TABLE OF CONTENTS

				Page
DEFINITIONS				1
ARTICLE I THE MERGER				6
1.1		The Merger		6
1.2		Closing		7
1.3		Effective Time		7
1.4		Effect of the Merger		7
1.5		Certificate of Incorporation and Bylaws of the Surviving Corporation		7
1.6		Directors and Officers of the Surviving Corporation		8
1.7		Conversion of Company Stock, Etc		8
1.8		Cancellation of Shares		9
1.9		Company Stock Options		9
1.10		Capital Stock of Merger Sub		9
1.11		Adjustments to Merger Consideration		10
1.12		Payment		10
1.13		Full Satisfaction		10
1.14		Closing of the Company’s Transfer Books		10
1.15		Taking of Necessary Action; Further Action.		10
1.16		Dissenting Shares.		11
1.17		Withholding.		11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY				11
2.1		Organization and Qualification; Subsidiaries		12
2.2		Capital Structure		12
2.3		Authority; No Conflict; Required Filings		13
2.4		Financial Statements; Accounts Receivable; SEC Filings		15
2.5		Most Recent Balance Sheet		16
2.6		Absence of Certain Changes or Events		16
2.7		Agreements, Contracts and Commitments		16
2.8		Compliance with Laws		20
2.9		Material Permits		21
2.10		Litigation		21
2.11		Employee and Labor Matters; Benefit Plans		21
2.12		Properties and Assets		23
2.13		Insurance		25
2.14		Tax Matters		25
2.15		Environmental Matters		27
2.16		Intellectual Property		28
2.17		Brokers		29
2.18		Certain Business Practices		29
2.19		Affiliate Transactions		29
2.20		Banking Relationships		30
2.21		Labor Matters		30

 

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2.22		No Other Agreements to Sell the Assets or Stock of the Company or any of its Subsidiaries		31
2.23		Customers and Suppliers		31
2.24		Rental Fleet; Assets		31
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND MERGER SUB				32
3.1		Organization and Qualification		32
3.2		Authority; Required Filings		32
3.3		Interim Operations of the Buyer and Merger Sub		33
3.4		Financing		33
3.5		Non-Contravention		34
3.6		Brokers		34
3.7		No Outside Reliance		34
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER				34
4.1		Conduct of Business Pending the Merger		34
4.2		Stockholder Approval.		38
4.3		No Solicitation of Other Proposals.		38
ARTICLE V ADDITIONAL AGREEMENTS				39
5.1		Access to Information; Confidentiality		39
5.2		Further Assurances		39
5.3		Employee Benefit Matters		41
5.4		Notification of Certain Matters		42
5.5		Public Announcements		43
5.6		Indemnification of Directors and Officers		43
5.7		Funding		44
5.8		Financial Statements		45
5.9		Transaction Expenses		46
5.10		Company Option Plans		46
5.11		Assistance with Debt Financing		46
5.12		Discharge of Existing Notes		47
5.13		EDGAR.		49
5.14		Provision of Funds.		49
5.15		Termination of Agreements.		49
5.16		Funded Debt Payoff.		50
5.17		FIRPTA.		50
ARTICLE VI CONDITIONS OF MERGER				50
6.1		Conditions to Obligation of Each Party to Effect the Merger		50
6.2		Additional Conditions to Obligations of the Buyer and Merger Sub		51
6.3		Additional Conditions to Obligations of the Company		53
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER				53
7.1		Termination		53
7.2		Effect of Termination		54

 

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7.3		Fees and Expenses		55
7.4		Amendment		55
7.5		Waiver		55
ARTICLE VIII GENERAL PROVISIONS				55
8.1		Survival of Representations and Warranties		55
8.2		Notices		55
8.3		Interpretation		57
8.4		Severability		57
8.5		Entire Agreement		58
8.6		Assignment		58
8.7		Parties in Interest		58
8.8		Failure or Indulgence Not Waiver		58
8.9		Governing Law; Enforcement		58
8.10		No Implied Representations		59
8.11		Construction of Certain Provisions		59
8.12		Counterparts.		59

 

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ANNEX

ANNEX I:

Index to Defined Terms

 

 

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AGREEMENT AND PLAN OF MERGER (this “Agreement”), made and entered into as of March 31, 2007 by and among LYN Holdings LLC, a Delaware limited liability company (the “ Buyer ”), LYN Holdings Corp., a Delaware corporation and direct wholly-owned Subsidiary of the Buyer (“ Holdings ”), LYN Acquisition Corp., a Delaware corporation and direct wholly-owned Subsidiary of Holdings (“ Merger Sub ”) and Neff Corp., a Delaware corporation (the “ Company ”).  The Buyer, Holdings, Merger Sub and the Company are sometimes referred to herein each individually as a “Party” and, together, as the “Parties.”

WHEREAS, the Boards of Directors of each of the Buyer, Holdings, Merger Sub and the Company have approved and declared the advisability of this Agreement and the merger of Merger Sub with and into the Company (the “ Merger ”), in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”) and the terms and conditions set forth herein.

WHEREAS, the Board of Directors of the Company has recommended that the stockholders of the Company adopt this Agreement and approve the Merger.

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

DEFINITIONS

In addition to the other words and terms defined elsewhere in this Agreement, as used in this Agreement, the following words and terms shall have the meanings specified or referred to below:

“ABL Credit Facility” means the Amended and Restated Credit Facility, dated as of July 8, 2005, among Neff Rental, Inc., as borrower, Neff Rental LLC and Neff Finance Corp., as guarantors, General Electric Capital Corporation, as agent and a lender, and the other financial institutions party thereto.

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with, such Person.  For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.

“Aggregate Option Exercise Price” means the aggregate exercise price payable to the Company upon exercise of all Company Stock Options that are (i) outstanding immediately prior to the Closing Date and (ii) have a per share exercise price less than the Merger Consideration per share.

 “Business Day” means any day on which banks are permitted to be open in New York, New York.

 

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“Capital Expenditures” means expenditures for goods acquired and/or services received that would be required to be capitalized as a capital expenditure in accordance with GAAP.

“Capitalized Leases” means leases required to be capitalized for financial reporting purposes in accordance with GAAP.

“Cash Amount” means $409,376,641 minus Transaction Expenses.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company Financial Statements” shall mean the Historical Audited Financial Statements and the 2006 Audited Financial Statements.

“Contract” shall mean, with respect to the Company and its Subsidiaries, any agreement, contract, lease, sublease, note, loan, evidence of indebtedness, indenture, guarantee, letter of credit, franchise agreement, covenant not to compete, employment agreement, license, sublicense or instrument to which the Company or any of its Subsidiaries is a party, whether oral or written, and that pursuant to its terms has not expired, terminated or been fully performed by the parties thereto.  For the avoidance of doubt, “Contract” shall not mean a purchase order or an invoice.

“Environmental Laws” means all Laws relating to the environment, preservation or reclamation of natural resources, the presence, management or Release of, or exposure to, harmful or deleterious materials, or to human health and safety, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq .), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq .), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq .), the Clean Water Act (33 U.S.C. § 1251 et seq .), the Clean Air Act (42 U.S.C. § 7401 et seq .), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq .), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. § 136 et seq .), and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq .), as each has been amended and the regulations promulgated pursuant thereto and all analogous state, local or foreign Laws.

