Exhibit 2

                      AGREEMENT AND PLAN OF REORGANIZATION


         THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is entered into
as of this 13th day of  February,  1998,  by and among PUBLIC  STORAGE,  INC., a
California  corporation  ("PSI")  and PUBLIC  STORAGE  PROPERTIES  XX,  INC.,  a
California corporation ("PSP20").

         A. The parties  intend that this Agreement  shall  constitute a Plan of
Reorganization  for purposes of Section  368(a) of the Internal  Revenue Code of
1986, as amended.  The Plan of  Reorganization  provides for the merger of PSP20
with and into PSI in accordance  with the  applicable  provisions of the General
Corporation  Law  of  California  (the  "GCLC")  and  the  Agreement  of  Merger
substantially in the form attached hereto as Exhibit A ("Merger Agreement").

         B. The Boards of Directors  of PSI and PSP20  believe that it is in the
best interests of such  corporations and their respective  shareholders to enter
into and complete this  Agreement and they have approved this  Agreement and the
transactions contemplated hereby.

         NOW, THEREFORE, the parties agree as follows:

         1.     Adoption  of  Plan.   The  parties  hereby  adopt  the  Plan  of
Reorganization hereinafter set forth.

         2.     The Merger.

                2.1 Completion of the Merger.  At the Effective Time (as defined
below), PSP20 will be merged with and into PSI (the "Merger") in accordance with
the terms, conditions and provisions of this Agreement and the Merger Agreement.
The Merger  shall become  effective  at the time at which the Merger  Agreement,
together with the requisite  Officers'  Certificates  of PSI and PSP20 are filed
with  the  California  Secretary  of  State in  accordance  with  the GCLC  (the
"Effective Time"). PSI and PSP20 are sometimes  collectively  referred to herein
as the "Constituent  Corporations" and PSI, as the surviving  corporation of the
Merger, is sometimes referred to herein as the "Surviving Corporation."

                2.2     Effect of the Merger.  At the Effective Time:

                        2.2.1 Constituent  Corporations.  The separate corporate
existence of PSP20 shall cease and the  Surviving  Corporation  shall  thereupon
succeed,  without  other  transfer,  to all the rights and property of PSP20 and
shall be subject to all the debts and liabilities of PSP20 in the same manner as
if the Surviving  Corporation  had itself incurred them; all rights of creditors
and all liens upon the property of each of the Constituent Corporations shall be
preserved  unimpaired,  provided that such liens upon property of PSP20 shall be
limited to the property  affected  thereby  immediately  prior to the  Effective
Time; and any action or proceeding pending by or against PSP20 may be prosecuted
to  judgment,  which  shall bind the  Surviving  Corporation,  or the  Surviving
Corporation may be proceeded against or substituted in its place.

                        2.2.2 Articles and Bylaws. The Articles of Incorporation
and the Bylaws of PSI, as then  amended,  shall  continue to be the  Articles of
Incorporation  and the  Bylaws of the  Surviving  Corporation  until  changed as
provided by law and their respective provisions.

                        2.2.3 Officers and Directors. The officers and directors
of PSI shall  continue as officers and  directors of the  Surviving  Corporation
until  their  successors  are elected  and  qualified  as provided by law and in
accordance  with the  Articles  of  Incorporation  and  Bylaws of the  Surviving
Corporation.

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                2.3   Conversion  of  Common  Stock  Series  A.  The  manner  of
converting the  outstanding  shares of Common Stock Series A ($.01 par value) of
PSP20 (the "PSP20  Shares")  into cash and/or  shares of Common  Stock ($.10 par
value) of PSI (the "PSI Shares") shall be as follows:

                        2.3.1 Cash Election.  At the Effective Time,  subject to
Sections  2.6 and 6.8 hereof,  each PSP20 Share as to which a cash  election has
been made in  accordance  with the  provisions of Section 2.5 hereof and has not
been  revoked,  relinquished  or lost  pursuant to Section 2.5 hereof (the "Cash
Election  Shares")  shall be  converted  into and shall  represent  the right to
receive $22.57 in cash (the "Cash Election Price"). As soon as practicable after
the Effective Time, the registered holders of Cash Election Shares shall be paid
the cash to which they are entitled  hereunder in respect of such Cash  Election
Shares.

                        2.3.2 Share Exchange.  At the Effective Time, subject to
Sections  2.4,  2.5,  2.7 and 6.8  hereof,  each PSP20  Share  (other  than Cash
Election  Shares and PSP20  Shares  owned by PSI) shall be  converted  into that
number of PSI Shares equal to, rounded to the nearest  thousandth,  the quotient
(the  "Conversion  Number") derived by dividing $22.57 by the average of the per
share closing  prices on the New York Stock  Exchange,  Inc. (the "NYSE") of PSI
Shares  during the 20  consecutive  trading days ending on the fifth trading day
prior to the  meeting of  shareholders  of PSP20  provided  for in  Section  6.2
hereof.  If, prior to the  Effective  Time,  PSI should split or combine the PSI
Shares,  or pay a stock dividend,  the Conversion  Number will be  appropriately
adjusted to reflect such action.

                2.4 No  Fractional  Shares.  Notwithstanding  any other  term or
provision of this  Agreement,  no fractional PSI Shares and no  certificates  or
script therefor,  or other evidence of ownership thereof,  will be issued in the
Merger.  In lieu of any such fractional  share  interests,  each holder of PSP20
Shares who would  otherwise  be entitled  to such  fractional  share will,  upon
surrender of the certificate representing such PSP20 Shares, receive a whole PSI
Share if such  fractional  share to which such holder would  otherwise have been
entitled  is .5 of an PSI  Share or more,  and such  fractional  share  shall be
disregarded if it represents  less than .5 of an PSI Share;  provided,  however,
that, such fractional share shall not be disregarded if such fractional share to
which such holder would otherwise have been entitled represents .5 of 1% or more
of the total  number of PSI Shares  such  holder is  entitled  to receive in the
Merger.  In such  event,  such holder  shall be paid an amount in cash  (without
interest),  rounded to the nearest $.01,  determined by multiplying  (i) the per
share closing price on the NYSE of the PSI Shares at the Effective  Time by (ii)
the fractional interest.

                2.5 Procedure for Cash  Election.  At the time of the mailing of
the Proxy Statement and Prospectus  provided for in Section 6.5 hereof, PSI will
send to each  holder  of record of PSP20  Shares  at the  record  date for PSP20
meetings of shareholders  referred to in Section 6.2 hereof a cash election form
(the  "Form of  Election")  providing  such  holder  with the option to elect to
receive  the Cash  Election  Price with  respect  to all or any  portion of such
holder's   PSP20  Shares.   Any  such  election  to  receive  the  cash  payment
contemplated  by Section  2.3.1  hereof  shall have been  properly  made only if
American Stock Transfer & Trust Company (the  "Depositary")  shall have received
at its designated  office, by 5:00 p.m., New York time, on the last business day
preceding the day of such meeting of shareholders,  a Form of Election  properly
completed and accompanied by  certificates  for the shares to which such Form of
Election relates (or an appropriate guarantee of delivery in a form and on terms
satisfactory  to  PSI),  as set  forth  in such  Form of  Election.  Any Form of
Election may be revoked by the person submitting the same to the Depositary only
by written notice received by the Depositary  prior to 5:00 p.m., New York time,
on the last business day before the day of the meeting of shareholders  referred
to in Section 6.2 hereof. In addition, all Forms of Election shall automatically
be revoked if the  Depositary is notified in writing by the parties  hereto that
the Merger have been  abandoned.  If a Form of  Election is revoked  pursuant to
this Section 2.5, the  certificate or  certificates or any guarantee of delivery
in respect of the PSP20 Shares to which such Form of Election  relates  shall be
promptly  returned  to the person  submitting  the same to the  Depositary.  The
Depositary  may  determine  whether or not  elections  to receive cash have been
properly   made  or  revoked   pursuant  to  this  Section  2.5,  and  any  such
determination shall be conclusive and binding. If the Depositary determines that
any election to receive  cash was not properly or timely made,  the PSP20 Shares
covered  thereby  shall not be treated  as Cash  Election  Shares,  and shall be
converted in the Merger as provided in Section 2.3.2 hereof. The Depositary may,
with the agreement of PSI and PSP20, establish such procedures, not inconsistent
with this Section  2.5, as may be  necessary  or  desirable  to  implement  this
Section 2.5.

