LOAN
AND SECURITY AGREEMENT





BETWEEN





ENTREPRENEUR
GROWTH CAPITAL LLC


505
Park Avenue


New
York, New York 10022





AND





BIOANALYTICAL
SYSTEMS, INC.


2701
Kent Avenue


West
Lafayette, IN 47906








This LOAN AND SECURITY AGREEMENT
(“Agreement”) dated
January 13, 2010 between BIOANALYTICAL SYSTEMS INC., a Indiana corporation
having its principal place of business at 2701 Kent Avenue, West Lafayette,
IN  47906 ("Borrower") and ENTREPRENEUR
GROWTH CAPITAL, LLC, a Delaware limited liability company, having a principal
office at 505 Park Avenue, 6th Floor,
New York, NY 10022 (hereinafter called "Lender").  This
Agreement sets forth the terms and conditions upon which Lender may, in its
reasonable business discretion, make loans, advances and other financial
accommodations to or for the benefit of Borrower upon the security referred to
herein.





SECTION
1.         DEFINED
TERMS





1.1.           All
capitalized terms used in this Agreement are defined either in this Agreement,
in the attached loan schedule (“Loan Schedule”), or in any
supplement to this Agreement or Loan Schedule.  All terms used herein
which are defined in Article 1 or Article 9 of the Uniform Commercial Code (the
"UCC") shall have the
same meaning as presently or as may hereafter be given therein unless otherwise
defined in this Agreement.  All references to the plural shall also
mean the singular.





1.2.           "Account" or "Accounts" shall have
the same meaning as contained in Article 9 of the UCC and shall also include
contract rights and general intangibles related to Accounts, payment
intangibles, instruments, and all proceeds thereof including, but not limited
to, the proceeds of any insurance thereon whether or not specifically assigned
to Lender.





1.3.           "Account Debtor" shall
have the same meaning as contained in Article 9 of the UCC and shall also
include each debtor or obligor in any way obligated on or in connection with any
Account.





1.4.           “Closing Date” means
the date of the initial advance made by Lender pursuant to this
Agreement.





1.5.           "Collateral" shall
have the meaning set forth in Section 3.1 of this Agreement.





1.6.           "Collateral Monitoring
Fee" shall have the meaning set forth in the Loan Schedule.





1.7.           "Costs and Expenses"
shall include, but not be limited to commissions, fees, appraisal fees, taxes,
title insurance premiums, internal and external field examination expenses for
routine and non-routine audits and field examinations, filing, recording and
search expenses, reasonable internal and external attorney's fees and
disbursements (as may be incurred with respect to the effectuation of this
Agreement or any claim of any nature or litigation whatsoever arising out of or
as a result of the interpretation of this Agreement or the financing provided
for hereunder, including, but not limited to, all fees and expenses for the
service and filing of papers, premiums on bonds and undertakings, fees of
marshals, sheriffs, custodians, auctioneers and others, travel expenses and all
court costs and collection charges), postage, wire transfer fees, check dishonor
fees and other internal and/or external fees, costs and expenses arising out of
or relating to the negotiations, preparation, consummation, administration and
enforcement of this Agreement or any other agreement between Borrower and Lender
including, but not limited to any guaranty of the Obligations (as defined
herein).


Page 1 of
16





1.8          
 "Eligible
Accounts" means Accounts arising in the ordinary course of Borrower's
business from the sale of goods or rendition of services, which Lender, in its
reasonable business discretion, shall deem eligible based on such considerations
as Lender may from time to time deem appropriate.  Without limiting
the foregoing, an Account shall not be deemed to be an Eligible Account if (i)
the Account Debtor has failed to pay the Account within a period of ninety (90)
days after invoice date; (ii) the account debtor has failed to pay more than 25%
of all outstanding Accounts owed by it to Borrower within ninety (90) days after
invoice date; (iii) the Account Debtor's total obligations to Borrower exceed
15% of all Eligible Accounts, to the extent of such excess; (iv) the Account
Debtor is a subsidiary or affiliate of Borrower; (v) the goods relating thereto
are placed on consignment, guaranteed sale, “bill and hold,” “COD” or other
terms pursuant to which payment by the Account Debtor may be conditional; (vi)
the Account Debtor is not located in the United States unless the Account is
supported by a letter of credit or other form of guaranty or security, in each
case in form and substance satisfactory to Lender; (vii) the Account Debtor is
the United States or any department, agency or instrumentality thereof or any
State, city or municipality of the United States, except as otherwise agreed to
in writing by Lender; (viii) Borrower is or may become liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower;
(ix) the Account Debtor disputes liability or makes any claim with respect
thereto, or is subject to any insolvency or bankruptcy proceeding, or becomes
insolvent, fails or goes out of a material portion of its business; (x) the
amount thereof consists of late charges or finance charges; (xi) the amount
thereof consists of a credit balance more than ninety (90) days past due; (xii)
the invoice constitutes a progress billing on a project not yet completed in a
manner inconsistent with Borrower’s ordinary course practices, except that the
final billing at such time as the matter has been completed and delivered to the
customer may be deemed an Eligible Account; (xiii) the amount thereof is not yet
represented by an invoice or bill issued in the name of the applicable Account
Debtor; (xiv) the amount thereof is denominated in or payable with any currency
other than U.S. Dollars; or (xv) such Account is not at all times subject to
Lender’s duly perfected first priority security interest.  In
determining eligibility, Lender may, but need not, rely on agings, reports and
schedules of Accounts furnished by Borrower but reliance by Lender thereon from
time to time shall not be deemed to limit its right to revise standards of
eligibility at any time without notice as to both Borrower's present and future
Accounts.





1.9.           "Facility Fee" shall
have the meaning set forth in the Loan Schedule.





1.10.         "Line of Credit" as
used herein is $3,000,000.00.





1.11.         "Loan Documents"
means, collectively, this Agreement, any note or notes executed by Borrower and
payable to Lender, the patent and/or trademark and/or copywrite security
agreement(s), and any other present or future agreement entered into in
connection with this Agreement, together with all alterations, amendments,
changes, extensions, modifications, refinancings, refundings, renewals,
replacements, restatements, or supplements, of or to any of the
foregoing.





1.12.         “Loan Party” "means
Borrower, each guarantor and each other party (other than Lender) to any Loan
Document.





1.13.         "Material Adverse
Change" shall mean, when used in connection with the Borrower, any event,
state of facts, circumstance, change, development, action or omission or effect
(any such item, an "Change") that, individually or in the aggregate, has been or
could reasonably be expected to be materially adverse to the business,
operations, properties, assets, liabilities, condition (financial or otherwise),
other than any Change resulting from (A) the economy, political conditions or
the financial markets in general (including any changes resulting from terrorist
activities, war or other armed hostilities to the extent that such Change does
not disproportionately affect the Borrower, taken as a whole, in relation to
other companies in the industry in which the Borrower operates), (B) general
changes in the industries in which the Borrower operate to the extent that such
Change does not disproportionately affect the Borrower, taken as a whole, in
relation to other companies in the industry in which the Borrower operates, (C)
changes in law, GAAP or in any interpretation thereof, or (D) changes in foreign
currency exchange rates.





