AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
REGISTRATION STATEMENT NO. 333-49841
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ARAMEX INTERNATIONAL LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
BERMUDA 4513 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
P.O. BOX 3371 CT CORPORATION SYSTEM
AMMAN, 11181 JORDAN 1633 BROADWAY
(MAILING ADDRESS) NEW YORK, NEW YORK 10019
(212) 246-5070
2 BADR SHAKER ALSAYYAB STREET (NAME, ADDRESS AND TELEPHONE NUMBER
UM UTHAYNA, AMMAN, JORDAN OF AGENT FOR SERVICE)
(011) 962-6-5522192
(ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
------------------------
Copies to:
LAWRENCE B. FISHER, ESQ. DAVID M. CARTER, ESQ.
CATERINA A. CONTI, ESQ. HUNTON & WILLIAMS
ORRICK, HERRINGTON & SUTCLIFFE LLP RIVERFRONT PLAZA, EAST TOWER
666 FIFTH AVENUE 951 EAST BYRD STREET
NEW YORK, NEW YORK 10103 RICHMOND, VIRGINIA 23219
(212) 506-5000 (804) 788-8200
(212) 506-5151 (FAX) (804) 788-8218 (FAX)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 1, 1998
1,000,000 SHARES
[ARAMEX LOGO]
COMMON STOCK
------------------------
Of the 1,000,000 shares of common stock (the 'Common Stock') being offered
hereby (the 'Offering'), 500,000 shares are being sold by Aramex International
Limited (the 'Company') and 500,000 shares are being sold by certain
Shareholders of the Company (the 'Selling Shareholders'). The Company will not
receive any proceeds from the sale of shares of Common Stock by the Selling
Shareholders.
The Company's Common Stock is traded on the Nasdaq National Market
('Nasdaq') under the symbol 'ARMXF.' On April 8, 1998, the last sale price of
the Common Stock on the Nasdaq was $13.50 per share. See 'Price Range of Common
Stock.'
------------------------
AN INVESTMENT IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. INVESTORS
SHOULD CAREFULLY CONSIDER THE INFORMATION UNDER 'RISK FACTORS' BEGINNING ON PAGE
8 IN CONNECTION WITH THEIR INVESTMENT DECISION CONCERNING THE PURCHASE OF COMMON
STOCK IN THIS OFFERING.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO PROCEEDS TO SELLING
THE PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
<S> <C> <C> <C> <C>
Per Share.............. $ $ $ $
Total(3)............... $ $ $ $
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See 'Underwriting.'
(2) Before deducting expenses and other fees estimated at $400,000, all of which
are payable by the Company.
(3) The Selling Shareholders have granted the Underwriters a 30 day option to
purchase up to 150,000 additional shares of Common Stock on the same terms
and conditions as set forth above, solely to cover over-allotments, if any.
If any such shares are purchased, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Shareholders will be $ , $ , $ and $
respectively. See 'Underwriting.'
The shares of Common Stock are being offered by the several Underwriters
subject to prior sale, when, as and if delivered to and accepted by them, and
subject to certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify this Offering without notice and to reject orders in
whole or in part. Delivery of the shares is expected against payment therefor on
or about , 1998 at the offices of Scott & Stringfellow, Inc.,
Richmond, Virginia.
------------------------
Scott & Stringfellow, Inc.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
[MAP OF THE WORLD SHOWING LOCATION OF SELECTED ARAMEX STATIONS AND SERVICE
PROVIDER/AGENTS SURROUNDED BY LOGOS REPRESENTING VARIOUS SERVICES THAT ARAMEX
OFFERS]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE
ACT OF 1934. SEE 'UNDERWRITING.'
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated or
the context otherwise requires: (i) the 'Company' or 'Aramex' refers to Aramex
International Limited, a Bermuda Company, its consolidated subsidiaries and its
predecessor entity, and (ii) all information in this Prospectus assumes no
exercise of the Underwriters' over allotment option. All references in this
Prospectus to '$' shall mean United States dollars. For purposes of this
Prospectus, the term 'Station' shall mean all of the Company's stations,
including operations through wholly owned subsidiaries, sponsorship agreements,
joint venture agreements, agency relationships and technical services and
exclusive agency agreements. For the purposes of this Prospectus, the 'Middle
East' shall include the following countries: Bahrain, Cyprus, Egypt, Iran, Iraq,
Israel, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian Territories,
Qatar, Saudi Arabia, Sudan, Syria, Turkey, the United Arab Emirates, and Yemen.
For purposes of this Prospectus, the 'Indian Sub-Continent' shall include the
following countries: Bangladesh, India, Pakistan and Sri Lanka.
THE COMPANY
Aramex is a leading provider of express package delivery, freight
forwarding and other transportation services primarily to, from and within the
Middle East and the Indian Sub-Continent. Since its founding in 1982, the
Company has expanded its station network to include 95 locations in 32 countries
with approximately 1,400 employees as of April 1, 1998. The Company also offers
logistics, trucking and warehousing services to its clients and holds a majority
interest in a direct marketing and mail order business, Middle East Direct
Marketing ('MED'). From 1995 to 1997, the Company's total revenues increased
from $43.6 million to $66.3 million and net income grew from $1.5 million to
$3.1 million, respectively.
The Company provides its services from its main hubs in Dubai (UAE),
London, New York and Amman (Jordan). The Company believes that it has
established itself as one of the leading transportation services companies in
the Middle East because of its ability to provide a wide array of transportation
solutions to its clients, its local market knowledge, reputation for quality
service, and its expansive station network. In addition, because the Company
does not own or operate its own aircraft, it is not constrained by restrictions
on delivery schedules, shipment size or weight, providing it with greater
flexibility to serve its clients. As a non-asset based solutions provider, the
Company believes that its information technology systems are a significant asset
and plans to continue to make significant investments in information systems and
technology to provide a continued strong platform for enhanced service and
future growth.
Historically, the majority of the Company's business has been derived from
its express package delivery operations. These express operations, combined with
its station network, have provided the Company with a solid foundation for the
development of additional revenue sources such as logistics, warehousing and
inventory management. The Company has implemented a comprehensive quality
control program and believes its efforts have enabled it to achieve a uniform
service offering throughout its network of stations and has helped to establish
a loyal base of customers. In recognition of this effort, the Company was
awarded corporate ISO 9002 certification in December 1997, after receiving
similar certification at certain stations beginning in August 1995. Each Aramex
station is divided into teams specialized in cross marketing multiple services
to industry-specific segments in their local market. Since each team targets one
or more industry segments in its local market, it can develop and offer
customized solutions for their clients where appropriate.
The Company and Airborne Freight Corporation ('Airborne'), the parent of
Airborne Express and the third largest domestic air express delivery carrier in
the United States, are founding members of the Overseas Express Carrier Network
(the 'OEC'). The OEC is a global alliance among certain leading independent
express companies that functions as a worldwide delivery network for its
members. For tracking and tracing of its express shipments worldwide, the
Company utilizes the FOCUS tracking system which is owned and operated by
Airborne. Airborne has been a shareholder of the Company since November 1996 and
prior to the Offering owns 6.9% of the outstanding Common Stock of the Company.
The Company believes that current and forecasted economic growth for the
Middle East should result in an increase in demand for its services. According
to the Boeing Commercial Airplane Group's ('Boeing')
3
<PAGE>
1996/1997 World Air Cargo Forecast, it has been estimated that real gross
domestic product ('GDP') for the Middle East will grow by approximately 3.5% per
year from approximately $383 billion in 1995 to approximately $740 billion by
2015. Saudi Arabia, where the Company continues to expand its operations, is the
largest market in the Middle East, representing 28% of the region's GDP. Because
of its strategic location at the crossroads of Asia, Europe, and Africa, the
Middle East is becoming a major center for world air freight distribution. In
fact, the Middle East air freight market has grown at a reported average rate of
15% per year since 1995. It was reported by Boeing that, in early 1996, total
air traffic through Dubai, where the Company operates one of its major hubs,
increased 23% and transshipments increased 41% from 1995. As a result of its
expansive station network and its local market knowledge, the Company believes
it is well positioned to benefit from the economic growth forecasted for the
Middle East which should result in an increased demand for express, freight
forwarding and regional trucking and logistics services.
The Company's goal is to be one of the leading providers of express package
delivery, freight forwarding and logistics services in the Middle East, the
Indian Sub-Continent and other contiguous emerging markets and to offer its
customers a wide range of distinct delivery and transportation services. The
Company intends to achieve this goal by implementing the following strategies:
EXPAND MARKET AND GEOGRAPHIC PRESENCE -- The Company is focused on
expanding its market and geographic presence in the Middle East, the Indian
Sub-Continent and other contiguous emerging markets. The Company is
currently deploying additional resources to expand its presence in Saudi
Arabia and the Indian Sub-Continent. The emerging markets targeted by the
Company, such as the Central Asian Republics and North Africa, are
characterized by large populations and growing economies which are
liberalizing and opening their markets to local and foreign investment. By
expanding its distribution network in these regions, the Company's
management believes it can (i) enhance its regional market presence; (ii)
expand its customer base; and (iii) reduce its geographic revenue
concentration.
PROVIDE TOTAL TRANSPORTATION SOLUTIONS -- The Company plans to
continue to capitalize on its reputation as a quality service provider of
total transportation solutions in its markets. A large part of this
strategy involves the continued development by the Company of customized
solutions for its clients in the areas of (i) logistics management; (ii)
multi-modal regional transportation and distribution (offering the options
of express package delivery, air freight forwarding, and ground
distribution); (iii) inventory management; and (iv) local warehousing. The
Company's 'One Stop Shop' approach is designed to provide its customers
with a total solution for their everyday transportation needs. To
effectuate this strategy and in order to facilitate the Company's ability
to provide comprehensive logistics services, the Company plans to build
additional warehouse facilities in Amman and Dubai.
CONTINUE EMPHASIS ON TECHNOLOGY -- The Company continues to make
significant investments in technology as a vehicle to enhance service,
increase sales and foster growth. The Company believes that continuing
improvements in its communications network and information systems, such as
linking all of the Company's offices via an on-line, real time
communications network and the ability of customers to have direct
connectivity to the Aramex information network, will yield continued
improvements in operations and customer service and improve the Company's
results of operations. The Company's on-going technology initiatives
include, among others, the continued implementation of remote hand-held bar
code and signature scanners to replace the manual process, an express
information system to provide production and cost related information and
analysis, and a software system that allows customers to track shipments
from their own personal computer.
MARKET ITS SERVICES THROUGH ARAMEX TEAMS -- The Company plans to
continue to market its services through cross functional, personalized
customer teams which possess the marketing skills, local market knowledge,
service expertise and industry experience necessary to identify and
effectively address individual client's transportation needs. This strategy
provides each station with a degree of flexibility and independence to
develop customized transportation solutions which the Company believes
provides a competitive advantage in its markets. The Company believes its
team based structure is an innovative substitute to the traditional sales
force format and facilitates the cross-marketing of the Company's services.
The Company is committed to strengthening and expanding the number of its
customer teams by recruiting
4
<PAGE>
individuals who demonstrate leadership qualities, are motivated and
energetic and comprehend the notion of teamwork and customer service.
GROW THROUGH STRATEGIC ALLIANCES AND ACQUISITIONS -- The Company plans
to pursue strategic alliances and may acquire complementary businesses in
order to maximize penetration in new and existing geographic markets,
expand the range of commercial services and increase the Company's name
recognition. Whenever possible, the Company considers increasing its
ownership in its joint ventures as well as converting its agency agreements
to Company-controlled joint ventures, which permits the consolidation of
these operations with the Company's operations. For example, in 1997, the
Company acquired a 51% interest in the Ramallah (the Palestinian Authority)
operations which were previously operated by a service provider agency.
The Company's mailing address is P.O. Box 960913, Amman, 11196 Jordan and
its principal executive office is located at 2 Badr Shaker Alsayyab Street, Um
Uthayna, Amman, Jordan and the Company's telephone number is 962-6-5522192. The
Company maintains an Internet site on the World Wide Web at
http://www.aramex.com. Information contained in the Company's Internet site
shall not be deemed to be a part of this Prospectus.
------------------------
ARAMEX(Registered) is a registered service mark of the Company.
This Prospectus includes trademarks and service marks of companies
other than those of the Company.
------------------------
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby:
By the Company........................................ 500,000 shares
By the Selling Shareholders........................... 500,000 shares
Common Stock to be outstanding after the Offering(l).... 4,929,688 shares
Use of Proceeds......................................... For expansion of warehouse facilities, investments in
technology and working capital and other general
corporate purposes. See 'Use of Proceeds.'
Nasdaq Symbol........................................... 'ARMXF'
Risk Factors............................................ See 'Risk Factors.'
</TABLE>
- ------------------
(1) Excludes as of March 31, 1998, an aggregate of (i) 100,000 shares of Common
Stock reserved for issuance upon exercise of warrants issued to the
underwriter of the Company's initial public offering and its designees (the
'Commonwealth Warrants'), and (ii) 300,000 shares of Common Stock issuable
upon exercise of outstanding options. See 'Principal and Selling
Shareholders.'
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial data as of and for the years
ended December 31, 1995, 1996 and 1997 have been derived from the Company's
audited Consolidated Financial Statements included herein. The summary
consolidated financial data as of and for the years ended December 31, 1993 and
1994 have been derived from the Company's audited consolidated financial
statements not included herein. The information should be read in conjunction
with the Consolidated Financial Statements and Notes thereto appearing elsewhere
in this Prospectus and 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'
The Company's Consolidated Financial Statements have been prepared in
accordance with international accounting standards, which, for purposes of the
Company's financial statements, are substantially consistent with United States
generally accepted accounting principles.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
International Express.................................... $19,802 $22,349 $25,491 $30,798 $36,556
Freight Forwarding....................................... 6,544 13,104 14,306 15,186 21,697
Domestic Express......................................... 833 1,291 2,007 2,880 3,967
MED...................................................... -- -- -- 1,078 1,833
Other(1)................................................. 1,635 1,385 1,798 2,333 2,277
------- ------- ------- ------- -------
Total Revenues........................................ 28,814 38,129 43,602 52,275 66,330
Shipping costs............................................. 13,676 19,992 23,045 28,080 35,471
------- ------- ------- ------- -------
Gross profit.......................................... 15,138 18,137 20,557 24,195 30,859
Operating expenses......................................... 6,099 6,877 7,986 9,796 10,682
Selling, general and administrative expenses............... 7,885 10,232 10,664 12,003 17,278
------- ------- ------- ------- -------
Operating income...................................... 1,154 1,028 1,907 2,396 2,899
Income before income taxes................................. 775 800 1,945 2,366 3,260
Net income................................................. $ 86 $ 295 $ 1,522 $ 2,047 $ 3,121
Earnings Per Share
Basic(2).............................................. $ 0.03 $ 0.09 $ 0.49 $ 0.64 $ 0.71
Diluted............................................... $ 0.03 $ 0.09 $ 0.49 $ 0.64 $ 0.69
Weighted average number of common shares outstanding
Basic(2).............................................. 3,125 3,125 3,125 3,185 4,397
Diluted............................................... 3,125 3,125 3,125 3,185 4,523
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1997
------------------------
1993 1994 1995 1996 ACTUAL AS ADJUSTED(3)
------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................. $ 2,239 $ 1,915 $ 2,867 $ 6,650 $13,596 $ 19,541
Total assets.................................... 10,297 13,178 14,344 19,372 30,704 36,649
Total liabilities............................... 6,908 9,715 9,649 10,463 12,960 12,960
Total Shareholders' equity...................... $ 2,612 $ 2,889 $ 4,404 $ 8,653 $16,759 $ 22,704
</TABLE>
- ------------------
(1) Amounts represent revenues from other special services which the Company
renders such as airline ticketing, remail and travel. All related costs are
reflected in shipping costs.
(2) Excludes 300,000 shares of Common Stock issuable upon exercise of
outstanding options and 100,000 shares of Common Stock issuable upon the
exercise of the Commonwealth Warrants. See 'Management.'
(3) Adjusted to reflect the sale by the Company of 500,000 shares of Common
Stock offered hereby at an assumed offering price of $13.50 (based upon the
closing market price of the Company's Common Stock on April 8, 1998) per
share, after deducting estimated offering expenses and underwriting discount
and commissions, and application of estimated proceeds therefrom as
described in 'Use of Proceeds.' See 'Capitalization' and 'Use of Proceeds.'
6
<PAGE>
THE COMPANY IS ORGANIZED UNDER THE LAWS OF THE ISLANDS OF BERMUDA AND IS
HEADQUARTERED IN JORDAN. CERTAIN OF THE COMPANY'S DIRECTORS, OFFICERS AND
CONTROLLING PERSONS, AND SELLING STOCKHOLDERS AS WELL AS CERTAIN OF THE EXPERTS
NAMED IN THIS PROSPECTUS RESIDE OUTSIDE THE UNITED STATES. ALL OR A SUBSTANTIAL
PORTION OF THEIR ASSETS AND THE ASSETS OF THE COMPANY AND SUCH PERSONS ARE
LOCATED OUTSIDE THE UNITED STATES, INCLUDING BERMUDA AND JORDAN. AS A RESULT, IT
MAY NOT BE POSSIBLE FOR INVESTORS TO EFFECT SERVICE OF PROCESS WITHIN THE UNITED
STATES UPON SUCH PERSONS OR TO ENFORCE JUDGMENTS AGAINST THE COMPANY OR SUCH
PERSONS OBTAINED IN UNITED STATES COURTS PREDICATED UPON THE CIVIL LIABILITY
PROVISIONS OF THE FEDERAL OR STATE SECURITIES LAWS OF THE UNITED STATES. THE
COMPANY HAS BEEN ADVISED BY CONYERS DILL & PEARMAN, BERMUDA COUNSEL TO THE
COMPANY, THAT THE ENFORCEMENT OF JUDGMENTS OF UNITED STATES COURTS OBTAINED IN
ACTIONS AGAINST THE COMPANY OR SUCH PERSONS PREDICATED UPON THE CIVIL LIABILITY
PROVISIONS OF THE FEDERAL OR STATE SECURITIES LAWS OF THE UNITED STATES AND THE
ENFORCEABILITY, IN ORIGINAL ACTIONS, OF LIABILITIES AGAINST THE COMPANY OR SUCH
PERSONS PREDICATED SOLELY UPON THE FEDERAL OR STATE SECURITIES LAWS OF THE
UNITED STATES WOULD REQUIRE THE COMMENCEMENT OF A SEPARATE ACTION IN THE BERMUDA
COURTS. THERE IS UNCERTAINTY AS TO WHETHER THE COURTS OF BERMUDA OR JORDAN WOULD
(i) ENFORCE JUDGMENTS OF UNITED STATES COURTS OBTAINED AGAINST THE COMPANY OR
SUCH PERSONS PREDICATED UPON THE CIVIL LIABILITY PROVISIONS OF THE FEDERAL OR
STATE SECURITIES LAWS OF THE UNITED STATES OR (ii) ENTERTAIN ORIGINAL ACTIONS
BROUGHT IN BERMUDA COURTS AGAINST THE COMPANY OR SUCH PERSONS PREDICATED UPON
THE FEDERAL OR STATE SECURITIES LAWS OF THE UNITED STATES. THE COMPANY HAS
IRREVOCABLY APPOINTED CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK
10019, AS ITS AUTHORIZED AGENT TO RECEIVE SERVICE OF PROCESS IN ANY LEGAL ACTION
OR PROCEEDING AGAINST IT BASED UPON THE FEDERAL SECURITIES LAWS OF THE UNITED
STATES AND/OR ARISING OUT OF OR RELATING TO THIS OFFERING. THE COMPANY HAS BEEN
ADVISED BY ALI SHARIF ZU'BI & SHARIF ALI ZU'BI LAW FIRM THAT THE ENFORCEMENT OF
FOREIGN JUDGMENTS IN JORDAN IS GOVERNED BY LAW NO. 8 OF 1952 WHICH PROVIDES THAT
A FOREIGN JUDGMENT MAY BE ENFORCED IN JORDAN BY MEANS OF AN APPLICATION TO THE
COMPETENT COURT WITHOUT RETRIAL AND RE-EXAMINATION OF THE MERITS OR ISSUES OF
THE CASE. JORDANIAN COURTS MAY, HOWEVER, DECLINE TO ENFORCE A FOREIGN JUDGMENT
(i) IF THE COURT WHICH PASSED THE JUDGMENT WAS WITHOUT COMPETENT JURISDICTION,
(ii) IF THE DEFENDANT HAS NOT CARRIED ON ANY BUSINESS WITHIN THE JURISDICTION OF
THE COURT WHICH PASSED THE JUDGMENT OR WAS NOT RESIDENT WITHIN ITS JURISDICTION
AND DID NOT WILLFULLY APPEAR BEFORE THE COURT OR DID NOT RECOGNIZE ITS
JURISDICTION, (iii) IF THE DEFENDANT WAS NOT NOTIFIED TO APPEAR BEFORE THE COURT
WHICH ISSUED THE JUDGMENT OR WAS NOT DULY OR PROPERLY SERVED WITH NOTICE, (iv)
IF THE JUDGMENT HAS BEEN PASSED IN A FRAUDULENT MANNER, (v) IF THE DEFENDANT IS
ABLE TO PERSUADE THE COURT THAT THE JUDGMENT IS NOT FINAL, (vi) IF THE JUDGMENT
CONTRAVENES JORDANIAN PUBLIC POLICY, AND (vii) IF THE LAWS OF THE COUNTRY OF THE
COURT WHICH PASSED THE JUDGMENT DO NOT RECOGNIZE AND ENFORCE JUDGMENTS OF
JORDANIAN COURTS.
7
<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing the securities offered hereby. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors
including those set forth in the following risk factors and elsewhere in this
Prospectus.
RISKS INHERENT IN INTERNATIONAL OPERATIONS
A majority of the Company's business is conducted outside of the United
States. As a result, the Company's operations are subject to various risks such
as the possibility of the loss of revenue, property or equipment due to
expropriation, nationalization, war, insurrection, terrorism or civil
disturbance, the instability of foreign economies, currency fluctuations and
devaluations, adverse tax policies and governmental activities that may limit or
disrupt markets, restrict payments or the movement of funds or result in the
deprivation of contract rights. Additionally, the ability of the Company to
compete may be adversely affected by foreign governmental regulations that
encourage or mandate the hiring of local contractors, or by regulations that
require foreign contractors to employ citizens of, or purchase supplies from
vendors in, a particular jurisdiction. The Company is subject to taxation in a
number of jurisdictions, and the final determination of its tax liabilities
involves the interpretation of the statutes and requirements of various domestic
and foreign taxing authorities. Foreign income tax returns of foreign
subsidiaries, unconsolidated affiliates and related entities are routinely
examined by foreign tax authorities. There can be no assurance that any of these
risks will not have an adverse effect on the Company. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
'Business.'
RISKS RELATING TO OPERATIONS IN THE MIDDLE EAST, THE INDIAN SUB-CONTINENT AND
CERTAIN EMERGING MARKETS
The Company operates in 18 countries located in the Middle East. The
Company derived 78% of 1997 revenue and substantially all of its operating
profit from operations in the Middle East, and the risks of doing business in
that region could adversely affect the Company. Such risks include the
following:
Political and Economic Factors. The Middle East's economies have been
subject to many destabilizing factors, including military conflicts and
tensions, including, but not limited to, the on-going dispute between the
United Nations and Iraq, civil unrest, large government deficits, low
foreign exchange revenues and fluctuations in world commodity prices. In
attempting to respond to these problems, many Middle Eastern governments
have intervened in their economies, employing among other things, fiscal,
monetary and trade policies, import duties, foreign currency restrictions
and controls of wages, prices and exchange rates. Some Middle Eastern
governments have frequently changed their policies in all these areas.
Certain Middle Eastern economies have received military and economic aid
from the United States and many Middle Eastern companies have been financed
by United States venture capital and investment concerns. There is no
assurance that such aid and investments will continue to be available in
the future.
Risks of Foreign Legal Systems. Many of the countries where the
Company operates and plans to operate have legal systems that differ from
the United States legal system and may provide substantially less
protection for foreign investors.
Effect of Postal Taxes and Other Payments. In several Middle Eastern
countries where the Company operates, it is required to pay taxes and/or
royalties to the local postal authority. To the extent these taxes and/or
royalties are increased, the Company's results of operations may adversely
be affected.
The political, economic and other risks of doing business in the Middle
East are similar to those which the Company has and may encounter in other
emerging markets in which it is conducting or planning to conduct business such
as the Indian Sub-Continent, the Central Asian Republics and North Africa. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and 'Business.'
8
<PAGE>
RISKS ASSOCIATED WITH GEOGRAPHIC EXPANSION AND NEW LINES OF BUSINESS
The Company intends to actively pursue a strategy of continued growth, and
will focus on expanding the range of its services, its geographic presence and
market in the Middle East, the Indian Sub-Continent and other contiguous
markets. The Company's ability to expand into new geographic markets will be
dependent upon its ability to secure and maintain the requisite local licenses,
permits and approvals necessary to conduct business, including those which may
be required by the local postal authority. Several countries targeted by the
Company for expansion have restricted express and freight forwarding companies
from operating in their jurisdiction. The loss or revocation of any existing
licenses, permits or approvals or the failure to obtain any necessary licenses,
permits or approvals in new jurisdictions where the Company intends to do
business would have an adverse effect on the ability of the Company to conduct
its business and/or on its ability to expand into such jurisdictions. No
assurance can be given that the Company will obtain such authorizations,
licenses, permits or necessary approvals. The Company also plans to open
additional catalog centers and expand its logistics management services along
with regional trucking and ground transportation. This will require additional
capital expenditures, including leasing additional facilities and purchasing
and/or leasing and operating a small trucking fleet. The Company has only
limited experience in operating a trucking operation and a logistics management
service. The availability of qualified and licensed drivers will become an
important factor in the Company's expansion of a regional trucking and ground
transportation business. In addition, the Company will be required to identify
suitable new geographic markets with sufficient demand for the Company's
services, to hire and retain skilled management, marketing, customer services
and other personnel, and to successfully manage growth, including monitoring
operations, controlling costs and maintaining effective quality and service
controls. There can be no assurance that the Company will be able to do so
effectively or that allocation of capital or human resources will not adversely
impact the Company as a whole. In addition, countries in which the Company
wishes to operate may have regulatory systems that impose other impediments on
the Company's operations. There can be no assurance that these restrictions will
not have a material adverse affect on the Company's expansion plans or results
of operations. See 'Business.'
RESTRICTIONS AND CONTROLS ON FOREIGN INVESTMENTS AND ACQUISITIONS OF MAJORITY
INTERESTS
Foreign investment by the Company in local joint ventures or business
acquisitions has been and will continue to be restricted or controlled to
varying degrees. These restrictions or controls have and may continue to limit
or preclude foreign investment in certain proposed joint ventures or business
acquisitions or increase the costs and expenses of the Company in seeking to
effectuate such a transaction. Various governments require governmental approval
prior to investments by foreign persons and limit the extent of any such
investment. In certain countries, the Company is required to conduct operations
pursuant to an agency or sponsorship agreement. The loss of an agent or sponsor
could result in the temporary or permanent cessation of operations in a
particular country. There can be no assurance that the Company will be able to
replace such agent or sponsor on favorable terms, if at all. Furthermore,
various governments restrict investment opportunities by foreign persons in
certain industries. Various governments may also require governmental approval
for the repatriation of capital and income by foreign investors. Various
governments have laws protecting local postal authorities. Although such
approvals are usually given, there can be no assurance that such approvals will
be forthcoming in the future. There can be no assurance that additional or
different restrictions or adverse policies applicable to the Company will not be
imposed in the future or, if imposed, as to the duration or impact of any such
restrictions or policies. See 'The Company's Organization.'
RELIANCE ON JOINT VENTURES
The Company relies upon joint ventures to conduct and expand its operations
in certain countries. The loss of any joint venture partner or the Company's
inability to attract and maintain additional joint venture partners may result
in delays and difficulties in effectuating the Company's business plan. There
can be no assurance that the Company will be able to attract joint venture
partners on acceptable terms, if at all. See 'The Company's Organization.'
9
<PAGE>
COMPETITION
The Company faces strong competition in the Middle East and other regions
in which it operates. The Company's ability to compete effectively depends
principally upon price, frequency and capacity of scheduled service, extent of
geographic coverage and reliability. Some of the Company's competitors have well
established reputations and significantly greater financial and other resources
available for expansion than the Company. The Company's principal express
competitors are DHL Worldwide Express, Federal Express Corporation, TNT Express
Worldwide and United Parcel Service of America, Inc. The Company's principal
freight forwarding competitors are Air Express International Corporation,
Expeditors International of Washington, Inc. and MSAS Cargo International Ltd.
There can be no assurance that the Company will be able to expand as rapidly as,
or compete effectively against, its competitors. See 'Business--Competition.'
DEPENDENCE ON KEY EMPLOYEES
The Company's growth and profitability are dependent upon, among other
things, the abilities and experience of the Company's management team including
Mr. William S. Kingson and Mr. Fadi Ghandour, the Company's Chairman and the
Company's President, Deputy Chairman and Chief Executive Officer, respectively.
If the services of Messrs. Kingson and Ghandour or a number of the Company's
executive officers or key employees were no longer available to the Company, the
Company's business, financial condition and results of operations could be
adversely affected. See 'Management.'
DEPENDENCE ON INTERNATIONAL TRADE
International trade is essential to the Company's results of operations and
has played an important role in the economic development of the Middle East and
other regions where the Company currently operates or plans to operate.
International trade is influenced by many factors, including economic and
political conditions, major work stoppages, currency fluctuations, and laws
relating to tariffs, trade restrictions, foreign investments, and taxation. A
reduction in the volume of international trade due to one or more of these
factors, any material restrictions on trade, or a downturn in the economies
where the Company currently operates or plans to operate could have a material
adverse effect on the Company. Political differences may lead to the imposition
of trade barriers and/or economic sanctions. The occurrence of such barriers or
sanctions could have a material adverse effect on the Company's operations.
RELIANCE ON COMMERCIAL CARRIERS
The Company relies on scheduled flights of commercial air carriers and
shipping companies in delivering its express package and freight forwarding
services. Consequently, the ability of the Company to provide reliable, low-cost
express delivery would be adversely affected by changes in policies and
practices such as pricing, payment terms, scheduling, and frequency of service
or increases in the cost of fuel, taxes and labor, and other factors that are
not within the Company's control.
