Baker Hughes 2009 Annual Report Download - page 137

2009 Form 10-K 63
Texas Cases
On September 4, 2009, a purported stockholder class
action lawsuit styled Garden City Employees’ Retirement Sys-
tem v. BJ Services Company, et al., was filed in the 80th Judi-
cial District Court of Harris County, Texas, on behalf of the
public stockholders of BJ Services with respect to the Merger
Agreement naming BJ Services, the current members of the BJ
Services Board, the Company and Merger Sub as defendants.
To date, three additional actions have been filed against
the Company, BJ Services and its Board in District Courts in
Harris County, Texas. They are: (1) Johnson v. Stewart, et al.,
filed on September 11, 2009, (2) Saratoga Advantage Trust –
Energy & Basic Materials Portfolio v. Huff, et al., filed on Sep-
tember 11, 2009, and (3) Matt v. Huff, et al., which was filed
on September 21, 2009. The lead plaintiff and plaintiff’s coun-
sel in the Garden City and Saratoga Advantage Trust cases
filed in Texas also filed the cases of the same name in Dela-
ware that are listed above. The Texas actions make substan-
tially the same allegations as were initially asserted in the
Delaware actions, and seek the same relief.
On October 9, 2009, the Harris County Court consolidated
the Texas actions and restyled the action as Garden City
Employees’ Retirement System, et al. v. BJ services Company,
et al., Cause No. 2009-57320, 80th Judicial District of Harris
County, Texas. No amended consolidated complaint has been
filed as of the date of this Annual Report on Form 10-K.
On October 20, 2009, the Court of Appeals for the First
District of Texas at Houston granted Defendants’ emergency
motion to stay the Texas cases pending its decision on defen-
dants’ mandamus petition seeking a stay of the Texas litigation
pending adjudication of the first-filed cases in Delaware.
Proposed Settlement of Delaware and Texas Cases
The Company believes that the Delaware and Texas actions
are without merit, and that it has valid defenses to all claims.
Nevertheless, in an effort to minimize further cost, expense,
burden and distraction of any litigation relating to such law-
suits, on February 9, 2010, the parties to the Delaware and
Texas actions entered into a Memorandum of Understanding
regarding the terms of settlement of such lawsuits. The
Memorandum of Understanding resolves the allegations by
the plaintiffs against the defendants in connection with the
merger and provides a release and settlement by the pur-
ported class of the BJ Services stockholders of all claims
against BJ Services, its directors and an officer and Baker
Hughes, and their affiliates and agents, in connection with
the merger. In exchange for such release and settlement, the
parties agreed, after discussions on an arms’ length basis, that
Baker Hughes and BJ Services provide additional supplemental
disclosures in the joint proxy statement/prospectus included in
a registration statement on Form S-4 filed by Baker Hughes on
February 9, 2010 with the SEC. The proposed settlement includes
an agreement that neither BJ Services nor Baker Hughes will
oppose plaintiff’s counsel’s application for BJ Services to pay
attorneys’ fees and costs in an amount to be determined by
the court up to $700,000. In general, the terms of the Mem-
orandum of Understanding will not become legally binding
unless and until further definitive documentation is entered
into and court approval is obtained. The settlement is contin-
gent upon consummation of the merger. There can be no
assurance as to when or whether any of the foregoing condi-
tions will be satisfied. In the event that these conditions are
not satisfied, the Company intends to continue to vigorously
defend these actions.
Environmental Matters
Our past and present operations include activities which
are subject to extensive domestic (including U.S. federal, state
and local) and international environmental regulations with
regard to air, land and water quality and other environmental
matters. Our environmental procedures, policies and practices
are designed to ensure compliance with existing laws and reg-
ulations and to minimize the possibility of significant environ-
mental damage.
We are involved in voluntary remediation projects at some
of our present and former manufacturing locations or other
facilities, the majority of which relate to properties obtained in
acquisitions or to sites no longer actively used in operations. On
rare occasions, remediation activities are conducted as specified
by a government agency-issued consent decree or agreed
order. Remediation costs are accrued based on estimates of
probable exposure using currently available facts, existing envi-
ronmental permits, technology and presently enacted laws and
regulations. Remediation cost estimates include direct costs
related to the environmental investigation, external consulting
activities, governmental oversight fees, treatment equipment
and costs associated with long-term operation, maintenance
and monitoring of a remediation project.
We have also been identified as a potentially responsible
party (“PRP”) in remedial activities related to various Super-
fund sites. We participate in the process set out in the Joint
Participation and Defense Agreement to negotiate with gov-
ernment agencies, identify other PRPs, determine each PRP’s
allocation and estimate remediation costs. We have accrued
what we believe to be our pro-rata share of the total esti-
mated cost of remediation and associated management of
these Superfund sites. This share is based upon the ratio that
the estimated volume of waste we contributed to the site
bears to the total estimated volume of waste disposed at the
site. Applicable United States federal law imposes joint and
several liability on each PRP for the cleanup of these sites leav-
ing us with the uncertainty that we may be responsible for the
remediation cost attributable to other PRPs who are unable to
pay their share. No accrual has been made under the joint and
several liability concept for those Superfund sites where our
participation is de minimis since we believe that the probability
that we will have to pay material costs above our volumetric
share is remote. We believe there are other PRPs who have
greater involvement on a volumetric calculation basis, who
have substantial assets and who may be reasonably expected
to pay their share of the cost of remediation. For those Super-
fund sites where we are a significant PRP, remediation costs
are estimated to include recalcitrant parties. In some cases,
we have insurance coverage or contractual indemnities from
third parties to cover a portion of or the ultimate liability.