PLM INTERNATIONAL INC, DEF 14A, 2000-02-04

PLM INTERNATIONAL INC
DEF 14A, 2000-02-04
EQUIPMENT RENTAL & LEASING, NEC

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SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use
of the Commission Only
(as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

PLM International, Inc.
-----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box): [ ] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

---------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

---------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):

$36,300,000 x 1% x 1/50
---------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$36,300,000
---------------------------------------------------------
(5) Total fee paid:
$7,260
---------------------------------------------------------

[x] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.

(1) Amount previously paid:

---------------------------------------------------------
(2) Form, schedule or registration statement no.:

---------------------------------------------------------
(3) Filing party:

---------------------------------------------------------
(4) Date filed:

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

February 4, 2000

[PLM LOGO]

SALE OF SUBSIDIARY -- YOUR VOTE IS VERY IMPORTANT

Dear Stockholders:

We have agreed to sell all of the outstanding stock of our
industrial and commercial equipment leasing and financing subsidiary,
American Finance Group, Inc., to Guaranty Federal Bank, F.S.B., if you
authorize the proposed sale. In exchange for the stock of AFG, Guaranty has
agreed to pay us a total of $29 million, subject to specific adjustments.
The proposed sale of AFG to Guaranty would take place under a Stock Sale
Agreement, dated as of October 26, 1999 and amended as of January 24, 2000.
The full text of the Stock Sale Agreement is included as Annex A to the
proxy statement that accompanies this letter.

It is not entirely clear under Delaware law whether the proposed
sale of AFG to Guaranty requires the authorization of PLM's stockholders.
To avoid any uncertainty, we are putting the proposed sale to a stockholder
vote, and the sale will not be completed unless it is authorized by the
holders of a majority of our outstanding shares of common stock. We have
scheduled a special meeting of our stockholders for this vote on February
25, 2000. YOUR VOTE IS VERY IMPORTANT.

OUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE
PROPOSED SALE OF AFG TO GUARANTY IS IN THE BEST INTERESTS OF PLM AND ITS
STOCKHOLDERS. THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE PROPOSED SALE
AND THE STOCK SALE AGREEMENT AND RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSED SALE.

We have retained an investment banking firm to investigate various
strategic alternatives for maximizing PLM stockholder value on a near-term
basis (taking into account tax and financial market considerations),
including, among other possibilities, the sale of all of PLM, either as a
whole or in separate parts. It should be emphasized that the proposed sale
of AFG is not conditioned on this process, which is in a preliminary stage,
and that it is possible that no transaction involving other parts of PLM
will occur. As to the possible sale of all of PLM, further stockholder
action (in the form of another stockholder vote or a tender of shares, or
perhaps both) will probably be required to complete such a transaction.
Please note that no specific action other than the proposed sale of AFG is
currently proposed and that we are not asking for your authorization of any
other transaction at this time.

Whether or not you plan to attend the meeting, please take the
time to vote by completing the enclosed proxy card and mailing it to us. A
postage paid envelope is provided for your convenience. If you sign, date
and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote in favor of the proposed sale. If you fail
to return your card and do not vote at the meeting, it will have the same
effect as a vote against the proposed sale.

Only stockholders of record as of December 29, 1999 are entitled
to attend and vote at the special meeting.

The date, time and place of the special meeting are as follows:

February 25, 2000
9:30 a.m.
World Trade Club
World Trade Center, Suite 300
The Embarcadero at the foot
of Market Street
San Francisco, California

The accompanying documents provide you with detailed information
about the proposed sale. In addition, you may obtain information about PLM
from documents that we have filed with the Securities and Exchange
Commission. We encourage you to read the accompanying documents carefully.

On behalf of your Board of Directors, we thank you for your
continued support and again urge you to vote for the proposed sale.

Very truly yours,

Robert N. Tidball
President, Chief Executive Officer
and Chairman of the Board

This proxy statement, dated February 4, 2000, will first be
mailed to stockholders on or about February 4, 2000.

PLM INTERNATIONAL, INC.
One Market
Steuart Street Tower, Suite 800
San Francisco, California 94105

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 25, 2000

To PLM Stockholders:

A special meeting of stockholders of PLM International, Inc., a
Delaware corporation, will be held at 9:30 a.m. on Friday, February 25,
2000 at the World Trade Club located at the World Trade Center, Suite 300,
The Embarcadero at the foot of Market Street, San Francisco, California. A
proxy card and proxy statement for the special meeting are enclosed.

The special meeting is for the purpose of:

1. Considering and voting upon a proposal to sell PLM's wholly-owned
subsidiary American Finance Group, Inc. to Guaranty Federal Bank, F.S.B.
pursuant to the terms of a Stock Sale Agreement, dated as of October 26,
1999 and amended as of January 24, 2000. A copy of the Stock Sale Agreement
is attached as Annex A to the accompanying proxy statement.

2. Transacting such other business as may properly come before the
special meeting and any adjournment thereof. The Board of Directors is not
aware of any other business that will be presented for consideration at the
special meeting.

PLM'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF
THE PROPOSED SALE ARE IN THE BEST INTERESTS OF PLM AND ITS STOCKHOLDERS
AND RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED SALE.

Only holders of PLM common stock of record as of the close of business
on December 29, 1999 are entitled to notice of and to vote at the special
meeting.

The proposed sale will not be completed unless it is authorized by the
affirmative vote of the holders of a majority of the shares of PLM common
stock entitled to vote at the special meeting.

Your vote is important. Whether or not you plan to attend the special
meeting, please complete, date and sign the enclosed proxy card and return
it in the enclosed envelope. If you attend the special meeting, you may
revoke your proxy and vote personally on each matter brought before the
special meeting.

By Order of the Board of Directors,

Susan C. Santo
Vice President, Secretary and General Counsel

San Francisco, California
February 4, 2000

YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY CARD IN THE ENCLOSED ENVELOPE PROMPTLY.

TABLE OF CONTENTS

DESCRIPTION PAGE
QUESTIONS AND ANSWERS ABOUT THE
PROPOSED SALE...........................................1
SUMMARY .....................................................2
The Company.............................................2
The Proposed Sale.......................................2
Sale of American Finance Group..........................2
Use of Proceeds.........................................2
Transition Services Agreement...........................2
Our Reasons for the Proposed Sale.......................2
The Special Meeting.....................................3
Record Date; Shares Entitled to Vote....................3
Vote Required...........................................3
Our Recommendation to Stockholders......................3
Opinion of Financial Advisor............................3
The Stock Sale Agreement................................3
Conditions to the Stock Sale Agreement..................3
Abandonment of the Transactions Contemplated
by the Stock Sale Agreement.............................3
Regulatory Approvals....................................4
Accounting Treatment....................................4
United States Federal Income
Tax Consequences....................................4
No Appraisal Rights.....................................4
RISK FACTORS.................................................5
Liquidity and Capital Resources.........................5
SELECTED CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL DATA................................5
INTRODUCTION.................................................9
THE COMPANY..................................................9
THE SPECIAL MEETING..........................................9
Date, Time and Place....................................9
Matters to be Considered................................9
Record Date; Shares Outstanding and
Entitled to Vote...................................10
Quorum; Vote Required..................................10
Voting and Revocation of Proxies.......................10
Proxy Solicitation.....................................11
THE PROPOSED SALE...........................................11
General................................................11
Description of AFG's Business..........................11
Background of the Proposed Sale........................12

Reasons for the Proposed Sale..........................13
Recommendation of PLM's Board
of Directors.......................................14
Opinion of Financial Advisor...........................14
Use of Proceeds .......................................18
Accounting Treatment for the
Proposed Sale......................................18
United States Federal Income Tax
Consequences.......................................18
Appraisal Rights.......................................18
Regulatory Filings and Approvals.......................18
Transition Services Agreement..........................19
TERMS OF THE STOCK SALE
AGREEMENT..............................................20
Purchase Price.........................................20
The Closing............................................20
Representations and Warranties ........................20
Covenants..............................................21
No Solicitation .......................................21
Employment and Employee Benefit Plans..................21
Conditions ............................................22
Abandonment ...........................................24
Indemnification; Survival of Indemnification
Obligations........................................24
Fees and Expenses .....................................25
Intellectual Property .................................25
Amendment of the Stock Sale Agreement .................25
MARKET PRICE DATA; DIVIDENDS................................26
PLM INTERNATIONAL, INC. UNAUDITED PRO
FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION..................................27
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT.............................................37
INDEPENDENT AUDITORS........................................38
STOCKHOLDER PROPOSALS.......................................38
WHERE YOU CAN FIND MORE
INFORMATION.................................................39
INDEX TO FINANCIAL STATEMENTS..............................F-1
ANNEX A - STOCK SALE AGREEMENT
ANNEX B - OPINION OF LEGG MASON
WOOD WALKER, INCORPORATED
ANNEX C - FINANCIAL COMPUTATIONS

QUESTIONS AND ANSWERS ABOUT THE PROPOSED SALE

Q: WHY IS PLM SELLING AMERICAN FINANCE GROUP?

A: Following an unsuccessful attempt to conduct an initial public
offering of AFG's common stock in 1998, PLM determined that it could not
effectively grow AFG's business because of various disadvantages it faces,
when compared to its competitors, in its cost of capital and its ability to
take full advantage of the tax benefits available to the owner of such a
business. PLM's Board of Directors believes that the price Guaranty is
paying for AFG is both fair and attractive.

Q: WHAT IS PLM PLANNING TO DO WITH THE NET PROCEEDS FROM THE SALE OF AFG?

A: We plan to retain the after-tax proceeds from the sale of AFG while
PLM's Board of Directors considers various strategic alternatives for PLM.
We expect to invest these proceeds in short-term money market accounts
pending a decision by PLM's Board of Directors as to which strategic
alternative it will pursue. Depending on tax and financial considerations
and the progress we may make in implementing our plans to maximize
stockholder value, we may decide to use some or all of the proceeds from
the sale of AFG to fund a self-tender for PLM's stock.

Q: WHY IS PLM ASKING FOR A STOCKHOLDER VOTE? WHAT VOTE IS REQUIRED?

A: The proposed sale may constitute a sale of "substantially all" of
PLM's assets under Delaware corporate law. If so, the proposed sale
requires authorization by the holders of a majority of PLM's outstanding
common stock. Since it is not entirely clear whether the proposed sale
requires stockholder authorization, we are making the sale subject to a
stockholder vote to avoid any uncertainty, and we will not complete the
sale unless it is authorized by the affirmative vote of holders of a
majority of PLM's common stock.

Q: WHAT DO I NEED TO DO NOW?

A: Just complete, sign and mail your signed proxy card in the enclosed
return envelope as soon as possible so that your shares may be represented
at the special meeting. The meeting will take place on February 25, 2000.
PLM's Board of Directors unanimously recommends that you vote in favor of
the proposed sale.

Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?

A: Yes. You can change your vote at any time before we vote your proxy
at the special meeting. You can do so in one of three ways. First, you can
send a written notice stating that you would like to revoke your proxy to
the Secretary of PLM at the address given below. Second, you can request a
new proxy card and complete and send it to the Secretary of PLM at the
address given below. Third, you can attend the special meeting and vote in
person.

You should send any written notice or request for a new proxy card to the
attention of the Secretary, PLM International, Inc., One Market, Steuart
Street Tower, Suite 800, San Francisco, California 94105.

Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?

A: Your broker will vote your shares only if you provide instructions
on how to vote. Following the directions provided by your broker, you
should instruct your broker to vote your shares. Without your instructions,
your shares will not be voted, which will have the same effect as a "no"
vote.

Q: WHEN DO YOU EXPECT THE PROPOSED SALE TO BE COMPLETED?

A: We are working to complete the proposed sale as quickly as possible.
If all necessary approvals have been obtained, we hope to complete the sale
shortly after the special meeting.

Q: WHO CAN ANSWER FURTHER QUESTIONS?

A: If you have more questions about the proposed sale, you should contact:

PLM International, Inc.
One Market
Steuart Street Tower, Suite 800
San Francisco, California 94105
(415) 974-1399
Attention: Investor Relations

SUMMARY

This summary highlights selected information from this document
and may not contain all of the information that is important to you. To
understand the proposed sale more fully and for a complete description of
the legal terms of the proposed sale, you should read carefully this entire
document and the documents we refer you to. See "Where You Can Find More
Information" on page 39. We have included page references parenthetically
to direct you to the place in this document where you can find a more
complete description of the topics presented in the summary.

THE COMPANY

PLM owns or manages a portfolio of commercial and industrial
equipment, transportation equipment and related assets with a combined
original cost of approximately $1.2 billion. PLM's operations are divided
into three segments: refrigerated and dry van (nonrefrigerated) over-the-
road trailer leasing, commercial and industrial equipment leasing and
financing, and the management of investment programs and other
transportation equipment leasing.

THE PROPOSED SALE

SALE OF AMERICAN FINANCE GROUP (SEE PAGE 11)

We have agreed to sell our industrial and commercial equipment
leasing and financing subsidiary, American Finance Group, Inc., to Guaranty
Federal Bank, F.S.B. Specifically, we will sell to Guaranty all of the
stock of AFG for $29 million, subject to adjustment to reflect tax
liabilities we retain and for changes in stockholders' equity between June
30, 1999 and the date on which the proposed sale is completed. The
adjustment is without limit and provides for additional consideration to
PLM to the extent the stockholders' equity account increases from the June
30, 1999 balance or reimbursement to Guaranty to the extent the
stockholders' equity account decreases from the June 30, 1999 balance. Had
the sale been completed as of December 31, 1999, PLM would have received an
aggregate of approximately $33.9 million for AFG, after transaction costs
and after giving effect to the adjustment described above, which includes
reimbursement for an approximately $5.5 million deferred tax liability
transferred by AFG to PLM in connection with the transaction.

USE OF PROCEEDS (SEE PAGE 18)

PLM currently anticipates receiving net after-tax proceeds from
the proposed sale of AFG of approximately $28.5 million. PLM expects to
invest these proceeds in short-term money market accounts while its Board
of Directors considers various strategic alternatives for PLM. Depending on
tax and financial considerations and the progress we may make in
implementing our plans to maximize stockholder value, we may decide to use
some or all of the proceeds from the sale of AFG to fund a self-tender for
PLM's stock.

TRANSITION SERVICES AGREEMENT (SEE PAGE 19)

At the completion of the sale of AFG, at Guaranty's option, PLM
will enter into a Transition Services Agreement with AFG. Under this
agreement, PLM will continue to provide various accounting and related
services to AFG for a limited period of time. PLM does not expect the
Transition Services Agreement to have any significant effect on its results
of operation.

OUR REASONS FOR THE PROPOSED SALE

Following an unsuccessful attempt to conduct an initial public
offering of AFG's common stock in 1998, PLM determined that it could not
effectively grow AFG's business because of disadvantages it faces, when
compared to competitors, in its cost of capital and its ability to take
full advantage of the tax benefits available to the owner of such a
business. PLM's Board of Directors believes that the price Guaranty is
paying for AFG is both fair and attractive.

THE SPECIAL MEETING

The special meeting will be held at the World Trade Club located
at the World Trade Center, Suite 300, The Embarcadero at the foot of Market
Street, San Francisco, California, at 9:30 a.m. on February 25, 2000.
Stockholders will be asked to consider and vote upon the proposed sale and
to transact such other business as may properly come before the special
meeting.

RECORD DATE; SHARES ENTITLED TO VOTE

You are entitled to vote at the meeting if you owned shares of
common stock of PLM as of the close of business on December 29, 1999, the
record date.

On the record date, there were 7,744,798 shares of PLM common
stock entitled to vote at the special meeting. Stockholders will have one
vote at the special meeting for each share of PLM common stock owned by
them on the record date.

VOTE REQUIRED

The proposed sale may constitute a sale of "substantially all" of
the assets of PLM under Delaware corporate law. If so, the proposed sale
requires authorization by a majority of the shares of PLM common stock
outstanding on the record date. Since it is not entirely clear whether the
proposed sale requires stockholder authorization, PLM is making the
proposed sale subject to a stockholder vote to avoid any uncertainty and
will not complete the sale unless it is authorized by the affirmative vote
of a majority of the shares of PLM common stock entitled to vote at the
special meeting.

OUR RECOMMENDATION TO STOCKHOLDERS

PLM's Board of Directors believes that the proposed sale is in the
best interests of PLM and its stockholders and unanimously recommends that
you vote in favor of the proposed sale.

OPINION OF FINANCIAL ADVISOR (SEE PAGE 14)

In deciding to approve the proposed sale, PLM's Board of Directors
considered the opinion of Legg Mason Wood Walker, Incorporated, its
financial advisor, that the consideration to be received by PLM in the
proposed sale is fair to PLM and the holders of PLM common stock from a
financial point of view. The opinion of Legg Mason is attached as Annex B
to this proxy statement. We encourage you to read this opinion.

THE STOCK SALE AGREEMENT

The Stock Sale Agreement, dated as of October 26, 1999 and amended
as of January 24, 2000, is attached as Annex A to this proxy statement. We
encourage you to read the agreement as it is the legal document that
governs the proposed sale.

CONDITIONS TO THE STOCK SALE AGREEMENT
(SEE PAGE 22)

The completion of the proposed sale depends upon meeting a number
of conditions, including the following:

o authorization by a majority vote of PLM's stockholders,
o there being no material adverse change in the business of
AFG and its continuing subsidiaries, taken as a whole,
o obtaining required governmental approvals, and
o the transactions contemplated by the Stock Sale Agreement
not having been abandoned, as described below.

ABANDONMENT OF THE TRANSACTIONS CONTEMPLATED
BY THE STOCK SALE AGREEMENT (SEE PAGE 24)

PLM and Guaranty may jointly agree to abandon the transactions
contemplated by the Stock Sale Agreement at any time prior to the
completion of the sale. Further, Guaranty may abandon the transactions if,
in its opinion, a supplement or amendment by PLM after signing to correct
the disclosure schedule to the agreement materially and adversely affect
the benefits to Guaranty under the agreement. In addition, either PLM or
Guaranty may abandon the transactions contemplated by the Stock Sale
Agreement if:

o a court or other governmental authority prohibits the proposed sale,
o the proposed sale has not been completed by March 15, 2000, or
o the other party breaches in any material respect its
representations, warranties, covenants or other agreements in the
Stock Sale Agreement and the breach cannot be, or has not been,
cured within 30 days.

REGULATORY APPROVALS

The Hart-Scott-Rodino Act prohibits PLM and Guaranty from
completing the proposed sale until each has furnished information to the
Antitrust Division of the Department of Justice and the Federal Trade
Commission and a required waiting period has expired. PLM and Guaranty each
filed the required notification and report forms with the Antitrust
Division and the FTC on December 28, 1999, and each requested early
termination of the required waiting period. The FTC subsequently notified
PLM that the request for early termination of the waiting period was
granted effective January 11, 2000.

Also, prior to completion of the proposed sale, Guaranty must
furnish information to the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation. Guaranty made the appropriate filings with
the OTS and the FDIC on November 23, 1999 and received clearance from the
FDIC on November 26, 1999 and from the OTS on December 20, 1999.

ACCOUNTING TREATMENT

PLM's loss on the sale of AFG will be measured by the difference
between the amount paid by Guaranty and the net book value of the assets
sold, reduced by transaction costs and applicable taxes.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The proposed sale of AFG by PLM will not result in any United
States federal income tax consequences to you. If completed, the proposed
sale will, however, be a taxable event to PLM for United States federal
income tax purposes.

NO APPRAISAL RIGHTS

Under Delaware law, PLM stockholders are not entitled to appraisal
rights in connection with the proposed sale of AFG.

RISK FACTORS

In considering whether to authorize the proposed sale, PLM
stockholders should consider, in addition to the other information
contained in this document, the following matter.

LIQUIDITY AND CAPITAL RESOURCES

The sale of AFG will reduce significantly PLM's revenues and
income from operations. Following the sale of AFG, PLM's results of
operations will depend in part on the internal rate of return generated by
the net proceeds from the proposed sale and on the income produced by PLM's
remaining businesses. To the extent PLM is unable to utilize the net
proceeds of the proposed sale in such a manner as to generate an internal
rate of return equal or nearly equal to AFG's historical returns, the sale
of AFG could adversely affect PLM's results of operations in the future.

SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA

We are providing the following financial data to aid you in your
analysis of the financial aspects of the proposed sale. With the exception
of (1) the selected data as of September 30, 1999 and 1998 and for the nine
months ended September 30, 1999 and 1998 and (2) the pro forma data as of
September 30, 1999 and for the nine months ended September 30, 1999 and
1998 and the fiscal years ended December 31, 1998, 1997 and 1996, we
derived the information from historical consolidated financial statements
of PLM. PLM's consolidated financial statements as of December 31, 1998 and
1997, and for each of the three years in the period ended December 31,
1998, have been audited by KPMG LLP, independent auditors, and are included
in PLM's annual report on Form 10-K for the year ended December 31, 1998,
which is included with the materials mailed with this proxy statement.
AFG's consolidated financial statements as of December 31, 1998 and 1997,
and for each of the three years in the period ended December 31, 1998, have
been audited by KPMG LLP, independent auditors, and appear elsewhere in
this proxy statement. The unaudited consolidated financial statements of
AFG as of September 30, 1999 and 1998 and for each of the nine-month
periods ended September 30, 1999 and 1998 also appear elsewhere in this
proxy statement. The selected financial data as of September 30, 1999 and
1998 and for the nine months ended September 30, 1999 and 1998 have been
derived from the unaudited interim consolidated financial statements of
PLM, which are included in PLM's quarterly report on Form 10-Q/A for the
nine-month period ended September 30, 1999, which is included with the
materials mailed with this proxy statement. The selected pro forma data are
derived from the unaudited pro forma consolidated financial statements and
accompanying notes appearing elsewhere in this proxy statement.

The selected financial data as of September 30, 1999 and 1998 and
for the nine months ended September 30, 1999 and 1998 reflect, in the
opinion of PLM management, all adjustments, consist of only normal,
recurring adjustments necessary for a fair presentation of such data and
have been prepared in accordance with the accounting principles followed in
the presentation of our audited financial statements for the year ended
December 31, 1998. Operating results for the nine months are not
necessarily indicative of the results to be expected for the full fiscal
year.

The selected financial data should be read in conjunction with the
unaudited pro forma consolidated financial statements and accompanying
notes appearing elsewhere in this proxy statement and with the consolidated
financial statements of PLM and accompanying notes and the information
contained in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in PLM's annual report on Form 10-K
for the year ended December 31, 1998 and quarterly report on Form 10-Q/A
for the nine-month period ended September 30, 1999, which are included with
the materials mailed with this proxy statement.

SELECTED CONSOLIDATED HISTORICAL
FINANCIAL DATA

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
HISTORICAL HISTORICAL
-------------------------------------------------------------- -----------------------

1998 1997 1996 1995 1994 1999 1998
---- ---- ---- ---- ---- ---- ----

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues................. $57,078 $49,665 $51,545 $60,073 $53,715 $45,156 $42,775
Operations support............. 17,571 16,633 21,595 26,001 23,510 14,018 12,917
General and administrative..... 7,086 9,472 7,956 10,539 10,366 4,851 6,174
Depreciation and amortization.. 11,833 8,447 11,318 8,616 12,135 11,383 8,891
Commissions.................... -- -- -- 1,416 5,192 -- --
------------ ----------- ------------- -------------- ----------- ------------ ------------
Operating income............... 20,588 15,113 10,676 13,501 2,512 14,904 14,793
Interest expense............... (14,608) (9,891) (7,341) (7,110) (9,777) (11,249) (10,663)
Interest income................ 1,446 1,635 1,228 1,973 3,744 680 1,212
Other income (expense)......... 473 (342) (670) (496) (2,058) (398) 478
Provision for (benefit from)
income tax................... 3,042 1,848 (202) 1,820 (4,068) 1,543 2,274
------------ ----------- -------------- ------------- ----------- ----------- -----------
Income (loss) from continuing
operations................... 4,857 4,667 4,095 6,048 (1,511) 2,394 3,546
Cumulative effect of
accounting change............ -- -- -- -- (5,130) (236) --
------------ ----------- ------------- -------------- ----------- ------------ ------------
Net income (loss).............. $4,857 $4,667 $4,095 $6,048 $ (6,641) $2,158 $3,546
============ =========== ============= ============== ============ ============ ============
Basic earnings (loss)
weighted-average per share... $0.58 $0.51 $0.41 $0.52 $(0.74) $0.27 $0.42
Diluted earnings (loss)
weighted-average per share... $0.57 $0.50 $0.40 $0.51 $(0.74) $0.26 $0.41
Net income (loss) to common
stock........................ $4,857 $4,667 $4,095 $6,048 $(9,071) $2,158 $3,546

</TABLE>

SELECTED CONSOLIDATED PRO FORMA
FINANCIAL DATA

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- -------------------------
PRO FORMA (1) PRO FORMA (1)
--------------------------------------------- -------------------------

1998 1997 1996 1999 1998
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.......................... $30,120 $31,169 $39,751 $25,480 $22,433
Operations support...................... 12,920 11,967 17,511 9,943 9,505
General and administrative.............. 7,086 9,472 7,956 4,851 6,174
Depreciation and amortization........... 4,868 4,489 6,705 5,651 3,461
---------------- --------------- -------------- ------------- -------------
Operating income........................ 5,246 5,241 7,579 5,035 3,293
Interest expense........................ (4,038) (4,572) (4,652) (3,907) (2,989)
Interest income......................... 941 1,311 1,052 252 838
Other income (expense).................. 473 (342) (650) 577 478
Provision for (benefit from)
income tax............................ 1,063 (5) (417) 784 705
---------------- --------------- -------------- ------------- -------------
Income from continuing
operations............................ $1,559 $1,643 $3,746 $1,173 $915
================ =============== ============== ============= =============
Basic earnings
weighted-average per share............ $0.19 $0.18 $0.37 $0.14 $0.11
Diluted earning
weighted-average per share............ $0.19 $0.18 $0.37 $0.14 $0.11
Net income to common stock.............. $1,559 $1,643 $3,746 $1,173 $915
</TABLE>

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

(1) Gives effect to the proposed transaction for the sale of AFG assuming
the transaction occurred on January 1, 1996. See "Unaudited Pro Forma
Consolidated Financial Information."

SELECTED CONSOLIDATED PRO FORMA AND HISTORICAL
FINANCIAL DATA

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------------------------------------- ------------------------------
PRO
HISTORICAL HISTORICAL FORMA
(1)
---------------------------------------------------------- -------------------- -----

1998 1997 1996 1995 1994 1999 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $8,786 $5,224 $7,638 $13,764 $16,131 $2,675 $6,377 $30,859
Receivables.......................... 7,282 4,969 5,286 4,931 5,747 8,499 5,939 7,162
Receivables from affiliates.......... 2,944 5,007 6,019 8,690 7,001 3,213 2,700 3,213
Investment in direct finance 145,088 119,613 69,994 -- - 120,548 173,387 1,707
leases, net........................
Loan receivable...................... 23,493 5,861 5,718 -- - 23,445 22,009 --
Assets held for sale................. -- - 6,222 719 17,644 8,004 -- 8,004
Equity interest in affiliates........ 22,588 26,442 30,407 27,566 18,374 19,743 23,323 19,743
Transportation equipment held for
operating leases, net............. 64,217 41,723 38,424 47,840 64,092 97,678 48,318 78,040
Restricted cash and
cash equivalents.................. 10,349 18,278 17,828 10,621 1,409 10,018 10,095 1,545
Other, net........................... 7,322 9,166 11,213 12,082 9,974 5,773 6,965 3,750
----------- --------- ---------- --------- --------- ---------- ---------- ---------
Total assets......................... $292,069 $236,283 $198,749 $126,213 $140,372 $299,596 $299,113 $154,023
=========== ========= ========== ========= ========= ========== ========== =========
Short-term secured debt.............. $34,420 $23,040 $30,966 $ - $6,404 $27,700 $44,500 $7,600
Long-term recourse debt.............. 56,047 44,844 43,618 47,853 60,119 73,273 41,254 73,273
Long-term nonrecourse debt........... 111,222 81,302 45,392 -- -- 110,679 124,097 --
Payables and other liabilities....... 21,768 25,366 16,757 13,884 11,589 13,907 21,825 10,457
Deferred income taxes................ 18,415 14,860 15,334 15,493 16,165 23,042 17,527 12,147
Minority interest.................... -- 323 362 363 400 -- -- --
Stockholders' equity................. 50,197 46,548 46,320 48,620 45,695 50,995 49,910 50,546
Total liabilities, minority interest ----------- --------- ---------- --------- --------- ---------- ---------- ---------
and stockholders' equity........... $292,069 $236,283 $198,749 $126,213 $140,372 $299,596 $299,113 $154,023
=========== ========= ========== ========= ========= ========== ========== =========
</TABLE>

(1) Gives effect to the proposed transaction for the sale of AFG assuming
the transaction occurred on September 30, 1999.

INTRODUCTION

This proxy statement and the accompanying form of proxy are being
furnished to the holders of shares of common stock, $.01 par value, of PLM
International, Inc., a Delaware corporation, in connection with the
solicitation of proxies by the Board of Directors of PLM for use at the
special meeting of the stockholders of PLM to be held on February 25, 2000,
at the World Trade Club located at the World Trade Center, Suite 300, The
Embarcadero at the foot of Market Street, San Francisco, California, at
9:30 a.m., local time.

THE COMPANY

PLM is a Delaware corporation formed in 1987. PLM is a diversified
equipment leasing company that owns and manages transportation, industrial
and commercial equipment, both domestically and internationally. Through
May 1996, PLM also syndicated investment programs organized to invest
primarily in transportation and related equipment. PLM continues to manage
these syndicated investment programs. PLM operates and manages
transportation, industrial and commercial equipment and related assets with
a combined original cost of approximately $1.2 billion for its own account
and for various investment programs and third-party investors.

At September 30, 1999, PLM and its subsidiaries, including AFG,
employed 156 persons.

PLM's Board of Directors has retained an investment banking firm to
investigate various strategic alternatives for maximizing stockholder value
on a near-term basis (taking into account tax and financial market
considerations), including the possible sale of all of PLM, either as a
whole or in separate parts. It should be emphasized that the proposed sale
of AFG is not conditioned on this process, which is in a preliminary stage,
and that it is possible that no transaction involving other parts of PLM
will occur. As to the possible sale of all of PLM, further stockholder
action (in the form of another stockholder vote or a tender of shares, or
perhaps both) will probably be required to complete such a transaction.

THE SPECIAL MEETING

DATE, TIME AND PLACE

The special meeting is scheduled to be held at the World Trade Club
located at the World Trade Center, Suite 300, The Embarcadero at the foot
of Market Street, San Francisco, California, on February 25, 2000,
beginning at 9:30 a.m., local time.

MATTERS TO BE CONSIDERED

At the special meeting, PLM stockholders will be asked to consider
and vote upon a proposal to authorize the sale to Guaranty Federal Bank,
F.S.B., a federally chartered savings bank whose address is 1300 South
Mopac Expressway, Austin, Texas 78746, of all of the issued and outstanding
shares of American Finance Group, Inc., a Delaware corporation and a
wholly-owned subsidiary of PLM, pursuant to the terms and conditions of the
Stock Sale Agreement, dated as of October 26, 1999 and amended as of
January 24, 2000, by and between PLM and Guaranty. See "The Proposed Sale"
beginning on page 11 and "Terms of the Stock Sale Agreement" beginning on
page 20. PLM's Board of Directors knows of no matter that will be presented
for consideration at the special meeting other than the matter described in
this proxy statement. If any other matters properly come before the special
meeting, the persons named in the enclosed form of proxy or their
substitutes will vote in accordance with their best judgment on such
matters.

RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE

PLM's Board of Directors has fixed the close of business on December
29, 1999 as the record date for the determination of the holders of PLM's
common stock entitled to notice of and to vote at the special meeting.

Only holders of record of PLM common stock as of the close of
business on the record date will be entitled to notice of and to vote at
the special meeting. As of the record date, there were 7,744,798 shares of
PLM common stock outstanding and entitled to vote at the special meeting,
held by approximately 3,068 stockholders of record, with each share
entitled to one vote.

QUORUM; VOTE REQUIRED

The presence, in person or represented by proxy, of the holders of a
majority of the shares of common stock issued and outstanding and entitled
to vote at the special meeting will constitute a quorum.

PLM has been advised by counsel that the proposed sale may constitute
a sale of "substantially all" of the assets of PLM under the Delaware
General Corporation Law although existing legal precedent does not provide
a definitive conclusion on this point. Under Section 271 of the Delaware
General Corporation Law, a sale of substantially all of a company's assets
requires for authorization the affirmative vote of the holders of a
majority of the shares of outstanding stock entitled to vote. Since the
issue of whether the proposed sale constitutes a sale of "substantially
all" of PLM's assets is not entirely clear, PLM has determined to submit
the proposed sale to stockholders to avoid any uncertainty. Accordingly,
the proposed sale will not be completed unless it receives the affirmative
vote of a majority of the shares of PLM common stock entitled to vote at
the special meeting.

VOTING AND REVOCATION OF PROXIES

Stockholders are requested to complete, date, sign and promptly
return the accompanying form of proxy in the enclosed envelope. Shares of
PLM common stock represented by properly executed proxies received by PLM
and not revoked will be voted at the special meeting in accordance with the
instructions contained in the proxy cards. If instructions are not given,
proxies will be voted FOR authorization of the proposed sale. However,
brokers do not have discretionary authority to vote shares held in street
name. Therefore, the failure of beneficial owners of shares held in street
name to give voting instructions to brokers will result in broker
non-votes. Broker non-votes, abstentions and the failure to vote will have
the same affect as votes cast against authorization of the proposed sale.

If any other matters are properly presented at the special meeting
for consideration, the persons named in the enclosed form of proxy and
acting under the proxy will have discretion to vote on such matters in
accordance with their best judgment. As PLM's by-laws require advance
notice of any business to be properly transacted at a meeting of
stockholders, PLM's Board of Directors does not expect any other matters to
be presented at the special meeting, and the persons named in the enclosed
form of proxy will not use their discretionary authority to present any
material matters not discussed in this proxy statement. In addition, PLM
does not expect any changes to the terms of the proposed sale described in
this proxy statement, and the persons named in the enclosed form of proxy
will not use their discretionary authority to approve any changes to the
proposed sale that are materially different than the terms of the proposed
sale described in this proxy statement without giving stockholders an
opportunity to change their vote.

Any proxy card signed and returned by a stockholder may be revoked at
any time before it is voted either by delivering to the Secretary of PLM,
at the address of PLM set forth in this proxy statement, written notice of
such revocation or a duly executed proxy bearing a later date or by
attending the special meeting and voting in person. Attendance at the
special meeting will not, in and of itself, constitute revocation of a
proxy.

PROXY SOLICITATION

PLM will bear the costs of solicitation of proxies for the special
meeting. In addition to solicitation by mail, directors, officers and
regular employees of PLM may solicit proxies from stockholders by
telephone, telegram, personal interview or otherwise. PLM directors,
officers and employees will not receive additional compensation but may be
reimbursed for out-of-pocket expenses in connection with their solicitation
of proxies. In addition to solicitation by directors, officers and regular
employees of PLM, PLM has retained MacKenzie Partners, Inc. to aid in the
solicitation of proxies for the special meeting. The fee for such services
is not expected to exceed $10,500, which will be borne by PLM. Brokers,
nominees, fiduciaries and other custodians have been requested to forward
soliciting material to the beneficial owners of shares of PLM common stock
held of record by them, and such custodians will be reimbursed by PLM for
their reasonable expenses.

THE PROPOSED SALE

GENERAL

Pursuant to the terms of the Stock Sale Agreement, PLM proposes to
sell to Guaranty all of the issued and outstanding capital stock of AFG.
The purchase price for AFG is $29 million, subject to adjustment for
changes in the AFG consolidated stockholders' equity account from June 30,
1999 to the date of the completion of the sale. The adjustment is without
limit and provides for additional consideration to PLM to the extent the
stockholders' equity account increases from the June 30, 1999 balance or
reimbursement to Guaranty to the extent the stockholders' equity account
decreases from the June 30, 1999 balance. Had the sale been completed as of
December 31, 1999, PLM would have received an aggregate of approximately
$33.9 million for AFG, after transaction costs and after giving effect to
the adjustment described above, which includes reimbursement for an
approximately $5.5 million deferred tax liability transferred by AFG to PLM
in connection with the transaction. At Guaranty's option, at the completion
of the proposed sale, PLM and AFG will enter into a Transition Services
Agreement. Under this agreement, PLM will continue to provide various
accounting and related services to AFG for a limited period of time.

DESCRIPTION OF AFG'S BUSINESS

AFG is a commercial finance company engaged in the leasing and
secured financing of a variety of equipment for investment-grade "Fortune
1000" companies and creditworthy middle-market companies. AFG's principal
businesses include:

o the direct origination through its sales force of equipment
leases and secured loans, hybrid leases and other specialized
financings,

o the management and servicing of equipment leases and structured
finance products retained by AFG or sold to institutional leasing
investment programs,

o the sale and acquisition of equipment leases and structured
finance products to and from third parties, and

o the sale and re-marketing of equipment as it comes off lease.

AFG's sales force markets its equipment leases and structured finance
products nationally through sales offices located in the Boston, Houston,
Chicago, Charlotte and Minneapolis/St. Paul metropolitan areas. Since
entering its current line of business in January 1996, AFG has originated
over $500 million of equipment leases and structured finance products
covering over 62,000 items of equipment.

On a combined basis, AFG and its subsidiaries had revenues of $27.0
million and operating income of $14.4 million for 1998 and revenues of
$19.5 million and operating income of $9.1 million for the nine months
ended September 30, 1999. AFG's operating results for 1999 reflect a charge
of approximately $1 million attributable to the expenses of an abandoned
public offering of common stock of AFG. AFG and its subsidiaries
constituted about 68% of PLM's total assets as of December 31, 1998 and
about 61% of PLM's total assets as of June 30, 1999. Historical financial
information for AFG and its subsidiaries is set forth under the heading
"Commercial and Industrial Equipment Leasing and Financing" in the
discussion of PLM's operating segments included as Note 18 in PLM's
consolidated financial statements as of December 31, 1998 and 1997, which
are included in PLM's annual report on Form 10-K for the year ended
December 31, 1998, which is included with the materials mailed with this
proxy statement.

BACKGROUND OF THE PROPOSED SALE

PLM on an on-going basis considers various alternatives to maximize
stockholder value. As part of this process, in December 1997 PLM began to
look at the feasibility of an initial public offering for all or some of
the common stock of AFG. PLM believed that its stock price was undervalued
in the public market, and that a public offering of its largest subsidiary
would be an attractive method of demonstrating PLM's value to the market.
Additionally, PLM believed that the strength of the initial public offering
market combined with the strength of AFG's performance made the timing of
the proposed offering appropriate.

In February 1998, PLM engaged Legg Mason Wood Walker, Incorporated as
lead underwriter in connection with a proposed registered public offering
of common stock of AFG. In May 1998, AFG filed a Registration Statement on
Form S-1 with the SEC for an initial public offering of 2,150,000 shares of
AFG's common stock (plus additional shares for over allotments, if any).
The shares were to be offered by both PLM and AFG, and PLM was to retain a
majority stake in AFG.

During the time AFG was preparing a response to the SEC's June 1998
comment letter on the registration statement and drafting a related
amendment to the registration statement, the market for initial public
offerings started to take a significant downturn. In October 1998, PLM
determined to have AFG file the amendment to the registration statement but
to delay the initial public offering on account of continued stock market
volatility. At this time, PLM also began to look at alternatives to the
initial public offering, including a sale of AFG.

In December 1998, PLM engaged Legg Mason to identify strategic
alternatives to maximize PLM's value in AFG, including the sale of AFG, and
to advise PLM concerning those alternatives. PLM also determined not to
withdraw the registration statement on file with the SEC, pending the
results of Legg Mason's review. In March 1999, after determining, in part
based on Legg Mason's advice, that it was in the best interests of PLM and
its stockholders to sell AFG rather than proceed with the stock offering,
AFG withdrew the registration statement.

