UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   -----------

                                    Form 10-Q


             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

                          COMMISSION FILE NUMBER 1-8383


                          Mission West Properties, Inc.
             (Exact name of registrant as specified in its charter)

           Maryland                                     95-2635431
           --------                                     ----------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)

                               10050 Bandley Drive
                        Cupertino, California 95014-2188
                    (Address of principal executive offices)

      Registrant's telephone number, including area code is (408) 725-0700
                                   -----------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. YES [X] NO [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

       Indicate the number of shares outstanding of each of the issuer's
           classes of common stock as of the latest practicable date:

               17,467,329 shares outstanding as of August 13, 2002


                                     - 1 -

<PAGE>


                          Mission West Properties, Inc.

                                    FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 2002

<TABLE>
<CAPTION>

                                      INDEX

                                                                                                                     PAGE
                                                                                                                     ----
<S>          <C>                                                                                                     <C>
PART I        FINANCIAL INFORMATION

   Item 1.    Financial Statements (unaudited):

              Consolidated Balance Sheets as of June 30, 2002
              and December 31, 2001 (unaudited)........................................................................3

              Consolidated Statements of Operations for the three
              and six months ended June 30, 2002 and 2001 (unaudited)..................................................4

              Consolidated Statements of Cash Flows for the
              six months ended June 30, 2002 and 2001 (unaudited)......................................................5

              Notes to Consolidated Financial Statements...............................................................6

   Item 2.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations.....................................................................10

   Item 3.    Quantitative and Qualitative Disclosures About Market Risk..............................................20


PART II       OTHER INFORMATION

   Item 4.     Submission of Matters to a vote of Security Holders....................................................20

   Item 6.     Exhibits and Reports on Form 8-K.......................................................................21

SIGNATURES............................................................................................................21
</TABLE>

                                     - 2 -

<PAGE>


PART I - FINANCIAL INFORMATION
ITEM 1   CONSOLIDATED FINANCIAL STATEMENTS

                          MISSION WEST PROPERTIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)
                                    ---------
<TABLE>
<CAPTION>
                                                                                   June 30, 2002         December 31, 2001
                                                                               ----------------------  ----------------------

                                     ASSETS
<S>                                                                                 <C>                     <C>
Real estate assets, at cost
    Land                                                                             $ 231,412               $ 218,058
    Buildings                                                                          711,616                 692,485
                                                                               ----------------------  ----------------------
                                                                                       943,028                 910,543
    Less accumulated depreciation                                                      (57,443)                (49,608)
                                                                               ----------------------  ----------------------
       Net real estate assets                                                          885,585                 860,935
Cash and cash equivalents                                                                5,812                   5,310
Restricted cash                                                                          2,721                  15,435
Deferred rent                                                                           16,319                  16,923
Other assets                                                                            10,781                  11,652
                                                                               ----------------------  ----------------------
       Total assets                                                                  $ 921,218               $ 910,255
                                                                               ======================  ======================

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
    Line of credit (related parties)                                                 $  73,774               $  79,887
    Unsecured loan                                                                      20,000                       -
    Mortgage notes payable                                                             126,413                 127,416
    Mortgage notes payable (related parties)                                            11,227                  11,371
    Interest payable                                                                       340                     342
    Security deposits                                                                    7,260                   7,337
    Prepaid rental income                                                               16,129                  12,470
    Dividends/distributions payable                                                     24,872                  24,742
    Refundable option payment                                                                -                  18,836
    Accounts payable and accrued expenses                                                5,329                   4,367
                                                                               ----------------------  ----------------------
       Total liabilities                                                               285,344                 286,768

Commitments and contingencies (Note 8)

Minority interest                                                                      525,092                 515,063

Stockholders' equity:
    Preferred stock, $.001 par value, 20,000,000 shares
       authorized, none issued and outstanding                                               -                       -
    Common stock, $.001 par value, 200,000,000 shares
       authorized, 17,467,329 and 17,329,779 shares issued and
       outstanding at June 30, 2002 and December 31, 2001,
       respectively                                                                         17                      17
    Paid-in-capital                                                                    128,095                 126,626
    Accumulated deficit                                                                (17,330)                (18,219)
                                                                               ----------------------  ----------------------
       Total stockholders' equity                                                      110,782                 108,424
                                                                               ----------------------  ----------------------
       Total liabilities and stockholders' equity                                    $ 921,218               $ 910,255
                                                                               ======================  ======================
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                     - 3 -
<PAGE>


                          MISSION WEST PROPERTIES, INC
                      CONSOLIDATED STATEMENTS OF OPERATIONS
           (Dollars in thousands, except share and per share amounts)
                                   (Unaudited)
                                    ---------

<TABLE>
<CAPTION>
                                                        Three months ended June 30,                Six months ended June 30,
                                                        2002                  2001                 2002                 2001
                                                 --------------------  -------------------- -------------------- -------------------
<S>                                                  <C>                    <C>                 <C>                  <C>
Revenues:
   Rental income from real estate                       $ 32,753              $ 31,654             $ 65,238             $ 61,333
   Tenant reimbursements                                   4,875                 3,756               10,201                7,245
   Other income, including interest                          278                   825                  774                1,340
                                                 --------------------  -------------------- -------------------- -------------------
        Total revenues                                    37,906                36,235               76,213               69,918
                                                 --------------------  -------------------- -------------------- -------------------

Expenses:
   Operating expenses                                      1,921                 1,717                4,196                2,942
   Real estate taxes                                       3,003                 2,576                6,060                4,897
   Depreciation of real estate                             4,455                 4,165                8,811                8,267
   General and administrative                                370                   483                  804                  801
   Interest                                                2,362                 2,216                4,633                4,426
   Interest (related parties)                                899                 1,163                1,909                2,463
                                                 --------------------  -------------------- -------------------- -------------------
        Total expenses                                    13,010                12,320               26,413               23,796
                                                 --------------------  -------------------- -------------------- -------------------

Income before minority interest                           24,896                23,915               49,800               46,122
Minority interest                                         20,823                19,932               41,591               38,439
                                                 --------------------  -------------------- -------------------- -------------------
   Income from continuing operations                       4,073                 3,983                8,209                7,683
                                                 --------------------  -------------------- -------------------- -------------------

Discontinued operations:
Gain from disposal of discontinued operations                  -                     -                6,103                3,102
Gain from discontinued operations                              -                     -                  287                    -
                                                 --------------------  -------------------- -------------------- -------------------
   Net gain from discontinued operations                       -                     -                6,390                3,102
                                                 --------------------  -------------------- -------------------- -------------------

Net income to minority interest                         $ 20,823              $ 19,932             $ 46,917             $ 41,022
                                                 ====================  ==================== ==================== ===================
Net income to common stockholders                       $  4,073              $  3,983             $  9,273             $  8,202
                                                 ====================  ==================== ==================== ===================
Income per share from continuing operations:
   Basic                                                $   0.23              $   0.23             $   0.47             $   0.45
                                                 ====================  ==================== ==================== ===================
   Diluted                                              $   0.23              $   0.23             $   0.46             $   0.44
                                                 ====================  ==================== ==================== ===================
Income per share from discontinued operations:
   Basic                                                       -                     -                    -                    -
                                                 ====================  ==================== ==================== ===================
   Diluted                                                     -                     -                    -                    -
                                                 ====================  ==================== ==================== ===================
Net income per share to common stockholders:
   Basic                                                $   0.23              $   0.23             $   0.47             $   0.45
                                                 ====================  ==================== ==================== ===================
   Diluted                                              $   0.23              $   0.23             $   0.46             $   0.44
                                                 ====================  ==================== ==================== ===================
Weighted average number of shares of
   common stock outstanding (basic)                   17,464,692             17,093,710          17,434,796           17,065,612
                                                 ====================  ==================== ==================== ===================
Weighted average number of shares of
   common stock outstanding (diluted)                 17,902,853             17,308,601          17,878,483           17,293,484
                                                 ====================  ==================== ==================== ===================

</TABLE>


        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                     - 4 -
<PAGE>


                          MISSION WEST PROPERTIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)
                                    ---------
<TABLE>
<CAPTION>

                                                                                              Six months ended June 30,
                                                                                         -------------------------------------
                                                                                               2002               2001
                                                                                         ------------------ ------------------
<S>                                                                                     <C>                <C>
Cash flows from operating activities:
     Net income                                                                          $     9,273        $     8,202
     Adjustments to reconcile net income to net cash provided by
       operating activities:
            Minority interest                                                                 46,917             41,022
            Depreciation                                                                       8,857              8,267
            Gain on sales of real estate                                                      (6,103)            (3,102)
            Other                                                                                (19)               105
     Changes in assets and liabilities:
            Deferred rent                                                                        604             (4,327)
            Other assets                                                                         870               (253)
            Interest payable                                                                      (2)                (2)
            Security deposits                                                                    (77)               819
            Prepaid rental income                                                              3,659                650
            Accounts payable and accrued expenses                                                690                 93
                                                                                         ------------------ ------------------
     Net cash provided by operating activities                                                64,669             51,474
                                                                                         ------------------ ------------------

Cash flows from investing activities:
     Improvements to real estate assets                                                         (943)              (324)
     Refundable option payment                                                               (18,836)            (1,000)
     Real estate purchase                                                                    (31,311)           (23,130)
     Proceeds from sales of real estate                                                       18,591             23,130
     Restricted cash                                                                          12,714                  -
                                                                                         ------------------ ------------------
     Net cash used in investing activities                                                   (19,785)            (1,324)
                                                                                         ------------------ ------------------

Cash flows from financing activities:
     Principal payments on mortgage notes payable                                             (1,003)            (3,671)
     Principal payments on mortgage notes payable (related parties)                             (144)              (133)
     Net payments under line of credit (related parties)                                     (13,613)            (8,216)
     Proceeds from unsecured loan                                                             20,000                  -
     Financing costs                                                                             (52)                 -
     Proceeds from line of credit                                                              5,000                  -
     Payment on line of credit                                                                (5,000)                 -
     Proceeds from stock options exercised                                                       151                457
     Minority interest distributions                                                         (41,371)           (31,078)
     Dividends paid                                                                           (8,350)            (6,476)
                                                                                         ------------------ ------------------
     Net cash used in financing activities                                                   (44,382)           (49,117)
                                                                                         ------------------ ------------------
     Net increase in cash and cash equivalents                                                   502              1,033
Cash and cash equivalents, beginning                                                           5,310              4,691
                                                                                         ------------------ ------------------
Cash and cash equivalents, ending                                                        $     5,812        $     5,724
                                                                                         ================== ==================

Supplemental information:
     Cash paid for interest                                                              $     6,379        $     6,839
                                                                                         ================== ==================
Supplemental schedule of non-cash investing and financing activities:
     Debt incurred in connection with property acquisitions (related parties)            $     7,500        $    22,973
                                                                                         ================== ==================
     Assumption of other liabilities in connection with property acquisitions            $       398        $         -
                                                                                         ================== ==================
     Issuance of operating partnership units in connection with property acquisitions    $     6,152        $    17,442
                                                                                         ================== ==================
</TABLE>



        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                     - 5 -
<PAGE>


                          MISSION WEST PROPERTIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             (Dollars in thousands, except share and per share data)
                                   (Unaudited)
                                    ---------


1.   PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

     The accompanying  consolidated financial statements include the accounts of
     Mission West Properties,  Inc. and its controlled  subsidiaries,  including
     the operating  partnerships (the "Company").  All significant  intercompany
     balances have been eliminated in consolidation.

     Certain prior year amounts have been reclassified to conform to the current
     year's presentation.

     Minority  interest   represents  the  separate  private  ownership  of  the
     operating  partnerships  by the Berg Group  (defined  as Carl E. Berg,  his
     brother Clyde J. Berg, members of their respective immediate families,  and
     certain entities they control) and other non-affiliate interests. In total,
     these interests account for approximately 83% of the ownership interests in
     the real estate  operations  of the Company as of June 30,  2002.  Minority
     interest in earnings  has been  calculated  by taking the net income of the
     operating   partnerships  (on  a  stand-alone   basis)  multiplied  by  the
     respective minority interest ownership percentage.

     The financial  statements  have been prepared in accordance with accounting
     principles  generally  accepted  in the United  States of America  ("GAAP")
     applicable to interim  financial  information and pursuant to the rules and
     regulations of the Securities and Exchange Commission. Accordingly, certain
     information  and  footnote   disclosures  normally  included  in  financial
     statements  prepared in accordance with GAAP have been condensed or omitted
     pursuant  to  such  rules  and  regulations.  However,  in the  opinion  of
     management,   all   adjustments,   consisting  only  of  normal   recurring
     adjustments,  necessary for a fair  presentation  have been  included.  The
     Company presumes that users of the interim financial  information have read
     or have access to the audited financial statements for the preceding fiscal
     year and that the  adequacy  of  additional  disclosure  needed  for a fair
     presentation  may be determined in that context.  The results of operations
     for the  three  and six  months  ended  June 30,  2002 are not  necessarily
     indicative of the results to be expected for the entire year.

     The Company adopted  Statement of Financial  Accounting  Standards No. 144,
     "Accounting for the Impairment or Disposal of Long Lived Assets"  effective
     January 1, 2002 (see note 9).

     The  Company  has  elected to be taxed as a real  estate  investment  trust
     ("REIT") under the Internal Revenue Code of 1986, as amended.  Accordingly,
     no  provision  has been made for income  taxes for the three and six months
     ended June 30, 2002.

2.   REAL ESTATE

     BERG LAND HOLDINGS OPTION AGREEMENT
     Under the terms of the Berg land holdings  option  agreement,  the Company,
     through the  operating  partnerships,  has the option to acquire any future
     Research & Development  ("R&D"),  office and industrial buildings developed
     by the Berg Group on land currently owned,  optioned, or acquired for these
     purposes in the future,  directly or indirectly  by certain  members of the
     Berg Group. At present, there are approximately 284 acres of Silicon Valley
     land,  including land under development,  owned directly or under 50% joint
     venture entities,  by certain members of the Berg Group that are subject to
     the terms of the Berg land  holdings  option  agreement.  The owners of the
     future  R&D  property  developments  may obtain  cash or, at their  option,
     operating  partnership  interests  ("O.P.  Units")  valued  at the  average
     closing  price of shares of common  stock  over the  30-trading-day  period
     preceding  the  acquisition  date.  As of June 30,  2002,  the  Company had
     completed 17  acquisitions  under the Berg land holdings  option  agreement
     representing   approximately  1,699,000  rentable  square  feet.  Upon  the
     Company's  exercise of an option to purchase any of the future R&D property
     developments  under the terms of the Berg land holdings  option  agreement,
     the acquisition  price will equal the sum of (a) the full construction cost
     of the building; (b) 10% of the full construction cost of the building; (c)
     the acquisition  value of the parcel as defined in the agreement upon which
     the  improvements are constructed  (currently  ranging from $8.50 to $20.00
     per square foot); (d) 10% per annum of the acquisition  value of the parcel
     for the  period  from  January  1,  1998 to the  close of  escrow;  and (e)
     interest at LIBOR (London Interbank Offer Rate) plus 1.65% per annum on the
     full construction  costs of the building for the period from the date funds
     were  disbursed by the developer to the close of escrow;  less (f) any debt
     encumbering the property,  or a lesser amount as approved by the members of
     the independent directors committee of the Company's board of directors.

                                     - 6 -
<PAGE>

     No  estimate  can be given at this time as to the total cost to the Company
     to acquire projects under the Berg land holdings option  agreement,  or the
     timing of the Company's  acquisition of any of such projects.  However, the
     Berg Group currently has four properties under  development with a total of
     approximately  476,000  rentable  square  feet of R&D  properties  that the
     Company  has the  right  to  acquire  under  this  agreement.  Of the  four
     properties,  three  are  joint  ventures  in  which  the Berg  Group  holds
     approximately a 50% interest.  The joint venture  properties  prospectively
     represent a total of approximately 311,000 rentable square feet. As of June
     30, 2002, the estimated acquisition price to the operating partnerships for
     these four projects would be approximately  $54,600.  The final acquisition
     price of  these  four  properties  could  differ  significantly  from  this
     estimate. In addition to projects currently under development,  the Company
     has the right to acquire future developments by the Berg Group on up to 250
     additional  acres of land  currently  controlled  by the Berg Group,  which
     could support  approximately  3.9 million square feet of new  developments.
     Under the Berg land holdings option agreement,  as long as the Berg Group's
     percentage ownership interest in the Company and the operating partnerships
     taken  as a whole is at least  65%,  the  Company  also  has an  option  to
     purchase  all land  acquired,  directly or  indirectly,  by Carl E. Berg or
     Clyde J. Berg in the  future  which has not been  improved  with  completed
     buildings and which is zoned for,  intended for or appropriate for research
     and development,  office and/or industrial development or use in the states
     of California, Oregon and Washington.

     PROPERTY DISPOSITION
     On March 6,  2002,  the  Company  completed  the  sale,  in a  tax-deferred
     exchange, of a 72,400 square foot R&D property located at 2001 Logic Drive,
     San Jose, California to Xilinx, Inc., which had exercised a purchase option
     in the same month.  The Company realized a gain of $6,103 on the total sale
     price of  approximately  $18,503.  At March 31, 2002, the proceeds from the
     sale of this  property were  classified  as  restricted  cash to be used in
     tax-deferred property exchanges.

     PROPERTY ACQUISITIONS
     Effective  January 1, 2002, the Company acquired an  approximately  125,000
     rentable square foot newly constructed R&D building located at 5345 Hellyer
     Avenue  in San Jose,  California  from the Berg  Group  under the Berg land
     holdings option  agreement.  The total  acquisition price for this property
     was $13,652.  The Company  acquired this property by borrowing $7,500 under
     the Berg Group line of credit and  issuing  502,805  O.P.  Units to various
     members of the Berg Group.

     Effective March 8, 2002, the Company acquired three R&D buildings  totaling
     approximately 206,500 rentable square foot located at 2610 and 2630 Orchard
     Parkway  and 55 West  Trimble  Road in San Jose,  California  from  Silicon
     Valley Properties, LLC in a tax-deferred exchange transaction involving the
     Company's  former R&D properties  located at 2001 Logic Drive and 5713-5729
     Fontanoso Way, San Jose,  California.  The total  acquisition price for the
     properties  acquired from Silicon Valley Properties,  LLC was approximately
     $31,250.

3.   RESTRICTED CASH

     At June 30, 2002,  restricted cash represents the remaining proceeds from a
     property sale and interest  income being held in a separate cash account at
     a trust  company in order to preserve  the  Company's  option of  receiving
     replacement property on a tax-deferred basis.

4.   STOCK TRANSACTIONS

     During the six months ended June 30, 2002, stock options to purchase 33,550
     shares of common stock were exercised at $4.50 per share. Total proceeds to
     the  Company  were  $151.  Two  limited  partners  of one of the  operating
     partnerships  exchanged  104,000  O.P.  Units  for  104,000  shares  of the
     Company's common stock under the terms of the December 1998 exchange rights
     agreement  among the  Company and all  limited  partners  of the  operating
     partnerships.

5.   NET INCOME PER SHARE

     Basic  operating  net income per share is computed by dividing  net income,
     excluding gain on sale of real estate,  by the  weighted-average  number of
     common shares outstanding for the period.  Diluted operating net income per
     share is computed by dividing  net income,  excluding  gain on sale of real
     estate,  by  the  sum of  the  weighted-average  number  of  common  shares
     outstanding  for the  period  plus the  assumed  exercise  of all  dilutive
     securities.

     The computation for weighted average shares is detailed below:

<TABLE>
<CAPTION>

                                                          Three Months Ended June 30,         Six Months Ended June 30,
                                                        -------------------------------    -------------------------------
                                                             2002              2001             2002              2001
                                                        --------------    -------------    --------------    -------------
<S>                                                      <C>              <C>               <C>              <C>
        Weighted average shares outstanding (basic)       17,464,692       17,093,710        17,434,796       17,065,612

        Incremental shares from assumed option exercise      438,161          214,891           443,687          227,872
                                                        --------------    -------------    --------------    -------------
        Weighted average shares outstanding (diluted)     17,902,853       17,308,601        17,878,483       17,293,484
                                                        ==============    =============    ==============    =============
</TABLE>
                                     - 7 -
<PAGE>

     The  outstanding  O.P. Units,  which are  exchangeable at the unit holder's
     option,  subject to  certain  conditions,  for shares of common  stock on a
     one-for-one  basis have been excluded from the diluted net income per share
     calculation,  as there  would  be no  effect  on the  amounts  because  the
     minority interests' share of income would also be added back to net income.
     The total number of O.P.  Units  outstanding  at June 30, 2002 and 2001 was
     86,161,346 and 84,824,911, respectively.

6.   RELATED PARTY TRANSACTIONS

     As of June 30, 2002, the Berg Group owned  78,005,998 O.P. Units.  Combined
     with shares of the Company's common stock owned by the Berg Group, the Berg
     Group's ownership as of June 30, 2002 represented  approximately 75% of the
     equity interests of the Company, assuming conversion of the 86,161,346 O.P.
     Units outstanding into the Company's common stock.

     As of June 30,  2002,  debt in the amount of $73,774 was due the Berg Group
     under the line of credit  established  March 1,  2000.  The Berg Group $100
     million  line of credit is  currently  collateralized  by nine  properties,
     bears interest at LIBOR plus 1.30%,  and matures in March 2003. The Company
     believes that the terms of the Berg Group line of credit are more favorable
     than those available from commercial  lenders. As of June 30, 2002, debt in
     the  amount  of  $11,227  was due the  Berg  Group  under a  mortgage  note
     established  May 15,  2000 in  connection  with  the  acquisition  of a 50%
     interest in Hellyer  Avenue  Limited  Partnership,  the  obligor  under the
     mortgage note. The mortgage note bears interest at 7.65%,  and is due in 10
     years with principal payments amortized over 20 years.

     Carl E. Berg has a  substantial  financial  interest  in one  company  that
     leases space from the operating  partnerships.  This company occupies 5,862
     square  feet at $2.30 per square  foot per month.  This lease was in effect
     prior to the Company's  acquisition of its general partnership interests in
     July 1998. The lease expires in May 2003.

     The Company currently leases office space owned by Berg & Berg Enterprises,
     Inc.,  an affiliate of Carl E. Berg and Clyde J. Berg.  Rental  amounts and
     overhead reimbursements paid to Berg & Berg Enterprises,  Inc. were $23 and
     $20 for the three month ended June 30, 2002 and 2001, respectively, and $45
     and $43 for the six months ended June 30, 2002 and 2001, respectively.

7.   SUBSEQUENT EVENTS

     On July 12, 2002,  the Company  established a $40,000  unsecured  revolving
     line of credit (the  "Revolving  Line of Credit") with  Cupertino  National
     Bank,  Cupertino,  California (the "Bank"). The Revolving Line of Credit is
     guaranteed  by the Company and two  operating  partnerships,  which pledged
     four  properties,  bears  interest at LIBOR plus 2%, matures July 12, 2004,
     and requires payment of an annual loan fee of $33. The Company will use the
     proceeds  from  the  Revolving  Line of  Credit  to  repay  debt,  complete
     acquisitions  and finance other working  capital  requirements. The Company
     pledged four  properties in accordance  with the Revolving Line of Credit's
     Non-Encumbrance  Agreement.  The  Revolving Line of Credit as of August 12,
     2002 had a zero outstanding balance.

     The  Non-Encumbrance  Agreement provides that the Company will not encumber
     the four properties while they are pledged in connection with the Revolving
     Line of Credit.

     The four properties  were previously  encumbered as collateral for the Berg
     Group line of credit.  As of July 12,  2002,  the Company  substituted  two
     additional properties as collateral for the Berg Group line of credit.

     On July 11, 2002,  the Company paid  dividends of $0.24 per share of common
     stock to all common stockholders of record as of June 28, 2002. On the same
     date,  the operating  partnerships  paid a  distribution  of $0.24 per O.P.
     Unit.

8.   COMMITMENTS AND CONTINGENCIES

     The Company and the operating  partnerships are or may become, from time to
     time,  parties to litigation  arising out of the normal course of business.
     Management  is not aware of any  litigation  against the Company that would
     have a material  adverse  effect on the  consolidated  financial  position,
     results of operations or cash flows of the Company.

     Insurance policies currently  maintained by the Company do not cover losses
     from the  consequence  of terrorism or seismic  activity,  although they do
     cover losses from fires after an earthquake.

9.   DISCONTINUED OPERATIONS

     Effective  January 1, 2002,  the Company  adopted  Statement  of  Financial
     Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
     Long Lived Assets" which addresses  financial  accounting and reporting for
     the impairment  and disposal of long-lived  assets.  In general,  income or
     loss  attributable  to  the  operations  and  sale  of  property,  and  the


                                     - 8 -
<PAGE>


     operations   related  to  property  held  for  sale,   are   classified  as
     discontinued  operations  in the  statements  of  operations.  Prior period
     statements of operations presented in this report have been reclassified to
     reflect  the  income  or loss  related  to  properties  that  were sold and
     presented as  discontinued  operations for the three and six  month-periods
     ended June 30,  2002.  Additionally,  all periods  presented in this report
     will  likely  require  further   reclassification   in  future  periods  if
     additional property sales occur.

     As of June 30, 2002,  there were no properties under contract to be sold or
     disposed of which would qualify as discontinued operations.

     In March 2002,  the Company sold one  property  for a gain of $6,103.  Gain
     from  operation  for this  property was  approximately  $0 and $430 for the
     three  months  ended  June  30,  2002  and  2001,  respectively.  Condensed
     operations  for this  property  for the three and six months ended June 30,
     2002 and 2001 are as follows:

<TABLE>
<CAPTION>

                                                  Three Months Ended June 30,                      Six Months Ended June 30,
                                           ------------------------------------------      -----------------------------------------
                                                  2002                   2001                    2002                    2001
                                           -------------------     ------------------      ------------------     ------------------
                                                    (Dollars in thousands)                          (Dollars in thousands)
<S>                                                <C>                  <C>                    <C>                    <C>
         Rental income from real estate             -                    $500                   $333                   $  999
         Tenant reimbursements                      -                      23                    293                       47
                                           -------------------     ------------------      ------------------     ------------------
               Total revenues                       -                     523                    626                    1,046

         Real estate taxes                          -                      23                    293                       47
         Depreciation                               -                      70                     46                      139
                                           -------------------     ------------------      ------------------     ------------------
              Total expenses                        -                      93                    339                      186
                                           -------------------     ------------------      ------------------     ------------------
                   Net income                       -                    $430                   $287                   $  860
                                           ===================     ==================      ==================     ==================
</TABLE>



                                     - 9 -

<PAGE>


ITEM 2
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations  should be read in  conjunction  with the  accompanying  consolidated
financial  statements  and notes  thereto  contained  herein  and the  Company's
consolidated  financial  statements and notes thereto contained in the Company's
Annual Report on Form 10-K as of and for the year ended  December 31, 2001.  The
results  for the three and six months  ended June 30,  2002 are not  necessarily
indicative  of the  results to be  expected  for the entire  fiscal  year ending
December 31, 2002. The following discussion includes forward-looking statements,
including but not limited to,  statements  with respect to the Company's  future
financial performance,  operating results, plans and objectives.  Actual results
may differ materially from those currently  anticipated depending upon a variety
of  factors,   including   those   described   below   under  the   sub-heading,
"Forward-Looking Information."

OVERVIEW

Mission West Properties,  Inc. (the "Company")  acquires,  markets,  leases, and
manages  R&D and office  properties,  primarily  located in the  Silicon  Valley
portion of the San Francisco  Bay Area.  As of June 30, 2002,  the Company owned
and managed 100 properties  totaling  approximately  7.0 million rentable square
feet through four limited partnerships, or operating partnerships,  for which it
is the sole general partner. This class of property is designed for research and
development  and  office  uses  and,  in some  cases,  includes  space for light
manufacturing  operations with loading docks.  The Company  believes that it has
one of the largest  portfolios of R&D properties in the Silicon Valley. The four
tenants  who  lease the most  square  footage  from the  Company  are  Microsoft
Corporation,  JDS Uniphase  Corporation,  Amdahl  Corporation  (a  subsidiary of
Fujitsu Limited),  and Apple Computer,  Inc. For federal income tax purposes the
Company has operated as a self-managed,  self-administered  and fully integrated
real estate investment trust ("REIT") since fiscal 1999.

The  Company's  acquisition  and  growth  strategy  incorporates  the  following
elements:

-    working  with  the Berg  Group to take  advantage  of their  abilities  and
     resources to pursue  development  opportunities  which we have an option to
     acquire, on pre-negotiated terms, upon completion and leasing;

-    capitalizing   on   opportunistic   acquisitions   from  third  parties  of
     high-quality  R&D and office  properties  that provide  attractive  initial
     yields and significant potential for growth in cash-flow;

-    focusing on general  purpose,  single-tenant  Silicon Valley R&D and office
     properties for  information  technology  companies in order to maintain low
     operating costs, reduce tenant turnover and capitalize on our relationships
     with these  companies  and our  extensive  knowledge  of their real  estate
     needs; and

-    maintaining prudent financial management  principles that emphasize current
     cash flow while building  long-term  value,  the  acquisition of pre-leased
     properties to reduce  development  and leasing risks and the maintenance of
     sufficient liquidity to acquire and finance properties on desirable terms.


                                     - 10 -




<PAGE>


RESULTS OF OPERATIONS

COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 TO THE THREE AND SIX
MONTHS ENDED JUNE 30, 2001.

