Bioanalytical Systems, Inc. - General Security Agreement





Exhibit 10.11





GENERAL SECURITY AGREEMENT



         THIS GENERAL SECURITY AGREEMENT
(“Security  Agreement”)  is made as of the 29th day of October,
2002, by BIOANALYTICAL SYSTEMS,  INC., an Indiana corporation,  having its chief
executive  offices at 2701 Kent Avenue,  West Lafayette,  Indiana (Taxpayer I.D.
No.  35-1345024)  (the  “Borrower”),  in favor of THE PROVIDENT
BANK, having a notice address of One East Fourth Street, Cincinnati,  Ohio 45202
(the “Bank”). 



ARTICLE 1.        
DEFINITIONS



Section 1.1   Defined Terms.   
As used herein:



            “Accounts”,
“Inventory”,                      “Equipment”,
“Fixtures”,    “General   Intangibles”,
“Chattel      Paper”,      “Documents”,
“Goods”, “Deposit
Accounts”,  “Instruments”,  “Investment
Property”   and   “Proceeds”   shall  mean  all  of
Borrower’s  such  property  within the  meanings  ascribed  in the  Indiana
Uniform Commercial Code, as in effect from time to time. 



        “Account
Debtor”  shall have the  meaning  ascribed  in the  Indiana  Uniform
Commercial Code, as in effect from time to time. 



        “Collateral”
shall  mean all of the  Borrower’s  property  or rights in which a security
interest is granted hereunder. 



        “Collateral
Account” shall mean the Deposit Account more fully described in Section
4.5. 



        “Control” shall
have the meaning  ascribed in the Indiana Uniform  Commercial Code, as in effect
from time to time. 



        “Credit
Agreement”  shall  mean  the  Credit  Agreement  executed  between  the
Borrower and the Bank of even date, as amended from time to time. 



        “Foreign
Subsidiaries” shall have the meaning set forth in Part B of Schedule
4 hereto. 



        “Intellectual
Property”  shall  mean  all  intellectual  property  of  the  Borrower,
including,  without limitation,  (a) all patents,  patent  applications,  patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice);  (b) all trademarks,  service marks, trade dress, trade names, and
corporate  names and all the goodwill and quality control  standards  associated
therewith;  (c)  all  registered  and  unregistered  statutory  and  common  law
copyrights;  (d) all  registrations,  applications  and  renewals for any of the
foregoing;  (e) all trade secrets,  confidential  information,  ideas, formulae,
compositions,  knowhow,  manufacturing and production  processes and techniques,
research and development information, drawings, specifications,  designs, plans,
improvements,  proposals,  technical and computer data, financial,  business and
marketing  plans, and customer and supplier lists and related  information;  (f)
all other  proprietary  rights  (including,  without  limitation,  all  computer
software and documentation and all license agreements and sublicense  agreements
to and from third parties relating to any of the foregoing);  (g) all copies and
tangible  embodiments  of the  foregoing  in  whatever  form or medium;  (h) all
damages  and  payments  for  past,  present  and  future  infringements  of  the
foregoing;  (i) all royalties and income due with respect to the foregoing;  and
(j) the right to sue and recover for past,  present and future  infringements of
the foregoing. 




	
GENERAL SECURITY AGREEMENT






        “Liabilities”
shall mean (a) all Obligations including all future advances; (b) all other time
to time  obligations of the Borrower to the Bank of every type and  description,
direct or indirect,  absolute or contingent,  due or to become due, now existing
or hereafter  arising,  and whether or not  contemplated  by the Borrower or the
Bank as of the date of this Security Agreement,  including,  without limitation,
any modification,  extension, or addition to or of the Obligations or the Credit
Agreement and any overlying  advances,  out of formula  advances and  overdrafts
made or permitted in connection with the Obligations or other  Liabilities;  and
(c) any duty of the Borrower to act or to refrain from acting in connection with
any Liability. 



        
“Obligations”   shall  have  the   meaning   ascribed  in  the  Credit
Agreement.



               “Schedule      of
Accounts” shall have the meaning ascribed in Section 4.3.



        “Stock Rights”
means any securities,  dividends or other  distributions  and any other right or
property  which the Borrower  shall receive or shall become  entitled to receive
for any reason  whatsoever with respect to, in  substitution  for or in exchange
for any securities or other ownership  interests in a corporation,  partnership,
joint  venture or limited  liability  company  constituting  Collateral  and any
securities,  any right to receive  securities and any right to receive earnings,
in which the  Borrower now has or  hereafter  acquires  any right,  issued by an
issuer  of  such   securities,   other  than   securities   that   would   cause
Borrower’s   pledge  to  Bank  to  exceed   Sixty-Five   Percent  (65%)  of
Borrower’s interest in Foreign Subsidiaries. 



        
Section     1.2   Incorporation     of    Credit     Agreement
Definitions.      Other capitalized terms used herein and not
specifically  herein  defined  shall have the  meanings  ascribed to them in the
Credit Agreement. 



        
Section  1.3   Terms Defined in the Indiana Uniform Commercial
Code.    Terms defined in the Indiana Uniform Commercial Code
which are not otherwise  defined in this  Security  Agreement are used herein as
defined in the Indiana Uniform Commercial Code, as in effect from time to time.




ARTICLE 2.          SECURITY INTEREST IN
COLLATERAL



         As security for the payment and
performance  of the  Liabilities,  the Bank shall have,  and the  Borrower  does
hereby  grant to the Bank,  a  continuing  security  interest  in the  following
Collateral: 




	
GENERAL SECURITY AGREEMENT	
Page 2






        
(a) All Accounts, Deposit Accounts, General Intangibles, Documents, Instruments,
Investment Property,  Chattel Paper and any other similar rights of the Borrower
however created or evidenced, whether now existing or hereafter owned, acquired,
created, used, or arising,  specifically including, without limitation,  claims,
leases,  agreements,  license agreements,  licensing fees, royalties,  policies,
credit insurance,  guaranties,  letters of credit, advices of credit, binders or
certificates of insurance,  deposits,  documents of title, securities,  security
interests,  licenses,  goodwill, tax refunds (federal, state or local), customer
lists,  franchises,  franchise  rights,  drawings,  designs,  marketing  rights,
computer programs,  artwork,  databases and other like business property rights,
all applications to acquire such rights,  for which  application may at any time
be made by the Borrower,  together with any and all books and records pertaining
thereto and any right,  title or interest in any Inventory which gave rise to an
Account, and all Intellectual Property throughout the world, but specifically
excluding  the shares of capital stock or other equity  interest of Borrower
in the Foreign Subsidiaries; 



        
(b) All  Inventory,  whether now  existing or  hereafter  acquired  and wherever
located,  specifically including, without limitation, all merchandise,  personal
property, raw materials, work in process, finished Goods, materials and supplies
of every nature usable or useful in connection with the manufacturing,  packing,
shipping,  advertising,  selling, leasing or furnishing of any of such Inventory
and all  materials of the Borrower used or consumed or to be used or consumed in
the  Borrower’s  business,  together  with any and all  books  and  records
pertaining thereto; 



        
(c) All  Equipment,  Goods  and all  other  tangible  personal  property  of the
Borrower  of every  kind or nature,  whether  now owned or  hereafter  acquired,
wherever located,  specifically  including,  without limitation,  all machinery,
trucks,  boats,  barges, on and off the road vehicles,  forklifts,  tools, dies,
jigs, presses, appliances, implements, improvements,  accessories,  attachments,
parts,  components,  partitions,  systems,  and apparatus,  but  specifically
excluding Fixtures;