As part of its engagement to sell AFG privately, Legg Mason prepared
for distribution to interested parties a confidential offering memorandum
describing the business and assets of AFG. Legg Mason initially identified
and contacted 70 potential purchasers of AFG, its subsidiaries or any of
their assets. Of the parties contacted, 47 requested a confidentiality
agreement and 38 signed and returned a confidentiality agreement and were
sent copies of the offering memorandum in turn.

In April 1999, PLM received indications of interest, both written and
oral, from several parties, some interested in purchasing the stock of AFG
and others interested in purchasing some of the assets of AFG only.
Following preliminary negotiations with two bidders who were interested in
purchasing the stock of AFG regarding specific terms of their bids, a
bidder was awarded the transaction, subject to negotiation and execution of
a final and binding agreement.

During the first two weeks of June 1999, PLM and the winning bidder
negotiated the terms and conditions of a Stock Purchase Agreement. The
winning bidder agreed to pay $33,500,000 in cash for the stock of AFG,
subject to a final adjustment to take into account cash transactions
between PLM and AFG during the period between signing the agreement and
closing the transaction. The final agreement was scheduled to be submitted
to both boards of directors for approval and, if approved, to be signed in
mid-June 1999 and to close as soon as possible thereafter provided that all
required consents were received and conditions to close were satisfied
before December 31, 1999. The winning bidder's board of directors, however,
failed to approve the final agreement and withdrew from the transaction
stating that the winning bidder had agreed to accept an offer to be
acquired by another party and was accordingly unwilling to proceed.

At the direction of PLM's Board of Directors, in June 1999 Legg Mason
revised and updated the confidential offering memorandum. The revised and
updated confidential offering memorandum includes the financial
computations that are attached as Annex C to this proxy statement. These
financial computations, which were prepared by PLM, are hypothetical and
make assumptions about cost of capital, tax efficiencies and results of
operations that PLM management believes are not achievable so long as AFG
is owned by PLM. Accordingly, these financial computations are not
projections of the future performance of AFG if it remains a subsidiary of
PLM but rather are a computation of the results that might be achieved if
AFG's cost of capital were lower than what PLM can provide and if the
ability of a buyer to utilize the tax benefits generated by AFG are
significantly greater than PLM's ability.

Legg Mason subsequently identified 29 parties interested in
purchasing the stock of AFG or the assets of AFG, including some of the
parties that had expressed interest during the first bidding process. By
August 1999, 11 of the newly identified parties had received
confidentiality agreements, 9 of which were signed and returned to Legg
Mason. A total of 12 copies of the revised and updated confidential
offering memorandum were distributed, in response to which Legg Mason
received three indications of interest, including a bid from Guaranty to
purchase AFG for $29,000,000. One of the other indications of interest
included a bid at a lower amount from a party that subsequently indicated
that it was unwilling and unable to increase its bid. This party's bid was
rejected by PLM as being inadequate prior to PLM's receipt of any other
bid. Following receipt of Guaranty's bid, Legg Mason did not convey the
terms of Guaranty's bid to any other party or offer any other party an
opportunity to make a competing bid since there were no other active
bidders at that time.

After consultation with Legg Mason and additional negotiations
regarding the terms of Guaranty's bid, Guaranty was advised that PLM would
sell AFG to Guaranty for $29,000,000 in cash, subject to negotiation and
execution of a final and binding agreement. Over the course of an
approximately one-month period, PLM and Guaranty negotiated the terms and
conditions of the Stock Sale Agreement, including terms relating to
repayment of AFG's outstanding indebtedness, a post-closing price
adjustment, representations and warranties by PLM and Guaranty,
indemnification for breaches of the agreement and related indemnification
threshold and cap amounts, and Guaranty's Board of Directors approved a
near-final form of the Stock Sale Agreement near the end of that period on
October 18, 1999. Based on the terms and conditions of the near-final form
of the agreement, Legg Mason provided PLM's Board of Directors with its
opinion that the transaction was fair, from a financial point of view, to
PLM and its stockholders. Relying in part on the opinion of Legg Mason,
PLM's Board of Directors unanimously approved the proposed sale on October
19, 1999 and directed the officers of PLM to conclude the negotiation of,
and execute, a definitive version of the Stock Sale Agreement. The
definitive agreement was signed by each of PLM and Guaranty as of October
26, 1999, and PLM publicly announced the agreement to sell AFG by a press
release dated the same date.

REASONS FOR THE PROPOSED SALE

In reaching its decision to recommend and approve the Stock Sale
Agreement, PLM's Board of Directors consulted with its advisors and
considered the material factors described below. Based upon its review of
such factors, PLM's Board of Directors approved the Stock Sale Agreement.

PLM's Board of Directors considered the following factors in deciding
to approve the Stock Sale Agreement and the transactions contemplated by
the agreement:

o PLM's determination that it could not effectively grow AFG's
business because of disadvantages it faces, when compared to
competitors, in its cost of capital and its ability to take full
advantage of the tax benefits available to the owner of such a
business;

o The consideration to be paid by Guaranty to PLM consists entirely
of cash;

o The consideration to be paid by Guaranty is superior to all other
offers received, excluding the previously withdrawn offer to pay
$33,500,000 in cash for the stock of AFG;

o The Stock Sale Agreement does not contain a financing condition
for Guaranty and, accordingly, PLM is not taking the risk that
Guaranty will be unable to obtain financing for the proposed
sale;

o The other terms of the Stock Sale Agreement, which is the product
of extensive, arm's-length negotiations;

o Its determination that the consideration to be received for AFG
is fair, a determination based on its assessment of the business
and financial results of AFG as well as the opinion of Legg Mason
Wood Walker, Incorporated, PLM's financial advisor, that the
consideration to be received by PLM in the proposed sale is fair
to PLM and its stockholders from a financial point of view; and

o The risk and uncertainty arising from the fact that the sale of
AFG will reduce significantly PLM's revenues and income from
operations and the related fact that PLM's results of operations
will depend in part on the internal rate of return generated by
the net proceeds from the proposed sale and on the income
produced by PLM's remaining businesses.

No other factors considered by PLM's Board of Directors were
considered material to its decision to approve the Stock Sale Agreement and
the transactions contemplated by the agreement. PLM's Board of Directors
did not find it practical to and did not quantify or attempt to attach
relative weight to any of the specific factors considered by it. PLM's
Board of Directors, however, did find that the positive factors listed
above outweighed the potential risks of the proposed sale and found the
opportunity to generate increased stockholder value through completion of
the proposed sale compelling.

Notwithstanding expectations of PLM's senior management regarding the
benefits to be realized from the proposed sale, no assurance can be given
that PLM will be able to realize such benefits.

RECOMMENDATION OF PLM'S BOARD OF DIRECTORS

At a special meeting held on October 19, 1999 to consider the Stock
Sale Agreement, PLM's Board of Directors unanimously approved the proposed
sale as being in the best interests of PLM and its stockholders. FOR THE
REASONS DISCUSSED ABOVE, PLM'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT PLM STOCKHOLDERS VOTE "FOR" THE PROPOSED SALE.

OPINION OF FINANCIAL ADVISOR

Pursuant to an engagement letter dated December 3, 1998, PLM engaged
Legg Mason to act as its exclusive financial advisor and render a fairness
opinion to PLM's Board of Directors with respect to the potential sale of
AFG. Legg Mason, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, and
private placements. PLM retained Legg Mason to act as its advisor based on
Legg Mason's general qualifications, reputation, experience and expertise
and on the familiarity Legg Mason had acquired of AFG in acting as
financial advisor and lead underwriter in connection with the proposed
initial public offering of AFG's common stock. See "-- Background of the
Proposed Sale" beginning on page 12.

On October 19, 1999, Legg Mason delivered to PLM's Board of Directors
its oral opinion, which was subsequently confirmed by written opinion,
dated October 21, 1999 (collectively, the "Opinion"), to the effect that,
as of the date of the Opinion and based on and subject to the assumptions,
factors and limitations set forth in the Opinion and described below, the
consideration proposed to be received by PLM pursuant to the Stock Sale
Agreement was fair, from a financial point of view, to PLM and its
stockholders. A copy of the Opinion is attached to this proxy statement as
Annex B and is incorporated by reference in this summary.

While Legg Mason rendered its Opinion to PLM's Board of Directors,
Legg Mason was not requested to and did not make any recommendation to
PLM's Board of Directors as to the specific form or amount of the
consideration to be received by PLM in the proposed sale. The Opinion,
which was delivered for use and considered by PLM's Board of Directors, is
directed only to the fairness to PLM and its stockholders, from a financial
point of view, of the proposed consideration to be received by PLM in
connection with the proposed sale. It does not constitute a recommendation
of the proposed sale over any other alternative transaction which may be
available to PLM and does not address the underlying business decision of
PLM's Board of the Directors to proceed with or effect the sale. In
addition, it does not constitute a recommendation to any stockholder of PLM
as to how such stockholder should vote at the stockholders' meeting to be
held in connection with the proposed sale. Legg Mason does not admit that
it is an expert within the meaning of the term "expert" as used in the
Securities Act of 1933, as amended, and the rules and regulations
promulgated under the Securities Act, or that its opinions constitute a
report or valuation within the meaning of Section 11 of the Securities Act
and the rules and regulations promulgated under that section.

The summary of the Opinion set forth below is qualified in its
entirety by reference to the full text of the Opinion, dated October 21,
1999 and attached to this proxy statement as Annex B. PLM stockholders are
urged to read the Opinion in its entirety for a complete description of the
assumptions made, matters considered and limits of the review undertaken.

In arriving at the Opinion, among other things, Legg Mason:

o reviewed a draft of the Stock Sale Agreement, dated October 15,
1999, and various related documents;

o reviewed AFG's audited financial statements for the years ended
December 31, 1996 through December 31, 1998;

o reviewed the unaudited financial statements of AFG for the nine
months ended September 30, 1999;

o reviewed the financial projections of AFG prepared by the
management of AFG;

o reviewed selected publicly available information concerning AFG;

o reviewed and analyzed selected publicly available financial data
for various companies deemed comparable to AFG;

o reviewed and analyzed selected publicly available information for
transactions deemed comparable to the proposed sale;

o performed a discounted cash flow analysis of AFG using various
assumptions of future performance provided by and discussed with
the management of AFG;

o at the request of PLM's Board of Directors, approached and spoke
with third parties to solicit indications of interest in the
possible acquisition of AFG; and

o performed such other analyses and reviewed such other information
as it deemed appropriate.

In addition, Legg Mason spoke with members of management of AFG and
PLM concerning AFG's financial condition, current operating results and
business outlook.

For purposes of the Opinion, Legg Mason relied upon and assumed the
accuracy, completeness and fairness of the financial and other information
made available to it and did not attempt to independently verify such
information. Legg Mason relied upon the assurances of the management of PLM
and AFG that the information provided by PLM and AFG had a reasonable basis
and, with respect to financial planning data and other business outlook
information, reflected the best available estimates, and that they were not
aware of any information or fact that would make the information provided
to Legg Mason incomplete or misleading. Legg Mason relied, without
independent verification, on the assessments by the management of PLM and
AFG. In arriving at the Opinion, Legg Mason did not perform, nor was it
furnished, any appraisal or valuation of specific assets or liabilities of
AFG and expressed no opinion regarding the liquidation value of any entity.
No limitations were imposed by PLM or AFG on the scope of Legg Mason's
investigation or the procedures to be followed in rendering its Opinion.
The Opinion is based upon information available to Legg Mason and the facts
and circumstances as they existed and were subject to evaluation on the
date of the Opinion. Events occurring after such date could materially
affect the assumptions used in preparing the Opinion.

Legg Mason performed various financial and comparative analyses,
including those summarized below, which it discussed with PLM's Board of
Directors on October 19, 1999. The discussion below summarizes the material
analyses performed by Legg Mason, all of which were reviewed with PLM's
Board of Directors in connection with rendering the Opinion.

Summary of Proposal. In the preparation of the Opinion, Legg Mason
assumed, based on information provided by PLM, that the total adjusted
purchase price would equal $36.3 million, representing the base purchase
price of $29.0 million and various adjustments under the Stock Sale
Agreement. In addition, Legg Mason assumed, based on information provided
by PLM, that PLM would retain approximately $7.5 million of AFG's deferred
tax liabilities. Based on the adjusted purchase price less the assumed
retained liabilities, Legg Mason calculated the price to book value, price
to last twelve months earnings and price to projected 1999 earnings
multiples. This analysis yielded a price to book value multiple of 0.9x, a
price to last twelve months earnings multiple of 15.9x (based on pro forma
net income excluding specific one-time charges) and a price to projected
1999 earnings multiples of 15.6x (based on estimates of AFG's senior
management and excluding specific one-time charges).

Comparable Merger and Acquisition Analysis. Legg Mason reviewed
selected transactions that were completed or proposed from January 1, 1998
to the present involving 100% acquired companies operating in the equipment
leasing sector deemed comparable to AFG. This analysis was based on
publicly available information obtained from Securities and Exchange
Commission filings, public company disclosures, press releases, industry
and popular press reports, data bases and other sources. This search
yielded five transactions deemed comparable and for which valuation data
was available. Based on its analysis of the comparable transactions, Legg
Mason derived the median, mean and ranges of various financial performance
and valuation multiples for the comparable transaction group, as such
information was available, and compared such multiples to AFG's comparable
multiples. Based on its review, for four of the target companies in
comparable transactions, Legg Mason derived median and mean latest twelve
months return on ending assets of 1.6% and 1.4%, and a range of 0.4% to
2.0% (compared to 1.1% for AFG); and, median and mean latest twelve months
return on ending equity of 8.2% and 9.8%, and a range of 3.4% to 19.3%
(compared to 7.2% for AFG). Legg Mason also derived the comparable
transaction group's median and mean equity value to latest twelve month net
income multiples of 14.2x and 20.1x, and range of 8.5x to 37.8x (compared
to a multiple of 15.9x for AFG). Legg Mason also derived for four of the
comparable transactions the median and mean equity value to book value
multiples of 1.5x and 1.6x, and range of 0.9x to 2.3x (compared to a
multiple of 0.9x for AFG). This analysis indicated an imputed range for all
of AFG's equity of $15.4 million to $74.4 million, based on the high and
low imputed range of the foregoing analysis.

Comparable Public Company Analysis. Legg Mason reviewed information
relating to seven publicly traded companies involved in equipment leasing.
Share pricing for publicly traded companies in the public market reflects
the value of a minority interest and does not reflect a control premium.
Based on its review, Legg Mason derived for the comparable public companies
median and mean latest twelve months net margins of 6.5% and 7.4%, and a
range of 0.2% to 16.5% (compared to 6.9% for AFG); median and mean latest
twelve months return on average assets of 1.6% and 2.4%, and a range of
0.2% to 5.8% (compared to 0.9% for AFG); median and mean latest twelve
months return on average equity of 8.7% and 9.5%, and a range of 1.4% to
17.4% (compared to 7.2% for AFG); and median and mean total debt to equity
ratios of 4.0x and 4.1x, and a range of 1.6x to 7.6x (compared to 5.2x for
AFG). Legg Mason also derived for the comparable public companies median
and mean price to latest twelve month earnings multiples of 9.0x and 12.6x,
and a range of 3.6x to 42.9x (compared to a multiple of 15.9x for AFG);
and, median and mean equity value to book value multiples of 0.6x and 0.8x,
and a range of 0.2x to 2.0x (compared to a 0.9x multiple for AFG). Legg
Mason also derived for four of the comparable public companies median and
mean price to projected fiscal year 1999 earnings (as reported by the
Institutional Brokers Estimate System) multiples of 7.2x and 7.2x, and a
range of 5.7x to 8.5x (compared to a multiple of 15.6x for AFG). This
analysis indicated an imputed range for all of AFG's equity of $6.5 million
to $77.8 million, based on the high and low imputed range of the foregoing
analysis.

Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
Legg Mason calculated a range of theoretical values for all of AFG's
capital stock based on the net present value of the future streams of after
tax cash flows that AFG could produce on a stand-alone basis from 2000
through 2003 and distribute to stockholders ("dividendable net income"). In
this analysis, Legg Mason assumed that AFG performed in accordance with the
earnings forecasts provided to Legg Mason by AFG's senior management, and
that AFG's common equity to total assets ratio would be maintained at a
minimum 13.0% level. Legg Mason estimated the terminal values for AFG's
equity value from 7 to 16 times AFG's 2003 estimated dividendable net
income. The dividendable net income streams and terminal values were then
discounted to present values using different discount rates (ranging from
12% to 20%) chosen to reflect different assumptions regarding required
rates of return of holders or prospective buyers of AFG. This discounted
cash flow analysis indicated an aggregate net present value for all of
AFG's equity of $15.0 million to $30.7 million. As indicated above, this
analysis was based on AFG's senior management estimates and is not
necessarily indicative of actual values or actual future results and does
not purport to reflect the prices at which any securities may trade at the
present or at any time in the future. Legg Mason noted that the discounted
cash flow analysis was included because it is a widely used valuation
methodology, but noted that the results of such methodology are highly
dependent upon the numerous assumptions that must be made, including
earnings growth rates, dividend payout rates, terminal values and discount
rates.

In reaching its conclusions as to the fairness to PLM and its
stockholders of the consideration to be received by PLM in the proposed
sale and in its discussion with PLM's Board of Directors, Legg Mason did
not rely on any single analysis or factor described above, assign relative
weights to the analyses or factors considered by it, or make any
conclusions as to how the results of any given analysis, taken alone,
supported its Opinion. The preparation of a fairness opinion is a complex
process and not necessarily susceptible to partial analyses or summary
description. Legg Mason believes that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors
considered by it, without considering all factors and analyses, would
create a misleading view of the process underlying the Opinion. The
analyses of Legg Mason are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses. Analyses relating to the value of companies do
not purport to be appraisals or valuations or necessarily reflect the price
at which companies may actually be sold. No company or transaction used in
any comparable analysis as a comparison is identical to AFG or the proposed
sale. Accordingly, an analysis of the results is not mathematical; rather
it involves complex considerations and judgments concerning, among other
things, differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of such companies.

AFG paid Legg Mason a total of $100,000 in connection with the
proposed initial public offering of AFG's common stock to reimburse Legg
Mason for out-of-pocket expenses incurred in connection with the proposed
initial public offering. For acting as financial advisor to PLM in
connection with the proposed sale, PLM has agreed to pay Legg Mason fees as
follows:

o a retainer fee of $50,000, which was paid on December 4, 1998;

o a fairness opinion fee of $75,000, payable upon Legg Mason
rendering the Opinion; and

o 1.5% of the aggregate total transaction consideration, which is
contingent upon and due upon consummation of the proposed sale.

PLM also has agreed to pay the out-of-pocket expenses of Legg Mason
incurred in acting as its exclusive financial advisor, not to exceed
$25,000 without PLM's consent. Additionally, PLM has agreed to indemnify
Legg Mason and various related persons, whether or not the proposed sale is
completed, against specific liabilities relating to or arising out of its
engagement, including liabilities arising under the securities laws. Legg
Mason will not receive any fees other than the retainer fee of $50,000 and
the fairness opinion fee of $75,000 if the proposed sale is not completed.

USE OF PROCEEDS

PLM estimates that it will receive net after-tax proceeds of
approximately $28.5 million upon completion of the proposed sale. PLM plans
to invest these proceeds in short-term money market accounts while its
Board of Directors evaluates various strategic alternatives. Depending on
tax and financial considerations and the progress we may make in
implementing our plans to maximize stockholder value, we may decide to use
some or all of the proceeds from the sale of AFG to fund a self-tender for
PLM's stock.

ACCOUNTING TREATMENT FOR THE PROPOSED SALE

After the sale, AFG and its continuing subsidiaries will be treated
for accounting purposes as a discontinued operation of PLM. This means that
financial statements for all prior periods will be restated to show the
operations of AFG and its continuing subsidiaries separately from PLM's
continuing operations. PLM's loss on the sale will be measured by the
difference between the amount paid by Guaranty and the net book value of
the assets sold, reduced by transaction costs and applicable taxes.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

If completed, the proposed sale of AFG by PLM will not result in any
United States federal income tax consequences to you. The proposed sale,
however, will be a taxable event to PLM for United States federal income
tax purposes.

APPRAISAL RIGHTS

PLM stockholders are not entitled to appraisal rights under the
Delaware General Corporation Law with respect to the proposed sale or any
other transactions contemplated by the Stock Sale Agreement.

REGULATORY FILINGS AND APPROVALS

Pursuant to the Stock Sale Agreement, on December 28, 1999 the
parties made the appropriate filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, in connection with the
transactions contemplated by the Stock Sale Agreement, and the consummation
of the proposed sale is subject to the expiration or early termination of
the waiting period prescribed under the Hart-Scott-Rodino Act. The parties
request for early termination of the applicable waiting period under the
Hart-Scott-Rodino Act was granted effective January 11, 2000.

Also, pursuant to the Stock Sale Agreement, Guaranty made the
appropriate filings with the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation on November 23, 1999 in connection with the
transactions contemplated by the Stock Sale Agreement. On November 26,
1999, Guaranty received confirmation from the FDIC that its filing met the
FDIC requirements and that nothing further was required from the FDIC. On
December 13, 1999, Guaranty filed an amendment letter to its application
with the OTS to confirm that AFG would dispose of all of the leases held by
it where affiliates of Guaranty were lessees prior to the closing of the
proposed sale and that Guaranty would not acquire those assets. Guaranty
received correspondence from the OTS dated December 20, 1999 consenting to
Guaranty's notice.

TRANSITION SERVICES AGREEMENT

Pursuant to the Stock Sale Agreement, at Guaranty's option, at the
completion of the proposed sale, PLM and AFG will enter into the Transition
Services Agreement under which PLM will continue to provide various
accounting and related services to AFG for a limited period of time.

TERMS OF THE STOCK SALE AGREEMENT

The following discussion of the terms and conditions of the Stock
Sale Agreement, while materially complete, is qualified in its entirety by
reference to the provisions of the Stock Sale Agreement, which is attached
to this proxy statement as Annex A and incorporated by reference in this
proxy statement. Terms not otherwise defined in this discussion have the
respective meanings set forth in the Stock Sale Agreement.

PURCHASE PRICE

The base purchase price for the stock of AFG is $29 million in cash
subject to adjustment as described below. PLM will prepare a closing date
balance sheet of AFG and its continuing subsidiaries and will deliver it to
Guaranty within sixty calendar days after the closing date. Guaranty will
have an opportunity to object to the closing date balance sheet, and the
Stock Sale Agreement contains a dispute resolution procedure in the event
Guaranty does so object. To object, Guaranty must give to PLM, within
thirty days following receipt of the closing date balance sheet, a notice
of disagreement specifying the nature and amount of any disagreement
relating to the closing date balance sheet. During the thirty-day period
following the timely delivery of a notice of disagreement, Guaranty and PLM
must try to resolve by written agreement the differences they have relating
to matters included in the notice. If they resolve these differences during
the thirty-day period, PLM will deliver to Guaranty, within two business
days after execution of the written agreement, a revised closing date
balance sheet reflecting the terms of that agreement. If any differences
remain unresolved after the thirty-day period, the parties will submit
those differences for review and resolution to a nationally recognized
accounting firm in the United States selected by them or, if they are
unable to agree, selected jointly by their independent accountants. The
accounting firm will deliver, as soon as practicable following its
selection, a final determination with respect to the unresolved issues,
which determination will be binding on the parties. Within two business
days following delivery by the accounting firm of its final determination
in writing to the parties, PLM will deliver to Guaranty a revised closing
date balance sheet reflecting any written agreement by the parties and any
final determination made by the accounting firm.

The base purchase price will be (1) increased or decreased, as
appropriate, by the net amount by which stockholders' equity as reflected
in the closing date balance sheet differs from stockholders' equity as
reflected in the consolidated balance sheet as of June 30, 1999 of AFG and
its consolidated subsidiaries and (2) increased, in either case, by
$150,000. The adjustment of the base purchase price will result in a final
purchase price. If the base purchase price is more than the final purchase
price, PLM will pay to Guaranty the amount of the difference in price
together with interest on the difference. If the base purchase price is
less than the final purchase price, Guaranty will pay to PLM the amount of
the difference in price together with interest on the difference. Payment
of the difference in price will be made within five business days after
delivery of the final closing date balance sheet to Guaranty.

THE CLOSING

The sale and transfer of the Shares by PLM to Guaranty will take
place on the later of (1) January 14, 2000 and (2) five business days
following the satisfaction and/or waiver of all the conditions to closing
set forth in Article VI of the Stock Sale Agreement, unless another date or
place is agreed to in writing by PLM and Guaranty.

REPRESENTATIONS AND WARRANTIES

The Stock Sale Agreement contains various representations and
warranties by PLM and Guaranty. These include representations and
warranties by PLM as to (1) the organization, good standing, and
capitalization of PLM, AFG and AFG's continuing subsidiaries, (2) proper
corporate authority, no conflicts, no violations and requisite approvals,
(3) ownership and possession of the Shares, (4) conveyance of good title to
the Shares, (5) accuracy of financial statements, books and records, (6)
absence of undisclosed liabilities, (7) outstanding indebtedness, (8)
absence of certain changes, (9) title to and condition of assets, (10)
properties leased by AFG and its continuing subsidiaries, (11) Leases, (12)
certain contracts and commitments, (13) customers and lenders, (14) bank
accounts, (15) casualty losses, (16) material litigation, (17)
environmental matters, (18) compliance with laws, (19) employee benefit
plans, (20) tax matters, (21) intellectual property, (22) labor matters,
(23) brokers, finders and fees, (24) Year 2000 readiness, (25) insurance,
(26) employee compensation and (27) AFG's non-continuing subsidiaries.

The Stock Sale Agreement also contains representations and warranties
of Guaranty, including representations and warranties as to: (1) the
organization and good standing of Guaranty, (2) proper corporate authority,
no conflicts, no violations and requisite approvals, (3) acquisition of the
Shares for investment, (4) availability of funds, (5) material litigation
and (6) brokers, finders and fees.

For a description of the survivability of the representations and
warranties and related indemnification, see "-- Indemnification; Survival
of Indemnification Obligations" beginning on page 24.

COVENANTS

The Stock Sale Agreement also contains various covenants of PLM.
During the period from the date of the Stock Sale Agreement to the closing
date, PLM will cause AFG and its continuing subsidiaries to conduct their
business and operations in the ordinary course consistent with past
practice and use all reasonable efforts to preserve the business of AFG and
to preserve the goodwill of customers, suppliers and others having business
relations with AFG. PLM will also cause AFG to provide Guaranty access to
information subject to the terms of the Confidentiality Agreement. Each of
the parties agrees to use its best efforts to make all filings and obtain
all licenses, consents and approvals of governmental authorities and other
third parties necessary to complete the proposed sale. In addition, PLM
will take, and will cause AFG to take, all action necessary to enable
Guaranty to repay, simultaneously with the closing, then outstanding
indebtedness to any Company Lender owed by AFG and its continuing
subsidiaries. The Stock Sale Agreement also contains agreements with
respect to tax matters. PLM also agrees to convene the special meeting of
stockholders described in this proxy statement for the purpose of obtaining
PLM stockholder authorization of the proposed sale.

NO SOLICITATION

In the Stock Sale Agreement, PLM agrees that, for 90 days from the
date of the agreement, it will not authorize or permit any officer,
director, employee or agent of AFG to solicit, initiate or enter into any
agreement with respect to any inquiries or proposals to acquire the Shares
or a material portion of the assets of AFG or its continuing subsidiaries,
whether by sale, merger, consolidation, reorganization, exchange or
otherwise.

EMPLOYMENT AND EMPLOYEE BENEFIT PLANS

Persons who are employees of AFG or its continuing subsidiaries
immediately prior to the closing are referred to in the Stock Sale
Agreement as "retained employees". Pursuant to the Stock Sale Agreement,
Guaranty will cause AFG to provide these retained employees with the
benefits of a retention bonus program, which is comprised of AFG's
obligations under various agreements between it and some of its employees.
These agreements provide for AFG to pay a retention bonus under specified
circumstances and to pay or provide severance benefits under specified
circumstances. From and after the consummation of the proposed sale, PLM
will have no obligations under the retention bonus program except to the
extent that it must indemnify Guaranty, Guaranty's affiliates, AFG and
AFG's continuing subsidiaries against claims relating to the program with
respect to any act or failure to act by PLM, AFG or AFG's continuing
subsidiaries prior to the consummation of the sale.

If any retained employee is discharged by AFG as of or after the
closing, Guaranty will be responsible for any and all severance costs for
that employee under those agreements, plans or arrangements listed in the
disclosure schedule to the Stock Sale Agreement. Guaranty will be
responsible and assume all liability for all notices or payments due to any
retained employees or to any governmental entity pursuant to any law,
statute, rule or regulation, including the Worker Adjustment and Retraining
Notification Act, with respect to the employment, discharge or layoff of
employees by AFG after the closing.

From and after the closing, Guaranty will be responsible for any and
all claims, losses, damages, costs and expenses and other liabilities and
obligations relating to (1) compensation and plan benefits accrued by PLM
but unpaid as of the closing and post-closing bonuses due to any retained
employee, (2) liabilities assumed by Guaranty under, and failure to comply
with, provisions of the Stock Sale Agreement with respect to employees and
employee benefits and (3) claims of, or damages or penalties sought by, any
retained employee or governmental entity arising from the employment,
discharge, layoff or termination of any retained employee on or after the
closing date. However, Guaranty will not have liability to the extent that
such liability relates to facts and circumstances that should have been,
but were not, disclosed to Guaranty pursuant to the Stock Sale Agreement.

PLM will be responsible for any and all claims, losses, damages,
costs and expenses and other liabilities and obligations relating to claims
of, or damages or penalties sought by, any retained employee, former
employee of PLM and its affiliates or governmental entity arising from the
employment, discharge, layoff or termination of any such employee prior to
the closing.

If PLM's group insurance plans permit, at the request of Guaranty,
PLM will continue to cover retained employees under such plans for 90 days
after the closing. AFG will reimburse PLM for the premiums allocable to the
retained employees.

CONDITIONS

General Closing Conditions. The respective obligations of each party
to effect the sale and transfer of the Shares are subject to the
satisfaction or waiver at or prior to the closing date of various
conditions, including the following: (1) the absence of any statute, rule
or regulation enacted or promulgated by any governmental entity that would
reasonably be expected to prohibit or invalidate the sale of the Shares or
materially and adversely affect Guaranty's ownership of the Shares or
operation of AFG or its continuing subsidiaries; (2) the absence of any
action, suit or proceeding pending or threatened before any governmental
entity that would reasonably be expected to prohibit or invalidate the sale
of the Shares or materially and adversely affect Guaranty's ownership of
the Shares or operation of AFG or its continuing subsidiaries; (3) the
applicable waiting period under the Hart-Scott-Rodino Act having expired or
been terminated and the requisite approval from the Office of Thrift
Supervision having been obtained; (4) all material consents of any person
necessary to effect the closing having been obtained; and (5) the
authorization of the proposed sale by PLM's stockholders as contemplated by
Section 271 of the Delaware General Corporation Law.

Guaranty's Closing Conditions. The obligation of Guaranty to effect
the closing is further subject to the satisfaction or waiver on or prior to
the closing date of the following conditions: (1) the absence of any
injunction, order, suit, action or proceeding, pending or threatened, by
any governmental entity or other person seeking to restrain or prohibit the
proposed sale, obtain damages that are material or that would adversely
affect the benefit of the proposed sale to Guaranty or materially limit
Guaranty's exercise of its rights of ownership of the Shares; (2) the
delivery by PLM prior to the closing date of a copy of a Payoff Letter from
each Company Lender that (a) is acceptable to Guaranty and (b) has been
duly executed by such Company Lender; (3) the representations and
warranties of PLM in the Stock Sale Agreement that are qualified as to
materiality being true and complete and any such representations and
warranties that are not so qualified being true and complete in all
material respects as of the date of the agreement and as of the closing
date as if made on and as of the closing date (except to the extent that
any such representation or warranty is made as of a specific date, in which
case such representation or warranty will be true and complete, or true and
complete in all material respects, as the case may be, as of such specified
date); (4) PLM having performed and complied in all material respects with
all agreements, covenants and conditions required by the Stock Sale
Agreement to be performed or complied with by it on or prior to the closing
date; (5) Guaranty having received a certificate of an authorized officer
of PLM to the effect that the condition relating to the authorization of
the proposed sale by the stockholders and the conditions in paragraphs (3)
and (4) above have been satisfied and that there has been no material
adverse change in the assets, properties, business or financial condition
of AFG since June 30, 1999; (6) Guaranty having received a written opinion
of counsel for PLM as to (a) the due incorporation of PLM, AFG and AFG's
continuing subsidiaries, (b) the due authorization of the execution and
delivery by PLM of the Stock Sale Agreement and the Transition Services
Agreement and the consummation by PLM of the transactions contemplated by
those agreements, (c) the valid and binding nature of the Stock Sale
Agreement and the Transition Services Agreement, (d) the lack of conflict
of the Stock Sale Agreement and the Transition Services Agreement with the
Certificate of Incorporation or by-laws of either PLM or AFG, and (e)
governmental approvals required for the authorization, execution, delivery
or performance by PLM or AFG of the Stock Sale Agreement or the Transition
Services Agreement; (7) if requested by Guaranty, the Transition Services
Agreement having been executed and delivered; (8) the transfer of the
Inland Leases in accordance with applicable law or receipt of written
evidence from the Office of Thrift Supervision that such transfer is not
required; (9) the receipt by AFG at the closing of written evidence
satisfactory to Guaranty from each Company Lender that, upon payment of the
amounts set forth in the Payoff Letters, the outstanding indebtedness to
each Company Lender will have been fully repaid and that all encumbrances
on the assets and properties of AFG and its continuing subsidiaries
resulting from such indebtedness will be discharged and released; (10)
Guaranty having received reasonably satisfactory evidence of the transfer
of all of the outstanding capital stock of AFG's non-continuing
subsidiaries and the entire limited partnership interest of AFG in Eireann
II and Eireann III; (11) Guaranty having received reasonably satisfactory
evidence of the assignment by AFG on or before the closing date of all
agreements, contracts, understandings or arrangements relating to the
Eireann Programs to which or by which AFG or any continuing subsidiary of
AFG is a party or bound; (12) the transactions contemplated by the Stock
Sale Agreement not having been abandoned; (13) the absence of any material
adverse change in the assets, properties, business or condition of AFG and
its continuing subsidiaries, taken as a whole, since June 30, 1999; (14)
the receipt by Guaranty of all the documents with respect to AFG, AFG's
continuing subsidiaries, the Shares and the transactions contemplated by
the Stock Sale Agreement as reasonably required by Guaranty; and (15) AFG
and its continuing subsidiaries not having entered into various
transactions between the date of the Stock Sale Agreement and the closing
date. With respect to the condition described in clause (8) above, AFG
intends to dispose of the Inland Leases on commercially reasonable terms,
although there can be no assurance that it will not recognize a loss upon
such disposal.

PLM's Closing Conditions. The obligation of PLM to effect the closing
is further subject to satisfaction or waiver on or prior to the closing
date of the following conditions: (1) the absence of any suit, action or
proceeding, pending or threatened, seeking to restrain or prohibit the
proposed sale or obtain material damages; (2) the representations and
warranties of Guaranty in the Stock Sale Agreement that are qualified as to
materiality being true and complete and any such representations and
warranties that are not so qualified being true and complete in all
material respects as of the date of the agreement and as of the closing
date as if made on and as of the closing date (except to the extent that
any such representation or warranty is made as of a specific date, in which
case such representation or warranty will be true and complete, or true and
complete in all material respects, as the case may be, as of such specified
date); (3) the transactions contemplated by the Stock Sale Agreement not
having been abandoned; and (4) PLM having received a written opinion of
counsel for Guaranty as to (a) the due authorization of the execution and
delivery by Guaranty of the Stock Sale Agreement and the Transition
Services Agreement and the consummation by Guaranty of the transactions
contemplated by those agreements, (b) the valid and binding nature of the
Stock Sale Agreement and the Transition Services Agreement, (c) the lack of
conflict of the Stock Sale Agreement and the Transition Services Agreement
with the Articles of Incorporation or by-laws of Guaranty, and (d)
governmental approvals required for the authorization, execution, delivery
or performance by Guaranty of the Stock Sale Agreement or the Transition
Services Agreement.

PLM currently has no intention of waiving any of the foregoing
conditions. In the unlikely event that the PLM Board of Directors were to
determine to waive one or more of the conditions in such a way that could
materially and adversely affect PLM, PLM would mail additional information
to its stockholders concerning the potential consequences to PLM arising
from the waiver of such conditions and the consummation of the proposed
sale and would resolicit proxies from its stockholders with respect to the
approval of the proposed sale.

ABANDONMENT

The transactions contemplated by the Stock Sale Agreement may be
abandoned at any time prior to the closing date: (1) by mutual written
consent of PLM and Guaranty; (2) by PLM or Guaranty, if any governmental
entity has issued an order, decree or ruling or taken other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Stock Sale Agreement and such order,
decree, ruling or other action has become final and nonappealable; (3) by
PLM or Guaranty if the closing has not occurred on or prior to March 15,
2000 and such party is not in material breach of the agreement at the time
such party abandons the transactions contemplated by the agreement; (4) by
Guaranty if, in its opinion, a supplement or amendment made by PLM after
signing to correct the disclosure schedule materially and adversely affects
the benefits to Guaranty under the Stock Sale Agreement; (5) by PLM in the
event of any breach by Guaranty in any material respect of any of its
representations, warranties, covenants or other agreements in the Stock
Sale Agreement that would cause the failure of a closing condition and that
has not been or cannot be cured within a specified period of time; or (6)
by Guaranty in the event of any breach by PLM of any representation,
warranty, covenant or other agreement in the Stock Sale Agreement that
would cause the failure of a closing condition and that has not been or
cannot be cured within a specified period of time.

In the event of abandonment of the transactions contemplated by the
agreement, there is no liability or obligation on the part of PLM or
Guaranty, except for fraud or willful breach of the Stock Sale Agreement
prior to abandonment and, except that the provisions regarding fees and
expenses will survive abandonment.

INDEMNIFICATION; SURVIVAL OF INDEMNIFICATION OBLIGATIONS

PLM has agreed to indemnify, defend and hold Guaranty harmless from
and against and in respect of all losses and liabilities incurred by any of
AFG, AFG's continuing subsidiaries, Guaranty and their affiliates arising
out of any breach by PLM, whether before of after the closing, of any of
its representations and warranties or covenants and agreements contained in
or made by or pursuant to the Stock Sale Agreement; provided that such
losses or liabilities will not include the matters referred to in Section
8.1(b) of the Stock Sale Agreement or the amount of any loss or liability
to the extent such amount reduces stockholders' equity as reflected on the
final closing date balance sheet. PLM will also indemnify and hold
Guaranty, AFG and AFG's continuing subsidiaries harmless from and against
tax liabilities referred to in Section 8.1(b) of the agreement. Except with
respect to losses relating to (1) PLM's authority to execute and deliver
the Stock Sale Agreement, (2) PLM's ownership and possession of the Shares,
(3) various tax matters, (4) brokers and finders fees, (5) a previously
contemplated initial public offering of AFG securities and a previously
proposed acquisition of AFG, neither of which was completed, (6) tax claims
under Section 8.1(b), and (7) PLM's solicitation of proxies in connection
with obtaining authorization of the proposed sale or the special meeting of
PLM stockholders, PLM will not have to reimburse Guaranty for losses unless
the aggregate amount of such losses exceeds 1% of the Final Purchase Price
and, in that event, only to the extent such losses exceed 1% of the Final
Purchase Price. In no event will PLM's aggregate liability for breaches of
representations or warranties, covenants or agreements exceed 75% of the
Final Purchase Price.

Guaranty will indemnify and hold PLM and its subsidiaries and
affiliates harmless from and against (1) taxes imposed on AFG for taxable
years or periods beginning after the closing date, (2) taxes specifically
identified and reflected as a liability on the June 30, 1999 balance sheet,
(3) taxes resulting from transactions or actions taken by AFG on the
closing date that are properly allocable to the portion of the closing date
after the closing, and (4) transfer taxes for which Guaranty is liable.

