UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K/A

(Amendment No. 1)

 

 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2016

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: 001-37757

 

 

 

LOGO

Adient plc

(exact name of Registrant as specified in its charter)

 

 

 

Ireland   98-1328821

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

25-28 North Wall Quay, IFSC, Dublin 1, Ireland

(Address of principal executive offices)

Registrant’s telephone number, including area code: 414-220-8900

Securities registered pursuant to Section 12(b) of the Act:

 

(Title of class)

 

(Name of exchange on which registered)

Ordinary Shares, par value $0.001   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act.    Yes  ☐    No  ☒

Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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      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 Act).    Yes  ☐    No   ☒

As of March 31, 2016, the registrant’s ordinary shares were not publicly traded. At October 31, 2016, 93,671,810 ordinary shares were issued and outstanding.

Documents Incorporated by Reference

Portions of the Registrant’s definitive proxy statement relating to its 2017 annual general meeting of shareholders that was held on March 13, 2017 (the “2017 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2017 Proxy Statement was filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

 

 

 


EXPLANATORY NOTE

This Amendment No. 1 to Form 10-K (this “Amendment”) amends the Annual Report on Form 10-K for the fiscal year ended September 30, 2016, originally filed on November 29, 2016 (the “Original 10-K”), of Adient plc (“Adient”). Adient is filing this Amendment to amend Item 15 to include the separate financial statements of Yanfeng Adient Seating Co., Ltd. (“YFAS”), which was formerly known as “Shanghai Yanfeng Johnson Controls Seating Co., Ltd.”, as required by Rule 3-09 of Regulation S-X because YFAS was deemed significant to the Company under Rule 3-09 of Regulation S-X (the “Rule 3-09 financial statements”). The Rule 3-09 financial statements were not included in the Original 10-K because, as previously disclosed, YFAS’s fiscal year ended on December 31, 2016, after the date of the filing of the Original 10-K. The Rule 3-09 financial statements include consolidated balance sheets of YFAS as of December 31, 2016, 2015 and 2014, and the related consolidated income statements, changes in owners’ equity, and cash flows for each of the three years in the period ended December 31, 2016. In accordance with Rule 3-09 of Regulation S-X, only the financial statements as of and for the years ended December 31, 2016 and December 31, 2014 are required to be audited. The Rule 3-09 financial statements as of and for the year ended December 31, 2015 are unaudited. The Rule 3-09 financial statements were prepared and provided to Adient by YFAS.

In addition, Adient is filing this Amendment to refile certain exhibits that were not originally filed in .htm format.

This Amendment should be read in conjunction with the Original 10-K. The Original 10-K has not been amended or updated to reflect events occurring after November 29, 2016, except as specifically set forth in this Amendment.


Item 15. Exhibits, Financial Statement Schedules

 

(a) Documents filed as part of this report

 

(1) Combined Financial Statements:

 

Index to Combined Financial Statements

  

Page

Report of Independent Registered Public Accounting Firm

   45

Combined Statements of Income for the years ended September 30, 2016, 2015 and 2014

   46

Combined Statements of Comprehensive Income (Loss) for the years ended September 30, 2016, 2015 and 2014

   47

Combined Statements of Financial Position as of September 30, 2016 and 2015

   48

Combined Statements of Cash Flows for the years ended September 30, 2016, 2015 and 2014

   49

Combined Statements of Invested Equity Attributable to Adient for the years ended September 30, 2016, 2015 and 2014

   50

Notes to Combined Financial Statements

   51

Schedule II - Valuation and Qualifying Accounts

   89

 

(2) Financial Statement Schedules

 

     Year Ended September 30,  

(in millions)

   2016      2015      2014  

Accounts Receivable - Allowance for Doubtful Accounts

        

Balance at beginning of period

   $ 12      $ 11      $ 14  

Provision charged to costs and expenses

     17        14        17  

Reserve adjustments

     (8      (13      (18

Transfers to held for sale

     —          —          (2
  

 

 

    

 

 

    

 

 

 

Balance at end of period

   $ 21      $ 12      $ 11  
  

 

 

    

 

 

    

 

 

 

Deferred Tax Assets - Valuation Allowance

        

Balance at beginning of period

   $ 392      $ 459      $ 426  

Allowance provision for new operating and other loss carryforwards

     53        24        33  

Allowance provision (benefit) adjustments

     (178      (91      —    
  

 

 

    

 

 

    

 

 

 

Balance at end of period

   $ 267      $ 392      $ 459  
  

 

 

    

 

 

    

 

 

 

The financial statements of YFAS and its consolidated subsidiaries required by Rule 3-09 of Regulation S-X are provided as Exhibit 99.1 to this Amendment.

All other financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the combined financial statements and notes thereto included in this Amendment.

 

(3) Exhibits required by Item 601 of Regulation S-K

The information required by this Section (a)(3) of Item 15 is set forth on the exhibit index that follows the signature page of this Amendment.


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Adient plc
By:  

/s/ R. Bruce McDonald

  R. Bruce McDonald
  Chairman and Chief Executive Officer
Date:   June 29, 2017
By:  

/s/ Jeffrey M. Stafeil

  Jeffrey M. Stafeil
  Executive Vice President and Chief Financial Officer
Date:   June 29, 2017


EXHIBIT INDEX

 

Exhibit
No.

  

Exhibit Title

  2.1    Separation and Distribution Agreement, dated as of September 8, 2016, by and between Johnson Controls International plc and Adient Limited (incorporated by reference to Exhibit 2.1 to Amendment No. 4 to Adient plc’s Registration Statement on Form 10 filed September 20, 2016 (File No. 1-37757)).#
  3.1    Memorandum of Association and Amended and Restated Articles of Association of Adient (incorporated by reference to Exhibit 3.1 to Adient plc’s Current Report on Form 8-K filed November 1, 2016 (File No. 1-37757)).
  4.1    Indenture, dated as of August 19, 2016, between Adient Global Holdings Ltd and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to Amendment No. 4 to Adient plc’s Registration Statement on Form 10 filed September 20, 2016 (File No. 1-37757)).
  4.2    Indenture, dated as of August 19, 2016, among Adient Global Holdings Ltd, U.S. Bank National Association, Elavon Financial Services DAC, UK Branch, and Elavon Financial Services DAC (incorporated by reference to Exhibit 4.2 to Amendment No. 4 to Adient plc’s Registration Statement on Form 10 filed September 20, 2016 (File No. 1-37757)).
  4.3    Guarantor Supplemental Indenture to the Euro Notes Indenture, dated as of October 14, 2016, by and among Adient Global Holdings Limited, U.S. Bank National Association, as Trustee, and certain subsidiaries of Adient Global Holdings Limited party thereto (incorporated by reference to Exhibit 4.1 to Adient plc’s Current Report on Form 8-K filed November 1, 2016 (File No. 1-37757)).
  4.4    Guarantor Supplemental Indenture to the Dollar Notes Indenture, dated as of October 14, 2016, by and among Adient Global Holdings Limited, U.S. Bank National Association, as Trustee, and certain subsidiaries of Adient Global Holdings Limited party thereto (incorporated by reference to Exhibit 4.2 to Adient plc’s Current Report on Form 8-K filed November 1, 2016 (File No. 1-37757)).
  4.5    Guarantor Supplemental Indenture to the Euro Notes Indenture, dated as of October 31, 2016, by and among Adient plc, Adient Global Holdings Limited, U.S. Bank National Association, as Trustee, and certain subsidiaries of Adient Global Holdings Limited party thereto (incorporated by reference to Exhibit 4.3 to Adient plc’s Current Report on Form 8-K filed November 1, 2016 (File No. 1-37757)).
  4.6    Guarantor Supplemental Indenture to the Dollar Notes Indenture, dated as of October 31, 2016, by and among Adient plc, Adient Global Holdings Limited, U.S. Bank National Association, as Trustee, and certain subsidiaries of Adient Global Holdings Limited party thereto (incorporated by reference to Exhibit 4.4 to Adient plc’s Current Report on Form 8-K filed November 1, 2016 (File No. 1-37757)).
10.1    Transition Services Agreement, dated as of September 8, 2016, by and between Johnson Controls International plc and Adient Limited, as amended October 31, 2016.
10.2    Tax Matters Agreement, dated as of September 8, 2016, by and between Johnson Controls International plc and Adient Limited, as amended October 31, 2016.
10.3    Employee Matters Agreement, dated as of September 8, 2016, by and between Johnson Controls International plc and Adient Limited (incorporated by reference to Exhibit 10.3 to Amendment No. 4 to Adient plc’s Registration Statement on Form 10 filed September 20, 2016 (File No. 1-37757)).
10.4    Transitional Trademark License Agreement, dated as of September 8, 2016, by and between Johnson Controls International plc and Adient Limited (incorporated by reference to Exhibit 10.4 to Amendment No. 4 to Adient plc’s Registration Statement on Form 10 filed September 20, 2016 (File No. 1-37757)).
10.5    Form of Indemnification Agreement (Ireland) with individual directors and officers.    


10.6    Form of Indemnification Agreement (US) with individual directors and officers.
10.7    Joint Venture Contract, dated October 22, 1997, between Shanghai Yanfeng Automotive Trim Company, Ltd. and Johnson Controls International, Inc., as amended (incorporated by reference to Exhibit 10.7 of Adient plc’s Registration Statement on Form 10 filed April 27, 2016 (File No. 1-37757)).
10.8    Credit Agreement, dated as of July 27, 2016, among Adient Global Holdings Ltd, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and agents party thereto (incorporated by reference to Exhibit 10.8 of Amendment No. 2 to Adient plc’s Registration Statement on Form 10 filed July 28, 2016 (File No. 1-37757)).
10.9    Adient plc 2016 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.1 to Adient plc’s Registration Statement on Form S-8 filed October 28, 2016 (File No. 1-37757)).*
10.10    Form of Adient plc Restricted Shares or Restricted Share Unit Award Agreement.*
10.11    Form of Adient plc Performance Share Unit Award Agreement.*
10.12    Adient plc 2016 Director Share Plan (incorporated by reference to Exhibit 4.2 to Adient plc’s Registration Statement on Form S-8 filed October 28, 2016 (File No. 1-37757)).*
10.13    Adient US LLC Retirement Restoration Plan, as amended and restated effective November 7, 2016.*
10.14    Adient US LLC Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 to Adient plc’s Current Report on Form 8-K filed November 1, 2016 (File No. 1-37757)).*
10.15    Adient plc Executive Compensation Incentive Recoupment Policy.*
10.16    Employment Agreement, dated January 17, 2008, between Johnson Controls, Inc. and R. Bruce McDonald (incorporated by reference to Exhibit 10.16 to Amendment No. 3 to Adient plc’s Registration Statement on Form 10 filed August 16, 2016 (File No. 1-37757)).*
10.17    Change of Control Employment Agreement, dated September 25, 2012, between Johnson Controls, Inc. and R. Bruce McDonald (incorporated by reference to Exhibit 10.17 to Amendment No. 3 to Adient plc’s Registration Statement on Form 10 filed August 16, 2016 (File No. 1-37757)).*
10.18    Adient plc Flexible Perquisites Program.*
10.19    Adient plc Compensation Summary and Ownership Guidelines for Non-Employee Directors.*
21.1    List of Subsidiaries.†
23.1    Consent of Independent Registered Public Accounting Firm, dated November 29, 2017.†
23.2    Consent of PricewaterhouseCoopers Zhong Tian LLC, Independent Auditors of YFAS and Consolidated Subsidiaries, dated June 29, 2017.
31.1    Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 29, 2016.†    


31.2    Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 29, 2016.†
31.3    Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated June 29, 2017.
31.4    Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated June 29, 2017.
32.1    Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November 29, 2016.†
32.2    Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated June 29, 2017.
99.1    Financial Statements of YFAS and Consolidated Subsidiaries as of December 31, 2016, December 31, 2015 and December 31, 2014 and for the years ended December 31, 2016, December 31, 2015 and December 31, 2014.

 

# Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Adient hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the SEC.
Previously filed with the Original 10-K.
* Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.

Exhibit 10.1

EXECUTION VERSION

TRANSITION SERVICES AGREEMENT

BY AND BETWEEN

JOHNSON CONTROLS INTERNATIONAL PLC

AND

ADIENT LIMITED

DATED AS OF SEPTEMBER 8, 2016

 


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS

     1  

Section 1.01.

  Definitions      1  

ARTICLE II SERVICES

     5  

Section 2.01.

  Services      5  

Section 2.02.

  Performance of Services      6  

Section 2.03.

  Charges for Services      8  

Section 2.04.

  Reimbursement for Out-of-Pocket Costs and Expenses      9  

Section 2.05.

  Changes in the Performance of Services      9  

Section 2.06.

  Transitional Nature of Services      9  

Section 2.07.

  Subcontracting      9  

ARTICLE III OTHER ARRANGEMENTS

     10  

Section 3.01.

  Access      10  

ARTICLE IV BILLING; TAXES

     11  

Section 4.01.

  Procedure      11  

Section 4.02.

  Late Payments      11  

Section 4.03.

  Taxes      11  

Section 4.04.

  No Set-Off      12  

Section 4.05.

  Billing Disputes      12  

ARTICLE V TERM AND TERMINATION

     12  

Section 5.01.

  Term      12  

Section 5.02.

  Early Termination      12  

Section 5.03.

  Interdependencies      13  

Section 5.04.

  Effect of Termination      13  

Section 5.05.

  Information Transmission      14  

ARTICLE VI CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

     14  

Section 6.01.

  Johnson Controls and Adient Obligations      14  

Section 6.02.

  No Release; Return or Destruction      14  

Section 6.03.

  Privacy and Data Protection Laws; Residual Information      15  

Section 6.04.

  Protective Arrangements      15  

ARTICLE VII LIMITED LIABILITY AND INDEMNIFICATION

     16  

Section 7.01.

  Limitations on Liability      16  

 

-i-


Section 7.02.

  Third Party Claims      16  

Section 7.03.

  Provider Indemnity      17  

Section 7.04.

  Indemnification Procedures      17  

ARTICLE VIII TRANSITION COMMITTEE

     17  

Section 8.01.

  Establishment      17  

ARTICLE IX MISCELLANEOUS

     17  

Section 9.01.

  Mutual Cooperation      17  

Section 9.02.

  Further Assurances      17  

Section 9.03.

  Audit Assistance      17  

Section 9.04.

  Title to Intellectual Property      18  

Section 9.05.

  Independent Contractors      18  

Section 9.06.

  Counterparts; Entire Agreement; Corporate Power      18  

Section 9.07.

  Governing Law      19  

Section 9.08.

  Assignability      19  

Section 9.09.

  Third-Party Beneficiaries      20  

Section 9.10.

  Notices      20  

Section 9.11.

  Severability      21  

Section 9.12.

  Force Majeure      21  

Section 9.13.

  Headings      22  

Section 9.14.

  Survival of Covenants      22  

Section 9.15.

  Waivers of Default      22  

Section 9.16.

  Dispute Resolution      22  

Section 9.17.

  Specific Performance      22  

Section 9.18.

  Amendments      23  

Section 9.19.

  Precedence of Schedules      23  

Section 9.20.

  Interpretation      23  

Section 9.21.

  Mutual Drafting      24  

 

 

-ii-


TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT, dated as of September 8, 2016 (this “ Agreement ”), is by and between Johnson Controls International plc, a public limited company organized under the laws of Ireland (“ Johnson Controls ”), and Adient Limited, a private limited company organized under the laws of Ireland (“ Adient ”).

R E C I T A L S:

WHEREAS, the board of directors of Johnson Controls (the “ Johnson Controls Board ”) has determined that it is in the best interests of Johnson Controls and its shareholders to create a new publicly traded company that shall operate the Adient Business;

WHEREAS, in furtherance of the foregoing, the Johnson Controls Board has determined that it is appropriate and desirable to separate the Adient Business from the Johnson Controls Business (the “ Separation ”) and, following the Separation, to make a distribution in specie of the Adient Business to the holders of Johnson Controls Shares on the Record Date, through (a) the transfer to Adient, which will have been re-registered as a public limited company, of Johnson Controls’ entire legal and beneficial interest in the issued share capital of Adient Global Holdings Ltd, an indirect, wholly owned subsidiary of Johnson Controls that has been formed to hold directly or indirectly the assets and liabilities associated with the Adient Business, and (b) the issuance of ordinary shares of Adient to holders of Johnson Controls Shares on the Record Date on a pro rata basis (the “ Distribution ”);

WHEREAS, in order to effectuate the Separation and the Distribution, Johnson Controls and Adient have entered into a Separation and Distribution Agreement, dated as of September 8, 2016 (the “ Separation and Distribution Agreement ”);

WHEREAS, in order to facilitate and provide for an orderly transition in connection with the Separation and the Distribution, the Parties desire to enter into this Agreement to set forth the terms and conditions pursuant to which each of the Parties shall provide Services to the other Party for a transitional period; and

WHEREAS, the Parties acknowledge that this Agreement, the Separation and Distribution Agreement, and the Ancillary Agreements represent the integrated agreement of Johnson Controls and Adient related to the Separation and the Distribution, are being entered together, and would not have been entered independently.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:


Action ” has the meaning set forth in the Separation and Distribution Agreement.

Adient ” has the meaning set forth in the Preamble.

Adient Business ” has the meaning set forth in the Separation and Distribution Agreement.

Adient Shares ” has the meaning set forth in the Separation and Distribution Agreement.

Adversely Affected Service ” has the meaning set forth in Section  5.03 .

Affiliate ” has the meaning set forth in the Separation and Distribution Agreement.

Agreement ” has the meaning set forth in the Preamble.

Ancillary Agreements ” has the meaning set forth in the Separation and Distribution Agreement.

Charge ” or “ Charges ” has the meaning set forth in Section  2.03 .

Confidential Information ” shall mean all Information that is either confidential and/or proprietary.

Dispute ” has the meaning set forth in Section 9.16(a) .

Distribution ” has the meaning set forth in the Recitals.

Distribution Date ” has the meaning set forth in the Separation and Distribution Agreement.

Divested Business ” has the meaning set forth in Section 9.08(b) .

Divested Business Acquirer ” has the meaning set forth in Section 9.08(b) .

Early Termination Charges ” shall mean, with respect to the termination of any Service pursuant to Section 5.02(a)(i) , the sum of (a) any and all reasonable costs, fees and expenses (other than any severance or retention costs) payable by the Provider of such Service to a Third Party due to the early termination of such Service; provided , however , that the Provider shall use commercially reasonable efforts to minimize any costs, fees or expenses payable by the Provider to any Third Party in connection with such early termination of such Service, and the Early Termination Charges payable by the Recipient shall be reduced accordingly; and (b) any additional severance and retention costs, if any, because of the early termination of such Service that the Provider of such terminated Service incurs to employees who had been retained primarily to provide such terminated Service (it being agreed that the costs set forth in this clause (b) shall only be the amount, if any, in excess of the severance and retention costs that such Provider would have paid to such employees if the Service had been provided for the full period during which such Service would have been provided hereunder but for such early termination).

 

-2-


Effective Time ” has the meaning set forth in the Separation and Distribution Agreement.

Force Majeure ” has the meaning set forth in the Separation and Distribution Agreement.

Governmental Authority ” has the meaning set forth in the Separation and Distribution Agreement.

Group ” has the meaning set forth in the Separation and Distribution Agreement.

Information ” has the meaning set forth in the Separation and Distribution Agreement.

Intellectual Property ” has the meaning set forth in the Separation and Distribution Agreement.

Interest Payment ” has the meaning set forth in Section  4.02 .

Johnson Controls ” has the meaning set forth in the Preamble.

Johnson Controls Board ” has the meaning set forth in the Recitals.

Johnson Controls Business ” has the meaning set forth in the Separation and Distribution Agreement.

Johnson Controls Shares ” has the meaning set forth in the Separation and Distribution Agreement.

Law ” has the meaning set forth in the Separation and Distribution Agreement.

Level of Service ” has the meaning set forth in Section 2.02(c) .

Liability ” or “ Liabilities ” has the meaning set forth in the Separation and Distribution Agreement.

New Service ” has the meaning set forth in Section 2.01(d) .

Notice of Breach ” has the meaning set forth in Section 5.02(a)(ii) .

Omitted Service ” has the meaning set forth in Section 2.01(b) .

One-Time Payment ” has the meaning set forth in Section 2.02(b) .

Party ” or “ Parties ” shall mean the parties to this Agreement.

 

-3-


Person ” has the meaning set forth in the Separation and Distribution Agreement.

Prime Rate ” has the meaning set forth in the Separation and Distribution Agreement.

Provider ” shall mean, with respect to any Service, the Party identified on the Schedules hereto as the “Provider” of such Service.

Provider Indemnitees ” has the meaning set forth in Section  7.02 .

Recipient ” shall mean, with respect to any Service, the Party receiving such Service hereunder.

Record Date ” has the meaning set forth in the Separation and Distribution Agreement.

Representatives ” has the meaning set forth in the Separation and Distribution Agreement.

Residual Information ” has the meaning set forth in the Separation and Distribution Agreement.

Schedule ” or “ Schedules ” has the meaning set forth in Section 2.01(a) .

Separation ” has the meaning set forth in the Recitals.

Separation and Distribution Agreement ” has the meaning set forth in the Recitals.

Service ” or “ Services ” has the meaning set forth in Section 2.01(a) .

Service Baseline Period ” has the meaning set forth in Section 2.02(c) .

Service Change ” has the meaning set forth in Section 2.01(c) .

Service Interruption has the meaning set forth in Section 2.02(a) .

Service Period ” shall mean, with respect to any individual Service, the period commencing on the Distribution Date and ending on the earlier of (a) the date that a Party terminates the provision of the entirety of such individual Service pursuant to Section  5.02 , (b) the date that is the twenty-four (24)-month anniversary of the Distribution Date, or (c) the date specified for termination of such individual Service in the Schedules hereto.

Service Standard ” has the meaning set forth in Section 2.02(a) .

Subsidiary ” or “ Subsidiaries ” has the meaning set forth in the Separation and Distribution Agreement.

Tax ” has the meaning set forth in the Tax Matters Agreement.

 

-4-


Tax Authority ” has the meaning set forth in the Tax Matters Agreement.

Tax Matters Agreement ” has the meaning set forth in the Separation and Distribution Agreement.

Term ” has the meaning set forth in the Section  5.01 .

Third Party ” shall mean any Person other than the Parties or any of their Affiliates.

Third Party Claim ” shall mean any claim asserted or any Action commenced by any Third Party against any Party or any of its Affiliates.

To-be-Terminated Service ” has the meaning set forth in Section  5.03 .

Transition Committee ” has the meaning set forth in the Separation and Distribution Agreement.

ARTICLE II

SERVICES

Section 2.01. Services .

(a) Commencing as of the Effective Time, the Provider agrees to provide, or to cause one or more of its Subsidiaries to provide, to the Recipient, or any designated Subsidiary or Affiliate of the Recipient, the applicable services (each a “ Service ” and, collectively, the “ Services ”) set forth on the schedules hereto (each, a “ Schedule ” and, collectively, the “ Sche d ules ”).

(b) During the Term, if a Party identifies a service that the other Party or any of its Subsidiaries provided to the identifying Party or any of its Subsidiaries during the twelve (12)-month period immediately prior to the Distribution Date, but such service was inadvertently omitted from the Services set forth in the Schedules hereto (an “ Omitted Service ”), then the Provider shall provide, or shall cause one of more of its Subsidiaries to provide, such Omitted Service, and the Parties shall negotiate in good faith the terms and conditions upon which the other Party shall provide such Omitted Service, which terms and conditions shall include the applicable Service Standard and shall otherwise be substantially in line with terms and conditions of such Omitted Service during the twelve (12)-month period immediately prior to the Distribution Date.

(c) During the Term, either Party may request that the other Party modify, alter or adjust the manner in which the other Party provides Services (a “ Service Change ”). Following the delivery of such request, the Parties shall negotiate in good faith the terms and conditions of such Service Change, which terms and conditions shall include the applicable Service Standard.

 

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(d) During the Term, either Party may request that the other Party provide an additional or different service that is not an Omitted Service and that does not constitute a Service Change (a “ New Service ”). The other Party shall consider such request, but nothing in this Agreement shall require the other Party to agree to provide such New Service. If the other Party consents to providing the requested New Service, then the Parties shall cooperate in good faith to determine the terms and conditions upon which the other Party shall provide such requested New Service, including the applicable Service Standard.

(e) The terms and conditions of any Omitted Service, agreed-upon Service Change or New Services that the providing Party consents to provide shall be documented in a supplement to the Schedules describing in reasonable detail the nature, scope, Charges, Service Period(s), termination provisions and other terms and conditions applicable to such Omitted Service, Service Change or New Service, as applicable, in a manner similar to that in which the Services are described in the Schedules. Each supplement to the Schedules that is agreed to in writing by the Parties shall be deemed part of this Agreement as of the date of such agreement, and the Omitted Service, Service Change or New Service set forth therein shall be deemed a Service provided under this Agreement, in each case subject to the terms and conditions of this Agreement.

Section 2.02. Performance of Services .

(a) The Provider shall perform, or shall cause one or more of its Subsidiaries to perform, all Services to be provided by the Provider in a commercially reasonable manner (i) that is based on its past practice and that is substantially similar in all material respects to the analogous services provided by or on behalf of Johnson Controls or any of its Subsidiaries to Johnson Controls or its applicable functional group or Subsidiary during the twelve (12) months immediately prior to the Effective Time, if such service or a similar service was provided prior to the Effective Time, or (ii) that is based on its then-current practice and that is substantially similar in all material respects to the analogous services provided by or on behalf of Johnson Controls or any of its Subsidiaries to Johnson Controls or its applicable functional group or Subsidiary following the Effective Time (clause (i) or (ii), as applicable, the “ Service Standard ”). Upon receipt of written notice from the Recipient identifying any outage, interruption, disruption, downturn or other failure of any Service (a “ Service Interruption ”), Provider shall use commercially reasonable efforts to respond, or to cause one or more of its Subsidiaries to respond, to such Service Interruption in a manner that is substantially similar to the manner in which Provider or its Affiliates responded to Service Interruptions during the twelve (12)-month period prior to the Effective Time or, if such service or a similar service was not provided prior to the Effective Time, in a manner that is substantially similar to the manner in which such Provider or its Affiliates respond with respect to internally provided services.

(b) Nothing in this Agreement shall require the Provider to perform or cause to be performed any Service to the extent that the Provider reasonably believes that the manner of such performance would constitute (i) a breach, violation or infringement of, or a default under, any of the terms, conditions or provisions of any agreement, instrument, contract, obligation or undertaking which was entered into by such Provider prior to the date of this Agreement or (ii) a violation of any applicable Law. If the Provider is or becomes aware of any potential violation on the part of the Provider, the Provider shall use commercially reasonable efforts to promptly advise the Recipient of such potential violation, and the Provider and the Recipient will mutually seek an alternative that addresses such potential violation. The Parties agree to cooperate

 

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in good faith and use commercially reasonable efforts to obtain any necessary Third Party consents required under any existing contract or agreement with a Third Party or under applicable Law to allow the Provider to perform, or cause to be performed, all Services to be provided by the Provider hereunder in accordance with the standards set forth in this Section  2.02 . Without limiting the foregoing, neither Party shall under any circumstance be required to (and the Provider shall not, without the prior written consent of the Recipient) pay or commit to pay any amount or incur any obligation in favor of or offer or grant any accommodation (financial or otherwise, including any requirements for the securing or posting of any bonds, letters of credit or similar instruments, or the furnishing of any guarantees) to obtain any such Third Party consent, except that the Provider shall be required to make one such payment, commitment or accommodation if required by such Third Party (a “ One-Time Payment ”). Unless otherwise agreed in writing in advance by the Parties, other than One-Time Payments, all reasonable out-of-pocket costs and expenses (if any) incurred by the Recipient or any of its Subsidiaries or, with the Recipient’s prior written consent, the Provider or any of its Subsidiaries in connection with obtaining any such Third Party consent that is required to allow the Provider to perform or cause to be performed such Services shall be borne solely by the Recipient. If, with respect to a Service, the Parties, despite the use of such commercially reasonable efforts and the making of a One-Time Payment, are unable to obtain a required Third Party consent, or the performance of such Service by the Provider would constitute a violation of any applicable Law, the Parties shall use commercially reasonable efforts to develop an alternative arrangement that is reasonably acceptable to each Party and that enables the Provider to perform or cause to be performed such Service or an analogous service without obtaining such required Third Party consent or violating any applicable Law.

(c) The Provider shall not be obligated to perform or to cause to be performed any Service in a manner that is materially more burdensome (with respect to service quality or quantity) than analogous services provided to Johnson Controls or its applicable functional group or Subsidiary (collectively referred to as the “ Level of Service ”) during Johnson Controls’ fiscal year 2016 (the “ Service Baseline Period ”). A Service shall be deemed materially more burdensome if, among other items, its usage exceeds the highest quantity of analogous services provided to the functional groups or Subsidiaries of Johnson Controls that are part of the Recipient during the Service Baseline Period, or if the Provider is required to hire new employees, engage new contractors or make capital investments in respect of such Service greater than the maximum number of employees or contractors dedicated at any time to analogous services, or investments made by Johnson Controls with respect to analogous services, during the Service Baseline Period. If the Recipient requests that the Provider perform or cause to be performed any Service that exceeds the Level of Service during the Service Baseline Period, including any acquisition or upgrade of technology, software or information systems, then the Parties shall cooperate and act in good faith to determine whether the Provider will be required to provide such requested higher Level of Service. If and to the extent that the Parties determine that the Provider shall provide the requested higher Level of Service, then such higher Level of Service shall be documented in a supplement to the Schedules. Each such supplement, as agreed to in writing by the Parties, shall be deemed part of this Agreement as of the date of such written agreement and the Level of Service increases set forth in such written agreement shall be deemed a part of the Services provided under this Agreement, in each case subject to the terms and conditions of this Agreement.

 

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(d) (i) Neither the Provider nor any of its Subsidiaries shall be required to perform or to cause to be performed any of the Services for the benefit of any Third Party or any other Person other than the Recipient and its Subsidiaries, and (ii) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION  2.02 OR SECTION  7.03 , EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL SERVICES ARE PROVIDED ON AN “AS-IS” BASIS, THAT THE RECIPIENT ASSUMES ALL RISK AND LIABILITY ARISING FROM OR RELATING TO ITS USE OF AND RELIANCE UPON THE SERVICES, AND THAT THE PROVIDER MAKES NO OTHER REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, WITH RESPECT TO THE SERVICES. EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

(ii) Each Party shall be responsible for its own compliance with any and all Laws applicable to its performance under this Agreement. No Party shall knowingly take any action in violation of any such applicable Law that results in Liability being imposed on the other Party. Notwithstanding any other provision of this Agreement, (i) neither Party shall, in connection with its performance or use of Services under this Agreement, knowingly take any action, or fail to take any action that Johnson Controls took in the ordinary course during the Service Baseline Period in connection with such Service, if the taking of such action or failure to take such action would materially adversely affect the ability of the other Party and its Subsidiaries or Affiliates to comply with such applicable Laws, and (ii) the Provider shall not have any obligation to provide, or cause to be provided, Services to the extent that any change in applicable Law after the date of this Agreement provision would materially increase or change the Provider’s burden or the burden of any applicable Subsidiary of the Provider with respect to compliance with applicable Laws, unless the applicable Recipient agrees to bear all incremental costs resulting from the increased compliance burden associated with providing such Services; provided , that the Provider shall use commercially reasonable efforts to promptly advise the Recipient of such increased burden, and the Provider and the Recipient will mutually seek an alternative that minimizes such increased burden.

