Document:

EXHIBIT
      4.1

    

    BIOANALYTICAL
      SYSTEMS, INC.

    2008
      STOCK OPTION PLAN

    

    
      	
               

            	
               1.

            	
              Establishment/Plan
                Purpose.
                Bioanalytical Systems, Inc., an Indiana corporation, hereby establishes
                an
                equity-based incentive compensation plan to be known as the Bioanalytical
                Systems, Inc. 2008 Stock Option Plan ("Plan") and to be effective
                as of
                the Effective Date provided for herein. The purpose of the Plan is
                to
                promote the long-term interests of the Company and its shareholders
                by
                providing a means for attracting and retaining officers, directors
                and key
                employees of the Company and its Affiliates.

            

    

    

    
      	
               

            	
               2.

            	
              Definitions/Rules
                of Construction.

            

    

    

    a. The
      following definitions are applicable to the Plan:

    

    "Affiliate"
      means
      any "parent corporation" or "subsidiary corporation" of the Company as such
      terms are defined in Code Sections 424(e) and (f),
      respectively.

    

    "Award"
      means
      the grant by the Committee of Incentive Stock Options or Non-Qualified Stock
      Options or any combination thereof, as provided in the Plan.

    

    "Award
      Agreement"
      means
      the written agreement setting forth the terms and provisions applicable to
      each
      Award granted under the Plan.

    

    "Beneficial
      Owner"
      shall
      have the meaning set forth in Rule 13d-3 under the Exchange Act. 

    

    "Board"
      means
      the Board of Directors of the Company.

    

    "Cause"
      means
      (a) a Participant’s dishonesty, fraud or misconduct with respect to the business
      or affairs of the Company or any Affiliate which materially and adversely
      affects the operations or reputation of the Company or any Affiliate (monetarily
      or otherwise); (b) a Participant’s conviction of a felony crime or a crime
      involving moral turpitude or entry of a plea of nolo contendre thereof; or
      (c) a
      Participant’s violation of the Company’s Code of Conduct. 

    

    "Change
      in Control"
      means
      the occurrence of any one of the following events:

    

    i. any
      Person, other than an Existing Substantial Shareholder, becomes the Beneficial
      Owner, directly or indirectly, of securities of the Company representing a
      majority of the combined voting power of the Company's then outstanding
      securities (assuming conversion of all outstanding non-voting securities into
      voting securities and the exercise of all outstanding options or other
      convertible securities);

    

    ii. the
      following individuals cease for any reason to constitute a majority of the
      number of directors then serving: individuals who, on the Effective Date,
      constitute the Board and any new director (other than a director whose initial
      assumption of office is in connection with an actual or threatened election
      contest, including but not limited to, a consent solicitation, relating to
      the
      election of directors of the Company) whose appointment or election by the
      Board
      or nomination for election by the Company's shareholders was approved or
      recommended by a vote of at least two-thirds (2/3) of the directors then still
      in office who either were directors on the Effective Date or whose appointment,
      election or nomination for election was previously so approved or
      recommended;

      

    iii. the
      consummation of a merger or consolidation of the Company or any direct or
      indirect subsidiary of the Company with any other corporation (other than with
      an Existing Substantial Shareholder or any of its affiliates), other than (x)
      a
      merger or consolidation which would result in the voting securities of the
      Company outstanding immediately prior to such merger or consolidation continuing
      to represent, either by remaining outstanding or by being converted into voting
      securities of the surviving entity or any parent thereof, a majority of the
      combined voting power of the securities of the Company or such surviving entity
      or any parent thereof outstanding immediately after such merger or
      consolidation, or (y) a merger or consolidation effected to implement a
      recapitalization of the Company (or similar transaction) in which no Person
      is
      or becomes the Beneficial Owner, directly or indirectly, of securities of the
      Company representing a majority of the combined voting power of the Company's
      then outstanding securities; or

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    iv. the
      shareholders of the Company approve a plan of complete liquidation or
      dissolution of the Company or there is consummated an agreement for the sale
      or
      disposition by the Company of all or substantially all of the Company's assets,
      other than a sale or disposition by the Company of all or substantially all
      of
      the Company's assets to an entity controlled by an Existing Substantial
      Shareholder or any of its affiliates, or to an entity a majority of the combined
      voting power of the voting securities of which is owned by substantially all
      of
      the shareholders of the Company immediately prior to such sale in substantially
      the same proportions as their ownership of the Company immediately prior to
      such
      sale. 

    

    "Code"
      means
      the Internal Revenue Code of 1986, as amended, and its implementing
      regulations.