As of June 30,  2002,  the  Company,  through its  controlling  interests in the
operating partnerships,  owned 100 properties totaling approximately 7.0 million
square feet compared to 93 properties totaling  approximately 6.4 million square
feet owned by the Company as of June 30, 2001. This represents a net increase of
approximately  9% in total rentable square footage from one year ago. Since June
30, 2001 the Company has  acquired the  properties  listed below and disposed of
77,700  rentable  square feet at  5713-5729  Fontanoso  Way and 72,400  rentable
square feet at 2001 Logic Drive in San Jose, California.
<TABLE>
<CAPTION>

                                                                                     Rentable Square
           Date of Acquisition                          Address                          Footage
          ---------------------     ------------------------------------------    ---------------------
<S>                                <C>                                                 <C>
                 07/01              5906-65  Silver  Creek  Valley  Rd. I  (1)          247,500
                 08/01              5750 Hellyer Avenue                                  73,312
                 10/01              5905-65 Silver Creek Valley Rd. II                   98,500
                 01/02              5345 Hellyer Avenue                                 125,000
                 03/02              2630 Orchard Parkway (2)                             60,633
                 03/02              2610 Orchard Parkway (2)                             54,093
                 03/02              55 West Trimble (2)                                  91,722

                                                                                  ---------------------
                                                                                        750,760
                                                                                  =====================
</TABLE>

(1)  Three buildings were acquired at this location.
(2)  Acquired in a  tax-deferred  exchange  from the sale of R&D  properties  at
     5713-5729 Fontanoso Way and 2001 Logic Drive, San Jose, California.


The  following  tables  reflect the increase in the Company's  rental  revenues,
excluding rental revenues from  discontinued  operations,  for the three and six
months ended June 30, 2002 over rental revenues for the comparable three and six
months in 2001:
<TABLE>
<CAPTION>

                            Three Months Ended June 30,
                          ---------------------------------
                                                                                      % Change by         % of Total Net
                              2002               2001              $ Change          Property Group           Change
                          --------------     --------------     ----------------     ---------------     -----------------
                                         (Dollars in thousands)
<S>                         <C>                <C>                <C>                   <C>                  <C>
   Same Property (1)         $25,750            $29,476            ($ 3,726)             (12.6%)              (11.7%)
   2001 Acquisitions (2)       5,163              2,178               2,985              137.1%                 9.4%
   2002 Acquisitions           1,840                  -               1,840              100.0%                 5.8%
                          --------------     --------------     ----------------                         -----------------
                             $32,753            $31,654             $ 1,099                3.5%                 3.5%
                          ==============     ==============     ================                         =================


                             Six Months Ended June 30,
                          ---------------------------------
                                                                                      % Change by         % of Total Net
                              2002               2001              $ Change          Property Group           Change
                          --------------     --------------     ----------------     ---------------     -----------------
                                         (Dollars in thousands)

   Same Property (1)         $51,660            $57,719            ($ 6,059)             (10.5%)               (9.9%)
   2001 Acquisitions (2)      10,698              3,614               7,084              196.0%                11.6%
   2002 Acquisitions           2,880                  -               2,880              100.0%                 4.7%
                          --------------     --------------     ----------------                         -----------------
                             $65,238            $61,333             $ 3,905                6.4%                 6.4%
                          ==============     ==============     ================                         =================
</TABLE>


(1)  "Same  Property"  is  defined  as  properties  owned as of July 1, 1998 and
     acquired in 1998, 1999 and 2000 and still owned as of June 30, 2002.
(2)  The figures for "2001 Acquisitions" in year 2001 for some properties do not
     reflect  a full  three  and six  months  of rent due to the  timing  of the
     acquisition of the properties during 2001.

RENTAL REVENUE FROM CONTINUING OPERATIONS
For the quarter ended June 30, 2002,  rental revenues  increased by $1.1 million
from $31.7 million for the three months ended June 30, 2001 to $32.8 million for
the same period of 2002. Of the $1.1 million increase in rental revenues, ($3.7)
million  resulted from the Company's  "Same  Property"  portfolio,  $3.0 million
resulted  from  properties  acquired in 2001,  and $1.8  million  resulted  from
properties  acquired in 2002.  Rental  revenues  increased  by $3.9 million from
$61.3  million for the six months  ended June 30, 2001 to $65.2  million for the
same period of 2002,  which  included a decrease of $1.4  million  straight-line
rent adjustment. Of the $3.9 million increase in rental revenues, ($6.1) million
resulted  from the  Company's  "Same  Property"  portfolio,  $7.1  million  were
generated by  properties  acquired in 2001,  and $2.9 million were  generated by
properties acquired in 2002.  Approximately $0.3 million in rental revenues were
generated from a discontinued  operation for the six months ended June 30, 2002.
The decline in rental revenues from the "same  property"  portfolio was a result
from  adverse  market  conditions  and  loss of  several  tenants  due to  their
bankruptcy or cessation of operations.  The net increase in rental  revenues was
primarily attributable to new acquisitions.

                                     - 11 -
<PAGE>

OTHER INCOME FROM CONTINUING OPERATIONS
Other  income,  including  interest,  was  approximately  $0.3  million and $0.8
million for the three months ended June 30, 2002 and 2001,  respectively.  Other
income,  including interest, was approximately $0.8 million and $1.3 million for
the six months ended June 30, 2002 and 2001, respectively.

EXPENSES FROM CONTINUING OPERATIONS
Tenant  reimbursements from continuing  operations increased by $1.1 million, or
29%,  from $3.8 million for the three months ended June 30, 2001 to $4.9 million
for the three  months ended June 30,  2002.  Operating  expenses and real estate
taxes  from  continuing  operations,  on a  combined  basis,  increased  by $0.6
million,  or 14%,  from $4.3  million to $4.9 million for the three months ended
June 30, 2001 and 2002,  respectively.  Both tenant reimbursements and operating
expenses  combined  with real estate taxes from a  discontinued  operation  were
approximately  $0.3 million  each for the six months  ended June 30,  2002.  The
increases in all  categories  resulted  primarily from the increase in the total
rentable square footage since June 30, 2001.

Depreciation  expense from continuing  operations increased by $0.3 million from
$4.2  million to $4.5 million for the three months ended June 30, 2001 and 2002,
respectively.  Depreciation expense from continuing operations increased by $0.5
million from $8.3 million to $8.8 million for the six months ended June 30, 2001
and 2002,  respectively.  Depreciation expense from a discontinued operation was
approximately  $46,000 for the six months ended June 30, 2002.  The increase was
attributable to the acquisition of nine R&D properties since June 30, 2001.

Interest expense increased by $0.14 million, or 6.3%, from $2.22 million for the
three  months  ended June 30, 2001 to $2.36  million for the three  months ended
June 30, 2002 from additional  debt that the Company  incurred under a new $20.0
million  unsecured  loan obtained  from Citicorp  during the first quarter 2002.
Interest expense (related  parties)  decreased by $0.26 million,  or 22.3%, from
$1.16  million for the three months ended June 30, 2001 to $0.90 million for the
three months ended June 30, 2002 due to lower  interest  rates and repayments on
the Berg Group line of credit. As a result,  overall interest expense (including
amounts to related  parties)  for the quarter  ended June 30, 2002  decreased by
$0.12  million  compared  to the  same  quarter  a year  ago.  Interest  expense
increased by $0.20 million, or 4.5%, from $4.43 million for the six months ended
June 30, 2001 to $4.63 million for the six months ended June 30, 2002.  Interest
expense  (related  parties)  decreased by $0.55  million,  or 22.4%,  from $2.46
million  for the six months  ended June 30,  2001 to $1.91  million  for the six
months ended June 30, 2002.  Overall  interest  expense for the six months ended
June 30, 2002  decreased by $0.35 million  compared to the six months ended June
30, 2001 due largely to lower  interest  rates and  repayments on the Berg Group
line of  credit.  The  nine  R&D  property  acquisitions  increased  total  debt
outstanding, including amounts due related parties, by $24.62 million, or 11.9%,
from $206.79 million as of June 30, 2001 to $231.41 million as of June 30, 2002.
Management  expects  interest  expense to  increase  as new debt is  incurred in
connection  with property  acquisitions,  as the Company draws on the Berg Group
line of credit, and as it seeks alternative sources of credit.

NET INCOME TO MINORITY INTEREST AND NET INCOME TO COMMON STOCKHOLDERS
The minority  interest  portion of income  increased by $0.89 million,  or 4.5%,
from $19.93  million for the three months ended June 30, 2001 to $20.82  million
for the three months ended June 30, 2002. Net income to  stockholders  increased
by $0.09  million,  or 2.3%,  from $3.98 million for the three months ended June
30, 2001 to $4.07 million for the same period in 2002.  For the six months ended
June 30,  2002 and 2001,  the  minority  interest  portion  of income was $46.92
million  and  $41.02   million,   respectively,   resulting  in  net  income  to
stockholders of $9.27 million and $8.20 million, respectively. Minority interest
represents  the  ownership  interest  of all limited  partners in the  operating
partnerships  taken as a whole,  which was approximately 83% as of June 30, 2002
and 2001.

RECENT RENTAL MARKET DEVELOPMENTS

All of the  Company's  properties  are located in the Northern  California  area
known as Silicon  Valley,  which  generally  consists of portions of Santa Clara
County,  Southwestern Alameda County,  Southeastern San Mateo County and Eastern
Santa Cruz  County.  The Silicon  Valley  economy and business  activity  slowed
markedly in 2001 and in the first six months of 2002 after fast-paced  growth in
1999  and  2000.  The  Silicon  Valley  R&D  property  market  has  historically
fluctuated with the local economy. According to a recent report by BT Commercial
Real  Estate,  vacancy  rates for Silicon  Valley R&D  property  increased  from
approximately 14.8% in late 2001 to 18.9% at the end of the second quarter 2002.
Total  vacant  R&D square  footage  in  Silicon  Valley at the end of the second
quarter of 2002  amounted to 28.6  million  square  feet,  of which 42%, or 12.0
million  square feet,  was being offered  under  subleases.  Total  negative net
absorption in 2001 amounted to approximately  (15.6) million square feet. During
the  first six  months of 2002,  there was  total  negative  net  absorption  of
approximately (5.2) million square feet. The impact of this decline has not been
uniform throughout the area, however. The Silicon Valley R&D property market has
been characterized by a substantial number of submarkets,  with rent and vacancy
rates varying considerably by submarket and location within each submarket.  The
Company's  average  occupancy rate for the six-month  period ended June 30, 2002
was 93% with approximately  476,000 rentable square feet expiring in 2002, which
is a significant  decline from the occupancy  rate of 99% at June 30, 2001,  but
higher than the area's average  occupancy  rate.  The Company  believes that its
occupancy  rate could  decline in the next two quarters if more key tenants seek
the protection of the bankruptcy laws. For example, during the last nine months,
six tenants accounting for approximately 458,000 net rentable square feet of R&D
properties  have either filed  petitions under Chapter 11 of the Bankruptcy Code
or have discontinued operations. Under the bankruptcy laws, tenants may have the
right to reject their leases with us and our claim for rent will be limited

                                     - 12 -
<PAGE>

to the greater of one year's  rent or 15% of the total  amount of rent under the
leases upon default, but not to exceed three years of rent on the remaining term
of the lease  following  the earlier of the petition  filing date or the date on
which we  gained  repossession  of the  property,  as well as any rent  that was
unpaid on the earlier of those dates.  These  properties  may take anywhere from
six to twelve months or longer to re-lease.  The Company anticipates its vacancy
rate to range between  14-15% by the end of 2002 and renewal  rental rates to be
the same as or,  perhaps,  lower than current  rents.  The  Company's  operating
results and  ability to pay  dividends  at current  levels  remain  subject to a
number of  material  risks,  as  indicated  under the  caption  "Forward-Looking
Information"  below and in the section  entitled "Risk Factors" in the Company's
most recent annual report on Form 10-K.

CHANGES IN FINANCIAL CONDITION

There were no significant  changes in the Company's  financial  condition during
the three months ended June 30, 2002.  The most  significant  changes during the
six  months  ended  June  30,  2002  resulted  from  property  acquisitions  and
exchanges.  In addition,  debt increased from new acquisitions and stockholders'
equity  increased  from the  exercise of stock  options and the exchange of O.P.
Units for common stock.

At June 30, 2002, real estate assets  increased by  approximately  $32.5 million
from December 31, 2001 taking into account new  acquisitions,  one  disposition,
and some tenant  improvements.  During the first six months of 2002, the Company
acquired one additional  property  representing  approximately  125,000 rentable
square  feet of R&D  property  located  in Silicon  Valley.  This  property  was
acquired from the Berg Group under the Berg land holdings option agreement.  The
aggregate  acquisition price for this property was approximately  $13.7 million.
The Company  financed this  acquisition by borrowing $7.5 million under the Berg
Group line of credit and issuing  502,805 O.P. Units. In March 2002, the Company
acquired three R&D properties representing approximately 206,500 rentable square
feet for approximately $31.3 million as replacement properties in a tax-deferred
exchange in which the Company  disposed of former R&D  properties  at  5713-5729
Fontanoso Way and 2001 Logic Drive in San Jose, California. Pending the purchase
of the  replacement  properties,  the proceeds for the  Fontanoso  Way and Logic
Drive properties were classified as restricted cash of which  approximately $2.7
million remained in restricted cash at June 30, 2002. No debt or O.P. Units were
issued for these acquisitions.  The Company also realized a gain of $6.1 million
on the transaction.

At June 30, 2002, total liabilities decreased by approximately $1.4 million from
December 31, 2001 as a result of debt repayment.

At June 30, 2002, total  stockholders'  equity  increased by approximately  $2.4
million from  December 31, 2001 from  reduction of  accumulated  deficit,  stock
option  exercises and the exchange of O.P. Units for the Company's common stock.
During the six months  ended June 30,  2002,  stock  options to purchase  33,550
shares of common stock were exercised at $4.50 per share.  Total proceeds to the
Company were  approximately  $0.15  million.  During the first half of 2002, two
limited partners of an operating  partnership  exchanged  104,000 O.P. Units for
104,000 shares of the Company's common stock under the exchange rights agreement
among the Company and the limited partners in the operating partnerships,  which
represented additional paid in capital of approximately $1.3 million.

LIQUIDITY AND CAPITAL RESOURCES

The Company  expects its  principal  sources of liquidity for  distributions  to
stockholders and unit holders,  debt service,  leasing commissions and recurring
capital  expenditures to come from Funds From Operations ("FFO") and/or the Berg
Group line of credit and other credit  facilities that may be established by the
Company  with third party  financial  institutions.  The Company  expects  these
sources  of  liquidity  to  be  adequate  to  meet  projected  distributions  to
stockholders and other presently anticipated liquidity requirements in 2002. The
Company expects to meet its long-term liquidity  requirements for the funding of
property  development,  property  acquisitions and other material  non-recurring
capital  improvements  through long-term secured and unsecured  indebtedness and
the issuance of additional equity securities by the Company. The Company has the
ability to meet  short-term  obligations or other  liquidity  needs based on the
line of credit (related  parties).  Despite the current weakness in the economy,
the Company expects interest expense to increase,  but not significantly,  as it
incurs  debt  through  acquisitions  of new  properties  and as  interest  rates
increase.

The Company is continually  evaluating  alternative sources of credit to replace
the Berg Group $100 million  line of credit,  which  expires in March 2003.  The
Company  believes  that the  terms of the Berg  Group  line of  credit  are more
favorable  than those  available  from  institutional  lenders.  There can be no
assurance  that the Berg Group will continue to rollover and extend this line of
credit, as it has been doing since 1999, or the Company will be able to obtain a
line of credit with terms  similar to the Berg Group line of credit.  Thus,  the
Company's cost of borrowing could increase substantially after 2002.

On March 1,  2002,  the  Company  obtained  a $20  million  unsecured  loan from
Citicorp USA, Inc. with an interest rate based on LIBOR. The loan, which matures
on March 1, 2003,  bears a fixed LIBOR  interest rate of 4.09% for the first six
months and LIBOR plus 2.0%  thereafter.  The Company  paid a loan fee of $50,000
and expects to use the loan for acquiring new R&D properties.

                                     - 13 -
<PAGE>

At June 30,  2002,  the  Company  had  total  indebtedness  of  $231.4  million,
including  $126.4 million of fixed rate mortgage  debt,  $11.2 million under the
Berg Group mortgage note (related  parties),  $73.8 million under the Berg Group
line of credit (related parties), and $20.0 million under the Citicorp loan.

As of June 30, 2002, the Company's Debt to Total Market Capitalization ratio was
approximately  15.4%, based upon a Total Market  Capitalization of approximately
$1.5 billion.  The Company  computed this ratio by dividing the Company's  total
debt  outstanding  as of June 30,  2002 by the sum of this debt plus the  market
value of common stock (based upon the closing  price of $12.19 per share on June
28, 2002) on a fully diluted  basis,  taking into account the  conversion of all
O.P. Units into common stock.

On July 11, 2002,  the Company paid dividends of $0.24 per share of common stock
to all common  stockholders of record as of June 28, 2002. On the same date, the
operating partnerships paid a distribution of $0.24 per O.P. Unit.

On July 12, 2002, the Company established a $40 million unsecured revolving line
of credit  (the  "Revolving  Line of  Credit")  with  Cupertino  National  Bank,
Cupertino,  California (the "Bank").  The Revolving Line of Credit is guaranteed
by the Company and two operating  partnerships,  which pledged four  properties,
bears  interest at LIBOR plus 2%, and matures July 12, 2004. The Company pays an
annual loan fee of $33.  The Company will use the  proceeds  from the  Revolving
Line of Credit to repay debt,  complete  acquisitions  and finance other working
capital requirements.

                                     - 14 -
<PAGE>


MORTGAGE DEBT

     The following table sets forth information regarding debt outstanding as of
June 30, 2002:

<TABLE>
<CAPTION>


                                                                                                                Maturity   Interest
                Debt Description                     Collateral Properties                        Balance         Date       Rate
-------------------------------------------- ----------------------------------------------- ----------------- ---------- ----------
                                                                                           (Dollars in thousands)
<S>                                         <C>                                                 <C>              <C>        <C>
LINE OF CREDIT:
Berg Group (related parties)                 2033-2043 Samaritan Drive, San Jose, CA             $ 73,774          3/03        (1)
                                             2133 Samaritan Drive, San Jose, CA              -----------------
                                             2233-2243 Samaritan Drive, San Jose, CA
                                             1310-1450 McCandless Drive, Milpitas, CA
                                             1315-1375 McCandless Drive, Milpitas, CA
                                             1650-1690 McCandless Drive, Milpitas, CA
                                             1795-1845 McCandless Drive, Milpitas, CA
                                             2251 Lawson Lane, Santa Clara, CA (4)
                                             20605-20705 Valley Green Dr., Cupertino, CA (4)

MORTGAGE NOTES PAYABLE (RELATED PARTIES):    5300 & 5350 Hellyer Avenue, San Jose, CA              11,227          6/10      7.650%
                                                                                             -----------------
MORTGAGE NOTES PAYABLE:
Prudential Capital Group                     20400 Mariani Avenue, Cupertino, CA                    1,512          4/09      8.750%
New York Life Insurance Company              10440 Bubb Road, Cupertino, CA                           330          9/09      9.625%
Home Savings & Loan Association              10460 Bubb Road, Cupertino, CA                           331         12/06      9.500%
Prudential Insurance Company of America (2)  10300 Bubb Road, Cupertino, CA                       124,240         10/08      6.560%
                                             10500 N. DeAnza Blvd, Cupertino, CA
                                             4050 Starboard Drive, Fremont, CA
                                             45700 Northport Loop, Fremont, CA
                                             45738 Northport Loop, Fremont, CA
                                             450-460 National Avenue,Mountain View, CA
                                             6311 San Ignacio Avenue, San Jose, CA
                                             6321 San Ignacio Avenue, San Jose, CA
                                             6325 San Ignacio Avenue, San Jose, CA
                                             6331 San Ignacio Avenue, San Jose, CA
                                             6341 San Ignacio Avenue, San Jose, CA
                                             6351 San Ignacio Avenue, San Jose, CA
                                             3236 Scott Blvd, Santa Clara, CA
                                             3560 Bassett Street, Santa Clara, CA
                                             3570 Bassett Street, Santa Clara, CA
                                             3580 Bassett Street, Santa Clara, CA
                                             1135 Kern Avenue, Sunnyvale, CA
                                             1212 Bordeaux Lane, Sunnyvale, CA
                                             1230 E. Arques, Sunnyvale, CA
                                             1250 E. Arques, Sunnyvale, CA
                                             1170 Morse Avenue, Sunnyvale, CA
                                             1600 Memorex Drive, Santa Clara, CA
                                             1688 Richard Avenue, Santa Clara, CA
                                             1700 Richard Avenue, Santa Clara, CA
                                             3540 Bassett Street, Santa Clara, CA
                                             3542 Bassett Street, Santa Clara, CA
                                             3544 Bassett Street, Santa Clara, CA
                                             3550 Bassett Street, Santa Clara, CA
                                                                                             -----------------
Mortgage Notes Payable Subtotal                                                                   126,413
                                                                                             -----------------

UNSECURED LOAN:
Citicorp USA, Inc.                                  Not Applicable                                 20,000          3/03        (3)
                                                                                             -----------------

TOTAL                                                                                            $231,414
                                                                                             =================
</TABLE>


(1)  The debt owed to the Berg Group under the line of credit carries a variable
     interest  rate  equal to LIBOR  plus  1.30% and is payable in full in March
     2003. The interest rate at June 30, 2002 was 3.248%.
(2)  John Kontrabecki, one of the limited partners, has guaranteed approximately
     $12.0 million of this debt.
(3)  The unsecured  loan from Citicorp USA, Inc.  carries a fixed LIBOR interest
     rate equal to 4.09% for the first six months and LIBOR plus 2.0% thereafter
     and is payable in full in March 2003.
(4)  Substituted  collateral  properties  for the Berg  Group  line of credit as
     explained above in Note 7 to the consolidated financial statements.


                                     - 15 -
<PAGE>


CURRENT PROPERTIES SUBJECT TO OUR ACQUISITION AGREEMENT WITH THE BERG GROUP

The following  table  presents  certain  projected  information at June 30, 2002
concerning  projects  for  which  the  Company,  through  its  interests  in the
operating  partnerships,  has the right to acquire  under the Berg land holdings
option agreement.
<TABLE>
<CAPTION>

                                                Approximate
                                Number of      Rentable Area           Anticipated             Total Estimated
Property                        Buildings      (Square Feet)         Acquisition Date       Acquisition Value (1)
------------------------------ ------------ -------------------- ------------------------- -------------------------
                                                                                             (Dollars in thousands)
<S>                                <C>        <C>                  <C>                             <C>
BERG LAND HOLDINGS OPTION
UNDER DEVELOPMENT
Morgan Hill (JV I) (2)              2            160,000            4th Q 2002/Q1 2003              $17,500
Morgan Hill (JV II) (2)             1            151,242            4th Q 2002/Q1 2003               16,200
Piercy & Hellyer                    1            165,000            3rd Q 2002                       20,900
                                    -            -------                                             ------
               SUBTOTAL             4                                                                54,600

AVAILABLE LAND
Piercy & Hellyer                                 490,000
Morgan Hill (2)                                  368,025
King Ranch                                       207,000
Fremont & Cushing                                387,000
Evergreen                                      2,480,000
                                               ---------
              SUBTOTAL


TOTAL                               4          4,408,267                                            $54,600
                                    =          =========                                            =======
</TABLE>


(1)  The estimated  acquisition  value  represents  the estimated cash price for
     acquiring  the projects  under the terms of the Berg land  holdings  option
     agreement,  which may differ from the actual acquisition cost as determined
     under GAAP, if O.P. Units or any other securities based on the market value
     of the Company's common stock are issued in the transaction.
(2)  The Company  expects to own an approximate  50% interest in the partnership
     through one of its  operating  partnerships.  The property will be operated
     and  managed by the other  partner in the  entity.  The  rentable  area and
     estimated  acquisition value shown above reflect both the Company's and the
     other partner's combined interest in these properties.


Pursuant to the Berg land holdings option agreement  between the Company and the
Berg  Group,  the  Company  currently  has the option to acquire any future R&D,
office and industrial  property developed by the Berg Group on land it currently
owns or has under option, or acquires for these purposes in the future, directly
or indirectly by certain members of the Berg Group.

The time required to complete the leasing of developments varies from project to
project.  The acquisition dates and acquisition costs set forth in the table are
only estimates by management. Generally, the Company will not acquire any of the
above  projects  until  they are fully  completed  and  leased.  There can be no
assurance that the  acquisition  date and final cost to the Company as indicated
above  would be  realized.  No  estimate  can be  given  at this  time as to the
Company's  total cost to acquire  projects  under the Berg land holdings  option
agreement,  nor can we be certain of the period in which we will  acquire any of
the projects.

Although the Company expects to acquire the new properties available to it under
the terms of the Berg land holdings option agreement, subsequent to the approval
by the  independent  directors  committee,  there can be no  assurance  that the
Company  actually will  consummate any intended  transactions,  including all of
those discussed above. Furthermore, the Company has not yet determined the means
by which it would  acquire and pay for any such  properties or the impact of any
of the acquisitions on its business, results of operations, financial condition,
FFO or available cash for distribution.

Leasing  activity for new  build-to-suit  and vacated R&D  properties has slowed
considerably   during   the  past  year  and  the  first  six  months  of  2002.
Consequently,  the Company  believes  that the projected  acquisition  dates for
other development properties subject to the Berg land holdings option agreement,
with the  exception  of the  project at Piercy  and  Hellyer  for  approximately
165,000  rentable square feet, may be delayed for the foreseeable  future.  Such
delays  could  reduce  future  growth in  revenues,  operating  income and Funds
Available for Distribution ("FAD").


                                     - 16 -
<PAGE>


HISTORICAL CASH FLOWS

Net cash provided by operating activities for the six months ended June 30, 2002
was $64.7  million  compared to $51.5 million for the same period in 2001, a 26%
increase.  The change was a direct result of increased  rent from newly acquired
properties.

Net cash used in investing  activities was approximately  $19.8 million and $1.3
million for the six months  ended June 30, 2002 and 2001,  respectively.  Of the
$19.8 million net cash used in investing  activities,  $18.5 million represented
the return of a deposit  furnished  by Xilinx,  Inc.  relating  to the  purchase
option  agreement  between  Xilinx and the  Company,  $1.0  million  was used to
acquire new equipment and tenant  improvements,  and $0.3 million was applied to
Xilinx's  monthly rent obligation  prior to the execution of the purchase option
agreement.

Net cash used in financing activities was $44.4 million for the six months ended
June 30,  2002  compared to $49.1  million  for the same  period in 2001,  a 10%
decrease.  Of the $44.4  million net cash used in  financing  activities,  $14.8
million was used to pay outstanding  debt,  $41.4 million for minority  interest
distributions,  $8.3 million for  dividends,  and the sum of which was offset by
$20.1  million  received  from the Citicorp  unsecured  loan and the proceeds of
exercised stock options.  During the six months ended June 30, 2002, the Company
made payments on  outstanding  debt and  distributions  to holders of its common
stock and O.P. Units by utilizing  cash generated from operating  activities and
other borrowed funds.

CAPITAL EXPENDITURES

The Company's  existing R&D properties  require periodic  investments of capital
for tenant-related  capital  expenditures and for general capital  improvements.
For the years ended  December 31, 1997 through  December 31, 2001, the recurring
tenant  improvement costs and leasing  commissions  incurred with respect to new
leases and lease  renewals of the  properties  that were owned or  controlled by
members of the Berg Group  prior to July 1, 1998  averaged  approximately  $1.75
million annually.  The Company expects that the average annual cost of recurring
tenant improvements and leasing commissions,  related to the properties, will be
approximately  $1.3 million  during 2002.  The Company  believes it will recover
substantially  all of these sums from the  tenants  under new or renewed  leases
through  increases in rental  rates.  The Company  expects to meet its long-term
liquidity  requirements  for  the  funding  of  property  development,  property
acquisitions  and other  material  non-recurring  capital  improvements  through
long-term  secured and  unsecured  indebtedness  and the issuance of  additional
equity securities by the Company.

FUNDS FROM OPERATIONS

As  defined  by the  National  Association  of  Real  Estate  Investment  Trusts
("NAREIT"),  FFO represents net income (loss) before  minority  interest of unit
holders  (computed in accordance  with GAAP),  excluding  gains (or losses) from
debt restructuring and sales of property,  plus real estate related depreciation
and  amortization  (excluding  amortization  of  deferred  financing  costs  and
depreciation of non-real estate assets) and after adjustments for unconsolidated
partnerships and joint ventures. Management considers FFO an appropriate measure
of performance  of an equity REIT because,  along with cash flows from operating
activities, financing activities and investing activities, it provides investors
with an  understanding  of the Company's  ability to incur and service debt, and
make  capital  expenditures.  With the  recent  emphasis  on the  disclosure  of
operating  earnings per share, we will still continue to use FFO as a measure of
the Company's  performance.  FFO should not be considered as an alternative  for
net income as a measure of profitability  and it is not comparable to cash flows
provided by operating activities  determined in accordance with GAAP, nor is FFO
necessarily  indicative  of funds  available to meet the  Company's  cash needs,
including its need to make cash distributions to satisfy REIT requirements.

The Company's  definition of FFO also assumes conversion at the beginning of the
period of all convertible securities, including minority interests that might be
exchanged  for common stock.  FFO does not  represent  the amount  available for
management's  discretionary  use  as  such  funds  may  be  needed  for  capital
replacement  or expansion,  debt service  obligations or other  commitments  and
uncertainties.

The minority  interest in earnings for unrelated parties are deducted from total
minority interest in earnings in calculating FFO.