EFFECTS OF INFLATION; CURRENCY FLUCTUATIONS
Exchange rates for some local currencies in countries where the Company
operates may fluctuate in relation to the U.S. dollar and such fluctuations may
have an adverse effect on the Company's earnings or assets when local currencies
are translated into U.S. dollars. Any weakening in the value of a local currency
against the U.S. dollar could result in lower revenues and earnings for the
Company when such local currencies are translated into U.S. dollars. In 1997,
approximately 80% of the Company's revenues came from currencies that are tied
to the U.S. dollar. Therefore, there can be no assurance that currency exchange
rates will not have a material adverse effect on the Company. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations.'
HOLDING COMPANY STRUCTURE
The Company is a holding company and substantially all of its operations
are conducted through subsidiaries, joint ventures and contractual sponsorship
arrangements. Consequently, the Company will rely principally on dividends or
advances from its subsidiaries (including ones that are wholly owned), joint
ventures,
10
<PAGE>
contractual sponsorship arrangements and agency relationships with service
providers. The ability of such subsidiaries to pay dividends and the ability of
the Company to realize on its investment in other entities is subject to
applicable local law and certain other restrictions. See 'The Company's
Organization.'
SEASONALITY
The Company's business is seasonal in nature. Historically, the Company
experiences a decrease in demand for its services during the first and third
quarters, the post-winter holiday and summer vacation seasons. The Company
traditionally experiences its highest volume in the fourth quarter due to the
holiday season. The seasonality of the Company's sales may cause a variation in
its quarterly operating results and a significant decrease in second or fourth
quarter revenues may have an adverse effect on the Company's results of
operations for that fiscal year. However, local Middle East holidays vary on a
year to year basis and, as a result, the Company's seasonality may shift over
time. See 'Management's Discussion and Analysis of Financial Condition and
Results Operations.'
POTENTIAL LIABILITY REGARDING DELIVERY OF SHIPMENTS AND NO INSURANCE COVERAGE
In the Company's business, the Company assumes responsibility to its
customers for the safe delivery of shipments up to $100.00 in value. Upon the
customer's request, the Company insures amounts above $100.00 with local
insurance companies. The Company does not carry an umbrella insurance policy.
The Company has, from time to time, made payments to its customers for claims
related to its shipments which, to date, have not been material to the Company's
results of operations. Should the Company experience an increase in the number
of such claims, there can be no assurance that the Company's results of
operations will not be adversely affected.
CONTROL BY EXISTING SHAREHOLDERS
Following the Offering, Messrs. Kingson and Ghandour and Ms. Ghandour will
beneficially own, in the aggregate, approximately 52.2% of the outstanding
shares of Common Stock (assuming no exercise of the Underwriters' over-allotment
option). As a result of such ownership, these shareholders will be able to
control the election of all directors and other actions submitted to a vote of
the Company's shareholders. See 'Principal and Selling Shareholders.'
RIGHTS OF SHAREHOLDERS UNDER BERMUDA AND JORDANIAN LAW
The Company is incorporated under the laws of Bermuda and is headquartered
in Jordan. Principles of law relating to such matters as the validity of
corporate procedures, the fiduciary duties of the Company's management and
directors and the rights of its shareholders, including those persons who will
become shareholders of the Company in connection with the Offering, are governed
by Bermuda law and the Company's Memorandum of Association and Bye-laws. Such
principles of law may differ from those that would apply if the Company were
incorporated in a jurisdiction in the United States. In addition, the Company
has been advised by Conyers Dill & Pearman, its Bermuda counsel, that there is
uncertainty as to whether the courts of Bermuda would enforce (i) judgments of
United States courts obtained against the Company or its officers and directors
predicated upon the civil liability provisions of the securities laws of the
United States or any state or (ii) in original actions brought in Bermuda,
liabilities against the Company or such persons predicated upon the securities
laws of the United States or any state. The Company has been further advised by
the Ali Sharif Zu'bi & Sharif Ali Zu'bi Law Firm, Jordanian counsel to the
Company, that the enforcement of foreign judgments in Jordan is governed by Law
No. 8 of 1952. Basically, a foreign judgment may be enforced in Jordan by means
of an application to the competent court without retrial and re-examination of
the merits or issues of the case. Jordanian courts may, however, decline to
enforce a foreign judgment (i) if the court which passed the judgment was
without competent jurisdiction, (ii) if the defendant has not carried on any
business within the jurisdiction of the court which passed the judgment or was
not resident within its jurisdiction and did not willfully appear before the
court or did not recognize its jurisdiction, (iii) if the defendant was not
notified to appear before the court which issued the judgment or was not duly or
properly served with notice, (iv) if the judgment has been passed in a
fraudulent manner, (v) if the defendant is able to persuade the court that the
judgment is not final, (vi) if the judgment contravenes Jordanian public policy,
and (vii) if the laws of the country of the court which passed the
11
<PAGE>
judgment do not recognize and enforce judgments of Jordanian courts. See
'Description of Capital Stock-- Bermuda Law.'
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have a total of 4,929,688
shares of Common Stock outstanding (4,929,688 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, an aggregate of
2,150,000 shares will be freely tradeable without restriction or registration
under the Securities Act by persons other than 'affiliates' of the Company, as
defined under the Securities Act. The remaining 2,779,688 shares will be
'restricted stock' as that term is defined by Rule 144 as promulgated under the
Securities Act and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the
exemption provided by Rule 144 (the 'Restricted Shares'). Pursuant to lock-up
agreements, all officers, directors and certain beneficial holders of Common
Stock, who collectively beneficially own 3,212,550 shares have agreed not to
sell or otherwise dispose of any beneficial interest in such securities for a
period of 180 days from the date of this Prospectus (the 'Lock-up Period')
without the prior written consent of the Representative, provided, however, that
any such person may make bona fide gifts of securities of the Company to persons
who agree in writing with the donor to be bound by the above restrictions. In
addition, Airborne has been granted certain 'piggyback' registration rights
pursuant to the Airborne Stock Purchase, as hereinafter defined. See 'Certain
Transactions.' Any future sales of shares of Common Stock may have an adverse
effect on the market price of the Common Stock. See 'Principal and Selling
Shareholders,' 'Shares Eligible for Future Sale,' 'Management--Stock Option
Plan,' and 'Underwriting.'
EFFECT OF PREFERRED STOCK AND STAGGERED BOARD
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of undesignated preferred stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action by
the shareholders. The rights of holders of Common Stock will be subject to, and
may be adversely affected by, the rights of holders of any preferred stock that
may be issued in the future. There are presently no shares of preferred stock
outstanding. Although the Company has no present intention to issue shares of
preferred stock after consummation of the Offering, any issuance of undesignated
preferred stock, while potentially providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company.
In addition, the Company's Bye-laws provide for and the Company maintains a
classified Board of Directors. This could inhibit a change of control of the
Company because it will take at least two annual meetings to change control of
the Board of Directors by shareholder vote. See 'Management--Directors,
Executive Officers and Key Employees.'
EFFECT OF SHAREHOLDERS AGREEMENT
In connection with the Airborne Stock Purchase, Messrs. Kingson and
Ghandour and Ms. Ghandour entered into a Shareholders Agreement which provides,
among other things, that in the event the Company transfers (as defined in the
Shareholders Agreement) any shares of Common Stock to certain listed competitors
of Airborne or to any other company primarily engaged in the transportation of
air freight or air express shipments, Airborne has the right to sell all of its
shares of Common Stock to the Company on the same terms and conditions as the
sale to such other company. In the event that Messrs. Kingson and Ghandour
and/or Ms. Rula Ghandour transfer any shares of Common Stock to certain listed
competitors to Airborne or any other company primarily engaged in the
transportation of air freight or air express shipments, it shall be a condition
of such transfer that Airborne shall be offered the right to sell to such
competitor all of its shares of Common Stock on the same terms and conditions as
the sale by Messrs. Kingson and Ghandour and/or Ms. Rula Ghandour. Such
provision may deter or frustrate a takeover of the Company. See 'Certain
Transactions.'
12
<PAGE>
POTENTIAL VOLATILITY OF COMMON STOCK PRICE
The trading price of the Common Stock may be volatile and may be
significantly affected by factors such as actual or anticipated fluctuations in
the Company's operating results, announcements of new services by the Company or
its competitors, government regulation, political conflict, instability in the
regions in which the Company operates, general market conditions and other
factors, many of which are beyond the Company's control. In addition, the stock
market has from time to time experienced significant price and volume
fluctuations that have adversely affected the market prices of securities of
companies irrespective of such companies' operating performances.
IMPACT OF YEAR 2000
The Company has closely examined the Year 2000 issue and the potential
costs and consequences to the Company in addressing this issue. Based on this
assessment, the Company has established programs to prepare its financial and
other information and computer based systems for the Year 2000, including
replacing and/or updating existing systems. The Company presently believes that
with modifications to existing software and conversions to new software, Year
2000 issues will not pose significant operational problems for its computer
systems. During the execution of the compliance process the Company will incur
certain costs and expenses. A significant portion of the Company's systems were
developed in the last few years and already encompass Year 2000 compliance.
Though the Company has not established a final cost estimate, the expense of the
Year 2000 compliance process is not expected to have a material effect on the
Company's financial position or results of operations. The Company expects that
its internal Year 2000 compliance process will be completed on a timely basis.
If such modifications are not made, however, or are not completed in a timely
manner, the Year 2000 issues could have a material impact on the operations and
financial condition of the Company. The Company has initiated formal
communications with all of its significant external interfaces to determine the
extent to which it is vulnerable to third party failures to remedy their own
potential problems related to Year 2000. There can be no assurance that the
Company will not be adversely affected by the failure of its customers and
suppliers (including, without limitation, members of the OEC and sellers of
express and freight cargo space) to implement appropriate systems within their
networks to address Year 2000 issues on a timely basis. In particular, there can
be no assurance that the commercial carrier industry, on which certain segments
of the Company's business is dependent, has or will complete any remediation
programs related to Year 2000 issues. There can be no assurance that the Company
will not be adversely affected by the failure of commercial carriers to be Year
2000 compliant. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations.'
FORWARD LOOKING STATEMENTS
The statements contained in this Prospectus, including, but not limited to,
those relating to the future availability of express and cargo space; the
Company's overseas presence and plans for international air freight forwarding
services and agreements for international cargo; the future expansion and
results of the Company's station network and warehouse facilities; plans for
local delivery services and truck brokerage; future improvements in the
Company's information systems and logistics systems and services; future
marketing results; construction of new facilities; the effect of litigation;
future costs of transportation; future operating expenses; future margins; any
seasonality of the Company's business; future stock issuances; future dividend
plans; future acquisitions, and any effects, benefits, results, terms or other
aspects of acquisitions; retention of employees or management; availability of
facilities; use of offering proceeds; ability to continue growth and implement
growth and business strategy; the ability of expected sources of liquidity to
support working capital and capital expenditure requirements; and any other
statements regarding future growth, future cash needs, future terminals, future
operations, business plans and future financial results; and any other
statements which are not historical facts are forward-looking statements. When
used in this document, the words 'anticipate,' 'estimate,' 'expect,' 'may,'
'plans,' 'project,' 'potential,' and similar expressions are intended to be
among the statements that identify forward-looking statements. Such statements
involve risks and uncertainties, including, but not limited to, those relating
to the Company's dependence on its ability to attract and retain skilled
managers and other personnel; the intense competition within the express,
freight and logistics industry; continued demand for and competition in the MED
business; the uncertainty of the Company's ability to manage and continue its
growth and implement its business strategy in each segment of its business; the
Company's
13
<PAGE>
dependence on the availability of express and cargo space to serve its
customers; effects of regulation; results of litigation; the Company's
vulnerability to instability in the geographic regions in which it operates and
general economic conditions and dependence on its principal customers; the
control by the Company's principal shareholders; the Company's potential
exposure to claims involving its local pick-up and delivery operations; the
Company's future financial and operating results, cash needs and demand for its
services; failure of information systems, including as a result of Year 2000
problems; and the Company's ability to maintain and comply with customs
regulations and other permits and licenses; as well as other factors detailed in
'Risk Factors' and elsewhere in this Prospectus and in the Company's other
filings with the Securities and Exchange Commission. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated.
14
<PAGE>
THE COMPANY'S ORGANIZATION
Aramex International Limited (sometimes referred to in this section as
'Aramex Bermuda') was incorporated under the laws of Bermuda in October 1996 as
the successor to Aramex International, Limited, a Hong Kong company which was
incorporated in February 1986 ('Aramex Hong Kong'). On December 13, 1996, Aramex
Bermuda subscribed for 100 shares of Aramex Hong Kong (the 'Ordinary Shares')
and each share of Aramex Hong Kong outstanding prior to such subscription was
converted by a special resolution of the shareholders of Aramex Hong Kong into
non-voting deferred shares (the 'Deferred Shares') (collectively, the
'Reorganization'). The Deferred Shares do not carry voting rights (other than in
respect of resolutions affecting their class rights) and are effectively
subordinated to the Ordinary Shares (all of which are held by Aramex Bermuda) in
respect of all dividends, distributions and liquidation rights until such time
as the holders of Ordinary Shares have received $100 billion. Subsequent to the
Reorganization and prior to the Company's initial public offering, the Company's
shareholders owned the same proportion of outstanding shares of Aramex Bermuda
as they had held in Aramex Hong Kong prior to the Reorganization. Pursuant to
the Reorganization, Aramex Bermuda became the parent holding company of Aramex
Hong Kong.
The corporate structure of the Company's operating subsidiaries is in part
influenced by the laws of the countries in which the Company operates. Various
Middle Eastern and other governments require governmental approval prior to
investments by foreign persons and limit the extent of any such investment. See
'Risk Factors--Restrictions and Controls on Foreign Investments and Acquisitions
of Majority Interests.' As a result, the Company generally operates through
subsidiaries, sponsors, joint ventures, service providers and agents.
The Company operates through wholly owned subsidiaries in Bahrain, France,
Greece, Jerusalem, Jordan, New York, Qatar, United Arab Emirates, United
Kingdom, Washington D.C., Hong Kong and the Palestinian Authority.
The Company has entered into sponsorship agreements whereby a domestic
company sponsors Aramex to obtain a charter or license. The Company has entered
into such agreements in Abu Dhabi, Bahrain, Cyprus, Dubai, Kuwait and Qatar.
The Company has entered into joint venture agreements in Bangladesh,
Canada, Egypt, India, Lebanon, Ramallah (the Palestinian Authority), Saudi
Arabia, Syria and Turkey. The Company has entered into a technical services and
exclusive agency agreement in Saudi Arabia and Syria.
The Company has also entered into agency relationships with local service
providers whereby it appoints an agent to conduct its courier services in a
designated territory in return for royalties. The Company has entered into such
relationships or agreements in Bulgaria, Ethiopia, Iran, Libya, Oman, Pakistan,
Sri Lanka, Switzerland, Uzbekistan, Sudan and Yemen.
Whenever possible, if it deems it commercially reasonable to do so, the
Company routinely considers increasing its ownership or participation interest
in its joint ventures as well as convert its agency arrangements with certain of
its service providers into joint ventures.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from sale of the 500,000 shares of Common
Stock offered hereby by the Company at an assumed Offering price of $13.50 are
estimated to be $5.95 million after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company.
The Company plans to use a portion of the net proceeds to expand its
warehouse facilities in Amman and Dubai, invest in and deploy additional
technologies and information systems to support its growth, and the remainder
for working capital and general corporate purposes.
As part of its growth strategy, the Company routinely considers
acquisitions of local service partners and complimentary businesses; however,
except as described herein, the Company does not presently have any plans,
arrangements or agreements with respect to any potential acquisitions and there
can be no assurance that any acquisitions will be consummated.
Pending application thereof, the net proceeds will be invested in
short-term, investment grade, interest-bearing securities. The Company will not
receive any proceeds from the sale of shares by the Selling Shareholders. In
accordance with Section 28 of the Companies Act 1981 of Bermuda, the minimum
amount which must be raised by this Offering is nil.
PRICE RANGE OF COMMON STOCK
Concurrent with the Company's initial public offering, the Common Stock
began trading on the Nasdaq under the symbol 'ARMXF' on January 13, 1997. Prior
to such date, there was no established public market for the Common Stock. The
following table sets forth, for the periods indicated, the high and low closing
prices for the Common Stock, as reported by Nasdaq:
HIGH LOW
------ ------
YEAR ENDING DECEMBER 31, 1997:
First Quarter............................................. $ 9.44 $ 7.88
Second Quarter............................................ 9.75 8.88
Third Quarter............................................. 17.13 9.25
Fourth Quarter............................................ 15.88 13.50
YEAR ENDING DECEMBER 31, 1998:
First Quarter............................................. $14.88 $12.25
Second Quarter (through April 8, 1998).................... 14.13 13.50
On April 8, 1998 the last sale price of the Common Stock, as reported by
the Nasdaq was $13.50 per share. As of such date, there were approximately 40
holders of record of the Common Stock. The Company believes it has over 400
shareholders.
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its Common Stock
since 1992. The Company made a cash distribution aggregating $0.26 million in
1992 and $0.08 million in 1991. Payments to minority interests represent
dividends paid to minority shareholders in subsidiaries and, in 1995 the
purchase of the minority interest of one of the Company's Middle Eastern
stations. The Company presently intends to retain earnings for use in its
business and does not anticipate paying cash dividends in the foreseeable
future. The payment of future cash dividends by the Company on its Common Stock
will be at the discretion of the Board of Directors and will depend on its
earnings, financial condition, cash flows, capital requirements and such other
considerations as the Board of Directors may consider relevant with respect to
the payment of dividends. In 1997, 1996, 1995, 1994 and 1993, payments to
minority interests were $0.1 million, $0.2 million, $0.9 million, $0.4 million
and $0.4 million, respectively.
16
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated short-term and long-term
debt and capitalization of the Company at December 31, 1997 and as adjusted to
reflect the sale of the Common Stock offered hereby at an assumed offering price
of $13.50, after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, and the application of the net
proceeds therefrom. See 'Use of Proceeds.' The information set forth below
should be read in conjunction with the Consolidated Financial Statements
including the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------
AS
ACTUAL ADJUSTED
------- --------
(IN THOUSANDS)
<S> <C> <C>
Due to banks and current portion of long term debt.......................................... $ 939 $ 939
------- --------
------- --------
Long-Term Debt.............................................................................. 456 456
------- --------
Minority interests in subsidiaries.......................................................... 985 985
------- --------
Shareholders' equity:(1)
Preferred Stock, $0.01 par value; 5,000,000 shares authorized; zero shares issued and
outstanding............................................................................ -0- -0-
Common Stock, $0.01 par value; 15,000,000 shares authorized; 4,429,688 shares issued and
outstanding; 4,929,688 shares issued and outstanding, as adjusted...................... 44 49
Additional paid-in capital................................................................ 7,263 13,203
Cumulative translation adjustment......................................................... (5) (5)
Retained Earnings......................................................................... 9,457 9,457
------- --------
Total shareholders' equity............................................................. 16,759 22,704
------- --------
Total capitalization................................................................... $18,200 $ 24,145
------- --------
------- --------
</TABLE>
- ------------------
(1) Excludes an aggregate of (i) 100,000 shares of Common Stock reserved for
issuance upon exercise of the Commonwealth Warrants, and (ii) 300,000 shares
of Common Stock reserved for issuance upon exercise of outstanding options.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of and for the years
ended December 31, 1995, 1996 and 1997 have been derived from the Company's
audited Consolidated Financial Statements included herein. The selected
consolidated financial data as of and for the years ended December 31, 1993 and
1994 have been derived from the Company's audited consolidated financial
statements not included herein. The information should be read in conjunction
with the Consolidated Financial Statements and Notes thereto appearing elsewhere
in this Prospectus and 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'
The Company's Consolidated Financial Statements have been prepared in
accordance with international accounting standards, which, for purposes of the
Company's financial statements, are substantially consistent with United States
generally accepted accounting principles.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
International Express........................................ $19,802 $22,349 $25,491 $30,798 $36,556
Freight Forwarding........................................... 6,544 13,104 14,306 15,186 21,697
Domestic Express............................................. 833 1,291 2,007 2,880 3,967
MED.......................................................... -- -- -- 1,078 1,833
Other(1)..................................................... 1,635 1,385 1,798 2,333 2,277
------- ------- ------- ------- -------
Total revenues............................................. 28,814 38,129 43,602 52,275 66,330
Shipping costs................................................. 13,676 19,992 23,045 28,080 35,471
------- ------- ------- ------- -------
Gross profit................................................. 15,138 18,137 20,557 24,195 30,859
Operating expenses............................................. 6,099 6,877 7,986 9,796 10,682
Selling, general and administrative expenses................... 7,885 10,232 10,664 12,003 17,278
------- ------- ------- ------- -------
Operating income........................................... 1,154 1,028 1,907 2,396 2,899
Interest income................................................ -- -- -- -- 365
Interest expense............................................... (4) (46) (61) (102) (65)
Gain (loss) on sale of fixed assets............................ 7 (4) (1) 14 (44)
Exchange gain (loss)........................................... (182) (55) 31 (13) (37)
Other income (loss)............................................ (200) (123) 69 71 142
------- ------- ------- ------- -------
Income before income taxes................................... 775 800 1,945 2,366 3,260
Provision for income taxes..................................... (56) (227) (266) (157) (170)
Minority interests............................................. (633) (278) (157) (162) 31
------- ------- ------- ------- -------
Net income..................................................... $ 86 $ 295 $ 1,522 $ 2,047 $ 3,121
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Earnings Per Share
Basic(2)..................................................... $ 0.03 $ 0.09 $ 0.49 $ 0.64 $ 0.71
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Diluted...................................................... $ 0.03 $ 0.09 $ 0.49 $ 0.64 $ 0.69
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Weighted average number of common shares outstanding
Basic(2)..................................................... 3,125 3,125 3,125 3,185 4,397
Diluted...................................................... 3,125 3,125 3,125 3,185 4,523
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- ----------------------
AS
ACTUAL ADJUSTED(3)
------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................... $ 2,239 $ 1,915 $ 2,867 $ 6,650 $13,596 $19,541
Total assets...................................... 10,297 13,178 14,344 19,372 30,704 36,649
Total liabilities................................. 6,908 9,715 9,649 10,463 12,960 12,960
Total Shareholders' equity........................ $ 2,612 $ 2,889 $ 4,404 $ 8,653 $16,759 $22,704
</TABLE>
- ------------------
(1) Amounts represent revenues from other special services which the Company
renders such as airline ticketing, remail and travel. All related costs are
reflected in shipping costs.
(2) Excludes 300,000 shares of Common Stock issuable upon exercise of
outstanding options and 100,000 shares of Common Stock issuable upon the
exercise of the Commonwealth Warrants. See 'Management.'
(3) Adjusted to reflect the sale by the Company of 500,000 shares of Common
Stock offered hereby at an assumed offering price of $13.50 per share (based
upon the closing market price of the Company's Common Stock on April 8,
1998), after deducting estimated offering expenses and underwriting
discounts and commissions and application of estimated proceeds therefrom as
described in 'Use of Proceeds.' See 'Capitalization' and 'Use of Proceeds.'
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
General. Aramex is a leading provider of express package delivery, freight
forwarding and other transportation and logistics services primarily to, from
and within the Middle East and the Indian Sub-Continent. Since its founding in
1982, the Company has expanded its station network to include 95 locations in 32
countries. From 1995 to 1997, the Company's total revenues increased from $43.6
million to $66.3 million and net income increased from $1.5 million to $3.1
million, respectively. The Company provides its services from its main hubs in
Dubai (UAE), London, New York and Amman (Jordan). The Company also holds a
majority interest in a direct marketing and mail order business, Middle East
Direct Marketing ('MED').
International express revenues are derived from the Company's international
express package delivery service. Freight forwarding revenues are derived from
the Company's freight forwarding services, including air and ocean freight
forwarding consolidation, warehousing, customs clearance and breakbulk services.
Domestic express revenues are derived from the Company's intra-country express
delivery services. MED revenues are derived from the Company's direct marketing
and mail order catalog service. Other revenues are derived from the Company's
other special services, including airline ticketing, remail, travel and other
corporate services. The Company recognizes revenues when shipments are
completed. For 'door to door' shipments revenues are recognized upon delivery of
freight at the destination. For other shipments, revenues are recognized upon
delivery of freight to the air carrier, at which time the revenue process is
completed. In 1997, 80% of the Company's total revenues were derived from
currencies that are tied to the U.S. dollar.
As a non-asset based provider of transportation services, the Company's
'cost of services' consists of purchased transportation on the most
cost-effective and reliable mode of transportation available. Therefore,
shipping costs include linehaul expenses, distribution expenses, inbound costs
and freight forwarding and related expenses, the latter constituting the largest
component of direct costs. The Company's operating expenses are primarily the
expenses of the Company's stations and include salaries and fringe benefits,
communication, travel expenses, vehicle expenses, operating material,
depreciation expense, office rent and utilities, printing and stationery,
maintenance expenses, governmental fees and uniform expenses. The Company's
operating expenses also include expenses of the Company's General Services
Office ('GSO'), which is located in Amman, Jordan and oversees all shipments
throughout the Company's distribution network and charges local stations.
Selling, general and administrative expenses include executive salaries,
corporate overhead at the GSO and selling and marketing expenses for the Company
as a whole.
During 1997, the Company expended significant financial and management
resources to expand its station network and its menu of product offerings. The
Company opened three additional stations in the Palestinian Territories and made
significant staff additions in the Palestinian Territories, Jordan and UAE. In
addition, the Company invested significantly in Saudi Arabia in 1997 by making
improvements to its stations, purchasing additional equipment and adding an
additional 105 employees to its three main stations located in Jeddah, Riyadh
and Dhahran. Although the Company's expenditures in Saudi Arabia negatively
impacted the Company's margins and therefore overall profitability for 1997, the
Company's Saudi Arabian operations started to contribute positively to its
operating income during the fourth quarter of 1997. The Company believes that
expansion in Saudi Arabia, the Middle East's largest market with 28% of the
region's gross domestic product, is critical to increase its market share of the
Middle East's express, freight forwarding and logistics business.
Historically, the majority of the Company's business has been derived from
its express package delivery operations. These express operations, combined with
its station network, have provided the Company with a solid foundation for the
development of additional revenue sources. The Company has made significant
investments over the past two years in training its personnel to sell and market
its freight forwarding services at most of its stations. This has resulted in an
increase in freight forwarding revenues of 42.9% from $15.2 million in 1996 to
$21.7 million in 1997. The Company's strategy is to continue to identify
additional revenue sources to add to its menu of products and services and
diversify its revenue base.
As an example of this strategy, the Company expanded its ground
transportation network for small parcels and fast moving consumer goods in the
region. As part of the Company's overall strategy to increase its logistics
19
<PAGE>
services, the Company plans to develop an intra-Gulf region ground
transportation network to address the growing electronics and computer needs of
the region. Consistent with the Company's plan to expand its logistics and
related transportation services, the Company plans to continue to expand its
warehousing facilities in Amman and Dubai as well as focus on increasing market
and client penetration with its existing clients by offering additional
transportation and logistics services.
In addition, the Company opened one additional MED location in Dubai in
1997 and plans to add three additional MED locations in Saudi Arabia in the
second quarter of 1998. Although the Company formally inaugurated MED in 1996,
the Company had limited financial and human resources to develop MED during its
first year and it was not until 1997, following the Company's initial public
offering, that the Company commenced expending marketing and other resources to
develop the MED business. The Company believes that while the expenditures made
in 1997 to develop this business negatively impacted the Company's margins and
profitability for 1997, the appropriate infrastructure has been put in place to
develop MED into a viable, complementary business to the Company's other
businesses while creating an additional source of revenue for the Company's
express business.
The Company generally operates through subsidiaries, sponsorship
agreements, joint ventures, or agency arrangements. The consolidated financial
statements include the accounts of the Company, its subsidiaries and other
entities that are controlled directly and indirectly through agreements that
provide the Company with authority to govern the financial and operating affairs
of the subsidiaries. Payments to the Company's joint venture partners, minority
owners, and sponsors are reflected in the Company's financial statements as
minority interests. Whenever possible under local law, the Company considers
increasing its ownership or participation interest in its joint ventures as well
as converting its agency arrangements with certain of its service providers into
joint ventures in order to permit the consolidation of these operations' results
with the Company's results of operations. For example, in 1997 the Company
acquired a 51% ownership interest in the Ramallah (the Palestinian Authority)
stations which were previously operated by a service provider agency.
As an offshore company incorporated in Bermuda, profits from operations of
foreign subsidiaries are not subject to Bermudian taxes. Additionally, for
certain of its operations in the Middle East, the Company is exempt from income
taxes. As a result, the Company's consolidated effective tax rate for 1997 was
5.2%. As long as the Company continues to generate a similar portion of its
operating profits from tax-free jurisdictions similar to many countries in the
Middle East, the Company believes its effective tax rate will remain in the
range of historical levels. See '--Effective Corporate Tax Rates.'
The Company's business is seasonal in nature. Historically, the Company
experiences a decrease in demand for its services during the first and third
quarters, the post-winter (and local Middle East) holiday and summer vacation
seasons. The Company traditionally experiences its highest volume in the fourth
quarter due to the holiday season. The seasonality of the Company's sales may
cause a variation in its quarterly operating results and a significant decrease
in second or fourth quarter revenue may have an adverse effect on the results of
operations for that fiscal year. However, local Middle East holidays vary on a
year to year basis and, as a result, the Company's seasonality may shift over
time.
RECENT EVENTS
Effective April 1, 1998, the Company converted its agency relationship in
India to a Company-controlled joint venture. As a consequence, the Company is in
a position to consolidate the results of the 28 existing Aramex locations in
India into its results of operations commencing in April, 1998. The Company
plans to increase its marketing efforts in this region and to introduce the
Company's customer team concept to these locations during the second quarter of
1998.
The Company has signed a joint venture agreement in Bangladesh pursuant to
which its agency arrangement will be converted to a Company-controlled joint
venture. In addition, the Company is currently negotiating a joint venture
agreement in Sri Lanka, to launch two locations in that country.