    

    "Committee"
      means
      the Compensation Committee of the Board of Directors.

    

    "Company"
      means
      Bioanalytical Systems, Inc., an Indiana corporation.

    

    "Director"
      means
      any individual who is a member of the Board.

    

    "Disability"
      means
      that a Participant meets one of the following requirements: (i) the Participant
      is unable to engage in any substantial gainful activity by reason of any
      medically determinable physical or mental impairment that can be expected to
      result in death or can be expected to last for a continuous period of not less
      than 12 months, or (ii) the Participant is, by reason of medically determinable
      physical or mental impairment that can be expected to result in death or can
      be
      expected to last for a continuous period of not less than 12 months, receiving
      income replacement benefits for a period of not less than 3 months under an
      accident and health plan covering employees of the Company. 

    

    "Effective
      Date"
      means
      the date that the Plan becomes effective as provided in
      Section 18.

    

    "Employee"
      means
      any person, including an officer or Director, who is employed by the Company
      or
      any Affiliate.

    

    "Exchange
      Act"
      means
      the Securities Exchange Act of 1934, as amended.

    

    "Exercise
      Price"
      means
      the price per Share at which the Shares subject to an Option may be purchased
      upon exercise of the Option.

    

    "Existing
      Substantial Shareholder"
      means
      any Person that alone or together with its affiliates is the Beneficial Owner
      of
      more than 15% of the Outstanding Common Stock as of the Effective Date.

    

    "Fair
      Market Value"
      means,
      with respect to a Share as of a particular date, the per share closing price
      for
      the Shares on the trading day immediately before such date, as reported by
      the
      principal exchange or market over which the Shares are then listed or regularly
      traded. If the price of a Share is not so reported, Fair Market Value shall
      be
      determined, in good faith, by the Committee in accordance with such procedures
      as the Committee shall from time to time prescribe.

    

    "Incentive
      Stock Option"
      means
      an option to purchase Shares granted by the Committee pursuant to the terms
      of
      the Plan, which option is intended to qualify under Code
      Section 422.

     

    "Non-Qualified
      Stock Option"
      means
      an option to purchase Shares granted by the Committee pursuant to the terms
      of
      the Plan, which option is not intended to qualify under Code
      Section 422.

    

    "Option"
      means
      an Incentive Stock Option or a Non-Qualified Stock Option.

    

    "Participant"
      means
      any individual selected by the Committee to receive an Award.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    "Person"
      shall
      have the meaning given in Section 3(a)(9) of the Exchange Act and used in
      Sections 13(d) and 14(d) thereof, except that such term shall not include (i)
      the Company or any subsidiary of the Company, (ii) a trustee or other fiduciary
      holding securities under an employee benefit plan of the Company or any of
      its
      affiliates, (iii) an underwriter temporarily holding securities pursuant to
      an
      offering of such securities or (iv) a corporation or other business entity
      owned, directly or indirectly, by substantially all of the shareholders of
      the
      Company in substantially the same proportions as their ownership of stock of
      the
      Company. 

    

    "Plan"
      means
      this Bioanalytical Systems, Inc. 2008 Stock Option Plan.

    

    "Retirement"
      means,
      in the case of an Employee, a Separation from Service for reasons other than
      Cause on or after the date on which the Employee attains age 60. 

    

    "Rule
      16b-3"
      means
      Rule 16b-3 under the Exchange Act and any future rule or regulation amending,
      supplementing, or superseding such rule.

    

    "Section
      16 Person"
      means a
      person subject to potential liability under Section 16(b) of the Exchange Act
      with respect to transactions that involve equity securities of the
      Company.

    

    "Securities
      Act"
      means
      the Securities Act of 1933, as amended.

    

    "Separation
      from Service"
      or
      "Separates
      from Service"
      shall
      mean death, Disability, Retirement, or other termination of employment with
      the
      Company.

    

    "Shares"
      means
      the common shares of the Company.

    

    "10%
      Shareholder"
      has the
      meaning set forth in Section 9.

    

    b. The
      following rules shall govern in the interpretation of the Plan:

    

    i. Except
      to
      the extent preempted by United States federal law or as otherwise expressly
      provided herein, the Plan and all Award Agreements shall be interpreted in
      accordance with and governed by the internal laws of the State of Indiana
      without giving effect to any choice or conflict of law provisions, principles,
      or rules.

    

    ii. The
      Plan
      and all Awards are intended to comply with an exemption from the requirements
      of
      Code Section 409A.

