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                                                                   EXHIBIT 10.27

                         SHURGARD STORAGE CENTERS, INC.
                          2000 LONG-TERM INCENTIVE PLAN

SECTION 1 PURPOSE

The purpose of the Shurgard Storage Centers, Inc. 2000 Long-Term Incentive Plan
(the "Plan") is to enhance the long-term profitability and shareholder value of
Shurgard Storage Centers, Inc., a Washington corporation (the "Company"), by
offering incentives to those employees, officers, directors, consultants and
agents of the Company and its Subsidiaries (as defined in Section 2.28 below)
who are key to the Company's growth and success, and to encourage them to remain
in the service of the Company and its Subsidiaries and to acquire and maintain
stock ownership in the Company.

SECTION 2 DEFINITIONS

For purposes of the Plan, the following terms shall be defined as set forth
below:

        2.1 AWARD

        "Award" means an award or grant made to a Participant pursuant to the
Plan, including, without limitation, awards or grants of Options, Stock
Appreciation Rights, Stock Awards, Performance Awards, Other Stock-Based Awards,
Dividend Equivalent Rights or any combination of the foregoing.

        2.2 BOARD

"Board" means the Board of Directors of the Company.

        2.3 CAUSE

"Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure of
confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, whose determination shall be conclusive and binding.

        2.4 CODE

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

        2.5 COMMON STOCK

"Common Stock" means the Class A Common Stock, par value $.001 per share, of the
Company.

        2.6 CORPORATE TRANSACTION

"Corporate Transaction" means any of the following events:

        (a) Approval by the holders of the Common Stock of any merger or
consolidation of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the Common Stock are
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Common Stock immediately prior to the merger
have substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;

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        (b) Approval by the holders of the Common Stock of any sale, lease,
exchange or other transfer in one transaction or a series of related
transactions of all or substantially all the Company's assets other than a
transfer of the Company's assets to a majority-owned subsidiary (as the term
"subsidiary" is defined in Section 8.3) of the Company; or

        (c) Approval by the holders of the Common Stock of any plan or proposal
for the liquidation or dissolution of the Company.

        2.7 DISABILITY

"Disability" means "disability" as that term is defined for purposes of the
Company's Long-Term Disability Plan or other similar successor plan applicable
to salaried employees.

        2.8 DIVIDEND EQUIVALENT RIGHT

"Dividend Equivalent Right" means a right, granted to a Participant under
Section 13, to receive cash, shares of Common Stock, other Awards or other
property equal in value to dividends paid with respect to a specified number of
shares of Common Stock.

        2.9 EARLY RETIREMENT

"Early Retirement" means retirement as that term is defined by the Plan
Administrator from time to time for purposes of the Plan.

        2.10 EFFECTIVE DATE

"Effective Date" has the meaning set forth in Section 20.

        2.11 EXCHANGE ACT

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

        2.12 FAIR MARKET VALUE

"Fair Market Value" means the closing price of the Common Stock as reported in
The Wall Street Journal for the New York Stock Exchange--Composite Transactions
(or similar successor consolidated transactions reports) for a single trading
day. If no sales of Common Stock were made on the New York Stock Exchange on the
transaction date, Fair Market Value shall mean the closing price of a share of
Common Stock as reported for the next preceding day on which sales of Common
Stock were made on the New York Stock Exchange.

        2.13 GOOD REASON

"Good Reason" means the occurrence of any of the following events or conditions:

        (a) a change in the Holder's status, title, position or responsibilities
(including reporting responsibilities) that, in the Holder's reasonable
judgment, represents a substantial reduction of the status, title, position or
responsibilities as in effect immediately prior thereto; the assignment to the
Holder of any duties or responsibilities that, in the Holder's reasonable
judgment, are inconsistent with such status, title, position or
responsibilities; or any removal of the Holder from or failure to reappoint or
reelect the Holder to any of such positions, except in connection with the
termination of the Holder's employment for Cause or Disability or as a result of
his or her death, or by the Holder other than for Good Reason;

        (b) a reduction in the Holder's annual base salary, unless such
reduction is part of a reduction in salary applicable to substantially all or
certain classes of Company employees;

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        (c) the Company's requiring the Holder (without the Holder's consent) to
be based at any place outside a 35-mile radius of his or her place of employment
prior to a Corporate Transaction, except for reasonably required travel on the
Company's business that is not materially greater than such travel requirements
prior to the Corporate Transaction;

        (d) the Company's failure to (i) continue in effect any material
compensation or benefit plan (or the substantial equivalent thereof) in which
the Holder was participating at the time of a Corporate Transaction, including,
but not limited to, the Plan, or (ii) provide the Holder with compensation and
benefits at least equal (in terms of benefit levels and/or reward opportunities)
to those provided for under each employee benefit plan, program and practice as
in effect immediately prior to the Corporate Transaction (or as in effect
following the Corporate Transaction, if greater), unless such reduction in
benefits as set forth in clauses (i) and (ii) above is part of a reduction in
benefits applicable to substantially all or certain classes of Company
employees;

        (e) any material breach by the Company of any provision of the Plan; or

        (f) any purported termination of the Holder's employment or service for
Cause by the Company that does not comply with the terms of the Plan.

        2.14 GRANT DATE

"Grant Date" means the date designated in a resolution of the Plan Administrator
as the date an Award is granted. If the Plan Administrator does not designate a
Grant Date in the resolution, the Grant Date shall be the date the Plan
Administrator completes the corporate action relating to the grant of an Award
and all conditions precedent to the grant have been satisfied; provided,
however, that conditions to the exercisability or vesting of Awards shall not
defer the Grant Date.

        2.15 HOLDER

"Holder" means the Participant to whom an Award is granted or the personal
representative of a Holder who has died.

        2.16 INCENTIVE STOCK OPTION

"Incentive Stock Option" means an option to purchase Common Stock granted under
Section 7 with the intention that it qualify as an "incentive stock option" as
that term is defined in Section 422 of the Code.

        2.17 NONQUALIFIED STOCK OPTION

"Nonqualified Stock Option" means an option to purchase Common Stock granted
under Section 7 other than an Incentive Stock Option.

        2.18 OPTION

"Option" means the right to purchase Common Stock granted under Section 7.

        2.19 OPTION TERM

"Option Term" shall have the meaning set forth in Section 7.3.

        2.20 OTHER STOCK-BASED AWARD

"Other Stock-Based Award" means an Award granted under Section 12.

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        2.21 PARTICIPANT

"Participant" means (a) an individual who is a Holder of an Award or, as the
context may require, any employee, consultant or agent of the Company or a
Subsidiary who has been designated by the Plan Administrator as eligible to
participate in the Plan, (b) for a Participant who has died, the personal
representative of the Participant's estate, the person or persons to whom the
Participant's rights under the Award have passed by will or by the applicable
laws of descent and distribution, or the beneficiary designated in accordance
with Section 15, or (c) the person or persons to whom an Award has been
transferred in accordance with Section 15.

        2.22 PERFORMANCE AWARD

"Performance Award" means an Award granted under Section 11 the payout of which
is subject to achievement through a performance period of performance goals
prescribed by the Plan Administrator.

        2.23 PLAN ADMINISTRATOR

"Plan Administrator" means any committee of the Board designated to administer
the Plan or any person or persons to whom the Board has delegated authority to
administer the Plan under Section 3.1.

        2.24 RESTRICTED STOCK

"Restricted Stock" means shares of Common Stock granted under Section 10, the
rights of ownership of which are subject to restrictions prescribed by the Plan
Administrator.

        2.25 RETIREMENT

"Retirement" means retirement as of the individual's normal retirement date
under the Shurgard Employees Retirement Savings Plan or other similar successor
plan applicable to salaried employees.

        2.26 STOCK APPRECIATION RIGHT

"Stock Appreciation Right" means an Award granted under Section 9.

        2.27 STOCK AWARD

"Stock Award" means an Award granted under Section 10.

        2.28 SUBSIDIARY

"Subsidiary," except as expressly provided otherwise in Section 8.3 in
connection with Incentive Stock Options, means any entity that is directly, or
indirectly controlled by the Company or in which the Company has a significant
ownership interest, as determined by the Plan Administrator, and any entity that
may become a direct or indirect parent of the Company.

        2.29 SUCCESSOR CORPORATION

"Successor Corporation" shall have the meaning set forth in Section 16.2.

        2.30 TERMINATION DATE

"Termination Date" shall have the meaning set forth in Section 7.6(a).

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SECTION 3 ADMINISTRATION

        3.1 PLAN ADMINISTRATOR

The Plan shall be administered by the Compensation Committee of the Board,
except to the extent the Board appoints another committee or committees (which
term includes subcommittees) consisting of one or more members of the Board to
administer the Plan. The Board may delegate the responsibility for administering
the Plan with respect to designated classes of eligible Participants to
different committees, subject to such limitations as the Board deems
appropriate. Committee members shall serve for such terms as the Board may
determine, subject to removal by the Board at any time. The Board shall
consider, in selecting the members of any committee responsible for
administering the Plan with respect to any persons subject, or likely to become
subject, to Section 16 of the Exchange Act as officers of the Company, the
requirements of (a) Rule 16b-3 under Section 16(b) of the Exchange Act and (b)
Section 162(m) of the Code, as then in effect. Currently, Rule 16b-3 requires
that Awards granted to directors and officers subject to Section 16 of the
Exchange Act be approved by a committee that consists solely of at least two
"nonemployee" directors of the Company and Section 162(m) requires that Awards
granted to officers subject to Section 162(m) be approved by a committee that
consists solely of at least two "outside" directors of the Company.

