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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ To _____
Commission File Number: 001-13836 
 
JOHNSON CONTROLS INTERNATIONAL PLC
(Exact name of registrant as specified in its charter) 
Ireland 98-0390500
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
One Albert Quay, Cork, Ireland, T12 X8N6
(353) 21-423-5000
(Address of Principal Executive Offices and Postal Code) (Registrant's Telephone Number)
Securities Registered Pursuant to Section 12(b) of the Exchange Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Ordinary Shares, Par Value $0.01 JCI New York Stock Exchange
 4.625% Notes due 2023  JCI23 New York Stock Exchange
 1.000% Senior Notes due 2023  JCI23A New York Stock Exchange
 3.625% Senior Notes due 2024  JCI24A New York Stock Exchange
 1.375% Notes due 2025  JCI25A New York Stock Exchange
 3.900% Notes due 2026  JCI26A New York Stock Exchange
0.375% Senior Notes due 2027 JCI27 New York Stock Exchange
1.750% Senior Notes due 2030 JCI30 New York Stock Exchange
2.000% Sustainability-Linked Senior Notes due 2031 JCI31 New York Stock Exchange
1.000% Senior Notes due 2032 JCI32 New York Stock Exchange
 6.000% Notes due 2036  JCI36A New York Stock Exchange
 5.70% Senior Notes due 2041  JCI41B New York Stock Exchange
 5.250% Senior Notes due 2041  JCI41C New York Stock Exchange
 4.625% Senior Notes due 2044  JCI44A New York Stock Exchange
 5.125% Notes due 2045  JCI45B New York Stock Exchange
 6.950% Debentures due December 1, 2045  JCI45A New York Stock Exchange
 4.500% Senior Notes due 2047  JCI47 New York Stock Exchange
 4.950% Senior Notes due 2064  JCI64A New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer ☐ Smaller reporting company ☐
Non-accelerated filer ¨ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Ordinary Shares Outstanding at December 31, 2021
Ordinary Shares, $0.01 par value per share 702,799,758


JOHNSON CONTROLS INTERNATIONAL PLC
FORM 10-Q
Report Index
  
Page
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Statements of Financial Position at December 31, 2021 and September 30, 2021
3
Consolidated Statements of Income for the Three Month Periods Ended December 31, 2021 and 2020
4
Consolidated Statements of Comprehensive Income for the Three Month Periods Ended December 31, 2021 and 2020
5
Consolidated Statements of Cash Flows for the Three Month Periods Ended December 31, 2021 and 2020
6
Consolidated Statements of Shareholders' Equity for the
       Three Month Periods Ended December 31, 2021 and 2020
7
Notes to Consolidated Financial Statements
8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
39
Item 3. Quantitative and Qualitative Disclosures About Market Risk
52
Item 4. Controls and Procedures
53
Part II. Other Information
Item 1. Legal Proceedings
53
Item 1A. Risk Factors
54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
55
Item 6. Exhibits
56
Signatures
57


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Johnson Controls International plc
Consolidated Statements of Financial Position
(in millions, except par value; unaudited)
December 31, 2021 September 30, 2021
Assets
Cash and cash equivalents $ 1,207  $ 1,336 
Accounts receivable - net 5,671  5,613 
Inventories 2,425  2,057 
Other current assets 1,050  992 
Current assets 10,353  9,998 
Property, plant and equipment - net 3,213  3,228 
Goodwill 18,386  18,335 
Other intangible assets - net 5,505  5,549 
Investments in partially-owned affiliates 1,102  1,066 
Noncurrent assets held for sale 159  156 
Other noncurrent assets 3,504  3,558 
Total assets $ 42,222  $ 41,890 
Liabilities and Equity
Short-term debt $ 392  $ 8 
Current portion of long-term debt 220  226 
Accounts payable 4,083  3,746 
Accrued compensation and benefits 926  1,008 
Deferred revenue 1,845  1,637 
Other current liabilities 2,521  2,473 
Current liabilities 9,987  9,098 
Long-term debt 7,437  7,506 
Pension and postretirement benefits 499  628 
Other noncurrent liabilities 5,809  5,905 
Long-term liabilities 13,745  14,039 
Commitments and contingencies (Note 22)
Ordinary shares, $0.01 par value
7  7 
Ordinary A shares, €1.00 par value
—  — 
Preferred shares, $0.01 par value
—  — 
Ordinary shares held in treasury, at cost (1,199) (1,152)
Capital in excess of par value 17,150  17,116 
Retained earnings 1,638  2,025 
Accumulated other comprehensive loss (347) (434)
Shareholders’ equity attributable to Johnson Controls 17,249  17,562 
Noncontrolling interests 1,241  1,191 
Total equity 18,490  18,753 
Total liabilities and equity $ 42,222  $ 41,890 

The accompanying notes are an integral part of the consolidated financial statements.
3


Johnson Controls International plc
Consolidated Statements of Income
(in millions, except per share data; unaudited)
Three Months Ended
December 31,
2021 2020
Net sales
Products and systems $ 4,420  $ 3,799 
Services 1,442  1,542 
5,862  5,341 
Cost of sales
Products and systems 3,153  2,719 
Services 818  894 
3,971  3,613 
Gross profit 1,891  1,728 
Selling, general and administrative expenses (1,369) (1,294)
Restructuring and impairment costs (49) — 
Net financing charges (53) (59)
Equity income 70  58 
Income from continuing operations before income taxes 490  433 
Income tax provision 71  61 
Income from continuing operations 419  372 
Income from discontinued operations, net of tax (Note 4) —  124 
Net income 419  496 
Income from continuing operations attributable to noncontrolling
   interests 		38  45 
Net income attributable to Johnson Controls $ 381  $ 451 
Amounts attributable to Johnson Controls ordinary shareholders:
Income from continuing operations $ 381  $ 327 
        Income from discontinued operations —  124 
Net income $ 381  $ 451 
Basic earnings per share attributable to Johnson Controls
Continuing operations $ 0.54  $ 0.45 
Discontinued operations —  0.17 
Net income $ 0.54  $ 0.62 
Diluted earnings per share attributable to Johnson Controls
Continuing operations $ 0.54  $ 0.45 
Discontinued operations —  0.17 
Net income $ 0.54  $ 0.62 
The accompanying notes are an integral part of the consolidated financial statements.
4


Johnson Controls International plc
Consolidated Statements of Comprehensive Income
(in millions; unaudited)
Three Months Ended
December 31,
  2021 2020
Net income $ 419  $ 496 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 86  308 
Realized and unrealized gains on derivatives 7  1 
Pension and postretirement plans (1) (1)
Other comprehensive income 92  308 
Total comprehensive income 511  804 
Comprehensive income attributable to noncontrolling interests:
Net income 38  45 
Other comprehensive income, net of tax:
Foreign currency translation adjustments 2  36 
Realized and unrealized gains on derivatives 3  — 
Other comprehensive income 5  36 
Comprehensive income attributable to noncontrolling interests 43  81 
Comprehensive income attributable to Johnson Controls $ 468  $ 723 

The accompanying notes are an integral part of the consolidated financial statements.
5

Johnson Controls International plc
Consolidated Statements of Cash Flows
(in millions; unaudited)
Three Months Ended December 31,
  2021 2020
Operating Activities of Continuing Operations
Net income from continuing operations attributable to Johnson Controls $ 381  $ 327 
Income from continuing operations attributable to noncontrolling interests 38  45 
Net income from continuing operations 419  372 
Adjustments to reconcile net income from continuing operations to cash provided by operating activities:
Depreciation and amortization 224  207 
Pension and postretirement benefit income (82) (46)
Pension and postretirement contributions (41) (17)
Equity in earnings of partially-owned affiliates, net of dividends received (18) (52)
Deferred income taxes (32) (59)
Equity-based compensation 29  22 
Other - net (28) (47)
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable (75) 224 
Inventories (376) (98)
Other assets (63) (70)
Restructuring reserves 19  (34)
Accounts payable and accrued liabilities 333  91 
Accrued income taxes 83  22 
Cash provided by operating activities from continuing operations 392  515 
Investing Activities of Continuing Operations
Capital expenditures (135) (91)
Sale of property, plant and equipment 7  34 
Acquisition of businesses, net of cash acquired (108) — 
Business divestitures, net of cash divested 16  11 
Changes in long-term investments 2  9 
Cash used by investing activities from continuing operations (218) (37)
Financing Activities of Continuing Operations
Increase (decrease) in short-term debt - net 394  (20)
Stock repurchases and retirements (526) (346)
Payment of cash dividends (191) (190)
Proceeds from the exercise of stock options 8  31 
Employee equity-based compensation withholding taxes (47) (21)
Other - net 5  (1)
Cash used by financing activities from continuing operations (357) (547)
Discontinued Operations
Cash used by operating activities (4) (36)
Cash used by discontinued operations (4) (36)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 67  (11)
Decrease in cash, cash equivalents and restricted cash (120) (116)
Cash, cash equivalents and restricted cash at beginning of period 1,342  1,960 
Cash, cash equivalents and restricted cash at end of period 1,222  1,844 
Less: Restricted cash 15  5 
Cash and cash equivalents at end of period $ 1,207  $ 1,839 

The accompanying notes are an integral part of the consolidated financial statements.
6

Johnson Controls International plc
Consolidated Statements of Shareholders' Equity
(in millions, except per share data; unaudited)
Three Months Ended December 31,
  2021 2020
Shareholders' Equity Attributable to Johnson Controls
Beginning Balance $ 17,562  $ 17,447 
Ordinary Shares
Beginning balance 7  8 
Repurchases and retirements of ordinary shares —  (1)
Ending balance 7  7 
Ordinary Shares Held in Treasury, at Cost
Beginning balance (1,152) (1,119)
Other, including options exercised (47) (27)
Ending balance (1,199) (1,146)
Capital in Excess of Par Value
Beginning balance 17,116  16,865 
Other, including options exercised 34  52 
Ending balance 17,150  16,917 
Retained Earnings
Beginning balance 2,025  2,469 
Net income attributable to Johnson Controls 381  451 
Cash dividends declared (242) (189)
Repurchases and retirements of ordinary shares (526) (345)
Adoption of ASU 2016-13 —  (4)
Ending balance 1,638  2,382 
Accumulated Other Comprehensive Income (Loss)
Beginning balance (434) (776)
Other comprehensive income 87  272 
Ending balance (347) (504)
Ending Balance 17,249  17,656 
Shareholders' Equity Attributable to Noncontrolling Interests
Beginning Balance 1,191  1,086 
Comprehensive income attributable to noncontrolling interests 43  81 
Change in noncontrolling interest share 7  — 
Ending Balance 1,241  1,167 
Total Shareholders' Equity $ 18,490  $ 18,823 
Cash Dividends Declared per Ordinary Share $ 0.34  $ 0.26 
7

Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2021
(unaudited)

1.Basis of Presentation

The consolidated financial statements include the consolidated accounts of Johnson Controls International plc, a public limited company organized under the laws of Ireland, and its subsidiaries (Johnson Controls International plc and all its subsidiaries, hereinafter collectively referred to as the "Company" or "Johnson Controls"). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include normal recurring adjustments) necessary to state fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2021 filed with the SEC on November 15, 2021. The results of operations for the three-month period ended December 31, 2021 are not necessarily indicative of results for the Company’s 2022 fiscal year because of seasonal and other factors.

Nature of Operations

Johnson Controls International plc, headquartered in Cork, Ireland, is a global leader in smart, healthy and sustainable buildings, serving a wide range of customers in more than 150 countries. The Company’s products, services, systems and solutions advance the safety, comfort and intelligence of spaces to serve people, places and the planet. The Company is committed to helping its customers win and creating greater value for all of its stakeholders through its strategic focus on buildings.

The Company is a global leader in engineering, manufacturing, commissioning and retrofitting building products and systems, including residential and commercial heating, ventilating, air-conditioning ("HVAC") equipment, industrial refrigeration systems, controls, security systems, fire-detection systems and fire-suppression solutions. The Company further serves customers by providing technical services, including maintenance, management and repair of equipment (in the HVAC, industrial refrigeration, security and fire-protection space), energy-management consulting and data-driven “smart building” services and solutions powered by its OpenBlue software platform and capabilities. The Company partners with customers by leveraging its broad product portfolio and digital capabilities powered by OpenBlue, together with its direct channel service and solutions capabilities, to deliver outcome-based solutions across the lifecycle of a building that address customers’ needs to improve energy efficiency and reduce greenhouse gas emissions.

Principles of Consolidation

The consolidated financial statements include the consolidated accounts of Johnson Controls International plc and its subsidiaries that are consolidated in conformity with U.S. GAAP. All significant intercompany transactions have been eliminated. The results of companies acquired or disposed of during the year are included in the consolidated financial statements from the effective date of acquisition or up to the date of disposal. Investments in partially-owned affiliates are accounted for by the equity method when the Company’s interest exceeds 20% and the Company does not have a controlling interest.

The Company consolidates variable interest entities ("VIE") in which the Company has the power to direct the significant activities of the entity and the obligation to absorb losses or receive benefits from the entity that may be significant. The Company did not have a significant variable interest in any consolidated or nonconsolidated VIEs in its continuing operations for the presented reporting periods.

Restricted Cash

At December 31, 2021 and September 30, 2021, the Company held restricted cash of approximately $15 million and $6 million, respectively, all of which was recorded within other current assets in the consolidated statements of financial position. These amounts were related to cash restricted for payment of asbestos liabilities and certain litigation and environmental matters.
8

Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2021
(unaudited)

Retrospective Changes

Effective October 1, 2021, the Company's marine businesses previously included in the Building Solutions Asia Pacific and Global Products segments are now part of the Building Solutions EMEA/LA segment. Historical information has been re-cast to present the comparative periods on a consistent basis. This change was not material to the segment presentation. Refer to Note 8, "Goodwill and Other Intangible Assets," and Note 20, “Segment Information,” of the notes to consolidated financial statements for further information.

2.      New Accounting Standards

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers.” Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in acquisition accounting. The guidance is applied prospectively to acquisitions occurring on or after the effective date. During the quarter ended December 31, 2021, the Company early adopted ASU No. 2021-08. The adoption of the new standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are not expected to have a material impact on the Company's consolidated financial statements.

3.Acquisitions and Divestitures

During the first quarter of fiscal 2022, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $142 million, of which $108 million was paid as of December 31, 2021. In connection with the acquisitions, the Company recorded goodwill of $45 million within the Building Solutions Asia Pacific segment, $20 million within the Building Solutions North America segment, $19 million within the Building Solutions EMEA/LA segment and $10 million within the Global Products segment.

During the first quarter of fiscal 2022, the Company completed a divestiture within the Buildings Solutions EMEA/LA segment. The selling price, net of cash divested, was $18 million, of which $16 million was received as of December 31, 2021. In connection with the divestiture, the Company reduced goodwill by $5 million.

During the first quarter of fiscal 2021, the Company completed certain divestitures within the Buildings Solutions Asia Pacific segment. The combined selling price was $15 million, of which $11 million was received as of December 31, 2020. In connection with the divestitures, the Company reduced goodwill by $4 million.

Acquisitions and divestitures were not material to the Company's consolidated financial statements in the first quarter of fiscal 2022 or 2021.

4.     Discontinued Operations

On April 30, 2019, the Company completed the sale of its Power Solutions business. In December 2020, the favorable resolution of certain post-closing working capital and net debt adjustments resulted in income from discontinued operations, net of tax, of $124 million due to a reversal of a reserve established in connection with the sale.

9

Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2021
(unaudited)
The following table summarizes the results of Power Solutions which are classified as discontinued operations for the three months ended December 31, 2020 (in millions):
  Three Months Ended December 31, 2020
Net sales $ — 
Income from discontinued operations before income taxes 150 
Provision for income taxes on discontinued operations
(26)
Income from discontinued operations attributable to noncontrolling interests, net of tax
— 
Income from discontinued operations $ 124 

There is no Power Solutions related activity for the three months ended December 31, 2021.

Assets and Liabilities Held for Sale

During the third quarter of fiscal 2020, the Company determined that certain assets of the Building Solutions Asia Pacific segment met the criteria to be classified as held for sale. The estimated fair value, less costs to sell, of these assets was $159 million at December 31, 2021 and $156 million at September 30, 2021.

5.     Revenue Recognition

Disaggregated Revenue

The following tables present the Company's revenues disaggregated by segment and by products and systems versus services revenue for the three months ended December 31, 2021 and 2020 (in millions):
Three Months Ended
December 31, 2021 		Three Months Ended
December 31, 2020
Products & Systems Services Total Products & Systems Services Total
Building Solutions North America $ 1,299  $ 853  $ 2,152  $ 1,242  $ 792  $ 2,034 
Building Solutions EMEA/LA 544  415  959  468  480  948 
Building Solutions Asia Pacific 501  174  675  334  270  604 
Global Products 2,076  —  2,076  1,755  —  1,755 
Total $ 4,420  $ 1,442  $ 5,862  $ 3,799  $ 1,542  $ 5,341 

The following table presents further disaggregation of Global Products segment revenues by product type for the three months ended December 31, 2021 and 2020 (in millions):
Three Months Ended
December 31,
2021 2020
HVAC $ 1,483  $ 1,218 
Fire & Security 544  488 
Industrial Refrigeration 49  49 
Total $ 2,076  $ 1,755 

10

Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2021
(unaudited)
Contract Balances

Contract assets relate to the Company’s right to consideration for performance obligations satisfied but not billed and consist of unbilled receivables and costs in excess of billings. Contract liabilities relate to customer payments received in advance of satisfaction of performance obligations under the contract. Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period. 

The following table presents the location and amount of contract balances in the Company's consolidated statements of financial position (in millions):
Location of contract balances December 31, 2021 September 30, 2021
Contract assets - current Accounts receivable - net $ 1,806  $ 1,718 
Contract assets - noncurrent Other noncurrent assets 98  99 
Contract liabilities - current Deferred revenue (1,845) (1,637)
Contract liabilities - noncurrent Other noncurrent liabilities (287) (269)

For the three months ended December 31, 2021 and December 31, 2020, the Company recognized revenue of $751 million and $714 million, respectively, that was included in the beginning of period contract liability balance.

Performance Obligations

A performance obligation is a distinct good, service, or a bundle of goods and services promised in a contract. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When contracts with customers require significant and complex integration, contain goods or services which are highly interdependent or interrelated, or are goods or services which significantly modify or customize other promises in the contracts and, therefore, are not distinct, then the entire contract is accounted for as a single performance obligation. For any contracts with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation based on the estimated relative standalone selling price of each distinct good or service in the contract. For product sales, each product sold to a customer typically represents a distinct performance obligation.

Performance obligations are satisfied as of a point in time or over time. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. As of December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $16.5 billion, of which approximately 60% is expected to be recognized as revenue over the next two years. The remaining performance obligations expected to be recognized in revenue beyond two years primarily relate to large, multi-purpose contracts to construct hospitals, schools and other governmental buildings, which include services to be performed over the building's lifetime, with initial contract terms of 25 to 35 years. Future contract modifications could affect both the timing and the amount of the remaining performance obligations. The Company excludes the value of remaining performance obligations for contracts with an original expected duration of one year or less.

Costs to Obtain or Fulfill a Contract

The Company recognizes the incremental costs incurred to obtain or fulfill a contract with a customer as an asset when these costs are recoverable. These costs consist primarily of sales commissions and bid/proposal costs. Costs to obtain or fulfill a contract are capitalized and amortized to revenue over the period of contract performance.

11

Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2021
(unaudited)
The following table presents the location and amount of costs to obtain or fulfill a contract recorded in the Company's consolidated statements of financial position (in millions):

December 31, 2021 September 30, 2021
Other current assets $ 149  $ 149 
Other noncurrent assets 120  117 
Total $ 269  $ 266 

During the three months ended December 31, 2021 and 2020, the Company recognized amortization expense of $50 million and $41 million, respectively, related to costs to obtain or fulfill a contract. There were no impairment losses recognized in the three months ended December 31, 2021 and 2020.

6.    Accounts Receivable, Net

Receivables consist of amounts billed and currently due from customers and unbilled costs and accrued profits related to revenues on long-term contracts that have been recognized for accounting purposes but not yet billed to customers. The Company extends credit to customers in the normal course of business and maintains an allowance for expected credit losses resulting from the inability or unwillingness of customers to make required payments. The allowance for expected credit losses is based on historical experience, existing economic conditions, reasonable and supportable forecasts, and any specific customer collection issues the Company has identified. The Company evaluates the reasonableness of the allowance for credit losses on a quarterly basis.

The Company enters into various factoring agreements to sell certain accounts receivable to third-party financial institutions. For ease of administration, the Company collects customer payments related to the factored receivables on behalf of the financial institutions but otherwise maintains no continuing involvement with respect to the factored receivables. During the quarter ended December 31, 2021, the Company sold $134 million of accounts receivable under these factoring agreements, and the costs of factoring such receivables were not material. As of December, 31, 2021, the outstanding amount of account receivable sold under the factoring agreements was $135 million. No receivables were factored during the quarter ended December 31, 2020. Sales of accounts receivable are reflected as a reduction of accounts receivable in the consolidated statements of financial position and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows.

Accounts receivable, net consisted of the following (in millions):
December 31, 2021 September 30, 2021
Accounts receivable $ 5,762  $ 5,723 
Less: Allowance for expected credit losses (91) (110)
Accounts receivable, net $ 5,671  $ 5,613 


12

The changes in the allowance for expected credit losses related to accounts receivable for the three months ended December 31, 2021 and 2020 were as follows (in millions):
Three Months Ended
December 31,
2021 2020
Balance at beginning of period $ 110  $ 173 
Provision (benefit) for expected credit losses (6) 7 
Write-offs charged against the allowance for expected credit losses (14) (12)
Other 1  5 
Balance at end of period
$ 91  $ 173 

7.     Inventories

Inventories consisted of the following (in millions):
December 31, 2021 September 30, 2021
Raw materials and supplies $ 967  $ 769 
Work-in-process 195  166 
Finished goods 1,263  1,122 
Inventories $ 2,425  $ 2,057 

8.    Goodwill and Other Intangible Assets

Effective October 1, 2021, the Company's marine businesses previously included in the Building Solutions Asia Pacific and Global Products reportable segments are now part of the Building Solutions EMEA/LA reportable segment. Historical information has been re-cast to present the comparative periods on a consistent basis. This change was not material to the segment presentation or the allocation of goodwill.

The changes in the carrying amount of goodwill in each of the Company’s reportable segments for the three-month period ended December 31, 2021 were as follows (in millions):
Business Acquisitions Business Divestitures Currency Translation and Other
September 30, December 31,
2021 2021
Building Solutions North America $ 9,215  $ 20  $ —  $ 1  $ 9,236 
Building Solutions EMEA/LA 2,041  27  (5) (29) 2,034 
Building Solutions Asia Pacific 1,237  45  —  4  1,286 
Global Products 5,842  10  —  (22) 5,830 
Total $ 18,335  $ 102  $ (5) $ (46) $ 18,386 

At September 30, 2021 and December 31, 2021, accumulated goodwill impairment charges totaled $471 million, of which $424 million related to the North America Retail reporting unit and $47 million related to the Building Solutions EMEA/LA - Building Solutions reporting unit.

The Company reviews goodwill for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. There were no triggering events requiring that an impairment assessment be conducted in the three-month period ended December 31, 2021. However, it is possible that future changes in circumstances would require the Company to record additional non-cash impairment charges.

13

The Company’s other intangible assets, primarily from business acquisitions valued based on independent appraisals, consisted of (in millions):
  December 31, 2021 September 30, 2021
  Gross
Carrying
Amount 		Accumulated
Amortization 		Net Gross
Carrying
Amount 		Accumulated
Amortization 		Net
Definite-lived intangible assets
Technology $ 1,505  $ (661) $ 844  $ 1,464  $ (629) $ 835 
Customer relationships 3,105  (1,244) 1,861  3,097  (1,191) 1,906 
Miscellaneous 772  (377) 395  750  (354) 396 
5,382  (2,282) 3,100  5,311  (2,174) 3,137 
Indefinite-lived intangible assets
Trademarks/trade names 2,325  —  2,325  2,332  —  2,332 
Miscellaneous 80  —  80  80  —  80 
2,405  —  2,405  2,412  —  2,412 
Total intangible assets $ 7,787  $ (2,282) $ 5,505  $ 7,723  $ (2,174) $ 5,549 

Amortization of other intangible assets included within continuing operations for the three-month periods ended December 31, 2021 and 2020 was $118 million and $104 million, respectively.

The Company reviews indefinite-lived intangible assets for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. There were no triggering events requiring that an impairment assessment be conducted in the three-month period ended December 31, 2021. However, it is possible that future changes in circumstances would require the Company to record additional non-cash impairment charges.

9.    Leases

The following table presents supplemental consolidated statement of financial position information as of December 31, 2021 and September 30, 2021 (in millions):
Location of lease balances December 31, 2021 September 30, 2021
Operating lease right-of-use assets
Other noncurrent assets
$ 1,341  $ 1,376 
Operating lease liabilities - current
Other current liabilities
314  319 
Operating lease liabilities - noncurrent
Other noncurrent liabilities
1,022  1,055 

The following table presents supplemental noncash operating lease activity, excluding leases acquired in business combinations, for the three months ended December 31, 2021 and 2020 (in millions):
Three Months Ended
December 31,
2021 2020
Right-of-use assets obtained in exchange for operating lease liabilities $ 55  $ 175 

10.    Debt and Financing Arrangements

As of December 31, 2021, the Company has a syndicated $2.5 billion committed revolving credit facility, which is scheduled to expire in December 2024, and a syndicated $500 million committed revolving credit facility, which was renewed in December 2021 and is now scheduled to expire in December 2022. As of December 31, 2021, there were no draws on the facilities.

14

In November 2021, the Company entered into a €200 million bank term loan which is due in October 2022.

The Company had $150 million of commercial paper outstanding as of December 31, 2021 and no commercial paper outstanding as of September 30, 2021.

Net Financing Charges

Net financing charges consisted of the following (in millions):
Three Months Ended
December 31,
2021 2020
Interest expense, net of capitalized interest costs $ 55  $ 59 
Banking fees and bond cost amortization 5  8 
Interest income (2) (3)
Net foreign exchange results for financing activities (5) (5)
Net financing charges $ 53  $ 59 

11.    Derivative Instruments and Hedging Activities

The Company selectively uses derivative instruments to reduce market risk associated with changes in foreign currency, commodities, stock-based compensation liabilities and interest rates. Under Company policy, the use of derivatives is restricted to those intended for hedging purposes; the use of any derivative instrument for speculative purposes is strictly prohibited. A description of each type of derivative utilized by the Company to manage risk is included in the following paragraphs. In addition, refer to Note 12, "Fair Value Measurements," of the notes to consolidated financial statements for information related to the fair value measurements and valuation methods utilized by the Company for each derivative type.

Cash Flow Hedges

The Company has global operations and participates in foreign exchange markets to minimize its risk of loss from fluctuations in foreign currency exchange rates. The Company selectively hedges anticipated transactions that are subject to foreign exchange rate risk primarily using foreign currency exchange forward contracts. The Company hedges 70% to 90% of the notional amount of each of its known foreign exchange transactional exposures.

The Company selectively hedges anticipated transactions that are subject to commodity price risk, primarily using commodity hedge contracts, to minimize overall price risk associated with the Company’s purchases of copper and aluminum in cases where commodity price risk cannot be naturally offset or hedged through supply base fixed price contracts. Commodity risks are systematically managed pursuant to policy guidelines. The maturities of the commodity hedge contracts coincide with the expected purchase of the commodities.

As cash flow hedges under ASC 815, "Derivatives and Hedging," the hedge gains or losses due to changes in fair value are initially recorded as a component of accumulated other comprehensive income (loss) ("AOCI") and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates during the three months ended December 31, 2021 and 2020.

15

The Company had the following outstanding contracts to hedge forecasted commodity purchases (in metric tons):
  Volume Outstanding as of
Commodity December 31, 2021 September 30, 2021
Copper 3,314  2,656 
Aluminum 7,193  5,159 

In April 2021, the Company entered into two forward-starting interest rate swaps with a combined notional amount of $500 million, in conjunction with its anticipated $500 million note issuance. In September 2021, the Company terminated the swaps as the debt was issued. Accumulated amounts recorded in AOCI as of the date of the debt issuance are amortized to interest expense over the life of the related note to reflect the difference between the swap's reference rate and the fixed rate of the note.

Net Investment Hedges

The Company enters into foreign currency denominated debt obligations to selectively hedge portions of its net investment in non-U.S. subsidiaries. The currency effects of the debt obligations are reflected in AOCI attributable to Johnson Controls ordinary shareholders where they offset currency gains and losses recorded on the Company's net investments globally. The Company had 2.3 billion of euro-denominated bonds designated as net investment hedges of a portion of its net investment in European subsidiaries and 25 billion of yen-denominated debt designated as a net investment hedge of a portion of its net investment in Japanese subsidiaries as of December 31, 2021 and September 30, 2021.

Derivatives Not Designated as Hedging Instruments

The Company selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans, such as its deferred compensation plans. These equity compensation liabilities increase as the Company’s stock price increases and decrease as the Company’s stock price decreases. In contrast, the value of the swap agreement moves in the opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount. The Company hedged approximately 0.3 million of its ordinary shares, which have a cost basis of $23 million, as of December 31, 2021 and September 30, 2021.

The Company also holds certain foreign currency forward contracts not designated as hedging instruments under ASC 815 to hedge foreign currency exposure resulting from monetary assets and liabilities denominated in nonfunctional currencies. The changes in fair value of these foreign currency forward exchange derivatives are recorded in the consolidated statements of income where they offset foreign currency transactional gains and losses on the nonfunctional currency denominated assets and liabilities being hedged.

16

Fair Value of Derivative Instruments

The following table presents the location and fair values of derivative instruments and hedging activities included in the Company’s consolidated statements of financial position (in millions):
  Derivatives and Hedging Activities Designated
as Hedging Instruments under ASC 815 		Derivatives and Hedging Activities Not
Designated as Hedging Instruments under ASC 815
  December 31, September 30, December 31, September 30,
2021 2021 2021 2021
Other current assets
Foreign currency exchange derivatives
$ 27  $ 15  $ 17  $ 17 
Commodity derivatives 3  2  —  — 
Other noncurrent assets
Equity swap —  —  28  23 
Total assets $ 30  $ 17  $ 45  $ 40 
Other current liabilities
Foreign currency exchange derivatives
$ 12  $ 11  $ 13  $ 6 
        Commodity derivatives 1  1  —  — 
Long-term debt
Foreign currency denominated debt 2,845  2,918  —  — 
Total liabilities $ 2,858  $ 2,930  $ 13  $ 6 

Counterparty Credit Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk. The Company has established policies and procedures to limit the potential for counterparty credit risk, including establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. As a matter of practice, the Company deals with major banks worldwide having strong investment grade long-term credit ratings. To further reduce the risk of loss, the Company generally enters into International Swaps and Derivatives Association ("ISDA") master netting agreements with substantially all of its counterparties. The Company enters into ISDA master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. The Company has not elected to offset the fair value positions of the derivative contracts recorded in the consolidated statements of financial position.

The Company's derivative contracts do not contain any credit risk related contingent features and do not require collateral or other security to be furnished by the Company or the counterparties. The Company's exposure to credit risk associated with its derivative instruments is measured on an individual counterparty basis, as well as by groups of counterparties that share similar attributes. The Company does not anticipate any non-performance by any of its counterparties, and the concentration of risk with financial institutions does not present significant credit risk to the Company.

The gross and net amounts of derivative assets and liabilities were as follows (in millions):
  Fair Value of Assets Fair Value of Liabilities
  December 31, September 30, December 31, September 30,
2021 2021 2021 2021
Gross amount recognized $ 75  $ 57  $ 2,871  $ 2,936 
Gross amount eligible for offsetting (17) (16) (17) (16)
Net amount $ 58  $ 41  $ 2,854  $ 2,920 
17

Derivatives Impact on the Statements of Income and Statements of Comprehensive Income

The following table presents the pre-tax gains (losses) recorded in other comprehensive income (loss) related to cash flow hedges for the three months ended December 31, 2021 and 2020 (in millions):    
Derivatives in ASC 815 Cash Flow
 Hedging Relationships 		Three Months Ended December 31,
2021 2020
Foreign currency exchange derivatives $ 13  $ 3 
Commodity derivatives (2) 1 
Total $ 11  $ 4 

The following table presents the location and amount of the pre-tax gains (losses) on cash flow hedges reclassified from AOCI into the Company’s consolidated statements of income for the three months ended December 31, 2021 and 2020 (in millions):
Derivatives in ASC 815 Cash Flow Hedging Relationships Location of Gain (Loss) Reclassified from AOCI into Income Three Months Ended
December 31,
2021 2020
Foreign currency exchange derivatives
Cost of sales $ 5  $ 2 
Commodity derivatives Cost of sales (4) (1)
Interest rate swaps Net financing charges (1) — 
Total $ —  $ 1 

The following table presents the location and amount of pre-tax gains (losses) on derivatives not designated as hedging instruments recognized in the Company’s consolidated statements of income for the three months ended December 31, 2021 and 2020 (in millions):
    Amount of Gain (Loss) Recognized in
Income on Derivative
Derivatives Not Designated as Hedging Instruments under ASC 815 Location of Gain (Loss)
Recognized in Income on Derivative 		Three Months Ended
December 31,
2021 2020
Foreign currency exchange derivatives
Cost of sales $ 10  $ 6 
Foreign currency exchange derivatives
Selling, general and administrative —  (2)
Foreign currency exchange derivatives
Net financing charges 87  (41)
Equity swap Selling, general and administrative 5  6 
Total $ 102  $ (31)

Pre-tax gains (losses) on net investment hedges recorded as foreign currency translation adjustments ("CTA") within other comprehensive income (loss) were $73 million and $(135) million for the three months ended December 31, 2021 and 2020, respectively. For the three months ended December 31, 2021 and 2020, no gains or losses were reclassified from CTA into income.