    

    iii. Any
      reference herein to a provision of law, regulation, or rule shall be deemed
      to
      include a reference to the successor of such law, regulation, or
      rule.

    

    iv. To
      the
      extent consistent with the context, any masculine term shall include the
      feminine, and vice
      versa, and
      the
      singular shall include the plural, and vice
      versa.

    

    v. If
      any
      provision of the Plan shall be held illegal or invalid for any reason, the
      illegality or invalidity of that provision shall not affect the remaining parts
      of the Plan, and the Plan shall be interpreted and enforced as if the illegal
      or
      invalid provision had never been included herein.

    

    vi. The
      grant
      of Awards and issuance of Shares hereunder shall be subject to all applicable
      statutes, laws, rules, and regulations and to such approvals
      and requirements as may be required from time to time by any governmental
      authority or securities exchange or market on which the Shares are then listed
      or traded.

      

    vii. The
      descriptive headings and sections of the Plan are provided for convenience
      of
      reference only and shall not serve as a basis for interpretation of the
      Plan.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3. Administration.

    

    a. The
      Committee.
      The
      Committee shall administer the Plan and, subject to the provisions of the Plan
      and applicable law, may exercise its discretion in performing its administrative
      duties. The Committee shall consist of not fewer than three (3) Directors,
      and
      Committee action shall require the affirmative vote of a majority of its
      members. The members of the Committee shall be appointed by, and shall serve
      at
      the pleasure of, the Board. It is intended that the Committee be composed
      solely of Directors who both are non-employee directors under Rule 16b-3 and
      "independent" as defined by the requirements of any stock exchange or quotation
      system on which the Company's common stock is listed or quoted. Failure of
      the
      Committee to be so composed shall not result in the cancellation, termination,
      expiration, or lapse of any Award.

    

    b. Authority
      of the Committee.
      Except
      as limited by law or by the Articles of Incorporation or By-Laws of the Company,
      and subject to the provisions of the Plan, the Committee shall have full power
      and discretion to: select the Employees who shall participate in the Plan;
      determine the sizes and types of Awards; determine the terms and conditions
      of Awards in a manner consistent with the Plan; construe and interpret the
      Plan, all Award Agreements, and any other agreements or instruments entered
      into
      under the Plan; establish, amend, or waive rules and regulations for the Plan's
      administration; and amend the terms and conditions of any outstanding Award
      and
      applicable Award Agreement to the extent that such terms and conditions are
      within the discretion of the Committee. Further, the Committee shall make all
      other determinations that may be necessary or advisable for the administration
      of the Plan. Each Award shall be evidenced by a written Award Agreement between
      the Company and the Participant and shall contain such terms and conditions
      as may be established by the Committee consistent with the provisions of the
      Plan. Notwithstanding the preceding provisions, the Committee shall not have
      any
      authority to take any action that would cause an Option to become subject to
      Code Section 409A. Except as limited by applicable law or the Plan, the
      Committee may use its discretion to the maximum extent that it deems appropriate
      in administering the Plan.

    

    c. Delegation
      by the Committee.
      The
      Committee may delegate all or any part of its authority and powers under this
      Plan to one or more Directors or officers of the Company; provided, however,
      the
      Committee may not delegate its authority and powers (i) with respect to grants
      to Section 16 Persons, or (ii) in a way that would jeopardize the Plan' s
      satisfaction of Rule 16b-3.

    

    d. Decisions
      Binding.
      All
      determinations and decisions made by the Committee, the Board, and any delegate
      of the Committee pursuant to this Section shall be final, conclusive, and
      binding on all persons, including the Company and Participants.

    

    4. Participants.
      Only
      those persons who are Employees or Directors of the Company shall be eligible
      to
      participate in the Plan. The Committee shall determine from time to time the
      particular Employees or Directors of the Company who shall be eligible to
      participate in the Plan and the extent of their participation
      therein.

    

    5. Shares
      Subject to Plan, Limitations on Grants and Exercise
      Price.
      Subject
      to adjustment by the operation of Section 11 hereof:

    

    a. The
      maximum number of Shares that may be issued with respect to Awards made under
      the Plan is 500,000 Shares. In the event any outstanding Option under the Plan
      expires or is terminated for any reason prior to the end of the period during
      which Options may be granted, the shares allocable to the unexercised portion
      of
      such Option may again be subject to an Option under the Plan.