“ERISA” means Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” shall mean any entity (whether or not incorporated) which is (or at any relevant time was) a member of a “controlled group of corporations” with, under “common control” with, a member of an “affiliated service group” with, or otherwise required to be aggregated with, the Company or any of its Subsidiaries, as set forth in Section 414(b), (c), (m) or (o) of the Code.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fully Diluted Outstanding Company Common Stock” means the sum of (i) the aggregate number of shares of Company Common Stock outstanding immediately prior to the Closing Date and (ii) the aggregate number of shares of Company Common Stock subject to

 

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Company Stock Options issued and outstanding immediately prior to the Closing Date and having a per share exercise price less than the Merger Consideration per share.

“Funded Debt” means, without duplication, the sum of (a) all principal and accrued (but unpaid) interest owing by the Company or any of its Subsidiaries for debt for borrowed money owed to any third party ( i.e ., specifically excluding intercompany debt between the Company and any of its Subsidiaries and any Subsidiary of the Company and another Subsidiary of the Company), including pursuant to the ABL Credit Facility, the Senior Secured Notes and the Senior Subordinated Notes, (b) all obligations of the Company or any of its Subsidiaries as lessee or lessees under Capitalized Leases, (c) indebtedness of any Person other than the Company or any of its Subsidiaries guaranteed in any manner by the Company or any of its Subsidiaries (whether as a guarantor or a surety), and (d) mark-to-market losses on hedging arrangements; provided that, notwithstanding the foregoing, in no event shall “Funded Debt” include liabilities or obligations of the Company or any of its Subsidiaries (i) incurred or arranged by either of the Buyer or Merger Sub or any Affiliate of either of the Buyer or Merger Sub in connection with the transactions contemplated hereby (including, without limitation, the Debt Financing) or (ii) incurred pursuant to any premium financing arrangements of the Company with respect to any of its insurance policies.

“Government Contract” means any prime contract, subcontract, basic ordering agreement, letter agreement, purchase order, delivery order, bid, change order or commitment between the Company or any of its Subsidiaries and (a) any Governmental Authority or (b) any prime contractor or subcontractor with respect to performance by the Company or any of its Subsidiaries as subcontractor of any portion of the obligations of a prime contract with any Governmental Authority.

“Hazardous Materials” means any material, substance or waste that is defined, listed, regulated, classified, or otherwise characterized under or pursuant to any Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive” or words of similar meaning or effect, including petroleum and its by-products, asbestos, asbestos-containing products, mold, polychlorinated biphenyls, radon, urea formaldehyde insulation, chlorofluorocarbons and all other ozone-depleting substances.

“Indemnified Costs” means any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent such claim, action, suit, proceeding or investigation is based in whole or in part on or arises in whole or in part out of the fact that the Indemnitee is or was an officer, director or employee of the Company or the Subsidiary of the Company, whether or not pertaining to any matter existing or occurring at or prior to the Effective Time and whether or not asserted or claimed prior to, at or after the Effective Time.

“knowledge” when used with respect to any representation, warranty or statement of the Company that is qualified by the Company’s “knowledge,” means the actual knowledge of Juan Carlos Mas, Mark Irion, Graham Hood, Steve Halliwell, Westley Parks, John Anderson, Steve Michaels and Steve Settelmayer.

 

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“Laws” means (a) all applicable laws, statutes, ordinances, regulations, decrees, rules and orders of every federal, state, local or foreign government and every federal, state, local or foreign court or other governmental or regulatory agency, department, authority, body or instrumentality and (b) all judgments, decisions, decrees or orders of any court or governmental or regulatory agency, department, authority, body or instrumentality

“Material Adverse Effect” means any adverse change in the financial condition, business or results of operations of a Person and its Subsidiaries which is material to such Person and its Subsidiaries, taken as a whole, other than any change or effect resulting from or arising out of (i) (A) changes or conditions generally affecting the industries or segments in which such Person operates or (B) changes in local, regional or national general economic, market or political conditions which, in the case of (A) or (B), is not specifically related to, or does not have a materially disproportionate effect (relative to other industry participants) on, such Person, (ii) the announcement of this Agreement or pendency of this Agreement or the Merger, (iii) any action taken by such Person or any of its Subsidiaries with the consent of either the Buyer or Merger Sub or from compliance by such Person or any of its Subsidiaries with the terms of, or the taking of any action contemplated or permitted by, this Agreement or (iv) the actions of either the Buyer or Merger Sub taken in bad faith or in breach of this Agreement or that constitute willful misconduct.

“Merger Consideration” means an amount determined by dividing (i) the Cash Amount plus the Aggregate Option Exercise Price by (ii) the Fully Diluted Outstanding Company Common Stock.

“Parts Inventory” means inventory owned by the Company and its Subsidiaries which consists of parts for the Rental Fleet and parts to be sold or leased by the Company and its Subsidiaries in the ordinary course of business, which parts are not incorporated or installed in or on, or affixed or appurtenant to, any such inventory or to any other property and which parts are new or used and in good condition, including inventory the Company and its Subsidiaries currently described in the Company Financial Statements as “inventories, including whole goods,” but excluding any Rental Fleet.

“Permitted Additional Debt” means the amount by which Funded Debt exceeds $490,623,359 (the “ Excess Amount ”) to the extent there is a corresponding increase from December 31, 2006 in the gross book value of the Rental Fleet of the Company and its Subsidiaries as would be reflected on a consolidated balance sheet of the Company prepared in accordance with GAAP and past practices at least equal to such Excess Amount, provided, that Permitted Additional Debt shall not exceed $25,000,000.

 “Person” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity, including a Governmental Authority.

“Personnel” means, with respect to the Company and its Subsidiaries, all directors, officers, employees on a full or part-time basis of the Company or any of its Subsidiaries.

 

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“Plan” means any employee benefit plan, program, policy, practice, agreement or other arrangement providing benefits to any current or former employee, officer, director or consultant of the Company or any of its Subsidiaries or any beneficiary or dependent thereof that is sponsored or maintained by the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries contributes or is obligated to contribute or in respect of which the Company or any of its Subsidiaries has any current or future liability (whether actual or contingent), including, without limitation, any employee welfare benefit plan within the meaning of Section 3(1) of ERISA, any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any bonus, incentive, deferred compensation, vacation, stock purchase, stock option, equity, equity-based, severance, employment, change of control or fringe benefit plan, program, policy, practice, agreement or other arrangement.

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migrating into or through the environment or any natural or man-made structure.

“Rental Fleet” means assets of a type offered for sale, rental or lease by the Company and its Subsidiaries in the ordinary course of business, including assets of the Company and its Subsidiaries currently described in the Company Financial Statements as “rental equipment, net,” but excluding any Parts Inventory and Property, Plant and Equipment (as defined under GAAP), net.

“Senior Secured Notes” means Neff Rental LLC’s and Neff Finance Corp.’s 11¼% Second Priority Senior Secured Notes due 2012.

“Senior Subordinated Notes” means Neff Rental LLC’s and Neff Finance Corp.’s 13% Senior Subordinated Notes due 2013.

“Subsidiary” means, with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, of which (i) such Person (or any other Subsidiary of such Person) is a general partner (excluding partnerships, the general partnerships of which held by such Person or Subsidiary of such Person do not have a majority of the voting interest of such partnership), (ii) at least a majority of the securities or other equity 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 are 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 (iii) at least 50% of the securities or equity interests of 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.

 “Tax” means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including, without limitation, taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, value added, ad valorem, transfer, franchise, withholding, payroll, recapture, abandoned or unclaimed

 

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property, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other Person with respect to such amounts and including any liability for Taxes of a predecessor entity.