12.    Fair Value Measurements

ASC 820, "Fair Value Measurement," defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities;

18

Level 2: Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Recurring Fair Value Measurements

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value as of December 31, 2021 and September 30, 2021 (in millions):
  Fair Value Measurements Using:
  Total as of
December 31, 2021 		Quoted Prices
in Active
Markets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
Other current assets
Foreign currency exchange derivatives $ 44  $ —  $ 44  $ — 
       Commodity derivatives 3  —  3  — 
Other noncurrent assets
Deferred compensation plan assets 67  67  —  — 
Exchange traded funds (fixed income)1
140  140  —  — 
Exchange traded funds (equity)1
183  183  —  — 
Equity swap
28  —  28  — 
Total assets $ 465  $ 390  $ 75  $ — 
Other current liabilities
Foreign currency exchange derivatives $ 25  $ —  $ 25  $ — 
Commodity derivatives 1  —  1  — 
Contingent earn-out liabilities 48  —  —  48 
Other noncurrent liabilities
Contingent earn-out liabilities 55  —  —  55 
Total liabilities $ 129  $ —  $ 26  $ 103 
 
The increases in the contingent earn-out liabilities during the three-month period ended December 31, 2021 were due to acquisitions.
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  Fair Value Measurements Using:
  Total as of September 30, 2021 Quoted Prices
in Active
Markets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
Other current assets
Foreign currency exchange derivatives $ 32  $ —  $ 32  $ — 
Commodity derivatives 2  —  2  — 
Other noncurrent assets
Deferred compensation plan assets 63  63  —  — 
Exchange traded funds (fixed income)1
146  146  —  — 
Exchange traded funds (equity)1
168  168  —  — 
Equity swap 23  —  23  — 
Total assets $ 434  $ 377  $ 57  $ — 
Other current liabilities
Foreign currency exchange derivatives $ 17  $ —  $ 17  $ — 
Commodity derivatives 1  —  1  — 
Contingent earn-out liabilities 32  —  —  $ 32 
Other noncurrent liabilities
Contingent earn-out liabilities 50  —  —  50 
Total liabilities $ 100  $ —  $ 18  $ 82 

1 Classified as restricted investments for payment of asbestos liabilities. See Note 22, "Commitments and Contingencies," of the notes to consolidated financial statements for further details.

Valuation Methods

Foreign currency exchange derivatives: The foreign currency exchange derivatives are valued under a market approach using publicized spot and forward prices.

Commodity derivatives: The commodity derivatives are valued under a market approach using publicized prices, where available, or dealer quotes.

Equity swaps: The equity swaps are valued under a market approach as the fair value of the swaps is equal to the Company’s stock price at the reporting period date.

Deferred compensation plan assets: Assets held in the deferred compensation plans will be used to pay benefits under certain of the Company's non-qualified deferred compensation plans. The investments primarily consist of mutual funds which are publicly traded on stock exchanges and are valued using a market approach based on the quoted market prices. Unrealized gains (losses) on the deferred compensation plan assets are recognized in the consolidated statements of income where they offset unrealized gains and losses on the related deferred compensation plan liability.

Investments in exchange traded funds: Investments in exchange traded funds are valued using a market approach based on quoted market prices, where available, or broker/dealer quotes of identical or comparable instruments. Refer to Note 22, "Commitments and Contingencies," of the notes to consolidated financial statements for further information.

Contingent earn-out liabilities: The contingent earn-out liabilities, which are primarily related to the Silent-Aire acquisition, were established using a Monte Carlo simulation based on the forecasted operating results and the earn-out formula specified in the purchase agreement.

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The following table presents the portion of unrealized gains recognized in the consolidated statements of income for the three months ended December 31, 2021 and 2020 that relate to equity securities still held at December 31, 2021 and 2020 (in millions):
Three Months Ended December 31,
2021 2020
 Deferred compensation plan assets $ 3  $ 5 
 Investments in exchange traded funds 14  21 

All of the gains on investments in exchange traded funds related to restricted investments.

The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values. At December 31, 2021, the fair value of long-term debt was $8.4 billion, including public debt of $8.2 billion and other long-term debt of $0.2 billion. At September 30, 2021, the fair value of long-term debt was $8.5 billion, including public debt of $8.3 billion and other long-term debt of $0.2 billion. The fair value of public debt was determined primarily using market quotes which are classified as Level 1 inputs within the ASC 820 fair value hierarchy. The fair value of other long-term debt was determined using quoted market prices for similar instruments and are classified as Level 2 inputs within the ASC 820 fair value hierarchy.

13.    Stock-Based Compensation

On March 10, 2021, the shareholders of the Company approved the Johnson Controls International plc 2021 Equity and Incentive Plan, which terminated the 2012 Share and Incentive Plan, as amended in September 2016 (collectively, the "Plans"). Both Plans authorize stock options, stock appreciation rights, restricted (non-vested) stock/units, performance shares, performance units and other stock-based awards. The Compensation and Talent Development Committee of the Company's Board of Directors determines the types of awards to be granted to individual participants and the terms and conditions of the awards. Awards are typically granted annually in the Company’s fiscal first quarter.

A summary of the stock-based awards granted during the three-month periods ended December 31, 2021 and 2020 is presented below:
  Three Months Ended December 31,
  2021 2020
Number Granted Weighted Average Grant Date Fair Value Number Granted Weighted Average Grant Date Fair Value
Stock options 548,398  $ 18.59  932,678  $ 9.36 
Stock appreciation rights 19,768  18.59  35,254  9.36 
Restricted stock/units 1,170,634  79.54  1,599,552  45.61 
Performance shares 438,476  84.27  410,934  50.53 

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Stock Options

Stock options are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards typically vest between two and three years after the grant date and expire ten years from the grant date.

The fair value of each option is estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table. The expected life of options represents the period of time that options granted are expected to be outstanding, assessed separately for executives and non-executives. The risk-free interest rate for periods during the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the historical volatility of the Company’s stock since October 2016 blended with the historical volatility of certain peer companies’ stock prior to October 2016 over the most recent period corresponding to the expected life as of the grant date. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of the Company’s ordinary shares as of the grant date. The Company uses historical data to estimate option exercises and employee terminations within the valuation model.
  Three Months Ended
December 31,
  2021 2020
Expected life of option (years) 6.0 6.5
Risk-free interest rate 1.35% 0.6%
Expected volatility of the Company’s stock 27.8% 27.6%
Expected dividend yield on the Company’s stock 1.71% 2.28%

Stock Appreciation Rights (SARs)

SARs vest under the same terms and conditions as stock option awards; however, they are settled in cash for the difference between the market price on the date of the exercise and the exercise price. As a result, SARs are recorded in the Company's consolidated financial statements of financial position as a liability until the date of exercise. The fair value of each SAR award is estimated using a similar method and assumptions as described for stock options. The fair value of each SAR award is recalculated at the end of each reporting period and the liability and expense are adjusted based on the new fair value.

Restricted (Non-vested) Stock / Units

Restricted stock or restricted stock units are typically share settled unless the employee is a non-U.S. employee, in which case the awards are settled in cash. Restricted awards typically vest over a period of three years from the grant date. The Plans allow for different vesting terms on specific grants with approval by the Compensation and Talent Development Committee. The fair value of each share-settled restricted award is based on the closing market value of the Company’s ordinary shares on the date of grant. The fair value of each cash-settled restricted award is recalculated at the end of each reporting period based on the closing market value of the Company's ordinary shares at the end of the reporting period, and the liability and expense are adjusted based on the new fair value.

Performance Share Awards

Performance-based share unit ("PSU") awards are generally contingent on the achievement of predetermined performance goals over a performance period of one to three years as well as on the award holder's continuous employment until the vesting date. The majority of PSUs are also indexed to the achievement of specified levels of total shareholder return versus a peer group over the performance period. Each PSU that is earned is settled with shares of the Company's ordinary shares following the completion of the performance period, unless the employee is a non-U.S. employee, in which case the awards are settled in cash.

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The fair value of the portion of PSUs linked to the achievement of performance goals is based on the closing market value of the Company's ordinary shares on the date of grant. Share-based compensation expense for these PSUs is recognized over the performance period based on the probability of achieving the performance targets.

The fair value of the portion of PSUs indexed to total shareholder return is estimated on the date of grant using a Monte Carlo simulation that uses the assumptions noted in the following table. The risk-free interest rate for periods during the contractual life of the PSU is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the historical volatility of the Company's stock over the most recent three-year period as of the grant date. Share-based compensation expense for these PSUs is not adjusted based upon performance subsequent to the grant date as the likelihood of achieving the market condition is incorporated in the grant date fair value of the award.
  Three Months Ended
December 31,
2021 2020
Risk-free interest rate 0.99% 0.20%
Expected volatility of the Company’s stock 30.0% 30.9%

14. Earnings Per Share

The Company presents both basic and diluted earnings per share ("EPS") amounts. Basic EPS is calculated by dividing net income attributable to Johnson Controls by the weighted average number of ordinary shares outstanding during the reporting period. Diluted EPS is calculated by dividing net income attributable to Johnson Controls by the weighted average number of ordinary shares and ordinary equivalent shares outstanding during the reporting period that are calculated using the treasury stock method for stock options, unvested restricted stock and unvested performance share awards. The treasury stock method assumes that the Company uses the proceeds from the exercise of stock option awards to repurchase ordinary shares at the average market price during the period. The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future and compensation cost for future service that the Company has not yet recognized. For unvested restricted stock and unvested performance share awards, assumed proceeds under the treasury stock method include unamortized compensation cost.

The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share (in millions):
Three Months Ended
December 31,
  2021 2020
Income Available to Ordinary Shareholders
Income from continuing operations $ 381  $ 327 
Income from discontinued operations —  124 
Basic and diluted income available to
   shareholders 		$ 381  $ 451 
Weighted Average Shares Outstanding
Basic weighted average shares outstanding 704.3  723.1 
Effect of dilutive securities:
Stock options, unvested restricted stock and
     unvested performance share awards
5.2  3.4 
Diluted weighted average shares outstanding 709.5  726.5 
Antidilutive Securities
Options to purchase shares —  0.2 
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15.    Equity

Share repurchase program

For the three months ended December 31, 2021 and 2020, the Company repurchased and immediately retired $526 million and $346 million of its ordinary shares, respectively. In March 2021, the Company's Board of Directors approved a $4 billion increase to the Company's share repurchase authorization, adding to the $2 billion remaining as of December 31, 2020 under the prior share repurchase authorization approved in 2019. As of December 31, 2021, approximately $4.5 billion remains available under the Company's share repurchase authorization.

Accumulated Other Comprehensive Income (Loss)

The following schedules present changes in AOCI attributable to Johnson Controls (in millions, net of tax):
Three Months Ended
December 31,
2021 2020
Foreign currency translation adjustments
Balance at beginning of period $ (421) $ (778)
Aggregate adjustment for the period (net of tax effect of $0 and $0)
84  272 
Balance at end of period (337) (506)
Realized and unrealized gains (losses) on derivatives
Balance at beginning of period (17) 2 
Current period changes in fair value (net of tax effect of $3 and $2)
4  2 
Reclassification to income (net of tax effect of $0 and $0) *
—  (1)
Balance at end of period (13) 3 
Pension and postretirement plans
Balance at beginning of period 4  — 
Reclassification to income (net of tax effect of $0 and $0)
(1) (1)
Balance at end of period 3  (1)
Accumulated other comprehensive loss, end of period $ (347) $ (504)
* Refer to Note 11, "Derivative Instruments and Hedging Activities," of the notes to consolidated financial statements for
disclosure of the line items in the consolidated statements of income affected by reclassifications from AOCI into income
related to derivatives.

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16.    Pension and Postretirement Plans

The components of the Company’s net periodic benefit costs from continuing operations associated with its defined benefit pension and postretirement plans, which are primarily recorded in selling, general and administrative expenses in the consolidated statements of income, are shown in the tables below in accordance with ASC 715, "Compensation – Retirement Benefits" (in millions):
  U.S. Pension Plans
Three Months Ended
December 31,
  2021 2020
Interest cost $ 10  $ 11 
Expected return on plan assets (41) (42)
Net actuarial gain (42) — 
Settlement gain (1) — 
Net periodic benefit credit $ (74) $ (31)

  Non-U.S. Pension Plans
Three Months Ended
December 31,
  2021 2020
Service cost $ 6  $ 7 
Interest cost 10  8 
Expected return on plan assets (21) (28)
Net periodic benefit credit $ (5) $ (13)

  Postretirement Benefits
Three Months Ended
December 31,
  2021 2020
Interest cost $ —  $ 1 
Expected return on plan assets (2) (2)
Amortization of prior service credit (1) (1)
Net periodic benefit credit $ (3) $ (2)

During the three months ended December 31, 2021, the amount of cumulative fiscal 2022 lump sum payouts triggered a remeasurement event for certain U.S. pension plans resulting in the recognition of net actuarial gains of $42 million, primarily due to favorable plan asset performance.

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17.    Significant Restructuring and Impairment Costs

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company commits to various restructuring plans as necessary. Restructuring plans generally result in charges for workforce reductions, plant closures, asset impairments and other related costs which are reported as restructuring and impairment costs in the Company’s consolidated statements of income. The other related costs consist primarily of consulting costs incurred as a direct result of the restructuring initiatives. The Company expects the restructuring actions to reduce cost of sales and SG&A due to reduced employee-related costs, depreciation and amortization expense.

In fiscal 2021, the Company committed to a significant multi-year restructuring plan ("2021 Plan") which is expected to be completed during fiscal 2023. During the three months ended December 31, 2021, the Company recorded $49 million of restructuring and impairment costs in the consolidated statements of income. The total amount expected to be incurred for this restructuring plan is $385 million across all segments and at Corporate. Of the restructuring and impairment costs recorded in the three months ended December 31, 2021, $24 million related to the Global Products segment, $9 million related to the Building Solutions North America segment, $8 million related to the Building Solutions Asia Pacific segment, $5 million related to the Building Solutions EMEA/LA segment and $3 million related to Corporate. In total, the Company has recorded $291 million of restructuring and impairment costs related to the 2021 Plan, including $115 million related to the Global Products segment, $79 million related to the Building Solutions North America segment, $36 million related to the Building Solutions Asia Pacific segment, $34 million related to the Building Solutions EMEA/LA segment and $27 million related to Corporate.

The following table summarizes the changes in the Company’s 2021 Plan reserve, included within other current liabilities in the consolidated statements of financial position (in millions):
Employee Severance and Termination Benefits Long-Lived Asset Impairments Other Total
Original reserve $ 68  $ 98  $ 76  $ 242 
Utilized—cash (28) —  (51) (79)
Utilized—noncash —  (98) —  (98)
Balance at September 30, 2021 40  —  25  65 
Additional restructuring costs 28  —  21  49 
Utilized—cash (13) —  (7) (20)
Currency translation (1) —  —  (1)
Balance at December 31, 2021 $ 54  $ —  $ 39  $ 93 

The 2021 Plan included workforce reductions of approximately 4,000 employees. Restructuring charges associated with employee severance and termination benefits are paid over the severance period granted to each employee or on a lump sum basis in accordance with individual severance agreements. As of December 31, 2021, approximately 1,800 of the employees have been separated from the Company pursuant to the 2021 Plan.

Company management closely monitors its overall cost structure and continually analyzes each of its businesses for opportunities to consolidate current operations, improve operating efficiencies and locate facilities in close proximity to customers. This ongoing analysis includes a review of its manufacturing, engineering and purchasing operations, as well as the overall global footprint for all its businesses.

18.    Impairment of Long-Lived Assets

The Company reviews long-lived assets, including right-of-use assets under operating leases, other tangible assets and intangible assets with definitive lives, for impairment whenever events or changes in circumstances indicate that the asset’s
26

carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets," ASC 350-30, "General Intangibles Other than Goodwill" and ASC 985-20, "Costs of Software to be Sold, Leased, or Marketed."

The Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluates the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on a discounted cash flow analysis or appraisals. Intangible assets acquired in a business combination that are used in research and development activities are considered indefinite-lived until the completion or abandonment of the associated research and development efforts. During the period that those assets are considered indefinite lived, they are not amortized but are tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.  If the carrying amount of an intangible asset exceeds its fair value, the Company recognizes an impairment loss in an amount equal to that excess. Unamortized capitalized costs of a computer software product are compared to the net realizable value of the product. The amount by which the unamortized capitalized costs of a computer software product exceed the net realizable value of that asset is written off.

At December 31, 2021 and 2020, the Company concluded it did not have any triggering events requiring assessment of impairment of its long-lived assets.

19.    Income Taxes

In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter.

The statutory tax rate in Ireland is being used as a comparison since the Company is domiciled in Ireland. For the three months ended December 31, 2021, the Company's effective tax rate for continuing operations was 14.5% and was higher than the statutory tax rate of 12.5% primarily due to the income tax effects of mark-to-market adjustments and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives. For the three months ended December 31, 2020, the Company's effective tax rate for continuing operations was 14.1% and was higher than the statutory tax rate of 12.5% primarily due to tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives.

Valuation Allowance

The Company reviews the realizability of its deferred tax assets on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset are considered, along with any other positive or negative evidence. Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

Uncertain Tax Positions

At September 30, 2021, the Company had gross tax-effected unrecognized tax benefits of $2,726 million, of which $2,268 million, if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2021 was approximately $252 million (net of tax benefit). Total net accrued interest during the three months ended December 31, 2021 and 2020 was approximately $17 million (net of tax benefit) and approximately $15 million (net of tax benefit), respectively. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

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In the U.S., fiscal years 2017 through 2018 are currently under exam by the Internal Revenue Service (“IRS”) for certain legal entities. Additionally, the Company is currently under exam in the following major non-U.S. jurisdictions for continuing operations:
Tax Jurisdiction Tax Years Covered
Belgium
2015 - 2020
Germany
2007 - 2018
Luxembourg
2017 - 2018
Mexico
2015 - 2020
United Kingdom
2014 - 2015, 2017 - 2018

It is reasonably possible that certain tax examinations and/or tax litigation will conclude within the next twelve months, which could have a material impact on tax expense. Based upon the circumstances surrounding these examinations, the impact is not currently quantifiable.

Other Tax Matters

In the first quarter of fiscal 2022, the Company recorded net mark-to-market gains of $57 million which generated tax expense of $14 million and restructuring and impairment costs of $49 million which generated a $7 million tax benefit.

Tax expenses and benefits for the above transactions reflect the Company’s current tax positions in the impacted jurisdictions. Refer to Note 17, “Significant Restructuring and Impairment Costs,” of the notes to consolidated financial statements for additional information.

Impacts of Tax Legislation

During the three months ended December 31, 2021, tax legislation was adopted in various jurisdictions. These law changes did not have a material impact on the Company's consolidated financial statements.

20. Segment Information

ASC 280, "Segment Reporting," establishes the standards for reporting information about segments in financial statements. In applying the criteria set forth in ASC 280, the Company has determined that it has four reportable segments for financial reporting purposes.

•Building Solutions North America: Building Solutions North America designs, sells, installs, and services HVAC, controls, building management, refrigeration, integrated electronic security, and integrated fire detection and suppression systems for commercial, industrial, retail, small business, institutional and governmental customers in the United States and Canada. Building Solutions North America also provides energy efficiency solutions and technical services, including inspection, scheduled maintenance, and repair and replacement of mechanical and control systems, as well as data-driven "smart building" solutions, to non-residential building and industrial applications in the United States and Canadian marketplace.

•Building Solutions EMEA/LA: Building Solutions EMEA/LA designs, sells, installs, and services HVAC, controls, building management, refrigeration, integrated electronic security, integrated fire detection and suppression systems, and provides technical services, including data-driven "smart building" solutions, to markets in Europe, the Middle East, Africa and Latin America.

•Building Solutions Asia Pacific: Building Solutions Asia Pacific designs, sells, installs, and services HVAC, controls, building management, refrigeration, integrated electronic security, integrated fire-detection and suppression systems, and provides technical services, including data-driven "smart building" solutions, to the Asia Pacific marketplace.

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•Global Products: Global Products designs, manufactures and sells HVAC equipment, controls software and software services for residential and commercial applications to commercial, industrial, retail, residential, small business, institutional and governmental customers worldwide. In addition, Global Products designs, manufactures and sells refrigeration equipment and controls globally. The Global Products business also designs, manufactures and sells fire protection, fire suppression and security products, including intrusion security, anti-theft devices, access control, and video surveillance and management systems, for commercial, industrial, retail, residential, small business, institutional and governmental customers worldwide. Global Products also includes the Johnson Controls-Hitachi joint venture.

Effective October 1, 2021, the Company's marine businesses previously included in Building Solutions Asia Pacific and Global Products reportable segments are now part of Building Solutions EMEA/LA reportable segment. Historical information has been re-cast to present the comparative periods on a consistent basis. This change was not material to the segment presentation.

Management evaluates the performance of its business segments primarily on segment earnings before interest, taxes and amortization ("EBITA"), which represents income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, restructuring and impairment costs, and the net mark-to-market adjustments related to pension and postretirement plans and restricted asbestos investments.

Financial information relating to the Company’s reportable segments is as follows (in millions):
  Net Sales
  Three Months Ended
December 31,
  2021 2020
Building Solutions North America $ 2,152  $ 2,034 
Building Solutions EMEA/LA 959  948 
Building Solutions Asia Pacific 675  604 
Global Products 2,076  1,755 
   Total net sales $ 5,862  $ 5,341 
  Segment EBITA
  Three Months Ended
December 31,
2021 2020
Building Solutions North America $ 250  $ 255 
Building Solutions EMEA/LA 104  98 
Building Solutions Asia Pacific 68  77 
Global Products 301  212 
      Total segment EBITA 723  642 
Corporate expenses (70) (67)
Amortization of intangible assets (118) (104)
Restructuring and impairment costs (49) — 
Net mark-to-market adjustments 57  21 
Net financing charges (53) (59)
Income from continuing operations before income taxes $ 490  $ 433 

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21.    Guarantees

Certain of the Company's subsidiaries at the business segment level have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from the current fiscal year through the completion of such transactions and would typically be triggered in the event of nonperformance. Performance under the guarantees, if required, would not have a material effect on the Company's financial position, results of operations or cash flows.

The Company offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement. A typical warranty program requires that the Company replace defective products within a specified time period from the date of sale. The Company records an estimate for future warranty-related costs based on actual historical return rates and other known factors. Based on analysis of return rates and other factors, the Company’s warranty provisions are adjusted as necessary. The Company monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates.

The Company’s product warranty liability for continuing operations is recorded in the consolidated statements of financial position in other current liabilities if the warranty is less than one year and in other noncurrent liabilities if the warranty extends longer than one year.

The changes in the carrying amount of the Company’s total product warranty liability for continuing operations, for the three months ended December 31, 2021 and 2020 were as follows (in millions):
Three Months Ended
December 31,
  2021 2020
Balance at beginning of period $ 192  $ 167 
Accruals for warranties issued during the period 22  22 
Accruals related to pre-existing warranties —  6 
Settlements made (in cash or in kind) during the period (29) (17)
Currency translation (1) 2 
Balance at end of period $ 184  $ 180 

22.    Commitments and Contingencies

Environmental Matters

The Company accrues for potential environmental liabilities when it is probable a liability has been incurred and the amount of the liability is reasonably estimable. The following table presents the location and amount of reserves for environmental liabilities in the Company's consolidated statements of financial position (in millions):

December 31, 2021 September 30, 2021
Other current liabilities $ 64  $ 48 
Other noncurrent liabilities 29  54 
Total reserves for environmental liabilities $ 93  $ 102 

Tyco Fire Products L.P. (“Tyco Fire Products”), in coordination with the Wisconsin Department of Natural Resources ("WDNR"), has been conducting an environmental assessment of its Fire Technology Center ("FTC") located in Marinette, Wisconsin and surrounding areas in the City of Marinette and Town of Peshtigo, Wisconsin. In connection with the assessment, perfluorooctane sulfonate ("PFOS") and perfluorooctanoic acid ("PFOA") and/or other per- and poly fluoroalkyl substances ("PFAS") have been detected at the FTC and in groundwater and surface water outside of the
30

boundaries of the FTC. Tyco Fire Products continues to investigate the extent of potential migration of these compounds and is working with WDNR to address these issues insofar as they related to this migration.

During the third quarter of 2019, the Company increased its environmental reserves, which included $140 million related to remediation efforts to be undertaken to address contamination relating to fire-fighting foams containing PFAS compounds at or near the FTC, as well as the continued remediation of arsenic and other contaminants at the Tyco Fire Products Stanton Street manufacturing facility also located in Marinette, Wisconsin (the “Stanton Street Facility”). The Company is not able to estimate a possible loss or range of loss in excess of the established accruals at this time.

A substantial portion of the increased reserves relates to remediation resulting from the use of fire-fighting foams containing PFAS at the FTC. The use of fire-fighting foams at the FTC was primarily for training and testing purposes in order to ensure that such products sold by the Company’s affiliates, Chemguard, Inc. ("Chemguard") and Tyco Fire Products, were effective at suppressing high intensity fires that may occur at military installations, airports or elsewhere. The reserve was recorded in the quarter ended June 30, 2019 following a comprehensive review by independent environmental consultants related to the presence of PFAS at or near the FTC, as well as remediation discussions with the WDNR.

On June 21, 2019, the WDNR announced that it had received from the Wisconsin Department of Health Services (“WDHS”) a recommendation for groundwater quality standards as to, among other compounds, PFOA and PFOS. The WDHS recommended a groundwater enforcement standard for PFOA and PFOS of 20 parts per trillion. On August 22, 2019, the Governor of Wisconsin issued an executive order that, among other things, directed the WDNR to create a PFAS Coordinating Council and to work with other Wisconsin agencies (including WDHS) to establish final groundwater quality standards based on the WDHS’s prior recommendation. On November 6, 2020, WDNR received further recommendations from WDHS regarding individual standards for 12 additional PFAS and a combined standard for four additional PFAS, PFOA, and PFOS.

In July 2019, the Company received a letter from the WDNR directing the expansion of the evaluation of PFAS in the Marinette region to include (1) biosolids sludge produced by the City of Marinette Waste Water Treatment Plant and spread on certain fields in the area and (2) the Menominee and Peshtigo Rivers. Tyco Fire Products voluntarily responded to the WDNR’s letter to request additional necessary information. On October 16, 2019, the WDNR issued a “Notice of Noncompliance” to Tyco Fire Products and Johnson Controls, Inc. regarding the WDNR’s July 2019 letter. The letter stated that “if you fail to take the actions required by Wis. Stat. § 292.11 to address this contamination, the DNR will move forward under Wis. Stat. § 292.31 to implement the SI workplan and evaluate further environmental enforcement actions and cost recovery under Wis. Stat. § 292.31(8).” The WDNR issued a further letter regarding the issue on November 4, 2019. In February 2020, the WDNR sent a letter to Tyco Fire Products and Johnson Controls, Inc. further directing the expansion of the evaluation of PFAS in the Marinette region to include investigation activities south and west of the previously defined FTC study area. In September 2021, the WDNR sent an additional “Notice of Noncompliance” to Tyco Fire Products and Johnson Controls, Inc. concerning land-applied biosolids, which reviewed and responded to the Company’s biosolids investigation conducted to date. Tyco Fire Products responded to the WDNR’s September 2021 notice by the December 27, 2021 deadline set by WDNR. Tyco Fire Products and Johnson Controls, Inc. believe that they have complied with all applicable environmental laws and regulations. The Company cannot predict what regulatory or enforcement actions, if any, might result from the WDNR’s actions, or the consequences of any such actions.

In May 2021, as part of Tyco Fire Products’ ongoing investigation and remediation program, WDNR approved Tyco Fire Products’ proposed Groundwater Extraction and Treatment System (“GETS”), a permanent groundwater remediation system that will extract groundwater that contains PFAS, treat it using advanced filtration systems, and return the treated water to the environment. Tyco Fire Products has commenced construction on the GETS. Tyco Fire Products also has started the process of removing PFAS-affected soil from the FTC.

In December 2020, the Company received a notice from the Wisconsin Department of Justice (“WDOJ”) that the WDOJ was considering a potential civil enforcement action against the Company relating to environmental matters at the FTC including, but not limited to, the investigation and remediation of PFAS at or near the FTC as discussed above and the Company’s alleged failure to timely report the presence of PFAS chemicals at the FTC. Such enforcement action could seek civil monetary penalties and/or injunctive relief. The Company is presently unable to predict the duration, scope, or
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results of any potential civil enforcement action that may result, the consequences of any such action, or the nature of any resolution of these potential claims with the WDOJ.

Tyco Fire Products has been engaged in remediation activities at the Stanton Street Facility since 1990. Its corporate predecessor, Ansul Incorporated (“Ansul”) manufactured arsenic-based agricultural herbicides at the Stanton Street Facility, which resulted in significant arsenic contamination of soil and groundwater on the site and in parts of the adjoining Menominee River. In 2009, Ansul entered into an Administrative Consent Order (the "Consent Order") with the U.S. Environmental Protection Agency to address the presence of arsenic at the site. Under this agreement, Tyco Fire Products’ principal obligations are to contain the arsenic contamination on the site, pump and treat on-site groundwater, dredge, treat and properly dispose of contaminated sediments in the adjoining river areas, and monitor contamination levels on an ongoing basis. Activities completed under the Consent Order since 2009 include the installation of a subsurface barrier wall around the facility to contain contaminated groundwater, the installation of a groundwater extraction and treatment system and the dredging and offsite disposal of treated river sediment. The increase in the reserve related to the Stanton Street Facility in the third quarter of 2019 was recorded following a further review of the Consent Order, which resulted in the identification of several structural upgrades needed to preserve the effectiveness of prior remediation efforts. In addition to ongoing remediation activities, the Company is also working with the WDNR to investigate the presence of PFAS at or near the Stanton Street Facility as part of the evaluation of PFAS in the Marinette region.

Potential environmental liabilities accrued by the Company do not take into consideration possible recoveries of future insurance proceeds. They do, however, take into account the likely share other parties will bear at remediation sites. It is difficult to estimate the Company’s ultimate level of liability at many remediation sites due to the large number of other parties that may be involved, the complexity of determining the relative liability among those parties, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur. It is possible that technological, regulatory or enforcement developments, the results of additional environmental studies or other factors could change the Company's expectations with respect to future charges and cash outlays, and such changes could be material to the Company's future results of operations, financial condition or cash flows. Nevertheless, the Company does not currently believe that any claims, penalties or costs in addition to the amounts accrued will have a material adverse effect on the Company’s financial position, results of operations or cash flows. In addition, the Company has identified asset retirement obligations for environmental matters that are expected to be addressed at the retirement, disposal, removal or abandonment of existing owned facilities. The Company recorded conditional asset retirement obligations for continuing operations of $29 million at both December 31, 2021 and September 30, 2021.

Asbestos Matters

The Company and certain of its subsidiaries, along with numerous other third parties, are named as defendants in personal injury lawsuits based on alleged exposure to asbestos containing materials. These cases have typically involved product liability claims based primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were used with asbestos containing components.

The Company estimates the asbestos-related liability for pending and future claims and related defense costs on a discounted basis. In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable.


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The following table presents the location and amount of asbestos-related assets and liabilities in the Company's consolidated statements of financial position (in millions):
December 31, 2021 September 30, 2021
Other current liabilities $ 58  $ 58 
Other noncurrent liabilities 395  400 
Total asbestos-related liabilities 453  458 
Other current assets 15  13 
Other noncurrent assets 373  365 
Total asbestos-related assets 388  378 
Net asbestos-related liabilities $ 65  $ 80 

The following table presents the components of asbestos-related assets (in millions):
December 31, 2021 September 30, 2021
Restricted
Cash $ 7  $ 6 
Investments 323  314 
Total restricted assets 330  320 
Insurance recoveries for asbestos-related liabilities 58  58 
Total asbestos-related assets $ 388  $ 378 

The Company's estimate of the liability and corresponding insurance recovery for pending and future claims and defense costs is based on the Company's historical claim experience, and estimates of the number and resolution cost of potential future claims that may be filed and is discounted to present value from 2068 (which is the Company's reasonable best estimate of the actuarially determined time period through which asbestos-related claims will be paid by Company affiliates). Asbestos-related defense costs are included in the asbestos liability. The Company's legal strategy for resolving claims also impacts these estimates. The Company considers various trends and developments in evaluating the period of time (the look-back period) over which historical claim and settlement experience is used to estimate and value claims reasonably projected to be paid through 2068. At least annually, the Company assesses the sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding claims filed, settled and dismissed, and amounts paid in settlements. In addition to claims and settlement experience, the Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment, and the Company's defense strategy. The Company also evaluates the recoverability of its insurance receivable on an annual basis. The Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future claims and defense costs or insurance receivable is warranted.