    

    b. The
      Shares with respect to which Awards may be made under the Plan may either be
      authorized and unissued shares or issued shares heretofore or hereafter
      reacquired and held as treasury shares. Any Award that expires, terminates
      or is
      surrendered for cancellation may be subject to new Awards under the Plan with
      respect to the number of Shares as to which a termination or forfeiture has
      occurred. Any option issued under the Plan surrendered in order to effect
      exercise of another option in accordance with Paragraph 7 (c) below shall be
      deemed to be an exercised option and will not be available for future option
      grants under this Plan.

      

    c. The
      Exercise Price for any Award made under the Plan may not be less than the Fair
      Market Value of the Shares as of the date of the award.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    d. No
      Participant may be granted Incentive Stock Options under this Plan that would
      result in Shares with an aggregate Fair Market Value (determined as of the
      date
      the Option is granted) of more than One Hundred Thousand Dollars ($100,000)
      first becoming exercisable in any one calendar year. To the extent that a
      purported Incentive Stock Option would violate the limitation specified in
      the
      preceding sentence, the portion of the Option in excess of such limitation
      shall
      be deemed a Non-Qualified Stock Option.

    

    e. Notwithstanding
      the preceding provisions, if the Company or an Affiliate consummates a
      transaction described in Code Section 424(a) (e.g., the acquisition of property
      or stock from an unrelated corporation), individuals who become Employees or
      Directors on account of such transaction may be granted Options in substitution
      for options granted by such former employer or recipient of services. If such
      substitute Options are granted, the Committee, in its sole discretion and
      consistent with Code Section 424(a) and the requirements of Code Section 409A,
      may determine that such substitute Options shall have an Exercise Price less
      than one hundred (100%) of the Fair Market Value of the Shares to which the
      Options relate determined as of the dates of grant. In carrying out the
      provisions of this Section, the Committee shall apply the principles contained
      in Section 11.

    

    6. General
      Terms and Conditions of Options. 
      The
      Committee will have full and complete authority and discretion, except as
      expressly limited by the Plan, to grant Options and to prescribe the terms
      and
      conditions (which need not be identical among Participants) of the Options.
      Each
      Option will be evidenced by an Award Agreement that will specify: (a) the
      Exercise Price, (b) the number of Shares subject to the Option,
      (c) the expiration date of the Option, (d) the manner, time and rate
      (cumulative or otherwise) of exercise of the Option, (e) the restrictions,
      if any, to be placed upon the Option or upon Shares that may be issued upon
      exercise of the Option, (f) the conditions, if any, under which a
      Participant may transfer or assign Options, and (g) any other terms and
      conditions as the Committee, in its sole discretion, may determine. The
      Committee may, as a condition of granting any Option, require that a Participant
      agree to surrender for cancellation one or more Options previously granted to
      such Participant.

    

    7. Exercise
      of Options.
      Subject
      to the provisions of the Plan and the applicable Award Agreement, a Participant
      may exercise an Option, in whole or in part, at any time prior to the
      termination of the Option, by giving written notice to the Company of exercise
      on a form provided by the Committee (if available). Such notice shall specify
      the number of Shares subject to the Option to be purchased and shall be
      accompanied by payment in full of the total Exercise Price by cash or check
      or
      such other form of payment as the Company may accept. If permitted by the
      Committee or the applicable the Award Agreement, payment in full or in part
      may
      also be made by:

    

    a. Delivering
      Shares already owned by the Participant for more than six (6) months and having
      a total Fair Market Value on the date of such delivery equal to the total
      Exercise Price;

    

    b. The
      certification of ownership of Shares owned by the Participant to the
      satisfaction of the Committee for later delivery to the Company as specified
      by
      the Committee;

    

    c. Delivering,
      if the Participant may do so without violating Section 16(b) of the Exchange
      Act, by surrendering sufficient vested options based on the difference between
      the exercise price and the Fair Market Value at the time of exercise of the
      Shares to equal the exercise price of the Shares to which the Option is being
      exercised;

    

    d. Any
      other
      method permitted by the Committee in the Award Agreement; or

    

    e. Any
      combination of the foregoing.

     

    No
      Shares
      shall be issued until full payment therefore has been made. A Participant shall
      have all of the rights of a shareholder of the Company holding the class of
      Shares subject to such Option (including, if applicable, the right to vote
      the
      shares and the right to receive dividends) when the Participant has given
      written notice of exercise, has paid the total Exercise Price, and such Shares
      have been recorded on the Company's official shareholder records (or the records
      of its transfer agents or registrars) as having been issued and transferred
      to
      the Participant.

