
BUSINESS LOAN AGREEMENT


<TABLE>
<CAPTION>
 <S>              <C>             <C>             <C>            <C>          <C>              <C>             <C>            <C>
   Principal      Loan Date       Maturity        Loan No.       Call         Collateral       Account       Officer        Initials
 $3,500,000.00    06-24-1999      06-24-2004                                      404          3209009006      00002

<FN>
References  in the  above  area are for  Lender's  use only and do not limit the
applicability of this document to any particular loan or item.
</FN>
</TABLE>


BORROWER: BIOANALYTICAL SYSTEMS, INC.      LENDER:  BANK ONE, INDIANA, NA
          2701 KENT AVE.                            COMMERCIAL/BUSINESS BANKING-
          WEST LAFAYETTE, IN 47906                  LAFAYETTE
                                                    111 MONUMENT CIRCLE
                                                    INDIANAPOLIS, IN 46277


THIS BUSINESS LOAN AGREEMENT between  BIOANALYTICAL  SYSTEMS,  INC. ("Borrower")
and Bank One,  Indiana,  NA ("Lender") is made and executed as of June 24, 1999.
This  Agreement  governs all loans,  credit  facilities  and/or other  financial
accommodations  described  herein and, unless  otherwise agreed to in writing by
Lender and Borrower,  all other present and future loans,  credit facilities and
other financial  accommodations  provided by Lender to Borrower. All such loans,
credit  facilities  and  other  financial  accommodations,   together  with  all
renewals,  amendments  and  modifications  thereof,  are  referred  to  in  this
Agreement  individually as the "Loan" and collectively as the "Loans."  Borrower
understands and agrees that: (a) in granting,  renewing,  or extending any Loan,
Lender is relying upon Borrower's  representations,  warranties, and agreements,
as set forth in this Agreement; and (b) all such Loans shall be and shall remain
subject to the following terms and conditions of this Agreement.

TERM.  This Agreement shall be effective as of June 24, 1999, and shall continue
thereafter  until all Loans and other  obligations  owing by  Borrower to Lender
hereunder have been paid in full and Lender has no commitments or obligations to
make further advances under the Loans to Borrower.

DEFINITIONS.  The following words shall have the following meanings when used in
this  Agreement.  Terms not otherwise  defined in this Agreement  shall have the
meanings  attributed to such terms in the Uniform  Commercial Code as adopted in
the State of Indiana.  All  references  to dollar  amounts shall mean amounts in
lawful money of the United States of America.

     Agreement.  The word "Agreement" means this Business Loan Agreement, as may
     be amended or modified  from time to time,  together  with all exhibits and
     schedules attached hereto from time to time.

     Borrower. The word "Borrower" means BIOANALYTICAL SYSTEMS, INC..

     Collateral. The word "Collateral" means and includes without limitation all
     property and assets  granted as  collateral  for any Loan,  whether real or
     personal property, whether granted directly or indirectly,  whether granted
     now or in the  future,  and  whether  granted  in the  form  of a  security
     interest,  mortgage, deed of trust,  assignment,  pledge, chattel mortgage,
     chattel trust,  factor's lien,  equipment  trust,  conditional  sale, trust
     receipt,  lien,  charge,  lien  or  title  retention  contract,   lease  or
     consignment  intended as a security  device,  or any other security or lien
     interest whatsoever, whether created by law, contract, or otherwise.

     ERISA. The word "ERISA" means the Employee  Retirement  Income Security Act
     of 1974, as amended.

     Grantor.  The word "Grantor" means and includes each and all of the persons
     or entities  granting a Security  Interest in any Collateral for any of the
     Loans.


<PAGE>

     Guarantor.The  word  "Guarantor"  means  and  includes  each and all of the
     guarantors, sureties, and accommodation parties for any of the Loans.

     Indebtedness.  The word "indebtedness" means the indebtedness  evidenced by
     the Note,  including all principal and accrued interest  thereon,  together
     with all other  liabilities,  costs and  expenses  for  which  Borrower  is
     responsible under this Agreement or under any of the Related Documents.  In
     addition, the word "Indebtedness" includes all other obligations, debts and
     liabilities,  plus any accrued interest thereon,  owing by Borrower, or any
     one or more of them,  to Lender of any kind or  character,  now existing or
     hereafter  arising,  as well as all  present  and  future  claims by Lender
     against Borrower, or any one or more of them, and all renewals, extensions,
     modifications,  substitutions  and  rearrangements of any of the foregoing;
     whether such  Indebtedness  arises by note,  draft,  acceptance,  guaranty,
     endorsement,  letter of credit, assignment;  overdraft, indemnity agreement
     or otherwise; whether such Indebtedness is voluntary or involuntary, due or
     not  due,  direct  or  indirect,  absolute  or  contingent,  liquidated  or
     unliquidated; whether such Indebtedness is voluntary or involuntary, due or
     not  due,  direct  or  indirect,  absolute  or  contingent,  liquidated  or
     unliquidated;  whether Borrower may be liable  individually or jointly with
     others;  whether  Borrower  may be liable  primarily or  secondarily  or as
     debtor, maker, comaker, drawer, endorser,  guarantor, surety, accommodation
     party or otherwise.

