    ---------
                                FORMER EMPLOYMENT
                                -----------------

      5.1 No Conflict. EMPLOYEE represents and warrants that the execution and
          -----------
delivery by him of this Agreement, his employment by EMPLOYER and his
performance of duties under this Agreement will not conflict with and will not
be constrained by any prior employment or consulting agreement or relationship,
or any other contractual obligation.

      5.2 No Use of Prior Confidential Information. EMPLOYEE will not
          ----------------------------------------
intentionally disclose to EMPLOYER or use on its behalf any confidential
information belonging to any of his former employers, but during his employment
by EMPLOYER he will use in the performance of his duties all information (but
only such information) which is generally known and used by persons with
training and experience comparable to his own or is common knowledge in the
industry or otherwise legally in the public domain.

                                    ARTICLE 6
                                    ---------
                                   TERMINATION
                                   -----------

      6.1 Term. This Agreement (including EMPLOYEE'S employment) shall continue
          ----
until terminated by either EMPLOYER or EMPLOYEE. Such termination (including
termination of Employee's employment) shall be effected by written notification
and may be affected at any time, with or without Cause, for any reason or no
reason.

      6.2 Severance. If this Agreement and/or Employee's employment is
          ---------
terminated as a result of Cause, EMPLOYEE shall be entitled to no severance pay.
If this Agreement and/or EMPLOYEE's employment is terminated other than for
Cause, EMPLOYEE shall be entitled to six (6) month's severance pay.

      Furthermore, if EMPLOYEE is terminated (other than for Cause) in
connection with an acquisition of EMPLOYER, EMPLOYEE shall be entitled to
additional severance pay of six (6) months' salary at EMPLOYEE's then base
salary rate (as well as the severance pay described in the previous paragraph)
and all of Employee's then unvested EMPLOYER stock options shall immediately
become fully vested.

                                      -2-


      "Cause" shall be defined to mean:

           (a) Death;

           (b) Voluntary resignation (other than because of a material breach by
EMPLOYER of its obligations under this Agreement, or reassignment of EMPLOYEE to
a location outside of San Diego County);

           (c) EMPLOYEE's repudiation of this Agreement;

           (d) Permanent disability (defined as EMPLOYEE's inability to perform,
with or without reasonable accommodation, the essential functions of his
position for any 50 business days -- exclusive of vacation days taken -- within
any continuous period of 200 days by reason of physical or mental illness or
incapacity);

           (e) EMPLOYEE being formally charged with the commission of a felony,
or being convicted of a misdemeanor involving moral turpitude;

           (f) EMPLOYEE's demonstrable fraud or dishonesty;

           (g) EMPLOYEE's use of alcohol, drugs or any illegal substance in such
a manner as to interfere with the performance of his duties under this
Agreement;

           (h) EMPLOYEE's intentional, reckless or grossly negligent action
materially detrimental to the best interest of the EMPLOYER, including any
misappropriation or unauthorized use of Employer's property or improper use or
disclosure of confidential information (but excluding any good faith exercise of
business judgment);

           (i) EMPLOYEE's intentional failure to perform material duties under
this Agreement if such failure has continued for 15 days after EMPLOYEE has been
notified in writing by EMPLOYER of the nature of EMPLOYEE's failure to perform;

           (j) Employee's chronic absence from work for reasons other than
illness or permitted vacation; or

           (k) EMPLOYEE's violation of policies in EMPLOYER's official Employee
Handbook, as it may be amended from time to time.

      Termination for Cause shall be without prejudice to any other right or
remedy to which EMPLOYER may be entitled at law, in equity, or under this
Agreement.

                                    ARTICLE 7
                                    ---------
                                   ARBITRATION
                                   -----------

      7.1 Final and Binding Arbitration. Any controversy, claim or dispute
          -----------------------------
between (a) a party to this Agreement, on the one hand, and (b) the other party
to this Agreement and/or such second party's parents, subsidiaries or affiliates
and/or any of their directors, officers, employees, agents, successors, assigns,
heirs, executors, administrators, or legal representatives, on the other hand,
arising out of, in connection with, or in relation to (t) the interpretation,
validity, performance or breach of this Agreement, (u) EMPLOYEE's stock options
and the underlying shares, (v) Employee's employment by EMPLOYER, (w) any
termination of such employment, (x) any actions during or with respect to
EMPLOYEE's work for EMPLOYER, (y) any claims for breach of contract, tort, or
breach of the covenant of good faith and fair dealing, or (z) any claims of
discrimination or other claims under any federal, state or local law or
regulation now in existence or hereinafter enacted and as amended from time to
time concerning in any way the subject of EMPLOYEE's employment with EMPLOYER or
its termination, shall, at the request of either party, be resolved to the
exclusion of a court of law by binding arbitration in San Diego, California, in
accordance with Exhibit A hereto. Each of EMPLOYEE and EMPLOYER understands and
agrees that the arbitration shall be instead of any civil litigation and that
the arbitrator's decision shall be final and binding to the fullest extent
permitted by law and enforceable by any court having jurisdiction thereof. The
only claims not covered by this Section 7.1 are claims for benefits under the
            ---
workers'

                                      -3-


compensation laws, claims for unemployment insurance benefits, and
matters within the jurisdiction of the California Labor Commissioner, which will
be resolved pursuant to those laws.

                                    ARTICLE 8
                                    ---------
                               GENERAL PROVISIONS
                               ------------------

      8.1 Governing Law. This Agreement and the rights of the parties thereunder
          -------------
shall be governed by and interpreted under California law.

      8.2 Assignment. EMPLOYEE may not delegate, assign, pledge or encumber his
          ----------
rights or obligations under this Agreement or any part thereof

      8.3 Notice. Any notice required or permitted to be given under this
          ------
Agreement shall be sufficient if it is in writing and is sent by registered or
certified mail, postage prepaid, or personally delivered, to the following
addresses, or to such other addresses as either party shall specify by giving
notice under this section:

          TO EMPLOYER:      Chief Executive Officer, Synbiotics Corporation
                            11011 Via Frontera
                            San Diego, CA 92127

          Copy to:          Hayden J. Trubitt
                            Brobeck, Phleger & Harrison LLP
                            550 West C Street, Suite 1300
                            San Diego, CA 92101

          TO EMPLOYEE:      Michael K. Green
                            c/o Synbiotics Corporation
                            11011 Via Frontera
                            San Diego, CA 92127

      8.4 Amendment. This Agreement may be waived, amended or supplemented only
          ---------
by an express writing signed by both of the parties hereto. To be valid,
EMPLOYER's signature must be by a person specially authorized by EMPLOYER's
Board of Directors to sign such particular document.

      8.5 Waiver. No waiver of any provision of this Agreement shall be binding
          ------
unless and until set forth expressly in writing and signed by the waiving party.
To be valid, EMPLOYER's signature must be by a person specially authorized by
EMPLOYER's Board of Directors to sign such particular document. The waiver by
either party of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any preceding or succeeding breach of the same or
any other term or provision, or a waiver of any contemporaneous breach of any
other term or provision, or a continuing waiver of the same or any other term or
provision. No failure or delay by a party in exercising any right, power, or
privilege hereunder or other conduct by a party shall operate as a waiver
thereof, in the particular case or in any past or future case, and no single or
partial exercise thereof shall preclude the full exercise or further exercise of
any right, power, or privilege. No action taken pursuant to this Agreement shall
be deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained herein.

      8.6 Severability. All provisions contained herein are severable and in the
          ------------
event that any of them shall be held to be to any extent invalid or otherwise
unenforceable by any court of competent jurisdiction, such provision shall be
construed as if it were written so as to effectuate to the greatest possible
extent the parties' expressed intent; and in every case the remainder of this
Agreement shall not be affected thereby and shall remain valid and enforceable,
as if such affected provision were not contained herein.

      8.7 Headings. Article and section headings are inserted herein for
          --------
convenience of reference only and in no way are to be construed to define, limit
or affect the construction or interpretation of the terms of this Agreement.

                                      -4-


      8.8 Drafting Party. The provisions of this Agreement have been prepared,
          --------------
examined, negotiated and revised by each party hereto, and no implication shall
be drawn and no provision shall be construed against either party by virtue of
the purported identity of the drafter of this Agreement, or any portion thereof.

      8.9 No Outside Representations. No r(-,presentation, warranty, condition,
          --------------------------
promise, understanding or agreement of any kind with respect to the subject
matter hereof has been made by either party, nor shall any such be relied upon
by either party, except those contained herein. There were no inducements to
enter into this Agreement, except for what is expressly set forth in this
Agreement.

      8.10 Entire Agreement. This Agreement, together with EMPLOYER's standard
           ----------------
Proprietary Information and Inventions Agreement, constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
completely supersedes all prior or contemporaneous agreements, understandings,
arrangements, commitments, negotiations and discussions of the parties, whether
oral or written (all of which shall have no substantive significance or
evidentiary effect). Each party acknowledges, represents and warrants that he or
it has not relied on any representation, agreement, understanding, arrangement
or commitment which has not been expressly set forth in this Agreement. Each
party acknowledges, represents and warrants that this Agreement is fully
integrated and not in need of parol evidence in order to reflect the intentions
of the parties. The parties specifically intend that the literal words of this
Agreement shall, alone, conclusively determine all questions concerning the
parties' intent.

IN WITNESS WHEREOF, the parties have executed and delivered this Employment
Agreement in San Diego, California as of the date first written above.

                                        SYNBIOTICS CORPORATION

                                        /s/ Kenneth M. Cohen
                                        --------------------
                                        Kenneth M. Cohen,
                                        President and Chief Executive Officer


                                        /s/ Michael K. Green
                                        --------------------
                                        Michael K. Green

                                      -5-


                                    EXHIBIT A
                                    ---------
                             ARBITRATION PROCEDURES
                             ----------------------

      1. Agreement to Arbitrate
         ----------------------

      In the event that there is any dispute relating to, regarding or arising
in connection with EMPLOYEE's employment with EMPLOYER which cannot be resolved
through direct discussion or mediation, regardless of the kind or type of
dispute (excluding claims for workers' compensation, unemployment insurance or
any matters within the jurisdiction of the California Labor Commissioner), all
such disputes shall be submitted exclusively to final and binding arbitration
pursuant to the provisions of the Federal Arbitration Act or, if inapplicable,
the Uniform Arbitration Act (California Code of Civil Procedure ss. 1280 et
seq.), upon request submitted in writing to the President within one year from
the date the dispute first arose, or within one year of the date of termination
of employment, whichever occurs first. This procedure shall be the exclusive
method for resolving all claims relating to the termination of EMPLOYEE's
employment, including but not limited to any alleged violations of federal,
state and/or local statutes; all claims based upon any purported breach of duty
arising in contract or tort, including but not limited to breach of contract,
breach of the covenant of good faith and fair dealing, or violation of public
policy; and any other alleged violation of an employee's statutory, contractual
or common law rights.

      Any failure to request arbitration in accordance with the foregoing
provisions shall constitute a waiver of all rights to raise or present any
claims in any form, in any forum, arising out of any dispute that was subject to
arbitration.

      2. Selection of Arbitrator
         -----------------------

      All disputes subject to arbitration will be resolved by a single
arbitrator selected from a list provided by the California Mediation and
Conciliation Service from its Employment Arbitration Panel. The parties shall
select the arbitrator by alternately striking names from the list, and the last
name remaining on the list shall be the arbitrator selected to resolve the
dispute. The arbitrator must be selected within thirty (30) days of receipt of
the written request for arbitration. The arbitration hearing shall be held in
San Diego, California, at a neutral location selected by the parties or, in the
event the parties are unable to agree, at a location designated by the
arbitrator.

