OFFICE LEASE by and between 300 W. FAYETTE STREET, LLC (Landlord) and BASI MARYLAND, INC. (Tenant)

OFFICE LEASE

by and between



300 W. FAYETTE STREET, LLC

(Landlord)



and



BASI MARYLAND, INC.

(Tenant)

TABLE OF CONTENTS

1

2

LEASE AGREEMENT

        This LEASE, made ___________________, 2004 by and between 300 W. FAYETTE STREET, LLC, a Delaware limited liability company, hereinafter called “Landlord,” and BASI MARYLAND, INC., a Maryland corporation, hereinafter called “Tenant.”

WITNESSETH :

        That in consideration of the mutual promises herein contained, the Landlord hereby rents to the Tenant, and the latter does hereby rent from the former, the Premises described as floors Basement, 2, 3, 4, 5, 6 and 7 of 300-306 W. Fayette Street, Baltimore City, Maryland, more particularly described on Exhibit A , attached hereto and made a part hereof, containing an agreed-upon amount of 101,000 square feet (the “Premises”) for the term of three (3) years beginning on the Commencement Date as hereinafter defined. The building at 300-306 W. Fayette Street will hereinafter be referred to as the “Building.”

        The Commencement Date, whenever used herein, shall be the date when 300-306 W. Fayette Street is conveyed to Landlord by Tenant via special warranty deed. Notwithstanding anything to the contrary contained herein, for the purpose of prevention of the application of the rule against perpetuities, if the Commencement Date has not occurred as of the date that is seven (7) years after the date of final execution hereof, this Lease shall be deemed terminated and shall be void and of no further force and effect.

        This Lease Agreement is contingent upon a Guaranty of Lease being executed by Bioanalytical Systems, Inc., which is attached as Exhibit F .

        1.         Rent :

        The total monthly rental for each month of the term after the Commencement Date shall be paid by Tenant in advance, on the first day of each month, in equal monthly installments of Sixty-Seven Thousand Three Hundred Thirty-Three Dollars and Thirty-Three Cents ($67,333.33). If the term does not begin on the first day or end on the last day of a month, the rent for that partial month shall be prorated by multiplying the monthly rent by a fraction, the numerator of which is the number of days of the partial month included in the term and the denominator of which is the total number of days in that full calendar month. The first installment of rent shall be any partial month plus the next full month’s rent and is due and payable on the Commencement Date (including Tenant’s Proportionate Share of estimated Real Estate Taxes and Operating Costs).

        2.         Payment, Late Charge, Time of Essence :

        The Tenant covenants to pay the rent as herein provided without any deduction whatsoever, and without any obligation on the Landlord to make demand for it, failing which the Tenant shall pay to the Landlord as Additional Rent, after the fifth (5th) Business Day (“Business Day” means every day except Saturdays, Sundays and Federal Holidays) that such payment remains due but unpaid, a late charge equal to five percent (5%) of such payment which remains due but unpaid. Time is of the essence in this Lease. Payments shall be made to Landlord at the address set forth herein for Notice.

1

        3.         Tenant’s Proportionate Share :

        Tenant’s Proportionate Share means a fraction, the numerator of which is the number of rentable square feet of the Premises and the denominator of which is the number of rentable square feet leased and occupied in the Building, subject to adjustment from time to time as the numerator and denominator change.

        4.         Real Estate Taxes :

                (a)         Tenant covenants that it has paid or will pay all real estate taxes owed for all periods preceding the Commencement Date. Tenant, as of the Commencement Date, covenants and agrees to pay Landlord within thirty (30) days of Landlord’s notice to Tenant, as additional rent, Tenant’s Proportionate Share of any real estate taxes assessed against the land and Building in which the Premises is included. If this Lease shall be in effect for less than a full tax fiscal year, Tenant shall pay a prorated share of the taxes, based upon the number of days that this Lease is in effect. “Taxes” as used herein shall include, but not by way of limitation, all real property taxes, and any and all other benefits or assessments which may be levied on the Premises or the land and Building in which the same are situate, but shall not include any income tax on the income or rent payable hereunder or any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax that is or may be imposed upon Landlord. Any reasonable expense incurred by Landlord in contesting any real estate tax shall be included as an item of taxes for the purpose of computing additional rent due the Landlord.