     Lender.  The word "Lender" means Bank One,  Indiana,  NA, it successors and
     assigns.

     Note.  The word  "Note"  means any and all  promissory  note or notes which
     evidence  Borrower's  Loans in favor of Lender,  as well as any  amendment,
     modification, renewal or replacement thereof.

     Permitted Liens.  The words "Permitted  Liens" mean: (a) liens and security
     interests  securing  Indebtedness owed by Borrower to Lender; (b) liens for
     taxes,  assessments,  or similar  charges  either (i) not yet due,  or (ii)
     being  contested  in good faith by  appropriate  proceedings  for and which
     Borrower has  established  adequate  reserves;  (c) purchase money liens or
     purchase money security  interests upon or in any property acquired or held
     by Borrower in the ordinary  course of business to secure any  indebtedness
     permitted under this Agreement; and (d) liens and security interests which,
     as of the date of this  Agreement,  have been  disclosed to and approved by
     the Lender in writing.

     Related Documents.  The words "Related  Documents" mean and include without
     limitation   the  Note  and  all  credit   agreements,   loan   agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments,  agreements and documents, whether now
     or hereafter existing, executed in connection with the Note.

     Security Agreement. The words "Security Agreement" mean and include without
     limitation   any    agreements,    promises,    covenants,    arrangements,
     understandings or other agreements,  whether created by law,  contract,  or
     otherwise,  evidencing,  governing,  representing,  or  creating a Security
     Interest.

     Security Interest.  The words "Security  Interest" mean and include without
     limitation  any type of security  interest,  whether in the form of a lien,
     charge,  mortgage,  deed of trust,  assignment,  pledge,  chattel mortgage,
     chattel trust,  factor's lien,  equipment  trust,  conditional  sale, trust
     receipt, lien or title retention contract, lease or consignment intended as
     a security  device,  or any other  security  or lien  interest  whatsoever,
     whether created by law, contract, or otherwise.

REPRESENTATIONS  AND WARRANTIES.  Borrower represents and warrants to Lender, as
of the date of this Agreement,  as of the date of each request for an advance or
disbursement  of Loan  proceeds,  as of the date of any  renewal,  extension  or
modification of any Loan, and at all times any indebtedness exists hereafter:

     Organization.  Borrower is a corporation  which is duly organized,  validly
     existing,  and in good standing  under the laws of the State of Indiana and
     is duly  qualified  and in good  standing  in all  other  states  in  which
     Borrower is doing  business.  Borrower has the full power and  authority to
     own its  properties and to transact the businesses in which it is presently
     engaged or presently proposes to engage.


<PAGE>

     Authorization.  The execution,  delivery, and performance of this Agreement
     and all  Related  Documents  to which  Borrower  is a party  have been duly
     authorized by all necessary  action; do not require the consent or approval
     of any other person,  regulatory authority or governmental body; and do not
     conflict with,  result in a violation of, or constitute a default under (a)
     any provision of its articles of incorporation or organization,  or bylaws,
     or any agreement or other instrument  binding upon Borrower or (b) any law,
     governmental  regulation,  court decree,  or order  applicable to Borrower.
     Borrower has all requisite  power and authority to execute and deliver this
     Agreement and all other Related Documents to which Borrower is a party.

     Financial  Information.  Each financial  statement of Borrower  supplied to
     Lender truly and completely  discloses Borrower's financial condition as of
     the date of the statement, and there has been no material adverse change in
     Borrower's  financial  condition  subsequent to the date of the most recent
     financial statement supplied to Lender. Borrower has no material contingent
     obligations except as disclosed in such financial statements.

     Legal  Effect.  This  Agreement  and all other  Related  Documents to which
     Borrower is a party  constitute  legal,  valid and binding  obligations  of
     Borrower  enforceable  against Borrower in accordance with their respective
     terms,  except as  limited by  bankruptcy,  insolvency  or similar  laws of
     general  application  relating to the enforcement of creditors'  rights and
     except  to the  extent  specific  remedies  may  generally  be  limited  by
     equitable principles.

     Properties.  Except  as  contemplated  by this  Agreement or as  previously
     disclosed in Borrower's financial statements or in writing to Lender and as
     accepted  by  Lender,  and  except  for  property  tax  liens for taxes not
     presently  due and  payable,  Borrower  is the sole  owner of, and has good
     title to,  all of  Borrower's  properties  free and  clear of all  Security
     Interests,  and  has not  executed  any  security  documents  or  financing
     statements  relating to such properties.  All of Borrower's  properties are
     titled in  Borrower's  legal name,  and Borrower  has not used,  or filed a
     financing  statement  under,  any other  name for at least the last six (6)
     years.