        
(d) Sixty-Five  Percent (65%) of the  outstanding  capital stock or other equity
interests of each Foreign Subsidiary owned by Borrower;



        
(e) All products and Proceeds of each of the foregoing,  specifically including,
without  limitation,  (i) any  and all  Proceeds  of any  insurance,  indemnity,
warranty or guaranty payable to the Borrower from time to time, (ii) any and all
payments of any form  whatsoever  made or due and payable to the  Borrower  from
time to time in connection  with any  requisition,  confiscation,  condemnation,
seizure or forfeiture  of all or any part of the  foregoing by any  Governmental
Authority or any Person acting under color of Governmental  Authority,  (iii) to
the  extent  of the  value  of  Collateral,  claims  arising  out  of the  loss,
nonconformity,  or  interference  with the use of,  defects or  infringement  of
rights in, or damage to, the Collateral,  (iv) any Stock Rights, and (v) any and
all other amounts from time to time paid or payable under or in connection  with
any of the foregoing, whether or not in lieu thereof; 



        
(f)  All   renewals,   extensions,   replacements,   modifications,   additions,
improvements, accretions, accessions, betterments, substitutions,  replacements,
annexations, tools, accessories, parts and the like now in, attached to or which
may  hereafter at any time be placed in or added to any  Collateral,  whether or
not of like kind; and 



        
(g) All rights, remedies, claims and demands under or in connection with each of
the foregoing.





	
GENERAL SECURITY AGREEMENT	
Page 3






ARTICLE 3.        
REPRESENTATIONS AND WARRANTIES



        To induce the Bank to enter into
the  Credit  Agreement  and to make  each and  every  loan and  other  financial
accommodation thereunder, the Borrower represents and warrants to the Bank that,
except as may otherwise be provided in the Credit Agreement: 



        
Section   3.1   Names  of   Borrower.   The
exact  corporate  name of the  Borrower and its state of  organization  are each
correctly  stated  in the  preamble  to this  Security  Agreement.  Set forth on
Schedule 1 hereto is a true,  accurate and complete  list of all previous  legal
names of the Borrower and all past and present assumed (or fictitious) names and
tradenames of the Borrower for the past six (6) years.




        
Section 3.2   Prior  Combinations.   Except
as set forth on Schedule 1 hereto, the Borrower has not ever been conducted as a
partnership  or  proprietorship,  no entity has merged into the  Borrower or has
been consolidated with the Borrower, and no entity has sold substantially all of
its assets to the Borrower or sold assets to the  Borrower  outside the ordinary
course of such entity’s business. 



        
Section         3.3   Chief          Executive         Office,
etc.   The   Borrower’s   chief  executive   office  and
taxpayer  identification  number are set forth in the preamble to this  Security
Agreement.  Subject to Section 4.1 hereof, Borrower maintains all of its records
with  respect to its  Accounts  at such  address.  Borrower  has not at any time
within the past four (4) months  maintained  its chief  executive  office or its
records with respect to Accounts at any other location. 



        
Section  3.4   Title to  Collateral.   Except  for
Intellectual  Property,  which is separately addressed in Section 3.6 below, all
Collateral  is  lawfully  owned by the  Borrower,  free and  clear of any  prior
security interest, pledge, sale, assignment, transfer or other encumbrance other
than Permitted Encumbrances;  the Borrower has the unencumbered right to pledge,
sell,  assign or transfer the Collateral  subject to the Permitted  Encumbrances
and to subject  the  Collateral  to the  security  interest in favor of the Bank
herein;  except in respect of Permitted  Encumbrances,  no  financing  statement
covering all or any portion of the  Collateral  is on file in any public  office
other than in favor of the Bank; and the security interest herein  constitutes a
legal and valid, first priority security interest in the Collateral. 



        
Section          3.5   Representations           Regarding
Accounts.   Except  for Permitted Encumbrances,  each Account
(a) is a valid Account  representing  an undisputed,  bona fide right to payment
from the Account Debtor named therein for Goods sold or leased, for Intellectual
Property  licensed,  or for  services  rendered,  whether  or not such  right to
payment has been earned by  performance;  (b) is free and clear of any agreement
wherein the Account  Debtor may claim a deduction or  discount;  and (c) is free
and clear of all set-offs or counterclaims. 




	
GENERAL SECURITY AGREEMENT	
Page 4






        
Section    3.6   Representations     Regarding    Intellectual
Property.   Schedule   2  hereto   contains  a  complete  and
accurate list as of the date hereof of all patented and registered  Intellectual
Property  owned  by the  Borrower  and  of  all  pending  applications  for  the
registration  of other  Intellectual  Property  owned or filed by the  Borrower.
Schedule 2 also  contains a complete and accurate list of all licenses and other
rights  granted  by  the  Borrower  to  any  third  party  with  respect  to the
Intellectual  Property and licenses and other rights  granted by any third party
to the  Borrower.  Except for  Permitted  Encumbrances  and except as may be set
forth in Schedule 2 (a) the Borrower  owns and  possesses  all right,  title and
interest in and to, or has a valid and  enforceable  license to use,  all of the
Intellectual  Property  necessary  for  the  operation  of  the  Borrower’s
business as presently conducted or proposed to be conducted; (b) no claim by any
third party  contesting  the validity,  enforceability,  use or ownership of any
Intellectual  Property  has been  made,  is  currently  outstanding  or,  to the
Borrower’s knowledge, is threatened, and, to the Borrower’s knowledge,
there are no grounds for any such claim;  (c) the  Borrower has not received any
notice of, nor is the Borrower  aware of any facts which indicate the likelihood
of, any material  infringement  or  misappropriation  by, or conflict  with, any
third party with  respect to any  Intellectual  Property,  nor has the  Borrower
received any claim of  infringement  or  misappropriation  of, or other conflict
with, any intellectual  property rights of any third party; (d) the Borrower has
not  materially  infringed,  misappropriated  or otherwise  conflicted  with any
intellectual  property  rights of any third party,  nor is Borrower aware of any
material infringement, misappropriation or conflict which will occur as a result
of  the  continued  operation  of the  business  of the  Borrower  as  presently
conducted or proposed to be conducted;  (e) the Borrower has made or will timely
make all necessary  filings and recordations  (except user filings) and has paid
or will pay all required  fees and taxes to record and maintain its ownership in
its  Intellectual  Property  throughout  the world to the  extent  necessary  to
conduct Borrower’s  business as currently being conducted or proposed to be
conducted; and (f) no consents are required on any licenses listed on Schedule 2
hereto,  except  as set  forth  on  Schedule  2, to the  grant  of the  security
interests  to,  and the  exercise  of the  rights  and  remedies  of,  the Bank.




        
Section   3.7   Representations    Regarding   Contracts   and
Leases.   All  leases of real or  personal  property  and all
contracts to which the Borrower is a party are in full force and effect.  To the
best of  Borrower’s  knowledge,  no Person is  challenging or disputing the
validity or enforceability of any such leases or contracts,  and the Borrower is
not in material default under any such leases or contracts. 



        
Section   3.8   Representations    Regarding   Equipment   and
Inventory.   Schedule  3 is a true  and  correct  list of all
locations  where  Equipment  and  Inventory of the  Borrower is located  (except
Inventory in transit) and all  locations  where  Equipment  and Inventory of the
Borrower has been located in the four (4) months immediately  preceding the date
of this  Agreement.  Borrower has not  purchased  any Inventory in a transaction
subject to the bulk transfer laws of any state or otherwise outside the ordinary
course of the Inventory seller’s business. 