Section 2.03. Charges for Services . Unless otherwise provided with respect to a specific Service on the Schedules hereto, the Recipient shall pay the Provider of the Services a fee (either one-time or recurring) for such Services (or category of Services, as applicable) (each fee constituting a “ Charge ” and, collectively, “ Charges ”), which Charges shall be set forth on the applicable Schedules hereto, or if not set forth, then based upon the actual cost of providing such Services as agreed to by the Parties from time to time. During the Term, the amount of a Charge for any Service may be modified to the extent of (a) any adjustments mutually agreed to in writing by the Parties, (b) any adjustments due to a change in Level of Service requested by the Recipient and agreed upon by the Provider, and (c) any adjustment in the rates or charges imposed by any Third Party provider that is providing Services pursuant to the existing agreement with such Third Party provider for such Services or any renewal thereof that contains substantially similar terms (proportional to the respective use of such Services by each Party). Each Party

 

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shall use commercially reasonable efforts to minimize the cost of providing the Services. Together with any invoice for Charges, the Provider shall provide the Recipient with reasonable documentation, including any additional documentation reasonably requested by the Recipient to the extent that such documentation is in the Provider’s or its Subsidiaries’ possession or control, to support the calculation of such Charges.

Section 2.04. Reimbursement for Out-of-Pocket Costs and Expenses . The Recipient shall reimburse the Provider for reasonable out-of-pocket costs and expenses incurred by the Provider or any of its Subsidiaries in connection with providing the Services (including reasonable travel-related expenses) to the extent that such costs and expenses are not reflected in the Charges for such Services; provided , that any such cost or expense in excess of five thousand dollars ($5,000.00), in the aggregate, that is not consistent with the historical practice between the Parties for any individual Service (including business travel and related expenses) shall require advance written approval of the Recipient. Any authorized travel-related expenses incurred in performing the Services shall be incurred and charged to the Recipient in accordance with the Provider’s then-applicable business travel policies.

Section 2.05. Changes in the Performance of Services . Subject to the performance standards for Services set forth in Section 2.02(a) , Section 2.02(b) and Section 2.02(c) , the Provider may make changes from time to time in the manner of performing the Services if the Provider is making similar changes in performing analogous services for itself and if the Provider furnishes to the Recipient reasonable prior written notice (in content and timing) of such changes; provided , that no such change shall have a significant adverse effect on the timeliness or quality of, or the Charges for, the applicable Service. If any such change by the Provider reasonably requires the Recipient to incur an increase in costs and expenses to continue to receive and utilize the applicable Services in the same manner as the Recipient was receiving and utilizing such Service prior to such change, the Provider shall be required to reimburse the Recipient for all such reasonable increase in costs and expenses. Upon request, the Recipient shall provide the Provider with reasonable documentation, including any additional documentation reasonably requested by the Provider to the extent that such documentation is in the Recipient’s or its Subsidiaries’ possession or control, to support the calculation of such increase in costs and expenses.

Section 2.06. Transitional Nature of Services . The Parties acknowledge the transitional nature of the Services. The Recipient agrees to cooperate in good faith and to use commercially reasonable efforts to effectuate a smooth transition of the Services from the Provider to the Recipient (or its designee) as soon as commercially practicable after the Distribution Date, but in any event before the end of the Service period for such Service (as described in Section  5.01 ). The Parties agree to use reasonable efforts to assist and cooperate in good faith with each other in order to effectuate such transition of the Services from the Provider to the Recipient (or its designee) in a timely and orderly manner.

Section 2.07. Subcontracting . The Provider may hire or engage one or more Third Parties to perform any or all of its obligations under this Agreement; provided , that if a Third Party was not already performing such obligation on behalf of the Provider immediately prior to the Distribution Date, the Provider shall (a) notify the Recipient prior to hiring or engaging such Third Party and (b) obtain the Recipient’s prior consent (such consent not to be unreasonably withheld, conditioned or delayed) if (i) the hiring or engagement of such Third Party

 

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would decrease the quality or level of the Services provided to the Recipient compared to the quality or level of Services provided by the Provider or (ii) the use of such Third Party would increase the Charges payable by the Recipient in connection with such Services; provided , further , that the Provider shall in all cases remain primarily responsible for all of its obligations under this Agreement with respect to the scope of the Services, the performance standard for Services set forth in Section 2.02(a) , Section 2.02(b) and Section 2.02(c) and the content of the Services provided to the Recipient. Subject to the confidentiality provisions set forth in Article VI , each Party shall, and shall cause its respective Affiliates to, provide, upon ten (10) business days’ prior written notice from the other Party, any Information within such Party’s or its Affiliates’ possession that the requesting Party reasonably requests in connection with any Services being provided to such requesting Party by a Third Party, including any applicable invoices, agreements documenting the arrangements between such Third Party and the Provider and other supporting documentation.

ARTICLE III

OTHER ARRANGEMENTS

Section 3.01. Access .

(a) Adient shall, and shall cause its Subsidiaries to, allow Johnson Controls and its Subsidiaries and their respective Representatives reasonable access to the facilities of Adient and its Subsidiaries that is necessary for Johnson Controls and its Subsidiaries to fulfill their obligations under this Agreement. In addition to the foregoing right of access, Adient shall, and shall cause its Subsidiaries to, afford Johnson Controls, its Subsidiaries and their respective Representatives, upon reasonable advance written notice, reasonable access during normal business hours to the facilities, Information, systems, infrastructure and personnel of Adient and its Subsidiaries as is reasonably necessary for Johnson Controls to verify the adequacy of internal controls over information technology, reporting of financial data and related processes employed in connection with the Services being provided by Adient or its Subsidiaries, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided , that (i) such access shall not unreasonably interfere with any of the business or operations of Adient or any of its Subsidiaries and (ii) in the event that Adient determines that providing such access could be commercially detrimental, violate any applicable Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit such access in a manner that avoids such harm or consequence. Johnson Controls agrees that all of its and its Subsidiaries’ employees shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees to, when on the property of Adient or its Subsidiaries, or when given access to any facilities, Information, systems, infrastructure or personnel of Adient or its Subsidiaries, conform to the policies and procedures of Adient and its Subsidiaries, as applicable, concerning health, safety, conduct and security which are made known or provided to Johnson Controls from time to time.

(b) Johnson Controls shall, and shall cause its Subsidiaries to, allow Adient and its Subsidiaries and their respective Representatives reasonable access to the facilities of Johnson Controls and its Subsidiaries that is necessary for Adient and its Subsidiaries to fulfill their obligations under this Agreement. In addition to the foregoing right of access, Johnson Controls shall, and shall cause its Subsidiaries to, afford Adient, its Subsidiaries and their respective

 

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Representatives, upon reasonable advance written notice, reasonable access during normal business hours to the facilities, Information, systems, infrastructure and personnel of Johnson Controls and its Subsidiaries as is reasonably necessary for Adient to verify the adequacy of internal controls over information technology, reporting of financial data and related processes employed in connection with the Services being provided by Johnson Controls or its Subsidiaries, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided , that (i) such access shall not unreasonably interfere with any of the business or operations of Johnson Controls or any of its Subsidiaries and (ii) in the event that Johnson Controls determines that providing such access could be commercially detrimental, violate any applicable Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit such access in a manner that avoids such harm or consequence. Adient agrees that all of its and its Subsidiaries’ employees shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees to, when on the property of Johnson Controls or its Subsidiaries, or when given access to any facilities, Information, systems, infrastructure or personnel of Johnson Controls or its Subsidiaries, conform to the policies and procedures of Johnson Controls and its Subsidiaries, as applicable, concerning health, safety, conduct and security which are made known or provided to Adient from time to time.

ARTICLE IV

BILLING; TAXES

Section 4.01. Procedure . Charges for the Services shall be charged to and payable by the Recipient. Amounts payable pursuant to this Agreement shall be paid by wire transfer (or such other method of payment as may be agreed between the Parties from time to time in writing) to the Provider (as directed by the Provider), on a monthly basis in the case of recurring fees, which amounts shall be due within thirty (30) days of the Recipient’s receipt of each such invoice, including reasonable documentation pursuant to Section  2.03 . Unless otherwise indicated in the Schedules, all amounts due and payable hereunder shall be invoiced and paid in U.S. dollars. If an amount is required to be paid in another currency, the conversion rate used to determine the amount of such Charge in U.S. dollars shall be the conversion rate used at the time that the obligation to pay arises in the financial reporting systems of the Party receiving such payment.

Section 4.02. Late Payments . Charges not paid when due pursuant to this Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of the receipt of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus two (2%) percent (the “ Interest Payment ”).

Section 4.03. Taxes . Without limiting any provisions of this Agreement, the Recipient shall bear any and all Taxes and other similar charges (and any related interest and penalties) imposed on, or payable with respect to, any fees or charges, including any Charges, payable by it pursuant to this Agreement, including all sales, use, value-added, and similar Taxes, but excluding any Taxes based on the Provider’s income. Notwithstanding anything to the contrary in the previous sentence or elsewhere in this Agreement, the Recipient shall be entitled to withhold from any payments to the Provider any such Taxes that the Recipient is required by applicable Law to withhold and shall pay such Taxes to the applicable Tax Authority.

 

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Section 4.04. No Set-Off . Except as mutually agreed to in writing by Johnson Controls and Adient, no Party or any of its Affiliates shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or (b) any other amounts claimed to be owed to the other Party or any of its Subsidiaries arising out of this Agreement.

Section 4.05. Billing Disputes . The Recipient’s payment of Charges for Services pursuant to this Article IV shall not be deemed to waive the Recipient’s right to dispute in good faith the accuracy or amount of any such Charge or any such payment. Any such Dispute regarding Charges, and any refund or reimbursement of Charges paid by the Recipient, shall be resolved in accordance with the terms of Section  9.16 .

ARTICLE V

TERM AND TERMINATION

Section 5.01. Term . This Agreement shall be effective as of the Effective Time and shall be in effect until terminated in accordance with this Article V (the “ Term ”). This Agreement shall terminate upon the earlier to occur of (a) the last date on which either Party is obligated to provide any individual Service to the other Party in accordance with the terms of this Agreement; (b) the mutual written agreement of the Parties to terminate this Agreement in its entirety; or (c) the date that is the twenty-four (24)-month anniversary of the Distribution Date. Unless otherwise terminated pursuant to Section  5.02 , this Agreement shall terminate with respect to each Service as of the close of business on the last day of the Service Period for such Service.

Section 5.02. Early Termination .

(a) Without prejudice to the Recipient’s rights with respect to Force Majeure, the Recipient may from time to time terminate this Agreement with respect to the entirety of any individual Service but not a portion thereof:

(i) for any reason or no reason, upon the giving of at least thirty (30) days’ prior written notice to the Provider of such Service; provided , that if a Schedule hereto sets forth a different notice period, then the Recipient shall comply with such different notice periods; provided , further , that any such termination shall be subject to the obligation to pay any applicable Early Termination Charges pursuant to Section  5.04 ; or

(ii) if the Provider of such Service has failed to perform any of its material obligations under this Agreement with respect to such Service, and such failure shall continue to be uncured for a period of at least thirty (30) days after receipt by the Provider of written notice of such failure (the “ Notice of Breach ”) from the Recipient; provided , that the Recipient shall not be entitled to terminate this Agreement with respect to the applicable Service if, as of the end of such period, there remains a good-faith Dispute between the Parties (undertaken in accordance with the terms of Section  9.16 ) as to whether the Provider has breached this Agreement or cured the applicable breach.

 

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(b) The Provider may terminate this Agreement with respect to any individual Service, but not a portion thereof, at any time upon prior written notice to the Recipient, if the Recipient has failed to perform any of its material obligations under this Agreement relating to such Service, including making payment of Charges for such Service when due, and such failure shall continue to be uncured for a period of at least thirty (30) days after receipt by the Recipient of the Notice of Breach from the Provider; provided , that the Provider shall not be entitled to terminate this Agreement with respect to the applicable Service if, as of the end of such period, there remains a good-faith Dispute between the Parties (undertaken in accordance with the terms of Section  9.16 ) as to whether the Recipient materially breached this Agreement or has cured the applicable breach.

(c) The Schedules hereto shall be updated to reflect any terminated Service.

Section 5.03. Interdependencies . The Parties acknowledge and agree that (a) there may be interdependencies among the Services being provided under this Agreement; (b) upon the request of either Party, the Parties shall cooperate and act in good faith to determine whether (i) any such interdependencies exist with respect to the particular Service that a Party is seeking to terminate pursuant to Section  5.02 (the “ To-be-Terminated Service ”) and (ii) in the case of such termination, the Provider’s ability to provide a particular Service in accordance with this Agreement would be materially and adversely affected by such termination of another Service (the “ Adversely Affected Service ”); and (c) in the event that the Parties have determined that such interdependencies exist and such termination would materially and adversely affect the Provider’s ability to provide a particular Service in accordance with this Agreement, the Parties shall negotiate in good faith to amend the Schedules hereto with respect to such Adversely Affected Service, which amendment shall be consistent with the terms of comparable Services. If, after such negotiations, the Parties are unable to agree on an amendment with respect to the Adversely Affected Service, the Dispute between the Parties shall be resolved in accordance with the terms of Section  9.16 , and the Provider’s obligation to provide, and the Recipient’s obligation to pay for, the To-be-Terminated Service and the Adversely Affected Service shall continue until the resolution of such Dispute.

Section 5.04. Effect of Termination . Upon the termination of any Service pursuant to this Agreement, the Provider of the terminated Service shall have no further obligation to provide the terminated Service, and the Recipient of such Service shall have no obligation to pay any future Charges relating to such Service; provided , that the Recipient shall remain obligated to the Provider for (a) the Charges owed and payable in respect of Services provided prior to the effective date of termination for such Service, and (b) any applicable Early Termination Charges (which, in the case of each of clauses (a) and (b), shall be payable only in the event that the Recipient terminates any Service pursuant to Section 5.02(a)( i ) ) (it being understood that the Parties shall use their commercially reasonable efforts to mitigate any such Early Termination Charges). Any Dispute regarding Charges and Early Termination Charges, and any refund or reimbursement of Charges or Early Termination Charges paid by the Recipient, shall be resolved in accordance with the terms of Section  9.16 . In connection with the termination of any Service, the provisions of this Agreement not relating solely to such terminated Service shall survive any such termination, and in connection with a termination of this Agreement, Article I , this Article V , Article VII and Article IX , all confidentiality obligations under this Agreement and Liability for all due and unpaid Charges, and Early Termination Charges shall continue to survive.

 

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Section 5.05. Information Transmission . The Provider, on behalf of itself and its respective Subsidiaries, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the Recipient, in accordance with Section 6.1 of the Separation and Distribution Agreement, any Information received or computed by the Provider for the benefit of the Recipient concerning the relevant Service during the Service Period; provided , that, except as otherwise agreed to in writing by the Parties, (a) the Provider shall not have any obligation to provide, or cause to be provided, Information in any non-standard format, (b) the Provider and its Subsidiaries shall be reimbursed for their reasonable costs in accordance with Section 6.3 of the Separation and Distribution Agreement for creating, gathering, copying, transporting and otherwise providing such Information, and (c) the Provider shall use commercially reasonable efforts to maintain any such Information in accordance with Section 6.4 of the Separation and Distribution Agreement.

ARTICLE VI

CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

Section 6.01. Johnson Controls and Adient Obligations . Subject to Section  6.04 , until the seven (7)-year anniversary of the end of the Term, each of Johnson Controls and Adient, on behalf of itself and each of its Subsidiaries, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to Johnson Controls’ Confidential Information pursuant to policies in effect as of the Effective Time, all Confidential Information concerning the other Party or its Subsidiaries or their respective businesses that is either in its possession (including Confidential Information in its possession prior to the date hereof) or furnished by any such other Party or such other Party’s Subsidiaries or their respective Representatives at any time pursuant to this Agreement, and shall not use any such Confidential Information of the other Party other than for such purposes as shall be expressly permitted hereunder, except, in each case, to the extent that such Confidential Information is or was (a) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any of its Subsidiaries or any of their respective Representatives in violation of this Agreement; (b) later lawfully acquired from other sources by such Party or any of its Subsidiaries, which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such Confidential Information; or (c) independently developed or generated without reference to or use of the Confidential Information of the other Party or any of its Subsidiaries. If any Confidential Information of a Party or any of its Subsidiaries is disclosed to the other Party or any of its Subsidiaries in connection with providing the Services, then such disclosed Confidential Information shall be used by the receiving Party only as required to perform such Services.

Section 6.02. No Release; Return or Destruction . Each Party agrees (a) not to release or disclose, or permit to be released or disclosed, any Confidential Information of the other Party addressed in Section  6.01 to any other Person, except its Representatives who need to know such Confidential Information in their capacities as such (who shall be advised of and have acknowledged in writing their obligations hereunder with respect to such Confidential Information)

 

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and except in compliance with Section  6.04 , and (b) to use commercially reasonable efforts to maintain such Confidential Information in accordance with Section 6.4 of the Separation and Distribution Agreement. Without limiting the foregoing, when any such Confidential Information is no longer needed for the purposes contemplated by the Separation and Distribution Agreement, this Agreement or any other Ancillary Agreements, each Party will promptly after request of the other Party either return to the other Party all such Confidential Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or notify the other Party in writing that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon); provided , that such Party’s Representatives may retain one (1) copy of such information to the extent required by applicable Law or professional standards, and shall not be required to destroy any such information located in back-up, archival electronic storage.

Section 6.03. Privacy and Data Protection Laws; Residual Information . Each Party shall comply with all applicable state, federal and foreign privacy and data protection Laws that are or that may in the future be applicable to the provision of the Services under this Agreement. Notwithstanding anything to the contrary herein, each Party and its Subsidiaries shall be free to use for any purpose the Residual Information resulting from access Representatives of such Party or its Subsidiaries have had to confidential and proprietary information concerning the other Party or its Subsidiaries. The Parties acknowledge and understand that the foregoing does not constitute a license under any patents or copyrights, nor does it confer any other rights or interests in either Parties’ Intellectual Property.

Section 6.04. Protective Arrangements . In the event that a Party or any of its Subsidiaries either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide information of the other Party (or any of its Subsidiaries) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such information and shall cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

 

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ARTICLE VII

LIMITED LIABILITY AND INDEMNIFICATION

Section 7.01. Limitations on Liability .

(a) THE CUMULATIVE AGGREGATE LIABILITIES OF THE PROVIDER AND ITS SUBSIDIARIES AND THEIR RESPECTIVE REPRESENTATIVES, COLLECTIVELY, UNDER THIS AGREEMENT FOR ANY ACT OR FAILURE TO ACT IN CONNECTION HEREWITH (INCLUDING THE PERFORMANCE OR BREACH OF THIS AGREEMENT), OR FROM THE SALE, DELIVERY, PROVISION OR USE OF ANY SERVICES PROVIDED UNDER OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, SHALL NOT EXCEED: (X) IF THE SERVICES WERE PERFORMED BY SUCH PROVIDER FOR LESS THAN SIX (6) MONTHS, THE AGGREGATE CHARGES PAID OR THAT OTHERWISE WOULD HAVE BEEN PAYABLE TO SUCH PROVIDER BY THE RECIPIENT PURSUANT TO THIS AGREEMENT DURING THE SIX (6)-MONTH PERIOD FOLLOWING THE EFFECTIVE TIME OF THIS AGREEMENT, (Y) IF THE SERVICES WERE PERFORMED BY SUCH PROVIDER FOR SIX (6) MONTHS OR LONGER, THE AGGREGATE CHARGES PAID AND PAYABLE TO SUCH PROVIDER BY THE RECIPIENT PURSUANT TO THIS AGREEMENT DURING THE SIX (6)-MONTH PERIOD IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH LIABILITIES.

(b) IN NO EVENT SHALL EITHER PARTY, ITS SUBSIDIARIES OR THEIR RESPECTIVE REPRESENTATIVES BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTIAL, CONSEQUENTIAL, SPECIAL, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER PARTY (INCLUDING LOST PROFITS OR LOST REVENUES) IN CONNECTION WITH THE SALE, DELIVERY, PROVISION OR USE OF ANY SERVICES PROVIDED UNDER OR CONTEMPLATED BY THIS AGREEMENT (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM), AND EACH PARTY HEREBY WAIVES ON BEHALF OF ITSELF, ITS SUBSIDIARIES AND ITS REPRESENTATIVES ANY CLAIM FOR SUCH DAMAGES, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.

(c) The limitations in Section 7.01(a) shall not apply in respect of any Liability arising out of or in connection with (i) either Party’s Liability for breaches of confidentiality under Article VI , (ii) either Party’s obligations under Section  7.02 or Section  7.03 , or (iii) the gross negligence, willful misconduct or fraud of or by the Party to be charged.

(d) The limitations in Section 7.01(b) shall not apply in respect of any Liability arising out of or in connection with (i) either Party’s obligations under Section  7.02 , or (ii) the gross negligence, willful misconduct or fraud of or by the Party to be charged.

Section 7.02. Third Party Claims . In addition to (but not in duplication of) its other indemnification obligations (if any) under the Separation and Distribution Agreement, this Agreement or any other Ancillary Agreement, the Recipient shall indemnify, defend and hold harmless the Provider, its Subsidiaries and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “ Provider Indemnitees ”), from and against any and all claims of Third Parties relating to, arising out of or resulting from the sale, delivery, provision or use of the Services by the Recipient, except to the extent that such claims relate to, arise out of or result from (a) the Provider’s breaches of confidentiality under Article VI or (b) Third Party Claims arising out of the gross negligence, willful misconduct or fraud of any Provider Indemnitee.

 

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Section 7.03. Provider Indemnity . In addition to (but not in duplication of) its other indemnification obligations (if any) under the Separation and Distribution Agreement, this Agreement or any other Ancillary Agreement, the Provider shall indemnify, defend and hold harmless the Recipient, its Subsidiaries and each of their respective Representatives, and each of the successors and assigns of any of the foregoing, from and against any and all Liabilities relating to, arising out of or resulting from the sale, delivery, provision or use of any Services provided by such Provider hereunder, but only to the extent that such Liability relates to, arises out of or results from (a) the Provider’s breaches of confidentiality under Article VI or (b) the gross negligence, willful misconduct or fraud of any Provider.

Section 7.04. Indemnification Procedures . The procedures for indemnification set forth in Sections 4.5, 4.6 and 4.7 of the Separation and Distribution Agreement shall govern any and all claims for indemnification under this Agreement.

ARTICLE VIII

TRANSITION COMMITTEE

Section 8.01. Establishment . Pursuant to the Separation and Distribution Agreement, a Transition Committee is to be established by Johnson Controls and Adient to, among other things, monitor and manage matters arising out of or resulting from this Agreement. Without limiting the generality of the foregoing, each Party shall cause each member of the Transition Committee who is an employee, agent or other Representative of such Party to work in good faith to resolve any Dispute arising out of or relating in any way to this Agreement.

ARTICLE IX

MISCELLANEOUS

Section 9.01. Mutual Cooperation . Each Party shall, and shall cause its Subsidiaries to, cooperate with the other Party and its Subsidiaries in connection with the performance of the Services hereunder; provided , that such cooperation shall not unreasonably disrupt the normal operations of such Party or its Subsidiaries; and, provided , further , that this Section  9.01 shall not require such Party to incur any out-of-pocket costs or expenses, unless and except as expressly provided in this Agreement or otherwise agreed to in writing by the Parties.

Section 9.02. Further Assurances . Subject to the terms of this Agreement, each Party shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party may reasonably request in order to effect the intent and purpose of this Agreement and the transactions contemplated hereby.

Section 9.03. Audit Assistance . Each of the Parties and their respective Subsidiaries are or may be subject to regulation and audit by a Governmental Authority (including a Tax Authority), standards organizations, customers or other parties to contracts with such Parties or their respective Subsidiaries under applicable Law, standards or contract provisions. If a Governmental Authority, standards organization, customer or other party to a contract with a Party or its Subsidiary exercises its right to examine or audit such Party’s or its Subsidiary’s books, records, documents or accounting practices and procedures pursuant to such applicable Law, standards

 

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or contract provisions, and such examination or audit relates to the Services, then the other Party shall provide, at the sole cost and expense of the requesting Party, all assistance reasonably requested by the Party that is subject to the examination or audit in responding to such examination or audit or requests for Information, to the extent that such assistance or Information is within the reasonable control of the cooperating Party and is related to the Services.

Section 9.04. Title to Intellectual Property . Except as expressly provided for under the terms of this Agreement, the other Ancillary Agreements or the Separation and Distribution Agreement, the Recipient acknowledges that it shall acquire no right, title or interest (including any license rights or rights of use) in any Intellectual Property which is owned or licensed by the Provider, by reason of the provision of the Services hereunder. The Recipient shall not remove or alter any copyright, trademark, confidentiality or other proprietary notices that appear on any Intellectual Property owned or licensed by the Provider, and the Recipient shall reproduce any such notices on any and all copies thereof. The Recipient shall not attempt to decompile, transform, reverse engineer or make excessive copies of any Intellectual Property owned or licensed by the Provider, and the Recipient shall promptly notify the Provider of any such attempt, regardless of whether by the Recipient or any Third Party, of which the Recipient becomes aware.

Section 9.05. Independent Contractors . The Parties each acknowledge and agree that they are separate entities, each of which has entered into this Agreement for its own independent business reasons. The relationships of the Parties hereunder are those of independent contractors and nothing contained herein shall be deemed to create a joint venture, partnership or any other relationship between the Parties. Employees performing Services hereunder do so on behalf of, under the direction of, and as employees of, the Provider, and the Recipient shall have no right, power or authority to direct such employees, unless otherwise specified with respect to a particular Service on the Schedules hereto.

Section 9.06. Counterparts; Entire Agreement; Corporate Power .

(a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

(b) This Agreement, the Separation and Distribution Agreement and the other Ancillary Agreements and the exhibits, schedules and appendices hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

(c) Johnson Controls represents on behalf of itself and, to the extent applicable, each of its Subsidiaries, and Adient represents on behalf of itself and, to the extent applicable, each of its Subsidiaries, as follows:

 

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(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

(ii) this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof.

(d) Each Party acknowledges and agrees that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

Section 9.07. Governing Law . This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of New York irrespective of the choice of laws principles of the State of New York (other than Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York) including all matters of validity, construction, effect, enforceability, performance and remedies. Each of Johnson Controls and Adient, on behalf of itself and the members of its Group, hereby irrevocably (a) agrees that any Dispute shall be subject to the exclusive jurisdiction of any federal court sitting in the Borough of Manhattan in The City of New York (or, only if such court lacks subject matter jurisdiction, in any New York State court sitting in the Borough of Manhattan in The City of New York), (b) waives any claims of forum non conveniens, and agrees to submit to the jurisdiction of such courts, as provided in New York General Obligations Law § 5-1402, (c) agrees that service of any process, summons, notice or document by United States registered mail to its respective address set forth in Section  9.10 shall be effective service of process for any litigation brought against it in any such court or for the taking of any other acts as may be necessary or appropriate in order to effectuate any judgment of said courts and (d) UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE.

Section 9.08. Assignability .

(a) This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided , that neither Party may assign its rights or delegate its obligations under this Agreement by operation of law or otherwise without the express prior written consent of the other Party. Notwithstanding the foregoing, no such consent shall be required for the assignment of a Party’s rights and obligations under the

 

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Separation and Distribution Agreement, this Agreement and the other Ancillary Agreements in whole ( i.e. , the assignment of a Party’s rights and obligations under the Separation and Distribution Agreement, this Agreement and all the other Ancillary Agreements all at the same time) in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all of the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, or shall be construed to, prohibit either Party or any of its Subsidiaries from being party to or undertaking a change of control.

(b) If there occurs a divestiture or other disposition of any Subsidiary, division or business that is a Recipient or Provider of Services (a “ Divested Business ”), the Party that is divesting or disposing of such Divested Business shall assign all of its rights and obligations under this Agreement, in respect of the Divested Business, to the Person that acquired control of such Divested Business (such Person, the “ Divested Business Acquirer ”), without any requirement to obtain the consent of the other Party, and the Party that is divesting or disposing of the Divested Business shall cause the Divested Business Acquirer to accept in writing the terms of this Agreement and the applicable Services with respect to such Divested Business and, to the extent that the Divested Business is a Provider of Services, assume the applicable obligations of the Provider under this Agreement.

Section 9.09. Third-Party Beneficiaries . Except as provided in Article VII with respect to the Provider Indemnitees in their capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person (except the Parties) any rights or remedies hereunder; and (b) there are no other third-party beneficiaries of this Agreement and this Agreement shall not provide any other Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 9.10. Notices . All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section  9.10 ):

If to Johnson Controls, to:

Johnson Controls International plc

5757 North Green Bay Avenue

Milwaukee, Wisconsin 53209

Attn: General Counsel

Facsimile: 414-524-2299

E-mail: CO-General.Counsel@jci.com

 

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If to Adient, to:

Adient Limited

833 East Michigan Street, Suite 1100

Milwaukee, Wisconsin 53202

Attn: General Counsel

E-mail: CO-General.Counsel@adient.com

Any Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 9.11. Severability . If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

Section 9.12. Force Majeure . No Party shall be deemed in default of this Agreement for any delay or failure to fulfill any obligation hereunder (other than the obligation to pay money for Charges and Early Termination Charges, if any, incurred) so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance (other than the obligation to pay money for Charges and Early Termination Charges, if any, incurred) shall be extended for a period equal to the time lost by reason of the delay unless this Agreement has previously been terminated under A r ticle V . A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such Force Majeure, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement as soon as reasonably practicable (and in no event later than the date that the affected Party resumes providing analogous services to, or otherwise resumes analogous performance under any other agreement for, itself, its Affiliates or any Third Party), unless this Agreement has previously been terminated under Article V . The Recipient shall be relieved of the obligation to pay Charges for the affected Service(s) throughout the duration of such Force Majeure. If any Force Majeure prevents, hinders, or delays the performance by the Provider, the Recipient may procure the affected Services from an alternate source, including the Recipient’s personnel (with the Provider reimbursing the Recipient for the cost of procuring the affected Services from such alternate source) throughout the duration of such Force Majeure, and the Provider shall cooperate in good faith with, provide any required Information to, and take such other action as may be reasonable required to enable such alternate source to provide the affected Services.

 

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Section 9.13. Headings . The Article, Section and Paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 9.14. Survival of Covenants . Except as expressly set forth in this Agreement, the covenants, representations and warranties and other agreements contained in this Agreement, and Liability for the breach of any obligations contained herein, shall survive the Effective Time and shall remain in full force and effect thereafter.

Section 9.15. Waivers of Default . Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party. No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 9.16. Dispute Resolution .