      3. Authority of Arbitrator
         -----------------------

      The arbitrator shall only be authorized to exercise the powers
specifically enumerated by this procedure and to decide the dispute in
accordance with governing principles of law and equity. The arbitrator shall
have no authority to modify the powers granted by the terms of this procedure or
to modify the terms of the employee handbook, except as required by law. The
arbitrator shall have the authority to rule on motions by the parties, to issue
protective orders upon motion of any party or third party, and to determine only
the disputes submitted by the parties based upon the grounds presented. Any
dispute or argument not presented by the parties is outside the scope of the
arbitrator's jurisdiction and any award invoking such disputes or arguments is
subject to a motion to vacate; provided, however, the arbitrator shall have
exclusive authority to resolve any dispute relating to the validity,
interpretation and enforcement of these arbitration procedures.

      4. Discovery
         ---------

      The arbitrator shall have the power, in addition to determining the merits
of the dispute submitted, to permit discovery regarding the subject matter of
arbitration and to enforce the rights, remedies, procedures, duties, liabilities
and obligations of discovery by the imposition of the same terms, conditions,
consequences, liabilities, sanctions and penalties as may be imposed in like
circumstances by a Superior Court under the California Code of Civil Procedure.
All discovery must be completed thirty (30) days prior to the date set for the
arbitration hearing.

      5. Hearing Procedure
         -----------------

      The issue(s) submitted to the arbitrator must be set forth in the request
for arbitration. The arbitrator shall have no authority to frame the statement
of the issue(s). Unless otherwise agreed by the parties, the arbitration hearing
shall be governed by the formal rules of evidence contained in the California
Evidence Code. The parties shall mutually agree on the

                                      A-1


number of days required for hearing. The hearing shall be recorded and
transcribed verbatim by a certified shorthand reporter. Each party shall bear
its own costs with respect to a copy of the transcript of the hearing; however,
the parties shall each be responsible for one-half the cost of the court
reporter's fee and the arbitrator's copy of the hearing transcript.

      6. Post-Hearing Procedure
         ----------------------

      Each party shall have the right to present closing argument at the
conclusion of all sworn testimony and, in addition to or in lieu of closing
argument, either party shall have the right to submit post-hearing briefs. The
due date and procedure for exchanging post-hearing briefs shall be mutually
agreed upon by the parties or as directed by the arbitrator.

      7. Opinion and Award
         -----------------

      The arbitrator shall issue a written opinion and award within sixty (60)
days of closing arguments or the receipt of post-hearing briefs, whichever is
later. The arbitration award and opinion shall be signed and dated by the
arbitrator and shall decide all issues submitted and set forth the legal
principles supporting each aspect of the opinion and award. The arbitrator shall
only be permitted to award those remedies in law or equity which are requested
by the parties and which are supported by the credible, relevant evidence. The
arbitrator shall have no authority to award punitive or exemplary damages under
any circumstances or for any reason.

      8. Fees and Costs
         --------------

      Each party shall be responsible for its own attorney's fees, except as
provided by law, and for all costs associated with discovery unless otherwise
ordered by the arbitrator. Each party shall also be responsible for one-half of
the arbitrator's fee and one-half of any costs associated with the facilities
for the arbitration hearing.

      9. Severability
         ------------

      In the event that any provision of this procedure is determined by the
arbitrator or by a court of competent jurisdiction to be illegal, invalid, or
unenforceable to any extent, such term or provision shall be enforced to the
extent permissible under law and all remaining terms and provisions hereof shall
continue in full force and effect.

                                      A-2

EX-10.8.1

                                                                  Exhibit 10.8.1
                                                                  --------------

                                  AMENDMENT OF
                              EMPLOYMENT AGREEMENT


           A. The Employment Agreement dated July 9, 1997 between Michael K.
Green and Synbiotics Corporation is amended by adding thereto a new Section 6.3,
to read in full as follows:

      6.3  Acquisition of Assets.
           ---------------------

           (a) Offer of Similar Job = No Severance Pay. If any company
               ---------------------------------------
("Acquirer") acquires at least a majority of EMPLOYER's assets in an acquisition
transaction outside the ordinary course of business, whether by asset purchase
or by a merger in which EMPLOYER does not survive (an "Asset Sale"), and
Acquirer offers to employ EMPLOYEE in a position not materially inferior to and
on terms and conditions not materially inferior to those called for by this
Agreement as of the time of the Asset Sale, then notwithstanding Section 6.2,
and whether or not EMPLOYEE accepts such offer, any termination of EMPLOYEE by
EMPLOYER upon or after the Asset Sale shall not entitle EMPLOYEE to any
severance pay whatever. The purpose of this provision is to ensure that if
EMPLOYEE has a chance to keep a similar job with Acquirer, then EMPLOYER should
not have to pay severance.

           (b) Job Offers Deemed Not Similar. For purposes of this Section 6.3,
               -----------------------------
an offer's terms and conditions are inferior if the offer requires a transfer to
outside of San Diego County, California or if the terms include severance
provisions materially inferior to those in Section 6.2 (or no severance
provisions at all). These are not the only ways in which an offer's terms and
conditions can be materially inferior. In addition, if Acquirer acquires
EMPLOYER by reverse triangular merger, resignation within 30 days after a
directive to transfer to outside of San Diego County, California shall be deemed
a termination without cause in connection with the acquisition.

           (c) Acceptance of Any Job = No Severance Pay. Also, if EMPLOYEE
               ----------------------------------------
accepts any position with Acquirer within six months after an Asset Sale, then
notwithstanding Section 6.2 and Section 6.3(a)-(b), any termination of EMPLOYEE
by EMPLOYER upon or after the Asset Sale shall not entitle EMPLOYEE to any
severance pay whatever; and EMPLOYEE shall refund to EMPLOYER any and all
severance pay which was previously paid.

           (d) No Similar Job Offer From Acquirer and Delayed Termination From
               ---------------------------------------------------------------
the Shell = Severance Pay. On the other hand, if after an Asset Sale Acquirer
- -------------------------
makes no such offer to EMPLOYEE (and even if EMPLOYEE remains employed by
EMPLOYER), then any termination of EMPLOYEE by EMPLOYER (other than for Cause)
upon or after the Asset Sale and






before the first anniversary of the Asset Sale shall be deemed to be "in
connection with an acquisition of EMPLOYER" for purposes of Section 6.2. If
Section 6.3(c) and 6.3(d) both apply, Section 6.3(c) shall govern.

           (e) Retention Plan. Stay bonuses paid or payable under any EMPLOYER
               --------------
retention plan are not "severance pay" for the purposes of this Agreement.

           B. If EMPLOYEE has an outstanding loan from EMPLOYER which is
accelerated upon "the cessation of EMPLOYEE's employment with EMPLOYER," then

      (1)  The loan shall not accelerate if EMPLOYEE accepts any Acquirer job
offer; but if EMPLOYEE's employment with Acquirer thereafter ceases, the loan
shall then accelerate.

      (2)  The loan shall not accelerate if the only job offer by Acquirer to
EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a position not
materially inferior to and on terms and conditions not materially inferior to"
those in the Employment Agreement; provided that if EMPLOYEE accepts any job
with Acquirer, Section B(1) of this Amendment shall apply.

      If EMPLOYEE has an outstanding loan from EMPLOYER which is to be forgiven
in tranches "provided EMPLOYEE is then employed by EMPLOYER," then

      (3)  The loan tranches shall continue to be forgiven if EMPLOYEE accepts
any Acquirer job offer and remains in Acquirer's employ at the time for
forgiveness.

      (4)  The loan tranches shall continue to be forgiven if the only job offer
by Acquirer to EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a
position not materially inferior to and on terms and conditions not materially
inferior to" those in the Employment Agreement; provided that if EMPLOYEE
accepts any job with Acquirer, Section B(3) of this Amendment shall apply.

      If EMPLOYEE has an outstanding loan from EMPLOYER which is to be entirely
forgiven "if EMPLOYEE's employment with EMPLOYER ceases other than for Cause,"
then

      (5)  The loan shall not be so forgiven if EMPLOYEE accepts any Acquirer
job offer, but if EMPLOYEE's employment with Acquirer thereafter ceases other
than for Cause the loan shall then be so forgiven.

      (6)  The loan shall be so forgiven if the only job offer by Acquirer to
EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a position not
materially inferior to and on terms and conditions not materially inferior to"
those in the Employment Agreement; provided that if EMPLOYEE accepts any job
with Acquirer, Section B(5) of this Amendment shall apply.

                                       2




      (7)  However, if EMPLOYEE accepts any position with Acquirer within six
months after an Asset Sale, then any forgiveness of the entire loan which
occurred between the date of the Asset Sale and the date of such acceptance
(inclusive) shall be "un-forgiven," and Section B(5) of this Amendment shall
apply.

      In addition, it is agreed that if Acquirer (or Synbiotics) transfers
EMPLOYEE to outside of San Diego County, California, or Lyon, France and
EMPLOYEE resigns within 30 days thereafter, for all purposes pertaining to any
such loan the cessation of employment shall be deemed a termination without
cause.

           C. Except as specifically set forth in this Amendment, the Employment
Agreement remains unchanged and in full force and effect.

         Dated:  February  14, 2001
                                                  /s/ Michael K. Green
                                                  --------------------
                                                  MICHAEL K. GREEN

                                                  SYNBIOTICS CORPORATION

                                         By:      /s/ Kenneth M. Cohen
                                                  --------------------
                                                  KENNETH M. COHEN

                                       3

EX-10.9.1

                                                                  Exhibit 10.9.1
                                                                  --------------

                                   AMENDMENT OF
                               EMPLOYMENT CONTRACT


The Employment Contract dated October 12, 1997 between Francois Guillemin and
Synbiotics Europe SAS/Synbiotics Corporation (the "Contract") is hereby amended
as follows. The purpose of these revisions is to assure that, if Mr. Guillemin
has the opportunity to keep his position with an Acquirer of the assets of
Synbiotics, this would be considered a continuation of his employment and not a
termination by Synbiotics.

The following is added to Section 11.

         If a party ("Acquirer") acquires the majority of the assets of
         Synbiotics Corporation and the Acquirer offers Mr. Guillemin a position
         not materially inferior to his present position, on terms not
         materially inferior to his present terms of employment, then Mr.
         Guillemin will not be entitled to receive termination pay ("Severance")
         from Synbiotics, whether he accepts the Acquirer's offer or not.

         An offer that permits the acquirer to transfer Mr. Guillemin outside of
         Lyon, France, or an offer that does not include the right to receive
         Severance payments as in the current contract, would be an inferior
         offer.

         If Mr. Guillemin accepts any position with Acquirer within six months
         after an Asset Sale, then Mr. Guillemin is not entitled to any
         Severance under this employment contract and Mr. Guillemin shall refund
         to the Company any and all Special Severance which was previously paid.

The following is deleted from Section 11:

         The second ss. of section 11 i.e. the last ss. of page 3 of the
         original Employment Contract ( Contrat de travail) signed on October
         the 17th, 1997, beginning by "en tout etat de cause ... and ending by
         ... de licenciement"

Except as specifically set forth in this Amendment, the Contract remains
unchanged and in full force and effect.

