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                                                                   EXHIBIT 10.31

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                               SECURITY AGREEMENT

                          Dated as of February 26, 2001

                                     between

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

                                       and

                             BANK OF AMERICA, N.A.,
                  as the Agent for the Lenders and the Holders

                          and accepted and agreed to by

                         SHURGARD STORAGE CENTERS, INC.

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                                TABLE OF CONTENTS

<TABLE>
<S>                                                                       <C>
1.     Definitions .................................................       2

2.     Grant of Security Interest ..................................       3

3.     Payment of Obligations ......................................       5

4.     Other Covenants .............................................       6

5.     Default; Remedies ...........................................       6

6.     Remedies Not Exclusive ......................................       7

7.     Performance by the Agent of the Borrower's Obligations ......       7

8.     Duty of the Agent ...........................................       7

9.     Powers Coupled with an Interest .............................       8

10.    Execution of Financing Statements ...........................       8

11.    Security Agreement Under Uniform Commercial Code ............       8

12.    Authority of the Agent ......................................       9

13.    Notices .....................................................       9

14.    Severability ................................................       9

15.    Amendment in Writing; No Waivers; Cumulative Remedies .......       9

16.    Section Headings ............................................      10

17.    Successors and Assigns ......................................      10

18.    The Borrower's Waiver of Rights .............................      10

19.    GOVERNING LAW ...............................................      10

20.    Obligations Are Without Recourse ............................      11

21.    Partial Release; Full Release ...............................      11

22.    Miscellaneous ...............................................      11

23.    Conflicts with Participation Agreement ......................      12

24.    LESSEE AS A PARTY ...........................................      12
</TABLE>

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                               SECURITY AGREEMENT

        This SECURITY AGREEMENT, dated as of February 26, 2001 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Security Agreement"), is made between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, as Owner Trustee under the Storage
Centers Trust 2001 (the "Borrower"), and BANK OF AMERICA, N.A., a national
banking association ("Bank"), as agent for (a) the Lenders (hereinafter defined)
under the Credit Agreement dated as of February 26, 2001 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, the "Credit
Agreement") by and among the Borrower, the lending institutions from time to
time parties thereto (the "Lenders") and Bank as the agent for the Lenders and
(b) the holders of the certificates issued pursuant to the Trust Agreement dated
as of February 26, 2001 (as amended, modified, extended, supplemented, restated
and/or replaced from time to time, the "Trust Agreement") among the holders from
time to time parties thereto (the "Holders") and the Borrower, in its individual
capacity thereunder and in its capacity as Owner Trustee thereunder. The Agent,
the Lenders and the Holders, together with their successors and permitted
assigns, are collectively referred to hereinafter as the "Secured Parties."
Bank, in its capacity as agent for the Secured Parties is referred to
hereinafter as the "Agent", and this Security Agreement is accepted and agreed
to by SHURGARD STORAGE CENTERS, INC., a Washington corporation.

                              Preliminary Statement

        Pursuant to the Credit Agreement, the Lenders have severally agreed to
make Loans to the Borrower in an aggregate amount not to exceed the aggregate
Commitments upon the terms and subject to the conditions set forth therein, to
be evidenced by the Notes issued by the Borrower under the Credit Agreement.
Pursuant to the Trust Agreement, the Holders have agreed to purchase the
ownership interests of the Trust created thereby in an aggregate amount not to
exceed the aggregate Holder Commitments upon the terms and subject to the
conditions set forth therein, to be evidenced by the Certificates issued by the
Borrower under the Trust Agreement. The Borrower is, or shall be upon the date
of the initial Advance with respect to each Property, the legal and beneficial
owner of such Property (except the Borrower may have a ground leasehold interest
in certain Properties pursuant to one or more Ground Leases).

        It is a condition, among others, to the obligation of the Lenders to
make their respective Loans to the Borrower under the Credit Agreement and the
Holders to make their respective Holder Advances under the Trust Agreement that
the Borrower shall have executed and delivered this Security Agreement to the
Agent, for the benefit of the Secured Parties.

        NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to make their respective Loans under the Credit Agreement and to induce
the Holders to make their respective Holder Advances under the Trust Agreement,
the Borrower hereby agrees with the Agent, for the benefit of the Secured
Parties, as follows:

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        1.      DEFINITIONS.

        (a) As used herein, the following terms shall have the following
respective meanings:

                "Accounts" shall mean all "accounts," as such term is defined in
        the Uniform Commercial Code, now owned or hereafter acquired by the
        Borrower, including without limitation (i) all accounts receivable,
        other receivables, book debts and other forms of obligations now owned
        or hereafter received or acquired by or belonging or owing to the
        Borrower, whether arising out of goods sold or leased or services
        rendered by it or from any other transaction (including without
        limitation any such obligations which may be characterized as an account
        under the Uniform Commercial Code), (ii) all of the Borrower's rights
        in, to and under all purchase orders or receipts now owned or hereafter
        acquired by it for goods or services, (iii) all of the Borrower's rights
        to any goods represented by any of the foregoing (including without
        limitation unpaid sellers' rights of rescission, replevin, reclamation
        and stoppage in transit and rights to returned, reclaimed or repossessed
        goods), (iv) all monies due or to become due to the Borrower under all
        purchase orders and contracts for the sale or lease of goods or the
        performance of services or both by the Borrower (whether or not yet
        earned by performance on the part of the Borrower) now or hereafter in
        existence, including without limitation the right to receive the
        proceeds of said purchase orders and contracts, and (v) all collateral
        security and guarantees of any kind, now or hereafter in existence,
        given by any Person with respect to any of the foregoing.

                "Chattel Paper" shall mean any and all "chattel paper," as such
        term is defined in the Uniform Commercial Code, now owned or hereafter
        acquired by the Borrower, wherever located.

                "Documents" shall mean any and all "documents", as such term is
        defined in the Uniform Commercial Code, now owned or hereafter acquired
        by the Borrower, wherever located, including without limitation each
        bill of lading, dock warrant, dock receipt, warehouse receipt or order
        for the delivery of goods, and also any other document which in the
        regular course of business or financing is treated as adequately
        evidencing that the person in possession of it is entitled to receive,
        hold and dispose of the document and the goods it covers.

                "General Intangibles" shall mean any and all "general
        intangibles," as such term is defined in the Uniform Commercial Code,
        now owned or hereafter acquired by the Borrower, including without
        limitation all contracts, undertakings, or agreements in or under which
        the Borrower may now or hereafter have any right (other than any right
        evidenced by Chattel Paper, Documents or Instruments), title or
        interest, including without limitation any agreements relating to the
        terms of payment or the terms of performance of any Account.

                "Holders" shall have the meaning specified in the first
        paragraph of this Security Agreement.

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                "Instruments" shall mean any and all "instruments", as such term
        is defined in the Uniform Commercial Code, now owned or hereafter
        acquired by the Borrower, wherever located, including without limitation
        all certificated securities, all certificates of deposit, and all notes
        and other, without limitation, evidences of indebtedness, other than
        instruments that constitute, or are a part of a group of writings that
        constitute, Chattel Paper.

                "Investment Property" shall mean any and all "investment
        property," as such term is defined in the Uniform Commercial Code, now
        owned or hereafter acquired by the Borrower, wherever located.

                "Lenders" shall have the meaning specified in the first
        paragraph of this Security Agreement.

                "Lessee" shall mean Shurgard Storage Centers, Inc., a Washington
        corporation, its successors, permitted assigns and permitted
        transferees.

                "Obligations" shall mean any and all obligations now existing or
        hereafter arising under the Credit Agreement, the Notes, the Trust
        Agreement, the Certificates and/or any other Operative Agreement.

                "Proceeds" shall mean any and all "proceeds," as such term is
        defined in the Uniform Commercial Code, at any time received or acquired
        by the Borrower with respect to the Trust Property.

                (b) Capitalized terms used but not otherwise defined in this
        Security Agreement shall have the respective meanings specified in the
        Credit Agreement or Appendix A to the 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
        Lessee, the various parties thereto from time to time, as guarantors,
        the Borrower, the Holders, the Lenders and the Bank of America, N.A., as
        agent for the Lenders and respecting the Security Documents, as the
        agent for the Secured Parties.

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

        2.      GRANT OF SECURITY INTEREST.

        To secure payment of all the amounts advanced under the Credit Agreement
in connection with the Notes, all the amounts advanced or contributed under the
Trust Agreement in connection with the Certificates and all other amounts now or
hereafter owing to the Lenders, the Holders or the Agent thereunder or under any
other Operative Agreement, THE BORROWER HEREBY CONVEYS, GRANTS, ASSIGNS,
TRANSFERS, HYPOTHECATES, MORTGAGES AND SETS OVER TO THE AGENT FOR THE BENEFIT OF
THE SECURED PARTIES, A FIRST PRIORITY SECURITY INTEREST IN AND LIEN ON THE TRUST

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ESTATE, WHETHER NOW EXISTING OR HEREAFTER ACQUIRED INCLUDING WITHOUT LIMITATION
THE FOLLOWING:

                (a) all right, title and interest of the Borrower in and to the
        Operative Agreements now existing or hereafter acquired by the Borrower
        (including without limitation all rights to payment and indemnity rights
        of the Borrower under the Participation Agreement) (all of the foregoing
        in this paragraph (a) being referred to as the "Rights in Operative
        Agreements");

                (b) all right, title and interest of the Borrower in and to all
        of the Equipment;

                (c) all right, title and interest of the Borrower in and to all
        of the Fixtures;

                (d) all the estate, right, title, claim or demand whatsoever of
        the Borrower, in possession or expectancy, in and to each Property,
        Fixture or Equipment or any part thereof;

                (e) all right, title and interest of the Borrower in and to all
        substitutes, modifications and replacements of, and all additions,
        accessions and improvements to, the Fixtures and Equipment, subsequently
        acquired or leased by the Borrower or constructed, assembled or placed
        by the Borrower on any Property, immediately upon such acquisition,
        lease, construction, assembling or placement, and in each such case,
        without any further conveyance, assignment or other act by the Borrower;

                (f) all right, title and interest of the Borrower in, to and
        under books and records relating to or used in connection with the
        operation of one or more Properties or any part thereof; all rights of
        the Borrower to the payment of money and all property; and all rights in
        and to any causes of action or choses in action now or hereafter
        existing in favor of the Borrower and all rights to any recoveries
        therefrom;

                (g) all right, title and interest of the Borrower in and to all
        unearned premiums under insurance policies now held or subsequently
        obtained by the Lessee relating to one or more Properties and the
        Borrower's interest in and to all proceeds of any insurance policies
        maintained by or for the benefit of the Borrower, including without
        limitation any right to collect and receive such proceeds; and all
        awards and other compensation, including without limitation the interest
        payable thereon and any right to collect and receive the same, made to
        the present or any subsequent owner of any Property for the taking by
        eminent domain, condemnation or otherwise, of all or any part of any
        Property or any easement or other right therein;

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                (h) all right, title and interest of the Borrower in and to (i)
        all consents, licenses, certificates and other governmental approvals
        relating to construction, completion, use or operation of any Property
        or any part thereof and (ii) all Plans and Specifications relating to
        any Property;

                (i) all right, title and interest of the Borrower in and to all
        Rent and all other rents, payments, purchase prices, receipts, revenues,
        issues and profits payable under the Lease or pursuant to any other
        lease with respect to any Property;

                (j) all right, title and interest of the Borrower in and to all
        Instruments and Documents;

                (k) all right, title and interest of the Borrower in and to all
        General Intangibles;

                (l) all right, title and interest of the Borrower in and to all
        Chattel Paper (including without limitation all rights under the Lease)
        and each Ground Lease;

                (m) all right, title and interest of the Borrower in and to all
        money, cash or cash equivalent and bank accounts;

                (n) all right, title and interest of the Borrower in and to all
        Accounts;

                (o) all right, title and interest of the Borrower in and to all
        proceeds of letters of credit issued in favor of the Borrower in
        connection with any Property; and

                (p) all right, title and interest of the Borrower in and to all
        Proceeds, both cash and noncash, of any of the foregoing.

        (All of the foregoing property and rights and interests now owned or
held or subsequently acquired by the Borrower and described in the foregoing
clauses (a) through (p) are collectively referred to as the "Trust Property").

        TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto the Agent (for the benefit of the Secured Parties) its
successors and assigns for the uses and purposes set forth, until all of the
obligations owing to the Lenders, the Holders or the Agent under the Operative
Agreements are paid in full; provided, that EXCLUDED from the Trust Property at
all times and in all respects shall be all Excepted Payments.

        3.      PAYMENT OF OBLIGATIONS.

        The Borrower shall pay all Obligations in accordance with the terms of
the Credit Agreement, the Notes, the Trust Agreement, the Certificates and the
other Operative Agreements

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and perform each term to be performed by it under the Credit Agreement, the
Notes, the Trust Agreement, the Certificates and the other Operative Agreements.

        4.      OTHER COVENANTS.

        At any time and from time to time, upon the written request of the
Agent, and at the expense of the Borrower (with funds provided by the Lessee for
such purpose), the Borrower will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the Agent
reasonably may request for the purposes of obtaining or preserving the full
benefits of this Security Agreement and of the rights and powers granted by this
Security Agreement.

        5.      DEFAULT; REMEDIES.

                (a) If a Credit Agreement Event of Default has occurred and is
        continuing:

                        (i) the Agent, in addition to all other remedies
                available at law or in equity, shall have the right forthwith to
                enter upon any Trust Property (or any other place where any
                component of any Trust Property is located at such time) without
                charge, and take possession of all or any portion of the Trust
                Property, and to sell, re-let or otherwise dispossess itself of
                the Trust Property and receive the rents, issues and profits
                thereof, to make repairs and to apply said rentals and profits,
                after payment of all necessary or proper charges and expenses,
                on account of the amounts hereby secured (subject to the
                Excepted Payments); and

                        (ii) the Agent, shall, as a matter of right, be entitled
                to the appointment of a receiver for the Trust Property, and the
                Borrower hereby consents to such appointment and waives notice
                of any application therefor.

                (b) If a Credit Agreement Event of Default has occurred and is
        continuing, the Agent may proceed by an action at law, suit in equity or
        other appropriate proceeding, to protect and enforce its rights, whether
        for the foreclosure of the Lien of this Security Agreement, or for the
        specific performance of any agreement contained herein or for an
        injunction against the violation of any of the terms hereof. The
        proceeds of any sale of any of the Trust Property shall be applied
        pursuant to Section 8.7 of the Participation Agreement. In addition, the
        Agent may proceed under Section 11 hereof.

                (c) The Borrower hereby waives the benefit of all appraisement,
        valuation, stay, extension and redemption laws now or hereafter in force
        and all rights of marshalling in the event of any sale of the Trust
        Property or any portion thereof or interest therein.

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        6.      REMEDIES NOT EXCLUSIVE.

        The Agent shall be entitled to enforce payment of the indebtedness and
performance of the Obligations and to exercise all rights and powers under this
Security Agreement or under any of the other Operative Agreements or other
agreements or any laws now or hereafter in force, notwithstanding some or all of
the Obligations may now or hereafter be otherwise secured, whether by deed of
trust, mortgage, security agreement, pledge, Lien, assignment or otherwise.
Neither the acceptance of this Security Agreement nor its enforcement, shall
prejudice or in any manner affect the Agent's right to realize upon or enforce
any other security now or hereafter held by the Agent, it being agreed that the
Agent shall be entitled to enforce this Security Agreement and any other
security now or hereafter held by the Agent in such order and manner as the
Agent may determine in its absolute discretion. No remedy conferred hereunder or
under any other Operative Agreement upon or reserved to the Agent is intended to
be exclusive of any other remedy herein or therein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or thereunder or now or hereafter existing at law or in
equity or by statute. Every power or remedy given by any of the Operative
Agreements to the Agent or to which it may otherwise be entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by the Agent. In no event shall the Agent, in the exercise
of the remedies provided in this Security Agreement (including without
limitation in connection with the assignment of Rents to the Agent, or the
appointment of a receiver and the entry of such receiver onto all or any part of
the Land), be deemed a "mortgagee in possession" or a "pledgee in possession",
and the Agent shall not in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.

        7.      PERFORMANCE BY THE AGENT OF THE BORROWER'S OBLIGATIONS.

        If the Borrower fails to perform or comply with any of its agreements
contained herein the Agent, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
agreement. The expenses of the Agent incurred in connection with actions
undertaken as provided in this Section 7, together with interest thereon at a
rate per annum equal to the Overdue Rate, from the date of payment by the Agent
to the date reimbursed by the Borrower, shall be payable by the Borrower (with
funds provided by the Lessee for such purpose) to the Agent on demand and
constitute part of the Obligations secured hereby.

        8.      DUTY OF THE AGENT.

        The Agent's sole duty with respect to the custody, safekeeping and
physical preservation of any Trust Property in its possession, under the Uniform
Commercial Code or otherwise, shall be to deal with it in the same manner as the
Agent deals with similar property for its own account. Neither the Agent, any
Lender, any Holder nor any of their respective directors, officers, employees,
shareholders, partners or agents shall be liable for failure to demand, collect
or realize upon any of the Trust Property or for any delay in doing so or shall
be under any obligation to sell or otherwise dispose of any Trust Property upon
the request of the Borrower or

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any other Person or to take any other action whatsoever with regard to the Trust
Property or any part thereof.

        9.      POWERS COUPLED WITH AN INTEREST.

        All powers, authorizations and agencies contained in this Security
Agreement are coupled with an interest and are irrevocable until this Security
Agreement is terminated and the Liens created hereby are released.

        10.     EXECUTION OF FINANCING STATEMENTS.

        The Borrower authorizes the Agent at the expense of the Borrower (such
amounts to be paid with funds provided by the Lessee for such purpose) to file
financing statements with respect to the Trust Property under this Security
Agreement without the signature of the Borrower in such form and in such filing
offices as the Agent reasonably determines appropriate to perfect the security
interests of the Agent under this Security Agreement. A carbon, photographic or
other reproduction of this Security Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. For purposes of such financing
statement, the Borrower shall be deemed to be the debtor, and the Agent shall be
deemed to be the secured party. The address of the Borrower is 79 South Main
Street, Salt Lake City, Utah 84111, Attention: Val T. Orton, Vice President, and
the address of the Agent is Bank of America, N.A., Fifth Avenue Plaza, 800 Fifth
Avenue, Floor 37, Maile Code: WA1-501-37-20, Seattle Washington, 98104-3185,
Attention: Dora A. Brown.

        11.     SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE.

                (a) It is the intention of the parties hereto that this Security
        Agreement as it relates to matters of the grant, perfection and priority
        of security interests the subject hereof, shall constitute a security
        agreement within the meaning of the Uniform Commercial Code of the
        States in which the Trust Property is located. If a Credit Agreement
        Event of Default shall occur, then in addition to having any other right
        or remedy available at law or in equity, the Agent may proceed under the
        applicable Uniform Commercial Code and exercise such rights and remedies
        as may be provided to a secured party by such Uniform Commercial Code
        with respect to all or any portion of the Trust Property which is
        personal property (including without limitation taking possession of and
        selling such property). If the Agent shall elect to proceed under the
        Uniform Commercial Code, then fifteen (15) days' notice of sale of the
        personal property shall be deemed reasonable notice and the reasonable
        expenses of retaking, holding, preparing for sale, selling and the like
        incurred by the Agent shall include, but not be limited to, attorneys'
        fees and legal expenses. At the Agent's request, the Borrower shall
        assemble such personal property and make it available to the Agent at a
        place designated by the Agent which is reasonably convenient to both
        parties.

                (b) The Borrower, upon request by the Agent from time to time,
        shall execute, acknowledge and deliver to the Agent one or more separate
        security agreements, in form satisfactory to the Agent, covering all or
        any part of the Trust Property and will further

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        execute,acknowledge and deliver, or cause to be executed, acknowledged
        and delivered, any financing statement, affidavit, continuation
        statement or certificate or other document as the Agent may request in
        order to perfect, preserve, maintain, continue or extend the security
        interest under, and the priority of the Liens granted by, this Security
        Agreement and such security instrument. The Borrower further agrees to
        pay to the Agent (with funds provided by the Lessee for such purpose) on
        demand all costs and expenses incurred by the Agent in connection with
        the preparation, execution, recording, filing and re-filing of any such
        document and all reasonable costs and expenses of any record searches
        for financing statements the Agent shall reasonably require. The filing
        of any financing or continuation statements in the records relating to
        personal property or chattels shall not be construed as in any way
        impairing the right of the Agent to proceed against any property
        encumbered by this Security Agreement.

        12.     AUTHORITY OF THE AGENT.

        The Borrower acknowledges that the rights and responsibilities of the
Agent under this Security Agreement with respect to any action taken by the
Agent or the exercise or non-exercise by the Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Security Agreement shall be governed by the Credit Agreement
and Section 8.6 of the Participation Agreement and by such other agreements with
respect thereto as may exist from time to time (until such time as all amounts
due and owing to the Secured Parties and the Agent under the Operative
Agreements have been paid in full), but the Agent shall be conclusively presumed
to be acting as agent for the Secured Parties with full and valid authority so
to act or refrain from acting, and the Borrower shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.

        13.     NOTICES.

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

        14.     SEVERABILITY.

        Any provision of this Security Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.

        15.     AMENDMENT IN WRITING; NO WAIVERS; CUMULATIVE REMEDIES.

                (a) None of the terms or provisions of this Security Agreement
        may be waived, amended, supplemented or otherwise modified except in
        accordance with the terms of Section 12.4 of the Participation
        Agreement.

                (b) No failure to exercise, nor any delay in exercising, on the
        part of the Agent, any right, power or privilege hereunder shall operate
        as a waiver thereof. No single or partial exercise of any right, power
        or privilege hereunder shall preclude any

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        other or further exercise thereof or the exercise of any other right,
        power or privilege. A waiver by the Agent of any right or remedy
        hereunder on any one occasion shall not be construed as a bar to any
        right or remedy which the Agent would otherwise have on any future
        occasion.

                (c) The rights and remedies herein provided are cumulative, may
        be exercised singly or concurrently and are not exclusive of any other
        rights or remedies provided by law.

        16.     SECTION HEADINGS.

        The section headings used in this Security Agreement are for convenience
of reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.

        17.     SUCCESSORS AND ASSIGNS.

        This Security Agreement shall be binding upon the successors of the
Borrower, and the Borrower shall not assign any of its rights or obligations
hereunder or with respect to any of the Trust Property without the prior written
consent of the Agent. This Security Agreement shall inure to the benefit of the
Agent, the Lenders, the Holders and their respective successors and assigns, in
accordance with their respective interest herein.

        18.     THE BORROWER'S WAIVER OF RIGHTS.

        Except as otherwise set forth herein, to the fullest extent permitted by
law, the Borrower waives the benefit of all laws now existing or that may
subsequently be enacted providing for (a) any appraisement before sale of any
portion of the Trust Property, (b) any extension of the time for the enforcement
of the collection of the indebtedness or the creation or extension of a period
of redemption from any sale made in collecting such debt and (c) exemption of
any portion of the Trust Property from attachment, levy or sale under execution
or exemption from civil process. Except as otherwise set forth herein, to the
fullest extent the Borrower may do so, the Borrower agrees that the Borrower
will not at any time insist upon, plead, claim or take the benefit or advantage
of any law now or hereafter in force providing for any appraisement, valuation,
stay, exemption, extension or redemption, or requiring foreclosure of this
Security Agreement before exercising any other remedy granted hereunder and the
Borrower, for the Borrower and its successors and assigns, and for any and all
Persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the Obligations and marshalling in the event of
foreclosure of the Liens hereby created.

        19.     GOVERNING LAW.

        EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 11(a) HEREOF, THIS
SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED,

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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).

        20.     OBLIGATIONS ARE WITHOUT RECOURSE.

The provisions of the Participation Agreement relating to limitations on
liability are hereby incorporated by reference herein, Mutatis Mutandis.

        21.     PARTIAL RELEASE; FULL RELEASE.

        The Agent may release for such consideration as it may require any
portion of the Trust Property without (as to the remainder of the Trust
Property) in any way impairing or affecting the Lien, security interest and
priority herein provided for the Agent compared to any other Lien holder or
secured party. Further, the Agent shall execute and deliver to the Borrower such
documents and instruments as may be required to release the Lien and security
interest created by this Security Agreement with respect to the Properties as
provided in Section 8.8 of the Participation Agreement or to grant the easements
and permit the other matters provided for in Section 8.5 of the Participation
Agreement.

        22.     MISCELLANEOUS.

                (a) This Security Agreement is one of the documents which create
        Liens and security interests that secure payment and performance of the
        Obligations. The Agent, at its election, may commence or consolidate in
        a single action all proceedings to realize upon all such Liens and
        security interests. The Borrower hereby waives (i) any objections to the
        commencement or continuation of an action to foreclose the Lien of this
        Security Agreement or exercise of any other remedies hereunder based on
        any action being prosecuted or any judgment entered with respect to the
        Obligations or any Liens or security interests that secure payment and
        performance of the Obligations and (ii) any objections to the
        commencement of, continuation of, or entry of a judgment in any such
        other action based on any action or judgment connected to this Security
        Agreement. In case of a foreclosure sale, the Trust Property may be
        sold, at the Agent's election, in one parcel or in more than one parcel
        and the Agent is specifically empowered (without being required to do
        so, and in its sole and absolute discretion) to cause successive sales
        of portions of the Trust Property to be held.

                (b) This Security Agreement may not be amended, waived,
        discharged or terminated except in accordance with Section 12.4 of the
        Participation Agreement. Upon the prior written consent of the Majority
        Secured Parties and unless such matter is a Unanimous Vote Matter, the
        Agent may release any portion of the Trust Property or any other
        security, and grant such extensions and indulgences in relation to the
        Obligations secured hereby without in any manner affecting the priority
        of the Lien hereof on any part of the Trust Property.

                                       11
<PAGE>   14

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

        23.     CONFLICTS WITH PARTICIPATION AGREEMENT.

        Notwithstanding any other provision hereof, in the event of any conflict
between the terms of this Security Agreement and the Participation Agreement,
the terms of the Participation Agreement shall govern.

        24.     LESSEE AS A PARTY.

        LESSEE HAS EXECUTED THIS SECURITY AGREEMENT FOR THE PURPOSE OF
SUBJECTING TO THE SECURITY INTERESTS GRANTED HEREUNDER ALL OF ITS RIGHT, TITLE,
ESTATE AND INTEREST, IF ANY, IN AND TO THE TRUST PROPERTY TO SECURE ALL
OBLIGATIONS OF ALL CREDIT PARTIES UNDER THE OPERATIVE AGREEMENTS. ACCORDINGLY,
LESSEE HEREBY GRANTS TO THE AGENT (FOR THE BENEFIT OF THE SECURED PARTIES) A
SECURITY INTEREST IN AND TO ALL OF ITS RIGHT, TITLE, ESTATE AND INTEREST, IF
ANY, IN AND TO THE TRUST PROPERTY (TO THE EXTENT LESSEE HAS ANY RIGHT, TITLE OR
INTEREST THEREIN AND WITHOUT REGARD TO ANY LANGUAGE IN SECTION 2 OR THE
DEFINITION OF "TRUST PROPERTY" OR ANY DEFINITION OF ANY ITEM CONSTITUTING THE
TRUST PROPERTY WHICH OTHERWISE WOULD LIMIT THE TRUST PROPERTY TO THE RIGHT,
TITLE AND INTEREST OF THE BORROWER THEREIN) TO SECURE ALL OBLIGATIONS OF ALL
CREDIT PARTIES UNDER THE OPERATIVE AGREEMENTS. LESSEE ACKNOWLEDGES AND AGREES
THAT, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, THE AGENT SHALL HAVE THE RIGHT
TO EXERCISE ANY OR ALL OF ITS REMEDIES HEREUNDER AS AGAINST ANY SUCH RIGHT,
TITLE, ESTATE OR INTEREST OF LESSEE IN OR TO THE TRUST PROPERTY.

                            [signature page follows]

                                       12
<PAGE>   15

        IN WITNESS WHEREOF, each of the undersigned has caused the Security
Agreement to be duly executed and delivered as of the date first above written.

