---

Exhibit
10.4








FIRST
AMENDMENT TO LEASE


(Extension of
Term)





THIS
FIRST AMENDMENT TO LEASE (this “Amendment”) is dated as of
June 30, 2009, by and between TAPO CANYON WAREHOUSE, INC., a Delaware
corporation (“Landlord”), and QUALSTAR
CORPORATION, a California corporation (“Tenant”).





RECITALS





A.      
     Strategic Performance Fund – II, Inc. (“SPF”) and Tenant entered into
that certain Lease (Multi-Tenant) dated September 20, 2000 (the “Lease”), for certain premises
consisting of approximately 56,845 square feet (the “Premises”) in the building
located at 3990-B Heritage Oaks Court, Simi Valley, California (the “Building”), which is part of
that certain industrial complex known as Tapo Canyon Business Park (the “Project”).  Landlord
has succeeded to the interest of SPF as “Landlord” under the Lease.





B.         
   The Term of the Lease is scheduled to expire on January 9,
2011.





C.           
 Capitalized terms used but not defined herein shall have the meanings
attributed to them in the Lease.





D.            
Landlord and Tenant presently desire to amend the Lease to extend the Term of
the Lease, as more fully set forth below.





AGREEMENT





NOW,
THEREFORE, in consideration of the foregoing Recitals and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:





1.             
Extension
of Term; Options to Renew.





(a)           
Extension of
Term.  The Term of the Lease is hereby extended so that the
expiration date of the Lease shall be December 31, 2015.  The period
commencing on April 1, 2009 and ending on December 31, 2015 is hereinafter
referred to as the “Extension
Term”.





(b)           
Options to
Renew.  Section 39 (Options) of the Lease is hereby deleted in
its entirety and shall be of no further force or effect. Tenant shall be
permitted to extend the Term of the Lease in accordance with the terms of Exhibit D attached
hereto.





2.             
Rent.





(a)           
Base
Rent.  Notwithstanding anything to the contrary set forth in
the Lease, commencing on April 1, 2009 and thereafter on or before the first day
of each calendar month during the Extension Term, in addition to additional rent
as provided in the Lease, as amended by this Amendment, Tenant shall pay to
Landlord Base Rent, in the manner provided in the Lease, in the following
amounts:







For the Period
            Monthly Base Rent04/1/09
      – 03/31/10
            $38,086.1504/1/10
      – 03/31/11
            $39,228.7304/1/11
      – 03/31/12
            $40,405.6004/1/12
      – 03/31/13
            $41,617.7604/1/13
      – 03/31/14
            $42,866.3004/1/14
      – 03/31/15
            $44,152.2904/1/15
      – 12/31/15
            $45,476.85





(b)  
         Landlord and Tenant
acknowledge that Tenant has paid the Base Rent for the Premises for the months
of April, May and June 2009 based on a higher amount than set forth in this
Amendment. The difference between the amount of Base Rent paid by Tenant for
these three (3) months and the amount of Base Rent due under the Lease, as
amended hereby, for such months is $32,638.44 (the “Excess Base Rent”).
Notwithstanding anything to contrary contained herein, Landlord shall credit the
Excess Base Rent against Base Rent due for the month of August
2009.  Furthermore, if Tenant pays any additional installments of Base
Rent at the rate set forth in the Lease which are in excess of the schedule set
forth in Section 2(a) above, then Landlord shall credit any such overpayment
against Rent next due under the Lease, as amended hereby.





(c)    
       Nothing herein shall be construed to
limit or alter Tenant’s obligation to pay Tenant’s Share of Operating Expenses
and real property taxes throughout the Extension Term in accordance with the
terms of the Lease.





(c)     
      Condition
of Premises.  Tenant shall accept the Premises in its “AS IS”
state and condition effective as of the commencement of the Extension Term,
subject to any obligations by Landlord to repair and/or maintain the Premises as
set forth in the Lease.  Tenant acknowledges that Landlord shall have
no obligation to make or pay for any improvements to the Premises or otherwise
prepare the Premises for Tenant’s occupancy during the Extension
Term.





3.          
   Subordination.  Landlord
hereby reaffirms its obligation set forth in Section 30.3 of the Lease to obtain
a commercially reasonable non-disturbance agreement from the beneficiary of any
future Security Device which is secured by the Building.





4.             
Modifications
to Lease.





4.1           Notice
Provision.  Landlord’s new address for receipt of notices under
the Lease is as follows:





c/o Unire
Real Estate Group, Inc.


