Exhibit 10.21

*    Portions of this marked Exhibit have been omitted pursuant to a request for
     confidential treatment and filed separately with the Commission.

                             DISTRIBUTION AGREEMENT

     Distribution  Agreement  (this  "Agreement")  dated  March  29,  2003  (the
"Effective Date") between AspenBio,  Inc., a Colorado corporation  ("AspenBio"),
and Merial Limited,  a company limited by shares registered in England and Wales
(registered number 3332751), with a registered office at PO Box 327, Sandringham
House,  Sandringham  Avenue,  Harlow  Business  Park,  Harlow,  Essex  CM19 5TG,
England, and domesticated in Delaware, USA as Merial LLC ("Merial").

                                    RECITALS

     WHEREAS,  AspenBio  wishes  for  Merial to  market,  distribute  and sell a
lateral  flow bovine early  pregnancy  test  developed by AspenBio  described in
Section 1.1 and Exhibit B attached hereto (the "Product"); and

     WHEREAS,  any transfer of Product from AspenBio to Merial hereunder will be
considered a "sale" of such Product, whether AspenBio receives the consideration
for such  transfer  directly  from  Merial or from any agent or  distributor  of
Merial or any other party receiving such Product from Merial.

         NOW, THEREFORE, the parties hereby agree as follows:

     1. Product Development.

     1.1 Development.
     ----------------
     In  consideration  of the payments  described in Section 5,  AspenBio  will
complete  the design and  development  of the Product  and deliver the  Product,
including  all  user  and  technical  documentation   associated  therewith,  in
accordance  with the  specifications,  design  and  functionality  set  forth on
Exhibit A attached hereto (the "Design") in accordance  with accepted  standards
within the industry to the best of its ability.  As used in this Agreement,  the
term  "Product"  shall  include all  components  set forth on Exhibit B attached
hereto,  all improvements or derivative works thereof developed by AspenBio,  if
and to the extent such  improvements  or  derivative  works relate to testing to
determine  the  pregnancy  status of cattle prior to 32 days after  insemination
("Early  Bovine  Pregnancy   Testing"),   and  all  intellectual   property  and
proprietary rights embodied therein, including,  without limitation, any patents
that are issued  with  respect  thereto.  Prior to  delivery  of the  Product in
accordance with Section 1.2,  AspenBio will demonstrate the Product for Merial's
approval and transfer to Merial all quality control tests ("QC Tests") developed
by AspenBio to confirm the  efficacy  of the Product  previously  released  from
AspenBio's facilities.

1.2 Delivery.
-------------
     AspenBio shall deliver to Merial the finished Product,  including packaging
in  accordance  with  Section  2.4 and  Exhibit B, ready for Launch (as  defined
below) in  accordance  with the Design as soon as  practicable,  but in no event
later than October 1, 2003. In the event  AspenBio fails to deliver the finished
Product to Merial in accordance  with the Design by October 1, 2003,  Merial may
terminate this Agreement and AspenBio shall reimburse Merial 50% of all payments

<PAGE>

made to date by Merial under this Agreement, provided that AspenBio shall not be
required to  reimburse  Merial for any delay  resulting  from delay by Merial in
determining  or approving the final form of packaging and  instructions  for the
Product or any other Merial delay.

     1.3 Reports.
     ------------
     AspenBio  shall meet with Merial  when  reasonably  requested  by Merial to
discuss and report on the progress of the Product.  Upon  reasonable  request by
Merial,  AspenBio shall deliver to Merial reports of AspenBio's  progress on the
Product,  including any  performance  and quality  control  tests.  Merial shall
deliver to AspenBio any reports,  data, or results of any performance or quality
control tests relating to the Product of which it becomes aware.

     1.4 Customer Information.
     -------------------------
     AspenBio shall promptly provide Merial with the names, addresses, telephone
numbers and all other  information  and marketing data obtained for all customer
leads in its  possession  or under its control  relating to the  prospective  or
potential sale of the Product, including, without limitation, customer inquiries
received by AspenBio for the Product (the "Customer Information").

     1.5 Training.
     -------------
     If  requested  by Merial  (and at  Merial's  cost),  AspenBio  shall  train
Merial's  employees  with  respect  to the  Product,  the QC Tests and any other
matter reasonably requested by Merial related to Early Bovine Pregnancy Testing.

     1.6 Due Diligence.
     ------------------
     Up to 30 days  following  Merial's  receipt of the final  Trial (as defined
below)   report,   AspenBio   shall   provide  to  Merial  and  its  agents  and
representatives such information  (including copies of documents) concerning the
Product as Merial may request,  and  reasonable  access during  normal  business
hours and upon reasonable  advance notice to the  properties,  books and records
relating  to  the  Product,   the  proposed  suppliers  thereof  and  any  other
information  necessary  to permit a full due  diligence  investigation  thereof.
Notwithstanding  the  foregoing,   proprietary   information   relating  to  the
purification  of antibodies or antigens or to the making of colloidal  gold (the
"Proprietary Information") shall be provided solely to Patrice Allibert and John
Johnson of Merial and any other  Permitted  Persons  (defined  below) upon their
execution  of a  confidentiality  agreement  substantially  in the  form  of the
Confidential  Disclosure Agreement between AspenBio and Merial dated October 21,
2002 (except  that such  agreement  shall not permit  disclosure  to  employees,
affiliates,  in addition to other third  parties,  and shall not have an express
termination  date). If Merial  reasonably  believes that additional  individuals
should have access to the Proprietary Information,  Merial shall request consent
from AspenBio for such individuals to receive the Proprietary Information,  such
consent not to be  unreasonably  withheld  (such  consented to  individuals  are
"Permitted Persons").

     1.7 Merial Property.
     --------------------
     All  information  received  and property  developed  by Merial  (other than
information and property received from AspenBio,  including, without limitation,
the Products,  the Licensed Property, as defined below, and any related patents)
as a result of this  Agreement and the  transactions  contemplated  hereby shall
remain the  exclusive  property of Merial.  For the  avoidance of doubt,  Merial
Property shall include any  tradenames,  trademarks  and  tradedress  other than
"Surbred" and related  tradedress  applied to the Products (the "Merial  Product
Trademarks").

                                        2
<PAGE>

     1.8 AspenBio Property.
     ----------------------
     The  intellectual  property related to the Product,  including  patents and
patent  applications,  the Licensed Property,  as defined below, and any related
patents,  and all information received and property developed by AspenBio (other
than  information  and  property  received  from  Merial)  as a  result  of this
Agreement and the  transactions  contemplated  hereby shall remain the exclusive
property of AspenBio (the "AspenBio Property").

2. Product Orders, Shipping and Delivery.
-----------------------------------------

     2.1 Product Orders.
     -------------------

     Within 30 days of the date this Agreement is executed, Merial shall provide
AspenBio  with sales  projections  for the Product for the initial six months of
sales (the  "Order  Schedule").  On or before the first of each  calendar  month
thereafter,  Merial  shall  provide  AspenBio  with  sales  projections  for  an
additional month, which shall be added to the Order Schedule, such that AspenBio
shall be provided with a rolling six month Order  Schedule.  AspenBio shall ship
the Product to Merial in accordance with the Order  Schedule.  Merial may revise
the Order  Schedule  with at least 90 days' advance  notice to AspenBio.  In the
event  that  Merial is unable to  provide  90 days  advance  notice,  Merial may
increase or decrease the Order  Schedule by up to 20% if 60 days' advance notice
is given to AspenBio.  Regardless of the timing of such request,  AspenBio shall
use commercially reasonable efforts to supply any request by Merial for delivery
of Products  in excess of the amounts  stated on the  relevant  Order  Schedule,
provided,  however,  that the  provisions  of Section 2.2 shall not apply to any
changes to the Order  Schedule  made by Merial  with less than 60 days'  advance
notice.  Merial  shall not place  any  order for less than  40,000  units of the
Product in any  particular  shipment  and in no event  shall  AspenBio  have any
obligation to fill or ship any order for less than 40,000 units.