     Compliance.  Except as  disclosed  in  writing to Lender  (a)  Borrower  is
     conducting Borrower's businesses in material compliance with all applicable
     federal, state and local laws, statutes,  ordinances,  rules,  regulations,
     orders,  determinations and court decisions,  including without limitation,
     those  pertaining  to health or  environmental  matters,  and (b)  Borrower
     otherwise  does  not  have  any  known  material  contingent  liability  in
     connection with the release into the environment,  disposal or the improper
     storage of any toxic or hazardous substance or solid waste.

     Litigation and Claims. No litigation, claim, investigation,  administrative
     proceeding or similar  action  (including  those for unpaid taxes)  against
     Borrower is pending or  threatened,  and no other event has occurred  which
     may  in any  one  case  or in the  aggregate  materially  adversely  affect
     Borrower's  financial  condition  or  properties,  other  than  litigation,
     claims,  or  other  events,  if  any,  that  have  been  disclosed  to  and
     acknowledged by Lender in writing.

     Taxes. All tax returns and reports of Borrower that are or were required to
     be  filed,   have  been  filed,  and  all  taxes,   assessments  and  other
     governmental  charges  have been paid in full,  except those that have been
     disclosed in writing to Lender which are presently being or to be contested
     by Borrower in good faith in the ordinary  course of business and for which
     adequate reserves have been provided.

     Lien Priority.  Unless  otherwise  previously  disclosed to and approved by
     Lender in writing,  Borrower has not entered into any Security  Agreements,
     granted a Security  Interest or permitted  the filing or  attachment of any
     Security  Interests on or affecting any of the Collateral,  except in favor
     of Lender.


<PAGE>

     Licenses,  Trademarks and Patents.  Borrower possesses and will continue to
     possess all permits, licenses, trademarks, patents and rights thereto which
     are needed to conduct Borrower's  business and Borrower's business does not
     conflict  with or violate any valid  rights of others  with  respect to the
     foregoing.

     Commercial  Purposes.  Borrower intends to use the Loan proceeds solely for
     business  or  commercial  related  purposes  approved  by  Lender  and such
     proceeds will not be used for the  purchasing or carrying of "margin stock"
     as defined in  Regulation U issued by the Board of Governors of the Federal
     Reserve System.

     Ineligible  Securities.  No portion or any  advance or Loan made  hereunder
     shall be used directly or indirectly to purchase ineligible securities,  as
     defined  by  applicable   regulations   of  the  Federal   Reserve   Board,
     underwritten  by  Lender  or any other  affiliate  of Banc One  Corporation
     during the underwriting period and for 30 days thereafter.

     Employee Benefit Plans. Each employee benefit plan as to which Borrower may
     have any liability  complies in all material  respects with all  applicable
     requirements  of law and  regulations,  and  (i) no  Reportable  Event  nor
     Prohibited  Transaction  (as defined in ERISA) has occurred with respect to
     any such  plan,  (ii)  Borrower  has not  withdrawn  from any such  plan or
     initiated  steps to do so, (iii) no steps have been taken to terminate  any
     such plan,  and (vi)  there are no  unfunded  liabilities  other than those
     previously disclosed to Lender in writing.

     Location of Borrower's  Offices and Records.  Borrower's place of business,
     or Borrower's chief executive office if Borrower has more than one place of
     business,  is located at 2701 KENT AVE., WEST LAFAYETTE,  IN 47906.  Unless
     Borrower has  designated  otherwise  in writing  this  location is also the
     office  or  offices  where  Borrower  keeps  its  records   concerning  the
     Collateral.

     Information.  All  information  heretofore  or  contemporaneously  herewith
     furnished by Borrower to Lender for the purposes of or in  connection  with
     this  Agreement  or  any  transaction   contemplated  hereby  is,  and  all
     Information  hereafter furnished by or on behalf of Borrower to Lender will
     be,  true and  accurate in every  material  respect on the date as of which
     such information is dated or certified;  and none of such information is or
     will be incomplete by omitting to state any material fact necessary to make
     such information not misleading.

     Survival of Representations and Warranties. Borrower understands and agrees
     that Lender, without independent  investigation,  is relying upon the above
     representations  and  warranties  in extending  Loan  advances to Borrower.
     Borrower further agrees that the foregoing  representations  and warranties
     shall be  continuing  in nature  and shall  remain in full force and effect
     during the term of this Agreement.

AFFIRMATIVE  COVENANTS.  Borrower  covenants and agrees with Lender that,  while
this Agreement is in effect, Borrower will:

     Depository  Relationship.  Establish  and  maintain  its primary  operating
     account(s) with Lender.

     Litigation.  Promptly inform Lender in writing of (a) all material  adverse
     changes  in  Borrower's  financial  condition,  (b)  all  existing  and all
     threatened litigation, claims,  investigations,  administrative proceedings
     or  similar  actions  affecting  Borrower  or  any  Guarantor  which  could
     materially  affect the  financial  condition  of Borrower or the  financial
     condition of any Guarantor, and (c) the creation,  occurrence or assumption
     by Borrower of any actual or contingent  liabilities  not  permitted  under
     this Agreement.