        3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR

Except for the terms and conditions explicitly set forth in the Plan, the Plan
Administrator shall have exclusive authority, in its discretion, to determine
all matters relating to Awards under the Plan, including the selection of
individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and may from time to time adopt, and change, rules and
regulations of general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be conclusive and binding on all parties involved or affected.
The Plan Administrator may delegate administrative duties to such of the
Company's officers as it so determines.

SECTION 4 STOCK SUBJECT TO THE PLAN

        4.1 AUTHORIZED NUMBER OF SHARES

Subject to adjustment from time to time as provided in Section 16.1, a maximum
of 1,400,000 shares of Common Stock shall be available for issuance under the
Plan. Shares issued under the Plan shall be drawn from authorized and unissued
shares.

        4.2 LIMITATIONS

        (a) Subject to adjustment as provided in Section 16.1, not more than an
aggregate of 400,000 shares of Common Stock shall be available for issuance
pursuant to grants of Stock Awards or Other Stock-Based Awards under the Plan.

        (b) Subject to adjustment from time to time as provided in Section 16.1,
not more than 500,000 shares of Common Stock may be made subject to Options or
Stock Appreciation Rights under the Plan to any individual Participant in any
one fiscal year of the Company, except that the Plan Administrator may make
additional one-time grants of up to 750,000 shares to newly hired or newly
promoted individuals, such limitations to be applied in a manner consistent with
the requirements of, and only to the extent required for compliance with, the
exclusion from the limitation on deductibility of compensation under Section
162(m) of the Code.

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        4.3 REUSE OF SHARES

Any shares of Common Stock made subject to an Award that cease to be subject to
that Award (other than by reason of exercise or payment of the Award to the
extent it is exercised for, or settled in, vested and nonforfeitable shares),
including, without limitation, in connection with the expiration, surrender,
cancellation or termination of an Award, shall again be available for issuance
in connection with future grants of Awards under the Plan; provided, however,
that for purposes of this Section 4.3, any such shares shall be counted in
accordance with the requirements of Section 162(m) of the Code. Shares that are
subject to tandem Awards shall be counted only once.

SECTION 5 ELIGIBILITY

Awards may be granted under the Plan to those officers, directors and employees
of the Company and its Subsidiaries as the Plan Administrator from time to time
selects. Awards may also be made to consultants and agents who provide services
to the Company and its Subsidiaries; provided, however, that such persons render
bona fide services that are not in connection with the offer and sale of the
Company's securities in a capital-raising transaction and that do not directly
or indirectly promote or maintain a market for the Company's securities.

SECTION 6 AWARDS

        6.1 FORM AND GRANT OF AWARDS

The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan. Such Awards may
include, but are not limited to, Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Stock Awards, Performance Awards, Other
Stock-Based Awards and Dividend Equivalent Rights. Awards may be granted singly,
in combination or in tandem so that the settlement or payment of one
automatically reduces or cancels the other. Awards may also be made in
combination or in tandem with, as alternatives to, or as the payment form for,
grants or rights under any other employee or compensation plan of the Company.

        6.2 SETTLEMENT OF AWARDS

The Plan Administrator may permit or require the deferral of any Award payment,
subject to such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred stock equivalents. The Plan
Administrator may at any time offer to buy out, for a payment in cash or Common
Stock, an Award previously granted, based on such terms and conditions as the
Plan Administrator shall establish and communicate to the Participant at the
time such offer is made.

        6.3 ACQUIRED COMPANY AWARDS

Notwithstanding anything in the Plan to the contrary, the Plan Administrator may
grant Awards under the Plan in substitution for awards issued under other plans,
or assume under the Plan awards issued under other plans, if the other plans are
or were plans of other entities ("Acquired Entities") (or the parent of the
Acquired Entity) and the new Award is substituted, or the old award is assumed,
by reason of a merger, consolidation, acquisition of property or of stock,
reorganization or liquidation (the "Acquisition Transaction"). In the event that
a written agreement pursuant to which the Acquisition Transaction is completed
is approved by the Board and said agreement sets forth the terms and conditions
of the substitution for or assumption of outstanding awards of the Acquired
Entity, said terms and conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator, except as
may be required for compliance with Rule 16b-3 under the Exchange Act, and the
persons holding such Awards shall be deemed to be Participants and Holders.

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SECTION 7 AWARDS OF OPTIONS

        7.1 GRANT OF OPTIONS

The Plan Administrator is authorized under the Plan, in its sole discretion, to
issue Options as Incentive Stock Options or as Nonqualified Stock Options, which
shall be appropriately designated.

        7.2 OPTION EXERCISE PRICE

The exercise price for shares purchased under an Option shall be as determined
by the Plan Administrator, but shall not be less than 100% of the Fair Market
Value of the Common Stock on the Grant Date with respect to Incentive Stock
Options and not less than 85% of the Fair Market Value of the Common Stock on
the Grant Date with respect to Nonqualified Stock Options. For Incentive Stock
Options granted to a more than 10% shareholder, the Option exercise price shall
be as specified in Section 8.2.

        7.3 TERM OF OPTIONS

The term of each Option (the "Option Term") shall be as established by the Plan
Administrator or, if not so established, shall be 10 years from the Grant Date.
For Incentive Stock Options, the maximum Option Term shall be as specified in
Sections 8.2 and 8.4.

        7.4 EXERCISE OF OPTIONS

The Plan Administrator shall establish and set forth in each instrument that
evidences an Option the time at which, or the installments in which, the Option
shall vest and become exercisable, which provisions may be waived or modified by
the Plan Administrator at any time. If not so established in the instrument
evidencing the Option, the Option shall vest and become exercisable according to
the following schedule, which may be waived or modified by the Plan
Administrator at any time:

<TABLE>
<CAPTION>
                  PERIOD OF HOLDER'S
           CONTINUOUS EMPLOYMENT OR SERVICE
                WITH THE COMPANY OR ITS                    PERCENT OF TOTAL
              SUBSIDIARIES FROM THE OPTION                   OPTION THAT
                       GRANT DATE                           IS EXERCISABLE
---------------------------------------------------------  ----------------
<S>                                                        <C>
    After one year...................................            33%
    After two years..................................            66%
    After three years................................           100%
</TABLE>

To the extent that the right to purchase shares has accrued thereunder, an
Option may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
accompanied by payment in full as described in Section 7.5. In no case may an
Option be exercised as to less than 100 shares at any one time (or the lesser
number of remaining shares covered by the Option).

        7.5 PAYMENT OF EXERCISE PRICE

The exercise price for shares purchased under an Option shall be paid in full to
the Company by delivery of consideration equal to the product of the Option
exercise price and the number of shares purchased. Such consideration must be
paid in cash, except that the Plan Administrator may, either at the time the
Option is granted or at any time before it is exercised and subject to such
limitations as the Plan Administrator may determine, authorize payment in any
combination of

        (a) cash or check;

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        (b) tendering (either actually or by attestation) shares of Common Stock
already owned by the Holder for at least six months (or any shorter period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes) having a Fair Market Value on the day prior to the exercise date equal
to the aggregate Option exercise price;

        (c) delivery of a full-recourse promissory note authorized pursuant to
Section 14;

        (d) delivery of a properly executed exercise notice, together with
irrevocable instructions, to (i) a brokerage firm designated by the Company to
deliver promptly to the Company the aggregate amount of sale or loan proceeds to
pay the Option exercise price and any withholding tax obligations that may arise
in connection with the exercise and (ii) the Company to deliver the certificates
for such purchased shares directly to such brokerage firm, all in accordance
with the regulations of the Federal Reserve Board; or

        (e) such other consideration as the Plan Administrator may permit.

        7.6 POST-TERMINATION EXERCISES

The Plan Administrator shall establish and set forth in each instrument that
evidences an Option whether the Option will continue to be exercisable, and the
terms and conditions of such exercise, if a Holder ceases to be employed by, or
to provide services to, the Company or its Subsidiaries, which provisions may be
waived or modified by the Plan Administrator at any time. If not so established
in the instrument evidencing the Option, the Option shall be exercisable
according to the following terms and conditions, which may be waived or
modified, by the Plan Administrator at any time:

        (a) Any portion of an Option that is not vested and exercisable on the
date of termination of the Participant's employment or service relationship (the
"Termination Date") shall expire on such date.

        (b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire on the earliest to occur of

                (i) the last day of the Option Term;

                (ii) if the Participant's Termination Date occurs for reasons
other than Cause, Retirement, Early Retirement at the Company's request,
Disability or death, the three-month anniversary of such Termination Date; and

                (iii) if the Participant's Termination Date occurs by reason of
Retirement, Early Retirement at the Company' request, Disability or death, the
three-year anniversary of such Termination Date.

Notwithstanding the foregoing, if the Participant dies after the Termination
Date while the Option is otherwise exercisable, the portion of the Option that
is vested and exercisable on such Termination Date shall expire on the earlier
to occur of (y) the last day of the Option Term and (z) the longer of the first
anniversary of the date of death and the post-termination exercise period
otherwise applicable, unless the Plan Administrator determines otherwise. Also,
notwithstanding the foregoing, in case of termination of the Holder's employment
or services for Cause, the Option shall automatically terminate on first
notification to the Holder of such termination, unless the Plan Administrator
determines otherwise. If a Holder's employment or services with the Company are
suspended pending an investigation of whether the Holder shall be terminated for
Cause, all the Holder's rights under any Option likewise shall be suspended
during the period of investigation. A transfer of employment or services between
or among the Company and its Subsidiaries shall not be considered a termination
of employment or services. Unless the Plan Administrator determines otherwise, a
leave of absence approved in accordance with Company procedures shall not be
considered a termination of employment or services, except that, with respect to
Incentive Stock Options, such leave of absence shall be subject to any
requirements of Section 422 of the Code.