	
GENERAL SECURITY AGREEMENT	
Page 5






        
Section     3.9   Representations     Regarding     Investment
Property.   The  Borrower is the direct and beneficial  owner
of each type of Investment  Property  listed on Schedule 4 hereto as being owned
by it, free and clear of any liens,  encumbrances or security  interests  except
for the security  interest granted to the Bank. The Borrower further  represents
and warrants that (i) all such Investment  Property which are shares of stock in
a  corporation  or ownership  interests in a  partnership  or limited  liability
company have been (to the extent such concepts are relevant with respect to such
Investment Property) duly and validly issued, are fully paid and non-assessable,
(ii) this pledge of such Investment  Property will not violate the proscriptions
or require the consent, license, filing, report, permit,  exemption,  regulation
or  approval,  of any  Governmental  Authority  or other  Person or violate  any
provision of law, (iii) such ownership of pledged Investment Property represent,
in the case of U.S.  Subsidiaries,  One Hundred Percent (100%) of the issued and
outstanding  ownership  of such U.S.  Subsidiaries,  and, in the case of Foreign
Subsidiaries,  Sixty-Five Percent (65%) of the issued and outstanding  ownership
of such  Foreign  Subsidiaries  (iv)  such  Investment  Property  has  not  been
materially altered and all signatures  thereon are genuine,  (v) there exists no
default by an issuer under any of such Investment Property with respect thereto,
(vi) no insolvency  proceedings  have been instituted with respect to the issuer
of such Investment Property (vii) the Borrower has executed no instrument of any
kind  assigning any of such  Investment  Property or the liability of any issuer
thereon,  or with respect thereto,  which remains in effect,  (viii) none of the
issuers  of  such   Investment   Property  have  any   obligation,   commitment,
subscription,  option,  warrant or other rights outstanding entitling the holder
thereof to purchase or otherwise  acquire any capital stock of such issuer,  and
(ix) with  respect to any  certificates  delivered to the Bank  representing  an
ownership  interest in a partnership or limited liability  company,  either such
certificates  are  Securities as defined in Article 8 or 8.1 (as  applicable) of
the  Uniform  Commercial  Code of the  applicable  jurisdiction  as a result  of
actions by the issuer or otherwise, or, if such certificates are not Securities,
the Borrower has so informed the Bank so that the Bank may take steps to perfect
its security interest therein as a General Intangible. 



ARTICLE 4.        
AGREEMENTS CONCERNING ACCOUNTS



        
Section 4.1   Location.   The Borrower will
give the Bank written  notice of each office of the Borrower at which records of
the Borrower  relative to Accounts are kept.  Except where such notice is given,
all records of the  Borrower  relative  to Accounts  are and will be kept at the
chief executive office of the Borrower. 



        
Section                    4.2   Returns                   and
Repossessions.   Prior  to the  occurrence  of a  Default  or
Unmatured  Default,  the Borrower may grant, in the ordinary course of business,
to any Account  Debtor,  any rebate,  refund or adjustment to which such Account
Debtor may be lawfully  entitled and may accept,  in connection  therewith,  the
return  of  Goods,  the  sale or lease of which  shall  have  given  rise to the
obligation of the Account Debtor, subject,  however, to the Bank’s security
interest therein and in any Proceeds arising from the disposition thereof. After
the  occurrence  of a Default or an Unmatured  Default,  no discount,  credit or
allowance shall be granted by the Borrower to any Account Debtor,  and no return
of Goods shall be accepted by the Borrower without the Bank’s prior written
consent. 




	
GENERAL SECURITY AGREEMENT	
Page 6






        
Section  4.3   Schedule of Accounts.   Upon
request by the Bank, the Borrower will, from time to time, deliver to the Bank a
schedule identifying each Account  (“Schedule of Accounts”),  together
with such schedules and  certificates  and reports relative to all or any of the
Collateral and the items or amounts  received by the Borrower in full or partial
payment or  otherwise,  as Proceeds of any of the  Collateral.  Each Schedule of
Accounts or other schedule,  certificate or report shall be executed by its duly
authorized  officer and shall be in the form specified by the Bank. Any Schedule
of Accounts identifying any Account shall be accompanied,  if the Bank requests,
(a) by a true and correct copy of the invoice  evidencing  such Account,  (b) by
evidence of shipment, delivery or performance,  and (c) if such request shall be
made  after the  occurrence  of a Default  or an  Unmatured  Default,  by a duly
executed  assignment  of such Account  from the Borrower to the Bank;  provided,
however,  that the  Borrower’s  failure to  execute  and  deliver  any such
Schedule of Accounts and/or assignment shall not affect or limit the Bank’s
security  interest or other rights in and to Accounts,  and  provided,  further,
that a proper  assignment of any Account wherein the United States Government is
the Account Debtor may be requested by the Bank at any time whether or not there
shall have occurred a Default or Unmatured Default. 



        
Section                  4.4   Verification                 of
Accounts.   After  the occurrence of a Default, the Bank, its
officers,  agents, attorneys, and accountants,  may verify Accounts and returned
and repossessed  Goods under  reasonable  procedures,  directly with the Account
Debtor or by other  methods,  and the  Borrower  shall  furnish to the Bank upon
request  additional  Schedules  of  Accounts,  together  with all notes or other
papers  evidencing  the same and any guaranty,  securities or other  information
relating thereto, and shall do, make and deliver all such additional and further
acts,  things,  deeds,  assurances  and  instruments  as the Bank may reasonably
require. 



        
Section  4.5   Collateral  Account.   After
the occurrence and during the  continuance of any Default or Unmatured  Default,
the Borrower (a) will, upon the written request of the Bank, deposit all checks,
drafts,  cash remittances and other Proceeds in payment of Accounts in a special
collateral account (“Collateral Account”) maintained with the Bank and
thereafter keep segregated any such checks,  drafts,  cash  remittances or other
Proceeds in trust for the benefit of the Bank until  deposited in the Collateral
Account with the Bank; (b) will,  upon the written request of the Bank, note the
security  interest  of  the  Bank  on all  records  relative  to the  Collateral
including, without limitation, any invoice which evidences an Account; (c) will,
upon the written request of the Bank,  give notice of the  Bank’s  security
interest to Account Debtor and other  obligors to the Borrower;  (d) agrees that
all checks and other  Instruments  received by the Bank after the occurrence and
during the  continuance  of any  Default or  Unmatured  Default as  Proceeds  of
Accounts will be credited upon receipt to the  Liabilities  in such order as the
Bank may  determine,  subject  to final  payment;  and (e)  will,  whenever  the
Borrower obtains possession (by return, repossession or otherwise) of any Goods,
the sale or lease of which shall have given rise to any of the Collateral,  upon
the Bank’s written request, segregate, label and hold such Goods as subject
to the security  interest of the Bank  hereunder,  and will, at its own expense,
dispose of such Goods in such  manner as the Bank may from time to time  direct.
After the  occurrence  and during the  continuance  of any Default or  Unmatured
Default,  the Bank may notify any Account Debtor to make payment directly to the
Bank of any  amounts  due or to become due and  enforce  the  collection  of any
Accounts by suit or otherwise and surrender, release or exchange all or any part
thereof,  or compromise  or extend or renew for a period  (whether or not longer
than the original period) any indebtedness thereunder or evidenced thereby. Such
notice may  require the  Account  Debtor or other  obligor to pay the Account or
other  obligation  directly to the Bank.  Any Proceeds shall be deposited in the
form received except for the  endorsement of the Borrower where required,  which
endorsement  the Bank is  authorized to make on the  Borrower’s  behalf and
shall be held by the Bank as security for all  Liabilities,  and the Bank may at
any time and from time to time apply all or any  portion of the funds on deposit
in the Collateral  Account against the Liabilities,  the order of application to
be at the discretion of the Bank. 