The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on the Company's strategies for resolving its asbestos claims, currently available information, and a number of estimates and assumptions. Key variables and assumptions include the number and type of new claims that are filed each year, the average cost of resolution of claims, the identity of defendants, the resolution of coverage issues with insurance carriers, amount of insurance, and the solvency risk with respect to the Company's insurance carriers. Many of these factors are closely linked, such that a change in one variable or assumption may impact one or more of the others, and no single variable or assumption predominately influences the determination of the Company's asbestos-related liabilities and insurance-related assets. Furthermore, predictions with respect to these variables are subject to greater uncertainty in the later portion of the projection period. Other factors that may affect the Company's liability and cash payments for asbestos-related matters include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms of state or federal tort legislation and the applicability of insurance policies among subsidiaries. As a result, actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company's calculations vary significantly from actual results.
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Insurable Liabilities

The Company records liabilities for its workers' compensation, product, general, and auto liabilities. The determination of these liabilities and related expenses is dependent on claims experience. For most of these liabilities, claims incurred but not yet reported are estimated by utilizing actuarial valuations based upon historical claims experience. The Company maintains captive insurance companies to manage its insurable liabilities.

The following table presents the location and amount of insurable liabilities in the Company's consolidated statements of financial position (in millions):
December 31, 2021 September 30, 2021
Other current liabilities $ 79  $ 77 
Accrued compensation and benefits 22  22 
Other noncurrent liabilities 218  226 
Total insurable liabilities $ 319  $ 325 

The following table presents the location and amount of insurable receivables in the Company's consolidated statements of financial position (in millions):
December 31, 2021 September 30, 2021
Other current assets $ 5  $ 5 
Other noncurrent assets 15  15 
Total insurable receivables $ 20  $ 20 

Aqueous Film-Forming Foam ("AFFF") Litigation

Two of the Company's subsidiaries, Chemguard and Tyco Fire Products, have been named, along with other defendant manufacturers, suppliers and distributors, and, in some cases, certain subsidiaries of the Company affiliated with Chemguard and Tyco Fire Products, in a number of class action and other lawsuits relating to the use of fire-fighting foam products by the U.S. Department of Defense (the "DOD") and others for fire suppression purposes and related training exercises. Plaintiffs generally allege that the firefighting foam products contain or break down into the chemicals PFOS and PFOA and/or other PFAS compounds and that the use of these products by others at various airbases, airports and other sites resulted in the release of these chemicals into the environment and ultimately into communities’ drinking water supplies neighboring those airports, airbases and other sites. Plaintiffs generally seek compensatory damages, including damages for alleged personal injuries, medical monitoring, diminution in property values, investigation and remediation costs, and natural resources damages, and also seek punitive damages and injunctive relief to address remediation of the alleged contamination.

PFOA, PFOS, and other PFAS compounds are being studied by the United States Environmental Protection Agency ("EPA") and other environmental and health agencies and researchers. The EPA has not issued binding regulatory limits, but had initially stated that it would propose regulatory standards for PFOS and PFOA in drinking water by the end of 2019, in accordance with its PFAS Action Plan released in February 2019, and issued interim recommendations for addressing PFOA and PFOS in groundwater in December 2019. While those studies continue, the EPA has issued a health advisory level for PFOA and PFOS in drinking water. In March 2021, the EPA published its final determination to regulate PFOS and PFOA in drinking water. In October 2021, the EPA released its "PFAS Strategic Roadmap: EPA's Commitments to Action 2021-2024." The 2021-2024 Roadmap sets timelines by which the EPA plans to take specific actions, including, among other items, publishing a national PFAS testing strategy, proposing to designate PFOA and PFOS as Comprehensive Environmental Response, Compensation and Liability Act hazardous substances, restricting PFAS discharges from industrial sources through Effluent Limitations Guidelines, publishing the final toxicity assessment for five additional PFAS, requiring water systems to test for 29 PFAS under the Safe Drinking Water Act, and publishing improved analytical methods in eight different environmental matrices to monitor 40 PFAS present in wastewater and stormwater
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discharges. Both PFOA and PFOS are types of synthetic chemical compounds that have been present in firefighting foam. However, both are also present in many existing consumer products. According to EPA, PFOA and PFOS have been used to make carpets, clothing, fabrics for furniture, paper packaging for food and other materials (e.g., cookware) that are resistant to water, grease or stains.

In September 2018, Tyco Fire Products and Chemguard filed a Petition for Multidistrict Litigation with the United States Judicial Panel on Multidistrict Litigation (“JPML”) seeking to consolidate all existing and future federal cases into one jurisdiction. On December 7, 2018, the JPML issued an order transferring various AFFF cases to a multi-district litigation (“MDL”) before the United States District Court for the District of South Carolina. Additional cases have been identified for transfer to or are being directly filed in the MDL.

AFFF Putative Class Actions

Chemguard and Tyco Fire Products are named in 32 putative class actions in federal courts originating from Colorado, Delaware, Florida, Massachusetts, New York, Pennsylvania, Washington, New Hampshire, South Carolina, the District of Columbia, Guam, West Virginia, Michigan, Texas and South Dakota. All of these cases except one have been direct-filed in or transferred to the MDL.

AFFF Individual or Mass Actions

There are more than 1,900 individual or “mass” actions pending that were filed in state or federal court in various states including California, Colorado, New York, Pennsylvania, New Mexico, Missouri, Arizona, Texas, and South Carolina against Chemguard and Tyco Fire Products and other defendants in which the plaintiffs generally seek compensatory damages, including damages for alleged personal injuries, medical monitoring, and alleged diminution in property values. The cases involve plaintiffs from various states including approximately 7,000 plaintiffs in Colorado and more than 1,900 other plaintiffs. The vast majority of these matters have been tagged for transfer to, transferred to, or directly-filed in the MDL, and it is anticipated that several newly filed state court actions will be similarly tagged and transferred. There are three matters that are proceeding in state court: One case, Young v. Chemguard et al., was filed in superior court in Maricopa County, Arizona, removed to the United States District Court, District of Arizona, and tagged to the MDL, but was remanded to state court prior to being transferred to the MDL. The decision to remand the case to state court is currently being appealed. The second case, Forbach et al. v. Chemguard et al., was filed in superior court in Coconino County, Arizona, and is proceeding with initial discovery. The third case, Ellison-Wood v. Chemguard, Inc., et al., was filed recently in district court in Tarrant County, Texas.

AFFF Municipal Cases

Chemguard and Tyco Fire Products have been named as defendants in approximately 168 cases in federal and state courts involving municipal or water provider plaintiffs in Alaska, Alabama, Arizona, California, Colorado, Connecticut, Florida, Idaho, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Virginia, Washington, West Virginia, Wisconsin, the District of Columbia, and several municipalities or water providers from various states who direct-filed complaints in South Carolina. All but five of these cases have been transferred to or directly filed in the MDL, and it is anticipated that the remaining cases will be transferred to the MDL. These municipal plaintiffs generally allege that the use of the defendants’ fire-fighting foam products at fire training academies, municipal airports, Air National Guard bases, or Navy or Air Force bases released PFOS and PFOA into public water supply wells, allegedly requiring remediation of public property.

The Company has periodically been notified by other municipal entities that those entities may assert claims regarding PFOS and/or PFOA contamination allegedly resulting from the use of AFFF.

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State or U.S. Territory Attorneys General Litigation related to AFFF

In June 2018, the State of New York filed a lawsuit in New York state court (State of New York v. The 3M Company et al No. 904029-18 (N.Y. Sup. Ct., Albany County)) against a number of manufacturers, including affiliates of the Company, with respect to alleged PFOS and PFOA contamination purportedly resulting from firefighting foams used at locations across New York, including Stewart Air National Guard Base in Newburgh and Gabreski Air National Guard Base in Southampton, Plattsburgh Air Force Base in Plattsburgh, Griffiss Air Force Base in Rome, and unspecified “other” sites throughout the State. The lawsuit seeks to recover costs and natural resource damages associated with contamination at these sites. This suit has been removed to the United States District Court for the Northern District of New York and transferred to the MDL.

In February 2019, the State of New York filed a second lawsuit in New York state court (State of New York v. The 3M Company et al (N.Y. Sup. Ct., Albany County)), against a number of manufacturers, including affiliates of the Company, with respect to alleged PFOS and PFOA contamination purportedly resulting from firefighting foams used at additional locations across New York. This suit has been removed to the United States District Court for the Northern District of New York and transferred to the MDL. In July 2019, the State of New York filed a third lawsuit in New York state court (State of New York v. The 3M Company et al (N.Y. Sup. Ct., Albany County)), against a number of manufacturers, including affiliates of the Company, with respect to alleged PFOS and PFOA contamination purportedly resulting from firefighting foams used at further additional locations across New York. This suit has been removed to the United States District Court for the Northern District of New York and transferred to the MDL. In November 2019, the State of New York filed a fourth lawsuit in New York state court (State of New York v. The 3M Company et al (N.Y. Sup. Ct., Albany County)), against a number of manufacturers, including affiliates of the Company, with respect to alleged PFOS and PFOA contamination purportedly resulting from firefighting foams used at further additional locations across New York. This suit has been removed to federal court and transferred to the MDL.

In January 2019, the State of Ohio filed a lawsuit in Ohio state court (State of Ohio v. The 3M Company et al., No. G-4801-CI-021804752 -000 (Court of Common Pleas of Lucas County, Ohio)) against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various specified and unspecified locations across Ohio. The lawsuit seeks to recover costs and natural resource damages associated with the contamination. This lawsuit has been removed to the United States District Court for the Northern District of Ohio and transferred to the MDL.

In addition, in May and June 2019, three other states filed lawsuits in their respective state courts against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various specified and unspecified locations across their jurisdictions (State of New Hampshire v. The 3M Company et al.; State of Vermont v. The 3M Company et al.; State of New Jersey v. The 3M Company et al.). All three of these suits have been removed to federal court and transferred to the MDL.

In September 2019, the government of Guam filed a lawsuit in the superior court of Guam against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various locations within its jurisdiction. This complaint has been removed to federal court and transferred to the MDL.

In November 2019, the government of the Commonwealth of the Northern Mariana Islands filed a lawsuit in the superior court of the Northern Mariana Islands against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various locations within its jurisdiction. This complaint has been removed to federal court and transferred to the MDL.

In August 2020, Attorney General of the State of Michigan filed two substantially similar lawsuits—one in federal court and one in state court—against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various locations within the State. The federal action has been transferred to the MDL, and the state court action has been removed to federal court and transferred to the MDL.

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In December 2020, the State of Mississippi filed a lawsuit against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State’s land and natural resources allegedly resulting from the use of firefighting foams at various locations throughout the State. This complaint was direct-filed in the MDL in South Carolina.

In April 2021, the State of Alaska filed a lawsuit in the superior court of the State of Alaska against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State’s land and natural resources allegedly resulting from the use of firefighting foams at various locations throughout the State. The State’s case has been removed to federal court and transferred to the MDL. The State of Alaska has also named a number of manufacturers and other defendants, including affiliates of the Company, as third-party defendants in two cases brought by individuals against the State. These two cases have also been transferred to the MDL.

In early November 2021, the Attorney General of the State of North Carolina filed four individual lawsuits in the superior courts of the State of North Carolina against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State’s land, natural resources, and property allegedly resulting from the use of firefighting foams at four separate locations throughout the State. These four cases have been removed to federal court and transferred to the MDL.

Other AFFF Related Matters

In March 2020, the Kalispel Tribe of Indians (a federally recognized Tribe) and two tribal corporations filed a lawsuit in the United States District Court for the Eastern District of Washington against a number of manufacturers, including affiliates of the Company, and the United States with respect to PFAS contamination allegedly resulting from the use and disposal of AFFF by the United States Air Force at and around Fairchild Air Force Base in eastern Washington. This case has been transferred to the MDL.

The Company is vigorously defending the above matters and believes that it has meritorious defenses to class certification and the claims asserted, including statutes of limitations, the government contractor defense, various medical and scientific defenses, and other factual and legal defenses. The government contractor defense is a form of immunity available to government contractors that produced products for the United States government pursuant to the government’s specifications. Tyco and Chemguard have insurance that has been in place for many years and the Company is pursuing this coverage for these matters. However, there are numerous factual and legal issues to be resolved in connection with these claims, and it is extremely difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and there can be no assurance that any such exposure will not be material.

Other Matters

The Company is involved in various lawsuits, claims and proceedings incident to the operation of its businesses, including those pertaining to product liability, environmental, safety and health, intellectual property, employment, commercial and contractual matters, and various other casualty matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, it is management’s opinion that none of these will have a material adverse effect on the Company’s financial position, results of operations or cash flows. Costs related to such matters were not material to the periods presented.

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23.    Related Party Transactions

In the ordinary course of business, the Company enters into transactions with related parties, such as equity affiliates. Such transactions consist of facility management services, the sale or purchase of goods and other arrangements.

The following table presents net sales to and purchases from related parties for the three months ended December 31, 2021 and 2020 (in millions):
Three Months Ended December 31,
2021 2020
Net sales to related parties $ 35  $ 44 
Purchases from related parties 44  29 

The following table presents receivables from and payables to related parties in the consolidated statements of financial position (in millions):
December 31, 2021 September 30, 2021
Receivable from related parties $ 58  $ 73 
Payable to related parties 15  45 

Additionally, the Company leases certain facilities used in its operations from a related party. As of December 31, 2021, the right-of-use asset and lease liability associated with these leases were $10 million. As of September 30, 2021, the right-of-use asset associated with these leases was $11 million and the lease liability was $10 million. Amounts paid for these leases were not material.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statements for Forward-Looking Information

Unless otherwise indicated, references to "Johnson Controls," the "Company," "we," "our" and "us" in this Quarterly Report on Form 10-Q refer to Johnson Controls International plc and its consolidated subsidiaries.

The Company has made statements in this document that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this document, statements regarding the Company’s future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures, debt levels and market outlook are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" and terms of similar meaning are also generally intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. The Company cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, that could cause the Company’s actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: The Company’s ability to manage general economic, business, capital market and geopolitical conditions, including global price inflation and shortages impacting the availability of raw materials and component products; the Company’s ability to manage the impacts of natural disasters, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; the strength of the U.S. or other economies; changes or uncertainty in laws, regulations, rates, policies or interpretations that impact the Company’s business operations or tax status; the ability to develop or acquire new products and technologies that achieve market acceptance and meet applicable regulatory requirements; changes to laws or policies governing foreign trade, including increased tariffs or trade restrictions; maintaining the capacity, reliability and security of the Company’s enterprise information technology infrastructure; the ability to manage the lifecycle cybersecurity risk in the development, deployment and operation of the Company’s digital platforms and services; the risk of infringement or expiration of intellectual property rights; any delay or inability of the Company to realize the expected benefits and synergies of recent portfolio transactions; the outcome of litigation and governmental proceedings; the ability to hire and retain senior management and other key personnel; the tax treatment of recent portfolio transactions; significant transaction costs and/or unknown liabilities associated with such transactions; fluctuations in currency exchange rates; labor shortages, work stoppages, union negotiations, labor disputes and other matters associated with the labor force; and the cancellation of or changes to commercial arrangements. A detailed discussion of risks related to Johnson Controls' business is included in the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the year ended September 30, 2021 filed with the United States Securities and Exchange Commission ("SEC") on November 15, 2021, which is available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. The description of certain of these risks is supplemented in Item 1A of Part II of this Quarterly Report on Form 10-Q. The forward-looking statements included in this document are made only as of the date of this document, unless otherwise specified, and, except as required by law, Johnson Controls assumes no obligation, and disclaims any obligation, to update such statements to reflect events or circumstances occurring after the date of this document.

Overview

Johnson Controls International plc, headquartered in Cork, Ireland, is a global leader in smart, healthy and sustainable buildings, serving a wide range of customers in more than 150 countries. The Company’s products, services, systems and solutions advance the safety, comfort and intelligence of spaces to serve people, places and the planet. The Company is committed to helping its customers win and creating greater value for all of its stakeholders through its strategic focus on buildings.

The Company is a global leader in engineering, manufacturing and commissioning building products and systems, including residential and commercial HVAC equipment, industrial refrigeration systems, controls, security systems, fire-detection systems and fire-suppression solutions. The Company further serves customers by providing technical services, including maintenance, management, repair, retrofit and replacement of equipment (in the HVAC, industrial refrigeration, security and fire-protection space), energy-management consulting and data-driven “smart building” services and solutions powered by its OpenBlue software platform and related digital capabilities. The Company partners with customers by leveraging its broad product portfolio and digital capabilities powered by OpenBlue, together with its direct channel service and solutions
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capabilities, to deliver outcome-based solutions across the lifecycle of a building that address customers’ needs to improve energy efficiency and reduce greenhouse gas emissions.

The following information should be read in conjunction with the September 30, 2021 consolidated financial statements and notes thereto, along with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended September 30, 2021 filed with the SEC on November 15, 2021. References in the following discussion and analysis to "Three Months" (or similar language) refer to the three months ended December 31, 2021 compared to the three months ended December 31, 2020.

Macroeconomic Trends

Much of the demand for installation of the Company’s products and solutions is driven by commercial and residential construction and industrial facility expansion and maintenance projects. Commercial and residential construction projects are heavily dependent on general economic conditions, localized demand for commercial and residential real estate and availability of credit. Positive or negative fluctuations in commercial and residential construction, industrial facility expansion and maintenance projects and other capital investments in buildings could have a corresponding impact on the Company’s financial condition, results of operations and cash flows.

As a result of the Company’s global presence, a significant portion of its revenues and expenses is denominated in currencies other than the U.S. dollar. The Company is therefore subject to non-U.S. currency risks and non-U.S. exchange exposure. While the Company employs financial instruments to hedge some of its transactional foreign exchange exposure, these activities do not insulate it completely from those exposures. Exchange rates can be volatile and a substantial weakening or strengthening of foreign currencies against the U.S. dollar could increase or reduce the Company’s profit margin in various locations outside of the U.S. and impact the comparability of results from period to period.

The Company continues to observe trends demonstrating increased interest and demand for safe, efficient and sustainable buildings, and seeks to capitalize on these trends to drive growth by developing and delivering technologies and solutions to create smart and healthy buildings. In 2020, the Company launched its software platform, OpenBlue, enabling enterprises to manage all aspects of their physical spaces delivering sustainability, new occupant experiences, and safety and security by combining the Company’s building expertise with cutting-edge technology, including AI-powered service solutions such as remote diagnostics, predictive maintenance, compliance monitoring and advanced risk assessments. The Company continues to leverage its install base, together with data-driven products and services to offer outcome-based solutions to customers with a focus on generating accelerated growth in services and recurring revenue for the Company. The Company has committed to investing in new product research and development in climate-related innovation to develop sustainable products and services.

The Company has experienced, and expects to continue to experience, increased input material cost inflation and component shortages, as well as disruptions and delays in its supply chain, as a result of global macroeconomic trends (including increased global demand), government-mandated actions in response to COVID-19 and labor shortages. Actions taken by the Company to mitigate supply chain disruptions and inflation, including expanding and redistributing its supplier network, supplier financing, price increases and productivity improvements, have generally been successful in offsetting some, but not all, of the impact of these trends. These trends have continued to negatively impact the Company’s revenue and margins during the first quarter of fiscal year 2022, and it is expected these trends will continue to be a headwind for the remainder of fiscal 2022. Therefore, the Company could experience further disruptions, shortages and price increases in the future, the effect of which will depend on the Company’s ability to successfully mitigate and offset the impact of these events.

Impact of COVID-19 pandemic

The global outbreak of COVID-19 severely restricted the level of economic activity around the world and caused a significant contraction in the global economy.

The Company’s affiliates, employees, suppliers, customers and others have been and may continue to be restricted or prevented from conducting normal business activities, including as a result of shutdowns, travel restrictions and other actions that may be requested or mandated by governmental authorities. Although shutdown orders and similar restrictions have been lifted in many jurisdictions in conjunction with the global distribution of vaccines, challenges in achieving sufficient vaccination levels and the spread of new variants of COVID-19 have caused some governments to extend or reinstitute restrictions in impacted areas. During the first quarter of fiscal 2022, the Company’s facilities generally operated at normal levels.
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The Company continues to focus its efforts on preserving the health and safety of its employees and customers, as well as maintaining the continuity of its operations. The Company modified its business practices in response to the COVID-19 outbreak, including restricting non-essential employee travel, implementing remote work protocols, and limiting physical participation in meetings, events and conferences. The Company also instituted preventive measures at its facilities, including enhanced health and safety protocols, temperature screening, requiring face coverings for all unvaccinated employees and encouraging employees to follow similar protocols when away from work. The Company has adopted and implemented a multifaceted framework to guide its decision making as it reopens its offices and facilities to employees, and will continue to monitor and audit its facilities to ensure that they are in compliance with the Company’s COVID-19 safety requirements.

The Company has experienced increases in both demand and volumes as governments have distributed vaccines and lifted COVID-19-related restrictions, leading to increases in retrofit activity and, to a lesser extent, commercial building construction. The global pandemic has also provided the Company with the opportunity to help its customers by delivering solutions and support that enhance the safety and increase the efficiency of their operations. As a result of the pandemic, the Company has seen an increase in demand for its products and solutions that promote building health and optimize customers’ infrastructure.

However, the Company continues to be influenced by COVID-19-related trends impacting site access and the labor force, which have and may continue to negatively impact the Company’s revenues and margins. Challenges in reaching sufficient vaccination levels and the introduction of new variants of COVID-19 have caused some governments to extend or reinstitute lockdowns and similar restrictive measures, which, in some cases, have limited the Company’s ability to access customer sites to install and maintain its products and deliver services. In addition, the Company has experienced and continues to experience labor shortages at certain facilities as the Company expands its production capacity to meet increased customer demand. Although the Company is mitigating these shortages through focused recruitment efforts and competitive compensation packages, the Company could continue to experience such shortages in the future. Recently, the U.S. Government has promulgated orders mandating vaccinations or regular COVID-19 testing for large employers and federal contractors. Similar mandates have also been imposed by local governments and certain of the Company’s customers. The Company’s efforts to comply with these mandates, including requiring that some or all of its employees be fully vaccinated against COVID-19, could result in increased labor attrition or disruption, and could adversely impact the Company’s ability to deliver services to its customers.

The extent to which the COVID-19 pandemic continues to impact the Company’s results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including the resurgence of COVID-19 and its variants in regions recovering from the impacts of the pandemic, the effectiveness of COVID-19 vaccines and the speed at which populations are vaccinated around the globe, the impact of COVID-19 on economic activity, and regulatory actions taken to contain its impact on public health and the global economy. See Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended September 30, 2021 for an additional discussion of risks related to COVID-19.

Restructuring and Cost Optimization Initiatives

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company has committed to various restructuring plans. In fiscal 2021, the Company announced its plans to optimize its cost structure through broad-based SG&A actions focused on simplification, standardization and centralization, with the intent to deliver annualized savings of $300 million by fiscal 2023. Additionally, the Company announced cost of sales actions to drive $250 million in annual run rate savings by fiscal 2023. The Company believes it is on track to deliver the productivity savings by fiscal 2023. For more information on the Company’s restructuring plans, see “Liquidity and Capital Resources—Restructuring.”

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Net Sales
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Net sales $ 5,862  $ 5,341  10  %

The increase in consolidated net sales for the three months ended December 31, 2021 was due to higher organic sales ($440 million) and incremental sales from acquisitions ($128 million), partially offset by the unfavorable impact of foreign currency translation ($45 million) and lower sales due to business divestitures ($2 million). Excluding the impact of foreign currency translation and business acquisitions and divestitures, consolidated net sales increased 8% as compared to the prior year, attributable to higher volumes and increased pricing in response to inflation pressures. Refer to the "Segment Analysis" below within this Item 2 for a discussion of net sales by segment.
    
Cost of Sales / Gross Profit
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Cost of sales $ 3,971  $ 3,613  10  %
Gross profit 1,891  1,728  9  %
% of sales 32.3  % 32.4  %

Cost of sales and gross profit increased for the three-month period ended December 31, 2021, and gross profit as a percentage of sales decreased by 10 basis points. Gross profit increased due to organic sales growth, business acquisitions, favorable foreign currency translation ($34 million) and the favorable year-over-year impact of net mark-to-market adjustments on pension plans ($9 million). Gross profit as a percentage of sales decreased slightly as the benefit of volume leverage was more than offset by supply chain inefficiencies and price/cost pressures. Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings before interest, taxes and amortization ("EBITA").

Selling, General and Administrative Expenses
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Selling, general and administrative expenses $ 1,369  $ 1,294  6  %
% of sales 23.4  % 24.2  %

Selling, general and administrative expenses ("SG&A") for the three-month period ended December 31, 2021 increased $75 million, and SG&A as a percentage of sales decreased by 80 basis points. The increase in SG&A was primarily due to the absence of certain one-time cost mitigation actions, incremental sales investments and current year business acquisitions, partially offset by the favorable year-over-year impact of net mark-to-market adjustments on pension plans ($34 million). Foreign currency translation had a favorable impact on SG&A of $10 million. Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA.

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Restructuring and Impairment Costs
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Restructuring and impairment costs $ 49  $ —  *
* Measure not meaningful

Refer to Note 17, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements and "Restructuring" below within this Item 2 for further disclosure related to the Company's restructuring plans and impairment costs.

Net Financing Charges
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Net financing charges $ 53  $ 59  -10  %

Refer to Note 10, "Debt and Financing Arrangements," of the notes to consolidated financial statements for further disclosure related to the Company's net financing charges.

Equity Income
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Equity income $ 70  $ 58  21  %

The increase in equity income for the three months ended December 31, 2021 was primarily due to higher income at certain partially-owned affiliates of the Johnson Controls - Hitachi joint venture and within the Building Solutions EMEA/LA segment. Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA by segment.

Income Tax Provision
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Income tax provision $ 71  $ 61  16  %
Effective tax rate 14.5  % 14.1  %

In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter.

The statutory tax rate in Ireland is being used as a comparison since the Company is domiciled in Ireland. For the three months ended December 31, 2021, the Company's effective tax rate for continuing operations was 14.5% and was higher than the statutory tax rate of 12.5% primarily due to the income tax effects of mark-to-market adjustments and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives. For the three months ended December 31, 2020, the Company's effective tax rate for continuing operations was 14.1% and was higher than the statutory tax rate of 12.5% primarily
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due to tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives. Refer to Note 19, "Income Taxes," of the notes to consolidated financial statements for further detail.

Income From Discontinued Operations, Net of Tax
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Income from discontinued operations, net of tax
$ —  $ 124  *
* Measure not meaningful

Refer to Note 4, "Discontinued Operations," of the notes to consolidated financial statements for further information regarding the Company's discontinued operations.

Income Attributable to Noncontrolling Interests
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Income from continuing operations attributable to noncontrolling interests
$ 38  $ 45  -16  %

The decrease in income from continuing operations attributable to noncontrolling interests for the three months ended December 31, 2021 was primarily due to lower net income at certain partially-owned affiliates within the Global Products segment.

Net Income Attributable to Johnson Controls
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Net income attributable to Johnson Controls $ 381  $ 451  -16  %

The decrease in net income attributable to Johnson Controls for the three months ended December 31, 2021 was primarily due to the prior year income from discontinued operations, higher SG&A and higher restructuring and impairment costs, partially offset by higher gross profit.

Diluted earnings per share attributable to Johnson Controls for the three months ended December 31, 2021 was $0.54 compared to $0.62 for the three months ended December 31, 2020.

Comprehensive Income Attributable to Johnson Controls
Three Months Ended
December 31,
(in millions) 2021 2020 Change
Comprehensive income attributable to Johnson Controls $ 468  $ 723  -35  %

The decrease in comprehensive income attributable to Johnson Controls for the three months ended December 31, 2021 was due to a decrease in other comprehensive income attributable to Johnson Controls ($185 million) resulting primarily from
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currency translation adjustments and lower net income attributable to Johnson Controls ($70 million). The year-over-year unfavorable foreign currency translation adjustments were primarily driven by the strengthening of the Brazilian real, British pound, euro and Mexican peso against the U.S. dollar in the prior year.

Segment Analysis

Management evaluates the performance of its business units based primarily on segment EBITA, which represents income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, restructuring and impairment costs, and net mark-to-market adjustments related to pension and postretirement plans and restricted asbestos investments.

Effective October 1, 2021, the Company's marine businesses previously included in Building Solutions Asia Pacific and Global Products reportable segments are now part of Building Solutions EMEA/LA reportable segment. Historical information has been re-cast to present the comparative periods on a consistent basis. This change was not material to the segment presentation. Refer to Note 20, “Segment Information,” of the notes to consolidated financial statements for further information.

Beginning on October 1, 2021, the Company began reporting certain retrofit projects in Building Solutions EMEA/LA and Building Solutions Asia Pacific as products and systems revenue on a prospective basis as they have evolved to be more aligned with other install offerings.

Net Sales
  Three Months Ended
December 31,
(in millions) 2021 2020 Change
Building Solutions North America $ 2,152  $ 2,034  6  %
Building Solutions EMEA/LA 959  948  1  %
Building Solutions Asia Pacific 675  604  12  %
Global Products 2,076  1,755  18  %
$ 5,862  $ 5,341  10  %

•The increase in Building Solutions North America was due to higher volumes and prices ($107 million), the favorable impact of foreign currency translation ($6 million) and incremental sales related to business acquisitions ($5 million). The sales increase was led by growth in service and HVAC & Controls.

•The increase in Building Solutions EMEA/LA was due to higher prices ($26 million) and incremental sales related to business acquisitions ($8 million), partially offset by the unfavorable impact of foreign currency translation ($22 million) and business divestitures ($1 million). The increase in sales is driven by balanced growth in both project installations and service activity, led by strength in Fire & Security. By region, sales growth outperformed in Europe and Latin America, partially offset by continued weakness in the Middle East.

•The increase in Building Solutions Asia Pacific was due to higher volumes and prices ($69 million) and incremental sales related to business acquisitions ($9 million), partially offset by the unfavorable impact of foreign currency translation ($6 million) and business divestitures ($1 million). The increase in sales was led by growth in project installations, driven by strong growth in Commercial Applied HVAC & Controls. China remains the primary source of growth, with growth stabilizing across the rest of the region.

•The increase in Global Products was due to higher volumes and prices ($238 million) and incremental sales related to business acquisitions ($106 million), partially offset by the unfavorable impact of foreign currency translation ($23 million). Sales growth was driven by broad-based strength across Commercial and Residential HVAC and Fire & Security products.

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Segment EBITA
  Three Months Ended
December 31,
(in millions) 2021 2020 Change
Building Solutions North America $ 250  $ 255  -2  %
Building Solutions EMEA/LA 104  98  6  %
Building Solutions Asia Pacific 68  77  -12  %
Global Products 301  212  42  %
$ 723  $ 642  13  %

•The decrease in Building Solutions North America was primarily due to supply chain disruptions and labor constraints, partially offset by favorable volumes, productivity savings and foreign currency translation.

•The increase in Building Solutions EMEA/LA was primarily due to favorable pricing and productivity savings, partially offset by unfavorable mix and the unfavorable impact of foreign currency translation.

•The decrease in Building Solutions Asia Pacific was primarily due to unfavorable mix, unfavorable price/cost and the unfavorable impact of foreign currency translation, partially offset by favorable volume leverage and productivity savings.

•The increase in Global Products was primarily due to favorable volumes and mix, productivity savings, higher equity income driven primarily by certain partially-owned affiliates of the Johnson Controls - Hitachi joint venture and the favorable impact of foreign currency translation, partially offset by unfavorable price/cost and supply chain disruptions.

Backlog

The Company’s backlog is applicable to its sales of systems and services. At December 31, 2021, the backlog was $10.9 billion, of which $10.5 billion was attributable to the field business. The backlog amount outstanding at any given time is not necessarily indicative of the amount of revenue to be earned in the upcoming fiscal year.

At December 31, 2021, remaining performance obligations were $16.5 billion, which is $5.6 billion higher than the Company's backlog of $10.9 billion. Differences between the Company’s remaining performance obligations and backlog are primarily due to:

•Remaining performance obligations include large, multi-purpose contracts to construct hospitals, schools and other governmental buildings, which are services to be performed over the building's lifetime with initial contract terms of 25 to 35 years for the entire term of the contract versus backlog which includes only the lifecycle period of these contracts which approximates five years;
•The Company has elected to exclude from remaining performance obligations certain contracts with customers with a term of one year or less or contracts that are cancelable without substantial penalty while these contracts are included within backlog; and
•Remaining performance obligations include the full remaining term of service contracts with substantial termination penalties versus backlog which includes one year for all outstanding service contracts.

The Company will continue to report backlog as it believes it is a useful measure of evaluating the Company's operational performance and relationship to total orders.