(a) In the event of any controversy, dispute or claim arising out of or relating to any Party’s rights or obligations under this Agreement (whether arising in contract, tort or otherwise), calculation or allocation of the costs of any Service or otherwise arising out of or relating in any way to this Agreement (including the interpretation or validity of this Agreement) (a “ Dispute ”) and (ii) is not resolved by the Transition Committee after a reasonable period of time, such Dispute shall be resolved in accordance with the dispute resolution process referred to in Article VII of the Separation and Distribution Agreement.

(b) In any Dispute regarding the amount of a Charge or an Early Termination Charge, if such Dispute is finally resolved by the Transition Committee or pursuant to the dispute resolution process set forth or referred to in Section 9.16(a) and it is determined that the Charge or the Early Termination Charge, as applicable, that the Provider has invoiced the Recipient, and that the Recipient has paid to the Provider, is greater or less than the amount that the Charge or the Early Termination Charge, as applicable, should have been, then (i) if it is determined that the Recipient has overpaid the Charge or the Early Termination Charge, as applicable, the Provider shall within thirty (30) business days after such determination reimburse the Recipient an amount of cash equal to such overpayment, plus the Interest Payment, accruing from the date of payment by the Recipient to the time of reimbursement by the Provider; and (ii) if it is determined that the Recipient has underpaid the Charge or the Early Termination Charge, as applicable, the Recipient shall within thirty (30) business days after such determination reimburse the Provider an amount of cash equal to such underpayment, plus the Interest Payment, accruing from the date such payment originally should have been made by the Recipient to the time of payment by the Recipient.

Section 9.17. Specific Performance . Subject to Section  9.16 , in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its rights or their rights under this Agreement, in addition to any and all other rights

 

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and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are hereby waived by each of the Parties. Unless otherwise agreed to in writing, the Parties shall continue to provide Services and honor all other commitments under this Agreement during the course of dispute resolution pursuant to the provisions of Section  9.16 and this Section  9.17 with respect to all matters not subject to such Dispute; provided , that this obligation shall only exist during the term of this Agreement.

Section 9.18. Amendments . No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment (including any extension of the term of any Service), supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 9.19. Precedence of Schedules . Each Schedule attached to or referenced in this Agreement is hereby incorporated into and shall form an integral part of this Agreement; provided , that the terms contained in such Schedule shall only apply with respect to the Services provided under that Schedule. In the event of a conflict between the terms contained in an individual Schedule and the terms in the body of this Agreement, the terms in the Schedules shall take precedence with respect to the Services under such Schedule only. No terms contained in individual Schedules shall otherwise modify the terms of this Agreement.

Section 9.20. Interpretation . In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules, Annexes and Exhibits hereto) and not to any particular provision of this Agreement; (c) Article, Section, Exhibit, Annex and Schedule references are to the Articles, Sections, Exhibits, Annexes and Schedules to this Agreement unless otherwise specified; (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in Ireland, the United States or the United Kingdom; (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to September 8, 2016.

 

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Section 9.21. Mutual Drafting (a) . This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Agreement.

[ Remainder of page intentionally left blank ]

 

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives.

 

JOHNSON CONTROLS INTERNATIONAL PLC
By:  

/s/ Brian J. Stief

  Name: Brian J. Stief
  Title: Executive Vice President and Chief Financial Officer
ADIENT LIMITED
By:  

/s/ Cathleen A. Ebacher

  Name: Cathleen A. Ebacher
  Title: Vice President, General Counsel and Secretary

[ Signature Page to Transition Services Agreement ]


Schedules

Transition Services


LOGO

Johnson Controls/Adient Service Schedule for: Bratislava Business Center (“BBC”) Facility Schedule Name: Bratislava Business Center (“BBC”) Facility Provider: Johnson Controls Recipient: Adient Duration: 9 Months The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing Services to be provided include JCI event management, building maintenance and IT infrastructure support. The headcount (738 as of 6/15/16) used to calculate this charge will be the actual organization headcount. Net cost to be charged as part of this TSA is 192.23 per head and is exclusive of rent and utilities. 2. Other Terms and Conditions: Service Name Description/Requirements/Other Matters All Termination: In the event of a partial termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed All Exit Support: Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs)


LOGO

Johnson Controls/Adient Service Schedule for: Dalian Business Center Schedule Name: Dalian Business Center Provider: Johnson Controls Recipient: Adient Duration: 2 Years The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing Yearly DBC Charges Total: $3,476,329 2. Other Terms and Conditions: If service for a Profit Center (operation) is terminated, the cost will remain for three (3) months before costs can be fully terminated. If an additional Profit Center (operation) is added, three (3) months’ notification will be required to ensure appropriate staff is in place to support demand. In a quarterly basis exchange rate RMB / USD will be reviewed and if there will be a deviation of +/- 5% compared with the previous quarter, an automatic review of the prices will be done to consider new exchange rate. The initial exchange rate will be based on the exchange rate at the TSA signature date. Exit Support: Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs)


LOGO

Adient / Johnson Controls Service Schedule for: Finance Schedule Name: Finance (includes CFS and General Finance) Provider: Adient Recipient: Johnson Controls Duration: 5 Months The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing CFS Statutory closing, audit Direct tax compliance Indirect tax compliance External audit coordination $2,950,000 Foreign corporate entities Tax provision + US GAAP to Local GAAP reconciliation US Tax General Finance Information sharing to support the 9/30/16 audit & financial statement period. No cost


LOGO

2. Other Terms and Conditions: Service Name Description/Requirements/Other Matters All Exit Support: Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs) Termination: In the event of a partial termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed


LOGO

Johnson Control / Adient Service Schedule for: Finance Schedule Name: Finance (includes General Finance and Tax) Provider: Johnson Controls Recipient: Adient Duration: 5 months The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern 1. Services and pricing: Information sharing to support the 9/30/16 audit & financial statement period. Service Desciption Estimated Cost General Finance $0 Tax $8,700 2. Other Terms and Conditions: Service Name Description/Requirements/Other Matters General Exit Support: Recipient will be responsible for all exit-related costs (internal service-provider costs Finance and will based on mutually agreed upon time-and-material costs) Tax Termination: In the event of an early termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed


LOGO

Johnson Controls Service Schedule for: Human Resources Schedule Name: Human Resources Provider: Adient Recipient: Johnson Controls Duration: 2 to 17 Months The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern.
1. Services and pricing: Total Shared Services cost estimate for entire TSA duration; $244,672 Total Payroll servicing cost estimate for entire TSA duration: $436,948


LOGO

Service Name Description/Requirements/Other Matters All The cost of HR Administration vary by region and country as a result of country specific regulations and contracts This pricing structure will hold during the Term where access to systems currently utilized will be granted by the vendor and where vendor pricing does not change. If vendor pricing changes, pricing changes may be reflected in the pricing structure. Services subject to vendor authorization that will allow for applications associated with delivering the TSA services for the same period of time. Termination: In the event of a partial termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed. Exit Support: Service Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs) Term: Extension will be granted but limited to two three month extensions


LOGO

Header or footer;Header or footer (2);Johnson Controls / Adient Service Schedule for: Human ResourcesBody text1;Body text (7);Schedule Name: Human Resources Provider: Johnson Controls Recipient: Adient Duration: 2 to 17 Months The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing: Total Shared Services cost estimate for entire TSA duration: $537,145 Total Payroll servicing cost estimate for entire TSA duration: $503,334 Total Talent Acquisition, L&D and Performance Management cost estimate for entire TSA duration: $11,556 Total Workday, Dynamics, global apps support cost estimate for entire TSA duration: $191,139 Total PeopleSoft support cost estimate for entire TSA duration: $85,973


LOGO

Other Terms and Conditions: Service Name Description/Requirements/Other Matters All • The cost of HR Administration and Payroll vary by region and country as a result of country specific regulations and contracts This pricing structure will hold during the Term where access to systems currently utilized will be granted by the vendor and where vendor pricing does not change. If vendor pricing changes, pricing changes may be reflected in the pricing structure. Services subject to vendor authorization that will allow for applications associated with delivering the TSA services for the same period of time. Termination: In the event of a partial termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed. Exit Support: Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs) Term: Extension will be granted but limited to two three month extensions


LOGO

Johnson Controls Service Schedule for: Information Technology Schedule Name: Information Technology Provider: Adient Recipient: Johnson Controls Duration: As specified below The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing: ID Sub Workstream Function Duration (months) 1. 1 Data Center Mgmt & Business Hosting Svcs CBRE/GWS application hosting from DBC 1. 1 Data Center Mgmt & Business Hosting Svcs HR IT Apps 17 1. 1 Data Center Mgmt & Business Hosting Svcs Unentangled Apps for PS/BE hosting from BDC and HDC 2 1. 3 SAP Applications Corp Genesis 5 1. 3 HCM Readiness Kronos Mexico Platform Support 2 \1.4 DBC Application Access 24 1. 5 Projects Adient Support for JCI Projects 3-4 Total: $913,197 IT TSA exit costs for internal provider resources: As part of the process to exit IT TSA services, all requests outside of services will be charged to the Recipient on a T&M basis.


LOGO

Body text (2)1;Body text (8)1;Process Area Description/Requirements/Other Matters Other Terms • Termination: In the event of a partial termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed. • Exit Support: Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs) • Term: Extension will be granted but limited to two three month extensions • All misdirected TIPS charges (i.e. variable charges that are billed to the Provider but are the liability of the Recipient) will be charged back to the Recipient


LOGO

Johnson Controls / Adient Service Schedule for: Information Technology Services Schedule Name: Information Technology Services: Application run/maintain and infrastructure services Provider: Johnson Controls Recipient: Adient Duration: As specified below The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing ID Area Function Duration (months) 1.1 Identity Management Identity and Access Management for TSA’d applications 5 1.2 Office365 Services Email forwarding, SharePoint & Skype will be provided to 3 service recipient during the migration period. There is no service level guarantee for the stability and availability of this service during TSA duration. 1.4 HCM Applications PeopleSoft / Identity 17 1.4HCM Applications Workday / SaaS 2 1.4 HCM Applications PeopleSoft / Identity - YFAI 17 1.4 HCM Applications Workday / SaaS - YFAI 2 1.4 Maximo Application Support 4 1.5 Projects JCI Support for Adient Projects 2 - 4 1.6 Microsoft Services 11 Total: $6,361,067 (FY17 & FY18) IT TSA cost for internal provider resources: As part of the process to exit IT TSA services, all requests outside of services defined will be charged to the Recipient on a T&M basis.


LOGO

Process Area Description/Requirements/Other Matters Other Terms • Termination: In the event of a partial termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed. • Exit Support: Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs) • Term: Extension will be granted but limited to two three month extensions All misdirected TIPS charges (i.e. variable charges that billed to the Provider but are the liability of the Recipient) will be charged back to the Recipient


LOGO

BBody text (7);Heading #1;Body text (8)1;Adient/Johnson Controls Service Schedule for: Sales and Marketing Services Schedule Name: Sales and Marketing Provider: Adient Recipient: Johnson Controls Duration: Eight (8) Months The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing: Process Area Market Forecast Report (supplier vehicle production data) Total for TSA duration: $90,646 Body text (2)1;Body text (5)1;Body text (7);Total for TSA duration: $90,646 1. Other Terms and Conditions: Service Name Description/Requirements/Other Matters Exit Support: Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs) Term: The term will be capped at eight (8) months Termination: In the event of a partial termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed.


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Johnson Controls Service Schedule for: China Support Center Shanghai SOHO (“SOHO”) Facility Schedule Name: China Support Center Shanghai SOHO (“SOHO”) Facility Provider: Adient Recipient: Johnson Controls Duration: 6 Months The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing: Service Description Pricing (RMB) Furniture Rental 51,420 per month 2. Other Terms and Conditions: • All charges between parties in local currency, RMB. • Actual changes to pricing will be calculated upon termination of service(s). Upon termination, there may be additional costs or cost reductions to be agreed upon in good faith between the Provider and Recipient. • Exit Support: Service Recipient will be responsible for all exit-related costs (internal service-provider costs will based on mutually agreed upon time-and-material costs).


LOGO

Johnson Controls / Adient Service Schedule for: China Support Center Shanghai SOHO (“SOHO”) Facility Schedule Name: China Support Center Shanghai SOHO (“SOHO”) Facility Provider: Johnson Controls Recipient: Adient Duration: 1 Month The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing: Service Description Pricing (RMB) Total Monthly lease cost 926,394 per month 2. Other Terms and Conditions: All charges between parties in local currency, RMB. Actual changes to pricing will be calculated upon termination of service(s). Upon termination, there may be additional costs or cost reductions to be agreed upon in good faith between the Provider and Recipient.
• Exit Support: Service Recipient will be responsible for all lease exit-related costs


LOGO

Johnson Controls / Adient Service Schedule for: Travel and Entertainment (Credit Card Services) Schedule Name: Travel and Entertainment (Asia Credit Card Services) Provider: Johnson Controls Recipient: Adient Duration: 12 Months The services described in this Service Schedule shall be provided subject to the terms described in the Transition Services Agreement (“Agreement”). Unless otherwise defined herein, all terms used but not defined herein shall have the meanings assigned to them in the Agreement. This Service Schedule shall govern areas not specifically provided in the Agreement. Where there is more specific provisions in this Service Schedule than the Agreement, this Service Schedule shall govern. 1. Services and pricing: Services supported in USD ($) Total Asia Credit Card administration $ 46,512. & Credit Card Program - Implementation 2. Other Terms and Conditions: Service Name Description/Requirements/Other Matters All • Exit Support: Recipient will be responsible for all exit-related costs (internal service- provider costs will based on mutually agreed upon time-and-material costs) Termination: In the event of a partial termination, a simple price-adjustment mechanism should be mutually agreed upon to ensure that the monthly charges are based on the actual services consumed

Exhibit 10.2

TAX MATTERS AGREEMENT

DATED AS OF SEPTEMBER 8, 2016

BY AND BETWEEN

JOHNSON CONTROLS INTERNATIONAL PLC

AND

ADIENT LIMITED

 


TABLE OF CONTENTS

 

         Page  

Section 1.

  Definition of Terms      2  

Section 2.

  Allocation of Tax Liabilities      13  

Section 2.01

  General Rule      13  

Section 2.02

  Allocation of Taxes      14  

Section 2.03

  Certain Transaction and Other Taxes      15  

Section 3.

  Preparation and Filing of Tax Returns      17  

Section 3.01

  Johnson Controls Returns      17  

Section 3.02

  Adient Returns      17  

Section 3.03

  Tax Reporting Practices      17  

Section 3.04

  Consolidated or Combined Tax Returns      18  

Section 3.05

  Right to Review Tax Returns      19  

Section 3.06

  Adient Carryback Items and Claims for Refund      20  

Section 3.07

  Apportionment of Earnings and Profits and Tax Attributes      20  

Section 4.

  Payments      21  

Section 4.01

  Payment of Taxes      21  

Section 4.02

  Adjustments Resulting in Underpayments      22  

Section 4.03

  Indemnification Payments      22  

Section 4.04

  Payors; Payees; Treatment      22  

Section 5.

  Tax Benefits      23  

Section 5.01

  Tax Benefits      23  

Section 5.02

  Johnson Controls and Adient Income Tax Deductions in Respect of Certain Equity Awards and Incentive Compensation      25  

Section 6.

  Transaction Status      25  

Section 6.01

  Restrictions on Adient      25  

 

i


Section 6.02

  Restrictions on Johnson Controls      28  

Section 6.03

  Procedures Regarding Opinions and Rulings      28  

Section 6.04

  Liability for Separation Tax Losses      29  

Section 6.05

  Certain Elections      31  

Section 7.

  Assistance and Cooperation      32  

Section 7.01

  Assistance and Cooperation      32  

Section 7.02

  Tax Return Information      32  

Section 7.03

  Reliance by Johnson Controls      32  

Section 7.04

  Reliance by Adient      33  

Section 8.

  Tax Records      33  

Section 8.01

  Retention of Tax Records      33  

Section 8.02

  Access to Tax Records      34  

Section 8.03

  Preservation of Privilege      34  

Section 9.

  Tax Contests      34  

Section 9.01

  Notice      34  

Section 9.02

  Control of Tax Contests      35  

Section 10.

  Effective Date; Termination of Prior Intercompany Tax Allocation Agreements      38  

Section 11.

  Survival of Obligations      38  

Section 12.

  Treatment of Payments; Tax Gross-Up      38  

Section 12.01

  Treatment of Tax Indemnity and Tax Benefit Payments      38  

Section 12.02

  Tax Gross-Up      39  

Section 12.03

  Interest      39  

Section 13.

  Disagreements      39  

Section 13.01

  Dispute Resolution      39  

Section 13.02

  Injunctive Relief      40  

 

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Section 14.

  Late Payments      40  

Section 15.

  Expenses      40  

Section 16.

  General Provisions      40  

Section 16.01

  Addresses and Notices      40  

Section 16.02

  Assignability      41  

Section 16.03

  Waiver      41  

Section 16.04

  Severability      41  

Section 16.05

  Authority      41  

Section 16.06

  Further Action      41  

Section 16.07

  Integration      42  

Section 16.08

  Construction      42  

Section 16.09

  No Double Recovery      42  

Section 16.10

  Currency      42  

Section 16.11

  Counterparts      42  

Section 16.12

  Governing Law      42  

Section 16.13

  Jurisdiction      43  

Section 16.14

  Amendment      43  

Section 16.15

  Adient Subsidiaries      43  

Section 16.16

  Successors      43  

Section 16.17

  Injunctions      43  

 

 

iii


TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (this “ Agreement ”) is entered into as of September 8, 2016, by and between Johnson Controls International plc, an Irish public limited company (“ Johnson Controls ”), and Adient Limited, a company organized under the laws of Ireland (“ Adient ”) (collectively, the “ Companies ” and each, a “ Company ”).

RECITALS

WHEREAS, Johnson Controls and Adient have entered into a Separation and Distribution Agreement, dated as of September 8, 2016 (the “ Separation and Distribution Agreement ”), providing for the separation of the Johnson Controls Group from the Adient Group;

WHEREAS, pursuant to the terms of the Separation and Distribution Agreement and the Separation Step Plan, Old Johnson Controls has and will, among other things, (i) contribute, sell or otherwise transfer (or cause to be contributed, sold or otherwise transferred) the Adient Assets to Jersey SpinCo and its Subsidiaries, (ii) cause Jersey SpinCo and its Subsidiaries to assume the Adient Liabilities, and (iii) sell or otherwise transfer all of the outstanding Jersey SpinCo Shares to a wholly owned (directly or indirectly) Affiliate of Johnson Controls (“ TSub ”) in exchange for a note or otherwise (the “ Old Johnson Controls Jersey SpinCo Sale ”);

WHEREAS, following the Old Johnson Controls Jersey SpinCo Sale, TSub will sell or otherwise transfer all of the outstanding Jersey SpinCo Shares to Johnson Controls in exchange for a note, in partial repayment of a loan or otherwise (the “ TSub Jersey SpinCo Sale ”);

WHEREAS, following the TSub Jersey SpinCo Sale, pursuant to the terms of the Separation and Distribution Agreement, Johnson Controls will (and will cause Adient to) effect the Distribution;

WHEREAS, Johnson Controls and its Subsidiaries have engaged in certain restructuring transactions to facilitate the Distribution, including the Old Johnson Controls Internal Contributions, the Old Johnson Controls Internal Distributions, the Old Johnson Controls Jersey SpinCo Sale, the TSub Jersey SpinCo Sale and the other transactions set forth in the Separation Step Plan;

WHEREAS, for U.S. Federal Income Tax purposes, it is intended that each of the Old Johnson Controls Internal Distributions shall qualify as a transaction that is generally tax-free pursuant to Sections 355(a) and 368(a)(1)(D) of the Code or Section 355(a) of the Code, as applicable; and

WHEREAS, the parties desire to provide for and agree upon the allocation between the parties of liabilities for Taxes arising prior to, as a result of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties hereby agree as follows:


Section 1.Definition of Terms. For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings, and capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Separation and Distribution Agreement:

Active Trade or Business ” means, with respect to any Old Johnson Controls Internal Distributing and any Old Johnson Controls Internal Controlled, the active conduct (as defined in Section 355(b)(2) of the Code and the regulations thereunder) by such entity and its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) of the trade or business relied upon to satisfy Section 355(b) of the Code with respect to the relevant Old Johnson Controls Internal Distribution immediately prior to such Old Johnson Controls Internal Distribution.

Actually Realized ” or “ Actually Realizes ” means, for purposes of determining the timing of the incurrence of any Tax Liability or the realization of a Refund (or any related Tax cost or Tax Benefit), whether by receipt or as a credit or other offset to Taxes otherwise payable, by a Person in respect of any payment, transaction, occurrence or event, the time at which the amount of Taxes paid (or Refund realized) by such Person is increased above (or reduced below) the amount of Taxes that such Person would have been required to pay (or Refund that such Person would have realized) but for such payment, transaction, occurrence or event.

Adient ” has the meaning set forth in the Preamble, and references herein to Adient shall include any entity treated as a successor to Adient.

Adient Business ” has the meaning set forth in the Separation and Distribution Agreement.

Adient Capital Stock ” means all classes or series of capital stock of Adient, including (i) the Adient Shares, (ii) all options, warrants and other rights to acquire such capital stock, and (iii) all instruments properly treated as stock in Adient for Federal Income Tax purposes.

Adient Carryback Item ” means any net operating loss, net capital loss, excess tax credit or other similar Tax item of any member of the Adient Group which may or must be carried from any Post-Distribution Period to any Pre-Distribution Period under the Code or other applicable Tax Law.

Adient Group ” means Adient and its Affiliates, as determined immediately after the Distribution.

Adient Group Employees ” has the meaning set forth in the Employee Matters Agreement.

Adient Group Relief ” means, without duplication, (i) any Relief of any member of the Adient Group as of immediately after the Distribution and (ii) any Relief generated by, or attributable or arising to, any member of the Adient Group in a Post-Distribution Period.

Adient Return ” has the meaning set forth in Section 3.02.

 

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Adient Separate Return ” means any Separate Return of Adient or any member of the Adient Group.

Adient Shares ” has the meaning set forth in the Separation and Distribution Agreement.

Adjusted Company ” has the meaning set forth in Section 9.02(c).

Adjustment Request ” means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, Refund, or credit of Taxes, including (a) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (b) any claim for equitable recoupment or other offset, and (c) any claim for Refund of Taxes previously paid.

Affiliate ” has the meaning set forth in the Separation and Distribution Agreement.

Agreement ” means this Tax Matters Agreement.

Business Day ” means any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by Law to close in Ireland, the United States or the United Kingdom.

Check-the-Box Election ” has the meaning set forth in Section 6.05(b).

Code ” means the U.S. Internal Revenue Code of 1986, as amended.

Combined Return ” means a consolidated, affiliated, combined, unitary, group or other similar Tax Return (including a Tax Return with respect to a profit and/or loss sharing group ( e.g. , UK group relief), group payment or similar group or fiscal unity) that actually includes, by election or otherwise, one or more members of the Johnson Controls Group together with one or more members of the Adient Group (including, for the avoidance of doubt, any such Tax Return that is an Old Johnson Controls Federal Consolidated Income Tax Return).

Companies ” or “ Company ” has the meaning set forth in the Preamble.

Compensatory Equity Interests ” has the meaning set forth in Section 5.02.

Competent Authority Proceeding ” means any proceeding pursuant to the mutual assistance or mutual agreement provisions of any tax treaty or any similar proceeding before any Competent Authority (or other body similar to a Competent Authority established pursuant to any tax treaty).

Distribution ” means the distribution by Johnson Controls of all of the Jersey SpinCo Shares to holders of Johnson Controls common stock, which will be effected by way of a distribution in specie by Johnson Controls of the Adient Business to the holders of Johnson Controls common stock, through (a) the transfer to Adient, which will have been re-registered as a public limited company, of Johnson Controls’ entire legal and beneficial interest in the issued share capital of Jersey SpinCo, and (b) the issuance of Adient Shares to holders of Johnson Controls common stock on a pro rata basis.

 

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Distribution Date ” has the meaning set forth in the Separation and Distribution Agreement.

Effective Time ” has the meaning set forth in the Separation and Distribution Agreement.

Electronics Business ” means the “Business,” as defined in that certain Purchase Agreement, dated as of January 12, 2014, by and between Johnson Controls, Inc. and Visteon Corporation, and the “Business,” as defined in that certain Asset Purchase Agreement, dated as of July 18, 2013, by and between Johnson Controls, Inc. and Gentex Corporation.

Electronics Business Tax ” means any Tax Liability imposed on any Electronics Entity and attributable to the Electronics Business (determined on a “with and without” basis).

Electronics Business Tax Attribute ” means any Tax Attribute of any Electronics Entity attributable to the Electronics Business, as determined by Johnson Controls in good faith.

Electronics Entity ” means each of Johnson Controls Automotive Electronics do Brasil Ltda. (formerly SAGEM Do Brasil), JC International ZAO, and any of their respective successors.

Employee Matters Agreement ” means the Employee Matters Agreement, dated as of September 8, 2016, by and between Johnson Controls and Adient.

Federal Income Tax ” means any Tax imposed by Subtitle A of the Code.

Federal Other Tax ” means any Tax imposed by the federal government of the United States of America other than any Federal Income Taxes.

Fifty-Percent or Greater Interest ” has the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code and the Treasury Regulations Thereunder.

Filing Date ” has the meaning set forth in Section 6.04(d).

Final Determination ” means the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a Tax Period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the Laws of a State, local or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of Law) the right of the taxpayer to file a claim for Refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such Tax Period (as the case may be); (b) by a decision, judgment, decree or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Section 7121 or 7122 of the Code, or a comparable agreement under the Laws of a State, local or foreign taxing jurisdiction; (d) by any allowance of a Refund in respect of an overpayment of Tax, but

 

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only after the expiration of all periods during which such Refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; (e) by a final settlement resulting from a Competent Authority Proceeding or determination; or (f) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties hereto.

Foreign Corporation Status ” means the status of Adient as a foreign corporation (within the meaning of Sections 7701(a)(3) and 7701(a)(5) of the Code) for U.S. federal tax purposes as of immediately after the Distribution.

Foreign Income Tax ” means any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or United States possession, which is an income tax as defined in Treasury Regulations Section 1.901-2.

Foreign Other Tax ” means any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or United States possession, other than any Foreign Income Taxes.

Former Adient Group Employees ” has the meaning provided in the Employee Matters Agreement.

Former Johnson Controls Group Employee ” has the meaning provided in the Employee Matters Agreement.

Group ” means the Johnson Controls Group or the Adient Group, or both, as the context requires.

High-Level Dispute ” means any dispute or disagreement (a) relating to liability under Section 6.04 or (b) in which the amount of liability in dispute exceeds $10 million.

Income Tax ” means any Federal Income Tax, State Income Tax or Foreign Income Tax.

Indemnitee ” has the meaning set forth in Section 12.03.

Indemnitor ” has the meaning set forth in Section 12.03.

IRS ” means the United States Internal Revenue Service.

Jersey SpinCo ” means Adient Global Holdings Ltd, a Jersey public limited company and a direct wholly owned Subsidiary of Adient immediately following the Distribution.

Jersey SpinCo Shares ” means the ordinary shares, par value £1 per share, of Jersey SpinCo.

Johnson Controls ” has the meaning set forth in the Preamble.

Johnson Controls Business ” has the meaning set forth in the Separation and Distribution Agreement.

 

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Johnson Controls Group ” means Johnson Controls and its Affiliates, excluding any entity that is a member of the Adient Group.

Johnson Controls Group Employees ” has the meaning set forth in the Employee Matters Agreement.

Johnson Controls Group Relief ” means, without duplication, (i) any Relief of any member of the Johnson Controls Group as of immediately after the Distribution and (ii) any Relief generated by, or attributable or arising to, any member of the Johnson Controls Group in a Post-Distribution Period.

Johnson Controls Return ” has the meaning set forth in Section 3.01(a).

Johnson Controls Separate Return ” means any Separate Return of Johnson Controls or any member of the Johnson Controls Group.

Law ” has the meaning set forth in the Separation and Distribution Agreement.

Loss ” has the meaning set forth in Section 5.01(b).

Non-Recoverable Transaction Tax Return ” has the meaning set forth in Section 3.01(a).

Non-Recoverable Transaction Taxes ” has the meaning set forth in Section 2.03(a).

Notified Action ” has the meaning set forth in Section 6.03(a).

Old Johnson Controls ” means Johnson Controls, Inc., a Wisconsin corporation.

Old Johnson Controls Affiliated Group ” has the meaning set forth in the definition of “Old Johnson Controls Federal Consolidated Income Tax Return.”

Old Johnson Controls Federal Consolidated Income Tax Return ” means any U.S. federal income Tax Return for the affiliated group (as that term is defined in Section 1504 of the Code and the regulations thereunder) of which Old Johnson Controls is the common parent (the “ Old Johnson Controls Affiliated Group ”).

Old Johnson Controls Internal Contribution ” means the contribution of specified assets to an Old Johnson Controls Internal Controlled pursuant to the Separation and Distribution Agreement and the Separation Step Plan.

Old Johnson Controls Internal Controlled ” means each of Recaro Automotive Mexico S. de R.L. de C.V., Ensamble de Interiors Automotrices S. de R.L. de C.V. and Johnson Controls Asia Holdings Co. Limited, and their respective successors.

Old Johnson Controls Internal Controlled Capital Stock ” means, with respect to any Old Johnson Controls Internal Controlled, all classes or series of capital stock of such Old Johnson Controls Internal Controlled, including (i) any class of common stock, preferred stock or other capital stock, (ii) all options, warrants and other rights to acquire such capital stock, and (iii) all instruments properly treated as stock in such Old Johnson Controls Internal Controlled for Federal Income Tax purposes.

 

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Old Johnson Controls Internal Distributing ” means each of JC Enterprises Mexico SRL, Johnson Controls Holding Company, Inc. and Johnson Controls Holding China Business Trust, and their respective successors.

Old Johnson Controls Internal Distributing Capital Stock ” means, with respect to any Old Johnson Controls Internal Distributing, all classes or series of capital stock of any Old Johnson Controls Internal Distributing, including (i) any class of common stock, preferred stock or other capital stock, (ii) all options, warrants and other rights to acquire such capital stock, and (iii) all instruments properly treated as stock in such Old Johnson Controls Internal Distributing for Federal Income Tax purposes.

Old Johnson Controls Internal Distribution ” means the distribution or exchange pursuant to a full or partial redemption by an Old Johnson Controls Internal Distributing of the common stock of the applicable Old Johnson Controls Internal Controlled to or with Johnson Controls or another member of the Johnson Controls Group in a transaction intended to qualify as generally tax-free pursuant to Sections 355(a) and 368(a)(1)(D) of the Code or Section 355(a) of the Code, as applicable.

Old Johnson Controls Jersey SpinCo Sale ” has the meaning set forth in the Recitals.

Other Tax ” means any Federal Other Tax, State Other Tax or Foreign Other Tax.

Past Practices ” has the meaning set forth in Section 3.03(a).

Payment Date ” means (i) with respect to any Old Johnson Controls Federal Consolidated Income Tax Return, the due date for any required installment of estimated taxes determined under Section 6655 of the Code, the due date (determined without regard to extensions) for filing the return determined under Section 6072 of the Code, and the date the return is filed, and (ii) with respect to any other Tax Return, the corresponding or similar dates determined under the applicable Tax Law.

