Document:

SEVERANCE AGREEMENT

         THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into on this
17th  day of  December,  1999,  by and  between  PLM  INTERNATIONAL,  INC.,  its
successors and/or assigns (the "Company"), and Susan C. Santo ("Employee").

         WHEREAS,  Employee  currently  holds the  position  of Vice  President,
General Counsel and Secretary of the Company; and

         WHEREAS, the Board of Directors of the Company has recently engaged the
investment  banking firm of Imperial  Capital,  LLC to explore various strategic
and  financial  alternatives  for  maximizing  shareholder  value on a near-term
basis,  including,  but not  limited  to, a  possible  transaction  or series of
transactions  representing  a  merger,  consolidation,  or  any  other  business
combination, a sale of all or a substantial amount of the business,  securities,
or assets of the Company, or a recapitalization or spin-off;

         WHEREAS,  the  consideration  of any such  transaction  by the Board of
Directors  has led to  uncertainty  regarding the future path of the Company and
the long-term prospects for executive employment with the Company;

         WHEREAS,  the Company's Board of Directors  believes it is important to
the enhancement of shareholder  value that,  notwithstanding  such  uncertainty,
Employee act vigorously and  constructively  in connection with any negotiations
being  conducted  regarding  any such  transaction  to achieve the results  most
favorable to the Company's  shareholders  and to continue to manage the on-going
business  of  the  Company  in  order  to  achieve  the  most  positive  results
attainable; and

         WHEREAS,  as an inducement  for Employee to remain in the employ of the
Company during this period of uncertainty,  this Agreement  provides for certain
incentives  for  Employee  upon a change in control (as defined  herein) and for
certain  severance  benefits  to be paid and  provided  to Employee in the event
Employee's employment is terminated following a change in control.

         NOW,  THEREFORE,  in  consideration  of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Employee agree as follows:

         1. Term. The term of this  Agreement  shall commence on January 1, 2000
and shall  continue (i) until  December 31, 2000 so long as no Change in Control
(as defined  below) has occurred on or before  December 31, 2000; or (ii) in the
event a Change in Control has occurred on or before  December  31,  2000,  until
Employee's  employment  has been  terminated (by the Company or by Employee) and
all obligations under this Agreement have been met.

         2.       Change in Control.

                  A. For the purposes of this  Agreement  only, the term "Change
in Control" shall mean the occurrence of any one of the following events:

                           (i) Any  person  or group (a  "Person"),  within  the
                  meaning of Sections 13(d) or 14(d) of the Securities  Exchange
                  Act of  1934,  as  amended  (the  "Exchange  Act"),  acquiring
                  "beneficial ownership" ("Beneficial Ownership"), as defined in
                  Rule  13d-3  under the  Exchange  Act,  of  securities  of the
                  Company  representing  more than  fifty  percent  (50%) of the
                  combined  voting  power  of  the  Company's  then  outstanding
                  securities; provided, however, in determining whether a Change
                  in Control has occurred,  voting securities which are acquired
                  in a "Non-Control  Acquisition" (as hereinafter defined) shall
                  not  constitute an  acquisition  which would cause a Change in
                  Control. A "Non-Control Acquisition" shall mean an acquisition
                  by (a) an  employee  benefit  plan (or  trust  forming  a part
                  thereof) maintained by the Company or any corporation or other
                  Person of which a majority  of its voting  power or its voting
                  equity  securities or equity  interests is owned,  directly or
                  indirectly, by the Company (for purposes of this definition, a
                  "Subsidiary"), (b) the Company or its Subsidiaries, or (c) any
                  Person in  connection  with a  "Non-Control  Transaction"  (as
                  hereinafter defined);

                           (ii)  A  merger,   consolidation  or   reorganization
                  (collectively,  a "Transaction")  involving the Company unless
                  such   Transaction   is   a   "Non-Control   Transaction."   A
                  "Non-Control  Transaction" shall mean a Transaction  involving
                  the Company where:

                                    (a)   The   stockholders   of  the   Company
                           immediately  before such Transaction own, directly or
                           indirectly,  immediately  following such Transaction,
                           at least fifty percent  (50%) of the combined  voting
                           power of the  outstanding  voting  securities  of the
                           corporation  resulting  from  such  Transaction  (the
                           "Surviving  Corporation") in  substantially  the same
                           proportion   as  their   ownership   of  the   voting
                           securities  of the  Company  immediately  before such
                           Transaction, or

                                    (b) No Person,  other than (1) the  Company,
                           (2) any Subsidiary,  or (3) any employee benefit plan
                           (or any trust forming a part  thereof)  maintained by
                           the  Company  or  any   Subsidiary,   has  Beneficial
                           Ownership  of more than  fifty  percent  (50%) of the
                           combined voting power of the Surviving  Corporation's
                           then outstanding voting securities;

                           (iii)  The  sale  or  other  disposition  of  all  or
                  substantially  all of the assets of the  Company to any Person
                  (other than a transfer to a Subsidiary of the Company)  and/or
                  the sale or other disposition of the Company's  subsidiary PLM
                  Financial Services, Inc. (through an asset sale or stock sale)
                  to any Person  (other than a transfer to a  Subsidiary  of the
                  Company);  provided,  however, that in no event shall the sale
                  or other  disposition  of the  Company's  subsidiary  American
                  Finance  Group,  Inc.  (AFG) by  itself,  or the sale or other
                  disposition of the Company's trailer leasing business (through
                  a sale of  substantially  all of the Company's  trailer assets
                  and/or  sale of the  stock  of the  Company's  subsidiary  PLM
                  Rental,  Inc.) (Trailer  Leasing) by itself, be deemed to be a
                  sale or other  disposition of all or substantially  all of the
                  assets of the Company for the purposes of this Agreement;  and
                  further provided, that the sale or other disposition of AFG or
                  the sale or other disposition of Trailer Leasing,  followed by
                  the sale or other  disposition of Trailer Leasing (in the case
                  of an earlier sale or  disposition of AFG) or AFG (in the case
                  of an earlier sale or disposition of Trailer  Leasing),  shall
                  be  deemed  to be a  sale  or  other  disposition  of  all  or
                  substantially all of the assets of the Company; or

                           (iv) The  stockholders  of the Company approve a plan
                  of dissolution or liquidation of the Company.

                  B. In the  event  that a  Change  in  Control  transaction  as
defined in this Agreement  occurs,  and such  transaction is also deemed to be a
Change  in  Control  as  defined  in and  under the  Employment  Agreement  (the
"Employment  Agreement")  dated as of November  19, 1997 between the Company and
Employee (specifically, a majority of the members of the Continuing Directors of
the Board of  Directors  of the  Company  does not approve the Change in Control
event specifically for purposes of the Employment Agreement), then the terms and
conditions of the  Employment  Agreement,  including but not limited to Sections
10.2, 11, 12 and 13 thereof, shall govern and supercede this Agreement.

         3.       Acceleration and Vesting.

                  A.       Stock Options and Grants.

                           (i) Upon the  occurrence of a Change in Control,  any
                  and all options to purchase  stock and grants of stock (common
                  or otherwise) in the Company  granted to Employee  pursuant to
                  any plan or otherwise,  including  options granted pursuant to
                  the 1988 Management  Stock  Compensation  Plan and/or the 1998
                  Management Stock  Compensation Plan, and any and all grants of
                  stock in the Company granted to Employee  pursuant to the 1996
                  Mandatory  Management Stock Bonus Plan  (collectively,  any or
                  all of these  plans  shall be referred to herein as the "Stock
                  Plans"), shall become immediately accelerated and fully vested
                  and any  restrictions on such options and grants shall, to the
                  extent  permissible  under  applicable  securities laws, fully
                  lapse. The Company shall endeavor to cause any restrictions on
                  the options or grants not lapsed by  operation of this Section
                  3(A)(i) to so lapse.

