| A. | Terms. |
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|   | 1. | Definitions.  The      terms “you” and “your” and “Chait” mean Dr. Edward M. Chait, and anyone who has      or obtains any legal right or claims through him.  “BASi” and      “Company” mean Bioanalytical Systems, Inc. and include its past and      present officers, directors, employees, agents, related corporations and      entities, affiliates, principals, insurers, shareholders, attorneys,      trustees, subsidiaries, predecessors, successors and assigns, any and all      employee benefit plans (and any fiduciary of such plans) sponsored by      BASi.  “Agreement” means this letter agreement which contains      the terms of the severance package and which includes a release of all      claims arising out of Chait's employment relationship with BASi and the      termination of the employment relationship.  “The Parties” means      Chait and BASi. |
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|   | 2. | No Admission of      Liability.  This Agreement shall not in any way be      construed as an admission by BASi that it has acted wrongfully with      respect to you or any other person, or that you have any rights whatsoever      against BASi. |
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|   | 3. | Claims released by      Chait.  By signing this Agreement, Chait unconditionally      and fully releases and forever discharges BASi from (a) any and all      possible claims, known or unknown, arising out of or from his employment      with BASi under any and all possible legal, equitable, tort, contract or      statutory theories, including but not limited to any claims for      constructive or wrongful discharge or breach of contract, except for any      claims relating to accrued and vested rights under a retirement plan; (b)      any and all claims arising on or before the date Chait signs this      Agreement, including but not limited to any charges, claims, demands or      actions under Title VII of the Civil Rights Act of 1964 and the Equal      Pay Act, 42 U.S.C. § 2000e et seq.,      Section 1981 of the Civil Rights Act of 1866, 42 U.S.C.      §  1981, the Age Discrimination in Employment Act, the Older      Workers’ Benefit Protection Act, the Americans with Disabilities Act, 42      U.S.C. § 12101 et      seq., the Indiana Civil Rights Law, the Employee Retirement Income      Security Act, 29 U.S.C. § 1001 et seq., the United      States Constitution, the Indiana Constitution, any and all amendments to      said statutes, and any other federal, state or local statute or law,      ordinance or regulation, dealing in any way with employment or      employment-related benefits and all claims for costs and attorneys’ fees;      and (c) all claims Chait may have against BASi arising out of Chait's      employment and/or termination of employment with BASi, including any      claims arising out of his Employment Agreement dated November 6, 2007, any      bonus program, or any vacation policy.  Chait agrees and      understands that any claims he may have under the aforementioned laws,      statutes or any other federal, state or local law, ordinance, rule or      regulation are effectively waived by this Agreement.  Chait      understands that the signing of this Agreement prevents him from making      any further claims against BASi in connection with his employment and the      termination of his employment with theBASi. |
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|   | 4. | Waiver of      Re-employment.  Chait waives any right or claim of      reinstatement to employment with BASi and agrees not to seek further      employment with BASi.  If Chait does seek employment with BASi,      BASi is under no obligation to consider him for  employment. |
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|   | 5. | Payments and Benefits      to be Provided to Chait.  In exchange for and in      consideration of Chait's agreement to release all claims against BASi as      described in paragraph 3 and in consideration of the other promises      contained in this Agreement, BASi agrees as  follows: |
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|   | a. | BASi      agrees to pay you a severance benefit of an amount equal to Twelve Months      salary (i.e.,      Thirteen Thousand Seven Hundred Fifty Dollars and No Cents ($13,750.00 per      month), for a gross amount of One Hundred Sixty-Five Thousand Dollars and      No Cents ($165,000.00), less tax and other deductions required by      law.  These amounts will be paid to you in the form of salary      continuation beginning the first pay period following the Release      Effective Date and ending twelve months later.  Unless you      notify BASi’s payroll department of a different bank account, this amount      will be deposited in the bank account that you have previously designated      for direct deposit. |
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|   | a. | Additionally,      BASi agrees to continue health insurance coverage for you and any covered      dependents under BASi’s group health insurance program through December      31, 2008.  You will be responsible for the employee portion of      the premium. |
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|   | b. | Chait      agrees that all of his stock options, including vested and unvested stock      options, shall be irrevocably terminated and of no further effect as of      the date hereof. |
