EXHIBIT 10.48

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



                       DEED OF TRUST, SECURITY AGREEMENT,
                FIXTURE FILING WITH ABSOLUTE ASSIGNMENT OF RENTS

     THIS  DOCUMENT  CONSTITUTES  A FIXTURE  FILING IN  ACCORDANCE  WITH SECTION
     9501(a)(1)(B) OF THE CALIFORNIA UNIFORM COMMERCIAL CODE.

     THIS INDENTURE (this "Deed of Trust"), is made and given as of the 6 day of
April,  2005, by MISSION WEST PROPERTIES,  L.P., a Delaware limited  partnership
("Borrower"),  as trustor,  to FIRST  AMERICAN  TITLE  COMPANY  ("Trustee"),  as
trustee,  for the benefit of ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA,  a
Minnesota corporation ("Lender"), as beneficiary.

                                   WITNESSETH:

     In  consideration  of the acceptance by Lender of the Note,  defined below,
and for the purposes of securing payment of the Indebtedness, as defined herein,
Borrower hereby GRANTS, BARGAINS, SELLS, TRANSFERS AND CONVEYS UNTO THE TRUSTEE,
ITS SUCCESSORS AND ASSIGNS, IN TRUST, WITH POWER OF SALE, AND GRANTS TO LENDER A
SECURITY INTEREST IN all of the following properties  hereinafter set forth (all
the following being hereinafter collectively referred to as the "Property"):

     A. That certain real property with the buildings and  improvements  thereon
situated in the City of San Jose,  County of Santa Clara,  State of  California,
and described in Exhibit A, attached hereto and  incorporated  herein,  together
with all the estates and rights in and to the real  property and in and to lands
lying within the right-of-way of any streets, roads and public places, opened or
proposed,  adjoining the said land and any and all sidewalks, alleys, strips and
gores and all buildings,  structures,  improvements,  fixtures and  annexations,
access rights, easements, rights of way or use, servitudes, licenses, tenements,
hereditaments and appurtenances now or hereafter  belonging or pertaining to the
real property (the "Real Property").

     B.  Except  for any  personal  property  owned by any  tenants  of the Real
Property,  all right,  title, and interest of Borrower now or hereafter acquired
in and to all fixtures, fittings, furnishings, appliances, goods, equipment, and
machinery,  including,  without  limitation,  all  gas  and  electric  fixtures,
radiators, heaters, engines and machinery, boilers, ranges, ovens, elevators and
motors,  escalators,  bathtubs, sinks, water closets, basins, pipes, faucets and
other ventilating and air conditioning, plumbing, lighting and heating fixtures,
and systems,  maintenance and repair machinery,  vehicles or equipment,  and all
building  materials,  supplies and equipment  now or hereafter  delivered to the
Property and installed or used or intended to be installed or used therein;  all
other  fixtures  and  personal  property of whatever  kind and nature at present
contained in or hereafter placed in any building standing on the Property;  such
other  goods,  equipment,  chattels and  personal  property as are  furnished by
Borrower in such letting;  and all renewals or replacements  thereof or articles
in  substitution  therefor.  All of the  estate,  right,  title and  interest of
Borrower  in and to all  property  of any nature  whatsoever,  now or  hereafter
situated on the  Property  or used or  intended to be used solely in  connection
with the operation thereof,  all of which (i) shall be deemed to be fixtures and
accessions  to the  freehold  and a part of the  realty as between  the  parties
hereto,  and all persons  claiming by,  through or under them, and (ii) shall be
deemed to be a portion of the security for the indebtedness herein mentioned and
secured  by this  Deed of  Trust.  Should  the lien of this Deed of Trust on any
fixtures  or  personal  property  be or  become  subject  to a lease  agreement,
conditional sale agreement or chattel mortgage covering such property,  then all
the rights,  title and interest of Borrower in and to any and all deposits  made
thereon or therefor are hereby assigned to Lender,  together with the benefit of
any payments now or hereafter made thereon. There is also transferred,  set over
and assigned  hereby by Borrower to Lender,  its  successors  and  assigns,  all
leases and use agreements of machinery, equipment and other personal property of
Borrower in the  categories  hereinabove  set forth used in connection  with the
Property, under which Borrower is the lessee of, or entitled to use, such items,
and  Borrower  agrees  to  execute  and  deliver  to  Lender  specific  separate
assignments  to Lender of such leases and  agreements  when requested by Lender;
but nothing herein constitutes Lender's consent to any financing of any fixtures
or personal  property,  and nothing herein shall obligate  Lender to perform any
obligations  of  Borrower  under  any such  leases  or  agreements  unless it so
chooses,  which  obligations  Borrower  hereby  covenants and agrees to well and
punctually perform.

<PAGE>

     C. All rents, income,  contract rights, leases and profits now due or which
may hereafter become due under or by virtue of any lease,  license or agreement,
whether written or verbal,  for the use or occupancy of the Property or any part
thereof together with all tenant security  deposits under leases of the Property
("Rents, Leases and Profits").

     D. All awards,  compensation  and  settlements  in lieu  thereof  made as a
result of any  insurance or any action or  proceeding  affecting the Property or
any  interest  therein  including  but not by way of  limitation  an action as a
result of the taking by power of eminent  domain of the whole or any part of the
Property,  including  any awards for damages  sustained to the  Property,  for a
temporary taking, change of grade of streets or taking of access and the like.

     E. All of the estate, interest or other claim or demand, which Borrower now
has or may hereafter  acquire,  in and with respect to said Property,  including
without  limitation  all deposits made with or other  security  given to utility
companies  by  Borrower  with  respect  to said  Property  and the  improvements
thereon,  and all advance  payments of insurance  premiums made by Borrower with
respect thereto and claims or demands  relating to insurance and all monies held
by Borrower as security deposits from lessees or licensees.

     F. To the extent  assignable,  all insurance  policies  covering all or any
portion of the Property;  all  "Reserves"  (as defined in Section 1.2) and funds
held in escrow by Lender or other  entity  for  Lender's  benefit;  all names by
which the  Property is now or  hereafter  known;  all  interests in the security
deposits  of tenants  and all  management  agreements,  certificates,  licenses,
approvals,   contracts,   entitlements,   building  permits,   environmental  or
warranties,  guaranties,  blueprints,  plans, maps, documents, books and records
relating to the construction, development and use of the Property.

     G.  Borrower's  interest  in  and to all  minerals,  royalties,  gas or oil
rights, water, water rights, water stock,  flowers,  shrubs, lawn plants, crops,
trees,  timber and other emblements now or hereafter  located on, under or above
all or any part of the Property.

     H. All proceeds of the  conversion,  voluntary or involuntary of any of the
foregoing into cash or liquidated claims.

     The  items  set  forth  in  paragraphs  A  through  H above  are  sometimes
hereinafter  separately  referred to as "Collateral",  and this Deed of Trust is
hereby  declared  by  Borrower to be a security  agreement  with  respect to the
Collateral; and to the extent that the Collateral are goods which are, or are to
become  fixtures,  this Deed of Trust is recorded as a fixture filing,  with the
Borrower as the Debtor, and the Lender as the Secured Party.

     It is specifically understood that the enumeration of any specific articles
of property  shall in no way exclude or be held to exclude any items of property
not specifically  mentioned.  All of the land,  estate and property herein above
described, real, personal and mixed, whether affixed or, annexed or not, and all
rights hereby conveyed and mortgaged are intended to be as a unit and are hereby
understood  and agreed and  declared to be  appropriated  to the use of the real
estate,  and shall for the  purposes  of this Deed of Trust be deemed to be real
estate and conveyed and mortgaged hereby.

     It is further specifically  understood and agreed that all right, title and
interest  of  Borrower  in  and to all  extensions,  improvements,  betterments,
renewals, substitutions and replacements of, and all additions and appurtenances
to, the Property, hereafter acquired by or released to Borrower, or constructed,
assembled  or placed by Borrower on the  Property,  and all  conversions  of the
security  constituted  thereby,  immediately  upon  such  acquisition,  release,
construction assembly,  placement or conversion, as the case may be, and in each
such case, without any further grant,  encumbrances,  conveyance,  assignment or
other act by Borrower, shall become subject to the lien of this Deed of Trust as
fully and  completely  and with the same  effect as though now owned by Borrower
and  specifically  described  herein,  but at any and all  times  Borrower  will
execute  and  deliver  to Lender  any and all such  further  assurances,  deeds,
conveyances,  or assignments thereof or security interests therein as Lender may
reasonably require for the purpose of expressly and specifically  subjecting the
same to the lien of this Deed of Trust.

     THIS CONVEYANCE IS MADE, IN TRUST, TO SECURE:

          (i) Payment by Borrower, its successors and assigns, as maker, of that
     certain Secured Installment Note (the "Note") of even date herewith, to the
     order of Lender, its successors and assigns, the sum of TWENTY-FIVE MILLION
     EIGHT HUNDRED THOUSAND DOLLARS  ($25,800,000.00),  with interest thereon at
     the "Note  Rate"  (as  defined  in the  Note),  according  to the terms and
     conditions  of the Note,  together with any  substitutions,  modifications,
     amendments, extensions or renewals thereof;

          (ii) Payment to the Lender,  its successors and assigns,  at the times
     demanded and with interest at the "Default  Rate" (as defined in the Note),
     to  accrue  from the date of  advance,  of all sums  advanced,  if any,  in
     protecting  the  interests  of the  Lender  under  this Deed of Trust,  and
     payment  of  taxes on the  Property,  and  payment  of  insurance  premiums
     covering  improvements  thereon,  and payment of principal  and interest on
     prior liens,  and payment of  out-of-pocket  expenses and  attorneys'  fees
     herein  provided for and payment of any Trustee's fees herein provided for,
     and any and all sums advanced under this Deed of Trust; and

<PAGE>

          (iii) Payment and performance by Borrower of all other liabilities and
     obligations of Borrower under the Note,  this Deed of Trust,  and all other
     documents  and  instruments  now or  hereafter  evidencing  or securing the
     Indebtedness (collectively, the "Security Documents").

     The Note  and all such  other  sums,  together  with  interest  thereon  as
aforesaid, being collectively referred to as the "Indebtedness".