Dated: February 14, 2001          Read and approved,


                                  /s/ Francois Guillemin
                                  ----------------------
                                  FRANCOIS GUILLEMIN

                                  SYNBIOTICS CORPORATION/SYNBIOTICS EUROPE SAS

                                  By:  /s/ Paul A. Rosinack
                                       --------------------

EX-10.10

                                                                   Exhibit 10.10
                                                                   -------------

                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS AGREEMENT is made by and between Synbiotics Corporation, a California
corporation ("EMPLOYER"), and Serge Leterme ("EMPLOYEE") as of August 1, 1998.

                                   RECITALS:
                                   --------

     WHEREAS, EMPLOYER and EMPLOYEE wish to set forth in this Agreement the
terms and conditions under which EMPLOYEE is to be employed by EMPLOYER.

     NOW, THEREFORE, EMPLOYER EMPLOYEE, in consideration of the mutual
promises set forth herein, agree as follows:

                                   ARTICLE 1
                                   ---------
                               TERM OF AGREEMENT
                               -----------------

     1.1  Term. The term of this Agreement shall commence on the date first
          ----
written above and shall continue until terminated pursuant to Article 6.

                                   ARTICLE 2
                                   ---------
                               EMPLOYMENT DUTIES
                               -----------------

     2.1  Title/Responsibilities. EMPLOYEE shall serve as an employee of
          ----------------------
EMPLOYER and hold the position of Vice President, Research and Development of
EMPLOYER, having the powers and responsibilities consistent with such position
and reporting to EMPLOYER's Chief Executive Officer, all subject to ultimate
direction and management of EMPLOYER's Board of Directors. EMPLOYEE shall also
perform all duties which from time to time are assigned to him by EMPLOYER's
Chief Executive Officer and/or Board of Directors, and shall provide the Chief
Executive Officer and/or Board with periodic reports upon request. EMPLOYEE's
job location shall be San Diego, California.

     2.2  Full Time Attention. EMPLOYEE shall perform his duties hereunder in a
          -------------------
diligent and professional manner and devote substantially all of his business
time and attention, best efforts, energy and skills to EMPLOYER during the time
he is employed hereunder as Vice President, Research and Development of
EMPLOYER. During the term of this Agreement EMPLOYEE shall not without the
express consent of EMPLOYER's Board of Directors serve or act as a shareholder
(except passive holdings of less than 1% of the stock), employee, agent,
consultant, officer, director, partner, representative or owner of any other
business entity, nor (if it would require more than an insubstantial amount of
business time or attention) of any nonprofit entity.

     2.3  Compliance with Rules. EMPLOYEE shall comply with all applicable
          ---------------------
governmental laws, rules and regulations and with all of EMPLOYER's policies,
rules and/or regulations applicable to all employees of EMPLOYER.

                                   ARTICLE 3
                                   ---------
                                 COMPENSATION
                                 ------------

     3.1  Base Salary. EMPLOYER shall pay semi-monthly to EMPLOYEE a salary of
          -----------
$120,000 per annum until such time or times as it may discretionarily be raised
(but not lowered) upon annual performance/salary review by EMPLOYER's Chief
Executive Officer (upon recommendation of its Compensation Committee.

                                      -1-


     3.2  Additional Compensation (Stock Option). In addition to the salary
          --------------------------------------
provided in Section 3.1, EMPLOYER hereby grants to EMPLOYEE as additional
compensation for Employee's services (but not for any capital-raising purposes
or in connection with any capital-raising activities), a non-qualified stock
option to purchase 25,000 shares of EMPLOYER Common Stock under EMPLOYER's 1995
Stock Option/Stock Issuance Plan, with an exercise price equal to the Fair
Market Value per share of EMPLOYER Common Stock on the date first written above,
such option to vest in sixteen equal quarterly installments. It is understood
that EMPLOYEE has previously been granted 20,000 stock options.

     3.3  Bonus. In addition to the salary provided in Section 3.1, EMPLOYEE
          -----
shall participate in any executive incentive bonus plan which EMPLOYEE may in
its discretion establish for 1998 and future years.

                                   ARTICLE 4
                                   ---------
                                OTHER BENEFITS
                                --------------

     4.1  Fringe Benefits. EMPLOYEE shall be entitled during the term of his
          ---------------
employment under this Agreement to all other fringe benefits made available from
time to time by EMPLOYER to its executives generally and/or its employees
generally, including without limitation participation in EMPLOYER's 401(k) plan
and group health insurance plan.

     4.2  Expenses. EMPLOYER shall reimburse EMPLOYEE, not less often than
          --------
monthly, for reasonable out-of-pocket business expenses incurred by EMPLOYEE in
the course of his duties hereunder upon submission by EMPLOYEE of appropriate
expense account reports and substantiating receipts.

     4.3  Vacation. EMPLOYEE shall be entitled to five (5) weeks paid vacation
          --------
per full year of service, in accordance with and subject to Employer's vacation
accrual plan and policies. EMPLOYEE acknowledges the "cap" on vacation accruals
set forth in such plan and policies.

     4.4  Relocation. EMPLOYER shall provide EMPLOYEE a loan in the amount of
          ----------
$75,000 t.assist EMPLOYEE with his relocation expenses. Such loan shall bear no
interest until maturity, and principal shall (to the extent not previously
forgiven) be payable in one lump sum on the day after the earlier of the
cessation of EMPLOYEE's employment with EMPLOYER or the fourth anniversary of
this Agreement. One-quarter of the original amount of the loan shall be forgiven
on each anniversary of this Agreement provided EMPLOYEE is then employed by
EMPLOYER, and the entire loan shall be forgiven if EMPLOYEE's employment with
EMPLOYER ceases other than for Cause or voluntary resignation.

                                   ARTICLE 5
                                   ---------
                               FORMER EMPLOYMENT
                               -----------------

     5.1  No Conflict. EMPLOYEE represents and warrants that the execution and
          -----------
delivery by him of this Agreement, his employment by EMPLOYER and his
performance of duties under this Agreement will not conflict with and will not
be constrained by any prior employment or consulting agreement or relationship,
or any other contractual obligation.

     5.2  No Use of Prior Confidential Information. EMPLOYEE will not
          ----------------------------------------
intentionally disclose to EMPLOYER or use on its behalf any confidential
information belonging to any of his former employers, but during his employment
by EMPLOYER he will use in the performance of his duties all information (but
only such information) which is generally known and used by persons with
training and experience comparable to his own or is common knowledge in the
industry or otherwise legally in the public domain.

                                   ARTICLE 6
                                   ---------
                                  TERMINATION
                                  -----------

     6.1  Term. This Agreement (including EMPLOYEE'S employment) shall continue
          ----
until terminated by either EMPLOYER or EMPLOYEE. Such termination (including
termination of Employee's employment) shall be effected by written notification
and may be affected at any time, with or without Cause, for any reason or no
reason.

                                      -2-


     6.2  Severance. If this Agreement and/or Employee's employment is
          ---------
terminated as a result of Cause, EMPLOYEE shall be entitled to no severance pay.
If this Agreement and/or EMPLOYEE's employment is terminated other than for
Cause, EMPLOYEE shall be entitled to six (6) month's severance pay.

     Furthermore, if EMPLOYEE is terminated (other than for Cause) in
connection with an acquisition of EMPLOYER, EMPLOYEE shall be entitled to
additional severance pay of six (6) months' salary at EMPLOYEE's then base
salary rate (as well as the severance pay described in the previous paragraph)
and all of Employee's then unvested EMPLOYER stock options shall immediately
become fully vested.

     "Cause" shall be defined to mean:

          (a)  Death;

          (b)  Voluntary resignation (other than because of a material breach by
EMPLOYER of its obligations under this Agreement, or reassignment of EMPLOYEE to
a location outside of San Diego County);

          (c)  EMPLOYEE's repudiation of this Agreement;

          (d)  Permanent disability (defined as EMPLOYEE's inability to perform,
with or without reasonable accommodation, the essential functions of his
position for any 50 business days -- exclusive of vacation days taken -- within
any continuous period of 200 days by reason of physical or mental illness or
incapacity);

          (e)  EMPLOYEE being formally charged with the commission of a felony,
or being convicted of a misdemeanor involving moral turpitude;

          (f)  EMPLOYEE's demonstrable fraud or dishonesty;

          (g)  EMPLOYEE's use of alcohol, drugs or any illegal substance in such
a manner as to interfere with the performance of his duties under this
Agreement;

          (h)  EMPLOYEE's intentional, reckless or grossly negligent action
materially detrimental to the best interest of the EMPLOYER, including any
misappropriation or unauthorized use of Employer's property or improper use or
disclosure of confidential information (but excluding any good faith exercise of
business judgment);

          (i)  EMPLOYEE's intentional failure to perform material duties under
this Agreement if such failure has continued for 15 days after EMPLOYEE has been
notified in writing by EMPLOYER of the nature of EMPLOYEE's failure to perform;

          (j)  Employee's chronic absence from work for reasons other than
illness or permitted vacation; or

          (k)  EMPLOYEE's violation of policies in EMPLOYER's official Employee
Handbook, as it may be amended from time to time.

      Termination for Cause shall be without prejudice to any other right or
remedy to which EMPLOYER may be entitled at law, in equity, or under this
Agreement.

                                   ARTICLE 7
                                   ---------
                                  ARBITRATION
                                  -----------

     7.1  Final and Binding Arbitration. Any controversy, claim or dispute
          -----------------------------
between (a) a party to this Agreement, on the one hand, and (b) the other party
to this Agreement and/or such second party's parents, subsidiaries or affiliates
and/or any of their directors, officers, employees, agents, successors, assigns,
heirs, executors, administrators, or legal representatives, on the other hand,
arising out of, in connection with, or in relation to (t) the interpretation,
validity, performance or breach of this Agreement, (u) EMPLOYEE's stock options
and the underlying shares, (v) Employee's employment by EMPLOYER, (w) any

                                      -3-


termination of such employment, (x) any actions during or with respect to
EMPLOYEE's work for EMPLOYER, (y) any claims for breach of contract, tort, or
breach of the covenant of good faith and fair dealing, or (z) any claims of
discrimination or other claims under any federal, state or local law or
regulation now in existence or hereinafter enacted and as amended from time to
time concerning in any way the subject of EMPLOYEE's employment with EMPLOYER or
its termination, shall, at the request of either party, be resolved to the
exclusion of a court of law by binding arbitration in San Diego, California, in
accordance with Exhibit A hereto. Each of EMPLOYEE and EMPLOYER understands and
agrees that the arbitration shall be instead of any civil litigation and that
the arbitrator's decision shall be final and binding to the fullest extent
permitted by law and enforceable by any court having jurisdiction thereof. The
only claims not covered by this Section 7.1 are claims for benefits under the
            ---
workers' compensation laws, claims for unemployment insurance benefits, and
matters within the jurisdiction of the California Labor Commissioner, which will
be resolved pursuant to those laws.

                                   ARTICLE 8
                                   ---------
                              GENERAL PROVISIONS
                              ------------------

     8.1  Governing Law. This Agreement and the rights of the parties thereunder
          -------------
shall be governed by and interpreted under California law.

     8.2  Assignment.  EMPLOYEE may not delegate, assign, pledge or encumber his
          ----------
 rights or obligations under this Agreement or any part thereof

     8.3  Notice. Any notice required or permitted to be given under this
          ------
Agreement shall be sufficient if it is in writing and is sent by registered or
certified mail, postage prepaid, or personally delivered, to the following
addresses, or to such other addresses as either party shall specify by giving
notice under this section:

          TO EMPLOYER:           Chief Executive Officer, Synbiotics Corporation
                                 11011 Via Frontera
                                 San Diego, CA 92127

          Copy to:               Hayden J. Trubitt
                                 Brobeck, Phleger & Harrison LLP
                                 550 West C Street, Suite 1300
                                 San Diego, CA 92101

          TO EMPLOYEE:           Michael K. Green
                                 c/o Synbiotics Corporation
                                 11011 Via Frontera
                                 San Diego, CA 92127

     8.4  Amendment. This Agreement may be waived, amended or supplemented
          ---------
only by an express writing signed by both of the parties hereto. To be valid,
EMPLOYER's signature must be by a person specially authorized by EMPLOYER's
Board of Directors to sign such particular document.