                           (ii) Upon the vesting of all such  options and grants
                  pursuant to Section 3(A)(i) or Section  6(C)(ii) below and, in
                  the case of options, so long as such options have not expired,
                  Employee  may elect by  written  notice to the  Company at any
                  time following such vesting that the Company  "cash-out"  such
                  options  and/or  grants by paying to Employee  within five (5)
                  days of such notice the value of the options  and/or grants so
                  long as Employee surrenders to the Company,  and agrees to the
                  cancellation  of,  the  options  or  grants.  The value of the
                  options  and/or grants shall be calculated as follows:  (a) in
                  the event  that the  Change in Control is a result of a tender
                  offer and so long as Employee  provides his "cash-out"  notice
                  to the Company  within 30 days of the conclusion of the tender
                  offer, then Employee shall be paid the per share price paid to
                  the  Company's  shareholders  in  connection  with such tender
                  offer, or (b) in all other  circumstances,  the Employee shall
                  be paid the average daily closing price of the common stock of
                  the Company for the ten trading days immediately preceding the
                  date of Employee's "cash-out" notice, less in the case of both
                  (a) and (b) for the cash-out  options,  the exercise  price of
                  the option. In the event Employee does not elect to "cash-out"
                  pursuant to this  Section  3(A)(ii),  then  Employee's  rights
                  regarding such options and grants shall be as set forth in the
                  respective  Stock Plans and agreements  governing such options
                  and grants,  except that Employee  shall be deemed to be fully
                  vested and any  restrictions  on such options and grants shall
                  remain fully lapsed.

                  B. Executive Deferred Compensation  Agreement. In the event of
a Change in Control as  defined  in this  Agreement,  a Change in Control of the
Company shall also be deemed to have occurred for the purpose of Section 10.1 of
the  Executive  Deferred   Compensation   Agreement  (the  "Executive   Deferred
Compensation  Agreement")  dated as of January 18, 1999  between the Company and
Employee,  so that  effective  with the  occurrence  of the  Change in  Control,
Employee  shall be treated for purposes of the Executive  Deferred  Compensation
Agreement  as if  Employee  had  attained  age 60 on the first day of the second
calendar  month  preceding the calendar  month in which the Change in Control of
the Company  occurs,  and  Employee's  Vesting  Factor under  Section 1.4 of the
Executive  Deferred  Compensation  Agreement shall become and forever thereafter
remain 1.

         4. Termination By Company In Connection With a Change in Control.

                  A. In the event that  Employee's  employment  is terminated by
the Company subsequent to or in connection with a Change in Control for a reason
other than Cause or  Disability,  the Company  shall pay Employee the  Severance
Benefits specified in Section 6(C).

                  B. For purposes of this  Agreement,  "Cause"  shall be limited
to:

                           (i) The willful and continued  failure by Employee to
                  perform his/her day to day  responsibilities  substantially in
                  the same  manner as  performed  prior to the Change in Control
                  (other than any failure  resulting from Employee's  incapacity
                  due to physical or mental  illness),  which has not been cured
                  within ten (10) days  after  written  demand  for  substantial
                  performance  is delivered  by the Company to  Employee,  which
                  demand  specifically  identifies  the manner in which Employee
                  has   not   substantially   performed   his/her   day  to  day
                  responsibilities.  The  financial  condition  of  the  Company
                  (including any  subsidiary,  division or department  thereof),
                  and/or   Employee's   contribution   thereto,   shall  not  be
                  considered  for the purposes of determining  whether  Employee
                  has   willfully   failed  to  perform   his/her   day  to  day
                  responsibilities;

                           (ii) A willful  and  intentional  act or  omission by
                  Employee  which is,  in the  reasonable  determination  of the
                  Company,  materially  injurious to the Company,  monetarily or
                  otherwise.  For  purposes  of  subsection  (i)  above and this
                  subsection  (ii), no act or omission on Employee's  part shall
                  be considered  willful and intentional unless done, or omitted
                  to be done,  by  him/her  not in good  faith and  without  the
                  reasonable belief that his/her action(s) or omission(s) was in
                  the best interests of the Company; or

                           (iii) The  conviction  of  Employee  of,  or  his/her
                  admission or plea of nolo  contendere to, a crime involving an
                  act of moral turpitude,  which is a felony or which results or
                  is intended  to result,  directly  or  indirectly,  in gain or
                  personal  enrichment  of Employee,  relatives of Employee,  or
                  their affiliates at the expense of the Company;

provided,  however, that,  notwithstanding anything to the contrary contained in
this Section 4(B),  "Cause" shall not be deemed to include a refusal by Employee
to execute any  certificate  or document that Employee in good faith  determines
contains any untrue statement of a material fact.

                  C. For the purposes of this Agreement,  Disability  shall mean
if, as a result of  Employee's  incapacity  due to physical  or mental  illness,
Employee  shall have been absent or  substantially  absent from  his/her  duties
hereunder  for a period of six (6)  consecutive  months,  and within thirty (30)
days after a Notice of  Termination  (as  hereinafter  defined) is given,  which
Notice  of  Termination  may be given  before or after the end of such six month
period,  Employee  shall not have returned to the  performance of his/her duties
hereunder on a full-time basis,  Employee's  employment shall terminate upon the
expiration of such thirty (30) days.  Employee's absence or substantial  absence
from his/her duties will be treated as resulting from incapacity due to physical
or mental illness if Employee is "totally disabled from his/her own occupation."
Total  disability from Employee's own occupation will exist where (i) because of
sickness or injury,  Employee  cannot  perform the  important  duties of his/her
occupation,  (ii)  Employee is either  receiving  Doctor's Care or has furnished
written proof  acceptable to the Company that further  Doctor's Care would be of
no benefit, and (iii) Employee does not work at all. Doctor's Care means regular
and personal care of a Doctor which,  under  prevailing  medical  standards,  is
appropriate for the condition causing the disability.

         5.       Termination by Employee.

                  A. Employee may terminate  his/her  employment during the term
of this  Agreement  upon thirty (30) days' Notice of  Termination to the Company
for any reason. If Employee terminates his/her employment  hereunder  subsequent
to a Change  in  Control  and such  termination  is made for any of the  reasons
listed  in  Section  5(B)  (such  reason(s)  to be  detailed  in the  Notice  of
Termination), such termination shall be deemed to have been done for good reason
("Good  Reason")  and the Company  shall pay  Employee  the  Severance  Benefits
specified in Section 6(C), below.

                  B. Reasons constituting "Good Reason" shall include:

                           (i)  Any  breach  by  the  Company  of  any  material
                  provision  of this  Agreement  which has not been cured within
                  ten  (10)   days   after   written   notice   detailing   such
                  non-compliance is given by Employee to the Company;

                           (ii) Any demonstrable and material  diminution of the
                  base  compensation,  duties,  responsibilities,  authority  or
                  powers of Employee as they relate to any  positions or offices
                  held by Employee during the term of this  Agreement;  provided
                  that Employee  provides a reasonable  description  of any such
                  diminution(s)  and a statement  that Employee  finds,  in good
                  faith,  such diminution to be a material  diminution and that,
                  as  such,  he/she  elects  to  terminate  his/her   employment
                  hereunder for Good Reason.  Notwithstanding  the foregoing,  a
                  reduction  in the staff of the  Company  following a Change in
                  Control  which  results in the Employee  taking on  additional
                  responsibilities  shall not be  considered a diminution of the
                  duties, responsibilities,  authority or powers of Employee for
                  the purposes of this Agreement;

                           (iii) The failure of the Company to include  Employee
                  in any employee  benefit plan or incentive  compensation  plan
                  for  which  Employee  has  previously  participated  or  would
                  reasonably  expect to participate  in. Employee may reasonably
                  expect  to   participate   in  a  benefit  plan  or  incentive
                  compensation plan if, without  limitation,  other employees of
                  the Company with similar titles, levels of responsibilities or
                  salaries  participate  or  have  participated  in  such  plan.
                  Notwithstanding the foregoing, (a) to the extent not otherwise
                  determined  pursuant to the incentive  compensation  plan, the
                  Board of Directors shall have the sole discretion to determine
                  the amount of such bonus, or incentive  compensation,  if any,
                  and (b) the Company  may change the terms of any benefit  plan
                  so long as such changes occur pursuant to a program applicable
                  to all  employees  or  executives  of the  Company  and do not
                  result in a proportionately greater reduction in the rights of
                  or  benefits  to the  Employee  as  compared  with  any  other
                  employee or executive of the Company; or

                           (iv) Any  requirement  by the Company  that  Employee
                  relocate  his/her  primary  business  office to a geographical
                  area  greater  than  twenty  (20)  miles  from the  Company 's
                  principal executive offices as existing on January 1, 1999, or
                  if  Employee  is based in an office  other than the  Company's
                  principal  executive  offices,  twenty  (20)  miles  from  the
                  Company's  office  where  Employee  is based as of  January 1,
                  1999.

                  C. In the event  Employee  terminates  his/her  employment for
Good Reason and the Company  disputes that the  termination was for Good Reason,
the Company  shall have the burden of proving that any such reason was not "Good
Reason".