      

    8. Termination
      of Options.
      Unless
      otherwise specifically provided by the Committee in the Award Agreement or
      any
      amendment thereto, Options will terminate as provided in this Section.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    a. Unless
      sooner terminated under the provisions of this Section and notwithstanding
      the
      provisions of Subsection (b) or (d) below of this Section 8, Options will expire
      not more than five (5) years from the date of grant if the Participant is a
      10%
      Shareholder, and not more than ten (10) years from the date of grant if the
      Participant is not a 10% Shareholder.

    

    b. If
      the
      Participant's Separation from Service (without Cause) occurs by reason of
      Retirement or Disability, the Participant may exercise all outstanding Options
      with respect to Shares for which it could have been exercised on the effective
      date of the Participant's Retirement within the period of three months
      immediately succeeding the Participant's Retirement, or if by reason of
      Disability, within twelve (12) months after termination of employment due to
      Disability.

    

    c. If
      the
      Participant's Separation from Service (with or without Cause) is due to any
      reason other than Retirement or Disability, all rights under any Options granted
      to the Participant will terminate immediately upon the Participant's Separation
      from Service.

    

    d. In
      the
      event the Participant's Separation from Service is due to death, the
      Participant's beneficiary or estate, if no beneficiary, may exercise outstanding
      Options to the extent that the Participant was entitled to exercise the Options
      at the date of his death, but only within the period of twelve (12) months
      from
      the date of the Participant's death.

    

    9. Special
      Rules Applicable to Incentive Stock Options.

    

    a. Incentive
      Stock Options may be granted only to Participants who are Employees. Any
      provisions of the Plan to the contrary notwithstanding, (a) no Incentive
      Stock Option will be granted more than ten (10) years from the earlier of the
      date the Plan is adopted by the Board or approved by the Company's Shareholders,
      (b) no Incentive Stock Option will be exercisable more than ten (10) years
      from the date the Incentive Stock Option is granted, (c) the Exercise Price
      of any Incentive Stock Option will not be less than the Fair Market Value per
      Share on the date such Incentive Stock Option is granted, (d) any Incentive
      Stock Option will not be transferable by the Participant to whom such Incentive
      Stock Option is granted other than by will or the laws of descent and
      distribution and will be exercisable during the Participant's lifetime only
      by
      such Participant, (e) no Incentive Stock Option will be granted that would
      permit a Participant to acquire, through the exercise of Incentive Stock Options
      in any calendar year, under all plans of the Company and its Affiliates, Shares
      having an aggregate Fair Market Value (determined as of the time any Incentive
      Stock Option is granted) in excess of $100,000 (determined by assuming that
      the
      Participant will exercise each Incentive Stock Option on the date that such
      Option first becomes exercisable), and (f) no Incentive Stock Option may be
      exercised more than three (3) months after the Participant's Separation from
      Service for reasons due to Retirement, or more than one (1) year after the
      Participant's Separation from Service due to the Disability or the death of
      the
      Participant. Notwithstanding the foregoing, no
      Incentive Stock Option shall be granted under the Plan to any Employee of the
      Company who, at the time such Incentive Stock Option is granted, owns shares
      possessing more than ten percent (10%) of the total combined voting power of
      all
      classes of shares of the Company or of any parent or subsidiary corporation
      of
      the Company or any parent or subsidiary corporation of any of the foregoing
      (such employee being hereinafter referred to as a "10% Shareholder"), except
      as
      provided below. For purposes of this Section 9, shares owned, directly or
      indirectly, by or for a corporation, partnership, estate, or trust shall be
      considered as being owned proportionately by or for its shareholders, partners,
      or beneficiaries. The percentage limitations of this Section 9 shall not apply,
      however, if, at the time such Incentive Stock Option is granted, the Exercise
      Price is at least one hundred ten percent (110%) of the Fair Market Value of
      the
      Shares subject to the Incentive Stock Option and such Option by its terms is
      not
      exercisable after the expiration of five (5) years from the date such Option
      is
      granted.

    

    b. Notwithstanding
      any other provisions of the Plan, if for any reason an Option granted under
      the
      Plan that is intended to be an Incentive Stock Option fails to qualify as an
      Incentive Stock Option, such Option will be deemed to be a Non-Qualified Stock
      Option, and such Option will be deemed to be fully authorized and validly issued
      under the Plan.

