Bioanalytical Systems, Inc. - Security Agreement





Exhibit 10.13




PATENT
SECURITY AGREEMENT



        THIS  PATENT SECURITY  AGREEMENT
(“Security Agreement”), dated as of October 29, 2002 is made by
and   between    BIOANALYTICAL    SYSTEMS,    INC.,   an   Indiana   corporation
(“Borrower”),   and  THE   PROVIDENT   BANK,  an  Ohio  banking
corporation, having a notice address of One East Fourth Street, Cincinnati, Ohio
45202 (“Bank”); 



WITNESSETH:




        WHEREAS,  pursuant  to a certain
Credit Agreement executed between Borrower and Bank dated as of October 29, 2002
(as  the  same  may  be  amended   from  time  to  time,   the   “Credit
Agreement”), Bank has agreed to make certain loans and to provide other
financial accommodations to Borrower; and 



        WHEREAS,  in connection with the
Credit Agreement,  Borrower has executed and delivered to Bank a certain General
Security  Agreement  dated as of October 29, 2002 (as the same may be  hereafter
amended or modified,  the “General  Security  Agreement”);  and




        WHEREAS, in order to perfect the
Bank’s security interest granted under the General Security Agreement,  the
Borrower is required to execute and deliver this Security Agreement; 



        NOW,  THEREFORE,  for  good  and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged,  in order to secure  payment,  performance  and  observance of the
Obligations  under the Credit  Agreement,  Borrower  hereby grants,  assigns and
conveys  to  Bank  a  continuing   security   interest  in  the  following  (the
“Patent Collateral”): 



        a.        
The entire  right,  title and  interest  of  Borrower  in and to the patents and
patent applications listed on Schedule 1 hereto (collectively, the "Patents");



        b.        
All proceeds of the Patent Collateral,  including,  without limitation,  license
royalties and the proceeds of infringement suits;



        c.        
The  right  (but  not  the  obligation)  to sue for  past,  present  and  future
infringements  of the Patent  Collateral  throughout  the world,  subject to the
occurrence and continuance of a Default under the Credit Agreement; and



        d.        
All   reissues,    divisions,    continuations,    renewals,    extensions   and
continuations-in-part of any of the Patent Collateral;



        and  Borrower  further agrees as
follows:



        1.        
Definitions.  Terms used herein, and not specifically  herein
defined, shall have the meanings ascribed to them in the Credit Agreement.



        2.        
Purpose.  This  Security  Agreement  has  been  executed  and
delivered  by  Borrower  to Bank for the  purpose  of  registering  the grant of
security  interest herein with the United States Patent and Trademark  Office or
with such  other  Governmental  Authorities  as may have  jurisdiction  over the
Patent Collateral within or without the United States of America. 





	
PATENT SECURITY AGREEMENT





 
        3.        
Representations.


	 	
        (a)  
The Patents are subsisting and have not been adjudged invalid or  unenforceable,
in whole or in part;



        (b)  
To  the  best  of  Borrower's  knowledge,  each  of the  Patents  is  valid  and
enforceable;



        (c)  
Except as  otherwise  disclosed  to Bank in  writing,  Borrower  is the sole and
exclusive owner of the entire and unencumbered  right, title and interest in and
to each of the Patents,  free and clear of any liens,  charges and encumbrances,
including, without limitation,  pledges, assignments,  licenses, shop rights and
covenants by Borrower not to sue third persons; and



        (d)  
Borrower has the  unqualified  right to enter into this  Security  Agreement and
perform its terms and has entered and will enter into  written  agreements  with
each of its  present and future  employees,  agents and  consultants  which will
enable it to comply with the covenants herein contained.



        
Except as  specifically  set forth  above,  Borrower  does not warrant  that the
Patents might not be declared invalid if challenged in court.








        4.        
Dispositions.  Borrower   agrees   that,   until   all  of  the
Obligations  shall  have been  satisfied  in full,  it will not sell,  assign or
otherwise  encumber the Patent  Collateral  without the prior written consent of
the Bank;  provided  however,  that  nothing  contained  herein  shall  prohibit
Borrower from granting  licenses under the Patents in the ordinary course of its
business. 



