Baker Hughes 2014 Annual Report Download - page 43

18
We insure against risks arising from our business to the extent deemed prudent by our management and to the
extent insurance is available, but no assurance can be given that the nature and amount of that insurance will be
sufficient to fully indemnify us against liabilities arising out of pending or future legal proceedings or other claims.
Most of our insurance policies contain deductibles or self-insured retentions in amounts we deem prudent and for
which we are responsible for payment. In determining the amount of self-insurance, it is our policy to self-insure
those losses that are predictable, measurable and recurring in nature, such as claims for automobile liability,
general liability and workers compensation.
The following lawsuits have been filed in Delaware in connection with our pending merger with Halliburton:
• On November 24, 2014, Gary Molenda, a purported shareholder of the Company, filed a class action
lawsuit in the Court of Chancery of the State of Delaware ("Delaware Chancery Court") against Baker
Hughes, the Company’s Board of Directors, Halliburton, and Red Tiger LLC, a wholly owned subsidiary of
Halliburton (“Red Tiger” and together with all defendants, “Defendants”) styled Gary R. Molenda v. Baker
Hughes, Inc., et al., Case No. 10390-CB.
• On November 26, 2014, a second purported shareholder of the Company, Booth Family Trust, filed a
substantially similar class action lawsuit in Delaware Chancery Court.
• On December 1, 2014, New Jersey Building Laborers Annuity Fund and James Rice, two additional
purported shareholders of the Company, filed substantially similar class action lawsuits in Delaware
Chancery Court.
• On December 10, 2014, a fifth purported shareholder of the Company, Iron Workers Mid-South Pension
Fund, filed another substantially similar class action lawsuit in the Delaware Chancery Court, and
• On December 24, 2014, a sixth purported shareholder of the Company, Annette Shipp, filed another
substantially similar class action lawsuit in the Delaware Chancery Court.
All of the lawsuits make substantially similar claims. The plaintiffs generally allege that the members of the
Company’s Board of Directors breached their fiduciary duties to our shareholders in connection with the merger
negotiations by entering into the merger agreement and by approving the merger, and that the Company,
Halliburton, and Red Tiger aided and abetted the purported breaches of fiduciary duties. More specifically, the
lawsuits allege that the merger agreement provides inadequate consideration to our shareholders, that the process
resulting in the merger agreement was flawed, that the Company’s directors engaged in self-dealing, and that
certain provisions of the merger agreement improperly favor Halliburton and Red Tiger, precluding or impeding third
parties from submitting potentially superior proposals, among other things. The lawsuit filed by Annettee Shipp also
alleges that our Board of Directors failed to disclose material information concerning the proposed merger in the
preliminary registration statement on Form S-4. On January 7, 2015, James Rice amended his complaint, adding
similar allegations regarding the disclosures in the preliminary registration statement on Form S-4. The lawsuits
seek unspecified damages, injunctive relief enjoining the merger, and rescission of the merger agreement, among
other relief. On January 23, 2015, the Delaware lawsuits were consolidated under the caption In re Baker Hughes
Inc. Stockholders Litigation, Consolidated C.A. No. 10390-CB. Pursuant to the Court’s consolidation order, plaintiffs
filed a consolidated complaint on February 4, 2015, which alleges substantially similar claims and seeks
substantially similar relief to that raised in the six individual complaints, except that while Baker Hughes is named as
a defendant, no claims are asserted against the Company.
On November 26, 2014, a seventh class action challenging the merger was filed by a purported Company
shareholder in the United States District Court for the Southern District of Texas (Houston Division). The lawsuit,
styled Marc Rovner v. Baker Hughes Inc., et al., Cause No. 4:14-cv-03416, asserts claims against the Company,
most of our current Board of Directors, Halliburton, and Red Tiger. The lawsuit asserts substantially similar claims
and seeks substantially similar relief as that sought in the Delaware lawsuits. The Defendants are currently
scheduled to respond to the complaint on February 13, 2015.
On October 9, 2014, our subsidiary filed a Request for Arbitration against a customer before the London Court
of International Arbitration, pursuing claims for the non-payment of invoices for goods and services provided in
amount provisionally quantified to exceed $67.9 million. In our Request for Arbitration, we also noted that invoices
in an amount exceeding $57 million had been issued to the customer, and would be added to the claim in the event
that they became overdue. The due date for payment of all of these invoices has now passed. On November 6,
2014, the customer filed its Response and Counterclaim, denying liability and counterclaiming damages for breach
of contract of approximately $182 million. We deny any liability to the customer and intend to pursue our claims
against the customer and defend the claims made under the counterclaim. No timetable for the conduct of the
arbitration has yet been established.