     2.2 Late Delivery.
     ------------------
     Subject to Section  17.9, in the event orders are not delivered by AspenBio
within five  business  days of their due date,  the  Purchase  Price (as defined
below)  shall be  reduced  by 10% for the  first 30 days  (or  portion  thereof)
thereafter  that  the  Product  is late and by 20% for each  30-day  period  (or
portion thereof)  thereafter that the Product is late. Such reductions shall not
apply to (i) any delay in delivery of the Products resulting from changes in the
Product or  packaging  requested by Merial or (ii) if and to the extent that any
delay in delivery results from AspenBio  previously  supplying Product in excess
of the amounts  provided on the Order  Schedules  in order to fill  requests for
delivery of additional Products by Merial.

     2.3 Shipping to Merial.
     -----------------------
     Unless  otherwise  requested  by  Merial  and  agreed to by  AspenBio,  all
Products ordered by Merial shall be shipped directly to Merial or its previously
designated agent or distributor by an appropriate  means. All costs and expenses
of shipment  shall be borne by  AspenBio.  AspenBio  shall honor all  reasonable
requests for other shipment methods at Merial's expense.  Title and risk of loss
or damage with  respect to Products to be  delivered  hereunder  shall pass from
AspenBio  to Merial on the date of  delivery  to Merial of such  Product  or its
agent.  Unless  otherwise  requested  by Merial and agreed to by  AspenBio,  all
Products ordered by Merial shall be shipped directly to Merial or its designated
agent,  to one of the  locations  set forth below,  as directed by Merial in its
purchase order:

(a)      Merial Limited
                           115 Transtech Drive, Bldg. 5
                           Athens, GA 30601

(b)      Merial Limited
         c/o Jacobsen Warehouse
         1610 Southeast Cortina
         Ankeny, IA 50021

                                        3
<PAGE>

(c)      Merial Limited
         c/o Jacobsen Warehouse
         4148 Delp Street
         Memphis, TN 38101

     2.4 Packaging.
     --------------
     AspenBio and Merial will design the  packaging  for the Product  (including
all inserts),  provided  that the  packaging for the Product will  ultimately be
determined by Merial,  in its  reasonable  discretion,  and Merial shall pay any
additional  costs for any  requests  by Merial for changes or  additions  to the
packaging or components of the Product,  from the costs for the basic design set
forth on Exhibit B, which is  attached  hereto and  incorporated  herein by this
reference.  Notwithstanding  the above, the parties hereby acknowledge and agree
that the packaging and  instructions  for the Product will include (i) customary
and appropriate  notations to reflect  intellectual  property rights,  including
trademark registrations,  copyrights, and patent applications and letters patent
received,  in accordance  with  applicable  patent  marking laws and other legal
requirements  and (ii) the statement  "[Product  tradename] is  manufactured  by
AspenBio,  Inc. and is distributed exclusively by Merial Limited" accompanied by
the logo of AspenBio or other corporate or `doing business as' name or a logo as
AspenBio  shall  designate in writing prior to any final proof edit deadline for
the printing of any such name or logo on the packaging and  instructions for the
Product,  which statement shall be distinct and conspicuous and which logo shall
be of the same size as the Merial logo, and shall be located on the side or back
label.  AspenBio  will work with Merial to ensure that  packaging  complies with
applicable  regulatory  requirements,  if any. The parties acknowledge and agree
that the packaging of the Product may vary  depending  upon the country in which
the Product is intended to be marketed.

     2.5 Obligations of Merial.

          (a)  Marketing.
          ---------------
               Merial  shall use  commercially  reasonable  efforts to bring the
          Product to market and to commercially  exploit the Product in a manner
          designed to maximize sales and revenues from the Product. Merial shall
          prepare a  marketing  plan for each  country  in which it  intends  to
          market the  Product.  Merial shall  provide to AspenBio  copies of its
          marketing  plans,  sales  forecasts  and  pricing  policies  for  each
          country.

               (b) Transfers without Consideration.
               ------------------------------------
               In  the  event  that  Merial   transfers  any  Products   without
          consideration,  Merial shall pay AspenBio for such  Products an amount
          equal to the average  Purchase  Price paid by Merial for the  trailing
          twelve month period (or portion  thereof).  Such payment shall be made
          by Merial in two installments in accordance with the payment procedure
          described in Section 5.2(a) hereof.

               (c) Compliance with Laws and Standards.
               ---------------------------------------
               Merial agrees that in performing its  obligations  hereunder,  it
          shall  comply with all  applicable  United  States and  foreign  laws,
          including,  without  limitation,  the  International  Traffic  in Arms
          Regulations (ITAR) and the Export Administration Regulations.

                                        4
<PAGE>

               (d) Foreign Government Approval or Registrations.
               -------------------------------------------------
               If this  Agreement or any  associated  transaction is required by
          the law of any nation to be either  approved  or  registered  with any
          governmental  agency,  Merial shall assume all legal obligations to do
          so and the costs in connection therewith. AspenBio will cooperate with
          Merial in  obtaining  any such  approval  or  registration,  including
          payment of reasonable expenses incurred by AspenBio.

     2.6 Product Returns; Expired Stock.
     -----------------------------------
    Subject to Section  10, all  Products  that are  returned by  customers  to
Merial or AspenBio for any reason shall be the  responsibility of Merial. In the
event expired Products are returned,  Merial may purchase replacement components
of the Product from AspenBio at AspenBio's Production Cost (as defined below) to
allow revalidation and sale of said Product.

3. Distribution Rights, Licenses and Patents.
---------------------------------------------

     3.1 Product Distribution Rights.
     --------------------------------
     During the Term of this  Agreement,  AspenBio grants to Merial the right to
exclusively market,  distribute and sell the Product worldwide,  either directly
or through  its  affiliates  or agents.  Without  the prior  written  consent of
Merial, AspenBio shall not market, advertise,  distribute or sell the Product or
grant any other  person or entity the right or  license  to  market,  advertise,
distribute  or sell the  Product  during the Term of this  Agreement;  provided,
however,  Merial's  consent  shall not be  required  if this  Agreement  becomes
non-exclusive  as a result of  Merial's  failure  to meet the sales  targets  in
accordance with Section 4.1 hereof or if Merial breaches this Agreement.

