LEASE EXTENSION AND MODIFICATION OF LEASE RATES

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:

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.

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