-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QJmO2NrgThLBRf0EdaraaoILkkH9Ug00ygZIyLPbEqO3KSBLh59LWHhg8EjQd4Y2 3BCc/tZquvJ6a1G5YWdm2Q== /in/edgar/work/20000814/0001012870-00-004417/0001012870-00-004417.txt : 20000921 0001012870-00-004417.hdr.sgml : 20000921 ACCESSION NUMBER: 0001012870-00-004417 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOGITECH INTERNATIONAL SA CENTRAL INDEX KEY: 0001032975 STANDARD INDUSTRIAL CLASSIFICATION: [3577 ] IRS NUMBER: 000000000 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 6-K SEC ACT: SEC FILE NUMBER: 000-29174 FILM NUMBER: 699932 BUSINESS ADDRESS: STREET 1: 6505 KAISER DR STREET 2: C/O LOGITECH INC CITY: FREMONT STATE: CA ZIP: 94555 BUSINESS PHONE: 5107958500 MAIL ADDRESS: STREET 1: 6505 KAISER DR CITY: FREMONT STATE: CA ZIP: 94555 6-K 1 0001.txt FORM 6-K File Number: 0-29174 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2000 LOGITECH INTERNATIONAL S.A. (Exact name of Registrant as specified in its charter) ________________ Not Applicable (Translation of Registrant's name into English) Canton of Vaud, Switzerland (Jurisdiction of incorporation or organization) ________________ Logitech International S.A. Apples, Switzerland c/o Logitech Inc. 6505 Kaiser Drive Fremont, California 94555 (510) 795-8500 (Address and telephone number of principal executive offices) ________________ Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. [X] Form 20-F [] Form 40-F Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. [] Yes [X] No If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). Not applicable LOGITECH INTERNATIONAL S.A. Form 6-K Table of Contents Page ---- Consolidated Financial Statements (unaudited): Consolidated Balance Sheets at June 30, 2000 and March 31, 2000.......................... 3 Consolidated Statements of Income for the three months ended June 30, 2000 and 1999...... 4 Consolidated Statements of Cash Flows for the three months ended June 30, 2000 and 1999.. 5 Notes to Consolidated Financial Statements............................................... 6 Management's Discussion and Analysis of Financial Condition and Results of Operations...... 8 Quantitative and Qualitative Disclosure About Market Risk.................................. 16 Signatures................................................................................. 17 Exhibit 4.1 Amendment No. 1 to Deposit Agreement by and among the company, the Bank of New York, as Depositary and owners and beneficial owners of American Depositary Receipts ................................................................................ A-1
2 LOGITECH INTERNATIONAL S.A. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)
June 30, March 31, 2000 2000 ----------- ------------ ASSETS (unaudited) Current assets: Cash and cash equivalents........................................................ $ 44,369 $ 49,426 Accounts receivable.............................................................. 107,151 123,172 Inventories...................................................................... 101,763 68,255 Other current assets............................................................. 23,916 25,354 ----------- ------------ Total current assets......................................................... 277,199 266,207 Investments....................................................................... 41,052 10,807 Property, plant and equipment..................................................... 40,871 42,117 Intangible assets................................................................. 13,002 14,007 Other assets...................................................................... 887 939 ----------- ------------ Total assets................................................................. $373,011 $334,077 =========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt.................................................................. $ 7,028 $ 6,990 Accounts payable................................................................. 95,283 92,430 Accrued liabilities.............................................................. 51,435 51,049 ----------- ------------ Total current liabilities.................................................... 153,746 150,469 Long-term debt.................................................................... 2,917 2,934 Other liabilities................................................................. 510 705 ----------- ------------ Total liabilities............................................................ 157,173 154,108 ----------- ------------ Contingencies (Note 7) Shareholders' equity: Registered shares, par value CHF 10 - 5,208,942 authorized, 1,101,058 conditionally authorized, 4,208,942 issued and outstanding at June 30, 2000; 4,362,920 authorized, 1,147,080 conditionally authorized, 4,162,920 issued and 30,020 29,752 outstanding at March 31, 2000.................................................. Additional paid-in capital...................................................... 85,550 83,686 Less registered shares in treasury, at cost, 24,532 at June 30, 2000 and 20,640 at March 31, 2000.............................................................. (2,120) (1,056) Retained earnings............................................................... 89,352 84,367 Cumulative translation adjustment............................................... (17,218) (16,780) Unrealized gain on securities................................................... 30,254 -- ----------- ------------ Total shareholders' equity................................................... 215,838 179,969 ----------- ------------ Total liabilities and shareholders' equity................................... $373,011 $334,077 =========== ============
The accompanying notes are an integral part of these financial statements. 3 LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts)
Three months ended June 30, ---------------------------- 2000 1999 ------------ -------------- (unaudited) Net sales............................................................. $ 141,416 $ 121,068 Cost of goods sold.................................................... 94,125 85,105 ------------ -------------- Gross profit.......................................................... 47,291 35,963 Operating expenses: Marketing and selling................................................ 26,449 21,353 Research and development............................................. 8,509 7,006 General and administrative........................................... 8,265 6,583 ------------ -------------- Operating income...................................................... 4,068 1,021 Interest income (expense), net........................................ 196 (204) Other income (expense), net........................................... 1,967 (82) ------------ -------------- Income before income taxes............................................ 6,231 735 Provision for income taxes............................................ 1,246 147 ------------ -------------- Net income............................................................ $ 4,985 $ 588 ============ ============== Net income per share: Basic................................................................ $ 1.20 $ .15 Diluted.............................................................. $ 1.06 $ .15 Net income per ADS (10 ADS : 1 share): Basic................................................................ $ .12 $ .02 Diluted.............................................................. $ .11 $ .01 Shares used to compute net income per share: Basic................................................................ 4,153,071 3,893,412 Diluted.............................................................. 4,680,840 4,001,732
The accompanying notes are an integral part of these financial statements. 4 LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three months ended June 30, 2000 1999 Three months ended June 30, ---------------------------- 2000 1999 ------------ -------------- (unaudited) Cash flows from operating activities: Net income........................................................... $ 4,985 $ 588 Non-cash items included in net income: Depreciation and amortization....................................... 4,367 4,609 Equity in net earnings (losses) of affiliated companies............. 388 (330) Gain on sale of investment.......................................... (442) -- Loss (gain) on disposal of property, plant and equipment............ (1,922) 58 Deferred income taxes............................................... 63 (704) Other............................................................... 225 57 Changes in current assets and liabilities: Accounts receivable................................................. 15,554 8,697 Inventories......................................................... (33,462) 11,258 Other current assets................................................ 1,545 (2,668) Accounts payable.................................................... 3,198 (28,423) Accrued liabilities................................................. 40 (1,123) ------------ -------------- Net cash used in operating activities............................ (5,461) (7,981) ------------- -------------- Cash flows from investing activities: Purchases of property, plant and equipment........................... (3,853) (6,901) Proceeds from sales of property, plant and equipment................. 3,637 -- Proceeds from sale of investment..................................... 526 -- Acquisitions and investments in affiliated companies................. (476) (1,121) ------------ -------------- Net cash used in investing activities............................ (166) (8,022) ------------ -------------- Cash flows from financing activities: Net repayment of short-term debt..................................... -- (4,954) Repayment of long-term debt.......................................... (54) (77) Purchase of treasury shares.......................................... (1,064) -- Proceeds from issuance of registered shares.......................... 2,131 1,899 ------------ -------------- Net cash provided by (used in) financing activities.............. 1,013 (3,132) ------------ -------------- Effect of exchange rate changes on cash and cash equivalents.......... (443) (226) ------------ -------------- Net decrease in cash and cash equivalents............................. (5,057) (19,361) Cash and cash equivalents at beginning of period...................... 49,426 43,251 ------------ -------------- Cash and cash equivalents at end of period............................ $ 44,369 $ 23,890 =========== ============= Supplemental cash flow information: Interest paid........................................................ $ 58 $ 223 Income taxes paid.................................................... $ 874 $ 235