     8.5  Waiver. No waiver of any provision of this Agreement shall be
          ------
binding unless and until set forth expressly in writing and signed by the
waiving party. To be valid, EMPLOYER's signature must be by a person specially
authorized by EMPLOYER's Board of Directors to sign such particular document.
The waiver by either party of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any preceding or succeeding breach of
the same or any other term or provision, or a waiver of any contemporaneous
breach of any other term or provision, or a continuing waiver of the same or any
other term or provision. No failure or delay by a party in exercising any right,
power, or privilege hereunder or other conduct by a party shall operate as a
waiver thereof, in the particular case or in any past or future case, and no
single or partial exercise thereof shall preclude the full exercise or further
exercise of any right, power, or privilege. No action taken pursuant to this
Agreement shall be deemed to constitute a waiver by the party taking such action
of compliance with any representations, warranties, covenants or agreements
contained herein.

                                      -4-


     8.6  Severability. All provisions contained herein are severable and in the
          ------------
event that any of them shall be held to be to any extent invalid or otherwise
unenforceable by any court of competent jurisdiction, such provision shall be
construed as if it were written so as to effectuate to the greatest possible
extent the parties' expressed intent; and in every case the remainder of this
Agreement shall not be affected thereby and shall remain valid and enforceable,
as if such affected provision were not contained herein.

     8.7  Headings. Article and section headings are inserted herein for
          --------
convenience of reference only and in no way are to be construed to define, limit
or affect the construction or interpretation of the terms of this Agreement.

     8.8  Drafting Party. The provisions of this Agreement have been
          --------------
prepared, examined, negotiated and revised by each party hereto, and no
implication shall be drawn and no provision shall be construed against either
party by virtue of the purported identity of the drafter of this Agreement, or
any portion thereof.

     8.9  No Outside Representations. No r(-,presentation, warranty, condition,
          --------------------------
promise, understanding or agreement of any kind with respect to the subject
matter hereof has been made by either party, nor shall any such be relied upon
by either party, except those contained herein. There were no inducements to
enter into this Agreement, except for what is expressly set forth in this
Agreement.

     8.10 Entire Agreement. This Agreement, together with EMPLOYER's standard
          ----------------
Proprietary Information and Inventions Agreement, constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
completely supersedes all prior or contemporaneous agreements, understandings,
arrangements, commitments, negotiations and discussions of the parties, whether
oral or written (all of which shall have no substantive significance or
evidentiary effect). Each party acknowledges, represents and warrants that he or
it has not relied on any representation, agreement, understanding, arrangement
or commitment which has not been expressly set forth in this Agreement. Each
party acknowledges, represents and warrants that this Agreement is fully
integrated and not in need of parol evidence in order to reflect the intentions
of the parties. The parties specifically intend that the literal words of this
Agreement shall, alone, conclusively determine all questions concerning the
parties' intent.

IN WITNESS WHEREOF, the parties have executed and delivered this Employment
Agreement in San Diego, California as of the date first written above.

                                       SYNBIOTICS CORPORATION

                                       /s/ Kenneth M. Cohen
                                       --------------------
                                       Kenneth M. Cohen,
                                       President and Chief Executive Officer


                                       /s/ Serge Leterme
                                       -----------------
                                       Serge Leterme

Attachment:  Exhibit A (Arbitration Procedures)

                                      -5-


                                   EXHIBIT A
                                   ---------

                            ARBITRATION PROCEDURES
                            ----------------------

     1.   Agreement to Arbitrate
          ----------------------

     In the event that there is any dispute relating to, regarding or arising
in connection with EMPLOYEE's employment with EMPLOYER which cannot be resolved
through direct discussion or mediation, regardless of the kind or type of
dispute (excluding claims for workers' compensation, unemployment insurance or
any matters within the jurisdiction of the California Labor Commissioner), all
such disputes shall be submitted exclusively to final and binding arbitration
pursuant to the provisions of the Federal Arbitration Act or, if inapplicable,
the Uniform Arbitration Act (California Code of Civil Procedure (S) 1280 et
seq.), upon request submitted in writing to the President within one year from
the date the dispute first arose, or within one year of the date of termination
of employment, whichever occurs first. This procedure shall be the exclusive
method for resolving all claims relating to the termination of EMPLOYEE's
employment, including but not limited to any alleged violations of federal,
state and/or local statutes; all claims based upon any purported breach of duty
arising in contract or tort, including but not limited to breach of contract,
breach of the covenant of good faith and fair dealing, or violation of public
policy; and any other alleged violation of an employee's statutory, contractual
or common law rights.

     Any failure to request arbitration in accordance with the foregoing
provisions shall constitute a waiver of all rights to raise or present any
claims in any form, in any forum, arising out of any dispute that was subject to
arbitration.

     2.   Selection of Arbitrator
          -----------------------

     All disputes subject to arbitration will be resolved by a single arbitrator
selected from a list provided by the California Mediation and Conciliation
Service from its Employment Arbitration Panel. The parties shall select the
arbitrator by alternately striking names from the list, and the last name
remaining on the list shall be the arbitrator selected to resolve the dispute.
The arbitrator must be selected within thirty (30) days of receipt of the
written request for arbitration. The arbitration hearing shall be held in San
Diego, California, at a neutral location selected by the parties or, in the
event the parties are unable to agree, at a location designated by the
arbitrator.

     3.   Authority of Arbitrator
          -----------------------

     The arbitrator shall only be authorized to exercise the powers specifically
enumerated by this procedure and to decide the dispute in accordance with
governing principles of law and equity. The arbitrator shall have no authority
to modify the powers granted by the terms of this procedure or to modify the
terms of the employee handbook, except as required by law. The arbitrator shall
have the authority to rule on motions by the parties, to issue protective orders
upon motion of any party or third party, and to determine only the disputes
submitted by the parties based upon the grounds presented. Any dispute or
argument not presented by the parties is outside the scope of the arbitrator's
jurisdiction and any award invoking such disputes or arguments is subject to a
motion to vacate; provided, however, the arbitrator shall have exclusive
authority to resolve any dispute relating to the validity, interpretation and
enforcement of these arbitration procedures.

     4.   Discovery
          ---------

     The arbitrator shall have the power, in addition to determining the merits
of the dispute submitted, to permit discovery regarding the subject matter of
arbitration and to enforce the rights, remedies, procedures, duties, liabilities
and obligations of discovery by the imposition of the same terms, conditions,
consequences, liabilities, sanctions and penalties as may be imposed in like
circumstances by a Superior Court under the California Code of Civil Procedure.
All discovery must be completed thirty (30) days prior to the date set for the
arbitration hearing.

     5.   Hearing Procedure
          -----------------

     The issue(s) submitted to the arbitrator must be set forth in the
request for arbitration. The arbitrator shall have no authority to frame the
statement of the issue(s). Unless otherwise agreed by the parties, the
arbitration hearing shall be governed by the formal rules of evidence contained
in the California Evidence Code. The parties shall mutually agree on the

                                      A-1


number of days required for hearing. The hearing shall be recorded and
transcribed verbatim by a certified shorthand reporter. Each party shall bear
its own costs with respect to a copy of the transcript of the hearing; however,
the parties shall each be responsible for one-half the cost of the court
reporter's fee and the arbitrator's copy of the hearing transcript.

     6.   Post-Hearing Procedure
          ----------------------

     Each party shall have the right to present closing argument at the
conclusion of all sworn testimony and, in addition to or in lieu of closing
argument, either party shall have the right to submit post-hearing briefs. The
due date and procedure for exchanging post-hearing briefs shall be mutually
agreed upon by the parties or as directed by the arbitrator.

     7.   Opinion and Award
          -----------------

     The arbitrator shall issue a written opinion and award within sixty (60)
days of closing arguments or the receipt of post-hearing briefs, whichever is
later. The arbitration award and opinion shall be signed and dated by the
arbitrator and shall decide all issues submitted and set forth the legal
principles supporting each aspect of the opinion and award. The arbitrator shall
only be permitted to award those remedies in law or equity which are requested
by the parties and which are supported by the credible, relevant evidence. The
arbitrator shall have no authority to award punitive or exemplary damages under
any circumstances or for any reason.

     8.   Fees and Costs
          --------------

     Each party shall be responsible for its own attorney's fees, except as
provided by law, and for all costs associated with discovery unless otherwise
ordered by the arbitrator. Each party shall also be responsible for one-half of
the arbitrator's fee and one-half of any costs associated with the facilities
for the arbitration hearing.

     9.   Severability
          ------------

     In the event that any provision of this procedure is determined by the
arbitrator or by a court of competent jurisdiction to be illegal, invalid, or
unenforceable to any extent, such term or provision shall be enforced to the
extent permissible under law and all remaining terms and provisions hereof shall
continue in full force and effect.

                                      A-2

EX-10.10.1

                                                                 Exhibit 10.10.1
                                                                 ---------------

                                 AMENDMENT OF
                             EMPLOYMENT AGREEMENT

          A.   The Employment Agreement dated August 1, 1998 between Serge
Leterme and Synbiotics Corporation is amended by adding thereto a new Section
6.3, to read in full as follows:

     6.3  Acquisition of Assets.
          ---------------------
          (a)  Offer of Similar Job = No Severance Pay. If any company
               ---------------------------------------
("Acquirer") acquires at least a majority of EMPLOYER's assets in an acquisition
transaction outside the ordinary course of business, whether by asset purchase
or by a merger in which EMPLOYER does not survive  (an "Asset Sale"), and
Acquirer offers to employ EMPLOYEE in a position not materially inferior to and
on terms and conditions not materially inferior to those called for by this
Agreement as of the time of the Asset Sale, then notwithstanding Section 6.2,
and whether or not EMPLOYEE accepts such offer, any termination of EMPLOYEE by
EMPLOYER upon or after the Asset Sale shall not entitle EMPLOYEE to any
severance pay whatever.  The purpose of this provision is to ensure that if
EMPLOYEE has a chance to keep a similar job with Acquirer, then EMPLOYER should
not have to pay severance.

          (b)  Job Offers Deemed Not Similar.  For purposes of this Section 6.3,
               -----------------------------
an offer's terms and conditions are inferior if the offer requires a transfer to
outside of San Diego County, California or Lyon, France or if the terms include
severance provisions materially inferior to those in Section 6.2 (or  no
severance provisions at all).  These are not the only ways in which an offer's
terms and conditions can be materially inferior.  In addition, if Acquirer
acquires EMPLOYER by reverse triangular merger, resignation within 30 days after
a directive to transfer to outside of San Diego County, California or Lyon,
France shall be deemed a termination without cause in connection with the
acquisition.

          (c)  Acceptance of Any Job = No Severance Pay. Also, if EMPLOYEE
               ----------------------------------------
accepts any position with Acquirer within six months after an Asset Sale, then
notwithstanding Section 6.2 and Section 6.3(a)-(b), any termination of EMPLOYEE
by EMPLOYER upon or after the Asset Sale shall not entitle EMPLOYEE to any
severance pay whatever; and EMPLOYEE shall refund to EMPLOYER any and all
severance pay which was previously paid.

