Document:

Amended and Restated General Security Agreement

AMENDED AND RESTATED

GENERAL SECURITY
AGREEMENT

        This Amended and Restated
General Security Agreement (“Security Agreement”) is made as of the
4th day of January, 2005, by Bioanalytical Systems, Inc., an Indiana
corporation, having its chief executive offices at 2701 Kent Avenue, West
Lafayette, Indiana (Taxpayer I.D. No. 35-1345024) (the “Borrower”), in
favor of National City Bank of Indiana, as successor to The Provident Bank,
having a notice address of One National City Center, #200E, Indianapolis,
Indiana 46255 (the “Bank”). 

Article
1.    DEFINITIONS

        Section
1.1    Defined Terms.    As used
herein:

        “Accounts”,
“Inventory”, “Equipment”, “Fixtures”,
“General Intangibles”, “Chattel Paper”,
“Documents”, “Goods”, “Deposit Accounts”,
“Instruments”, “Investment Property” and
“Proceeds” shall mean all of Borrower’s such property
within the meanings ascribed in the Indiana Uniform Commercial Code, as in
effect from time to time. 

        “Account
Debtor” shall have the meaning ascribed in the Indiana Uniform
Commercial Code, as in effect from time to time. 

        “Collateral”
shall mean all of the Borrower’s property or rights in which a security
interest is granted hereunder. 

        “Collateral
Account” shall mean the Deposit Account more fully described in Section
4.5. 

        “Control” shall
have the meaning ascribed in the Indiana Uniform Commercial Code, as in effect
from time to time. 

        “Credit
Agreement” shall mean the Amended and Restated Credit Agreement
executed between the Borrower and the Bank of even date, as amended from time to
time. 

        “Foreign
Subsidiaries” shall have the meaning set forth in Part B of Schedule 4
hereto. 

        “Intellectual
Property” shall mean all intellectual property of the Borrower,
including, without limitation, (a) all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); (b) all trademarks, service marks, trade dress, trade names, and
corporate names and all the goodwill and quality control standards associated
therewith; (c) all registered and unregistered statutory and common law
copyrights; (d) all registrations, applications and renewals for any of the
foregoing; (e) all trade secrets, confidential information, ideas, formulae,
compositions, knowhow, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, financial, business and
marketing plans, and customer and supplier lists and related information; (f)
all other proprietary rights (including, without limitation, all computer
software and documentation and all license agreements and sublicense agreements
to and from third parties relating to any of the foregoing); (g) all copies and
tangible embodiments of the foregoing in whatever form or medium; (h) all
damages and payments for past, present and future infringements of the
foregoing; (i) all royalties and income due with respect to the foregoing; and
(j) the right to sue and recover for past, present and future infringements of
the foregoing. 

        “Liabilities”
shall mean (a) all Obligations including all future advances; (b) all other time to time
obligations of the Borrower to the Bank of every type and description, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising, and
whether or not contemplated by the Borrower or the Bank as of the date of this Security
Agreement, including, without limitation, any modification, extension, or addition to or
of the Obligations or the Credit Agreement and any overlying advances, out of formula
advances and overdrafts made or permitted in connection with the Obligations or other
Liabilities; and (c) any duty of the Borrower to act or to refrain from acting in
connection with any Liability. 

        “Obligations”
shall have the meaning ascribed in the Credit Agreement. 

        “Schedule
of Accounts” shall have the meaning ascribed in Section 4.3. 

        “Stock Rights”
means any securities, dividends or other distributions and any other right or
property which the Borrower shall receive or shall become entitled to receive
for any reason whatsoever with respect to, in substitution for or in exchange
for any securities or other ownership interests in a corporation, partnership,
joint venture or limited liability company constituting Collateral and any
securities, any right to receive securities and any right to receive earnings,
in which the Borrower now has or hereafter acquires any right, issued by an
issuer of such securities, other than securities that would cause
Borrower’s pledge to Bank to exceed Sixty-Five Percent (65%) of
Borrower’s interest in Foreign Subsidiaries. 

        Section
1.2    Incorporation of Credit Agreement
Definitions.    Other capitalized terms used herein and
not specifically herein defined shall have the meanings ascribed to them in the
Credit Agreement. 

        Section
1.3    Terms Defined in the Indiana Uniform Commercial
Code.    Terms defined in the Indiana Uniform Commercial
Code which are not otherwise defined in this Security Agreement are used herein
as defined in the Indiana Uniform Commercial Code, as in effect from time to
time.

Article
2.    SECURITY INTEREST
IN COLLATERAL

        As security for the payment and
performance of the Liabilities, the Bank shall have, and the Borrower does
hereby grant to the Bank, a continuing security interest in the following
Collateral: 

        (a)        
All Accounts, Deposit Accounts, General Intangibles, Documents, Instruments,
Investment Property, Chattel Paper and any other similar rights of the Borrower
however created or evidenced, whether now existing or hereafter owned, acquired,
created, used, or arising, specifically including, without limitation, claims,
leases, agreements, license agreements, licensing fees, royalties, policies,
credit insurance, guaranties, letters of credit, advices of credit, binders or
certificates of insurance, deposits, documents of title, securities, security
interests, licenses, goodwill, tax refunds (federal, state or local), customer
lists, franchises, franchise rights, drawings, designs, marketing rights,
computer programs, artwork, databases and other like business property rights,
all applications to acquire such rights, for which application may at any time
be made by the Borrower, together with any and all books and records pertaining
thereto and any right, title or interest in any Inventory which gave rise to an
Account, and all Intellectual Property throughout the world, but specifically
excluding the shares of capital stock or other equity interest of Borrower in
the Foreign Subsidiaries;

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT   
             
             
             
             
             
             
             
             
             
PAGE 2

        (b)        
All Inventory, whether now existing or hereafter acquired and wherever located,
specifically including, without limitation, all merchandise, personal property,
raw materials, work in process, finished Goods, materials and supplies of every
nature usable or useful in connection with the manufacturing, packing, shipping,
advertising, selling, leasing or furnishing of any of such Inventory and all
materials of the Borrower used or consumed or to be used or consumed in the
Borrower’s business, together with any and all books and records pertaining
thereto;

        (c)        
All Equipment, Goods and all other tangible personal property of the Borrower of
every kind or nature, whether now owned or hereafter acquired, wherever located,
specifically including, without limitation, all machinery, trucks, boats,
barges, on and off the road vehicles, forklifts, tools, dies, jigs, presses,
appliances, implements, improvements, accessories, attachments, parts,
components, partitions, systems, and apparatus, but specifically excluding
Fixtures;

        (d)        
Sixty-Five Percent (65%) of the outstanding capital stock or other equity
interests of each Foreign Subsidiary owned by Borrower;

        (e)        
All products and Proceeds of each of the foregoing, specifically including,
without limitation, (i) any and all Proceeds of any insurance, indemnity,
warranty or guaranty payable to the Borrower from time to time, (ii) any and all
payments of any form whatsoever made or due and payable to the Borrower from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the foregoing by any Governmental
Authority or any Person acting under color of Governmental Authority, (iii) to
the extent of the value of Collateral, claims arising out of the loss,
nonconformity, or interference with the use of, defects or infringement of
rights in, or damage to, the Collateral, (iv) any Stock Rights, and (v) any and
all other amounts from time to time paid or payable under or in connection with
any of the foregoing, whether or not in lieu thereof;

        (f)        
All renewals, extensions, replacements, modifications, additions, improvements,
accretions, accessions, betterments, substitutions, replacements, annexations,
tools, accessories, parts and the like now in, attached to or which may
hereafter at any time be placed in or added to any Collateral, whether or not of
like kind; and

        (g)        
All rights, remedies, claims and demands under or in connection with each of the
foregoing.

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT   
             
             
             
             
             
             
             
             
             
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Article 3.    REPRESENTATIONS AND
WARRANTIES

        To induce the Bank to enter into
the Credit Agreement and to make each and every loan and other financial
accommodation thereunder, the Borrower represents and warrants to the Bank that,
except as may otherwise be provided in the Credit Agreement: 

        Section
3.1    Names of Borrower.    The
exact corporate name of the Borrower and its state of organization are each
correctly stated in the preamble to this Security Agreement. Set forth on
Schedule 1 hereto is a true, accurate and complete list of all previous legal
names of the Borrower and all past and present assumed (or fictitious) names and
tradenames of the Borrower for the past six (6) years. 