The accompanying notes are an integral part of these financial statements. 5 LOGITECH INTERNATIONAL S.A. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 -- The Company: Logitech International S.A. designs, manufactures and markets human interface devices and supporting software which often serve as the primary physical interface between users and their personal computers and the internet. The Company's products include corded and cordless mice, optical trackballs, keyboards, joysticks, gamepads, racing systems, internet video cameras and multimedia speakers. The Company sells its products to both original equipment manufacturers ("OEMs") and to a network of retail distributors and resellers. Note 2 -- Interim Financial Data: The accompanying consolidated financial statements should be read in conjunction with the Company's 2000 Annual Report on Form 20-F as filed with the Securities and Exchange Commission. In the opinion of management, the accompanying financial information includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows for the interim periods. The results of operations and cash flows for the interim periods presented are not necessarily indicative of the results of any future period. The Company reports quarterly results on thirteen-week periods, each ending on a Friday. For purposes of presentation, the Company has indicated its quarterly periods as ending on the month end. Certain amounts reported in prior quarters' financial statements have been reclassified to conform with the current quarter's presentation. Note 3 -- Stock Split: In June 2000, the Company's shareholders approved a two-for-one stock split which was effected on July 5, 2000 and distributed to stockholders of record as of July 4, 2000. All references to share and per-share data for all periods presented have been adjusted to give effect to this two-for-one stock split. In June 2000, the Company's shareholders also approved an increase of 1 million authorized registered shares for use in acquisitions, mergers and other transactions. Note 4 -- Equity Investments: In November 1999, Logitech announced the formation of a new company, Spotlife Inc., that will enhance video communications using the internet infrastructure. At the same time, Logitech announced the investment of $10.8 million in Spotlife by other investors, including two venture capital firms. Spotlife is independently managed and launched its internet service in May 2000. Logitech has invested $2 million in Spotlife, and has agreed to guarantee up to a maximum of $5.3 million of the new company's capital lease obligation. As of June 30, 2000, the outstanding balance of the lease obligation, and therefore the Company's guarantee, was $4.4 million. As of June 30, 2000, Logitech owns approximately 44% of Spotlife's outstanding shares on a fully diluted basis, with outside investors having the ability to exercise significant influence over the management of the new company. Logitech accounts for its investment in this company using the equity method. In July 2000, Spotlife Inc. closed on its third round of financing totaling $25 million. In June 1998, the Company acquired 49% of the outstanding shares of the LogiCad 3D Group (formerly Space Control GmbH), the German-based provider of Logitech's Magellan 3D Controller, and has an obligation for the Company to acquire the remaining outstanding shares if certain conditions are met. The Company is using the equity method of accounting for this investment. In April 1998, the Company acquired 10% of the then outstanding stock of Immersion Corporation, a developer of force feedback technology for PC peripherals and software applications. In November 1999, Immersion registered shares on the U.S. NASDAQ Stock Market in an initial public offering. In June 2000, the Company sold a partial interest in Immersion and recognized a gain of $.4 million in other income. Subsequent to this sale the Company changed its method of accounting for its investment in Immersion from the cost method to 6 the available for sale method in accordance with FASB 115 - Accounting for Certain Investments in Debt and Equity Securities. Accordingly, the Company carries its investment in Immersion at market value and records periodic increases or decreases in market value as a component of shareholders' equity. As of June 30, 2000, Logitech owns 7.2% of Immersion. The cost of these securities was $4.9 million and the gross unrealized gain was $30.3 million. However, as of July 31, 2000, the gross unrealized gain decreased to $19.0 million. The Company uses the cost method of accounting for all other investments. Note 5 -- Comprehensive Income: Comprehensive income is defined as the total change in shareholders' equity during the period other than from transactions with shareholders. For the Company, comprehensive income consists of net income, the net change in the accumulated foreign currency translation adjustment account, and the net change in the unrealized gain or loss on securities. For the three months ended June 30, 2000 and 1999, comprehensive income (loss) was $34.8 and ($.7) million. Note 6 Inventory At June 30 and March 31, 2000, inventory consisted of the following:
June 30, 2000 March 31, 2000 ------------- -------------- (in thousands) Raw materials................................................ $ 31,440 $16,762 Work-in-process.............................................. 635 517 Finished goods............................................... 69,688 50,976 ------------- -------------- $101,763 $68,255 ============= ==============
Note 7 -- Contingencies: In December 1996, the Company was advised of the intention to begin implementing a value-added tax ("VAT") on goods manufactured in certain parts of China since July 1995, including where the Company's operations are located, and intended for export. In January 1999, the Company was advised that the VAT would not be applied to goods manufactured during calendar 1999 and subsequent years. With respect to prior years, the Company is in ongoing discussions with Chinese officials and has been assured that, notwithstanding statements made by tax authorities, the VAT for these prior periods would not be charged to the Company. The Company believes the ultimate resolution of this matter will not have a material adverse effect on the Company's financial position, cash flows or results of operations. The Company is involved in a number of lawsuits relating to patent infringement and intellectual property rights. The Company believes the lawsuits are without merit and intends to defend against them vigorously. However, there can be no assurances that the defense of any of these actions will be successful, or that any judgment in any of these lawsuits would not have a material adverse impact on the Company's business, financial condition and result of operations. 7 LOGITECH INTERNATIONAL S.A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Logitech International S.A. designs, manufactures and markets human interface devices and supporting software which often serve as the primary physical interface between users and their personal computers and the internet. The Company's products include corded and cordless mice, optical trackballs, keyboards, joysticks, gamepads, racing systems, internet video cameras, and multimedia speakers. The Company sells its products to both original equipment manufacturers ("OEMs") and to a network of retail distributors and resellers. Results of Operations The following table sets forth certain consolidated financial statement amounts as a percentage of net sales for the periods indicated:
Three months ended June 30, --------------------------- 2000 1999 Net sales............................................................. 100.0% 100.0% Cost of goods sold.................................................... 66.6 70.3 ------- ------- Gross profit.......................................................... 33.4 29.7 Operating expenses: Marketing and selling................................................ 18.7 17.7 Research and development............................................. 6.0 5.8 General and administrative........................................... 5.8 5.4 ------- ------- Operating income...................................................... 2.9 .8 Interest income (expense), net........................................ .1 (.2) Other income (expense), net .......................................... 1.4 (.1) ------- ------- Income before income taxes............................................ 4.4 .6 Provision for income taxes............................................ .9 .1 ------- ------- Net income............................................................ 3.5% .5% ======= =======
Comparison of three months ended June 30, 2000 and 1999 Net Sales Net sales for the three months ended June 30, 2000 increased 17% to $141.4 million compared to the same period last year. This growth primarily came from the Company's keyboard and video products. Retail sales for the first quarter of fiscal 2001 grew by 21% over the same period in fiscal 2000. As has been the case for the last several quarters, this growth primarily came from keyboard and video products. Retail sales of the Company's traditional pointing devices, which include mice and trackballs, decreased slightly. The decrease was primarily a result of product transitions and the Company not having an optical offering in our mouse line. However, the Company has introduced new corded and cordless optical mice and cordless trackball products in the second quarter of fiscal 2001. Mice sales represented 36% of the Company's total retail revenue for this quarter, compared to 43% in the same quarter last year, reflecting the Company's expanded retail product offerings. Keyboard products continue to be a source of strong growth with sales increasing by 74% over the first quarter in fiscal 2000. Sales growth this quarter primarily came from the renewed line of cordless desktops. In the video camera business, retail sales grew by 50% compared to the prior year, with unit volume doubling. Sales of interactive entertainment products were flat from the same quarter last 8 year. This market is displaying increased seasonality, with year over year market declines in unit volumes during the summer season. OEM sales increased this quarter by 10% compared to the same quarter last year, with unit volume increasing slightly. This quarters' growth was driven principally by the Company's internet video cameras which, beginning in the forth quarter of fiscal 2000, are being bundled by Compaq with most of their Presario(R) models sold in the North American market. Gross Profit Gross profit consists of net sales, less cost of goods sold which consists of