          (d)  No Similar Job Offer From Acquirer and Delayed Termination From
               ---------------------------------------------------------------
the Shell = Severance Pay. On the other hand, if after an Asset Sale Acquirer
- -------------------------
makes no such offer to EMPLOYEE (and even if EMPLOYEE remains employed by
EMPLOYER), then any termination of EMPLOYEE by EMPLOYER (other than for Cause)
upon or after the Asset Sale and


before the first anniversary of the Asset Sale shall be deemed to be "in
connection with an acquisition of EMPLOYER" for purposes of Section 6.2. If
Section 6.3(c) and 6.3(d) both apply, Section 6.3(c) shall govern.

          (e)  Retention Plan.  Stay bonuses paid or payable under any EMPLOYER
               --------------
retention plan are not "severance pay" for the purposes of this Agreement.

          B.   If EMPLOYEE has an outstanding loan from EMPLOYER, which is
accelerated upon "the cessation of EMPLOYEE's employment with EMPLOYER," then

     (1)  The loan shall not accelerate if EMPLOYEE accepts any Acquirer job
offer; but if EMPLOYEE's employment with Acquirer thereafter ceases, the loan
shall then accelerate.

     (2)  The loan shall not accelerate if the only job offer by Acquirer to
EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a position not
materially inferior to and on terms and conditions not materially inferior to"
those in the Employment Agreement; provided that if EMPLOYEE accepts any job
with Acquirer, Section B(1) of this Amendment shall apply.

     If EMPLOYEE has an outstanding loan from EMPLOYER which is to be forgiven
in tranches "provided EMPLOYEE is then employed by EMPLOYER," then

     (3)  The loan tranches shall continue to be forgiven if EMPLOYEE accepts
any Acquirer job offer and remains in Acquirer's employ at the time for
forgiveness.

     (4)  The loan tranches shall continue to be forgiven if the only job offer
by Acquirer to EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a
position not materially inferior to and on terms and conditions not materially
inferior to" those in the Employment Agreement; provided that if EMPLOYEE
accepts any job with Acquirer, Section B(3) of this Amendment shall apply.

     If EMPLOYEE has an outstanding loan from EMPLOYER which is to be entirely
forgiven "if EMPLOYEE's employment with EMPLOYER ceases other than for Cause,"
then

     (5)  The loan shall not be so forgiven if EMPLOYEE accepts any Acquirer job
offer, but if EMPLOYEE's employment with Acquirer thereafter ceases other than
for Cause the loan shall then be so forgiven. (For clarification purposes, it is
understood that the loan is neither forgiven nor accelerated upon death of the
employee.)

     (6)  The loan shall be so forgiven if the only job offer by Acquirer to
EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a position not
materially inferior to and on terms and conditions not materially inferior to"
those in the Employment Agreement; provided that if EMPLOYEE accepts any job
with Acquirer, Section B(5) of this Amendment shall apply.

                                       2


     (7)  However, if EMPLOYEE accepts any position with Acquirer within six
months after an Asset Sale, then any forgiveness of the entire loan, which
occurred between the date of the Asset Sale and the date of such acceptance
(inclusive), shall be "un-forgiven," and Section B(5) of this Amendment shall
apply.

     In addition, it is agreed that if Acquirer (or Synbiotics) transfers
EMPLOYEE to outside of San Diego County, California, or Lyon, France and
EMPLOYEE resigns within 30 days thereafter, for all purposes pertaining to any
such loan the cessation of employment shall be deemed a termination without
cause.


          C.   Except as specifically set forth in this Amendment, the
Employment Agreement remains unchanged and in full force and effect.

     Dated:  February  14, 2001


                                                  /s/ Serge Leterme
                                                  ------------------------------
                                                  SERGE LETERME
                                                  SYNBIOTICS CORPORATION


                                             By:  /s/ Kenneth M. Cohen
                                                  ------------------------------
                                                  KENNETH M. COHEN

                                       3

EX-10.11

                                                                   Exhibit 10.11
                                                                   -------------


                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS AGREEMENT is made by and between Synbiotics Corporation, a California
corporation ("EMPLOYER") and Robert Buchanan ("EMPLOYEE") as of April 24, 2000.

                               R E C I T A L S:
                               ---------------

     WHEREAS, EMPLOYER and EMPLOYEE wish to set forth in this Agreement the
terms and conditions under which EMPLOYEE is to be employed by EMPLOYER.

     NOW, THEREFORE, EMPLOYER and EMPLOYEE, in consideration of the mutual
promises set forth herein, agree as follows:

                                   ARTICLE 1
                                   ---------

                               TERM OF AGREEMENT
                               -----------------

     1.1  Term. The term of this Agreement shall commence on the date first
          ----
written above and shall continue until terminated pursuant to Article 6.

                                   ARTlCLE 2
                                   ---------

                               EMPLOYMENT DUTIES
                               -----------------

     2.1  Title/Responsibilities.   EMPLOYEE shall serve as an employee of
          ----------------------
EMPLOYER and hold the position of Vice President, Sales and Marketing of
EMPLOYER, having the powers and responsibilities consistent with such position
and reporting to EMPLOYER's President, all subject to ultimate direction and
management of EMPLOYER's Chief Executive Officer and Board of Directors.
EMPLOYEE shall also perform all duties that from time to time are assigned to
him by EMPLOYER's President, Chief Executive Officer and/or Board of Directors,
and shall provide the President, Chief Executive Officer and/or Board with
periodic reports upon request. EMPLOYEE's Job location shall be San Diego,
California.

     2.2  Full Time Attention.   EMPLOYEE shall perform his duties hereunder in
          -------------------
a diligent and professional manner and devote substantially all of his business
time and attention, best efforts, energy and skills to EMPLOYER during the time
he is employed hereunder as Vice President, Sales and Marketing of EMPLOYER.
During the term of this Agreement EMPLOYEE shall not without the express consent
of EMPLOYER's Board of Directors serve or act as a shareholder (except passive
holdings

                                       1


of less than 1% of the stock), employee, agent, consultant, officer, director,
partner, representative or owner of any other business entity, nor (if it would
require more than an insubstantial amount of business time or attention) of any
non-profit entity.

     2.3  Compliance with Rules.   EMPLOYEE shall comply with all applicable
          ---------------------
governmental laws, rules and regulations and with all of EMPLOYER's policies,
rules and/or regulations applicable to all employees of EMPLOYER.

                                   ARTICLE 3
                                   ---------

                                 COMPENSATION
                                 ------------

     3.1  Base Salary.   EMPLOYER shall pay $5,208.33 semi-monthly to EMPLOYEE
          -----------
until such time or times as it may discretionarily be raised (but not lowered)
upon annual performance/salary review by EMPLOYER's President (upon
recommendation of its Compensation Committee).

     3.2  Additional Compensation (Stock Option).   In addition to the salary
          --------------------------------------
provided in Section 3.1, EMPLOYER hereby grants to EMPLOYEE as additional
compensation for EMPLOYEE's services (but not for any capital-raising purposes
or in connection with any capital-raising activities), a non-qualified stock
option to purchase 50,000 shares of EMPLOYER Common Stock under EMPLOYER's 1995
Stock Option/Stock Issuance Plan, with an exercise price equal to the Fair
Market Value per share of EMPLOYER Common Stock on the date first written above,
such option to vest in sixteen (16) equal quarterly installments.

     3.3  Bonus.   In addition to the salary provided in Section 3.1, EMPLOYEE
          -----
shall participate in any executive incentive bonus plan up to 15% of salary
based on achievement of corporate goals, which EMPLOYER may in its discretion
establish for 2000, and future years.

                                   ARTICLE 4
                                   ---------

                                OTHER BENEFITS
                                --------------

     4.1  Fringe Benefits.   EMPLOYEE shall be entitled during the term of his
          ---------------
employment under this Agreement to all other fringe benefits made available from
time to time by EMPLOYER to its executives generally and/or its employees
generally, including without limitation participation in EMPLOYER's 401(k) plan
and group health insurance plan.

     4.2  Expenses.   EMPLOYER shall reimburse EMPLOYEE, not less often than
          --------
monthly, for reasonable out-of-pocket business expenses incurred by EMPLOYEE in
the course of his duties hereunder upon submission by EMPLOYEE of appropriate
expense account reports and substantiating receipts.

                                      2


     4.3  Vacation.   EMPLOYEE shall be entitled to three (3) weeks paid
          --------
vacation per full year of service, in accordance with and subject to EMPLOYER's
vacation accrual plan and policies. EMPLOYEE acknowledges the "cap" on vacation
accruals set forth in such plan and policies.

     4.4  Relocation. EMPLOYER shall provide EMPLOYEE a loan not to exceed the
          -----------
amount of $35,000 to assist EMPLOYEE with his relocation expenses. Such loan
shall bear no interest until maturity, and principal shall (to the extent not
previously forgiven) be payable in one lump sum on the day after the earlier of
the cessation of EMPLOYEE's employment with EMPLOYER or the fourth anniversary
of this Agreement.  If EMPLOYEE's employment with EMPLOYER ceases within two
years of employment date, the loan amount shall be paid in full to EMPLOYER.
One-half of the original amount of the loan shall be forgiven on the second
anniversary of this Agreement, three-fourths shall be forgiven on the third
anniversary, and the entire loan shall be forgiven on the fourth anniversary,
provided EMPLOYEE is then employed by EMPLOYER.  The entire loan shall be
forgiven if EMPLOYEE's employment with EMPLOYER ceases other than for Cause or
voluntary resignation.

                                   ARTICLE 5
                                   --------

                               FORMER EMPLOYMENT
                               -----------------

     5.1  No Conflict   EMPLOYEE represents and warrants that the execution and
          -----------
delivery by him of this Agreement, his employment by EMPLOYER and his
performance of duties under this Agreement will not conflict with and will not
be constrained by any prior employment or consulting agreement or relationship,
or any other contractual obligation.

     5.2  No Use of Prior Confidential Information. EMPLOYEE will not
          ----------------------------------------
intentionally disclose to EMPLOYER or use on its behalf any confidential
information belonging to any of his former employers, but during his employment
by EMPLOYER he will use in the performance of his duties all information (but
only such information) which is generally known and used by persons with
training and experience comparable to his own or is common knowledge in the
industry or otherwise legally in the public domain.

                                   ARTICLE 6
                                   ---------

                                  TERMINATION
                                  -----------

     6.1  Term.   This Agreement (including EMPLOYEE'S employment) shall
          ----
continue until terminated by either EMPLOYER or EMPLOYEE. Such termination
(including termination of EMPLOYEE's employment) shall be effected by written
notification and may be effected at any time, with or without Cause, for any
reason or no reason.

     6.2  Severance.   If this Agreement and/or EMPLOYEE's employment is
          ---------
terminated as a result of Cause, EMPLOYEE shall be entitled to no severance pay.
If this Agreement and/or EMPLOYEE's employment is terminated other than for
Cause, EMPLOYEE shall be entitled to six (6) months' severance pay.

                                       3


     Furthermore, if EMPLOYEE is terminated (other than for Cause) in connection
with an acquisition of EMPLOYER, EMPLOYEE shall be entitled to additional
severance pay of six (6) months' salary at EMPLOYEE's then base salary rate (as
well as the severance pay described in the previous paragraph) and all of
EMPLOYEE's then unvested EMPLOYER stock options shall immediately become fully
vested.