	
GENERAL SECURITY AGREEMENT	
Page 7






        
Section     4.6   Accounts     Owed     by     the     Federal
Government.   If  any  Account  shall arise out of a contract
with the United States of America, or any department,  agency,  subdivision,  or
instrumentality  thereof, the Borrower shall promptly notify the Bank thereof in
writing  and shall take all other  action  requested  by the Bank to protect the
Bank’s  security  interest  in such  Account  under the  provisions  of the
federal Assignment of Claims Act, as amended. 



        
Section          4.7   Assignment          of         Security
Interests.   If,  at any time  the  Borrower  shall  take and
perfect a security  interest in any  property of an Account  Debtor or any other
Person to secure  payment or  performance  of an  Account,  the  Borrower  shall
promptly assign such security interest to the Bank. 



ARTICLE 5.        
AGREEMENTS CONCERNING CERTAIN COLLATERAL



        
Section        5.1   Maintenance        of        Intellectual
Property.   Unless  otherwise  agreed in writing by the Bank,
Borrower  shall  have the duty to do any and all acts  which  are  necessary  to
preserve and maintain all material rights in the Intellectual Property. Borrower
will give proper statutory notice in connection with the use of its Intellectual
Property.  Borrower has used,  and will continue to use for the duration of this
Agreement,  consistent  standards of quality in its  manufacture  or creation of
products sold under its  trademarks.  The Borrower  shall not abandon any of the
Intellectual  Property nor permit the  expiration  of any material  Intellectual
Property registrations,  except where occasioned by non-use, without the written
consent of the Bank.  Borrower shall do any and all acts reasonably  required by
the Bank to  ensure  Borrower’s  compliance  with  this  Section  5.1.  Any
reasonable expenses incurred in connection with the Intellectual  Property shall
be borne by Borrower. 



        
Section  5.2     After-Acquired  Intellectual Property. If
the Borrower obtains rights to any new Intellectual  Property, the provisions of
this Security Agreement shall automatically  apply thereto.  With respect to any
new applications for Intellectual Property, the issuance of any new registration
for Intellectual  Property,  and renewals or extensions of any of the foregoing,
the  Borrower  shall give the Bank  prompt  written  notice  thereof in writing.




        
Section 5.3     Opposition  Proceedings.  Unless and until
there shall have occurred and be continuing a Default, Borrower shall retain the
legal and equitable title to the Intellectual  Property and shall have the right
to bring any opposition proceedings,  cancellation proceedings or lawsuit in its
own name to enforce,  protect and use the Intellectual  Property in the ordinary
course  of its  business,  but  shall not be  permitted,  except  with the prior
written consent of the Bank, to sell, assign, transfer or otherwise encumber the
Intellectual  Property,  other  than  licensings  or other  dispositions  in the
ordinary course of business or to resolve  litigation or disputed claims brought
or made by unrelated parties. 




	
GENERAL SECURITY AGREEMENT	
Page 8






        
Section  5.4     Verification  of  Intellectual  Property.
After the occurrence of a Default, the Bank, its officers, agents, attorneys and
accountants,  may verify the  Intellectual  Property  and all licenses and other
agreements with respect  thereto,  under  reasonable  procedures,  directly with
licensees or by other  methods,  and the Borrower shall furnish to the Bank upon
request  schedules of  Intellectual  Property and licenses,  together with other
information relating thereto, and shall do, make and deliver all such additional
and further acts,  things,  deeds,  assurances  and  instruments as the Bank may
reasonably require with respect to the Intellectual Property, including, without
limitation,  the licenses.  The Borrower shall  promptly  notify the Bank, if it
knows that any material  application or  registration  relating to  Intellectual
Property may become  abandoned  or  dedicated to the public,  or of any material
adverse  determination  or  development  (including  any  claim)  regarding  the
Intellectual Property or any material license with respect thereto, or regarding
its  right to  register,  keep and  maintain  the  same,  or if it knows  that a
material   item  of   Intellectual   Property   is   materially   infringed   or
misappropriated  by a third party, and, in any such event,  unless (a) the Bank,
or (b) the Board of Directors of the Borrower in the exercise of its  reasonable
business judgment after having  considered the advice of reputable  intellectual
property  counsel shall have  determined  that  litigation is  inappropriate  or
unadvisable, promptly sue for infringement or misappropriation. 



        
Section 5.5     Supplemental  Documentation.  Concurrently
with the execution of this Security  Agreement,  and from time to time hereafter
upon  request of the Bank,  the Borrower  shall  execute and deliver to the Bank
supplemental  security  agreements  relating to any or all  registered  patents,
trademarks, tradenames, copyrights and applications for any of the foregoing, in
a form satisfactory to the Bank and suitable for recording in the records of the
registering Governmental Authority. 



        
Section  5.6     Contracts and Leases.  The Borrower shall
perform, when due, each of its obligations under all contracts, leases and other
agreements (including,  without limitation, all license agreements) to which the
Borrower is a party,  and,  immediately upon learning of any material default by
any party under any such contract,  lease or other agreement, the Borrower shall
give written notice  thereof to the Bank,  together with a description as to the
nature and status  thereof.  After the  occurrence  of any Default or  Unmatured
Default, the Borrower shall not amend, modify,  supplement or otherwise agree to
any change in any  contract,  lease or other  agreement  or waive any  provision
thereof, without the prior written consent of the Bank. 



        
Section  5.7     Deposit  Accounts.  The Borrower will (i)
upon the Bank’s request,  cause each bank or other financial institution in
which it maintains (a) a Deposit Account to enter into a control  agreement with
the Bank,  in form and substance  satisfactory  to the Bank in order to give the
Bank Control of the Deposit  Account or (b) other deposits  (general or special,
time or demand,  provisional  or final) to be notified of the security  interest
granted  to the Bank  hereunder  and cause  each  such  bank or other  financial
institution  to  acknowledge  such  notification  in writing,  and (ii) upon the
Bank’s  request  after the  occurrence  and  during  the  continuance  of a
Default,  deliver to each such bank or other financial  institution a letter, in
form and substance acceptable to the Bank, transferring ownership of the Deposit
Account to the Bank or  transferring  dominion  and control over each such other
deposit to the Bank until such time as no Default exists. 




	
GENERAL SECURITY AGREEMENT	
Page 9






        
Section 5.8   Letter-of-Credit Rights. The Borrower will,
upon the Bank’s request, cause each issuer of a letter of credit to consent
to the  assignment of proceeds of the letter of credit in order to give the Bank
Control of the letter-of-credit rights to such letter of credit. 



        
Section  5.9     Uncertificated  Securities.  The Borrower
will permit the Bank from time to time to cause the appropriate issuers (and, if
held  with  a  securities   intermediary,   such  securities   intermediary)  of
uncertificated  securities  which are Collateral to mark their books and records
with the numbers and face amounts of all such uncertificated  securities and all
rollovers  and  replacements  therefor to reflect  the Lien of the Bank  granted
pursuant  to this  Security  Agreement.  The  Borrower  will  take  any  actions
necessary to cause the issuers of uncertificated securities which are Collateral
and which are  Securities to cause the Bank to have and retain Control over such
Securities. 