Person ” means any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization or a governmental entity or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for Federal Income Tax purposes.

Permitted Adient Carryback ” has the meaning set forth in Section 5.01(d).

Post-Distribution Period ” means any Tax Period beginning after the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period beginning the day after the Distribution Date.

 

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Pre-Distribution Period ” means any Tax Period ending on or before the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Distribution Date.

Prime Rate ” has the meaning set forth in the Separation and Distribution Agreement.

Privilege ” means any privilege that may be asserted under applicable Law, including any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.

Privileged Tax Documentation ” has the meaning set forth in Section 8.03.

Proposed Acquisition Transaction ” means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulations Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by Adient management or shareholders, is a hostile acquisition, or otherwise, as a result of which Adient would merge or consolidate with any other Person or as a result of which any Person or Persons would (directly or indirectly) acquire, or have the right to acquire, from Adient and/or one or more holders of Adient Capital Stock, a number of shares of Adient Capital Stock that would, when combined with any other changes in ownership of Adient Capital Stock pertinent for purposes of Section 355(e) of the Code, comprise 40% or more of (A) the value of all outstanding shares of stock of Adient as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (B) the total combined voting power of all outstanding shares of voting stock of Adient as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (A) the adoption by Adient of a shareholder rights plan or (B) issuances by Adient that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This definition and the application thereof are intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated into this definition and its interpretation.

Recipient ” means, with respect to the transfers occurring pursuant to any of the Separation Transactions, the Person receiving assets and/or liabilities.

Refund ” means any refund of Taxes, including any refund or reduction in Tax Liabilities by means of a credit or offset.

Relief ” means any relief, loss allowance, exemption, set-off, Refund, deduction, credit or Tax Attribute utilized in computing, or against, taxable income or Tax Liability.

 

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Responsible Company ” means, with respect to any Tax Return, the Company having responsibility for preparing such Tax Return under this Agreement.

Restriction Period ” means the period beginning on the date hereof and ending on (and including) the two-year anniversary of the Distribution Date.

Retention Date ” has the meaning set forth in Section 8.01.

Section 336(e) Election ” has the meaning set forth in Section 6.05(a).

Separate Return ” means (a) in the case of any Tax Return of any member of the Adient Group (including any consolidated, affiliated, combined, unitary, group or other similar Tax Return (including a Tax Return with respect to a profit and/or loss sharing group ( e.g. , UK group relief), group payment or similar group or fiscal unity)), any such Tax Return that does not include any member of the Johnson Controls Group and (b) in the case of any Tax Return of any member of the Johnson Controls Group (including any consolidated, affiliated, combined, unitary, group or other similar Tax Return (including a Tax Return with respect to a profit and/or loss sharing group ( e.g. , UK group relief), group payment or similar group or fiscal unity)), any such Tax Return that does not include any member of the Adient Group.

Separation ” means the separation of the Adient Business from the Johnson Controls Business.

Separation and Distribution Agreement ” has the meaning set forth in the Recitals.

Separation Related Tax Contest ” means any Tax Contest in which the IRS, another Tax Authority or any other party asserts a position that could reasonably be expected to adversely affect, jeopardize or prevent (a) the Tax-Free Status of any of the Old Johnson Controls Internal Distributions (and, where applicable, the related Old Johnson Controls Internal Contribution), (b) a relevant entity, instrument or Separation Transaction (other than a Separation Transaction described in clause (a)) to have the tax-free or other tax treatment described in the Tax Treatment Schedule or Separation Step Plan, or (c) the Unrestricted Inversion Status of the Tyco Merger.

Separation Step Plan ” means the global plan of reorganization setting forth the specific transactions undertaken in anticipation and furtherance of the Separation, attached as Schedule 2.1(a) to the Separation and Distribution Agreement.

Separation Tax Losses ” means (i) all Taxes imposed pursuant to (or any reduction in a Refund resulting from) any settlement, Final Determination, judgment or otherwise; (ii) all third-party accounting, legal and other professional fees and court costs incurred in connection with such Taxes (or reduction in a Refund), as well as any other out-of-pocket costs incurred in connection with such Taxes; and (iii) all third-party costs, expenses and damages associated with any stockholder litigation or other controversy and any amount required to be paid by Johnson Controls (or any Johnson Controls Affiliate) or Adient (or any Adient Affiliate) in respect of any liability of or to shareholders, whether paid to shareholders or to the IRS or any other Tax Authority, in each case, resulting from (x) the failure of any of the Old Johnson Controls Internal

 

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Contributions or Old Johnson Controls Internal Distributions to have Tax-Free Status (including, for the avoidance of doubt, any Taxes imposed on income or gain recognized pursuant to any “gain recognition agreement” within the meaning of Treasury Regulations Section 1.367(a)-8 previously entered into in connection with any other transaction that results from or is attributable to the failure of any of the Old Johnson Controls Internal Contributions or Old Johnson Controls Internal Distributions to have Tax-Free Status), (y) the failure of a relevant entity, instrument or Separation Transaction (other than a Separation Transaction described in clause (x)) to have the tax-free or other tax treatment described in the Tax Treatment Schedule or the Separation Step Plan, or (z) the failure of the Tyco Merger to have Unrestricted Inversion Status; provided that amounts shall be treated as having been required to be paid for purposes of clause (iii) of this definition to the extent they are paid in a good-faith compromise or settlement of an asserted claim. For the avoidance of doubt, except as expressly provided to the contrary in this Agreement, the amount of Taxes that are Separation Tax Losses for which Johnson Controls and Adient, as applicable, are liable pursuant to this Agreement shall be calculated without taking into account the utilization of any Adient Group Relief or Johnson Controls Group Relief, respectively.

Separation Transactions ” means the Distribution and the other transactions contemplated by the Separation and Distribution Agreement and the Separation Step Plan in furtherance of the Separation (including the Old Johnson Controls Internal Contributions, the Old Johnson Controls Internal Distributions, the Old Johnson Controls Jersey SpinCo Sale and the TSub Jersey SpinCo Sale).

Specified PRC Taxes ” means any income Taxes (a) imposed on Adient Asia Holdings Co., Limited (“Adient Asia Holdings”) by the People’s Republic of China (the “PRC”) on the direct transfer of interests in Baoding Fengfan Rising Battery Separator Co., Ltd. or the direct transfer of interests in JC (China) Investment Co., Ltd. pursuant to the Separation Transactions, or (b) imposed by the PRC, pursuant to Guoshuihan [2009] Circular No. 698 or Public Notice [2015] Circular No. 7, on the indirect transfer of interests in PRC-resident entities as a result of the direct or indirect transfer of interests in Adient Asia Holdings or Johnson Controls Interior Hong Kong Limited pursuant to the Separation Transactions.

State Income Tax ” means any Tax imposed by any State of the United States or by any political subdivision of any such State or the District of Columbia that is imposed on or measured by net income, including state and local franchise or similar Taxes measured by net income.

State Other Tax ” means any Tax imposed by any State of the United States or by any political subdivision of any such State or the District of Columbia, other than any State Income Taxes.

Straddle Combined Return ” means any Combined Return for a Straddle Period that is, under applicable Law, required to include a member of the Adient Group in the portion of such Straddle Period that is a Post-Distribution Period.

Straddle Period ” means any Tax Period that begins on or before and ends after the Distribution Date.

 

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Tax ” or “ Taxes ” means any taxes, fees, assessments, duties or other similar charges imposed by any Tax Authority, including, without limitation, income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers’ compensation, unemployment, disability, property, ad valorem , stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value-added, alternative minimum, estimated or other tax (including any fee, assessment, duty, or other charge in the nature of or in lieu of any tax), and any interest, penalties, additions to tax or additional amounts in respect of the foregoing. For the avoidance of doubt, Tax includes any increase in Tax as a result of a Final Determination.

Tax Advisor ” means tax counsel or accountant of recognized national standing.

Tax Advisor Dispute ” has the meaning set forth in Section 13.01.

Tax Attribute ” or “ Attribute ” means a net operating loss, net capital loss, unused investment credit, unused foreign tax credit, excess charitable contribution, general business credit or any other Tax Item that could reduce a Tax or create a Tax Benefit.

Tax Authority ” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision or otherwise having jurisdiction with respect to such Tax.

Tax Benefit ” means any loss, deduction, refund, credit, offset or other Tax item reducing Taxes paid or payable. For purposes of this Agreement, the amount of any Tax Benefit Actually Realized by a Person as a result of any such Tax item shall be determined on a “with and without basis” as the excess of (a) the hypothetical liability of such Person for the relevant Tax for the relevant Tax Period, calculated as if such Tax item had not been utilized but with all other facts unchanged, over (b) the actual liability of such Person for such Tax for such Tax Period, calculated taking into account such Tax item (and, for this purpose, treating a Refund as a reduction in liability for Tax).

Tax Contest ” means an audit, review, examination or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for any Refund).

Tax-Free Status ” means, with respect to each Old Johnson Controls Internal Distribution (where relevant, taken together with the related Old Johnson Controls Internal Contribution), the qualification thereof (a) as a transaction described in Sections 355(a) and 368(a)(1)(D) of the Code or Section 355(a) of the Code, as applicable, (b) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(c)(2) and 361(c)(2) of the Code, and (c) as a transaction in which Johnson Controls, Adient and the members of their respective Groups recognize no income or gain for U.S. federal income tax purposes pursuant to Sections 355, 361 and 1032 of the Code, other than intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code.

 

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Tax Item ” means, with respect to any Income Tax, any item of income, gain, loss, deduction, or credit.

Tax Law ” means the Law of any governmental entity or political subdivision thereof relating to any Tax.

Tax Liability ” means any liability or obligation for Taxes.

Tax Period ” means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.

Tax Records ” means any Tax Returns, Tax Return workpapers, documentation relating to any Tax Contest, and any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other medium) maintained or required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority.

Tax Return ” or “ Return ” means any report of Taxes due, any claim for Refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document filed or required to be filed under the Code or other Tax Law, including any attachments, exhibits or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

Tax Treatment Schedule ” means the schedule setting forth the intended tax treatment of certain entities, instruments and Separation Transactions, attached as Schedule 1.7 to the Separation and Distribution Agreement.

TSub ” has the meaning set forth in the Recitals.

TSub Jersey SpinCo Sale ” has the meaning set forth in the Recitals.

Transaction Taxes ” means any value-added, goods and services, sales, use, consumption, excise, service, transfer, stamp, documentary, filing, recordation Taxes or similar Taxes, in each case imposed or payable upon any of the Separation Transactions.

Transferor ” means, with respect to the transfers occurring pursuant to any of the Separations Transactions, the Person transferring assets and/or liabilities.

Treasury Regulations ” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.

Tyco Merger ” means the merger of an indirect subsidiary of Tyco International, plc with and into Old Johnson Controls effected on September 2, 2016.

Unrestricted Inversion Status ” means, with respect to the Tyco Merger, the failure of the ownership threshold of Section 7874(a)(2)(B)(ii) of the Code to be met.

 

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Unqualified Tax Opinion ” means an unqualified opinion of a Tax Advisor on which Johnson Controls may rely to the effect that a transaction will not adversely affect (i) the Tax-Free Status of any of the Old Johnson Controls Internal Distributions and any of the Old Johnson Controls Internal Contributions and (ii) the Unrestricted Inversion Status of the Tyco Merger; provided that any tax opinion obtained in connection with a proposed acquisition of Adient Capital Stock or any Old Johnson Controls Internal Controlled Capital Stock entered into during the Restriction Period shall not qualify as an Unqualified Tax Opinion unless such tax opinion concludes that such proposed acquisition will not be treated as “part of a plan (or series of related transactions),” within the meaning of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, that includes the Old Johnson Controls Internal Distribution involving such Old Johnson Controls Internal Controlled. Any such opinion must assume that (i) each of the Old Johnson Controls Internal Distributions and Old Johnson Controls Internal Contributions would have qualified for Tax-Free Status if the transaction in question did not occur and (ii) the Tyco Merger would have had Unrestricted Inversion Status if the transaction in question did not occur.

VAT ” shall mean any value added Taxes, goods and services Taxes or the equivalent of such Taxes in any relevant jurisdiction.

VAT Charges ” shall mean any Transaction Taxes that are recoverable VAT, to the extent such Taxes were paid, but not yet recovered (whether by way of input VAT, offset, Refund or otherwise), by Johnson Controls, Adient or any of their respective Affiliates on or prior to the Distribution Date.

Section 2. Allocation of Tax Liabilities.

Section 2.01 General Rule .

(a) Johnson Controls Liability . Johnson Controls shall be liable for, and shall indemnify and hold harmless the Adient Group from and against any liability for, any Taxes for which Johnson Controls is responsible, or which are allocated to Johnson Controls, pursuant to this Section 2 or Section 3.

(b) Adient Liability . Adient shall be liable for, and shall indemnify and hold harmless the Johnson Controls Group from and against any liability for, any Taxes for which Adient is responsible, or which are allocated to Adient, pursuant to this Section 2 or Section 3.

(c) Costs and Expenses. The amounts for which Johnson Controls or Adient, as applicable, is liable pursuant to Sections 2.01(a) and (b), respectively, shall include all accounting, legal and other professional fees, and court costs incurred in connection with the relevant Taxes.

(d) Relief . For the avoidance of doubt, except as expressly provided to the contrary herein, the amount of Taxes for which Johnson Controls or Adient, as applicable, is liable pursuant to this Section 2, Section 3 or otherwise under this Agreement shall be calculated without taking into account the utilization of any Adient Group Relief or Johnson Controls Group Relief, respectively.

 

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Section 2.02 Allocation of Taxes. Except as otherwise provided in Section 2.03(a), (b) or (c), Taxes shall be allocated as follows:

(a) Taxes Relating to Combined Returns for Pre-Distribution Periods.

(i) Johnson Controls shall be responsible for any and all Taxes due with respect to, attributable to or required to be reported on any Combined Return that are allocable to Pre-Distribution Periods (including, for the avoidance of doubt, any such Taxes imposed or payable as a result of a Final Determination).

(ii) For the avoidance of doubt, for purposes of this Agreement, any and all Taxes due with respect to, attributable to or required to be reported on any Combined Return that does not include any member of the Adient Group in any Post-Distribution Period shall be allocable to a Pre-Distribution Period.

(b) Taxes Relating to Combined Returns for Post-Distribution Periods.

(i) Johnson Controls shall be responsible for any and all Taxes due with respect to, attributable to or required to be reported on any Combined Return that are allocable to Post-Distribution Periods (including any increase in such Taxes as a result of a Final Determination) to the extent such Taxes are attributable to the Johnson Controls Business. Adient shall be responsible for any and all Taxes due with respect to, attributable to or required to be reported on any Combined Return that are allocable to Post-Distribution Periods (including any increase in such Taxes as a result of a Final Determination) to the extent such Taxes are attributable to the Adient Business.

(ii) For purposes of this Agreement, in the case of any Taxes for any Straddle Period, the amount of Taxes allocable to the portion of the Straddle Period ending on the Distribution Date shall be deemed to be (i) in the case of Taxes imposed on a periodic basis (such as real or personal property Taxes), the amount of such Taxes for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period) multiplied by a fraction, the numerator of which is the number of calendar days in the Straddle Period ending on and including the Distribution Date and the denominator of which is the number of calendar days in the entire relevant Straddle Period; and (ii) in the case of Taxes not described in clause (i) above (such as Income Taxes or Taxes based upon occupancy or imposed in connection with any sale or other transfer or assignment of property (real or personal, tangible or intangible)), the amount of any such Taxes shall be determined as if such taxable period ended as of the close of business on the Distribution Date, with exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions) to be allocated between the period ending on and including the Distribution Date and the period beginning after the Distribution Date in proportion to the number of days in each period.

(c) Taxes Relating to Separate Returns.

(i) Johnson Controls shall be responsible for any and all Taxes due with respect to, attributable to or required to be reported on any Johnson Controls Separate Return for any Tax Period (including, for the avoidance of doubt, any such Taxes imposed or payable as a result of a Final Determination).

 

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(ii) Adient shall be responsible for any and all Taxes due with respect to, attributable to or required to be reported on any Adient Separate Return for any Tax Period (including, for the avoidance of doubt, any such Taxes imposed or payable as a result of a Final Determination); provided that Johnson Controls shall be responsible for any such Taxes that are Electronics Business Taxes (including, for the avoidance of doubt, any such Taxes imposed or payable as a result of a Final Determination).

(d) Penalties and Interest. Any penalties or interest imposed in connection with any Taxes described in Section 2.02(a), (b) or (c) shall be the responsibility of the Company that is responsible for the underlying Tax, unless such penalties or interest are the result of an action or failure to act by the other Company or any of its Affiliates.

Section 2.03 Certain Transaction and Other Taxes .

(a) Transaction Taxes.

(i) All charges in respect of the transfers occurring pursuant to the Separation Transactions, and related transaction costs, shall be exclusive of any Transaction Taxes. Without limiting any provision of this Agreement, (a) in the case of any Transaction Taxes that are non-recoverable under applicable Law (whether by way of credit, offset, Refund, input VAT or otherwise, and such Taxes, “ Non-Recoverable Transaction Taxes ”), Johnson Controls shall be responsible for any such Non-Recoverable Transaction Taxes, unless any such Non-Recoverable Transaction Taxes become non-recoverable as a result of an action or failure to act by Adient or any of its Affiliates, in which case Adient shall be responsible for such Transaction Taxes and (b) in the case of any Transaction Taxes that are recoverable under applicable Law (whether by way of credit, offset, Refund, input VAT or otherwise), the Recipient (or, if not the Recipient, such other Person that is entitled to a recovery of such Transaction Taxes under applicable Law) shall be responsible for any such recoverable Transaction Taxes, unless any such recoverable Transaction Taxes become non-recoverable as a result of an action or failure to act by the Transferor or any of its Affiliates, in which case the Transferor shall be responsible for such Transaction Taxes. Notwithstanding anything to the contrary in this Agreement, to the extent a Company (or any of its Affiliates) recovers (whether by way of credit, offset, Refund, input VAT or otherwise) any Transaction Taxes that were paid or otherwise borne by the other Company (or any of its Affiliates), the Company that received (or the Affiliate of which received) such recovery shall, without duplication of any other amounts payable pursuant to this Agreement, promptly pay over to such other Company the amount of such recovery; provided , that recovery in respect of VAT Charges (and entitlement thereto) shall be governed exclusively by Schedule 2.12(c)(ii) to the Separation and Distribution Agreement. The Transferor shall promptly issue proper and timely invoices usable by the Recipient to recover (by way of credit or Refund) any Transaction Taxes in jurisdictions where they are recoverable. The Transferor and the Recipient shall cooperate to minimize any Transaction Taxes and in obtaining any Refund, return or rebate of Transaction Taxes, or applying an exemption or zero-rating for goods or services giving rise to any Transaction Taxes, including by filing any exemption or other similar forms or providing valid tax identification numbers or other relevant registration numbers, certificates or other documents. The Recipient and the Transferor shall cooperate regarding any requests for information, audits or similar requests by any Tax Authority concerning Transaction Taxes payable with respect to the transfers occurring pursuant to the Separation Transactions.

 

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(ii) The Recipient shall be entitled to deduct and withhold Tax required by applicable Law to be withheld on payments made to the Transferor pursuant to the Separation Transactions. To the extent any amounts are so withheld, the Recipient shall timely remit such deducted and withheld amounts to the relevant Tax Authority and promptly provide the Transferor with evidence of such payment. The Transferor agrees to complete and provide to the Recipient or, if required, to the relevant Tax Authority, at least ten (10) days prior to the payment due date, such forms, certifications or other documents as may be reasonably requested by the Recipient, in order to reduce or exempt the withholding of any Tax with respect to payments made to the Transferor when and where applicable by Law. The Recipient and the Transferor shall reasonably cooperate (A) to minimize and obtain any reduction of or relief from deduction or withholding and (B) cooperate regarding any requests for information, audits or similar requests by any Tax Authority concerning the withholding of any Tax payable with respect to the Separation Transactions.

(iii) Johnson Controls shall be responsible for any Specified PRC Taxes. Johnson Controls and Adient shall cooperate to minimize the Specified PRC Taxes and in obtaining any Refund, return or rebate of any Specified PRC Taxes. Johnson Controls and Adient shall cooperate regarding any requests for information, audits or similar requests by any Tax Authority concerning any Specified PRC Taxes.

(iv) Any penalties or interest imposed in connection with any Transaction Taxes described in Section 2.03(a)(i) or Tax described in Section 2.03(a)(ii) or 2.03(a)(iii) shall be the responsibility of the Company that is responsible for the underlying Tax, unless such penalties or interest are the result of an action or failure to act by the other Company or any of its Affiliates.

(b) Adient Liability . Adient shall be liable for, and shall indemnify and hold harmless the Johnson Controls Group from and against any liability for:

(i) any Tax resulting from a breach by Adient of any representation or covenant in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement; and

(ii) any Separation Tax Losses for which Adient is responsible pursuant to Section 6.04.

(c) Johnson Controls Liability . Johnson Controls shall be liable for, and shall indemnify and hold harmless the Adient Group from and against any liability for:

(i) any Tax resulting from a breach by Johnson Controls of any representation or covenant in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement; and

 

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(ii) any Separation Tax Losses for which Johnson Controls is responsible pursuant to Section 6.04.

Section 3. Preparation and Filing of Tax Returns.

Section 3.01 Johnson Controls Returns .

(a) Johnson Controls shall prepare or cause to be prepared (i) all Old Johnson Controls Federal Consolidated Income Tax Returns, (ii) all other Combined Returns, (iii) all Johnson Controls Separate Returns, (iv) all Tax Returns required to be filed with respect to any Non-Recoverable Transaction Taxes (“ a Non-Recoverable Transaction Tax Return ”) and (v) all Tax Returns required to be filed with respect to any Specified PRC Taxes, if any (a “ Specified PRC Tax Return ,” and any return described in clause (i), (ii), (iii), (iv) or (v), a “ Johnson Controls R e turn ”). Except as provided in Section 3.01(b), Johnson Controls shall file or cause to be filed all Johnson Controls Returns and shall pay or cause to be paid all Taxes shown to be due on any such Johnson Controls Return to the relevant Tax Authority and Adient shall make any payments to Johnson Controls required pursuant to Section 4.01 in respect of any such Johnson Controls Return.

(b) In the event that Adient or a member of the Adient Group (or an authorized representative of Adient or a member of the Adient Group) is obligated to sign and file a Johnson Controls Return under applicable Tax Law, Johnson Controls shall deliver such Johnson Controls Return to Adient and pay to Adient the amount of Taxes due on such Johnson Controls Return prior to the due date for filing such Johnson Controls Return (taking into account extensions), and Adient shall timely file or cause to be timely filed such Johnson Controls Return (taking into account extensions). Adient shall pay or cause to be paid all Taxes shown to be due on any Johnson Controls Return required to be filed by Adient pursuant to this Section 3.01(b).

Section 3.02 Adient Returns . Adient shall prepare and timely file, or cause to be prepared and timely filed (in each case, taking into account extensions), all Adient Separate Returns and any other Tax Return required to be filed by or with respect to a member of the Adient Group other than any Tax Return which Johnson Controls is required to prepare pursuant to Section 3.01(a) (each, a “ Adient Return ”). Adient shall file or cause to be filed all Adient Returns and shall pay or cause to be paid all Taxes shown to be due on any such Adient Return to the relevant Tax Authority and Johnson Controls shall make any payments to Adient required pursuant to Section 4.01 in respect of any such Adient Return.

Section 3.03 Tax Reporting Practices .

(a) Except as otherwise provided in Section 3.03(c), with respect to any Tax Return that Adient has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 3.02 for any Pre-Distribution Period or any Straddle Period (or, to the extent relating to any Taxes or Tax Items of any Electronics Entity attributable to the Electronics Business), such Tax Return shall be prepared in accordance with past practices, accounting methods, elections and conventions (“ Past Practices ”) used with respect to the Tax Returns in question, and, to the extent there is no Past Practice with respect to such item, in accordance with reasonable Tax accounting or other practices selected by Adient and reasonably acceptable to Johnson Controls; provided that, except to the extent relating to any Taxes or Tax Items of any Electronics Entity

 

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attributable to the Electronics Business, Adient may determine in good faith to prepare and file, or cause to be prepared and filed, any such Tax Return in a manner that deviates from Past Practices; provided , however , that if any such Tax Return is prepared or filed in a manner that deviates from Past Practices, Adient shall be responsible for any additional Taxes imposed on or payable by Johnson Controls or any of its Affiliates (including pursuant to the terms of this Agreement) as a result of any such deviation (other than any such deviation that was previously consented to by Johnson Controls (including in connection with the review, if any, by Johnson Controls of the relevant Tax Return pursuant to the procedures set forth in Section 3.05(a))).

(b) Except as otherwise provided in Section 3.03(c), with respect to any Straddle Combined Return to the extent relating to the Post-Distribution Period or any Combined Return for any taxable period beginning on or after the Distribution Date, in each case, that Johnson Controls has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 3.01, such Tax Return (or such portion thereof) shall be prepared in accordance with Past Practices used with respect to the Tax Returns in question, and, to the extent there is no Past Practice with respect to such item, in accordance with reasonable Tax accounting or other practices selected by Johnson Controls and reasonably acceptable to Adient; provided that Johnson Controls may determine in good faith to prepare and file, or cause to be prepared and filed, any such Tax Return in a manner that deviates from Past Practices; provided , however , that if any such Tax Return is prepared or filed in a manner that deviates from Past Practices, Johnson Controls shall be responsible for any additional Taxes imposed on or payable by Adient or any of its Affiliates (including pursuant to the terms of this Agreement) as a result of any such deviation (other than any such deviation that was previously consented to by Adient (including in connection with the review, if any, by Adient of the relevant Tax Return pursuant to the procedures set forth in Section 3.05(a))).

(c) Except to the extent otherwise required by applicable Law or as a result of a Final Determination, (A) neither Johnson Controls nor Adient shall, and neither shall permit or cause any member of its respective Group to, take any position that is inconsistent with the treatment of (i) each of the Old Johnson Controls Internal Distributions (where applicable, taken together with the relevant Old Johnson Controls Internal Contribution) as having Tax-Free Status (or analogous status under state or local Law), (ii) any of the relevant entities, instruments or Separation Transactions as having the tax-free or other tax treatment indicated on the Tax Treatment Schedule or the Separation Step Plan, (iii) the Tyco Merger as having Unrestricted Inversion Status or (iv) Adient as having Foreign Corporation Status as of immediately after the Distribution and (B) Adient shall not, and shall not permit or cause any member of the Adient Group to, take any position with respect to an item of income, deduction, gain, loss or credit on a Tax Return, or otherwise treat such item in a manner that is inconsistent with the manner such item is reported on a Tax Return required to be prepared or filed by Johnson Controls pursuant to Section 3.01 hereof (including, without limitation, the claiming of a deduction previously claimed on any such Tax Return), except with the prior consent of Johnson Controls.

Section 3.04 Consolidated or Combined Tax Returns .

(a) Except to the extent otherwise required pursuant to clause (A) of Section 3.03(c), Johnson Controls shall determine in its good faith sole discretion whether to file a Tax Return for any Tax Period as a Combined Return and the entities to be included in any Combined Return, and Johnson Controls shall (and shall be entitled to) make or revoke any Tax elections, adopt or

 

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change any Tax accounting methods, and determine any other position taken on or in respect of any Combined Return; provided that any Combined Return prepared and filed by Johnson Controls pursuant to this Agreement shall, to the extent relating to Adient or the Adient Group, be prepared in good faith; and provided further that a Combined Return shall not include any member of the Adient Group in a Post-Distribution Period except to the extent required by applicable Law. Adient will elect and join (and take any other action necessary to give effect to such election), and will cause its respective Affiliates to elect and join (and take any other action necessary to give effect to such election), in filing any Combined Returns (including any Old Johnson Controls Federal Consolidated Income Tax Returns) that Johnson Controls determines in good faith are required by applicable Law to be filed (or that Johnson Controls chooses in good faith to file) by the Companies or any of their Affiliates for Tax Periods ending on, before or after the Distribution Date. With respect to any Adient Separate Returns relating to any Pre-Distribution Period, Adient will elect and join, and will cause its Affiliates to elect and join, in filing any consolidated, affiliated, combined, unitary, group or other similar Tax Return (including a Tax Return with respect to a profit and/or loss sharing group ( e.g. , UK group relief), group payment or similar group or fiscal unity), to the extent each entity is eligible to join in such Tax Returns, if Johnson Controls reasonably determines that the filing of such Tax Returns is consistent with past reporting practices, or, in the absence of applicable past practices, is reasonably determined to result in the minimization of the net present value of the aggregate Tax to the entities eligible to join in such Tax Returns or is otherwise reasonably acceptable to Johnson Controls.

(b) At Johnson Controls’ request, Adient shall, and shall cause each member of the Adient Group to, as promptly as practicable (and in no event later than ninety (90) days after such request) prepare and submit to Johnson Controls, at Adient’s cost and expense, all information that Johnson Controls shall reasonably request, in such form as Johnson Controls shall reasonably request, to enable Johnson Controls to prepare or cause to be prepared any Johnson Controls Return.

Section 3.05 Right to Review Tax Returns .

(a) General . The Responsible Company with respect to any material Tax Return shall make such Tax Return (or the relevant portions thereof), related workpapers and other supporting documents available for review by the other Company, to the extent (i) such Tax Return relates to Taxes for which such other Company is or would reasonably be expected to be liable, (ii) such other Company is or would reasonably be expected to be liable, in whole or in part, for any additional Taxes owing as a result of adjustments to the amount of Taxes reported on such Tax Return, (iii) such Tax Return relates to Taxes for which the other party would reasonably be expected to have a claim for Tax Benefits under this Agreement, (iv) such Tax Return is a Combined Return that would reasonably be expected to be binding and to have a material adverse effect on Adient in a Post-Distribution Period, (v) such other Company or an Affiliate thereof (or an authorized representative of either) is obligated to sign and file such Tax Return under applicable Law, or (vi) reasonably necessary for the other party to confirm compliance with the terms of this Agreement. With respect to any Tax Return described in clauses (i) through (iv) of the immediately preceding sentence, the Responsible Company shall (i) consult with the other Company with respect to the preparation of, and positions taken on, such Tax Return (to the extent relating to any matters described in clauses (i) through (iv) of the immediately preceding sentence), (ii) use reasonable efforts to make such Tax Return (or the relevant portions thereof),

 

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workpapers and other supporting documents available for review as required under this paragraph promptly once such Tax Return is materially complete, such that the other party has an opportunity to review and comment on such Tax Return prior to the timely filing thereof (taking into account extensions), and (iii) shall consider in good faith any comments (to the extent relating to any matters described in clauses (i) through (iv) of the immediately preceding sentence) provided by the other Company on such Tax Return reasonably in advance of the due date for filing such Tax Return (taking into account extensions). Johnson Controls and Adient shall attempt in good faith to resolve any disagreement arising out of the review of any Tax Return pursuant to this Section 3.05(a). For the avoidance of doubt, any dispute among the Companies with respect to a Company’s compliance with the requirements of this Section 3.05(a) shall be resolved in accordance with the disagreement resolution provisions of Section 13 as promptly as practicable.