Furthermore, FFO is not comparable to similarly entitled items reported by other
REITs that do not define them  exactly as the Company  defines  FFO. FFO for the
three and six months ended June 30, 2002 and 2001 are  summarized  in the tables
below:
<TABLE>
<CAPTION>

                                  Three Months Ended June 30,                     Six Months Ended June 30,
                            -----------------------------------------     ------------------------------------------
                                  2002                   2001                    2002                   2001
                            ------------------     ------------------     -------------------    -------------------
                                      (Dollars in thousands)                        (Dollars in thousands)
<S>                           <C>                    <C>                     <C>                    <C>
Net income                     $ 4,073                $ 3,983                 $ 9,273                $ 8,202
Add:
    Minority interest (1)       20,671                 19,779                  46,605                 40,696
    Depreciation                 4,455                  4,165                   8,857                  8,267
Less:
    Gain on sale of assets           -                      -                   6,103                  3,102
                            ------------------     ------------------     -------------------    -------------------
FFO                            $29,199                $27,927                 $58,632                $54,063
                            ==================     ==================     ===================    ===================
</TABLE>

(1)  The  minority  interest  for  unrelated  parties  was  deducted  from total
     minority interest in calculating FFO.

                                     - 17 -
<PAGE>


DISTRIBUTION POLICY

The Company intends to pay  distributions  to stockholders and O.P. unit holders
based upon total Funds Available for Distribution  ("FAD"),  which is calculated
as FFO less adjustment for straight-line  rents included in net income,  leasing
commissions paid and capital expenditures made during the respective period. The
calculations  of FAD for the three and six months  ended June 30,  2002 and 2001
are as follows:

<TABLE>
<CAPTION>


                                   Three Months Ended June 30,                     Six Months Ended June 30,
                            ------------------------------------------     ------------------------------------------
                                   2002                   2001                    2002                   2001
                            -------------------    -------------------     -------------------    -------------------
                                     (Dollars in thousands)                         (Dollars in thousands)
<S>                             <C>                    <C>                     <C>                    <C>
FFO                              $29,199                $27,927                 $58,632                $54,063
Less:
    Straight-line rents              176                  2,238                    (605)                 4,327
    Leasing commissions              104                    419                     245                    582
    Capital expenditures             113                    170                     113                    324
                            -------------------    -------------------     -------------------    -------------------
FAD                              $28,806                $25,100                 $58,879                $48,830
                            ===================    ===================     ===================    ===================

</TABLE>


The  Company's  board of  directors  will  determine  the  amount  and timing of
distributions  to our  stockholders.  The board of directors  will consider many
factors prior to making any distributions, including the following:

-    the amount of cash available for distribution;

-    the Company's financial condition;

-    whether to reinvest funds rather than to distribute such funds;

-    the Company's committed and projected capital expenditures;

-    the effects of new  property  acquisitions,  including  acquisitions  under
     existing agreements with the Berg Group;

-    the  annual  distribution  requirements  under the REIT  provisions  of the
     federal income tax laws; and

-    such other factors as the board of directors deems relevant.

We  cannot  assure  you  that  the  Company  will be  able  to meet or  maintain
management's cash distribution objectives.


                                     - 18 -

<PAGE>


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The  Company  does  not  believe  recently  issued  accounting   standards  will
materially impact the Company's financial statements.


FORWARD-LOOKING INFORMATION

This quarterly report contains forward-looking  statements within the meaning of
the federal securities laws. The Company intends such forward-looking statements
to be covered  by the safe  harbor  provisions  for  forward-looking  statements
contained in the Private  Securities  Reform Act of 1995,  and is including this
statement  for  purposes  of  complying  with  these  safe  harbor   provisions.
Forward-looking statements,  which are based on certain assumptions and describe
future  plans,  strategies  and  expectations  of  the  Company,  are  generally
identifiable by use of the words "believe,"  "expect,"  "intend,"  "anticipate,"
"estimate,"  "project" or similar  expressions.  Additionally,  all  disclosures
under Part I.,  Item 3  constitute  forward-looking  statements.  The  Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.

Factors that could have a material  adverse  effect on the operations and future
prospects of the Company include, but are not limited to, changes in:

-    economic conditions generally and the real estate market specifically,
-    legislative  or  regulatory  provisions  affecting  the Company  (including
     changes to laws governing the taxation of REITs),
-    availability of capital,
-    interest rates,
-    competition,
-    supply of and  demand  for R&D,  office and  industrial  properties  in the
     Company's current and proposed market areas,
-    tenant defaults and bankruptcies, and
-    general accounting principles, policies and guidelines applicable to REITs.

In addition, the actual timing of development,  construction, and leasing on the
projects  that the Company  believes it may acquire in the future under the Berg
land holdings option agreement is unknown presently,  and reliance should not be
placed on the estimates  concerning  these projects set forth under the caption,
"Current  Properties Subject to Our Acquisition  Agreement with the Berg Group,"
above.  These risks and  uncertainties,  together with the other risks described
from time to time in the Company's  reports and other  documents  filed with the
Securities  and  Exchange   Commission,   should  be  considered  in  evaluating
forward-looking  statements  and  undue  reliance  should  not be placed on such
statements.

                                     - 19 -

<PAGE>


ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not generally hold market risk sensitive instruments for trading purposes.
We use fixed and variable rate debt to finance our  operations.  Our exposure to
market risk for changes in interest  rates relates  primarily to our current and
future debt  obligations.  We are  vulnerable  to  significant  fluctuations  of
interest  rates on our floating  rate debt,  and pricing on our future debt.  We
manage our market risk by  monitoring  interest  rates where we try to recognize
the  unpredictability  of the financial  markets and seek to reduce  potentially
adverse effect on the results of our operations.  This takes frequent evaluation
of available  lending rates and examination of  opportunities to reduce interest
expense  through  new  sources  of  debt  financing.   By  attempting  to  match
anticipated  cash  inflow  from our  operating  and  financing  activities  with
anticipated  cash outflow to fund debt payments,  distributions  to shareholders
and O.P. Unit holders,  capital  expenditures  and other cash  requirements,  we
expect to  minimize  the  effects  on our  future  earnings  and cash flow where
interest rate risk is most  sensitive.  Several  factors  affecting the interest
rate  risk  include  governmental  monetary  and  tax  policies,   domestic  and
international economics and other factors that are beyond our control.

The primary market risk we face is the risk of interest rate  fluctuations.  The
Berg Group line of credit,  which is tied to a LIBOR based  interest  rate,  was
approximately  $73.8 million, or 32%, of the total $231.4 million of outstanding
debt as of June 30, 2002. As a result, we pay lower rates of interest in periods
of  decreasing  interest  rates and  higher  rates of  interest  in  periods  of
increasing  interest  rates.  At June 30, 2002,  we had no interest rate caps or
interest rate swap contracts.

The  following  discussion  of  market  risk  is  based  solely  on  a  possible
hypothetical  change in future market  conditions  related to our  variable-rate
debt. It includes "forward-looking statements" regarding market risk, but we are
not forecasting  the occurrence of these market changes.  Based on the amount of
variable  debt  outstanding  as of June 30,  2002,  a 1% increase or decrease in
interest  rates on our $73.8  million of  floating  rate debt would  decrease or
increase,  respectively,  six months  earnings  and cash flows by  approximately
$0.37  million,  as a result of the  increased  or  decreased  interest  expense
associated  with the  change  in rate,  and would not have an impact on the fair
value of the floating rate debt.  This amount is determined by  considering  the
impact  of  hypothetical  interest  rates  on  our  borrowing  cost.  Due to the
uncertainty  of  fluctuations  in interest  rates and the specific  actions that
might  be  taken by us to  mitigate  of such  fluctuations  and  their  possible
effects, the foregoing  sensitivity analysis assumes no changes on our financial
structure.


================================================================================

PART II - OTHER INFORMATION

ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

a)   The annual meeting of  stockholders of the Company was held on May 23, 2002
     in which proxies representing  13,893,461 shares of common stocks, or 79.6%
     of the total outstanding shares, voted.

b)   At the  annual  meeting of  stockholders,  Carl E.  Berg,  John C.  Bolger,
     William A. Hasler,  Lawrence B. Helzel,  and Raymond V. Marino were elected
     as directors for the ensuing year, all of whom were serving on the board of
     directors at the time of the meeting.

c)   The following proposals were voted upon at the meeting:

     Proposal No. 1: Election of Directors

<TABLE>
<CAPTION>

                                Total Vote for Each        Total Vote Withheld                                 Total Vote Against
  Directors                          Director              from Each Director         Total Abstentions           Each Director
  ---------------------------- ----------------------     ----------------------    ----------------------    ----------------------

<S>                                <C>                            <C>                     <C>                          <C>
  Carl E. Berg                      13,811,114                     78                      82,269                       -
  John C. Bolger                    13,811,114                     78                      82,269                       -
  William A. Hasler                 13,811,112                     78                      82,269                       2
  Lawrence B. Helzel                13,811,114                     78                      82,269                       -
  Raymond V. Marino                 13,811,114                     78                      82,269                       -

</TABLE>


     Proposal No. 2:  Ratification  of the selection of  PricewaterhouseCoopers,
     LLP as independent  public  accountants for the Company for the year ending
     December 31, 2002.  There were  13,837,752  votes in favor of the proposal,
     35,042 votes against the proposal, and 20,667 abstentions.

                                     - 20 -

<PAGE>


ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K

         a.       EXHIBITS

                  10.29 Cupertino National Bank Revolving Credit Loan Agreement
                  10.30 Mission West Properties, LP Continuing Guaranty
                  10.31 Mission West Properties, LP II Continuing Guaranty
                  99.1 Certification of CEO and CFO

         b.       Reports on Form 8-K

                  None

================================================================================
SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
     registrant  has duly  caused  this report to be signed on its behalf by the
     undersigned thereto duly authorized.


                                     Mission West Properties, Inc.
                                     (Registrant)


Date:   August 13, 2002              By:/s/ Wayne N. Pham
                                        --------------------------------------
                                        Wayne N. Pham
                                        Vice President of Finance and Controller
                                        (Principal Accounting Officer and Duly
                                        Authorized Officer)

                                     - 21 -
<PAGE>


EXHIBIT 10.29

                             CUPERTINO NATIONAL BANK
                         REVOLVING CREDIT LOAN AGREEMENT


     THIS  REVOLVING  CREDIT  LOAN  AGREEMENT  (this  "Agreement")  is made  and
delivered  this 12th day of July 2002, by and between  Mission West  Properties,
Inc., a Maryland  corporation  ("Borrower")  and  Cupertino  National  Bank (the
"Bank").

                                   WITNESSETH

     WHEREAS,  the  Borrower  desires  to  borrow  up to Forty  Million  Dollars
($40,000,000.00)  from the Bank  from time to time to meet the  working  capital
needs of the Borrower; and

     WHEREAS,  the Bank is willing to supply such financing subject to the terms
and conditions set forth in this Agreement;

     NOW,  THEREFORE,  in  consideration of the premises and the mutual promises
herein contained and in reliance upon Borrower's  representations and warranties
set forth herein, the Borrower and the Bank agree as follows:

1.   Definitions.

     1.1  Defined Terms.  As used in this  Agreement,  the following terms shall
          have the following respective meanings:

     "Affiliate"  shall mean,  when used with  respect to any person,  any other
person which,  directly or indirectly,  controls or is controlled by or is under
common  control with such person.  For  purposes of this  definition,  "control"
(including  the  correlative  meanings of the terms  "controlled  by" and "under
common  control  with"),  with  respect to any  person,  shall mean  possession,
directly or  indirectly,  of the power to direct or cause the  direction  of the
management and policies of such person,  whether through the ownership of voting
securities or by contract or otherwise.

     "Agreement" is defined in the first paragraph of this Agreement.

     "Annual Gross Rental Income" shall mean with respect to any of the MWP Pool
Properties and any of the MWP II Pool Properties, the annual gross rental income
received by MWP or MWP II from each of their respective properties, except that,
for purposes of determining  Annual Gross Rental Income hereunder,  income shall
be  calculated  on a  stabilized  basis and shall not include  security or other
deposits or letters of credit,  late fees,  lease  termination  or other similar
charges,  delinquent rent recoveries unless previously reflected in reserves, or
proceeds of insurance or any other items of a non-recurring nature.

     "Automatic  Loan  Calculation  Time" is defined  in  Section  2.4.1 of this
Agreement.

     "Automatic  Loan  Repayment  Time"  is  defined  in  Section  2.4.2 of this
Agreement.

                                     - 1 -

<PAGE>


     "Automatic  Variable  Rate  Loan"  is  defined  in  Section  2.4.1  of this
Agreement.

     "Bank" is defined in the first paragraph of this Agreement.

     "Bankruptcy  Code"  shall  mean  Title 11 of the  United  States  Code,  as
amended, or any successor act or code.

     "Borrower" is defined in the first paragraph of this Agreement.

     "Borrower's Deposit Account" is defined in Section 6.12 of this Agreement.

     "Business  Day"  shall mean a day on which the Bank is open to carry on its
normal commercial lending business.

     "Commitment"  shall  mean  the  Bank's  agreement  to lend to  Borrower  in
accordance with and subject to the terms of this Agreement.

     "Commitment Amount" shall mean, as of any applicable date of determination,
Forty Million Dollars and no cents ($40,000,000.00).

     "Consolidated"  or  "consolidated"  shall mean, when used with reference to
any financial term in this  Agreement,  the aggregate for two or more persons of
the  amounts  signified  by such  term  for all  such  persons  determined  on a
consolidated  basis in accordance with GAAP as defined below.  Unless  otherwise
specified herein,  reference to "consolidated"  financial  statements or data of
the Borrower  includes  consolidation  with its  Subsidiaries in accordance with
GAAP.

     "Debt" shall mean, as of any applicable date of determination, all items of
indebtedness, obligation or liability of a person, whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, joint or
several, that should be classified as liabilities in accordance with GAAP.

     "Debt  Service  Coverage  Ratio" shall mean, as of any  applicable  date of
determination, the ratio of: (1) the sum of Borrower's net income, plus interest
(related  parties),  plus all other  interest  (including but not limited to any
interest paid to any other party), plus minority interest  distributions paid by
Borrower (as set forth in Borrower's Consolidated Statement of Cash Flows), plus
dividends paid by Borrower (as set forth in Borrower's Consolidated Statement of
Cash Flows), plus depreciation,  minus deferred rent (as set forth in Borrower's
Consolidated  Statement of Cash Flows),  and minus  Borrower's  gains on sale of
real  estate;  to (2) the sum of  interest  (related  parties),  plus all  other
interest  (including  but not limited to any interest  paid to any other party),
plus the current portion of Borrower's long term debt. The Debt Service Coverage
Ratio  shall be  determined  by the Bank as of each  Fiscal  Quarter (as defined
below) and on the basis of the  preceding  twelve (12) month  period  (actual or
based on annualized  quarters) as follows:  (i) as to each Fiscal Quarter ending
on March 31, June 30, and September 30, from Borrower's SEC Form 10-Q filed with
the  Securities  and Exchange  Commission

                                     - 2 -
<PAGE>

relating to such quarter,  with such quarter results annualized;  and (ii) as to
each  Fiscal  Quarter  ending on  December  31,  from  Borrower's  SEC Form 10-K
relating to the year ending on such date.  Notwithstanding  the  foregoing,  the
Bank may also rely on other information that Borrower is obligated to provide to
the Bank pursuant to Section 6.1 of this Agreement. Exhibit E hereto includes an
example of the calculation of Debt Service Coverage Ratio as defined herein from
Borrower's  SEC Form  10-K for the  period  ending  December  31,  2001,  and is
provided for example purposes only.

     "Default" shall mean a condition or event which,  with the giving of notice
or the  passage of time,  or both,  would  become an Event of Default as defined
below.

     "Default  Rate"  shall  mean,  as  of  the  applicable   date  or  time  of
determination, LIBOR as defined below plus nine percent (9%).

     "Deposit  Account  Excess  Amount"  is  defined  in  Section  2.4.2 of this
Agreement.

     "Deposit  Account  Shortfall  Amount" is  defined in Section  2.4.1 of this
Agreement.

     "Effective  Date" shall mean the date this Agreement  becomes  effective as
set forth in Section 9.1 herein.

     "Election" shall mean that election  referred to in Section  2.3.2.2.2.1 of
this Agreement.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
amended, or any successor act or code.

     "Event of Default"  shall mean any of those  conditions or events listed in
Section 8.1 of this Agreement.

     "Financial  Statements" shall mean all those  consolidated  balance sheets,
consolidated  earnings  statements and other  consolidated  financial data which
have been furnished to the Bank for the purposes of, or in connection with, this
Agreement and the transactions  contemplated hereby, including without limit the
following:  the "Proposed Pool Of Assets - Multi-Tenant" provided by Borrower to
the Bank, Borrower's SEC Form 10-K for the periods ending December 31, 2000, and
December  31,  2001,  Borrower's  SEC Form 10-Q dated  November 12, 2001 for the
period ending  September 30, 2001,  and  Borrower's  SEC Form 10-Q dated May 14,
2002 for the period ending March 31, 2002.

     "Fiscal  Quarter"  shall mean each  three-month  period ending on March 31,
June 30, September 30, and December 31 of each year.

     "Funding  Date" shall mean,  with respect to any Revolving Loan made by the
Bank hereunder, the date of the funding of such Revolving Loan by Bank.

     "GAAP" shall mean, as of any applicable  date of  determination,  generally
accepted accounting principles consistently applied in the United States.

                                     - 3 -

<PAGE>


     "Guarantor"  shall mean Mission West  Properties,  L.P., a Delaware limited
partnership,   and  Mission  West  Properties,   L.P.  II,  a  Delaware  limited
partnership,  and any other  person who may execute a Guaranty of all or part of
the Indebtedness, jointly and severally.

     "Guaranty"  shall mean a guaranty (or separate  guaranties) in the form and
content of Exhibit A to this Agreement pursuant to which the Guarantors (jointly
and  severally)  unconditionally  guarantee  repayment  to the  Bank  of all the
Indebtedness and other obligations as provided therein.

     "Indebtedness" shall mean all loans,  advances,  indebtedness,  obligations
and liabilities of Borrower to the Bank under this Agreement,  together with all
other  indebtedness,  obligations and liabilities  whatsoever of the Borrower to
the Bank,  whether matured or unmatured,  liquidated or unliquidated,  direct or
indirect,  absolute or contingent,  joint or several,  due or to become due, now
existing or hereafter arising.

     "Initial  LIBOR Period" shall mean, as to each LIBOR Loan as defined below,
the LIBOR Period  selected by Borrower in its Notice of Borrowing  applicable to
such LIBOR Loan.

     "Initial  LIBOR Rate" shall mean,  as to each LIBOR Loan as defined  below,
the  interest  rate  payable  for such LIBOR  Loan in  accordance  with  Section
2.3.2.2.1  herein as of the first day of the Initial LIBOR Period for such LIBOR
Loan.

     "Interest  Coverage  Ratio"  shall  mean,  as of  any  applicable  date  of
determination, the ratio of: (1) the sum of Borrower's net income, plus interest
(related  parties),  plus all other  interest  (including but not limited to any
interest paid to any other party), plus minority interest  distributions paid by
Borrower  (as set  forth in the  Consolidated  Statement  of Cash  Flows),  plus
dividends paid by Borrower (as set forth in the  Consolidated  Statement of Cash
Flows),  plus  depreciation,  minus  deferred  rent (as set forth in  Borrower's
Consolidated  Statement of Cash Flows),  and minus  Borrower's  gains on sale of
real  estate;  to (2) the sum of  interest  (related  parties),  plus all  other
interest  (including  but not limited to any interest  paid to any other party).
The Interest  Coverage  Ratio shall be  determined by the Bank as of each Fiscal
Quarter (as defined  below) and on the basis of the preceding  twelve (12) month
period  (actual or based on  annualized  quarters)  as  follows:  (i) as to each
Fiscal  Quarter  ending on March 31, June 30, and September 30, from  Borrower's
SEC Form 10-Q filed with the Securities and Exchange Commission relating to such
quarter,  with  such  quarter  results  annualized;  and (ii) as to each  Fiscal
Quarter  ending on December 31, from  Borrower's  SEC Form 10-K  relating to the
year ending on such date.  Notwithstanding the foregoing, the Bank may also rely
on other  information that Borrower is obligated to provide to the Bank pursuant
to Section 6.1 of this  Agreement.  Exhibit F hereto  includes an example of the
calculation of Interest  Coverage  Ratio as defined  herein from  Borrower's SEC
Form 10-K for the period ending  December 31, 2001,  and is provided for example
purposes only.

     "Internal  Revenue  Code" shall mean the Internal  Revenue Code of 1986, as
amended from time to time and hereafter, and any successor statute.

     "Legal Rate" shall mean the maximum interest rate allowed by law to be paid
by the  Borrower  or  received  by the Bank  with  respect  to the  Indebtedness
represented by the Note.

                                     - 4 -

<PAGE>


     "Lender"  shall  mean any bank,  financial  institution,  finance  company,
insurance or other financial  institution or any other person who extends or has
extended any credit or loan or line of credit to any other person.

     "LIBOR"  shall mean the London  Inter-Bank  Offered  Rate,  rounded  up, if
necessary, to the nearest whole 1/100 of 1%.

     "LIBOR Loan" shall mean a Revolving Loan as to which,  pursuant to Sections
2.3.1,  2.3.2,  and 2.3.4,  Borrower  has  selected an interest  rate based on a
thirty (30), sixty (60), or ninety (90) day LIBOR Period.

     "LIBOR Period" shall mean the period beginning on and including the Funding
Date and ending on (but excluding) the day which numerically corresponds to such
date thirty  (30),  sixty (60) or ninety (90) days  thereafter,  in each case as
Borrower  may select in its  relevant  Notice of  Borrowing  pursuant to Section
2.3.4.1 herein or in its Election pursuant to Section 2.3.2.2.2.1 herein (except
that if the LIBOR  Period would  otherwise  end on a day which is not a Business
Day,  then such LIBOR  Period shall end on the next  following  Business Day and
except that no LIBOR Period may end later than the  Termination  Date as defined
below).

     "Loan" shall mean the Revolving Loans.

     "Loan  Documents" shall mean this Agreement,  the Note, each Guaranty,  the
Non-Encumbrance  Agreement and all other  agreements,  instruments and documents
(together with all amendments and supplements thereto and replacements  thereof)
now or hereafter  executed by Borrower or Guarantor that  evidence,  guaranty or
secure  all or  any  portion  of  the  Indebtedness  or  Borrower's  obligations
hereunder.

     "Material  Adverse Effect" or "Materially  Adverse Effect" shall mean, with
respect to a Person, a material adverse effect upon the condition  (financial or
otherwise), operations, performance or properties or assets of such Person.

     "Minimum  Tangible Net Worth" shall be calculated  each Fiscal  Quarter and
shall mean, as of any  applicable  date of  determination,  Total  Stockholders'
Equity  (but not  including  Minority  Interest)  as stated in the  Consolidated
Balance Sheet of Borrower in  Borrower's  SEC Form 10-Q or, as  applicable,  SEC
Form  10-K (or  other  financial  information  that  Bank may  obtain  regarding
Borrower or that may be provided by Borrower to Bank in accordance  with),  less
intangibles calculated in accordance with GAAP.

     "MWP"  shall  mean  Mission  West  Properties,  L.P.,  a  Delaware  limited
partnership, and its successors and assigns.

     "MWP II" shall mean Mission West  Properties,  L.P. II, a Delaware  limited
partnership, and its successors and assigns.

     "MWP Pool Properties" shall mean those real estate properties identified in
Schedule 1 to the  Non-Encumbrance  Agreement  as defined  below  including  any
"Replacement Properties" as defined in such agreement.

                                     - 5 -
<PAGE>


     "MWP II Pool Properties" shall mean those real estate properties identified
in Schedule 2 to the  Non-Encumbrance  Agreement as defined below  including any
"Replacement Properties" as defined in such agreement.

     "Non-Encumbrance  Agreement" shall mean a non-encumbrance agreement between
Bank,  Borrower,  MWP and MWP II in the form and  content  of  Exhibit C to this
Agreement  pursuant to which  Borrower,  MWP and MWP II (jointly and  severally)
agree not to encumber the MWP Pool  Properties and the MWP II Pool Properties in
accordance with the terms therein.

     "Note" shall mean the Revolving Credit Note.

     "Notice of Borrowing" shall mean, with respect to a proposed Revolving Loan
pursuant to Section 2.3 of this Agreement, a notice substantially in the form of
Exhibit D hereto.

     "PBGC" shall mean the Pension  Benefit  Guaranty  Corporation or any person
succeeding to the present powers and functions of the Pension  Benefit  Guaranty
Corporation.

     "Person" or "person" shall mean any individual,  corporation,  partnership,
joint  venture,  association,  trust,  unincorporated  association,  joint stock
company,  government,  municipality,  political  subdivision or agency, or other
entity.

     "Prepayment Date" is defined in Section 2.3.2.3 of this Agreement.

     "Prepayment Penalty" is defined in Section 2.3.2.3 of this Agreement.

     "Prime  Variable  Rate" shall mean that variable rate of interest  equal to
the Prime Rate as published in the Wall Street Journal minus 3/4 percent (3/4%),
per annum,  with the interest rate to be initially  calculated by the Bank as of
approximately 10:00 a.m. San Jose, California time on the date on which the Bank
exercises  its option under Section 2.16 if such option date is the first day of
the month, or, if not, as of approximately 10:00 a.m. San Jose,  California time
as the first day of the month during which such option date occurs, and with the
interest rate to thereafter  fluctuate with changes in such Prime Rate with such
fluctuations to be effective, and the interest rate to be adjusted, on the first
day of each month.

     "Revolving  Credit Note" shall mean a promissory note conforming to Section
2.5 of  this  Agreement  and in the  form  and  content  of  Exhibit  B to  this
Agreement.

     "Revolving  Loan"  shall  mean  advances  or loans  made by the Bank to the
Borrower under this Agreement.

     "Section" when used to refer to a portion of this Agreement  shall mean the
section to which reference is made plus all subparts and subsections thereof.

     "Solvent" shall mean, as to any person at the time of  determination,  that
such  person  (a) owns  property  and  assets  the value of which  (both at fair
valuation and at present fair salable value) is greater than the amount required
to pay all of such person's liabilities  (including  contingent  liabilities and
debts); (b) is able to pay all of its debts as such debts mature; and (c)

                                     - 6 -
<PAGE>

has  capital  sufficient  to  carry on its  business  and  transactions  and all
business and transactions in which it is about to engage.

     "Subsidiary" shall mean any corporation  (whether now existing or hereafter
organized or acquired) in which more than fifty percent (50%) of the outstanding
securities having ordinary voting power for the election of directors, as of any
applicable date of determination, shall be owned directly, or indirectly through
one or more Subsidiaries, by the Borrower.

     "Termination Date" shall mean July 12, 2004.

     "Total  Loans  of  Borrower"  shall  mean,  as of  the  date  of  any  such
determination, the sum of the total outstanding principal balance of all secured
loans to Borrower  from any Lender plus the total amount of all the balances and
the credit  commitments  under any and all unsecured  loans,  unsecured lines of
credit,  unsecured  credit  facilities of any kind (including but not limited to
the Commitment  Amount),  and any other commitments  evidencing any extension of
unsecured debt to Borrower by any Lender.

     "Value" as to each and any of the MWP Pool  Properties  and each and any of
the MWP II Pool  Properties  shall be based upon the Annual Gross Rental  Income
from each such property less a fifteen percent reserve for vacancy and expenses,
and using a ten percent income  capitalization  rate, and shall mean at any time
an amount equal to (i) the Annual Gross Rental Income from such property for the
preceding twelve month period multiplied by 0.85, and (ii) which amount shall be
divided by 0.10, illustrated as follows:

     (Annual Gross Rental Income x 0.85) / 0.10 = Value of subject property

     "Value (Borrower  Aggregate)" shall be determined as of each Fiscal Quarter
and shall mean, as of the  applicable  date of  determination,  the sum of total
quarterly rental revenue as reported by Borrower in its SEC Form 10-Q filed with
the  Securities  Exchange  Commission  (or as determined by Bank from such other
financial information as Bank may reasonably request and Borrower may provide in
accordance  with  Section 6.1 herein or as Bank may obtain)  multiplied  by four
(which sum shall be  referred  to as  "Annualized  Quarterly  Rental  Revenue"),
multiplied by 0.85,  and which amount shall be divided by 0.10,  illustrated  as
follows:

     "Quarterly Rental Revenue x 4 = Annualized Quarterly Rental Revenue

          (Annualized Quarterly Rental Revenue x 0.85) / 0.10 = Value
                             (Borrower Aggregate)"

     "UCC"  shall  mean  Uniform  Commercial  Code of the  State  of  California
(approved June 8, 1968) as amended.

     "Variable  Rate" shall mean that variable rate of interest equal to the sum
of LIBOR  applicable  to funds  borrowed  for a thirty  (30) day period plus two
percent (2%),  per annum,  the interest  rate to be initially  calculated by the
Bank as of  approximately  10:00 a.m. San Jose,  California  time on the Funding
Date  if the  Funding  Date is the  first  day of a  month,  or,  if not,  as of
approximately 10:00 a.m. San Jose, California time on the first day of the month
during which the Funding Date occurs,  and with the interest  rate to thereafter
fluctuate with changes in such

                                     - 7 -
<PAGE>

LIBOR  with such  fluctuations  to be  effective,  and the  interest  rate to be
adjusted, on the first day of each month.

     "Variable  Rate Loan" shall mean a Revolving  Loan as to which Borrower has
selected a Variable Rate pursuant to Sections 2.3.1, 2.3.3, and 2.3.4, any LIBOR
Loan that has converted to a Variable Rate Loan pursuant to Section  2.3.2.2.2.2
or Section 2.13.2; and/or an Automatic Variable Rate Loan under Section 2.4.1.

     "Variable  Rate Loans  Outstanding  Amount" is defined in Section  2.4.2 of
this Agreement.

     1.2  Accounting  Terms. All accounting  terms not  specifically  defined in
          this Agreement shall be construed in accordance with  ----------------
          GAAP.