1.14.         "Material
Agreement" shall mean any material contract, agreement or other arrangement that
is required to be filed by the Borrower as an exhibit to a report with the
Securities and Exchange Commission.





1.15          "Minimum Interest
Charge" shall have the meaning set forth in the Loan
Schedule.





1.16.         "Net Amount of Eligible
Accounts" shall mean the gross amount of Eligible Accounts less sales,
excise or similar taxes, and less returns, discounts, claims, credits,
reasonable reserves consistent with past practices (as determined by Lender in
its reasonable business discretion) and allowances of any nature at any time
issued, owing, granted, outstanding, available or claimed.





1.17.         "Obligations" shall
mean any and all loans, advances, accommodations, indebtedness, liabilities,
Costs and Expenses and all obligations of every kind and nature owing by
Borrower to Lender under this Agreement or any supplement to hereto, however
evidenced, whether now existing or hereafter arising, whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, original, renewed,
modified or extended, and including, without limitation, all sums chargeable to
Borrower hereunder or under any of the other Loan Documents, of whatever nature,
including commissions, interest, expenses, costs and attorneys'
fees.  .


Page 2 of
16





1.18.         "Person" means any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, government, or any agency or political division thereof, or any other
entity.




SECTION
2. LOANS AND ADVANCES; INTEREST
RATE AND OTHER CHARGES





2.1.           Loans.  Whenever
the Borrower makes a request (but not more frequently than twice a week unless
Lender consents), Lender shall make loans, advances and/or extend credit to or
for the Borrower; but Lender shall not be obligated to make loans, advances
and/or extend credit beyond the Line of Credit set forth in the Loan Schedule
and subject to deduction of any reasonable loan reserves (“Loan
Reserves”) Lender deems proper from time to time in its reasonable
business discretion consistent with past practices, and less amounts Lender may
be obligated to pay in the future on behalf of Borrower.  Advances
under the Line of Credit (“Loans”
and individually, a “Loan”)
shall be comprised of the amounts shown on the Loan Schedule.





2.2           
Interest and
Fees.  The Borrower shall pay Lender the interest and fees set
forth on the Loan Schedule, but only to the maximum extent permitted by
applicable law.  Borrower shall pay principal, interest, and all other
amounts payable hereunder, or under any other Loan Document, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.  In no event shall the Revolving Interest Rate
or the Default Rate of Interest exceed the highest rate permitted under any
applicable law or regulation.  If any part or provision of this
Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto, and any payment of
interest and fees which individually or collectively might be deemed to be in
excess of the highest rate permitted by law shall be credited against Borrower's
Obligations as principal repayments of loans and advances made hereunder, to the
extent of such excess.





2.3           
Overlines;
Overadvances.  If at any time or for any reason the outstanding
amount of advances extended or issued pursuant hereto exceeds any of the dollar
limitations (“Overline”)
or percentage limitations (“Overadvance”)
in the Loan Schedule on any day in any month, then Borrower shall, upon Lender's
demand, immediately pay to Lender, in cash, the full amount of such Overline or
Overadvance which shall be applied to reduce the outstanding principal balance
of the Loans or any other Obligations.  Without limiting Borrower's
obligation to repay to Lender on demand the amount of any Overline or
Overadvance, Borrower agrees to pay Lender interest on the outstanding principal
amount of any Overline or Overadvance, on demand, at the rate set forth on the
Loan Schedule, whether any such Overline or Overadvance is made with or without
Lender's knowledge or consent.





2.4.           (a)           Establishment of a Lockbox
Account or Dominion Account.  Except as otherwise provided in
Section 2.4(b), Borrower shall cause all proceeds of Collateral to be remitted
directly to Lender by instructing its Account Debtors to direct their payments
as follows:




Name
of Borrower


Accounting
Department


505
Park Avenue, 6th
Floor


New
York, NY 10022





(b)           Lender
may, at any time and from time to time, direct Borrower to collect and deliver
to Lender in their original form, on the same date as the date of the actual
receipt thereof, all checks, drafts, notes, acceptances, cash, wire transfers
and any other evidences of payment, and/or direct Borrower to cause all proceeds
of Collateral to be deposited into a lock box account or other blocked account
as Lender may require or take any other action Lender may
require.  Without limiting any rights of Lender to require Borrower to
cause proceeds of Collateral to be delivered to the address set forth in Section
2.4(a) above, upon the execution of a control agreement on terms and conditions
satisfactory to Lender with Borrower’s lockbox bank, Lender agrees that Borrower
may, pursuant to this Section 2.4(b), cause all proceeds of Collateral to be
deposited into a lockbox account or other blocked account upon which Lender
shall have control (and Borrower shall not have access to) pursuant to said
control agreement.


Page 3 of
16





2.5.          Clearance or Float
Days.  In computing interest on the Obligations, all checks,
wire transfers and other items of payment received by Lender (including proceeds
of Accounts and payment of the Obligations in full) shall be deemed applied by
Lender on account of the Obligations on the day such payment is received or, if
received after 12:00 noon New York, NY time, the next business
day.  However, Lender shall be entitled to charge Borrower’s account
five (5) business days of “clearance” or “float” at the Revolving Interest Rate
set forth in the Loan Schedule, on all checks, wire transfers and other items
received by Lender, regardless of whether such five (5) business days of
clearance or float actually occur, and such charge shall be deemed to be the
equivalent of charging five (5) business days of interest on such payments
and/or collections.  The five (5) business days clearance or float
charge on all payments and collections is acknowledged by the parties to
constitute an integral aspect of the pricing of Lender’s financing to
Borrower.  Lender shall not, however, be required to credit Borrower’s
account for the amount of any item of payment which is unsatisfactory to Lender,
in Lenders reasonable business discretion, and Lender may charge Borrower’s loan
account for the amount of any item of payment which is returned to Lender unpaid
until Lender confirms collection or clearance of such item of payment, and
Lender may, in either case, charge Borrower’s loan account for the amount of any
item of payment which is returned to Lender unpaid.





2.6.           Application of Collateral
and Payments.  Except as otherwise provided herein, Lender
shall have the continuing and exclusive right to apply or reverse and re-apply
any and all payments to any portion of the Obligations in such order and manner
as Lender shall determine in its reasonable business discretion.  To
the extent that Borrower makes a payment or Lender receives any payment or
proceeds of the Collateral for Borrower’s benefit that is subsequently
invalidated, set aside or required to be repaid to any other Person, then, to
such extent, the Obligations intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender and
Lender may appropriately adjust the Loan balances, in its reasonable business
discretion.





2.7.           Monthly
Accountings.  All Obligations shall be charged to an account in
the Borrower's name as maintained on Lender's books.  Lender shall
render to Borrower a monthly statement of its account which statement shall be
deemed correct, accepted by, and conclusively binding upon Borrower as an
account stated, except to the extent that Borrower shall deliver to Lender
written notice of any specific exceptions thereto within twenty (20) days after
the date such statement is rendered.





2.8.           Charges to Borrower’s
Account.  All principal, interest, fees (including
Documentation Fees), commissions, charges, Costs and Expenses incurred with or
in respect of this Agreement, the other Loan Documents or any supplement or
amendment hereto or thereto (all of which shall be cumulative and not exclusive)
and any and all Obligations shall be charged to Borrower's account as maintained
by Lender.  In furtherance thereof, Borrower hereby authorizes Lender
to charge the Borrower's loan account on the first day of each month or as
Lender otherwise determines: (a) all Costs and Expenses; (b) all interest; and
(c) all fees and other charges provided in this Agreement and the other Loan
Documents.