         6.       Compensation Upon Termination.

                  A.  Termination For Cause.  Following a Change in Control,  if
Employee's employment is terminated for Cause as defined in this Agreement,  the
Company shall pay Employee  his/her full Base Salary (and any accrued but unused
vacation  and  personal  days)  through the Date of  Termination  at the rate in
effect at the time Notice of Termination is given, and the Company shall have no
further obligations to Employee under this Agreement.  The Employment  Agreement
shall also be terminated as of the Date of Termination,  and neither party shall
have any further rights or obligations thereunder.  The rights,  limitations and
obligations of each of the Employee and the Company under any other agreement or
plan,  including  but not limited to any stock  option  plan,  stock grant plan,
deferred  compensation  plan and  related  agreement(s),  each as may have  been
modified by the terms of this Agreement, shall remain in full force and effect.

                  B. Termination for Disability.  Following a Change in Control,
if  Employee's  employment  is  terminated  for  Disability  as  defined in this
Agreement,  the Company shall pay to Employee  his/her full Base Salary  through
the Date of  Termination at the rate in effect at the time Notice of Termination
is given. The Company shall also pay to Employee any accrued but unused vacation
and  personal  days,  and the Company  shall also  provide  benefits to Employee
pursuant  to the  standard  policy of the  Company  with  respect to  terminated
disabled employees.  The Employment Agreement shall also be terminated as of the
Date of  Termination,  and  neither  party  shall  have any  further  rights  or
obligations thereunder.  The rights,  limitations and obligations of each of the
Employee and the Company  under any other  agreement or plan,  including but not
limited to any stock option plan, stock grant plan,  deferred  compensation plan
and related  agreement(s),  each as may have been  modified by the terms of this
Agreement, shall remain in full force and effect.

                  C.  Termination  Without Cause or  Termination by Employee For
Good Reason.  If, (a)  subsequent  to or resulting  from a Change in Control the
Company  terminates  Employee's  employment  hereunder  other  than for Cause or
Disability, or (b) subsequent to a Change in Control Employee terminates his/her
employment for Good Reason,  the Company shall,  in addition to paying  Employee
his/her full Base Salary  through the Date of  Termination at the rate in effect
at the time the  Notice of  Termination  is given  and any  accrued  but  unused
vacation and personal  days (as required by law),  pay to Employee  within seven
(7)  business  days of the Date of  Termination,  and provide to  Employee,  the
following severance benefits:

                           (i) The Company shall pay to Employee an amount equal
                  to twelve (12) months of Employee's  annual base salary at the
                  highest   rate  in  effect   during  the  twelve  (12)  months
                  immediately preceding the Date of Termination,  less customary
                  payroll  deductions,  such  payment  to be made at  Employee's
                  option either in a lump sum, or in  semi-monthly  installments
                  (starting on the first regularly  scheduled  payday  following
                  the Date of  Termination,  and  continuing  on each  regularly
                  scheduled payday thereafter until paid). In the event Employee
                  fails to notify  the  Company of  his/her  option,  the amount
                  shall be paid in a lump sum;

                           (ii) Any and all options to purchase stock (common or
                  otherwise)  in the  Company  granted to  Employee  following a
                  Change in Control  pursuant to any plan or otherwise,  and any
                  and all grants of stock in the  Company  granted  to  Employee
                  following  a  Change  in  Control  pursuant  to  any  plan  or
                  otherwise,  shall  become  immediately  accelerated  and fully
                  vested  and  any  restrictions  on  such  options,  grants  or
                  equivalent or similar rights shall, to the extent  permissible
                  under  applicable  securities  laws,  fully lapse. The Company
                  shall  endeavor  to cause  any  restrictions  on the  options,
                  grants or equivalent or similar rights not lapsed by operation
                  of this Section 6(C)(ii) to so lapse.  Employee shall have the
                  same rights in such  accelerated and vested options and grants
                  as provided in Section  3(A)(ii) and the Company  shall pay to
                  Employee the value of the options  and/or  grants upon receipt
                  of Employee's written notice of his/her election to "cash-out"
                  pursuant to Section 3(A)(ii); and

                           (iii) At the Employee's election by written notice to
                  the Company made within five (5) business  days  following the
                  Notice of Termination,  the Company shall pay to Employee in a
                  lump  sum  the   total   amount  of  any   Monthly   Executive
                  Compensation  Benefit  payments  that are  payable  under  the
                  Executive Deferred Compensation Agreement,  which amount shall
                  have been  determined  pursuant to the terms of Sections  5(a)
                  and  5(b) of the  Executive  Deferred  Compensation  Agreement
                  after taking into consideration the automatic  acceleration of
                  vesting as provided in Section 10.1 (including Section 10.1(a)
                  and 10.1(b)) of the Executive Deferred Compensation Agreement.
                  In  the  event   Employee  is  paid  his  executive   deferred
                  compensation  in a  lump  sum  as  provided  in  this  Section
                  5(A)(ii),  the Executive Deferred Compensation Agreement shall
                  be terminated and of no further force or effect.  In the event
                  Employee  does not elect to receive a lump sum  payment of his
                  executive  deferred  compensation,  then the Monthly Executive
                  Compensation  Benefit  payments  that are  payable  under  the
                  Executive  Deferred  Compensation   Agreement  shall  be  paid
                  pursuant to the terms of that agreement, which shall remain in
                  full force and effect; and

                           (iv) Employee  shall  continue to  participate in all
                  life insurance,  medical, health, dental and disability plans,
                  programs or arrangements ("Insurance Plans") in which Employee
                  participated  immediately  prior to the Date of Termination on
                  the same terms as Employee  participated  immediately prior to
                  the Date of  Termination  for the shorter period of (a) twelve
                  (12) months  from the Date of  Termination  or (b)  Employee's
                  commencement  of full time  employment with a new company that
                  provides Employee with benefits at least as favorable as those
                  provided by the Company;  provided that  Employee's  continued
                  participation   is  possible   under  the  general  terms  and
                  provisions  of such  plans  and  programs  and  Employee  will
                  continue to be obligated to pay the same  employee  portion of
                  any premium and any deductible and/or  co-payments  associated
                  with such insurance Plans as was required immediately prior to
                  the Date of Termination.  Employee's  right to continued group
                  benefits  after any  period  covered  by the  Company  will be
                  determined in accordance with federal and state law.

                           (v) The payments  and  benefits  provided for in this
                  Section 6(C) are in addition to, and shall not be deemed to be
                  in lieu  of,  any  other  payments  and/or  benefits  to which
                  Employee is entitled, including without limitation any and all
                  payments and benefits under the PLM  International,  Inc. 401K
                  and Profit Sharing Plan and any other insurance and disability
                  plans.

                  D. Other  Termination  by  Employee.  If following a Change in
Control Employee  terminates  his/her  employment for any reason other than Good
Reason,  the Company shall pay to Employee  his/her full Base Salary through the
Date of  Termination  at the rate in effect at the time Notice of Termination is
given and any accrued but unused  vacation  and personal  days,  and the Company
shall  have no  further  obligations  to  Employee  under  this  Agreement.  The
Employment Agreement shall also be terminated as of the Date of Termination, and
neither  party  shall have any further  rights or  obligations  thereunder.  The
rights,  limitations  and  obligations  of each of the  Employee and the Company
under any other agreement or plan, including but not limited to any stock option
plan, stock grant plan,  deferred  compensation  plan and related  agreement(s),
each as may have been modified by the terms of this  Agreement,  shall remain in
full force and effect.

                  E.  Termination  Prior to a Change in Control.  This Agreement
does  not  provide  for the  payment  or  provision  of  severance  benefits  in
connection  with a  termination  by Employee or the Company  prior to and not in
connection  with a Change in  Control.  Employee's  rights to any such  benefits
shall continue to be governed by law or other written  agreement,  if any exists
between  Employee and the Company,  and nothing in this Agreement is intended to
change,  or shall be  construed  as  changing,  any of the legal or  contractual
rights of either party to terminate Employee's  employment (for Cause,  at-will,
for Good Reason,  or otherwise)  prior to and not in connection with a Change in
Control.

