Lease Agreement

AMENDMENT TO LEASE



This Amendment to Lease is entered into as of September 1, 1995 between Bayer Corporation, an Indiana corporation (formerly known as Miles, Inc.)("Landlord") and Diamond Animal Health, Inc., ("Tenant") an Iowa corporation.









WHEREAS, Landlord and Tenant entered into that certain Lease dated as of December 31, 1993 (the "Lease") for certain property and improvements located in Des Moines, Polk County, Iowa, as more particularly described in the Lease (the "Demised Premises"); and





WHEREAS, the initial term of the Lease commenced January 1, 1994 and ends on December 31, 1998; and





WHEREAS, Tenant is granted the right to extend the term of the Lease for an additional term of five (5) years and for one (1) additional term of one (1) year, upon the terms and conditions set forth in the Lease; and





WHEREAS, Landlord has agreed to grant Tenant an additional option to extend the term of the Lease for a period of five (5) years upon the terms and conditions set forth herein; and





WHEREAS, Landlord and Tenant have agreed to amend the Lease to reflect the additional renewal option, among other matters.





NOW THEREFORE, in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows:













1. TERM.



a) Section 3.3 of the Lease is hereby deleted in its entirety and in

its place substituted the following:



SECTION 3.4 - CONDITIONAL EXTENDED TERM. Tenant shall have and

is hereby granted the right, at its option, to extend the term of

this Lease for one (1) additional term of one (1) year,

commencing on January 1, 2009 and ending on December 31, 2009,

subject to the following conditions:





(1) Tenant shall notify Landlord, on or before December 31,

2005, that Tenant intends to construct a new plant for use

in connection with Tenant's business; and





(2) On or before September 30, 2008, Tenant notifies Landlord

that it is not reasonably practicable for Tenant to occupy

its new plant on or before December 31, 2008 because of

Tenant's inability to obtain timely government regulatory

approval of its new plant.





The notices described in subsections (a) and (b) hereof shall be

given in the manner set forth in Article 21 hereof. Such

extension shall be upon the terms and conditions as for the

second Extended Term described in Section 3.3, including the

Basic Rent as provided in Section 4.2 hereof.





b) Article 3 of the Lease is hereby amended by adding the following

as new Section 3.3:











SECTION 3.3 - SECOND EXTENDED TERM. Tenant shall have and is

hereby granted the right, at its option, upon the expiration of

the Extended Term described in Section 3.2, to extend the term of

this Lease for a second additional term of five (5) years

commencing January 1, 2004, provided such option is exercised in

writing one hundred twenty (120) days prior to the end of the

first Extended Term. The notice described in the preceding

sentence shall be given in the manner set forth in Article 21 of

the Lease. Such extension shall be upon the terms and conditions

as for the original term and first Extended Term except that the

Basic Rent shall be as provided in Section 4.2 hereof.





2. RENT.



Article 4 of the Lease is hereby amended by adding the following to the

end of Section 4.2 thereof:



During the extended terms of the Lease described in Sections 3.3

and 3.4 above, if any, Tenant shall pay to Landlord, as annual

Basic Rent for the Demised Premises, without deduction, setoff,

prior notice or demand, the annual sum of Two Hundred Thousand

Dollars ($200,000), payable in monthly installments of Sixteen

Thousand Six Hundred and Sixty-Seven Dollars ($16,667) each,

commencing on January 1, 2004 and ending on December 31, 2008 if

Tenant has not exercised the renewal option described in Section

3.4 above, or commencing on January 1, 2004 and ending on

December 31, 2009 if Tenant has exercised the Section 3.4 renewal











3. USE.



Section 5.3 the Lease is amended by adding the words "or 3.4" after the

words "Section 3.2 or 3.3" in the twenty-sixth line of Section 5.3.





4. MAINTENANCE AND REPAIRS



Section 9.4 of the Lease is amended by adding the words "or 3.4" after

the words "Section 3.2 or 3.3" in the last sentence of Section 9.4.