      

    10. Restrictive
      Covenants.
      In its
      discretion, the Committee may condition the grant of any Award under the Plan
      upon the Participant agreeing to covenants in favor of the Company and/or any
      Affiliate (including, without limitation, covenants not to compete, not to
      solicit employees and customers, and not to disclose confidential information)
      that may have effect following the termination of employment with the Company
      or
      any Affiliate, and after the Award has been exercised, including, without
      limitation, the requirement to disgorge any profit, gain or other benefit
      received upon exercise of the Award prior to any breach of any covenant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    11. Adjustments
      Upon Changes in Capitalization.
      In the
      event of any change in the outstanding Shares subsequent to the effective date
      of the Plan by reason of any reorganization, recapitalization, stock split,
      reverse stock split, spin-off, stock dividend, combination or exchange of Shares
      or other securities of the Company, any change in the corporate structure or
      Shares of the Company or other similar corporate transaction or event, the
      maximum aggregate number and class of Shares as to which Awards may be granted
      under the Plan and the number and class of Shares and the Exercise Price of
      any
      outstanding Options will be appropriately adjusted by the Committee to prevent
      the dilution or diminution of Awards. The Committee's determination with respect
      to any adjustments will be conclusive. Any fractional shares so determined
      will
      be rounded to the nearest whole number of shares.

    

    12. Assignments
      and Transfers.
      Except
      as otherwise expressly authorized by the Committee in the Award Agreement or
      any
      amendment thereto during the lifetime of a Participant, no Award nor any right
      or interest of a Participant in any Award under the Plan may be assigned,
      encumbered or transferred otherwise than by will or the laws of descent and
      distribution.

    

    13. Rights
      Under the Plan.
      No
      officer, Employee, Director or other person will have a right to be selected
      as
      a Participant nor, having been so selected, to be selected again as a
      Participant, and no officer, Employee, Director or other person will have any
      claim or right to be granted an Award under the Plan or under any other
      incentive or similar plan of the Company or any Affiliate. Neither the Plan
      nor
      any action taken under the Plan will be construed as giving any Employee any
      right to be retained in the employ of the Company or any Affiliate.

    

    14. Delivery
      and Registration of Shares.
      The
      Company's obligation to deliver Shares with respect to an Award will, if the
      Committee requests, be conditioned upon the receipt of a representation as
      to
      the investment intention of the Participant to whom such Shares are to be
      delivered, in such form as the Committee will determine to be necessary or
      advisable to comply with the provisions of the Securities Act or any other
      applicable federal or state securities laws. It may be provided that any
      representation requirement will become inoperative upon a registration of the
      Shares or other action eliminating the necessity of the representation under
      the
      Securities Act or other state securities laws. The Company will not be required
      to deliver any Shares under the Plan prior to (a) the admission of such Shares
      to listing on any stock exchange or system on which Shares may then be listed,
      and (b) the completion of any registration or other qualification of the Shares
      under any state or federal law, rule or regulation, as the Company determines
      to
      be necessary or advisable.

    

    15. Withholding
      Tax.
      To the
      extent required by law in effect at the time any Options are exercised, the
      Company has the right and power to deduct or withhold, or require the
      Participant to remit to the Company, an amount sufficient to satisfy all
      applicable tax withholding requirements. The Committee, in its sole discretion
      and pursuant to such procedures as it may specify from time to time, may permit
      or require a Participant to satisfy all or part of the tax withholding
      obligations in connection with an Award by (a) having the Company withhold
      otherwise deliverable Shares, or (b) delivering to the Company Shares already
      owned for a period of at least six months and, in each case, having a value
      equal to the amount required to be withheld. The amount of the withholding
      requirement will be deemed to include any amount that the Committee determines,
      not to exceed the amount determined by using the maximum federal, state or
      local
      marginal income tax rates applicable to the Participant with respect to the
      Award on the date that the amount of tax to be withheld is to be determined
      for
      these purposes. For these purposes, the value of the Shares to be withheld
      or
      delivered will be equal to the Fair Market Value as of the date that the taxes
      are required to be withheld.

      

    16. Termination,
      Amendment and Modification of Plan.
      The
      Board may at any time terminate, and may at any time and from time to time
      and
      in any respect amend or modify the Plan; provided, however, that to the extent
      necessary and desirable to comply with Rule 16b-3 under the Exchange Act or
      Code Section 422 (or any other applicable law or regulation, including
      requirements of any stock exchange or quotation system on which the Company's
      common stock is listed or quoted), shareholder approval of any Plan amendment
      will be obtained in the manner and to the degree as is required by the
      applicable law or regulation; and provided further, that no termination,
      amendment or modification of the Plan will in any manner affect any Award
      theretofore granted pursuant to the Plan without the consent of the Participant
      to whom the Award was granted or the transferee of the Award. The Plan shall
      be
      binding upon any successor to substantially all the assets of the Company.
      However, no Options shall be granted hereunder upon termination of the
      Plan.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    17. Repricing.
      Notwithstanding any provision in the Plan to the contrary and except for
      adjustments made pursuant to Section 11 of the Plan (relating to the adjustment
      of Shares and related Awards upon certain changes in capitalization), the
      Exercise Price of any outstanding Option granted under the Plan may not be
      decreased after the date of grant nor may any outstanding Option granted under
      the Plan be surrendered to the Company as consideration for the grant of a
      new
      Option with a lower Exercise Price. 