<PAGE>

     Financial  Records.  Maintain  its books and  records  in  accordance  with
     generally accepted  accounting  principles,  applied on a consistent basis,
     and  permit  Lender to  examine,  audit  and make and take  away  copies or
     reproductions of Borrower's  books and records at all reasonable  times. If
     Borrower  now or at any time  hereafter  maintains  any records  (including
     without  limitation   computer  generated  records  and  computer  software
     programs for the  generation of such records) in the  possession of a third
     party, Borrower,  upon request of Lender, shall notify such party to permit
     Lender free access to such records at all  reasonable  times and to provide
     Lender  with  copies  of any  records  it may  request,  all at  Borrower's
     expense.

     Financial Statements.  Furnish Lender with, as soon as available, but in no
     event later than one hundred twenty (120) days after the end of each fiscal
     year, Borrower's balance sheet, income statement,  and statement of changes
     in  financial  position for the year ended,  audited by a certified  public
     accountant  satisfactory to Lender, together with the management letter, if
     any,  prepared by such accountants  promptly upon receipt,  and, as soon as
     available, but in no event later than forty-five (45) days after the end of
     each fiscal  quarter,  Borrower's  balance  sheet,  income  statement,  and
     statement of changes in financial  position for the period ended,  prepared
     and certified,  subject to year-end review  adjustments,  as correct to the
     best  knowledge  and belief by Borrow's  chief  financial  officer or other
     officer or person  acceptable to Lender.  All financial reports required to
     be provided  under this  Agreement  shall be prepared  in  accordance  with
     generally accepted  accounting  principles,  applied on a consistent basis,
     and certified by Borrower as being true and correct.

     Additional Information. Furnish such additional information and statements,
     lists of assets  and  liabilities,  agings  of  receivables  and  payables,
     inventory  schedules,  budgets,  forecasts,  tax returns, and other reports
     with respect to Borrower's  financial  condition and business operations as
     Lender may request from time to time.

     Insurance.  Maintain  fire  and  other  risk  insurance,  public  liability
     insurance,  business  interruption  insurance  and such other  insurance as
     Lender may require with respect to Borrower's properties and operations, in
     form, amounts, coverages and with insurance companies reasonably acceptable
     to Lender.  Borrower,  upon request of Lender,  will deliver to Lender from
     time to time the policies or certificates of insurance in form satisfactory
     to Lender,  including  stipulations that coverages will not be cancelled or
     diminished  without at least  thirty  (30) days'  prior  written  notice to
     Lender.  In connection  with all policies  covering  assets in which Lender
     holds or is  offered a  Security  Interest  for the  Loans,  Borrower  will
     provide  Lender  with such  lender loss  payable or other  endorsements  as
     Lender may require.

     Insurance Reports.  Furnish to Lender,  upon request of Lender,  reports on
     each  existing  insurance  policy  showing such  information  as Lender may
     reasonably  request,  including without  limitation the following:  (a) the
     name of the insurer;  (b) the risks insured;  (c) the amount of the policy;
     (d) the properties  insured;  (e) the then current  property  values on the
     basis of which  insurance has been obtained,  and the manner of determining
     those values; and (f) the expiration date of the policy.

     Other  Agreements.  Comply  with all  terms  and  conditions  of all  other
     agreements,  whether now or hereafter  existing,  between  Borrower and any
     other  party and notify  Lender  immediately  in writing of any  default in
     connection with any other such agreements.

     Loan  Proceeds.  Use all  Loan  proceeds  solely  for  Borrower's  business
     operations,  unless  specifically  consented  to the  contrary by Lender in
     writing.


<PAGE>

     Taxes,   Charges  and  Liens.  Pay  and  discharge  when  due  all  of  its
     indebtedness and obligations, including without limitation all assessments,
     taxes,  governmental  charges,  levies and liens, of every kind and nature,
     imposed upon Borrower or its properties,  income, or profits,  prior to the
     date on which  penalties  would  attach,  and all lawful  claims  that,  if
     unpaid,  might become a lien or charge upon any of  Borrower's  properties,
     income, or profits;  provided however, Borrower will not be required to pay
     and discharge any such assessment, tax, charge, levy, lien or claim so long
     as (a) the  legality  of the  same  shall  be  contested  in good  faith by
     appropriate  proceedings,  and (b) Borrower  shall have  established on its
     books  adequate  reserves with respect to such contested  assessment,  tax,
     charge,  levy,  lien,  or  claim  in  accordance  with  generally  accepted
     accounting  principles.  Borrower,  upon demand of Lender,  will furnish to
     Lender  evidence of payment of the  assessments,  taxes,  charges,  levies,
     liens and claims and will authorize the appropriate  governmental  official
     to deliver to Lender at any time a written  statement  of any  assessments,
     taxes,  charges,  levies,  liens and claims against Borrower's  properties,
     Income, or profits.

     Performance.  Perform and comply with all terms, conditions, and provisions
     set  forth  in this  Agreement  and in the  Related  Documents  in a timely
     manner,  and promptly notify Lender if Borrower learns of the occurrence of
     any event which  constitutes  an Event of Default  under this  Agreement or
     under any of the Related Documents.