     1.3  Singular and Plural.  Where the context herein requires,  the singular
          number  shall be deemed to include the plural,  the  masculine  gender
          shall include the feminine and neuter genders, and vice versa.

2.   Commitment, Procedures, Interest and Fees.

     2.1  Revolving  Credit  Commitment.  Subject to the terms and conditions of
          this  Agreement  and at any time  from the  Effective  Date  until the
          earlier of (a) the  Termination  Date, (b) such earlier date on which,
          pursuant to the terms of this  Agreement and a result of  acceleration
          or otherwise,  the  Indebtedness is fully due and payable,  or (c) the
          termination of the Bank's  Commitment  pursuant to Section 8.2 of this
          Agreement or otherwise, the Bank agrees to make Revolving Loans to the
          Borrower  on a revolving  basis up to an  aggregate  principal  amount
          outstanding  at  any  time  not  to  exceed  the  Commitment   Amount.
          Notwithstanding the foregoing, the Bank shall not be obligated to make
          the Revolving Loan if: (i) any of the  conditions  precedent set forth
          in Section 4 of this Agreement shall not have been satisfied or waived
          by the Bank in accordance with Section 9.4 of this Agreement,  or (ii)
          such  proposed   Revolving  Loan  would  cause  the  aggregate  unpaid
          principal  amount  of  the  Revolving  Loans  outstanding  under  this
          Agreement to exceed the Commitment Amount on the Funding Date.

     2.2  Revolving  Loans Made  Pursuant to Notice of Borrowing  and  Automatic
          Loans. Pursuant to the terms of this Agreement,  Revolving Loans shall
          be made  pursuant to a Notice of Borrowing  pursuant to Section 2.3 or
          automatically pursuant to Section 2.4.

     2.3  Revolving Loans Made Pursuant to Notice of Borrowing.

          2.3.1Borrower's Selection of Loan Type. Pursuant to the procedures set
               forth  in  Section  2.3.4  and as to  each  Revolving  Loan  made
               pursuant to a Notice of Borrowing,  Borrower shall select whether
               the Loan shall be a LIBOR Loan or a Variable Rate Loan, and, if a
               LIBOR Loan, the applicable LIBOR Period (whether 30-day,  60-day,
               or  90-day).  Borrower  may  select a LIBOR Loan only if there is
               sufficient time for the selected LIBOR Period to commence and end
               prior to the Termination Date.

          2.3.2LIBOR Loans. The following provisions apply to each LIBOR Loan:

                                     - 8 -
<PAGE>



               2.3.2.1 Maximum Number of LIBOR Loans;  Revolving Loan Amount. At
                    any one  time,  there  shall  not be  more  than  eight  (8)
                    outstanding  LIBOR Loans. The amount of each LIBOR Loan must
                    be in the amount of One Million Dollars  ($1,000,000.00)  or
                    integral multiples of One Million Dollars ($1,000,000.00).

               2.3.2.2  Interest  Rate.  Except  as  otherwise  provided  herein
                    (including  without  limitation  Section 2.6 relating to the
                    Default  Rate),  each  LIBOR  Loan  will  bear  interest  as
                    follows:

                    2.3.2.2.1  Initial  LIBOR  Rate.  During the  Initial  LIBOR
                         Period,  the LIBOR  Loan  shall  bear  interest  on the
                         unpaid  principal  amount  thereof  at a rate per annum
                         equal to the sum of  LIBOR  applicable  to the  Initial
                         LIBOR Period calculated by the Bank as of approximately
                         10:00 a.m. San Jose,  California  time on the first day
                         of the Initial  LIBOR Period plus two percent (2%) (the
                         "Initial LIBOR Rate").

                    2.3.2.2.2 Subsequent  Rates.  Upon expiration of the Initial
                         LIBOR  Period,  the LIBOR Loan shall bear  interest  as
                         follows:

                         2.3.2.2.2.1  Borrower's  Timely  Election of Additional
                              LIBOR  Period(s).   Borrower may elect to continue
                              the  LIBOR  Loan  after e xpiration of the Initial
                              LIBOR  Period  for  additional,  successive  LIBOR
                              Periods  as long as,  (i) there is sufficient time
                              for the  additional  LIBOR Period to  commence and
                              end prior  to the Termination Date;  (ii) there is
                              no Default or Event of Default; and (iii) not less
                              than two (2) nor more than five  (5) Business Days
                              prior  to the  expiration  of each  LIBOR  Period,
                              Borrower  provides to the  Bank at  20230  Stevens
                              Creek  Boulevard,   Cupertino,  California  95014,
                              Attention Michael Zukin,  or to such other persons
                              or entities as the Bank may designate,  a written
                              election  (the "Election")  to continue the  LIBOR
                              Loan for an additional LIBOR Period.  The Election
                              shall specify the additional LIBOR Period (whether
                              30-day, 60-day, or 90-day). During each additional
                              LIBOR Period,  the  LIBOR Loan shall bear interest
                              on the unpaid  principal  amount thereof at a rate
                              per annum equal to the sum of  LIBOR applicable to
                              such  additional  LIBOR  Period  calculated by the
                              Bank as of approximately  10:00 a.m.  on the first
                              Business Day  immediately following  expiration of
                              the Initial LIBOR Period plus two percent (2%).

                         2.3.2.2.2.2    Borrower's  Failure  to  Make  a  Timely
                              Election  of   Additional   LIBOR   Period(s)   or
                              Insufficient  Time Left Prior to Termination Date.
                              If, during any LIBOR Period, (i) Borrower fails to
                              provide the  Election in accordance  with  Section
                              2.3.2.2.2.1,  or  (ii)  there is insufficient time
                              for an additional LIBOR Period to commence and end
                              prior  to the  Termination  Date,  then  upon  the
                              expiration  of such  LIBOR Period,  the LIBOR Loan
                              will convert automatically to a Variable Rate Loan
                              and shall  bear interest  on the unpaid  principal
                              amount thereof at the Variable Rate.


               2.3.2.3 Prepayment Penalty. Borrower acknowledges that prepayment
                    or  acceleration  of a LIBOR Loan during a LIBOR  Period may
                    result  in the Bank  incurring  additional  costs,  expenses
                    and/or  liabilities  and  that  it  is  extremely  difficult
                    andimpractical  to  ascertain  the  extent  of  such  costs,
                    expenses and/or  liabilities.  Therefore,  on a date a LIBOR
                    Loan  is so  prepaid  or  so  accelerated  (the  "Prepayment
                    Date"),  Borrower  will pay to the Bank (in  addition to all
                    other sums then  owing) an amount (a  "Prepayment  Penalty")
                    equal  to the  following:  (i) the  present  value as of the
                    Prepayment Date of the amount of interest that would

                                     - 9 -
<PAGE>

                    have  accrued  on the LIBOR  Loan for the  remainder  of the
                    LIBOR Period at the rate applicable to such LIBOR Loan, less
                    (ii)  the  present  value as of the  Prepayment  Date of the
                    amount of interest  that would accrue on the same LIBOR Loan
                    for the  same  period  if LIBOR  were set on the  Prepayment
                    Date.  The present  value shall be  calculated by using as a
                    discount  rate LIBOR  quoted on the  Prepayment  Date.  Upon
                    notice to Borrower by the Bank,  Borrower shall  immediately
                    pay to the Bank the Prepayment  Penalty as calculated by the
                    Bank.  Exhibit G hereto  includes an example of a prepayment
                    calculation and is provided for example purposes only.

          2.3.3Variable  Rate  Loans.  The  following  provisions  apply to each
               Variable Rate Loan:

               2.3.3.1  Interest  Rate.  Except  as  otherwise  provided  herein
                    (including  without  limitation  Section 2.6 relating to the
                    Default Rate), each Variable Rate Loan will bear interest on
                    the unpaid principal amount thereof at the Variable Rate.

          2.3.4Borrowing  Procedures for Revolving Loans Made Pursuant to Notice
               of Borrowing.

               2.3.4.1 Notice of Borrowing.  Whenever Borrower desires to Borrow
                    under  Section 2.3,  Borrower  shall  provide to the Bank at
                    20230 Stevens Creek Boulevard,  Cupertino, California 95014,
                    Attention  Michael  Zukin,  or  to  such  other  persons  or
                    entities  as Bank  may  designate,  an  original  Notice  of
                    Borrowing.  Such Notice of Borrowing shall be provided by no
                    later than 11:00 A.M. (San Jose,  California  time) for each
                    Revolving  Loan requested and not less than two (2) nor more
                    than five (5)  Business  Days prior to the  noticed  Funding
                    Date of each such Revolving  Loan.  Each Notice of Borrowing
                    shall  specify  (A)  the  Funding  Date  (which  shall  be a
                    Business  Day) in respect  of the  Revolving  Loan,  (B) the
                    amount of the  proposed  Revolving  Loan,  (C)  whether  the
                    Borrower  selects a LIBOR Loan or a Variable  Rate Loan and,
                    if a  LIBOR  Loan,  the  applicable  LIBOR  Period,  (D) the
                    deposit  account  number of Borrower  with Bank to which the
                    funds are to be  directed,  and (E) the proposed use of such
                    Revolving   Loan.   Any   Notice  of   Borrowing   shall  be
                    irrevocable.  At the time of execution of this Agreement and
                    as a condition to the Bank's obligations hereunder, Borrower
                    shall   provide   the  Bank   with   written   documentation
                    satisfactory  to the  Bank  specifying  the  names  of those
                    employees,  officers  or agents of  Borrower  authorized  by
                    Borrower to execute and submit  Notices of  Borrowing to the
                    Bank ("Authorized  Agent") and a signature  exemplar of each
                    such  Authorized  Agent,  and the Bank shall be  entitled to
                    rely on such  documentation  until  notified  in  writing by
                    Borrower  of any  change(s)  of the  persons so  authorized.
                    Borrower  agrees  to  indemnify,  defend  and  hold the Bank
                    harmless  from and  against any and all  liabilities,  costs
                    (including  but not  limited to  attorneys'  fees),  claims,
                    damages  and  demands  arising  from or  related  to  Bank's
                    acceptance  of  instructions  in  any  Notice  of  Borrowing
                    executed and submitted an Authorized Agent, unless caused by
                    the gross negligence or willful  misconduct of the Person to
                    be indemnified.

               2.3.4.2 Bank Obligations.  Subject to the terms and conditions of
                    this Agreement  including without limitation Section 2.1 and
                    subject to Borrower's performance of and compliance with the
                    terms hereof including  without  limitation  Section 2.3.4.1
                    herein,  the Bank agrees to make the Revolving Loan pursuant
                    to a Notice of Borrowing on the Funding

                                     - 10 -
<PAGE>

                    Date established by the Notice of Borrowing by crediting the
                    deposit  account of the Borrower with the Bank  specified in
                    the  Notice of  Borrowing  in the  amount of such  Revolving
                    Loan.

     2.4  Automatic Variable Rate Loans and Automatic Repayments. Subject to the
          terms and conditions of this Agreement  including  without  limitation
          Section 2.1, the Bank is hereby authorized and shall, without the need
          for any Notice of Borrowing  or other  authorization,  make  Automatic
          Variable Rate Loans to Borrower and make automatic  repayments  toward
          Variable Rate Loans as follows:

          2.4.1Automatic Variable Rate Loans. If, after close of business on any
               Business Day (the "Automatic Loan Calculation  Time"), the amount
               on  deposit  in the  Borrower's  Deposit  Account  as  defined in
               Section  6.12 is less than One Million  Dollars  ($1,000,000.00),
               then the Bank shall  calculate the amount of the  shortfall  (the
               "Deposit  Account  Shortfall  Amount") as of the  Automatic  Loan
               Calculation  Time,  and,  by no  later  than  the end of the next
               Business Day, shall make a Revolving Loan (an "Automatic Variable
               Rate Loan") in the Deposit Account Shortfall Amount by depositing
               such  amount  into the  Borrower's  Deposit  Account.  Except  as
               otherwise   provided  in  this   Agreement   (including   without
               limitation  Section 2.6 relating to Default Rate),  the Automatic
               Variable Rate Loan will bear interest at the Variable Rate.

          2.4.2Automatic  Repayment of Automatic  Variable Rate Loans. If, after
               close  of  business  on any  Business  Day (the  "Automatic  Loan
               Repayment Time"), the amount on deposit in the Borrower's Deposit
               Account  as  defined  in  Section  6.12 is more than One  Million
               Dollars ($1,000,000.00) and there is an amount outstanding on the
               Variable  Rate  Loans  (the  "Variable  Rate  Loans   Outstanding
               Amount"), then the Bank shall calculate, as of the Automatic Loan
               Repayment  Time,  the amount of the excess (the "Deposit  Account
               Excess Amount") and the Variable Rate Loans  Outstanding  Amount,
               and, by no later than the end of the next  Business Day, the Bank
               shall transfer the Deposit Account Excess Amount,  or such lesser
               amount as may be necessary,  from the Borrower's  Deposit Account
               and apply such amount toward repayment of the Variable Rate Loans
               Outstanding Amount.

     2.5  Revolving  Credit Note. The Revolving  Loans shall be evidenced by the
          Revolving  Credit Note,  executed by the  Borrower,  dated the date of
          this Agreement,  payable to the Bank on the Termination  Date (or such
          earlier  date as the  Indebtedness  is due  under  the  terms  of this
          Agreement whether by reason of acceleration or otherwise),  and in the
          principal  amount  of the  original  Commitment  Amount.  The date and
          amount of each  Revolving  Loan made by the Bank and of each repayment
          of  principal  thereon  received  by the Bank shall be recorded by the
          Bank in its records. The aggregate unpaid principal amount so recorded
          by the Bank shall constitute the best evidence of the principal amount
          owing and unpaid on the Revolving Credit Note, provided, however, that
          the  failure by the Bank so to record any such  amount or any error in
          so recording  any such amount shall not limit or otherwise  affect the
          obligations  of the Borrower  under this  Agreement  or the  Revolving
          Credit Note to repay the principal  amount of all the Revolving  Loans
          together with all interest accrued or accruing thereon.

     2.6  Default  Interest.  Upon the  occurrence  of an Event of Default,  all
          amounts due and owing by  Borrower to the Bank shall bear  interest at
          the Default Rate.

                                     - 11 -
<PAGE>

     2.7  Interest Payments. Interest shall be payable by Borrower to the extent
          then  accrued  on the first  day of each  consecutive  calendar  month
          beginning  on August 1,  2002,  with all  remaining  interest  due and
          payable  on  the  Termination  Date  (or  such  earlier  date  as  the
          Indebtedness  is due  under  the terms of this  Agreement  whether  by
          reason of acceleration  or otherwise).  Any interest not paid when due
          shall become part of the  principal  and bear  interest as provided in
          this Agreement.

     2.8  Maximum  Rate.  At no time shall the rate of  interest  payable on the
          Revolving  Loans or pursuant to the Revolving  Credit Note pursuant to
          the terms of this Agreement be deemed to exceed the Legal Rate. In the
          event any interest is charged or received by the Bank in excess of the
          Legal Rate, the Borrower  acknowledges  that any such excess  interest
          shall be the result of an  accidental  and bona fide  error,  and such
          excess  shall  first be applied to reduce the  principal  then  unpaid
          hereunder (in inverse order of their  maturities if principal  amounts
          are due in installments); second, applied to reduce any obligation for
          other  indebtedness  of the  Borrower  to the  Bank;  and  third,  any
          remaining excess returned to the Borrower.

     2.9  Term. The  Indebtedness  and the outstanding  balance of all Revolving
          Loans and all other accrued and unpaid interest,  charges and expenses
          hereunder  and  under  the  Note  shall  be  payable  in  full  on the
          Termination Date or such earlier date as the Indebtedness is due under
          the terms of this Agreement whether by reason of acceleration pursuant
          to Section 8.2 or otherwise.

     2.10 Fees.  Borrower  shall pay to Bank the fees  described in this Section
          2.10.  All fees  described  herein  are earned as of the date they are
          accrued.

          2.10.1  Minimum  Annual  Fee.  The  Borrower  shall  pay to the Bank a
               minimum  annual fee of Thirty Three Thousand Three Hundred Thirty
               Three  Dollars and no cents  ($33,333.00)  (the  "Minimum  Annual
               Fee").  The Minimum Annual Fee paid by Borrower shall be credited
               towards Borrower's payment of the Non-Utilization Fee as required
               by Section 2.10.2 below.  The Minimum Annual Fee shall be payable
               in advance, in the manner provided in Section 2.14 herein, on the
               Effective  Date  for  the  first  year  hereunder,  and  on  each
               anniversary of the Effective Date for each subsequent year.

          2.10.2  Non-Utilization  Fee.  From and after the  Effective  Date and
               until  (i)  the   Indebtedness  is  paid  in  full  or  (ii)  the
               Termination Date,  whichever is later,  Borrower shall pay to the
               Bank a fee (the "Non-Utilization  Fee") each Fiscal Quarter which
               shall accrue as follows:

               (i)  If the sum of the Commitment  Amount minus the average daily
                    principal  balance of all Revolving  Loans as determined for
                    each  Fiscal  Quarter  (the  "Average  Line  Non-Utilization
                    Amount") is greater than Twenty Million Dollars and no cents
                    ($20,000,000.00),  then  the  Non-Utilization  Fee for  such
                    Fiscal  Quarter  shall  equal  the sum of the  Average  Line
                    Non-Utilization Amount multiplied by 0.000375.

               (ii) If the Average Line  Non-Utilization  Amount is less than or
                    equal   to   Twenty    Million    Dollars   and   no   cents
                    ($20,000,000.00),  then  the  Non-Utilization  Fee for  such
                    Fiscal  Quarter  shall  equal  the sum of the  Average  Line
                    Non-Utilization Amount multiplied by 0.000625.

                                     - 12 -
<PAGE>

               The  Non-Utilization Fee shall be payable, in the manner provided
               in Section 2.14 herein,  in arrears on the first  Business Day in
               each Fiscal  Quarter,  beginning with the end of the first Fiscal
               Quarter  after the  Effective  Date.  Exhibit  H hereto  includes
               examples  of the  calculation  of the  Non-Utilization  Fee under
               Sections  2.10.2 (i) and 2.10.2 (ii), and is provided for example
               purposes only.

          2.10.3 No Fee After Termination of Bank  Obligations.  Notwithstanding
               Sections  2.10.1 and 2.10.2,  the Borrower shall not be obligated
               to pay any Minimum Annual Fee or any  Non-Utilization  Fee earned
               by the Bank after the date which is ten (10) days after  Borrower
               has: (i) given written notice to the Bank  terminating the Bank's
               Commitment  and any  further  obligation  by the Bank  under this
               Agreement; and (ii) paid the Indebtedness in full.

     2.11 Preparation Fees.  Simultaneously with the execution of this Agreement
          and as a condition to the Bank's obligations  hereunder,  the Borrower
          shall pay to the Bank the amount of the  expenses  (including  without
          limit  attorneys'  fees,  whether  of inside or outside  counsel,  and
          disbursements) incurred by the Bank in connection with the preparation
          of this  Agreement  and the Loan  Documents  in the  amount of Fifteen
          Thousand Dollars ($15,000.00).

     2.12 Basis of  Computation.  The amount of all interest and fees  hereunder
          shall be computed for the actual  number of days elapsed in the period
          in which interest  accrues on the basis of a year  consisting of three
          hundred sixty (360) days.

     2.13 Mandatory Payments and Prepayments.

          2.13.1 Mandatory Payments.  In addition to all other payments required
               to be made under the Loan  Documents,  Borrower  shall pay to the
               Bank the amount,  if any, by which the aggregate unpaid principal
               amount  of all  Revolving  Loans  from time to time  exceeds  the
               Commitment Amount,  together with all interest accrued and unpaid
               on the amount of such excess.  Such payment shall be  immediately
               due and owing without notice or demand upon the occurrence of any
               such excess,  provided,  however, that any mandatory payment made
               under this Section 2.13.1 shall not reduce the Commitment Amount.

          2.13.2 Optional Prepayments and Conversions. The Borrower, at any time
               and from time to time, may prepay the unpaid  principal amount of
               the  Variable  Rate  Loans,   including  without  limitation  the
               Automatic Variable Rate Loans. In addition,  the Borrower, at any
               time and from time to time, may convert all or any portion of the
               outstanding Variable Rate Loans into LIBOR Loans upon and subject
               to the terms,  conditions,  and  procedures set forth in Sections
               2.3.2 and 2.3.4  applicable  to LIBOR  Loans made  thereunder  in
               which case the Notice of  Borrowing  shall be modified to request
               the  conversion of a specified  amount of the Variable Rate Loans
               to be converted to a LIBOR Loan (rather than the  disbursement of
               proceeds),  to specify the date on which the  conversion is to be
               made (rather than a Funding Date), and to delete the requirements
               in  Schedule 1 relating  to wire  instructions,  proposed  use of
               funds, and deposit  account.  In addition,  the Borrower,  at any
               time and from time to time,  upon at least one (1) Business Day's
               prior  written  notice  received  by the Bank and  subject to the
               Prepayment  Penalty in  Section  2.3.2.3  herein,  may prepay the
               unpaid  principal  amount of the LIBOR Loans in whole or in part,
               provided,  however, as follows:  (i) any such optional prepayment
               under this Section 2.13.2 shall be made in integral  multiples of
               One Hundred Thousand Dollars

                                     - 13 -
<PAGE>

               ($100,000.00);  (ii) to the extent that such optional  prepayment
               repays part but not all of any LIBOR Loan,  such LIBOR Loan shall
               immediately  convert to a Variable Rate Loan (but Borrower  shall
               still be liable for the  Prepayment  Penalty  in Section  2.3.2.3
               herein);  and (iii)  any  optional  prepayment  made  under  this
               Section 2.13.2 shall not reduce the Commitment Amount.

     2.14 Basis of Payments.  All sums payable by the Borrower to the Bank under
          this  Agreement or the Loan  Documents  shall be paid  immediately  by
          Borrower  when due  directly to the Bank at its  principal  office set
          forth in Section 9.12 hereof in  immediately  available  United States
          funds, without condition,  set off, deduction or counterclaim.  In its
          sole  discretion,  the Bank may  charge  any and all  deposit or other
          accounts   (including   without  limit  an  account   evidenced  by  a
          certificate  of  deposit) of the  Borrower  with the Bank for all or a
          part of any  Indebtedness  when  due;  provided,  however,  that  this
          authorization shall not affect the Borrower's  obligation to pay, when
          due, any  Indebtedness  whether or not account balances are sufficient
          to pay  amounts  due.  Whenever  any  payment  to be made by  Borrower
          hereunder  shall be stated to be due on a day which is not a  Business
          Day,  payments shall be made on the next  succeeding  Business Day and
          such  extension  of time shall be included in the  computation  of the
          payment of  interest  hereunder  and of any of the fees  specified  in
          Sections  2.3.2.3 and 2.10, as the case may be. Borrower  acknowledges
          and  agrees  that  the  fees   described  in  Section  2.10  represent
          compensation  for services  rendered  and to be rendered  separate and
          apart from the lending of money or the  provision of credit and do not
          constitute  compensation  for the use,  detention  or  forbearance  of
          money, and the obligation of Borrower to pay the fees described herein
          shall  be in  addition  to,  and not in lieu  of,  the  obligation  of
          Borrower to pay interest,  other fees and expenses otherwise described
          in this  Agreement.  If Borrower  fails to make any payment of fees or
          expenses  specified  or referred to in this  Agreement  owing to Bank,
          including  without  limitation  those  referred to in Section 2.10, or
          otherwise under this Agreement,  or any separate fee agreement between
          Borrower or Bank  relating  to this  Agreement,  when due,  the amount
          shall bear interest until paid at the Default Rate.

     2.15 Receipt of Payments. Any payment of the Indebtedness made by mail will
          be deemed  tendered and received only upon actual  receipt by the Bank
          at the address  designated  for such payment,  whether or not the Bank
          has authorized  payment by mail or any other manner,  and shall not be
          deemed to have been made in a timely  manner  unless  received  on the
          date  due for  such  payment,  time  being  of the  essence.  Borrower
          expressly  assumes  all  risks  of loss or  liability  resulting  from
          non-delivery  or delay of delivery of any item of payment  transmitted
          by mail or in any other manner.  Acceptance by the Bank of any payment
          in an  amount  less  than the  amount  then due  shall  be  deemed  an
          acceptance on account  only,  and the failure to pay the entire amount
          then due shall be and  continue to be a Default or Event of Default as
          provided  in Section  8.1,  and at any time  thereafter  and until the
          entire  amount  then due has been paid,  the Bank shall be entitled to
          exercise  any  and  all  rights  conferred  upon it  herein  upon  the
          occurrence  of a Default or Event of Default  as  provided  in Section
          8.1.  Borrower  waives the right to direct the  application of any and
          all payments at any time or times hereafter  received by the Bank from
          or on behalf of the Borrower. Borrower agrees that the Bank shall have
          the  continuing  exclusive  right to apply and to reapply  any and all
          payments   received  at  any  time  or  times  hereafter  against  the
          Indebtedness   in  such  manner  as  the  Bank  may  deem   advisable,
          notwithstanding  any  entry by the  Bank  upon  any of its  books  and
          records.  Borrower  expressly  agrees that to the extent that the Bank
          receives  any payment of benefit and such  payment or benefit,  or any
          part thereof, is subsequently  invalidated,  declared to be fraudulent
          or  preferential,  set aside or is required to be repaid to a trustee,
          receiver,  or any other  party  under  any  bankruptcy  act,  state or
          federal law,

                                     - 14 -
<PAGE>

          common law or equitable  cause,  then to the extent of such payment or
          benefit,  the  Indebtedness  or part thereof  intended to be satisfied
          shall be  revived  and  continued  in full force and effect as if such
          payment or benefit had not been made and,  further any such  repayment
          by the Bank,  to the extent that the Bank did not  directly  receive a
          corresponding  cash  payment,  shall  be  added  to and be  additional
          Indebtedness payable upon demand by the Bank.

     2.16 LIBOR Unlawful or Unavailable.  Should the Bank in its sole discretion
          binding on Borrower  determine that the  introduction of or any change
          in any law or the  interpretation of any law makes it unlawful for the
          Bank to make or maintain  Revolving  Loans bearing  interest  based on
          LIBOR or that LIBOR has become  unavailable as an index,  then, at the
          Bank's  option and upon its exercise of such option:  (i) the interest
          rate  on  any  outstanding  Revolving  Loans  shall  thenceforth  bear
          interest at the Prime Variable Rate; and (ii) all additional Revolving
          Loans  shall be  Variable  Rate  Loans  except  that they  shall  bear
          interest at the Prime Variable Rate.

3.   Guaranty.

          To guaranty full and timely  performance of the  Borrower's  covenants
     set out in this  Agreement  and to secure the  repayment  of the  Revolving
     Credit Note and all other  Indebtedness,  the Borrower shall have caused to
     be executed and delivered to the Bank the Guaranty.

4.   Conditions to Obligations of Bank.

     4.1  Conditions  Precedent to First  Disbursement.  The  obligations of the
          Bank under this Agreement to make the first Revolving Loan are subject
          to the occurrence,  prior to or  simultaneously  with the Funding Date
          first occurring, of each of the following conditions:

          4.1.1Borrower Documents Executed and Filed and Fees Paid. The Borrower
               shall have  executed (or caused to be executed)  and delivered to
               the Bank the following in form and substance acceptable to Bank:

               (a)  This Agreement;

               (b)  The Revolving Credit Note;

               (c)  The Non-Encumbrance Agreement;

               (d)  Copy of Borrower's Bylaws,  including all amendments thereto
                    and restatements thereof, which shall have been certified by
                    the  Secretary or Assistant  Secretary of the Borrower as of
                    the Funding Date first occurring as being complete, accurate
                    and in effect; and

               (e)  A copy of  resolutions  of the  Board  of  Directors  of the
                    Borrower authorizing the execution, delivery and performance
                    of this Agreement,  the borrowing  hereunder,  the Revolving
                    Credit  Note and any other  documents  contemplated  by this
                    Agreement,  which shall have been certified by the Secretary
                    or  Assistant  Secretary  of the  Borrower as of the Funding
                    Date first  occurring  as being  complete,  accurate  and in
                    effect.

                                     - 15 -
<PAGE>



          4.1.2Payment of Fees.  Borrower shall have paid the Minimum Annual Fee
               and the  Preparation  Fees in accordance with Sections 2.10.1 and
               2.11.

          4.1.3Guarantor Documents Executed and Filed. Each Guarantor shall have
               executed and  delivered  (or caused to be delivered) to Bank each
               of the following, in form and substance acceptable to Bank:

               (a)  A Guaranty;

               (b)  Partnership  agreements of each Guarantor and all amendments
                    and modifications thereto,  certified as complete,  accurate
                    and in effect by the general partner of each Guarantor;

               (c)  Bank  shall  have   received   preliminary   title   reports
                    disclosing  no  notice of any  liens or  encumbrances  filed
                    against   any   of  the   properties   set   forth   in  the
                    Non-Encumbrance Agreement.

               Upon its execution of this Agreement,  the Bank acknowledges that
               it has received  the  documents  described in Sections  4.1.1(d),
               4.1.3(b), and 4.1.3(c) above.

          4.1.4Other  Documents  Executed  and Filed.  The  Borrower  shall have
               caused   to  be   executed   and   delivered   to  the  Bank  the
               Non-Encumbrance  Agreement dated as of the date of this Agreement
               between and among Bank, Borrower, MWP, and MWP II.

          4.1.5Casualty  Insurance.  The  Borrower  shall have  furnished to the
               Bank,   in  form,   content  and   amounts  and  with   companies
               satisfactory to the Bank,  casualty  insurance policies with loss
               payable clauses in favor of the Bank,  relating to the assets and
               properties  of Borrower and  relating to the MWP Pool  Properties
               and  the MWP II  Pool  Properties.  Upon  its  execution  of this
               Agreement,  Borrower  represents,  and upon its execution of this
               Agreement,  the Bank  acknowledges  that Borrower has provided to
               Bank the foregoing insurance policies.