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Liquidity and Capital Resources

Working Capital
December 31, September 30,
(in millions) 2021 2021 Change
Current assets $ 10,353  $ 9,998 
Current liabilities (9,987) (9,098)
366  900  -59  %
Less: Cash and cash equivalents (1,207) (1,336)
Add: Short-term debt 392  8 
Add: Current portion of long-term debt 220  226 
Working capital (as defined) $ (229) $ (202) 13  %
Accounts receivable - net $ 5,671  $ 5,613  1  %
Inventories 2,425  2,057  18  %
Accounts payable 4,083  3,746  9  %

•The Company defines working capital as current assets less current liabilities, excluding cash, short-term debt, the current portion of long-term debt, and the current portions of assets and liabilities held for sale. Management believes that this measure of working capital, which excludes financing-related items and businesses to be divested, provides a more useful measurement of the Company’s operating performance.

•The decrease in working capital at December 31, 2021 as compared to September 30, 2021, was primarily due to an increase in accounts payable and deferred revenue, partially offset by an increase in inventory due to supply chain disruptions and a decrease in accrued compensation and benefits liabilities.

•The Company’s days sales in accounts receivable at December 31, 2021 and September 30, 2021 were 62 days and 58 days, respectively. There has been no significant adverse changes in the level of overdue receivables or significant changes in revenue recognition methods.

•The Company’s inventory turns for the three months ended December 31, 2021 were lower than the comparable period ended September 30, 2021, primarily due to supply chain disruptions.

•Days in accounts payable at December 31, 2021 were 90 days, higher than 76 days at the comparable period ended September 30, 2021, primarily due to timing.

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Cash Flows From Continuing Operations
  Three Months Ended December 31,
(in millions) 2021 2020
Cash provided by operating activities $ 392  $ 515 
Cash used by investing activities (218) (37)
Cash used by financing activities (357) (547)

•The decrease in cash provided by operating activities was primarily due to increases in accounts receivable and inventory, partially offset by favorable changes in accounts payable and accrued liabilities.

•The increase in cash used by investing activities was primarily due to higher cash payments made for acquisitions and higher capital expenditures.

•The decrease in cash used by financing activities was primarily due to higher net short-term debt borrowings, partially offset by higher stock repurchases.

Capitalization
December 31, September 30,
(in millions) 2021 2021 Change
Short-term debt $ 392  $ 8 
Current portion of long-term debt 220  226 
Long-term debt 7,437  7,506 
Total debt 8,049  7,740  4  %
Less: Cash and cash equivalents 1,207  1,336 
Total net debt 6,842  6,404  7  %
Shareholders’ equity attributable to Johnson Controls
   ordinary shareholders
17,249  17,562  -2  %
Total capitalization $ 24,091  $ 23,966  1  %
Total net debt as a % of total capitalization 28.4  % 26.7  %

•Net debt and net debt as a percentage of total capitalization are non-GAAP financial measures. The Company believes the percentage of total net debt to total capitalization is useful to understanding the Company’s financial condition as it provides a view of the extent to which the Company relies on external debt financing for its funding and is a measure of risk to its shareholders.

•The Company's material cash requirements primarily consist of working capital requirements, repayments of long-term debt and related interest, operating leases, dividends, capital expenditures, potential acquisitions and share repurchases.

•As of December 31, 2021, approximately $4.5 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice. The Company expects to repurchase outstanding shares from time to time depending on market conditions, alternate uses of capital, liquidity, and the economic environment.

•In the first quarter of fiscal 2022, the Company raised its quarterly dividend from $0.27 per share to $0.34 per share. The Company intends to continue paying quarterly dividends throughout fiscal 2022.

•The Company believes its capital resources and liquidity position at December 31, 2021 are adequate to meet projected needs. The Company believes requirements for working capital, capital expenditures, dividends, minimum pension
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contributions, debt maturities and any potential acquisitions or stock repurchases in the remainder of fiscal 2022 will continue to be funded from operations, supplemented by short- and long-term borrowings, if required. The Company currently manages its short-term debt position in the U.S. and euro commercial paper markets and bank loan markets. In the event the Company is unable to issue commercial paper, it would have the ability to draw on its $2.5 billion revolving credit facility which expires in December 2024 or its $0.5 billion 364-day revolving credit facility which expires in December 2022. There were no draws on the revolving credit facilities as of December 31, 2021 and September 30, 2021. The Company estimates that, as of December 31, 2021, it could borrow up to $2.9 billion based on average borrowing levels during the first quarter of fiscal 2022 on committed credit lines. The Company maintains a shelf registration statement with the SEC under which it may issue additional debt securities, ordinary shares, preferred shares, depositary shares, warrants purchase contracts and units that may be offered in one or more offerings on terms to be determined at the time of the offering. The Company anticipates that the proceeds of any offering would be used for general corporate purposes, including repayment of indebtedness, acquisitions, additions to working capital, repurchases of ordinary shares, dividends, capital expenditures and investments in the Company's subsidiaries. In addition, the Company held cash and cash equivalents of $1.2 billion as of December 31, 2021. As such, the Company believes it has sufficient financial resources to fund operations and meet its obligations for the foreseeable future.

•The Company's ability to access the global capital markets and the related cost of financing is dependent upon, among other factors, the Company's credit ratings. As of December 31, 2021, the Company's credit ratings and outlook were as follows:
Rating Agency Short-Term Rating Long-Term Rating Outlook
S&P A-2 BBB+ Stable
Moody's P-2 Baa2 Stable

The security ratings set forth above are issued by unaffiliated third party rating agencies and are not a recommendation to buy, sell or hold securities. The ratings may be subject to revision or withdrawal by the assigning rating organization at any time.

•Financial covenants in the Company's revolving credit facilities requires a minimum consolidated shareholders’ equity attributable to Johnson Controls of at least $3.5 billion at all times. The revolving credit facility also limits the amount of debt secured by liens that may be incurred to a maximum aggregated amount of 10% of consolidated shareholders’ equity attributable to Johnson Controls for liens and pledges. For purposes of calculating these covenants, consolidated shareholders’ equity attributable to Johnson Controls is calculated without giving effect to (i) the application of Accounting Standards Codification ("ASC") 715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment. As of December 31, 2021, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future. None of the Company’s debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Company's credit rating.

•The key financial assumptions used in calculating the Company’s pension liability are determined annually, or whenever plan assets and liabilities are re-measured as required under accounting principles generally accepted in the U.S., including the expected rate of return on its plan assets. In fiscal 2022, the Company believes the long-term rate of return will approximate 7.00%, 3.70% and 5.30% for U.S. pension, non-U.S. pension and postretirement plans, respectively. During the first three months of fiscal 2022, the Company made approximately $41 million in total pension and postretirement contributions. In total, the Company expects to contribute approximately $100 million in cash to its defined benefit pension plans in fiscal 2022. The Company expects to contribute $3 million in cash to its postretirement plans in fiscal 2022.

•The Company earns a significant amount of its income outside of the parent company. Outside basis differences in these subsidiaries are deemed to be permanently reinvested except in limited circumstances. The Company currently does not intend nor foresee a need to repatriate undistributed earnings included in the outside basis differences other than in tax efficient manners. The Company's intent is to reduce basis differences only when it would be tax efficient. The Company expects existing U.S. cash and liquidity to continue to be sufficient to fund the Company’s U.S. operating activities and cash commitments for investing and financing activities for at least the next twelve months and thereafter for the foreseeable future. In the U.S., should the Company require more capital than is generated by its operations, the Company could elect to raise capital in the U.S. through debt or equity issuances. The Company has borrowed funds in the U.S. and continues to have the ability to borrow funds in the U.S. at reasonable interest rates. In addition, the Company expects
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existing non-U.S. cash, cash equivalents, short-term investments and cash flows from operations to continue to be sufficient to fund the Company’s non-U.S. operating activities and cash commitments for investing activities, such as material capital expenditures, for at least the next twelve months and thereafter for the foreseeable future. Should the Company require more capital at the Luxembourg and Ireland holding and financing entities, other than amounts that can be provided in tax efficient methods, the Company could also elect to raise capital through debt or equity issuances. These alternatives could result in increased interest expense or other dilution of the Company’s earnings.

•The Company may from time to time purchase its outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

•Refer to Note 10, "Debt and Financing Arrangements," of the notes to consolidated financial statements for additional information on items impacting capitalization.

Restructuring

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company has committed to various restructuring plans. Restructuring plans generally result in charges for workforce reductions, plant closures, asset impairments and other related costs which are reported as restructuring and impairment costs in the Company’s consolidated statements of income. The Company expects the restructuring actions to reduce cost of sales and SG&A due to reduced employee-related costs, depreciation and amortization expense.

•In fiscal 2021, the Company announced its plans to optimize its cost structure through broad-based SG&A actions focused on simplification, standardization and centralization, with the intent to deliver annualized savings of $300 million by fiscal 2023. Additionally, the Company announced cost of sales actions intended to drive $250 million in annual run rate savings by fiscal 2023. The one-time pre-tax costs associated with these actions are estimated to be approximately $385 million across all segments and at Corporate. During the three months ended December 31, 2021, the Company recorded $49 million of costs resulting from the 2021 restructuring plan. The restructuring action is expected to be substantially complete in fiscal 2023. The Company has outstanding restructuring reserves of $93 million at December 31, 2021, all of which is expected to be paid in cash.

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Co-Issued Securities: Summarized Financial Information

The following information is provided in compliance with Rule 13-01 of Regulation S-X under the Securities Exchange Act of 1934 with respect to the (i) $625 million aggregate principal amount of 1.750% Senior Notes due 2030 (the “2030 Notes”), (ii) €500 million aggregate principal amount of 0.375% Senior Notes due 2027 (the “2027 Notes”), (iii) €500 million aggregate principal amount of 1.000% Senior Notes due 2032 (the “2032 Notes”) and (iv) $500 million aggregate principal amount of 2.000% Sustainability-Linked Senior Notes due 2031 (the “2031 Notes” and together with the 2032 Notes, the 2030 Notes and the 2027 Notes, the “Notes”), each issued by Johnson Controls International plc ("Parent Company") and Tyco Fire & Security Finance S.C.A. (“TFSCA”), a corporate partnership limited by shares (société en commandite par actions) incorporated and organized under the laws of the Grand Duchy of Luxembourg (“Luxembourg”).

TFSCA is a wholly-owned consolidated subsidiary of the Company that is 99.924% owned directly by the Parent Company and 0.076% owned by TFSCA’s sole general partner and manager, Tyco Fire & Security S.à r.l., which is itself wholly-owned by the Company. The Notes are the Parent Company’s and TFSCA’s unsecured, unsubordinated obligations. The Parent Company is incorporated and organized under the laws of Ireland and TFSCA is incorporated and organized under the laws of Luxembourg. The bankruptcy, insolvency, administrative, debtor relief and other laws of Luxembourg or Ireland, as applicable, may be materially different from, or in conflict with, those of the United States, including in the areas of rights of creditors, priority of governmental and other creditors, ability to obtain post-petition interest and duration of the proceeding. The application of these laws, or any conflict among them, could adversely affect noteholders’ ability to enforce their rights under the Notes in those jurisdictions or limit any amounts that they may receive.

The following tables set forth summarized financial information of the Parent Company and TFSCA (collectively, the “Obligor Group”) on a combined basis after intercompany transactions have been eliminated, including adjustments to remove the receivable and payable balances, investment in, and equity in earnings from, those subsidiaries of the Parent Company other than TFSCA (collectively, the "Non-Obligor Subsidiaries").

The following table presents summarized income statement information (in millions):

Three Months Ended December 31, 2021 Year Ended
September 30, 2021
Net sales $ —  $ — 
Gross profit —  — 
Loss from continuing operations (57) (212)
Net loss (57) (212)
Income attributable to noncontrolling interests —  — 
Net loss attributable to the entity (57) (212)

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Excluded from the table above are the intercompany transactions between the Obligor Group and Non-Obligor Subsidiaries as follows (in millions):

Three Months Ended December 31, 2021 Year Ended
September 30, 2021
Net sales $ —  $ — 
Gross profit —  — 
Income from continuing operations 14  223 
Net income 14  223 
Income attributable to noncontrolling interests —  — 
Net income attributable to the entity 14  223 

The following table presents summarized balance sheet information as of December 31, 2021 and September 30, 2021 (in millions):

December 31, 2021 September 30, 2021
Current assets $ 1,405  $ 1,036 
Noncurrent assets 271  280 
Current liabilities 2,601  1,825 
Noncurrent liabilities 7,192  7,260 
Noncontrolling interests —  — 

Excluded from the table above are the intercompany balances between the Obligor Group and Non-Obligor Subsidiaries as follows (in millions):

December 31, 2021 September 30, 2021
Current assets $ 348  $ 465 
Noncurrent assets 2,989  2,992 
Current liabilities 2,512  1,660 
Noncurrent liabilities 7,127  7,199 
Noncontrolling interests —  — 

The same accounting policies as described in Note 1, "Summary of Significant Accounting Policies," of the Company's Annual Report on 10-K for the year ended September 30, 2021 are used by the Parent Company and each of its subsidiaries in connection with the summarized financial information presented above.

New Accounting Standards

Refer to Note 2, "New Accounting Standards," of the notes to consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2021, the Company had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in the Company's Annual Report on Form 10-K for the year ended September 30, 2021.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based upon their evaluation of these disclosure controls and procedures, the principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of December 31, 2021 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in the Company’s internal control over financial reporting during the three months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Gumm v. Molinaroli, et al.

On August 16, 2016, a putative class action lawsuit, Gumm v. Molinaroli, et al., Case No. 16-cv-1093, was filed in the United States District Court for the Eastern District of Wisconsin, naming Johnson Controls, Inc., the individual members of its board of directors at the time of the merger with the Company’s merger subsidiary and certain of its officers, the Company and the Company’s merger subsidiary as defendants. The complaint asserted various causes of action under the federal securities laws, state law and the Taxpayer Bill of Rights, including that the individual defendants allegedly breached their fiduciary duties and unjustly enriched themselves by structuring the merger among the Company, Tyco and the merger subsidiary in a manner that would result in a United States federal income tax realization event for the putative class of certain Johnson Controls, Inc. shareholders and allegedly result in certain benefits to the defendants, as well as related claims regarding alleged misstatements in the proxy statement/prospectus distributed to the Johnson Controls, Inc. shareholders, conversion and breach of contract. The complaint also asserted that Johnson Controls, Inc., the Company and the Company’s merger subsidiary aided and abetted the individual defendants in their breach of fiduciary duties and unjust enrichment. The complaint seeks, among other things, disgorgement of profits and damages. Plaintiffs filed an amended complaint on February 15, 2017. On November 3, 2021, the court granted the Company’s motion to dismiss the amended complaint. Plaintiffs have appealed to the United States Court of Appeals for the Seventh Circuit.

Refer to Note 22, "Commitments and Contingencies," of the notes to consolidated financial statements for discussion of environmental, asbestos, insurable liabilities and other litigation matters, which is incorporated by reference herein and is considered an integral part of Part II, Item 1, "Legal Proceedings."

53

ITEM 1A. RISK FACTORS

The following should be read in conjunction with, and supplements and amends, the factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended September 30, 2021. Other than as described in this Item 1A, there have been no other material changes to our risk factors from the risk factors previously disclosed in the 2021 Annual Report.

The following updates and replaces the risk factor entitled “Impacts related to the COVID-19 pandemic could have an adverse effect on our business, financial condition, results of operations and cash flows".

Impacts related to the COVID-19 pandemic could have an adverse effect on our business, financial condition, results of operations and cash flows.

The global outbreak of COVID-19 has disrupted economic activity around the world. As a result, we and our affiliates, employees, suppliers, customers and others have been and may continue to be restricted or prevented from conducting normal business activities, including as a result of shutdowns, travel restrictions and other actions that may be requested or mandated by governmental authorities. While a substantial portion of our businesses and facilities have been classified as essential in jurisdictions in which facility closures have been mandated, we can give no assurance that there will not be additional closures in the future or that our businesses and facilities will be classified as essential in each of the jurisdictions in which we operate.

The COVID-19 outbreak has impacted, and may continue to impact, our office locations, manufacturing and servicing facilities and distribution centers, as well as those of our third-party vendors, including the effects of facility closures, reductions in operating hours and other social distancing efforts. In response to the challenges presented by COVID-19, we modified our business practices, including restricting non-essential employee travel, implementing remote work protocols, and limiting physical participation in meetings, events and conferences, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners and suppliers. These modifications to our business practices, including any future actions we take, may cause us to experience increases in costs, reductions in productivity and disruptions to our business routines.

In September 2021, the Biden Administration issued an executive order requiring U.S.-based employees, contractors, and subcontractors, that work on or in support of U.S. Government contracts, to be fully vaccinated. The executive order includes on-site and remote U.S.-based employees, contractors and subcontractors but permits limited exceptions for medical and religious reasons. However, the implementation and enforcement of the federal contractor mandate remains uncertain due to ongoing legal challenges. If the mandate is upheld and implemented, it is expected to be applicable to our federal contracting business. We have internally announced policies with respect to our U.S.-based employees to comply with this mandate if it is implemented. In addition, a number of our customers have issued vaccine requirements with respect to our employees who provide on-site service at customer facilities. It is also possible that additional vaccine mandates may be announced in other jurisdictions in which our businesses operate. Our efforts to comply with these mandates, including requiring that some or all of our employees be fully vaccinated against COVID-19, could result in increased labor attrition and disruption, as well as difficulty securing future labor needs, and could materially impact our ability to deliver services to our U.S. federal government customers and potentially other customers, which could in turn adversely impact our results of operations.

We may also experience impacts from market forces and changes in consumer behavior related to pandemic fears as a result of COVID-19. Although we experienced increases in both demand and volumes during fiscal 2021 as governments distributed vaccines and lifted COVID-19-related restrictions, challenges in achieving sufficient vaccination levels and the introduction of new variants of COVID-19 have and could continue to negatively impact our results of operations due to the extension or reinstitution of lockdowns and similar restrictive measures, limited access to customer sites to perform installation and service work, the delay or abandonment of projects on which we provide products and/or services, and the general adverse impacts on demand and sales volumes from industries that are sensitive to economic downturns and volatility in commodity prices. In addition, the Company has experienced and could continue to experience labor shortages at its facilities as the Company expands its production capacity to meet increased customer demand. Further, the COVID-19 pandemic could result in permanent changes in the behaviors of our customers, including the increased prevalence of remote work and a corresponding decline in demand for the construction and maintenance of commercial buildings. Any of these impacts could cause our stock price and the operating performances of our businesses to be adversely affected, which could require us to incur material impairment, restructuring or other charges.

54

Our management of the impact of COVID-19 has and will continue to require significant investment of time from our management and employees, as well as resources across our global enterprise. This may cause us to divert or delay the application of our resources toward new initiatives or investments, which may adversely impact our future results of operations. In addition, issues relating to the COVID-19 pandemic may result in legal claims or litigation against us.

The extent to which the COVID-19 pandemic continues to impact our results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including the resurgence of COVID-19 and its variants in regions recovering from the impacts of the pandemic, the effectiveness of COVID-19 vaccines and the speed at which populations are vaccinated around the globe, the impact of COVID-19 on economic activity and regulatory actions taken to contain the impact of COVID-19 on public health and the global economy. The impact of COVID-19 may also exacerbate other risks discussed in Item 1A of our Annual Report on Form 10-K, any of which could have a material effect on our financial condition, results of operations and cash flows.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In March 2021, the Company's Board of Directors approved a $4.0 billion increase to the Company's share repurchase authorization, adding to the $2.0 billion remaining as of December 31, 2020 under the prior share repurchase authorization approved in 2019. The share repurchase authorization does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice. During the three months ended December 31, 2021, the Company repurchased approximately $0.5 billion of its ordinary shares on an open market. As of December 31, 2021, approximately $4.5 billion remains available under the share repurchase authorization.

The following table presents information regarding the repurchase of the Company’s ordinary shares by the Company as part of its publicly announced program during the three months ended December 31, 2021.

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of the Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased under the Programs
10/1/21 - 10/31/21
Purchases by Company 4,444,772  $ 70.28  4,444,772  $ 4,742,679,758 
11/1/21 - 11/30/21
Purchases by Company 1,203,101  76.36  1,203,101  4,650,808,119 
12/1/21 - 12/31/21
Purchases by Company 1,561,159  78.04  1,561,159  4,528,969,522 

During the three months ended December 31, 2021, acquisitions of shares by the Company from certain employees in order to satisfy employee tax withholding requirements in connection with the vesting of restricted shares were not material.
55

ITEM 6. EXHIBITS
INDEX TO EXHIBITS
Exhibit No. Description
10.1
10.2
31.1
31.2
32.1
101 The following materials from Johnson Controls International plc's Quarterly Report on Form 10-Q for the quarter ended December 31, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Position, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity and (vi) Notes to Consolidated Financial Statements.
104 Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)
** Management contract or compensatory plan


56

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  JOHNSON CONTROLS INTERNATIONAL PLC
Date: February 2, 2022   By: /s/ Olivier Leonetti
  Olivier Leonetti
  Executive Vice President and
Chief Financial Officer

57

Exhibit 10.1
AMENDMENT NO. 2
Dated as of December 2, 2021
to
CREDIT AGREEMENT
Dated as of December 5, 2019

THIS AMENDMENT NO. 2 (this “Amendment”) is made as of December 2, 2021 by and between Johnson Controls International plc, with company number 543654, an Irish public limited company (the “Principal Borrower”) and JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders (the “Administrative Agent”), under that certain Credit Agreement dated as of December 5, 2019, by and among the Principal Borrower, Tyco Fire & Security Finance S.C.A., a corporate partnership limited by shares (société en commandite par actions) incorporated under the laws of Luxembourg, having its registered office at 2, rue Jean Monnet, L-2180 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg trade and companies register (RCS Luxembourg) under number B190265, the Lenders from time to time party thereto and the Administrative Agent (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.
WHEREAS, a Benchmark Transition Event has occurred with respect to Euro and Sterling;
WHEREAS, pursuant to Section 8.01(b) of the Credit Agreement, upon the occurrence of a Benchmark Transition Event, the Administrative Agent and the Principal Borrower may amend the Credit Agreement to replace the LIBO Rate in respect of the applicable currencies with a Benchmark Replacement for such applicable currencies, and pursuant to Section 8.01(c) of the Credit Agreement, the Administrative Agent may, in connection with the implementation of a Benchmark Replacement, make Benchmark Replacement Conforming Changes.
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Principal Borrower and the Administrative Agent hereby agree to enter into this Amendment.
1.Amendments to the Credit Agreement. Effective as of the date of satisfaction of the conditions precedent set forth in Section 2 below, the parties hereto agree that the Credit Agreement shall be amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Annex A hereto (the Credit Agreement as so amended, the “Amended Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Amended Credit Agreement.
2.Conditions of Effectiveness. The effectiveness of this Amendment (which shall occur at 12:00 a.m., New York City time, on December 2, 2021, unless the Administrative Agent shall have received prior to 5:00 p.m., New York City time, on December 1, 2021 written notice of objection to this Amendment or the Benchmark Replacements being effected hereby from Lenders comprising the Required Lenders) is subject to the condition precedent that the Administrative Agent shall have received counterparts of this Amendment duly executed by the Principal Borrower and the Administrative Agent.



3.Representations and Warranties of the Principal Borrower. The Principal Borrower hereby represents and warrants as follows:
a.Each of this Amendment and the Amended Credit Agreement constitutes a valid and binding agreement of each Borrower enforceable against the applicable Borrower in accordance with its terms, in each case subject to applicable bankruptcy, insolvency, receivership, examinership, moratorium, reorganization and other similar laws of general application affecting creditors’ rights, by any mandatory applicable provisions of Luxembourg law of general application and general principles of equity, regardless of whether considered in a proceeding in equity or at law.
b.As of the date hereof and immediately after giving effect to the terms of this Amendment, (i) no Default has occurred and is continuing and (ii) the representations and warranties of the Borrowers set forth in the Credit Agreement (except the representations and warranties set forth in Sections 4.04(b), 4.05 and 4.07 of the Credit Agreement) are true in all material respects, except to the extent any such representation and warranty (i) expressly relates to an earlier date in which case such representation and warranty is true and correct in all material respects as of such earlier date or (ii) is qualified by materiality, in which case such representation and warranty is true and correct in all respects.
4.Reference to and Effect on the Credit Agreement.
a.From and after the effectiveness of the amendment to the Credit Agreement evidenced hereby, the terms “Agreement”, “this Agreement”, “herein”, “hereinafter”, “hereto”, “hereof” and words of similar import, as used in the Amended Credit Agreement, shall, unless the context otherwise requires, refer to the Amended Credit Agreement, and the term “Credit Agreement”, as used in the other Loan Documents, shall mean the Amended Credit Agreement.
b.Each Loan Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.
c.The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Amended Credit Agreement, the Loan Documents or any other documents, instruments and agreements executed and/or delivered in connection therewith.
d.This Amendment shall be a Loan Document.
5.Governing Law; Jurisdiction. This Amendment shall be governed by and construed in accordance with the laws of the State of New York.
6.Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

    2

7.Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment and/or any document to be signed in connection with this Amendment and the transactions contemplated hereby shall be deemed to include Electronic Signatures (as defined below), deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be. As used herein, “Electronic Signatures” means any electronic symbol or process attached to, or associated with, any contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
[Signature Pages Follow]

    3


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the day and year first above written.

JOHNSON CONTROLS INTERNATIONAL PLC,
as the Principal Borrower


By: /s/ Olivier Leonetti
Name: Olivier Leonetti
Title: Executive Vice President and Chief Financial Officer


By: /s/ Pieter Lens
Name: Pieter Lens
Title: Vice President and Treasurer


Signature Page to Amendment No. 2 to
Credit Agreement dated as of December 5, 2019
Johnson Controls International plc

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent



By: /s/ Peter Predun
Name: Peter Predun
Title: Executive Director


Signature Page to Amendment No. 2 to
Credit Agreement dated as of December 5, 2019
Johnson Controls International plc


Annex A

Attached































TABLE OF CONTENTS
____________________________________
PAGE


ARTICLE 1. Definitions    1
Section 1.01    Definitions    1
Section 1.02    Accounting Terms and Determinations    2830
Section 1.03    Types of Loans and Borrowings    2931
Section 1.04    Terms Generally    2931
Section 1.05    Interest Rates; LIBOR Notification    2931
Section 1.06    Certain Calculations    3032
Section 1.07    Divisions    3032
Section 1.08    Luxembourg Terms    3032
ARTICLE 2. THE CREDITS    3133
Section 2.01    Commitments to Lend    3133
Section 2.02    Notice of Borrowing    3234
Section 2.03    Notice to Lenders; Funding of Loans    3234
Section 2.04    Notes    3335
Section 2.05    Maturity of Loans    3436
Section 2.06    Interest Rates    3436
Section 2.07    Fees    3537
Section 2.08    Optional Termination or Reduction of Commitments    3537
Section 2.09    Mandatory Termination of Commitments    3638
Section 2.10    Optional Prepayments    3638
Section 2.11    General Provisions as to Payments    3739
Section 2.12    Funding Losses    3840
Section 2.13    Computation of Interest and Fees    3841
Section 2.14    Regulation D Compensation[Reserved]    3841
Section 2.15    Method of Electing Interest Rates    3841
Section 2.16    Determining Dollar Amounts; Related Mandatory Prepayments    4043
Section 2.17    Additional Reserve Costs [Reserved]    4043
Section 2.18    Judgment Currency    4143
Section 2.19    Letters of Credit    4144
Section 2.20    Increased Commitments, Incremental Term Loans    4648
Section 2.21    Defaulting Lenders    4750
ARTICLE 3. CONDITIONS    5052
Section 3.01    Closing Date    5052
Section 3.02    Borrowings and Issuances of Letters of Credit    5154
Section 3.03    First Borrowing by Each Eligible Subsidiary    5254






ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES    5558

Section 4.01    Legal Existence and Power    5355
Section 4.02    Legal and Governmental Authorization; No Contravention    5355
Section 4.03    Binding Effect    5355
Section 4.04    Financial Information    5355
Section 4.05    Litigation    5356
Section 4.06    Compliance with ERISA    5356
Section 4.07    Environmental Matters    5456
Section 4.08    Not an Investment Company    5456
Section 4.09    Full Disclosure    5456
Section 4.10    Anti-Corruption Laws and Sanctions    5557
Section 4.11    Domiciliation; Centre of Main Interests    5557
Section 4.12    Taxes and Qualifying Lenders    5558
ARTICLE 5. COVENANTS    5558
Section 5.01    Information    5558
Section 5.02    Payment of Taxes    5760
Section 5.03    Maintenance of Property; Insurance    5860
Section 5.04    Conduct of Business and Maintenance of Existence    5860
Section 5.05    Compliance with Laws    5861
Section 5.06    Inspection of Property, Books and Records    5861
Section 5.07    Minimum Consolidated Shareholders’ Equity    5961
Section 5.08    Negative Pledge    5961
Section 5.09    Consolidation, Mergers and Sales of Assets    6063
Section 5.10    Use of Proceeds    6163
ARTICLE 6. Defaults    6164
Section 6.01    Events of Default    6464
Section 6.02    Notice of Default    6466
Section 6.03    Cash Cover    6466
ARTICLE 7. The Administrative Agent    6466
Section 7.01    Appointment and Authorization    6466
Section 7.02    Administrative Agent and Affiliates    6467
Section 7.03    Action by Administrative Agent    6467
Section 7.04    Consultation with Experts    6467
Section 7.05    Liability of Administrative Agent    6467
Section 7.06    Indemnification    6567
Section 7.07    Credit Decision    6567
Section 7.08    Successor Administrative Agent    6567
Section 7.09    Administrative Agent’s Fee    6668
Section 7.10    Other Agents    6668
Section 7.11    Posting of Communications    6668







Section 7.12    Certain ERISA Matters    6770
Section 7.13    Sustainability Matters    6971
ARTICLE 8. Change In Circumstances    6971
Section 8.01    Basis for Determining Interest Rate Inadequate or Unfair    6971
Section 8.02    Illegality    7073
Section 8.03    Increased Cost and Reduced Return    7073
Section 8.04    Taxes    7275
Section 8.05    Base Rate Loans Substituted for Affected Euro-Currency Loans    7679
Section 8.06    Mitigation Obligations; Replacement of Lenders    7780
ARTICLE 9. Representations And Warranties Of Eligible Subsidiaries    7881
Section 9.01    Legal Existence and Power    7881
Section 9.02    Legal and Governmental Authorization; No Contravention    7881
Section 9.03    Binding Effect    7881
Section 9.04    Taxes    7881
ARTICLE 10. Guaranty    7982
Section 10.01    The Guaranty    7982
Section 10.02    Guaranty Unconditional    7982
Section 10.03    Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances    8083
Section 10.04    Waiver by the Parent    8083
Section 10.05    Subrogation    8083
Section 10.06    Stay of Acceleration    8083
Section 10.07    Continuing Guaranty    8083
ARTICLE 11. Miscellaneous    8083
Section 11.01    Notices    8083
Section 11.02    No Waivers    8285
Section 11.03    Expenses; Indemnification    8285
Section 11.04    Sharing of Set-offs    8387
Section 11.05    Amendments and Waivers    8487
Section 11.06    Successors and Assigns    8588
Section 11.07    Collateral    8992
Section 11.08    Governing Law; Submission to Jurisdiction    8992
Section 11.09    Counterparts; Integration; Severability    8992
Section 11.10    Waiver of Jury Trial    9093
Section 11.11    Confidentiality    9093
Section 11.12    USA Patriot Act    9194
Section 11.13    Termination of Existing Agreement    9194
Section 11.14    Acknowledgment and Consent to Bail-In of EEA Financial Institutions    9194
Section 11.15    No Advisory or Fiduciary Responsibility    9296
Section 11.16    Acknowledgement Regarding Any Supported QFCs    9396







Section 11.17    Right of Set-off    9497





CREDIT AGREEMENT dated as of December 5, 2019 among JOHNSON CONTROLS INTERNATIONAL PLC, incorporated under the laws of Ireland with registered number 543654, as Principal Borrower and as Parent, the ELIGIBLE SUBSIDIARIES referred to herein, the LENDERS from time to time parties hereto and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.01 Definitions. The following terms, as used herein, have the following meanings:
“2017 GHG Intensity Baseline” means, with respect to the GHG Intensity, the baseline as set forth in the Sustainability Table, as such baseline may be modified as described herein based on the 2017 KPI Metrics Report.
“2017 KPI Metrics Report” means the KPI Metrics Auditor’s assurance of the method of calculation of each KPI Metric as of December 31, 2017, excluding the Power Solutions business of the Parent, which shall be delivered by the Parent to the Administrative Agent on or prior to April 30, 2020.
“2017 TRIR Baseline” means, with respect to the TRIR, the baseline as set forth in the 2017 KPI Metrics Report, as such baseline may be modified as described herein based on the 2017 KPI Metrics Report.
“Acquisition-Related Incremental Term Loans” has the meaning set forth in Section 2.20. “Act” has the meaning set forth in Section 11.12.
“Additional Letter of Credit” means a letter of credit issued hereunder by an Issuing Lender on or after the Closing Date.
“Adjusted EURIBO Rate” means, with respect to any Euro-Currency Borrowing denominated in Euro for any Interest Period, an interest rate per annum equal to (a) the EURIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
“Adjusted LIBO Rate” means, with respect to any Euro-Currency Borrowing denominated in Dollars for any Interest Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
“Administrative Agent” means JPMorgan Chase Bank, N.A. (including its branches and affiliates, as applicable) in its capacity as administrative agent for the Lenders hereunder, and its successors in such capacity.
“Administrative Questionnaire” means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Principal Borrower) duly completed by such Lender.
“Affiliate” has the meaning set forth in the definition of “Lender Affiliate”.
1


“Agent” means any of the Administrative Agent, the Syndication Agent, the Documentation Agents or the Sustainability Structuring Agent.
“Agreed Currency” means Dollars and each Alternative Currency.
“Agreement” means this Credit Agreement (including, for the avoidance of doubt, all Schedules and Exhibits hereto), as amended, amended and restated, supplemented, waived or otherwise modified from time to time.
“Alternative Currency” means (i) Euro, (ii) Sterling and (iii) any other currency that is (A) a lawful currency (other than Dollars) that is readily available and freely transferable and convertible into Dollars and (B) agreed to by the Administrative Agent and each of the Lenders.
“Alternative Currency Lending Office” means, as to each Lender, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Alternative Currency Lending Office) or such other office, branch or affiliate of such Lender as it may hereafter designate as its Alternative Currency Lending Office by notice to the Principal Borrower and the Administrative Agent; provided that any Lender may from time to time by notice to the Principal Borrower and the Administrative Agent designate separate Alternative Currency Lending Offices for its Loans in different currencies, in which case all references herein to the Alternative Currency Lending Office of such Lender shall be deemed to refer to any or all of such offices, as the context may require.
“Alternative Currency Loan” means a Loan that is made in an Alternative Currency and bears interest at a rate determined by reference to the LIBO Rate (except pursuant to clause (c) of the definition of “Base Rate”).
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Parent or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.
“Applicable Lending Office” means, with respect to any Lender, (i) in the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of its Euro-Currency Loans, its Euro-Currency and its RFR Loans, its Alternative Currency Lending Office.
“Applicable Parties” has the meaning set forth in Section 7.11(c).
“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment; provided that in the case of Section 2.21 when a Defaulting Lender shall exist, “Applicable Percentage” shall mean the percentage of the total Commitments (disregarding any Defaulting Lender’s Commitment) represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments and to any Lender’s status as a Defaulting Lender at the time of determination.
“Approved Electronic Platform” has the meaning set forth in Section 7.11(a).
“Approved Jurisdiction” means (i) Ireland, (ii) Luxembourg, (iii) the United States and (iv) any other jurisdiction approved for this purpose by each of the Lenders.
“Assignee” has the meaning set forth in Section 11.06(c).


