10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2008
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to           

Commission file number:  333-128688

AHERN RENTALS, INC.

(Exact name of registrant as specified in its charter)

Nevada	88-0381960
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
4241 South Arville Street
Las Vegas, Nevada	89103
(Address of principal executive offices)	(Zip Code)

(702) 362-0623

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o           No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes x           No o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x           No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.                           x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o	Non-accelerated filer x
(Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o           No x

As of March 1, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $-0-

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at March 26, 2009
Common Stock no par value per share	1,000 shares

PART I		3
ITEM 1.	BUSINESS	3
ITEM 1A.	RISK FACTORS	11
ITEM 2.	PROPERTIES	18
ITEM 3.	LEGAL PROCEEDINGS	19
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	19
PART II		19
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	19
ITEM 6.	SELECTED FINANCIAL DATA	19
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	30
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	30
ITEM 9A.	CONTROLS AND PROCEDURES	30
ITEM 9B.	OTHER INFORMATION	31
PART III		31
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	31
ITEM 11.	EXECUTIVE COMPENSATION	33
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	36
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE DFA	36
ITEM 14.	PRINCIPAL ACCOUNTANTS’ FEES AND SERVICES	38
PART IV		40
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	40

Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements which are subject to risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this report under “Item 1A - Risk Factors.” You should carefully review the risks described in this report and in other documents we file from time to time with the Securities and Exchange Commission (“SEC”). When used in this report, the words “expects,” “could,” “would”, “may,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “looks for,” “looks to,” and similar expressions, as well as statements regarding our focus for the future, are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the filing of this document.

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PART I

ITEM 1.  BUSINESS

We are the 8th largest equipment rental company in the United States as measured by 2007 rental revenues according to [the Rental Equipment Register] with locations primarily in the southwestern United States. We rent a broad range of equipment, sell new and used rental equipment, sell parts and supplies related to our rental equipment, and sell merchandise used by the construction industry. We also provide maintenance and repair services. We serve a diverse base of customers, including commercial and residential construction companies, industrial companies, utilities, convention centers, municipalities and homeowners. Founded in 1953 with one location in Las Vegas, Nevada, we now offer our rental equipment to customers through our 53 rental branches in Nevada, California, Arizona, Utah, Texas, Oregon, Colorado, New Mexico, Kansas, Oklahoma, New Jersey, and North Carolina. We are an S corporation, incorporated under the laws of the state of Nevada.

As of December 31, 2008, our rental fleet, at original cost, was $827 million and included:

·over 22,400 high reach units, such as scissor lifts, forklifts and boom lifts, at original cost of $647 million; and

·almost 16,000 general rental units, comprised of ground engaging units, such as backhoes, skidsteers, skiploaders and trenchers; and other rental units, including compressors, generators, light towers, welders and other equipment, at original cost of $180 million.

For the year ended December 31, 2008, we generated revenues of $382 million; 67% of our revenues was from high reach equipment rental, 19% from general equipment rental and 14% from the sale of new and used rental equipment and related merchandise, parts and services.

Our principal executive offices are located at 4241 South Arville Street, Las Vegas, Nevada 89103. Our main telephone number is (702) 362-0623, and our web site is http://www.ahern.com. The content of our web site is not part of this report.

Operations

Management structure. We employ what we call a “quality matrix management” organizational structure, which is core to our company culture that we believe differentiates us from our competition.  We manage our business through an executive management team organized by operating disciplines (such as sales, service, and  operations supported by centralized administration (finance, purchasing, information technology, risk management and transportation, growth and development, and facilities and construction) rather than the traditional geographic branch and regional manager hierarchy prevalent in the equipment rental industry.  The vice presidents of the disciplines traditionally have had direct responsibility for the employees and functions within that discipline, and each vice president reports directly to the company’s President and Executive Vice President.  The benefits to this matrix management structure include streamlined information flow, access by branches to all company skill sets, a uniform corporate culture and standardized operating policies and procedures, which ultimately allow us to provide better customer service and achieve higher profitability.

Beginning in 2009, we reorganized responsibilities within sales, operations, and service into four geographic regions, generally represented by the four time zones in the continental United States.  Previously, we had a single vice president for each of sales, operations, and service with responsibility for the entire company within his discipline.  With the reorganization, there are now four regional vice

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presidents for each of sales, operations, and service.  We believe this change in management structure will enable us to better serve our customers and more effectively and efficiently operate the branch locations in the four regions.

The centralized administration disciplines within the executive management team (finance, purchasing, information technology, risk management and transportation, growth and development, and facilities and construction) continue to be managed on a company-wide basis in support of our matrix management by operational disciplines.

Equipment Rentals. Our rental equipment includes a wide array of items from bulldozers and boom lifts to ladders and lawnmowers. Our primary focus is on high reach equipment. The breadth of our rental offerings allows us to meet virtually all of the equipment needs of our customers, from the largest contractor to the individual homeowner.

Floating Fleet.  We have developed and employ an equipment fleet management system, our “floating fleet,” which we believe is distinctive and superior to the equipment sharing concept practiced by many of our competitors, in which equipment is assigned to one branch and then shared with other branches.  In contrast, all of our high reach equipment is assigned to a single centralized cost center and provided to our branches based on customer demand.  The operating costs (primarily maintenance, depreciation and carrying costs) of the floating fleet are allocated to each branch based upon usage.  Our floating fleet strategy encourages our branch managers to focus on increasing revenue and profitability rather than managing equipment.  Accordingly, we can quickly reallocate high reach equipment among branches in accordance with changing customer demand. Most of our other rental equipment, although it may be assigned to individual branches, also is available to any branch based on demand. Using a floating fleet and sharing equipment allows us to respond rapidly to the needs of our customers and to increase the utilization rates of equipment, thereby reducing our capital expenditures and improving our profitability.

We offer our equipment for rent on a daily, weekly and monthly basis. We determine rental rates for each type of equipment based on the cost and expected utilization of the equipment and adjust rental rates at each branch based on demand, length of rental, volume of equipment rented and other competitive considerations.

We have a well-maintained, high-quality rental fleet that has an average age of 30 months as of December 31, 2008 and is supported by an extensive, in-house maintenance program. In addition to routine maintenance, we repaint and refurbish our rental equipment frequently to maintain the appearance and performance of our fleet. Historically, we have made regular and significant capital investments in new equipment and generally do not purchase used equipment for our rental fleet other than from time to time in connection with opening new branches. In making equipment acquisition decisions, we evaluate current economic and market conditions, competition, manufacturer’s availability, pricing and return on investment over the estimated life of the specific equipment, among other factors.

New Equipment Sales. We sell a variety of new high reach and other construction equipment. The equipment we sell is manufactured by JLG Industries, Inc., Skyjack Inc., Snorkel International and others. Because of our strong relationships with equipment manufacturers, we are able to acquire almost any type of equipment our customers need.

Used Rental Equipment Sales. We sell our used rental equipment in the normal course of business primarily through our experienced sales force, or through our branch locations or at auction. We market and sell our used rental equipment and invest in new equipment based on general economic conditions and other factors including:   (1) customer demand, (2) growth opportunities, and (3) management of the size and composition of our fleet.

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Parts, Supplies and Merchandise. We sell a full range of parts and supplies related to our rental equipment, and we also sell merchandise used by the construction industry. Each rental branch stocks parts with high-turnover rates. Our central purchasing facility in Las Vegas stocks a wide array of lower-turnover parts and can ship those parts to a branch where they are needed, usually within one day. Parts availability is also critical to our ability to repair and service our rental equipment and satisfy the demands of our customers.

Equipment Purchasing

All of our new equipment is acquired from reputable national manufacturers that are known for their product quality and reliability.  We believe we have sufficient alternative sources of supply for the equipment we purchase in each of our principal product categories. In 2008, our top 10 suppliers accounted for 86% of our total equipment purchases. We believe our size and the quantity of equipment we acquire enable us to purchase equipment at lower prices and on more favorable terms than many of our competitors. We usually obtain 15 - 50% discounts off retail prices from our major suppliers. We do not enter into long-term supplier commitments to purchase equipment and have the flexibility to cancel orders with our suppliers if expected demand for rental equipment diminishes. We purchase all of our rental equipment centrally to ensure the most favorable and consistent terms from our suppliers.

Parts Purchasing and Supply

We believe the quality and timely availability of parts and service are key competitive factors, significant elements in overall customer satisfaction and strong contributors to the decision to rent equipment.

Each of our branches maintains a full range of high-turnover parts to allow us to repair quickly the equipment we rent and sell. Slower moving parts are stored at our central purchasing facility in Las Vegas for distribution to our branches when needed. We handle all logistical arrangements through an agreement with a nationally recognized overnight courier. We track each branch’s parts inventory through our centralized computer system, which allows us to monitor our overall inventory and adjust its distribution throughout our branches. Through our centralized parts tracking and logistical arrangements, we are able to transfer parts among our branches to maximize utilization.

If parts are unavailable at any of our branches or our central purchasing facility, the experienced purchasing agents at our central purchasing facility will purchase the parts from a manufacturer or supplier, often at previously negotiated prices. Whenever possible, we purchase our parts in volume to take advantage of discounts and other favorable terms. We also have agreements with national suppliers to provide certain items, such as batteries and filters, to our branches. We believe our parts purchasing capabilities are adequate to support our existing branches.

Customers

We serve a diverse customer base, including commercial and residential construction companies, industrial companies, utilities, convention centers, municipalities and homeowners. Customers in construction-related end markets constitute our principal customer base. In 2008, our largest customer accounted for less than 3% of our revenues, and our top 10 customers accounted for less than 11% of our revenues. Many of our customers operate in several of the different markets we serve. We offer these customers the ability to rent equipment on the same terms in each of these regions. Many of our customers have been with us for over a decade.

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We rent equipment, sell related parts and supplies, sell other merchandise used by the construction industry, provide repair services, and sell new equipment and our used rental equipment on account to customers who are screened through a credit application process. Credit account customers are our core customers, accounting for approximately 98% of our revenues in 2008, and our largest source of repeat business. In 2008, approximately 68% of our credit account customers rented equipment three or more times from us. We also assist customers in arranging financing for purchases of large equipment through a variety of sources including manufacturers, banks, finance companies and other financial institutions.  The current economic recession may result in reduced credit availability for our customers (see Item 1A — Risk Factors).

Sales and Marketing

We maintain a strong sales and marketing organization that is committed to building relationships with customers and potential customers, working with customers on an ongoing basis and internally sharing information about new business opportunities. We undertake sales and marketing initiatives designed to increase revenues and market share and build brand awareness. We actively network with decision makers from construction and industrial companies, utilities, convention centers, municipalities and other organizations. We promote brand awareness through involvement in the community. In addition, we prepare marketing analyses that address key business issues such as market and industry history, opportunities, company philosophy, sales trends, consumer behavior trends, distribution channels, pricing issues, target markets, advertising and media analyses, competitive situations and selling strategies. Based on the results of our analyses, we develop additional targeted marketing and sales strategies.

Although our entire executive management is involved in our sales and marketing efforts, our vice presidents of sales are responsible for training, supervising and directing the Ahern Rentals sales force. They are supported by experienced sales managers, each of whom is responsible for overseeing and coordinating sales and marketing activities at one or more of our rental branches, overseeing the mix of equipment at the branches they serve, and keeping abreast of local and regional activity in the end markets we serve.

As of December 31, 2008, we employed 147 salespeople who manage our customer relationships. We train our salespeople both in selling our rental services and selling new equipment and our used rental equipment. Our salespeople use targeted local marketing strategies to address specific customer needs and respond to competitive pressures. Our local sales force focuses on maintaining and building strong relationships with local decision makers in the end markets we serve. In addition, they keep abreast of local market activity by tracking construction, industrial and municipal projects and new and used equipment sales in their area.

Our salespeople are dedicated to maintaining strong relationships with our customers. Our sales structure is customer-account based rather than territory based. Our salespeople serve as the single point of initial contact for all customer needs. They are encouraged to ensure that existing customers continue to choose our company to fulfill their rental needs when those customers expand their operations into new territories. Our salespeople elicit input from customers concerning their equipment needs and communicate this input to our management team. We use this information in our efforts to tailor to local or regional demand the mix of equipment available at each of our rental branches.

Through our performance-based compensation system, salespeople are encouraged to maximize rental rates. This compensation system has permitted us to attract and retain talented salespeople.

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Customer Service and Support

We provide high-quality customer service in every phase of a customer’s rental or purchasing life cycle. We believe high-quality service greatly influences customer satisfaction and retention and allows us to develop and maintain the loyalty of our customers and to enhance our rental rates. Typical services we provide to our customers include:

·assisting the customer with choosing the right equipment for its needs;

·ensuring timely delivery of the equipment;

·setting up on-site rental yards on selected construction and other projects;

·dispatching repair technicians to service equipment or delivering replacement equipment in a timely manner to provide customers with operable equipment as quickly as possible;

·accommodating special requests by customers;

·moving the equipment of our rental customers from one job site to another;

·ensuring strict quality control of our billing and, in the circumstance when we have a payment or other dispute, resolving the dispute quickly; and

·providing access to a broad range of rental equipment through our floating fleet and the sharing of equipment among our branches.

Each customer is assigned to one of our sales representatives who serves as the primary contact for all aspects of the customer relationship and ensures that all of the customer’s needs are met promptly and satisfactorily. Our sales team is available 24 hours a day, seven days a week to respond to customer needs.

Inside Sales.  In addition, we operate a 24/7 centralized inside sales call center that supports our entire sales team and all branch operations.  This inside sales team is extensively trained and has access to our customer and equipment databases to provide the right equipment to our customers when they ask for it and when they need it.  We continually enhance the quality of our customer’s experience in utilizing this service by recording selected phone calls that in turn provide coaching opportunities for our inside sales staff.

Customer Portal.  We provide our customers with self service, web-based access to their account information 24 hours a day.  Through our customer portal, our customers have access to their rental history by type and month, current equipment on rent, open rental contracts, open sales orders, and a summary of open rentals.  Our customers view this portal as a valuable tool to evaluate total jobsite costs, status of open contracts, and a complete summary of account activity.

Our local branches are able to supply equipment and services quickly to our customers in most cases. If a customer’s local branch does not have a particular item, we are able to take advantage of our floating fleet and centralized parts database to access equipment and parts at our other branches, usually within one day. The manager of each branch can obtain an item from another branch by contacting our central purchasing facility in Las Vegas. The central purchasing facility then identifies the nearest branch that has the equipment available and arranges for the equipment to be shipped to the branch where it is

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needed. Our central purchasing facility may also purchase needed equipment if satisfactory equipment is not immediately available in our floating fleet.

We provide customers with equipment operation and safety training, equipment inspection and maintenance services that meet or exceed the standards of the American National Standards Institute and the Security Industry Association, often provided at the customer’s location. We include this training in the rental fees and purchase prices we charge our customers. We believe this training is highly valued by our customers and is an important factor supporting the rental rates we are able to charge.

Growth and Development

Our growth and development department conducts market research on construction activity in potential metropolitan areas and regions in which to establish new branches. We focus on high-growth metropolitan areas to take advantage of strong demand from the construction industry. We also analyze the competitive environment and the demographic outlook of each potential branch location. Once a decision is made to enter a new market, we look for branch sites in industrial areas with convenient freeway access and begin hiring employees to operate the new branch.

Growth at each new location typically occurs in three stages. First, we stock new branches primarily with high reach equipment, including units we already own, to take advantage of our strong expertise in this area. As demand develops at that branch, we add general rental equipment designed for contractor use, as well as additional high reach equipment, followed by ground engaging equipment. Typically, we are able to open a new branch in two weeks or less from the date we obtain possession of the property.

Competition

The equipment rental industry is capital intensive, highly fragmented and characterized by intense price and service competition. We compete through a combination of pricing, service, equipment quality, equipment availability, value and convenience. We compete with independent equipment rental businesses in all of the markets in which we operate, and we compete with equipment manufacturers that sell and rent equipment to customers, directly and through their dealer networks. We also compete with the tool rental centers of national home improvement stores. As a result of industry consolidation in recent years, many of our competitors operate on a regional or national basis. Many of our competitors are significantly larger and have greater financial and marketing resources than we have.

At times, industry-wide price pressures on certain classes of equipment have adversely affected equipment rental companies, and we have, on such occasions, priced our equipment rentals in response to these pressures. Moreover, at times when the equipment rental industry has experienced equipment oversupply, competitive pressure has intensified, with a negative impact on the industry’s rental rates.

We believe we have a competitive advantage over many of our competitors because of our loyal customer base, our reputation for and emphasis on customer service, our ability to provide our customers with new and well-maintained equipment and our ability to transfer equipment in our floating fleet among rental branches in response to changing customer demand. We also believe our entrepreneurial management system and organizational structure enables us to respond to market changes more quickly than many of our competitors.

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Technology

We employ diverse technologies that create a highly scalable and reliable environment. Our information systems allow us to make rapid and informed decisions and respond quickly to changing market conditions.

Supported by a team of over 20 IT professionals, we are able to identify and deploy appropriate technology solutions to address our dynamic business needs.

The core of our information technology infrastructure is our IBM AS/400, a reliable, redundant, and efficient operating platform. The IBM AS/400 is used for our daily operations and supports rental contracts, inventory, dispatch, equipment maintenance, and financial reporting in addition to numerous other essential business functions. Our information technology infrastructure also includes:

·Central Enterprise Data Center. Our critical computer systems are located in a Tier 1, carrier class data center that includes dual independent and redundant power sources, a dedicated back-up generator, multiple key card security checkpoints, a 24x7 controlled environment monitored for both temperature and humidity, pre-action fire protection, water detection, raised floors with positive air ventilation, and other security features.

·Centralized Computing through Thin-Client Technology. Utilizing thin-client technology for user desktops enables quick connections to each of our operating environments. This technology allows us to control security and configuration from one central location, which minimizes our technical staff requirements. System-wide upgrades are also easier and less time- consuming as we simply upgrade the servers located in our Central Enterprise Data Center.

·Wynne Systems’ RentalMan Software. For the past five years, we have been one of the leading developers for RentalMan software. RentalMan is our primary line-of-business software and is used by many of the top rental companies in North America. With full access to RentalMan source code, we are able to enhance the software independently to address our diverse business needs.

·Infor Infinium Financial Management Software. We use Infinium Financial Management software, which is IBM AS/400-based and fully integrated with RentalMan.  Infinium is used for financial reporting, payroll and human resource functions, non-purchase order accounts payable transactions, and fixed asset depreciation.

·Centralized Dispatch and Communication Systems. Our dispatch and communication systems enable our dispatchers to make informed decisions quickly and efficiently, facilitate equipment delivery, and route field service vehicles.  Additionally, all service and delivery vehicles are equipped with GPS tracking units, allowing us to meet our customers’ needs with superior response times.

·BlackBerry Technology. We have deployed more than 800 handheld wireless communication devices, which provide e-mail, telephone, and radio services to our management, sales, and customer service teams. Armed with up-to-the minute information, personnel can make informed, critical business decisions while in the field and away from our networked computer systems.

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·Document Imaging. We employ an integrated document imaging and workflow system that allows us to streamline our business processes, improve efficiency, and preserve document integrity. Documents are captured electronically as they are received or created and are routed through a pre-determined workflow process. This system provides easy access to information, clear separation of duties, and strong internal controls. Remote locations have instant, secure access to the critical information they need. Extensive audit logs and reporting capabilities detailing actions taken on each document further enhance the security of the system.

·Reporting. Our centralized information systems allow us to generate more than 170 scheduled reports providing branch-level operating statistics and metrics such as branch profitability, equipment utilization, return on investment, inventory control, and labor. These reports keep management and other key employees in touch with the business.

·Video Conferencing. Each branch is equipped with state-of-the art video conferencing capabilities. This enables Ahern employees to have direct access to people both within and outside the company without incurring travel expenses. The system allows management to meet and resolve time-sensitive issues quickly. Additionally, the system has the ability to conference all company locations at the same time and is used regularly for company-wide meetings and training.

Seasonality

Our revenues and operating results fluctuate in many of our key markets according to the seasonal rental and purchasing patterns of our customers, with rental and purchasing activity tending to be lower in the winter. This seasonality is accentuated due to higher construction equipment prices during the construction season. As a result of this seasonality, our purchases of equipment and parts have historically increased with stronger demand in the second and third quarters, and our inventory and accounts payable correspondingly increase.

Intellectual Property

We have registered the mark “Ahern Rentals” with the United States Patent and Trademark Office. We own a service mark registered in the state of Nevada that includes the name “Ahern Rentals.” We have registered in the state of Nevada the trade name “Ahern Rentals.” We have also registered in Clark County, Nevada the trade name “Ahern Heavy Equipment.”

Employees

As of December 31, 2008, we had 400 salaried and 1,073 hourly employees, two of whom are members of a labor union. The table below sets forth the number of employees assigned to our various departments as of December 31, 2008.

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Department	Number of Employees
Service	580
Transportation and risk management	328
Operations	191
Sales and marketing	175
Administration, growth and development, and management information systems	111
Purchasing and parts	88
Total	1,473

We believe our entrepreneurial business model and our performance-based compensation program create an attractive working environment for our employees. We believe our relations with our employees are good.

Environmental Matters

Our facilities and operations are subject to comprehensive and frequently changing federal, state and local environmental and occupational safety and health requirements, including those relating to discharges of substances into the air, water and land, the handling, storage, use and disposal of hazardous materials and wastes and the cleanup of properties affected by pollutants. We do not currently anticipate any material adverse effect on our business or financial condition or competitive position as a result of our efforts to comply with such requirements. Although we have made and will continue to make capital and other expenditures to comply with environmental requirements, we do not expect to incur material capital expenditures for environmental controls or compliance in this or the next fiscal year.

In the future, federal, state or local governments could enact new or stricter laws or issue new or stricter regulations concerning environmental and worker health and safety matters, or effect a change in their enforcement of existing laws or regulations, that could affect our operations. Also, in the future, we could discover previously unknown environmental noncompliance or contamination, or contamination may be found to exist at our facilities or off-site locations where we have sent wastes. We could be held liable for such newly discovered noncompliance or contamination. Changes in environmental and worker health and safety requirements or liabilities from newly discovered noncompliance or contamination could have a material adverse effect on our business, financial condition and results of operations.  See “Item 1A.  Risk Factors — We must comply with numerous environmental and occupational health and safety regulations that may subject us to unanticipated liabilities.”

ITEM 1A.  RISK FACTORS

Our business, our 9 1/4% Second Priority Senior Secured Notes due 2013 and our financial performance are subject to the following risks. If any of the circumstances described in these risk factors occurs, our business, results of operations or financial condition would likely suffer and the value of our outstanding notes could be adversely affected.

The effects of the current economic recession have adversely affected our revenues and operating results and may further erode our revenues, operating results, or financial condition.

The recent global economic crisis has reduced demand for equipment rentals and sales, which in turn has negatively impacted, and may continue to have a negative impact on, the value of our rental fleet, which could decrease our borrowing availability.  Additionally, current or potential customers may delay or decrease equipment rentals or purchases, may be unable to pay us for prior equipment rentals, may delay paying us for prior equipment rentals and services, or may be unable to obtain financing for planned equipment purchases.  Also, if the banking system or the financial markets continue to deteriorate or

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remain volatile, the funding for and number of capital projects may continue to decrease, which may further impact the demand for our rental equipment and services.

Decreases in construction, industrial activities or the convention business could adversely affect our revenues and operating results by decreasing the demand for our equipment or the rental rates or prices we can charge.

Our products and services are used primarily in non-residential construction activity and, to a lesser extent, in residential construction activity, industrial activity and the convention business.  The current economic downturn and the resulting decreases in construction and industrial activities in the United States has adversely affected our revenues and operating results and may further decrease the demand for our equipment and the prices we can charge.  By way of comparison, in 2002 and 2003, non-residential construction activity declined significantly from prior periods, which had an adverse effect on our results in 2002 and 2003.  Because of the current economic environment, we have seen similar adverse effects on our results in 2008 and expect this to continue through most, if not all, of 2009.

Certain factors that may cause weakness, either temporary or long-term, in the construction industry include:

·weakness in the economy, the onset of a recession or a prolonged recession;

·an increase in interest rates;

·lack of available financing to fund development projects;

·reductions in corporate spending for plants and facilities or government spending for infrastructure projects;

·adverse weather conditions and natural disasters;

·terrorism or hostilities involving the United States; and

·an increase in the cost of construction materials.

Our operating results are highly dependent on the strength of the Las Vegas economy and that of the other principal markets in which we operate. In 2006, 2007 and 2008, the percentage of our revenues attributable to our Las Vegas operations was 35%, 32% and 29%, respectively. An additional 35%, 33%, and 30% were generated in California. Any future weakness in the Las Vegas or California economies could have a material adverse effect on our operations.

Our substantial debt exposes us to risks.

Our total indebtedness was $611 million at December 31, 2008. Our substantial indebtedness has the potential to affect us adversely in many ways. For example, it will or could:

·increase our vulnerability to adverse economic, industry or competitive developments;

·require us to devote a substantial portion of our cash flow to debt service, reducing funds available for other purposes or otherwise constrain our financial flexibility;

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·affect our ability to obtain additional financing, particularly because substantially all of our assets are subject to security interests relating to existing indebtedness; or

·decrease our profitability or cash flow.

Also, if we are unable to service our indebtedness and fund our operations, we will be forced to seek alternatives that may include:

·reducing or delaying capital expenditures;

·limiting our growth;

·seeking additional capital;

·selling assets; or

·restructuring or refinancing our indebtedness.

If we adopt an alternative strategy, it may not be successful and we may still be unable to service our indebtedness and fund our operations.

If we are unable to obtain additional capital as required, we may be unable to fund the capital outlays required for the success of our business, including those relating to purchasing equipment and to new rental branches. If we expand our operations, we may incur significant transaction expenses and experience additional risks associated with entering new markets.

Our ability to compete, sustain our growth and expand our operations through new branches largely depends on access to capital. If the cash we generate from our business, together with cash on hand and cash that we may borrow under our bank credit facility, is not sufficient to implement our growth strategy and meet our capital needs, we will require additional financing. However, we may not succeed in obtaining additional financing on terms that are satisfactory to us or at all. Due to recent developments and current conditions in the credit and capital markets, financing may not be available to us at acceptable rates or prices.  In addition, our ability to obtain additional financing is restricted by both the indenture governing our notes and the agreements covering our credit facility. Although the terms of our existing debt agreements contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. If we are unable to obtain sufficient additional capital in the future, we may be unable to fund the capital outlays required for the success of our business, including those relating to purchasing equipment and to new rental branches. Furthermore, any additional indebtedness that we do incur may make us more vulnerable to the risks described above relative to our substantial debt levels.

The opening of any new branches or the completion of any future acquisitions of other equipment rental companies may result in significant start-up or transaction expenses and risks associated with entering new markets in which we have limited or no experience. New rental branches, in particular, require significant capital expenditures and may initially have a negative impact on our results of operations. New branches may not become profitable when projected or ever. Our ability to realize the expected benefits from any future acquisitions of other equipment rental companies depends in large part on our ability to integrate and consolidate the new operations with our existing operations in a timely and effective manner. In addition, we may fail or be unable to discover certain liabilities of any acquired business, including liabilities relating to noncompliance with environmental and occupational health and

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safety laws and regulations. Any significant diversion of management’s attention from our existing operations, the loss of key employees or customers of any acquired business, or any major difficulties encountered in opening new branches or integrating new operations could have a material adverse effect on our business, financial condition or results of operations.

The agreements governing our debt contain cross default or cross acceleration provisions that may cause all of the debt issued under such agreements to become immediately due and payable as a result of a default under one of our debt agreements.

Our failure to comply with the obligations contained in the indenture governing our notes and the agreements governing our credit facility or other instruments governing our indebtedness could result in an event of default under the applicable agreement, which could result in the related debt and the debt issued under other agreements becoming immediately due and payable.  In that event, we would need to raise funds from alternative sources, which funds may not be available to us on favorable terms, on a timely basis or at all.  Alternatively, a default could require us to sell our assets and otherwise curtail our operations in order to pay our creditors, or file for bankruptcy protection.  Such alternative measures could harm our business, financial condition and results of operations.

Economic conditions and uncertainties could adversely affect the lenders that are parties to our revolving credit facility.

As of December 31, 2008, we had $30.1 million of unused availability under our revolving credit facility.  Many banks and other financial institutions have been adversely affected by conditions in the banking and financial markets during the past year.  If any of the lenders that are parties to our revolving credit facility experience difficulties that render them unable to fund future draws on the facility, we may not be able to access all or a portion of these funds.  The inability to make future draws on our credit facility could have a material adverse effect on our business, results of operations or ability to maintain the overall quality of our rental fleet.

We depend on key personnel whom we may not be able to retain.

Our future performance depends on the continued contributions of key management personnel. A loss of one or more of these key people, our inability to attract and retain additional key management personnel, including qualified rental store managers, or the inability of these personnel to manage our operations successfully could harm our business and prevent us from implementing our business strategy. We do not maintain “key man” life insurance, and do not have employment agreements with any of our key employees.

The equipment rental industry is highly competitive, and competition could lead to a decrease in our market share or in the rental rates and prices we charge.

The equipment rental industry is highly fragmented and competitive. Our competitors include:

·small independent businesses with one or two rental locations;

·regional competitors that operate in one or more states;

·large national companies, including public companies and divisions of public companies; and

·equipment manufacturers and dealers that both sell and rent equipment directly to customers.

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Many of our competitors are significantly larger and have greater financial and marketing resources than we have, are more geographically diverse than we are and have greater name recognition than we do. We may in the future encounter increased competition in the equipment rental market or in the equipment repair and services market from existing competitors or from new market entrants.

Competition could adversely affect our revenues and operating results by decreasing our market share or depressing the rental rates and prices we can charge. We believe rental rates are one of the primary competitive factors in the equipment rental industry. From time to time, we or our competitors may attempt to compete aggressively by lowering rental rates or prices. To the extent we lower rental rates or prices to attempt to increase or retain market share, our operating margins would be adversely impacted. In some cases, we may not be able to or may choose not to match a competitor’s rate or price reductions. If we do not, we may lose market share, resulting in decreased revenues and cash flow, which could have a material adverse effect on our business.

Disruptions in our information technology systems could adversely affect our operating results by limiting our capacity to effectively monitor and control our operations.

Our information technology systems help us monitor and control our operations to adjust to changing market conditions, including management of our floating fleet. Any disruptions in our information technology systems or the failure of these systems to operate as expected could adversely affect our operating results.

The nature of our business exposes us to liability claims, which may exceed the level of our insurance.

Our business exposes us to claims for personal injury, death or property damage resulting from the use of the equipment we rent, sell, service or repair and from injuries caused in motor vehicle accidents in which our personnel are involved. Our business also exposes us to worker compensation claims and other employment-related claims. We carry comprehensive insurance, subject to deductibles, at levels we believe are sufficient to cover existing and future claims.  Recently and for the first time, we experienced a material loss that was not covered by insurance (see note 6 to our financial statements included in this report and Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Selling, General and Administrative).  Other claims have been made against us that, on their face, far exceeded the level of our insurance. Future claims may exceed the level of our insurance, and our insurance may not continue to be available on economically reasonable terms, or at all. In addition, certain types of claims, such as claims for punitive damages, are not covered by our insurance.  Whether we are covered by insurance or not, certain claims may generate negative publicity, which may lead to lower revenues, as well as additional similar claims being filed.