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                2.6     Procedure for Proration.

                        2.6.1 No Proration  of PSP20  Shares.  If the  aggregate
number of Cash Election Shares and Dissenting Shares (as defined below) of PSP20
is 20% or less than the number of PSP20 Shares outstanding as of the record date
for the meeting of  shareholders  of PSP20 referred to in Section 6.2, then each
Cash Election  Share of PSP20 shall be converted in the Merger into the right to
receive the Cash Election Price for PSP20 Shares.

                        2.6.2 Proration of PSP20 Shares. If the aggregate number
of Cash Election  Shares and  Dissenting  Shares of PSP20 exceeds 20%, then each
Cash Election  Share of PSP20 shall be converted in the Merger into the right to
receive cash or into PSI Shares as follows:  the number of Cash Election  Shares
of PSP20  owned by a holder of PSP20  Shares  that shall be  converted  into the
right to receive the Cash Election Price for PSP20 Shares shall equal the number
obtained by  multiplying  (i) (A) 20% of  outstanding  PSP20 Shares less (B) the
number of Dissenting Shares (as hereinafter defined) of PSP20, if any, by (ii) a
fraction  of which the  numerator  shall be the number of Cash  Election  Shares
owned by such holder and the denominator  shall be the aggregate  number of Cash
Election  Shares of PSP20.  The balance of such Cash  Election  Shares  shall be
converted  into PSI Shares in  accordance  with the  provisions of Section 2.3.2
hereof.  Notwithstanding the foregoing,  PSI, in its sole discretion,  may allow
Cash  Election  Shares of PSP20 to  receive  the Cash  Election  Price for PSP20
Shares  even if the  aggregate  number of Cash  Election  Shares and  Dissenting
Shares of PSP20 exceeds 20% of the number of PSP20 Shares  outstanding as of the
record date for the meeting of shareholders of PSP20 referred to in Section 6.2,
provided that in no event shall the number of Cash Election Shares exceed 50% of
the outstanding PSP20 Shares.

                2.7  Dissenting  Shares.  PSP20  Shares held by a holder who has
demanded and  perfected  his right to an appraisal of such shares in  accordance
with Section 1300 et seq. of the GCLC and who has not  effectively  withdrawn or
lost his right to appraisal ("Dissenting Shares") shall not be converted into or
represent  the right to receive cash and/or PSI Shares,  but the holder  thereof
shall be entitled  only to such rights as are granted by Section 1300 et seq. of
the GCLC. Each holder of Dissenting  Shares who becomes  entitled to payment for
PSP20 Shares  pursuant to these  provisions  of the GCLC shall  receive  payment
therefor from the Surviving Corporation in accordance  therewith.  If any holder
of PSP20 Shares who demands appraisal in accordance with Section 1300 et seq. of
the  GCLC  shall  effectively   withdraw  with  the  consent  of  the  Surviving
Corporation  or lose  (through  failure to perfect  or  otherwise)  his right to
appraisal with respect to PSP20 Shares, such PSP20 Shares shall automatically be
converted into the right to receive PSI Shares pursuant to Section 2.3.2 hereof.

                2.8 PSI Shares Unaffected.  The Merger shall effect no change in
any of the  outstanding  PSI  Shares  and no  outstanding  PSI  Shares  shall be
converted  or  exchanged  as a  result  of the  Merger,  and no  cash  shall  be
exchangeable, and no securities shall be issuable, with respect thereto.

                2.9  Cancellation  of Shares  Held or Owned by  Parties.  At the
Effective Time, any PSP20 Shares owned by PSI shall be cancelled and retired and
no shares shall be  issuable,  and no cash shall be  exchangeable,  with respect
thereto.

                2.10 Exchange of  Certificates.  After the Effective  Time, each
holder of a certificate  theretofore  evidencing  outstanding PSP20 Shares which
were  converted  into  PSI  Shares  pursuant  hereto,  upon  surrender  of  such
certificate to The First National Bank of Boston (the "Exchange  Agent") or such
other agent or agents as shall be appointed by the Surviving Corporation,  shall
be entitled to receive a certificate representing the number of whole PSI Shares
into  which the PSP20  Shares  theretofore  represented  by the  certificate  so
surrendered  shall have been  converted as provided in Section  2.3.2 hereof and
cash  payment in lieu of  fractional  share  interests,  if any,  as provided in
Section  2.4  hereof.  As soon as  practicable  after the  Effective  Time,  the
Exchange Agent will send a notice and a transmittal form to each holder of PSP20
Shares of record at the  Effective  Time whose stock  shall have been  converted
into PSI Shares, advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent  certificates  evidencing PSP20
Shares in exchange for certificates evidencing PSI Shares.

                2.11 Status Until Surrendered.  Until surrendered as provided in
Section 2.10 hereof, each outstanding  certificate which, prior to the Effective
Time, represented PSP20 Shares (other than Cash Election Shares and Dissenting

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Shares, if any) will be deemed for all corporate  purposes to evidence ownership
of the number of whole PSI Shares into which the PSP20 Shares evidenced  thereby
were converted. However, until such outstanding certificates formerly evidencing
PSP20 Shares are so surrendered, no dividend payable to holders of record of PSI
Shares shall be paid to the holders of such outstanding  certificates in respect
of PSP20 Shares,  but upon surrender of such  certificates by such holders there
shall be paid to such  holders the amount of any  dividends  (without  interest)
theretofore  paid with respect to such whole PSI Shares as of any record date on
or  subsequent  to the  Effective  Time  and the  amount  of any  cash  (without
interest) payable to such holder in lieu of fractional share interests  pursuant
to Section 2.4 hereof.

                2.12 Transfer of Shares.  After the Effective Time,  there shall
be no further  registration of transfers of PSP20 Shares on the records of PSP20
and,  if  certificates  formerly  evidencing  such shares are  presented  to the
Surviving  Corporation,  they shall be cancelled and exchanged for  certificates
evidencing PSI Shares and cash in lieu of fractional  share  interests as herein
provided.

                2.13 Conversion of Common Stock Series B and C. At the Effective
Time,  subject to Section 6.8 hereof,  each share of Common Stock Series B and C
($.01 par value) of PSP20  (other than shares  owned by PSI) shall be  converted
(or deemed to be converted)  into that number of PSI Shares equal to, rounded to
the nearest  thousandth,  the quotient derived by dividing $10.90 by the average
per share  closing  prices on the NYSE of PSI Shares  during the 20  consecutive
trading  days  ending  on  the  fifth  trading  day  prior  to  the  meeting  of
shareholders  of PSP20  provided  for in Section  6.2 hereof.  If,  prior to the
Effective  Time,  PSI should  split or combine  the PSI  Shares,  or pay a stock
dividend,  such conversion number will be appropriately adjusted to reflect such
action. At the Effective Time, any Common Stock Series B and C of PSP20 owned by
PSI shall be cancelled  and retired and no shares shall be issuable with respect
thereto.

         3.     Closing.

                3.1 Time and Place of Closing.  If this Agreement is approved by
the  shareholders  of PSP20,  a meeting  (the  "Closing")  shall  take  place as
promptly as practicable thereafter at which the applicable parties will exchange
certificates  and other  documents as required by this  Agreement.  Such Closing
shall  take place at such time and place as PSI may  designate.  The date of the
Closing shall be referred to as the "Closing Date."

                3.2 Execution and Filing of Merger  Agreement.  At or before the
Closing and after  shareholder  approval of PSP20, the applicable  parties shall
execute and deliver the Merger Agreement,  together with the requisite Officers'
Certificates,  for filing with the  California  Secretary  of State.  The Merger
Agreement,  together with the requisite  Officers'  Certificates,  shall be duly
filed with the California Secretary of State in accordance with the GCLC as soon
as practicable following the Closing.

         4.   Representations,   Warranties  and  Agreements  of  PSP20.   PSP20
represents, warrants and agrees with PSI that:

                4.1 Authorization.  Subject to approval of this Agreement by the
shareholders  of PSP20,  (i) the  execution,  delivery and  performance  of this
Agreement  by PSP20 has been  duly  authorized  and  approved  by all  necessary
corporate  action of PSP20,  and (ii) PSP20 has  necessary  corporate  power and
authority to enter into this Agreement, to perform its obligations hereunder and
to complete the transactions contemplated hereby.