     PROVIDED,  HOWEVER,  that if Borrower  shall pay,  or cause to be paid,  to
Lender the Indebtedness and the applicable prepayment premium, if any, to become
due thereupon at the time and in the manner stipulated  herein, and in the Note,
then the  estate,  right,  title and  interest  of the Trustee and Lender in the
Property  shall cease,  terminate and become void, and upon proof being given to
the  satisfaction  of the  Lender  that  the  Indebtedness  and  the  applicable
prepayment premium, if any, has been paid or satisfied,  and upon payment of all
other fees, costs, charges,  expenses and liabilities  chargeable or incurred or
to be incurred  by Trustee or Lender,  the Trustee  shall,  upon  receipt of the
written request of the Lender,  cancel, release and discharge this Deed of Trust
and cause same to be canceled and marked satisfied of record.

     AND IT IS FURTHER COVENANTED, AGREED AND WARRANTED BY BORROWER AS FOLLOWS:

                                    ARTICLE I

                                    COVENANTS

     Borrower warrants, represents, covenants and agrees with Lender as follows:

     Title.  (a) Borrower  warrants that as of the date of  recordation  of this
Deed of Trust in the Official Records of Santa Clara County,  California, it has
good and marketable  title to an indefeasible fee simple estate in the Property,
subject to no liens,  except the lien of general  taxes which may be due but not
yet payable and all encumbrances described in Schedule B of the ALTA loan policy
of title insurance (the "Title Policy") in favor of Lender, as insured, covering
the Real Property and dated as of the date of  recordation of this Deed of Trust
in the Official  Records of Santa Clara County and any other  encumbrances  that
may hereafter be approved by Lender (the "Permitted Encumbrances"),  and further
warrants  that  as of the  date of  recordation  of this  Deed of  Trust  in the
Official  Records  of Santa  Clara  County,  (i) it has good  right  and  lawful
authority to grant, bargain, sell and convey the Property in the manner and form
herein provided, and (ii) it has full power and authority to convey the Property
in the manner and form herein done or intended  hereafter  to be done.  Borrower
hereby  fully and  absolutely  waives and  releases all rights and claims it may
have in or to said lands,  tenements and property as a homestead  declaration or
exemption,  or other  exemption,  under  and by  virtue  of any act of the State
Legislature  of the State of  California  now existing or which may hereafter be
passed in relation  thereto.  This Deed of Trust is and shall remain a valid and
enforceable first lien on the Property subject only to Permitted Encumbrances.

     Borrower has and shall  maintain  title to the  Collateral,  including  any
additions or replacements  thereto,  free of all security  interests,  liens and
encumbrances,  other  than  the  security  interest  hereunder,  purchase  money
personal property security interests and other than as disclosed to and accepted
by Lender in  writing or  permitted  herein,  and has good right to subject  the
Collateral to the security interest hereunder.

     Borrower shall, at the cost of Borrower, and without expense to Lender, do,
execute,  acknowledge  and  deliver  all and every  such  further  acts,  deeds,
conveyances, deeds of trust, assignments, notices of assignments,  transfers and
assurances as Lender shall from time to time reasonably require,  for the better
assuring,  conveying,  assigning,  transferring  and confirming  unto Lender the
property and rights hereby  conveyed or assigned or intended now or hereafter to
be, or which  Borrower may be or may hereafter  become bound to convey or assign
to Lender,  or for carrying out the intention of facilitating the performance of
the terms of this Deed of Trust and, on demand, shall execute and deliver one or
more financing statements, chattel mortgages or comparable security instruments,
to evidence more effectively the lien hereof upon the Collateral.

     Borrower  forthwith  upon the  execution and delivery of this Deed of Trust
and  thereafter  from time to time,  shall  cause  this  Deed of Trust,  and any
security  instrument  creating a lien or  evidencing  the lien  hereof  upon the
Collateral and each instrument of further  assurance to be filed,  registered or
recorded  in such manner and in such places as may be required by any present or
future law or order to publish  notice of and fully to protect  the lien  hereof
upon the interest of Lender in the Property.

     Borrower  shall pay all filing,  registration  or recording  fees,  and all
out-of-pocket expenses incident to the preparation, execution and acknowledgment
of this Deed of  Trust,  any deed of trust  supplemental  hereto,  any  security
instrument  with  respect  to the  Property  including  the  Collateral  and any
instrument of further assurance,  and all federal,  state,  county and municipal
stamp taxes and other taxes,  duties,  imposts,  assessments and charges arising
out of or in connection  with the execution and delivery of the Note,  this Deed
of Trust, any deed of trust supplemental  hereto,  any security  instrument with
respect to the Property,  including the Collateral, or any instrument of further
assurance.  Notwithstanding the foregoing,  Borrower shall have no obligation to
pay any taxes assessed upon the net income of Lender.

<PAGE>

     Borrower  shall do all things  necessary to preserve and keep in full force
and effect its  existence,  franchises,  rights and  privileges as a corporation
under the laws of the state of its  formation  and shall  comply in all material
respects with all regulations,  rules, ordinances,  statutes, orders and decrees
of any  governmental  authority or court  applicable to the Property or any part
thereof.

     Payment of Note and Reserves.  (a) Borrower  shall  promptly and punctually
pay all principal and interest,  prepayment  premium, if any, and all other sums
to become due in respect to the Note,  according  to the true intent and meaning
thereof. Borrower shall also pay to Lender, together with and in addition to the
monthly  payments of principal and interest payable under the terms of the Note,
on the date set forth  therein  for the making of monthly  payments,  until said
Note is fully paid, a sum, as estimated by Lender,  equal to one-twelfth  (1/12)
of the last annual taxes and  assessments  on said  Property  (unless said taxes
were based upon  assessments  which  excluded  the current  improvements  or any
portions thereof, in which event the amount of such deposits shall be based upon
Lender's  reasonable  estimate as to the total  amount of taxes to be levied and
assessed),  the taxes and assessments  next due on the Property  covered by this
Deed of Trust,  plus the  premiums  that will next  become  due and  payable  on
insurance  policies as may be required  hereunder,  Borrower agreeing to deliver
promptly to Lender all bills and notices  thereof,  less all sums  already  paid
therefor,  divided by the number of months to elapse  before one month  prior to
the date when such premiums, taxes and assessments will become delinquent,  such
sums to be held by Lender to pay said  premiums,  taxes  and  assessments.  Such
payments,  hereinafter  referred to as  "Reserves",  are to be held  without any
allowance of interest or dividend to Borrower and need not be kept  separate and
apart  from  other  funds of Lender.  In lieu of  monthly  payment  of  Reserves
hereunder,  Lender in its sole discretion may require  Borrower to pay insurance
premiums and taxes and  assessments  directly and to deliver to Lender copies of
paid insurance  premium receipts and copies of paid tax and assessment  receipts
within thirty (30) days after receipt of the same by Borrower.  Lender from time
to time  thereafter  may require  payment of Reserves upon ten (10) days,  prior
written notice to Borrower.

     The  Reserves are solely for the added  protection  of Lender and entail no
responsibility  on  Lender's  part beyond the  allowing  of due credit,  without
interest,  for the sums actually  received by it. Upon assignment of the Deed of
Trust by Lender,  any  Reserves on hand shall be turned over to the assignee and
any  responsibility  of the assignor with respect thereto shall terminate.  When
the  Indebtedness  has been fully paid, any remaining  deposits shall be paid to
Borrower or to the then owner or owners of the Property as the case may be. Such
deposits are hereby  pledged as  additional  security for the  Indebtedness  and
shall be held in trust to be irrevocably applied for the purposes for which made
hereunder  and shall not be subject  to the  direction  or control of  Borrower;
provided,  however, that the Lender shall not be liable for any failure to apply
to the payment of taxes and  assessments  and  insurance  premiums any amount so
deposited  unless  Borrower  shall have been  furnished  with  invoices for such
charges.

     If the total of the Reserves  shall exceed the amount of payments  actually
applied by Lender,  such excess may be credited by Lender on subsequent payments
to be made by  Borrower  or its  successors  in  interest  as may  appear on the
records of Lender. If, however,  the Reserves shall not be sufficient to pay the
sums  required  when the same  shall  become  due and  payable,  Borrower  shall
immediately deposit with Lender the full amount of any such deficiency. If there
shall be an "Event of  Default"  (as  defined  in  Article  IV) under any of the
provisions of this Deed of Trust,  Lender may apply, at any time, the balance of
the  Reserves  against  such sums due and payable  under the Note,  or under any
instrument constituting additional security for said Note.

     Lender, in making any payment hereby authorized:  (i) relating to taxes and
assessments,  may do so  according to any bill,  statement or estimate  procured
from the  appropriate  public office  without  inquiry into the accuracy of such
bill, statement or estimate or into the validity of any tax, assessments,  sale,
forfeiture,  tax  lien or  title or  claim  thereof;  or (ii) for the  purchase,
discharge, compromise or settlement of any other prior lien, may do so only upon
reasonable  inquiry as to the validity or amount of any claim for lien which may
be asserted.

     Maintenance and Repair; Inspection. Borrower shall keep the Property in the
current  operating  order,  repair  and  condition,  reasonable  wear  and  tear
excepted, and shall not commit or permit any waste thereof.  Borrower shall make
or  cause  to  be  made  all  repairs,  replacements,  renewals,  additions  and
improvements and, subject to the provisions of Section 1.6 hereof,  complete and
restore  promptly and in good  workmanlike  manner any building or  improvements
which may be constructed,  damaged,  or destroyed thereon,  and pay when due all
costs  incurred  therefor  (unless  Borrower  is  contesting  such costs in good
faith). Except as otherwise permitted herein, Borrower shall not remove from the
Property or demolish any of the improvements or the Collateral  conveyed hereby,
nor demolish or materially  alter such Property without prior written consent of
Lender, which shall not be unreasonably withheld or delayed. Borrower shall upon
reasonable prior notice permit Lender, its agents and authorized representatives
the  opportunity  to  inspect  the  Property,  including  the  interior  of  any
structures,  at any  reasonable  times  subject  to the  rights  of all  lessees
thereof.

