(Bioanalytical
Systems, Inc)


2701 Kent
Avenue


West
Lafayette, IN 47906 USA


TEL:
(765) 463-4527 - FAX: (765) 497-1102


www.basinc.com




August
18, 2010




Albert F.
Hidalgo, Jr.


1336
Central Avenue


Indianapolis,
IN 46202




Dear
Alberto:




The
Compensation Committee of the Board of Directors of Bioanalytical Systems, Inc.
(the "Company")
has approved the grant of non-qualified stock options to you as an inducement to
your employment with the Company. This letter will serve as notice of the grant,
effective as of the date of this letter (the "Date of Grant") of
an option to purchase (the "Option") 30,000
shares of the Common Shares of the Company (the "Option Shares") on
the terms and conditions set forth herein, and upon your execution and delivery
to the Company of the copy of this letter included herein will constitute our
agreement as to those terms. This Option has notbeen granted under the
termsof the Company's employee stock
option plans, and is not a"qualified" stock option as defined
by the Internal Revenue Service.You are urged to consult with your tax
advisors concerning the tax effect of the grant and exercise of this
Option.




1.           OPTION PRICE. The
purchase price of the Option Shares is $1.00 per share (the "Option
Price").




2.           MEDIUM AND TIME OF
PAYMENT. You must pay the Option Price with respect to the Option Shares
being purchased at the time you exercise the Option. The Option Price may be
paid either (a) in cash; (b) by certified check or by bank cashier's check; (c)
if you can do so without violating Section 16(b) of the Securities Exchange Act
of 1934, through the tender to the Company of outstanding Common Shares, which
shall be valued, for purposes of determining the extent to which the purchase
price has been paid, at the fair market value of the Common Shares on the date
of exercise of the Option; (d) by surrendering a sufficient portion of the
vested Option based on the difference between the exercise price of the Option
and the fair market value at the time of exercise of the Shares subject to the
Option, or (e) by any combination of (a), (b), (c) and (d).





3.           TERM AND EXERCISABILITY OF
OPTIONS. The Option is effective immediately upon your acceptance of this
letter. Unless the Option is terminated or vesting of the Option or any portion
thereof is accelerated (in each case as provided in this letter), the Option
shall vest and become exercisable in whole or in part from time to time subject
to the limitation that no Option may be exercised with respect to fewer than
twenty-five (25) shares then subject to Option hereunder, in which event any
exercise must be as to all such shares and subject to the further limitation
that the Options represented by the Agreement shall first become exercisable in
four equal installments and pursuant to the following sentence. The Option may
be exercised as to the shares covered by the first installment from and after
the second anniversary of the grant of the Option, with second, third and fourth
installments becoming exercisable on the three succeeding anniversary dates.
Unless sooner terminated under the terms of this Agreement, the Option shall
expire as to all shares subject to purchase hereunder on the 10th
anniversary date of this Agreement if not exercised on or before such date. The
Option shall also vest and become exercisable as to all unvested Option Shares
upon the occurrence of a "Change in Control" as defined in your Employment
Agreement with the Company dated August 12, 2010, as the same may be amended
from time to time. The Option will be considered to have been effectively
exercised only upon delivery to the Company, with a copy to the Chair of the
Compensation Committee of the Board of Directors of the Company, of the Option
Price and a "Notice ofExercise" in the form
attached hereto, and the satisfaction of all other conditions described in this
letter. The Option shall expire as to all unexercised Option Shares at the close
of business on the tenth anniversary of the date of this letter (or on the next
business day if that date is a Saturday, Sunday or holiday).




4.           CESSATION OF SERVICE WITH
THE COMPANY. In the event you cease to serve as an employee of the
Company or any of its subsidiaries, this Option shall terminate immediately upon
termination of employment as to any unexercised Option Shares; provided,
however, that if termination of employment is due to retirement with the consent
of the Company, the expiration of the term of your employment with the Company
set forth in your employment agreement, or is due to a permanent and total
disability, you shall have the right to exercise the Option with respect to the
Common Shares for which it could have been exercised on the effective date of
termination of employment at any time within three (3) months after the
termination date. In the event of your death while serving as an employee of the
Company or any of its subsidiaries, your personal representative shall have the
right to exercise this Option with respect to the Common Shares for which it
could have been exercised on the date of your death at any time within six (6)
months of your death. Whether termination is a retirement with the consent of
the Company or due to permanent and total disability, and whether an authorized
leave of absence on military or government service shall be deemed to constitute
termination of employment for the purposes of this Option, shall be determined
by the Board of Directors in its sole discretion, which determination shall be
final and conclusive.




5.           RECAPITALIZATION. The
number of Option Shares and the Option Price each shall be proportionally
adjusted for any increase or decrease in the number of issued Common Shares
resulting from a subdivision or consolidation of shares of the Company, the
payment of a share dividend, a share split or other increase or decrease in the
outstanding Common Shares effected without receipt of consideration by the
Company (including an increase or decrease effected as a part of the
Recapitalization of the Company, as defined herein). In the event that there
shall be a recapitalization or reorganization of the Company or a
reclassification of its outstanding shares (each a "Recapitalization")as a result of
which other shares (the "NewShares") are issued
in exchange for Common Shares, then there shall be substituted for the Option
Shares then issuable hereunder that number of New Shares into which those Option
Shares have been converted had they been outstanding at the effective date of
the Recapitalization.