We must comply with numerous environmental and occupational health and safety regulations that may subject us to unanticipated liabilities.

Our facilities and operations are subject to federal, state and local environmental and occupational safety and health requirements, including those relating to discharges of substances into the air, water and land, the handling, storage, use and disposal of hazardous materials and wastes and the cleanup of properties affected by pollutants. We do not anticipate any material adverse effect on our business, financial condition or competitive position as a result of our efforts to comply with these requirements. However, if we violate environmental laws or regulations, we may be held liable for damages and the costs of remedial actions, and could be subject to fees and penalties. We may violate or incur liability under environmental laws and regulations in the future as a result of human error, newly discovered

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noncompliance, contamination or other causes. These violations or liabilities could have a material adverse effect on our business, financial condition and results of operations.

Under some environmental laws and regulations, an owner or operator of a site or facility may be liable for the costs of removal or remediation of hazardous substances located on or emanating from the site or facility. These laws and regulations often impose strict and, under certain circumstances, joint and several liability without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances.

Some of our business operations at existing and former branches use, or have used, substances which are or may be considered hazardous or otherwise are subject to applicable environmental requirements. As a result, we may incur liability in connection with the use, management and disposal of these substances. We use hazardous materials such as petroleum products for fueling our rental equipment and vehicles and solvents to clean and maintain rental equipment and vehicles. We incur expenses associated with using, storing and managing these materials in compliance with environmental requirements. We also generate and must manage in accordance with applicable environmental laws and regulations certain used or spent materials such as used motor oil, radiator fluid and solvents. We often seek to reuse, recycle or dispose of these spent materials at offsite disposal facilities in accordance with environmental laws and regulations. We could become liable under various federal, state and local laws and regulations for environmental contamination at off-site facilities where our waste has been disposed of, regardless of whether the waste was disposed of in compliance with environmental requirements.

Environmental and safety requirements may become stricter or be interpreted and applied more strictly in the future. In addition, we may be required to indemnify other parties for adverse environmental conditions that are now unknown to us. These future changes or interpretations, or the indemnification for such adverse environmental conditions, could result in environmental compliance or remediation costs not anticipated by us, which could have a material adverse effect on our business, financial condition or results of operations.

We may encounter substantial competition in our efforts to expand our operations.

A key element of our growth strategy is to continue to expand by opening new rental branches. The success of our growth strategy depends in part on identifying sites for new branches at attractive prices. Zoning restrictions often prevent us from being able to open new branches at sites we have identified. We may also encounter substantial competition in our efforts to acquire new sites or in any efforts we may make to acquire other equipment rental companies, which may limit the number of acquisition opportunities and lead to higher acquisition costs. We may not have the financial resources necessary to open any new branches or complete any acquisitions in the future or the ability to obtain the necessary funds on satisfactory terms or at all.

In the past when we have opened new branches, we have attracted talented salespeople who have terminated their employment with other rental companies to work for us. It has become industry practice for equipment rental companies to seek non-competition agreements when they hire salespeople. This practice may hinder our ability to attract talented salespeople to work at new branches, which could prevent us from opening new branches at sites we have identified or result in our failure to realize the expected benefits from any new branch we open.

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We are controlled by one shareholder. His interests may conflict with the interests of the holders of our notes.

Don F. Ahern, our President and Chief Executive Officer, beneficially owns 97% of our outstanding common stock; his brother, John Paul Ahern, Jr., owns the remaining 3% of our outstanding common stock. As a result, Don F. Ahern controls the outcome of matters submitted to a shareholder vote. Circumstances may occur in which the interests of Don F. Ahern, as our majority shareholder, could conflict with the interests of our noteholders and other creditors.  We are also party to a number of lease and other transactions involving entities controlled by Don F. Ahern.  See Note 6 to our financial statements included elsewhere in this report.

We purchase a significant amount of our equipment from a small number of manufacturers. Termination of our relationship with any of those manufacturers could have a material adverse effect on our business because we may be unable to obtain adequate rental and sales equipment from other sources in a timely manner or at all.

We purchase most of our rental and sales equipment from a small number of original equipment manufacturers. For example, we acquired from JLG Industries, Inc. nearly 20% of all rental equipment we purchased in 2008. Although we believe we have alternative sources of supply for the rental and sales equipment and parts we purchase in each of our principal product categories, termination of our relationship with any of these major suppliers could have a material adverse effect on our business, financial condition or results of operations in the unlikely event that we were unable to obtain adequate rental and sales equipment, parts and other supplies from other sources in a timely manner or at all.

Our rental fleet is subject to residual value risk upon disposition.

The market value of any piece of rental equipment could be less than its depreciated value at the time it is sold, in which case, that sale would result in a loss. The market value of used rental equipment depends on several factors, including:

·the market price for new equipment of a like kind;

·wear and tear on the equipment relative to its age;

·the time of year that it is sold (generally prices are higher during the construction season);

·bankruptcy or insolvency of our competitors, which could lead to a larger than expected amount of used equipment for sale in the market, potentially adversely impacting used equipment values;

·worldwide and domestic demand for used equipment; and

·general economic conditions.

Weakness in the non-residential construction market has caused, and may continue to cause, a decrease in the value of used rental equipment, which could negatively impact our borrowing availability.

Fluctuations in fuel costs or reduced supplies of fuel could harm our business.

One of our competitive advantages is the mobility of our fleet. We could be adversely affected by limitations on fuel supplies or increases in fuel prices that result in higher costs of transporting equipment from one branch to another branch.

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If our repair and maintenance and equipment replacement costs increase as our rental fleet ages and we are unable to recoup such costs, our earnings will decrease.

During the third quarter of 2008, we began aggressively scaling back our capital expenditures.  For all of 2008, we had total capital expenditures for rental equipment of $131.1 million.  We expect total capital expenditures for rental equipment in 2009 to be less than half of the 2008 amount based on anticipated customer demand and market conditions.   Because of these substantial reductions in capital expenditures for new rental fleet, the average age of our rental fleet will increase in 2009.  Accordingly, we expect that the cost of repairing and maintaining our rental fleet will likely increase.  Additionally, if the cost of new equipment we use in our rental fleet increases, we may be required to spend more for replacement equipment.  The cost of new equipment may increase due to increased material costs and increases in the cost of fuel, which is used in the manufacturing process and in delivering the equipment to us.  Although such increases did not have a significant effect on our financial condition and results of operations in 2008, any material increase in new equipment and repairs and maintenance costs could adversely affect our revenues, profitability and financial condition.

We may be unable to maintain an effective system of internal control over financial reporting and comply with Section 404 of the Sarbanes-Oxley Act of 2002 and other related provisions of the United States securities laws.

We are required by the terms of the indenture governing our notes to file certain reports, including annual and quarterly periodic reports, under the Securities Exchange Act of 1934.  The current economic downturn and business outlook may require us to cut staff in order to maintain our cash flow.  If this occurs, our internal and disclosure controls and procedures could be adversely effected.  To the extent we are unable to maintain effective internal control over financial reporting and/or disclosure controls and procedures, we may be unable to produce reliable financial reports and/or public disclosure, detect and prevent fraud and comply with our reporting obligations on a timely basis.  Any such failure could harm our business.  In addition, failure to maintain effective internal control over financial reporting and/or disclosure controls and procedures could result in the loss of investor confidence in the reliability of our financial statements and public disclosure and a loss of customers, which in turn could harm our business.

ITEM 2.  PROPERTIES

Our principal executive offices are located in Las Vegas, Nevada. As of March 16, 2009, we operated 53 rental branches in 12 states. We lease the real estate for all of our branches, in most cases from related parties. See “Item 13 — Certain Relationships and Related Transactions, and Director Independence.” We believe our facilities are sufficient for our current needs. Below is an overview of our branches:

States with Ahern Rentals Branches	Number of Locations
California	16
Texas	11
Nevada	9
Utah	5
Arizona	3
Oregon	2
New Mexico	2
Colorado	1
New Jersey	1
Kansas	1
Oklahoma	1
North Carolina	1
Total	53

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With the exception of our corporate headquarters in Las Vegas, Nevada, each of our properties consists of an equipment lot, a shop facility and an office from which we conduct our local rental operations. These properties are not materially different from each other in size, facilities or purpose. Our Las Vegas headquarters consists of offices and an extensive rental yard. Of our 53 leased properties, 41 are leased from related parties. See “Item 13 — Certain Relationships and Related Transactions, and Director Independence.” Each lease with a related party runs through October 27, 2014, unless earlier terminated. Annual aggregate rental payments to related parties and unaffiliated third parties under our property leases were $7,833,469 and $1,338,231, respectively, for 2008.

ITEM 3.  LEGAL PROCEEDINGS

We are party to various litigation matters in the ordinary course of our business. We cannot estimate with certainty our ultimate legal and financial liability, if any, with respect to our pending litigation matters. However, we believe, based on our examination of such matters, that our ultimate liability will not have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

In lieu of a shareholder meeting, on March 9, 2009 our two shareholders, the DFA Separate Property Trust and John Paul Ahern, Jr. voted unanimously by written consent to elect the following individuals to our board of directors, each to serve until his successor is duly elected and qualified or until his earlier death, resignation or removal:  Don F. Ahern, Evan B. Ahern, Howard L. Brown, P. Enoch Stiff and Mark J. Wattles.

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)           There is no public trading market for our common equity. On December 31, 2008, there were two holders of record of our common stock. In 2006, 2007 and 2008, we paid cash distributions to our shareholders in the amount of $8,469,774, $10,963,223 and $9,914,079, respectively. We expect to pay cash distributions in the future. Our ability to pay distributions is limited by our credit facility and the indenture governing our notes. On February 20, 2009, our board of directors declared and paid a distribution to the shareholders of the Company in the amount of $2,350,552, which is in compliance with the provisions of the indenture governing our notes and was approved by the lenders for our credit facility.

(b)           We did not, and our affiliates did not, purchase any of our shares of common equity in the quarter ended December 31, 2008.

ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth selected historical financial data (presented in thousands, except percentages and ratios) of Ahern Rentals, Inc. as of the dates and for the periods indicated. The selected historical financial data as of December 31, 2004, 2005 and 2006 and for the years ended December 31, 2004 and 2005 have been derived from our audited financial statements that are not included in this

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report. The selected historical financial data as of December 31, 2007 and 2008 and for the years ended December 31, 2006, 2007 and 2008 have been derived from our audited financial statements included elsewhere in this report. We have elected to be treated as an S corporation for federal income tax purposes. As a result, our shareholders are taxed directly on their respective shares of our income. Accordingly, no provision or liability for federal and state income tax is included in our financial statements. The following data should be read in conjunction with the financial statements and notes thereto, and with “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Year Ended December 31,
	2004			2005			2006			2007			2008
Income Statement Data:
Revenues:
Equipment rentals and related	$	136,402		$	179,858		$	236,855		$	293,408		$	329,461
Sales of rental equipment	7,256			11,379			16,600			24,918			19,664
Sales of new equipment and other	11,411			12,470			12,531			22,131			32,462
Total revenues	155,069			203,707			265,986			340,457			381,587
Cost of revenues:
Cost of equipment rental operations, excluding depreciation	61,086			75,130			91,927			114,177			135,221
Depreciation, rental equipment	28,412			36,900			54,183			73,482			90,611
Cost of rental equipment sold	5,210			8,197			11,457			17,274			12,428
Cost of new equipment sold and other	8,804			9,969			9,163			17,005			25,971
Total cost of revenues	103,512			130,196			166,730			221,938			264,231
Gross profit	51,557			73,511			99,256			118,519			117,356
Operating expenses:
Selling, general and administrative	22,961			30,417			37,039			47,408			57,754
Depreciation and amortization, non-rental property and equipment	3,006			4,323			5,949			7,435			9,174
Total operating expenses	25,967			34,740			42,988			54,843			66,928
Operating income	25,590			38,771			56,268			63,676			50,428
Other income (expense):
Interest expense	(15,488		)	(33,388		)	(31,152		)	(41,844		)	(43,626		)
Other	187			214			59			84			(118		)
Net income	$	10,289		$	5,597		$	25,175		$	21,916		$	6,684
Other Financial Data:
EBITDA(1)	$	57,195		$	80,208		$	116,459		$	144,677		$	150,095
EBITDA margin(1)(2)	36.9		%	39.4		%	43.8		%	42.5		%	39.3		%
Debt to EBITDA ratio	3.97		x	3.69		x	3.46		x	3.72		x	4.07		x
Depreciation	31,418			41,223			60,132			80,917			99,785
Net cash provided by operating activities	33,588			52,133			93,428			91,031			65,749
Net cash used in investing activities	(13,018		)	(120,950		)	(192,338		)	(213,479		)	(130,848		)
Net cash provided by (used in) financing activities	(20,374		)	69,599			98,898			125,023			62,597

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	As of December 31,
	2004		2005		2006		2007		2008
Balance Sheet Data:
Cash	$	914	$	1,696	$	1,684	$	4,260	$	1,758
Rental equipment, net	180,169		262,843		392,084		518,205		546,057
Total assets	260,406		357,180		509,528		694,351		708,000
Total debt	217,711		295,723		403,329		538,412		611,198
Total stockholders’ equity	24,320		29,917		46,622		57,575		54,344

(1)EBITDA is defined as earnings before interest, taxes, depreciation, and amortization. We present EBITDA because we believe EBITDA is a useful analytical tool for assessing our financial performance, including our ability to meet future debt service obligations and capital expenditure and working capital requirements. EBITDA is not, however, a measure of financial performance or liquidity under U.S. generally accepted accounting principles. Accordingly, EBITDA should not be considered a substitute for net income or cash flows as an indicator of our operating performance or liquidity. The table below provides a reconciliation of net income and EBITDA for the periods indicated.

	Year Ended December 31,
	2004		2005		2006		2007		2008
Net income	$	10,289	$	5,597	$	25,175	$	21,916	$	6,684
Interest expense	15,488		33,388		31,152		41,844		43,626
Depreciation, rental equipment	28,412		36,900		54,183		73,482		90,611
Depreciation and amortization, non-rental property and equipment	3,006		4,323		5,949		7,435		9,174
EBITDA	$	57,195	$	80,208	$	116,459	$	144,677	$	150,095

(2)EBITDA margin is defined as EBITDA as a percentage of total revenues.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial statements and accompanying notes included in this report

Overview

Through our network of 53 equipment rental branches, we rent a full range of equipment, sell our used rental equipment, new equipment, parts, supplies and related merchandise, and provide maintenance, repair and other services that supplement our rental activities. The types of equipment we rent range from a fleet of high reach and earth engaging units to hand tools. Accordingly, our business is capital intensive, and our profitability and cash flows depend upon the availability and terms of financing. See “— Liquidity and Capital Resources”.

Our revenues are affected primarily by changes in the level of investment in new equipment for our rental fleet, openings of new branch locations and the relative strength of the economies in the geographic regions in which we operate. For financial reporting purposes, our revenues are divided into three categories:

·Equipment rentals and related includes revenues from renting equipment and related revenues such as the fees we charge for equipment delivery, damage waivers, repair of rental equipment and fuel. For the year ended December 31, 2008, revenues from equipment rentals and

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related accounted for approximately 86% of our total revenues. Of equipment rentals and related revenues in that period, 67% were attributable to rentals of high reach equipment, 19% to rentals of general rental equipment, including ground engaging equipment, and 14% to rental related revenues.

·Sales of rental equipment represent revenues from the sale of our used rental equipment. For the year ended December 31, 2008, these revenues accounted for approximately 5% of our total revenues.

·Sales of new equipment and other is primarily revenues from the sale of new equipment, merchandise and supplies. For the year ended December 31, 2008, these revenues accounted for approximately 9% of our total revenues.

Equipment rental revenues are affected by several factors including general economic conditions and conditions in the nonresidential construction industry in particular, the amount and quality of equipment available for rent, rental rates, the mix and percentage of equipment rented, length of time the equipment is on rent, and weather. We use “dollar utilization” to measure the interaction of changes in rental rates, product mix, average length of rental, and time utilization. Dollar utilization is the annualized ratio of equipment rentals and related revenues for a period to the average original cost of our rental fleet during that period. Revenues from the sale of used equipment are affected by price, general economic conditions, the amount and type of equipment available in the marketplace, and the condition and age of the equipment. Consequently, the age and mix of equipment in our rental fleet has a direct impact on these revenues. Other revenues, including revenues from the sale of new equipment and from the sale of parts, supplies and maintenance and repair services, are affected by price and general economic conditions.

For financial reporting purposes, our cost of revenues is divided into four categories.

·Cost of equipment rental operations, excluding depreciation includes branch personnel costs, the cost of repairing and maintaining rental equipment and our service and delivery vehicles, fuel costs and other costs of transporting our rental equipment (excluding depreciation on our fleet of service and delivery vehicles), occupancy costs and supply costs for our rental locations.

·Depreciation of rental equipment.

·Cost of rental equipment sold which represents the net book value of rental equipment sold.

·Cost of new equipment sold and other includes the cost of the items we sell, including new equipment, parts, merchandise and supplies.

Operating expenses include all selling, general and administrative expenses (“SG&A”) and depreciation and amortization on non-rental property and equipment. Non-rental property and equipment mainly includes our fleet of service and delivery trucks, furniture and fixtures, and leasehold improvements.  SG&A expenses include primarily sales force compensation, information technology costs, administrative payroll, marketing costs, professional fees, and property and casualty insurance.

Our cost of revenues and operating expenses also include lease expense for rental branches and other facilities, several of which we lease from affiliates. See “Item 13 — Certain Relationships and Related Transactions, and Director Independence.”

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Our operating results are subject to annual and seasonal variations resulting from a variety of factors, including overall economic conditions, construction activity in the geographic regions we serve, the competitive supply of rental equipment, the number of our significant competitors and, to a lesser extent, seasonal rental patterns resulting from lower activity by our customers during the winter. The expansion or contraction of our network of rental branches also causes fluctuations in our revenues and operating results, particularly as a result of the timing of new branch openings and expenditures related to those openings. Thus, the results of any period are not necessarily indicative of the results that may be expected for any other period.

In addition, our operating results are highly dependent on the strength of the economy of Las Vegas, Nevada. In 2006, 2007, and 2008, the percentage of our total revenues attributable to our Las Vegas operations was 35%, 32%, and 29%, respectively. The rapid growth experienced by the Las Vegas area in recent years has contributed significantly to our revenues.  Based on anticipated customer demand and market conditions, we do not believe that the strong operating results we have historically experienced in Las Vegas will continue at the same or similar levels in 2009 or beyond.  Because of this and also due to the economic slowdown in general, we have been diversifying, and plan to continue to diversify, our business by opening branch locations in new markets.  This strategy enables us to improve the utilization of our rental fleet by moving unutilized fleet from existing branch locations to new markets.  We determine the markets to open branch locations through extensive economic and demographic studies and also evaluate markets that may already be complementary to our existing branch locations.  Opening new branch locations does not require significant capital because most of the fleet that will be deployed in a new branch will be moved from existing branches.

In response to the economic slowdown that began last year, which has caused our utilization levels to decrease, we have significantly reduced our capital expenditures.  In 2007 we spent approximately $240 million on capital expenditures but reduced that to around $150 million in 2008.  We expect 2009 capital expenditures to be less than half of the amount spent in 2008.  A consequence of reduced capital expenditures is that the average age of our rental fleet will likely increase, leading to increased repair, maintenance, and equipment replacement costs.  See “Item 1A. Risk Factors.”

We have elected to be treated as an S corporation for federal income tax purposes. Accordingly, our shareholders are taxed directly on their respective shares of our income, and no provision or liability for federal and state income tax is included in our financial statements. During the periods presented herein, our shareholders have not been required to pay income tax on their respective shares of our income because of the availability to our shareholders of excess depreciation on rental equipment, net operating losses and suspended losses due to at-risk basis limitations. We may, however, need to make future distributions to our shareholders to cover future tax liability they may incur with respect to our income. Our indenture generally allows us to make such distributions, with some limitations.

Recent Developments

Management structure. Beginning in 2009, we reorganized responsibilities within sales, operations, and service into four geographic regions, generally represented by the four time zones in the continental United States.  Previously, we had a single vice president for each of sales, operations, and service with responsibility for the entire company within his discipline.  With the reorganization, there are now four regional vice presidents for each of sales, operations, and service.  We believe this change in management structure will enable us to better serve our customers and more effectively and efficiently operate the branch locations in the four regions.

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The centralized administration disciplines within the executive management team (finance, purchasing, information technology, risk management and transportation, growth and development, and facilities and construction) continue to be managed on a company-wide basis in support of our matrix management by operational disciplines.

In November 2008, we opened our 49th and 50th branches in San Antonio and Austin, Texas.  We lease both of these branches from unrelated parties.  In 2009, we opened three more branches in Waco and Odessa, Texas and Charlotte, North Carolina.  We lease the real property on which three these branches are located from an affiliated entity controlled by Don F. Ahern, our President, Chief Executive Officer, and majority shareholder.

Key operating results for the first two months of 2009 compared to the same period in 2008 are as follows:  Rental and related revenues are down 17%, revenues from sales of rental equipment are down 62%, average rental rates have decreased 13%, and average time utilization of our high reach equipment decreased to 56% from 66%.

Results of Operations

2008 Compared to 2007 Compared to 2006 Revenues

Revenues in 2008 increased 12% over 2007. Revenues in 2007 increased 28% over 2006. The primary factors contributing to the changes are discussed below.

Equipment rentals and related revenues. Equipment rentals and related revenues in 2008 increased 12%, or $36 million, over 2007.  These revenues accounted for 86% of our total revenues for 2008 and 2007.  Same branch revenues increased 11%, or $31 million; the remaining $5 million increase in revenues is from seven new stores opened in 2008, five of which were opened in the second half of 2008.  Additionally, the increased revenues resulted from an increase in the number of units available for rent as a result of capital expenditures that increased the average original cost of our rental fleet to $794 million in 2008 from $639 million in 2007, offset by a decrease in our dollar utilization to 42% in 2008 from 46% in 2007.  Average rental rates decreased 4% in 2008 and average time utilization of our high reach equipment decreased to 67% in 2008 compared to 70% in 2007.

Equipment rentals and related revenues in 2007 increased 24%, or $57 million, over 2006. These revenues accounted for 86% and 89% of our total revenues for 2007 and 2006, respectively. Same branch revenues increased 19%, or $46 million; the remaining $11 million increase in revenues is from nine new stores opened in 2007. Additionally, the increased revenues resulted from an increase in the number of units available for rent as a result of capital expenditures that increased the average original cost of our rental fleet to $639 million in 2007 from $474 million in 2006, offset by a decrease in our dollar utilization to 46% in 2007 from 50% in 2006. Average rental rates increased 3% in 2007 and average time utilization of our high reach equipment decreased to 70% in 2007 compared to 73% 2006.

Sales of rental equipment. Sales of rental equipment in 2008 decreased 21% compared to 2007 due mainly to an 18% decrease in the number of units sold in 2008.  The decrease in revenue can be attributed to softening in the used equipment markets and the mix of equipment sold.

Sales of rental equipment in 2007 increased 50% over 2006.  This increase is attributed to the growth in our rental fleet and the strong retail and secondary market demand for rental equipment in 2007. We sold 37% more equipment units in 2007 compared to 2006; this is comprised of 75% more equipment units sold at auction and 24% more equipment units sold through retail channels.  In 2007, we placed increased emphasis on selling equipment at auctions because profit margins realized at auctions were comparable to sales through retail channels and it provided an effective means to dispose of older and under-utilized equipment.

Sales of new equipment and other revenues. Sales of new equipment and other revenues in 2008 increased 47% over 2007.  Approximately $4.9 million of the increased revenues relates to the sale of a group of new equipment units held for resale; these units were sold in March 2008.  Excluding this

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transaction, sales of new equipment and other revenues in 2008 increased 25% over 2007, mostly due to a 17% increase in new equipment sales revenue and a 44% increase in merchandise sales revenue.  In 2008, we sold just over twice as many new equipment units than in 2007 resulting in approximately $2.3 million in increased revenues.  The increased new equipment sales volume is mainly attributable to the hiring of a sales manager in the summer of 2007 who provides support and coaching of the sales force on new equipment sales.  Merchandise sales increased approximately $2.8 million in 2008 due to increased emphasis on such sales.

Sales of new equipment and other revenues in 2007 increased 77% over 2006. This change resulted from:  (1) an increase of 128%, or $8 million, in the sale of new equipment due to increased emphasis on such sales, and (2) an increase of 32%, or $2 million, in merchandise and other revenue due to increased emphasis on merchandise sales.

Cost of Revenues

Cost of revenues in 2008 increased 19% over 2007. Cost of revenues in 2007 increased 33% over 2006. As a percentage of revenues, cost of revenues was 69%, 65% and 63% for 2008, 2007 and 2006, respectively. The primary factors contributing to the changes are described below.

Cost of equipment rental operations, excluding depreciation. Cost of equipment rental operations, excluding depreciation, in 2008 increased 18% over 2007.  The increase is due to increased payroll costs, repairs and maintenance costs, freight costs, and rent and facilities expenses related to the increase in revenues and the opening of seven new rental branches in 2008.  As a percentage of equipment rentals and related revenues, cost of equipment rental operations was 41% in 2008 compared to 39% in 2007; the increase is due mainly to the opening of seven new rental branches in 2008, five of which opened in the second half of 2008.

Cost of equipment rental operations, excluding depreciation, in 2007 increased 25% over 2006. The increase is due to increased payroll costs, repairs and maintenance costs, and rent and facilities expenses related to the increase in revenues and the opening of nine new rental branches in 2007. As a percentage of equipment rentals and related revenues, cost of equipment rental operations was 39% in 2007 and 2006.

Depreciation, rental equipment.  Depreciation, rental equipment in 2008 increased 23% over 2007 due to the increased investment in our rental fleet described previously under the caption “—Revenues — Equipment rentals and related revenues.”

Depreciation, rental equipment in 2007 increased 36% over 2006 due to the increased investment in our rental fleet described previously under the caption “—Revenues — Equipment rentals and related revenues.”

Cost of rental equipment sold.  Cost of rental equipment sold in 2008 decreased 28% compared to 2007.  This decrease is due to the 21% decrease in revenue from the sale of rental equipment described under the caption “—Revenues — Sales of rental equipment”, and because our profit margins improved in 2008 due mainly to the mix of equipment sold.  The main cost of rental equipment sales is the net carrying value of the sold equipment, which averaged 63% in 2008 and 69% in 2007.

Cost of rental equipment sold in 2007 increased 51% over 2006 principally as a result of the 50% increase in the sales of rental equipment described under the caption “—Revenues — Sales of rental equipment.” The net carrying value of the sold equipment averaged 69% of the selling price in both 2007 and 2006.

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Cost of new equipment sold and other. Cost of new equipment sold and other in 2008 increased 53% over 2007.  Approximately $5.1 million of the increased cost of revenues relates to the sale of a group of new equipment units held for resale; these units were sold in March 2008.  Excluding this transaction, cost of new equipment sold and other in 2008 increased 23% over 2007 mostly due to the 25% increase in new equipment and merchandise sold described under the caption “—Revenues — Sales of new equipment and other revenues.”

Cost of new equipment sold and other in 2007 increased 86% over 2006. This increase is due mainly to the 77% increase in other revenues described under the caption “—Revenues — Sales of new equipment and other revenues.”

Selling, General and Administrative

SG&A in 2008 increased 22% over 2007 due to increases in  payroll costs, rents, travel, legal and professional fees, and other miscellaneous administrative costs resulting from the growth of our rental fleet and business.  In September 2008, we recorded a $1.1 million expense related to a legal settlement.  Excluding the effects of this legal settlement, SG&A in 2008 increased 20% over 2007.  As a percentage of total revenues, SG&A was 15% for 2008 and 14% for 2007.

SG&A in 2007 increased 28% over 2006 due to increases in payroll and related costs, rents, travel, professional fees, and other miscellaneous administrative costs. However, as a percentage of total revenues, SG&A remained the same at 14% for both 2007 and 2006.

Depreciation and Amortization, Non-Rental Property and Equipment

Depreciation and amortization, non-rental property and equipment in 2008 increased 23% over 2007 due to an increased investment in non-rental equipment to an average original cost of $88 million in 2008 from $69 million in 2007.

Depreciation and amortization, non-rental property and equipment in 2007 increased 25% over 2006 due to an increased investment in non-rental equipment to an average original cost of $69 million in 2007 from $53 million in 2006.

Interest Expense

Interest expense in 2008 increased 4% over 2007 primarily due to higher average debt balances in 2008 of $600 million compared to $473 million in 2007 incurred to fund the growth in our fleet of rental and non-rental equipment.  The effect of the increased debt was offset by a decrease in our aggregate weighted average interest rate to 6.9% in 2008 from 8.4% in 2007, primarily due to decreases in the LIBOR index rate applicable to amounts outstanding under our revolving credit facility.  See “---Liquidity and Capital Resources.”

Interest expense in 2007 increased 34% over 2006 due to higher average debt balances in 2007 of $473 million compared to $350 million in 2006 incurred to fund the growth in our fleet of rental and non-rental equipment. Our aggregate weighted average interest rate was 8.4% in both 2007 and 2006.

Critical Accounting Estimates and Policies

We prepare our financial statements in accordance with United States generally accepted accounting principles (“GAAP”).  Our significant accounting policies are described in Note 1 to our financial statements included elsewhere in this report.  Many times, the application of accounting

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principles requires management to make assumptions, estimates and judgments which are often subjective and may change based on changing circumstances or changes in our analysis.  Actual results could differ materially from our calculated estimates although we believe our estimates are reasonable and appropriate.  The following is a summary of what we believe are the critical accounting estimates and policies for our company that, if we were to change underlying assumptions, estimates or judgments, could produce materially different results.

Depreciation Methods and Asset Lives. We depreciate rental equipment and other property by the straight-line method to an estimated salvage value (10% of original cost) over the estimated useful lives of the assets. The estimated useful life of an asset is determined based on our expectation of the period over which the asset will generate sufficient revenues and profits. Estimated salvage value is determined based on our expectation of the minimum value we will realize from disposition of the asset after such period.

Allowance for Collection Losses. An allowance for collection losses of trade receivables is maintained at levels we believe adequately provide for such estimated losses. In determining the allowance, we consider economic conditions generally, the financial condition of specific customers, the value of any underlying collateral, including the effect of mechanics’ liens on construction projects, prices and volumes in used equipment markets, historical write-offs relationships to revenues and receivables, and other factors we believe are relevant. We review the adequacy of the allowance monthly.

