Filed by Bowne Pure Compliance





Exhibit 10.12




LEASE EXTENSION

AND MODIFICATION OF LEASE RATES




This agreement modifies the lease originally dated May 3, 1989 and subsequent modifications dated
August 30, 1990, November 4, 1994 and May 19, 1995, and May 10, 2000 between Mikron Industries,
Inc. (Mikron) Lessee, and The W. R. Sandwith and Michael G. Ritter Partnership. (Partnership)
Lessor for the premises located at 1034 6th Avenue North in Kent, Washington.



It is now mutually understood and agreed between the parties, Mikron and Partnership, that said
lease shall be modified as follows:



The lease shall be extended for a period of Five (5) years beginning on March 1, 2005.



For the leased area known by the Partnership as Division 1, And consisting of 33,752 square feet of
Shop Area and 1,248 square feet of Office Area, the following monthly lease rates will apply:



For the Warehouse/Shop Area for the five-year extension period:



	 	 	 
	First Year

	 	$.325 per square foot ($10,969.40) Per Month
	Second Year

	 	$.330 per square foot ($11,138.16) Per Month
	Third Year

	 	$.335 per square foot ($11,306.92) Per Month
	Fourth Year

	 	$.340 per square foot ($11,475.68) Per Month
	Fifth Year

	 	$.345 per square foot ($11,644.44) Per Month






For the Office Area for the entire five-year extension period:



$.600 per square foot ($748.80) Per Month



Except as herein above provided, all of the terms, covenants, modifications, and conditions of said
lease shall remain in full force and effect.



IN WITNESS WHEREOF, the parties hereto have executed this agreement on June 9, 2004.



	 	 	 
	Lessor:

	 	Lessee:
	The W. R. Sandwith &

	 	Mikron Industries, Inc.
	Michael G. Ritter Partnership
	 	 






	 	 	 	 	 
	 

	 	[SEAL]	 	 
	 
	 	 	 	 
	By: /s/ Jeff Sandwith
 


	 	By: /s/ Paul Warner
 

	 	 
	It’s: Managing Partner

	 	It’s: CO-CEO
	 	 





 


 









 





L E A S E




THIS AGREEMENT OF LEASE, made and entered into this 3rd
day of May, 1989, between 1034 Joint Venture, Lessor, and Mikron
Industries, Inc.,
Lessee.



W I T N E S S E T H :




IT IS AGREED by and between the parties as follows:



1. Premises. The Lessor, in consideration of the rental to be
paid and the covenants and conditions to be performed by the Lessee as here-inafter provided, does hereby lease and let unto the Lessee for the term and
period and subject to the terms and conditions hereinafter stated, an area
Comprising approximately 40,000 Square Feet of that certain property known as Industrial
Distribution Building situated in Kent, King County, Washington, described in Exhibit “A” attached
hereto and made a part hereof.



2. Term. The term of this lease shall be 68 months commencing June 1, 1989 and
terminating February 28, 1995.



3. Rental. Lessee covenants and agrees to pay to Lessor as rental
for the leased premises for the lease term herein fixed the sum of Ten thousand dollars ($10,000.00) per month, each of said installments to become due and payable on the First (1st) day of each calendar month during the lease term, commencing June 1, 1989.



4. Operating Expense. Lessee shall pay lessor as additional rent, lessee’s share
of Operating Expenses. Lessee’s share of Operating Expenses shall be equal to 100 percent of all reasonable and necessary
expenses actually incurred by lessor for the operation, cleaning,
maintenance, repair and management of the building, walkways, drive-ways, parking and loading areas, lawns and landscaping.



5. Purpose and Use.




(a) Lessee shall use said demised premises during the term of
this lease for the conduct of Manufacturing and for no other
purpose without Lessor’s written consent.




(b) Lessee will not make any unlawful, improper, or
offensive use of said premises; it will not suffer or
strip or waste thereof; it will not permit any objectionable noise or odor to escape or to be emitted from said
premises, or do anything or permit anything to be done
upon or about said premises in any way tending to create
a nuisance.