(b) Executing Returns . In the case of any Tax Return which is required to be prepared and filed by one Company under this Agreement and which is required by Law to be signed by the other Company (or by its authorized representative), the Company which is legally required to sign such Tax Return shall not be required to sign such Tax Return under this Agreement unless there is at least a greater than 50% likelihood of prevailing on the merits for the Tax treatment of each material item reported on the Tax Return. For the avoidance of doubt, any dispute among the Companies with respect to the likelihood of any Tax treatment prevailing on the merits shall be resolved in accordance with the disagreement resolution provisions of Section 13 as promptly as practicable.

(c) Certain Amended Returns . Adient shall not amend, or permit any of its Affiliates to amend, any Tax Return required to be filed by or with respect to the Electronic Entity to the extent relating to any Taxes or Tax Items of the Electronics Business without the prior written consent of Johnson Controls (not to be unreasonably withheld, conditioned or delayed).

Section 3.06 Adient Carryback Items and Claims for Refund . Unless Johnson Controls otherwise consents in writing (such consent not to be unreasonably withheld, conditioned or delayed, taking into account (x) all tax planning undertaken by Johnson Controls (including, without limitation, any tax planning in connection with the Tyco Merger or the Separation) and (y) the Tax Attributes of Johnson Controls and its Affiliates and the expected utilization thereof), Adient shall (and shall cause each member of the Adient Group to) (i) not file any Adjustment Request with respect to any Combined Return (or any other Tax Return reflecting Taxes for which Johnson Controls is responsible under Section 2), (ii) make any available election to relinquish, waive or otherwise forgo a carry back of any Adient Carryback Item arising in a Post-Distribution Period to any Combined Return, and (iii) not make any affirmative election to claim any such Adient Carryback Item if such election would result in a carryback of such Adient Carryback Item to any Combined Return.

Section 3.07 Apportionment of Earnings and Profits and Tax Attributes .

(a) If the Old Johnson Controls Affiliated Group has a Tax Attribute, the portion, if any, of such Tax Attribute required to be apportioned to Adient or the members of the Adient Group and treated as a carryover to the first Post-Distribution Period of Adient (or such member) shall be determined in good faith by Johnson Controls in accordance with Treasury Regulations Sections 1.1502-21, 1.1502-21T, 1.1502-22, 1.1502-79 and, if applicable, 1.1502-79A.

 

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(b) No Tax Attribute with respect to consolidated Federal Income Tax of the Old Johnson Controls Affiliated Group, other than those described in Section 3.07(a), and no Tax Attribute with respect to consolidated, combined or unitary state, local or foreign Income Tax, in each case, arising in respect of a Combined Return shall be apportioned to Adient or any member of the Adient Group, except as Johnson Controls (or such member of the Johnson Controls Group as Johnson Controls shall designate) determines in good faith is otherwise required under applicable Law.

(c) Johnson Controls (or its designee) shall determine in good faith and at its own cost and expense the portion, if any, of any Tax Attribute which must (absent a Final Determination to the contrary) be apportioned to Adient or any member of the Adient Group in accordance with this Section 3.07 and applicable Law and the amount of tax basis and earnings and profits to be apportioned to Adient or any member of the Adient Group in accordance with applicable Law, and shall provide written notice of the calculation thereof (including any related workpapers and other supporting documentation) to Adient as soon as reasonably practicable after the information necessary to make such calculation becomes available to Johnson Controls (and in any event no later than six (6) months after the close of the Tax Period in which the Distribution occurs). In the event of any subsequent adjustment to the apportionment of Tax Attributes, tax basis and/or earnings and profits reflected on such written notice, Johnson Controls shall promptly notify Adient in writing of any such adjustment and provide any related workpapers and other supporting documentation). In the case of any particular Tax Attribute not addressed in such written notice or any subsequent adjustment, Adient may request that Johnson Controls undertake a determination, of the portion, if any, of such particular Tax Attribute to be allocated or apportioned to the Adient Group under applicable Law. To the extent that Johnson Controls determines, in its sole discretion, not to undertake such determination, or does not otherwise advise Adient of its intention to undertake such determination within twenty (20) Business Days of the receipt of such request, Adient shall be permitted to undertake such determination at its own cost and expense and shall notify Johnson Controls of its determination, which determination shall not be binding on Johnson Controls. For the absence of doubt, Johnson Controls shall not be liable to Adient or any member of the Adient Group for any failure of any determination under this Section 3.07 to be accurate under applicable Law.

(d) The written notice delivered by Johnson Controls pursuant to Section 3.07(c) shall be binding on Adient and each member of the Adient Group and shall not be subject to dispute resolution. Except to the extent otherwise required by applicable Law or pursuant to a Final Determination, Adient shall not (and shall cause its Affiliates not to) take any position (whether on a Tax Return or otherwise) that is inconsistent with the information contained in such written notice provided that there is at least “substantial authority” within the meaning of Treasury Regulations Section 1.6662-4(d)(2) (or any similar provision of state, local or foreign Law) for the relevant position contained in such written notice.

Section 4. Payments.

Section 4.01 Payment of Taxes . In the case of any Tax Return reflecting Taxes for which the Company that is not the Responsible Company is responsible under Section 2, the Responsible Company shall pay any Taxes required to be paid to the applicable Tax Authority on or before the relevant Payment Date (and provide notice and proof of payment to the other Company). The Responsible Company shall compute the amount of such Taxes allocable to the other

 

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Company under the provisions of Section 2 or Section 3 as promptly as practicable (but in no event less than fifteen (15) Business Days prior to the relevant Payment Date) and shall provide written notice and demand for payment of such amount, accompanied by a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto, to the other Company. The other Company shall pay to the Responsible Company the amount of such Taxes allocable to the other Company under the provisions of Section 2 or Section 3 within ten (10) Business Days of the date of receipt of such written notice and demand; provided that no such payment shall be required to be made earlier than ten (10) Business Days prior to the relevant Payment Date.

Section 4.02 Adjustments Resulting in Underpayments . In the case of any adjustment pursuant to a Final Determination with respect to any Tax Return, the Responsible Company shall pay to the applicable Tax Authority when due any additional Taxes due with respect to such Tax Return required to be paid as a result of such adjustment. The Responsible Company shall compute the amount of such Taxes allocable to the other Company under the provisions of Section 2 or Section 3 as promptly as practicable (but in no event less than fifteen (15) Business Days prior to the relevant Payment Date) and shall provide written notice and demand for payment of such amount, accompanied by a statement detailing the Taxes paid and describing in reasonable detail the particular relating thereto, to the other Company. The other Company shall pay to the Responsible Company the amount of such Taxes allocable to the other Company under the provisions of Section 2 within ten (10) Business Days of the date of receipt of such written notice and demand; provided that no such payment shall be required to be made earlier than ten (10) Business Days prior to the date the additional Tax is required to be paid to the applicable Tax Authority.

Section 4.03 Indemnification Payments . Unless otherwise specified in this Agreement, all indemnification payments required to be made under this Agreement shall be made within ten (10) Business Days of the date of receipt by the indemnifying party of written notice from the indemnified party of the amount owed, together with reasonable documentation showing the basis for the calculation of such amount and evidence of payment of such amounts by the indemnified party to the relevant Tax Authority or other recipient.

Section 4.04 Payors ; Payees; Treatment . All payments made under this Agreement shall be made by Johnson Controls directly to Adient and by Adient directly to Johnson Controls; provided , however , that if the Companies mutually agree with respect to any such payment, any member of the Johnson Controls Group, on the one hand, may make such indemnification payment to any member of the Adient Group, on the other hand, and vice versa (for the avoidance of doubt, if a Company makes a request to the other Company to the effect that any payment required to be made by it to the other Company or received by it from the other Company, in each case, pursuant to this Agreement, be made or received by a member of the relevant Company’s Group other than a Company, the other Company’s consent to such request shall not be unreasonably withheld, conditioned or delayed). All payments made pursuant to this Agreement shall be treated in the manner described in Section 12.

 

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Section 5. Tax Benefits.

Section 5.01 Tax Benefits .

(a) Except as set forth below, (i) Johnson Controls shall be entitled to any Refund (and any interest thereon received from the applicable Tax Authority) of (x) any Taxes actually paid prior to the Distribution Date (except to the extent (A) such Refund was reflected as an asset on Adient’s opening standalone balance sheet dated as of the date of Distribution, (B) such Refund is received in respect of excess estimated Tax payments taken into account for purposes of determining the amount of the adjustment payment, if any, required to be made pursuant to Section 2.12(c) of the Separation and Distribution Agreement), or (C) such Taxes were actually paid by a member of the Adient Group (and not paid by a member of the Johnson Controls Group on behalf of a member or members of the Adient Group) prior to the Distribution Date and the payment of such Taxes was not taken into account, directly or indirectly (including as a result of the Distribution Cash Amounts (as defined in Schedule 2.12(c)(i) to the Separation and Distribution Agreement) being lower as a result of such payment), for purposes of determining the amount of the adjustment payment, if any, required to be made pursuant to Section 2.12(c) of the Separation and Distribution Agreement) and (y) any Taxes for which Johnson Controls is liable hereunder and (ii) Adient shall be entitled to any Refund (and any interest thereon received from the applicable Tax Authority) of any Taxes for which Adient is liable hereunder (other than any Refund to which Johnson Controls is entitled pursuant to clause (i) above). The Company receiving a Refund to which another Company is entitled hereunder, in whole or in part, shall pay over the amount of such Refund (or portion thereof) (and any interest on such amount received from the applicable Tax Authority) to such other Company within ten (10) Business Days after the receipt of such Refund or application of such Refund against Taxes otherwise payable. To the extent that any Refund (or portion thereof) in respect of which any amounts were paid over pursuant to the immediately preceding sentence is subsequently disallowed by the applicable Tax Authority, the Company that received such amounts shall promptly repay such amounts (together with any penalties, interest or other charges imposed by the relevant Tax Authority) to the other Company.

(b) If (i) a member of the Adient Group Actually Realizes any Tax Benefit as a result of (A) an adjustment pursuant to a Final Determination that increases Taxes for which a member of the Johnson Controls Group is liable hereunder or otherwise (or reduces any Tax Attribute of a member of the Johnson Controls Group or any other Johnson Controls Group Relief), (B) any liability, obligation, loss or payment (each, a “ Loss ”) for which a member of the Johnson Controls Group is required to indemnify any member of the Adient Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement (in each case, without duplication of any amounts payable or taken into account under this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement), (C) any Section 336(e) Election (including, for the avoidance of doubt, any Tax Benefit Actually Realized by the Adient Group as a result of any step-up in asset basis for U.S. federal income tax purposes resulting from such Section 336(e) Election), except to the extent any such Tax Benefit is directly attributable to Taxes imposed on Johnson Controls as a result of such Section 336(e) Election and for which Adient has actually indemnified Johnson Controls pursuant to this Agreement, (D) the utilization of any Electronics Business Tax Attribute (or otherwise in respect of the Electronics Business), and, in each case, such Tax Benefit would not have arisen but for such adjustment, Loss, election or Electronics Business Tax Attribute (or Electronics Business) (determined on a “with and without” basis), or (E) the payment of any Specified PRC Taxes, or (ii) if a member of the Johnson Controls Group Actually Realizes any Tax Benefit as a result of (A) an adjustment pursuant to a Final Determination that increases Taxes for which a member of

 

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the Adient Group is liable hereunder or otherwise (or reduces any Tax Attribute of a member of the Adient Group or any other Adient Group Relief), or (B) any Loss for which a member of the Adient Group is required to indemnify any member of the Johnson Controls Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement (in each case, without duplication of any amounts payable or taken into account under this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement), and, in each case, such Tax Benefit would not have arisen but for such adjustment or Loss (determined on a “with and without” basis), Adient or Johnson Controls, as the case may be, shall make a payment to the other Company in an amount equal to the amount of such Actually Realized Tax Benefit in cash within ten (10) Business Days of Actually Realizing such Tax Benefit. To the extent that any Tax Benefit (or portion thereof) in respect of which any amounts were paid over pursuant to the foregoing provisions of this Section 5.01(b) is subsequently disallowed by the applicable Tax Authority, the Company that received such amounts shall promptly repay such amounts (together with any penalties, interest or other charges imposed by the relevant Tax Authority) to the other Company.

(c) No later than ten (10) Business Days after a Tax Benefit described in Section 5.01(b) is Actually Realized by a member of the Johnson Controls Group or a member of the Adient Group, Johnson Controls or Adient, as the case may be, shall provide the other Company with a written calculation of the amount payable to such other Company pursuant to Section 5.01(b). In the event that Johnson Controls or Adient, as the case may be, disagrees with any such calculation described in this Section 5.01(c), Johnson Controls or Adient shall so notify the other Company in writing within twenty (20) Business Days of receiving such written calculation. Johnson Controls and Adient shall endeavor in good faith to resolve such disagreement, and, failing that, the amount payable under this Section 5 shall be determined in accordance with the disagreement resolution provisions of Section 13 as promptly as practicable.

(d) Adient shall be entitled to any Refund that is attributable to, and would not have arisen but for, an Adient Carryback Item that is required to be carried back to a Pre-Distribution Period under applicable Law and is carried back pursuant to and in accordance with Section 3.06 (a “ Permitted Adient Carryback ”); provided , however , that Adient shall indemnify and hold the members of the Johnson Controls Group harmless from and against any and all collateral Tax consequences resulting from or caused by any such Permitted Adient Carryback, including (but not limited to) the loss or postponement of any benefit from the use of any Tax Attribute of any member of the Johnson Controls Group, any Tax Attribute generated by a member of the Johnson Controls Group or an Affiliate thereof or any other Johnson Controls Group Relief (each, a “ Johnson Controls Group Tax Attribute ”) if (x) such Tax Attribute expires unutilized, but would have been utilized but for such Permitted Adient Carryback, or (y) the use of such Tax Attribute is postponed to a later Tax Period than the Tax Period in which such Tax Attribute would have been utilized but for such Permitted Adient Carryback. Any such payment of the amount of such Refund made by Johnson Controls to Adient pursuant to this Section 5.01(d) shall be recalculated in light of any Final Determination (or any other facts that may arise or come to light after such payment is made, such as a carryback of a Johnson Controls Group Tax Attribute to a Tax Period in respect of which such Refund is received) that would affect the amount to which Adient is entitled, and an appropriate adjusting payment shall be made by Adient to Johnson Controls such that the aggregate amount paid pursuant to this Section 5.01(d) equals such recalculated amount. To the extent that any Refund (or portion thereof) in respect of

 

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which any amounts were paid over by Johnson Controls to Adient pursuant to the foregoing provisions of this Section 5.01(d) is subsequently disallowed by the applicable Tax Authority, Adient shall promptly repay such amounts (together with any penalties, interest or other charges imposed by the relevant Tax Authority) to Johnson Controls.

(e) For the avoidance of doubt, notwithstanding any of the foregoing (or any other provision in this Agreement) to the contrary, any recovery, Refund or other Tax Benefit in respect of VAT Charges (and entitlement thereto) shall be governed exclusively by Schedule 2.12(c)(ii) to the Separation and Distribution Agreement.

Section 5.02 Johnson Controls and Adient Income Tax Deductions in Respect of Ce r tain Equity Awards and Incentive Compensation .

(a) To the extent permitted by applicable Law, any and all Income Tax deductions arising by reason of exercises of options to acquire Johnson Controls or Adient stock, vesting of “restricted” Johnson Controls stock or Adient stock, or settlement of stock appreciation rights, restricted stock awards, restricted stock units or performance share units, in each case, following the Distribution, with respect to Johnson Controls stock or Adient stock (such options, stock appreciation rights restricted stock, restricted stock units, performance share units and deferred stock units, collectively, “ Compensatory Equity Interests ”) held by any Person shall be claimed (i) in the case of a Johnson Controls Group Employee, Former Johnson Controls Group Employee, or any Johnson Controls non-employee director who served on the Johnson Controls Board immediately prior to the Effective Time, solely by the Johnson Controls Group, and (ii) in the case of an Adient Group Employee, Former Adient Group Employee or Transferred Director, solely by the Adient Group.

(b) Tax reporting and withholding with respect to Compensatory Equity Interests shall be governed by the Employee Matters Agreement.

Section 6. Transaction Status.

Section 6.01 Restrictions on Adient .

(a) Adient hereby represents and warrants that (i) it has no plan or intention of taking any action, or failing to take any action, or causing or permitting any of its Affiliates to take or fail to take any action, or knows of any circumstance, in each case, that could reasonably be expected to (A) adversely affect, jeopardize or prevent Tax-Free Status, (B) adversely affect, jeopardize or prevent any of the relevant entities, instruments or Separation Transactions (other than the Old Johnson Controls Internal Contributions or Old Johnson Controls Internal Distributions) to have the tax-free or other tax treatment described in the Tax Treatment Schedule or the Separation Step Plan, (C) adversely affect, jeopardize or prevent Unrestricted Inversion Status, or (D) cause any representation or factual statement made in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement to be untrue; and (ii) during the period beginning two years before the date of the first Old Johnson Controls Internal Distribution and ending on the Distribution Date, there was no “agreement, understanding, arrangement, substantial negotiations or discussions” (as such terms are defined in Treasury Regulations Section 1.355-7(h)) by any one or more officers or directors of any member of the Adient Group or by any other person or persons with the implicit or explicit permission of one or more of such officers or directors

 

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regarding an acquisition of all or a significant portion of the Adient Capital Stock or of the Old Johnson Controls Internal Controlled Capital Stock of any Old Johnson Controls Internal Controlled (and any predecessor of any of them); provided that no representation or warranty is made by Adient regarding any “agreement, understanding, arrangement, substantial negotiations or discussions” (as such terms are defined in Treasury Regulations Section 1.355-7(h)) by any one or more officers or directors of Johnson Controls (or another person with the implicit or explicit permission of one or more of such persons).

(b) Adient shall not take or fail to take, or cause or permit any Adient Affiliate to take or fail to take, any action if such action or failure to act (i) would be inconsistent with or cause to be untrue any statement, information, covenant or representation in this Agreement, the Separation and Distribution Agreement or any of the Ancillary Agreements, (ii) would reasonably be expected to adversely affect, jeopardize or prevent Tax-Free Status, (iii) would reasonably be expected to adversely affect, jeopardize or prevent any of the relevant entities, instruments or Separation Transactions (other than the Old Johnson Controls Internal Contributions or Old Johnson Controls Internal Distributions) to have the tax-free or other tax treatment described in the Tax Treatment Schedule or the Separation Step Plan, or (iv) would or would reasonably be expected to (taking into account any change or proposed change in Law or IRS guidance, or any change or proposed change in official judicial or administrative interpretation of applicable Law or IRS guidance) adversely affect, jeopardize or prevent Unrestricted Inversion Status (for the avoidance of doubt, other than any action or failure to act requested by Johnson Controls). It is agreed and understood that in determining whether any action or failure to act is prohibited by reason of any proposed change in Law or IRS guidance (or official judicial or administrative interpretation of Law or IRS guidance) described in clause (iv) above, the likelihood that such proposed change shall be adopted, enacted or otherwise occur shall be taken into account. For the avoidance of doubt, in the event that a proposed change in Law or IRS guidance (or official judicial or administrative interpretation of Law or IRS guidance) does not prohibit an action or failure to act pursuant to the immediately preceding sentence, but such proposed change in Law or IRS guidance (or official judicial or administrative interpretation of Law or IRS guidance) is subsequently adopted, enacted or otherwise occurs, any action or failure to act that would be prohibited pursuant to clause (iv) above following such adoption, enactment or other occurrence shall, for all purposes of this Agreement (including Section 6.04) be deemed to have been prohibited at all times under this Section 6.01 even if such action or failure to act occurred prior to such adoption, enactment or other occurrence.

(c) From the date hereof until the first day after the Restriction Period, Adient will cause each Old Johnson Controls Internal Controlled to (i) maintain its status as a company engaged in its Active Trade or Business for purposes of Section 355(b)(2) of the Code and (ii) not engage in any transaction that would result in it ceasing to be a company engaged in its Active Trade or Business for purposes of Section 355(b)(2) of the Code.

(d) From the date hereof until the first day after the Restriction Period,

(i) Adient will not (x) enter into any Proposed Acquisition Transaction or, to the extent Adient has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur or (y) dispose of, or permit any of its Affiliates to dispose of, directly or indirectly, any interest in any Old Johnson Controls Internal Controlled;

 

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(ii) Adient will not cause or permit any Old Johnson Controls Internal Controlled to (or to enter into any agreement, understanding, arrangement or substantial negotiations to):

(A) in a single transaction or series of transactions sell or transfer (other than sales or transfers of inventory in the ordinary course of business) all or substantially all of its assets (as of immediately prior to the relevant Old Johnson Controls Internal Controlled Distribution) or sell or transfer 50% or more of the gross assets of any Active Trade or Business or 30% or more of the consolidated gross assets of any Old Johnson Controls Internal Controlled and its Subsidiaries (such percentages to be measured based on fair market value as of the Distribution Date);

(B) redeem or otherwise repurchase (directly or through an Affiliate) any of its stock, or rights to acquire stock; or

(C) merge or consolidate with any other Person or liquidate or partially liquidate; and

(iii) Adient will not and will not cause or permit any Old Johnson Controls Internal Controlled to:

(A) amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of its Old Johnson Controls Internal Controlled Capital Stock (including, without limitation, through the conversion of one class of its Old Johnson Controls Internal Controlled Capital Stock into another class of its Old Johnson Controls Internal Controlled Capital Stock); or

(B) take any other action or actions which in the aggregate (and taking into account any other transactions described in this subparagraph (d)) would be reasonably likely to have the effect of causing or permitting one or more Persons to acquire, directly or indirectly, stock representing a Fifty-Percent or Greater Interest in Adient, any Old Johnson Controls Internal Controlled or otherwise jeopardize, adversely affect or prevent Tax-Free Status;

unless, in each case, prior to taking any such action set forth in the foregoing clauses (i) through (iii), (x) Adient shall have requested that Johnson Controls obtain a private letter ruling (or, if applicable, a supplemental private letter ruling) from the IRS and/or any other applicable Tax Authority (a “ Ruling ”) in accordance with Sections 6.03(b) and (d) to the effect that such transaction will not affect the Tax-Free Status or the Unrestricted Inversion Status and Johnson Controls shall have received such a Ruling in form and substance satisfactory to Johnson Controls in its sole good faith discretion (and in determining whether a private letter ruling is satisfactory, Johnson Controls may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations made in connection with such Ruling), (y) Adient shall provide Johnson Controls with an Unqualified Tax Opinion in form and substance satisfactory to Johnson Controls in its sole good faith discretion (and in determining whether an opinion is satisfactory, Johnson Controls may consider, among other factors, the appropriateness of any

 

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underlying assumptions and management’s representations if used as a basis for the opinion and Johnson Controls may determine that no opinion would be acceptable to Johnson Controls), or (z) Johnson Controls shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion.

(e) With respect to any member of the Adient Group that is characterized as a foreign corporation for Federal Income Tax purposes, from the Distribution Date through the end of the Tax Period of such entity that includes the Distribution Date, Adient shall not, and shall cause its respective Affiliates (including any such member of the Adient Group) not to, enter into any extraordinary transaction or otherwise take any action or enter into any transaction that would be considered under the Code to constitute the payment of an actual or deemed dividend by such member of the Adient Group, including pursuant to Section 304 of the Code, or that would otherwise result in a diminution of foreign tax credits that, absent such transaction, may be claimed by Johnson Controls or any of its Affiliates.

(f) Adient shall procure that, as described in the Separation Step Plan and as soon as reasonably practicable, Adient Olympus SAS redeem the shares of Adient Olympus SAS from Adient Global Holdings Ltd for total cash of EUR 59,001, including by causing Adient Olympus SAS to (1) enter into a share purchase agreement with respect to such redemption, (2) decrease its capital as a result of such redemption, (3) complete any post-closing filings or updates required to reflect such redemption and (4) take any and all other actions required to complete such share redemption.

(g) Adient shall apply, pursuant to Section 80 of the Stamp Duty Consolidation Act, 1999 (as amended) of Ireland, for relief from stamp duty imposed by the Republic of Ireland in connection with the transfer of shares of Adient Global Holdings Ltd by Johnson Controls International plc to Adient plc pursuant to the Separation Transactions, and shall take any and all other actions required to obtain such relief.

Section 6.02 Restrictions on Johnson Controls . Johnson Controls agrees that it will not take or fail to take, or cause or permit any member of the Johnson Controls Group to take or fail to take, any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in this Agreement, the Separation and Distribution Agreement, any of the Ancillary Agreements.

Section 6.03 Procedures Regarding Opinions and Rulings .

(a) If Adient notifies Johnson Controls that it desires to take one of the actions described in Section 6.01(d) (a “ Notified Action ”) during the Restricted Period, Johnson Controls and Adient shall reasonably cooperate to attempt to obtain the Ruling or Unqualified Tax Opinion referred to in Section 6.01(d), unless Johnson Controls shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion.

(b) Unless Johnson Controls shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion, at the reasonable request of Adient pursuant to Section 6.01(d), Johnson Controls shall cooperate with Adient and use commercially reasonable efforts to seek to obtain, as expeditiously as possible, a Ruling or an Unqualified Tax Opinion for the purpose of permitting Adient or Old Johnson Controls Internal Controlled, as applicable, to take the

 

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Notified Action. Notwithstanding the foregoing, in no event shall Johnson Controls be required to file or cooperate in connection with the filing of any request for a Ruling under this Section 6.03(b) unless Adient represents that (A) it has reviewed such request for a Ruling, and (B) all statements, information and representations relating to any member of the Adient Group contained in such request for a Ruling are (subject to any qualifications therein) true, correct and complete. Adient shall reimburse Johnson Controls for all reasonable costs and expenses, including out-of-pocket expenses and expenses relating to the utilization of Johnson Controls personnel, incurred by the Johnson Controls Group in obtaining a Ruling or Unqualified Tax Opinion requested by Adient within ten (10) Business Days after receiving an invoice from Johnson Controls therefor.

(c) Johnson Controls shall have the right to obtain a Ruling or an Unqualified Tax Opinion at any time in its sole and absolute discretion. If Johnson Controls determines to obtain a Ruling or an Unqualified Tax Opinion, Adient shall (and shall cause each Affiliate of Adient to) cooperate with Johnson Controls and take any and all actions reasonably requested by Johnson Controls in connection with obtaining the Ruling or Unqualified Tax Opinion (including, without limitation, by making any representation or covenant or providing any materials or information requested by the IRS or other applicable Tax Authority, or Tax Advisor; provided that Adient shall not be required to make (or cause any Affiliate of Adient to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control). Johnson Controls shall reimburse Adient for all reasonable costs and expenses, including out-of-pocket expenses and expenses relating to the utilization of Adient personnel, incurred by the Adient Group in connection with such cooperation requested by Johnson Controls within ten (10) Business Days after receiving an invoice from Adient therefor.

(d) Johnson Controls shall have sole and exclusive control over the process of obtaining any Ruling, and only Johnson Controls shall apply for a Ruling. In connection with obtaining a Ruling, (A) Johnson Controls shall keep Adient informed in a timely manner of all material actions taken or proposed to be taken by Johnson Controls in connection therewith; (B) Johnson Controls shall (1) reasonably in advance of the submission of any request for a Ruling provide Adient with a draft copy thereof, (2) reasonably consider Adient’s comments on such draft copy, and (3) provide Adient with a final copy; and (C) Johnson Controls shall provide Adient with notice reasonably in advance of, and Adient shall have the right to attend, any formally scheduled meetings with the IRS or other applicable Tax Authority (subject to the approval of the IRS or other applicable Tax Authority) that relate to such Ruling. Neither Adient nor any Adient Affiliate directly or indirectly controlled by Adient shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning any of the Separation Transactions (including the impact of any transaction on any of the Separation Transactions).

Section 6.04 Liability for Separation Tax Losses .

(a) Notwithstanding anything in this Agreement or the Separation and Distribution Agreement to the contrary (and, in each case, regardless of whether a Ruling, Unqualified Tax Opinion or waiver described in clause (z) of Section 6.01(d) may have been obtained or provided), subject to Section 6.04(c), Adient shall be responsible for, and shall indemnify and hold harmless Johnson Controls and its Affiliates and each of their respective officers, directors

 

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and employees from and against any Separation Tax Losses that are attributable to or result from any one or more of the following: (A) the acquisition (other than pursuant to the Separation Transactions) of all or a portion of the stock or assets of Adient, any Old Johnson Controls Internal Controlled or any of their respective Affiliates (including any Adient Capital Stock or any Old Johnson Controls Internal Controlled Capital Stock) by any means whatsoever by any Person, (B) the acquisition (other than pursuant to the Separation Transactions) by Adient or any of its Affiliates of all or a portion of the stock or assets of any “domestic corporation” (within the meaning of Sections 7701(a)(3) and 7701(a)(4) of the Code) or any issuance of stock by Adient or any Old Johnson Controls Internal Controlled, (C) any negotiations, understandings, agreements or arrangements by Adient or any of its Affiliates with respect to transactions or events (including, without limitation, stock issuances pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, amendments or a series of such transactions or events) that cause any of the Old Johnson Controls Internal Distributions to be treated as part of a plan pursuant to which one or more Persons acquire, directly or indirectly, a Fifty-Percent or Greater Interest in any Old Johnson Controls Internal Controlled, (D) any action or failure to act by Adient after the Distribution (including, without limitation, any amendment to Adient’s or any Old Johnson Controls Internal Controlled’s certificate of incorporation (or other organizational documents), whether through a stockholder vote or otherwise) affecting the voting rights of the stock of Adient or any Old Johnson Controls Internal Controlled (including, without limitation, through the conversion of one class of stock into another class of stock), or (E) any act or failure to act by Adient or any Adient Affiliate described in Section 6.01 (regardless whether such act or failure to act is covered by a private letter ruling, Unqualified Tax Opinion or waiver described in clause (z) of Section 6.01(d) and regardless of whether such act or failure to act may have been permitted at the time it was taken (or not taken) pursuant to the penultimate sentence of Section 6.01(b)).

(b) Notwithstanding anything in this Agreement or the Separation and Distribution Agreement to the contrary, subject to Section 6.04(c), Johnson Controls shall be responsible for, and shall indemnify and hold harmless Adient and its Affiliates and each of their respective officers, directors and employees from and against any Separation Tax Losses that are attributable to, or result from, any one or more of the following: (A) the acquisition (other than pursuant to the Separation Transactions or the Tyco Merger) of all or a portion of the stock or assets of Johnson Controls or any of its Affiliates (including any Old Johnson Controls Internal Distributing Capital Stock) by any means whatsoever by any Person, (B) any negotiations, understandings, agreements or arrangements by Johnson Controls or any of its Affiliates with respect to transactions or events (including, without limitation, stock issuances pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, amendments or a series of such transactions or events) that cause any of the Old Johnson Controls Internal Distributions to be treated as part of a plan pursuant to which one or more Persons acquire, directly or indirectly, a Fifty-Percent or Greater Interest in any Old Johnson Controls Internal Distributing, or (C) any act or failure to act by Johnson Controls or a member of the Johnson Controls Group described in Section 6.02.

