Item 1.01 Entry into a Material Definitive Agreement.
Master Agreement
On November 13, 2018, GE, BHGE and BHGE
LLC entered into a Master Agreement, which provides, among other things, that the parties will (1) immediately following execution
of the Master Agreement, enter into amended and restated versions of the Stockholders Agreement, Supply Agreements, Non-Competition
Agreement, Channel Agreement, Intercompany Services Agreement, GE Digital Master Products and Services Agreement, IP Cross License
Agreement and Trademark License Agreement, each as described below, (2) use commercially reasonable efforts to negotiate in good
faith definitive agreements that contain all of the terms included in (a) an aero-derivative joint venture term sheet, which, among
other things, sets forth the terms on which BHGE LLC and GE would form and operate a joint venture for acquiring aero-derivative
gas turbine engines and new product introductions related thereto (and ancillary agreements, including distribution agreements
related thereto), (b) an industrial steam turbine term sheet, which, among other things, sets forth the terms on which BHGE LLC
would be granted an option, exercisable following completion of any applicable information and consultation processes with employee
representative bodies, to transfer certain of its assets, liabilities and employees that are related to BHGE LLC’s existing
business of developing, designing, engineering, marketing, supplying, installing and servicing certain industrial steam turbine
product lines (the “Industrial Steam Turbine Business”) to GE, (c) an exclusive distribution term sheet with respect
to heavy duty gas turbines arrangements and (d) a tax matters term sheet, which among other things, clarifies how certain tax benefits
will be shared between the parties pursuant to the Tax Matters Agreement, and (3) immediately following execution of the Master
Agreement, enter into the Aero Supply Agreement, the HDGT Supply Agreement, the Employee Benefits Matters Agreement and the Umbrella
Aero-Derivatives IP Agreement, each as described below. The Master Agreement provides that if definitive agreements with respect
to such term sheets are not entered into prior to January 31, 2019 that such term sheets will be binding on the applicable parties,
except that the term sheet related to the Tax Matters Agreement will be binding immediately.
The foregoing description of the Master
Agreement, and the term sheets attached thereto, is not a complete description thereof and is qualified in its entirety by reference
to the full text of such agreement, which is filed as Exhibit 10.1 hereto, and incorporated herein by reference.
Aero-Derivatives Supply and Technology Development Agreement
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE LLC entered into a supply and technology development agreement under which, among other
things, GE agrees to provide aero-derivative gas turbine technologies and components to BHGE LLC and the JV that is effective upon
the Trigger Date (the “Aero Supply Agreement”), with licenses to certain tools and other IP being effective on signing.
Under the Aero Supply Agreement, GE and
BHGE LLC undertake to cause the JV to join (following the closing of the JV transaction) the Aero Supply Agreement. The Aero Supply
Agreement provides that GE will exclusively provide certain aero-derivative gas turbine technologies and components to the JV,
and the JV will exclusively purchase certain aero-derivative gas turbine technologies and components from GE, subject to certain
termination rights in favor of GE and the JV, including that GE has a right to terminate such exclusivity if, among other things,
certain purchasing levels are not maintained (subject to specific cure provisions). The foregoing description of the Aero Supply
Agreement is not a complete description thereof and is qualified in its entirety by reference to the full text of such agreement,
which is filed as Exhibit 10.2 hereto, and incorporated herein by reference.
HDGT Supply Agreement
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE LLC entered into a supply agreement with respect to heavy duty gas turbine units, parts
and components that is effective upon the Trigger Date (the “HDGT Supply Agreement”). The initial term of the HDGT
Supply Agreement is five years for new units, and the later of 20 years and the operating service life for parts and components.
Under the HDGT Supply Agreement, BHGE agrees to exclusively purchase certain units, parts and components from GE, and GE agrees
to exclusively supply certain units, parts and components to BHGE, subject to certain termination rights.
The foregoing description of the HDGT Supply
Agreement is not a complete description thereof and is qualified in its entirety by reference to the full text of such agreement,
which is filed as Exhibit 10.3 hereto, and incorporated herein by reference.