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SECTION 8 INCENTIVE STOCK OPTION LIMITATIONS

To the extent required by Section 422 of the Code, Incentive Stock Options shall
be subject to the following additional terms and conditions:

        8.1 DOLLAR LIMITATION

To the extent the aggregate Fair Market Value (determined as of the Grant Date)
of Common Stock with respect to which Incentive Stock Options are exercisable
for the first time during any calendar year (under the Plan and all other stock
option plans of the Company) exceeds $100,000, such portion in excess of
$100,000 shall be treated as a Nonqualified Stock Option. In the event the
Participant holds two or more such Options that become exercisable for the first
time in the same calendar year, such limitation shall be applied on the basis of
the order in which such Options are granted.

        8.2 MORE THAN 10% SHAREHOLDERS

If a Participant owns more than 10% of the total voting power of all classes of
the Company's stock, then the exercise price per share of an Incentive Stock
Option shall not be less than 110% of the Fair Market Value of the Common Stock
on the Grant Date and the Option term shall not exceed five years. The
determination of 10% ownership shall be made in accordance with Section 422 of
the Code.

        8.3 ELIGIBLE EMPLOYEES

Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.

        8.4 TERM

Subject to Section 8.2, the term of an Incentive Stock Option shall not exceed
10 years.

        8.5 EXERCISABILITY

An Option designated as an Incentive Stock Option shall cease to qualify for
favorable tax treatment as an Incentive Stock Option to the extent it is
exercised (if permitted by the terms of the Option) (a) more than three months
after the Termination Date for reasons other than Disability or death, (b) more
than one year after the Termination Date by reason of Disability, or (c) after
the Participant has been on leave of absence for more than 90 days, unless the
Participant's reemployment rights are guaranteed by statute or contract.

SECTION 9 STOCK APPRECIATION RIGHTS

        9.1 GRANT OF STOCK APPRECIATION RIGHTS

The Plan Administrator may grant a Stock Appreciation Right separately or in
tandem with a related Option.

        9.2 TANDEM STOCK APPRECIATION RIGHTS

A Stock Appreciation Right granted in tandem with a related Option will give the
Holder the right to surrender to the Company all or a portion of the related
Option and to receive an appreciation distribution (in shares of Common Stock or
cash or any combination of shares and cash, as the Plan Administrator shall
determine at any time) in an amount equal to the excess of the Fair Market Value
on the date the Stock Appreciation Right is exercised over the exercise price
per share of the right, which shall be the same as the exercise price of the
related Option. A tandem Stock Appreciation Right will have the same other terms

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and provisions as the related Option. Upon and to the extent a tandem Stock
Appreciation Right is exercised, the related Option will terminate.

        9.3 STAND-ALONE STOCK APPRECIATION RIGHTS

A Stock Appreciation Right granted separately and not in tandem with an Option
will give the Holder the right to receive an appreciation distribution in an
amount equal to the excess of the Fair Market Value for the date the Stock
Appreciation Right is exercised over the exercise price per share of the right.
A stand-alone Stock Appreciation Right will have such terms as the Plan
Administrator may determine, except that the exercise price per share of the
right must be at least equal to 85% of the Fair Market Value on the Grant Date
and the term of the right, if not otherwise established by the Plan
Administrator, shall be 10 years from the Grant Date.

        9.4 EXERCISE OF STOCK APPRECIATION RIGHTS

Unless otherwise provided by the Plan Administrator in the instrument that
evidences the Stock Appreciation Right, the provisions of Section 7.6 relating
to the termination of a Holder's employment or services shall apply equally, to
the extent applicable, to the Holder of a Stock Appreciation Right.

SECTION 10 STOCK AWARDS

        10.1 GRANT OF STOCK AWARDS

The Plan Administrator is authorized to make Awards of Common Stock to
Participants on such terms and conditions and subject to such restrictions, if
any (which may be based on continuous service with the Company or performance
goals related to profits, profit growth, profit-related return ratios, cash
flow, total return to shareholders, funds from operations, customer service,
employee satisfaction or performance against budget, whether applicable to the
Company or any relevant Subsidiary or business unit, comparisons with competitor
companies or groups and with stock market indices, or any combination thereof,
as the Plan Administrator shall determine), which terms, conditions and
restrictions shall be set forth in the instrument evidencing the Award. The
terms, conditions and restrictions that the Plan Administrator shall have the
power to determine shall include, without limitation, the manner in which shares
subject to Stock Awards are held during the periods they are subject to
restrictions and the circumstances under which forfeiture of Restricted Stock
shall occur by reason of termination of the Holder's services.

        10.2 ISSUANCE OF SHARES

Upon the satisfaction of any terms, conditions and restrictions prescribed in
respect to a Stock Award, or upon the Holder's release from any terms,
conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall deliver, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, a stock certificate for the
appropriate number of shares of Common Stock.

        10.3 WAIVER OF RESTRICTIONS

Notwithstanding any other provisions of the Plan, the Plan Administrator may, in
its sole discretion, waive the forfeiture period and any other terms, conditions
or restrictions on any Restricted Stock under such circumstances and subject to
such terms and conditions as the Plan Administrator shall deem appropriate;
provided, however, that the Plan Administrator may not adjust performance goals
for any Stock Award intended to be exempt under Section 162(m) of the Code for
the year in which the Stock Award is settled in such a manner as would increase
the amount of compensation otherwise payable to a Participant.

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SECTION 11 PERFORMANCE AWARDS

        11.1 PLAN ADMINISTRATOR AUTHORITY

Performance Awards may be denominated in cash, shares of Common Stock or any
combination thereof. The Plan Administrator is authorized to grant Performance
Awards and shall determine the nature, length and starting date of the
performance period for each Performance Award and the performance objectives to
be used in valuing Performance Awards and determining the extent to which such
Performance Awards have been earned. Performance objectives and other terms may
vary from Participant to Participant and between groups of Participants.
Performance objectives shall be profits, profit growth, profit-related return
ratios, cash flow, total return to shareholders, funds from operations, customer
service, employee satisfaction or performance against budget, whether applicable
to the Company or any relevant Subsidiary or business unit, comparisons with
competitor companies or groups and with stock market indices, or any combination
thereof, as the Plan Administrator may deem appropriate. Performance periods may
overlap and Participants may participate simultaneously with respect to
Performance Awards that are subject to different performance periods and
different performance factors and criteria. The Plan Administrator shall
determine for each Performance Award the range of dollar values or number of
shares of Common Stock (which may, but need not, be shares of Restricted Stock
pursuant to Section 10), or any combination thereof, to be received by the
Participant at the end of the performance period if and to the extent that the
relevant measures of performance for such Performance Awards are met. The earned
portion of a Performance Award may be paid currently or on a deferred basis with
such interest or earnings equivalent as may be determined by the Plan
Administrator. Payment shall be made in the form of cash, whole shares of Common
Stock (which may, but need not, be shares of Restricted Stock pursuant to
Section 10), Options, or any combination thereof, either in a single payment or
in annual installments, all as the Plan Administrator shall determine.

        11.2 ADJUSTMENT OF AWARDS

The Plan Administrator may adjust the performance goals and measurements
applicable to Performance Awards to take into account changes in law and
accounting and tax rules and to make such adjustments as the Plan Administrator
deems necessary or appropriate to reflect the inclusion or exclusion of the
impact of extraordinary or unusual items, events or circumstances; provided,
however, that the Plan Administrator may not adjust performance goals for any
Performance Award intended to be exempt under Section 162(m) of the Code for the
year in which the Performance Award is settled in such a manner as would
increase the amount of compensation otherwise payable to a Participant. The Plan
Administrator also may adjust the performance goals and measurements applicable
to Performance Awards and thereby reduce the amount to be received by any
Participant pursuant to such Awards if and to the extent the Plan Administrator
deems it appropriate.

        11.3 PAYOUT UPON TERMINATION

The Plan Administrator shall establish and set forth in each instrument that
evidences a Performance Award whether the Award will be payable, and the terms
and conditions of such payment, if a Holder ceases to be employed by, or to
provide services to, the Company or its Subsidiaries, which provisions may be
waived or modified by the Plan Administrator at any time. If not so established
in the instrument evidencing the Performance Award, the Award will be payable
according to the following terms and conditions, which may be waived or modified
by the Plan Administrator at any time. If during a performance period a
Participant's employment or services with the Company terminate by reason of the
Participant's Retirement, Early Retirement at the Company's request, Disability
or death, such Participant shall be entitled to a payment with respect to each
outstanding Performance Award at the end of the applicable performance period
(a) based, to the extent relevant under the terms of the Award, on the
Participant's performance for the portion of such performance period ending on
the date of termination and (b) prorated for the portion of the performance
period during which the Participant was employed by the Company, all as
determined by the Plan Administrator. The Plan Administrator may provide for an
earlier payment in settlement of such Performance Award discounted at a
reasonable interest rate and otherwise in such amount and under such

                                       11
<PAGE>   12

terms and conditions as the Plan Administrator deems appropriate. Except as
otherwise provided in Section 16 or in the instrument evidencing the Performance
Award, if during a performance period a Participant's employment or services
with the Company terminate other than by reason of the Participant's Retirement,
Early Retirement at the Company's request, Disability or death, then such
Participant shall not be entitled to any payment with respect to the Performance
Awards relating to such performance period, unless the Plan Administrator shall
otherwise determine. The provisions of Section 7.6 regarding leaves of absence
and termination for Cause shall apply to Performance Awards.

SECTION 12 OTHER STOCK-BASED AWARDS

The Plan Administrator may grant other Awards under the Plan pursuant to which
shares of Common Stock (which may, but need not, be shares of Restricted Stock
pursuant to Section 10) are, or may in the future be, acquired, or Awards
denominated in stock units, including ones valued using measures other than
market value. Such Other Stock-Based Awards may be granted alone, or in addition
to, or in tandem with, any Award of any type granted under the Plan and must be
consistent with the Plan's purpose.