Revenue and Cost Recognition. A rental contract may be daily, weekly, or monthly. To enable us to recognize revenue from equipment rentals in the period earned, over the contract term, regardless of the timing of the billing to customers, we record unbilled rental revenue and deferred revenue as necessary, based on the status of open rental contracts as of the end of the reporting period. Revenues from the sale of our used rental equipment and inventories of new equipment and other merchandise and services are recognized at the time of delivery of the product or service to the customer.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements that are not yet effective and that management believes are likely to have a significant effect on our future financial statements.

Liquidity and Capital Resources

Indebtedness

Credit Facility.  We have a $350 million revolving credit facility secured by a first priority interest in substantially all of our existing and future acquired assets.  As of December 31, 2008, we had $319.4 million outstanding and $30.1 million of unused availability under the credit facility. This credit facility is used to finance ongoing working capital needs, capital expenditures, and for general corporate purposes. Cash flow from operations and net proceeds from the sale of our used rental equipment are applied to reduce borrowings under our credit facility, and our expenditures for rental equipment and other property and equipment increase borrowings under our credit facility.  At any time that borrowing availability falls below $25 million, the facility requires us to report financial covenants for the most recently completed quarter for which financial statements have been issued and each quarter thereafter unless borrowing availability returns above $25 million for 20 consecutive business days, at which time the requirement to report financial covenants ceases.  The financial covenants required to be maintained, when the reporting requirements described above are triggered, include a minimum fixed charge coverage ratio of not less than 1.00 to 1.00, a maximum total funded debt to EBITDA ratio of between 4.60 to 1.00 and 4.50 to 1.00 (depending on the then current fiscal quarter) and a minimum time utilization ratio of 45%. The credit facility contains other usual and customary covenants and default provisions.

As of December 31, 2008, the credit facility had a weighted average interest rate of 3.9% per annum. The credit facility matures August 21, 2011.

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Second Priority Senior Secured Notes. At December 31, 2008, we had outstanding $290 million principal amount of 9 1/4% Second Priority Senior Secured Notes (the “Second Priority Notes”). These notes are due August 15, 2013 and are secured on a second priority basis, behind the credit facility, by substantially all of our existing and future acquired assets.

As of December 31, 2008, the weighted average interest rate on our total debt of $611.2 million was approximately 6.4%.

Loan Covenants and Compliance. As of December 31, 2008, we were in compliance with the covenants and other provisions of our credit facility and the Second Priority Notes.

Credit Rating.  Our credit ratings relating to the Second Priority Notes as of March 20, 2009 were as follows:

Moody’s:              Caa3

Standard & Poor’s:          B+

Both our ability to obtain financing and the related cost of borrowing are affected by our credit ratings, which are periodically reviewed by these rating agencies. Our current credit ratings are lower than they have been in the past, and we expect our access to the public debt markets to be limited as long as our ratings remain at their current levels.

Liquidity and adequacy of capital resources

Our business is capital intensive. We purchase new equipment both to expand the size and maintain the age of our rental fleet. For 2008, 2007, and 2006, we had total expenditures on rental equipment of $131.1, $216.5 and $195.2 million, respectively.  During the third quarter of 2008, we began aggressively scaling back our capital expenditures; we expect rental equipment expenditures to decrease substantially in 2009 based on anticipated customer demand and market conditions.  However, if demand for rental equipment from our customers increases, expenditures to purchase new rental equipment, replace used rental equipment, and purchase transportation equipment could be higher than we currently expect subject to the availability of financing.

We manage our liquidity using cash management practices that project our future sources and uses of cash taking into consideration the legal requirements of our financing agreements. Our principal existing sources of cash are generated from operations and from the sale of rental equipment and borrowings available under our credit facility. Our current and expected long-term cash requirements consist primarily of expenditures to fund operating activities and working capital, to purchase new rental equipment, and to meet debt service obligations.

The United States is currently experiencing a recession accompanied by, among other things, reduced credit availability and highly curtailed construction activities.  The effects and duration of these developments and related risks and uncertainties on the Company’s future operations and cash flows are difficult to estimate at this time but may be significant.  See Item 1A. — Risk Factors.

In response to the economic recession, the effect of which began last year and which has caused our utilization levels to decrease, we have significantly reduced our capital expenditures.  In 2007, we spent approximately $240 million for capital expenditures but reduced that to around $150 million in 2008.  We expect our 2009 capital expenditures to be less than half of the amount spent in 2008.

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A consequence of reduced capital expenditures is that the average age of our rental fleet will likely increase.

We believe that, subject to the effects of further economic developments and the outcome of related uncertainties, our existing sources of liquidity will be sufficient to meet the cash requirements of our operations for at least the next twelve months. To the extent the sources of liquidity described above are not sufficient to fund our operations, we may require additional debt or equity financing, access to which will be affected by prevailing economic conditions and financial, business, and other factors, some of which are beyond our control. In addition, our ability to access additional or alternative sources of capital is restricted by the indenture governing our Second Priority Notes and the terms of the agreements governing our credit facility.

Sources and uses of cash. Net cash provided by operating activities for 2008 decreased by $25.3 million compared to 2007 mainly from the deferral of approximately $20 million of cash payments from 2007 into 2008 for new equipment acquired in 2007.  Net cash used in investing activities for 2008 decreased by $82.7 million compared to 2007 primarily due to planned reductions in capital expenditures, realized primarily in the second half of 2008.  Net cash provided by financing activities for 2008 decreased by $62.4 million compared to 2007 primarily due to lower net borrowings caused by our planned reductions in capital expenditures.

Contractual Obligations

At December 31, 2008, we had total payments due under our various contractual obligations as follows (amounts in thousands).

Type of Obligation	Total		Less than one year		1-3 years		3-5 years		Longer
Credit facility (1)	$	353,377	$	12,506	$	340,871	$	—	$	—
Second Priority Notes (1)	424,125		26,825		53,650		343,650		—
Other note payable (1)	2,071		208		423		433		1,007
Operating lease obligations: (1)
Real estate	57,665		9,549		19,408		19,753		8,955
Other	5,267		660		1,342		1,374		1,891
TOTAL	$	842,505	$	49,748	$	415,694	$	365,210	$	11,853

(1)Payments due with respect to a period represent (i) in the case of our credit facility, other debt and the Second Priority Notes, the scheduled principal and interest payments due in the period and (ii) in the case of operating leases, the minimum lease payments due in the period under non-cancelable operating leases. Interest amounts on our credit facility are based on $319.4 million outstanding as of December 31, 2008 and the then applicable rate of interest of 3.9% per year. To the extent amounts are outstanding under our credit facility, we will be obligated to make required payments of principal and interest when due. Interest amounts on other debt are based on annual interest of 2.9% on $1.8 million outstanding as of December 31, 2008. We pay 9.25% interest semi-annually on the Second Priority Notes.

Inflation

Inflation has not had, and we believe it is not likely in the foreseeable future to have, a material impact on our results of operations.

Off-Balance Sheet Transactions

In April 2006 and October 2007, we entered into separate operating lease agreements, each for a corporate aircraft.  Additionally, we lease real estate under operating leases as a regular business activity.  See Note 6 to our audited financial statements included elsewhere in this report.

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ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The fair value of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of our long-term fixed interest rate debt at December 31, 2008 was $58 million; its carrying value was $290 million. Estimated fair values were determined by reference to quoted market prices.

The interest on borrowings under our credit facility is at variable rates based on a financial performance test. Borrowings under the credit facility accrue interest at either (a) prime rate plus zero to 50 basis points for prime rate loans, or at our option (b) LIBOR plus 175 to 225 basis points for LIBOR based loans; the rates charged will fluctuate within these ranges depending on our leverage ratio. In addition, our credit facility has an annual unused line fee of 25 basis points for each lender’s unused commitments under the revolving credit line. An increase in interest of 100 basis points would increase our annual interest expense by $3.2 million based on $319.4 million, which was the amount of outstanding debt under our credit facility as of December 31, 2008.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements required by this item are submitted as a separate section of this report. See Item 15 (a)(2) for a listing of financial statements provided in the section titled “Financial Statements.”

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES

We have evaluated, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2008, our disclosure controls and procedures were effective in timely alerting them to material information required to be included in the filings we make under the Securities Exchange Act of 1934.

Report of Management on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 15d-15(f) under the Exchange Act.

Under the supervision and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on our assessment we determined that, as of December 31, 2008, our internal control over financial reporting is effective based on those criteria.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by

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our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this report.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred in our fiscal quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table is a list of our current directors and executive officers.

Name	Age	Position
Don F. Ahern	55	President, Chief Executive Officer, and Chairman of the Board of Directors
Howard L. Brown	66	Chief Financial Officer, Secretary, and Director
Evan B. Ahern	34	Executive Vice President and Director
Mark J. Wattles	48	Director
P. Enoch Stiff	61	Director
Timothy N. Lotspeich	55	Senior Vice President of Risk Management and Transportation
D. Kirk Hartle	43	Senior Vice President of Finance and Treasurer
Michael S. Stigler	41	Vice President and Chief Information Officer

Don F. Ahern has been our President, Chief Executive Officer and a member of our board of directors since February 1994. Prior to that, since 1978, Mr. Ahern was the sole proprietor of Los Arcos Equipment, an equipment rental company. Mr. Ahern has over 30 years of experience in the equipment rental industry. Mr. Ahern is Evan B. Ahern’s father.

Howard L. Brown has been our Chief Financial Officer since September 1997. He joined our board of directors in April 2004. Mr. Brown has over 35 years of finance experience. Prior to joining us, from October 1995 through September 1997, Mr. Brown was Chief Financial Officer of the H&O Foods division of Rykoff-Sexton, Inc. (now known as U.S. Foodservice, Inc.), the largest food service distributor in Las Vegas, Nevada. From September 1992 through October 1995, Mr. Brown was Chief Financial Officer of H&O Foods, Inc.

Evan B. Ahern has been our Executive Vice President since March 2004 and joined our board of directors in April 2004. He served as Chief Information Officer from 1998 to May 2007. Between 1993 and 1998, Mr. Ahern was responsible for managing and implementing our technology infrastructure. From 1990 through 1993, Mr. Ahern held various other positions with the company. Mr. Ahern has been and continues to be involved in nearly every aspect of the our operations. He spends much of his current time in business development activities, branch level process reengineering and training, and technology integration into every aspect of our business to improve operational efficiencies and effectiveness.  Evan Ahern is Don F. Ahern’s son.

Mark J. Wattles joined our board of directors in April 2004. Mr. Wattles founded Hollywood Entertainment Corporation (“Hollywood”), a chain of video rental and game stores, in June 1988, and

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until September 1998 he served as Hollywood’s Chairman of the Board, President, and Chief Executive Officer. From August 1998 through June 2000, Mr. Wattles left his full-time position at Hollywood and served as Chief Executive Officer of Reel.com, then a wholly owned subsidiary of Hollywood. In August 2000, Mr. Wattles returned full time to Hollywood to assist with changes in its business strategy. He served as President of Hollywood from January 2001 until January 2004 and as Chief Executive Officer from January 2001 until February 2005. Since January 2005, Mr. Wattles has served as President of Wattles Capital Management, LLC, a capital management company that invests in public and private companies providing consumer products and services. In April 2005, Ultimate Acquisition Partners, L.P., an entity owned by Wattles Capital Management, LLC, purchased from Ultimate Electronics, Inc. the assets associated with 32 Ultimate Electronics and SoundTrack stores. Since that time, Mr. Wattles has served as Chairman of Ultimate Acquisition Partners, L.P., which does business as Ultimate Electronics, a retailer of home entertainment and consumer electronics products.

P. Enoch Stiff joined our board of directors in April 2004. Mr. Stiff has been the managing partner of the Executive Management Group, a consulting firm specializing in effective management practices for senior executive teams of midsize businesses, since November 2002. Additionally, since January 2004, Mr. Stiff has been a partner in the Value Management Group, a Chicago-based investment management company that focuses on manufacturing companies.  In February 2008, Mr. Stiff became President and Chief Executive Officer of American Sportworks, a company that manufactures various types of utility vehicles. From September 2000 to November 2002, Mr. Stiff provided independent business consulting services to executive management groups. From September 1996 to September 2000, Mr. Stiff was the President, Chief Executive Officer and a member of the board of directors of OmniQuip International, Inc., a North American manufacturer of telescopic material handlers, aerial work platforms and other material handling equipment. From August 1989 to September 1996, Mr. Stiff was the President and Chief Executive Officer of TRAK International, Inc. (“TRAK”), a wholly owned subsidiary of OmniQuip International, Inc. He previously served as the Chief Operating Officer of TRAK from November 1987 to August 1989.

Timothy N. Lotspeich has been our Senior Vice President of Risk Management and Transportation since April 2005. From December 1995 until April 2005, he served as our Senior Vice President and was responsible for our floating fleet, transportation and risk management. Mr. Lotspeich has approximately 23 years of experience in the equipment rental industry. From July 1986 through December 1995, Mr. Lotspeich served as our California regional manager responsible for supervising operations and sales of all of our California branches. From April 1983 through June 1986, Mr. Lotspeich served as manager of our Bloomington, California branch and was responsible for operations and sales of that branch. Prior to joining us, from 1972 through June 1982, Mr. Lotspeich was a customer service representative for Grove Manufacturing, a large manufacturer of high reach equipment.

D. Kirk Hartle has been our Senior Vice President of Finance and Treasurer since March 2009; previously, Mr. Hartle served as Vice President of Finance since September 2007 and prior to that he served as our Director of Finance from the time he was hired in February 2004. His responsibilities include oversight of all accounting and financial reporting for the Company. During his career, Mr. Hartle has held positions with KPMG LLP and Deloitte LLP. Prior to joining Ahern Rentals, Mr. Hartle was chief financial officer for five years with a publicly held golf retail and sports entertainment company.  Mr. Hartle also is the immediate past-president of the University of Nevada, Las Vegas Alumni Association and has served on its Board of Directors for 13 years.

Michael S. Stigler joined Ahern Rentals in 2004 as the Director of IT and was promoted to Vice President and Chief Information Officer in May 2007. Mr. Stigler is an experienced business owner, author, and Microsoft Certified systems engineer. In addition to being a founding partner and former CEO

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of Tech Results, a Nevada corporation that specialized in custom software development for the gaming industry, Mr. Stigler has owned and operated server computer related businesses over the past 15 years. Mr. Stigler was among the first of the Microsoft Certified professionals in Las Vegas and helped create Microsoft Certified training programs in the greater Las Vegas area. Also, Mr. Stigler is the author of several information technology books including SQL Server 2000 Administration (Osborne/McGraw-Hill) and IIS 4 & Proxy Server 2 (Sybex Network Press), which have been translated into multiple languages and are referenced by experts around the world.

Pursuant to our bylaws, each of our directors serves for a term of one year or until his successor is elected and qualified.

We have not adopted a formal code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We are not required to adopt such a code and our board of directors believes a formal code of ethics would not provide significant value to our two stockholders.

ITEM 11.  EXECUTIVE COMPENSATION

Throughout this report, the individuals who served as our Chief Executive Officer and Chief Financial Officer during 2008, as well our three other most highly compensated executive officers during 2008, are referred to as the “named executive officers.” These individuals are listed in the Summary Compensation Table on page 26. The following compensation discussion and analysis, executive compensation tables and related narrative describe the compensation awarded to, earned by or paid to the named executive officers for services provided to us in 2008 and their compensatory arrangements.

Compensation Discussion and Analysis

Overview, Philosophy and Objectives of Executive Compensation

The board of directors has authority to establish the salaries, bonuses and equity plan participation levels for the named executive officers. We do not have a separately designated compensation committee. The board of directors also has the authority to review and approve employment agreements, severance arrangements and retirement plans for the named executive officers and otherwise to review and approve our compensation plans. The board of directors evaluates the performance of the Chief Executive Officer and, with input from the Chief Executive Officer, evaluates the performance of the other named executive officers.

We compensate our named executive officers primarily through a combination of base salary and bonus. The primary objectives of the board of directors with respect to the compensation of the named executive officers are to attract, motivate and retain talented and dedicated executives and to foster a team orientation toward the achievement of company-wide business objectives. The board of directors’ compensation philosophy with respect to the named executive officers includes the following general elements:    (1) providing base salaries and bonus targets within a market competitive range and (2) rewarding achievement of company financial performance objectives as well as individual managerial effectiveness.

Base Salary

The primary component of compensation of our executives is base salary. The base salary levels of our executives in 2008 were established based upon:   (i) the individual’s background and circumstances, including experience and skills, (ii) our knowledge of competitive factors in our industry,

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(iii) the job responsibilities of the individual, (iv) our expectations as to the performance and contribution of the individual and our judgment as to the individual’s potential future value to us, (v) prior year salary levels, (vi) prior year performance, (vii) length of service and (viii) with respect to those executives other than the Chief Executive Officer, the recommendations of the Chief Executive Officer. In establishing the current base salary levels, we did not engage in any formal benchmarking activities or engage any outside compensation advisors.

The base salary of named executive officers is intended to provide a competitive base level of pay for the services provided. We believe the fixed base annual salary levels of the named executive officers help us to retain qualified executives and provide a measure of income stability for the named executive officers that reduces pressure to take possibly excessive risks to achieve performance measures under incentive compensation arrangements. The base salaries of some named executive officers may be increased in 2009.

Bonus

All of the named executive officers are eligible for a bonus. In addition, certain employees who are viewed as having an opportunity to directly and substantially contribute to achievement of our short-term objectives are eligible for a bonus.

Our bonuses reward the named executive officers for achieving company financial performance objectives and for demonstrating individual leadership. We believe that, by providing a positive incentive and cash rewards, the bonus plays an integral role in motivating and retaining qualified executives. We also believe the allocation of base salary and incentive compensation opportunities for named executive officers generally represents a reasonable combination of fixed salary compared to variable incentive pay opportunities and reflects our goal of retaining and motivating our named executive officers.

All Other Compensation

Other compensation to the named executive officers in 2008 included eligibility to participate in our employee benefit plans, including medical, dental, life insurance and 401(k) plans, which are available to employees generally. These payments and other benefits, the amounts of which are not material to us, provide additional compensation and benefits to the named executive officers.

Summary Compensation Table

		Annual Compensation				All Other		Total
Name and Principal Position	Year	Salary		Bonus		Compensation (1)		Compensation
Don F. Ahern	2008	$	624,000	$	400,373	$	—	$	1,024,373
President and Chief Executive Officer	2007	636,000		451,948		—		1,087,948
	2006	624,000		479,821		—		1,103,821
Howard L. Brown	2008	180,000		65,000		4,380		249,380
Chief Financial Officer	2007	183,462		100,000		4,380		287,842
	2006	180,000		150,000		4,200		334,200
Evan B. Ahern	2008	200,000		225,000		4,380		429,380
Executive Vice President	2007	203,846		250,000		4,380		458,226
	2006	200,000		200,000		4,200		404,200
Timothy N. Lotspeich	2008	100,000		185,000		—		285,000
Senior Vice President of Risk	2007	101,923		75,000		—		176,923
Management and Transportation	2006	100,000		165,000		—		265,000

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		Annual Compensation		All Other	Total
Name and Principal Position	Year	Salary	Bonus	Compensation (1)	Compensation
Roy Allen Holland, Jr.	2008	120,000	220,000	3,880	343,880
Vice President of Operations	2007	122,308	105,000	3,880	231,188
	2006	120,000	175,000	2,380	297,380

(1)This item consists of matching contributions by the company to its 401(k) Plan on behalf of each of the named executive officers to match pre-tax elective deferral contributions (included under Salary) made by each to such plan. Participation in the 401(k) Plan is open to any employee age 21 or older who has been employed by us for at least 12 months and who completed at least 1,000 hours of service in the previous year. Subject to limitations contained in the Internal Revenue Code, participants may contribute 1% to 15% of annual compensation and the company contributes 50% of the participant’s contribution not to exceed 2% of the participant’s annual compensation.

The following table summarizes all compensation paid or accrued for directors’ services in 2008 and excludes compensation for service as an officer or other employees or reimbursement of expenses. Our directors who are employees do not receive separate compensation for service on our board of directors.

Director Compensation

Name	Fees Earned or Paid in Cash($)		Stock Awards ($)		All Other Comp($)		Total($)
Don F. Ahern	$	0	$	0	$	0	$	0
Howard L. Brown	0		0		0		0
Evan B. Ahern	0		0		0		0
Mark J. Wattles	0		0		0		0
P. Enoch Stiff	5,000		0		0		5,000

Our non-employee directors are entitled to receive $5,000 per day in director’s fees for each day they attend a board meeting in addition to travel and other expense reimbursement incidental to board meeting attendance. Mark Wattles waived all amounts owed him on account of service on our board.

Compensation Committee Report

The board of directors has reviewed and discussed the “Compensation Discussion and Analysis” included in this report with management. Based on that review and discussion, the board of directors approved the “Compensation Discussion and Analysis” for inclusion in this report.

Don F. Ahern
Howard L. Brown
Evan B. Ahern
Mark J. Wattles
P. Enoch Stiff

Compensation Committee Interlocks and Insider Participation

During 2008, the board of directors was comprised of Don F. Ahern, Howard L. Brown, Evan B. Ahern, Mark J. Wattles and P. Enoch Stiff. Don Ahern is our President and Chief Executive Officer, Mr. Brown serves as our Chief Financial Officer, and Evan Ahern is an Executive Vice President. Don Ahern is primarily responsible for decisions regarding executive compensation. Neither of Mr. Wattles or Mr. Stiff is a current or former officer or employee. There are no interlocking board memberships between our officers and any member of our board of directors.

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ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information with respect to the beneficial ownership of our common stock at December 31, 2008, by:  (1) each person or entity who owns of record or beneficially 5% or more of any class of our voting securities; (2) each of our named executive officers and directors; and (3) all of our directors and executive officers as a group. Except as noted below, the address for each of the directors and named executive officers is at our principal executive offices c/o Ahern Rentals, Inc., 4241 South Arville Street, Las Vegas, Nevada 89103.

	Shares Beneficially Owned (1)
	Common Stock
Name	Number of  Shares	Percentage of Class
Principal Shareholders, Executive Officers and Directors
Don F. Ahern (2)	970	97	%
Howard L. Brown	—	—
Evan B. Ahern	—	—
Timothy N. Lotspeich	—	—
Roy Allen Holland, Jr.	—	—
Enoch Stiff	—	—
Mark Wattles	—	—
Executive Officers and Directors as group (11 Persons)	970	97	%

(1)Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act.

(2)Includes shares of common stock held by the DFA Separate Property Trust, a revocable trust established by Don F. Ahern. Don F. Ahern is sole trustee and income beneficiary of this trust and, as trustee, has sole voting and investment power with respect to all 970 shares. The 30 shares (or 3%) of the Common Stock of Ahern Rentals not owned by Don F. Ahern are owned by John Paul Ahern, Jr., Don F. Ahern’s brother.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE DFA

Family Limited Partnership

We lease the property that houses our principal executive offices from DFA Family Limited Partnership, of which Don F. Ahern, our President and Chief Executive Officer and a member of our board of directors, is the general partner and which is 1% owned by Don F. Ahern as trustee of the DFA Separate Property Trust and 49.5% owned by each of Don F. Ahern’s two children, including Evan B. Ahern, our Executive Vice President and a member of our board of directors. Our lease payments to DFA Family Limited Partnership totaled $405,128 in 2008. The written lease agreement for this property provides for monthly lease payments of $34,834. Under the lease, the monthly payment increases annually by the greater of (a) 3% of the monthly payment for the prior year or (b) the percentage increase in the Consumer Price Index. The term of the lease continues until October 27, 2014.

DFA, LLC

We lease 41 of our rental branches, as well as our parts warehouse, our dispatch facility, our credit department facility and our payroll facility, from DFA, LLC, of which Don F. Ahern is the managing member and which is 1% owned by Don F. Ahern individually and 99% owned by Don F. Ahern as trustee of the DFA Separate Property Trust. Our aggregate lease payments to DFA, LLC totaled $6,884,715 in 2008. The aggregate monthly lease payments for the properties we lease from DFA, LLC was approximately $655,761 at December 31, 2008. We are party to a written lease agreement for each rental branch we lease from DFA, LLC. Under each lease, the monthly payment increases annually by the

36

greater of (a) 3% of the monthly payment for the prior year or (b) the percentage increase in the Consumer Price Index. The term of each lease continues until October 27, 2014.

Don and Paul, LLC

We lease property housing our Bonanza Road, Las Vegas, Nevada rental facilities from Don and Paul, LLC (“DPLLC”), of which Don F. Ahern is the managing member and which is 85.5% owned by Don F. Ahern as trustee of the DFA Separate Property Trust and 14.5% owned by John Paul Ahern, Jr., Don F. Ahern’s brother. Our lease payments to DPLLC totaled $543,626 in 2008.  The written lease agreement for this property provides for monthly lease payments of $46,743. Under the lease, the monthly payment increases annually by the greater of (a) 3% of the monthly payment for the prior year or (b) the percentage increase in the Consumer Price Index. The term of the lease continues until October 27, 2014.

Xtreme Manufacturing, LLC

We purchase forklifts and other equipment from Xtreme Manufacturing, LLC (“Xtreme”), of which Don F. Ahern is the managing member and which is 96.6% owned by Don F. Ahern as trustee of the DFA Separate Property Trust. We purchased approximately $37.7 million of equipment from Xtreme in 2008.

In addition, Xtreme’s employees participate in the health plans and the 401(k) retirement plan that we make available to our employees. Xtreme directly pays the costs associated with its employees’ participation in the 401(k) retirement plan and reimburses us for our costs associated with its employees’ participation in the medical and dental plans.

A&K 67, LLC

We have a verbal agreement for the part-time use of a boat owned by A&K 67, LLC, which is 25% owned by Don F. Ahern as trustee of the DFA Separate Property Trust. Our payments to A&K 67, LLC pursuant to this agreement totaled approximately $43,100 in 2008. The verbal agreement provides for monthly payments of approximately $3,590. The agreement is terminable on reasonable notice.

XFS, Inc.

XFS, Inc. (“XFS”), of which Don F. Ahern is President and which is wholly owned by Don F. Ahern as trustee of the DFA Separate Property Trust, engages in lease financing transactions in which XFS purchases equipment from us for the purpose of leasing the equipment to third-party lessees. XFS did not purchase any equipment from us in 2008.

Hutt Aviation

We entered into an Aircraft Management and Operating Agreement (the “Aircraft Agreement”) with Hutt Aviation, Inc. (“Hutt”) in September 2006. Don F. Ahern, our President, Chief Executive Officer and Chairman of the board of directors, owns 50% of the outstanding capital stock of Hutt. Under the Aircraft Agreement, Hutt operates our Cessna CE-525 aircraft (the “Aircraft”) both for our use and for charter flights for others; as of March 20, 2009, Hutt has not yet operated the aircraft for charter flights. We paid or reimbursed Hutt $3,686 in 2008, $100,461 in 2007 and $80,398 in 2006 for fees and expenses it incurred in operating the aircraft, including without limitation flight crew salaries and benefits and crew training. Hutt has agreed to pay us $1,400 per hour of time the aircraft is used for charter flights for others; Hutt has not paid us any amount because the aircraft has not yet been used for charter flights for others.

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Diamond A Equipment, LLC

We sell and lease equipment to Diamond A Equipment, LLC (“Diamond A”), of which Don F. Ahern is the managing member and which is 1% owned by Don F. Ahern individually and 99% owned by Don F. Ahern as trustee of the DFA Separate Property Trust.  Diamond A operates as an equipment dealership.  In 2008, we sold $756,633 in new serialized equipment, parts and merchandise to Diamond A.

American Sportworks

We purchase certain utility vehicles from American Sportworks, an entity in which one of our directors, P. Enoch Stiff, is President and Chief Executive Officer.  In 2008, we purchased approximately $1.8 million in utility vehicles from American Sportworks.

Director Independence

The board of directors has determined that Mark J. Wattles and P. Enoch Stiff are independent under the standards set forth in NASDAQ Marketplace Rule 4200.

Policies and Procedures for Review, Approval or Ratification of Transactions with Related Persons

Our policy is to require that any transaction with a related party required to be reported under applicable Securities and Exchange Commission rules, other than compensation-related matters, be reviewed and approved or ratified by a majority of independent, disinterested directors. We have not adopted procedures for review of, or standards for approval of, these transactions, but review these transactions on a case by case basis.

ITEM 14.  PRINCIPAL ACCOUNTANT’S FEES AND SERVICES

The following table presents the aggregate fees for professional audit services rendered by our independent registered public accounting firm, Piercy Bowler Taylor & Kern, Certified Public Accountants, for the audit of our annual financial statements for the year ended December 31, 2008 and fees billed for other services rendered by Piercy Bowler Taylor & Kern.

	2007		2008
Audit Fees (1)	$	131,686	$	100,756
Audit-Related Fees (2)	29,606		—
Tax Fees (3)	18,414		5,378
Total	$	179,706	$	106,134

(1)   Audit fees are exclusively related to our annual financial statement audit and quarterly review services.

(2)   Audit related fees are related to comfort letters, consents and other services related to SEC matters.

(3)   Fees for tax services consisted of:

·Tax compliance and planning services;

·Federal, state and local income tax return assistance;

·Sales and use, property and other tax return assistance; and

·Assistance with tax audits and appeals.

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We do not, nor are we required to, have an audit committee currently serving and as a result our board of directors performs the duties of an audit committee. Our board of directors evaluates and approves in advance the scope and cost of any proposed services to be provided by our auditor before the auditor renders audit or non-audit services.

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PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)       Documents filed as part of this report

		Page
1.	Report of Independent Registered Public Accounting Firm	41
2.	Financial statements
	Balance sheets	42
	Statements of income and retained earnings	43
	Statements of cash flows	44
3.	Notes to the financial statements	45
4.	Exhibits	52

The exhibits listed in the accompanying Index to Exhibits are filed or incorporated by reference as part of this report.

40

Report of Independent Registered Public Accounting Firm

Board of Directors
Ahern Rentals, Inc.
Las Vegas, Nevada

We have audited the accompanying balance sheets of Ahern Rentals, Inc. as of December 31, 2008 and 2007, and the related statements of income, retained earnings and cash flows for each of the three years ended December 31, 2008, 2007 and 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. 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 financial statements referred to above present fairly, in all material respects, the financial position of Ahern Rentals, Inc. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years ended December 31, 2008, 2007 and 2006, in conformity with accounting principles generally accepted in the United States.