PLM's indemnification obligations will survive until the second
anniversary of the closing date except that PLM's indemnification
obligations relating to (1) losses arising under ERISA or various tax
matters will survive until the sixth anniversary of the closing date, (2)
tax claims under Section 8.1(b) will survive until expiration of applicable
tax statute of limitations (including extensions of time for assessment
granted to the applicable taxing authority) and (3) losses relating to the
previously contemplated initial public offering of AFG securities and
previously proposed acquisition of AFG, PLM's solicitation of proxies in
connection with obtaining authorization of the proposed sale or the special
meeting of PLM stockholders, PLM's authority to execute and deliver the
Stock Sale Agreement, and brokers and finders fees will survive until the
expiration of the applicable statute limitations. The parties agree that no
claims or causes of action may be brought against PLM or Guaranty based
upon, directly or indirectly, any of the representations, warranties or
agreements contained in Articles III and IV of the Stock Sale Agreement
after the applicable survival period or, except as otherwise provided in
the agreement, any termination of the Stock Sale Agreement.

FEES AND EXPENSES

Whether or not the proposed sale is completed, all costs and expenses
incurred in connection with the Stock Sale Agreement and the consummation
of the transactions contemplated by the agreement will be paid by the party
incurring those expenses, except as specifically provided in the Stock Sale
Agreement and except that PLM and Guaranty will each bear 50% of the fee
payable in connection with the pre-merger notification filing required by
the Hart-Scott-Rodino Act.

INTELLECTUAL PROPERTY

Guaranty is not purchasing, acquiring or otherwise obtaining, and AFG
will not be entitled to retain following the closing date, any right, title
or interest in any trademarks employing PLM's name or any part or variation
of PLM's name or anything confusingly similar to PLM's name. Following the
closing, neither AFG nor Guaranty or its affiliates will make any use of
PLM's trademarks from and after the sale. In addition, following the
closing, neither PLM nor any of its affiliates will use, or have any right
to, the name "American Finance Group" or the acronym "AFG" or any variants
of either of the two or anything confusingly similar to either of the two.

AMENDMENT OF THE STOCK SALE AGREEMENT

In an amendment dated as of January 24, 2000, PLM and Guaranty agreed
to amend Section 7.1(c) of the Stock Sale Agreement to change the date
referenced in that section from March 1, 2000 to March 15, 2000.

MARKET PRICE DATA; DIVIDENDS

PLM's common stock is listed on the American Stock Exchange under the
symbol "PLM". The table below sets forth, for the calendar periods
indicated, the high and low intra-day sales price per share of PLM common
stock as reported by the AMEX.

HIGH LOW
1997
First Quarter.................... $3.813 $3.000
Second Quarter................... 6.375 3.500
Third Quarter.................... 6.000 5.500
Fourth Quarter................... 5.875 5.125
1998
First Quarter.................... $6.250 $5.063
Second Quarter................... 9.250 5.813
Third Quarter.................... 7.750 5.438
Fourth Quarter................... 7.000 5.063
1999
First Quarter.................... $6.375 $5.313
Second Quarter................... 7.000 5.375
Third Quarter.................... 5.938 4.375
Fourth Quarter................... 6.156 4.375

On October 25, 1999, the last full trading day before the public
announcement of the proposed sale, the high sales price per share of PLM
common stock, as quoted by the AMEX, was $5.063 and the low sales price per
share was $4.938.

The closing sales price for the shares of PLM common stock as reported
by the AMEX on February 1, 2000 (the latest practicable date prior to
mailing this proxy statement) was $6.188. As of the close of business on
the record date, there were approximately 3,068 holders of record of PLM
common stock.

On July 24, 1997, PLM redeemed all outstanding share purchase rights
under its Shareholder Rights Plan at a cost of $.01 per right. Between
January 1, 1997 and December 29, 1999 PLM repurchased a total of 1,232,076
shares of its common stock. Except as described in the preceding sentences,
since November 1991 PLM has not paid cash dividends on or repurchased any
of its common stock. PLM currently intends to retain its earnings and does
not anticipate paying any cash dividends in the foreseeable future. See the
consolidated financial statements of PLM and the accompanying notes
contained in PLM's annual report on Form 10-K for the year ended December
31, 1998 and quarterly report on Form 10-Q/A for the nine-month period
ended September 30, 1999, which are included with the materials mailed with
this proxy statement, concerning restrictions on dividends.

PLM INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The unaudited pro forma condensed consolidated financial information
as of September 30, 1999 and for the nine months ended September 30, 1999
and 1998 and the years ended December 31, 1998, 1997 and 1996 presented in
this proxy statement gives effect to PLM's sale of AFG and its continuing
subsidiaries. For purposes of the unaudited pro forma condensed
consolidated financial information, the term "AFG" means AFG and its
continuing subsidiaries. The unaudited pro forma condensed consolidated
statement of income for the nine months ended September 30, 1999 and 1998
and the unaudited pro forma condensed consolidated statements of income for
the years ended December 31, 1998, 1997 and 1996 assume that the proposed
sale occurred on January 1, 1996. Accordingly, the pro forma financial
information for the 1999 and 1998 periods is based upon the historical
financial statements of PLM and AFG for the nine months ended September 30,
1999 and 1998. The pro forma financial information for 1998, 1997 and 1996
is based upon the historical financial statements of PLM and AFG.

The unaudited pro forma condensed consolidated financial statements
give effect to events that are directly attributable to the proposed sale.
Explanations for these adjustments are included in the notes accompanying
the unaudited pro forma condensed consolidated balance sheet and income
statements.

PLM's unaudited pro forma condensed consolidated financial information
should be read in conjunction with the historical financial statements of
PLM and the information contained in PLM's "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in
PLM's annual report on Form 10-K for the year ended December 31, 1998 and
quarterly report on Form 10-Q/A for the nine-month period ended September
30, 1999, which are included with the materials mailed with this proxy
statement. The unaudited pro forma condensed consolidated financial data
should not be construed to be indicative of our financial condition,
results of operations or covenant compliance had the proposed sale and
events described above been completed on the dates assumed and are not
intended to project our financial condition on any future date or our
results of operations for any future period.

PLM INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999

PROPOSED UNAUDITED
HISTORICAL AFG TRANSACTION PRO FORMA
---------------- -------------- --------------------- --------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 2,675 $ (360) 28,544 (3) $ 30,859
Receivables.............................. 8,499 (1,337) -- 7,162
Receivables from affiliates.............. 3,213 -- -- 3,213
Investment in direct finance
leases, net............................ 120,548 (118,841) -- 1,707
Loan receivable.......................... 23,445 (23,445) -- --
Assets held for sale..................... 8,004 -- -- 8,004
Equity interest in affiliates............ 19,743 -- -- 19,743
Trailer equipment held for operating
leases, net............................ 78,040 -- -- 78,040
Commercial and industrial equipment
held for operating leases, net......... 19,638 (19,638) -- --
Restricted cash and cash equivalents..... 10,018 (8,473) -- 1,545
Other, net............................... 5,773 (2,023) -- 3,750
---------------- ---------------- ------------- ----------------
Total assets............................. $ 299,596 $ (174,117) $ 28,544 $ 154,023
================ ================ ============= ================
Short-term secured debt.................. $ 27,700 $ (20,100) $ -- $ 7,600
Long-term recourse debt.................. 73,273 -- -- 73,273
Nonrecourse securitized debt............. 110,679 (110,679) -- --
Payables and other liabilities........... 13,907 (3,450) -- 10,457
Deferred income taxes.................... 23,042 (14,550) 3,655 (2) 12,147
Stockholders' equity..................... 50,995 (25,338) 24,889 (2) 50,546
---------------- ---------------- ------------- -----------------
Total liabilities and stockholders' equity $ 299,596 $ (174,117) $ 28,544 $ 154,023
================ ================ ============= =================
</TABLE>

The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.

PLM INTERNATIONAL, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

1. AFG

The pro forma condensed consolidated balance sheet gives effect to the
proposed sale assuming the sale occurred on September 30, 1999.

2. PROPOSED TRANSACTION

The proposed transaction assumes the following for PLM (in millions of
dollars):

<TABLE>
<S> <C>
Net sales proceeds................................................................. $33.9
AFG net book value at September 30, 1999........................................... (25.3)
AFG estimated after tax earnings through closing (retained by PLM)................. 0.3
Additional transaction tax liability of PLM due to 338 (h)(10) election
on sale of AFG ................................................................ (9.3)
------
Loss from transaction........................................................... $(0.4)
======
</TABLE>

The net loss amount has been included in stockholders' equity in the
pro forma condensed consolidated balance sheets as of September 30, 1999.

3. USE OF PROCEEDS

The pro forma condensed consolidated balance sheet assumes for the
purpose of this presentation that the net sales proceeds of $28.5 million
on from the proposed sale of AFG, net of $5.4 million deemed payable on the
transaction, will be deposited into the bank and are presumed to be
non-interest bearing cash for the pro forma statements of income.

4. CLOSING ADJUSTMENTS

The actual sale proceeds at the closing date will be adjusted from the
amounts presented herein on a dollar for dollar basis for increases or
decreases in stockholders' equity of AFG between June 30, 1999 and the
closing date.

PLM INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999

<TABLE>
<CAPTION>
UNAUDITED
HISTORICAL AFG ADJUSTMENTS PRO FORMA
------------------ ------------- ------------- ---------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues................................$ 45,156 (19,676) $ - $ 25,480
Operations support............................ 14,018 (4,672) 597(2) 9,943
General and administrative.................... 4,851 - -- 4,851
Depreciation and amortization................. 11,383 (5,732) -- 5,651
-------------------------------------------------------------------------
Operating income.............................. 14,904 (9,272) (597) 5,035

Interest expense.............................. (11,249) 7,387 (45)(7) (3,907)
Interest income............................... 680 (428) - 252
Other income (expense)........................ (398) 975 - 577
Provision for (benefit from) income tax....... 1,543 (515) (244)(5) 784
------------------------------------------------------------------------
Income (loss) from continuing operations......$ 2,394 $ (823) $ (398) $ 1,173
========================================================================

Basic earnings weighted-average
per share from continuing operations.......$ 0.30 $ 0.14
Diluted earnings weighted-average
per share from continuing operations.......$ 0.29 $ 0.14
Net income to common stock from continuing $ 2,394 $ 1,173
operations.................................
</TABLE>

The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.

PLM INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
UNAUDITED
HISTORICAL AFG ADJUSTMENTS PRO FORMA
------------------ ------------- ------------- --------------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues................................$ 42,775 $ (20,342) $ -- $ 22,433
Operations support............................ 12,917 (4,126) 714(2) 9,505
General and administrative.................... 6,174 -- -- 6,174
Depreciation and amortization................. 8,891 (5,430) -- 3,461
-----------------------------------------------------------------------
Operating income.............................. 14,793 (10,786) (714) 3,293

Interest expense.............................. (10,663) 7,857 (183)(7) (2,989)
Interest income............................... 1,212 (374) -- 838
Other income.................................. 478 - -- 478
Provision for (benefit from) income tax....... 2,274 (1,228) (341)(5) 705
-------------------------------------------------------------------------
Income (loss) from continuing operations......$ 3,546 $ (2,075) $ (556) $ 915
=========================================================================

Basic earnings weighted-
average per share..........................$ 0.42 $ 0.11
Diluted earnings weighted-
average per share..........................$ 0.41 $ 0.11
Net income to common stock....................$ 3,546 $ 915
</TABLE>

The notes to the unaudited pro forma
condensed consolidated financial
statements are an integral part of this
statement.

PLM INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
UNAUDITED
HISTORICAL AFG ADJUSTMENTS PRO FORMA
------------------ ------------- ------------- --------------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues................................$ 57,078 $ (26,958) $ - $ 30,120
Operations support............................ 17,571 (5,629) 978(2) 12,920
General and administrative.................... 7,086 -- -- 7,086
Depreciation and amortization................. 11,833 (6,965) -- 4,868
-------------------------------------------------------------------------
Operating income.............................. 20,588 (14,364) (978) 5,246

Interest expense.............................. (14,608) 10,783 (213)(7) (4,038)
Interest income............................... 1,446 (505) - 941
Other income.................................. 473 - - 473
Provision for (benefit from) income tax....... 3,042 (1,526) (453)(5) 1,063
-------------------------------------------------------------------------
Income (loss) from continuing operations......$ 4,857 (2,560) $ (738) $ 1,559
=========================================================================

Basic earnings weighted-
average per share..........................$ 0.58 $ 0.19
Diluted earnings weighted-
average per share..........................$ 0.57 $ 0.19
Net income to common stock....................$ 4,857 $ 1,559

</TABLE>

The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.

PLM INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997

UNAUDITED
HISTORICAL AFG ADJUSTMENTS PRO FORMA
---------------- ------------- ------------ ------------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues........................... $ 49,665 $ (18,496) $ -- $ 31,169
Operations support....................... 16,633 (5,729) 1,063 (2) 11,967
General and
administrative...................... 9,472 -- -- 9,472
Depreciation and
amortization ....................... 8,447 (3,958) -- 4,489
---------------------------------------------------------------
Operating income ........................ 15,113 (8,809) (1,063) 5,241

Interest expense......................... (9,891) 5,800 (481)(7) (4,572)
Interest income.......................... 1,635 (324) -- 1,311
Other (expense).......................... (342) -- -- (342)
Provision for (benefit from) income tax.. 1,848 (1,266) (587)(5) (5)
----------------------------------------------------------------
Income (loss) from continuing operations. $ 4,667 $ (2,067) $ (957) $ 1,643
================================================================

Basic earnings weighted-
average per share................... $ 0.51 $ 0.18
Diluted earnings weighted-
average per share................... $ 0.50 $ 0.18
Net income to common stock............... $ 4,667 $ 1,643
</TABLE>

The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.

PLM INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
Unaudited
HISTORICAL AFG Adjustments Pro Forma
------------- ------------- ------------- --------------

(in thousands, except per share amount)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues........................ $ 51,545 $ (11,794) $ -- $ 39,751
Operations support.................... 21,595 (5,062) 978(2) 17,511
General and
administrative................... 7,956 -- -- 7,956
Depreciation and
amortization .................... 11,318 (4,613) -- 6,705
------------------------------------------------------------------------
Operating income ..................... 10,676 (2,119) (978) 7,579

Interest expense...................... (7,341) 2,689 -- (4,652)
Interest income....................... 1,228 (176) -- 1,052
Other income (expense)................ (670) 20 -- (650)
(Benefit from) provision for
income tax......................... (202) 157 (372)(5) (417)
------------------------------------------------------------------------
Income (loss) from
continuing operations.............. $ 4,095 $ 257 $ (606) $ 3,746
========================================================================

Basic earnings weighted-
average per share................ $ 0.41 $ 0.37
Diluted earnings weighted-
average per share................ $ 0.40 $ 0.37
Net income to common stock............ $ 4,095 $ 3,746
</TABLE>

The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.

PLM INTERNATIONAL, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME

1. AFG

The pro forma condensed consolidated statements of income
give effect to the proposed sale assuming the sale occurred on January
1, 1996.

2. OPERATIONS SUPPORT

The pro forma condensed consolidated statements of income
exclude all direct expenses of AFG that will be eliminated on the
completion of the sale of AFG but include allocated costs from PLM
that will not be eliminated as a result of the sale.

3. PROPOSED TRANSACTION

The estimated loss on the sale of AFG, net of taxes, is $0.4
million. The estimated loss has not been included in any of the pro
forma income statements.

4. USE OF PROCEEDS

PLM projects sales proceeds after transaction costs to be
$33.9 million. On this transaction, the income tax associated with the
proposed sale are estimated to be $9.3 million, of which $5.4 million
will be paid at the time of sale. The tax liability will be partially
offset by the deferred tax assets of PLM. Thus, the net sales proceeds
from this transaction are $28.5 million. The net sales proceeds will
be deposited into the bank and are presumed to be non-interest bearing
cash for the pro forma statements of income.

5. INCOME TAXES

The pro forma condensed consolidated statements of income
give effect to the tax adjustments at a statutory rate of 38%, of
which 34% is for federal tax and 4% for state tax.

6. CLOSING ADJUSTMENTS

The actual sales proceeds will be adjusted at the closing
date from the amounts presented herein on a dollar for dollar basis
for increases or decreases in stockholders' equity of AFG between June
30, 1999 and the closing date, excluding the effect of changes
resulting from income tax liabilities to be paid by PLM.

7. INTEREST EXPENSE

The pro forma condensed consolidated statements of income
exclude the interest expenses charged by PLM to AFG for cash borrowed
from PLM.

8. RECONCILIATION OF PRO FORMA STATEMENTS OF OPERATIONS TO
HISTORICAL FINANCIAL STATEMENTS

The following table reconciles income from continuing
operations in AFG's pro forma statements of operations to income from
continuing operations in AFG's historical financial statements.

PLM INTERNATIONAL, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE
FOR THE TWELVE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1997 1996 1999 1998
---------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations - pro
forma statements........................ $2,560 $2,067 ($257) $823 $2,075
Net effect of different accounting treatment for
indirect costs incurred in 1996 and 1997,
net of tax.............................. (168) 135 175 (99) (130)
Pro forma adjustments to reflect net income from
subsidiary of PLM earned on behalf of AFG,
net of tax.............................. 0 0 (838) 0 0
Other, net of tax................................ 172 (96) 84 0 150
------------------------------------ ----------------------
Income (loss) from continuing operation - histori-
cal financial statements................ $2,564 $2,106 ($836) $724 $2,095
==================================== ======================
</TABLE>

The results of AFG's operations included in the pro forma
statements reflect PLM's accounting treatment of AFG's operations.

As stated in PLM's annual report on Form 10-K for the year
ended December 31, 1998, prior to 1998 PLM expensed indirect costs
related to lease originations at AFG as incurred as they were not
material to PLM's financial statements taken as a whole. As the AFG
lease portfolio grew in 1998, these costs increased and became
material. As such, beginning in 1998 PLM began capitalizing these
costs and amortizing them over the related lease term.

Indirect costs have always been material to AFG's stand-alone
financial statements. Thus, it has always been AFG's policy to
capitalize and amortize indirect costs related to lease origination.

In the first quarter of 1998, PLM announced the proposed
initial public offering of AFG. Prior to that time, AFG was not
audited as a stand-alone entity. The audit of AFG for the years ended
1995, 1996 and 1997 was completed on April 24, 1998.

The audit for PLM for 1995 was completed on March 25, 1996.
The audit for PLM for 1996 was completed on February 24, 1997. The
audit for PLM for 1997 was completed on February 23, 1998. With the
additional passage of time between the audits of PLM and AFG, certain
estimates and assumptions made in the audited financial statements of
PLM were modified prior to the audit of AFG. The effect of the changes
in the estimates and assumptions are reflected in the "other" line of
the above reconciliation.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to PLM with
respect to beneficial ownership of its common stock by (1) each
stockholder known by PLM to be the beneficial owner of more than 5% of
its common stock, (2) each of its directors, the chief executive
officer and the four other most highly compensated executive officers,
and (3) all directors and executive officers of PLM as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF
NAME OF BENEFICIAL OWNER COMMON STOCK (1) COMMON STOCK (1)
------------------------- ------------------ ----------------
<S> <C> <C>
Steel Partners II, L.P................... 1,337,300 17.04
750 Lexington Avenue, 27th Floor
New York, New York 10022

Dimensional Fund Advisors, Inc. (2)...... 469,800 5.99
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401

Oak Forest Investment Management, Inc. (3).. 458,000 5.84
6701 Democracy Blvd., Ste. 402
Bethesda, Maryland 20817

J. Michael Allgood (4)...................... -- --

Stephen M. Bess (5)......................... 46,688 *

Randall L-W. Caudill (6).................... 5,333 *

Douglas P. Goodrich (7)..................... 183,810 2.32

Warren G. Lichtenstein (8).................. 1,337,300 17.04
750 Lexington Avenue, 27th Floor
New York, New York 10022

Howard M. Lorber............................ -- --

Susan C. Santo (9).......................... 15,833 *

Harold R. Somerset (10)..................... 36,000 *

Robert N. Tidball (11)...................... 340,671 4.27

Robert L. Witt (12)......................... 8,333 *

All directors and executive officers as a group
(11 people) (13)......................... 2,049,490 25.06

</TABLE>

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

* Represents less than 1% of the outstanding shares.

(1) Computed on the basis of 7,847,680 shares of common stock
outstanding (excluding treasury stock) as of November 30, 1999.
Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended.
(2) Includes 469,800 shares held by Dimensional Fund Advisors Inc. as
investment advisor and investment manager on behalf of four
investment companies registered under the Investment Company Act
of 1940 and other investment vehicles, including commingled group
trusts. In its role as investment advisor and investment manager,
Dimensional possesses both voting and investment power over the
shares. Dimensional disclaims beneficial ownership of all such
shares.
(3) Includes 458,000 shares held by Oak Forest Investment Management,
Inc. as an investment advisor registered under the Investment
Company Act of 1940. In its role as investment advisor, Oak
Forest Investment Management, Inc., possesses both voting and
investment power over such shares.
(4) Mr. Allgood resigned from his position as Chief Financial Officer
of PLM on May 31, 1999.
(5) Includes 16,666 shares of common stock issuable to Mr. Bess
pursuant to options exercisable within 60 days of November 30,
1999.
(6) Includes 3,333 shares of common stock issuable to Mr. Caudill
pursuant to options exercisable within 60 days of November 30,
1999.
(7) Includes 83,333 shares of common stock issuable to Mr. Goodrich
pursuant to options exercisable within 60 days of November 30,
1999.
(8) Includes 1,337,300 shares held by Steel Partners II, L.P. The
general partner of Steel Partners II, L.P. is Steel Partners
L.L.C., of which Mr. Lichtenstein is the chief executive officer.
Mr. Lichtenstein may be deemed to be the beneficial owner of all
of such shares by virtue of his power to vote and dispose of such
shares.
(9) Includes 13,333 shares of common stock issuable to Ms. Santo
pursuant to options exercisable within 60 days of November 30,
1999.
(10) Includes 29,999 shares of common stock issuable to Mr. Somerset
pursuant to options exercisable within 60 days of November 30,
1999.
(11) Includes 121,666 shares of common stock issuable to Mr. Tidball
pursuant to options exercisable within 60 days of November 30,
1999.
(12) Includes 3,333 shares of common stock issuable to Mr. Witt
pursuant to options exercisable within 60 days of November 30,
1999.
(13) Includes 331,664 shares of common stock issuable to members of
the Board of Directors and executive officers pursuant to options
exercisable within 60 days of November 30, 1999.

INDEPENDENT AUDITORS

We expect representatives of KPMG LLP, PLM's independent auditors,
to be present at the special meeting. We will afford them the
opportunity to make a statement if they desire to do so and expect
them to be available to respond to questions.

STOCKHOLDER PROPOSALS

The date for receipt of proposals from stockholders for PLM's 2000
annual meeting has passed, and no further proposals from stockholders
will be considered for inclusion in PLM's proxy statement and proxy
card relating to the 2000 annual meeting.

Pursuant to PLM's by-laws, a stockholder who desires to present a
proposal at a meeting of stockholders of PLM without inclusion of such
proposal in PLM's proxy materials relating to the meeting must give
timely notice of the proposal in writing to the Secretary of PLM. To
be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of PLM not less than 50
days nor more than 75 days prior to the meeting; provided, however,
that if less than 65 days' prior notice or prior public disclosure of
the date of the meeting is given or made to stockholders, a
stockholder's notice must be so received not later than the close of
business on the fifteenth day following the day on which notice of the
date of the meeting was mailed or public disclosure was made,
whichever occurs first. PLM reserves the right to reject, rule out of
order, or take other appropriate action with respect to any proposal
that does not comply with these and other applicable requirements.

All notices of proposals of stockholders, whether or not to be
included in PLM's proxy materials, should be sent to the attention of
the Secretary, PLM International, Inc., One Market, Steuart Street
Tower, Suite 800, San Francisco, California 94105.

WHERE YOU CAN FIND MORE INFORMATION

PLM files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission.
Stockholders may read and copy any reports, statements or other
information that PLM files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information about the
public reference rooms. Our filings are also available from commercial
document retrieval services and at the Internet web site maintained by
the SEC at http:www.sec.gov. PLM's annual report on Form 10-K for the
year ended December 31, 1998 and quarterly report on Form 10-Q/A for
the nine-month period ended September 30, 1999 are included with the
materials mailed with this proxy statement.

The SEC allows us to "incorporate by reference" information into
this proxy statement, which means that we can disclose important
information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is
deemed to be part of this proxy statement, except for any information
superseded by information contained directly in this proxy statement.
This proxy statement incorporates by reference the documents set forth
below that we have previously filed with the SEC. These documents
contain important information about us and our financial condition.

PLM SEC FILINGS (FILE NO. 1-9670) PERIOD
--------------------------------- ------
Quarterly Reports on Form 10-Q..... Quarters ended March 31, 1999
and June 30, 1999
Current Report on Form 8-K......... Filed January 19, 1999
Proxy Statement.................... Filed April 15, 1999 (as amended
April 29, 1999)

We are also incorporating by reference PLM's annual report on Form
10-K for the year ended December 31, 1998 and quarterly report on Form
10-Q/A for the nine-month period ended September 30, 1999, each of
which is included with the materials mailed with this proxy statement.
On January 20, 2000, we filed an amendment to our annual report on
Form 10-K for the year ended December 31, 1998 to amend Item 14
(Exhibits, Financial Statement Schedules, and Reports on Form 8-K) and
to attach Exhibits 10.30 through 10.44 to the Form 10-K. You may
obtain a copy of the amended Form 10-K from us without charge,
excluding all exhibits unless we have specifically incorporated by
reference an exhibit in this proxy statement, by requesting our annual
report on Form 10-K/A for the year ended December 31, 1998 in writing
or by telephone from PLM at the address indicated below. In addition,
if you are a PLM stockholder, you may have previously received some of
the documents incorporated by reference. You may still obtain copies
of any of these documents from PLM or the SEC or the SEC's Internet
web site described above. Documents incorporated by reference are
available from us without charge, excluding all exhibits unless we
have specifically incorporated by reference an exhibit in this proxy
statement, by requesting them in writing or by telephone from PLM at
the following address:

PLM International, Inc.
One Market
Steuart Street Tower, Suite 800
San Francisco, California 94105
Attention: Investor Relations
Telephone: (415) 974-1399

Please request documents by February 11, 2000 to ensure receipt before
the special meeting.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Statements of Operations for the Three Months Ended
September 30, 1998 and 1999 and for the Nine Months Ended
September 30, 1998 and 1999
(unaudited)....................................................................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and September 30, 1999
(unaudited)....................................................................................... F-3
Consolidated Statements of Changes in Stockholders' Equity for the Year Ended
December 31, 1998 and the Nine Months Ended September 30, 1999 (unaudited)........................ F-4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1998 and 1999 (unaudited)......................................................................... F-5
Notes to Unaudited Consolidated Financial Statements.............................................. F-6
Independent Auditors' Report...................................................................... F-11
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1997
and 1998.......................................................................................... F-12
Consolidated Balance Sheets as of December 31, 1997 and 1998...................................... F-13
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1996, 1997 and 1998.................................................................. F-14
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997
and 1998.......................................................................................... F-15
Notes to Consolidated Financial Statements........................................................ F-16
</TABLE>

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
UNAUDITED

<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1999 1998 1999
---------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Finance lease income.............................. $3,474 $2,655 $ 9,182 $ 8,439
Operating lease income............................ 2,095 2,439 6,288 6,819
Financing income ................................. 325 430 661 1,254
Management fees .................................. 206 171 613 578
Revenue from sale of leases and related assets ... 1,688 521 3,464 2,452
---------------------------------------------------------------
Total revenues............................... 7,788 6,216 20,208 19,542
---------------------------------------------------------------

COSTS AND EXPENSES
Operations support................................ 1,241 1,244 3,262 3,925
Depreciation and amortization..................... 1,631 2,157 5,264 5,757
General and administrative ....................... 268 259 864 747
---------------------------------------------------------------
Total costs and expenses..................... 3,140 3,660 9,390 10,429
---------------------------------------------------------------

Operating income.................................. 4,648 2,556 10,818 9,113

Interest expense.................................. (3,077) (2,317) (7,857) (7,387)
Interest income................................... 142 144 374 428
Other expense..................................... -- -- -- (975)
---------------------------------------------------------------
Income before income taxes and cumulative
effect of accounting change.................... 1,713 383 3,335 1,179
Provision for income taxes ....................... 635 161 1,240 455
---------------------------------------------------------------
Net income before cumulative effect of
accounting change.............................. 1,078 222 2,095 724

Cumulative effect of accounting change,
net of tax of $148............................. -- -- -- (253)
---------------------------------------------------------------
Net income ................................. $1,078 $ 222 $ 2,095 $ 471
===============================================================
</TABLE>

See accompanying notes to these unaudited consolidated financial statements.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
UNAUDITED

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
1998 30,
1999
--------------------- ---------------------
<S> <C> <C>
Cash and cash equivalents............................................... $ -- $ 360
Restricted cash......................................................... 8,088 8,473
Receivables, net of allowance........................................... 2,279 1,337
Investment in direct finance leases, net................................ 143,304 118,841
Loans receivable........................................................ 23,493 23,445
Commercial and industrial equipment held for operating leases........... 24,520 30,411
Less accumulated depreciation......................................... (7,831) (10,773)
--------------------- ---------------------
16,689 19,638
Other assets, net....................................................... 3,958 2,023
--------------------- ---------------------

Total assets....................................................... $197,811 $174,117
===================== =====================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Warehouse credit facility............................................... $ 34,420 $ 20,100
Nonrecourse notes payable............................................... 7,585 5,227
Nonrecourse securitization facility..................................... 103,637 105,452
Advance from PLM International, Inc..................................... 4,417 7
Payables and other liabilities.......................................... 12,120 3,450
Deferred income taxes................................................... 12,349 14,550
--------------------- ---------------------
Total liabilities.................................................. 174,528 148,786

STOCKHOLDERS' EQUITY:
Common stock ($0.01 par value, 30,000,000 shares authorized, 4,200,000
shares issued and outstanding as of September
30, 1999 and December 31, 1998)...................................... 42 42
Paid-in capital, in excess of par....................................... 20,201 21,778
Retained earnings....................................................... 3,040 3,511
--------------------- ---------------------
Total stockholders' equity........................................... 23,283 25,331
--------------------- ---------------------

Total liabilities and stockholders' equity....................... $197,811 $174,117
===================== =====================
</TABLE>

See accompanying notes to these unaudited consolidated financial statements.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER
31, 1998, AND THE NINE
MONTHS ENDED SEPTEMBER 30,
1999 (IN THOUSANDS OF
DOLLARS)
UNAUDITED

<TABLE>
<CAPTION>
PAID-IN
CAPITAL TOTAL
COMMON IN EXCESS RETAINED STOCKHOLDERS'
STOCK OF PAR EARNINGS EQUITY
------------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C> <C>
Balances, December 31, 1997.......... $ 42 $ 19,461 $ 476 $ 19,979

Capital contributions from Parent....... -- 740 -- 740

Net income.............................. -- -- 2,564 2,564
------------------------------------------------------------------------------

Balances, December 31, 1998.......... 42 20,201 3,040 23,283

Capital contributions from Parent....... -- 1,577 -- 1,577

Net income.............................. -- -- 471 471
------------------------------------------------------------------------------

Balances, September 30, 1999......... $ 42 $ 21,778 $ 3,511 $ 25,331
==============================================================================
</TABLE>

See accompanying notes to these unaudited consolidated financial statements.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
UNAUDITED

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1998 1999
-----------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income........................................................ $ 2,095 $ 471
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................... 5,264 5,757
Cumulative effect of accounting change, net of tax.............. -- (253)
Write off IPO costs............................................. -- 975
Deferred income tax expense..................................... 2,684 2,201
Gain on the sale or disposition of assets, net.................. (2,111) (2,099)
Changes in assets and liabilities:
(Increase) decrease in receivables............................ (501) 942
(Increase) decrease in other assets, net...................... (445) 143
Increase (decrease) in payables and other liabilities......... 244 (2,131)
------------------------------------------
Net cash provided by operating activities................... 7,230 6,006
------------------------------------------

INVESTING ACTIVITIES
Principal payments received on loans.............................. 3,511 6,185
Investment in loans receivable.................................... (19,659) (6,137)
Principal payments received on finance leases..................... 22,923 25,735
Investment in direct finance leases............................... (107,664) (34,791)
Purchase of property, plant, and equipment........................ (17) --
Purchase of commercial and industrial equipment
held for operating lease........................................ (23,052) (20,283)
Proceeds from the sale of commercial and industrial equipment..... 56,616 41,726
------------------------------------------
Net cash (used in) provided by investing activities........... (67,342) 12,435
------------------------------------------

FINANCING ACTIVITIES
Borrowings on warehouse credit facility.......................... 106,689 38,120
Repayment of warehouse credit facility........................... (85,485) (52,440)
Borrowings on nonrecourse notes payable.......................... 12,427 --
Repayment on nonrecourse notes payable........................... (3,362) (2,358)
Borrowings on nonrecourse securitization facility................ 52,150 41,705
Repayment on nonrecourse securitization facility................. (18,421) (39,890)
Increase in restricted cash...................................... (2,446) (385)
Repayment of advances from PLM International, Inc., net.......... (4,595) (4,410)
Capital contributions from PLM International, Inc................ 3,155 1,577
------------------------------------------
Net cash provided by (used in) financing activities.......... 60,112 (18,081)
------------------------------------------

Net change in cash and cash equivalents.......................... -- 360
Cash and cash equivalents at beginning of period................. -- --
Cash and cash equivalents at end of period....................... $ -- $ 360
=========================================

SUPPLEMENTAL DISCLOSURE
Net cash paid for interest....................................... $ 7,280 $ 7,937
=========================================
Net cash paid for income taxes................................... $ 213 $ 194
=========================================
</TABLE>

See accompanying notes to these unaudited consolidated financial statements.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999

1. GENERAL

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary, consisting
primarily of normal recurring accruals, to present fairly the
financial position as of December 31, 1998 and September 30, 1999,
statements of income for the three and nine months ended September 30,
1998 and 1999, statements of changes in stockholders' equity for the
year ended December 31, 1998 and the nine months ended September 30,
1999 and statements of cash flows for the nine months ended September
30, 1998 and 1999 of American Finance Group, Inc. and its wholly owned
subsidiaries (the "Company") . Certain information and note
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying consolidated financial
statements. For further information, reference should be made to the
financial statements and notes thereto for the year ended December 31,
1998, which are included with the materials mailed with this proxy
statement.

2. PROPOSED SALE OF AMERICAN FINANCE GROUP

On October 26, 1999, PLM International, Inc. ("PLMI" or the "Parent")
agreed to sell the Company, its wholly owned subsidiary, for
approximately $33.9 million, net of transaction costs, in cash to
Guaranty Federal Bank, subject to closing adjustments which are not
expected to be material. Consummation of the transaction is subject to
various conditions, including the approval of PLMI's stockholders, and
closing of the transaction is expected to occur only after such
approval has been secured and all other conditions have been
satisfied.

3. DIRECT FINANCE LEASES

During the nine months ended September 30, 1999, the Company funded
$34.8 million in commercial and industrial equipment that was placed
on finance lease. Also during the nine months ended September 30,
1999, the Company sold equipment on finance lease with an original
equipment cost of $40.5 million, resulting in a net gain of $0.4
million.

4. LOANS RECEIVABLE

As of September 30, 1999, the Company had loans receivable outstanding
with 14 customers, totaling $23.4 million with interest rates ranging
from 6.39% to 10.24 %, secured by commercial and industrial equipment.

During the nine months ended September 30, 1999, the Company funded
$6.1 million in loans to customers.

5. COMMERCIAL AND INDUSTRIAL EQUIPMENT HELD FOR OPERATING LEASES

During the nine months ended September 30, 1999, the Company funded
$20.3 million in commercial and industrial equipment that was placed
on operating lease. During the nine months ended September 30, 1999,
the Company sold commercial and industrial equipment that was on
operating lease for a net gain of $1.7 million.

6. WAREHOUSE CREDIT FACILITY

On December 10, 1999, the Company amended its warehouse credit
facility to extend the facility to April 21, 2000, and lower the
amount available to be borrowed from $60.0 million to $50.0 million.
The Company is the sole borrower of this facility. This facility
provides borrowings for 100% of the present value of the lease stream
from the assets collateralized in this facility, up to 90% of original
equipment cost of the assets held in this facility. In the event that
the sale of the Company is not completed by April 21, 2000, the
Company believes it will be able to renew this facility on similar
terms.

As of September 30, 1999, the Company had $20.1 million outstanding
under this facility.

7. NONRECOURSE DEBT

The Company has available a nonrecourse debt facility, secured by
direct finance leases, operating leases, and loans on commercial and
industrial equipment at the Company that generally have terms of one
to seven years. The facility was amended in October 1999 to extend the
facility to October 10, 2000. This amendment also reduced the amount
available to be borrowed under the facility from $150.0 million to
$125.0 million. Repayment of the facility matches the terms of the
underlying leases. The securitized debt bears interest equivalent to
the lender's cost of funds based on commercial paper market rates for
the determined period of borrowing plus an interest rate spread and
fees. As of September 30, 1999, there was $105.5 million in borrowings
under this facility. The Company is required to hedge the interest
rate exposure to the Company on at least 90% of the aggregate
discounted lease balance (ADLB) of those leases and loans used as
collateral in its nonrecourse securitization facility. As of September
30, 1999, 90% of the ADLB had been hedged.

In addition to the $125.0 million nonrecourse debt facility discussed
above, as of September 30, 1999, the Company also had $5.2 million in
nonrecourse notes payable secured by direct finance leases on
commercial and industrial equipment at the Company that have terms
corresponding to the note repayment schedule that began April 1998 and
ends March 2001. The notes bear interest from 8.32% to 9.5% per annum.

8. TRANSACTIONS WITH AFFILIATES

PLMI and its various subsidiaries, including the Company, incur costs
associated with management, accounting, legal, data processing, and
other general and administrative activities. Direct expenses are
charged directly to the Company as incurred. Indirect expenses are
allocated among the Company, PLMI, and other subsidiaries of PLMI
using an allocation method that management believes is reasonable when
compared to business activities.

General and administrative expenses allocated from the Parent to the
Company during the nine months ended September 30, 1998 and 1999 were
$0.9 million, and $0.7 million, respectively.

The Parent may make capital contributions to the Company for the
equity required for the purchase of equipment and for loan fundings.
The Company periodically borrowed cash from the parent in lieu of
borrowing on the warehouse credit facility. The Parent charged
interest expense to the Company at market rates for these loans. The
total interest charged for the nine months ended September 30, 1999
and 1998 was $0.1 million.

9. COMMITMENTS AND CONTINGENCIES

LEASE AGREEMENTS

The Company has entered into operating leases for office space. The
Company's total net rent expense was $0.1 million in the nine months
ended September 30, 1998 and 1999.

PURCHASE COMMITMENTS

As of September 30, 1999, the Company had committed to purchase $16.3
million of equipment for its commercial and industrial lease and
finance receivable portfolio.

From October 1, 1999 to December 29, 1999, the Company funded $19.8
million in purchases for its commercial and industrial equipment and
finance receivable portfolio.

As of December 29, 1999, the Company had committed to purchase $63.5
million of commercial and industrial equipment. This includes
equipment that will be held for lease by the Company and equipment
that will be sold to third parties.

LEGAL PROCEEDINGS

The Company is not involved in any material legal proceedings and is
not aware of any pending or threatening legal proceedings that would
have a material adverse affect upon its financial condition or results
of operations.

OTHER

The Company has entered into agreements with almost all of its
employees that require the Company to pay, under certain
circumstances, an amount equal to up to two years salary if the
Company terminates the employment of those employees. In addition, the
Company would be required to continue insurance coverage during this
period.

10. STOCKHOLDERS' EQUITY

COMMON STOCK

The Company had 30.0 million shares of common stock at $0.01 par value
authorized, 4,200,000 of which were issued and outstanding as of
December 31, 1998 and September 30, 1999. All of the shares were owned
by the Parent.

PREFERRED STOCK

The Company has authorized 5.0 million shares of preferred stock at
$0.01 par value, none of which were outstanding as of December 31,
1998 and September 30, 1999.

PAID-IN CAPITAL

During the nine months ended September 30, 1999, the Company received
capital contributions from the Parent of $1.6 million.

11. ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which standardizes the accounting for derivative
instruments, including certain derivative instruments embedded in
other contracts, by requiring that an entity recognize those items as
assets or liabilities in the statement of financial position and
measure them at fair market value.

FASB Statement No. 137, "Accounting for Derivatives, Instruments, and
Hedging Activities - Deferral of the Effective Date of FASB Statement
No. 133, an amendment of FASB Statement No. 133," issued in June 1999,
defers the effective date of Statement No. 133. Statement No. 133, as
amended, is now effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. As of September 30, 1999, the Company
is reviewing the effect SFAS No. 133 will have on the Company's
consolidated financial statements.

12. CUMULATIVE EFFECT OF ACCOUNTING CHANGE FROM DISCONTINUED OPERATIONS,
NET OF TAX

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," which requires costs related to start-up activities to be
expensed as incurred. The statement requires that initial application
be reported as a cumulative effect of a change in accounting
principle. The Company adopted this statement during the first quarter
of 1999, at which time it took a $0.2 million charge, net of tax of
$0.1 million, related to start-up costs of its commercial and
industrial equipment operations.

13. EFFECTS OF YEAR 2000

It is possible that the Company's currently installed computer
systems, software products and other business systems, or those of
PLMI or the Company's vendors, service providers and customers,
working either alone or in conjunction with other software or systems,
may not accept input of, store, manipulate and output dates on or
after January 1, 2000 without error or interruption (a problem
commonly known as the "Year 2000" problem). Although the Company's
asset management software has been modified so that it correctly
recognizes dates on or after January 1, 2000 and is therefore "Year
2000 compliant," the Company depends, and will continue to depend, on
PLMI for certain essential administrative and other operational
services to be provided under the terms of the Intercompany Agreement.
As the Company relies substantially on PLMI's software systems,
applications and control devices in operating and monitoring
significant aspects of its business, any Year 2000 problem suffered by
PLMI could have a material adverse effect on the Company's business,
financial condition and results of operations.

PLMI has indicated to the Company that it has established a special
Year 2000 oversight committee to review the impact of Year 2000 issues
on its business systems in order to determine whether such systems
will retain functionality after December 31, 1999. As of September 30,
1999, PLMI has informed the Company that it has completed inventory,
assessment, remediation, and testing stages of its Year 2000 review of
its core business information systems. Specifically, PLMI has informed
the Company that (a) it has integrated Year 2000-compliant programming
code into its existing internally customized and internally developed
transaction processing software systems and (b) PLMI's accounting and
asset management software systems have been made Year 2000 compliant.
In addition, numerous other software systems provided by vendors and
service providers have been replaced with systems represented by the
vendor or service provider to be Year 2000 functional. These systems
have been fully tested by PLMI as of September 30, 1999 and are
compliant.

As of September 30, 1999, PLMI has informed the Company that it has
spent $0.1 million to become Year 2000 compliant and does not
anticipate any additional Year 2000-compliant expenditures.

Some risks associated with the Year 2000 problem are beyond the
ability of the Company to control, including the extent to which third
parties can address the Year 2000 problem. PLMI is communicating with
vendors, service providers, and customers in order to assess the Year
2000 compliance readiness of such parties and the extent to which the
Company is vulnerable to any third-party Year 2000 issues. As part of
this process, vendors and service providers were ranked in terms of
the relative importance of the service or product provided. All
service providers and vendors who were identified as of medium to high
relative importance were surveyed to determine Year 2000 status. PLMI
has received satisfactory responses to Year 2000 readiness inquiries
from surveyed service providers and vendors.

It is possible that certain of the Company's equipment lease portfolio
may not be Year 2000 compliant. The Company has contacted equipment
manufacturers of the portion of the Company's leased equipment
portfolio identified as date sensitive to assure Year 2000 compliance
or to develop remediation strategies. The Company does not expect that
non-Year 2000 compliance of its leased equipment portfolio will have
an adverse material impact on the Company's financial statements. The
Company has surveyed the majority of its lessees and the majority of
those surveyed have responded satisfactorily to Year 2000 readiness
inquiries.

There can be no assurance that the software systems of such parties
will be converted or made Year 2000 compliant in a timely manner. Any
failure by PLMI or such other parties to make their respective systems
Year 2000 compliant could have a material adverse effect on the
business, financial position, and results of operations of the
Company. PLMI has informed the Company that it has made and will
continue an ongoing effort to recognize and evaluate potential
exposure relating to third-party Year 2000 noncompliance. PLMI has
informed the Company that it will implement a contingency plan if PLMI
determines that third-party noncompliance would have a material
adverse effect on the Company's business, financial position, or
results of operation.

PLMI has informed the Company that it has developed a contingency plan
to address the possible failure of any systems, vendors or service
providers due to Year 2000 problems. For the purpose of such
contingency planning, a reasonably likely worst case scenario
primarily anticipates an inability to access systems and data on a
temporary basis resulting in possible delay in reconciliation of funds
received or payment of monies owed. Contingency planning encompass
strategies up to and including manual processes.

INDEPENDENT AUDITORS' REPORT

The Board of Directors
American Finance Group, Inc.

We have audited the accompanying consolidated balance sheets of
American Finance Group, Inc. and subsidiaries (the "Company") as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of American Finance Group, Inc. and subsidiaries as of December 31,
1997 and 1998, and the results of operations and their cash flows for
each of the years in the three-year period ended December 31, 1998 in
conformity with generally accepted accounting principles.

/s/ KPMG LLP

San Francisco, California
February 15, 1999

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
1996 1997 1998
------------------------------------------------
<S> <C> <C> <C>
REVENUES
Finance lease income (Note 2).......................... $ 1,763 $ 7,027 $ 12,424
Operating lease income (Note 4)........................ 5,020 8,634 7,830
Financing income (Note 3).............................. 92 546 1,151
Management fees (Note 1)............................... 485 729 818
Revenue from sale of leases and related assets (Note 1) 2,188 3,737 4,585
Total revenues.................................... 9,548 20,673 26,808
------------------------------------------------

COSTS AND EXPENSES
Operations support..................................... 3,509 3,947 4,451
Depreciation and amortization (Note 1)................. 4,292 6,622 6,808
General and administrative (Note 9).................... 1,178 1,263 1,178
Total costs and expenses.......................... 8,979 11,832 12,437
------------------------------------------------

Operating income....................................... 569 8,841 14,371

Interest expense (Note 6 and 7)........................ (2,019) (5,800) (10,783)
Interest income........................................ 176 324 505
Other expenses......................................... (19) -- --
Income (loss) before income taxes................... (1,293) 3,365 4,093

Provision for (benefit from) income taxes (Note 8)..... (457) 1,259 1,529
------------------------------------------------

Net income (loss)................................... $ (836) $ 2,106 $ 2,564
================================================

PRO FORMA DATA (UNAUDITED-SEE NOTE 13)
Historical net loss.................................... $ (836)
Pro forma adjustments to reflect net income from
subsidiary of Parent earned on behalf of the
Company 838
---------------

Pro forma net income............................... $ 2
===============

</TABLE>

See accompanying notes to these consolidated financial statements.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,
(IN THOUSANDS OF DOLLARS)

ASSETS
<TABLE>
<CAPTION>
1997 1998
----------------------------------
<S> <C> <C>
Restricted cash (Note 1).................................................... $ 3,775 $ 8,088
Receivables (net of allowances of $23 and $0 in 1997, and 1998, respectively) 1,762 2,279
Investment in direct finance leases, net (Note 2)........................... 112,465 143,304
Loans receivable (Note 3)................................................... 5,861 23,493
Commercial and industrial equipment held for operating leases (Note 4)...... 28,806 24,520
Less accumulated depreciation............................................. (5,061) (7,831)
----------------------------------
23,745 16,689

Other assets, net (Note 5).................................................. 3,858 3,958
Total assets.......................................................... $ 151,466 $ 197,811
==================================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Warehouse credit facility (Note 6).......................................... $ 23,040 $ 34,420
Nonrecourse securitization facility (Note 7)................................ 71,302 103,637
Nonrecourse notes payable (Note 7).......................................... 10,000 7,585
Advance from PLM International, Inc. (Note 9)............................... 6,478 4,417
Payables and other liabilities.............................................. 13,477 12,120
Deferred income taxes (Note 8).............................................. 7,190 12,349
----------------------------------
Total liabilities......................................................... 131,487 174,528

Commitments and contingencies (Note 10)

STOCKHOLDERS' EQUITY (Note 11)
Common stock ($0.01 par value, 30,000,000 shares authorized, 4,200,000
shares issued and outstanding as of December 31,
1997 and 1998).......................................................... 42 42
Paid-in capital, in excess of par........................................... 19,461 20,201
Retained earnings........................................................... 476 3,040
----------------------------------
Total stockholders' equity............................................... 19,979 23,283
----------------------------------
Total liabilities and stockholders' equity............................ $ 151,466 $ 197,811
==================================
</TABLE>

See accompanying notes to these consolidated financial statements.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
PAID-IN RETAINED
CAPITAL EARNINGS/ TOTAL
COMMON IN EXCESS (ACCUMULATED STOCKHOLDERS'
STOCK OF PAR DEFICIT) EQUITY
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1995............................. $ 4 $ 2,58 $ (79) $ 1,834

Capital contributions from Parent....................... -- 16,875 -- 16,875

Net loss................................................ -- -- (836) (836)
------------------------------------------------------------

Balances, December 31, 1996........................... 42 19,461 (1,630) 17,873

Net income.............................................. -- -- 2,106 2,106
------------------------------------------------------------

Balances, December 31, 1997........................... 42 19,461 476 19,979

Capital contributions from Parent....................... -- 740 -- 740

Net income.............................................. -- -- 2,564 2,564
------------------------------------------------------------

Balances, December 31, 1998............................. $ 4 $ 20,201 $ 3,040 $ 23,283
============================================================
</TABLE>

See accompanying notes to these consolidated financial statements.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
1996 1997 1998
--------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................................. $ (836) $ 2,106 $ 2,564
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 4,292 6,622 6,808
Deferred income tax expense............................... 1,504 4,880 5,159
Gain on the sale or disposition of assets, net............ (1,039) (2,388) (3,204)
Changes in assets and liabilities:
(Increase) decrease in receivables................... (1,611) 209 (517)
(Increase) decrease in other assets, net............. (182) 115 (647)
Increase in payables and other liabilities............ 1,561 1,520 150
Net cash provided by operating activities................. 3,689 13,064 10,313
---------------------------------------------------

INVESTING ACTIVITIES
Principal payments received on loans........................... 227 2,020 5,272
Investment in loans receivable................................. (5,945) (2,163) (22,904)
Principal payments received on finance leases.................. 4,832 15,569 32,013
Investment in direct finance leases............................ (53,281) (72,704) (127,469)
Purchase of commercial and industrial equipment held
for operating lease.......................................... (73,027) (50,204) (25,316)
Proceeds from the sale of commercial and industrial
equipment.................................................... 39,888 56,638 92,499
Proceeds from the sale of fixed assets......................... 528 -- --
Purchase of fixed assets....................................... (605) (539) (74)
Purchase of certain lease origination and management assets.... (1,907) -- --
---------------------------------------------------
Net cash used in investing activities....................... (89,290) (51,383) (45,979)
---------------------------------------------------

FINANCING ACTIVITIES
Borrowings on warehouse credit facility........................ 76,392 90,908 151,726
Repayment of warehouse credit facility......................... (49,506) (94,754) (140,346)
Borrowings on nonrecourse notes payable........................ -- 10,000 12,427
Repayment of nonrecourse notes payable......................... -- -- (14,842)
Borrowings on nonrecourse securitization facility.............. 56,024 111,716 62,059
Repayment of nonrecourse securitization facility............... (10,632) (85,806) (29,724)
Increase in restricted cash.................................... (3,552) (223) (4,313)
Advance from (repayment to) PLM International, Inc. net........ -- 6,478 (2,061)
Capital contributions from Parent.............................. 16,875 -- 740
Net cash provided by financing activities................... 85,601 38,319 35,666
----------------------------------------------------

Net change in cash and cash equivalents........................ -- -- --
Cash and cash equivalents at beginning of year................. -- -- --
----------------------------------------------------

Cash and cash equivalents at end of year....................... $ -- $ -- $ --
====================================================

SUPPLEMENTAL DISCLOSURE NET CASH PAID (RECEIVED) FOR:
Interest....................................................... $ 1,893 $ 5,538 10,381
====================================================
Income taxes................................................... $ (1,961) $ (3,621) (3,630)
====================================================
</TABLE>

See accompanying notes to these consolidated financial statements.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements contain all necessary
adjustments, consisting primarily of normal recurring accruals, to
present fairly the results of operations, financial position, changes in
stockholders' equity, and cash flows of American Finance Group, Inc. and
its wholly owned subsidiaries (the "Company"). The principal subsidiary
is AFG Credit Corporation, whose primary purpose is to own equipment
pledged in the nonrecourse securitization facility. All intercompany
transactions among the consolidated group have been eliminated.

These consolidated financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles. This requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosures
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

The Company was incorporated in Delaware and commenced operations in
February 1995. The Company is a wholly owned subsidiary of PLM
International, Inc., a Delaware corporation ("PLMI" or the "Parent"). The
Company is an equipment leasing and management company that originates
and services lease and loan transactions for commercial and industrial
equipment, such as data processing, communications, materials-handling,
and construction equipment. Equipment may be financed by nonrecourse debt
or sold to institutional leasing investment programs ("institutional
programs") or other unaffiliated third-party investors. The Company uses
its warehouse credit facility to finance the acquisition of assets prior
to permanent financing by nonrecourse debt or sale. The leases are
accounted for as operating or direct finance leases. The Company also
originates loans in which it takes a security interest in the assets
financed.

In March 1998, the Parent announced that its Board of Directors had
authorized management to engage investment bankers for the purpose of
undertaking an initial public offering of common stock for the Company.
On May 7, 1998, the Company filed a registration statement with the
United States Securities and Exchange Commission (SEC) for the initial
public offering (IPO). On October 15, 1998, the Company filed an amended
registration statement with the SEC for the initial public offering.

On January 11, 1999, the Parent announced that its Board of Directors had
engaged an investment banking firm to explore strategic alternatives for
the Company. The Company does not intend to withdraw the current
registration statement on file with the SEC at the present time, pending
the results of the review.

LEASING OPERATIONS

The Company's leasing operations generally consist of operating and
direct finance leases on commercial and industrial equipment. Under the
operating lease method of accounting, the leased asset is recorded at
cost and depreciated over its estimated useful life. Rental payments are
recorded as revenue over the lease term as earned.

Under the direct finance lease method of accounting, the leased asset is
recorded as an investment in direct finance leases and represents the
minimum net lease payments receivable, including third-party guaranteed
residuals, plus the unguaranteed residual value of the equipment, less
unearned income. Rental payments, including principal and interest on the
lease, reduce the investment in the finance lease, and the interest is
recorded as revenue over the lease term.

The Company capitalizes initial direct costs of lease originations.
Amounts capitalized related to direct finance leases are included in the
net investment in direct finance leases and are amortized using the
effective interest method. Amounts capitalized related to operating
leases are included in other assets and are amortized straight-line over
the lease term, which usually ranges from one to seven years.

EQUIPMENT AND RESIDUAL INTERESTS

Commercial and industrial equipment held for operating leases is stated
at the lower of depreciated cost or estimated fair value less cost to
sell. Depreciation of commercial and industrial equipment on operating
lease is computed on the straight-line method down to the equipment's
estimated residual value, utilizing the estimated useful life of the
equipment, which usually ranges from one to seven years. Residual values
for commercial and industrial equipment vary according to the type of
equipment. The residual value of equipment under direct finance lease is
the estimated amount to be received by the Company at lease termination.
Maintenance costs are generally the obligation of the lessee.

In accordance with Financial Accounting Standards Board (FASB) Statement
of Financial Accounts Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", the Company reviews the carrying value of its equipment at least
annually in relation to expected future market conditions for the purpose
of assessing recoverability of the recorded amounts. In addition, the
Company utilizes third-party appraisals to estimate fair value of its
equipment, comparing the aggregate carrying value for each equipment type
to the aggregate appraisal value in order to assess potential impairment.
If projected undiscounted future lease revenues plus residual values are
lower than the carrying value of the equipment, a loss on revaluation or
reduction in finance lease income is recorded depending on if the
equipment was under an operating or finance lease. Finance lease income
was reduced by $0.2 million due to a reduction in the estimated residual
of certain equipment in 1998. There were no similar reductions in 1996 or
1997.

INTEREST-RATE SWAP AGREEMENTS

The Company has entered into interest-rate swap agreements to hedge its
interest-rate exposure on its nonrecourse securitization facility. The
terms of the swap agreements correspond to the hedged debt. The
differential to be paid or received under the swap agreement is charged
or credited to interest expense.

INSTITUTIONAL PROGRAMS

The Company earns revenues in connection with lease originations and
servicing equipment leases for institutional programs. Acquisition fees,
which are included in revenue for sale of leases and related assets, are
generally earned through the purchase and initial lease of equipment, and
are generally recognized as revenue when the Company completes
substantially all of the services required to earn the fees, generally
when binding commitment agreements are signed. Management fees are earned
for servicing the equipment portfolios and leases as provided for in
various agreements, and are recognized as revenue over time as they are
earned.

TRANSFER OF DIRECT FINANCE LEASES, LOANS AND OPERATING LEASES

On January 1, 1997, the Company adopted SFAS No. 125 "Accounting
for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ( "SFAS No. 125 "). SFAS No. 125
provides guidelines for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings.
The Company's transfers of direct finance leases and loans to the
securitization facility are accounted for as financings under
SFAS No. 125.

The transfer to the securitization facility of equipment subject to
operating leases in which the Company retains substantial risk of
ownership, are not treated as sales in accordance with the provisions of
SFAS No. 13 and are also accounted for as financings. The transfer of
equipment subject to operating leases to institutional programs and third
parties, where the Company retains no risk of ownership, are treated as
sales with gain or loss on sale recognized in the period title passes.

RESTRICTED CASH

Restricted cash consists of collateral accounts subject to withdrawal
restrictions in the nonrecourse debt facility. This agreement requires
all payments on pledged lease receivables to be deposited into a
restricted cash account. Principal, interest, and related fees are paid
monthly in arrears from this account. Cash remaining after these payments
may be released to the Company subject to certain debt covenant
limitations.

INTANGIBLES

Intangibles are included in other assets, net on the balance sheet, and
are shown at the lower of net amortized cost or fair value. Intangibles
primarily relate to goodwill related to acquisitions, loan fees,
software, and lease origination costs. Goodwill is being amortized over
eight years from the acquisition date. Loan fees are amortized over the
life of the related loan. Software is amortized over three years from the
acquisition date. Lease origination costs are amortized over the life of
the related lease. The Company annually reviews the valuation of all
intangibles based on the related projected future cash flows.

INCOME TAXES

The Company recognizes income tax expense using the liability method.
Deferred taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities.

The Company is included in the consolidated federal and certain combined
state income tax returns of the Parent. The Company provides for income
tax expense using a combined federal and state tax rate applied to pretax
earnings. The tax provision is calculated on a separate return basis.

Deferred income taxes arise primarily because of differences in the
timing of reporting equipment depreciation for financial statement and
income tax reporting purposes.

ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which standardizes the accounting
for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those
items as assets or liabilities in the statement of financial position and
measure them at fair value. This statement is effective for all quarters
of fiscal years beginning after June 15, 1999. As of December 31, 1998,
the Company is reviewing the effect this standard will have on the
Company's consolidated financial statements.

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" which requires costs related to start-up activities to be
expensed as incurred. The statement requires that initial application be
reported as a cumulative effect of a change in accounting principle. This
statement must be adopted in fiscal year 1999. Upon adoption of this
statement, the Company will take a pre-tax charge related to start-up
costs of approximately $0.4 million.

2. DIRECT FINANCE LEASES

During 1997, the Company purchased $75.3 million in commercial and
industrial equipment that was placed on finance lease. During 1998, the
Company purchased $127.3 million in commercial and industrial equipment
that was placed on finance lease. Also during 1998, the Company sold
equipment on finance lease resulting in net gains of $1.3 million. No
equipment under finance lease was sold in 1997.

As of December 31, commercial and industrial equipment, at original
equipment cost, subject to finance leases is represented by the following
types (in thousands of dollars):

<TABLE>
<CAPTION>
1997 1998
----------------------- ---------------------
<S> <C> <C> <C> <C>
Computers and peripherals............... $60,274 45% $62,307 33%
Materials handling...................... 28,693 21 45,446 24
Manufacturing........................... 7,200 5 31,385 17
Point of sale........................... 21,991 17 22,302 12
General purpose plant and warehouse..... 3,239 2 9,203 5
Construction and mining................. 3,348 3 4,514 2
Communications.......................... 3,481 3 4,511 2
Other................................... 4,842 4 10,028 5
------------------------ ---------------------
Total................................. $133,068 100% $189,696 100%
======================== =====================
</TABLE>

The following lists the components of the investment in direct finance
leases, net, as of December 31, (in thousands of dollars):

<TABLE>
<CAPTION>
1997 1998
--------------- -----------
<S> <C> <C>
Minimum lease payments receivable................... $ 115,521 $ 145,119
Estimated unguaranteed residual values
of leased properties.............................. 18,998 24,782
Initial direct lease origination costs, net......... 535 733
--------------- -----------
135,054 170,634
Less unearned income................................ (22,589) (27,330)
--------------- -----------
Investment in direct finance leases, net............ $ 112,465 $ 143,304
=============== ===========
</TABLE>

Schedule of Minimum Lease Payments Receivable
As of December 31, 1998
(in thousands of dollars)

1999 $ 46,214
2000 38,960
2001 26,552
2002 16,293
2003 12,697
Thereafter 4,403
-----------
Total minimum lease payments receivable $145,119
===========

3. LOANS RECEIVABLE

As of December 31, 1997, the Company had loans receivable outstanding
with three customers, totaling $5.9 million with interest rates ranging
from 8.7% to 10.81%, secured by commercial and industrial equipment. As
of December 31, 1998, the Company had loans receivable outstanding with
12 customers, totaling $23.5 million with interest rates ranging from
6.23% to 10.81%, secured by commercial and industrial equipment. Future
payments receivable on the notes as of December 31, 1998 are as follows
(in thousands of dollars):

1999 $ 7,179
2000 4,786
2001 4,123
2002 6,490
2003 848
Thereafter 67
------------
Total loans receivable $23,493
============

4. COMMERCIAL AND INDUSTRIAL EQUIPMENT HELD FOR OPERATING LEASES

Commercial and industrial equipment, at cost, held for operating leases
as of December 31, is represented by the following types (in thousands of
dollars):

<TABLE>
<CAPTION>
1997 1998
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Materials handling............................... $ 7,356 26% $ 9,246 38%
Point of sale.................................... 4,259 15 5,166 21
Communications................................... 5,419 19 2,721 11
Construction and mining.......................... 701 2 2,365 10
Computers and peripherals........................ 2,219 8 1,665 7
Medical.......................................... 1,010 3 1,033 4
Manufacturing.................................... 6,735 23 254 1
Other............................................ 1,107 4 2,070 8
--------------------------- ---------------------------
28,806 100% 24,520 100%
=========================== ===========================
Less accumulated depreciation.................... (5,061) (7,831)
--------------- ---------------
Net equipment held for operating leases... $ 23,745 $ 16,689
=============== ===============
</TABLE>

During 1997, the Company purchased $52.9 million in commercial and
industrial equipment, which was placed on operating lease. During 1997,
the Company sold to third parties commercial and industrial equipment
that was on operating lease with an original cost of $58.3 million, for
net gain of $2.4 million. During 1998, the Company purchased $24.0
million in commercial and industrial equipment, which was placed on
operating lease. During 1998, the Company sold to the institutional
programs commercial and industrial equipment that was on operating lease
for a net gain of $1.9 million. The Company does not expect to sell
assets and their related leases to the institutional programs in the
future.

Future minimum rentals receivable under noncancellable operating leases
as of December 31, 1998 are approximately $5.1 million in 1999, $3.7
million in 2000, $2.0 million in 2001, $0.8 million in 2002, $0.3 million
in 2003, and $2,000 in 2004.

5. OTHER ASSETS, NET

Other assets net, consisted of the following at December 31, (in
thousands of dollars):

<TABLE>
<CAPTION>
1997 1998
----------------------------------
<S> <C> <C>
Intangibles, net of accumulated amortization of $685 and $1,028
as of 1997 and 1998, respectively....................................... $2,055 $1,713
Prepaid expenses, deposits, and other..................................... 138 896
Loan fees, net of accumulated amortization of $207 and $436
as of 1997 and 1998, respectively....................................... 725 615
Software, net of accumulated depreciation of $214 and $404 as of
1997 and 1998, respectively............................................. 646 530
Furniture, fixtures, and equipment, net of accumulated depreciation of $83 and
$137 as of 1997 and 1998, respectively................................. 201 144
Lease origination costs, net of accumulated amortization
of $33 and $67 as of 1997 and 1998, respectively........................ 93 60
----------------------------

Total other assets, net............................................ $3,858 $3,958
============================
</TABLE>

Prepaid expenses, deposits, and other as of December 31, 1998 included
$0.7 million of costs related to the proposed IPO of the Company. If the
Company does not proceed with the IPO, it will have to expense all costs
related to the IPO in 1999.

6. WAREHOUSE CREDIT FACILITIES

The Company had a warehouse credit facility which allowed the Company to
borrow up to $50.0 million to be used to acquire assets on an interim
basis prior to placement in the Company's nonrecourse securitization
facility, sale to institutional programs or syndication to unaffiliated
third parties. This facility was shared with another subsidiary of the
Parent and various investment programs managed by an affiliate of the
Parent. Interest accrued at prime or LIBOR plus 162.5 basis points, at
the option of the Company. This facility expired on December 14, 1998.

On December 14, 1998, the Company entered into a new warehouse credit
facility which allows the Company to borrow up to $60.0 million until
December 14, 1999. The Company is the sole borrower of this facility.
This facility provides for 100% of the present value of the lease stream
of commercial and industrial equipment, up to 90% of original equipment
cost of the assets held on this facility.

Borrowings secured by investment-grade lessees can be held under this
facility until the facility's expiration. Borrowings secured by
noninvestment-grade lessees may by outstanding for 120 days. Interest
accrues at prime or LIBOR plus 137.5 basis points, at the option of the
Company. The Company retains the difference between the net lease revenue
earned and the interest expense during the interim holding period, since
its capital is at risk. Repayment of the borrowings for commercial and
industrial equipment matches the terms of the underlying leases. The
Company believes it will be able to renew this facility on substantially
the same terms upon its expiration.

The weighted-average interest rates on the Company's warehouse credit
facilities were 7.6% and 7.22% for 1997 and 1998, respectively. As of
December 31, 1998, the Company had $34.4 million outstanding under this
facility. As of February 15, 1999, the Company had $34.4 million in
borrowings outstanding under this facility.

7. NONRECOURSE DEBT

The Company has available a nonrecourse securitization facility to be
used to acquire assets secured by direct finance leases, operating
leases, and loans on commercial and industrial equipment that generally
have terms from one to seven years. The facility allows the Company to
borrow up to $125.0 million through October 12, 1999. Repayment of the
facility matches the terms of the underlying leases. The securitized debt
bears interest equivalent to the lender's cost of funds based on
commercial paper market rates for the determined period of borrowing plus
an interest rate spread and fees (7.16% and 6.46% as of December 31, 1997
and 1998, respectively). As of December 31, 1997 and 1998, there were
$71.3 million and $103.6 million in borrowings under this facility,
respectively.

During 1998, the Company assumed $12.4 million in additional nonrecourse
notes payable, and received principal payments of $4.6 million. Also
during 1998, the Company prepaid $10.2 million of the nonrecourse notes
due to the sale of the related assets, resulting in total nonrecourse
notes payable of $7.6 million as of December 31, 1998. Principal and
interest on the notes are due monthly beginning November 1997 through
March 2001. The notes bear interest ranging from 8.32% to 9.5% per annum
and are secured by direct finance leases for commercial and industrial
equipment that have terms corresponding to the repayment of the notes.

Scheduled principal payments on long-term nonrecourse debt are (in
thousands of dollars):

1999 $ 42,901
2000 32,887
2001 19,411
2002 8,836
2003 3,950
Thereafter 3,237
-------------
Total $ 111,222
=============

8. INCOME TAXES

The provision for (benefit from) income taxes attributable to income from
operations for the years ended December 1996, 1997, and 1998 consists of
the following (in thousands of dollars):

<TABLE>
<CAPTION>
1996 1997
---------------------------------------------------------------------------------------
Federal State Total Federal State Total
------------------------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current $ (1,754) $ (207) $ (1,961) $ (3,240) $ (381) $ (3,621)
Deferred 1,347 157 1,504 4,361 519 4,880
------------------------------------------ ------------------------------------------
$ (407) $ (50) $ (457) $ 1,121 $ 138 $ 1,259
========================================== ==========================================
</TABLE>

1998
------------------------------------------------
Federal State Total
------------------------------------------------
Current $ (3,255) $ (375) $ (3,630)
Deferred 4,617 542 5,159
------------------------------------------------
$ 1,362 $ 167 $ 1,529
================================================

Amounts for the current year are based on estimates and assumptions as of
the date of this report and could vary significantly from amounts shown
on the tax returns ultimately filed.

The difference between the effective rate and the expected federal
statutory rate is reconciled below:

<TABLE>
<CAPTION>
1996 1997 1998
--------------- -------------- -----------
<S> <C> <C> <C>
Federal statutory tax (benefit) expense rate.... (34)% 34% 34%
State income tax (benefit) expense rate......... (2) 2 2
Nondeductible expenses.......................... 1 1 1
------------------------------------------
Effective tax (benefit) expense rate........ (35)% 37% 37%
==========================================
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities as of December 31, are presented
below (in thousands of dollars):

<TABLE>
<CAPTION>
1997 1998
---------- ---------
<S> <C> <C>
Deferred tax assets:
Lease classification................................... $ 2,282 22,273
Federal benefit of state taxes......................... 13 2
Bad debt reserve....................................... 9 - -
Other.................................................. -- 15
---------- ---------
Total deferred tax assets.......................... 2,304 22,290
---------- ---------

Deferred tax liabilities:
Equipment, principally differences in depreciation..... 9,469 34,572
Other.................................................. 25 67
---------- ---------
Total deferred tax liabilities..................... 9,494 34.639
---------- ---------

Net deferred tax liabilities................... $ 7,190 12,349
========== =========
</TABLE>

Management has reviewed all established tax interpretations of items
reflected in its consolidated tax returns and believes that these
interpretations do not require valuation allowances as described in SFAS
No. 109.

Current taxes receivable for 1996, 1997, and 1998, were paid to the
Company by the Parent in the respective years. Amounts reported by the
Company and its subsidiaries are included in the consolidated and
combined tax returns filed by PLMI. The above amounts have been computed
on a separate company basis.

The Company believes that future operations will generate sufficient
taxable income to realize the deferred tax assets.

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

9. TRANSACTIONS WITH AFFILIATES

PLMI and its various subsidiaries, including the Company, incur costs
associated with management, accounting, legal, data processing, and other
general and administrative activities. Direct expenses are charged
directly to the Company as incurred. Indirect expenses are allocated
among the Company, PLMI, and other subsidiaries of PLMI using an
allocation method that management believes is reasonable when compared to
business activities.

General and administrative expenses allocated from the Parent to the
Company during 1996, 1997 and 1998 were $1.2 million, $1.3 million, and
$1.2 million, respectively.

The Parent may make capital contributions to the Company for the equity
required for the purchase of equipment and for loan fundings. In 1997 and
1998, the Company periodically borrowed cash from the Parent in lieu of
borrowing on the warehouse credit facility. The Parent charged interest
expense to the Company at market rates for these loans. Total interest
charged by the Parent for these loans was $0.5 million and $0.2 million
in 1997 and 1998, respectively. The Parent did not make any loans to the
Company in 1996. As of December 31, 1997 and 1998, the Company had
outstanding borrowings from the Parent of $6.5 million and $4.4 million,
respectively.

10. COMMITMENTS AND CONTINGENCIES

LEASE AGREEMENTS

The Company has entered into operating leases for office space. The
Company's total net rent expense was $0.1 million in 1996, $0.2 million
in 1997, and $0.2 million in 1998. Annual lease commitments for the
Company's locations are $0.1 million in 1999, $0.1 million in 2000,
$33,000 in 2001, and $0 thereafter.

PURCHASE COMMITMENTS

As of December 31, 1998, the Company had committed to purchase $40.5
million of equipment for its lease and finance receivable portfolio of
which $8.7 million had been received by lessees and accrued for as of
December 31, 1998. This includes equipment that will be held by the
Company and equipment that will be sold to third parties.

From January 1, 1999 through February 15, 1999, the Company funded $5.4
million of commitments outstanding for its commercial and industrial
lease and finance receivable portfolio as of December 31, 1998.

As of February 15, 1999, the Company had committed to purchase $37.6
million of commercial and industrial equipment. This includes equipment
that will be held for lease by the Company and equipment that will be
sold to third parties.

LEGAL PROCEEDINGS

The Company is not involved in any material legal proceedings and is not
aware of any pending or threatening legal proceedings that would have a
material adverse affect upon its financial condition or results of
operations.

OTHER

The Company has an agreement with an employee that requires the Company
to pay, under certain circumstances, an amount equal to two years salary
if the Company terminates this employee's employment. In addition, the
Company would be required to continue insurance coverage for a two year
period. In consideration for these payments, this employee would release
all claims against the Company and agree not to compete with the Company
or solicit its customers for a two year period.

The Company may enter into similar agreements with other employees in the
future.

11. STOCKHOLDERS' EQUITY

COMMON STOCK

The Company had 30.0 million shares of common stock at $0.01 par value,
authorized, 4,200,000 of which were issued and outstanding as of December
31, 1997 and 1998. All of the shares were owned by the Parent.

PREFERRED STOCK

The Company has authorized 5.0 million shares of preferred stock at $0.01
par value, none of which were outstanding as of December 31, 1998. This
preferred stock was authorized in 1998.

PAID-IN CAPITAL

During 1996 and 1998, the Company received capital contributions from the
Parent of $16.9 million and $0.7 million, respectively. The Company did
not receive capital contributions from the Parent during 1997.

12. OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of receivables from
loans and leases. Concentrations of credit risk with respect to lease and
finance receivables are limited due to the large number of customers
comprising the Company's customer base and their dispersion across
different business and geographic areas. Currently, none of the Company's
equipment is leased internationally.

As of December 31, 1997, the Company's five largest lessees accounted for
approximately 40% of its lease and finance receivables. As of December
31, 1998, the Company's five largest lessees accounted for approximately
37% of the Company's lease and finance receivables.

As of December 31, 1997 and 1998, management believes the Company had no
other significant concentrations of credit risk that could have a
material adverse effect on the Company's business, financial condition or
results of operations.

INTEREST-RATE RISK MANAGEMENT

The Company has entered into interest-rate swap agreements in order to
manage the interest-rate exposure associated with its nonrecourse
securitization facility. As of December 31, 1998, the swap agreements had
a weighted-average duration of 1.28 years, corresponding to the terms of
the remaining debt. As of December 31, 1998, a notional amount of $99.0
million of interest-rate swap agreements effectively fixed interest rates
at an average of 6.59% on such obligations. Interest expense was
increased by $0.1 million, $0.3 million, and $0.4 million due to these
arrangements in 1996, 1997, and 1998, respectively.

13. PRO FORMA DISCLOSURE (UNAUDITED)

PRO FORMA NET INCOME (LOSS)

Since May 31, 1996, the Company has had available a warehouse credit
facility used to acquire assets on an interim basis prior to placement in
the Company's nonrecourse securitization facility, sale to institutional
programs or syndication to unaffiliated third parties (as discussed in
Note 6). Prior to the Company's becoming a borrower under this facility,
the Company arranged for the purchase of commercial and industrial
equipment by TEC AcquiSub, Inc., another subsidiary of the Parent ("TEC
AcquiSub"). All costs related to arranging these transactions are
included in the Company's results; however, the revenue earned from these
transactions are not included in the Company's results. As of September
1, 1996, all equipment owned by TEC AcquiSub was sold to the Company at
its net book value, which approximated its fair market value. A pro forma
adjustment to reflect the income and expenses to TEC AcquiSub related to
these transactions has been reflected in the accompanying 1996 statement
of operations. Income taxes have been provided at an effective rate of
35%.

The following pro forma unaudited statement of operations is presented to
reflect the transactions discussed above for the year ended December 31,
1996 (in thousands of dollars):

<TABLE>
<CAPTION>
PRO FORMA 1996
1996 ADJUSTMENTS PRO FORMA
--------------------- --------------------- --------------
<S> <C> <C> <C>
Revenues
Finance lease income............................... $ 1,763 $ 996 $ 2,759
Operating lease income............................. 5,020 2,449 7,469
Financing income................................... 92 -- 92
Management fees.................................... 485 -- 485
Revenue from sale of leases and related assets..... 2,188 353 2,541
------------------- ----------------- ------------------
Total revenues................................ 9,548 3,798 13,346
------------------- ----------------- ------------------

COSTS AND EXPENSES
Operations support................................. 3,509 6 3,515
Depreciation and amortization...................... 4,292 1,891 6,183
General and administrative......................... 1,178 -- 1,178
------------------- ----------------- ------------------
Total costs and expenses...................... 8,979 1,897 10,876
------------------- ----------------- ------------------
Operating income................................... 569 1,901 2,470

Interest expenses.................................. (2,019) (605) (2,624)
Interest income.................................... 176 -- 176
Other expense...................................... (19) -- (19)
-------------------- ------------------ ------------------
Income (loss) before income taxes.................. (1,293) 1,296 3
Provision for (benefit from) income taxes.......... (457) 458 1
-------------------- ----------------- ------------------
Net income (loss)............................. $ (836) $ 838 $ 2
==================== ================= ==================
</TABLE>

AMERICAN FINANCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

14. PROFIT SHARING AND 401(K) PLAN

Since February 1996, the Company has participated in the PLM
International, Inc. Profit Sharing and 401(k) Plan (the "Plan"). The Plan
provides for deferred compensation as described in Section 401(k) of the
Internal Revenue Code. The Plan is a contributory plan available to
essentially all full-time employees of the Company. In 1998, employees
who participated in the Plan could elect to defer and contribute to the
trust established under the Plan up to 9% of pretax salary or wages up to
$10,000. The Company matched up to a maximum of $4,000 of employees'
401(k) contributions in 1996, 1997 and 1998 to vest in four equal
installments over a four-year period. The Company's total 401(k)
contributions were $42,000, $58,000, and $58,000 for 1996, 1997, and
1998, respectively.

During 1996, 1997 and 1998, the Parent accrued discretionary
profit-sharing contributions. Profit-sharing contributions are allocated
equally among the eligible Plan participants. The Company's portion of
the total profit-sharing contributions was $21,000, $37,000, and $27,000
in 1996, 1997, and 1998, respectively.

15. CONCENTRATION

Revenues related to one of the institutional programs accounted for 19%
and 10% of the Company's revenues in 1996 and 1997, respectively. No
customer accounted for more than 10% of the Company's revenue in 1998.

16. ESTIMATED FAIR VALUE OF THE COMPANY'S FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments as of
December 31, are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
1997 1998
--------------------------------- -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Restricted cash (Note 1).......................... $ 3,775 3,775 $ 8,088 8,088
Loans receivable (Note 3)......................... 5,861 5,921 23,493 23,548
Financial liabilities:
Warehouse credit facility (Note 6)................ 23,040 23,040 34,420 34,420
Nonrecourse notes payable (Note 7)................ 10,000 10,407 7,585 7,673
Nonrecourse securitization facility (Note 7)...... 71,302 71,302 103,637 103,637
Unrecognized financial instruments.................. -- 113 -- 683
</TABLE>

17. EFFECTS OF YEAR 2000 (UNAUDITED)

It is possible that the Company's currently installed computer systems,
software products and other business systems, or those of PLMI or the
Company's vendors, service providers and customers, working either alone
or in conjunction with other software or systems, may not accept input
of, store, manipulate and output dates on or after January 1, 2000
without error or interruption (a problem commonly known as the "Year
2000" problem). Although the Company's asset management software has been
modified so that it correctly recognizes dates on or after January 1,
2000 and is therefore "Year 2000 compliant," the Company depends, and
will continue to depend, on PLMI for certain essential administrative and
other operational services to be provided under the terms of the
Intercompany Agreement. As the Company relies substantially on PLMI's
software systems, applications and control devices in operating and
monitoring significant aspects of its business, any Year 2000 problem
suffered by PLMI could have a material adverse effect on the Company's
business, financial condition and results of operations.