     "Cause" shall be defined to mean:

     (a)  Death;

     (b)  Voluntary resignation (other than because of a material breach by
EMPLOYER of its obligations under this Agreement, or reassignment of EMPLOYEE to
a location outside of San Diego County)

     (c)  EMPLOYEE's repudiation of this Agreement;

     (d)  Permanent disability (defined as EMPLOYEE's inability to perform, with
or without reasonable accommodation, the essential functions of his position for
any 50 business days -- exclusive of vacation days taken -- within any
continuous period of 200 days by reason of physical or mental illness or
incapacity);

     (e)  EMPLOYEE being formally charged with the commission of a felony, or
being convicted of a misdemeanor involving moral turpitude;

     (f)  EMPLOYEE's demonstrable fraud or dishonesty;

     (g)  EMPLOYEE's use of alcohol, drugs or any illegal substance in such a
manner as to interfere with the performance of his duties under this Agreement;

     (h)  EMPLOYEE's intentional, reckless or grossly negligent action
materially detrimental to the best interest of the EMPLOYER, including any
misappropriation or unauthorized use of EMPLOYER's property or improper use or
disclosure of confidential information (but excluding any good faith exercise of
business judgment);

     (i)  EMPLOYEE's intentional failure to perform material duties under this
Agreement if such failure has continued for 15 days after EMPLOYEE has been
notified in writing by EMPLOYER of the nature of EMPLOYEE's failure to perform;

     (j)  EMPLOYEE's chronic absence from work for reasons other than illness or
permitted vacation; or

     (k)  EMPLOYEE's violation of policies in EMPLOYER's official Employee
Handbook, as it may be amended from time to time.

                                       4


     Termination for Cause shall be without prejudice to any other right or
remedy to which EMPLOYER may be entitled at law, in equity, or under this
Agreement.

                                   ARTICLE 7
                                   ---------

                                  ARBITRATION
                                  -----------

     7.1  Final and Binding Arbitration. Any controversy, claim or dispute
          -----------------------------
between (a) a party to this Agreement, on the one hand, and (b) the other party
to this Agreement and/or such second party's parents, subsidiaries or affiliates
and/or any of their directors, officers, employees, agents, successors, assigns,
heirs, executors, administrators, or legal representatives, on the other hand,
arising out of, in connection with, or in relation to (c) the interpretation,
validity, performance or breach of this Agreement, (d) EMPLOYEE's stock options
and the underlying shares, (e) EMPLOYEE's employment by EMPLOYER, (f) any
termination of such employment, (g) any actions during or with respect to
EMPLOYEE's work for EMPLOYER, (h) any claims for breach of contract, tort, or
breach of the covenant of good faith and fair dealing, or (i) any claims of
discrimination or other claims under any federal, state or local law or
regulation now in existence or hereinafter enacted and as amended from time to
time concerning in any way the subject of EMPLOYEE's employment with EMPLOYER or
its termination, shall, at the request of either party, be resolved to the
exclusion of a court of law by binding arbitration in San Diego, California, in
accordance with Exhibit A hereto. Each of EMPLOYEE and EMPLOYER understands and
agrees that the arbitration shall be instead of any civil litigation and that
the arbitrator's decision shall be final and binding to the fullest extent
permitted by law and enforceable by any court having jurisdiction thereof. The
only claims not covered by this Section 7.1 are claims for benefits under the
            ---
workers' compensation laws, claims for unemployment insurance benefits, and
matters within the jurisdiction of the California Labor Commissioner, which will
be resolved pursuant to those laws.

                                   ARTICLE 8
                                   ---------

                              GENERAL PROVISIONS
                              ------------------

     8.1  Governing Law.   This Agreement and the rights of the parties
          -------------
thereunder shall be governed by and interpreted under California law.

     8.2  Assignment.   EMPLOYEE may not delegate, assign, pledge or encumber
          ----------
his rights or obligations under this Agreement or any part thereof.

     8.3  Notice.   Any notice required or permitted to be given under this
          ------
Agreement shall be sufficient if it is in writing and is sent by registered or
certified mail, postage prepaid, or personally delivered, to the following
addresses, or to such other addresses as either party shall specify by giving
notice under this section:

                                       5


               TO EMPLOYER:   President, Synbiotics Corporation
                                   11011 Via Frontera
                                   San Diego, CA 92127

               Copy to:       Hayden J. Trubitt
                                   Brobeck, Phleger & Harrison LLP
                                   12390 El Camino Real
                                   San Diego, CA 92130

               TO EMPLOYEE:   Robert Buchanan
                                   c/o Synbiotics Corporation
                                   11011 Via Frontera
                                   San Diego, CA 92127

     8.4  Amendment.  This Agreement may be waived, amended or supplemented only
          ---------
by an express writing signed by both of the parties hereto. To be valid,
EMPLOYER's signature must be by a person specially authorized by EMPLOYER's
Board of Directors to sign such particular document.

     8 5  Waiver. No waiver of any provision of this Agreement shall be binding
          ------
unless and until set forth expressly in writing and signed by the waiving party.
To be valid, EMPLOYER's signature must be by a person specially authorized by
EMPLOYER's Board of Directors to sign such particular document. The waiver by
either party of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any preceding or succeeding breach of the same or
any other term or provision, or a waiver of any contemporaneous breach of any
other term or provision, or a continuing waiver of the same or any other term or
provision. No failure or delay by a party in exercising any right, power, or
privilege hereunder or other conduct by a party shall operate as a waiver
thereof, in the particular case or in any past or future case, and no single or
partial exercise thereof shall preclude the full exercise or further exercise of
any right, power, or privilege. No action taken pursuant to this Agreement shall
be deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained herein.

     8.6  Severability.   All provisions contained herein are severable and in
          ------------
the event that any of them shall be held to be to any extent invalid or
otherwise unenforceable by any court of competent jurisdiction, such provision
shall be construed as if It were written so as to effectuate to the greatest
possible extent the parties' expressed intent; and in every case the remainder
of this Agreement shall not be affected thereby and shall remain valid and
enforceable, as if such affected provision were not contained herein.

     8.7  Headings.   Article and section headings are inserted herein for
          --------
convenience of reference only and in no way are to be construed to define, limit
or affect the construction or interpretation of the terms of this Agreement.

                                       6


     8.8  Drafting Party. The provisions of this Agreement have been prepared,
          --------------
examined, negotiated and revised by each party hereto, and no implication shall
be drawn and no provision shall be construed against either party by virtue of
the purported identity of the drafter of this Agreement, or any portion thereof.

     8.9  No Outside Representations.   No representation, warranty, condition,
          --------------------------
promise, understanding or agreement of any kind with respect to the subject
matter hereof has been made by either party, nor shall any such be relied upon
by either party, except those contained herein. There were no inducements to
enter into this Agreement, except for what is expressly set forth in this
Agreement.

     8.10 Entire Agreement.   This Agreement, together with EMPLOYER's
          ----------------
standard Proprietary Information and Inventions Agreement, constitutes the
entire agreement between the parties pertaining to the subject matter hereof and
completely supersedes all prior or contemporaneous agreements, understandings,
arrangements, commitments, negotiations and discussions of the parties, whether
oral or written (all of which shall have no substantive significance or
evidentiary effect). Each party acknowledges, represents and warrants that he or
it has not relied on any representation, agreement, understanding, arrangement
or commitment which has not been expressly set forth in this Agreement. Each
party acknowledges, represents and warrants that this Agreement is fully
integrated and not in need of parol evidence in order to reflect the intentions
of the parties. The parties specifically intend that the literal words of this
Agreement shall, alone, conclusively determine all questions concerning the
parties' intent.

     IN WITNESS WHEREOF, the parties have executed and delivered this Employment
Agreement in San Diego, California as of the date first written above.

                              SYNBIOTICS CORPORATION

                              /s/ Paul A. Rosinack
                              --------------------
                              Paul A. Rosinack, President


                              /s/ Robert Buchanan
                              -------------------
                              Robert Buchanan


Attachment: Exhibit A (Arbitration Procedures)

                                       7





                                   EXHIBIT A
                                   ---------

                            ARBITRATION PROCEDURES
                            ----------------------

     1.   Agreement to Arbitrate
          ----------------------

     In the event that there is any dispute relating to, regarding or arising in
connection with EMPLOYEE's employment with EMPLOYER which cannot be resolved
through direct discussion or mediation, regardless of the kind or type of
dispute (excluding claims for workers' compensation, unemployment insurance or
any matters within the jurisdiction of the California Labor Commissioner), all
such disputes shall be submitted exclusively to final and binding arbitration
pursuant to the provisions of the Federal Arbitration Act or, if inapplicable,
the Uniform Arbitration Act (California Code of Civil Procedure (S) 1280 et
seq.), upon request submitted in writing to the President within one year from
the date the dispute first arose, or within one year of the date of termination
of employment, whichever occurs first. This procedure shall be the exclusive
method for resolving all claims relating to the termination of EMPLOYEE's
employment, including but not limited to any alleged violations of federal,
state and/or local statutes; all claims based upon any purported breach of duty
arising in contract or tort, including but not limited to breach of contract,
breach of the covenant of good faith and fair dealing, or violation of public
policy; and any other alleged violation of an employee's statutory, contractual
or common law rights.

     Any failure to request arbitration in accordance with the foregoing
provisions shall constitute a waiver of all rights to raise or present any
claims in any form, in any forum, arising out of any dispute that was subject to
arbitration.

     2.   Selection of Arbitrator
          -----------------------

     All disputes subject to arbitration will be resolved by a single arbitrator
selected from a list provided by the California Mediation and Conciliation
Service from its Employment Arbitration Panel. The parties shall select the
arbitrator by alternately striking names from the list, and the last name
remaining on the list shall be the arbitrator selected to resolve the dispute.
The arbitrator must be selected within thirty (30) days of receipt of the
written request for arbitration. The arbitration hearing shall be held in San
Diego, California, at a neutral location selected by the parties or, in the
event the parties are unable to agree, at a location designated by the
arbitrator.

     3.   Authority of Arbitrator
          -----------------------

     The arbitrator shall only be authorized to exercise the powers specifically
enumerated by this procedure and to decide the dispute in accordance with
governing principles of law and equity. The arbitrator shall have no authority
to modify the powers granted by the terms of this procedure or to modify the
terms of the employee handbook, except as required by law. The arbitrator shall
have the authority to rule on motions by the parties, to issue protective orders
upon motion of any party or third

                                      A-1


party, and to determine only the disputes submitted by the parties based upon
the grounds presented. Any dispute or argument not presented by the parties is
outside the scope of the arbitrator's jurisdiction and any award invoking such
disputes or arguments is subject to a motion to vacate; provided, however, the
arbitrator shall have exclusive authority to resolve any dispute relating to the
validity, interpretation and enforcement of these arbitration procedures.

     4.   Discovery
          ---------

     The arbitrator shall have the power, in addition to determining the merits
of the dispute submitted, to permit discovery regarding the subject matter of
arbitration and to enforce the rights, remedies, procedures, duties, liabilities
and obligations of discovery by the imposition of the same terms, conditions,
consequences, liabilities, sanctions and penalties as may be imposed in like
circumstances by a Superior Court under the California Code of Civil Procedure.
All discovery must be completed thirty (30) days prior to the date set for the
arbitration hearing.

     5.   Hearing Procedure
          -----------------

     The issue(s) submitted to the arbitrator must be set forth in the request
for arbitration. The arbitrator shall have no authority to frame the statement
of the issue(s). Unless otherwise agreed by the parties, the arbitration hearing
shall be governed by the formal rules of evidence contained in the California
Evidence Code. The parties shall mutually agree on the number of days required
for hearing. The hearing shall be recorded and transcribed verbatim by a
certified shorthand reporter. Each party shall bear its own costs with respect
to a copy of the transcript of the hearing; however, the parties shall each be
responsible for one-half the cost of the court reporter's fee and the
arbitrator's copy of the hearing transcript.