PIERCY BOWLER TAYLOR & KERN

Certified Public Accountants

Las Vegas, Nevada

March 26, 2009

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AHERN RENTALS, INC.
BALANCE SHEETS

DECEMBER 31, 2008 AND 2007

(In thousands, except share amounts)

	2008		2007
ASSETS
Cash	$	1,758	$	4,260
Accounts receivable, net of allowance of $1,705 and $1,549	52,620		51,436
Inventories	35,096		56,059
Rental equipment, net	546,057		518,205
Other property and equipment, net	59,943		49,760
Debt issuance costs, net	7,844		9,712
Other	4,682		4,919
	708,000		694,351
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Revolving credit facility	319,354		246,418
Accounts payable	16,988		73,731
Accrued expenses	23,098		21,749
Second priority senior secured notes	292,371		292,884
Other note payable	1,844		1,994
	653,655		636,776
Stockholders’ Equity
Common stock, no par or stated value, 25,000 shares authorized, 1,000 shares issued and outstanding	5,915		5,915
Retained earnings	48,430		51,660
	54,345		57,575
	$	708,000	$	694,351

See notes to financial statements

42

AHERN RENTALS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS

YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006

(In thousands)

	2008			2007			2006
REVENUES
Equipment rentals and related	$	329,461		$	293,408		$	236,855
Sales of rental equipment	19,664			24,918			16,600
Sales of new equipment and other	32,462			22,131			12,531
	381,587			340,457			265,986
COST OF REVENUES
Cost of equipment rental operations, excluding depreciation, including related party rent of $5,571, $3,917 and $2,822	135,221			114,177			91,927
Depreciation, rental equipment	90,611			73,482			54,183
Cost of rental equipment sold	12,428			17,274			11,457
Cost of new equipment sold and other	25,971			17,005			9,163
	264,231			221,938			166,730
GROSS PROFIT	117,356			118,519			99,256
OPERATING EXPENSES
Selling, general, and administrative, including related party rent of $2,263, $2,067 and $1,226	57,754			47,408			37,039
Depreciation and amortization, non-rental property and equipment	9,174			7,435			5,949
	66,928			54,843			42,988
OPERATING INCOME	50,428			63,676			56,268
OTHER INCOME (EXPENSE)
Interest expense	(43,626		)	(41,844		)	(31,152		)
Other, net	(118		)	84			59
NET INCOME	$	6,684		$	21,916		$	25,175
RETAINED EARNINGS, BEGINNING OF PERIOD	$	51,660		$	40,707		$	24,002
Net income	6,684			21,916			25,175
Distributions	(9,914		)	(10,963		)	(8,470		)
RETAINED EARNINGS, END OF PERIOD	$	48,430		$	51,660		$	40,707

See notes to financial statements

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AHERN RENTALS, INC.
STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006

(In thousands)

	2008			2007			2006
OPERATING ACTIVITIES:
Net income	$	6,684		$	21,916		$	25,175
Adjustments to reconcile net income to net cash provided by operating activities:
Gross profit on disposition of property and equipment	(7,012		)	(7,629		)	(5,072		)
Depreciation and amortization of property and equipment	99,785			80,917			60,132
Amortization of debt issuance costs	2,143			1,978			1,847
Amortization of premium on senior secured notes	(513		)	(491		)	—
Bad debts	758			81			261
Changes in operating assets and liabilities:
Accounts receivable	(1,942		)	(7,637		)	(7,071		)
Inventories	20,963			(33,181		)	(8,962		)
Other	277			(827		)	(918		)
Accounts payable	(56,743		)	31,499			24,800
Accrued expenses	1,349			4,405			3,236
Net cash provided by operating activities	65,749			91,031			93,428
INVESTING ACTIVITIES:
Purchases of rental equipment	(131,113		)	(216,509		)	(195,157		)
Purchases of other property and equipment	(19,808		)	(22,512		)	(14,255		)
Proceeds from sales of rental equipment and other property	20,073			25,542			17,074
Net cash used in investing activities	(130,848		)	(213,479		)	(192,338		)
FINANCING ACTIVITIES:
Proceeds from borrowings	484,175			585,567			386,449
Repayment of borrowings	(411,389		)	(447,109		)	(278,843		)
Debt issuance costs paid	(275		)	(2,472		)	(238		)
Distributions	(9,914		)	(10,963		)	(8,470		)
Net cash provided by financing activities	62,597			125,023			98,898
NET INCREASE (DECREASE) IN CASH	(2,502		)	2,575			(12		)
CASH, BEGINNING OF PERIOD	4,260			1,685			1,697
CASH, END OF PERIOD	$	1,758		$	4,260		$	1,685

See notes to financial statements

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AHERN RENTALS, INC.

NOTES TO THE FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(all dollar amounts in thousands)

1.             Nature of business and summary of significant accounting policies:

Basis of presentation and accounting. The nature of the Company’s business is such that short-term obligations are typically met by cash flow generated from long-term assets. Therefore, the balance sheets are presented on an unclassified basis consistent with equipment rental industry practice.  In addition, the Company has not elected to adopt the option available under Financial Accounting Standards Board “FASB” No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, to measure any of its eligible financial instruments or other items. Accordingly, the Company continues to measure all of its assets and liabilities on the historical cost basis of accounting.

Management has evaluated the circumstances attendant to its relationships with its affiliated lessors and other related parties described in Notes 5 and 6 and concluded that none of these entities qualify as either a “variable interest entity” (VIE), as defined in FASB Interpretation (FIN) No. 46R, Consolidation of Variable Interest Entities—An Interpretation of ARB No. 51, or an “implicit VIE,” as described in FASB Staff Position FIN 46R-5 and, accordingly, are not consolidated.

Nature of business. The Company operates a comprehensive equipment rental and sales business servicing a customer base that includes construction and industrial companies, municipalities, manufacturers, utilities, homeowners and others in Nevada, California, Arizona, Texas, Colorado, Utah, Oregon, New Mexico, Kansas, Oklahoma, and New Jersey. Each of the Company’s 50 equipment rental and sales branches is considered a separate profit center.  However, all profit centers are aggregated into one reportable segment because they offer similar products and services in similar markets and the factors that influence management’s strategic decisions are comparable.

Concentrations. Realization of the Company’s receivables (which are uncollateralized) and its future operations, could be affected by adverse changes in economic conditions in Las Vegas, Nevada, and elsewhere in the Company’s principal market areas in the southwestern United States, particularly in the construction industry.  Approximately 29%, 32%, and 35% of the Company’s total revenues were generated in Las Vegas during 2008, 2007, and 2006, respectively.  An additional 30%, 33%, and 35% were generated in California.

Accounts receivable are carried, net of an appropriate allowance, at their estimated collectible value. The Company manages its concentrations of credit risk by evaluating the credit worthiness of customers before credit is extended and monitoring it thereafter. When material amounts of credit are extended to a single customer in connection with a construction project, the Company usually has the right to, and does, lien the project as additional security for repayment if the customer fails to pay. Since customer credit is generally extended on a short-term basis, receivables do not bear interest, although a finance charge may be applied to accounts that are more than 90 days past due. Accounts receivable are periodically evaluated for collectability, and the allowance for doubtful accounts is adjusted monthly based primarily on customers’ past credit history and current financial condition, general and local economic conditions, and the relative strength of the Company’s relationship with the customer and its legal position and the cost of related proceedings. Accounts with invoices over 90 days past due are considered delinquent; however, customary collection efforts are initiated once an invoice is over 60 days past due.  Accounts are written off at the time that all collection efforts have been exhausted and the likelihood of collecting the outstanding balance is remote. The maximum losses that the Company would incur if a customer failed to both pay amounts owed and return the rental equipment would be limited to

45

the recorded amount due net of any allowances provided, plus the net carrying value of the related unrecovered equipment less insurance recovery, if any.

Use of estimates. Timely preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts, some of which may require revision in future periods.

Inventories. Inventories (Note 2) are valued at the lower of market or cost determined by the average cost method, except for new serialized equipment units held for sale, the cost of which is determined using the specific identification method.

Property and equipment and depreciation and amortization. Property and equipment, including revenue-producing rental equipment (Note 3), is stated at cost. Depreciation and amortization is provided by the straight-line method to an estimated salvage value over the estimated useful lives of the assets, typically 3-10 years which for leasehold improvements (which are not material) is limited to the lease term. Costs the Company incurs that extend the useful life of its equipment are capitalized and amortized over the remaining useful life of the related asset. Ordinary repair and maintenance costs are expensed to operations as incurred.

Income taxes. The Company has elected “S corporation” status for federal income tax purposes. Therefore, no provision or liability for federal or state income tax has been included in the accompanying financial statements.

Revenue recognition. The Company’s revenues are divided into three categories:

·Equipment rentals and related. This includes revenue from renting equipment and related items such as the fees charged for equipment delivery, damage waivers, repair of rental equipment and fuel.

·Sales of rental equipment. This includes revenue from the sale of used rental equipment.

·Sales of new equipment and other. This primarily includes revenue from the sale of new equipment, merchandise and supplies.

Revenue related to rental equipment is recognized as earned over the contract term. The Company records unbilled rental revenue and deferred revenue as necessary, based on the status of open rental contracts as of the end of the reporting period.  Revenue related to sales of used rental equipment and inventories is recognized at the time of delivery to the customer. The Company may provide 30, 60, or 90 day warranties or maintenance services with the products sold. However, revenue from warranties and service contracts sold separately is not material.

Sales tax amounts collected from customers have been recorded on a net basis; that is, such amounts are not recorded as revenue but rather as a liability payable to the appropriate governmental agency and included in accrued expenses (see Note 8).

Cost of revenues and gross profit. Consistent with industry practice, certain expenses associated with the Company’s equipment rental operations, including costs of repairs and maintenance of the equipment, occupancy, supplies and personnel (excluding compensation of sales personnel, which costs are included in selling, general and administrative expenses) have been accounted for as cost of revenues and therefore, deducted in arriving at gross profit in the statements of income. In summary, cost of revenues consists of the following:

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·Cost of equipment rental operations, excluding depreciation. This includes branch personnel costs, the cost of repairing and maintaining rental equipment and the Company’s service and delivery vehicles, fuel costs, occupancy costs and supply costs for the Company’s rental locations.

·Depreciation on rental equipment.

·Cost of rental equipment sold. This represents the net book value of rental equipment sold.

·Cost of new equipment sold and other. This includes the cost of items sold, including new equipment, parts, merchandise and supplies.

Debt issuance costs. Costs relating to borrowings are deferred and amortized to interest expense using the straight line method, which does not differ materially from the effective interest method, over the terms of the related borrowings. As of December 31, 2008 and 2007, debt issuance costs shown in the accompanying balance sheet are net of accumulated amortization of $7,546 and $5,403, respectively.

Advertising. Advertising costs are charged as incurred to selling, general, and administrative expenses and amounted to $601, $460, and $372 for 2008, 2007, and 2006, respectively.

Legal defense costs. Legal and related defense costs in connection with pending or threatened litigation or other disputes, if any, are not included in accruable estimated losses but rather are recorded as period costs as incurred.

Accounts payable. Checks payable to vendors are issued from the Company’s “zero-balance” controlled disbursements bank account and remain classified as accounts payable until cleared by the Company’s bank, at which time they reduce the Company’s recorded cash balance.  Checks issued that had not cleared the Company’s bank account at December 31, 2008 and 2007 were approximately $5,619 and $9,000, respectively.

Reclassifications. Certain amounts in the 2007 and 2006 Statements of Income and Retained Earnings have been reclassified to conform to the 2008 presentation.

2.             Inventories:  Inventories, excluding used equipment held for rental (Note 3), consist of the following as of December 31:

	2008		2007
Serialized resale equipment	$	17,258	$	41,135
Parts	15,362		13,467
Accessories	2,476		1,457
	$	35,096	$	56,059

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3.             Property and equipment:

Property and equipment consists of the following as of December 31:

	2008			2007
Revenue-producing rental equipment	$	826,794		$	732,955
Less accumulated depreciation	(280,737		)	(214,750		)
Rental equipment, net	$	546,057		$	518,205
Leasehold improvements, furniture and fixtures, and shop equipment	$	47,353		$	35,891
Non-rental transportation equipment	47,054			43,525
Construction in progress	2,464			317
	96,871			79,733
Less accumulated depreciation and amortization	(36,928		)	(29,973		)
Property and other equipment, net	$	59,943		$	49,760

4.             Debt:

Revolving Credit Facility. The Company has a senior secured revolving credit facility with a group of institutional lenders providing for an aggregate commitment of up to $350,000 subject to a borrowing base test of eligible accounts receivable, rental equipment, transportation equipment and inventories. This facility is secured by a first priority security interest in substantially all of the Company’s existing and future acquired assets.

Borrowings accrue interest at either (a) prime rate plus zero to 50 basis points for prime rate loans, or at the Company’s option (b) London Interbank Offered Rate (“LIBOR”) plus 175 to 225 basis points for LIBOR based loans; the rates charged will fluctuate within these ranges depending on the Company’s leverage ratio. At any time that borrowing availability falls below $25 million, the facility requires us to report financial covenants for the most recently completed quarter for which financial statements have been issued and each quarter thereafter unless borrowing availability returns above $25 million for 20 consecutive business days, at which time the requirement to report financial covenants ceases. The financial covenants required to be maintained, when the reporting requirements described above are triggered, include a minimum fixed charge coverage ratio of not less than 1.00 to 1.00, a maximum total funded debt to EBITDA ratio of between 4.60 to 1.00 and 4.50 to 1.00 (depending on the then current fiscal quarter) and a minimum time utilization ratio of 45%. The credit facility contains other usual and customary covenants and default provisions.

As of December 31, 2008, the Company had unused availability of approximately $30,106.  The weighted average interest rate for 2008, 2007, and 2006 was 4.8%, 7.2%, and 7.2%, respectively. This facility matures August 21, 2011.

Second Priority Senior Secured Notes. In August 2005, the Company issued $200,000 principal amount of 91/4 % Second Priority Senior Secured Notes (“Second Priority Notes”) under an indenture.  The proceeds from this transaction were principally used to pay off prior debt and pay down the Revolving Credit Facility.

In January 2007, the Company issued, at a premium, an additional $90,000 in Second Priority Notes; the proceeds of this transaction of approximately $91,400, after deducting fees and expenses of about $2,000, were used to repay a portion of amounts outstanding under the Revolving Credit Facility. The Second Priority Notes are due August 15, 2013, bear interest at 91/4 % payable semi-annually on each February 15 and August 15 and are secured, on a second priority basis behind the Revolving Credit Facility, by substantially all of the Company’s existing and future acquired assets.

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Note payable consists of a note for a corporate aircraft. The note bears interest at prime minus 38 basis points, monthly payments approximate $20, and the note matures in October 2014 with a balloon payment of approximately $860.

Maturities of debt, including the Revolving Credit Facility, as of December 31, 2008, are as follows:

2009	$	157
2010	164
2011	319,526
2012	179
2013	290,187
Thereafter	985
	$	611,198

5.             Related party transactions:

The Company purchases forklifts and certain other equipment from an entity controlled by the Company’s majority shareholder. In addition, the affiliate’s employees participate in the Company’s employee benefit programs, including its workers’ compensation program, and the affiliate pays its costs related thereto. During 2008 and 2007, the Company purchased from the affiliate $37,681 and $43,083 of equipment, respectively.

The Company purchases utility vehicles from an entity controlled by one of its directors.  During 2008 and 2007, the Company purchased from this director’s company $1,822 and $0, respectively.

The indenture that governs the Second Priority Notes restricts the Company’s ability to pay distributions, generally, up to fifty percent of its cumulative net income for the period commencing October 1, 2005 to the end of its most recently completed fiscal quarter, and an additional amount up to $5,000 in the aggregate over the life of the indenture. In 2008 and 2007, the Company paid distributions of $9,914 and $10,963, respectively, to its shareholders.

See Note 6 for related party leases.

6.             Commitments and contingencies:

Related party operating leases. The Company leases property from a partnership owned and controlled by Don F. Ahern and members of his family. Also, the Company leases the majority of the real estate used in the Company’s equipment rental operations from commonly-controlled affiliates. These leases provide for annual rent increases equal to the greater of 3% or the consumer price index, as defined, and generally expire October 27, 2014, with no renewal provisions. The aggregate annual payment commitment under all related party leases as of December 31, 2008 is approximately $8,629.  In addition, the Company is responsible for any maintenance costs under the leases.

Other operating leases. In April 2006, the Company entered into an operating lease agreement expiring in 2016 for a corporate aircraft. The annual rental commitment at December 31, 2008 is $344.  The monthly rental payment floats with changes in the 30-day LIBOR rate. There are early buyout options in years 3 and 9 based on a percentage of the original cost of the aircraft, and the buyout option at the end of the lease is at fair market value. The Company’s principal officer and majority shareholder is a joint lessee/obligor in this agreement.

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In October 2007, the Company entered into an operating lease agreement for a corporate aircraft that expires in 2018. The aggregate annual rental commitment at December 31, 2008 is $316. There are early buyout options in years 6 and 10 of the lease based on a percentage of the original cost of the aircraft, and a buyout option at the end of the lease at estimated fair value. The Company’s principal officer and majority shareholder is a joint lessee/obligor in this agreement.

Minimum future obligations over the primary terms of the Company’s long-term related party and other operating leases as of December 31, 2008, are as follows:

Year ending December 31,	Related party		Other		Total
2009	$	8,629	$	1,580	$	10,209
2010	8,864		1,407		10,271
2011	9,130		1,349		10,479
2012	9,403		1,052		10,455
2013	9,686		985		10,671
Thereafter	8,273		2,574		10,847
Total	$	53,985	$	8,947	$	62,932

The Company incurred a total of $9,920, $7,188, and $5,229 in operating lease rent expense during 2008, 2007, and 2006, including $7,834, $5,984, and $4,048, respectively, in connection with the related party leases.

Company sponsored profit-sharing plan. The Company maintains a 401(k) plan. Participation in the plan is limited to full-time employees with a minimum of one year of service, and at least 21 years of age.  Company matching contributions to the plan are made annually at the discretion of management.  These matching contributions are accrued during the plan year and are generally then paid into the plan in March following the plan year.  For the 2007 and 2006 plan years, the Company contributed $352 and $247, respectively.  The Company has elected not to make a matching contribution for the 2008 plan year; as a result, no amounts are accrued as of December 31, 2008 for this matching contribution.

Legal matters.  In October 2008, the Company settled a lawsuit for approximately $1,700; $1,100 of this settlement was in excess of the Company’s insurance coverage for such matters.  Additionally, the Company is a defendant in certain other legal matters arising in the ordinary course of business.  Based on available information, management is unable to estimate the minimum costs, if any, to be incurred upon disposition of these matters, and therefore no provision for loss has been made.  However, in the opinion of management, the outcome of these matters is not likely to have a material effect on the future financial position, results of operations or cash flows of the Company.

Economic risks and uncertainties.  The United States is currently experiencing a recession accompanied by, among other things, reduced credit availability and highly curtailed construction activities.  The effects and duration of these developments and related risks and uncertainties on the Company’s future operations and cash flows cannot be estimated at this time but may likely be significant.

7.             Fair value of financial instruments:

The estimated fair values at December 31, 2008, for cash, accounts receivable, accounts payable, accrued expenses and debt, excluding the Second Priority Notes, approximate their historical cost-based carrying amounts due to the short maturity of these instruments, or because the related interest rates approximate current market rates.  The estimated fair value of the Second Priority Notes was $58,000 based on reference to quoted market prices; the carrying amount was $290,000.

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8.             Accrued expenses:

Accrued expenses consist of the following as of December 31:

	2008		2007
Interest payable	$	11,212	$	11,596
Property taxes payable	3,436		676
Payroll and related taxes payable	2,748		3,101
Worker’s compensation and health insurance reserves	2,432		2,663
Sales tax payable	2,149		2,508
Other	1,121		1,205
Total	$	23,098	$	21,749

9.             Supplemental cash flow information

	2008		2007		2006
Noncash financing and investing activities
Cash paid for interest	$	42,379	$	37,027	$	28,403

10.          Subsequent events

On February 20, 2009, the Company’s board of directors declared, and the Company paid, a distribution of $2,351 to the Company’s shareholders.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 26, 2009.

AHERN RENTALS, INC.
By:	/s/ DON F. AHERN
	Don F. Ahern
	Chairman of the Board, Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 26th day of March, 2009.

Signature	Title
/s/ DON F. AHERN	Chairman of the Board, Chief Executive
Don F. Ahern	Officer and President
	(Principal Executive Officer)
/s/ HOWARD L. BROWN	Chief Financial Officer and Director
Howard L. Brown	(Principal Financial and Accounting Officer)
/s/ EVAN B. AHERN	Executive Vice President, and Director
Evan B. Ahern
/s/ Mark J. Wattles	Director
Mark J. Wattles
	Director
P. Enoch Stiff

Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act

Ahern Rentals, Inc. is not required to nor does it intend to furnish an Annual Report or a Proxy Statement to security holders.

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INDEX TO EXHIBITS

3.1	Amended and Restated Articles of Incorporation of Registrant.(1)
3.2	Amended and Restated Bylaws of Registrant.(1)
4.1	Indenture, dated as of August 18, 2005, between the Company, as Issuer, and Wells Fargo, N.A., as Trustee.(1)
4.2	Registration Rights Agreement, dated as of January 17, 2007, by and among the Company, CIBC World Markets Corp. and Banc of America Securities LLC.(2)
4.3	Amended and Restated Loan and Security Agreement, dated as of August 18, 2005, among the Company, Bank of America, N.A. as Administrative Agent, Wachovia Bank, National Association as Collateral Agent, and Bank of America, N.A., Wachovia Bank, National Association, Keybank National Association, PNC Bank, National Association and Comerica Bank, as lenders.(1)
4.4	Amendment No. 1, dated as of August 21, 2006, to Amended and Restated Loan and Security Agreement, dated as of August 18, 2005.(3)
4.5	Amendment No. 3, dated as of October 24, 2007, to Amended and Restated Loan and Security Agreement, dated as of August 18, 2005.(4)
4.6	Incremental Commitment Agreement, dated March 20, 2008, to Amended and Restated Loan and Security Agreement, dated as of August 18, 2005.(5)
10.1	Aircraft Lease Agreement between Banc of America Leasing & Capital, LLC, as Lessor and Ahern Rentals, Inc. and Don F. Ahern, as Lessee dated as of October 5, 2007.(6)
10.2	Aircraft Lease Agreement between Key Equipment Finance Inc., as Lessor and Ahern Rentals, Inc. and Don F. Ahern, as Lessee dated as of April 20, 2006.
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).
31.2	Certification of Chief Financial Officer and Principal Accounting Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)Incorporated herein by reference to our Registration Statement on Form S-4, File No. 333-128688, filed with the SEC on September 29, 2005.

(2)Incorporated herein by reference to our Registration Statement on Form S-4, File No. 333-141011, filed with the SEC on March 1, 2007.

(3)Incorporated herein by reference to our Current Report on Form 8-K, filed with the SEC on August 25, 2006.

(4)Incorporated herein by reference to our Current Report on Form 8-K, filed with the SEC on October 24, 2007.

(5)Incorporated herein by reference to our Quarterly Report on Form 10-Q, filed with the SEC on November 14, 2007.

(6)Incorporated herein by reference to our Annual Report on Form 10-K, filed with the SEC on March 27, 2008.

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EX-10.2

Exhibit 10.2

RECORDED
Federal Aviation Administration
Date 5-11-06		Time 11:37 a.m.
Conveyance Number			44038820
By	/s/ V. Dodson

AIRCRAFT LEASE AGREEMENT
(N742AR)

between

KEY EQUIPMENT FINANCE INC.,
as Lessor

and

AHERN RENTALS, INC.
and
DON F. AHERN
as Lessee

Dated as of April 20, 2006

THIS ORIGINAL DOES NOT CONSTITUTE CHATTEL PAPER AS CONTEMPLATED BY THE UNIFORM COMMERCIAL CODE

FAA Authorization Code	IRN20060420110250
International Registration File Number(s):		Airframe	8421
141155		Engine #1	8423
141156		Engine #2	8427

TABLE OF CONTENTS

Section 1	Purchase and Lease of Aircraft
Section 2	Conditions to Closing; Closing Covenants
Section 3	Term, Rent and Payment
Section 4	Limited Appointment of Agent
Section 5	Covenants and Warranties
Section 6	Representations, Warranties and Agreements of Lessee
Section 7	Net Lease
Section 8	Return of Aircraft
Section 9	Liens
Section 10	Taxes
Section 11	Registration, Maintenance and Operation; Compliance and Use; Replacement Parts; Additions; Aircraft Marking
Section 12	Inspection
Section 13	Loss or Destruction
Section 14	Insurance
Section 15	Indemnification
Section 16	Assignment and Sublease
Section 17	[RESERVED]
Section 18	Events of Default
Section 19	Remedies
Section 20	Performance of Obligations of Lessee by Lessor
Section 21	Intent
Section 22	Notices
Section 23	Purchase and Renewal Options
Section 24	Transaction Expenses
Section 25	Miscellaneous
Section 26	Amendments
Section 27	Jury Trial Waiver
Section 28	Truth in Leasing

TABLE OF ATTACHMENTS

EXHIBIT A	Definitions
EXHIBIT B	Warranty Bill of Sale
Lease Supplement 1	Schedule 1 to Lease Supplement 1
	Schedule 2 to Lease Supplement 1
	Schedule 2-A to Lease Supplement 1
Lease Supplement 2	Purchase Documentation; Aircraft Markings

C#:  27645

L#:  27642

Ls#:  8800531987

Aircraft Lease Agreement (Tax Lease)

THIS AIRCRAFT LEASE AGREEMENT (together with all supplements, exhibits and certificates attached hereto, the “Lease”) is made and entered into as of April 20, 2006 by and between KEY EQUIPMENT FINANCE INC., a Michigan corporation, as lessor (“Lessor”), with a place of business at 1000 South McCaslin Boulevard, Superior, CO 80027, and AHERN RENTALS, INC., a Nevada corporation (sometimes referred to as “Ahern”), and Don F. Ahern, an individual, as joint lessees (Ahern and Don F. Ahern each a “Lessee” and collectively “Lessees”), with its principal place of business at 4241 S. Arville St, Las Vegas, NV 89103-3713. Certain capitalized terms as used in this Lease are defined in Exhibit A hereto, and such definitions are hereby incorporated herein and made a part hereof as though set forth herein in full.

Section 1 — Purchase and Lease of Aircraft.

Subject to the satisfaction of each condition set forth below, Lessor hereby agrees to purchase the Aircraft from the Supplier and to lease the same to Lessee and Lessee hereby agrees to lease the same from Lessor for the Basic Term hereof pursuant to the terms and conditions of this Lease. This Lease provides an International Interest in the Aircraft in favor of the Lessor. The parties hereto agree that the obligations of the Lessees are joint and several. Each reference to the term “Lessee” shall be deemed to refer to each of the Lessees; each representation and warranty made by Lessee shall be deemed to have been made by each such party; each covenant and undertaking on the part of Lessee shall be deemed individually applicable with respect to each such party; and each Event of Default shall be determined with respect to each such party. Separate action or actions may be brought and prosecuted against any Lessee whether an action is brought against any other Lessee or whether any other Lessee is joined in any such action or actions. Each Lessee waives any right to require Lessor to: (a) proceed against any other party; (b) proceed against or exhaust any security held from any other party; or (c) pursue any other remedy in Lessor’s power whatsoever. Notices hereunder required to be provided to Lessee shall be effective if provided to any Lessee. Any consent on the part of Lessee hereunder shall be effective when provided by any Lessee and Lessor shall be entitled to rely upon any notice or consent given by any Lessee as being notice or consent given by Lessee hereunder.

Section 2 — Conditions to Closing; Closing Covenants.

(a)Lessor’s obligations to purchase the Aircraft from the Supplier and to lease the Aircraft to Lessee are both subject to and conditioned upon (i) the representations and warranties of the Lessee contained herein being true and accurate as of the Acceptance Date and (ii) the Lessor receiving on or prior to the Acceptance Date, all of the following in form and substance satisfactory to it:

(i)the Purchase Documents duly executed and accompanied by evidence of authenticity and authority;

(ii)evidence of reservation of an “N” number for the Aircraft, together with an assignment of Lessee’s rights in such “N” number to Lessor unless an “N” number has already been assigned and will be retained;

(iii)evidence that the Aircraft has been duly certified as to type and airworthiness by the FAA in the form of a Standard Airworthiness Certificate (FAA AC Form 8100-2) issued by the FAA;

(iv)four (4) duly executed originals of the Lease, including, Lease Supplement 1, Lease Supplement 2 and all schedules and exhibits thereto, all in proper form for filing with the FAA;

(v)(A) such organizational documents for Lessee as requested by Lessor, (B) a certificate or certificates executed by an authorized representative of the Lessee certifying that the execution, delivery and performance of this Lease, the Purchase Documents, the applicable FAA documents and the transactions contemplated hereby and thereby have been authorized by all necessary action on the part of the Lessee, and (C) an incumbency certificate of the Lessee containing the name(s), title(s) and specimen signatures of the person(s) authorized to execute and deliver such documents on behalf of Lessee;

(vi)certificate(s) of insurance as to the coverage required under Section 14 hereof, accompanied, if requested by Lessor, by the applicable policies and report(s) of insurance broker(s) or underwriter(s) as to the conformity of such coverage with such requirements;

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(vii)evidence that each of the Lessee and the Supplier is a registered user entity and has appointed an administer with the International Registry, that all such parties have been approved as such by the registrar of the International Registry and that each such administer, if requested by Lessor, has consented to FAA Counsel as its professional user entity to act on such parties behalf for purposes of consenting to the registration of the International Interest provided for in the Aircraft by this Lease and the Warranty Bill of Sale with the International Registry, as applicable, and that FAA Counsel has received in escrow the executed FAA AC Form 8050-2 Aircraft Bill of Sale (the “Bill of Sale”) by Supplier in the name of Lessor,AC Form 8050-1 Aircraft Registration Application in the name of Lessor (the “Registration Application”) (except for the pink copy which will be available to be placed on the Aircraft upon acceptance thereof), and FAA AC Form 8050-135 FAA Entry Point Filing International Registry, releases, consents and discharges in form and substance satisfactory to Lessor, FAA Counsel and/or Lessor’s counsel of any Liens, such other bills of sale, in the form of FAA AC Form 8050-2, the Warranty Bill of Sale, filing forms, or otherwise, as are necessary, in the opinion of Lessor’s counsel and/or FAA Counsel to vest good and marketable title to the Aircraft in the name of Lessor, and three (3) executed originals of the Lease and Lease Supplements 1 and 2, all the foregoing (except for the Warranty Bill of Sale) being in proper form for filing with the FAA;

(viii)certificate(s) of good standing for Lessee from the state of its organization and the state in which Lessee’s chief executive offices and principal place of business are located if requested by the Lessor;

(ix)an opinion of counsel for Lessee in form and substance satisfactory to Lessor and its counsel if requested by Lessor;

(x)an opinion of FAA counsel in form and substance satisfactory to Lessor and its counsel;

(xi)evidence of filing of such UCC financing statements and registration with the International Registry of Lessor’s International Interest and of the Warranty Bill of Sale in the Aircraft (including the Airframe and each Engine) as deemed appropriate by Lessor’s counsel;

(xii)Evidence of the payment of a documentation fee to Lessor;

(xiii)Payment of all fees and disbursements (including attorneys’ fees) incurred by Lessor in the negotiation and filing of documentation; and

(xiv)collateral assignment(s) to Lessor of any and all subleases, management agreements, interchange agreements, charter agreements, purchase agreements and any other present and future agreements of any kind whatsoever relating to the Aircraft or any part thereof (which assignments shall include Lessee’s International Interest and associated rights therein relating to the Aircraft but shall not include any obligations, liabilities and/or duties of any kind whatsoever of Lessee or any other party, person or entity of any kind whatsoever in connection therewith or related thereto) and, if requested by Lessor, evidence of the registration with the International Registry of the assignment of the International Interest and associated rights of Lessee in such agreements; and

(xv)Such other documents as Lessor may reasonably request.