                  F. Section 280G.  Notwithstanding any other provisions of this
Agreement or any other  agreement  between the Company and the Employee,  in the
event that any payment or benefit  received or to be received by the Employee in
connection  with a  Change  in  Control  or the  termination  of the  Employee's
employment  (whether  pursuant to the terms of this Agreement or any other plan,
arrangement  or agreement with the Company or any Person whose actions result in
a Change in Control or any Person  affiliated  with the Company or such  Person)
(all such payments and  benefits,  including  the  severance  benefits  provided
hereunder,  being  hereinafter  called "Total Payments") would not be deductible
(in whole or part),  by the Company,  an affiliate or Person making such payment
or providing  such  benefit as a result of section 280G of the Internal  Revenue
Code of 1986,  as amended (the "Code"),  then,  to the extent  necessary to make
such portion of the Total Payments deductible (and after taking into account any
reduction in the Total  Payments  provided by reason of section 280G of the Code
in such other plan,  arrangement or agreement),  the benefits provided hereunder
shall  be  reduced  (if   necessary,   to  zero);   provided,   however,   that,
notwithstanding the terms of any other plan or agreement, the Employee may elect
to have the  benefits  payable  under any other plan or  agreement  reduced  (or
eliminated) prior to any reduction of the benefits payable under this Agreement,
which may include, in the case of the Executive Deferred Compensation Agreement,
an election to reduce the  Employee's  Compensation  Period under the  Executive
Deferred Compensation  Agreement (without increasing the amount determined under
Section 1.1 of the  Executive  Deferred  Compensation  Agreement  as  Employee's
Monthly Deferred Compensation Benefit).

                           (i) For purposes of this  limitation in the event the
                  Company  asserts  that  the  limitation  would  apply,  (a) no
                  portion of the Total  Payments  the  receipt or  enjoyment  of
                  which the Employee  shall have waived at such time and in such
                  manner as not to constitute a "payment"  within the meaning of
                  section  280G(b) of the Code shall be taken into account,  (b)
                  no portion of the Total  Payments  shall be taken into account
                  that, in the opinion of tax counsel ("Tax  Counsel")  selected
                  by the Employee and reasonably  accepted by the Company,  does
                  not  constitute  a "parachute  payment"  within the meaning of
                  section 280G(b)(2) of the Code, including by reason of section
                  280G(b)(4)(A) of the Code, (c) the benefits payable under this
                  Agreement  shall be reduced  only to the extent  necessary  so
                  that the Total  Payments  (other  than  those  referred  to in
                  clauses (a) or (b)) in their  entirety  constitute  reasonable
                  compensation for services actually rendered within the meaning
                  of  section  280G(b)(4)(B)  of the Code or are  otherwise  not
                  subject to  disallowance  as  deductions  by reason of section
                  280G of the Code,  in the opinion of Tax Counsel,  and (d) the
                  value  of any  noncash  benefit  or any  deferred  payment  or
                  benefit  included in the Total Payments shall be determined in
                  accordance with the principles of sections  280G(d)(3) and (4)
                  of the Code.

                           (ii)  If  it  is  established  pursuant  to  a  final
                  determination  of a  court  or  an  Internal  Revenue  Service
                  proceeding  that,   notwithstanding  the  good  faith  of  the
                  Employee and the Company in applying the terms of this Section
                  6(F), the Total Payments paid to or for the Employee's benefit
                  are in an amount  that  would  result in any  portion  of such
                  Total  Payments being subject to the Excise Tax, then, if such
                  repayment  would  result in (a) no  portion  of the  remaining
                  Total  Payments  being  subject  to the  Excise  Tax and (b) a
                  dollar-for-dollar  reduction in the Employee's  taxable income
                  and wages for purposes of federal,  state and local income and
                  employment taxes, the Employee shall have an obligation to pay
                  the Company  upon demand an amount equal to the sum of (x) the
                  excess of the  Total  Payments  paid to or for the  Employee's
                  benefit over the Total  Payments  that could have been paid to
                  or for the  Employee's  benefit  without  any  portion of such
                  Total  Payments  being  subject  to the  Excise  Tax;  and (y)
                  interest  on the  amount  set  forth  in  clause  (x) of  this
                  sentence at the rate provided in section  1274(b)(2)(B) of the
                  Code from the date of the  Employee's  receipt of such  excess
                  until the date of such payment.

                           (iii) By execution  and  delivery of this  Agreement,
                  the  provisions  of  Section  10.4 of the  Executive  Deferred
                  Compensation  Agreement are hereby superseded and such section
                  is hereby declared null and void.

         7. Mitigation. Employee shall not be required to mitigate the amount of
any  payment  or  benefit  provided  for in  this  Agreement  by  seeking  other
employment or otherwise and, except as otherwise  provided in Section  6(C)(iv),
no payment or benefit  provided  for in this  Agreement  shall be reduced by any
compensation  earned by Employee as the result of employment by another employer
after the termination of his/her employment with the Company.

         8.  Other  Definitions.  The  following  definitions  shall  apply  for
purposes of this Agreement:

                  A. Notice of  Termination.  Any purported  termination  by the
Company or by Employee shall be communicated by written Notice of Termination to
the  other  party  hereto.  For  purposes  of  this  Agreement,   a  "Notice  of
Termination"  shall mean a notice which shall indicate the specific  termination
provision in this Agreement relied upon. Any purported termination of Employee's
employment which is not effected pursuant to a Notice of Termination  satisfying
the requirements of this paragraph shall not be effective.

                  B. Date of Termination.  "Date of Termination"  shall mean, as
applicable,  (a) if Employee's  employment is terminated for Disability,  thirty
(30) days after Notice of Termination is given (provided that Employee shall not
have returned to the  performance of his/her duties on a full-time  basis during
such  thirty  (30)  day  period),  (b)  the  date  specified  in the  Notice  of
Termination in compliance with the terms of this Agreement, or (c) if no date is
specified, the date on which a Notice of Termination is given.

         9.       Successors; Binding Agreement.

                  A.  The  Company  shall  require  any  successors  or  assigns
(whether direct or indirect by purchase, merger,  consolidation or otherwise) to
all or substantially  all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent as if they were an original party hereto,  and this Agreement shall inure
to the benefit of any such successor or assign.

                  B.  This  Agreement  shall  inure  to  the  benefit  of and be
enforceable  by  Employee's  executors,   administrators,   successors,   heirs,
distributes, devisees and legatees.

         10. Other Agreements.  Except as expressly set forth herein, nothing in
this  Agreement is intended to alter the  obligations  of the Company and/or the
Employee in connection with any other written  agreement between the Company and
the Employee.

         11.      Miscellaneous.

         11.1 Written  notices  required by this Agreement shall be delivered to
the  Company or  Employee in person or sent by  overnight  courier or  certified
mail, with a return receipt requested,  to the Company's  registered address and
to Employee's last shown address on the Company's records, respectively.  Notice
sent by certified  mail shall be deemed to be delivered two days after  mailing,
and all other notices shall be deemed to be delivered when received.

         11.2 This Agreement contains the full and complete understanding of the
parties  regarding the subject matter  contained herein and supersedes all prior
representations, promises, agreements and warranties, whether oral or written.

         11.3 This Agreement shall be governed by and  interpreted  according to
the laws of the state of California.

         11.4  The  captions  of the  various  sections  of this  Agreement  are
inserted only for  convenience  and shall not be  considered in construing  this
Agreement.

         11.5 This Agreement can be modified, amended or any of its terms waived
only by a writing signed by both parties.

         11.6 If any provision of this Agreement shall be held invalid,  illegal
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid,  illegal or  unenforceable  provision shall be
limited or eliminated  only to the extent  necessary to remove such  invalidity,
illegality or  unenforceability  in accordance  with the  applicable law at that
time.

         11.7 If either party  institutes an action to enforce the terms of this
Agreement,  the  prevailing  party in such  action  shall be entitled to recover
reasonable attorneys' fee, costs and expenses.

         11.8 No remedy made  available to either party by any of the provisions
of this  Agreement  is intended to be exclusive  of any other  remedy.  Each and
every remedy shall be cumulative  and shall be in addition to every other remedy
given hereunder as well as those remedies existing at law, in equity, by statute
or otherwise.

         IN WITNESS  WHEREOF,  the parties have executed this document as of the
date specified above.

PLM INTERNATIONAL, INC.                     EMPLOYEE

By:      /s/Robert N. Tidball                /s/Susan C. Santo
         --------------------------          -----------------------------
Its:     President                           Susan C. Santo

ATTEST:  _______________________            ATTEST:  _____________________EMPLOYMENT AGREEMENT

         THIS  EMPLOYMENT  AGREEMENT  ("Agreement")  is made and entered into on
this 1st day of January,  1999, by and between American Finance Group, Inc. (the
"Company") and Donald R. Dugan ("Employee").