(c) Lessee will not allow the leased premises at any
time to fall into a state of disrepair or disorder, nor
use the premises in such a manner, so as to increase the
hazard of fire to the building or contents thereof of which
the premises hereby leased are a part; any violation of
this provision shall, at Lessor’s option, be deemed a
default under the terms of this lease, and in any event,
any increase in insurance premiums paid by Lessor or any
other occupier of space in the building of which the
leased premises are a part resulting from the action or
inaction of Lessee as above provided shall be paid by
Lessee, in the case of Lessor as additional rent, and in
the case of such other occupier of space, as reimbursement
for such increase in insurance premiums. Lessee shall not store gasoline or other highly combustible material on said premises at any
time other than those reasonable and customarily used in the proper conduct of
its business. Lessee shall not, without Lessor’s written consent, store any of
its property, equipment, refuse or trash on the exterior of the premises
hereby leased, except that Lessee may place reasonable amounts of refuse and
trash on the exterior of such premises in properly constructed and maintained
containers for refuse and trash only.



 


 









 








6. Maintenance, Repairs and Improvements.




(a) Lessor shall not be required to make any repairs,
alterations, additions, or improvements to or upon said
leased premises during the term of this lease, except
only those hereinafter specifically provided for; the
Lessee hereby agrees to maintain and keep said leased
premises, including heating system, wiring, doors,
windows, plumbing, and drain pipes to sewers, in good
order and repair during the entire term of this lease
at Lessee’s own cost and expense; Lessee further agrees
that it will make no alterations, additions or improvements to or upon said leased premises without the
written consent of Lessor first being obtained.




(b) Lessor agrees to maintain in good order and repair
during the term of this lease the exterior walls, roof,
gutters, downspouts, and foundations of the building in
which the demised premises are situated. It is understood and agreed that the Lessor reserves and at any and
all times shall have the right to repair or improve the
building of which said demised premises are a part, or to
add thereto and, for that purpose, at any time may erect
scaffolding and all other necessary structures about and
upon the demised premises, and Lessor and Lessor’s
representatives, contractors, and workmen for that purpose may enter in or about the said demised premises
with such material as Lessor may deem necessary therefor,
and Lessee waives any claim to damages, including loss
of business resulting therefrom.




(c) Lessee shall give Lessor prompt written notice of
any defect or condition in the leased premises which
Lessor, by other terms of this paragraph, is required to
repair or maintain. Lessee shall promptly take all
measures and precautions necessary to prevent injuries
to persons or damage to property from occurring because of such defects or
conditions. Lessor shall effect such maintenance or repairs promptly after
receiving notice from Lessee.



7. Utilities - Public Regulations.




(a) Lessee shall pay for all heat, light, water, garbage,
sewer, power, gas, and other services or utilities used in
the demised premises during the term of this lease.




(b) Lessee shall comply, at Lessee’s own expense, with
all laws and regulations of any municipal, county, state,
federal or other public authority respecting the use of
said leased premises.



8. Exhibition and Inspection of Premises.



Lessor shall have the right at reasonable times during the term hereof to exhibit demised
premises to prospective purchasers and during the final six months of the term hereof to
prospective tenants. Lessors and Lessor’s agents, workman and engineers may retain and use a pass
key to the premises described herein to enable them to examine the demised premises from time to
time with reference to any emergency or the general maintenance of the demised premises.


 


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9. Right of Assignment.



Lessee shall have no right to assign, transfer, pledge, hypothecate, surrender, or
dispose of this lease, or any interest herein, or permit any other person or persons
whomsoever to occupy the leased premises without the consent of the Lessor being first
obtained in writing, such consent not to be unreasonably witheld. In any event, any consent
by Lessor to any such assignment or subletting pursuant to this provision shall not be, and in
no way construed to be, a consent to an assignment or sub-letting by Lessee beyond the initial
term of this lease ending Five (5) years from the commencement of this lease, or beyond the
end of any option period, if such assignment or sub-letting is consented to during the life of
the option period as exercised, it being specifically understood and agreed that any such
assignment or subletting which purports to extend beyond such dates is null and void and of no
effect whatsoever. This lease is personal to said Lessee; Lessee’s interests, in whole or in
part, cannot be sold, assigned, transferred, seized or taken by operation of law, or under or
by virtue of any execution or legal process, attachment, or proceeding instituted against the
Lessee, or under or by virtue of any bankruptcy or insolvency proceedings had in regard to the
Lessee, or in any other manner, except as above mentioned. Lessor’s consent to any assignment
of this lease shall not relieve Lessee of any of its obligations hereunder.



10. Liens.



Lessee will not permit any lien of any kind, type, or description to be placed or
imposed upon the building in which said leased premises are situated or any part thereof,
or the real estate on which it stands.