Section 3 — Term, Rent and Payment.

(a)Term. This Lease will commence on the Acceptance Date and will continue, unless earlier terminated pursuant to the provisions hereof, until and including the Expiration Date stated in Schedule 2 or, if extended in accordance with the terms hereof, until the end of any Renewal Term.

(b)Rent. Rent payable for the Basic Term (“Basic Rent”) will commence on the Acceptance Date. Lessee will pay Basic Rent to Lessor at its address stated below its signature, except as otherwise directed by Lessor, and in the amounts and at such intervals as set forth in Schedule 2-A to Lease Supplement 1.

(c)Supplemental Rent. Lessee will pay to Lessor when due all amounts other than Basic Rent that are payable hereunder (all such amounts being referred to herein as “Supplemental Rent”). Basic Rent and Supplemental Rent are referred to herein together as “Rent.” The expiration or other termination of Lessee’s obligation to pay Basic Rent hereunder will not terminate, limit or modify the obligations of Lessee with respect to Supplemental Rent, which will survive such expiration or other termination.

(d)Holdover. Lessee’s obligation to pay Rent will continue until the Aircraft is returned to the Lessor in accordance with and in the condition required by Sections 8 and 11 hereof.

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(e)Late Payments. All amounts payable to Lessor hereunder that are not paid when due will accrue interest at the

Late Payment Rate for the number of days actually elapsed from the due date until paid in full. In addition, if Lessee fails to remit any Basic Rent on the date such amount is due, Lessee will pay Lessor a late charge equal to the lesser of five percent of such delinquent amount or the maximum amount permitted by law. Lessee acknowledges and agrees that the late charge is an estimate of the costs Lessor will incur as a result of the late payment and is reasonable in amount.

(f)Payments. All amounts required to be paid to Lessor hereunder will be made in immediately available United States funds.

Section 4 — Limited Appointment of Agent.

Lessor hereby appoints Lessee as Lessor’s agent for the sole and limited purpose of accepting delivery of the Aircraft from the Supplier. The execution by Lessee of Lease Supplement 1 will evidence that the Aircraft is leased under, and is subject to all of the terms, provisions and conditions of, this Lease and will constitute Lessee’s unconditional and irrevocable acceptance of the Aircraft for all purposes of this Lease.

Section 5 — Covenants and Warranties.

(a)Quiet Enjoyment. So long as no Default or Event of Default has occurred and is continuing, Lessee will peaceably hold and quietly enjoy the Aircraft without interruption by Lessor or any person or entity claiming through Lessor.

(b)Disclaimer of Warranties. LESSOR MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING TITLE TO, DESIGN, OPERATION, CONDITION, OR QUALITY OF THE MATERIAL OR WORKMANSHIP IN, THE AIRCRAFT OR ANY PART THEREOF, ITS MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE ABSENCE OF LATENT OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE), LACK OF INFRINGEMENT ON ANY PATENT, TRADEMARK OR COPYRIGHT, AND LESSOR HEREBY DISCLAIMS ALL SUCH WARRANTIES; IT BEING UNDERSTOOD THAT THE AIRCRAFT IS LEASED TO LESSEE “AS IS, WHERE IS.” LESSEE HAS MADE THE SELECTION OF THE AIRCRAFT FROM THE SUPPLIER BASED ON ITS OWN JUDGMENT AND EXPRESSLY DISCLAIMS ANY RELIANCE ON ANY STATEMENTS OR REPRESENTATIONS MADE BY LESSOR. IN NO EVENT WILL LESSOR BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES.

(c)Vendor Warranties. So long as an Event of Default or Default hereunder shall not have occurred and be continuing, and so long as the Aircraft is subject to this Lease and Lessee is entitled to possession of the Aircraft hereunder, Lessor appoints Lessee as Lessor’s agent and authorizes Lessee, at Lessee’s expense, for sole purpose of asserting for Lessor’s account, all rights and powers of Lessor under any manufacturer’s, vendor’s or dealer’s warranty on the Aircraft or any part thereof (including any warranty of Manufacturer or Supplier). Notwithstanding the foregoing, Lessee will not attempt to enforce any such performance by legal proceeding without Lessor’s prior written approval.

Section 6 — Representations, Warranties and Agreements of Lessee.

(a)Due Organization. Lessee has the form of business organization indicated in the caption of this Lease, and is duly organized and existing in good standing under the laws of its state of organization and is duly qualified to do business wherever necessary to carry on its present business and operations, including the Primary Hangar Location and to own its property.

(b)Due Authorization; No Violation. This Lease has been duly authorized by all necessary action on the part of Lessee consistent with its form of organization, does not require any further shareholder, member or partner approval, does not require the approval of, or the giving notice to, any federal, state or foreign governmental authority (including the Department of Transportation and/or the FAA) and does not contravene any law or violate any judgment or order binding on Lessee or contravene any provision of or constitute a default or result in the creation of any Lien, charge, security interest or other encumbrance (other than a Permitted Lien) under any certificate or articles of incorporation or organization or bylaws or partnership certificate or limited liability company agreement, as applicable, or any agreement, indenture, or other instrument to which Lessee is a party or by which it may be bound.

(c)Enforceability. This Lease has been duly executed and delivered by authorized officers or partners or members or managers, as applicable, of Lessee and constitutes the legal, valid and binding obligation of Lessee enforceable in accordance with its terms.

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(d)Financial Statements. Lessee agrees to furnish Lessor:

(i)as soon as available, and in any event within ninety (90) days after the last day of each fiscal year of Lessee, a copy of the balance sheet of Ahern as of the end of such fiscal year, and related statements of income and retained earnings of Ahern for such fiscal year, all in reasonable detail prepared in accordance with generally accepted accounting principles consistently applied and audited by an independent certified public accounting firm of recognized standing and which is reasonably acceptable to Lessor, each on a comparative basis with corresponding statements for the prior fiscal year;

(ii)within forty-five (45) days after the last day of each fiscal quarter of Ahern (except the last fiscal quarter for any fiscal year), a copy of the balance sheet of Ahern as of the end of each such quarter, and statement of income and retained earnings covering the fiscal year to date of Ahern, each on a comparative basis with the corresponding period of the prior year, all in reasonable detail and certified by the treasurer or principal financial officer of Ahern; and

(iii)within thirty (30) days after the date on which they are filed, all reports, forms and other filings, if any, required to be made by Ahern to the Securities and Exchange Commission (“SEC”) or (in respect of the Aircraft or the Lease) the FAA, including any SEC Forms 10-K and 10-Q and related reports or documents. All credit, financial and other information provided by Ahern or at Ahern’s direction is, and all such information hereafter furnished will be, true, correct and complete in all material respects.

(iv)(a) as soon as available, and in any event within ninety (90) days after December 31st of each calendar year, a signed personal financial statement of Don F. Ahern (which shall include, among other things, a disclosure of all assets, liabilities and contingent liabilities of Don F. Ahern), which personal financial statement shall be in form and substance satisfactory in all respects to Lessor; and (b) within thirty (30) days after the filing by Don F. Ahern of his federal income tax returns for a given year, true and accurate signed copies of any such federal income tax returns, including all schedules thereto, and, in addition, provided that Don F. Ahern has filed for an individual income tax filing extension, within thirty (30) days after the filing by Don F. Ahern a true and accurate signed copy of IRS Form 4868 ‘Application for Automatic Extension of Time to File U.S. Individual Income Tax Return; and

(v)promptly, such additional financial and other information as Lessor may from time to time reasonably request.

(e)Furnishing of Information. Lessee agrees that it will furnish Lessor from time to time with such information relating to Lessee, its subsidiaries and affiliates, financial or otherwise, as Lessor reasonably requests.

(f)Location of Chief Executive Office; Lessee Name. The chief executive office and principal place of business of Lessee is located at the address set forth in Schedule 2, Lessee’s full and accurate legal name is as stated in the first paragraph of this Lease, and the organizational number of Lessee is as set forth in the signature block below. Lessee agrees to give Lessor thirty (30) days’ prior written notice of any relocation of its chief executive office and of any change in its name, identity or state of organization. Within the previous six (6) years Lessee has not changed its name, done business under any other names, changed its chief place of business from its present location or merged or been the surviving entity of any merger.

(g)Documents on Board. A current and valid Registration Application or Certificate of Aircraft Registration, and a copy of this Lease and the Lease Supplements, will be kept on board the Aircraft at all times during the Term.

(h)Litigation. There are no proceedings pending or, to Lessee’s knowledge, threatened against or affecting Lessee or any of its property before any court, administrative officer or administrative agency that would, directly or indirectly, (i) adversely affect or impair the title of Lessor to the Aircraft, or (ii) if decided adversely, affect the financial condition or operations of Lessee or the ability of Lessee to perform its obligations under this Lease.

(i)No Adverse Mortgages. Lessor’s right, title and interest in and to the Aircraft and the Rent will not be adversely affected or impaired by, and no lien will attach to the Aircraft as a result of, the terms of any existing mortgage, loan agreement or indenture or any other contract, agreement or instrument to which Lessee is a party, or under which Lessee or any of its property is or may become bound.

(j)Taxes. Lessee has filed or caused to be filed and (except as otherwise provided herein) will continue to file all required federal, state and local tax returns, and has paid or caused to be paid and will continue to pay all taxes that are due and payable with respect to its business and assets (except if being contested in good faith and if adequate reserves for the payment thereof have been established).

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(k)Filing. Except for (i) registration of the Aircraft with the FAA, (ii) filing and recording of the Lease and related documents pursuant to the Act, including the filing with the FAA of an AC Form 8050-135 with respect to the International Interest provided for in the Aircraft (including the Airframe and each Engine) by this Lease and with respect to the Warranty Bill of Sale and effecting the registration of such International Interest and the Warranty Bill of Sale with the International Registry and (iii) filing of a financing statement under the UCC, no further action, including any filing, registration or recording of any document, is necessary or advisable in order to establish and perfect Lessor’s title to and interest in, the Aircraft, as against Lessee and/or any other Person.

(l)Good Title. Lessor is or, as of the Acceptance Date, will be the owner of the Aircraft and has or, as of the Acceptance Date, will have good and marketable title to the Aircraft free and clear of all Liens other than Permitted Liens.

(m)Records. Lessee has reviewed all Records with respect to the operation and maintenance of the Aircraft prior to the Acceptance Date and such Records have been kept in accordance with the requirements of the FAA rules and regulations and industry standards. Lessee will maintain all such Records during the Term in accordance with the requirements of the FAA, any Manufacturer’s maintenance programs or requirements, and Sections 8 and 11 of this Lease.

(n)Claims. Lessee has no pending claims and Lessee has no knowledge of any facts upon which a future claim may be based, in each case for breach of warranty or otherwise, against any prior owner, any Manufacturer, or any Supplier of the Airframe, any Engine, any Propeller or any Parts.

(o)U.S. Citizen. The Lessee is now and at all times during the Term will continue to be a “citizen of the United States” within the meaning of 49 USC § 40102(a)(15) of the Act.

(p)Engines. Each of the Engines has 550HP or greater rated takeoff horsepower or the equivalent of such horsepower and, if a jet propulsion engine, has at least 1750 lbs of thrust or its equivalent.

(q)Charges. All sales, use, documentation or similar taxes, fees or other charges due and payable on or prior to the date hereof with respect to the sale to and purchase by the Lessor of the Aircraft and/or the leasing of the Aircraft by Lessor to Lessee have been paid in full.

(r)Aircraft. The Lessee has selected the Aircraft, Manufacturer, Supplier, and all maintenance facilities to be used in connection with the Aircraft. Lessee hereby assigns to Lessor any and all rights relating to the Aircraft which Lessee has acquired or hereafter acquires from the Manufacturer or any other entity; provided, Lessor will have no right to exercise such right except upon the occurrence, and during the continuation of, a Default or an Event of Default.

(s)Insolvency, Fair Consideration. Lessee is not insolvent within the meaning of any applicable state or federal law.

Section 7 — Net Lease.

THE LEASE IS A NET LEASE. LESSEE’S OBLIGATIONS TO PAY RENT AND PERFORM ITS OBLIGATIONS HEREUNDER ARE ABSOLUTE, IRREVOCABLE AND UNCONDITIONAL AND WILL NOT BE SUBJECT TO ANY RIGHT OF SETOFF, COUNTERCLAIM, DEDUCTION, DEFENSE OR ANY RIGHT LESSEE MAY HAVE AGAINST THE SUPPLIER, MANUFACTURER, LESSOR OR ANY OTHER PERSON; PROVIDED, HOWEVER, THAT NOTHING HEREIN WILL PRECLUDE LESSEE FROM ASSERTING ANY SUCH CLAIMS IN A SEPARATE CAUSE OF ACTION. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THIS LEASE WILL NOT TERMINATE, NOR WILL THE OBLIGATIONS OF LESSEE BE AFFECTED, BY REASON OF ANY DEFECT IN OR DAMAGE TO, OR ANY LOSS OR DESTRUCTION OF, THE AIRCRAFT OR ANY PART THEREOF FROM WHATSOEVER CAUSE, OR THE INVALIDITY OR UNENFORCEABILITY OR LACK OF DUE AUTHORIZATION OF THIS LEASE OR LACK OF RIGHT, POWER OR AUTHORITY OF LESSOR TO ENTER INTO THIS LEASE, OR FOR ANY OTHER CAUSE, WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING, ANY PRESENT OR FUTURE LAW OR REGULATION TO THE CONTRARY NOTWITHSTANDING, IT BEING THE EXPRESS INTENTION OF LESSOR AND LESSEE THAT ALL RENT PAYABLE TO LESSOR HEREUNDER WILL BE, AND CONTINUE TO BE, PAYABLE IN ALL EVENTS UNLESS AND UNTIL THE OBLIGATION TO PAY THE SAME ARE FULLY SATISFIED PURSUANT TO THE EXPRESS PROVISIONS HEREOF. LESSEE UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER OR THE MANUFACTURER, NOR ANY SALES REPRESENTATIVE OR OTHER AGENT OF EITHER OF THEM, IS AN AGENT OF LESSOR OR IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THIS LEASE, AND NO SUCH WAIVER OR ALTERATION WILL VARY THE TERMS HEREOF. LESSOR IS NEITHER A SUPPLIER NOR A MANUFACTURER, AND LESSOR IS NOT RESPONSIBLE FOR REPAIRS, SERVICE OR DEFECTS IN THE AIRCRAFT OR ANY PART

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THEREOF. LESSEE AGREES NOT TO ASSERT AGAINST LESSOR ANY CLAIMS OR DEFENSES LESSEE MAY HAVE WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, AND UNDERSTANDS THAT IT MAY ASSERT SUCH CLAIMS AGAINST THE SUPPLIER OR MANUFACTURER.

Section 8 — Return of Aircraft.

(a)Condition Upon Return. Upon the expiration or other termination of this Lease (whether following an Event of Default or otherwise), unless Lessee shall have purchased the Aircraft in accordance with the terms hereof, Lessee, at its own expense, will return the Aircraft (including the Engines) to Lessor at a location specified by the Lessor within the continental United States with no deferred maintenance items outstanding and in the condition in which the Aircraft is required to be maintained pursuant to the terms of this Lease. Without limiting the generality of the foregoing, upon return the Aircraft will:

(i)be duly certified by the FAA as airworthy;

(ii)be free and clear of all Liens other than Permitted Liens;

(iii)be in the same configuration, in the same operating and physical condition, with all systems operating normally, and in good appearance (in each case, ordinary wear and tear excepted) as when delivered to Lessee hereunder;

(iv)be in compliance with all so-called “mandatory,” “alert” and (to the extent applicable to Lessee, or its operations) “highly recommended” service bulletins, service letters, modification kits, and similar notices and components issued, supplied, or available by or through the Manufacturer, and with all “airworthiness alerts” and airworthiness or other directives, circulars, operator bulletins and instructions and all other applicable service, maintenance, repair and overhaul regulations issued by the FAA or similar regulatory agency having authority; and

(v)otherwise be in the condition required under this Lease.

(b)Overhaul-General. At the time of return:

(i)the Airframe (including the landing gear) will not have been operated more than one-half of the allowable time between major airframe overhauls or major block maintenance before the next major airframe overhaul or major block maintenance, whichever then applies, in accordance with Lessee’s then approved overhaul and/or maintenance program authorized by and performed to FAA requirements applicable to Lessee or the Airframe, and will have no less than half life (as measured by reference to calendar, phase, periodic maintenance, and/or inspection standards) remaining on any life limited Airframe Part or component (including the landing gear) before overhaul or replacement; and

(ii)each Engine will not have been operated more than one-half of the allowable time remaining before overhaul (both hot and cold sections as measured by reference to calendar, phase, periodic maintenance, and/or inspection standards) and all cycle limited Parts or time controlled components of each Engine will not have been operated more than one-half the allowable cycles or time remaining before replacement; said Engine overhaul and Engine Parts and components replacement to be performed in accordance with Lessee’s then approved engine overhaul and parts and components replacement program authorized by and performed to FAA requirements applicable to Lessee; and

(iii)Lessee will have performed all inspections and scheduled maintenance required to be performed on the Airframe, Propeller(s), Engines and all life limited Parts and components within one hundred eighty (180) days after the date of return and one hundred fifty (150) hours of additional operation after the hour of return.

(c)Overhaul-Airframe.

(i)If the conditions set forth in Sections 8(b)(i) and (iii) hereof are not met, Lessee will pay Lessor a dollar

amount computed by multiplying (A) Lessor’s then current cost for such major overhaul or major block maintenance as the case may be (such cost being the then current rates charged by an airframe overhaul facility approved by the Manufacturer and acceptable to Lessor, together with all costs associated with such overhaul), times (B) a fraction of which (x) the numerator is the excess of the number of hours since the last such major overhaul or major block maintenance, as the case may be, over fifty percent (50%) of the number of hours of allowable time between major overhauls or major block maintenance and (y) the denominator is the total number of hours of such allowable time.

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(ii)If the life limited Parts or components requirement contained in Section 8(b) hereof are not met, Lessee will pay to Lessor with respect to each Part or component for which said requirement is not met the dollar amount obtained by multiplying (A) the ratio that the life expended in excess of half-life bears to the total allowable life for such Part or component by (B) Lessor’s cost of replacement of such Part or component. Lessor’s cost of replacement of such Part or component will include Lessor’s then current cost of purchasing the Part or component itself and all of Lessor’s then current costs associated with the replacement.

(d)Overhaul-Engine.

(i)If the conditions specified in clause (ii) and/or (iii) of Section 8(b) hereof are not met with respect to the Engines, Lessee will pay to the Lessor with respect to each Engine for which said conditions are not met the dollar amount per Engine obtained by multiplying (A) the ratio that the time accumulated since half time bears to the time allowable between overhauls by (B) Lessor’s cost for overhaul of such Engine (such Lessor’s cost being the then current rates charged by an engine overhaul facility approved by the Manufacturer and acceptable to Lessor, together with all costs associated with such overhaul).

(ii)If the conditions specified in clause (ii) and/or (iii) of Section 8(b) hereof are not met with respect to Engine cycle limited Parts and time controlled components, Lessee will pay to Lessor with respect to each Engine for which said requirement is not met the dollar amount per Part or per component, as applicable, obtained by multiplying (A) the ratio that the time (or cycles) accumulated since half time (or one-half the allowable cycles) bears to the time (or cycles) allowable between replacements by (B) Lessor’s cost of replacement of the part (or component). Lessor’s cost of replacement of a part or component will include Lessor’s then current cost of purchasing the part or component itself and all of Lessor’s then current costs associated with the replacement.

(e)Fuel; Records. Upon the return of the Aircraft:

(i)each fuel tank will contain the same quantity of fuel as was contained in such tank when the Aircraft was delivered to Lessee on the Acceptance Date, which will be presumed to be fifty percent (50%) of full capacity unless otherwise specified in the Purchase Documents. If the fuel tank(s) contain less than such amount, Lessee will pay to Lessor the cost, at the then current market price of fuel, of the amount of fuel necessary to bring the fuel level to the required amount; and

(ii)Lessee will deliver all Records to Lessor. If any Records are missing or incomplete, Lessor will have the right to cause any such Records to be reconstructed at the sole expense of Lessee.

(f)Storage. Upon the expiration or other termination of the Lease and for two (2) months thereafter, Lessee will, if requested by Lessor, permit Lessor to store the Aircraft at the Primary Hangar Location as described in Schedule 2. During such storage period Lessor will, at Lessor’s cost and expense unless a Default or Event of Default has occurred and is continuing, keep the Aircraft properly hangared, and Lessee will permit Lessor or any person designated by Lessor, including the authorized representative or representatives of any prospective purchaser, lessee or user of the Aircraft to inspect the same. Lessee will not be liable, except in the case of the negligence or intentional misconduct of Lessee or of its employees or agents, for injury to, or the death of, any person exercising, either on behalf of Lessor or any prospective purchaser, lessee or user, the rights of inspection granted hereunder. Unless a Default or Event of Default has occurred and is continuing, Lessor will bear the risk of loss and will pay any and all expenses connected with insuring and maintaining the Aircraft during such storage period. The cost of storage, hangaring, insuring and maintaining the Aircraft, and the risk of loss to the Aircraft, under this section will be for Lessee’s account if a Default or Event of Default has occurred and is continuing. Notwithstanding the foregoing, upon the cancellation or termination of the Lease in connection with an Event of Default, the storage period provided for in this paragraph and the obligations of Lessee regarding risk of loss, maintenance and its obligations to hangar and insure the Aircraft shall continue so long as Lessor is pursuing its rights and remedies as a result of such Event of Default.

(g)Return of Engines. If, notwithstanding the requirement set forth in Section 8(a) that Lessee return the Engines to Lessor, Lessee wishes to return the Aircraft with an engine other than an Engine installed on the Airframe and if Lessor is willing in its sole reasonable discretion to accept such engine, then concurrently with such return Lessee will, at its sole expense, furnish Lessor with (i) a full warranty bill of sale, in form and substance satisfactory to Lessor, with respect to each such engine,(ii) a written opinion of FAA Counsel to the effect that such engine is free and clear of all Liens other than Lessor’s Liens. Lessee shall and take all such other steps as are necessary to effect the registration of such sale with the International Registry. Upon receipt of the bill of sale and opinion, unless a Default or Event of Default has occurred and is continuing, Lessor will transfer to Lessee on an “AS-IS, WHERE-IS” BASIS WITHOUT ANY

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REPRESENTATION OR WARRANTY BY LESSOR (OTHER THAN AS TO LESSOR’S LIENS), all of Lessors right, title and interest in and to the Engine that was replaced by the engine.

(h)Inspection Prior to Return. Not more than ninety (90) days prior to the Expiration Date, upon the written request of Lessor, Lessee will, at its sole expense, (i) review the maintenance records of the Aircraft to determine if the Aircraft is in the condition required by the Lease, and (ii) deliver to Lessor a written certificate (x) certifying that the Aircraft is in the condition required by the Lease according to the maintenance records for such Aircraft, or (y) if the maintenance records so indicate, certifying that maintenance or repairs are required and specifying what maintenance or repair is required in order to bring the Aircraft to the required condition.

(i)Survival. The provisions of this Section 8 will survive the expiration or other termination of this Lease and the return of the Aircraft for any reason whatsoever.

(j)Injunctive Relief. Without limiting any other terms or conditions of this Lease, the provisions of this Section 8 are of the essence in this Lease, and upon application to any court of equity having jurisdiction, Lessor will be entitled to a decree against Lessee requiring specific performance of the covenants of Lessee set forth in this Section 8.

(k)Excess Use. Upon the return of the Aircraft to the Lessor, Lessor and Lessee shall consult for the purpose of determining the Excess Use Amount (as defined below), if any, and an amount so agreed upon in writing between Lessor and Lessee shall be binding on both parties. The “Excess Use Amount” shall mean the amount, if any, by which (i) the fair market sales value of the Aircraft (determined pursuant to Section 23 (c) without Excess Hours, exceeds (ii) the fair market sales value of the Aircraft (determined pursuant to Section 23 (c)) with Excess Hours (and as to this Section 8 (k) (ii), without making the assumption in Section 23 (c) (iii). If Lessor and Lessee fail to agree within ten (10) days after the return of the Aircraft to Lessor, then Lessor shall appoint an independent appraiser (reasonably acceptable to Lessee) to determine the Excess Use Amount. Lessee agrees to pay the costs and expenses of any such determination and appraisal. The independent appraiser shall be required to complete such determination as promptly as practical, but in any event, not later than thirty (30) days after the date on which it is appointed. A final determination by the independent appraiser regarding the extent of the Excess Use Amount, if any, shall be binding on Lessor and Lessee. Lessee shall pay to Lessor within ten (10) days of determination an amount equal to the Excess Use Amount.

Section 9 — Liens.

Lessee will not directly or indirectly, voluntarily or involuntarily, create, incur, assume or suffer to exist any Liens other than Permitted Liens on or with respect to the Aircraft or any part thereof, Lessor’s title thereto, or any interest of Lessor therein, and Lessee will promptly, at its own expense, take such action as Lessor deems necessary or advisable to duly discharge any such Lien. If Lessee fails to take action to discharge or remove any such Lien, Lessor may take such action as it deems necessary or appropriate to discharge or remove such Lien. Lessee will reimburse Lessor on demand for any costs incurred by Lessor in connection with such action. Lessor’s rights hereunder are in addition to, and not in derogation of, any other rights Lessor may have hereunder, at law, or in equity.

Section 10 — Taxes.

Lessor will be responsible for reporting and paying to the applicable jurisdiction, and Lessee will pay to Lessor when due and will defend and indemnify Lessor against liability for, all sales and use taxes and all taxes that are the equivalent of sales or use taxes (including any related interest or penalties) now or hereafter imposed by any governmental body or agency upon the Aircraft or the leasing thereof or otherwise with respect to the transactions contemplated hereby. Except to the extent such impositions are included in the preceding sentence, Lessee will (i) report, (ii) pay when due, and (iii) defend and indemnify Lessor against liability for all license and registration fees, assessments, and property, excise, documentary, privilege and other taxes (including any related interest or penalties) or other charges or fees now or hereafter imposed by any governmental body or agency upon the Aircraft, or with respect to landing, airport use, manufacturing, ordering, shipment, purchase, ownership, delivery, installation, leasing, operation, possession, use, return, or other disposition thereof or the rentals hereunder (other than taxes on or measured solely by the net or gross income of Lessor or taxes on gross receipts in lieu of taxes on net income (but not including sales, use, rental or property taxes or taxes of a similar nature)) (together with sales, use and equivalent taxes, “Impositions”). Any fees, taxes or other lawful charges paid by Lessor upon failure of Lessee to make such payments will immediately become due from and payable by Lessee to Lessor. Notwithstanding the foregoing, Lessee will pay and will indemnify, defend, and hold harmless Lessor, on a net after-tax basis, from and against all Impositions on or measured by the net income of Lessor imposed against Lessor by any local or foreign government or other local or foreign taxing authority if and to the extent Lessor would not have incurred such Impositions but for the operation or presence of the Aircraft in the jurisdiction asserting an Imposition.

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Section 11— Registration, Maintenance and Operation; Compliance and Use;
Replacement Parts; Additions; Aircraft Marking.

(a)Registration, Maintenance and Operation. During the Term, Lessee, at its sole cost and expense, will (i) cause the Aircraft to be duly registered in the name of the Lessor under the Act at all times; (ii) maintain, inspect, service, repair, overhaul and test the Airframe, any Propellers and each Engine in accordance with FAA approved and Manufacturer’s recommended maintenance programs and in accordance with (A) all maintenance manuals furnished with the Aircraft, including all subsequent amendments or supplements to such manuals issued by the Manufacturer from time to time, (B) all mandatory “Service Bulletins” issued, supplied, or available by or through any Manufacturer and/or any other manufacturer of any Engine or Part having a compliance date during the Term of this Agreement and up to twelve (12) months after the Expiration Date or the last day of any Renewal Term, and (C) all airworthiness directives or circulars issued by the FAA or similar regulatory agency having jurisdictional authority, and causing compliance with such directives or circulars to be completed through corrective modification or operating manual restrictions, having a compliance date during the Term and up to twelve (12) months after the Expiration Date or the last day of any Renewal Term; (iii) maintain (in English) all Records and (iv) promptly furnish to Lessor such information as may be required to enable Lessor to file any reports required by any governmental authority as a result of Lessor’s ownership of the Aircraft. All maintenance procedures required by Section 11, subparagraph (a)(ii) or any other provision of this Lease will be performed in accordance with all FAA and Manufacturer’s standards and procedures by properly trained, licensed, and certified maintenance sources and maintenance personnel using replacement parts approved by the FAA and the Manufacturer, so as to keep the Airframe, any Propellers and each Engine in as good operating condition as when delivered to the Lessee hereunder, ordinary wear and tear alone excepted, and to enable the airworthiness certificate for the Aircraft to be continually maintained in good standing at all times under the regulations of the FAA.

(b)Compliance and Use. (i) Except as permitted in Section 16, Lessee will operate the Aircraft solely in the conduct of its business and/or for commercial purposes (and not for consumer, home or family purposes) and in such configuration as authorized by the FAA. Lessee will not operate the Aircraft or permit the Aircraft to be operated (A) at any time or in any geographic area when or where insurance required by the provisions of Section 14 hereof is not in effect, (B) in a manner or for any time period such that Lessor or a Person other than Lessee will be deemed to have “operational control” of the Aircraft without the prior written consent of Lessor, or (C) for the carriage of persons or property for hire or the transport of mail or contraband. Throughout the Term, possession, use and maintenance of the Aircraft will be at the sole risk and expense of Lessee and the Aircraft will be based at the Primary Hangar Location set forth in Schedule 2. Lessee will deliver to Lessor a written waiver of any Lien or claim of Lien against the Aircraft that is or could be held by any landlord (other than a governmental entity) or mortgagee of any hangar or storage facility where the Aircraft is or will be located. Lessee will not remove the Aircraft, or permit the Aircraft to be removed, from its designated Primary Hangar Location for a period in excess of thirty (30) days without Lessor’s prior written consent. Lessee will cause the Aircraft to be operated at all times by duly qualified pilots who (x) are supplied by Lessee, (y) hold at least a valid commercial airman certificate and instrument rating and any other certificate, rating, type rating or endorsement appropriate to the Aircraft, purpose of flight, condition of flight or as otherwise required by the FARS or other applicable law or regulation, and (z) meet the requirements established and specified by the insurance policies required hereunder and the FAA. (ii) The Aircraft shall not be operated, used or located outside the continental United States except that it may be flown temporarily to any country in North America, Central America or South America for any purpose expressly permitted under this Lease. Notwithstanding the foregoing, the Aircraft shall not be flown, operated, used or located in, to or over any such country or area (temporarily or otherwise), (A) which is excluded from the required insurance coverages, or would otherwise cause Lessee to be in breach of the insurance requirements or other provisions, of this Lease (provided, further, prior to any operation in Mexico, Lessee shall (x) provide prior written notice to Lessor, and (y) furnish Lessor with evidence of insurance coverage for such use), (B) with which the U.S. does not maintain favorable diplomatic relations, (C) in any area of recognized or threatened hostilities, (D) in violation of any applicable law, including any U.S. law or United Nations Security Council Directive, (E) which is subject to any sanction program of the Office of Foreign Assets Control or (F) in a manner that causes it to be deemed to have been used or operated “predominantly” outside of the United States, as that phrase is used in Section 168(g)(1)(A) of the Code.