(c) To the extent that any Separation Tax Loss is subject to indemnity under both Sections 6.04(a) and (b), responsibility for such Separation Tax Loss shall be shared by Johnson Controls and Adient according to relative fault as determined by Johnson Controls in good faith.

 

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(d) Adient shall pay Johnson Controls the amount of any Separation Tax Losses for which Adient is responsible under this Section 6.04: (A) in the case of Separation Tax Losses described in clause (i) of the definition of Separation Tax Losses, no later than two Business Days prior to the date Johnson Controls files, or causes to be filed, the applicable Tax Return (the “ Filing Date ”) (or, if such Separation Tax Losses arise pursuant to a Final Determination described in clause (a), (b) or (c) of the definition of “Final Determination,” then Adient shall pay Johnson Controls no later than two Business Days prior to the due date for making payment with respect to such Final Determination) and (B) in the case of Separation Tax Losses described in clause (ii) or (iii) of the definition of “Separation Tax Losses,” no later than two Business Days after the date Johnson Controls pays such Separation Tax Losses. Johnson Controls shall pay Adient the amount of any Separation Tax Losses (described in clause (ii) or (iii) of the definition of “Separation Tax Losses”) for which Johnson Controls is responsible under this Section 6.04 no later than two Business Days after the date Adient pays such Separation Tax Losses. Each Company shall have the right to review the calculation of any Separation Tax Losses prepared by the other Company, including any related workpapers and other supporting documentation.

Section 6.05 Certain Elections .

(a) If Johnson Controls determines, in its sole discretion, that a protective election under Section 336(e) of the Code (a “ Section 336(e) Election ”) shall be made with respect to any Old Johnson Controls Internal Distribution, Adient shall (and shall cause the relevant member of the Adient Group to) join with Johnson Controls or the relevant member of the Johnson Controls Group in the making of such election and shall take any action reasonably requested by Johnson Controls or that is otherwise necessary to give effect to such election (including making any other related election permitted by applicable Law); provided , however , that Johnson Controls shall reimburse Adient (and any relevant member of the Adient Group) for all reasonable costs and expenses incurred by Adient (or any relevant member of the Adient Group) to amend any Tax Returns or amend or file any other governmental filings related to such Section 336(e) Election. If a Section 336(e) Election is made with respect to any Old Johnson Controls Internal Distribution, then this Agreement shall be amended in such a manner, if any, as is determined by Johnson Controls in good faith to take into account such Section 336(e) Election.

(b) If Johnson Controls determines, in its sole discretion, that an entity classification election pursuant to Treasury Regulations Section 301.7701-3(c) (a “ Check-the-Box Election ”) shall be made with respect to any member of the Adient Group effective as of, or before, the Distribution Date, Adient shall (and shall cause all relevant members of the Adient Group to) make such election effective as of such date and shall take any action reasonably requested by Johnson Controls or that is otherwise necessary to give effect to such election (including making any other related election). If Johnson Controls requires any member of the Adient Group to file for relief with the IRS to make a late Check-the-Box Election, Johnson Controls shall reimburse Adient (and any relevant member of the Adient Group) for all reasonable costs and expenses incurred by Adient (or any relevant member of the Adient Group) in connection with filing for such relief.

 

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Section 7. Assistance and Cooperation.

Section 7.01 Assistance and Cooperation .

(a) The Companies shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters relating to the Companies, including (i) preparing and filing Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any Refund or any Tax Benefit, in each case, pursuant to this Agreement or otherwise, (iii) examinations of Tax Returns and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed. Such cooperation shall include making available, upon reasonable notice, all information and documents in their possession relating to the other Company and its Affiliates as provided in Section 8. Each of the Companies shall also make available to the other, as reasonably requested and available, personnel (including employees and agents of the Companies or their respective Affiliates) responsible for preparing, maintaining and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceeding relating to Taxes.

(b) Any information or documents provided under this Section 7 or Section 8 shall be kept confidential by the Company receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes. Notwithstanding any other provision in this Agreement to the contrary, (i) neither Johnson Controls nor any of its Affiliates shall be required to provide Adient or any of its Affiliates or any other Person access to or copies of any information, documents or procedures (including the proceedings of any Tax Contest) other than information, documents or procedures that relate to Adient or any other member of the Adient Group, the business or assets of Adient or any other member of the Adient Group and (ii) in no event shall either of the Companies or any of its respective Affiliates be required to provide the other Company or any of its respective Affiliates or any other Person access to or copies of any information if such action could reasonably be expected to result in the waiver of any Privilege. In addition, in the event that either Company determines that the provision of any information to the other Company or its Affiliates could be commercially detrimental, violate any Law or agreement or waive any Privilege, the parties shall use reasonable best efforts to permit compliance with its obligations under this Section 7 or Section 8 in a manner that avoids any such harm or consequence.

Section 7.02 Tax Return Information . Adient and Johnson Controls acknowledge that time is of the essence in relation to any request for information, assistance or cooperation made by Johnson Controls or Adient pursuant to this Agreement. Adient and Johnson Controls acknowledge that failure to conform to the deadlines set forth herein or reasonable deadlines otherwise set by Johnson Controls or Adient could cause irreparable harm. Each Company shall provide to the other Company information and documents relating to its Group required by the other Company to prepare Tax Returns. Any information or documents the Responsible Company requires to prepare such Tax Returns shall be provided in such form as the Responsible Company reasonably requests and in sufficient time for the Responsible Company to file such Tax Returns on a timely basis (but in no event later than ninety (90) days after such request).

Section 7.03 Reliance by Johnson Controls . If any member of the Adient Group supplies information to a member of the Johnson Controls Group in connection with Taxes and an officer of a member of the Johnson Controls Group signs a statement or other document under

 

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penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Johnson Controls Group identifying the information being so relied upon, the chief financial officer of Adient (or any officer of Adient as designated by the chief financial officer of Adient) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. Adient agrees to indemnify and hold harmless each member of the Johnson Controls Group and its directors, officers and employees from and against any fine, penalty or other cost or expense of any kind attributable to a member of the Adient Group having supplied, pursuant to this Section 7, a member of the Johnson Controls Group with inaccurate or incomplete information in connection with a Tax Liability.

Section 7.04 Reliance by Adient . If any member of the Johnson Controls Group supplies information to a member of the Adient Group in connection with a Tax Liability and an officer of a member of the Adient Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Adient Group identifying the information being so relied upon, the chief financial officer of Johnson Controls (or any officer of Johnson Controls as designated by the chief financial officer of Johnson Controls) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. Johnson Controls agrees to indemnify and hold harmless each member of the Adient Group and its directors, officers and employees from and against any fine, penalty, or other cost or expense of any kind attributable to a member of the Johnson Controls Group having supplied, pursuant to this Section 7, a member of the Adient Group with inaccurate or incomplete information in connection with a Tax Liability.

Section 8. Tax Records.

Section 8.01 Retention of Tax Records . Each Company shall preserve and keep all Tax Records (including emails and other digitally stored materials and related workpapers and other documentation) in its possession as of the date hereof or relating to Taxes of the Groups for Pre-Distribution Periods or Taxes or Tax matters that are the subject of this Agreement, in each case, for so long as the contents thereof may become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (i) 90 days after the expiration of any applicable statutes of limitations (taking into account any extensions), or (ii) seven years after the Distribution Date (such later date, the “ Retention Date ”). After the Retention Date, each Company may dispose of such Tax Records upon 90 days’ prior written notice to the other Company. If, prior to the Retention Date, a Company reasonably determines that any Tax Records which it would otherwise be required to preserve and keep under this Section 8 are no longer material in the administration of any matter under the Code or other applicable Tax Law and the other Company agrees, then such first Company may dispose of such Tax Records upon 90 days’ prior notice to the other Company. Any notice of an intent to dispose given pursuant to this Section 8.01 shall include a list of the Tax Records to be disposed of describing in reasonable detail each file, book or other record accumulation being disposed. The notified Company shall have the opportunity, at its cost and expense, to copy or remove, within such 90-day period, all or any part of such Tax Records, and the other Company will then dispose of the same Tax Records.

 

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Section 8.02 Access to Tax Records . The Companies and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (and, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) to the extent reasonably required by the other Company in connection with the preparation of financial accounting statements, audits, litigation, the preparation of Tax Returns or the resolution of items under this Agreement.

Section 8.03 Preservation of Privilege . The parties hereto agree to cooperate and use commercially reasonable efforts to maintain Privilege with respect to any documentation relating to Taxes existing prior to the Distribution Date or Separation Tax Losses to which Privilege may reasonably be asserted (any such documentation, “ Privileged Tax Documentation ”). No member of the Adient Group shall provide access to or copies of, or otherwise disclose to any Person, any Privileged Tax Documentation without the prior written consent of Johnson Controls, such consent not to be unreasonably withheld, conditioned or delayed. No member of the Johnson Controls Group shall provide access to or copies of, or otherwise disclose to any Person, any Privileged Tax Documentation without the prior written consent of Adient, such consent not to be unreasonably withheld, conditioned or delayed. Notwithstanding any of the foregoing, (x) in the event that any governmental authority requests, outside of normal working hours, that either Company (or any of its Affiliates) provide to such governmental authority access to or copies of, or otherwise disclose, any Privileged Tax Documentation, (y) immediate compliance with such request is required under applicable Law, and (z) such Company attempts in good faith to obtain the prior written consent of the other Company but it is not able to do so, then, such Company shall be permitted to comply with such request by such governmental authority without obtaining the prior written consent of the other Company and shall as promptly as practicable inform the other Company of such request and the access and/or disclosure provided pursuant thereto.

Section 9. Tax Contests.

Section 9.01 Notice . Each of the Companies shall provide prompt notice to the other Company of any written communication from a Tax Authority regarding any pending or threatened Tax audit, assessment or proceeding or other Tax Contest relating to Taxes, Refunds or Tax Benefits for which it may be entitled to indemnification by the other Company hereunder or for which it may be required to indemnify the other Company hereunder. Such notice shall include copies of the pertinent portion of any written communication from a Tax Authority and contain factual information (to the extent known) describing any asserted Tax Liability and/or other relevant Tax matters in reasonable detail. The failure of one Company to notify the other of such communication in accordance with the immediately preceding sentences shall not relieve such other Company of any liability or obligation to pay such Tax or make indemnification payments under this Agreement, except to the extent that the failure timely to provide such notification actually prejudices the ability of such other Company to contest such Tax Liability (or contest any determination in respect of any Refund or Tax Benefit) or increases the amount of such Tax Liability (or reduces the amount of such Refund or Tax Benefit).

 

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Section 9.02 Control of Tax Contests .

(a) Separate Returns. Except in the case of any Competent Authority Proceeding (which shall be governed by Section 9.02(c)):

(i) In the case of any Tax Contest with respect to any Johnson Controls Separate Return, Johnson Controls shall have exclusive control over such Tax Contest, including exclusive authority with respect to any settlement of such Tax Contest, subject to Section 9.02(d).

(ii) In the case of any Tax Contest with respect to any Adient Separate Return, Adient shall have exclusive control over such Tax Contest, including exclusive authority with respect to any settlement of such Tax Contest, subject to Section 9.02(b) and Sections 9.02(e) and (f).

(b) Combined Returns, Non-Recoverable Transaction Tax Returns and Specified PRC Tax Returns. Except in the case of any Competent Authority Proceeding (which shall be governed by Section 9.02(c)), in the case of any Tax Contest with respect to any Combined Return, Non-Recoverable Transaction Tax Return or Specified PRC Tax Return, Johnson Controls shall have exclusive control over such Tax Contest, including exclusive authority with respect to any settlement of such Tax Contest, subject to Section 9.02(d).

(c) Competent Authority Proceedings . In the event that a Tax Authority proposes an adjustment with respect to a Tax Return of a Company (the “ Adjusted Company ”) or a member of its Group, and, in connection with such adjustment, a corresponding adjustment or other relief may be available to the other Company or a member of its Group pursuant to a Competent Authority Proceeding, the Adjusted Company shall promptly notify the other Company of such adjustment and the Companies shall cooperate in good faith to determine whether to initiate a Competent Authority Proceeding to request such corresponding adjustment or other relief. If the Companies initiate any such Competent Authority Proceeding, the Adjusted Company shall have the right to control such Competent Authority Proceeding; provided that (i) the Adjusted Company shall keep the other Company reasonably informed in a timely manner of all significant developments in respect of such Competent Authority Proceeding, and all significant actions taken or proposed to be taken by the Adjusted Company with respect to such Tax Contest, (ii) the Adjusted Company shall timely provide the other Company with copies of any written materials prepared, furnished or received in connection with such Competent Authority Proceeding, (iii) the Adjusted Company shall consult with the other Company reasonably in advance of taking any significant action in connection with such Competent Authority Proceeding, (iv) the Adjusted Company shall consult with the other Company and offer the other Company a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Competent Authority Proceeding and shall consider the other Company’s comments in good faith, (v) the Adjusted Company shall conduct such Competent Authority Proceeding diligently and in good faith as if it were the only party in interest in connection with such Competent Authority Proceeding, and (vi) the Adjusted Company shall not settle, compromise or abandon any such Competent Authority Proceeding without the prior written consent of the other Company, which consent shall not be unreasonably withheld, conditioned or delayed. The other Company shall cooperate with the Adjusted Company (including by providing any necessary information reasonably requested by the Adjusted Company) with respect to the conduct of any such Competent Authority Proceeding. In making any decisions in connection with any Competent Authority Proceeding described in this Section 9.02(c) (including the determination whether to initiate such Competent Authority Proceeding, relief to be sought pursuant to such Competent Authority Proceeding and actions to be taken in connection with such Competent Authority Proceeding), the Companies shall seek to minimize the aggregate Tax Liability of the Johnson Controls Group and the Adient Group.

 

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(d) Adient Rights. In the case of any Tax Contest described in Section 9.02(a)(i) or (b) (other than, in each case, any Tax Contest described in Section 9.02(f)), if (x) as a result of such Tax Contest, Adient could reasonably be expected to (A) become liable to make any indemnification payment to Johnson Controls hereunder in excess of $1 million or (B) not have Foreign Corporation Status as of immediately after the Distribution and (y) Johnson Controls has control of such Tax Contest pursuant to Section 9.02(a)(i) or (b), as applicable, then (i) Johnson Controls shall keep Adient reasonably informed in a timely manner of all significant developments in respect of such Tax Contest and all significant actions taken or proposed to be taken by Johnson Controls with respect to such Tax Contest, (ii) Johnson Controls shall timely provide Adient with copies of any written materials prepared, furnished or received in connection with such Tax Contest, (iii) Johnson Controls shall consult with Adient reasonably in advance of taking any significant action in connection with such Tax Contest, (iv) Johnson Controls shall consult with Adient, offer Adient a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax Contest and shall consider Adient’s comments in good faith, (v) Johnson Controls shall defend such Tax Contest diligently and in good faith as if it were the only party in interest in connection with such Tax Contest, and (vi) Johnson Controls shall not settle, compromise or abandon any such Tax Contest in a manner that would disproportionately disadvantage Adient and, in determining whether to settle, compromise or abandon any such Tax Contest, Johnson Controls shall otherwise make such determination in good faith as if it were the only party in interest in connection with such Tax Contest.

(e) Johnson Controls Rights . In the case of any Tax Contest described in Section 9.02(a)(ii), if (x) as a result of such Tax Contest, Johnson Controls could reasonably be expected to become liable to make any indemnification payment to Adient hereunder in excess of $1 million and (y) Adient has the right to control such Tax Contest pursuant to Section 9.02(a)(ii), then (i) Adient shall keep Johnson Controls reasonably informed in a timely manner of all significant developments in respect of such Tax Contest and all significant actions taken or proposed to be taken by Adient with respect to such Tax Contest, (ii) Adient shall timely provide Johnson Controls with copies of any written materials prepared, furnished or received in connection with such Tax Contest, (iii) Adient shall consult with Johnson Controls reasonably in advance of taking any significant action in connection with such Tax Contest, (iv) Adient shall consult with Johnson Controls and offer Johnson Controls a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax Contest and shall consider Johnson Controls’ comments in good faith, (v) Adient shall defend such Tax Contest diligently and in good faith as if it were the only party in interest in connection with such Tax Contest, and (vi) Adient shall not settle, compromise or abandon any such Tax Contest without obtaining the prior written consent of Johnson Controls, which consent shall not be unreasonably withheld, conditioned or delayed; provided that, in the case of any Tax Contest with respect to any Electronics Entity, to the extent such Tax Contest involves a claim that could reasonably be expected to result in Electronics Business Taxes and Taxes that are not Electronics Business Taxes (an “ Electronics Tax Contest ”), (A) the Companies shall cooperate to separate such Electronics Tax Contest into two Tax Contests, one Tax Contest relating exclusively to Electronics

 

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Business Taxes (over which Tax Contest Johnson Controls shall have exclusive control, including exclusive authority with respect to any settlement, subject to Section 9.02(b) and Section 9.02(d)) and the other Tax Contest relating to all other Taxes of any Electronics Entity (over which Tax Contest Adient shall have exclusive control, including exclusive authority with respect to any settlement, subject to this Section 9.02(e) (other than this proviso)) and (B) if it is not possible to separate such Tax Contest in the manner set forth in clause (A), the Controlling Party shall have the right to control such Tax Contest, provided that the foregoing provisions of this Section 9.02(e) (other than this proviso) shall apply to such Tax Contest (for this purpose, substituting the term “Controlling Party,” for the term “Adient” and substituting the term “Non-Controlling Party” for the term “Johnson Controls”). For purposes of this Section 9.02(e), in the case of any Electronics Tax Contest, the Controlling Party shall be whichever of Adient or Johnson Controls would be reasonably expected to bear the greater Tax Liability in connection with such Electronics Tax Contest, and the Non-Controlling Party shall be whichever Company is not the Controlling Party with respect to such Electronics Tax Contest.

(f) Separation Related Tax Contests. Johnson Controls shall have exclusive control over any Separation Related Tax Contest, including exclusive authority with respect to any settlement of such Tax Contest, subject to the following provisions of this Section 9.02(f). In the event of any Separation Related Tax Contest as a result of which Adient could reasonably be expected to (x) become liable for any Separation Tax Losses or (y) not have Foreign Corporation Status as of immediately after the Distribution, (A) Johnson Controls shall keep Adient reasonably informed in a timely manner of all significant developments in respect of such Tax Contest and all significant actions taken or proposed to be taken by Johnson Controls with respect to such Tax Contest, (B) Johnson Controls shall timely provide Adient with copies of any written materials prepared, furnished or received in connection with such Tax Contest, (C) Johnson Controls shall consult with Adient reasonably in advance of taking any significant action in connection with such Tax Contest, and (D) Johnson Controls shall offer Adient a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax Contest. Notwithstanding anything in the preceding sentence to the contrary, the final determination of the positions taken, including with respect to settlement or other disposition, in any Separation Related Tax Contest shall be made in the sole discretion of Johnson Controls and shall be final and not subject to the dispute resolution provisions of Section 13 of this Agreement or Article VII of the Separation and Distribution Agreement.

(g) Power of Attorney .

(i) Each member of the Adient Group shall execute and deliver to Johnson Controls (or such member of the Johnson Controls Group as Johnson Controls shall designate) any power of attorney or other similar document reasonably requested by Johnson Controls (or such designee) in connection with any Tax Contest controlled by Johnson Controls that is described in this Section 9.

(ii) Each member of the Johnson Controls Group shall execute and deliver to Adient (or such member of the Adient Group as Adient shall designate) any power of attorney or other similar document reasonably requested by Adient (or such designee) in connection with any Tax Contest controlled by Adient that is described in this Section 9.

 

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Section 10. Effective Date; Termination of Prior Intercompany Tax Allocation Agreements . This Agreement shall be effective as of the Effective Time. To the knowledge of the parties hereto, there are no prior intercompany Tax allocation agreements or arrangements solely between or among Johnson Controls and/or any of its Subsidiaries, on the one hand, and Adient and/or any of its Subsidiaries, on the other hand and no termination of any such arrangement or agreement, or any settlement of amounts owing in respect of any such arrangement or agreement should be required. To the extent that, contrary to the expectation of the parties, there is any such intercompany arrangement or agreement in place as of immediately prior to the Effective Time, (i) such arrangement or agreement shall be deemed terminated with effect as of the Effective Time, and (ii) amounts due under such agreements as of the date on which the Effective Time occurs shall be settled as promptly as practicable. Upon such settlement, no further payments by or to Johnson Controls or any of its Subsidiaries or by or to Adient or any of its Subsidiaries with respect to such agreements shall be made, and all other rights and obligations resulting from such agreements between the Companies and their Affiliates shall cease at such time. Any payments pursuant to such agreements shall be disregarded for purposes of computing amounts due under this Agreement.

Section 11. Survival of Obligations. The representations, warranties, covenants and agreements set forth in this Agreement shall be unconditional and absolute and shall remain in effect without limitation as to time.

Section 12. Treatment of Payments; Tax Gross-Up.

Section 12.01 Treatment of Tax Indemnity and Tax Benefit Payments . In the absence of any change in Tax treatment under the Code or other applicable Tax Law and except as otherwise agreed between the Companies, for all Income Tax purposes, the Companies agree to treat, and to cause their respective Affiliates to treat, (i) any indemnity payment required by this Agreement or by the Separation and Distribution Agreement, as applicable (in the case of each of clauses (A), (B) and (C), subject to clause (D)), (A) in the case of an indemnity payment attributable to the Distribution, a contribution by Johnson Controls to Adient or a distribution by Adient to Johnson Controls, as the case may be, occurring immediately prior to the Distribution (but only to the extent the payment does not relate to a Tax allocated to the payor in accordance with Section 1552 of the Code or the Treasury Regulations thereunder or Treasury Regulation Section 1.1502-33(d) (or under corresponding principles of other applicable Tax Laws)), (B) in the case of an indemnity payment attributable to an Old Johnson Controls Internal Distribution or Old Johnson Controls Internal Contribution, a contribution by the relevant Old Johnson Controls Internal Distributing to the relevant Old Johnson Controls Internal Controlled or a distribution by the relevant Old Johnson Controls Internal Controlled to the relevant Old Johnson Controls Internal Distributing, as the case may be, occurring immediately prior to the relevant Old Johnson Controls Internal Distribution, (C) in the case of an indemnity payment attributable to the Old Johnson Controls Jersey SpinCo Sale or the TSub Jersey SpinCo Sale or any sale of the Adient Assets or assumption of the Adient Liabilities pursuant to the Separation Transactions, an adjustment to the purchase price, or (D) in the case of an indemnity payment attributable to a transfer of Adient Assets or assumption of Adient Liabilities (other than pursuant to a sale), or in any other case described in clauses (A), (B) or (C) above to the extent appropriate, as payments of an assumed or retained liability; and (ii) any payment of interest or State Income Taxes by or to a Tax Authority, as taxable or deductible, as the case may be, to the Company entitled under this Agreement to retain such payment or required under this Agreement to make such payment.

 

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Section 12.02 Tax Gross-Up . If notwithstanding the manner in which payments described in clause (i) of Section 12.01 were reported, there is an adjustment to the Tax Liability of a Company as a result of its receipt of a payment pursuant to this Agreement or the Separation and Distribution Agreement, such payment shall be appropriately adjusted so that the amount of such payment, reduced by the amount of all Income Taxes payable with respect to the receipt thereof (but taking into account all correlative Tax Benefits resulting from the payment of such Income Taxes), shall equal the amount of the payment which the Company receiving such payment would otherwise be entitled to receive.

Section 12.03 Interest . Anything herein to the contrary notwithstanding, to the extent one Company (“ Indemnitor ”) makes a payment of interest to another Company (“ Indemnitee ”) under this Agreement with respect to the period from the date that the Indemnitee made a payment of Tax to a Tax Authority to the date that the Indemnitor reimbursed the Indemnitee for such Tax payment, the interest payment shall be treated as interest expense to the Indemnitor (deductible to the extent provided by Law) and as interest income by the Indemnitee (includible in income to the extent provided by Law). The amount of the payment shall not be adjusted to take into account any associated Tax Benefit to the Indemnitor or increase in Tax to the Indemnitee.

Section 13. Disagreements.

Section 13.01 Dispute Resolution . The Companies desire that collaboration will continue between them. Accordingly, they will try, and they will cause their respective Group members to try, to resolve in good faith all disagreements regarding their respective rights and obligations under this Agreement, including any amendments hereto. In furtherance thereof, in the event of any dispute or disagreement (other than a High-Level Dispute) (a “ Tax Advisor Dispute ”) between any member of the Johnson Controls Group and any member of the Adient Group as to the interpretation of any provision of this Agreement or the performance of obligations hereunder, the Tax departments of the Companies shall negotiate in good faith to resolve the Tax Advisor Dispute. If such good faith negotiations do not resolve the Tax Advisor Dispute, then the matter will be referred to a Tax Advisor acceptable to each of the Companies. The Tax Advisor may, in its discretion, obtain the services of any third-party appraiser, accounting firm or consultant that the Tax Advisor deems necessary to assist it in resolving such disagreement. The Tax Advisor shall furnish written notice to the Companies of its resolution of any such Tax Advisor Dispute as soon as practicable, but in any event no later than forty-five (45) days after its acceptance of the matter for resolution. Any such resolution by the Tax Advisor shall be consistent with the terms of this Agreement, and if so consistent, shall be conclusive and binding on the Companies. Following receipt of the Tax Advisor’s written notice to the Companies of its resolution of the Tax Advisor Dispute, the Companies shall each take or cause to be taken any action necessary to implement such resolution of the Tax Advisor. In accordance with Section 15, each Company shall pay its own fees and expenses (including the fees and expenses of its representatives) incurred in connection with the referral of the matter to the Tax Advisor. All fees and expenses of the Tax Advisor in connection with such referral shall be shared equally by the Companies. Any High-Level Dispute shall be resolved pursuant to the procedures set forth in Article VII of the Separation and Distribution Agreement.

 

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Section 13.02 Injunctive Relief . Nothing in this Section 13 will prevent either Company from seeking injunctive relief if reasonably necessary to avoid irreparable harm. Notwithstanding anything to the contrary in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement, Johnson Controls and Adient are the only members of their respective Groups entitled to commence a dispute resolution procedure under this Agreement, and each of Johnson Controls and Adient will cause its respective Group members not to commence any dispute resolution procedure other than through such party as provided in this Section 13.

Section 14. Late Payments. Any amount owed by one party to another party under this Agreement which is not paid when due shall bear interest at the Prime Rate plus two percent (2%), compounded semiannually, from the due date of the payment to the date paid. To the extent interest required to be paid under this Section 14 duplicates interest required to be paid under any other provision of this Agreement, interest shall be computed at the higher of the interest rate provided under this Section 14 or the interest rate provided under such other provision.

Section 15. Expenses. Except as otherwise provided in this Agreement, each party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement.

Section 16. General Provisions.

Section 16.01 Addresses and Notices . All notices, requests, claims, demands or other communications under this Agreement shall be in writing, together with a copy by electronic mail (which shall not constitute notice), and shall be given or made (and shall be deemed to have been duly given or made upon acknowledgment of receipt) by delivery in person, by overnight courier service or by registered or certified mail (postage prepaid, return receipt requested) to the respective Companies at the following addresses (or at such other address for a Company as shall be specified in a notice given in accordance with this Section 16.01):

If to Johnson Controls :

Johnson Controls International plc

5757 North Green Bay Avenue

Milwaukee, Wisconsin 53209

Attention: General Counsel

Email: CO-General.Counsel@jci.com

If to Adient :

Adient Limited

833 East Michigan Street, Suite 1100

Milwaukee, Wisconsin 53202

Attention: General Counsel

Email: CO-General.Counsel@adient.com

 

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A Company may, by notice to the other Company, change the address to which such notices are to be given.

Section 16.02 Assignability . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns; provided that neither Company nor any such party thereto may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Company hereto. Notwithstanding the foregoing, no such consent shall be required for the assignment of a party’s rights and obligations under this Agreement and the Ancillary Agreements (except as may be otherwise provided in any such Ancillary Agreement) in whole ( i.e. , the assignment of a party’s rights and obligations under this Agreement and all Ancillary Agreements all at the same time) in connection with a change of control of a Company so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Company. Nothing in this Section 16.02 is intended to, or shall be construed to, prohibit either Company or any member of its Group from being party to or undertaking a change of control.

Section 16.03 Waiver . Waiver by a Company of any default by the other Company of any provision of this Agreement shall not be deemed a waiver by the waiving Company of any subsequent or other default, nor shall it prejudice the rights of the other Company. No failure or delay by a Company in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 16.04 Severability . If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Companies shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Companies.

Section 16.05 Authority . Johnson Controls represents on behalf of itself and each other member of the Johnson Controls Group, and Adient represents on behalf of itself and each other member of the Adient Group, as follows: (i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and (ii) this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

Section 16.06 Further Action . The parties shall execute and deliver all documents, provide all information, and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement, including the execution and delivery to the other parties and their Affiliates and representatives of such powers of attorney or other authorizing documentation as is reasonably necessary or appropriate in connection with Tax Contests (or portions thereof) under the control of such other parties in accordance with Section 9.

 

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Section 16.07 Integration . This Agreement, the Ancillary Agreements and the Exhibits, Schedules and appendices hereto and thereto contain the entire agreement between the Companies with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Companies other than those set forth or referred to herein or therein. In the event of any inconsistency between this Agreement, the Separation and Distribution Agreement, any other agreements relating to the transactions contemplated by the Separation and Distribution Agreement, or the Tax Allocation Agreement, with respect to matters addressed herein, the provisions of this Agreement shall control.

Section 16.08 Construction . The language in all parts of this Agreement shall in all cases be construed according to its fair meaning and shall not be strictly construed for or against any party. The captions, titles and headings included in this Agreement are for convenience only, and do not affect this Agreement’s construction or interpretation. Unless otherwise indicated, all “Section” references in this Agreement are to sections of this Agreement.

Section 16.09 No Double Recovery . No provision of this Agreement shall be construed to provide an indemnity or other recovery for any costs, damages, or other amounts for which the damaged party has been fully compensated under any other provision of this Agreement or under any other agreement or action at Law or equity. Unless expressly required in this Agreement, a party shall not be required to exhaust all remedies available under other agreements or at Law or equity before recovering under the remedies provided in this Agreement.

Section 16.10 Currency . All amounts payable pursuant to this Agreement shall be payable in U.S. dollars, based on the conversion rate used at the time that the obligation to pay arises in the financial reporting systems of the party receiving such payment.

Section 16.11 Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Companies and delivered to the other Company. Each Company acknowledges that it and each other Company is executing certain of the Ancillary Agreements by facsimile, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (.pdf) shall be effective as delivery of such executed counterpart of this Agreement. Each Company expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (.pdf)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Company to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Company at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

Section 16.12 Governing Law . This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated    

 

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on common Law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of New York irrespective of the choice of laws principles of the State of New York including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 16.13 Jurisdiction . If any dispute arises out of or in connection with this Agreement, except as expressly contemplated by another provision of this Agreement, the parties irrevocably (and the parties will cause each other member of their respective Group to irrevocably) (a) consent and submit to the exclusive jurisdiction of any federal court sitting in the Borough of Manhattan in The City of New York (or, only if such court lacks subject matter jurisdiction, in any New York State court sitting in the Borough of Manhattan in The City of New York), (b) waive any claims of forum non conveniens, and agree to submit to the jurisdiction of such courts, as provided in New York General Obligations Law § 5-1402, (c) agree that service of any process, summons, notice or document by United States registered mail to each Company’s respective address set forth in Section 16.01 shall be effective service of process for any litigation brought against it in any such court or for the taking of any other acts as may be necessary or appropriate in order to effectuate any judgment of said courts and (d) WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO TRIAL OR ADJUDICATION BY JURY.