                4.2  Organization  and Related  Matters.  PSP20 is a corporation
duly  organized,  existing and in good  standing  under the laws of the State of
California  with all requisite  corporate  power and authority to own, lease and
operate  its  properties  and to carry on its  business  as and where now owned,
leased,  operated or carried on, as the case may be; and is duly qualified to do
business as a foreign  corporation and is in good standing in each  jurisdiction
in which the  property  owned,  leased or  operated  by it or the  nature of the
business carried on by it requires such  qualification  and where the failure to
so qualify would have a material  adverse  effect on the  business,  properties,
results of  operations or financial  condition of PSP20.  PSP20 has no direct or
indirect  equitable or beneficial  interest in any other  corporation other than
PSCC, Inc.

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                4.3  Capital  Stock.  The  authorized  capital  stock  of  PSP20
consists  solely of (i)  1,393,709  shares of  Common  Stock  Series A ($.01 par
value),  860,734 of which were issued and  outstanding  as of December 31, 1997,
(ii) 90,859 shares of Common Stock Series B ($.01 par value),  all of which were
issued and  outstanding  as of  December  31, 1997 and (iii)  257,432  shares of
Common Stock Series C ($.01 par value), all of which were issued and outstanding
as of December  31,  1997.  All of the issued and  outstanding  shares of Common
Stock  Series  A, B and C of PSP20  have been duly and  validly  authorized  and
issued, and are fully paid and nonassessable. There are no options or agreements
to which PSP20 is a party or by which it is bound  calling for or requiring  the
issuance of any of PSP20's capital stock, except that the shares of Common Stock
Series  B and C  are  convertible  into  shares  of  Common  Stock  Series  A in
accordance with PSP20's Articles of Incorporation.

                4.4 Consents and Approvals;  No Violation.  Assuming approval of
the Merger and of this  Agreement  by the  shareholders  of PSP20,  neither  the
execution and delivery of this  Agreement nor the  consummation  by PSP20 of the
transactions contemplated hereby will: (i) conflict with or result in any breach
of any provision of its Articles of  Incorporation  or Bylaws;  (ii) require any
consent,  waiver,  approval,  authorization  or permit  of,  or  filing  with or
notification  to,  any  governmental  or  regulatory  authority,  except  (A) in
connection with the applicable  requirements,  if any, of the  Hart-Scott-Rodino
Antitrust  Improvements Act of 1976, as amended (the "HSR Act"), (B) pursuant to
the applicable  requirements  of the federal  securities  laws and the rules and
regulations promulgated  thereunder,  (C) the filing of the Merger Agreement and
Officers'  Certificates  pursuant to the GCLC and appropriate documents with the
relevant  authorities  of other  states  in  which  PSP20  is  authorized  to do
business, (D) in connection with any state or local tax which is attributable to
the beneficial ownership of PSP20's real property, (E) as may be required by any
applicable state securities or takeover laws, or (F) where the failure to obtain
such  consent,  approval,  authorization  or permit,  or to make such  filing or
notification, would not in the aggregate have a material adverse effect on PSP20
or  adversely  affect  the  ability  of PSP20  to  consummate  the  transactions
contemplated  hereby;  (iii) result in a violation or breach of, or constitute a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, license, mortgage,
agreement or other  instrument or obligation to which PSP20 is a party or any of
its properties or assets may be bound, except for such violations,  breaches and
defaults  which, in the aggregate,  would not have a material  adverse effect on
PSP20 or adversely  affect the ability of PSP20 to consummate  the  transactions
contemplated hereby; or (iv) assuming the consents, approvals, authorizations or
permits and filings or  notifications  referred to in this  Section 4.4 are duly
and timely  obtained  or made,  violate  any order,  writ,  injunction,  decree,
statute,  rule or regulation  applicable  to PSP20 or its  properties or assets,
except for violations  which would not in the aggregate have a material  adverse
effect on PSP20 or  adversely  affect  the  ability of PSP20 to  consummate  the
transactions contemplated hereby.

                4.5   Litigation.   There  is  no   litigation,   proceeding  or
governmental investigation which, individually or in the aggregate, is or may be
material and adverse,  pending or, to the knowledge of PSP20, threatened against
PSP20 or involving any of its properties or assets.

                4.6 SEC  Reports.  Since  January 1,  1994,  PSP20 has filed all
forms, reports and documents with the Securities and Exchange Commission ("SEC")
required to be filed by it pursuant to the federal securities laws and the rules
and regulations promulgated by the SEC thereunder,  all of which complied in all
material  respects with all applicable  requirements  of the federal  securities
laws and such rules and  regulations  (collectively,  the "PSP20 SEC  Reports").
None of the  PSP20 SEC  Reports,  including  without  limitation  any  financial
statements or schedules included therein, at the time filed contained any untrue
statement of a material  fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

                4.7 Financial  Statements.  The financial statements included in
the  PSP20  SEC  Reports  complied  as to form  in all  material  respects  with
applicable  accounting  requirements  and the published rules and regulations of
the SEC with respect  thereto,  have been prepared in accordance  with generally
accepted accounting  principles applied on a basis consistent with prior periods
(except as otherwise noted therein),  and present fairly the financial  position
of PSP20 as of their  respective  dates,  and the results of operations of PSP20
for the periods presented therein (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).

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                4.8 Absence of Certain Changes or Events. Since January 1, 1997,
the  business of PSP20 has been carried on only in the ordinary and usual course
and there has not been any material  adverse change in its business,  results of
operations or financial condition, or any damage or destruction in the nature of
a casualty loss,  whether covered by insurance or not, that would materially and
adversely affect its properties, business or results of operations.

                4.9  S-4   Registration   Statement  and  Proxy   Statement  and
Prospectus.  None of the  information  supplied  or to be  supplied by PSP20 for
inclusion or incorporation by reference in the S-4 Registration Statement or the
Proxy Statement and Prospectus (as such terms are defined in Section 6.5 hereof)
will (i) in the case of the S-4 Registration  Statement,  at the time it becomes
effective and at the Effective Time,  contain any untrue statement of a material
fact or omit to state  any  material  fact  required  to be  stated  therein  or
necessary in order to make the statements therein not misleading, or (ii) in the
case of the Proxy  Statement and  Prospectus,  at the time of the mailing of the
Proxy  Statement  and  Prospectus  and  at  the  time  of  the  meetings  of the
shareholders of PSP20,  contain any untrue  statement of a material fact or omit
to state any material fact  required to be stated  therein or necessary in order
to make the statements  therein,  in light of the circumstances under which they
are made, not misleading.

                4.10 Insurance.  All material insurance of PSP20 is currently in
full force and effect and PSP20 has reported all claims and  occurrences  to the
extent required by such insurance.

                4.11 Disclosure.  The representations and warranties by PSP20 in
this Agreement and any  certificate or document  delivered by it pursuant hereto
do not and will not contain any untrue  statement of a material  fact or omit to
state a material  fact  necessary  to make the  statements  contained  herein or
therein not misleading.

         5.  Representations,  Warranties  and  Agreements  of PSI.  PSI  hereby
represents, warrants and agrees with PSP20 that:

                5.1  Authorization.  The execution,  delivery and performance of
this  Agreement by PSI have been duly  authorized  and approved by all necessary
corporate action of PSI, and PSI has all necessary corporate power and authority
to enter  into this  Agreement,  to perform  its  obligations  hereunder  and to
complete the transactions contemplated hereby.

                5.2 Organization and Related Matters.  PSI is a corporation duly
organized,  existing  and in  good  standing  under  the  laws of the  State  of
California,  with all requisite  corporate power and authority to own, lease and
operate  its  properties  and to carry on its  business  as and where now owned,
leased,  operated or carried on, as the case may be; and is duly qualified to do
business as a foreign  corporation and is in good standing in each  jurisdiction
in which the  property  owned,  leased or  operated  by it or the  nature of the
business carried on by it requires such  qualification  and where the failure to
so qualify would have a material  adverse  effect on the  business,  properties,
results of operations or financial condition of PSI.