     Compliance With  Laws/Maintenance of Permits.  Borrower shall comply in all
material respects with all laws, ordinances,  regulations, covenants, conditions
and restrictions affecting said Property or the operation thereof, and shall pay
all fees or charges of any kind in  connection  therewith  (except to the extent
Borrower is contesting the same in good faith).  Borrower shall obtain, keep and
constantly maintain in full force and effect during the entire term of this Deed
of Trust, all certificates,  licenses and permits necessary for the operation of
the Real  Property  and,  except as  specifically  provided  for in this Deed of
Trust,  Borrower  shall  not  assign,  transfer  or in any  manner  change  such
certificates, licenses or permits without first receiving the written consent of
Lender. Except with respect to the Permitted Encumbrances, Borrower shall not by
act or omission,  permit any property which is not subject to this Deed of Trust
to rely on the Property or any part  thereof or any interest  therein to fulfill
any governmental  requirement for the existence or use of such property;

<PAGE>

and the  Property  shall not rely on any  property  which is not subject to this
Deed of Trust to fulfill any  governmental  requirement for the existence or use
of the Property.  Borrower shall not by act or omission  impair the integrity of
the Property as a separate tax parcel or subdivided zoning lot or lots, separate
and apart from all other lots.

     Insurance.  (a) Borrower shall keep all buildings and  improvements  now or
hereafter  situated on the Real Property  insured against loss or damage by fire
and other hazards as may  reasonably be required by Lender,  including,  without
limitation,  rent loss insurance,  flood  insurance,  and earthquake  insurance.
Flood  insurance will be waived upon receipt by Lender of evidence  satisfactory
to Lender that flood  insurance  is not required  for the  Property.  Earthquake
insurance  will be waived  upon  receipt by Lender of evidence  satisfactory  to
Lender that the Scenario  Upper Loss ("SUL")  rating of the Property is equal to
or less than  twenty  percent  (20%).  In the event that  conditions  arise with
respect to the Property which would lead a prudent lender to require  additional
inspection  or  testing  of the  Property  to  insure  that  adequate  levels of
insurance are in place, Lender reserves the right to require Borrower to provide
an updated SUL rating report not more often than  annually.  Borrower shall also
provide  liability  insurance with such limits for personal injury and death and
property  damage as Lender may  reasonably  require  with the right of Lender to
reasonably  require increases in the amount of insurance when such increases are
justified by changed circumstances.

     Borrower shall initially maintain, until Lender shall otherwise indicate in
writing,  (i) all  risk  insurance  in an  amount  of not  less  than  the  full
replacement cost of the Property,  with "all risk", "boiler and machinery",  and
"earth quake" coverage, "agreed amount",  "inflation guard", "replacement cost",
"vandalism" and "malicious mischief"  endorsements,  together with an "ordinance
or law  coverage" or  "enforcement"  endorsement,  and  terrorism  insurance (if
commercially  available at commercially  reasonable rates), with a deductible of
not more than ONE HUNDRED THOUSAND DOLLARS ($100,000.00),  which policy shall be
written by a company or companies having a current rating of A:X or better under
Best's Insurance Guide or a rating otherwise approved in writing by Lender, (ii)
general  commercial  liability  insurance  (occurrence form) in the amount of at
least FIVE MILLION  DOLLARS  ($5,000,000.00)  combined single limit for personal
injury  and  property  damage,  which  policy  shall be  written by a company or
companies  having a current rating of A:X or better under Best's Insurance Guide
or a rating otherwise  approved in writing by Lender, and (iii) rental insurance
in an amount  sufficient to cover any loss of rents for the Property  (including
expenses  payable by tenants)  suffered by Borrower for a period of up to twelve
(12)  months.  Borrower  shall be  entitled  to  maintain  all of the  insurance
required above in the form of "blanket" policies.

     All certificates of insurance  coverage to be furnished  hereunder shall be
in forms, companies and amounts reasonably  satisfactory to Lender with standard
non-contributory  mortgagee  clauses or lender's loss payable clause attached to
all casualty policies in favor of and in form reasonably satisfactory to Lender,
including a provision requiring that the coverage evidenced thereby shall not be
materially  modified without thirty (30) days, prior written notice to Lender or
terminated  for  non-payment  of premiums  without ten (10) days prior notice to
Lender.  Borrower  shall  deliver all  certificates,  including  additional  and
renewal certificates,  to Lender, and, in the case of insurance about to expire,
shall deliver renewal  certificates of insurance prior to their respective dates
of  expiration.  Borrower  shall  be  entitled  to  pay  insurance  premiums  in
installments.

     Borrower  shall  not  take out  separate  insurance  concurrent  in form or
contributing in the event of loss with that required to be maintained  hereunder
unless Lender is included thereon under a standard  mortgagee clause or Lender's
loss payable clause reasonably acceptable to Lender.  Borrower shall immediately
notify  Lender  whenever  any such  separate  insurance  is taken  out and shall
promptly deliver to Lender the  certificates  evidencing such policy or policies
of such insurance.

     Casualty.  (a) Borrower shall promptly  notify Lender of any loss in excess
of ONE HUNDRED THOUSAND DOLLARS  ($100,000.00),  whether covered by insurance or
not.  In case of loss or  damage  by fire or other  casualty,  Lender,  or after
foreclosure,  the holder of the  certificate  or  certificates  of purchase,  is
authorized  (i) to settle and adjust any claim under  insurance  policies  which
insure  against  such  risks  (with the duty of Lender to meet and  confer  with
Borrower),  or (ii) to allow  Borrower  to agree with the  insurance  company or
companies on the amount to be paid in regard to such loss; provided, however, so
long as no Event of Default then exists, Borrower shall have the right to settle
all  insurance  claims  involving  amounts up to ONE  HUNDRED  THOUSAND  DOLLARS
($100,000.00)  without  Lender's  involvement  or  consent  and to  receive  the
proceeds  directly for application to the costs of restoration.  In either case,
Lender is authorized to collect and receipt for insurance  proceeds in excess of
ONE HUNDRED THOUSAND DOLLARS ($100,000.00).

     Subject to the preceding Section 1.6(a),  provided no Event of Default then
exists and Borrower  certifies as to same,  the net  insurance  proceeds  (after
deduction of Lender's out of pocket costs and  expenses,  if any, in  collecting
the same) shall be made available for the  restoration or repair of the Property
if, in Lender's sole and absolute discretion:  (i) restoration or repair and the
continued operation of the Property is economically feasible;  (ii) no lease has
terminated as a result of the loss or damage and all leases  remain  enforceable
under their terms,  without  modification;  (iii) the loss does not occur in the
six (6) month period preceding the stated Maturity Date and Lender's independent
consultant  certifies  that the  restoration of the Property can be completed at
least  ninety  (90) days  prior to the  Maturity  Date;  and (iv) the  insurance
proceeds are  sufficient to complete the  restoration  or repair or Borrower has
deposited with Lender an amount,  in cash, which Lender, in its sole discretion,
determines is necessary,  in addition to the net insurance  proceeds,  to pay in
full  the  cost of the  restoration  or  repair  (Borrower's  deposit  shall  be
disbursed prior to any disbursement of insurance  proceeds held by Lender).  Any
excess proceeds  remaining after  completion of such repair shall be distributed
first to Borrower to the extent  Borrower  has

<PAGE>

deposited funds with Lender for such repair with the balance applied against the
Indebtedness.  Notwithstanding the foregoing,  it shall be a condition precedent
to any  disbursement of insurance  proceeds held by Lender hereunder that Lender
shall have approved (x) all plans and  specifications for any proposed repair or
restoration,  (y) the construction schedule, and (z) the architect's and general
contractor's  contract for all  restoration  that  exceeds ONE HUNDRED  THOUSAND
DOLLARS ($100,000.00) in the aggregate. Lender may establish other conditions it
deems  reasonably  necessary to assure the work is fully completed in a good and
workmanlike  manner  free of all  liens or  claims  by  reason  thereof,  and in
compliance with all applicable laws, rules and regulations.  At Lender's option,
the net insurance proceeds shall be disbursed pursuant to a construction  escrow
acceptable  to  Lender.  If an  Event  of  Default  then  exists,  or any of the
conditions set forth in clauses (i) through (iv) of this Section 1.6(b) have not
been met or  satisfied,  the net  insurance  proceeds  shall be  applied  to the
Indebtedness  in such order and  manner as Lender may elect,  whether or not due
and  payable,  with any excess paid to  Borrower;  provided  that if no Event of
Default then exists,  the  prepayment  of the  Indebtedness  resulting  from the
application of the insurance  proceeds to the Indebtedness  shall not be subject
to payment of a  prepayment  premium.  Lender may apply any  insurance  proceeds
remaining after completion of restoration to the  Indebtedness,  or if the above
conditions  are  not  met,  Lender  may  apply  all  insurance  proceeds  to the
Indebtedness.

     In case of loss after  foreclosure  proceedings have been  instituted,  the
proceeds of any such insurance  policy or policies,  if not applied as aforesaid
in rebuilding or restoring the buildings or  improvements,  shall be used to pay
the Indebtedness and the balance,  if any, shall be paid to the persons entitled
thereto.

     Condemnation.   Borrower,  immediately  upon  obtaining  knowledge  of  the
institution  of any  proceeding  for the  condemnation  of the  Property  or any
portion thereof,  shall notify Lender of the pendency  thereof.  Borrower hereby
assigns, transfers and sets over unto Lender all compensation, rights of action,
the  entire  proceeds  of any award and any  claim  for  damages  for any of the
Property taken or damaged under the power of eminent  domain or by  condemnation
or by sale in lieu  thereof.  While any Event of Default is  continuing,  Lender
may, at its option,  commence,  appear in and  prosecute,  in its own name,  any
action or proceeding,  or make any compromise or settlement,  in connection with
such  condemnation,  taking  under the power of  eminent  domain or sale in lieu
thereof with the duty to meet and confer with  Borrower.  Such proceeds shall be
made  available  in the manner  and under the same  conditions  that  Lender may
require in the manner  provided  under  Section  1.6. If the  proceeds  are made
available by Lender to reimburse  Borrower  for the cost of said  rebuilding  or
restoration,  any surplus  which may remain out of said award  after  payment of
such cost of  rebuilding  or  restoration  shall,  at the option of  Lender,  be
applied on account of the  Indebtedness  (without the payment of any  prepayment
premium)  or be paid to  Borrower.  Borrower  agrees  to  execute  such  further
assignments of any compensation,  award, damages,  right of action and proceeds,
as Lender may require.