     Operations. Conduct its business affairs in a reasonable and prudent manner
     and in compliance  with all applicable  federal,  state and municipal laws,
     ordinances,  rules and  regulations  respecting its  properties,  charters,
     businesses and operations,  including without  limitation,  compliance with
     the Americans With Disabilities Act, all applicable environmental statutes,
     rules,  regulations and ordinances  with all minimum funding  standards and
     other  requirements  of ERISA  and  other  laws  applicable  to  Borrower's
     employee benefit plans.

     Compliance Certificate.  Unless waived in writing by Lender, provide Lender
     quarterly  within  forty-five  (45) days  with a  certificate  executed  by
     Borrower's chief financial  officer,  or other officer or person acceptable
     to Lender, (a) certifying that the representations and warranties set forth
     in this  Agreement  are true and correct as of the date of the  certificate
     and that,  as of the date of the  certificate,  no Event of Default  exists
     under this Agreement,  and (b) demonstrating  compliance with all financial
     covenants set forth in this Agreement.

     Environmental Compliance and Reports. Borrower shall comply in all respects
     with all federal, state and local environmental laws, statutes, regulations
     and ordinances; not cause or permit to exist, as a result of an intentional
     or unintentional action or omission on its part or on the part of any third
     party,  on properly owned and/or  occupied by Borrower,  any  environmental
     activity  where  damage  may  result  to  the   environment,   unless  such
     environmental activity is pursuant to and in compliance with the conditions
     of a permit issued by the appropriate federal,  state or local governmental
     authorities;  and furnish to Lender promptly and in any event within thirty
     (30) days  after  receipt  thereof  a copy of any  notice,  summons,  lien,
     citation,  directive,  letter or other  communication from any governmental
     agency or  instrumentality  concerning  any  intentional  or  unintentional
     action or omission on Borrower's part in connection with any  environmental
     activity  whether or not there is damage to the  environment  and/or  other
     natural resources.


<PAGE>

     Additional Assurances.  Make, execute and deliver to Lender such promissory
     notes,   mortgages,   deeds  of  trust,   security  agreements,   financing
     statements,  instruments,  documents and other  agreements as lender or its
     attorneys  may  reasonably  request to evidence and secure the Loans and to
     perfect all Security Interests.

NEGATIVE  COVENANTS.  Borrower  covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

     Maintain Basic Business.  Engage in any business  activities  substantially
     different than those in which Borrower is presently engaged.

     Continuity of Operations. Cease operations, liquidate, dissolve or merge or
     consolidate with or into any other entity.

     Indebtednes.  Create, incur or assume additional  indebtedness for borrowed
     money,  including capital leases,  or guarantee any indebtedness  owning by
     others,  other  than (a)  current  unsecured  trade  debt  incurred  in the
     ordinary  course  of  business,  (b)  indebtedness  owing  to  Lender,  (c)
     borrowings  outstanding  as of the date hereof and  disclosed  to Lender in
     writing, and (d) any borrowings otherwise approved by Lender in writing.

     Liens. Mortgage,  assign, pledge, grant a security interest in or otherwise
     encumber Borrower's assets, except as allowed as a Permitted Lien.

     Transfer  of  Assets.  Transfer,  sell  or  otherwise  dispose  of  any  of
     Borrower's assets other than in the ordinary course of business.

     Investments.  Invest in, or purchase,  create, form or acquire any interest
     in, any other enterprise or entity.

     Affiliates. Enter into any transaction,  including, without limitation, the
     purchase,  sale,  or exchange of property or the  rendering of any service,
     with any  Affiliate  of  Borrower,  except  in the  ordinary  course of and
     pursuant to the  reasonable  requirements  of Borrower's  business and upon
     fair and  reasonable  terms no less  favorable  than would be obtained in a
     comparable  arm's  length  transaction  with  a  person  or  entity  not an
     Affiliate  of  Borrower.  As used herein,  the term  "Affiliate"  means any
     individual or entity directly or indirectly  controlling,  controlled by or
     under common control with, another entity or individual.

CONDITIONS  PRECEDENT  TO  ADVANCES.  If  Lender is  obligated  to make any Loan
advances or to otherwise disburse any Loan proceeds to Borrower, such obligation
shall be subject to the conditions precedent that as of the date of such advance
or  disbursement  and after giving effect  thereto (a) all  representations  and
warranties  made to Lender in this Agreement and the Related  Documents shall be
true and correct as of the most recent financial statements furnished to Lender,
or in the value of any Collateral, shall have occurred and be continuing, (c) no
event has occurred and is continuing, or would result from the requested advance
or  disbursement,  which with notice or lapse of time, or both, would constitute
an Event of Default, (d) no Guarantor has sought, claimed or otherwise attempted
to limit, modify or revoke such Guarantor's guaranty of any Loan, and (e) Lender
has received all Related  Documents  appropriately  executed by Borrower and all
other proper parties.