                5.3 Capital Stock. The authorized  capital stock of PSI consists
solely of (i) 200,000,000  shares of Common Stock ($.10 par value),  105,102,145
of which were issued and  outstanding  as of December 31, 1997,  (ii)  7,000,000
shares of Class B Common  Stock ($.10 par  value),  all of which were issued and
outstanding as of December 31, 1997, (iii) 50,000,000  shares of Preferred Stock
($.10 par value), 13,261,884 of which were issued and outstanding as of December
31, 1997 and (iv) 200,000,000  shares of Equity Stock ($.01 par value),  225,000
of which were issued and outstanding at December 31, 1997. All of the issued and
outstanding  shares of Common Stock,  Class B Common Stock,  Preferred Stock and
Equity Stock of PSI have been duly and validly  authorized  and issued,  and are
fully paid and  nonassessable.  The issuance of the PSI Shares in the Merger has
been duly and validly  authorized  and, when issued and delivered as provided in
this  Agreement,  the PSI Shares will have been duly and validly  issued,  fully
paid and  nonassessable;  and the shareholders of PSI have no preemptive  rights
with respect to any shares of capital stock of PSI.

                5.4 Consents and Approvals; No Violation.  Neither the execution
and delivery of this Agreement nor the  consummation by PSI of the  transactions
contemplated  hereby  will:  (i)  conflict  with or result in any  breach of any
provision of its Articles of Incorporation or Bylaws; (ii) require any consent,

                                       6
<PAGE>

waiver, approval, authorization or permit of, or filing with or notification to,
any  governmental  or regulatory  authority,  except (A) in connection  with the
applicable requirements,  if any, of the HSR Act, (B) pursuant to the applicable
requirements  of the  federal  securities  laws and the  rules  and  regulations
promulgated  thereunder,  (C) the filing of the Merger  Agreement  and Officers'
Certificates  pursuant to the GCLC and  appropriate  documents with the relevant
authorities  of other states in which PSI is authorized  to do business,  (D) in
connection  with any state or local tax which is  attributable to the beneficial
ownership  of the  real  property  of  PSP20,  (E) as  may  be  required  by any
applicable state securities or takeover laws, or (F) where the failure to obtain
such  consent,  approval,  authorization  or permit,  or to make such  filing or
notification,  would not in the aggregate have a material  adverse effect on PSI
or  adversely   affect  the  ability  of  PSI  to  consummate  the  transactions
contemplated  hereby;  (iii) result in a violation or breach of, or constitute a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, license, mortgage,
agreement or other  instrument  or  obligation to which PSI is a party or any of
its properties or assets may be bound, except for such violations,  breaches and
defaults  which, in the aggregate,  would not have a material  adverse effect on
PSI or  adversely  affect the  ability  of PSI to  consummate  the  transactions
contemplated hereby; or (iv) assuming the consents, approvals, authorizations or
permits and filings or  notifications  referred to in this  Section 5.4 are duly
and timely  obtained  or made,  violate  any order,  writ,  injunction,  decree,
statute,  rule or  regulation  applicable  to PSI or its  properties  or assets,
except for violations  which would not in the aggregate have a material  adverse
effect  on PSI or  adversely  affect  the  ability  of  PSI  to  consummate  the
transactions contemplated hereby.

                5.5   Litigation.   There  is  no   litigation,   proceeding  or
governmental investigation which, individually or in the aggregate, is or may be
material and adverse,  pending or, to the knowledge of PSI,  threatened  against
PSI or involving any of its properties or assets.

                5.6 SEC Reports. Since January 1, 1994, PSI has filed all forms,
reports and  documents  with the SEC  required to be filed by it pursuant to the
federal  securities  laws and the rules and  regulations  promulgated by the SEC
thereunder,  all of which complied in all material  respects with all applicable
requirements  of the  federal  securities  laws and such  rules and  regulations
(collectively,  the "PSI SEC Reports").  None of the PSI SEC Reports,  including
without limitation any financial  statements or schedules  included therein,  at
the time filed  contained any untrue  statement of a material fact or omitted to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

                5.7 Financial  Statements.  The financial statements included in
PSI's SEC Reports  complied as to form in all material  respects with applicable
accounting  requirements and the published rules and regulations of the SEC with
respect  thereto,  have been  prepared in  accordance  with  generally  accepted
accounting  principles  applied on a basis consistent with prior periods (except
as otherwise noted therein), and present fairly the financial position of PSI as
of their respective  dates, and the results of operations of PSI for the periods
presented  therein  (subject,  in the case of the  unaudited  interim  financial
statements, to normal year-end adjustments).

                5.8 Absence of Certain Changes or Events. Since January 1, 1997,
the  business of PSI has been  carried on only in the  ordinary and usual course
and there has not been any material  adverse change in its business,  results of
operations or financial condition, or any damage or destruction in the nature of
a casualty loss,  whether covered by insurance or not, that would materially and
adversely affect its properties, business or results of operations.

                5.9  S-4   Registration   Statement  and  Proxy   Statement  and
Prospectus.  None  of the  information  supplied  or to be  supplied  by PSI for
inclusion or incorporation by reference in the S-4 Registration Statement or the
Proxy  Statement  and  Prospectus  (as those  terms are  defined in Section  6.5
hereof) will (i) in the case of the S-4 Registration  Statement,  at the time it
becomes  effective and at the Effective Time,  contain any untrue statement of a
material fact or omit to state any material  fact required to be stated  therein
or necessary in order to make the statements therein not misleading,  or (ii) in
the case of the Proxy  Statement and  Prospectus,  at the time of the mailing of
the  Proxy  Statement  and  Prospectus  and at the time of the  meetings  of the
shareholders of PSP20,  contain any untrue  statement of a material fact or omit
to state any material fact  required to be stated  therein or necessary in order
to make the statements  therein,  in light of the circumstances under which they
are made, not misleading.

                5.10  Insurance.  All material  insurance of PSI is currently in
full force and effect and PSI has  reported  all claims and  occurrences  to the
extent required by such insurance.

                                       7
<PAGE>

                5.11 Disclosure.  The  representations  and warranties by PSI in
this Agreement and any  certificate or document  delivered by it pursuant hereto
do not and will not contain any untrue  statement of a material  fact or omit to
state a material  fact  necessary  to make the  statements  contained  herein or
therein not misleading.

         6.     Covenants and Agreements.

                6.1 Ordinary  Course.  Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, each of
PSI and PSP20 will carry on its business in the ordinary course in substantially
the same manner as heretofore  conducted and use all reasonable  efforts to: (a)
preserve intact its present  business,  organization and goodwill,  (b) maintain
all permits,  licenses and  authorizations  required by applicable laws, and (c)
keep  available  the  services  of  its  present   employees  and  preserve  its
relationships with customers, suppliers, lenders, lessors, governmental entities
and others having business or regulatory  dealings with it. PSP20 will not issue
any capital stock or debt  securities  convertible  into capital stock.  PSI and
PSP20 will  promptly  notify the  others of any event or  occurrence  not in the
ordinary  and usual  course of  business  or which may have a  material  adverse
effect on the properties or financial condition of such party.

                6.2  Meetings  of  Shareholders.  PSP20  will  take  all  action
necessary  in  accordance  with  applicable  law to  convene  a  meeting  of its
shareholders  as promptly as  practicable  to consider and vote upon approval of
this  Agreement,  it being  understood that the principal terms of the Agreement
must be approved by the affirmative vote of a majority of the outstanding shares
of Common Stock Series A, B and C of PSP20,  counted  together as a single class
with the  shares of Common  Stock  Series B and C voted  with the  holders  of a
majority of the unaffiliated shares of Common Stock Series A.

                6.3 Tax  Reporting.  Each of PSI and PSP20  agrees to report the
Merger for federal and state income tax  purposes,  as a  reorganization  of the
type described in Section  368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended.