6.           MERGER, DISSOLUTION.
If the Company shall enter into any agreement of merger or consolidation
(whether or not it shall be the surviving entity thereunder), the Company shall
have the right to terminate this Option as of any date specified in a written
notice given to you not less than 30 days prior to the termination date. If the
merger or consolidation described in that notice is not consummated within 180
days following the termination date of this Option specified in the notice, this
Option thereafter shall be deemed to have been continuously in effect since the
date hereof. In the event of the sale of all or substantially all of the assets
of the Company and the distribution of the proceeds thereof to shareholders in
liquidation of the company, the Company shall give you 30 days prior written
notice specifying record date for the purpose of determining the shareholders
entitled to participate in that distribution and this Option shall expire as to
all Option Shares that remain unexercised as of the date of that
distribution.




7.           NONASSIGNABILITY.
This Option is not assignable or transferable except by will or under the laws
of descent and distribution. During your lifetime, this Option shall be
exercisable only by you (or if you become incapacitated, by your legal guardian
or attorney-in-fact).




8.           ISSUANCE OF SHARES AND
COMPLIANCE WITH SECURITIES LAWS.The Company may
postpone the issuance and delivery of certificates representing Common Shares
until (a) the admission of such shares to listing on any exchange on which
shares of the Company of the same class are then listed and (b) the completion
of any requirements for registration or other qualification of the shares under
any state or Federal law, rule or regulation or the rules and regulations of any
exchange upon which the Common shares are traded as the Company shall determine
to be necessary or advisable. The Company shall use reasonable commercial
efforts to complete any required registration or other qualification. You have
no right to require the Company to register the Common Shares acquired upon the
exercise of this Option under federal or state securities laws. As a condition
to the effective exercise of this Option you may be required to make such
representations and furnish such information as may, in the opinion of counsel
for the Company, be appropriate to permit the Company to determine whether
registration or qualification of those shares is required in connection with
that transaction.




9.           RIGHTS AS A
SHAREHOLDER. You shall have no rights as a shareholder with respect to
Common Shares subject to this Option until the date of issuance of a certificate
to you. A certificate will not be issued until you have exercised the Option,
fully paid for the Common Shares acquired thereby and satisfied all other
details described in this letter. No adjustment will be made for dividends or
other rights for which the record date is prior to the date a certificate is
issued.




10.         NO OBLIGATION TO EXERCISE
OPTION. The grant of this Option imposes no obligation upon you to
exercise the Option.




11.         NO OBLIGATION TO CONTINUE
EMPLOYMENT. The grant of this Option to you does not constitute any
contract of employment between you and the Company, and does not impose any
obligation of the Company to continue your employment.







12.         WITHHOLDINGS. As a
condition to the effective exercise of this Option, the Company shall have the
right to require you to remit to the Company amounts sufficient to satisfy any
applicable withholding requirements set forth in the Internal Revenue Code of
1986, as amended, or under state or local law relating to the Option. The
Company shall have the right, to the extent permitted by law, to deduct from any
payment of any kind otherwise due to you any federal, state or local taxes of
any kind required by law to be withheld with respect to the exercise of the
Option.




13.         POWER AND AUTHORITY.
The Board of Directors shall have the full power and authority to take all
actions and make all determinations required or provided for under the terms of
this Option; to interpret and construe the provisions of this letter, which
interpretation or construction shall be final, conclusive and binding on the
Company and you; and to take any and all other actions and make any and all
other determinations not consistent with the specific terms and provisions of
this letter which the Board of Directors deems necessary or
appropriate.




Please
acknowledge your receipt of this letter and your agreement to the terms set
forth herein by signing and returning the copy enclosed for that
purpose.





Very
      truly yours,BIOANALYTICAL
      SYSTEMS, INC.By:Michael
      R. Cox, Vice President- Finance
                            and
      Chief Financial OfficerAccepted
      and agreed to:Alberto
      F. Hidalgo, Jr.Date:









EXHIBIT
A




BIOANALYTICAL
SYSTEMS, INC.




NOTICE OF
EXERCISE




Date:




Mr.
Michael R. Cox


Chief
Financial Officer


BIOANALYTICAL
SYSTEMS, INC.


2701 Kent
Avenue


West
Lafayette, Indiana 47906




Dear Mr.
Cox:




Pursuant
to the agreement dated August 18, 2010 granting me an option ("Option") with respect
to the purchase of Common Shares of Bioanalytical Systems, Inc., please accept
this letter as notice of exercise of the Option with respect to
__________________________ Common Shares. I am tendering full payment to the
Company for the Common Shares and all applicable withholdings in one or more of
the following forms:




1. Cash in
the amount of $ __________




2.           Certified
or bank cashier's check in the amount of $ __________




3.           Tender
to the Company of _____ outstanding Common Shares




4.           _________________________
Common Shares that are subject to the Option




Unless I
have delivered herewith sufficient funds to pay in full all required
withholdings under applicable law, I authorize the Company to withhold from the
Common Shares otherwise issuable to me as a result of this exercise of the
Option to pay in full all such required withholdings.




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