     3.2 Licenses.
     -------------

               (a) Trademark License.
               ----------------------
               During the Term of this  Agreement,  AspenBio grants to Merial an
          exclusive  license to use the name "SURBRED" (the  "Trademark")  and a
          non-exclusive  license  to use the other  names and marks set forth on
          Exhibit E for the marketing,  distribution  and sale of the Product as
          expressly  provided  herein,   including,   without   limitation,   in
          advertising the Product and for use on the Website (as defined below).
          Merial may use the  Trademark or any other name to market the Product,
          in its sole discretion. Merial will be responsible for registering the
          tradenames it uses to market the Product wherever such registration is
          required.  Regardless  of the  tradename  used by Merial to market the
          Product,  Merial will distinctly and  conspicuously  label the Product
          with the statement  "[Product  tradename] is manufactured by AspenBio,
          Inc. and is distributed exclusively by Merial Limited" and the logo of
          AspenBio,  or other corporate or `doing business as' name or a logo as
          AspenBio  shall  designate  in writing  prior to any final  proof edit
          deadline for the printing of the Product label.  AspenBio reserves the
          right to conduct  quality  control for any  Product  handled by Merial
          where the Product is used in  conjunction  with the  Trademark  or any
          other trademark of AspenBio.

               (b) URL License.
               ----------------
               During  the Term of this  Agreement,  Merial  shall also have the
          right   to   the    exclusive    use   and    control   of   the   URL
          http://www.surbred.com  (the  "Surbred  URL," and with the  Trademark,
          collectively,  the "Licensed Property"). In the event Merial elects to
          utilize the Surbred URL, it may modify the website associated with the
          Surbred URL (the "Website") and all content  thereon,  at its expense.
          In such event,  the Website  shall be hosted and served by Merial,  at

                                        5
<PAGE>

          its  expense;  provided,  however,  that  Merial  will  include on the
          Website (or any other website  describing  the Product) the statement:
          "[Product  tradename]  is  manufactured  by  AspenBio,   Inc.  and  is
          distributed  exclusively  by Merial  Limited" and the AspenBio logo or
          other  corporate  or `doing  business  as' name or a logo as  AspenBio
          shall  designate,  in a  distinct  and  conspicuous  manner  and shall
          include a link to AspenBio's website.  In addition,  the parties agree
          to  provide a link from the home  page of their  respective  corporate
          websites  to the home  page of the  other.  Upon  termination  of this
          Agreement,  Merial shall take whatever action is reasonably necessary,
          at its expense,  to transfer  control and  maintenance  of the Website
          back to AspenBio or its designee.

     3.3 Patents.
     ------------

               (a) Application.
               ----------------
               AspenBio  and Merial  shall  jointly  determine  the  appropriate
          patent  strategy for the Product,  provided  that the ultimate  patent
          strategy for the Product shall be the decision of AspenBio in its sole
          discretion.  Notwithstanding the foregoing,  AspenBio agrees to pursue
          the  development  and  the  implementation  of  its  patent  strategy,
          including  the filing of  applications  and other  related  filings as
          applicable,  with reasonable  diligence and timeliness (the "Diligence
          Requirement").  All  costs and  expenses  associated  with the  patent
          application process,  including application,  filing,  prosecution and
          maintenance  shall be borne by AspenBio.  Merial shall  cooperate with
          AspenBio,   as  reasonably  requested  by  AspenBio,   in  the  patent
          application  process.   Merial  shall  provide  reasonable  notice  of
          countries  in which  it  anticipates  marketing  the  Product  so that
          AspenBio may apply for such  registrations or patent  protection as it
          deems  appropriate,  subject  to the  Diligence  Requirement,  in such
          countries.

               (b) Ownership.
               --------------
               Full and exclusive rights and ownership in the Licensed  Property
          and in any and all related  letters  patent,  trademarks,  copyrights,
          trade  secrets,  processes,  domain names,  and any other  proprietary
          rights  associated  with the Product or the Licensed  Property  (other
          than those independently developed by Merial or co-developed by Merial
          pursuant to the  agreement  provided for in Section  3.3(c) hereof and
          the Merial  Product  Trademarks)  shall remain the sole and  exclusive
          property of AspenBio.

               (c) Other Patent Rights.
               ------------------------
               Each  party  acknowledges  that  Merial may be a  co-inventor  of
          patents  linked  to  further  developments  and  improvements  to  the
          Product.  The parties shall address ownership of such patent rights in
          a  separate  agreement  which they will  negotiate  in good  faith.  A
          schedule of existing  patents and patent  applications  is detailed on
          Exhibit D.

     3.4 Enforcement.
     ----------------
     AspenBio  shall have the sole right and  authority  to initiate any suit or
legal  proceeding,  or to take any other  action it may consider  reasonable  or
necessary,  in its sole and absolute discretion to enforce and defend AspenBio's
rights to the Product,  the Licensed  Property or the related patents.  AspenBio
shall be entitled to retain all amounts awarded in connection with any such suit
or legal  proceeding.  Merial shall promptly notify AspenBio of any potential or
actual infringement or other unlawful use of the Product, the Licensed Property,
or any  related  patent.  Merial  shall  have the sole  right and  authority  to
initiate any suit or legal proceeding,  or take any other action it may consider
reasonable  or  necessary,  in its sole and  absolute  discretion  to defend and
enforce  Merial's  rights to the  Merial  Product  Trademarks.  Merial  shall be
entitled to retain all amounts awarded in connection with any such suit or legal
proceeding.

                                        6
<PAGE>

     3.5 Right of First Negotiation.
     -------------------------------
     During the first two years of the Term of this  Agreement,  AspenBio grants
to Merial a right of first negotiation to distribute, market and sell all future
animal health  products  developed by AspenBio  ("Right of First  Negotiation").
AspenBio  shall notify  Merial of future  animal  health  products it intends to
develop,  distribute,  market, and sell ("Product Notice").  Within ten business
days of a request  by  AspenBio,  and  prior to  disclosure  of any  information
regarding   such  future   animal   health   products,   Merial   shall  sign  a
confidentiality  agreement  whereby  Merial agrees to maintain in confidence and
not to use any information  relating to such animal health products disclosed by
AspenBio.  To exercise  the Right of First  Negotiation,  Merial  shall  provide
AspenBio  with  notice of its  interest  in  pursuing  negotiations  ("Notice of
Interest") within 60 days of receipt of any Product Notice from AspenBio. In the
event that Merial does not enter into a  confidentiality  agreement in such time
period, the Right of First Negotiation shall terminate  immediately.  The Notice
of  Interest  shall be  accompanied  by a  non-refundable  payment of $50,000 to
AspenBio to exercise the Right of First  Negotiation  granted under this Section
3.5 for 30 days from the Notice of Interest.  Upon the expiration of such 30-day
period,  Merial  may extend the Right of First  Negotiation  granted  under this
Section  3.5 for up to two  additional  30-day  periods by making an  additional
non-refundable  payment of $50,000 for each such 30-day  extension  prior to the
expiration of the Right of First  Negotiation.  After timely receipt of a Notice
of Interest and the non-refundable payment or payments described above, AspenBio
shall not enter  into  negotiations  with any third  parties  while the Right of
First  Negotiation is in effect,  provided,  that the Right of First Negotiation
may not be  extended  for more than 90 days  following  the date of receipt of a
Notice of Interest (the "Negotiation Period") and during such Negotiation Period
AspenBio and Merial each shall negotiate in good faith. In the event that Merial
does  not  deliver  a  timely  Notice  of  Interest  or no  final  agreement  is
consummated prior to the expiration of the Negotiation Period, AspenBio shall be
free to negotiate and enter into  agreements with third parties to distribute or
market such animal  health  product.  Nothing in this Section 3.5 shall  prevent
AspenBio from conducting additional research and testing and market research and
analysis  (alone or in conjunction  with third parties) prior to the termination
of the Right of First  Negotiation  described above.  This Section 3.5 shall not
apply to animal  health  products  for which  AspenBio  receives a  proposal  to
develop for, or co-develop with, independent third parties.