                (b)         Landlord shall collect, together with the monthly payment of rent hereunder, an amount equal to one-twelfth (1/12) of Tenant’s Proportionate Share of the estimated real estate taxes due for the next succeeding fiscal year so that Landlord shall have an amount sufficient to pay such taxes when due. Landlord may also make adjustments when necessary in the case of special assessments or taxes so that Landlord will have an amount sufficient to pay such taxes when due. Appropriate adjustments shall be made between Landlord and Tenant upon the determination of the actual amount of such taxes.

        5.         Operating Costs :

                (a)         Tenant covenants that it has paid or will pay all Operating Costs for all periods preceding the Commencement Date. Tenant, as of the Commencement Date, covenants and agrees to pay Landlord within thirty (30) days of Landlord’s notice to Tenant, as additional rent, Tenant’s Proportionate Share of all Operating Costs.

                (b)         Landlord shall collect, together with the monthly payment of rent hereunder, an amount equal to one-twelfth (1/12) of Tenant’s Proportionate Share of the estimated Operating Costs due for the next succeeding calendar year so that Landlord shall have an amount sufficient to pay such Operating Costs when due. Appropriate adjustments shall be made between Landlord and Tenant upon the determination of the actual amount of such Operating Costs.

                (c)         “Operating Costs” means any and all reasonable costs and expenses incurred by the Landlord for services performed by the Landlord or by others on behalf of the Landlord (and not performed by Tenant as described in Section 5.(a)) with respect to the operation and maintenance of the Premises, Building and the Common Facilities located therein, in a manner deemed reasonable and appropriate by Landlord, including, without limitation, all costs and expenses of:

2

                          (i)         operating, maintaining, repairing, lighting, signing, cleaning, removing trash from, painting, controlling of rodents in, policing and securing the Common Facilities;

                          (ii)         purchasing and maintaining in full force insurance for the Building as deemed necessary in Landlord’s reasonable discretion (including, without limitation, liability insurance for personal injury, death and property damage, rent insurance, insurance against fire, extended coverage, theft or other casualties, workers’ compensation insurance covering personnel, fidelity bonds for personnel, insurance against liability for defamation and claims of false arrest occurring on or about the Common Facilities, and plate glass insurance);

                          (iii)         operating, maintaining, repairing and replacing machinery, furniture, accessories and equipment used in the operation and maintenance of the Building, and the personal property taxes and other charges incurred in connection with such machinery, furniture, accessories and equipment; however, if a replacement expenditure is not a current expense under Generally Accepted Accounting Principles (“GAAP”), then, the cost thereof shall be amortized over a period equal to the useful life of such replacement, determined in accordance with GAAP, and the amortized cost allocated to each calendar year during the Term;

                          (iv)         maintaining, replacing and repairing curbs, walkways, drainage pipes, ducts, conduits and lighting fixtures throughout the Common Facilities;

                          (v)         interior and exterior planting, replanting and replacing flowers, shrubbery, trees, grass and planters;

                          (vi)         providing electricity, heating, steam, ventilation and air conditioning to the Building, HVAC service to the Building and non-central HVAC usage (VAV boxes), and telecommunications services infrastructure, and operating, maintaining and repairing any equipment used in connection therewith, including, without limitation, costs incurred in connection with determining the feasibility of installing, maintaining, repairing or replacing any facilities, equipment, systems or devices which are intended to reduce utility expenses of the Building as a whole and repair and maintenance of HVAC facilities and telecommunications infrastructure and related electrical and mechanical equipment serving all rentable square feet of office space in the Building; however, if a replacement expenditure is not a current expense under GAAP, then, the cost thereof shall be amortized over a period equal to the useful life of such replacement, determined in accordance with GAAP, and the amortized cost allocated to each calendar year during the Term;

                          (vii)         water and sanitary sewer services and other services, if any, furnished to the Building, Premises, Common Facilities and all rentable square feet in the Building for the non-exclusive use of tenants;