                6.4 Acquisition Proposals.  PSP20 will not initiate,  solicit or
encourage,  directly or indirectly,  any inquiries or the making of any proposal
with respect to a merger,  consolidation,  share exchange or similar transaction
involving PSP20, or any purchase of all or any significant  portion of either of
their  assets,  or any  equity  interest  in  either  of  them,  other  than the
transactions  contemplated hereby (an "Acquisition Proposal"),  or engage in any
negotiations concerning,  or provide any confidential information or data to, or
have any  discussions  with,  any person  relating to an  Acquisition  Proposal;
provided,  however, that the Board of Directors of PSP20 may furnish or cause to
be  furnished   information  and  may   participate  in  such   discussions  and
negotiations  through its representatives  with persons who have sought the same
if the failure to provide such  information or participate in such  negotiations
and  discussions  might cause the members of the Board of  Directors of PSP20 to
breach their fiduciary duty to the shareholders of PSP20 under applicable law as
advised by counsel.  PSP20 will notify PSI  immediately if any such inquiries or
proposals are received by, any such  information is requested  from, or any such
negotiations  or discussions are sought to be initiated or continued with PSP20,
and will keep PSI informed of the status and terms of any such proposals and any
such negotiations or discussions.

                6.5  Registration  and Proxy  Statements.  PSP20  will  promptly
prepare and file with the SEC a preliminary  proxy  statement in connection with
the vote of  shareholders  of PSP20 with  respect to the  Merger.  PSI will,  as
promptly as practicable,  prepare and file with the SEC a registration statement
on Form S-4 (the "S-4  Registration  Statement"),  containing  a combined  proxy
statement/prospectus,  in connection with the registration  under the Securities
Act of 1933, as amended (the "Securities Act") of the PSI Shares to be issued to
holders of PSP20 Shares in the Merger (such combined proxy statement/prospectus,
together with any amendments thereof or supplements thereto, in each case in the
form or forms to be mailed to the shareholders of PSP20, being herein called the
"Proxy Statement and Prospectus").  PSI and PSP20 will use their best efforts to
have or  cause  the S-4  Registration  Statement  to be  declared  effective  as
promptly  as  practicable,  and also will take any other  action  required to be
taken  under  federal  or state  securities  laws,  and PSP20  will use its best
efforts  to cause  the  Proxy  Statement  and  Prospectus  to be  mailed  to its
shareholders at the earliest  practicable date. PSP20 agrees that if at any time
prior to the  Effective  Time any event with respect to PSP20 should occur which
is required to be described in an  amendment  of, or a supplement  to, the Proxy
Statement and Prospectus or the S-4 Registration Statement, such event shall be

                                       8
<PAGE>

so described,  and such amendment or supplement shall be promptly filed with the
SEC and, as required by law,  disseminated to the shareholders of PSP20 and (ii)
the Proxy  Statement  and  Prospectus  will (with respect to PSP20) comply as to
form in all material  respects with the  requirements of the federal  securities
laws.  PSI agrees that (i) if at any time prior to the Effective  Time any event
with  respect  to PSI should  occur  which is  required  to be  described  in an
amendment of, or a supplement to, the Proxy  Statement and Prospectus or the S-4
Registration Statement,  such event shall be so described, and such amendment or
supplement  shall  be  promptly  filed  with the SEC and,  as  required  by law,
disseminated  to the  shareholders  of PSP20  and (ii) the Proxy  Statement  and
Prospectus will (with respect to PSI) comply as to form in all material respects
with the requirements of the federal securities laws.

                6.6 Best Efforts. Each of PSI and PSP20 shall: (i) promptly make
its respective filings and thereafter make any other required  submissions under
all  applicable  laws with  respect  to the  Merger  and the other  transactions
contemplated hereby; and (ii) use its best efforts to promptly take, or cause to
be  taken,  all other  actions  and do,  or cause to be done,  all other  things
necessary,   proper  or   appropriate  to  consummate  and  make  effective  the
transactions contemplated by this Agreement as soon as practicable.

                6.7  Registration  and Listing of PSI  Shares.  PSI will use its
best efforts to register the PSI Shares under the  applicable  provisions of the
Securities  Act and to cause the PSI Shares to be listed for trading on the NYSE
upon official notice of issuance.

                6.8  Distributions.  PSP20  will not,  at any time  prior to the
Effective  Time,  declare or pay any cash  distribution  on its capital stock or
make any other  distribution of assets to its  shareholders,  except (i) regular
quarterly  dividends  on its Common  Stock at a quarterly  rate not in excess of
$.28 per share, (ii)  distributions to shareholders of record  immediately prior
to the  Effective  Time in an aggregate  amount equal to the amount by which the
estimated  Net  Asset  Value  of  PSP20  (as  defined  below)  allocable  to the
shareholders  as of the Effective  Time exceeds  $22.57 per share in the case of
the PSP20  Shares  and $10.90  per share in the case of the PSP20  Common  Stock
Series B and C and (iii)  pre-Merger  cash  distributions  required  to  satisfy
PSP20's REIT  distribution  requirements (the number of PSI Shares issued in the
Merger and the amount  receivable  upon Cash Elections would be reduced on a pro
rata basis in an aggregate amount equal to such additional  distributions).  For
this  purpose,  the Net Asset  Value of PSP20 is the sum of (a) the fair  market
value of PSP20's real estate  assets as determined by appraisal by The Nicholson
Group,  Ltd. as of October 31, 1997, and (b) the book value of PSP20's  non-real
estate assets as of the date of determination,  and less (c) PSP20's liabilities
as of the date of determination. The determination of book value and liabilities
shall be from PSP20's financial statements prepared in accordance with generally
accepted accounting principles on a basis consistent with prior periods.

         7.     Conditions.

                7.1  Conditions  to Each  Party's  Obligations.  The  respective
obligations of each party to consummate the  transactions  contemplated  by this
Agreement are subject to the  fulfillment  at or prior to the Closing of each of
the following conditions, any or all of which may be waived in whole or in part,
to the extent permitted by applicable law:

                        7.1.1 PSP20 Shareholder Approval. This Agreement and the
transactions   contemplated   hereby  shall  have  been  duly  approved  by  the
shareholders of PSP20 as contemplated by Section 6.2.

                        7.1.2 Governmental and Regulatory Consents.  All filings
required  to be made  prior  to the  Effective  Time  with,  and  all  consents,
approvals,  permits and  authorizations  required  to be  obtained  prior to the
Effective Time from,  governmental and regulatory authorities in connection with
the  execution  and  delivery  of this  Agreement  and the  consummation  of the
transactions contemplated hereby (including the expiration of the waiting period
requirements  of the HSR Act) shall have been made or obtained  (as the case may
be)  without  material  restrictions,  except  where the  failure to obtain such
consents, approvals, permits and authorizations could not reasonably be expected
to have a material adverse effect on PSI, PSP20.

                        7.1.3 Litigation. No court or governmental or regulatory
authority of competent  jurisdiction  shall have enacted,  issued,  promulgated,

                                       9
<PAGE>

enforced or entered any statute, rule, regulation,  judgment, decree, injunction
or other order (whether temporary, preliminary or permanent) or taken any action
which  prohibits  the  consummation  of the  transactions  contemplated  by this
Agreement;  provided,  however, that the party invoking this condition shall use
its best efforts to have any such  judgment,  decree,  injunction or other order
vacated.

                        7.1.4  Registration  Statement.   The  S-4  Registration
Statement  shall  have been  declared  effective  and no stop  order  suspending
effectiveness   shall  have  been  issued,  no  action,   suit,   proceeding  or
investigation  by the SEC to suspend the  effectiveness  thereof shall have been
initiated and be continuing, and all necessary approvals under federal and state
securities laws relating to the issuance or trading of the PSI Shares shall have
been received.

                        7.1.5  Listing  of PSI  Shares on NYSE.  The PSI  Shares
shall  have  been  approved  for  listing  on the NYSE upon  official  notice of
issuance.

                        7.1.6 Fairness Opinion. The Boards of Directors of PSP20
shall have  received  the opinion of Robert A.  Stanger & Co.,  Inc. in form and
substance  satisfactory  to them to the  effect  that  the  consideration  to be
received by the shareholders of PSP20 in the Merger is fair to such shareholders
from a financial  point of view,  and such opinion shall not have been withdrawn
or revoked.

                        7.1.7 Tax  Opinion.  The Boards of  Directors of PSI and
PSP20 shall have  received a legal  opinion of Hogan & Hartson  L.L.P.  that the
Merger will qualify as a tax-free  reorganization  under  Section  368(a) of the
Internal Revenue Code of 1986, as amended.

