November
10, 2008

     

    VIA HAND
DELIVERY

     

    Dr.
Edward M. Chait

    308
Rosebank Lane

    West
Lafayette, IN  47906

     

    Re:           Severance
Agreement and Release of All Claims

     

    Dear
Ed:

     

    As you
were advised on November 6, 2008, your employment with BASi has been separated
effective as of Friday, November 7, 2008.

    


    In order
to ease your transition and resolve any disputes arising from your Employment
Agreement dated November 6, 2007, BASi is prepared to offer you a severance
package with the terms detailed in this letter.  In addition to the
severance amounts offered below, you will receive a check on Friday, November 14
for hours worked November 1 through November 10.  This check will be
direct deposited and the pay stub will be mailed to your current address on file
with BASi.

    


    Please
submit any outstanding expense statements as soon as possible.  We
would like to finalize all claims in that regard within a short period of
time.

    


    You will
receive information concerning your right to continuation of insurance pursuant
to the federal law known as COBRA by separate letter.  In addition,
the process to have your money withdrawn from the 401K plan can be initiated at
your discretion.  We have enclosed some literature explaining the
latest tax rules with regard to withdrawals that are not rolled over to another
plan or an IRA.  Please contact Jeri Ungersma (ext. 358) if you have
questions on this.

    


    Please
return all keys, BASi property, credit cards, and the enclosed termination
agreement to me.

    


    
      	
              A.

            	
              Terms.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Dr.
Edward M. Chait

    November
10, 2008

    Page
2

    


    
      	
               
      

            	
              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 the
BASi.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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:

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      Dr.
Edward M. Chait

      November
10, 2008

      Page
3

       

    

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      Dr.
Edward M. Chait

      November
10, 2008

      Page
4

    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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:

            


    

     

    
      	
               
      

            	
              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:

            


    

     

    
      	
               
      

            	
              i.

            	
              diverting
      or influencing or attempting to divert or influence any business of the
      Company to a Competitor of the
Company;

            


    

     

    
      	
               
      

            	
              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

            


    

     

    
      	
               
      

            	
              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 Prospective
Customers.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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:

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      Dr.
Edward M. Chait

      November
10, 2008

      Page
5

    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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 the
Company.

            


    

     

    
      	
               
      

            	
              e.

            	
              Definitions.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      Dr.
Edward M. Chait

      November
10, 2008

      Page
6

    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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 biological
research.

            


    

     

    
      	
               
      

            	
              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.

            


    

    


    
      	
               
      

            	
              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.”

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      Dr.
Edward M. Chait

      November
10, 2008

      Page
7

    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      	
               
      

            	
              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").

            


    

     

    
      	
               
      

            	
              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.

            


    

     

    
      
        
          	 
      	
                  Sincerely,

                
	 	 
	 
      	
                  
                    
                      BIOANALYTICAL
      SYSTEMS,
      INC.

                    

                  

                
	 
      	 
	 
      	
                  Richard
      M. Shepperd

                
	 
      	
                  President
      & C.E.O.

                


        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      Dr.
Edward M. Chait

      November
10, 2008

      Page
8

       

    

    My
signature below represents my unconditional acceptance of all terms and
conditions contained in this Agreement.

    


    
      
        
          	 
      	 
      	 
      
	
                  Dr.
      Edward M..
      Chait

                	 
      	
                  Date