4. Sales Targets.
-----------------

     4.1 Target Sales.
     -----------------
     Merial shall sell at least 1.5 million  Products in calendar  year 2004, at
least 4 million  Products in calendar year 2005 and at least 5 million  Products
in each calendar year thereafter  during the Term of this  Agreement;  provided,
however,  that in the event the  Launch  does not occur on or before  October 1,
2003, the minimum sales targets shall be reduced,  on a pro rata basis, for each
calendar quarter (or portion  thereof)  thereafter that the Product is Launched.
In the event Merial  fails to achieve such minimum  sales target in any calendar
year during the Term of this  Agreement  and such default is not due in any part
to AspenBio's failure to supply Merial with Products as ordered by Merial or any
other  material  breach of this  Agreement by AspenBio,  AspenBio shall have the
right to convert,  after written  notice to Merial,  the exclusive  distribution
rights and licenses granted to Merial  hereunder to  non-exclusive  distribution
rights  and  licenses.  Merial  shall  have 30 days  after  notice of failure to
achieve sales targets to cure the default  without the  distribution  rights and
licenses granted herein becoming non-exclusive.

                                        7
<PAGE>

     4.2 Expiration.
     ---------------
     The minimum sales  requirements  described above shall expire and no longer
be applicable in the event a Competing  Technology  (as defined  below)  becomes
available on the market. "Competing Technology" means any bovine early pregnancy
test of (i) equivalent or greater  accuracy than the Product or (ii)  equivalent
or earlier determination  following insemination than the Product, as determined
by  Merial,  in its  reasonable  discretion,  with  the  specific  exception  of
currently  marketed  Early  Conception  Factor  (ECF)  tests and any  technology
developed by AspenBio and included in the Product or the Licensed Property under
this Agreement.

5. Payments.
------------

     5.1 Development Payments.
     -------------------------
     Merial shall make the following payments to AspenBio for the services to be
provided by AspenBio under this Agreement:

               (a) immediately  upon execution of this  Agreement,  Merial shall
          pay to AspenBio USD 200,000;

               (b) within 30 days of the execution of this Agreement, Merial and
          AspenBio  shall  mutually  agree  in  writing  to the  procedures  and
          standards  of  performance  to be applied in a field trial of at least
          500 cows to be initiated  on or before  April 30, 2003 (the  "Trial").
          AspenBio  shall  provide  the  parties  conducting  the Trial with all
          Surbred 15 test strips and other components of the Product  reasonably
          required to complete the Trial on or before July 15,  2003.  Within 30
          days of receipt of a final report  confirming  to Merial's  reasonable
          satisfaction that the Product conforms to the Design, Merial shall pay
          to AspenBio USD 700,000 (the "Second Installment"); provided, however,
          that in the event the final Trial  report is not complete on or before
          July 15,  2003 and  there is no  unreasonable  delay by  Merial in the
          performance  of  its  obligations   hereunder  (which  delay  AspenBio
          reported to Merial by written notice within 10 days of its occurrence)
          that are a condition to AspenBio's  completion of a satisfactory final
          Trial report, the amount of the Second Installment shall be reduced by
          USD  100,000 for each month or portion of a month  following  July 15,
          2003 that the final Trial  report is not  presented  (the  "Discounted
          Second  Installment").  If there  is a  reasonable  delay in  Merial's
          performance of its obligations  hereunder,  then the date for delivery
          by AspenBio of the final Trial  report to Merial shall be extended for
          an  equivalent  period of time  beyond July 15, 2003 to allow for such
          delay.  In the event that the final  Trial  report does not confirm to
          Merial's  reasonable  satisfaction  that the  Product  conforms to the
          Design, the parties will meet and attempt to modify the Product or the
          Trial in a mutually  agreeable manner. If no such agreement is reached
          within  30  days of the  delivery  of the  final  Trial  report,  this
          Agreement  shall  terminate  and 50% of all amounts  paid by Merial to
          AspenBio  hereunder  prior to such date shall be  returned  to Merial;
          and.

               (c) Upon the  Launch  (as  defined  below) of the  Product in the
          first country,  Merial shall pay to AspenBio USD 1,000,000 (the "Final
          Installment").  "Launch" means AspenBio's ability to ship to Merial at
          least  250,000  Products,   AspenBio's  reaching  an  inventory  level
          sufficient to supply Merial for the next  calendar  quarter  (based on
          the Order Schedules provided by Merial) and following the satisfaction
          of the QC Tests for the Product.

                                        8
<PAGE>

     5.2 Purchase Price.
     -------------------
     Merial  shall pay to  AspenBio  an amount  equal to 33% of  Invoiced  Sales
Price, which, for purposes of this Agreement, shall mean, as applicable,  either
(a) for  Product  sold by Merial  distributors,  the gross  price  listed on the
invoice,  before rebates,  credits,  discounts or other  deductions,  or (b) for
direct sales by Merial (meaning sales using  distribution  channels other than a
third party  distributor) to veterinary clinic customers,  the net invoice price
on which  Merial  bills and seeks  collection  from  such  customers  ("Purchase
Price").  The minimum  Purchase Price in the United States shall be [*] per unit
of  Product  and  outside  of the  United  States  shall be [*] per unit of
Product;  provided,  however,  if a Competing  Technology  is  introduced in the
United  States,  then  from that date  through  the end of the Term the  minimum
Purchase Price will no longer be applicable (the  "Fluctuating  Minimum Purchase
Price Period").  During the Fluctuating  Minimum  Purchase Price Period,  Merial
shall  provide  to  AspenBio  within 45 days  after the close of each  quarter a
report of the average  Purchase  Price  (calculated  under this Section 5.2 from
sales in all countries using foreign  currency  conversion  rates as of the time
such conversions are determined for Merial's internal  accounting  purposes) for
the most recently  completed  quarter (the "Trailing  Average  Purchase  Price")
covered  by the  report.  If after  the  beginning  of the  Fluctuating  Minimum
Purchase Price Period the Trailing  Average  Purchase Price is less than [*] per
unit of  Product  (a "Low  Purchase  Price")  for  any two  successive  calendar
quarters, then AspenBio may, at its option,  terminate this Agreement by written
notice  within 45 days of  receiving  any  report  referenced  in the  preceding
sentence that discloses the second successive calendar quarter of a Low Purchase
Price. If AspenBio  elects to terminate this Agreement  pursuant to this Section
5.2 within 3 years after the Launch Date,  then AspenBio shall pay to Merial all
monies paid by Merial to AspenBio under Section 5.1 on a prorata basis according
to the following formula:

     (The amounts paid by Merial under Section 5.1) times the  following  ratio:
(number of months  remaining  until 36 months  after the  initial  Launch  Date)
divided by 36 months.

     AspenBio  shall  pay  such  monies  pursuant  to a  promissory  note (to be
negotiated  by the parties in good faith) at the  prevailing  interest rate on a
monthly basis in equal installments over the time remaining of the 3 year period
after the Launch Date. During the Fluctuating Minimum Purchase Price Period, the
minimum Purchase Price shall be no less than [*].