5. DEFAULT.



Section 17.1 of the Lease is amended by adding "; or" at the end of

subsection (h) and adding the following to the end of Section 17.1:





(i) Tenant shall be in default under the Promissory Note dated

as of September 1, 1995 in the original principal amount

of Four Hundred Thousand Dollars ($400,000) by Tenant in

favor of Landlord, and such default shall not be cured or

waived within the period of grace, if any, applicable

thereto, and Landlord shall have given notice of

acceleration thereto to Tenant.





6. DEFINED TERMS.



All capitalized terms not otherwise defined herein shall have the

meanings assigned to them in the Lease. References in the Lease to the

Manufacturing Agreement shall mean the Manufacturing Agreement as

amended and extended from time to time.













7. SUCCESSORS AND ASSIGNS.



The terms, covenants, and conditions of this Amendment shall be binding

upon and inure to the benefit of the parties hereto and their heirs,

executors, administrators, successors and (in the case of Tenant,

permitted) assigns.





8. LEASE OTHERWISE UNCHANGED.



Except as specifically set forth herein, the terms of the Lease are

unchanged and in full force and effect. In the event of any conflict

between the terms of this Amendment and the Lease, the terms of this

Amendment shall govern.





IN WITNESS WHEREOF, the parties have executed this Amendment to Lease to be effective as of the date first above written.







LANDLORD: TENANT:

BAYER CORPORATION DIAMOND ANIMAL HEALTH, INC. AGRICULTURE DIVISION

BY: /s/ LOUIS VAN DAELE BY: /s/ GARY R. ZIMMERMAN -------------------------------

-------------------------------- TITLE: President TITLE: Vice President New Business

DATE: 10/4/95 DATE: 10/18/95











December 31, 1993







ARTICLE 1. PARTIES



This Lease is entered into as of the 31st day of December, 1993 between Miles Inc., an Indiana corporation ("Landlord"), and Diamond Animal Health, Inc., an Iowa corporation ("Tenant").





ARTICLE 2. DEMISED PREMISES



SECTION 2.1 - DESCRIPTION.



Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, that certain premises situated in Des Moines, Iowa, which is more particularly described in Exhibit A attached hereto and made a part hereof, together with all improvements located thereon (collectively, the "Demised Premises").



SECTION 2.2 - CONDITION.



Subject to Article 25 hereof, Tenant acknowledges that (a) Tenant has inspected the Demised Premises and accepts the same in its present "as is" condition, and (b) no representations or warranties have been made by Landlord concerning the condition, repair, remodeling, alteration or improvement of the Demised Premises.



ARTICLE 3. TERM



SECTION 3.1 - INITIAL TERM.



The initial term of this Lease shall be for a period of five (5) years, beginning on the 1st day of January, 1994 and ending on the 31st day of December, 1998, unless sooner terminated as hereinafter provided.



SECTION 3.2- EXTENDED TERM.



Tenant shall have and is hereby granted the right, at its option, to extend the term of this Lease for one (1) additional term of five (5) years, provided such option is exercised in writing one hundred twenty (120) days prior to the end of the initial term hereof. The notice described in the preceding sentence shall be given in the manner set forth in Article 21 hereof. Such extension shall be upon the terms and conditions as for the original term except that the Basic Rent shall be as provided in Section 4.2 hereof.





SECTION 3.2 - CONDITIONAL EXTENDED TERM.



Tenant shall have and is hereby granted the right, at its option, to extend the term of this Lease for one (1) additional term of one (1) year, commencing on January 1, 2004 and ending December 31, 2004, subject to the following conditions:



(a) Tenant shall notify Landlord, on or before December 31, 2000,

that Tenant intends to construct a new plant for use in connection with

Tenant's business; and



(b) On or before September 30, 2003, Tenant notifies Landlord that it

is not reasonably practicable for Tenant to occupy its new plant on or

before December 31, 2003 because of Tenant's inability to obtain timely

government regulatory approval of its new plant. The notices described in subsections (a) and (b) hereof shall be given in the manner set forth in Article 21 hereof. Such extension shall be upon the terms and conditions as for the Extended Term, including the Basic Rent as provided in Section 4.2 hereof.