     Liens and Encumbrances.  Except as provided in Section 1.11, Borrower shall
not, without Lender's express written consent,  permit the creation of any liens
or  encumbrances  on the Property  other than the lien of this Deed of Trust and
any lien for real  property  taxes so long as they are not yet  delinquent,  and
shall pay when due all  obligations,  lawful  claims or  demands  of any  person
which,  if  unpaid,  might  result  in, or  permit  the  creation  of, a lien or
encumbrance on the Property or on the rents, issues,  income and profits arising
therefrom,  whether such lien would be senior or subordinate hereto,  including,
but without  limiting the generality of the foregoing,  all claims of mechanics,
materialmen,  laborers, and others for work or labor performed,  or materials or
supplies  furnished  in  connection  with  any work of  demolition,  alteration,
improvement of or construction upon the Property,  and Borrower will do or cause
to be done everything necessary so that the priority of the lien of this Deed of
Trust shall be fully  preserved,  at the cost of  Borrower,  without  expense to
Lender. So long as no Event of Default exists hereunder, Borrower shall have the
right to contest the validity of any lien by  appropriate  judicial  proceedings
timely and  diligently  prosecuted  and to  withhold  payment  of any  contested
amount, and shall, as a condition to such challenge and withholding,  furnish to
Lender such surety  undertaking  as may be required by law or otherwise  provide
such  security  to  Lender  as  Lender  shall  reasonably  request.  Any lien or
encumbrance on the Property created hereafter shall contain,  or shall by virtue
hereof be deemed to contain, a provision  subordinating such lien or encumbrance
to all leases then or in the future affecting the Property, unless the holder of
such lien grants the lessees under the leases nondisturbance rights.

     Taxes and  Assessments.  Borrower  shall  pay in full when due,  and in any
event  before  any  penalty  or  interest   attaches,   all  general  taxes  and
assessments,  special taxes, special assessments,  water charges,  sewer service
charges and all other  charges  against the Property and shall furnish to Lender
official receipts evidencing the payment thereof. Notwithstanding the foregoing,
so long as no Event of Default then exists  hereunder,  Borrower may contest any
tax or  assessment  which  Borrower  may desire to contest  in  accordance  with
Section 1.8.

     Indemnification.  Borrower  shall appear in and defend any suit,  action or
proceeding that might in any way adversely affect the value of the Property, the
priority  of this Deed of Trust or the rights  and  powers of Lender  under this
Deed of Trust.  Borrower shall, at all times,  indemnify,  defend, hold harmless
and on demand,  reimburse Lender for any and all loss, damage,  expense or cost,
including  cost of  evidence  of title and  attorneys'  fees,  arising out of or
incurred in connection with any such suit, action or proceeding,  and the sum of
such expenditures shall be secured by this Deed of Trust and shall bear interest
if not paid when due at the rate  provided in the Note secured  hereby and shall
be due and  payable  within ten (10) days  following  Lender's  written  demand.
Notwithstanding  the  foregoing,  nothing  contained  herein  shall be deemed to
require Borrower to indemnify,  defend, protect or hold harmless Lender from any
claim,  loss,  liability,  damage,  cause  of  action,  judgment,  court  costs,
attorneys'  fees or other  expenses,  to the extent  resulting  from Lender's or
Lender's employees',  contractors' or agents' negligence,  willful misconduct or
breach of its obligations under any Loan Document.  In

<PAGE>

addition,  if Borrower is  obligated to  indemnify  and defend  Lender under the
foregoing  indemnity,  Borrower shall be entitled to indemnify and defend Lender
with counsel  selected by Borrower,  but  reasonably  acceptable to Lender,  and
Borrower  shall be  entitled  to  control  the  litigation  and any  settlements
thereof. Nothing contained in this indemnity shall prevent Lender from obtaining
its own counsel in any proceedings,  at Lender's sole expense, provided further,
that  Lender  shall  have the right to employ  separate  counsel  at  Borrower's
expense if there are legal defenses  available to Lender that are different from
or  additional  to those  available  to Borrower  and which,  in the  reasonable
opinion of Lender's counsel,  are sufficient to make it undesirable for the same
counsel to represent both Borrower and Lender,  or, in the reasonable opinion of
Lender's counsel, a conflict of interest exists between Borrower and Lender that
would make such separate representation  advisable.  Borrower shall pay the cost
of suit, cost of evidence of title and attorneys' fees in any proceeding,  suit,
and foreclosure proceedings through the court brought by the Lender to foreclose
this Deed of Trust.

     Transfer of Title or Further Encumbrances. (a) Except as otherwise provided
herein, Borrower and all endorsers,  guarantors, sureties, accommodation parties
hereof and all other  persons  liable or to become liable for all or any part of
the  Indebtedness  agree that if the  Property  or any part  thereof or interest
therein, or any interest in Borrower, is sold, assigned, transferred,  conveyed,
encumbered,  hypothecated, mortgaged or otherwise alienated (excepting leases in
the ordinary course of managing income property,  transfers of personal property
authorized  herein  and  purchase  money  encumbrances  of  personalty)  whether
voluntarily,  involuntarily  or by operation of law,  without the prior  written
consent of Lender,  Lender, at its option,  may declare the Note to be forthwith
due and payable.

     Notwithstanding  anything to the contrary  set forth in this Section  1.11,
provided  that there shall not then exist any "Event of Default"  (as defined in
Section 4.1) Borrower  shall have a one-time right to transfer the Property to a
bona fide third  party  purchaser  (a  "Purchaser"),  which  shall be subject to
Lender's  consent and approval,  in Lender's sole and absolute  discretion.  The
Purchaser  shall  be  required  to  assume  all of  Borrower's  liabilities  and
obligations  under  the  Note,  this  Deed  of  Trust,  and all  other  Security
Documents,  and to execute  and  deliver an  Environmental  Indemnity  Agreement
satisfactory  to Lender,  and upon the closing of such transfer and  assumption,
Borrower and any  guarantor(s)  of the  Indebtedness  shall be relieved from all
liability  under the  Security  Documents,  including  the Note,  and under that
certain  Environmental  Indemnity  Agreement of even date herewith from Borrower
and "Principal"  (defined  below),  first arising or occurring after the date of
such  transfer and  assumption,  and Lender shall confirm the same in writing to
Borrower.  Borrower and/or  Purchaser shall pay all of Lender's actual costs and
expenses,  including  attorneys'  fees,  in  connection  with such  transfer and
assumption,  and shall pay to Lender a transfer fee, equal to one percent (1.0%)
of the  outstanding  balance  of the  Note as of the date of such  transfer  and
assumption,  and shall  execute and provide to Lender  such other  documents  or
instruments as Lender may require.

     Borrower  shall not create or permit to be created or to remain any lien on
the Property,  or any part  thereof,  except for the lien of this Deed of Trust.
Notwithstanding  the  foregoing,  provided  that there  shall not then exist any
Event of Default, and subject to Lender's prior written consent, in its sole and
absolute discretion, Borrower shall be permitted to place a lien on the Property
securing  additional  financing on the Property  (the  "Additional  Financing"),
provided  that (i) the lien of the  Additional  Financing  shall at all times be
secondary and subordinate to the lien of this Deed of Trust, (ii) the Additional
Financing shall have a fixed rate of interest, (iii) the aggregate loan-to-value
ratio  of the  loan  evidenced  by the  Note  (the  "Loan")  and the  Additional
Financing  shall not exceed seventy  percent (70%), as evidenced by an appraisal
satisfactory  to  Lender  by an  appraiser  satisfactory  to  Lender;  (iv)  the
aggregate debt service coverage ratio of the Loan and Additional Financing shall
not be less than 1.45:1,  (v) the  Additional  Financing  shall have a scheduled
maturity  date after the maturity  date of the Loan,  (vi) Lender shall have the
right to approve the documentation for the Additional  Financing;  and (vii) the
lender under the Additional  Financing shall execute an intercreditor  agreement
satisfactory to Lender.

     Borrower  hereby agrees that Lender will have the first right of refusal to
provide the Additional Financing.  All out of pocket costs incurred by Lender in
connection  with  making  the  Additional  Financing,   or  with  reviewing  the
Additional  Financing  if the  same is not  made  by  Lender,  shall  be paid by
Borrower.

     Lender  may,  without  notice to  Borrower,  waive any  default  under this
Section  1.11 and deal with such  successor  or  successors  in  interest in the
Property  in the same  manner as with  Borrower,  without in any way  releasing,
discharging  or otherwise  affecting the liability of Borrower,  the  endorsers,
guarantors,  sureties, accommodation parties hereof and all other persons liable
or to become  liable  for all or any part of this  Indebtedness.  No sale of the
Property, no forbearance on the part of the Lender, no extension of the time for
the  payment of the  Indebtedness  or any change in the terms of the Note or the
Security  Documents  consented  to by the Lender and  Borrower  shall in any way
whatsoever operate to release, discharge,  modify, change or affect the original
liability of Borrower and all such persons liable or to become liable for all or
any part of this Indebtedness, either in whole or in part.

     Advances.  If Borrower  shall fail to perform any of the  covenants  herein
contained or contained in any instrument  constituting  additional  security for
the Note (and any notice  and/or cure period  provided  herein or therein  shall
have  expired),  Lender may, but without  obligation  to do so, and with written
notice to Borrower, make advances to perform same in its behalf, and all sums so
advanced  shall be a lien upon the Property and shall be secured by this Deed of
Trust and become part of the  Indebtedness.  Borrower  shall repay on demand all
sums so  advanced  in its behalf  with  interest  thereon at the  Default  Rate,
defined  in the Note from the time of such  advance.  Nothing  herein  contained
shall  prevent  any  such  failure  to  perform  on the  part of  Borrower  from
constituting an Event of Default as defined below.