         WHEREAS, Employee currently holds the position(s) of President of the
Company; and

         WHEREAS,  the  Company's  sole  shareholder,  PLM  International,  Inc.
("PLMI")  recently  announced  publicly  that its Board of Directors has engaged
Legg Mason Wood Walker,  Incorporated to explore strategic  alternatives for the
Company; and

         WHEREAS,  such announcement has led to uncertainty regarding the future
path of the Company and the long-term  prospects for executive  employment  with
the Company; and

         WHEREAS,  Employee is an "employee at will", and as such the Company is
not legally  obligated to continue  his/her  employment  for any fixed period of
time; and

         WHEREAS,  the  Company's  Board of Directors  ("Board")  believes it is
important to the  enhancement of shareholder  value that,  notwithstanding  such
uncertainty, Employee continue his/her employment with the Company in order that
the Company can benefit from the continued  availability of Employee's  services
for a period  continuing  until  after  PLMI has  completed  its  evaluation  of
strategic alternatives regarding the Company and, should PLMI engage in any form
of transaction  involving the Company to increase shareholder value,  continuing
for  a  period  of  time  after  such  transaction  has  been  consummated;  and
consequently,  the Board intends to provide the  incentives set forth herein for
Employee to remain in the Company's employ during such period; and

         WHEREAS,  as an  additional  inducement  for  Employee to remain in the
employ of the  Company  both  before and after a change in control  transaction,
this Agreement provides that certain severance benefits will be paid to Employee
in the event Employee's employment is terminated by the Company without cause or
by Employee for good reason  following the execution of this  Agreement  through
June 30, 2000;

         NOW,  THEREFORE,  in  consideration  of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Employee agree as follows:

         1.  Services.  The Company  hereby  engages the  exclusive  services of
Employee as  President  with the powers and duties in that  capacity  consistent
with the powers and duties  exercised  by Employee as  President  as of the date
hereof, and as determined by the Board from time to time. Employee hereby agrees
to perform such  services on the terms and  conditions  herein  contained and to
abide by all rules and  regulations for conduct that are now or may hereafter be
reasonably established by the Company.  Employee shall be based at the principal
executive  offices of the Company,  except for required  travel on the Company's
business to an extent  substantially  consistent  with present  business  travel
obligations.

         2. Agreement  Term. The term of this Agreement shall be from January 1,
1999 through June 30, 2000.  Employee's  employment  under this Agreement  shall
continue during the term of this Agreement unless  terminated sooner pursuant to
Sections  10 or 11 of this  Agreement,  and  after  the term of this  Agreement,
Employee's employment shall continue at-will.

         3. Compensation. The Company shall pay to Employee as full compensation
for all services  performed for the Company,  the sum of One Hundred Eighty Nine
Thousand Dollars  ($189,000) per year, or such higher amount as may be agreed to
by the  Company  and  Employee  from  time to time (the  original  amount or the
adjusted  amount,  if  applicable,  being the "Base  Salary"),  payable in equal
semi-monthly installments.  Employee's compensation may be adjusted from time to
time, but it may not be reduced below the Base Salary without  Employee's  prior
written  consent.  The Company may deduct and  withhold  from all payments to be
made to Employee hereunder amounts required or, with Employee's written consent,
permitted  to be  deducted  or  withheld  pursuant  to  any  provisions  of  any
applicable law or  regulation,  together with the right and authority to pay any
such deductions or withholdings  over to any party entitled to the same pursuant
to the provisions of any such law or regulation.

         4.      Bonus.

                  A. Incentive Bonus.  Employee shall be eligible to participate
in any bonus or  incentive  compensation  plan in  effect  from time to time for
senior  executives of the Company  generally  (each, an "Incentive  Compensation
Plan").  To the extent not  otherwise  determined  pursuant  to the terms of any
Incentive  Compensation  Plan,  (a) the Board shall have the sole  discretion to
determine  the amount of bonus or  incentive  compensation  ("Incentive  Bonus")
payable under such Incentive  Compensation  Plan, if any, and (b) Employee shall
not be entitled to payment of any  Incentive  Bonus unless he/she is employed by
the Company on the date such bonus is paid.  Notwithstanding the foregoing,  the
Company shall within thirty (30) days  following a Change in Control (as defined
in Section 12 hereof),  pay to Employee  the  amount,  if any, of any  Incentive
Bonus  which the Board  determines  in its sole  discretion  has been  earned by
Employee  during  the  performance  period  ending as of the date the  Change in
Control  occurs,  so long as  Employee is employed by the Company as of the date
the Change in Control occurs.

                  B.  Retention  Bonus.  The Company agrees to pay to Employee a
retention bonus under either of the following circumstances:

                           (i)     In the absence of a Change in Control, during
                                   the period of one (1) year following the date
                                   of  this   Agreement,   Employee  shall  have
                                   remained employed by the Company continuously
                                   throughout such period; or

                           (ii)    In the event a Change in  Control  does occur
                                   within  one (1)  year  following  the date of
                                   this Agreement,  Employee shall have remained
                                   employed  by the  Company  or  its  successor
                                   continuously throughout the period of six (6)
                                   consecutive  months  from  the  date  of  the
                                   Change of Control.

         The amount of the retention bonus payable under this Section 4(B) shall
be Forty Seven Thousand Two Hundred Fifty Dollars ($47,250). The retention bonus
shall be paid to  Employee  in cash  within  thirty  (30) days after the date on
which Employee  satisfies the  conditions of either  Section  4(B)(i) or Section
4(B)(ii)  above,  whichever  is  applicable.  No amount  paid to  Employee  as a
retention  bonus hereunder shall be deemed to be in lieu of a bonus or incentive
compensation, if any, payable to Employee pursuant to any Incentive Compensation
Plan.

         5. Other Benefits. During the term of this Agreement, the Company shall
maintain,  and Employee shall be entitled to continue to participate  in, all of
the  Company's  employee  benefit plans and  arrangements  in effect on the date
hereof in which Employee participates;  or such other plans or arrangements that
would  provide  Employee  with  substantially   equivalent  benefits  thereunder
(including  without limitation each pension and retirement plan and arrangement,
life insurance plan and  arrangement,  health and accident plan and arrangement,
medical  insurance plan and  arrangement,  disability  plan and  arrangement and
vacation plan) (the "Employee  Benefit  Plans");  provided,  however,  that this
Section  5  shall  not  apply  to any of the  Company's  Incentive  Compensation
Plan(s),  the  terms of which  shall  prevail.  The  Company  shall not make any
changes in such plans or arrangements  which would adversely  affect  Employee's
rights or benefits  thereunder,  unless such change occurs pursuant to a program
applicable  to all employees or executives of the Company and does not result in
a proportionately  greater reduction in the rights of or benefits to Employee as
compared with any other employee or executive of the Employer. Employee shall be
entitled to participate in and receive  benefits under any Employee Benefit Plan
or  arrangement  made  available by the Company in the future to its  employees,
executives or key  management  employees,  subject to and on a basis  consistent
with  the  terms,  conditions  and  overall  administration  of such  plans  and
arrangements.  Nothing paid to Employee under any plan or arrangement  presently
in effect or made  available  in the future shall be deemed to be in lieu of the
Base  Salary  payable  to  Employee  pursuant  to Section 3 hereof or any amount
payable to Employee  pursuant to an  Incentive  Compensation  Plan or  retention
bonus as provided in Section 4 hereof.

         6. Other  Interests.  Employee  shall devote his/her full business time
and  attention  solely to the  business and  interests  of the Company,  and the
Company  shall be  entitled  to all the  benefits  arising  from or  incident to
Employee's  services.  During  the  term  of  Employee's  employment  hereunder,
Employee shall not, without the Company's written consent,  have any interest in
any business which competes  either directly or indirectly with the Company's or
PLMI's  business,  except that Employee may hold an interest not exceeding  five
percent (5%) in any corporation whose stock is publicly traded.

         7. Confidentiality.  It is specifically understood and agreed that some
of the Company's  business  activities are secret in nature and constitute trade
secrets,  including  but not  limited to the  Company's,  PLMI's or any of their
subsidiaries'  (the  "Subsidiaries")   "know-how,"  methods  of  production  and
manufacturing, ideas and results of research and development,  specifications of
equipment and materials,  profit  margins,  planning  information,  projections,
customer and supplier information,  reports,  analyses,  agreements,  as well as
financial data and reports (collectively,  the "Confidential Information").  All
Confidential Information is and shall be the property of the Company and/or PLMI
for each of their own exclusive use and benefit, and Employee agrees that he/she
will hold the same in  strictest  confidence  and will not at any  time,  either
during or after his/her  employment by the Company,  communicate  or divulge any
such  Confidential  Information  to  anyone  other  than the  Company  and those
designated  by it, or use or permit the use of the same for  his/her own benefit
or for the benefit of others unless  authorized to do so by the Company's  prior
written consent or by a contract or agreement to which the Company is a party or
by which it is bound. Employee's undertakings set forth in this Section 7 are in
addition to, and not in substitution of, any other obligation the Employee have,
whether by other  agreement  or imposed by law,  regarding  confidentiality  and
disclosure of information,  knowledge or data relating to the Company,  PLMI and
their Subsidiaries.