In addition, extending its strategy of implementing a trucking route
connecting Dubai in the UAE to Muscat in Oman, the Company recently launched a
trucking route linking Dubai with Riyadh in Saudi Arabia. The Company does not
own the trucks used in connection with its freight forwarding transportation
services, but
20
<PAGE>
rather wet leases them (whereby lessor provides truck, driver, maintenance and
insurance, and the Company pays a usage fee) on an as needed basis. In
developing a parcel shuttle service linking the main cities in the Middle East,
the Company expects to lower the cost of linehauling by reducing air freight
movement and thereby offering customers the option of deferred service at lower
prices. This service complements an extension of the Company's logistics
management service. Management believes the addition of such complementary
businesses should help strengthen the core business of the Company.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentages of
total revenues represented by certain items reflected in the Company's
consolidated statements of income:
YEARS ENDED DECEMBER 31,
------------------------
1995 1996 1997
----- ----- -----
Revenues
International express........................... 58.5% 58.9% 55.1%
Freight forwarding.............................. 32.8 29.1 32.7
Domestic express................................ 4.6 5.5 6.0
MED............................................. -- 2.1 2.8
Other........................................... 4.1 4.5 3.4
----- ----- -----
Total Revenues............................... 100.0 100.0 100.0
Shipping costs.................................... 52.9 53.7 53.5
----- ----- -----
Gross profit...................................... 47.1 46.3 46.5
Operating expenses................................ 18.3 18.7 16.1
Selling, general and administrative expenses...... 24.5 23.0 26.0
----- ----- -----
Operating income.................................. 4.4 4.6 4.4
----- ----- -----
Income before income taxes........................ 4.5 4.5 4.9
Provision for income taxes........................ 0.6 0.3 0.3
Minority interests................................ 0.4 0.3 (0.1)
----- ----- -----
Net income........................................ 3.5 3.9 4.7
----- ----- -----
----- ----- -----
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Revenues. Consolidated revenues of the Company increased by $14.1 million,
or 26.8%, to $66.3 million for the year ended December 31, 1997 ('1997') from
$52.3 million for the year ended December 31, 1996 ('1996').
International express revenues increased by $5.8 million, or 18.8%, to
$36.6 million for 1997 from $30.8 million in 1996, primarily as a result of
additional revenues generated by the Company's expansion of its operations in
Saudi Arabia and the Arabian Gulf. Specifically, express revenue growth was
driven largely by increased growth in the Company's retail express business of
approximately 25%, primarily attributable to a 225% and 35% increase in retail
express business generated by the Company's stations in Saudi Arabia and Dubai,
respectively.
Freight forwarding revenues increased by $6.5 million, or 42.9%, to $21.7
million for 1997 from $15.2 million for 1996, primarily as a result of increased
revenue growth in the Company's operations in Saudi Arabia, the UAE, Jordan and
Lebanon. Management believes this growth is the direct result of the Company's
focus on, and investment in, training its employees to sell freight forwarding
service at most of its stations.
Domestic express revenues increased by $1.1 million, or 37.7%, to $4.0
million for 1997 from $2.9 million for 1996, primarily as a result of the
continued growth in the Company's activities in the UAE and Saudi Arabia and the
addition of domestic express services in most of the Company's stations in the
Middle East.
MED revenues increased by $0.8 million, or 70.0%, to $1.8 million for 1997
from $1.1 million for 1996, primarily as a result of growth in MED's core
markets of Jordan, Kuwait and Lebanon and the opening of a MED office in Dubai
(UAE).
Other revenues decreased by $0.05 million, or 2.4%, to $2.3 million for
1997 from $2.3 million for 1996.
21
<PAGE>
Shipping Costs. Shipping costs increased by $7.4 million, or 26.3%, to
$35.5 million for 1997 from $28.1 million for 1996, primarily as a result of the
increased volume in the number of 1997 shipments. As a percentage of total
revenues, however, shipping costs remained stable at approximately 53.5%. During
1997, the Company experienced lower shipping costs as a percentage of
international express and freight forwarding revenues, respectively, offset by
increased shipping costs as a percentage of MED and domestic express revenues,
respectively.
Gross Profit. As a result of the above factors, gross profit increased by
$6.7 million, or 27.5%, to $30.9 million in 1997 from $24.2 million in 1996.
Gross margin remained stable at approximately 46.5% of total revenues for each
of 1997 and 1996.
Operating Expenses. Operating expenses increased by $0.9 million, or 9.0%,
to $10.7 million for 1997 from $9.8 million for 1996, primarily as a result of
the addition of employees involved in the Company's Saudi Arabian operations. As
a percentage of total revenues, however, operating expenses decreased to 16.1%
of 1997 total revenues from 18.7% of 1996 total revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $5.3 million, or 44.0% to $17.3 million for
1997 from $12.0 million for 1996. As percentage of total revenues, selling,
general and administrative expenses increased to 26.0% of 1997 total revenues
from 23.0% of 1996 total revenues. This increase resulted primarily from
additional expenditures during 1997 related to addition of executive, marketing
and sales employees associated with the Company's expansion in Saudi Arabia, the
Palestinian Territories, Jordan and Dubai.
Operating Income. As a result of the above factors, operating income
increased by $0.5 million, or 21.0%, to $2.9 million in 1997 from $2.4 million
in 1996. As a percentage of total revenues, operating income decreased slightly
to 4.4% of total 1997 revenues from 4.6% of total 1996 revenues.
Other Income. Other income increased to $0.4 million in 1997 from $(0.03)
million in other expense in 1996, primarily as a result of interest income from
the proceeds of the Company's 1997 initial public offering.
Net Income. Net income increased by $1.1 million, or 52.5% to $3.1 million
for 1997 from $2.0 million for 1996.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Revenues. Consolidated revenues of the Company increased by $8.7 million,
or 19.9%, to $52.3 million for 1996 from $43.6 million for the year ended
December 31, 1995 ('1995').
International express revenues increased by $5.3 million, or 20.8%, to
$30.8 million for 1996 from $25.5 million in 1995, primarily as a result of an
increase in the demand for the Company's express services particularly in Dubai
and the Gulf region which was experiencing economic growth. The increase in
revenues was also attributable to the addition of new accounts in Greece and
Kuwait and increases in the GSO's wholesale business.
Freight forwarding revenues increased by $0.9 million, or 6.2%, to $15.2
million for 1996 from $14.3 million in 1995, primarily due to higher selling
rates.
Domestic express and other revenues increased by $2.5 million, or 65.3%, to
$6.3 million for 1996 from $3.8 million for 1995, primarily as a result of
revenues generated from sales commissions on mail order products from the
Company's MED business and from fees and commissions from Middle East airline
ticketing and travel services.
Shipping Costs. Shipping costs increased by $5.0 million, or 21.8%, to
$28.1 million for 1996 from $23.0 million for 1995, primarily as a result of
increased shipment volume and, to a lesser extent, increased MED product costs
which are included in shipping costs. As a percentage of total revenues,
however, shipping costs increased to 53.7% of total 1996 revenues from 52.9% of
total 1995 revenues.
Gross Profit. Gross profit increased by $3.6 million, or 17.7%, to $24.2
million in 1996 from $20.6 million in 1995. Gross margin declined slightly to
46.3% of total revenues from 47.1% of total revenues for 1995.
22
<PAGE>
Operating Expenses. Operating expenses increased by $1.8 million, or
22.7%, to $9.8 million for 1996 from $8.0 million for 1995, primarily as a
result of an increase in local ground delivery expenses.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.3 million, or 12.6%, to $12.0 million
for 1996 from $10.7 million for 1995, primarily as a result of additional
promotional, travel, market research and other expenses for 1996 related to its
MED business. As a percentage of total revenues, selling, general and
administrative expenses decreased slightly to 23.0% of total 1996 revenues from
24.5% of total 1995 revenues.
Operating Profit. As a result of the above factors, operating income
increased by $0.5 million, or 25.6%, to $2.4 million in 1996 from $1.9 million
in 1995. As a percentage of total revenues, operating income increased to 4.6%
of total 1996 revenues from 4.4% of total 1995 revenues.
Other (Expense) Income. The Company had other expense of $(0.03) million
in 1996 as compared to $0.04 million in other income in 1995, primarily as a
result of increased interest expense in 1996.
Net Income. Net income increased by $0.5 million, or 34.5%, to $2.0
million for 1996 from $1.5 million for 1995.
GEOGRAPHIC BREAKDOWN OF REVENUES
The Company sells its services primarily to customers in the Middle East,
Europe and North America. Revenues are generally recognized at the source, i.e.,
by the station which invoices the ultimate customer. The table below shows the
breakdown of revenues (dollars in millions) by geographic region for 1997, 1996
and 1995.
<TABLE>
<CAPTION>
INTERNATIONAL DOMESTIC EXPRESS,
EXPRESS FREIGHT FORWARDING MED TOTAL
(55%) (33%) & OTHER (12%) COMPANY (100%)
1997 ------------------- ------------------ ------------------ ---------------------
REGION $ % $ % $ % $ %
- ----------------- ------ ---- ----- ---- ----- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Middle East...... 42.3 77 16.5 76 8.0 94 66.8 79
Europe........... 9.5 17 2.7 12 0.1 1 12.3 14
North America.... 3.1 6 2.5 12 0.4 5 6.0 7
Eliminations(1).. (18.3) -- -- -- (0.5) -- (18.8) --
------ ---- ----- ---- ----- ---- ------ ------
Total 1997
Revenues..... $ 36.6 100% $21.7 100% $ 8.0 100% $ 66.3 100%
------ ---- ----- ---- ----- ---- ------ ------
------ ---- ----- ---- ----- ---- ------ ------
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL DOMESTIC EXPRESS,
EXPRESS FREIGHT FORWARDING MED TOTAL
(60%) (29%) & OTHER (11%) COMPANY (100%)
1996 ------------------- ------------------ ------------------ ---------------------
REGION $ % $ % $ % $ %
- ----------------- ------ ---- ----- ---- ----- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Middle East...... 34.2 74 10.9 72 6.1 92 51.2 75
Europe........... 8.9 19 2.0 13 0.1 2 11.0 16
North America.... 3.1 7 2.3 15 0.4 6 5.8 9
Eliminations(1).. (15.4) -- -- -- (0.3) -- (15.7) --
------ ---- ----- ---- ----- ---- ------ ------
Total 1996
Revenues..... $ 30.8 100% $15.2 100% $ 6.3 100% $ 52.3 100%
------ ---- ----- ---- ----- ---- ------ ------
------ ---- ----- ---- ----- ---- ------ ------
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL
EXPRESS FREIGHT FORWARDING DOMESTIC EXPRESS & TOTAL
(58%) (33%) OTHER (9%) COMPANY (100%)
1995 ------------------- ------------------ ------------------ ---------------------
REGION $ % $ % $ % $ %
- ----------------- ------ ---- ----- ---- ----- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Middle East...... 27.7 72 9.2 65 3.6 94 40.6 71
Europe........... 8.0 21 2.1 14 0.1 3 10.1 18
North America.... 3.0 7 3.0 21 0.1 3 6.1 11
Eliminations(1).. (13.2) -- -- -- -- -- (13.2) --
------ ---- ----- ---- ----- ---- ------ ------
Total 1995
Revenues..... $ 25.5 100% $14.3 100% $ 3.8 100% $ 43.6 100%
------ ---- ----- ---- ----- ---- ------ ------
------ ---- ----- ---- ----- ---- ------ ------
</TABLE>
- ------------------
(1) Revenues between stations that are wholly-owned subsidiaries are priced at
cost. Transactions with other affiliated stations are priced at cost plus
10%. All intercompany transactions have been eliminated in consolidation.
23
<PAGE>
UNAUDITED SELECTED QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly operating
information for each of the eight quarters ending with the quarter ended
December 31, 1997, both in U.S. dollars and as a percentage of total revenues.
This data has been prepared on the same basis as the audited financial
statements contained elsewhere in this Prospectus and management believes that
it includes all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the information for the periods presented
when read in conjunction with the Company's Financial Statements and related
Notes thereto. Results for any previous fiscal quarter are not necessarily
indicative of results for the full year or for any future quarter. The Company's
quarterly operating results have varied significantly in the past and may vary
significantly in the future. See 'Risk Factors--Seasonality.'
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------
1996 1997
-------------------------------------- --------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- ------- ------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
International Express...... $ 6,729 $ 7,156 $ 7,509 $ 9,404 $ 8,118 $ 8,864 $ 8,968 $10,606
Freight Forwarding......... 3,121 3,437 3,863 4,765 4,576 5,295 5,516 6,310
Domestic Express........... 579 778 742 781 794 844 1,027 1,302
MED........................ 0 0 582 496 342 352 440 699
Other...................... 341 620 439 933 767 275 658 577
------- ------- -------- ------- ------- ------- -------- -------
Total revenues.......... 10,770 11,991 13,135 16,379 14,597 15,630 16,609 19,494
Shipping costs............... 5,449 6,241 6,933 9,457 8,000 8,230 9,060 10,181
------- ------- -------- ------- ------- ------- -------- -------
Gross profit............ 5,321 5,750 6,202 6,922 6,597 7,400 7,549 9,313
Operating expenses........... 1,962 2,258 2,236 3,340 2,681 2,509 2,769 2,723
Selling, general and
administrative expenses.... 2,933 2,926 3,191 2,953 3,273 4,172 4,187 5,646
------- ------- -------- ------- ------- ------- -------- -------
Operating income............. 426 566 775 629 643 719 593 944
Net income................... 355 432 661 599 636 722 757 1,006
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------
1996 1997
-------------------------------------- --------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
International Express...... 62.5% 59.7% 57.2% 57.4% 55.6% 56.7% 54.0% 54.4%
Freight Forwarding......... 30.0 28.7 29.4 29.1 31.3 33.9 33.2 32.4
Domestic Express........... 5.4 6.5 5.6 4.8 5.4 5.4 6.2 6.7
MED........................ 0 0 4.4 3.0 2.3 2.3 2.6 3.6
Other...................... 3.2 5.2 3.3 5.7 5.3 1.8 4.0 3.0
------- ------- -------- ------- ------- ------- -------- -------
Total revenues.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Shipping costs............... 50.6 52.0 52.8 57.7 54.8 52.7 54.5 52.2
------- ------- -------- ------- ------- ------- -------- -------
Gross profit............ 49.4 48.0 47.2 42.3 45.2 47.3 45.5 47.8
Operating expenses........... 18.2 18.8 17.0 20.4 18.4 16.1 16.7 14.0
Selling, general and
administrative expenses.... 27.2 24.4 24.3 18.0 22.4 26.7 25.2 29.0
------- ------- -------- ------- ------- ------- -------- -------
Operating income............. 4.0 4.7 5.9 3.8 4.4 4.6 3.6 4.8
Net income................... 3.3 3.6 5.0 3.7 4.4 4.6 4.6 5.2
</TABLE>
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements to date have been funding its
accounts receivable and expansion of its station network. The requirements have
been met primarily by internally generated funds, bank financings and proceeds
from the Company's 1996 private sale of shares of Common Stock to Airborne and
the Company's 1997 initial public offering.
The Company's working capital was $13.6 million at December 31, 1997, as
compared to $6.7 million at December 31, 1996. The increase in working capital
was primarily the result of the proceeds from the Company's initial public
offering.
The Company's cash balances were $6.6 million at December 31, 1997 as
compared to $2.3 million at December 31, 1996, and $1.3 million at December 31,
1995. Net cash from operating activities was $2.1 million at December 31, 1997
as compared to $0.5 million at December 31, 1996, and $1.5 million at December
31, 1995. The increase in net cash from operating activities in 1997 compared to
1996 was due primarily to the increase in earnings before depreciation expenses.
Net cash used in investing activities was $4.1 million at December 31, 1997
as compared to $1.1 million at December 31, 1996, and $0.9 million at December
31, 1995. Purchases of property, plant and equipment increased to $3.8 million
in 1997 from $1.0 million in 1996 and $0.8 million in 1995. The increase in such
purchases in 1997 was primarily associated with the Company's expansion in Saudi
Arabia. Net cash from (used in) financing activities was $6.2 million at
December 31, 1997 as compared to $1.7 million at December 31, 1996, and $(0.2)
million at December 31, 1995. The increase in 1997 of cash flows from financing
activities was primarily the result of the issuance of shares in the Company's
initial public offering.
The Company leases office space and office and transportation equipment
under various operating leases, some of which are renewable annually. Rent
expense related to these leases amounted to $1.2 million, $1.1 million, and $0.9
million for 1997, 1996, and 1995, respectively.
The Company has from time to time experienced a need for cash to fund its
receivables and sourced such needs with bank overdrafts and/or available credit
under its lines of credit. The Company maintains several lines of credit with
various banks aggregating $0.5 million, $0.3 million and $0.6 million at
December 31, 1997, 1996, and 1995, respectively. The Company had $0.3 million,
$0.3 million and $0.6 million outstanding under these lines of credit at
December 31, 1997, 1996, and 1995, respectively. The remaining amounts due to
banks of $0.3 million, $0.4 million, and $0.2 million due at December 31, 1997,
1996, and 1995, respectively, represent bank overdrafts. The weighted average
interest rates on the Company's lines of credit were 12.8%, 11.9%, and 11.3% at
December 31, 1997, 1996, and 1995, respectively.
In June 1996, the Company entered into a three-year term loan from NatWest
Bank in the principal amount of $0.2 million bearing interest at 9.875% per
annum.
For 1997, 1996, and 1995, payments to minority interests aggregated $(0.1)
million, $(0.2) million, and $(0.9) million, respectively.
In January 1997, the Company completed the initial public offering of
1,000,000 shares of Common Stock. The net proceeds of the issue received by the
Company (after deducting underwriting discounts, commissions and other costs
associated with the offering) were approximately $5.0 million. The Company used
a portion of the net proceeds from its initial public offering (i) to expand
into existing and emerging markets by acquiring ownership interests or
increasing existing participation interests in certain local service providers,
(ii) to open additional Shop the World Direct catalog centers, (iii) to invest
in technology and systems infrastructure in order to introduce logistics
management services, (iv) to acquire additional vehicles for operation of
domestic and cross border ground transportation, and (v) working capital and
general corporate purposes.
In October 1996, the Company received $2.0 million of proceeds from the
Airborne Stock Purchase and utilized the proceeds for working capital purposes.
The Company's capital commitments for 1998 are anticipated to relate to the
expansion of the Company's warehouse facilities in Amman and Dubai and
additional investments in technology and information systems to
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<PAGE>
support the Company's growth. In addition, the Company is considering the
purchase of the building in Amman, Jordan where its principal executive offices
are located.
Management believes that the proceeds from the Offering coupled with cash
flows from operations and borrowing capacity should be sufficient to fund the
Company's operations for the foreseeable future.
EFFECTIVE CORPORATE TAX RATES
The Company's consolidated effective tax rate was 5.2%, 6.7%, and 13.7% for
1997, 1996, 1995, respectively. The principal differences between the effective
tax rates and the statutory tax rate applicable in the United States of 35% are
exemptions from income taxes of many of the Company's subsidiaries operating in
the Middle East and lower statutory rates at certain other locations. As long as
the Company continues to generate a similar portion of its operating profits
from tax-free jurisdictions similar to many countries in the Middle East, the
Company believes its effective tax rate will remain in the range of historical
levels.
The Company is subject to taxation in a number of jurisdictions, and the
final determination of its tax liabilities involves the interpretation of the
statutes and requirements of various domestic and foreign taxing authorities.
Foreign income tax returns of foreign subsidiaries, unconsolidated affiliates
and related entities are routinely examined by foreign tax authorities. In
certain countries, the tax returns have not yet been reviewed by the tax
authorities. However, the Company is satisfied that adequate provisions have
been provided for potential tax contingencies.
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS
The Company does not believe that inflation or currency fluctuations has
had a material adverse effect on revenues and results of operations. However,
demand for the Company's services is influenced by general economic conditions,
including inflation and currency fluctuations. Periods of economic recession,
high inflation or the devaluation of currencies in counties in which the Company
operates could have a material adverse effect on the express and freight
forwarding industry and the Company's results of operations. In 1997, 80% of the
Company's total revenues came from currencies that are tied to the U.S. dollar.
IMPACT OF YEAR 2000
The Company has closely examined the Year 2000 issue and the potential
costs and consequences to the Company in addressing this issue. Based on this
assessment, the Company has established programs to prepare its financial and
other information and computer based systems for the Year 2000, including
replacing and/or updating existing systems. The Company presently believes that
with modifications to existing software and conversions to new software, Year
2000 issues will not pose significant operational problems for its computer
systems. During the execution of the compliance process the Company will incur
certain costs and expenses. A significant portion of the Company's systems were
developed in the last few years and already encompass Year 2000 compliance.
Though the Company has not established a final cost estimate, the expense of the
Year 2000 compliance process is not expected to have a material effect on the
Company's financial position or results of operations. The Company expects that
its internal Year 2000 compliance process will be completed on a timely basis.
If such modifications are not made, however, or are not completed in a timely
manner, the Year 2000 issues could have a material impact on the operations and
financial condition of the Company. The Company has initiated formal
communications with all of its significant external interfaces to determine the
extent to which it is vulnerable to third party failures to remedy their own
potential problems related to Year 2000. There can be no assurance that the
Company will not be adversely affected by the failure of its customers and
suppliers (including, without limitation, members of the OEC and sellers of
express and freight cargo space) to implement appropriate systems within their
networks to address Year 2000 issues on a timely basis. In particular, there can
be no assurance that the commercial carrier industry, on which certain segments
of the Company's business is dependent, has or will complete any remediation
programs related to Year 2000 issues. There can be no assurance that the Company
will not be adversely affected by the failure of commercial carriers to be Year
2000 compliant.
26
<PAGE>
BUSINESS
THE COMPANY
Aramex is a leading provider of express package delivery, freight
forwarding and other transportation services primarily to, from and within the
Middle East and the Indian Sub-Continent. Since its founding in 1982, the
Company has expanded its station network to include 95 locations in 32 countries
with approximately 1,400 employees as of April 1, 1998. The Company also offers
logistics, trucking and warehousing services to its clients and holds a majority
interest in a direct marketing and mail order business, Middle East Direct
Marketing ('MED'). From 1995 to 1997, the Company's total revenues increased
from $43.6 million to $66.3 million and net income grew from $1.5 million to
$3.1 million, respectively.
The Company provides its services from its main hubs in Dubai (UAE),
London, New York and Amman (Jordan). The Company believes that it has
established itself as one of the leading transportation services companies in
the Middle East because of its ability to provide a wide array of transportation
solutions to its clients, its local market knowledge, reputation for quality
service, and its expansive station network. In addition, because the Company
does not own or operate its own aircraft, it is not constrained by restrictions
on delivery schedules, shipment size or weight, providing it with greater
flexibility to serve its clients. As a non-asset based solutions provider, the
Company believes that its information technology systems are a significant asset
and plans to continue to make significant investments in information systems and
technology to provide a continued strong platform for enhanced service and
future growth.
Historically, the majority of the Company's business has been derived from
its express package delivery operations. These express operations, combined with
its station network, have provided the Company with a solid foundation for the
development of additional revenue sources such as logistics, warehousing and
inventory management. The Company has implemented a comprehensive quality
control program and believes its efforts have enabled it to achieve a uniform
service offering throughout its network of stations and has helped to establish
a loyal base of customers. In recognition of this effort, the Company was
awarded corporate ISO 9002 certification in December 1997, after receiving
similar certification at certain stations beginning in August 1995. Each Aramex
station is divided into teams specialized in cross marketing multiple services
to industry-specific segments in their local market. Since each team targets one
or more industry segments in its local market, it can develop and offer
customized solutions for their clients where appropriate.
The Company and Airborne Freight Corporation ('Airborne'), the parent of
Airborne Express the third largest domestic air express delivery carrier in the
United States, are founding members of the Overseas Express Carrier Network (the
'OEC'). The OEC is a global alliance among certain leading independent a
worldwide delivery network for its members. For tracking and tracing of its
express shipments worldwide, the Company utilizes the FOCUS tracking system
which is owned and operated by Airborne. Airborne has been a shareholder of the
Company since November 1996 and prior to the Offering owns 6.9% of the
outstanding Common Stock of the Company.
INDUSTRY BACKGROUND
The international express package delivery, freight forwarding and
logistics businesses have experienced significant growth during this past decade
as a result of the globalization of business and world trade. The international
express delivery, or expedited delivery, market has grown rapidly in recent
years as a result of what the Company believes to be an increasing need for
timely delivery of documents, small packages, and other time-sensitive items in
an information and service-oriented economy and as a result of the development
of centralized distribution systems. The worldwide freight forwarding and
logistics markets have also grown rapidly in recent years as a result of
sourcing, assembly and distribution of manufactured products on a global basis
and the use of just-in-time manufacturing techniques. Finally, the use of
multiple transportation modes, as well as the trend of companies to focus on
their core business, has created a need for companies to seek a reduced number
of transportation solutions providers to serve their various shipping needs.
In the United States, the express segment of the domestic air freight
market has averaged 25% growth per year since 1977, accounting for a reported
60% of the U.S. domestic market in 1996. Boeing reports in its 1996/1997 World
Air Cargo Forecast, that international express has grown more than 22% from its
1994 level to
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achieve a 5% market share in 1995. Boeing also estimates that the international
express market will average an annual growth rate of 18% to achieve a 37% market
share, or approximately 350 billion revenue tonne kilometers ('RTKs'), a measure
used in the industry to compare performance, of the world air cargo market in
2015.
In its 1996/1997 World Air Cargo Forecast, Boeing estimates an annual
growth rate of 6.6% for worldwide air cargo traffic, resulting in approximately
400 billion RTKs in the year 2015. Boeing estimates that the international
market growth will continue to outpace U.S. domestic growth, exceeding 80% of
total RTKs by the year 2015. According to Boeing, the U.S. airline share of the
world market is expected to decline from 32% in 1994 to 27% in the year 2015.
The Middle East. The Company believes that the Middle East's strategic
location at the crossroads of Asia, Europe and Africa, positions it to become a
major international distribution center for air freight distribution. The Middle
East air freight market has grown at an average rate of 15% per year since 1995.
The growth in the Middle East air freight market is attributable to economic
expansion in the region. According to Boeing, Middle East real GDP is expected
to grow by 3.5% per year from approximately $383 billion in 1995 to
approximately $740 billion by 2015. Saudi Arabia accounts for a reported 28% of
the region's GDP, and, together with the UAE, for the majority of air traffic.
Many countries in the Middle East are also developing trade as a basis to
diversify their economies which should result in increased demand for express,
freight forwarding and logistics services. While the express market is generally
less developed in the Middle East than in Europe and North America, the Middle
East airborne markets experienced growth of approximately 10% during 1994 and
12% during 1995.
The Middle East's strategic location between the manufacturers of the Far
East and the consumer markets of the West have contributed to the growth of new
international trade hubs such as Dubai. Boeing reports total air traffic through
Dubai in early 1996 increased 23% and transshipments increased 41% from 1995.
From the perspective of freight forwarding, the U.S. is the single largest
exporter of goods to the Middle East.
The Middle East fosters relatively little cross-border ground
transportation of packages and shipments, due largely to complex regulations and
time-consuming customs procedures that accompany such shipments. This has
created a fragmented industry in the Middle East where no one company dominates
express, freight forwarding or logistics in most markets. Management believes
that this regional attribute gives the Company, which has an established
network, future growth potential.
THE ARAMEX COMPETITIVE ADVANTAGE
The Company believes its 'One Stop Shop' service approach is unique to the
industry in that it offers the widest variety of transportation related services
in the Middle East and the Indian Sub-Continent. The Company believes that in
the majority of the markets it services in the Middle East, it is one of the
leading companies offering comprehensive express package delivery and freight
forwarding services to its clients. The Company's specialized customer team
approach to selling its multiple services allows the Company to maximize its
resources and offer customized solutions to its clients. Management believes the
Aramex customer teams (i) allow the customer to seek multiple Aramex products
and services from one point of service, (ii) create personalized relationships
with customers and (iii) foster an environment of direct employee accountability
to the customer. Additionally, the Company's extensive station network
throughout the Middle East enables it to better serve its clients by enhancing
Aramex's ability to timely deliver and develop new and customized solutions to
its customers. These factors, coupled with its knowledge of local market
conditions and industry-specific transportation requirements, has served to
increase the Company's market share in certain markets, as well as expand its
service offerings to existing and new clients.
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STRATEGY
The Company's goal is to be one of the leading providers of express package
delivery, freight forwarding and logistics services in the Middle East, the
Indian Sub-Continent and other contiguous emerging markets and to offer its
customers a wide range of distinct delivery and transportation services. The
Company intends to achieve this goal by implementing the following strategies:
EXPAND MARKET AND GEOGRAPHIC PRESENCE. The Company is focused on expanding
its market and geographic presence in the Middle East (including, but not
limited to, Saudi Arabia) the Indian Sub-Continent (including, but not limited
to, India), and other contiguous emerging markets. These emerging markets
targeted by the Company are characterized by large populations and growing
economies which are liberalizing and opening their markets to local and foreign
investment. By expanding its distribution network in these regions, the
Company's management believes it can (i) enhance its regional market presence;
(ii) expand its customer base; and (iii) reduce its geographic revenue
concentration.
o The Middle East. In order to capitalize on the projected growth of the
Middle East air transportation market, the Company is continuing to
expand its station network in the region, developing an intra-Gulf ground
transportation network, adding additional warehousing facilities in
strategic free zone locations and continually adding to its comprehensive
menu of transportation solutions designed to address the unique needs of
the region's customers. Consistent with this strategy, in 1997, the
Company opened three additional stations in the Palestinian Territories
and made significant staff additions in the Palestinian Territories,
Jordan and UAE. In addition, the Company invested significantly in Saudi
Arabia in 1997 by making improvements to its stations, purchasing
additional equipment and adding an additional 105 employees to its three
main stations located in Jeddah, Riyadh and Dhahran. The Company believes
that expansion in Saudi Arabia, the Middle East's largest market with 28%
of the region's gross domestic product, is critical to increase its
market share of the Middle East's express, freight forwarding and
logistics business.
o The Indian Sub-Continent. India is a significant market for both express
package delivery and freight forwarding services. Aramex is the OEC board
member serving the Indian Sub-Continent and has been operating in India
through an agency relationship since July 1996. Effective April 1, 1998,
the Company converted its agency relationship in India, consisting of 28
locations, to a Company-controlled joint venture. The Company has also
signed a joint venture agreement in Bangladesh pursuant to which its
agency arrangement will be converted to a Company-controlled joint
venture. In addition, the Company is currently negotiating a joint
venture agreement in Sri Lanka, to launch two locations in that country.
The Company plans to aggressively market its services in these regions.
o Central Asian Republics. The Central Asian Republics are emerging
markets which have experienced an inflow of foreign capital and
technological expertise. These investments have already aided in making
this region a major world supplier of oil, natural gas and raw materials.
The Company believes that Uzbekistan, Kazakhstan and Azerbaijan are
currently poorly served by freight and express companies and therefore
sees potential for expansion in the area. The Company commenced
operations in Uzbekistan in 1997 with the opening of two stations and is
in discussions to expand its operations through joint-ventures in
Kazakhstan and Azerbaijan.
o North Africa. The Company currently maintains a limited presence in
North Africa with operations in Egypt, Ethiopia, Libya and Sudan, and
views this region as a source of possible future expansion. Morocco,
Tunisia and Algeria are three additional emerging markets which the
Company plans to target for expansion once they are liberalized and
become open to the services which the Company provides.