<PAGE>

     Financial  Statements/Records.  Borrower  shall  deliver  or  cause  to  be
delivered  to  Lender,  within  ninety  (90)  days  after the end of each of the
respective party's fiscal years, (i) an annual operating statement of income and
expenses  (which shall be audited if an Event of Default exists) with respect to
the operation of the Property,  prepared in accordance  with generally  accepted
accounting principles,  consistently applied ("GAAP") and certified by the chief
financial officer or manager of Borrower as complete and correct in all material
respects,  (ii)  financial  statements of Borrower and Mission West  Properties,
Inc.,  a Maryland  corporation,  the general  partner of Borrower  ("Principal")
(which shall be audited if an Event of Default exists), in reasonable detail and
certified  as  complete  and  correct  in all  material  respects  by the  party
furnishing the statement,  and (iii)  financial  statements of all tenants under
leases of the Property,  if available according to such leases.  Borrower agrees
to keep adequate books and records of account in accordance  with GAAP and shall
permit Lender, and its agents,  accountants and attorneys, upon reasonable prior
notice,  to visit and inspect the Property and examine the Property's  books and
records of account at Borrower's  office during normal  business  hours,  and to
discuss the Property's  affairs,  finances and accounts with  Borrower,  at such
reasonable  times as Lender may request.  Such statements shall be prepared in a
form acceptable to Lender,  to include,  without  limitation,  a current leasing
summary  (which shall  disclose,  among other things,  names of tenants,  square
footage of leased area, commencement dates and expiration dates of the leases as
well as concessions granted to Lessees), gross rental income, other income, real
estate  taxes,   insurance,   operating  expenses  and  depreciation   deduction
accompanied by financial  statements  received by Borrower from tenants.  If the
operating  statements  for the  Property  provided by Borrower are not in a form
acceptable to Lender or Borrower  fails to furnish such  statements and reports,
Lender  shall have the right to audit the  respective  books and  records of the
Property  at the  expense of  Borrower  and if  Borrower  prevents  Lender  from
conducting such audit, Lender may at the election of Lender declare this Deed of
Trust in default.

     Time. Borrower agrees that time is of the essence hereof in connection with
all  obligations  of  Borrower  herein or in said Note or any other  instruments
constituting additional security for said Note.

     Estoppel  Certificates.  Borrower,  within  ten  (10)  days  after  written
request,  shall furnish a duly  acknowledged  written  statement  confirming the
amount  secured by this Deed of Trust,  and  stating  either that to the best of
Borrower's  knowledge no setoffs or defenses exist against the Deed of Trust or,
if such setoffs or defenses are alleged to exist, the nature thereof.

     Maintenance of Parking and Access; Prohibition Against Alteration. Borrower
shall construct,  keep and constantly  maintain,  as the case may be, all curbs,
drives,  parking areas and the number of parking spaces  heretofore  approved by
Lender or heretofore or hereafter  required by any governmental  body, agency or
authority  having  jurisdiction  over  Borrower or the  Property,  and shall not
alter, erect, build or construct upon any portion of the Property,  any building
or structure of any kind whatsoever,  the erection,  building or construction of
which has not been  previously  approved  by Lender in writing,  which  approval
shall not be unreasonably withheld.  Nothing contained herein shall, however, be
construed to prohibit  Borrower (or any tenant of the Property)  from or require
Lender's  consent to,  construction  of any alterations  permitted,  required or
contemplated under any lease of the Property,  to the extent Lender has approved
such lease.

     Property  Manager.  The exclusive manager of the Property shall be Borrower
or  Principal,  or such  other  manager as may be first  approved  in writing by
Lender, which approval shall not be unreasonably withheld. The exclusive leasing
agent of the  Property,  if other  than the  foregoing  parties,  shall be first
approved in writing by Lender, which approval shall not be unreasonably withheld
The management and leasing contracts and all tenant leases shall be satisfactory
to and subject to the written  approval of Lender,  which  approval shall not be
unreasonably  withheld,  throughout the term of the  Indebtedness,  and shall be
subordinate to this Deed of Trust;  provided that upon the request of any tenant
not affiliated with Borrower, any member of Borrower or any shareholder,  member
or partner of any member of Borrower,  Lender shall grant to such tenant written
nondisturbance  rights in form  satisfactory  to Lender so long as the lease has
been approved by Lender.  Upon default in any of these  requirements,  not cured
within the applicable  cure period,  if any, then the whole of the  Indebtedness
shall, at the election of Lender, become immediately due and payable, and Lender
shall be entitled to exercise any or all remedies  provided for or referenced in
this Deed of Trust.

     Payment of Junior  Encumbrances.  Borrower  shall not permit any default or
delinquency under any other lien, imposition,  charge or encumbrance against the
Property,  even  though  junior and  inferior to the lien of this Deed of Trust;
provided, however, the foregoing shall not be construed to permit any other lien
or encumbrances against the Property,  except as otherwise specifically provided
herein.

     Alteration,  Removal  and Change in Use of  Property  Prohibited.  Borrower
agrees not to permit or suffer any of the  following  without the prior  written
consent of Lender, which consent shall not be unreasonably withheld:

          ANY  STRUCTURAL  ALTERATION OF, OR ADDITION TO, THE PROPERTY AS NOW OR
     HEREAFTER  SITUATED  UPON THE PROPERTY OR THE ADDITION OF ANY NEW BUILDINGS
     OR OTHER STRUCTURE(S) THERETO,  EXCEPT FOR THE ERECTION OF NON-LOAD-BEARING
     INTERIOR WALLS;  PROVIDED,  HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE
     DEEMED TO REQUIRE THE CONSENT OF LENDER IN CONNECTION  WITH ANY  ALTERATION
     OR IMPROVEMENT  REQUIRED OR PERMITTED BY ANY LEASE OF THE PROPERTY APPROVED
     BY LENDER; OR

<PAGE>

          THE REMOVAL,  TRANSFER,  SALE OR LEASE OF THE COLLATERAL,  EXCEPT THAT
     THE RENEWAL,  REPLACEMENT OR  SUBSTITUTION  OF COLLATERAL  (REPLACEMENT  OR
     SUBSTITUTED  ITEMS MUST BE OF LIKE OR BETTER QUALITY THAN THE REMOVED ITEMS
     IN THEIR ORIGINAL  CONDITION)  ENCUMBERED  HEREBY MAY BE MADE IN THE NORMAL
     COURSE OF BUSINESS.

     Conveyance of Mineral Rights Prohibited. Borrower agrees that the making of
any oil,  gas or  mineral  lease or the sale or  conveyance  of any oil,  gas or
mineral  lease or the sale or  conveyance  of any  mineral  interest or right to
explore for minerals under,  through or upon the Property would impair the value
of the Property securing the Note; and that Borrower shall have no right,  power
or authority to lease the Property,  or any part thereof,  for oil, gas or other
mineral  purposes,  or to grant,  assign or convey any  mineral  interest of any
nature,  or the right to explore for oil, gas and other minerals,  without first
obtaining from Lender express  written  permission  therefor,  which  permission
shall not be valid until recorded among the real property  records of the County
in which the Real Property is situated. Borrower further agrees that if Borrower
shall  make,  execute  or enter into any such lease or attempt to grant any such
mineral  rights without the prior written  consent of Lender,  then Lender shall
have the option,  without notice,  to declare the same to be a default hereunder
and to declare the  Indebtedness  immediately  due and payable.  Whether  Lender
shall consent to such lease or grant of mineral rights, Lender shall receive the
entire  consideration to be paid for such lease or grant of mineral rights, with
the same to be applied to the  Indebtedness,  notwithstanding  the fact that the
amount owing thereon may not then be due and payable or the said indebtedness is
otherwise  adequately secured;  provided,  however,  that the acceptance of such
consideration  shall  in no way  impair  the  lien of this  Deed of Trust on the
Property.

                                   ARTICLE II

                   SECURITY AGREEMENT AND FINANCING STATEMENT
                    UNDER CALIFORNIA UNIFORM COMMERCIAL CODE

     Security  Agreement.  To the extent any Collateral  covered by this Deed of
Trust  consists  of  rights  in  action  or  personal  property  covered  by the
California Uniform Commercial Code (the "Commercial  Code"),  this Deed of Trust
constitutes  a security  agreement  and  financing  statement  as defined in the
Commercial Code.

     Financing  Statement.  THIS DEED OF TRUST SHALL BE EFFECTIVE AS A FINANCING
STATEMENT  FILED AS A FIXTURE  FILING WITH RESPECT TO ALL GOODS  CONSTITUTING  A
PART OF THE  COLLATERAL  WHICH  ARE OR ARE TO  BECOME  FIXTURES  RELATED  TO THE
PREMISES.  FOR PURPOSES OF THE CALIFORNIA  UNIFORM COMMERCIAL CODE THE FOLLOWING
INFORMATION IS FURNISHED:

          THE NAME AND ADDRESS OF THE RECORD OWNER OF THE REAL ESTATE  DESCRIBED
     IN THIS INSTRUMENT ARE:

                           Mission West Properties, L.P.
                           10050 Bandley Drive
                           Cupertino, California 95014
                           Attn:    Carl E. Berg
                                    Raymond V. Marino

          THE NAME AND ADDRESS OF THE DEBTOR ARE:

                           Mission West Properties, L.P.
                           10050 Bandley Drive
                           Cupertino, California 95014
                           Attn:    Carl E. Berg
                                    Raymond V. Marino
                           (Organization No. 2500587)

<PAGE>

          THE NAME AND ADDRESS OF THE LENDER ARE:

                           ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
                           c/o Allianz of America, Inc.
                           55 Greens Farms Road
                           P.O. Box 5160
                           Westport, Connecticut 06881-5160
                           Attn:  Real Estate Department

          INFORMATION   CONCERNING  THE  SECURITY  INTEREST  EVIDENCED  BY  THIS
     INSTRUMENT MAY BE OBTAINED FROM THE SECURED PARTY AT ITS ADDRESS ABOVE;

          THIS DOCUMENT COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES; AND

          PRODUCTS OF THE COLLATERAL ARE ALSO COVERED.

     Additional  Documents.  This  Deed of Trust  shall be  self-operative  with
respect to any Collateral covered by this Deed of Trust which consists of rights
in action or personal  property  covered by the  Commercial  Code,  but Borrower
agrees to execute  and  deliver on demand such  security  agreements,  financing
statements or other  instruments as Lender may reasonably  request to impose the
lien hereof more specifically upon any of such property and to pay the recording
and/or filing fees associated  therewith.  Borrower hereby  authorizes Lender to
file UCC-1  financing  statements or such other  financing  statements as may be
necessary  under the  Commercial  Code to fully  perfect the security  interests
granted herein by Borrower.