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

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

                                        BANK OF AMERICA, N.A., as the Agent for
                                        the Lenders and the Holders

                                        By:           /s/ Dora A. Brown
                                           -------------------------------------
                                        Name:         Dora A. Brown
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

Accepted and Agreed to:

SHURGARD STORAGE CENTERS, INC.,
as Lessee and Construction Agent

By:            /s/ Harrell Beck
   -------------------------------------
Name:          Harrell Beck
     -----------------------------------
Title:         CFO
      ----------------------------------<PAGE>   1
                                                                   EXHIBIT 10.32

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

                             PARTICIPATION AGREEMENT

                          Dated as of February 26, 2001

                                      among

                         SHURGARD STORAGE CENTERS, INC.,
                  as the Construction Agent and as the Lessee,

                  THE VARIOUS PARTIES HERETO FROM TIME TO TIME,
                               as the Guarantors,

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                      not individually, except as expressly
              stated herein, but solely as the Owner Trustee under
   the Storage Centers Trust 2001, which is the Lessor and Borrower hereunder

       THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES
                   HERETO FROM TIME TO TIME, as the Holders,

       THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES
                   HERETO FROM TIME TO TIME, as the 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

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         PAGE
                                                                                                         ----
<S>                                                                                                      <C>
SECTION 1.  THE LOANS ..............................................................................       1

SECTION 2.  HOLDER ADVANCES ........................................................................       2

SECTION 3.  SUMMARY OF TRANSACTIONS ................................................................       2
        3.1.   Operative Agreements ................................................................       2
        3.2.   Property Purchase ...................................................................       2
        3.3.   Construction of Improvements; Commencement of Basic Rent ............................       3
        3.4.   Ratable Interests of the Holders and the Lenders ....................................       3

SECTION 4.  THE CLOSINGS ...........................................................................       3
        4.1.   Initial Closing Date ................................................................       3
        4.2.   Initial Closing Date; Property Closing Dates; Acquisition Advances;
               Construction Advances ...............................................................       3

SECTION 5.  FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON
               COMPLETION DATE;  THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON
               LIENS ...............................................................................       4
        5.1.   General .............................................................................       4
        5.2.   Procedures for Funding ..............................................................       5
        5.3.   Conditions Precedent for  the Lessor, the Agent, the Lenders and the Holders
               Relating to the Initial Closing Date and the Advance of Funds for the
               Acquisition of a Property ...........................................................       8
        5.4.   Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders
               Relating to the Advance of Funds after the Acquisition Advance ......................      14
        5.5.   Additional Reporting and Delivery Requirements on Date of Final Certificate
               of Occupancy ........................................................................      16
        5.6.   Construction Budget Modifications ...................................................      16
        5.7.   Restrictions on Liens ...............................................................      17
        5.8.   Joinder Agreement Requirements ......................................................      17
        5.9.   Payments ............................................................................      17
        5.10.  Unilateral Right to Increase the Holder Commitments and the Lender
               Commitments .........................................................................      18
        5.11.  Limitation on Acquisition of Properties .............................................      18

SECTION 6.  REPRESENTATIONS AND WARRANTIES .........................................................      18
        6.1.   Representations and Warranties of the Borrower ......................................      18
        6.2.   Representations and Warranties of the Credit Parties ................................      21

SECTION 6B.  GUARANTY ..............................................................................      26
        6B.1.  Guaranty of Payment and Performance .................................................      26
        6B.2.  Obligations Unconditional ...........................................................      26
        6B.3.  Modifications .......................................................................      27
</TABLE>

                                       i

<PAGE>   3

<TABLE>
<S>                                                                                                      <C>
        6B.4.  Waiver of Rights ....................................................................      28
        6B.5.  Reinstatement .......................................................................      28
        6B.6.  Remedies ............................................................................      28
        6B.7.  Limitation of Guaranty ..............................................................      29
        6B.8.  Payment of Amounts to the Agent .....................................................      29
        6B.9.  Release of Guarantors ...............................................................      29

SECTION 7. PAYMENT OF CERTAIN EXPENSES .............................................................      30
        7.1.   Transaction Expenses ................................................................      30
        7.2.   [Intentionally Omitted] .............................................................      31
        7.3.   Certain Fees and Expenses ...........................................................      31
        7.4.   Unused Fees .........................................................................      31
        7.5.   Administrative Fee ..................................................................      31

SECTION 8.  OTHER COVENANTS AND AGREEMENTS .........................................................      32
        8.1.   Cooperation with the Construction Agent or the Lessee ...............................      32
        8.2.   Covenants of the Owner Trustee and the Holders ......................................      32
        8.3.   Credit Party Covenants, Consent and Acknowledgment ..................................      34
        8.4.   Sharing of Certain Payments .........................................................      37
        8.5.   Grant of Easements, etc .............................................................      37
        8.6.   Appointment by the Agent, the Lenders, the Holders and the Owner Trustee ............      38
        8.7.   Collection and Allocation of Payments and Other Amounts .............................      38
        8.8.   Release of Properties, etc ..........................................................      42

SECTION 9.  CREDIT AGREEMENT AND TRUST AGREEMENT ...................................................      42
        9.1.   The Construction Agent's and the Lessee's Credit Agreement Rights ...................      42
        9.2.   The Construction Agent's and the Lessee's Trust Agreement Rights ....................      43

SECTION 10.  TRANSFER OF INTEREST ..................................................................      44
        10.1.  Restrictions on Transfer ............................................................      44
        10.2.  Effect of Transfer ..................................................................      44

SECTION 11.  INDEMNIFICATION .......................................................................      45
        11.1.  General Indemnity ...................................................................      45
        11.2.  General Tax Indemnity ...............................................................      48
        11.3.  Unavailability of Eurodollar Rate ...................................................      54
        11.4.  Funding/Contribution Indemnity ......................................................      54
        11.5.  EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC ..............      56
        11.6.  Additional Provisions Regarding Environmental Indemnification .......................      56
        11.7.  Additional Provisions Regarding Indemnification .....................................      56
        11.8.  Indemnifications Provided by the Owner Trustee in Favor of the Other
               Indemnified Persons .................................................................      57

SECTION 12.  MISCELLANEOUS .........................................................................      58
        12.1.  Survival of Agreements ..............................................................      58
        12.2.  Notices .............................................................................      58
</TABLE>

                                       ii

<PAGE>   4

<TABLE>
<S>                                                                                                      <C>
        12.3.  Counterparts ........................................................................      58
        12.4.  Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters .....................      59
        12.5.  Headings, etc .......................................................................      60
        12.6.  Parties in Interest .................................................................      61
        12.7.  GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE ..............      61
        12.8.  Severability ........................................................................      62
        12.9.  Liability Limited ...................................................................      62
        12.10. Rights of the Credit Parties ........................................................      63
        12.11. Further Assurances ..................................................................      64
        12.12. Calculations under Operative Agreements .............................................      64
        12.13. Confidentiality .....................................................................      64
        12.14. Financial Reporting/Tax Characterization ............................................      65
        12.15. Set-off .............................................................................      65
        12.16. [Intentionally Omitted.] ............................................................      66
</TABLE>

                                      iii

<PAGE>   5

EXHIBITS

A - Form of Requisition - Sections 4.2, 5.2, 5.3 and 5.4

B - Form of Outside Counsel Opinion for the Lessee - Section 5.3(j)

C - Form of Officer's Certificate - Section 5.3(z)

D - Form of Secretary's Certificate - Section 5.3(aa)

E - Form of Officer's Certificate - Section 5.3(cc)

F - Form of Secretary's Certificate - Section 5.3(dd)

G - Form of Outside Counsel Opinion for the Owner Trustee - Section 5.3(ee)

H - Form of Outside Counsel Opinion for the Lessee - Section 5.3(ff)

I - Form of Officer's Certificate - Section 5.5

J - Form of Joinder Agreement - Section 5.8(a)

K - Description of Material Litigation - Section 6.2(d)

L - State of Incorporation/Formation and Principal Place of Business of Each
    Guarantor - Section 6.2(i)

M - Form of Monthly NOI Certificate - Section 8.3(l)

N - Interest Rate/Holder Yield Selection Notice -- Section 8.3(t)

O - Form of Third Party Confidentiality Agreement -- Section 12.13(a)

Appendix A - Rules of Usage and Definitions

                                       iv

<PAGE>   6

                             PARTICIPATION AGREEMENT

        THIS PARTICIPATION AGREEMENT dated as of February 26, 2001 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Agreement") is by and among SHURGARD STORAGE CENTERS, INC., a Washington
corporation (the "Lessee" or the "Construction Agent"); the various parties
hereto from time to time as guarantors (subject to the definition of Guarantors
in Appendix A hereto, individually, a "Guarantor" and collectively, the
"Guarantors"); FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not individually (in its individual capacity, the "Trust Company"),
except as expressly stated herein, but solely as the Owner Trustee under the
Storage Centers Trust 2001 (the "Owner Trustee", the "Borrower" or the
"Lessor"); the various banks and other lending institutions which are parties
hereto from time to time as holders of certificates issued with respect to the
Storage Centers Trust 2001 (subject to the definition of Holders in Appendix A
hereto, individually, a "Holder" and collectively, the "Holders"); the various
banks and other lending institutions which are parties hereto from time to time
as lenders (subject to the definition of Lenders in Appendix A hereto,
individually, a "Lender" and collectively, the "Lenders"); and BANK OF AMERICA,
N.A., a national banking association, as the agent for the Lenders and
respecting the Security Documents, as the agent for the Secured Parties (in such
capacity, the "Agent"). Capitalized terms used but not otherwise defined in this
Agreement shall have the meanings set forth in Appendix A hereto.

        In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:

                              SECTION 1. THE LOANS.

        Subject to the terms and conditions of this Agreement and the other
Operative Agreements and in reliance on the representations and warranties of
each of the parties hereto contained herein or made pursuant hereto, the Lenders
have agreed to make Loans to the Lessor from time to time in an aggregate
principal amount not to exceed at any time the aggregate amount of the Available
Commitments of the Lenders in order for the Lessor to acquire the Properties and
certain Improvements, to develop and construct certain Improvements in
accordance with the Agency Agreement and the terms and provisions hereof and for
the other purposes described herein, and in consideration of the receipt of
proceeds of the Loans, the Lessor will issue the Notes. The Loans shall be made
and the Notes shall be issued pursuant to the Credit Agreement. Pursuant to
Section 5 of this Agreement and Section 2 of the Credit Agreement, the Loans
will be made to the Lessor from time to time at the request of the Construction
Agent in consideration for the Construction Agent agreeing for the benefit of
the Lessor, pursuant to the Agency Agreement, to acquire the Properties, to
acquire the Equipment, to construct certain Improvements and to cause the Lessee
to lease the Properties, each in accordance with the Agency Agreement and the
other Operative Agreements. The Loans and the obligations of the Lessor under
the Credit Agreement shall be secured by the Collateral.

<PAGE>   7

                           SECTION 2. HOLDER ADVANCES.

        Subject to the terms and conditions of this Agreement and the other
Operative Agreements and in reliance on the representations and warranties of
each of the parties hereto contained herein or made pursuant hereto, on each
date Advances are requested to be made in accordance with Section 5 hereof, each
Holder shall make a Holder Advance on a pro rata basis to the Lessor with
respect to the Storage Centers Trust 2001 based on its Holder Commitment in an
amount in immediately available funds; provided, that (i) an initial Holder
Advance of $2,700,000 (the "Initial Holder Advance") will be made on the Initial
Closing Date, such initial Holder Advance will be used to pay certain upfront
fees related to this facility and such initial Holder Advance will be shared pro
rata by the Designated Holders and (ii) no Holder shall be obligated for any
Holder Advance in excess of its Available Holder Commitment. The aggregate
amount of Holder Advances at any time outstanding shall not exceed the aggregate
amount of the Available Holder Commitments. No prepayment or any other payment
with respect to any Advance shall be permitted such that the Holder Advance with
respect to such Advance is less than three percent (3%) of the outstanding
amount of such Advance, except in connection with termination or expiration of
the Term or in connection with the exercise of remedies relating to the
occurrence of a Lease Event of Default. The representations, warranties,
covenants and agreements of the Holders herein and in the other Operative
Agreements are several, and not joint or joint and several.

                       SECTION 3. SUMMARY OF TRANSACTIONS.

        3.1.    OPERATIVE AGREEMENTS.

        On the date hereof, each of the respective parties hereto and thereto
shall execute and deliver this Agreement, the Lease, each applicable Ground
Lease, the Agency Agreement, the Credit Agreement, the Notes, the Trust
Agreement, the Certificates, the Security Agreement, all Mortgage Instruments,
if applicable, and such other documents, instruments, certificates and opinions
of counsel as agreed to by the parties hereto.

        3.2.    PROPERTY PURCHASE.

        On each Property Closing Date and subject to the terms and conditions of
this Agreement (a) the Holders will each make a Holder Advance in accordance
with Sections 2 and 5 of this Agreement and the terms and provisions of the
Trust Agreement, (b) the Lenders will each make Loans in accordance with
Sections 1 and 5 of this Agreement and the terms and provisions of the Credit
Agreement, (c) the Lessor will purchase and acquire good and marketable title to
or ground lease pursuant to a Ground Lease, the applicable Property, each to be
within an Approved State, identified by the Construction Agent, in each case
pursuant to a Deed, Bill of Sale or Ground Lease, as the case may be, and grant
the Agent a lien on such Property by execution of the required Security
Documents, (d) the Agent, the Lessee and the Lessor shall execute and deliver a
Lease Supplement relating to such Property and (e) the Basic Term shall commence
with respect to such Property; provided that all Properties shall be acquired
and all Acquisition Advances shall be made on or before the last day of the
Acquisition Period.

                                       2
<PAGE>   8

        3.3.    CONSTRUCTION OF IMPROVEMENTS; COMMENCEMENT OF BASIC RENT.

        Construction Advances will be made with respect to particular
Improvements to be constructed and with respect to ongoing Work regarding the
Equipment and construction of particular Improvements, in each case, pursuant to
the terms and conditions of this Agreement and the Agency Agreement.
Construction Advances may be made as Post-Completion Construction Advances
subject to the terms and conditions set forth in this Agreement. Subject to the
terms and conditions of Section 5.1(b) of this Agreement, Construction Advances
shall also be made after the Rent Commencement Date for any Property to the
extent that, on any Payment Date, the Basic Rent the Lessee is required to pay
with respect to such Property is less than the interest and Holder Yield with
respect to such Property due on such Payment Date. The Construction Agent will
act as a construction agent on behalf of the Lessor respecting the Work
regarding the Equipment, the construction of such Improvements and the
expenditures of the Construction Advances related to the foregoing. The
Construction Agent shall promptly notify the Lessor upon Completion of the
Improvements and the Lessee shall commence to pay Basic Rent as of the Rent
Commencement Date.

        3.4.    RATABLE INTERESTS OF THE HOLDERS AND THE LENDERS.

        Other than with respect to any non-ratable interests existing as of the
Initial Closing Date, each Holder and Lender agrees at all times (a) to hold the
same ratable portion of the aggregate Lender Commitment for Tranche A Loans, the
aggregate Lender Commitment for Tranche B Loans, the aggregate Holder
Commitments for Holder Advances and the aggregate Lessee Credit Agreement
Commitment Amounts and (b) to make advances consistent with such committed
amounts referenced in Section 3.4(a) in accordance with the requirements of the
Operative Agreements and the Lessee Credit Agreement, respectively.

                            SECTION 4. THE CLOSINGS.

        4.1.    INITIAL CLOSING DATE.

        All documents and instruments required to be delivered on the Initial
Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC,
Charlotte, North Carolina, or at such other location as may be determined by the
Lessor, the Agent and the Lessee.

        4.2.    INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION
                ADVANCES; CONSTRUCTION ADVANCES.

        The Construction Agent shall deliver to the Agent a requisition (a
"Requisition"), in the form attached hereto as Exhibit A or in such other form
as is satisfactory to the Agent, in its reasonable discretion, in connection
with (a) the Transaction Expenses and other fees, expenses and disbursements
payable, pursuant to Section 7.1, by the Lessor, (b) each Acquisition Advance
pursuant to Section 5.3 and (c) each Construction Advance pursuant to Section
5.4. No Requisition shall be required for the Lenders and the Holders to make
Advances pursuant to or in connection with Sections 5.1(b), 7.1(a), 7.1(b) and
11.8.

                                       3
<PAGE>   9

              SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT;
                   REPORTING REQUIREMENTS ON COMPLETION DATE;
            THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS.

        5.1.    GENERAL.

                (a) To the extent funds have been advanced to the Lessor as
        Loans by the Lenders and to the Lessor as Holder Advances by the
        Holders, the Lessor will use such funds from time to time in accordance
        with the terms and conditions of this Agreement and the other Operative
        Agreements (i) at the direction of the Construction Agent to acquire the
        Properties in accordance with the terms of this Agreement, the Agency
        Agreement and the other Operative Agreements, (ii) to make Advances to
        the Construction Agent to permit the acquisition, testing, engineering,
        installation, development, construction, modification, design, and
        renovation, as applicable, of the Properties (or components thereof) in
        accordance with the terms of the Agency Agreement and the other
        Operative Agreements, (iii) to pay Transaction Expenses, fees, expenses
        and other disbursements payable by the Lessor under Sections 7.1(a),
        7.1(b) and 11.8 and (iv) for the purposes specified in Section 5.1(b).
        Funds advanced to the Lessor as Loans by the Lenders and as Holder
        Advances by the Holders shall be used for no other purposes.

                (b) In lieu of the payment of interest on the Loans and Holder
        Yield on the Holder Advances on any Scheduled Interest Payment Date with
        respect to any Property during the period prior to the Rent Commencement
        Date with respect to such Property, and after such Rent Commencement
        Date to the extent that the Basic Rent the Lessee is required to pay
        with respect to such Property on such Scheduled Interest Payment Date is
        less than the interest on the Loans and Holder Yield due on such
        Scheduled Interest Payment Date with respect to Advances made in
        connection with such Property, (and subject to Section 5.10) then (i)
        each Lender's Loan with respect to such Property shall automatically be
        increased by the amount of interest accrued and unpaid on such Loan for
        such period (except to the extent that at any time such increase would
        (A) cause such Lender's Loan to exceed such Lender's Available
        Commitment or (B) cause the Property Cost for such Property to exceed
        the Construction Budget for such Property, in either of which cases the
        Lessee shall pay such excess amount to such Lender in immediately
        available funds on the Scheduled Interest Payment Date on which such
        Lender's Available Commitment or such Construction Budget, as
        applicable, is exceeded), and (ii) each Holder's Holder Advance with
        respect to such Property shall automatically be increased by the amount
        of Holder Yield accrued and unpaid on such Holder Advance for such
        period (except to the extent that at any time such increase would (A)
        cause the Holder Advance of such Holder to exceed such Holder's
        Available Holder Commitment or (B) cause the Property Cost for such
        Property to exceed the Construction Budget for such Property, in either
        of which cases the Lessee shall pay such excess amount to such Holder in
        immediately available funds on the Scheduled Interest Payment Date on
        which such Holder's Available Holder Commitment or such Construction
        Budget, as applicable, is exceeded). Such increases in a Lender's Loan
        and a Holder's Holder Advance with

                                       4
<PAGE>   10

        respect to any Property shall occur without the necessity of submitting
        a Requisition or any disbursement of funds by any Person, but such
        increases shall only be made if, at the time of such proposed increase,
        no Default or Event of Default shall have occurred and be continuing or
        will have occurred as a result of the making of such Advances; and all
        representations and warranties of the Credit Parties in Section 6.2
        shall be true on and as of such date with the same force and effect if
        made on and as of such date.

        5.2.    PROCEDURES FOR FUNDING.

                (a) The Construction Agent shall notify the Agent whether it
        will be requesting Advances hereunder in accordance with the terms and
        provisions hereof on or before the time specified in this subsection
        (a); provided, however, it is understood and agreed that:

                        (i) no more than one (1) Advance (excluding any
                conversion and/or continuation of any Loan or Holder Advance
                under the Credit Agreement and Trust Agreement, respectively)
                may be requested during any calendar month;

                        (ii) such Advance will only be made on the first day of
                any calendar month; provided that if the first day of any
                calendar month is not a Business Day, such Advance will be made
                on the next succeeding Business Day; and

                        (iii) no such request from the Construction Agent is
                required for funding of interest and Holder Yield pursuant to
                Section 5.1(b) or for Transaction Expenses, fees, expenses and
                other disbursements payable by the Lessor pursuant to or in
                connection with Sections 7.1(a), 7.1(b) and 11.8.

                Except as otherwise provided in this Section 5.1(b), prior to
        11:00 a.m. Pacific time (i) four (4) Business Days prior to the date
        that the first Advance is requested hereunder and (ii) four (4) Business
        Days prior to the first day of any calendar month (or, if the first day
        of such calendar month is not a Business Day, prior to the Business Day
        next succeeding such first day), the Construction Agent shall deliver to
        the Agent, (A) with respect to the date that the first Advance is
        requested hereunder and each subsequent Acquisition Advance, a
        Requisition as described in Section 4.2 hereof (including without
        limitation a legal description of the Land, if any, a schedule of the
        Improvements, if any, and a schedule of the Equipment, if any, acquired
        or to be acquired on such date, and a schedule of the Work, if any, to
        be performed, each of the foregoing in a form reasonably acceptable to
        the Agent) and (B) with respect to each Construction Advance, a
        Requisition identifying (among other things) the Property to which such
        Construction Advance relates.

                (b) Each Requisition shall: (i) be irrevocable, (ii) request
        funds in an amount that is not, when added to the Unfunded Amount, in
        excess of the total aggregate of the Available Commitments plus the
        Available Holder Commitments at such time, and (iii) request that the
        Holders make Holder Advances and that the Lenders make Loans to the
        Lessor for the payment of Transaction Expenses, Property Acquisition
        Costs (in the case

                                       5
<PAGE>   11

        of an Acquisition Advance) or other Property Costs (in the case of a
        Construction Advance) that have previously been incurred or are to be
        incurred on (or, with respect to an Advance being deposited into the
        Escrow Account, after) the date of such Advance to the extent such were
        not subject to a prior Requisition, in each case as specified in the
        Requisition.

                (c) Subject to the satisfaction of the conditions precedent set
        forth in Sections 5.3 or 5.4, as applicable, and after giving effect to
        the Initial Holder Advance by the Designated Holders on the Initial
        Closing Date as described in Section 2 hereof, on each Property Closing
        Date or the date on which the Construction Advance is to be made, as
        applicable, (i) the Lenders shall make Loans based on their respective
        Lender Commitments to the Lessor in an aggregate amount equal to
        ninety-seven percent (97%) of (A) the Requested Funds specified in any
        Requisition plus (B) any additional amount of Transaction Expenses as
        referenced in Sections 7.1(a) and 7.1(b) and any additional amount
        respecting any indemnity payment as referenced in Section 11.8, unless
        any such funding of any indemnity payment pursuant to Section 11.8 is
        declined in writing by each Lender and each Holder (such decision to be
        in the sole discretion of each Lender and each Holder) ratably between
        the Tranche A Lenders and the Tranche B Lenders with the Tranche A
        Lenders funding eighty-seven percent (87%) of the Requested Funds and
        the Tranche B Lenders funding ten percent (10%) of the Requested Funds),
        up to an aggregate principal amount equal to the aggregate of the
        Available Commitments and (ii) the Holders shall make Holder Advances
        based on their respective Holder Commitments in an aggregate amount
        equal to three percent (3%) of (A) the Requested Funds specified in such
        Requisition plus (B) any additional amount of Transaction Expenses as
        referenced in Sections 7.1(a) and 7.1(b) and any additional amount
        respecting any indemnity payment as referenced in Section 11.8, unless
        any such funding of any indemnity payment pursuant to Section 11.8 is
        declined in writing by each Lender and each Holder (such decision to be
        in the sole discretion of each Lender and each Holder), up to the
        aggregate advanced amount equal to the aggregate of the Available Holder
        Commitments.

        The total amount of such Loans and Holder Advances made on such date
        shall, as applicable:

                        (x) be used by the Lessor to pay Property Costs
                including Transaction Expenses within three (3) Business Days of
                the receipt by the Lessor of such Advance; or

                        (y) be advanced by the Lessor on the date of such
                Advance to the Construction Agent or the Lessee to pay Property
                Costs; or

                        (z) at the request of the Construction Agent, shall
                remain under the control of the Agent and be deposited by the
                Agent into the Escrow Account for disbursement to pay Property
                Costs in accordance with the terms of this Agreement, subject to
                the satisfaction of the Escrow Instructions, no later than the
                14th day of the next succeeding calendar month.

                                       6
<PAGE>   12

        Notwithstanding that the Operative Agreements state that Advances shall
        be directed to the Lessor, each Advance not applied by the Agent to the
        purposes described in Sections 5.1(b), 7.1(a), 7.1(b) and 11.8 shall in
        fact be directed to the Construction Agent (for the benefit of the
        Lessor) in accordance with directions provided by the Construction Agent
        in the applicable Requisition and applied by the Construction Agent (for
        the benefit of the Lessor) pursuant to the requirements imposed on the
        Lessor under the Operative Agreements.

                (d) With respect to an Advance to be applied by the Agent or
        used by the Construction Agent to pay for Property Costs and/or
        Transaction Expenses or other costs payable under Sections 7.1(a),
        7.1(b) or 11.8 hereof and not (i) expended by the Agent or the
        Construction Agent, as applicable, for such purpose on the date of such
        Advance or (ii) deposited into the Escrow Account for later disbursement
        pursuant to Section 5.2(c), such amounts shall be held by the Agent
        until the applicable closing date or payment date or, if such closing
        date or payment date does not occur within three (3) Business Days of
        the date of receipt by the Agent of such Advance from the Lenders and
        Holders, shall be applied regarding the applicable Advance to repay the
        Lenders and the Holders and, subject to the terms hereof, and of the
        Credit Agreement and the Trust Agreement, shall remain available for
        future Advances. Any such amounts held by the Agent shall be subject to
        the lien of the Security Agreement and shall accrue interest and Holder
        Yield from the date any such amounts are advanced by the Lenders and
        Holders until such amounts are returned to the Lenders and the Holders.
        With respect to an Advance deposited into the Escrow Account and not
        disbursed by the date required under Section 5.2(c), whether because of
        failure to satisfy each of the Escrow Instructions or otherwise, the
        amount of such Advance shall be withdrawn by the Agent from the Escrow
        Account and shall be applied to repay the Lenders and the Holders and,
        subject to the terms hereof, and of the Credit Agreement and the Trust
        Agreement, shall remain available for future Advances.

                (e) All Operative Agreements which are to be delivered to the
        Lessor, the Agent, the Lenders or the Holders shall be delivered to the
        Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders,
        and such items (except for Notes, Certificates, Bills of Sale, the
        Ground Leases and chattel paper originals, with respect to which in each
        case there shall be only one original) shall be delivered with originals
        sufficient for the Lessor, the Agent, each Lender and each Holder. All
        other items which are to be delivered to the Lessor, the Agent, the
        Lenders or the Holders shall be delivered to the Agent, on behalf of the
        Lessor, the Agent, the Lenders or the Holders, and such other items
        shall be held by the Agent. To the extent any such other items are
        requested in writing from time to time by the Lessor, any Lender or any
        Holder, the Agent shall provide a copy of such item to the party
        requesting it. Receipt by the Agent of an item to be delivered to any or
        all of the Lessor, the Lenders, and the Holders shall constitute receipt
        by such Person.

                (f) Notwithstanding the completion of any closing under this
        Agreement pursuant to Sections 5.3 or 5.4, each condition precedent in
        connection with any such

                                       7
<PAGE>   13

        closing may be subsequently enforced by the Agent (unless such has been
        expressly waived in writing by the Agent).

        5.3.    CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND
                THE HOLDERS RELATING TO THE INITIAL CLOSING DATE AND THE ADVANCE
                OF FUNDS FOR THE ACQUISITION OF A PROPERTY.