PROVIDE TOTAL TRANSPORTATION SOLUTIONS. The Company plans to continue to
capitalize on its reputation as a quality service provider of total
transportation solutions in its markets. A large part of this strategy involves
the continued development by the Company of customized solutions for its clients
in the areas of (i) logistics management; (ii) multi-modal regional
transportation and distribution (offering the options of express package
delivery, air freight forwarding, and ground distribution); (iii) inventory
management, and (iv) local warehousing. To effectuate this strategy and in order
to facilitate the Company's ability to provide comprehensive logistics services,
the Company plans to build additional warehouse facilities in Amman and Dubai.
The Company's
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'One Stop Shop' approach is designed to provide its customers with a total
solution for their everyday transportation needs.
CONTINUE EMPHASIS ON TECHNOLOGY. The Company continues to make significant
investments in technology as a vehicle to enhance service, increase sales and
foster growth. The Company believes that continuing improvements in its
communications network and information systems, such as linking all of the
Company's offices via an on-line, real time communications network and the
ability of customers to have direct connectivity to the Aramex information
network, will yield continued improvements in operations and customer service
and improve the Company's results of operations. The Company is committed to a
number of on-going technology initiatives including, among others, the continued
implementation of remote hand held bar code and signature scanners to replace
the manual process, an express information system to provide production and cost
related information and analysis, and a software system that allows customers to
trace shipments from their own personal computer.
MARKET ITS SERVICES THROUGH ARAMEX CUSTOMER TEAMS. The Company plans to
continue to market its services through cross functional, personalized customer
teams which possess the marketing skills, local market knowledge, service
expertise and industry experience necessary to identify and effectively address
individual client's transportation needs. This strategy provides each station
with a degree of flexibility and independence in developing customized
transportation solutions which the Company believes is a competitive advantage
in its markets. The Company believes its team based structure is an innovative
substitute to the traditional sales force format and facilitates the
cross-marketing of the Company's services. The Company is committed to
strengthening and expanding the number of its customer teams by recruiting
individuals who demonstrate leadership qualities, are motivated and energetic
and comprehend the notion of teamwork and customer service.
GROW THROUGH STRATEGIC ALLIANCES AND ACQUISITIONS. The Company plans to
continue to pursue strategic alliances and may acquire complementary businesses
in order to expand the distribution of its services, maximize penetration in new
and existing geographic markets, expand the range of commercial services based
upon its technology and infrastructure and to increase name recognition.
Whenever possible, the Company considers increasing its ownership in its joint
ventures as well as converting its agency agreements to Company-controlled joint
ventures, which permits the consolidation of these operations' results with the
results of the Company's operations. For example, the Company acquired a 51%
interest in the Ramallah (the Palestinian Authority) operations which were
previously service provider agencies.
THE COMPANY'S PRODUCTS AND SERVICES
INTERNATIONAL EXPRESS DELIVERY SERVICE. Express shipments consist of small
packages, typically ranging in weight of up to 110 pounds, with time-sensitive
delivery requirements. The Company offers its express delivery services on an
international basis to both retail and wholesale express accounts and offers its
customers the ability to track their shipments on the world wide web through the
Company's web site. At December 31, 1997, the Company had approximately 20,000
retail express accounts and 650 wholesale express accounts. In order to satisfy
the customer's need for rapid tracing of express shipments, the Company
provides, through the FOCUS system, an instantaneous worldwide on-line system
linking all the Company's offices.
In an effort to capitalize on the significant growth rate and higher
margins associated with the retail express business, the Company plans to
concentrate its express marketing efforts towards its retail customers. Retail
express customers include trading companies, pharmaceutical companies, banks,
service and information companies and manufacturing and regional distribution
companies, and are not concentrated in any one industry. Revenues from retail
accounts were $20.6 million (or 31.1% of total revenues) and $16.1 million (or
30.9% of total revenues) for 1997 and 1996, respectively.
Wholesale customers consist primarily of express delivery companies (such
as Airborne Express, Emery Worldwide, Purolator Canada, United Parcel Service of
America, Inc.), which originate express packages that have a Middle Eastern
destination and require Aramex's network in the region to deliver their
shipments. The end-user remains a customer of Aramex's wholesale client. Based
upon its knowledge of the Middle East market, management believes that the
Company is the leading independent wholesaler to the Middle East. Revenues from
wholesale accounts were $15.0 million (or 22.6% of total revenues) and $14.7
million (or 28% of total revenues) for 1997 and 1996, respectively.
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The Company is a founding member of the Overseas Express Carriers Network
('OEC'), which is a global alliance among certain leading or independent express
companies that functions as a worldwide seamless delivery network for its
members. The OEC was formed in 1990 by Airborne Express, Aramex, Purolator
Courier-Canada, International Bonded Couriers and Trans Africa Express. The
current OEC board members are Airborne Express, Airborne Express Japan, Aramex,
I.B.C. (International Bonded Couriers), Purolator Canada, Servicio Urgente de
Transportes S.A. ('SEUR') and Ziegler, a Belgian company. The OEC sets rates for
deliveries by members in each of the member markets and establishes standards
for service and performance. OEC members, who each have valuable knowledge of
their respective markets, conduct joint marketing efforts and participate in
committees that meet periodically to address the operations of the network as a
whole. The OEC in aggregate employs more than 30,000 people in 230 countries.
The six OEC members serve these areas:
<TABLE>
<CAPTION>
OEC BOARD MEMBER REGION SERVED
- -------------------------------------------- ----------------------------------------------------------
<S> <C>
Airborne Express............................ U.S., U.K., Far East & Holland
Airborne Express Japan...................... Japan
Aramex...................................... Middle East & Indian Sub-continent
I.B.C. (International Bonded Couriers)...... South & Central America
Purolator Canada............................ Canada
Seur........................................ Spain
Ziegler..................................... France, Belgium, Luxembourg, Switzerland & Denmark
</TABLE>
The Company's express business, especially with the increasing strength of
the retail portion, serves as a foundation for the development of additional
revenue sources. The retail express customer often becomes a freight forwarding
or customized special services customer. The Company can also market services
such as its Shop the World Direct (MED) catalog centers to its express customer
base.
FREIGHT FORWARDING. The Company offers a wide range of freight forwarding
services, including air and ocean freight forwarding consolidation, warehousing,
customs clearance and breakbulk services. The Company provides full 'door to
door' service from, to and within the Middle East and the Indian Sub-Continent.
A significant portion of the Company's freight forwarding business involves
consignee sales (imports) and, to a lesser extent exports. Freight forwarding
shipments typically have gross weights in excess of 110 pounds, often require
more handling and are normally less time-sensitive than express shipments.
The Company launched its freight forwarding business in 1987 at selected
stations and in 1993 at every one of the Company's stations. The Company has
made significant investments over the past two years in training its personnel
to sell and market its freight forwarding services at most of its stations.
Revenues from the Company's freight forwarding operations were $21.7 million (or
32.7% of total revenues) and $15.2 million (or 29.1% of total revenues) for 1997
and 1996, respectively.
The Company continues to expand its ground transportation network for small
packages and fast-moving consumer goods in the region, servicing what the
Company perceives to be a highly underdeveloped market. The Company has launched
a trucking route linking Dubai in the UAE and Muscat in Oman and recently
launched a trucking route linking Dubai with Riyadh in Saudi Arabia. The Company
plans to add additional trucking routes linking major cities in the Gulf. The
Company does not own the trucks used in connection with these services, but
rather wet leases them on an as needed basis. In developing a package shuttle
service linking the main cities in the Middle East, the Company expects to lower
the cost of linehauling by reducing air freight movement and thereby offering
customers the option of deferred service at lower prices. This service is an
extension of the Company's logistics management service. Management believes the
addition of such complementary businesses should help strengthen the core
businesses of the Company.
DOMESTIC EXPRESS DELIVERY SERVICE. The Company has developed an extensive
network for the delivery of small packages and has the capability to pick-up and
deliver shipments from city to city in every country in which it operates,
thereby satisfying customers' local distribution and information needs. The
Company owns or leases the transportation vehicles used in connection with its
domestic express delivery services. Customers for these services typically
include local distributors, pharmaceutical companies, banks and a TV home
shopping
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network. Domestic revenues accounted for $4.0 million (or 6.0% of total
revenues) and $2.9 million (or 5.5% of total revenues) for 1997 and 1996,
respectively.
SHOP THE WORLD DIRECT CATALOG CENTERS (MED). In January 1996, the Company
formally introduced MED, a direct marketing and mail order catalog service, at
certain stations in the Middle East. MED assists customers in selecting,
ordering and delivering a broad variety of merchandise from the catalogs of
retail and mail order companies based principally in the United States and
Europe. Customers may place orders directly at MED locations or over the
telephone by calling the Company's customer service representatives. The Company
takes delivery of all orders at airport locations in New York City and London
(UK) and then delivers the product to the customer.
The Company operates 13 MED centers in Jordan, Kuwait, Egypt, Lebanon,
Qatar, Bahrain and the United Arab Emirates. The Company plans to open three
additional MED offices in Saudi Arabia in April 1998. At December 31, 1997, MED
had exclusive Middle East rights to sell and distribute products offered by
approximately 12 catalogs including J.C. Penney, Littlewoods (UK), Brooks
Brothers, Sundance, The Self Care Catalog, Bullocks and Jones and others in the
Middle East (with the exception of Saudi Arabia, Kuwait and the Gulf States in
the case of J.C. Penney).
The Company developed MED in response to Middle Eastern client requests to
receive goods marketed through foreign catalogs. Management believes MED is
complementary to the Company's core businesses in that it generates shipments of
packages throughout its network in the Middle East, provides the Company with a
platform by which it can cross-market its services and increase name recognition
to an expanded customer base, and provides the Company with an additional source
of revenue. The Company receives a commission on each MED product sale and
generates shipping revenue on the delivery of the product to the customer.
Revenue generated from such sales by MED accounted for $1.8 million (or 2.8% of
total revenues) and $1.1 million (or 2.1% of total revenues) for 1997 and 1996,
respectively. The Company had limited financial and human resources to develop
MED during its first year and the Company believes that while expenditures made
in 1997 to develop this business negatively impacted the Company's margins and
profitability for 1997, the appropriate infrastructure has been put in place to
develop MED into a viable, complementary business to the Company's other
businesses.
CUSTOMERS
The Company has a diverse customer base, totaling over 20,650 accounts
during 1997, which spans a broad geographic area mainly in the Middle East,
Europe and North America and includes companies in a wide range of industries.
The Company's customers are not concentrated in any one particular industry but
customers include trading companies, pharmaceutical companies, banks, service
and information companies, manufacturing and regional distribution companies and
express companies. Its customers, both retail and wholesale, are also diverse in
terms of their service needs. The broad range of services which the Company
offers has developed in response to the growing diversity of its customers. The
Company's customers make increasing use of the high value-added services
provided by the Company, from reliable express services to cost effective
door-to-door air freight forwarding to customized special services.
The Company has both retail and wholesale customers. Retail customers,
i.e., those who are serviced and billed directly by Aramex, include both express
and freight forwarding accounts. Wholesale customers consist primarily of
express accounts. The Company is dependent upon its relationship with Airborne
Express, which is a wholesale customer of the Company and whose parent is a
shareholder of the Company. None of the Company's express customers accounted
for more than 5% of express revenues, and none of its freight forwarding
customers accounted for more than 5% of freight forwarding revenues for the
years ended 1996 and 1997, respectively.
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OPERATIONS
General. The Company operates through a network of 95 locations in 32
countries. The Company's station network includes the following:
ARAMEX STATIONS
<TABLE>
<CAPTION>
COUNTRY PRINCIPAL STATION OTHER SIGNIFICANT STATIONS
- ------- ----------------- --------------------------
<S> <C> <C>
Bahrain Manama
Bangladesh Dhaka
Bulgaria Sofia
Canada Montreal
Cyprus Nicosia Larnaca, Limassol
Egypt Cairo Main Office Cairo Down Town, 10th of Ramadan,
Alexandria, Heliopolis
Ethiopia Addis Adaba
France Paris
Greece Athens Thessaloniki
Hong Kong Hong Kong
India(1) Bombay Bangalore, Calcutta, Delhi, Hyderbad
Iran Tehran
Israel Jerusalem
Jordan Amman Aqaba, Irbid, Sahab
Kuwait Kuwait
Lebanon Beirut Ain Mreisseh, Jounieh
Libya Tripoli
Oman Muscat
Pakistan Karachi Islamabad, Lahore
Palestinian National Authority Nabulus Ramallah, Gaza, East Jerusalem
Qatar Doha
Saudi Arabia Jeddah, Riyadh, Dhahran
Sri Lanka Colombo
Sudan Khartoum
Switzerland Geneva
Syria Damascus Latakia, Homs, Aleppo, Hama, Tartous
Turkey Istanbul Ankara, Izmir
United Arab Emirates Dubai, Abu Dhabi Fujeirah, Al Ain, Jebel Ali
United Kingdom London
United States New York, Washington D.C.
Uzbekistan Samarkand Tashkent
Yemen Sana'a Aden
</TABLE>
- ------------------
(1) Excludes 23 other stations.
The Company's General Services Office ('GSO'), which is located in Amman,
provides general corporate, marketing, advertising, auditing, and strategic and
technical support to the stations and charges local offices accordingly. Senior
management interacts with each station through monthly meetings or conference
calls, on-site visits and audits several times per year and station managers
attend the Company's annual managers' meeting. The interactive structure of the
GSO provides a natural environment for effective management and
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problem-solving. In addition, it has improved the information flow within the
Company and between the Company and its markets and customers.
The Company is a decentralized company, providing each station with the
flexibility and independence necessary to maximize its resources and customize
operations to the needs of local customers. The Company has transformed the
structure of its stations from a department setup (e.g., express, freight
forwarding, etc.) into cross-functional personalized customer teams. Each
station is operated by a station manager and customer teams, each consisting of
3 to 7 members who possess expertise in the geographic region in which the team
operates and the industries in which the team's customers participate. Teams are
responsible for revenue and profit projections, billing and collections,
regionally based advertising, sales and product development. Teams draw upon
their expertise of local markets as they strive to be a total solutions provider
to each of their clients. The Company believes this 'One-Stop Shop' service
differentiates it from many of its competitors in that it permits the Company to
offer a wide variety of transportation related services. The Company also
believes its customer team system provides it with a competitive advantage as it
encourages frequent customer communications while fostering creative problem
solving and customized transportation solutions.
Aramex's Hubs. The Company maintains hubs in Dubai (UAE), London, New York
and Amman (Jordan). Whereas express shipments in the Aramex network virtually
always pass through one of its four international hubs, cargo shipments are
routed directly from the sender to the destination by way of the commercial
carrier routing that is best suited to the size, weight and time sensitivity of
the shipment.
On a broad scale, the Middle East is a net importer of goods and services.
This 'import' orientation has shaped the Company's express and freight
forwarding marketing and sales efforts in very different ways. Express provides
a valuable delivery network for the Company and OEC packages incoming from
worldwide destinations. The Company's freight forwarding service, from its
inception, has focused on generating 'routings' or consignee sales from
importers, which are then fulfilled by the Company stations and its strategic
partners in Europe and the United States, the two major exporters to the Middle
East.
For the Company, the European market serves as: (i) a facilitator in the
delivery network wherein most of the system's express packages pass through
London; and (ii) an important source of wholesale express revenue. Other than
wholesale express accounts generated from the GSO based in Amman, Paris and
London are the largest wholesale revenue sources for the Company. The Company
has a long-established presence in those two cities, which represent very
important trade gateways to the Middle East.
From the perspective of freight forwarding, the U.S. is the single largest
exporter of goods to the Middle East, creating freight forwarding 'routings' for
Aramex throughout the country. The Company has a well established position in
New York's JFK airport, which represents the most important gateway for Middle
East trade, as well as in Washington, D.C.
The Middle East also fosters relatively little cross-border ground
transportation of packages and shipments, due largely to complex regulations and
time-consuming customs procedures that accompany such shipments. Management
believes that this regional attribute, coupled with the Company's local market
knowledge, gives the Company, which has an established network in the region, a
competitive advantage over other non-regionally based companies.
TECHNOLOGY
The Company continues to pursue a strategy that includes significant
investment in information systems in order to maintain a technological
advantage. The Company views its information systems as a vehicle to enhance
service, increase sales and foster growth.
The Company currently utilizes the SITA system for its communications needs
with both its stations and customers. The SITA system is widely used by airlines
and related companies around the world. For tracking and tracing of its courier
and cargo shipments worldwide, Aramex utilizes the FOCUS tracking system which
is owned and operated by Airborne Express. FOCUS enables the Company to access
real time information about shipments anywhere in the world and provides a
variety of shipment control activities, such as confirming proof of delivery and
electronic mail capabilities, which allow all account holders to communicate
directly. FOCUS
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<PAGE>
also includes world situation updates, providing information about events or
circumstances that could affect the times of delivery and shipments. All OEC
members utilize the FOCUS system for express package tracking.
The following are some of the Company's ongoing technological initiatives.
In recent years, the Company has developed its own private communication network
and integrated information system. It has also developed a centralized
information bank that provides customers and suppliers with direct electronic
connectivity to the Aramex network. The Company has purchased and continues to
implement remote hand held bar code and signature scanners for use by its
pick-up and delivery operations to replace the manual process. The Company is
currently introducing: (i) ESS--an express information system to provide
production and cost related information and analysis; (ii) Lightship Tracker--a
software system developed in connection with Airborne that allows customers to
track shipments from their own personal computer; and (iii) E-Guide--also
available on the Company's website, which provides service information about the
Company and its OEC partners. Management believes that its investments in
technology should continue to yield improvements in its operations and overall
quality of service.
CUSTOMER SERVICE AND QUALITY CONTROL
The Company strives to provide prompt, responsive and customized service to
its clients and business prospects. To effectuate this goal, the Company has
implemented a comprehensive quality control program. The Company has developed a
set of standards relating to transit time, shipment status information relay,
shipment and consul recovery and customs clearances times, by which each
station's shipments and deliveries are measured. The Company also monitors
delivery performance by setting and evaluating standards for delivery attempts,
refusals, misrouting, and status tracking. The Company utilizes questionnaires
to solicit feedback from its customers. The GSO monitors the performance and
overall quality of service delivered by each station through frequent internal
audits of each station. The Company believes its quality control efforts have
enabled it to achieve a uniform service offering throughout its network of
stations and has helped to establish a base of loyal customers. Aramex's UK
operation was first awarded ISO 9002 certification in August 1995 followed by
the Jordan operation in November 1996. As of December 1997, the Company earned
its corporate certification after registering its UAE, Bahrain, Kuwait, Lebanon,
Egypt and Qatar stations as well as its corporate office in Jordan.
SALES AND MARKETING
The Company markets its services through cross-functional personalized
customer teams which possess the marketing skills, local market knowledge,
service expertise and industry experience necessary to identify and effectively
address individual client's transportation needs at each of its stations. The
Company believes its team based structure is an innovative substitute to the
traditional sales force. Teams educate consumers and businesses as to the
Company's services through in-person meetings and demonstrations. The teams
further allow the Company to identify additional areas of the client's business
which could be served or benefit from the Company's transportation solutions,
thereby facilitating the cross-marketing of the Company's multiple services. The
Company keeps its teams well informed through close interaction with the
Company's information technology personnel who identify and develop innovation
systems to support the team's operations. The Company believes the Aramex team
approach differentiates it from its competition and provides it with a
competitive advantage in its core markets.
Aramex in Jordan acts as the General Sales Agent worldwide for Marriott
Hotels. The Company's Amman office makes a commission on every Marriott
reservation it makes for travelers outbound from Jordan, Yemen and Lebanon.
Aramex has also been appointed to act as the General Sales Agent for Qatar
Airways and Yemenia Airlines in New York.
The Company also generates brand awareness of its services and educates
consumers as to the timeliness, reliability and costs of its services through
targeted advertising. The Company advertises in regional print media. The
Company maintains agreements with various regional publications whereby the
Company provides courier services in exchange for advertising space. The Company
plans to use a portion of the proceeds from the Offering to increase its
advertising through print and other media.
The Company receives positive publicity through its participation and
sponsorship of business, charity and sporting events, including the sponsorship
of the Pan Arab games (the Olympics of the Arab World) and a
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<PAGE>
Jordanian basketball club. The Company believes that continued participation and
sponsorship of such events will increase consumer awareness of the Company's
services.
COMPETITION
The express package delivery and freight forwarding industry is highly
competitive. The principal competitive factors within the express package
delivery and freight forwarding industry include price, frequency and capacity
of scheduled service, extent of geographic coverage and reliability. Many of the
Company's competitors have well established reputations and possess
substantially greater financial, marketing, personnel and other resources than
the Company. The Company's principal express package delivery competitors are
DHL Worldwide Express, Federal Express Corporation and TNT Express, Inc. The
Company's principal freight forwarding competitors are Air Express International
Corporation, Expeditors International of Washington, Inc. and MSAS Cargo
International Ltd. In addition, the Company competes against other express and
freight forwarding companies, such as United Parcel Service of America, Inc.,
who wish to establish or broaden their presence in the Middle Eastern express
package delivery and freight forwarding markets. The Company competes primarily
by seeking to offer customers a wide range of distinct delivery and
transportation services, competitive pricing, a high level of service and
on-time delivery. The Company believes its competitive position is enhanced by
(i) its strategy of becoming a 'One Stop' solution provider for its clients
transportation needs; (ii) its knowledge of the Middle East based upon its 16
year presence in the region; (iii) its decentralized operation and team approach
which allows local management to maximize its resources and customize operations
to the needs of local customers; (iv) its strong management team; and (v) its
emphasis on operating cost controls.
EMPLOYEES
As of April 1, 1998, the Company had 1,417 employees with 270 in
administration, 689 in operations and 458 in service and sales. The Company also
uses temporary employees as necessary. The Company's future success will depend,
in part, on its ability to attract, retain and motivate qualified personnel. The
Company believes that relations with its employees are satisfactory. None of the
Company's employees are covered by labor contracts or other collective
bargaining agreements. However, certain of the Company's subsidiaries are
required by the labor law of each related country to provide indemnity payment
upon termination of relationships with their employees. The benefit accrues to
employees on a pro rata basis during their employment period and is based on
each employee's current salary.
FACILITIES
The Company's principal executive offices are located at Amman, Jordan.
Such offices are leased by the Company under a one year lease, renewable
annually, commencing January 1996, for approximately 12,900 square feet of
office space. Annual rent payments under the lease are approximately $106,000,
effective January 1, 1998. The Company is considering the purchase of this
facility.
The Company also leases 53 other facilities aggregating approximately
117,800 square feet of office space in 16 countries. The terms of such leases
range from one to six years with the last lease to expire in December 2002. The
aggregate annual rental under such leases is approximately $1.2 million for
1997. See 'Certain Transactions.'
The Company believes its existing facilities are adequate to meet current
needs and it does not anticipate any difficulty in negotiating renewals as
leases expire or in finding other satisfactory space if existing facilities
become unavailable. However, in order to effectuate the Company's expansion
plans, the Company will need to service additional facilities. There can be no
assurances that the Company will be able to secure such facilities on terms
favorable to the Company, if at all.
GOVERNMENT REGULATION
The Company's operations require and will require various licenses, permits
and approvals in each jurisdiction where it operates. The loss or revocation of
any existing licenses, permits or approvals or the failure to obtain any
necessary licenses, permits or approvals in new jurisdictions where the Company
intends to do business would have an adverse effect on the ability of the
Company to conduct its business and/or on its ability
36
<PAGE>
to expand into such jurisdictions. Authorization to commence operations will be
required in each country in which the Company intends to operate. No assurance
can be given that the Company will obtain such authorization, licenses or
necessary approvals. In addition, countries in which the Company wishes to
operate may have regulatory systems that impose other impediments on the
Company's operations. There can be no assurance that the Company will be able to
profitably operate in light of these restrictions.
INTELLECTUAL PROPERTY
The Company believes that its Aramex trade name is material to its business
and takes steps to protect it where it deems appropriate. There can be no
assurance, however, that the Company will not be adversely affected by third
parties infringing upon the Company's trade name or in their use of the same or
a similar name.
LEGAL PROCEEDINGS
In September 1995, an action was brought in the U.S. District Court,
Central District, California, by a station manager against a subsidiary of the
Company, claiming compensatory damages of not less than $1 million, punitive
damages, attorney's fees and equitable and injunctive relief. The Company
believes it has meritorious defenses to the action, is defending the action and
has filed a counterclaim. In March 1996, the Court dismissed most of the
Plaintiff's claims. Of the 11 claims originally alleged, the only claim granted
was for an accounting. The only claims remaining are the Company's counterclaims
and a trial date of June 30, 1998 has been set for the Company's counterclaims.
The parties are currently engaged in settlement discussions, although there can
be no assurance that the Company will reach a settlement on favorable terms, if
at all. However, management believes this action should not have a material
adverse effect on the financial position of results of operation of the Company.
In addition, the Company may be involved in various legal proceedings
arising in the ordinary course of its business. In the opinion of management,
the outcome of such proceedings will not have a material adverse effect on the
Company's operations.
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<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth the directors, executive officers and key
employees of the Company, their ages and the positions held by them with the
Company.
NAME AGE POSITIONS HELD
- ---- --- --------------
William S. Kingson.............58 Chairman of the Board
Fadi Ghandour..................39 President, Deputy Chairman, Chief Executive
Officer and Director
Hazem Malhas...................38 Chief Operating Officer
Safwan Tannir..................49 Senior Vice President--Freight Forwarding
Camille Tam Nasrallah..........52 Senior Vice President--Gulf and Indian
Subcontinent
Emad Shishtawi.................40 Vice President--Finance
Basem Malhas...................36 Vice President--Information Technology
Yousef Ghandour................49 Managing Director of MED
Iyad Kamal.....................30 Express--Product Manager
Bashar Obeid...................26 Group Financial Controller
Rula Ghandour..................39 Director
Roy Liljebeck..................60 Director
Ayed Al-Jeaid..................43 Director
The business experience of each of the Company's directors, executive
officers and key employees during at least the past five years is set forth
below.
BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
William S. Kingson has been Chairman of the Board and a Director of the
Company since its incorporation in 1996 and Chairman of the Board and Director
of the Company's predecessor entities since 1982 when he co-founded Aramex with
Mr. Ghandour. Mr. Kingson is President of New York based DHX Group, Ltd., Co-
Chairman and President of the Pointe Group and has had long and extensive
involvement in the airline and aerospace industries. He has served on the board
of numerous airlines, and has had many years of experience in the industry, and
has participated in transactions with Cathay Pacific, Korean Air, China Airlines
and Singapore Airlines. Mr. Kingson pilots his own airplanes and holds eighteen
world and/or national speed records for type and class of aircraft. Mr. Kingson
holds a B.S. in Economics from the University of Rhode Island.
Fadi Ghandour has been the President, Deputy Chairman, Assistant Secretary
and a Director of the Company since its incorporation in 1996 and Chief
Executive Officer, President, Deputy Chairman and Director of the Company's
predecessor entities since 1982, when he co-founded Aramex with Mr. Kingson. Mr.
Ghandour has been largely responsible for the creation of the Aramex network in
the Middle East and Gulf region, Europe and the United States. Mr. Ghandour
serves on the Board of the OEC network and is Chairman of the Express
Association of the Middle East ('EAME'), a group which consists of TNT, UPS,
FedEx and Aramex and acts to protect the interests of express companies
throughout the region. Mr. Ghandour holds a B.A. in Political Science from The
George Washington University.
Hazem Malhas has been the Chief Operating Officer since December 1996. Mr.
Malhas served as the Vice President and Chief Operating Officer Express of the
Company and its predecessor entities from 1993 until December 1996. Mr. Malhas
began his career with Aramex in 1986 when he held the position of Freight
Forwarding Sales Manager. In 1987, he became Country Manager for Jordan. From
1987 to 1993 Mr. Malhas shared responsibility for Aramex's strategic and
operations planning in his position as Vice President-- Operations and Planning.
In 1994, Mr. Malhas oversaw the extensive re-engineering of the General Services
Office into a cross-functional team structure and he has also implemented a
team-structured sales organization
38
<PAGE>
which is being introduced throughout the Aramex organization. Mr. Malhas holds a
B.S. in Civil Engineering from the University of Texas, Austin.
Safwan Tannir has been the Senior Vice President--Freight Forwarding since
December 1996. Mr. Tannir served as the Vice President and Chief Operating
Officer--Freight Forwarding of the Company and its predecessor entities from
1991 until December 1996. Mr. Tannir began his career in the air transportation
industry in 1976 with Trans Mediterranean Airways ('TMA'), a Lebanon-based
international air-cargo airline, where he served as Assistant Manager of the
Taiwan office and Country Manager--Italy. Mr. Tannir joined Aramex in 1986 as
General Manager of Air Cargo Jordan, the predecessor to the Company's freight
forwarding network. While developing the freight forwarding operations, he held
positions as Vice President--Marketing and Sales and Vice President Middle East
until 1990 when he assumed responsibility for all North America operations. In
his current position, Mr. Tannir has been largely responsible for establishing
freight forwarding operations in all of Aramex's stations worldwide. Mr. Tannir
holds a B.A. in Political Studies & Public Administration from The American
University of Beirut.
Camille Tam Nasrallah has been the Senior Vice President--Gulf and Indian
Subcontinent since December 1996. Mr. Nasrallah served as the Vice
President--Corporate Affairs of the Company and its predecessor entities from
1993 until December 1996. Mr. Nasrallah began his 30-year career in the air
transportation industry with TMA, where he served in various sales,
reservations, traffic and financial capacities for eight years beginning in
1966. He later served as Manager for Airlink International Ltd., as Managing
Director of the Zakhour Agency, a Beirut-based freight forwarding and ticketing
company, and as Branch Manager for the Saudi General Transport Company. He
served in various management positions from 1982 to 1988 in the freight
forwarding operations of Al Zouman Aviation, a combination carrier. Mr.
Nasrallah joined Aramex in 1988, where he first served as General
Manager--U.A.E., then later as Vice President--Gulf and Indian Sub-Continent.
Emad Shishtawi has been the Vice President--Finance since December 1996.
Mr. Shishtawi served as the Accounting and Finance Manager of the Company and
its predecessor entities from 1994 until December 1996. Mr. Shishtawi was an
auditor in Amman with the local affiliate of Arthur Andersen & Company from 1982
to 1984. Mr. Shishtawi joined Aramex in 1984 as Accountant in the Amman
headquarters, was later promoted to Financial Manager and was Controller from
1988 to 1994. Mr. Shishtawi holds a B.A. in accounting from the University of
Jordan.
Basem Malhas has been the Vice-President--Information Technology since
December 1997. Mr. Malhas began his career with Aramex in 1989 when he held the
position of IT Manager. In 1992 he became the General Manager of Information
Technology. Mr. Malhas holds a B.S. in Civil Engineering from the University of
Texas, Austin and an MBA in Information Systems from the University of
Wisconsin-Madison.