        Section
3.2    Prior
Combinations.    Except as set forth on Schedule 1
hereto, the Borrower has not ever been conducted as a partnership or
proprietorship, no entity has merged into the Borrower or has been consolidated
with the Borrower, and no entity has sold substantially all of its assets to the
Borrower or sold assets to the Borrower outside the ordinary course of such
entity’s business. 

        Section
3.3    Chief Executive Office,
etc.    The Borrower’s chief executive office and
taxpayer identification number are set forth in the preamble to this Security
Agreement. Subject to Section 4.1 hereof, Borrower maintains all of its records
with respect to its Accounts at such address. Borrower has not at any time
within the past four (4) months maintained its chief executive office or its
records with respect to Accounts at any other location. 

        Section
3.4    Title to
Collateral.    Except for Intellectual Property, which
is separately addressed in Section 3.6 below, all Collateral is lawfully owned
by the Borrower, free and clear of any prior security interest, pledge, sale,
assignment, transfer or other encumbrance other than Permitted Encumbrances; the
Borrower has the unencumbered right to pledge, sell, assign or transfer the
Collateral subject to the Permitted Encumbrances and to subject the Collateral
to the security interest in favor of the Bank herein; except in respect of
Permitted Encumbrances, no financing statement covering all or any portion of
the Collateral is on file in any public office other than in favor of the Bank;
and the security interest herein constitutes a legal and valid, first priority
security interest in the Collateral. 

        Section
3.5    Representations Regarding
Accounts.    Except for Permitted Encumbrances, each
Account (a) is a valid Account representing an undisputed, bona fide right to
payment from the Account Debtor named therein for Goods sold or leased, for
Intellectual Property licensed, or for services rendered, whether or not such
right to payment has been earned by performance; (b) is free and clear of any
agreement wherein the Account Debtor may claim a deduction or discount; and (c)
is free and clear of all set-offs or counterclaims. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT   
             
             
             
             
             
             
             
             
             
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        Section
3.6    Representations Regarding Intellectual
Property.    Schedule 2 hereto contains a complete and
accurate list as of the date hereof of all patented and registered Intellectual
Property owned by the Borrower and of all pending applications for the
registration of other Intellectual Property owned or filed by the Borrower.
Schedule 2 also contains a complete and accurate list of all licenses and other
rights granted by the Borrower to any third party with respect to the
Intellectual Property and licenses and other rights granted by any third party
to the Borrower. Except for Permitted Encumbrances and except as may be set
forth in Schedule 2 (a) the Borrower owns and possesses all right, title and
interest in and to, or has a valid and enforceable license to use, all of the
Intellectual Property necessary for the operation of the Borrower’s
business as presently conducted or proposed to be conducted; (b) no claim by any
third party contesting the validity, enforceability, use or ownership of any
Intellectual Property has been made, is currently outstanding or, to the
Borrower’s knowledge, is threatened; (c) the Borrower has not received any
notice of, nor is the Borrower aware of any facts which indicate the likelihood
of, any material infringement or misappropriation by, or conflict with, any
third party with respect to any Intellectual Property, nor has the Borrower
received any claim of infringement or misappropriation of, or other conflict
with, any intellectual property rights of any third party; (d) the Borrower has
not materially infringed, misappropriated or otherwise conflicted with any
intellectual property rights of any third party, nor is Borrower aware of any
material infringement, misappropriation or conflict which will occur as a result
of the continued operation of the business of the Borrower as presently
conducted or proposed to be conducted; (e) the Borrower has made or will timely
make all necessary filings and recordations (except user filings) and has paid
or will pay all required fees and taxes to record and maintain its ownership in
its Intellectual Property throughout the world to the extent necessary to
conduct Borrower’s business as currently being conducted or proposed to be
conducted; and (f) no consents are required on any licenses listed on Schedule 2
hereto, except as set forth on Schedule 2, to the grant of the security
interests to, and the exercise of the rights and remedies of, the Bank.

        Section
3.7    Representations Regarding Contracts and
Leases.    All leases of real or personal property and
all contracts to which the Borrower is a party are in full force and effect. To
Borrower’s knowledge, no Person is challenging or disputing the validity or
enforceability of any such leases or contracts, and the Borrower is not in
material default under any such leases or contracts. 

        Section
3.8    Representations Regarding Equipment and
Inventory.    Schedule 3 is a true and correct list of all
locations where Equipment and Inventory of the Borrower is located (except
Inventory in transit) and all locations where Equipment and Inventory of the
Borrower has been located in the four (4) months immediately preceding the date
of this Agreement. Borrower has not purchased any Inventory in a transaction
subject to the bulk transfer laws of any state or otherwise outside the ordinary
course of the Inventory seller’s business. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT   
             
             
             
             
             
             
             
             
             
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        Section
3.9    Representations Regarding Investment
Property.    The Borrower is the direct and beneficial
owner of each type of Investment Property listed on Schedule 4 hereto as being
owned by it, free and clear of any liens, encumbrances or security interests
except for the security interest granted to the Bank. The Borrower further
represents and warrants that (i) all such Investment Property which are shares
of stock in a corporation or ownership interests in a partnership or limited
liability company have been (to the extent such concepts are relevant with
respect to such Investment Property) duly and validly issued, are fully paid and
non-assessable, (ii) this pledge of such Investment Property will not violate
the proscriptions or require the consent, license, filing, report, permit,
exemption, regulation or approval, of any Governmental Authority or other Person
or violate any provision of law, (iii) such ownership of pledged Investment
Property represent, in the case of U.S. Subsidiaries, One Hundred Percent (100%)
of the issued and outstanding ownership of such U.S. Subsidiaries, and, in the
case of Foreign Subsidiaries, Sixty-Five Percent (65%) of the issued and
outstanding ownership of such Foreign Subsidiaries (iv) such Investment Property
has not been materially altered and all signatures thereon are genuine, (v)
there exists no default by an issuer under any of such Investment Property with
respect thereto, (vi) no insolvency proceedings have been instituted with
respect to the issuer of such Investment Property (vii) the Borrower has
executed no instrument of any kind assigning any of such Investment Property or
the liability of any issuer thereon, or with respect thereto, which remains in
effect, (viii) none of the issuers of such Investment Property have any
obligation, commitment, subscription, option, warrant or other rights
outstanding entitling the holder thereof to purchase or otherwise acquire any
capital stock of such issuer, and (ix) with respect to any certificates
delivered to the Bank representing an ownership interest in a partnership or
limited liability company, either such certificates are Securities as defined in
Article 8 or 8.1 (as applicable) of the Uniform Commercial Code of the
applicable jurisdiction as a result of actions by the issuer or otherwise, or,
if such certificates are not Securities, the Borrower has so informed the Bank
so that the Bank may take steps to perfect its security interest therein as a
General Intangible. 

Article 4.    AGREEMENTS
CONCERNING ACCOUNTS

        Section
4.1    Location.    The Borrower
will give the Bank written notice of each office of the Borrower at which
records of the Borrower relative to Accounts are kept. Except where such notice
is given, all records of the Borrower relative to Accounts are and will be kept
at the chief executive office of the Borrower. 

