Invacare 2011 Annual Report Download - page 40

Download and view the complete annual report

Please find page 40 of the 2011 Invacare annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 136

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136

which would require the suspension of certain operations at those facilities until they are certified by the
company and then determined by FDA to be in compliance with FDA quality system regulations. The company
is in the process of negotiating with the FDA on the terms of the consent decree. There can be no assurance that
the company will be able to successfully conclude its negotiations with the FDA. In addition, in December 2010,
the company received a warning letter from the FDA related to quality system processes and procedures at the
company’s Sanford, Florida facility. See Item 1A. Risk Factors. At the time of this filing, these matters remain
pending.
As previously disclosed, on August 23, 2011, the City of Lansing Police and Fire Retirement System (the
“Lansing Retirement System”), a holder of approximately 3,400 common shares of the company, filed a
shareholder derivative action in the Court of Common Pleas in Lorain County, Ohio against the company’s board
of directors and the company nominally. In March 2011, a lawyer for the Lansing Retirement System sent the
company’s board of directors a letter demanding that the company initiate a lawsuit against members of its board
and any other culpable parties for damages allegedly suffered by the company primarily in connection with
certain matters relating to the warning letter from the FDA following inspections in 2010. The company’s board
appointed a special committee of independent directors that worked with independent counsel to review and
recommend a response to these allegations. After a thorough review of the shareholder’s allegations by the
special committee, the board determined that it was not in the company’s best interests to pursue any of the
actions requested in the letter. The Lansing Retirement System then filed this litigation, which the company has
removed to the U.S. District Court, Northern District of Ohio, Eastern Division.
On February 2, 2012, another shareholder derivative lawsuit asserting similar claims to those asserted by the
Lansing Retirement System was filed by a purported shareholder of the company, Mary Witmer (“Witmer”), who
has not issued a demand letter, against substantially all of the directors and the company nominally in the U.S.
District Court, Northern District of Ohio, Eastern Division. The Witmer complaint also alleges claims of unjust
enrichment and waste of corporate assets, as well as requesting specific corporate governance reforms.
In accordance with the company’s organizational documents and indemnification agreements entered into
between the company and its executive officers and directors, the costs of the shareholder derivative lawsuits
brought by both the Lansing Retirement System and Witmer will be borne by the company. The company has
notified its directors’ and officers’ insurance carrier of the Witmer and the Lansing Retirement System matters.
The company received a subpoena in 2006 from the U.S. Department of Justice seeking documents relating
to three long-standing and well-known promotional and rebate programs maintained by the company. The
company believes that the programs described in the subpoena are in compliance with all applicable laws and the
company has cooperated fully with the government investigation. As of February 2012, the subpoena remains
pending.
Item 4. Mine Safety Disclosures.
None.
I-34