        5.        
Additional Patent Collateral.  If, before the Obligations shall
have been fully, finally and irrevocably paid in full and all of the commitments
of Bank  shall  have  been  terminated,  Borrower  shall  obtain  rights  to any
patentable  invention,   or  become  entitled  to  the  benefit  of  any  patent
application  or  patent  for  any  reissue,  division,  continuation,   renewal,
extension  or  continuation-in-part  of any  patent  or any  improvement  of any
patent,  the provisions of this Security  Agreement  shall  automatically  apply
thereto, and Borrower shall give to Bank prompt written notice thereof. Borrower
agrees  to  enter  into  modifications  to  this  Security  Agreement  to  amend
Schedule  1 to include any future Patent  Collateral under this Section 5
for the purpose of recording  Bank’s  security interest under this Security
Agreement against such Patent Collateral. Borrower shall prosecute diligently in
a manner consistent with sound commercial  practices any patent applications and
shall take all  necessary  action to  maintain  and  preserve  all rights in the
Patent Collateral. 



        6.        
Rights and Remedies.  If any Default under the Credit Agreement shall have
occurred and be continuing, Bank shall have, in addition to all other rights and
remedies  given it by this  Security  Agreement,  those  allowed  by law and the
rights and  remedies of a secured  party under the  Uniform  Commercial  Code as
enacted in any  jurisdiction in which the Patent  Collateral may be located and,
without limiting the generality of the foregoing, Bank may immediately,  without
demand of performance  and without other notice (except as set forth next below)
or demand whatsoever to Borrower,  all of which are hereby expressly waived, and
without advertisement, sell at public or private sale or otherwise realize upon,
in Indianapolis,  Indiana, or elsewhere, the whole or from time to time any part
of the Patent  Collateral,  or any interest which the Borrower may have therein,
and after deducting from the proceeds of sale or other disposition of the Patent
all expenses (including all reasonable expenses for brokers’ fees and legal
services),  shall apply the residue of such  proceeds  toward the payment of the
Obligations.  Any  remainder  of the  proceeds  after  payment  in  full  of the
Obligations  shall be paid  over to the  Borrower.  Notice  of any sale or other
disposition  of the Patent  Collateral  shall be given to  Borrower at least ten
(10)  days  before  the time of any  intended  public or  private  sale or other
disposition of the Patent Collateral is to be made, which Borrower hereby agrees
shall be reasonable notice of such sale or other  disposition.  At any such sale
or  other  disposition,  any  holder  of any  note or Bank  may,  to the  extent
permissible  under applicable law,  purchase the whole or any part of the Patent
Collateral  sold,  free from any right of  redemption  on the part of  Borrower,
which right is hereby waived and released. 




	
PATENT SECURITY AGREEMENT	
Page 2






        7.        
Power of Attorney.  Borrower hereby authorizes and empowers Bank, upon the
occurrence and during the  continuance of a Default under the Credit  Agreement,
to make,  constitute and appoint any officer or agent of Bank as Borrower’s
true and lawful attorney-in-fact,  with power to endorse Borrower’s name on
all  applications  and  other  documents  necessary  for Bank to use the  Patent
Collateral or to grant any exclusive or  non-exclusive  license under the Patent
Collateral  to any third  Person,  or to  assign,  pledge,  convey or  otherwise
transfer  title in, or dispose of, the Patent  Collateral  to any third  Person.
This power shall be deemed coupled with an interest and shall be irrevocable for
the term of this Security Agreement. 



        8.        
Fees and Expenses.  Any and all fees, costs and expenses, of whatever kind
or nature,  including the  reasonable  attorney’s  fees and legal  expenses
incurred by Bank in connection with the  preparation of this Security  Agreement
and  all  other  documents   relating  hereto  and  the   consummation  of  this
transaction,  the filing or recording of any documents  (including  all taxes in
connection  therewith) in public offices, the payment or discharge of any taxes,
counsel  fees,   maintenance   fees,   encumbrances  or  otherwise   protecting,
maintaining or preserving the Patent Collateral,  or in defending or prosecuting
any actions or proceedings  arising out of or related to the Patent  Collateral,
shall be borne and paid by Borrower on demand by Bank and until so paid shall be
added to the principal  amount of the Obligations and shall bear interest at the
highest rate prescribed in the Credit Agreement. 