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|   | 6. | Acknowledgement.  Chait      acknowledges that he is not entitled to any of the payments and benefits      listed in paragraph 5 of this Agreement unless he signs this      Agreement.  Chait further acknowledges that: (a) the payments      and benefits listed in paragraph 5 of this Agreement are in lieu of any      amounts he may claim to have been entitled to under his Employment      Agreement dated November 6, 2007, BASi's vacation policy, and any      applicable bonus programs; and (b) the release of claims contained in      paragraph 3 of this Agreement includes any claims by him for further      payments or benefits under his Employment Agreement dated November 6,      2007, BASi's vacation policy and/or any applicable bonus      programs. |
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|   | 7. | Non-Disparagement.  In      consideration of the promises made in this Agreement, Chait agrees that he      shall not make any false, negative or disparaging remarks or comments to      any person and/or entity about BASI or any of its executives, nor shall      Chait make any statement that may subject BASi to potential embarrassment,      humiliation or any other negative consequence.  In addition,      Chait agrees that he shall not make any public statement, including but      not limited to, the media or to BASi employees, regarding the termination      of his employment with BASi. |
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|   | 8. | Confidentiality.  The      Parties agree that an essential condition and material term of this      Agreement shall be that the terms of this Agreement and all negotiations,      discussions, correspondence and other related matters that preceded it      shall be maintained confidential. Chait agrees that neither he nor his      representatives shall in any way publish, reveal, disclose, or cause to be      published, revealed, or disclosed, any terms, information, or details of      this Agreement, or the negotiations and discussions that preceded      it.  These restrictions on disclosure do not apply to      disclosures which may be required by law or by judicial or administrative      process or order. The Parties may disclose the terms of this Agreement to      BASi management or Chait's immediate family, attorney, or income tax      services provider, provided they agree to keep same confidential and not      make any disclosures in any manner that is inconsistent with the terms of      this Agreement. |
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|   | 9. | Consultation with      Attorney.  Chait agrees that he has read this Agreement      and the releases contained herein, that he understands all of the terms      hereof, that he has not been coerced, threatened or intimidated into      signing this Agreement, and that he executes this Agreement voluntarily      and with full knowledge of its meaning and consequences and that he has      had sufficient opportunity to consult with his attorney regarding this      Agreement.  Chait further acknowledges that BASi hereby advises      him that he should consult with an attorney before executing this      Agreement. |
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|   | 10. | Violation of Agreement      and Severability.  Chait agrees that if he breaches any      obligation set forth in this Agreement, BASi shall cease all payments to      him, as described in this Agreement.  Chait also understands and      agrees that in the event that this Agreement is ever held to be invalid or      unenforceable, in whole or in part, as to any particular type of claim or      charge or as to any particular circumstances, this Agreement shall remain      fully valid and enforceable as to all other claims, charges and      circumstances. |
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|   | 11. | Restrictive      Covenants.  Chait agrees that for the two (2) years      immediately following the effective date hereof (which, in the event of a      breach of this paragraph 11 by Chait, shall be extended      automatically by a number of days equal to the number of days during which      the breach exists) (the “Restricted      Period”), Chait shall not directly or  indirectly: |
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|   | a. | Customer      Non-Solicitation.  Contact, solicit or communicate with      any Customer of the Company, or any Prospective Customer of the Company,      for the purpose of: |
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|   | i. | diverting      or influencing or attempting to divert or influence any business of the      Company to a Competitor of theCompany; |
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|   | ii. | marketing,      selling, distributing, leasing or providing any products or services in      competition with the services or products offered by the Company in the      Company’s Business; or |
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|   | iii. | otherwise      interfering in any fashion with the Company’s Business or operations then      being conducted by the Company or the Company's relationship with any of      its Customers or ProspectiveCustomers. |