          4.1.6Environmental Audit. The Borrower shall have provided to the Bank
               environmental  reports  satisfactory in form and content to Bank,
               covering  all of the  MWP  Pool  Properties  and  the MWP II Pool
               Properties.  Upon  its  execution  of  this  Agreement,  Borrower
               represents,  and upon its execution of this  Agreement,  the Bank
               acknowledges   that   Borrower   has   provided   to  Bank   such
               environmental reports. Borrower agrees that the Bank may disclose
               the  contents of such reports to such  governmental  agencies and
               entities as the Bank deems  necessary  under  applicable law, and
               the  Borrower  shall  deliver to the Bank the written  consent to
               such disclosure from the environmental consultant and MWP and MWP
               II.

          4.1.7Approval of Bank Counsel. All actions,  proceedings,  instruments
               and documents required to carry out the transactions contemplated
               by this  Agreement or  incidental  thereto and all other  related
               legal  matters  shall have been  satisfactory  to and approved by
               legal  counsel  for the Bank,  and said  counsel  shall have been
               furnished with such certified  copies of actions and  proceedings
               and such  other  instruments  and  documents  as they  shall have
               reasonably requested.

                                     - 16 -
<PAGE>



     4.2  Conditions Precedent to All Disbursements. The obligations of the Bank
          to make any  Revolving  Loan on any Funding Date,  including,  but not
          limited  to, the  Funding  Date first  occurring,  are  subject to the
          occurrence,  prior to or on the Funding Date related to such Revolving
          Loan, of each of the following conditions:

          4.2.1Certificate. The Bank shall have received a certificate, executed
               by the chief  executive or chief  financial  officer of Borrower,
               certified as of the initial  Funding Date,  and thereafter as the
               Bank may from time to time require on such date, that:

               (a)  No  Default  or  Event  of  Default  has   occurred  and  is
                    continuing;

               (b)  The warranties and representations set forth in Section 5 of
                    this  Agreement are true and correct on and as of such date;
                    and

               (c)  Borrower is Solvent.

          4.2.2Bank Satisfaction.  The Bank shall not know or have any reason to
               believe that, as of such Funding Date:

               (a)  Any  Default  or  Event  of  Default  has  occurred  and  is
                    continuing;

               (b)  Any  warranty  or  representation  set forth in Section 5 of
                    this Agreement shall not be true and correct; or

               (c)  Any  provision  of  law,  any  order  of  any  court  or any
                    regulation,  rule or  interpretation  thereof shall have had
                    any  Material   Adverse   Effect  on  Borrower's   financial
                    condition or on any Guarantor's  financial condition,  or on
                    the  validity  or  enforceability  of  this  Agreement,  the
                    Revolving  Credit Note,  the Guaranty,  the  Non-Encumbrance
                    Agreement or any other Loan Document.

          4.2.3Maximum  Borrower  Aggregate  Loan-To-Value.  The Total  Loans of
               Borrower shall not exceed fifty percent (50%) of Value  (Borrower
               Aggregate).

          4.2.4Loan-To-Value  of MWP Pool Properties and MWP II Pool Properties.
               The Commitment Amount shall not exceed fifty percent (50%) of the
               total  combined  Value of the MWP Pool  Properties and the MWP II
               Pool Properties.

     4.3  Other Documents to be Provided by Borrower.  No later than thirty (30)
          days after the  Effective  Date,  Borrower  shall  provide to Bank the
          following documents:

          (a)  Copy  of  Borrower's  Articles  of  Incorporation  including  all
               amendments  thereto  and  restatements  thereof,  and  all  other
               charter  documents of the Borrower,  all of which shall have been
               certified by the Maryland  Department of  Corporations or similar
               governmental   authority  in  the  state  in  which  Borrower  is
               organized  and  incorporated,  as of a date within thirty days of
               the Funding Date first occurring;

                                     - 17 -
<PAGE>

          (b)  Certified copy of Borrower's Good Standing  certificate  from the
               California  Secretary of State,  dated as of a date within thirty
               days of the Funding Date first occurring;

          (c)  A  copy  of  the  Certificate  of  Limited  Partnership  of  each
               Guarantor  required to be filed to create a limited  partnership,
               including all amendments thereto and restatements thereof, all of
               which shall have been  certified  by the Delaware  Department  of
               Corporations  or other  appropriate  filing  office  as of a date
               within thirty days of the Funding Date first occurring; and

          (d)  Good Standing  Certificate  for each Guarantor from the Secretary
               of State of the state in which such Guarantor is formed, dated as
               of a date within thirty days of the Funding Date first occurring.

5.   Warranties and Representations.

     On a continuing  basis from the date of this  Agreement  until the later of
     (a) the Termination  Date or (b) the date on which the Indebtedness is paid
     in  full  and the  Borrower  has  performed  all of its  other  obligations
     hereunder, Borrower represents and warrants to the Bank that:

     5.1  Corporate  Existence  and Power.  (a) Borrower is a  corporation  duly
          organized, validly existing and in good standing under the laws of the
          State of  Maryland  and in good  standing  under  the laws of,  and is
          authorized  to do  business  in,  the  State of  California,  (b) Each
          Guarantor is a limited  partnership  duly organized,  validly existing
          and in good  standing  under the laws of the State of Delaware  and is
          authorized to do business in the State of California, (c) Borrower and
          the Guarantors  each has the power and authority to own its properties
          and assets and to carry out its business as now being conducted and is
          qualified  to do business and in good  standing in every  jurisdiction
          wherein such  qualification  is necessary,  (d) Borrower has the power
          and  authority  to execute,  deliver and perform  this  Agreement,  to
          borrow money in  accordance  with its terms,  to execute,  deliver and
          perform the  Revolving  Credit Note and other  documents  contemplated
          hereby,  and to do any and all other  things  required of it hereunder
          (e) each Guarantor has the power and authority to execute, deliver and
          perform its Guaranty in accordance with its terms,  (f) MWP and MWP II
          each has the power and  authority to execute,  deliver and perform the
          Non-Encumbrance  Agreement in accordance with its terms;  (g) Borrower
          is a qualified real estate  investment trust as defined in Section 856
          of the Internal Revenue Code (or any successor  provision thereto) and
          has no  knowledge  of any  circumstance  that is likely to lead to its
          failure to qualify as such a real  estate  investment  trust;  (h) the
          execution,  delivery and  performance  of the Loan  Documents will not
          result in Borrower being disqualified as such a real estate investment
          trust; and (i) Borrower has made and will timely make all filings with
          and obtained all consents of the  Securities  and Exchange  Commission
          required  under the  Securities  Act of 1933 (as amended  from time to
          time) or the  Security  Exchange  Act of 1934 (as amended from time to
          time) in connection  with the execution,  delivery and  performance by
          Borrower of the Loan Documents.

     5.2  Authorization and Approvals.  The execution,  delivery and performance
          of  this  Agreement,  the  borrowings  hereunder  and  the  execution,
          delivery and  performance of the Revolving  Credit Note, the Guaranty,
          the Non-Encumbrance Agreement, and other documents

                                     - 18 -
<PAGE>

          contemplated  hereby (a) have been duly  authorized  by all  requisite
          corporate  action of the Borrower and all  partnership  action of each
          Guarantor and MWP and MWP II, (b) do not require  registration with or
          consent or  approval  of, or other  action by, any  federal,  state or
          other   governmental   authority  or  regulatory  body,  or,  if  such
          registration,  consent  or  approval  is  required,  the same has been
          obtained and  disclosed  in writing to the Bank,  (c) will not violate
          any  provision  of law,  any  order of any  court or other  agency  of
          government,  the Articles of Incorporation and Bylaws of Borrower, the
          partnership certificates and partnership agreements of each Guarantor,
          any provision of any indenture, note, agreement or other instrument to
          which the Borrower is a party, or by which it or any of its properties
          or assets are bound,  (d) will not be in  conflict  with,  result in a
          breach of or constitute  (with or without notice or passage of time) a
          default under any such indenture, note, agreement or other instrument,
          and (e) will not result in the  creation  or  imposition  of any lien,
          charge  or  encumbrance  of  any  nature  whatsoever  upon  any of the
          properties or assets of the Borrower  (other than in favor of the Bank
          and as contemplated hereby) or upon the MWP Pool Properties or the MWP
          II Pool  Properties.  Reference to the  "Borrower" in this Section 5.2
          shall  instead  be  deemed to be  references  to each  Guarantor  with
          respect to the Guaranty.

     5.3  Valid and Binding  Agreement.  This  Agreement  is, and the  Revolving
          Credit Note, and all other documents contemplated hereby will be, when
          delivered,   valid,  binding,  and  enforceable   obligations  of  the
          Borrower, and the Guaranty and the Non-Encumbrance  Agreement will be,
          when delivered,  valid,  binding,  and enforceable  obligations of the
          Guarantors  and of MWP and MWP II,  respectively,  in accordance  with
          their terms.

     5.4  Actions,  Suits  or  Proceedings.  There  are  no  actions,  suits  or
          proceedings,  at  law or in  equity,  and no  proceedings  before  any
          arbitrator or by or before any governmental commission, board, bureau,
          or other administrative agency,  pending, or, to the best knowledge of
          the Borrower, threatened against or affecting the Borrower, any of its
          Subsidiaries  or the  Guarantors  or any  properties  or rights of the
          Borrower,  any  of  its  Subsidiaries  or the  Guarantors,  which,  if
          adversely  determined,  could  materially  impair  the  right  of  the
          Borrower,  any of  its  Subsidiaries  or the  Guarantor  to  carry  on
          business  substantially  as now  conducted  or could  have a  Material
          Adverse  Effect upon the financial  condition of the Borrower,  any of
          its Subsidiaries or the Guarantors.

     5.5  Accounting  Principles.  All  consolidated and  consolidating  balance
          sheets,  earnings statements and other financial data furnished to the
          Bank for the purposes of, or in connection  with,  this  Agreement and
          the transactions contemplated by this Agreement, have been prepared in
          accordance  with GAAP,  and do or will fairly  present  the  financial
          condition of the Borrower, its Subsidiaries and the Guarantors,  as of
          the dates,  and the results of their  operations for the periods,  for
          which  the  same are  furnished  to the  Bank.  Without  limiting  the
          generality  of the  foregoing,  the  Financial  Statements  have  been
          prepared in  accordance  with GAAP (except as  disclosed  therein) and
          fairly   present  the  financial   condition  of  the  Borrower,   its
          Subsidiaries and, if relevant,  the Guarantor as of the dates, and the
          results of its operations for the fiscal  periods,  for which the same
          are  furnished to the Bank.  The  Borrower has no material  contingent
          obligations,  liabilities  for  taxes,  long-term  leases  or  unusual
          forward or long-term commitments not disclosed by, or reserved against
          in, the Financial Statements.

     5.6  Financial Condition.  The Borrower and the Guarantors is each solvent,
          able to pay its debts as they mature,  has capital sufficient to carry
          on its  business  and has assets the fair

                                     - 19 -
<PAGE>

          market value of which exceed its liabilities, and neither the Borrower
          nor   either   of  the   Guarantors   will  be   rendered   insolvent,
          under-capitalized  or unable to pay maturing debts by the execution or
          performance  of this  Agreement,  the  Guaranty,  the  Non-Encumbrance
          Agreement or the other documents  contemplated  hereby. There has been
          no material  adverse  change in the business,  properties or condition
          (financial or otherwise) of the Borrower,  any of its  Subsidiaries or
          the Guarantor since the date of the latest Financial Statements.

     5.7  Conditions  Precedent.  As  of  each  Funding  Date,  all  appropriate
          conditions  precedent  referred  to in  Section  4  hereof  have  been
          satisfied or, alternatively, have been waived in writing by the Bank.

     5.8  Taxes. Borrower, its Subsidiaries and the Guarantors has each filed by
          the due date therefor  (including any extensions)  all federal,  state
          and local tax returns and other reports it is required by law to file,
          has  paid or  caused  to be paid  all  taxes,  assessments  and  other
          governmental  charges that are shown to be due and payable  under such
          returns,  and has made  adequate  provision  for the  payment  of such
          taxes,  assessments or other  governmental  charges which have accrued
          but are not yet payable. The Borrower has no knowledge of any material
          deficiency or assessment in connection with any taxes,  assessments or
          other governmental  charges not adequately  disclosed in the Financial
          Statements.

     5.9  Compliance with Laws.  Borrower,  its  Subsidiaries and the Guarantors
          has each complied with all applicable laws, to the extent that failure
          to comply would materially  interfere with the conduct of the business
          of the Borrower, any of its Subsidiaries or the Guarantor.

     5.10 Indebtedness. Except as disclosed in the Financial Statements or other
          public filings,  neither  Borrower nor any of its Subsidiaries has any
          indebtedness for money borrowed or any direct or indirect  obligations
          under any leases  (whether  or not  required to be  capitalized  under
          GAAP)  or any  agreements  of  guarantee  or  surety  except  for  the
          endorsement  of  negotiable   instruments  by  the  Borrower  and  its
          Subsidiaries  in the  ordinary  course  of  business  for  deposit  or
          collection.

     5.11 Material  Agreements.  Except as disclosed in the Financial Statements
          or other public filings, neither the Borrower, any of its Subsidiaries
          nor the Guarantor has any material leases, contracts or commitments of
          any  kind  (including,  without  limitation,   employment  agreements,
          collective  bargaining  agreements,  powers of attorney,  distribution
          contracts, patent or trademark licenses, contracts for future purchase
          or delivery of goods or  rendering  of  services,  bonus,  pension and
          retirement  plans,  or accrued  vacation  pay,  insurance  and welfare
          agreements);  to the best  knowledge of Borrower,  all parties to such
          agreements have complied with the provisions of such leases, contracts
          or commitments; and to the best knowledge of the Borrower, no party to
          such agreements is in default  thereunder,  nor has there occurred any
          event  which  with  notice  or the  passage  of time,  or both,  would
          constitute such a default.

     5.12 Margin  Stock.  Neither the  Borrower nor any of its  Subsidiaries  is
          engaged  principally,  or as one of its important  activities,  in the
          business of extending credit for the purpose of purchasing or carrying
          any "margin  stock" within the meaning of Regulation U of the Board of
          Governors of the Federal Reserve  System,  and no part of the proceeds
          of any  loan  hereunder  will be  used,  directly  or  indirectly,  to
          purchase or carry any margin  stock or to extend  credit to others for
          the  purpose of  purchasing  or carrying  any margin  stock or for any
          other

                                     - 20 -
<PAGE>

          purpose which might violate the  provisions of Regulation G, T, U or X
          of the said Board of  Governors.  The Borrower does not own any margin
          stock.

     5.13 Pension Funding. Neither the Borrower, any of its Subsidiaries nor the
          Guarantor has incurred any accumulated  funding  deficiency within the
          meaning of ERISA or incurred any  liability to the PBGC in  connection
          with any  employee  benefit  plan  established  or  maintained  by the
          Borrower,  any of its Subsidiaries or the Guarantors and no reportable
          event or  prohibited  transaction,  as defined in ERISA,  has occurred
          with respect to such plans.

     5.14 Misrepresentation.  No  warranty  or  representation  by the  Borrower
          contained herein or in any certificate or other document  furnished by
          the Borrower pursuant hereto contains any untrue statement of material
          fact or omits to state a material fact necessary to make such warranty
          or representation  not misleading in light of the circumstances  under
          which  it was  made.  There  is no fact  which  the  Borrower  has not
          disclosed  to the  Bank in  writing  which  materially  and  adversely
          affects  nor, so far as the  Borrower  can now  foresee,  is likely to
          prove to affect  materially  and adversely  the business,  operations,
          properties,  prospects,  profits or condition (financial or otherwise)
          of the Borrower,  any of its  Subsidiaries or the Guarantor or ability
          of the  Borrower  to  perform  this  Agreement  or the  ability of the
          Guarantor to perform the Guaranty.

     5.15 Shares and  Shareholders.  As of May 14,  2002 the  Borrower's  entire
          issued and outstanding  capital stock consists of 17,463,329 shares of
          common stock,  $.001 par value. All currently owned  Subsidiaries,  if
          any,  are set forth in  Exhibit 21 in  Borrower's  SEC Form 10-K dated
          March 25, 2002 along with the  percentage  of the  outstanding  voting
          stock owned by the Borrower or by a Subsidiary (and  identifying  that
          Subsidiary).

     5.16 No  Conflicting   Agreements.   Neither  the  Borrower,   any  of  its
          Subsidiaries  nor the  Guarantors is in default under any  shareholder
          agreement,  preferred  stock agreement or any other agreement to which
          it is a party or by  which it or any of its  property  is  bound,  the
          effect of which might have a Material  Adverse  Effect on the business
          or  operations  of  the  Borrower,  any  of  its  Subsidiaries  or the
          Guarantor. No provision of the Certificate of Incorporation,  Articles
          of Incorporation, By-Laws or preferred stock, if any, of the Borrower,
          and no provision of any existing mortgage,  indenture, note, contract,
          agreement,  statute  (including,  without  limitation,  any applicable
          usury or similar law),  rule,  regulation,  judgment,  decree or order
          binding on the  Borrower or  affecting  the  property of the  Borrower
          conflicts  with,  or requires any consent  under,  or would in any way
          prevent the execution,  delivery or carrying out of the terms of, this
          Agreement and the documents contemplated hereby, and the taking of any
          such  action will not  constitute  a default  under,  or result in the
          creation or  imposition  of, or obligation to create any lien upon the
          property of the Borrower  pursuant to the terms of any such  mortgage,
          indenture, note, contract or agreement.

     5.17 Hazardous Materials.

          (a)  The  Borrower  has  not  used  Hazardous  Materials  (as  defined
               hereinafter)  on or affecting any of the MWP I Pool Properties or
               MWP II Pool Properties  (collectively  and singly the "premises")
               in any  manner  which  violates  federal,  state or  local  laws,
               ordinances,  statutes,  rules, regulations or judgments governing
               the   use,    storage,    treatment,    handling,    manufacture,
               transportation,    or    disposal    of    Hazardous    Materials
               ("Environmental  Laws"),  and

                                     - 21 -

<PAGE>

               that, to the best of the Borrower's knowledge,  no prior owner of
               the premises or any current or prior  occupant has used Hazardous
               Materials  on or  affecting  the  premises  in any  manner  which
               violates  Environmental  Laws. The Borrower  covenants and agrees
               that it shall not use,  introduce  or maintain  and shall use its
               best efforts to ensure that any occupant shall not use, introduce
               or maintain  Hazardous  Materials  on the  premises in any manner
               unless done in strict compliance with all Environmental Laws.

          (b)  The  Borrower  shall  conduct and  complete  all  investigations,
               studies, sampling and testing, and al remedial, removal and other
               actions necessary to clean up and remove all Hazardous  Materials
               on or affecting the premises, whether caused by the Borrower or a
               third party,  in accordance  with all  Environmental  Laws and as
               required by orders and  directives  of all  federal,  state,  and
               local governmental authorities.  Additionally, the Borrower shall
               defend,  indemnify  and hold  harmless the Bank,  its  employees,
               agents,  officers  and  directors,  from and  against any and all
               claims,  demands,  penalties,  fines,  liabilities,  settlements,
               damages, costs or expenses of whatever kind or nature arising out
               of  or  related  to  (1)  the  presence,   disposal,  release  or
               threatened  release  of  any  Hazardous  Materials  on,  from  or
               affecting the premises or the soil, water, vegetation, buildings,
               personal property,  persons or animals thereon,  (2) any personal
               injury  (including  wrongful  death) or property  damage (real or
               personal) arising out of or related to such Hazardous  Materials,
               (3) any  lawsuit  brought or  threatened,  settlement  reached or
               governmental order relating to such Hazardous Materials,  (4) the
               cost of removal of all such  Hazardous  Materials from all or any
               portions of the premises,  (5) taking  necessary  precautions  to
               protect  against  the  release  of  Hazardous   Materials  on  or
               affecting the premises, (6) complying with all Environmental Laws
               and/or (7) any violation of  Environmental  Laws, which are based
               upon or in any way related to such Hazardous Materials including,
               without  limitation,   attorney's  and  consultant's  fees  (said
               attorneys   and   consultants   to  be  selected  by  the  Bank),
               investigation and laboratory fees, environmental studies required
               by the Bank (whether prior to  foreclosure  or otherwise),  court
               costs and litigation expenses.

          (c)  To the best of its knowledge, the Borrower has never received any
               notice   ("Environmental   Complaint")   of  any   violations  of
               Environmental  Laws  (and,  within  five days of  receipt  of any
               Environmental  Complaint the Borrower  shall give the Bank a copy
               thereof), and to the best of the Borrower's knowledge, there have
               been  no  actions  commenced  or  threatened  by  any  party  for
               noncompliance with any Environmental Laws.

          (d)  Upon  ten  (10)  days'  notice  to  the  Borrower  (except  in an
               emergency),  without  limiting the Bank's other rights under this
               Agreement or  elsewhere,  the Bank shall have the right,  but not
               the  obligation,  to enter on the  premises or to take such other
               actions as it deems  appropriate to clean up, remove,  resolve or
               minimize the impact of any  Hazardous  Material or  Environmental
               Complaint  upon  the  Bank's  receipt  of  any  notice  from  any
               governmental  or reliable  source  asserting the existence of any
               Hazardous  Material or an Environmental  Complaint  pertaining to
               the premises  which, if true,  could result in an order,  suit or
               other action against the Borrower and/or any part of the premises
               which,  in the sole  opinion of the Bank,  could  jeopardize  its
               rights  under this  Agreement or any related  document.  The Bank
               agrees that,  if, prior to the  expiration  of the ten (10) days'
               notice given by the Bank under this  subsection,  Borrower  gives
               notice to the Bank of its desire to replace  the  property  as to
               which  notice  was given  with  other  property  pursuant  to and
               subject to the terms of the Non-Encumbrance  Agreement,  the Bank
               agrees (except in an emergency) to wait an additional thirty (30)
               days after expiration of any such ten (10) day period to take the
               actions  authorized by this subsection.  All

                                     - 22 -
<PAGE>

               reasonable  costs  and  expenses  incurred  by  the  Bank  in the
               exercise of any such rights  shall be payable by the  Borrower to
               Bank upon demand.

          (e)  The  provisions  of this section  shall be in addition to any and
               all other  obligations  and  liabilities the Borrower may have to
               the Bank at common law or  pursuant to any other  agreement  and,
               notwithstanding  anything in Section 9.15 hereof to the contrary,
               shall  survive (i) the  repayment  of all sums due under the Note
               and the other loan documents executed in connection  herewith and
               the   repayment   of  all  other   Indebtedness,   and  (ii)  the
               satisfaction  of all of the  other  obligations  of the  Borrower
               hereunder and under the other loan documents.

          (f)  "Hazardous   Materials"   including,   without  limitation,   any
               flammable explosives, radioactive materials, hazardous materials,
               hazardous  wastes,  hazardous  or  toxic  substances  or  related
               materials  defined in the Comprehensive  Environmental  Response,
               Compensation  and  Liability  Act of 1980,  as amended (42 U.S.C.
               Sections 9601, et seq.). the Hazardous  Materials  Transportation
               Act, as amended (49 U.S.C.  Section 1801, et seq.),  the Resource
               Conservation  and  Recovery  Act, as amended (42 U.S.C.  Sections
               6901, et seq.) and in the  regulations  adopted and  publications
               promulgated  pursuant  thereto,  or any other  federal,  state or
               local governmental law, ordinance, rule, or regulation.

6.   Affirmative  Covenants.  On a  continuing  basis  from  the  date  of  this
     Agreement  until the later of (a) the  Termination  Date or (b) the date on
     which the  Indebtedness  is paid in full and the Borrower has performed all
     of its other obligations hereunder,  the Borrower covenants and agrees that
     it will:

     6.1  Financial and Other  Information.  Borrower shall maintain or cause to
          be maintained a system of accounting  established and  administered in
          accordance  with sound  business  practices and  consistent  with past
          practice  to permit  preparation  of  quarterly  and annual  financial
          statements  in  conformity  with GAAP,  and Borrower  shall deliver or
          cause  to be  delivered  to  Bank  the  following  information  and/or
          documents:

          6.1.1Annual Financial Reports. As soon as practicable and in any event
               within  ninety  (90) days after the close of each  fiscal year of
               the Borrower,  furnish to the Bank a copy of Borrower's  SEC Form
               10-K filed or to be filed by  Borrower  with the  Securities  and
               Exchange  Commission  or, if such  statement is not available for
               any  reason,   financial   statements   of  the   Borrower  on  a
               consolidated  basis  containing the balance sheet of the Borrower
               as of the close of such  fiscal  year,  statements  of income and
               retained  earnings  and a  statement  of cash flows for each such
               fiscal year, and such other comments and financial details as are
               usually  included in SEC Form 10-K and  certified  by  Borrower's
               chief financial officer or chief accounting officer. Such reports
               shall  be  prepared  in  accordance   with  GAAP  by  independent
               certified public  accountants of recognized  standing selected by
               the Borrower  and shall  contain  unqualified  opinions as to the
               fairness of the statements therein contained. 1.1.1

          6.1.2Quarterly Financial Statements. As soon as practicable and in any
               event within  forty-five (45) days after the close of each Fiscal
               Quarter of each  fiscal year of the  Borrower,  furnish to Bank a
               copy of Borrower's SEC Form 10-Q filed or to be filed by Borrower
               with the Securities and Exchange Commission or, if such statement
               is not  available  for any reason,  financial  statements  of the
               Borrower on a consolidated  basis containing the balance sheet of
               the  Borrower as of the end of each such  period,  statements  of
               income and  retained  earnings of

                                     - 23 -
<PAGE>

               the  Borrower  and a statement  of cash flows of the Borrower for
               the portion of the fiscal year up to the end of such period,  and
               such other comments and financial details as are usually included
               in SEC Form 10-Q and  certified  by  Borrower's  chief  financial
               officer or chief  accounting  officer.  These statements shall be
               prepared in  accordance  with GAAP and shall be in such detail as
               the  Bank  may  reasonably  require,  and  the  accuracy  of  the
               statements shall be certified by the chief executive or financial
               officer of the Borrower.

          6.1.3Adverse  Events;  Litigation.  Promptly  inform  the  Bank of the
               occurrence  of any Default or Event of  Default,  or of any other
               occurrence  which has or could  reasonably  be expected to have a
               Materially Adverse Effect upon the Borrower or any Guarantor,  or
               upon  any of  Borrower's  Subsidiaries,  or upon  the  Borrower's
               ability to comply with its obligations hereunder.  Borrower shall
               promptly  inform Bank in writing upon obtaining  knowledge of (i)
               the   institution   of,  or  threat  of,  any  material   action,
               proceeding,  governmental investigation or arbitration against or
               affecting  Borrower or any Guarantor not previously  disclosed by
               Borrower  in writing to Bank,  including  but not  limited to any
               eminent domain or other condemnation proceedings affecting any of
               the MWP Pool Properties or any of the MWP II Pool Properties,  or
               (ii) any material  development in any action,  suit,  proceeding,
               governmental  investigation  or  arbitration  already  disclosed,
               which has a Material  Adverse Affect on Borrower or any Guarantor
               or any of the MWP Pool Properties or the MWP II Pool  Properties,
               and shall provide such information as Bank may reasonably request
               to enable Bank and its counsel to evaluate such matters.

          6.1.4Shareholder  Reports.  Promptly furnish to the Bank upon becoming
               available a copy of all financial statements,  reports,  notices,
               proxy statements and other communications sent by the Borrower or
               any of its  Subsidiaries to their  stockholders,  and all regular
               and  periodic  reports  filed  by  the  Borrower  or  any  of its
               Subsidiaries  with any  securities  exchange,  the Securities and
               Exchange  Commission,  the Corporations and Securities  Bureau of
               the Department of Corporations of the State of California or like
               agency for the State of Maryland or any governmental  authorities
               succeeding to any or all of the  functions of such  Commission or
               Bureau.

          6.1.5Management  Letters.  Furnish to the Bank,  promptly upon receipt
               thereof,  copies of all  management  letters and other reports of
               substance submitted to the Borrower or any of its Subsidiaries by
               independent  certified public  accountants in connection with any
               annual or interim audit of the financial  records of the Borrower
               or any of its Subsidiaries.

          6.1.6Other Information As Requested. Promptly furnish to the Bank such
               other information regarding the operations,  business affairs and
               financial  condition of the Borrower and its  Subsidiaries as the
               Bank may  reasonably  request from time to time including but not
               limited to all such information  necessary to determine Value and
               Value (Borrower Aggregate) as those terms are defined herein, and
               permit the Bank, its employees,  attorneys and agents, to inspect
               all of the books,  records and properties of the Borrower and its
               Subsidiaries at any reasonable time.