SECTION 13 DIVIDEND EQUIVALENT RIGHTS

The Plan Administrator is authorized to make Awards of Dividend Equivalent
Rights. The Plan Administrator shall establish such rules and procedures
governing the crediting of Dividend Equivalent Rights, including the timing,
form of payment and payment contingencies of such Dividend Equivalent Rights, as
it deems are appropriate or necessary.

SECTION 14 LOANS, LOAN GUARANTEES AND INSTALLMENT PAYMENTS

To assist a Holder (including a Holder who is an officer or director of the
Company) in acquiring shares of Common Stock pursuant to an Award granted under
the Plan, the Plan Administrator may authorize, either at the Grant Date or at
any time before the acquisition of Common Stock pursuant to the Award, (a) the
extension of a full-recourse loan to the Holder by the Company, (b) the payment
by the Holder of the purchase price, if any, of the Common Stock in
installments, or (c) the guarantee by the Company of a full-recourse loan
obtained by the grantee from a third party. Subject to the foregoing, the Plan
Administrator, in its sole discretion, shall specify the terms of any loans,
installment payments or guarantees, including the interest rate and terms of
repayment. The maximum credit available is the purchase price, if any, of the
Common Stock acquired, plus the maximum federal and state income and employment
tax liability that may be incurred in connection with the acquisition.

SECTION 15 ASSIGNABILITY

No Option, Stock Appreciation Right, Restricted Stock Award, Performance Award,
Other Stock-Based Award or Dividend Equivalent Right granted under the Plan may
be assigned, pledged or transferred by the Holder other than by will or by the
laws of descent and distribution, and during the Holder's lifetime, such Awards
may be exercised only by the Holder. Notwithstanding the foregoing, and to the
extent permitted by Section 422 of the Code, the Plan Administrator, in its sole
discretion, may permit such assignment, transfer and exercisability and may
permit a Holder of such Awards to designate a beneficiary who may exercise the
Award or receive compensation under the Award after the Holder's death;
provided, however, that any Award so assigned or transferred shall be subject to
all the same terms and conditions contained in the instrument evidencing the
Award.

SECTION 16 ADJUSTMENTS

        16.1 ADJUSTMENT OF SHARES

In the event that, at any time or from time to time, a stock dividend, stock
split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash dividend or
other change in the Company's corporate or capital structure results in (a) the
outstanding

                                       12
<PAGE>   13

shares, or any securities exchanged therefor or received in their place, being
exchanged for a different number or kind of securities of the Company or any
other corporation or (b) new, different or additional securities of the Company
or any other corporation being received by the holders of shares of Common Stock
of the Company, then the Plan Administrator, in its sole discretion, shall make
such equitable adjustments as it shall deem appropriate in the circumstances in
(i) the maximum number of and kind of securities subject to the Plan as set
forth in Section 4.1, (ii) the maximum number and kind of securities that may be
made subject to Stock Awards and Awards to any individual Participant as set
forth in Section 4.2, and (iii) the number and kind of securities that are
subject to any outstanding Award and the per share price of such securities,
without any change in the aggregate price to be paid therefor. The determination
by the Plan Administrator as to the terms of any of the foregoing adjustments
shall be conclusive and binding.

        16.2 CORPORATE TRANSACTION

Except as otherwise provided in the instrument that evidences the Award, in the
event of any Corporate Transaction, each Option, Stock Appreciation Right or
Stock Award that is at the time outstanding shall automatically accelerate so
that each such Award shall, immediately prior to the specified effective date of
the Corporate Transaction, become 100% vested, except that such acceleration
will not occur if, in the opinion of the Company's accountants, it would render
unavailable "pooling of interest" accounting for a Corporate Transaction that
would otherwise qualify for such accounting treatment. Such Award shall not so
accelerate, however, if and to the extent, (a) such Award is, in connection with
the Corporate Transaction, either to be assumed by the surviving corporation,
the successor corporation or the parent thereof, as applicable (the "Successor
Corporation"), or to be replaced with a comparable award for the purchase of
shares of the capital stock of the Successor Corporation, (b) such Award is to
be replaced with a cash incentive program of the Successor Corporation that
preserves the spread existing at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting schedule
applicable to such Award, or (c) the acceleration of such Award is subject to
other limitations imposed by the instrument evidencing the Award. The
determination of Award comparability under clause (a) above shall be made by the
Plan Administrator, and its determination shall be conclusive and binding. All
such Awards shall terminate and cease to remain outstanding immediately
following the consummation of the Corporate Transaction, except to the extent
assumed by the Successor Corporation. Any such Awards that are assumed or
replaced in the Corporate Transaction pursuant to clause (a) or (b) above and
that do not otherwise accelerate at that time shall be accelerated in the event
the Holder's employment or services should subsequently terminate within two
years following such Corporate Transaction, unless such employment or services
are terminated by the Successor Corporation for Cause or by the Holder
voluntarily without Good Reason. Notwithstanding the foregoing, no Incentive
Stock Option shall become exercisable pursuant to this Section 16.2 without the
Holder's consent, if the result would be to cause such Option not to be treated
as an Incentive Stock Option (whether by reason of the annual limitation
described in Section 8.1 or otherwise).

        16.3 FURTHER ADJUSTMENT OF AWARDS

Without limiting the preceding Section 16.2, and subject to the limitations set
forth in Section 11, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation or change in control of the Company, as defined by the Plan
Administrator, to take such further actions as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to Awards. Such
authorized actions may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Awards so as to provide for earlier, later, extended or additional time for
exercise, payment or settlement or lifting restrictions, differing methods for
calculating payments or settlements, alternate forms and amounts of payments and
settlements and other modifications, and the Plan Administrator may take such
actions with respect to all Participants, to certain categories of Participants
or only to individual Participants. The Plan Administrator may take such actions
before or after granting Awards to which the actions relate and before or after
any public announcement with respect to such sale, merger, consolidation,
reorganization, liquidation or change in control that is the reason for such
actions.

                                       13
<PAGE>   14

        16.4 LIMITATIONS

The grant of Awards will in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

        16.5 FRACTIONAL SHARES

In the event of any adjustment in the number of shares covered by any Award,
each such Award shall cover only the number of full shares resulting from such
adjustment.

SECTION 17 WITHHOLDING OF TAXES

The Company may require the Holder to pay to the Company the amount of any
withholding taxes that the Company is required to withhold with respect to the
grant, vesting, exercise, payment or settlement of any Award. In such instances,
the Plan Administrator may, in its discretion and subject to the Plan and
applicable law, permit the Holder to satisfy withholding obligations, in whole
or in part, (a) by paying cash, (b) by electing to have the Company withhold
shares of Common Stock (up to the minimum required federal tax withholding
rate), or (c) by transferring shares of Common Stock to the Company (already
owned by the Holder for the period necessary to avoid a charge to the Company's
earnings for financial accounting purposes), in such amounts as are equivalent
to the Fair Market Value of the withholding obligation. The Company shall have
the right to withhold from any Award or any shares of Common Stock issuable
pursuant to an Award or from any cash amounts otherwise due, or to become due,
from the Company to the Participant an amount equal to such taxes. The Company
may also deduct from any Award any other amounts due from the Participant to the
Company or a Subsidiary.

SECTION 18 AMENDMENT AND TERMINATION OF PLAN

        18.1 AMENDMENT OF PLAN

The Plan may be amended only by the Board in such respects as it shall deem
advisable; provided, however, that, to the extent required for compliance with
Section 422 of the Code or any applicable law or regulation, shareholder
approval will be required for any amendment that will (a) increase the total
number of shares that may be issued under the Plan or that may be issued as
Stock Awards, (b) materially modify the class of persons eligible to receive
Awards, or (c) otherwise require shareholder approval under any applicable law
or regulation. Any amendment made to the Plan that would constitute a
"modification" to Incentive Stock Options outstanding on the date of such
amendment shall not, without the consent of the Participant, be applicable to
such outstanding Incentive Stock Options but shall have prospective effect only.

        18.2 TERMINATION OF PLAN

The Board may suspend or terminate the Plan at any time. Unless the Plan shall
theretofore have been terminated by the Board, the Plan shall have no fixed
termination date; provided, however, that no Incentive Stock Option may be
granted more than 10 years after the later of (a) the Plan's adoption by the
Board and (b) the adoption by the Board of any amendment to the Plan that
constitutes the adoption of a new plan for purposes of Section 422 of the Code.

        18.3 CONSENT OF HOLDER

The amendment or termination of the Plan or the amendment of an outstanding
Award shall not, without the Holder's consent, impair or diminish any rights or
obligations under any Award theretofore granted to the Holder under the Plan.
Any change or adjustment to an outstanding Incentive Stock Option shall not,
without the consent of the Holder, be made in a manner so as to constitute a
"modification" that would cause such Incentive Stock Option to fail to continue
to qualify as an Incentive Stock Option.

                                       14
<PAGE>   15

Notwithstanding the foregoing, any adjustments made pursuant to Section 16 shall
not be subject to these restrictions.

SECTION 19 GENERAL

        19.1 EVIDENCE OF AWARDS

Awards granted under the Plan shall be evidenced by a written instrument that
shall contain such terms, conditions, limitations and restrictions as the Plan
Administrator shall deem advisable and that are not inconsistent with the Plan.

        19.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS

Neither the Plan nor participation in the Plan as a Participant nor any action
of the Plan Administrator taken under the Plan shall be construed as giving any
Participant or employee of the Company any right to be retained in the employ of
the Company or limit the Company's right to terminate the employment or services
of the Participant.

        19.3 REGISTRATION; CERTIFICATES FOR SHARES

The Company shall be under no obligation to any Participant to register for
offering or resale under the Securities Act of 1933, as amended, or register or
qualify under state securities laws, any shares of Common Stock, security or
interest in a security paid or issued under, or created by, the Plan. The
Company may issue certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.