        Section
4.2    Returns and
Repossessions.    Prior to the occurrence of a Default
or Unmatured Default, the Borrower may grant, in the ordinary course of
business, to any Account Debtor, any rebate, refund or adjustment to which such
Account Debtor may be lawfully entitled and may accept, in connection therewith,
the return of Goods, the sale or lease of which shall have given rise to the
obligation of the Account Debtor, subject, however, to the Bank’s security
interest therein and in any Proceeds arising from the disposition thereof. After
the occurrence of a Default or an Unmatured Default, no discount, credit or
allowance shall be granted by the Borrower to any Account Debtor, and no return
of Goods shall be accepted by the Borrower without the Bank’s prior written
consent. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT   
             
             
             
             
             
             
             
             
             
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        Section
4.3    Schedule of Accounts.    Upon
request by the Bank, the Borrower will, from time to time, deliver to the Bank a
schedule identifying each Account (“Schedule of Accounts”), together
with such schedules and certificates and reports relative to all or any of the
Collateral and the items or amounts received by the Borrower in full or partial
payment or otherwise, as Proceeds of any of the Collateral. Each Schedule of
Accounts or other schedule, certificate or report shall be executed by its duly
authorized officer and shall be in the form specified by the Bank. Any Schedule
of Accounts identifying any Account shall be accompanied, if the Bank requests,
(a) by a true and correct copy of the invoice evidencing such Account, (b) by
evidence of shipment, delivery or performance, and (c) if such request shall be
made after the occurrence of a Default or an Unmatured Default, by a duly
executed assignment of such Account from the Borrower to the Bank; provided,
however, that the Borrower’s failure to execute and deliver any such
Schedule of Accounts and/or assignment shall not affect or limit the Bank’s
security interest or other rights in and to Accounts, and provided, further,
that a proper assignment of any Account wherein the United States Government is
the Account Debtor may be requested by the Bank at any time whether or not there
shall have occurred a Default or Unmatured Default. 

        Section
4.4    Verification of
Accounts.    After the occurrence of a Default, the
Bank, its officers, agents, attorneys, and accountants, may verify Accounts and
returned and repossessed Goods under reasonable procedures, directly with the
Account Debtor or by other methods, and the Borrower shall furnish to the Bank
upon request additional Schedules of Accounts, together with all notes or other
papers evidencing the same and any guaranty, securities or other information
relating thereto, and shall do, make and deliver all such additional and further
acts, things, deeds, assurances and instruments as the Bank may reasonably
require. 

        Section
4.5    Collateral
Account.    After the occurrence and during the
continuance of any Default or Unmatured Default, the Borrower (a) will, upon the
written request of the Bank, deposit all checks, drafts, cash remittances and
other Proceeds in payment of Accounts in a special collateral account
(“Collateral Account”) maintained with the Bank and thereafter keep
segregated any such checks, drafts, cash remittances or other Proceeds in trust
for the benefit of the Bank until deposited in the Collateral Account with the
Bank; (b) will, upon the written request of the Bank, note the security interest
of the Bank on all records relative to the Collateral including, without
limitation, any invoice which evidences an Account; (c) will, upon the written
request of the Bank, give notice of the Bank’s security interest to Account
Debtor and other obligors to the Borrower; (d) agrees that all checks and other
Instruments received by the Bank after the occurrence and during the continuance
of any Default or Unmatured Default as Proceeds of Accounts will be credited
upon receipt to the Liabilities in such order as the Bank may determine, subject
to final payment; and (e) will, whenever the Borrower obtains possession (by
return, repossession or otherwise) of any Goods, the sale or lease of which
shall have given rise to any of the Collateral, upon the Bank’s written
request, segregate, label and hold such Goods as subject to the security
interest of the Bank hereunder, and will, at its own expense, dispose of such
Goods in such manner as the Bank may from time to time direct. After the
occurrence and during the continuance of any Default or Unmatured Default, the
Bank may notify any Account Debtor to make payment directly to the Bank of any
amounts due or to become due and enforce the collection of any Accounts by suit
or otherwise and surrender, release or exchange all or any part thereof, or
compromise or extend or renew for a period (whether or not longer than the
original period) any indebtedness thereunder or evidenced thereby. Such notice
may require the Account Debtor or other obligor to pay the Account or other
obligation directly to the Bank. Any Proceeds shall be deposited in the form
received except for the endorsement of the Borrower where required, which
endorsement the Bank is authorized to make on the Borrower’s behalf and
shall be held by the Bank as security for all Liabilities, and the Bank may at
any time and from time to time apply all or any portion of the funds on deposit
in the Collateral Account against the Liabilities, the order of application to
be at the discretion of the Bank. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT   
             
             
             
             
             
             
             
             
             
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        Section
4.6    Accounts Owed by the Federal
Government.    If any Account shall arise out of a
contract with the United States of America, or any department, agency,
subdivision, or instrumentality thereof, the Borrower shall promptly notify the
Bank thereof in writing and shall take all other action requested by the Bank to
protect the Bank’s security interest in such Account under the provisions
of the federal Assignment of Claims Act, as amended. 

        Section
4.7    Assignment of Security
Interests.    If, at any time the Borrower shall take
and perfect a security interest in any property of an Account Debtor or any
other Person to secure payment or performance of an Account, the Borrower shall
promptly assign such security interest to the Bank. 

Article 5.    AGREEMENTS
CONCERNING CERTAIN
COLLATERAL

        Section
5.1    Maintenance of Intellectual
Property.    Unless otherwise agreed in writing by the
Bank, Borrower shall have the duty to do any and all acts which are necessary to
preserve and maintain all material rights in the Intellectual Property. Borrower
will give proper statutory notice in connection with the use of its Intellectual
Property. Borrower has used, and will continue to use for the duration of this
Agreement, consistent standards of quality in its manufacture or creation of
products sold under its trademarks. The Borrower shall not abandon any of the
Intellectual Property nor permit the expiration of any material Intellectual
Property registrations, except where occasioned by non-use, without the written
consent of the Bank. Borrower shall do any and all acts reasonably required by
the Bank to ensure Borrower’s compliance with this Section 5.1. Any
reasonable expenses incurred in connection with the Intellectual Property shall
be borne by Borrower. 

        Section
5.2    After-Acquired Intellectual
Property.    If the Borrower obtains rights to any new
Intellectual Property, the provisions of this Security Agreement shall
automatically apply thereto. With respect to any new applications for
Intellectual Property, the issuance of any new registration for Intellectual
Property, and renewals or extensions of any of the foregoing, the Borrower shall
give the Bank prompt written notice thereof in writing. 

        Section
5.3    Opposition
Proceedings.    Unless and until there shall have
occurred and be continuing a Default, Borrower shall retain the legal and
equitable title to the Intellectual Property and shall have the right to bring
any opposition proceedings, cancellation proceedings or lawsuit in its own name
to enforce, protect and use the Intellectual Property in the ordinary course of
its business, but shall not be permitted, except with the prior written consent
of the Bank, to sell, assign, transfer or otherwise encumber the Intellectual
Property, other than licensings or other dispositions in the ordinary course of
business or to resolve litigation or disputed claims brought or made by
unrelated parties. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT   
             
             
             
             
             
             
             
             
             
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        Section
5.4    Verification of Intellectual
Property.    After the occurrence of a Default, the
Bank, its officers, agents, attorneys and accountants, may verify the
Intellectual Property and all licenses and other agreements with respect
thereto, under reasonable procedures, directly with licensees or by other
methods, and the Borrower shall furnish to the Bank upon request schedules of
Intellectual Property and licenses, together with other information relating
thereto, and shall do, make and deliver all such additional and further acts,
things, deeds, assurances and instruments as the Bank may reasonably require
with respect to the Intellectual Property, including, without limitation, the
licenses. The Borrower shall promptly notify the Bank, if it knows that any
material application or registration relating to Intellectual Property may
become abandoned or dedicated to the public, or of any material adverse
determination or development (including any claim) regarding the Intellectual
Property or any material license with respect thereto, or regarding its right to
register, keep and maintain the same, or if it knows that a material item of
Intellectual Property is materially infringed or misappropriated by a third
party, and, in any such event, unless (a) the Bank, or (b) the Board of
Directors of the Borrower in the exercise of its reasonable business judgment
after having considered the advice of reputable intellectual property counsel
shall have determined that litigation is inappropriate or unadvisable, promptly
sue for infringement or misappropriation. 

        Section
5.5    Supplemental
Documentation.    Concurrently with the execution of
this Security Agreement, and from time to time hereafter upon request of the
Bank, the Borrower shall execute and deliver to the Bank supplemental security
agreements relating to any or all registered patents, trademarks, tradenames,
copyrights and applications for any of the foregoing, in a form satisfactory to
the Bank and suitable for recording in the records of the registering
Governmental Authority. 