“Transaction Expenses” means, without duplication, the sum of: (i) the amount of Funded Debt as of immediately prior to the Closing in excess of the sum of (a) $490,623,359 and (b) Permitted Additional Debt, (ii) any prepayment, redemption, purchase price or consent fees, premiums (including net redemption costs in the event of a Discharge, after giving effect to the any interest to be earned on the amount deposited with the trustee under the applicable indenture) or penalties or LIBOR breakage fees (excluding the principal amount and accrued and unpaid interest in respect of any indebtedness) payable to the creditors of the Company and its Subsidiaries and incurred by the Company or its Subsidiaries in connection with the repayment, redemption, purchase (including by means of a tender offer and consent solicitation) or defeasance of Funded Debt at or prior to Closing or, following Closing with respect to any repayment, redemption or defeasance required to Discharge any Notes not repurchased in connection with any tender offer and consent solicitation, in connection with the transactions contemplated by this Agreement and any interest payments due with respect to any period after Closing in connection with a Discharge of Funded Debt, (iii) fees and expenses of legal and financial advisors (including, without limitation, the Financial Advisors) to the Company or any of its Subsidiaries incurred in connection with this Agreement and the transactions contemplated hereby, but only to the extent arising directly from or as a result of such transactions, and not already paid as of the Closing Date, (iv) cash payments to employees of the Company under the Company’s 2006 Bonus Plan (provided, that, for purposes of this determination, this calculation shall not include any amounts other than payments under the 2006 Bonus Plan that may be payable in connection with the change in control of the Company), (v) cash fees paid to third parties that are parties to Contracts with the Company or any of its Subsidiaries in order to obtain the consent of such third parties to this Agreement and the transactions contemplated hereby or due to the vesting of any payment right as a result of such transactions (but only to the extent arising directly from or as a result of such transactions), (vi) all other fees and expenses of third parties (such as consultants or other advisors, but excluding for purposes of this clause (vi) the overhead and similar internal costs of the Company and its Subsidiaries) incurred by the Company or any of its Subsidiaries arising from or as a result of the transactions contemplated hereby and not already paid as of the Closing Date, and (vii) 50% of any HSR Act and Competition Law filing costs, as set forth in Section 7.3.  For the avoidance of doubt, expenses incurred by the Company or its Subsidiaries to assist either of the Buyer or Merger Sub in fulfilling their obligations under this Agreement, including any assistance provided with respect to the Buyer’s or Merger Sub’s receipt of the financing pursuant to the Financing Commitment Letters shall not be considered “Transaction Expenses.”

ARTICLE I

THE MERGER

1.1           The Merger .

 

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At the Effective Time (as defined in Section 1.3), in accordance with the DGCL and the terms and conditions of this Agreement, Merger Sub shall be merged with and into the Company.  From and after the Effective Time, the separate corporate existence of Merger Sub shall cease, and the Company, as the surviving corporation in the Merger, shall continue its existence under the Laws of the State of Delaware.  The Company as the surviving corporation after the Merger is hereinafter sometimes referred to as the “ Surviving Corporation .”

1.2           Closing .

Unless this Agreement shall have been terminated and the transactions contemplated by this Agreement abandoned pursuant to the provisions of Article VII, and subject to the satisfaction or waiver, as the case may be, of the conditions set forth in Article VI, the closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m. (eastern daylight standard time) on a Business Day (the “ Closing Date ”) after all the conditions set forth in Article VI (excluding conditions that, by their nature, cannot be satisfied until the Closing) shall have been satisfied or waived in accordance with Section 7.5 or another Business Day to be mutually agreed upon by the Parties; provided that, for the avoidance of doubt, unless the Financing received in satisfaction of the condition in Section 6.2(e) does not include any funding of the Bridge Facility (as such term is defined in the Debt Financing Commitment Letter), the Buyer, Holdings and Merger Sub shall in no event be required to effect the Closing prior to June 28, 2007.  The Closing shall take place at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017.

1.3           Effective Time .

Subject to the provisions of this Agreement, on the Closing Date, the Parties shall cause the Merger to become effective by executing and filing in accordance with the DGCL a certificate of merger with the Secretary of State of the State of Delaware (the “ Certificate of Merger ”), the date and time of such filing, or such later date and time as may be agreed upon by the Parties and specified therein, being hereinafter referred to as the “ Effective Time .”

1.4           Effect of the Merger .

At the Effective Time, the Merger shall have the effects set forth in this Agreement and in Section 259 of the DGCL.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the assets, properties, rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

1.5           Certificate of Incorporation and Bylaws of the Surviving Corporation .

From and after the Effective Time and without further action on the part of the Parties, the Certificate of Incorporation and Bylaws of the Company shall be amended in their entirety to contain only the provisions set forth in the Articles of Incorporation and Bylaws  of Merger Sub as in effect immediately prior to the Merger, except for the name of the Surviving Corporation.

 

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1.6           Directors and Officers of the Surviving Corporation .

(a)           The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Certificate of Incorporation and Bylaws.

(b)           The officers of the Company immediately prior to the Effective Time, with changes and additions thereto as the Buyer may designate in writing to the Company prior to the Effective Time, shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and the Bylaws of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Certificate of Incorporation and Bylaws.

1.7           Conversion of Company Stock, Etc .

(a)           At the Effective Time, by virtue of the Merger and without any action on the part of the Parties or the holders of the following securities, each share of the Company’s Class A Common Stock, par value $0.01 per share (the “ Company Common Stock ”), issued and outstanding immediately prior to the Effective Time (other than (x) any shares of Company Common Stock to be canceled and retired pursuant to Section 1.8 and (y) Dissenting Shares (as defined in Section 1.16)) shall be converted automatically into the right to receive the Merger Consideration in cash, without interest, subject to adjustment as set forth in Section 1.11 and to Section 1.12(c).

(b)           From and after the Effective Time, all shares of Company Common Stock (other than (x) any shares of Company Common Stock to be canceled and retired pursuant to Section 1.8 and (y) Dissenting Shares) shall, without any further action, automatically be canceled and shall cease to exist, and each holder of a certificate which previously represented any such share of Company Common Stock (each, a “ Company Certificate ” and, collectively, the “ Company Certificates ”) shall cease to have any rights with respect thereto other than the right to receive the Merger Consideration such holder is entitled to receive pursuant to this Section 1.7 upon surrender of such certificate in accordance with Section 1.12 hereof, without interest.

(c)           Notwithstanding the foregoing, the Buyer, Holdings or Merger Sub may enter into one or more agreements (each, a “ Contribution Agreement ”) with any one or more holders of Company Common Stock to cause any portion of the Company Common Stock held by such holder to be contributed to Holdings (such shares of Common Stock, the “ Rollover Shares ”) in exchange for shares of common stock of Holdings, on such terms and subject to such conditions as may be set forth in any such Contribution Agreement, and neither any holder executing such a Contribution Agreement nor the Buyer or Holdings shall be entitled to receive any payment with respect to any Rollover Shares subject to such Contribution Agreement; provided , however, that such Rollover Shares shall be considered to be outstanding immediately

 

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prior to the Effective Time for purposes of determining the Merger Consideration and the definition of “Fully Diluted Outstanding Company Common Stock.”

1.8           Cancellation of Shares .

Immediately prior to the Effective Time, each share of Company Common Stock held in the Company’s treasury or owned by the Buyer, Holdings or Merger Sub immediately prior to the Effective Time, shall, without any further action, automatically be canceled and extinguished without any conversion thereof or payment therefore.  At the Effective Time, each share of the Company Common Stock held by any Subsidiary of the Company shall remain outstanding.