To the extent that the Plan or any instrument evidencing an Award provides for
issuance of stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be effected on a noncertificated basis, to the extent
not prohibited by applicable law or the applicable rules of any stock exchange.

        19.4 NO RIGHTS AS A SHAREHOLDER

No Option, Stock Appreciation Right, Stock Award denominated in units,
Performance Award or Other Stock-Based Award shall entitle the Holder to any
dividend (except to the extent provided in an Award of Dividend Equivalent
Rights), voting or other right of a shareholder unless and until the date of
issuance under the Plan of the shares that are the subject of such Awards, free
of all applicable restrictions.

        19.5 COMPLIANCE WITH LAWS AND REGULATIONS

Notwithstanding anything in the Plan to the contrary, the Board, in its sole
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to Participants who are officers or directors
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other Participants. Additionally, in
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an "incentive stock option" within the meaning of Section
422 of the Code.

        19.6 NO TRUST OR FUND

The Plan is intended to constitute an "unfunded" plan. Nothing contained herein
shall require the Company to segregate any monies or other property, or shares
of Common Stock, or to create any trusts, or to make any special deposits for
any immediate or deferred amounts payable to any Participant, and no Participant
shall have any rights that are greater than those of a general unsecured
creditor of the Company.

                                       15
<PAGE>   16

        19.7 PARTICIPANTS IN FOREIGN COUNTRIES

The Plan Administrator shall have the authority to adopt such modifications,
procedures and subplans as may be necessary or desirable to comply with
provisions of the laws of foreign countries in which the Company or its
Subsidiaries may operate to assure the viability of the benefits from Awards
granted to Participants employed in such countries and to meet the objectives of
the Plan.

        19.8 SEVERABILITY

If any provision of the Plan or any Award is determined to be invalid, illegal
or unenforceable in any jurisdiction, or as to any person, or would disqualify
the Plan or any Award under any law deemed applicable by the Plan Administrator,
such provision shall be construed or deemed amended to conform to applicable
laws, or, if it cannot be so construed or deemed amended without, in the Plan
Administrator's determination, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.

        19.9 CHOICE OF LAW

The Plan and all determinations made and actions taken pursuant hereto, to the
extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of Washington without giving effect to
principles of conflicts of laws.

SECTION 20 EFFECTIVE DATE

The Plan's Effective Date is the date on which it is approved by the Company's
shareholders.

Adopted by the Board March 6, 2000 and approved by the Company's shareholders.

                                       16<PAGE>   1
                                                                   EXHIBIT 10.28

--------------------------------------------------------------------------------

                               AGENCY AGREEMENT

                          Dated as of February 26, 2001

                                     between

                         SHURGARD STORAGE CENTERS, INC.,
                            as the Construction Agent

                                       and

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
             as Owner Trustee under the Storage Centers Trust 2001,
                                  as the Lessor

--------------------------------------------------------------------------------

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>                                                                                  <C>
ARTICLE I DEFINITIONS; RULES OF USAGE ..........................................       1
        1.1    Definitions .....................................................       1
        1.2    Interpretation ..................................................       2

ARTICLE II APPOINTMENT OF THE CONSTRUCTION AGENT ...............................       2
        2.1    Appointment .....................................................       2
        2.2    Acceptance and Undertaking ......................................       4
        2.3    Term ............................................................       5
        2.4    Scope of Authority ..............................................       5
        2.5    Delegation of Duties ............................................       6
        2.6    Covenants of the Construction Agent .............................       6
        2.7    Construction Period Cure Option .................................       7

ARTICLE III THE PROPERTIES .....................................................       8
        3.1    Construction ....................................................       8
        3.2    Amendments; Modifications .......................................       8
        3.3    Abandonment or Permanent Discontinuance .........................       9

ARTICLE IV PAYMENT OF FUNDS ....................................................       9
        4.1    Right to Receive Construction Cost ..............................       9

ARTICLE V EVENTS OF DEFAULT ....................................................      10
        5.1    Events of Default ...............................................      10
        5.2    Damages .........................................................      11
        5.3    Remedies; Remedies Cumulative ...................................      11

ARTICLE VI THE LESSOR'S RIGHTS .................................................      12
        6.1    Exercise of the Lessor's Rights .................................      12
        6.2    The Lessor's Right to Cure the Construction Agent's Defaults ....      12

ARTICLE VII MISCELLANEOUS ......................................................      13
        7.1    Notices .........................................................      13
        7.2    Successors and Assigns ..........................................      13
        7.3    GOVERNING LAW ...................................................      13
        7.4    SUBMISSION TO JURISDICTION; VENUE; WAIVERS ......................      13
        7.5    Amendments and Waivers ..........................................      13
        7.6    Counterparts ....................................................      13
        7.7    Severability ....................................................      14
        7.8    Headings and Table of Contents ..................................      14
        7.9    WAIVER OF JURY TRIAL ............................................      14
        7.10   Incorporation of Lease Provisions ...............................      14
</TABLE>

                                       i

<PAGE>   3

                                AGENCY AGREEMENT

        THIS AGENCY AGREEMENT, dated as of February 26, 2001 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
the "Agreement"), between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association ("FSB"), as Owner Trustee under the Storage Centers Trust
2001 (the "Lessor") and SHURGARD STORAGE CENTERS, INC., a Washington corporation
(the "Construction Agent").

                              PRELIMINARY STATEMENT

        A. The Lessor and the Construction Agent are parties to that certain
Lease Agreement dated as of even date herewith (as amended, modified, extended,
supplemented, restated and/or replaced from time to time, the "Lease"), pursuant
to which the Construction Agent, as lessee (in such capacity, the "Lessee") has
agreed to lease certain Land, Improvements and Equipment and/or to sublease a
ground leasehold in certain Properties subject to one or more Ground Leases from
the Lessor.

        B. In connection with the execution and delivery of the Participation
Agreement, the Lease and the other Operative Agreements, and subject to the
terms and conditions hereof, (i) the Lessor desires to appoint the Construction
Agent as its sole and exclusive agent in connection with the identification and
acquisition or ground lease of the Properties (provided, title to the Properties
shall be held in the name of the Lessor, except that the interest of the Lessor
in certain of the Properties shall be a ground leasehold interest pursuant to
one or more Ground Leases, if requested by the Construction Agent) and the
development, acquisition, installation, construction and testing of the
Improvements and the Equipment in accordance with the Plans and Specifications
and (ii) the Construction Agent desires, for the benefit of the Lessor, to
identify and acquire or ground lease the Properties and to cause the
development, acquisition, installation, construction and testing of the
Improvements, the Equipment and the other components of the Properties in
accordance with the Plans and Specifications and to undertake such other
liabilities and obligations as are herein set forth.

        NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:

                                    ARTICLE I
                           DEFINITIONS; RULES OF USAGE

        1.1     DEFINITIONS.

               For purposes of this Agreement, capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in Appendix A to that certain

<PAGE>   4

Participation Agreement dated as of February 26, 2001 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time in accordance
with the applicable provisions thereof, the "Participation Agreement") among the
Construction Agent, the various parties thereto from time to time, as
Guarantors, the Lessor, the various banks and lending institutions parties
thereto from time to time, as Holders, the various banks and lending
institutions parties thereto from time to time, as Lenders, and Bank of America,
N.A., as the agent for the Lenders and respecting the Security Documents, as the
agent for the Secured Parties. Unless otherwise indicated, references in this
Agreement to articles, sections, paragraphs, clauses, appendices, schedules and
exhibits are to the same contained in this Agreement.

        1.2     INTERPRETATION.

               The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Agreement.

                                   ARTICLE II
                      APPOINTMENT OF THE CONSTRUCTION AGENT

        2.1     APPOINTMENT.

        Subject to the terms and conditions hereof, the Lessor hereby
irrevocably designates and appoints the Construction Agent as its exclusive
agent and as general contractor, and the Construction Agent accepts such
appointment, in connection with the identification and acquisition from time to
time of the Properties (provided, title to the Properties shall be held in the
name of the Lessor, except that the interest of the Lessor in certain Properties
shall be a ground leasehold interest pursuant to one or more Ground Leases if
requested by the Construction Agent) and the development, acquisition,
installation, construction and testing of the Improvements, the Equipment and
the other components of the Properties in accordance with the Plans and
Specifications on the Land, and pursuant to the terms of the Operative
Agreements. Notwithstanding any provisions hereof or in any other Operative
Agreement to the contrary, the Construction Agent acknowledges and agrees that
the Lessor shall advance no more than the sum of the aggregate Available
Commitments plus the aggregate Available Holder Commitments of the Holders in
regard to the Properties.

        After the Construction Agent gains knowledge or a reasonable expectation
that the aggregate of all amounts previously requested or thereafter to be
requested as Advances with respect to any Property shall exceed the Construction
Budget for such Property (each such circumstance, a "Cost Overrun") or that
Completion for any Property shall not occur on or prior to the Construction
Period Termination Date for such Property (each such circumstance, a
"Construction Failure"), the Construction Agent shall promptly (and in any event
within ten (10) Business Days of gaining such knowledge or expectation) notify
the Agent in writing of the same. If at any time prior to the Construction
Period Termination Date for any Property, (a)(i) the Lessor or the Agent shall
have determined in its respective reasonable good faith judgment that a Cost
Overrun or a Construction Failure shall occur with respect to such Property or
(ii)

                                       2
<PAGE>   5

received any notice from the Construction Agent as referenced in the preceding
provisions of this paragraph, and (b) if the Construction Agent shall have
failed to complete a Construction Period Cure for such Property within the Cure
Period with respect to such Property in accordance with Section 2.7, then, in
any such case, upon the lapse of the Cure Period (if any), the Lessor shall have
the option (at the direction of the Agent, acting with consent of the Majority
Secured Parties) to replace the Construction Agent with a new construction agent
selected by the Lessor (at the direction of the Agent, acting with consent of
the Majority Secured Parties) to finalize the Completion of the Properties. The
cost and expense incurred to finalize the Completion of the Properties as
referenced in the preceding sentence shall be the responsibility of the
Construction Agent and shall be payable by the Construction Agent on demand;
provided, in no event shall the obligations of the Construction Agent for such
costs and expenses exceed the Maximum Amount; provided, further, amounts
expended by the Lessor to finalize the Completion of the Properties as
referenced in the preceding sentence shall be added to the Property Cost.