Page 4 of
16





SECTION
3. GRANTING PROVISIONS;
SECURITY INTEREST





3.1        
   Grant of
Security.  As security for the prompt performance, observance
and payment in full of all Obligations, Borrower hereby pledges, assigns,
transfers and grants to Lender a first priority security interest in, and
continuing lien upon, and right of setoff against, all of the personal property
assets of every kind and nature of Borrower, in each case, whether now owned or
existing or hereafter created, acquired or arising and wherever located, all of
which are herein collectively referred to as the "Collateral" including but not
limited to, the following assets as defined under the UCC: (a) Accounts,
contract rights and the proceeds thereof;  (b) Chattel Paper,
including Electronic Chattel Paper and tangible Chattel Paper;  (c)
Collateral;  (d) Commercial Tort Claims;  (e) Deposit
Accounts;  (f) Documents;  (g) subject to the liens of the
Equipment Lender as described in Section 4.1(a), Equipment, machinery,
furniture, furnishings and fixtures and all parts, tools, accessories and
Accessions;  (h) Fixtures;  (i) General Intangibles,
including but not limited to patents, trademarks and tradenames and the goodwill
and inherent value associated therewith, tax refunds, customer lists, insurance
claims and goodwill of Borrower;  (j) Goods;  (k) Health
Care Insurance Receivables;  (l) Instruments;  (m)
Inventory, merchandise, materials, whether raw, work in progress or finished
goods, packaging and shipping materials and all other tangible property held for
sale or lease;  (n) Investment Property;  (o) Letter of
Credit Rights;  (p) Payment Intangibles; (q) Proceeds, including Cash
Proceeds and Non-Cash Proceeds, and proceeds of any insurance policies covering
any of the Collateral;  (r) Promissory Notes;  (s) Records,
including all books, records and other property at any time evidencing or
relating to any of the foregoing, and all electronic means of storing such
Records;  (t) to the extent not otherwise included above, all
collateral support and Supporting Obligations relating to any of the foregoing;
and  (u) to the extent not otherwise included above, all Proceeds,
products, accessions, rents and profits of or in respect of any of the
foregoing; provided
however that Lender shall not be granted a lien and security interest in
shares representing 35% of the outstanding shares of each of Borrower's non-US
subsidiaries.  The security interests granted herein shall remain
effective whether or not the Collateral covered thereby is acceptable to Lender
or deemed by Lender to be ineligible for the purposes of any Loans or advances
contemplated under this Agreement.





3.2.           In
addition to the foregoing, the Obligations of Borrower shall be secured by, and
the following shall be deemed to be part of the Collateral: (i) specific liens
on and assignments of Borrower’s intellectual property, to be evidenced by
appropriate security agreements and recorded in the United States Patent and
Trademark Office; (ii) a mortgage evidenced by a real estate mortgage security
agreement or other similar instrument in form and substance reasonably
acceptable to Lender, to be recorded on Borrower’s real property located in West
Lafayette, Indiana, subordinate in right only to that certain real estate
mortgage recorded by Regions Bank (f/k/a Union Planters Bank, N.A.); (iii) the
corporate guaranty executed by BAS Evansville, Inc. guaranteeing the Obligations
of Borrower to Lender and secured by a mortgage evidenced by a real estate
mortgage security agreement or other similar instrument in form and substance
reasonably acceptable to Lender, to be recorded on Borrower’s real property
located in Mt. Vernon, Indiana, subordinate in right only to that certain real
estate mortgage recorded by Regions Bank (f/k/a Union Planters Bank, N.A.), and
(iv)  such other collateral as may be hereafter deposited with and/or
or pledged by Borrower and/or any Loan Party, including the guarantors, to
Lender.





3.3.           Authorization to File
Financing Statements.  Borrower hereby authorizes Lender to
execute and/or file UCC financing statements (including amendments) in order to
perfect the security interests granted to Lender under this Agreement, the other
Loan Documents or otherwise, as well as record assignments of Borrower’s
intellectual property in the United States Patent and Trademark
Office.





3.4.           Assignment of Accounts and
Other Collateral.  Borrower shall collaterally assign and
deliver to Lender a duplicate and/or original invoice, and all original
documents evidencing the delivery of goods or the performance of services with
regard to each Account, including but not limited to all original contracts,
purchase orders, invoices, time sheets, bills of lading, warehouse receipts,
delivery tickets and shipping receipts, together with schedules describing the
Accounts and/or written confirmatory assignments to Lender of each Account, in
form and substance satisfactory to Lender and duly executed by Borrower,
together with such other information as Lender may request.  In no
event shall the making (or the failure to make) of any schedule or assignment or
the content of any schedule or assignment or Borrower's failure to comply with
the provisions hereof be deemed or construed as a waiver, limitation or
modification of Lender's security interest in, lien upon and assignment of the
Collateral or Borrower's representations, warranties or covenants under this
Agreement or any supplement or amendment hereto.





SECTION
4. REPRESENTATIONS, WARRANTIES
AND COVENANTS





Borrower hereby represents, warrants
and covenants to Lender the following (which shall survive the execution and
delivery of this Agreement), the truth and accuracy of which, and continuing
compliance with, being a continuing condition of the making of all loans and
advances hereunder by Lender or under any supplement or amendment
hereto:


Page 5 of
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4.1.           Owner of Collateral;
Validity of Accounts.





(a)       
    Borrower is and shall be the owner of or has other
rights in the Collateral free and clear of all liens, security interests, claims
and encumbrances of every kind and nature, except in Lender's favor or as
otherwise consented to in writing by Lender, and Borrower shall indemnify and
defend Lender from and against all cost, loss and expense with regard to the
same.  None of Borrower's Accounts has been previously sold or
assigned to any Person and will not be sold or assigned, other than to Lender,
at any time during the term of this Agreement without first obtaining Lender's
consent in writing.  Borrower shall not execute any security agreement
in favor of any other party or borrow against the security of any corporate
asset, including but not limited to the Collateral, or authorize any Person
other than Lender to file UCC financing statements naming Borrower as Debtor,
without first obtaining Lender's consent in writing; provided,
however,
that Lender hereby acknowledges, agrees and consents (i) that Borrower may
borrow up to $1 million against its machinery and equipment and grant a lien and
security interest to the lender thereof (the “Equipment Lender”) against
Collateral consisting of Borrower’s machinery and equipment, and (ii) that such
lien and security interest in such machinery and equipment Collateral shall be
subject to the terms and conditions set forth in a certain Lien Subordination
Agreement entered into (or to be entered into) by and between Lender and the
Equipment Lender, in form and substance acceptable to Lender; provided,
further,
that Lender shall have no obligation to subordinate its lien in machinery and
equipment Collateral if, at the time of such request, (i) an Event of Default
shall have occurred and be continuing, (ii) Borrower is in breach of a covenant,
term or condition of this Agreement, whether or not Lender elects to call a
default, or (iii) if Borrower is in an Overadvance or Overline.