Yousef Ghandour has been Managing Director of MED since 1994 and is
responsible for the implementation and management of MED's growth strategy
worldwide. Prior to such time, Mr. Ghandour was Vice President of International
Trading and Development Company based in Jordan. Mr. Ghandour holds a Masters
degree in Philosophy from Georgetown University.
Iyad Kamal has been the Quality Assurance Manager since 1995 and
responsible for the Quality team in the GSO. From 1992 to 1995 he was the OEC
Coordinator stationed in Jordan. Mr. Kamal holds an M.A. in Economics from
Bowling Green State University.
Bashar Obeid has been the Company's Group Financial Controller since
January 1998. Mr. Obeid started his career with Aramex in 1993 as an accountant
and was then promoted to Financial Controller. Mr. Obeid holds a B.A. in
Accounting and Finance from Yarmonk University in Jordan.
Rula Ghandour has been a Director of the Company since its incorporation in
1996 and a Director of the Company's predecessor entities since 1982. Ms.
Ghandour has been a principal shareholder and manager of Silsal, a pottery
company, for over five years. Ms. Ghandour holds a B.A. in Sociology from Santa
Clara University and an M.A. in International Affairs from Georgetown
University.
Roy Liljebeck has been a director of the Company since April 1997. Mr.
Liljebeck was appointed to the Company's Board of Directors pursuant to the
Airborne Stock Purchase Agreement. Mr. Liljebeck is Executive
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<PAGE>
Vice President and Chief Financial Officer of Airborne Freight Corporation,
having held various management positions with that organization since he joined
in 1967.
Ayed Al-Jeaid has been a director of the Company since April 1997. Mr.
Al-Jeaid is Chief Executive Officer of Makshaff Services Ltd., a holding company
for various aviation and media interests in Saudi Arabia and worldwide.
Directors currently do not receive any additional remuneration for services
on the Board of Directors. Except for Mr. Fadi Ghandour and Ms. Rula Ghandour
being husband and wife and Mr. Yousef Ghandour being Mr. Fadi Ghandour's uncle,
there are no family relationships among directors or executive officers of the
Company. The Company may compensate directors who are not employees of the
Company. Members of the Board of Directors will also be eligible for the grant
of options under the Stock Option Plan.
The Company has a classified Board of Directors currently consisting of
five members. The directors are divided into three classes consisting of one
director in each class. The term of office of the directors expires as follows:
Class 1, at the 2000 annual general meeting of shareholders; Class 2, at the
1998 annual general meeting of shareholders; and Class 3, at the 1999 annual
general meeting of shareholders. Thereafter, the term of office of each director
will expire at the third annual meeting of shareholders following his or her
election. Ms. Rula Ghandour and Roy Liljebeck are Class 1 directors, Mr. William
S. Kingson and Ayed Al-Jeaid are Class 2 directors and Mr. Fadi Ghandour is a
Class 3 director. Having a classified Board of Directors may be viewed as
inhibiting a change of control of the Company and having a possible
anti-takeover effect because it would take at least two annual meetings to
change control of the Board of Directors by shareholder vote.
COMMITTEES OF THE BOARD
The Board has an Executive Committee which consists of two directors. The
Executive Committee can exercise all of the powers of the Board between meetings
of the Board. The members of the Executive Committee are Messrs. Kingson and
Ghandour.
The Board has an Audit Committee which consists of four directors, at least
two of whom cannot be employees of the Company. The Audit Committee is
authorized to engage the Company's independent auditors and review with them the
scope and timing of their audit services and any other services they are asked
to perform, their report on the Company's financial statements following
completion of their audit and the Company's policies and procedures with respect
to internal accounting and financial controls. The members of the Audit
Committee are Messrs. Kingson, Ghandour, Liljebeck and Al-Jeaid.
See '--Stock Option Plan' for a description of the Committee administering
the Company's Stock Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to the Company's
President and Chief Executive Officer for the year ended December 31, 1997 (the
'Named Executive Officer'). No other executive officer of the Company received a
total annual salary and bonus in excess of $100,000 during the year ended
December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION ---------------------
------------ SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY OPTIONS
- ----------------------------------------------------------------------------- ------------ ---------------------
<S> <C> <C>
Fadi Ghandour
President, Deputy Chairman, Chief Executive Officer and Assistant
Secretary.................................................................. $115,000 100,000
All Directors, Officers and Key Employees as a Group (13 persons)............ $626,500 300,000
</TABLE>
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<PAGE>
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXPIRATION ---------------------------------
NAME GRANTED FISCAL YEAR EXERCISE PRICE DATE 5% 10%
- --------------------------- ---------- ------------ -------------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William S. Kingson......... 100,000 33.33% $ 7.70 01/13/02 $123,396 $ 357,357
Fadi Ghandour.............. 100,000 33.33% $ 7.00 01/13/07 $440,223 $ 1,115,618
</TABLE>
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED DECEMBER 31, 1997
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON
STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT DECEMBER 31,
DECEMBER 31, 1997 1997(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William S. Kingson......................................... 100,000 0 $ 730,000 $0.00
Fadi Ghandour.............................................. 100,000 0 $ 800,000 $0.00
</TABLE>
- ------------------
(1) Represents the fair market value of the shares of Common Stock underlying
the options as of December 31, 1997, less the exercise price of the options.
STOCK OPTION PLAN AND STOCK AWARDS
The Company's Stock Option Plan (the 'Plan') permits the granting of both
incentive stock options (which are entitled to certain favorable treatment under
the Internal Revenue Code of 1986) and nonqualified stock options (i.e., options
which are not intended to be incentive stock options). A total of 400,000 shares
of Common Stock has been authorized for issuance pursuant to options granted
under the Plan. Employees and consultants of the Company and its subsidiaries
and non-employee members of the Board of Directors of the Company are eligible
to be selected to receive one or more options.
The Plan is administered by a committee of nonemployee members of the Board
of Directors (the 'Committee'). Subject to the terms of the Plan, the Committee
has the sole discretion to determine the employees and consultants to whom
options will be granted and the terms and conditions of such options. However,
the exercise price of any option granted under the Plan cannot be less than 100%
of the fair market value of the Company's Common Stock on the date of grant. In
the case of an incentive stock option recipient possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
subsidiaries, the option price shall not be less than 10% of the fair market
value of the Company's Common Stock on the date of the grant. No options were
granted in 1996.
On January 13, 1997, Mr. Kingson was granted incentive stock options to
purchase 100,000 shares of Common Stock at an option price of $7.70 per share.
Each of Mr. Kingson's options are exercisable for a period of five years from
the date of vesting. Fifty percent of these options vested on January 13, 1997
and the other fifty percent vested on July 13, 1997.
On January 13, 1997, Mr. Ghandour was granted non-qualified stock options
to purchase 100,000 shares of Common Stock at an option price of $7.00 per
share. Mr. Ghandour's options are exercisable for a period of ten years from the
date of vesting. Fifty percent of these options vested on January 13, 1997 and
the other fifty percent vested on July 13, 1997.
On January 13, 1997, stock options to purchase an aggregate of 100,000
shares of Common Stock at an option price of $7.00 per share were granted to 139
persons, including the Company's executive officers (other than Messrs. Kingson
and Ghandour), employees and consultants. These options will vest over a
five-year period on the basis of one-quarter each year following the first year
anniversary of the grant of such option. (Of these
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<PAGE>
options, options to purchase 25,000 shares of Common Stock were granted to
executive officers of the Company, excluding Messrs. Kingson and Ghandour.)
INDEMNIFICATION; LIMITATION OF LIABILITY
Bermuda law permits a company to indemnify its directors and officers,
except for any act of fraud or dishonesty. The Company has provided in its
Bye-Laws that the directors and officers of the Company will be indemnified and
held harmless against any expenses, judgments, fines, settlements and other
amounts incurred by reason of any act or omission in the discharge of their
duty, other than in the case of fraud or dishonesty.
Bermuda law and the Bye-Laws of the Company permit the Company to purchase
insurance for the benefit of directors and officers against any liability
incurred by them for the failure to exercise the requisite care, diligence and
skill in the exercise of their powers and the discharge of their duties, or
indemnifying them in respect of any loss arising or liability incurred by them
by reason of negligence, default, breach of duty or breach of trust. The Company
maintains a directors' and officers' liability insurance policy.
The Company has entered into indemnification agreements with certain of the
Company's officers and directors. To the extent permitted by law, the
indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from fraud or dishonesty) and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
At present, there is no pending material litigation or proceeding involving
a director or officer of the Company where indemnification will be required or
permitted. In addition, the Company is not aware of any threatened material
litigation or proceeding that may result in a claim for such indemnification.
Bermuda law requires that every officer, including all directors, of the
Company in discharging his duties act honestly and in good faith with a view to
the best interests of the Company, and exercise the care, diligence
and skill that a reasonably prudent person would exercise in comparable
circumstances, including compliance with the Companies Act 1981 of Bermuda (the
'Act'), the regulations thereunder and the Company's Bye-Laws. The Company's
Bye-Laws provide, however, that no director of the Company shall be liable to
the Company or its shareholders for breach of such director's fiduciary duty as
a director, except for any fraud or dishonesty of which he may be guilty in
relation to the Company.
EMPLOYMENT AGREEMENTS
In January 1997, the Company and Mr. Kingson entered into a two-year
employment agreement providing for his employment as the company's Chairman of
the Board at an initial salary of $85,000. At the same time, Mr. Ghandour
entered into a two-year employment agreement providing for his employment as the
Company's President and Chief Executive officer at a base salary of $115,000.
Each of the employment agreements provide that in the event of termination: (i)
as a result of a major event (defined to include, but not limited to, a change
of control whereby 'any person' (other than persons who beneficially own more
than 30% of the capital stock of the Company on a fully diluted and as converted
basis on the date thereof) becomes the 'beneficial owner' (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 30% or more of the
Company's outstanding capital stock on a fully diluted and on a converted basis
at such time, the liquidation, dissolution or sale of all or substantially all
of the Company's assets), without cause or by Mr. Kingson or Mr. Ghandour for
good reason (defined to include, but not limited to, a reduction in base salary,
a relocation of the Company's principal executive offices and any material
breach by the Company of any material provision in such employment agreements),
or by Mr. Kingson or Mr. Ghandour for cause, Mr. Kingson or Mr. Ghandour, as the
case may be, will receive a lump sum severance allowance in an amount equal to
3.0 times his then annual salary; (ii) as a result of the disability or
incapacity of Mr. Kingson or Mr. Ghandour, Mr. Kingson or Mr. Ghandour, as the
case may be, will be entitled to receive 60% of his salary during the two years
following the termination notice; and (iii) as a result of the death of Mr.
Kingson or Mr. Ghandour, Mr. Kingson or Mr. Ghandour (or their respective
estates), as the case may be, will be entitled to receive a lump sum payment
equal to his then annual base salary. Each agreement includes a one-year
non-compete covenant commencing on the termination of employment.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Common Stock, the only class of capital stock of the Company of
which shares will be outstanding after this Offering, on a comparative basis, as
of April 1, 1998 and as adjusted to reflect the sale of Common Stock offered
hereby (in each case) by (i) all persons who beneficially own, to the knowledge
of the Company, 5% or more of the Common Stock, (ii) the Selling Shareholders,
(iii) each director of the Company individually, (iv) each Named Executive
Officer that owns stock, and (v) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
OWNERSHIP
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES SHARES BEING BEFORE AFTER
OR NUMBER OF PERSONS IN GROUP BENEFICIALLY OWNED OFFERED OFFERING OFFERING
- ----------------------------------------------------------- ------------------ ------------ -------- --------
<S> <C> <C> <C> <C>
William S. Kingson(1)(5)(6)................................ 1,588,500 250,000 35.1% 26.6%
Fadi Ghandour(2)(5)(7)..................................... 1,587,500 125,000 35.1% 26.6%
Rula Ghandour(3)(5)(7)..................................... 1,587,500 125,000 35.1% 26.6%
Roy Liljebeck.............................................. 0 0 -- --
Ayed Al-Jeaid.............................................. 0 0 -- --
Airborne Freight Corporation(4)(5)......................... 304,688 0 6.9% 6.2%
All directors, executive officers and key employees as a
group (13 persons)(1)(2)(5)(8)(9)........................ 3,212,550 500,000 69.0% 52.6%
</TABLE>
- ------------------
(1) Includes 100,000 shares of Common Stock issuable upon exercise of incentive
stock options held by Mr. Kingson having an initial exercise price of
$7.70, which expire 50% in January 2002 and 50% in July 2002. Mr. Kingson's
address is c/o Suite 451, 866 United Nations Plaza, New York, New York
10017.
(2) Includes (a) 743,750 shares of Common Stock owned by Mr. Fadi Ghandour's
spouse, Ms. Rula Ghandour and (b) 100,000 shares of Common Stock issuable
upon exercise of non-qualified options held by Mr. Ghandour having an
exercise price of $7.00, which expire 50% in January 2007 and 50% in July
2007. The address of Mr. Ghandour is in care of the Company at P.O. Box
3371, Amman 1181 Jordan.
(3) Includes (a) 100,000 shares of Common stock issuable upon exercise of
non-qualified options held by Mr. Ghandour having an exercise price of
$7.00, which expire 50% in January 2007 and 50% in July 2007 and (b)
743,750 shares of Common Stock held of record by Ms. Ghandour's spouse, Mr.
Fadi Ghandour. The address of Ms. Ghandour is in care of the Company at
P.O. Box 3371, Amman 1181 Jordan.
(4) The address of Airborne Freight Corporation is 3101 Western Avenue,
Seattle, Washington 98121.
(5) Persons designated have entered into a Shareholders Agreement which
provides for certain restrictions on transfer and other rights described in
'Certain Transactions.'
(6) If the Underwriters' over-allotment option is exercised in full, Mr.
Kingson will offer an additional 75,000 shares and, after the Offering,
will beneficially own approximately 25.1% of the shares then outstanding.
(7) If the Underwriters' over-allotment option is exercised in full, Mr.
Ghandour and Ms. Ghandour will each offer an additional 37,500 shares,
respectively, and after the Offering will beneficially own approximately
25.1% of the shares then outstanding, respectively.
(8) If the Underwriters' over-allotment option is exercised in full, such group
will offer an additional 150,000 shares and, after the Offering will
beneficially own approximately 49.4% of the shares then outstanding.
(9) Includes 28,750 shares of Common Stock issuable upon exercise of options
held by certain executive officers and key employees other than Messrs.
Kingson and Ghandour.
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<PAGE>
CERTAIN TRANSACTIONS
As part of the Reorganization that resulted in the Company becoming the
successor to Aramex Hong Kong, on December 13, 1996 the Company subscribed for
100 Ordinary Shares of Aramex Hong Kong and each share of Aramex Hong Kong
outstanding prior to such subscription was converted by a special resolution of
the shareholders of Aramex Hong Kong into non-voting deferred shares (the
'Deferred Shares'). The Deferred Shares do not carry voting rights (other than
with respect to resolutions affecting their class rights) and are effectively
subordinated to the Ordinary Shares (all of which are held by the Company) in
respect of all dividends, distributions and liquidation rights until such time
as the holders of Ordinary Shares have received $100 billion. Messrs. Kingson
and Ghandour, Ms. Ghandour and Airborne Freight Corporation ('Airborne'), in
their capacity as shareholders of Aramex Hong Kong, retain a nominal interest in
Aramex Hong Kong through their ownership of the Deferred Shares.
On October 21, 1996, Aramex Hong Kong sold 195 shares of its Common Stock
to Airborne for an aggregate purchase price of $2,000,000 (the 'Airborne Stock
Purchase'). After the Reorganization became effective, such shares were
converted into 304,688 shares of Common Stock of the Company. In connection with
the Airborne Stock Purchase, Mr. William S. Kingson, Mr. Fadi Ghandour, Ms. Rula
Ghandour and Airborne entered into a Shareholders Agreement, as amended on
December 11, 1996 and December 12, 1996, which, among other things, provides
that in the event the Company transfers any shares of Common Stock to certain
listed competitors to Airborne or any other company primarily engaged in air,
freight or in express shipments, Airborne has the right to sell all of its
shares of Common Stock to the Company on the same terms and conditions as the
sale to such other company. In the event that Messrs. Kingson and Ghandour
and/or Ms. Rula Ghandour transfer any shares of Common Stock to certain listed
competitors of to Airborne or any other company primarily engaged in the
transportation of air freight or air express shipments, it shall be a condition
of such transfer that Airborne shall be offered the right to sell to such
competitor all of its shares of Common Stock on the same terms and conditions as
the sale by Messrs. Kingson and Ghandour and/or Ms. Rula Ghandour. 'Transfer' is
defined to mean the direct or indirect, through intermediaries or otherwise,
sale, transfer, distribution, assignment, bequest, pledge, hypothecation,
encumbrance, grant of security interest in, or grant, issuance, sale or
conveyance of any option, warrant or right to acquire, grant of a proxy to vote,
or other disposition of shares of Common Stock of the Company and is defined to
exclude a sale on the open market or the Transfer of shares by the Company in
connection with a strategic acquisition or similar transaction where the Company
(directly or through one or more subsidiaries) is the acquiring party. In
connection with the Airborne Stock Purchase, Airborne was granted certain
'piggyback' registration rights relating to their shares of Common Stock (which
have been waived in connection with this the Offering). In addition, under the
terms of the Airborne Stock Purchase, Airborne was granted the right to appoint
one Director to the Company's Board of Directors. On April 23, 1997, Mr. Roy
Liljebeck was designated by Airborne to be its Board designee.
MED was organized under the laws of the Isle of Jersey in 1996. Of the 100
shares of MED currently outstanding, the Company owns 80 shares (5 of which
shares were acquired in connection with the Company's initial public offering
from Mr. Hazem Malhas, the Chief Operating Officer, for nominal consideration)
and Mr. Yousef Ghandour owns 20 shares. Mr. Yousef Ghandour is Mr. Fadi
Ghandour's uncle.
The Company leases the premises currently occupied by the Company's London
operations from Mr. Ali Ghandour, the father of Fadi Ghandour, at an annual
rental of $88,000. The lease renews annually. The Company believes that the
terms of the lease are at least as favorable to the Company as those available
from unaffiliated third parties.
The Company leases the premises currently occupied by the Company's
corporate offices in Amman, Jordan, from ARAM, an investment company controlled
by the Ghandour family at an annual rental of $106,000, effective January 1,
1998. The lease renews annually. The Company believes that the terms of the
lease are at least as favorable to the Company as those available from
unaffiliated third parties. The Company is considering the acquisition of this
facility.
Ms. Asmahan Abboud, the sister of Fadi Ghandour, is, with her husband a 50%
shareholder in two of the Company's Lebanese subsidiaries. In addition, Ms.
Abboud and her husband own 25% of the outstanding capital stock of the Company's
Lebanese MED subsidiary. Ms. Abboud's interest in the capital and retained
earnings of the Company's Lebanese subsidiaries was $170,364 for 1997 and
$227,828 for 1996. Ms. Abboud and her
44
<PAGE>
husband's aggregate salary from these operations was $96,512 for 1997 and
$96,512 for 1996. Ms. Abboud and her husband received withdrawals from these
operations of $90,400 in 1997 and $51,155 in 1996.
The Company has entered into nominee shareholder agreements with Fadi
Ghandour and Ms. Raghida Ghandour, the sister of Fadi Ghandour, the owners of
78% and 22% of the share capital of Arab American International Express Company
(Aramex) Limited, the entity through which the Company conducts its Jordanian
operations. Mr. Ghandour and Ms. Ghandour have held their shares in Arab
American International Express Company (Aramex) Limited as nominees for the
Company since inception of its operations on April 3, 1982. However, in January
1995, the Company formalized the arrangement with Mr. Ghandour and Ms. Ghandour
pursuant to nominee shareholder agreements which have been subsequently amended
in connection with the Reorganization. Pursuant to such agreements, Mr. and Ms.
Ghandour confirmed that they are holding their respective shares in the name of
the Company and that they will abide by any written instructions given by the
Company concerning the shares. The Company agreed that they will reimburse and
indemnify Mr. and Ms. Ghandour for all expenses incurred in acquiring and
holding the shares. Arab American International Express Company (Aramex) Limited
has been included in the consolidated financial statements of the Company as a
wholly-owned subsidiary for all periods presented herein.
In 1997, Mr. Fadi Ghandour personally guaranteed bank overdrafts in Jordan
in the aggregate amount of $200,000.
45
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 15,000,000 shares
of Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred
Stock, par $.01 value per share. As of the date of this Prospectus 4,429,688
shares of Common Stock are outstanding. After giving effect to the sale of the
shares offered hereby, there will be 4,929,688 shares of Common Stock
outstanding.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote per share on
all matters submitted to a vote at a meeting of shareholders. Each shareholder
may exercise such vote either in person or by proxy. Shareholders are not
entitled to cumulate their votes for the election of directors, which means that
the holders of more than 50% of the Common Stock voting for the election of
directors can elect all of the directors to be elected by holders of Common
Stock, in which event the holders of the remaining Common Stock voting will not
be able to elect any director. The Company has a staggered Board of Directors.
Subject to preferences to which holders of Preferred Stock issued after the sale
of the Common Stock offered hereby may be entitled, the holders of Common Stock
are entitled to receive ratably such dividends, any, as may be declared from
time to time by the Board out of funds legally available therefor. The Company
does not presently anticipate paying cash dividends in the foreseeable future.
See 'Dividend Policy.' In the event of a liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets of the Company which are legally available for distribution to
shareholders, subject to the prior rights on liquidation of creditors and to
preferences to which holders of Preferred Stock issued after the sale of the
Common Stock offered hereby may be entitled. The holders of Common Stock have no
preemptive, subscription, redemption or sinking fund rights. The Common Stock
currently outstanding, and the Common Stock offered hereby, is or will be
validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Board has the authority to issue Preferred Stock in one or more series
and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption (including sinking fund provisions), redemption prices and
liquidation preferences, and the number of shares constituting and the
designation of any such series, without further vote or action by the
shareholders. At present, the Company has no plans to issue any of the Preferred
Stock and is not aware of any pending or proposed transaction that would be
affected by such an issuance.
BERMUDA LAW
The following discussion is based upon the advice of Conyers Dill &
Pearman, Bermuda counsel for the Company.
The Company is an exempted company under the Companies Act 1981 of Bermuda
(the 'Act'). The rights of the Company's shareholders, including those persons
who will become shareholders of the Company in connection with this Offering,
are governed by Bermuda law and the Company's Memorandum of Association and
Bye-laws. The Act differs in certain material respects from laws generally
applicable to United States corporations and their shareholders. The following
is a summary of certain provisions of Bermuda law and the Company's
organizational documents. This summary is not a comprehensive description of
such laws and documents and is qualified in its entirety by appropriate
reference to Bermuda law and to the organizational documents of the Company.
Dividends. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.
Voting Rights. Under Bermuda law, save as otherwise provided in the Act or
the Bye-laws of the Company, questions brought before a general meeting of
shareholders are decided by a majority vote of shareholders present and voting
at the meeting. The Company's Bye-laws provide that, subject to the provisions
46
<PAGE>
of the Act, any questions proposed for the consideration of the shareholders
will be decided by a simple majority of the votes cast, on a show of hands, with
each shareholder present and each person holding proxies for any shareholder
entitled to one vote, unless a poll is requested. If a poll is requested, each
shareholder present in person or by proxy has one vote for each share held. A
poll may only be requested under the Company's Bye-laws by (i) the Chairman of
the meeting, (ii) at least three shareholders present in person or by proxy,
(iii) any shareholder or shareholders, present in person or by proxy, holding
between them not less than 10% of the total voting rights of all shareholders
having the right to vote at such meeting, or (iv) a shareholder or shareholders
present in person or by proxy holding voting shares in the company on which an
aggregate sum has been paid equal to not less than 10% of the total sum paid up
on all such voting shares.
Rights in Liquidation. Under Bermuda law and the Bye-laws, in the event of
liquidation or winding up of a company, after satisfaction in full of all claims
of creditors and subject to the preferential rights accorded to any series of
preferred shares, the proceeds of such liquidation or winding up are distributed
pro rata among the holders of common shares.
Meetings of Shareholders. Under Bermuda law, a company is required to
convene at least one general shareholders' meeting per calendar year. Bermuda
law provides that a special general meeting may be called by the board of
directors and must be called upon the request of shareholders holding not less
than 10% of the paid-up capital of the company carrying the right to vote.
Bermuda law also requires that shareholders be given at least five days' advance
notice of a general meeting but the accidental omission to give notice to any
person does not invalidate the proceedings at a meeting. Under the Bye-laws of
the Company, at least five days' notice of the annual general meeting and of any
special general meeting must be given to each shareholder.
Under Bermuda law, the number of shareholders constituting a quorum at any
general meeting of shareholders is determined by the bye-laws of a company. The
Company's Bye-laws provide that the presence in person or by proxy of the
holders of more than 50% of the voting capital stock of the Company constitutes
a quorum.
Access to Books and Records and Dissemination of Information. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include a company's Certificate of Incorporation, its Memorandum of
Association (including its objects and powers) and any alteration to its
Memorandum of Association. The shareholders have the additional right to inspect
the bye-laws of the company, minutes of general meetings and the company's
audited financial statements, which must be presented at the annual general
meeting. The register of shareholders of a company is also open to inspection by
shareholders without charge and by members of the general public on the payment
of a fee. A company is required to maintain its share register in Bermuda but
may, subject to the provisions of the Act, establish a branch register outside
Bermuda. The Company maintains a share register in New York, New York. A company
is required to keep at its registered office a register of its directors and
officers which is open for inspection for not less than two hours in each day by
members of the public without charge. Bermuda law does not, however, provide a
general right for shareholders to inspect or obtain copies of any other
corporate records.
Election or Removal of Directors. Under Bermuda law and the Company's
Bye-laws, directors are elected or appointed at the annual general meeting and
shall serve until their term of office expires or until their successors are
elected or appointed, unless they are earlier removed or resign. The Company has
a staggered Board of Directors.
Under Bermuda law and the Bye-laws of the Company, a director may be
removed at a special general meeting of shareholders specifically called for
that purpose, provided the director is served with at least 14 days' notice. The
director has a right to be heard at such meeting. Any vacancy created by the
removal of a director at a special general meeting may be filled at such meeting
by the election of another director in his or her place or, in the absence of
any such election, by the Board of Directors.
Amendment of Memorandum of Association and Bye-laws. Bermuda law provides
that the Memorandum of Association of a company may be amended by a resolution
passed at a general meeting of shareholders of which due notice has been given.
An amendment to the Memorandum of Association other than an amendment which
alters or reduces a company's share capital as provided in the Act, also
requires the approval of the
47
<PAGE>
Bermuda Minister of Finance, who may grant or withhold approval at his
discretion. The Bye-laws may be amended by the Board of Directors if such
amendment is approved by the shareholders by a resolution passed by a majority
of votes cast at a general meeting.
Under Bermuda law, the holders of an aggregate of no less than 20% in par
value of a company's issued share capital or any class thereof have the right to
apply to the Bermuda Court for an annulment of any amendment of the Memorandum
of Association adopted by shareholders at any general meeting, other than an
amendment which alters or reduces a company's share capital as provided in the
Act. Where such an application is made, the amendment becomes effective only to
the extent that it is confirmed by the Bermuda Court. An application for the
annulment of an amendment of the Memorandum of Association must be made within
21 days after the date on which the resolution altering the company's memorandum
is passed and may be made on behalf of the persons entitled to make the
application by one or more of their number as they may appoint in writing for
the purpose. No such application may be made by persons voting in favor of the
amendment.
Appraisal Rights and Shareholder Suits. Under Bermuda law, in the event of
an amalgamation of two Bermuda companies, a shareholder who is not satisfied
that fair value has been paid for his shares may apply to the Bermuda Court to
appraise the fair value of his shares. The amalgamation of a company with
another company requires the amalgamation agreement to be approved by the board
of directors and, except where the amalgamation is between a holding company and
one or more of its wholly owned subsidiaries or between two or more wholly owned
subsidiaries of the same holding company, by meetings of the holders of shares
of each company and of each class of such shares. Under Bermuda law, an
amalgamation also requires the consent of the Bermuda Minister of Finance, who
may grant or withhold such consent at his discretion.
Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of is alleged to
be beyond the corporate power of the company or is illegal or would result in
the violation of the company's Memorandum of Association or Bye-laws.
Furthermore, consideration would be given by the Court to acts that are alleged
to constitute a fraud against the minority shareholders or, for instance, where
an act requires the approval of a greater percentage of the company's
shareholders than that which actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or compelling the purchase of the
shares of any shareholder, by other shareholders or by the company.
TRANSFER AGENT AND BRANCH REGISTRAR
The Transfer Agent and Branch Registrar for the Common Stock is the
Continental Stock Transfer and Trust Company, New York, New York.
48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Common Stock of the Company in the
public market could adversely affect the prevailing market prices for the Common
Stock and the ability of the Company to raise equity capital in the future. Upon
completion of the Offering, the Company will have outstanding 4,929,688 shares
of Common Stock (4,929,688 shares if the Underwriters' over-allotment option is
exercised in full). Of these shares, an aggregate of 2,150,000 shares will be
freely tradable in the public market, unless acquired by affiliates of the
Company. The remaining 2,779,688 shares held by existing shareholders will be
restricted securities as defined in Rule 144 under the Securities Act (the
'Restricted Shares'). Restricted Shares may be sold in the public market only if
registered under the Securities Act or qualified for an exemption from
registration under Rule 144 or 701, promulgated under the Securities Act.
Pursuant to lock-up agreements, all officers, directors and certain beneficial
holders of outstanding Common Stock who collectively beneficially own 3,212,550
shares have agreed not to sell or otherwise dispose of any beneficial interest
in such securities for a period of 180 days from the date of this Prospectus
(the 'Lock-up Period') without the prior written consent of the Representative,
provided, however, that any such person may make bona fide gifts of securities
of the Company to persons who agree in writing to be bound by the above
restrictions.
In general, under Rule 144, a person who has beneficially owned Restricted
Shares for at least one year (including the holding period of any prior owner
except an affiliate) would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of (i) one percent of the
number of shares of Common Stock then outstanding, or (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company at any time during
the 90 days preceding a sale, and who has beneficially owned the shares proposed
to be sold for at least two years (including the holding period of any prior
owner except an affiliate) is entitled to sell such shares without complying
with the manner of sale, public information, volume limitation or notice
provisions of Rule 144.
In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts 90 days after the Company becomes
subject to the reporting requirements of the Securities Exchange Act, in
reliance upon Rule 144, but without compliance with certain restrictions
including the holding period requirements contained in Rule 144.
