Exhibit 10.1

Air Transport Services Group, Inc.

1.125% Convertible Senior Notes due 2024

 

 

Purchase Agreement

September 25, 2017

Goldman, Sachs & Co. LLC

SunTrust Robinson Humphrey, Inc.

As representatives of the several Purchasers

named in Schedule I hereto,

c/o Goldman, Sachs & Co. LLC,

200 West Street,

New York, New York 10282-2198.

c/o SunTrust Robinson Humphrey, Inc.

711 5th Avenue | 14th Floor

New York, New York 10022

Ladies and Gentlemen:

Air Transport Services Group, Inc., a Delaware corporation (the “Company”),
proposes, subject to the terms and conditions set forth in this purchase
agreement (this “Agreement”), to issue and sell to the purchasers named in
Schedule I hereto (the “Purchasers”), for which Goldman, Sachs & Co. LLC and
SunTrust Robinson Humphrey, Inc. are acting as representatives (the
“Representatives”) an aggregate of $225,000,000 principal amount of its 1.125%
Convertible Senior Notes due 2024 (the “Firm Securities”), and, at the option of
the Purchasers, up to an additional $33,750,000 aggregate principal amount of
its 1.125% Convertible Senior Notes due 2024 (the “Optional Securities”) if and
to the extent that the Purchasers shall exercise the option to purchase such
Optional Securities granted to the Purchasers in Section 2 hereof. The Firm
Securities and the Optional Securities are herein referred to collectively as
the “Securities.” The Securities will be convertible into cash, shares of common
stock, par value $0.01 per share, of the Company (“Stock”), or a combination of
cash and shares of Stock, at the option of the Company, on the terms, and
subject to the conditions, set forth in the Indenture (as defined below). The
Securities are to be issued pursuant to that certain indenture, dated as of
September 29, 2017 (the “Indenture”), to be entered into among the Company and
U.S. Bank National Association, as trustee, paying agent and conversion agent
(the “Trustee”).

In connection with the offering of the Firm Securities, the Company is
separately entering into convertible note hedge and warrant transactions with
certain financial institutions, including one or more of the Purchasers (the
“Call Spread Counterparties”) pursuant to convertible note hedge confirmations
(the “Base Bond Hedge Confirmations”) and warrant confirmations (the “Base
Warrant Confirmations” and, together with the Base Bond Hedge Confirmations, the
“Base Call Spread Confirmations”), respectively, each to be dated the date
hereof, and in connection with any

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exercise by the Purchasers of their option to purchase any Optional Securities,
the Company and the Call Spread Counterparties will enter into additional
convertible note hedge and warrant transactions pursuant to additional
convertible note hedge confirmations (the “Additional Bond Hedge Confirmations”)
and additional warrant confirmations (the “Additional Warrant Confirmations”
and, the Additional Warrant Confirmations together with the Additional Bond
Hedge Confirmations, the “Additional Call Spread Confirmations”), respectively,
each to be dated the date on which the Purchasers exercise their option to
purchase such Optional Securities. We refer to the Base Call Spread
Confirmations and the Additional Call Spread Confirmations collectively herein
as the “Call Spread Confirmations.”

1.    The Company represents and warrants to, and agrees with, each of the
Purchasers that:

 

  (a) A preliminary offering circular, dated September 25, 2017 (the
“Preliminary Offering Circular”), and an offering circular, dated September 25,
2017 (the “Offering Circular”), have been prepared in connection with the
offering of the Securities and the shares of Stock, if any, issuable upon
conversion thereof. The Preliminary Offering Circular, as amended and
supplemented immediately prior to the Applicable Time (as defined in
Section 1(b)), is hereinafter referred to as the “Pricing Circular.” Any
reference to the Preliminary Offering Circular, the Pricing Circular or the
Offering Circular shall be deemed to refer to and include all documents filed
with the United States Securities and Exchange Commission (the “Commission”)
pursuant to Section 13(a), 13(c) or 15(d) of the United States Securities
Exchange Act of 1934, as amended (the “Exchange Act”), on or prior to the date
of such circular and incorporated by reference therein and any reference to the
Preliminary Offering Circular or the Offering Circular, as the case may be, as
amended or supplemented, as of any specified date, shall be deemed to include
(i) any documents filed with the Commission pursuant to Section 13(a), 13(c) or
15(d) of the Exchange Act after the date of the Preliminary Offering Circular or
the Offering Circular, as the case may be, and prior to such specified date and
(ii) any Additional Issuer Information (as defined in Section 5(f)) furnished by
the Company prior to the completion of the distribution of the Securities; and
all documents filed under the Exchange Act and so deemed to be included in the
Preliminary Offering Circular, the Pricing Circular or the Offering Circular, as
the case may be, or any amendment or supplement thereto are hereinafter called
the “Exchange Act Reports” (provided that where only sections of such documents
are specifically incorporated by reference, only such sections shall be
considered to be part of the “Exchange Act Reports”). The Exchange Act Reports,
when they were or are filed with the Commission, conformed or will conform in
all material respects to the applicable requirements of the Exchange Act and the
applicable rules and regulations of the Commission thereunder; and no such
documents were filed with the Commission since the Commission’s close of
business on the business day immediately prior to the date of this Agreement and
prior to the execution of this Agreement, except as set forth on Schedule II(a)
hereof. The Preliminary Offering Circular or the Offering Circular and any
amendments or supplements thereto and the Exchange Act Reports did not and will
not, as of their respective dates, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by a Purchaser through the
Representatives expressly for use therein.

 

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  (b) For the purposes of this Agreement, the “Applicable Time” is 4:30 pm
(Eastern time) on the date of this Agreement; the Pricing Circular as
supplemented by the term sheet set forth in Schedule III hereto, taken together
(collectively, the “Pricing Disclosure Package”) as of the Applicable Time, did
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and each Company
Supplemental Disclosure Document (as defined in Section 6(a) listed on Schedule
II(b) hereto) and each Permitted General Solicitation Material (as defined in
Section 6(a) listed on Schedule II(d) hereto) does not conflict with the
information contained in the Pricing Circular or the Offering Circular and each
such Company Supplemental Disclosure Document and Permitted General Solicitation
Material, as supplemented by and taken together with the Pricing Disclosure
Package as of the Applicable Time, did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to statements or omissions made in a Company Supplemental
Disclosure Document or Permitted General Solicitation Material in reliance upon
and in conformity with information furnished in writing to the Company by a
Purchaser through the Representatives expressly for use therein.

 

  (c) When the Securities are issued and delivered pursuant to this Agreement,
the Securities will not be of the same class (within the meaning of Rule 144A
under the United States Securities Act of 1933, as amended (the “Act”)) as
securities which are listed on a national securities exchange registered under
Section 6 of the Exchange Act”) or quoted in a U.S. automated inter-dealer
quotation system.

 

  (d) Neither the Company nor any person acting on its or their behalf (other
than the Purchasers, as to which no representation is made) has offered or sold
the Securities by means of any general solicitation or general advertising
within the meaning of Rule 502(c) under the Act (other than by means of a
Permitted General Solicitation, as defined below) or, with respect to Securities
sold outside the United States to non-U.S. persons (as defined in Rule 902 under
the Act), by means of any directed selling efforts within the meaning of Rule
902 under the Act and the Company, any affiliate of the Company and any person
acting on its or their behalf has complied with and will implement the “offering
restriction” within the meaning of such Rule 902.

 

  (e) Within the preceding six months, neither the Company nor any other person
acting on behalf of the Company has offered or sold to any person any
Securities, or any securities of the same or a similar class as the Securities,
other than Securities offered or sold to the Purchasers hereunder. The Company
will take reasonable precautions designed to insure that any offer or sale,
direct or indirect, in the United States or to any U.S. person (as defined in
Rule 902 under the Act) of any Securities or any substantially similar security
issued by the Company, within six months subsequent to the date on which the
distribution of the Securities has been completed (as notified to the Company by
the Representatives), is made under restrictions and other circumstances
reasonably designed not to affect the status of the offer and sale of the
Securities in the United States and to U.S. persons contemplated by this
Agreement as transactions exempt from the registration provisions of the Act.

 

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  (f) The statements set forth in the Pricing Disclosure Package and the
Offering Circular under the captions “Description of Notes” and “Description of
Capital Stock”, insofar as they purport to constitute a summary of the terms of
the Securities and the Stock, under the captions “Description of Certain
Indebtedness” and “Description of Concurrent Convertible Note Hedge Transactions
and Warrant Transactions,” insofar as they purport to describe the provisions of
the documents referred to therein, and under the captions “Certain U.S. Federal
Income Tax Considerations” and “Plan of Distribution,” insofar as they purport
to describe the provisions of the laws, legal conclusions with respect thereto
and documents referred to therein, are accurate and complete in all material
respects.

 

  (g) None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the Securities)
will result in a violation by the Company of Section 7 of the Exchange Act, or
any regulation promulgated thereunder, including, without limitation,
Regulations T, U, and X of the Board of Governors of the Federal Reserve System.

