Document:

EMPLOYMENT
AGREEMENT

    

    THIS
AGREEMENT ("Agreement") is made and entered into effective the ___ day of
August, 2010 by and among BIOANALYTICAL SYSTEMS, INC. (“BASi”, “Company”) a
corporation organized under the laws of the State of Indiana (“Company”), and
Alberto F. Hidalgo, Jr., ("Employee") as Vice President, Business Development
and Marketing for BASi.

    

    Preliminary
Statements:

    

    A.          BASi
is engaged in the business of providing contract research services and
manufacturing and distributing scientific instruments. The Company is in the
business of conducting laboratory experiments and research on behalf of other
businesses (“Business”) which is expected to add significantly to the value of
the Company and BASi.

    

    B.           Employee
is experienced in the Business, and is familiar with the management and
operations of the Company. The Company wishes to employ Employee on the terms
and conditions contained herein. Employee views entry into this employment as a
mutually beneficial long-term investment by both the Business and by the
Employee as a major career commitment.

    

    In consideration of the premises and
mutual covenants and agreements contained herein, the parties hereby agree as
follows:

    

    ARTICLE
1

    

    Term, Compensation, and
Benefits

    

    Section 1.1. Term The Company
hereby agrees to employ the Employee, and the Employee hereby accepts employment
with the Company, on the terms and conditions set forth in this Agreement until
December 30, 2011, (the “Initial Term”). The Initial Term shall be extended for
successive one year periods (the "Additional Terms," and together with the
Initial Term, the "Employment Period"), except that if either Employee or
Company gives the other party written notice at least ninety days (90) before
the end of the Initial Term, then this Agreement shall expire at the end of its
then current term. The Employee shall take absences at such time as shall be
approved by the Chief Executive Officer.

    

    Section 1.2 Compensation and
Benefits

    

    Section 1.2.1 Salary: BASi will pay
a base salary of $13633.33 per month. Salary shall be paid in equal semi-monthly
installments in arrears. All amounts to be paid hereunder shall be paid in
accordance with normal payroll procedures of the Company and shall be subject to
all required withholdings and deductions.

    

    Section 1.2.2. Stock
Options: This Agreement will also include options to purchase BASi
shares. The exact number, strike price and maturity schedule of those options
are defined in an appendix which includes information on BASi option plans form
of grant/s and exercise.

    

    Section 1.2.3. Bonus: Employee will
also be eligible for bonus grants under bonus plans adopted by the Company at
the discretion of the Compensation Committee of the Board of Directors. A bonus
will be considered in January, 2011 and will be given if the following key
personal goals are met within the first 3 months: 1) Develop a clear
understanding of BASi products and the CRO market 2) Develop and implement a
sales and marketing strategy to meet fiscal 2011budget 3) To structure and build
the sales group to achieve sales targets and service mix.

    

    Section 1.2.4 Vacation Policy:
Employee will accumulate one (1) vacation day per month in accordance with
policies described in the BASi Employee Handbook. Employee shall also be granted
an additional five vacation days at the start of the initial term, and again at
the start of any subsequent term effectively granting employee 15 years
seniority. Employee’s compensation shall continue to be paid in full during this
period.. Any vacation at the end of any year ending on an anniversary date shall
carry over to the following one-year period commencing on such anniversary date
(the “Following Year”), but shall not carry over beyond the Following Year.
Vacation time not used prior to the expiration will be banked for short-term
disability as described in the BASi Employee Handbook.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Section 1.2.6 Cobra
Premium: BASi will pay your COBRA premium for a 90 day period in the
amount of $1,154.01 per month, less required taxes.

    

    Section 1.2.7 Other Benefits:
During the Employment Period, the Employee shall be entitled to participate in
all employee benefit plans which are generally made available to employees of
the Company, subject to the eligibility, qualification, waiting period and other
terms and conditions of such plans as they shall be in effect from time to time
unless listed herein as exceptions from those terms and conditions. The
highlights of the benefits are as follows: group health insurance (after ninety
days); two weeks unpaid vacation (optional); term life insurance ($100,000);
long term disability insurance; and a 401K deferred tax savings incentive/profit
sharing plan. Optional participation benefits include a flexible spending
account, dental, vision, and short-term disability.