                          (viii)         parcel pick up, delivery and other similar services;

3

                          (ix)         enforcing and complying with any operating agreements pertaining to the Common Facilities or any portions thereof, and any easement and/or rights agreements entered into by the Landlord for the benefit and use of the Building or tenants thereof, or any arbitration or judicial actions undertaken with respect to the same and all minor privilege fees;

                          (x)         cleaning, maintaining and repairing the Building, including, without limitation, exhaust systems, sprinkler systems, pumps, fans, switchgear, loading docks and ramps, freight elevators, passenger elevators, stairways, service corridors, delivery passages, transformers, doors, walls, floors, skylights, ceilings, windows, emergency generators, and fire and life safety equipment;

                          (xi)         accounting, audit and fees and expenses, including a commercially reasonable property management fee not to exceed five percent (5%) of all revenue of the Building, payroll, payroll taxes, employee benefits and related expenses of all personnel engaged in the operation, maintenance, and management of the Building, including, without limitation, the property manager, any maintenance personnel, secretaries and bookkeepers (including, specifically, uniforms and working clothes and the cleaning thereof, tools, equipment and supplies used by such personnel, and the expenses imposed on or allocated to the Landlord or its agents pursuant to any collective bargaining or other agreement) (if any personnel are engaged in or responsible for more than one (1) property, then an equitable allocation shall be made of the expense associated with such personnel), office expenses for on-site maintenance and/or management office;

                          (xii)         the cost and expense for substituting services, labor or materials in place of any of the items comprising the Operating Costs, or for any additional services, labor or materials or improvements to comply with any federal, state and local laws, orders, regulations and ordinances applicable to the Building enacted after the Commencement Date, which may hereafter be in force, provided, however that if, at the time of the substitution or addition, such costs are not considered a current operating expense under GAAP, then the cost thereof shall be amortized over a period equal to the useful life of such replacement, determined in accordance with GAAP, and the amortized cost allocated to each calendar year during the Term;

                          (xiii)         the cost (including reasonable legal, architectural and engineering fees incurred in connection therewith) of any improvement made to the Building during any Operating Year either (x) in order to comply with any future legal requirement or insurance requirement imposed or enacted after the Commencement Date, whether or not such legal requirement or insurance requirement is valid or mandatory, (y) with the reasonable expectation by Landlord of reducing Operating Costs (as, for example, a labor-saving improvement) or enhancing services, or (z) in lieu of a repair; provided, however, to the extent the cost of such improvement is required to be capitalized under generally accepted accounting principles, such cost shall be amortized over the useful economic life of such improvement as reasonably estimated by Landlord, and the annual amortization shall be deemed an Operating Cost in each of the Operating Years during which the cost of the improvement is amortized;

                          (xiv)         providing janitorial and trash removal services to the Building and Premises; and

4

                          (xv)         all other costs of maintaining, repairing or replacing any or all of the Building (including expenses of landscaping, snow, ice, water and debris removal, outdoor lighting, road maintenance and exterior signage relating to the Building); however, if a replacement expenditure is not a current expense under GAAP, then, the cost thereof shall be amortized over a period equal to the useful life of such replacement, determined in accordance with GAAP, and the amortized cost allocated to each calendar year during the Term.

        Notwithstanding the foregoing, the following items shall be excluded from Operating Expenses:

                (a)         franchise or income taxes imposed upon Landlord;

                (b)         debt service on Mortgages and any costs and expenses relating to a refinancing or debt modification, including legal fees, title insurance premiums, survey expenses, appraisal, environmental report, or engineering report;

                (c)         leasing commissions, brokerage fees or legal fees incurred in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases and related documents or enforcement with respect to the leasing, assignment or subletting of space for any occupant of the Building;

                (d)         the cost of tenant installations incurred in connection with preparing space for a new tenant or refurbishing or renovating space for an existing tenant;

                (e)         salaries and other compensations of personnel above the grade of building manager;