          (a) Installments.
          -----------------
          The Purchase Price will be payable by Merial in two installments.  The
     initial payment will be [*] per Product  delivered to Merial and shall
     be due 30 days after receipt of the Product by Merial;  provided,  however,
     that Merial shall pre-pay for its first 1,000,000  Product orders, on an as
     ordered basis,  (in an aggregate  amount not to exceed [*]).  The
     final payment will comprise the balance of the Purchase  Price  (calculated
     in  accordance  with Section 5.2) and shall be due 30 days after the end of
     each calendar quarter during which such Product is sold by Merial.

          (b) Review of Production Cost.
          ------------------------------
          AspenBio  shall use its best efforts to minimize the  Production  Cost
     (which,  for purposes of this Agreement,  means AspenBio's costs to produce
     or purchase the Product  (including  shipping  expenses,  duties,  printing
     expenses,  and packaging  expenses)) of the Product ("Production Cost"). If
     AspenBio's  Production  Cost exceeds [*] per Product,  AspenBio may provide
     written  notice to Merial ("Cost Overage  Notice").  Upon receipt of a Cost
     Overage Notice, Merial may elect to perform an audit of AspenBio to confirm
     that  AspenBio's  Production  Cost  exceeds [*] per  Product.  Merial shall
     provide  written  notice of its intent to perform any such audit  within 10

                                        9
<PAGE>

     days of receipt  of the Cost  Overage  Notice  and any such audit  shall be
     completed by Merial  within 30 days of the Cost Overage  Notice.  If Merial
     does not make a timely  election  to conduct  such an audit or if the audit
     confirms that AspenBio's  Production Cost exceeds [*],  AspenBio and Merial
     shall  review the  Purchase  Price amount and attempt to agree on a revised
     amount.  If the  parties  are unable to agree on a revised  Purchase  Price
     amount  within 30 days of the Cost Overage  Notice,  Merial or AspenBio may
     terminate this Agreement upon written notice to the other party;  provided,
     however,  that neither party may terminate this Agreement  pursuant to this
     Section during the first three full years of the Term of this Agreement. If
     this Agreement is not terminated  pursuant to this Section or in accordance
     with Section 6, the Agreement shall remain in full force and effect.

          (c) Records and Audit Rights.
          -----------------------------
          Each of AspenBio and Merial  shall keep,  maintain and preserve for at
     least five years  following  the  termination  or expiration of the Term of
     this  Agreement,  accurate  records  relating to the Purchase Price and the
     Production Cost. During the Term of this Agreement and the five-year period
     thereafter, AspenBio shall have the right, at its sole cost and expense, to
     audit the records of Merial for the purpose of verifying the Purchase Price
     and Merial shall have the right, at its sole cost and expense, to audit the
     records  of  AspenBio  following  receipt  of  a  Cost  Overage  Notice  in
     accordance  with Section 5.2(c) for the purpose of verifying the Production
     Cost. Should any audit reveal a greater than two percent discrepancy in the
     amount of the Purchase  Price or the  Production  Cost for the period being
     audited,  the party that  misreported such amount shall reimburse the other
     party for all costs and expenses  associated with such audit in addition to
     all other amounts due as a result of the incorrect reported amount.  Audits
     shall be made upon not less than ten days' prior written  notice and during
     regular business hours.  Any parties  performing such audit may be required
     to  execute  a  standard   confidentiality   agreement   restricting  their
     disclosure and use of any confidential  information  obtained in connection
     with the audit.


     5.3 Taxes.
     ----------
     Each  party  shall pay its own  federal,  state,  and local  taxes or other
charges (including import taxes and fees, if any) assessed,  designated, levied,
imposed or arising under this Agreement.

6. Term and Termination.
------------------------

     6.1 Term.
     ---------
     With respect to each market in which Merial  markets the Product,  the term
of this Agreement shall be the greater of (a) five years from the Effective Date
or (b) the term of the last to  expire  of any  patent  for the  Product  in the
United States or applicable  foreign country (the "Term").  This Agreement shall
automatically  be extended for  successive  one-year  terms  unless  AspenBio or
Merial  gives  the other  party  written  notice of its  intent to not renew the
Agreement  not less than 90 days prior to the end of the Term or any  successive
one-year term.

     6.2 Effect of Termination.
     --------------------------
     Upon the expiration or  termination  of this Agreement for any reason,  the
distribution  rights and licenses granted hereunder and other provisions of this
Agreement  shall  immediately  terminate  and be of no further  force or effect,
except as  otherwise  provided  herein.  Nothing  herein  shall be  construed to
release  Merial of the  obligation  to pay the  Purchase  Price for any Products
delivered prior to the date of such  termination or to release either party from
any  other  obligation  that  matured  prior  to  the  effective  date  of  such
termination.  Upon the  expiration  or  termination  of this  Agreement  for any

                                       10
<PAGE>

reason,  Merial shall  return to AspenBio  all AspenBio  Property and any books,
records,  files, forms, reports,  memoranda,  or other documents,  writings, and
similar materials containing information or other intellectual property received
from  AspenBio or relating to the Licensed  Property  and the Products  (whether
received  from  AspenBio or developed  solely or partially by Merial  during the
Term hereof except if such materials relate to a Merial Product  Trademark or to
an improvement or development for which Merial is a co-inventor  pursuant to the
agreement  described in Section  3.3(c)) and AspenBio shall return to Merial all
Merial  Property.  Notwithstanding  anything to the contrary  set forth  herein,
however,  Merial  shall have the right for 12 months to dispose of all  Products
then in its  inventory  and shall pay the Purchase  Price  thereon in accordance
with the terms hereof.

     6.3 Termination by Merial.
     --------------------------
     Merial may terminate this Agreement:

          (a) within 30 days of Merial's  receipt of the final  Trial  report in
     the event the results of such report  concludes  that the Product  does not
     meet the standards  mutually  agreed to by the parties in  accordance  with
     Exhibit A;

          (b)  immediately,  if  AspenBio  is unable to provide  Merial with the
     finished  Product  that  is  ready  for  Launch  in the  United  States  in
     accordance  with the Design by October 1, 2003 (in which case Merial  shall
     be  reimbursed  50% of all  payments  made as of such  date  by  Merial  in
     accordance with Section 1.2);

          (c) upon 30 days'  written  notice to AspenBio  in the event  AspenBio
     breaches any material  agreement,  covenant,  representation or warranty of
     this  Agreement  after notice from Merial and such condition or act has not
     been fully remedied within such 30-day period; or

          (d) pursuant to Section 5.2(b).

     6.4 Termination by AspenBio.
     ----------------------------
     AspenBio may terminate this Agreement:

          (a) upon 15 days'  written  notice to Merial in the event that  Merial
     breaches any obligation to make any payment to AspenBio hereunder,  or upon
     30 days'  written  notice to Merial in the event Merial  breaches any other
     material agreement, covenant,  representation or warranty of this Agreement
     and such condition or act has not been fully remedied  within such 15 or 30
     day period, as applicable; or

          (b) pursuant to Sections 5.2 and 5.2(b).

     6.5 Termination by Either Party.
     --------------------------------
     Either party may terminate  this Agreement  immediately  upon notice to the
other in the event of (a) the filing of an application  for the appointment of a
receiver or custodian for such party or such party's property,  (b) the entry of
an order for relief or the filing of a petition  by or against  such party under
the provisions of any  bankruptcy or insolvency  law, (c) any assignment for the
benefit  of  creditors  by or against  such  party,  or (d) such  party  becomes
insolvent.