ADDITIONAL  AFFIRMATIVE  COVENANT-FIXED CHARGE RATIO. Borrower further covenants
and agrees with Lender that,  while this  Agreement is in effect,  Borrower will
comply at all times with the  following  ratio:  Maintain  as of the end of each
fiscal  quarter,  a ratio of (a) net maturities of long term debt,  taxes,  cash
capital  expenditures  (capital  expenditures  net of  external  financing)  and
dividends for the same such twelve month period, of not less than 1.05 to 1.00.


<PAGE>

ADDITIONAL  AFFIRMATIVE  COVENANT-FUNDED  DEBT.  Borrower further  covenants and
agrees  with Lender  that,  while this  Agreement  is in effect,  Borrower  will
maintain as of each fiscal  quarter and, a ratio of Funded Debt on such date, to
its net income before  interest,  depreciation,  and amortization for the twelve
month period then ending of not greater than 3.0 to 1.0. The term "Funded  Debt"
means, as of the date of any  determination,  outstanding  Indebtedness plus any
other outstanding interest-bearing debt of Borrower.

RIGHT OF SETOFF.  Unless a lien  would be  prohibited  by law or would  render a
nontaxable  account  taxable,  Borrower grants to Lender a contractual  security
interest in, and hereby assigns,  conveys,  delivers,  pledges, and transfers to
Lender all Borrower's right,  title and interest in and to, Borrower's  accounts
with Lender (whether checking, savings, or any other account), including without
limitation all accounts held jointly with someone else and all accounts Borrower
may open in the future.  Borrower  authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the  Indebtedness  against
any and all such accounts.

EVENTS OF DEFAULT.  Each of the following  shall  constitute an Event of Default
under this Agreement:

     Default on  Indebtedness.  Failure of Borrower to make any payment when due
     on any of the Indebtedness.

     Other Defaults. Failure of Borrower, any Guarantor or any Grantor to comply
     with or to  perform  when  due any  other  term,  obligation,  covenant  or
     condition  contained  in this  Agreement,  the Note or in any of the  other
     Related Documents,  or failure of Borrower to comply with or to perform any
     other  term,  obligation,  covenant  or  condition  contained  in any other
     agreement now existing or hereafter arising between Lender and Borrower.

     False  Statements.  Any  warranty,  representation  or  statement  made  or
     furnished to Lender under this Agreement or the Related  Documents is false
     or misleading in any material respect.

     Default to Third  Party.  The  occurrence  of any event  which  permits the
     acceleration of the maturity of any indebtedness owing by Borrower, Grantor
     or any Guarantor to any third party under any agreement or undertaking.

     Bankruptcy or Insolvency.  If the Borrower,  Grantor or any Guarantor:  (i)
     becomes insolvent,  or makes a transfer in fraud of creditors,  or makes an
     assignment for the benefit of creditors, or admits in writing its inability
     to pay its debts as they become due; (ii) generally is not paying its debts
     as such debts  become  due;  (iii) has a  receiver,  trustee  or  custodian
     appointed  for,  or take  possession  of, all or  substantially  all of the
     assets  of such  party or any of the  Collateral,  either  in a  proceeding
     brought by such party or in a  proceeding  brought  against  such party and
     such  appointment  is not  discharged or such  possession is not terminated
     within  sixty  (60) days  after the  effective  date  thereof or such party
     consents to or acquiesces in such  appointment or possession;  (iv) files a
     petition for relief under the United  States  Bankruptcy  Code or any other
     present or future federal or state  insolvency,  bankruptcy or similar laws
     (all  of  the  foregoing   hereinafter   collectively   called  "Applicable
     Bankruptcy  Law") or an  involuntary  petition for relief is filed  against
     such  party  under  any  Applicable  Bankruptcy  Law and  such  involuntary
     petition is not dismissed  within sixty (60) days after the filing thereof,
     or an order for relief  naming such party is entered  under any  Applicable
     Bankruptcy   Law,   or   any   composition,    rearrangement,    extension,
     reorganization  or other  relief of debtors  now or  hereafter  existing is
     requested  or  consented  to by such  party;  (v) fails to have  discharged
     within a period of sixty (60) days any attachment, sequestration or similar
     writ  levied upon any  property of such party;  or (vi) fails to pay within
     thirty (30) days any final money judgment against such party.

     Liquidation,  Death  and  Related  Events.  If  Borrower,  Grantor  or  any
     Guarantor  is  an  entity,   the   liquidation,   dissolution,   merger  or
     consolidation  of  any  such  entity  or,  if  any of  such  parties  is an
     individual, the death or legal incapacity of any such individual.

     Creditor  or  Forfeiture   Proceedings.   Commencement  of  foreclosure  or
     forfeiture   proceedings,   whether  by  judicial  proceeding,   self-help,
     repossession or any other method, by any creditor of Borrower, any creditor
     of any Grantor against any collateral securing the Indebtedness,  or by any
     governmental agency.