        
Section 5.10   Stock and Other Ownership Interests.


	
	
             
   (a)        
Changes in Capital Structure of Issuers.  The Borrower will not (i) cause
any issuer of privately held corporate  securities or other ownership  interests
in a  corporation,  partnership,  joint  venture  or limited  liability  company
constituting Collateral to dissolve,  liquidate, retire any of its capital stock
or other Instruments or Securities evidencing  ownership,  reduce its capital or
merge or  consolidate  with  any  other  entity,  or  (ii) vote  any of the
Instruments or Securities in favor of any of the foregoing.






	
	
             
   (b)        
Issuance of Additional Securities. The Borrower will not cause the issuer
of  privately  held  corporate  securities  or other  ownership  interests  in a
corporation,   partnership,   joint   venture  or  limited   liability   company
constituting  Collateral  to  issue  any  such  securities  or  other  ownership
interests,  any  right to  receive  the same or any right to  receive  earnings,
except to the Borrower.






	
	
             
   (c)        
Registration of Pledged Securities. The Borrower will permit any
registerable  Collateral to be registered in the name of the Bank or its nominee
at any time after the  occurrence  of a Default or at any time if  necessary  to
perfect   the    Bank’s    security    interest   in   such    registerable
Collateral.






	
	
             
   (d)        
Exercise of Rights in Pledged Securities. The Borrower will permit the
Bank or its  nominee at any time  after the  occurrence  of a  Default,  without
notice,  to exercise all voting and corporate rights relating to the Collateral,
including,  without  limitation,  exchange,  subscription  or any other  rights,
privileges, or options pertaining to any corporate securities or other ownership
interests  in  or  of a  corporation,  partnership,  joint  venture  or  limited
liability company constituting Collateral and the Stock Rights as if it were the
absolute owner thereof.







ARTICLE 6.        
AGREEMENTS CONCERNING INVENTORY



        
Section  6.1   Locations.  Borrower  will  give  the  Bank
written  notice of each  location at which  Inventory  is or will be kept at all
times.  Except where such notice is given and except for  Inventory  sold in the
ordinary course of business, all Inventory is and shall be kept at the locations
set forth on Schedule 3 hereto. 




	
GENERAL SECURITY AGREEMENT	
Page 10






        
Section  6.2   Sales  of   Inventory.   The
Borrower  may, in the  ordinary  course of business,  at its own expense,  sell,
lease or  furnish  under  contracts  of sale or  service,  any of the  Inventory
normally held by the Borrower for such purpose (a sale in the ordinary course of
business  does not  include a  transfer  in total or partial  satisfaction  of a
debt),  and use  and  consume,  in the  ordinary  course  of  business,  any raw
materials,  work-in-process  or materials  normally held by it for such purpose.




        
Section   6.3       Condition  of  Inventory;  Books  and
Records.   Borrower  shall keep all  Inventory  in good order
and condition and shall maintain  full,  accurate and complete books and records
with respect to Inventory at all times. 



        
Section           6.4               Warehousemen           and
Landlords.   Borrower shall not store any material portion of
its  Inventory  with any  bailee,  warehouseman,  or similar  party  without the
Bank’s  prior written  consent.  If Inventory is so stored,  Borrower will,
concurrently with storing such Inventory,  cause such bailee,  warehouseman,  or
similar  party to issue and  deliver to the Bank,  in a form  acceptable  to the
Bank,  warehouse  receipts in the Bank’s name evidencing the storage of the
Inventory.  The Borrower  shall  provide the Bank with copies of all  agreements
between the Borrower and any bailee,  warehouseman,  or similar  party and shall
deliver to the Bank a landlord’s  or  warehouseman’s  lien waiver in a
form  acceptable  to the Bank,  prior to entering  into any  material  lease for
warehouse storage or business facilities.




        
Section 6.5    Consigned Inventory.   If at
any time any of the Inventory is placed by the Borrower on consignment  with any
consignee,  Borrower shall, prior to delivery of such consigned  Inventory,  (a)
provide  Bank  with  all  consignment   agreements  and  other  instruments  and
documentation to be used in connection with such consignment (all of which shall
be in a form acceptable to the Bank); (b) prepare,  execute and file appropriate
financing  statements  with  respect  to any  consigned  Inventory  showing  the
consignee as debtor,  the Borrower as secured party, and the Bank as assignee of
the  secured  party;  (c)  prepare,   execute  and  file  appropriate  financing
statements  with respect to any consigned  Inventory  showing the  Borrower,  as
debtor,  and the Bank, as secured party; (d) conduct a search of all UCC filings
made  against  the  consignee  in all  jurisdictions  in which  Inventory  to be
consigned  is to be located  while on  consignment,  and furnish  copies of such
results to the Bank;  and (e) notify in writing all  creditors of the  consignee
that  are or  may be  holders  of  security  interests  in the  Inventory  to be
consigned  that  the  Borrower  expects  to  deliver  certain  Inventory  to the
consignee. 



        
Section                  6.6   Compliance                 with
Law.   Borrower  shall  substantially  comply in all material
respects with all federal, state and local laws, regulations, rulings and orders
applicable  to the  Borrower for its assets or  business.  Without  limiting the
generality of the foregoing,  Borrower shall comply with all requirements of the
federal Fair Labor Standards Act, as amended, in the conduct of its business and
the production of Inventory.  Borrower shall notify the Bank  immediately of any
violation by Borrower of the Fair Labor  Standards  Act, and the absence of such
notice  shall  constitute  Borrower’s  continuing  representation  that all
Inventory  then  existing has been  produced in  compliance  with the Fair Labor
Standards Act. 




	
GENERAL SECURITY AGREEMENT	
Page 11






ARTICLE 7.        
AGREEMENTS CONCERNING EQUIPMENT



        
Section   7.1   Locations.   Borrower  will
give the Bank written  notice of each location at which  Equipment is or will be
kept at all times. Except where such notice is given, the Equipment will be kept
at locations set forth on Schedule 3 hereto. Schedule 3 sets forth
all  locations  at which  Equipment  of the Borrower is located and the name and
owner of record of the real estate at each  location if the  Borrower is not the
owner of record. 



        
Section   7.2   Condition.   The   Borrower
will  keep the  Equipment  in good  order  and  repair,  ordinary  wear and tear
excepted,  and will not waste or destroy the  Equipment or any portion  thereof,
except in the case of  obsolete  Equipment  which is no longer used or useful in
Borrower’s business. 



        
Section    7.3   Titled     Equipment.   If
Borrower now or  hereafter  has any  vehicles,  aircraft,  watercraft,  or other
Equipment  for which a  certificate  of title has been issued by a  Governmental
Authority,  the  Borrower  shall  immediately  deliver  to  the  Bank,  properly
endorsed,  each  certificate of title or application for title or other evidence
of ownership  for each such item of Equipment,  and the Borrower  shall take all
actions necessary to have the Bank’s security interest properly recorded on
each such  certificate  of title and shall  take all other  steps  necessary  to
perfect the Bank’s security interest in such Equipment. 



        
Section  7.4   Compliance  with Laws.   The
Borrower will not use the Equipment in material violation of any statute,  rule,
regulation  or  ordinance  or any policy of  insurance  thereon.  Borrower  will
neither use the Equipment nor permit the Equipment to be used,  for any unlawful
purpose or contrary to any statute, law, ordinance or regulation relating to the
registration, use, operation or control of the Equipment. 