 

  (h) The accountants who certified the audited financial statements and
supporting schedules included in the Pricing Circular, the Pricing Disclosure
Package and the Offering Circular are independent public accountants as required
by the Act, the Act Regulations, the Exchange Act, the Exchange Act Regulations
and the Public Company Accounting Oversight Board.

 

  (i) The financial statements included or incorporated by reference in the
Pricing Circular, the Pricing Disclosure Package and the Offering Circular,
together with the related schedules and notes, present fairly the financial
position of the Company and its consolidated subsidiaries at the dates indicated
and the statement of operations, stockholders’ equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with U.S. generally
accepted accounting principles (“GAAP”) applied on a consistent basis throughout
the periods involved. The supporting schedules, if any, present fairly in
accordance with GAAP the information required to be stated therein. The selected
financial data and the summary financial information included in the Pricing
Circular, the Pricing Disclosure Package and the Offering Circular present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included therein. All
disclosures contained in the Pricing Circular, the Pricing Disclosure Package
and the Offering Circular, or incorporated by reference therein, regarding
“non-GAAP financial measures” (as such term is defined by the rules and
regulations of the Commission) comply with Regulation G of the Exchange Act and
Item 10 of Regulation S-K of the Act, to the extent applicable. The interactive
data in eXtensible Business Reporting Language incorporated by reference in the
Pricing Circular, the Pricing Disclosure Package and the Offering Circular
fairly presents the information called for in all material respects and has been
prepared in accordance with the Commission’s rules and guidelines applicable
thereto.

 

  (j)

Except as otherwise stated therein, since the respective dates as of which
information is given in the Pricing Circular, the Pricing Disclosure Package or
the Offering Circular, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
“Material Adverse Effect”), (B) there have been no transactions entered into by
the Company or any of its Subsidiaries, other than those in the ordinary course
of business, which are material with respect to the Company and its subsidiaries
considered as one

 

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  enterprise, and (C) there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.

 

  (k) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and has
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Pricing Circular, the Pricing
Disclosure Package and the Offering Circular and to enter into and perform its
obligations under each of this Agreement, the Indenture and the Securities; and
the Company is duly qualified as a foreign corporation to transact business and
is in good standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.

 

  (l) Each “significant subsidiary” of the Company (as such term is defined in
Rule 1-02 of Regulation S-X) (each, a “Subsidiary” and, collectively, the
“Subsidiaries”) has been duly organized and is validly existing in good standing
under the laws of the jurisdiction of its incorporation or organization, has
corporate or similar power and authority to own, lease and operate its
properties and to conduct its business as described in the Pricing Circular, the
Pricing Disclosure Package and the Offering Circular and is duly qualified to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify or
to be in good standing would not result in a Material Adverse Effect. Except as
otherwise disclosed in the Pricing Circular, the Pricing Disclosure Package and
the Offering Circular, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through Subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity. None of the outstanding shares of capital stock of any
Subsidiary were issued in violation of the preemptive or similar rights of any
securityholder of such Subsidiary. The only subsidiaries of the Company are
(A) the subsidiaries listed on Exhibit 21.1 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2016 and (B) certain other
subsidiaries which, considered in the aggregate as a single subsidiary, do not
constitute a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X.

 

  (m) The authorized, issued and outstanding shares of capital stock of the
Company are as set forth in the Pricing Circular, the Pricing Disclosure Package
and the Offering Circular in the column entitled “Actual” under the caption
“Capitalization” (except for subsequent issuances, if any, pursuant to this
Agreement, pursuant to reservations, agreements or employee benefit plans
referred to in the Pricing Circular, the Pricing Disclosure Package and the
Offering Circular or pursuant to the exercise of convertible securities or
options referred to in the Pricing Circular, the Pricing Disclosure Package and
the Offering Circular).

 

  (n) This Agreement has been duly authorized, executed and delivered by the
Company.

 

  (o)

The Indenture has been duly authorized by the Company and, at the Closing Time,
will have been duly executed and delivered by the Company and, when duly
executed and delivered by the Company and the Trustee, will constitute a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors’ rights generally and except as enforcement thereof is
subject to

 

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  general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law); and the Securities and the Indenture will
conform in all material respects to the descriptions thereof in the Pricing
Disclosure Package and the Offering Circular.

 

  (p) The Securities have been duly authorized and, at the Closing Time, will
have been duly executed and delivered by the Company and, when authenticated,
issued and delivered in the manner provided for in the Indenture and delivered
against payment of the purchase price therefor as provided in this Agreement,
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors’ rights generally and except as
enforcement thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), and will
be in the form contemplated by, and entitled to the benefits of, the Indenture.
The Base Call Spread Confirmations have been, and any Additional Call Spread
Confirmations on the date or dates that the Purchasers exercise their right to
purchase the relevant Optional Securities will have been, duly authorized,
executed and delivered by the Company and, assuming due execution and delivery
thereof by the Counterparties, constitute, or will constitute, as the case may
be, valid and legally binding agreements of the Company enforceable against the
Company in accordance with their terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles. A
total of 9,500,000 shares of Stock issuable under the Base Warrant Confirmations
and any Additional Warrant Confirmations (the “Warrant Shares”), have been duly
authorized and reserved for issuance by all necessary corporate action and all
shares of Stock issuable upon conversion of the Securities will be duly
authorized and reserved for issuance after shareholder approval. All shares of
Stock issuable upon conversion of the Securities, after shareholder approval and
when issued in accordance with the terms of the Securities and the Indenture,
and all Warrant Shares, when issued in accordance with the Base Warrant
Confirmations or the Additional Warrant Confirmations, as applicable, will be
validly issued, fully paid and non-assessable; no holder of such shares will be
subject to personal liability by reason of being such a holder; and the issuance
of such shares upon such conversion will not be subject to the preemptive or
other similar rights of any securityholder of the Company.

 

  (q)

Neither the Company nor any of its Subsidiaries is (A) in violation of its
charter, by-laws or similar organizational document, (B) in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which it or any of them may be bound or
to which any of the properties or assets of the Company or any Subsidiary is
subject (collectively, “Agreements and Instruments”), except, with respect to
this clause B, for such defaults that would not, singly or in the aggregate,
result in a Material Adverse Effect, or (C) in violation of any law, statute,
rule, regulation, judgment, order, writ or decree of any arbitrator, court,
governmental body, regulatory body, administrative agency or other authority,
body or agency having jurisdiction over the Company or any of its Subsidiaries
or any of their respective properties, assets or operations (each, a
“Governmental Entity”), except, with respect to this clause C, for such
violations that would not, singly or in the

 

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  aggregate, result in a Material Adverse Effect. The execution, delivery and
performance of this Agreement, the Call Spread Confirmations, the Indenture, the
Securities, and the consummation of the transactions contemplated herein,
therein and in the Pricing Circular, the Pricing Disclosure Package and the
Offering Circular (including the issuance and sale of the Securities and the use
of the proceeds from the sale of the Securities as described therein under the
caption “Use of Proceeds” and any conversion of Securities or issuance of Stock
upon conversion) and compliance by the Company with its obligations hereunder,
and with the provisions of the Indenture and Call Spread Confirmations
(including the issuance of any Warrant Shares in accordance with the terms
thereof) have been duly authorized by all necessary corporate action and do not
and will not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company or any
Subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches, defaults or Repayment Events or liens, charges or
encumbrances that would not, singly or in the aggregate, result in a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter, by-laws or similar organizational document of the Company or any
of its Subsidiaries or any law, statute, rule, regulation, judgment, order, writ
or decree of any Governmental Entity. As used herein, a “Repayment Event” means
any event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder’s behalf) the
right to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company or any of its Subsidiaries.

 

  (r) No labor dispute with the employees of the Company or any of its
Subsidiaries exists or, to the knowledge of the Company, is imminent, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its or any Subsidiary’s principal suppliers, manufacturers,
customers or contractors, which, in either case, would reasonably be expected to
result in a Material Adverse Effect.

 

  (s) Except as disclosed in the Pricing Circular, the Pricing Disclosure
Package and the Offering Circular, there is no action, suit, proceeding, inquiry
or investigation before or brought by any Governmental Entity now pending or, to
the knowledge of the Company, threatened, against or affecting the Company or
any of its Subsidiaries, which would reasonably be expected to result in a
Material Adverse Effect, or which would reasonably be expected to materially and
adversely affect their respective properties or assets or the consummation of
the transactions contemplated in this Agreement, the Call Spread Transactions or
the performance by the Company of its obligations hereunder; and the aggregate
of all pending legal or governmental proceedings to which the Company or any
such Subsidiary is a party or of which any of their respective properties or
assets is the subject which are not described in the Pricing Circular, the
Pricing Disclosure Package and the Offering Circular, including ordinary routine
litigation incidental to the business, would not reasonably be expected to
result in a Material Adverse Effect.

 

  (t)

No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any Governmental Entity is necessary
or required for the performance by the Company of its obligations hereunder, in
connection with the offering, issuance or sale of the Securities hereunder or
the consummation of the transactions contemplated by this Agreement or under the
Call Spread Confirmations or for the due execution, delivery and

 

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  performance of the Indenture (including any conversion of Securities or
issuance of Stock upon conversion), except such as have been already obtained or
as may be required under the Act, the Act Regulations, the rules of the Nasdaq
Global Select Market, state securities laws or the rules of Financial Industry
Regulatory Authority, Inc. (“FINRA”), excluding any filing, authorization,
approval, consent, license, order, registration, qualification or decree the
failure of which to obtain or make would not reasonably be expected to have a
Material Adverse Effect.