ARTICLE 4. RENT



SECTION 4.1 - BASIC RENT.



During the term set forth in Section 3.1 hereof, Tenant shall pay to Landlord, as basic annual rent ("Basic Rent") for the Demised Premises, without deduction, set-off, prior notice or demand, the sum of One Hundred Fifty Thousand Dollars ($150,000.00) payable in monthly installments of Twelve Thousand Five Hundred Dollars ($12,500.00) each, commencing on January 1, 1994 and ending on December 31, 1998. During the term of that certain Manufacturing and Supply Agreement of even date herewith (the "Manufacturing Agreement") entered into by and between Landlord, Tenant, Agrion Corporation ("Agrion") and Diamond Scientific Co. ("Diamond Scientific"), respectively, the Basic Rent reserved herein shall be paid by permitting Landlord to set off the amount of the monthly installments of Basic Rent against the monthly payment due from Landlord to Tenant under the Manufacturing Agreement.



SECTION 4.2 - BASIC RENT, EXTENDED TERM.



During the first extended term, if any, Tenant shall pay to Landlord, as Basic Rent for the Demised Premises, without deduction, setoff, prior notice or demand, the sum of One Hundred Seventy-Five Thousand Dollars ($175,000.00), payable in monthly installments of Fourteen Thousand Five Hundred Fifty-One and 67/100 Dollars ($14,551.67) each, commencing on January 1, 1999 and ending on December 31,2003.



SECTION 4.3 - ADDITIONAL RENT.



All other payments required to be made by Tenant to Landlord under this Lease shall be deemed to be additional rent hereunder ("Additional Rent"). The Basic Rent and Additional Rent are collectively referred to herein as "Rent." All Rent shall be payable at the address of Landlord set forth in the Section hereof which is entitled "Notices," or at such other place as Landlord may from time to time direct. Any payment of Rent not made when due after applicable cure periods shall bear interest from the due date thereof at a rate (the "Default Rate") equal to four (4) points above the prime rate for Chase Manhattan Bank, New York, New York. In addition, a late penalty of five percent (5%) of any delinquent payment of Rent shall also be charged if any such payment is more than five (5) days overdue.



SECTION 4.4- BASIC RENT TO BE NET.



Except as otherwise provided in this Lease, it is the intent of Tenant and Landlord that the Basic Rent shall be absolutely net to Landlord so that, during the term of the Lease, Tenant shall pay absolutely all items of cost and expense relating to the operation, use and ownership of the Demised Premises, and any portion thereof, to the extent that they are incurred during, or relate to, the period included with the term of this Lease, including, without limitation, all general and special real and personal property taxes and assessments, insurance premiums, payments under any service contracts, license and permit fees, maintenance, repair and replacement costs, costs of all utilities and the costs of all other services which are used in connection with operation, use or ownership of the Demised Premises, or any portion thereof; provided, however, that in no event shall Tenant be liable for any "Covered Claim" as set forth in Section 25.1(b).











ARTICLE 5. USE



SECTION 5.1 - AUTHORIZED.



The Demised Premises shall be used solely for the purposes of manufacturing biological and pharmaceutical care products and for no other purpose. Tenant may request a consent to change business use of the Demised Premises, which consent shall not be unreasonably withheld (it being understood that consent withheld due to Landlord's reasonable concern about impairment of the USDA status of the Demised Premises shall automatically be deemed to be reasonable for purposes of this Section).



SECTION 5.2 - LICENSES.



Tenant shall at its expense use its best efforts to obtain and shall at all times maintain, any and all licenses and permits which may be necessary for the use and operation of the Demised Premises, except in connection with the Covered Claims as set forth in Section 25.1(b).



SECTION 5.3 - LAWFUL USE.