1.9           Company Stock Options .

(a)           At or immediately prior to the Effective Time, each option to purchase a share of Company Common Stock (each, a “ Company Stock Option ” and collectively, the “ Company Stock Options ”) outstanding under any Plan or other compensation plan or arrangement of the Company immediately prior to the Effective Time (the “ Company Option Plans ”), whether or not vested or exercisable, shall be cancelled, cease to be outstanding or cease to exist and be converted into the right to receive, and the Company shall pay each holder of a Company Stock Option at or promptly after the Effective Time an amount in cash equal to the excess, if any, of the Merger Consideration over the applicable per share exercise price of such option (less all applicable withholding and employment taxes); provided that to the extent determined necessary or appropriate by the Company, the Company shall obtain the consent of any holder of a Company Stock Option to effectuate the actions contemplated by this Section 1.9(a).

(b)           Notwithstanding the foregoing, the Buyer, Holdings or Merger Sub may enter into one or more agreements (each, a “ Rollover Agreement ”) with any one or more holders of Company Stock Options to cause any portion of the Company Stock Options held by such holder to be rolled over into options exercisable for shares of common stock of Holdings, on such terms and subject to such conditions as may be set forth in any such Rollover Agreement, and any holder executing such a Rollover Agreement shall not be entitled to receive any payment with respect to any Company Stock Options subject to such Rollover Agreement; provided , however, that such Company Stock Options shall be considered to be outstanding immediately prior to the Effective Time for purposes of determining the Merger Consideration and the definitions of “Fully Diluted Outstanding Company Common Stock” and “Aggregate Option Exercise Price.”

1.10         Capital Stock of Merger Sub .

Each share of common stock of Merger Sub, $0.01 par value per share (“ Merger Sub Common Stock ”), issued and outstanding immediately prior to the Effective Time shall be converted automatically into one share of Common Stock of the Surviving Corporation at the Effective Time.   From and after the Effective Time, each stock certificate of Merger Sub which previously represented shares of Merger Sub Common Stock shall evidence ownership of a corresponding number of shares of Common Stock of the Surviving Corporation.

 

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1.11         Adjustments to Merger Consideration.   Without limiting any other provision of this Agreement, the Merger Consideration shall be adjusted, at any time and from time to time, to fully reflect the effect of any stock split, reverse split, stock dividend (including, without limitation, any dividend or distribution of securities convertible into Company Common Stock), reorganization, recapitalization or other like change with respect to Company Common Stock occurring prior to the Effective Time.

1.12         Payment.

(a)           Each holder of Company Common Stock shall surrender to the Buyer at the Closing for cancellation the Company Certificate that immediately prior to the Effective Time represented the outstanding shares of Company Common Stock owned by such holder, accompanied by a transmittal letter in the form mutually agreed upon by the Buyer and the Company (the “ Letter of Transmittal ”), and shall include customary representations and warranties regarding the holder’s title to its shares of Company Common Stock.  At the Closing, each such holder of Company Common Stock shall be entitled to receive upon surrender of such holder’s Company Certificate and delivery of its Letter of Transmittal the Merger Consideration in respect of each share of Company Common Stock represented by such Company Certificate, subject to Section 1.12(b), and the Buyer shall promptly deliver by wire transfer of immediately available funds the Merger Consideration due pursuant to Section 1.7(a) in accordance with the instructions set forth in the Letter of Transmittal.

(b)           If the Merger Consideration due pursuant to Section 1.7(a) is to be delivered to a Person other than the Person in whose name the Company Certificate surrendered in exchange therefor is registered, it shall be a condition to the payment of such consideration that the Company Certificate so surrendered shall be properly endorsed or accompanied by appropriate powers and otherwise in proper form for transfer, that such transfer otherwise be proper and that the Person requesting such transfer pay to the Buyer any transfer or other Taxes payable by reason of the foregoing or establish to the satisfaction of the Buyer that such Taxes have been paid or are not required to be paid.

1.13         Full Satisfaction.

All consideration paid pursuant to Section 1.7(a) or Section 1.9(a) in accordance with the terms thereof shall be deemed to have been paid in full satisfaction of all rights pertaining to the Company Common Stock and the Company Stock Options.

1.14         Closing of the Company’s Transfer Books.

At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of shares of Company Common Stock or Company Stock Options shall be made thereafter.  If after the Effective Time Company Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged as provided in this Agreement.

1.15         Taking of Necessary Action; Further Action.

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If, at any time and from time to time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest in the Surviving Corporation full right, title and possession of all properties, assets, rights, privileges, powers and franchises of the Company, the Buyer and Merger Sub, the officers and directors of the Company and the Surviving Corporation shall be and are fully authorized and directed, in the name of and on behalf of their respective corporations, to take, or cause to be taken, all such lawful and necessary action as is not inconsistent with this Agreement.

1.16         Dissenting Shares.

Each outstanding share of Company Common Stock held by a Company stockholder who has demanded and perfected his or her right to an appraisal of his or her shares of Company Common Stock in accordance with Section 262 of the DGCL and who has not effectively withdrawn or lost his or her right to such appraisal (“ Dissenting Shares ”) shall not be converted into or represent the right to receive Merger Consideration in accordance with Section 1.7, but the holder thereof shall be entitled only to such rights as are granted by Section 262 of the DGCL.  The Company shall give the Buyer prompt notice of any appraisal demands and the Buyer shall have the right to participate in all negotiations and proceedings with respect to such demands.  Without the prior written consent of the Buyer, the Company shall not voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment.  From and after the Effective Time, no stockholder who has properly exercised and perfected appraisal rights pursuant to Section 262 of the DGCL shall be entitled to vote its shares for any purpose or receive payment of dividends or other distributions with respect to its shares (except dividends and distributions payable to shareholders of record at a date which is prior to the Effective Time).

1.17         Withholding.

The Buyer shall be entitled to deduct and withhold or cause to be deducted and withheld from amounts otherwise payable to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to such payments under any provision of federal, state, local or foreign tax Law.  Any amounts so deducted will be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure schedule provided by the Company to the Buyer on the date hereof (the “ Company Disclosure Schedule ”), the Company represents and warrants to each of the Buyer, Holdings and Merger Sub that the statements contained in this Article II are true, complete and correct; provided , however , that the mere inclusion of an item on the Company Disclosure Schedule as an exception to a representation or warranty shall not be

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deemed to be an admission by the Company that such item is or was material or is or was required to be disclosed thereon.  Any matter disclosed, or as to which any exception is made, in any item on the Company Disclosure Schedule shall constitute an exception to each representation and warranty under this Agreement (whether or not the representation contains the phrase “except as set forth on Schedule __” or similar language) where the applicability of the disclosed matter or circumstance to the representation or warranty is reasonably apparent.

2.1           Organization and Qualification; Subsidiaries.

Each of the Company and its Subsidiaries is a corporation or limited liability company validly existing and in good standing under the Laws of its respective jurisdiction of incorporation or formation.  Each of the Company and each of its Subsidiaries is duly qualified or licensed as a foreign corporation or foreign limited liability company to conduct business under the Laws of each jurisdiction where the character of the properties owned, leased or operated by it, or the nature of its activities, makes such qualification or licensing necessary, except where the failure to be so qualified, licensed or in good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.  Each of the Company and its Subsidiaries has provided the Buyer complete and correct copies of its Certificate or Articles of Incorporation and Bylaws or equivalent governing documents, each as amended to date.