                        7.1.8  PSI  Board  Approval.   This  Agreement  and  the
transactions  contemplated  hereby shall have been duly approved by the Board of
Directors of PSI.

                7.2 Conditions to Obligations of PSI. The  obligations of PSI to
consummate the  transactions  contemplated  by this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, which may be
waived in whole or in part by PSI to the extent permitted by applicable law:

                        7.2.1  Accuracy  of   Representations;   Performance  of
Agreements.  Each of the  representations  and warranties of PSP20  contained in
this Agreement  shall be true and correct in all material  respects at and as of
the Closing  Date as if made at and as of the Closing Date (except to the extent
they relate to a  particular  date) and PSP20 shall have  performed  or complied
with all agreements and covenants  required by this Agreement to be performed or
complied with by it at or prior to the Closing.

                        7.2.2  Certificate of Officers.  PSI shall have received
such  certificates  of  officers  of  PSP20  as PSI may  reasonably  request  in
connection with the Closing,  including upon request a certificate  satisfactory
to it of the Chief Executive  Officer and the Chief Financial  Officer of PSP20,
to the effect that,  to the best of their  knowledge,  all  representations  and
warranties  of PSP20  contained  in this  Agreement  are true and correct in all
material  respects  at and as of the  Closing  Date  as if made at and as of the
Closing  Date,  and PSP20 have  performed or complied  with all  agreements  and
covenants required by this Agreement to be performed or complied with by them at
or prior to the Closing.

                        7.2.3 Title to Properties;  Environmental Audits. PSI in
its sole  discretion  shall be satisfied as to the status of title to (including
the  existence  and  effect of liens and  encumbrances),  and the  results of an
environmental audit of, each of the real properties owned by PSP20.

                        7.2.4  Trading  Price of PSI Shares.  The average of the
per share closing prices of the PSI Shares on the NYSE during the 20 consecutive
trading  days  ending  on  the  fifth  trading  day  prior  to  the  meeting  of
shareholders of PSP20 provided for in Section 6.2 hereof (the "Average PSI Share
Price") shall be not less than $28.

                        7.2.5 Dissenting Shares. The number of Dissenting Shares
shall be less than 5% of the outstanding PSP20 Shares.

                                      10
<PAGE>

                7.3 Conditions to Obligations of PSP20. The obligations of PSP20
to consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, which may be
waived in whole or in part by PSP20 to the extent permitted by applicable law.

                        7.3.1  Accuracy  of   Representations;   Performance  of
Agreements.  Each of the representations and warranties of PSI contained in this
Agreement  shall be true and correct in all  material  respects at and as of the
Closing Date as if made at and as of the Closing Date (except to the extent they
relate to a  particular  date) and PSI shall have  performed  or complied in all
material  respects with all agreements and covenants  required by this Agreement
to be performed or complied with by it at or prior to the Closing.

                        7.3.2 Certificate of Officers. PSP20 shall have received
such  certificates  of  officers  of PSI as  PSP20  may  reasonably  request  in
connection with the Closing,  including upon request a certificate  satisfactory
to them of the Chief Executive  Officer and the Chief Financial  Officer of PSI,
to the effect that,  to the best of their  knowledge,  all  representations  and
warranties  of PSI  contained  in this  Agreement  are true and  correct  in all
material  respects  at and as of the  Closing  Date  as if made at and as of the
Closing  Date,  and PSI has  performed  or  complied  with  all  agreements  and
covenants  required by this  Agreement to be performed or complied with by it at
or prior to the Closing.

         8.     Termination.

                8.1  Termination  by  Mutual  Consent.  This  Agreement  may  be
terminated  and the Merger may be abandoned  at any time prior to the  Effective
Time,  before or after  shareholder  approval,  by the mutual written consent of
PSI, PSP20.

                8.2 Termination by PSI, PSP20.  This Agreement may be terminated
and the  Merger may be  abandoned  by action of the Board of  Directors  of PSI,
PSP20 if (i) the Merger  shall not have been  consummated  by December  31, 1998
(provided that the right to terminate  this Agreement  under this Section 8.2(i)
shall not be  available  to any party whose  failure to fulfill  any  obligation
under this  Agreement  has been the cause of or  resulted  in the failure of the
Merger  to  occur  on  or  before  such  date);  (ii)  any  court  of  competent
jurisdiction in the United States or some other  governmental body or regulatory
authority shall have issued an order, decree or ruling or taken any other action
permanently restraining,  enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
or (iii) the  shareholders  of PSP20 shall have failed to approve this Agreement
and the transactions contemplated hereby at its meeting of shareholders.

                8.3 Termination by PSI. This Agreement may be terminated by PSI,
and the Merger may be abandoned at any time prior to the  Effective  Time, as to
the  defaulting  party if (i) PSP20 shall have failed to comply in any  material
respect with any of the  covenants,  conditions or agreements  contained in this
Agreement  to be complied  with or  performed  by such party at or prior to such
date of  termination,  which  failure to comply has not been cured  within  five
business days following notice to such party of such failure to comply,  or (ii)
any representation or warranty of PSP20 contained in this Agreement shall not be
true in all material  respects when made, which inaccuracy or breach (if capable
of cure) has not been cured within five business days  following  notice to such
party of the inaccuracy or breach, or on and as of the Closing as if made on and
as of the Closing Date.

                8.4  Termination  by PSP20.  This Agreement may be terminated by
PSP20 and the Merger may be abandoned at any time prior to the  Effective  Time,
before or after shareholder  approval, if (i) PSI shall have failed to comply in
any  material  respect  with  any of the  covenants,  conditions  or  agreements
contained in this  Agreement to be complied with or performed by PSI at or prior
to such date of  termination,  which failure to comply has not been cured within
five business days  following  notice to PSI of such failure to comply,  or (ii)
any  representation  or warranty of PSI contained in this Agreement shall not be
true in all material  respects when made,  which inaccuracy or beach (if capable
of cure) has not been cured within five business days following notice to PSI of
the  inaccuracy  or breach,  or on and as of the Closing as if made on and as of
the Closing Date.

                8.5  Effect  of  Termination  and  Abandonment.  In the event of
termination  of this Agreement and  abandonment  of the Merger  pursuant to this

                                      11
<PAGE>

Section  8,  no  party  (or  any  directors,   officers,  employees,  agents  or
representatives  of any party) shall have any liability or further obligation to
any other  party or any person who  controls a party  within the  meaning of the
Securities Act, except as provided in Section 9.1 and except that nothing herein
will relieve any party from liability for any breach of this Agreement.

         9.     Miscellaneous.

                9.1  Payment of  Expenses.  If the Merger are  consummated,  the
Surviving  Corporation  shall pay all the expenses  incident to  preparing  for,
entering  into and  carrying  out this  Agreement  and the  consummation  of the
transactions contemplated hereby. If the Merger are not consummated, each of PSI
and PSP20  shall pay its own  expenses,  except  that any  expenses  incurred in
connection  with the printing of the S-4  Registration  Statement  and the Proxy
Statement and Prospectus, the real estate appraisals and environmental audits of
the properties of PSP20 and preparation for real estate closings, and any filing
fees under the HSR Act, the Securities  Act and the  Securities  Exchange Act of
1934, as amended shall be paid 50% by PSI and 50% by PSP20.

                9.2 Survival of Representations,  Warranties and Covenants.  The
respective  representations  and warranties of PSI and PSP20 contained herein or
in any certificate or document  delivered  pursuant hereto shall expire with and
be terminated and extinguished by the  effectiveness of the Merger and shall not
survive  the  Effective   Time.  The  sole  right  and  remedy  arising  from  a
misrepresentation  or  breach of  warranty,  or from the  failure  of any of the
conditions to be met,  shall be the  termination  of this Agreement by the other
party.  This  Section  9.2  shall not limit any  covenant  or  agreement  of the
parties, which by its terms contemplates performance after the Effective Time.

                9.3  Modification or Amendment.  The parties may modify or amend
this  Agreement by written  agreement  authorized by the Boards of Directors and
executed and delivered by officers of the respective parties; provided, however,
that  after  approval  of this  Agreement  by the  shareholders  of a party,  no
amendment  shall be made which changes any of the principal  terms of the Merger
or this Agreement, without the approval of such shareholders.