        9.        
Patent Applications.  Borrower shall have the duty to prosecute diligently
any patent  applications  of the Patents pending as of the date of this Security
Agreement or thereafter  until the Obligations  shall have been paid in full, to
make  application  on  unpatented  but  patentable   inventions   unless  it  is
inconsistent  with  sound  commercial  practices  to do so and to  preserve  and
maintain all rights in patent applications and patents of the Patent Collateral,
including, without limitation, the payment of all maintenance fees. Any expenses
incurred in  connection  with such an  application  shall be borne by  Borrower.
Borrower  shall  not  abandon  any  right to file a patent  application,  or any
pending patent  application or patent without the consent of Bank, which consent
shall not be unreasonably withheld. 



        10.        
Preservation  of Rights.  No course of dealing between Borrower and Bank,
nor any failure to exercise  nor any delay in  exercising,  on the part of Bank,
any right,  power or  privilege  hereunder or under the Credit  Agreement  shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right, power or privilege  hereunder or thereunder preclude any other or further
exercise  thereof  or the  exercise  of any  other  right,  power or  privilege.





	
PATENT SECURITY AGREEMENT	
Page 3





        11.        
Remedies  Cumulative.  All  of Bank's  rights and remedies with
respect to the Patent  Collateral,  whether  established hereby or by the Credit
Agreement,  or by any other  agreements or by law shall be cumulative and may be
exercised singularly or concurrently.



        12.        
Severability.  The  provisions of this Security  Agreement are severable,
and if any clause or provision shall be held invalid and  unenforceable in whole
or in part in any jurisdiction,  then such invalidity or unenforceability  shall
affect only such clause or provision, or part thereof, in such jurisdiction, and
shall  not  in  any  manner  affect  such  clause  or  provision  in  any  other
jurisdiction,  or any clause or  provision  of this  Security  Agreement  in any
jurisdiction. 



        13.        
Amendment.  This Security  Agreement is subject to modification only by a
writing signed by the parties. 



        14.        
Successors  and  Assigns.  The  benefits  and  burdens  of this  Security
Agreement  shall  inure to the  benefit  of and be binding  upon the  respective
successors and assigns of the parties.



        15.        
Incorporation by  Reference.  The  security interest herein has
been granted as a supplement to, and not in limitation of, the security interest
granted to Bank under the  General  Security  Agreement.  The  General  Security
Agreement  and all rights and remedies of Bank  thereunder  shall remain in full
force and effect in accordance with its terms.  This Security  Agreement is made
subject to all the terms, covenants, conditions,  obligations,  stipulations and
agreements  contained in the General  Security  Agreement to the same extent and
effect as if fully set forth  herein,  and the  General  Security  Agreement  is
subject to all the terms, covenants, conditions,  obligations,  stipulations and
agreements contained in this Security Agreement to the same extent and effect as
if fully set forth  therein.  In the event of any  irreconcilable  inconsistency
between the terms of the General Security Agreement and this Security Agreement,
the General Security Agreement shall control. 



        16.        
Counterparts.  This  Security  Agreement  may  be  executed  in
counterparts,  each of which shall be deemed an original, but all of which taken
together shall constitute but one and the same document. 



        17.        
Headings.  Section  headings in this Security Agreement are for
convenience of reference only and shall not govern the  interpretation of any of
the provisions of this Security Agreement. 



        18.        
Choice  of  Law.  This  Security  Agreement  and the rights and
obligations  of the parties  hereunder  shall be governed by, and  construed and
interpreted in accordance with the laws of the State of Indiana. 





	
PATENT SECURITY AGREEMENT	
Page 4





        
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed and delivered by their  respective  officers duly authorized as of
the day and year first above written. 


	
	
BIOANALYTICAL SYSTEMS, INC.







By:  /s/ Peter T. Kissinger

Its:  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












	
PATENT SECURITY AGREEMENT	
Page 5





	
ACCEPTED:	
THE PROVIDENT BANK







By:  /s/ Jeffrey A. Salesman, VP

Its:  Vice President






	
STATE OF INDIANA
	
)


	
	
)  SS:

	
COUNTY OF MARION

	
)





        
Before me, a Notary Public in and for said County and State, personally appeared
Jeffrey A. Salesman,  known to me to be a Vice President of The Provident  Bank,
and  acknowledged the execution of the foregoing for and on behalf of said bank.




        
Witness my hand and Notarial Seal, this 29th day of October, 2002.



	
	




/s/ Cheryl G. Croghan

Notary Public - Signature




Cheryl G. Croghan

Notary Public - Printed







	
My Commission Expires:



10-27-2007


	
My County of Residence:



Marion