    

    ARTICLE
2

    

    Duties

    

    Section 2.1. Duties During the
Employment Period, the Employee will be the ranking business
development/marketing officer of the company, with responsibility for the
marketing/sales segment of our business. The Employee will lead the business
development staff,, be the ultimate contact with clients and scientific
advisors, and own responsibility for the business development/scientific
viability of the Company. The Employee will be called upon to perform certain
services for the Company including, without limitation, the
following:

    

    Assess
and document business needs (develop and solicit business plans and budgets,
working with various department heads).

    Motivate,
lead and teach qualified staff to meet or exceed expectations.

     Develop
and manage resources (staff, facilities, and equipment) to deliver new business
and maintain current clients.

    Engage in
benchmarking against competitors, presenting alternate strategies and generally
become knowledgeable about the drug development and medical device
industries.

    Enhance
the professional image of BASi in public forums.

    Manage
relationships with outside business leaders.

    Support
operations and administration of Board by advising and informing Board members
of issues and trends related to Business Development and Marketing.

    

    Section 2.2. The
Employee shall serve the Company by performing such other services as the
Company may reasonably require to conduct the Company’s business. The Company
shall also have the absolute right and power to direct and control the Employee
in carrying out duties assigned by the Company, including, but not limited to,
the right (1) to review, modify and cancel all work performed, and (2) to assign
specific duties to be performed, including the general means and manner by which
such duties shall be performed. Notwithstanding any other provisions of this
Agreement, the Company shall not impose employment duties or constraints of any
kind upon the Employee which would require the Employee to violate any
ordinance, regulation, statute or other law. The Employee shall devote his full
working time, attention and energy to the performances of the duties imposed
hereunder. The Employee shall conform to such hours of work as may from time to
time reasonably be required of him and shall not be entitled to receive any
additional remuneration for work outside his normal hours. The Employee will NOT
be held financially, legally, or otherwise liable for any practice or action or
decision made by BASi, or its predecessors or successors prior to the start date
of Employee’s beginning date of employment.

    
      
         

      

      
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    Confidentiality and Other
Matters

    

    Section 3.1. Confidentiality
Agreement. The Employee, prior to and during the term of employment under
this Agreement, has had and will have access to and has become or will become
familiar with information, whether or not originated by the Employee, which is
used in or related to the Business or the business of BASi or certain
subsidiaries or affiliates of BASi and is (a) proprietary to, about, or created
by the Company its subsidiaries or its affiliates; (b) designated as
confidential by the Company, its subsidiaries or its affiliates; or (c) not
generally known to or ascertainable by proper means by the public ("Confidential
Information").

    

    Further, the Employee has had and will
have access to items proprietary to the Company, its subsidiaries or its
affiliates ("Proprietary Items"). "Proprietary Items" shall mean all
legally-recognized rights which result from or are derived from the Employee's
work product or the work product of others made for the Company, its
subsidiaries or its affiliates, including all past, present and future work
product made for the Company, its subsidiaries or its affiliates, or with
knowledge, use or incorporation of Confidential Information, including, but not
limited to works of authorship, developments, inventions, innovations, designs,
discoveries, improvements, trade secrets, trademarks, applications, techniques,
know-how and ideas, whether or not patentable or copyrightable, conceived or
made or developed by the Employee (solely or in cooperation with others) or
others during the term of this Agreement or prior to or during his tenure with
the Company, or which are reasonably related to the Business or the business of
BASi or certain subsidiaries or affiliates of BASi or the actual or demonstrably
anticipated research and development of the Company.

    

    The Employee agrees that any
Confidential Information and Proprietary Items will be treated in full
confidence and shall not be used, directly or indirectly, by him, nor shall the
same be disclosed to any other firms, organizations, or persons outside of the
Company's employees bound by similar agreement, during the term of this
Agreement or at any time thereafter, except as required in the course of his
employment with the Company. All Confidential Information and Proprietary Items,
whether prepared by the Employee or otherwise, coming into his possession, shall
remain the exclusive property of the Company and shall not be permanently
removed from the premises of the Company under any circumstances whatsoever,
without the prior written consent of the Company.