 

  (u) The Company and its Subsidiaries possess such permits, licenses,
approvals, consents and other authorizations (collectively, “Governmental
Licenses”) issued by the appropriate Governmental Entities necessary to conduct
the business now operated by them, except where the failure so to possess would
not, singly or in the aggregate, result in a Material Adverse Effect. The
Company and its Subsidiaries are in compliance with the terms and conditions of
all Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, result in a Material Adverse Effect. All of the
Governmental Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not, singly or in the aggregate,
result in a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the revocation
or modification of any Governmental Licenses which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.

 

  (v) Except such real property owned by the Company or its subsidiaries that is
subject to mortgages or pledges granted to the lenders under the Company’s
senior credit facility as security for amounts borrowed thereunder, the Company
and its subsidiaries have good and marketable title to all real property owned
by them and good title to all other properties owned by them, in each case, free
and clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (A) are described in the
Pricing Circular, the Pricing Disclosure Package and the Offering Circular or
(B) would not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect; and all of the leases and subleases material to the
business of the Company and its Subsidiaries, considered as one enterprise, and
under which the Company or any of its Subsidiaries holds properties described in
the Pricing Circular, the Pricing Disclosure Package and the Offering Circular,
are in full force and effect, with such exceptions as, singly or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect,
and neither the Company nor any such subsidiary has received any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or such
subsidiary to the continued possession of the leased or subleased premises under
any such lease or sublease.

 

  (w)

Except as would not, singly or in the aggregate, result in a Material Adverse
Effect, the Company and its Subsidiaries own or possess, or can acquire on
reasonable terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, “Intellectual Property”) necessary to carry on the business now
operated by them, and neither the Company nor any of its Subsidiaries has
received any

 

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  notice or is otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or invalidity or
inadequacy that, singly or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.

 

  (x) Except as described in the Pricing Circular, the Pricing Disclosure
Package and the Offering Circular and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company nor any
of its Subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products,
asbestos-containing materials or mold (collectively, “Hazardous Materials”) or
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, “Environmental
Laws”), (B) the Company and its Subsidiaries have all permits, authorizations
and approvals required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating to any Environmental Law against the Company or any of its
Subsidiaries and (D) there are no events or circumstances that would reasonably
be expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or Governmental Entity, against
or affecting the Company or any of its Subsidiaries relating to Hazardous
Materials or any Environmental Laws.

 

  (y)

The Company and each of its subsidiaries maintain effective internal control
over financial reporting (as defined under Rule 13-a15 and 15d-15 under the
Exchange Act Regulations) and a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are executed
in accordance with management’s general or specific authorization;
(B) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(C) access to assets is permitted only in accordance with management’s general
or specific authorization; (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences; and (E) the interactive data in
eXtensible Business Reporting Language incorporated by reference in the Pricing
Circular, the Pricing Disclosure Package and the Offering Circular fairly
presents the information called for in all material respects and is prepared in
accordance with the Commission’s rules and guidelines applicable thereto. Except
as described in the Pricing Circular, the Pricing Disclosure Package and the
Offering Circular, since the end of the Company’s most recent audited fiscal
year, there has been (1) no material weakness in the Company’s internal control
over financial reporting (whether or not remediated) and (2) no change in the
Company’s internal control over financial reporting that has materially and
adversely affected, or is reasonably likely to materially and adversely affect,
the Company’s internal control over financial reporting. The Company and each of
its subsidiaries maintain an effective system of disclosure controls and
procedures (as defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act
Regulations) that are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits

 

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  under the Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms, and is accumulated and
communicated to the Company’s management, including its principal executive
officer or officers and principal financial officer or officers, as appropriate,
to allow timely decisions regarding disclosure.

 

  (z) There is and has been no failure on the part of the Company or any of the
Company’s directors or officers, in their capacities as such, to comply in all
material respects with any provision of the Sarbanes-Oxley Act of 2002 and the
rules and regulations promulgated in connection therewith, including Section 402
related to loans and Sections 302 and 906 related to certifications.

 

  (aa) All United States federal income tax returns of the Company and its
Subsidiaries required by law to be filed have been filed or extensions to file
such returns have been timely requested and all taxes whether or not shown by
such returns or otherwise assessed, which are due and payable, have been paid,
except assessments against which appeals have been or will be promptly taken and
as to which adequate reserves have been provided. The Company and its
Subsidiaries have filed all other tax returns that are required to have been
filed by them pursuant to applicable foreign, state, local or other law except
insofar as the failure to file such returns would not result in a Material
Adverse Effect, and has paid all taxes due whether or not pursuant to such
returns or pursuant to any assessment received by the Company and its
Subsidiaries, except for such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been established by the Company or
where the failure to pay such taxes would not have a Material Adverse Effect.
The charges, accruals and reserves on the books of the Company in respect of any
income and corporation tax liability for any years not finally determined are
adequate to meet any assessments or re-assessments for additional income tax for
any years not finally determined, except to the extent of any inadequacy that
would not result in a Material Adverse Effect.

 

  (bb) The Company and its Subsidiaries carry or are entitled to the benefits of
insurance, with financially sound and reputable insurers, in such amounts and
covering such risks as is generally maintained by companies of established
repute engaged in the same or similar business, and all such insurance is in
full force and effect. The Company has no reason to believe that it or any of
its Subsidiaries will not be able (A) to renew its existing insurance coverage
as and when such policies expire or (B) to obtain comparable coverage from
similar institutions as may be necessary or appropriate to conduct its business
as now conducted and at a cost that would not result in a Material Adverse
Effect. Neither of the Company nor any of its Subsidiaries has been denied any
insurance coverage which it has sought or for which it has applied.

 

  (cc) The Company is not required, and upon the transactions contemplated by
the Call Spread Confirmations, the issuance and sale of the Securities as herein
contemplated and the application of the net proceeds therefrom as described in
the Pricing Circular, the Pricing Disclosure Package and the Offering Circular
will not be required, to register as an “investment company” under the
Investment Company Act of 1940, as amended (the “1940 Act”).

 

  (dd)

Neither the Company nor, to the knowledge of the Company, any affiliate of the
Company has taken, nor will the Company or any affiliate take, directly or
indirectly, any action which is designed, or would reasonably be expected, to
cause or result in, or which constitutes, the

 

10

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  stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or to result in a violation of
Regulation M under the Exchange Act.

 

  (ee) None of the Company, any of its subsidiaries or, to the knowledge of the
Company, any director, officer, agent, employee, affiliate or other person
acting on behalf of the Company or any of its subsidiaries is aware of or has
taken any action, directly or indirectly, that would result in a violation by
such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the
rules and regulations thereunder (the “FCPA”), including, without limitation,
making use of the mails or any means or instrumentality of interstate commerce
corruptly in furtherance of an offer, payment, promise to pay or authorization
of the payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any “foreign official” (as
such term is defined in the FCPA) or any foreign political party or official
thereof or any candidate for foreign political office, in contravention of the
FCPA and the Company and, to the knowledge of the Company, its affiliates have
conducted their businesses in compliance with the FCPA and have instituted and
maintain policies and procedures designed to ensure, and which are reasonably
expected to continue to ensure, continued compliance therewith.

 

  (ff) The operations of the Company and its subsidiaries are and have been
conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the money laundering statutes of all applicable jurisdictions,
the rules and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any Governmental
Entity (collectively, the “Money Laundering Laws”); and no action, suit or
proceeding by or before any Governmental Entity involving the Company or any of
its subsidiaries with respect to the Money Laundering Laws is pending or, to the
best knowledge of the Company, threatened. The Company and its subsidiaries, and
their directors, officers, employees, agents, affiliates, representatives or any
other persons acting for or on behalf of the Issuer shall not directly or
indirectly use the transaction proceeds for any purpose that would breach
Anti-Money Laundering Laws.

 

  (gg) (i) None of the Company, any of its subsidiaries or, to the knowledge of
the Company, any director, officer, agent, employee, controlled affiliate or
representative of the Company or any of its subsidiaries is an individual or
entity (“Person”) currently the subject or target of any sanctions administered
or enforced by the United States Government, including, without limitation, the
U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the
United Nations Security Council (“UNSC”), the European Union, Her Majesty’s
Treasury (“HMT”), or other relevant sanctions authority (collectively,
“Sanctions”), nor is the Company located, organized or resident in a country or
territory that is the subject of Sanctions and (ii) neither the Company nor any
of its subsidiaries will directly or indirectly use the proceeds of the offering
of the Notes hereunder or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other person or entity, for
the purpose of financing, directly or indirectly, the activities of any person
in contravention of any US Economic Sanctions Law or any equivalent European
Union measure, including sanctions imposed against certain states, organizations
and individuals under the European Union’s Common Foreign & Security Policy, any
economic sanctions administered by Her Majesty’s Treasury, or any sanctions
administered by the United Nations Security Council.