PLMI has indicated to the Company that it has established a special Year
2000 oversight committee to review the impact of Year 2000 issues on its
software products and other business systems in order to determine
whether such systems will retain functionality after December 31, 1999.
PLMI has also informed the Company that (i) it is currently integrating
Year 2000 compliant programming code into its existing internally
customized and internally developed transaction processing software
systems and (ii) PLMI's accounting and asset management software systems
have either already been made Year 2000 compliant or Year 2000 compliant
upgrades of such systems are planned to be implemented by PLMI before the
end of fiscal 1999. Although PLMI has indicated to the Company that it
believes that its Year 2000 compliance program can be completed by the
beginning of 1999, there can be no assurance that the compliance program
will be completed by that date. As of December 31, 1998, allocations to
the Company to become Year 2000 compliant amounted to approximately $0.1
million. The Company expects to spend or be allocated an additional
$100,000 in order to become Year 2000 compliant. Because the Company
relies significantly on PLMI's software systems and the cost allocable to
the Company of making such systems Year 2000 compliant is not expected to
be material, the incremental cost to the Company of becoming Year 2000
compliant is not expected to have a material adverse effect on the
business, financial position or results of operations of the Company.

Some risks associated with the Year 2000 problem are beyond the ability
of the Company to control, including the extent to which third parties
can address the Year 2000 problem. The Company has begun to communicate
with vendors, service providers and customers in order to assess the Year
2000 compliance readiness of such parties and the extent to which the
Company is vulnerable to any third-party Year 2000 issues. There can be
no assurance that the software systems of such parties will be converted
or made Year 2000 compliant in a timely manner. Any failure by PLMI or
such other parties to make their respective systems Year 2000 compliant
could have a material adverse effect on the business, financial position
and results of operations of the Company. The Company will make an
ongoing effort to recognize and evaluate potential exposure relating to
third-party Year 2000 non-compliance and will develop a contingency plan
if the Company determines, or is unable to determine, that third-party
non-compliance would have a material adverse effect on the Company's
business, financial position or results of operation.

ANNEX A

STOCK SALE AGREEMENT

by and between

PLM INTERNATIONAL, INC.

and

GUARANTY FEDERAL BANK, F.S.B.

dated as of

October 26, 1999

TABLE OF CONTENTS

ARTICLE I
PURCHASE AND SALE OF SHARES

Section 1.1 Sale and Transfer of Shares . . . . . . . . . . . . . 1
Section 1.2 Base Purchase Price . . . . . . . . . . . . . . . . . 1
Section 1.3 Base Purchase Price Adjustment . . . . . . . . . . . 2

ARTICLE II
THE CLOSING

Section 2.1 The Closing . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 Deliveries by Seller . . . . . . . . . . . . . . . . 4
Section 2.3 Deliveries by Purchaser . . . . . . . . . . . . . . . 5

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER

Section 3.1 Organization . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Authorization; Validity of Agreement . . . . . . . . 6
Section 3.3 Execution; Validity of Agreement . . . . . . . . . . 6
Section 3.4 Consents and Approvals; No Violations . . . . . . . . 6
Section 3.5 Ownership and Possession of Shares . . . . . . . . . 7
Section 3.6 Good Title Conveyed . . . . . . . . . . . . . . . . . 7
Section 3.7 Company Action . . . . . . . . . . . . . . . . . . . 7
Section 3.8 Capitalization . . . . . . . . . . . . . . . . . . . 7
Section 3.9 Organization; Qualification . . . . . . . . . . . . . 8
Section 3.10 Financial Statements . . . . . . . . . . . . . . . . 8
Section 3.11 No Undisclosed Liabilities . . . . . . . . . . . . . 9
Section 3.12 Outstanding Indebtedness . . . . . . . . . . . . . . 9
Section 3.13 Absence of Certain Changes . . . . . . . . . . . . . 9
Section 3.14 Title to Properties; Encumbrances . . . . . . . . . . 9
Section 3.15 Leased Real Property . . . . . . . . . . . . . . . 10
Section 3.16 Leases . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.17 Contracts and Commitments . . . . . . . . . . . . . 11
Section 3.18 Customers and Lenders . . . . . . . . . . . . . . . 13
Section 3.19 Bank Accounts . . . . . . . . . . . . . . . . . . . 13
Section 3.20 Casualties . . . . . . . . . . . . . . . . . . . . 13
Section 3.21 Litigation . . . . . . . . . . . . . . . . . . . . 13
Section 3.22 Environmental Matters . . . . . . . . . . . . . . . 14
Section 3.23 Compliance with Laws . . . . . . . . . . . . . . . 15
Section 3.24 Employee Benefit Plans . . . . . . . . . . . . . . 15
Section 3.25 Tax Matters . . . . . . . . . . . . . . . . . . . . 16
Section 3.26 Intellectual Property . . . . . . . . . . . . . . . 21
Section 3.27 Labor Matters . . . . . . . . . . . . . . . . . . . 22
Section 3.28 Brokers or Finders . . . . . . . . . . . . . . . . 23
Section 3.29 Year 2000 Readiness . . . . . . . . . . . . . . . . 23
Section 3.30 Insurance . . . . . . . . . . . . . . . . . . . . . 23
Section 3.31 Employees . . . . . . . . . . . . . . . . . . . . . 24
Section 3.32 Non-Continuing Subsidiaries . . . . . . . . . . . . 24
Section 3.33 Disclosure; No Other Representations . . . . . . . 24

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Section 4.1 Organization . . . . . . . . . . . . . . . . . . . 24
Section 4.2 Authorization and Execution; Validity of
Agreement . . . . . . . . . . . . . . . . . . . . . 25
Section 4.3 Consents and Approvals; No Violations . . . . . . . 25
Section 4.4 Acquisition of Shares for Investment;
Ability to Evaluate and Bear Risk . . . . . . . . 26
Section 4.5 Availability of Funds . . . . . . . . . . . . . . . 26
Section 4.6 Litigation . . . . . . . . . . . . . . . . . . . . 26
Section 4.7 Brokers or Finders . . . . . . . . . . . . . . . . 26

ARTICLE V
COVENANTS

Section 5.1 Interim Operations of the Company . . . . . . . . . 26
Section 5.2 Access; Confidentiality . . . . . . . . . . . . . . 29
Section 5.3 Efforts and Actions to Cause Closing to Occur . . . 30
Section 5.4 Tax Matters . . . . . . . . . . . . . . . . . . . . 32
Section 5.5 Publicity . . . . . . . . . . . . . . . . . . . . . 40
Section 5.6 Employees; Employee Benefits . . . . . . . . . . . 41
Section 5.7 Indemnification . . . . . . . . . . . . . . . . . . 42
Section 5.8 Transition Services . . . . . . . . . . . . . . . . 43
Section 5.9 Intercompany Arrangements . . . . . . . . . . . . . 43
Section 5.10 Payment of Outstanding Indebtedness . . . . . . . . 43
Section 5.11 Knowledge of Breach; Prior Knowledge . . . . . . . 44
Section 5.12 Disclosure Schedule: Supplement,
Amendments and Updates . . . . . . . . . . . . . . 44
Section 5.13 Maintenance of Books and Records . . . . . . . . . 45
Section 5.14 Seller's Trademarks and Logos . . . . . . . . . . . 45
Section 5.15 Use of Name . . . . . . . . . . . . . . . . . . . . 46
Section 5.16 Inland Leases . . . . . . . . . . . . . . . . . . . 46
Section 5.17 Eireann Programs . . . . . . . . . . . . . . . . . 46
Section 5.18 No Solicitation . . . . . . . . . . . . . . . . . . 46
Section 5.19 Investment Committee Meetings . . . . . . . . . . . 47
Section 5.20 Stockholders' Meeting. . . . . . . . . . . . . . . 47

ARTICLE VI
CONDITIONS

Section 6.1 Conditions to Each Party's Obligation to Effect
the Closing . . . . . . . . . . . . . . . . . . . 48
Section 6.2 Conditions to Obligations of Purchaser to
Effect the Closing . . . . . . . . . . . . . . . 49
Section 6.3 Conditions to Obligations of Seller to Effect
the Closing . . . . . . . . . . . . . . . . . . . . . . 52

ARTICLE VII

TERMINATION
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . 53
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . 54

ARTICLE VIII
INDEMNIFICATION

Section 8.1 Indemnification; Remedies . . . . . . . . . . . . . 54
Section 8.2 Notice of Claim; Defense . . . . . . . . . . . . . 57
Section 8.3 Resolution of All Tax-Related Disputes . . . . . . 59
Section 8.4 Tax Effect of Indemnification Payments . . . . . . 59
Section 8.5 No Duplication; Sole Remedy Procedures . . . . . . 59
Section 8.6 No Right of Off-Set/Set-off . . . . . . . . . . . . 59

ARTICLE IX
DEFINITIONS AND INTERPRETATION

Section 9.1 Definitions . . . . . . . . . . . . . . . . . . . . 60
Section 9.2 Interpretation . . . . . . . . . . . . . . . . . . 71

ARTICLE X
MISCELLANEOUS

Section 10.1 Fees and Expenses . . . . . . . . . . . . . . . . . 72
Section 10.2 Amendment and Modification . . . . . . . . . . . . 72
Section 10.3 Notices . . . . . . . . . . . . . . . . . . . . . . 72
Section 10.4 Counterparts . . . . . . . . . . . . . . . . . . . 74
Section 10.5 Entire Agreement; No Third-Party Beneficiaries . . 74
Section 10.6 Severability . . . . . . . . . . . . . . . . . . . 74
Section 10.7 Governing Law . . . . . . . . . . . . . . . . . . . 74
Section 10.8 Venue . . . . . . . . . . . . . . . . . . . . . . . 74
Section 10.9 Time of Essence . . . . . . . . . . . . . . . . . . 74
Section 10.10 Extension; Waiver . . . . . . . . . . . . . . . . . 74
Section 10.11 Election of Remedies . . . . . . . . . . . . . . . 75
Section 10.12 Assignment . . . . . . . . . . . . . . . . . . . . 75

EXHIBITS

Exhibit A Form of Opinion of Counsel to Seller
Exhibit B Form of Opinion of Counsel to Purchaser
Exhibit C Inland Leases
Exhibit D Form of Transition Services Agreement

STOCK SALE AGREEMENT

Stock Sale Agreement, dated as of October 26, 1999, by and
between Guaranty Federal Bank, F.S.B., a federally chartered savings bank,
and PLM International, Inc., a Delaware corporation and the holder of all
the outstanding capital stock of American Finance Group, Inc., a Delaware
corporation. Certain capitalized terms used in this Agreement have the
meanings assigned to them in Article IX.

WHEREAS, Seller owns, of record and beneficially, all of the
Shares; and

WHEREAS, each of the boards of directors of Purchaser and Seller
has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by
Purchaser, which acquisition is to be effected by the purchase of the
Shares by Purchaser upon the terms and subject to the conditions set forth
herein;

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I
PURCHASE AND SALE OF SHARES

Section 1.1 Sale and Transfer of Shares. Subject to the terms
and conditions of this Agreement, Seller shall, at the Closing, sell,
convey, assign, transfer and deliver to Purchaser all of the Shares, free
and clear of all Encumbrances, except for any restrictions on transfer
arising under the Securities Act or any applicable state securities laws.

Section 1.2 Base Purchase Price. Subject to the terms and
conditions of this Agreement, in consideration of the aforesaid sale,
conveyance, assignment, transfer and delivery to Purchaser of the Shares,
Purchaser shall pay to Seller at the Closing the Base Purchase Price, which
amount shall be payable in immediately available funds by wire transfer to
such bank account or accounts as may be specified by Seller to Purchaser at
least five (5) Business Days prior to the Closing.

Section 1.3 Base Purchase Price Adjustment.

(a) As promptly as practicable, but not later than sixty
(60) calendar days after the Closing Date, Seller, with the cooperation of
Purchaser, shall cause to be prepared and delivered to Purchaser the
Closing Date Balance Sheet. Except as set forth in and in accordance with
Section1.3(b) or Section 1.3(c), as the case may be, the Closing Date
Balance Sheet shall not be binding on Purchaser if Purchaser timely
exercises its right to dispute the same pursuant to the procedures set
forth in this Section 1.3. If Purchaser does not exercise such right with
respect to the Closing Date Balance Sheet on a timely basis under this
Section 1.3, then Purchaser shall be deemed to have accepted the Closing
Date Balance Sheet.

(b) Purchaser must cooperate in good faith in the
preparation of the Closing Date Balance Sheet. The Closing Date Balance
Sheet shall be prepared on a basis consistent with the preparation of the
Balance Sheet. During the thirty (30) days immediately following
Purchaser's receipt of the Closing Date Balance Sheet, Purchaser shall be
permitted to review the working papers of Seller relating to the Closing
Date Balance Sheet. The Closing Date Balance Sheet shall become final and
binding upon Seller and Purchaser on the thirtieth (30th) day following
receipt thereof by Purchaser unless Purchaser gives a Notice of
Disagreement to Seller on or before such date. Any Notice of Disagreement
shall (i) specify in reasonable detail the nature and amount of any
disagreement so asserted and (ii) include disagreements relating only to
the Closing Date Balance Sheet.

(c) During the thirty (30) days immediately following the
delivery of a Notice of Disagreement, Seller and Purchaser shall seek in
good faith to resolve by written agreement any differences that they may
have with respect to any matter included in the Notice of Disagreement.
During such 30-day period, Seller shall have full access to the working
papers of Purchaser prepared in connection with Purchaser's preparation of
the Notice of Disagreement. Should the parties resolve by written agreement
all differences included in the Notice of Disagreement during such 30-day
period, Seller shall prepare a revised Closing Date Balance Sheet
reflecting the terms of such written agreement and deliver such revised
Closing Date Balance Sheet to Purchaser within two (2) Business Days after
the execution of such written agreement by both parties. Should any such
differences remain unresolved at the end of such 30-day period, Seller and
Purchaser shall submit to the Accounting Firm for review and resolution any
and all matters which remain in dispute and which were properly included in
the Notice of Disagreement, and the Accounting Firm shall make a final
determination in writing in respect of such matters, which determination
shall be binding on the parties (it being understood, however, that the
Accounting Firm shall act as an arbitrator to determine, based solely on
presentations by Purchaser and Seller (and not by independent review), only
those matters that remain in dispute and were properly included in the
Notice of Disagreement). Each of Seller and Purchaser shall instruct the
Accounting Firm to deliver, as soon as practicable following the selection
of the Accounting Firm, its final determination to the parties in writing.
Within two (2) Business Days following delivery by the Accounting Firm of
its final determination in writing to the parties, Seller shall deliver to
Purchaser a revised version of the Closing Date Balance Sheet reflecting
(i) any written agreement by the parties with respect to any matter
included in the Notice of Disagreement and/or (ii) the final determination
of the Accounting Firm. Purchaser and Seller shall bear equally the fees
and expenses incurred by the Accounting Firm in carrying out its duties
under this Section 1.3. If a timely Notice of Disagreement is given by
Purchaser in accordance with Section 1.3(b), then the Closing Date Balance
Sheet, as revised in accordance with this Section 1.3(c), shall become
final and binding upon Seller and Purchaser on the date Seller delivers
such revised version of the Closing Date Balance Sheet to Purchaser.

(d) If the Base Purchase Price is more than the Final
Purchase Price, Seller shall, within five (5) Business Days after the
Closing Date Balance Sheet has become final and binding on Seller and
Purchaser pursuant to this Section 1.3, make payment to Purchaser by wire
transfer in immediately available funds of the amount of such difference,
together with interest thereon at the Applicable Rate calculated on the
basis of the number of days elapsed from the Closing Date to the date of
payment. If the Base Purchase Price is less than the Final Purchase Price,
Purchaser shall, within five (5) Business Days after the Closing Date
Balance Sheet has become final and binding on Seller and Purchaser
pursuant to this Section 1.3, make payment to Seller by wire transfer in
immediately available funds of the amount of such difference, together with
interest thereon at the Applicable Rate calculated on the basis of the
number of days elapsed from the Closing Date to the date of payment.

ARTICLE II
THE CLOSING

Section 2.1 The Closing. The sale and transfer of the Shares
by Seller to Purchaser shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, Four Embarcadero Center, Suite 3800, San
Francisco, California, at 10:00 a.m., Pacific Standard Time, on the later
of (a) January 14, 2000 and (b) five (5) Business Days following the
satisfaction and/or waiver of all conditions to closing set forth in
Article VI, unless another date or place is agreed in writing by each of
the parties hereto.

Section 2.2 Deliveries by Seller. At the Closing, Seller shall
deliver to Purchaser:

(a) one or more certificates representing all of the
Shares, each such certificate to be duly and validly endorsed in the name
of Purchaser or in blank or accompanied by separate stock powers duly and
validly executed by Seller in blank, in proper form for transfer, together
with evidence of payment by Seller of any applicable transfer taxes;

(b) resignations of each director of the Company and each
Company Subsidiary;

(d) all minute books and stock ledgers for the Company and
the Company Subsidiaries;

(e) a certification of non-foreign status for Seller in the
form and manner which complies with the requirements of Section 1445 of the
Code;
(f) the opinions, certificates and other documents to be
delivered by Seller to Purchaser at or prior to the Closing in connection
with the Transactions; and

(g) a certificate of an officer of Seller that the
resolution of its stockholders contemplated by Section 271 of the DGCL
authorizing the sale of the Shares has been obtained.

Section 2.3 Deliveries by Purchaser. At the Closing, Purchaser
shall:

(a) transfer the Base Purchase Price in accordance with
Section 1.2; and

(b) deliver, or cause to be delivered, to Seller such
opinions, certificates and other documents to be delivered by Purchaser to
Seller at or prior to the Closing in connection with the Transactions.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Purchaser that all of the
statements contained in this Article III are true as of the date of this
Agreement (or, if made as of a specified date, as of such date). For
purposes of the representations and warranties of Seller contained herein
and except with respect to Schedules 3.8, 3.12, 3.16 and 3.21, disclosure
in any section of the Disclosure Schedule (excluding the Financial
Statements attached thereto as Schedule 3.10) of specific facts or
circumstances sufficient to clearly and actually notify Purchaser of the
nature and extent of the matter required to be disclosed shall be deemed to
be adequate response and disclosure of such facts or circumstances with
respect to all representations or warranties by Seller calling for
disclosure of such information, whether or not such disclosure is
specifically associated with or purports to respond to one or more or all
of such representations or warranties. The inclusion of any information in
any section of the Disclosure Schedule or other document delivered by
Seller pursuant to this Agreement shall not be deemed to be an admission or
evidence of the materiality of such item, nor shall it establish a standard
of materiality for any purpose whatsoever.

Seller, for itself, and on behalf of the Company and each
Company Subsidiary (as applicable), represents and warrants to Purchaser
that:

Section 3.1 Organization. Except as set forth on Schedule 3.1,
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Seller has all requisite
corporate or other power and authority and all necessary governmental
approvals to own, lease and operate its properties and assets and to carry
on its business as now being conducted, except where the failure to have
such power, authority and governmental approvals would not have a Company
Material Adverse Effect.

Section 3.2 Authorization; Validity of Agreement. Except as
set forth on Schedule 3.2 and subject to receiving the authorization of its
stockholders contemplated by Section 271 of the DGCL, Seller has full
corporate power and authority to execute and deliver this Agreement and to
consummate the Transactions. The execution, delivery and performance by
Seller of this Agreement and the consummation of the Transactions have been
duly authorized by the Board of Directors of Seller and, except for the
authorization of the stockholders of Seller contemplated by Section 271 of
the DGCL, no other corporate or other action on the part of Seller or its
stockholders is necessary to authorize the execution and delivery by Seller
of this Agreement or the consummation of the Transactions.

Section 3.3 Execution; Validity of Agreement. Except as set
forth on Schedule 3.3, this Agreement has been duly executed and delivered
by Seller, and, assuming due and valid authorization, execution and
delivery hereof by Purchaser, is a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms except: (a) as may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws of general
application affecting enforcement of creditors' rights generally and (b)
the availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses.

Section 3.4 Consents and Approvals; No Violations. Except as
set forth on Schedule 3.4, and for the filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Exchange Act, the HSR Act, the DGCL, state securities
or blue sky laws and the OTS, none of the execution, delivery or
performance of this Agreement by Seller, the consummation by Seller of the
Transactions or compliance by Seller with any of the provisions hereof
will: (a) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws of Seller, (b) require any filing
with, or permit, authorization, consent or approval of, any Governmental
Entity, (c) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to
which Seller or any of its Subsidiaries is a party or by which any of them
or any of their respective properties or assets may be bound, or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller, any of its Subsidiaries or any of their properties or
assets, excluding from the foregoing clauses (b), (c) and (d) such
violations, breaches or defaults which would become applicable as a result
of the business or activities in which Purchaser is or proposes to be
engaged or as a result of the status of Purchaser as a federally chartered
savings bank.

Section 3.5 Ownership and Possession of Shares. Except as set
forth on Schedule 3.5, Seller is the record and beneficial owner of all of
the Shares. The certificates representing the Shares are now and at all
times during the term hereof shall be held by Seller or by a nominee or
custodian for the sole and exclusive benefit of Seller, free and clear of
all Encumbrances whatsoever, except for any Encumbrances created by this
Agreement and restrictions on transfer arising under the Securities Act or
any applicable state securities laws.

Section 3.6 Good Title Conveyed. Except as set forth on
Schedule 3.6, the stock certificates, stock powers, endorsements,
assignments and other instruments to be executed and delivered by Seller to
Purchaser at the Closing will be valid and binding obligations of Seller,
enforceable in accordance with their respective terms, and will vest in
Purchaser good title to all the Shares, free and clear of all Encumbrances,
except restrictions on transfer imposed by the Securities Act and any
applicable state securities laws.

Section 3.7 Company Action. Except as set forth on Schedule
3.7, no vote of, or consent by, the holders of any class or series of
capital stock issued by the Company or any Company Subsidiary is necessary
to authorize the execution and delivery by Seller of this Agreement or the
consummation by it of the Transactions.

Section 3.8 Capitalization. The total number of shares of
capital stock, and the classes and par values thereof, which the Company
and each Company Subsidiary is authorized to issue, the number of such
shares which are issued and outstanding and the number of such outstanding
shares owned by Seller or the Company (with respect to each Company
Subsidiary) are set forth on Schedule 3.8. All the Shares and all
outstanding shares of capital stock of each of the Company Subsidiaries are
duly authorized, validly issued, fully paid and non-assessable. Except as
set forth in Schedule 3.8, as of the date hereof, (a) there are no shares
of capital stock or other equity securities of the Company or any Company
Subsidiary authorized, issued or outstanding; and (b) there are no existing
options, warrants, calls, pre-emptive rights, exchange rights,
subscriptions or other rights, agreements, arrangements or commitments of
any character, relating to the issued or unissued capital stock or other
equity securities of the Company or any Company Subsidiary, obligating the
Company or any Company Subsidiary to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or other equity
securities of the Company or any Company Subsidiary.

Section 3.9 Organization; Qualification. Each of the Company
and the Company Subsidiaries (a) is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation,
and (b) has full corporate power and authority to carry on its business as
it is now being conducted and to own the properties and assets it now owns.
Each of the Company and the Company Subsidiaries is duly qualified or
licensed to do business as a foreign corporation in good standing in every
jurisdiction in which such qualification or license is required or, if the
Company or any Company Subsidiary is not so qualified in any such
jurisdiction, (A) it can become so qualified or licensed in such
jurisdiction without a Company Material Adverse Effect and (B) prior to the
date of this Agreement, any such failure to be so qualified or licensed has
not had, and is not reasonably expected to have a Company Material Adverse
Effect. Seller has heretofore delivered to Purchaser complete and correct
copies of the certificate of incorporation and by-laws of each of the
Company and the Company Subsidiaries as presently in effect. Schedule 3.9
sets forth the name and jurisdiction of incorporation of the Company and
each Company Subsidiary and the jurisdictions in which the Company and each
Company Subsidiary is qualified to do business. All the outstanding capital
stock of each Company Subsidiary is owned directly or indirectly by the
Company, free and clear of all Encumbrances and all material claims or
charges of any kind and is validly issued, fully paid and nonassessable.

Section 3.10 Financial Statements. True and complete copies of
the Financial Statements are attached hereto as Schedule 3.10. The
Financial Statements have been prepared from, are in accordance with and
accurately reflect, the books and records of the Company and the Company
Subsidiaries, comply in all material respects with applicable accounting
requirements, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be stated in
the notes thereto) and fairly present the consolidated financial position
and the consolidated results of operations and cash flows (and changes in
financial position, if any) of the Company and the Company Subsidiaries as
of the dates and for the periods referred to therein (subject, in the case
of unaudited statements, to normally recurring year-end adjustments which
are not material).

Section 3.11 No Undisclosed Liabilities. Except (a) as
disclosed in the Financial Statements or in Schedule 3.11 and (b) for
liabilities and obligations incurred in the ordinary course of business
since the Balance Sheet Date, the Company has not incurred any liability or
obligation of any nature, whether or not accrued, contingent or otherwise,
that has, or would be reasonably likely to have, a Company Material Adverse
Effect.

Section 3.12 Outstanding Indebtedness. Schedule 3.12 lists all
Indebtedness outstanding as of June 30, 1999, except for items of
outstanding Indebtedness the principal amount of which did not exceed as of
such date $25,000 in any individual case or $100,000 in the aggregate.
Schedule 3.12 sets forth the amount of principal and unpaid (accrued and
unaccrued) interest outstanding as of June 30, 1999 (except as otherwise
noted) under each instrument evidencing outstanding Indebtedness, including
such amounts of principal or interest, if any, that will accelerate or
become due or result in a right on the part of the holder of such
Indebtedness (with or without due notice or lapse of time) to require
prepayment, redemption or repurchase as a result of the execution of this
Agreement or the consummation of any of the Transactions.

Section 3.13 Absence of Certain Changes. Except as set forth on
Schedule 3.13, since the Balance Sheet Date, each of the Company and the
Company Subsidiaries has conducted its respective business only in the
ordinary course consistent with past practice, and neither the Company nor
any Company Subsidiary has taken any action, or permitted any fact or
circumstance to occur or exist, that would constitute a breach of any
provision of Section 5.1 had such action been taken or such fact or
circumstance occurred or existed at any time since the Balance Sheet Date.
Except as set forth on Schedule 3.13, since the Balance Sheet Date, none of
the Company or any Company Subsidiary has suffered any change in its
working capital, business, financial condition, results of operations,
assets or liabilities which has resulted in, or may reasonably be expected
to result in, a Company Material Adverse Effect, nor, to the Knowledge of
Seller, has any such change been threatened.

Section 3.14 Title to Properties; Encumbrances. Except for
properties and assets (including Leases) sold since the Balance Sheet Date
in the ordinary course of business and except as set forth on Schedule
3.14, either the Company or a Company Subsidiary has good title to each of
the properties and assets reflected on the Balance Sheet, free and clear of
any Encumbrance that would reasonably be expected to have a Company
Material Adverse Effect and which is not disclosed on the Balance Sheet. As
of the date hereof, all tangible assets and properties of the Company and
each Company Subsidiary, excluding Leased Properties, are in good operating
condition and repair and are usable in the ordinary course of business
consistent with past practice. Each Lease requires the lessee to maintain
the Leased Property in good operating condition and repair, and to the
Knowledge of Seller, there have been no failures to maintain Leased
Properties that, individually or in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect.

Section 3.15 Leased Real Property. None of the Company or any
of the Company Subsidiaries owns any real property. Schedule 3.15 sets
forth a complete list, and the location and a brief description, of all
real property leased by the Company and the Company Subsidiaries. True and
complete copies of leases relating to such real property have heretofore
been furnished to Purchaser.

Section 3.16 Leases. Schedule 3.16 sets forth a complete list
of all Leases (including certain material terms of such Leases) as of the
date hereof, complete and correct copies of which, together with all
amendments thereto, have been made available to Purchaser. Each Lease is
valid, binding and enforceable in accordance with its terms except: (a) as
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws of general
application affecting enforcement of creditors' rights generally and (b)
the availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses. The
Company and each Company Subsidiary (as the case may be) have fulfilled, or
taken all action necessary to enable it to fulfill when due, all of their
respective obligations under each Lease. Except as set forth on Schedule
3.16, to the Knowledge of Seller, no party is in default under any Lease
such that that default would reasonably be expected to result in a loss to
the Company or a Company Subsidiary in excess of $10,000 individually or
$100,000 in the aggregate, and no notice of any claim of default has been
given by a lessee under a Lease to the Company or any Company Subsidiary.
To the Knowledge of Seller, there does not exist under any Lease any other
event or condition that, after notice or lapse of time or both, would
constitute on the part of any lessee thereto a violation, breach or event
of default thereunder which would reasonably be expected to result in a
loss to the Company or any Company Subsidiary in excess of $10,000
individually or $100,000 in the aggregate. Except as set forth in Schedule
3.16, no consent of any lessee or guarantor under any Lease is required as
a result of or in connection with the execution, delivery or performance of
this Agreement or the consummation of the Transactions.

Section 3.17 Contracts and Commitments.

(a) Schedule 3.17(a) contains a complete and correct list
and description of all agreements, contracts, commitments and other
instruments and arrangements (whether or not written), other than Leases,
of the types described below to which the Company or any Company Subsidiary
is a party or by which any of them is bound as of the date hereof and with
respect to which payments by or to the Company or any Company Subsidiary
exceeded $10,000 during the 12-month period ended September 30, 1999 or, if
continued, would be expected to exceed $10,000 during the 12-month period
ending September 30, 2000 (the "Contracts"):

(i) employment, consulting, agency,
collective bargaining, profit sharing, stock option, severance or
other similar contracts, agreements, and other instruments and
arrangements relating to or for the benefit of current, future or
former employees, officers, directors, agents, independent
contractors or consultants;

(ii) loan agreements, indentures, letters of
credit, mortgages, security agreements, pledge agreements, deeds
of trust, bonds, notes, guarantees, and other agreements and
instruments relating to the borrowing of money or obtaining of or
extension of credit;

(iii) licenses, licensing arrangements
and other contracts providing in whole or in part for the use of,
or limiting the use of, any Intellectual Property;

(iv) brokerage or finder's agreements;

(v) joint venture, partnership and similar
contracts;

(vi) asset purchase agreements and other
acquisition or divestiture agreements, including but not limited
to any agreements relating to the sale, lease or disposal of any
assets (other than Leased Property), or involving continuing
indemnity or other obligations;

(vii) agent, representative, sales,
marketing or similar agreements;

(viii) contracts, agreements or
arrangements with respect to the representation of the Company
business in foreign countries;

(ix) lease agreements where the Company or
any Company Subsidiary is the lessee, providing for the leasing
of personal property, whether or not primarily used in, or held
for use primarily in connection with, the business of the Company
or any Company Subsidiary; and

(x) any other contracts, agreements or
commitments that are material to the business of the Company or
any Company Subsidiary.

(b) Except as set forth on Schedule 3.17(b), Seller has
made available to Purchaser complete and correct copies of all Contracts,
together with all amendments and supplements thereto.

(c) Except as set forth on Schedule 3.17(c)(i), all
Contracts are in full force and effect. There does not exist under any
Contract any event of default or event or condition that, after notice or
lapse of time or both, would constitute a violation, breach or event of
default thereunder on the part of the Company or any Company Subsidiary,
or, to the Knowledge of Seller, any other party thereto, except for such
events or conditions that, individually or in the aggregate, have not had
or resulted in, and will not have or result in, a Company Material Adverse
Effect. Except as set forth in Schedule 3.17(c)(ii), no consent of any
third party is required under any Contract as a result of or in connection
with the execution, delivery or performance of this Agreement or the
consummation of the Transactions.

(d) Other than as set forth on Schedule 3.17(d), neither
the Company nor any Company Subsidiary has outstanding any power of
attorney that is material to the business of the Company and the Company
Subsidiaries.

(e) Except as set forth on Schedule 3.17(e), no purchase
contracts or commitments of the Company or any Company Subsidiary are in
excess of the normal, ordinary and usual requirements of business or are at
an excessive price.

(f) Except as set forth on Schedule 3.17(f), neither the
Company nor any Company Subsidiary is restricted by agreement from carrying
on its business anywhere in the world, except such restrictions as would
not have a Company Material Adverse Effect.

(g) Except as set forth on Schedule 3.17(g), neither the
Company nor any Company Subsidiary has outstanding any agreement to acquire
or guarantee any debt obligations of others.

Section 3.18 Customers and Lenders. Except as set forth on
Schedule 3.18, since the Balance Sheet Date there has not been any material
adverse change in the business relationship of the Company or any Company
Subsidiary with any customer who accounted for more than 5% of the
Company's revenues from Leases (on a consolidated basis) during the period
from January 1, 1999 to June 30, 1999, or any lender from whom the Company
or the Company Subsidiaries borrowed funds constituting more than 5% of its
total assets as of June 30, 1999.

Section 3.19 Bank Accounts. Schedule 3.19 sets forth the names
and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company or any Company
Subsidiary maintains safe deposit boxes, checking accounts or other
accounts of any nature as of the date hereof.

Section 3.20 Casualties. Except as set forth on Schedule 3.20,
since the Balance Sheet Date, neither the Company nor any Company
Subsidiary has been affected as a result of flood, fire or explosion which
constitutes a Company Material Adverse Effect.

Section 3.21 Litigation.

(a) Except as set forth on Schedule 3.21, there are no
actions, suits, claims or administrative or arbitral proceedings or
investigations pending or, to the Knowledge of Seller, threatened naming
the Company or any Company Subsidiary as a defendant and seeking damages of
$10,000 or more or an injunction against the Company or any Company
Subsidiary. Except as set forth on Schedule 3.21, there are no outstanding
judgments, orders, writs, injunctions or decrees of any Governmental Entity
against the Company or any Company Subsidiary. Except for pending or
unresolved claims existing as of the date hereof and except as otherwise
set forth in Schedule 3.21, no lessee under a Lease listed on Schedule 3.16
or Governmental Entity has informed the Company that it believes there are
any bases or grounds for any action, suit, claim, investigation or
proceeding by it that would be required to be listed in Schedule 3.21 if
such action, suit, claim, investigation or proceeding were now pending or
threatened. Neither the Company nor any Company Subsidiary is currently
engaged in any action as plaintiff except as otherwise set forth in
Schedule 3.21.

(b) There are no actions, suits or claims, or legal,
administrative or arbitral proceedings, pending or, to Knowledge of Seller,
threatened, that would give rise to any right of indemnification against
the Company or any Company Subsidiary or any successor to the business of
the Company or any Company Subsidiary under any contract or other agreement
to which the Company or such Company Subsidiary is a party, or by which it
or its respective properties or assets is bound or subject.

(c) There is no action, suit, inquiry, proceeding or
investigation by or before any Governmental Entity pending or, to the
Knowledge of Seller, threatened against or involving the Company or any
Company Subsidiary which questions or challenges the validity of this
Agreement or any action taken or to be taken by the Company or any Company
Subsidiary pursuant to this Agreement or in connection with the
Transactions.

Section 3.22 Environmental Matters. Except as set forth on
Schedule 3.22, to the Knowledge of Seller, (a) the Company and each Company
Subsidiary are in compliance with all applicable Environmental Laws, (b)
neither the Company nor any Company Subsidiary has received any written
notice with respect to the business of, or any property or assets owned or
leased by, the Company or any Company Subsidiary from any Governmental
Entity or other Person alleging that the Company or any Company Subsidiary
is not in compliance with any Environmental Law, (c) there has been no
"release" of a "hazardous substance", as those terms are defined in the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. section 9601 et seq., in excess of a reportable quantity on any real
property owned by the Company or any Company Subsidiary that is used for
the business of the Company or any Company Subsidiary, (d) there is no
proceeding threatened before any Governmental Entity in which the Company
or any Company Subsidiary reasonably would be expected to be named as a
defendant or potentially responsible party for alleged noncompliance with
any applicable Environmental Law, and (e) there is no proceeding pending
before any Governmental Entity in which the Company or any Company
Subsidiary has been named as a defendant or potentially responsible party
for alleged noncompliance with any applicable Environmental Law.

Section 3.23 Compliance with Laws. Except as set forth on
Schedule 3.23, to the Knowledge of Seller, the Company and the Company
Subsidiaries have complied in a timely manner and in all respects with all
laws, rules and regulations, ordinances, judgments, decrees, orders, writs
and injunctions of all Governmental Entities that are material to the
business, properties or assets of the Company or any Company Subsidiary.

Section 3.24 Employee Benefit Plans.

(a) Schedule 3.24(a) contains a true and complete list of
all Plans and indicates, where applicable, each Plan sponsored by the
Company or a Company Subsidiary. The Company has heretofore made available
to Purchaser a true and complete copy of each written Plan and any
amendments thereto and each agreement creating or modifying any related
trust or other funding vehicle, and a written summary of any unwritten
Plan; the summary plan description for each Plan; the most recent Form 5500
and summary annual report for each Plan; and the most recent Internal
Revenue Service determination letter for each Plan to the extent
applicable.

(b) Except as set forth on Schedule 3.24(b), to the
Knowledge of Seller, no liability under Title IV or Section 302 of ERISA or
Section 4980 B of the Code has been incurred by the Company or any ERISA
Affiliate that has not been satisfied in full.

(c) Except as set forth on Schedule 3.24(c), to the
Knowledge of Seller, the PBGC has not instituted proceedings to terminate
any Title IV Plan and no condition exists that presents a material risk
that such proceedings will be instituted.

(d) Except as set forth on Schedule 3.24(d), no Title IV
Plan is a "multi-employer pension plan," as defined in Section 3(37) of
ERISA, nor is any Title IV Plan a plan described in Section 4063(a) of
ERISA.

(e) Except as set forth on Schedule 3.24(e), each Plan has
been operated and administered in accordance with its terms and applicable
law, including ERISA and the Code, except as would not have a Company
Material Adverse Effect; no breaches of fiduciary duty or "prohibited
transactions" within the meaning of Section 406 of ERISA have occurred with
respect to any Plan; and all contributions and premiums due (taking into
account any extensions for such contributions and premiums) at or prior to
the Closing Date have been paid in full or accrued with respect to each
Plan.

(f) Except as set forth on Schedule 3.24(f), each Plan
intended to be "qualified" within the meaning of Section 401(a) of the Code
is so qualified.

(g) Except as set forth on Schedule 3.24(g), no Plan
provides health or death benefits after termination of employment except as
required by Part 6 of Title I of ERISA.

(h) Except as set forth on Schedule 3.24(h), the
consummation of the transactions contemplated by this Agreement will not
(i) entitle any individual to any tax "gross-up" payments with respect to
the imposition of any tax pursuant to Section 4999 of the Code or
accelerate the time of payment or vesting, or increase the amount, of
compensation or benefits due to any individual with respect to any Plan, or
(ii) constitute or result in a "prohibited transaction" under Section 4975
of the Code or Section 406 or 407 of ERISA with respect to any Plan.

Section 3.25 Tax Matters.