    

    The Employee will not be obliged to
keep information confidential to the extent that the information has ceased to
be confidential and has entered the public domain otherwise than due to the
Employee's acts. The provisions of this Section 3.1 shall be
in addition to, and shall not affect, the Employee's common law duty of fidelity
to the Company.

    

    Section 3.2. The
parties foresee that the Employee may make inventions or create other
intellectual property in the course of his duties hereunder and agree that in
this respect the Employee has a special responsibility to further the interests
of the Company and its affiliates.

    

    Section 3.3 The
Employee agrees that during the Employee’s employment with the Company and for
an additional period of the two (2) years immediately following termination of
the Employee’s employment with the Company, the Employee shall not directly or
indirectly, as an individual or as a director, officer, contractor, employee,
consultant, partner, investor or in any other capacity with any corporation,
partnership or other person or entity, other than the Company (an “Other
Entity”), (i) contact or communicate any then current material customer or
client of the Company in the Business, or any person or entity with which the
Company is then engaged in material discussions regarding that person or entity
becoming a client or customer of the Company in the Business, for the purpose of
inducing any such customer or client to move its account from the Company to
another company in the Business; provided, however, that nothing in this
sentence shall prevent the Employee from becoming employed by or providing
consulting services to any such customer or client of the Company in the
Business, or (ii) solicit any other employee of the Company for employment or a
consulting or other services arrangement with an Other Entity. The restrictions
of this Section
3.3 shall not be deemed to prevent the Employee from owning 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(g) of the Securities Exchange Act of 1934, as amended. In
the event a court of competent jurisdiction determines that the foregoing
restriction is unreasonable in terms of geographic scope or otherwise then the
court is hereby authorized to reduce the scope of said restriction and enforce
this Section
3.3 as so reduced. If any sentence, word or provision of this Section 3.3 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. Notwithstanding any provision of this Agreement to the contrary,
the terms and conditions of this Section 3.3 shall
survive for a period of two (2) years following termination of the Employee’s
employment with the Company, at which time the terms and conditions of this
Section 3.3
shall terminate.

    
      
         

      

      
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    Section 3.4. The
employee agrees to abide by all the conditions of the Company Code of Conduct
and Ethics.

    

    ARTICLE
4

    

    Termination of
Employment

    

    Section 4.1. Resignation by the
Employee. The Employee may resign from his employment with the Company at
any time providing written notice to the Company of resignation at least ninety
days (90) prior to the effective date of the resignation (the “Resignation
Date”). Employee may resign at any time for” good reason” due to (a) a material
breach of this Agreement by the Company which continues after the Employee has
given the Company thirty days (30) written notice of such breach, or (b) the
assignment to the Employee of duties materially inconsistent with this Agreement
other than in accordance with the terms of this Agreement, and the Company has
not rectified such assignment within thirty days (30) after the Employee has
given the Company written notice of such breach.

    

    A
termination by the Employee for “good reason” shall entitle the Employee to the
same compensation and benefits as if the Employee had been terminated by the
Company without cause. In the event of a termination by the Employee for “good
reason,” the provisions of Section 3.3 shall not
apply and shall be of no force or effect. Upon any resignation by the Employee,
the Employee shall use reasonable best efforts to assist the Company in good
faith to effect a smooth transition. If Employee voluntarily resigns his
position without “good reason” prior to the determination of this contract the
compensation terms of this agreement are null and void.

    

    Section 4.2. Termination by the Company
without Cause. At any time, the Company may, in its sole and absolute
discretion, terminate the Employee's employment with the Company (the actual
date of termination being referred to as the "Termination Date") without cause,
by providing written notice thereof to the Employee ("Termination Notice") at
least ninety days (90) prior to the Termination Date. In the event of
termination of the Employee's employment pursuant to this Section, the Company
shall continue to pay to the Employee the Employee’s then current Annual Salary
throughout such ninety-day (90) notice period and shall pay the Employee as
compensation for loss of office (a) 3 months Salary at the Employee’s then
current salary in equal monthly installments over the three month period
following the Termination Date (reduced pro rata if such termination occurs
during the last year of the Initial Term and based on estimated time worked
pursuant to Article 1), provided that such payments shall cease if the Employee
becomes employed by a company which is in the Business during such six month
period, and (b) all vacation accrued as of the Termination Date calculated in
accordance with Section 1.2.4. Upon
receipt by the Employee of a Termination Notice pursuant to this Section 4.2, (a) the
Employee shall assist the Company in good faith to effect a smooth transition,
and (b) the Company may request the Employee to vacate the premises owned by the
Company and used in connection with the Business within a reasonable time,
provided that the obligation of the Company to make payments to the Employee
pursuant to this Section 4.2 and the
other provisions of this Agreement shall not be affected, provided further, that
in the event of a termination by the Company without cause pursuant to this
Section 4.2,
the provisions of Section 3.3 shall not
apply and shall be of no further force or effect.