(b)    
       Each Account represents a valid and
legally enforceable indebtedness based upon a bona fide sale and delivery of
goods or rendition of services usually dealt in by Borrower in the ordinary
course of its business.  Each Account is and will be for a liquidated
amount maturing as stated in the invoice rendered to the Account Debtor who is
unconditionally liable to make payment of the amount stated in each invoice,
document or instrument evidencing the Account in accordance with the terms
thereof, without offset, defense, deduction, counterclaim, discount or
condition, except ordinary course discounts or deductions consistent with
Borrower’s past practices, all of which Borrower shall promptly notify
Lender.  If any Account is not paid in full within the eligibility
parameters set forth in Section 1.8 above or as otherwise determined by Lender
in Lender’s reasonable business discretion (i.e., Lender is notified of a
dispute of deduction of the Account otherwise becomes ineligible), the amount of
such unpaid Account (whether in whole or in part) may be charged against and
deducted from any advance then or thereafter made by Lender to Borrower or, in
the event Borrower then has no borrowing availability, Borrower shall pay
Lender, upon demand, the full amount remaining unpaid thereon.  Such
payment or deduction shall not constitute a reassignment, and Lender may retain
the Account as collateral for all Obligations of Borrower to Lender until the
same have been fully satisfied.





(c)       
    All statements made and all unpaid balances appearing in
the invoices, documents and instruments evidencing each Account are true and
correct and are in all respects what they purport to be and to Borrower's
knowledge all signatures and endorsements that appear thereon are genuine and
all signatories and endorsers have full capacity to contract.  To
Borrower’s knowledge, each Account Debtor is solvent and financially able to pay
in full each Account.  None of the transactions underlying or giving
rise to any Account shall violate any state or federal laws or regulations, and
all documents relating to the Accounts shall be legally sufficient under such
laws or regulations and shall be legally enforceable in accordance with their
terms and all recording, filing and other requirements of giving public notice
under any applicable law have been and shall be duly complied with.





(d)     
      Without first obtaining Lender's consent in
writing (which consent shall not be unreasonably withheld) Borrower will not
directly or indirectly sell, lease, transfer, abandon or otherwise dispose of
all or any material portion of the Collateral (except in the ordinary course of
business) or consolidate or merge with or into any other entity or permit any
other entity to consolidate or merge with or into Borrower.





4.2.           Corporate
Authority.





(a)      
     The execution, delivery and performance of this
Agreement, any supplement or amendment hereto, or any agreements, instruments
and documents executed and delivered in connection herewith, are within
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of Borrower's charter, by-laws or other incorporation
papers, or of any indenture, agreement or undertaking to which Borrower is a
party or by which Borrower is bound.


Page 6 of
16





(b)
           The Loan
Schedule annexed hereto and incorporated herein by reference sets forth the
Borrower's exact legal name, the Borrower's type of organization, the
jurisdiction in which Borrower was organized, the Borrower's organizational
identification number or accurately states that the Borrower has none, the
Borrower's place of business or if more than one, its chief executive office as
well as all other locations including the Borrower's mailing address if
different, the address of every location or place of business previously
maintained by the Borrower during the past five years and the location at which,
or Person with which, any of the Collateral has been previously held at any time
during the past twelve months;





(c)  
         Borrower is in good
standing as a corporation or other legal entity, validly existing under the laws
of its state of incorporation or organization, and will preserve, renew and keep
in full force and effect Borrower's existence and good standing as a corporation
or other legal entity and its rights and franchises with respect thereto and
will not change its state of incorporation or organization;





(d)   
        Borrower shall obtain and
preserve, renew and keep in full force and effect Borrower's authority to do
business in all jurisdictions where the Borrower now or hereafter does
business;





(e)     
      Borrower will continue to engage in a
business of the same type as Borrower is engaged as of the date
hereof;





(f)            Borrower
will give Lender thirty (30) days prior written notice of any proposed change in
Borrower's legal  name which notice shall set forth the new name;
and





(g)       
    Borrower will give Lender thirty (30) days prior written
notice of any use of any corporate name or tradename in addition to those names
set forth on the annexed Loan Schedule.





4.3.           Chief Executive
Office.  Borrower's Records and principal executive office are
maintained at the address referred to herein and Borrower shall furnish Lender
reasonably prompt written notice of any change to such location.





4.4.           Books, Records, Financial
Statements.





(a)           
Borrower shall maintain its shipping forms, invoices and other related documents
in a form satisfactory to Lender and shall maintain its books, records and
accounts in accordance with generally accepted accounting principles
consistently applied.  Borrower agrees to promptly furnish Lender
monthly but in no event later than ten (10) days after the end of each month,
accounts receivable agings, together with reconciliation and recap sheets,
accounts payable agings and inventory reports (if requested by
Lender).





(b)           
Borrower shall furnish to Lender, as soon as available, but in any event not
later than ninety days (90) after the close of each fiscal year, Borrower’s
audited financial statements for such fiscal year (including balance sheets,
statements of income and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, setting forth in each
case, in comparative form, figures for the previous fiscal year, all in
reasonable detail, fairly representing in all material respects the financial
position and the results of Borrower’s operations as at the date thereof and for
the fiscal year then ended and prepared in accordance with generally accepted
accounting principles consistently applied.  Such reviewed statements
shall be examined in accordance with generally accepted auditing practices and
certified by independent certified public accountants selected by Borrower and
acceptable to Lender.





(c)          
Borrower shall also furnish to Lender, as Lender may reasonably request,
quarterly (or monthly if reasonably requested) unaudited financial statements
(including balance sheets, statements of income and loss, statements of cash
flows and statements of shareholders' equity) and the accompanying notes
thereto, all in reasonable detail, fairly presenting  in all material
respects the financial position and results of Borrower’s operation as at the
date thereof and for such period prepared in accordance with generally accepted
accounting principles consistently applied and such other information with
respect to Borrower’s business, operations and condition (financial and
otherwise) as Lender may from time to time reasonably request. Such financial
statements shall be certified for accuracy by Borrower’s chief financial
officer.


Page 7 of
16





(d)         
  Provided such information may be freely disseminated without
violating any laws, statutes or regulations applicable to publicly traded
entities, Borrower hereby irrevocably authorizes and directs all accountants,
auditors and any other third parties to deliver to Lender, at Borrower's
expense, copies of Borrower's financial statements, papers related thereto, and
other accounting records of any kind or nature in their possession and to
disclose to Lender any information they may have regarding Borrower's business
affairs and financial condition; provided, however that Borrower shall
not  have any liability to Lender for any failure by its accountants,
auditors or other third parties to comply with such direction and any such
failure shall not constitute an Event of Default hereunder.





4.5.           Further
Information.  Lender shall have the right to request and
receive from the Borrower's agents, employees, attorneys and accountants all
information pertaining to the Borrower which Lender may reasonably request, and
such persons are hereby authorized and directed by the Borrower to furnish such
information, subject to applicable laws, statutes and regulations regarding
publicly traded entities and privileged communications; provided, however that
Borrower shall not  have any liability to Lender for any failure by
its accountants, auditors or other third parties to comply with such direction
and any such failure shall not constitute an Event of Default
hereunder.





4.6.        
   Solvency;
Taxes.





(a)           
 Borrower is solvent and will so remain.