        Costs in excess of each Construction Budget previously delivered to the
Agent for each Property shall not be the responsibility of the Construction
Agent (unless the Construction Agent elects to incur such costs as out-of-pocket
expenses) but instead shall be paid by the Lenders and the Holders to the
extent, but only to the extent, that (after taking into account such excess
costs and any other items of excess cost which are then known to the
Construction Agent or are reasonable for the Construction Agent to expect) the
conditions precedent set forth in Section 5.4 of the Participation Agreement are
satisfied.

        Subject to the Lenders and the Holders not agreeing to continue making
Advances in accordance with the provisions of the next paragraph and in the
event from time to time the Construction Agent gains knowledge or a reasonable
expectation, or the Lessor or the Agent shall have determined in its respective
reasonable good faith judgment, that a Cost Overrun or a Construction Failure
shall occur, and if the Construction Agent shall have failed to complete a
Construction Period Cure with respect to such Property in accordance with
Section 2.7, then the Construction Agent shall elect and comply (within ten (10)
days of the Construction Agent gaining such knowledge or expectation or within
ten (10) days of the Lessor's or the Agent's making such determination and
giving written notice of the same to the Construction Agent) with one of the
options set forth in the following subsections (i) or (ii) (collectively, the
"Construction Agent Options"): (i) the Construction Agent shall pay to the
Lessor, on a date designated by the Lessor, an aggregate amount equal to (A) the
Termination Value for all, but not less than all, the Properties plus (B) any
and all fees and expenses incurred by or on behalf of the Lessor or the Agent in
connection with the Properties (including without limitation the transfer
thereof) that are to be reimbursed by the Construction Agent or Lessee under the
terms of the Operative Agreements, and on such date the Lessor shall transfer
and convey to the Construction Agent all right, title and interest of the Lessor
in and to the Properties in the manner provided in the Lease or (ii) the
Construction Agent shall pay to the Lessor, on a date designated by the Lessor,
an aggregate amount equal to the Maximum Amount and on and after such date, the
Construction Agent shall be irrevocably deemed, without any further action, to
have relinquished all right, title and interest in and to all, but not less than
all, the Properties and to have transferred and conveyed all such right, title
and interest to the Lessor. In connection with any transfer of the Properties as
referenced above in this Section 2.1 by the Lessor to the Construction Agent,
the Lessor shall execute and deliver to the Construction Agent, at the cost and
expense of the

                                       3
<PAGE>   6

Construction Agent (subject to the limitations described in the next sentence),
each of the following: (v) a termination or assignment (as requested by the
Construction Agent) of each applicable Ground Lease and special or limited
warranty Deeds conveying each Property (to the extent it is real property not
subject to a Ground Lease) to the Construction Agent free and clear of the Lien
of the Lease, the Lien of the Credit Documents and any Lessor Liens; (w) a Bill
of Sale conveying each Property (to the extent it is personal property) to the
Construction Agent free and clear of the Lien of the Lease, the Lien of the
Credit Documents and any Lessor Liens; (x) any real estate tax affidavit or
other document required by law to be executed and filed in order to record the
applicable Deed and/or the applicable Ground Lease termination; (y) FIRPTA
affidavits and (z) such other instruments and documents as may be necessary in
the jurisdiction in which each Property is located to consummate such transfer.
The Lessor (at the discretion of the Agent) shall elect whether the
out-of-pocket fees and expenses associated with the transfer of the Properties
shall be paid by either (i) sales proceeds from the Properties, (ii) the Lessor
(but only to the extent amounts are available therefor with respect to the
Available Commitments and the Available Holder Commitments or each Lender and
each Holder approves the necessary increases in the Available Commitments and
the Available Holder Commitments to fund such fees and expenses) or (iii) the
Construction Agent; provided, if the Construction Agent funds such fees and
expenses (as referenced in subsection (iii)) then the Maximum Amount will be
reduced accordingly, as more specifically described in the definition of
"Maximum Amount". Amounts funded by the Lenders and the Holders with respect to
the foregoing shall be added to the Property Cost. All of the foregoing
documentation must be in form and substance reasonably satisfactory to the
Lessor. Subject to the foregoing, all, but not less than all, the Properties
shall be conveyed to the Construction Agent "AS-IS", "WHERE-IS" and in then
present physical condition.

        In the event the costs in excess of any original or modified
Construction Budget previously delivered to the Agent for any Property (other
than such costs that the Construction Agent has incurred as out-of-pocket
expenses) are not funded by the Lenders and the Holders because (after taking
into account such excess costs and any other items of excess cost which are then
known to the Construction Agent or are reasonable for the Construction Agent to
expect) the conditions precedent set forth in Section 5.4 of the Participation
Agreement are not satisfied, then if, but only if, the Majority Secured Parties
agree at such time (but subject to Section 5.10 of the Participation Agreement),
(a) such excess costs shall be funded and (b) the Holder Commitments and the
Lender Commitments shall be increased accordingly.

        2.2     ACCEPTANCE AND UNDERTAKING.

        The Construction Agent hereby unconditionally accepts the agency
appointment and undertakes, for the benefit of the Lessor, to identify and
acquire certain Properties (provided, title to the Properties shall be held in
the name of the Lessor, except that the interest of the Lessor in certain
Properties shall be a ground leasehold interest pursuant to one or more Ground
Leases if requested by the Construction Agent) and the development, acquisition,
installation, construction and testing of the Improvements, the Equipment and
the other components of the Properties in accordance with the Plans and
Specifications and the Operative Agreements.

                                       4
<PAGE>   7

        2.3     TERM.

        This Agreement shall commence on the date hereof and, unless the Lessor
(in its sole discretion) elects otherwise, this Agreement shall terminate with
respect to a Property on the Construction Period Termination Date for such
Property. If this Agreement expires prior to the Completion of all, but not less
than all, the Properties, then the Lessor may hire a new construction agent (at
the direction of the Agent) to finalize the Completion of all such Properties.
The cost and expense incurred to finalize the Completion of the Properties as
referenced in the preceding sentence shall be the responsibility of the
Construction Agent and shall be payable by the Construction Agent on demand;
provided, in no event shall the obligations of the Construction Agent for such
costs and expenses exceed the Maximum Amount; provided, further, amounts
expended by the Lessor to finalize the Completion of the Properties as
referenced in the preceding sentence shall be added to the Property Cost.

        2.4     SCOPE OF AUTHORITY.

                (a) The Lessor hereby expressly authorizes the Construction
        Agent, or any agent or contractor of the Construction Agent, and the
        Construction Agent unconditionally agrees for the benefit of the Lessor,
        subject to Section 2.4(b), to take all action necessary or desirable for
        the performance and satisfaction of any and all of the Lessor's
        obligations under any construction agreement and to fulfill all of the
        obligations of the Construction Agent including without limitation:

                        (i) the identification and assistance with the
                acquisition of Properties in accordance with the terms and
                conditions of the Participation Agreement;

                        (ii) all design and supervisory functions relating to
                the development, acquisition, installation, construction and
                testing of the related Improvements, Equipment and other
                components of the applicable Property and performing all
                engineering work related thereto;

                        (iii) (A) negotiating, entering into, performing and
                enforcing all contracts and arrangements to acquire or ground
                lease the Properties and to procure the equipment necessary to
                construct the Properties and (B) negotiating, executing,
                performing and enforcing all contracts and arrangements to
                develop, acquire, install, construct and test the Improvements,
                the Equipment and the other components of the Properties on such
                terms and conditions as are deemed appropriate by the
                Construction Agent in its reasonable, good faith discretion;

                        (iv) obtaining all necessary permits, licenses,
                consents, approvals, entitlements and other authorizations,
                including without limitation all of the foregoing required for
                the Properties and the use and occupancy thereof and those
                required under applicable Law (including without limitation
                Environmental Laws), from all Governmental Authorities in
                connection with the development, acquisition, installation,
                construction and testing of the Improvements, the

                                       5
<PAGE>   8

                Equipment and the other components of the Properties in
                accordance with the Plans and Specifications;

                        (v) maintaining all books and records with respect to
                the Properties and the construction, operation and management
                thereof; and

                        (vi) performing any other acts necessary in connection
                with the identification and acquisition or ground leasing of the
                Properties and the development, acquisition, installation,
                construction and testing of the related Improvements, Equipment
                and all other additional components of the Properties in
                accordance with the Plans and Specifications.

                (b) The Construction Agent shall have the right to enter into
        such contracts and agreements in its own name or through one or more
        Affiliates as it deems necessary or desirable to perform its obligations
        hereunder, but neither the Construction Agent nor any of its Affiliates
        or agents shall enter into any contract or consent to any contract in
        the name of the Lessor without the Lessor's prior written consent, such
        consent to be given or withheld in the exercise of the Lessor's
        reasonable discretion; provided, however, that (i) no such contract will
        increase the obligations of the Lessor beyond the obligations of the
        Lessor as are expressly set forth in the Operative Agreements and (ii)
        each such contract shall be expressly non-recourse to the Lessor on
        terms and conditions that are reasonably acceptable to the Lessor.