     Nature of  Collateral.  The  remedies for any  violation of the  covenants,
terms  and  conditions  of  the  agreements  herein  contained  shall  be (a) as
prescribed herein, or (b) by general law, or (c) as to such part of the security
which is covered by the Commercial Code by the specific  statutory  consequences
now or hereafter  enacted and specified in said Commercial Code, all at Lender's
sole election.  Borrower and Lender agree that nothing herein contained shall be
construed as in any way derogating from or impairing this declaration and hereby
stated intention of the parties hereto,  that everything used in connection with
the  production of income from the Property  and/or  adapted for the use therein
and/or  which is  described  or  reflected  in this Deed of Trust is, and at all
times and for all  purposes  and in all  proceedings,  both legal or  equitable,
shall be  regarded as part of the real  estate  irrespective  of whether (i) any
such item is physically  attached to the  improvements,  (ii) serial numbers are
used for the better  identification  of certain equipment items capable of being
thus  identified  in a recital  contained  therein or in any list filed with the
Lender,  or (iii) any such item is referred  to or  reflected  in any  financing
statement filed at any time.  Similarly,  the mention in any financing statement
of (x) the rights in or the proceeds of any fire and/or hazard insurance policy,
or (y) any  award in  eminent  domain  proceedings  for a taking  or for loss of
value,  or (z) the Borrower's  interest as lessor in any present or future lease
or rights to income  growing out of the use and/or  occupancy  of the  Property,
whether  pursuant to lease or otherwise,  shall never be construed as in any way
altering  any of the  rights of  Lender  as  determined  by this  instrument  or
impugning the priority of Lender's lien granted  hereby or by any other recorded
document, but such mention in said financing statement is declared to be for the
protection of Lender in the event any Court or Judge shall at any time hold with
respect to clauses  (x),  (y) and (z) above that notice of Lender's  priority of
interest to be effective  against a particular class of person,  including,  but
not  limited  to,  the  Federal  Government,  must be filed in the Office of the
California Secretary of State, Commercial Code Records. For purposes of treating
this Deed of Trust as a security agreement and financing statement, Lender shall
be deemed to be the Secured Party and Borrower shall be deemed to be the Debtor.

                                   ARTICLE III

                                LEASES AND RENTS

     Borrower to Comply with Leases. Borrower covenants and agrees that it will,
at its own cost and expense:

          FAITHFULLY  ABIDE BY,  PERFORM AND DISCHARGE  EACH AND EVERY  MATERIAL
     OBLIGATION,  COVENANT  AND  AGREEMENT  UNDER  EACH AND  EVERY  LEASE OF THE
     PROPERTY  TO BE  PERFORMED  BY THE  LANDLORD  THEREUNDER  ON OR BEFORE  THE
     EXPIRATION OF THE APPLICABLE NOTICE AND CURE PERIOD SET FORTH THEREIN;

          USE  REASONABLE  EFFORTS,  IN GOOD  FAITH,  TO  ENFORCE  OR SECURE THE
     PERFORMANCE OF EACH AND EVERY MATERIAL OBLIGATION,  COVENANT, CONDITION AND
     AGREEMENT OF SAID LEASES BY THE TENANTS THEREUNDER TO BE PERFORMED;

          NOT BORROW  AGAINST,  PLEDGE OR FURTHER  ASSIGN ANY  RENTALS DUE UNDER
     SAID LEASES EXCEPT PURSUANT TO THE SECURITY DOCUMENTS;

<PAGE>

          NOT  PERMIT THE  PREPAYMENT  OF ANY RENTS DUE UNDER ANY LEASE FOR MORE
     THAN  THIRTY  (30)  DAYS IN  ADVANCE  NOR FOR MORE  THAN THE NEXT  ACCRUING
     INSTALLMENT OF RENTS,  NOR  ANTICIPATE,  DISCOUNT,  COMPROMISE,  FORGIVE OR
     WAIVE ANY SUCH RENTS WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER;

          NOT WAIVE,  EXCUSE  CONDONE OR IN ANY MANNER  RELEASE OR DISCHARGE ANY
     TENANTS OF OR FROM THE  MATERIAL  OBLIGATIONS,  COVENANTS,  CONDITIONS  AND
     AGREEMENTS  BY SAID  TENANTS TO BE PERFORMED  UNDER THE LEASES  WITHOUT THE
     PRIOR WRITTEN CONSENT OF LENDER;

          NOT PERMIT ANY MATERIAL MODIFICATION OR AMENDMENT TO ANY OF THE LEASES
     UNLESS SUCH  MODIFICATION  OR AMENDMENT IS NOT  MATERIALLY  LESS  FAVORABLE
     OVERALL ON A COMMERCIAL BASIS WHEN COMPARED TO THE ORIGINAL TERMS,  WITHOUT
     THE PRIOR WRITTEN CONSENT OF LENDER;

          NOT TO  TERMINATE  ANY LEASE OR ACCEPT A SURRENDER  THEREOF  EXCEPT BY
     REASON OF A DEFAULT BY THE TENANT  THEREUNDER,  OR AS OTHERWISE PROVIDED BY
     SUCH LEASE; AND

          PROVIDE EXECUTED COPIES OF ANY NEW LEASES, AND AMENDMENTS, RENEWALS OR
     MODIFICATIONS TO LEASES (SUBJECT TO THE PROHIBITION IN PARAGRAPH (F) ABOVE)
     ENTERED INTO BY BORROWER FROM AND AFTER THE DATE OF THIS DEED OF TRUST.

     Lender's  Right to  Perform  under  Leases.  Should  the  Borrower  fail to
perform, comply with or discharge any material obligations of Borrower under any
lease or should the Lender  become  aware of or be notified by any tenant  under
any lease of a failure on the part of  Borrower  to so  perform,  comply with or
discharge  its  material  obligations  under  said  lease,  Lender  may upon the
expiration  of the  applicable  cure  period  provided  in  the  lease  for  the
obligation in question, but shall not be obligated to, with prior written notice
to Borrower but without  waiving or releasing  Borrower  from any  obligation in
this Deed of Trust  contained,  remedy such failure,  and the Borrower agrees to
repay upon demand all out-of-pocket sums incurred by the Lender in remedying any
such failure  together  with interest  pursuant to Section 1.12 above.  All such
sums,  together  with  interest as  aforesaid  shall  become so much  additional
Indebtedness,  but no such advance  shall be deemed to relieve the Borrower from
any default hereunder.

     Absolute   Assignment  of  Leases  and  Rents.  (a)  Borrower  does  hereby
absolutely  assign and  transfer  unto Lender for  security  purposes all of the
Rents, Leases and Profits now due and which may hereafter become due under or by
virtue of any lease,  whether written or verbal, or any agreement for the use or
occupancy  of the  Property,  it being  the  intention  of this Deed of Trust to
establish an absolute  transfer and assignment of all Rents,  Leases and Profits
from the  Property  unto the  Lender  and,  upon the  occurrence  and during the
continuation  of  an  Event  of  Default,   the  Borrower  does  hereby  appoint
irrevocably the Lender its true and lawful attorney in its name and stead, which
appointment  is coupled with an interest,  to collect all of said Rents,  Leases
and Profits; provided, however, Lender grants the Borrower the revocable license
and privilege to collect and retain such Rents,  Leases and Profits  except upon
the  occurrence  and during the  continuation  of an Event of Default under this
Deed of Trust.

     Upon the occurrence and during the continuation of an Event of Default, and
whether  before or after the  institution of proceedings to sell the Property or
foreclose this Deed of Trust,  or during any period of  redemption,  and without
regard to waste,  adequacy of the security or solvency of the  Borrower,  Lender
may revoke the revocable  license and privilege  granted  Borrower  hereunder to
collect the Rents,  Leases and Profits of the Property,  and may, at its option,
without notice in person or by agent,  with or without  taking  possession of or
entering the Property, with or without bringing any action or proceeding or by a
receiver duly appointed, give, or require Borrower to give, notice to any or all
tenants under any lease  authorizing and directing the tenant to pay such Rents,
Leases and  Profits,  to Lender,  such  agent,  or  receiver as the case may be;
collect all of the Rents,  Leases and Profits;  enforce the payment  thereof and
exercise all of the rights of the landlord under any lease and all of the rights
of Lender  hereunder;  enter upon,  take  possession of, manage and operate said
Property, or any part thereof;  cancel, enforce or modify any leases, and fix or
modify  Rents,  and do any acts which the  Lender-deems  proper to  protect  the
security hereof. At such time as Borrower cures an Event of Default,  Borrower's
license  to  collect  the  Rents,  Leases and  Profits  shall  automatically  be
reinstated.  Supplementing  the  remedies  set forth  herein  and after the date
hereof,  Lender shall have all rights and remedies under  California  Civil Code
Section 2938.

     Any Rents,  Leases and Profits  collected shall be applied to the costs and
expenses of operation, management and collection,  including attorneys' fees, to
the payment of the fees and expenses of any agent or receiver so acting,  to the
costs  incurred  by the Lender,  including  attorneys'  fees,  to the payment of
taxes,  assessments,  insurance  premiums and  expenditures  for the management,
repair and upkeep of the Property, to the performance of landlord's  obligations
under any  leases  and to the  Indebtedness  all in such order as the Lender may
require.  To the extent  permitted by law,  Borrower waives any right to require
Lender to utilize Rents,  Leases and Profits for purposes other than as provided
under the Loan Documents,  including  without  limitation any rights of Borrower
under  California  Civil Code  Section  2938(g).  All Rents,  Leases and Profits
received by Borrower  after  Lender has  exercised  any of its rights under this
assignment  (and after  Lender has revoked the above  license)  shall be held by
Borrower  in trust for  Lender  and  shall be  delivered  to Lender  immediately
without demand.