2


“Bail-In Action” has the meaning set forth in Section 11.14.
“Bail-In Legislation” has the meaning set forth in Section 11.14.
“Bail-In Lender” has the meaning set forth in Section 8.06(b).
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.
“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a voluntary or involuntary bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment or has had any order for relief in such proceeding entered in respect thereof, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided, further, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“Base Rate” means, for any day, a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus ½ of 1% and (c) the LIBO Rate for a one month Interest Period on such day (or if such day is not a Euro Dollar Business Day, on the immediately preceding Euro Dollar Business Day) plus 1%, provided that for the purpose of this definition, the LIBO Rate for any day shall be based on the LIBO Screen Rate (or if the LIBO Screen Rate is not available for such one month Interest Period, the LIBO Interpolated Rate) at approximately 11:00 a.m. (London time) on such day. Any change in the Base Rate due to a change in the Prime Rate, the NYFRB Rate or the LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the LIBO Rate, respectively. If the Base Rate is being used as an alternate rate of interest pursuant to Section 8.01 (for the avoidance of doubt, only until any amendment has become effective pursuant to Section 8.01(b)), then the Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the Base Rate as so determined would be less than 1.00%, such rate shall be deemed to be 1.00% for purposes of this Agreement.
“Base Rate Loan” means a Loan which bears interest at the Base Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or the provisions of Section 2.06(a) or Article 8.
“Base Rate Margin” means, at any date, the applicable rate per annum determined in accordance with the Pricing Schedule.
“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate (which may, in the case of Dollars, be a SOFR-Based Rate) that has been selected by the Administrative Agent and the Principal Borrower giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the LIBO Rate for syndicated credit facilities denominated in the applicable Agreed Currency and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined
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authority over the administrator for the LIBO Screen Rate, in each case which states that the administrator of the LIBO Screen Rate has ceased or will cease to provide the LIBO Screen Rate permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBO Screen Rate; and/or

(3) a public statement or publication of information by the regulatory supervisor for the administrator of the LIBO Screen Rate announcing that the LIBO Screen Rate is no longer representative.

“Benchmark Transition Start Date” means (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by the Administrative Agent and/or the Principal Borrower or the Required Lenders, as applicable, by notice to the Principal Borrower (in the case of notice by the Required Lenders), the Administrative Agent (in the case of such notice by the Required Lenders) and the Lenders.

“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the LIBO Rate and solely to the extent that the LIBO Rate has not been replaced with a Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the LIBO Rate for all purposes hereunder in accordance with Section 8.01 and (y) ending at the time that a Benchmark Replacement has replaced the LIBO Rate for all purposes hereunder pursuant to Section 8.01.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Arrangement” means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Internal Revenue Code to which Section 4975 of the Internal Revenue Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Internal Revenue Code) the assets of any such “employee benefit plan” or “plan”.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Blocking Regulation” has the meaning set forth in Section 4.10.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Borrower” means the Principal Borrower or any Eligible Subsidiary, as the context may require, and their respective successors, and “Borrowers” means all of the foregoing. When used in relation to any Loan or Letter of Credit, references to “the Borrower” are to the particular Borrower to which such Loan is or is to be made or at whose request such Letter of Credit is or is to be issued.
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“Borrowing” has the meaning set forth in Section 1.03.
“Business Day” means any day (other than a Saturday or a Sunday) on which banks are open for business in New York City or Chicago; provided that, (i) in relation to the calculation or computation of LIBOR, any day (other than a Saturday or a Sunday) on which banks are open for business in London, (ii) in relation to Loans denominated in Euro and in relation to the calculation or computation of EURIBOR, any day which is a TARGET Day and (iii) in relation to RFR Loans and any interest rate settings, fundings, disbursements, settlements or payments of any such RFR Loan, or any other dealings in the applicable Agreed Currency of such RFR Loan, any such day that is only an RFR Business Day.
“Cash Collateralize” means to (i) pledge and deposit with or deliver to the applicable Issuing Lender, as collateral for the applicable outstanding Letter of Credit, cash or deposit account balances pursuant to documentation in form and substance reasonably satisfactory to the applicable Issuing Lender in an amount equal to 105% of the face amount of such Letter of Credit or, except in the case of Section 6.03, (ii) deliver to the Administrative Agent a letter of credit, from a financial institution and in a form, in each case, reasonably satisfactory to the Administrative Agent and the applicable Issuing Lender, to support the Borrower’s obligations with respect to the applicable outstanding Letter of Credit. Each Borrower hereby grants to the applicable Issuing Lender, for the benefit of such Issuing Lender and the Lenders, a security interest in all of its right, title and interest (if any) in such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash collateral shall be maintained in blocked interest bearing (to the extent available) deposit accounts at the applicable Issuing Lender.
“Change in Law” means the occurrence, after the Closing Date (or, with respect to any Lender, if later, the date on which such Lender becomes a Lender), of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rules, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided, however, that notwithstanding anything herein to the contrary (and except to the extent merely proposed and not in effect), (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law” regardless of the date enacted, adopted, issued or implemented.
“Closing Date” means the date on which the conditions set forth in Section 3.01 of this Agreement are satisfied (or waived in accordance with Section 11.05).
“Combination” has the meaning set forth in Section 2.08(b).
“Combined Companies” means the Parent and its Consolidated Subsidiaries.
“Combined Lender” has the meaning set forth in Section 2.08(b).
“Commitment” means, for each Lender, the obligation of such Lender to make Loans and purchase participations in Letter of Credit Liabilities, in an aggregate principal amount at any one time
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through the most recently ended calendar year in respect of which the Parent has delivered a Pricing Certificate as compared to the baseline contemplated by the most recently delivered Pro Forma KPI Metrics Report.
“Debt” of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property, except trade and similar payables and accrued expenses or liabilities arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with GAAP as in effect on December 14, 2018, (v) all Debt (as defined in one of the other clauses of this definition) of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person; provided that, for purposes of determining the amount of any Debt of the type described in this clause (v), if recourse with respect to such Debt is limited to such asset, the amount of such Debt shall be limited to the lesser of (A) the greater of (x) the book value of such asset or (y) the fair market value of such asset or (B) the amount of such Debt and (vi) all Debt of others Guaranteed by such Person (each such Guarantee to constitute Debt in an amount equal to the lesser of (A) the stated maximum amount of such Guarantee, if any, or (B) the amount of such other Person’s Debt Guaranteed thereby); provided that Debt shall not include (1) obligations in respect of letters of credit to secure the performance of bids, trade contracts (other than for Debt), operating leases (determined in accordance with GAAP as in effect on December 14, 2018), any customary purchase price adjustments, earnouts, holdbacks and deferred payments of a similar nature in connection with an acquisition (including deferred compensation representing consideration or other contingent obligations incurred in connection with an acquisition), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, (2) letters of credit issued in connection with the Combined Companies’ self-insurance programs for workman’s compensation, product liability and general liability, (3) any Debt that has been defeased, discharged and/or redeemed, provided that funds in an amount equal to all such Debt (including interest and any other amounts required to be paid to the holders thereof in order to give effect to such defeasance, discharge and/or redemption) have been irrevocably deposited with a trustee or other comparable escrow agent for the benefit of the relevant holders of such Debt, (4) intercompany loans or other advances from the Parent or any of its Subsidiaries to the Parent or any of its Subsidiaries, (5) any obligations in respect of customer advances held in the ordinary course of business or (6) interest, fees, make-whole amounts, premiums, charges or expenses, if any, relating to the principal amount of Debt. For all purposes of this Agreement, the amount of Debt of the Parent and its Subsidiaries shall be calculated without duplication of guaranty obligations of the Parent or any Subsidiary in respect thereof.
“Daily Simple RFR” means, for any day (an “RFR Interest Day”), an interest rate per annum equal to the greater of (a) for any RFR Loan denominated in Pound Sterling, (x) SONIA for the day that is five (5) Business Days prior to (A) if such RFR Interest Day is a Business Day, such RFR Interest Day or (B) if such RFR Interest Day is not a Business Day, the Business Day immediately preceding such RFR Interest Day plus (y) 0.0326% and (b) 0%. Any change in Daily Simple RFR due to a change in the applicable RFR shall be effective from and including the effective date of such change in the RFR without notice to the Principal Borrower.
“Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
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“Defaulting Lender” means any Lender that (a) has failed, within two Domestic Business Days of the date required to be funded or paid, to (i) fund all or any portion of its Loans, (ii) fund all or any portion of its participations in Letters of Credit or (iii) pay over to the Administrative Agent or any Lender any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent and the Principal Borrower in writing that such failure is the result of such Lender’s reasonable determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Principal Borrower or the Administrative Agent in writing, or has made a public statement to the effect, that it does not intend or expect to comply with all or any portion of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s reasonable determination that a condition precedent (specifically identified and including the particular default, if any) to funding under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Domestic Business Days after written request by the Administrative Agent, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations to fund Loans and participations in then outstanding Letters of Credit under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Administrative Agent’s receipt of such certification in form and substance reasonably satisfactory to it, or (d) has become, or has a direct or indirect Lender Parent that has become, the subject of a Bankruptcy Event or a Bail-In Action.
“Designated Jurisdiction” means any country, region or territory to the extent that such country or territory itself is the subject of any Sanctions (on the Closing Date, Crimea, Cuba, Iran, North Korea and Syria).
“Disqualified Institutions” means, on any date, (i) those Persons identified by the Principal Borrower to the Administrative Agent and the Lenders in writing prior to the Closing Date, (ii) those Persons that are reasonably determined by the Principal Borrower to be competitors of the Principal Borrower or any of its Subsidiaries and that have been specifically identified by the Principal Borrower to the Administrative Agent and the Lenders in writing prior to the Closing Date and (iii) in the case of each of clauses (i) and (ii) (and any supplements thereto as contemplated below), any of their respective Affiliates, to the extent any such Affiliate (x) is clearly identifiable as an Affiliate of the applicable Person solely by similarity of such Affiliate’s name and (y) is not a bona fide debt investment fund that is an Affiliate of such Person; provided that, the Principal Borrower, by notice to the Administrative Agent and the Lenders after the Closing Date, shall be permitted to supplement from time to time in writing by name the list of Persons that are Disqualified Institutions to the extent that the Persons added by such supplements are determined by the Principal Borrower to be competitors of the Principal Borrower or any of its Subsidiaries (or Affiliates of such competitors that are not bona fide debt investment funds). Each such supplement shall become effective three (3) Domestic Business Days after delivery thereof to the Administrative Agent and the Lenders (including through an Approved Electronic Platform) in accordance with Section 11.01, but shall not apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in the Loans (but solely with respect to such Loans). It is understood and agreed that (A) the Administrative Agent shall have no responsibility, liability or duty, to ascertain, inquire, monitor or enforce whether any Lender or potential Lender is a Disqualified Institution, (B) the Principal Borrower’s failure to deliver such list (or supplement thereto) in accordance with Section 11.01 shall render such list (or supplement) not received and not effective and (C) “Disqualified Institution” shall exclude any Person that the Principal Borrower has designated as no longer being a “Disqualified Institution” by written notice delivered to the Administrative Agent (which notice may be distributed to the Lenders) from time to time in accordance with Section 11.01.
“Documentation Agents” means Barclays Bank PLC, Citibank, N.A. and MUFG Bank, Ltd., in their capacity as Documentation Agents with the credit facility provided hereunder.
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“Dollar Amount” of any amount of any currency means, at the time of determination thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in an Alternative Currency, the equivalent of such amount in Dollars determined by using the rate of exchange for the purchase of Dollars with such Alternative Currency last provided (either by publication or otherwise provided to the Administrative Agent) by the applicable Reuters source on the Domestic Business Day (New York City time) immediately preceding the date of determination or if such service ceases to be available or ceases to provide a rate of exchange for the purchase of Dollars with such Alternative Currency, as provided by such other publicly available information service which provides that rate of exchange at such time in place of Reuters chosen by the Administrative Agent in its reasonable good faith discretion (or if such service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars as reasonably determined in good faith by the Administrative Agent, in consultation with the Principal Borrower, using any reasonable method of determination it deems reasonably appropriate) and (c) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as reasonably determined in good faith by the Administrative Agent, in consultation with the Principal Borrower, using any reasonable method of determination it deems reasonably appropriate.
“Dollar-Denominated Loan” means a Loan that is made in Dollars pursuant to the applicable Notice of Borrowing.
“Dollars” and the sign “$” mean lawful currency of the United States.
“Domestic Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.
“Domestic Lending Office” means, as to each Lender, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Lender may hereafter designate as its Domestic Lending Office by notice to the Principal Borrower and the Administrative Agent.
“DQ List” has the meaning set forth in Section 11.06(h)(iv).
“Early Opt-in Election” means the occurrence of:
(1) (i) a determination by the Administrative Agent and/or the Principal Borrower or (ii) a notification by the Required Lenders to the Administrative Agent (with a copy to the Principal Borrower) that the Required Lenders have determined that syndicated credit facilities denominated in the applicable Agreed Currency being executed at such time, or that include language similar to that contained in Section 8.01 are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the LIBO Rate, and
(2) (i) the election by the Administrative Agent and/or the Principal Borrower or (ii) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Administrative Agent of written notice of such election to the Principal Borrower and the Lenders, by the Principal Borrower of written notice of such election to the Administrative Agent and the Lenders or by the Required Lenders of written notice of such election to the Administrative Agent (with a copy to the Principal Borrower).
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“EU Bail-In Legislation Schedule” has the meaning set forth in Section 11.14.
“EURIBO Interpolated Rate” means, at any time, with respect to any Euro-Currency Borrowing denominated in Euro and for any Interest Period, the rate per annum determined reasonably and in good faith by the Administrative Agent (which determination shall be conclusive and binding absent demonstrable error) to be equal to the rate that results from interpolating on a linear basis between: (a) the EURIBO Screen Rate for the longest period (for which the EURIBO Screen Rate is available for Euro) that is shorter than the Impacted EURIBO Rate Interest Period; and (b) the EURIBO Screen Rate for the shortest period (for which the EURIBO Screen Rate is available for Euro) that exceeds the Impacted EURIBO Rate Interest Period, in each case, at such time; provided that, if any EURIBO Interpolated Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“EURIBO Rate” means, with respect to any Euro-Currency Borrowing denominated in Euro and for any Interest Period, the EURIBO Screen Rate at approximately 11:00 a.m. (Brussels time) two (2) TARGET Days prior to the commencement of such Interest Period; provided that, if the EURIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted EURIBO Rate Interest Period”) with respect to Euro then the EURIBO Rate shall be the EURIBO Interpolated Rate.
“Euro” means the single currency of the Participating Member States.
“Euro-Currency Business Day” means a Euro-Dollar Business Day, unless such term is used in connection with an Alternative Currency Borrowing or Alternative Currency Loan, in which case such day shall only be a Euro-Currency Business Day if (i) commercial banks are open for international business (including dealings in deposits in such Alternative Currency) in London and (ii) if such Alternative Currency is Euro, the TARGET2 payment system is open for the settlement of payment in Euro.
“Euro-Currency Lending Office” means, as to each Lender, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Currency Lending Office) or such other office, branch or affiliate of such Lender as it may hereafter designate as its Euro-Currency Lending Office by notice to the Principal Borrower and the Administrative Agent; provided that any Lender may from time to time by notice to the Principal Borrower and the Administrative Agent designate separate Euro-Currency Lending Offices for its Loans in different currencies, in which case all references herein to the Euro-Currency Lending Office of such Lender shall be deemed to refer to any or all of such offices, as the context may require.
“Euro-Currency Loan” means either a Euro-Dollar Loan or an Alternative Currency Loan.
“Euro-Currency Margin” means, at any date, the applicable rate per annum determined in accordance with the Pricing Schedule.
“Euro Currency Reserve Percentage EURIBO Screen Rate” means, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Currency Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). and time, with respect to any Euro-Currency
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Borrowing denominated in Euro and for any Interest Period, the Euro interbank offered rate administered by the European Money Markets Institute (or any other person which takes over the administration of such rate) for Euro for the relevant period displayed on page EURIBOR01 of the Reuters screen (or any replacement Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If such page or service ceases to be available, the Administrative Agent may specify another page or service displaying the relevant rate after consultation with the Principal Borrower. If the EURIBO Screen Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“Euro-Dollar Business Day” means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London.
“EURIBOR” has the meaning set forth in Section 1.05.
“Euro” means the single currency of the Participating Member States.
“Euro-Dollar Loan” means a Dollar-Denominated Loan that bears Euro-Currency”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate (except pursuant to clause (c) of the definition of “Base Rate”) or the Adjusted EURIBO Rate.
“Euro-Currency Margin” means, at any date, the applicable rate per annum determined in accordance with the Pricing Schedule.
“Event of Default” has the meaning set forth in Section 6.01.
“Excluded Taxes” has the meaning set forth in Section 8.04(a).
“Existing Agreement” means the $2,000,000,000 Credit Agreement dated as of March 10, 2016, among the Principal Borrower, the Eligible Subsidiaries referred to therein, the lenders parties thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof.
“Existing Letters of Credit” means the letters of credit issued by an Issuing Lender under the Existing Agreement before the Closing Date.
“Extension Agreement” has the meaning set forth in Section 2.01(c).
“Extension Date” has the meaning set forth in Section 2.01(c).
“Facility Fee Rate” means, at any date, the applicable rate per annum determined in accordance with the Pricing Schedule.
“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code, as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code, and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Internal Revenue Code.
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“FCA” has the meaning set forth in Section 1.05.
“Federal Funds Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions, as determined in such manner as shall be set forth on the Federal Reserve Bank of New York’s NYFRB’s Website from time to time, and published on the next succeeding Domestic Business Day by the NYFRB as the effective federal funds rate; provided that if the Federal Funds Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“Federal Reserve Bank of New York’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“Fee Letters” means the JPMorgan Fee Letter and the Arranger Fee Letters.
“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or assistant treasurer.
“Foreign Subsidiary” means a Subsidiary of the Parent not organized under the laws of a jurisdiction located in the United States of America, or any state thereof or the District of Columbia.
“GAAP” shall mean U.S. generally accepted accounting principles as in effect from time to time.
“GHG Intensity” means the total greenhouse gas emissions of the Parent and its subsidiaries measured in Metric Tons CO2e, per Million Dollars in revenue. The metric tons of CO2e include Scope 1 (direct) and 2 (energy indirect, market-based) emissions according to the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocols.
“GHG Intensity Target” means, with respect to any calendar year, the GHG Intensity Target for such calendar year as set forth on the Sustainability Table.
“GHG Intensity 10% Threshold” means, with respect to any calendar year, the GHG Intensity 10% Threshold for such calendar year as set forth on the Sustainability Table.
“GHG Intensity Fee Adjustment Amount” means, with respect to any calendar year, (i) positive 0.25 bps if the GHG Intensity for such calendar year as set forth in the KPI Metrics Report is greater than the GHG Intensity 10% Threshold for such calendar year, (ii) 0.0 bps if the GHG Intensity for such calendar year as set forth in the KPI Metrics Report is less than or equal to the GHG Intensity 10% Threshold for such calendar year but greater than the GHG Intensity Target for such calendar year or (iii) negative 0.25 bps if the GHG Intensity for such calendar year as set forth in the KPI Metrics Report is less than or equal to the GHG Intensity Target for such calendar year.
“GHG Intensity Margin Adjustment Amount” means, with respect to any calendar year, (i) positive 1.5 bps if the GHG Intensity for such calendar year as set forth in the KPI Metrics Report is greater than the GHG Intensity 10% Threshold for such calendar year, (ii) 0.0 bps if the GHG Intensity for such calendar year as set forth in the KPI Metrics Report is less than or equal to the GHG Intensity 10% Threshold for such calendar year but greater than the GHG Intensity Target for such calendar year or (iii) negative 1.5 bps if the GHG Intensity for such calendar year as set forth in the KPI Metrics Report is less than or equal to the GHG Intensity Target for such calendar year.
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“GHG Savings” means the guaranteed reduction in metric tons of greenhouse gas emissions as a result of performance infrastructure projects completed by the Parent and its subsidiaries (whether for the Parent or any subsidiary or any third party) measured in CO2e.
“GHG Savings Target” means, with respect to any calendar year, the GHG Savings Target for such calendar year as set forth on the Sustainability Table.
“GHG Savings 10% Threshold” means, with respect to any calendar year, the GHG Savings 10% Threshold for such calendar year as set forth on the Sustainability Table.
“GHG Savings Fee Adjustment Amount” means, with respect to any calendar year, (i) positive 0.25 bps if the GHG Savings for such calendar year as set forth in the KPI Metrics Report is less than the GHG Savings 10% Threshold for such calendar year, (ii) 0.0 bps if the GHG Savings for such calendar year as set forth in the KPI Metrics Report is greater than or equal to the GHG Savings 10% Threshold for such calendar year but less than the GHG Savings Target for such calendar year or (iii) negative 0.25 bps if the GHG Savings for such calendar year as set forth in the KPI Metrics Report is greater than or equal to the GHG Savings Target for such calendar year.
“GHG Savings Margin Adjustment Amount” means, with respect to any calendar year, (i) positive 1.5 bps if the GHG Savings for such calendar year as set forth in the KPI Metrics Report is less than the GHG Savings 10% Threshold for such calendar year, (ii) 0.0 bps if the GHG Savings for such calendar year as set forth in the KPI Metrics Report is greater than or equal to the GHG Savings 10% Threshold for such calendar year but less than the GHG Savings Target for such calendar year or (iii) negative 1.5 bps if the GHG Savings for such calendar year as set forth in the KPI Metrics Report is greater than or equal to the GHG Savings Target for such calendar year.
“Governmental Authority” means the government of the United States of America, Ireland, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Group of Loans” means, at any time, a group of Loans consisting of (i) all Loans to the same Borrower which are Base Rate Loans at such time or, (ii) all Loans which are Euro-Currency Loans in the same currency to the same Borrower having the same Interest Period at such time or (iii) all Loans which are RFR Loans in the same currency to the same Borrower, provided that, if a Loan of any particular Lender is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group of Loans or Groups of Loans from time to time as it would have been in if it had not been so converted or made.
“Guarantee” by any Person means, without duplication, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the holder of such Debt of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning. It is understood that the amount of any Guarantee of or by any Person shall be deemed to be the lower of (a)
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the amount of Debt in respect of which such Guarantee exists and (b) the maximum amount for which such Person may be liable pursuant to the instrument embodying such Guarantee.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“Holding Company” means a corporation or other legal entity organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development which becomes the direct or indirect owner of the equity interests of the Parent and its Subsidiaries pursuant to a Holding Company Reorganization.
“Holding Company Reorganization” means a transaction or series of transactions pursuant to which the Parent becomes a direct or indirect wholly-owned subsidiary of the Holding Company.
“IBA Impacted EURIBO Rate Interest Period” has the meaning set forth in Section 1.05 assigned to such term in the definition of “EURIBO Rate”.
“Impacted LIBO Rate Interest Period” has the meaning assigned to such term in the definition of “LIBO Rate”.
“Increasing Lender” has the meaning set forth in Section 2.20.
“Increasing Lender Supplement” means a supplement to this Agreement substantially in the form of Exhibit B attached hereto.
“Incremental Term Loan” has the meaning set forth in Section 2.20.
“Incremental Term Loan Amendment” has the meaning set forth in Section 2.20.
“Indemnified Person” has the meaning set forth in Section 11.03(b).
“Ineligible Institution” means (a) a natural person, (b) a Defaulting Lender or its Lender Parent, (c) the Principal Borrower, any of its Subsidiaries or any of its Affiliates, (d) a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof or (e) a Disqualified Institution.
“Information” has the meaning set forth in Section 11.11(a).
“Initial Issuing Lender” means each of JPMorgan Chase Bank, N.A., Bank of America, N.A., Barclays Bank PLC and Citibank, N.A.
“Insolvency Regulation” shall mean the Regulation EU 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast).
“Interest Period” means, with respect to each Euro-Currency Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one week or one, two, three or six months thereafter (or such other period of time as may at the time be mutually agreed by the Borrower and all of the Lenders) (in each case, subject to the availability for the Benchmark applicable to the relevant
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Loan or Commitment for any Agreed Currency), as the Borrower may elect in such notice; provided that:
(a)    any Interest Period which would otherwise end on a day which is not a Euro-Currency Business Day shall be extended to the next succeeding Euro-Currency Business Day unless such Euro-Currency Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Currency Business Day; and
(b)    any Interest Period (other than an Interest Period of one week) which begins on the last Euro-Currency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Currency Business Day of a calendar month; and
(c)    any Interest Period applicable to any Loan of any Lender which would otherwise end after the Termination Date for such Lender shall end on the Termination Date for such Lender.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, or any successor statute.
“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum determined reasonably and in good faith by the Administrative Agent (which determination shall be conclusive and binding absent demonstrable error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available for the applicable currency) that is shorter than the Impacted Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which the LIBO Screen Rate is available for the applicable currency) that exceeds the Impacted Interest Period, in each case, at such time; provided that if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“Irish Treaty” has the meaning set forth in the definition of “Irish Treaty State”.
“Irish Treaty State” means a jurisdiction having a double taxation agreement (a “Treaty”) with Ireland (an “Irish Treaty”) that has force of law and makes provision for full exemption from tax imposed by Ireland on interest.
“Issuing Lender” means each Initial Issuing Lender and any other Lender that may agree to issue letters of credit hereunder pursuant to an instrument in form reasonably satisfactory to the Principal Borrower, such Lender and the Administrative Agent, in its capacity as issuer of a Letter of Credit hereunder. Each Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates or branches of such Issuing Lender, in which case the term “Issuing Lender” shall include any such Affiliate or branch, as applicable, with respect to Letters of Credit issued by such Affiliate or branch, as applicable. Each reference herein to the “Issuing Lender” in connection with a Letter of Credit or other matter shall be deemed to be a reference to the relevant Issuing Lender with respect thereto, and, further, references herein to “the Issuing Lender” shall be deemed to refer to each of the Issuing Lenders or the relevant Issuing Lender, as the context requires. Unless the contest otherwise requires, any reference herein to a “Lender” includes each Issuing Lender.
“JCI” means Johnson Controls, Inc., a Wisconsin corporation.
“JPMorgan Fee Letter” means that certain JPMorgan Fee Letter, dated November 4, 2019, among JPMorgan and the Principal Borrower.
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“KPI Metrics” means, collectively, the GHG Intensity, the TRIR and the GHG Savings and each a “KPI Metric”.
“KPI Metrics Report” means an annual report (it being understood that this annual report may take the form of the Sustainability Report) audited by the KPI Metrics Auditor that sets forth the calculations for each KPI Metric for a specific calendar year.
“KPI Metrics Auditor” means (i) BureauVeritas as it relates to GHG Intensity and (ii) PricewaterhouseCoopers as it relates to GHG Savings and TRIR, or, in each case such other auditor (in each case of the foregoing clauses (i) and (ii), and any replacement auditor thereof) acting in its capacity as an independent auditor of the operations of the Parent, designated from time to time by the Parent, provided that any such replacement KPI Metrics Auditor (A) shall be (1) a nationally recognized “big four” auditing firm or (2) another auditing firm designated by the Parent, which designation is posted to the Lenders, unless Lenders constituting the Required Lenders object to such designation under this clause (2) within five (5) Domestic Business Days after such posting, and (B) shall apply substantially the same auditing standards and methodology used in the 2017 KPI Metrics Report, except for any changes to such standards and/or methodology that (x) are consistent with then generally accepted industry standards or (y) if not so consistent, are proposed by the Parent and posted to the Lenders, unless Lenders constituting the Required Lenders object to such changes within five (5) Domestic Business Days after such posting.
“LC Sublimit” means (i) as to aggregate Letter of Credit Liabilities with respect to all Letters of Credit, $300,000,000 and (ii) as to aggregate Letter of Credit Liabilities with respect to the Letters of Credit issued by any individual Issuing Lender, such Issuing Lender’s Letter of Credit Fronting Sublimit.
“LC Termination Date” means, at any time, the fifth Domestic Business Day prior to the earliest Termination Date then in effect as to any Lender.
“Lead Arranger Fee Letters” means those certain fee letters, dated November 4, 2019, among certain of the Lead Arrangers and the Principal Borrower.
“Lead Arrangers” means JPMorgan Chase Bank, N.A., BofA Securities, Inc., Barclays Bank PLC and Citibank, N.A. in their capacity as joint lead arrangers and joint bookrunners for the credit facility provided hereunder.
“Lender” means each Person listed in the Commitment Schedule, each New Lender or Assignee which becomes a Lender pursuant to Section 2.20 or 11.06(c) or other documentation contemplated hereby, and their respective successors, other than any such Person that ceases to be a party hereto pursuant to Section 11.06(c) or other documentation contemplated hereby.
“Lender Affiliate” means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by such Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. As used in this Agreement, (x) “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with such specified Person and (y) “Control” means possession, directly or indirectly, of the power to
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direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise (and “Controlled” has a meaning correlative thereto).
“Lender Parent” means, with respect to any Lender, any Person controlling such Lender.
“Letter of Credit” means any Existing Letter of Credit or Additional Letter of Credit.
“Letter of Credit Agreement” has the meaning set forth in Section 2.19(b).
“Letter of Credit Disbursement” means a payment made by an Issuing Lender pursuant to a Letter of Credit.
“Letter of Credit Fronting Sublimit” means (x) for each Initial Issuing Lender, the amount set forth as such Initial Issuing Lender’s Fronting Sublimit on Schedule 2.19 and (y) for each other Issuing Lender, the amount agreed by such Issuing Lender as its Letter of Credit Fronting Sublimit which, subject to the prior written consent of the Principal Borrower, shall ratably reduce the Letter of Credit Fronting Sublimit of each then-existing Issuing Lender, as each of the foregoing amounts may be decreased or increased from time to time with the written consent of the Principal Borrower, the Administrative Agent and the Issuing Lenders (provided that any increase in the Letter of Credit Fronting Sublimit with respect to any Issuing Lender shall only require the consent of the Principal Borrower and such Issuing Lender).
“Letter of Credit Liabilities” means, for any Lender and at any time, such Lender’s ratable participation in the sum of (x) the amounts then owing by the Borrowers in respect of amounts drawn under Letters of Credit and (y) the aggregate amount then available for drawing under all Letters of Credit. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Article 29(a) of the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 600 (or such later version thereof as may be in effect at the applicable time) or Rule 3.13 or Rule 3.14 of the International Standby Practices, International Chamber of Commerce Publication No. 590 (or such later version thereof as may be in effect at the applicable time) or similar terms of the Letter of Credit itself, or if compliant documents have been presented but not yet honored, such Letter of Credit shall be deemed to be “outstanding” and “undrawn” in the amount so remaining available to be paid, and the obligations of the Borrowers and each Lender shall remain in full force and effect until the relevant Issuing Lender and the Lenders shall have no further obligations to make any payments or disbursements under any circumstances with respect to any such Letter of Credit.
“LIBO Interpolated Rate” means, at any time, with respect to any Euro-Currency Borrowing denominated in Dollars and for any Interest Period, the rate per annum determined by the Administrative Agent (which determination shall be conclusive and binding absent demonstrable error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available for Dollars) that is shorter than the Impacted LIBO Rate Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which the LIBO Screen Rate is available for Dollars) that exceeds the Impacted LIBO Rate Interest Period, in each case, at such time; provided that if any LIBO Interpolated Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“LIBO Rate” means, with respect to any Euro-Currency Borrowing denominated in Dollars and for any Interest Period, the LIBO Screen Rate at approximately 11:00 a.m. (London time) two Euro-Currency (2) Business Days prior to the commencement of such Interest Period, as the rate for deposits in Dollars or the relevant Alternative Currency with a maturity comparable to such Interest Period; provided that if the LIBO Screen Rate shall not be available at such time for such Interest
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Period for such currency at such time (an “Impacted LIBO Rate Interest Period”) but rates are then available on the Screen for other periods for such currency with respect to Dollars, then the LIBO Rate shall be the LIBO Interpolated Rate; provided, that if any LIBO Rate determined in accordance with the foregoing shall be less than zero, the LIBO Rate shall be deemed to be zero for all purposes of this Agreement.
“LIBO Screen Rate” means, for any day and time, with respect to any Euro-Currency Borrowing denominated in Dollars and for any Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for the applicable currency for a period equal in length to such Interest Period as displayed on such day and time on pages LIBOR01 or LIBOR02 of the Reuters Screen screen that displays such rate (or, in the event such rate does not appear on a Reuters page or Screen screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion), provided that if the LIBO Screen Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“LIBOR” has the meaning set forth in Section 1.05.
“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Parent or any Consolidated Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease (determined in accordance with GAAP as in effect on December 14, 2018) or other title retention agreement relating to such asset (other than an operating lease (determined in accordance with GAAP as in effect on December 14, 2018)).
“Limited Conditionality Acquisition” has the meaning set forth in Section 2.20.
“Limited Conditionality Acquisition Agreement” has the meaning set forth in Section 2.20.
“Loan” means a loan made by a Lender pursuant to Section 2.01; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term “Loan” shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be.
“Loan Documents” means this Agreement, each Election to Participate and any Notes issued to any Lender hereunder.
“Loan Parties” means the Borrowers.
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“New York Office” means the office of the Administrative Agent identified on the signature pages hereof as its New York office, or such other office of the Administrative Agent as it may specify for such purpose by notice to the other parties hereto.
“Notes” means promissory notes of a Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of such Borrower to repay the Loans made to it, and “Note” means any one of such promissory notes issued hereunder.
“Notice of Borrowing” has the meaning set forth in Section 2.02.
“Notice of Interest Rate Election” has the meaning set forth in Section 2.15(a).
“Notice of Issuance” has the meaning set forth in Section 2.19(c).
“NYFRB” means the Federal Reserve Bank of New York.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Euro-Currency Business Day, for the immediately preceding Euro-Currency Business Day); provided that if none of such rates are published for any day that is a Euro-Currency Business Day, the term “NYFRB Rate” means the rate quoted for such day for a federal funds transaction quoted at 11:00 a.m. (New York City time) on such day received by the Administrative Agent from a federal funds broker unaffiliated with the Administrative Agent of recognized standing selected by it; provided, further, that if any of the aforesaid rates as so determined would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“NYFRB’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“Other Connection Taxes” means, with respect to the Administrative Agent or a Lender, Taxes imposed as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction imposing such Tax (other than connections arising from the Administrative Agent or such Lender having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Currency” has the meaning set forth in Section 2.18.
“Other Taxes” has the meaning set forth in Section 8.04(b).
“Outstanding Amount” means, as to any Lender at any time, the sum of (i) the aggregate Dollar Amount of Loans made by it outstanding at such time plus (ii) the aggregate Dollar Amount of its Letter of Credit Liabilities at such time.
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight Euro-Currency eurodollar borrowings denominated in Dollars by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by the NYFRB as set forth on the Federal Reserve Bank of New York’s NYFRB’s Website from time to time, and published on the next succeeding Euro-Dollar Business Day by the NYFRB as an overnight bank funding rate.
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(d)    a qualifying company within the meaning of section 110 TCA and whose Applicable Lending Office is located in Ireland; or
(e)    an investment undertaking within the meaning of section 739B TCA and whose Applicable Lending Office is located in Ireland.
“Qualifying Lender Confirmation” means a confirmation substantially in the form of Exhibit F.
“Quarterly Payment Date” means each March 31, June 30, September 30 and December 31.
“Register” has the meaning set forth in Section 11.06(c).
“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.
“Reimbursement Obligation” has the meaning set forth in Section 2.19(e).
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.
“Related Person” has the meaning set forth in Section 11.03(b).
“Relevant Governmental Body” means the Federal Reserve (i) with respect to a Benchmark Replacement in respect of Loans denominated in Dollars, the Board and/or the NYFRB, or a committee officially endorsed or convened by the Federal Reserve Board and/or the NYFRB or, in each case, any successor thereto., (ii) with respect to a Benchmark Replacement in respect of Loans denominated in Pound Sterling, the Bank of England, or a committee officially endorsed or convened by the Bank of England or, in each case, any successor thereto, (iii) with respect to a Benchmark Replacement in respect of Loans denominated in Euro, the European Central Bank, or a committee officially endorsed or convened by the European Central Bank or, in each case, any successor thereto or (iv) with respect to a Benchmark Replacement in respect of Loans denominated in any other currency, (a) the central bank for the currency in which such Benchmark Replacement is denominated or any central bank or other supervisor which is responsible for supervising either (1) such Benchmark Replacement or (2) the administrator of such Benchmark Replacement or (b) any working group or committee officially endorsed or convened by (1) the central bank for the currency in which such Benchmark Replacement is denominated, (2) any central bank or other supervisor that is responsible for supervising either (A) such Benchmark Replacement or (B) the administrator of such Benchmark Replacement, (3) a group of those central banks or other supervisors or (4) the Financial Stability Board or any part thereof.
“Relevant Rate” means (i) with respect to any Euro-Currency Borrowing denominated in Dollars, the LIBO Rate, (ii) with respect to any Euro-Currency Borrowing denominated in Euro, the EURIBO Rate or (iii) with respect to any Borrowing denominated in Pound Sterling, the Daily Simple RFR, as applicable.
“Relevant Screen Rate” means (i) with respect to any Euro-Currency Borrowing denominated in Dollars, the LIBO Screen Rate or (ii) with respect to any Euro-Currency Borrowing denominated in Euro, the EURIBO Screen Rate, as applicable.
“Replacement Lender” has the meaning set forth in Section 2.08(b).
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“Required Currency” has the meaning set forth in Section 2.18.
“Required Lenders” means, subject to Section 2.21, at any time, Lenders having Credit Exposures representing more than 50% of the sum of the total Credit Exposures at such time; provided that for the purpose of determining the Required Lenders needed for any waiver, amendment, modification or consent of or under this Agreement or any other Loan Document, any Lender that is the Parent or an Affiliate of the Parent shall be disregarded.
“Retired Commitments” has the meaning set forth in Section 2.08(b).
“Reuters” means Thomson Reuters Corp., Refinitiv or any successor thereto.
“RFR” means, for any RFR Loan denominated in Pound Sterling, SONIA.
“RFR Borrowing” means, as to any Borrowing, the RFR Loans comprising such Borrowing.
“RFR Business Day” means, for any Loan denominated in Pound Sterling, any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which banks are closed for general business in London.
“RFR Interest Day” has the meaning specified in the definition of “Daily Simple RFR”.
“RFR Loan” means a Loan that bears interest at a rate based on Daily Simple RFR.
“RFR Margin” means, at any date, the applicable rate per annum determined in accordance with the Pricing Schedule.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State or by the United Nations Security Council, the European Union, Her Majesty’s Treasury of the United Kingdom or Canada, (b) any Person organized or resident in a Sanctioned Country in violation of Sanctions and (c) any Person 50% or greater owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).
“Sanctions” means any international economic sanctions administered or enforced by (a) the U.S. government, including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, Her Majesty’s Treasury (UK) or Canada.
“Screen” means (a) with respect to Dollar-Denominated Loans, the Reuters “LIBOR01” screen displaying the London interbank offered rate as administered by ICE Benchmark Administration and (b) with respect to Alternative Currency Loans, the Reuters screen selected by the Administrative Agent that displays rates for interbank deposits in the appropriate Alternative Currency or, in the case of either (a) or (b), any successor or substitute screen provided by Reuters, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such screen, as determined by the Administrative Agent from time to time in its reasonable discretion (and consistent with any such determination by the Administrative Agent generally under substantially similar credit
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facilities for which it acts as administrative agent) for purposes of providing quotations of interest rates applicable to deposits in the London interbank market.
“Significant ESG Event” means a sale, divestment, disposition, casualty, closure, condemnation, governmental taking, seizure, nationalization, acquisition, investment or other similar transaction or event that would reasonably be expected to result in a 5% increase or decrease in one or more of the KPI Metrics.
“Significant Subsidiary” means any Consolidated Subsidiary of the Parent (which term, as used in this definition, includes such Subsidiary’s Consolidated Subsidiaries) which meets any of the following conditions:
(i)    the Parent’s and the Parent’s other Subsidiaries’ outstanding investments in and advances to such Subsidiary exceed 10% of the consolidated total assets of the Parent, in each case as of the end of the most recently completed fiscal year of the Parent for which financial statements have been delivered pursuant to Section 5.01(a) (or, prior to the first such delivery, Section 4.04(a)) (the “Most Recent Financial Statements”);
(ii)    the total assets (after intercompany eliminations) of such Subsidiary exceed 10% of the consolidated total assets of the Parent as of the end of the most recently completed fiscal year of the Parent for which the Most Recent Financial Statements have been delivered;
(iii)    the net sales of such Subsidiary (after intercompany eliminations) exceed 10% of the consolidated net sales of the Parent for the most recently completed fiscal year of the Parent for which the Most Recent Financial Statements have been delivered; or
(iv)    any Consolidated Subsidiary with or into which a Significant Subsidiary is merged or which has acquired all or substantially all the assets of a Significant Subsidiary in either case pursuant to a transaction permitted by Section 5.09; provided, however, that such Subsidiary shall cease to be a Significant Subsidiary at the time of delivery pursuant to Section 5.01(a) of financial statements covering the fiscal year in which such transaction occurred unless one of the conditions set forth in clauses (i), (ii) or (iii) above is satisfied with respect to such Subsidiary.
“SOFR” with respect to any day means the secured overnight financing rate published for such day by the NYFRB, as the administrator of the benchmark (or a successor administrator), on the Federal Reserve Bank of New York’s NYFRB’s Website.
“SOFR-Based Rate” means SOFR, Compounded SOFR or Term SOFR.
“SONIA” means, with respect to any Business Day, a rate per annum equal to the Sterling Overnight Index Average for such Business Day published by the SONIA Administrator on the SONIA Administrator’s Website on the immediately succeeding Business Day.
“SONIA Administrator” means the Bank of England (or any successor administrator of the Sterling Overnight Index Average).
“SONIA Administrator’s Website” means the Bank of England’s website, currently at http://www.bankofengland.co.uk, or any successor source for the Sterling Overnight Index Average identified as such by the SONIA Administrator from time to time.
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“Specified Calendar Year” has the meaning set forth in the Pricing Schedule.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate or Adjusted EURIBO Rate, as applicable, for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D) or any other reserve ratio or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Loans. Such reserve percentage shall include those imposed pursuant to Regulation D. Euro-Currency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
“Sterling” means the lawful currency of the United Kingdom.
“Stop Issuance Notice” has the meaning set forth in Section 2.19(i).
“Subsidiary” means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of stock (or comparable ownership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of the Person or a combination thereof.
“Supported QFC” has the meaning set forth in Section 11.16.
“Surviving Commitment” has the meaning set forth in Section 2.08(b).
“Surviving Lender” has the meaning set forth in Section 2.08(b).
“Sustainability Fee Adjustment” with respect to any KPI Metrics Report for any calendar year, the number of basis points (whether positive, negative or zero) resulting from the sum of (i) the GHG Intensity Fee Adjustment Amount, plus (ii) the GHG Savings Fee Adjustment Amount, plus (iii) the TRIR Fee Adjustment Amount, in each case for such calendar year.
By way of example and for purposes of illustration only, (A) if the applicable GHG Intensity Fee Adjustment Amount is positive 0.25 bps and the GHG Savings Fee Adjustment Amount is positive 0.25 bps and the TRIR Fee Adjustment Amount is 0.0 bps, the Sustainability Fee Adjustment in such example would be positive 0.50 bps or (B) if the applicable GHG Intensity Fee Adjustment Amount is negative 0.25 bps and the GHG Savings Fee Adjustment Amount is negative 0.25 bps and the TRIR Fee Adjustment Amount is positive 0.25 bps, the Sustainability Fee Adjustment in such example would be negative 0.25 bps.
“Sustainability Margin Adjustment” with respect to any KPI Metrics Report for any calendar year, the number of basis points (whether positive, negative or zero) resulting from the sum of (i) the GHG Intensity Margin Adjustment Amount, plus (ii) the GHG Savings Margin Adjustment Amount, plus (iii) the TRIR Margin Adjustment Amount, in each case for such calendar year.