         8. Services  Furnished.  During the term of Employee's  employment with
the Company,  the Company shall furnish Employee with office space,  secretarial
assistance  and such  other  facilities  and  service  as have  heretofore  been
furnished to Employee.

         9.  Other  Positions.  Employee  agrees  to  serve  without  additional
compensation  if elected or  appointed  a director  of the Company or any of its
subsidiaries,  provided that Employee is indemnified  for serving in any and all
such  capacities on a basis no less favorable  than is currently  provided other
directors of the Company and its subsidiaries.

         10. Termination by the Company.  Employee's employment hereunder may be
terminated  by the  Company  without  any  breach  of this  Agreement  under the
following circumstances:

         10.1  Death  or  Disability.   The  Company  may  terminate  Employee's
employment  hereunder  either  before or following a Change in Control under the
following circumstances:

                  A.       Death.  Employee's  employment  hereunder  shall
automatically  terminate  upon his/her death.

                  B. Disability. If, as a result of Employee's incapacity due to
physical or mental  illness,  Employee  shall have been absent or  substantially
absent from his/her duties hereunder for a period of six (6) consecutive months,
and  within  thirty  (30) days  after a Notice of  Termination  (as  hereinafter
defined) is given,  which Notice of Termination may be given before or after the
end  of  such  six  month  period,  Employee  shall  not  have  returned  to the
performance  of  his/her  duties  hereunder  on a  full-time  basis,  Employee's
employment  shall  terminate  upon the  expiration  of such  thirty  (30)  days.
Employee's absence or substantial absence from his/her duties will be treated as
resulting  from  incapacity  due to  physical  or mental  illness if Employee is
"totally disabled from his/her own occupation." Total disability from Employee's
own  occupation  will exist where (1)  because of  sickness or injury,  Employee
cannot  perform the  important  duties of his/her  occupation,  (2)  Employee is
either receiving  Doctor's Care or has furnished written proof acceptable to the
Company that further Doctor's Care would be of no benefit, and (3) Employee does
not work at all.  Doctor's  Care means  regular  and  personal  care of a Doctor
which,  under  prevailing  medical  standards,  is appropriate for the condition
causing the disability.

         10.2 Without  Cause.  The Company may terminate  Employee's  employment
during the term of this Agreement  without  cause,  either before or following a
Change in Control,  in the sole,  absolute and  unreviewable  discretion  of the
Company,  by a Notice of Termination  given by the Chairman of the Board stating
that the Board has determined that it is in the best interests of the Company or
its shareholders to terminate Employee's employment hereunder.

         10.3     For Cause.

                  A. The Company may terminate Employee's  employment during the
term of this  Agreement  for  Cause,  either  before  or  following  a Change in
Control,  by a Notice of Termination  given by the Chairman of the Board setting
forth one of the reasons specified in Section 10.3(B), below.

                  B. For purposes of this Agreement, "Cause" shall mean:

                           (i)     The willful and continued failure by Employee
                                   to perform  his/her duties  hereunder  (other
                                   than any failure  resulting  from  Employee's
                                   incapacity   due  to   physical   or   mental
                                   illness), which has not been cured within ten
                                   (10)   days   after   written    demand   for
                                   substantial  performance  is delivered by the
                                   Company    to    Employee,    which    demand
                                   specifically  identifies  the manner in which
                                   Employee  has  not  substantially   performed
                                   his/her duties;

                           (ii)    A willful and  intentional act or omission by
                                   Employee   which   is,   in  the   reasonable
                                   determination  of  the  Company,   materially
                                   injurious  to  the  Company,   monetarily  or
                                   otherwise.  For  purposes of  subsection  (i)
                                   above  and this  subsection  (ii),  no act or
                                   omission   on   Employee's   part   shall  be
                                   considered  willful  and  intentional  unless
                                   done,  or omitted to be done,  by him/her not
                                   in good  faith  and  without  the  reasonable
                                   belief that his/her  action(s) or omission(s)
                                   was in the best interests of the Company;

                           (iii)   The  conviction  of  Employee  of, or his/her
                                   admission  or plea of nolo  contendere  to, a
                                   crime  involving  an act of  moral  turpitude
                                   which is a  felony  or  which  results  or is
                                   intended to result,  directly or  indirectly,
                                   in gain or personal  enrichment  of Employee,
                                   relatives of Employee, or their affiliates at
                                   the expense of the Company; or

                           (iv)    The  breach  by  Employee  of  any   material
                                   covenant of this Agreement which has not been
                                   cured  within  ten (10)  days  after  written
                                   notice  detailing such breach is given by the
                                   Company to Employee;

provided,  however, that,  notwithstanding anything to the contrary contained in
clauses (i) and (ii) of this  Section  10.3(B),  "Cause"  shall be deemed not to
include a refusal by  Employee  to execute  any  certificate  or  document  that
Employee in good faith  determines  contains any untrue  statement of a material
fact.

        11.      Termination by Employee.

                  A. Employee may terminate  his/her  employment during the term
of this  Agreement  upon thirty (30) days' Notice of  Termination to the Company
for any reason. If Employee  terminates  his/her  employment  hereunder and such
termination  is made  for any of the  reasons  listed  in  Section  11(B)  (such
reason(s) to be detailed in the Notice of Termination),  such termination  shall
be deemed to have been done for good reason ("(Good Reason").

                  B. Reasons constituting "Good Reason" shall be limited to:

                           (i)     Any  breach by the  Company  of any  material
                                   provision  of this  Agreement  which  has not
                                   been cured within ten (10) days after written
                                   notice detailing such non-compliance is given
                                   by Employee to the Company;

                           (ii)    Any demonstrable  and material  diminution of
                                   the      base      compensation,      duties,
                                   responsibilities,   authority  or  powers  of
                                   Employee as they relate to any  positions  or
                                   offices  held by Employee  during the term of
                                   this   Agreement;   provided   that  Employee
                                   provides a reasonable description of any such
                                   diminution(s)  and a statement  that Employee
                                   finds, in good faith, such diminution to be a
                                   material diminution and that, as such, he/she
                                   elects  to   terminate   his/her   employment
                                   hereunder for Good Reason;

                           (iii)   The   failure  of  the   Company  to  include
                                   Employee  in any  Employee  Benefit  Plan  or
                                   Incentive   Compensation   Plan   for   which
                                   Employee is properly eligible,  including the
                                   failure to pay Employee  the amount,  if any,
                                   due and owing  Employee  pursuant to any such
                                   Employee    Benefit    Plan   or    Incentive
                                   Compensation Plan;

                           (iv)    Any  requirement by the Company that Employee
                                   relocate his/her primary business office to a
                                   geographical  area  greater  than  fifty (50)
                                   miles from the Company 's principal executive
                                   offices as existing on January 1, 1999, or if
                                   Employee is based in an office other than the
                                   Company's principal executive offices,  fifty
                                   (50) miles from the  Company's  office  where
                                   Employee is based as of January 1, 1999.

         12. Definitions.  The following definitions shall apply for purposes of
this Agreement:

                  A. Notice of  Termination.  Any purported  termination  by the
Company or by Employee shall be communicated by written Notice of Termination to
the  other  party  hereto.  For  purposes  of  this  Agreement,   a  "Notice  of
Termination"  shall mean a notice which shall indicate the specific  termination
provision in this Agreement relied upon. Any purported termination of Employee's
employment which is not effected pursuant to a Notice of Termination  satisfying
the requirements of this paragraph shall not be effective.

                  B. Date of Termination.  "Date of Termination"  shall mean, as
applicable,  (a) if Employee's  employment is terminated for Disability,  thirty
(30) days after Notice of Termination is given (provided that Employee shall not
have returned to the  performance of his/her duties on a full-time  basis during
such  thirty  (30)  day  period),  (b)  the  date  specified  in the  Notice  of
Termination in compliance with the terms of this Agreement, or (c) if no date is
specified, the date on which a Notice of Termination is given.