<PAGE>

     The entering upon and taking possession of the Property,  the collection of
such Rents,  Leases and Profits and the  application  thereof as aforesaid shall
not cure or waive any defaults  under this Deed of Trust or affect any notice of
default  or  invalidate  any act done  pursuant  to such  notice  nor in any way
operate to prevent the Lender from pursuing any other remedy which it may now or
hereafter have under the terms of this Deed of Trust or any other security given
for the  Indebtedness nor shall it in any way be deemed to constitute the Lender
to be a  "mortgagee-in-possession."  Each  lease  of  the  Property  hereinafter
entered into shall at Lender's option be filed for record in the local recording
office of the county where the Property is located. Also, to the extent required
by the Lender, each tenant shall execute an estoppel certificate and acknowledge
receipt of a notice of the assignment of its lease, all reasonably  satisfactory
in form and content to the Lender.

                                   ARTICLE IV

                         EVENTS OF DEFAULT AND REMEDIES

     Events of Default. Each of the following shall be deemed to be an "Event of
Default" hereunder:

          FAILURE TO MAKE ANY PAYMENT OF  PRINCIPAL  AND/OR  INTEREST  WHEN SUCH
     PAYMENT IS DUE UNDER THE NOTE;

          FAILURE TO MAKE ANY PAYMENT,  OTHER THAN A PAYMENT OF PRINCIPAL AND/OR
     INTEREST  UNDER THE NOTE,  UNDER ANY OF THE SECURITY  DOCUMENTS  WITHIN TEN
     (10) DAYS AFTER THE DATE SUCH PAYMENT IS DUE;

          EXCEPT AS OTHERWISE PERMITTED IN THIS DEED OF TRUST, TRANSFER OF TITLE
     TO THE PROPERTY OR ANY  INTEREST IN BORROWER OR CREATION OF AN  ENCUMBRANCE
     ON THE  PROPERTY  OR ANY  INTEREST IN  BORROWER  WITHOUT THE PRIOR  WRITTEN
     CONSENT OF LENDER, AS GOVERNED BY THE PROVISIONS OF SECTION 1.11;

          FAILURE TO PERFORM ANY OF THE OTHER TERMS, COVENANTS AND CONDITIONS OF
     THE NOTE,  THIS DEED OF TRUST,  OR ANY OTHER SECURITY  DOCUMENTS,  PROVIDED
     THAT SUCH  DEFAULT  SHALL HAVE  CONTINUED  FOR A PERIOD OF THIRTY (30) DAYS
     AFTER  WRITTEN  NOTICE OF SUCH DEFAULT FROM LENDER,  OR, TO THE EXTENT SUCH
     PERFORMANCE CANNOT REASONABLY BE COMPLETED WITHIN THIRTY (30) DAYS, FAILURE
     OF BORROWER TO COMMENCE AND  DILIGENTLY  PROSECUTE THE  PERFORMANCE TO CURE
     THE  DEFAULT,  BUT IN ANY EVENT NOT LATER THAN  NINETY (90) DAYS AFTER SUCH
     NOTICE;

          A  MATERIAL   MISSTATEMENT   BY   BORROWER   OF  ANY   WARRANTIES   OR
     REPRESENTATIONS  CONTAINED HEREIN, IN THE NOTE, THE BORROWER'S  CERTIFICATE
     DATED AS OF THE DATE HEREOF (BUT ONLY TO THE EXTENT THE  REPRESENTATION  OR
     WARRANTY WAS MATERIALLY NOT ACCURATE WHEN MADE), OR THE ASSIGNMENT;

          SHOULD BORROWER OR PRINCIPAL,  OR ANY SUCCESSORS AND ASSIGNS  THEREOF,
     INCLUDING,  WITHOUT LIMITATION,  THE THEN CURRENT OWNERS OF ANY INTEREST IN
     THE PROPERTY:

               File a petition under the Federal  Bankruptcy Code or any similar
          law, state or federal,  whether now or hereafter  existing  (hereafter
          referred to as a "Bankruptcy Proceeding"); or

               File any answer  admitting  insolvency  or  inability  to pay its
          debts generally as they become due; or

               Fail to obtain a vacation or stay of any  involuntary  Bankruptcy
          Proceeding within ninety (90) days, as hereinafter provided; or

               Be  the  subject  of an  order  for  relief  against  it  in  any
          Bankruptcy Proceeding; or

               Have a custodian or trustee or receiver appointed for or have any
          court  take  jurisdiction  of all of its  property,  or the major part
          thereof,   in  any   involuntary   proceeding   for  the   purpose  of
          reorganization,  arrangement,  dissolution,  or  liquidation  if  such
          trustee or receiver  shall not be discharged  or if such  jurisdiction
          shall not be  relinquished,  vacated or stayed on appeal or  otherwise
          within ninety (90) days; or

               Make an assignment for the benefit of its creditors; or

               Admit in writing its inability to pay its debts generally as they
          become due; or

<PAGE>

               Consent to an appointment of a custodian,  receiver or trustee of
          all of its property, or the major part thereof.

          PRINCIPAL  SHALL FAIL TO  MAINTAIN  THE "NET  WORTH"  REQUIRED BY THAT
     CERTAIN  LIMITED  GUARANTY  DATED AS OF THE DATE HEREOF FROM  PRINCIPAL  TO
     LENDER.

     Remedies.  (a) Upon and during any such Event of Default,  Lender,  without
notice,  may declare the entire  principal of the Note then  outstanding (if not
then due and payable), and all accrued and unpaid interest thereon, all premiums
payable thereunder and all other obligations of Borrower hereunder to be due and
payable immediately, and upon any such declaration the principal of the Note and
said accrued and unpaid  interest shall become due and payable,  anything in the
Note or in this Deed of Trust to the contrary notwithstanding.

     Upon and after any such  Event of  Default,  Lender  shall  have all of the
remedies  of a Secured  Party  under the  Commercial  Code,  including,  without
limitation,  the  right  and  power  to  sell,  or  otherwise  dispose  of,  the
Collateral,  or any part thereof,  and for that purpose may take with or without
judicial process,  enter upon any of the Property,  on which the Collateral,  or
any part thereof,  may be situated and remove the same  therefrom  without being
deemed guilty of trespass and without liability for damages thereby  occasioned,
or at Lender's  option,  Borrower  shall  assemble  the  Collateral  and make it
available  to  Lender at the place  and at the time  designated  in the  demand.
Lender shall be entitled to hold, maintain,  preserve and prepare the Collateral
for sale.  Lender,  without  removal,  may render the  Collateral  unusable  and
dispose of the Collateral on the Property.

     Upon and during any such Event of Default,  Lender,  with or without entry,
personally or by its agents or attorneys, insofar as applicable, may:

          Institute  proceedings  for the complete  foreclosure  of this Deed of
     Trust; or

          Apply to any court of competent  jurisdiction for the appointment of a
     receiver or receivers for the Property and of all the  earnings,  revenues,
     rents, issues, profits and income thereof; or

          Take such steps to protect and  enforce its rights  whether by action,
     suit or proceeding in equity or at law for the specific  performance of any
     covenant,  condition or agreement in the Note or in this Deed of Trust,  or
     in aid of the execution of any power herein granted, or for any foreclosure
     hereunder,  or for  the  enforcement  of any  other  appropriate  legal  or
     equitable remedy or otherwise as Lender shall elect.

     Upon and after any such Event of  Default,  Lender  shall have the right to
execute  a written  notice  of such  default  and of its  election  to cause the
Property to be sold to satisfy the  Indebtedness.  Trustee shall give and record
such notice as the law then  requires as a  condition  precedent  to a Trustee's
sale.  When the  minimum  period of time  required  by law after such notice has
elapsed,  Trustee, without notice to or demand upon Borrower except as otherwise
required by law,  shall sell the Property at the time and place of sale fixed by
it in the notice of sale,  either as a whole or in separate  parcels and in such
order as it or Lender may determine, at public auction to the highest bidder for
cash,  in  lawful  money of the  United  States,  payable  at time of sale  (the
Indebtedness  being the  equivalent of cash for purposes of said sale).  Trustee
may,  if so  instructed  by Lender,  postpone  sale of all or any portion of the
Property by public announcement at such time and place of sale, and from time to
time thereafter may postpone such sale by public announcement at such time fixed
by the  preceding  postponement.  Trustee shall deliver to the purchaser at such
sale a deed  conveying  the  Property  or portion  thereof so sold,  but without
covenant  or  warranty,  express or  implied.  The  recitals in such deed of any
matters or facts shall be conclusive proof of the truthfulness thereof. Borrower
or Lender, but not Trustee, may purchase at such sale.

     In connection with any sale or sales  hereunder,  Lender may elect to treat
any of the  Property  which  consists  of a right in action or which is Property
that can be severed from the real property  covered  hereby or any  improvements
thereon without causing  structural  damage thereto as if the same were personal
property,  and dispose of some or all of the same in any sequence in  accordance
with  applicable law,  separate and apart from the sale of real property.  Sales
hereunder  of any  personal  property  only  shall be  conducted  in any  manner
permitted by the Commercial Code.  Where the Property  consists of real property
and personal  property located on or within the real property,  Lender may elect
in its discretion to dispose of some or all of the real property and some or all
of the personal  property  together in one sale pursuant to real property law as
permitted  by the  Commercial  Code.  Lender shall not be deemed to have elected
irrevocably to proceed as to both real and personal property fixtures unless and
until the  particular  Property  has been  actually  disposed  of  pursuant to a
unified  sale  (judicial  or  nonjudicial),  and then only as to the Property so
sold. Lender shall also have the right,  exercisable in its sole discretion,  to
proceed in any  sequence  as to some or all of the real  property  and  personal
property as provided in the  Commercial  Code and as to other real  property and
personal property in accordance with the procedures applicable to real property.
Should  Lender elect to sell the  Property,  or any part  thereof  which is real
property,  or which  Lender has  elected to treat as real  property  as provided
above,  Lender or Trustee shall give such notice of default and election to sell
as may then be required by law.

     After deducting all costs,  fees and expenses of Trustee and of this trust,
including cost of evidence of title and attorneys'  fees in connection  with the
sale,  Trustee  shall  apply the  proceeds of sale to payment of (i) all sums so
expended  under the terms hereof not then repaid,  with accrued  interest at the
Default  Rate,  (ii) the payment of all other sums then  secured  hereby in such
order as Lender may direct,  and (iii) the  remainder,  if any, to the person or
persons legally entitled thereto.