        Section
5.6    Contracts and
Leases.    The Borrower shall perform, when due, each of
its obligations under all contracts, leases and other agreements (including,
without limitation, all license agreements) to which the Borrower is a party,
and, immediately upon learning of any material default by any party under any
such contract, lease or other agreement, the Borrower shall give written notice
thereof to the Bank, together with a description as to the nature and status
thereof. After the occurrence of any Default or Unmatured Default, the Borrower
shall not amend, modify, supplement or otherwise agree to any change in any
contract, lease or other agreement or waive any provision thereof, without the
prior written consent of the Bank. 

        Section
5.7    Deposit Accounts.    The
Borrower will (i) upon the Bank’s request, cause each bank or other
financial institution in which it maintains (a) a Deposit Account to enter into
a control agreement with the Bank, in form and substance satisfactory to the
Bank in order to give the Bank Control of the Deposit Account or (b) other
deposits (general or special, time or demand, provisional or final) to be
notified of the security interest granted to the Bank hereunder and cause each
such bank or other financial institution to acknowledge such notification in
writing, and (ii) upon the Bank’s request after the occurrence and during
the continuance of a Default, deliver to each such bank or other financial
institution a letter, in form and substance acceptable to the Bank, transferring
ownership of the Deposit Account to the Bank or transferring dominion and
control over each such other deposit to the Bank until such time as no Default
exists. 

        Section
5.8    Letter-of-Credit
Rights.    The Borrower will, upon the Bank’s
request, cause each issuer of a letter of credit to consent to the assignment of
proceeds of the letter of credit in order to give the Bank Control of the
letter-of-credit rights to such letter of credit. 

AMENDED AND RESTATED GENERAL
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        Section
5.9    Uncertificated
Securities.    The Borrower will permit the Bank from
time to time to cause the appropriate issuers (and, if held with a securities
intermediary, such securities intermediary) of uncertificated securities which
are Collateral to mark their books and records with the numbers and face amounts
of all such uncertificated securities and all rollovers and replacements
therefor to reflect the Lien of the Bank granted pursuant to this Security
Agreement. The Borrower will take any actions necessary to cause the issuers of
uncertificated securities which are Collateral and which are Securities to cause
the Bank to have and retain Control over such Securities. 

        Section
5.10    Stock and Other Ownership Interests.

	 	
        (a)        Changes
in Capital Structure of Issuers.    The Borrower will
not (i) cause any issuer of privately held corporate securities or other
ownership interests in a corporation, partnership, joint venture or limited
liability company constituting Collateral to dissolve, liquidate, retire any of
its capital stock or other Instruments or Securities evidencing ownership,
reduce its capital or merge or consolidate with any other entity, or
(ii) vote any of the Instruments or Securities in favor of any of the
foregoing. 

	 	
        (b)        
Issuance of Additional Securities.    The Borrower
will not cause the issuer of privately held corporate securities or other
ownership interests in a corporation, partnership, joint venture or limited
liability company constituting Collateral to issue any such securities or other
ownership interests, any right to receive the same or any right to receive
earnings, except to the Borrower. 

	 	
        (c)        
Registration of Pledged Securities.    The Borrower
will permit any registerable Collateral to be registered in the name of the Bank
or its nominee at any time after the occurrence of a Default or at any time if
necessary to perfect the Bank’s security interest in such registerable
Collateral. 

		
        (d)        
Exercise of Rights in Pledged Securities.    The
Borrower will permit the Bank or its nominee at any time after the occurrence of
a Default, without notice, to exercise all voting and corporate rights relating
to the Collateral, including, without limitation, exchange, subscription or any
other rights, privileges, or options pertaining to any corporate securities or
other ownership interests in or of a corporation, partnership, joint venture or
limited liability company constituting Collateral and the Stock Rights as if it
were the absolute owner thereof. 

Article 6.    AGREEMENTS
CONCERNING INVENTORY

        Section
6.1    Locations.    Borrower
will give the Bank written notice of each location at which Inventory is or will
be kept at all times. Except where such notice is given and except for Inventory
sold in the ordinary course of business, all Inventory is and shall be kept at
the locations set forth on Schedule 3 hereto. 

        Section
6.2    Sales of Inventory.    The
Borrower may, in the ordinary course of business, at its own expense, sell,
lease or furnish under contracts of sale or service, any of the Inventory
normally held by the Borrower for such purpose (a sale in the ordinary course of
business does not include a transfer in total or partial satisfaction of a
debt), and use and consume, in the ordinary course of business, any raw
materials, work-in-process or materials normally held by it for such purpose.

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT
             
             
             
             
             
             
             
             
             
PAGE 10

        Section
6.3    Condition of Inventory; Books and
Records.    Borrower shall keep all Inventory in good
order and condition and shall maintain full, accurate and complete books and
records with respect to Inventory at all times. 

        Section
6.4    Warehousemen and
Landlords.    Borrower shall not store any material
portion of its Inventory with any bailee, warehouseman, or similar party without
the Bank’s prior written consent. If Inventory is so stored, Borrower will,
concurrently with storing such Inventory, cause such bailee, warehouseman, or
similar party to issue and deliver to the Bank, in a form acceptable to the
Bank, warehouse receipts in the Bank’s name evidencing the storage of the
Inventory. The Borrower shall provide the Bank with copies of all agreements
between the Borrower and any bailee, warehouseman, or similar party and shall
deliver to the Bank a landlord’s or warehouseman’s lien waiver in a
form acceptable to the Bank, prior to entering into any material lease for
warehouse storage or business facilities. 

        Section
6.5    Consigned Inventory.    If
at any time any of the Inventory is placed by the Borrower on consignment with
any consignee, Borrower shall, prior to delivery of such consigned Inventory,
(a) provide Bank with all consignment agreements and other instruments and
documentation to be used in connection with such consignment (all of which shall
be in a form acceptable to the Bank); (b) prepare, execute and file appropriate
financing statements with respect to any consigned Inventory showing the
consignee as debtor, the Borrower as secured party, and the Bank as assignee of
the secured party; (c) prepare, execute and file appropriate financing
statements with respect to any consigned Inventory showing the Borrower, as
debtor, and the Bank, as secured party; (d) conduct a search of all UCC filings
made against the consignee in all jurisdictions in which Inventory to be
consigned is to be located while on consignment, and furnish copies of such
results to the Bank; and (e) notify in writing all creditors of the consignee
that are or may be holders of security interests in the Inventory to be
consigned that the Borrower expects to deliver certain Inventory to the
consignee. 

        Section
6.6    Compliance with
Law.    Borrower shall substantially comply in all
material respects with all federal, state and local laws, regulations, rulings
and orders applicable to the Borrower for its assets or business. Without
limiting the generality of the foregoing, Borrower shall comply with all
requirements of the federal Fair Labor Standards Act, as amended, in the conduct
of its business and the production of Inventory. Borrower shall notify the Bank
immediately of any violation by Borrower of the Fair Labor Standards Act, and
the absence of such notice shall constitute Borrower’s continuing
representation that all Inventory then existing has been produced in compliance
with the Fair Labor Standards Act. 

Article 7.    AGREEMENTS
CONCERNING EQUIPMENT

        Section
7.1    Locations.    Borrower
will give the Bank written notice of each location at which Equipment is or will
be kept at all times. Except where such notice is given, the Equipment will be
kept at locations set forth on Schedule 3 hereto. Schedule 3 sets forth all
locations at which Equipment of the Borrower is located and the name and owner
of record of the real estate at each location if the Borrower is not the owner
of record. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT
             
             
             
             
             
             
             
             
             
PAGE 11

        Section
7.2    Condition.    The Borrower
will keep the Equipment in good order and repair, ordinary wear and tear
excepted, and will not waste or destroy the Equipment or any portion thereof,
except in the case of obsolete Equipment which is no longer used or useful in
Borrower’s business. 

        Section
7.3    Titled Equipment.    If
Borrower now or hereafter has any vehicles, aircraft, watercraft, or other
Equipment for which a certificate of title has been issued by a Governmental
Authority, the Borrower shall immediately deliver to the Bank, properly
endorsed, each certificate of title or application for title or other evidence
of ownership for each such item of Equipment, and the Borrower shall take all
actions necessary to have the Bank’s security interest properly recorded on
each such certificate of title and shall take all other steps necessary to
perfect the Bank’s security interest in such Equipment. 