2.2           Capital Structure.

(a)           The authorized capital stock of the Company consists of (i) 20,000,000 shares of Company Common Stock and (ii) 1,000,000 shares of Preferred Stock, $0.01 par value per share (“ Company Preferred Stock ”).  The authorized capital stock of each Subsidiary of the Company is set forth on Schedule 2.2(a). All shares of Company Common Stock have the same rights under the Company’s Certificate of Incorporation with respect to the receipt of proceeds in connection with the Merger.

(b)           As of the date hereof:  (i) 12,478,697 shares of Company Common Stock are issued and outstanding as set forth on Schedule 2.2(b); (ii) no shares of Company Preferred Stock are outstanding; (iii) no shares of Company Common Stock are held in the treasury of the Company; (iv) options to purchase an aggregate of 1,834,079 shares of Company Common Stock are outstanding; and (v) no Company Common Stock is owned by any Subsidiary of the Company.  Schedule 2.2(b) sets forth a complete list of the outstanding options to purchase Company Common Stock, including the name of each holder of an option, the Company Option Plan under which such option was issued, the number of shares of Company Common Stock subject to such option, whether such option is vested the exercise price of each such option and the expiration date of each such option.  Except as described above, as of the date hereof, there are no shares of voting or non-voting capital stock, equity interests or other securities of the Company authorized, issued, reserved for issuance or otherwise outstanding.

(c)           All outstanding shares of Company Common Stock and the equity interests in each Subsidiary (“ Subsidiary Capital Stock ”) are, and all shares of Company Common Stock which may be issued pursuant to the Company Option Plans, will be, when

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issued against payment therefore in accordance with the terms thereof, duly authorized, validly issued, fully paid and non-assessable, and not subject to, or issued in violation of, any kind of preemptive, subscription or any kind of similar rights.

(d)           There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into securities having the right to vote) on any matters on which stockholders of the Company may vote.  Except as set forth in Schedule 2.2(d) or as described in subsection (b) above, there are no outstanding securities, options, warrants, calls, rights, commitments or other agreements of any kind to which the Company or any of its Subsidiaries is a party or bound obligating the Company or any of its Subsidiaries to issue, transfer, sell, purchase, redeem or acquire any shares of capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of capital stock of the Company or any of its Subsidiaries.

(e)           All outstanding Subsidiary Capital Stock is owned by the Company, directly or indirectly, free and clear of all liens, charges, encumbrances and claims of any nature (“ Liens ”), except Liens incurred in connection with the ABL Credit Facility and the Senior Secured Notes.  Except for the Subsidiary Capital Stock, neither the Company or any of its Subsidiaries has any interest in any stock, partnership or membership interests or units (whether general or limited) or any other interest or participation that confers on the Company or any of its Subsidiaries the right to receive a share of the profits and losses of, or distribution of assets of, any other Person.

(f)            All of the issued and outstanding Company Common Stock and Subsidiary Capital Stock was issued in compliance in all material respects with all applicable federal and state securities Laws.

(g)           Except as set forth in Schedule 2.2(g), there are no outstanding contractual obligations of the Company or any of its Subsidiaries entitling any Person to cause the Company or any of its Subsidiaries to file a registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”) with respect to the registration of any securities of the Company or any of its Subsidiaries.

(h)           Except as set forth on Schedule 2.2(h), there are no voting trusts, proxies or other agreements, commitments or understandings of any character to which the Company or any of its Subsidiaries, or, to the knowledge of the Company, any of the stockholders of the Company, is a party or by which any of them is bound with respect to the issuance, holding, acquisition, voting or disposition of any shares of capital stock or other security or equity interest of the Company or any of its Subsidiaries.

(i)            Schedule 2.2(i) sets forth a complete list of the Funded Debt as of February 28, 2007, including the balance of each item of Funded Debt as of February 28, 2007 and all letters of credit issued by the Company or any of its Subsidiaries.  The Company has made available to the Buyer all Contracts and other documentation regarding such Funded Debt.

2.3           Authority; No Conflict; Required Filings

 

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(a)           The Company has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger and other transactions contemplated hereby.  The execution and delivery of this Agreement, the performance of its obligations hereunder and the consummation of the Merger and other transactions contemplated hereby, have been duly authorized by all corporate action on the part of the Company, and, no other corporate proceedings are necessary other than, with respect to the Merger, the approval and adoption of this Agreement by the affirmative vote of the holders of a majority of the sum of the outstanding shares of Company Common Stock in accordance with the DGCL and the Company’s Certificate of Incorporation.

(b)           This Agreement has been duly executed and delivered by the Company and (assuming this Agreement constitutes the valid and binding agreement of each of the Buyer, Holdings and Merger Sub) constitutes a valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to:  (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting the enforcement of creditors’ rights generally; and (ii) general principles of equity, including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies, whether such principles are considered at Law or in equity (collectively, the “ Equitable Exceptions ”).

(c)           Except as set forth on Schedule 2.3(c), the execution and delivery of this Agreement do not, and the performance by the Company of its obligations hereunder and the consummation of the Merger and other transactions contemplated hereby will not, conflict with or result in any violation of, or default (with or without notice or lapse of time, or both) under, or require the consent of or notification to any party under, or result in the creation of any Liens in or upon any of the properties or other assets of the Company or any of its Subsidiaries or the creation or acceleration of rights of any Person under any provision of:  (i) the Certificate of Incorporation and Bylaws of the Company or other equivalent organizational documents of any of the Company’s Subsidiaries; (ii) subject to the governmental filings and other matters referred to in paragraph (d) below, any (A) permit, license, franchise, statute, Law, ordinance or regulation or (B) judgment, decree or order, in each case applicable to the Company or any of its Subsidiaries, or by which any of their respective properties or assets may be bound or affected; or (iii) any Company Material Contract (as such term is defined in Section 2.7(a) hereof), except, in the case of clauses (ii) or (iii) above, for any such failures to provide notice, conflicts, violations, defaults or other occurrences, if any, that would not, individually or in the aggregate, result in a Material Adverse Effect on the Company.

(d)           No consent, approval, order or authorization of, or registration, declaration or filing with, any government, governmental, statutory, regulatory or administrative authority, agency, body or commission or any court, tribunal or judicial body, whether federal, state, local or foreign (each, a “ Governmental Authority ”) is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the Merger and other transactions contemplated hereby except for:  (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL; (ii) compliance with any applicable requirements under the

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Exchange Act; (iii) compliance with any applicable state securities, takeover or so-called “Blue Sky” Laws; (iv) compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”); and (v) such consents, approvals, orders or authorizations, or registrations, declarations or filings which if not obtained or made, would not result in a Material Adverse Effect on the Company.

2.4   Financial Statements; Accounts Receivable; SEC Filings .

(a)           The audited consolidated balance sheet of the Company and its Subsidiaries as of December 31, 2003, 2004 and 2005 and the audited consolidated statements of operations and cashflows of the Company and its Subsidiaries for the years ended December 31, 2003, 2004 and 2005 including, in each case, any related notes thereto attached hereto as Schedule 2.4(a) were prepared in accordance with U.S. generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods involved except as may otherwise be indicated in the notes thereto and fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as at the respective dates and the consolidated results of operations and cash flows of the Company and its Subsidiaries for the periods therein indicated (the “ Historical Audited Financial Statements ”).  The audited consolidated balance sheet (the “ Most Recent Balance Sheet ”) of the Company and its Subsidiaries as of December 31, 2006 (the “ Most Recent Balance Sheet Date ”) and the audited consolidated statements of operations and cashflows for the year ended December 31, 2006, attached hereto as Schedule 2.4(b) (the “ 2006 Audited Financial Statements ”), were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved and fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as at the respective dates and the consolidated results of operations and cash flows of the Company and its Subsidiaries for the periods therein indicated.  When delivered to the Buyer in accordance with Section 5.8, the Interim Financial Statements (as defined in Section 5.8) will have been prepared in accordance with GAAP applied on a consistent basis throughout the periods involved and will fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of and for the periods then ended, except for (i) normal year-end adjustments and reclassifications, the effect of which will not, individually or in the aggregate, be materially adverse to the Company and its Subsidiaries and (ii) the absence of footnotes.  Each of the Company and its Subsidiaries maintains systems of internal accounting controls sufficient to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability in conformity with GAAP.

