Director's 1998 Nonqualified Stock Option Plan

EXHIBIT 10.2
AMERICAN FINANCE GROUP, INC.


DIRECTORS' 1998 NONQUALIFIED STOCK OPTION PLAN
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1. Purpose
-------


The purpose of this Directors' 1998 Nonqualified Stock Option Plan (the "Plan") is to motivate and reward those directors of American Finance Group, Inc. (the "Company") who are not employees of the Company or any subsidiary (as defined below) of the Company eligible for participation in the American Finance Group, Inc. 1998 Management Stock Compensation Plan (the "Management Plan"), by granting each such director options to purchase shares of the Company's common stock, par value $.01 per share ("Common Shares"). For purposes of this Plan, the term "subsidiary" shall, with respect to the Company, have the meaning ascribed to the term "subsidiary corporation" under Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code").


2. Effective Date
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This Plan was adopted by the Company's Board of Directors (the "Board") and was approved by the Company's sole shareholder, PLM International, Inc. ("PLM"), on ____________, 1998.


3. Shares Subject to Plan
----------------------


Subject to the other provisions of this Plan, the total number of Common Shares with respect to which options may be granted under this Plan shall be 100,000, subject to adjustment in accordance with paragraph 12(b). Shares delivered to an optionee by the Company upon exercise of all or any portion of an option may be previously unissued shares or repurchased shares. All Common Shares issued upon the exercise of any option granted under this Plan, whatever their source, shall be counted against the 100,000-share limit, provided, however, that shares subject to options that lapse, expire or otherwise terminate, or shares that are surrendered pursuant to the terms of this Plan shall be available for reissue under the Plan.


4. Administration
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(a) Board to Administer. This Plan shall be administered by the Board.
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(b) Voting. A majority of the Board shall constitute a quorum for the
------ purposes of this Plan. Provided a quorum is present, the Board may take action by consent of a majority of its members present at a meeting. Meetings may be held telephonically as long as all parties are able to hear one another, and a member of the Board shall be "present" for purposes of the preceding sentence if he or she is in simultaneous communication by telephone with the other members, provided, again, that all parties are able to hear one another.


(c) Tasks of Board in Administering Plan. The Board shall have full and
------------------------------------ final authority, in its sole discretion, subject to the express provisions of this Plan, to: (i) authorize any person to execute on behalf


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of the Company an agreement evidencing the grant of an option; (ii) interpret the Plan and any option; and (iii) make all other determinations deemed by the Board necessary or advisable for the administration of the Plan. The Board may also make whatever rules and regulations it deems useful to administer the Plan. Any decision or action of the Board in connection with the Plan or any options granted, or shares purchased, under the Plan, shall be final and binding.


(d) Reports. Unless otherwise decided by the Board, the Board shall
------- cause written summaries of stock option grants under this Plan to be maintained as follows: (i) all grants shall be summarized into a single schedule; (ii) annually within 60 days of the end of the calendar year, all outstanding options shall be summarized in a single schedule; and (iii) at any additional time, within the Board's discretion, all stock option grants and exercises shall be summarized.


(e) Delegation. The Board may delegate nondiscretionary administrative
----------- duties to such employees of the Company as it deems proper.


5. Eligibility
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(a) Only Non-employee Directors May Receive Options. Stock options
------------------------------------------------ shall be granted under this Plan only to persons who at the time of grant are directors of the Company but not employees of the Company or of any subsidiary of the Company.


(b) All Non-Employee Directors to Receive Options on a Non-discretionary
-------------------------------------------------------------------- Basis. Each of the Company's directors who is eligible under paragraph 5(a) - ------ above to participate in this Plan shall be granted upon the consummation of the IPO an option under this Plan to purchase 10,000 Common Shares. In addition, each such director shall be granted on each of February 1, 1999 and February 1, 2000 an option under this Plan to purchase 5,000 Common Shares. If on the grant date the number of Common Shares available for grant under this Plan is insufficient to provide each eligible director an option to purchase the number of Common Shares set forth above, options shall be granted pro rata to each eligible director to the extent Common Shares are available under the Plan.


6. Grant of Options and Limitations
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(a) General Rules. As soon as practical after the date of the grant of
-------------- each option, the optionee and the Company shall enter into a written agreement (the "Option Agreement") that shall specify the date of the grant, the number of Common Shares covered by the option, the option price, and the other terms and conditions of the option grant.


(b) Non-qualified Stock Options. All of the options granted under this
---------------------------- Plan shall be options not qualifying for the benefits, and not subject to the requirements, of "incentive stock options" within the meaning of Section 422 of the Code.


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7. Terms and Conditions of Option.
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Options granted under this Plan shall be subject to the following terms and conditions, and to any other terms and conditions, not inconsistent with this Plan, that the Board imposes when the option is granted:


(a) Time of Exercise. Options shall be exercisable as follows:
-----------------


If the optionee continues to be a director of the Company or of a parent or subsidiary of the Company With respect to each on such date, the option grant of shares as shall become exercisable on shown below ------------------------------------------------------------


first anniversary of grant date 1/3 of shares granted


second anniversary of grant date 1/3 of shares granted


third anniversary of grant date 1/3 of shares granted


(b) Price. With respect to options granted under this Plan as of the
------ consummation of the IPO, the price to be paid by the option holder for Common Shares issued pursuant to such option shall be the offering price of the Common Shares in such IPO, which price shall be specified in the Option Agreement. With respect to any other option granted under this Plan, the price to be paid by the option holder for Common Shares issued pursuant to such option shall be equal to the average of the high and low prices, as reported in the Wall Street Journal, of such shares on NASDAQ or such other national
------------------- stock exchange on which the Common Shares are traded on the day immediately preceding the date as of which such option is granted, which price shall be specified in the Option Agreement.


(c) Option Term. The term of any option granted under the Plan shall
------------ be from the date of grant through a date no l ...