    

    Section 4.3. Termination by the Company
With Cause. This Agreement shall be deemed to be terminated and the
employment relationship between the Employee and the Company shall be deemed
severed upon written notice to the Employee by the Company after the occurrence
of any of the following:

    

    a)           The
final, non-appealable imposition of any restrictions or limitations by any
governmental authority having jurisdiction over the Employee to such an extent
that he cannot render the services for which he was employed.

    
      
         

      

      
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    b)           The
Employee (i) willfully and continually fails or refuses (without proper cause)
to substantially perform the duties of his employment and to adhere in all
material respects to the provisions of this Agreement and the written policies
of the Company, which failure shall not be remedied within thirty (30) days
after written notice from the Company to the Employee, or (ii) conducts himself
in a fraudulent manner, or (iii) conducts himself in an unprofessional or
unethical manner which in the reasonable judgment of the Board of Directors of
the Company is detrimental to the Company.

    

    c)           The
Employee willfully and continually fails or refuses to adhere to any written
agreements to which the Employee and the Company or any of its affiliates are
parties, which failure shall not be remedied within thirty (30) days after
written notice from the Company to the Employee.

    

    d)           In
the event of death of the Employee during employment. In such event the Company
shall pay to the estate of the Employee the compensation earned by the Employee
prior to his death but not yet paid to him by the Company.

    

    Section 4.4. Continuation of Health
Insurance Benefits. If Employee is terminated by the Company without
Cause, or terminated his employment with the Company for Good Reason, and
provided that Employee elects continuation of health coverage pursuant to
Section 601 through 608 of the Employee Retirement Income Security Act of 1974,
as amended (“COBRA”), Company shall pay Employee an amount equal to his monthly
COBRA premiums for a period equal to the period remaining in the Employment
Period after termination; provided further, such payment will cease upon
Employee’s entitlement to other health insurance without charge.

    

    ARTICLE
5

    

    Change of
Control

    

    The Board
of Directors of the Company (“the Board”) has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication of the Vice President, Business Development and
Marketing, notwithstanding the possibility or occurrence of a Change in Control
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of personal uncertainties and risks
created by a pending or threatened Change in Control and to encourage the
Executive’s full attention and dedication to the Company currently and in the
event of any pending, threatened or actual Change in Control and to provide the
Employee with compensation and benefits arrangements upon a Change in Control
which are consistent with the Employee’s significant leadership position and
which are competitive. (See Addendum A for Definition of Change in
Control)

    

    Section 5.1 Involuntary
Termination/Change in Control. In the case of involuntary termination of
the Employee by the Company within one (1) year after a Change in Control of the
Company (which shall include any termination as to which notice is given by the
Company within such one (1) year period, notwithstanding the effective date of
termination) the Employee will be paid compensation in terminal pay and
participation in benefits, savings and retirement plans as set forth in section
5.3, 5.4 and 5.5 of this Agreement.

    

    Section 5.2 Voluntary
Termination/Change in Control. In the case of voluntary termination by
the Employee within one (1) year after a Change in Control of the Company (which
shall include any termination as to which notice is given by the Employee within
such one (1) year period, so long as the effective date of such termination is
no later than ninety (90) days after the end of such one (1) year period), the
Employee will be paid compensation in terminal pay and participation in
benefits, savings and retirement plans as set forth in Section 5.3, 5.4 and 5.5
of this Agreement.

    

    Section 5.3 Terminal
Pay. The Employee will receive terminal pay, to be paid in equal
installments in semi-monthly installments, at least equal to one (1) year annual
base salary payable to the Employee by the Company in respect of the twelve
month period immediately preceding termination.