11. Overloading.



Lessee will not overload the said premises in such a way as to cause any undue or serious
stress or strain upon the building on said demised premises, or any part thereof, and the Lessor
shall have the right, at any time, to call upon any competent engineer or architect whom the Lessor
may choose, and who is not reasonably objectionable to Lessee, to decide whether or not the said
premises, or any part thereof, are being overloaded so as to cause any undue or serious stress or
strain on said building, or any part thereof, and the decision of said engineer or architect shall
be final and binding upon the Lessee; and in the event that the engineer or architect so called
upon shall decide that in his opinion the stress or strain is such as to endanger or injure said
building, or any part thereof, then and in that event the Lessee agrees immediately to relieve said
stress or strain either by reinforcing the building or by lightening the load which causes such
stress or strain in a manner satisfactory to said engineer or architect.



12. Signs.



No sign, picture, advertisement or notice shall be displayed, inscribed, painted or affixed to
any of the glass or woodwork of the subject premises in such a manner that it would be exposed to
exterior views unless prior written approval has been obtained by the Lessor. Lessor reserves the
right to change the project name without notice.



13. Indemnity.



(a) As a material consideration without which this lease would
not have been made by Lessor, Lessee agrees to and hereby does assume the
risk of injury to or death of persons whomsoever, and damage to or
destruction of property whatsoever occurring in, upon, or about said leased
premises or improvements thereon, from any defective or dangerous
conditions, whether known or unknown, apparent or concealed, and regardless
of whether such conditions or defects exist at the commencement of this
lease or at such later time. Lessee shall and will, and hereby agrees to,
indemnify and hold harmless the Lessor from and against any and all loss,
cost, damage and expense directly or indirectly resulting from the risks
hereby assumed by Lessee, and from and against any and all liability
therefor.




 


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Indemnity. (Continued)




(b) Lessee also shall and will indemnify and hold harmless the
Lessor from and against any and all loss, cost, damage and expense
resulting from injuries to or death of persons whomsoever and
damage to or destruction of property whatsoever (including, but not
limited to, property hereby leased), caused by or resulting from
any act, omission, or neglect of the Lessee, its officers, agents,
servants, employees or others, upon or about said premises at its
invitation or with its consent.



14. Waiver of Subrogation.



The parties shall obtain from their prospective insurance carriers waivers of subrogation
against the other party, agents, employees and, as to the lessee invitees. Neither party
shall be liable to the other for any loss or damage caused by fire or any other risks
enumerated in a standard fire insurance policy with an extended coverage endorsement if such
insurance was obtainable at the time of such loss or damage.



15. Liability Insurance.



Lessee further agrees at all times during the term hereof, at its own expense, to maintain,
keep in effect, furnish and deliver to the Lessor liability insurance policies with a reliable
insurance company, insuring both the Lessor and the Lessee against all liability for damages to
persons or property in or about said leased premises; the amount of said liability insurance shall
not be less than $200,000.00 for injury to one person, $1,000,000.00 for injuries arising out of
any one accident, and not less than $100,000.00 for property damage.



16. Fire and Extended Coverage.



During the term of the lease the Lessor shall procure and maintain in full force in
effect with respect to the building, a policy or policies of fire insurance with extended
coverage endorsement attached, including vandalism and malicious coverage, and any other
endorsements required by the holder of any fee or lease hold mortgage in an amount equal to
one hundred percent (100%) of the full insurance replacement value (replacement cost new,
including debris removal and demolition) thereof. Lessee shall promptly pay to Lessor within
five (5) days after demand therefor an amount equal to 42% percentage of the insurance
maintained by the Lessor as described in this paragraph.



17. Fixtures.



All partitions, plumbing, electrical wiring, additions to or improvements upon said
leased premises, whether installed by Lessor or Lessee, shall be and become a part of the
building as soon as installed and the property of Lessor unless otherwise herein provided. Any
trade fixtures installed in the leased premises by Lessee shall remain the personal property
of Lessee during the term hereof, and Lessee shall have the right and obligation to remove the
same not later than the time when Lessee is required to surrender possession of the leased
premises to Lessor under the terms of this lease. Any damage to the leased premises occasioned
or caused by the removal of said fixtures shall be repaired by Lessee, and Lessee shall be
liable to reimburse Lessor for the costs of such repair if not effected by Lessee. All trade
fixtures not removed within the time herein specified for such removal may be deemed
conclusively to be abandoned by the Lessee and, at Lessor’s election, said fixtures shall
become the property of Lessor, or Lessor may require the removal thereof by Lessee.