materials, direct labor and related overhead costs, costs of manufacturing facilities, costs of purchasing finished products from outside suppliers, distribution costs and inventory write-offs. Gross profit increased 32% from $36 million to $47.3 million. This increase was due principally to significant cost reductions impacting retail and OEM product offerings, increased internet video camera sales in OEM and the shift in revenue mix by sales channel. Gross profit as a percentage of net sales increased from 29.7% to 33.4% primarily due to increased OEM margins from video products. Retail gross profit as a percentage of sales remained flat compared to the same quarter last year. Overall, the Company does not believe the current quarter's high gross margin is sustainable. Over the next few quarters, the Company expects the gross margin to be within the long-term targeted range of 30% to 33%. Operating Expenses Total operating expenses increased 24%, from $34.9 million to $43.2 million. As a percentage of net sales, operating expenses increased from 29% to 31%. The increase in marketing and selling expenses is directly related to the Company's increased sales performance and marketing initiatives aimed at strengthening the Company's retail presence. Development efforts are focused on new product development and cost reductions on existing products. The increase in general and administrative expenses is primarily due to higher payroll costs. Interest Income (Expense) Interest income for the most recent quarter was $.2 million, compared to expense of $.2 million in the prior year. The decline in expense was primarily the result of using cash generated from operations to reduce short term debt. Other Income (Expense) Other income was $2 million for the current quarter, compared to expense of $.1 million last year, and primarily due to gains recognized from the sale of a building and the sale of shares of Immersion. Provision for Income Taxes The provision for income taxes consists of income and withholding taxes. The amount recorded in each period reflects management's best estimate of the effective tax rate for the fiscal year. Estimates are based on factors such as management's expectations as to payments of withholding taxes on amounts repatriated through dividends, the jurisdictions in which taxable income is generated, changes in local tax laws and changes in valuation allowances based upon the likelihood of recognizing deferred tax assets. The Company has reviewed its projections of taxable income in various tax jurisdictions for fiscal 2001. Based on a number of factors, including the phased expiration of a tax holiday in China and expected changes in taxable income in certain tax jurisdictions, the Company believes its effective tax rate for fiscal 2001 will be approximately 20%. As a result, the provision for income taxes for the three months ended June 30, 2000 and 1999 was $1 million and $.1 million, representing a 20% effective tax rate. 9 Liquidity and Capital Resources Cash Balances, Available Borrowings, and Capital Resources At June 30, 2000, cash and cash equivalents totaled $44.4 million. The Company also had credit lines with several European and Asian banks totaling $55.8 million. As is common for businesses in European countries, these credit lines are uncommitted and unsecured. Despite the lack of formal commitments from its banks, the Company believes that these lines of credit will continue to be made available because of its long-standing relationships with these banks. As of June 30, 2000, $49.1 million was available under these facilities. The Company has financed its operations and capital requirements primarily through cash flow from operations, bank borrowings and the sale of equity securities. The Company anticipates that its capital resource requirements will be provided from three sources: ongoing cash flow from operations, cash and cash equivalents on hand and as needed, borrowings, under the credit facilities. Cash Flow from Operating Activities The Company's operating activities used cash of $5.5 million and $8 million for the three months ended June 30, 2000 and 1999. The Company's first fiscal quarter typically has higher working capital requirements, with inventories of raw materials and finished products needed in anticipation of higher sales at the end of the second quarter and in the third quarter. Inventory increased 74% from $58.5 million at June 30, 1999 to $101.7 million at June 30, 2000. In the quarter ended June 30, 2000, the Company was building inventory due to transitions related to a number of new products and to the Company's expectation of strong sales in the second and third quarters. The increased inventory is intended to ensure that the new products are available for shipping early to retailers so they are on the shelves in advance of the Christmas buying season. The higher use of cash last year is due not only to increased working capital requirements needed to support anticipated higher sales volumes, but also to a significant reduction of payables. Cash Flow from Investing Activities The Company's investing activities used cash of $.2 million and $8 million for the three months ended June 30, 2000 and June 30, 1999. Included in fiscal 2001 is cash proceeds of $3.6 million for the sale of a building in Europe that was no longer being used in the Company's operations. Capital expenditures totaled $3.9 million in fiscal 2001, compared to $6.9 million in fiscal 2000. The decrease in fiscal 2001 capital expenditures related primarily to the completion of the Company's computer systems implementation project, in the second quarter of fiscal 2000. Cash Flow from Financing Activities Net cash provided by financing activities for the three months ended June 30, 2000 was $1 million. This represents $2.1 million of proceeds from the issuance of registered shares to fulfill employee stock option and stock purchase plans, net of $1.1 million used to purchase treasury shares. Net cash used in financing activities for the three months ended June 30, 1999 was $3.1 million. This represents a $5 million net paydown of short-term debt, net of $1.9 million of proceeds from the sale of treasury shares. Capital Commitments The Company believes that it will continue to make capital expenditures in the future to support ongoing and expanded operations and that such expenditures may be substantial. The Company believes that its cash and cash equivalents, cash generated from operations, and available borrowings under its bank lines of credit will be sufficient to fund capital expenditures and working capital needs for the foreseeable future. Fixed commitments for long lead time parts totaled $34.6 million at June 30, 2000. Fixed commitment for capital and other expenditures, primarily for manufacturing equipment, approximated $3 million at June 30, 2000. In addition, the Company has agreed to guarantee up to a maximum of $5.3 million of Spotlife's capital lease obligation. As of June 30, 2000, the outstanding balance of the lease obligation, and therefore the Company's guarantee, was $4.4 million. 10 Certain Factors Affecting Operating Results This quarterly report on Form 6-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 relating to, among other things, i) price competition, ii) an emerging environment in the PC video camera market, iii) gross margins, iv) the Company's brand strategy, v) the Company's research and development strategy, vi) effective tax rate, vii) capital commitments, viii) bank credit line availability, ix) cash liquidity availability, and x) the outcome of contingencies. Predictions of future events involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in the forward-looking statements due to, among others, the following risk factors: Potential Fluctuations in Future Operating Results The Company's operating results in the past have varied significantly from quarter to quarter and these fluctuations are expected to continue in the future. Future quarterly operating results may vary significantly due to a number of factors, including: the volume and timing of orders received during the quarter; the maturation of product lines; the timing of new product introductions by the Company and its competitors and their acceptance by the market; the impact of competition on the Company's average selling prices and operating expenses; the availability and pricing of components for the Company's products; inventory levels at the Company or in the distribution channels; changes in laws or regulations; changes in product or distribution channel mix; price protection charges; product returns from customers; deferrals of customer orders in anticipation of new products or otherwise; changes in technologies and their acceptance by the market; fluctuations in exchange rates; changes in the Company's strategy; changes in personnel; the performance of the Company's suppliers and third-party product manufacturers; seasonality; and general economic conditions. Many of these factors are beyond the Company's control. In addition, due to the short product life cycles inherent in the Company's markets, the Company's failure to introduce new, competitive products consistently and in a timely manner would adversely affect results of operations for one or more product cycles. The volume and timing of orders received during a quarter are difficult to forecast. Customers generally order on an as-needed basis. Accordingly, the Company has operated with a relatively small backlog, and net sales in any quarter depend primarily on orders booked and shipped in that quarter. In spite of the difficulty in forecasting sales in advance of a quarter and the relatively small backlog at any given time, the Company generally must plan production, order components and enter into development, sales and marketing, and other operating commitments well before each quarter begins. This is particularly acute because substantially all of the Company's products are manufactured in Asia, and the Company relies on suppliers who are located in many other parts of the world. Consequently, any shortfall in net sales in a given quarter may negatively impact the Company's results of operations due to an inability to adjust expenses during such quarter. Excess inventory may negatively impact cash flows and result in charges associated with inventory write-offs. The Company's retail sales are seasonal. Net sales are typically higher during the Company's third fiscal quarter, due primarily to the increased demand for the Company's products during the year-end holiday buying season, and to a lesser extent in the fourth fiscal quarter. Net sales in the first and second quarters can vary significantly as a result of new product introductions and other factors. As a result, the Company