        Section
7.4    Compliance with
Laws.    The Borrower will not use the Equipment in
material violation of any statute, rule, regulation or ordinance or any policy
of insurance thereon. Borrower will neither use the Equipment nor permit the
Equipment to be used, for any unlawful purpose or contrary to any statute, law,
ordinance or regulation relating to the registration, use, operation or control
of the Equipment. 

        Section
7.5    Transfers of
Equipment.    Borrower may from time to time substitute
Equipment, provided that (a) the substituted Equipment is not subject to any
lien or other encumbrance and has a fair market value at least equal to the fair
market of the Equipment for which it is substituted; (b) the marketability and
operating integrity of Borrower’s Equipment after such substitution is not
impaired; (c) the Equipment substituted for is no longer used or useful in the
operation of Borrower’s business and is sold in arm’s length
transaction in exchange for money or money’s worth at least equal to the
fair market value of such Equipment substituted for; and (d) no Default or
Unmatured Default has occurred and is continuing. 

        Section
7.6    Fixtures.    The Borrower
shall not permit any item of Equipment to become a Fixture to real estate or an
accession to any other property not subject to the Bank’s security interest
herein without the prior written consent of the Bank. 

Article 8.    GENERAL
PROVISIONS CONCERNING
COLLATERAL

        Section
8.1    Title to After-Acquired
Collateral.    All Collateral acquired after the date
hereof will be acquired by the Borrower free of any lien, security interest or
encumbrance, except Permitted Encumbrances. 

        Section
8.2    Further Assurances.    The
Borrower agrees to do such reasonable acts and things and deliver or cause to be
delivered such other documents as the Bank may deem necessary to establish and
maintain a valid security interest in the Collateral (free of all other liens
and claims except Permitted Encumbrances) to secure the payment and performance
of the Liabilities and to defend title to the Collateral against any Person
claiming any interest therein adverse to the Bank. The Borrower authorizes the
Bank, at the expense of the Borrower, to execute and file a financing statement
or statements on its behalf in those public offices deemed advisable or
necessary by the Bank to protect the security interests of the Bank herein
granted. If permitted by law, the Borrower agrees that a carbon, photographic or
other reproduction of this Security Agreement or of a financing statement may be
filed as a financing statement. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT
             
             
             
             
             
             
             
             
             
PAGE 12

         Section
8.3    Insurance.

	 	
        (a)        
The Borrower shall have and maintain at all times, with respect to Inventory and
Equipment, insurance written by companies acceptable to the Bank covering risks
customarily insured against by companies engaged in business similar to that of
the Borrower in reasonable amounts, containing such terms, in such form, and for
such periods customarily maintained by companies engaged in business similar to
that of the Borrower. Such insurance shall be payable to the Borrower and the
Bank as their interests may appear. 

	 	
        (b)        
In addition to the insurance requirements set forth in Section 8.3(a), the
Borrower will carry any other insurance and amounts for periods as may be
reasonably required by the Bank, and will deliver to the Bank, not less than
five (5) days prior to the expiration of any such policy of insurance, renewals
or new policies in like amounts covering the same risks. 

	 	
        (c)        
All such insurance policies shall carry standard, non-contributory lender’s
loss payable clauses and breach of warranty endorsements, in favor of the Bank.
The insurance certificates evidencing the Borrower’s compliance with the
above shall be deposited with the Bank, and in the event the Borrower fails to
file and maintain such insurance, the Bank may, at its option, purchase such
insurance and the cost of such insurance shall become a Liability secured by
these presents and all sums expended shall bear interest at the highest Default
rate of interest set forth in the Credit Agreement until paid. If requested by
the Bank, the Borrower shall deliver certified copies of such policies to the
Bank. The Borrower shall pay all insurance premiums promptly when due and shall
provide substitute policies of insurance should the Bank at any time reject, for
reasonable cause, any such policies of insurance furnished by the Borrower. The
Borrower hereby assigns to the Bank the proceeds of all such insurance,
including, without limitation, any premium refunds, to the extent of the
Liabilities, shall direct the insurer to make payment of any losses or refunds
directly to the Bank, and appoints the Bank its attorney-in-fact to endorse any
draft, check or other form of payment made by such insurer. So long as there
then exists no Default, the Bank shall remit any insurance proceeds less than
Two Hundred Thousand Dollars ($200,000) to the Borrower. Any insurance proceeds
not remitted to the Borrower shall be applied to the outstanding Liabilities, in
the order of preference determined by the Bank. 

        Section
8.4    Collection of
Collateral.    The Borrower will, at its own expense,
endeavor to collect, as and when due, all amounts due with respect to any
Collateral including the taking of such action with respect to such collection
as the Bank may reasonably request or, in the absence of such request, as the
Borrower may deem advisable. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT
             
             
             
             
             
             
             
             
             
PAGE 13

        Section
8.5    Bank May Defend
Title.    In the event the Borrower fails to pay any
taxes, assessments, premiums, or fees, or fails to discharge any liens or claims
against the Collateral required to be paid or discharged by the Borrower, or
fails to purchase, maintain and file with the Bank any insurance required by
this Security Agreement, or if any such insurance is inappropriate to the
situation, in the Bank’s reasonable discretion, the Bank may, without
demand or notice, pay any such taxes, assessments, premiums or fees, or pay,
acquire, satisfy or discharge any liens or claims asserted against the
Collateral (without any obligation to determine the validity thereof), or
purchase any such insurance. All sums so expended by the Bank shall become a
Liability secured by these presents and shall bear interest at the highest
Default rate of interest set forth in the Credit Agreement until paid.

        Section
8.6    Negotiable
Collateral.    If any Collateral, including Proceeds,
consists of a letter of credit, advice of credit, Instrument, certificates of
deposit, negotiable Documents, chattel paper or similar property, the Borrower
shall, immediately upon receipt thereof, endorse and assign such Collateral, and
deliver actual physical possession thereof, to the Bank, and prior to such
delivery, shall hold such property in trust for the Bank. Schedule 5 hereto is a
true and correct list of all such negotiable Collateral owned by the Borrower,
other than money. The Borrower will give the Bank written notice each time it
acquires such additional negotiable Collateral, other than money. 

        Section
8.7    Contracts.    The Borrower
shall remain liable to perform its obligations under any contracts included in
the Collateral to the extent as though this Security Agreement had not been
entered into, and the Bank shall not have any obligation under any such
contracts by reason of this Agreement. 

        Section
8.8    Accounting
System.    Borrower shall maintain a standard and modern
system of accounting in accordance with GAAP which contains information
pertaining to the Collateral that may from time to time be requested by the
Bank. 

        Section
8.9    Inspection of Collateral and
Records.    During Borrower’s usual business hours,
the Bank may inspect and examine the Collateral and check and test the same as
to quality, quantity, value, and condition. The Bank shall also have the right
at any time or times hereafter, during Borrower’s usual business hours or
during the usual business hours of any third party having control over the
records of the Borrower, to inspect Borrower’s books and records in order
to verify the amount or condition of, or any other matter relating to, the
Collateral and Borrower’s financial condition and to copy and make extracts
from such books and records. Borrower waives the right to assert a confidential
relationship, if any, it may have with any accounting firm in connection with
any information requested by the Bank pursuant to this Security Agreement and
agrees that the Bank may directly contact any such accounting firm in order to
obtain such information. 