        The obligations:

                (i) on the Initial Closing Date:

                        (A) of the Lessor, the Agent, the Lenders and the
                Holders to enter into the transactions contemplated by this
                Agreement, including without limitation the obligation to
                execute and deliver the applicable Operative Agreements to which
                each is a party on the Initial Closing Date; and

                        (B) of the Holders to make Holder Advances, and of the
                Lenders to make Loans in order to pay Transaction Expenses,
                fees, expenses and other disbursements payable by the Lessor
                under Section 7.1(a) of this Agreement; and

                (ii) during the Acquisition Period:

                        (A) of the Holders to make Holder Advances and of the
                Lenders to make Loans on a Property Closing Date for the purpose
                of providing funds to the Lessor necessary to pay the
                Transaction Expenses, fees, expenses and other disbursements
                payable by the Lessor under Section 7.1(b) of this Agreement and
                to acquire or ground lease a Property (an "Acquisition
                Advance"); and

                        (B) of the Agent to release funds from the Escrow
                Account on a Property Closing Date for the purpose of providing
                funds for an Acquisition Advance to the Lessor; and

                        (C) of the Holders to make Holder Advances and of the
                Lenders to make Loans on the date of any Advance pursuant to a
                Requisition that is to be deposited into the Escrow Account for
                later release as an Acquisition Advance (an "Escrow Funding
                Date"),

in each case (with regard to the foregoing Sections 5.3(i) and (ii)) are subject
to the satisfaction or waiver of each of the following conditions precedent on
or prior to the Initial Closing Date, the applicable Property Closing Date
and/or the applicable Escrow Funding Date, as specified in each subsection of
this Section 5.3; provided that, to the extent such conditions precedent require
the delivery of any agreement, certificate, instrument, memorandum, legal or
other opinion, appraisal, commitment, title insurance commitment, lien report or
any other document of any kind or type, such shall be in form and substance
satisfactory to the Agent, in its reasonable discretion:

                                       8
<PAGE>   14

                (a) as of each such date, the correctness in all material
        respects of the representations and warranties of the parties to this
        Agreement contained herein, in each of the other Operative Agreements
        and each certificate delivered pursuant to any Operative Agreement
        (including without limitation the Incorporated Representations and
        Warranties), except to the extent that any such representation and
        warranty expressly and solely relates to an earlier date, in which case
        such representation and warranty shall be correct as of such earlier
        date;

                (b) on or prior to each such date, the performance in all
        material respects by the parties to this Agreement of their respective
        agreements contained herein and in the other Operative Agreements to be
        performed by them;

                (c) on or before four (4) Business Days prior to each such date
        (other than a Property Closing Date on which the funds necessary to
        complete the acquisition of such Property have been previously deposited
        in the Escrow Account), the Agent shall have received a fully executed
        counterpart copy of the Requisition for the Advance, appropriately
        completed, including an expenditure summary in the form of Schedule 1 to
        Exhibit A to this Agreement;

                (d) as of each Property Closing Date, title to each such
        Property shall conform to the representations and warranties set forth
        in Section 6.2(l) hereof;

                (e) on or before four (4) Business Days prior to each Property
        Closing Date, the Construction Agent shall have delivered to the Agent a
        good standing certificate for the Construction Agent in the Approved
        State where each such Property is located (provided, that no such good
        standing shall be required from an Approved State for which a good
        standing certificate has previously been delivered to the Agent);

                (f) as of each such date, there shall not have occurred and be
        continuing any Default or Event of Default under any of the Operative
        Agreements and no Default or Event of Default under any of the Operative
        Agreements will have occurred after giving effect to the requested
        Advance (if any);

                (g) as of each Property Closing Date, the Construction Agent
        shall have delivered to the Agent title insurance commitments to issue
        policies respecting each such Property, in an amount at least equal to
        (i) the maximum total Property Cost indicated by the Construction Budget
        referenced in Section 5.3(r) or (ii) with respect to the acquisition of
        a Property for which construction has been completed at the time of such
        acquisition, the amount of the Acquisition Advance requested therefor in
        the applicable Requisition, in each case with such endorsements as the
        Agent deems necessary in its reasonable discretion, in favor of the
        Lessor and the Agent from a title insurance company acceptable to the
        Agent in its reasonable discretion, but only with such title exceptions
        thereto as are acceptable to the Agent;

                (h) no less than 30 nor more than 180 days prior to each
        Property Closing Date (such time period to be adjusted as necessary upon
        agreement of the Agent and the

                                       9
<PAGE>   15

        Construction Agent), the Construction Agent shall have delivered to the
        Agent an environmental site assessment respecting each such Property
        prepared by an independent recognized professional acceptable to the
        Agent and evidencing no pre-existing environmental condition with
        respect to which there is more than a remote risk of loss;

                (i) as of each Property Closing Date, the Construction Agent
        shall have delivered to the Agent a survey (with an acceptable flood
        hazard certification) respecting each such Property prepared by (i) an
        independent recognized professional acceptable to the Agent and (ii) in
        a manner and including such information as is reasonably required by the
        Agent;

                (j) as of each Property Closing Date, unless such an opinion has
        previously been delivered with respect to a particular state, the
        Construction Agent shall have caused to be delivered to the Agent a
        legal opinion in the form attached hereto as Exhibit B or in such other
        form as is acceptable to the Agent with respect to local law real
        property issues respecting the state in which each such Property is
        located addressed to the Lessor, the Agent, the Lenders and the Holders,
        from counsel located in the state where each such Property is located,
        prepared by counsel acceptable to the Agent in its reasonable
        discretion;

                (k) as of each Property Closing Date, the Construction Agent
        shall have delivered to the Agent: (i) a copy of the Deed with respect
        to the Land and existing Improvements (if any), (ii) a copy of the
        Ground Lease (if any), and (iii) a copy of the Bill of Sale with respect
        to the Equipment (if any), respecting such of the foregoing as are being
        acquired or ground leased on each such date with the proceeds of the
        Loans and Holder Advances or which have been previously acquired or
        ground leased with the proceeds of the Loans and Holder Advances;
        provided that such Land, existing Improvements (if any) and Equipment
        (if any) shall be located in an Approved State;

                (l) [intentionally omitted];

                (m) as of each Property Closing Date, the Construction Agent
        shall have caused to be delivered to the Agent a Mortgage Instrument (in
        such form as is acceptable to the Agent, with revisions as necessary to
        conform to applicable state law), Lessor Financing Statements and Lender
        Financing Statements respecting each such Property (which Lender
        Financing Statements Lessor hereby covenants to execute and deliver
        promptly following the Construction Agent's request), all fully executed
        and in recordable form;

                (n) as of each Property Closing Date, the Lessee shall have
        delivered to the Agent with respect to each such Property a Lease
        Supplement and a memorandum (or short form lease) regarding the Lease
        and such Lease Supplement (such memorandum or short form lease to be in
        the form attached to the Lease as Exhibit B or in such other form as is
        acceptable to the Agent, with modifications as necessary to conform to
        applicable state law, and in form suitable for recording);

                                       10
<PAGE>   16

                (o) as of each such date, the sum of the aggregate Available
        Commitments plus the aggregate Available Holder Commitments (after
        giving effect to any Acquisition Advance on such date) will be
        sufficient to pay the Unfunded Amount;

                (p) as of each Property Closing Date, if any such Property is
        subject to a Ground Lease, the Construction Agent shall have caused a
        lease memorandum (or short form lease) to be delivered to the Agent for
        such Ground Lease and, if requested by the Agent, a landlord waiver and
        a mortgagee waiver (in each case, in such form as is acceptable to the
        Agent);

                (q) as of each Property Closing Date, counsel (acceptable to the
        Agent) for the ground lessor of each such Property subject to a Ground
        Lease shall have issued to the Lessor, the Agent, the Lenders and the
        Holders, its opinion;

                (r) on or before four (4) Business Days prior to each Property
        Closing Date, the Construction Agent shall have delivered to the Agent a
        preliminary Construction Budget for each such Property, if applicable;

                (s) on or before four (4) Business Days prior to each Property
        Closing Date, the Construction Agent shall have provided evidence to the
        Agent of insurance with respect to each such Property as provided in the
        Lease;

               (t) not less than 30 days nor more than 180 days prior to each
        Property Closing Date with respect to a Property for which construction
        has been completed on or prior to such Property Closing Date (such time
        period to be adjusted as necessary upon agreement of the Agent and the
        Construction Agent), the Construction Agent shall have caused an
        Appraisal regarding each such Property to be provided to the Agent from
        an appraiser selected by the Agent and such Appraisal shall reflect an
        appraised value for such Property greater than or equal to 90% of the
        total Acquisition Advance requested for such Property;

                (u) on or before each Property Closing Date, the Construction
        Agent shall cause (i) Uniform Commercial Code lien searches, tax lien
        searches and judgment lien searches regarding the Lessee to be conducted
        (and copies thereof to be delivered to the Agent) in such jurisdictions
        as determined by the Agent by a nationally recognized search company
        acceptable to the Agent (it being understood that such searches are
        conducted only once in each such jurisdiction) and (ii) the liens
        referenced in such lien searches which affect the Property and are
        objectionable to the Agent to be either removed or otherwise handled in
        a manner satisfactory to the Agent in its reasonable discretion;

                (v) as of each Property Closing Date, all taxes, fees and other
        charges in connection with the execution, delivery, recording, filing
        and registration of the Operative Agreements and/or documents related
        thereto shall have been paid or provisions for such payment shall have
        been made to the satisfaction of the Agent in its reasonable discretion;

                                       11
<PAGE>   17

                (w) [intentionally omitted];

                (x) as of each such date, each of the Operative Agreements to be
        entered into on such date shall have been duly authorized, executed and
        delivered by the parties thereto, and shall be in full force and effect,
        and the Agent shall have received a fully executed copy of each of such
        Operative Agreements;

                (y) as of each such date, since the date of the most recent
        audited financial statements (as delivered pursuant to the requirements
        of the Lessee Credit Agreement) of the Lessee, there shall not have
        occurred any event, condition or state of facts which shall have or
        could reasonably be expected to have a Material Adverse Effect, other
        than as specifically contemplated by the Operative Agreements;

                (z) as of the Initial Closing Date only, the Agent shall have
        received an Officer's Certificate, dated as of the Initial Closing Date,
        of the Lessee in the form attached hereto as Exhibit C or in such other
        form as is acceptable to the Agent stating that (i) each and every
        representation and warranty of each Credit Party contained in the
        Operative Agreements to which it is a party is true and correct in all
        material respects on and as of the Initial Closing Date; (ii) no Default
        or Event of Default has occurred and is continuing under any Operative
        Agreement; (iii) each Operative Agreement to which any Credit Party is a
        party is in full force and effect with respect to it; and (iv) each
        Credit Party has duly performed and complied in all material respects
        with all covenants, agreements and conditions contained herein or in any
        Operative Agreement required to be performed or complied with by it on
        or prior to the Initial Closing Date;

                (aa) as of the Initial Closing Date only, the Agent shall have
        received (i) a certificate of the Secretary or an Assistant Secretary of
        each Credit Party, dated as of the Initial Closing Date, in the form
        attached hereto as Exhibit D or in such other form as is acceptable to
        the Agent attaching and certifying as to (1) the resolutions of the
        Board of Directors of such Credit Party duly authorizing the execution,
        delivery and performance by such Credit Party of each of the Operative
        Agreements to which it is or will be a party, (2) the articles of
        incorporation of such Credit Party certified as of a recent date by the
        Secretary of State of its state of incorporation and its by-laws and (3)
        the incumbency and signature of persons authorized to execute and
        deliver on behalf of such Credit Party the Operative Agreements to which
        it is or will be a party and (ii) a good standing certificate (or local
        equivalent) from the respective states where such Credit Party is
        incorporated and where the principal place of business of such Credit
        Party is located as to its good standing in each such state. To the
        extent any Credit Party is a partnership, a limited liability company or
        is otherwise organized, such Person shall deliver to the Agent (in form
        and substance satisfactory to the Agent) as of the Initial Closing Date
        (A) a certificate regarding such Person and any corporate general
        partners covering the matters described in Exhibit D and (B) a good
        standing certificate, a certificate of limited partnership or a local
        equivalent of either of the foregoing, as applicable;

                (bb) as of the Initial Closing Date only, there shall not have
        occurred any material adverse change in the consolidated assets,
        liabilities, operations, business or

                                       12
<PAGE>   18

        condition (financial or otherwise) of the Credit Parties (on a
        consolidated basis) from that set forth in the most recent audited
        consolidated financial statements of the Credit Parties which have been
        provided to the Agent;

                (cc) as of the Initial Closing Date only, the Agent and the
        Lessee shall have received an Officer's Certificate of the Lessor dated
        as of the Initial Closing Date in the form attached hereto as Exhibit E
        or in such other form as is acceptable to the Agent, stating that (i)
        each and every representation and warranty of the Lessor contained in
        the Operative Agreements to which it is a party is true and correct in
        all material respects on and as of the Initial Closing Date, (ii) each
        Operative Agreement to which the Lessor is a party is in full force and
        effect with respect to it and (iii) the Lessor has duly performed and
        complied in all material respects with all covenants, agreements and
        conditions contained herein or in any Operative Agreement required to be
        performed or complied with by it on or prior to the Initial Closing
        Date;

                (dd) as of the Initial Closing Date only, the Agent and the
        Lessee shall have received (i) a certificate of the Secretary, an
        Assistant Secretary, Trust Officer or Vice President of the Trust
        Company in the form attached hereto as Exhibit F or in such other form
        as is acceptable to the Agent, attaching and certifying as to (A) the
        signing resolutions duly authorizing the execution, delivery and
        performance by the Lessor of each of the Operative Agreements to which
        it is or will be a party, (B) its articles of association or other
        equivalent charter documents and its by-laws, as the case may be,
        certified as of a recent date by an appropriate officer of the Trust
        Company and (C) the incumbency and signature of persons authorized to
        execute and deliver on its behalf the Operative Agreements to which it
        is a party and (ii) a good standing certificate from the Office of the
        Comptroller of the Currency;

                (ee) as of the Initial Closing Date only, counsel for the Lessor
        acceptable to the Agent shall have issued to the Lessee, the Holders,
        the Lenders and the Agent its opinion in the form attached hereto as
        Exhibit G or in such other form as is reasonably acceptable to the
        Agent;

                (ff) as of the Initial Closing Date only, the Construction Agent
        shall have caused to be delivered to the Agent a legal opinion in the
        form attached hereto as Exhibit H or in such other form as is acceptable
        to the Agent, addressed to the Lessor, the Agent, the Lenders and the
        Holders, from counsel acceptable to the Agent; and

                (gg) as of the Initial Closing Date only, the Construction Agent
        shall cause (i) tax lien searches and judgment lien searches regarding
        each Credit Party to be conducted (and copies thereof to be delivered to
        the Agent) in such jurisdictions as determined by the Agent by a
        nationally recognized search company acceptable to the Agent and (ii)
        the liens referenced in such lien searches which are objectionable to
        the Agent to be either removed or otherwise handled in a manner
        satisfactory to the Agent.

        Notwithstanding the foregoing, the obligations of each party shall not
be subject to any conditions contained in this Section 5.3 which are required to
be performed by, or relate to the

                                       13
<PAGE>   19

representations and warranties of, such party.

        5.4.    CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND
                THE HOLDERS RELATING TO THE ADVANCE OF FUNDS AFTER THE
                ACQUISITION ADVANCE.

        Subsequent to the acquisition of a Property, the obligations on any date
of the Holders to make Holder Advances and the Lenders to make Loans in
connection with all requests for Advances (including Post-Completion
Construction Advances) or pursuant to Section 5.1(b) with respect to such
Property (and to pay the Transaction Expenses, fees, expenses and other
disbursements payable by the Lessor under Section 7.1 of this Agreement in
connection therewith) are subject to the satisfaction or waiver of the following
conditions precedent on or prior to such date or dates as specified in each
subsection of this Section 5.4:

                (a) on each such date, the correctness in all material respects
        on such date of the representations and warranties of the parties to
        this Agreement contained herein, in each of the other Operative
        Agreements and in each certificate delivered pursuant to any Operative
        Agreement (including without limitation the Incorporated Representations
        and Warranties) except to the extent that any such representation and
        warranty expressly and solely relates to an earlier date, in which case
        such representation and warranty shall be correct as of such earlier
        date;

                (b) as of each such date, the performance in all material
        respects by the parties to this Agreement of their respective agreements
        contained herein and in the other Operative Agreements to be performed
        by them on or prior to each such date;

                (c) on or before four (4) Business Days prior to each such date,
        the Agent shall have received a fully executed counterpart of the
        Requisition, appropriately completed, including an expenditure summary
        in the form of Schedule 1 to Exhibit A to this Agreement;

                (d) as of each such date, the sum of the aggregate Available
        Commitments plus the aggregate Available Holder Commitments (after
        giving effect to all Advances on such date) will be sufficient to pay
        the Unfunded Amount;

                (e) as of each such date, there shall not have occurred and be
        continuing any Default or Event of Default under any of the Operative
        Agreements and no Default or Event of Default under any of the Operative
        Agreements will have occurred after giving effect to the Construction
        Advance requested by the applicable Requisition;

                (f) on or before four (4) Business Days prior to each such date,
        the title insurance policy delivered in connection with the requirements
        of Section 5.3(g) shall (i) provide for (or shall be endorsed to provide
        for) insurance in an amount at least equal to (A) with respect to any
        Property still under construction, the cost to construct such Property
        indicated by the Construction Budget for such Property or (B) with
        respect to any Property for which construction is complete as of the
        date on which such Advance is to be made, the amount provided therefor
        in Section 5.3(g), and (ii) reflect no title change

                                       14
<PAGE>   20

        or exception objectionable to the Agent;

                (g) as of each date on which an Advance is to be made for the
        construction of Improvements on a Property, the Construction Agent shall
        have delivered to the Agent copies of the Plans and Specifications for
        the applicable Improvements;

                (h) [intentionally omitted];

                (i) as of each such date, with regard to any Equipment or other
        components of such Property then being acquired with the proceeds of the
        Loans and Holder Advances, documentation satisfactory to the Agent
        naming the Lessor as purchaser and transferee;

                (j) as of each such date, all taxes, fees and other charges in
        connection with the execution, delivery, recording, filing and
        registration of the Operative Agreements shall have been paid or
        provisions for such payment shall have been made to the satisfaction of
        the Agent;

                (k) as of each such date, since the date of the most recent
        audited Consolidated Financial Statements (as such term is defined in
        the Lessee Credit Agreement) of the Lessee, there shall not have
        occurred any event, condition or state of facts which shall have or
        could reasonably be expected to have a Material Adverse Effect, other
        than as specifically contemplated by the Operative Agreements;

                (l) on or before the date of the first Construction Advance with
        respect to such Property, the Agent shall have received a copy of the
        building permit for such Property issued by the applicable Governmental
        Authority or Authorities; and

                (m) if an Appraisal for such Property has not previously been
        delivered pursuant to Section 5.3(t), not less than 30 days nor more
        than 180 days prior to the date of the first Construction Advance for
        such Property (such time period to be adjusted as necessary upon
        agreement of the Agent and the Construction Agent), the Construction
        Agent shall have caused an Appraisal based upon the Plans and
        Specifications for such Property to be provided to the Agent from an
        appraiser selected by the Agent and such Appraisal shall reflect an
        appraised value for such Property greater than or equal to 90% of the
        total Construction Budget for such Property delivered pursuant to
        Section 5.3(r) of this Agreement.

To the extent the above conditions precedent require the delivery of any
agreement, certificate, instrument, memorandum, legal or other opinion,
appraisal, commitment, title insurance commitment, lien report or any other
document of any kind or type, such shall be in form and substance satisfactory
to the Agent, in its reasonable discretion; notwithstanding the foregoing, the
obligations of each party shall not be subject to any conditions contained in
this Section 5.4 which are required to be performed by, or relate to the
representations and warranties of, such party.

                                       15
<PAGE>   21

        5.5.    ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON DATE OF FINAL
                CERTIFICATE OF OCCUPANCY.

        Within 30 days of issuance of the final, permanent certificate of
occupancy for each Property, the Construction Agent shall deliver to the Agent
an Officer's Certificate in the form attached hereto as Exhibit I or in such
other form as is acceptable to the Agent specifying (a) the address for such
Property, (b) the date of issuance of the final, permanent certificate of
occupancy for such Property, (c) the aggregate Property Cost for such Property
and all additional amounts expended by the Construction Agent or the Lessee with
respect to such Property on or before such date and (d) an itemization of the
components of the total Property Cost as well as documentation supporting the
asserted Property Cost figures, to the extent available. Furthermore, on or
prior to the date of issuance of the final, permanent certificate of occupancy
for each Property, the Construction Agent shall deliver or cause to be delivered
to the Agent (unless previously delivered to the Agent) originals of the
following, each of which shall be in form and substance acceptable to the Agent,
in its reasonable discretion: (w) a title insurance endorsement regarding the
title insurance policy delivered in connection with the requirements of Section
5.3(g), but only to the extent such endorsement is necessary to provide for
insurance in an amount at least equal to the total Property Cost for such
Property and, if endorsed, the endorsement shall not include a title change or
exception objectionable to the Agent; (x) an as-built survey for such Property,
(y) insurance certificates respecting such Property as required hereunder and
under the Lease Agreement, and (z) if requested by the Agent in its reasonable
discretion to reflect changes in facts or circumstances, amendments to the
Lessor Financing Statements executed by the appropriate parties (which, if
required from the Lessor, the Lessor covenants to execute and deliver promptly
after the Construction Agent's or Lessee's request). In addition, on the date of
issuance of the final, permanent certificate of occupancy for such Property the
Construction Agent covenants and agrees that the recording fees, documentary
stamp taxes or similar amounts required to be paid in connection with the
related Mortgage Instrument shall be paid in an amount required by applicable
law, subject, however, to the obligations of the Lenders and the Holders to fund
such costs to the extent required pursuant to Section 7.1.

        5.6.    CONSTRUCTION BUDGET MODIFICATIONS.

        The Construction Agent may increase the Construction Budget for any
Property (a) during the twelve months following the Initial Closing Date, with
the written consent of the Agent and (b) thereafter, with the written consent of
the Majority Secured Parties; provided no Construction Budget may be increased
without the consent of all of the Financing Parties (i) if such increase would
cause the appraised value reflected in the most recent Appraisal delivered
pursuant to Section 5.3(t) or Section 5.4(m) of this Agreement to be less than
ninety percent (90%) of the total amount of such Construction Budget (as
increased) (it being understood and agreed that, to satisfy the condition of
this clause (i), the Construction Agent may deliver a new Appraisal for such
Property to the Agent from an appraiser selected by the Agent); (ii) unless the
title insurance policies referenced in Section 5.3(g) are also modified or
endorsed, if necessary, to provide for insurance in an amount that satisfies the
requirements of Section 5.4(f) of this Agreement and (iii) unless, after giving
effect to any such modification, the Construction Budget remains in compliance
with the requirements of Section 5.4(d) of this Agreement. The Lessee

                                       16
<PAGE>   22

may without consent decrease the Construction Budget for any Property on or
after the Completion Date for such Property.

        5.7.    RESTRICTIONS ON LIENS.

        On each Property Closing Date, the Construction Agent shall cause each
Property acquired by the Lessor on such date to be free and clear of all Liens
except those referenced in Sections 6.2(r)(i) and 6.2(r)(ii). On each date a
Property is either sold to a third party in accordance with the terms of the
Operative Agreements or, pursuant to Section 22.1(a) of the Lease Agreement,
retained by the Lessor, the Lessee shall cause such Property to be free and
clear of all Liens (other than Lessor Liens and such other Liens that are
expressly set forth as title exceptions on the title commitment issued under
Section 5.3(g) with respect to such Property, to the extent such title
commitment has been approved by the Agent, and Permitted Liens of the type
described in clauses (b), (c), (g) and (i) of the definition of such term).

        5.8.    JOINDER AGREEMENT REQUIREMENTS.

        Each Subsidiary of each Credit Party that shall become a guarantor under
the Lessee Credit Agreement after the Initial Closing Date shall satisfy the
following conditions within thirty (30) days after the joinder of such
Subsidiary as a guarantor under to the Lessee Credit Agreement:

                (a) such Subsidiary shall execute and deliver to the Agent a
        Joinder Agreement in the form attached hereto as Exhibit J;

                (b) such Subsidiary shall have delivered to the Agent (x) an
        Officer's Certificate of such Subsidiary in the form attached hereto as
        Exhibit C, (y) a certificate of the Secretary or an Assistant Secretary
        of such Subsidiary in the form attached hereto as Exhibit D and (z) good
        standing certificates (or local equivalent) from the respective states
        where such Subsidiary is incorporated or organized and where the
        principal place of business of such Subsidiary is located as to its good
        standing in each such state; and

                (c) such Subsidiary shall have delivered to the Agent an opinion
        of counsel (acceptable to the Agent) in the form attached hereto as
        Exhibit H.

        5.9.    PAYMENTS.

        All payments of principal, interest and Holder Yield, all returns of
Holder Advances and all payments of other amounts to be made by the Construction
Agent or the Lessee under this Agreement or any other Operative Agreements
(excluding Excepted Payments which shall be paid directly to the party to whom
such payments are owed) shall be made to the Agent at the office designated by
the Agent from time to time in Dollars and in immediately available funds,
without setoff, deduction, or counterclaim. Subject to the definition of
"Interest Period" in Appendix A attached hereto, whenever any payment under this
Agreement or any other Operative Agreements shall be stated to be due on a day
that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time in such

                                       17
<PAGE>   23

case shall be included in the computation of interest, Holder Yield and fees
payable pursuant to the Operative Agreements, as applicable and as the case may
be.

        5.10.   UNILATERAL RIGHT TO INCREASE THE HOLDER COMMITMENTS AND THE
                LENDER COMMITMENTS.

        Notwithstanding any other provision of any Operative Agreement or any
objection by any Person (including without limitation any objection by any
Credit Party), (a) after an increase in the Holder Commitments has been approved
pursuant to Section 12.4, each Holder, in its sole discretion, may unilaterally
elect to increase its Holder Commitment in order to fund amounts due and owing
pursuant to Sections 7.1(a), 7.1(b) and/or 11.8 and/or the last paragraph of
Section 2.1 of the Agency Agreement and (b) after an increase in the Lender
Commitments has been approved pursuant to Section 12.4, each Lender, in its sole
discretion, may unilaterally elect to increase its Lender Commitment in order to
fund amounts due and owing pursuant to Sections 7.1(a), 7.1(b) and/or 11.8
and/or the last paragraph of Section 2.1 of the Agency Agreement.

        5.11.   LIMITATION ON ACQUISITION OF PROPERTIES.

        Notwithstanding any provision to the contrary in any Operative
Agreement, no Property may be acquired, and no Acquisition Advance therefor
shall be made by any Lender or Holder, if (a) as of the proposed Property
Closing Date, the aggregate Property Cost of all Properties in the Property Pool
would be greater than or equal to twenty percent (20%) of the aggregate Property
Cost for all Properties for which the Completion Date has occurred or (b) (i)
such Property is proposed to be acquired during the last six months of the
Acquisition Period and (ii) the Construction Budget (including Acquisition
Advances) for such Property, when added to the Construction Budgets (including
Acquisition Advances) for all other Properties acquired during the last six
months of the Acquisition Period, would exceed $65,000,000.

                   SECTION 6. REPRESENTATIONS AND WARRANTIES.