(b)           The accounts receivable reflected on the consolidated balance sheet of the Company and its Subsidiaries as reflected in the 2006 Audited Financial Statements represent bona fide claims of the Company and its Subsidiaries against debtors.  To the Company’s knowledge, such accounts receivable will be collectible in the ordinary course of business, consistent with past practice, subject to reserves reflected in the 2006 Audited Financial Statements.

(c)           Since September 24, 2006, the Company and its Subsidiaries, as applicable, have filed all reports, schedules, forms and other documents and materials required to

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be filed by them with the SEC under the Exchange Act (collectively, the “ Required SEC Reports ”).  The Required SEC Reports, including the financial statements contained therein, (i) were prepared, in all material respects, in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, including all rules and regulations promulgated by the Securities and Exchange Commission thereunder, in each case, as in effect at the time they were filed and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

2.5   Most Recent Balance Sheet .

As of the Most Recent Balance Sheet Date, neither the Company nor any of its Subsidiaries had any material liabilities or obligations of any nature, whether fixed, contingent, accrued or otherwise, liquidated or unliquidated and whether due or to become due, that were not reflected, disclosed or reserved against in the Most Recent Balance Sheet.  Except as set forth on Schedule 2.5 or as reflected in the 2006 Audited Financial Statements included in Schedule 2.4(b), neither the Company nor any Subsidiary of the Company, has any material liability (absolute, accrued, contingent or otherwise) except (i) liabilities that are reflected and reserved against on the Most Recent Balance Sheet, that have not been paid or discharged since the date thereof, (ii) liabilities incurred since the Most Recent Balance Sheet Date in the ordinary course of business consistent with past practice, (iii) liabilities under Contracts to which the Company or any of its Subsidiaries is a party (it being understood that, if required by this Agreement, such Contracts are disclosed on the Company Disclosure Schedule) and (iv) liabilities incurred in connection with the transactions contemplated by this Agreement.

2.6   Absence of Certain Changes or Events .

As of the date hereof, other than in connection with this Agreement and the transactions contemplated hereby, since the Most Recent Balance Sheet Date, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course of business consistent with past practice, and except as set forth on Schedule 2.6, there has not been: (a) any action, event or occurrence which has had a Material Adverse Effect on the Company; or (b) other than as set forth in the 2006 Audited Financial Statements any other action, event or occurrence that would have required the consent of the Buyer pursuant to Section 4.1 had such action, event or occurrence taken place after the execution and delivery of this Agreement other than, with respect to this clause (b), the following in the ordinary course of business consistent with past practice: (i) sales of Parts Inventory, (ii) actions expressly permitted by Section 4.1(b)(iv), (iv) actions permitted by Section 4.1(b)(viii), (v) acquisitions of Rental Fleet, (vi) Capital Expenditures other than acquisitions of Rental Fleet, or incurrence of obligations or liabilities in connection therewith and (vii) actions described in Section 4.1(b)(xvii).

2.7   Agreements, Contracts and Commitments .

(a)           Schedule 2.7(a) identifies, and the Company has made available to the Buyer, true, complete and correct copies of each of the following Contracts to which the

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Company or any of its Subsidiaries is a party to the extent not available in substantially complete form (excluding annexes, exhibits and schedules) on EDGAR (including any Contracts made available on EDGAR by Neff Rental LLC and Neff Finance Corp. pursuant to the Registration Statement on Form S-4, File No.  333-130841) (each, a “ Company Material Contract ” and, collectively, the “ Company Material Contracts ”):

(i)            each Contract that would be required to be filed as an exhibit to a Registration Statement on Form S-1 under the Securities Act or an Annual Report on Form 10-K under the Exchange Act if such registration statement or report was filed by the Company with the Securities and Exchange Commission on the date of this Agreement;

(ii)           any employment agreement (other than (x) Contracts for “at will” employment that do not contain any severance obligations and (y) non-competition Contracts benefiting the Company between the Company and any employee of the Company or any of its Subsidiaries), and any agreement, contract or commitment pursuant to which the Company or any of its Subsidiaries is or may become obligated to make any severance, termination or similar payment to any current or former employee, executive officer or director of the Company or any of its Subsidiaries;

(iii)          any Contract that limits (or would limit after the date hereof) the freedom or ability of the Company or any of its Subsidiaries to compete in any material manner in any line of business or in any geographic area;

(iv)          any Contract (other than Company Stock Options) to which the Company or any of its Subsidiaries is a party (A) relating to the acquisition, issuance, voting, registration, sale or transfer of any securities of any of the Company or any of its Subsidiaries, (B) providing any Person with any preemptive right or any similar right with respect to any securities of any of the Company or any of its Subsidiaries, or (C) providing the Company or any of its Subsidiaries with any right of first refusal with respect to, or right to repurchase or redeem, any securities of the Company or any of its Subsidiaries;

(v)           any Contract (or group of related agreements with the same third parties) under which the Company or any of its Subsidiaries created, incurred, assumed or guaranteed any Funded Debt or letters of credit  (other than Contracts between the Company and any of its Subsidiaries or between Subsidiaries of the Company);

(vi)          any Contract containing “standstill” or similar provisions currently in effect;

(vii)         any Contract that contemplates or involves the payment or delivery of cash or other consideration by or to the Company or any of its Subsidiaries in an amount or having a value in excess of $500,000 in the aggregate, or contemplates or involves the performance of services by or to the Company or any of its Subsidiaries having a value in excess of $500,000 in the aggregate;

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(viii)        any partnership, limited liability company, joint venture or other similar agreement that is material to the Company and its Subsidiaries;

(ix)           Contracts under which the Company or any of its Subsidiaries has (x) lent or promised to lend, or made any other loan or advance to, or other investment in, any other Person, in each case, in excess of $50,000 or (y) lent or promised to lend, or made any other loan or advance to an executive officer or director of the Company or any of its Subsidiaries;

(x)            distribution or franchise Contracts related to the assets or the businesses of the Company or any of its Subsidiaries, except for such Contracts that are cancelable on not more than thirty (30) days’ notice by the Company or any of its Subsidiaries without penalty or increased cost;

(xi)           consulting, agency or advertising Contracts related to the assets or the businesses of the Company or any of its Subsidiaries, and involving payment to or by the Company or any of its Subsidiaries in excess of $250,000, except for such Contracts that are cancelable on not more than thirty (30) days’ notice by the Company or any of its Subsidiaries without penalty or increased cost;

(xii)          Contracts relating to licenses or royalties, whether the Company or any of its Subsidiaries is the licensor or licensee thereunder (other than with respect to off-the-shelf or prepackaged software);

(xiii)         Contracts for the purchase or sale of any business, corporation, partnership, joint venture, association or other business organization or any division, operating unit or product line of the Company or any of its Subsidiaries;