                  C. Change in Control.  The term "Change in Control" shall mean
the occurrence of any one of the following events:

                            (i)     Any person or group (a "Person"), within the
                                    meaning  of  Sections  13(d) or 14(d) of the
                                    Securities  Exchange Act of 1934, as amended
                                    (the "Exchange Act"),  acquiring "beneficial
                                    ownership"  ("Beneficial   Ownership"),   as
                                    defined  in Rule  13d-3  under the  Exchange
                                    Act,   of    securities   of   the   Company
                                    representing  more than fifty  percent (50%)
                                    of  the   combined   voting   power  of  the
                                    Company's   then   outstanding   securities;
                                    provided,  however, in determining whether a
                                    Change  in  Control  has  occurred,   voting
                                    securities   which   are   acquired   in   a
                                    "Non-Control  Acquisition"  (as  hereinafter
                                    defined) shall not constitute an acquisition
                                    which  would  cause a Change in  Control.  A
                                    "Non-Control   Acquisition"  shall  mean  an
                                    acquisition by (a) an employee  benefit plan
                                    (or trust forming a part thereof) maintained
                                    by (1)  PLMI,  (2)  the  Company  or (3) any
                                    corporation  or  other  Person  of  which  a
                                    majority  of its voting  power or its voting
                                    equity  securities  or equity  interests  is
                                    owned,  directly or  indirectly,  by PLMI or
                                    the   Company   (for    purposes   of   this
                                    definition, a "Subsidiary"), (b) the Company
                                    or its  Subsidiaries,  or (c) any  Person in
                                    connection  with a Non-Control  Transaction"
                                    (as hereinafter defined);

                           (ii)    A  merger,  consolidation  or  reorganization
                                   (collectively, a "Transaction") involving the
                                   Company   unless   such   Transaction   is  a
                                   "Non-Control   Transaction."  A  "Non-Control
                                   Transaction"   shall   mean   a   Transaction
                                   involving the Company where:

                                   (a)   The   stockholders   of   the   Company
                                   immediately   before  such  Transaction  own,
                                   directly or indirectly, immediately following
                                   such  Transaction,  at  least  fifty  percent
                                   (50%)  of the  combined  voting  power of the
                                   outstanding    voting   securities   of   the
                                   corporation  resulting from such  Transaction
                                   (the     "Surviving      Corporation")     in
                                   substantially  the same  proportion  as their
                                   ownership  of the  voting  securities  of the
                                   Company  immediately before such Transaction,
                                   or

                                   (b) No Person,  other  than (1) the  Company,
                                   (2)  PLMI,  (3)  any  Subsidiary,  or (4) any
                                   employee benefit plan (or any trust forming a
                                   part thereof)  maintained the Company,  PLMI,
                                   or any Subsidiary,  has Beneficial  Ownership
                                   of  more  than  fifty  percent  (50%)  of the
                                   combined   voting  power  of  the   Surviving
                                   Corporation's    then   outstanding    voting
                                   securities; or

                           (iii)   The  sale  or  other  disposition  of  all or
                                   substantially   all  of  the  assets  of  the
                                   Company  or PLMI  to any  Person  or  Persons
                                   (other   than  a   transfer   to  PLMI  or  a
                                   Subsidiary of the Company or PLMI).

For purposes of this Agreement,  an event constituting a Change in Control shall
be deemed to have  occurred  upon the  closing or  consummation  of such  event.
Notwithstanding  the  foregoing  provisions of this Section  12(C),  a Change in
Control will not be deemed to have occurred with respect to Employee as a result
of an event specified in this Section 12(C) if Employee has a financial interest
in the Change in Control  transaction other than as an employee of any successor
to the  Company or any  Person who  purchases  all or  substantially  all of the
Company's assets.

         13.      Compensation Upon Termination.

         13.1 Death.  If Employee's  employment is terminated by his/her  death,
the Company shall pay to Employee's  spouse or, if Employee leaves no spouse, to
his/her  estate,  Employee's  full Base  Salary  through  the date of death and,
commencing on the next  succeeding  day which is the last day of the month,  and
monthly thereafter on the last day of each month until a total of three payments
have been made,  an amount  equal to one  twelfth  of the Base  Salary in effect
immediately  prior to Employee's death. The Company shall also pay to Employee's
spouse or, if  Employee  leaves no spouse,  to his/her  estate,  any accrued but
unused vacation and personal days.

         13.2 Termination for Disability. If Employee's employment is terminated
pursuant to Section 10.1(B), the Company shall pay to Employee his/her full Base
Salary  through the Date of Termination at the rate in effect at the time Notice
of Termination is given.  The Company shall also pay to Employee any accrued but
unused  vacation and personal days, and the Company shall also provide  benefits
to Employee  pursuant to the  standard  policy of the  Company  with  respect to
terminated disabled employees.

         13.3 Termination For Cause. If Employee's  employment is terminated for
Cause,  either  before  or after a Change  in  Control,  the  Company  shall pay
Employee  his/her  full Base Salary (and any  accrued  but unused  vacation  and
personal days) through the Date of Termination at the rate in effect at the time
Notice  of  Termination  is  given,  and  the  Company  shall  have  no  further
obligations to Employee under this Agreement.

         13.4  Termination  Without  Cause or  Termination  by Employee For Good
Reason. If, during the term of this Agreement, the Company terminates Employee's
employment  hereunder  other  than  for  Cause  under  Section  10.2,  Death  or
Disability,  or (b) Employee  terminates his/her employment for Good Reason, the
Company shall pay to Employee the severance benefits described below so long as,
upon the  Company's  request,  Employee  enters into a Release  (the  "Release")
substantially  in the form attached hereto as Exhibit A, and such Release is not
revoked before the "Effective  Date," as defined in the Release.  If the Company
does  not  request  the  Release  within  fifteen  (15)  days of the  Notice  of
Termination, this condition shall be deemed waived by the Company.

                  The severance  benefits payable to Employee under this Section
13.4 shall be as follows:

                  (i)     The Company  shall pay to Employee  his/her  full Base
                          Salary  through the Date of Termination at the rate in
                          effect at the time the Notice of  Termination is given
                          and shall pay any  accrued  but  unused  vacation  and
                          personal days;

                  (ii)    The  Company   shall  also  pay  to  Employee  on  the
                          Effective  Date a lump sum amount equal to twenty four
                          (24) months of  Employee's  Base Salary at the highest
                          rate  in  effect   during  the  twelve   (12)   months
                          immediately  preceding the Date of  Termination,  less
                          customary payroll deductions;

                  (iii)   The  Company   shall  also  pay  to  Employee  on  the
                          Effective Date the amount payable as a retention bonus
                          as set forth in Section  4(B),  so long as the Company
                          has not yet paid such retention bonus to Employee; and

                  (iv)   Employee  shall  continue  to  participate  in all life
                         insurance,   medical,  health,  dental  and  disability
                         plans, programs or arrangements  ("Insurance Plans") in
                         which Employee  participated  immediately  prior to the
                         Date of  Termination  on the  same  terms  as  Employee
                         participated   immediately   prior   to  the   Date  of
                         Termination  for the shorter  period of (a) twenty four
                         (24)  months  from  the  Date  of  Termination  or  (b)
                         Employee's  commencement of full time employment with a
                         new  company;   provided  that   Employee's   continued
                         participation  is possible  under the general terms and
                         provisions of such plans and programs and Employee will
                         continue  to be  obligated  to pay  the  same  employee
                         portion  of  any  premium  and  any  deductible  and/or
                         co-payments associated with such insurance Plans as was
                         required  immediately prior to the Date of Termination.
                         Employee's  right to continued group benefits after any
                         period  covered by the Company  will be  determined  in
                         accordance with federal and state law.

         13.5 Other  Termination  by Employee.  If Employee  terminates  his/her
employment  pursuant to Section 11 hereof for any reason other than Good Reason,
the Company shall pay to Employee  his/her full Base Salary  through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
any accrued but unused vacation and personal days.

         13.6 Mitigation.  Employee shall not be required to mitigate the amount
of any payment  provided for in this  Agreement by seeking  other  employment or
otherwise  and,  except as otherwise  provided in Section  13.4(iv),  no payment
provided for in this Agreement  shall be reduced by any  compensation  earned by
Employee as the result of employment by another  employer after the  termination
of his/her employment with the Company.