Employee Benefits
Matters Agreement
On November 13, 2018, in connection with
the Master Agreement Framework, GE, BHGE and BHGE LLC entered into an employee benefits matters agreement (the “Employee
Benefits Matters Agreement”). Under the Employee Benefits Matters Agreement, BHGE will cease participation at agreed upon
times in certain GE US, UK and Dutch pension and retirement plans, and certain liabilities with respect to such plans will be allocated
between BHGE and GE. GE will transfer to BHGE certain UK pension liabilities related to the oil and gas businesses of BHGE and
certain identified oil and gas businesses of GE on what is intended to be a fully funded basis (using agreed upon actuarial assumptions).
No liabilities associated with the GE Pension Plan will be transferred to BHGE. BHGE LLC will be responsible for certain liabilities
with respect to certain BHGE employees who will not continue to participate in the GE Supplementary Pension Plan. The Employee
Benefits Matters Agreement also provides that (1) no liabilities associated with the GE Retirement Savings Plan or GE post-termination
health and welfare benefit programs will be transferred to BHGE and (2) effective on the date on which GE ceases to own at least
50% of the voting power of BHGE’s outstanding common stock, outstanding GE long-term incentive plan awards held by BHGE employees
(i) will vest in full with respect to time-based conditions on such date and (ii) to the extent that the awards are options or
stock appreciation rights, they will be exercisable until the earlier of (x) five years from such date and (y) the original award
period under the applicable award agreement.
The foregoing description of the Employee
Benefits Matters Agreement is not a complete description thereof and is qualified in its entirety by reference to the full text
of such agreement, which will be filed with the U.S. Securities and Exchange Commission as an exhibit to the Company’s Annual
Report on Form 10-K for the year ending December 31, 2018.
Amended and Restated Stockholders Agreement
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE entered into an amendment and restatement (the “Amended and Restated Stockholders
Agreement”) of the Stockholders Agreement between GE and BHGE dated July 3, 2017, as amended (the “Original Stockholders
Agreement”). The Amended and Restated Stockholders Agreement amends and restates certain provisions in the Original Stockholders
Agreement to provide (1) for the termination of certain aspects of the transfer restrictions applicable to GE and its affiliates
and the clarification of other aspects of such transfer restrictions (in each case, as further described below), (2) that, following
the Trigger Date and until GE and its affiliates own less than 20% of the voting power of BHGE, GE will be entitled to designate
one person for nomination to BHGE’s board of directors, and (3) that the “Trigger Date” is the later of (x) the
date on which GE and its affiliates cease to beneficially own, in the aggregate, more than 50% of the outstanding voting power
of BHGE’s common stock and (y) July 3, 2019.
The amendments to the transfer restrictions
applicable to GE and its affiliates include the termination, effective as of November 12, 2018, of the prohibition (absent certain
approvals by BHGE) on the transfer by GE and its affiliates of any shares of BHGE’s Class A common stock, par value $0.0001
per share (“Class A Common Stock”) or BHGE’s Class B common stock, par value $0.0001 per share (“Class
B Common Stock” and, together with Class A Common Stock, “BHGE Stock”), prior to July 3, 2019. Certain other
aspects of the transfer restrictions remain in place, including restrictions on transfers prior to July 3, 2022 by GE and its affiliates
of BHGE Stock that would result in a person or group owning more than 15% of the voting power of BHGE (other than transfers pursuant
to widely distributed public offerings, including “spin-off” or “split-off” transactions) (the “Continuing
Transfer Restrictions”). However, the Continuing Transfer Restrictions clarify that GE’s obligation to cause a buyer
of all of GE’s paired interests of BHGE LLC membership units and Class B Common Stock, or all of GE’s Class A Common
Stock, to (a) offer to purchase all shares of Class A Common Stock held by non-GE stockholders for the same consideration and on
otherwise substantially the same terms and conditions and (b) if such offer does not result in the buyer owning 100% of the outstanding
shares of BHGE Stock, either assume GE’s obligations under the Amended and Restated Stockholders Agreement or enter into
a stockholders agreement with BHGE containing substantially the same terms and conditions as the Amended and Restated Stockholders
Agreement, will not apply to a sale permitted by the Continuing Transfer Restrictions.
The foregoing description of the Amended
and Restated Stockholders Agreement is not a complete description thereof and is qualified in its entirety by reference to the
full text of such amended and restated agreement, which is filed as Exhibit 10.4 hereto, and incorporated herein by reference.