(xiv)        Contracts for the lease (whether the Company or any of its Subsidiaries is lessee or lessor thereunder) or rental of any Rental Fleet with (A) a term of one year or longer or (B) where the aggregate payments under any lease where the Company or any of its Subsidiaries is the lessee thereunder are more than $1,000,000; Schedule 2.7(a)(xiv) lists, as of December 31, 2006, the original cost basis of all Rental Fleet subject to leases where the Company or any of its Subsidiaries is the lessee thereunder required to be disclosed on such schedule pursuant to this clause (xiv);

(xv)         powers of attorney;

(xvi)        Contracts under which the consequences of a default or termination would reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries;

(xvii)       any Contract granting another Person an option to purchase or sell (A) personal property or assets of the Company or any of its Subsidiaries having a value in excess of $500,000 or (B) any Owned Real Property;

 

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(xviii)      Contracts relating to commissions based on amounts paid for the sale, lease or rental of Rental Fleet to be paid by the Company or any of its Subsidiaries to any Person, other than an employee of the Company or any of its Subsidiaries, that are not terminable at the discretion of the Company or any of its Subsidiaries;

(xix)         Contracts relating to suretyship or performance bond, whether the Company or any of its Subsidiaries is the beneficiary or obligor thereunder;

(xx)          Contracts containing material indemnification or contribution obligations of the Company or any of its Subsidiaries, other than pursuant to the Contracts listed pursuant to Section 2.7(a)(viii); and

(xxi)         Government Contracts involving payments in excess of $200,000.

(b)           Neither the Company nor any of its Subsidiaries is currently in material breach of, or has received in writing any claim or threat that it is currently in material breach of, any of the terms or conditions of any Company Material Contract.  Neither the Company nor any of its Subsidiaries has received notice of a claim for indemnification under any Company Material Contract.

(c)           Each Company Material Contract is in full force and effect and, to the knowledge of the Company, no other party to such contract is in default in any material respect.

(d)           Schedule 2.7(d) is a true and complete list as of March 4, 2007 of all purchase orders for Rental Fleet and Property, Plant and Equipment (as defined under GAAP) submitted by the Company or any of its Subsidiaries for which the equipment has not been received by the Company or its Subsidiaries as of the date hereof.

(e)           To the Company’s knowledge, each of the Company’s and its Subsidiaries’ accounting and procurement systems are in compliance in all material respects with all material governmental regulations and requirements applicable to Government Contracts.

(f)            To the Company’s knowledge, with respect to each Government Contract for which performance has not been or was not completed or final payment has not been or was not received, in either case, prior to the date that is three years prior to the date of this Agreement:  (i) the Company and each of its Subsidiaries have complied with all material terms and conditions of such Government Contract; (ii) the Company and each of its Subsidiaries have complied with all material requirement of Law expressly pertaining to such Government Contract; (iii) all facts set forth in or acknowledged by any representations and certifications executed by the Company in connection with a  Government Contract were complete and correct in all material respects as of their effective date, and the Company and each of its Subsidiaries have complied in all material respects with any material obligations imposed by such representations and certifications; (iv) neither the United States Government nor any prime contractor, subcontractor or other Person has notified the Company or any of its Subsidiaries, either orally or in writing, that the Company or any of its Subsidiaries has breached or violated in any material respect any Law, or any material certification, representation, clause, provision or

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requirement pertaining to such Government Contract; and (v) no termination for convenience, termination for default, cure notice or show cause notice is in effect as of the date hereof pertaining to any Government Contract, except any notice that, individually or in the aggregate, has not had, and could not reasonably be expected to have, a Material Adverse Effect on the Company.

(g)           Neither the Company nor any of its Subsidiaries nor to the knowledge of the Company any of their respective directors or officers is (or during the last three (3) years has been) under any material administrative, civil or criminal investigation, or indictment or audit by any Governmental Authority with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract (other than in the ordinary course of business consistent with past practice, such as routine DCAA audits, in which no such irregularities, misstatements or omissions were identified that, individually or in the aggregate, had, or could reasonably be expected to have, a Material Adverse Effect on the Company); and during the last three (3) years, to the Company’s knowledge, neither the Company nor any of its Subsidiaries has conducted or initiated any internal investigation (other than in the ordinary course of business) or made a voluntary disclosure to the United States Government, with respect to any alleged material irregularity, misstatement or omission arising under or relating to any Government Contract.

(h)           To the Company’s knowledge, there are (i) no outstanding claims against the Company or any of its Subsidiaries, either by the United States Government or by any prime contractor, subcontractor, vendor or other third party, arising under or relating to any Government Contract; (ii) no formal disputes between the Company or any its Subsidiaries, on the one hand, and the United States Government, on the other hand, under the Contract Disputes Act or any other Laws; and (iii) and  no disputes between the Company or any of its Subsidiaries, on the one hand, and any prime contractor, subcontractor or vendor, on the other hand, arising under or relating to any Government Contract, except in each case, for any claim or dispute where the amount in dispute is not in excess of $100,000.

(i)            Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge any of its or the applicable Subsidiary’s directors or officers is (or during the last three (3) years has been) suspended or debarred from participation in the award of contracts with any Governmental Authority or has been (or during such period was) found nonresponsible by any Governmental Authority (it being understood that debarment and suspension and nonresponsibility does not include ineligibility to bid for certain contracts due to generally applicable bidding requirements).

(j)            No Government Contract to which the Company or any of its Subsidiaries is a party has an aggregate funded or unfunded backlog in excess of $1,000,000.

2.8           Compliance with Laws .

Each of the Company and its Subsidiaries is in compliance with all federal, state and local statutes, Laws and regulations (including Laws of the United States or any other country), and is not in violation of, and has not received any written claim or notice of violation of, any

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such statutes, Laws and regulations with respect to the conduct of its business or the ownership and operation of its properties and other assets, except for such instances of non-compliance or violation, if any, which would not reasonably be expected to result in a Material Adverse Effect on the Company.

2.9           Material Permits .

(a)           Each of the Company and each of its Subsidiaries holds all federal, state and local governmental licenses, permits, franchises and authorizations material to the conduct of its business as presently conducted and the ownership and operation of its properties and other assets, including, without limitation, export licenses and those that are required under all Environmental Laws (collectively, the “ Material Permits ”).  There are no Permits that are individually material to the conduct of the business of the Company and its Subsidiaries, taken as a whole.

(b)           Each of the Company and each of its Subsidiaries is in compliance in all material respects with the terms and conditions of the Material Permits.

(c)           Each Material Permit is in full force and effect and no action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending or, to the knowledge of the Company, threatened, which seeks to revoke or limit any Material Permit.

2.10         Litigation .

Except as set forth on Schedule 2.10, there is no action, suit, investigation, arbitration, claim, or proceeding pending or, to the knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries or any of their respective assets or properties, or their officers or directors in their capacity as such, before any Governmental Authority or arbitrator which (i) seeks damages (including compensatory, consequential and punitive damages) in excess of $500,000 or seeks injunctive relief or (ii) alleges criminal liability or (iii) would materially and adversely affect the Company’s ability to consummate the transactions contemplated by this Agreement, nor is there any unsatisfied judgment or award or judgment, decree, injunction, rule or order of any Governmental Authority or arbitrator outstanding against the Company or any of its Subsidiaries that would materially and adversely affect the Company’s ability to consummate the transactions contemplated by this Agreement on a timely basis.