 

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  (hh) Except as disclosed in the Pricing Circular, the Pricing Disclosure
Package and the Offering Circular, the Company does not have any material
lending or other relationship with any bank or lending affiliate of any
Purchaser.

 

  (ii) Any statistical and market-related data included in the Pricing Circular,
the Pricing Disclosure Package and the Offering Circular are based on or derived
from sources that the Company believes, after reasonable inquiry, to be reliable
and accurate in all material respects and, to the extent required, the Company
has obtained the written consent to the use of such data from such sources.

 

  (jj) On and immediately after each Time of Delivery, the Company, and its
subsidiaries, on a consolidated basis (in each case, after giving effect to the
issuance of the Securities, the application of the proceeds therefrom and the
other transactions related thereto as described in each of the Pricing
Disclosure Package and the Offering Circular), will be Solvent. As used in this
Agreement, the term “Solvent” means, with respect to any party on a particular
date, that on such date (i) the present fair market value (or present fair
saleable value) of the assets of such party is not less than the total amount
required to pay the liabilities of such party on its total existing debts and
liabilities (including identified contingent liabilities) to the extent such
liabilities are required to be reserved under IFRS; (ii) such party is able to
realize upon its assets and pay its debts and other liabilities, contingent
obligations and commitments as they mature and become due in the normal course
of business; (iii) such party is not incurring debts or liabilities beyond its
ability to pay as such debts and liabilities mature; and (iv) such party is not
engaged in any business or transaction, or proposes to engage in any business or
transaction, for which its property would constitute unreasonably small capital.

 

  (kk) Assuming the accuracy of the representations and warranties of the
Purchasers contained in Section 3 below and their compliance with their
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Securities to the Purchasers and the offer, resale and
delivery of the Securities by the Purchasers in the manner contemplated by this
Agreement, the Pricing Disclosure Package and the Offering Circular, to register
the Securities under the Act or to qualify the Indenture under the United States
Trust Indenture Act of 1939, as amended (including the rules and regulations of
the Commission promulgated thereunder).

 

2. Subject to the terms and conditions herein set forth, (a) the Company agrees
to issue and sell to each of the Purchasers, and each of the Purchasers agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
97.250% of the aggregate principal amount thereof, the Firm Securities, and
(b) in the event and to the extent that the Representatives shall exercise the
election to purchase Optional Securities as provided below, the Company agrees
to issue and sell to each of the Purchasers, and each of the Purchasers agrees,
severally and not jointly, to purchase from the Company, at the same purchase
price set forth in clause (a) of this Section 2, that portion of the aggregate
principal amount of the Optional Securities as to which such election shall have
been exercised (to be adjusted by you so as to eliminate Securities in
denominations other than in multiples of $1,000), in each case as set forth
opposite the name of such Purchaser in Schedule I hereto and any additional
principal amount of Securities which such Purchaser may become obligated to
purchase pursuant to the provisions of Section 10(b) hereof.

The Company hereby grants to the Purchasers the right to purchase at their
election up to $33,750,000 in aggregate principal amount of the Optional
Securities, at the purchase price set forth in clause (a) of the first paragraph
of this Section 2. Any such election to purchase Optional

 

12

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  Securities may be exercised from time to time only by written notice from the
Representatives to the Company, given within a period of 30 calendar days after
the date of this Agreement, setting forth the aggregate principal amount of
Optional Securities and the date on which such Optional Securities are to be
delivered, as determined by the Representatives but in no event earlier than the
First Time of Delivery (as defined in Section 4 hereof) or, unless the
Representatives and the Company otherwise agree in writing, earlier than two or
later than ten business days after the date of such notice.

 

3. Upon the authorization by you of the release of the Securities, the several
Purchasers propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement, the Pricing Disclosure Package, and the
Offering Circular and each Purchaser, acting severally and not jointly, hereby
represents and warrants to, and agrees with the Company that:

 

  (a) It will sell the Securities only to persons who it reasonably believes are
“qualified institutional buyers” (“QIBs”) within the meaning of Rule 144A under
the Act in transactions meeting the requirements of Rule 144A; and

 

  (b) It is an Institutional Accredited Investor (within the meaning of Rule 501
under the Act).

 

4.

(a)

The Securities to be purchased by each Purchaser hereunder will be represented
by one or more definitive global Securities in book-entry form which will be
deposited by or on behalf of the Company with The Depository Trust Company
(“DTC”) or its designated custodian. The Company will deliver the Securities to
the Representatives, for the account of each Purchaser, against payment by or on
behalf of such Purchaser of the purchase price therefor by wire transfer in
Federal (same day) funds, by causing DTC to credit the Securities to the account
of the Representatives at DTC. The Company will cause the certificates
representing the Securities to be made available to the Representatives for
checking at least twenty-four hours prior to the applicable Time of Delivery (as
defined below) at the office of Latham & Watkins LLP, 885 Third Avenue, New
York, New York 10022-4834 (the “Closing Location”).

The time and date of such delivery and payment shall be, with respect to the
Firm Securities, 9:30 a.m., New York City time, on September 29, 2017 or such
other time and date as the Representatives and the Company may agree upon in
writing, and, with respect to the Optional Securities, 9:30 a.m., New York City
time, on the date specified by the Representatives in the written notice given
by the Representatives of the Purchasers’ election to purchase such Optional
Securities, or such other time and date as the Representatives and the Company
may agree upon in writing. Such time and date for delivery of the Firm
Securities is herein called the “First Time of Delivery”, such time and date for
delivery of the Optional Securities, if not the First Time of Delivery, is
herein called the “Second Time of Delivery”, and each such time and date for
delivery is herein called a “Time of Delivery”.

 

  (b)

The documents to be delivered at each Time of Delivery by or on behalf of the
parties hereto pursuant to Section 8 hereof, including the cross-receipt for the
Securities and any additional documents requested by the Purchasers pursuant to
Section 8(k) hereof, will be delivered at such time and date at the Closing
Location, and the Securities will be delivered at the office of DTC (or its
designated custodian), all at such Time of Delivery. A meeting will be held at
the Closing Location at 5:00 p.m., New York City time, on the New York Business
Day next preceding such Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties

 

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  hereto. For the purposes of this Section 4, “New York Business Day” shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York City are generally authorized or obligated by
law or executive order to close.

 

5. The Company agrees with each of the Purchasers:

 

  (a) To prepare the Preliminary Offering Circular, the Pricing Disclosure
Package and the Offering Circular in a form approved by you; to make no
amendment or any supplement to the Offering Circular which shall be disapproved
by you promptly after reasonable notice thereof; and to furnish you with copies
thereof;

 

  (b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities and the shares of Stock, if any, issuable upon
conversion of the Securities for offering and sale under the securities laws of
such jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Securities,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction or to subject itself to taxation for doing business
in any jurisdiction;

 

  (c) To furnish the Purchasers with written and electronic copies of the
Offering Circular and any amendment or supplement thereto in such quantities as
you may from time to time reasonably request, and if, at any time prior to the
expiration of nine months after the date of the Offering Circular, any event
shall have occurred as a result of which the Offering Circular as then amended
or supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Offering
Circular is delivered, not misleading, or, if for any other reason it shall be
necessary or desirable during such same period to amend or supplement the
Offering Circular, to notify you and upon your request to prepare and furnish
without charge to each Purchaser and to any dealer in securities as many written
and electronic copies as you may from time to time reasonably request of an
amended Offering Circular or a supplement to the Offering Circular which will
correct such statement or omission or effect such compliance;

 

  (d)

During the period beginning from the date hereof and continuing until the date
that is 60 days after the First Time of Delivery, not to (i) offer, issue, sell,
contract to sell, pledge, grant any option to purchase, make any short sale or
otherwise transfer or dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act relating to any securities of
the Company that are substantially similar to the Securities or the Stock,
including but not limited to any options or warrants to purchase shares of Stock
or any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities, or publicly disclose the intention to make any offer, sale, pledge,
disposition or filing or (ii) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
the Stock or any such other securities, whether any such transaction is to be
settled by delivery of Stock or such other securities, in cash or otherwise
(other than pursuant to employee stock plans or contractual registration rights
existing on, or upon the conversion, exchange or exercise of convertible,
exchangeable or exercisable securities outstanding as of, the date of this
Agreement), without your prior written consent; provided, however, that nothing
in this clause (d) will prohibit the conversion of any Security in accordance
with its terms and the

 

14

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  terms of the Indenture or the issuance of any Warrant Shares or the issuance
of shares of Stock or rights to acquire shares of Stock pursuant to the
Company’s long-term incentive plan or the issuance of shares of Stock as a
result of the exercise of warrants issued under the Investment Agreement, dated
as of March 8, 2016, between Amazon.com, Inc. (“Amazon”) and the Company or the
issuance of warrants in accordance with the terms of such Investment Agreement
(the “Amazon Investment Agreement”); or

 

  (e) Not to be or become, at any time prior to the expiration of two years
after the each Time of Delivery, an open-end investment company, unit investment
trust, closed-end investment company or face-amount certificate company that is
or is required to be registered under Section 8 of the 1940 Act;

 