believes that quarter-to-quarter comparisons of its results of operations should not be relied upon as indications of future performance. In addition, due to the foregoing factors, it is possible that in some future quarter the Company's operating results may be below the expectations of public market analysts and investors. In such event, the price of the Company's ADSs and registered shares would likely be materially and adversely affected. The Company's prospects must be considered in light of the risks, expenses and difficulties frequently encountered by technology companies participating in rapidly evolving markets. There can be no assurance that the Company will be successful in addressing these concerns. Distribution The Company sells its products through a domestic and international network of distributors, resellers and OEM customers, and the Company's success is dependent on the continued viability and financial stability of its customer base. The OEM, distribution and reseller industries have been historically characterized by rapid change, 11 including periods of widespread financial difficulties and consolidations, and the emergence of alternative distribution channels. The Company's distributor and reseller customers generally offer products of several different companies, including products competitive with the Company's products. Accordingly, there is a risk that these distributors and resellers may give higher priority, including greater retail shelf space, to products of other suppliers, and may reduce their efforts in selling the Company's products. The loss of one or more of the Company's OEM customers, distributors or major resellers could have a material adverse effect on the Company's business, financial condition and results of operations. Product Return Risks Like other manufacturers of consumer products, the Company is exposed to the risk of product returns, either through the exercise by customers of contractual return rights or as a result of the Company's assistance in balancing inventories of retailers and distributors. In addition, the Company offers price protection to its distributors and retailers. A portion of the Company's net sales may result in increased inventory at its distributors and resellers which could lead to reduced orders by these customers in future periods. As a result, historical net sales may not be indicative of future net sales. Overstocking by Logitech's distributors and retailers may lead to higher than normal returns. The short product life cycles of certain of the Company's products and the difficulty in predicting future sales increase the risk that new product introductions, price reductions or other factors affecting the computer industry would result in significant product returns. In addition, the Company continuously introduces product upgrades, enhancements and improved packaging, and thus may experience higher rates of return on its older products. The Company recognizes revenue upon product shipment, less amounts for estimated returns and price protection. Amounts provided for returns and price protection are estimated based upon historical and anticipated experience and the Company's assessment of inventory in the channels. Although the Company believes that it has provided adequate amounts for projected returns, from time to time it has experienced return levels in excess of amounts provided, and no assurance can be given that such amounts will be sufficient for actual returns in future periods. In addition, there can be no assurance that the accruals for price protection will be sufficient, or that any future price changes will not have a material adverse effect on the Company's results of operations. Proprietary Rights The Company's future success depends in part on its proprietary technology, technical know-how and other intellectual property. The Company relies on a combination of patent, trade secret, copyright, trademark and other intellectual property laws, and confidentiality procedures and contractual provisions such as nondisclosure agreements and licenses, to protect its intellectual property. The Company holds various United States patents, together with corresponding patents from other countries relating to certain of the same inventions. The Company also has various United States patent applications pending, together with corresponding applications from other countries relating to certain of the same inventions. Despite these patents and patent applications, there can be no assurance that any patent owned by the Company will not be invalidated, deemed unenforceable, circumvented or challenged, that the rights granted thereunder will provide competitive advantages to the Company, or that any of the Company's pending or future patent applications will be issued with claims of the scope sought by the Company. In addition, there can be no assurance that other intellectual property laws, or the Company's confidentiality procedures and contractual provisions, will adequately protect the Company's intellectual property. There can also be no assurance that the Company's competitors will not independently develop similar technology, duplicate the Company's products, or design around the Company's patents or other intellectual property rights. In addition, unauthorized parties may attempt to copy aspects of the Company's products or to obtain and use information that the Company regards as proprietary. Any of these events could have a material adverse effect on the Company's business, financial condition and results of operations. See "Legal Proceedings." The Company also relies on certain technologies that it obtains from others. The Company may find it necessary or desirable in the future to obtain licenses or other rights relating to one or more of its products or to current or future technologies. There is no assurance that such licenses or other rights will be available on commercially reasonable terms, or at all. 12 Rapid Technological Change The market for the Company's products is characterized by rapidly changing technology and frequent new product introductions. The Company's success will depend to a substantial degree on its ability to develop and introduce in a timely manner new products and enhancements that meet changing customer requirements and emerging industry standards. The development of new, technologically-advanced products and enhancements is a complex and uncertain process requiring high levels of innovation as well as the anticipation of technology and market trends. There can be no assurance that the Company will be able to identify, develop, manufacture, market, sell, or support new products and enhancements successfully, that new products or enhancements will achieve market acceptance, or that the Company will be able to respond effectively to technology changes, emerging industry standards or product announcements by competitors. New product announcements by the Company could cause its customers to defer purchases of existing products or cause distributors to request price protection credits or stock rotations. Any of these events could have a material adverse effect on the Company's business, financial condition and results of operations. Risks Associated with International Operations Substantially all of the Company's manufacturing operations are located in Suzhou, China and other locations in the Far East. These operations could be severely impacted by economic or political instability in China, including instability which may occur in connection with a change in leadership in China, by evolving interpretation and enforcement of legal standards, by strains on Chinese transportation, communications, trade and other infrastructures related to the rapid industrialization of an agrarian economy, by conflicts, embargoes, increased tensions or escalation of hostilities between China and Taiwan, and by other trade customs and practices that are dissimilar to those in the United States. Interpretation and enforcement of China's laws and regulations continues to evolve and the Company expects differences in interpretation and enforcement to continue in the foreseeable future. In addition, the Company's Chinese employees in Suzhou are subject to a number of government regulations regarding employment practices and customs that are fundamentally different in certain respects from those in the United States and Europe. The Suzhou facility is managed by several key Taiwanese expatriate employees of the Company. The loss of such employees, either voluntarily or because of a deterioration in relations between China and Taiwan, may have a material adverse effect on the Company's Suzhou manufacturing operations. Logitech transacts a substantial portion of its business outside the United States. There are certain risks inherent to doing business in international markets, including tariffs, customs, duties and other trade barriers, difficulties in staffing and managing foreign operations, problems in collecting accounts receivable, longer accounts receivable payment cycles, political instability, expropriation, nationalization and other political risks, foreign exchange controls, technology export and import restrictions or prohibitions, delays from customs brokers or government agencies, seasonal reductions in business activity, subjection to multiple taxation regimes and potentially adverse tax consequences, any of which could adversely impact the success of the Company's international operations and, in turn, have a material adverse effect on the Company's business, financial condition and results of operations. Competition The Company's business is characterized by intense competition, a trend of declining average selling prices in OEM and performance enhancements of competing products in retail. The Company expects that competition will continue to be intense and may increase from current or future competitors. Logitech believes that the principal competitive factors include the price, performance, user-centric design, ease of use, functionality, innovation, quality and timeliness of products, as well as the responsiveness, capacity, technical abilities, established customer relationships, retail shelf space, advertising and promotion programs, and brands of manufacturers. The Company competes primarily with Creative Technology, Ezonics Corporation, Guillemot Corporation, Intel, Interact Multimedia, Kensington/Advanced Gravis, KYE/Mouse Systems, Labtec Inc., Microsoft, Mitsumi, Philips, Primax, Saitek Industries Ltd., and Xirlink Inc. Many of the Company's current and potential competitors have longer operating histories and significantly greater financial, technical, sales, marketing and other resources, as well as greater name recognition and larger 13 customer bases, than the