(b)           
Borrower's federal, state and local taxes of every kind and nature, including,
but not limited to employment taxes, are current, and except as otherwise
disclosed to Lender and/or disclosed in Borrower’s public filings, there are no
pending tax audits or examinations with respect to Borrower's federal, state or
local tax returns.





(c)           
Borrower shall duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets prior to the
date on which penalties attach thereto.  Borrower shall be liable for
all taxes and penalties imposed upon any transaction under this Agreement or any
supplement or amendment hereto or giving rise to the Accounts or any other
Collateral or which Lender may be required to withhold or pay on behalf of
Borrower for any reason.  Borrower agrees to repay to Lender on demand
the amount thereof, and until paid by Borrower such amounts shall be added to
and included in Borrower's Obligations.





4.7.           Litigation.  There
is no investigation by any state, federal or local agency pending or threatened
against Borrower and there is no action, suit, proceeding or claim pending or
threatened against Borrower or Borrower's assets or goodwill or affecting any
transactions contemplated by this Agreement, or any supplement or amendment
hereto, or any agreements, instruments or documents delivered in connection
herewith or therewith before any court, arbitrator, or governmental or
administrative body or agency which if adversely determined with respect to
Borrower would result in any material adverse change in Borrower's business,
properties, assets, goodwill or condition, financial or otherwise.





4.8.           Sales, Accounting and
Assignment.  Borrower shall keep and maintain, at its sole cost
and expense, satisfactory and complete Records including records of all
Accounts, all payments received and credits granted thereon, and all other
dealings therewith.  Borrower shall make appropriate entries in its
books and records disclosing Lender's security interest in such Accounts and
each Account created by Borrower shall be deemed collaterally assigned to
Lender.





4.9.           Collections.  In
the event payments of Accounts or other monies or property in which Lender has
an interest are delivered to or received by Borrower, including proceeds from
the sale of Collateral in the ordinary course of Borrower’s business, unless
otherwise consented to in writing by Lender or specifically permitted under
Section 2.4 herein, Borrower shall hold all such remittances and proceeds of
Accounts and other Collateral, in trust for Lender.  Borrower shall
deliver all such payments to the lockbox account or blocked account referred to
in Section 2.4(b), in kind with an appropriate endorsement, on the next business
day following the date of receipt by Borrower.


Page 8 of
16





4.10.         Further
Acts.  Borrower shall, at Borrower's expense, duly execute and
deliver, or shall cause to be duly executed and delivered, such further
agreements, instruments and documents, including, without limitation, additional
security agreements, collateral assignments, UCC financing statements or
amendments and continuations thereof, landlord's or mortgagee's waivers of liens
and consents to the exercise by Lender of all of its rights and remedies
hereunder, under any supplement or amendment hereto, or applicable law with
respect to the Collateral.  In addition, Borrower shall do or cause to
be done such further acts as may be necessary or proper, in Lender's opinion, to
evidence, perfect, maintain and enforce its security interest and the priority
thereof in and to the Collateral and to otherwise effect the provisions and
purposes of this Agreement or any supplement or amendment
hereto.  Borrower hereby authorizes Lender to execute and file UCC
financing statements in order to perfect the security interests granted to
Lender under this Agreement, including amendments and modification statements
deemed reasonably necessary by Lender to perfect and protect Lender’s interest
in the Collateral.





4.11.         Insurance.  Borrower
shall, at Borrower's expense, maintain insurance covering the Collateral in such
amounts and with such insurance companies as may be acceptable to Lender in its
reasonable business discretion.  Borrower shall have Lender named as
loss payee and additional insured on all such insurance policies.  In
the event Borrower shall fail to maintain insurance acceptable to Lender, Lender
without notice, may obtain such insurance in the name of the  Borrower
and charge Borrower's account with the costs and expenses of such insurance. All
expenses incurred by Lender with regard to such insurance policies shall be
deemed part of the Obligations.





4.12.         Margin
Stock.  The Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G issued
by the Board of Governors of the Federal Reserve System), and no proceeds of any
Loan or advances made by Lender to Borrower will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock, or in any manner which might cause such loan or
advance or the application of such proceeds to violate (or require any
regulatory filing under) Regulation G, Regulation U, or Regulation X of the
Board of Governors of the Federal Reserve System, in each case as in effect on
the date or dates of such loan or advance and such use of
proceeds.  Further, no proceeds of any loan or advance will be used to
acquire any security of a class which is registered pursuant to Section 12 of
the Securities Exchange Act of 1934.





4.13.         Loan Proceeds for Ordinary
Business Use Only.  Any loan at any time received by the
Borrower from Lender shall not be used directly or indirectly other than in the
Borrower's business; it shall not, directly or indirectly, pay any dividend on
its stock other than a dividend payable in shares of its own stock; it shall
not, directly or indirectly, make any loan to, or pay any claim other than for
current remuneration or current reimbursable expense payable to any person
controlling, controlled by or under common control with the Borrower, and it
shall, on demand, obtain and deliver to Lender subordinations in form and
substance satisfactory to Lender of all claims of controlling and controlled
persons consistent with the foregoing.





4.14.         Commercial Tort
Claim.  The Borrower shall immediately notify Lender in a
writing signed by the Borrower of any commercial tort claims it holds or
acquires such writing shall set forth the details and grant Lender a security
interest in and to any commercial tort claims it holds or acquires and in the
proceeds thereof, such writing to be satisfactory to Lender in form and
substance.





4.15.         Net Worth
Covenant.  Borrower shall have a minimum tangible net worth
(total assets minus intangible
assets minus
total liabilities, all as defined in accordance with generally accepted
accounting principles in effect in the United States from time to time) of not
less than $9,500,000.


Page 9 of
16





SECTION
5. ADDITIONAL POWERS;
ENFORCEMENT OF RIGHTS IN AND TO COLLATERAL





5.1.           Power of
Attorney.  Borrower appoints Lender and Lender’s designees as
Borrower's attorney and attorney-in-fact, at Borrower’s sole cost and expense,
and Lender may exercise at any time (unless otherwise specified below), in
Lender’s reasonable business discretion, all or any of the following powers
which, being coupled with an interest, shall be irrevocable until all
Obligations have been paid in full and Lender’s obligation to provide loans
hereunder shall have terminated:





(a) 
          endorse Borrower's
name on any checks, notes, acceptances, money orders or other forms of payment
or security that come into Lender’s possession;





(b)  
         sign Borrower's name on
any invoice or bill of lading relating to any Account, on drafts against Account
Debtors, on assignments of Accounts, on notices of assignment, financing
statements and other public records, on verifications of accounts and on notices
to Account Debtors;





(c)    
       send requests for verification of
Accounts to Account Debtors and, after the occurrence of any Event of Default,
to notify Account Debtors to make payment directly to Lender; and





(d)     
      to do all other things Lender deems
reasonably necessary or desirable to carry out the terms of this
Agreement.





(e)       
    Borrower hereby ratifies and approves all acts of such
attorney.  Neither Lender nor any of its designees shall be liable for
any acts or omissions nor for any error of judgment or mistake of fact or law
while acting as Borrower's attorney and Borrower hereby releases Lender and
Lender's officers, employees and designees, from all liability arising from any
act or acts under this Agreement or in furtherance thereof, whether by omission
or commission, and whether based upon any error of judgment or mistake of law or
fact.