        6.1.    REPRESENTATIONS AND WARRANTIES OF THE BORROWER.

        Effective as of the Initial Closing Date and the date of each Advance,
the Trust Company in its individual capacity and as the Borrower, as indicated,
represents and warrants to each of the other parties hereto as follows,
provided, that the representations in the following paragraphs (h), (j) and (k)
are made solely in its capacity as the Borrower:

                (a) It is a national banking association and is duly organized
        and validly existing and in good standing under the laws of the United
        States of America and has the power and authority to enter into and
        perform its obligations under the Trust Agreement and (assuming due
        authorization, execution and delivery of the Trust Agreement by the
        Holders) has the corporate and trust power and authority to act as the
        Owner Trustee and to enter into and perform the obligations under each
        of the other Operative Agreements to which the Trust Company or the
        Owner Trustee, as the case may be, is or will be a party and each other
        agreement, instrument and document to be executed and delivered by it on

                                       18
<PAGE>   24

        or before such date in connection with or as contemplated by each such
        Operative Agreement to which the Trust Company or the Owner Trustee, as
        the case may be, is or will be a party;

                (b) The execution, delivery and performance of each Operative
        Agreement to which it is or will be a party, either in its individual
        capacity or (assuming due authorization, execution and delivery of the
        Trust Agreement by the Holders) as the Owner Trustee, as the case may
        be, has been duly authorized by all necessary action on its part and
        neither the execution and delivery thereof, nor the consummation of the
        transactions contemplated thereby, nor compliance by it with any of the
        terms and provisions thereof (i) does or will require any approval or
        consent of any trustee or holders of any of its indebtedness or
        obligations, (ii) does or will contravene any Legal Requirement relating
        to its banking or trust powers, (iii) does or will contravene or result
        in any breach of or constitute any default under, or result in the
        creation of any Lien upon any of its property under, (A) its charter or
        by-laws, or (B) any indenture, mortgage, chattel mortgage, deed of
        trust, conditional sales contract, bank loan or credit agreement or
        other agreement or instrument to which it is a party or by which it or
        its properties may be bound or affected, which contravention, breach,
        default or Lien under clause (B) would materially and adversely affect
        its ability, in its individual capacity or as the Owner Trustee, to
        perform its obligations under the Operative Agreements to which it is a
        party or (iv) does or will require any Governmental Action by any
        Governmental Authority regulating its banking or trust powers;

                (c) The Trust Agreement and, assuming the Trust Agreement is the
        legal, valid and binding obligation of the Holders, each other Operative
        Agreement to which the Trust Company or the Owner Trustee, as the case
        may be, is or will be a party have been, or on or before such Closing
        Date will be, duly executed and delivered by the Trust Company or the
        Owner Trustee, as the case may be, and the Trust Agreement and each such
        other Operative Agreement to which the Trust Company or the Owner
        Trustee, as the case may be, is a party constitutes, or upon execution
        and delivery will constitute, a legal, valid and binding obligation
        enforceable against the Trust Company or the Owner Trustee, as the case
        may be, in accordance with the terms thereof;

                (d) There is no action or proceeding pending or, to its
        knowledge, threatened to which it is or will be a party, either in its
        individual capacity or as the Owner Trustee, before any Governmental
        Authority that, if adversely determined, would materially and adversely
        affect its ability, in its individual capacity or as the Owner Trustee,
        to perform its obligations under the Operative Agreements to which it is
        a party or would question the validity or enforceability of any of the
        Operative Agreements to which it is or will become a party;

                (e) It, either in its individual capacity or as the Owner
        Trustee, has not assigned or transferred any of its right, title or
        interest in or under the Lease, the Agency Agreement or its interest in
        any Property or any portion thereof, except in accordance with the
        Operative Agreements;

                                       19
<PAGE>   25

                (f) No Default or Event of Default under the Operative
        Agreements attributable to it has occurred and is continuing;

                (g) Except as otherwise contemplated in the Operative
        Agreements, the proceeds of the Loans and Holder Advances shall not be
        applied by the Owner Trustee, either in its individual capacity or as
        the Owner Trustee, for any purpose other than the purchase and/or lease
        of the Properties, the acquisition, installation and testing of the
        Equipment, the construction of Improvements and the payment of amounts
        referenced in Sections 5.1(b), 7.1(a), 7.1(b) and 11.8 of this
        Agreement;

                (h) Neither the Owner Trustee nor any Person authorized by the
        Owner Trustee to act on its behalf has offered or sold any interest in
        the Trust Estate or the Notes, or in any similar security relating to a
        Property, or in any security the offering of which for the purposes of
        the Securities Act would be deemed to be part of the same offering as
        the offering of the aforementioned securities to, or solicited any offer
        to acquire any of the same from, any Person other than, in the case of
        the Notes, the Agent, and neither the Owner Trustee nor any Person
        authorized by the Owner Trustee to act on its behalf will take any
        action which would subject, as a direct result of such action alone, the
        issuance or sale of any interest in the Trust Estate or the Notes to the
        provisions of Section 5 of the Securities Act or require the
        qualification of any Operative Agreement under the Trust Indenture Act
        of 1939, as amended;

                (i) The Owner Trustee's principal place of business, chief
        executive office and office where the documents, accounts and records
        relating to the transactions contemplated by this Agreement and each
        other Operative Agreement are kept are located at 79 South Main Street,
        Salt Lake City, Utah 84111;

                (j) The Owner Trustee is not engaged principally in, and does
        not have as one of its important activities, the business of extending
        credit for the purpose of purchasing or carrying any margin stock
        (within the meaning of Regulation U of the Board of Governors of the
        Federal Reserve System of the United States), and no part of the
        proceeds of the Loans or the Holder Advances will be used by it to
        purchase or carry any margin stock or to extend credit to others for the
        purpose of purchasing or carrying any such margin stock or for any
        purpose that violates, or is inconsistent with, the provisions of
        Regulations T, U, or X of the Board of Governors of the Federal Reserve
        System of the United States;

                (k) The Owner Trustee is not an "investment company" or a
        company controlled by an "investment company" within the meaning of the
        Investment Company Act;

                (l) Each Property is free and clear of all Lessor Liens
        attributable to the Owner Trustee, either in its individual capacity or
        as the Owner Trustee; and

                (m) The Owner Trustee, in its trust capacity, is not a party to
        any documents, instruments or agreements other than the Operative
        Agreements executed by the Owner

                                       20
<PAGE>   26

        Trustee,in its trust capacity, and the Trust engages in no business or
        activities other than those expressly provided for in the Operative
        Agreements.

        6.2.    REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES.

        Effective as of the Initial Closing Date, the date of each Advance and
each release of funds from the Escrow Account, and the date each Domestic
Subsidiary delivers a Joinder Agreement, each Credit Party represents and
warrants to each of the other parties hereto that:

                (a) The Incorporated Representations and Warranties are true and
        correct in all material respects (unless such relate solely to an
        earlier point in time) and the Lessee has delivered to the Agent the
        financial statements and other reports referred to in Section 7.8 of the
        Lessee Credit Agreement;

                (b)     (i) Each of the Construction Agent and the Lessee is
                a corporation duly organized and validly existing and in good
                standing under the laws of the State of Washington and each
                Guarantor is a corporation, limited partnership or limited
                liability company, as the case may be, duly organized, validly
                existing and in good standing under the laws of the state of
                formation and each Credit Party has the power and authority to
                enter into and perform its obligations under the Operative
                Agreements to which it is a party and has the corporate or
                partnership power and authority to act as the Construction
                Agent, the Lessee or a Guarantor, as the case may be, and to
                enter into and perform the obligations under each of the other
                Operative Agreements to which it is a party or will be a party
                and each other agreement, instrument and document to be executed
                and delivered by it on or before such date in connection with or
                as contemplated by each such Operative Agreement to which it is
                a party or will be a party;

                        (ii) The execution and delivery by each Credit Party of
                this Agreement and the other applicable Operative Agreements as
                of such date and the performance by each Credit Party of its
                respective obligations under this Agreement and the other
                applicable Operative Agreements are within the corporate,
                partnership or limited liability company (as the case may be)
                powers of each Credit Party, have been duly authorized by all
                necessary corporate, partnership or limited liability company
                (as the case may be) action on the part of each Credit Party
                (including without limitation any necessary shareholder action),
                have been duly executed and delivered, have received all
                necessary governmental approval, and do not and will not (A)
                violate any Legal Requirement which is binding on any Credit
                Party or any of its Subsidiaries, (B) contravene or conflict
                with, or result in a breach of, any provision of the Articles of
                Incorporation, By-Laws, Partnership Agreement or other
                organizational documents of any Credit Party or any of its
                Subsidiaries or of any agreement, indenture, instrument or other
                document which is binding on any Credit Party or any of its
                Subsidiaries or (C) result in, or require, the creation or
                imposition of any Lien (other than pursuant to the terms of the
                Operative Agreements) on any asset of any Credit Party or any of
                its Subsidiaries;

                                       21
<PAGE>   27

                (c) This Agreement and the other applicable Operative
        Agreements, executed prior to and as of such date by any Credit Party,
        constitute the legal, valid and binding obligation of such Credit Party,
        as applicable, enforceable against such Credit Party, as applicable, in
        accordance with their terms. Each Credit Party has executed the various
        Operative Agreements required to be executed by such Credit Party as of
        such date;

                (d) Other than as set forth in Exhibit K attached hereto, there
        is no material action, suit or proceeding pending or, to its knowledge,
        threatened against any Credit Party in any court or before any
        Governmental Authority (nor has any order, judgment or decree been
        issued or proposed to be issued by any Governmental Authority) that (i)
        seeks to set aside, restrain, enjoin or prevent the full performance of
        any Operative Agreement or any transaction contemplated thereby, (ii)
        questions the validity or enforceability of any Operative Agreement to
        which any Credit Party is a party or the overall transaction described
        in the Operative Agreements to which any Credit Party is a party or
        (iii) has or could reasonably be expected to have a Material Adverse
        Effect;

                (e) No Governmental Action by any Governmental Authority or
        other authorization, registration, consent, approval, waiver, notice or
        other action by, to or of any other Person pursuant to any Legal
        Requirement, contract, indenture, instrument or agreement or for any
        other reason is required to authorize or is required in connection with
        (i) the execution, delivery or performance of any Operative Agreement by
        the Credit Parties that are parties thereto, (ii) the legality,
        validity, binding effect or enforceability of any Operative Agreement
        with respect to the Credit Parties that are parties thereto, (iii) the
        acquisition, ownership, construction, completion, occupancy, operation,
        leasing or subleasing of any Property by the Lessee, the Construction
        Agent or the Lessor or (iv) the Lessee's, the Construction Agent's or
        the Lessor's request, receipt or use of any Advance, in each case,
        except those which have been obtained and are in full force and effect
        or will be obtained in the ordinary course of development and
        construction of the Properties;

                (f) Upon the execution and delivery of each Lease Supplement to
        the Lease, (i) the Lessee will have unconditionally accepted the
        Property subject to the Lease Supplement and will have a valid and
        subsisting leasehold interest in such Property, subject only to the
        Permitted Liens, and (ii) no offset will exist with respect to any Rent
        or other sums payable under the Lease;

                (g) Except as otherwise contemplated by the Operative
        Agreements, neither the Construction Agent nor the Lessee shall use the
        proceeds of any Holder Advance or Loan with respect to any Property for
        any purpose other than the purchase and/or lease of such Property, the
        acquisition, installation and testing of the Equipment, the construction
        of Improvements in accordance with the Plans and Specifications for such
        Property and the payment of amounts referenced in Sections 7.1(a),
        7.1(b) and 11.8 of this Agreement, in each case which accrue prior to
        the Rent Commencement Date with respect to such Property, and for the
        purposes described in, and subject to the conditions of, Section 5.1(b);

                                       22
<PAGE>   28

                (h) All information heretofore or contemporaneously herewith
        furnished by each Credit Party or its Subsidiaries to the Agent, the
        Owner Trustee, any Lender or any Holder for purposes of or in connection
        with this Agreement and the transactions contemplated hereby is, and all
        information hereafter furnished by or on behalf of each Credit Party or
        its Subsidiaries to the Agent, the Owner Trustee, any Lender or any
        Holder pursuant hereto or in connection herewith will be, true and
        accurate in every material respect on the date as of which such
        information is dated or certified, and such information, taken as a
        whole, does not and will not omit to state any material fact necessary
        to make such information, taken as a whole, not misleading;

                (i) The principal place of business, chief executive office and
        office of the Construction Agent and the Lessee where the documents,
        accounts and records relating to the transactions contemplated by this
        Agreement and each other Operative Agreement are kept are located at
        1155 Valley Street, Suite 400, Seattle, Washington, 98109 and the states
        of formation and the chief executive offices of each other Credit Party
        are located at the places set forth in Exhibit L, or, in each case,
        subject to the requirements of Section 12.11, such other address or
        addresses as may be identified to the Agent pursuant to Section 8.3;

                (j) The representations and warranties of each Credit Party set
        forth in any of the Operative Agreements are true and correct in all
        material respects on and as of each such date as if made on and as of
        such date, except to the extent that any such representation and
        warranty expressly and solely relates to an earlier date, in which case
        such representation and warranty shall be correct as of such earlier
        date. Each Credit Party is in compliance in all material respects with
        its obligations under the Operative Agreements and there exists no
        Default or Event of Default under any of the Operative Agreements which
        is continuing and which has not been cured within any cure period
        expressly granted under the terms of the applicable Operative Agreement
        or otherwise waived in accordance with the applicable Operative
        Agreement. No Default or Event of Default will occur under any of the
        Operative Agreements as a result of, or after giving effect to, the
        Advance requested by the Requisition on the date of each Advance;

                (k) As of each Property Closing Date and the date of each
        subsequent Advance only, each Property then being financed consists of
        (i) unimproved Land or (ii) Land and existing Improvements thereon which
        Improvements are either suitable for occupancy at the time of
        acquisition or ground leasing or will be renovated and/or modified in
        accordance with the terms of this Agreement. Each Property then being
        financed is located at the location set forth on the applicable
        Requisition, each of which is in one of the Approved States;

                (l) As of each Property Closing Date and the date of each
        subsequent Advance only, the Lessor has good and marketable fee simple
        title to each Property, or, if any Property is the subject of a Ground
        Lease, the Lessor will have a valid ground leasehold interest
        enforceable against the ground lessor of such Property in accordance
        with the terms of such Ground Lease, subject only to (i) such Liens
        referenced in Sections 6.2(r)(i) and 6.2(r)(ii) on the applicable
        Property Closing Date and (ii) subject to

                                       23
<PAGE>   29

        Section 5.7, Permitted Liens after the applicable Property Closing Date;

                (m) As of each Property Closing Date and the date of each
        subsequent Advance only, no portion of any Property is located in an
        area identified as a special flood hazard area by the Federal Emergency
        Management Agency or other applicable agency, or if any such Property is
        located in an area identified as a special flood hazard area by the
        Federal Emergency Management Agency or other applicable agency, then
        flood insurance has been obtained for such Property in accordance with
        Section 14.2(b) of the Lease and in accordance with the National Flood
        Insurance Act of 1968, as amended;

                (n) As of each Property Closing Date and the date of each
        subsequent Advance only, each Property complies with all Insurance
        Requirements and all standards of Lessee with respect to similar
        properties owned by Lessee;

                (o) As of each Property Closing Date and the date of each
        subsequent Advance only, each Property complies with all Legal
        Requirements as of such date (including without limitation all zoning
        and land use laws and Environmental Laws), except to the extent that
        failure to comply therewith, individually or in the aggregate, shall not
        have and could not reasonably be expected to have a Material Adverse
        Effect;

                (p) As of each Property Closing Date and the date of each
        subsequent Advance only, all utility services and facilities necessary
        for the construction and operation of the Improvements and the
        installation and operation of the Equipment regarding each Property
        (including without limitation gas, electrical, water and sewage services
        and facilities) are available at the applicable Land or will be
        constructed prior to the Completion Date for such Property;

                (q) As of each Property Closing Date and the date of each
        subsequent Advance only, acquisition, installation and testing of the
        Equipment (if any) and construction of the Improvements (if any) to such
        date shall have been performed in a good and workmanlike manner,
        substantially in accordance with the applicable Plans and
        Specifications;

                (r)     (i) The Security Documents create, as security for
                the Obligations (as such term is defined in the Security
                Agreement), valid and enforceable security interests in, and
                Liens on, all of the Collateral, in favor of the Agent, for the
                ratable benefit of the Secured Parties, as their respective
                interests appear in the Operative Agreements, and such security
                interests and Liens are subject to no other Liens other than
                Liens that are expressly set forth as title exceptions on the
                title commitment issued under Section 5.3(g) with respect to the
                applicable Property, to the extent such title commitment has
                been approved by the Agent and, with respect to dates after the
                Property Closing Date for such Property, Permitted Liens with
                respect to such Property. With respect to each Property, upon
                recordation of the Mortgage Instrument encumbering such Property
                in the real estate recording office in the applicable Approved
                State identified by the

                                       24
<PAGE>   30

                Construction Agent or the Lessee, the Lien created by the
                Mortgage Instrument in the real property described therein shall
                be a perfected first priority mortgage Lien on such real
                property (or, in the case of a Ground Lease, on the leasehold
                estate under such Ground Lease) in favor of the Agent, for the
                ratable benefit of the Secured Parties, as their respective
                interests appear in the Operative Agreements. To the extent that
                the security interests in the portion of the Collateral
                comprised of personal property can be perfected by filing in the
                filing offices in the applicable Approved States or elsewhere
                identified by the Construction Agent or the Lessee, upon filing
                of the Lender Financing Statements in such filing offices, the
                security interests created by the Security Agreement shall be
                perfected first priority security interests in such personal
                property in favor of the Agent, for the ratable benefit of the
                Secured Parties, as their respective interests appear in the
                Operative Agreements;

                        (ii) The Lease Agreement creates, as security for the
                obligations of the Lessee under the Lease Agreement, valid and
                enforceable security interests in, and Liens on, each Property
                leased thereunder, in favor of the Lessor, and such security
                interests and Liens are subject to no other Liens other than
                Liens that are expressly set forth as title exceptions on the
                title commitment issued under Section 5.3(g) with respect to the
                applicable Property, to the extent such title commitment has
                been approved by the Agent. Upon recordation of the memorandum
                of the Lease Agreement and the memorandum of a Ground Lease (or,
                in either case, a short form lease) in the real estate recording
                office in the applicable Approved State identified by the
                Construction Agent or the Lessee, the Lien created by the Lease
                Agreement in the real property described therein shall be a
                perfected first priority mortgage Lien on such real property
                (or, in the case of a Ground Lease, the leasehold estate under
                such Ground Lease) in favor of the Agent, for the ratable
                benefit of the Secured Parties, as their respective interests
                appear in the Operative Agreements. To the extent that the
                security interests in the portion of any Property comprised of
                personal property can be perfected by the filing in the filing
                offices in the applicable Approved State or elsewhere identified
                by the Construction Agent or the Lessee upon filing of the
                Lessor Financing Statements in such filing offices, a security
                interest created by the Lease Agreement shall be perfected first
                priority security interests in such personal property in favor
                of the Lessor, which rights pursuant to the Lessor Financing
                Statements are assigned to the Agent, for the ratable benefit of
                the Secured Parties, as their respective interests appear in the
                Operative Agreements;

                (s) The Plans and Specifications for each Property will be
        prepared prior to the commencement of construction in accordance with
        all applicable Legal Requirements (including without limitation all
        applicable Environmental Laws and building, planning, zoning and fire
        codes), except to the extent the failure to comply therewith,
        individually or in the aggregate, shall not have and could not
        reasonably be expected to have a Material Adverse Effect. Upon
        completion of the Improvements for each Property in accordance with the
        applicable Plans and Specifications, such Improvements will be within
        any building restriction lines and will not encroach in any manner onto
        any

                                       25
<PAGE>   31

        adjoining land (except as permitted by express written easements, which
        have been approved by the Agent); and

                (t) As of the Rent Commencement Date only, each Property shall
        be improved in a good and workmanlike manner (and, with respect to a
        Property constructed by the Construction Agent, substantially in
        accordance with the applicable Plans and Specifications) and shall be
        operational.

                              SECTION 6B. GUARANTY

        6B.1.   GUARANTY OF PAYMENT AND PERFORMANCE.

        Subject to Section 6B.7, each Guarantor hereby, jointly and severally,
unconditionally guarantees to each Financing Party the prompt payment and
performance of the Company Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise) or when such
is otherwise to be performed; provided, notwithstanding the foregoing, the
obligations of the Guarantors under this Section 6B shall not constitute a
direct guaranty of the indebtedness of the Lessor evidenced by the Notes but
rather a guaranty of the Company Obligations arising under the Operative
Agreements. This Section 6B is a guaranty of payment and performance and not of
collection and is a continuing guaranty and shall apply to all Company
Obligations whenever arising. All rights granted to the Financing Parties under
this Section 6B shall be subject to the provisions of Section 8.2(h) and 8.6.

        6B.2.   OBLIGATIONS UNCONDITIONAL.

        Each Guarantor agrees that the obligations of the Guarantors hereunder
are absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Operative Agreements, or
any other agreement or instrument referred to therein, or any substitution,
release or exchange of any other guarantee of or security for any of the Company
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety, guarantor or
co-obligor, it being the intent of this Section 6B.2 that the obligations of the
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that this Section 6B may be enforced by the
Financing Parties without the necessity at any time of resorting to or
exhausting any other security or collateral and without the necessity at any
time of having recourse to the Notes, the Certificates or any other of the
Operative Agreements or any collateral, if any, hereafter securing the Company
Obligations or otherwise and each Guarantor hereby waives the right to require
the Financing Parties to proceed against the Construction Agent, the Lessee or
any other Person (including without limitation a co-guarantor) or to require the
Financing Parties to pursue any other remedy or enforce any other right. Each
Guarantor further agrees that it hereby waives any and all right of subrogation,
indemnity, reimbursement or contribution against the Lessee and the Construction
Agent or any other Guarantor of the Company Obligations for amounts paid under
this Section 6B until such time as the Loans, Holder Advances, accrued but
unpaid interest, accrued but unpaid Holder Yield and all other amounts owing
under the Operative Agreements have been paid in full. Without limiting the

                                       26
<PAGE>   32

generality of the waiver provisions of this Section 6B, each Guarantor hereby
waives any rights to require the Financing Parties to proceed against the
Construction Agent, the Lessee or any co-guarantor or to require Lessor to
pursue any other remedy or enforce any other right. Each Guarantor further
agrees that nothing contained herein shall prevent the Financing Parties from
suing on any Operative Agreement or foreclosing any security interest in or Lien
on any collateral, if any, securing the Company Obligations or from exercising
any other rights available to it under any Operative Agreement, or any other
instrument of security, if any, and the exercise of any of the aforesaid rights
and the completion of any foreclosure proceedings shall not constitute a
discharge of any Guarantor's obligations hereunder; it being the purpose and
intent of each Guarantor that its obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances; provided that any
amounts due under this Section 6B which are paid to or for the benefit of any
Financing Party shall reduce the Company Obligations by a corresponding amount
(unless required to be rescinded at a later date). Neither any Guarantor's
obligations under this Section 6B nor any remedy for the enforcement thereof
shall be impaired, modified, changed or released in any manner whatsoever by an
impairment, modification, change, release or limitation of the liability of the
Construction Agent or the Lessee or by reason of the bankruptcy or insolvency of
the Construction Agent or the Lessee. Each Guarantor waives any and all notice
of the creation, renewal, extension or accrual of any of the Company Obligations
and notice of or proof of reliance by any Financing Party upon this Section 6B
or acceptance of this Section 6B. The Company Obligations shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Section 6B. All dealings between the
Construction Agent, the Lessee and any of the Guarantors, on the one hand, and
the Financing Parties, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Section 6B.

        6B.3.   MODIFICATIONS.

        Each Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Company Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) no Financing Party shall have
any obligation to protect, perfect, secure or insure any such security
interests, liens or encumbrances now or hereafter held, if any, for the Company
Obligations or the properties subject thereto; (c) the time or place of payment
of the Company Obligations may be changed or extended, in whole or in part, to a
time certain or otherwise, and may be renewed or accelerated, in whole or in
part; (d) the Construction Agent, the Lessee and any other party liable for
payment under the Operative Agreements may be granted indulgences generally; (e)
any of the provisions of the Notes, the Certificates or any of the other
Operative Agreements may be modified, amended or waived; (f) any party
(including any co-guarantor) liable for the payment thereof may be granted
indulgences or be released; and (g) any deposit balance for the credit of the
Construction Agent, the Lessee or any other party liable for the payment of the
Company Obligations or liable upon any security therefor may be released, in
whole or in part, at, before or after the stated, extended or accelerated
maturity of the Company Obligations, all without notice to or further assent by
such Guarantor, which shall remain bound thereon, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration, modification,
indulgence or release.

                                       27
<PAGE>   33

        6B.4.   WAIVER OF RIGHTS.

        Each Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this Section 6B by any Financing
Party and of all extensions of credit or other Advances to the Construction
Agent and the Lessee by the Lenders pursuant to the terms of the Operative
Agreements; (b) presentment and, other than as required under SECTION 17.1 OF
THE LEASE, demand for payment or performance of any of the Company Obligations;
(c) protest and notice of dishonor or, other than as required under SECTION 17.1
OF THE LEASE, of default with respect to the Company Obligations or with respect
to any security therefor; (d) notice of any Financing Party obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, lien or
encumbrance, if any, hereafter securing the Company Obligations, or any
Financing Party's subordinating, compromising, discharging or releasing such
security interests, liens or encumbrances, if any; and (e) all other notices to
which such Guarantor might otherwise be entitled, other than those required
under SECTION 17.1 OF THE LEASE,. Notwithstanding anything to the contrary
herein, each Guarantor's payments hereunder shall be due five (5) Business Days
after written demand by the Agent for such payment (unless the Company
Obligations are automatically accelerated pursuant to the applicable provisions
of the Operative Agreements in which case the Guarantors' payments shall be
automatically due).

        6B.5.   REINSTATEMENT.

        The obligations of the Guarantors under this Section 6B shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Company Obligations is rescinded or
must be otherwise restored by any holder of any of the Company Obligations,
whether as a result of any proceedings in bankruptcy or reorganization or
otherwise, and each Guarantor agrees that it will indemnify each Financing Party
on demand for all reasonable costs and expenses (including, without limitation,
reasonable fees of counsel) incurred by any Financing Party in connection with
such rescission or restoration, including without limitation any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.

        6B.6.   REMEDIES.

        The Guarantors agree that, as between the Guarantors, on the one hand,
and each Financing Party, on the other hand, the Company Obligations may be
declared to be forthwith due and payable as provided in the applicable
provisions of the Operative Agreements (and shall be deemed to have become
automatically due and payable in the circumstances provided therein)
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing such Company Obligations from becoming automatically
due and payable) as against any other Person and that, in the event of such
declaration (or such Company Obligations being deemed to have become
automatically due and payable), such Company Obligations (whether or not due and
payable by any other Person) shall forthwith become due and payable by the
Guarantors in accordance with the applicable provisions of the Operative
Agreements.

                                       28
<PAGE>   34

        6B.7.   LIMITATION OF GUARANTY.

                (a) Notwithstanding any provision to the contrary contained
        herein or in any of the other Operative Agreements, and without
        affecting the obligations of all other Guarantors, the recourse of the
        Financing Parties against Shurgard Institutional Fund LP II (the
        "Specified Guarantor") as a Guarantor under this Agreement or any other
        Operative Agreement shall be limited to the assets of the Specified
        Guarantor. Neither the general partner(s) of the Specified Guarantor,
        nor the general partner(s) of such general partners, shall be liable for
        the Specified Guarantor's obligations under this Agreement or any other
        Operative Agreement. Without limiting the foregoing, neither Shurgard
        Partner LP II nor any of its general partner(s) shall be liable for the
        Specified Guarantor's obligations under this Agreement or any other
        Operative Agreement.

                (b) Notwithstanding any provision to the contrary contained
        herein or in any of the other Operative Agreements, to the extent the
        obligations of any Guarantor shall be adjudicated to be invalid or
        unenforceable for any reason (including without limitation because of
        any applicable state or federal law relating to fraudulent conveyances
        or transfers) then the obligations of such Guarantor hereunder shall be
        limited to the maximum amount that is permissible under applicable law
        (whether federal or state and including without limitation the
        Bankruptcy Code).

                (c) Subject to Section 6B.5, upon the satisfaction of the
        Company Obligations in full, regardless of the source of payment, the
        Guarantors' obligations hereunder shall be deemed satisfied, discharged
        and terminated, other than indemnifications set forth herein and in the
        other Operative Agreements that expressly survive.