1800 East
Imperial Hwy, Suite 205


Brea,
CA  92821


2


Attention:  Tapo
Canyon Property Manager





with a
copy to:





c/o
Invesco Real Estate


500 Three
Galleria Tower


13155
Noel Road


Dallas,
TX 75240


Attention:  Tapo
Canyon Asset Manager





4.2  
         Security
Deposit.  The parties acknowledge that Landlord is currently
holding a security deposit in the amount of $48,965.63 pursuant to the Lease.
Landlord will require a security deposit in the amount of $38,086.15 to be held
in accordance with the terms of the Lease for the remainder of the Term
(including the Extension Term).  Promptly following the full execution
of this Amendment by Landlord and Tenant, Landlord shall credit the amount of
$10,879.40 against Base Rent due for the month of August 2009.





4.3    
       Surrender
Obligations.  Section 7.5.1 of the Lease is hereby revised by
the addition of the following language: “Tenant shall not be required to
remove:  (i) any of its improvements or alterations that were approved
by Landlord and completed during the initial construction of the Premises prior
to the original commencement date of the Lease (the “Initial Improvements”), and
(ii) any improvements existing in the Premises as of April 1,
2009.”  Tenant represents and warrants to Landlord that Tenant has not
made any material alterations in, or improvements to, the Premises since the
construction of the Initial Improvements.





4.4      
     Additional
Provisions.  As of the date of this Amendment, the following
provisions are hereby added to the Lease:





“59.          USA
Patriot Act and Anti-Terrorism Laws.





(a)     
      Tenant represents and warrants to, and
covenants with, Landlord that neither Tenant nor any of its respective
constituent owners or affiliates currently are, or shall be at any time during
the term hereof, in violation of any laws relating to terrorism or money
laundering (collectively, the “Anti-Terrorism Laws”),
including without limitation Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001 and relating to Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(the “Executive Order”)
and/or the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)
(the “USA Patriot
Act”).





(b)      
     Tenant covenants with Landlord that neither Tenant
nor any of its respective constituent owners or affiliates is or shall be during
the term hereof a “Prohibited Person,” which is defined as
follows:  (i) a person or entity that is listed in the Annex to, or is
otherwise subject to, the provisions of the Executive Order; (ii) a person or
entity owned or controlled by, or acting for or on behalf of, any person or
entity that is listed in the Annex to, or is otherwise subject to the provisions
of, the Executive Order; (iii) a person or entity with whom Landlord is
prohibited from dealing with or otherwise engaging in any transaction by any
Anti-Terrorism Law, including without limitation the Executive Order and the USA
Patriot Act; (iv) a person or entity who commits, threatens or conspires to
commit or support “terrorism” as defined in Section 3(d) of the Executive Order;
(v) a person or entity that is named as a “specially designated national and
blocked person” on the then-most current list published by the U.S. Treasury
Department Office of Foreign Assets Control at its official website, http://www.treas.gov/offices/eotffc/ofac/sdn/t11sdn.pdf,
or at any replacement website or other replacement official publication of such
list; and (vi) a person or entity who is affiliated with a person or entity
listed in items (i) through (v) above.


3


(c)    
       At any time and from time to time
during the Term, Tenant shall deliver to Landlord, within ten (10) days after
receipt of a written request therefor, a written certification or such other
evidence reasonably acceptable to Landlord evidencing and confirming Tenant’s
compliance with this Section
59.





60.     
      Mold.  It
is generally understood that mold spores are present essentially everywhere and
that mold can grow in most any moist location.  Emphasis is properly
placed on prevention of moisture and on good housekeeping and ventilation
practices.  Tenant acknowledges the necessity of commercially
reasonable housekeeping, ventilation and moisture control (especially in
kitchens, janitor’s closets, bathrooms, break rooms and around outside walls)
for mold prevention.  Without limiting the generality of the
foregoing, Tenant shall adopt and implement the following guidelines: (A) report
any maintenance problems involving water, moist conditions or mold to the
property manager for the Industrial Center (the “Property Manager”) promptly
and conduct its required activities in a commercially reasonable manner that
prevents unusual moisture conditions or mold growth; (B) do not block or inhibit
the flow of return or make-up air into the HVAC system; (C) maintain the
Premises at a consistent temperature and humidity level in accordance with the
Property Manager’s instructions; (D) regularly conduct janitorial activities,
especially in bathrooms, kitchens and janitorial spaces, to remove mildew and
prevent or correct moist conditions using commercially reasonable measures; and
(E) maintain water in all drain taps at all times.  In signing that
certain First Amendment to Lease, Tenant acknowledges that it is currently in
occupancy of the Premises and certifies that, to the best of Tenant’s knowledge,
Tenant has not observed mold, mildew or moisture within the
Premises.  Tenant agrees to immediately notify Landlord if it observes
mold/mildew and/or moisture conditions (from any source, including leaks), and
allow Landlord to evaluate and make recommendations and/or take appropriate
corrective action.  Except to the extent caused by the gross
negligence or willful misconduct of Landlord or Landlord’s agents and/or
contractors, Tenant relieves Landlord from any liability for any bodily injury
or damages to property caused by or associated with moisture or the growth of or
occurrence of mold or mildew on the Premises.  In addition, execution
of the First Amendment to Lease constitutes acknowledgement by Tenant that
commercially reasonable control of moisture and mold prevention are integral to
its Lease obligations.