        
Section                   7.5   Transfers                   of
Equipment.   Borrower   may  from  time  to  time  substitute
Equipment,  provided  that (a) the  substituted  Equipment is not subject to any
lien or other encumbrance and has a fair market value at least equal to the fair
market of the Equipment for which it is substituted;  (b) the  marketability and
operating integrity of Borrower’s  Equipment after such substitution is not
impaired;  (c) the Equipment  substituted for is no longer used or useful in the
operation  of  Borrower’s   business  and  is  sold  in  arm’s  length
transaction  in exchange for money or  money’s  worth at least equal to the
fair  market  value of such  Equipment  substituted  for;  and (d) no Default or
Unmatured Default has occurred and is continuing. 



        
Section   7.6   Fixtures.   The    Borrower
shall not permit any item of  Equipment to become a Fixture to real estate or an
accession to any other property not subject to the Bank’s security interest
herein without the prior written consent of the Bank. 



ARTICLE 8.        
GENERAL PROVISIONS CONCERNING COLLATERAL



        
Section          8.1   Title         to         After-Acquired
Collateral.   All  Collateral  acquired after the date hereof
will  be  acquired  by the  Borrower  free of any  lien,  security  interest  or
encumbrance, except Permitted Encumbrances. 




	
GENERAL SECURITY AGREEMENT	
Page 12






        
Section   8.2   Further   Assurances.   The
Borrower agrees to do such reasonable acts and things and deliver or cause to be
delivered  such other  documents as the Bank may deem necessary to establish and
maintain a valid security  interest in the  Collateral  (free of all other liens
and claims except Permitted  Encumbrances) to secure the payment and performance
of the  Liabilities  and to defend  title to the  Collateral  against any Person
claiming any interest  therein adverse to the Bank. The Borrower  authorizes the
Bank, at the expense of the Borrower,  to execute and file a financing statement
or  statements  on its  behalf  in those  public  offices  deemed  advisable  or
necessary  by the Bank to protect  the  security  interests  of the Bank  herein
granted. If permitted by law, the Borrower agrees that a carbon, photographic or
other reproduction of this Security Agreement or of a financing statement may be
filed as a financing statement. 



        
Section 8.3   Insurance.


	
	
             
   (a)        
The Borrower shall have and maintain at all times, with respect to Inventory and
Equipment,  insurance written by companies acceptable to the Bank covering risks
customarily  insured against by companies engaged in business similar to that of
the Borrower in reasonable amounts, containing such terms, in such form, and for
such periods customarily  maintained by companies engaged in business similar to
that of the Borrower.  Such  insurance  shall be payable to the Borrower and the
Bank as their interests may appear.






	
	
             
   (b)        
In addition  to the  insurance  requirements  set forth in Section  8.3(a),  the
Borrower  will  carry any other  insurance  and  amounts  for  periods as may be
reasonably  required by the Bank,  and will  deliver to the Bank,  not less than
five (5) days prior to the expiration of any such policy of insurance,  renewals
or new policies in like amounts covering the same risks.






	
	
             
   (c)        
All such insurance policies shall carry standard, non-contributory lender’s
loss payable clauses and breach of warranty endorsements,  in favor of the Bank.
The insurance  certificates  evidencing the Borrower’s  compliance with the
above shall be deposited  with the Bank,  and in the event the Borrower fails to
file and maintain  such  insurance,  the Bank may, at its option,  purchase such
insurance  and the cost of such  insurance  shall become a Liability  secured by
these presents and all sums expended shall bear interest at the highest  Default
rate of interest set forth in the Credit  Agreement  until paid. If requested by
the Bank,  the Borrower shall deliver  certified  copies of such policies to the
Bank. The Borrower shall pay all insurance  premiums promptly when due and shall
provide substitute policies of insurance should the Bank at any time reject, for
reasonable cause, any such policies of insurance furnished by the Borrower.  The
Borrower  hereby  assigns  to the  Bank  the  proceeds  of all  such  insurance,
including,  without  limitation,  any  premium  refunds,  to the  extent  of the
Liabilities,  shall  direct the insurer to make payment of any losses or refunds
directly to the Bank, and appoints the Bank its  attorney-in-fact to endorse any
draft,  check or other form of payment  made by such  insurer.  So long as there
then exists no Default,  the Bank shall remit any  insurance  proceeds less than
Two Hundred Thousand Dollars ($200,000) to the Borrower.  Any insurance proceeds
not remitted to the Borrower shall be applied to the outstanding Liabilities, in
the order of preference determined by the Bank.







        
Section                   8.4   Collection                  of
Collateral.   The Borrower will, at its own expense, endeavor
to collect,  as and when due,  all amounts  due with  respect to any  Collateral
including the taking of such action with respect to such  collection as the Bank
may reasonably  request or, in the absence of such request,  as the Borrower may
deem advisable. 




	
GENERAL SECURITY AGREEMENT	
Page 13






        
Section  8.5   Bank May Defend  Title.   In
the event the Borrower fails to pay any taxes,  assessments,  premiums, or fees,
or fails to discharge any liens or claims against the Collateral  required to be
paid or discharged by the Borrower, or fails to purchase, maintain and file with
the Bank any  insurance  required  by this  Security  Agreement,  or if any such
insurance is  inappropriate  to the  situation,  in the  Bank’s  reasonable
discretion,  the Bank  may,  without  demand  or  notice,  pay any  such  taxes,
assessments,  premiums or fees, or pay, acquire,  satisfy or discharge any liens
or claims asserted  against the Collateral  (without any obligation to determine
the validity thereof),  or purchase any such insurance.  All sums so expended by
the Bank  shall  become a  Liability  secured by these  presents  and shall bear
interest  at the  highest  Default  rate of  interest  set  forth in the  Credit
Agreement until paid. 



        
Section 8.6     Negotiable Collateral.   If
any Collateral,  including Proceeds,  consists of a letter of credit,  advice of
credit, Instrument, certificates of deposit, negotiable Documents, chattel paper
or similar  property,  the Borrower  shall,  immediately  upon receipt  thereof,
endorse  and assign such  Collateral,  and deliver  actual  physical  possession
thereof,  to the Bank, and prior to such  delivery,  shall hold such property in
trust for the Bank.  Schedule  5 hereto is a true and  correct  list of all such
negotiable Collateral owned by the Borrower, other than money. The Borrower will
give the Bank written  notice each time it acquires such  additional  negotiable
Collateral, other than money. 



        
Section   8.7   Contracts.   The   Borrower
shall remain liable to perform its obligations  under any contracts  included in
the  Collateral  to the extent as though this  Security  Agreement  had not been
entered  into,  and the  Bank  shall  not  have any  obligation  under  any such
contracts by reason of this Agreement. 



        
Section 8.8   Accounting System.   
Borrower shall maintain a standard and modern system
of accounting in accordance with GAAP which contains information pertaining to
the Collateral that may from time to time be requested by the Bank. 



        
Section      8.9   Inspection      of      Collateral      and
Records.   During  Borrower’s  usual business hours, the
Bank may inspect and  examine the  Collateral  and check and test the same as to
quality,  quantity,  value, and condition. The Bank shall also have the right at
any time or times  hereafter,  during  Borrower’s  usual  business hours or
during the usual  business  hours of any third  party  having  control  over the
records of the Borrower,  to inspect  Borrower’s books and records in order
to verify the  amount or  condition  of, or any other  matter  relating  to, the
Collateral and Borrower’s financial condition and to copy and make extracts
from such books and records.  Borrower waives the right to assert a confidential
relationship,  if any, it may have with any accounting  firm in connection  with
any  information  requested by the Bank pursuant to this Security  Agreement and
agrees that the Bank may directly  contact any such  accounting firm in order to
obtain such information. 