5.2.           Access to Books, Records and
Collateral.  Lender or Lender's representatives shall at all
reasonable times and upon reasonable prior notice have free access to and right
of inspection of the Collateral and have full access to and the right to examine
and make copies of Borrower's Records, to confirm and verify all Accounts, to
perform general audits and field examinations and to do whatever else Lender
deems reasonably necessary to protect Lender's interests.  Lender may
at any reasonable time upon reasonable prior notice require Borrower to deliver
copies of (or after the occurrence of a material Event of Default, original
copies) any Records to Lender.  Lender may, at Borrower's cost and
expense, use any of Borrower's personnel, supplies, computer equipment
(including all computer programs, software and data) and space at Borrower's
places of business or at any other place as Lender may designate, as may be
reasonably necessary for the handling of collections.





5.4.           Returns;
Credits.  All returns of merchandise, credits issued by
Borrower, claims or disputes of Account Debtors whether or not accepted by
Borrower or given an allowance of any nature shall be reported by Borrower to
Lender at least weekly.  Each such report shall be accompanied by
copies of all documentation provided to Borrower in support of all merchandise
returns, credits, claims and disputes.  Borrower shall, promptly upon
obtaining knowledge thereof, report to Lender all reclaimed, repossessed and
returned goods, Account Debtor claims and any other matter affecting the value,
enforceability or collectability of Accounts.  At Lender's request,
any goods reclaimed or repossessed by or returned to Borrower will be set aside,
marked with Lender's name and held by Borrower (at Borrower's place of business
or at such other place as Lender may designate) for Lender's account and subject
to Lender's security interest.  Notwithstanding the foregoing, Lender
may require Borrower to pay to Lender the original invoice price of such
reclaimed, repossessed or returned goods.  In case any such goods
shall be re-sold, the Account thereby created shall be subject to Lender's
security interest.





5.5      
     Disputes.  All
claims and disputes relating to Accounts shall be adjusted within a reasonable
time at Borrower's own cost and expense.


Page 10
of 16





SECTION
6.          DEFAULTS AND
REMEDIES.





6.1.           The
occurrence of any one or more of the following constitute events of default
(“Events of
Default”):





(a)           
The material breach by the Borrower of any of the terms, representations,
warranties, covenants, conditions or provisions of this Agreement of any of the
Loan Documents or any supplement or amendment hereto or thereto, which, provided
it shall not constitute any other Event of Default, shall remain uncured for
more than thirty (30) days after notice thereof to the Borrower; or





(b)           
The failure of the Borrower to pay any Obligation to Lender calling for the
payment of money pursuant to this Agreement or any of the Loan Documents, as and
when the same should be paid; the Borrower becoming insolvent or otherwise
failing to meet its or their debts as they mature; the Borrower suspending or
discontinuing its business for any reason; the Borrower commencing or having
commenced against it a petition for a receivership of its business or property
or a bankruptcy or any other legal proceeding or action relating to the relief
of debtors or the readjustment of debts; the Borrower making an assignment for
the benefit of creditors, seeking a composition of creditors or calling a
meeting of creditors or have a creditors' committee appointed; or Borrower
suffering a lien against or judgment or the attachment of any of its property
(which has not been bonded or otherwise secured); having a receiver, custodian
or trustee of any kind appointed with regard to any property of Borrower; the
Borrower disposing of any property included in the Collateral otherwise than in
accordance with this Agreement; or the Borrower committing or suffering, by any
of its agents or employees, a fraudulent conversion of any material part of the
Collateral;.





(c)           
Any Material Adverse Change occurs in Borrower's business, assets, operations,
prospects or condition, financial or otherwise, or the prospect of repayment of
any portion of the Obligations or the value or priority of Lender’s security
interest in the Collateral is materially impaired;





(d)           
Any default shall occur under any Material Agreement between Borrower and any
third party including, without limitation, any default which would result in a
right by such third party to accelerate the maturity of any indebtedness of
Borrower to such third party in excess of $ 50,000;





(e)           
Any representation or warranty made or deemed to be made by Borrower, any
affiliate or any other Loan Party in any Loan Document or any other statement,
document or report made or delivered to Lender in connection therewith shall
prove to be false or misleading or the failure to disclose any material
disclosure which if disclosed shall prove to have been misleading in any
material respect;





(f)            
Any guarantor of the Obligations hereunder dies, terminates or attempts to
terminate its guaranty or any security therefor or becomes subject to any
bankruptcy or other insolvency proceeding; or





(g)           
Any transfer of the issued and outstanding shares of common stock or other
evidence of ownership of Borrower which would result in a change in
control.





NOTWITHSTANDING
ANYTHING TO THE CONTRARY HEREIN, LENDER RESERVES THE RIGHT TO CEASE MAKING ANY
LOANS DURING ANY CURE PERIOD STATED ABOVE, AND THEREAFTER IF AN EVENT OF DEFAULT
HAS OCCURRED.


Page 11
of 16


6.2.           REMEDIES.





(a)     
      Upon the occurrence of an Event of Default,
Lender may, at its option and in its sole discretion and in addition to all of
its other rights under the UCC, this Agreement, and the other Loan Documents,
cease making advances or Loans, charge the Default Rate of Interest on all
Obligations, terminate this Agreement and/or declare all of the Obligations to
be immediately payable in full.  Borrower agrees that Lender
shall also have all of its rights and remedies under applicable law, including
without limitation, the default rights and remedies of a secured party under the
UCC (which includes the right to notify Account Debtors of the Borrower to make
payment directly to Lender), and upon the occurrence of an Event of Default,
Borrower hereby consents to the appointment of a receiver by Lender in any
action initiated by Lender pursuant to this Agreement and to the jurisdiction
and venue set forth in this Agreement, and Borrower waives notice and posting of
a bond in connection therewith.





(b)           Lender
is authorized and empowered at any time upon the occurrence and continuation of
an Event of Default, to compromise or extend the time for payment of any
Account, for such amounts and upon such terms as Lender may, in its sole
discretion determine and to accept the return of the merchandise represented by
any Account, all without notice to or consent by Borrower, and without
discharging or affecting Borrower's Obligations hereunder to any extent, and
Borrower will, upon demand, pay to Lender the amount of any allowance given or
authorized by Lender hereunder.





(c)   
        Lender may, at any time upon the
occurrence and continuation of an Event of Default, take possession of the
Collateral and keep it on Borrower's premises, at no cost to Lender, or remove
any part of it to such other place(s) as Lender may desire.  In the
event Lender seeks to take possession of all or any portion of the Collateral by
judicial process (including, but not limited to, Lender obtaining an order of
attachment, a temporary restraining order, a preliminary or permanent injunction
or otherwise) against the Borrower or with regard to the Collateral, Borrower
irrevocably waives the posting of any bond, surety or security with respect
thereto which might otherwise be required, any demand for possession prior to
the commencement of any suit or action to recover the Collateral, and any
requirement that Lender retain possession and not dispose of any Collateral
until after trial or final judgment.