18. Damage by Fire or Other Casualty.




(a) In the event the leased premises are destroyed or
damaged by fire or other casualty to the extent of more
than eighty (80) percent of their sound value, either party
hereto may terminate this lease by written notice to the
other of its election so to terminate given within thirty
(30) days of said fire or other casualty.


 


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Damage by Fire or Other Casualty




(b) In the event the leased premises are destroyed or damaged
by fire or other casualty to the extent of not less than
forty (40) percent and not more than eighty (80) percent
of their sound value, Lessor may elect to repair or not to repair said
leased premises; written notice of Lessor’s said election shall be given
Lessee within sixty (60) days after the occurrence of said fire or other
casualty; if said notice is not so given, Lessor shall be conclusively
deemed to have elected not to repair; in the event Lessor elects not to
repair said leased premises, then in that event this lease shall be deemed
to have terminated on the date of said fire or other casualty.




(c) In the event the leased premises are destroyed or
damaged by fire or other casualty to the extent of less
than forty (40) percent of their sound value, Lessor
shall be obligated to repair said building with all convenient speed and shall have the right to take possession
of and occupy, to the exclusion of Lessee, all or any
part of said leased premises in order to make the necessary repairs,
and Lessee agrees to vacate upon request all or any part of said leased
premises which Lessor may require for the purpose of making necessary
repairs.




(d) Should Lessor elect or be required to make repairs
in accordance with subparagraphs (a), (b) or (c) above,
then for the period of time between the date of such damage
and until such repairs have been substantially completed,
there shall be an abatement of rent in proportion to the
floor area from which Lessee is excluded during the making
of such repairs; provided, however, that if the making of the repairs shall
not cause any material interference of occupancy and use of the leased
premises by Lessee, then there shall be no abatement of rent.



19. Eminent Domain.



If the whole or any part of the premises and improvements thereon hereby leased shall be
condemned or taken by any properly constituted corporation or any public authority under the power
of eminent domain or under the threat of eminent domain, then at Lessor’s option the term of this
lease shall cease as to the part so taken from the day the possession of that part shall be taken
by such corporation or public authority and the rent shall be paid to that date with a
proportionate refund by the Lessor of such rent as may have been paid in advance. If by reason of
any partial taking by condemnation or purchase under threat of condemnation the utility of the
premises to Lessee be substantially impaired, then the Lessee shall have the right either to
terminate this lease or to continue in the possession of the remainder of the same under the terms
herein provided, except that the rent shall be reduced in the proportion that the value of the
whole of the area of the premises thus taken or purchased represents to the value of the entire
leased premises at such time. All damages awarded, for such taking or the proceeds from any sale
under threat of such taking, whether for the whole or a part of the leased premises, shall belong
to and be the property of Lessor, whether such damages shall be awareded as compensation for
diminution in value to the leasehold or to the fee of the premises herein leased; except, however,
nothing herein contained shall deprive or deny to Lessee such lawful claims which Lessee may have
against the condemning authority for loss or damage to Lessee’s fixtures, or for expense of moving
or other claims not inconsistent with or in diminution of Lessor’s claims as owner of the premises
and the improvements thereon.



20. Interest on Delinquent Payments.



If any installment of Rent is not paid promptly when do, it shall bear interest at the maximum
rate permitted by law, from the date on which it is due until the date on which it is paid
regardless of whether or not a notice of default or a notice of termination has been given by the
lessor. This provision shall not relieve tenant from payment of Rent at the time and in the manner
herein specified.


 


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21. Delivering up Premises on Termination.



At the expiration of said term or upon any sooner termination
thereof, the Lessee will quit and deliver up said leased premises and all future erections
or additions to or upon the same, broom-clean, to the Lessor or those having Lessor’s
estate in the premises, peaceably, quietly, and in as good order and condition, reasonable
use and wear thereof, damage by fire and the elements alone excepted, as the same are now
in or hereafter may be put in by the Lessor.