Section 16.14 Amendment . No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Company, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Company against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 16.15 Adient Subsidiaries . If, at any time, Adient acquires or creates one or more subsidiaries that are includable in the Adient Group, they shall be subject to this Agreement and all references to the Adient Group herein shall thereafter include a reference to such subsidiaries.

Section 16.16 Successors . This Agreement shall be binding on and inure to the benefit of any successor by merger, acquisition of assets, or otherwise, to any of the parties hereto (including, but not limited to, any successor of Johnson Controls or Adient succeeding to the Tax attributes of either under Section 381 of the Code), to the same extent as if such successor had been an original party to this Agreement.

Section 16.17 Injunctions . Subject to the provisions of Section 13, the parties acknowledge that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. The parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled at Law or in equity.

 

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IN WITNESS WHEREOF, each party has caused this Agreement to be executed on its behalf by a duly authorized officer on the date first set forth above.

 

JOHNSON CONTROLS INTERNATIONAL PLC
By:  

/s/ Brian J. Stief

Name:   Brian J. Stief
Title:   Executive Vice President and Chief Financial Officer
ADIENT LIMITED
By:  

/s/ Cathleen A. Ebacher

Name:   Cathleen A. Ebacher
Title:   Vice President, General Counsel and Secretary

[Signature Page to Tax Matters Agreement]

 

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Exhibit 10.5

DEED OF INDEMNITY

This deed (“ Deed ”) is made as of             , 2016 by and between Adient plc, a public limited company organized under the laws of Ireland (“ Adient ”), and              (“ Indemnitee ”). Except as provided herein, this Deed supersedes and replaces any and all previous agreements between Adient and Indemnitee covering the subject matter of this Deed.

RECITALS

WHEREAS, it is essential to Adient that Adient retain and attract as directors and secretary the most capable persons available;

WHEREAS, due to restrictions imposed by the laws of Ireland, the Articles of Association of Adient (the “ Adient Articles ”) do not confer indemnification and advance rights on its directors and secretary as broad as the indemnification and advance rights that are customarily provided to the directors and secretary of a company organized under the laws of the State of Delaware;

WHEREAS, the Board of Directors of Adient believes that highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, Adient has requested that the Indemnitee serve as an Official of Adient, and, if requested to do so by Adient, as an Official of another foreign or domestic corporation, partnership, limited liability company, joint venture, employee benefit plan, trust, or other Enterprise;

WHEREAS, it is reasonable, prudent and necessary for Adient contractually to obligate itself to indemnify, and to advance expenses to, the Indemnitee to the fullest extent permitted by applicable law, including the Act, so that he or she will serve or continue to serve Adient free from undue concern that he or she will not be so indemnified;

WHEREAS, in recognition of Indemnitee’s need for (a) substantial protection against personal liability, (b) specific contractual assurance that such protection will be available to Indemnitee, Adient wishes to provide in this Deed for the indemnification by Adient of, and the advancing by Adient of expenses to, Indemnitee as set forth in this Deed; and

WHEREAS, this Deed is a supplement to and in furtherance of any insurance maintained by Adient and the Adient Articles, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.


NOW, THEREFORE, in consideration of the premises and the covenants contained herein, Adient and Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions . As used in this Deed:

(a) The “ Act ” shall mean the Irish Companies Act 2014 as amended from time to time.

(b) References to “ agent ” shall mean, with respect to any Enterprise, any person who is or was a director, officer, or employee of such Enterprise or a subsidiary of the Enterprise or other person authorized by the Enterprise to act for the Enterprise, to include such person serving in such capacity as an Official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Enterprise or a subsidiary of the Enterprise.

(c) “ Associated Company ” shall mean a company formed under the Act, or any predecessor to the Act, that is a subsidiary, under the Act, of Adient.

(d) “ Beneficially Own ” and “ Beneficial Ownership ” shall have the meanings given to such terms in Rule 13d-3 under the Exchange Act.

(e) “ Board ” shall mean the board of directors of Adient.

(f) A “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Deed of any of the following events:

i. the acquisition by any Person (as defined below) of Beneficial Ownership, directly or indirectly, of securities of Adient representing twenty percent (20%) or more of either (1) the then outstanding ordinary shares of Adient (the “ Outstanding Adient Shares ”) or (2) the combined voting power of the then outstanding voting securities of Adient entitled to vote generally in the election of directors (the “ Outstanding Adient Voting Securities ”); provided , that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from Adient, (2) any acquisition by Adient or any of its subsidiaries, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Adient or any of its subsidiaries or (4) an acquisition by any Person pursuant to a transaction that complies with clauses (A), (B) and (C) of subsection (iii) of this Section 1(f);

ii. individuals who, as of the date of this Deed, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided , that any individual becoming a director of the Board after the date of this Deed whose election, or nomination for election by Adient’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest, a resolution proposed under Section 178 of the Act, or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

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iii. consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving Adient or any of its subsidiaries with any Person other than its subsidiaries or other disposition of all or substantially all of the assets of Adient to a Person other than a subsidiary of Adient (a “ Business Combination ”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals, and entities who were the beneficial owners, respectively, of the Outstanding Adient Shares and Outstanding Adient Voting Securities immediately prior to such Business Combination Beneficially Own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of voting securities and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Adient Shares and Outstanding Adient Voting Securities, as the case may be; (B) no Person (excluding any entity resulting from such Business Combination or any parent of such entity, and excluding any employee benefit plan (or related trust) of Adient, such entity resulting from such Business Combination or such parent) Beneficially Owns, directly or indirectly, more than 50%, respectively, of the then outstanding voting securities of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors or equivalent governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

iv. the approval by the shareholders of Adient of a complete liquidation or dissolution of Adient.

For purposes of this Section 1(f), the term “ Person ” shall have the meaning as set forth in Sections 13(d)(3) and 14(d)(2) of the Exchange Act; provided , that Person shall exclude (i) Adient, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of Adient, and (iii) any corporation owned, directly or indirectly, by the shareholders of Adient in substantially the same proportions as their ownership of ordinary shares of Adient.

(g) “ Corporate Status ” describes the status of a person who is or was an Official of an Enterprise.

(h) The term “ Criminal Proceeding ” shall mean any threatened, actual or completed proceedings brought in any jurisdiction concerning a criminal offence, whether committed by way of act or omission, in which Indemnitee was, is or will be involved as a party, or potential party to such proceedings, by reason of any act or omission taken by Indemnitee or of any action or omission on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status.

 

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(i) “ Disinterested Director ” shall mean a director of the Board who is not and was not a party to the Proceeding or Criminal Proceeding in respect of which indemnification is sought by Indemnitee, and who has no conflict of interest under the duties laid down in the Act, in relation to such Proceeding or Criminal Proceeding.

(j) “ Enterprise ” shall mean Adient and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of Adient as an Official.

(k) “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

(l) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended from time to time.

(m) “ Expenses ” shall include all reasonable fees of attorneys, solicitors, barristers and other counsel, retainers, court costs, transcript costs, fees of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Deed, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, claiming, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of Judgments.

(n) “ Fines ” shall mean any fine imposed in Criminal Proceedings, or any sum or fine payable to any regulatory authority regardless of whether such authority has a statutory footing or not, by way of a penalty in respect of non-compliance with any requirement of a regulatory nature however so arising.

(o) “ Independent Counsel ” shall mean a law firm, or a member of a law firm, that is experienced in matters of Irish company law and US corporation law and neither presently is, nor in the past three (3) years has been, retained to represent: (i) Adient or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Deed, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing Adient or Indemnitee in an action to determine Indemnitee’s rights under this Deed.

 

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(p) “ Judgment ” shall mean any ruling of any civil or administrative court in any jurisdiction that directs the Indemnitee to pay a fixed sum to the other party whether for costs, damages or other monies.

(q) “ Official ” shall mean a director, officer, secretary, employee, trustee, agent, partner, managing member, fiduciary or other official of Adient or another Enterprise.

(r) The term “ Proceeding ” shall include any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of Adient or otherwise and whether of a civil, administrative, legislative, or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the Indemnitee’s Corporate Status, by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advance of Expenses can be provided under this Deed. For the avoidance of doubt, Proceedings shall not include Criminal Proceedings.

(s) “ Prohibited Expense Payment ” shall mean any direct or indirect payment by way of indemnification by Adient or an Associated Company to Indemnitee of Expenses or any arrangement by which Adient or Associated Company enables Indemnitee to avoid incurring Expenses, where Indemnitee is defending any Criminal Proceedings or any Proceedings or other claims in connection with any alleged negligence, default, breach of duty, or breach of trust by Indemnitee in relation to Adient or Associated Company, or applying for relief under either section 233 or 234 of the Act (until such time as such relief is granted, subject to the provisions of this Deed).

(t) References to “ serving at the request of Adient ” shall include any service as a director, officer, employee or agent of Adient that imposes duties on, or involves services by, such director, officer, secretary, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of Adient ” as referred to in this Deed.

Section 2. Indemnity in Third-Party Proceedings . Adient shall indemnify Indemnitee in accordance with the provisions of this Section 2 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of Adient or an Associated Company, to procure a judgment in its favor, by reason of Indemnitee’s Corporate Status (“ Third Party Proceedings ”). Pursuant to this Section 2, Indemnitee shall be indemnified to the fullest extent permitted by applicable law, including the Act, against all Expenses, Judgments and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, Judgments, and amounts paid

 

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in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Third Party Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of Adient. The parties hereto intend that this Deed (a) shall provide to the fullest extent permitted by law, including the Act, for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Adient Articles, a vote of Adient’s shareholders, disinterested directors or applicable law, including the Act and (b) shall not be deemed a substitute for, nor to diminish or abrogate any rights of Indemnitee under any insurance maintained by Adient. Nothing in this Section 2 or this Deed shall indemnify an Indemnitee in respect of any liability incurred by the Indemnitee to the extent prohibited by the Act, including the payment of Fines, Judgments against Indemnitee or Prohibited Expense Payments.

Section 3. Advancement of Expenses to directors in Proceedings and Criminal Proceedings . Adient may, to the fullest extent permitted by applicable law, advance such funds to Indemnitee as Adient, in its reasonable discretion, considers appropriate for Indemnitee to cover Expenses incurred or to be incurred by Indemnitee, (a) in defending any Criminal Proceedings, (b) in defending any Proceedings in connection with any alleged negligence, default, breach of duty or breach of trust by the Indemnitee in relation to Adient or Associated Company, (c) in connection with any application for relief under either section 233 or 234 of the Act or (d) any other Proceedings. If Adient considers it appropriate to make any advance pursuant to this Section 3, such advance is to be repaid or any liability of Adient incurred in any transaction connected with the thing done is to be discharged in the event of (i) the Indemnitee being convicted in Criminal Proceedings, (ii) judgment being given against the Indemnitee in Proceedings or (iii) the court refusing to grant relief in the circumstances set out in either section 233 or 234 of the Act.

Section 4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provisions of this Deed, to the fullest extent permitted by applicable law, including the Act, and to the extent that Indemnitee is defending any Proceedings or Criminal Proceedings or making any application for relief under either section 233 or 234 of the Act and is wholly successful, on the merits or otherwise, in any Proceedings, Criminal Proceedings or in defense of any claim, issue or matter therein, Adient shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection therewith. If Indemnitee is not wholly successful in Proceedings but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, but not Criminal Proceedings, Adient shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law, including the Act. For the purposes of this Section 4 and without limitation, the termination of any claim, issue or matter in Proceedings or Criminal Proceedings by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. Nothing in this Section 4 or this Deed shall indemnify an Indemnitee in respect of any liability incurred by the Indemnitee prohibited by applicable law, including the Act.

 

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Section 5. Indemnification For Expenses of a Witness . Notwithstanding any other provision of this Deed, to the fullest extent permitted by applicable law, including the Act, and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness or otherwise asked to participate in any Proceeding or Criminal Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

Section 6. Partial Indemnification . If Indemnitee is entitled under any provision of this Deed to indemnification by Adient for some or a portion of Expenses, but not, however, for the total amount thereof, Adient shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Section 7. Exclusions . Notwithstanding any provision in this Deed, Adient shall not be obligated under this Deed to make any indemnification payment in connection with any Proceedings or Criminal Proceedings involving Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision;

(b) for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of Adient within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, (ii) any reimbursement of Adient by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of Adient, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of Adient pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), or Section 904 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the payment to Adient of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of Adient by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act; or

(c) in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against Adient and its directors, officers, secretary, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) Adient provides the indemnification, in its sole discretion, pursuant to the powers vested in Adient, as applicable, under applicable law, including the Act;

(d) in respect of any Fines; or

(e) in respect of any Prohibited Expense Payment.

 

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Notwithstanding any other provision of this Deed, Adient shall not indemnify and does not intend to indemnify Indemnitee in respect of Proceedings, Criminal Proceedings or any other action, except as to the fullest extent permitted by the Act.

Section 8. Procedure for Notification and Defense of Claim; Exhaustion of Remedies .

(a) Indemnitee shall notify Adient in writing of any matter with respect to which Indemnitee intends to seek indemnification or an advance under this Deed, of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to Adient shall include a description of the nature of the Proceeding or Criminal Proceeding and the facts underlying the Proceeding or Criminal Proceeding. To obtain indemnification under this Deed, Indemnitee shall submit to Adient a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. The omission by Indemnitee to notify Adient hereunder will not relieve Adient from any liability which it may have to Indemnitee hereunder or otherwise than under this Deed except to the extent that such delay materially and adversely affects Adient’s ability to participate in the defense of such Proceeding or Criminal Proceeding, and any delay in so notifying Adient shall not constitute a waiver by Indemnitee of any rights under this Deed. The Secretary of Adient shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) Adient will be entitled to participate in the Proceeding or Criminal Proceeding at its own expense and, except as otherwise provided below, to the extent Adient so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from Adient to Indemnitee of its election to assume the defense of any such claim, Adient shall not be liable to Indemnitee under this Deed or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee’s defense of such claim except as otherwise provided below and allowed under applicable law, including the Act. Indemnitee shall have the right to employ its own legal counsel in such claim, but all Expenses related to such counsel incurred after notice from Adient of its assumption of the defense shall be at Indemnitee’s own expense; provided , that if (i) Indemnitee’s employment of its own legal counsel has been authorized by Adient, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and Adient in the defense of such claim, (iii) after a Change in Control, Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) Adient shall not in fact have employed counsel to assume the defense of such claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such claim) and all Expenses related to such separate counsel shall be borne by Adient provided such payment does not amount to a Prohibited Expense Payment.

 

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(c) Prior to making a written request for indemnification or an advance pursuant to Section 8(a), Indemnitee shall (i) seek such indemnification or advance of Expenses, as applicable, under any applicable insurance policy and (ii) request that Adient consider in its discretion, and as permitted by this Deed and applicable law, including the Act, whether to make such indemnification or advance of Expenses, as applicable. Upon any such request by Indemnitee of Adient, Adient shall consider whether to make such indemnification or advance of Expenses, as applicable, based on the facts and circumstances related to the request. Adient may require, as a condition to making any indemnification or advance of Expenses, as applicable, that Indemnitee enter into an agreement providing for such indemnification or advance of Expenses, as applicable, to be made subject to substantially the same terms and conditions applicable to an indemnification or advance of Expenses, as applicable, by Adient under this Deed. If indemnification or advance of Expenses, as applicable, is not received pursuant to an insurance policy, or from Adient, within five (5) business days of the later of Indemnitee’s request of the insurer and Indemnitee’s request of Adient pursuant to the first sentence of this Section 8(c), Indemnitee may make written demand on Adient for indemnification pursuant to Section 8(a) or make a request for an advance of Expenses pursuant to Section 3, as applicable.

Section 9. Procedure Upon Application for Indemnification .

(a) Upon written request by Indemnitee for indemnification or an advance pursuant to Section 8(a), a determination, if required by applicable law, including the Act, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, or (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee (collectively, the “ Reviewing Party ”); and, if it is so determined that Indemnitee is entitled to indemnification or an advance, payment by way of indemnification or an advance, as applicable, to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the Reviewing Party with respect to Indemnitee’s entitlement to indemnification, including providing to the Reviewing Party upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Adient promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied.

(b) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 9(a), the Independent Counsel shall be selected as provided in this Section 9(b). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board, and Adient shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding

 

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sentence shall apply), and Indemnitee shall give written notice to Adient advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or Adient, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to Adient or to Indemnitee, as the case may be, a written objection to such selection; provided , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Irish Court has determined that such objection is without merit. If, within twenty (20) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 8(a) and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either Adient or Indemnitee may petition the Irish Court for resolution of any objection which shall have been made by Adient or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 9(a). Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 11(a), Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

Section 10. Presumptions and Effect of Certain Proceedings .

(a) In making a determination with respect to entitlement to indemnification hereunder, the Reviewing Party shall, to the fullest extent not prohibited by law, including the Act, presume that Indemnitee is entitled to indemnification under this Deed if Indemnitee has submitted a request for indemnification in accordance with Section 8(a), and the Reviewing Party shall, to the fullest extent not prohibited by law, including the Act, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Reviewing Party to have made a determination prior to the commencement of any action pursuant to this Deed that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Reviewing Party that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) The termination of any Proceeding or Criminal Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or its equivalent, shall not (except as otherwise expressly provided in this Deed) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of Adient or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

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(c) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of any Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, officers or other Officials of such Enterprise in the course of their duties, or on the advice of legal counsel for such Enterprise or on information or records given or reports made to such Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of such Enterprise as to matters Indemnitee reasonably believes are within such Person’s professional or expert competence. The provisions of this Section 10(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Deed.

(d) The knowledge and/or actions, or failure to act, of any Official of any Enterprise or any other person shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Deed.

Section 11. Remedies of Indemnitee .

(a) Subject to Section 11(e), if (i) a determination is made pursuant to Section 9 of this Deed that Indemnitee is not entitled to indemnification under this Deed, (ii) an advance of Expenses is not timely made pursuant to Section 3 of this Deed, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 9(a) of this Deed within ninety (90) days after receipt by Adient of a request for indemnification (after Indemnitee has exhausted the procedures set forth in Section 8(c)), (iv) payment of indemnification is not made pursuant to Section 4, 5 or 6 within ten (10) days after receipt by Adient of a written request therefor (after Indemnitee has exhausted the procedures set forth in Section 8(c)), or (v) payment of indemnification pursuant to Section 2 is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) if Adient or any other person takes or threatens to take any action to declare this Deed void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by the Irish Court of Indemnitee’s entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 11(a). Adient shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) If a determination shall have been made pursuant to Section 9(a) of this Deed that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 11 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 11, Adient shall have the burden of proving Indemnitee is not entitled to indemnification or an advance of Expenses, as the case may be.

 

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(c) If a determination shall have been made pursuant to Section 9(a) that Indemnitee is entitled to indemnification, Adient shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 11, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, but only to the extent that the misstatement or omission affected such determination, or (ii) a prohibition of such indemnification under applicable law, including the Act.

(d) Adient shall, to the fullest extent not prohibited by law, including the Act, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 11 that the procedures and presumptions of this Deed are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that Adient is bound by all the provisions of this Deed.

(e) Notwithstanding anything in this Deed to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Deed shall be required to be made prior to the final disposition of the Proceeding or Criminal Proceeding.

Section 12. Non-exclusivity; Survival of Rights; Insurance; Subrogation .

(a) The rights of Indemnitee under this Deed shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, including the Act, the Adient Articles, any agreement, a vote of Adient’s shareholders, a resolution of directors, any insurance maintained by Adient or otherwise. No amendment, alteration or repeal of this Deed or of any provision hereof shall limit or restrict any right of Indemnitee under this Deed in respect of any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Irish law, including the Act, or any other applicable laws, whether by statute or judicial decision, permits greater indemnification or advance of Expenses than would be afforded currently under Irish law and/or under the Adient Articles and/or this Deed, it is the intent of the parties hereto that Indemnitee shall enjoy by this Deed the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that Adient maintains an insurance policy or policies providing liability insurance for directors, officers, secretaries, employees, or agents of any Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, secretary,

 

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employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, Adient has director and officer liability insurance in effect, Adient shall give prompt notice of such claim or of the commencement of a Proceeding or Criminal Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. Adient shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(c) In the event of any payment made by Adient under this Deed, Adient shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable Adient to bring suit to enforce such rights.

(d) Adient shall not be liable under this Deed to make any payment of amounts otherwise indemnifiable (or provide an advance pursuant to Section 3 of this Deed) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. Notwithstanding the foregoing, Adient shall be required to make payments under this Deed within the time periods set forth in this Deed regardless of whether, at the time such payments are due, the Indemnitee is pursuing recovery under any such policy, contract, agreement or other means.

(e) Adient’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of Adient as an Official of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advance of Expenses from such Enterprise. Notwithstanding the foregoing, Adient shall be required to make payments under this Deed within the time periods set forth in this Deed regardless of whether, at the time such payments are due, the Indemnitee is pursuing recovery from such other Enterprise.

Section 13. Duration of this Deed; Successors and Assigns . All agreements and obligations of Adient contained in this Deed shall continue for so long as Indemnitee shall be subject to, or involved in, any Proceeding for which indemnification is provided pursuant to this Deed. Notwithstanding the foregoing, no legal action shall be brought and no cause of action shall be asserted by or on behalf of Adient or any of its subsidiaries against Indemnitee, Indemnitee’s spouse, heirs, executors, or personal or legal representatives after the expiration of two (2) years from the date of accrual of such cause of action, or such longer period as may be required by the laws of Ireland under the circumstances. Any claim or cause of action of Adient or any of its subsidiaries shall be extinguished and deemed released unless asserted by the timely filing and notice of a legal action within such period; provided , that if any shorter period of limitations is otherwise applicable to any such cause of action, the shorter period shall govern. The indemnification and advance of expenses rights provided by or granted pursuant to this Deed shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of Adient), shall continue as to an Indemnitee who has ceased to be an Official of Adient or of any other Enterprise, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

 

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Section 14. Severability . If any provision or provisions of this Deed shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Deed (including each portion of any section of this Deed containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law, including the Act; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law, including the Act and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Deed (including each portion of any section of this Deed containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 15. Enforcement .

(a) Adient expressly confirms and agrees that it has entered into this Deed and assumed the obligations imposed on it hereby to induce Indemnitee to serve as a director or officer of Adient, and Adient acknowledges that Indemnitee is relying upon this Deed in serving or continuing to serve as a director or officer of Adient. Accordingly, the parties hereto agree that in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Deed, Indemnitee shall have the right to specific performance and injunctive or other equitable relief in respect of his or her rights under this Deed, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The parties hereto also agree that the remedies at law for any breach or threatened breach of this Deed, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the parties hereto.

(b) This Deed constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided , that this Deed is a supplement to and in furtherance of the Adient Articles, any insurance maintained by Adient and applicable law, including the Act, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

Section 16. Modification and Waiver . No supplement, modification or amendment of this Deed shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Deed shall be deemed or shall constitute a waiver of any other provisions of this Deed nor shall any waiver constitute a continuing waiver.

 

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Section 17. Notice by Indemnitee . Indemnitee agrees promptly to notify Adient in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or Criminal Proceeding or matter which may be subject to indemnification or advance of Expenses covered hereunder. The failure of Indemnitee to so notify Adient shall not relieve Adient of any obligation which it may have to the Indemnitee under this Deed or otherwise, except to the extent that Adient is materially and adversely prejudiced by such failure.

Section 18. Notices . All notices, requests, demands and other communications under this Deed shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to Adient.

(b) If to Adient, to:

Adient plc

833 East Michigan Street, Suite 1100

Milwaukee, Wisconsin 53202

Attn: General Counsel

Email: CO-General.Counsel@adient.com

or to any other address as may have been furnished to Indemnitee by Adient.

Section 19. Applicable Law and Consent to Jurisdiction . This Deed is to be governed by and construed in accordance with Irish law. Any matter, claim or dispute arising out of or in connection with this Deed, whether contractual or non-contractual, is to be governed by and determined in accordance with Irish law. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 11(a), Adient and Indemnitee hereby irrevocably and unconditionally (i) agree that the courts of Ireland (the “ Irish Court ”) are to have exclusive jurisdiction to settle any dispute arising out of or in connection with this Deed, and any action or proceeding arising out of or in connection with this Deed shall be brought only in the Irish Court and not in any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Irish Court for purposes of any action or proceeding arising out of or in connection with this Deed and (iii) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Irish Court has been brought in an improper or inconvenient forum.

Section 20. The Act . Adient’s obligations under this Deed remain subject at all times to the provisions of section 235 of the Act.

 

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Section 21. Identical Counterparts . This Deed may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Deed. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Deed. Signatures to this Deed transmitted by facsimile transmission, by electronic mail in “portable document format” (“ pdf ”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signatures.

Section 22. Miscellaneous . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of this Deed are inserted for convenience only and shall not be deemed to constitute part of this Deed or to affect the construction thereof. Unless otherwise specified, references to a Section or clause refer to Sections or clauses of this Deed. The word “including” and words of similar import shall mean “including without limitation” unless otherwise specified. The word “or” shall not be exclusive. Any reference to “days” means calendar days unless Business Days are expressly specified.

[ Remainder of page intentionally left blank ]

 

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IN WITNESS WHEREOF, the parties have caused this Deed to be executed and delivered as of the day and year first above written.

 

GIVEN under the common seal of

ADIENT PLC

and DELIVERED as a DEED:

  
  

 

Duly Authorised Signatory

 

Executed as a deed by                         )            (Signature of individual)
in the presence of:    )            (Address of Indemnitee)
Witness’s signature:      
 
Witness’s name (print):      
 
Witness’s occupation:      
 
Witness’s address:        

[ Signature Page to Deed of Indemnity]

Exhibit 10.6

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“ Agreement ”) is made as of             , 2016 by and between Adient US LLC, a Michigan limited liability company (“ Company ”), and              (“ Indemnitee ”). Except as provided herein, this Agreement supersedes and replaces any and all previous agreements between the Company and Indemnitee covering the subject matter of this Agreement.

RECITALS

WHEREAS, the Company is a subsidiary of Adient plc, a public limited company organized under the laws of Ireland (“ Adient ”);

WHEREAS, it is essential to the Company and Adient that Adient retain and attract as directors and secretary the most capable persons available;

WHEREAS, due to restrictions imposed by the laws of Ireland, the Articles of Association of Adient (the “ Adient Articles ”) do not confer indemnification and advancement rights on its directors and secretary as broad as the indemnification and advancement rights that are customarily provided to the directors and secretary of a limited liability company organized under the laws of the State of Michigan;

WHEREAS, the Board of Directors of the Company believes that highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers, secretaries or in other capacities unless they are provided with adequate protection through insurance and adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Company has requested that the Indemnitee serve as an Official of Adient, and, if requested to do so by the Company, as an Official of another foreign or domestic corporation, partnership, limited liability company, joint venture, employee benefit plan, trust, or other Enterprise;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, the Indemnitee to the fullest extent permitted by applicable law so that he or she will serve or continue to serve Adient or the Company free from undue concern that he or she will not be so indemnified;

WHEREAS, in recognition of Indemnitee’s need for (a) substantial protection against personal liability, (b) specific contractual assurance that such protection will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of the Adient Articles, the limited liability company operating agreement of the Company (the “ Operating Agreement ”) or any change in the composition of the Board of Directors of the Company or acquisition transaction relating to Adient), the Company wishes to provide in this Agreement for the indemnification by the Company of and the advancing by the Company of expenses to Indemnitee as set forth in this Agreement;

 


WHEREAS, this Agreement is a supplement to and in furtherance of any insurance maintained by Adient or the Company, the Adient Articles, the Deed of Indemnity which Indemnitee has with Adient (the “ Adient Deed of Indemnity ”), the Operating Agreement and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection available under the Adient Articles, the Adient Deed of Indemnity, the Operating Agreement and insurance as adequate in the present circumstances, and may not be willing to serve or continue to serve as an officer or director of Adient without adequate protection, and the Company desires Indemnitee to serve or continue to serve in such capacity.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions. As used in this Agreement:

(a) References to “ agent ” shall mean, with respect to any Enterprise, any person who is or was a director, officer, or employee of such Enterprise or a subsidiary of the Enterprise or other person authorized by the Enterprise to act for the Enterprise, to include such person serving in such capacity as an Official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Enterprise or a subsidiary of the Enterprise.

(b) “ Beneficially Own ” shall have the meanings given to such terms in Rule 13d-3 under the Exchange Act.

(c) “ Board ” shall mean the board of directors of Adient.

(d) A “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

i. The acquisition by any Person (as defined below) of Beneficial Ownership, directly or indirectly, of securities of Adient representing twenty percent (20%) or more of either (1) the then outstanding ordinary shares of Adient (the “ Outstanding Adient Shares ”) or (2) the combined voting power of the then outstanding voting securities of Adient entitled to vote generally in the election of directors (the “ Outstanding Adient Voting Securities ”); provided , that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from Adient, (2) any acquisition by Adient or any of its subsidiaries, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Adient or any of its subsidiaries or (4) an acquisition by any Person pursuant to a transaction that complies with clauses (A), (B) and (C) of subsection (iii) of this Section 1(d);

 

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ii. Individuals who, as of the date of this Agreement, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided , that any individual becoming a director of the Board after the date of this Agreement whose election, or nomination for election by Adient’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

iii. Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving Adient or any of its subsidiaries with any Person other than Adient or its subsidiaries or other disposition of all or substantially all of the assets of Adient to a Person other than a subsidiary of Adient (a “ Business Combination ”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals, and entities who were the beneficial owners, respectively, of the Outstanding Adient Shares and Outstanding Adient Voting Securities immediately prior to such Business Combination Beneficially Own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of voting securities and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Adient Shares and Outstanding Adient Voting Securities, as the case may be; (B) no Person (excluding any entity resulting from such Business Combination or any parent of such entity, and excluding any employee benefit plan (or related trust) of Adient, such entity resulting from such Business Combination or such parent) Beneficially Owns, directly or indirectly, more than 50%, respectively, of the then outstanding voting securities of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors or equivalent governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

iv. The approval by the shareholders of Adient of a complete liquidation or dissolution of Adient.

For purposes of this Section 1(d), the term “ Person ” shall have the meaning as set forth in Sections 13(d)(3) and 14(d)(2) of the Exchange Act; provided , that Person shall exclude (i) Adient, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of Adient, and (iii) any corporation owned, directly or indirectly, by the shareholders of Adient in substantially the same proportions as their ownership of ordinary shares of Adient.

(e) “ Corporate Status ” describes the status of a person who is or was an Official of an Enterprise.

 

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(f) “ Disinterested Director ” shall mean a director of the Board who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(g) “ Enterprise ” shall mean Adient, the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as an Official.