Amended and Restated Supply Agreement (GE to BHGE) and
Amended and Restated Supply Agreement (BHGE to GE)
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE LLC each entered into amendments and restatements of two supply agreements (one with
respect to the supply agreement under which GE is “Seller” and BHGE LLC is “Buyer” and one with respect
to the supply agreement under which BHGE LLC is “Seller” and GE is “Buyer”) (as amended and restated the
“Amended and Restated Supply Agreements” and such agreements as in effect prior to such amendment and restatement,
the “Original Supply Agreements”). The Amended and Restated Supply Agreements, among other things, amend and restate
certain provisions of the Original Supply Agreements to provide that (1) the initial term with respect to certain control products
will not end prior to the date that is four years following the Trigger Date and (2) GE is required to fulfill BHGE LLC’s
requirements, and vice versa, with respect to certain control products.
The foregoing description of the Amended
and Restated Supply Agreements is not a complete description thereof and is qualified in its entirety by reference to the full
text of such amended and restated agreements, which are filed as Exhibit 10.5 and Exhibit 10.6 hereto, and incorporated herein
by reference.
Amended and Restated Non-Competition Agreement and Amended
and Restated Channel Agreement
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE entered into an amendment and restatement (the “Amended and Restated Non-Competition
Agreement”) of the Non-Competition Agreement between GE and BHGE dated July 3, 2017 (the “Original Non-Competition
Agreement”). The Amended and Restated Non-Competition Agreement, among other things, amends and restates certain provisions
of the Original Non-Competition Agreement to provide, in addition to the existing non-competition arrangements, that until the
third anniversary of the Trigger Date, GE and its subsidiaries may not engage in certain additive activities related to certain
oil and gas products and services and certain oil and gas companies.
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE entered into an amendment and restatement (the “Amended and Restated Channel
Agreement”) of the Channel Agreement between GE and BHGE dated July 3, 2017 (the “Original Channel Agreement”).
The Amended and Restated Channel Agreement, among other things, amends and restates certain provisions in the Original Channel
Agreement (1) to extend the term of the channel with respect to the upgrade of certain controls systems products and services until
the fourth anniversary of the Trigger Date and (2) to terminate the additives activities channel.
The foregoing description of the Amended
and Restated Non-Competition Agreement and the Amended and Restated Channel Agreement is not a complete description thereof and
is qualified in its entirety by reference to the full text of each such amended and restated agreements, which are filed as Exhibit
10.7 and Exhibit 10.8 hereto, and incorporated herein by reference.
Amended and Restated Intercompany Services Agreement
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE LLC entered into an amendment and restatement (the “Amended and Restated ISA”)
of the Intercompany Services Agreement between GE and BHGE LLC dated July 3, 2017 (the “Original ISA”). The Amended
and Restated ISA, among other things, amends and restates certain provisions in the Original ISA to provide that (1) the corporate
assessment (i.e., the consideration for GE providing BHGE certain administrative services, technology access and use of the GE
mark) would be reduced to $27.5 million per year beginning on January 1, 2019 to reflect the scope of services currently being
provided and (2) BHGE LLC would receive certain technology access until 48 months following the Trigger Date. The ISA will otherwise
terminate 90 days following the Trigger Date.
The foregoing description of the Amended
and Restated ISA is not a complete description thereof and is qualified in its entirety by reference to the full text of such amended
and restated agreement, which is filed as Exhibit 10.9 hereto, and incorporated herein by reference.
Amended and Restated GE Digital Master Products and Services
Agreement
On November 13, 2018, in connection with
the Master Framework Agreement, GE Digital LLC and BHGE LLC entered into an amendment and restatement (the “Amended and Restated
GE Digital MPSA”) of the GE Digital Master Products and Services Agreement between GE Digital LLC and BHGE LLC dated July
3, 2017 (the “Original GE Digital MPSA”). The Amended and Restated GE Digital MPSA, among other things, amends and
restates certain provisions in the Original GE Digital MPSA (1) to reflect a new pricing structure between the parties, (2) to
establish service level agreement between the parties, (3) to set up a governance council and other mechanisms to monitor the performance
of the Amended and Restated GE Digital MPSA, (4) to establish a roadmap of products that GE Digital LLC will develop and governance
provisions around the roadmap and (5) to establish an escrow of the source code of certain software offered to BHGE LLC for the
benefit of customers of BHGE LLC in case GE Digital LLC ceases to do business in the ordinary course or if other customary release
conditions are satisfied. The Amended and Restated GE Digital MPSA now covers the entire spectrum of GE Digital offerings that
BHGE LLC resells and/or distributes to third parties. Subject to certain exceptions, BHGE LLC is the exclusive reseller of such
offerings to entities engaged in oil and gas activities in the oil and gas industry.