        
Section                   8.10   Transfer                   of
Collateral.   Borrower   shall  not  sell,  lease,   license,
transfer or otherwise dispose of any interest in any Collateral except (a) sales
of  Inventory in the  ordinary  course of business  pursuant to Section 6.2, (b)
licensings  and other  dispositions  of  Intellectual  Property in the  ordinary
course of business  pursuant to Section  5.3, (c)  dispositions  of Equipment in
accordance with Section 7.5, and (d) the writeoff of  uncollectible  Accounts in
the ordinary course of business. 




	
GENERAL SECURITY AGREEMENT	
Page 14






ARTICLE 9.        
REMEDY



        
Section      9.1   Remedies      Generally;      Power      of
Sale.   Upon  the  occurrence  of any Default and at any time
thereafter,  the Bank shall have all rights and remedies  available at law or in
equity including, without limitation, the rights and remedies of a secured party
under the  Indiana  Uniform  Commercial  Code,  as in  effect  from time to time
(regardless  of  whether  the Code has been  enacted in the  jurisdiction  where
rights or remedies are asserted),  including,  without limitation,  the right to
take possession of the Collateral,  and for that purpose the Bank may, so far as
the Borrower can give authority  therefor,  enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Bank shall give to
the Borrower at least ten (10)  days’  prior written notice of the time and
place of any public  sale of  Collateral  or of the time after which any private
sale or any  other  intended  disposition  is to be  made.  The  Bank may in its
discretion  transfer any  securities or other property  constituting  Collateral
into its own name or that of its nominee and receive the income thereon and hold
the same as security for Liabilities or apply it on principal or interest due on
Liabilities.  In the event that the Bank takes  possession  of any  Intellectual
Property, the goodwill associated with any trademarks,  tradenames, trade dress,
and service marks of the Borrower shall be transferred to the Bank. 



        
Section   9.2   Deposits.   Any   and   all
Deposit Accounts, deposits or other sums at any time credited by or due from the
Bank to the  Borrower  shall at all times  constitute  security  for any and all
Liabilities,  and the Bank may  apply or set off  such  deposits  or other  sums
against  Liabilities at any time in Default  whether or not the  Liabilities are
then  due or  other  Collateral  is  considered  by  the  Bank  to be  adequate.




        
Section                    9.3   Waiver                    and
Amendment.   Except  as otherwise expressly set forth herein,
to the extent  permitted by law, the Borrower  waives demand,  notice,  protest,
notice of acceptance of this Security  Agreement,  notice of loans made,  credit
extended,  Collateral  received or  delivered  or other action taken in reliance
hereon and all other  demands and notices of any  description.  With  respect to
both  Liabilities  and  Collateral,  the  Borrower  assents to any  extension or
postponement  of  the  time  of  payment  or  any  other   indulgence,   to  any
substitution,  exchange, or release of Collateral, to the addition or release of
any party or person  primarily  or  secondarily  liable,  to the  acceptance  of
partial  payments  thereon and the  settlement,  compromise or adjustment of any
thereof,  all in such  manner  and at such  time or  times  as the Bank may deem
advisable.  Except as otherwise  provided by law, the Bank shall have no duty as
to the collection or protection of the Collateral,  or any income therefrom, nor
as  to  the  preservation  of  rights  against  prior  parties  nor  as  to  the
preservation of any rights  pertaining  thereto beyond the safe custody thereof.
The Bank may exercise its rights with respect to Collateral without resorting or
regard to other  Collateral or sources of reimbursement  for any Liability.  The
Bank  shall not be  deemed  to have  waived  any of these  rights  upon or under
Liabilities  or  Collateral  unless  such waiver be in writing and signed by the
Bank. No delay or omission on the part of the Bank in exercising any right shall
operate  as a waiver  of such  right or any  other  right.  A waiver  on any one
occasion  shall not be  construed  as a bar to the  exercise of any right on any
future  occasion.  All rights and remedies of the Bank as to the  Liabilities or
Collateral  whether  evidenced hereby or by any other instrument or papers shall
be cumulative and may be exercised  singly,  successively or together.  The Bank
may,  from time to time,  without  notice to the Borrower (a) retain or obtain a
security  interest  in any  property  of any other  Person,  in  addition to the
Collateral,  to secure any of the Liabilities;  (b) retain or obtain the primary
or secondary liability of any party or parties, in addition to the Borrower with
respect to any of the  Liabilities;  (c) extend or renew for any period (whether
or not longer than the original  period) or release or compromise  any liability
of any party or parties  primarily or  secondarily  liable to the Bank under the
Credit  Agreement;  (d) release  its  security  interest in any of the  property
securing any of the Liabilities and permit any  substitution or exchange for any
such  property;  and (e) resort to the  Collateral for the payment of any of the
Liabilities whether or not it shall have resorted to any other property or shall
have proceeded against any party primarily or secondarily  liable for any of the
Liabilities.  The Bank  shall  not,  under  any  circumstances,  or in any event
whatsoever,  have any  liability  for any error or omission or delay of any kind
occurring in the  liquidation  of any  Collateral,  including the  settlement or
collection  of any  Account  or  for  any  damage  resulting  therefrom,  except
liability  resulting  from any act or  omission  by the Bank  which  constitutes
wilful misconduct. This Security Agreement may be amended only by a writing duly
signed by the Bank and the Borrower. 




	
GENERAL SECURITY AGREEMENT	
Page 15






        
Section          9.4   Expenses;          Proceeds          of
Collateral.   The  Borrower  shall  pay to the Bank on demand
any  and   all   reasonable   out-of-pocket   expenses,   including   reasonable
attorneys’  fees, incurred or paid by the Bank in protecting the Collateral
or the existence,  perfection or priority of the Bank’s  security  interest
therein.  After  deducting all of such expenses,  the residue of any Proceeds of
collection  or sale  of the  Collateral  shall  be  applied  to the  payment  of
principal or interest on Liabilities in such order of preference as the Bank may
determine, and any excess shall be returned to the Borrower. 



        
Section   9.5   Power  of   Attorney.   The
Borrower hereby irrevocably appoints the Bank and the Bank’s designees from
time to  time  its  true  and  lawful  attorneys-in-fact,  with  full  power  of
substitution  in the premises  upon the  occurrence  of a Default (a) to demand,
collect, receipt for, settle, compromise,  adjust, sue for, foreclose or realize
upon the Collateral in such manner as the Bank may determine, whether or not the
Collateral is then due; (b) to receive,  open,  and dispose of mail addressed to
the Borrower; (c) to endorse notes, checks,  drafts, money orders,  Documents or
other  evidences of payment,  shipment or storage or any form of  Collateral  on
behalf of and in the name of the Borrower; (d) to sign and send on behalf of the
Borrower  any  invoice  or bill of lading  relating  to any  Account,  on drafts
against  customers,  on schedules  and  assignments  of Accounts,  on notices of
assignment,  financing  statements and other public records, on verifications of
Accounts and on notices to customers;  (e) to sign the  Borrower’s  name to
the proofs of claim against any Account Debtor on behalf of the Borrower; (f) to
notify the post office  authorities  to change the  address for  delivery of the
Borrower’s  mail to an  address  designated  by the  Bank;  (g) to  endorse
Borrower’s name on all applications,  documents,  papers,  certificates and
instruments  necessary  or  expedient  for  the  Bank  to use  the  Intellectual
Property,  or  necessary  or  expedient  to  grant  or issue  any  exclusive  or
nonexclusive  license  under  the  Intellectual  Property  to  anyone  else,  or
necessary  or  expedient  for the Bank to assign,  pledge,  convey or  otherwise
transfer title in, or dispose of, the Intellectual  Property to anyone else, for
the purpose of recording, registering, filing or accomplishing any other formula
with respect to the Intellectual Property; and (h) to do all things necessary to
carry out this Security Agreement. The Borrower hereby ratifies and approves all
acts of such attorneys. Neither the Bank nor any attorney will be liable for any
acts or  omissions  nor for any error of  judgment  or  mistake  of fact or law,
absent  gross  negligence,  bad faith or wilful  misconduct.  This power,  being
coupled with an interest,  is irrevocable  until the Liabilities have been fully
satisfied.  Notwithstanding  anything herein to the contrary, no attorney acting
pursuant to this  Section 9.5 shall have any  authority  to confess  judgment on
behalf of the Borrower. 