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By way of example and for purposes of illustration only, (A) if the applicable GHG Intensity Margin Adjustment Amount is positive 1.5 bps and the GHG Savings Margin Adjustment Amount is positive 1.5 bps and the TRIR Margin Adjustment Amount is 0.0 bps, the Sustainability Margin Adjustment in such example would be positive 3.0 bps or (B) if the applicable GHG Intensity Margin Adjustment Amount is negative 1.5 bps and the GHG Savings Margin Adjustment Amount is negative 1.5 bps and the TRIR Margin Adjustment Amount is positive 1.5 bps, the Sustainability Margin Adjustment in such example would be negative 1.5 bps.
“Sustainability Pricing Adjustment Date” has the meaning set forth in the Pricing Schedule.
“Sustainability Report” means the annual non-financial disclosure form according to the GRI Standard for Sustainability Reporting publicly reported by the Parent and published on an Internet or intranet website to which each Lender and the Administrative Agent have been granted access free of charge.
“Sustainability Structuring Agent” means ING Capital LLC, in its capacity as Sustainability Structuring Agent in connection with the credit facility provided hereunder.
“Sustainability Table” means the Sustainability Table attached hereto as Schedule 1.01, as the same may be updated from time to time (i) to incorporate the relevant baselines (and the targets and the 10% thresholds derived therefrom) set forth in the 2017 KPI Metrics Report as described in the Pricing Schedule and (ii) to incorporate revised baselines (and the targets and the 10% thresholds derived therefrom) set forth in the relevant Pro Forma KPI Metrics Report in connection with each Significant ESG Event as described in the Pricing Schedule.
“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Parent or the Subsidiaries shall be a Swap Agreement.
“Syndication Agent” means Bank of America, N.A., in its capacity as Syndication Agent in connection with the credit facility provided hereunder.
“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET2) payment system which utilizes a single shared platform and which was launched on November 19, 2007.
“TARGET Day” means any day on which TARGET2 (or, if such payment system ceases to be operative, such other payment system(, if any), reasonably determined by the Administrative Agent to be a suitable replacement) is open for the settlement of payments in euro Euro.
“Taxes” has the meaning set forth in Section 8.04(a).
“TCA” means the Taxes Consolidation Act, 1997 of Ireland.
“Term SOFR” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
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“Termination Date” means, as to each Lender, December 5, 2024 or, in the case of any Lender, such later date to which the Commitment of such Lender shall have been extended pursuant to Section 2.01(c) (or, if any of the foregoing days is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day).
“Terminating Lender” has the meaning set forth in Section 2.01(c).
“Total Outstanding Amount” means, at any time, the aggregate Dollar Amount of all Loans outstanding at such time plus the aggregate Dollar Amount of the Letter of Credit Liabilities of all Lenders at such time.
“Trade Date” has the meaning set forth in Section 11.06(h)(i).
“Transactions” means the execution, delivery and performance by the Borrowers of the Loan Documents, the borrowing of Loans and the issuance of Letters of Credit hereunder.
“TRIR” means the Total Recordable Incident Rate measured as the number of incidents per 200,000 workhours according to the recordkeeping and reporting rules of the United States Department of Labor – Occupational Safety and Health Administration Severe Injury Reports (or any replacement(s) thereof); it being understood and agreed that on the date hereof the Parent applies the US-OSHA Recordkeeping rules [www.osha.gov/recordkeeping2014/] to determine recordable injuries globally, and reported numbers include the performance of the Parent’s employees and supervised contractors (e.g. agency temp workers and other workers under the direct supervision of the Parent).
“TRIR Target” means, with respect to any calendar year, the TRIR Target for such calendar year as set forth on the Sustainability Table.
“TRIR 10% Threshold” means, with respect to any calendar year, the TRIR 10% Threshold for such calendar year as set forth on the Sustainability Table.
“TRIR Fee Adjustment Amount” means, with respect to any calendar year, (i) positive 0.25 bps if the TRIR for such calendar year as set forth in the KPI Metrics Report is greater than the TRIR 10% Threshold for such calendar year, (ii) 0.0 bps if the TRIR for such calendar year as set forth in the KPI Metrics Report is less than or equal to the TRIR 10% Threshold for such calendar year but greater than the TRIR Target for such calendar year or (iii) negative 0.25 bps if the TRIR for such calendar year as set forth in the KPI Metrics Report is less than or equal to the TRIR Target for such calendar year.
“TRIR Margin Adjustment Amount” means, with respect to any calendar year, (i) positive 1.5 bps if the TRIR for such calendar year as set forth in the KPI Metrics Report is greater than the TRIR 10% Threshold for such calendar year, (ii) 0.0 bps if the TRIR for such calendar year as set forth in the KPI Metrics Report is less than or equal to the TRIR 10% Threshold for such calendar year but greater than the TRIR Target for such calendar year or (iii) negative 1.5 bps if the TRIR for such calendar year as set forth in the KPI Metrics Report is less than or equal to the TRIR Target for such calendar year.
“Type” refers to the determination whether a loan is a Base Rate Loan or a Euro Currency Loan. when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Adjusted EURIBO Rate, the Base Rate or the Daily Simple RFR.
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“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment; provided that, if the Unadjusted Benchmark Replacement as so determined would be less than zero, the Unadjusted Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.
“Unfunded Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.
“United States” means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.
“U.S. Special Resolution Regime” has the meaning set forth in Section 11.16.
“Wholly-Owned Consolidated Subsidiary” means, with respect to any Person at any time, any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors’ qualifying shares) are at the time directly or indirectly owned by such Person at such time.
“Withholding Agent” has the meaning set forth in Section 8.04(a).
“Write-Down and Conversion Powers” has the meaning set forth in Section 11.14.
Section 1.02     Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Parent’s independent public accountants) with the most recent audited consolidated financial statements of the Parent and its Consolidated Subsidiaries delivered to the Lenders; provided that, if the Parent notifies the Administrative Agent that the Parent wishes to amend any covenant in Article 5 to eliminate the effect of any change in GAAP or the application thereof on the operation of such covenant (or if the Administrative Agent notifies the Parent that the Required Lenders wish to amend Article 5 for such purpose), then the Parent’s compliance with such covenant shall be determined on the basis of GAAP without giving effect to the relevant change in GAAP or the application thereof, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Parent and the Required Lenders. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein (including computations in respect of compliance with Section 5.07) shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of the Parent or any Subsidiary at “fair value”, as defined therein, (ii) without giving effect to any treatment of Debt under Accounting Standards Codification 470-20 or 2015-03 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Debt in a reduced or bifurcated manner as described therein, and such Debt shall at all times be valued at the full stated principal amount thereof and (iii) without giving effect to any change to, or modification of, GAAP (including any future phase-in of changes to GAAP that have been approved as of December 14, 2018) which would require the capitalization of leases characterized as “operating leases” as of December 14, 2018 (it being understood and agreed, for the avoidance of doubt, financial statements delivered pursuant to Sections 5.01(a) and 5.01(b) shall be prepared without giving effect to this sentence).
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Section 1.03    Types of Loans and Borrowings. The term “Borrowing” denotes the aggregation of Loans of one or more Lenders to be made to a single Borrower pursuant to Article 2 on the same date, all of which Loans are of the same Type and currency and, in the case of Euro-Currency Loans, have the same initial Interest Period. Identification of a Borrowing by Type (e.g., a “Euro-Currency Borrowing”) indicates that such Borrowing is comprised of Loans of such Type.
Section 1.04     Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, amended and restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein), (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
Section 1.05    Interest Rates; LIBOR Notification. The interest rate on a Loan denominated in dollars or an Alternative an Agreed Currency may be derived from an interest rate benchmark that is, or may in the future become, the subject of regulatory reform. Regulators have signaled the need to use alternative benchmark reference rates for some of these interest rate benchmarks and, as a result, such interest rate benchmarks may cease to comply with applicable laws and regulations, may be permanently discontinued, and/or the basis on which they are calculated may change. The London interbank offered rate (“LIBOR”) is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. In July 2017 On March 5, 2021, the U.K. Financial Conduct Authority (“FCA”) publicly announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator, the “IBA”) for purposes of the IBA setting the London interbank offered rate. As a result, it is possible that commencing in 2022, the London interbank offered rate may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on Eurodollar Loans. In light of this eventuality, public: (a) immediately after December 31, 2021, publication of all seven Euro LIBOR settings, all seven Swiss Franc LIBOR settings, the spot next, 1-week, 2-month and 12-month Japanese Yen LIBOR settings, the overnight, 1-week, 2-month and 12-month Pound Sterling LIBOR settings, and the 1-week and 2-month U.S. Dollar LIBOR settings will permanently cease; immediately after June 30, 2023, publication of the overnight and 12-month U.S. Dollar LIBOR settings will permanently cease; immediately after December 31, 2021, the 1-month, 3-month and 6-month Japanese Yen LIBOR settings and the 1-month, 3-month and 6-month Pound Sterling LIBOR settings will cease to be provided or, subject to consultation by the FCA, be provided on a changed methodology (or “synthetic”) basis and no longer be representative of the underlying market and economic reality they are intended to measure and that representativeness will not be restored; and immediately after June 30, 2023, the 1-month, 3-month and 6-month U.S. Dollar LIBOR settings will cease to be provided or, subject to the FCA’s consideration of the case, be provided on a synthetic basis and no longer be representative of the underlying market and economic reality they are intended to measure and that representativeness will not be restored. There is no assurance that dates announced by the FCA will not change or that the administrator of LIBOR and/or regulators will not take further action that could impact the availability, composition, or characteristics of LIBOR or the currencies
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and/or tenors for which LIBOR is published. Each party to this agreement should consult its own advisors to stay informed of any such developments. Public and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of the London interbank offered rate LIBOR. Upon the occurrence of a Benchmark Transition Event or an Early Opt-In Opt-in Election, Section 8.01(b) provides a mechanism for determining an alternative rate of interest. The Administrative Agent will promptly notify the Principal Borrower, pursuant to Section 8.01(d), of any change to the reference rate upon which the interest rate on Eurodollar Euro-Currency Loans is based. However, the Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or availability of the London interbank offered rate, performance or any other matter related to the Daily Simple RFR, LIBOR, EURIBOR or other rates in the definition of “LIBO Rate” (or “EURIBO Rate”, as applicable) or with respect to any alternative or successor rate thereto, or replacement rate thereof (including, without limitation, (i) any such alternative, successor or replacement rate implemented pursuant to Section 8.01(b), whether upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, and (ii) the implementation of any Benchmark Replacement Conforming Changes pursuant to Section 8.01(c)), including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, the Daily Simple RFR, the LIBO Rate (or the EURIBO Rate, as applicable) or have the same volume or liquidity as did LIBOR (or the London Euro interbank offered rate (“EURIBOR”), as applicable) prior to its discontinuance or unavailability (other than, for the avoidance of doubt, with respect to its obligation to apply the definition of such rate in accordance with its terms and comply with its obligations in Article 2 (including and Section 8.01) of this Agreement). The Administrative Agent and its affiliates and/or other related entities may engage in transactions unrelated to the Principal Borrower and this Agreement that affect the calculation of any Daily Simple RFR, any alternative, successor or alternative rate (including any Benchmark Replacement) and/or any relevant adjustments thereto, in each case, in a manner adverse to the Principal Borrower. The Administrative Agent may select information sources or services in its reasonable good faith discretion to ascertain any RFR, Daily Simple RFR or any rate with respect to any Euro-Currency Loan, any component thereof, or rates referenced in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrowers, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) by any such information source or service.
Section 1.06    Certain Calculations. No Default or Event of Default shall arise as a result of any limitation or threshold set forth in Dollars in Sections 5.08, 5.09 and 5.10 and Article 6 under this Agreement being exceeded solely as a result of changes in currency exchange rates from those rates applicable on the last day of the fiscal quarter of the Parent immediately preceding the fiscal quarter of the Parent in which the applicable transaction or occurrence requiring a determination occurs.
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Section 2.02    Notice of Borrowing. The Borrower shall give the Administrative Agent notice (a “Notice of Borrowing”) (1) at its New York Office not later than 10:30 a.m. (New York City time) on (y) the date of each Base Rate Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Euro-Currency Borrowing denominated in Dollars or Euro and (2) at its New York Office and its London Office not later than 10:30 a.m. (London 11:00 a.m. (New York City time) on the third Euro-Currency fifth Business Day before each Borrowing of Alternative Currency RFR Loans, specifying:
    (i)    the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Currency Business Day in the case of a Euro-Currency Borrowing;
    (ii)    the currency and aggregate amount (in such currency) of such Borrowing;
    (iii)    in the case of a Borrowing of Dollar-Denominated Loans whether such Loans are Borrowing is to be a Base Rate Loans or a Euro-Dollar Loans Borrowing, a Euro-Currency Borrowing or an RFR Borrowing; and
    (iv)    in the case of a Euro-Currency Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.
Section 2.03    Notice to Lenders; Funding of Loans.
(a)    Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender’s share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b)     On the date of each Borrowing, each Lender participating therein shall make available its ratable share of such Borrowing:
        (A)    if such Borrowing is to be made in Dollars, not later than 2:00 p.m. (New York City time), in Federal or other funds immediately available in New York City, to the Administrative Agent at its New York Office; or
        (B)    if such Borrowing is to be made in an Alternative Currency, in such Alternative Currency (in such funds as may then be customary for the settlement of international transactions in such Alternative Currency) to the account of the Administrative Agent at its London Office.
Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied or waived in accordance with Section 11.05, the Administrative Agent will make the funds so received from the Lenders available to the Borrower on the date of each Borrowing as directed by the Borrower.
(c)    Unless the Administrative Agent shall have received at its New York Office notice from a Lender prior to the date (or in the case of a Base Rate Borrowing, prior to 2:00 p.m. (New York City time) on the date of such Borrowing) of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.03 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such share available to the Administrative
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Agent, such Lender (and, if such Lender shall not have paid such amount to the Administrative Agent within two Domestic Business Days of the Administrative Agent’s demand therefor, the Borrower) agrees to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the NYFRB Rate (if such Borrowing is in Dollars) or the applicable LIBO Rate (if such Borrowing is in an Alternative Currency). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Loan included in such Borrowing for purposes of this Agreement.
(d)    The failure of any Lender to make any Loan to be made by it on the date specified therefor shall not relieve any other Lender of any obligation to make a Loan on such date.
(e)    Each Lender may, at its option, make any Loan available to any Borrower by causing any foreign or domestic branch or affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of such Borrower to repay such Loan in accordance with the terms of this Agreement.
Section 2.04    Notes.
(a)    Each Lender may, on and from time to time after the Closing Date, by notice to the Principal Borrower and the Administrative Agent, request (i) that its Loans to any Borrower be evidenced by a single Note of such Borrower payable to such Lender for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Lender’s Loans to such Borrower or (ii) that its Loans of a particular Type or currency to any Borrower be evidenced by a separate Note of such Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant Type or currency. Each reference in this Agreement to the “Notes” of such Lender shall be deemed to refer to and include any or all of such Notes, as the context may require.
(b)    Each Lender shall record the date, amount, Type, currency and maturity of each Loan made by it and the date and amount of each payment of principal made with respect thereto, and may, if such Lender so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Lender to make any such recordation or endorsement shall not affect the obligations of any Borrower hereunder or under the Notes. Each Lender is hereby irrevocably authorized by the Borrowers so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required.
Section 2.05    Maturity of Loans. Each Loan of each Lender shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the Termination Date of such Lender.
Section 2.06    Interest Rates.
(a)    Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the sum of the Base Rate Margin and the Base Rate for each such day. Such interest shall be payable at maturity, quarterly in arrears on each Quarterly Payment Date prior to maturity and, with respect to the principal amount of any Base Rate Loan converted to a Euro-Dollar Euro-Currency Loan denominated in Dollars, on the date such amount is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day from and including the date payment thereof
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was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for each such day.
(b)    Each Euro-Currency Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Currency Margin for such day plus the applicable Adjusted LIBO Rate or the Adjusted EURIBO Rate, as applicable, for such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.
(c)    Each RFR Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the sum of the RFR Margin and the Daily Simple RFR for each such day. Such interest shall be payable at maturity and on each date that is on the numerically corresponding day in each calendar month that is one month after the Borrowing of such RFR Loan (or, if there is no such numerically corresponding day in such month, then the last day of such month). Any overdue principal of or interest on any RFR Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the sum of the RFR Margin for such day plus Daily Simple RFR otherwise applicable to RFR Loans for each such day.
(d)    (c) Any overdue principal of or interest on any Euro-Currency Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the Euro-Currency Margin for such day plus the Adjusted LIBO Rate or the Adjusted EURIBO Rate, as applicable, that is applicable to such Loan on the day before such payment was due and (ii) the Euro-Currency Margin for such day plus the quotient obtained by dividing (x) the average of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Currency Business Days, then for such other period of time not longer than six months as the Administrative Agent may select) deposits in the relevant currency in an amount approximately equal to such overdue payment are offered by the London Office of the Administrative Agent in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Currency Reserve Percentage.
(e)    (d) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Lenders of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of demonstrable error.
(f)     (e) Interest in respect of Loans denominated in Dollars shall be paid in Dollars, and interest in respect of Loans denominated in an Alternative Currency shall be paid in such Alternative Currency.
Section 2.07    Fees. (a) The Principal Borrower shall pay to the Administrative Agent for the account of the Lenders ratably a facility fee in Dollars at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule) on the daily aggregate amount of the Credit Exposures. Such facility fee shall accrue from and including the Closing Date to but excluding the date on which the Credit Exposures are permanently reduced to zero.
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(b)    The Borrower shall pay to the Administrative Agent (i) for the account of the Lenders ratably a letter of credit fee in Dollars accruing daily on the aggregate Dollar Amount of all outstanding Letters of Credit at a rate per annum equal to the Euro-Currency Margin or, in the case of performance standby Letters of Credit with respect to nonfinancial contractual obligations, a rate per annum equal to 50% of the Euro-Currency Margin (determined daily in accordance with the Pricing Schedule) and (ii) for the account of each Issuing Lender a letter of credit fronting fee accruing daily on the aggregate Dollar Amount of all Letters of Credit issued by such Issuing Lender at a rate per annum mutually agreed from time to time by the Principal Borrower and such Issuing Lender, as well as such Issuing Lender’s standard fees and commissions with respect to the issuance, amendment, cancellation, negotiation, transfer, presentment or extension of any Letter of Credit or processing of drawings thereunder.
(c)    Accrued fees under this Section 2.07 shall be payable quarterly in arrears on the fifteenth (15th) day following each Quarterly Payment Date and on the date of termination of the Commitments in their entirety (and, if later, the date the Credit Exposures are permanently reduced to zero). All fees payable hereunder shall be paid on the dates due, in immediately available funds in Dollars (except as expressly provided in this Section), to the Administrative Agent (or to the relevant Issuing Lender, in the case of fees payable to it) for distribution, in the case of facility fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances.
(d)    The Principal Borrower shall pay to the appropriate Persons for their own respective accounts fees in the amounts and at the times specified in the Fee Letters.
Section 2.08     Optional Termination or Reduction of Commitments.
(a)    The Principal Borrower may, upon at least three Domestic Business Days’ notice (which notice may be conditioned upon the effectiveness of other credit facilities or other matters specified therein, in which case such notice may be rescinded by the Principal Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied) to the Administrative Agent at its New York Office, (i) terminate the Commitments at any time, if no Loans or Letter of Credit Liabilities are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple thereof, the aggregate amount of the Commitments in excess of the Total Outstanding Amount so long as the Outstanding Amount of each Lender shall not exceed the amount of such Lender’s Commitment after giving effect thereto. Promptly after receiving a notice pursuant to this Section, the Administrative Agent shall notify each Lender of the contents thereof.
(b)    Notwithstanding the foregoing, upon the acquisition of one Lender by another Lender, or the merger, consolidation or other combination of any two or more Lenders (any such acquisition, merger, consolidation or other combination being referred to hereinafter as a “Combination” and each Lender which is a party to such Combination being hereinafter referred to as a “Combined Lender”), the Principal Borrower may notify the Administrative Agent that it desires to reduce the Commitment of the Lender surviving such Combination (the “Surviving Lender”) to an amount equal to the Commitment of that Combined Lender which had the largest Commitment of each of the Combined Lenders party to such Combination (such largest Commitment being the “Surviving Commitment” and the Commitments of the other Combined Lenders being hereinafter referred to, collectively, as the “Retired Commitments”). If the Required Lenders (determined as set forth below) and the Administrative Agent agree to such reduction in the Surviving Lender’s Commitment, then (i) the aggregate amount of the Commitments shall be reduced by the Retired Commitments effective upon the effective date of the Combination (or such later date as the Principal Borrower may specify in its request), provided, that, on or before such date the Borrowers have paid in full the outstanding principal amount of the Loans and funded participations in Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder of each of the Combined Lenders other than the
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Combined Lender whose Commitment is the Surviving Commitment, (ii) from and after the effective date of such reduction, the Surviving Lender shall have no obligation with respect to the Retired Commitments, and (iii) the Principal Borrower shall notify the Administrative Agent whether it wants such reduction to be a permanent reduction or a temporary reduction. If such reduction is to be a temporary reduction, then the Principal Borrower shall be responsible for finding one or more financial institutions (which for the avoidance of doubt may be an existing Lender) (each, a “Replacement Lender”), acceptable to the Administrative Agent (such acceptance not to be unreasonably withheld, conditioned or delayed), willing to assume the obligations of a Lender hereunder with aggregate Commitments up to the amount of the Retired Commitments. The Administrative Agent may require the Replacement Lenders to execute such documents, instruments or agreements as the Administrative Agent reasonably deems necessary or desirable to evidence such Replacement Lenders’ agreement to become parties hereunder. For purposes of this Section 2.08(b), Required Lenders shall be determined as if the reduction in the aggregate amount of the Commitments requested by the Principal Borrower had occurred (i.e., the Combined Lenders shall be deemed to have a single Commitment equal to the Surviving Commitment and the aggregate amount of the Commitments shall be deemed to have been reduced by the Retired Commitments).
Section 2.09    Mandatory Termination of Commitments. The Commitment of each Lender shall terminate on its Termination Date.
Section 2.10    Optional Prepayments.
(a)     Subject in the case of Euro-Currency Loans to Section 2.12, the Borrower may upon notice to the Administrative Agent (which notice may be conditioned upon the effectiveness of other credit facilities or other matters specified therein, in which case such notice may be rescinded by the Principal Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied subject to Section 2.12) (i) at its New York Office not later than 10:30 a.m. (New York City time) on any Domestic Business Day for prepayment on that date of any Group of Loans consisting of Base Rate Loans or, (ii) at its New York Office not later than 10:30 a.m. (New York City time) on the third Euro-Dollar Business Day before the date of prepayment of any Group of Loans consisting of Euro-Dollar Loans Euro-Currency Loans denominated in Dollars, (iii) at its London Office not later than 10:30 a.m. (New York City time) on the third Business Day before the date of prepayment of any Group of Loans consisting of Euro-Currency Loans denominated in euro, prepay any such Group of Loans or (iiiv) at its London Office not later than 11:00 a.m. (London New York City time) on the third Euro-Currency fifth Business Day before the date of prepayment, prepay any Group of Loans consisting of Alternative Currency RFR Loans, in each case in whole at any time, or from time to time in part in Dollar Amounts aggregating not less than $10,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to but not including the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Lenders included in such Group of Loans.
(b)    Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender’s ratable share of such prepayment and once notice is so given to the Lenders, the Borrower’s notice of prepayment shall not thereafter be revocable by the Borrower (except as provided in Section 2.10(a)).
Section 2.11    General Provisions as to Payments.
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(a)    Each Borrower, as applicable, shall make payments of principal of, and interest on, the Dollar-Denominated Loans made to it, of Letter of Credit Liabilities in respect of Letters of Credit denominated in Dollars issued for its account and of fees owing by it hereunder, not later than 2:00 p.m. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, without set-off, counterclaim or other deduction, to the Administrative Agent at its New York Office. Each Borrower, as applicable, shall make payments of principal of, and interest on, the Alternative Currency Loans made to it and of Letter of Credit Liabilities in respect of Letters of Credit denominated in an Alternative Currency issued for its account, in the relevant Alternative Currency in such funds as may then be customary for the settlement of international transactions in such Alternative Currency, without set-off, counterclaim or other deduction, to the Administrative Agent at its London Office. The Administrative Agent will promptly distribute to each Lender its ratable share of each such payment received by the Administrative Agent for the respective accounts of the Lenders. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Currency Loans shall be due on a day which is not a Euro-Currency Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Currency Business Day unless such Euro-Currency Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Currency Business Day. Whenever any payment of principal of, or interest on, the RFR Loans or of fees shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.
(b)    Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so made such payment, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at (i) the NYFRB Rate (if such amount was distributed in Dollars) or (ii) the rate per annum at which one-day deposits in the relevant currency are offered by the London Office of the Administrative Agent in the London interbank market for such day (if such amount was distributed in an Alternative Currency).
(c)    If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.03(b), 2.11(b), 2.19(e) or 7.06 and has not cured the payment within two (2) Domestic Business Days, then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, (i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender for the benefit of the Administrative Agent or the applicable Issuing Lenders to satisfy such Lender’s obligations to it under such Section until all such unsatisfied obligations are fully paid, and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender under any such Section, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative Agent in its discretion. Such cash collateral shall be returned to the Lender (x) if such Lender is a Defaulting Lender, once it ceases to be a Defaulting Lender or (y) upon termination of this Agreement; provided that, in each of clause (x) and (y), the Lender has made all payments required to be made hereunder.
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Section 2.12     Funding Losses. If the Borrower makes any payment of principal with respect to any Euro-Currency Loan or any Euro-Dollar Loan is converted to a Base Rate Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.06(c), or if the Borrower fails to borrow, prepay, convert or continue any Euro-Currency Loans after notice has been given to any Lender in accordance with Section 2.03(a), 2.10(b) or 2.15 (and in the case of a notice given to any Lender in accordance with Section 2.10(b), regardless of whether such notice is conditional and such condition fails to occur), the Borrower shall reimburse each Lender within 15 days after demand for any resulting loss or expense reasonably incurred by it (or by an existing or prospective Participant in the related Loan) in obtaining, liquidating or employing deposits or other funds from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue; provided that such Lender shall have delivered to the Borrower a certificate specifying in reasonable detail the calculation of, and the reasons for, the amount of such loss or expense, which certificate shall be conclusive in the absence of clearly demonstrable error.
(a)    With respect to Loans that are not RFR Loans, in the event of (i) the payment of any principal of any Euro-Currency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default or as a result of any prepayment pursuant to Section 2.10), (ii) the conversion of any Euro-Currency Loan other than on the last day of the Interest Period applicable thereto, (iii) the failure to borrow, convert, continue or prepay any Euro-Currency Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(a) and is revoked in accordance therewith), (iv) the assignment of any Euro-Currency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 8.06(b) or (v) the failure by the Borrower to make any payment of any Loan (or interest due thereof) denominated in an Alternative Currency on its scheduled due date or any payment thereof in a different currency, then, in any such event, the Borrower shall compensate each Lender for the loss (excluding loss of margin), cost and expense attributable to such event. In the case of a Euro-Currency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (x) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate or the Adjusted EURIBO Rate, as applicable, that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (y) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in the relevant Agreed Currency of a comparable amount and period from other banks in the applicable offshore market for such Agreed Currency, whether or not such Euro-Currency Loan was in fact so funded; provided, however, that the Borrower shall not be required to compensate any Lender for any costs of terminating or liquidating any hedge or trading position (including any rate swap, basis swap, forward rate transaction, interest rate option, cap, collar or floor transaction, or any similar transaction). A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section and the calculation of such amount or amounts in reasonable detail shall be delivered to the Borrower and shall be conclusive absent clearly demonstrable error. The Borrower shall pay such Lender the amount shown as due on any such certificate free of clearly demonstrable error within 10 days after receipt thereof.
(b)    With respect to RFR Loans, in the event of (i) the payment of any principal of any RFR Loan other than on the interest payment date for such RFR Loan pursuant to the terms of Section 2.06(c) applicable thereto (including as a result of an Event of Default or as a result of any prepayment pursuant to Section 2.10), (ii) the failure to borrow, convert, continue or prepay any RFR Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(a) and is revoked in accordance therewith), (iii) the assignment of any RFR Loan other than on the interest payment date for such RFR Loan pursuant to the terms of Section
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2.06(c) applicable thereto as a result of a request by the Borrower pursuant to Section 8.06(b) or (iv) the failure by the Borrower to make any payment of any Loan (or interest due thereof) denominated in an Alternative Currency on its scheduled due date or any payment thereof in a different currency, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section and the calculation of such amount or amounts in reasonable detail shall be delivered to the Borrower and shall be conclusive absent clearly demonstrable error. The Borrower shall pay such Lender the amount shown as due on any such certificate free of clearly demonstrable error within 10 days after receipt thereof.
Section 2.13    Computation of Interest and Fees Interest on Euro-Currency Loans denominated in Sterling and interest calculated on the basis of computed by reference to the LIBO Rate or the EURIBO Rate hereunder shall be computed on the basis of a year of 360 days. Interest computed by reference to the Daily Simple RFR with respect to Pound Sterling or the Base Rate at times when the Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid. In each case interest shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees hereunder on any Loan shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).a daily basis based upon the outstanding principal amount of such Loan as of the applicable date of determination. The applicable Base Rate, Adjusted LIBO Rate, LIBO Rate, Adjusted EURIBO Rate, EURIBO Rate or Daily Simple RFR shall be determined by the Administrative Agent, and such determination shall be conclusive absent demonstrable error.
Section 2.14    Regulation D Compensation [Reserved]. Each Lender may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Currency Loans, additional interest on the related Euro-Currency Loan of such Lender at a rate per annum determined by such Lender up to but not exceeding the excess of (i) (A) the applicable LIBO Rate divided by (B) one minus the Euro-Currency Reserve Percentage over (ii) the applicable LIBO Rate. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrower, the Principal Borrower and the Administrative Agent, in which case such additional interest on the Euro-Currency Loans of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Currency Business Days after the giving of such notice, and (y) shall notify the Borrower at least five Euro-Currency Business Days prior to each date on which interest is payable on the Euro-Currency Loans of the amount then due it under this Section.
Section 2.15    Method of Electing Interest Rates.
(a)    The Dollar-Denominated Loans included in each Each Borrowing shall initially be of the Type specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the Type of each such Group of Loans (subject to subsection 2.15(d) of this Section and the provisions of Article 8), as follows:
(i)    if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Euro-Currency Loans denominated in Dollars as of any Euro-Dollar Business Day; and
(ii)    if such Loans are Euro-Dollar Euro-Currency Loans denominated in Dollars, the Borrower may elect to convert such Loans to Base Rate Loans or elect to continue such Loans as Euro-Dollar Euro-Currency Loans denominated in Dollars for an additional Interest Period, subject
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to Section 2.12 if any such conversion is effective on any day other than the last day of an Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a “Notice of Interest Rate Election”) to the Administrative Agent at its New York Office not later than 10:30 a.m. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group of Loans and (ii) the portion to which such Notice of Interest Rate Election applies, and the remaining portion to which it does not apply, are each in an aggregate Dollar Amount of not less than $10,000,000 (unless such portion is comprised of Base Rate Loans). If no such notice is timely received before the end of an Interest Period for any Group of Loans consisting of Euro-Dollar Euro-Currency Loans denominated in Dollars, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans at the end of such Interest Period.
(b)    Each Notice of Interest Rate Election shall specify:
            (i)    the Group of Loans (or portion thereof) to which such notice applies;
    (ii)    the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of Section 2.15(a) above;
(iii)    if the Loans comprising such Group of Loans are to be converted, the new Type of Loans and, if the Loans resulting from such conversion are to be Euro-Dollar Euro-Currency Loans denominated in Dollars, the duration of the next succeeding Interest Period applicable thereto; and
(iv)    if such Loans are to be continued as Euro-Dollar Euro-Currency Loans denominated in Dollars for an additional Interest Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period.
(c)    Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Administrative Agent shall notify each Lender of the contents thereof and such notice shall not thereafter be revocable by the Borrower.
(d)    The Borrower shall not be entitled to elect to convert any Loans to, or continue any Loans for an additional Interest Period as, Euro-Dollar Euro-Currency Loans denominated in Dollars if (i) the aggregate Dollar Amount of any Group of Loans consisting of Euro-Dollar Euro-Currency Loans denominated in Dollars created or continued as a result of such election would be less than $10,000,000 or (ii) a Default shall have occurred and be continuing when the Borrower delivers notice of such election to the Administrative Agent.
(e)    The initial Interest Period for each Borrowing of Alternative Currency Loans Euro-Currency Loans denominated in Euro shall be specified by the Borrower in the applicable Notice of Borrowing. The Borrower may specify the duration of each subsequent Interest Period applicable to such Group of Loans by delivering to the Administrative Agent at its London Office not later than 11:00 a.m. (London time) on the third Euro-Currency Business Day before the end of the immediately preceding Interest Period, a notice specifying the Group of Loans to which such notice applies and the
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duration of such subsequent Interest Period (which shall comply with the provisions of the definition of Interest Period). Such notice may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group of Loans and (ii) the Dollar Amounts of the portion to which such notice applies, and the remaining portion to which it does not apply, are each at least $10,000,000. If no such notice is timely received by the Administrative Agent before the end of any applicable Interest Period, the Borrower shall be deemed to have elected that the subsequent Interest Period for such Group of Loans shall have a duration of one month (subject to the provisions of the definition of Interest Period).
(f)    If the relevant Borrower fails to deliver a timely Notice of Interest Rate Election with respect to a Euro-Currency Borrowing denominated in Dollars prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period (i) in the case of a Borrowing denominated in Dollars, such Borrowing shall be converted to an Base Rate Borrowing; provided that if the Principal Borrower shall have delivered to the Administrative Agent its customary standard documentation (if any) authorizing automatic continuations, such Borrowing shall automatically continue continued as a Euro-Currency Borrowing in Dollars with an Interest Period of one month unless such Euro-Currency Borrowing is or was repaid as provided herein and (ii) in the case of a Borrowing denominated in an Alternative Currency in respect of which the applicable Borrower shall have failed to deliver an month’s duration. If the relevant Borrower fails to deliver a timely and complete Notice of Interest Rate Election prior to the third (3rd) Domestic Business Day preceding the end of such Interest Period, such with respect to a Euro-Currency Borrowing denominated in an Alternative Currency prior to the end of the Interest Period therefor, then, unless such Euro-Currency Borrowing is repaid as provided herein, such Borrower shall be deemed to have selected that such Euro-Currency Borrowing shall automatically continue be continued as a Euro-Currency Borrowing in the same Alternative its original Agreed Currency with an Interest Period of one month unless such Euro-Currency Borrowing is or was repaid as provided herein at the end of such Interest Period.
Section 2.16    Determining Dollar Amounts; Related Mandatory Prepayments.
(a)    The Administrative Agent shall determine the Dollar Amount of:
(i)     any Loan denominated in an Alternative Currency, on each of the following: (i) the date of the Borrowing of such Loan and (ii) (A) with respect to any Euro-Currency Loan, each date of a conversion or continuation of such Loan pursuant to the terms of this Agreement, and (B) with respect to an RFR Loan, each date that is on the numerically corresponding day in each calendar month that is one month after the Borrowing of such Loan (or, if there is no such numerically corresponding day in such month, then the last day of such month),
(ii)    any Letter of Credit denominated in an Alternative Currency, on each of the following: (i) the date on which such Letter of Credit is issued, (ii) the first Domestic Business Day of each calendar month and (iii) the date of any amendment of such Letter of Credit that has the effect of increasing the face amount thereof, and
(iii)     any Credit Event, on any additional date as the Administrative Agent may determine at any time when an Event of Default exists.
(b)    Each determination of a Dollar Amount pursuant to clauses (a)(i), (a)(ii) or (a)(iii) above shall be conclusive in the absence of demonstrable error.
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(c)    If after giving effect to any such determination of a Dollar Amount, the Total Outstanding Amount exceeds the aggregate amount of the Commitments, the Borrowers shall within five Euro-Currency Business Days prepay outstanding Loans (as selected by the Principal Borrower and notified to the Lenders through the Administrative Agent not less than three Euro-Currency Business Days prior to the date of prepayment) or take other action to the extent necessary to eliminate any such excess.
Section 2.17    Additional Reserve Costs[Reserved].
(a)    If and so long as any Lender is required to comply with reserve assets, liquidity, cash margin or other requirements of any monetary or other authority (including any such requirement imposed by the European Central Bank or the European System of Central Banks, but excluding requirements reflected in an applicable Euro-Currency Reserve Percentage) in respect of any of such Lender’s Euro-Currency Loans in any Alternative Currency, such Lender may require the Borrower to pay, contemporaneously with each payment of interest on each of such Lender’s Euro-Currency Loans subject to such requirements, additional interest on such Loan at a rate per annum specified by such Lender to be the cost to such Lender of complying with such requirements in relation to such Loan.
(b)    Any additional interest owed pursuant to subsection (b) above shall be determined by the relevant Lender, which determination shall be conclusive in the absence of clearly demonstrable error, and notified to the Borrower (with a copy to the Administrative Agent) at least five Euro-Currency Business Days before each date on which interest is payable for the relevant Loan, and such additional interest so notified to the Borrower by such Lender shall be payable to the Administrative Agent for the account of such Lender on each date on which interest is payable for such Loan.
Section 2.18    Judgment Currency. If, under any applicable law and whether pursuant to a judgment being made or registered against any Borrower or for any other reason, any payment under or in connection with this Agreement is made or satisfied in a currency (the “Other Currency”) other than that in which the relevant payment is due (the “Required Currency”) then, to the extent that the payment (when converted into the Required Currency at the rate of exchange on the date of payment or, if it is not practicable for the party entitled thereto (the “Payee”) to purchase the Required Currency with the Other Currency on the date of payment, at the rate of exchange as soon thereafter as it is practicable for it to do so) actually received by the Payee falls short of the amount due under the terms of this Agreement, such Borrower shall, to the extent permitted by law, as a separate and independent obligation, indemnify and hold harmless the Payee against the amount of such short-fall. For the purpose of this Section, “rate of exchange” means the rate at which the Payee is able on the relevant date to purchase the Required Currency with the Other Currency and shall take into account any premium and other costs of exchange.
Section 2.19    Letters of Credit. (a) On the Closing Date, without further action by any party hereto, the applicable Issuing Lenders shall be deemed to have granted to each Lender, and each Lender shall be deemed to have acquired from the applicable Issuing Lenders, a participation in each Existing Letter of Credit equal to such Lender’s Applicable Percentage of (i) the aggregate amount available to be drawn thereunder and (ii) the aggregate unpaid amount of any outstanding reimbursement obligations in respect thereof. Such participations shall be on all the same terms and conditions as participations granted in Additional Letters of Credit under Section 2.19(b).
(b)    Subject to the terms and conditions hereof, each Issuing Lender agrees to issue Additional Letters of Credit hereunder denominated in Dollars or in an Alternative Currency from time to time after the Closing Date upon the request of any Borrower; provided that, immediately after each Additional Letter of Credit is issued (i) the Total Outstanding Amount shall not exceed the aggregate amount of the Commitments, (ii) the Outstanding Amount of such Lender shall at no time exceed the amount of such Lender’s Commitment, (iii) the aggregate Dollar Amount of Letter of Credit Liabilities
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under Letters of Credit issued by such Issuing Lender shall not exceed such Issuing Lender’s Letter of Credit Fronting Sublimit, (iv) the aggregate Dollar Amount of Letter of Credit Liabilities shall not exceed any applicable LC Sublimit and (v) Barclays Bank PLC, in its capacity as an Issuing Lender, shall not be obligated to issue trade or commercial Letters of Credit hereunder. Upon the date of issuance by an Issuing Lender of an Additional Letter of Credit, such Issuing Lender shall be deemed, without further action by any party hereto, to have sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have purchased from such Issuing Lender, a participation in such Letter of Credit and the related Letter of Credit Liabilities in the proportion their respective Commitments bear to the aggregate Commitments. If required by the applicable Issuing Lender, as a condition to any such Letter of Credit issuance, the Principal Borrower shall have entered into a continuing agreement (or other letter of credit agreement) for the issuance of letters of credit and/or shall submit a letter of credit application, in a form agreed to by the Principal Borrower and the applicable Issuing Lender in connection with any request for a Letter of Credit (each, a “Letter of Credit Agreement”). In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any Letter of Credit Agreement, the terms and conditions of this Agreement shall control. An Issuing Lender shall not be under any obligation to issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Lender from issuing such Letter of Credit, or any law applicable to such Issuing Lender shall prohibit, or require that such Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Lender is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such Issuing Lender any unreimbursed loss, cost or expense that was not applicable on the Closing Date and that such Issuing Lender in good faith deems material to it; or (ii) the issuance of such Letter of Credit would violate one or more policies of such Issuing Lender applicable to letters of credit generally.
(c)    The Borrower shall give the applicable Issuing Lender notice at least five Euro-Currency Business Days prior to the requested issuance of a Letter of Credit (or such lesser notice as may be acceptable to the applicable Issuing Lender) specifying the date such Letter of Credit is to be issued, and describing the terms of such Letter of Credit and the nature of the transactions to be supported thereby (such notice, including any such notice given in connection with the extension or amendment of a Letter of Credit, a “Notice of Issuance”). Upon receipt of a Notice of Issuance, the applicable Issuing Lender shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Lender of the contents thereof and of the amount of such Lender’s participation in such Letter of Credit. The issuance by the applicable Issuing Lender of each Letter of Credit shall, in addition to the conditions precedent set forth in Article 3, be subject to the conditions precedent that (i) such Letter of Credit shall be in such form and contain such terms as shall be reasonably satisfactory to the applicable Issuing Lender and the Borrower shall have executed and delivered such other instruments and agreements relating to such Letter of Credit as the applicable Issuing Lender shall have reasonably requested and (ii) no Stop Issuance Notice shall be in effect. The Borrower shall also pay to the applicable Issuing Lender for its own account issuance, drawing, amendment and extension charges in the amounts and at the times as agreed between the Borrower and the applicable Issuing Lender.
(d)    The extension or amendment to increase the amount of any Letter of Credit shall be deemed to be an issuance of such Letter of Credit, and if any Letter of Credit contains a provision pursuant to which it is deemed to be extended unless notice of termination is given by the applicable Issuing Lender, the applicable Issuing Lender shall timely give such notice of termination unless it has theretofore timely received a Notice of Issuance and the other conditions to issuance of a Letter of Credit have also theretofore been met with respect to such extension. Each Letter of Credit shall expire at or before the close of business on the date that is one year after such Letter of Credit is issued (or, in the case of any extension thereof, one year after such extension); provided that (i) a Letter of Credit may contain a provision pursuant to which it is deemed to be extended on an annual basis unless notice
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of termination is given by the applicable Issuing Lender and (ii) in no event will a Letter of Credit expire (including pursuant to an extension thereof) on a date later than the LC Termination Date unless Cash Collateralized or backed by a standby letter of credit in a manner reasonably satisfactory to the applicable Issuing Lender.
(e)    Each Issuing Lender shall, within the time period stipulated by the terms and conditions of the applicable Letter of Credit following its receipt thereof (and, if no time period is so stipulated, promptly), examine all documents purporting to represent a demand for payment under a Letter of Credit. After such examination, such Issuing Lender shall promptly notify the Administrative Agent and the Principal Borrower by telephone (confirmed by telecopy or email in accordance with Section 11.01) of such demand for payment and whether such Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Principal Borrower of its obligation to reimburse such Issuing Lender and the Lenders with respect to any such LC Disbursement in accordance with this Section 2.19(e), and the Administrative Agent shall promptly notify the Lenders as to the amount to be paid as a result of such demand or drawing and the payment date. If an Issuing Lender shall make any Letter of Credit Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such Letter of Credit Disbursement by paying to the Administrative Agent an amount equal to such Letter of Credit Disbursement (the “Reimbursement Obligation”) in the currency of such Letter of Credit Disbursement (i) if such Letter of Credit Disbursement shall have been denominated in Dollars, not later than 2:00 p.m. (New York City time) on the date that such Letter of Credit Disbursement is made, if the Borrower shall have received notice of such Letter of Credit Disbursement prior to 9:00 a.m. (New York City time) on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 2:00 p.m. (New York City time) on the Domestic Business Day immediately following the day that the Borrower receives such notice and (ii) if such Letter of Credit Disbursement shall have been denominated in an Alternative Currency, not later than 12:00 noon (London time) on the Euro-Currency Business Day following the date that such Letter of Credit Disbursement is made, if the Borrower shall have received notice of such Letter of Credit Disbursement prior to 4:00 p.m. (London time) on the date such Letter of Credit Disbursement is made, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon (London time) on the second Euro-Currency Business Day immediately following the day that the Borrower receives such notice (it being understood that, subject to the terms and conditions otherwise applicable to a Borrowing hereunder, such payment may, in each case, be financed with a Borrowing hereunder). If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable Letter of Credit Disbursement payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.03 with respect to Loans made by such Lender (and Section 2.03 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Lender the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Lender or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the applicable Issuing Lender, then to such Lenders and the applicable Issuing Lender as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the applicable Issuing Lender for any Letter of Credit Disbursement (other than the funding of a Borrowing
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the principal amount of any Loans or Letter of Credit Disbursements in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 3.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and Letter of Credit Disbursements owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Letter of Credit Disbursements owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in the Borrowers’ obligations corresponding to such Defaulting Lender’s Letter of Credit Liabilities are held by the Lenders pro rata in accordance with the Commitments without giving effect to clause (d) below. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto;
(c)    the Commitment and Credit Exposure of such Defaulting Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification permitted to be effected by the Required Lenders pursuant to Section 11.05);
(d)    if any Letter of Credit Liabilities exist at the time such Lender becomes a Defaulting Lender then:
(i)    the Letter of Credit Liabilities of such Defaulting Lender shall be automatically reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent the sum of all non-Defaulting Lenders’ Credit Exposures plus such Defaulting Lender’s Letter of Credit Liabilities does not exceed the total of all non-Defaulting Lenders’ Commitments;
(ii)    if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Principal Borrower shall within three Domestic Business Days following notice by the Administrative Agent either (x) procure the reduction or termination of the Defaulting Lender’s Letter of Credit Liabilities (after giving effect to any partial reallocation pursuant to clause (i) above) or (y) Cash Collateralize for the benefit of the applicable Issuing Lender only the Borrowers’ obligations corresponding to such Defaulting Lender’s Letter of Credit Liabilities (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 6.03 for so long as such Letter of Credit Liabilities are outstanding;
(iii)    if the Borrower Cash Collateralizes any portion of such Defaulting Lender’s Letter of Credit Liabilities pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.07(b) with respect to such Defaulting Lender’s Letter of Credit Liabilities during the period such Defaulting Lender’s Letter of Credit Liabilities are Cash Collateralized;
(iv)    to the extent that the Letter of Credit Liabilities of the Defaulting Lender are reallocated among the non-Defaulting Lenders pursuant to clause (i) above, the letter of credit fees otherwise payable to the Defaulting Lender pursuant to Section 2.07(b) in respect of such reallocated Letter of Credit Liabilities shall be payable to the non-Defaulting Lenders in accordance with such non-Defaulting Lenders’ Applicable Percentages; and
(v)    if all or any portion of such Defaulting Lender’s Letter of Credit Liabilities is not reallocated, reduced, terminated nor Cash Collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of the Issuing Lenders or any other Lender hereunder,
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than one (1) Domestic Business Day prior to the date of its designation and (ii) a non-registration certificate (certificat de non-inscription d’une décision judiciaire) issued by the Luxembourg Trade and Companies Register regarding the absence of judicial proceedings dated no earlier than one (1) Domestic Business Day prior to the date of its designation.
(b)    Following the giving of any Election to Participate, if the designation of such Eligible Subsidiary obligates the Administrative Agent or any Lender to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Principal Borrower shall, promptly upon the request of the Administrative Agent or any Lender, supply such documentation (including, to the extent such Eligible Subsidiary qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, a Beneficial Ownership Certification) and other evidence as is reasonably requested by the Administrative Agent or any Lender in order for the Administrative Agent or such Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations.
(c)    Any extension of credit to an Eligible Subsidiary which is not organized under the laws of the United States or any political subdivision thereof shall not contravene any law or regulation applicable to the Lender extending such credit.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
The Principal Borrower represents and warrants on the Closing Date and on each date thereafter as required by Section 3.02 that:
Section 4.01    Legal Existence and Power. Each of the Loan Parties is an entity duly organized, validly existing and (to the extent the concept exists under the laws of that jurisdiction) in good standing under the laws of its jurisdiction of organization, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted except where the failure to have such power or possess such licenses, authorizations, consents and approvals would not have a Material Adverse Effect.
Section 4.02    Legal and Governmental Authorization; No Contravention. The execution, delivery and performance by each of the Loan Parties of this Agreement and its Notes are within the Loan Parties’ legal powers, have been duly authorized by all necessary legal action, require no action by or in respect of, or filing with, any Governmental Authority and do not materially contravene, or constitute a material default under, any provision of applicable law or regulation or of the organizational documents, by-laws or articles of association of any of the Loan Parties or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Loan Parties or result in the creation or imposition of any Lien on any asset of the Loan Parties or any of its Consolidated Subsidiaries (other than under any Loan Document).
Section 4.03    Binding Effect. This Agreement constitutes a valid and binding agreement of the Loan Parties, and each Note, if and when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, in each case subject to applicable bankruptcy, insolvency, receivership, examinership, moratorium, reorganization and other similar laws of general application affecting creditors’ rights, by any mandatory applicable provisions of Luxembourg law of general application and general principles of equity, regardless of whether considered in a proceeding in equity or at law.
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may reasonably request (it being understood and agreed that neither the Parent nor any of its Subsidiaries shall be required to disclose or discuss, or permit the inspection, examination or making of extracts of, any records, books, information or account or other matter (1) in respect of which disclosure to the Administrative Agent, any Lender or their representatives is then prohibited by applicable law or any agreement binding on the Parent or its Subsidiaries, (2) that is protected from disclosure by the attorney-client privilege or the attorney work product privilege or (3) constitutes non-financial trade secrets or non-financial proprietary information).
Information required to be delivered pursuant to subsections (a), (b), (e) or (f) above shall be deemed to have been delivered on the date on which (x) such information has been posted on the Internet by the Securities and Exchange Commission at https://www.sec.gov/edgar/searchedgar/webusers.htm (or any successor website) or (y) the Principal Borrower provides notice to the Administrative Agent that such information has been posted on the Principal Borrower’s website on the Internet at www.johnsoncontrols.com or at another website identified in such notice and accessible by the Lenders without charge; provided that such notice may be included in a certificate delivered pursuant to subsection 5.01(c). Notwithstanding the above, if any report, certificate or other information required under this Section 5.01 is due on a day that is not a Domestic Business Day, then such report, certificate or other information shall be required to be delivered on the first day after such day that is a Domestic Business Day.
Section 5.02    Payment of Taxes. The Parent will pay and discharge, and will cause each of its Consolidated Subsidiaries to pay and discharge, by when such become due, all income and other taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, except (i) where the same may be contested in good faith by appropriate action and/or (ii) if the failure to pay or discharge could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and will maintain, and will cause each of its Consolidated Subsidiaries to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same.
Section 5.03    Maintenance of Property; Insurance.
(a)    The Parent will, to the best of its ability, keep, and will cause each of its Consolidated Subsidiaries to keep, all material property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.
(b)    The Parent will, and will cause each of its Consolidated Subsidiaries to, maintain (either in the name of the Parent or in such Consolidated Subsidiary’s own name) insurance on all their respective properties in at least such amounts, and with such reasonable amounts of self-insurance, and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business, except, in all of the foregoing cases, where the failure to maintain such insurance could not reasonably be expected to have a Material Adverse Effect; and will furnish to the Administrative Agent upon its request therefor information presented in reasonable detail as to the insurance so carried.
Section 5.04    Conduct of Business and Maintenance of Existence. (a) The Parent will preserve, renew and keep in full force and effect, and will cause each of its Significant Subsidiaries to preserve, renew and keep in full force and effect, their respective legal existence; provided that nothing in this Section 5.04(a) shall prohibit (i) any transaction expressly permitted by Section 5.09 or (ii) the termination of the legal existence of any Significant Subsidiary if the Parent in good faith determines that
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Sanctions if conducted by a company organized in the United States or by a company organized in a European Union member state, the United Kingdom or Canada, or (C) in any other manner that would result in liability to any Lender, the Administrative Agent or any Issuing Lender under any applicable Sanctions or the violation of any Sanctions by any Lender, the Administrative Agent or any Issuing Lender. The foregoing clauses (B) and (C) of this Section 5.10 will not apply to any party hereto to which the Blocking Regulation applies, if and to the extent that such representations are or would be unenforceable by or in respect of that party pursuant to, or would otherwise result in a breach and/or violation of, (i) any provision of the Blocking Regulation (or any law or regulation implementing the Blocking Regulation in any member state of the European Union) or (ii) any similar blocking or anti-boycott law in the United Kingdom.
ARTICLE 6.
Defaults
Section 6.01    Events of Default. If, on or after the Closing Date, one or more of the following events (each an “Event of Default”) shall have occurred and be continuing:
(a)    any principal of any Loan or any Reimbursement Obligation shall not be paid when due, or any interest, any fees or any other amount payable hereunder, shall not be paid within five Domestic Business Days of the due date therefor;
(b)    any Loan Party shall fail to observe or perform any covenant contained in Sections 5.01(d), 5.04(a) (with respect to the Parent’s existence) or 5.07 to 5.10, inclusive;
(c)    any Loan Party shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above and other than Section 5.01(g)) for 30 days after written notice thereof has been given to the Principal Borrower by the Administrative Agent at the request of any Lender;
(d)    the guaranty provided by the Parent under Section 10.01 of this Agreement shall cease to be in full force and effect (other than, for the avoidance of doubt, in accordance with the terms of this Agreement);
(e)    any representation, warranty, certification or statement made by any Loan Party in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made);
(f)    any Loan Party or any Consolidated Subsidiary shall fail to make any payment of principal or premium or interest in respect of any Material Debt when due or within any applicable grace period;
(g)    any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables (any applicable grace or cure period having expired) the holder of such Debt or any Person acting on such holder’s behalf to accelerate the maturity thereof; provided that none of the following shall give rise to a Default: (i) the obligation of any Loan Party or any Subsidiary thereof to prepay or repurchase, or offer to prepay or repurchase, Debt of an acquired Person pursuant to change-of-control provisions in the documentation governing such Debt, (ii) any Default under Debt of an acquired Person that is cured, or which Debt is repaid, within 60 days after the consummation of the acquisition of such Person; (iii) secured Debt that becomes due as a result of the voluntary transfer of assets securing such Debt or a casualty or similar event; (iv) prepayments of Debt which are mandatory under the terms of the documentation governing such Debt by reason of the receipt of net cash proceeds
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Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement; or
(iv)    such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
(b)    In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or such Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, and the Lead Arrangers, the Syndication Agent, the Documentation Agents or any of their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Principal Borrower or any other Loan Party, that none of the Administrative Agent, or the Lead Arrangers, the Syndication Agent, the Documentation Agents or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).
(c)    The Administrative Agent and each Lead Arranger hereby informs the Lenders that each such Person is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the Commitments, this Agreement and any other Loan Documents, (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the Commitments for an amount less than the amount being paid for an interest in the Loans, the Letters of Credit or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent fees or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
Section 7.13    Sustainability Matters. It is hereby understood and agreed that neither the Administrative Agent nor the Sustainability Structuring Agent shall have any responsibility for (or liability in respect of) reviewing, auditing or otherwise evaluating any calculation by the Parent of any Sustainability Fee Adjustment or any Sustainability Margin Adjustment (or any of the data or computations that are part of or related to any such calculation) set forth in any Pricing Certificate (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry).
ARTICLE 8
Change In Circumstances
Section 8.01    Basis for Determining Interest Rate Inadequate or Unfair.
(a) If on or prior to the first day of any Interest Period for any Euro Currency Loan:
(a)    Subject to clauses (b), (c), (d) and (e) of this Section 8.01:
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(i)    if the Administrative Agent determines (which determination shall be conclusive and binding absent demonstrable error) (A) prior to the commencement of any Interest Period for a Euro-Currency Borrowing, that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the LIBO Rate, the Adjusted EURIBO Rate or the EURIBO Rate, as applicable (including, without limitation, because the LIBO Relevant Screen Rate is not available or published on a current basis), for the applicable Agreed Currency and such Interest Period; provided that no Benchmark Transition Event shall have occurred at such time; or or (B) at any time, that adequate and reasonable means do not exist for ascertaining the applicable Daily Simple RFR or RFR for the applicable Agreed Currency, or
(ii)    if the Administrative Agent is advised by the Required Lenders that (A) prior to the commencement of any Interest Period for a Euro-Currency Borrowing, the Adjusted LIBO Rate, the LIBO Rate, the Adjusted EURIBO Rate or the EURIBO Rate for the applicable to Euro Currency Borrowings in the relevant currency for Agreed Currency and such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for the applicable Agreed Currency and such Interest Period, or (B) at any time, the applicable Daily Simple RFR or RFR for the applicable Agreed Currency will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for the applicable Agreed Currency,
then the Administrative Agent shall forthwith give notice (in reasonable detail) thereof to the Principal applicable Borrower and the Lenders, whereupon, of the applicable Class prior to the commencement of such Interest Period by telephone, facsimile or email in accordance with Section 11.01 as promptly as practicable thereafter and, until the Administrative Agent notifies the applicable Borrower and the Lenders of the applicable Class that the circumstances giving rise to such notice no longer exist (which notice the Administrative Agent hereby agrees to provide promptly after its determination of such circumstances ceasing to exist), (i) any Notice of Interest Rate Election that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Euro-Currency Borrowing shall be ineffective, (ii) if any Notice of Borrowing requests a Euro-Currency Borrowing in Dollars, such Borrowing shall be made as a Base Rate Borrowing and (iii) if any Notice of Borrowing requests a Euro-Currency Borrowing or an RFR Borrowing for the relevant rate above in an Alternative Currency, then such request shall be ineffective; provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then all other Types of Borrowings shall be permitted. Furthermore, if any Euro-Currency Loan or RFR Loan in any Agreed Currency is outstanding on the date of the applicable Borrower’s receipt of the notice from the Administrative Agent referred to in this Section 8.01(a) with respect to a Relevant Rate applicable to such Euro-Currency Loan or RFR Loan, then until the Administrative Agent notifies the Principal Borrower and the Lenders that the circumstances giving rise to such suspension notice no longer exist (which the Administrative Agent shall do promptly after becoming aware thereof), (i) the obligations of the Lenders to make Euro-Currency Loans or RFR Loans in the relevant currency, or to continue or convert outstanding Loans as or into Euro-Currency Loans in the relevant currency, shall be suspended and (ii) each outstanding Euro-Currency Loan or RFR Loan, as applicable, in the relevant currency shall be prepaid (or, in the case of a Euro-Dollar Euro-Currency Loan denominated in Dollars, converted into a Base Rate Loan) on the last day of the then current Interest Period applicable thereto (in the case of Euro-Currency Loans) or on the next interest payment date applicable thereto (in the case of RFR Loans). Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Euro-Currency Borrowing or any RFR Loans for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing in an equal Dollar Amount.
(b)    Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the Administrative Agent and the Principal Borrower may amend this Agreement to replace the LIBO Rate with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event
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will become effective at 5:00 p.m. on the fifth (5th) Domestic Business Day after the Administrative Agent has posted such proposed amendment to all Lenders and the Principal Borrower, so long as the Administrative Agent has not received, by such time, written notice of objection to such proposed amendment from Lenders comprising the Required Lenders; provided that, with respect to any proposed amendment containing any SOFR-Based Rate, the Lenders shall be entitled to object only to the Benchmark Replacement Adjustment contained therein. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders accept such amendment. No replacement of the LIBO Rate with a Benchmark Replacement will occur prior to the applicable Benchmark Transition Start Date.
(c)    In connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any such amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.
(d)    The Administrative Agent will promptly notify the Principal Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or Lenders pursuant to this Section 8.01, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent demonstrable error and may be made in its or their sole reasonable good faith discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 8.01.
(e)    Upon the Principal Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, (i) the Principal Borrower may revoke any request for a Euro-Currency Loan or conversion to or continuation of any Euro-Currency Loan, (ii) the obligations of the Lenders to make Euro-Currency Loans in the relevant currency, or to continue or convert outstanding Loans as or into Euro-Currency Loans in the relevant currency, shall be suspended and (iii) each outstanding Euro-Currency Loan in the relevant currency shall be prepaid (or, in the case of a Euro-Dollar Euro-Currency Loan denominated in Dollars, converted into a Base Rate Loan) on the last day of the then current Interest Period applicable thereto.
Section 8.02    Illegality. If a Change in Law shall make it unlawful or impossible for any Lender (or its Euro-Dollar Applicable Lending Office) to make, maintain or fund its Euro-Currency Loans or RFR Loans, as applicable, to any Borrower in any currency and such Lender shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Principal Borrower, whereupon until such Lender notifies the Principal Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist (which notice such Lender shall give promptly after such circumstances cease to exist), the obligation of such Lender to make Euro-Currency Loans or RFR Loans, as applicable, to a Borrower in such currency shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section 8.02, such Lender shall designate a different Euro-Currency Applicable Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise materially disadvantageous to such Lender. If such notice is given, each affected Euro-Currency Loan or RFR Loan, as applicable, of such Lender then outstanding shall be converted to a Base Rate Loan (in the case of an Alternative Currency Loan, in a principal amount equal to the Dollar Amount thereof on the date of conversion) either (a) with respect to a Euro-Currency Loan (i) on the last day of the then current Interest Period applicable to such Euro-Currency Loan if such Lender may lawfully continue to maintain
77