(d)      
     Lender shall have the right in such manner and
upon such terms as Lender shall determine in Lender’s reasonable business
discretion, to enforce payment of any Collateral, to settle, compromise or
release in whole or in part, any amounts owing on any Collateral, to prosecute
any action, suit or proceeding with respect to the Collateral, to extend the
time of payment of any and all Collateral, to make allowances and adjustments
with respect thereto, to issue credits in Lender's or Borrower's name, to sell,
assign and deliver the Collateral (or any part thereof) at public or private
sale, for cash, upon credit or otherwise at Lender's sole option and discretion,
and Lender may bid or become purchaser at any such sale, free from any right of
redemption which is hereby expressly waived to the extent permitted by
applicable law.  Borrower agrees that Lender has no obligation to
preserve rights to the Collateral or marshaling any Collateral for the benefit
of any Person.  Lender may sell the Collateral without giving any
warranties as to the Collateral and may specifically disclaim any warranties of
title or the like without affecting the commercial reasonableness of the sale of
any of the Collateral.  Lender is hereby granted a license or other
right to use, without charge, Borrower's labels, patents, copyrights, name,
trade secrets, trade names, trademarks and advertising matter, or any similar
property, in completing production, advertising or selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's benefit.  Borrower agrees that the giving of ten (10) days'
notice by Lender, sent by ordinary mail, postage prepaid, to Borrower's address
set forth herein, designating the place and time of any public sale or of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrower waives any other notice with respect thereto.





(e)      
     The net cash proceeds, after deducting all costs
and expenses of sale (including attorneys’ fees and other professional fees),
resulting from the exercise of any of Lender's rights or remedies under this
Agreement, the UCC or other applicable law, shall be applied by Lender to the
payment of the Obligations in such order as Lender may elect, in Lender’s sole
discretion.  Lender shall return any excess to Borrower and Borrower
shall remain liable to Lender for any deficiency, to the fullest extent
permitted by law.  Without limiting the generality of the foregoing,
if Lender enters into any credit transaction, directly or indirectly, in
connection with the disposition of any Collateral, Lender shall reduce the
Obligations by the amount of such credit transaction.


Page 12
of 16





(f)    
        The enumeration of the foregoing
rights and remedies is not intended to be exclusive, and such rights and
remedies are in addition to and not by way of limitation of any other rights or
remedies Lender may have under the UCC or other applicable
law.  Lender shall have the right, in Lender's sole and absolute
discretion, to determine which rights and remedies, and in which order any of
the same, are to be exercised, and to determine which Collateral is to be
proceeded against and in which order, and the exercise of any right or remedy
shall not preclude the exercise of any others, all of which shall be
cumulative.





(g)    
       No act, failure or delay by Lender
shall constitute a waiver of any of its rights or remedies.  No single
or partial waiver by Lender of any provision of this Agreement or any supplement
or amendment hereto, or breach or default thereunder, or of any right or remedy
which Lender may have shall operate as a waiver of any other provision, breach,
default, right or remedy or of the same provision, breach, default, right or
remedy on a future occasion.





(h)     
      Borrower waives presentment, notice of
dishonor, protest and notice of protest of all instruments included in or
evidencing any of the Obligations or the Collateral and any and all notices or
demands whatsoever (except as expressly provided herein).  Lender may,
at all times, proceed directly against Borrower or any guarantor or endorser to
enforce payment of the Obligations and shall not be required to take any action
of any kind to preserve, collect or protect Lender's or Borrower's rights in the
Collateral.





SECTION
7.         MISCELLANEOUS





7.1.           Term.  This
Agreement shall become effective upon acceptance by Lender and shall continue in
full force and effect for a term ending on the last business day of the month,
one (1) year from the date hereof (the "Initial Term") and shall
automatically renew from year to year thereafter (each, a “Renewal Term”) until
terminated pursuant to the terms hereof.  In addition to Lender's
right to declare this Agreement immediately terminated at any time upon the
occurrence of an Event of Default, Lender may terminate this Agreement at the
end of the Initial Term or upon the expiration or any Renewal Term by giving
Borrower at least sixty (60) days prior written notice of such termination by
registered or certified mail, return receipt requested.  Borrower may
terminate this Agreement at the expiration of the Initial Term or upon the
expiration of any Renewal Term by giving Lender at least sixty (60) days prior
written notice of such termination by registered or certified mail, return
receipt requested.  No termination of this Agreement, however, shall
relieve or discharge Borrower of Borrower's duties, obligations and covenants
hereunder until all Obligations have been paid in full and Lender's continuing
security interest in and to the Collateral shall remain in effect until all such
Obligations have been fully discharged.





7.2.           Early Termination
Fee.  If Lender terminates this Agreement upon the occurrence
of an Event of Default or if Borrower terminates this Agreement, in either case
prior to the expiration of the Initial Term or the expiration of any Renewal
Term, in view of the impracticality and extreme difficulty in ascertaining
Lender's actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrower
hereby agrees that, in addition to payment of the Obligations as provided
herein, Borrower shall immediately pay to Lender by wire transfer, certified
check or bank cashier's check, liquidated damages of an amount equal to the
total of the Minimum Interest Charges for the number of months remaining until
the expiration of the Initial Term or the expiration of any Renewal Term, as
applicable.  Prior to its actual receipt of payment as aforesaid,
Lender shall be free to exercise, without limitation, all of its right under
this Agreement.  The liquidated damages provided for in this Section
shall be deemed included in the Obligations and shall be presumed to be the
amount of damages sustained by Lender due to the Borrower's early termination
and Borrower agrees that such damages are reasonable and appropriate under the
circumstances currently existing.





7.3.           One General Obligation;
Cross Collateral.  All Loans and advances by Lender to Borrower
under this Agreement, the other Loan Documents and under all other agreements,
present and future, between Lender and Borrower constitute one loan, and all
indebtedness and obligations of Borrower to Lender under this Agreement, the
other Loan Documents, and under all other agreements, present and future,
between Lender and Borrower, constitute one general obligation secured by the
Collateral and security held and to be held by Lender hereunder and by virtue of
all other agreements between Borrower (and all guarantors) and Lender now and
hereafter existing.  It is distinctly understood and agreed that all
of the rights of Lender contained in this Agreement shall likewise apply insofar
as applicable to any modification of or supplement to this Agreement, the other
Loan Documents and to any other agreements, present and future, between Lender
and Borrower.


Page 13
of 16





7.4.           Binding on Successor and
Assigns; Severability.  All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
Lender’s and Borrower's respective representatives, successors and
assigns.  If any provision of this Agreement shall be prohibited or
invalid under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.





7.5.           Amendments;
Assignments.  This Agreement may not be modified, altered or
amended, except by an agreement in writing signed by Borrower and Lender, which
requirement shall not be modified by oral agreement or by course of
conduct.  Borrower may not sell, assign or transfer any interest in
this Agreement or any other Loan Document, or any portion thereof, including,
without limitation, any of Borrower's rights, title, interests, remedies, powers
and duties hereunder or thereunder.  Borrower hereby consents to
Lender’s participation, sale, assignment, transfer or other disposition, at any
time or times hereafter, of this Agreement and any of the other Loan Documents,
or of any portion hereof or thereof, including, without limitation, Lender’s
rights, title, interests, remedies, powers and duties hereunder or
thereunder.  In connection therewith, subject to compliance with
federal and state securities laws regarding the disclosure of material
non-public information, Lender may disclose all documents and information which
Lender now or hereafter may have relating to Borrower or Borrower's
business.  To the extent that Lender assigns its rights and
obligations hereunder to a third party, Lender shall thereafter be released from
such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such third party.