	
GENERAL SECURITY AGREEMENT	
Page 16






        
Section   9.6   License.   Borrower  hereby
grants  to  the  Bank  a  license  to  use,   without  charge,   Borrower’s
Intellectual   Property  and  other  Collateral  in  completing  production  of,
advertising  for sale, or selling any Collateral  after any Default,  and all of
the Borrower’s rights under all licenses and franchise agreements shall, in
such event, inure to the Bank’s  benefit. In addition,  the Borrower shall,
upon request by the Bank,  make  available  such  personnel  in  Borrower’s
employ on the date of any Default as the Bank may reasonably designate to permit
the Bank to continue, directly or indirectly, to produce, advertise and sell the
Collateral sold by the Borrower under any Intellectual  Property or license. The
license  herein shall include the right of the Bank to use,  assign,  license or
sublicense any of the Borrower’s  Intellectual Property,  including in such
license reasonable access as to all media in which any of the licensed items may
be recorded or stored; provided that the Bank shall comply with all pre-existing
quality control  standards and trademark use  requirements  of the Borrower.  No
agreements  hereafter  entered into by the Borrower shall prohibit,  restrict or
impair the rights of the Bank granted hereunder. 



        
Section  9.7   Reinstatement.   If,  at any
time after payment in full by the Borrower of all Liabilities and termination of
the Bank’s  security interest,  any payments on the Liabilities  previously
made by the  Borrower or any other  Person must be disgorged by the Bank for any
reason whatsoever,  including, without limitation, the insolvency, bankruptcy or
reorganization of the Borrower or such Person,  this Security  Agreement and the
Bank’s  security  interests  herein shall be reinstated as to all disgorged
payments as though such payments had not been made,  and the Borrower shall sign
and deliver to the Bank all documents,  and shall do such other acts and things,
as may be necessary to re-perfect the Bank’s security interest. 



        
Section     9.8   No      Marshaling.   The
Borrower, on its own behalf and on behalf of its successors and assigns,  hereby
expressly  waives all rights,  if any, to require a marshaling  of assets by the
Bank or to require the  Bank’s  first  resort to some or any portion of the
Collateral before foreclosing upon, selling or otherwise  realizing on any other
portion thereof. 



ARTICLE 10.        
MISCELLANEOUS PROVISIONS



        
Section 10.1   Priority.   Unless otherwise
expressly  provided,  the security  interest hereby created shall be pro rata on
par with  any  prior  security  interests  in the  Collateral  now or  hereafter
existing in favor of the Bank. 




	
GENERAL SECURITY AGREEMENT	
Page 17






        
Section    10.2   Governing     Law.   This
Security Agreement and all rights and obligations  hereunder,  including matters
of  construction,  validity  and  performance,  shall be governed by the Uniform
Commercial  Code and  other  applicable  laws of the State of  Indiana,  without
regard to conflict of law principles. 



        
Section     10.3   Severability.   Whenever
possible each provision of this Security  Agreement shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Security  Agreement  shall be prohibited by or invalid under  applicable
law, such provision shall be ineffective  only to the extent of such prohibition
without invalidating the remainder of such provision or the remaining provisions
of this Security Agreement.  The Borrower recognizes that the Bank has relied on
this Security Agreement in extending credit to the Borrower and agrees that such
reliance  by the  Bank  shall be  sufficient  consideration  for  this  Security
Agreement. 



        
Section  10.4   Binding  on  Successors.   
The  rights  and  privileges  of the  Bank  shall  inure to the  benefit  of its
respective successors and assigns.



        
Section  10.5   Chattel  Mortgage.     This
Security Agreement shall also constitute a chattel mortgage and an assignment of
rents.



        
SECTION 10.6   WAIVER OF JURY TRIAL.   BANK
AND BORROWER,  AFTER  CONSULTING OR HAVING HAD THE  OPPORTUNITY  TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY, INTENTIONALLY,  IRREVOCABLY AND UNCONDITIONALLY
WAIVE  ANY RIGHT  EITHER  OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY  LITIGATION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF
THE  TRANSACTIONS  CONTEMPLATED  BY THIS  AGREEMENT  OR ANY  COURSE OF  CONDUCT,
DEALING,  STATEMENTS  (WHETHER  ORAL OR WRITTEN),  OR ACTIONS OF EITHER OF THEM.
NEITHER  BANK  NOR  BORROWER  SHALL  SEEK TO  CONSOLIDATE,  BY  COUNTERCLAIM  OR
OTHERWISE,  ANY  ACTION  IN WHICH A JURY  TRIAL HAS BEEN  WAIVED  WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  THESE PROVISIONS
SHALL NOT BE DEEMED TO HAVE BEEN  MODIFIED  IN ANY  RESPECT OR  RELINQUISHED  BY
EITHER BANK OR BORROWER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.



                      [THIS SPACE LEFT INTENTIONALLY BLANK]






	
GENERAL SECURITY AGREEMENT	
Page 18







        IN WITNESS WHEREOF, the Borrower
and the Bank  have  caused  this  Security  Agreement  to be  executed  by their
respective  officers  duly  authorized  as of  the  date  first  above  written.



	
	
BIOANALYTICAL SYSTEMS, INC.

and Indiana corporation







By:  /s/ Peter T. Kissinger

Printed:  Peter T. Kissinger

Title:  CHM & CEO







	
STATE OF INDIANA
	
)


	
	
)  SS:

	
COUNTY OF TIPPECANOE

	
)




        
Before me, a Notary Public in and for said County and State, personally appeared
Peter T.  Kissinger,  known to me to be the  CHM/CEO of  BIOANALYTICAL  SYSTEMS,
INC., and  acknowledged the execution of the foregoing for and on behalf of said
corporation. 



        
Witness my hand and Notarial Seal, this 28th day of October, 2002.



	
	




/s/  Jeri A. Ungersma

Notary Public - Signature




Jeri A. Ungersma

Notary Public - Printed







	
My Commission Expires:



July 17, 2008


	
My County of Residence:



Tippecanoe












	
GENERAL SECURITY AGREEMENT	
Page 19





	ACCEPTED:	
THE PROVIDENT BANK







By:  /s/ Jeffrey A. Salesman, VP

Printed:  Jeffrey A. Salesman

Title:  Vice President
















	
GENERAL SECURITY AGREEMENT	
Page 20