    

    Section 5.4 Special
Bonus. In addition to the Terminal Pay and Annual Bonus, the Employee
will be eligible, based on performance, for any special bonus program which may
be instituted by the Company in recognition of particular assignments, duties or
responsibilities required during the crucial transition period leading up to, or
following, the Change in Control.

    
      
         

      

      
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    Section 5.5 Benefits,
Savings and Retirement. Plans. During the period of terminal payments,
the Employee will remain in employee status for benefits purposes only and will
be entitled to participate in all benefits, savings and retirement plans,
practices, policies and programs of the Company applicable generally to other
peer executives of the Company, with the expectation that the Employee continue
to make all applicable employee contributions to said program(s).

    

    Section 5.6. Interaction
with Article IV of this Agreement. To the extent any of the provisions of
this Article V are in conflict with the provisions of Article IV of this
Agreement (e.g., as to terminal pay due upon involuntary termination), in
circumstances in which this Article V applies, the terms of Article V shall
control and shall supersede and replace any varying provisions set forth in
Article IV; provided, however, that nothing in this Section 5.6 shall be deemed
to limit or eliminate any rights of the Employee or the Company under any
provision of Article IV not so superseded and replaced.

    

    ARTICLE
6

    

    Guarantee

    

    BASi hereby unconditionally and
irrevocably guarantees to the Employee the due performance by the Company of all
its obligations under or in respect of the terms of this Agreement and shall as
primary obligor and not as surety on demand pay to the Employee all sums due to
be paid by the Company to the Employee. This guarantee shall be a continuing
guarantee and shall inure to the benefit of the Employee, his heirs, successors
and assigns.

    

    ARTICLE
7

    

    Miscellaneous

    

    Section 7.1. Relationship between the
Parties. The relationship between the Company and the Employee shall be
that of an employer and an employee, and nothing contained herein shall be
construed or deemed to give the Employee any interest in any of the assets of
the Company.

    

    Section 7.2. Notices. Any notice
required or permitted to be given under this Agreement shall be in writing and
delivered personally or sent by certified mail, addressed to the party entitled
to receive said notice, at the following addresses:

    

    
      
        	
                If
      to Company:

              	
                Bioanalytical
      Systems

              
	 
      	
                2701
      Kent Avenue

              
	 
      	
                West
      Lafayette, IN 47906

              
	 
      	 
      
	
                If
      to Employee:

              	
                Alberto
      F. Hidalgo, Jr.

              
	 
      	
                1336
      Central Avenue

              
	 
      	
                Indianapolis,
      IN 46202

              

      

    

    

    or at
such other address as may be specified from time to time in notices given in
accordance with the provisions of this Section
7.2.

    
      
         

      

      
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    Section 7.3
Enforceability. Both the Company and the Employee stipulate and agree
that if any portion, paragraph sentence, term or provision of this Agreement
shall to any extent be declared illegal, invalid or unenforceable by a duly
authorized court of competent jurisdiction, then, (a) the remainder of this
Agreement or the application of such portion, paragraph, sentence, term or
provision in circumstances other than those as to which it is so declared
illegal, invalid or unenforceable, shall not be affected thereby, (b) this
Agreement shall be construed in all respects as if the illegal, invalid or
unenforceable matter had been omitted and each portion and provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law
and (c) the illegal, invalid or unenforceable portion, paragraph, sentence, term
or provision shall be replaced by a legal, valid and enforceable provision which
most closely reflects the intention of the parties hereto as reflected
herein.

    

    Section 7.4. Nonwaiver. The
failure of either party hereto to insist in any one or more instances upon
performance of any of the provisions of this Agreement or to pursue its or his
rights hereunder shall not be construed as a waiver of any such provisions or as
the relinquishment of any such rights.

    

    Section 7.5. Succession. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and upon their heirs, personal representatives, and successor entities. This
Agreement may not be assigned by either party without prior written agreement of
both parties.

    

    Section 7.6. Governing Law. The laws of the
United States and the State of Indiana shall govern the construction and
enforceability of this Agreement.

