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                                                                   EXHIBIT 10.39

      SALARY CONTINUATION AGREEMENT DATED MAY 21, 1998 WITH GARY L. DREHER

                          SALARY CONTINUATION AGREEMENT

        This Salary Continuation Agreement, dated as of May 21, 1998
("Agreement"), by and between AMDL, INC., a Delaware corporation (the "Company")
and GARY L. DREHER (the "Employee"), sets forth certain benefits to be received
by the Employee upon the occurrence of a Termination Event (as defined in
Section 2.3 below) following a Change in Control of the Company (as defined in
Section 2.2 below).

                                        I
                                    RECITALS

        1.1 The Company considers it essential to the best interests of its
shareholders to foster the continuous employment of certain key management
personnel. In this connection, the board of directors of the Company (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a Change in Control of the Company may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of certain key management
personnel, including the Employee, to the detriment of the Company and its
shareholders.

        1.2 The Board has determined that the continued employment of the
Employee is essential to the best interests of the Company's shareholders and to
reinforce and encourage the Employee's continued attention and dedication to his
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control of the Company, the Company
desires to enter into this Agreement with the Employee.

                                       II
                                    AGREEMENT

        2.1 Termination Following a Change in Control. After a Change in Control
of the Company and the occurrence of a Termination Event, the Employee shall be
entitled to Termination Benefits (as defined in Section 2.4) during the term of
this Agreement, all as provided in this Agreement.

        2.2 Definition of "Change in Control". A "Change in Control" of the
Company shall be deemed to have occurred upon the occurrence of any one or more
of the following events:

        (a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other
than the Employee or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, hereafter becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities;

        (b) during any period (other than any period prior to the execution of
this Agreement), individuals who at the beginning of such period constitute the
Board and any new directors (other than directors designated by a person who has
entered into an agreement with the Company to effect a transaction described in
paragraph (a) or (c) of this Section 2.2) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or

        (c) the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 51% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; or


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        (d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.

        2.3 Definition of "Termination Event". A Termination Event shall be
deemed to have occurred upon the occurrence of any one or more of the following
events:

        (a) Termination by the Company of Employee's employment for a reason
other than the Employee's willful and continued failure to substantially perform
the duties with the Company (other than any such failure resulting from
incapacity due to physical or mental illness or any such actual or anticipated
failure by the Employee for reasons set forth in Section 2.3(b) below) after a
written demand for substantial performance is delivered to the Employee by the
Board, which demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed his duties.

        For purposes of this Section 2.3(a), no act, or failure to act, on the
part of the Employee shall be deemed "willful" unless done, or omitted to be
done, not in good faith and without reasonable belief that such action or
omission was in the best interest of the Company.

        (b) The occurrence of any of the following events described in
subparagraphs (i) - (vii) of this paragraph (b), without the express written
consent of the Employee. Notwithstanding any other provision of this Agreement,
the Employee's continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting a Termination Event as
described in this Section 2.3(b).

            (i) the assignment of any duties inconsistent with the Employee's
status as a Vice President, Sales and Marketing of the Company or a substantial
adverse alteration in the nature or status of his responsibilities from those in
effect immediately prior to the Change in Control of the Company;

            (ii) a reduction of the Employee's annual salary by the Company as
in effect on the date thereof or as the same may be increased from time to time
except for across-the-board salary reductions similarly affecting all senior
executives of the Company and all senior executives of any person in control of
the Company;

            (iii) the relocation of the Company's principal executive offices to
a location more than fifty (50) miles from the location of such offices
immediately prior to the Change in Control of the Company or the Company's
requirement that the Employee be based anywhere other than the Company's
principal executive offices except for required travel on the Company's business
to an extent substantially consistent with the Employee's present business
travel obligations;

            (iv) the failure by the Company, without the consent of the
Employee, to pay any portion of the Employee's current compensation except
pursuant to an across-the-board compensation deferral similarly affecting all
senior executives of the Company and all senior executives of any person in
control of the Company, within seven days of the date such compensation is due;

            (v) the failure by the Company to continue in effect any
compensation plan in which the Employee participates immediately prior to the
Change in Control of the Company which is material to the Employee's total
compensation, including but not limited to the Company's profit sharing plan, or
any substitute plans adopted prior to the Change in Control of the Company,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the failure by the
Company to continue the Employee's participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of the Employee's participation
relative to other participants, as existed at the time of the Change in Control
of the Company;

            (vi) the failure by the Company to continue to provide the Employee
with benefits substantially similar to those currently enjoyed under any of the
Company's pension, life insurance, medical, health and accident, or disability
plans in which the Employee was participating at the time of the Change in
Control of the Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or deprive the
Employee of any material fringe benefit enjoyed by the Employee at the time of
the Change in Control of the Company, or the failure by the Company to provide
the Employee with the number of paid vacation days to which the Employee is
entitled on the basis of years of service with the Company in accordance with
the Company's normal vacation policy in effect at the time of the Change in
Control of the Company; or

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            (vii) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated in Section 3.1.