                9.4 Waiver of Conditions. The conditions to each of the parties'
obligations  to consummate the Merger are for the sole benefit of such party and
may be  waived  by such  party in whole or in part to the  extent  permitted  by
applicable law.

                9.5  Governing  Law.  This  Agreement  shall be  governed by and
construed in accordance with the laws of the State of California, without giving
effect to the principles of conflict of laws thereof.

                9.6  Interpretation.  This Agreement has been  negotiated by the
parties and is to be interpreted according to its fair meaning as if the parties
had prepared it together and not strictly for or against any party.  Each of the
capitalized  terms  defined in this  Agreement  shall,  for all purposes of this
Agreement (and whether  defined in the plural and used in the singular,  or vice
versa),  have the  respective  meaning  assigned  to such term in the Section in
which such meaning is set forth.  References in this Agreement to "parties" or a
"party" refer to parties to this Agreement unless expressly indicated otherwise.
At each place in this  Agreement  where the context so requires,  the masculine,
feminine or neuter gender  includes the others and the singular or plural number
includes the other. "Including" means "including without limitation."

                9.7 Headings. The descriptive headings contained in the Sections
and  subsections  of this  Agreement are for  convenience  of reference only and
shall not affect in any way the meaning or interpretation of this Agreement.

                9.8  Parties  in  Interest.  This  Agreement,  and  the  rights,
interests and obligations created by this Agreement, shall bind and inure to the
benefit of the parties and their  respective  successors and permitted  assigns,
and shall confer no right, benefit or interest upon any other person,  including
shareholders of the respective parties.

                9.9  Notices.  All notices or other  communications  required or
permitted  under  this  Agreement  shall be in  writing  and shall be  delivered
personally or sent by U.S. mail,  postage prepaid,  addressed as follows or such
other  address as the party to be notified has  furnished in writing by a notice
given in accordance with this Section 9.9:

                                      12
<PAGE>

                        If to PSI:

                        Public Storage, Inc.
                        701 Western Avenue, Suite 200
                        Glendale, California 91201-2397
                        Attention:  Harvey Lenkin
                                    President

                        If to PSP20:

                        Public Storage Properties XX, Inc.
                        701 Western Avenue, Suite 200
                        Glendale, California 91201-2397
                        Attention:  B. Wayne Hughes
                                    Chief Executive Officer

Any  such  notice  or  communication  shall  be  deemed  given as of the date of
delivery, if delivered  personally,  or on the second day after deposit with the
U.S. Postal Service, if sent by U.S. mail.

                9.10 Counterparts. This Agreement may be executed in two or more
counterparts,  each of which shall be deemed to be an original, but all of which
shall be considered one and the same agreement.

                9.11 Assignment.  No rights,  interests or obligations of either
party  under this  Agreement  may be  assigned  or  delegated  without the prior
written consent of the other party.

                9.12 Entire  Agreement.  This  Agreement,  including  the Merger
Agreement,  embodies the entire agreement and understanding  between the parties
pertaining to the subject  matter hereof,  and supersedes all prior  agreements,
understandings,  negotiations,  representations and discussions, whether written
or oral.

                9.13  Severable  Provisions.  If any of the  provisions  of this
Agreement may be determined to be illegal or otherwise  unenforceable,  in whole
or in part, the remaining provisions,  and any partially enforceable  provisions
to the extent enforceable, shall nevertheless be binding and enforceable.

                9.14 Further  Action.  If at any time after the Effective  Time,
the Surviving Corporation shall determine that any assignments, transfers, deeds
or other assurances are necessary or desirable to vest,  perfect or confirm,  of
record or  otherwise,  in the  Surviving  Corporation,  title to any property or
rights  of  PSP20,  the  officers  of  any  Constituent  Corporation  are  fully
authorized  in the  name of PSP20 or  otherwise  to  execute  and  deliver  such
documents  and do all things  necessary  and proper to vest,  perfect or confirm
title to such property or rights in the Surviving Corporation.

         IN WITNESS WHEREOF,  the parties have entered into this Agreement as of
the date first above written.

                                        PUBLIC STORAGE, INC.


                                        By:  /s/ HARVEY LENKIN
                                            -----------------------------
                                            Harvey Lenkin
                                            President

                                        PUBLIC STORAGE PROPERTIES XX, INC.


                                        By:  /s/ B. WAYNE  HUGHES
                                            -----------------------------
                                            B. Wayne Hughes
                                            Chief Executive Officer

                                      13
<PAGE>

                                                                     Exhibit A

                               AGREEMENT OF MERGER


         THIS AGREEMENT OF MERGER ("Agreement") is entered into as of this _____
day of _______________,  1998, by and between PUBLIC STORAGE, INC., a California
corporation  ("PSI"),  and PUBLIC  STORAGE  PROPERTIES  XX,  INC.,  a California
corporation ("PSP20"), with reference to the following:

         A. PSI was  incorporated  in 1980 under the laws of California,  and on
the date hereof its authorized  capital stock consists of 200,000,000  shares of
Common Stock, $.10 par value (the "PSI Shares"), ___________ of which are issued
and outstanding,  7,000,000 shares of Class B Common Stock,  $.10 par value, all
of which are issued and outstanding,  50,000,000 shares of Preferred Stock, $.01
par  value,  ___________  of which are issued and  outstanding  and  200,000,000
shares of Equity Stock, $.01 par value,  _______________ of which are issued and
outstanding.

         B. PSP20 was incorporated in 1990 under the laws of California,  and on
the date hereof has outstanding __________ shares of Common Stock Series A, $.01
par value (the "PSP20  Shares"),  _________  shares of Common Stock Series B and
_________ shares of Common Stock Series C.

         C.  PSI  and  PSP20  have  entered  into  an  Agreement   and  Plan  of
Reorganization dated as of February 13, 1998 (the "Plan"), setting forth certain
representations,  warranties, conditions and agreements pertaining to the Merger
(as defined below).

         D. The Boards of Directors of PSI and PSP20 have  approved the Plan and
this  Agreement  of Merger,  and the  requisite  shareholder  approval  has been
obtained.

         NOW, THEREFORE, the parties agree as follows:

                                    ARTICLE I

                1.1 The Merger. At the Effective Time (as defined below),  PSP20
will be merged with and into PSI (the  "Merger")  and PSI shall be the surviving
corporation.  PSI and PSP20 are sometimes collectively referred to herein as the
"Constituent  Corporations" and PSI, as the surviving corporation of the Merger,
is sometimes referred to herein as the "Surviving Corporation."

                1.2  Effective  Time.  The Merger shall become  effective at the
time at which this Agreement, together with the requisite Officers' Certificates
of PSI and  PSP20,  are  filed  with the  California  Secretary  of  State  (the
"Effective Time").

                1.3 Effect of the Merger. At the Effective Time:

                        (a) The  separate  corporate  existence  of PSP20  shall
cease and the  Surviving  Corporation  shall  thereupon  succeed,  without other
transfer,  to all the rights and  property  of PSP20 and shall be subject to all
the  debts  and  liabilities  of PSP20 in the same  manner  as if the  Surviving
Corporation had itself incurred them; all rights of creditors and all liens upon
the  property  of  each  of the  Constituent  Corporations  shall  be  preserved
unimpaired,  provided that such liens upon property of PSP20 shall be limited to
the property  affected thereby  immediately prior to the Effective Time; and any
action or proceeding  pending by or against PSP20 may be prosecuted to judgment,
which shall bind the Surviving Corporation,  or the Surviving Corporation may be
proceeded against or substituted in its place.

                                      A-1
<PAGE>

                        (b) The Articles of Incorporation and the Bylaws of PSI,
as then  amended,  shall  continue to be the Articles of  Incorporation  and the
Bylaws of the Surviving  Corporation  until changed as provided by law and their
respective provisions.

                        (c) The directors of PSI shall  continue as directors of
the Surviving  Corporation  until their  successors are elected and qualified as
provided by law and in accordance with the Articles of Incorporation  and Bylaws
of the Surviving Corporation.