     6.   Post-Hearing Procedure
          ----------------------

     Each party shall have the right to present closing argument at the
conclusion of all sworn testimony and, in addition to or in lieu of closing
argument, either party shall have the right to submit post-hearing briefs. The
due date and procedure for exchanging post-hearing briefs shall be mutually
agreed upon by the parties or as directed by the arbitrator.

     7.   Opinion and Award
          -----------------

     The arbitrator shall issue a written opinion and award within sixty (60)
days of closing arguments or the receipt of post-hearing briefs, whichever is
later. The arbitration award and opinion shall be signed and dated by the
arbitrator and shall decide all issues submitted and set forth the legal
principles supporting each aspect of the opinion and award. The arbitrator shall
only be permitted to award those remedies in law or equity which are requested
by the parties and which are supported by the credible, relevant evidence. The
arbitrator shall have no authority to award punitive or exemplary damages under
any circumstances or for any reason.

                                      A-2


     8.   Fees and Costs
          --------------

     Each party shall be responsible for its own attorney's fees, except as
provided by law, and for all costs associated with discovery unless otherwise
ordered by the arbitrator. Each party shall also be responsible for one-half of
the arbitrator's fee and one-half of any costs associated with the facilities
for the arbitration hearing.

     9.   Severability
          ------------

     In the event that any provision of this procedure is determined by the
arbitrator or by a court of competent jurisdiction to be illegal, invalid, or
unenforceable to any extent, such term or provision shall be enforced to the
extent permissible under law and all remaining terms and provisions hereof shall
continue in full force and effect.

                                      A-3

EX-10.11.1

                                                                 Exhibit 10.11.1
                                                                 ---------------
                                 AMENDMENT OF
                             EMPLOYMENT AGREEMENT

          A.   The Employment Agreement dated April 24, 2000 between Robert
Buchanan and Synbiotics Corporation is amended by adding thereto a new Section
6.3, to read in full as follows:

     6.3  Acquisition of Assets.
          ---------------------

          (a)  Offer of Similar Job = No Severance Pay. If any company
               ----------------------------------------
("Acquirer") acquires at least a majority of EMPLOYER's assets in an acquisition
transaction outside the ordinary course of business, whether by asset purchase
or by a merger in which EMPLOYER does not survive  (an "Asset Sale"), and
Acquirer offers to employ EMPLOYEE in a position not materially inferior to and
on terms and conditions not materially inferior to those called for by this
Agreement as of the time of the Asset Sale, then notwithstanding Section 6.2,
and whether or not EMPLOYEE accepts such offer, any termination of EMPLOYEE by
EMPLOYER upon or after the Asset Sale shall not entitle EMPLOYEE to any
severance pay whatever.  The purpose of this provision is to ensure that if
EMPLOYEE has a chance to keep a similar job with Acquirer, then EMPLOYER should
not have to pay severance.

          (b)  Job Offers Deemed Not Similar.  For purposes of this Section 6.3,
               ------------------------------
an offer's terms and conditions are inferior if the offer requires a transfer to
outside of San Diego County, California or if the terms include severance
provisions materially inferior to those in Section 6.2 (or  no severance
provisions at all).  These are not the only ways in which an offer's terms and
conditions can be materially inferior.  In addition, if Acquirer acquires
EMPLOYER by reverse triangular merger, resignation within 30 days after a
directive to transfer to outside of San Diego County, California shall be deemed
a termination without cause in connection with the acquisition.

          (c)  Acceptance of Any Job = No Severance Pay. Also, if EMPLOYEE
               ----------------------------------------
accepts any position with Acquirer within six months after an Asset Sale, then
notwithstanding Section 6.2 and Section 6.3(a)-(b), any termination of EMPLOYEE
by EMPLOYER upon or after the Asset Sale shall not entitle EMPLOYEE to any
severance pay whatever; and EMPLOYEE shall refund to EMPLOYER any and all
severance pay which was previously paid.

          (d)  No Similar Job Offer From Acquirer and Delayed Termination From
               ---------------------------------------------------------------
the Shell = Severance Pay. On the other hand, if after an Asset Sale Acquirer
- -------------------------
makes no such offer to EMPLOYEE (and even if EMPLOYEE remains employed by
EMPLOYER), then any termination of EMPLOYEE by EMPLOYER (other than for Cause)
upon or after the Asset Sale and


before the first anniversary of the Asset Sale shall be deemed to be "in
connection with an acquisition of EMPLOYER" for purposes of Section 6.2. If
Section 6.3(c) and 6.3(d) both apply, Section 6.3(c) shall govern.

          (e)  Retention Plan.  Stay bonuses paid or payable under any EMPLOYER
               ---------------
retention plan are not "severance pay" for the purposes of this Agreement.

          B.   If EMPLOYEE has an outstanding loan from EMPLOYER which is
accelerated upon "the cessation of EMPLOYEE's employment with EMPLOYER," then

          (1)  The loan shall not accelerate if EMPLOYEE accepts any Acquirer
job offer; but if EMPLOYEE's employment with Acquirer thereafter ceases, the
loan shall then accelerate.

          (2)  The loan shall not accelerate if the only job offer by Acquirer
to EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a position
not materially inferior to and on terms and conditions not materially inferior
to" those in the Employment Agreement; provided that if EMPLOYEE accepts any job
with Acquirer, Section B(1) of this Amendment shall apply.

          If EMPLOYEE has an outstanding loan from EMPLOYER which is to be
forgiven in tranches "provided EMPLOYEE is then employed by EMPLOYER," then

          (3)  The loan tranches shall continue to be forgiven if EMPLOYEE
accepts any Acquirer job offer and remains in Acquirer's employ at the time for
forgiveness.

          (4)  The loan tranches shall continue to be forgiven if the only job
offer by Acquirer to EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b)
as "a position not materially inferior to and on terms and conditions not
materially inferior to" those in the Employment Agreement; provided that if
EMPLOYEE accepts any job with Acquirer, Section B(3) of this Amendment shall
apply.

          If EMPLOYEE has an outstanding loan from EMPLOYER which is to be
entirely forgiven "if EMPLOYEE's employment with EMPLOYER ceases other than for
Cause," then

          (5)  The loan shall not be so forgiven if EMPLOYEE accepts any
Acquirer job offer, but if EMPLOYEE's employment with Acquirer thereafter ceases
other than for Cause the loan shall then be so forgiven.

          (6)  The loan shall be so forgiven if the only job offer by Acquirer
to EMPLOYEE, if any, does not qualify under Section 6.3(a)-(b) as "a position
not materially inferior to and on terms and conditions not materially inferior
to" those in the Employment Agreement; provided that if EMPLOYEE accepts any job
with Acquirer, Section B(5) of this Amendment shall apply.

                                       2


          (7)  However, if EMPLOYEE accepts any position with Acquirer within
six months after an Asset Sale, then any forgiveness of the entire loan which
occurred between the date of the Asset Sale and the date of such acceptance
(inclusive) shall be "un-forgiven," and Section B(5) of this Amendment shall
apply.

          In addition, it is agreed that if Acquirer (or Synbiotics) transfers
EMPLOYEE  to outside of San Diego County, California, or Lyon, France and
EMPLOYEE resigns within 30 days thereafter, for all purposes pertaining to any
such loan the cessation of employment shall be deemed a termination without
cause.

          C.   Except as specifically set forth in this Amendment, the
Employment Agreement remains unchanged and in full force and effect.

     Dated:  February  14, 2001


                                             /s/ Robert Buchanan
                                             -------------------
                                             ROBERT BUCHANAN

                                             SYNBIOTICS CORPORATION

                                       By:   /s/ Kenneth M. Cohen
                                             --------------------
                                             KENNETH M. COHEN

                                       3

EX-10.76

                                                                   Exhibit 10.76
                                                                   -------------

                      ASSET SALE AND ASSIGNMENT AGREEMENT


    This Asset Sale and Assignment Agreement ("Agreement") is entered into as of
June 1, 2001, by and between SYNBIOTICS CORPORATION, a California corporation,
with a place of business at 11011 Via Frontera, San Diego, CA 92127
("Synbiotics"), MERIAL LIMITED, a company limited by shares registered in
England and Wales (registered number 3332751) with a registered office at 27
Knightsbridge, London, SWIX 7QT, England, and domesticated in Delaware, U.S.A.
as Merial LLC ("Merial Limited"), MERIAL S.A.S., a "Societe par Actions
Simplifiee" registered in France (registered number 590 800 215) with offices at
29 avenue Tony Garnier, Lyon, France ("Merial S.A.S."), and MERIAL, INC., a
Georgia corporation with offices at 115 Transtech Drive, Athens, Georgia 30601
("Merial, Inc."). Merial Limited, Merial S.A.S., and Merial, Inc. may be
collectively referred to as "Merial".

1.  Definitions.

    (a)  "Bio-Trends Agreement" means the Distribution Agreement between
         ----------------------
Synbiotics and Bio-Trends International, Inc. ("Bio-Trends") dated February 7,
1990, as amended August 22, 1996. Bio-Trend's interest in the Bio-Trends
Agreement was assigned to Intervet, Inc., a Delaware corporation ("Intervet"),
effective as of April 2000.

    (b)  "Effective Date" shall mean June 1, 2001.
         ----------------

    (c)  "Merial USA Agreement" means the Agreement between Rhone Merieux, Inc.
         ---------------------
(n/k/a Merial, Inc.) and Synbiotics effective January 1, 1992, as amended July
27, 1993, August 22, 1996 and March 1, 1999 (effective as of July 1, 1998).
Rhone Merieux, Inc.'s interest in the Merial USA Agreement was assigned to
Merial Limited, effective as of March 1, 1999.

    (d)  "Merial Europe Agreement" means the Distribution Agreement between
         ------------------------
Rhone Merieux  S.A. (n/k/a Merial S.A.S) and Synbiotics dated July 10, 1990, as
amended April 11, 1996, August 27, 1996, and February 5, 1997.

    (e)  "Open Purchase Orders" means purchase orders numbers 101121, 100910,
         ----------------------
101122, 300031, 101200, 101330, 101471, 101477, 101478 and 101479 placed by
Synbiotics with lntervet for delivery of an aggregate of 800,000 doses of bulk
FeLV Product pursuant to the Merial Europe Agreement and 4,400,000 doses of bulk
FeLV Product pursuant to the Merial USA Agreement.  The term "Open Purchase
Orders" includes the contracts represented thereby.

    (f)  "Outstanding Payables" means all of Synbiotics' payables to
         -----------------------
lntervet/Bio-Trends) for FeLV Product delivered by lntervet/Bio-Trends before
the Effective Date (currently estimated to be US$409,604.13);

    (g)  "Product" shall mean the feline leukemia ("FeLV") vaccine sold under
         ---------
the agreements herein.

    (h)  "Put Option" means the RM Put Option, as described in Article 3 of the
         ------------
Stock Restriction and Rights Agreement dated July 9, 1997 (the "Stock
Agreement'), between Rhone Merieux S.A. (now known as Merial S.A.S.) and
Synbiotics.

2.  Synbiotics assigns all its right, title and interest in and to the Open
Purchase Orders to Merial as of the Effective Date. Synbiotics retains, however,
its claims and the causes of action against any non-parties to this Agreement
for any breaches or damages incurred prior to the Effective Date.  Merial
accepts the assignment, and assumes and agrees to honor and completely perform
all of Synbiotics' obligations under the Open Purchase Orders, except for any
debts owed or obligations incurred by Synbiotics prior to the Effective Date.