        Section
8.10    Transfer of
Collateral.    Borrower shall not sell, lease, license,
transfer or otherwise dispose of any interest in any Collateral except (a) sales
of Inventory in the ordinary course of business pursuant to Section 6.2, (b)
licensings and other dispositions of Intellectual Property in the ordinary
course of business pursuant to Section 5.3, (c) dispositions of Equipment in
accordance with Section 7.5, and (d) the writeoff of uncollectible Accounts in
the ordinary course of business. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT
             
             
             
             
             
             
             
             
             
PAGE 14

Article 9.    REMEDY

        Section
9.1    Remedies Generally; Power of
Sale.    Upon the occurrence of any Default and at any
time thereafter, the Bank shall have all rights and remedies available at law or
in equity including, without limitation, the rights and remedies of a secured
party under the Indiana Uniform Commercial Code, as in effect from time to time
(regardless of whether the Code has been enacted in the jurisdiction where
rights or remedies are asserted), including, without limitation, the right to
take possession of the Collateral, and for that purpose the Bank may, so far as
the Borrower can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Bank shall give to
the Borrower at least ten (10) days’ prior written notice of the time and
place of any public sale of Collateral or of the time after which any private
sale or any other intended disposition is to be made. The Bank may in its
discretion transfer any securities or other property constituting Collateral
into its own name or that of its nominee and receive the income thereon and hold
the same as security for Liabilities or apply it on principal or interest due on
Liabilities. In the event that the Bank takes possession of any Intellectual
Property, the goodwill associated with any trademarks, tradenames, trade dress,
and service marks of the Borrower shall be transferred to the Bank. 

        Section
9.2    Deposits.    Any and all
Deposit Accounts, deposits or other sums at any time credited by or due from the
Bank to the Borrower shall at all times constitute security for any and all
Liabilities, and the Bank may apply or set off such deposits or other sums
against Liabilities at any time in Default whether or not the Liabilities are
then due or other Collateral is considered by the Bank to be adequate.

        Section
9.3    Waiver and
Amendment.    Except as otherwise expressly set forth
herein, to the extent permitted by law, the Borrower waives demand, notice,
protest, notice of acceptance of this Security Agreement, notice of loans made,
credit extended, Collateral received or delivered or other action taken in
reliance hereon and all other demands and notices of any description. With
respect to both Liabilities and Collateral, the Borrower assents to any
extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange, or release of Collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromise or adjustment of any
thereof, all in such manner and at such time or times as the Bank may deem
advisable. Except as otherwise provided by law, the Bank shall have no duty as
to the collection or protection of the Collateral, or any income therefrom, nor
as to the preservation of rights against prior parties nor as to the
preservation of any rights pertaining thereto beyond the safe custody thereof.
The Bank may exercise its rights with respect to Collateral without resorting or
regard to other Collateral or sources of reimbursement for any Liability. The
Bank shall not be deemed to have waived any of these rights upon or under
Liabilities or Collateral unless such waiver be in writing and signed by the
Bank. No delay or omission on the part of the Bank in exercising any right shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to the exercise of any right on any
future occasion. All rights and remedies of the Bank as to the Liabilities or
Collateral whether evidenced hereby or by any other instrument or papers shall
be cumulative and may be exercised singly, successively or together. The Bank
may, from time to time, without notice to the Borrower (a) retain or obtain a
security interest in any property of any other Person, in addition to the
Collateral, to secure any of the Liabilities; (b) retain or obtain the primary
or secondary liability of any party or parties, in addition to the Borrower with
respect to any of the Liabilities; (c) extend or renew for any period (whether
or not longer than the original period) or release or compromise any liability
of any party or parties primarily or secondarily liable to the Bank under the
Credit Agreement; (d) release its security interest in any of the property
securing any of the Liabilities and permit any substitution or exchange for any
such property; and (e) resort to the Collateral for the payment of any of the
Liabilities whether or not it shall have resorted to any other property or shall
have proceeded against any party primarily or secondarily liable for any of the
Liabilities. The Bank shall not, under any circumstances, or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the liquidation of any Collateral, including the settlement or
collection of any Account or for any damage resulting therefrom, except
liability resulting from any act or omission by the Bank which constitutes
wilful misconduct. This Security Agreement may be amended only by a writing duly
signed by the Bank and the Borrower. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT
             
             
             
             
             
             
             
             
             
PAGE 15

        Section
9.4    Expenses; Proceeds of
Collateral.    The Borrower shall pay to the Bank on
demand any and all reasonable out-of-pocket expenses, including reasonable
attorneys’ fees, incurred or paid by the Bank in protecting the Collateral
or the existence, perfection or priority of the Bank’s security interest
therein. After deducting all of such expenses, the residue of any Proceeds of
collection or sale of the Collateral shall be applied to the payment of
principal or interest on Liabilities in such order of preference as the Bank may
determine, and any excess shall be returned to the Borrower. 

        Section
9.5    Power of Attorney.    The
Borrower hereby irrevocably appoints the Bank and the Bank’s designees from
time to time its true and lawful attorneys-in-fact, with full power of
substitution in the premises upon the occurrence of a Default (a) to demand,
collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize
upon the Collateral in such manner as the Bank may determine, whether or not the
Collateral is then due; (b) to receive, open, and dispose of mail addressed to
the Borrower; (c) to endorse notes, checks, drafts, money orders, Documents or
other evidences of payment, shipment or storage or any form of Collateral on
behalf of and in the name of the Borrower; (d) to sign and send on behalf of the
Borrower any invoice or bill of lading relating to any Account, on drafts
against customers, on schedules and assignments of Accounts, on notices of
assignment, financing statements and other public records, on verifications of
Accounts and on notices to customers; (e) to sign the Borrower’s name to
the proofs of claim against any Account Debtor on behalf of the Borrower; (f) to
notify the post office authorities to change the address for delivery of the
Borrower’s mail to an address designated by the Bank; (g) to endorse
Borrower’s name on all applications, documents, papers, certificates and
instruments necessary or expedient for the Bank to use the Intellectual
Property, or necessary or expedient to grant or issue any exclusive or
nonexclusive license under the Intellectual Property to anyone else, or
necessary or expedient for the Bank to assign, pledge, convey or otherwise
transfer title in, or dispose of, the Intellectual Property to anyone else, for
the purpose of recording, registering, filing or accomplishing any other formula
with respect to the Intellectual Property; and (h) to do all things necessary to
carry out this Security Agreement. The Borrower hereby ratifies and approves all
acts of such attorneys. Neither the Bank nor any attorney will be liable for any
acts or omissions nor for any error of judgment or mistake of fact or law,
absent gross negligence, bad faith or wilful misconduct. This power, being
coupled with an interest, is irrevocable until the Liabilities have been fully
satisfied. Notwithstanding anything herein to the contrary, no attorney acting
pursuant to this Section 9.5 shall have any authority to confess judgment on
behalf of the Borrower. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT
             
             
             
             
             
             
             
             
             
PAGE 16

        Section
9.6    License.    Borrower
hereby grants to the Bank a license to use, without charge, Borrower’s
Intellectual Property and other Collateral in completing production of,
advertising for sale, or selling any Collateral after any Default, and all of
the Borrower’s rights under all licenses and franchise agreements shall, in
such event, inure to the Bank’s benefit. In addition, the Borrower shall,
upon request by the Bank, make available such personnel in Borrower’s
employ on the date of any Default as the Bank may reasonably designate to permit
the Bank to continue, directly or indirectly, to produce, advertise and sell the
Collateral sold by the Borrower under any Intellectual Property or license. The
license herein shall include the right of the Bank to use, assign, license or
sublicense any of the Borrower’s Intellectual Property, including in such
license reasonable access as to all media in which any of the licensed items may
be recorded or stored; provided that the Bank shall comply with all pre-existing
quality control standards and trademark use requirements of the Borrower. No
agreements hereafter entered into by the Borrower shall prohibit, restrict or
impair the rights of the Bank granted hereunder. 

        Section
9.7    Reinstatement.    If, at
any time after payment in full by the Borrower of all Liabilities and
termination of the Bank’s security interest, any payments on the
Liabilities previously made by the Borrower or any other Person must be
disgorged by the Bank for any reason whatsoever, including, without limitation,
the insolvency, bankruptcy or reorganization of the Borrower or such Person,
this Security Agreement and the Bank’s security interests herein shall be
reinstated as to all disgorged payments as though such payments had not been
made, and the Borrower shall sign and deliver to the Bank all documents, and
shall do such other acts and things, as may be necessary to re-perfect the
Bank’s security interest. 