     6.2  Insurance.  Keep its insurable properties and the insurable properties
          of its  Subsidiaries  adequately  insured and maintain  (a)  insurance
          against  fire and other risks  customarily  insured  against  under an
          "all-risk"  policy  and  such  additional  risks  customarily  insured
          against by companies engaged in the same or a similar business to that
          of the Borrower or its Subsidiaries, as the case may be, (b) necessary
          worker's  compensation  insurance,

                                     - 24 -
<PAGE>

          (c) public  liability and product  liability  insurance,  and (d) such
          other  insurance  as may be  required  by law or as may be  reasonably
          required in writing by the Bank,  all of which  insurance  shall be in
          such amounts,  containing such terms, in such form, for such purposes,
          prepaid for such time period,  and written by such companies as may be
          satisfactory  to the Bank.  Notwithstanding  anything to the  contrary
          herein,  Borrower  is  not  required,  unless  otherwise  required  by
          applicable   law,  to  maintain   earthquake  or  flood  or  terrorist
          insurance.  All such policies  shall contain a provision  whereby they
          may not be  canceled  or amended  except  upon thirty (30) days' prior
          written notice to the Bank. The Borrower will promptly  deliver to the
          Bank, at the Bank's  request,  evidence  satisfactory to the Bank that
          such  insurance  has been so procured  and,  with  respect to casualty
          insurance  relating  to  the  MWP  Pool  Properties  or  MWP  II  Pool
          Properties,  made  payable  to the  Bank.  If the  Borrower  fails  to
          maintain  satisfactory  insurance as herein  provided,  the Bank shall
          have the  option to do so, and the  Borrower  agrees to repay the Bank
          upon  demand,  with  interest  at the  Variable  Rate,  all amounts so
          expended by the Bank. As to the MWP Pool Properties and/or MWP II Pool
          Properties,  the Borrower  hereby appoints the Bank or any employee or
          agent  of  the  Bank  as  the   Borrower's   attorney-in-fact,   which
          appointment  is  coupled  with  an  interest  and   irrevocable,   and
          authorizes the Bank or any employee or agent of the Bank, on behalf of
          the Borrower,  to adjust and  compromise any loss under said insurance
          and  to  endorse  any  check  or  draft  payable  to the  Borrower  in
          connection with returned or unearned premiums on said insurance or the
          proceeds of said insurance, and any amount so collected may be applied
          toward satisfaction of the Indebtedness,  provided,  however, that the
          Bank shall not be required hereunder so to act.

     6.3  Taxes.  Pay promptly and within the time that they can be paid without
          late charge,  penalty or interest all taxes,  assessments  and similar
          imposts and charges of every kind and nature lawfully levied, assessed
          or imposed upon the Borrower or its Subsidiaries,  and their property,
          except to the extent  being  contested in good faith and, if requested
          by the Bank, bonded in an amount and manner  satisfactory to the Bank.
          If, as to the MWP Pool Properties  and/or MWP II Pool Properties,  the
          Borrower shall fail to pay such taxes and assessments  within the time
          they can be paid  without  penalty,  late charge or interest  the Bank
          shall have the option to do so, and the  Borrower  agrees to repay the
          Bank upon demand,  with interest at the Variable  Rate, all amounts so
          expended by the Bank.

     6.4  Maintain  Corporation and Business.  Do or cause to be done all things
          necessary to preserve and keep in full force and effect the Borrower's
          and  each  of  its  Subsidiaries'  corporate  existence,   rights  and
          franchises  and comply with all  applicable  laws;  maintain  its good
          standing  in all states  and  jurisdictions  in which it is  currently
          authorized  to conduct  business;  continue to conduct and operate its
          and each of its Subsidiaries'  business substantially as conducted and
          operated during the present and preceding  calendar year; at all times
          maintain,  preserve  and  protect all  franchises  and trade names and
          preserve all the remainder of its and its  Subsidiaries'  property and
          keep the same in good repair,  working order and  condition;  and from
          time to time make, or cause to be made, all needed and proper repairs,
          renewals,  replacements,  betterments and improvements thereto so that
          the business  carried on in  connection  therewith may be properly and
          advantageously conducted at all times.

     6.5  Continued Status as a REIT;  Prohibited  Transactions.  Borrower will:
          (i)  continue  to be a real  estate  investment  trust as  defined  in
          Section 856 of the Internal  Revenue Code (or any successor  provision
          thereto),  (ii)  will not  revoke  its  election  to be a real  estate
          investment   trust;   (iii)  will  not   engage  in  any   "prohibited
          transactions"  as defined in Section  857(b) of the

                                     - 25 -
<PAGE>

          Internal  Revenue Code (or any successor  provision  thereto) that the
          Bank reasonably believes could lead to Borrower's  disqualification as
          a real  estate  investment  trust as  defined  in  Section  856 of the
          Internal Revenue Code (or any successor provision thereto);  (iv) will
          continue  to be  entitled  to a dividend  paid  deduction  meeting the
          requirements  of Section 857 of the Internal  Revenue  Code;  and will
          otherwise  comply with all  provisions  and  requirements  of Internal
          Revenue  Code  Sections  856  and  857 to  maintain  its  real  estate
          investment trust status under Section 856.

     6.6  Failure  of  Borrower  to  Qualify as Real  Estate  Investment  Trust.
          Borrower  shall  promptly  inform  Bank in  writing,  and in any event
          within forty eight (48) hours after Borrower has actual knowledge,  of
          the following  circumstances  or occurrences:  (i) Borrower failing to
          continue  to qualify as a real estate  investment  trust as defined in
          Section 856 of the Internal  Revenue Code (or any successor  provision
          thereof);  (ii) any act by  Borrower  causing  or which will cause its
          election  to  be  taxed  as a  real  estate  investment  trust  to  be
          terminated;  (iii) any act causing Borrower to be subject to the taxes
          imposed by Section  857(b)(6)  of the  Internal  Revenue  Code (or any
          successor provision thereto),  or (iv) Borrower failing to be entitled
          to a dividends paid deduction which meets the  requirements of Section
          857 of the Internal Revenue Code.

     6.7  AMEX Listed  Company.  The common stock of Borrower shall at all times
          be listed for trading and be traded on the American  Stock Exchange or
          any alternative recognized stock exchange.

     6.8  Compliance With Securities Laws. Borrower shall comply in all material
          respects with all rules and regulations  with the Securities  Exchange
          Commission and file all reports  required by the  Securities  Exchange
          Commission relating to Borrower's publicly held securities.

     6.9  Maintain Minimum Tangible Net Worth. On a consolidated basis, Borrower
          shall  maintain a Minimum  Tangible  Net Worth of not less than Eighty
          Million Dollars ($80,000,000.00), not including minority interests.

     6.10 Maintain  Debt  Service  Coverage  Ratio.  On  a  consolidated  basis,
          maintain a Debt Service Coverage Ratio of at least 2.90 to 1.00.

     6.11 Maintain Interest Coverage Ratio. On a consolidated basis, maintain an
          Interest Coverage Ratio of at least 3.35 to 1.00.

     6.12 Maintain  Operating  Accounts and Minimum Balance in Deposit Accounts.
          Borrower  shall  maintain all of its operating  accounts with Bank. At
          all times  hereunder,  there shall be a combined average daily minimum
          balance  of at  least  One  Million  Dollars  ($1,000,000.00)  in  the
          non-interest  bearing deposit account of Borrower  (Cupertino National
          Bank account no. 1141422) (the "Borrower's Deposit Account").

     6.13 ERISA.  (a) At all times  meet and cause each of the  Subsidiaries  to
          meet the minimum  funding  requirements  of ERISA with  respect to the
          Borrower's and Subsidiaries'  employee benefit plans subject to ERISA;
          (b) promptly after the Borrower knows or has reason to know (i) of the
          occurrence  of any event,  which would  constitute a reportable  event
          instituted  or will  institute  proceedings  to  terminate an employee
          pension plan, deliver to the Bank a

                                     - 26 -
<PAGE>

          certificate  of the chief  financial  officer of the Borrower  setting
          forth details as to such event or proceedings and the action which the
          Borrower  proposes to take with respect thereto,  together with a copy
          of any notice of such event which may be required to be filed with the
          PBGC; and (c) furnish to the Bank (or cause the plan  administrator to
          furnish the Bank) a copy of the annual return (including all schedules
          and  attachments)  for each plan covered by ERISA,  and filed with the
          Internal  Revenue Service by the Borrower not later than ten (10) days
          after such report has been so filed.

     6.14 Use  of  Loan  Proceeds.  Use  the  proceeds  of the  Revolving  Loans
          hereunder  only for the  purposes  set forth in the  recitals  to this
          Agreement  and, as to each Revolving Loan made pursuant to a Notice of
          Borrowing, as set forth in such Notice of Borrowing.

7.   Negative Covenants.

     On a continuing  basis from the date of this  Agreement  until the later of
     (a) the Termination  Date or (b) the date on which the Indebtedness is paid
     in  full  and the  Borrower  has  performed  all of its  other  obligations
     hereunder, the Borrower covenants and agrees that it will not, and will not
     permit any Subsidiary to:

     7.1  Stock Acquisition.  Purchase,  redeem, retire or otherwise acquire any
          of the shares of its capital stock, or make any commitment to do so.

     7.2  Indebtedness   (Maximum   Borrower   Aggregate    Loan-to-Value)   and
          Loan-to-Value  of MWP  Pool  Properties  and MWP II  Pool  Properties.
          Permit the Total Loans of Borrower to exceed  fifty  percent  (50%) of
          Value (Borrower  Aggregate) or permit the Commitment  Amount to exceed
          fifty  percent  (50%)  of the  total  combined  Value  of the MWP Pool
          Properties and the MWP II Pool Properties

     7.3  Extension of Credit.  Make loans,  advances or extensions of credit to
          any  Person,  except for sales on open  account and  otherwise  in the
          ordinary course of business.

     7.4  Subordinate Indebtedness. Subordinate any indebtedness due to Borrower
          from a Person to indebtedness or other creditors of such Person.

     7.5  Property  Transfer,  Merger  or  Lease-Back.  (a)  Sell,  transfer  or
          otherwise  dispose of properties  and assets having an aggregate  book
          value   of   more   than   Three   Hundred   Fifty   Million   Dollars
          ($350,000,000.00)  (whether  in  one  transaction  or in a  series  of
          transactions)  except  as to the  sale of  inventory  in the  ordinary
          course of  business;  (b) change its name,  consolidate  with or merge
          into any other  corporation or entity,  permit another  corporation or
          entity  to  merge   into  it,   enter  into  any   reorganization   or
          recapitalization  or reclassify its capital  stock,  or (c) enter into
          any sale-leaseback transaction where Borrower is lessee.

     7.6  Pension Plan. (a) Allow any fact, condition or event to occur or exist
          with  respect  to  any  employee   pension  or  profit  sharing  plans
          established  or  maintained by it which might  constitute  grounds for
          termination of any such plan or for the court appointment of a trustee
          to  administer  any such  plan,  or (b) permit any such plan to be the
          subject of termination  proceedings (whether voluntary or involuntary)
          from which termination proceedings there may result a liability of the
          Borrower or any of its  Subsidiaries to the PBGC which, in the opinion
          of

                                     - 27 -
<PAGE>

          the Bank,  will have a materially  adverse effect upon the operations,
          business,  property,  assets,  financial  condition  or  credit of the
          Borrower or any of its Subsidiaries.

     7.7  Misrepresentation.  Furnish  the Bank  with any  certificate  or other
          document  that  contains any untrue  statement  of a material  fact or
          omits to state a material fact  necessary to make such  certificate or
          document not misleading in light of the  circumstances  under which it
          was furnished.

     7.8  Margin Stock.  Apply any of the proceeds of the Note or of any loan in
          any  manner  which  might  cause  the   extension  of  credit  or  the
          application  of such proceeds to violate  Regulation G, U or X (or any
          regulations,  interpretations  or  rulings  thereunder)  or any  other
          regulation of the Federal  Reserve Board or to violate the  Securities
          Exchange  Act of 1934 (as  amended to the date hereof and from time to
          time  hereafter) or the Securities Act of 1933 (as amended to the date
          hereof and from time to time hereafter).

     7.9  Amendment of Constituent Documents.  Amend or re-state its articles of
          incorporation  or by-laws  without the prior written  consent of Bank,
          except  (i) to  increase  authorized  capital,  (ii)  as  required  by
          applicable law or applicable tax requirements,  or (iii) as prudent to
          maintain qualification as a real estate investment trust as defined in
          Section 856 of the Internal  Revenue Code or any  successor  provision
          thereto.

     7.10 Organization  of Borrower.  Cease to remain a Maryland  corporation or
          cease to  maintain  its  position,  interests  and  status as  General
          Partner of MWP and MWP II.

8.   Events of Default, Enforcement, Application of Proceeds

     8.1  Events of Default.  The occurrence of any of the following  conditions
          or events shall  constitute  an Event of Default  hereunder if either:
          (i) the condition or event is  continuing  for more than ten (10) days
          after the Bank sends written notice thereof,  or (ii) the condition or
          event is reasonably  deemed by the Bank to require immediate action to
          protect its rights hereunder:

          8.1.1Failure to Pay Monies  Due.  If the  Borrower  shall fail to pay,
               when due,  any  principal or interest or other sums due under the
               Revolving  Credit Note or this Agreement or any taxes,  insurance
               or other amount  payable by the Borrower  under this Agreement or
               if the Borrower,  any of its  Subsidiaries or the Guarantor shall
               fail to pay, when due, any indebtedness,  obligation or liability
               whatsoever  of  the  Borrower,  any of  its  Subsidiaries  or the
               Guarantor to the Bank.

          8.1.2Breach  of  Covenants.  If  Borrower  shall  fail to  satisfy  or
               perform any of the covenants in this Agreement  including without
               limitation Section 6 and Section 7.

          8.1.3Defaults  Under the  Guaranty.  If  Guarantors  or either of them
               shall  fail to  perform  or  observe  or  purport  to  revoke  or
               terminate  any  agreement,  covenant,  or  obligation  under  the
               Guaranty;  or any representation or warranty made or deemed to be
               made  by any  such  Guarantor  in  any  Loan  Document  or in any
               statement,  certificate or financial  statement or information of
               any kind at any time given by such Guarantor pursuant to any Loan
               Document to Bank, shall be false,  incorrect or misleading in any
               material respect as of the date made.

                                     - 28 -

<PAGE>


          8.1.4Defaults Under the Non-Encumbrance  Agreement.  If Borrower,  MWP
               or MWP II or either of them shall fail to perform or observe  any
               agreement,  covenant,  or  obligation  under the  Non-Encumbrance
               Agreement; or any representation or warranty made or deemed to be
               made by  Borrower,  MWP or MWP II in any Loan  Document or in any
               statement,  certificate or financial  statement or information of
               any kind at any time given by MWP or MWP II  pursuant to any Loan
               Document to Bank, shall be false,  incorrect or misleading in any
               material respect as of the date made.

          8.1.5Misrepresentation.  If  any  warranty  or  representation  of the
               Borrower in connection with or contained in this Agreement or any
               Loan Document,  or if any financial data or other information now
               or  hereafter  furnished  to  the  Bank  by or on  behalf  of the
               Borrower, shall prove to be false, incorrect or misleading in any
               material respect.

          8.1.6Solvency;  Material Adverse Change.  If Borrower or any Guarantor
               shall  cease to be  Solvent,  or there  shall have  occurred  any
               Material Adverse Effect in the business, operations,  properties,
               assets or condition  (financial  or otherwise) of Borrower or any
               Guarantor.

          8.1.7Other Defaults.  If the Borrower,  any of its Subsidiaries or the
               Guarantor  shall  default in the  payment  when due of any of its
               indebtedness  (other  than to the Bank) or in the  observance  or
               performance  of any term,  covenant or condition in any agreement
               or   instrument   evidencing,   securing   or  relating  to  such
               indebtedness,   and  such  default  be  continued  for  a  period
               sufficient   to   permit   acceleration   of  the   indebtedness,
               irrespective of whether there has been acceleration by the holder
               thereof.  Notwithstanding the foregoing, such a default shall not
               constitute  an Event of Default  hereunder if all persons to whom
               the  indebtedness is owed has fully and completely and in writing
               waived  the  default.  In  addition,  if  a  default  occurs  and
               continues to exist on an  indebtedness  of the  Borrower  that is
               secured  by  real  property  and  is  fully  non-recourse  to the
               Borrower,  such  default may not  represent a default  under this
               agreement  if  Bank,  it its  sole  discretion,  determines  that
               Borrower  is in  compliance  and can  maintain  compliance  going
               forward with all the financial covenants of this Agreement.

          8.1.8Judgments.  If there shall be rendered against the Borrower,  any
               of its  Subsidiaries  or the Guarantor  one or more  judgments or
               decrees involving an aggregate  liability of Five Million Dollars
               ($5,000,000.00) or more, which has or have become  non-appealable
               and shall  remain  undischarged,  unsatisfied  by  insurance  and
               unstayed  for  more  than  thirty  (30)  days,   whether  or  not
               consecutive;  or if a writ of attachment or  garnishment  against
               the  property of the  Borrower,  any of its  Subsidiaries  or the
               Guarantor  shall be issued and levied in an action  claiming Five
               Million  Dollars  ($5,000,000.00)  or more  and not  released  or
               appealed and bonded in an amount and manner  satisfactory  to the
               Bank within twenty-five (25) days after such issuance and levy.

          8.1.9Business Suspension, Bankruptcy, Etc. If the Borrower, any of its
               Subsidiaries   or  the  Guarantor   shall   voluntarily   suspend
               transaction  of  its  business;  or if the  Borrower,  any of its
               Subsidiaries  or the  Guarantor  shall  not pay its debts as they
               mature or shall  make a general  assignment  for the  benefit  of
               creditors, or proceedings in bankruptcy, or for reorganization or
               liquidation of the Borrower, any of its Subsidiaries or the

                                     - 29 -

<PAGE>

               Guarantor  under the Bankruptcy  Code or under any other state or
               federal law for the relief of debtors shall be commenced or shall
               be commenced against the Borrower, any of its Subsidiaries or the
               Guarantor and shall not be  discharged  within  twenty-five  (25)
               days of commencement;  or a receiver,  trustee or custodian shall
               be appointed for the  Borrower,  any of its  Subsidiaries  or the
               Guarantor  or for any  substantial  portion  of their  respective
               properties or assets.

          8.1.10Change  of  Management   or  Ownership.   If the  Borrower  or a
               controlling  portion of its voting stock or a substantial portion
               of its assets comes under the practical,  beneficial or effective
               control of one or more persons  other than Carl Berg,  whether by
               reason of death, merger, consolidation, sale or purchase of stock
               or assets or otherwise;  and Ray Marino, who is the President and
               COO of the  Borrower,  shall no longer  remain  in such  offices,
               whether by reason of death,  resignation  or  otherwise;  and any
               such change of control or office holder may adversely  affect, in
               the sole  judgment of the Bank,  the  ability of the  Borrower to
               carry on its business as conducted before such change.

          8.1.11Inadequate  Funding or Termination of  Employee Benefit Plan(s).
               If the Borrower,  any of its  Subsidiaries or the Guarantor shall
               fail to meet its minimum  funding  requirements  under ERISA with
               respect to any employee benefit plan established or maintained by
               it,  or  if  any  such  plan  shall  be  subject  of  termination
               proceedings  (whether  voluntary or involuntary)  and there shall
               result from such termination proceedings a liability of Borrower,
               any of its Subsidiaries or the guarantor to the PBGC which in the
               opinion of the Bank will have a  materially  adverse  effect upon
               the operations, business, property, assets financial condition or
               credit of the Borrower, any of its Subsidiaries or the Guarantor,
               as the case may be.

          8.1.12Occurrence of Certain  Reportable Events.  If there shall occur,
               with respect to any pension plan maintained by the Borrower,  any
               of its Subsidiaries or the Guarantor any reportable event (within
               the  meaning  of Section  4043(b) of ERISA)  which the Bank shall
               determine  constitutes a ground for the  termination  of any such
               plan, and if such event  continues for thirty (30) days after the
               Bank  gives  written  notice  to  the  Borrower,   provided  that
               termination of such plan or appointment of such trustee would, in
               the opinion of the Bank,  have a materially  adverse  effect upon
               the operations,  business,  property, assets, financial condition
               or  credit  of  the  Borrower,  any of  its  Subsidiaries  or the
               Guarantor, as the case may be.

     8.2  Acceleration  of  Indebtedness;  Remedies.  Upon the  occurrence of an
          Event of Default, at the Bank's option, the Bank shall have no further
          obligation  to advance  funds to  Borrower  and the  Commitment  shall
          terminate.   Upon  the   occurrence  of  an  Event  of  Default,   all
          Indebtedness  shall  be due and  payable  in full  immediately  at the
          option of the Bank without presentation,  demand,  protest,  notice of
          dishonor  or  other  notice  of any  kind,  all of  which  are  hereby
          expressly waived. Upon the occurrence of an Event of Default, the Bank
          shall have and may exercise any one or more of the rights and remedies
          for which  provision  is made  hereunder  or under any other  document
          contemplated  hereby or for which  provision  is provided by law or in
          equity,  including,  without limitation,  the right to set off against
          the  Indebtedness  any amount owing by the Bank to the Borrower and/or
          any property of the Borrower in  possession  of the Bank.  Any amounts
          collected by the Bank after an Event of Default may be applied, at the
          Bank's  option  and  in  any  order  against  outstanding   principal,
          interest, fees and/or costs.

     8.3  Cumulative  Remedies.  The remedies provided for herein are cumulative
          to the remedies for collection of the Indebtedness as provided by law,
          in equity  or by any  document  contemplated  hereby.  Nothing  herein
          contained is intended, nor shall it be construed, to


                                     - 30 -
<PAGE>

          preclude  the Bank from  pursuing any other remedy for the recovery of
          any  other sum to which  the Bank may be or  become  entitled  for the
          breach of this Agreement by the Borrower.

9.   Miscellaneous.

     9.1  Effectiveness. This Agreement shall become effective when Borrower and
          Bank  have  duly  executed  and  delivered  signature  pages  of  this
          Agreement  to each  other,  and  Borrower  has  delivered  a  Guaranty
          executed by each Guarantor, and the Non-Encumbrance Agreement executed
          by MWP and MWP II.

     9.2  Independent  Rights. No single or partial exercise of any right, power
          or privilege  hereunder,  or any delay in the exercise thereof,  shall
          preclude  other or further  exercise  of the rights of the  parties to
          this Agreement.

     9.3  Covenant Independence. Each covenant in this Agreement shall be deemed
          to  be  independent  of  any  other  covenant,  and  an  exception  or
          illegality of one covenant shall not create an exception or illegality
          in another covenant.

     9.4  Waivers and Amendments. No forbearance,  delay or omission on the part
          of the Bank in enforcing any of its rights under this Agreement or any
          of the Loan Documents, nor any renewal,  extension or rearrangement of
          any  payment  or  covenant  to be made or  performed  by the  Borrower
          hereunder,  shall constitute or be construed as a waiver of any of the
          terms of, or remedies of Bank under, this Agreement or any of the Loan
          Documents or of any such right.  No Default or Event of Default  shall
          be waived by the Bank except in a writing  signed and  delivered by an
          officer  of the Bank,  and no waiver of any other  Default or Event of
          Default  shall  operate as a waiver of any Default or Event of Default
          or of the same  Default or Event of Default on a future  occasion.  No
          other  amendment,  modification  or waiver of, or consent with respect
          to,  any  provision  of this  Agreement  or the Note or any other Loan
          Documents contemplated hereby shall be effective unless the same shall
          be in writing and signed and delivered by a duly authorized officer of
          the Bank and the President and CEO of the Borrower.

     9.5  Governing Law. This  Agreement,  and each and every term and provision
          hereof,  shall be governed by and  construed  in  accordance  with the
          internal law of the State of  California.  If any  provisions  of this
          Agreement shall for any reason be held invalid or unenforceable,  such
          invalidity or  unenforceability  shall not affect any other  provision
          hereof,  but this  Agreement  shall be construed as if such invalid or
          unenforceable provisions had never been contained herein.

     9.6  Survival  of  Warranties,   Etc.  All  of  the  Borrower's  covenants,
          agreements,  representations  and warranties  made in connection  with
          this Agreement and any document  contemplated hereby shall survive the
          borrowing  and the delivery of the Note  hereunder and shall be deemed
          to  have  been   relied   upon  by  the  Bank,   notwithstanding   any
          investigation heretofore or hereafter made by the Bank. All statements
          contained in any  certificate or other document  delivered to the Bank
          at any time by or on  behalf  of the  Borrower  pursuant  hereto or in
          connection with the transactions  contemplated hereby shall constitute
          representations and warranties by the Borrower in connection with this
          Agreement.

                                     - 31 -
<PAGE>



     9.7  Costs and  Expenses.  The Borrower  agrees that it will  reimburse the
          Bank,  upon demand,  for all reasonable fees and  out-of-pocket  costs
          incurred by the Bank in connection  with (i)  collecting or attempting
          to collect the  Indebtedness or any part thereof,  (ii) maintaining or
          defending  the  Bank's  security  interests  or liens,  if any (or the
          priority  thereof),  (iii) the  enforcement  of the  Bank's  rights or
          remedies  under this  Agreement  or the other  documents  contemplated
          hereby,   (iv)  the   preparation   or  making   of  any   amendments,
          modifications,  waivers or consents with respect to this  Agreement or
          the other documents  contemplated hereby, and/or (v) any other matters
          or  proceedings  arising  out of or in  connection  with  any  lending
          arrangement  between  the  Bank  and the  Borrower,  which  costs  and
          expensesinclude  without  limit  payments  made by the Bank for taxes,
          insurance,  assessments, or other costs or expenses which the Borrower
          is  required  to pay  under  this  Agreement  or the  other  documents
          contemplated  hereby;  audit  expenses;  court  costs  and  reasonable
          attorneys' fees (whether in-house or outside counsel is used,  whether
          legal  assistants  are used,  and whether  such costs are  incurred in
          formal or informal collection actions, federal bankruptcy proceedings,
          of Borrower or  Guarantor  or affecting  any  collateral  or rights of
          Bank, whether an involuntary or voluntary bankruptcy case,  including,
          without  limitation,   all  attorneys'  fees  and  costs  incurred  in
          connection with motions for relief from stay, cash collateral motions,
          nondischargeability    motions,    preferential   liability   motions,
          fraudulent conveyance liability motions, fraudulent transfer liability
          motions and all other motions brought by Borrower,  Guarantor, Bank or
          third  parties in any way  relating to Bank's  rights with  respect to
          such  Borrower,   Guarantor,  or  third  party  and/or  affecting  any
          collateral   securing  any  obligation   owed  to  Bank  by  Borrower,
          Guarantor,  or any  third  party,  probate  proceedings,  on appeal or
          otherwise);  and all other costs and expenses of the Bank  incurred in
          connection with any of the foregoing.

     9.8  Attorneys'  Fees and Costs.  Bank may hire or pay someone else to help
          collect  the Note if Borrower  does not pay.  In such event,  Borrower
          agrees to pay all reasonable fees and out-of-pocket  costs incurred by
          Bank  in  connection  with  collecting  the  Note.  In  addition,  the
          prevailing   party  (the   "Prevailing   Party")  in  any  litigation,
          arbitration,  bankruptcy  proceeding,  or  other  formal  or  informal
          resolution (collectively, a "Proceeding") brought by Bank or any party
          to this  Agreement of any claims  brought to enforce the terms of this
          Agreement or any of the Loan Documents based upon, arising from, or in
          any way related to this  Agreement  or the  transactions  contemplated
          herein,  including without  limitation  contract claims,  tort claims,
          breach of duty claims,  and all other  common law or statutory  claims
          (collectively,  the "Claims"),  shall be entitled to recover from such
          other  party all its fees and costs  incurred in  connection  with the
          Proceeding,  including without  limitation all its attorneys' fees and
          costs,  whether incurred by in-house  counsel or outside counsel,  all
          its  expert  witness  and/or  consultant's  fees  and  costs,  all its
          paralegal  fees and  costs,  and all its  other  costs  and  expenses,
          regardless of whether such costs are otherwise statutorily recoverable
          (collectively, the "Fees and Costs"), and including without limitation
          all the Fees and Costs incurred by the Prevailing  Party in connection
          with proceedings in bankruptcy for relief from and/or  modification of
          automatic stay, for orders of  nondischargeability,  and/or  regarding
          use of cash  collateral,  claims,  and/or plans.  The Prevailing Party
          shall also be entitled to recover  from such other party all its costs
          incurred  in  enforcing  the  judgment  or  award  giving  rise to the
          Prevailing  Party's status as the Prevailing  Party. Each party hereto
          acknowledges  that it is on notice  that,  in the event that the other
          party retain the services of one or more  experts in  connection  with
          the  Proceeding,  such other  party will seek to recover  the fees and
          costs of such  expert or experts  hereunder,  and that,  if such party
          becomes the Prevailing  Party in the  Proceeding,  such party shall be
          entitled to recover such fees and costs  hereunder,  whether such fees
          and costs are sought  before  trial,  during  trial,  or by post-

                                     - 32 -
<PAGE>

          trial motion or  memorandum  of costs.  The parties to this  Agreement
          waive the provisions of Civil Code section 1717(b)(2), and agree that,
          in the event of a unilateral voluntary dismissal,  the dismissed party
          shall be deemed the  Prevailing  Party entitled to the recovery of all
          of its Fees and Costs.

     9.9  Payments on Saturdays,  Etc. Whenever any payment to be made hereunder
          shall be stated to be due on a Saturday, Sunday or any other day which
          is not a Business Day, such payment may be made on the next succeeding
          Business  Day,  and  such  extension,  if any,  shall be  included  in
          computing interest in connection with such payment.

     9.10 Binding Effect. This Agreement shall inure to the benefit of and shall
          be binding upon the parties hereto and their respective successors and
          assigns;  provided,  however,  that the  Borrower  may not  assign  or
          transfer its rights or obligations hereunder without the prior written
          consent  of the Bank.  Borrower  authorizes  Bank,  without  notice or
          demand  and  without  affecting  Borrower's  liability  hereunder,  to
          assign,  without  notice,  the Loan Documents or the  Indebtedness  in
          whole or in part and Bank's rights thereunder to anyone at any time or
          to transfer one or more participation  interests in the Loan Documents
          or the  Indebtedness in whole or in part to one or more purchasers and
          provide  information to prospective  purchasers  relating to Borrower.
          The Bank  agrees,  upon written  request by  Borrower,  to provide the
          identity of any current participants.

     9.11 Maintenance  of  Records.  The  Borrower  will keep all of its records
          concerning  its business  operations  and  accounting at its principal
          place of  business.  The  Borrower  will give the Bank prompt  written
          notice of any change in its  principal  place of  business,  or in the
          location of its records.