                (f)         any expense for which Landlord is otherwise compensated through the proceeds of insurance (less any deductible amounts paid) or is otherwise compensated by any tenant (including Tenant) of the Building for services in excess of the services Landlord is obligated to furnish to Tenant hereunder;

                (g)         capital costs, depreciation or amortization (except as provided in the list of inclusions for Operating Costs under item (xiii) above);

                (h)         costs incurred by Landlord due to a violation of any lease in the Building or penalties or charges arising due to violation of any Legal Requirement or Insurance Requirement required to be complied with by Landlord;

                (i)         the cost of repairing the roof,

                (j)         the cost of removing any hazardous materials located at the Building and/or complying with all environmental laws, but only to the extent such costs are not otherwise caused by or borne by Tenant;

                (k)         fines or penalties for late payment;

                (l)         services provided to other tenants but not to Tenant;

5

                (m)         general corporate overhead;

                (n)         works of art, charitable or political contributions;

                (o)         reserves; and

                (p)         entertainment or travel expenses.

Landlord warrants and represents that none of the expenses included in determining Tenant’s Proportionate Share of Common Costs shall be included in any other charge payable under this Lease. Tenant shall have the right to audit Landlord’s books and records from time to time, but no more than one time every 12 months, to verify the accuracy of the statements being provided by Landlord with respect to Operating Costs. Tenant shall recover the costs of such audit if the pass through of Operating Costs is more than 110% of the amount Tenant should have paid.:

        6.         Care of Premises :

                (a)         The Tenant agrees that it will take good care (including its own interior janitorial service) of the Premises, fixtures, and appurtenances, including the following items and elements serving the Premises: exterior doors and windows, window frames, hardware and the like, and meters, plumbing, heating and air conditioning equipment (including that on the exterior of the building), the elevators of the Building and keep same in good order and repair throughout the term of this Lease in a manner comparable to the order and state of repair extant of the Commencement Date, and suffer or permit no waste or injury; Landlord shall assign to Tenant, for the benefit of the Tenant, to the extent they are assignable or otherwise available for the benefit of the Tenant, any warranties on such equipment furnished Landlord by the Tenant and/or provider thereof; that Tenant will conform to all laws, orders, and regulations of the Federal, State, County and City authorities or any of their departments, and will not, through its own act or neglect, cause any situation to exist in or about the Premises which would constitute a violation of any applicable Federal, State, County, or City Code Regulation or Ordinance governing use, occupancy, health, sanitation, or fire; that it will save harmless the Landlord from any liability arising from injury to person or property caused by any act or omission of Tenant, his agents, employees or guests; that it will repair at or before the end of the term, or sooner if so requested by the Landlord, all injury done by the installation or removal of furniture or other property, and will surrender the Premises at the end of the term broom cleaned in as good condition as they were at the beginning of the term, ordinary wear and tear, condemnation, alterations as permitted by this Lease and casualties by fire and elements excepted. In the event of any increase in the cost of insurance as a result of the failure of the Tenant to comply with the provisions of this Paragraph, the Tenant will pay the amount of such increase as additional rent within thirty (30) days after the Landlord’s written demand, which will provide evidence that the stated actions increased the cost of insurance.

        The Landlord shall be under no liability to the Tenant for any discontinuance of heat, air conditioning, and hot water unless due solely to Landlord’s negligence. The Landlord shall not be liable for any loss or damage to the Tenant caused by rain, snow, water or storms that may leak into or flow from any part of the premises through any defects in the roof or plumbing or from any other source unless due solely to Landlord’s negligence.

6

                (b)         Landlord shall have no obligation whatsoever to make any repairs to the Premises other than to make repairs resulting from damage caused by negligence, if any, of Landlord or its agents or employees or contractors except as otherwise provided in this Agreement.

                (c)         Landlord agrees to maintain and will keep in good repair, the exterior walls of the Building, the roof, slabs, foundations and structural elements of the Building. Landlord, at its expense, will make all structural repairs that it deems necessary in its reasonable discretion (excluding, however, all doors, door frames, floors, windows and glass); provided Tenant shall give Landlord notice of the necessity for such repairs. If the Premises, or any portion thereof critical to performance of Tenant’s business, are rendered unfit for the business purposes for which it was leased due to a structural problem in the exterior walls, structural columns, roof, roof penetrations or structural floor, for more than thirty (30) consecutive days, then the rent shall abate proportionately to the amount of space rendered unfit for the business purposes for which it was leased for the amount of time such condition shall exist.