        Section
9.8    No Marshaling.    The
Borrower, on its own behalf and on behalf of its successors and assigns, hereby
expressly waives all rights, if any, to require a marshaling of assets by the
Bank or to require the Bank’s first resort to some or any portion of the
Collateral before foreclosing upon, selling or otherwise realizing on any other
portion thereof. 

Article 10.    MISCELLANEOUS
PROVISIONS

        Section
10.1    Priority.    Unless
otherwise expressly provided, the security interest hereby created shall be pro
rata on par with any prior security interests in the Collateral now or hereafter
existing in favor of the Bank. 

        Section
10.2    Governing Law.    This
Security Agreement and all rights and obligations hereunder, including matters
of construction, validity and performance, shall be governed by the Uniform
Commercial Code and other applicable laws of the State of Indiana, without
regard to conflict of law principles. 

AMENDED AND RESTATED GENERAL
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PAGE 17

        Section
10.3    Severability.    Whenever
possible each provision of this Security Agreement shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
without invalidating the remainder of such provision or the remaining provisions
of this Security Agreement. The Borrower recognizes that the Bank has relied on
this Security Agreement in extending credit to the Borrower and agrees that such
reliance by the Bank shall be sufficient consideration for this Security
Agreement. 

        Section
10.4    Binding on
Successors.    The rights and privileges of the Bank
shall inure to the benefit of its respective successors and assigns. 

        Section
10.5    Chattel Mortgage.    This
Security Agreement shall also constitute a chattel mortgage and an assignment of
rents.

        Section
10.6    Amendment and
Restatement.    This Security Agreement amends and
restates that certain Security Agreement from Borrower to Bank dated October 29,
2002. 

        Section
10.7    Waiver Of Jury
Trial.    Bank And Borrower, After Consulting Or Having
Had The Opportunity To Consult With Counsel, Knowingly, Voluntarily,
Intentionally, Irrevocably And Unconditionally Waive Any Right Either Of Them
May Have To A Trial By Jury In Any Litigation Based Upon Or Arising Out Of This
Agreement Or Any Other Loan Document Or Any Of The Transactions Contemplated By
This Agreement Or Any Course Of Conduct, Dealing, Statements (Whether Oral Or
Written), Or Actions Of Either Of Them. Neither Bank Nor Borrower Shall Seek To
Consolidate, By Counterclaim Or Otherwise, Any Action In Which A Jury Trial Has
Been Waived With Any Other Action In Which A Jury Trial Cannot Be Or Has Not
Been Waived. These Provisions Shall Not Be Deemed To Have Been Modified In Any
Respect Or Relinquished By Either Bank Or Borrower Except By A Written
Instrument Executed By Both Of Them. 

[THIS SPACE LEFT
INTENTIONALLY BLANK]

AMENDED AND RESTATED GENERAL
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PAGE 18

        IN
WITNESS WHEREOF, the Borrower and the Bank have
caused this Security Agreement to be executed by their respective officers duly
authorized as of the date first above written.

	
 	
BIOANALYTICAL SYSTEMS, INC.,

an Indiana corporation

By:  /s/  Michael R. Cox

Printed:  Michael R. Cox

Title:  VP—Finance

	
STATE OF INDIANA	
)
	
 	
)  SS:
	
COUNTY OF MARION	
)

        Before me, a Notary Public in
and for said County and State, personally appeared Michael R. Cox, known to
me to be the VP—Finance of BIOANALYTICAL SYSTEMS,
INC., and acknowledged the execution of the foregoing for and on
behalf of said corporation. 

        Witness my hand and Notarial
Seal, this 3rd day of January, 2005. 

	

My Commission Expires:

Juy 17, 2008

ACCEPTED:
	

/s/  Jeri A. Ungersha

Notary Public - Signature

Jeri A. Ungersha

Notary Public - Printed

My County of Residence:

Tippecanoe

	
 	
NATIONAL CITY BANK OF
INDIANA

By:  /s/  Michael Callas

Printed:  Michael Callas

Title:  Vice President

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT
             
             
             
             
             
             
             
             
             
PAGE 19

SCHEDULE 1

Former Names, Assumed Names

and Tradenames of Borrower

BAS

BASi

Prior Combinations

The Borrower purchased 100% of the outstanding shares of Vetronics, Inc.
pursuant to that certain Stock Purchase Agreement, dated as of or about October
27, 1997, by and among the Borrower and Janet R. Andre' Bootsma, Dr. Walt
Weirich, Dr. Clare McGillem, Dr. Alan Pritsker, Dr. Jorge Aunon and David
Wortma.

The Borrower
purchased 100% of the outstanding shares of T.P.S., Inc. pursuant to that
certain Share Purchase Agreement, dated as of December 9, 1999, by and among the
Borrower, James A. Botta, Jr., Jarilyn B. Botta, Robert B. Botta, Deryl T. Botta
and Sheryl B. Abreu. The Borrower subsequently changed the name of this entity
to BAS Evansville, Inc. 

Bioanalytical
Systems Limited (a wholly-owned subsidiary of the Borrower) purchased 100% of
the outstanding shares of Clinical Innovations Ltd. pursuant to that certain
Share Purchase Agreement, dated as of July 9, 1998, by and among Bioanalytical
Systems Limited, James B. Spence, Carol Anne Green, Bryan Green and John Cooper.

The Borrower
purchased 100% of the outstanding shares of LC Resources Inc. pursuant to that
certain Stock Purchase Agreement, dated as of December 13, 2002, by and among
the Borrower, LC Resources Inc., John W. Dolan, Snyder Family Trust UDT, Thomas
H. Jupille, and Derek L. Sourthern. The Borrower changed the name of this entity
to BASi Northwest Laboratory, Inc. 

The Borrower
and PI Acquisition Corp., a Maryland corporation and wholly-owned subsidiary of
Borrower, entered into a Merger Agreement with PharmaKinetics Laboratories,
Inc., a Maryland corporation, whereby PharmaKinetics Laboratories, Inc. was
merged with and into PI Acquisition Corp. and PharmaKinetics Laboratories, Inc.
was the surviving corporation. Pursuant to the Merger Agreement, dated as of
June 20, 2002, all outstanding shares of PharmaKinetics Laboratories, Inc.
common stock were terminated and shareholders were issued Borrower’s common
shares. The Borrower subsequently changed the name of PharmaKinetics
Laboratories, Inc. to BASi Maryland, Inc. 

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT

SCHEDULE 2

Trademark and Trademark Applications and Copyright Registrations

	Application or

Registration No.	Trademark	Country      	Registration

Date
	2,083,635 	BAS (Stylized)	United States	07/29/1997
	1,461,414 	BAS ANALYTICS (Stylized)	United States	10/13/1987
	2,431,031 	CULEX	United States	02/27/2001
	76/424,603	EMPIS	United States	08/03/2004
	76/440,731	EMPIS (and Design)	United States	08/03/2004
	1,902,141 	UNIJET	United States	06/27/1995
	TX4-877-335	Raturn v1.0 (copyright)	n/a	10/19/1998

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT

SCHEDULE 2 (Cont’d)

Patents

	Title	Patent No.	Issue Date	Serial No.	Filed	Country
	 

	Linear Microdialysis	5,706,806 	01/13/1998	08/638,642	04/26/1996	United States
	Probe with Support
	Fiber
	 
	Electrochemical	5,399,256 	03/21/1995	08/178,913	01/07/1994	United States
	Detector Cell
	 
	Movement-
Responsive
System for Conducting
Tests on Freely-Moving
Animals	0,872,179 	02/12/2003	97310046.4	12/12/1997	European
Patent
Convention
	 
	Movement-
Responsive
System for Conducting
Tests on Freely-Moving
Animals	published 	published	99307384	09/17/1999	European
Patent
Convention
	 
	Movement-	published 	published	106661/98	04/16/1998	Japan
	Responsive
	System for Conducting
	Tests on Freely-Moving
	Animals
	 
	Movement-	5,816,256 	10/06/1998	08/839,299	04/17/1997	United States
	System for Conducting
	Tests on Freely-Moving
	Animals
	 
	Movement-	6,062,224 	05/16/2000	09/156,459	09/18/1998	United States
	System for Conducting
	Tests on Freely-Moving
	Animals
	 