and fund such Loan as a Euro-Currency Loan to such day or (bii) immediately if such Lender shall determine that it may not lawfully continue to maintain and fund such Loan as a Euro-Currency Loan to such day. or (b) with respect to an RFR Loan (i) on the interest payment date for such RFR Loan pursuant to the terms of Section 2.06(c) applicable to such RFR Loan if such Lender may lawfully continue to maintain and fund such Loan as an RFR Loan to such day or (ii) immediately if such Lender shall determine that it may not lawfully continue to maintain and fund such Loan as an RFR Loan to such day.
Section 8.03    Increased Cost and Reduced Return.
(a)    If a Change in Law shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Currency Loan any such requirement with respect to which such Lender is entitled to compensation during the relevant Interest Period under Section 2.14), special deposit, liquidity, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, such Lender (or its Applicable Lending Office) or shall impose on any Lender (or its Applicable Lending Office) or on the London or other applicable offshore interbank market for the Applicable Currency any other condition affecting its Euro-Currency Loans (other than with respect to taxes), its Note(s) or its obligation to make Euro-Currency Loans or its obligations hereunder in respect of Letters of Credit and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making or maintaining any Euro-Currency Loan or of issuing or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Note(s) with respect thereto, by an amount deemed by such Lender to be material, then, within 30 days after demand by such Lender (with a copy to the Administrative Agent), the Principal Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction.
(b)    If any Lender shall have determined that a Change in Law (other than with respect to taxes) has or would have the effect of reducing the rate of return on capital of such Lender (or its Lender Parent) as a consequence of such Lender’s obligations hereunder to a level below that which such Lender (or its Lender Parent) could have achieved but for such Change in Law (taking into consideration its policies with respect to capital adequacy or liquidity) by an amount deemed by such Lender to be material, then from time to time, within 30 days after demand by such Lender (with a copy to the Administrative Agent), the Principal Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender (or its Lender Parent) for such reduction.
(c)    If after the date of this Agreement, a Change in Law shall subject any Lender to any taxes (including any interest, additions to tax or penalties applicable) (other than Taxes imposed on or with respect to any payment made by a Loan Party hereunder or under any Notes and Excluded Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, and the result shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Principal Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