EFFECT OF AN EVENT OF DEFAULT.  If any Event of Default shall occur, Lender may,
at its option,  without further notice or demand,  (a) terminate all commitments
and  obligations  of Lender to make Loans to  Borrower,  if any, (b) declare all
Loans and any other  Indebtedness  immediately  due and  payable,  (c) refuse to
advance any  additional  amounts  under the Note, or (d) exercise all the rights
and  remedies  provided  in the  Note  or in any of  the  Related  Documents  or
available at law, in equity, or otherwise;  provided,  however,  if any Event of
Default of the type described in the "Bankruptcy or Insolvency" subsection above
shall occur, all Loans and any other Indebtedness shall automatically become due
and payable,  without any notice,  demand or action by Lender.  Except as may be
prohibited  by  applicable  law, all of Lender's  rights and  remedies  shall be
cumulative and may be exercised  singularly or concurrently.  Election by Lender
to pursue any remedies  shall not exclude  pursuit of any other  remedy,  and an
election  to make  expenditures  or to take action to perform an  obligation  of
Borrower or any Grantor shall not affect Lender's right to declare a default and
to exercise its rights and remedies.


<PAGE>

MISCELLANEOUS PROVISIONS

     Amendments.   This   Agreement,   together  with  any  Related   Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement.  No alteration of or amendment to this
     Agreement  shall be  effective  unless  given in writing  and signed by the
     party or  parties  sought  to be  charged  or bound  by the  alteration  or
     amendment.

     Applicable Law. This Agreement has been delivered to Lender and accepted by
     Lender in the State of Indiana.  Subject to the provisions on  arbitration,
     this  Agreement  shall be governed by and construed in accordance  with the
     laws of the State of  Indiana  without  regard to any  conflict  of laws or
     provisions thereof.

JURY  WAIVER.  THE  UNDERSIGNED  AND LENDER (BY ITS  ACCEPTANCE  HEREOF)  HEREBY
VOLUNTARILY,  KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE  (WHETHER BASED UPON CONTRACT,  TORT
OR OTHERWISE)  BETWEEN OR AMONG THE  UNDERSIGNED AND LENDER ARISING OUT OF OR IN
ANY WAY  RELATED  TO THIS  DOCUMENT,  AND ANY  OTHER  RELATED  DOCUMENT,  OR ANY
RELATIONSHIP  BETWEEN  LENDER AND THE  BORROWER.  THIS  PROVISION  IS A MATERIAL
INDUCEMENT TO LENDER TO PROVIDE THE FINANCING  DESCRIBED  HEREIN OR IN THE OTHER
RELATED DOCUMENTS.

     Arbitration.  Lender and  Borrower  agree that upon the  written  demand of
     either  party,  whether made before or after the  institution  of any legal
     proceedings, but prior to the rendering of any judgment in that proceeding,
     all disputes,  claims and controversies  between them, whether  individual,
     joint,  or class in  nature,  arising  from  this  Agreement,  any  Related
     Document or otherwise,  including without limitation  contract disputes and
     tort  claims,  shall be  resolved  by binding  arbitration  pursuant to the
     Commercial  Rules of the  American  Arbitration  Association  ("AAA").  Any
     arbitration proceeding held pursuant to this arbitration provision shall be
     conducted in the city nearest the Borrower's address having an AAA regional
     office,  or at any other place selected by mutual agreement of the parties.
     No act to take or dispose of any  Collateral  shall  constitute a waiver of
     this arbitration agreement or be prohibited by this arbitration  agreement.
     This arbitration provision shall not limit the right of either party during
     any dispute,  claim or controversy to seek, use, and employ  ancillary,  or
     preliminary rights and/or remedies, judicial or otherwise, for the purposes
     of realizing upon, preserving,  protecting,  foreclosing upon or proceeding
     under  forcible  entry and detainer for possession of, any real or personal
     property,  and any such action shall not be deemed an election of remedies.
     Such remedies include, without limitation, obtaining injunctive relief or a
     temporary  restraining  order,  invoking  a power of sale under any deed of
     trust or  mortgage,  obtaining  a writ of  attachment  or  imposition  of a
     receivership,  or  exercising  any rights  relating to  personal  property,
     including  exercising the right of set-off,  or taking or disposing of such
     property  with  or  without   judicial  process  pursuant  to  the  Uniform
     Commercial  Code. Any disputes,  claims,  or  controversies  concerning the
     lawfulness or reasonableness of an act, or exercise of any right or remedy,
     concerning  any  Collateral,  including  any claim to rescind,  reform,  or
     otherwise  modify any agreement  relating to the Collateral,  shall also be
     arbitrated;  provided,  however that no arbitrator  shall have the right or
     the power to enjoin or restrain any act of either party.  Judgment upon any
     award  rendered  by any  arbitrator  may be  entered  in any  court  having
     jurisdiction.  The statute of  limitations,  estoppel,  waiver,  laches and
     similar  doctrines which would otherwise be applicable in an action brought
     by a party  shall be  applicable  in any  arbitration  proceeding,  and the
     commencement of an arbitration  proceeding shall be deemed the commencement
     of any action for these purposes.  The Federal  Arbitration Act (Title 9 of
     the United  States Code) shall apply to the  construction,  interpretation,
     and enforcement of this arbitration provision.