2.11         Employee and Labor Matters; Benefit Plans .

(a)           Set forth on Schedule 2.11(a) is a true and complete list of each material Plan.  The Company has heretofore made available to the Buyer true and complete copies of each of the Plans and, to the extent applicable: (i) the actuarial report and financial statements for such Plan for each of the last two years, (ii) the most recent determination or opinion letter from the Internal Revenue Service, (iii) the summary plan description for such Plan (if any), and (iv) the Form 5500 for such Plan (if applicable) for each of the last three years.  The Plans have been operated in compliance in all material respects with their terms and with the applicable requirements of ERISA, the Code, and any other applicable Law.  Each Plan intended to be

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qualified under Section 401(a) of the Code has received a determination or opinion letter and, to the Company’s knowledge, no event has occurred since the date of such determination or opinion letter that is reasonably likely to result in the loss of such tax qualification.  All annual reports on Form 5500 Series (including all required schedules thereto) required to be filed with any governmental entity on or prior to the Closing Date with respect to any Plan have been timely filed or any failure to file can be corrected pursuant to the Department of Labor Delinquent Filer Voluntary Compliance Program.

(b)           None of the Plans, the Company or any of its Subsidiaries has incurred any material liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA or has engaged in any transaction that may result in any such material liability or penalty.  No fiduciary (within the meaning of Section 3(21) of ERISA) has any liability for breach of fiduciary duty or for any other failure to act or comply in connection with the administration or investment of the assets of any Plan that could reasonably be expected to result in any material liability for the Company or any of its Subsidiaries.  There is no pending or, to the knowledge of the Company, anticipated litigation against or otherwise involving any of the Plans, and no litigation (excluding claims for benefits incurred in the ordinary course of Plan activities) has been brought against or with respect to any such Plan, except for any of the foregoing that would not have reasonably be expected to result in any material liability for the Company or any of its Subsidiaries.

(c)           No Plan (i) is or has ever been subject to Title IV of ERISA or Section 412 of the Code, (ii) is or has ever been a multiemployer plan (within the meaning of Section 3(37) of ERISA), or (iii) provides or has ever promised to provide welfare benefits to former employees or their dependents, other than coverage mandated by applicable Law.  None of the Company, any of its Subsidiaries, or any ERISA Affiliate has any liability (whether absolute or contingent) under Title IV of ERISA with respect to any employee pension benefit plan (as defined in Section 3(2) of ERISA) or any multiemployer plan (as defined in Section 3(37) of ERISA) and no event has occurred that could reasonably be expected to result in any such liability to the Company, any of its Subsidiaries, or any ERISA Affiliate.

(d)           Other than as set forth on Schedule 2.11(d), except for rights to severance under the Employment Agreements and Severance Agreements listed in Schedule 2.7(a), none of the Personnel will become entitled to any bonus, retirement, severance, job security or similar benefit or any accelerated or enhanced payment or benefit of any kind (including without limitation payments under any employment agreement, accelerated vesting of any stock option or other equity-based compensation award) as a result of the transactions contemplated by this Agreement (either alone or upon the occurrence of any subsequent event).

(e)           Other than as set forth in Schedule 2.11(e), there is no contract, plan or arrangement (written or otherwise) covering any of the Personnel that, individually or collectively, could give rise to the payment of any amount (i) that would not be deductible pursuant to the terms of Section 162(a)(1) or 404 of the Code (or any corresponding provision of state or local tax Law) or (ii) that would be an “excess parachute payment” pursuant to Section 280G of the Code.  Within the three year period immediately prior to the Closing Date, the

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Company has not made any payments to employees that would fail to be deductible under Section 280G of the Code.

(f)            Neither the Company nor any of its Subsidiaries maintains or otherwise has any liability with respect to any deferred compensation, excess benefit or other non-qualified supplemental retirement plan, program or arrangements.

(g)           As of and including the Closing Date, the Company and its Subsidiaries shall have made all contributions required to be made by them up to and including the Closing Date with respect to their Plan(s).  All notices, filings and disclosures required by ERISA or the Code (including notices under Section 4980B of the Code) have been timely made with respect to each Plan except where any failure to make any such notice, filing or disclosure would not reasonably be expected to result in a material liability for the Company or any Subsidiary.

(h)           Except as set forth on Schedule 2.11(h), no Person or entity has a consulting or independent contractor agreement with the Company or any of its Subsidiaries under which the annual payments exceed $200,000.  No “leased employee” (within the meaning of Section 414(n) of the Code), performs any material services for the Company or any of its Subsidiaries.  Neither the Company nor any of its Subsidiaries has any material liability, whether absolute or contingent, including any obligations under the Plans, with respect to any misclassification of a Person performing services for the Company or any of its Subsidiaries as an independent contractor rather than as an employee.

(i)            No Plan provides for deferred compensation that is not in good faith compliance with the requirements for deferred compensation contained within Section 409A of the Code and the proposed regulations promulgated thereunder. For purposes of confirming that Section 409A of the Code does not apply to the grant of stock options to employees, the Company and its Subsidiaries have a reasonable good faith basis for asserting that each such grant was made at a strike price that was not less than the fair market value of the Company Common Stock on the date of grant and that any adjustments thereto were also in good faith compliance with Section 409A of the Code.

(j)            There are no collective bargaining or other labor union agreements to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound. As of the date hereof, to the Company’s knowledge, there are no organizing activities involving the Company or any of its Subsidiaries pending with any labor organization or group of employees of the Company or any of its Subsidiaries.

2.12         Properties and Assets .

(a)           The Company and each of its Subsidiaries have good and valid title to all of the real property listed under the caption “Owned Real Property” on Schedule 2.12 (the “ Owned Real Property ”) and to their respective interests in personal properties and assets, reflected on the Most Recent Balance Sheet or acquired since the Most Recent Balance Sheet Date, or, in the case of leased real property listed under the caption “Leased Real Property” on Schedule 2.12 (“ Leased Real Property ”) and all other leased properties and assets, valid

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leasehold interests in such properties and assets, in each case free and clear of all Liens except for: (i) Liens consisting of zoning or planning restrictions, easements, rights-of-way, covenants, permits and other restrictions or limitations on the use of real property or irregularities in title thereto which do not materially detract from the value of, or materially impair the use of, such property as it is presently used; (ii) Liens consisting of encumbrances, defects, exceptions, easements, rights of way, restrictions, covenants, claims or other similar charges, which do not materially detract from the value of, or materially impair the use of, such property as it is currently used; (iii) Liens for current Taxes, assessments or governmental charges or levies on property not yet due or which are being contested in good faith and for which appropriate reserves in accordance with GAAP have been created; (iv) mechanic’s, materialmen’s and similar Liens arising in the ordinary course of business (including, without limitation,  by operation of Law); (v) standard exceptions which would be contained in an ALTA Form extended coverage owner’s policy of title insurance (or the locally available form of title insurance policy, as applicable) relating to (A) laws, ordinances and governmental regulations, (B) police power and (C) eminent domain, in each instance, to the extent the same would not constitute a material breach of the other representations made by the Company under this Agreement; and (vi) any Liens granted pursuant to or permitted under the ABL Credit Facility and the Senior Secured Notes (including Liens for after-acquired collateral) (collectively, the “ Permitted Liens ”).

(b)           Schedule 2.12 sets forth a true, complete and correct list of all Owned Real Property and Leased Real Property owned or leased by the Company or any of its Subsidiaries (other than immaterial leases or occupancy agreements executed in the ordinary course of business).  True and correct copies of all of the leases for the Leased Real Property (other than immaterial leases or occupancy agreements executed in the ordinary course of business) have been made available to the Buyer prior to the date hereof.  Each of the Company and its Subsidiaries is in compliance in all