  (f) At any time when the Company is not subject to Section 13 or 15(d) of the
Exchange Act, for the benefit of holders from time to time of Securities, to
furnish at its expense, upon request, to holders of Securities and prospective
purchasers of securities information (the “Additional Issuer Information”)
satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Act;

 

  (g) Except for such documents that are publicly available on the Commission’s
EDGAR system, to furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders’ equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), to make available to its stockholders consolidated summary
financial information of the Company and its subsidiaries for such quarter in
reasonable detail;

 

  (h) During the period of one year after each Time of Delivery, the Company
will not, and will not permit any of its “affiliates” (as defined in Rule 144
under the Act) to, resell any of the Securities or the Stock issued upon
conversion thereof which constitute “restricted securities” under Rule 144 that
have been reacquired by any of them (other than pursuant to a registration
statement that has been declared effective under the Act);

 

  (i) To use the net proceeds received by the Company from the sale of the
Securities pursuant to this Agreement in the manner specified in the Pricing
Circular under the caption “Use of Proceeds;”

 

  (j) To reserve and keep available at all times, free of preemptive rights,
shares of Stock for the purpose of enabling the Company to satisfy any
obligations to issue shares of its Stock upon conversion of the Securities; and

 

  (k) To use its best efforts to list for quotation, subject to notice of
issuance, the shares of Stock issuable upon conversion of the Securities and the
Warrant Shares on the Nasdaq Stock Market Inc.’s National Market (the “NASDAQ”).

 

6.

(a)

The Company represents and agrees that, without the prior consent of the
Representatives, it and its affiliates and any other person acting on its or
their behalf (other than the Purchasers, as to which no statement is given) (x)
have not made and will not make any offer relating to the Securities that, if
the offering of the Securities contemplated by this Agreement were conducted as
a public offering pursuant to a registration statement filed under the Act with
the Commission, would constitute an “issuer free writing prospectus,” as

 

15

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  defined in Rule 433 under the Act (any such offer is hereinafter referred to
as a “Company Supplemental Disclosure Document”) and (y) have not solicited and
will not solicit offers for, and have not offered or sold and will not offer or
sell, the Securities by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D other than any
such solicitation listed on Schedule II(d) (each such solicitation, a “Permitted
General Solicitation”; each written general solicitation document listed on
Schedule II(d), a “Permitted General Solicitation Material”);

 

  (b) Each Purchaser, severally and not jointly, represents and agrees that,
without the prior consent of the Company and the Representatives, other than one
or more term sheets relating to the Securities containing customary information
and conveyed to purchasers of securities or any Permitted General Solicitation
Material, it has not made and will not make any offer relating to the Securities
that, if the offering of the Securities contemplated by this Agreement were
conducted as a public offering pursuant to a registration statement filed under
the Act with the Commission, would constitute a “free writing prospectus,” as
defined in Rule 405 under the Act (any such offer (other than any such term
sheets and any Permitted General Solicitation Material), is hereinafter referred
to as a “Purchaser Supplemental Disclosure Document”); and

 

  (c) Any Company Supplemental Disclosure Document, Purchaser Supplemental
Disclosure Document or Permitted General Solicitation Material, the use of which
has been consented to by the Company and the Representatives, is listed as
applicable on Schedule II(b), Schedule II(c) or Schedule II(d) hereto,
respectively.

 

7.

The Company covenants and agrees with the several Purchasers that the Company
will pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Company’s counsel and accountants in connection with the issue
of the Securities and the shares of Stock issuable upon conversion of the
Securities and all other expenses in connection with the preparation, printing,
reproduction and filing of the Preliminary Offering Circular and the Offering
Circular and any amendments and supplements thereto and the mailing and
delivering of copies thereof to the Purchasers and dealers; (ii) the cost of
printing or producing any agreement among Purchasers, this Agreement, the
Indenture, the Call Spread Confirmations, the Securities, the Blue Sky
Memorandum, closing documents (including any compilations thereof), Permitted
General Solicitation Materials and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all expenses in
connection with the qualification of the Securities and the shares of Stock
issuable upon conversion of the Securities for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Securities;
(v) the cost of preparing the Securities; (vi) the fees and expenses of the
Trustee and any agent of the Trustee and the fees and disbursements of counsel
for the Trustee in connection with the Indenture and the Securities; (vii) 50%
of all costs and expenses incurred in connection with any “road show”
presentation to potential purchasers of the Securities; (viii) any cost incurred
in connection with the issuance, delivery and listing of the shares of Stock, if
any, issuable upon conversion of the Securities and the Warrant Shares; and
(ix) all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section. It
is understood, however, that, except as provided in this Section, and Section 9
and Section 12 hereof, the Purchasers will pay all of their own costs and
expenses,

 

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  including the fees of their counsel, transfer taxes on resale of any of the
Securities by them, and any advertising expenses connected with any offers they
may make.

 

8. The obligations of the Purchasers hereunder, as to the Securities to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company contained herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:

 

  (a) Latham & Watkins LLP, counsel for the Purchasers, shall have furnished to
you their written opinion and negative assurance letter, in each case, dated
such Time of Delivery, in form and substance satisfactory to you, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;

 

  (b) Vorys, Sater, Seymour and Pease LLP, counsel for the Company, shall have
furnished to you their written opinion and negative assurance letter, in each
case, dated such Time of Delivery, in form and substance satisfactory to you, to
the effect set forth in Annex I hereto;

 

  (c) On the date of the Offering Circular concurrently with the execution of
this Agreement and also at each Time of Delivery, Deloitte & Touche LLP shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you;

 

  (d) (i) Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included in the
Pricing Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Pricing Circular, and (ii) since the
respective dates as of which information is given in the Pricing Circular, at
each Time of Delivery, there shall not have been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Pricing Circular, the effect of which, in any such case
described in clause (i) or (ii), is in your judgment so material and adverse as
to make it impracticable or inadvisable to proceed with the offering or the
delivery of the Securities on the terms and in the manner contemplated in this
Agreement and in each of the Pricing Disclosure Package and the Offering
Circular;

 

  (e) On or after the Applicable Time (i) no downgrading shall have occurred in
the rating accorded the Company’s debt securities by any “nationally recognized
statistical rating organization”, as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company’s debt securities;

 

  (f)

On or after the Applicable Time there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the NASDAQ; (ii) a suspension or material limitation in trading in
the Company’s securities on the NASDAQ; (iii) a general moratorium on commercial
banking activities declared by either Federal or New York State authorities or a
material disruption in commercial banking or securities settlement or clearance
services in the United States; (iv) the outbreak or escalation of hostilities

 

17

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  involving the United States or the declaration by the United States of a
national emergency or war or (v) the occurrence of any other calamity or crisis
or any change in financial, political or economic conditions in the United
States or elsewhere, if the effect of any such event specified in clause (iv) or
(v) in your judgment makes it impracticable or inadvisable to proceed with the
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Pricing Disclosure Package and the Offering Circular;

 

  (g) The shares of Stock issuable upon conversion of the Securities shall have
been approved for listing, subject to notice of issuance, for quotation on the
NASDAQ;

 

  (h) The Company shall have obtained and delivered to the Purchasers executed
copies of a lock-up agreement from each of the parties named in Schedule IV
hereto substantially in the form set forth in Annex II hereto;

 

  (i) The Company shall have executed and delivered the Indenture, and the
Purchasers shall have received an executed original copy thereof, and no event
that would be a “Default” or “Event of Default” under the Indenture exists;

 

  (j) The Securities shall be eligible for clearance and settlement through the
facilities of DTC; and

 

  (k) The Company shall have furnished or caused to be furnished to you at each
Time of Delivery certificates of officers of the Company satisfactory to you as
to the accuracy of the representations and warranties of the Company herein at
and as of such Time of Delivery, as to the performance by the Company of all of
its obligations hereunder to be performed at or prior to such Time of Delivery,
as to the matters set forth in subsection (e) of this Section and as to such
other matters as you may reasonably request.

 

  (l) No event has occurred that would, if the Securities were outstanding,
require an adjustment to the conversion rate for the Securities pursuant to the
Indenture.

 

  (m) The Purchasers shall have received at each Time of Delivery a certificate
of solvency, dated such Time of Delivery, executed by the principal financial or
accounting officer of the Company in the form of Annex III attached hereto.

 

9.

(a)

The Company will indemnify and hold harmless each Purchaser against any losses,
claims, damages or liabilities, joint or several, to which such Purchaser may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Offering Circular, the Pricing Circular, the
Pricing Disclosure Package, the Offering Circular, or any amendment or
supplement thereto, any Company Supplemental Disclosure Document, any Permitted
General Solicitation Material or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, and will reimburse each Purchaser for any
legal or other expenses reasonably incurred by such Purchaser in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Offering Circular, the Pricing
Circular, the Pricing Disclosure Package, the Offering Circular or any such
amendment or supplement, any Company Supplemental Disclosure Document or any
Permitted General Solicitation

 

18

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  Material, in reliance upon and in conformity with written information
furnished to the Company by any Purchaser through the Representatives expressly
for use therein.