78


reasonable written request from the Principal Borrower or Administrative Agent provide an updated Qualifying Lender Confirmation.
(p)    If the Lender fails to provide a Qualifying Lender Confirmation in accordance with Section 8.04(o) above, then that Lender shall be treated for the purposes of this Agreement (including by the Principal Borrower) as if it is not a Qualifying Lender until such time as it notifies the Principal Borrower which category applies. Each Lender, upon reasonable written request from the Principal Borrower from time to time shall, if applicable, provide such information as may be required to enable the Principal Borrower to comply with Sections 891A, 891E, 891F and 891G TCA (and any regulations made thereunder).
Section 8.05    Base Rate Loans Substituted for Affected Euro-Currency Loans. If (i) the obligation of any Lender to make, or to continue or convert outstanding Loans as or to, Euro-Currency Loans to any Borrower in any currency has been suspended pursuant to Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03 or 8.04 with respect to its Euro-Currency Loans in any currency and the Principal Borrower shall, by at least five Euro-Dollar Business Days’ prior notice to such Lender through the Administrative Agent, have elected that the provisions of this Section shall apply to such Lender, then, unless and until such Lender notifies the Principal Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, all Loans which would otherwise be made by such Lender as (or continued as or converted to) Euro-Currency Loans in such currency to such Borrower shall instead be Base Rate Loans (in the case of Alternative Currency Loans, in the same Dollar Amount as the Euro-Currency Loan that such Lender would otherwise have made in the Alternative Currency) on which interest and principal shall be payable contemporaneously with the related Euro-Currency Loans of the other Lenders. If such Lender notifies the Principal Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Base Rate Loan shall be converted into a Euro-Currency Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Currency Loans of the other Lenders. If such Loan is converted into an Alternative Currency Loan, such Lender, the Administrative Agent and the Borrower shall make such arrangements as shall be required (including increasing or decreasing the amount of such Alternative Currency Loan) so that such Alternative Currency Loan shall be in the same amount as it would have been if the provisions of this Section had never applied thereto.
Section 8.06    Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation (or provides notice of an intent to request compensation) under Section 8.03, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 8.04, or if any Lender invokes Section 3.03(c), then such Lender shall use reasonable efforts to designate a different Applicable Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 8.03 or 8.04, as the case may be, in the future or with respect to Section 3.03(c) would eliminate the contravention of law or regulation and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be materially disadvantageous to such Lender. The Principal Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b)    If any Lender or its Participant requests compensation (or provides notice of an intent to request compensation) under Section 8.03, or if any Borrower is required to pay any additional amount to any Lender or its Participant or any Governmental Authority for the account of any Lender (or its Participant) pursuant to Section 8.04, or if any Lender becomes a Defaulting Lender or invokes Section 3.03(c) or 8.02, or if any Lender shall reject a requested additional Approved Jurisdiction or a requested
84


any amended or successor version) or, if different, under Sections 871(h) or 881(c) of the Internal Revenue Code. The entries in the Participant Register shall be conclusive absent clearly demonstrable error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. Each Lender that sells a participation pursuant to this Section shall obtain a Qualifying Lender Confirmation completed and signed by or on behalf of the Participant and shall obtain such information required under Sections 891A; provided that, notwithstanding anything to the contrary, such confirmation or information shall be shared with Borrowers only to the extent required by law for reduced withholding or exemption from withholding.
(c)    Any Lender may at any time assign to one or more Persons (other than an Ineligible Institution) (each an “Assignee”) all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000) of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Lender, with (and subject to) the consent of the Administrative Agent, each Issuing Lender and the Principal Borrower, such consents not to be unreasonably withheld or delayed; provided that (i) no consent of the Principal Borrower shall be required for (1) an assignment to a Lender or a Lender Affiliate (it being understood that the Principal Borrower shall nevertheless receive prompt notice, either prior to or promptly after such assignment, of any such assignment to a Lender or a Lender Affiliate) (provided further, notwithstanding the preceding clause (1), so long as no Event of Default under Section 6.01(a), (h) or (i) has occurred and is continuing, the consent of the Principal Borrower shall be required if, after giving effect to such assignment, the assignee, collectively with its affiliated Lenders and affiliated Lender Affiliates, would, as a result of such assignment, hold more than fifteen percent (15%) of the aggregate amounts of Loans and unused Commitments), or (2) an assignment to any assignee if an Event of Default under Section 6.01(a), (h) or (i) has occurred and is continuing and (ii) the Principal Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 15 Domestic Business Days after having received notice thereof. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, such Assignee shall be a Lender party to this Agreement and shall have all the rights and obligations of a Lender with a Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection, the transferor Lender, the Administrative Agent and the Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Lender shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500. The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrowers, shall maintain at one of its offices in New York a copy of each Assignment and Assumption Agreement delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent clearly demonstrative error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

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PRICING SCHEDULE


Each of “Facility Fee Rate”, “Euro-Currency Margin”, “RFR Margin” and “Base Rate Margin” means, for any day, the rate set forth below, in basis points per annum, in the row opposite such term and in the column corresponding to the Pricing Level that applies for such day:

LEVEL I
LEVEL II
LEVEL III
LEVEL IV
LEVEL V
Facility Fee Rate
7.0
9.0
10.0
12.5
17.5
Euro-Currency Margin
80.5
91.0
102.5
112.5
120.0
RFR Margin
80.5
91.0
102.5
112.5
120.0
Base Rate Margin
0.0
0.0
2.5
12.5
20.0


For purposes of this Schedule, the following terms have the following meanings, subject to the concluding paragraph of this Schedule:
“Fitch” means Fitch, Inc.
“Level I” status exists at any date if, at such date, the Credit Rating is A or higher by S&P or A2 or higher by Moody’s or A or higher by Fitch.
“Level II” status exists at any date if, at such date, (i) Level I status does not exist and (ii) the Credit Rating is A- or higher by S&P or A3 or higher by Moody’s or A- or higher by Fitch.
“Level III” status exists at any date if, at such date, (i) neither Level I status nor Level II status exists and (ii) the Credit Rating is BBB+ or higher by S&P or Baa1 or higher by Moody’s or BBB+ or higher by Fitch.
“Level IV” status exists at any date if, at such date, (i) none of Level I status, Level II status or Level III status exists and (ii) the Credit Rating is BBB or higher by S&P or Baa2 or higher by Moody’s or BBB or higher by Fitch.
“Level V” status exists at any date if, at such date, no other Pricing Level status exists.
“Moody’s” means Moody’s Investors Service, Inc.
“Pricing Level” refers to the determination of which of Level I, Level II, Level III, Level IV or Level V status exists at any date.
“S&P” means Standard & Poor’s Ratings Services, a division of McGraw-Hill Financial, Inc.



“Credit Rating” means the rating assigned to the Principal Borrower’s senior unsecured long-term debt.
The rating in effect at any date is that in effect at the close of business on such date. If the Principal Borrower is split-rated and the ratings differential between the highest rating and the next highest rating is one notch, the highest of the ratings will apply. If the Principal Borrower is split-rated and the ratings differential between the highest rating and the next highest rating is more than one notch, a rating that is one notch lower than the highest of the ratings shall be used. In the event that the Principal Borrower does not have a Credit Rating by any two of S&P, Moody’s or Fitch, then Level V shall apply.
It is hereby understood and agreed that (i) the Facility Fee Rate shall be adjusted from time to time based upon the Sustainability Fee Adjustment and (ii) both each of the Euro-Currency Margin, the RFR Margin and the Base Rate Margin shall be adjusted from time to time based upon the Sustainability Margin Adjustment, in each case as calculated and applied as set forth in this Agreement (including this Pricing Schedule); provided that in no event shall any of the Facility Fee Rate, the Euro-Currency Margin, the RFR Margin or the Base Rate Margin be less than zero (0.0) basis points per annum.
After the Parent delivers the 2017 KPI Metrics Report to the Administrative Agent, the Parent will determine if any changes are required to the Sustainability Table attached as Schedule 1.01 in respect of the GHG Intensity Targets and GHG Intensity 10% Thresholds and/or the TRIR Targets and TRIR 10% Thresholds due to the 2017 GHG Intensity Baseline and/or the 2017 TRIR Baseline being different from the relevant baseline that was used to create the Sustainability Table attached as Schedule 1.01, it being understood and agreed that such changes shall be limited to resetting such relevant baselines based on the 2017 KPI Metrics Report and the cumulative decrease of each such metric shall be 25.00% and the rate of reduction in respect of each such metric year over year shall be substantially the same as set forth in the Sustainability Table attached as Schedule 1.01. Such revised Sustainability Table will be provided by the Parent to the Administrative Agent with written direction to post (and the Administrative Agent shall post) such item to the Lenders, and, upon the date of such posting, such revised Sustainability Table shall constitute the Sustainability Table for purposes of this Agreement on and after such date (subject to further modification as contemplated by clause (ii) of the definition of “Sustainability Table”).
It is hereby understood and agreed that no Pricing Certificate may be delivered under this Agreement until the Parent has delivered the 2017 KPI Metrics Report and the Sustainability Table has been finalized based on such report as contemplated by the immediately preceding paragraph.
Following the date on which the Parent provides a Pricing Certificate in respect of its most recently ended calendar year, (i) the Euro-Currency Margin, the RFR Margin and the Base Rate Margin shall be increased or decreased (or neither increased nor decreased), as applicable, pursuant to the Sustainability Margin Adjustment as set forth in such Pricing Certificate and (ii) the Facility Fee Rate shall be increased or decreased (or neither increased nor decreased), as applicable, pursuant to the Sustainability Fee Adjustment as set forth in such Pricing Certificate. For purposes of the foregoing, (a) each of the Sustainability Margin Adjustment and the Sustainability Fee Adjustment shall be determined as of the fifth (5th) Domestic Business Day following receipt by the Administrative Agent of a Pricing Certificate delivered in accordance with Section 5.01(g) based upon the KPI Metrics set forth in such Pricing Certificate and the calculations of the Sustainability Margin Adjustment and the Sustainability Fee Adjustment calculations, as applicable, therein (such day, the “Sustainability Pricing Adjustment Date”) and (b) each change in the Euro-Currency Margin, the RFR Margin and the Base Rate Margin and the Facility Fee Rate resulting from a Pricing Certificate shall be effective during the period commencing on and including the applicable Sustainability Pricing Adjustment Date and ending on the date immediately preceding the next such Sustainability Pricing Adjustment Date (or, in the case of non-delivery of a Pricing Certificate, the last day such Pricing Certificate could have been delivered pursuant to the terms of Section 5.01(g)).



For the avoidance of doubt, only one Pricing Certificate may be delivered in respect of any calendar year. It is further understood and agreed that the Euro-Currency Margin, the RFR Margin and the Base Rate Margin will never be reduced or increased by more than 4.5 bps and the Facility Fee Rate will never be reduced or increased by more than 0.75 bps, in each case pursuant to the Sustainability Margin Adjustment or the Sustainability Fee Adjustment, as applicable, during any calendar year.
It is hereby understood and agreed that if no such Pricing Certificate is delivered by the Parent within the period set forth in Section 5.01(g), the Sustainability Margin Adjustment will be positive 4.5 bps and the Sustainability Fee Adjustment will be positive 0.75 bps commencing on the last day such Pricing Certificate could have been delivered pursuant to the terms of Section 5.01(g) and continuing until the Parent delivers a Pricing Certificate to the Administrative Agent.
If (a) the Parent or the Lenders become aware of any material inaccuracy in the Sustainability Margin Adjustment, the Sustainability Fee Adjustment or the KPI Metrics as reported on the applicable Pricing Certificate or (b) the Parent and the Lenders agree that the Sustainability Margin Adjustment, the Sustainability Fee Adjustment or the KPI Metrics as calculated by the Parent at the time of delivery of the relevant Pricing Certificate was inaccurate, and in each case, a proper calculation of the Sustainability Margin Adjustment, the Sustainability Fee Adjustment or the KPI Metrics would have resulted in an increase in the Euro-Currency Margin, the RFR Margin and the Base Rate Margin and the Facility Fee Rate for such period, the Parent shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the Lenders, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Parent under the bankruptcy code, automatically and without further action by the Administrative Agent or any Lender), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. It is understood and agreed that any inaccuracies in the Sustainability Margin Adjustment, the Sustainability Fee Adjustment, the KPI Metrics or the KPI Metrics Report shall not constitute a Default or Event of Default under this Agreement, provided that the Parent complies with the foregoing provisions of this paragraph.
If a Significant ESG Event occurs, the Sustainability Table will be restated for the calendar year in which the Parent’s auditors consider the impacted entity or assets as part of (or no longer part of) the Parent’s consolidated financial statements (such calendar year, the “Specified Calendar Year”) and each calendar year following the Specified Calendar Year through the Parent’s 2025 calendar year. The Parent will provide the Pro Forma KPI Metrics Report (as defined below) and the proposed restatement of the Sustainability Table to the Administrative Agent for distribution by the Administrative Agent to the Lenders. The restatement of the Sustainability Table (i) will be based on the KPI Metrics Report most recently delivered by the Parent giving pro forma effect to the impacted entity or assets using the same auditing standards and methodology used in the 2017 KPI Metrics Report (except for any changes to such standards and/or methodology that (x) are consistent with then generally accepted industry standards or (y) if not so consistent, are proposed by the Parent and posted to the Lenders, unless Lenders constituting the Required Lenders object to such changes within five (5) Domestic Business Days after such posting) (such pro forma report, the “Pro Forma KPI Metrics Report”), (ii) will set new GHG Intensity Targets, GHG Intensity 10% Thresholds, TRIR Targets and TRIR 10% Thresholds, and such new targets and thresholds shall be calculated so that the sum of (x) the cumulative percentage reduction of GHG Intensity and TRIR, as applicable, that would be realized during the period comprised of the Specified Calendar Year and each calendar year thereafter through and including the Parent’s 2025 calendar year based on such targets, as compared to the baseline contemplated by the Pro Forma KPI Metrics Report, plus (y) the Cumulative GHG Intensity Reduction and the Cumulative TRIR Reduction, as applicable, realized prior



Exhibit 10.2
AMENDMENT NO. 1
Dated as of May 25, 2021
to
CREDIT AGREEMENT
Dated as of December 5, 2019

THIS AMENDMENT NO. 1 (this “Amendment”) is made as of May 25, 2021 by and between Johnson Controls International plc, with company number 543654, an Irish public limited company (the “Principal Borrower”) and JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders (the “Administrative Agent”), under that certain Credit Agreement dated as of December 5, 2019, by and among the Principal Borrower, Tyco Fire & Security Finance S.C.A., a corporate partnership limited by shares (société en commandite par actions) incorporated under the laws of Luxembourg, having its registered office at 2, rue Jean Monnet, L-2180 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg trade and companies register (RCS Luxembourg) under number B190265, the Lenders from time to time party thereto and the Administrative Agent (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.
WHEREAS, pursuant to Section 11.05 of the Credit Agreement, technical and conforming modifications to the Credit Agreement may be made with the consent of the Principal Borrower and the Administrative Agent (but without the consent of any Lender or Issuing Lender) to the extent necessary to cure any ambiguity, omission, error, defect or inconsistency;
WHEREAS, pursuant to the terms of the Pricing Schedule, the Sustainability Table may be updated from time to time to incorporate revised baselines (and the targets and the 10% thresholds derived therefrom) set forth in the relevant Pro Forma KPI Metrics Report in connection with each Significant ESG Event;
WHEREAS, the Sustainability Table set forth in the Credit Agreement as of the Closing Date contained certain errors and was inconsistent with information materials presented to the Lenders prior to the Closing Date;
WHEREAS, certain Significant ESG Events have occurred since the Closing Date;
WHEREAS, the Sustainability Table needs to be updated to correct such errors and to reflect the effects of such Significant ESG Events;
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Principal Borrower and the Administrative Agent hereby agree to enter into this Amendment.
1.Amendments to the Credit Agreement. Effective as of the date of satisfaction of the conditions precedent set forth in Section 2 below, the Sustainability Table shall be restated in its entirety as set forth on Annex A hereto.
2.Conditions of Effectiveness. This Amendment shall become effective as of the first date on which the Administrative Agent shall have received counterparts of this Amendment duly executed by the Principal Borrower and the Administrative Agent.



3.Representations and Warranties of the Principal Borrower. The Principal Borrower hereby represents and warrants as follows:
(a)Each of this Amendment and the Credit Agreement as amended hereby (the “Amended Credit Agreement”) constitutes a valid and binding agreement of each Borrower enforceable against the applicable Borrower in accordance with its terms, in each case subject to applicable bankruptcy, insolvency, receivership, examinership, moratorium, reorganization and other similar laws of general application affecting creditors’ rights, by any mandatory applicable provisions of Luxembourg law of general application and general principles of equity, regardless of whether considered in a proceeding in equity or at law.
(b)As of the date hereof and immediately after giving effect to the terms of this Amendment, (i) no Default has occurred and is continuing and (ii) the representations and warranties of the Borrowers set forth in the Credit Agreement (except the representations and warranties set forth in Sections 4.04(b), 4.05 and 4.07 of the Credit Agreement) are true in all material respects, except to the extent any such representation and warranty (i) expressly relates to an earlier date in which case such representation and warranty is true and correct in all material respects as of such earlier date or (ii) is qualified by materiality, in which case such representation and warranty is true and correct in all respects.
4.Reference to and Effect on the Credit Agreement.
(a)From and after the effectiveness of the amendment to the Credit Agreement evidenced hereby, the terms “Agreement”, “this Agreement”, “herein”, “hereinafter”, “hereto”, “hereof” and words of similar import, as used in the Amended Credit Agreement, shall, unless the context otherwise requires, refer to the Amended Credit Agreement, and the term “Credit Agreement”, as used in the other Loan Documents, shall mean the Amended Credit Agreement.
(b)Each Loan Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.
(c)The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Amended Credit Agreement, the Loan Documents or any other documents, instruments and agreements executed and/or delivered in connection therewith.
(d)This Amendment shall be a Loan Document.
5.Governing Law; Jurisdiction. This Amendment shall be governed by and construed in accordance with the laws of the State of New York.
6.Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
7.Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment and/or any document to be signed in connection with this Amendment and the transactions contemplated hereby shall be deemed to include Electronic Signatures (as defined below), deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be. As used herein, “Electronic Signatures” means any electronic symbol or process attached to, or associated with, any contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
[Signature Pages Follow]

    2


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the day and year first above written.

JOHNSON CONTROLS INTERNATIONAL PLC,
as the Principal Borrower


By: /s/ Olivier Leonetti
Name: Olivier Leonetti
Title: Executive Vice President and Chief Financial Officer


By: /s/ Marc Vandiepenbeeck
Name: Marc Vandiepenbeeck
Title: Vice President and Treasurer

Signature Page to Amendment No. 1 to
Credit Agreement dated as of December 5, 2019
Johnson Controls International plc

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent



By: /s/ Will Price
Name: Will Price
Title: Vice President


Signature Page to Amendment No. 1 to
Credit Agreement dated as of December 5, 2019
Johnson Controls International plc


Annex A

Updated Sustainability Table

Attached




updated 3/19/2021 -3.53%
KPI # 1 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
2025 Strategy target - 25% reduction by 2025 0.56 0.54 0.52 0.50 0.48 0.47 0.45 0.44 0.42
10% threshold     0.57 0.55 0.53 0.51 0.50 0.48 0.46
Actual TRIR   0.48 0.41 0.40          
compounded % decrease - -3.53% -6.94% -10.23% -13.40% -16.46% -19.41% -22.25% -25.00%
Actual % reduction - -14.75% -26.46% -29.33%          
Total decrease by 2025 -25.00%
annual decrease -3.53%
KPI # 2 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
GHG savings from Performance Infrastructure projects 0.00 120,000 240,000 360,000 480,000 600,000 720,000 840,000 960,000
10% Threshold NA 108,000 216,000 324,000 432,000 540,000 648,000 756,000 864,000
Actual - 144,550 237,908 338,730          
KPI # 3 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
GHG Intensity Target 47.60 45.9 44.3 42.7 41.2 39.8 38.4 37.0 35.7
10% Threshold NA NA 48.73 47.01 45.35 43.74 42.20 40.71 39.27
Cumulative % decrease - -3.53% -6.94% -10.23% -13.40% -16.46% -19.41% -22.25% -25.00%
Actual - -15.20% -19.90% -26.10%          
Total decrease by 2025 -25.00%
Restated values due to rebaselining



Exhibit 31.1
CERTIFICATIONS
I, George R. Oliver, of Johnson Controls International plc, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Johnson Controls International plc;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 2, 2022
                                 
/s/ George R. Oliver
George R. Oliver
Chairman and Chief Executive Officer


Exhibit 31.2
CERTIFICATIONS
I, Olivier Leonetti, of Johnson Controls International plc, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Johnson Controls International plc;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 2, 2022        
/s/ Olivier Leonetti
Olivier Leonetti
Executive Vice President and
Chief Financial Officer


Exhibit 32.1
CERTIFICATION OF PERIODIC FINANCIAL REPORTS
We, George R. Oliver and Olivier Leonetti, of Johnson Controls International plc, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.the Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 (Periodic Report) to which this statement is an exhibit fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and

2.information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Johnson Controls International plc.

Date: February 2, 2022

                                    
/s/ George R. Oliver
George R. Oliver
Chairman and Chief Executive Officer
 
                                    
/s/ Olivier Leonetti
Olivier Leonetti
Executive Vice President and
Chief Financial Officer