(c)Replacement Parts. Except as otherwise provided in the succeeding paragraph (d) of this section, Lessee, at its sole cost and expense, will promptly replace all Parts that from time to time become worn out, lost, stolen, taken, destroyed, seized, confiscated, requisitioned, damaged beyond repair or permanently rendered or declared unfit for use for any reason whatsoever with a replacement part of at least the same manufacture, value, remaining useful life and utility as the replaced Part immediately preceding the replacement (assuming that such replaced Part is in the condition required by this Lease). Such replacement part will be free and clear of all Liens. Upon installation, attachment or incorporation in, on or into the Aircraft, immediately and without further act such replacement part will be fully subject to the Lease and title thereto will vest in Lessor.

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(d)Additions. Lessee will be entitled from time to time during the Term to acquire and install on the Aircraft at Lessee’s sole cost and expense (and Lessor hereby appoints Lessee to be Lessor’s agent for such purpose so long as no Default or Event of Default has occurred and is continuing), any additional accessory, device or equipment as may be available at such time (“Additions”) but only if (i) such Additions are ancillary to the Aircraft, (ii) such Additions are not required to render the Aircraft complete for its intended use by Lessee, (iii) such Additions will not impair the originally intended function or use of the Aircraft or diminish the value of same, (iv) such Additions can be readily removed without causing material damage to the Aircraft, and (v) the incorporation of such Additions into the Aircraft will not result in a violation of the provisions of any FARS or other applicable law, rule or regulation. Lessee will be entitled to remove all Additions from the Aircraft, except for any Addition that constitutes an Alteration (as defined below). Any Addition that is permitted to be removed will be released from the terms of this Lease upon the removal thereof. Title to Additions that are not removed by Lessee prior to the return of the Aircraft to Lessor will vest in Lessor upon such return. Lessee will repair all damage to the Aircraft resulting from such installation or removal of Additions so as to restore the Aircraft to its condition prior to installation.

(e)Alterations. Lessee will, at its expense, make any and all alterations and modifications (each an “Alteration”) with respect to the Aircraft that may at any time during the Term be required to comply with any applicable law or any government rule or regulation. All Alterations and all nonseverable repairs made by Lessee to or upon the Aircraft, including any Engine or replacement Parts installed thereon, in the course of repairing or maintaining the Aircraft will be deemed an accession, and title thereto will immediately vest in Lessor without cost or expense to Lessor.

(f)Aircraft Marking. Lessee agrees, at its sole cost and expense, to (i) cause the Airframe, any Propellers and the Engines to be kept numbered with the identification or serial number therefor as specified in Schedule 1; (ii) prominently display on the Aircraft that “N” number, and only that “N” number specified in Schedule 1, or such other “N” number as has been approved in writing by the Lessor and duly recorded with the FAA; (iii) (A) notify Lessor in writing not less than thirty (30) days prior to making any change in the configuration, appearance or coloring of the Aircraft (other than changes mandated by the FAA or that are reasonably consistent with the configuration, appearance and coloring on the Acceptance Date), and (B) at Lessor’s request, either (x) restore the Aircraft to the configuration, appearance and coloring as of the Acceptance Date (other than changes that were mandated by the FAA) or (y) pay Lessor an amount equal to the reasonable cost of such restoration; and (iv) affix and maintain in the Airframe adjacent to the airworthiness certificate and on each Engine a metal nameplate bearing the Aircraft Marking specified in Lease Supplement 2 and such other markings as from time to time may be required by law or otherwise deemed necessary or advisable by Lessor in order to protect Lessor’s title to the Aircraft and Lessor’s rights hereunder. Lessee will not operate the Aircraft until such Aircraft Markings have been placed thereon. Lessee will promptly replace or repair, as applicable, any such Aircraft Marking that may be removed, defaced or destroyed.

Section 12 — Inspection.

Lessor will have the right, but not the duty, to inspect the Aircraft, any component thereof, and the Records at any reasonable time and from time to time, wherever the same may be located, upon reasonable prior written notice to Lessee unless a Default or Event of Default has occurred and is continuing, in which case no prior notice will be required. At Lessor’s request, Lessee will confirm to Lessor the location of the Aircraft and will, at any reasonable time and from time to time, make the Aircraft and/or the Records available to Lessor for inspection.

Section 13 — Loss or Destruction.

(a)Event of Loss with Respect to the Aircraft. (i) Lessee will deliver to Lessor written notice of the occurrence of any Event of Loss with respect to the Aircraft within ten (10) days after the occurrence thereof. On the next Basic Rent Date following such Event of Loss (or, if the Event of Loss occurs after the Last Basic Rent Date, within thirty (30) days after the Event of Loss), Lessee will pay to Lessor an amount equal to the sum of (A) all Rent then due hereunder, plus (B) the Casualty Value of the Aircraft determined as of such next Basic Rent Date or the Last Basic Rent Date, as applicable. Upon Lessor’s receipt of such amounts, Lessee’s obligation to pay further Basic Rent for the Aircraft will cease, but Lessee’s obligation to pay Supplemental Rent and any other amounts due under this Lease, if any, will remain in full force and effect, Except in the case of total destruction, permanent disappearance, Requisition of Use, or Return to Manufacturer, Lessor will be entitled to possession of the Aircraft, unless possession by an insurance carrier is required in order to settle an insurance claim. Lessor will be under no duty to Lessee to pursue any claim against any Person in connection with an Event of Loss, but Lessee may at its sole cost and expense and with Lessor’s prior written consent pursue the same on behalf of Lessor in such manner as may be reasonably acceptable to Lessor.

(ii)Following payment to Lessor of the Casualty Value, Lessee will dispose of the Aircraft as Lessor’s agent as soon as it is able for the best price obtainable Any such disposition will be on as “AS-IS, WHERE-IS” BASIS

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WITHOUT ANY REPRESENTATION OR WARRANTY BY LESSOR (OTHER THAN AS TO LESSOR’S LIENS) of any kind whatsoever. Lessee may retain all amounts received from such disposition up to an amount equal to the sum of the Casualty Value actually paid by Lessee plus Lessee’s reasonable costs and expenses of disposition. Any excess will be paid over to, and retained by, Lessor. In the event of a Return to Manufacturer, Lessee will be entitled to all amounts payable to Lessor by the Manufacturer up to the amount, if any, of the Casualty Value actually paid by Lessee to Lessor, and any excess will be retained by Lessor. With respect to a Requisition of Use, Lessee will be entitled to all amounts paid by any governmental authority up to the Casualty Value actually paid by Lessee, and any excess will be paid over to, and retained by, Lessor.

(b)Event of Loss With Respect to an Engine. Upon an Event of Loss with respect to any Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe upon which such Engine was installed, Lessee will give Lessor prompt written notice thereof and will, within thirty (30) days after the occurrence of such Event of Loss, convey to Lessor title to an engine that is (i) the same make and model number as the Engine suffering the Event of Loss, (ii) free and clear of all Liens, (iii) of a value, utility, and useful life at least equal to, and be in as good an operating condition as, the Engine suffering the Event of Loss, assuming such Engine was of the value and utility and in the condition and repair required by the terms hereof immediately prior to the occurrence of such Event of Loss. Lessee, at its sole cost and expense, will furnish Lessor with such documents to evidence the conveyance as Lessor requests. Upon full compliance by Lessee with the terms of this paragraph, Lessor will transfer to Lessee, without recourse, representation or warranty of any kind whatsoever, other than as to Lessor’s Liens, all of Lessor’s right, title and interest, if any, in and to the Engine suffering the Event of Loss. SUCH TRANSFER WILL BE ON AN “AS-IS, WHERE-IS” BASIS WITHOUT ANY REPRESENTATION OR WARRANTY BY LESSOR (OTHER THAN AS TO LESSOR’S LIENS) AS TO THE ENGINE SO TRANSFERRED TO LESSEE. Each replacement engine will, after such conveyance, be deemed an “Engine” as defined herein and will be deemed part of the same Aircraft as was the replaced Engine. In connection with any replacement of an Engine pursuant to this Section 13(b) Lessee will enter into a supplement to this Lease identifying the replacement engine, subjecting such engine to this Lease and providing for an International Interest in favor of the Lessor and Lessee shall effect the registration of such International Interest and the bill of sale transferring title in such replacement engine to Lessor with the International Registry, and take such other action and make such filings as reasonably requested by Lessor to register, protect, preserve and perfect its interests in and relating to such replacement engine. No Event of Loss with respect to an Engine will result in any reduction or delay in the payment of Basic Rent or relieve Lessee of any obligation under this Lease.

(c)Risk of Loss, No Release of Obligations. Lessee will bear the entire risk of loss, theft, confiscation, expropriation, requisition, damage to or destruction of the Aircraft and will not be released from its obligations hereunder in the event of any damage to the Aircraft or any part thereof or any Event of Loss relating thereto, until such time as all obligations hereunder have been performed in full.

Section 14 — Insurance.

(a)Insurance. Lessee, at its sole cost and expense, will maintain or cause to be maintained:

(i)aircraft liability insurance covering claims arising from the use or operation of the Aircraft in or over any area (including contractual liability and bodily injury and property damage liability) in an amount not less than the greater of (a) $50,000,000 per occurrence, or such higher amounts as are required by law in the geographic location or country in or over which the Aircraft is flown, operated or located and (b) the amounts of aircraft liability insurance from time to time applicable to aircraft operated by Lessee (whether owned or leased) of the type of the Aircraft;

(ii)cargo liability insurance sufficient to cover the maximum value of cargo on the Aircraft at any one time if Lessee is engaged in transporting property of others;

(iii)all-risk aircraft physical damage insurance covering the Aircraft in motion and not in motion, in flight and on the ground, and the Engine and all Parts while attached to or removed from the Airframe, in an amount not less than the lesser of the full insurable value of the Aircraft or the then Casualty Value;

(iv)for all locations which the Aircraft travels to and through: war and allied perils insurance to cover the perils of (A) war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, martial law, military or usurped power or attempts at usurpation of power, (B) strikes, riots, civil commotions of labor disturbances, (C) any act of one or more persons, whether or not agents of a sovereign power, for political or terrorist purposes and whether the loss or damage resulting therefrom is accidental or intentional, (D) any vandalism, malicious act or act of sabotage, (E) confiscation, naturalization, seizure, restraint, detention, diversion, appropriation,

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requisition for title or use by or under the order of any government (whether civil, military or de facto) or public or local authority and (F) hijacking, or any unlawful seizure or wrongful exercise of control of the crew in flight; and

(v)such other insurance against such other risks as is usually carried by similar companies owning or leasing and operating aircraft similar to the Aircraft. All such insurance will be maintained with insurers of recognized reputation and responsibility (reasonably satisfactory to Lessor) having a rating not less than A- from A.M. Best, or other rating approved by Lessor. All insurance policies will be in a form acceptable to Lessor.

If Lessee fails to maintain insurance as herein provided, Lessor may, at its option, provide such insurance, and Lessee will, upon demand, reimburse Lessor for the cost thereof.

(b)Requirements. All insurance policies required hereunder will: (i) require 30 days’ prior written notice to Lessor of cancellation, non-renewal or material change in coverage (any such cancellation, non-renewal or change, as applicable, not being effective until the thirtieth (30th) day after the giving of such notice) except, in the case of cancellation for nonpayment of premium, only 10 days’ prior written notice shall be required and in the case of cancellation of the coverages described under Section 14.a.(iv), notice as established under the applicable endorsements; (ii) name the Additional Insureds (as hereinafter defined) as an additional insured under the liability coverage and name Additional Insureds as sole loss payee under the physical damage insurance coverage; (iii) not require contributions from other policies held by the Additional Insureds; (iv) waive any right of subrogation against the Additional Insureds; (v) in respect of any liability of any of the Additional Insureds, except for the insurers’ salvage rights in the event of a loss or damage, waive the right of such insurers to setoff, to counterclaim or to any other deduction, whether by attachment or otherwise, to the extent of any monies due the Additional Insureds under such policies; (vi) permit but not require that any of the Additional Insureds pay or be liable for any premiums with respect to such insurance covered thereby; (vii) provide for coverage in all areas in which the Aircraft is permitted to fly under the terms hereof; (viii) provide that all of the provisions thereof, except the limits of liability, will operate in the same manner as if there were a separate policy covering each Additional Insured; and (ix) contain breach of warranty provisions providing that, in respect of the interests of the Additional Insureds in such policies, the insurance will not be invalidated by any action or inaction of Lessee or any other person (other than an Additional Insured, as to itself only) and will insure the Additional Insureds regardless of any breach or violation of any warranty, declaration or condition contained in such policies by Lessee or by any other person (other than an Additional Insured, as to itself only). As used herein, the term “Additional Insureds” means “KeyCorp and its subsidiaries and affiliated companies including KeyEquipment Finance Inc., and their respective successors and/or assigns.”

(c)No Right to Self-insure. Lessee will not self-insure (by deductible, premium adjustment, or risk retention arrangement of any kind) the insurance required to be maintained hereunder, except to the extent of deductibles usually and customarily maintained by companies engaged in the same or similar business as Lessee and operating the same or similar aircraft and approved by Lessor.

(d)Notice of Loss or Damage; Application of Proceeds. Lessee will give Lessor prompt notice of any damage to or loss of, the Aircraft, or any part thereof. So long as no Default or Event of Default shall have occurred and be continuing under this Lease, insurance proceeds for partial loss or damage to the Aircraft or any part thereof for which the cost of repair is less than $250,000.00 will be applied solely for payment of the costs actually incurred with respect to repairs made to the Aircraft so as to restore it to the operating condition required hereby. If a Default or Event or Default has occurred and is continuing or such insurance proceeds for partial loss or damage to the Aircraft or any part thereof for which the cost of repair is greater than $250,000.00, such insurance proceeds will be applied as Lessor in its sole discretion determines.

(e)Reports, Policies, Certificates. Not less than fifteen (15) days prior to the expiration dates of the policies obtained by Lessee pursuant to this section, Lessee will deliver to the Additional Insureds certificate(s) of insurance evidencing that the coverage required hereunder has been obtained beyond such expiration date, together with a certificate certifying that such insurance complies with the terms hereof, accompanied, if requested by Lessor, by the applicable policies and report(s) of insurance broker(s) or underwriter(s) as to the conformity of such coverage with such requirements; provided, however, that the Additional Insureds will be under no duty either to ascertain the existence of or to examine any certificates or reports or to advise Lessee if such insurance does not comply with the requirements of this section.

(f)Attorney-in Fact. Lessee irrevocably appoints Lessor (and any assignee, mortgagee and/or lender of the Lessor) its attorney-in-fact to file, settle, or adjust, and receive payment of, claims under any insurance policy required hereby and to endorse Lessee’s name on any checks, drafts or other instruments in payment of such claims, and to otherwise act in Lessee’s name and on its behalf to make, execute, deliver and file any instruments or documents necessary in connection therewith, and to take any action as Lessor (and any such assignee, mortgagee and/or lender)

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deems necessary or appropriate to obtain the benefits intended to inure to Lessor under this Section 14. To the extent appropriate or permissible under applicable law, such appointment is coupled with an interest, is irrevocable, and will terminate only upon payment in full of the obligations set forth in this Lease and/or any agreements, documents or instruments related thereto. Notwithstanding the foregoing, unless a Default or Event of Default has occurred and is continuing hereunder, Lessor agrees that it will not exercise its powers as attorney in fact with respect to claims for damages in amounts which are less than the lesser of (i) $250,000.00, or (2) ten percent (10%) of the Lessor’s Cost if the Lessor’s Cost is under one million dollars ($1,000,000.00).

Section 15 — Indemnification.

(a)General Indemnity. Lessee will indemnify and hold harmless Lessor and each Lessor Assignee, on an after tax basis, from and against any and all liabilities, causes of action, claims, suits, penalties, damages, losses, costs or expenses (including attorneys’ fees), obligations, demands and judgments (collectively, a “Liability”) arising out of or in any way related to: (i) Lessee’s failure to perform any covenant under any of the Lease Documents, (ii) the untruth of any representation or warranty made by Lessee under the Lease Documents, (iii) the order, manufacture, purchase, ownership, selection, acceptance, rejection, possession, rental, sublease, operation, use, maintenance, control, loss, damage, destruction, removal, storage, surrender, sale, condition, delivery, return or other disposition of or any other matter relating to the Aircraft, or (iv) injury to persons, property or the environment including any Liability based on strict liability in tort, negligence, breach of warranties or Lessee’s failure to comply fully with applicable law or regulatory requirements; provided, that the foregoing indemnity will not extend to any Liability to the extent resulting solely from the gross negligence or willful misconduct of Lessor.

(b)Tax Indemnity. Lessor and Lessee intend that the Lease be treated as a true lease in which Lessor is entitled to all federal and state tax benefits, including the ability to take MACRS depreciation and, if applicable, bonus depreciation (the “Tax Benefits”) available to the owner of the Aircraft. If Lessor is not entitled to claim the Tax Benefits or the Tax Benefits are adjusted, deferred or recaptured (in each case, a “Tax Loss”) as a result of any act, omission or misrepresentation of Lessee, then Lessee will pay to Lessor, as indemnity and as additional rent, the amount, on an after tax basis, necessary to provide Lessor the same net economic return under the Lease that Lessor would have realized had there not been a Tax Loss; provided, that Lessor shall provide Lessee a reasonably detailed statement as to the cause and calculation of the Tax Loss and, if (i) the amount of the Tax Loss involves more than $50,000, (ii) Lessee has provided a written opinion of its tax counsel that it is more likely than not that Lessor could prevail with the Internal Revenue Service with respect to such Tax Loss, (iii) Lessee agrees in writing to be responsible for the costs of the contest (including (x) reasonable attorney and accountant fees of Lessor, and (y) the Tax Loss, if the contest is unsuccessful, or shall have paid such Tax Loss, if required to pursue the contest), and (iv) no Event of Default has occurred and is continuing, then Lessor shall contest such Tax Loss; provided, further, that Lessor shall not be responsible to contest this further than Tax Court or District Court, as the case may be. Unless otherwise agreed, Lessor shall control the contest; provided, that Lessor agrees to reasonably consider suggestions of Lessee and its counsel and to promptly provide Lessee and its counsel with all information relating to such Tax Loss and the contest (other than copies of tax returns and confidential pricing information). This indemnity will be computed assuming that Lessor is taxed at the highest corporate rate then in effect and otherwise applying the same assumptions used by Lessor in originating the Lease, and will include all penalties and interest that are assessed with respect to the Tax Loss. The indemnity due hereunder will be payable in full within thirty days of a demand by Lessor accompanied by the supporting computation of the Tax Loss. In the absence of manifest error, Lessor’s computation will be binding. For purposes of this Section, the term “Lessor” includes any entities with which Lessor consolidates tax returns. All rights arising from this indemnity will survive the expiration or termination of the Lease.

Section 16 — Assignment and Sublease.

(a)By Lessee. LESSEE WILL NOT SELL, TRANSFER, ASSIGN, CHARTER, SUBLEASE, CONVEY, PLEDGE, MORTGAGE OR OTHERWISE ENCUMBER ITS INTEREST IN, UNDER, OR TO THE LEASE OR THE AIRCRAFT, AND ANY SUCH SALE, TRANSFER, ASSIGNMENT, CHARTER, SUBLEASE, CONVEYANCE, PLEDGE, MORTGAGE OR ENCUMBRANCE, WHETHER BY OPERATION OF LAW OR OTHERWISE, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR WILL BE NULL AND VOID IN ADDITION, LESSEE WILL NOT ENTER INTO ANY INTERCHANGE AGREEMENT WITH RESPECT TO THE AIRCRAFT OR RELINQUISH POSSESSION OF THE AIRCRAFT OR ANY ENGINE, OR INSTALL ANY ENGINE OR PART, OR PERMIT ANY ENGINE OR PART TO BE INSTALLED, ON ANY AIRFRAME OTHER THAN THE AIRFRAME LEASED HEREUNDER EXCEPT AS EXPRESSLY SET FORTH HEREIN OR CONSENT TO, CREATE OR PROVIDE FOR AN INTERNATIONAL INTEREST, PROSPECTIVE INTERNATIONAL INTEREST OR PROSPECTIVE SALE IN OR RELATING TO THE AIRCRAFT OR ANY CHARTER OR SUBLEASE THEREOF WITHOUT THE PRIOR WRITTEN CONSENT OF THE LESSOR. No

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acceptance, assignment, subletting, relinquishment or installation will in any event relieve Lessee of primary, absolute and unconditional liability for its duties and obligations under this Lease.

(b)By Lessor. Lessor, at any time with or without notice to Lessee, may sell, transfer, assign and/or grant a security interest in all or any part of Lessor’s interest in this Lease or the Aircraft or any part thereof (each, a “Lessor Transfer”) and Lessee hereby expressly consents in advance to any such assignment by Lessor of this Lease, including Lessor’s International Interest and any associated rights in the Aircraft. Any purchaser, transferee, assignee or secured party of Lessor (each a “Lessor Assignee”) will have and may exercise all of Lessor’s rights hereunder with respect to the items to which any such Lessor Transfer relates, and Lessee will not assert against any Lessor Assignee any claim Lessee may have against Lessor, provided Lessee may assert any such claim in a separate action against Lessor. Upon receipt of written notice of a Lessor Transfer, Lessee will promptly acknowledge in writing its obligations under the Lease, will comply with the written directions or demands of any Lessor Assignee and will make all payments due under the assigned Lease as directed in writing by the Lessor Assignee. Following such Lessor Transfer, the term “Lessor” will be deemed to include or refer to each Lessor Assignee. Lessee will provide reasonable assistance to Lessor to complete any transaction contemplated by this subsection (b).

(c)Successors. Subject to the restriction on assignment contained in subsection (a), the Lease will inure to the benefit of, and is binding upon, the successors and assigns of the parties hereto.

Section 17 — [RESERVED].

Section 18 — Events of Default.

(a)The term “Event of Default,” wherever used herein, means any of the following events or circumstances (whatever the reason for such Event of Default and whether it be voluntary, involuntary, occur by operation of law, or occur pursuant to or as a result of actions in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(i)Lessee fails to pay any Rent or any other amount due hereunder within ten (10) days after the same has become due;

(ii)Lessee fails to keep in full force and effect any of the insurance required under this Lease, or operates the Aircraft at a time when, or at a place in which, such insurance is not in effect;

(iii)Lessee fails to perform or observe any other covenant, condition or agreement required to be performed or observed by it hereunder or under any agreement, document or certificate related hereto, provided if such failure is capable of cure within twenty (20) days of Lessee’s knowledge of such failure, Lessee shall have a period of twenty (20) days to cure such failure (but not beyond the expiration of the Term) after the earlier of (i) actual knowledge thereof by Lessee, or (ii) written notice by Lessor thereof;

(iv)Lessee defaults in the (x) payment of any other obligation to Lessor or any affiliated Person controlling, controlled by or under common control with Lessor or (y) performance of any other obligation to Lessor or any affiliated Person controlling, controlled by or under common control with Lessor under any agreement or instrument having an original amount or amount then in controversy greater than $500,000.00;

(v)any representation or warranty now or hereafter made or information now or hereafter provided by Lessee, including any financial information, proves to be or to have been false, inaccurate, or misleading in any material respect;

(vi)the commencement of any bankruptcy, insolvency, arrangement, reorganization, receivership, liquidation or other similar proceeding by or against Lessee or any of its properties or businesses (which, in the case of a proceeding commenced against Lessee, has not been dismissed within sixty (60) days of the filing thereof), the appointment of a trustee, receiver, liquidator or custodian for Lessee or any of its properties or businesses, or the making by Lessee of a general assignment or deed of trust for the benefit of creditors;

(vii)Lessee defaults in any obligation to a third party involving debt in excess of $500,000.00 and such default shall continue for more than the period of grace, if any, therein specified, if the effect thereof (with or without the giving of notice or further lapse of time or both) is to accelerate or to permit the holders of any such debt to accelerate, the maturity

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of any such debt, or any such debt shall be declared due and payable or be required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof, or any such debt shall not be paid on the stated maturity date thereof;

(viii)the occurrence of a Change of Control;

(ix)Lessee becomes insolvent or generally fails to pay its debts as they became due or Lessee admits in writing its inability to pay its debts or obligations generally as they become due;

(x)the occurrence of any event or events that, individually or in the aggregate, results in a Material Adverse Effect;

(xi)any event or condition set forth in subsections iv through xiii of this Section 18 occurs with respect to any Guarantor or other Person responsible, in whole or in part, for payment or performance of Lessee’s obligations under this Lease;

(xii)any event or condition set forth in subsections iv through xiii of this Section 18 occurs with respect to DFA LLC.

(b)Lessee will promptly notify Lessor of the occurrence of any Default or Event of Default.

Section 19 — Remedies.

(a)Upon the occurrence and during the continuance of any Event of Default, Lessor may exercise any one or more of the following remedies, as Lessor in its sole discretion elects:

(i)Proceed by appropriate court action, either at law or in equity, to enforce performance by Lessee of this Lease or to recover damages, including incidental and consequential damages, for the breach hereof.

(ii)By notice to Lessee, terminate this Lease, whereupon all rights of Lessee to the use of the Aircraft or any part thereof will absolutely cease and terminate but Lessee will remain liable as hereinafter provided.

(iii)Cause Lessee, at its expense, promptly to return the Aircraft to Lessor at such place as Lessor designates.

(iv)Enter upon any premises where the Aircraft is located and, without notice to Lessee, take immediate possession of and remove the same, together with any Engines and Parts, by self-help, summary proceedings or otherwise without any liability of any kind whatsoever on the part of Lessor for or by reason of such entry or taking of possession, and without such action constituting a cancellation or termination of the Lease unless Lessor notifies Lessee in writing to such effect.

(v)By written notice to Lessee specifying a payment date (the “Remedy Date”), demand that Lessee pay to Lessor, and Lessee will forthwith pay to Lessor on the Remedy Date, an amount equal to the sum of (i) any unpaid Rent due and payable for all periods up to and including the Remedy Date, plus, (ii) as liquidated damages for loss of a bargain and not as a penalty, an amount equal to the Casualty Value of the Aircraft, computed as of the Remedy Date, plus (iii) all costs, charges and expenses including reasonable legal fees and disbursements incurred by Lessor by reason of the occurrence of any Event of Default or the exercise of any of Lessor’s remedies with respect thereto or otherwise.

(vi)Sell or otherwise dispose of the Aircraft by public or private sale, with or without notice to the Lessee, and without having the Aircraft present at the place of sale and in such manner as it deems appropriate. Lessor may elect to purchase the Aircraft at such sale for a price not less than the highest bona fide bid given by a Person unrelated to Lessee. Lessee waives all of its rights under laws governing such sale to the extent permitted by law. Lessee hereby agrees that ten working days’ prior notice to Lessee of any public sale or of the time after which a private sale may be negotiated will be conclusively deemed commercially reasonable notice.

(vii)Hold, keep idle, lease, or use or operate all or part of the Aircraft without any liability whatsoever and store the Aircraft on Lessee’s premises pending lease or sale or hold a sale on such premises without liability for rent or costs whatsoever.

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(viii)Exercise any other right or remedy available to Lessor under applicable law, including any applicable rights and remedies specified under the Cape Town Treaty available to Lessor. In addition, Lessee will be liable for all reasonable costs, expenses, and legal fees incurred in enforcing Lessor’s rights under the Lease, before or in connection with litigation and for any deficiency in the disposition of the Aircraft.

(b)If Lessor has exercised its remedies as set forth in Section 19(a)(v) hereof and has irrevocable and indefeasibly received all amounts contemplated in Section 19(a)(v), Lessor shall be required to sell the Aircraft or cause the Aircraft to be sold. In the event of any sale of the Aircraft under this Section 19, the net proceeds of any sale or lease as provided above will be applied by Lessor (i) first, to pay all costs, charges and expenses incurred in enforcing its rights hereunder, including the cost of discharging all Liens on the Aircraft (other than Lessor Liens) and all reasonable legal fees and disbursements incurred by Lessor as a result of the Event of Default and/or the exercise of its remedies with respect thereto, (ii) second, to pay to Lessor an amount equal to any unpaid Rent due and payable and the Casualty Value, to the extent not previously paid, and (iii) third, to reimburse Lessee for the Casualty Value to the extent paid by Lessee as liquidated damages. Any surplus remaining thereafter will be retained by Lessor.

(c)Lessee hereby waives, to the maximum extent now or hereafter permitted by applicable law, for itself and for its successors or assigns any and all rights Lessee or Lessee’s successors or assigns may have following an Event of Default under any bankruptcy, insolvency or similar laws, rules or regulations with respect to the continued possession or use of the Aircraft or relief from the payment of Rent therefor or otherwise with respect to this Lease. Rejection of this Lease by any bankruptcy trustee or debtor-in-possession will entitle Lessor to the immediate return of the Aircraft and to liquidated damages calculated in the manner provided for in Section 19(v) above.

(d)No right or remedy referred to herein is intended to be exclusive, but each will be cumulative and in addition to any other right or remedy referred to above or otherwise available to Lessor at law or in equity, including such rights and/or remedies as are provided for in the UCC and the Cape Town Treaty. No express or implied waiver by Lessor of any Default or Event of Default hereunder will in any way be, or be construed as, a waiver of any future or subsequent Default or Event of Default. The failure or delay of Lessor in exercising any rights granted it hereunder upon the occurrence of any of the contingencies set forth herein will not constitute a waiver of any such right upon the continuation or reoccurrence of any such contingencies or similar contingencies, and any single or partial exercise of any particular right by Lessor will not exhaust the same or constitute a waiver of any other right provided for or otherwise referred to herein.

(e)With respect to any exercise by Lessor of its right to recover and/or dispose of the Aircraft, Lessee acknowledges and agrees that Lessor may dispose of the Aircraft on an “AS-IS, WHERE-IS” basis, in compliance with applicable law and with such preparation (if any) as Lessor determines to be commercially reasonable. Lessee will remain liable for any deficiency in the disposition of the Aircraft.

(f)Except as specified in this Lease, to the extent permitted by applicable law, Lessee hereby waives any rights now or hereafter conferred by statute, treaty or otherwise which may require Lessor to sell, lease or otherwise use the Aircraft in mitigation of Lessor’s damages as set forth in this Section 19 or which may otherwise limit or modify any of Lessor’s rights or remedies under this Section 19. To the extent permitted by applicable law, Lessee waives any and all rights and remedies conferred upon a lessee by Section 2A-508 to 2A-522 (inclusive) of the UCC, including any rights of Lessee (i) to cancel or repudiate this Lease or any supplement or any document relating thereto, (ii) to reject or revoke acceptance of the Aircraft or any component thereof and (iii) to recover from Lessor any general or consequential damages, for any reason whatsoever.