 

  (b) Each Purchaser, severally and not jointly, will indemnify and hold
harmless the Company against any losses, claims, damages or liabilities to which
the Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Offering Circular, the Pricing
Circular, the Pricing Disclosure Package, the Offering Circular, or any
amendment or supplement thereto, or any Company Supplemental Disclosure
Document, any Permitted General Solicitation Material or arise out of or are
based upon the omission or alleged omission to state therein a material fact or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary Offering
Circular, the Pricing Circular, the Pricing Disclosure Package, the Offering
Circular or any such amendment or supplement, any Company Supplemental
Disclosure Document or any Permitted General Solicitation Material, in reliance
upon and in conformity with written information furnished to the Company by such
Purchaser through the Representatives expressly for use therein; and each
Purchaser will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any such
action or claim as such expenses are incurred.

 

  (c) Promptly after receipt by an indemnified party under subsection (a) or (b)
above of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of any
indemnified party.

 

  (d)

If the indemnification provided for in this Section 9 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each

 

19

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  indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Purchasers on
the other from the offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Purchasers on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Purchasers on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (net of
underwriting discounts but before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Purchasers, in each case as set forth in the Offering Circular. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Purchasers on the other and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Purchasers agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to investors were offered to
investors exceeds the amount of any damages which such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The Purchasers’ obligations in this subsection
(d) to contribute are several in proportion to their respective purchase
obligations and not joint.

 

  (e) The obligations of the Company under this Section 9 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to any affiliate of each Purchaser and each person,
if any, who controls any Purchaser within the meaning of the Act; and the
obligations of the Purchasers under this Section 9 shall be in addition to any
liability which the respective Purchasers may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
and to each person, if any, who controls the Company within the meaning of the
Act.

 

10.

(a)

If any Purchaser shall default in its obligation to purchase the Securities
which it has agreed to purchase hereunder at a Time of Delivery, you may in your
discretion arrange for you or another party or other parties to purchase such
Securities on the terms contained herein. If within thirty-six hours after such
default by any Purchaser you do not arrange for the purchase of such Securities,
then the Company shall be entitled to a further period of

 

20

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  thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Securities, or the Company notifies
you that it has so arranged for the purchase of such Securities, you or the
Company shall have the right to postpone such Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Offering Circular, or in any other documents or
arrangements, and the Company agrees to prepare promptly any amendments or
supplements to the Offering Circular which in your opinion may thereby be made
necessary. The term “Purchaser” as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Securities.

 

  (b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities to be purchased at such Time of
Delivery, then the Company shall have the right to require each non-defaulting
Purchaser to purchase the principal amount of Securities which such Purchaser
agreed to purchase hereunder at such Time of Delivery and, in addition, to
require each non-defaulting Purchaser to purchase its pro rata share (based on
the principal amount of Securities which such Purchaser agreed to purchase
hereunder) of the Securities of such defaulting Purchaser or Purchasers for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Purchaser from liability for its default.

 

  (c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities to be purchased at such Time of Delivery, or if the
Company shall not exercise the right described in subsection (b) above to
require non-defaulting Purchasers to purchase Securities of a defaulting
Purchaser or Purchasers, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Purchasers to purchase and the Company
to sell the Optional Securities) shall thereupon terminate, without liability on
the part of any non-defaulting Purchaser or the Company, except for the expenses
to be borne by the Company and the Purchasers as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 9 hereof; but nothing
herein shall relieve a defaulting Purchaser from liability for its default.

 

11. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Purchasers, as set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Purchaser or any controlling person of any Purchaser, or the Company, or
any officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Securities.

 

12.

If this Agreement shall be terminated pursuant to Section 10 hereof, the Company
shall not then be under any liability to any Purchaser except as provided in
Sections 7 and 9 hereof; but, if for any other reason, the Securities are not
delivered by or on behalf of the Company as provided herein, the Company will
reimburse the Purchasers through you for all expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the

 

21

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

  Purchasers in making preparations for the purchase, sale and delivery of the
Securities, but the Company shall then be under no further liability to any
Purchaser except as provided in Sections 7 and 9 hereof.

 

13. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or given
by you jointly or by Goldman, Sachs & Co. LLC or SunTrust Robinson Humphrey,
Inc. on behalf of you as the Representatives.

All statements, requests, notices and agreements hereunder shall be in writing,
and if to the Purchasers shall be delivered or sent by mail or facsimile
transmission to you as the Representatives, in care of Goldman, Sachs & Co. LLC,
200 West Street, New York, New York 10282-2198, Attention: Registration
Department and SunTrust Robinson Humphrey, Inc., 711 5th Avenue | 14th Floor,
New York, New York 10022; and if to the Company shall be delivered or sent by
mail or facsimile transmission to the address of the Company set forth in the
Offering Circular, Attention: Secretary; provided, however, that any notice to a
Purchaser pursuant to Section 9 hereof shall be delivered or sent by mail or
facsimile transmission to such Purchaser at its address set forth in its
Purchasers’ Questionnaire, which address will be supplied to the Company by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.

In accordance with the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)), the Purchasers are required to
obtain, verify and record information that identifies their respective clients,
including the Company, which information may include the name and address of
their respective clients, as well as other information that will allow the
Purchasers to properly identify their respective clients.

 

14. This Agreement shall be binding upon, and inure solely to the benefit of,
the Purchasers, the Company and, to the extent provided in Sections 9 and 11
hereof, the officers and directors of the Company and each person who controls
the Company or any Purchaser, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Purchaser shall be deemed a successor or assign by reason
merely of such purchase.

 

15. Time shall be of the essence of this Agreement.

 

16. The Company acknowledges and agrees that (i) the purchase and sale of the
Securities pursuant to this Agreement is an arm’s-length commercial transaction
between the Company, on the one hand, and the several Purchasers, on the other,
(ii) in connection therewith and with the process leading to such transaction
each Purchaser is acting solely as a principal and not the agent or fiduciary of
the Company, (iii) no Purchaser has assumed an advisory or fiduciary
responsibility in favor of the Company with respect to the offering contemplated
hereby or the process leading thereto (irrespective of whether such Purchaser
has advised or is currently advising the Company on other matters) or any other
obligation to the Company except the obligations expressly set forth in this
Agreement and (iv) the Company has consulted its own legal and financial
advisors to the extent it deemed appropriate. The Company agrees that it will
not claim that the Purchasers, or any of them, has rendered advisory services of
any nature or respect, or owes a fiduciary or similar duty to the Company, in
connection with such transaction or the process leading thereto.

 

17. This Agreement supersedes all prior agreements and understandings (whether
written or oral) between the Company and the Purchasers, or any of them, with
respect to the subject matter hereof.

 

22

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

18. THIS AGREEMENT AND ANY MATTERS RELATED TO THIS TRANSACTION SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF
ANY LAW OTHER THAN THE LAWS OF THE STATE OF NEW YORK. The Company agrees that
any suit or proceeding arising in respect of this agreement or our engagement
will be tried exclusively in the U.S. District Court for the Southern District
of New York or, if that court does not have subject matter jurisdiction, in any
state court located in The City and County of New York and the Company agrees to
submit to the jurisdiction of, and to venue in, such courts.

 

19. The Company and each of the Purchasers hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

 

20. This Agreement may be executed by any one or more of the parties hereto in
any number of counterparts, each of which shall be deemed to be an original, but
all such respective counterparts shall together constitute one and the same
instrument.

 

21. Notwithstanding anything herein to the contrary, the Company (and the
Company’s employees, representatives, and other agents) are authorized to
disclose to any and all persons, the tax treatment and tax structure of the
potential transaction and all materials of any kind (including tax opinions and
other tax analyses) provided to the Company relating to that treatment and
structure, without the Purchasers’ imposing any limitation of any kind. However,
any information relating to the tax treatment and tax structure shall remain
confidential (and the foregoing sentence shall not apply) to the extent
necessary to enable any person to comply with securities laws. For this purpose,
“tax treatment” means US federal and state income tax treatment, and “tax
structure” is limited to any facts that may be relevant to that treatment.

If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this Agreement and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers and the
Company. It is understood that your acceptance of this Agreement on behalf of
each of the Purchasers is pursuant to the authority set forth in a form of
Agreement among Purchasers, the form of which shall be submitted to the Company
for examination upon request, but without warranty on your part as to the
authority of the signers thereof.

[Signature Page to Follow]

 

23

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Very truly yours, Air Transport Services Group, Inc.

 

By:   /s/ W. Joseph Payne Name:   W. Joseph Payne Title:   Chief Legal Officer

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

Accepted as of the date hereof:

Goldman, Sachs & Co. LLC

 

By:   /s/ Daniel Young Name:   Daniel Young Title:   Managing Director

SunTrust Robinson Humphrey, Inc.

 

By:   /s/ Terence T. O’Malley, Jr. Name:   Terence T. O’Malley, Jr. Title:  
Managing Director

On behalf of each of the Purchasers

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

SCHEDULE I  

Purchaser

   Principal
Amount of
Firm
Securities
to be
Purchased  

Goldman Sachs & Co. LLC

   $ 112,500,000  

SunTrust Robinson Humphrey, Inc.