                (c) Subject to the terms and conditions of this Agreement and
        the other Operative Agreements, the Construction Agent shall have sole
        management and control over the installation, construction and testing
        means, methods, sequences and procedures with respect to the Properties.

        2.5     DELEGATION OF DUTIES

        The Construction Agent may execute any of its duties under this
Agreement by or through agents, contractors, employees or attorneys-in-fact;
provided, however, that no such delegation shall limit or reduce in any way the
Construction Agent's duties and obligations under this Agreement.

        2.6     COVENANTS OF THE CONSTRUCTION AGENT.

        The Construction Agent hereby covenants and agrees that it will:

                (a) following the Construction Commencement Date for each
        Property, cause the development, acquisition, installation, construction
        and testing of such Property to be prosecuted in a good and workmanlike
        manner, and respecting each Property substantially in accordance with
        the applicable Plans and Specifications, the Construction Budget, the
        applicable contracts relating to the Improvements, the Equipment, other
        components of such Property and procurement of construction materials,
        the applicable

                                       6
<PAGE>   9

        construction contracts, the applicable construction schedule, prevalent
        industry practices and otherwise in accordance with Section 3.1 hereof;

                (b) not commence construction with respect to any Improvements
        to a Property on a date that is within six (6) months prior to the
        Construction Period Termination Date for such Property;

                (c) subject to Sections 2.1 and 2.7, on or before the
        Construction Period Termination Date for any Property, cause the
        Completion Date for any Improvements to such Property to occur, in each
        case free and clear (by removal or bonding) of Liens or claims for
        materials supplied or labor or services performed in connection with the
        development, acquisition, installation, construction or testing thereof
        and otherwise in compliance with the other terms and provisions of the
        Operative Agreements;

                (d) subject to Sections 2.1 and 2.7, cause all outstanding punch
        list items with respect to any Property to be completed within six
        months following the Completion Date for such Property;

                (e) at all times subsequent to the initial Advance respecting a
        Property (i) cause good and marketable title to the applicable Property
        to vest in the Owner Trustee (except that the interest of the Lessor in
        certain Properties shall be a ground leasehold interest pursuant to one
        or more Ground Leases if requested by the Construction Agent) (ii) cause
        a valid, perfected, first priority Lien on the applicable Property to be
        in place in favor of the Agent (for the benefit of the Lenders and the
        Holders), (iii) file all necessary documents under the applicable real
        property law and Article 9 of the Uniform Commercial Code to perfect
        such title and Liens and (iv) not permit Liens (other than Permitted
        Liens) to be filed or maintained respecting the applicable Property;

                (f) no less than five (5) Business Days prior to the scheduled
        date for the initial Construction Advance to be made in connection with
        any Property, the Construction Agent shall deliver to the Agent (for the
        benefit of the Lessor) true, complete and correct copies of the
        Construction Budget therefor. Thereafter, the Construction Agent, on a
        monthly basis, shall deliver to the Lessor true, correct and complete
        copies of any material modifications of (including increases to) the
        Construction Budget and progress reports regarding the development,
        acquisition, installation, construction and testing of the Properties;
        and

                (g) procure insurance for the Properties during the Construction
        Period in accordance with the provisions of Article XIV of the Lease.

        2.7     CONSTRUCTION PERIOD CURE OPTION.

               Upon the occurrence of any Cost Overrun, Construction Failure or
any event, condition or breach described in subsection (b) of the next
paragraph, the Construction Agent

                                       7
<PAGE>   10

shall promptly (and in any event within ten (10) Business Days of gaining
knowledge or any reasonable expectation thereof) notify the Agent in writing of
the same.

        Notwithstanding anything in this Agreement or any other Operative
Agreement to the contrary, upon the occurrence of (a) any Cost Overrun or
Construction Failure as defined in Section 2.1 or (b) except, in all cases, for
any breach of any payment obligation owing by the Construction Agent or the
Lessee to any Financing Party pursuant to the Operative Agreements, any breach
of any Property-related obligation, covenant or warranty or any Property-related
misrepresentation pursuant to the Operative Agreements by the Construction Agent
or the Lessee, in each case which affects an individual Construction Period
Property, if (i) the Construction Agent purchases or causes to be purchased such
Construction Period Property for its Termination Value in accordance with
subsections (v) through (z) of the fourth paragraph of Section 2.1 (the
"Construction Period Cure"), (ii) such purchase is consummated, and the
Termination Value of such Construction Period Property is paid to the Agent,
within 30 days following the earliest of (A) the date on which the Construction
Agent knows, or is deemed to know, of such occurrence and (B) the date any
Financing Party notifies the Construction Agent of such occurrence (the "Cure
Period"), and (iii) the aggregate Property Cost of all Properties subject to a
Construction Period Cure does not at any time exceed $30,000,000, then, in each
such case, neither the Lessor, the Agent nor any other Financing Party shall
have the right, during such Cure Period, (y) to replace the Construction Agent
or require the Construction Agent to elect a Construction Agent Option pursuant
to Section 2.1 (in the case of an occurrence described in subsection (a) above)
or (z) to declare a Default or an Event of Default and no such Default or Event
of Default shall be deemed to have occurred (in the case of an occurrence
described in subsection (b) above).

                                   ARTICLE III
                                 THE PROPERTIES

        3.1     CONSTRUCTION.

        The Construction Agent shall cause the Improvements, the Equipment and
all other components of the Properties to be developed, acquired, installed,
constructed and tested in compliance with all Legal Requirements, all Insurance
Requirements, all manufacturer's specifications and standards and the standards
maintained by the Construction Agent for similar properties owned or operated by
the Construction Agent, unless non-compliance, individually or in the aggregate,
shall not have and could not be reasonably expected to have a Material Adverse
Effect.

        3.2     AMENDMENTS; MODIFICATIONS.

                (a) The Construction Agent may at any time revise, amend or
        modify the Plans and Specifications with respect to any Property without
        the consent of the Lessor; provided, that any such amendment to such
        Plans and Specifications does not result (i) in the Completion Date of
        the Improvements on such Property occurring on or after the Construction
        Period Termination Date for such Property, (ii) in the cost of such

                                       8
<PAGE>   11

        Improvements or the Property Cost for such Property exceeding the amount
        of the Construction Budget for such Property or (iii) the aggregate cost
        of all Improvements or the aggregate Property Costs exceeding an amount
        equal to the sum of the then aggregate Available Commitments plus the
        then aggregate Available Holder Commitments (reduced by the Unfunded
        Amount, if any).

                (b) The Construction Agent agrees that it will not implement any
        revision, amendment or modification to the Plans and Specifications for
        any Property if the aggregate effect of such revision, amendment or
        modification, when taken together with any previous or contemporaneous
        revision, amendment or modification to the Plans and Specifications for
        any Property, would cause a material reduction in value in excess of the
        cost reduction of such revision, amendment or modification of the
        Property when completed, unless such revision, amendment or modification
        is required by Legal Requirements.

        3.3     ABANDONMENT OR PERMANENT DISCONTINUANCE.

        Until termination of the Lease Agreement and the Agency Agreement, the
Construction Agent shall promptly and diligently complete the development,
acquisition, refinancing, installation, construction and testing of each
Construction Period Property substantially in accordance with the Plans and
Specifications and with the terms hereof and cause the Completion Date with
respect to such Construction Period Property to occur on or prior to the
Construction Period Termination Date.

        If the Construction Agent shall abandon or permanently discontinue the
construction and development of one or more Construction Period Properties, then
the Construction Agent shall pay to the Lessor, on a date designated by the
Lessor, an aggregate amount equal to the liquidated damages amount referenced in
Section 5.3(b) of this Agreement regarding all, but not less than all,
Properties. On such date, Lessor shall deliver the Properties to the
Construction Agent in accordance with Sections 2.1(w) through (z).

                                   ARTICLE IV
                                PAYMENT OF FUNDS

        4.1     RIGHT TO RECEIVE CONSTRUCTION COST.

                (a) In connection with the development, acquisition,
        installation, construction and testing of any Property and during the
        course of the construction of the Improvements on any Property, the
        Construction Agent may request that the Lessor advance funds for the
        payment of Property Acquisition Costs or other Property Costs, and the
        Lessor will comply with such request to the extent provided for under
        the Participation Agreement. The Construction Agent and the Lessor
        acknowledge and agree that the Construction Agent's right to request
        such funds and the Lessor's obligation to advance such funds for the
        payment of Property Acquisition Costs or other Property Costs is subject
        in all respects to the terms and conditions of the Participation
        Agreement and each of the other Operative Agreements. Without limiting
        the generality of the

                                       9
<PAGE>   12

        foregoing it is specifically understood and agreed that in no event
        shall the aggregate amounts advanced by the Lenders and the Holders for
        Property Acquisition Costs or other Property Costs and any other amounts
        due and owing hereunder or under any of the other Operative Agreements
        exceed the sum of the aggregate Commitments of the Lenders plus the
        aggregate amount of the Holder Commitments, including without limitation
        such amounts owing for (i) development, acquisition, installation,
        construction and testing of the Properties, (ii) additional amounts
        which accrue or become due and owing under the Credit Agreement or Trust
        Agreement as obligations of the Lessor prior to any Completion Date or
        (iii) any other purpose.

                (b) The proceeds of any funds made available to the Lessor to
        pay Property Acquisition Costs or other Property Costs shall be made
        available to the Construction Agent in accordance with the Requisition
        relating thereto and the terms of the Participation Agreement. The
        Construction Agent will use such proceeds only to pay the Property
        Acquisition Costs or other Property Costs set forth in the Requisition
        relating to such funds.