7. Indemnity; Liquidated Damages; Limit of Liability.
-----------------------------------------------------


                                       11
<PAGE>


     7.1 Indemnification of Merial.
     ------------------------------
     AspenBio  shall  indemnify,  defend  and  hold  harmless  Merial,  and  its
respective affiliates,  officers,  directors,  stockholders,  employees, agents,
successors and assigns,  against any and all claims,  demands,  losses, damages,
judgments, actions, proceedings,  liabilities, settlements or any other costs or
liabilities  whatsoever,  including all reasonable  attorneys'  fees,  resulting
from, arising out of or otherwise  attributable to (a) any act or omission under
this Agreement,  including any breach of any representation,  warranty, covenant
or agreement of this  Agreement by AspenBio,  (b) any claim or action based upon
the claim that the Product or Licensed Property infringes the patent, copyright,
trademark,  trade secret or other intellectual property or proprietary rights of
another person or entity, (c) any product liability claim or action with respect
to the Product,  except to the extent such claim or action results from a use of
the  Product in a manner  other than its  intended  use,  (d) any  violation  by
AspenBio of any applicable law,  ordinance or regulation in connection with this
Agreement,  and (e) the informational  contents of the packaging for the Product
or any information posted on the Website and provided to Merial by AspenBio.

     7.2 Indemnification of AspenBio.
     --------------------------------
     Merial  shall  indemnify,  defend  and  hold  harmless  AspenBio,  and  its
respective affiliates,  officers,  directors,  stockholders,  employees, agents,
successors and assigns,  against any and all claims,  demands,  losses, damages,
judgments, actions, proceedings,  liabilities, settlements or any other costs or
liabilities  whatsoever,  including all reasonable  attorneys'  fees,  resulting
from, arising out of or otherwise  attributable to (a) any act or omission under
this Agreement,  including any breach of any representation,  warranty, covenant
or  agreement  of this  Agreement  by Merial (b) any  violation by Merial of any
applicable law,  ordinance or regulation in connection with this Agreement,  (c)
any claim or action based upon the claim that the Merial Property  infringes the
patent,  copyright,  trademark,  trade secret or other intellectual  property or
proprietary  rights of  another  person  or  entity,  and (d) the  informational
contents  of the  packaging  for the  Product or any  information  posted on the
Website,  provided such contents or  information  were not provided to Merial by
AspenBio or its suppliers.

     7.3 Liquidated Damages.
     -----------------------
     In the event Merial's ability to distribute, market and sell the Product is
impaired  as a result of  AspenBio's  breach of  Sections  8.2(d) and 9 and such
breach is not subject to a cure, AspenBio shall pay to Merial liquidated damages
in an amount equal to all monies paid by Merial to AspenBio under Section 5.1 of
this  Agreement  and all lost  profits of Merial due to the loss of sales of any
unsold Product held in Merial's inventory at the time of such breach;  provided,
that such lost profits  shall not exceed the total  profits of Merial from sales
of the Product for the previous six month period.  This remedy is in addition to
any other remedies granted to Merial under this Agreement.

     7.4 Limit of Liability.
     -----------------------
     EXCLUDING ASPENBIO'S OBLIGATIONS UNDER SECTIONS 7.1 AND 7.3, ASPENBIO SHALL
HAVE  NO  LIABILITY  UNDER  THIS  AGREEMENT  OR  OTHERWISE  FOR   CONSEQUENTIAL,
EXEMPLARY, SPECIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES EVEN IF IT HAS BEEN
ADVISED  OF THE  POSSIBILITY  OF  SUCH  DAMAGES.  IN ANY  EVENT,  THE  AGGREGATE
LIABILITY  OF  ASPENBIO  FOR ANY  REASON  AND UPON ANY CAUSE OF ACTION OR CLAIM,
INCLUDING,  WITHOUT  LIMITATION,  ASPENBIO'S  OBLIGATION  TO INDEMNIFY  AND HOLD
HARMLESS UNDER THIS AGREEMENT,  SHALL BE LIMITED TO THE AMOUNTS PAID TO ASPENBIO
BY MERIAL HEREUNDER.  THIS LIMITATION  APPLIES TO ALL CAUSES OF ACTION OR CLAIMS
IN THE AGGREGATE,  INCLUDING, WITHOUT LIMITATION,  BREACH OF CONTRACT, BREACH OF
WARRANTY, INDEMNITY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATIONS, AND OTHER
TORTS.

                                       12
<PAGE>


8. Representations  &  Warranties,  Product  Warranties,  Disclaimer  of  Other
-------------------------------------------------------------------------------
   Warranties.
--------------

     8.1 Mutual.
     -----------

     Each of  AspenBio  and Merial  represents  and  warrants  to the other on a
continuing basis throughout the Term of this Agreement that:

          (a) it has all necessary  capacity,  power and authority to enter into
     and perform this  Agreement  and has obtained  all  approvals  and consents
     required for the execution and performance of this Agreement;

          (b) the execution and delivery of this  Agreement  will not violate or
     contravene  any  agreement,   obligation,   commitment,   law,  statute  or
     regulation  to which it may be subject or any  provision  of its charter or
     bylaws;

          (c) this Agreement  represents the binding and enforceable  obligation
     of such party, enforceable in accordance with its terms; and

          (d) the persons  executing this  Agreement are duly  authorized by the
     respective parties to sign and deliver this Agreement on their behalf.

     8.2 AspenBio's Representations and Warranties.
     ----------------------------------------------
     AspenBio represents and warrants to Merial on a continuing basis throughout
the Term of this Agreement that:

          (a) to the best knowledge of AspenBio,  except as set forth in Section
     8.2(e),  in connection  with  performing the services  contemplated by this
     Agreement and developing the Product, AspenBio is not infringing,  and will
     not infringe, upon any patent, copyright,  trademark, trade secret or other
     proprietary right of any person or entity;

          (b) except for the rights of the licensors under the licenses attached
     hereto as Exhibit C (the "University Licenses"),  AspenBio is not under any
     obligation to assign or give any work performed under this Agreement to any
     third  party  (provided,  however,  that this  representation  shall not be
     construed  as a  restriction  against  AspenBio  subcontracting  all or any
     portion of the work to be performed hereunder);

          (c) except for the  University  Licenses  and the rights  described in
     Section  8.2(e),  AspenBio  owns the  rights to the  intellectual  property
     comprising the Product and the Licensed Property outright without any claim
     or  encumbrance  thereon  and has  the  unilateral  right  and  ability  to
     consummate the transactions contemplated hereby with respect to the Product
     and the Licensed Property; and

                                       13
<PAGE>

          (d) to the best knowledge of AspenBio,  except as set forth in Section
     8.2(e), the University  Licenses  constitute all the licenses necessary for
     the  development  of the Product by AspenBio,  the exclusive  distribution,
     marketing and sale of the Product by Merial and the license of the Licensed
     Property  to Merial  (the  "Licenses"),  and  there  are no other  licenses
     necessary  for the  development  of the Product by AspenBio,  the exclusive
     distribution, marketing and sale of the Product by Merial or the license of
     the Licensed  Property to Merial.  In the event any other  license  becomes
     necessary  for the  development  of the Product by AspenBio,  the exclusive
     distribution,  marketing  and sale of the Product by Merial and the license
     of  the  Licensed   Property  to  Merial,   AspenBio   shall  promptly  use
     commercially  reasonable efforts to obtain such license at its own cost and
     expense.  During the Term of this Agreement,  AspenBio shall be responsible
     for using commercially reasonable efforts to obtain and maintain reasonably
     necessary Licenses,  including the costs associated therewith, and AspenBio
     shall  comply with the terms of all such  Licenses.  In the event  Merial's
     ability to distribute,  market and sell the Product is materially  impaired
     as a result of AspenBio's  breach of this Section,  AspenBio shall promptly
     cure, at AspenBio's own cost and expense,  such breach (including,  without
     limitation,   procuring   another  license  or  developing  the  technology
     necessary to develop, distribute, maintain, support, sublicense or sell the
     Product)  or  Merial  may  cure  AspenBio's  breach   (including,   without
     limitation,   procuring   another  license  or  developing  the  technology
     necessary to develop, distribute, maintain, support, sublicense or sell the
     Product),  in which case AspenBio shall promptly  reimburse  Merial for all
     reasonable fees,  costs and expenses  incurred by Merial to cure AspenBio's
     breach.