	Movement- DK/EP	0,872,179 	02/12/2003	97310046.4	12/12/1997	Denmark
	System for Conducting
	Tests on Freely-Moving
	Animals
	 
	Movement-	0,872,179(E)	02/24/2003	97310046.4	12/12/1997	Spain
	System for Conducting
	Tests on Freely-Moving
	Animals
	 
	Movement-	0,872,179(E)	 	97310046.4	12/12/1997	Belgium
	System for Conducting
	Tests on Freely-Moving
	Animals

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT

SCHEDULE 2 (Cont’d)

Registered Copyrights

Patents

	Title	Patent No.	Issue Date	Serial No.	Filed	Country
	 

	Pinch Value	published	published	10/175,580	06/19/2002	United States
	and Method
	of Operating Same
	 

	Device, System	6,557,898	05/06/2003	09/804,900	03/13/2001	United States
	and Method for
	Labeling
	Three-Dimensional
	Objects
	 

	Device, System and

Method for Labeling

Three-Dimensional

Objects	published	published	WO 02/072365 A1	03/11/2002	World
Intellectual
Property
Organization
	 

	Device and Method	pending	pending	60/393,738	07/03/2002	United States
	Electrocardiology on
	Freely Moving Animals
	 

	Device and Method	pending	pending	60/393,816	07/03/2002	United States
	Drug Delivery to
	Animals

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT

SCHEDULE 2 (Cont’d)

Licenses

	
Name of Licensee	
Licensed

Mark
	
Date of

License
	
Expiration
Date

There are no licenses that are for products, services, or intellectual property
that generate revenues for Borrower (i.e., numerous user software licenses are
not included herein).

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT

SCHEDULE 3

Location of Collateral

Equipment Locations:

Bioanalytical Systems, Inc.

2701 Kent Avenue

West Lafayette, Indiana 47906

BAS Evansville, Inc.

1024 Middle Mt. Vernon Road

Mount Vernon, Indiana 47620

BASi Northwest Laboratory, Inc.

2075 Lafayette Avenue

McMinnville, Oregon  97128

BASi Maryland, Inc.

302 West Fayette Street

Baltimore, Maryland  21201

Inventory Locations:

Bioanalytical Systems, Inc.

2701 Kent Avenue

West Lafayette, Indiana 47906

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT

SCHEDULE 4

Investment Property

A.    U.S. CERTIFICATED SECURITIES:

	
Issuer	
Issuer's
Organization	
Certificate
Number	
Number of
Shares Owned	
Number of
Shares Pledged	
Percentage
of Shares
Pledged
	 

	
BAS

Evansville, Inc.	
 	
1	
294	
294	
100%
	 

	
BAS

Maryland, Inc.	
 	
	
	
	
100%
	 

	
BAS Northwest

Laboratory, Inc.	
 	
	
	
	
100%

B.    NON-U.S. CERTIFICATED
SECURITIES (“FOREIGN
SUBSIDIARIES”)

	
Issuer	
Issuer's
Organization	
Certificate
Number	
Number of
Shares Owned	
Number of
Shares Pledged	
Percentage
of Shares
Pledged
	 

	
Bioanalytical
Systems, Ltd.	
 	
	
	
	
65%
	 

	
BAS
Instruments, Ltd.	
 	
	
	
	
65%
	 

	
BAS Analytics, Ltd.	
 	
	
	
	
65%

C.    UNCERTIFICATED SECURITIES:

	
Issuer	
Issuer’s
Organization	
Description of Collateral	
Percentage Ownership Interest

None

D.    SECURITY ENTITLEMENTS:

None

E.    SECURITY ACCOUNTS:

None

F.    COMMODITY CONTRACTS:

None

G.    COMMODITY ACCOUNTS:

None

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENT

SCHEDULE 5

Negotiable Collateral

None

AMENDED AND RESTATED GENERAL
SECURITY AGREEMENTMr. Eugene Stark
7 Linderberry Court
Martinsville, NJ 08836

Dear Gene:

This letter confirms the terms of your employment with Prospect Administration,
LLC ("PA"), the administrator of Prospect Energy Corporation ("PSEC"). Although
you will be employed by PA, your engagement will be as Chief Financial Officer
of PSEC.

Your primary responsibility will be to fulfill all responsibilities of the Chief
Financial Officer of PSEC.

You will be compensated at a rate so as to be entitled to an annual salary of
$150,000, payable in 12 monthly installments in arrears. Your initial target
bonus will be $150,000 for any full calendar year (pro rated for the portion of
the current calendar year remaining), depending on your and PSEC's performance,
paid at the end of such calendar year or as soon thereafter as practicable. The
full target bonus will be paid unless the Board of Directors of PSEC directs a
lesser amount pursuant to a resolution stating the reasons therefor. Your full
time start date will be on January 3, 2004.

In addition, Prospect Capital Management, LLC ("PCM"), the investment adviser of
PSEC, allocates up to half (50%) of the incentive carry received under the
investment advisory agreement between PSEC and PCM to the professionals
originating, closing, monitoring and exiting the transactions earning that
incentive carry (the "Professional Share"), and you will receive from PCM 1/20
(5%) of that Professional Share (1/40 or 2.5% of the entire incentive carry) as
and when paid during your tenure with PSEC. You hereby agree and acknowledge
that your employment under the terms of this letter does not include being a
member of the investment committee of PCM and your participation in the
Professional Share as described above shall not entitle you to any such
position.

You understand that any increase in the amount of your bonus, and incentive
carry payments in excess of the minimum stated above, if any, will be subject to
the sole discretion of the Board of Directors of PSEC (in the case of the bonus)
and PSEC and PCM (in the case of the incentive carry), which discretion shall be
subject to no

<PAGE>

standard of reasonableness or review, and shall give rise to no claim in any
judicial, regulatory or arbitration body.

You will receive the same health benefit package I receive (the waiting period
is 30 days).

This agreement may be terminated at any time by either party provided that, if
you are terminated not for cause, you shall be paid $300,000. Cause shall be
defined as (i) willful failure to discharge the responsibilities of the Chief
Financial Officer, (ii) commission of a felony involving dishonesty or (iii) a
finding by the Board of Directors of PSEC that you have committed a wrongful act
materially adverse to PSEC. In addition to other common law duties imposed on an
officer or employee, you agree not to aid any competitor to the potential
detriment of PSEC, PA, PCM or their affiliates during the term of your
employment with PA or your position as Chief Financial Officer of PSEC and for
six months thereafter.

You agree to respect the confidentiality of all confidential or proprietary
information you obtain as a result of your employment by PA or your position
with PSEC or its affiliates. You agree not to use any such confidential or
proprietary information to compete with or otherwise harm PSEC, PA, PCM or any
of their affiliates. You agree to keep this agreement confidential, except as
required by law. This confidentiality provision shall survive for two years
following the term of this agreement.

This agreement shall be governed by the laws of the State of New York for
contracts made and to be enforced therein. We agree that we shall resolve any
dispute through binding arbitration in New York City according to the rules of
the American Arbitration Association.

This agreement is our entire agreement, superseding all other agreements, and
this agreement cannot be amended except in writing by the party charged.

You acknowledge that allocations of credit to team members for closed
transactions and for bonus purposes is not amenable to any simple or precise
formula but must be entrusted to the discretion of PSEC and PCM; accordingly,
wherever this agreement refers to such allocations or to the discretion of PSEC
and PCM, such discretion is subject to no standard of reasonableness, shall be
unreviewable by any judicial, arbitration or regulatory body and shall not give
rise to any claim in arbitration or the courts.

<PAGE>

Gene, you have an important role and we look forward to you stepping aboard as
soon as possible.

Very truly yours,

Prospect Energy Corporation

By:  ____________________
      Name:  John Barry
      Title: Chief Executive Officer

Prospect Administration, LLC

By:  ____________________
      Name:  John Barry
      Title:

Prospect Capital Management, LLC
(solely for purposes of the portion of this letter
relating to the participation in its carried interest)

By: _____________________
      Name:  John Barry
      Title:

Accepted and Agreed to:

_________________________
Eugene Stark

_________________________
Date

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