    

    18. Effective
      Date and Term of Plan.
      The
      Plan will become effective upon approval by the holders of a majority of the
      issued and outstanding Shares of each class of the voting Shares of the Company
      voting in person or by proxy at the duly held shareholder's meeting, provided
      that the Plan shall become effective only if approved within twelve (12) months
      before or after the Plan is adopted. The Plan shall terminate on the ten (10)
      year anniversary of the Effective Date.

    

    19. Securities
      Law.
      No
      Option shall be granted, and no shares issued in connection with any Award
      unless the grant of the Option and the issuance and delivery of shares or cash
      pursuant to the Award, complies with all relevant provisions of state and
      federal law, including without limitation, the Securities Act, the Exchange
      Act,
      the rules and regulations promulgated thereunder, and the requirements of any
      market system or stock exchange upon which the shares may then be listed or
      traded. Participant shall not offer, sell or otherwise dispose of any Option
      in
      any manner that would: (a) require the Company to file any registration
      statement with the Securities and Exchange Commission (or any similar filing
      under state law), or to amend or supplement such filing or (b) violate or cause
      the Company to violate the Securities Act, or any other state or federal
      law.

    

    20. Mistake
      of Fact.
      Any
      mistake of fact or misstatement of facts shall be corrected when it becomes
      known by a proper adjustment to an Award or Award Agreement.

    

    21. Evidence.
      Evidence required of anyone under the Plan may be by certificate, affidavit,
      document, or other information which the person relying thereon considers
      pertinent and reliable, and signed, made, or presented by the proper party
      or
      parties.

    

    22. Notices.
      Any
      notice or document required to be given to or filed with the Committee will
      be
      properly given or filed if hand delivered (and a delivery receipt is received)
      or mailed by certified mail, return receipt requested, postage paid, to the
      Committee.

    

    23. No
      Company Obligation.
      Unless
      required by applicable law, the Company, an Affiliate, the Board, and the
      Committee shall not have any duty or obligation to affirmatively disclose
      material information to a record or beneficial holder of Shares or an Award,
      and
      such holder shall have no right to be advised of any material information
      regarding the Company or any Affiliate at any time prior to, upon, or in
      connection with the receipt, exercise, or distribution of an Award. In
      addition, the Company, an Affiliate, the Board, the Committee, and any
      attorneys, accountants, advisors, or agents for any of the foregoing shall
      not
      provide any advice, counsel, or recommendation to any Participant with respect
      to, without limitation, any Award, any exercise of an Option, or any tax
      consequences relating to an Award.

    

    24. Liability
      and Indemnification.
      No
      member of the Board, the Committee, or any officer or employee of the Company
      or
      any Affiliate shall be personally liable for any action, failure to act,
      decision, or determination made in good faith in connection with this Plan.
      By
      participating in the Plan, each Participant agrees to release and hold harmless
      the Company and its Affiliates (and their respective directors, officers, and
      employees) and the Committee from and against any tax liability, including,
      but
      not limited to, interest and penalties, incurred by the Participant in
      connection with his receipt of Awards under the Plan and the payment, and
      exercise thereof. Each person who is or shall have been a member of the
      Committee, or of the Board, shall be indemnified and held harmless by the
      Company against and from (i) any loss, cost, liability, or expense (including,
      but not limited to, attorneys fees) that may be imposed upon or reasonably
      incurred by him or her in connection with or resulting from any claim, action,
      suit, or proceeding to which he or she may be a party or in which he or she
      may be involved by reason of any action taken or failure to act under the Plan
      or any Award Agreement, and (ii) any and all amounts paid by him or her in
      settlement thereof, with the Company's prior written approval, or paid by him
      or
      her in satisfaction of any judgment in any such claim, action, suit, or
      proceeding against him or her; provided, however, that he or she shall give
      the
      Company an opportunity, at the Company's expense, to handle and defend such
      claim, action, suit, or proceeding before he or she undertakes to handle and
      defend the same on his or her own behalf. The foregoing right of indemnification
      shall not be exclusive of any other rights of indemnification to which such
      persons may be entitled under the Company's Articles of Incorporation or
      By-Laws, by contract, as a matter of law or otherwise, or under any power that
      the Company may have to indemnify them or hold them harmless.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    25. Mitigation
      of Excise Tax.
      Subject
      to any other agreement providing for the Company's indemnification of the tax
      liability described herein, if any payment or right accruing to a Participant
      under this Plan (without the application of this Section), either alone or
      together with other payments or rights accruing to the Participant from the
      Company or an Affiliate, would constitute a "parachute payment," as defined
      in
      Section 280G of the Code and regulations thereunder, such payment or right
      shall
      be reduced to the largest amount or greatest right that will result in no
      portion of the amount payable or right accruing under this Plan being subject
      to
      an excise tax under Section 4999 of the Code or being disallowed as a deduction
      under Section 280G of the Code. The determination of whether any reduction
      in
      the rights or payments under this Plan is to apply shall be made by the
      Committee in good faith after consultation with the Participant, and such
      determination shall be conclusive and binding on the Participant. The
      Participant shall cooperate in good faith with the Committee in making such
      determination and providing the necessary information for this purpose.