22. Attachment, Bankruptcy, Default.



It is a condition of this lease that if the Lessee shall be in arrears in the payment of rent
for a period of five (5) days after notice from Lessor that the same is delinquent, or if Lessee
shall fail or neglect to do, keep, perform, or observe any of the covenants and agreements
contained herein on Lessee’s part to be done, kept, performed and observed, and such default shall
continue for ten (10) days or more after written notice of such failure or neglect shall be-mailed
to Lessee, or if said Lessee shall be declared bankrupt or insolvent according to law, or if any
assignment of Lessee’s property shall be made for the benefit of creditors, or if on the expiration
of this lease, Lessee fails to surrender possession of said leased premises, then and in either of
said cases or events, the Lessor or those having Lessor’s estate in the premises, lawfully, at its
or their option, immediately or at any time thereafter, without demand or notice, may enter into
and upon said demised premises and every part thereof, and repossess the same as of Lessor’s former
estate, and expel said Lessee and those claiming by, through or under Lessee, and remove Lessee’s
effects at Lessee’s expense, forcibly if necessary, and store the same, all without being deemed
guilty of trespass and without prejudice to any remedy which otherwise might be used for arrears of
rent or preceding breach of covenant.



23. Holding Over.



In the event the Lessee for any reason shall hold over after the expiration of this
lease, such holding over shall not be deemed to operate as a renewal or extension of this
lease, but shall only create a tenancy from month to month which may be terminated at will
at any time by the Lessor.



24. Attorney Fees and Court Costs.



If any action is brought by either party hereto as against the other by reason of the
breach of any term, covenant or condition of this lease on the part of the other party,
then, and in that event, party in whose favor final judgement shall be entered shall be
entitled to have and recover of and from the other reasonable attorneys fees, to be fixed
by the court wherein such judgement shall be entered.



25. Non-Waiver of Breach.



Any waiver by Lessor of any breach of any covenant herein contained to be kept and
performed by Lessee shall not be deemed or considered as a continuing waiver, and shall
not operate to bar or prevent Lessor from declaring a forfeiture for any succeeding
breach, either of the same condition or covenant or otherwise. Acceptance of rent after
any breach of any covenant herein shall not be deemed a waiver of such breach.



26. Heirs and Assigns.



All rights, remedies and liabilities herein given to or imposed upon either of the
parties hereto shall extend to, inure to the benefit of, and bind, as the circumstances
may require, the heirs, executors, and administrators, successors and, so far as this
lease is assignable by the terms hereof, to the assigns of such parties.



27. Notices.



Any notice which either party shall deem it necessary or desirable to give to the other
party shall be in writing and shall be sent by United States mail, postage prepaid, certified
or registered, with return receipt requested. Such notice shall be addressed as follows:



If to Lessor:



MIKRON INDUSTRIES INC.



 


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Notices (Continued)




If to Lessee:



The addresses to which mailings must be made may be changed from time to time by a
notice delivered or mailed as aforesaid.




28. Subordination to Mortgage.



Lessee will, upon demand by Lessor, execute such instruments as may be required at any time,
and from time to time, to subordinate the rights and interest of Lessee under this lease to the
lien of any mortgage at any time placed on the leased premises; provided, however, that such
subordination shall not affect Lessee’s right to possession, use or occupancy of the leased
premises so long as Lessee shall not be in default under any of the terms or conditions of this
lease.




29. Real Estate Taxes.



Lessee further covenants and agrees to pay as additional rent, Lessee’s share of all real
property taxes applicable to the premises during the term of this lease. All such payments shall
be made at least ten (10) days prior to the delinquency date of such payment. A tax bill
submitted by Lessor to Lessee shall be sufficient evidence of the amount of the taxes assessed or
levied against the real property to which the bill relates. In this case, the real estate tax
assessment shall be equal to 42% percent of the total taxes assessed against the
property.




30. Personal Property Taxes.



Tenant shall pay or be caused to be paid, prior to delinquency, any and all taxes and
assessments levied upon all trade fixtures, inventory and other personal property placed in
and upon the subject premises by the Lessee.



CONSULT YOUR ATTORNEY:





If this lease has been filled in it has been prepared for submission to your attorney
for his approval. No representation or recommendation is made by R. J. Hallissey Co.,
Inc. or its agents or employees as to the legal sufficiency, legal effect, or tax
consequences of this lease.



IN
WITNESS WHEREOF, the parties hereto have affixed their signatures
on the day and year first above written.



	 	 	 	 	 
	 	BY:  	     /s/ W. Ronald Sandwith
 	 
	 	 	      LESSOR 	 
	 	 	 
	 	BY:  	     /s/ Michael G. Ritter
 	 
	 	 	      LESSOR 	 
	 	 	 
	 	MIKRON IND. INC.

 	 
	 	BY:  	/s/ W. Ronald Sandwith
 	 
	 	 	      LESSEE 	 
	 	 	 
	 	BY:  	
 	 
	 	 	      LESSEE