        6B.8.   PAYMENT OF AMOUNTS TO THE AGENT.

        Each Financing Party hereby instructs each Guarantor, and each Guarantor
hereby acknowledges and agrees, that until such time as the Loans and the Holder
Advances are paid in full and the Liens evidenced by the Security Agreement and
the Mortgage Instruments have been released any and all Rent (excluding Excepted
Payments which shall be payable to each Holder or other Person as appropriate)
and any and all other amounts of any kind or type under any of the Operative
Agreements due and owing or payable to any Person shall instead be paid directly
to the Agent (excluding Excepted Payments which shall be payable to each Holder
or other Person as appropriate) or as the Agent may direct from time to time for
allocation and distribution in accordance with the procedures set forth in
Section 8.7 hereof.

        6B.9.   RELEASE OF GUARANTORS.

        Each Financing Party hereby agrees that (a) the Agent shall be permitted
to release any Guarantor from its guaranty obligations under this Section 6B
without the consent of any other Financing Party if the release is granted in
connection with a disposition by the applicable Credit Party of all the shares
of stock or partnership or other equity interest in such Guarantor and such
disposition is permitted pursuant to the applicable provisions of the Operative
Agreements and the Lessee Credit Agreement and (b) the Agent shall be permitted
to release any Guarantor from its

                                       29
<PAGE>   35

guaranty obligations under this Section 6B.9 without the consent of any other
Financing Party if the release is requested by the Lessee in connection with a
dissolution of such Guarantor, subject to the Lessee providing to the Agent
written representations to the effect that such Guarantor has no business
operations and no assets.

                     SECTION 7. PAYMENT OF CERTAIN EXPENSES.

        7.1.    TRANSACTION EXPENSES.

                (a) The Lessor agrees on the Initial Closing Date, to pay, or
        cause to be paid, all Transaction Expenses arising from the Initial
        Closing Date, including without limitation all reasonable fees, expenses
        and disbursements of the various legal counsels for the Lessor and the
        Agent in connection with the transactions contemplated by the Operative
        Agreements and incurred in connection with such Initial Closing Date,
        the initial fees and expenses of the Owner Trustee due and payable on
        such Initial Closing Date, all fees, taxes and expenses for the
        recording, registration and filing of documents and all other reasonable
        fees, expenses and disbursements incurred in connection with such
        Initial Closing Date; provided, however, the Lessor shall pay such
        amounts described in this Section 7.1(a) only if funds are made
        available by the Lenders and the Holders in an amount sufficient to
        allow such payment and without regard to whether such amounts are
        referenced in any Requisition. On the Initial Closing Date after
        satisfaction of the conditions precedent for such date (excluding the
        requirement that a Requisition be delivered), the Holders shall make
        Holder Advances and the Lenders shall make Loans to the Lessor to pay
        for the Transaction Expenses, fees, expenses and other disbursements
        referenced in this Section 7.1(a).

                (b) Assuming no Default or Event of Default shall have occurred
        and be continuing, the Lessor agrees (i) on the applicable Property
        Closing Date, (ii) on the date of any Construction Advance for such
        Property, (iii) on the Completion Date for such Property and (iv) on the
        date of any Post-Completion Construction Advance for such Property, to
        pay, or cause to be paid, to the extent related to such Property, all
        Transaction Expenses including without limitation all reasonable fees,
        expenses and disbursements of the various legal counsels for the Lessor
        and the Agent in connection with the transactions contemplated by the
        Operative Agreements and billed in connection with such Advance or such
        Completion Date, all amounts described in Section 7.1(a) of this
        Agreement which have not been previously paid, all fees, expenses and
        disbursements incurred with respect to the various items referenced in
        Sections 5.3, 5.4 and/or 5.5 (including without limitation any premiums
        for title insurance policies and charges for any updates to such
        policies) and all other reasonable fees, expenses and disbursements in
        connection with such Advance or such Completion Date including without
        limitation all expenses relating to and all fees, taxes and expenses for
        the recording, registration and filing of documents and during the
        Construction Period, all fees, expenses and costs referenced in Sections
        7.3(a), 7.3(b), 7.3(d) and 7.4; provided, however, the Lessor shall pay
        such amounts described in this Section 7.1(b) only if funds are made
        available by the Lenders and the Holders in an amount sufficient to
        allow such

                                       30
<PAGE>   36

        payment and without regard to whether such amounts are referenced in any
        Requisition. On each Property Closing Date, on the date of any
        Construction Advance, on any Completion Date, and on the date of any
        Post-Completion Construction Advance, after satisfaction of the
        conditions precedent for such date (excluding the requirement that a
        Requisition be delivered), the Holders shall make a Holder Advance and
        the Lenders shall make Loans to the Lessor to pay for the Transaction
        Expenses, fees, expenses and other disbursements referenced in this
        Section 7.1(b).

        7.2.    [INTENTIONALLY OMITTED].

        7.3.    CERTAIN FEES AND EXPENSES.

        The Lessee agrees to pay or cause to be paid (a) the initial and annual
Owner Trustee's fee and all reasonable out-of-pocket expenses of the Owner
Trustee and any co-trustees (including without limitation reasonable counsel
fees and expenses) or any successor owner trustee and/or co-trustee, for acting
as the owner trustee under the Trust Agreement, (b) all reasonable costs and
out-of-pocket expenses incurred by the Agent, the Lenders, the Holders or the
Lessor in entering into any Lease Supplement and any future amendments,
modifications, supplements, restatements and/or replacements with respect to any
of the Operative Agreements, whether or not such Lease Supplement, amendments,
modifications, supplements, restatements and/or replacements are ultimately
entered into, or giving or withholding of waivers of consents hereto or thereto,
which have been requested by any Credit Party, the Agent, the Lenders, the
Holders or the Lessor, (c) all reasonable costs and out-of-pocket expenses
incurred by the Credit Parties, the Agent, the Lenders, the Holders or the
Lessor in connection with any exercise of remedies under any Operative Agreement
or any purchase of any Property by the Construction Agent, the Lessee or any
third party and (d) all reasonable costs and out-of-pocket expenses incurred by
the Agent, the Lenders, the Holders or the Lessor in connection with any
transfer or conveyance of any Property, whether or not such transfer or
conveyance is ultimately accomplished.

        7.4.    UNUSED FEES.

        The Lessee agrees to pay all Unused Fees to the Lenders and the Holders
as and when the same become due and payable under the terms of Section 2.8 of
the Lessee Credit Agreement.

        7.5.    ADMINISTRATIVE FEE.

        The Lessee shall pay or cause to be paid an administrative fee to the
Agent (for its individual account) on the terms and conditions set forth in the
engagement letter dated November 28, 2000 addressed to Lessee from Bank of
America, N.A. and Banc of America Securities LLC.

                                       31
<PAGE>   37

                   SECTION 8. OTHER COVENANTS AND AGREEMENTS.

        8.1.    COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE.

        The Holders, the Lenders, the Lessor (at the direction of the Majority
Secured Parties) and the Agent shall, at the expense of and to the extent
reasonably requested by the Construction Agent or the Lessee (but without
assuming additional liabilities on account thereof and only to the extent such
is acceptable to the Holders, the Lenders, the Lessor (at the direction of the
Majority Secured Parties) and the Agent in their reasonable discretion),
cooperate with the Construction Agent or the Lessee in connection with the
Construction Agent or the Lessee satisfying its covenant obligations contained
in the Operative Agreements including without limitation at any time and from
time to time, promptly and duly executing and delivering any and all such
further instruments, documents and financing statements (and continuation
statements related thereto).

        8.2.    COVENANTS OF THE OWNER TRUSTEE AND THE HOLDERS.

        Each of the Owner Trustee and the Holders hereby agrees that so long as
this Agreement is in effect:

                (a) Neither the Owner Trustee (in its trust capacity or in its
        individual capacity) nor any Holder will create or permit to exist at
        any time, and each of them will, at its own cost and expense, promptly
        take such action as may be necessary duly to discharge, or to cause to
        be discharged, all Lessor Liens on the Properties attributable to it;
        provided, however, that the Owner Trustee and the Holders shall not be
        required to so discharge any such Lessor Lien while the same is being
        contested in good faith by appropriate proceedings diligently prosecuted
        so long as such proceedings shall not materially and adversely affect
        the rights of the Lessee under the Lease and the other Operative
        Agreements or involve any material danger of impairment of the Liens of
        the Security Documents or of the sale, forfeiture or loss of, and shall
        not interfere with the use or disposition of, any Property or title
        thereto or any interest therein or the payment of Rent;

                (b) Without prejudice to any right under the Trust Agreement of
        the Owner Trustee to resign (subject to the requirement set forth in the
        Trust Agreement that such resignation shall not be effective until a
        successor shall have agreed to accept such appointment), or the Holders'
        rights under the Trust Agreement to remove the institution acting as the
        Owner Trustee (after consent to such removal by the Agent as provided in
        the Trust Agreement), each of the Owner Trustee and the Holders hereby
        agrees with the Lessee and the Agent (i) not to terminate or revoke the
        trust created by the Trust Agreement except as permitted by Article VIII
        of the Trust Agreement, (ii) not to amend, supplement, terminate or
        revoke or otherwise modify any provision of the Trust Agreement in such
        a manner as to adversely affect the rights of any such party without the
        prior written consent of such party and (iii) to comply with all of the
        terms of the Trust Agreement, the nonperformance of which would
        adversely affect such party;

                                       32
<PAGE>   38

                (c) The Owner Trustee or any successor may resign or be removed
        by the Holders as the Owner Trustee, a successor Owner Trustee may be
        appointed and a corporation may become the Owner Trustee under the Trust
        Agreement, only in accordance with the provisions of Article IX of the
        Trust Agreement and, with respect to such appointment, with the consent
        of the Lessee (so long as there shall be no Lease Event of Default that
        shall have occurred and be continuing), which consent shall not be
        unreasonably withheld or delayed;

                (d) The Owner Trustee, in its capacity as the Owner Trustee
        under the Trust Agreement, and not in its individual capacity, shall not
        contract for, create, incur or assume any Indebtedness, or enter into
        any business or other activity or enter into any contracts or
        agreements, other than pursuant to or under the Operative Agreements;

                (e) The Holders will not instruct the Owner Trustee to, and the
        Owner trustee shall not, take any action in violation of the terms of
        any Operative Agreement;

                (f) Neither any Holder nor the Owner Trustee shall (i) commence
        any case, proceeding or other action with respect to the Owner Trustee
        under any existing or future law of any jurisdiction, domestic or
        foreign, relating to bankruptcy, insolvency, reorganization,
        arrangement, winding-up, liquidation, dissolution, composition or other
        relief with respect to it or its debts, or (ii) seek appointment of a
        receiver, trustee, custodian or other similar official with respect to
        the Owner Trustee or for all or any substantial benefit of the creditors
        of the Owner Trustee; and neither any Holder nor the Owner Trustee shall
        take any action in furtherance of, or indicating its consent to,
        approval of, or acquiescence in, any of the acts set forth in this
        paragraph;

                (g) The Owner Trustee shall give prompt notice to the Lessee,
        the Holders and the Agent if the Owner Trustee's principal place of
        business or chief executive office, or the office where the records
        concerning the accounts or contract rights relating to any Property are
        kept, shall cease to be located at 79 South Main Street, Salt Lake City,
        Utah 84111, or if it shall change its name; and

                (h) The Owner Trustee shall take or refrain from taking such
        actions and grant or refrain from granting such approvals with respect
        to the Operative Agreements and/or relating to any Property in each case
        as directed in writing by the Agent (with the Agent to be directed by
        the Majority Lenders until such time as the Loans are paid in full, and
        then by the Majority Holders) or, in connection with Sections 8.5 and
        9.2 hereof, the Lessee; provided, however, that notwithstanding the
        foregoing provisions of this subparagraph (h) the Owner Trustee, the
        Agent, the Lenders and the Holders each acknowledge, covenant and agree
        that neither the Owner Trustee nor the Agent shall act or refrain from
        acting, regarding each Unanimous Vote Matter, until such party has
        received the approval of each Lender and each Holder affected by such
        matter.

                (i) In its capacity as the Borrower under the Credit Agreement,
        the Owner Trustee shall perform all of its obligations under the Credit
        Agreement, cause all of the representations and warranties of the
        Borrower made in the Credit Agreement to be

                                       33
<PAGE>   39

        correct at all pertinent times, and not cause or permit a Default or
        Event of Default to exist under the Credit Agreement (other than, in
        each case, to the extent such performance is prevented by, or such
        Default or Event of Default is caused by, the action or inaction of a
        Credit Party).

        8.3.    CREDIT PARTY COVENANTS, CONSENT AND ACKNOWLEDGMENT.

                (a) Each Credit Party acknowledges and agrees that the Owner
        Trustee, pursuant to the terms and conditions of the Security Agreement
        and the Mortgage Instruments, shall create Liens respecting the various
        personal property, fixtures and real property described therein in favor
        of the Agent. Each Credit Party hereby irrevocably consents to the
        creation, perfection and maintenance of such Liens. Each Credit Party
        shall, to the extent reasonably requested by any of the other parties
        hereto, cooperate with the other parties in connection with their
        covenants herein or in the other Operative Agreements and shall from
        time to time duly execute and deliver any and all such future
        instruments, documents and financing statements (and continuation
        statements related thereto) as any other party hereto may reasonably
        request.

                (b) The Lessor hereby instructs each Credit Party, and each
        Credit Party hereby acknowledges and agrees, that until such time as the
        Loans and the Holder Advances are paid in full and the Liens evidenced
        by the Security Agreement and the Mortgage Instruments have been
        released (i) any and all Rent and any and all other amounts of any kind
        or type under any of the Operative Agreements due and owing or payable
        to any Person (other than Excepted Payments) shall instead be paid
        directly to the Agent (on behalf of the Person entitled thereto) or as
        the Agent may direct from time to time for allocation and distribution
        in accordance with the procedures set forth in Section 8.7 hereof, (ii)
        all rights of the Lessor under the Lease shall be exercised by the Agent
        and (iii) each Credit Party shall cause all notices, certificates,
        financial statements, communications and other information which are
        delivered, or are required to be delivered, to the Lessor, to also be
        delivered at the same time to the Agent.

                (c) No Credit Party shall consent to or permit any amendment,
        supplement or other modification of the terms or provisions of any
        Operative Agreement except in accordance with Section 12.4 of this
        Agreement.

                (d) Each Credit Party hereby covenants and agrees that, except
        for amounts payable as Basic Rent, any and all payment obligations owing
        from time to time under the Operative Agreements by any Person to the
        Agent, any Lender, any Holder or any other Person shall (without further
        action) be deemed to be Supplemental Rent obligations payable by the
        Lessee and guaranteed by the other Credit Parties. Without limitation,
        such obligations of the Credit Parties shall include the Supplemental
        Rent obligations pursuant to Section 3.3 of the Lease, arrangement fees,
        administrative fees, participation fees, commitment fees, Unused Fees,
        prepayment penalties, breakage costs, indemnities, trustee fees and
        transaction expenses incurred by the parties hereto in connection with
        the transactions contemplated by the Operative Agreements.

                                       34
<PAGE>   40

                (e) The Lessee hereby covenants and agrees to cause an Appraisal
        or reappraisal (in form and substance satisfactory to the Agent and from
        an appraiser selected by the Agent) to be issued, at the Lessee's sole
        expense, respecting any Property as requested by the Agent from time to
        time (i) at each and every time as such shall be required to satisfy any
        Legal Requirements imposed on the Agent, the Lessor, the Trust Company,
        any Lender and/or any Holder and (ii) after the occurrence and during
        the continuation of an Event of Default.

                (f) [intentionally omitted].

                (g) At any time the Lessor or the Agent is entitled under the
        Operative Agreements to possession of a Property or any component
        thereof, each of the Construction Agent and the Lessee hereby covenants
        and agrees, at its own cost and expense, to assemble and make the same
        available to the Agent (on behalf of the Lessor).

                (h) The Lessee hereby covenants and agrees that on or before the
        date that is six months after the Initial Closing Date, the Trust shall
        own one or more Properties (i) for which Completion has occurred and
        (ii) which have an aggregate Property Cost (exclusive of the Initial
        Holder Advance) that equals or exceeds $10,000,000.

                (i) The Lessee hereby covenants and agrees that as of the date
        of the final Post-Completion Construction Advance for each individual
        Property: (i) the Property Cost for such Property shall not exceed
        $12,500,000 and (ii) such Property shall be a Permitted Facility.

                (j) The Lessee hereby covenants and agrees that (i) it shall
        give prompt notice to the Agent if the Lessee's principal place of
        business or chief executive office, or the office where the records
        concerning the accounts or contract rights relating to any Property are
        kept, shall cease to be located at 1155 Valley Street, Suite 400,
        Seattle, Washington, 98109, and (ii) if it shall change its name, or if
        the chief executive office of any Credit Party shall change from that
        identified on Exhibit J attached hereto, each such change shall be
        subject to Section 12.11.

                (k) Unless the Agent otherwise agrees in writing, the Lessee
        hereby covenants and agrees that the aggregate Property Cost of
        Non-Integral Equipment purchased for any reason by the Lessee prior to
        the Expiration Date shall not exceed ten percent (10%) of the aggregate
        Property Cost for all Properties funded hereunder.

                (l) Until all the obligations of the Credit Parties under the
        Operative Agreements have been finally and indefeasibly paid and
        satisfied in full and the Commitments and the Holder Commitments
        terminated, then unless consent has been obtained from the Majority
        Secured Parties, the Lessee will furnish or cause to be furnished to the
        Agent, for the benefit of each Holder and each Lender at its address,
        set forth or referenced in Section 12.2 of this Agreement, or such other
        office as may be designated by the Agent from time to time, not later
        than 11:00 a.m. on the 11th day of each calendar month, a certificate (a
        "Monthly NOI Certificate") duly signed by the chief

                                       35
<PAGE>   41

        executive officer, chief operating officer, chief financial officer,
        treasurer or controller of the Lessee substantially in the form of
        Exhibit M attached hereto setting forth the NOI for each Property for
        which the Completion Date has occurred and the aggregate NOI for all
        Properties for the calendar month ending immediately prior to such
        delivery date; provided that no Monthly NOI Certificate will be required
        for any individual Property until the next delivery date following the
        90th day after the Completion Date for such Property, on which delivery
        date a Monthly NOI Certificate for such Property for each of the
        immediately preceding three calendar months shall be delivered to the
        Agent by the Lessee.

                (m) [intentionally omitted].

                (n) Each Credit Party hereby covenants and agrees to cause each
        Subsidiary of such Credit Party that becomes a Guarantor under the
        Lessee Credit Agreement after the Initial Closing Date pursuant to
        Section 7.19 thereof, to execute a Joinder Agreement and to observe the
        terms of Sections 5.8(a)-(d) of this Agreement, all within thirty (30)
        days of the joinder of such Subsidiary as a Guarantor under the Lessee
        Credit Agreement.

                (o) Each Credit Party shall promptly notify the Agent, or cause
        the Agent to be promptly notified, upon such Credit Party gaining
        knowledge of the occurrence of any Default or Event of Default which is
        continuing at such time. In any event, such notice shall be provided to
        the Agent within ten (10) days of when such Credit Party gains such
        knowledge.

                (p) Until all of the obligations under the Operative Agreements
        have been finally and indefeasibly paid and satisfied in full and the
        Commitments and the Holder Commitments terminated unless consent has
        been obtained from the Majority Secured Parties, each Credit Party will:

                        (i) except as permitted by the express provisions of the
                Lessee Credit Agreement, preserve and maintain its separate
                legal existence and all rights, franchises, licenses and
                privileges necessary to the conduct of its business, and qualify
                and remain qualified as a foreign corporation (or partnership,
                limited liability company or other such similar entity, as the
                case may be) and authorized to do business in each jurisdiction
                in which the failure to so qualify would have a Material Adverse
                Effect;

                        (ii) pay and perform all obligations of the Credit
                Parties under the Operative Agreements and pay and perform (A)
                all taxes, assessments and other governmental charges that may
                be levied or assessed upon it or any of its property, and (B)
                all other indebtedness, obligations and liabilities in
                accordance with customary trade practices, which if not paid
                would have a Material Adverse Effect; provided that any Credit
                Party may contest any item described in this Section 8.3(p)(ii)
                in good faith so long as adequate reserves are maintained with
                respect thereto in accordance with GAAP;

                                       36
<PAGE>   42

                        (iii) to the extent failure to do so would have a
                Material Adverse Effect, observe and remain in compliance with
                all applicable Laws and maintain in full force and effect all
                Governmental Actions, in each case applicable to the conduct of
                its business; keep in full force and effect all licenses,
                certifications or accreditations necessary for any Property to
                carry on its business; and not permit the termination of any
                insurance reimbursement program available to any Property; and

                        (iv) provided that the Agent, the Lenders and the
                Holders use reasonable efforts to minimize disruption to the
                business of the Credit Parties permit representatives of the
                Agent or any Lender or Holder, from time to time, to visit and
                inspect its properties; inspect, audit and make extracts from
                its books, records and files, including without limitation
                management letters prepared by independent accountants; and
                discuss with its principal officers, and its independent
                accountants, its business, assets, liabilities, financial
                condition, results of operations and business prospects.

                (q) Lessee shall perform any and all obligations of Lessor
        under, and cause Lessor to otherwise remain in full compliance with, the
        terms and provisions of each Ground Lease, if any.

                (r) [intentionally omitted].

                (s) The Lessee shall deliver to the Agent a copy of the final
        certificate of occupancy for each Property within 180 days of the
        Completion Date for such Property.

                (t) The Lessee shall submit the interest rate/holder yield
        selection notice in the form set forth in Exhibit N as required from
        time to time pursuant to the Credit Agreement and the Trust Agreement.

        8.4.    SHARING OF CERTAIN PAYMENTS.

        Except for Excepted Payments, the parties hereto acknowledge and agree
that all payments due and owing by any Credit Party to the Lessor under the
Lease or any of the other Operative Agreements shall be made by such Credit
Party directly to the Agent as more particularly provided in Section 8.3 hereof.
The Lessor, the Holders, the Agent, the Lenders and the Credit Parties
acknowledge the terms of Section 8.7 of this Agreement regarding the allocation
of payments and other amounts made or received from time to time under the
Operative Agreements and agree, that all such payments and amounts are to be
allocated as provided in Section 8.7 of this Agreement.

        8.5.    GRANT OF EASEMENTS, ETC.

        The Agent, the Lenders and the Holders hereby agree that, so long as no
Event of Default shall have occurred and be continuing, the Owner Trustee shall,
from time to time at the request of the Lessee (and with the prior consent of
the Agent, which consent shall not be unreasonably

                                       37
<PAGE>   43

withheld or delayed), in connection with the transactions contemplated by the
Agency Agreement, the Lease or the other Operative Agreements, (i) grant
easements and other rights in the nature of easements with respect to any
Property, (ii) release existing easements or other rights in the nature of
easements which are for the benefit of any Property, (iii) execute and deliver
to any Person any instrument appropriate to confirm or effect such grants or
releases, and (iv) execute and deliver to any Person such other documents or
materials in connection with the acquisition, development, construction, testing
or operation of any Property, including without limitation reciprocal easement
agreements, construction contracts, operating agreements, development
agreements, plats, replats or subdivision documents; provided, that each of the
agreements referred to in this Section 8.5 shall be of the type normally
executed by the Lessee in the ordinary course of the Lessee's business and shall
be on commercially reasonable terms so as not to diminish the value of any
Property in any material respect.

        8.6.    APPOINTMENT BY THE AGENT, THE LENDERS, THE HOLDERS AND THE OWNER
                TRUSTEE.

        The Holders hereby appoint the Agent to act as collateral agent for the
Holders in connection with the Lien granted by the Security Documents to secure
the Holder Amount. The Lenders and the Holders acknowledge and agree and direct
that the rights and remedies of the beneficiaries of the Lien of the Security
Documents shall be exercised by the Agent on behalf of the Lenders and the
Holders as directed from time to time by the Majority Secured Parties or,
pursuant to Sections 8.2(h) and 12.4, all of the Lenders and the Holders, as the
case may be; provided, in all cases, the Agent shall allocate payments and other
amounts received in accordance with Section 8.7. The Agent is further appointed
to provide notices under the Operative Agreements on behalf of the Owner Trustee
(as determined by the Agent, in its reasonable discretion), to receive notices
under the Operative Agreements on behalf of the Owner Trustee and (subject to
Sections 8.5 and 9.2) to take such other action under the Operative Agreements
on behalf of the Owner Trustee as the Agent shall determine in its reasonable
discretion from time to time. The Agent hereby accepts such appointments. For
purposes hereof, the provisions of Section 7 of the Credit Agreement, together
with such other terms and provisions of the Credit Agreement and the other
Operative Agreements as required for the full interpretation and operation of
Section 7 of the Credit Agreement are hereby incorporated by reference as if
restated herein for the mutual benefit of the Agent and each Holder as if each
Holder were a Lender thereunder. Outstanding Holder Advances and outstanding
Loans shall each be taken into account for purposes of determining Majority
Secured Parties. Further, the Agent shall be entitled to take such action on
behalf of the Owner Trustee as is delegated to the Agent under any Operative
Agreement (whether express or implied) as may be reasonably incidental thereto.
The parties hereto hereby agree to the provisions contained in this Section 8.6.
Any appointment of a successor agent under Section 7.9 of the Credit Agreement
shall also be effective as an appointment of a successor agent for purposes of
this Section 8.6.

        8.7.    COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.

                (a) Each Credit Party has agreed pursuant to Section 5.9 and
        otherwise in accordance with the terms of this Agreement to pay to (i)
        the Agent any and all Rent and any and all other amounts of any kind or
        type under any of the Operative Agreements due and owing or payable to
        any Person and (ii) each Person as appropriate the Excepted

                                       38
<PAGE>   44

        Payments. Payment by a Credit Party pursuant to clause (i) of the
        preceding sentence to Agent of an amount owing to another Person shall,
        as between such Credit Party and such Person, constitute payment to such
        Person. Promptly after receipt, the Agent shall apply and allocate, in
        accordance with the terms of this Section 8.7, such amounts received
        from any Credit Party and all other payments, receipts and other
        consideration of any kind whatsoever received by the Agent pursuant to
        the Security Agreement or otherwise received by the Agent, the Holders
        or any of the Lenders in connection with the Collateral, the Security
        Documents or any of the other Operative Agreements. Ratable
        distributions among the Lenders and the Holders under this Section 8.7
        shall be made based on (in the case of the Lenders) the ratio of the
        outstanding Loans to the aggregate Property Cost and (in the case of the
        Holders) the ratio of the outstanding Holder Advances to the aggregate
        Property Cost. Ratable distributions among the Lenders (in situations
        where the Tranche A Lenders are not differentiated from the Tranche B
        Lenders) shall be made based on the ratio of the individual Lender's
        Loans outstanding to the aggregate of all the Lenders' Loans
        outstanding; provided, to the extent there are no Loans outstanding,
        such distributions shall be made based on the ratio of the individual
        Lender's Commitment to the aggregate of all the Lenders' Commitments.
        Ratable distributions among the Holders under this Section 8.7 shall be
        based on the ratio of the individual Holder's Holder Advances
        outstanding to the aggregate of all the Holders' Holder Advances
        outstanding; provided, to the extent there are not Holder Advances
        outstanding, such distributions shall be made based on the ratio of the
        individual Holder's Holder Commitment to the aggregate of all the
        Holders' Holder Commitments.

                (b) Payments and other amounts received by the Agent from time
        to time in accordance with the terms of subparagraph (a) shall be
        applied and allocated as follows (subject in all cases to Section
        8.7(c)):

                        (i) Any such payment or amount identified as or deemed
                to be Basic Rent shall be applied and allocated by the Agent
                first, ratably to the Lenders and the Holders for application
                and allocation to the payment of interest on the Loans and
                thereafter the principal of the Loans, if any, which may be due
                and payable on such date and to the payment of accrued Holder
                Yield with respect to the Holder Advances and thereafter the
                portion of the Holder Advances, if any, which may be due on such
                date; and second, if no Default or Event of Default is in
                effect, any excess shall be paid to such Person or Persons as
                the Lessee may designate; provided, that if a Default or Event
                of Default is in effect, such excess (if any) shall instead be
                held by the Agent until the earlier of (I) the first date
                thereafter on which no Default or Event of Default shall be in
                effect (in which case such payments or returns shall then be
                made to such other Person or Persons as the Lessee may
                designate) and (II) the Maturity Date or the Expiration Date, as
                the case may be (or, if earlier, the date of any Acceleration),
                in which case such amounts shall be applied and allocated in the
                manner contemplated by Section 8.7(b)(iv).