Tenant shall not use the Demised Premises, or permit the same to be used, in whole or in part, for any unlawful purpose and shall comply with all laws, statutes, ordinances, regulations, or rules of any public authority, agency or organization applicable to the Demised Premises or the use thereof, including, but not limited to, those pertaining to zoning, environmental protection, hazardous substance, or OSHA. Except for Covered Claims as set forth in Section 25.1(b), Tenant shall promptly comply with all governmental orders and directives of every nature whatsoever pertaining to the Demised Premises, including, but not limited to, the correction, prevention and abatement of nuisances in, upon, or connected with the Demised Premises, all at Tenant's expense. Except for environmental problems caused by Tenant which are the responsibility of Tenant pursuant to Section 25.1(a), if (i) the costs of compliance in the aggregate as required by this Section for any calendar year exceeds $4,000.00 times the number of months or parts thereof remaining until the termination date of this Lease, and (ii) such compliance requirements are not required due to Tenant's failure to maintain the Demised Premises or any part thereof, then Tenant shall give Landlord written notice of the cost of compliance as otherwise required by this Section. Thereupon, Landlord shall pay the cost of compliance required by this Section (but in no event shall such cost in the aggregate for any calendar year exceed $8,000.00 times the number of months or parts thereof remaining until the termination date of this Lease), in which event the Basic Rent shall be increased by an amount equal to the cost of compliance required by this Section to accomplish such compliance, divided by the useful life of such assets as determined under Section 167 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, which amount shall be payable in equal monthly installments in the manner set forth in Article 4 hereof for the number of months or parts thereof remaining until the termination date of the then-effective Term, as and if extended. In the event that Tenant exercises its option to extend this Lease as provided in Section 3.2 or 3.3 hereof, the phrase "number of months or part thereof remaining until the termination date" as used in this Section shall be determined with reference to such extended term.



The provisions of this section shall not be applicable to European Unity compliance requirements. The parties must mutually agree before proceeding to satisfy such requirements and if they mutually agree to comply, they shall further agree as to how the cost of compliance shall be shared.











The costs of compliance required for the manufacture of goods pursuant to contract manufacturing agreements with purchasers other than Landlord shall be the responsibility of the Tenant.



ARTICLE 6. TAXES



SECTION 6.1 - PERSONAL PROPERTY, BUSINESS, ETC.



Landlord shall present to Tenant all official bills for taxes attributable to fixtures, equipment, inventory and all other personal property owned by Tenant, as well as for all local business taxes, licenses, fees, and other charges or assessments related to, or the result of, Tenant's property or business being located or conducted on the Demised Premises, Tenant shall pay to Landlord the amount of each such bill, or each installment thereof as reflected on such bill, at least fifteen (15) days prior to the date upon which such installment becomes delinquent.



SECTION 6.2 - REAL PROPERTY.



Landlord shall present to Tenant all official bills for all real estate taxes and assessments imposed, charged or levied upon the Demised Premises during or related to the term of this Lease, and Tenant shall pay to Landlord the amount of each such bill, or each installment thereof as reflected on such bill, at least fifteen (15) days prior to the date upon which such installment becomes delinquent.



SECTION 6.3 - ACCRUED TAXES ON COMMENCEMENT OF LEASE.



The Tenant agrees to be responsible for all applicable Personal and Real Property Taxes that accrue during the term of this Lease, regardless of when such taxes are payable.



ARTICLE 7. INSURANCE



SECTION 7.1 - LIABILITY INSURANCE.



Tenant shall procure and maintain, throughout the term of this Lease, a policy or policies of insurance at the Tenant's expense, insuring both Landlord and Tenant against all claims, demands, or actions arising out of, or in connection with, Tenant's use or occupancy of the Demised Premises, or from the condition of said Demised Premises. The liability limits of such policy or policies shall be in an amount not less than $1,000,000.00 in respect of injuries to or death of any one person, and in an amount of not less than $2,000,000.00 in respect of any one accident or disaster, and in an amount of not less than $100,000.00 in respect of property damaged or destroyed, all of such liability insurance to be written by insurers of recognized responsibility which are authorized to do business in the State of Iowa. Such policies (or duly executed certificates as to such policies) shall be promptly delivered to Landlord, and renewals thereof, as required, shall be delivered to Landlord, at least ten (10) days prior to the expiration of the respective policy terms. ...