4


61.   
        Landlord’s
Interest in the Building.  The liability of Landlord (and its
partners, shareholders or members) to Tenant (or any person or entity claiming
by, through or under Tenant) for any default by Landlord under the terms of this
Lease or any matter relating to or arising out of the occupancy or use of the
Premises and/or other areas of the Building or the Project shall be limited to
Tenant’s actual direct, but not consequential (or other speculative), damages
therefor and shall be recoverable only from the interest of Landlord in the
Building, and Landlord (and its partners, shareholders or members) shall not be
personally liable for any deficiency.  Additionally, to the extent
allowed by law, Tenant hereby waives any statutory lien it may have against
Landlord or its assets, including without limitation, the
Building.”





4.5      
     Substituted
Provision.  Section 52 of the Lease is hereby deleted in its
entirety and the following language is hereby substituted therefor:





“52.          Waiver of
Jury Trial.  IN GRAFTON PARTNERS L.P. V. SUPERIOR
COURT, 36 CAL.4TH 944
(2005), THE CALIFORNIA SUPREME COURT RULED THAT CONTRACTUAL, PRE-DISPUTE JURY
TRIAL WAIVERS ARE UNENFORCEABLE.  THE PARTIES, HOWEVER, ANTICIPATE
THAT THE CALIFORNIA LEGISLATURE MAY ENACT LEGISLATION TO PERMIT SUCH WAIVERS IN
CERTAIN CASES.  IN ANTICIPATION OF SUCH LEGISLATION, LANDLORD AND
TENANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, AS OF THE
EFFECTIVE DATE OF SUCH LEGISLATION AND TO THE EXTENT PERMITTED BY APPLICABLE
REQUIREMENTS, THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THE PREMISES (INCLUDING
WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS LEASE OR ANY CLAIMS OR
DEFENSES ASSERTING THAT THIS LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID
OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LANDLORD TO ENTER INTO
AND ACCEPT THIS LEASE.  LANDLORD AND TENANT AGREE TO TAKE ALL FURTHER
ACTION REQUIRED TO EFFECTUATE THEIR WAIVER UNDER SUCH LEGISLATION, INCLUDING
EXECUTING ADDITIONAL DOCUMENTS SATISFYING ALL REQUIREMENTS
THEREOF.  Landlord and Tenant agree and intend that this paragraph
constitutes a written consent to waiver of trial by jury within the meaning of
California Code of Civil Procedure Section 631(d)(2).  Each party
hereby authorizes and empowers the other to file this Section 52 and this
Lease with the clerk or judge of any court of competent jurisdiction as a
written consent to waiver of jury trial.”


5


5.        
     Real
Estate Brokers.  Tenant and Landlord warrant that they have had
no dealings with any broker or agent in connection with this Amendment, other
than Landlord’s brokers, CB Richard Ellis and Unire Real Estate Group
(collectively, “Landlord’s
Broker”) and CresaPartners (Tenant’s Broker).  Landlord shall
pay a brokerage commission to Landlord’s Broker pursuant to a separate written
agreement.  Landlord covenants to pay, hold harmless and indemnify
Tenant from and against any and all cost, expense or liability for any
compensation, commissions or charges claimed by any other broker or agent
utilized by Landlord with respect to this Amendment or the negotiation
hereof.  Tenant covenants to pay, hold harmless and indemnify Landlord
from and against any and all cost, expense or liability for any compensation,
commissions or charges claimed by any other broker or agent utilized by Tenant
with respect to this Amendment or the negotiation hereof.





6.            
 Authority.  Tenant
and each person executing this Amendment on behalf of Tenant hereby covenants
and warrants that (a) Tenant is in good standing under the laws of the State of
California, (b) Tenant has full power and authority to enter into this Amendment
and to perform all Tenant’s obligations under the Lease, as amended by this
Amendment, and (c) each person (and all of the persons if more than one signs)
signing this Amendment on behalf of Tenant is duly and validly authorized to do
so.