                        (ii) If on any date the Agent or the Lessor shall
                receive any amount in respect of (A) any Casualty or
                Condemnation pursuant to Sections 15.1(a) or

                                       39
<PAGE>   45

                15.1(g) of the Lease (excluding any payments in respect thereof
                which are payable to the Lessee in accordance with the Lease),
                or (B) the Termination Value in connection with the delivery of
                a Termination Notice pursuant to Article XVI of the Lease, or
                (C) the Termination Value in connection with the exercise of the
                Purchase Option under Section 20.1 of the Lease or the exercise
                of the option of the Lessor to transfer the Properties to the
                Lessee pursuant to Section 20.3 of the Lease, or (D) any payment
                required to be made or elected to be made by the Construction
                Agent to the Lessor pursuant to the terms of the Agency
                Agreement (other than any payment of the Maximum Amount which
                shall be applied and allocated pursuant to Section 8.7(b)(iv)),
                then in each case, the Lessor shall be required to pay such
                amount received (1) if no Event of Default has occurred, to
                prepay the principal balance of the Loans and the Holder
                Advances, on a pro rata basis, a portion of such amount to be
                distributed to the Lenders and the Holders (provided, however,
                if the Initial Holder Advance is repaid pursuant to the last
                sentence of Section 20.2 of the Lease, such repayment of the
                Initial Holder Advance shall be allocated pro rata to the
                Designated Holders) or (2) if an Event of Default has occurred,
                to apply and allocate the proceeds respecting Sections
                8.7(b)(ii)(A) through 8.7(b)(ii)(D) in accordance with Section
                8.7(b)(iii) hereof.

                        (iii) An amount equal to any payment identified as
                proceeds of the sale or other disposition (or lease upon the
                exercise of remedies) of the Properties or any portion thereof,
                whether pursuant to Article XXII of the Lease or the exercise of
                remedies under the Security Documents or otherwise, the
                execution of remedies set forth in the Lease and any payment in
                respect of excess wear and tear pursuant to Section 22.3 of the
                Lease (whether such payment relates to a period before or after
                the Construction Period Termination Date) shall be applied and
                allocated by the Agent first, ratably to the payment of the
                principal and interest of the Tranche B Loans then outstanding,
                second, ratably to the payment to the Holders of the outstanding
                principal balance of all Holder Advances plus all outstanding
                Holder Yield with respect to such outstanding Holder Advances,
                third, to the extent such amount exceeds the maximum amount to
                be returned pursuant to the foregoing provisions of this
                paragraph (iii), ratably to the payment of the principal and
                interest of the Tranche A Loans then outstanding, fourth, to any
                and all other amounts owing under the Operative Agreements to
                the Lenders under the Tranche B Loans, fifth, to any and all
                other amounts owing under the Operative Agreements to the
                Holders, sixth, to any and all other amounts owing under the
                Operative Agreements to the Lenders under the Tranche A Loans,
                and seventh, to the extent moneys remain after application and
                allocation pursuant to clauses first through sixth above, to the
                Owner Trustee for application and allocation to any and all
                other amounts owing to the Holders or the Owner Trustee and as
                the Holders shall determine; provided, where no Event of Default
                shall exist and be continuing and a prepayment is made for any
                reason with respect to less than the full amount of the
                outstanding principal amount of the Loans and the outstanding
                Holder Advances, the proceeds shall be applied and allocated
                ratably to the Lenders and to the Holders.

                                       40
<PAGE>   46

                        (iv) An amount equal to (A) any such payment identified
                as a payment of the Maximum Amount or any payment pursuant to
                Section 22.1(b) of the Lease (or otherwise) of the Maximum
                Residual Guarantee Amount (and any such lesser amount as may be
                required by Section 22.1(b) of the Lease) in respect of the
                Properties and (B) any other amount payable upon any exercise of
                remedies after the occurrence of an Event of Default not covered
                by Sections 8.7(b)(i) or 8.7(b)(iii) above (including without
                limitation any amount received in connection with an
                Acceleration which does not represent proceeds from the sale or
                liquidation of the Properties) and (C) any other amount payable
                by any Guarantor pursuant to Section 6B shall be applied and
                allocated by the Agent first, ratably, to the payment of the
                principal and interest balance of Tranche A Loans then
                outstanding, second, ratably to the payment of the principal and
                interest balance of the Tranche B Loans then outstanding, third,
                ratably to the payment of the principal balance of all Holder
                Advances plus all outstanding Holder Yield with respect to such
                outstanding Holder Advances, fourth, to the payment of any other
                amounts owing to the Lenders hereunder or under any of the other
                Operative Agreement, and fifth, to the extent moneys remain
                after application and allocation pursuant to clauses first
                through fourth above, to the Owner Trustee for application and
                allocation to Holder Advances and Holder Yield and any other
                amounts owing to the Holders or the Owner Trustee as the Holders
                shall determine.

                        (v) An amount equal to any such payment identified as
                Supplemental Rent shall be applied and allocated by the Agent to
                the payment of any amounts then owing to the Agent, the Lenders,
                the Holders and the other parties to the Operative Agreements
                (or any of them) (other than any such amounts payable pursuant
                to the preceding provisions of this Section 8.7(b)) as shall be
                determined by the Agent in its reasonable discretion; provided,
                however, that Supplemental Rent received upon the exercise of
                remedies after the occurrence and continuance of an Event of
                Default in lieu of or in substitution of the Maximum Residual
                Guarantee Amount or as a partial payment thereon shall be
                applied and allocated as set forth in Section 8.7(b)(iv).

                        (vi) The Agent in its reasonable judgment shall identify
                the nature of each payment or amount received by the Agent and
                apply and allocate each such amount in the manner specified
                above.

                (c) Upon the payment in full of the Loans, the Holder Advances
        and all other amounts then due and owing by the Owner Trustee hereunder
        or under any Credit Document and the payment in full of all other
        amounts then due and owing to the Lenders, the Holders, the Agent, the
        Owner Trustee and the other Financing Parties pursuant to the Operative
        Agreements, any moneys remaining with the Agent shall be returned to the
        Lessee. It is agreed that, prior to the application and allocation of
        amounts received by the Agent in the order described in Section 8.7(b)
        above or any distribution of money to the Lessee, any such amounts shall
        first be applied and allocated to the payment of (i) any and all sums
        advanced by the Agent in order to preserve the Collateral

                                       41
<PAGE>   47

        or to preserve its Lien thereon, (ii) the expenses of retaking, holding,
        preparing for sale or lease, selling or otherwise disposing or realizing
        on the Collateral, or of any exercise by the Agent of its rights under
        the Security Documents, together with reasonable attorneys' fees and
        expenses and court costs and (iii) all accrued and unpaid annual
        administration fees owed to the Agent under or in connection with the
        transactions contemplated by the Operative Agreements.

        8.8.    RELEASE OF PROPERTIES, ETC.

        If the Lessee shall at any time purchase any Property pursuant to the
Lease, or the Construction Agent shall purchase any Property pursuant to the
Agency Agreement, or if any Property shall be sold in accordance with Article
XXII of the Lease, then the Agent is hereby authorized and directed to release
or cause to be released such Property from the Liens created by the Security
Documents (and the other Financing Parties shall deliver to the Agent all
authorizations and instruments necessary to permit the Agent to release all such
Liens) and the Agent will in good faith assist the Lessee in obtaining the
release of any Lessor Liens with respect to such Property. In addition, upon the
termination of the Commitments and the Holder Commitments and the payment in
full of the Loans, the Holder Advances and all other amounts owing by the Owner
Trustee and the Lessee hereunder or under any other Operative Agreement the
Agent is hereby authorized and directed to release all of the Properties from
the Liens created by the Security Documents (and the other Financing Parties
shall deliver to the Agent all authorizations and instruments necessary to
permit the Agent to release all such Liens) and the Agent will in good faith
assist the Lessee in obtaining the release of any Lessor Liens with respect to
such Property. Upon request of the Owner Trustee or the Lessee following any
such release, the Agent shall, at the sole cost and expense of the Lessee,
execute and deliver to the Owner Trustee and the Lessee such documents as the
Owner Trustee or the Lessee shall reasonably request to evidence such release.

                SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT.

        9.1.    THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT
                RIGHTS.

        Notwithstanding anything to the contrary contained in the Credit
Agreement, the Agent, the Lenders, the Holders, the Construction Agent, the
Credit Parties and the Owner Trustee hereby agree that, prior to the occurrence
and continuation of any Default or Event of Default, the Construction Agent or
the Lessee, as the case may be, shall have the following rights:

                (a) the exclusive right to designate an account to which amounts
        funded under the Operative Agreements shall be credited pursuant to
        Section 2.3(a) of the Credit Agreement;

                (b) the exclusive right to terminate or reduce the Commitments
        pursuant to Section 2.5(a) of the Credit Agreement;

                (c) the exclusive right to request Advances pursuant to Section
        2.3 of the Credit Agreement, to give notice of a prepayment under
        Section 2.6 of the Credit

                                       42
<PAGE>   48

        Agreement and to exercise the conversion and continuation options
        pursuant to Section 2.7 of the Credit Agreement;

                (d) the exclusive right on behalf of the Borrower to dispute
        information recorded on the Notes, the determination of an interest rate
        and the computations of interest under the Credit Agreement;

                (e) the right to receive any notice and any certificate, in each
        case issued pursuant to Sections 2.9(a) and 2.11(a) of the Credit
        Agreement;

                (f) the exclusive right to terminate the Commitment of and
        replace any Lender pursuant to Section 2.11(b) of the Credit Agreement;

                (g) the exclusive right to approve any successor agent pursuant
        to Section 7.9 of the Credit Agreement; and

                (h) the right to consent to any assignment by a Lender to which
        the Lessor has the right to consent pursuant to Section 9.8 of the
        Credit Agreement.

        9.2.    THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT
                RIGHTS.

        Notwithstanding anything to the contrary contained in the Trust
Agreement, the Credit Parties, the Owner Trustee and the Holders hereby agree
that, prior to the occurrence and continuation of any Default or Event of
Default, the Construction Agent or the Lessee, as the case may be, shall have
the following rights:

                (a) the exclusive right to request an Advance pursuant to
        Section 3.1(a) of the Trust Agreement, to give notice of a prepayment
        under Section 3.4(a) of the Trust Agreement and to exercise the
        conversion and continuation options pursuant to Section 3.8 of the Trust
        Agreement;

                (b) the right to receive any notice and any certificate, in each
        case issued pursuant to Section 3.9(a) of the Trust Agreement;

                (c) the exclusive right on behalf of the Trust to dispute the
        determination of Holder Yield under the Trust Agreement;

                (d) the exclusive right to terminate the Holder Commitment of
        and replace any Holder pursuant to Section 3.9(b) of the Trust
        Agreement;

                (e) the exclusive right to exercise the removal options
        contained in Section 9.1 of the Trust Agreement; provided, however, that
        no removal of the Owner Trustee and appointment of a successor Owner
        Trustee by the Holders pursuant to Section 9.1 of the Trust Agreement
        shall be made without the prior written consent (not to be unreasonably
        withheld or delayed) of the Lessee.

                                       43
<PAGE>   49

                        SECTION 10. TRANSFER OF INTEREST.

        10.1.   RESTRICTIONS ON TRANSFER.

        Each Lender may participate, assign or transfer all or a portion of its
interest hereunder and under the other Operative Agreements in accordance with
Sections 9.7 and 9.8 of the Credit Agreement; provided, that each participant,
assignee or transferee must obtain the same ratable interest in Tranche A Loans,
Tranche A Commitments, Tranche B Loans, Tranche B Commitments, Holder Advances,
Holder Commitments, the Trust Estate and the loans and loan commitments with
regard to the Lessee Credit Agreement as the interests that are held by the
Lender making such assignment or transfer or selling such participation;
provided further, that each Lender that participates, assigns or transfers all
or a portion of its interest hereunder and under the other Operative Agreements
shall deliver to the Agent a copy of each Assignment and Acceptance (as
referenced in Section 9.8 of the Credit Agreement) for purposes of maintaining
the Register. The Holders may, directly or indirectly, assign, convey or
otherwise transfer any of their right, title or interest in or to the Trust
Estate or the Trust Agreement with the prior written consent of the Agent and
the Lessee (which consent shall not be unreasonably withheld or delayed) and in
accordance with the terms of Section 11.8(b) of the Trust Agreement; provided,
that each such assignee, receiver of a conveyance or other transferee must also
obtain the same ratable interest in and to the Tranche A Loans, Tranche A
Commitments, Tranche B Loans, Tranche B Commitments and the loans and loan
commitments with regard to the Lessee Credit Agreement as the interests that are
held by the Holder making such assignment, conveyance or transfer. The Owner
Trustee may, subject to the rights of the Lessee under the Lease and the other
Operative Agreements and to the Lien of the applicable Security Documents but
only with the prior written consent of the Agent (which consent may be withheld
by the Agent in its sole discretion) and (provided, no Default or Event of
Default has occurred and is continuing) with the consent of the Lessee, directly
or indirectly, assign, convey, appoint an agent with respect to enforcement of,
or otherwise transfer any of its right, title or interest in or to any Property,
the Lease, the Trust Agreement and the other Operative Agreements (including
without limitation any right to indemnification thereunder), or any other
document relating to a Property or any interest in a Property as provided in the
Trust Agreement and the Lease. The provisions of the immediately preceding
sentence shall not apply to the obligations of the Owner Trustee to transfer
Property to the Lessee or a third party purchaser pursuant to Article XXII of
the Lease upon payment for such Property in accordance with the terms and
conditions of the Lease. No Credit Party may assign any of the Operative
Agreements or any of their respective rights or obligations thereunder 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. In no
event shall any Credit Party have any responsibility for the payment or
reimbursement of any fees, costs or expenses that arise in connection with any
assignment or transfer of any interest of a Lender or a Holder or the Owner
Trustee in or to any Operative Agreement.

        10.2.   EFFECT OF TRANSFER.

        From and after any transfer effected in accordance with this Section 10,
the transferor shall be released, to the extent, and only to the extent, of such
transfer, from its liability hereunder and under the other documents to which it
is a party in respect of obligations to be

                                       44
<PAGE>   50

performed on or after the date of such transfer; provided, however, that any
transferor shall remain liable hereunder and under such other documents to the
extent that the transferee shall not have assumed the obligations of the
transferor thereunder. Upon any transfer by the Owner Trustee, a Holder or a
Lender as above provided, any such transferee shall assume the obligations of
the Owner Trustee, the Holder or the Lender, as the case may be, and shall be
deemed an "Owner Trustee", "Holder", or "Lender", as the case may be, for all
purposes of such documents and each reference herein to the transferor shall
thereafter be deemed a reference to such transferee for all purposes, except as
provided in the preceding sentence. Notwithstanding any transfer of all or a
portion of the transferor's interest as provided in this Section 10, the
transferor shall be entitled to all benefits accrued and all rights vested prior
to such transfer including without limitation rights to indemnification under
any such document.

                          SECTION 11. INDEMNIFICATION.

        11.1.   GENERAL INDEMNITY.

        Subject to and limited by in all respects the provisions of Sections
11.6 through 11.8 and whether or not any of the transactions contemplated hereby
shall be consummated, the Indemnity Provider hereby assumes liability for and
agrees to defend, indemnify and hold harmless each Indemnified Person on an
After Tax Basis from and against any Claims (provided however that, other than
for purposes of Section 11.2(f), any Claim relating to Taxes shall be governed
solely by Section 11.2), which may be imposed on, incurred by or asserted
against an Indemnified Person by any third party, including without limitation
Claims arising from the negligence of an Indemnified Person (but not to the
extent such Claims (i) are attributable to acts or events occurring after the
Expiration Date or, with respect to any individual Property, after retention by
the Lessor of such Property or the sale of such Property to a third party, in
each case pursuant to the Lease (including, without limitation, Articles XX and
XXII of the Lease) or (ii) arise from the gross negligence or willful misconduct
of such Indemnified Person itself, as determined by a court of competent
jurisdiction, as opposed to gross negligence or willful misconduct imputed to
such Indemnified Person) in any way relating to or arising or alleged to arise
out of the execution, delivery, performance or enforcement of this Agreement,
the Lease or any other Operative Agreement or on or with respect to any Property
or any component thereof, including without limitation Claims in any way
relating to or arising or alleged to arise out of (a) the financing,
refinancing, purchase, acceptance, rejection, ownership, design, construction,
refurbishment, development, delivery, acceptance, nondelivery, leasing,
subleasing, possession, use, occupancy, operation, maintenance repair,
modification, transportation, condition, sale, return, repossession (whether by
summary proceedings or otherwise), or any other disposition of any Property or
any part thereof, including without limitation the acquisition, holding or
disposition of any interest in the Property, lease or agreement comprising a
portion of any thereof; (b) any latent or other defects in any Property or any
portion thereof whether or not discoverable by an Indemnified Person or the
Indemnity Provider; (c) a violation of Environmental Laws, Environmental Claims
or other loss of or damage to any property or the environment relating to the
Property, the Lease, the Agency Agreement or the Indemnity Provider; (d) the
Operative Agreements, or any transaction contemplated thereby; (e) any breach by
the Indemnity Provider of any of its representations or warranties under the
Operative

                                       45
<PAGE>   51

Agreements to which the Indemnity Provider is a party or failure by the
Indemnity Provider to perform or observe any covenant or agreement to be
performed by it under any of the Operative Agreements; (f) personal injury,
death or property damage, including without limitation Claims based on strict or
absolute liability in tort; and (g) any fees, expenses and/or other assessments
by any business park or any other applicable entity with oversight
responsibility for the applicable Property.

        If a written Claim is made against any Indemnified Person or if any
proceeding shall be commenced against such Indemnified Person (including without
limitation a written notice of such proceeding), for any Claim, such Indemnified
Person shall promptly notify the Indemnity Provider in writing and shall not
take action with respect to such Claim without the consent of the Indemnity
Provider for thirty (30) days after the receipt of such notice by the Indemnity
Provider; provided, however, that in the case of any such Claim, if action shall
be required by law or regulation to be taken prior to the end of such period of
thirty (30) days, such Indemnified Person shall endeavor to, in such notice to
the Indemnity Provider, inform the Indemnity Provider of such shorter period,
and no action shall be taken with respect to such Claim without the consent of
the Indemnity Provider before seven (7) days before the end of such shorter
period; provided, further, that the failure of such Indemnified Person to give
the notices referred to in this sentence shall not diminish the Indemnity
Provider's obligation hereunder except to the extent such failure materially
prejudices the Indemnity Provider from contesting such Claim.

        If, within thirty (30) days of receipt of such notice from the
Indemnified Person (or such shorter period as the Indemnified Person has
notified the Indemnity Provider is required by law or regulation for the
Indemnified Person to respond to such Claim), the Indemnity Provider shall
request in writing that such Indemnified Person respond to such Claim, the
Indemnified Person shall, at the expense of the Indemnity Provider, in good
faith conduct and control such action (including without limitation by pursuit
of appeals) (provided, however, that (A) if such Claim, in the Indemnity
Provider's reasonable discretion, can be pursued by the Indemnity Provider on
behalf of or in the name of such Indemnified Person, the Indemnified Person, at
the Indemnity Provider's request, shall allow the Indemnity Provider to conduct
and control the response to such Claim and (B) in the case of any Claim (and
notwithstanding the provisions of the foregoing subsection (A)), the Indemnified
Person may request the Indemnity Provider to conduct and control the response to
such Claim (with counsel to be selected by the Indemnity Provider and consented
to by such Indemnified Person, such consent not to be unreasonably withheld;
provided, however, that any Indemnified Person may retain separate counsel at
the expense of the Indemnity Provider in the event of a conflict of interest
between such Indemnified Person and the Indemnity Provider)) by, in the sole
discretion of the Person conducting and controlling the response to such Claim
(1) resisting payment thereof, (2) not paying the same except under protest, if
protest is necessary and proper, (3) if the payment be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings, or (4) taking such other action as is reasonably requested by the
Indemnity Provider from time to time.

        The party controlling the response to any Claim shall consult in good
faith with the non-controlling party and shall keep the non-controlling party
reasonably informed as to the conduct of the response to such Claim; provided,
that all decisions ultimately shall be made in the

                                       46
<PAGE>   52

discretion of the controlling party and provided further that, if an Indemnified
Person is the controlling party and the Indemnity Provider recommends the
acceptance of a solely monetary settlement offer with respect to such Claim that
does not contain any stipulation or admission objectionable to such Indemnified
Person, and such Indemnified Person rejects such settlement offer, then the
amount for which an Indemnity Provider will be required to indemnify such
Indemnified Person with respect to such Claim shall not exceed the amount which
the Indemnity Provider would have owed had such offer been accepted. The parties
agree that an Indemnified Person may at any time decline to take further action
with respect to the response to such Claim and may settle such Claim if such
Indemnified Person shall waive its rights to any indemnity from the Indemnity
Provider that otherwise would be payable in respect of such Claim (and any
future Claim, the pursuit of which is precluded by reason of such resolution of
such Claim) and shall pay to the Indemnity Provider any amount previously paid
or advanced by the Indemnity Provider pursuant to this Section 11.1 by way of
indemnification or advance for the payment of an amount regarding such Claim.

        Each Indemnified Person shall supply the Indemnity Provider with such
information and documents reasonably requested by the Indemnity Provider as are
necessary or advisable for such Indemnity Provider to contest or prosecute any
Claim, provided, however, that such Indemnified Person shall not be required to
provide the Indemnity Provider with copies of such Indemnified Person's tax
returns or any other information or documents that such Indemnified Person
reasonable deems to be confidential or proprietary.

        Notwithstanding the foregoing provisions of this Section 11.1, an
Indemnified Person shall not be required to take any action and the Indemnity
Provider shall not be permitted to respond to any Claim in its own name or that
of the Indemnified Person unless (A) the Indemnity Provider shall have agreed to
pay and shall pay to such Indemnified Person on demand and on an After Tax Basis
all reasonable costs, losses and expenses that such Indemnified Person actually
incurs in connection with such Claim, including without limitation all
reasonable legal, accounting and investigatory fees and disbursements and the
Indemnity Provider shall have agreed that the Claim is an indemnifiable Claim
hereunder, (B) in the case of a Claim that must be pursued in the name of an
Indemnified Person (or an Affiliate thereof), the amount of the potential
indemnity (taking into account all similar or logically related Claims that have
been or could be raised for which the Indemnity Provider may be liable to pay an
indemnity under this Section 11.1) exceeds $25,000 (or such lesser amount as may
be subsequently agreed between the Indemnity Provider and the Indemnified
Person), (C) the Indemnified Person shall have reasonably determined that the
action to be taken will not result in any material danger of sale, forfeiture or
loss of the Property, or any part thereof or interest therein, will not
interfere with the payment of Rent, and will not result in risk of criminal
liability, (D) if such Claim shall involve the payment of any amount prior to
the resolution of such Claim, the Indemnity Provider shall provide to the
Indemnified Person an interest-free advance in an amount equal to the amount
that the Indemnified Person is required to pay (with no additional net after-tax
cost to such Indemnified Person) prior to the date such payment is due, (E) in
the case of a Claim that must be pursued in the name of an Indemnified Person
(or an Affiliate thereof), the Indemnity Provider shall have provided to such
Indemnified Person an opinion of independent counsel selected by the Indemnity
Provider and reasonably satisfactory to the Indemnified Person stating that a
reasonable basis exists to contest such Claim (or, in the case of an appeal of
an adverse

                                       47
<PAGE>   53

determination, an opinion of such counsel to the effect that the position
asserted in such appeal will more likely than not prevail) and (F) no Event of
Default shall have occurred and be continuing. In no event shall an Indemnified
Person be required to appeal an adverse judicial determination to the United
States Supreme Court. In addition, an Indemnified Person shall not be required
to contest any Claim in its name (or that of an Affiliate) if the subject matter
thereof shall be of a continuing nature and shall have previously been decided
adversely by a court of competent jurisdiction pursuant to the contest
provisions of this Section 11.1, unless there shall have been a change in law
(or interpretation thereof) and the Indemnified Person shall have received, at
the Indemnity Provider's expense, an opinion of independent counsel selected by
the Indemnity Provider and reasonably acceptable to the Indemnified Person
stating that as a result of such change in law (or interpretation thereof), it
is more likely than not that the Indemnified Person will prevail in such
contest. In no event shall the Indemnity Provider be permitted to adjust or
settle any Claim without the consent of the Indemnified Person to the extent any
such adjustment or settlement involves, or is reasonably likely to involve, any
performance by or adverse admission by or with respect to the Indemnified
Person.

        11.2.   GENERAL TAX INDEMNITY.

                (a) Subject to and limited by in all respects the provisions of
        Sections 11.6 through 11.8, the Indemnity Provider shall pay and assume
        liability for, and does hereby agree to indemnify, protect and defend
        each Property and all Indemnified Persons, and hold them harmless
        against, all Impositions on an After Tax Basis, and all payments
        pursuant to the Operative Agreements shall be made free and clear of and
        without deduction for any and all present and future Impositions.

                (b) Notwithstanding anything to the contrary in Section 11.2(a)
        hereof, the following shall be excluded from the indemnity required by
        Section 11.2(a) (collectively, the "Excluded Taxes"):

                        (i) Taxes (other than Taxes that are, or are in the
                nature of, sales, use, rental, value added, transfer or property
                taxes) that are imposed on a Indemnified Person (other than the
                Lessor, the Owner Trustee and the Trust) by the United States
                federal government that are based on or measured by the net
                income (including without limitation taxes based on capital
                gains and minimum taxes and Taxes collected by withholding) of
                such Person; provided, that this clause (i) shall not be
                interpreted to prevent a payment from being made on an After Tax
                Basis if such payment is otherwise required to be so made;

                        (ii) Taxes (other than Taxes that are, or are in the
                nature of, sales, use, rental, value added, transfer or property
                taxes) that are imposed on any Indemnified Person (other than
                the Lessor, the Owner Trustee and the Trust) by any state, local
                or foreign jurisdiction or taxing authority within any state,
                local or foreign jurisdiction and that are based upon or
                measured by or with respect to the gross receipts, franchise,
                excess profits, capital, net worth or net income (including
                without limitation taxes based on capital gains, doing business,
                business privilege and minimum taxes and Taxes collected by
                withholding) of

                                       48
<PAGE>   54

                such Person, in each case imposed by any Governmental Authority
                in any jurisdiction in which such Indemnified Person is subject
                to such Taxes other than as a result of the transactions
                contemplated by the Operative Agreements; provided that this
                clause (ii) shall not be interpreted to prevent a payment from
                being made on an After Tax Basis if such payment is otherwise
                required to be so made;

                        (iii) any Tax to the extent it relates to any act, event
                or omission that occurs after the termination of the Lease and
                redelivery or sale of the Property in accordance with the terms
                of the Lease (but not any Tax that relates to such termination,
                redelivery or sale and/or to any period prior to such
                termination, redelivery or sale);

                        (iv) any Taxes which are imposed on an Indemnified
                Person or an Affiliate thereof as a result of the gross
                negligence or willful misconduct of such Indemnified Person or
                such Affiliate itself, as determined by a court of competent
                jurisdiction (as opposed to gross negligence or willful
                misconduct imputed to such Indemnified Person), but not Taxes
                imposed as a result of ordinary negligence of such Indemnified
                Person or such Affiliate;

                        (v) any Tax for so long as, but only for so long as, it
                is being contested in accordance with the provisions of Sections
                11.1 and 11.2(f) hereof; provided that the foregoing shall not
                limit any obligation under such Sections to advance to the
                relevant Indemnified Person amounts with respect to Taxes that
                are being contested in accordance with such Sections or any
                expenses reasonably incurred by such Indemnified Person in
                connection with such contest;

                        (vi) any interest, additions to tax or penalties imposed
                as a result of a breach by the Indemnified Person of its
                obligations under the Operative Agreements or as a result of the
                Indemnified Person's failure to file any return, certification,
                information, documentation or other reporting requirement or
                document timely and as prescribed by applicable law; provided
                that this clause (vi) shall not apply (1) if such interest,
                additions to tax or penalties arise as a result of a position
                taken (or requested to be taken) by the Indemnity Provider in a
                contest controlled by the Indemnity Provider under Section 11.1
                hereof or (2) if such failure is attributable to a failure by
                the Indemnity Provider, including without limitation the
                Indemnity Provider's obligations under Section 11.2(d) hereof;

                        (vii) Taxes resulting from, or that would not have been
                imposed but for, a breach by the Indemnified Person or any
                Affiliate thereof of any representations, warranties or
                covenants set forth in the Operative Agreements (unless such
                breach is caused by the Indemnity Provider's breach of any of
                its representations, warranties or covenants set forth in the
                Operative Agreements);

                                       49
<PAGE>   55

                        (viii) any Taxes imposed with regard to any Plan under
                Section 4975 of the Code or Section 406 of ERISA; and

                        (ix) Taxes imposed on the Trust Company with respect to
                any fees received or payable to the Trust Company for services
                rendered in its capacity as Owner Trustee under the Operative
                Agreements.