Company. In this regard, the Company's chief competitors are Microsoft in the market for pointing devices, gaming devices, and keyboards and Intel in the market for video cameras. However, the Company believes that Intel will soon introduce products in the corded and cordless mice, keyboard and gamepad segments. In the December 1999 quarter, Microsoft began shipping two new mouse products that are based on a technology that replaces the mouse ball with an optical sensor. Logitech has responded to Microsoft with optical offerings in the second quarter of fiscal 2001. In addition, the Company will continue to focus on the advantages of its cordless offerings to the end user. Microsoft is also a leading producer of operating systems and applications with which the Company's pointing and gaming devices are designed to operate. As a result of its position, Microsoft may be able to make improvements in the functionality of its pointing and gaming devices to correspond with ongoing modifications and enhancements to its operating systems and software applications in advance of the Company. This ability could provide Microsoft with significant lead time advantages for product development. In addition, Microsoft may be able to offer pricing advantages on bundled hardware and software products that the Company is not able to offer. Certain of the Company's competitors may also have patents or intellectual property rights, which provide them with an advantage. As a result, these competitors may be able to respond more effectively to new or emerging technologies and changes in customer requirements. Consequently, the Company expects to continue to experience increased competition, significant price reductions in OEM and performance enhancements of competing products in retail. This could result in decreased gross margin, loss of market share and lack of acceptance of the Company's products. In the event of significant price competition in the market for the Company's products, the Company would be required to decrease costs at least proportionately to any price decreases in order to maintain its existing margin levels and would be at a significant disadvantage compared to competitors with substantially greater resources, which could more readily withstand an extended period of downward pricing pressure. There can be no assurance that the Company will be able to compete successfully in the future or that competition will not have a material adverse effect on the Company's business, financial condition and results of operations. Reliance on Suppliers Certain key components used in the manufacture of the Company's products, as well as certain products, are currently purchased by the Company from single or limited sources that specialize in such components or products. At present, single-sourced components include certain of the Company's ASICs, sensors, certain other integrated circuits and components, and balls used in certain of the Company's trackballs. The Company generally does not have long-term agreements with its single or limited sources of supply. Lead times for materials and components ordered by the Company or its contract manufacturers can vary significantly and depend on factors such as the specific supplier, contract terms and demand for a component at a given time. From time to time the Company has experienced supply shortages and fluctuation in component prices. Shortages or interruptions in the supply of components or subcontracted products, or the inability of the Company to procure these components or products from alternate sources at acceptable prices in a timely manner, could have a material adverse effect upon the Company's business, financial condition and results of operations. Dependence on Key Personnel The Company's success depends to a significant degree on the continued contributions of the Company's management, including its Chief Executive Officer, Guerrino De Luca, and other key design, development, manufacturing, marketing, finance and sales personnel. The loss of any of such personnel could have a material adverse effect on the Company's business, financial condition and results of operations. Assimilation and retention of personnel may be made more difficult by the fact that the Company's management and other key personnel are dispersed throughout various locations worldwide, thus requiring the coordination of organizations separated by geography and time zone and the integration of personnel with disparate business backgrounds, cultures and languages. In addition, the Company believes that its future success will depend on its ability to attract and retain highly skilled managerial, engineering, operations, marketing and sales personnel, and competition for whom is intense. There can be no assurance that the Company will be successful in attracting and retaining such personnel, 14 and the failure to attract and retain key personnel could have a material adverse effect on the Company's business, financial condition and results of operations. Fluctuations in Effective Tax Rates; Potential Tax Increases The Company operates in multiple jurisdictions and its profits are taxed pursuant to the tax laws of such jurisdictions. The Company's effective tax rate may be affected by changes in or interpretations of tax laws in any given jurisdiction, utilization of net operating losses and tax credit carryforwards, changes in transfer pricing that impact the recognition of net sales and allocation of expenses in the Company's various subsidiaries, and changes in management's assessment of matters such as the realizability of deferred tax assets. The Company regularly assesses the realizability of deferred tax assets based on a number of factors, including the Company's past earnings history and expected future taxable income over a two-year period. As a result of this process, a valuation allowance is recorded for deferred tax assets when management believes it is more likely than not that the Company will not realize such deferred tax assets. In the past, the Company has experienced substantial fluctuation in its effective income tax rate. The Company's effective income tax rates in the past three fiscal years reflect a variety of factors that may not be present in fiscal 2001. As a result, the Company's effective income tax rate may change in future periods. Outcome of Legal Proceedings There has been substantial litigation in the technology industry regarding rights to intellectual property, and the Company is subject to the risk of claims against it for alleged infringement of the intellectual property rights of others. Through its U.S. and China subsidiaries, the Company is currently involved in several pending lawsuits with respect to patent infringement claims by third parties. The Company believes that all of these pending lawsuits are without merit and intends to defend against them vigorously. There can be no assurance, however, that the defense of any of these actions will be successful, or that any judgment in or settlement of any of these lawsuits would not have a material adverse impact on the Company's business, financial condition and results of operations. Pending and future litigation involving the Company, whether as plaintiff or defendant, regardless of outcome, may result in significant diversion of effort by the Company's technical and management personnel, result in costly litigation, cause product shipment delays or require the Company to enter into royalty or licensing agreements, any of which could have a material adverse effect on the Company's business, financial condition and results of operations. There can be no assurance that such royalty or licensing agreements, if required, will be available on terms acceptable to the Company, or at all. In addition, there can be no assurance that the Company's efforts to protect its intellectual property through litigation will prevent duplication of the Company's technology or products. Other For discussions identifying other factors that could cause actual results to differ from those anticipated in the forward-looking statements, see "Description of Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 20-F for the year ended March 31, 2000. The Company cautions that the foregoing list of risk factors is not exhaustive. 15 LOGITECH INTERNATIONAL S.A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market Risk As a global concern, the Company faces exposure to adverse movements in foreign currency exchange rates and interest rates. These exposures may change over time as business practices evolve and could have a material adverse impact on the Company's financial results. Foreign Currency Exchange Rates Currently, the Company's primary exposures relate to non-dollar denominated sales in Europe and Asia and non-dollar denominated operating expenses and inventory costs in Europe and Asia, as well as net assets located in these geographies. For the quarter ended June 30, 2000, 47% of the Company's sales were denominated in non-U.S. currencies and 25% of the Company's net assets were recorded in non-U.S. currencies. For the quarter ended June 30, 1999, 42% of the Company's sales were denominated in non-U.S. currencies and 27% of the Company's net assets were recorded in non-U.S. currencies. The Company primarily uses the local currencies of its foreign subsidiaries as the functional currency. Accordingly, unrealized foreign currency gains or losses resulting from the translation of net assets denominated in foreign currencies to the U.S. dollar are accumulated in the cumulative translation adjustment component of shareholders' equity. At the present time, the Company does not hedge any currency exposures. The Company estimates that if the U.S. dollar had appreciated by an additional 10% as compared to the functional currencies used by foreign subsidiaries, net income for the quarters ended June 30, 2000 and 1999 would have been adversely impacted by approximately $2.8 million and $2.1 million. Interest Rates Changes in interest rates could impact the Company's anticipated interest income on its cash equivalents and interest expense on debt. The Company prepared sensitivity analyses of its interest rate exposures to assess the impact of hypothetical changes in interest rates. Based on the results of these analyses, a 10% adverse change in interest rates from the fiscal 2001 and 2000 quarter end rates would not have a material adverse effect on the Company's results of operations, cash flows or financial condition for the next year. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized. Logitech International S.A. By: /s/ Guerrino De Luca ---------------------------------------- Guerrino De Luca President and Chief Executive Officer By: /s/ Kristen M. Onken ----------------------------------------- Kristen M. Onken Chief Finance Officer, Chief Accounting Officer, and U.S. Representative August 14, 2000 17 EX-4.1 2 0002.txt AMENDMENT NO. 1 TO DEPOSIT AGREEMENT EXHIBIT 4.1 ____________________________________________________________ AMENDMENT NO. 1 TO DEPOSIT AGREEMENT LOGITECH INTERNATIONAL S.A. AND THE BANK OF NEW YORK, as Depositary AND OWNERS AND BENEFICIAL OWNERS OF AMERICAN DEPOSITARY RECEIPTS Dated as of July 5, 2000 ____________________________________________________________ A-1 AMENDMENT NO. 1 TO DEPOSIT AGREEMENT AMENDMENT NO. 1 TO DEPOSIT AGREEMENT, dated as of July 5, 2000 (herein called the Amendment), among LOGITECH INTERNATIONAL S.A., incorporated under the laws of Switzerland (herein called the Company), THE BANK OF NEW YORK, as Depositary (herein called the Depositary), and all Owners and Beneficial Owners from time to time of American Depositary Receipts issued hereunder. W I T N E S S E T H ------------------- WHEREAS, the Company and the Depositary entered into the Deposit Agreement, dated as of March 27, 1997 (herein called the Deposit Agreement), for the purposes set forth therein; WHEREAS, as a consequence of the stock split of the share capital of the Company and pursuant to Section 6.01 of the Deposit Agreement, the Company and the Depositary deem it advisable to amend the Deposit Agreement, such amendment to take effect as of the date hereof. NOW, THEREFORE, the Company and the Depositary hereby agree to amend the Deposit Agreement, as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless otherwise defined in the ----------- Amendment, terms which are defined in the Deposit Agreement are used herein as therein defined. ARTICLE II AMENDMENTS TO DEPOSIT AGREEMENT Section 2.01. Amendment to Section 1.17. Section 1.17 of the Deposit ------------------------- Agreement is amended to delete the words "Chf 20.00" in the second line thereof and replace such words with the words "Chf 10.00". ARTICLE III FORM OF RECEIPT Section 3.01 Form of Receipt. The Form of Receipt is amended and --------------- restated in its entirety in the form set forth as Exhibit A hereto. A-2 IN WITNESS WHEREOF, LOGITECH INTERNATIONAL S.A. and THE BANK OF NEW YORK have duly executed this Amendment as of the date first above written. LOGITECH INTERNATIONAL S.A. By: /s/ Daniel Borel ---------------------------------- Daniel Borel Chairman of the Board By: /s/ Guerrino De Luca ---------------------------------- Guerrino De Luca President and Chief Executive Officer THE BANK OF NEW YORK By: /s/ David Stueber ------------------------------------ David Stueber Vice President A-3 EXHIBIT A AMERICAN DEPOSITARY SHARES (Each American Depositary Share represents one-tenth of one deposited Share) THE BANK OF NEW YORK AMERICAN DEPOSITARY RECEIPT FOR REGISTERED SHARES OF THE PAR VALUE OF CHF 10.00 EACH OF LOGITECH INTERNATIONAL S.A. (INCORPORATED UNDER THE LAWS OF SWITZERLAND) The Bank of New York, as depositary (hereinafter called the "Depositary"), hereby certifies that _____________________________, or registered assigns IS THE OWNER OF ___________________________. AMERICAN DEPOSITARY SHARES representing deposited Registered Shares (herein called "Shares") of Logitech International S.A., incorporated under the laws of Switzerland (herein called the "Company"). At the date hereof, each American Depositary Share represents one-tenth of one Share deposited or subject to deposit under the Deposit Agreement (as such term is hereinafter defined) at the Zurich, Switzerland office of Swiss Bank Corporation (herein called the "Custodian"). The Depositary's Corporate Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is located at 101 Barclay Street, New York, N.Y. 10286, and its principal executive office is located at One Wall Street, New York, N.Y. 10286. THE DEPOSITARY'S CORPORATE TRUST OFFICE ADDRESS IS 101 BARCLAY STREET, NEW YORK, N.Y. 10286 1. THE DEPOSIT AGREEMENT. This American Depositary Receipt is one of an issue (herein called "Receipts"), all issued and to be issued upon the terms and conditions set forth in the deposit agreement, dated as of March 27, 1997, and as amended by Amendment No. 1 thereto dated as of [June 29, 2000] and as it may further be amended from time to time (herein called the "Deposit Agreement"), by and among the Company, the Depositary, and all Owners and Beneficial Owners from time to time of Receipts issued thereunder, each of whom by accepting a Receipt agrees to become a party thereto and becomes bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of Owners and Beneficial Owners of the Receipts and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Shares and held thereunder (such Shares, securities, property, and cash are herein called "Deposited Securities"). Copies of the Deposit Agreement are on file at the Depositary's Corporate Trust Office in New York City and at the office of the Custodian. The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms defined in the Deposit Agreement and not defined herein shall have the meanings set forth in the Deposit Agreement. A-4 2. SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES. Upon surrender at the Corporate Trust Office of the Depositary of this Receipt, and upon payment of the fee of the Depositary provided in this Receipt, and subject to the terms and conditions of the Deposit Agreement, the Owner hereof is entitled to delivery, to him or upon his order, of the Deposited Securities at the time represented by the American Depositary Shares for which this Receipt is issued. Delivery of such Deposited Securities may be made by the delivery of (a) Shares registered in the name of the Owner hereof or as ordered by him or properly endorsed or accompanied by proper instruments of transfer and (b) any other securities, property and cash to which such Owner is then entitled in respect of this Receipt. Such delivery will be made at the option of the Owner hereof, either at the office of the Custodian or at the Corporate Trust Office of the Depositary, provided that the forwarding of Shares or other Deposited Securities for such delivery at the Corporate Trust Office of the Depositary shall be at the risk and expense of the Owner hereof. 3. TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS. The transfer of this Receipt is registrable on the books of the Depositary at its Corporate Trust Office by the Owner hereof in person or by a duly authorized attorney, upon surrender of this Receipt properly endorsed for transfer or accompanied by proper instruments of transfer and funds sufficient to pay any applicable transfer taxes and the expenses of the Depositary and upon compliance with such regulations, if any, as the Depositary may establish for such purpose. This Receipt may be split into other such Receipts, or may be combined with other such Receipts into one Receipt, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, or surrender of any Receipt or withdrawal of any Deposited Securities, the Depositary, the Custodian, or Registrar may require payment from the depositor of the Shares or the presentor of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Receipt, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of the Deposit Agreement or this Receipt, including, without limitation, this Article 3. The delivery of Receipts against deposit of Shares generally or against deposit of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of the Deposit Agreement or this Receipt, or for any other reason, subject to the provisions of the following sentence. Notwithstanding anything to the contrary in the Deposit Agreement or this Receipt, the surrender of outstanding Receipts and withdrawal of Deposited Securities may not be suspended subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders' meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration statement is in effect as to such Shares. 4. LIABILITY OF OWNER OR BENEFICIAL OWNER FOR TAXES. If any tax or other governmental charge shall become payable by the Custodian or the Depositary with respect to any Receipt or any Deposited Securities represented hereby, such tax or other governmental charge shall be payable by the Owner or Beneficial Owner hereof to the Depositary. The Depositary may refuse to effect any transfer of this Receipt or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner or Beneficial Owner hereof any part or all of the Deposited Securities A-5 represented by the American Depositary Shares evidenced by this Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge and the Owner or Beneficial Owner hereof shall remain liable for any deficiency. The Depositary shall make and maintain reasonable arrangements to enable Owners to receive tax credits, reduction in Swiss withholding tax or other benefits (pursuant to treaty or otherwise) relating to dividend payments received in respect of the Shares represented by the American Depositary Shares. 5. WARRANTIES ON DEPOSIT OF SHARES. Every person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and warrant that (a) such Shares and each certificate therefor are validly issued, fully paid, not subject to calls for additional payments of any kind and free of any preemptive rights of the holders of outstanding Shares, (b) such is duly authorized so to do and (c)(i) registration under the Securities Act of 1933 is not required in connection with the public offer and sale of such Shares in the United States, (ii) the offer and sale of such Shares is registered under the Securities Act of 1933, or (iii) such person acquired such Shares in a transaction meeting the requirements of Rule 144 under the Securities Act of 1933 and such Shares are no longer "restricted securities" within the meaning of Rule 144. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts. 6. FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION. Any person presenting Shares for deposit or any Owner or Beneficial Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, any required exchange control approval, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary or proper. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. No Share shall be accepted for deposit unless accompanied by evidence satisfactory to the Depositary that any necessary approval has been granted by any governmental body in Switzerland which is then performing the function of the regulation of currency exchange. 