<PAGE>

     In the  event of any sale  whether  made  under  the  power of sale  herein
granted or under or by virtue of judicial proceedings or of a judgment or decree
of foreclosure and sale, the entire  principal of, and interest on, the Note, if
not  previously  due and  payable,  and all other  sums  required  to be paid by
Borrower pursuant to this Deed of Trust,  immediately  thereupon shall, anything
in the Note or in this Deed of Trust to the contrary notwithstanding, become due
and payable.

     Limited  Liability.  Notwithstanding  anything  to the  contrary  contained
herein or in any other Loan  Document,  but without in any manner  affecting the
validity  of the Note or the lien of this  Deed of Trust or any  other  Security
Document,  this Deed of Trust and all of  Borrower's  obligations  hereunder are
subject to the  provisions of Paragraph 15 of the Note,  which are  incorporated
herein by this reference.

                                    ARTICLE V

                                  MISCELLANEOUS

     Taxation of Note and Deed of Trust. If, at any time before the Indebtedness
is fully paid, any law be enacted, deducting from the value of said real estate,
for the purposes of taxation,  any lien thereon,  or revising or changing in any
way the laws now in force for the  taxation  of deeds of trust or bonds,  or the
debts secured hereby,  for state or local purposes,  or the manner of collection
of such taxes,  so as to affect  adversely this Deed of Trust or the debt hereby
secured,  or the owner and holder thereof in respect thereto,  then this Deed of
Trust and the Note hereby secured shall at the option of Lender,  upon notice to
Borrower,  become due and payable  without  prepayment  premium ninety (90) days
following the giving of such notice. If any such law should be enacted,  then to
the extent  permitted by such law,  Borrower  shall have the option of paying to
Lender the amount of any  additional  cost or taxes to Lender from such law, and
upon demand by Lender, shall pay such taxes or assessments,  or reimburse Lender
therefor.

     Marshaling  of  Assets.  Borrower  on its own  behalf  and on behalf of its
successors  and  assigns  hereby  expressly  waives  all  rights  to  require  a
marshaling  of assets by Lender or to require  Lender,  upon a  foreclosure,  to
first  resort to the sale of any  portion of the  Property  that might have been
retained by Borrower  before  foreclosing  upon and selling any other portion as
may be  conveyed  by  Borrower  subject to this Deed of Trust.  Borrower  hereby
waives and relinquishes any right to designate which portion of the Indebtedness
may be satisfied by a partial payment, whether pursuant to California Civil Code
Section 2822 or otherwise.

     Partial  Reconveyance.  Lender may,  without notice,  release any person so
liable, extend the maturity or with the consent of Borrower, modify the terms of
any such obligation, or grant other indulgences, release or reconvey or cause to
be released or reconveyed at any time all or any part of the Property  described
herein,  take or  release  any  other  security  or make  compromises  or  other
arrangements with debtors.  Lender may also accept additional  security,  either
concurrently  herewith  or  hereafter,  and sell the same or  otherwise  release
thereon either before, concurrently with, or after sale hereunder.

     Non-Waiver.  (a) By accepting  payment of any sum secured  hereby after its
due date or altered  performance of any obligation secured hereby,  Lender shall
not waive  its  right  against  any  person  obligated  directly  or  indirectly
hereunder or with respect to any indebtedness hereby secured,  either to require
prompt  payment  when due of all other  sums so  secured  or to take  remedy for
failure to make such prompt payment or full performance  (except with respect to
the  payment  made).  No  exercise  of any right or remedy by Borrower or Lender
hereunder  shall  constitute  a  waiver  of any  other  right or  remedy  herein
contained or provided by law.

     No delay or omission  of  Borrower or Lender in the  exercise of any right,
power or remedy  accruing  hereunder or arising  otherwise shall impair any such
right,  power or  remedy,  or be  construed  to be a waiver  of any  default  or
acquiescence therein.

     Receipt  of rents,  awards,  and any other  monies  or  evidences  thereof,
pursuant to the Provisions of this Deed of Trust and any disposition of the same
by Trustee or Lender shall not  constitute a waiver of the right of  foreclosure
by  Trustee or Lender in the event of  default  or  failure  of  performance  by
Borrower of any  covenant or agreement  contained  herein or in any note secured
hereby,  which default  remains uncured at the expiration of the applicable cure
period set forth herein.

     Protection  of  Security.  Should  Borrower  fail to make any payment or to
perform any covenant as herein  provided (after the expiration of any applicable
notice and/or cure period),  Lender (but without obligation so to do and without
notice (in cases of emergency) to or demand upon Borrower and without  releasing
Borrower from, any obligation hereof) may: (a) make or do the same in the manner
and to such extent as Lender may deem necessary to protect the security  hereof,
Lender  being  authorized  to enter upon the  Property  for such  purposes;  (b)
commence, appear in and defend any action or proceeding purporting to affect the
security  hereof  or the  rights  or powers  of  Lender;  or (c) pay,  purchase,
contest,  or compromise any encumbrance,  charge or lien which in the reasonable
judgment of Lender is prior or  superior  hereto  and,  in  exercising  any such
power,  incur any  liability  and  expend  whatever  amounts  in its  reasonable
discretion may deem necessary therefor,  including cost of evidence of title and
attorneys'  fees. Any  expenditures in connection  herewith shall  constitute an
advance hereunder and shall be repaid in accordance with Section 1.12.

<PAGE>

     Future  Advances  Secured.  (a)  This  Deed of  Trust  secures  any and all
advances to be made by Lender to Borrower  pursuant  to the  Additional  Funding
Agreement,  which advances shall be considered to be mandatory  future  advances
for the purpose of this Deed of Trust.

     Any advances or disbursements made while any Event of Default is continuing
for the benefit or protection of or the payment of taxes, assessments, levies or
insurance  upon the Property,  with interest on such  disbursements  as provided
herein,  shall be added to the principal  balance of the Note and collected as a
part  thereof.  To the extent  that this Deed of Trust may secure  more than one
note,  a default in the payment of any such note shall  constitute  a default in
the payment of all such notes.

     Rule of  Construction.  When the  identity of the  parties  hereto or other
circumstances  make it  appropriate,  the  masculine  gender  shall  include the
feminine and/or neuter,  and the singular  number shall include the plural.  The
headings of each paragraph are for information  and convenience  only and do not
limit or construe  the  contents of any  provision  hereof.  The language in all
parts of this Deed of Trust shall be in all cases construed simply, according to
its fair meaning and not for or against Borrower or Lender,  regardless of which
party drafted the  particular  language which is being  construed,  both parties
having been represented by adequate  counsel.  Except as otherwise  specifically
indicated,  all  references  in this Deed of Trust to  "Articles"  or "Sections"
shall be references to the Articles and Sections of this Deed of Trust.

     Severability.  If any term of this Deed of Trust or the application thereof
to  any  person  or   circumstances,   shall  to  any  extent,   be  invalid  or
unenforceable,  the remainder of this Deed of Trust or the  application  of such
term to persons or  circumstances  other than those as to which it is invalid or
unenforceable,  shall  not be  affected  thereby,  and each term of this Deed of
Trust shall be valid and enforceable to the fullest extent permitted by law.

     Successors  In  Interest.  This  Deed of Trust  applies  to,  inures to the
benefit  of, and is binding not only on the  parties  hereto,  but also on their
heirs,  executors,  administrators,  successors and assigns.  All obligations of
Borrower  hereunder  are joint and  several.  The term  "Lender"  shall mean the
holder  and owner of the Note  secured  hereby,  whether  or not named as Lender
herein.

     Notices.  (a) All  notices to be given by Lender to Borrower or by Borrower
to Lender  pursuant to the Note secured hereby or under this Deed of Trust shall
be sufficient  if mailed either (i) by postage  prepaid,  U.S.  certified  mail,
return  receipt  requested,  or  (ii) by  delivery  to a  nationally  recognized
overnight delivery service,  to the following described addresses of the parties
hereto, or to such other address as a party may request in writing:

         If to Borrower:

                  Mission West Properties, L.P.
                  10050 Bandley Drive
                  Cupertino, California 95014
                  Attn:    Carl E. Berg
                           Raymond V. Marino

         If to Lender:

                  Allianz Life Insurance Company of North America
                  c/o Allianz of America, Inc.
                  55 Greens Farms Road
                  P.O. Box 5160
                  Westport, Connecticut 06881-5160
                  Attn:  Real Estate Department

         If to Trustee:

                  First American Title Company
                  1737 N. First Street
                  San Jose, California 95112

Any time period  provided in the giving of any notice  hereunder  shall commence
three (3)  business  days after the date such notice is deposited in the mail or
upon the date following delivery to said overnight delivery service, as the case
may be.

     Borrower  hereby  requests  that a copy  of any  notice  of  default  under
California  Civil Code  Section 2924 and that a copy of any notice of sale under
such Code be mailed to the address of Borrower provided herein.

<PAGE>

     Modifications.  This Deed of Trust may not be amended,  modified or changed
nor shall any waiver of any  provision  hereof be  effective,  except only by an
instrument  in writing and signed by the party against whom  enforcement  of any
waiver, amendment, change, modification or discharge is sought.

     Governing  Law.  This Deed of Trust  shall be  construed  according  to and
governed by the Laws of the State of California.

     Rights and Remedies of Lender Cumulative. The rights and remedies of Lender
arising under the clauses and covenants contained in this Deed of Trust shall be
separate,  distinct and cumulative and none of them shall be in exclusion of the
others;  and no act of Lender shall be construed as an election to proceed under
any one  provision  herein to the  exclusion of any other  provisions,  anything
herein or otherwise to the contrary notwithstanding.

     Captions.  The captions set forth at the beginning of the various  sections
of this  Deed of  Trust  are  for  convenience  only  and  shall  not be used to
interpret or construe the provisions of this Deed of Trust.

     IN WITNESS WHEREOF,  Borrower has caused this instrument to be signed as of
the date first written above.

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

                                   By:   Mission West Properties, Inc.,
                                         a Maryland corporation, General Partner


                                         By: /s/ Carl E Berg
                                            ------------------------------------
                                            Carl E. Berg,
                                            Chief Executive Officer