        (c) Except as provided in Section 3.1(a), the term "date of termination"
used in this Agreement shall mean the date on which a Termination Event is
deemed to have occurred. 2.4 Definition of "Termination Benefits"; Payment of
Termination Benefits. (a) The term "Termination Benefits" shall mean the payment
or provision of all of the following at such times as provided below:

            (i) salary through the date of termination at the rate in effect at
that time, plus all other amounts to which the Employee is entitled under any
compensation plan of the Company, shall be paid at the time such payments are
due, but in any event no later than six (6) months after the date of
termination;

            (ii) sales commission for twelve (12) months after the date of
termination based on the formula provided in that certain Employment Agreement
dated January 15, 1998, by and between the Company and the Employee; provided
that such sales commission shall be calculated solely on the basis of net sales
receipts attributable to the business of the Company immediately prior to the
occurrence of Change of Control so as to result in the payment of sales
commission contemplated under the aforesaid Employment Agreement;

            (iii) a severance payment (in an amount equal to twelve (12) months'
salary at the rate in effect on the termination date (hereinafter, "Severance
Payment")) shall be paid in twelve (12) equal monthly payments after the date of
termination; provided, however, that the Severance Payment will be reduced to
the maximum amount, determined under Section 280G(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), which may be paid to the Employee and not
be deemed "excess parachute payments" (as defined in Section 280G(b) of the
Code), if any;

            (iv) the Company shall pay all legal fees and expenses incurred by
the Employee as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of Section 280G(b) of the Code, to any payment or benefit provided
hereunder), within five days after request for payment by the Employee
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require; and

            (v) any and all options to purchase securities of the Company held
by Employee on the date of termination (whether issued prior to or after the
date hereof and whether or not fully vested and immediately excercisable) shall
be fully vested and immediately exercisable by the Employee from and after the
date of termination.

        (b) The Employee shall not be required to mitigate the amount of any
payment provided for in this Section 2.4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 2.4 be reduced by any compensation earned by the Employee as the result
of employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Employee to the Company, or otherwise.

        (c) The Company will vigorously and diligently defend any contest or
dispute between the Employee or the Company and the Internal Revenue Service in
connection with any tax audit or proceeding to the extent attributable to the
application of Section 280G(b) of the Code to the payments made or to be made to
the Employee pursuant to this Section 2.4. The Company agrees to indemnify and
hold the Employee harmless from any loss or expense experienced by the Employee
as the result of the failure by the Company to fully perform its obligation
under this Section 2.4.

        2.5 Termination in the Absence of a Change in Control. The Employee
hereby acknowledges and agrees that the rights and benefits provided under this
Agreement shall be triggered to benefit the Employee only after a Change in
Control of the Company and the occurrence of a Termination Event and shall not
be triggered to benefit the Employee in the absence of a Change in Control of
the Company. This Agreement has been entered into solely to address the
legitimate concerns of the Company arising as the result of a possible Change in
Control of the Company, all as summarized in the Recitals to this Agreement. The
provisions of this Agreement are not intended to and do not purport to provide
any assurances or rights to the Employee's continued employment with the
Company.


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        2.6 Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through May 21, 2000 provided, however, that
commencing on May 22, 2000, and each May 22 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than December 31 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement. If a Change in Control of
the Company shall have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of 24 months
beyond the month in which such Change in Control of the Company occurred.

        2.7 Payment of Termination Benefits is in Addition to Amounts Payable
under Employment Agreement. The Termination Benefits provided under this
Agreement are in addition to any other amount payable to the Employee under any
Employment Agreement with the Company. Any amount payable as Termination Benefit
shall not cause any reduction, offset or diminution of amounts payable to the
Employee under any Employment Agreement.

                                       III
                               STANDARD PROVISIONS

        3.1 Successors; Binding Agreement.

        (a) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to Termination Benefits from the Company as provided
in this Agreement, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the date of
termination for purposes of this Agreement. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement,
by operation of law or otherwise.

        (b) This Agreement shall inure to the benefit of and be enforceable by
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. In the event the Employee
should die while any amount would still be payable to him hereunder if the
Employee had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Employee's devisee, legatee or other designee or, if there is no such designee,
to the Employee's estate.

        3.2 Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by United
States, registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective parties as provided in this Section 6.3; provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other addresses as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.

      COMPANY:             AMDL, Inc.                                
                           14272 Franklin Avenue, Suite 106          
                           Tustin, California 92780-7039             
                           Attention: That T. Ngo, Ph.D., President  
                                                                     
      EMPLOYEE:            Gary L. Dreher                            
                           6301 Acacia Hill Drive                    
                           Yorba Linda, California  92886            

        3.3 Modifications, Waivers or Discharge of Agreement. No provision of
this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by the Employee and
such officer as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. The


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validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of California. All references to sections
of the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Company under this Agreement shall survive the expiration
of the term of this Agreement.

        3.4 Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

        3.5 Attorneys Fees. In the event it becomes necessary to commence any
proceeding or action to enforce the provision of this Salary Continuation
Agreement, the court before whom the same shall be tried, may award to the
prevailing party all costs and expenses thereof, including but not limited to,
reasonable attorneys' fees, the usual, customary and lawfully recoverable court
costs and all other expenses in connection therewith.

        3.6 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

        IN WITNESS WHEREOF, this Salary Continuation Agreement shall be
effective as of and on the date first written above.

                                            COMPANY:

                                            AMDL, INC., A DELAWARE CORPORATION


                                            By:   /s/ THAT T. NGO, PH.D.
                                                  ------------------------------
                                            Name:  That T. Ngo, Ph.D.
                                            Title: President

                                            EMPLOYEE:


                                            By:  /s/ GARY L. DREHER
                                            ------------------------------------
                                                     Gary L. Dreher


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