Section 20 — Performance of Obligations of Lessee by Lessor.

If Lessee fails to perform or comply with any of its obligations contained herein, Lessor will have the right, but will not be obligated, to effect such performance or compliance and Lessee will remit to Lessor promptly upon demand therefor the amount expended by Lessor in effecting such performance or compliance plus any out-of-pocket expenses incurred by Lessor in connection therewith. Any such action by Lessor will not be deemed a cure or waiver of any of Lessee’s obligations hereunder or of any Default or Event of Default.

Section 21 — Nature of Transaction.

(a)General. This Lease is intended to be a true lease and not a sale of the Aircraft. Title to the Aircraft will at all times remain in Lessor, and the parties agree that this Lease is a “Finance Lease” as defined in the UCC. Lessee represents that Lessee: (i) has selected the Supplier and directed Lessor to purchase the Aircraft from the Supplier in connection with this Lease, (ii) has been informed in writing in this Lease, before Lessee’s execution of this Lease, that Lessee is entitled

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under UCC Article 2A to the promises and warranties provided to Lessor by the Supplier in connection with or as part of the Purchase Agreement, including those of any third party, and (iii) understands that it may communicate with the Supplier and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.

(b)Lien. Should a court of competent jurisdiction determine that this agreement is not a true lease, but rather one intended as security, then solely in that event and for the expressly limited purposes thereof, Lessee will be deemed to have hereby granted Lessor a security interest (and created an International Interest in favor of the Lessor) in the Aircraft and all accessions, substitutions and replacements thereto and therefor, and proceeds thereof, to secure the prompt payment and performance as and when due of all obligations of Lessee to Lessor pursuant to this Lease or otherwise, now existing or hereafter created.

Section 22 — Notices.

All notices and other communications hereunder will be in writing and will be transmitted by hand, overnight courier or certified mail (return receipt requested), US postage prepaid. Such notices and other communications will be addressed, if to Lessor, to Key Equipment Finance, 66 South Pearl Street - 7th Floor, Albany, NY 12207 Attn: Customer Service, and if to Lessee, to the address set forth in the introductory paragraph of this Lease or at such other address as any party may, from time to time, designate by notice duly given in accordance with this section. Such notices and other communications will be effective upon the earlier of receipt or three days after mailing if mailed in accordance with the terms of this section.

Section 23 — Purchase and Renewal Options.

(a)Purchase Option. So long as (i) no Default or Event of Default shall have occurred and be continuing under this Lease and (ii) this Lease has not been earlier terminated, Lessee will be entitled, at its option, upon written notice to Lessor at least ninety (90) but not more than one hundred eighty (180) days prior to the expiration of the Basic Term, to purchase all but not less than all of the Aircraft at the expiration of the Basic Term for an amount, payable in immediately available funds, equal to the fair market sales value of the Aircraft as of the end of the Basic Term determined in accordance with Section 23(c) hereof, plus any applicable sales, excise or other taxes imposed as a result of such sale (other than gross or net income taxes on Lessor’s income attributable to such sale) and together with all Rent and all other amounts then due and owing hereunder. Lessor’s sale of the Aircraft will be on an “AS-IS, WHERE-IS” BASIS WITHOUT ANY REPRESENTATION OR WARRANTY BY LESSOR (OTHER THAN AS TO LESSOR’S LIENS).

(b)Renewal Option. So long as (i) no Default or Event of Default shall have occurred and be continuing under this Lease, (ii) Lessee has not exercised its purchase option pursuant to Section 23(a) hereof and (iii) this Lease has not been earlier terminated, Lessee will be entitled, at its option, to extend the Term of this Lease with respect to the Aircraft at the expiration of the Basic Term for an additional period. The length of such additional period will be as set forth on Schedule 2 (such additional period being hereinafter referred to as the “Renewal Term”). A Renewal Term will commence at the expiration of the Basic Term. Lessee’s option to renew this Lease for a Renewal Term will be exercisable by giving written notice to Lessor at least ninety (90) but not more than one hundred eighty (180) days prior to the expiration of the Basic Term. All provisions of this Lease will be applicable during the Renewal Term, except that, during the Renewal Term, the Basic Rent will be an amount equal to the Aircraft’s fair rental value, which will be determined in accordance with Section 23(c) hereof. Such Basic Rent will be payable monthly, in advance or arrears, and on the same day of each month during the Renewal Term as, in each case, was applicable during the Basic Term. Such payment dates will be “Basic Rent Dates.”

(c)Determination of Fair Market Sales and Rental Values. If Lessee has elected to exercise its purchase or renewal options, as provided in Section 23(a) or (b) hereof, then as soon as practicable following Lessor’s receipt of the written notice from Lessee of Lessee’s intent to exercise such option, Lessor and Lessee will consult for the purpose of determining the fair market sales value or fair market rental value, as applicable, (as defined below) of the Aircraft as of the end of the Basic Term, and any values agreed upon in writing will constitute such fair market sales value or fair market rental value, as the case may be, of the Aircraft for the purposes of this Section 23. If Lessor and Lessee fail to agree upon such value before the expiration of the Basic Term, Lessor will appoint an independent appraiser (reasonably acceptable to Lessee) to determine fair market sales value or fair market rental value, as the case may be, and that determination will be final, binding and conclusive. Lessee agrees to pay the costs and expenses of any such appraisal. For the purposes of this Section 23, “fair market sales value” and ‘‘fair market rental value” will be determined on the basis of, and will equal in value, the amount that would be obtained in an arm’s length transaction between an informed and willing buyer-user or lessee, as the case may be (who is neither a lessee in possession nor a used equipment dealer) and an informed and willing seller or lessor, as the case may be, under no compulsion to sell or lease, as the case may be, and in such determination costs of removal of the Aircraft from its then location will not be a deduction from such fair

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market sales value or fair market rental value, as the case may be, and it will be assumed (whether or not the same be true) that (i) the Aircraft has been maintained in accordance with the provisions of this Lease (ii) the Aircraft would have been returned to Lessor in compliance with the requirements of Section 8 hereof or any other applicable section, and (iii) that the total number of Airframe hours (including any component with hourly overhaul schedules) accumulated from the Acceptance Date to the Expiration Date or other date of termination or cancellation do not exceed the product of Estimated Annual Hours times the number of twelve month periods and any portion thereof, from the Acceptance Date to the such expiration, termination, or cancellation date (any such excess, the “Excess Hours”).

(d)Time to Exercise Option. Lessee will be deemed to have waived the purchase option under Section 23(a) and the renewal option under Section 23(b) and the early buyout option under Section 23(e)(ii) and the early termination option under Section 23(e)(i) unless, in each case, Lessee provides Lessor with written notice of its irrevocable election to exercise the applicable option within the time period specified in each such section.

(e)Early Buyout Option and Early Termination Option.

(i)Early Termination Option. If Lessee determines in good faith that the Aircraft has become economically obsolete or surplus to Lessee in its business, then Lessee may, at its option, elect to terminate the Lease with respect to all but not less than all such Aircraft by delivering to Lessor written notice of its election not less than ninety (90) days prior to the anticipated termination date. Such notice shall (A) specify the date of such termination (the “Termination Date”), which shall be any Rent Payment Date on or after the Rent Payment Date that is thirty-six (36) months after the Rent Commencement Date, and (B) include written certification from an authorized officer of Lessee that the Aircraft has become economically obsolete or surplus to Lessee in its business. During the period from the date of delivery to Lessor of such notice to the Termination Date, Lessee, as exclusive agent for Lessor and at Lessee’s sole risk, cost and expense, shall use reasonable efforts to obtain bids from persons other than Lessee or any affiliated Person controlling, controlled by or under common control with Lessee (“Lessee Affiliate”) for the cash purchase of the Aircraft. Unless an Event of Default shall have occurred and be continuing or Lessor shall have elected to retain the Aircraft as provided below, on the Termination Date (A) Lessee shall sell the Aircraft to the highest bidder, which shall not be a Lessee Affiliate, and (B) regardless of whether Lessee has complied with its obligation to sell the Aircraft as required in the foregoing subsection, Lessee shall pay Lessor the sum of (I) all amounts accrued but unpaid under the Lease, plus (II) the greater of (a) the net sales price actually received by Lessee from the sale of the Aircraft, or (b) the amount of the highest bid if Lessee has not sold the Aircraft or (c) the amount specified as the “Termination Value” for the corresponding Rent Payment Date on Schedule 4 to Lease Supplement 1 attached hereto, plus (III) applicable sales taxes that are or would be attributable to the sale of the Aircraft. Any sale by Lessee shall be on an as-is, where-is basis, without any representation or warranty (other than as to the absence of Lessor Liens) by or recourse to Lessor. Lessee shall be liable for all costs and expenses incurred by Lessor in connection with Lessee’s election to terminate this Lease, including, without limitation, any breakage charges incurred by Lessor. Notwithstanding the foregoing, Lessor may irrevocably elect by written notice to Lessee, no later than thirty (30) days after receipt of Lessee’s notice of termination, to retain the Aircraft. If Lessor elects to retain the Aircraft, Lessee shall (i) deliver the Aircraft to Lessor on the Termination Date in the same manner and condition required under the Lease as if delivery were made to Lessor pursuant to Section 8 and (ii) pay to Lessor all amounts accrued but unpaid hereunder. Upon delivery of the Aircraft to Lessor and Lessor’s receipt of all such amounts, the Lease shall terminate except with respect to indemnities and other provisions herein expressly stated to survive termination of the Lease.

(ii)Early Buyout Option. So long as no Default shall have occurred and be continuing, Lessee shall have the option to purchase all, but not less than all, of the Equipment on the dates which are 36 and 108 months after the Rent Commencement Date (the “EBO Dates”) respectively at a price (the “EBO Price”) equal to 92.43% of the Total Cost of the Equipment for the first date and 65.97% of the Total Cost of the Equipment for the second date, plus, in each case, any applicable sales taxes (the “Early Purchase Option”).

(iii)Fair Market Value. The amounts set forth in Schedule 4 to Lease Supplement 1 and the EBO Prices set forth in Schedule 2A to Lease Supplement 1 represent the parties’ present best estimate of the fair market value of the Aircraft on the applicable EBO Date determined by using commercially reasonable methods which are standard in the industry.

(iv)Notice and Payment. If Lessee desires to exercise either the Early Buyout Option or the Early Termination Option, Lessee shall notify Lessor in writing of such election at least one hundred and eighty (180) days prior to the applicable EBO Date. Such notice shall be irrevocable. Payment of the EBO Price, applicable sales taxes, together with all other amounts due and owing by Lessee under the Lease (including, without limitation, Rent) on or before the EBO Date, shall be made on the EBO Date in immediately available funds. Thereafter, upon Lessee’s written request, Lessor shall deliver to Lessee a bill of sale transferring to Lessee all right, title and interest of Lessor in and to the Aircraft

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ON AN “AS IS, WHERE IS” BASIS, WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER EXCEPT AS TO LESSOR’S LIENS. If Lessee fails to pay all amounts required to be paid under the Lease on the EBO Date, the Lease shall continue in full force and effect and Lessee shall reimburse Lessor for all reasonable costs, expenses and liabilities incurred in connection with such failure.

Section 24 — Transaction Expenses.

Lessee will pay all actual and reasonable fees, costs and expenses incurred by Lessor in connection with this Lease, whether or not the transactions contemplated hereby are consummated, including appraisal fees, Lessor’s counsel fees and expenses and FAA Counsel fees and expenses, and FAA, International Registry and UCC title and lien searches, reports, filing, discharge, registration and recording fees, charges and taxes. Lessee also agrees to pay all fees and expenses of Lessor’s counsel, FAA Counsel and all other third parties who are engaged by Lessor to enforce Lessor’s rights and/or remedies hereunder, to update any FAA or UCC title and/or lien reports and/or to review, file, register, discharge and record any and all documents and instruments as required by Lessor, the Cape Town Treaty, the International Registry or the FAA during and after the Term of this Lease.

Section 25 — Miscellaneous.

(a)All agreements, indemnities, representations, covenants and warranties contained in this Lease or any agreement, document or certificate delivered pursuant hereto or thereto or in connection herewith or therewith will survive the execution and delivery of this Lease and the expiration or other termination of this Lease for any reason whatsoever.

(b)Any provision of a Lease that is prohibited or unenforceable will be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof.

(c)This Lease, and each related instrument, document, agreement and certificate, collectively constitute, and are intended to collectively constitute, the complete and exclusive statement of the terms of the agreement between Lessor and Lessee with respect to the purchase and leasing of the Aircraft and cancel and supersede any and all prior or contemporaneous oral or written understandings, memoranda, negotiations, communications and agreements with respect thereto including any proposal letter, commitment letter and/or term sheet delivered to the Lessee by Lessor.

(d)This Lease may be executed in several counterparts and by different parties hereto on separate counterparts, each of which when so executed or otherwise authenticated and delivered will be an original, but all such counterparts will together consist of one and the same instrument; except, to the extent that the Lease constitutes chattel paper under the UCC, no security interest therein may be created other than through the transfer or possession of the original counterpart, which will be identified by Lessor. If this Lease is executed by more than one person or entity as Lessee, the obligations of all such signers hereunder will be joint and several and all references to “Lessee” will apply both jointly and severally. The Lease will be binding upon Lessor only if executed by a duly authorized officer or representative of Lessor at Lessor’s address set forth above. An authorized signer of Lessee will execute the Lease Documents on Lessee’s behalf.

(e)The division of this Lease into sections, the provision of a table of contents and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation of this Lease.

(f)LESSEE HEREBY AUTHORIZES LESSOR TO AUTHENTICATE AND/OR FILE ALL UCC FINANCING STATEMENTS AND AMENDMENTS THAT IN LESSOR’S SOLE DISCRETION ARE DEEMED NECESSARY OR PROPER TO SECURE OR PROTECT LESSOR’S INTEREST IN THE AIRCRAFT OR ANY PART THEREOF IN ALL APPLICABLE JURISDICTIONS.

(g)Lessee hereby consents to the registration of the International Interests in the Airframe and Engines provided for by this Lease (including under Section 13(b) hereof) with the International Registry, Lessee hereby ratifies, to the extent permitted by law, all that Lessor lawfully and in good faith does or causes to be done by reason of and in compliance with this section. Lessee will provide written notice to Lessor at least thirty days prior to any contemplated change in Lessee’s name, jurisdiction of organization or chief executive office address. Lessee will promptly execute, consent to or otherwise authenticate and deliver to Lessor or such other Person, including the International Registry, such further documents, instruments, registrations, assurances and other records and take such further action as Lessor may reasonably request in order to carry out the intent and purpose of this Lease and to establish and protect the rights and remedies created or intended to be created in favor of Lessor hereunder. Lessee irrevocably appoints Lessor (and any assignee, mortgagee and/or lender of the Lessor) its attorney-in-fact to act in Lessee’s name and on its behalf to make, execute, deliver and file any instruments or documents and to take any action as Lessor (any such assignee, mortgagee and/or lender) deems necessary or appropriate to carry out the intent of this Lease or any agreements, documents or instruments related

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thereto. To the extent appropriate or permissible under applicable law, such appointment is coupled with an interest, will be irrevocable and will terminate only upon payment in full of the obligations set forth in this Lease and/or any agreements, documents or instruments related thereto.

(h)Time is of the essence in the payment and performance of all of Lessee’s obligations under this Lease.

(i)THIS LEASE IS BEING DELIVERED IN, AND WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS. Lessor and Lessee agree that the court of the State of New York have non-exclusive jurisdiction in respect of any claim brought under the Cape Town Treaty relating to the Aircraft.

Section 26 — Amendments.

This Lease may not be amended except by a writing signed by Lessor and Lessee. Delivery of an executed copy of this Lease by facsimile or any other reliable means will be deemed as effective for all purposes as delivery of a manually executed copy. Lessee will provide to Lessor the manually executed original of any document delivered by facsimile within five days.

Section 27 — Jury Trial Waiver.

LESSOR AND LESSEE HEREBY EACH WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THE AIRCRAFT OR THIS LEASE. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY LESSOR AND LESSEE WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THIS WAIVER APPLIES TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO.

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Section 28 — Truth in Leasing.

THE AIRCRAFT BECAME SUBJECT TO THE MAINTENANCE REQUIREMENTS OF PART 91, OF THE FEDERAL AVIATION REGULATIONS (“FARS”) UPON THE REGISTRATION OF THE AIRCRAFT WITH THE FAA. LESSEE CERTIFIES THAT DURING THE 12 MONTHS (OR PORTION THEREOF DURING WHICH THE AIRCRAFT HAS BEEN SUBJECT TO U.S. REGISTRATION) PRECEDING THE EXECUTION OF THIS LEASE, THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER PART 91, OF THE FARS. LESSEE CERTIFIES THAT THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER PART 91 OF THE FARS FOR OPERATIONS TO BE CONDUCTED UNDER THE LEASE. UPON EXECUTION OF THIS LEASE, AND DURING THE TERM HEREOF, THE LESSEE, WHOSE NAME AND ADDRESS ARE SET FORTH IMMEDIATELY BELOW, ACTING BY AND THROUGH THE SIGNATORY HERETO, WHO EXECUTES THIS SECTION SOLELY IN THE CAPACITY SET FORTH BELOW THE SIGNATORY’S SIGNATURE, CERTIFIES THAT THE LESSEE WILL BE RESPONSIBLE FOR THE OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THE LEASE, UNLESS, THE AIRCRAFT IS SUBLEASED TO AN AIR CARRIER OR AIR TAXI OPERATOR CERTIFICATED UNDER PART 121 OR PART 135, RESPECTIVELY, OF THE FARS. THE NAME, ADDRESS AND SIGNATURE OF THE PERSON RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE ARE SET FORTH IN THIS SECTION 28 AND SUCH PERSON’S EXECUTION HEREOF CONSTITUTES A CERTIFICATION BY SUCH PERSON THAT SUCH PERSON UNDERSTANDS HIS OR HER RESPONSIBILITY FOR COMPLIANCE WITH APPLICABLE FARS.

a)	Name:	DON F. AHERN
	Signature:	/s/ Don F. Ahern
	Address:	4241 S. ARVILLE, LAS VEGAS, NV 89103

THE LESSEE FURTHER CERTIFIES THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FARS. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FARS CAN BE OBTAINED FROM THE NEAREST FEDERAL AVIATION FLIGHT STANDARD DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE OR AIR CARRIER DISTRICT OFFICE.

Lessee’s Initials:	/s/ DA
Lessee’s Initials:	/s/ DA

(Signature Page follows)

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IN WITNESS WHEREOF, the parties hereto have caused the Aircraft Lease Agreement to be duly executed by their respective officers thereunto duly authorized.

LESSOR:			LESSEE:
KEY EQUIPMENT FINANCE INC.			AHERN RENTALS, INC.
Signature:		/s/ Donald C. Davis	Signature:
Print Name:		Donald C. Davis	Print Name:
Title:		Vice President	Title:
Date:	April 20, 2006		Date:
Address:			Address:
1000 South McCaslin Blvd			4241 Arville St
Superior, CO 80027			Las Vegas, NV 89103-3713
			LESSEE:
			DON. F. AHERN
			Signature:
			Print Name:
			Date:
			Address:
			4241 Arville St
			Las Vegas, NV 89103-3713

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IN WITNESS WHEREOF, the parties hereto have caused the Aircraft Lease Agreement to be duly executed by their respective officers thereunto duly authorized.

LESSOR:		LESSEE:
KEY EQUIPMENT FINANCE INC.		AHERN RENTALS, INC.
Signature:		Signature:		/s/ Don F. Ahern
Print Name:	Donald C. Davis	Print Name:		DON F. AHERN
Title:	Vice President	Title:		PRESIDENT
Date:		Date:		4/20/06
Address:		Address:
1000 South McCaslin Blvd		4241 Arville St
Superior, CO 80027		Las Vegas, NV 89103-3713
		LESSEE:
		DON. F. AHERN
		Signature:	/s/ Don F. Ahern
		Print Name:	DON F. AHERN
		Date:	4/20/06
		Address:
		4241 Arville St
		Las Vegas, NV 89103-3713

STATE OF NEVADA	)
	)SS#
COUNTY OF CLARK	)

On this 17 day of APRIL, 2006, before me the subscriber personally appeared  DON F. AHERN who being by me duly sworn, did depose and say; that he resides at 4241 S. ARVILLE, LAS VEGAS, NV, that he is the person described in and who executed the foregoing instrument; and that he signed his name thereto freely and of his own volition.

/s/ Lois Petruzzo

NOTARY PUBLIC	[SEAL]
My Commission Expires:
1/10/08

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EXHIBIT A TO

AIRCRAFT LEASE AGREEMENT

DEFINITIONS

1.All References in the Lease to designated Sections and other subdivisions are to such designated Sections and other subdivisions only, and the words “herein,” “hereof” “hereunder” and other words of similar import refer to the Lease as whole and not to any particular section or other subdivision.

2.Except as otherwise indicated, all the agreements and instruments defined herein or in the Lease means such agreements and instruments as the same may from time to time be supplemented or amended, or as the terms thereof may be waived or modified to the extent permitted by, and in accordance with, the terms thereof.

3.The terms defined in the Lease will, for purposes of the Lease and all Lease Supplements, schedules and exhibits thereto, have the meanings assigned to them and will include the plural as well as the singular as the context requires.

4.The terms “including,” “includes” and “include” will be deemed to be followed by the words “without limitation.”

5.The following terms have the following meanings for all purposes of the Lease:

Acceptance Date means the date (which date will be no later than the date designated as the “Last Acceptance Date” on Schedule 2) on which Lessee irrevocably and unconditionally accepts the Aircraft for lease under the Lease as evidenced by the execution and delivery of Lease Supplement 1 relating thereto dated such date.

Act means Subtitle VII of Title 49 of the United States Code, as amended and re-codified.

Additions has the meaning set forth in Section 11 of the Lease.

Additional Insureds has the meaning set forth in Section 14(b) of the Lease.

Aircraft means (i) the Airframe, (ii) the Engines, and (iii) where the context permits, the Records.

Aircraft Marking means the marking described on Lease Supplement 2.

Airframe means (i) the Airframe described in Schedule 1 and, unless the context requires otherwise, will not include the Engines, and (ii) any and all Parts from time to time incorporated in, installed on or attached to such Airframe and any and all Parts removed therefrom so long as title thereto will remain vested in Lessor in accordance with the applicable terms of this Lease after removal from the Airframe.

Alterations has the meaning set forth in Section 11 of the Lease.

Basic Rent has the meaning set forth in Section 3 of the Lease.

Basic Rent Date has the meaning set forth in Schedule 2.

Basic Term means the number of months set forth on Schedule 2.

Bill of Sale has the meaning set forth in Section 2 of the Lease.

Business Day means any day other than a Saturday, Sunday or other day on which banks located in New York are required or permitted to be closed.

Cape Town Treaty has the meaning provided in 49 U.S.C. § 44113(1).

Casualty Value will be the amount set forth on such Schedule 3 for the applicable Basic Rent Date except that, in the case of an Event of Loss covered by the insurance required to be maintained by Lessee pursuant to Section 14(b) of the Lease (or which would have been covered by such insurance, had such insurance been maintained as required), Casualty Value means the higher of fair market sales value (as determined in accordance with the provisions of Section 23 hereof) or the amount set forth on Schedule 3 to Lease Supplement 1.

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Change of Control means the occurrence of any of the following: (a) the adoption of a plan relating to the liquidation or dissolution of Lessee; (b) (i) Don F. Ahern shall cease to own, directly or indirectly, at least 51% of the outstanding voting capital stock of Ahern, (ii) Don F. Ahern, any member of his immediate family and any trust established for the benefit of Don F. Ahern and/or any member of his immediate family shall cease to own, directly or indirectly, at least 75.0% of the outstanding voting capital stock of Ahern, (iii) Don F. Ahern shall, by agreement or otherwise, cease to have the right to exercise voting control of Ahern or (iv) Don F. Ahern shall die or shall become incapacitated or disabled such that Don F. Ahern is unable to properly perform the duties for Ahern that he performs for Ahern on the date hereof; provided, that if Don F. Ahern shall die or become so incapacitated or disabled, a “Change of Control” under this clause (b) shall not occur as a result of such death, incapacitation or disability if, within 90 days after the occurrence of his death or such incapacity or disability and at all times thereafter, (x) Ahern shall have employed one or more Persons with requisite experience that are reasonably satisfactory to Lessor to perform those duties for Ahern that Don F. Ahern performs for Ahern as of the date hereof and (y) Don F. Ahern’s obligations under this Lease are assumed by a Person acceptable to Lessor in its sole discretion; or (c) there shall occur a “Change of Control” or a “Change in Control” as defined in any other document or agreement governing material debt of Lessee.

Claims has the meaning set forth in Section 15 of the Lease.

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

Default means an event or circumstance which, after the giving of notice or lapse of time, or both, would become an Event of Default.

Estimated Annual Hours means the anticipated number of average annual flight hours as shown on Schedule No. 2-A.

Event of Default has the meaning set forth in Section 18 of the Lease.

Event of Loss with respect to the Aircraft, the Airframe, any Propellers or any Engine means any of the following events with respect to such property (i) loss of such property or the use thereof due to theft, disappearance, destruction, damage beyond repair or rendition of such property permanently unfit for normal use for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss or constructive total loss; (iii) the condemnation, confiscation or seizure of, or requisition of title to or use of, such property by the act of any government (foreign or domestic) or of any state or local authority or any instrumentality or agency of the foregoing (“Requisition of Use”); (iv) as a result of any rule, regulation, order or other action by any government (foreign or domestic) or governmental body (including the FAA or any similar foreign governmental body) having jurisdiction, the use of such property has been prohibited, or such property has been declared unfit for use, for a period of six (6) consecutive months, unless Lessee, prior to the expiration of such six-month period, will have undertaken and, in the opinion of the Lessor, will be diligently carrying forward all steps necessary or desirable to permit the normal use thereof by Lessee or, in any event, if use has been prohibited, or such property has been declared unfit for use, for a period of twelve (12) consecutive months; (v) with respect to an Engine, the removal thereof from the Airframe for a period of six (6) months or longer, whether or not such Engine is operational or (vi) such property will be returned to the Manufacturer, other than for modification required as a result of patent infringement or for repair or replacement (any such return being herein referred to as a “Return to Manufacturer”). The date of any Event of Loss will be the date of such theft, disappearance, destruction, damage, Requisition of Use, prohibition, unfitness for use for the stated period, removal for the stated period or Return to Manufacturer. An Event of Loss with respect to the Aircraft will be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. An Event of Loss with respect to any Engine will not, without loss of the Airframe, be deemed an Event of Loss with respect to the Aircraft.

Excess Hours has the meaning set forth in Section 23(c) of the Lease.

Expiration Date means the date set forth in Schedule 2.

FAA means the United States Federal Aviation Administration and any successor agency or agencies thereto.

FAA Counsel means Crowe & Dunlevy, Oklahoma City, Oklahoma 73102, or such other counsel as Lessor may designate.

FARS has the meaning set forth in Section 28 of the Lease.

First Basic Rent Date has the meaning set forth in Schedule 2.

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Guarantor means any guarantor of Lessee’s obligations hereunder.

Guaranty means individually and collectively, any agreement under which any Guarantor guarantees Lessee’s obligations owed to Lessor

Impositions, has the meaning set forth in Section 10 of the Lease.

International Interest has the meaning provided thereto in the Cape Town Treaty.

International Registry has the meaning provided in 49 U.S.C. § 44113(3).

Last Basic Rent Date has the meaning set forth in Schedule 2.

Late Payment Rate means the lesser of 1.5% per month or the highest rate permitted by applicable law, computed on the basis of a 360 day year and 30 day month.

Lease Documents means this Lease, the Purchase Documents and the Guaranty and all amendments, restatements, modifications and supplements thereto.

Lease Supplement means a supplement to the Lease to be entered into as of the Acceptance Date by Lessor and Lessee, which supplement will be substantially in the form as attached to the Lease and identified as either Lease Supplement 1 or Lease Supplement 2, both of which are attached to the Lease and made a part thereof.

Lessor Transfer has the meaning specified in Section 16(b) of the Lease.

Lessor Assignee has the meaning specified in Section 16(b) of the Lease.

Lessor’s Cost has meaning set forth in Schedule 2.

Lessor’s Liens means any Liens created or granted by Lessor, or any Liens resulting from claims against Lessor not related to Lessor’s ownership of the Aircraft.

Liability has the meaning specified in Section 29 of the Lease.

Liens means all liens, charges, security interests, and encumbrances of every nature and description whatsoever, including liens, charges, security interests and encumbrances with respect to Impositions, International Interests, Prospective International Interests and Prospective Sales and rights of third parties under management, pooling, interchange, overhaul, repair or other similar agreements or arrangements.

MACRS means modified accelerated cost recovery system, as defined in the Code.

Manufacturer means the manufacturers identified on Lease Supplement 2 and their respective successors and

assigns.

Material Adverse Effect means: (a) a material adverse change in, or a material adverse effect upon, (i) the Aircraft or (ii) the operations, business, properties, prospects or condition (financial or otherwise) of Ahern and its subsidiaries, taken as a whole; (b) a material impairment of the ability of Lessee to perform under any Lease Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect, or enforceability against Lessee or any affiliate of Lessee of any Lease Document to which it is a party.

Parts means all appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines), which are from time to time incorporated or installed in or attached to an Airframe or any Engine and all such items which are subsequently removed therefrom so long as Lessor has title thereto pursuant to the terms hereof.

Permitted Liens means (a) the rights of Persons under agreements or arrangements expressly permitted by the terms of Section 16 of the Lease, (b) Lessor’s Liens, (c) the rights of the Lessor as set forth in the Lease, and (d) Liens for taxes either not yet due or being contested by Lessee in good faith and inchoate materialmen’s, mechanic’s, workmen’s, repairmen’s, employee’s or other like Liens arising in the ordinary course of business of Lessee for sums not yet

3

delinquent or being contested in good faith (and, in each case, which do not involve any material risk of the sale, forfeiture or loss of the Aircraft or any interest therein) with due diligence and by appropriate proceedings.

Person means any individual, partnership, corporation, trust, association, joint venture, joint stock company, or non-incorporated organization or government or any department or agency thereof, or any other entity of any kind whatsoever.

Propeller(s) means the propellers described and listed by manufacturer’s serial numbers listed in Schedule 1.

Primary Hangar Location means the hangar location identified on Schedule 2.

Prospective International Interest has the meaning provided thereto in the Cape Town Treaty

Prospective Sale has the meaning provided thereto in the Cape Town Treaty.

Purchase Documents means the documents identified on Lease Supplement 2 and such other documents as Lessor considers necessary or advisable in order to convey to Lessor title to the Aircraft as contemplated under the Lease, which documents will be in form and substance satisfactory to Lessor.