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|   | b. | Employee      Non-Solicitation.  Solicit, hire or employ any person who      is an employee of the Company or in any way (a) cause or assist or      attempt to cause or assist any employee to leave the Company or      (b) directly or indirectly seek to solicit, induce, bring about,      influence, promote, facilitate, or encourage any current employee of the      Company to leave the Company. |
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|   | c. | Activities Not      Prohibited.  The restrictions of this paragraph 11 shall not be deemed to      prevent Chait from owning (1) not more than 5%      of the issued and outstanding shares of any class of securities of an      issuer whose securities are listed on a national securities exchange or      registered pursuant to Section 12 of the Securities Exchange Act of 1934,      as amended, and/or (2) any issued and outstanding securities of BASi,      provided that Chait shall not, either directly or indirectly (i) act to      increase his direct or beneficial ownership of any class of equity      security of BASi, provided, however: |
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|   | i. | Neither      Chait nor any Affiliate (as such term is defined in Rule 405 under the      Securities Act of 1933 as amended) of Chait will:  (i) acquire,      offer to acquire, or agree to acquire, directly or indirectly, by purchase      or otherwise, any voting securities or direct rights or options to acquire      any voting securities of BASi, (ii) make, or in any way participate,      directly or indirectly, in any "solicitation" of "proxies" to vote as such      terms are used in the proxy rules of the Securities and Exchange      Commission, or seek to advise or influence any person or entity with      respect to the voting of any voting securities of BASi, (iii) form, join,      or in any way participate in a "group" within the meaning of Section      13(d)(3) of the Securities Exchange Act of 1934, as amended, with respect      to any voting securities of BASi, or (iv) otherwise act, alone or in      concert with others, to seek to control or influence the management, Board      of Directors, or policies of BASi, or initiate, induce or attempt to      induce or give encouragement to any other person to initiate, any tender      or exchange offer for securities of BASi or for a change of control of      BASi.  Chait acknowledges that BASi would not have an adequate      remedy at law for money damages in the event that this covenant were not      performed in accordance with its terms and therefore agrees that BASi      shall be entitled to specific enforcement of the terms hereof in addition      to any other remedy to which it may be entitled, at law or in      equity. |
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|   | d. | Modification.  In      the event a court of competent jurisdiction determines that any of the      foregoing restrictions are unreasonable in terms of geographic scope or      otherwise then Chait and the Company agree that the court is hereby      authorized to reduce the scope of said restriction through application of      the blue pencil doctrine and enforce this paragraph 11 as so reduced.  If      any sentence, word or provision of this paragraph 11 shall be      determined to be unenforceable, the same shall be severed herefrom and the      remainder shall be enforced as if the unenforceable sentence, word or      provision did not exist.  Chait acknowledges that all of the      provisions contained in this Agreement, including the restrictions of the      covenant not to compete, are reasonable and necessary to protect the      legitimate interests of theCompany. |
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|   | e. | Definitions. |
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|   | i. | Competitor.  A      “Competitor” shall mean any person or entity that provides research or      development resources to pharmaceutical, medical device or biotechnology      companies, or that provides outsourced drug development services,      biological services or products used in the development of pharmaceutical      products or in pharmaceutical or biological  research. |
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|   | ii. | Customer.  A      “Customer” of the Company is any person or entity which, within the      twenty-four (24) month period preceding the date hereof, used, leased,      received or purchased or contracted to use, lease, receive or purchase any      of Company’s products or services. |
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|   | iii. | Prospective      Customer.  A “Prospective Customer” of the Company is any      person or entity to which, within the twenty-four (24) month period      preceding the date hereof, a proposal for services was submitted or which      was specifically identified by the Company as a prospective customer or      prospective client. |
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|   | iv. | Business.  The      "Business" is BASi's products and services offered as an alternative to      its clients' internal product development, compliance, and quality control      programs and outsourced drug development services, biological services and      products useful in developing pharmaceutical products and performing      pharmaceutical and biologicalresearch. |