     96,368,000  

J.P. Morgan Securities LLC

     8,066,000  

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

     8,066,000     

 

 

 

Total

   $ 225,000,000     

 

 

 

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

SCHEDULE II

 

(a) Additional Documents Incorporated by Reference: [None.]

 

(b) Company Supplemental Disclosure Documents: [None.]

 

(c) Purchaser Supplemental Disclosure Documents: [None.]

 

(d) Permitted General Solicitation Materials: [None.]

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

SCHEDULE III

Pricing Term Sheet

 

PRICING TERM SHEET    CONFIDENTIAL

September 25, 2017

Air Transport Services Group, Inc.

Offering of

$225,000,000 Aggregate Principal Amount of

1.125% Convertible Senior Notes due 2024

The information in this pricing term sheet supplements Air Transport Services
Group, Inc.’s preliminary offering circular, dated September 25, 2017 (the
“Preliminary Offering Circular”), and supersedes the information in the
Preliminary Offering Circular to the extent inconsistent with the information in
the Preliminary Offering Circular. Terms used, but not defined, in this pricing
term sheet have the respective meanings set forth in the Preliminary Offering
Circular. As used in this pricing term sheet, “we,” “our” and “us” refer to Air
Transport Services Group, Inc. and not to its subsidiaries.

 

Issuer    Air Transport Services Group, Inc. Ticker / Exchange for Common Stock
   ATSG / The NASDAQ Global Select Market (“NASDAQ”). Trade Date   
September 26, 2017. Settlement Date    September 29, 2017, which is the fourth
business day after the date of this pricing term sheet. Currently, trades in the
secondary market for convertible notes ordinarily settle two business days after
the date of execution, unless the parties to the trade agree otherwise.
Accordingly, investors in this offering who wish to sell their Notes before the
second business day preceding the Settlement Date must specify an alternate
settlement arrangement at the time of the trade to prevent a failed settlement.
Those investors should consult their advisors. Notes    1.125% convertible
senior notes due 2024 (the “Notes”).

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

Principal Amount    $225,000,000 (or, if the initial purchasers fully exercise
their option to purchase additional Notes, $258,750,000) aggregate principal
amount of Notes. Offering Price    100% of the principal amount of the Notes.
Maturity    October 15, 2024, unless earlier repurchased or converted. Stated
Interest Rate    1.125% per annum. Interest Payment Dates    April 15 and
October 15 of each year, beginning on April 15, 2018. Record Dates    April 1
and October 1.

Last Reported Sale Price per

    Share of Common Stock on

    NASDAQ on

    September 25, 2017

   $23.63. Conversion Premium    Approximately 35% above the Last Reported Sale
Price per Share of Common Stock on NASDAQ on September 25, 2017. Initial
Conversion Price    Approximately $31.90 per share of common stock. Initial
Conversion Rate    31.3475 shares of common stock per $1,000 principal amount of
Notes. Use of Proceeds    The Issuer estimates that the net proceeds to it from
this offering will be approximately $204.0 million (or approximately
$234.6 million if the initial purchasers fully exercise their option to purchase
additional Notes), after deducting the initial purchasers’ discounts and
commissions and the Issuer’s estimated offering expenses. The Issuer intends to
use approximately $15.3 million of the net proceeds from this offering, together
with the proceeds from the warrants described in the Preliminary Offering
Circular, to pay the

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

   cost of the convertible note hedge transactions described in the Preliminary
Offering Circular (or approximately $17.6 million if the Issuer enters into
additional convertible note hedge transactions as a result of the initial
purchasers fully exercising their option to purchase additional Notes). The
Issuer intends to use the remainder of the net proceeds to repay a portion of
the outstanding borrowings under its $545 million revolving credit facility and
for general corporate purposes. If the initial purchasers exercise their option
to purchase additional Notes, then the Issuer intends to sell additional
warrants as described in the Preliminary Offering Circular and use a portion of
the net proceeds from the sale of the additional Notes, together with the
proceeds from the additional warrants, to enter into an additional convertible
note hedge transactions as described in the Preliminary Offering Circular.
Book-Running Managers    Goldman Sachs & Co. LLC SunTrust Robinson Humphrey,
Inc. Co-Managers   

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

 

J.P. Morgan Securities LLC

CUSIP / ISIN Numbers    00922R AA3 / US00922RAA32.

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

Increase to Conversion Rate in Connection with a
Make-Whole Fundamental
Change

   If a make-whole fundamental change occurs and the conversion date for the
conversion of a Note occurs during the related make-whole fundamental change
conversion period, then, subject to the provisions described in the Preliminary
Offering Circular under the caption “Description of Notes—Conversion
Rights—Increase in Conversion Rate in Connection with a Make-Whole Fundamental
Change,” the conversion rate applicable to such conversion will be increased by
a number of shares set forth in the table below corresponding (after
interpolation as described in the Preliminary Offering Circular under such
caption) to the effective date and the stock price of such make-whole
fundamental change:

 

     Stock Price  

Effective Date

   $23.63      $25.00      $30.00      $31.90      $35.00      $40.00     
$50.00      $60.00      $70.00      $80.00  

September 29, 2017

     10.9715        9.7988        6.7023        5.8683        4.7791       
3.5210        2.0558        1.2838        0.8340        0.5501  

October 15, 2018

     10.9715        9.6692        6.4820        5.6332        4.5329       
3.2795        1.8566        1.1328        0.7239        0.4723  

October 15, 2019

     10.9715        9.5452        6.2383        5.3690        4.2534       
3.0045        1.6330        0.9668        0.6054        0.3901  

October 15, 2020

     10.9715        9.3944        5.9333        5.0386        3.9057       
2.6678        1.3692        0.7788        0.4763        0.3038  

October 15, 2021

     10.9715        9.1892        5.5243        4.5984        3.4497       
2.2383        1.0548        0.5682        0.3389        0.2153  

October 15, 2022

     10.9715        8.9116        4.9400        3.9730        2.8140       
1.6695        0.6858        0.3458        0.2039        0.1318  

October 15, 2023

     10.9715        8.5684        4.0053        2.9712        1.8354       
0.8918        0.2914        0.1427        0.0884        0.0606  

October 15, 2024

     10.9715        8.6525        1.9859        0.0000        0.0000       
0.0000        0.0000        0.0000        0.0000        0.0000  

If such effective date or stock price are not set forth in the table above,
then:

 

  •   if such stock price is between two stock prices in the table above or the
effective date is between two effective dates in the table above, then the
number of additional shares will be determined by a straight-line interpolation
between the numbers of additional shares set forth for the higher and lower
stock prices in the table and the earlier and later effective dates in the table
above, as applicable, based on a 365- or 366-day year, as applicable; and

 

  •  

if the stock price is greater than $80.00 (subject to adjustment in the same
manner as the stock prices set forth in the column headings of the table above
are adjusted, as described in the Preliminary Offering Circular under the
caption “Description of Notes—Conversion Rights—Increase in Conversion Rate in
Connection with a Make-Whole Fundamental

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

 

Change—Adjustment of Stock Prices and Number of Additional Shares”), or less
than $23.63 (subject to adjustment in the same manner), per share, then no
additional shares will be added to the conversion rate.

Notwithstanding anything to the contrary, in no event will the conversion rate
be increased to an amount that exceeds 42.3190 shares of common stock per $1,000
principal amount of Notes, which amount is subject to adjustment in the same
manner as, and at the same time and for the same events for which, the
conversion rate is required to be adjusted pursuant to the provisions described
in the Preliminary Offering Circular under the caption “Description of
Notes—Conversion Rights—Conversion Rate Adjustments—Generally.”

* * *

This communication is confidential and is intended for the sole use of the
person to whom it is provided by the sender. The information in this pricing
term sheet does not purport to be a complete description of the Notes or the
offering.

The offer and sale of the Notes and any shares of common stock issuable upon
conversion of the Notes have not been, and will not be, registered under the
Securities Act of 1933, as amended (the “Securities Act”), or any other
securities laws, and the Notes and any such shares cannot be offered or sold
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and any other applicable
securities laws. The initial purchasers are initially offering the Notes only to
qualified institutional buyers as defined in, and in reliance on, Rule 144A
under the Securities Act. The Notes and any shares of common stock issuable upon
conversion of the Notes are not transferable except in accordance with the
restrictions described in the Preliminary Offering Circular under the caption
“Transfer Restrictions.”

You should rely only on the information contained or incorporated by reference
in the Preliminary Offering Circular, as supplemented by this pricing term
sheet, in making an investment decision with respect to the Notes.

Neither this pricing term sheet nor the Preliminary Offering Circular
constitutes an offer to sell or a solicitation of an offer to buy any Notes in
any jurisdiction where it is unlawful to do so, where the person making the
offer is not qualified to do so or to any person who cannot legally be offered
the Notes.

ANY DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO
THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES
WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA
BLOOMBERG OR ANOTHER EMAIL SYSTEM.

