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WHEN RECORDED RETURN TO: Blackwell Sanders Peper Martin LLP 4801 Main Street, Suite 1000 Kansas City, Missouri 64112 Attn: Gaylord G. Smith


LOAN MODIFICATION AGREEMENT


THIS LOAN MODIFICATION AGREEMENT (this "Agreement") is made as of the 26 day of July, 2005, by and between MISSION WEST PROPERTIES, L.P., a Delaware limited partnership, whose address is 10050 Bandley Drive, Cupertino, California 95014 ("Borrower"), and ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA, a Minnesota corporation, whose address is c/o Allianz of America, Inc., 55 Greens Farms Road, Post Office Box 5160, Westport, Connecticut, 06881-5160, Attn: Real Estate Department ("Lender").


WITNESSETH:


WHEREAS, Lender has made a mortgage loan in the amount of $25,800,000.00 (the "Loan") to Borrower, as evidenced by a Secured Installment Note in the amount of the Loan dated April 6, 2005 (the "Note"); and


WHEREAS, the Loan is secured by Deed of Trust, Security Agreement, Fixture Filing with Absolute Assignment of Rents dated April 6, 2005, granted by Borrower for the benefit of Lender, and recorded on April 6, 2005, as Document No. 18305259 (the "Deed of Trust"), and by an Absolute Assignment of Leases, Rents and Income dated April 6, 2005, given by Borrower to Lender, and recorded on April 6, 2005, as Document No. 10305260 (the "Assignment"), encumbering the "Property," as defined in the Deed of Trust, including the real property described on Exhibit A, attached hereto (the Note, Deed of Trust, Assignment, and all other documents or instruments evidencing or securing the Loan are hereinafter referred to as the "Security Documents"); and


WHEREAS, certain obligations of Borrower under the Loan have been guaranteed by Mission West Properties, Inc. ("Guarantor") pursuant to a Limited Guaranty dated April 6, 2005 (the "Guaranty"); and


WHEREAS, Lender has agreed to make a new loan to Borrower and Mission West Properties I, L.P., in the amount of $125,000,000.00, to be secured by certain real property in Santa Clara County, California (the "New Loan"); and


WHEREAS, Lender has agreed to make the New Loan on the condition that Borrower modify the Deed of Trust to provide that a default by Borrower under the New Loan will constitute a default under the Deed of Trust and the Loan; and


WHEREAS, Borrower has agreed to Lender's conditions for the New Loan and Lender and Borrower have agreed to amend the Security Documents as hereinafter set forth.


NOW, THEREFORE, in consideration of the agreement of Lender to make the New Loan, and of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower hereby agree as follows:


1. AMENDMENT OF NOTE. The Note is hereby amended by deleting therefrom Paragraph 1 in its entirety and by substituting the following therefor:


1. PAYMENT. Said principal sum, and interest as herein provided to
accrue on the unpaid principal, shall be paid as follows:


(a) On August 10, 2005, Borrower shall make a payment of
principal and interest in the amount of $178,351.00.


(b) On each "Payment Date" to and including July 10, 2025,
payments of principal and interest in the amount of $176,713.00 shall
be due and payable. "Payment Date" means the tenth (10th) day of each
consecutive calendar month for the term of this Note commencing
September 10, 2005. The payments due under this subparagraph (b) are
each called a "Monthly Installment."


(c) The entire remaining principal amount, together with any
accrued and unpaid interest (the "Final Installment"), shall be due
and payable in full on August 10, 2025 (the "Maturity Date").

 


(d) Interest shall be computed on the basis of a three hundred
sixty (360) day year consisting of twelve (12) months of thirty (30)
days each.


2. AMENDMENT OF DEED OF TRUST. (a) Section 1.13 of the Deed of Trust is hereby deleted in its entirety and the following is substituted therefor:


1.13 Financial Statements/Records. Borrower shall deliver or
cause to be delivered to Lender, within ninety (90) days after the end
of each of the respective party's fiscal years, (i) an annual
operating statement of income and expenses (which shall be audited if
an Event of Default exists) with respect to the operation of the
Property, in reasonable detail and certified by the chief financial
officer or manager of Borrower as complete and correct in all material
respects, (ii) a financial statement of Mission West Properties, Inc.,
a Maryland corporation, the general partner of Borrower ("Principal")
(which shall be audited if an Event of Default exists), prepared in
accordance with generally accepted accounting principles, consistently
applied, and certified as complete and correct in all material
respects by the chief financial officer of Principal, and (iii)
financial statements of all tenants under leases of the Property, if
available according to such leases. Borrower agrees to keep adequate
books and records of account, and shall permit Lender, and its agents,
accountants and attorneys, upon reasonable prior notice, to visit and
inspect the Property and examine the Property's books and records of
account at Borrower's office during normal business hours, and to
discuss the Property's affairs, finances and accounts with Borrower,
at such reasonable times as Lender may request. Such statements shall
be prepared in a form acceptable to Lender, to include, without
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