          (e) Merial  acknowledges that in the current form of the Product,  one
     of the components is a lateral flow test strip, the  intellectual  property
     rights  to  which  are or may be  owned  by a  third  party.  AspenBio  has
     historically  obtained  these  components  from a  supplier  that  pays the
     royalties  thereon.  In the event that  AspenBio  is unable to obtain  such
     lateral flow test strips without payment of additional royalties,  fees, or
     equivalent  expenses,  the cost of such  expenses  shall be included in the
     calculation of AspenBio's Production Cost pursuant to Section 2.5(b).

          (f) AspenBio  represents and warrants that AspenBio has not received a
     notice  of  deficiency  under  Section  6.5 of the  License  Agreement  for
     Determination of Pregnancy Status of Ungulates between  AspenBio,  Inc. and
     The Idaho  Research  Foundation,  Inc.  dated  September  26, 2001 and that
     AspenBio  will  provide an  executed  copy of this  Agreement  to the Idaho
     Research Foundation,  Inc. in accordance with its obligations under Section
     3.2 of that agreement.

9. Sale of Product.
-------------------
     AspenBio and Merial  acknowledge and agree that any transfer of the Product
from  AspenBio to Merial under this  Agreement is a "sale" of the Product.  If a
court or arbitration panel of competent jurisdiction determines otherwise,  then
effective as of the Effective  Date,  AspenBio agrees that it shall be deemed to
have granted to Merial such patent  licenses and sublicenses as may be necessary
to allow  Merial  to market  and  distribute  the  Product  in accord  with this
Agreement.

10. Warranty; Insurance.
------------------------

     10.1 Warranty.
     --------------
     AspenBio warrants that it will use its commercially best efforts to perform
the services to be provided by it hereunder and that, during the period that the
Products are viable and not expired  (according to the expiration date indicated
on each such Product's  packaging),  such Products will perform according to the
requirements  of the Design and their  intended use,  provided that the Products
are stored, handled, and used in the manner prescribed by AspenBio. In the event
of any  breach of the  foregoing  warranty,  AspenBio  shall,  within 30 days of

                                       14
<PAGE>

Merial's  notice to AspenBio that a Product is not  performing  according to the
requirements  of  the  Design  or its  intended  use,  replace  the  Product  at
AspenBio's  sole  cost and  expense.  In the event a  Product  does not  perform
according  to the  requirements  of the Design or its  intended  use within such
30-day period, at Merial's option,  AspenBio shall promptly refund to Merial all
fees,   costs  and  expenses  paid  by  Merial  that  are  attributable  to  the
non-conforming Product.

     10.2 Insurance.
     ---------------
     During the term of this  Agreement,  AspenBio shall at all times at its own
expense,  keep and maintain  commercial  general liability  insurance  including
contractual liability for duties assumed by AspenBio under this Agreement,  with
limits of no less than USD 500,000, subject to a USD 1,000,000 general aggregate
limit.

     11. Relationship of Parties.
     ----------------------------
     Merial is and shall be considered  an  independent  contractor  with entire
control and  direction  of its  business  and  operations,  subject  only to the
conditions and obligations established by this Agreement. No agency, employment,
partnership or joint venture is created by this Agreement. Neither party to this
Agreement  shall make any  representations  tending to create  apparent  agency,
employment,  partnership or joint venture.  Neither party will have authority to
act for the other in any manner or to create obligations or debts binding on the
other,  and neither party will be  responsible  for any  obligations or expenses
whatsoever of the other.

     12. Governing Law.
     ------------------
     This  Agreement  shall be governed,  enforced,  performed  and construed in
accordance  with the laws of the State of Georgia,  excepting those conflicts of
law provisions  that would serve to defeat  application  of Georgia  substantive
law.

     13. Arbitration.
     ----------------
     The parties agree that any controversy, claim, or damages arising out of or
relating in any manner to this Agreement,  its formation, or any breach thereof,
will be resolved by binding  arbitration in Denver,  Colorado.  The  arbitration
shall be before a single neutral  arbitrator and, unless otherwise agreed by the
parties, shall be conducted pursuant to the JAMS Comprehensive Arbitration Rules
and Procedures ("Rules") as in effect at the time of the arbitration;  provided,
however, that the arbitration will not be administered by JAMS or conducted by a
JAMS arbitrator if both parties agree otherwise.  If either party objects to the
administration  by JAMS, then the arbitration shall be administered by an entity
or person mutually  agreed upon by the parties or, absent such an agreement,  by
the arbitrator  himself or herself.  If the  arbitration is not  administered by
JAMS, then, where reasonably  practical,  the provisions in the Rules applicable
to the JAMS administrator shall be read to apply to the administrator  appointed
by the parties. If it is not reasonably  practical to apply a provision relating
to the JAMS  administrator to the administrator  appointed by the parties,  then
that provision of the Rules shall not apply to this  arbitration.  If a conflict
exists between the Rules and this Section, then this Section shall govern.

     The arbitration  shall be commenced by one party  submitting an arbitration
demand to the other.  The parties shall have 20 days following the  commencement
of the  arbitration to select a mutually  agreeable  arbitrator.  If the parties
fail to mutually select an arbitrator within this 20-day period, then each party
shall,  within 10 days from such  failure,  submit to the other  party a list of
five neutral  arbitrators who such party has contacted and confirmed are free of
any conflicts and are  available to conduct the  arbitration.  Within three days

                                       15
<PAGE>

after these lists are  exchanged,  each party  shall  peremptorily  strike up to
three of the proposed  arbitrators  on the other party's list and shall submit a
list of such strikes to the other party.  Within three days after the peremptory
strikes  are  exchanged,  each  party  shall  rank in  order of  preference  the
remaining proposed  arbitrators,  with "1" being the most preferred.  The person
with the lowest total combined  ranking ("1" being the lowest  ranking) shall be
appointed as the  arbitrator.  In the case of a tie, the proposed  arbitrator(s)
who have or has the  highest  ranking  of any single  numeric  ranking by either
party (i.e.,  the least preferred by one party of those that are tied),  will be
struck and the remaining person shall be selected as the arbitrator.  If the tie
continues after those with the single highest  numeric ranking are struck,  then
the  arbitrator  shall be selected  from those  remaining in the tie by a single
toss of a coin. If an arbitrator  for any reason  withdraws  from serving as the
arbitrator after being appointed,  then the replacement  arbitrator shall be the
next lowest ranking person from the original arbitration selection process. If a
tie exists, then it shall be resolved by a single toss of a coin. If none of the
ranked  arbitrators  from  the  original  selection  process  can  serve  as the
replacement  arbitrator,  then the parties shall re-start the entire arbitration
selection process with new lists of proposed arbitrators.