                                    ARTICLE V
                                EVENTS OF DEFAULT

        5.1     EVENTS OF DEFAULT.

        If any one or more of the following events (each an "Event of Default")
shall occur:

                (a) the Construction Agent fails to apply any funds paid by the
        Lessor to the Construction Agent in a manner consistent with the
        requirements of the Operative Agreements and as specified in the
        applicable Requisition for the development, acquisition, installation,
        construction and testing of the Properties and related Improvements and
        Equipment or otherwise respecting the Properties to the payment of
        Property Acquisition Costs or other Property Costs;

                (b) the Construction Agent shall fail to make any payment
        required pursuant to the terms of this Agreement (including without
        limitation pursuant to Sections 2.1 and 3.3) within three (3) Business
        Days after receipt of notice that the same has become due and payable;

                (c) any Event of Default (as such term is defined in Appendix A
        to the Participation Agreement) shall have occurred and not be cured
        within any cure period expressly permitted under the terms of the
        applicable Operative Agreement; and

                (d) the Construction Agent shall materially breach any of its
        representations or warranties under any Operative Agreement or shall
        fail to observe or perform any term, covenant or condition of any
        Operative Agreement other than as set forth in paragraphs (a), (b) or
        (c) of this Section 5.1 and such failure to observe or perform any

                                       10
<PAGE>   13

        such term, covenant or condition shall continue for more than fifteen
        (15) days after the Construction Agent either has gained knowledge
        thereof or has received notice thereof;

and if the Construction Agent shall have failed to complete a Construction
Period Cure for a Property within the Cure Period with respect to such Property
in accordance with Section 2.7 so as to eliminate the conditions giving rise to
such Event of Default, then, in any such case, upon the lapse of such Cure
Period (if any), the Lessor may, in addition to the other rights and remedies
provided for in this Agreement, terminate this Agreement by giving the
Construction Agent written notice of such termination and upon the expiration of
the time fixed in such notice and the payment of all amounts owing by the
Construction Agent hereunder (including without limitation any amounts specified
under Section 5.3 hereof), this Agreement shall terminate. The Construction
Agent shall pay all costs and expenses incurred by or on behalf of the Lessor,
including without limitation fees and expenses of counsel, as a result of any
Event of Default hereunder.

        5.2     DAMAGES.

        The termination of this Agreement pursuant to Section 5.1 shall in no
event relieve the Construction Agent of its liability and obligations hereunder,
all of which shall survive any such termination.

        5.3     REMEDIES; REMEDIES CUMULATIVE.

                (a) If an Event of Default shall have occurred and be
        continuing, the Lessor shall have all rights available to the Lessor
        under the Lease and the other Operative Agreements and all other rights
        otherwise available at law, equity or otherwise.

                (b) Upon the occurrence and during the continuation of an Event
        of Default, the Lessor shall have (in addition to its rights otherwise
        described in this Agreement or existing at law, equity or otherwise) the
        option (and shall be deemed automatically, and without any further
        action, to have exercised such option upon the occurrence of any Lease
        Event of Default arising under Sections 17.1(g), (h) or (i) of the
        Lease) to transfer and convey to the Construction Agent upon a date
        designated by the Lessor all right, title and interest of the Lessor in
        and to any Construction Period Property or Properties (including without
        limitation any Land and/or any Improvements, any interest in any
        Improvements, any Equipment and any Property then under construction).
        On any transfer and conveyance date specified by the Lessor pursuant to
        this Section 5.3(b), (i) the Lessor shall transfer and convey (at the
        cost of the Construction Agent) all right, title and interest of the
        Lessor in and to any or all such Construction Period Properties free and
        clear of the Lien of the Lease and all Lessor Liens, (ii) the
        Construction Agent hereby covenants and agrees that it will accept such
        transfer and conveyance of right, title and interest in and to the
        respective Construction Period Property or Construction Period
        Properties and (iii) the Construction Agent hereby promises to pay to
        the Lessor, as liquidated damages (it being agreed that it would be
        impossible accurately to determine actual damages), an aggregate amount
        equal to the Termination Value of any or all such Construction Period
        Properties. The Construction Agent specifically acknowledges and

                                       11
<PAGE>   14

        agrees that its obligations under this Section 5.3(b), including without
        limitation its obligations to accept the transfer and conveyance of
        Construction Period Properties and its payment obligations described in
        subparagraph (iii) of this Section 5.3(b), shall be absolute and
        unconditional under any and all circumstances and shall be performed
        and/or paid, as the case may be, without notice or demand and without
        any abatement, reduction, diminution, setoff, defense, counterclaim or
        recoupment whatsoever. Notwithstanding the foregoing provisions of this
        Section 5.3(b), the Lessor shall have the right in its sole discretion
        to rescind any exercise of its option under this Section 5.3(b) upon the
        giving of its written confirmation of such rescission to the
        Construction Agent on or prior to the earlier to occur of (a) the actual
        date of transfer and (b) the date one hundred and twenty (120) days
        after the date the Lessor has given notice of its intent to transfer and
        convey any Property to the Construction Agent as referenced above in
        this Section 5.3(b).

                (c) Without limiting Section 2.7, the Construction Agent shall
        have the right to cure an Event of Default hereunder with respect to any
        given Property by purchasing such Property from the Lessor (to the
        extent no Event of Default is continuing with respect to any other
        Property remaining subject to this Agreement or any other matter after
        such purchase) for an amount equal to the liquidated damages amount set
        forth in Section 5.3(b) of this Agreement.

                (d) No failure to exercise and no delay in exercising, on the
        part of the Lessor, any right, remedy, power or privilege under this
        Agreement or under the other Operative Agreements shall operate as a
        waiver thereof; nor shall any single or partial exercise of any right
        remedy, power or privilege under this Agreement preclude any other or
        further exercise thereof or the exercise of any other right, remedy,
        power or privilege. The rights, remedies, powers and privileges provided
        in this Agreement are cumulative and not exclusive of any rights,
        remedies, powers and privileges provided by law.

                                   ARTICLE VI
                               THE LESSOR'S RIGHTS

        6.1     EXERCISE OF THE LESSOR'S RIGHTS.

        Subject to the Excepted Payments, the Construction Agent and the Lessor
hereby acknowledge and agree that, subject to and in accordance with the terms
of the Security Agreement made by the Lessor in favor of the Agent, the rights
and powers of the Lessor under this Agreement have been assigned to the Agent.

        6.2     THE LESSOR'S RIGHT TO CURE THE CONSTRUCTION AGENT'S DEFAULTS.

        The Lessor, without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) remedy any Event of Default
for the account of and at the sole cost and expense of the Construction Agent.
All out-of-pocket costs and expenses so incurred (including without limitation
fees and expenses of counsel), together with interest thereon at the

                                       12
<PAGE>   15

Overdue Rate from the date on which such sums or expenses are paid by the
Lessor, shall be paid by the Construction Agent to the Lessor on demand.

                                   ARTICLE VII
                                  MISCELLANEOUS

        7.1     NOTICES.

        All notices required or permitted to be given under this Agreement shall
be in writing and delivered as provided in Section 12.2 of the Participation
Agreement.

        7.2     SUCCESSORS AND ASSIGNS.

        This Agreement shall be binding upon and inure to the benefit of the
Lessor, the Construction Agent and their respective successors and the assigns
of the Lessor. The Construction Agent may not assign this Agreement or any of
its rights or obligations hereunder or with respect to any Property in whole or
in part to any Person without the prior written consent of the Agent, the
Lenders, the Holders and the Lessor.

        7.3     GOVERNING LAW.

        THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF WASHINGTON (WITHOUT GIVING
EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

        7.4     SUBMISSION TO JURISDICTION; VENUE; WAIVERS

        THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION AND VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS
MUTANDIS.

        7.5     AMENDMENTS AND WAIVERS.

        This Agreement may not be terminated, amended, supplemented, waived or
modified except in accordance with the provisions of Section 12.4 of the
Participation Agreement.

        7.6     COUNTERPARTS.

        This Agreement may be executed in any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.

                                       13
<PAGE>   16

        7.7     SEVERABILITY.

        Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

        7.8     HEADINGS AND TABLE OF CONTENTS.

        The headings and table of contents contained in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

        7.9     WAIVER OF JURY TRIAL.

        TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, THE LESSOR AND THE
CONSTRUCTION AGENT IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY COUNTERCLAIM
THEREUNDER.

        7.10    INCORPORATION OF LEASE PROVISIONS.

        Regardless of whether the Term of the Lease has commenced, the
Construction Agent and the Lessor agree that Articles XIV, XV, XVII, XVIII,
XXIV, XXV, XXVI, XXVII, XXIX and XXX of the Lease Agreement and any other
Articles or Sections of the Lease Agreement that are referenced in any Operative
Agreement are hereby incorporated by reference into this Agreement to the same
extent and with the same effect as if set forth fully herein.

        The above-referenced incorporated provisions shall be in effect as if
the Lease Agreement were in effect for all Properties from and after the date of
this Agreement. For purposes of the above-referenced incorporated provisions,
the Construction Agent shall be responsible for all matters for which the Lessee
is referenced as a responsible party in such provisions. Any out-of-pocket
expense for which the Construction Agent is responsible pursuant to the
above-referenced incorporated provisions shall be payable with Advances to the
extent that the applicable conditions precedent for such an Advance pursuant to
the Operative Agreements have been satisfied or waived.

                            [signature page follows]

                                       14
<PAGE>   17

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

                                        SHURGARD STORAGE CENTERS, INC.,
                                        as the Construction Agent

                                        By:           /s/ Harrell Beck
                                           -------------------------------------
                                        Name:         Harrell Beck
                                             -----------------------------------
                                        Title:        Chief Financial Officer
                                              ----------------------------------

                                        FIRST SECURITY BANK, NATIONAL
                                        ASSOCIATION, as Owner Trustee under
                                        the Storage Centers Trust 2001, as
                                        the Lessor

                                        By:           /s/ Val T. Orton
                                           -------------------------------------
                                        Name:         Val T. Orton
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

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