(a) Except as set forth on Schedule 3.25(a), all Tax
Returns required to be filed by the Company, any Company Subsidiary or any
member of the Seller's Group or any corporation that was included in the
filing of a return with the Company or any Company Subsidiary on a
consolidated, combined or unitary basis have been filed and all Taxes
required to be shown on Tax Returns or otherwise due or payable have been
paid and any penalties and interest relating to such Taxes have been paid.
None of the Tax Returns contain, or are required to contain, a disclosure
statement under Section 6662 of the Code, or any similar provision of
state, local or foreign law, in order to avoid a penalty for any taxable
year. Except as set forth on Schedule 3.25(a), no extension of time within
which to file any Tax Return with respect to the Company, any Company
Subsidiary, or any member of the Seller's Group has been requested, which
Tax Return has not since been filed. All Tax Returns are true, correct and
complete in all respects

(b) Except as set forth on Schedule 3.25(b), no adjustment
relating to any Tax Returns has been proposed in writing by any
Governmental Entity, and no basis exists for any such adjustment. There
are no outstanding subpoenas or requests for information with respect to
any Tax Returns or portions thereof. There are no pending investigations,
actions or proceedings in respect of which the Seller's Group has received
written notice for the assessment or collection of Taxes for which the
Company or any Company Subsidiary may become liable in its own right or as
a member of the Seller's Group, or as a transferee of the assets of, or
successor to, any entity against the Company, any Company Subsidiary, or
any member of the Seller's Group. There are no deficiencies in Taxes that
have been assessed in writing against any member of the Seller's Group.

(c) Except as set forth on Schedule 3.25(c), no consent
under Section 341(f) of the Code has been filed with respect to the
Company, any Company Subsidiary or any member of the Seller's Group.

(d) Except as set forth on Schedule 3.25(d), there are no
Tax liens on any assets of the Company or any Company Subsidiary, except
with respect to Taxes which are not yet due and payable.

(e) Except as set forth on Schedule 3.25(e), neither the
Company nor any Company Subsidiary has made any payments, is obligated to
make any payments, or is a party to any agreement that could obligate it to
make any payments that would not be deductible under Section 280G of the
Code.

(f) Except as set forth on Schedule 3.25(f), neither the
Company nor any Company Subsidiary has been at any time a member of any
partnership or joint venture or the holder of a beneficial interest in any
trust for any person for which the statute of limitations for any Tax
potentially applicable as a result of such membership or holding has not
expired.

(g) Except as set forth on Schedule 3.25(g), the Company
and each Company Subsidiary is a member of an affiliated group (within the
meaning of Section 1504 of the Code) that is eligible to file a
consolidated return with Seller for United States federal income tax
purposes. No other entity is or has since January 1, 1995 been eligible to
file a consolidated or combined return with the Company or any Company
Subsidiary and the Company has not filed or consented to the filing of any
United States federal or state consolidated or combined return with any
entity not a member of the Seller's Group.

(h) Except as set forth on Schedule 3.25(h), neither the
Company nor any Company Subsidiary owes any amounts pursuant to any tax
sharing agreement or arrangement, nor will they have any liability after
the date hereof in respect of any tax sharing agreement or arrangement
executed or agreed to prior to the date hereof, whether any such agreement
or arrangement is written or unwritten.

(i) Except as set forth on Schedule 3.25(i), all Taxes
required to be withheld, collected or deposited in connection with the
operations and activities of the Company, any Company Subsidiary or any
member of the Seller's Group have been timely withheld, collected or
deposited and, to the extent required, have been paid to the relevant
taxing authority.

(j) Except as set forth on Schedule 3.25(j), the Company
and each Company Subsidiary has properly accrued all current or contested
Taxes on their books and records, and their books and records reflect
reserves that are adequate in accordance with GAAP for the payment of all
Taxes not yet due and payable that are properly accruable thereon through
the close of business on the Closing Date (including Taxes being
contested).

(k) Except as set forth on Schedule 3.25(k), as of the
Balance Sheet Date, neither the Company nor any Company Subsidiary had
liability for any Taxes in excess of amounts accrued or the reserves
established on the Balance Sheet, including any liability for Taxes
resulting from being a member of or leaving the Seller's Group.

(l) Except as set forth on Schedule 3.25(l), there are no
outstanding requests, waivers, consents or agreements to extend the statute
of limitations for any period with respect to any Tax or deficiency to
which the Company or any Company Subsidiary may be liable either directly
or as a member of the Seller's Group.

(m) Except as set forth on Schedule 3.25(m), neither the
Company nor any Company Subsidiary has (i) income that may be reportable
for a period ending after the Closing Date but attributable to a
transaction (e.g., an installment sale) occurring in, or a change in
accounting method made for, a period ending at or prior to the Closing Date
that will not be reflected on the Closing Date Balance Sheet which may
result in a deferred reporting of income from such transaction or from such
change in accounting method (other than a deferred intercompany
transaction), or (ii) deferred gain or loss arising out of any deferred
intercompany transaction.

(n) Except as set forth on Schedule 3.25(n), neither the
Company nor any Company Subsidiary is liable for the Taxes of any
individual, corporation, unincorporated organization or Government Entity
(i) under Treasury Department Regulation Section 1.1502-6 or any similar
provision of state, local, or foreign law, (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise.

(o) Except as set forth on Schedule 3.25(o), there are no
requests for rulings or determination letters made by or on behalf of the
Company, any Company Subsidiary or any member of the Seller's Group
currently outstanding that could affect the Taxes of the Company or any
Company Subsidiary.

(p) Except as set forth on Schedule 3.25(p), no power of
attorney that is currently in force has been granted with respect to any
matter relating to Taxes that could affect the Company or any Company
Subsidiary.

(q) Except as set forth on Schedule 3.25(q), Seller and the
Company have made available to Purchaser true and complete copies of all
Tax Returns of the Company and each Company Subsidiary, for all periods
which are not closed by the statute of limitations.

(r) Except as set forth on Schedule 3.25(r), Seller and the
Company made available to Purchaser a true and complete copy of any: (i)
elections, letter rulings and determination letters relating to Taxes with
respect to the Company or any Company Subsidiary; and (ii) examination
reports, closing agreements and statements of deficiencies for Taxes
assessed against or agreed to by the Company or any Company Subsidiary, or
any member of the Seller's Group, in each case, within the last six (6)
years.

(s) Except as set forth on Schedule 3.25(s), Seller and the
Company have delivered to Purchaser a true and complete copy of any tax
sharing or allocation agreement or arrangement involving the Company or any
Company Subsidiary and have informed the Purchaser in writing of any such
agreement or arrangement that is unwritten or informal.

(t) Schedule 3.25(t) sets forth a complete list of all
current tax elections in effect with respect to the Company or any Company
Subsidiary, and Seller agrees not to cause or permit the Company or any
Company Subsidiary to change any current elections or make any new
elections prior to Closing which would affect the Company or any Company
Subsidiary without obtaining the consent of Purchaser.

(u) Schedule 3.25(u) lists or indicates, as the case may
be, as of the date hereof (i) all income Tax Returns and all State sales
tax returns filed with respect to the Company or any Company Subsidiary for
taxable periods ended on or after December 31, 1994; (ii) the jurisdictions
in which such returns have been filed on the basis of a consolidated,
combined or unitary group; (iii) the most recent of such returns for each
relevant jurisdiction for which an audit has been completed; (iv) all of
such returns that currently are the subject of an audit; and (v) the period
for the assessment of any taxes relating to such returns that is not closed
by reason of the applicable statute of limitations or by reason of a
closing agreement with the appropriate authority.

(v) Except as set forth on Schedule 3.25(v), as of the date
hereof the Tax Returns of the Company, each Company Subsidiary, and the
Seller's Group have been audited by the Internal Revenue Service or other
governmental agency (or closed by applicable statutes of limitations) and
all tax liabilities in respect thereof have been finally determined for all
taxable years ending on or before December 31, 1995.

(w) Except as set forth on Schedule 3.25(w), none of the
assets of the Company or any Company Subsidiary is property which the
Company or any Company Subsidiary is required to treat as being owned by
any other person pursuant to the so called "Safe Harbor" lease provisions
of former Section 168(f)(8) of the Code.

(x) Except as set forth on Schedule 3.25(x), none of the
assets of the Company or any Company Subsidiary, directly or indirectly,
secures any debt the interest of which is tax exempt under Section 103(a)
of the Code.

(y) Except as set forth on Schedule 3.25(y), none of the
assets of the Company or any Company Subsidiary is tax exempt use property
within the meaning of Section 168(h) of the Code.

(z) Except as set forth on Schedule 3.25(z), the Seller is
a United States person within the meaning of the Code.

(aa) Except as set forth on Schedule 3.25(aa), the
transactions contemplated herein are not subject to the tax withholding
provisions of Section 3406 of the Code or of Subchapter A of Chapter 3 of
the Code.

(bb) Except as set forth on Schedule 3.25(bb), the Company
is, and at all times from and after the date hereof until the Closing Date,
shall be a member of the "selling consolidated group" within the meaning of
Section 338(h)(10) of the Code.

Section 3.26 Intellectual Property. Schedule 3.26 sets forth a
list of all Company Intellectual Property owned, licensed to or used by the
Company and the Company Subsidiaries that is material to the business or
operation of the Company and the Company Subsidiaries, and with respect to
which the Company and each of the Company Subsidiaries possesses legally
enforceable rights. To the Knowledge of Seller, there are no oppositions,
cancellations, invalidity proceedings, interferences or re-examination
proceedings presently pending with respect to the Company Intellectual
Property that are reasonably likely to have a Company Material Adverse
Effect. Except as set forth on Schedule 3.26, to the Knowledge of Seller,
the conduct of the business of the Company and the Company Subsidiaries and
the Company Intellectual Property does not infringe any Intellectual
Property rights of any Person, and neither the Company nor any Company
Subsidiary has received any written notice from any other Person pertaining
to or challenging the right of the Company or any Company Subsidiary to use
any of the Company Intellectual Property.

Section 3.27 Labor Matters.

Except as set forth on Schedule 3.27:

(a) There is no labor strike, dispute, slowdown, stoppage
or lockout pending, or to the Knowledge of Seller, threatened against the
Company or any Company Subsidiary.

(b) Neither the Company nor any Company Subsidiary is a
party to or bound by any collective bargaining agreement with any labor
organization applicable to employees of the Company or any Company
Subsidiary.

(c) No labor union has been certified by the National Labor
Relations Board as bargaining agent for any of the employees of the Company
or any Company Subsidiary.

(d) Neither the Company nor any Company Subsidiary has
experienced any material work stoppage or other material labor difficulty
during the two-year period ending on the date hereof.

(e) There is no unfair labor practice charge or complaint
against the Company or any Company Subsidiary pending or, to the Knowledge
of Seller, threatened before the National Labor Relations Board.

(f) At no time have the Company and its Subsidiaries, taken
as a whole, had, nor as of the date hereof do the Company and its
Subsidiaries, taken as a whole, have more than 49 employees.

(g) As of the date hereof, (i) there are no pending or, to
the Knowledge of Seller, threatened employment discrimination claims or
charges against the Company or any Company Subsidiary, (ii) there are no
pending or, to the Knowledge of Seller, threatened employment
discrimination or wrongful termination lawsuits against the Company or any
Company Subsidiary and (iii) there are no other pending or, to the
Knowledge of Seller, threatened claims or lawsuits by an current or former
employee of the Company or any Company Subsidiary.

(h) All wages that have been paid or payable by the Company
or any Company Subsidiary have been paid in material compliance with the
Fair Labor Standards Act and any contractual agreements between the Company
or any Company Subsidiary and any of its current or former employees.

(i) All unemployment insurance premiums relating to any
current or former employee of the Company or any Company Subsidiary have
been paid.

Section 3.28 Brokers or Finders. Except for Legg Mason Wood
Walker, Incorporated and Katherine Delano, each of whose fees and expenses
will be paid by Seller in accordance with Seller's agreement or arrangement
with such firm, neither Seller nor any of or its Affiliates has entered
into any agreement or arrangement entitling any agent, broker, investment
banker, financial advisor or other Person to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
Transactions.

Section 3.29 Year 2000 Readiness. Except as set forth on
Schedule 3.29, the Company has reviewed its internal information and
business systems, including its computer software, hardware and related
systems, that the Company reasonably believes may be affected by the Year
2000 Problem. The Company reasonably believes that its internal information
and business systems will be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 and that such
systems currently are not, and will not be, materially adversely affected
by the Year 2000 Problem. In addition, the Company has surveyed the Outside
Parties. Based upon the aforementioned internal review and surveys (and
associated responses) of the Outside Parties, Seller reasonably believes
that the Year 2000 Problem has not resulted in and would not reasonably be
expected to have a Company Material Adverse Effect.

Section 3.30 Insurance. Schedule 3.30 contains a true and
complete list as of the date hereof of all insurance policies or related
binders, in the event that the relevant insurance policy is not in the
possession of Seller, that have provided, are currently providing or will
provide coverage to the Company or any of the Company Subsidiaries at any
time during the period commencing October 1, 1997 and ending on the Closing
Date. Seller has made available to Purchaser copies of each of the
insurance policies or related binders listed on Schedule 3.30 in its
possession, and, except as set forth in Schedule 3.30, all of such policies
are in full force and effect as of the date hereof.

Section 3.31 Employees. Schedule 3.31 sets forth the names and
current annual salary rates or current hourly wages of all employees of the
Company and each Company Subsidiary as of the date hereof, the date of the
last salary increase, the date of commencement of employment of each
employee with the Company each Company Subsidiary or their respective
predecessors, and a summary of any accrued salary, bonuses, vacation, leave
and other compensation payable to each employee.

Section 3.32 Non-Continuing Subsidiaries. Except as set forth
on Schedule 3.32, the Company has prior to the date hereof (a) transferred
to Seller all of the outstanding capital stock of the Non-Continuing
Subsidiaries and (b) assigned to Seller its entire limited partnership
interest in Eireann II and its entire limited partnership interest in
Eireann III, together with all of its rights and obligations as a limited
partner under the limited partnership agreements for each of such limited
partnerships, in each case with no further liability to the Company, the
Company Subsidiaries, Purchaser or any of their respective Affiliates.

Section 3.33 Disclosure; No Other Representations. The
representations and warranties contained in this Article III do not contain
any untrue statement of a fact or omit to state any fact necessary in order
to make the statements and information contained in this Article III not
misleading. Except for the representations and warranties contained in this
Article III, neither Seller nor any other Person acting on behalf of Seller
makes any representation or warranty, express or implied.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller that:

Section 4.1 Organization. Purchaser is a federally chartered
savings bank duly organized and validly existing under the laws of the
United States of America and has all requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power, authority, and governmental approvals would not have, a material
adverse effect on Purchaser's ability to consummate the Transactions.

Section 4.2 Authorization and Execution; Validity of
Agreement. Purchaser has full corporate power and authority to execute and
deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance by Purchaser of this Agreement and the
consummation of the Transactions have been duly authorized by the Board of
Directors of Purchaser, and no other corporate action on the part of
Purchaser is necessary to authorize the execution and delivery by Purchaser
of this Agreement or the consummation of the Transactions. No vote of, or
consent by, the holders of any class or series of capital stock issued by
Purchaser is necessary to authorize the execution and delivery by Purchaser
of this Agreement or the consummation by it of the Transactions. This
Agreement has been duly executed and delivered by Purchaser, and, assuming
due and valid authorization, execution and delivery hereof by Seller, is a
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms except: (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other
similar laws of general application affecting enforcement of creditors'
rights generally and (b) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject
to equitable defenses.

Section 4.3 Consents and Approvals; No Violations. Except for
the filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the OTS, the Exchange
Act, the HSR Act and state securities or blue sky laws, none of the
execution, delivery or performance of this Agreement by Purchaser, the
consummation by Purchaser of the Transactions or compliance by Purchaser
with any of the provisions hereof will (a) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws of
Purchaser, (b) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity, (c) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Purchaser or any of its
Subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound, or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Purchaser,
any of its Subsidiaries or any of their properties or assets, excluding
from the foregoing clauses (b), (c) and (d) such violations, breaches or
defaults which would not, individually or in the aggregate, have a material
adverse effect on Purchaser's ability to consummate the Transactions.

Section 4.4 Acquisition of Shares for Investment; Ability to
Evaluate and Bear Risk.

(a) Purchaser is acquiring the Shares for investment and
not with a view toward, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or selling the
Shares (other than, if applicable, to any Affiliate of Purchaser).
Purchaser agrees that the Shares may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration
under the Securities Act and any applicable state securities laws, except
pursuant to an exemption from such registration under such Act and such
laws.

(b) Purchaser is able to bear the economic risk of holding
the Shares for an indefinite period and has knowledge and experience in
financial and business matters such that it is capable of evaluating the
risks of the investment in the Shares.

Section 4.5 Availability of Funds. Purchaser will have at the
Closing sufficient immediately available funds, in cash, to pay the Base
Purchase Price and to effect the Transactions as contemplated under this
Agreement.

Section 4.6 Litigation. There is no claim, action, suit,
proceeding or, to the knowledge of Purchaser, governmental investigation
pending or, to the knowledge of Purchaser, threatened against Purchaser or
any of its Subsidiaries by or before any Governmental Entity that,
individually or in the aggregate, would have or would reasonably be
expected to impede the ability of Purchaser to complete the Closing in all
respects.

Section 4.7 Brokers or Finders. Neither Purchaser nor any of
or its Affiliates has entered into any agreement or arrangement entitling
any agent, broker, investment banker, financial advisor or other Person to
any broker's or finder's fee or any other commission or similar fee in
connection with any of the Transactions.

ARTICLE V
COVENANTS

Section 5.1 Interim Operations of the Company. Except as
expressly permitted by this Agreement and except as may be consented to in
writing by Purchaser (which consent shall not be unreasonably withheld or
delayed), from the date hereof to the Closing Date Seller shall cause the
Company and each Company Subsidiary not to:

(a) conduct the business of the Company and the Company
Subsidiaries other than in the same manner as heretofore conducted and only
in the ordinary course, using all reasonable efforts to (i) preserve intact
the present business of the Company and the Company Subsidiaries, (ii)
maintain their respective properties and assets in good operating
condition, (iii) keep available the services of their respective officers
and significant employees, and (iv) preserve their relationships with their
respective customers, suppliers, licensors, lessors, lessees and other
Persons having business dealings with them, to the end that their goodwill
and ongoing business shall be unimpaired in all material respects following
the Closing Date;

(b) (i) amend its certificate of incorporation or by-laws
or similar organizational documents, (ii) issue, sell, transfer, pledge,
dispose of or encumber any shares of any class or series of its capital
stock (including the Shares), or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of any class or series of its capital stock, or
(iii) split, combine or reclassify any shares of any class or series of its
capital stock;

(c) except with respect to the Leases, (i) incur or assume
any Indebtedness in excess of an aggregate amount of $50,000, (ii) modify
the terms of any Indebtedness or other liability other than Indebtedness
set forth on Schedule 5.1(c) which the Company shall be entitled to renew
provided that such renewal permits repayment on or prior to the Closing
Date without penalty or continuing obligation, (iii) assume, guarantee or
indemnify the obligations of any other Person in excess of an aggregate
amount of $50,000, or (iv) mortgage, pledge or subject to lien, any
property, business or assets (tangible or intangible) not subject to a
Lease and held in connection with the business of the Company and the
Company Subsidiaries;

(d) outside the ordinary course of business, make any loan
to, or enter into any non-arm's length transaction with, any stockholder,
director or officer, or make any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or pay
or agree or orally promise to pay, conditionally or otherwise, any bonus,
incentive, retention or other compensation, retirement, welfare, fringe or
severance benefit or vacation pay, to or in respect of any stockholder,
director, officer, employee or agent of the Company or any Company
Subsidiary (other than normal recurring increases in the ordinary course of
business or pursuant to plans, programs or agreements existing on the date
hereof and described in the Disclosure Schedule);

(e) permit any insurance policies naming any of them as a
beneficiary or a loss payable payee to lapse or expire, except to the
extent such policies are replaced with equivalent policies, without
diminution of or gaps in coverage and sufficient to insure the assets,
property and business of the Company and each Company Subsidiary to the
same extent as currently insured;

(f) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any Company Subsidiary;

(g) change, in any material respect, any of the accounting
methods used by it unless required by GAAP;

(h) in respect of its capital stock, make, declare or pay
any dividends or distribution, other than cash dividends or distributions,
to its stockholders or redeem, purchase or otherwise acquire any shares of
any class or series of its capital stock or other securities of the Company
or any Company Subsidiary;

(i) make any capital expenditures in an aggregate amount
exceeding $50,000 (other than directly with respect to Leases);

(j) except with respect to Leases, enter into any contract,
agreement or understanding (written or otherwise) (i) the performance of
which will extend over a period of more than six (6) months, (ii) which
will result in a loss to the Company or any Company Subsidiary, or (iii)
involve aggregate consideration payable by the Company or any Company
Subsidiary in excess of $25,000 over the next twelve (12) months;

(k) institute, settle or agree to settle any litigation,
action or proceeding before any Governmental Entity, or waive any rights of
value or rights that would otherwise accrue to the Company or any Company
Subsidiary after the Closing Date;

(l) collect its accounts receivable other than in the
ordinary course of business consistent with past practice;

(m) pay its accounts payable other than in the ordinary
course of business consistent with past practice, nor fail to pay or
discharge when due any liabilities;

(n) sell, transfer, encumber, lease, pledge, mortgage or
otherwise dispose of all or any material portion of its assets or
properties; provided, however, that nothing in this Section 5.1 shall
prohibit the Company or any Company Subsidiary from selling or transferring
in the ordinary course and consistent with past practice any Lease, Leased
Property or personal property formerly subject to a Lease;

(o) take, or agree to commit to take, any action that would
result in any of the conditions to the Closing set forth in Article VI
(other than the condition described in Section 6.2(o)) not being satisfied,
or would make any representation or warranty of Seller contained herein
inaccurate in any material respect at, or as of any time prior to, the
Closing Date, or that would impair the ability of Purchaser or Seller to
consummate the Closing in accordance with the terms hereof or materially
delay such consummation; or

(p) enter into any agreement, contract, commitment or
arrangement to do any of the foregoing.

Section 5.2 Access; Confidentiality.

(a) Seller shall cause the Company, prior to the Closing,
to (i) give Purchaser and its authorized representatives reasonable access
to all books, records, personnel, offices and other facilities and
properties of the Company, (ii) permit Purchaser to make such copies and
inspections thereof as Purchaser may reasonably request and (iii) cause the
officers of the Company to furnish Purchaser with such financial and
operating data and other information with respect to the business and
properties of the Company as Purchaser may from time to time reasonably
request; provided, however, that any such access shall be conducted at
Purchaser's expense, at a reasonable time, under the supervision of
Seller's or the Company's personnel and in such a manner as not to
interfere with the normal operation of the business of Seller or the
Company. Notwithstanding anything contained in this or any other agreement
between Purchaser and Seller executed prior to the date hereof, nothing in
this Section 5.2(a) shall require either Seller or the Company to disclose
any information to Purchaser if such disclosure would (i) jeopardize any
attorney-client or other legal privilege or (ii) contravene any applicable
laws, fiduciary duty or binding agreement entered into prior to the date of
this Agreement (including any confidentiality agreement to which Seller,
the Company or any Affiliate of either is a party); provided, however, that
any such failure to disclose shall not excuse Seller from any resulting
breach of any representation, warranty or covenant of Seller (excluding any
covenant set forth in this Section 5.2) contained in this Agreement.

(b) The provisions of the Confidentiality Agreement shall
remain binding and in full force and effect until the Closing or until it
terminates in accordance with its terms. The information contained in the
Disclosure Schedule shall be subject to the Confidentiality Agreement as
Evaluation Material (as defined and subject to the exceptions contained
therein) until the Closing and, for that purpose and to that extent, the
terms of the Confidentiality Agreement are incorporated herein by
reference. Except as otherwise provided in Section 5.5, Purchaser shall
cause its consultants, advisors and representatives to treat the
information delivered to Purchaser or its authorized representatives
pursuant hereto as strictly confidential (unless compelled to disclose by
judicial or administrative process or, in the opinion of legal counsel of
Purchaser, by other requirements of law).

Section 5.3 Efforts and Actions to Cause Closing to Occur.

(a) Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, Purchaser and Seller shall use their
respective best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done and cooperate with each other in order to do, all
things necessary, proper or advisable (subject to any applicable laws) to
consummate the Closing and the other Transactions as promptly as
practicable, including the preparation and filing of all forms,
registrations and notices required to be filed to consummate the Closing
and the other Transactions and the taking of such actions as are necessary
to obtain any requisite approvals, authorizations, consents, orders,
licenses, permits, qualifications, exemptions or waivers by any third party
or Governmental Entity. In addition, no party hereto shall take any action
after the date hereof that could reasonably be expected to materially delay
the obtaining of, or result in not obtaining, any permission, approval or
consent from any Governmental Entity or other Person required to be
obtained prior to Closing. Except as set forth in Section 10.1, nothing
contained in this Agreement shall require Seller or the Company to pay any
consideration to any other Person from whom any such approvals,
authorizations, consents, orders, licenses, permits, qualifications,
exemptions or waiver is requested.

(b) Prior to the Closing, each party shall promptly consult
with the other party hereto with respect to, provide any necessary
information with respect to, and provide the other parties (or their
respective counsel) with copies of, all filings made by such party with any
Governmental Entity or any other information supplied by such party to a
Governmental Entity in connection with this Agreement and the Transactions.
Each party hereto shall promptly inform the other of any communication
received by such party from any Governmental Entity regarding any of the
Transactions. If any party hereto or Affiliate thereof receives a request
for information or documentary material from any such Governmental Entity
with respect to any of the Transactions, then such party shall endeavor in
good faith to make, or cause to be made, as soon as reasonably practicable
and after consultation with the other parties, an appropriate response in
compliance with such request.

(c) In addition to and without limiting the agreements of
the parties contained above, Purchaser and Seller shall (i) take promptly
all actions necessary to make the filings required of them or any of their
Affiliates under the HSR Act, or with the OTS (ii) comply at the earliest
practicable date with any request for additional information or documentary
material received by the Company, Purchaser, Seller or any of their
Affiliates from the FTC or the DOJ pursuant to the HSR Act or from any
state attorney general or other Governmental Entity in connection with
antitrust matters, (iii) cooperate with each other in connection with any
filing under the HSR Act and in connection with resolving any investigation
or other inquiry concerning the Transactions commenced by the FTC, DOJ,
OTS, any state attorney general or any other Governmental Entity, (iv) use
their best efforts to resolve such objections, if any, as may be asserted
with respect to the Transactions under any antitrust law and (v) advise the
other parties promptly of any material communication received by such party
from the FTC, DOJ, OTS, any state attorney general or any other
Governmental Entity regarding any of the Transactions, and of any
understandings, undertakings or agreements (oral or written) such party
proposes to make or enter into with the FTC, DOJ, any state attorney
general or any other Governmental Entity in connection with the
Transactions. Concurrently with the filing of notifications under the HSR
Act or as soon thereafter as practicable, Seller and Purchaser shall each
request early termination of the HSR Act waiting period.

Section 5.4 Tax Matters.

(a) Section 338 Election.

(i) Seller and Purchaser shall jointly make
and file a Section 338(h)(10) Election with respect to the
acquisition of Company and each Company Subsidiary. Seller shall
execute and deliver to Purchaser such documents or forms as
Purchaser shall request or as are required by applicable law to
effect and preserve timely Section 338(h)(10) Elections for the
acquisition of the stock of Company and Company Subsidiaries.
With respect to the Section 338(h)(10) Election, Purchaser and
Seller shall agree on the MADSP and the Election Allocations. The
Election Allocations shall be determined in accordance with
Section 338 of the Code and the applicable Treasury Regulations
thereunder and any comparable provisions of state, local or other
law, as appropriate.

(ii) At least one hundred twenty (120) days
prior to the latest date for the filing of each Section 338 Form,
Purchaser shall prepare and submit to Seller a draft of such
Section 338 Form setting forth the Election Allocations. Neither
Purchaser nor Seller shall file, or permit to be filed, any
Section 338 Form unless it shall have obtained the consent of the
other, which consent shall not be unreasonably withheld or
delayed. On or prior to the thirtieth (30th) day after Seller's
receipt of a draft Section 338 Form, Seller shall either (A)
consent to the filing of the Section 338 Form or (B) notify
Purchaser that it disagrees with the Election Allocations as set
forth on the draft Section 338 Form or other matters contained in
the draft Section 338 Form. Seller shall be deemed to have
consented to the Election Allocations prepared by Purchaser
unless Seller has notified Purchaser of its disagreement within
thirty (30) days of its receipt of the draft Section 338 Forms.
If Purchaser and Seller have been unable to resolve their
differences within thirty (30) days after Purchaser has been
notified of Seller's disagreement with the Election Allocations
or other matters as set forth on the draft Section 338 Form, then
any remaining disputed issues shall be submitted to the
Accounting Firm to resolve in a final binding manner after
hearing the views of both parties. The fees and expenses of the
mutually agreed upon independent national accounting firm shall
be shared equally by Purchaser and Seller. Except as may be
required by law, Seller and Purchaser will (A) file, or cause to
be filed, all Tax Returns in a manner consistent with the
Election Allocations and (B) not take any action inconsistent
therewith. In the event that any of the Election Allocations is
disputed by any Taxing Authority, the party receiving notice of
the dispute shall promptly notify the other party hereto of the
dispute.

(iii) Seller shall be responsible for and
shall pay any income, gross receipts, franchise or similar taxes
(but not Excluded Taxes) arising as a result of the Section
338(h)(10) Elections made by Purchaser and Seller pursuant to
this Agreement (including any election under state, local or
other law comparable to election available under Section 338(g)
of the Code).

(b) Tax Returns. Except as provided in Section 5.4(d),

(i) Seller shall file or cause to be filed
when due all Tax Returns that are required to be filed by or with
respect to the Company or any Company Subsidiary for taxable
years or periods ending on or before the Closing Date, and Seller
shall remit (or cause to be remitted), subject to Section 8.1(b),
any Taxes due in respect of such Tax Returns. All such Tax
Returns shall be prepared in accordance with the prior practices
of the Company and Company Subsidiaries, and Seller shall not
file any Tax Returns relating to the Company or any Company
Subsidiary without the prior consent of Purchaser, which consent
shall not be unreasonably withheld or delayed. Seller shall
provide Purchaser with a copy of such Tax Returns (and supporting
schedules) in the form proposed to be filed by Seller at least
thirty (30) days in advance of the due date for filing the Tax
Returns. Purchaser shall be deemed to have consented to the
items and positions reflected in such Tax Returns unless
Purchaser shall object to Seller in writing not later than
fifteen (15) days after receipt thereof.

(ii) Purchaser shall file or cause to be
filed when due all Tax Returns that are required to be filed by
or with respect to the Company for taxable years or periods
ending after the Closing Date, and Purchaser shall remit (or
cause to be remitted) any Taxes due in respect of such Tax
Returns.

(iii) Any Tax Return required to be filed
by Purchaser relating to any Straddle Period shall be submitted
(with copies of any relevant schedules, work papers and other
documentation then available) to Seller for Seller's approval not
less than thirty (30) days prior to the due date for the filing
of such Tax Return, which approval shall not be unreasonably
withheld or delayed. Such return shall be prepared in a manner
consistent with past practices of Seller, including elections
accounting methodologies and asset write-off periods. Seller
shall be deemed to have consented to the items and positions
reflected in such Tax Returns unless Seller shall object in
writing not later than fifteen (15) days after receipt thereof.

(iv) Upon the written request of Purchaser
setting forth in detail the computation of the amount owed,
Seller shall pay to Purchaser, no later than five (5) days prior
to the due date for the applicable Tax Return, the Taxes for
which Seller is liable pursuant to Section 8.1(b)(ii) but which
are payable with any Tax Return to be filed by Purchaser with
respect to any Straddle Period.

(v) Within one hundred twenty (120) days
after the Closing Date, Purchaser shall cause the Company to
prepare and provide to Seller a package of Tax information
materials (to the extent such information is not within the
possession of Seller following the Closing), including schedules
and work papers required by Seller to enable Seller to prepare
and file all Tax Returns required to be prepared and filed by it
pursuant to Section 5.4(b)(i). Purchaser shall prepare such
package in good faith in a manner consistent with Seller's past
practice.

(vi) Seller shall not (i) exercise its
authority as agent of the Company under Treasury Regulations
Section 1.1502-77 (or any comparable provision of state, local or
other tax law), or (ii) file any election or take any other
similar action, including without limitation, amending any Tax
Return or agreeing to any determination or audit, without having
first received the consent of Purchaser, which consent shall not
be unreasonably withheld.

(i) To the extent permitted or required by
law or administrative practice, (A) the taxable year of the
Company which includes the Closing Date shall be treated as
closing on (and including) the Closing Date and, notwithstanding
the foregoing, (B) all transactions not in the ordinary course of
business occurring after the Closing shall be reported on
Purchaser's consolidated United States federal income Tax Return
to the extent required by Treasury Regulation Section 1.1502-
76(b)(1)(ii)(B) and shall be similarly reported on other Tax
Returns of Purchaser or its Affiliates to the extent required by
law. Where it is necessary to apportion between Seller and
Purchaser the Tax liability of an entity for a Straddle Period
(which is not treated under the immediately preceding sentence as
closing on the Closing Date), such liability shall be apportioned
between the period deemed to end at the close of the Closing
Date, subject to Sections 8.1 (b)(i) and 8.1(e)(1)(B), and the
period deemed to begin at the beginning of the day following the
Closing Date on the basis of an interim closing of the books
(e.g., no income, losses or deductions attributable to a post-
Closing period shall be taken into account), except that Taxes
(such as real property Taxes) that are calculated on a periodic
or annual basis shall be allocated on a daily basis.

(ii) In determining Seller's liability for
taxes pursuant to Section 8.1(b) (ii) of this Agreement, Seller
shall be credited with the amount of estimated Taxes paid by or
on behalf of the Company prior to the Closing. To the extent
that Seller's liability for Taxes for a taxable year or period is
less than the amount of estimated income Taxes previously paid
by or on behalf of the Company with respect to all or a portion
of such taxable year or periods, such difference shall be for the
account of Seller.

(d) Transfer Taxes. All Transfer Taxes resulting directly
from the sale and transfer of the Shares shall be borne by Purchaser.
Seller shall cooperate with Purchaser and, subject to the other terms of
this Agreement, take any action reasonably requested by Purchaser which
does not cause Seller to incur any cost or material inconvenience in order
to minimize Transfer Taxes. At the direction of Seller, Purchaser shall
deliver to Seller, the Company or AFG Credit Corporation any resale,
exemption or similar certificates (including any certificates to avoid or
reduce the incidence of state or local sales and use taxes resulting from
the sale and transfer of the Shares pursuant to this Agreement) reasonably
requested by Seller. Notwithstanding the provisions of Section 5.4(b),
which shall not apply to Tax Returns relating to Transfer Taxes, any Tax
Returns that must be filed in connection with Transfer Taxes shall be
prepared and filed when due by the party primarily or customarily
responsible under the applicable local law for filing such Tax Returns, and
such party will use its reasonable efforts to provide such Tax Returns to
the other party at least ten (10) days prior to the Due Date for such Tax
Returns.

(e) Refunds.

(i) Except as otherwise provided in Section
5.4(l)(ii), any Tax refund (including any interest in respect
thereof) received by Purchaser or the Company, and any amounts
credited against Tax to which Purchaser or the Company becomes
entitled (including by way of any amended Tax Returns or any
carryback filing), that relate to any taxable period of the
Company or any Company Subsidiary, or portion thereof, ending on
or before the Closing Date shall be for the account of Seller,
and Purchaser shall pay over to Seller any such refund or the
amount of any such credit within five (5) days after receipt or
entitlement thereto unless any such refunds are carried as an
asset on the Closing Balance Sheet in which such event any such
refund shall be property of the Company. Any Tax refund
(including any interest in respect thereof) received by Seller,
and any amounts credited against tax to which Seller becomes
entitled (including by way of any amended Tax Returns or any
carryback filing for state or local taxes on a separate
unconsolidated return but not for Federal or consolidated state
or local returns), that relate to any taxable period of the
Company or any Company Subsidiary or portion thereof ending after
the Closing Date shall be for the account of the Purchaser, and
Seller shall pay over to Purchaser any such refund or the amount
of any such credit within five (5) days after receipt or
entitlement thereto. Purchaser shall pay Seller or Seller shall
pay Purchaser, as the case may be, interest at the rate
prescribed under Section 6621(a)(1) of the Code, compounded
daily, on any amount not paid when due under this Section 5.4(e).
For purposes of this Section 5.4(e), where it is necessary to
apportion a refund or credit between Purchaser and Seller for a
Straddle Period, such refund or credit shall be apportioned
between the period deemed to end at the close of the Closing Date
and the period deemed to begin at the beginning of the day
following the Closing Date on the basis of an interim closing of
the Company's books, except that refunds or credits of Taxes
(e.g., real property Taxes) imposed on a periodic basis shall be
allocated on a daily basis.

(ii) The Parties shall cooperate with each
other in obtaining any Tax refund Purchaser or Seller reasonably
believes should be available, including through filing
appropriate forms with the applicable Taxing Authorities.

(f) Certain Post-Closing Settlement Payments.

(i) If the examination of any United States
federal, state, local or other Tax Return of Seller for any
taxable period ending on or before the Closing Date shall result
(by settlement or otherwise) in any adjustment which permits
Purchaser or the Company to increase deductions, losses or tax
credits or decrease the income, gains or recapture of tax credits
which would otherwise (but for such adjustments) have been
reported or taken into account (including by way of any increase
in basis) by Purchaser or the Company for one or more periods
ending after the Closing Date, Seller shall notify Purchaser and
provide it with adequate information so that Purchaser can
reflect on its or the Company's Tax Returns such increases in
deductions, losses or tax credits or decreases in income, gains
or recapture of tax credits.

(ii) If the examination of any United States
federal, state, local or other Tax Return of Purchaser or the
Company for any taxable period ending after the Closing Date
shall result (by settlement or otherwise) in any adjustment which
permits Seller to increase deductions, losses or tax credits or
decrease the income, gains or recapture of tax credits which
would otherwise (but for such adjustments) have been reported or
taken into account (including by way of any increase in basis) by
Seller for one or more periods ending on or before the Closing
Date, Purchaser shall notify Seller and provide it with adequate
information so that Seller can reflect on its Tax Returns such
increases in deductions, losses or tax credits or decreases in
income, gains or recapture of tax credits.

(g) Post-Closing Actions which Affect Seller's Liability
for Taxes.

(i) Purchaser shall not permit the Company
to take any action which would increase Seller's liability for
Taxes (including any liability of Seller to indemnify Purchaser
for Taxes pursuant to this Agreement).

(ii) Except as otherwise provided in Section
5.4(l), none of Purchaser or any Affiliate of Purchaser shall (or
shall cause or permit the Company to) amend, refile or otherwise
modify any Tax Return relating in whole or in part to the Company
with respect to any taxable year or period ending on or before
the Closing Date (or with respect to any Straddle Period) without
the prior written consent of Seller, which consent may be
withheld in the sole discretion of Seller.

(h) Terminating Tax Sharing Agreements. Any and all
existing tax sharing agreements or arrangements, written or oral, between
Seller and the Company, shall terminate as of the Closing and any payments
that are owed to the Company or Company Subsidiary pursuant thereto shall
be paid, and all other rights and obligations resulting from such
agreements or arrangements with respect to the Company shall cease at such
time.

(i) Assistance and Cooperation. After the Closing Date,
each of Seller and Purchaser shall (and shall cause their respective
Affiliates to):

(i) timely sign and deliver such
certificates or forms as may be necessary or appropriate to
establish an exemption from (or otherwise reduce), or file Tax
Returns or other reports with respect to, Transfer Taxes;

(ii) assist the other party in preparing any
Tax Returns which such other party is responsible for preparing
and filing in accordance with Section 5.4(b); and

(iii) cooperate with each other and with
each other's respective agents, including accounting firms and
legal counsel, in connection with the preparation or audit of any
tax return or report, amended return or report, claim for refund
and any tax claim or litigation in respect of the Company or
Company Subsidiary or their activities, which cooperation shall
include, but not be limited to making available to the other for
inspection and copying during normal business hours all
reasonably requested information, records and documents in their
possession relating to the liabilities for Taxes associated with
the Company or Company Subsidiary, except as limited by this
Agreement. Seller and Purchaser shall also make available to the
other, as reasonably requested and available, personnel
responsible for preparing, maintaining and interpreting
information, records and documents in connection with Taxes as
well as related litigation.

Any information provided or obtained under this Section 5.4(i)
shall be kept confidential, except as may be otherwise necessary in
connection with the filing of returns or reports, refund claims, audits,
tax claims and litigation.