     9.12 Notices. All notices and communications  provided for herein or in any
          document  contemplated  hereby or required by law to be given shall be
          in writing and shall be served (i) personally in which case the notice
          or communication is effective immediately, (ii) by overnight mail by a
          national, reputable carrier, in which case the notice or communication
          is effective upon deposit with such carrier, (ii) by certified mail in
          which case the notice or communication  is effective upon mailing,  or
          (iv) by first class mail,  postage prepaid in which case the notice or
          communication  is  effective  two (2)  days  after  mailing,  with all
          notices  or  communications  to  be  delivered,  mailed,  or  sent  as
          aforesaid  as  follows:   (a)  If  the  Borrower,   to:  Mission  West
          Properties, Inc., 10050 Bandley Drive, Cupertino, CA 95014, and (b) if
          to  the  Bank,  to:  Cupertino  National  Bank,  20230  Stevens  Creek
          Boulevard,  Cupertino,  CA 95014,  Attention Mr. Michael Zukin,  or to
          such other  address as a party shall have  designated  to the other in
          writing in accordance with this section.

     9.13 Counterparts.   This   Agreement  may  be  signed  in  any  number  of
          counterparts  with the same effect as if the signatures  were upon the
          same instrument.

     9.14 Headings.  Article and section headings in this Agreement are included
          for the  convenience of reference only and shall not constitute a part
          of this Agreement for any purpose.

     9.15 Release  and  Discharge.  Upon full  payment of the  Indebtedness  and
          performance  by the Borrower of all its other  obligations  hereunder,
          except as  otherwise  provided  in this  Agreement  including  without
          limitation in Sections 2.15 and 5.17(e),  the parties shall  thereupon

                                     - 33 -
<PAGE>


          automatically  each  be  fully,   finally  and  forever  released  and
          discharged from any claim,  liability or obligation in connection with
          this Agreement and the Loan Documents.

     9.16 Waiver of Jury Trial. BANK AND BORROWER EACH HEREBY  ACKNOWLEDGES THAT
          THE RIGHT TO TRIAL BY JURY MAY BE WAIVED.  AFTER CONSULTING (OR HAVING
          HAD THE  OPPORTUNITY  TO CONSULT) WITH COUNSEL OF THEIR  CHOICE,  EACH
          PARTY HERETO KNOWINGLY AND VOLUNTARILY,  AND FOR THEIR MUTUAL BENEFIT,
          WAIVE ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION  REGARDING
          THE  PERFORMANCE  OR  ENFORCEMENT  OF, OR IN ANY WAY  RELATED TO, THIS
          AGREEMENT OR ANY LOAN DOCUMENT.

          EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO READ
          AND  REVIEW  WITH  ITS  COUNSEL   THIS   AGREEMENT,   AND  EACH  PARTY
          ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE MEANING AND EFFECT OF THIS
          DOCUMENT BEFORE SIGNING IT.

     9.17 Further Assurances.  Immediately  following  reasonable request by the
          Bank, the Borrower  shall provide to the Bank such further  documents,
          instruments,  and  assurances as may be requested from time to time by
          Bank in connection  with this  Agreement or any documents  executed in
          connection herewith.

     9.18 Integrated Agreement.  This is an integrated agreement.  Except as set
          forth specifically otherwise herein and except for the Loan Documents,
          it  supersedes  all  prior  representations  and  agreements,  if any,
          between  the  parties to this  Agreement  and other  respective  legal
          counsel relating to the subject matter hereof.  This Agreement and the
          exhibits hereto and the other Loan Documents when executed contain the
          entire and only  understanding  between  the  parties,  and may not be
          altered, amended or extinguished,  except by a writing which expressly
          refers to this instrument and is signed subsequent to the execution of
          this instrument by the parties to this Agreement.

                                     - 34 -
<PAGE>





         IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first written above.


                             MISSION WEST PROPERTIES, INC.
                             A Maryland corporation


                             By: /s/ Carl E. Berg
                             --------------------------------------------
                             Its: Chairman & CEO


                             By: /s/ Raymond V. Marino
                             --------------------------------------------
                             Its: President & COO


                             CUPERTINO NATIONAL BANK


                             By: /s/ Michael Zukin
                             --------------------------------------------
                             Its: Vice President


                                     - 35 -

<PAGE>


EXHIBIT 10.30


                               CONTINUING GUARANTY


                                                                   July 12, 2002

Cupertino National Bank
20230 Stevens Creek Boulevard
Cupertino, CA 95014


TO:      Cupertino National Bank

     For  good and  valuable  consideration  the  receipt  of  which  is  hereby
acknowledged,  and in order to induce Cupertino  National Bank (the "Bank"),  to
extend  and/or  continue  to extend  financial  accommodations  to Mission  West
Properties, Inc., a Maryland corporation ("Borrower"), pursuant to the terms and
conditions of that certain  Revolving Credit Loan Agreement and Revolving Credit
Note  (individually  and collectively,  the  "Agreement"),  dated July 12, 2002,
evidencing and otherwise  relating to a revolving loan by Bank to Borrower up to
the  total  principal  amount of Forty  Million  Dollars  ($40,000,000.00)  (the
"Loan")  Mission  West  Properties,   L.P.,  a  Delaware   limited   partnership
("Guarantor"),  whose  address is 10050  Bandley  Drive,  Cupertino,  California
95014,  hereby,  jointly  and  severally,   guarantees,   promises,  represents,
warrants,  covenants and  undertakes to Bank and its  successors  and assigns as
follows:

     1. Guarantor  unconditionally,  absolutely and  irrevocably  guarantees and
promises  to pay to Bank,  or order,  on demand,  in lawful  money of the United
States, any and all indebtedness  and/or obligations of Borrower to Bank and the
payment to Bank of all sums which may be presently due and owing and of all sums
which shall in the future become due and owing to Bank from  Borrower  under the
Agreement. The terms "indebtedness" and "obligations"  (hereinafter collectively
referred to as the  "Obligations")  are used herein in their most  comprehensive
sense and include, without limitation,  the Loan and any and all advances to, or
debts, obligations,  and liabilities of Borrower,  heretofore, now, or hereafter
made, incurred,  or created,  whether voluntarily or involuntarily,  and however
arising,  including,  without limitation,  (i) indebtedness owing by Borrower to
third parties who have granted Bank a security interest in the accounts, chattel
paper  and/or  general  intangibles  of  said  third  party;  (ii)  any  and all
attorneys'  fees,  expenses,  costs,  premiums,  charges and/or interest owed by
Borrower to Bank, whether under the Agreement, or otherwise,  whether due or not
due,  absolute  or  contingent,   liquidated  or  unliquidated,   determined  or
undetermined,  whether  Borrower  may be liable  individually  or  jointly  with
others,  whether  recovery upon such  indebtedness  may be or hereafter  becomes
barred by any statute of  limitations  or whether  such  indebtedness  may be or
hereafter becomes otherwise unenforceable,  and includes Borrower's prompt, full
and  faithful  performance,  observance  and  discharge  or each and every term,
condition, agreement,  representation,  warranty undertaking and provision to be
performed by Borrower  under the  Agreement;  (iii) any and all  obligations  or
liabilities  of Borrower to Bank arising out of any other  agreement by Borrower
including  without  limitation any agreement to indemnify Bank for environmental
liability  or to  clean  up  hazardous  waste;  (iv)  any and all  indebtedness,
obligations or liabilities  for which Borrower would otherwise be liable to Bank
were it not for the  invalidity,  irregularity  or  unenforceability  of them by
reason  of any  bankruptcy,  insolvency  or  other  law or  order  of any  kind,
including  from and after the  filing by or  against  Borrower  of a  bankruptcy
petition,   whether  an  involuntary  or  voluntary  bankruptcy  case,  and  all
attorneys' fees related thereto; and (v) any and all amendments,  modifications,
renewals  and/or  extensions  of any  of  the  above,  including  without  limit
amendments, modifications, renewals and/or extensions which are evidenced by new
or additional instruments, documents or agreements.

                                     - 36 -
<PAGE>

     2. This Guaranty  ("Guaranty") is a continuing  guaranty which shall remain
effective  until  full  satisfaction  of  all  of the  Obligations  to the  Bank
(including  without  limitation those which arise under successive  transactions
under the Agreement),  full  satisfaction by Guarantor of its obligations  under
this  Guaranty,  and  the  termination  of  the  Bank's  obligations  under  the
Agreement.

     3. Guarantor  agrees that it is directly and primarily liable to Bank, that
the obligations  hereunder are  independent of the obligations of Borrower,  and
that a  separate  action  or  actions  may be  brought  and  prosecuted  against
Guarantor  irrespective  of  whether  Borrower  is joined in any such  action or
actions.  Guarantor  agrees  that  any  releases  which  may be given by Bank to
Borrower  or any other  guarantor  or  endorser  shall not  release it from this
Guaranty.

     4. In the event that any  bankruptcy,  insolvency,  receivership or similar
proceeding is instituted by or against Guarantor and/or Borrower or in the event
that either Guarantor or Borrower become  insolvent,  make an assignment for the
benefit of creditors,  or attempts to effect a composition with creditors, or if
there be any default under the  Agreement  (whether  declared or not),  then, at
Bank's election,  without notice or demand, the obligations of Guarantor created
hereunder shall become due, payable and enforceable against Guarantor whether or
not the Obligations are then due and payable.

     5.  Guarantor  agrees to defend,  indemnify and hold Bank harmless from and
against  all  obligations,   demands,  judgments,  claims  and  liabilities,  by
whomsoever asserted and against all losses,  fees, expenses and costs in any way
suffered, incurred, or paid by Bank as a result of or in any way arising out of,
following, or consequential to Bank's or Guarantor's  transactions with Borrower
under the Agreement, and also agrees that this Guaranty shall not be impaired by
any  modification,  supplement,  extension,  or  amendment  of any  contract  or
agreement  to  which  Bank  and  Borrower  may  hereafter   agree,  nor  by  any
modification,  release,  or other  alteration of any of the  Obligations  hereby
guaranteed or of any security  therefor,  nor by any agreements or  arrangements
whatsoever with Borrower or anyone else.

     6. Guarantor hereby  authorizes Bank,  without notice or demand and without
affecting its liability hereunder,  from time to time to: (a) renew, compromise,
extend,  accelerate, or otherwise change the interest rate, time for payment, or
the other terms of the Agreement or of any of the Obligations guaranteed hereby,
and exchange,  enforce,  waive, and release any security therefor; (b) apply any
such  security  and  direct  the order or manner of sale  thereof as Bank in its
discretion may determine;  (c) release or substitute any one or more endorser(s)
or  guarantor(s);   and  (d)  assign,  without  notice,  this  Guaranty  or  the
Indebtedness  in whole or in part and/or Bank's  rights  thereunder to anyone at
any time and/or transfer one or more participation  interests in the Obligations
or any  of  them  and  this  Guaranty  to one or  more  purchasers  and  provide
information to  prospective  purchasers  relating to Borrower or Guarantor.  The
Bank agrees,  upon written request by Guarantor,  to provide the identity of any
current  participants.  Guarantor  agrees  that  Bank  may  do any or all of the
foregoing in such  manner,  upon such terms,  and at such times as Bank,  in its
discretion,  deems  advisable,  without,  in  any  way  or  respect,  impairing,
affecting,  reducing or releasing Guarantor from its undertakings  hereunder and
Guarantor  hereby consents to each and all of the foregoing acts,  events and/or
occurrences.

     7.  Guarantor  hereby waives any right to assert against Bank as a defense,
counterclaim, set-off or cross-claim, any defense (legal or equitable), set-off,
counterclaim, and/or claim which Guarantor may now or at any time hereafter have
against Borrower and/or any other party liable to Bank in any way or manner.

     8. Guarantor hereby waives all defenses,  counterclaims and off-sets of any
kind or nature,  arising  directly or indirectly from the present or future lack
of perfection,  sufficiency, validity and/or enforceability of the Agreement, or
any security interest granted in connection therewith.

     9.  Guarantor  hereby waives any defense  arising by reason of any claim or
defense  based upon an election of remedies by Bank that in any manner  impairs,
affects, reduces, releases, destroys and/or

                                     - 37 -
<PAGE>

extinguishes  Guarantor's subrogation rights, rights to proceed against Borrower
or any other person for subrogation,  reimbursement,  exoneration, contribution,
indemnification  or participation in any claim, right or remedy against Borrower
or any other person for any security  which Bank now has or hereafter  acquires,
whether or not such claim, right or remedy arises in equity, under contract,  by
statute,  under  common law or  otherwise,  and/or any  rights of  Guarantor  to
proceed against Borrower or against any other person or security, including, but
not  limited  to,  any  defense  based upon an  election  of  remedies  by Bank.
Guarantor  expressly  waives all benefits which might  otherwise be available to
Guarantor under  California  Civil Code Sections 2809,  2810,  2815, 2819, 2822,
2839,  2845,  2847,  2848,  2849,  2850, and 3433 and  California  Code of Civil
Procedure  Sections 580a, 580b, 580d and 726, as those statutory  provisions are
now in effect and hereafter  amended,  and under any other similar  statutes now
and hereafter in effect deemed applicable to this Guaranty and its enforcement.

Guarantor  acknowledges  that  neither  the  Indebtedness  nor  the  obligations
hereunder are secured by an interest in real property, but to the extent that it
should  ever be  determined  that  either the  Indebtedness  or the  obligations
hereunder are so secured or should the Indebtedness or the obligations hereunder
be so secured in the future, Guarantor agrees to the following:

     The  guarantor  waives all rights and defenses  that the guarantor may have
     because the debtor's debt is secured by real  property.  This means,  among
     other things:

          (1)  A  creditor  may  collect  from  the   guarantor   without  first
               foreclosing on any real or personal property  collateral  pledged
               by the debtor;

          (2)  If a creditor  forecloses on any real property collateral pledged
               by the debtor:

               (A)  The amount of the debt may be reduced  only by the price for
                    which that collateral is sold at the foreclosure  sale, even
                    if the collateral is worth more than the sale price,
               (B)  The  creditor  may collect  from the  guarantor  even if the
                    creditor,  by foreclosing  on the real property  collateral,
                    has  destroyed  any right the  guarantor may have to collect
                    from the debtor.

This is an unconditional  and irrevocable  waiver of any rights and defenses the
Guarantor  may have  because  the  Borrower's  debt is or may be secured by real
property.  These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 6580b,  580d, or 726 of the California Code
of Civil Procedure.

The undersigned  further  understands that, absent this waiver,  California law,
including without  limitation the laws cited above, could afford the undersigned
one or more  affirmative  defenses to any action  maintained by Bank against the
undersigned on this Guaranty. Notwithstanding any foreclosure of the lien of any
security  instrument,  with  respect  to any or all  property  secured  thereby,
whether by the exercise of the power of sale contained therein, by an action for
judicial  foreclosure,  or by an  acceptance  of a deed in lieu of  foreclosure,
Guarantor  shall  remain  bound  under  this  Guaranty.   Without  limiting  the
generality of the foregoing,  Guarantor acknowledges that, but for the waiver of
such rights in this Guaranty, Guarantor has or may have rights of subrogation or
reimbursement  against Borrower  arising from  Guarantor's  status as surety and
guarantor of Borrower's obligations to Bank. Therefore, in addition to the above
waivers,  Guarantor hereby agrees that if now or hereafter  Borrower is or shall
become insolvent and the  Indebtedness or Obligations  shall not at all times be
fully secured by collateral pledged by Borrower, Guarantor hereby forever waives
and gives up in favor of Bank and Borrower, and Bank's and Borrower's respective
successors and assigns,  any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so that
at no time shall  Guarantor  be or become a  "creditor"  of Borrower  within the
meaning of 11 U.S.C.  section 547(b), or any successor  provision of the Federal
bankruptcy laws.

                                     - 38 -
<PAGE>

Guarantor  acknowledges  that  Guarantor  has been provided the  opportunity  to
discuss with Guarantor's counsel the effect and meaning of the waivers set forth
in this paragraph. Nothing within this paragraph is to be construed to limit the
generality of any other term or provision within this Guaranty.

     10. Guarantor waives all presentments,  demands for performance, notices of
non-performance,  protests,  notices of protest, notices of dishonor, notices of
default,  notices  of  intent  to  accelerate  or  demand  payment  of any kind,
diligence in collecting any Obligations, notices of acceptance of this Guaranty,
notices  of  the  existence,   creation,  or  incurring  of  new  or  additional
indebtedness,  notices  respecting  the  terms,  time and place of any public or
private  sale of  personal  property  security  held from  Borrower or any other
person, and all other notices or formalities to which Guarantor may be entitled.
Bank may modify the terms of the  Agreement or of any  Obligations,  compromise,
extend, increase,  accelerate, renew or forbear to enforce payment of any or all
Obligations or other sums due under the Agreement,  or permit  Borrower to incur
additional Obligations, all without notice to Guarantor and without affecting in
any  manner the  unconditional  obligation  of  Guarantor  under this  Guaranty.
Guarantor  further  waives any and all other  notices to which  Guarantor  might
otherwise be entitled.  Guarantor  acknowledges  and agrees that the liabilities
created by this Guaranty are direct and are not conditioned upon pursuit by Bank
of any  remedy  Bank  may have  against  Borrower  or any  other  person  or any
security. No invalidity,  irregularity or unenforceability of any part or all of
the Agreement or any other Obligations or any documents  evidencing the same, by
reason of any  bankruptcy,  insolvency  or other law or order of any kind or for
any other  reason,  and no defense or setoff  available at any time to Borrower,
shall impair,  affect or be a defense or setoff to the  obligations of Guarantor
under this Guaranty.

     11. Any and all present  and future  debts and  obligations  of Borrower to
Guarantor are hereby  postponed in favor of and subordinated to the full payment
and  performance of all present and future debts and  obligations of Borrower to
Bank. All monies or other property of Guarantor at any time in Bank's possession
may be held by Bank as security for any and all obligations of Guarantor to Bank
no matter how or when arising, whether absolute or contingent, whether due or to
become due, and whether under this Guaranty or otherwise.  Guarantor also agrees
that Bank's  books and records  showing the account  between  Bank and  Borrower
shall be  admissible  in any  action or  proceeding  and shall be  binding  upon
Guarantor for the purpose of establishing  the terms set forth therein and shall
constitute prima facie proof thereof.

     12.  Based  solely on its own  independent  investigation  and not upon any
information provided by Bank, Guarantor acknowledges and represents and warrants
that it is presently informed of the financial  condition of Borrower and of all
other  circumstances  which a diligent  inquiry would reveal and which bear upon
the risk of nonpayment of the Obligations or  non-performance  of the Agreement.
Guarantor  hereby  covenants  that it will  continue to keep itself  informed of
Borrower's  financial  condition and of all other  circumstances which bear upon
the risk of nonpayment.  Guarantor hereby waives its rights,  if any, to require
the disclosure of, and Bank is relieved of any obligation or duty to disclose to
Guarantor,  any information which Bank may now or hereafter  acquire  concerning
such condition or  circumstances.  Guarantor  agrees that it is not relying upon
nor expecting Bank to disclose to Guarantor any fact now or later known by Bank,
whether  relating to the  operations  or condition of Borrower,  the  existence,
liabilities or financial  condition of any co-guarantor of the Obligations,  the
occurrence  of any default with  respect to the  Obligations  including  but not
limited to under the Agreement,  or otherwise,  notwithstanding any effect these
facts may have upon Guarantor's  risk under this Guaranty or Guarantor's  rights
against Borrower. Guarantor knowingly accepts the full range of risk encompassed
in this  Guaranty,  which  risk  includes  without  limit the  possibility  that
Borrower  may  incur  Obligations  to Bank  after  the  financial  condition  of
Borrower, or its ability to pay its debts as they mature, has deteriorated.

     13. On a continuing  basis from the date of this  Guaranty and at all times
during its  effectiveness,  Guarantor hereby  represents and warrants to Bank as
follows: (a) Guarantor is a limited partnership duly organized, validly existing
and in good  standing  under  the  laws of the  State  of  Delaware  and in good
standing  under the laws of, and is  authorized  to do business in, the State of
California,  (b) Guarantor has the power and authority to own its properties and
assets and to carry out its business as now being conducted and is

                                     - 39 -
<PAGE>

qualified to do business and in good standing in every jurisdiction wherein such
qualification  is  necessary,  (c)  Guarantor  has the  power and  authority  to
execute,  deliver and perform this Guaranty in accordance with its terms, and to
do any and  all  other  things  required  of it  hereunder,  (d) the  execution,
delivery and  performance  of this  Guaranty  have been duly  authorized  by all
requisite  partnership  action and will not violate any provision of Guarantor's
partnership or other constituency agreements or partnership  certificates or any
provision of any  indenture,  note,  agreement or other  instrument to which the
Guarantor is a party, or by which it or any of Guarantor's  properties or assets
are bound, (e) there are no actions, suits or proceedings,  at law or in equity,
and no  proceedings  before  any  arbitrator  or by or before  any  governmental
commission,  board, bureau, or other administrative agency,  pending, or, to the
best  knowledge of the  Guarantor,  threatened  against or  affecting  Guarantor
which, if adversely  determined,  could materially impair the right of Guarantor
to carry on business  substantially  as now  conducted  or could have a material
adverse effect upon the financial  condition of Guarantors,  (f) upon the Bank's
request and  Borrower's  failure to timely  provide to the Bank,  Guarantor will
provide to the Bank financial and credit  information in form  acceptable to the
Bank,  and such  information  and all  consolidated  and  consolidating  balance
sheets,  earnings  statements and other financial data furnished to the Bank for
the purposes of, or in  connection  with,  the Agreement and this Guaranty do or
will fairly present the financial condition of Guarantor, as of their dates, and
the results of Guarantor's  operations  for the periods,  for which the same are
furnished to the Bank,  and  Guarantor has no material  contingent  obligations,
liabilities  for  taxes,  long-term  leases  or  unusual  forward  or  long-term
commitments  not  disclosed  by, or  reserved  against  in,  all such  financial
information  provided to Bank,  and (g)  Guarantor  is solvent,  able to pay its
debts as they mature,  has capital  sufficient  to carry on its business and has
assets the fair market value of which exceed its liabilities.

     14.  Guarantor   covenants  and  agrees  that,  at  all  times  during  the
effectiveness of this Guaranty, Guarantor will do or cause to be done all things
necessary to preserve and keep in full force and effect Guarantor's  partnership
existence,  rights and franchises and comply with all applicable laws;  maintain
its good  standing  in all states  and  jurisdictions  in which it is  currently
authorized  to conduct  business;  continue to conduct and operate its  business
substantially  as  conducted  and  operated  during the  present  and  preceding
calendar year; at all times maintain, preserve and protect all franchises, trade
names and preserve  all the  remainder of its property and keep the same in good
repair, working order and condition;  and from time to time make, or cause to be
made, all needed and proper  repairs,  renewals,  replacements,  betterments and
improvements thereto so that the business carried on in connection therewith may
be properly and advantageously conducted at all times.

     15.  Guarantor   covenants  and  agrees  that,  at  all  times  during  the
effectiveness of this Guaranty, it will not transfer all or substantially all of
its assets and that it will not  dissolve or wind-up  its  affairs or  otherwise
cease  doing  business  or  transfer  its  assets  in  such a way  as to  impair
Guarantor's ability to perform its obligations under this Guaranty.

     16.  Notwithstanding  any  prior  revocation,   termination,  surrender  or
discharge of this  Guaranty in whole or part,  this Guaranty  shall  continue in
full force and effect until Borrower's  Obligations including but not limited to
under the Agreement  are fully paid,  performed  and  discharged  and Bank gives
Guarantor  written  notice of that  fact.  Borrower's  Obligations  shall not be
considered fully paid, performed and discharged unless and until all payments by
Borrower  to Bank are no longer  subject  to any right on the part of any person
whomsoever   including   but   not   limited   to   Borrower,   Borrower   as  a
debtor-in-possession, and/or any trustee or receiver in bankruptcy, to set aside
such  payments  or seek to  recoup  the  amount  of such  payments,  or any part
thereof.  In the event that any such  payments by Borrower to Bank or on account
of Borrower to Bank are set aside after the making thereof, in whole or in part,
or settled without litigation, to the extent of such settlement, all of which is
within Bank's discretion,  Guarantor shall be liable for the full amount Bank is
required to repay plus costs, interest, attorneys' fees and any and all expenses
which  Bank paid or  incurred  in  connection  therewith.  The  foregoing  shall
include,  by way of example and not by way of limitation,  all rights to recover
preferences  voidable under the United States  Bankruptcy Code and any liability
imposed,  or sought to be imposed,  against Bank  relating to the  environmental
condition of, or the presence of hazardous or toxic  substances on, in or about,
any of  Borrower's  property.  For  purposes  of this  Guaranty,  "environmental
condition" includes, without

                                     - 40 -
<PAGE>

limitation,  conditions  existing  with respect to the surface or ground  water,
drinking water supply, land surface or subsurface and the air; and "hazardous or
toxic substances" shall include all substances now or subsequently determined by
any federal,  state or local  authority  to be hazardous or toxic,  or otherwise
regulated by any of these authorities.

     17.  This  Guaranty  shall be binding  upon the  successors  and assigns of
Guarantor  and shall  inure to the  benefit of Bank's  successors  and  assigns.
Guarantor's  rights and  liability  shall not be  affected by any changes in the
name of  Borrower  or in the  event  Borrower  merges  with or  into  any  other
corporation or entity or in the event Borrower  transfers,  assigns or sells its
assets and liabilities to any person.

     18. All notices,  demands and other  communications which Guarantor or Bank
may  desire,  or may be  required,  to give to the other shall be in writing and
shall be sent via registered or certified mail,  nationally recognized overnight
courier,  or  personally  delivered  and shall be  addressed to the party at the
addresses set forth in the preamble of this Guaranty. Any such notice, demand or
communication  shall be deemed given when  received if  personally  delivered or
sent by  overnight  courier,  or deposited  in the United  States mail,  postage
prepaid,  if sent by  registered  or  certified  mail.  The  address  of  either
Guarantor  or Bank may be  changed  by  notice  given in  accordance  with  this
paragraph.

     19. This is an  integrated  agreement  and is the sole and final  agreement
with respect to the subject matter hereof, and supersedes all prior negotiations
and  agreements.  No  modification  of this Guaranty  shall be effective for any
purpose unless it is in writing and executed by Guarantor and an officer of Bank
authorized to do so.

     20.  Guarantor  agrees  to  pay  all  costs  and  fees,  including  without
limitation all reasonable  attorneys' fees and out-of-pocket costs,  incurred by
Bank in enforcing the Agreement or this  Guaranty.  In addition,  the prevailing
party  (the  "Prevailing  Party")  in any  litigation,  arbitration,  bankruptcy
proceeding,   or  other   formal  or  informal   resolution   (collectively,   a
"Proceeding")  brought  by Bank or any  party  to this  Guaranty  of any  claims
brought to enforce the terms of this  Guaranty  based upon,  arising from, or in
any way  related  to this  Guaranty  or the  transactions  contemplated  herein,
including  without  limitation  contract  claims,  tort  claims,  breach of duty
claims,  and  all  other  common  law or  statutory  claims  (collectively,  the
"Claims"),  shall be entitled to recover  from such other party all its fees and
costs incurred in connection with the Proceeding,  including without  limitation
all its  attorneys'  fees and costs,  whether  incurred by  in-house  counsel or
outside counsel,  all its expert witness and/or consultant's fees and costs, all
its paralegal fees and costs,  and all its other costs and expenses,  regardless
of whether such costs are otherwise statutorily recoverable  (collectively,  the
"Fees and  Costs"),  and  including  without  limitation  all the Fees and Costs
incurred by the Prevailing  Party in connection  with  proceedings in bankruptcy
for  relief  from  and/or   modification   of  automatic  stay,  for  orders  of
nondischargeability,  and/or  regarding use of cash collateral,  claims,  and/or
plans.  The  Prevailing  Party shall also be entitled to recover from such other
party all its costs  incurred in enforcing  the judgment or award giving rise to
the Prevailing  Party's status as the Prevailing Party.  Guarantor  acknowledges
that it is on notice that, in the event that the other party retain the services
of one or more experts in connection with the Proceeding,  such other party will
seek to  recover  the fees and costs of such  expert or experts  hereunder,  and
that, if such party becomes the Prevailing  Party in the Proceeding,  such party
shall be entitled to recover  such fees and costs  hereunder,  whether such fees
and costs are sought before  trial,  during  trial,  or by post-trial  motion or
memorandum of costs.

     21. In all cases where the word  "Guarantor" is used in this  Guaranty,  it
shall  mean and apply  equally  to each of and all of the  entities  which  have
executed  this  Guaranty.  If any  Obligation  is  guaranteed  by  two  or  more
guarantors,  the obligation of Guarantor  shall be several and also joint,  each
with all and also each with any one or more of the  others,  and may be enforced
at the option of Bank against each severally,  any two or more jointly,  or some
severally and some jointly.

                                     - 41 -
<PAGE>



     22. The term  "Borrower"  includes any  debtor-in-possession  or trustee in
bankruptcy  or  court-appointed  receiver  which  succeeds to the  interests  of
Borrower.

     23. This  Guaranty and all acts and  transactions  hereunder and the rights
and  obligations  of  the  parties  hereto  shall  be  governed,  construed  and
interpreted  in  accordance  with the laws of the State of  California,  without
regard to choice of law principles.

     24.  GUARANTOR   ACKNOWLEDGES  THAT  THE  RIGHT  TO  TRIAL  BY  JURY  IS  A
CONSTITUTIONAL RIGHT, BUT THAT IT MAY BE WAIVED. AFTER CONSULTING (OR HAVING HAD
THE  OPPORTUNITY  TO CONSULT) WITH COUNSEL OF THEIR  CHOICE,  GUARANTOR AND BANK
KNOWINGLY  AND  VOLUNTARILY,  AND FOR THEIR MUTUAL  BENEFIT,  WAIVE ANY RIGHT TO
TRIAL  BY  JURY  IN  THE  EVENT  OF  LITIGATION  REGARDING  THE  PERFORMANCE  OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR THE OBLIGATIONS.