                (c)     (i) Subject to the terms of Section 11.2(f), the
                Indemnity Provider shall pay or cause to be paid all Impositions
                directly to the taxing authorities where feasible and otherwise
                to the Indemnified Person, as appropriate, and the Indemnity
                Provider shall at its own expense, upon such Indemnified
                Person's reasonable request, furnish to such Indemnified Person
                copies of official receipts or other satisfactory proof
                evidencing such payment.

                        (ii) In the case of Impositions for which no contest is
                conducted pursuant to Section 11.2(f) and which the Indemnity
                Provider pays directly to the taxing authorities, the Indemnity
                Provider shall pay such Impositions prior to the latest time
                permitted by the relevant taxing authority for timely payment.
                In the case of Impositions for which the Indemnity Provider
                reimburses an Indemnified Person, the Indemnity Provider shall
                do so within thirty (30) days after receipt by the Indemnity
                Provider of demand by such Indemnified Person describing in
                reasonable detail the nature of the Imposition and the basis for
                the demand (including without limitation the computation of the
                amount payable), accompanied by receipts or other reasonable
                evidence of such demand. In the case of Impositions for which a
                contest is conducted pursuant to Section 11.2(f), the Indemnity
                Provider shall pay such Impositions or reimburse such
                Indemnified Person for such Impositions, to the extent not
                previously paid or reimbursed pursuant to subsection (a), prior
                to the latest time permitted by the relevant taxing authority
                for timely payment after conclusion of all contests under
                Section 11.2(f).

                        (iii) At the Indemnity Provider's request, the amount of
                any indemnification payment by the Indemnity Provider pursuant
                to subsection (a) shall be verified and certified by an
                independent public accounting firm mutually acceptable to the
                Indemnity Provider and the Indemnified Person. The fees and
                expenses of such independent public accounting firm shall be
                paid by the Indemnity Provider unless such verification shall
                result in an adjustment in the Indemnity Provider's favor of ten
                percent (10%) or more of the payment as computed by the
                Indemnified Person, in which case such fee shall be paid by the
                Indemnified Person.

                (d) The Indemnity Provider shall be responsible for preparing
        and filing any real and personal property or ad valorem tax returns in
        respect of each Property. In the case of any other report, statement or
        tax return that shall be required to be made with respect to any
        Impositions subject to indemnification under Section 11.2(a) or 11.2(e),
        the Indemnity Provider, at its sole cost and expense, shall notify the
        relevant Indemnified

                                       50
<PAGE>   56

        Person of such requirement and (except if such Indemnified Person
        notifies the Indemnity Provider that such Indemnified Person intends to
        prepare and file such report or return) (A) to the extent required or
        permitted by and consistent with Legal Requirements, make and file in
        the Indemnity Provider's name such return, statement or report; and (B)
        in the case of any other such return, statement or report required to be
        made in the name of such Indemnified Person, advise such Indemnified
        Person of such fact and prepare such return, statement or report for
        filing by such Indemnified Person or, where such return, statement or
        report shall be required to reflect items in addition to any obligations
        of the Indemnity Provider under or arising out of subsection (a),
        provide such Indemnified Person at the Indemnity Provider's expense with
        information sufficient to permit such return, statement or report to be
        properly made with respect to any obligations of the Indemnity Provider
        under or arising out of subsection (a); provided, however, in no event
        shall an Indemnity Provider be responsible for preparing and filing a
        tax return based on the overall gross receipts or overall gross or net
        income of an Indemnified Person. Such Indemnified Person shall, upon the
        Indemnity Provider's request and at the Indemnity Provider's expense,
        provide any data maintained by such Indemnified Person (and not
        otherwise available to or within the control of the Indemnity Provider)
        with respect to each Property which the Indemnity Provider may
        reasonably require to prepare any required tax returns or reports.

                (e) As between the Indemnity Provider on one hand, and each
        Financing Party on the other hand, the Indemnity Provider shall be
        responsible for, and the Indemnity Provider shall indemnify and hold
        harmless each Financing Party (without duplication of any
        indemnification required by subsection (a)) on an After Tax Basis
        against, any obligation for United States or foreign withholding taxes
        or similar levies, imposts, charges, fees, deductions or withholdings
        (collectively, "Withholdings") imposed in respect of the interest
        payable on the Notes, Holder Yield payable on the Certificates or with
        respect to any other payments under the Operative Agreements (all such
        payments being referred to herein as "Exempt Payments" to be made
        without deduction, withholding or set off) (and, if any Financing Party
        receives a demand for such payment from any taxing authority or a
        Withholding is otherwise required with respect to any Exempt Payment,
        the Indemnity Provider shall discharge such demand on behalf of such
        Financing Party); provided, however, that the obligation of the
        Indemnity Provider under this Section 11.2(e) shall not apply to:

                        (i) Withholdings on any Exempt Payment to any Financing
                Party which is a non-U.S. Person unless such Financing Party is,
                on the date hereof (or on the date it becomes a Financing Party
                hereunder) and on the date of any change in the principal place
                of business or the lending office of such Financing Party,
                entitled to submit a Form W-8BEN (relating to such Financing
                Party and entitling it to a complete exemption from Withholding
                on such Exempt Payment) or Form W-8ECI or is otherwise subject
                to exemption from Withholding with respect to such Exempt
                Payment (except where the failure of the exemption results from
                a change in the principal place of business of the Lessee;
                provided if a failure of exemption for any Financing Party
                results from a change in the principal place of business or
                lending office of any other Financing Party, then

                                       51
<PAGE>   57

                such other Financing Party shall be liable for any Withholding
                or indemnity with respect thereto), or

                        (ii) Any U.S. Taxes imposed solely by reason of the
                failure by a non-U.S. Person to comply with applicable
                certification, information, documentation or other reporting
                requirements concerning the nationality, residence, identity or
                connections with the United States of America of such non-U.S.
                Person if such compliance is required by statute or regulation
                of the United States of America as a precondition to relief or
                exemption from such U.S. Taxes and if such non-U.S. Person is
                entitled to submit such certification, information,
                documentation or other report.

                A Financing Party shall notify the Indemnity Provider of any
        foreign Withholdings (other than any foreign Withholdings that arise as
        a result of a change in applicable law) to the extent that such
        Financing Party has knowledge or becomes aware that such foreign
        Withholdings could be imposed as a result of the transactions
        contemplated by the Operative Agreements, with such notice to be
        provided promptly after the time such Financing Party obtains such
        knowledge or becomes so aware; provided, however, the failure to provide
        such notice shall not affect the obligation of the Indemnity Provider
        for such foreign Withholdings under this Section 11.2(e) except to the
        extent that such failure to notify materially impairs the contest of
        such Withholdings pursuant to Sections 11.1 and 11.2(f).

                For the purposes of this Section 11.2(e), (A) "U.S. Person"
        shall mean a citizen, national or resident of the United States of
        America, a corporation, partnership or other entity created or organized
        in or under any laws of the United States of America or any State
        thereof, or any estate or trust that is subject to Federal income
        taxation regardless of the source of its income, (B) "U.S. Taxes" shall
        mean any present or future tax, assessment or other charge or levy
        imposed by or on behalf of the United States of America or any taxing
        authority thereof or therein, (C) "Form W-8BEN" shall mean Form W-8BEN
        (Certificate of Foreign Status of Beneficial Owner for United States Tax
        Withholding) and (D) "Form W-8ECI" shall mean Form W-8ECI (Certificate
        of Foreign person's Claim for Exemption from Withholding on Income
        Effectively Connected with the Conduct of a Trade or Business in the
        United States) of the Department of Treasury of the United States of
        America. Each of the forms referred to in the foregoing clauses (C) and
        (D) shall include such successor and related forms as may from time to
        time be adopted by the relevant taxing authorities of the United States
        of America to document a claim to which such Form relates.

                Any form described in Section 11.2(e)(i) above that is
        applicable to a Financing Party shall be delivered by such Financing
        Party to the Lessee (i) on or before the date such Financing Party
        becomes a party to any Operative Agreement or, if later, prior to the
        time any payment is due to such Financing Party under any Operative
        Agreement, (ii) before the expiration, obsolescence or invalidity of any
        such form previously delivered by such Financing Party to the Lessee,
        and (iii) before or promptly after the occurrence of any event requiring
        a change in the most recent form previously delivered by such

                                       52
<PAGE>   58

        Financing Party to the Lessee pursuant to this Section 11.2(e). The
        Lessee shall be entitled to rely upon such forms in its possession until
        receipt of any revised or successor form pursuant to the preceding
        sentence. For any period with respect to which a Financing Party is
        required pursuant to this Section 11.2(e) to provide a form to the
        Indemnity Provider but has failed to do so, such Financing Party shall
        not be entitled to any indemnification with respect to Impositions
        pursuant to Section 11.2(a) or Withholdings pursuant to this Section
        11.2(e) to the extent that such Impositions or Withholdings are imposed
        solely as a result of such failure.

                If a Financing Party or an Affiliate with whom such Financing
        Party files a consolidated tax return (or equivalent) subsequently
        receives the benefit in any country of a tax credit or an allowance
        resulting from U.S. Taxes with respect to which it has received a
        payment of an additional amount under this Section 11.2(e), such
        Financing Party will pay to the Indemnity Provider such part of that
        benefit as in the reasonable good faith judgment of such Financing Party
        will leave it (after such payment) in a position no more and no less
        favorable than it would have been in if no additional payment had been
        required to be paid, provided always that (i) such Financing Party will
        be the sole judge of the amount of any such benefit and of the date on
        which it is received, (ii) such Financing Party will have the absolute
        discretion as to the order and manner in which it employs or claims tax
        credits and allowances available to it and (iii) such Financing Party
        will not be obliged to disclose to the Indemnity Provider any
        information regarding its tax affairs or tax computations; provided
        however that, at the request of the Indemnity Provider, the amount of
        any such benefit may be verified (and the cost of such verification
        shall be apportioned) in a manner similar to that contemplated pursuant
        to Section 11.2(c)(iii).

                Each non-U.S. Person that shall become a Financing Party after
        the date hereof shall, upon the effectiveness of the related transfer or
        otherwise upon becoming a Financing Party hereunder, be required to
        provide all of the forms and statements referenced above or other
        evidences of exemption from Withholdings.

                (f) If a written Claim is made against any Indemnified Person or
        if any proceeding shall be commenced against such Indemnified Person
        (including without limitation a written notice of such proceeding), for
        any Impositions or Withholdings, the provisions in Section 11.1 relating
        to notification and rights to contest shall apply; provided, however,
        that the Indemnity Provider shall have the right to conduct and control
        such contest only if such contest involves a Tax other than a Tax on net
        income of the Indemnified Person and can be pursued independently from
        any other proceeding involving a Tax liability of such Indemnified
        Person.

        The Credit Parties and the Financing Parties intend that for federal and
all state and local income tax purposes, bankruptcy purposes, regulatory
purposes, commercial law and real estate purposes and all other purposes (other
than for accounting purposes) (A) the Lease will be treated as a financing
arrangement and (B) the Lessee will be treated as the owner of the Properties
and will be entitled to all tax benefits ordinarily available to owners of
property similar to the Properties for such tax purposes. Notwithstanding the
foregoing, no party hereto

                                       53
<PAGE>   59

has made, or shall be deemed to have made, any representation or warranty as to
the availability of any of the foregoing treatments under applicable accounting
rules, tax, bankruptcy, regulatory, commercial or real estate law or under any
other set of rules. The Lessee shall claim the cost recovery deductions
associated with each Property, and the Lessor shall not, to the extent not
prohibited by Law, take on its tax return a position inconsistent with the
Lessee's claim of such deductions.

        11.3.   UNAVAILABILITY OF EURODOLLAR RATE.

        If, for any reason, any Lender or Holder (each an "Advancing Party")
determines that fair and adequate means do not exist for establishing the
Eurodollar Rate or that the making or continuation of any Eurodollar Loan or
Eurodollar Holder Advance, as the case may be, by such Advancing Party has
become unlawful, then such Advancing Party may give notice of that fact to the
Agent, the Borrower and the Lessee and such determination shall become
conclusive and binding absent manifest error. After such notice has been given
and until such Advancing Party notifies the Borrower, the Agent and the Lessee
that the circumstances giving rise to such notice no longer exist, the
Eurodollar Rate shall no longer be available for any Advance. Any subsequent
request by the Borrower and/or the Lessee to have interest on Loans or Holder
Yield on Holder Advances accrue at the Eurodollar Rate shall be deemed to be a
request for interest or Holder Yield, as the case may be, to accrue at the ABR.
If such Advancing Party shall thereafter determine that it is able to make
Advances at the Eurodollar Rate, such Advancing Party shall notify the Borrower,
the Agent and the Lessee in writing of that fact, and the Borrower and the
Lessee shall then once again become entitled to request Advances at the
Eurodollar Rate.

        11.4.   FUNDING/CONTRIBUTION INDEMNITY.

        In the event that after the date hereof any change occurs in any
applicable law, regulation, treaty or directive or interpretation thereof by any
Governmental Authority charged with the administration or interpretation
thereof, or any condition is imposed by any Governmental Authority after the
date hereof or any change occurs in any condition imposed by any Governmental
Authority on or prior to the date hereof, in each case that:

                (a) subjects any Advancing Party to any Tax (other than any
        Excluded Tax (other than Withholdings)), or changes the basis of
        taxation of any payments to any Advancing Party on account of principal
        of or interest or Holder Yield on any Advance at the Eurodollar Rate,
        the Notes (to the extent the Notes evidence a Eurodollar Loan) or
        Certificates (to the extent the Certificates evidence a Eurodollar
        Holder Advance), or fees in respect of the obligation of such Advancing
        Party to make Advances at the Eurodollar Rate or other amounts payable
        with respect to its Advances; or

                (b) imposes, modifies or determines to be applicable any
        reserve, deposit or similar requirements against any assets held by,
        deposits with or for the account of, or advances or commitments by, any
        office of such Advancing Party in connection with its Advances at the
        Eurodollar Rate to the extent the amount of which is in excess of, or
        was not applicable at the time of computation of, the amounts provided
        for in the definition of such Advances at the Eurodollar Rate; or

                                       54
<PAGE>   60

                (c) affects the amount of capital required to be maintained by
        banks generally or corporations controlling banks and any Advancing
        Party determines the amount by which such Advancing Party or any
        corporation controlling such Advancing Party is required to maintain or
        increase its capital is increased by, or based upon, the existence of
        this Agreement or any of the other Operative Agreements or of such
        Advancing Party's Advances at the Eurodollar Rate or commitment to make
        the same hereunder;

                (d) imposes upon any Advancing Party any other condition with
        respect to its Advances at the Eurodollar Rate or its commitment to make
        the same hereunder;

and, as a result thereof, (i) the cost to such Advancing Party of making or
maintaining its Advances or its commitment to make Advances hereunder is
increased, or (ii) the net amount of any payment received by such Advancing
Party in respect of its Advances (whether of principal, interest or Holder
Yield, commitment fees or otherwise) is reduced, or (iii) such Advancing Party
is required to make any payment on or calculated by reference to the gross
amount of any sum received by it in respect of its Advances at the Eurodollar
Rate, in each case by a material amount, then and in any such case the Lessee,
on behalf of the Borrower, shall pay to Agent for the account of such Advancing
Party on demand such amount or amounts as will compensate such Advancing Party
for any increased cost, deduction or payment actually incurred or made by such
Advancing Party. The demand for payment by any Advancing Party shall be
delivered to the Agent, the Lessee and the Borrower and shall state the
subjection or change which occurred or the Tax, reserve, deposit or capital
requirements or other conditions which have been imposed upon such Advancing
Party or the request, direction or requirement with which it has complied,
together with the date thereof, the amount of such cost, reduction or payment
and the manner in which such amount has been calculated. Any such demand for
payment shall be accompanied by an officer's certificate from the affected
Advancing Party stating that the amount assessed against the Borrower with
respect to such Advancing Party's Advances at the Eurodollar Rate is not greater
than the Borrower's pro rata share of the amount assessed against all such
Advancing Party's advances at the Eurodollar Rate (such pro rata share equaling
a fraction whose numerator is the aggregate amount of the Borrower's Advances at
the Eurodollar Rate from such Advancing Party and whose denominator is total
amount of all such Advancing Party's advances that are subject to the increased
costs, reduction in payment or additional payment referred to in clauses (i),
(ii) or (iii) above). The statement of any Advancing Party as to the additional
amounts payable pursuant to this Section 11.4 shall be, absent manifest error,
prima facie evidence of the amounts due hereunder.

The protection of this Section 11.4 shall be available to each Advancing Party
regardless of any possible contention of invalidity or inapplicability of the
relevant law, regulation, treaty, directive, condition or interpretation thereof
provided that no amount shall be owing under this Section 11.4 to the extent it
is caused or triggered by such Advancing Party's negligence or willful
misconduct. In the event that the Borrower, or the Lessee on behalf of the
Borrower, pays any Advancing Party the amount necessary to compensate such
Advancing Party for any charge, deduction or payment incurred or made by such
Advancing Party as provided in this Section 11.4 and such charge, deduction or
payment or any part thereof is subsequently returned to such Advancing Party as
a result of the final determination of the invalidity or inapplicability of the
relevant law, regulation, treaty, directive or condition, then such Advancing
Party shall remit to the Borrower or to the Lessee, as the case may be, the
amount paid by the Borrower or

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the Lessee, as the case may be, that has actually been returned to such
Advancing Party (together with any interest actually paid to such Advancing
Party on such returned amount). Neither the Borrower, nor the Lessee on its
behalf, shall be obligated to pay any amount under this Section 11.4 with
respect to any Interest Period prior to the Interest Period during which the
affected Advancing Party provides notice to the Borrower, the Agent and the
Lessee that such additional payment shall be assessed.

        11.5.   EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT
                LIABILITY, ETC.

        SUBJECT TO AND LIMITED BY IN ALL RESPECTS THE PROVISIONS OF SECTION 11.6
THROUGH 11.8 AND WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION
PROVISIONS OF ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING
INDEMNIFICATION OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER
EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS
FOR LOSS OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR
OMISSION ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY
NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH
BENEFICIARY, AND INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE
AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS,
CLAIMS, LOSSES, COSTS, LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT
LIMITATION ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH
BENEFICIARY (IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE
ACTION FOR WHICH INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE
AGREEMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY.

        11.6.   ADDITIONAL PROVISIONS REGARDING ENVIRONMENTAL INDEMNIFICATION.

        Each and every Indemnified Person shall at all times have the rights and
benefits, and the Indemnity Provider shall have the obligations, in each case
provided pursuant to the Operative Agreements with respect to environmental
matters, violations of any Environmental Law, any Environmental Claim or other
loss of or damage to any property or the environment relating to any Property,
the Lease, the Agency Agreement or the Indemnity Provider (including without
limitation the rights and benefits provided pursuant to Section 11.1(c)).

        11.7.   ADDITIONAL PROVISIONS REGARDING INDEMNIFICATION.

        The Owner Trustee shall be the only beneficiary of the provisions set
forth in Sections 11.1, 11.2 and 11.5 (other than with respect to matters
concerning environmental indemnification referenced in Section 11.6) with
respect to each Property solely for the period prior to the earlier to occur of
the applicable Completion Date or Construction Period

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<PAGE>   62

Termination Date for such Property. The limited rights of indemnification
referenced in the preceding sentence (to the extent relating to third-party
claims) shall be limited to third-party claims caused by or resulting from the
acts or omissions of the Indemnity Provider and/or all other Persons acting by,
through or under the Indemnity Provider. The limitations of this Section 11.7
shall be effective notwithstanding any provision of Sections 11.1, 11.2 or 11.5
to the contrary.

        11.8.   INDEMNIFICATIONS PROVIDED BY THE OWNER TRUSTEE IN FAVOR OF THE
                OTHER INDEMNIFIED PERSONS.

        To the extent the Indemnity Provider is not obligated to indemnify each
Indemnified Person with respect to the various matters described in this Section
11.8, the Owner Trustee shall provide such indemnities (but only to the extent
amounts sufficient to pay such indemnity are funded by the Lenders and the
Holders) in favor of each Indemnified Person in accordance with this Section
11.8 and shall pay all such amounts owed with respect to this Section 11.8 with
amounts advanced by the Lenders and the Holders (a) to the extent, but only to
the extent, amounts are available therefor within the Available Commitments and
the Available Holder Commitments (subject to the rights of the Lenders and the
Holders to increase their respective commitment amounts in accordance with the
provisions of Section 5.10) and (b) unless each Lender and each Holder has
declined in writing to fund such amount. Notwithstanding any other provision in
any other Operative Agreement to the contrary, all amounts so advanced shall be
deemed added (ratably, based on the ratio of the Property Cost for each Property
individually to the aggregate Property Cost of all Properties at such time) to
the Property Cost of all Properties then subject to the terms of the Operative
Agreements.

        Whether or not any of the transactions contemplated hereby shall be
consummated, the Owner Trustee hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person by any third party, including without
limitation Claims arising from the negligence of an Indemnified Person (but not
to the extent such Claims arise from the gross negligence or willful misconduct
of such Indemnified Person itself, as determined by a court of competent
jurisdiction, as opposed to gross negligence or willful misconduct imputed to
such Indemnified Person or breach of such Indemnified Person's obligations under
this Agreement, the Lease or any other Operative Agreement) in any way relating
to or arising or alleged to arise out of the execution, delivery, performance or
enforcement of this Agreement, the Lease or any other Operative Agreement or on
or with respect to any Property or any component thereof, including without
limitation Claims in any way relating to or arising or alleged to arise out of
the matters set forth in Sections 11.1(a) through 11.1(h).

        The Owner Trustee shall pay and assume liability for, and does hereby
agree to indemnify, protect and defend each Property and all Indemnified
Persons, and hold them harmless against, all Impositions on an After Tax Basis,
and all payments pursuant to the Operative Agreements shall be made free and
clear of and without deduction for any and all present and future Impositions.
Notwithstanding anything to the contrary in this paragraph, the Excluded Taxes
shall be excluded from the indemnity provisions afforded by this paragraph.

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<PAGE>   63

        THE INDEMNITY OBLIGATIONS UNDERTAKEN BY THE OWNER TRUSTEE PURSUANT TO
THIS SECTION 11.8 ARE IN ALL RESPECTS SUBJECT TO THE LIMITATIONS ON LIABILITY
REFERENCED IN SECTION 12.9.

                           SECTION 12. MISCELLANEOUS.

        12.1.   SURVIVAL OF AGREEMENTS.

        The representations, warranties, covenants, indemnities and agreements
of the parties provided for in the Operative Agreements, and the parties'
obligations under any and all thereof, shall survive the execution and delivery
of this Agreement, the transfer of any Property to the Owner Trustee, the
acquisition of any Property (or any of its components), the construction of any
Improvements, the Completion of any Property, any disposition of any interest of
the Owner Trustee in any Property or any interest of the Holders in the Trust
Estate, the payment of the Notes and any disposition thereof and shall be and
continue in effect notwithstanding any investigation made by any party and the
fact that any party may waive compliance with any of the other terms, provisions
or conditions of any of the Operative Agreements. Except as otherwise expressly
set forth herein or in other Operative Agreements, the indemnities of the
parties provided for in the Operative Agreements shall survive the expiration or
termination of any thereof.

        12.2.   NOTICES.

        All notices and other communications provided for in any Operative
Agreement shall be in writing (unless otherwise specified) and shall be mailed
(with first class postage prepaid) or sent or delivered to each party by telefax
or courier service at the address or telefax number set forth under its name on
the signature page of this Agreement, or, with respect to the Lenders, at the
address set forth for such Lender on Schedule 2.1 to the Credit Agreement and,
with respect to the Holders, at the address set forth for such Holder on
Schedule I to the Trust Agreement, or, in each case, at such other address as
shall be designated by such party in a written notice to the other parties
hereto. Except as otherwise specified all notices and communications if duly
given or made shall be effective upon receipt. Neither the Agent nor any other
Financing Party shall incur any liability to the Construction Agent or the
Lessee for actions taken in reliance on any telephonic notice referred to in
this Agreement which the Agent or such Financing Party believes in good faith to
have been given by a duly authorized officer or other person authorized to
request an Advance or give such telephonic notice hereunder on behalf of the
Construction Agent or the Lessee, as applicable.

        12.3.   COUNTERPARTS.

        This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.

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        12.4.   TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE MATTERS.

        Each Basic Document may be terminated, amended, supplemented, waived or
modified only by an instrument in writing signed by, subject to Article VIII of
the Trust Agreement regarding termination of the Trust Agreement, the Majority
Secured Parties and each Credit Party (to the extent such Credit Party is a
party to such Basic Document); provided, to the extent no Default or Event of
Default shall have occurred and be continuing, the Majority Secured Parties
shall not amend, supplement, waive or modify any provision of any Basic Document
to which a Credit Party is not a party in such a manner as to adversely affect
the rights of any Credit Party without the prior written consent (not to be
unreasonably withheld or delayed) of such Credit Party. Each Operative Agreement
which is not a Basic Document may be terminated, amended, supplemented, waived
or modified only by an instrument in writing signed by the parties thereto and
(without the consent of any other Financing Party) the Agent. In addition, the
Unanimous Vote Matters shall require the consent of each Lender and each Holder,
except a Defaulting Lender or Defaulting Holder.