         14. Covenant Not to Compete.  In  consideration of the mutual terms and
agreements  set  forth  herein,  Employee  hereby  agrees  that  until the first
anniversary of Employee's Date of Termination, (i) Employee will not recruit any
employee of the Company or its subsidiaries or solicit or induce,  or attempt to
solicit or induce,  any  employee of the Company or its  subsidiaries,  provided
that nothing herein shall preclude  Employee from hiring any person who contacts
Employee  for  employment  and who has not been  employed  by the Company or its
subsidiaries at any time during the preceding six months, and (ii) provided that
Employee  has  received  (or the  Company  has  committed  in  writing to pay to
Employee) the severance benefits described in Section 13.4 hereof, Employee will
not solicit,  divert or take away,  or attempt to solicit,  divert or take away,
the business or patronage of any of existing  clients,  customers or accounts of
the Company or its  Subsidiaries.  For  purposes  of this  Section 14, a client,
customer  or account of the Company  shall be deemed to be an  existing  client,
customer or account if such  client,  customer or account is a party to a Master
Lease with the Company or is being invoiced on a regular basis by the Company as
of the Date of Termination.  Notwithstanding  anything in this Section 14 to the
contrary,  the confidentiality  provisions of Section 7 hereof shall continue to
apply in all circumstances arising under this Section 14.

         15. Remedies.  If Employee  violates Section 14 or the  confidentiality
provisions  of Section 7, and  continues to do so after the Company has notified
Employee of such  violation,  the Company shall have the right to seek equitable
restraint of Employee from such activities in contravention of the provisions of
this Agreement,  including  seeking and obtaining a temporary  restraining order
and/or injunction against Employee.

         16. Arbitration.  Except as provided in Section 15, if a dispute arises
between the Company and Employee  concerning any of the terms of this Agreement,
the disputed matter shall be submitted to arbitration. Any disputed matter shall
be settled by  arbitration  in the City of Boston,  Massachusetts  in accordance
with the labor arbitration rules of the American  Arbitration  Association ("AAA
Rules").  Any judgment upon the award rendered by the arbitrators may be entered
in any  court  having  jurisdiction  thereof.  The  arbitrators  shall  have the
authority to grant any equitable  and legal  remedies that would be available in
any  judicial  proceeding   instituted  to  resolve  the  disputed  matter.  The
arbitrators  shall apply the law of the  Commonwealth of Massachusetts in making
any determination hereunder.  Notwithstanding anything to the contrary which may
now or  hereafter  be  contained  in the AAA Rules,  the parties  agree any such
arbitration  shall be conducted before a panel of three arbitrators who shall be
compensated  for  their  services  at a rate to be  determined  by the  American
Arbitration  Association  in the event the  parties  are not able to agree  upon
their  rate of  compensation.  Each party  shall  have the right to appoint  one
arbitrator (to be appointed  within twenty days of the notice of a dispute to be
resolved by  arbitration  hereunder)  and the two  arbitrators  so chosen  shall
mutually  agree  upon the  selection  of the  third  impartial  arbitrator.  The
majority  decision  of the  arbitrators  will be final and  conclusive  upon the
parties hereto.  Employee  specifically  consents to such arbitration and hereby
represents such consent is willfully and voluntarily  given without influence by
coercion or threatening statements from the Company.

         17. Taxes. Notwithstanding anything herein to the contrary, the Company
shall not be  obligated  to pay any portion of any amount  otherwise  payable to
Employee  hereunder if the Company is not reasonably able to deduct such portion
(the  "Excess  Amount")  solely by  operation  of  Section  28OG (or such  other
provision(s) as may from time to time be enacted  governing the deductibility of
so-called "Golden Parachute  Payments") of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall be deemed able reasonably to deduct such
Excess Amount, and all amounts accruing hereunder,  including the Excess Amount,
shall be paid to  Employee,  in the event  Employee  delivers  to the Company an
opinion of an attorney that is reasonably acceptable to the Company stating such
Excess  Amount is  reasonably  deductible by the Company by operation of Section
28OG (or such other provisions as may from time to time be enacted governing the
deductibility of so-called "Golden Parachute Payments") of the Code.

         18. Review by Counsel.  The Company and Employee do hereby  acknowledge
and agree that they have each been  represented by independent  counsel of their
own choice  throughout  all  negotiations  which  preceded the execution of this
Employment  Agreement and that they fully understand and voluntarily accept this
Employment  Agreement and have executed this Employment  Agreement after seeking
the advice of said independent counsel.

         19. Indemnification. During the period of his/her employment hereunder,
the Company  agrees to indemnify  Employee in his/her  capacity as an officer of
the Company  and, if  applicable,  as a member of the Board of  Directors of the
Company or any Subsidiary, all to the maximum extent permitted by law.

         20.  Legal  Fees.  Each  party  to this  Agreement  shall  bear its own
attorneys'  fees, costs and expenses in connection with any action or proceeding
brought to enforce any term or provision of this Agreement.

         21.      Successors; Binding Agreement.

                  A.  The  Company  shall  require  any  successors  or  assigns
(whether direct or indirect by purchase, merger,  consolidation or otherwise) to
all or substantially  all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent  that the Company  would be required to perform it if no such  succession
had taken  place,  and this  Agreement  shall  inure to the  benefit of any such
successor or assign.  Failure of the Company to obtain such  agreement  upon the
effectiveness  of any such  succession  shall be a breach of this  Agreement and
shall entitle  Employee to compensation  from the Company in the same amount and
on the same terms as Employee would be entitled hereunder if Employee terminated
his/her employment for Good Reason, except that for purposes of implementing the
foregoing,  the date on which any such  succession  becomes  effective  shall be
deemed the Date of Termination

                  B.  This  Agreement  shall  inure  to  the  benefit  of and be
enforceable  by  Employee's  executors,   administrators,   successors,   heirs,
distributees,  devisees and legatees.  If Employee  should die after a Notice of
Termination  has been  delivered  by Employee or while any amount would still be
payable to Employee hereunder if Employee had continued to live, all amounts due
to Employee under this Agreement,  unless otherwise  provided  herein,  shall be
paid in  accordance  with the terms of this  Agreement  to  Employee's  devisee,
legatee  or other  designee  or,  if there be no such  designee,  to  Employee's
estate.

         22.      Miscellaneous.

         22.1 Written  notices  required by this Agreement shall be delivered to
the  Company or  Employee in person or sent by  overnight  courier or  certified
mail, with a return receipt requested,  to the Company's  registered address and
to Employee's last shown address on the Company's records, respectively.  Notice
sent by certified  mail shall be deemed to be delivered two days after  mailing,
and all other notices shall be deemed to be delivered when received.

         22.2 This Agreement contains the full and complete understanding of the
parties  regarding the subject matter  contained herein and supersedes all prior
representations, promises, agreements and warranties, whether oral or written.

         22.3 This Agreement shall be governed by and  interpreted  according to
the laws of the Commonwealth of Massachusetts.

         22.4  The  captions  of the  various  sections  of this  Agreement  are
inserted only for  convenience  and shall not be  considered in construing  this
Agreement.

         22.5 This Agreement can be modified, amended or any of its terms waived
only by a writing signed by both parties.

         22.6 If any provision of this Agreement shall be held invalid,  illegal
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid,  illegal or  unenforceable  provision shall be
limited or eliminated  only to the extent  necessary to remove such  invalidity,
illegality or  unenforceability  in accordance  with the  applicable law at that
time.  Notwithstanding the foregoing  provision,  in the event that a payment is
made  pursuant to Section  13.4 and Employee has entered into a Release and such
Release is determined to be invalid, illegal or unenforceable,  Employee and the
Company shall  negotiate in good faith to enter into a new release  covering the
released claims.

         22.7 No remedy made  available to either party by any of the provisions
of this  Agreement  is intended to be exclusive  of any other  remedy.  Each and
every remedy shall be cumulative  and shall be in addition to every other remedy
given hereunder as well as those remedies existing at law, in equity, by statute
or otherwise.

         22.8  Notwithstanding  the  expiration or termination of this Agreement
for any reason whatsoever, the provisions of Sections 7, 14, 15, 16 and 19 shall
expressly survive expiration or termination of the Agreement.

         IN WITNESS WHEREOF,  the parties have executed this document under seal
as of the date specified above.

<PAGE>

                                 THE COMPANY:

                                 AMERICAN FINANCE GROUP, INC.

                                 By:  /s/ Robert N. Tidball
                                 Its: Executive Vice President

                                 ATTEST:

                                    EMPLOYEE:

                               /s/Donald R. Dugan

                                 Donald R. Dugan

                                 ATTEST:

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