9. Contingencies
From time to time, the Company is involved in various legal
proceedings, claims, suits and complaints arising out of the normal
course of business. Based on the facts currently available to the
Company, management believes that these claims, suits and
complaints are adequately provided for, covered by insurance,
without merit or not probable that an unfavorable outcome will
result.
As previously disclosed, on September 7, 2012, the Company
received a letter from counsel for Talbot (Todd) Smith, a former
employee, alleging that Mr. Smith was wrongly terminated.
Mr. Smith, who was terminated “for cause” by the
Company, filed a complaint with the Occupational Safety &
Health Administration (“OSHA”) in November 2012. The
Company and various third parties have investigated the allegations
made by Mr. Smith and have determined that the allegations are
without merit. The Company believes the allegations made by
Mr. Smith against the Company are in retaliation for his
“for cause” termination and has been defending itself
vigorously in the OSHA matter. Because OSHA did not make a final
determination on Mr. Smith’s complaint within 180 days,
Mr. Smith filed a complaint with the U.S. District Court for
the Eastern District of Pennsylvania (“USDC”) on
August 30, 2013. The USDC complaint makes the same allegations
made by Mr. Smith in the OSHA complaint and does not make any
additional material allegations. Given that the allegations made by
Mr. Smith in the USDC complaint are nearly identical to those
made in his OSHA complaint, the Company and various third parties
have investigated the allegations previously and have determined
that the allegations are without merit, and the Company will defend
itself vigorously in court. The case is currently in discovery.
Given that Mr. Smith filed the complaint with the USDC, OSHA
dismissed the OSHA matter without a final determination.
As previously disclosed, subsequent to the filing of the OSHA
complaint by Mr. Smith on February 12, 2013, the Company
received a subpoena from the staff of the U.S. Securities and
Exchange Commission (the “Staff”) requesting the
Company to provide certain information to the Staff, which is
generally consistent with the meritless allegations made by
Mr. Smith in his OSHA complaint. In the USDC complaint,
Mr. Smith states that he provided the Staff with information
about his allegations in July and August 2012. The Company
responded to that subpoena and received a second subpoena from the
Staff, requesting additional information consistent with the first
subpoena. The Company is cooperating fully with the Staff and has
provided the requested information.
As previously disclosed, on November 1, 2013, the Company and
certain of its officers were named as defendants in a purported
class action lawsuit filed in the United States District Court for
the Middle District of Pennsylvania alleging violations of the
federal securities laws. The lawsuit was brought on behalf of
a purported stockholder of the Company and all other similarly
situated stockholders who purchased the Company’s securities
between July 13, 2011 and September 9, 2013 (the
“Class Period”). The complaint was mainly based on
the meritless allegations made by Mr. Smith in his complaint
and generally alleged that the defendants made false and misleading
statements regarding the Company’s business, operations and
prospects, which allegedly caused the plaintiff and other members
of the purported class to purchase the Company’s securities
at inflated prices during the Class Period. The lawsuit sought
unspecified damages. There were no additional filings by parties
seeking to be designated as the lead plaintiff by the required
December 31, 2013 deadline, and the plaintiff filed a Notice
of Voluntary Dismissal without Prejudice on January 7, 2014,
so this matter has concluded.
On January 8, 2014, the Company was served with a derivative
complaint filed in the Delaware Chancery Court by Cambridge
Retirement System, a purported shareholder of the Company, against
the Company’s Board of Directors to recover allegedly
“excessive and wasteful” compensation paid to the
non-executive directors since 2010. The Company believes that these
allegations are baseless and without merit given that the Company
has received favorable say-on-pay votes at the last three annual
shareholders meetings and the shareholders previously have voted in
favor of the equity grants to the directors, which is required
under ASX listing rules, as recently as November 2013. The Company
and the directors will defend themselves vigorously in this matter
and expect to file a motion to dismiss in response to the complaint
by Cambridge in lieu of an answer. The Company does not believe
there will be any material impact to the Company or its
business.
The Company does not believe there will be any material impact to
the Company or its business as a result of these matters.