3.  Synbiotics assigns to Merial all of Synbiotics' right, title and interest in
and to the Bio-Trends Agreement, including Synbiotics' rights to sell and
distribute Product in Canada, the Merial USA Agreement, and the Merial Europe
Agreement, as of the Effective Date.  Synbiotics retains, however, its claims
and the causes of action against any non-parties to this Agreement for any
breaches or damages incurred prior to the Effective Date.

    (a)  Merial accepts the assignment and assumes and agrees to honor and
faithfully perform Synbiotics' obligations under the Bio-Trends Agreement, the
Merial USA Agreement and the Merial European Agreement, except the Outstanding
Payables and those obligations incurred by Synbiotics prior to the Effective
Date.  In addition, Merial covenants to Intervet (as the third-party beneficiary
of this Agreement) to honor and faithfully perform all obligations to Intervet
(except the Outstanding Payables) which may arise in the future under the Bio-
Trends Agreement, and to continue to actively market and sell Product pursuant
to both the letter and the spirit of the Bio-Trends Agreement.

    (b)  Merial shall perform, and not look to Synbiotics to perform, the
obligations of Synbiotics under the Bio-Trends Agreement after the Effective
Date.  Synbiotics agrees to remain fully responsible to any parties, including
but not limited to Bio-Trends, lntervet, the USDA, Synbiotics distributors, or
its end-use customers, for any actions, claims, liabilities, judgments,
settlements, costs and expenses (including attorneys' fees) that arise from
Synbiotics' actions, omissions or contractual obligations prior to the Effective
Date.

    (c)  For avoidance of doubt, Synbiotics represents that Intervet has been
consulted as to whether it would or would not consent to the assignment of the
BioTrends Agreement.  Furthermore, Synbiotics represents to Merial and Merial
agrees that the consent of Intervet cannot be unreasonably withheld for this
assignment of the Bio-Trends Agreement, and that therefore the actual receipt of
Intervet's consent is not a condition precedent or subsequent to the
consummation of the transactions contemplated by this Asset Sale and Assignment
Agreement.

4.  Synbiotics assigns to Merial all right, title and interest in and to
Synbiotics' customer lists for Synbiotics VacSYN FeLV Product, subject to the
license granted in Section 8 below.  Synbiotics shall promptly transmit the list
to Merial by whatever reasonable means Merial specifies.

5.  Synbiotics shall retain its accounts receivable in respect of and
inventories pertaining to VacSYN FELV Product. Upon execution of this Agreement,
Synbiotics shall supply no more FELV Product to Merial, and all open orders from
Merial to Synbiotics for FELV Product are nullified in this transaction.  The
parties acknowledge, however, that the rights corresponding to open orders from
Synbiotics to Intervet under the Bio-Trends Agreement are also assigned to
Merial.

6.  Promptly after the Effective Date, Synbiotics shall immediately provide
Merial with copies of all records of VacSYN customer orders, purchases, payments
and other relevant customer information.

7.  Synbiotics agrees not to use its VacSYN trademark for any purpose other than
to sell its existing inventory of VacSYN Product.  Upon the earlier of the
completion of Synbiotics selling of the remaining VacSYN Product or October 31,
2001, Synbiotics shall assign, without additional consideration and at its own
cost, the VacSYN trademark to Merial.  Synbiotics shall take no action nor fail
to act in any way that would dilute or impair the value of the VacSYN trademark.

8.  Merial grants Synbiotics a six (6) month license to use the VacSYN customer
list and associated customer information for the sole purpose of selling
Synbiotics existing inventory of VacSYN FELV Product.  Synbiotics represents
that it has no more than 14,000 doses of remaining Product, and that apart from
the license granted herein, it will sell no more Product after the Effective
Date.

    Synbiotics agrees to maintain complete regulatory and legal responsibility
for VacSYN Product, regardless of any right, title or interest assigned to
Merial under this Agreement.  Synbiotics will indemnify and hold harmless Merial
on demand for any actions, claims, liabilities, judgments, settlements, costs
and expenses (including attorneys' fees) related to Synbiotics packaging,
labeling, marketing, advertising, distribution or sales of VacSYN.

                                       2


9.  In consideration for Synbiotics' assignments and agreed-upon terms in
Sections 2 - 8 above, Merial agrees to the following:

    (a)  any WITNESS(R) diagnostic license fees owing from Synbiotics to Merial
for sales of WITNESS through April 30, 2001 (US$613,000), shall be due and
payable only in tenths, with one-tenth (1/10) becoming due and payable on the
15th day of each of the ten (10) months commencing July 2001 and ending April
2002.  Synbiotics shall make such payments to Merial S.A.S., to the account
specified by authorized representatives of Merial S.A.S., currently account #
IBAN FR20 3000 2019 0000 0061 0407 M76, opened in the books of Credit Lyonnais
Bank in Lyon.  Synbiotics agrees that it owes Six Hundred Thirteen Thousand
Dollars (US$613,000) to Merial and will pay the amount owed as per the terms of
this Agreement.  Synbiotics warranties that such payments will be made free of
any claims by holders of any existing security interests; and

    (b)  Merial will forego its right to exercise the Put Option, provided that
                                                                  --------
as of April 15, 2002, Synbiotics has completed all of its material obligations
and commitments to be completed by April 15, 2002 under the terms of this
Agreement.  Merial will not forego its right to exercise the Put Option if, as
of April 15, 2002, there is any material failure of Synbiotics to comply with
the terms of the Agreement to be completed by April 15, 2002; and

    (c)  Merial shall be permitted to sell any or all of its 821,340 shares of
Synbiotics Common Stock at any time after the Effective Date, subject to any and
all limitations imposed by applicable securities laws and rules, regardless of
the restrictions contained in the Stock Agreement; and

    (d)  Merial agrees that Section 6.05 of the Option and License Agreement,
executed June 4, 1999 between Merial Limited and Synbiotics Corporation, is
amended to read in full: "Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party hereto without the prior written
consent of the other party, which shall not be unreasonably withheld; except
that Synbiotics may assign this Agreement, and its rights and obligations
hereunder, to any party that acquires Synbiotics."

10. In consideration for Merial assuming Synbiotics' obligations under the Bio-
Trends Agreement, Synbiotics agrees:

    (a)  that Section I 1.3(a) of the Stock Purchase Agreement (executed July 9,
1997 between Rhone Merieux S.A. and Synbiotics Corporation) is amended as of the
Effective Date to change the words "existing or proposed product manufactured by
the Company or proposed to be" to "existing product". Sections 11.3(b) and
11.3(c) shall remain in effect between the parties.

    (b)  to irrevocably waive its rights, which would have arisen after the
Effective Date, under Article 1 of the Collaboration Research Agreement
(executed July 9, 1997 between Synbiotics Corporation and Rhone Merieux S.A.S.),
except the last paragraph of Article 1, which shall remain applicable to any
- -------
technologies provided to Synbiotics by Merial under Article 1 prior to the
Effective Date.  Article 1 of the Collaboration Research Agreement provides
Synbiotics with a right of first refusal for any technology which could have an
application in the Diagnostics Field (as defined in the Collaboration Research
Agreement).

    (e)  Additionally, Merial may consider Synbiotics as a candidate for
manufacturing of any diagnostic products developed by or licensed to Merial
after the Effective Date.  For avoidance of doubt, this provision does not
oblige Merial to consider or use Synbiotics as a manufacturer for any animal
health products, including diagnostics.

11. Merial shall have no further obligation to supply vaccines to Synbiotics
under the Merial USA Agreement after the Effective Date.

12. Synbiotics warrants to Merial that it has performed all of its obligations
under the Bio-Trends Agreement, except the Outstanding Payables, and any other
agreements or rules related to its obligations for FeLV, including but not
limited to those-obligations to Merial, lntervet, Bio-Trends, regulatory
agencies, Synbiotics' customers, and the end-users of the Product, and

                                       3


further agrees to indemnify Merial on demand for any loss sustained by Merial as
a result of this warranty. Synbiotics will remain responsible for payment of any
Outstanding Payables.

13. The parties agree that any press release or publication disclosure required
by the U.S. Securities and Exchange Commission (SEC) or other regulatory
agencies may be issued, but that the disclosing party shall provide the intended
text of the publication to the other party seven (7) days before publishing the
release.  The disclosing party shall cooperate with the other party to prevent
the disclosure of any proprietary or confidential information.  If the receiving
party does not respond within seven (7) days of receiving the proposed text from
the disclosing party, the disclosing party may assume that the receiving party
consents to the text for publication.  Except for disclosures required for the
purposes above, any other information about this Agreement or the business
relationship between the parties shall be kept confidential.

14. Except as otherwise specifically provided in this Agreement, notices,
demands or other communications pursuant to this Agreement shall be in writing,
and shall be effective when delivered personally or when sent by certified or
registered mail, return receipt requested, overnight courier service, or
facsimile transmission.  Such notice, demands or other communications shall be
addressed to the party or parties to whom the notice, demand or other
communication must be provided at the address set forth below or to such other
address specified by the party from time to time by written notice to the other
parties:

         Address of notices to Merial:

              Vice President - Companion Animal Global Enterprise
              Merial Limited
              3239 Satellite Boulevard
              Duluth, GA 30096         Fax 678.638.3830

         and  Corporate Counsel Legal Department
              Merial Limited
              115 Transtech Drive
              Athens, GA 30601         Fax 706.548.4512

         Address of notices to Synbiotics:

              Paul A. Rosinack
              President
              Synbiotics Corporation
              11011 Via Frontera
              San Diego, CA 92127      Fax: 858.451.5719

         and  Hayden J. Trubitt, Esq.
              Brobeck, Phleger & Harrison
              12390 El Camino Real
              San Diego, CA 92130      Fax: 858.720.2555

Failure by any party to this Agreement to enforce, at any time, any provisions
of this Agreement or to require, at any time, performance by any other party of
any of the provisions hereof shall not constitute, and shall not in any way be
construed to be, a waiver of any such provisions or of that party's right
thereafter to enforce each and every provision of this Agreement.

15. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party hereto without the prior written consent of the other
party, which shall not be unreasonably withheld; except that Synbiotics may
assign this Agreement, and its rights and obligations hereunder, to any party
that acquires all the share capital of Synbiotics.  Any subsequent assignee,
purchaser, or transferee shall be bound by the terms of this Agreement.

                                       4


16. This Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Georgia without reference to Georgia
choice of law rules, and any action or claim related to this Agreement shall be
filed in the State of Georgia.  This document constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior or contemporaneous negotiations and agreements.  This Agreement may not be
amended or waived except in express written terms as agreed between the parties.

17. If any term, condition or provision of this Agreement is held to be
unenforceable for any reason, it shall, if possible, be interpreted rather than
voided, in order to achieve the intent of the parties to this Agreement to the
extent possible.  In any event, all other terms, conditions and provisions of
this Agreement shall be deemed valid and enforceable to the full extent
possible.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their
duly authorized representatives.

SYNBIOTICS CORPORATION                          MERIAL LIMITED

By: /s/ Paul A. Rosinack                        By:  /s/ Dennis Tomaso
    --------------------                             -----------------
Title: President & CEO                          Title: Vice President
Date: June 1, 2001                              Date: June 1, 2001

MERIAL S.A.S.                                   MERIAL, INC.

By: /s/ Daniel Gouffe                           By: /s/ Dennis Tomaso
    -----------------                               -----------------
Title: President                                Title: Vice President
Date: June 7, 2001                              Date: June 1, 2001

                                       5