(j) Tax Records. Within sixty (60) days after the Closing
Date, Seller shall deliver to Purchaser copies of all tax records of the
Company and each Company Subsidiary that are in Seller's possession,
including but not limited to: property tax records, records for Taxes not
measured by income and records relating to taxable periods that begin
before and end after the Closing Date. Seller may retain its original
United States federal tax records and retain all other tax records
currently in its possession.

(k) Payment. All Taxes, including Taxes owed after a
compromise or settlement of an audit or dispute with a taxing authority,
shall be paid to the taxing authority by the party which is legally
responsible therefor by law. Upon payment of any Taxes with respect to
which a party is entitled to receive indemnification hereunder, such party
shall submit an invoice, with evidence of payment, to the indemnifying
party stating that such Taxes have been paid and giving in reasonable
detail the particulars relating thereto. The indemnifying party shall
remit payment for such Taxes promptly upon receipt of such invoice,
evidence of payment and particulars.

(l) Loss Carryovers or Carrybacks.

(i) Notwithstanding the provisions of any
other Agreement between the parties, Seller shall waive any right
it may have under the Internal Revenue Code (including, but not
limited to, the right to make an election under Treasury
Regulation Section 1.1502-20(g)) to reattribute to itself or any
other entity any loss carryovers or current year losses
attributable to the Company in connection with this transaction.

(ii) Subject to Section 5.4(g)(i) above, if
subsequent to the Closing, the Company or any Company Subsidiary
incurs a net operating loss or capital loss that is available to
be carried back to an unconsolidated state or local Tax Return of
Seller's Group (but not to Federal or consolidated state or local
Tax Returns), Seller shall cooperate with the Purchaser and the
Company, at the Purchaser's expense, in effecting such carryback
and shall pay to the Company all tax refunds (including interest)
within five (5) days of the receipt thereof.

(m) Non-Continuing Subsidiaries. Seller shall be
responsible for any Taxes (including Excluded Taxes) resulting from the
transfer of the ownership of the Non-Continuing Subsidiaries and limited
partnership interests in Eireann II and Eireann III referred to in Section
3.32.

(n) Inland Leases. Seller shall be responsible for any
Taxes (including Excluded Taxes) resulting from the transfer of the Inland
Leases as contemplated in Section 5.16.

(o) Survival of Obligations. Notwithstanding any other
provision in this Agreement to the contrary (including, without limitation,
Section 8.1(e)), the obligations of the parties set forth in this Section
5.4 shall be unconditional and absolute and shall remain in effect without
limitation as to time or amount.

Section 5.5 Publicity. The initial press release with respect
to the execution of this Agreement shall be a press release acceptable to
Purchaser and Seller. Thereafter, until the Closing, or the date the
Transactions are abandoned pursuant to Article VII, neither Seller, the
Company, Purchaser nor any of their respective Affiliates shall issue or
cause the publication of any press release or other public announcement
with respect to this Agreement or the Transactions without prior
consultation with the other party, except as may be required by law or by
any listing agreement with a national securities exchange or trading
market.

Section 5.6 Employees; Employee Benefits.

(a) Purchaser shall cause the Company to provide the
Retained Employees with the benefits of the "Retention Bonus Program"
described on Schedule 5.6.

(b) None of the Company, any Company Subsidiary or
Purchaser shall assume any Plan that is not sponsored by the Company or a
Company Subsidiary.

(c) If any Retained Employee is discharged by the Company
as of or after the Closing, then Purchaser shall be responsible for any and
all severance costs for such Retained Employee, under those agreements,
plans or arrangements listed on Schedule 5.6. Purchaser shall be
responsible and assume all liability for all notices or payments due to any
Retained Employees, and all notices, payments, fines or assessments due to
any Governmental Entity, pursuant to any applicable foreign, federal, state
or local law, common law, statute, rule or regulation with respect to the
employment, discharge or layoff of employees by the Company after the
Closing, including the WARN Act and any rules or regulations as have been
issued in connection with the foregoing.

(d) From and after the Closing, Purchaser shall be
responsible for, and shall indemnify and hold harmless Seller and its
Affiliates and their officers, directors, employees, Affiliates and agents
and the fiduciaries (including plan administrators) of the Plans, from and
against, any and all claims, losses, damages, costs and expenses (including
attorneys' fees and expenses) and other liabilities and obligations
relating to or arising out of (i) all salaries, wages, commissions or other
compensation or Plan benefits accrued by the Company but unpaid as of the
Closing and post-Closing bonuses (including payments due pursuant to the
retention bonus program referred to above) due to any Retained Employee,
(ii) the liabilities assumed by Purchaser under this Section 5.6 or any
failure by Purchaser to comply with the provisions of this Section 5.6, and
(iii) any claims of, or damages or penalties sought by, any Retained
Employee, or any Governmental Entity on behalf of or concerning any
Retained Employee, with respect to any act or failure to act by Purchaser
to the extent arising from the employment, discharge, layoff or termination
of any Retained Employee on or after the Closing Date; provided, however,
that Purchaser shall have no liability under this subsection (d) to the
extent it relates to facts or circumstances which should have been, but
were not, disclosed to Purchaser under Article III.

(e) Notwithstanding any other provision of this Agreement
(including, without limitation, Article VIII), Seller shall indemnify and
hold harmless Purchaser and its Affiliates, the Company, the Company
Subsidiaries and their respective officers, directors, employees,
Affiliates and agents and the fiduciaries (including plan administrators)
of the Plans and of benefit plans maintained by Purchaser and its
Affiliates, from and against any and all claims, losses, damages, costs and
expenses (including attorney's fees and expenses) and other liabilities and
obligations relating to or arising out of any claims of, or damages or
penalties sought by, any Retained Employee or former employee of Seller and
its Affiliates, or any Governmental Entity on behalf of or concerning any
such person, with respect to any act or failure to act by Seller, the
Company or the Company Subsidiaries to the extent arising from the
employment, discharge, layoff or termination of any such person prior to
the Closing (including, without limitation, arising under the WARN Act).

(f) Nothing in this Section 5.6 shall be construed to alter
the "at-will" nature of the employment relationship between the Retained
Employees and the Company and the Company Subsidiaries.

(g) If permitted under the terms of Seller's group
insurance Plans, at the request of Purchaser, Seller shall cause such Plans
to continue to cover the Retained Employees for a period of ninety (90)
days after the Closing, so long as the Company reimburses Seller for the
premiums thereunder allocable to the Retained Employees promptly upon
request by Seller.

Section 5.7 Indemnification. Following the Closing and until
the date which is the third anniversary thereof, Purchaser shall cause the
Company and the Company Subsidiaries not to make any changes to their
respective certificates of incorporation or by-laws that would adversely
affect the rights of persons who are currently or were officers or
directors of the Company or any Company Subsidiary to claim indemnification
from the Company or any Company Subsidiary for indemnifiable actions under
the terms of such certificate of incorporation or by-laws as in effect on
the date hereof. Purchaser shall make any payments required under such
indemnification provisions relating to indemnifiable actions, unless such
payments were due and payable by the Company prior to the Closing Date, in
which case liability to make such payment remains with Seller.

Section 5.8 Transition Services. Except as agreed to in
writing by Seller and Purchaser, all data processing, accounting,
insurance, banking, personnel, legal, communications and other products and
services provided to the Company by Seller or any Affiliate of Seller,
including any agreements or understandings (written or oral) with respect
thereto, shall terminate simultaneously with the Closing without any
further action or liability on the part of the parties thereto.
Notwithstanding the foregoing, in the absence of a written agreement, the
provision of any services (similar to those contemplated by the preceding
sentence) by Seller to the Company from and after the Closing shall be for
the convenience, and at the expense, of Purchaser only and shall be
furnished without any liability on the part of Seller with respect thereto.
Notwithstanding the foregoing, at the Closing, Seller will, at Purchaser's
request, enter into the Transition Services Agreement with Purchaser.

Section 5.9 Intercompany Arrangements. Except as otherwise
expressly contemplated by this Agreement, all agreements and commitments,
whether written, oral or otherwise, which are solely between the Company,
on the one hand, and Seller and its Affiliates (excluding the Company), on
the other hand, shall be terminated and of no further effect,
simultaneously with the Closing without any further action or liability on
the part of the parties thereto.

Section 5.10 Payment of Outstanding Indebtedness.

(a) Seller agrees to take, and shall cause the Company to
take, all action necessary to enable Purchaser to repay, simultaneously
with the Closing, all of the Indebtedness to any Company Lender then
outstanding. Without limiting the generality of the foregoing, Seller
shall:

(i) obtain from each Company Lender a Payoff
Letter acceptable to Purchaser; and

(ii) arrange for each Company Lender to
deliver to the Company at the Closing upon payment in full to
such lender of the amounts set forth in such Company Lender's
Payoff Letter a document executed by such Company Lender
acknowledging that the Indebtedness owed by the Company to such
Company Lender has been fully repaid, including all principal,
interest, premium (if any), penalty (if any) and fees and
expenses (if any), together with all documentation necessary to
release any and all security interests pertaining to such
outstanding Indebtedness (including, without limitation, UCC-3
Termination Statements).

(b) If Section 5.10(a) is satisfied, Purchaser agrees that
at the Closing, it shall pay, or cause to be paid, to each Company Lender
the amount stated in such Company Lender's Payoff Letter as necessary to
fully repay the Indebtedness owed to such Company Lender.

Section 5.11 Knowledge of Breach; Prior Knowledge. If prior to
the Closing Purchaser shall have actual knowledge of any breach of a
representation or warranty of Seller, Purchaser shall promptly notify
Seller of its knowledge, in reasonable detail, including the amount that it
believes, based on the facts actually known to it, would be payable by
Seller pursuant to the indemnification provisions hereof without reference
to any indemnification limitations set forth in Section 8.1(e).

Section 5.12 Disclosure Schedule: Supplement, Amendments and
Updates.

(a) Seller shall, by notice in accordance with this
Agreement, supplement or amend the Disclosure Schedule promptly after
becoming aware of any matter that would constitute a breach of any
representation, warranty or covenant contained herein, including any
information received by Seller pursuant to Section 5.11.

(b) On the second Business Day immediately preceding the
Closing Date, Seller shall update the Disclosure Schedule to correctly
reflect any changes occurring during the period from the date hereof to the
second Business Day immediately preceding the Closing Date.

(c) If, in Purchaser's sole discretion, a supplement or
amendment of any section of the Disclosure Schedule by Seller pursuant to
Section 5.12(a) materially and adversely affects the benefits to be
obtained by Purchaser under this Agreement, then Purchaser shall have the
right to abandon the Transactions pursuant to Section 7.1(d), but such
abandonment shall be Purchaser's sole remedy relating to matters set forth
in amendments or supplements to any section of the Disclosure Schedule.
Purchaser hereby agrees that it shall have no right of abandonment pursuant
to this Section 5.12(c) based solely on any update of the Disclosure
Schedules made by Seller pursuant to Section 5.12(b); provided, however,
that Seller hereby acknowledges that Purchaser may abandon the Transactions
if such an update describes an event, fact or circumstance that prevents
one or more of the conditions set forth in Article VI from being satisfied.

Section 5.13 Maintenance of Books and Records. Each of the
parties hereto shall preserve, until at least the third anniversary of the
Closing Date, all pre-Closing Date records possessed or to be possessed by
such party relating to the Company. After the Closing Date and up until at
least the third anniversary of the Closing Date, upon any reasonable
request from a party hereto or its representatives, the party holding such
records shall (a) provide to the requesting party or its representatives
reasonable access to such records during normal business hours and (b)
permit the requesting party or its representatives to make copies of such
records, in each case at no cost to the requesting party or its
representatives (other than for reasonable out-of-pocket expenses);
provided, however, that nothing herein shall require either party to
disclose any information to the other if such disclosure would jeopardize
any attorney-client or other legal privilege or contravene any applicable
law. Such records may be sought under this Section for any reasonable
purpose, including to the extent reasonably required in connection with the
audit, accounting, tax, litigation, federal securities disclosure or other
similar needs of the party seeking such records. Notwithstanding the
foregoing, any and all such records may be destroyed by a party if such
destroying party sends to the other parties hereto written notice of its
intent to destroy such records, specifying in reasonable detail the
contents of the records to be destroyed; such records may then be destroyed
after the thirtieth (30th) day following such notice unless the other party
hereto notifies the destroying party that such other party desires to
obtain possession of such records, in which event the destroying party
shall transfer the records to such requesting party and such requesting
party shall pay all reasonable expenses of the destroying party in
connection therewith.

Section 5.14 Seller's Trademarks and Logos. Notwithstanding
anything to the contrary contained in this Agreement, it is expressly
agreed that (a) Purchaser is not purchasing, acquiring or otherwise
obtaining, and the Company will not be entitled to retain following the
Closing Date, any right, title or interest in any Trademarks employing
Seller's name or any part or variation of such name or anything confusingly
similar thereto and (b) neither the Company nor Purchaser or its Affiliates
shall make any use of Seller's Trademarks from and after the Closing.

Section 5.15 Use of Name. From and after the Closing Date,
neither Seller nor any of its Affiliates shall have any right to the name
"American Finance Group" or the acronym "AFG" or any variants thereon or
anything confusingly similar thereto, and Seller shall not use, or permit
any of its Affiliates, to use such names.

Section 5.16 Inland Leases. Prior to the Closing Date, Seller
shall take, or cause the Company to take, all action necessary to transfer,
to a Person other than the Company, any Company Subsidiary or any of their
respective Affiliates, the Inland Leases, in each case, on commercially
reasonable terms reasonably satisfactory to Purchaser and in compliance
with all applicable laws. The proceeds of such transfers (less any
associated Indebtedness) shall be identified to Purchaser prior to the
Closing Date and shall remain with the Company on the Closing Date.

Section 5.17 Eireann Programs. On or before the Closing Date,
Seller shall take, or cause the Company to take, all action necessary to
assign to Seller all agreements, contracts, understandings or
arrangements (whether or not written) relating to the Eireann Program to
which or by which the Company or any Company Subsidiary is a party or
bound. Seller hereby agrees to cause such assignment or assignments to
occur in such a manner that there is no continuing obligation of the
Company or any Company Subsidiary or further liability to the Company, any
Company Subsidiary, Purchaser or any of their respective Affiliates arising
out of or in connection with the Eireann Programs. Notwithstanding the
foregoing, the Company shall be permitted to enter into (a) a Subcontract
Agreement (Eireann II) pursuant to which the Company will provide certain
of the services of the Manager under the Management Agreement, dated as of
January 30, 1996, between Seller (as successor by assignment to the
Company) and Eireann II and (b) a Subcontract Agreement (Eireann III)
pursuant to which the Company will provide certain of the services of the
Manager under the Management Agreement, dated as of November 25, 1997,
between Seller (as successor by assignment to the Company) and Eireann III.

Section 5.18 No Solicitation. Seller agrees that, for ninety
(90) days from the date hereof, it shall not authorize or permit any
officer, director or employee of, or any financial advisor, attorney,
accountant or other advisor or representative retained by, the Company to
solicit, initiate or enter into any agreement (written or oral) with
respect to, any inquiries or the making of any proposal that constitutes,
or may be reasonably be expected to lead to, a Proposal. Seller shall, as
soon as reasonably practicable, advise Purchaser of any Proposal or any
inquiries or discussions with respect thereto. Notwithstanding the
foregoing, nothing contained in this Section 5.18 shall prevent the Board
of Directors of Seller from furnishing information to or entering into
discussions or negotiations with any unsolicited Person if and only to the
extent that the Board of Directors of Seller shall have determined in good
faith that such action is required in the exercise of its fiduciary duties,
based upon the advice of Skadden, Arps, Meagher, Slate & Flom LLP or in
order to comply with Rule 14e-2 promulgated under the Exchange Act. Seller
will, as soon as reasonably practicable, notify Purchaser if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, Seller.

Section 5.19 Investment Committee Meetings. From the date
hereof to the Closing Date, Seller shall, or shall cause the Company to,
(a) give Purchaser at least forty-eight (48) hours' prior notice (which may
be oral) of each meeting of the Company's investment committee, (b) deliver
to Purchaser in advance of each such meeting copies of all materials being
delivered to members of such committee and (c) permit Purchaser's
representatives to attend and participate in each such meeting as observers
without the power to vote, either in person or by conference telephone;
provided, however, that attendance by any representative of Purchaser at
any such meeting shall be deemed a full, complete and irrevocable waiver of
the notice requirement set forth in clause (a) of this Section 5.19.

Section 5.20 Stockholders' Meeting. Seller, acting through its
board of directors, shall, in accordance with applicable law:

(a) duly call, give notice of, convene and hold a special
meeting of its stockholders as promptly as practicable following the date
hereof for the purpose of considering and taking action to authorize the
sale of the Shares;

(b) prepare and file with the SEC a preliminary proxy
statement relating to this Agreement and use its best efforts to obtain and
furnish the information required to be included by the SEC in the
definitive form of such proxy statement and to respond promptly to any
comments made by the SEC with respect to the preliminary proxy statement
and cause a definitive proxy statement, including any amendment or
supplement thereto, to be mailed to its stockholders;

(c) include in the definitive proxy statement the
recommendation of its board of directors that stockholders of Seller vote
in favor of the authorization of the sale of the Shares; and

(d) use its best efforts to solicit from holders of its
outstanding shares proxies in favor of the authorization of the sale of the
Shares and take all other action reasonably necessary or advisable to
secure any vote or consent of stockholders required by the DGCL to
consummate the Transactions.

ARTICLE VI
CONDITIONS

Section 6.1 Conditions to Each Party's Obligation to Effect
the Closing. The respective obligation of each party to effect the Closing
shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions (any one or more of which may be waived):

(a) Statutes; Court Orders. There shall be (i) no statute,
rule or regulation enacted or promulgated by any Governmental Entity and
(ii) no action, suit or proceeding pending or threatened before any
Governmental Entity wherein an unfavorable and non-appealable injunction,
judgment, order, decree or ruling would reasonably be expected to (a)
prevent consummation of the sale of the Shares by Seller to Purchaser, (b)
cause the sale of the Shares by Seller to Purchaser to be rescinded
following the Closing Date, or (c) materially and adversely affect the
right of Purchaser or its assigns to own the Shares or to operate the
business of the Company or the Company Subsidiaries (and no such
injunction, judgment, order, decree, ruling or charge shall be in effect);
provided, however, that the parties shall use their reasonable efforts to
have any such order or injunction vacated or lifted.

(b) HSR/OTS Approval. The applicable waiting period under
the HSR Act shall have expired or been terminated and the requisite
approval from the OTS shall have been obtained.

(c) Consents Obtained. All material consents of any Person
necessary to the consummation of the Closing and the other Transactions,
including consents from parties to loans, contracts, Leases or other
agreements and consents from Governmental Entities and other Persons, shall
have been obtained.

(d) Stockholder Authorization. The stockholders of Seller
shall have authorized the sale of the Shares as contemplated by Section 271
of the DGCL.

Section 6.2 Conditions to Obligations of Purchaser to Effect
the Closing. The obligations of Purchaser to consummate the Closing shall
be subject to the satisfaction on or prior to the Closing Date of each of
the following conditions, the imposition of which is solely for the benefit
of Purchaser and any one or more of which may waived by Purchaser:

(a) Government Action. On the Closing Date, there shall not
be threatened or pending any injunction, order, suit, action or proceeding
by any Governmental Entity or any other Person:

(i) seeking to restrain or prohibit the
consummation of the Closing or the performance of any of the
other Transactions, seeking to obtain from Seller, the Company,
the Company Subsidiaries or Purchaser any damages that are
material in relation to the Company or the Company Subsidiaries,
or which would reasonably be expected to reduce or impair the
benefit to Purchaser of the Closing and the other Transactions;

(ii) seeking to impose material limitations
on the ability of Purchaser effectively to exercise its rights of
ownership of the Shares, including the right to vote the Shares.

(b) Receipt of Payoff Letters. Prior to the Closing, Seller
shall have delivered to Purchaser a copy of a Payoff Letter from each
Company Lender that (i) is acceptable to Purchaser and (ii) has been duly
executed by such Company Lender.

(c) Representations and Warranties. All of the
representations and warranties of Seller set forth in this Agreement that
are qualified as to materiality shall be true and complete and any such
representations and warranties that are not so qualified shall be true and
complete in all material respects as of the date of this Agreement and as
of the Closing Date as if made on and as of the the Closing Date (except to
the extent that any such representation or warranty is made as of a
specific date, in which case such representation or warranty shall be true
and complete, or true and complete in all material respects, as the case
may be, as of such specified date), and no such representation or warranty
shall contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein
not false or misleading. Notwithstanding the foregoing, Purchaser agrees
that this condition shall be satisfied for all purposes hereunder so long
as the aggregate amount of any claims Purchaser may have with respect to
any breaches of the representations and warranties of Seller set forth in
this Agreement does not exceed one percent (1%) of the Final Purchase
Price.

(d) Performance by Seller. Seller shall have performed and
complied in all material respects with all agreements, covenants and
conditions required by this Agreement to be performed and complied with by
it prior to or on the Closing Date.

(e) Certificate. Purchaser shall have received a
certificate, dated the Closing Date, signed by the Chief Executive Officer
or Chief Financial Officer of Seller to the effect that (i) the conditions
set forth in Section 6.1(d) and Sections 6.2(c) and (d) have been satisfied
and (ii) there has not been any material adverse change in the assets,
properties, business or financial condition of the Company since the
Balance Sheet Date.

(f) Opinion of Counsel for Seller. Purchaser shall have
received a written opinion, dated the Closing Date, in the form attached as
Exhibit A hereto.

(g) Transition Services Agreement. If Purchaser shall have
so requested, the Transition Services Agreement shall have been executed
and delivered by Seller.

(h) Inland Leases. The Inland Leases shall have been
transferred in accordance with Section 5.16 in a manner consistent with
applicable law or Purchaser shall have received written evidence from the
OTS, to Purchaser's sole satisfaction, that such transfer is not required
in order to permit Purchaser to be in compliance with applicable law.

(i) Receipt of Documents related to Payoff Letters. At the
Closing, the Company shall have received from each Company Lender written
evidence satisfactory to Purchaser that, upon payment of the amounts set
forth in the Payoff Letters, the outstanding Indebtedness to each Company
Lender shall have been fully repaid and that all Encumbrances on the assets
and properties of the Company and the Company Subsidiaries resulting from
such Indebtedness shall be discharged and released, including the receipt
of UCC-3 Termination Statements and similar documents and instruments
relating to such discharge and release.

(j) Transfer of Non-Continuing Subsidiaries. Purchaser
shall have received reasonably satisfactory evidence that (i) all of the
outstanding capital stock of each of the Non-Continuing Subsidiaries and
(ii) the entire limited partnership interest of the Company in Eireann II
and Eireann III have been transferred prior to or on the Closing Date, with
no further liability to the Company, the Company Subsidiaries, Purchaser or
any of their respective Affiliates.

(k) Eireann Programs. Purchaser shall have received
reasonably satisfactory evidence that all agreements, contracts,
understandings or arrangements (whether or not written) relating to the
Eireann Programs to which or by which the Company or any Company Subsidiary
is a party or bound have been assigned by the Company on or before the
Closing Date such that, except as otherwise contemplated by Section 5.17,
none of the Company, any of the Company Subsidiaries, Purchaser or any of
their respective Affiliates has any further liability arising out of or in
connection with the Eireann Programs.

(l) Termination. The Transactions shall not have been
abandoned in accordance with Article VII.

(m) No Material Adverse Change. Since the Balance Sheet
Date, there shall not have been any material adverse change in the assets,
properties, business or financial condition of the Company and the Company
Subsidiaries, taken as a whole.

(n) Additional Documents. Purchaser shall have received all
such certificates, documents, agreements and instruments with respect to
the Company, the Company Subsidiaries, the Shares and the Transactions as
Purchaser may reasonably require to carry out the intent and purpose of
this Agreement.

(o) Certain Transactions. From the date hereof to the
Closing, neither the Company nor any Company Subsidiary will have entered
into (i) a Lease, or a series of related Leases with a single lessee
negotiated simultaneously, relating to equipment with an acquisition cost
to the Company or any Company Subsidiary in excess of $1,000,000 or (ii) a
binding commitment or agreement, or a series of related binding commitments
or agreements with a single purchaser negotiated simultaneously, for the
sale of Leases or Leased Property resulting in net proceeds to the Company
or any Company Subsidiary in excess of $1,000,000.

Section 6.3 Conditions to Obligations of Seller to Effect the
Closing. The obligations of Seller to consummate the Closing shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, the imposition of which is solely for the benefit of
Seller and any one or more of which may be waived by Seller:

(a) Government Action. There shall not be threatened or
pending any suit, action or proceeding seeking to restrain or prohibit the
consummation of the Closing or the performance of any of the other
Transactions, or seeking to obtain from Seller any damages that are
material in relation to the Company or the Company Subsidiaries.

(b) Representations and Warranties. All of the
representations and warranties of Purchaser set forth in this Agreement
that are qualified as to materiality shall be true and complete and any
such representations and warranties that are not so qualified shall be true
and complete in all material respects as of the date of this Agreement and
as of the Closing Date as if made on and as of the Closing Date (except to
the extent that any such representation or warranty is made as of a
specific date, in which case such representation or warranty shall be true
and complete, or true and complete in all material respects, as the case
may be, as of such specified date), and no such representation or warranty
shall contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein
not false or misleading.

(d) Opinion of Counsel for Purchaser. Seller shall have
received a written opinion, dated the Closing Date, in the form attached as
Exhibit B hereto.

ARTICLE VII
TERMINATION

Section 7.1 Termination. The Transactions may be abandoned at
any time prior to the Closing Date:

(a) By the mutual written consent of Purchaser and Seller;

(b) By Purchaser or Seller if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action which
permanently restrains, enjoins or otherwise prohibits the acquisition by
Purchaser of the Shares or the consummation of the Transactions and such
order, decree, ruling or other action shall have become final and non-
appealable;

(c) By either party if the Closing shall not have occurred
on or prior to March 1, 2000, and such party is not in material breach of
this Agreement at the time such party abandons the Transactions;

(d) By Purchaser if (i) in Purchaser's sole discretion, a
supplement or amendment of any section of the Disclosure Schedule made by
Seller pursuant to Section 5.12(a) materially and adversely affects the
benefits to be obtained by Purchaser under this Agreement and (ii) any
breach of a representation, warranty, covenant or other agreement referred
to in such supplement or amendment cannot be or has not been cured within
thirty (30) days after such supplement or amendment is made by Seller;

(e) By Seller if Purchaser shall have breached in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement which would give rise to the failure
of a condition set forth in Article VI, which breach cannot be or has not
been cured within thirty (30) days after the giving of written notice by
Seller to Purchaser specifying such breach; or

(f) By Purchaser if Seller shall have breached any
representation, warranty, covenant or other agreement contained in this
Agreement which would give rise to the failure of a condition set forth in
Article VI, which breach cannot be or has not been cured within thirty (30)
days after the giving of written notice by Purchaser to Seller specifying
such breach.

Section 7.2 Effect of Termination. In the event of the
abandonment of the Transactions by any party hereto pursuant to the terms
of this Agreement, written notice thereof shall forthwith be given to the
other party or parties specifying the provision hereof pursuant to which
such abandonment of the Transactions is made, and there shall be no
liability or obligation thereafter on the part of Purchaser or Seller
except (a) for fraud or for willful breach of this Agreement prior to such
abandonment of the Transactions and (b) as set forth in Section 10.1.

ARTICLE VIII
INDEMNIFICATION

Section 8.1 Indemnification; Remedies.

(a) Seller shall indemnify, defend and hold harmless
Purchaser from and against and in respect of all Purchaser Losses.

(b) Seller shall indemnify and hold Purchaser, Company and
any Company Subsidiary harmless from and against the following:

(i) any liability for Taxes imposed on the
Company or any Company Subsidiary or for which the Company or any
Company Subsidiary may otherwise be liable as members of the
"affiliated group" (within the meaning of Section 1504(a) of the
Code) of which Seller (or any predecessor or successor) is the
common parent that arises under Treasury Regulation Section
1.1502-6(a) or comparable provisions of foreign, state or local
law or as a result of the Company or any Company Subsidiary no
longer being a member of Seller's Group;

(ii) any liability for Taxes imposed on the
Company or any Company Subsidiary, or for which the Company or
any Company Subsidiary may otherwise be liable for any taxable
year or period that ends on or before the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle
Period deemed to end on and include the Closing Date; and

(iii) all liability for Taxes as a result
of any Section 338(h)(10) Election (and any election under state,
local or law similar to the election available under Section
338(g) of the Code with respect to the Company and any Company
Subsidiary) as contemplated by Section 5.4(a).

provided, however, that Seller shall not be liable for and shall not
indemnify Purchaser (or its Subsidiaries and Affiliates) for Excluded
Taxes.

(i) Taxes imposed on the Company for any
taxable year or period that begins after the Closing Date and,
with respect to any Straddle Period, the portion of such Straddle
Period beginning after the Closing Date; and

(ii) Excluded Taxes.

(d) For purposes of Section 8.1(b)(ii), whenever it is
necessary to determine the liability for Taxes of the Company for a portion
of a Straddle Period, the determination of such Taxes for the portion of
the Straddle Period ending on, and the portion of the Straddle Period
beginning after, the Closing Date shall be determined by assuming that the
Company, as the case may be, had a taxable year or period which ended at
the close of the Closing Date as described in Section 5.4(c)(i).

(e) Seller's indemnification obligations under Sections
8.1(a) and 8.1(b) shall be subject to each of the following limitations:

(i) Seller's indemnification obligations
relating to (A) Purchaser Losses (other than Prior Transaction
Purchaser Losses, Stockholder Action Losses and Purchaser Losses
arising from any breach of the representations and warranties set
forth in Sections 3.2, 3.25 and 3.28) shall survive only until
the second (2nd) anniversary of the Closing Date (but, with
respect to Purchaser Losses arising under ERISA or Section 3.25,
until the sixth (6th) anniversary of the Closing Date), (B) Tax
Claims shall survive until the expiration of the applicable tax
statute of limitations (including extensions of time for
assessment granted to the applicable Taxing Authority) and (C)
Prior Transaction Purchaser Losses, Stockholder Action Losses and
Purchaser Losses arising from any breach of the representations
and warranties set forth in Sections 3.2 and 3.29 hereof shall
survive until the expiration of the applicable statute of
limitations. No claim for the recovery of any Purchaser Losses
or Tax Claims may be asserted by any Purchaser Indemnified Person
after the expiration of the applicable indemnification period set
forth above; provided, however, that claims first asserted in
writing by any Purchaser Indemnified Person with reasonable
specificity prior to the expiration of the applicable
indemnification period shall not thereafter be barred by the
expiration of the applicable indemnification period. The parties
intend to shorten the statute of limitations and agree that no
claims or causes of action may be brought against Seller or
Purchaser based upon, directly or indirectly, any of the
representations, warranties or agreements contained in Articles
III and IV after the applicable survival period or, except as
provided in Section 7.2, any termination of this Agreement. This
Section 8.1 shall not limit any covenant or agreement of the
parties that contemplates performance after the Closing.

(ii) Except for (A) Purchaser Losses
resulting from any breach of the representations and warranties
set forth in Sections 3.2, 3.5, 3.25 and 3.28, (B) Prior
Transaction Purchaser Losses, (C) Tax Claims, and (D) Stockholder
Action Losses (with respect to each of which the following
limitations shall not apply), no reimbursement for Purchaser
Losses Claims asserted under Section 8.1 (a) shall be required
unless the aggregate amount of Purchaser Losses exceeds an amount
equal to one percent (1%) of the Final Purchase Price and, in
such event, indemnification shall be made by Seller only to the
extent Purchaser Losses exceed an amount equal to one percent
(1%) of the Final Purchase Price.

(iii) In no event shall Seller's
aggregate liability to Purchaser under this Agreement for
breaches of representations or warranties, covenants or
agreements whether pursuant to this Article VII or otherwise,
exceed seventy-five percent (75%) of the Final Purchase Price.

(iv) Each Purchaser Loss shall be reduced by
(1) the amount of any insurance proceeds payable to Purchaser or
any Purchaser Indemnified Party with respect to such loss and (2)
any indemnity, contribution or other similar payment payable to
Purchaser or any Purchaser Indemnified Party by any third party
with respect to such loss.

Section 8.2 Notice of Claim; Defense.

(a) Purchaser shall give Seller prompt notice of any third-
party claim (other than claims arising out of any pending or threatened
audit, notice of deficiency, proposed adjustment, assessment, examination
or other administrative or court proceeding suit, dispute or other claim
which could affect the liability for a Tax claim) that may give rise to any
indemnification obligation under this Article VIII, together with the
estimated amount of such claim, and Seller shall have the right to assume
the defense (at Seller's expense) of any such claim through counsel of
Seller's own choosing by so notifying Purchaser within thirty (30) days of
the receipt by Seller of such notice from Purchaser; provided, however,
that any such counsel shall be reasonably satisfactory to Purchaser. Seller
shall be liable for the fees and expenses of counsel employed by Purchaser
for any period during which Seller has not assumed the defense of any such
third-party claim (other than during any period in which Purchaser will
have failed to give notice of the third-party claim as provided above). If
Seller assumes such defense, Purchaser shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate
from the counsel employed by Seller, it being understood that Seller shall
control such defense. If Seller chooses to defend or prosecute a third-
party claim, Purchaser shall cooperate in the defense or prosecution
thereof (at Seller's expense), which cooperation shall include, to the
extent reasonably requested by Seller, the retention, and the provision to
Seller, of records and information reasonably relevant to such third-party
claim, and making employees of the Company available on a commercially
reasonable basis (from the Company's business standpoint) to provide
additional information and explanation of any materials provided hereunder.
If Seller chooses to defend or prosecute any third-party claim, Purchaser
shall agree to any monetary settlement, compromise or discharge of such
third party claim that Seller may recommend and that, by its terms,
discharges Purchaser from the full amount of liability in connection with
such third-party claim. None of Purchaser, any of its Affiliates or the
Company may settle or otherwise dispose of any Claim for which Seller may
have a liability under this Agreement without the prior written consent of
Seller, which consent may be withheld in the reasonable discretion of
Seller, unless Purchaser fully indemnifies Seller in writing with respect
to such liability in a manner satisfactory to Seller. Seller shall not be
liable under this Section 8.2(a) for any settlement, compromise or
discharge effected without its consent in respect of any claim for which
indemnity may be sought hereunder. No indemnified party shall take any
action the purpose of which is to prejudice the defense of any claim
subject to indemnification hereunder or to induce a third party to assert a
claim subject to indemnification hereunder.

(b) (i) Each party hereto shall notify the chief
financial officer of the other party in writing within fifteen (15)
days following receipt by such party of written notice of any pending
or threatened audits, notice of deficiency, proposed adjustment,
assessment, examination or other administrative or court proceeding,
suit, dispute or other claim which could affect the liability for
Taxes of such other party. If the party required to give such notice
fails to give such notice to the other party promptly, it shall not be
entitled to indemnification for any Taxes arising in connection with
such Tax Claim if and to the extent that such failure to give notice
materially and adversely affects the other party's right to
participate in or defend the Tax Claim.

(ii) Seller shall have the sole right to represent
the Company's interests in any Tax Claim relating to taxable periods
ending on or before the Closing Date and to employ counsel of its
choice at its expense subject to Purchaser's right to review and
approve ultimate decisions affecting the interests of Purchaser,
Company or any Company Subsidiary, with such approval not to be
unreasonably withheld or delayed by Purchaser.

(iii) In the case of a Straddle Period, Seller
shall be entitled to participate at its expense in any Tax Claim
relating in any part to Taxes attributable to the portion of such
Straddle Period deemed to end on or before the Closing Date which may
be the subject of indemnification by Seller pursuant to this Agreement
and, with the written consent of Purchaser, at Seller's sole expense,
may assume the control of such Tax Claim. None of Purchaser, any of
its Affiliates or the Company may settle or otherwise dispose of any
Tax Claim for which Seller may have a liability under this Agreement
without the prior written consent of seller, which consent may be
withheld in the sole discretion of Seller, unless Purchaser fully
indemnifies Seller in writing with respect to such liability in a
manner satisfactory to Seller.

Section 8.3 Resolution of All Tax-Related Disputes. If Seller
and Purchaser cannot agree on the calculation of any amount relating to
Taxes or the interpretation or application of any provision of this
Agreement relating to Taxes, such dispute shall be resolved by the
Accounting Firm, whose decision shall be final and binding upon all persons
involved and whose expenses shall be shared equally by Seller and
Purchaser.

Section 8.4 Tax Effect of Indemnification Payments. All
indemnity payments made by Seller to Purchaser Indemnified Persons, or by
Purchaser Indemnified Persons to Seller, pursuant to this Agreement shall
be treated for all Tax purposes as adjustments to the consideration paid
with respect to the Shares.

Section 8.5 No Duplication; Sole Remedy Procedures.

(a) Any liability for indemnification hereunder shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.

(b) Except with respect to intentional misrepresentations
or breaches, Purchaser's rights to indemnification as provided for in
Section 8.1 for a breach of Seller's representations or warranties
contained in this Agreement shall constitute Purchaser's sole remedy for
such a breach, and Seller shall have no other liability or damages to
Purchaser resulting from the breach.

(c) The indemnification and other provisions of this
Article VIII shall govern the procedure for all indemnification matters
under this Agreement, except to the extent otherwise expressly provided
herein.

Section 8.6 No Right of Off-Set/Set-off. Neither Purchaser nor
Seller shall have any right to off-set or set-off any payment due pursuant
to Section 1.2 of this Agreement against any other payment to be made
pursuant to this Agreement or otherwise (including against indemnification
payments).

ARTICLE IX
DEFINITIONS AND INTERPRETATION

Section 9.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context clearly
requires otherwise:

"Accounting Firm" shall mean a nationally recognized accounting
firm in the United States selected by Seller and Purchaser or, if the
parties are unable to agree, selected jointly by Seller's and Purchaser's
independent accountants.

"Affiliate" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act.

"Agreement" or "this Agreement" shall mean this Stock Sale
Agreement, together with the Exhibits and Appendices hereto and the
Disclosure Schedule.

"Applicable Rate" shall mean the prime rate as then in effect at
Citibank N.A.

"Balance Sheet" shall mean the consolidated balance sheet as of
June 30, 1999 of the Company and its consolidated Subsidiaries included in
the Financial Statements.

"Balance Sheet Date" shall mean the date of the Balance Sheet.

"Base Purchase Price" shall mean Twenty-Nine Million United
States Dollars (US$29,000,000).

"Business Day" shall mean each day other than a Saturday, Sunday
or any day on which banks located in the State of New York are authorized
or obligated by law to close.

"Closing" shall mean the closing referred to in Section 2.1.

"Closing Date" shall mean the date on which the Closing occurs.

"Closing Date Balance Sheet" shall mean a balance sheet audited
by Seller's Accountants which reflects the assets and liabilities of the
Company and the Company Subsidiaries as of the Closing Date (but
immediately prior to Closing and before the effect of the Section
338(h)(10) Election), and which has been prepared on a basis consistent
with the Balance Sheet and in accordance with GAAP.

"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the United States Treasury Department regulations thereunder.

"Company" shall mean American Finance Group, Inc., a Delaware
corporation.

"Company Intellectual Property" shall mean all Intellectual
Property that is currently used in the business of the Company or any
Company Subsidiary or that is necessary to conduct the business of the
Company or the Company Subsidiaries as presently conducted or as currently
proposed to be conducted.

"Company Lenders" shall mean First Union National Bank, as agent
for all lenders under the Company's securitization facility and the
Company's warehousing credit facility, Heller Financial, Inc., Interpool,
Inc., General Electric Capital Corporation and Transamerica Business Credit
Corporation.

"Company Material Adverse Effect" shall mean any material
adverse change in, or material adverse effect on, the business, financial
condition or operations of the Company and all the Company Subsidiaries,
taken as a whole.

"Company Subsidiary" shall mean each of AFG Credit Corporation,
a Delaware corporation, and AFG Acquisition Corporation, a Delaware
corporation.

"Computer Software" shall mean computer software programs,
databases and all documentation related thereto.

"Contract" shall have the meaning set forth in Section 3.17(a).