     GUARANTOR  ACKNOWLEDGES  THAT GUARANTOR HAS HAD THE OPPORTUNITY TO READ AND
REVIEW WITH GUARANTOR'S COUNSEL THIS GUARANTY, AND GUARANTOR ACKNOWLEDGES HAVING
READ AND UNDERSTOOD THE MEANING AND EFFECT OF THIS DOCUMENT BEFORE SIGNING IT.

                                     - 42 -

<PAGE>

         IN WITNESS WHEREOF, the undersigned has/have executed this Guaranty as
of the date set forth above.


                                         MISSION WEST PROPERTIES, L.P.
                                         A Delaware limited partnership

                                         By       Mission West Properties, Inc.,
                                                  A Maryland corporation,
                                                  Its General Partner


                                                  By: /s/ Carl E. Berg
                                                  ------------------------------
                                                  Its: Chairman & CEO



                                                  By: /s/ Raymond V. Marino
                                                  ------------------------------
                                                  Its: President & COO


                                     - 43 -

<PAGE>


EXHIBIT 10.31


                               CONTINUING GUARANTY


                                                                   July 12, 2002

Cupertino National Bank
20230 Stevens Creek Boulevard
Cupertino, CA 95014


TO:      Cupertino National Bank

     For  good and  valuable  consideration  the  receipt  of  which  is  hereby
acknowledged,  and in order to induce Cupertino  National Bank (the "Bank"),  to
extend  and/or  continue  to extend  financial  accommodations  to Mission  West
Properties, Inc., a Maryland corporation ("Borrower"), pursuant to the terms and
conditions of that certain  Revolving Credit Loan Agreement and Revolving Credit
Note  (individually  and collectively,  the  "Agreement"),  dated July 12, 2002,
evidencing and otherwise  relating to a revolving loan by Bank to Borrower up to
the  total  principal  amount of Forty  Million  Dollars  ($40,000,000.00)  (the
"Loan")  Mission  West  Properties,  L.P.  II, a  Delaware  limited  partnership
("Guarantor"),  whose  address is 10050  Bandley  Drive,  Cupertino,  California
95014,  hereby,  jointly  and  severally,   guarantees,   promises,  represents,
warrants,  covenants and  undertakes to Bank and its  successors  and assigns as
follows:

     1. Guarantor  unconditionally,  absolutely and  irrevocably  guarantees and
promises  to pay to Bank,  or order,  on demand,  in lawful  money of the United
States, any and all indebtedness  and/or obligations of Borrower to Bank and the
payment to Bank of all sums which may be presently due and owing and of all sums
which shall in the future become due and owing to Bank from  Borrower  under the
Agreement. The terms "indebtedness" and "obligations"  (hereinafter collectively
referred to as the  "Obligations")  are used herein in their most  comprehensive
sense and include, without limitation,  the Loan and any and all advances to, or
debts, obligations,  and liabilities of Borrower,  heretofore, now, or hereafter
made, incurred,  or created,  whether voluntarily or involuntarily,  and however
arising,  including,  without limitation,  (i) indebtedness owing by Borrower to
third parties who have granted Bank a security interest in the accounts, chattel
paper  and/or  general  intangibles  of  said  third  party;  (ii)  any  and all
attorneys'  fees,  expenses,  costs,  premiums,  charges and/or interest owed by
Borrower to Bank, whether under the Agreement, or otherwise,  whether due or not
due,  absolute  or  contingent,   liquidated  or  unliquidated,   determined  or
undetermined,  whether  Borrower  may be liable  individually  or  jointly  with
others,  whether  recovery upon such  indebtedness  may be or hereafter  becomes
barred by any statute of  limitations  or whether  such  indebtedness  may be or
hereafter becomes otherwise unenforceable,  and includes Borrower's prompt, full
and  faithful  performance,  observance  and  discharge  or each and every term,
condition, agreement,  representation,  warranty undertaking and provision to be
performed by Borrower  under the  Agreement;  (iii) any and all  obligations  or
liabilities  of Borrower to Bank arising out of any other  agreement by Borrower
including  without  limitation any agreement to indemnify Bank for environmental
liability  or to  clean  up  hazardous  waste;  (iv)  any and all  indebtedness,
obligations or liabilities  for which Borrower would otherwise be liable to Bank
were it not for the  invalidity,  irregularity  or  unenforceability  of them by
reason  of any  bankruptcy,  insolvency  or  other  law or  order  of any  kind,
including  from and after the  filing by or  against  Borrower  of a  bankruptcy
petition,   whether  an  involuntary  or  voluntary  bankruptcy  case,  and  all
attorneys' fees related thereto; and (v) any and all amendments,  modifications,
renewals  and/or  extensions  of any  of  the  above,  including  without  limit
amendments, modifications, renewals and/or extensions which are evidenced by new
or additional instruments, documents or agreements.

                                     - 44 -
<PAGE>

     2. This Guaranty  ("Guaranty") is a continuing  guaranty which shall remain
effective  until  full  satisfaction  of  all  of the  Obligations  to the  Bank
(including  without  limitation those which arise under successive  transactions
under the Agreement),  full  satisfaction by Guarantor of its obligations  under
this  Guaranty,  and  the  termination  of  the  Bank's  obligations  under  the
Agreement.

     3. Guarantor  agrees that it is directly and primarily liable to Bank, that
the obligations  hereunder are  independent of the obligations of Borrower,  and
that a  separate  action  or  actions  may be  brought  and  prosecuted  against
Guarantor  irrespective  of  whether  Borrower  is joined in any such  action or
actions.  Guarantor  agrees  that  any  releases  which  may be given by Bank to
Borrower  or any other  guarantor  or  endorser  shall not  release it from this
Guaranty.

     4. In the event that any  bankruptcy,  insolvency,  receivership or similar
proceeding is instituted by or against Guarantor and/or Borrower or in the event
that either Guarantor or Borrower become  insolvent,  make an assignment for the
benefit of creditors,  or attempts to effect a composition with creditors, or if
there be any default under the  Agreement  (whether  declared or not),  then, at
Bank's election,  without notice or demand, the obligations of Guarantor created
hereunder shall become due, payable and enforceable against Guarantor whether or
not the Obligations are then due and payable.

     5.  Guarantor  agrees to defend,  indemnify and hold Bank harmless from and
against  all  obligations,   demands,  judgments,  claims  and  liabilities,  by
whomsoever asserted and against all losses,  fees, expenses and costs in any way
suffered, incurred, or paid by Bank as a result of or in any way arising out of,
following, or consequential to Bank's or Guarantor's  transactions with Borrower
under the Agreement, and also agrees that this Guaranty shall not be impaired by
any  modification,  supplement,  extension,  or  amendment  of any  contract  or
agreement  to  which  Bank  and  Borrower  may  hereafter   agree,  nor  by  any
modification,  release,  or other  alteration of any of the  Obligations  hereby
guaranteed or of any security  therefor,  nor by any agreements or  arrangements
whatsoever with Borrower or anyone else.

     6. Guarantor hereby  authorizes Bank,  without notice or demand and without
affecting its liability hereunder,  from time to time to: (a) renew, compromise,
extend,  accelerate, or otherwise change the interest rate, time for payment, or
the other terms of the Agreement or of any of the Obligations guaranteed hereby,
and exchange,  enforce,  waive, and release any security therefor; (b) apply any
such  security  and  direct  the order or manner of sale  thereof as Bank in its
discretion may determine;  (c) release or substitute any one or more endorser(s)
or  guarantor(s);   and  (d)  assign,  without  notice,  this  Guaranty  or  the
Indebtedness  in whole or in part and/or Bank's  rights  thereunder to anyone at
any time and/or transfer one or more participation  interests in the Obligations
or any  of  them  and  this  Guaranty  to one or  more  purchasers  and  provide
information to  prospective  purchasers  relating to Borrower or Guarantor.  The
Bank agrees,  upon written request by Guarantor,  to provide the identity of any
current  participants.  Guarantor  agrees  that  Bank  may  do any or all of the
foregoing in such  manner,  upon such terms,  and at such times as Bank,  in its
discretion,  deems  advisable,  without,  in  any  way  or  respect,  impairing,
affecting,  reducing or releasing Guarantor from its undertakings  hereunder and
Guarantor  hereby consents to each and all of the foregoing acts,  events and/or
occurrences.

     7.  Guarantor  hereby waives any right to assert against Bank as a defense,
counterclaim, set-off or cross-claim, any defense (legal or equitable), set-off,
counterclaim, and/or claim which Guarantor may now or at any time hereafter have
against Borrower and/or any other party liable to Bank in any way or manner.

     8. Guarantor hereby waives all defenses,  counterclaims and off-sets of any
kind or nature,  arising  directly or indirectly from the present or future lack
of perfection,  sufficiency, validity and/or enforceability of the Agreement, or
any security interest granted in connection therewith.

                                     - 45 -
<PAGE>

     9.  Guarantor  hereby waives any defense  arising by reason of any claim or
defense  based upon an election of remedies by Bank that in any manner  impairs,
affects, reduces, releases, destroys and/or extinguishes Guarantor's subrogation
rights,  rights to proceed against Borrower or any other person for subrogation,
reimbursement,  exoneration,  contribution,  indemnification or participation in
any claim, right or remedy against Borrower or any other person for any security
which Bank now has or hereafter  acquires,  whether or not such claim,  right or
remedy  arises in  equity,  under  contract,  by  statute,  under  common law or
otherwise, and/or any rights of Guarantor to proceed against Borrower or against
any other person or security,  including,  but not limited to, any defense based
upon an election of remedies by Bank.  Guarantor  expressly  waives all benefits
which might  otherwise be available to  Guarantor  under  California  Civil Code
Sections 2809,  2810,  2815, 2819, 2822, 2839, 2845, 2847, 2848, 2849, 2850, and
3433 and California Code of Civil Procedure  Sections 580a,  580b, 580d and 726,
as those statutory provisions are now in effect and hereafter amended, and under
any other similar statutes now and hereafter in effect deemed applicable to this
Guaranty and its enforcement.

Guarantor  acknowledges  that  neither  the  Indebtedness  nor  the  obligations
hereunder are secured by an interest in real property, but to the extent that it
should  ever be  determined  that  either the  Indebtedness  or the  obligations
hereunder are so secured or should the Indebtedness or the obligations hereunder
be so secured in the future, Guarantor agrees to the following:

     The  guarantor  waives all rights and defenses  that the guarantor may have
     because the debtor's debt is secured by real  property.  This means,  among
     other things:

          (1)  A  creditor  may  collect  from  the   guarantor   without  first
               foreclosing on any real or personal property  collateral  pledged
               by the debtor;

          (2)  If a creditor  forecloses on any real property collateral pledged
               by the debtor:

               (A)  The amount of the debt may be reduced  only by the price for
                    which that collateral is sold at the foreclosure  sale, even
                    if the collateral is worth more than the sale price,
               (B)  The  creditor  may collect  from the  guarantor  even if the
                    creditor,  by foreclosing  on the real property  collateral,
                    has  destroyed  any right the  guarantor may have to collect
                    from the debtor.

This is an unconditional  and irrevocable  waiver of any rights and defenses the
Guarantor  may have  because  the  Borrower's  debt is or may be secured by real
property.  These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 6580b,  580d, or 726 of the California Code
of Civil Procedure.

The undersigned  further  understands that, absent this waiver,  California law,
including without  limitation the laws cited above, could afford the undersigned
one or more  affirmative  defenses to any action  maintained by Bank against the
undersigned on this Guaranty. Notwithstanding any foreclosure of the lien of any
security  instrument,  with  respect  to any or all  property  secured  thereby,
whether by the exercise of the power of sale contained therein, by an action for
judicial  foreclosure,  or by an  acceptance  of a deed in lieu of  foreclosure,
Guarantor  shall  remain  bound  under  this  Guaranty.   Without  limiting  the
generality of the foregoing,  Guarantor acknowledges that, but for the waiver of
such rights in this Guaranty, Guarantor has or may have rights of subrogation or
reimbursement  against Borrower  arising from  Guarantor's  status as surety and
guarantor of Borrower's obligations to Bank. Therefore, in addition to the above
waivers,  Guarantor hereby agrees that if now or hereafter  Borrower is or shall
become insolvent and the Indebtedness or Obligations shall not at all times be

                                     - 46 -
<PAGE>

fully secured by collateral pledged by Borrower, Guarantor hereby forever waives
and gives up in favor of Bank and Borrower, and Bank's and Borrower's respective
successors and assigns,  any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so that
at no time shall  Guarantor  be or become a  "creditor"  of Borrower  within the
meaning of 11 U.S.C.  section 547(b), or any successor  provision of the Federal
bankruptcy laws.

Guarantor  acknowledges  that  Guarantor  has been provided the  opportunity  to
discuss with Guarantor's counsel the effect and meaning of the waivers set forth
in this paragraph. Nothing within this paragraph is to be construed to limit the
generality of any other term or provision within this Guaranty.

     10. Guarantor waives all presentments,  demands for performance, notices of
non-performance,  protests,  notices of protest, notices of dishonor, notices of
default,  notices  of  intent  to  accelerate  or  demand  payment  of any kind,
diligence in collecting any Obligations, notices of acceptance of this Guaranty,
notices  of  the  existence,   creation,  or  incurring  of  new  or  additional
indebtedness,  notices  respecting  the  terms,  time and place of any public or
private  sale of  personal  property  security  held from  Borrower or any other
person, and all other notices or formalities to which Guarantor may be entitled.
Bank may modify the terms of the  Agreement or of any  Obligations,  compromise,
extend, increase,  accelerate, renew or forbear to enforce payment of any or all
Obligations or other sums due under the Agreement,  or permit  Borrower to incur
additional Obligations, all without notice to Guarantor and without affecting in
any  manner the  unconditional  obligation  of  Guarantor  under this  Guaranty.
Guarantor  further  waives any and all other  notices to which  Guarantor  might
otherwise be entitled.  Guarantor  acknowledges  and agrees that the liabilities
created by this Guaranty are direct and are not conditioned upon pursuit by Bank
of any  remedy  Bank  may have  against  Borrower  or any  other  person  or any
security. No invalidity,  irregularity or unenforceability of any part or all of
the Agreement or any other Obligations or any documents  evidencing the same, by
reason of any  bankruptcy,  insolvency  or other law or order of any kind or for
any other  reason,  and no defense or setoff  available at any time to Borrower,
shall impair,  affect or be a defense or setoff to the  obligations of Guarantor
under this Guaranty.

     11. Any and all present  and future  debts and  obligations  of Borrower to
Guarantor are hereby  postponed in favor of and subordinated to the full payment
and  performance of all present and future debts and  obligations of Borrower to
Bank. All monies or other property of Guarantor at any time in Bank's possession
may be held by Bank as security for any and all obligations of Guarantor to Bank
no matter how or when arising, whether absolute or contingent, whether due or to
become due, and whether under this Guaranty or otherwise.  Guarantor also agrees
that Bank's  books and records  showing the account  between  Bank and  Borrower
shall be  admissible  in any  action or  proceeding  and shall be  binding  upon
Guarantor for the purpose of establishing  the terms set forth therein and shall
constitute prima facie proof thereof.

     12.  Based  solely on its own  independent  investigation  and not upon any
information provided by Bank, Guarantor acknowledges and represents and warrants
that it is presently informed of the financial  condition of Borrower and of all
other  circumstances  which a diligent  inquiry would reveal and which bear upon
the risk of nonpayment of the Obligations or  non-performance  of the Agreement.
Guarantor  hereby  covenants  that it will  continue to keep itself  informed of
Borrower's  financial  condition and of all other  circumstances which bear upon
the risk of nonpayment.  Guarantor hereby waives its rights,  if any, to require
the disclosure of, and Bank is relieved of any obligation or duty to disclose to
Guarantor,  any information which Bank may now or hereafter  acquire  concerning
such condition or  circumstances.  Guarantor  agrees that it is not relying upon
nor expecting Bank to disclose to Guarantor any fact now or later known by Bank,
whether  relating to the  operations  or condition of Borrower,  the  existence,
liabilities or financial  condition of any co-guarantor of the Obligations,  the
occurrence  of any default with  respect to the  Obligations  including  but not
limited to under the Agreement,  or otherwise,  notwithstanding any effect these
facts may have upon Guarantor's risk under this Guaranty or

                                     - 47 -
<PAGE>

Guarantor's rights against Borrower.  Guarantor knowingly accepts the full range
of risk  encompassed  in this  Guaranty,  which risk includes  without limit the
possibility  that  Borrower may incur  Obligations  to Bank after the  financial
condition  of  Borrower,  or its  ability to pay its debts as they  mature,  has
deteriorated.

     13. On a continuing  basis from the date of this  Guaranty and at all times
during its  effectiveness,  Guarantor hereby  represents and warrants to Bank as
follows: (a) Guarantor is a limited partnership duly organized, validly existing
and in good  standing  under  the  laws of the  State  of  Delaware  and in good
standing  under the laws of, and is  authorized  to do business in, the State of
California,  (b) Guarantor has the power and authority to own its properties and
assets and to carry out its business as now being  conducted and is qualified to
do  business  and  in  good   standing  in  every   jurisdiction   wherein  such
qualification  is  necessary,  (c)  Guarantor  has the  power and  authority  to
execute,  deliver and perform this Guaranty in accordance with its terms, and to
do any and  all  other  things  required  of it  hereunder,  (d) the  execution,
delivery and  performance  of this  Guaranty  have been duly  authorized  by all
requisite  partnership  action and will not violate any provision of Guarantor's
partnership or other constituency agreements or partnership  certificates or any
provision of any  indenture,  note,  agreement or other  instrument to which the
Guarantor is a party, or by which it or any of Guarantor's  properties or assets
are bound, (e) there are no actions, suits or proceedings,  at law or in equity,
and no  proceedings  before  any  arbitrator  or by or before  any  governmental
commission,  board, bureau, or other administrative agency,  pending, or, to the
best  knowledge of the  Guarantor,  threatened  against or  affecting  Guarantor
which, if adversely  determined,  could materially impair the right of Guarantor
to carry on business  substantially  as now  conducted  or could have a material
adverse effect upon the financial  condition of Guarantors,  (f) upon the Bank's
request and  Borrower's  failure to timely  provide to the Bank,  Guarantor will
provide to the Bank financial and credit  information in form  acceptable to the
Bank,  and such  information  and all  consolidated  and  consolidating  balance
sheets,  earnings  statements and other financial data furnished to the Bank for
the purposes of, or in  connection  with,  the Agreement and this Guaranty do or
will fairly present the financial condition of Guarantor, as of their dates, and
the results of Guarantor's  operations  for the periods,  for which the same are
furnished to the Bank,  and  Guarantor has no material  contingent  obligations,
liabilities  for  taxes,  long-term  leases  or  unusual  forward  or  long-term
commitments  not  disclosed  by, or  reserved  against  in,  all such  financial
information  provided to Bank,  and (g)  Guarantor  is solvent,  able to pay its
debts as they mature,  has capital  sufficient  to carry on its business and has
assets the fair market value of which exceed its liabilities.

     14.  Guarantor   covenants  and  agrees  that,  at  all  times  during  the
effectiveness of this Guaranty, Guarantor will do or cause to be done all things
necessary to preserve and keep in full force and effect Guarantor's  partnership
existence,  rights and franchises and comply with all applicable laws;  maintain
its good  standing  in all states  and  jurisdictions  in which it is  currently
authorized  to conduct  business;  continue to conduct and operate its  business
substantially  as  conducted  and  operated  during the  present  and  preceding
calendar year; at all times maintain, preserve and protect all franchises, trade
names and preserve  all the  remainder of its property and keep the same in good
repair, working order and condition;  and from time to time make, or cause to be
made, all needed and proper  repairs,  renewals,  replacements,  betterments and
improvements thereto so that the business carried on in connection therewith may
be properly and advantageously conducted at all times.

     15.  Guarantor   covenants  and  agrees  that,  at  all  times  during  the
effectiveness of this Guaranty, it will not transfer all or substantially all of
its assets and that it will not  dissolve or wind-up  its  affairs or  otherwise
cease  doing  business  or  transfer  its  assets  in  such a way  as to  impair
Guarantor's ability to perform its obligations under this Guaranty.

     16.  Notwithstanding  any  prior  revocation,   termination,  surrender  or
discharge of this  Guaranty in whole or part,  this Guaranty  shall  continue in
full force and effect until Borrower's  Obligations including but not limited to
under the Agreement  are fully paid,  performed  and  discharged  and Bank gives
Guarantor  written

                                     - 48 -

<PAGE>


notice of that fact. Borrower's  Obligations shall not be considered fully paid,
performed and  discharged  unless and until all payments by Borrower to Bank are
no longer  subject to any right on the part of any person  whomsoever  including
but not  limited to  Borrower,  Borrower as a  debtor-in-possession,  and/or any
trustee or receiver in bankruptcy,  to set aside such payments or seek to recoup
the amount of such  payments,  or any part  thereof.  In the event that any such
payments  by  Borrower  to Bank or on account of  Borrower to Bank are set aside
after the making thereof, in whole or in part, or settled without litigation, to
the  extent  of such  settlement,  all of which  is  within  Bank's  discretion,
Guarantor  shall be liable for the full  amount  Bank is  required to repay plus
costs,  interest,  attorneys'  fees and any and all expenses  which Bank paid or
incurred in connection therewith. The foregoing shall include, by way of example
and not by way of limitation,  all rights to recover preferences  voidable under
the United States  Bankruptcy  Code and any liability  imposed,  or sought to be
imposed,  against  Bank  relating  to the  environmental  condition  of,  or the
presence of hazardous or toxic  substances  on, in or about,  any of  Borrower's
property.  For purposes of this Guaranty,  "environmental  condition"  includes,
without  limitation,  conditions  existing with respect to the surface or ground
water,  drinking  water  supply,  land  surface or  subsurface  and the air; and
"hazardous or toxic substances" shall include all substances now or subsequently
determined by any federal, state or local authority to be hazardous or toxic, or
otherwise regulated by any of these authorities.

     17.  This  Guaranty  shall be binding  upon the  successors  and assigns of
Guarantor  and shall  inure to the  benefit of Bank's  successors  and  assigns.
Guarantor's  rights and  liability  shall not be  affected by any changes in the
name of  Borrower  or in the  event  Borrower  merges  with or  into  any  other
corporation or entity or in the event Borrower  transfers,  assigns or sells its
assets and liabilities to any person.

     18. All notices,  demands and other  communications which Guarantor or Bank
may  desire,  or may be  required,  to give to the other shall be in writing and
shall be sent via registered or certified mail,  nationally recognized overnight
courier,  or  personally  delivered  and shall be  addressed to the party at the
addresses set forth in the preamble of this Guaranty. Any such notice, demand or
communication  shall be deemed given when  received if  personally  delivered or
sent by  overnight  courier,  or deposited  in the United  States mail,  postage
prepaid,  if sent by  registered  or  certified  mail.  The  address  of  either
Guarantor  or Bank may be  changed  by  notice  given in  accordance  with  this
paragraph.

     19. This is an  integrated  agreement  and is the sole and final  agreement
with respect to the subject matter hereof, and supersedes all prior negotiations
and  agreements.  No  modification  of this Guaranty  shall be effective for any
purpose unless it is in writing and executed by Guarantor and an officer of Bank
authorized to do so.

     20.  Guarantor  agrees  to  pay  all  costs  and  fees,  including  without
limitation all reasonable  attorneys' fees and out-of-pocket costs,  incurred by
Bank in enforcing the Agreement or this  Guaranty.  In addition,  the prevailing
party  (the  "Prevailing  Party")  in any  litigation,  arbitration,  bankruptcy
proceeding,   or  other   formal  or  informal   resolution   (collectively,   a
"Proceeding")  brought  by Bank or any  party  to this  Guaranty  of any  claims
brought to enforce the terms of this  Guaranty  based upon,  arising from, or in
any way  related  to this  Guaranty  or the  transactions  contemplated  herein,
including  without  limitation  contract  claims,  tort  claims,  breach of duty
claims,  and  all  other  common  law or  statutory  claims  (collectively,  the
"Claims"),  shall be entitled to recover  from such other party all its fees and
costs incurred in connection with the Proceeding,  including without  limitation
all its  attorneys'  fees and costs,  whether  incurred by  in-house  counsel or
outside counsel,  all its expert witness and/or consultant's fees and costs, all
its paralegal fees and costs,  and all its other costs and expenses,  regardless
of whether such costs are otherwise statutorily recoverable  (collectively,  the
"Fees and  Costs"),  and  including  without  limitation  all the Fees and Costs
incurred by the Prevailing  Party in connection  with  proceedings in bankruptcy
for relief from and/or modification of automatic stay, for orders of

                                     - 49 -
<PAGE>


nondischargeability,  and/or  regarding use of cash collateral,  claims,  and/or
plans.  The  Prevailing  Party shall also be entitled to recover from such other
party all its costs  incurred in enforcing  the judgment or award giving rise to
the Prevailing  Party's status as the Prevailing Party.  Guarantor  acknowledges
that it is on notice that, in the event that the other party retain the services
of one or more experts in connection with the Proceeding,  such other party will
seek to  recover  the fees and costs of such  expert or experts  hereunder,  and
that, if such party becomes the Prevailing  Party in the Proceeding,  such party
shall be entitled to recover  such fees and costs  hereunder,  whether such fees
and costs are sought before  trial,  during  trial,  or by post-trial  motion or
memorandum of costs.

     21. In all cases where the word  "Guarantor" is used in this  Guaranty,  it
shall  mean and apply  equally  to each of and all of the  entities  which  have
executed  this  Guaranty.  If any  Obligation  is  guaranteed  by  two  or  more
guarantors,  the obligation of Guarantor  shall be several and also joint,  each
with all and also each with any one or more of the  others,  and may be enforced
at the option of Bank against each severally,  any two or more jointly,  or some
severally and some jointly.

     22. The term  "Borrower"  includes any  debtor-in-possession  or trustee in
bankruptcy  or  court-appointed  receiver  which  succeeds to the  interests  of
Borrower.

     23. This  Guaranty and all acts and  transactions  hereunder and the rights
and  obligations  of  the  parties  hereto  shall  be  governed,  construed  and
interpreted  in  accordance  with the laws of the State of  California,  without
regard to choice of law principles.

     24.  GUARANTOR   ACKNOWLEDGES  THAT  THE  RIGHT  TO  TRIAL  BY  JURY  IS  A
CONSTITUTIONAL RIGHT, BUT THAT IT MAY BE WAIVED. AFTER CONSULTING (OR HAVING HAD
THE  OPPORTUNITY  TO CONSULT) WITH COUNSEL OF THEIR  CHOICE,  GUARANTOR AND BANK
KNOWINGLY  AND  VOLUNTARILY,  AND FOR THEIR MUTUAL  BENEFIT,  WAIVE ANY RIGHT TO
TRIAL  BY  JURY  IN  THE  EVENT  OF  LITIGATION  REGARDING  THE  PERFORMANCE  OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR THE OBLIGATIONS.

     GUARANTOR  ACKNOWLEDGES  THAT GUARANTOR HAS HAD THE OPPORTUNITY TO READ AND
REVIEW WITH GUARANTOR'S COUNSEL THIS GUARANTY, AND GUARANTOR ACKNOWLEDGES HAVING
READ AND UNDERSTOOD THE MEANING AND EFFECT OF THIS DOCUMENT BEFORE SIGNING IT.


                                     - 50 -

<PAGE>


         IN WITNESS WHEREOF, the undersigned has/have executed this Guaranty as
of the date set forth above.


                         MISSION WEST PROPERTIES, L.P. II
                         A Delaware limited partnership

                         By       Mission West Properties, Inc.,
                                  A Maryland corporation,
                                  Its General Partner


                                  By: /s/ Carl E. Berg
                                  -------------------------------
                                  Its: Chairman & CEO



                                  By: /s/ Raymond V. Marino
                                  -------------------------------
                                  Its: President & COO

                                     - 51 -

<PAGE>


EXHIBIT 99.1

                    CERTIFICATION OF CEO AND CFO PURSUANT TO
                               18 U.S.C. ss. 1350,
                             AS ADOPTED PURSUANT TO
                    ss. 906 OF THE SARBANES-OXLEY ACT OF 2002

     In  connection  with the  Quarterly  Report  on Form 10-Q of  Mission  West
Properties, Inc. (the "Company") for the quarterly period ended June 30, 2002 as
filed with the  Securities  and  Exchange  Commission  on the date  hereof  (the
"Report"),  each of Carl E.  Berg,  Chairman  of the Board  and Chief  Executive
Officer  of the  Company,  and Wayne N. Pham,  Vice  President  of  Finance  and
Controller of the Company,  hereby certify,  pursuant to 18 U.S.C.  ss. 1350, as
adopted  pursuant to ss. 906 of the  Sarbanes-Oxley  Act of 2002, to the best of
his knowledge, that:

     (1) The Report fully  complies  with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and result of  operations of the
Company.


================================================================================
Carl E. Berg
Chairman of the Board and Chief Executive Officer
August 13, 2002


================================================================================
Wayne N. Pham
Vice President of Finance and Controller
August 13, 2002

     This  certification  accompanies  this  Report  pursuant  to ss. 906 of the
Sarbanes-Oxley  Act of 2002 and shall not,  except to the extent required by the
Sarbanes-Oxley  Act of 2002,  or  otherwise  required,  be  deemed  filed by the
Company  for  purposes  of ss. 18 of the  Securities  Exchange  Act of 1934,  as
amended.

                                     - 52 -