     Caption  Headings.  Caption  headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the  provisions
     of this Agreement.

     Consent to Loan  Participation.  Borrower  agrees and  consents to Lender's
     sale or  transfer,  whether  now or  later,  of one or  more  participation
     interests  in the  Loans  to one or more  purchasers,  whether  related  or
     unrelated to Lender. Lender may provide, without any limitation whatsoever,
     to any one or more purchasers, or potential purchasers,  any information or
     knowledge Lender may have about Borrower or about any other matter relating
     to the Loan,  and Borrower  hereby waives any rights to privacy it may have
     with  respect to such  matters.  Borrower  additionally  waives any and all
     notices of sale of participation  interests,  as well as all notices of any
     repurchase of such participation interests.


<PAGE>

     Costs and  Expenses.  Borrower  agrees to pay upon  demand all of  Lender's
     expenses,  including  attorneys'  fees,  incurred  in  connection  with the
     preparation,  execution,  enforcement,  modification and collection of this
     Agreement or in connection  with the Loans made pursuant to this Agreement.
     Lender may hire one or more attorneys to help collect the  indebtedness  if
     Borrower does not pay, and Borrower will pay Lender's reasonable attorneys'
     fees.

     Notices.  All notices  required to be given under this  Agreement  shall be
     given in writing,  and shall be effective  when actually  delivered or when
     deposited with a nationally  recognized  overnight  courier or deposited in
     the United  States mail,  first class,  postage  prepaid,  addressed to the
     party to whom the notice is to be given at the  address  shown  above.  Any
     party may change its  address for notices  under this  Agreement  by giving
     formal written notice to the other parties;  specifying that the purpose of
     the notice is to change the party's address. For notice purposes,  Borrower
     will keep Lender informed at all times of Borrower's current address(es).

     Severability.  If a court of competent  jurisdiction finds any provision of
     this  Agreement  to be  invalid  or  unenforceable  as  to  any  person  or
     circumstance,  such  finding  shall not render  that  provision  invalid or
     unenforceable as to any other persons or  circumstances.  If feasible,  any
     such  offending  provision  shall be deemed to be modified to be within the
     limits of enforceability or validity;  however,  if the offending provision
     cannot be so  modified,  it shall be stricken and all other  provisions  of
     this Agreement in all other respects shall remain valid and enforceable.

     Counterparts.  This Agreement may be executed in one or more  counterparts,
     each of which shall be deemed an original and all of which  together  shall
     constitute  the same  document.  Signature  pages may be detached  from the
     counterparts  to a single copy of this  Agreement  to  physically  form one
     document.

     Successors  and Assigns.  All covenants and  agreements  contained by or on
     behalf of Borrower shall bind its successors and assigns and shall inure to
     the benefit of Lender,  its  successors  and assigns.  Borrower  shall not,
     however,  have the right to assign its rights  under this  Agreement or any
     interest therein, without the prior written consent of Lender.

     Survival. All warranties,  representations,  and covenants made by Borrower
     in this Agreement or in any  certificate or other  instrument  delivered by
     Borrower to Lender under this  Agreement  shall be  considered to have been
     relied upon by Lender and will  survive the making of the Loan and delivery
     to Lender of the Related Documents, regardless of any investigation made by
     Lender or on Lender's behalf.

     Time is of the Essence.  Time is of the essence in the  performance of this
     Agreement.

     Waiver.  Lender  shall not be deemed to have  waived any rights  under this
     Agreement  unless such waiver is given in writing and signed by Lender.  No
     delay or  omission  on the part of Lender  in  exercising  any right  shall
     operate as a waiver of such right or any other right. A waiver by Lender of
     a provision of this Agreement shall not prejudice or constitute a waiver of
     Lender's right otherwise to demand strict compliance with that provision or
     any other provision of this Agreement.  No prior waiver by Lender,  nor any
     course of dealing  between  Lender and Borrower,  or between Lender and any
     Grantor or Guarantor,  shall  constitute a waiver of any of Lender's rights
     or of any  obligations  of  Borrower  or of any  Grantor  as to any  future
     transactions.  Whenever  the  consent  of Lender  is  required  under  this
     Agreement, the granting of such consent by Lender in any instance shall not
     constitute continuing consent in subsequent instances where such consent is
     required,  and in all cases such  consent may be granted or withheld in the
     sole discretion of Lender.




<PAGE>


BORROWER  ACKNOWLEDGES  HAVING READ ALL THE  PROVISIONS  OF THIS  BUSINESS  LOAN
AGREEMENT,  AND BORROWER  AGREES TO ITS TERMS.  THIS AGREEMENT IS EXECUTED AS OF
THE DATE SET FORTH ABOVE.

         BORROWER:

         BIOANALYTICAL SYSTEMS, INC.


         By:
            ---------------------------------------
            Doug Wieten, Vice President of Finances

         LENDER:

         Bank One, Indiana, NA


         By:
            ---------------------------------------
            Authorized Officer