     Discovery  shall be permitted  pursuant to the Rules,  and the  arbitration
hearing shall occur within 90 days following the  appointment of the arbitrator.
Any  provisional or injunctive  remedy that would be available in a court of law
will be available  from the arbitrator  pending the  arbitration of the dispute.
Each party shall pay its own  attorneys'  fees,  and each party shall pay 50% of
the fees and expenses of the arbitrators and the costs of the arbitration.

     Within 30 days following the completion of the hearing, the arbitrator will
issue a written  ruling with an  explanation  of the reasons for the award and a
full  statement  of the facts as found and the rules of law  applied in reaching
his decision.

14.  Survival;  Consultation  of Counsel.
-----------------------------------------
     The  provisions of Sections 1.7,  1.8,  5.2(c),  6.2, 7, 9, 10.1, 12 and 15
hereof shall survive the  termination of this Agreement and remain in full force
and effect  thereafter.  Each of the  parties  represents  that it has read this
Agreement, that it understands fully all of its terms, that it has been afforded
the  opportunity  to discuss this Agreement with legal counsel of its choice and
that it enters  into  this  Agreement  voluntarily  and of its own free will and
fully and completely accepts the terms of this Agreement.

15. Assignment.
---------------
     Except as  otherwise  provided  herein,  neither  AspenBio  nor  Merial may
assign, subcontract, transfer or otherwise delegate any of its rights, interests
or duties  whatsoever under this Agreement  without the prior written consent of
the other party;  provided,  however, that upon 14 days' prior written notice to
Merial, AspenBio may assign or transfer this Agreement in connection with a sale
of  substantially  all of the stock or assets of AspenBio.  Merial shall provide
AspenBio  with notice of any change in the equity  ownership or voting rights of
Merial constituting 10% or more of such equity ownership or voting rights within
10 days of such change.

16. Public  Announcement.
-------------------------
     Except as otherwise required by law, the parties will submit to each other,
prior to publication or release,  any press release  relating to this Agreement.
The parties will promptly  review  proposed press releases and provide the other
party with any comments  regarding the press  release.  Merial also will provide
the same  opportunity  to AspenBio  regarding any initial  press release  Merial

                                       16
<PAGE>

intends to publish relating to this Agreement. Merial acknowledges that AspenBio
will file this Agreement in AspenBio's  reports with the Securities and Exchange
Commission. AspenBio will request confidential treatment of the market sensitive
information contained in this Agreement as identified by Merial and agreed to by
AspenBio prior to execution of this Agreement.

     In addition to the initial  press  release  described  above,  AspenBio and
Merial  agree that they will issue press  releases to  announce  the  successful
completion of each of the following milestones: (i) the successful completion of
the Trial; (ii) the United States launch of the Product, and (iii) the launch of
the Product in each country  outside of the United States.  The text of all such
press  releases  shall  be  agreed  to by both  AspenBio  and  Merial  in  their
reasonable discretion except as otherwise required by law.

17. Miscellaneous.
------------------

     17.1 Amendment.
     ---------------
     This  Agreement  may be amended or modified  only in a writing  executed by
both parties.


     17.2 Headings.
     --------------
     Captions  are  inserted  only  for  convenience  and  are  in no  way to be
construed as part of this Agreement.

     17.3 Waiver.
     ------------
     The  waiver or  failure  of any party to  exercise  any  rights  under this
Agreement shall not be deemed a waiver or other limitation of any other right or
any future right.

     17.4 Successors and Assigns.
     ----------------------------
     Subject to Section  15, this  Agreement  shall inure to the benefit of, and
shall be binding upon, the parties,  their  respective  successors and permitted
assigns.

     17.5 Counterparts.
     ------------------
     This Agreement may be executed in two or more counterparts,  including with
facsimile signatures,  each of which shall be an original and all of which taken
together shall constitute one and the same agreement.

     17.6 Notices.
     -------------
     All notices required or permitted by this Agreement shall be in writing and
shall be hand delivered, sent by facsimile (with transmission confirmed) or sent
by  overnight  courier,  and shall be  effective  when  received  or, if sent by
overnight  courier,  on the next  business  day after  delivery  to the  courier
service.  Notices shall be sent to the address set forth on Exhibit A or at such
address as a party notifies the other party.

     17.7 Costs and Expenses.
     ------------------------
     Except as expressly set forth herein,  each party shall bear its own costs,
expenses,  taxes and other charges  whatsoever  incurred in connection  with the
execution and performance of this Agreement.

     17.8 Attorneys' Fees.
     ---------------------
     In the event that any action (including an arbitration  action) is filed in
relation  to this  Agreement,  the party  which does not  prevail in such action
shall pay the reasonable attorneys' fees and other costs and expenses, including
investigation costs, incurred by the prevailing party in such proceedings.

                                       17
<PAGE>

     17.9 Force Majeure.
     -------------------
     Should  either of the  parties be delayed in its  performance  (other  than
payments of amounts due  hereunder)  for reasons  which are beyond its  control,
including but not limited to labor disputes, fire, flood, civil strife, military
action, accidents,  terrorism, sabotage, riots, or other casualty or acts of God
or any similar cause,  the date of performance by such party shall be extended a
reasonable  time to allow for such  delay.  In no event  shall  either  party be
liable for any loss or damage to the other occasioned by any such delay.

     17.10 Severability.
     -------------------
     If for any  reason any  provision  of this  Agreement  shall be deemed by a
court of competent  jurisdiction  to be legally  invalid or  unenforceable,  the
validity,  legality and  enforceability of the remainder of this Agreement shall
not be  affected  and such  provision  shall be deemed  modified  to the minimum
extent  necessary to make such provision  consistent with applicable law and, in
its modified form, such provision shall then be enforceable and enforced.

     17.11 Further Assurances.
     -------------------------
     The parties  agree to conduct  such further acts and to execute and deliver
such additional agreements and instruments from time to time as the other may at
any time  reasonably  request in order to assure and confirm unto it its rights,
powers and remedies under this Agreement.

     17.12 Entire Agreement.
     -----------------------
     This Agreement,  including any exhibits and schedules  attached hereto, and
the Confidential  Disclosure Agreement between AspenBio and Merial dated October
21, 2002,  contain the entire  agreement and  understanding  of the parties with
respect to the subject  matter  hereof,  and  supersedes  all prior  agreements,
negotiations, representations and proposals, written and oral, relating thereto.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>



IN WITNESS  WHEREOF,  the parties  hereto have executed this Agreement as of the
date first set forth above.

                                   ASPENBIO, INC.


                                   By:
                                          --------------------------------------

                                          Name:
                                                       -------------------------

                                          Title:
                                                       -------------------------

                                          Address:

                                                       -------------------------


                                          Facsimile:
                                                       -------------------------



                                   MERIAL LIMITED


                                   By:
                                          --------------------------------------
                                          Name:
                                                       -------------------------

                                          Title:
                                                       -------------------------

                                          Address:
                                                       -------------------------

                                          Facsimile:
                                                       -------------------------

                                       19