7.6.           Integration;
Survival.  This Agreement, together with the Loan Schedule
(which is a part hereof) and the other Loan Documents, reflect the entire
understanding of the parties with respect to the transactions contemplated
hereby.  All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties.  No termination of this Agreement
(or of any guaranty of the Obligations) shall affect or impair the powers,
obligations, duties, rights, representations, warranties or liabilities of the
parties hereto and all shall survive such termination.





7.7.           Evidence of
Obligations.  Each Obligation may, in Lender’s discretion, be
evidenced by notes or other instruments issued or made by Borrower to
Lender.  If not so evidenced, such Obligation shall be evidenced
solely by entries upon Lender’s books and records.





7.8.           Loan
Requests.  Each oral or written request for an advance by any
Person who purports to be any employee, officer or authorized agent of Borrower
shall be made to Lender on or prior to 11:00 a.m., NY time, on the business day
on which the proceeds thereof are requested to be paid to Borrower and shall be
conclusively presumed to be made by a Person authorized by Borrower to do so and
the crediting of a loan to Borrower's operating account shall conclusively
establish Borrower's obligation to repay such loan. Unless and until Borrower
otherwise directs Lender in writing, all loans shall be wired to Borrower's
operating account set forth on the Loan Schedule.





7.9        
   Brokerage
Fees.  Borrower represents and warrants to Lender that, with
respect to the financing transaction herein contemplated, no Person is entitled
to any brokerage fee or other commission and Borrower agrees to indemnify and
hold Lender harmless against any and all such claims.





7.10           Application of Insurance
Proceeds.  The net proceeds of any casualty insurance insuring
the Collateral, after deducting all costs and expenses (including attorneys’
fees) of collection, shall be applied, at Lender’s option, either toward
replacing or restoring the Collateral, in a manner and on terms satisfactory to
Lender, or toward payment of the Obligations.  Any proceeds applied to
the payment of Obligations shall be applied in such manner as Lender may
elect.  In no event shall such application relieve Borrower from
payment in full of all installments of principal and interest which thereafter
become due in the order of maturity thereof or with respect to the payment of
fees and costs.


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7.11.          Notices,
Correspondence.  All notices, requests, demands and other
communications under this Agreement shall be in writing and will be personally
served, telecopied or sent by overnight courier service or United States mail
and will be deemed to have been given: (i) if delivered in person, when
delivered; (ii) if delivered by telecopy, on the date of transmission if
transmitted on a business day before 4:00 p.m. New York time or, if not, on the
next succeeding business day; (iii) if delivered by overnight courier, the
following business day after depositing with such courier, properly addressed;
or (iv) if by U.S. Mail, four (4) business days after depositing in the United
States mail, with postage prepaid and properly addressed.  All
notices, requests and demands are to be given or made to the respective parties
at the addresses set forth herein or at such other addresses as either party may
designate in writing by notice in accordance with the provisions of this
paragraph.  All notices to Lender should be addressed to the attention
of:  Portfolio Manager.  All notices to Borrower should be
addressed to the attention of :  Chief Financial Officer.





7.12.         Governing
Law.  This Agreement and all transactions hereunder are deemed
to be consummated in the State of New York and shall be governed by and
interpreted in accordance with the substantive and procedural laws of the State
of New York (without regard to any choice of law rules).  If any part
or provision of this Agreement shall be determined to be invalid or in
contravention of any applicable law or regulation of the controlling
jurisdiction, such part or provision shall be severed without affecting the
validity of any other part or provision of this Agreement.





7.13.         JURY
WAIVER.  BORROWER AND LENDER EACH HEREBY WAIVE ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR RELATING
TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY SUPPLEMENT OR AMENDMENT
HERETO OR THERETO.  BORROWER HEREBY WAIVES ALL OF ITS RIGHTS OF SETOFF
AND RIGHTS TO INTERPOSE ANY DEFENSES AND/OR COUNTERCLAIMS IN THE EVENT OF ANY
LITIGATION WITH RESPECT TO ANY MATTER CONNECTED WITH THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND ANY SUPPLEMENT OR AMENDMENT HERETO OR THERETO (OTHER THAN
DEFENSES OR COUNTERCLAIMS THAT MUST BE MADE OR DEEMED
WAIVED).  BORROWER HEREBY IRREVOCABLY CONSENTS AND SUBMITS TO THE
JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE
COUNTY OF NEW YORK (WITHOUT REGARD TO ANY CHOICE OF LAW RULES) OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH
ANY ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY SUPPLEMENT OR AMENDMENT HERETO OR
THERETO.  BORROWER AGREES THAT ANY ACTION BROUGHT BY IT AGAINST LENDER
WITH REGARD TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY SUPPLEMENT OR
AMENDMENT HERETO OR THERETO, SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION AND
VENUE OF THE COURTS OF THE STATE OF NEW YORK (WITHOUT REGARD TO ANY CHOICE OF
LAW RULES), LOCATED IN THE COUNTY OF NEW YORK OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.





7.14.         Service.  In
any litigation brought by Lender, Borrower waives personal service of any
summons, complaint or other process and agrees that service thereof may be made
by certified or registered mail directed to Borrower at Borrower's address set
forth in the preamble of this Agreement.





7.15.         Lien
Termination.  In recognition of Lender’s right to have all of
its attorneys’ fees and other expenses incurred in connection with this
Agreement secured by the Collateral, notwithstanding the payment in full of the
Obligations, Lender shall not be required to execute or record any terminations
or satisfactions of any of its liens on the Collateral unless and until Borrower
(and all Guarantors) have executed and delivered to Lender general releases of
all claims, in form and substance satisfactory to Lender in Lender’s reasonable
discretion.





7.16      
   Publication.  Borrower
and Lender agree that no public release or announcement concerning the
transactions contemplated hereby shall be issued by any party without the prior
consent of the other parties (which consent shall not be unreasonably withheld,
conditioned or delayed), except as such release or announcement may be required
by law, in which case the party required to make the release or announcement
shall use its reasonable best efforts to allow the other party reasonable time
to comment on such release or announcement in advance of such
issuance.


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7.17.         Counterparts; Facsimile
Execution.  This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument, admissible into evidence.  An executed facsimile of this
Agreement shall be deemed to be a valid and binding agreement between the
parties hereto.





BIOANALYTICAL
      SYSTEMS INC.By:Name:
                                    Michael
      R. CoxTitle:
                                    Vice
      President - FinanceACCEPTED:ENTREPRENEUR
      GROWTH CAPITAL LLCBy:Name:
                                    Dean
      LandisTitle:
                                    President





STATE
      OF INDIANA
            ))ss.:COUNTY
      OF
            )





On this
13th day of January, 2010 before me personally appeared Michael R.
Cox,  personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he/she a Vice President of
BIOANALYTICAL SYSTEMS INC., the corporation herein described and that he/she
executed the same in his/her capacity as an officer of said corporation, and
that he/she signed the instrument by order of the board of directors of said
corporation.





Notary
      Public


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