49
<PAGE>
CERTAIN FOREIGN ISSUER CONSIDERATIONS
The following discussion is based on the advice of Conyers Dill & Pearman,
Bermuda counsel to the Company.
The Company has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority ('BMA'). Consent under the Exchange
Control Act 1972 (and regulations promulgated thereunder) has been obtained from
the BMA for the sale or transfer to non-residents of Bermuda for exchange
control purposes of the Common Stock being offered pursuant to the Offering. In
addition, prior to this Offering, this Prospectus will be filed with the
Registrar of Companies in Bermuda in accordance with Bermuda law.
IT MUST BE DISTINCTLY UNDERSTOOD THAT, IN GRANTING SUCH CONSENT AND
ACCEPTING THIS PROSPECTUS FOR FILING, THE BMA AND THE REGISTRAR OF COMPANIES IN
BERMUDA WILL ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF ANY
PROPOSAL OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS
EXPRESSED HEREIN.
Under Bermuda law, there are no limitations on the rights of non-Bermuda
resident owners of the Common Stock to hold or vote their shares. Because the
Company has been designated as a non-resident for Bermuda exchange control
purposes, there are no restrictions on its ability to transfer funds in and out
of Bermuda or to pay dividends to United States residents who are holders of the
Company's Common Stock, other than in respect of local Bermuda currency.
In the case of an applicant acting in a special capacity (for example, as
an executor or trustee), certificates may, at the request of the applicant,
record the capacity in which the applicant is acting. Notwithstanding the
recording of any such special capacity, the Company is not bound to investigate
or see to the execution of a trust pursuant to which any of its shares are held.
The Company will take no notice of any trust applicable to any of its shares
whether or not it had notice of such trust.
Under Bermuda law, the Company is an exempted company (that is, it is
exempted from the provisions of Bermuda law which stipulate that at least 60% of
the equity must be beneficially owned by Bermudians). Consents under The
Exchange Control Act 1972 of Bermuda (and regulations promulgated thereunder)
have been obtained for the issue and all subsequent transfers of the shares of
Common Stock offered by this Prospectus to and among persons not resident in
Bermuda for exchange control purposes. Persons regarded as residents of Bermuda
for exchange control purposes require specific consent under The Exchange
Control Act 1972 to acquire securities issued by the Company. The Act permits
companies to adopt bye-law provisions relating to the transfer of securities.
Neither Bermuda law, the Memorandum of Association nor the Bye-laws of the
Company impose limitations on the right of foreign nationals or nonresidents of
Bermuda to hold shares of the Company or vote such shares. Pursuant to the
provisions of Section 28 of the Act, there is no minimum subscription which must
be raised by the issue of the Common Stock to provide the funds required to be
provided in respect of the matters set forth in that section.
As an exempted company, the Company may not participate in certain business
transactions, including: (i) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years) without the express authorization of the
Bermuda legislature; (ii) the taking of mortgages on land in Bermuda to secure
an amount in excess of $50,000 without the consent of the Bermuda Minister of
Finance; (iii) the acquisition of bonds or debentures secured on land in
Bermuda, unless they are issued by the Bermuda Government or a public authority;
or (iv) the carrying on of business of any kind in Bermuda, except in certain
restricted circumstances such as carrying on business with another exempted
undertaking in furtherance of the business of the Company carried on outside
Bermuda or under a license granted by the Bermuda Minister of Finance. In
addition, present BMA policy permits no more than 20% of the share capital of an
exempted company to be held by Bermudians.
The Bermuda government actively encourages foreign investment in exempted
entities like the Company that are based in Bermuda but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign ownership, the Company is subject neither to taxes on its
income or dividends nor to any foreign exchange controls in Bermuda. In
addition, there is no capital gains tax in Bermuda, and profits can be
accumulated by the Company, as required, without limitation.
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The following is a summary of the law relating to the enforcement of
foreign judgments in Jordan and represents the opinion of Ali Sharif Zu'bi &
Sharif Ali Zu'bi Law Firm, Jordan counsel to the Company, that the enforcement
of foreign judgments in Jordan is governed by Law No. 8 of 1952. Basically, a
foreign judgment may be enforced in Jordan by means of an application to the
competent court without retrial and reexamination of the merits or issues of the
case. Jordanian courts may, however, decline to enforce a foreign judgment (i)
if the court which passed the judgment was without competent jurisdiction, (ii)
if the defendant has not carried on any business within the jurisdiction of the
court which passed the judgment or was not resident within its jurisdiction and
did not willfully appear before the court or did not recognize its jurisdiction,
(iii) if the defendant was not notified to appear before the court which issued
the judgment or was not duly or properly served with notice, (iv) if the
judgment has been passed in a fraudulent manner, (v) if the defendant is able
to persuade the court that the judgment is not final, (vi) if the judgment
contravenes Jordanian public policy, and (vii) if the laws of the country of the
court which passed the judgment do not recognize and enforce judgments of
Jordanian courts.
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TAXATION
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain of the principal United States
federal income tax consequences relating to an investment in the Common Stock as
of the date hereof and represents the opinion of Orrick, Herrington & Sutcliffe
LLP, special United States counsel to the Company. The summary is based on the
Internal Revenue Code of 1986 (the 'Code'), and existing final, temporary and
proposed Treasury Regulations, Revenue Rulings and judicial decisions, all of
which are subject to prospective and retroactive changes. The Company will not
seek a ruling from the Internal Revenue Service (the 'IRS') with regard to the
United States federal income tax treatment relating to an investment in the
Common Stock and, therefore, there can be no assurance that the IRS will agree
with the conclusions set forth below. The summary does not purport to address
all federal income tax consequences that may be relevant to particular
investors. For example, the summary applies only to holders who hold the Common
Stock as a capital asset within the meaning of Section 1221 of the Code, and
does not address the tax consequences that may be relevant to investors in
special tax situations (including, for example, life insurance companies,
tax-exempt organizations, dealers in securities or currency, banks or other
financial institutions, or investors that hold the Common Stock as part of a
hedge, straddle or conversion transaction). Further, it does not address the
alternative minimum tax consequences of an investment in the Common Stock or the
indirect consequences to holders of equity interests in investors in the Common
Stock. ACCORDINGLY, PERSONS CONSIDERING THE PURCHASE OF THE COMMON STOCK SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES
FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION, TO THEIR PARTICULAR SITUATIONS.
For purposes of this discussion, 'Company' refers to Aramex International
Limited and 'U.S. Holder' means a holder of Common Stock that is a citizen or
resident of the United States, a partnership or corporation created or organized
in the United States or any State thereof (including the District of Columbia),
or an estate or trust the income of which is subject to United States federal
income tax on a net income basis with respect to the Common Stock. The term
'non-U.S. Holder' refers to any holder of Common Stock other than a U.S. Holder.
Taxation of the Company
The Company believes that most of the Company's income currently is and,
according to the Company's plans set forth in 'Business' above, will be from
sources outside the United States and not be effectively connected with the
conduct by the Company of a trade or business within the United States. However,
the Company may decide in the future to directly engage in a trade or business
within the United States. The Company generally will not be subject to United
States federal income tax on its income from sources outside the United States
that is not effectively connected with the conduct of a trade or business within
the United States. If the Company is treated as engaged in the conduct of a
trade or business within the United States it will be subject to United States
federal income tax on its United States effectively connected income in the same
manner as if it were a United States corporation, and will be subject to a
United States branch profits tax equal to 30% of such effectively connected
income, subject to adjustments.
In addition, the Company may be classified as a personal holding company (a
'PHC') for United States federal income tax purposes if both of the following
tests are satisfied: (i) at any time during the last half of the Company's
taxable year, five or fewer individuals (without regard to their citizenship or
residency) own or are deemed to own under certain attribution rules more than
50% of the stock of the Company by value (the 'PHC Ownership Test') and (ii) the
Company receives 60% or more of its United States related gross income, as
specifically adjusted, from certain passive sources (the 'PHC Income Test'). A
corporation classified as a PHC is taxed (currently at a rate of 39.6%) on
certain of its undistributed United States source income (e.g., dividends from
United States corporations) and United States effectively connected income, to
the extent such income is not distributed to shareholders.
After this Offering, five or fewer individuals may own or be deemed to own
more than 50% of the Common Stock. Furthermore, the Company may receive
distributions from United States corporations after this Offering. As a result,
the PHC Ownership Test and the PHC Income Test may be satisfied after this
Offering. The
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Company currently intends to manage its affairs so as to minimize liability for
the PHC tax, but there can be no assurance that the Company will be successful
in minimizing such tax. Further, in the future the Company may determine that
the Company's funds are better used for purposes other than making the
distributions required to minimize such tax.
Taxation of U.S. Holders
Distributions of Common Stock. Distributions made by the Company with
respect to Common Stock generally will constitute dividends for federal income
tax purposes and will be taxable to a U.S. Holder as ordinary income to the
extent of the Company's undistributed current or accumulated earnings and
profits (as determined for United States federal income tax purposes).
Distributions in excess of the Company's current or accumulated earnings and
profits will be treated first as a nontaxable return of capital reducing the
U.S. Holder's tax basis in the Common Stock, thus increasing the amount of any
gain (or reducing the amount of any loss) which might be realized by such holder
upon the sale or exchange of such Common Stock. Any such distributions in excess
of the U.S. Holder's tax basis in the Common Stock will be treated as capital
gain to the U.S. Holder and will be either long-term or short-term capital gain
depending upon the U.S. Holder's federal income tax holding period for the
Common Stock. Dividends paid by the Company generally will not be eligible for
the dividends received deduction available to certain United States corporate
shareholders under Code Sections 243 and 245.
Sale or Exchange of Common Stock. A U.S. Holder of Common Stock generally
will recognize capital gain or loss upon the sale or exchange of the Common
Stock measured by the difference between the amount realized and the U.S.
Holder's tax basis in the Common Stock. The gain or loss on such disposition
will be long term capital gain or loss if the Common Stock has been held for
more than one year. For corporate taxpayers, long-term capital gains are taxed
at the same rates as ordinary income. For individual taxpayers, net capital
gains (the excess of net long-term capital gain over net short-term capital
loss) are subject to a maximum tax rate of 28%, reduced to 20% if the Common
Stock was held for more than 18 months. The deductibility of capital losses is
restricted and generally may only be used to reduce capital gains to the extent
thereof. However, individual taxpayers generally may deduct annually $3,000 of
capital losses in excess of their capital gains.
Passive Foreign Investment Company. A foreign corporation generally will
be treated as a passive foreign investment company (a 'PFIC') if, after applying
certain 'look-through' rules, either (i) 75% or more of its gross income is
passive income or (ii) 50% or more of the average value of its assets is
attributable to assets that produce or are held to produce passive income.
Passive income for this purpose generally includes dividends, interest, rents,
royalties and gains from securities and commodities transactions. The
look-through rules require a foreign corporation that owns at least 25%, by
value, of an operating subsidiary to treat that proportion of the subsidiaries
assets and income as held or received directly by the foreign parent.
The Company does not believe that it is currently a PFIC nor does it
anticipate that it will be a PFIC in the future because it expects that less
than 75% of its annual gross income will be passive income and less than 50% of
its assets will be passive assets, based on the look-through rules, the current
income and assets of the Company and its subsidiaries, and the manner in which
the subsidiaries are anticipated to conduct their businesses in the future.
However, there can be no assurance that the Company is not or will not be
treated as a PFIC in the future. If the Company were to be treated as a PFIC,
all U.S. Holders may be required, in certain circumstances, to pay an interest
charge together with tax calculated at maximum rates on certain 'excess
distributions,' including any gain on the sale of Common Stock. In order to
avoid this tax consequence, a U.S. Holder (i) may be permitted to make a
'qualified electing fund' election, in which case, in lieu of such treatment
would be required to include in their taxable income certain undistributed
amounts of the Company's income or (ii) may elect to mark-to-market the Common
Stock and recognize ordinary income (or possible ordinary loss) each year with
respect to such investment and on the sale or other disposition of the Common
Stock. Neither the Company nor its advisors have the duty to or will undertake
to inform U.S. Holders of changes in circumstances that would cause the Company
to become a PFIC. U.S. Holders should consult their own tax advisors concerning
the status of the Company as a PFIC at any point in time after the date of this
Prospectus. There can be no assurance that the Company will be willing or able
to take the action necessary for a U.S. Holder to make a 'qualified electing
fund' election in the event the Company is determined to be a PFIC.
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Controlled Foreign Corporation. If more than 50% of the stock (vote or
value) of the Company is owned, directly or indirectly, by U.S. Holders, each of
whom owns or is deemed to own under certain attribution rules 10% or more of the
total combined voting power of all classes of stock of the Company ('10%
Shareholder'), the Company will be treated as a 'controlled foreign corporation'
(a 'CFC') under Subpart F of the Code. One of the Company's existing
shareholders who is a 10% Shareholder may be considered as owning approximately
25% of the Common Stock immediately after this Offering. It is unclear how
controlling blocks of stock will be valued for these purposes. Accordingly, the
Company may be treated as a CFC for United States federal income tax purposes
even though 10% Shareholders do not own more than 50% of the outstanding Common
Stock.
The Company does not believe that it is a CFC and it is not anticipated
that the Company will become a CFC as a result of this Offering; however, no
assurance can be given that the Company will not be a CFC immediately after this
Offering or that it will not become a CFC as a result of future changes in its
ownership. If the Company were to be treated as a CFC, each 10% Shareholder
would be required to include in its taxable income as a deemed dividend its pro
rata share of certain undistributed income of the Company (which possibly could
be substantial) and certain investments by the Company in United States
property, and all or a portion of the gain from the sale or exchange of Common
Stock may be treated under Section 1248 of the Code as dividend income. Neither
the Company nor its advisors have the duty to or will undertake to inform U.S.
Holders of changes in circumstances that would cause the Company to become a
CFC. U.S. Holders should consult their own tax advisors concerning the status of
the Company as a CFC at any point in time after the date of this Prospectus.
Foreign Personal Holding Company. A foreign corporation may be classified
as a foreign personal holding company (a 'FPHC') for federal income tax purposes
if both of the following tests are satisfied: (i) at any time during the taxable
year five or fewer individuals who are United States citizens or residents own
or are deemed to own (under certain attribution rules) more than 50% of its
stock (vote or value) and (ii) at least 60% (50% for years subsequent to the
year in which it becomes a FPHC) of its gross income (regardless of its source),
as specifically adjusted, is 'foreign personal holding company income,' which
includes dividends, interest, rents, royalties and gain from the sale of stock
or securities.
The Company does not believe that it is currently a FPHC nor does it
anticipate that it will be a FPHC in the future; however, no assurance can be
given that the Company is not or will not become a FPHC as a result of future
changes of ownership or changes in the nature of the income of the Company. If
the Company were to be classified as a FPHC, each U.S. Holder would be required
to include in income as a taxable constructive dividend its pro rata share of
the Company's undistributed foreign personal holding company income.
Form 5471. Any U.S. Holder who owns 5% or more in value of the stock of
the Company may be required to file IRS Form 5471 with the IRS to report certain
acquisitions or dispositions of stock of the Company. In addition, annual
filings of IRS Form 5471 would be required (i) by any U.S. Holder of 10% or more
in value of the stock of the Company, if the Company were treated as a CFC or
FPHC, and (ii) by any U.S. Holder owning more than 50%, in voting power or
value, of the stock of the Company.
Taxation of Non-U.S. Holders
Distributions on Common Stock. Distributions made by the Company with
respect to the Common Stock to non-U.S. Holders who are not engaged in the
conduct of a trade or business within the United States will be subject to
United States federal income tax only if 25% or more of the gross income of the
Company (from all sources for the three-year period ending with the close of the
taxable year preceding the declaration of the distribution) was effectively
connected with the conduct of a trade or business in the United States by the
Company. The Company does not anticipate engaging in the conduct of a trade or
business within the United States, except through its subsidiaries. However, if
the 25% threshold for such period is exceeded, a portion of any distribution
paid by the Company to a non-U.S. Holder could be subject to federal income tax
withholding at the rate of 30%; the portion of the distribution that could be
subject to withholding would correspond to the portion of the Company's gross
income for the period that is effectively connected to its conduct of a trade or
business within the United States.
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Sale or Exchange of Common Stock. A non-U.S. Holder will not be subject to
United States federal income tax on any gain realized upon the sale or exchange
of the Common Stock if such holder has no connection with the United States
other than holding the Common Stock and in particular (i) such gain is not
effectively connected with a trade or business in the United States of the
non-U.S. Holder, (ii) in the case of a non-U.S. Holder who is an individual
which has a 'tax home' (as defined in Section 911(d)(3) of the Code) in the
United States, such non-U.S. Holder is not present in the United States for 183
days or more in the taxable year of such disposition, and (iii) the Company is
not and has not been at any time within 5 years preceding such disposition a
'U.S. real property holding corporation' (a 'USRPHC') for federal income tax
purposes.
The Company believes that it is not and does not currently intend to become
a USRPHC, but no assurance can be given that the Company is not or will not
become a USRPHC in the future. In general, if the Company is determined to be a
USRPHC then non-U.S. Holders may be subject to United States federal income tax
on the sale or exchange of the Common Stock, and to withholding at a rate of 10%
on any such disposition. However, a non-U.S. Holder will not be subject to these
special rules even if the Company is determined to be a USRPHC provided that (i)
such non-U.S. Holder did not at any time during the five years ending on the
date of sale or disposition actually or constructively own more than 5% of the
Common Stock of the Company and (ii) the Common Stock is then 'regularly traded'
on an established securities market in the United States. Since the Common Stock
is traded on the Nasdaq stock market and since it is regularly quoted by broker
dealers, the Common Stock should be considered to be 'regularly traded' on an
established securities market. However, it is possible to interpret the current
Temporary Regulations as concluding that the Common Stock will not be considered
'regularly traded' at any time during which 50% or more thereof is owned by 100
or fewer persons, which will be the case after this Offering and for some time
to come.
United States Business. A non-U.S. Holder engaged in a trade or business
in the United States whose income from the Common Stock (including gain from the
sale or exchange thereof) is effectively connected with the conduct of such
trade or business will generally be subject to regular United States federal
income tax on such income in the same manner as if it were a U.S. Holder. In
addition, if such a holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments.
Backup Withholding
Distributions made by the Company with respect to the Common Stock and the
gross proceeds received from the disposition of the Common Stock may be subject
to certain information reporting to the IRS and to a 31% backup withholding tax.
However, backup withholding generally will not apply to payments made to certain
exempt recipients (such as a corporation or financial institution) or to a
holder who furnishes a correct taxpayer identification number or provides a
certificate of foreign status and provides certain other required information.
If backup withholding applies, the amount withheld is not an additional tax, but
is credited against such holder's United States federal income tax liability.
CERTAIN BERMUDA TAX CONSIDERATIONS
This section is a summary of the principal Bermuda tax considerations that
may be relevant to prospective purchasers of the Common Stock. Conyers Dill &
Pearman, special Bermuda counsel to the Company has delivered an opinion to the
Company to the effect that the discussion set forth below, to the extent that it
relates to matters of Bermuda tax consideration, is accurate in all material
respects. At the present time, there is no Bermuda income or profits tax,
withholding tax, capital gains tax, capital transfer tax, estate duty or
inheritance tax payable by a Bermuda company or its shareholders, other than
shareholders ordinarily resident in Bermuda. The Company has obtained an
assurance from the Minister of Finance under the Exempted Undertakings Tax
Protection Act 1966 that, in the event that any legislation is enacted in
Bermuda imposing any tax computed on profits or income, or computed on any
capital asset, gain or appreciation, or any tax in the nature of an estate duty
or inheritance tax, such tax shall not, until March 28, 2016, be applicable to
the Company or to any of its operations or to the shares, debentures or other
obligations of the Company except insofar as such tax applies to persons
ordinarily resident in Bermuda or any tax payable pursuant to the Land Tax Act
1967 in relation to any land leased to the Company. Therefore, there will be no
Bermuda tax consequences with respect to the sale of the Common Stock or with
respect to distributions in respect of the Common Stock. As an exempted company,
the
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Company is liable to pay in Bermuda an annual fee based upon its authorized
share capital and the premium on its shares.
OTHER COUNTRIES
The Company (and its subsidiaries) will likely be subject to tax on income
earned in each of the countries in which it does business (directly or through
subsidiaries or joint ventures). In addition, dividends from the Company's
subsidiaries may be subject to withholding tax when paid to the Company. The
Company has not to date analyzed the tax consequences of doing business in any
jurisdiction other than those described above.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the 'Underwriters'), for whom Scott & Stringfellow,
Inc. is acting as representative (the 'Representative'), have severally agreed
to purchase from the Company and the Selling Shareholders, and the Company and
the Selling Shareholders have agreed to sell to the Underwriters, the respective
number of shares of Common Stock set forth opposite each Underwriter's name
below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Scott & Stringfellow, Inc...................................................
----------------
Total............................................................. 1,000,000
----------------
----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the Shares are subject to certain conditions. The
nature of the Underwriters' obligation is such that they are committed to
purchase and pay for all of the Shares if any are purchased.
The Underwriters propose to offer the Shares directly to the public at the
public offering price set forth on the cover page of the Prospectus and to
certain securities dealers at such price less a concession not in excess of
$ per share. The Underwriters may allow, and such selected dealers may
reallow to certain dealers a discount, not in excess of $ per share. After
this Offering, the public offering price, concession, allowance and reallowance
may be changed by the Representative.
The Selling Shareholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
150,000 additional shares of Common Stock, at the public offering price less the
underwriting discount, as set forth on the cover page of the Prospectus. To the
extent the option is exercised, the Underwriters will become obligated, subject
to certain conditions, to purchase such additional shares of Common Stock in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only for the purpose of covering
over-allotments, if any, made in connection with this Offering. If purchased,
the Underwriters will offer such additional shares on the same terms as those on
which the initial 1,000,000 shares are being offered.
The Company and the Selling Shareholders have agreed, severally and not
jointly, to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments that the
Underwriters may be required to make in respect thereof.
The Company has agreed not to issue, and all its officers and directors who
own Common Stock have agreed that they will not, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise dispose of any shares of Common Stock of the Company or any securities
convertible into, or exchangeable for, any shares of Common Stock or any other
capital stock of the Company, for a period of 180 days from the date of this
Prospectus, subject to certain limited exceptions, without the prior written
consent of the Representative. See 'Shares Eligible for Future Sale.'
The Underwriters and dealers may engage in passive market making
transactions in the Common Stock in accordance with Rule 103 of Regulation M
promulgated by the Commission. In general, a passive market maker may not bid
for, or purchase, the Common Stock at a market price that exceeds the highest
independent bid. In addition, the net daily purchases made by any passive market
maker generally may not exceed the greater of 30% of its average daily trading
volume in the Common Stock during a specified two month prior period, or 200
shares. A passive market maker must identify passive market making bids as such
on the Nasdaq electronic inter-dealer reporting system. Passive market making
may stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters and dealers are not required to engage in
passive market making and may end passive market making activities at any time.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the Common Stock for
their own account. In
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addition, to cover overallotments, syndicate short positions or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the Offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
LEGAL MATTERS
The validity of the Stock of Common Stock offered hereby and certain other
matters of Bermuda law will be passed upon for the Company by Conyers Dill &
Pearman, located in Hamilton, Bermuda. Ali Sharif Zu'bi & Sharif Ali Zu'bi Law
Firm, located in Amman, Jordan, has acted as counsel to the Company and certain
of the Selling Shareholders with respect to certain matters of Jordanian law.
Certain legal matters with respect to United States law will be passed upon for
the Company and certain of the Selling Shareholders by Orrick, Herrington &
Sutcliffe LLP, located in New York, New York. Certain legal matters will be
passed upon for the Underwriters by Hunton & Williams, located in Richmond,
Virginia.
EXPERTS
The financial statements included in this prospectus and elsewhere in the
registration statement, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen and are included herein in
reliance upon the authority of said firms as experts in giving said reports.
With respect to the financial statements for 1995 and 1996, Arthur Andersen's
report states that with respect to certain subsidiaries its report is based on
the reports of other independent public accountants, including Dr. Mohamed
Al-Amri & Co., Mehta & Tengra, and Edward Isaacs & Company, LLP.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission'), Washington, D.C. 20549, a registration statement on Form F-1
(together with all amendments and exhibits thereto, the 'Registration
Statement') under the Securities Act of 1933, as amended (the 'Securities Act').
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted from this Prospectus
in accordance with the Commission's rules and regulations. For further
information, reference should be made to the Registration Statement and to the
exhibits filed thereto. For further information with respect to the Company and
the Common Stock, reference is made to the Registration Statement and the
exhibits and schedules thereto which may be inspected without charge or copied
at the public reference facilities of the Commission at 450 Fifth Street, N.W,
Washington, D.C. 20549, 7 World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Commission's
Public Reference Section at prescribed rates. Registration statements
transmitted through the Commission's Electronic Data Gathering, Analysis and
Retrieval System are also publicly available through the Commission's Internet
site on the World Wide Web (http://www.sec.gov). Descriptions contained in this
Prospectus as to the contents of any contract or other documents filed as an
exhibit to the Registration Statement are not necessarily complete and each such
description is qualified by reference to such contract or document.
The Company's Common Stock is listed on the Nasdaq National Market under
the symbol 'ARMXF' and reports and other information concerning the Company may
be inspected at the offices of The Nasdaq Stock Market, Inc., 1735 K Street,
N.W. Washington, D.C. 20006, and its Internet site on the World Wide Web is
http://www.Nasdaq.com.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and an opinion thereon expressed by
independent certified public accountants and quarterly reports for the first
three quarters of each fiscal year containing unaudited financial information.
Such audited financial statements and unaudited quarterly financial information
will be prepared in accordance with International Accounting
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Standards (with reconciliations to generally accepted accounting principles in
the United States). While the Company is exempt from the rules under the
Exchange Act prescribing the content and distribution of proxy statements, it
intends to substantially comply with the rules governing the preparation of
proxy statements and the solicitation of proxies (excluding provisions requiring
disclosures relating to corporate reorganizations, and the inclusion of
shareholder proposals in proxy materials prepared by the Company) to the extent
deemed advisable by the Company under the circumstances of particular
solicitations. In addition, requirements with regard to the accuracy of proxy
disclosures will be governed by certain Bye-law provisions interpreted under
Bermuda law. The Company has been advised that, under Bermuda law, the record
owners of Common Stock will, to the extent indicated in the Company's Bye-laws,
also be bound by such principles incorporated from Commission rules relating to
proxy statements and the solicitation of proxies.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets at December 31, 1997 and 1996.................................................. F-3
Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995..................... F-4
Statement of Changes in Shareholders' Equity for the Years Ended December 31, 1997, 1996 and 1995.......... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
Other Auditors' Reports on certain Consolidated Financial Statements (separate financial statements not
included herein)......................................................................................... F-19
</TABLE>
F-1
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN]
Arthur Andersen & Co.
Certified Public Accountants
BMB Centre Diplomatic Area
P.O. Box 20323 Manama Bahrain
Telephone 530400 Fax 530321
C.R. No. 8877
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders and Board of Directors of
Aramex International Limited
We have audited the accompanying consolidated balance sheets of ARAMEX
International Limited (a Bermuda Corporation as defined in Note 1 to
consolidated financial statements) and subsidiaries as of December 31, 1997 and
1996 and the related consolidated statements of income, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the
financial statements of certain subsidiaries operating in Saudi Arabia (1995
only), United Kingdom, United States and France, which reflect total assets and
total revenue of 29 percent and 28 percent in 1996, and 41 percent and 39
percent in 1995, respectively, of the consolidated totals. Those statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for those entities is
based solely on the reports of the other auditors.
We conducted our audits in accordance with International Auditing Standards
which are substantially consistent with those in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of ARAMEX International Limited and subsidiaries as of
December 31, 1997 and 1996 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with International Accounting Standards.