    

    26. Proceeds.
      The
      proceeds received by the Company from the sale of Shares pursuant to the Plan
      will be used for general corporate purposes.

     

    

    
      	
               

            	
              Adopted
                by the Board of Directors of

              Bioanalytical
                Systems, Inc.

            
	
               

            	
               

            
	
               

            	
                
                

            
	
               

            	
              William
                E. Baitinger

            
	
               

            	
               

            
	
               

            	
                
                

            
	
               

            	
              Larry
                S. Boulet

            
	
               

            	
               

            
	
               

            	
                
                

            
	
               

            	
              David
                W. Crabb

            
	
               

            	
               

            
	
               

            	
                
                

            
	
               

            	
              Leslie
                B. Daniels

            
	
               

            	
               

            
	
               

            	
                
                

            
	
               

            	
              Richard
                M. ShepperdEXHIBIT
      4.2

    May
      18,
      2007

     

    Mr.
      Richard M. Shepperd

    1664
      Rockcrest Hills Ave.

    Henderson,
      NV 89052

     

    Dear
      Richard:

     

    The
      Board
      of Directors of Bioanalytical Systems, Inc. (the "Company")
      has
      approved the grant of non-qualified stock options to you. This letter will
      serve
      as notice of the grant, effective as of the date of this letter (the
      "Date
      of Grant"),
      and
subject
      to and conditioned in all respects on the approval of the shareholders of the
      Company,
      of
      an
      option to purchase (the "Option")
      275,000 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 $7.10 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 subject
      only
      to approval of the Company's shareholders. 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 three
      installments, as follows: (a) as to the first installment of 75,000 shares,
      at
      5:00 p.m., West Lafayette, Indiana time, on the day the shareholders of the
      Company approve the Option, (b) as to the second installment of 100,000 shares,
      on December 1, 2008, and (c) as to the third installment of 100,000 shares,
      on December 1, 2009. 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 of even date herewith,
      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. APPROVAL
      BY SHAREHOLDERS.
      The
      Option granted hereby is conditioned upon and subject to approval by the
      shareholders of the Company. In the event that the shareholders of the Company
      fail to approve the grant of the Option within twelve (12) months of the date
      of
      this letter, the Option shall be null and void and of no effect, and neither
      you
      nor the Company shall have any continuing rights or obligations hereunder.
      The
      Company will submit the Option to its shareholders for approval at the first
      annual or special meeting of its shareholders occurring after the date hereof,
      and in any event prior to the expiration of twelve (12) months from the date
      hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5. 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.

     

    6. 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.

     

    7. 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.

     

    8. 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).

     

    9. 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
      its
      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.

     

    10. 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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

      

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

     

    12. 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.

     

    13. 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.

     

    14. 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:  

            	
              /s/ Michael
                R. Cox

            
	
               

            	
               

            	
              Michael
                R. Cox, Vice President-Finance and 

              Chief
                Financial Officer

            
	
               

            	
               

            	
               

            
	
               

            	
              Accepted
                and agreed to:   

            
	
               

            	
               

            
	
               

            	
              /s/
                Richard M. Shepperd

            
	
               

            	
              Richard
                M. Shepperd

            

    

    
      	
               

            	
               

            	
               

            
	
               

            	
              
                Date:

              

            	
              
                May 18,
                  2007

              

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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 May 18, 2007 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.	
                Surrender
                  of vested Options to purchase __________ 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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