7.             
No
Offer.  Submission of this instrument for examination and
signature by Tenant does not constitute an offer to lease or a reservation of or
option for lease, and this instrument is not effective as a lease amendment or
otherwise until executed and delivered by both Landlord and Tenant.





8.             Release.  Tenant
hereby releases Landlord of and from all liabilities, claims, controversies,
causes of action and other matters of every nature which, through the date
hereof, have or might have arisen out of or in any way in connection with the
Lease and/or the Premises demised thereunder.  Tenant acknowledges
that it is familiar with Section 1542 of the Civil Code of the State of
California which provides as follows:





A general
release does not extend to claims which the creditor does not know or suspect to
exist in his or her favor at the time of executing the release, which if known
by him or her must have materially affected his or her settlement with the
debtor.





Tenant
hereby waives and relinquishes every right or benefit it may have under Civil
Code Section 1542 and all other provisions of law with respect to any such claim
it may have against Landlord to the full extent that it may lawfully do
so.  In connection with such waiver and relinquishment, Tenant
acknowledges that it is aware that it may hereafter discover facts in addition
to or different from those which it now knows or believes to be true with
respect to the subject matter of this Amendment, but that it is Tenant’s
intention hereby to fully, finally and forever settle and release all such
claims, known or unknown, suspected or unsuspected, which may now exist or which
have previously existed between Tenant and Landlord.  Accordingly,
Tenant agrees that this Amendment shall be and remain in effect as a full and
complete release notwithstanding the discovery or existence of any such
additional or different facts.





9.             Confidentiality.  Tenant
acknowledges that the terms and conditions of this Amendment are to remain
confidential for Landlord’s benefit, and may not be disclosed by Tenant to
anyone (except for Tenant’s Broker, consultants, accountants and legal counsel),
by any manner or means, directly or indirectly, without Landlord’s prior written
consent.  The consent by Landlord to any disclosures shall not be
deemed to be a waiver on the part of Landlord of any prohibition against any
future disclosure.


6


10.    
       Lease in
Full Force and Effect.  This Amendment contains the entire
understanding between the parties with respect to the matters contained
herein.  Tenant hereby affirms that on the date hereof no breach or
default by either party has occurred and that the Lease, and all of its terms,
conditions, covenants, agreements and provisions, except as hereby modified, are
in full force and effect with no defenses or offsets thereto.  No
representations, warranties, covenants or agreements have been made concerning
or affecting the subject matter of this Amendment, except as are contained
herein and in the Lease.  This Amendment may not be changed orally,
but only by an agreement in writing signed by the party against whom enforcement
of any waiver, change or modification or discharge is sought.





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





LANDLORD:
            TAPO
      CANYON WAREHOUSE, INC.,a
      Delaware corporation/s/
      KEVIN JOHNSONKevin
      JohnsonVice
      PresidentTENANT:
            QUALSTAR
      CORPORATIONa
      California corporation/s/
      NIDHI H. ANDALONNidhi
      H. AndalonChief
      Financial Officer/s/
      RICHARD A. NELSONRichard
      A. NelsonVice
      President Engineering[If
      Tenant is a corporation, Tenant should have one officer from each of the
      following categories sign for Tenant: (a) a president, vice president or
      chairman of the board and (b) a
      secretary, assistant secretary, chief financial officer or assistant
      treasurer (unless the Amendment is returned accompanied by a corporate
      resolution identifying a single authorized
  signatory).]


7


EXHIBIT
D





RENEWAL
OPTION





A.    
       If Tenant has not committed an Event
of Default more than twice during the Term (as such Term may have previously
been extended), and Tenant is occupying the entire Premises at the time of such
election, Tenant may renew the Lease for two (2) additional periods of three (3)
years (each, a “Renewal
Term”), by delivering written notice of the exercise thereof (the “Renewal Notice”) to Landlord
not earlier than nine (9) months nor later than six (6) months before the
expiration of the Extension Term, or the first Renewal Term, as the case may
be.  The Base Rent payable for each month during each Renewal Term
shall be the prevailing rental rate (the “Prevailing Rental Rate”), at
the commencement of the subject Renewal Term, for renewals of space in the
Project of equivalent quality, size, utility and location, with the length of
the Renewal Term, the credit standing of Tenant and the condition of the
improvements to the Premises to be taken into account.  Within thirty
(30) days after receipt of Tenant’s Renewal Notice for the subject Renewal Term,
Landlord shall deliver to Tenant written notice of the Prevailing Rental Rate
for the subject Renewal Term and shall advise Tenant of the required adjustment
to Rent, if any, and the other terms and conditions offered.  Tenant
shall, within ten (10) days after receipt of Landlord’s notice, notify Landlord
in writing whether Tenant accepts or rejects Landlord’s determination of the
Prevailing Rental Rate, and if Tenant rejects Landlord’s determination, Tenant
shall indicate whether Tenant desires to determine the Prevailing Rental Rate in
accordance with Paragraph B below.  If Tenant timely delivers the
Renewal Notice to Landlord, and Tenant timely notifies Landlord that Tenant
accepts Landlord’s determination of the Prevailing Rental Rate, then, on or
before the commencement date of the subject Renewal Term, Landlord and Tenant
shall execute an amendment to the Lease extending the Term on the same terms
provided in the Lease, except as follows:





(i)        
    Base Rent shall be adjusted to the Prevailing Rental
Rate.





(ii)      
     Tenant shall have no further renewal option other
than as set forth in this Exhibit.





(iii)           Landlord
shall lease to Tenant the Premises in their then-current condition, and Landlord
shall not provide to Tenant any allowances (e.g., moving allowance, construction
allowance, and the like) or other tenant inducements.





B.          
  If Tenant timely delivers the Renewal Notice and Tenant indicated in
such Notice that Tenant rejects Landlord’s determination of the Prevailing
Rental Rate and that Tenant wished to determine the Prevailing Rental Rate in
accordance with this Paragraph B then, if by that date which is four (4) months
prior to the commencement of the subject Renewal Term (the “Trigger Date”), Landlord and
Tenant have not agreed in writing as to the Prevailing Rental Rate, the parties
shall determine the Prevailing Rental Rate in accordance with the procedure set
forth in this Paragraph B.  If Landlord and Tenant are unable to reach
agreement on the Prevailing Rental Rate by the Trigger Date, then within seven
(7) days of the Trigger Date, Landlord and Tenant shall each simultaneously
submit to the other in a sealed envelope its good faith estimate of the
Prevailing Rental Rate.  If either Landlord or Tenant fails to propose
a Prevailing Rental Rate, then the Prevailing Rental Rate proposed by the other
party shall prevail.  If the higher of such estimates is not more than
one hundred five percent (105%) of the lower, then the fair market rent shall be
the average of the two.  Otherwise, the dispute shall be resolved by
arbitration in accordance with the remainder of this Paragraph
B.  Within seven (7) days after the exchange of estimates, the parties
shall select as an arbitrator either (i) a licensed real estate broker with at
least ten (10) years of experience leasing premises in industrial complexes in
the Simi Valley area or (ii) an independent MAI appraiser with at least five (5)
years of experience in appraising industrial complexes in the Simi Valley area
(a “Qualified
Arbitrator”).  If the parties cannot agree on a Qualified
Arbitrator, then within a second period of seven (7) days, each shall select a
Qualified Arbitrator and within ten (10) days thereafter the two appointed
Qualified Arbitrators shall select a third Qualified Arbitrator and the third
Qualified Arbitrator shall be the sole arbitrator.  If one party shall
fail to select a Qualified Arbitrator within the second seven (7)-day period,
then the Qualified Arbitrator chosen by the other party shall be the sole
arbitrator. Within thirty (30) days after submission of the matter to the
arbitrator, the arbitrator shall determine the Prevailing Rental Rate by
choosing whichever of the estimates submitted by Landlord and Tenant or a
combination of the two estimates the arbitrator judges to be more
accurate.  The arbitrator shall notify Landlord and Tenant of his or
her decision, which shall be final and binding.  If the arbitrator
believes that expert advice would materially assist him or her, the arbitrator
may retain one or more qualified persons to provide expert
advice.  The fees of the arbitrator and the expenses of the
arbitration proceeding, including the fees of any expert witnesses retained by
the arbitrator, shall be shared equally by Landlord and Tenant.  Each
party shall pay the fees of its respective counsel and the fees of any witness
called by that party.


D-1


C.       
     If Tenant fails to timely notify Landlord in
writing within the time frames set forth herein that Tenant accepts or rejects
Landlord’s determination of the Prevailing Rental Rate, time being of the
essence with respect thereto, Tenant’s rights under this Exhibit shall terminate
and Tenant shall have no right to renew the Lease.





D.        
    Tenant’s rights under this Exhibit shall terminate if
(1) the Lease or Tenant’s right to possession of the Premises is terminated, (2)
Tenant assigns any of its interest in the Lease or sublets any portion of the
Premises to any party, (3) Tenant fails to timely exercise its option under this
Exhibit, time being of the essence with respect to Tenant’s exercise thereof, or
(4) Landlord determines, in its sole but reasonable discretion, that Tenant’s
financial condition or creditworthiness has materially deteriorated since the
date of the Lease.






D-2