    

    Section 7.7. Entire Agreement.
This Agreement constitutes the entire Agreement between the parties as to the
subject matter contained herein and all other agreements or understandings are
hereby superseded and terminated.

    

    Section 7.8. Collective
Agreements. There are no collective agreements which directly affect the
terms and conditions of the Employee's employment.

    

    Section 7.9. Grievance and Disciplinary
Procedures. If the Employee wishes to obtain redress of any grievance
relating to her employment or if she is dissatisfied with any reprimand,
suspension or other disciplinary steps taken by the Company, she shall apply in
writing to the Chairman of the board of directors of the Company, setting out
the nature and details of any such grievance or dissatisfaction.

    

    Section 7.10. Heading. The headings
of the sections are inserted for convenience only and do not affect the
interpretation or construction of the sections.

    

    Section 7.11. Remedies. Employee
acknowledges that a remedy at law for any breach or threatened breach of the
provisions of Sections 3.1 through 3.3 of this Agreement would be inadequate and
therefore agrees that the Company shall be entitled to injunctive relief, both
preliminary and permanent, in addition to any other available rights and
remedies in case of any such breach or threatened breach; provided, however,
that nothing contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available for any such breach or threatened breach.
Employee further acknowledges and agrees that in the event of a breach by
Employee of any provision of Sections 3.1 through 3.3 of this agreement, the
Company shall be entitled, in addition to all other remedies to which the
Company may be entitled under this Agreement to recover from Employee its
reasonable costs including attorney's fees if the Company is the prevailing
party in an action by the Company. This Agreement is entered into by the Company
for itself and in trust for each of its affiliates with the intention that each
company will be entitled to enforce the terms of this Agreement directly against
Employee.

    
      
         

      

      
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    IN
WITNESS WHEREOF, the Company and the Employee have executed, or caused to be
executed, this Agreement as of the day and year first written
above.

    

    
      
        
          
            
              	
                      "COMPANY"

                    	 
      	
                      “EMPLOYEE”

                    
	 
      	 
      	 
      
	 	 	 
	
                      Anthony
      Chilton

                    	 
      	
                      Alberto
      F. Hidalgo, Jr.

                    
	
                      President
      and CEO

                    	 
      	 
      
	
                      Bioanalytical
      Systems, Inc.

                    	 
      	 
      

            

          

        

      

    

     

    
      
         

      

      
        8(Bioanalytical
Systems, Inc)

    2701 Kent
Avenue

    West
Lafayette, IN 47906 USA

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

    www.basinc.com

     

    August
18, 2010

     

    Albert F.
Hidalgo, Jr.

    1336
Central Avenue

    Indianapolis,
IN 46202

     

    Dear
Alberto:

     

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

     

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

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

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

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

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

     

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

    

    
      
        
          
            
              
                
                  
                    	 
      	
                            Very
      truly yours,

                          
	 
      	 
      
	 
      	
                            BIOANALYTICAL
      SYSTEMS, INC.

                          
	 
      	 
      	 
      
	 	By: 	 
	 
      	
                             
      

                          	
                            Michael
      R. Cox, Vice President- Finance

                            and
      Chief Financial Officer

                          
	 
      	 
      	 
      
	 
      	
                            Accepted
      and agreed to:

                          
	 	 
	 
      	 
      	 
      
	 
      	
                            Alberto
      F. Hidalgo, Jr.

                          
	 
      	 
      	 
      
	 
      	
                            Date: 

                          	 
      

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
A

     

    BIOANALYTICAL
SYSTEMS, INC.

     

    NOTICE OF
EXERCISE

     

    Date:

     

    Mr.
Michael R. Cox

    Chief
Financial Officer

    BIOANALYTICAL
SYSTEMS, INC.

    2701 Kent
Avenue

    West
Lafayette, Indiana 47906

     

    Dear Mr.
Cox:

     

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

     

    
      1.          
Cash in
the amount of $ __________

    

     

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

     

    3.           Tender
to the Company of _____ outstanding Common Shares

     

    4.           _________________________
Common Shares that are subject to the Option

     

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

     

    
      
        
          
            
              
                	 
      	 
      
	 
      	
                        Signature

                      
	 
      	 
      
	 
      	 
      
	 
      	
                        Printed
      Name

                      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                        Address

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