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|   | f. | Confidentiality and      Other Matters.  Chait acknowledges that the terms of this      paragraph 11 are in addition to      the terms of Article 3 ("Confidentiality and Other Terms") of his      Employment Agreement dated November 6, 2007.  In the event of      any conflict between the terms of this paragraph 11 and Article 3 of his      Employment Agreement, Chait understands and agrees that the more      restrictive terms will control. |
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|   | 12. | Acceptance of      Agreement.  To accept the terms of this Agreement, Chait      must deliver this Agreement, after it has been signed and dated by him to      the undersigned in an envelope marked “Personal and      Confidential.” |
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|   | 13. | Chait's      Representations.  Chait represents and warrants that in      the making and execution of this Agreement, he is not relying on any      representation, statement, or assertion of fact or opinion made by any      agent, attorney, employee, or representative of the persons, parties, or      corporations being released herein, and he hereby waives any right to rely      upon all prior agreements and/or oral representations made by any agent,      attorney, employee, or representative of such persons, parties, or      corporations even though made for the purpose of inducing him to enter      into this Agreement. |
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|   | 14. | Return of BASi’s      Property.  Chait hereby represents and warrants that he      has returned to BASi all of BASi’s property that was in his possession or      control.  This includes, but is not limited to, keys, credit      cards, phone cards, cellular telephones, pagers, directories, computer      hardware and software, books, documents, memoranda, and all other records,      and copies thereof. |
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|   | 15. | Cooperation and      Transition Assistance.  Chait agrees that he will be      available to assist BASi with transitional matters relating to his former      duties with BASi, without additional compensation, for the severance      period discussed in paragraph 5,above. |
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|   | 16. | Miscellaneous.      The Parties agree that this Agreement is deemed made and entered into in      the State of Indiana and in all respects shall be interpreted, enforced      and governed under the laws of the State of Indiana, unless otherwise      preempted by federal law. Jurisdiction and venue for litigation of any      dispute, controversy, or claim arising out of or in connection with this      Agreement shall lie exclusively in the federal or state courts in      Tippecanoe County, Indiana, and the Parties hereby consent to service of      process from said courts.  This Agreement shall inure to the      benefit of and may be enforced by, and shall be binding on The Parties and      their heirs, executors, administrators, personal representatives, assigns,      and successors in interest.  The language of all parts of this      Agreement shall be in all cases construed as a whole, according to its      fair meaning, and not strictly for or against the  drafter. |
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|   | 17. | Time to Consider this      Agreement.  Chait understands that he has until      twenty-one (21) days from the date of delivery of this Agreement to      consider the terms of this Agreement.  Chait understands that he      may sign this Agreement at any time during the twenty-one day      period.  Chait understands that he may revoke this Agreement if      he so chooses until seven (7) days after the date of      execution.  Chait further understands that this Agreement will      not become effective or enforceable and that BASi’s obligations in      paragraph 5 of this Agreement to make payments and provide benefits will      not become effective or enforceable until seven (7) days from the date of      Chait's execution of this Agreement and provided that the Agreement is not      revoked during such seven day period ("Release Effective      Date"). |
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|   | 18. | OWBPA      Disclosures. Chait understands that the claims released by this      Agreement include claims under the Age Discrimination in Employment Act,      as modified by the Older Worker Benefit Protection Act      ("OWBPA").  Chait acknowledges that he has been advised by BASi      to consult with an attorney concerning the requirements of the      OWBPA.  By his signature below, Chait signifies his      understanding that this Agreement satisfies the requirements of the      OWBPA. |
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|   | Sincerely,                      |
|--------|---------------------------------|
|   |                            |
|   | BIOANALYTICAL      SYSTEMS,INC. |
|   |                            |
|   | Richard      M. Shepperd        |
|   | President      & C.E.O.     |

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|                           |   |   |
|--------------------------------|--------|--------|
| Dr.      Edward M..      Chait |   | Date   |

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