        Notwithstanding the foregoing, no such termination, amendment,
supplement, waiver or modification shall, without the consent of the Agent, each
Lender and each Holder (collectively, the "Unanimous Vote Matters") (i) modify
the Lender Commitments and/or the Holder Commitments except as otherwise
provided in Section 2.5 of the Credit Agreement and Section 3.1(e) of the Trust
Agreement, extend the scheduled date of maturity of any Note, extend the
scheduled Expiration Date, extend any payment date of any Note or Certificate,
reduce the stated rate of interest payable on any Note, reduce the stated Holder
Yield payable on any Certificate (other than as a result of waiving the
applicability of any post-default increase in interest rates or Holder Yields),
except as required in any Operative Agreement, modify the priority of or release
any Lien in favor of the Agent under any Security Document, subordinate any
obligation owed to such Lender or Holder, reduce any Unused Fees payable to such
Lender or Holder (as the case may be), extend the scheduled date of payment of
any Unused Fees payable to such Lender or Holder (as the case may be), elect to
decline the funding of any Transaction Expense with respect to Sections 7.1(a)
or 7.1(b), elect to decline the funding of any indemnity payment by the Owner
Trustee with respect to Section 11.8 or extend the expiration date of such
Lender's Commitment or the Holder Commitment of such Holder, forgive the
repayment of any portion of the Holder Advances, Holder Yield or other amounts
due to the Holders, or (ii) terminate, amend, supplement, waive or modify any
provision of this Section 12.4 or reduce the percentages specified in the
definitions of Majority Lenders, Majority Holders or Majority Secured Parties,
modify any other voting provision contained in any of the Operative Agreements
that requires unanimous consent, or consent to the assignment or transfer by the
Owner Trustee of any of its rights and obligations under any Credit Document or
release a material portion of the Collateral (except in accordance with Section
8.8) or release any Credit Party from its obligations under any Operative
Agreement or otherwise alter or extend any payment obligations of any Credit
Party to the Lessor or any Financing Party under the Operative Agreements
(including, without limitation, as a result of any change in the definition of
Base Rent, Limited Recourse Amount, Maximum Amount, Maximum Residual Guaranty
Amount, Rent Commencement Date, Termination Value or any other defined term), or
(iii) terminate, amend, supplement, waive or modify any provision of Section 7
of the Credit Agreement (which shall also require the consent of the Agent), or
(iv) eliminate the automatic

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<PAGE>   65

option under Section 5.3(b) of the Agency Agreement requiring that the
Construction Agent pay certain liquidated damages in exchange for the conveyance
of a Property to the Construction Agent, or (v) permit the extension of the
Construction Period for any individual Property beyond the date that is fifteen
(15) months from the Property Closing Date for such Property or (vi) permit the
Lessee to purchase any Property pursuant to the Purchase Option provided for in
Sections 20.1 and 20.2 of the Lease for less than the Termination Value for such
Property. Any such termination, amendment, supplement, waiver or modification
shall apply equally to each of the Lenders and the Holders and shall be binding
upon all the parties to this Agreement. In the case of any waiver, each party to
this Agreement shall be restored to its former position and rights under the
Operative Agreements, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon. The parties to this Agreement agree that any increase in the Lender
Commitment of any Lender and/or any increase in the Holder Commitment of any
Holder shall be a matter decided by the Majority Secured Parties and not as a
Unanimous Vote Matter.

        If at a time when the conditions precedent set forth in the Operative
Agreements to any Loan are, in the opinion of the Majority Lenders, satisfied,
any Lender shall fail to fulfill its obligations to make such Loan (any such
Lender, a "Defaulting Lender") then, for so long as such failure shall continue
(and without limiting any claims, rights or remedies of the Credit Parties
against the Defaulting Lender), the Defaulting Lender shall (unless the Lessee
and the Majority Lenders, determined as if the Defaulting Lender were not a
"Lender", shall otherwise consent in writing) be deemed for all purposes
relating to terminations, amendments, supplements, waivers or modifications
under the Operative Agreements to have no Loans, shall not be treated as a
"Lender" when performing the computation of Majority Lenders or Majority Secured
Parties, and shall have no rights under this Section 12.4; provided that any
action taken pursuant to the second paragraph of this Section 12.4 shall not be
effective as against the Defaulting Lender.

        If at a time when the conditions precedent set forth in the Operative
Agreements to any Holder Advance are, in the opinion of the Majority Holders,
satisfied, any Holder shall fail to fulfill its obligations to make such Holder
Advance (any such Holder, a "Defaulting Holder") then, for so long as such
failure shall continue (and without limiting any claims, rights or remedies of
the Credit Parties against the Defaulting Holder), the Defaulting Holder shall
(unless the Lessee and the Majority Holders, determined as if the Defaulting
Holder were not a "Holder", shall otherwise consent in writing) be deemed for
all purposes relating to terminations, amendments, supplements, waivers or
modifications under the Operative Agreements to have no Holder Advances, shall
not be treated as a "Holder" when performing the computation of Majority Holders
or Majority Secured Parties, and shall have no rights under this Section 12.4;
provided that any action taken pursuant to the second paragraph of this Section
12.4 shall not be effective as against the Defaulting Holder.

        12.5.   HEADINGS, ETC.

        The Table of Contents and headings of the various Articles and Sections
of this Agreement are for convenience of reference only and shall not modify,
define, expand or limit

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any of the terms or provisions hereof.

        12.6.   PARTIES IN INTEREST.

        Except as expressly provided herein, none of the provisions of this
Agreement are intended for the benefit of any Person except the parties hereto.

        12.7.   GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
                VENUE.

                (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
        HEREUNDER 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).
        Any legal action or proceeding with respect to this Agreement or any
        other Operative Agreement may be brought in the courts of the State of
        Washington in King County or of the United States for the Western
        District of Washington, and, by execution and delivery of this
        Agreement, each of the parties to this Agreement hereby irrevocably
        accepts for itself and in respect of its property, generally and
        unconditionally, the nonexclusive jurisdiction of such courts. Each of
        the parties to this Agreement further irrevocably consents to the
        service of process out of any of the aforementioned courts in any such
        action or proceeding by the mailing of copies thereof by registered or
        certified mail, postage prepaid, to it at the address set out for
        notices pursuant to Section 12.2, such service to become effective three
        (3) days after such mailing. Nothing herein shall affect the right of
        any party to serve process in any other manner permitted by Law or to
        commence legal proceedings or to otherwise proceed against any party in
        any other jurisdiction.

                (b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY,
        TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN
        ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY OTHER
        OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

                (c) Each of the parties to this Agreement hereby irrevocably
        waives any objection which it may now or hereafter have to the laying of
        venue of any of the aforesaid actions or proceedings arising out of or
        in connection with this Agreement or any other Operative Agreement in
        the courts referred to in subsection (a) above and hereby further
        irrevocably waives and agrees not to plead or claim in any such court
        that any such action or proceeding brought in any such court has been
        brought in an inconvenient forum.

                (d) Each party to this Agreement and/or any other Operative
        Agreement agrees that it shall not have a remedy of special, punitive or
        exemplary damages against any other party in any judicial proceeding,
        any dispute, claim or controversy arising out of, connected with or
        relating to this Agreement and/or any other Operative Agreement

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        between,among, or brought by or against any party to this Agreement
        and/or any other Operative Agreement (each, a "Dispute") and hereby
        waives any right or claim to special, punitive or exemplary damages it
        has now or which may arise in the future in connection with any Dispute.

                (e) Nothing in this Section 12.7 shall impair the right of any
        party to request or demand arbitration under Section 12.16.

                (f) IT SHOULD BE NOTED THAT ORAL AGREEMENTS OR ORAL COMMITMENTS
        TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF
        A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

        12.8.   SEVERABILITY.

        Any provision of this Agreement that 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.

        12.9.   LIABILITY LIMITED.

                (a) The Lenders, the Agent, the Credit Parties, the Owner
        Trustee and the Holders each acknowledge and agree that the Owner
        Trustee is (except as otherwise expressly provided herein or therein)
        entering into this Agreement and the other Operative Agreements to which
        it is a party (other than the Trust Agreement and to the extent
        otherwise provided in Section 6.1 of this Agreement), solely in its
        capacity as trustee under the Trust Agreement and not in its individual
        capacity and that the Trust Company shall not be liable or accountable
        under any circumstances whatsoever in its individual capacity for or on
        account of any statements, representations, warranties, covenants or
        obligations stated to be those of the Owner Trustee, except for its own
        gross negligence or willful misconduct and as otherwise expressly
        provided herein or in the other Operative Agreements.

                (b) Anything to the contrary contained in this Agreement, the
        Credit Agreement, the Notes or in any other Operative Agreement
        notwithstanding, but subject to the exceptions set forth in the
        definition of "Exculpated Person" in Appendix A to this Agreement, no
        Exculpated Person shall be personally liable in any respect for any
        liability or obligation arising hereunder or in any other Operative
        Agreement including without limitation the payment of the principal of,
        or interest on, the Notes, or for monetary damages for the breach of
        performance of any of the covenants contained in the Credit Agreement,
        the Notes, this Agreement, the Security Agreement or any of the other
        Operative Agreements. The Lenders, the Holders and the Agent agree that,
        in the event any remedies under any Operative Agreement are pursued,
        neither the Lenders, the

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        Holders nor the Agent shall have any recourse against any Exculpated
        Person, for any deficiency, loss or Claim for monetary damages or
        otherwise resulting therefrom and recourse shall be had solely and
        exclusively against the Trust Estate (excluding Excepted Payments) and
        the Credit Parties (with respect to the Credit Parties' obligations
        under the Operative Agreements); but nothing contained herein shall be
        taken to prevent recourse against or the enforcement of remedies against
        the Trust Estate (excluding Excepted Payments) in respect of any and all
        liabilities, obligations and undertakings contained herein and/or in any
        other Operative Agreement. Notwithstanding the provisions of this
        Section, nothing in any Operative Agreement shall: (i) constitute a
        waiver, release or discharge of any indebtedness or obligation evidenced
        by the Notes and/or the Certificates arising under any Operative
        Agreement or secured by any Operative Agreement, but the same shall
        continue until paid or discharged; (ii) relieve any Exculpated Person
        from liability and responsibility for (but only to the extent of the
        damages arising by reason of): active waste knowingly committed by any
        Exculpated Person with respect to any Property, any fraud, gross
        negligence or willful misconduct on the part of any Exculpated Person;
        (iii) relieve any Exculpated Person from liability and responsibility
        for (but only to the extent of the moneys misappropriated, misapplied or
        not turned over) (A) except for Excepted Payments, misappropriation or
        misapplication by the Lessor (i.e., application in a manner contrary to
        any of the Operative Agreements) of any insurance proceeds or
        condemnation award paid or delivered to the Lessor by any Person other
        than the Agent, (B) except for Excepted Payments, any deposits or any
        escrows or amounts owed by the Construction Agent under the Agency
        Agreement held by the Lessor or (C) except for Excepted Payments, any
        rent or other income received by the Lessor from any Credit Party that
        is not turned over to the Agent; or (iv) affect or in any way limit the
        Agent's rights and remedies under any Operative Agreement with respect
        to the Rents and rights and powers of the Agent under the Operative
        Agreements or to obtain a judgment against the Lessee's interest in the
        Properties or the Agent's rights and powers to obtain a judgment against
        the Lessor or any Credit Party (provided, that no deficiency judgment or
        other money judgment shall be enforced against any Exculpated Person
        except to the extent of the Lessor's interest in the Trust Estate
        (excluding Excepted Payments) or to the extent the Lessor may be liable
        as otherwise contemplated in clauses (ii) and (iii) of this Section
        12.9(b)).

        12.10.  RIGHTS OF THE CREDIT PARTIES.

        If at any time all obligations (i) of the Owner Trustee under the Credit
Agreement, the Security Documents and the other Operative Agreements and (ii) of
the Credit Parties under the Operative Agreements have in each case been
satisfied or discharged in full, then the Credit Parties shall be entitled to
(a) terminate the Lease and guaranty obligations under Section 6B and (b)
receive all amounts then held under the Operative Agreements and all proceeds
with respect to any of the Properties. Upon the termination of the Lease and
Section 6B pursuant to the foregoing clause (a), the Lessor shall transfer to
the Lessee all of its right, title and interest free and clear of the Lien of
the Lease, the Lien of the Security Documents and all Lessor Liens in and to any
Properties then subject to the Lease and any amounts or proceeds referred to in
the foregoing clause (b) shall be paid over to the Lessee.

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        12.11.  FURTHER ASSURANCES.

        The parties hereto shall promptly cause to be taken, executed,
acknowledged or delivered, at the sole expense of the Lessee, all such further
acts, conveyances, documents and assurances as the other parties may from time
to time reasonably request in order to carry out and effectuate the intent and
purposes of this Participation Agreement, the other Operative Agreements and the
transactions contemplated hereby and thereby (including without limitation the
preparation, execution and filing of any and all Uniform Commercial Code
financing statements, filings of Mortgage Instruments and other filings or
registrations which the parties hereto may from time to time request to be filed
or effected). The Lessee, at its own expense and without need of any prior
request from any other party, shall take such action as may be necessary
(including without limitation any action specified in the preceding sentence),
or (if the Owner Trustee shall so request) as so requested, in order to maintain
and protect all security interests provided for hereunder or under any other
Operative Agreement. In addition, in connection with the sale or other
disposition of any Property or any portion thereof, the Lessee agrees to execute
such instruments of conveyance as may be reasonably required in connection
therewith.

        12.12.  CALCULATIONS UNDER OPERATIVE AGREEMENTS.

        The parties hereto agree that all calculations and numerical
determinations to be made under the Operative Agreements by the Owner Trustee
shall be made by the Agent and that such calculations and determinations shall
be conclusive and binding on the parties hereto in the absence of manifest
error.

        12.13.  CONFIDENTIALITY.

        Each of the Agent, Holders and Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' (as defined below) directors,
officers, employees and agents, including accountants, legal counsel and other
advisors (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such Information and instructed
to keep such Information confidential); (b) to the extent requested by any
regulatory authority; (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process; (d) to any other party
to any Operative Agreement; (e) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to any Operative Agreement
or the enforcement of rights hereunder; (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (1) any
participant, assignee or transferee or any prospective participant, assignee or
transferee permitted under Section 10.1 of the Participation Agreement, Sections
9.7 or 9.8 of the Credit Agreement or Section 11.8 of the Trust Agreement, or
(2) any direct or indirect contractual counterparty or prospective counterparty
(or such contractual counterparty's or prospective counterparty's professional
advisor) to any credit derivative transaction relating to obligations of any
Credit Party (g) with the consent of any Credit Party; (h) to the extent such
Information (1) becomes publicly available other than as a result of a breach of
this Section or (2) becomes available to Agent, any Holder or any Lender on a
nonconfidential basis from a source other than any Credit Party; (i) to the
National Association

                                       64
<PAGE>   70

of Insurance Commissioners or any other similar organization or any nationally
recognized rating agency that requires access to information about a Lender's or
Holder's or any of their Affiliates' investment portfolio in connection with
ratings issued with respect to such Lender or Holder or any of their Affiliates;
or (j) to market data collectors, and similar service providers to the lending
industry and in connection with the administration and management of this
Agreement or any other Operative Agreement. For the purposes of this Section,
"Information" means the existence of this Agreement and all information received
from any Credit Party relating to such Credit Party or its business, other than
any such information that is available to Agent, any Holder or any Lender on a
nonconfidential basis prior to disclosure by such Credit Party; provided that,
in the case of information received from any Credit Party after the date hereof,
such information is clearly identified in writing at the time of delivery as
confidential. For the purposes of this Section, "Affiliate" means, as to any
Person, any other Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person. Any Person required
to maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information. The
obligations under this Section shall survive the expiration of this Agreement
and shall remain in effect for two years after the Expiration Date.

        12.14.  FINANCIAL REPORTING/TAX CHARACTERIZATION.

        Each Financing Party and each Credit Party agrees to obtain advice from
its own accountants and tax counsel regarding the financial reporting treatment
and the tax characterization of the transactions described in the Operative
Agreements. Each Financing Party and each Credit Party further agrees that it
shall not rely upon any statement of any other Financing Party or Credit Party
or any of their respective Affiliates and/or Subsidiaries regarding any such
financial reporting treatment and/or tax characterization. Each Financing Party
and each Credit Party further agrees that no other Financing Party or Credit
Party shall have any liability (including without limitation with respect to any
act or omission on the part of such party) with respect to the financial
reporting treatment and/or the tax characterization of the transactions
described in the Operative Agreements.

        12.15.  SET-OFF.

        In addition to any rights now or hereafter granted under applicable Law
and not by way of limitation of any such rights, and regardless of the adequacy
of any collateral, upon and after the occurrence of any Event of Default and
during the continuance thereof, the Lenders, the Holders, their respective
Affiliates and any assignee or participant of a Lender or a Holder in accordance
with the applicable provisions of the Operative Agreements are hereby authorized
by the Credit Parties at any time or from time to time, without notice to the
Credit Parties or to any other Person, any such notice being hereby expressly
waived, to set-off and to appropriate and to apply any and all deposits (general
or special, time or demand, including without limitation indebtedness evidenced
by certificates of deposit, whether matured or unmatured) and any other
indebtedness at any time held or owing by the Lenders, the Holders, their
respective Affiliates or

                                       65
<PAGE>   71

any assignee or participant of a Lender or a Holder in accordance with the
applicable provisions of the Operative Agreements to or for the credit or the
account of any Credit Party against and on account of the obligations of any
Credit Party under the Operative Agreements irrespective of whether or not (a)
the Lenders or the Holders shall have made any demand under any Operative
Agreement or (b) the Agent shall have declared any or all of the obligations of
any Credit Party under the Operative Agreements to be due and payable and
although such obligations shall be contingent or unmatured. Notwithstanding the
foregoing, neither the Agent nor any other Financing Party shall exercise, or
attempt to exercise, any right of setoff, banker's lien, or the like, against
any deposit account or property of any Credit Party held by the Agent or any
other Financing Party, without the prior written consent of the Majority Secured
Parties, and any Financing Party violating this provision shall indemnify the
Agent from any and all costs, expenses, liabilities and damages resulting
therefrom. The contractual restriction on the exercise of setoff rights provided
in the foregoing sentence is solely for the benefit of the Agent and the
Financing Parties and may not be enforced by any Credit Party.

        12.16.  [INTENTIONALLY OMITTED.]

                            [signature pages follow]

                                       66
<PAGE>   72

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

CONSTRUCTION AGENT
AND LESSEE:                             SHURGARD STORAGE CENTERS, INC., as the
                                        Construction Agent and as the Lessee

                                        By:           /s/ Harrell Beck
                                           -------------------------------------
                                        Name:         Harrell Beck
                                             -----------------------------------
                                        Title:        CFO
                                              ----------------------------------

                                        Address:      1155 Valley Street
                                                      Suite 400
                                                      Seattle, Washington  98109
                                                      Attention: Harrell Beck
                                                      Telephone:  206-652-3765
                                                      Telecopy:  206-652-3710

                                        with a copy to:

                                                      1155 Valley Street
                                                      Suite 400
                                                      Seattle, Washington  98109
                                                      Attention: General Counsel
                                                      Telephone:  206-652-3765
                                                      Telecopy:  206-652-3710

<PAGE>   73

GUARANTORS:                             SHURGARD EVERGREEN LIMITED PARTNERSHIP,
                                        as a Guarantor

                                        By:  Shurgard Storage Centers, Inc.,
                                             its general partner

                                        By:        /s/ Harrell Beck
                                           -------------------------------------
                                        Name:      Harrell Beck
                                             -----------------------------------
                                        Title:     CFO
                                              ----------------------------------

                                        Address:   c/o Shurgard Storage Centers,
                                                   Inc.
                                                   1155 Valley Street
                                                   Suite 400
                                                   Seattle, Washington  98109
                                                   Attention: Harrell Beck
                                                   Telephone:  206-652-3765
                                                   Telecopy:  206-652-3710

                                        SHURGARD TEXAS LIMITED PARTNERSHIP,
                                        as a Guarantor

                                        By:  Shurgard Storage Centers, Inc.,
                                             its general partner

                                        By:        /s/ Harrell Beck
                                           -------------------------------------
                                        Name:      Harrell Beck
                                             -----------------------------------
                                        Title:     CFO
                                              ----------------------------------

                                        Address:   c/o Shurgard Storage Centers,
                                                   Inc.
                                                   1155 Valley Street
                                                   Suite 400
                                                   Seattle, Washington  98109
                                                   Attention: Harrell Beck
                                                   Telephone:  206-652-3765
                                                   Telecopy:  206-652-3710

<PAGE>   74

                                        SHURGARD INSTITUTIONAL FUND LP II,
                                        as a Guarantor

                                        By:  Shurgard Partners L.P. II,
                                             its general partner

                                        By:  Shurgard General Partner, Inc.,
                                             one of its general partners

                                        By:        /s/ Harrell Beck
                                           -------------------------------------
                                        Name:      Harrell Beck
                                             -----------------------------------
                                        Title:     CFO
                                              ----------------------------------

                                        Address:   c/o Shurgard Storage Centers,
                                                   Inc.
                                                   1155 Valley Street
                                                   Suite 400
                                                   Seattle, Washington  98109
                                                   Attention: Harrell Beck
                                                   Telephone:  206-652-3765
                                                   Telecopy:  206-652-3710

                                        SSC EVERGREEN, INC., as a Guarantor

                                        By:        /s/ Taunya Schultz
                                           -------------------------------------
                                        Name:      Taunya Schultz
                                             -----------------------------------
                                        Title:     Secretary
                                              ----------------------------------

                                        Address:   c/o Shurgard Storage Centers,
                                                   Inc.
                                                   1155 Valley Street
                                                   Suite 400
                                                   Seattle, Washington  98109
                                                   Attention: Harrell Beck
                                                   Telephone:  206-652-3765
                                                   Telecopy:  206-652-3710

<PAGE>   75

OWNER TRUSTEE AND
LESSOR:                                 FIRST SECURITY BANK, NATIONAL
                                        ASSOCIATION, not individually, except as
                                        expressly stated herein, but solely as
                                        the Owner Trustee under the Storage
                                        Centers Trust 2001

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

                                        Address:    First Security Bank,
                                                           National Association
                                                    79 South Main Street,
                                                    Third Floor
                                                    Salt Lake City, Utah 84111
                                                    Attention: Val T. Orton,
                                                           Vice President
                                                    Telephone:  801-246-5300
                                                    Telecopy:  801-246-5053

<PAGE>   76

AGENT:                                  BANK OF AMERICA, N.A., as the Agent
-----

                                        By:           /s/ Dora A. Brown
                                           -------------------------------------
                                        Name:         Dora A. Brown
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

                                        Address:      Bank of America, N.A.
                                                      Fifth Avenue Plaza
                                                      800 Fifth Avenue
                                                      Floor 37
                                                      Mail Code:  WA1-501-37-20
                                                      Seattle, WA 98104-3185
                                                      Attention: Dora A. Brown
                                                      Telephone:  206-358-0101
                                                      Telecopy:  206-358-0971

<PAGE>   77

LENDERS:                                BANK HAPOALIM B.M., as a Lender

                                        By:           /s/ Marc Bosc
                                           -------------------------------------
                                        Name:         Marc Bosc
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

                                        By:           /s/ Conrad Wagner
                                           -------------------------------------
                                        Name:         Conrad Wagner
                                             -----------------------------------
                                        Title:        First Vice President
                                              ----------------------------------

<PAGE>   78

                                        BANK OF AMERICA, N.A., as a Lender

                                        By:           /s/ William P. Stivers
                                           -------------------------------------
                                        Name:         William P. Stivers
                                             -----------------------------------
                                        Title:        Senior Vice President
                                              ----------------------------------

<PAGE>   79

                                        THE BANK OF NOVA SCOTIA, as a Lender

                                        By:           /s/ Patrik G. Norris
                                           -------------------------------------
                                        Name:         Patrik  G. Norris
                                             -----------------------------------
                                        Title:        Director
                                              ----------------------------------

<PAGE>   80

                                        BANK ONE, NA, as a Lender

                                        By:           /s/ Timothy J. Carew
                                           -------------------------------------
                                        Name:         Timothy J. Carew
                                             -----------------------------------
                                        Title:        First Vice President
                                              ----------------------------------

<PAGE>   81

                                        COMMERZBANK AG, NEW YORK AND GRAND
                                        CAYMAN BRANCHES, as a Lender

                                        By:         /s/ R. William Knickerbocker
                                           -------------------------------------
                                        Name:       R. William Knickerbocker
                                             -----------------------------------
                                        Title:      Assistant Vice President
                                              ----------------------------------

                                        By:         /s/ Christine H. Finkel
                                           -------------------------------------
                                        Name:       Christine H. Finkel
                                             -----------------------------------
                                        Title:      Vice President
                                              ----------------------------------

<PAGE>   82

                                        KEYBANK NATIONAL ASSOCIATION,
                                        as a Lender

                                        By:           /s/ Kevin P. Murray
                                           -------------------------------------
                                        Name:         Kevin P. Murray
                                             -----------------------------------
                                        Title:        Assistant Vice President
                                              ----------------------------------

<PAGE>   83

                                        SUNTRUST BANK, as a Lender

                                        By:           /s/ Blake K. Thompson
                                           -------------------------------------
                                        Name:         Blake K. Thompson
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

<PAGE>   84

                                        U.S. BANK, NATIONAL ASSOCIATION,
                                        as a Lender

                                        By:           /s/ Miles S. Silverthorn
                                           -------------------------------------
                                        Name:         Miles S. Silverthorn
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

<PAGE>   85

                                        WASHINGTON MUTUAL BANK, as a Lender

                                        By:           /s/ David M. Purcell
                                           -------------------------------------
                                        Name:         David M. Purcell
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

<PAGE>   86

                                        FLEET NATIONAL BANK, as a Lender

                                        By:           /s/ Kathleen M. Ahern
                                           -------------------------------------
                                        Name:         Kathleen M. Ahern
                                             -----------------------------------
                                        Title:        Director
                                              ----------------------------------

<PAGE>   87

                                        LASALLE BANK, NATIONAL ASSOCIATION,
                                        as a Lender

                                        By:           /s/ Klay Schmeisser
                                           -------------------------------------
                                        Name:         Klay Schmeisser
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

<PAGE>   88

HOLDERS:                                BANK OF AMERICA, N.A., as a Holder

                                        By:           /s/ William P. Stivers
                                           -------------------------------------
                                        Name:         William P. Stivers
                                             -----------------------------------
                                        Title:        Senior Vice President
                                              ----------------------------------

<PAGE>   89

                                        BANK HAPOALIM B.M., as a Holder

                                        By:           /s/ Marc Bosc
                                           -------------------------------------
                                        Name:         Marc Bosc
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

                                        By:           /s/ Conrad Wagner
                                           -------------------------------------
                                        Name:         Conrad Wagner
                                             -----------------------------------
                                        Title:        First Vice President
                                              ----------------------------------

<PAGE>   90

                                        THE BANK OF NOVA SCOTIA, as a Holder

                                        By:           /s/ Patrik G. Norris
                                           -------------------------------------
                                        Name:         Patrik G. Norris
                                             -----------------------------------
                                        Title:        Director
                                              ----------------------------------

<PAGE>   91

                                        COMMERZBANK AG, NEW YORK AND GRAND
                                        CAYMAN BRANCH, as a Holder

                                        By:        /s/ R. William Knickerbocker
                                           -------------------------------------
                                        Name:      R. William Knickerbocker
                                             -----------------------------------
                                        Title:     Assistant Vice President
                                              ----------------------------------

                                        By:        /s/ Christine H. Finkel
                                           -------------------------------------
                                        Name:      Christine H. Finkel
                                             -----------------------------------
                                        Title:     Vice President
                                              ----------------------------------

<PAGE>   92

                                        KEYBANK NATIONAL ASSOCIATION,
                                        as a Holder

                                        By:           /s/ Kevin P. Murray
                                           -------------------------------------
                                        Name:         Kevin P. Murray
                                             -----------------------------------
                                        Title:        Assistant Vice President
                                              ----------------------------------

<PAGE>   93

                                        SUNTRUST BANK, as a Holder

                                        By:           /s/ Blake K. Thompson
                                           -------------------------------------
                                        Name:         Blake K. Thompson
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

<PAGE>   94

                                        U.S. BANK, NATIONAL ASSOCIATION,
                                        as a Holder

                                        By:           /s/ Miles S. Silverthorn
                                           -------------------------------------
                                        Name:         Miles S. Silverthorn
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

<PAGE>   95

                                        WASHINGTON MUTUAL BANK, as a Holder

                                        By:           /s/ David M. Purcell
                                           -------------------------------------
                                        Name:         David M. Purcell
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

<PAGE>   96

                                        FLEET NATIONAL BANK, as a Holder

                                        By:           /s/ Kathleen M. Ahern
                                           -------------------------------------
                                        Name:         Kathleen M. Ahern
                                             -----------------------------------
                                        Title:        Director
                                              ----------------------------------

<PAGE>   97

                                        LASALLE BANK, NATIONAL ASSOCIATION,
                                        as a Holder

                                        By:           /s/ Klay Schmeisser
                                           -------------------------------------
                                        Name:         Klay Schmeisser
                                             -----------------------------------
                                        Title:        Vice President
                                              ----------------------------------

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