                (d)         Tenant shall not place a load upon any floor of the Premises that exceeds the lesser of (i) floor load per square foot, which such floor was designed to carry or (ii) the maximum floor load per square foot allowed by law. Business machines and mechanical equipment shall be placed and maintained by Tenant, at Tenant’s expense, in settings sufficient in Landlord’s reasonable judgment to absorb and prevent vibration, noise and annoyance.

                (e)         There shall be no allowance to Tenant for any diminution of rental value and no liability on the part of the Landlord by reason of inconvenience, annoyance or injury to business arising from the making by Landlord, Tenant or others of any repairs in or to the Building or the Premises, or in or to the fixtures, appurtenances or equipment thereof. Except in case of emergency, as determined in Landlord’s sole discretion, Landlord will use commercially reasonable efforts to minimize any interference with Tenant’s use and occupancy in connection with Landlord’s entering to make repairs.

                (f)         In the event Tenant shall not proceed promptly and diligently to make any repairs or perform any obligation imposed upon it by this Section 4 within ten (10) days after receiving written notice from Landlord to make such repairs or perform such obligation (unless such repairs or obligation is of such nature that it cannot be cured within such ten (10) day period, in which case Tenant shall have such longer period of time as is required, provided that Tenant shall diligently prosecute such repairs or perform such obligation), then and in such event, Landlord, may, at its option, enter the Premises and do and perform the things specified in said notice, without liability on the part of Landlord for any loss or damage resulting from any such action by Landlord and Tenant agrees to pay promptly upon demand any cost or expense incurred by Landlord in taking such action, including an administrative fee equal to 10% of the cost or expense incurred.

        7.         Use and Occupancy :

        The Premises is to be used only for the purposes that it is being used by the Tenant during 2004 or for general office use, and for no other purpose without Landlord’s prior approval which approval shall not be unreasonably withheld. Tenant will not use the Premises for any unlawful purpose; Tenant covenants not to conduct nor permit to be conducted on the Premises any business in violation of any law of the City in which the Premises is located or State or Federal law, ordinance or regulation. With respect to the remainder of the Building, Landlord shall, throughout the Term, and at Landlord’s sole cost and expense, promptly observe and comply with all present and future laws, ordinances, notices, orders, rules, regulations, directions and requirements of all federal, state, county and municipal governments and the appropriate departments, commissions, boards and officers thereof (including, but not limited to, environmental laws (excluding, however, any environmental laws that apply solely due to the presence of hazardous materials brought onto the Premises by Tenant)), as well as any and all notices, orders, rules and regulations of the National Board of Fire Underwriters, or any other body now or hereafter constituted and exercising similar functions.

7

        8.         Permitted Name :

        Tenant shall conduct business in the Premises only in the name of Tenant and under no other name or trade name unless and until the use of some other name is approved in writing by Landlord, which approval shall not be unreasonably withheld.

        9.         Access by Landlord :

        The Landlord shall retain duplicate keys to all of the doors of the Premises, and the Landlord or his agents shall have access to the Premises at all reasonable hours in order to inspect same, to clean or to make necessary repairs improvements within the Premises or the Building with reasonable prior notice to tenant unless an emergency situation exists at which time no notice is required. The Landlord will use reasonable efforts not to disturb Tenant’s use or enjoyment of Premises if Landlord or his agents enters non-secured areas. The Landlord will not, except in the case of emergency, under any circumstances, enter secured areas during active clinical studies without advance notice to Tenant. To ensure federal regulatory compliance during active studies, Tenant’s chaperone will be required for Landlord or his agents. Landlord or his agents will follow chaperone guidance in all matters to ensure regulatory compliance. The Landlord shall have the right to show the Premises to prospective tenants upon 48 hours advance notice and put a FOR LEASE sign in the windows at any time during the lease