"Confidentiality Agreement" shall mean a letter agreement dated
July 27, 1999 between the Legg Mason Wood Walker, Incorporated, on behalf
of Seller and the Company, and Temple-Inland Financial Services, Inc.

"Copyrights" shall mean United States and foreign registered and
unregistered copyrights (including those in Computer Software and
databases), rights of publicity and all registrations and applications to
register the same.

"Disclosure Schedule" shall mean collectively, the disclosure
schedules attached hereto and referred to in Article III and Article V,
dated of even date herewith, prepared and signed by Seller and delivered to
Purchaser simultaneously with the execution hereof, as amended or
supplemented by Seller pursuant to the terms hereof.

"DGCL" shall mean the General Corporation Law of the State of
Delaware.

"DOJ" shall mean the Antitrust Division of the United States
Department of Justice.

"Due Date" shall mean, with respect to any Tax Return, the date
such return is due to be filed (taking into account any valid extensions).

"Eireann II" shall mean AFG/Eireann Limited Partnership II, a
Massachusetts limited partnership.

"Eireann III" shall mean AFG/Eireann Limited Partnership III, a
Massachusetts limited partnership.

"Eireann Programs" shall mean those transactions contemplated by
(a) the Eireann Program Contracts and (b) any other agreements, contracts,
understandings or arrangements (whether or not written) between any of the
Non-Continuing Subsidiaries, Eireann II or Eireann III and any other
Person.

"Eireann Program Contracts" shall mean the following agreements:
(a) Master Purchase Agreement, dated as of January 30, 1996, between the
Company and Eireann II; (b) Management Agreement, dated as of January 30,
1996, between the Company and Eireann II; (c) Cross Collateral Agreement,
dated as of January 30, 1996, among the Company, Eireann II, Old AFG and
Cantrip Investments Limited, a corporation organized under the laws of
Ireland; (d) Indemnification Agreement, dated January 30, 1996, among the
Company, Eireann II, and IIBU Fund II Public Limited Company; (e) letter
agreement, dated January 30, 1996, among the Company, Eireann II, Old AFG,
and AFG/Eireann Limited Partnership, a Massachusetts limited partnership;
(f) Master Purchase Agreement, dated as of November 25, 1997, between the
Company and Eireann III; (g) Management Agreement, dated as of November 25,
1997, between the Company and Eireann III; and (h) Indemnification
Agreement, dated November 25, 1997, among the Company, Eireann III, and RBE
Ijara Fund Plc.

"Election Allocations" shall mean collectively (a) the
determination of MADSP to by made by Seller and Purchaser and (b) the
allocation of MADSP by Seller and Purchaser among the Company assets and
the assets of each Company Subsidiary, in each case pursuant to Section
5.4.

"Encumbrances" shall mean any and all liens, charges, security
interests, options, claims, mortgages, pledges, proxies, voting trusts or
agreements, restrictions, obligations, understandings or arrangements or
other restrictions on title or transfer of any nature whatsoever.

"Environmental Law" shall mean all federal, state, local or
foreign laws, codes, licenses, permits, orders, judgments, decree or
injunction of any Governmental Entity to (a) the protection of the
environment (including air, water, soil or other natural resources) or (b)
the use, storage, handling, release or disposal of Hazardous Substances, in
each case, in effect on the date of this Agreement.

"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.

"ERISA Affiliate" shall mean any trade or business, whether or
not incorporated, that together with the Company would be deemed a "single
employer" within the meaning of Section 4001 (b) of ERISA.

"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.

"Excluded Taxes" shall mean any Transfer Taxes for which
Purchaser is liable pursuant to Section 5.4(d).

"Final Purchase Price" shall mean (i) if stockholders' equity as
reflected on the Closing Date Balance Sheet (in the form that it becomes
final and binding upon Seller and Purchaser pursuant to Section 1.3)
exceeds stockholders' equity as reflected on the Balance Sheet, an amount
equal to $29,000,000 plus the amount of such excess plus $150,000 or (ii)
if stockholders' equity as reflected on the Closing Date Balance Sheet (in
the form that it becomes final and binding upon Seller and Purchaser
pursuant to Section 1.3) is less than stockholders' equity as reflected on
the Balance Sheet, an amount equal to $29,000,000 minus the amount of such
shortfall plus $150,000.

"Financial Statements" shall mean (i) the consolidated balance
sheets of the Company and the Company's consolidated Subsidiaries as at
December 31 in each of the years 1997 and 1998, together with consolidated
statements of income, stockholders' equity and cash flows for each of the
three years ended December 31, 1998, 1997 and 1996, all audited by Seller's
Accountants, whose reports thereon are included therein and (ii) the
unaudited consolidated balance sheet of the Company and the Company's
consolidated Subsidiaries as of June 30, 1999, together with a consolidated
statement of income, stockholders' equity and cash flows for such period,
in the form set forth in the Disclosure Schedule.

"FTC" shall mean the United States Federal Trade Commission.

"GAAP" shall mean United States generally accepted accounting
principles.

"Governmental Entity" shall mean any United States federal,
state or local, or foreign, government or political subdivision thereof,
any legislative or judicial body, any court, arbitral tribunal,
administrative agency or commission or other governmental or other
regulatory authority or agency.

"Hazardous Substance" shall mean any substance to the extent
presently listed, defined, designated or classified as hazardous, toxic or
radioactive under any applicable Environmental Laws, including petroleum or
any derivatives or by product thereof.

"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

"Indebtedness" shall mean (a) all indebtedness of the Company or
any of the Company Subsidiaries for borrowed money or for the deferred
purchase price of property, assets or services (other than current trade
liabilities incurred in the ordinary course of business), including without
limitation, indebtedness arising from or relating to Leases, (b) any other
indebtedness of the Company or any of the Company Subsidiaries that is
evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of the Company or any of the Company Subsidiaries under
financing leases, (d) all obligations of the Company or any of the Company
Subsidiaries in respect of acceptances issued or created, (e) all
liabilities secured by any lien on any property or assets of the Company or
any Company Subsidiary and (f) all guarantee obligations of the Company or
any Company Subsidiary for the indebtedness of other Persons.

"Indemnifiable action" shall mean any act by an officer or
director of a company with respect to which such officer or director has
valid rights of indemnification under the terms of such company's
certificate of incorporation or by-laws.

"Inland Leases" shall mean those Leases listed on Exhibit C.

"Insurance Policy" shall mean any insurance policy maintained by
Purchaser or any of its Affiliates, other than any state workers'
compensation policy, the premiums of which are paid directly by the Company
or any Company Subsidiary.

"Intellectual Property" shall mean all of the following:
Trademarks, Patents, Copyrights and Licenses.

"Knowledge of Seller" shall mean the actual (and not
constructive or imputed) knowledge of the Chief Executive Officer, the
Chief Financial Officer and the General Counsel of Seller after inquiry of
those employees of the Company and the Company Subsidiaries whose duties
would, in the normal course of the Company's and the Company Subsidiaries'
affairs, result in such persons having knowledge concerning the relevant
subject, area or aspect.

"Lease" shall mean each agreement or instrument pursuant to
which the Company or any Company Subsidiary leases any personal property or
loans money to another Person in the ordinary course of business of the
Company or such Company Subsidiary.

"Leased Property" shall mean any personal property being leased
at the time of determination by the Company or any Company Subsidiary to
another Person under a Lease.

"Licenses" shall mean all licenses and agreements pursuant to
which the Company or any Company Subsidiary has (a) acquired rights in or
to any Trademarks, Patents or Copyrights or (b) licensed or transferred the
right to use any of the foregoing, excluding in each case all software
licenses relating to any Lease.

"MADSP" shall mean the Modified Aggregate Deemed Sale Price
within the meaning of, and in accordance with, Section 1.338(h)(10)-1(f) of
the Treasury Regulations.

"Non-Continuing Subsidiaries" shall mean all Subsidiaries of the
Company except the Company Subsidiaries, including, without limitation,
AFG/Ireland II, Inc. and AFG/Ireland III, Inc.

"Notice of Disagreement" shall mean a written notice of any
disagreement with the Closing Date Balance Sheet given by Purchaser to
Seller in accordance with Section 1.3.

"Old AFG" shall mean Equis Financial Group, a Massachusetts
general partnership formerly known as American Finance Group.

"OTS" shall mean the Office of Thrift Supervision of the United
States Department of the Treasury.

"Outside Parties" shall mean those parties under Leases, vendors,
suppliers and other third parties who participated in Seller's survey
regarding Year 2000 compliance.

"Patents" shall mean issued United States and foreign patents
and pending patent applications, patent disclosures, and any and all
divisions, continuations, continuations-in-part, reissues, reexaminations,
and extensions thereof, any counterparts claiming priority therefrom,
utility models, patents of importation/confirmation, certificates of
invention and similar statutory rights.

"Payoff Letter" shall mean a letter of a Company Lender pursuant
to which such Company Lender agrees, among other things, that (a) payment
of a specified amount will constitute payment in full of the outstanding
Indebtedness to such Company Lender and (b) upon receipt of such payment
all security interests and liens held by such Company Lender in respect of
such Indebtedness will be released and terminate.

"PBGC" shall mean the Pension Benefit Guaranty Corporation.

"Person" shall mean a natural person, partnership, limited
liability partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Entity (as applicable) or other entity or
organization.

"Plan" shall mean each deferred compensation and each incentive
compensation, stock purchase, stock option and other equity compensation
plan, program, agreement or arrangement, each severance or termination pay,
medical, surgical, hospitalization, life insurance and other "welfare"
plan, fund or program (within the meaning of Section 31 of ERISA); each
profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA)each employment, termination
or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by the
Company or by any ERISA Affiliate, or to which the Company or an ERISA
Affiliate is party, whether written or oral, for the benefit of any
director, employee or former employee of the Company or any Company
Subsidiary. Notwithstanding the foregoing, the term "Plan" shall not
include any plan or arrangement no part of the expense of which is borne by
the Company or any Company Subsidiary.

"Pre-Closing Periods" shall mean all tax periods ending on or
before the Closing Date and, with respect to any tax period that includes
but does not end on the Closing Date, the portion of such period that ends
on and includes the Closing Date.

"Prior Transaction Purchaser Losses" shall mean any and all
losses, claims, liabilities, damages, actions, suits, penalties, judgments,
settlements and expenses, (including attorneys' and accountants' fees and
expenses) whether arising out of the Securities Act, the Exchange Act,
applicable state blue sky laws or otherwise, that arise out of or relate to
(i) the filing by the Company of a registration statement (and related
filings) with the Securities and Exchange Commission in connection with a
non-consummated initial public offering of securities of the Company
contemplated in 1998 and 1999 and (ii) a non-consummated proposed
acquisition of the Company during the first six months of 1999.

"Proposal" shall mean any proposal to acquire the Shares or a
material portion of the assets of the Company or any Company Subsidiary,
whether by sale, merger, consolidation, reorganization, exchange or
otherwise.

"Purchaser" shall mean Guaranty Federal Bank, F.S.B., a
federally chartered savings bank.

"Purchaser Indemnified Persons" shall mean Purchaser and each of
its Affiliates.

"Purchaser Losses" shall mean any and all losses, claims,
liabilities, damages, actions, suits, penalties, judgments, settlements and
expenses (including attorneys' fees and expenses and accountants' fees and
expenses) incurred by the Company, any Company Subsidiary, any Purchaser
Indemnified Person or any of their respective Affiliates that arise out of
(a) any breach by Seller of any of Seller's representations and warranties
contained in or made by or pursuant to this Agreement; or (b) any breach by
Seller of any of Seller's covenants and agreements contained in this
Agreement, whether such breach occurs prior to or after the Closing;
provided, however; that notwithstanding any of the foregoing, the term
"Purchaser Losses" shall (a) include Prior Transaction Purchaser Losses and
Stockholder Action Losses, except as such terms are specifically excluded
from the definition of the term "Purchaser Losses" as set forth in Section
8.1(e) of this Agreement and (b) exclude (i) the matters referred to in
Section 8.1(b) and (ii) the amount of any loss or liability to the extent
such amount reduces stockholders' equity as reflected on the Closing Date
Balance Sheet (in the form that it becomes final and binding upon Seller
and Purchaser pursuant to Section 1.3).

"Retained Employee" shall mean each person who was an employee
of the Company or any Company Subsidiary immediately prior to the Closing
Date.

"SEC" shall mean the United States Securities and Exchange
Commission.

"Section 338 Forms" shall mean all returns, documents,
statements, and other forms that are required to be submitted to any
federal, state, local or other taxing authority in connection with a
Section 338(h)(10) Election, including, without limitation, any statement
of Section 338 election and IRS Form 8023 (together with any schedules or
attachments thereto).

"Section 338(h)(10) Election" shall mean collectively an election
under Section 338(h)(10) of the Code (and any comparable election under
state, local or other law).

"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.

"Seller" shall mean PLM International, Inc., a Delaware
corporation.

"Seller's Accountants" shall mean KPMG LLP, independent certified
public accountants.

"Seller's Group" shall mean "affiliated group" (as defined in
Section 1504(a) of the Code) that includes Seller, the Company and any
Company Subsidiary.

"Seller Guaranty" or "Seller Guarantees" shall mean any
guaranty, letter of credit, letter of comfort, indemnity or contribution
agreement or other similar agreement entered into by Seller or any of its
Affiliates in favor of any third party with respect to any actual or
potential liability or obligation of the Company or any Company Subsidiary
to such third party.

"Shares" shall mean all of the issued and outstanding shares of
common stock, par value $0.01, of the Company.

"Stockholder Action Losses" shall mean any and all losses,
claims, liabilities, damages, actions, suits, penalties, judgments,
settlements and expenses (including attorneys' and accountants' fees and
expenses) incurred by the Company, any Company Subsidiary, any Purchaser
Indemnified Person or any of their respective Affiliates (or any of their
respective officers, directors, stockholders and other representatives and
agents) that arise out of any breach by Seller of any of the
representations and warranties contained in Section 3.2 of this Agreement,
including without limitation, any losses, claims, liabilities, damages,
actions, suits, penalties, judgments, settlements and expenses (including
attorneys' and accountants' fees and expenses) arising from or relating to
any action taken, or to be taken, by Seller, or any failure by Seller to
take such action (including filings with the Securities and Exchange
Commission and self-regulatory organizations) in connection with (i) the
solicitation of proxies under the Exchange Act or the DGCL in connection
with seeking, as required by Section 5.20, stockholder authorization of the
sale of the Shares in compliance with Section 271 of the DGCL or (ii) the
special meeting of stockholders of Seller contemplated herein.

"Straddle Period" shall mean a taxable year or period beginning
on or before, and ending on or after, the Closing Date.

"Subsidiary" shall mean, with respect to any Person, any
corporation or other organization, whether incorporated or unincorporated,
of which (a) at least a majority of the securities or other interests
having, by their terms, ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such Person or by any one or more of its Subsidiaries, or by
such Person and one or more of its subsidiaries or (b) such Person or any
other Subsidiary of such Person is a general partner (excluding any such
partnership where such Person or any Subsidiary of such party does not have
a majority of the voting interest in such partnership).

"Tax" or "Taxes" shall mean all taxes, charges, fees, duties,
levies, penalties or other assessments imposed by any United States
federal, state, local or foreign Governmental Entity, including income,
gross receipts, excise, property, (real or personal) sales, gain, use,
license, custom duty, unemployment, capital stock, transfer, franchise,
payroll, withholding, social security, minimum, estimated, profit, gift,
severance, value added, disability, premium, recapture, credit, occupation,
service, leasing, employment, wage, stamp, excise and other taxes, and
shall include interest, penalties or additions attributable thereto or
attributable to any failure to comply with any requirement regarding Tax
Returns.

"Tax Claim" shall mean a claim for indemnification or defense
arising out of Section 8.1 (b), including attorneys' fees and expenses and
accountants' fees and expenses incurred in the investigation or defense of
any of the same or in asserting, preserving, or enforcing any of the rights
of Purchaser arising under Section 8.1(b).

"Tax Return" shall mean any United States federal, state, local
or foreign return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any such document prepared
on a consolidated, combined or unitary basis, including any amendment
thereof; required to be filed by Seller, the Company and Company
Subsidiary, or any member of Seller's Group.

"Taxing Authority" shall mean any United States federal, state,
local or foreign Governmental Entity responsible for the imposition of any
Taxes.

"Title IV Plan" shall mean a Plan that is subject to Section 302
or Title IV of ERISA or Section 412 of the Code.

"Trademarks" shall mean United States and foreign registered and
unregistered trademarks, trade dress, service marks, logos, trade names,
corporate names and all registrations and applications to register the
same.

"Transactions" shall mean all the transactions provided for or
contemplated by this Agreement.

"Transfer Taxes" shall mean all sales (including bulk sales),
use, transfer, recording, ad valorem, documentary, registration,
conveyance, excise, license, stamp, duties or similar Taxes and fees (but
not any Taxes that result from a Section 338(h)(10) Election or any
election under state, local or other law similar to the election available
under Section 338(g) of the Code with respect to the Company or any Company
Subsidiary). Transfer Taxes shall not include gross receipts taxes..

"Transition Services Agreement" shall mean that certain
Transition Services Agreement to be entered into, at the option of
Purchaser, between the Company and Seller effective on and after the
Closing in the form attached hereto as Exhibit D.

"WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act, as amended.

"Year 2000 Problem" shall mean any ceasing to function,
generation of incorrect data or production of incorrect results by
information and business systems, including computer software, hardware and
related systems, when processing, providing or receiving (a) date-related
data from, into and between the twentieth and twenty-first centuries or (b)
date-related data in connection with any valid date in the twentieth and
twenty-first centuries.

Section 9.2 Interpretation.

(a) The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

(b) Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation."

(c) The words "hereof", "herein" and "herewith" and words
of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule references
are to the articles, sections, paragraphs, exhibits and schedules of this
Agreement unless otherwise specified.

(d) The meaning assigned to each term defined herein shall
be equally applicable to both the singular and the plural forms of such
term, and words denoting any gender shall include all genders. Where a word
or phrase is defined herein, each of its other grammatical forms shall have
a corresponding meaning.

(e) A reference to any party to this Agreement or any other
agreement or document shall include such party's successors and permitted
assigns.

(f) A reference to any legislation or to any provision of
any legislation shall include any amendment to, and any modification or re-
enactment thereof, any legislative provision substituted therefor and all
regulations and statutory instruments issued thereunder or pursuant
thereto.

(g) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any provisions of this Agreement.

ARTICLE X
MISCELLANEOUS

Section 10.1 Fees and Expenses. All costs and expenses incurred
in connection with this Agreement and the consummation of the Transactions
shall be paid by the party incurring such expenses, except as specifically
provided to the contrary in this Agreement and except that Seller and
Purchaser shall each bear 50% of the fee payable in connection with the
Pre-Merger Notification filing required by the HSR Act.

Section 10.2 Amendment and Modification. This Agreement may be
amended, modified and supplemented in any and all respects, but only by a
written instrument signed by all of the parties hereto expressly stating
that such instrument is intended to amend, modify or supplement this
Agreement.

Section 10.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if mailed,
delivered personally, telecopied (which is confirmed) or sent by an
overnight courier service, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):

if to Purchaser, to:

Guaranty Federal Bank, F.S.B.
1300 S. Mopac Expressway
Austin, Texas 78746
Attention: President and Chief Executive Officer
Telephone: 512-434-8586
Telecopy: 512-434-8289

with a copy to:

Schnader Harrison Segal & Lewis, LLP
1300 Eye Street, N.W., 11th Floor
Washington, D.C. 20005
Attention: Edward F. Schiff, Esq.
Telephone: 202-216-4208
Telecopy: 202-775-8741

if to Seller, to:

PLM International, Inc.
One Market Plaza
Steuart Street Tower, Suite 800
San Francisco, California 94105
Attention: President and Chief Executive Officer
Telephone: 415-974-1399
Telecopy: 415-905-7236

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
Four Embarcadero Center
Suite 3800
San Francisco, California 94111
Attention: Theodore J. Kozloff, Esq.
Telephone: 415-984-2600
Telecopy: 415-984-2698

Section 10.4 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have
been signed by each of the parties and delivered to the other parties.

Section 10.5 Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the Confidentiality Agreement (a) constitute the entire
agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof and thereof and (b)are not intended to confer upon any Person other
than the parties hereto and thereto and the officers and directors of
Seller and the Retained Employees any rights or remedies hereunder.

Section 10.6 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction.

Section 10.7 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.

Section 10.8 Venue. Each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in
the State of Delaware or any Delaware state court in the event any dispute
arises out of this Agreement or any of the Transactions, (b) agrees that it
shall not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it shall
not bring any action relating to this Agreement or any of the Transactions
in any court other than a federal or state court sitting in the State of
Delaware.

Section 10.9 Time of Essence. Each of the parties hereto hereby
agrees that, with regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.

Section 10.10 Extension; Waiver. At any time prior to the
Closing Date, either party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other
party contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) waive compliance by the other parties with any of the
agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by or on behalf of such party. The
failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.

Section 10.11 Election of Remedies. Neither the exercise of nor
the failure to exercise a right of set-off or to give notice of a claim
under this Agreement will constitute an election of remedies or limit
Purchaser or any of Purchaser Indemnified Persons in any manner in the
enforcement of any other remedies that may be available to any of them,
whether at law or in equity.

Section 10.12 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Purchaser may assign, in
its sole discretion, any or all of its rights and interests hereunder to
any Affiliate of Purchaser. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.

IN WITNESS WHEREOF, Purchaser and Seller have executed this
Agreement or caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first written above.

PLM INTERNATIONAL, INC., Seller

By: /s/ Robert N. Tidball
---------------------------------
Name: Robert N. Tidball
Title: Chairman of the Board

GUARANTY FEDERAL BANK,
F.S.B., Purchaser

By: /s/ Ronald D. Murff
----------------------------------
Name: Ronald D. Murff
Title: Chief Financial Officer

AMENDMENT NO. 1 TO STOCK SALE AGREEMENT

This Amendment No. 1 to Stock Sale Agreement (this "Amendment")
is made as of January 24, 2000 by and between Guaranty Federal Bank,
F.S.B., a federally chartered savings bank ("Purchaser"), and PLM
International, Inc., a Delaware corporation ("Seller"), in connection with
that certain Stock Sale Agreement, dated as of October 26, 1999, by and
between Purchaser and Seller (the "Stock Sale Agreement").

WHEREAS, Purchaser and Seller constitute all of the parties to
the Stock Sale Agreement; and

WHEREAS, the parties hereto desire to enter into this Amendment
to amend Section 7.1(c) of the Stock Sale Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants and agreements set forth herein, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:

11. Definitions. Capitalized terms used and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Stock
Sale Agreement.

12. Termination Date. The date "March 1, 2000" that appears in Section
7.1(c) of the Stock Sale Agreement is hereby amended and changed to
"March 15, 2000."

13. Effect on Stock Sale Agreement. Except as set forth above, all
provisions of the Stock Sale Agreement shall remain in full force or
effect.

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

PLM INTERNATIONAL, INC., Seller

By: /s/ Robert N. Tidball
---------------------------------
Name: Robert N. Tidball
Title: Chairman of the Board

GUARANTY FEDERAL BANK,
F.S.B., Purchaser

By: /s/ Ronald D. Murff
---------------------------------
Name: Ronald D. Murff
Title: Chief Financial Officer

ANNEX B

[Letterhead of Legg Mason Wood Walker, Incorporated]

October 21, 1999

The Board of Directors
PLM International, Inc.
One Market Plaza
Steuart Street Tower
San Francisco, California 94105

Ladies and Gentlemen:

We understand that PLM International, Inc. ("PLM") and Guaranty
Federal Bank, FSB (the "Purchaser") intend to enter into a Stock Sale
Agreement (the "Agreement") which will provide for the purchase of all of
the issued and outstanding capital stock of American Finance Group, Inc.
("AFG") by the Purchaser (the "Transaction"). In the Transaction, the
Purchaser will pay a Base Purchase Price, as defined in the Agreement, of
$29,000,000, adjusted for any increase or decrease in stockholder's equity
from June 30, 1999 through the Closing Date, in cash, plus the assumption
of certain liabilities, for such capital stock.

You have requested us to render a written opinion (the "Opinion") to
the Board of Directors (the "Board of Directors") of PLM as to the
fairness, from a financial point of view, to PLM and its stockholders of
the consideration to be received by PLM in the Transaction.

In arriving at our Opinion, we:

(a) reviewed a draft of the Agreement dated October 15, 1999 and
certain related documents;

(b) reviewed AFG's audited financial statements for the years
ended December 31, 1996 through December 31, 1998;

(d) reviewed the financial projections of AFG prepared by the
management of AFG, and held discussions with the senior
management of AFG with respect to the business, capital
requirements and prospects for future growth of AFG;

(e) reviewed certain publicly available information concerning
AFG;

(f) reviewed and analyzed certain publicly available financial
data for certain companies we deemed comparable to AFG;

(g) reviewed and analyzed certain publicly available information
for transactions that we deemed comparable to the Transaction;

(h) performed a discounted cash flow analysis of AFG using certain
assumptions of future performance provided to and discussed with
us by the management of AFG;

(i) at the request of the Board of Directors of PLM, approached
and held discussions with certain third parties to solicit
indications of interest in the possible acquisition of AFG; and,

(j) performed such other analyses and reviewed such other
information as we deemed appropriate.

We have relied upon the accuracy and completeness of all of the
financial and other information reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this Opinion. With
respect to forecasts of future financial condition and operating results of
AFG provided to or discussed with us, we assumed, at the direction of the
management of PLM and AFG, without independent verification or
investigation, that such forecasts were reasonably prepared on bases
reflecting the best available information, estimates and judgements of the
management of PLM and AFG. In addition, at the direction of PLM, in
performing our analysis, we have made certain assumptions regarding
adjustments to the Base Purchase Price. We also have assumed, at the
direction of the Board of Directors of PLM, that the final terms of the
Agreement will not vary materially from those set forth in the draft of the
Agreement reviewed by us. We have neither made nor obtained any independent
evaluations or appraisals of the assets or the liabilities of AFG,
contingent or otherwise. Estimates of values of companies and assets do
not purport to be appraisals or necessarily reflect the prices at which
companies and assets may actually be sold. Because such estimates are
inherently subject to uncertainty, Legg Mason assumes no responsibility for
their accuracy. We are not expressing any opinion as to the underlying
valuation, future performance or long-term viability of AFG. Our Opinion
is necessarily based on the information available to us and general
economic, financial and stock market conditions and circumstances as they
exist and can be evaluated by us on the date hereof. It should be
understood that, although subsequent developments may affect this Opinion,
we do not have any obligation to update, revise or reaffirm the Opinion.

Legg Mason Wood Walker, Incorporated ("Legg Mason"), as part of its
investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, and private placements.
Legg Mason is familiar with AFG, having been selected by PLM to serve as
its financial advisor and the managing underwriter in connection with a
proposed initial public offering of AFG's common stock which was withdrawn
in March 1999.

Legg Mason has served as financial advisor to PLM in connection with
the Transaction and will receive a fee for its services, a portion of which
is contingent upon the consummation of the Transaction.

It is understood that this letter is directed to the Board of
Directors of PLM and the Opinion expressed herein is provided for the use
of the Board of Directors of PLM in its evaluation of the proposed
Transaction. This letter does not constitute a recommendation of the
Transaction over any other alternative transaction which may be available
to PLM and does not address the underlying business decision of the Board
of Directors of PLM to proceed with or effect the Transaction. In
addition, this Opinion does not constitute a recommendation to any
stockholder of PLM as to how such stockholder should vote at the
stockholders' meeting to be held in connection with the Transaction. This
letter is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any other
document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without the prior written
consent of Legg Mason Wood Walker, Incorporated, provided that this Opinion
may be included in its entirety in any filing made by PLM with the
Securities and Exchange Commission with respect to the Transaction.

Based upon and subject to the foregoing, and such other factors as we
deemed relevant, it is our Opinion that as of the date hereof the
consideration to be received by PLM in the Transaction is fair to PLM and
its stockholders from a financial point of view.

Very truly yours,

/s/ Legg Mason Wood Walker, Incorporated
LEGG MASON WOOD WALKER, INCORPORATED

ANNEX C

FINANCIAL COMPUTATIONS

The financial computations set forth below were prepared by PLM
for inclusion in the confidential offering memorandum prepared by Legg
Mason and delivered to Guaranty. The financial computations are
hypothetical and make assumptions about cost of capital, tax efficiencies
and results of operations that PLM management believes are not achievable
so long as AFG is owned by PLM. Accordingly, these financial computations
are not projections of the future performance of AFG if it remains a
subsidiary of PLM but rather are a computation of the results that might
be achieved if AFG's cost of capital were lower than what PLM can provide
and if the ability of a buyer to utilize the tax benefits generated by
AFG are significantly greater than PLM's ability.

SUMMARY

The following projections assume a sale of the Company is consummated on
October 1, 1999. The key assumptions which are described below include
the following:

o Sustainable growth in lease originations

o An increase in leases retained versus leases syndicated

o An increase in average lease term driven by equipment focus and
tax appetite

o No assumed gains on residuals

o Competitive cost of debt and efficient tax base provided by new
owner

ORIGINATIONS

Management believes that under a new owner with a more competitive cost
of capital (i.e., a lower cost of debt and tax efficient equity), AFG
would be able to increase significantly and sustainably its lease
originations. This increased volume would be driven by a greater number
of direct sales representatives and a broader financial product offering.

The table below highlights the assumed growth in lease originations.

<TABLE>
<CAPTION>
ACTUAL PROJECTED
------------ -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in millions) 1998 1999 2000 2001 2002 2003
------------ ------------ ----------- ----------- ------------ -----------
Leases retained $ 94.9 $ 87.2 $ 187.9 $ 260.3 $ 340.9 $ 423.7
Leases syndicated and brokered 105.1 61.4 109.1 116.8 123.0 133.0
------------ ------------ ----------- ----------- ------------ -----------
Total originations $ 200.0 $ 148.7 $ 297.0 $ 377.2 $ 463.9 $ 556.7
============ ============ =========== =========== ============ ===========
Year-to-year growth 25.9% -25.7% 99.8% 27.0% 23.0% 20.0%
No. of sales representatives 6 7 11 13 15 17
Production per representative $ 33.3 $ 21.2 $ 27.0 $ 29.0 $ 30.9 $ 32.7
</TABLE>

Operating leases are assumed to comprise 15% of the Company's
originations throughout the projected period. Finance leases are assumed
to decline from 70% of originations in FY 1999 to 48% by FY 2003. Secured
loans are assumed to increase from 15% of originations to 37% during that
same period.

REVENUE

Revenue projections are derived from combining the existing portfolio
with the assumed lease originations.

o EXISTING PORTFOLIO. The existing portfolio is assumed to run-off
in accordance with the terms of the underlying contracts. No
renewals or continuous billings are assumed at the end of the
initial lease terms. No gains or losses on the sale of equipment
are assumed.

o RETAINED LEASES. Management anticipates increasing the percentage
of originated leases retained by the Company from approximately
50% to approximately 75%. The implicit rate on operating leases
is assumed to decrease modestly from FY 1999 through FY 2003,
while the average final term of the leases is expected increase
reflecting the acquiror's assumed ability to utilize the tax
benefits of the transactions. Finance leases generally are
assumed to have economics comparable to operating leases, however
an additional expense for residual value insurance is assumed to
qualify the transactions for finance lease treatment. The assumed
implicit rate on secured loans is expected to range from 8.18% to
8.35% with terms increasing from 38 months to 48 months.

The table below highlights the key economic assumptions regarding
lease and secured loan originations.

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
---------------------------------------------------------------------------
1999 2000 2001 2002 2003
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating Leases: Implicit rate 8.95% 8.85% 8.80% 8.75% 8.70%
Term (months) 45 48 54 60 66
Lease rate factor 2.13% 1.99% 1.75% 1.56% 1.36%
Residual as % of OEC 24.4% 26.4% 31.7% 36.5% 45.0%
Interim rent (% month) 45% 42% 40% 40% 40%

Loans: Implicit rate 8.18% 8.35% 8.30% 8.30% 8.20%
Term (months) 38 42 48 48 48
</TABLE>

o SYNDICATIONS. Transactions sold to third parties are divided
between brokered transactions and leases which are funded by AFG
and subsequently sold. Brokered transactions are assumed as a
percentage of total syndications to range between 31% and 28%
from FY 2000 to FY 2003. Fees on brokered deals are assumed to
range from 1.25% in FY 2000 to 1.15% by FY 2003. Transactions
which are funded and subsequently sold provide the opportunity
for AFG to earn rentals during the period they are held and fees
upon the sale of the transactions; these fees are assumed to
range from 1.80% in FY 1999 to 1.50% in FY 2003.

o RESIDUALS. All equipment is sold at its net book value (i.e., no
gain or loss is assumed). No renewal rental revenue or continuous
billing revenue is assumed during those six months.

EXPENSES

o SALES AND MARKETING. Sales representatives are paid on a
commission basis commensurate with the scale currently in place
at AFG. Initial direct costs associated with the origination of
lease transactions either are capitalized and amortized over the
life of associated lease if such lease is retained, or are
expensed in the case of syndicated transactions.

o G&A AND OPERATIONS SUPPORT. Back office expenses grow in
proportion to an assumed increased staffing level as well as at
an annualized base rate of 4%. Additional personnel assumed
include three professionals in FY 2000 (1 account manager, 1
senior equipment management specialist and 1 credit specialist).
By FY 2003, the Company anticipates adding a total of 10
professionals in the fields of account management, tax
processing, equipment management and research, and credit. This
relatively modest rate of increase reflects management's view
regarding the excess capacity of AFG's existing infrastructure.
Also included in each of FY 1999 and FY 2000 are retention
bonuses of $200,000 paid to key employees upon a change of
control in the Company's ownership.

o INTEREST EXPENSE. All existing debt is assumed to be repaid.
Future debt is assumed to be funded at a rate of 5.70% reflecting
the acquiror's lower cost of funding.

o TAXES. The Company's effective tax rate is assumed to be 38.0%.
All tax payments are assumed to be deferred given the shelter
provided by the accelerated tax depreciation of equipment under
operating leases.

BALANCE SHEET CONSIDERATIONS

It is assumed that the Company operates at an approximately 10%
equity-to-assets ratio throughout the period of the projections. The
projected growth in the Company's retained lease portfolio will require
additional capital contributions on a periodic basis to maintain the
targeted capitalization ratio. These capital contributions are
represented by the "Additional capital" line under Stockholder's equity
on the projected balance sheets.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1999 2000 2001 2002 2003
--------------- ------------ ---------------- ----------------------
INCOME STATEMENT: (Dollars in thousands)
<S> <C> <C> <C> <C> <C>
REVENUES
Finance lease income $ 12,710 $ 16,908 $ 22,216 $ 29,218 $ 37,682
Operating lease income 7,007 9,775 15,509 22,358 26,820
Financing income 1,575 2,764 6,516 11,388 17,641
Management fees 655 221 130 64 4
Revenue from sale of leases and related assets 2,924 2,821 2,786 2,790 2,744
--------------------------------------------------------------------
Total revenues 24,871 32,489 47,157 65,818 84,891
--------------------------------------------------------------------
COSTS AND EXPENSES
Operations support (1) 4,880 6,001 6,543 7,046 7,483
Depreciation and amortization 5,644 7,122 11,024 16,080 20,827
General and administrative 853 520 541 562 585
Interest expense, net 9,259 11,788 18,997 27,895 38,480
Other expenses (2) 1,894 - - - -
--------------------------------------------------------------------
Total costs and expenses 22,530 25,431 37,105 51,583 67,376
--------------------------------------------------------------------

Income (loss) before income taxes 2,341 7,058 10,052 14,235 17,515

Provision for (benefit from) income taxes 890 2,682 3,820 5,409 6,656

Net income (loss) before accounting change 1,451 4,376 6,232 8,826 10,859

Cumulative effect of accounting change (3) (253) - - - -
--------------------------------------------------------------------
Net income (loss) $ 1,198 $ 4,376 $ 6,232 $ 8,826 $ 10,859
====================================================================

PRO FORMA ADJUSTMENT (4)
Net income $ 1,198
Pro forma adjustments for one-time charges $ 1,564
-------------
Pro forma net income $ 2,762
=============

</TABLE>

Notes: (1) Includes retention bonuses of $200,000 per year, in both
FY 1999 and FY 2000, payable upon a change of control.
(2) Reflects pre-tax write-off of expenses incurred in
connection with the Company's proposed IPO which was
withdrawn during the first quarter of 1999. Other
one-time charges for the remainder of FY 1999 include
costs that would be incurred upon the acquisition of
the Company, including the write-off of capitalized
costs associated with the securitization facility
($266,000) and the write-off of goodwill ($654,000).
(3) Reflects Company's adoption of AICPA Statement of
Position 98-5, "Reporting the Costs of Start-Up
Activities" which requires costs related to be expensed
as incurred.
(4) Adjusted for tax-effected, one-time charges in FY 1999 as
stated in Notes 1, 2 and 3.

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------------------------
1999 2000 2001 2002 2003
-------------------------------------------------------------------------
BALANCE SHEET: (Dollars in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Restricted cash $ - $ - $ - $ - $ -
Receivables, net of allowances 2,267 3,135 4,710 6,704 8,746
Investment in direct finance leases, net 156,156 228,135 312,958 410,676 521,609
Loans receivable 19,026 55,773 110,793 183,795 269,317
Equipment held for operating leases, net 19,599 40,346 67,360 101,414 142,178
Other assets, net 3,000 1,819 1,740 1,700 1,700
--------------------------------------------------------------------------
Total assets $ 200,048 $ 329,208 $ 497,561 $ 704,289 $ 943,550
==========================================================================

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Debt $ 146,328 $ 257,754 $ 399,146 $ 571,026 $ 770,669
Payables and other liabilities 16,000 26,676 34,718 43,484 52,520
Deferred income taxes 7,439 10,121 13,941 19,350 26,006
---------------------------------------------------------------------------
Total liabilities 169,767 294,551 447,805 633,860 849,195

Stockholder's equity:
Additional capital - - 8,866 20,713 33,780
Paid-in-capital 26,043 26,043 26,043 26,043 26,043
Retained earnings (accumulated deficit) 4,238 8,614 14,847 23,673 34,532
--------------------------------------------------------------------------
Total stockholder's equity 30,281 34,657 49,756 70,429 94,355
--------------------------------------------------------------------------
Total liabilities and
stockholder's equity $ 200,048 $ 329,208 $ 497,561 $ 704,289 $ 943,550
===========================================================================
</TABLE>

PROXY PROXY

PLM INTERNATIONAL, INC.
ONE MARKET, STEUART STREET TOWER, SUITE 800
SAN FRANCISCO, CALIFORNIA 94105-1301

SPECIAL MEETING OF STOCKHOLDERS -- FEBRUARY 25, 2000

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints Robert N. Tidball and
Douglas P. Goodrich, and each of them, true and lawful agents and proxies
to the undersigned, with full power of substitution, to represent the
undersigned and to vote all shares of stock that the undersigned is
entitled to vote at the special meeting of stockholders of PLM
International, Inc., to be held on February 25, 2000, and at any and all
adjournments and postponements thereof.

This proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder. IF NO VOTE IS SPECIFIED, HOWEVER,
THIS PROXY WILL BE VOTED "FOR" PROXY ITEM NO. 1. This proxy grants
discretionary authority to vote in accordance with the best judgment of the
named proxies on other matters that may properly come before the special
meeting.

Please mark this proxy card, fill in the date, sign on the reverse
side and return promptly using the enclosed envelope. No postage is
necessary if mailed in the United States.

(CONTINUED, AND TO BE SIGNED, ON THE REVERSE SIDE)

[x] Please mark your votes
as in this example

THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR"
PROXY ITEM NO. 1:

1. To authorize the proposed sale of American Finance Group, Inc. to
Guaranty Federal Bank, F.S.B. pursuant to the Stock Sale Agreement,
dated as of October 26, 1999 and amended as of January 24, 2000, by
and between PLM International, Inc. and Guaranty Federal Bank, F.S.B.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

Signature(s) ___________________ Dated: _______, ___

________________________

Please sign this proxy exactly as your name appears hereon. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name
appears, a majority should sign. If a corporation, the signature should be
that of an authorized person who should also state his/her title.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.