Records means any and all logs, manuals, certificates, date and inspection, modification, maintenance, engineering, technical and overhaul records (including all computerized data, records and materials of any kind whatsoever) with respect to the Aircraft, including all records required to be maintained by the FAA or any other governmental agency or authority having jurisdiction with respect to the Aircraft or any Manufacturer or Supplier of the Aircraft (or any part thereof) with respect to the enforcement of warranties or otherwise, which Records will be at all times the property of the Lessor after the Acceptance Date.

Recovery Period has the meaning set forth in Schedule 2.

Remedy Date has the meaning set forth in Section 30 of the Lease.

Renewal Term has the meaning set forth in Section 23(b) of the Lease.

Rent has the meaning set forth in Section 3 of the Lease.

Rent Commencement Date has the meaning set forth in Schedule 2.

Requisition of Use has the meaning set forth in the Event of Loss definition contained herein.

Return to Manufacturer has the meaning set forth in the Event of Loss definition contained herein.

Schedule 1 means Schedule 1 to Lease Supplement 1.

Schedule 2 means Schedule 2 to Lease Supplement 1.

Supplemental Rent has the meaning set forth in Section 3 of the Lease.

Supplier means the “Supplier” or “Suppliers,” as the case may be, identified as such on Lease Supplement 2 and their respective successors and assigns.

Tax Benefits has the meaning set forth in Section 15(b) of the Lease.

Tax Loss has the meaning set forth in Section 15(b) of the Lease.

Term means the Basic Term together with (i) the period, if any, from and including the Acceptance Date through, but not including, the Rent Commencement Date and (ii) any Renewal Term entered into pursuant to Section 23(b) of the Lease.

UCC means the Uniform Commercial Code as in effect in the applicable jurisdiction.

4

Warranty Bill of Sale means a warranty bill of sale in the form of Exhibit B to the Lease.

5

EXHIBIT B

TO AIRCRAFT LEASE AGREEMENT

(FORM OF WARRANTY BILL OF SALE)

WARRANTY BILL OF SALE

Cessna Aircraft Company (the “Seller”), in consideration of the sum of $6,580,325.00 paid by Key Equipment Finance Inc. (the “Buyer”), receipt and sufficiency of which are hereby acknowledged, hereby grants, sells, assigns, transfers and delivers to Buyer the aircraft described below together with the engines installed thereon and all appliances, parts, instruments, appurtenances, accessories, furnishings, avionics, components and other equipment of whatever nature installed on said aircraft and all logbooks, manuals, certificates, data and inspection, modification, maintenance, engineering, technical, overhaul and all other books and records (including all computerized data, records and materials) as pertain to the operation and maintenance of such aircraft (all of the foregoing hereinafter collectively referred to as the “Aircraft”), along with whatever claims and rights Seller may have against the manufacturer and/or supplier of the Aircraft, including but not limited to all warranties and representations. At Buyer’s request, Seller will cause the supplier to execute an Acknowledgment in form and substance satisfactory to Buyer in its sole discretion.

DESCRIPTION OF AIRCRAFT

Cessna Aircraft Company model Citation             525B aircraft hearing FAA Registration Mark N742AR and manufacturer’s serial number* 0074 and (2) Williams model FJ44-3A                 engines, respectively, bearing manufacturer’s serial numbers 141155 & 141156. (See also Schedule A attached hereto and made a part hereof for further description of the Aircraft.)

Seller hereby represents, warrants and agrees that (1) Seller is the lawful owner of the full title to the Aircraft and that Buyer will acquire by the terms of this Bill of Sale good and full title to the Aircraft free and clear of all mortgages, leases, security interests, claims, charges, liens and encumbrances of any kind whatsoever; (2) Seller has the right to sell the Aircraft as aforesaid; (3) Seller will defend title to the Aircraft and defend and indemnify Buyer against any claims by any person, party, firm, corporation or entity of any kind whatsoever relating to the Aircraft; and (4) the Aircraft had been delivered to Seller, and has been delivered to Buyer, in good order and condition and conforms to the specifications and the requirements and standards applicable thereto under FAA rules and regulations, the Lease, and any other applicable rule, regulation or contract.

Seller agrees to save and hold harmless Buyer from and against any and all foreign, federal, state, municipal and local license fees and taxes of any kind or nature, including but not limited to any and all excise, personal property, privilege, use and sales taxes, and from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions and suits, including but not limited to attorney’s fees, resulting therefrom and imposed upon, incurred by or asserted against Buyer as a consequence of the sale of the Aircraft to the Buyer.

Seller agrees and acknowledges that the terms and conditions of this Bill of Sale, including but not limited to all representations, warranties and agreements for the benefit of Buyer, will survive the delivery of the Aircraft and the delivery, execution and recording of this or any Federal Aviation Administration Bill of Sale.

Seller consents to the registration of this Warranty Bill of Sale with the “International Registry” as such term is defined in 49 U.S.C. § 44113(3) and agrees to take such steps reasonably requested by Buyer to effect such registration.

IN WITNESS WHEREOF, Seller has executed this Warranty Bill of Sale this         day of                             , 20    .

SELLER: Cessna Aircraft Company

By:

Title:

*    525B

1

SCHEDULE A

TO WARRANTY BILL OF SALE

AIRCRAFT DESCRIPTION

Airframe Make and Model:	CESSNA AIRCRAFT COMPANY MODEL CJ3-525B
United States Registration Number:	N742AR
Airframe Manufacturer’s Serial Number:	525B-0074
Engine Make and Model:	WILLIAMS MODEL FJ44-3A/9912614-1
Engine Manufacturer’s Serial Numbers:	141155 & 141156
Avionics:	WX-1000E LIGHTNING DETECTION — L3 COMMUNICATIONS
	630D BROADCAST GRAPHICAL WEATHER DISPLAY (XM) — COLLINS
	HF-9000 HIGH FREQUENCY COMMUNICATIONS — COLLINS
	TTR-4000 TCAS II — COLLINS
	ELETRONIC CHARTS — JEPPESEN
	AIRCELL ST-3100 - IRIDIUM
	GPS-500 GARMIN
	MARK VIII EGPWS — HONEYWELL
	VHF-4000 VHF COMMS
	CVR LOCATOR BEACON
	ADC-3000 AIR DATA COMPUTER 1 & 2
	ALT-4000 RADIO ALTIMETER
	AHC-3000 AHRS COMPUTER
	FDU-3000 UNIT-FLUX DETECTOR
	GH-3000 SECONDARY FLIGHT DISPLAY
	DCU-3001 DATA CONCENTRATOR UNIT
	DCP-3030 AFD DISPLAY CONTROL PANEL
	CCP-3000 AFD-CRSR CONTROL PANEL
	AFD-3010 ADAPTIVE FLIGHT DISPLAY
	AFD-3010E ADAPTIVE FLIGHT DISPLAY CENTER POSITION
	RTA-800 WEATHER RADAR
	XMA-1000 SATELLITE DATALINK WITH ANTENNA
	XMWR-1000 SATELLITE DATALINK WITH RECEIVER
	DME-4000 DME 1 & 2 TRANCIEVER
	TDR-94D TRANSPONDER 1 & 2
	FMC-3000 FMS 1 COMPUTER
	CDU-3000 FMS CONTROL DISPLAY UNIT
	GPS-500 FMS GPS DISPLAY
	GPS-4000A GPS RECEIVER
	NAV-4500 NAV REC/VOR/ADF/MRK BECON/ILS
	RTU-4200 RADIO TUNING UNIT
	TCAS PROCESSOR
	TRE-920 TCAS II ANTENNA
Interior:	TOWNSEND LEATHER SEATING
	CARL BOOTH HIGH CLOSS WOOD VENEER SIDELEGES / TABLES
	AFT CABIN LH LAVATORY CLOSURE
	CENTER AFT COAT ROD
Exterior:	WHITE WITH BURGUNDY MIST EFFECT AND SILVER PLATINUM METALLIC AND PAISLEY METALLIC STRIPES

1

Lease Supplement 1

To Aircraft Lease Agreement

(Form of Certificate of Acceptance)

CERTIFICATE OF ACCEPTANCE

THIS IS A CERTIFICATE ACKNOWLEDGING
ACCEPTANCE OF THE AIRCRAFT FOR
PURPOSES OF THE BELOW-REFERENCED LEASE.

THIS IS NOT A DELIVERY RECEIPT.

This is Lease Supplement 1 to the AIRCRAFT LEASE AGREEMENT dated as of April 20, 2006, (the “Lease”) by and between Key Equipment Finance Inc., as lessor (“Lessor”) and AHERN RENTALS, INC., as lessee (“Lessee”).

1)             The Aircraft. Lessee hereby acknowledges, agrees and certifies that the Aircraft as set forth and described in Schedule 1 is in Lessee’s possession, has been inspected by Lessee to its complete satisfaction, has been found to be in good working order, repair and condition and fully equipped to operate as required under applicable law for its purpose, is of a size, design, capacity and manufacture selected by Lessee and suitable for Lessee’s purposes, and is, as of the date set forth below, unconditionally, irrevocably and fully accepted by Lessee for lease under the Lease. Lessee hereby further unconditionally and irrevocably reaffirms its representations, warranties, covenants and acknowledgments in the Lease and agrees that the Lease provides in favor of the Lessor an International Interest in the Aircraft. All capitalized terms used herein that are not otherwise defined herein has the meanings given to such terms in the Lease.

2)             Lessee Representations. Lessee represents and warrants to Lessor that on the date hereof:

a)     The representations and warranties of Lessee set forth in the Lease and all certificates and opinions delivered in connection therewith were true and correct in all respects when made and are true and correct as of the date hereof, with the same force and effect as if the same had been made on this date.

b)    Lessee has satisfied or complied with all conditions precedent and requirements set forth in the Lease and Lease Supplements that are required to have been satisfied or complied with on or prior to the date hereof.

c)     No Default or Event of Default under the Lease has occurred and is continuing.

d)    Lessee has obtained, and there are in full force and effect, such insurance policies with respect to the Aircraft as are required to be obtained under the terms of the Lease.

e)     Lessee has furnished no equipment for the Aircraft other than as stated on Schedule 1 or permitted as an Addition thereto pursuant to the Lease.

f)     The facts, terms, information, description and costs set forth in the attached Schedules 1, 2 and 2-A hereto are true, complete, accurate and correct.

g)    The Lease is a “finance lease” under Section 2A-103(g) of the UCC.

Date of unconditional, irrevocable and final acceptance by Lessee: April 20, 2006.

IN WITNESS WHEREOF, Lessee has caused this Lease Supplement 1 to be duly executed by its officer thereunto duly authorized.

AHERN RENTALS, INC.		DON F. AHERN
Signature:	/s/ Don F. Ahern	Signature:	/s/ Don F. Ahern
Print Name:	DON F. AHERN	Print Name:	DON F. AHERN
Title:	PRESIDENT	Date:	4/20/06
Date:	4/20/06

1

Schedule 1

to Lease Supplement 1

Description of Aircraft

Cessna Aircraft Company model 525B (Citation CJ3-525B) aircraft which consists of the following components:

a)Airframe manufactured by Cessna Aircraft Company bearing FAA Registration Mark N742AR, having a model number of 525B (Citation CJ3-525B) and manufacturer’s serial number of 525B0074*

b)(2) Williams model FJ44-3A                    engines bearing manufacturer’s serial numbers 141155 & 141156 each of which has 550HP or greater rated takeoff horsepower or the equivalent of such horsepower.**

c)Standard accessories and optional equipment and such other items fitted or installed on the Aircraft and as may be more particularly described on Schedule A that is attached hereto and made a part hereof.

d)Those items of Lessee furnished equipment described in a bill of sale or bills of sale therefor (copies of which may be appended hereto), delivered by Lessee to Lessor that constitute appliances and equipment that are or will be installed on the Aircraft.

Initials:
Lessee:		/s/ DA
Lessee:		/s/ DA
Lessor:	/s/ Donald C. Davis

*	described on the International Registry as “Cessna” model “525B” with manufacturer’s serial number “525B-0074”
**	described on the International Registry as “Willams International Co LLC” model “FJ44-3A” with manufacturer’s serial numbers “141155” and “141156”

1

SCHEDULE A TO

SCHEDULE 1

Standard accessories and optional equipment:

Avionics:	WX-1000E LIGHTNING DETECTION — L3 COMMUNICATIONS
	630D BROADCAST GRAPHICAL WEATHER DISPLAY (XM) — COLLINS
	HF-9000 HIGH FREQUENCY COMMUNICATIONS — COLLINS
	TTR-4000 TCAS II — COLLINS
	ELETRONIC CHARTS — JEPPESEN
	AIRCELL ST-3100 - IRIDIUM
	GPS-500 GARMIN
	MARK VIII EGPWS — HONEYWELL
	VHF-4000 VHF COMMS
	CVR LOCATOR BEACON
	ADC-3000 AIR DATA COMPUTER 1 & 2
	ALT-4000 RADIO ALTIMETER
	AHC-3000 AHRS COMPUTER
	FDU-3000 UNIT-FLUX DETECTOR
	GH-3000 SECONDARY FLIGHT DISPLAY
	DCU-3001 DATA CONCENTRATOR UNIT
	DCP-3030 AFD DISPLAY CONTROL PANEL
	CCP-3000 AFD-CRSR CONTROL PANEL
	AFD-3010 ADAPTIVE FLIGHT DISPLAY
	AFD-3010E ADAPTIVE FLIGHT DISPLAY CENTER POSITION
	RTA-800 WEATHER RADAR
	XMA-1000 SATELLITE DATALINK WITH ANTENNA
	XMWR-1000 SATELLITE DATALINK WITH RECEIVER
	DME-4000 DME 1 & 2 TRANCIEVER
	TDR-94D TRANSPONDER 1 & 2
	FMC-3000 FMS 1 COMPUTER
	CDU-3000 FMS CONTROL DISPLAY UNIT
	GPS-500 FMS GPS DISPLAY
	GPS-4000A GPS RECEIVER
	NAV-4500 NAV REC/VOR/ADF/MRK BECON/ILS
	RTU-4200 RADIO TUNING UNIT
	TCAS PROCESSOR
	TRE-920 TCAS II ANTENNA
Interior:	TOWNSEND LEATHER SEATING
	CARL BOOTH HIGH CLOSS WOOD VENEER SIDELEGES / TABLES
	AFT CABIN LH LAVATORY CLOSURE
	CENTER AFT COAT ROD
Exterior:	WHITE WITH BURGUNDY MIST EFFECT AND SILVER PLATINUM
	METALLIC AND PAISLEY METALLIC STRIPES

1

SCHEDULE 2 TO

LEASE SUPPLEMENT 1

Financial Terms

Rent Commencement Date:		April 20, 2006.
Basic Term:		120 months commencing on the Rent Commencement Date and continuing through and including the Expiration Date.
Basic Rent Date:		the First day of each and every calendar month from and including the First Basic Rent Date through the Last Basic Rent Date.
First Basic Rent Date:		April 20, 2006.
Last Basic Rent Date:		March 20, 2016.
Expiration Date:		March 20, 2016.
Renewal Date:		March 20, 2016.
Renewal Term:		(12) Months.
Primary Hangar Location:		145 E. RENO AVE., SUITE El
		LAS VEGAS, NV 89119
Lessee’s Chief Executive Offices and Principal Place of Business:		4241 ARVILLE ST, LAS VEGAS, NV 891033713
Acceptance Date:		April 20, 2006.
Last Acceptance Date:		April 20, 2006.
Recovery Period:		5 Years.
Date of Last Financing:		April 20, 2006.
Lessor’s Cost:		$6,580,325.00
Initials:
Lessee:	/s/ DA
Lessee:	/s/ DA
Lessor:	/s/ Donald C. Davis

1

Lease Supplement 2

to Aircraft Lease Agreement

This is Lease Supplement 2 under the AIRCRAFT LEASE AGREEMENT dated as of April 20, 2006 (the “Lease”) by and between Key Equipment Finance Inc., as lessor (“Lessor”) and Ahern Rentals, Inc. as lessee (“Lessee”). All capitalized terms used herein that are not otherwise defined herein has the meanings given to such terms in the Lease.

Manufacturer of Airframe:	Cessna
Manufacturer of Engines:	Williams International Co, LLC
Supplier:	Cessna Aircraft Company

1)Purchase Documents:

a)Order or Aircraft Purchase Agreement between Supplier and Ahern Rentals, Inc. dated September 10, 2002.

b)Warranty Bill of Sale to Lessor dated April 20, 2006 relating to the Aircraft in the form of Exhibit B hereto.

c)Warranty Agreements between Cessna Aircraft Company or any other manufacturer or vendor and Ahern Rentals, Inc., and, if applicable, the duly executed and authorized assignments of same to Lessor in form and substance satisfactory to Lessor.

d)FAA Bill of Sale.

e)Invoices for the Aircraft, including the Engines, from the Supplier thereof showing Ahern Rentals, Inc as the purchaser thereof, and, if applicable, the duly executed and authorized assignments of same to Lessor in form and substance satisfactory to Lessor, and evidence that such invoices have been and are paid in full.

2)Aircraft marking (Referenced in Section 11 of the Lease):

a)Two-inch by four-inch plaque to be maintained in cockpit and affixed in a conspicuous position stating:

“This property is owned by and leased from Key Equipment Finance Inc., 1000 South McCaslin Boulevard, Superior, CO 80027. Any removal, alteration, disposal or other change in the condition or location of this property must be approved by Key Equipment Finance Inc.”

b)Similar markings to be permanently affixed to each Engine.

3)Additional Maintenance Provisions and Other Purchase Documents:

a)None.

IN WITNESS WHEREOF, effective as of April 20, 2006, the parties hereto have each caused this Lease Supplement 2 to be duly executed by their respective officers, thereunto duly authorized.

LESSOR:		LESSEE:
KEY EQUIPMENT FINANCE INC.		AHERN RENTALS, INC.
Signature:	/s/ Donald C. Davis	Signature:	/s/ Don F. Ahern
Print Name:	Donald C. Davis	Print Name:	DON F. AHERN
Title:	Vice President	Title:	PRESIDENT
		LESSEE:
		DON F. AHERN
		Signature:	/s/ Don F. Ahern
		Print Name:	DON F. AHERN

1

AMENDMENT NO. 1 TO LEASE SUPPLEMENT 1

This AMENDMENT NO. 1 TO LEASE SUPPLEMENT 1 dated as of                          , 2006 (“Amendment”), by and between KEY EQUIPMENT FINANCE INC., a Michigan corporation (“Lessor”), and AHERN RENTALS, INC., a Nevada corporation and Don F. Ahern (“Lessee”), is made to that certain Lease Supplement 1 dated as of April 20, 2006, (“Lease Supplement 1”)* to that certain Aircraft Lease Agreement dated as of April 20, 2006, (the “Lease”)* In each case between Lessor and Lessee. Capitalized terms used herein but not otherwise defined herein shall have the meaning set forth therefor in the Lease. In the case of any conflict between the provisions of this Amendment and the provisions of the Lease or Lease Supplement 1, the provisions of this Amendment shall control construction of the terms.

* as further described in Schedule No. 1

W I T N E S S E T H:

WHEREAS, Lessor and Lessee wish to amend Lease Supplement 1 in certain respects pursuant to the terms hereof.

A G R E E M E N T

NOW, THEREFORE, for mutual promises herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Lessee and Lessor do hereby agree to amend Lease Supplement 1 as follows:

SECTION 1.AMENDMENTS TO LEASE SUPPLEMENT 1

1.1Schedule 2. Schedule 2 to Lease Supplement 1 is hereby deleted and replaced in its entirety with Schedule 2 to Lease Supplement 1 attached hereto.

1.2Schedule 2-A. Schedule 2-A to Lease Supplement 1 is hereby deleted and replaced in its entirety with Schedule 2-A to Lease Supplement 1 attached hereto.

1.3Schedule 4. Lease Supplement 1 is hereby amended by adding Schedule 4 to Lease Supplement 1 attached hereto as Schedule 4 to Lease Supplement 1 thereto.

SECTION 2MISCELLANEOUS

2.1Full Force and Effect. Lessor and Lessee each agree that nothing contained in this Amendment shall be construed to in any manner affect, impair, lessen, release, cancel, terminate or extinguish the indebtedness, liabilities or obligations of Lessee under the Lease or any of the other Lease Documents. Lessee shall continue to pay Rent in the amount, in the manner and at the times specified in the Lease, as amended hereby, and to otherwise perform its obligations under the Lease, as amended hereby, and the other Lease Documents. In no event shall this Amendment be deemed a waiver, discharge, novation, substitution or replacement of the Lease or any of the other Lease Documents. Lessee hereby ratifies and confirms in all respects all of its indebtedness, liabilities and obligations under the Lease and the other Lease Documents and agrees that, except as expressly modified by this Amendment, the Lease and the other Lease Documents continue in full force and effect as if set forth specifically herein.

2.2Representations and Warranties. Lessee hereby represents, warrants and agrees that: (a) each and every representation and warranty set forth in the Lease (as amended hereby) and the other Lease Documents continues to remain true, accurate and complete in all respects; (b) this Amendment, the Lease (as amended hereby) and the other Lease Documents are its valid and legally binding obligations, fully enforceable against it in accordance with their respective terms; (c) its execution and delivery of this Amendment and any other documents, agreements and instruments executed or delivered in connection herewith have been, or will be, duly authorized on its part, (d) the terms of the Lease and the other Lease Documents have not heretofore been amended or modified by any action or omission or course of conduct on the part of Lessor nor has Lessor waived or relinquished any of its rights, powers or remedies under the Lease or any of the Lease Documents; (e) no default or Event of Default presently exists; and (f) the Rent is and continues to be secured by the Aircraft and the other Collateral, and Lender has and shall continue to have a perfected first priority security interest and lien with respect thereto.

2.3No Further Amendments. Except as amended hereby, the Lease Supplement 1 shall remain in full force and effect.

2.4Effective Date. This Amendment is effective as of the date set forth above.

2.5Applicable Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York.

2.6Counterparts. This Amendment may be executed in any number of counterparts, each of which, when so executed and delivered, shall constitute an original fully enforceable counterpart for all purposes.

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date as set forth above.

LESSOR:		LESSEE:
KEY EQUIPMENT FINANCE INC.		AHERN RENTALS, INC.
Signature:	/s/ Donald C. Davis	Signature:		/s/ Don F. Ahern
Print Name:	Donald C. Davis	Print Name:		DON F. AHERN
Title:	Vice President	Title:		PRESIDENT
Date:	June   , 2006	Date:		JUNE   , 2006
Address:		Address:
1000 South McCaslin Blvd		4241 S. Arville St
Superior, CO 80027		Las Vegas, NV 89103-3713
		LESSEE:
		DON F. AHERN
		Signature:	/s/ Don F. Ahern
		Print Name:	DON F. AHERN
		Date:	JUNE   , 2006
		Address:
		4241 S. Arville St
		Las Vegas, NV 89103-3713

SCHEDULE 2 TO

LEASE SUPPLEMENT 1

Financial Terms

Rent Commencement Date:		May 1st, 2006.
Basic Term:		120 months commencing on the Rent Commencement Date and continuing through and including the Expiration Date.
Basic Rent Date:		the First day of each and every calendar month from and including the First Basic Rent Date through the Last Basic Rent Date.
First Basic Rent Date:		May 1st, 2006.
Last Basic Rent Date:		April 1st, 2016.
Expiration Date:		May 1st, 2016.
Renewal Date:		May 1st, 2016.
Renewal Term:		Twelve (12) Months.
Primary Hangar Location:		145 E. RENO AVE., SUITE El
		LAS VEGAS. NV 89119
Lessee’s Chief Executive Offices and Principal Place of Business:		4241 S. ARVILLE ST. LAS VEGAS, NV 891033713
Acceptance Date:		April 20th, 2006.
Last Acceptance Date:		April 20th, 2006.
Recovery Period:		5 Years.
Date of Last Financing:		April 20th, 2006.
Lessor’s Cost:		$6,580,325.00
Initials:
Lessee:	/s/ DA
Lessee:	/s/ DA
Lessor:	/s/ Donald C. Davis

AMENDMENT NO. 1 TO LEASE SUPPLEMENT 1

This AMENDMENT NO. 1 TO LEASE SUPPLEMENT 1 dated as of          , 2006 (“Amendment”), by and between KEY EQUIPMENT FINANCE INC., a Michigan corporation (“Lessor”) and AHERN RENTALS, INC., a Nevada corporation (“Lessee”), is made to that certain Lease Supplement 1 dated as of April 20, 2006, (“Lease Supplement 1”) to that certain Aircraft Lease Agreement dated as of April 20, 2006, (the “Lease”) in each case between Lessor and Lessee. Capitalized terms used herein but not otherwise defined herein shall have the meaning set forth therefor in the Lease. In the case of any conflict between the provisions of this Amendment and the provisions of the Lease or Lease Supplement 1, the provisions of this Amendment shall control construction of the terms.

W I T N E S S E T H:

WHEREAS, Lessor and Lessee wish to amend Lease Supplement 1 in certain respects pursuant to the terms hereof.

A G R E E M E N T

NOW, THEREFORE, for mutual promises herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Lessee and Lessor do hereby agree to amend Lease Supplement 1 as follows:

SECTION 1.AMENDMENTS TO LEASE SUPPLEMENT 1

1.1Schedule 2. Schedule 2 to Lease Supplement 1 is hereby deleted and replaced in its entirety with Schedule 2 to Lease Supplement 1 attached hereto.

1.2Schedule 2-A. Schedule 2-A to Lease Supplement 1 is hereby deleted and replaced in its entirety with Schedule 2-A to Lease Supplement 1 attached hereto.

1.3Schedule 4. Lease Supplement 1 is hereby amended by adding Schedule 4 to Lease Supplement 1 attached hereto as Schedule 4 to Lease Supplement 1 thereto.

SECTION 2MISCELLANEOUS

2.1Full Force and Effect. Lessor and Lessee each agree that nothing contained in this Amendment shall be construed to in any manner affect, impair, lessen, release, cancel, terminate or extinguish the indebtedness, liabilities or obligations of Lessee under the Lease or any of the other Lease Documents. Lessee shall continue to pay Rent in the amount, in the manner and at the times specified in the Lease, as amended hereby, and to otherwise perform its obligations under the Lease, as amended hereby, and the other Lease Documents. In no event shall this Amendment be deemed a waiver, discharge, novation, substitution or replacement of the Lease or any of the other Lease Documents. Lessee hereby ratifies and confirms in all respects all of its indebtedness, liabilities and obligations under the Lease and the other Lease Documents and agrees that, except as expressly modified by this Amendment, the Lease and the other Lease Documents continue in full force and effect as if set forth specifically herein.

2.2Representations and Warranties. Lessee hereby represents, warrants and agrees that: (a) each and every representation and warranty set forth in the Lease (as amended hereby) and the other Lease Documents continues to remain true, accurate and complete in all respects; (b) this Amendment, the Lease (as amended hereby) and the other Lease Documents are its valid and legally binding obligations, fully enforceable against it in accordance with their respective terms; (c) its execution and delivery of this Amendment and any other documents, agreements and instruments executed or delivered in connection herewith have been, or will be, duly authorized on its part; (d) the terms of the Lease and the other Lease Documents have not heretofore been amended or modified by any action or omission or course of conduct on the part of Lessor nor has Lessor waived or relinquished any of its rights, powers or remedies under the Lease or any of the Lease Documents; (e) no default or Event of Default presently exists; and (f) the Rent is and continues to be secured by the Aircraft and the other Collateral, and Lender has and shall continue to have a perfected first priority security interest and lien with respect thereto.

2.3No Further Amendments. Except as amended hereby, the Lease Supplement 1 shall remain in full force and effect.

2.4Effective Date. This Amendment is effective as of the date set forth above.

2.5Applicable Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York.

2.6Counterparts. This Amendment may be executed in any number of counterparts, each of which, when so executed and delivered, shall constitute an original fully enforceable counterpart for all purposes.

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date as set forth above.

LESSOR:		LESSEE:
KEY EQUIPMENT FINANCE INC.		AHERN RENTALS, INC.
Signature:		Signature:	/s/ Don F. Ahern
Print Name:	Donald C. Davis	Print Name:	DON F. AHERN
Title:	Vice President	Title:	PRESIDENT
Date:		Date:	JUNE 14, 2006
Address:		Address:
1000 South McCaslin Blvd		4241 S. Arville St
Superior, CO 80027		Las Vegas, NV 89103-3713
		LESSEE:
		DON F. AHERN
		Signature:	/s/ Don F. Ahern
		Print Name:	DON F. AHERN
		Date:	JUNE 14, 2006
		Address:
		4241 S. Arville St
		Las Vegas, NV 89103-3713

SCHEDULE 2 TO

LEASE SUPPLEMENT 1

Financial Terms

Rent Commencement Date:		May 1st, 2006.
Basic Term:		120 months commencing on the Rent Commencement Date and continuing through and including the Expiration Date.
Basic Rent Date:		the First day of each and every calendar month from and including the First Basic Rent Date through the Last Basic Rent Date.
First Basic Rent Date:		May 1st, 2006.
Last Basic Rent Date:		April 1st, 2016.
Expiration Date:		May 1st, 2016.
Renewal Date:		May 1st, 2016.
Renewal Term:		Twelve (12) Months.
Primary Hangar Location:		145 E. RENO AVE., SUITE El
		LAS VEGAS, NV 89119
Lessee’s Chief Executive Offices
and Principal Place of Business:		4241 S. ARVILLE ST, LAS VEGAS, NV 891033713
Acceptance Date:		April 20th, 2006.
Last Acceptance Date:		April 20th, 2006.
Recovery Period:		5 Years.
Date of Last Financing:		April 20th, 2006.
Lessor’s Cost:		$6,580,325.00
Initials:
Lessee:	/s/ DA
Lessee:	/s/ DA
Lessor:

EX-31.1

Exhibit 31.1

I, Don F. Ahern, certify that:

1.I have reviewed this Annual Report on Form 10-K of Ahern Rentals, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13 a-1 5(e) and 1 5d-1 5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—1 5(f) and 1 5d—1 5(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 26, 2009
	/s/ DON F. AHERN
	Don F. Ahern
	Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Howard L. Brown, certify that:

1.I have reviewed this Annual Report on Form 10-K of Ahern Rentals, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 26, 2009
	/s/ HOWARD L. BROWN
	Howard L. Brown
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Don F. Ahern, Chief Executive Officer, in connection with the Annual Report on Form 10-K of Ahern Rentals, Inc. for the annual period ended December 31, 2008 (the “Report”), hereby certify in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Ahern Rentals, Inc.

/s/ DON F. AHERN

Don F. Ahern

Chief Executive Officer

Dated:  March 26, 2009

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Howard L. Brown, Chief Financial Officer, in connection with the Annual Report on Form 10-K of Ahern Rentals, Inc. for the annual period ended December 31, 2008 (the “Report”), hereby certify in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Ahern Rentals, Inc.

/s/ HOWARD L. BROWN

Howard L. Brown

Chief Financial Officer

Dated:  March 26, 2009