                                   ARTICLE II

                2.1  Conversion  of PSP20 Shares.  The manner of converting  the
outstanding PSP20 Shares into cash and/or PSI Shares shall be as follows:

                        (a) At the Effective Time, subject to Section 2.6 of the
Plan,  each PSP20 Share as to which a cash  election has been made in accordance
with the  provisions  of  Section  2.5 of the  Plan  and has not  been  revoked,
relinquished  or lost  pursuant to Section  2.5 of the Plan (the "Cash  Election
Shares")  shall be  converted  into and shall  represent  the  right to  receive
$_______ in cash (the "Cash Election  Price").  As soon as practicable after the
Effective Time, the registered holders of Cash Election Shares shall be paid the
cash to which they are  entitled  hereunder  in  respect  of such Cash  Election
Shares.

                        (b) At the Effective Time,  subject to Sections 2.4, 2.5
and 2.7 of the Plan, each PSP20 Share (other than Cash Election Shares and PSP20
Shares owned by PSI) shall be converted into ______ PSI Shares.

                2.2 No  Fractional  Shares.  Notwithstanding  any other  term or
provision  of this  Agreement  or the Plan,  no  fractional  PSI  Shares  and no
certificates or script therefor, or other evidence of ownership thereof, will be
issued in the  Merger.  In lieu of any such  fractional  share  interests,  each
holder of PSP20 Shares who would otherwise be entitled to such fractional  share
will, upon surrender of the certificate  representing such PSP20 Shares, receive
a whole PSI Share if such fractional  share to which such holder would otherwise
have been  entitled  is .5 of an PSI Share or more,  and such  fractional  share
shall be  disregarded if it represents  less than .5 of an PSI Share;  provided,
however, that, such fractional share shall not be disregarded if such fractional
share to which such holder would  otherwise have been entitled  represents .5 of
1% or more of the total  number of PSI Shares such holder is entitled to receive
in the  Merger.  In such  event,  such  holder  shall be paid an  amount in cash
(without interest),  rounded to the nearest $.01,  determined by multiplying (i)
the per share  closing  price on the New York Stock  Exchange,  Inc.  of the PSI
Shares at the Effective Time by (ii) the fractional interest.

                2.3  Dissenting  Shares.  PSP20  Shares held by a holder who has
demanded and  perfected  his right to an appraisal of such shares in  accordance
with  Section 1300 et seq. of the General  Corporation  Law of  California  (the
"GCLC") and who has not  effectively  withdrawn  or lost his right to  appraisal
("Dissenting  Shares")  shall not be converted  into or  represent  the right to
receive cash and/or PSI Shares, but the holder thereof shall be entitled only to
such rights as are granted by Section  1300 et seq. of the GCLC.  Each holder of
Dissenting  Shares who becomes  entitled to payment for PSP20 Shares pursuant to
these  provisions of the GCLC shall receive payment  therefor from the Surviving
Corporation in accordance  therewith.  If any holder of PSP20 Shares who demands
appraisal in accordance with Section 1300 et seq. of the GCLC shall  effectively
withdraw with the consent of the Surviving  Corporation or lose (through failure
to perfect or  otherwise)  his right to appraisal  with respect to PSP20 Shares,
such PSP20 Shares shall automatically be converted into the right to receive PSI
Shares pursuant to Section 2.1(b) hereof.

                2.4 PSI Shares Unaffected.  The Merger shall effect no change in
any of the  outstanding  PSI  Shares  and no  outstanding  PSI  Shares  shall be
converted  or  exchanged  as a  result  of the  Merger,  and no  cash  shall  be
exchangeable and no securities shall be issuable, with respect thereto.

                2.5  Cancellation  of Shares  Held or Owned by  Parties.  At the
Effective Time, any PSP20 Shares owned by PSI shall be cancelled and retired and
no shares shall be  issuable,  and no cash shall be  exchangeable,  with respect
thereto.

                                      A-2
<PAGE>

                2.6 Exchange of  Certificates.  After the Effective  Time,  each
holder of a certificate  theretofore  evidencing  outstanding PSP20 Shares which
were  converted  into  PSI  Shares  pursuant  hereto,  upon  surrender  of  such
certificate  to First  National  Bank of Boston (the  "Exchange  Agent") or such
other agent or agents as shall be appointed by the Surviving Corporation,  shall
be entitled to receive a certificate representing the number of whole PSI Shares
into  which the PSP20  Shares  theretofore  represented  by the  certificate  so
surrendered  shall have been  converted  and cash payment in lieu of  fractional
share  interests,  if any. As soon as practicable  after the Effective Time, the
Exchange Agent will send a notice and a transmittal form to each holder of PSP20
Shares of record at the  Effective  Time whose stock  shall have been  converted
into PSI Shares, advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent  certificates  evidencing PSP20
Shares in exchange for certificates evidencing PSI Shares.

                2.7 Status Until  Surrendered.  Until surrendered as provided in
Section 2.6 hereof,  each outstanding  certificate which, prior to the Effective
Time,  represented  PSP20 Shares (other than Cash Election Shares and Dissenting
Shares, if any) will be deemed for all corporate  purposes to evidence ownership
of the number of whole PSI Shares into which the PSP20 Shares evidenced  thereby
were converted. However, until such outstanding certificates formerly evidencing
PSP20 Shares are so surrendered, no dividend payable to holders of record of PSI
Shares shall be paid to the holders of such outstanding  certificates in respect
of PSP20 Shares,  but upon surrender of such  certificates by such holders there
shall be paid to such  holders the amount of any  dividends  (without  interest)
theretofore  paid with respect to such whole PSI Shares as of any record date on
or  subsequent  to the  Effective  Time  and the  amount  of any  cash  (without
interest) payable to such holder in lieu of fractional share interests.

                2.8 Transfer of Shares. After the Effective Time, there shall be
no further  registration  of  transfers  of PSP20 Shares on the records of PSP20
and,  if  certificates  formerly  evidencing  such shares are  presented  to the
Surviving  Corporation,  they shall be cancelled and exchanged for  certificates
evidencing PSI Shares and cash in lieu of fractional  share  interests as herein
provided.

                2.9  Conversion of Common Stock Series B and C. At the Effective
Time, each share of Common Stock Series B (other than shares owned by PSI) shall
be  converted  into  ______ PSI Shares and each share of Common  Stock  Series C
(other than shares owned by PSI) shall be converted into ______ PSI Shares.

                                   ARTICLE III

                3.1 Headings. The descriptive headings contained in the Sections
of this Agreement are for  convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.

                3.2  Parties  in  Interest.  This  Agreement,  and  the  rights,
interests and obligations created by this Agreement, shall bind and inure to the
benefit of the parties and their respective successors and permitted assigns.

                3.3 Counterparts.  This Agreement may be executed in two or more
counterparts,  each of which shall be deemed to be an original, but all of which
shall be considered one and the same agreement.

                3.4 Further Action. If at any time after the Effective Time, the
Surviving Corporation shall determine that any assignments,  transfers, deeds or
other  assurances  are  necessary or desirable to vest,  perfect or confirm,  of
record or  otherwise,  in the  Surviving  Corporation,  title to any property or
rights of  PSP20,  the  officers  of either  Constituent  Corporation  are fully
authorized  in the  name of PSP20 or  otherwise  to  execute  and  deliver  such
documents  and do all things  necessary  and proper to vest,  perfect or confirm
title to such property or rights in the Surviving Corporation.

                3.5  Governing  Law.  This  Agreement  shall be  governed by and
construed in accordance with the laws of the State of California, without giving
effect to the principles of conflict of laws thereof.

                3.6 Abandonment of Merger. The Constituent Corporations have the
power to abandon  the Merger by mutual  written  consent  prior to the filing of
this Agreement with the California Secretary of State.

                                      A-3
<PAGE>

         IN WITNESS WHEREOF,  the parties have entered into this Agreement as of
the date first above written.

                                        PUBLIC STORAGE, INC.


                                        By: ________________________________
                                            Harvey Lenkin
                                            President


                                        By: ________________________________
                                            Obren B. Gerich
                                            Assistant Secretary


                                        PUBLIC STORAGE PROPERTIES XX, INC.


                                        By: ________________________________
                                            Harvey Lenkin
                                            President


                                        By: ________________________________
                                            Obren B. Gerich
                                            Secretary

                                      A-4