/s/ ARTHUR ANDERSEN
-----------------------------
Arthur Andersen
Certified Public Accountants
Manama--Bahrain
February 10, 1998
F-2
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(IN THOUSANDS OF U.S. DOLLARS)
NOTES 1997 1996
----- ------- -------
ASSETS
Current assets:
Cash on hand and at banks........................ 3 $ 6,627 $ 2,335
Receivables, net................................. 4 15,592 11,694
Deferred income taxes............................ 14 54 37
Other current assets............................. 5 2,438 1,968
------- -------
Total current assets.......................... 24,711 16,034
Property, plant and equipment, net................. 6 5,012 2,811
Investments in affiliates, at cost................. 40 40
Other assets....................................... 941 487
------- -------
Total assets....................................... $30,704 $19,372
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to banks..................................... 8 $ 587 $ 715
Current portion of long-term debt................ 9 352 112
Trade payables................................... 6,305 5,239
Other current liabilities........................ 7 3,871 3,318
------- -------
Total current liabilities..................... 11,115 9,384
------- -------
------- -------
Long-term debt..................................... 9 456 130
Deferred income taxes.............................. 14 52 34
Other liabilities.................................. 2 1,337 915
------- -------
1,845 1,079
------- -------
Minority interests in subsidiaries................. 985 256
Shareholders' equity
Share capital.................................... 1,10 44 34
Additional paid in capital......................... 1,10 7,263 2,225
Cumulative translation adjustment.................. (5) 58
Retained earnings.................................. 9,457 6,336
------- -------
Total shareholders' equity......................... 16,759 8,653
------- -------
Total liabilities and shareholders' equity......... $30,704 $19,372
------- -------
------- -------
The accompanying Notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NOTES 1997 1996 1995
----- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues........................................................ 11 $ 66,330 $ 52,275 $ 43,602
Shipping costs.................................................. 12 (35,471) (28,080) (23,045)
---------- ---------- ----------
Gross profit.................................................. 30,859 24,195 20,557
Operating expenses.............................................. (10,682) (9,796) (7,986)
Selling, general and administrative expenses.................... (17,278) (12,003) (10,664)
---------- ---------- ----------
Operating income.............................................. 2,899 2,396 1,907
---------- ---------- ----------
Other income (expenses)
Interest income................................................. 365 -- --
Interest expenses............................................... (65) (102) (61)
(Loss) gain on sale of assets................................... (44) 14 (1)
Exchange (loss) gain............................................ (37) (13) 31
Other income.................................................... 142 71 69
---------- ---------- ----------
361 (30) 38
---------- ---------- ----------
Income before income taxes.................................... 3,260 2,366 1,945
Provision for income taxes...................................... 14 (170) (157) (266)
Minority interests.............................................. 31 (162) (157)
---------- ---------- ----------
Net income.................................................... $ 3,121 $ 2,047 $ 1,522
---------- ---------- ----------
---------- ---------- ----------
Basic Earnings per share........................................ 15 $ 0.71 $ 0.64 $ 0.49
---------- ---------- ----------
---------- ---------- ----------
Diluted earnings per share...................................... 15 $ 0.69 $ 0.64 $ 0.49
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of shares outstanding--basic............ 4,396,811 3,184,939 3,125,000
Weighted average number of shares outstanding--diluted.......... 4,523,047 3,184,939 3,125,000
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED EARNINGS
SHARE CAPITAL ADDITIONAL CUMULATIVE ----------------------------- TOTAL
----------------- PAID IN TRANSLATION UNAPPROPRIATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL ADJUSTMENTS LEGAL RESERVE EARNINGS EQUITY
--------- ------ ---------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 ..... 3,125,000 31 $ 228 $(137) $46 $2,721 $ 2,889
Net income...................... -- -- -- -- 4 1,518 1,522
Translation adjustment.......... -- -- -- (7) -- -- (7)
--
--------- ---------- ----------- --- ------- --------------
Balance at December 31, 1995 . 3,125,000 31 228 (144) 50 4,239 4,404
Issuance of shares.............. 304,688 3 1,997 -- -- -- 2,000
Net income...................... -- -- -- -- 25 2,022 2,047
Translation adjustment.......... -- -- -- 202 -- -- 202
--
--------- ---------- ----------- --- ------- --------------
Balance at December 31, 1996 . 3,429,688 34 2,225 58 75 6,261 8,653
Issuance of shares.............. 1,000,000 10 5,038 -- -- -- 5,048
Net income...................... -- -- -- -- -- 3,121 3,121
Translation adjustment.......... -- -- -- (63) -- -- (63)
--
--------- ---------- ----------- --- ------- --------------
Balance at December 31, 1997 . 4,429,688 44 $7,263 $ (5) $75 $9,382 $ 16,759
--------- -- ---------- ----------- --- ------- --------------
--------- -- ---------- ----------- --- ------- --------------
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements
F-5
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Income before income taxes...................................................... $ 3,260 $ 2,366 $ 1,945
Adjustments to reconcile income before tax to net cash from operating
activities:
Depreciation............................................................... 1,319 868 891
Loss (gain) on sale of assets.............................................. 44 (14) 1
------- ------- -------
4,623 3,220 2,837
Increase in receivables.................................................... (3,898) (2,625) (484)
Increase in other current assets........................................... (470) (1,144) (125)
Increase (decrease) in payables............................................ 1,066 578 (1,065)
Increase (decrease) in other liabilities................................... 422 173 (307)
Increase in other current liabilities...................................... 553 477 659
Other...................................................................... 34 (10) 13
------- ------- -------
Cash generated from operations.......................................... 2,330 669 1,528
Income taxes paid.......................................................... (217) (198) (62)
------- ------- -------
Net cash from operating activities...................................... 2,113 471 1,466
------- ------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment....................................... (3,841) (1,029) (757)
Proceeds from sale of assets.................................................... 234 48 67
Increase in other assets........................................................ (454) (159) (180)
------- ------- -------
Net cash used in investing activities........................................ (4,061) (1,140) (870)
------- ------- -------
Cash flows from financing activities:
Due to banks, net............................................................... (128) (62) 435
Proceeds from long term loan.................................................... 678 238 5
Repayment of long term debt..................................................... (112) (141) (95)
Issuance of shares.............................................................. 5,048 2,000 --
Proceeds from issue of common stock to minority interests....................... 894 214 266
Payments to minority interests.................................................. (134) (197) (929)
Due to shareholders, net........................................................ -- (396) 71
------- ------- -------
Net cash from (used in) financing activities................................. 6,246 1,656 (247)
------- ------- -------
Effect of exchange rate changes on cash........................................... (6) 7 (2)
------- ------- -------
Net increase in cash on hand and at banks......................................... 4,292 994 347
Cash on hand and at banks, beginning of year...................................... 2,335 1,341 994
------- ------- -------
Cash on hand and at banks, end of year............................................ $ 6,627 $ 2,335 $ 1,341
------- ------- -------
------- ------- -------
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BUSINESS AND ORGANIZATION
ARAMEX International Limited, ('ARAMEX' or the 'Company') was incorporated
under the laws of Bermuda on October 31, 1996 to be the successor to ARAMEX
International, Limited, a Hong Kong company which was incorporated in February
1986 ('ARAMEX Hong Kong').
On December 13,1996, ARAMEX subscribed for 100 shares of ARAMEX Hong Kong
(the 'Ordinary Shares') and each share of ARAMEX Hong Kong outstanding prior to
such subscription was converted by a special resolution of the Shareholders of
ARAMEX Hong Kong into non-voting deferred shares (the 'Deferred Shares')
(collectively, the 'Reorganization'). The Deferred Shares do not carry voting
rights (other than in respect of resolutions affecting their class rights) and
are effectively subordinated to the Ordinary Shares (all of which are held by
ARAMEX) in respect of all dividends, distributions and liquidation rights until
such time as the holders of Ordinary Shares have received $100 billion.
Accordingly, no value has been assigned to the Deferred Shares. Pursuant to the
Reorganization, ARAMEX became the parent holding company of ARAMEX Hong Kong.
The existing shareholders of ARAMEX Hong Kong will retain a nominal interest in
ARAMEX Hong Kong through their ownership of the Deferred Shares. ARAMEX Hong
Kong transferred its properties, assets and other claims, rights and interests
which were directly or indirectly, owned, licensed or used by it to ARAMEX
subject to certain conditions.
ARAMEX has an authorized share capital of 15,000,000 shares of common stock
with a par value of $0.01 per share. The Company is also authorized to issue
5,000,000 shares of preferred stock with a par value of $ 0.01 per share, none
of which has been issued or is outstanding.
Principal Activities
ARAMEX provides express delivery and freight forwarding services from its
main stations (hubs) in Dubai, London, New York and Amman primarily to, from and
within destinations in the Middle East. ARAMEX's operations are controlled
through a regional office which was registered in Jordan on March 15, 1988 under
the name of ARAMEX International Limited (the 'Regional Office') pursuant to the
foreign companies law No. (58) of 1985. The operations of the Regional Office
are facilitated by the hubs of the ARAMEX network.
Effective January 1, 1996, the Company formally inaugurated its direct
marketing and mail order catalog service at certain stations in the Middle East.
The service, called Middle East Direct ('MED'), provides assistance to customers
in selecting, ordering and delivering merchandise through catalogs of retail
companies based principally in the United States and Western Europe.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation
The consolidated financial statements of the Company have been prepared in
accordance with International Accounting Standards (IAS). For purposes of these
financial statements, there are no significant differences between the Company's
accounting principles utilized and the accounting principles generally accepted
in the United States.
b) Principles of consolidation
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries that are controlled directly and indirectly through
agreements that provide the Company with authority to govern the financial and
operating affairs of the subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
F-7
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Following is a listing of the subsidiaries, comprising the consolidated
financial statements together with the respective percentage and investment
amounts owned by ARAMEX International Limited:
<TABLE>
<CAPTION>
INVESTMENT OWNERSHIP
---------------- --------------------
1997 1996 1997 1996 1995
------ ------ ---- ---- ----
SUBSIDIARIES
------------
<S> <C> <C> <C> <C> <C>
Amman.......................................................... $ 474 $ 249 100% 100% 100%
Damascus....................................................... 6 6 60 60 60
Beirut**....................................................... 0 0 50 50 50
Beirut CGO**................................................... 1 1 50 50 50
Cairo**........................................................ 8 8 49 49 49
Dubai.......................................................... 245 245 100 100 100
Abu Dhabi...................................................... 75 75 100 100 100
Doha........................................................... 20 20 100 100 100
Bahrain........................................................ 3 3 100 100 100
Jeddah**....................................................... 80 80 50 50 50
Nicosia........................................................ 0 0 100 100 100
Paris.......................................................... 36 36 100 100 85
London......................................................... 804 804 100 100 100
Washington, D.C................................................ 15 15 100 100 100
New York....................................................... 1,000 1,000 100 100 100
Texas*......................................................... -- -- -- -- 99
Montreal**..................................................... 7 7 19.5 19.5 19.5
Kuwait......................................................... 0 0 100 100 100
New Jersey..................................................... 82 82 100 100 51
Athens......................................................... 228 228 100 100 100
Jerusalem...................................................... 0 0 100 100 --
Palestine...................................................... 100 -- 100 -- --
Ramallah....................................................... 54 -- 51 -- --
MED............................................................ 218 17 80 80 --
</TABLE>
- ------------------
* The Houston station was closed in 1995.
** Controlled through shareholder agreements.
c) Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates.
d) Concentration of risk in geographic area
The Company derived approximately 78%, 75% and 71%, respectively, of 1997,
1996 and 1995 revenues from operations in the Middle East. The risk of doing
business in this region could adversely affect the Company, as the region has
been subject to many destabilizing political and economic factors over the
years.
F-8
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
e) Revenue recognition
Revenues are recognized when shipments are completed. For 'door-to-door'
shipments, revenues are recognized upon delivery of freight at the destination.
For other shipments, revenues are recognized upon delivery of freight to the air
carrier, at which time, the revenue process is completed.
Certain customers pay in advance, giving rise to deferred revenue.
f) Translation of the financial statements of foreign stations
The Company's functional currency is the United States Dollar. The
financial statements of foreign subsidiaries where the local currency is the
functional currency (substantially all stations) are translated into U.S Dollars
using exchange rates in effect at period end for assets and liabilities and
average exchange rates during each reporting period for results of operations.
Adjustments resulting from translation of financial statements are reflected as
a separate component of shareholders' equity.
Exchange gains and losses resulting from transactions of the Company and
its subsidiaries which are made in currencies different from their own are
included in income as they occur.
g) Property, plant and equipment
Property, plant and equipment are recorded at cost and are depreciated over
their estimated useful lives using primarily the straight-line method.
The estimated useful lives of these assets are:
Furniture and fixtures............................ 7 years
Office equipment.................................. 7 years
Computers......................................... 5 years
Vehicles.......................................... 5 years
Assets held under capital leases are depreciated over the shorter of the
lease terms and the useful lives of the assets.
h) Income taxes
The Company provides income taxes in accordance with IAS 12. As an offshore
company incorporated in Bermuda, profits from operations of foreign subsidiaries
are not subject to Bermudan taxes. For certain operations in the Middle East,
the Company is exempt from income taxes. For other operations, deferred income
taxes have been provided, using the liability method under IAS 12, for the
difference between the book and tax bases of assets and liabilities.
Deferred income taxes have not been provided on the undistributed earnings
of subsidiaries operating outside of Bermuda, as such earnings are expected to
be indefinitely reinvested or, if distributed, are expected to be distributed
tax free.
i) Employee termination indemnities
Certain of the Company's subsidiaries are required, by the labor law of
each related country, to provide indemnity payments upon termination of
relationship with their employees. The benefit accrues to employees on a
pro-rata basis during their employment period and is based on each employee's
current salary. Other liabilities in the accompanying Consolidated Financial
Statements reflects the maximum amounts of the indemnities as of the balance
sheet dates of $1,212 and $855, respectively, at December 31, 1997 and 1996.
F-9
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
3. CASH ON HAND AND AT BANKS
Cash on hand and at banks as of December 31, 1997 in cludes compensating
balances of $300 maintained by the Company to support the Company's lines of
credit.
4. RECEIVABLES
This item consists of the following:
1997 1996
------- -------
Trade receivables................................. $15,902 $11,917
------- -------
Employee advances................................. 556 516
------- -------
16,458 12,433
Less: Allowance for doubtful accounts............. (866) (739)
------- -------
$15,592 $11,694
------- -------
------- -------
All employee advances bear no interest and are due within one year.
Geographic concentrations of accounts receivables as of December 31, 1997
and 1996 are the following:
1997 1996
------ ------
Middle East........................................ 77.4% 71.1%
Europe............................................. 17.5% 22.5%
North America...................................... 5.1% 6.4%
Management believes that all receivables, net of related allowances, will
be collected in due course.
Movements in the allowance for doubtful accounts are as follows:
1997 1996 1995
----- ----- -----
Balance--Beginning of the year................... $ 739 $ 960 $ 860
Provision........................................ 433 125 268
Write-offs....................................... (306) (346) (168)
----- ----- -----
Balance--End of the year......................... $ 866 $ 739 $ 960
----- ----- -----
----- ----- -----
5. OTHER CURRENT ASSETS
This item consists of the following:
1997 1996
------ ------
Prepaid expenses............................ $ 793 $ 658
Share issuance expenses..................... -- 240
Refundable deposits......................... 398 313
Advances.................................... 314 41
Tax withholdings............................ 242 307
Supplies and stationary..................... 448 274
Accrued interest receivable................. 157 --
Other....................................... 86 135
------ ------
$2,438 $1,968
------ ------
------ ------
F-10
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
6. PROPERTY, PLANT AND EQUIPMENT
This item consists of the following:
Costs:
<TABLE>
<CAPTION>
AT THE
BEGINNING EXCHANGE AT THE END
OF THE YEAR PURCHASES DISPOSALS DIFFERENCES OF THE YEAR
----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Land................................................. -- $ 249 -- -- $ 249
Furniture and fixtures............................... 1,542 848 (1) (24) 2,365
Office equipment..................................... 889 445 (22) (34) 1,278
Computers............................................ 1,696 942 (134) (11) 2,493
Vehicles............................................. 1,504 1,357 (371) (19) 2,471
--------- -------- ------- -------- ---------
$ 5,631 $ 3,841 $ 528 $ (88) $8,856
--------- -------- ------- -------- ---------
--------- -------- ------- -------- ---------
</TABLE>
Accumulated depreciation:
<TABLE>
<CAPTION>
AT THE
BEGINNING DEPRECIATION EXCHANGE AT THE END
OF THE YEAR EXPENSES DISPOSALS DIFFERENCES OF THE YEAR
----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Furniture and fixtures............................. $ 734 $ 355 -- $ (16) $1,073
Office equipment................................... 423 190 (8) (15) 590
Computers.......................................... 877 319 (24) (4) 1,168
Vehicles........................................... 786 455 (218) (10) 1,013
--------- --------- ------- -------- ---------
2,820 $1,319 $(250) $ (45) 3,844
--------- --------- ------- -------- ---------
Net book value..................................... $ 2,811 $5,012
--------- ---------
--------- ---------
</TABLE>
The net book value of assets included above which are held under capital
leases is $676 as of December 31, 1997.
7. OTHER CURRENT LIABILITIES
This item consists of the following:
1997 1996
------ ------
Accrued expenses................................. $2,149 $1,211
Deferred revenue................................. 600 685
Income taxes payable............................. 328 376
Social securities and taxes payable.............. 436 541
Sales taxes and other............................ 217 311
Other............................................ 141 194
------ ------
$3,871 $3,318
------ ------
------ ------
8. DUE TO BANKS
ARAMEX and its subsidiaries maintain lines of credit with various banks in
the aggregate of $538 and $348, respectively, at December 31, 1997 and 1996. At
December 31, 1997 and 1996, the Company had $328 and $269 outstanding under
these lines of credit. Some of the lines of credit are personally guaranteed by
Mr. Fadi Ghandour and secured by a mortgage debenture over the assets of Aramex
(UK) International Courier Limited. The weighted average interest rates on the
Company's lines of credit were 12.8% and 11.9% at December 31, 1997 and 1996,
respectively. The remaining balances of $259 and $446 in Due to Banks as of
December 31, 1997 and 1996, respectively, represent bank overdrafts.
F-11
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
9. LONG TERM DEBT
This item consists of the following:
1997 1996
----- -----
Long term loan(a).................................. $ 88 $ 145
Long term notes payable(b)......................... 44 97
Capital lease obligations (c)...................... 676 --
----- -----
808 242
Less: current maturities........................... (352) (112)
----- -----
Long term portion.................................. 456 130
----- -----
----- -----
(a) Long term loan
This represents a bank loan at a fixed interest rate of 9.875%. The loan is
denominated in Great Britain pounds and is secured by a mortgage debenture over
the assets of Aramex (UK) International Courier Limited.
(b) Long term notes payable
This represents various vehicle notes payable in monthly installments with
original average maturities of three years, at interest rates ranging from 6.75%
to 16%. Long term notes payable including current maturities are payable in
various currencies including the U.S. Dollars.
The aggregate amounts of annual principal maturities of long-term loan and
notes payable are as follows:
DECEMBER 31
-----------
1998............................... $94
1999............................... 38
2000............................... --
(c) Capital lease obligations
<TABLE>
<CAPTION>
1997 1996
----- ----
<S> <C> <C>
Capital lease obligations in respect of vehicles and telephone
equipment......................................................... $ 676 --
Less: current maturities............................................ (258) --
----- ----
Long term portion................................................... 418 --
----- ----
----- ----
</TABLE>
Future minimum annual payments under all noncancellable capital leases are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
<S> <C>
1998........................................................ $ 316
1999........................................................ 347
2000........................................................ 101
2001........................................................ 6
2002........................................................ 1
--------
Total minimum lease payments................................ 771
Less: interest component.................................... (95)
--------
Present value of minimum lease payments..................... $ 676
--------
--------
</TABLE>
F-12
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
10. SHARE CAPITAL
ARAMEX has an authorized share capital of 15,000,000 shares of common stock
with a par value of $0.01 per share. The Company is also authorized to issue
5,000,000 shares of preferred stock with a par value of $0.01 per share, none of
which has been issued or is outstanding.
On January 13, 1997, the Company completed an initial public offering of
1,000,000 shares of common stock on the Nasdaq National Market at a price of $7
per share. The net proceeds of the issue received by the Company, (after
deducting underwriting discounts, commissions and other costs associated with
the offering), were approximately $5,048.
On January 29, 1997, the underwriters exercised their over-allotment option
(which was granted by the Selling Shareholders), on 150,000 shares of the
Company's common stock. The Company has also agreed to sell, for a nominal
price, to the Underwriters, warrants to purchase up to 100,000 shares of its
common stock at an exercise price of $8.40 per share. The warrants are not
redeemable, and are exercisable during a four-year period commencing January 13,
1998. The warrants provide, subject to certain conditions, for a period of four
years commencing on January 13, 1998, one 'demand' registration right and will
provide, subject to certain conditions, for a period of three years commencing
January 13, 1999, certain 'piggyback' registration rights.
The following options have been granted under the Company's Stock Option
Plan:
<TABLE>
<CAPTION>
BALANCE AT THE BALANCE AT
BEGINNING OF THE GRANTED DURING EXERCISED DURING THE END OF EXERCISE
YEAR THE YEAR THE YEAR THE YEAR PRICE
---------------- -------------- ---------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Mr. F. Ghandour......................... -- 100,000 -- 100,000 $ 7.00
Mr. W. Kingson.......................... -- 100,000 -- 100,000 $ 7.70
Officers & managers..................... -- 100,000 -- 100,000 $ 7.00
-- --
----------- ---------
-- 300,000 -- 300,000
-- ----------- -- ---------
-- ----------- -- ---------
</TABLE>
The Plan provides for the granting of incentive stock options and
nonqualified stock options. The total number of shares available for grant under
the Plan shall not exceed 400,000. The option price shall not be less than 100%
of the fair market value of the Company's share on the date of the grant. In the
case of an incentive stock option recipient possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
subsidiaries, the option price shall not be less than 110 % of the fair market
value of the Company's share on the date of the grant. On January 13, 1997, Mr.
Fadi Ghandour (CEO), was granted nonqualified options to purchase 100,000 shares
of common stock at an option price of $7 per share. The options are exercisable
for a period of ten years from the date of vesting. Fifty percent of these
options vested on January 13, 1997 and the other fifty percent vested six months
from said date. On January 13, 1997, Mr. William Kingson (Chairman), was granted
incentive stock options to purchase 100,000 shares of common stock at an option
price of $7.7 per share. The options are exercisable for a period of five years
from the date of vesting. Fifty percent of these options have vested on January
13, 1997 and the other fifty percent vested six months from said date.
Stock options to purchase an additional aggregate 100,000 shares of common
stock at an exercise price equal to $7 per share have been granted on January
13, 1997 to certain of the Company's executive officers and managers. These
options will vest over a five-year period on the basis of one-quarter each year
following the first anniversary of the grant of such options.
International Accounting Standards do not require compensation expense to
be recognized for stock options. Under United States generally accepted
accounting principles, stock options are accounted for in accordance with the
provisions of Statement of Financial Accounting Standard No. 123, 'Accounting
for Stock-Based Compensation' (SFAS 123). As permitted by SFAS 123, the Company
has elected to account for stock-based compensation using the intrinsic value
method under Accounting Principles Board Opinion No. 25. Accordingly no
compensation expense has been recognized for stock options. If compensation
expense for the Company's
F-13
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
10. SHARE CAPITAL--(CONTINUED)
stock options issued in 1997 had been determined based on the fair value method
of accounting, as defined in SFAS 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:
1997
------
Net income:
As reported........................................... $3,121
Pro forma............................................. 2,338
Basic earnings per share:
As reported........................................... 0.71
Pro forma............................................. 0.53
Diluted earnings per share
As reported........................................... 0.69
Pro forma............................................. 0.52
The fair value of granted stock options is estimated on the date of the
grant using a variant of the Black-Scholes option pricing model incorporating
the following assumptions:
Expected share price volatility........................... 34.4%
Risk free interest rate................................... 6.4%--6.8%
Expected life of options.................................. 5 to 10 years
The weighted average fair value of stock options granted during 1997 was
$3.27 per option share. No options were granted during 1996 and 1995.
11. REVENUES
This item consists of the following:
1997 1996 1995
------- ------- -------
International Express........................... $36,556 $30,798 $25,491
Freight forwarding.............................. 21,697 15,186 14,306
Domestic Express................................ 3,967 2,880 2,007
MED............................................. 1,833 1,078 --
Other*.......................................... 2,277 2,333 1,798
------- ------- -------
$66,330 $52,275 $43,602
------- ------- -------
------- ------- -------
- ------------------
* Amounts represent revenues from other services which the Company renders such
as airline ticketing and travel. All related costs are reflected in shipping
costs.
12. SHIPPING COSTS
This item consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Linehaul expenses--Express............................ $ 7,392 $ 7,281 $ 5,608
Distribution expenses--Express........................ 6,607 4,879 4,347
Inbound costs--Express................................ 1,555 1,441 949
Freight forwarding and related expenses............... 16,843 11,904 11,279
MED cost of sales..................................... 1,246 697 --
Other................................................. 1,828 1,878 862
------- ------- -------
$35,471 $28,080 $23,045
------- ------- -------
------- ------- -------
</TABLE>
F-14
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
13. COMMITMENTS
The Company leases office space and office and transportation equipment
under various operating leases, some of which are renewable annually. Rent
expense related to these leases amounted to $1,159, $1,072 and $892 for the
years ended December 31, 1997, 1996 and 1995, respectively. The Company believes
that most operating leases should be renewable at comparable rates to the
expiring leases.
The approximate minimum annual rental commitments of the Company under the
existing lease agreements, are as follows:
DECEMBER 31
-----------
1998...................................... $ 807
1999...................................... 431
2000...................................... 228
2001...................................... 134
2002...................................... 95
Thereafter................................ 45
14. INCOME TAXES
The provision for income taxes on results of operations of foreign
subsidiaries is comprised of the following:
1997 1996 1995
---- ---- ----
Current...................................... $169 $167 $252
Deferred..................................... 1 (10) 14
---- ---- ----
$170 $157 $266
---- ---- ----
---- ---- ----
Deferred income taxes are provided in accordance with the liability method
under IAS 12, for the temporary differences between the financial reporting
basis and the tax basis of the Company's assets and liabilities. The composition
of deferred taxes reflected on the balance sheet is as follows:
ASSETS (LIABILITIES)
1997 1996
------ -------------
Current
Provision for doubtful accounts............ $ 30 $ 17
Termination indemnities.................... 19 15
Donation carryover......................... 5 5
------ ------
$ 54 $ 37
------ ------
Non-current
Depreciation............................... 6 5
Net operating losses carryforward.......... 871 587
Other...................................... 7 1
Valuation allowance........................ (936) (627)
------ ------
(52) (34)
------ ------
$ 2 $ 3
------ ------
------ ------
At December 31, 1997, the Company and its subsidiaries had net operating
losses carryforward of approximately $2,407 which expire between 1998 and 2012.
F-15
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
14. INCOME TAXES--(CONTINUED)
The Company's consolidated effective tax rate was 5.2%, 6.7% and 13.7% for
1997, 1996, and 1995, respectively. The principal differences between these
effective tax rates and the statutory tax rate applicable in the United States
of 35% are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Computed tax at U.S. rate of 35%................................... $1,141 $ 828 $ 681
Effects of tax exemptions.......................................... (633) (320) (228)
Effect of lower rates in certain countries......................... (650) (430) (518)
Losses not benefited............................................... 400 107 253
Other.............................................................. (88) (28) 78
------ ----- -----
$ 170 $ 157 $ 266
------ ----- -----
------ ----- -----
</TABLE>
In certain countries the tax returns have not yet been reviewed by the tax
authorities. However, the Company is satisfied that adequate provisions have
been provided for potential tax contingencies.
As of December 31, 1997, the retained earnings of the Company represent the
retained earnings of ARAMEX and its share of the retained earnings of its other
subsidiaries. Such earnings are expected to be indefinitely reinvested or if
distributed, are expected to be distributed tax-free.
15. EARNINGS PER SHARE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE BASIC DILUTED
NET NO. OF SHARES-- EFFECT OF NO. OF SHARES-- EARNINGS PER EARNINGS PER
INCOME BASIC DILUTION DILUTED SHARE SHARE
------ ---------------- --------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1997........................ $3,121 4,396,811 126,236 4,523,047 $ 0.71 $ 0.69
1996........................ 2,047 3,184,939 -- 3,184,939 0.64 0.64
1995........................ 1,522 3,125,000 -- 3,125,000 0.49 0.49
</TABLE>
16. LITIGATION
In September 1995, an action was brought by a station manager against the
Company, claiming $1,000 in damages for certain breaches of contracts and other
matters. The Company's legal counsel has filed a motion for summary judgment. On
February 3, 1997, the motion for partial summary judgment was granted, and the
only remaining claim is the claim for an accounting. The Company's legal counsel
filed a motion for partial summary judgment on the claim for an accounting. The
motion was denied and the plaintiff was granted an accounting. The only claims
remaining are the counterclaims of the Company. A trial date is set for June 30,
1998 on the Company's counterclaims. Management believes that this action should
not have a material adverse effect on the financial position or results of
operations of the Company.
17. RELATED PARTY TRANSACTIONS
On October 21, 1996, ARAMEX Hong Kong, sold 195 shares of common stock
(304,688 shares after the reorganization effected on December 13, 1996 as
discussed in Note 1), to Airborne Freight Corporation ('Airborne') for an
aggregate consideration of $2,000 ('the Airborne stock purchase'). In connection
with such purchase, the shareholders of ARAMEX Hong Kong entered into a
Shareholders Agreement (the Shareholders Agreement), as amended on December 11,
1996 which provides, among other things, that in the event the Company transfer
(as defined in the Shareholders Agreement) any shares of common stock to certain
listed competitors of Airborne or any other company primarily engaged in the
transportation of air freight or air express shipments, Airborne has the right
to sell all of its shares of common stock to the Company on the same terms and
conditions as the sale to such other company. In the event that Messrs. Kingson
and Ghandour and/or Ms. Rula Ghandour transfer any shares of common stock to
certain listed competitors to Airborne or any other
F-16
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
17. RELATED PARTY TRANSACTIONS--(CONTINUED)
company primarily engaged in the transportation of air freight or air express
shipments, it shall be a condition of such transfer that Airborne shall be
offered the right to sell to such competitor all of its shares of common stock
on the same terms and conditions as the sale by Messrs. Kingson and Ghandour
and/or Ms. Rula Ghandour. In addition, under the terms of the Airborne stock
purchase, Airborne was granted certain 'piggyback' registration rights relating
to its shares of common stock and is entitled to appoint one director to the
Company's Board of Directors for as long as Airborne continues to own at least
half of the shares it acquired in the Airborne stock purchase.
On January 4, 1995, the Company purchased the minority interest of one of
its Middle East stations and immediately sold it to another third party for
$640. As part of the transaction, the new minority shareholder paid during 1996
and 1995 $214 and $266 in cash respectively. The balance of $160 was paid during
1997.
Payments to minority interests in the accompanying statements of cash flows
represent dividends paid to minority shareholders in subsidiaries and, in 1995,
the cost of purchasing the Middle Eastern stations discussed above.
The Company leases the premises currently occupied by the Company's London
operations from Mr. Ali Ghandour, the father of Mr. Fadi Ghandour (CEO), at an
annual rental of $88 (GBP 50). The lease is open-ended and is renewed annually.
The Company believes that the terms of the lease are at least as favorable to
the Company as those available from unaffiliated third parties.
During 1996, the Company leased the premises currently occupied by the
Company's corporate offices in Amman, Jordan, from ARAM, an investment company
controlled by the CEO's family at an annual rental of $70 (JD 50). The lease is
open-ended and is renewed annually. The Company believes that the terms of the
lease are at least as favorable to the Company as those available from
unaffiliated third parties.
Mr. Fadi Ghandour has personally guaranteed bank overdrafts in Jordan in
the aggregate amount of $200.
18. RESTRICTIONS ON UNAPPROPRIATED EARNINGS
The legal reserve of the Company represents earnings restricted from
payment of dividends in accordance with the local laws of the domiciles of
certain subsidiaries. The law dictates that a fixed percentage, which is 10% of
the net income of the applicable subsidiaries, must be annually appropriated.
F-17
<PAGE>
ARAMEX INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996 AND 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
19. INDUSTRY SEGMENT AND GEOGRAPHIC AREA
The company operates predominantly in a single industry as a courier and
cargo freight forwarder. The following is a summary of financial data by
geographic area:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues(1)
Middle East................................................ $ 66,799 $ 51,167 $ 40,580
North America.............................................. 6,012 5,809 6,097
Europe..................................................... 12,342 11,038 10,148
Eliminations............................................... (18,823) (15,739) (13,223)
-------- -------- --------
Total revenues............................................. $ 66,330 $ 52,275 $ 43,602
-------- -------- --------
-------- -------- --------
Operating profit (loss)
Middle East................................................ 2,717 2,148 2,017
North America.............................................. (84) (29) (51)
Europe..................................................... 266 277 (44)
Eliminations............................................... -- -- (15)
-------- -------- --------
Total operating profit..................................... $ 2,899 $ 2,396 $ 1,907
-------- -------- --------
-------- -------- --------
Identifiable assets
Middle East................................................ $ 38,099 $ 24,909
North America.............................................. 1,569 1,387
Europe..................................................... 4,905 4,737
-------- --------
Total identifiable assets.................................. 44,573 31,033
Eliminations............................................... (13,909) (11,701)
Investments in affiliates.................................. 40 40
-------- --------
Total assets............................................... $ 30,704 $ 19,372
-------- --------
-------- --------
</TABLE>
- ------------------
(1) Revenues between stations that are wholly owned subsidiaries are priced at
cost. Transactions with other affiliated stations are priced at cost plus
10%. All intercompany transactions have been eliminated in consolidation.