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SCHEDULE IV

Parties to Lock-Up Agreement

Joseph C. Hete

Quint O. Turner

Richard F. Corrado

W. Joseph Payne

Richard A. Baudouin

Randy D. Rademacher

J. Christopher Teets

Jeffrey J. Vorholt

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ANNEX I

Form of Opinion of Company’s Counsel

to be delivered pursuant to Section 8(b)

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ANNEX II

Form of Lock-Up Agreement

Lock-Up Agreement

[ ● ], 2017

Goldman, Sachs & Co. LLC,

SunTrust Robinson Humphrey, Inc.

c/o Goldman, Sachs & Co. LLC,

200 West Street

New York, New York 10282-2198

c/o SunTrust Robinson Humphrey, Inc.

711 5th Avenue, 14th Floor

New York, New York 10022

Dear Sirs:

The undersigned, a stockholder, an officer and/or director of Air Transport
Services Group, Inc., a Delaware corporation (the “Company”), understands that
Goldman, Sachs & Co. LLC and SunTrust Robinson Humphrey, Inc. (together, the
“Representatives”) propose to enter into a Purchase Agreement (the “Purchase
Agreement”) with the Company providing for the private offering of 1.125%
Convertible Senior Notes due 2024 (the “Offering”), convertible into common
stock, par value $0.01 per share, of the Company (the “Common Stock”), which
will be offered pursuant to Rule 144A by means of an offering circular (the
“Offering Circular”). In recognition of the benefit that such an offering will
confer upon the undersigned as a stockholder, an officer and/or director of the
Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with the
Representatives that, during the period beginning on the date hereof and ending
on the date that is 60 days from the date of the Purchase Agreement (subject to
extensions as discussed below) (the “Lock-Up Period”), the undersigned will not,
without the prior written consent of the Representatives, except pursuant to the
Purchase Agreement, (i) directly or indirectly, offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any shares of the Company’s Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, whether now
owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition (collectively,
the “Lock-Up Securities”), or exercise any right with respect to the
registration of any of the Lock-up Securities, or file or cause to be filed any
registration statement in connection therewith, under the Securities Act of
1933, as amended, or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Lock-Up Securities, whether any such
swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise.

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Notwithstanding the foregoing, and subject to the conditions below, the
undersigned may transfer the Lock-Up Securities without the prior written
consent of the Representatives, provided that (1) the Representatives receive or
have received a signed lock-up agreement for the balance of the lockup period
from each donee, trustee, distributee, or transferee, as the case may be (except
in the case of clauses (ii), (v) and (vi)), (2) any such transfer shall not
involve a disposition for value (except in the case of clauses (v) and (vi)),
(3) such transfers are not required during the Lock-Up Period to be reported
with the Securities and Exchange Commission on Form 4 in accordance with
Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) (except in the case of clauses (v), (vi) and (ix)), and (4) the
undersigned does not otherwise voluntarily effect any public filing or report
regarding such transfers during the Lock-Up Period (except in the case of
clauses (v), (vi) and (ix)):

 

  i. as a bona fide gift or gifts; or

 

  ii. as a bona fide charitable donation; or

 

  iii. to any trust for the direct or indirect benefit of the undersigned or the
immediate family of the undersigned (for purposes of this lock-up agreement,
“immediate family” shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin); or

 

  iv. as a distribution to limited partners, stockholders or equity holders of
the undersigned; or

 

  v. in connection with the withholding, receipt, exercise, cashless (or net)
exercise (whether to cover exercise price, taxes or other fees and expenses),
settlement, vesting or forfeiture of, or removal or lapse of restrictions on,
any stock option, Common Stock issued upon exercise of a stock option,
restricted share unit, restricted stock or other award pursuant to any employee
benefit or director equity plan or agreement in existence as of the date hereof,
so long as (x) such transaction or event does not involve the sale or transfer
of any shares of Common Stock (other than from the undersigned to the Company),
(y) any filing or public announcement made in connection therewith states that
such transfer was to the Company in connection with such exercise or settlement,
and (z) such right of exercise or settlement occurs or expires during the
Lock-Up Period; provided, that for the avoidance of doubt, this clause (iv) will
expressly permit the cashless exercise of stock options due to expire during the
term of this Agreement; provided, further, that the net proceeds of such
exercise following the sale or transfer of any shares of Common Stock to cover
the exercise price, taxes or other fees and expenses, shall be held in shares of
Common Stock; or

 

  vi.

in connection with the withholding of Common Stock or restricted share units by
the Company, at the direction of the undersigned, for the payment of taxes in
connection with the vesting or settlement of a stock option, restricted share
unit, restricted stock or other award pursuant to any employee benefit or
director equity plan or agreement in existence as of the date hereof; provided,
that (x) such transaction or event does not involve the sale or transfer of any
shares of Common Stock or restricted share units (other than from the
undersigned to the Company), (y) any filing or public

 

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  announcement made in connection therewith states that such transfer was to the
Company in connection with such exercise, and (z) such right of vesting or
settlement occurs or expires during the Lock-Up Period; or

 

  vii. in connection with the establishment of a trading plan pursuant to Rule
10b5-1 under the Exchange Act for the sale of shares of Common Stock, provided,
that such plan does not provide for the sale of Common Stock during the Lock-Up
Period and no public announcement or filing under the Exchange Act regarding the
establishment of such plan shall be required of or voluntarily made by or on
behalf of the undersigned or the Company; or

 

  viii. in connection with sales under a trading plan existing on the date
hereof pursuant to Rule 10b5-1 under the Exchange Act for the sale of shares of
Common Stock; provided that such plan cannot be altered or amended to permit the
sale of shares of Common Stock during the Lock-Up Period; or

 

  ix. to the undersigned’s affiliates or to any investment fund or other entity
controlled or managed by the undersigned, provided that any filing or public
announcement made in connection therewith states that such transfer was to the
undersigned’s affiliates or to any investment fund or other entity controlled,
managed by the undersigned.

Furthermore, the undersigned may sell shares of Common Stock of the Company
purchased by the undersigned on the open market following the Offering if and
only if (i) such sales are not required during the Lock-Up Period to be reported
in any public report or filing with the Securities and Exchange Commission, or
otherwise and (ii) the undersigned does not otherwise voluntarily effect any
public filing or report regarding such sales during the Lock-Up Period.

This letter agreement shall automatically terminate and become void upon the
earlier to occur, if applicable of: (i) the termination of the Purchase
Agreement prior to the consummation of the Offering and (ii) October 31, 2017 if
the Purchase Agreement has not been executed by then.

The undersigned also agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent and registrar against the
transfer of the Lock-Up Securities except in compliance with the foregoing
restrictions.

 

Very truly yours, Signature:                                              Print
Name:                                          

 

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ANNEX III

FORM OF SOLVENCY CERTIFICATE

The undersigned, Quint O. Turner, Chief Financial Officer of Air Transport
Services Group, Inc., a Delaware corporation (“the Company”), solely in his
capacity as Chief Financial Officer of Company and not in any individual
capacity, does herby certify pursuant to Section 8(m) of the purchase agreement
(the “Purchase Agreement”) dated as of September 25, 2017, by and between the
Company and Goldman, Sachs & Co. and SunTrust Robinson Humphrey, Inc., as
Representatives of the Purchasers named therein, as follows:

On the date hereof, after giving effect to the Company’s business as currently
proposed to be conducted as described in the Pricing Disclosure Package and
Offering Circular and after giving pro forma effect to the offering and the use
of proceeds therefrom described under the caption “Use of Proceeds” in the
Pricing Disclosure Package and Offering Circular:

 

  1. The fair value of the properties of the Company and its subsidiaries, taken
as a whole, will exceed their consolidated debts and liabilities, subordinated,
contingent or otherwise;

 

  2. The present fair saleable values of the property of the Company and its
subsidiaries, taken as a whole, will be greater than the amount that will be
required to pay the probable liability of their consolidated debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured;

 

  3. The Company and its subsidiaries, taken as a whole, will be able to pay
their consolidated debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured;

 

  4. The Company and its subsidiaries, taken as a whole, will not have
unreasonably small capital with which to conduct the business in which they are
engaged as such business is now conducted and is proposed, contemplated or about
to be conducted following the Time of Delivery;

 

  5. The Company has not incurred (by way of assumption or otherwise) any
obligation or liability (contingent or otherwise) under the Purchase Agreement,
the Indenture and the Securities with actual intent to hinder, delay or defraud
either present or future creditors of the Company and its subsidiaries or any of
their affiliates, as case may be;

 

  6.

In reaching the conclusions set forth in this Certificate, the undersigned has
considered such facts, circumstances and matters as the undersigned has deemed
appropriate and

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  has made such investigations and inquiries as the undersigned has deemed
appropriate, having taken into account the nature of the particular business
anticipated to be conducted by the Company after consummation of the
transactions.

Unless otherwise defined herein, terms defined in the Purchase Agreement and
used herein shall have the meanings given to them in the Purchase Agreement.

The undersigned understands that the Purchasers are relying on the truth and
accuracy of contents of this Certificate in connection with its entering into
the Purchase Agreement. This certificate is being delivered by the undersigned
officer only in his capacity as Chief Financial Officer of the Company and not
individually and the undersigned shall have no personal liability to the
Purchasers or any other person with respect thereto.

 

AIR TRANSPORT SERVICES GROUP, INC. By:  

 

Name:   Quint O. Turner Title:   Chief Financial Officer

 

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