7. CHARGES OF DEPOSITARY. The Company agrees to pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Company from time to time. The Depositary shall present its statement for such charges and expenses to the Company once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary. The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the Receipts or Deposited Securities or a distribution of Receipts pursuant to Section 4.03 of the Deposit Agreement), whichever applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals under the terms of the Deposit Agreement, (3) such cable, telex and facsimile transmission expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.05 of the Deposit Agreement, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the execution and delivery of Receipts pursuant to Section 2.03, 4.03 or 4.04 of the Deposit Agreement and the surrender of Receipts pursuant to Section 2.05 or 6.02 of the Deposit Agreement, (6) a fee of $.02 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to Sections 4.01 through 4.04 of the A-6 Deposit Agreement, (7) a fee for the distribution of securities pursuant to Section 4.02 of the Deposit Agreement, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause 7 treating all such securities as if they were Shares), but which securities are instead distributed by the Depositary to Owners and (8) any other charge payable by the Depositary, any of the Depositary's agents, including the Custodian, or the agent's of the Depositary's agents in connection with the servicing of Shares or other Deposited Securities (which charge shall be assessed against Owners of record as of the date or dates set by the Depositary in accordance with Section 4.06 of the Deposit Agreement and shall be collected at the sole discretion of the Depositary by billing such Owners for such charge or by deducting such charge from one or more cash dividends or other cash distributions). The Depositary, subject to Article 8 hereof, may own and deal in any class of securities of the Company and its affiliates and in Receipts. 8. PRE-RELEASE OF RECEIPTS. Notwithstanding Section 2.03 of the Deposit Agreement, the Depositary may execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.02 of the Deposit Agreement (a "Pre-Release"). The Depositary may, pursuant to Section 2.05 of the Deposit Agreement, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation from the person to whom Receipts or Shares are to be delivered that such person, or its customer, owns the Shares or Receipts to be remitted, as the case may be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of American Depositary Shares which are outstanding at any time as a result of Pre-Releases will not normally exceed thirty percent (30%) of the Shares deposited under the Deposit Agreement; provided, however, that the Depositary reserves the right to -------- ------- change or disregard such limit from time to time as it deems appropriate. The Depositary may retain for its own account any compensation received by it in connection with the foregoing. 9. TITLE TO RECEIPTS. It is a condition of this Receipt and every successive Owner and Beneficial Owner of this Receipt by accepting or holding the same consents and agrees, that title to this Receipt when properly endorsed or accompanied by proper instruments of transfer, is transferable by delivery with the same effect as in the case of a negotiable instrument under the laws of the State of New York; provided, however, that the Depositary, notwithstanding any notice to the - -------- ------- contrary, may treat the person in whose name this Receipt is registered on the books of the Depositary as the absolute owner hereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement or for all other purposes. 10. VALIDITY OF RECEIPT. This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been executed by the Depositary by the manual signature of a duly authorized signatory of the Depositary; provided, however that such signature -------- ------- may be a facsimile if a Registrar for the Receipts shall have been appointed and such Receipts are countersigned by the manual of a duly authorized officer of the Registrar. A-7 11. REPORTS; INSPECTION OF TRANSFER BOOKS. The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports with the Commission. Such reports will be available for inspection and copying by Owners and Beneficial Owners at the public reference facilities maintained by the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549. The Depositary will make available for inspection by Owners of Receipts at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary will also send to Owners of Receipts copies of such reports when furnished by the Company pursuant to the Deposit Agreement. Any such reports and communications, including any such proxy soliciting material, furnished to the Depositary by the Company shall be furnished in English to the extent such materials are required to be translated into English pursuant to any regulations of the Commission. The Depositary will keep books, at its Corporate Trust Office, for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners of Receipts; provided that such -------- inspection shall not be for the purpose of communicating with Owners in the interest of a business or object other than the business of the Company or a matter related to this Deposit Agreement or the Receipts. 12. DIVIDENDS AND DISTRIBUTIONS. Whenever the Depositary receives any cash dividend or other cash distribution on any Deposited Securities, the Depositary will, if at the time of receipt thereof any amounts received in a foreign currency can in the judgment of the Depositary be converted on a reasonable basis into United States dollars transferable to the United States, and subject to the Deposit Agreement, convert such dividend or distribution into dollars and will distribute the amount thus received (net of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement) to the Owners of Receipts entitled thereto; provided, however, that in the event that the Company or the -------- ------- Depositary is required to withhold and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, the amount distributed to the Owners of the Receipts evidencing American Depositary Shares representing such Deposited Securities shall be reduced accordingly. Subject to the provisions of Section 4.11 and 5.09 of the Deposit Agreement, whenever the Depositary receives any distribution other than a distribution described in Section 4.01, 4.03 or 4.04 of the Deposit Agreement, the Depositary may, and shall at the request of the Company, cause the securities or property received by it to be distributed to the Owners entitled thereto, after deduction or upon payment of any fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement or any taxes or other governmental charges in any manner, after consultation with the Company, to the extent practicable, that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution - -------- ------- cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other reason the Depositary deems such distribution not to be feasible, the Depositary may, after consultation with the Company, to the extent practicable, adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement) will be distributed by the Depositary to the Owners of Receipts entitled thereto all in the manner and subject to the conditions described in Section 4.01 of the Deposit Agreement. If any distribution consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Company so requests, distribute to the Owners of outstanding Receipts entitled thereto, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution subject to the terms and conditions of the Deposit Agreement with respect to the A-8 deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement. In lieu of delivering Receipts for fractional American Depositary Shares in any such case, the Depositary will sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.01 of the Deposit Agreement. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby. In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary and practicable to pay any such taxes or charges, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners of Receipts entitled thereto. 13. RIGHTS. In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary, after consultation with the Company, to the extent practicable, shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason, the Depositary may not either make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion, after consultation with the Company, to the extent practicable, that it is lawful and feasible to make such rights available to all or certain Owners but not to other Owners, the Depositary may distribute to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it deems appropriate. In circumstances in which rights would otherwise not be distributed, if an Owner of Receipts requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law. If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an Owner pursuant to such warrants or other instruments to the Depositary from such Owner to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon payment of the fees and expenses of the Depositary as provided in Article 7 hereof and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02 of the Deposit Agreement, and shall, pursuant to Section 2.03 of the Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a distribution pursuant to the preceding paragraph, such Receipts shall be legended if required in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws. If the Depositary determines, after consultation with the Company, to the extent practicable, in its discretion that it is not lawful and feasible to make such rights available to all or certain Owners, it may sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the A-9 Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of the Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise. The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to all Owners or are registered under the provisions of such Act; provided, that nothing in this -------- Deposit Agreement shall create, any obligation on the part of the Company to file a registration statement with respect to such rights or underlying securities or to endeavor to have such a registration statement declared effective. If an Owner of Receipts requests the distribution of warrants or other instruments, notwithstanding that there has been no such registration under such Act, the Depositary shall not effect such distribution unless it has received an opinion from recognized counsel in the United States for the Company upon which the Depositary may rely that such distribution to such Owner is exempt from such registration. The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular. 14. CONVERSION OF FOREIGN CURRENCY. Whenever the Depositary or the Custodian shall receive foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such foreign currency into Dollars, and such Dollars shall be distributed to the Owners entitled thereto or, if the Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.09 of the Deposit Agreement. If such conversion or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable. If at any time the Depositary shall determine that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, after consultation with the Company, to the extent practicable, the Depositary may distribute the foreign currency (or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same. If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to the extent permissible to the Owners entitled thereto and may distribute the balance of the foreign currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled thereto. A-10 15. RECORD DATES. Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall find it necessary or convenient, the Depositary, after consultation with the Company, to the extent practicable, shall fix a record date, which shall be the record date, if any, established by the Company for such purpose or, if different, as close thereto as practicable, (a) for the determination of the Owners of Receipts who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, (b) on or after which each American Depositary Share will represent the changed number of Shares, subject to the provisions of the Deposit Agreement or (c) obligated to pay any charges pursuant to clause (8) of Section 5.09 of the Deposit Agreement and Article 7 of this Receipt. 16. VOTING OF DEPOSITED SECURITIES. Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, mail to the Owners of Receipts a notice, in the form prepared by the Depositary, after consultation with the Company which shall contain (a) such information as is contained in such notice of meeting received by the Depositary from the Company, (b) a statement that the Owners of Receipts as of the close of business on a specified record date will be entitled, subject to any applicable provision of law and of the statutes of the Company, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares and (c) a statement as to the manner in which such instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated to the Company (and the Company will cause such person to vote the Shares represented by such Deposited Securities in accordance with instructions of the Board of Directors of the Company). Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Depositary for such purpose, the Depositary shall endeavor insofar as practicable to vote or cause to be voted the amount of Shares or other Deposited Securities represented by such American Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request; provided, -------- that the Depositary shall not demand a poll. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with such instructions or deemed instructions. If no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities represented by the American Depositary Shares evidenced by such Owner's Receipts on or before the date established by the Depositary for such purpose, the Depositary shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a person designated by the Company with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a person designated by the Company to vote such Deposited Securities (and the Company will cause such person to vote the Shares represented by such Deposited Securities in accordance with instructions of the Board of Directors of the Company); provided, that no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary (and the Company agrees to provide such information as promptly as practicable in writing) that (x) the Company does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially and adversely affects the rights of holders of Shares. 17. CHANGES AFFECTING DEPOSITED SECURITIES. In circumstances where the provisions of Section 4.03 of the Deposit Agreement do not apply, upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets affecting the Company or to which it is a party American Depositary Shares shall thenceforth represent any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited A-11 Securities, in addition to the existing Deposited Securities, the right to receive the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, after consultation with the Company, and shall if the Company so requests, execute and deliver additional Receipts as in the case of a dividend in Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities. 18. LIABILITY OF THE COMPANY AND DEPOSITARY. Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law or regulation of the United States or any other country, or of any other governmental or regulatory authority, or by reason of any provision, present or future, of the statutes of the Company, or by reason of any provision of any securities issued or distributed by the Company, or any offering or distribution thereof, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Company shall be prevented, delayed or forbidden from or be subject to any civil or criminal penalty on account of doing or performing any act or thing which by the terms of the Deposit Agreement or Deposited Securities it is provided shall be done or performed; nor shall the Depositary or the Company or any of their respective directors, employees, agents or affiliates incur any liability to any Owner or Beneficial Owner of a Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement. Where, by the terms of a distribution pursuant to Section 4.01, 4.02 or 4.03 of the Deposit Agreement, or an offering or distribution pursuant to Section 4.04 of the Deposit Agreement, such distribution or offering may not be made available to Owners of Receipts, and the Depositary may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse. Neither the Company nor the Depositary assumes any obligation or shall be subject to any liability under the Deposit Agreement to Owners or Beneficial Owners of Receipts, except that they agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary shall not be subject to any liability with respect to the validity or worth of the Deposited Securities. Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary. Neither the Depositary nor the Company shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or Beneficial Owner of a Receipt, or any other person believed by it in good faith to be competent to give such advice or information. The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or non-action is in good faith. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with a matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises, the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the reasonable expenses of counsel) which may arise out of any registration with the Commission of Receipts, American Depositary Shares or Deposited Securities or the offer or sale thereof in the United States or out of acts performed or omitted, in accordance with the provisions of the Deposit Agreement and of the Receipts, as the same may be amended, modified, or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of its directors, employees, agents and affiliates. The indemnities contained in the preceding sentence shall not extend to any liability or expense which may arise out of any Pre-Release (as defined in Section 2.09 of the Deposit Agreement) but only to the extent that any such liability or expense arises in connection with (a) any United States federal, state or local A-12 income tax laws, or (b) the failure of the Depositary to deliver Deposited Securities when required under the terms of Section 2.05. However, the indemnities provided in the preceding paragraph shall apply to any such liability or expense which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum), or preliminary prospectus (or preliminary placement memorandum relating to the offer of sale of American Depositary Shares, except to the extent any such liability or expense arises out of (i) information relating to the Depositary or any Custodian (other than the Company), as applicable, furnished in writing and not materially changed or altered by the Company expressly for use in any of the foregoing documents, or, (ii) if such information is provided, the failure to state a material fact necessary to make the information provided not misleading. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Deposit Agreement. 19. RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF SUCCESSOR CUSTODIAN. The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by written notice of such removal, effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners of Receipts to do so, it may appoint a substitute or additional custodian or custodians. 20. AMENDMENT. The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable without the consent of Owners or Beneficial Owners of Receipts. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges, registration fees and cable, telex or facsimile transmission costs, delivery costs or other such expenses), or which shall otherwise prejudice any substantial existing right of Owners of Receipts, shall, however, not become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner of a Receipt at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby except in order to comply with mandatory provisions of applicable law. 21. TERMINATION OF DEPOSIT AGREEMENT. The Depositary at any time at the direction of the Company, shall terminate the Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 90 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding if at any time 90 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in the Deposit Agreement. On and after the date of termination, the Owner of a Receipt will, upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 5.09 of the Deposit Agreement, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under the Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights and other property as provided A-13 in the Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it thereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt referred to in Section 5.09, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). Upon the termination of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary with respect to indemnification, charges, and expenses. 22. SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES. In the Deposit Agreement, the Company has (i) appointed CT Corporation System, 1633 Broadway, New York, New York 10019, in the State of New York, as the Company's authorized agent upon which process may be served in any suit or proceeding arising out of or relating to the Deposited Securities, the American Depositary Shares, the Receipts or this Agreement, (ii) consented and submitted to the jurisdiction of any state or federal court in the State of New York in which any such suit or proceeding may be instituted, and (iii) agreed that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. 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