20. SUPPLEMENTAL FINANCIAL STATEMENT DISCLOSURES
Disclosures about fair values of financial instruments:
The carrying amounts of cash, current receivables, trade payables, due to
banks and long term debt approximate their fair market values.
F-18
<PAGE>
[LETTERHEAD OF METHA & TENGRA]
ARAMEX INTERNATIONAL COURIER FRANCE SARL
REPORT OF THE AUDITORS
We have audited the accompanying balance sheet of Aramex International Courier
France Sarl as of 31 December 1996 and the related statements of income and cash
flows for the year then ended. The accounts for the year ended 31 December 1994
were not audited by us. The company's manager is responsible for the preparation
of the financial statements. It is our responsibility to form an independent
opinion, based on our audit, on those financial statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board in the United Kingdom, which are accepted as
substantially consistent with those in the United States. An audit includes an
examination on a test basis of evidence relevant to the amounts and disclosures
in the financial statements. It also includes an assessment of the significant
estimates and judgements made by the manager in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the
company's circumstances consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the company at 31 December 1996 and of its profit for the year
then ended and have been properly prepared in accordance with applicable
generally accepted accounting standards in the United Kingdom.
/s/ MEHTA & TENGRA
-------------------------------
Chartered Accountants
Registered Auditors
24 Bedford Row
London WC1R 4EB
Date: 24 March 1997
F-19
<PAGE>
[LETTERHEAD OF METHA & TENGRA]
ARAMEX INTERNATIONAL COURIER FRANCE SARL
REPORT OF THE AUDITORS
We have audited the accompanying balance sheet of Aramex International Courier
France Sarl as of 31 December 1995 and the related statements of income and cash
flows for the year then ended. The accounts for the year ended 31 December 1994
were not audited by us. The company's manager is responsible for the preparation
of the financial statements. It is our responsibility to form an independent
opinion, based on our audit, on those financial statements and to report our
opinion to you.
BASIS OF OPINION
We conduct our audit in accordance with Auditing Standards issued by the
Auditing Practices Board in the United Kingdom, which are accepted as
substantially consistent with those in the United States. An audit includes an
examination on a test basis of evidence relevant to the amounts and disclosures
in the financial statements. It also includes an assessment of the significant
estimates and judgements made by the manager in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the
company's circumstances consistently, applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the company at 31 December 1995 and of its profit for the year
then ended and have been properly prepared in accordance with applicable
generally accepted accounting standards in the United Kingdom.
/s/ MEHTA & TENGRA
-----------------------------------
Chartered Accountants
Registered Auditors
4 Wellington Terrace Bayswater Road
London W2 4LW
Date: 30 December 1996
F-20
<PAGE>
[LETTER OF MEHTA & TENGRA]
ARAMEX (UK) INTERNATIONAL COURIER LIMITED
REPORT OF THE AUDITORS
We have audited the accompanying balance sheet of Aramex (UK) International
Courier Ltd as of 31 December 1996 and the related statements of income and cash
flows for the year then ended. The company's directors are responsible for the
preparation of these financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those financial statements and to
report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board in the United Kingdom, which are accepted as
substantially consistent with those in the United States. An audit includes an
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the company at 31 December 1996 and of its profit and statement of
cash flows for the year then ended and have been properly prepared in accordance
with the Companies Act 1985.
/s/ MEHTA & TENGRA
--------------------------------
Mehta & Tengra
Chartered Accountants
Registered Auditors
24 Bedford Row
London WC1R 4EB
Date: 24 March 1997
F-21
<PAGE>
[LETTER OF MEHTA & TENGRA]
ARAMEX (UK) INTERNATIONAL COURIER LIMITED
REPORT OF THE AUDITORS
We have audited the accompanying balance sheet of Aramex (UK) International
Courier Ltd as of 31 December 1995 and the related statements of income and cash
flows for the year then ended. The company's directors are responsible for the
preparation of these financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those financial statements and to
report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board in the United Kingdom, which are accepted as
substantially consistent with those in the United States. An audit includes an
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the company at 31 December 1995 and of its profit and statement of
cash flows for the year then ended and have been properly prepared in accordance
with the Companies Act 1985.
/s/ MEHTA & TENGRA
-------------------------------
Mehta & Tengra
Chartered Accountants
Registered Auditors
4 Wellington Terrace
Baywater Road
London W2 44LW
Date: 18 April 1996 [except with
respect to the cash flow statements
as to which the date is
23 December 1996]
F-22
<PAGE>
[LETTERHEAD OF EDWARD ISAACS & COMPANY LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Aramex International Courier, Ltd.
New York, New York
We have audited the consolidated balance sheets of Aramex International Courier,
Ltd. as of December 31, 1996 and 1995, and the related statements of operations
and accumulated deficit, and cash flows for each of the three years in the
period ended December 31, 1996 (none of which are shown separately herein).
These financial statements are the responsibility of the Companies' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aramex International Courier,
Ltd. as of December 31, 1996 and 1995, and the results of its operations and
cash flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
/s/ EDWARD ISAACS & COMPANY LLP
New York, New York
February 5, 1997
F-23
<PAGE>
[LETTERHEAD OF EDWARD ISAACS & COMPANY LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder
Aramex International Courier of Virginia, Inc.
Falls Church, Virginia
We have audited the balance sheets of Aramex International Courier of Virginia,
Inc. as of December 31, 1996 and 1995, and the related statements of income and
retained earnings, and cash flows for each of the three years in the period
ended December 31, 1996 (none of which are shown separately herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aramex International Courier of
Virginia, Inc. as of December 31, 1996 and 1995, and the results of its
operations and cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
/s/ EDWARD ISAACS & COMPANY LLP
New York, New York
January 28, 1997
F-24
<PAGE>
[LETTERHEAD OF EDWARD ISAACS & COMPANY LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Aramex International Courier, Ltd.
New York, New York
We have audited the consolidated balance sheets of Aramex International Courier,
Ltd. and subsidiary, Aramex International Courier of N.J., Inc. as of December
31, 1995, 1994 and 1993, and the related consolidated statements of operations
and accumulated deficit, and cash flows for each of the three years in the
period ended December 31, 1995 (none of which are shown separately herein).
These consolidated financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Aramex
International Courier, Ltd. and subsidiary as of December 31, 1995, 1994 and
1993, and the results of their operations and cash flows for the each of the
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
/s/ EDWARD ISAACS & COMPANY L.L.P.
New York, New York
March 30, 1996
F-25
<PAGE>
[LETTERHEAD OF EDWARD ISAACS & COMPANY LLP]
INDEPENDENT AUDITORS' REPORT
To the Partners
Aramex International Courier--Texas, Ltd.
Houston, Texas
We have audited the statements of operations and changes in partners' equity
deficiency and cash flows of Aramex International Courier--Texas, Ltd. (a
partnership) for the nine months ended September 30, 1995 (date of dissolution).
These financial statements (none of which are shown separately herein) are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, results of operations and cash flows of Aramex
International Courier--Texas, Ltd. for the nine months ended September 30, 1995
in conformity with generally accepted accounting principles.
/s/ EDWARD ISAACS & COMPANY L.L.P.
New York, New York
December 1, 1995
F-26
<PAGE>
[LETTERHEAD FOR DR. MOHAMED AL-AMRI & CO.]
AUDITORS' REPORT
To: The Partners of Al-Awsat International Transport Company Limited
(a limited liability company)
We have audited the accompanying consolidated balance sheet of Al-Awsat
International Transport Company Limited as of December 31, 1995 and the
consolidated statements of income (loss) and retained earnings (deficit) and
cash flows for the year then ended including the related notes from No. 1 to No.
10. These consolidated financial statements are the responsibility of the
company's management and were prepared to comply with applicable articles of
regulations for companies. We have obtained all information and explanations
which we considered necessary for our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements taken as a whole:
-- Present fairly the financial position of Al-Awsat International
Transport Company Limited as of December 31, 1995 and the
results of its operations and cash flows for the year then
ended in conformity with generally accepted accounting
principles in Saudi Arabia; and,
-- Comply with requirements of the Regulations for Companies and
the Company's Articles of Association with respect to the
preparation and presentation of consolidated financial
statements.
The previous partners sold their total shares to new partners as Note No. 8
indicates.
For Dr. Mohamed Al-Amri & Co.
/s/ MOHAMED A. AL-AMRI
---------------------------------
Dr. Mohamed A. Al-Amri
Certified Public Accountant
Registration No. (60)
Shawal 07,1416 (H)
February 25, 1996 (G)
Jeddah, The Kingdom of
Saudi Arabia
F-27
<PAGE>
[ARAMEX 15 YEARS SERVING THE WORLD LOGO SURROUNDED BY 10 PICTURES OF
VARIOUS ELEMENTS OF THE COMPANY'S BUSINESS]
<PAGE>
================================================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDERS, ANY OF THE UNDERWRITERS OR ANY OTHER PERSON. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SHARES OF COMMON STOCK OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary............................. 3
Summary Consolidated Financial
Information.................................. 6
Risk Factors................................... 8
The Company's Organization..................... 15
Use of Proceeds................................ 16
Price Range of Common Stock.................... 16
Dividend Policy................................ 16
Capitalization................................. 17
Selected Consolidated Financial Data........... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 19
Business....................................... 27
Management..................................... 38
Principal and Selling Shareholders............. 43
Certain Transactions........................... 44
Description of Capital Stock................... 46
Shares Eligible for Future Sale................ 49
Certain Foreign Issuer Considerations.......... 50
Taxation....................................... 52
Underwriting................................... 57
Legal Matters.................................. 58
Experts........................................ 58
Additional Information......................... 58
Index to Financial Statements.................. F-1
================================================================================
<PAGE>
================================================================================
1,000,000 SHARES
[LOGO]
ARAMEX
INTERNATIONAL
LIMITED
COMMON STOCK
------------------------
PROSPECTUS
------------------------
Scott & Stringfellow, Inc.
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses expected to be incurred by the
Company (on behalf of itself and the Selling Shareholders) in connection with
this offering.
<TABLE>
<CAPTION>
NATURE OF FEES AND EXPENSES AMOUNT TO BE PAID
- ------------------------------------------------------- -----------------
<S> <C>
SEC Registration Fee................................... $ 4,580
NASD Filing Fee........................................ 2,053
Nasdaq National Market Listing Fee..................... 10,000
Accounting Fees and Expenses........................... 75,000
Legal Fees and Expenses................................ 175,000
Blue Sky Qualification Fees and Expenses............... 1,500
Transfer Agent and Registrar Fee....................... 5,000
Printing Expenses...................................... 75,000
Miscellaneous.......................................... 51,867
-------------
Total........................................ $ 400,000
--------------
--------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(i) Section 98 of the Companies Act 1981 of Bermuda renders void any
provisions, whether contained in a company's bye-laws or in any
contract between the company and any officer thereof, exempting such
officer from, or indemnifying such officer against, any liability
which by virtue of any rule of law would otherwise attach to him in
respect of any fraud or dishonesty of which he may be guilty in
relation of the company; provided, that a company may indemnify such
officer against any liability incurred by him in defending any
proceedings, criminal or civil, in which judgment is given in such
officer's favor or in which he is acquitted or when relief is granted
to such officer by the Supreme Court of Bermuda as provided for by the
Companies Act 1981.
(ii) Section 98A of the Companies Act 1981 of Bermuda provides that a
company may purchase and maintain insurance for the benefit of any
officer of the Company against any liability incurred by him in his
capacity as an officer of the company with respect to a violation of
his duty to exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances or
indemnifying such officer in respect of any loss arising or liability
attaching to him by virtue of any rule of law in respect of any
negligence, default, breach of duty or breach of trust of which the
officer may be guilty in relation to the company or any subsidiary
and that no provision of the Companies Act 1981 shall render any such
insurance policy void or voidable. The registrant intends to obtain
such an insurance policy prior to the closing of the offering
pursuant to this registration statement.
(iii) The Bye-laws of the registrant provide that the directors, secretary
and other officers for the time being of the Company and the
liquidatory or trustees (if any) for the time being acting in
relation to any of the affairs of the Company and every one of them,
and their heirs, executors and administrators, shall be indemnified
and secured harmless out of the assets of the Company from and
against all actions, costs, charges, losses, damages and expenses
which they or any of them, their heirs, executors or administers,
shall or may incur or sustain by or by reason of any act done,
concurred in or omitted in or about the execution of their duty, or
supposed duty, or in their respective offices or trusts, and none of
them shall be answerable for the acts, receipts, neglects or defaults
of the others of them or for joining in any receipts for the sake of
conformity, or for any bankers or other persons with whom any moneys
or effects belonging to the Company shall or may be lodged or
deposited for safe custody, or for the insufficiency or deficiency of
any security upon which any moneys or belonging to the Company shall
be placed out on or invested, or for any other loss, misfortune or
damage which may happen in the execution of their respective offices
or trusts, or in relation thereto, PROVIDED THAT this indemnity
II-1
<PAGE>
shall not extend to any matter in respect of any fraud or dishonesty
which may attach to any of said persons.
The Bye-laws also provide that the registrant may purchase insurance on
behalf of any person, including officers and directors, serving at the
request of the registrant against any liability asserted against such
person.
The registrant intends to enter into agreements with its directors and
executive officers which provide for indemnification of such persons against
judgments, fines, penalties, charges and expenses suffered or incurred by them
in their capacity as representatives of the registrant. The agreements will
provide that, in certain circumstances, the registrant may reimburse or advance
funds to any person in respect of expenses incurred in advance of the final
disposition of any suit, claim or proceeding.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) (i) On October 22, 1996, Aramex International, Limited, a Hong Kong
company ('Aramex Hong Kong'), and the Company's predecessor sold
195 shares (or 304,688 shares giving effect to the
Reorganization) of common stock to Airborne Freight Corporation
for an aggregate consideration of $2 million. The shares were
offered in reliance on Section 4(2) of the Securities Act of
1933.
(ii) On December 13, 1996, Aramex International Limited subscribed
for 100 shares of Aramex Hong Kong and each share of Aramex
Hong Kong outstanding prior to such subscription was converted
by a special resolution of the shareholders of Aramex Hong Kong
into non-voting deferred shares.
(iii) Prior to the effective date of the Company's initial public
offering, Messrs. William Kingson, Fadi Ghandour, Ms. Rula
Ghandour and Airborne Freight Corporation subscribed for an
aggregate of 3,125,688 shares of Aramex Bermuda.
(b) There were no underwriters, brokers or finders employed in connection
with any of the transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement (3)
3.1 Memorandum of Association of Aramex International Limited (1)
3.2 Bye-laws of Aramex International Limited (1)
4.1 Specimen of Common Stock Certificate (1)
4.2 Form of Underwriter's Warrant Agreement, for the Company's initial public offering, including form of
Redeemable Warrant Certificate (1)
5.1 Opinion of Conyers Dill & Pearman
8.1 Opinion of Conyers Dill & Pearman relating to tax matters
8.2 Opinion of Orrick, Herrington & Sutcliffe LLP relating to tax matters
10.1 Stock Option Plan (1)
10.2 Form of Agreement granting a license to use the Aramex name (1)
10.3 Form of Management Agreement (1)
10.4 Form of Agreement with each of the Company's Middle East (MED) Mail Order Catalog Companies (1)
10.5 Employment Agreement dated as of November 4, 1996 between Aramex International Limited and William
Kingson (1)
10.6 Employment Agreement dated as of November 4, 1996 between Aramex International Limited and Fadi
Ghandour (1)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------------------------
<C> <S>
10.7 Form of Indemnification Agreement, between Aramex International Limited and members of the Board of
Directors (1)
10.8 Stock Purchase Agreement dated as of October 22, 1996 between William Kingson, Fadi Ghandour, Rula
Ghandour and Airborne Freight Corporation (1)
10.9 Shareholders Agreement dated as of October 22, 1996 between William Kingson, Fadi Ghandour, Rula
Ghandour and Airborne Freight Corporation (1)
10.10 Amendment No. 1 to Shareholders Agreement dated as of December 11, 1996 between William Kingson, Fadi
Ghandour, Rula Ghandour and Airborne Freight Corporation as amended by Agreement dated as of December
12, 1996 (1)
10.11 Nominee Shareholder Agreement dated January 1, 1995 by and between Raghida Ali Ghandour and Aramex
International Limited (1)
10.12 Nominee Shareholder Agreement dated January 1, 1995 by and between Fadi Ali Ghandour and Aramex
International Limited (1)
10.13 Amendment No. 1 to each of the Nominee Shareholder Agreements dated as of December 23, 1996 (1)
21.1 List of subsidiaries of Aramex International Limited (3)
23.1 Consent of Edward Issacs & Company LLP (3)
23.2 Consent of Arthur Andersen (3)
23.3 Consent of Mehta & Tengra (3)
23.4 Consent of Dr. Mohamed Al-Amri & Co. (3)
23.5 Consent of Orrick, Herrington & Sutcliffe LLP
23.6 Consent of Ali Sharif Zu'bi & Sharif Ali Zu'bi
23.7 Consent of Conyers Dill & Pearman (included in Exhibit 5.1)
24.1 Powers of attorney executed by certain officers and directors of the Registrant (included on signature
page)
99.1 Press Release dated March 31, 1997 (2)
99.2 Press Release dated June 30, 1997 (2)
</TABLE>
- ------------------
(1) Previously filed together with the Registrant's Registration Statement on
Form F-1 (File No. 333-15639) as amended and incorporated herein by
reference.
(2) Previously filed together with Registrant's Quarterly Report on Form 6-K
(File No. 0-2918) dated September 12, 1997 incorporated herein by reference.
(3) Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(2) To include any prospectus required by Section 10(a)(3) of the
Securities Act
(3) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price
II-3
<PAGE>
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the 'Calculation of Registration Fee' table
in the effective registration statement.
(4) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(5) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(6) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM F-1, AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF NEW YORK, ON APRIL 30, 1998.
ARAMEX INTERNATIONAL LIMITED
By: /s/ WILLIAM S. KINGSON
--------------------------------
William S. Kingson
Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE OF CAPACITIES DATE
--------- ------------------- ----
<S> <C> <C>
/s/ WILLIAM S. KINGSON Chairman of the Board April 30, 1998
- --------------------------- (Principal Executive Officer)
William S. Kingson
* President and Chief Executive Officer April 30, 1998
- ---------------------------
Fadi Ghandour
* Director April 30, 1998
- ---------------------------
Rula Ghandour
* Director April 30, 1998
- ---------------------------
Roy Liljebeck
* Director April 30, 1998
- ---------------------------
Ayed Al-Jeaid
* Accounting and Finance Manager April 30, 1998
- --------------------------- (Principal Financial and Accounting Officer)
Emad Shishtawi
*By: /s/ WILLIAM S. KINGSON
----------------------
William S. Kingson
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement (3)
3.1 Memorandum of Association of Aramex International Limited (1)
3.2 Bye-laws of Aramex International Limited (1)
4.1 Specimen of Common Stock Certificate (1)
4.2 Form of Underwriter's Warrant Agreement, for the Company's initial public offering, including
form of Redeemable Warrant Certificate (1)
5.1 Opinion of Conyers Dill & Pearman
8.1 Opinion of Conyers Dill & Pearman relating to tax matters
8.2 Opinion of Orrick, Herrington & Sutcliffe LLP relating to tax matters
10.1 Stock Option Plan (1)
10.2 Form of Agreement granting a license to use the Aramex name (1)
10.3 Form of Management Agreement (1)
10.4 Form of Agreement with each of the Company's Middle East (MED) Mail Order Catalog Companies (1)
10.5 Employment Agreement dated as of November 4, 1996 between Aramex International Limited and
William Kingson (1)
10.6 Employment Agreement dated as of November 4, 1996 between Aramex International Limited and
Fadi Ghandour (1)
10.7 Form of Indemnification Agreement, between Aramex International Limited and members of the
Board of Directors (1)
10.8 Stock Purchase Agreement dated as of October 22, 1996 between William Kingson, Fadi Ghandour,
Rula Ghandour and Airborne Freight Corporation (1)
10.9 Shareholders Agreement dated as of October 22, 1996 between William Kingson, Fadi Ghandour,
Rula Ghandour and Airborne Freight Corporation (1)
10.10 Amendment No. 1 to Shareholders Agreement dated as of December 11, 1996 between William
Kingson, Fadi Ghandour, Rula Ghandour and Airborne Freight Corporation as amended by
Agreement dated as of December 12, 1996 (1)
10.11 Nominee Shareholder Agreement dated January 1, 1995 by and between Raghida Ali Ghandour and
Aramex International Limited (1)
10.12 Nominee Shareholder Agreement dated January 1, 1995 by and between Fadi Ali Ghandour and
Aramex International Limited (1)
10.13 Amendment No. 1 to each of the Nominee Shareholder Agreements dated as of December 23, 1996 (1)
21.1 List of subsidiaries of Aramex International Limited (3)
23.1 Consent of Edward Isaacs & Company LLP (3)
23.2 Consent of Arthur Andersen (3)
23.3 Consent of Mehta & Tengra (3)
23.4 Consent of Dr. Mohamed Al-Amri & Co. (3)
23.5 Consent of Orrick, Herrington & Sutcliffe LLP
23.6 Consent of Ali Sharif Zu'bi & Sharif Ali Zu'bi
23.7 Consent of Conyers Dill & Pearman (included in Exhibit 5.1)
24.1 Powers of attorney executed by certain officers and directors of the Registrant (included on
signature page)
99.1 Press Release dated March 31, 1997 (2)
99.2 Press Release dated June 30, 1997 (2)
</TABLE>
- ------------------
(1) Previously filed together with the Registrant's Registration Statement on
Form F-1 (File No. 333-15639) as amended and incorporated herein by
reference.
(2) Previously filed together with Registrant's Quarterly Report on Form 6-K
(File No. 0-2918) dated September 12, 1997 incorporated herein by reference.
(3) Previously filed.
EXHIBIT 5.1
April 24, 1998
Aramex International Ltd.
Clarendon House
2 Church Street
Hamilton
Bermuda
Re: ARAMEX INTERNATIONAL LTD. (the 'Company')
Dear Sirs:
We have acted as special legal counsel in Bermuda to you in connection with the
proposed sale by the Company of up to 500,000 common shares, US$0.01 par value
each ('Common Shares') and the proposed sale by certain shareholders of the
Company of up to 650,000 Common Shares (together with the sale by the Company,
the 'Offering') which includes 150,000 Common Shares to cover an overallotment
option granted by certain shareholders to the underwriters of the Offering.
For the purposes of giving this opinion, we have examined the registration
statement on Form F-1 No. 333-49841 (the 'Registration Statement' which term
when used herein shall not include any documents exhibited thereto or
incorporated therein by reference) relating to the registration of the Offering.
We have also examined such other documents and made such enquiries as to
questions of law as we have deemed necessary in order to render the opinion set
forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the
conformity to the originals of all copies of documents (whether or not
certified), (b) the accuracy and completeness of all factual representations
made in the Registration Statement and other documents reviewed by us, (c) the
authority of all persons signing any documents reviewed by us, (d) that there is
no provision of the law of any jurisdiction, other than Bermuda, which would
have any implication in relation to the opinions expressed herein.
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda.
On the basis of, and subject to, the foregoing, we are of the opinion that:
1. the 500,000 Common Shares to be sold by the Company pursuant to the
Offering, when issued by the Company and paid for in accordance with the
terms of the Offering will be legally issued, fully paid and
non-assessable (which term, when used herein, shall mean solely that no
further sums are required to be paid by the holders thereof in
connection with the issue of such shares);
2. the 650,000 Common Shares to be sold by certain shareholders of the
Company pursuant to the Offering are legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever it appears in the
Registration Statement, including the prospectus constituting a part thereof. In
giving such consent, we do not consider that we are 'experts' within the meaning
of such term as used in the U.S. Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission issued
thereunder, with respect to any part of the Registration Statement, including
this opinion as an exhibit or otherwise.
Yours faithfully,
CONYERS DILL & PEARMAN
EXHIBIT 8.1
April 24, 1998
Aramex International Ltd.
Clarendon House
2 Church Street
Hamilton
Bermuda
Re: ARAMEX INTERNATIONAL LTD. (the 'Company')
Dear Sirs:
We have acted as special legal counsel in Bermuda to you in connection with the
proposed sale by the Company of up to 500,000 common shares, US$0.01 par value
each ('Common Shares') and the proposed sale by certain shareholders of the
Company of up to 650,000 Common Shares (together with the sale by the Company,
the 'Offering') which includes 150,000 Common Shares to cover an overallotment
option granted by certain shareholders to the underwriters of the Offering.
For the purposes of giving this opinion, we have examined the registration
statement on Form F-1 No. 333-49841 (the 'Registration Statement' which term
when used herein shall not include any documents exhibited thereto or
incorporated therein by reference) relating to the registration of the Offering.
We have also examined such other documents and made such enquiries as to
questions of law as we have deemed necessary in order to render the opinion set
forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the
conformity to the originals of all copies of documents (whether or not
certified), (b) the accuracy and completeness of all factual representations
made in the Registration Statement and other documents reviewed by us, (c) the
authority of all persons signing any documents reviewed by us, (d) that there is
no provision of the law of any jurisdiction, other than Bermuda, which would
have any implication in relation to the opinions expressed herein.
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda.
On the basis of, and subject to, the foregoing, we hereby confirm:
1. that the statements in the Registration Statement under the heading
'Certain Bermuda Tax Considerations' on page 55 of the Registration
Statement, insofar as such statements constitute summaries of Bermuda
tax laws, are accurate as to the matters referred to therein; and
2. that the statements in the Registration Statement in the paragraph
printed in bold on page 7 of the Registration Statement, insofar as such
statements summarize the Bermuda law in relation to the enforcement of
US civil liability provisions, are accurate as to the matters referred
to therein; and
3. that, excluding the last paragraph thereof, the statements in the
section entitled 'Certain Foreign Issuer Considerations' on page 50 of
the Registration Statement, insofar as such statements constitute
summaries of Bermuda tax laws, are accurate as to the matters referred
to therein.
<PAGE>
We hereby consent:
1. to the reference to our name under the caption 'Taxation' on page 55 of
the Registration Statement;
2. to the reference to our name on page 7 of the Registration Statement;
3. to the reference to our name on page 50 of the Registration Statement; and
4. to the reference to our name on page 11 of the Registration Statement.
5. to the filing of this opinion as an exhibit to the Registration
Statement.
In giving such consent, we do not consider that we are 'experts' within the
meaning of such term as used in the U.S. Securities Act of 1933, as amended, or
the rules and regulations of the Securities and Exchange Commission issued
thereunder, with respect to any part of the Registration Statement, including
this opinion as an exhibit or otherwise.
Yours faithfully,
CONYERS DILL & PEARMAN
2
EXHIBIT 8.2
[LETTER OF ORRICK HERRINGTON & SUTCLIFFE LLP]
April 29, 1998
Aramex International Limited
2 Badr Shaker Alsayyab Street
Um Uthayna, Amman, Jordan
Ladies and Gentlemen:
We have acted as United States counsel to Aramex International Limited (the
'Company') in connection with the proposed issuance by the Company of common
stock pursuant to the Registration Statement of the Company on Form F-1 (the
'Registration Statement'), filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, (collectively, the
'Securities'). In connection therewith, you have requested our opinion regarding
certain United States federal income tax matters.
In formulating our opinion, we have examined such documents as we have deemed
appropriate, including (but not limited to) the Registration Statement. In
addition, we have obtained such additional factual representations and
information as we have deemed relevant and necessary through consultation with
the Company.
Based on the foregoing, we are of the opinion that the statements in the
Registration Statement under the caption 'Taxation--Certain United States
Federal Income Tax Considerations,' insofar as such statement constitute
summaries of United States federal income tax laws, are accurate in all material
respects.
The foregoing opinion is based on the Internal Revenue Code of 1986 (the
'Code'), existing final, temporary and proposed Treasury Regulations, Internal
Revenue Service rulings and pronouncements and judicial decision all of which
are subject to prospective and retroactive changes. You should be aware that an
opinion of counsel is not binding on the Internal Revenue Service or the courts,
and the authorities on which our opinions are based are subject to varying
interpretations. In addition, our opinions cannot be relied upon if any of the
factual information obtained from the Company or facts contained in the
documents that we have examined are, or later become, inaccurate. No opinion is
expressed on any matters other than those specifically referred to herein. We do
not undertake to update this opinion for changes of law or facts that come to
our attention after the date hereof.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and all references to our firm included in or made a part
of the Registration Statement.
Very truly yours,
/s/ ORRICK, HERRINGTON & SUTCLIFFE LLP
[LETTERHEAD OF ORRICK, HERRINGTON & SUTCLIFFE LLP]
EXHIBIT 23.5
We hereby consent to the use of our name wherever it appears in the Registration
Statement of Aramex International Limted, including the Prospectus constituting
a part thereof, as originally filed or as subsequently amended or supplemented.
In giving such consent, we do not consider that we are 'experts' within the
meaning of such term as used in the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission issued
thereunder, with respect to any part of the Registration Statement, including
this opinion as an exhibit or otherwise.
Very truly yours,
/s/ ORRICK, HERRINGTON & SUTCLIFFE LLP
EXHIBIT 23.6
[LETTERHEAD OF ALI SHARIF ZU'BI AND SHARIF ALI ZU'BI]
Our Ref. 7/1/98 April 27, 1998
Aramex International Limited
2 Badr Shaker Alsayyab Street
Um Uthayna, Amman, Jordan
Re: Aramex International Limited Registration Statement on Form F-1
Ladies and Gentlemen:
At your request, we are rendering this opinion in connection with a proposed
sale by Aramex International Limited, a Bermuda Corporation (the 'Company'), of
up to 500,000 shares of common shares, $0.01 par value (the 'Common Shares'),
and the sale by certain Company shareholders of up to 650,000 shares of Common
Stock.
We hereby confirm that the paragraph contained under the heading 'Certain
Foreign Issuer Considerations' on page 51 of the Registration Statement is an
accurate summary of the matters referred to therein.
We hereby consent to the reference to our name in the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever it appears in said
Registration Statement, including the Prospectus constituting in part thereof,
as originally filed or as subsequently amended or supplemented. In giving such
consent, we do not consider that we are 'experts' within the meaning of such
term as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission issued thereunder, with
respect to any part of the Registration Statement, including this opinion as an
exhibit or otherwise.
Very Truly yours,
/s/ Khaled As Four
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Ali Sharif Zu'bi & Sharif Ali
Zu'bi Law Office