The foregoing description of the Amended
and Restated GE Digital MPSA is not a complete description thereof and is qualified in its entirety by reference to the full text
of such amended and restated agreement, which is filed as Exhibit 10.10 hereto, and incorporated herein by reference.
Amended and Restated IP Cross License Agreement
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE LLC entered into the Amended and Restated Intellectual Property Cross License Agreement
(the “A&R IP Cross License Agreement”) to amend and restate the Intellectual Property Cross License Agreement dated
July 3, 2017 (the “Original IP Cross License Agreement”). The A&R IP Cross License Agreement, among other things,
amends and restates certain provisions in the Original IP Cross License Agreement to allow licenses granted to BHGE LLC under the
agreement to survive termination for certain intellectual property actually in use or held for use by BHGE LLC on the Trigger Date
or that was used by the GE oil and gas business (“GE O&G”) during the five year period prior to July 3, 2017. The
A&R IP Cross License Agreement will not take effect unless and until definitive agreements are entered into with respect to
all term sheets attached to the Master Agreement. In the event definitive agreements are not entered into with respect to all such
term sheets, the A&R IP Cross License Agreement shall not become effective and the Original IP Cross License Agreement will
remain in place. In addition, GE and BHGE LLC have entered into a side letter to the A&R IP Cross License Agreement (the “IP
Cross License Side Letter”) which provides for the transfer of certain patents and patent applications.
The foregoing description of the A&R
Intellectual Property Cross License Agreement and the IP Cross License Side Letter is not a complete description thereof and is
qualified in its entirety by reference to the full text of such amended and restated agreement and side letter, respectively, which
are filed as Exhibit 10.11 and Exhibit 10.12 hereto, and incorporated herein by reference.
Amended and Restated Trademark License Agreement
On November 13, 2018, in connection with
the Master Agreement Framework, GE and BHGE LLC entered into the Amended and Restated Trademark License Agreement (the “A&R
Trademark License Agreement”) to amend and restate the Trademark License Agreement dated July 3, 2017 (the “Original
Trademark License Agreement”). The A&R Trademark License Agreement, among other things, amends and restates certain provisions
in the Original Trademark License Agreement to provide a pre-negotiated phase-out period for BHGE LLC’s use of the GE word
mark and GE monogram logo in the event that GE ceases to beneficially own more than 50% of the voting power of the outstanding
BHGE Stock.
The foregoing description of the A&R
Trademark License Agreement is not a complete description thereof and is qualified in its entirety by reference to the full text
of such amended and restated agreement, which is filed as Exhibit 10.13 hereto, and incorporated herein by reference.
Umbrella Aero-Derivatives IP Agreement
On November 13, 2018, GE and BHGE LLC entered
into an Umbrella Aero-Derivatives IP Agreement under which, among other things the parties agree to clarify their respective rights,
limitations and obligations with respect to certain intellectual property (“IP”) of GE Aviation in light of the Aero
Supply Agreement and the IP Cross License Agreement (the “Umbrella Aero-Derivatives IP Agreement”).
Under the Umbrella Aero-Derivatives IP
Agreement, GE Aviation’s IP existing prior to December 1, 2018 will be governed by the terms of the IP Cross License Agreement.
All other GE Aviation IP existing on or after December 1, 2018 will be governed by the terms of the Aero-Derivative Supply Agreement.
However, certain IP existing prior to December 1, 2018 that is unable to be segregated from GE Aviation’s IP existing on
or after December 1, 2018 will be governed by the terms of the Aero-Derivative Supply Agreement.
The foregoing description of the Umbrella
Aero-Derivatives IP Agreement is not a complete description thereof and is qualified in its entirety by reference to the full text
of such amended and restated agreement, which is filed as Exhibit 10.14 hereto, and incorporated herein by reference.