(h) “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

(i) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended from time to time.

(j) “ Expenses ” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) judgments, fines and amounts paid in settlement, (ii)  Expenses incurred in connection with any appeal resulting from any Proceeding, including the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, (iii) for purposes of Section 12(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise and (iv) including all interest, assessments and other charges paid or payable in connection with or in respect of Expenses.

(k) “ Independent Counsel ” shall mean a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past three (3) years has been, retained to represent: (i) Adient, the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing Adient, the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(l) “ Michigan Act ” shall mean the Michigan Limited Liability Company Act, as amended, supplemented or restated from time to time, and any successor to such statute.

(m) “ Official ” shall mean a director, officer, secretary, employee, trustee, agent, partner, managing member, fiduciary or other official of the Company, Adient or another Enterprise.

 

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(n) The term “ Proceeding ” shall include any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of Adient, the Company or otherwise and whether of a civil, criminal, administrative, legislative, or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the Indemnitee’s Corporate Status, by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement.

(o) References to “ fines ” shall include any excise tax assessed with respect to any employee benefit plan; references to “ serving at the request of the Company ” shall include any service as a director, officer, secretary, employee or agent of Adient or the Company that imposes duties on, or involves services by, such director, officer, secretary, employee or agent with respect to an employee benefit plan, its participants or beneficiaries.

Section 2. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 2 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by reason of Indemnitee’s Corporate Status. Pursuant to this Section 2, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein; provided that the Indemnitee shall not be indemnified and held harmless pursuant to this Agreement if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this Agreement, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, a knowing violation of the law. The parties hereto intend that this Agreement (a) shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including any indemnification provided by the Adient Articles, the Adient Deed of Indemnity, the Operating Agreement, vote of Adient’s shareholders, vote of the Company’s members or disinterested directors or applicable law and (b) shall not be deemed a substitute for, nor to diminish or abrogate any rights of Indemnitee under any insurance maintained by Adient or the Company.

Section 3. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall

 

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indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section 3 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 4. Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness or otherwise asked to participate in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

Section 5. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Section 6. Additional Indemnification.

(a) Notwithstanding any limitation in Sections 2 or 3, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding by reason of Indemnitee’s Corporate Status.

(b) For purposes of Section 6(a), the meaning of the phrase “ to the fullest extent permitted by applicable law ” shall include, but not be limited to:

i. to the fullest extent permitted by the provision of the Michigan Act that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the Michigan Act; and

ii. to the fullest extent authorized or permitted by any amendments to or replacements of the Michigan Act adopted after the date of this Agreement that increase the extent to which a limited liability company may indemnify its officers and directors.

Section 7. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification payment in connection with any claim involving Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision;

(b) for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of Adient within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, (ii) any reimbursement of Adient by the Indemnitee of any bonus or other incentive-based or equity-based compensation

 

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or of any profits realized by the Indemnitee from the sale of securities of Adient, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of Adient pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), or Section 904 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the payment to Adient of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of Adient by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act; or

(c) except as provided in Section 12(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against Adient, the Company or their respective directors, officers, secretary, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) Adient or the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in Adient or the Company, as applicable, under applicable law.

Section 8. Advances of Expenses. Notwithstanding any provision of this Agreement to the contrary (other than Section 12(d)), the Company shall advance, to the extent not prohibited by law, the Expenses (other than judgments, fines and amounts paid in settlement) incurred and paid by Indemnitee in connection with any Proceeding (or any part of any Proceeding) not initiated by Indemnitee or any Proceeding initiated by Indemnitee with the prior approval of the Board as provided in Section 7(c), and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay such Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. In accordance with Section 12(d), advances shall include any and all reasonable Expenses (other than judgments, fines and amounts paid in settlement) incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that the Indemnitee undertakes to repay the amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the execution of this Agreement. This Section 8 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 7.

 

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Section 9. Procedure for Notification and Defense of Claim; Exhaustion of Remedies.

(a) Indemnitee shall notify Adient and the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to Adient and the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to Adient and the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. The omission by Indemnitee to notify Adient and the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement except to the extent that such delay materially and adversely affects the Company’s ability to participate in the defense of such Proceeding, and any delay in so notifying Adient and the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) The Company will be entitled to participate in the Proceeding at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any such claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses (other than judgments, fines and amounts paid in settlement) subsequently directly incurred by Indemnitee in connection with Indemnitee’s defense of such claim other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at Indemnitee’s own expense; provided , that if (i) Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of such claim, (iii) after a Change in Control, Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such claim) and all Expenses related to such separate counsel shall be borne by the Company.

(c) Prior to making a written request for indemnification pursuant to Section 9(a) or making a request for advancement of Expenses pursuant to Section 8, Indemnitee shall (i) seek such indemnification or advancement of such Expenses, as applicable, under any applicable insurance policy and (ii) request that Adient consider in its discretion whether to make such indemnification or advancement of such Expenses, as applicable. Upon any such request by Indemnitee of Adient, it is expected that Adient will consider whether to make such indemnification or advancement of such Expenses, as applicable, based on the facts and circumstances related to the request. Adient may require, as a condition to making any indemnification or advancement of Expenses, as applicable, that Indemnitee enter into an agreement providing for such indemnification or advancement of such Expenses, as applicable, to be made subject to substantially the same terms and conditions applicable to an indemnification or advancement of Expenses, as applicable, by the Company under this

 

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Agreement (including conditioning any advancement of Expenses upon delivery to Adient of an undertaking of the type described in Section 8). If indemnification or advancement of Expenses (other than judgments, fines and amounts paid in settlement), as applicable, is not received pursuant to an insurance policy, or from Adient, within five (5) business days of the later of Indemnitee’s request of the insurer and Indemnitee’s request of Adient pursuant to the first sentence of this Section 9(c), Indemnitee may make written demand on the Company for indemnification pursuant to Section 9(a) or make a request for advancement of Expenses pursuant to Section 8, as applicable.

Section 10. Procedure Upon Application for Indemnification.

(a) Upon written request by Indemnitee for indemnification pursuant to Section 9(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, or (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee (collectively, the “ Reviewing Party ”); and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the Reviewing Party with respect to Indemnitee’s entitlement to indemnification, including providing to the Reviewing Party upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including reasonable attorneys’ fees and disbursements, but excluding judgments, fines and amounts paid in settlement) incurred by Indemnitee in so cooperating with the Reviewing Party shall be borne by the Company irrespective of the determination as to Indemnitee’s entitlement to indemnification, and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied.

(b) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(a), the Independent Counsel shall be selected as provided in this Section 10(b). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to Adient and the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to Adient and the Company or to Indemnitee, as the case may be, a

 

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written objection to such selection; provided , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Michigan Court has determined that such objection is without merit. If, within twenty (20) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 9(a) and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Michigan Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 10(a). Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a), Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

Section 11. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the Reviewing Party shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a), and the Reviewing Party shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Reviewing Party to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Reviewing Party that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, a knowing violation of the law.

(c) Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of any Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, officers or other Officials of such Enterprise in the course of their duties, or on the advice of legal counsel for such Enterprise or on information or records given or reports made to such Enterprise by an

 

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independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of such Enterprise as to matters Indemnitee reasonably believes are within such Person’s professional or expert competence. The provisions of this Section 11(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(d) The knowledge and/or actions, or failure to act, of any Official of any Enterprise or any other person shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 12. Remedies of Indemnitee.

(a) Subject to Section 12(e), if (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses (other than judgments, fines and amounts paid in settlement) is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(a) of this Agreement within ninety (90) days after receipt by Adient and the Company of a request for indemnification (after Indemnitee has exhausted the procedures set forth in Section 9(c)), (iv) payment of indemnification is not made pursuant to Section 3, 4 or 5 or the second to last sentence of Section 10(a) within ten (10) days after receipt by Adient and the Company of a written request therefor (after Indemnitee has exhausted the procedures set forth in Section 9(c)), (v) payment of indemnification pursuant to Section 2 or 6 is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) if Adient, the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by the Michigan Court of Indemnitee’s entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a). Neither Adient nor the Company shall oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) If a determination shall have been made pursuant to Section 10(a) that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

 

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(c) If a determination shall have been made pursuant to Section 10(a) that Indemnitee is entitled to indemnification, Adient and the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, but only to the extent that the misstatement or omission affected the such determination, or (ii) a prohibition of such indemnification under applicable law.

(d) Adient and the Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all of the provisions of this Agreement. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law, indemnify Indemnitee against any and all Expenses (other than judgments, fines and amounts paid in settlement) and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company if Indemnitee is successful in such action.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

Section 13. Non-exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Adient Articles, the Adient Deed of Indemnity, the Operating Agreement, any agreement, a vote of Adient shareholders, a vote of the Company’s stockholders, a resolution of directors, any insurance maintained by Adient or the Company or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Michigan law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Adient Articles, the Adient Deed of Indemnity, the Operating Agreement and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

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(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, secretaries, employees, or agents of any Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, secretary, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, Adient or the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(c) In the event of any payment made by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. Notwithstanding the foregoing, the Company shall be required to make payments under this Agreement within the time periods set forth in this Agreement regardless of whether, at the time such payments are due, the Indemnitee is pursuing recovery under any such policy, contract, agreement or other means.

(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as an Official of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other Enterprise. Notwithstanding the foregoing, the Company shall be required to make payments under this Agreement within the time periods set forth in this Agreement regardless of whether, at the time such payments are due, the Indemnitee is pursuing recovery from such other Enterprise.

Section 14. Duration of Agreement; Successors and Assigns. All agreements and obligations of the Company contained in this Agreement shall continue for so long as Indemnitee shall be subject to, or involved in, any proceeding for which indemnification is provided pursuant to this Agreement. Notwithstanding the foregoing, no legal action shall be brought and no cause of action shall be asserted by or on behalf of Adient, the Company or any of their subsidiaries against Indemnitee, Indemnitee’s spouse, heirs, executors, or personal or legal representatives after the expiration of two (2) years from the date of accrual of such cause of action, or such longer period as may be required by the laws of Michigan under the

 

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circumstances. Any claim or cause of action of Adient, the Company or any of their subsidiaries shall be extinguished and deemed released unless asserted by the timely filing and notice of a legal action within such period; provided , that if any shorter period of limitations is otherwise applicable to any such cause of action, the shorter period shall govern. The indemnification and advancement of expenses rights provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be an Official of Adient, the Company or of any other Enterprise, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

Section 15. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 16. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby to induce Indemnitee to serve as a director or officer of Adient or the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director or officer of Adient or the Company, as applicable. Accordingly, the parties hereto agree that in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, Indemnitee shall have the right to specific performance and injunctive or other equitable relief in respect of his or her rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The parties hereto also agree that the remedies at law for any breach or threatened breach of this Agreement, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the parties hereto.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided , that this Agreement is a supplement to and in furtherance of the Adient Articles, the Adient Deed of Indemnity, the Operating Agreement, any insurance maintained by Adient or the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

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Section 17. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

Section 18. Notice by Indemnitee. Indemnitee agrees promptly to notify Adient and the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify Adient and the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise, except to the extent that the Company is materially and adversely prejudiced by such failure.

Section 19. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

(b) If to the Company to:

Adient US LLC

833 East Michigan Street, Suite 1100

Milwaukee, Wisconsin 53202

Attn: General Counsel

Email: CO-General.Counsel@adient.com

or to any other address as may have been furnished to Indemnitee by the Company.

Section 20. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the Expenses incurred by Indemnitee in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding to reflect (i) the relative benefits received by Adient and the Company, on the one hand, and Indemnitee, on the other hand, as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of Adient and the Company (and their respective directors, officers, employees and agents), on the one hand, and Indemnitee, on the other hand, in connection with such event(s) and/or transaction(s).

 

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Section 21. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Michigan, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a), the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Circuit Court in the County of Wayne, Michigan) (the “ Michigan Court ”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Michigan Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Michigan, irrevocably The Corporation Trust Company, 30600 Telegraph Road – Suite 2345, Bingham Farms, Michigan 48025 as its agent in the State of Michigan as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Michigan, (iv) waive any objection to the laying of venue of any such action or proceeding in the Michigan Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Michigan Court has been brought in an improper or inconvenient forum.

Section 22. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“ pdf ”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signatures.

Section 23. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. Unless otherwise specified, references to a Section or clause refer to Sections or clauses of this Agreement. The word “including” and words of similar import shall mean “including without limitation” unless otherwise specified. The word “or” shall not be exclusive. Any reference to “days” means calendar days unless business days are expressly specified.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

ADIENT US LLC       INDEMNITEE
By:                                                                                           By:                                                                            
Name:       Name:
Office:      

Address:                                                                   

                                                                                  

                                                                                       

[ Signature Page to Indemnification Agreement ]

Exhibit 10.10

ADIENT PLC

RESTRICTED SHARES OR RESTRICTED SHARE UNIT AWARD

Grant - Terms for Restricted Shares and Restricted Share Units

 

Participant Name:   
Grant Date:   
Number of Restricted Shares:   
Number of Restricted Share Units:   
Restriction Period:   
Units Settled in Cash (check box if applies; see Section 3(b)):   
Dividend Equivalents Settled in Cash (check box if applies):   
Dividends or Dividend Equivalents Paid Currently (check box if applies):   

Adient plc has adopted the 2016 Omnibus Incentive Plan to permit awards of restricted shares or restricted share units to be made to certain key employees of the Company or any Affiliate. The Company desires to provide incentives and potential rewards for future performance by the employee by providing the Participant with a means to acquire or to increase his or her proprietary interest in the Company’s success.

Definitions . Capitalized terms used in this Award have the following meanings:

 

(a) “Award” means this grant of Restricted Shares and/or Restricted Share Units.

 

(b) “Award Notice” means an Award notification (if any) delivered to the Participant in connection with this Award.

 

(c) “Company” means Adient plc or any successor thereto.

 

(d) “Inimical Conduct” means any of the following as determined by the Administrator in its sole discretion: (i) any act or omission that is inimical to the best interests of the Company or any Affiliate as determined by the Administrator, (ii) violation of any employment, non-compete, confidentiality or other agreement in effect with the Company or any Affiliate, or the Company’s or an Affiliate’s code of ethics, as then in effect, (iii) conduct rising to the level of gross negligence or willful misconduct in the course of employment with the Company or an Affiliate, (iv) commission of an act of dishonesty or disloyalty involving the Company or an Affiliate, or taking any action which damages or negatively reflects on the reputation of the Company or an Affiliate, (v) failure to comply with applicable laws relating to trade secrets, confidential information or unfair competition or a violation of any other federal, state or local law in connection with the Participant’s employment or service, or (vi) breach of any fiduciary duty to the Company or an Affiliate.

 

(e) “Participant” means the individual selected to receive this Award.

 

(f) “Plan” means the Adient plc 2016 Omnibus Incentive Plan, as may be amended from time to time.

 

(g) “Restriction Period” means the length of time indicated above or in any Award Notice during which the Participant cannot sell, transfer, pledge, assign or otherwise encumber the Restricted Shares or Restricted Share Units granted under this Award.

 

(h) “Restricted Shares” means Shares that are subject to a risk of forfeiture and the Restriction Period.

 

(i) “Restricted Share Unit” means the right to receive a payment, in cash or Shares, equal to the Fair Market Value of one Share, that is subject to a risk of forfeiture and the Restriction Period.

 

(j) “Share” means an ordinary share of the Company.

Other capitalized terms used in this Award have the meanings given in the Plan.


The parties agree as follows:

1. Grant of Award . The Company hereby grants to the Participant an award of Restricted Shares or Restricted Share Units, as specified above or in any Award Notice, on the date and with respect to the number of Shares or Units specified above or in any Award Notice. The Award is subject to the terms and conditions set forth herein and in the Plan, a copy of which has been delivered to the Participant, and which is made a part of this Award.

2. Restricted Shares . If the Award is in the form of Restricted Shares, the Shares are subject to the following terms:

 

  a. Restriction Period . The Company will hold the Shares in escrow or via an independent trust or nominee for the Restriction Period. During this period, the Shares shall be subject to forfeiture as provided in Section 4.

 

  b. Removal of Restrictions . Subject to any applicable deferral election under the Adient US LLC Executive Deferred Compensation Plan (or any successor plan) and to Section 4 below, Shares that have not been forfeited shall become available to the Participant after the last day of the Restriction Period upon payment in full of all taxes due with respect to such Shares.

 

  c. Voting Rights . During the Restriction Period, the Participant may exercise full voting rights with respect to the Shares.

 

  d. Dividends and Other Distributions . Any cash dividends or other distributions paid or delivered with respect to Restricted Shares for which the record date occurs on or before the last day of the Restriction Period will be credited to a bookkeeping account for the benefit of the Participant unless it is indicated above or in any Award Notice that such cash dividends or other distributions shall be paid currently. To the extent such account is credited, it will be converted into and settled in additional Shares issued under the Plan at the end of the applicable Restriction Period unless it is indicated above or in any Award Notice that the account will be paid to the Participant in cash, in which case it will be paid in cash at the end of the applicable Restriction Period. Prior to the end of the Restriction Period, any account credited pursuant to this paragraph will be subject to the same terms and conditions (including risk of forfeiture) as the Restricted Shares to which the dividends or other distributions relate.

3. Restricted Share Units. If the Award is in the form of Restricted Share Units , the Restricted Share Units are subject to the following terms:

 

  a. Restriction Period . During the Restriction Period, the Restricted Share Units shall be subject to forfeiture as provided in Section 4.

 

  b.

Settlement of Restricted Share Units . Subject to any applicable deferral election under the Adient US LLC Executive Deferred Compensation Plan (or any successor plan thereto) and to Section 4 below, the Restricted Share Units shall be settled by payment of one Share per Restricted Share Unit unless it is indicated above or in any Award Notice that the Restricted Share Units will be settled through payment of cash, in which case the Restricted Share Units will be settled through payment of cash equal to the Fair Market Value of one Share per Restricted Share Unit, in each case as soon as practicable after the last day of the Restriction Period and upon payment in full of all taxes due with respect to such Restricted Share Units. Notwithstanding

 

Terms for RS-RSUs – 2016 Plan    - 2 -   


  the foregoing, if this Award provides that it will be settled in cash, but the Company has satisfied all registration, qualification or other legal requirements necessary to permit the settlement of the Restricted Share Units in Shares in the Participant’s jurisdiction without adverse legal, tax, financial or accounting consequences to the Company or its Affiliates, then such Award will instead be settled in Shares and the Participant will have no right to receive cash. Notwithstanding the foregoing, if the Participant is a specified employee within the meaning of Code Section 409A and the Restriction Period lapses due to a termination of employment (other than for death), then the vested Restricted Share Units will be settled as soon as practicable six months after the Participant’s termination to the extent required to comply with Code Section 409A.

 

  c. Dividend Equivalent Units . Any cash dividends or other distributions paid or delivered with respect to the Shares for which the record date occurs on or before the last day of the Restriction Period will result in a credit to a bookkeeping account for the benefit of the Participant unless it is indicated above or in any Award Notice that such cash dividends or other distributions shall result in the current payment of a dividend equivalent. Any such credit or dividend equivalent will be equal to the dividends or other distributions that would have been paid with respect to the Shares subject to the Restricted Share Units had such Shares been outstanding. To the extent a bookkeeping account is credited pursuant to this paragraph, it will be converted into and settled in additional Shares issued under the Plan at the end of the applicable Restriction Period unless it is indicated above or in any Award Notice that the account will be paid to the Participant in cash, in which case it will be paid in cash at the end of the applicable Restriction Period. Prior to the end of the Restriction Period, any account credited pursuant to this paragraph will be subject to the same terms and conditions (including risk of forfeiture) as the Restricted Share Units to which the dividends or other distributions relate.

4. Termination of Employment – Risk of Forfeiture.

 

  a. Retirement . If the Participant’s employment with the Company and its Affiliates terminates after the first anniversary of the Grant Date due to Retirement, and at a time when the Participant’s employment could not have been terminated for Cause, then the Participant shall become vested in (and the Restriction Period shall lapse with respect to) a prorated portion of the total number of Restricted Shares or Restricted Share Units subject to this Award based on the number of days of the Participant’s employment during the Restricted Period prior to Retirement compared to the total number of days in the Restricted Period. Any Restricted Shares or Restricted Share Units subject to this Award that do not become vested under this paragraph as a result of the Retirement shall automatically be forfeited and returned to the Company as of the date of the Retirement. If the Participant engages in Inimical Conduct after his or her Retirement, as determined by the Administrator, any vested Restricted Share Units that have not yet been settled shall automatically be forfeited as of the date of the Administrator’s determination.

 

  b.

Death . If the Participant’s employment with the Company and its Affiliates terminates because of death at a time when the Participant could not have been terminated for Cause, then, effective as of the date the Company determines the Participant’s employment terminated due to death (provided such determination is made no more than 75 days after the date of death), any remaining Restriction Period shall automatically lapse. If the Participant dies after Retirement while this Award is still subject to the Restriction Period, then, effective as of the date of the Participant’s

 

Terms for RS-RSUs – 2016 Plan    - 3 -   


  death (provided the Company receives notice of the Participant’s death within 75 days), any remaining Restriction Period shall automatically lapse as of the date of death. The Company shall have no liability to any person for any taxes, penalties or interest incurred by any person due to the Company not receiving notice of the Participant’s death within 75 days.

 

  c. Disability . If the Participant’s employment with the Company and its Affiliates terminates because of Disability at a time when the Participant could not have been terminated for Cause, then the Participant shall become vested in (and any remaining Restriction Period shall automatically lapse with respect to) the Restricted Shares or Restricted Share Units subject to this Award as of the date such employment terminates.

 

  d. Other Termination. If the Participant’s employment terminates for any reason not described above, then any Restricted Shares or any Restricted Share Units (and all deferred dividends paid or credited thereon) still subject to the Restriction Period as of the date of such termination of employment shall automatically be forfeited and returned to the Company. In the event the Participant’s employment terminates due to the Participant’s involuntary termination of employment by the Company or an Affiliate for other than Cause, the Administrator may waive the automatic forfeiture of any or all such Restricted Shares or Restricted Share Units (and all deferred dividends or other distribution paid or credited thereon) and may add such new restrictions to such Restricted Shares or Restricted Share Units as it deems appropriate. The Company may suspend payment or delivery of Shares (without liability for interest thereon) pending the Administrator’s determination of whether the Participant’s employment was or should have been terminated for Cause or whether the Participant has engaged in Inimical Conduct.

5. Withholding . The Participant agrees to remit to the Company any foreign, U.S. federal, state and/or local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to the issuance of Shares under this Award, the vesting of this Award or the payment of cash under this Award. Unless the Company otherwise determines, the Company will satisfy any withholding obligations in connection with this Award by withholding from cash or Shares otherwise payable or issuable under this Award in the amount needed to satisfy any withholding obligations; provided that, in the case of Shares, the amount withheld may not exceed the Participant’s minimum statutory tax withholding obligations associated with the transaction to the extent needed for the Company and its Affiliates to avoid an accounting charge until Accounting Standards Update 2016-09 applies to the Company, after which time the amount withheld may not exceed the total maximum statutory tax rates associated with the transaction. Alternatively, the Company may require the Participant to pay to the Company, in cash, promptly on demand, amounts sufficient to satisfy such tax obligations or make other arrangements satisfactory to the Company regarding the payment to the Company of the aggregate amount of any such tax obligations, or the Company may withhold from cash or other property, payable or issuable to the Participant or from Shares no longer subject to restrictions in the amount needed to satisfy any withholding obligations.

6. No Claim for Forfeiture . Neither the Award nor any benefit accruing to the Participant from the Award will be considered to be part of the Participant’s normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments. In no event may the Award or any benefit accruing to the Participant from the Award be considered as compensation for, or relating in any way to, past services for the Company or any Affiliate. In consideration of the Award, no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from

 

Terms for RS-RSUs – 2016 Plan    - 4 -   


termination of the Participant’s employment by the Company or any Affiliate (for any reason whatsoever and whether or not in breach of local labor laws) and the Participant irrevocably releases the Company and its Affiliates from any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the grant, the Participant shall have been deemed irrevocably to have waived any entitlement to pursue such claim.

7. Electronic Delivery . The Company or its Affiliates may, in its or their sole discretion, decide to deliver any documents related to current or future participation in the Plan or related to this Award by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. The Participant hereby agrees that all on-line acknowledgements shall have the same force and effect as a written signature.

8. Securities Compliance. The Company may place a legend or legends upon the certificates for Shares issued under the Plan and may issue “stop transfer” instructions to its transfer agent in respect of such Shares as it determines to be necessary or appropriate to (a) prevent a violation of, or to obtain an exemption from, the registration requirements of the Securities Act of 1933, as amended, applicable state securities laws or other legal requirements, or (b) implement the provisions of the Plan, this Award or any other agreement between the Company and the Participant with respect to such Shares.

9. Successors . All obligations of the Company under this Award shall be binding on any successor to the Company. The terms of this Award and the Plan shall be binding upon and inure to the benefit of the Participant, and his or her heirs, executors, administrators or legal representatives.

10. Legal Compliance . The granting of this Award and the issuance of Shares under this Award shall be subject to all applicable laws, rules, and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required.

11. Governing Law; Arbitration . This Award and the rights and obligations hereunder shall be governed by and construed in accordance with, except to the extent preempted by other applicable laws (a) with respect to the corporate law requirements applicable to the Company, the validity and authorization of the issuance of Shares under the Plan and similar matters, the internal laws of Ireland (without reference to conflict of law principles thereof) and (b) with respect to all other matters relating to the Plan and Awards, the internal laws of the State of New York (without reference to conflict of law principles thereof). Arbitration will be conducted, to the extent applicable, per the provisions in the Plan.

12. Data Privacy and Sharing . As a condition of the granting of the Award, the Participant acknowledges and agrees that it is necessary for some of the Participant’s personal identifiable information to be provided to certain employees of the Company, the third party data processor that administers the Plan and the Company’s designated third party broker in the United States. These transfers will be made pursuant to a contract that requires the processor to provide adequate levels of protection for data privacy and security interests in accordance with the EU Data Privacy Directive 95/46 EC and the implementing legislation of the Participant’s home country. By accepting the Award, the Participant acknowledges having been informed of the processing of the Participant’s personal identifiable information described in the preceding paragraph and consents to the Company collecting and transferring to the Company’s Total Rewards Department or Shareholder Services Department, and its independent benefit plan administrator and third party broker, the Participant’s personal data that are necessary to administer the Award and the Plan. The Participant understands that his or her personal information may be transferred, processed and stored outside of the Participant’s home country in a country that may not have the same data protection laws as his or her home country, for the purposes mentioned in this Award.

 

Terms for RS-RSUs – 2016 Plan    - 5 -   


This Award, including any Award Notice delivered to the Participant and any other documents expressly referenced in this Award contain all of the provisions applicable to the Award and no other statements, documents or practices may modify, waive or alter such provisions unless expressly set forth in writing, signed by an authorized officer of the Company and delivered to the Participant.

The Company has caused this Award to be executed by one of its authorized officers as of the date of grant.

ADIENT PLC

[Placeholder for signature]

Neil E. Marchuk

Executive Vice President - Human Resources

 

Terms for RS-RSUs – 2016 Plan    - 6 -   

Exhibit 10.11

ADIENT PLC

PERFORMANCE UNIT AWARD

Grant - Terms for Performance Units

 

Participant Name:

  

Grant Date:

  

Number of Performance Units:

  

Performance Period:

  

Performance Goals:

  

Units Settled in Cash (check box if applies):

    

Dividend Equivalents Settled in Cash (check box if applies):

    

Adient plc has adopted the 2016 Omnibus Incentive Plan to permit awards of performance units to be made to certain key employees of the Company or any Affiliate. The Company desires to provide incentives and potential rewards for future performance by the employee by providing the Participant with a means to acquire or to increase his or her proprietary interest in the Company’s success.

Definitions . Capitalized terms used in this Award have the following meanings:

 

(a) “Award” means this grant of Performance Units.

 

(b) “Award Notice” means an Award notification (if any) delivered to the Participant in connection with this Award.

 

(c) “Company” means Adient plc or any successor thereto.

 

(d) “Inimical Conduct” means any of the following as determined by the Administrator in its sole discretion: (i) any act or omission that is inimical to the best interests of the Company or any Affiliate as determined by the Administrator, (ii) violation of any employment, non-compete, confidentiality or other agreement in effect with the Company or any Affiliate, or the Company’s or an Affiliate’s code of ethics, as then in effect, (iii) conduct rising to the level of gross negligence or willful misconduct in the course of employment with the Company or an Affiliate, (iv) commission of an act of dishonesty or disloyalty involving the Company or an Affiliate, or taking any action which damages or negatively reflects on the reputation of the Company or an Affiliate, (v) failure to comply with applicable laws relating to trade secrets, confidential information or unfair competition or a violation of any other federal, state or local law in connection with the Participant’s employment or service, or (vi) breach of any fiduciary duty to the Company or an Affiliate.

 

(e) “Participant” means the individual selected to receive this Award.

 

(f) “Performance Unit” or “Unit” means the right to receive a payment, in cash or Shares, equal to the Fair Market Value of one Share, to the extent the Performance Goals specified above, or in any Award Notice or Summary of Terms and Conditions delivered to the Participant, are achieved.

 

(g) “Plan” means the Adient plc 2016 Omnibus Incentive Plan, as may be amended from time to time.

 

(h) “Share” means an ordinary share of the Company.

Other capitalized terms used in this Award have the meanings given in the Plan.


The parties agree as follows:

1. Grant of Award . The Company hereby grants to the Participant an award of Performance Units on the date and with respect to the number of Units specified above or in any Award Notice. The Award is subject to the terms and conditions set forth herein and in the Plan, a copy of which has been delivered to the Participant, and which is made a part of this Award. [In addition, for purposes of qualifying the Award as performance-based compensation under Section 162(m) of the Code, the Award is contingent on shareholder approval of the material terms of the performance goals under the Plan].

2. Units Earned . At the end of the performance period indicated above or in any Award Notice, the Participant shall earn the number of Units indicated above or in any Award Notice to the extent the Performance Goals set forth above or in any Award Notice or Summary of Terms and Conditions delivered to the Participant.

3. Dividend Equivalent Units . Any cash dividends or other distributions paid or delivered with respect to the Shares for which the record date occurs on or before the settlement of the Performance Units under Section 4 below will result in a credit to a bookkeeping account for the benefit of the Participant. The credit will be equal to the dividends or other distributions that would have been paid with respect to the Shares subject to the Performance Units had such Shares been outstanding. The account will be converted into and settled in additional Shares issued under the Plan at the same time as the Performance Units are settled under Section 4 below unless it is indicated above or in any Award Notice that the account will be paid to the Participant in cash at such time. Such account will be subject to the same terms and conditions (including Performance Goals and risk of forfeiture) as the Performance Units to which the dividends or other distributions relate.

4. Settlement of Units . Subject to any applicable deferral election under the Adient US LLC Executive Deferred Compensation Plan (or any successor plan) and to Section 7 below, the Units that have been earned at the end of the performance period shall be settled by payment of one Share per whole Unit unless it is indicated above or in any Award Notice that the Units will be settled through payment of cash, in which case the Units that have been earned will be settled through payment of cash equal to the Fair Market Value of one Share per whole Unit, in each case within 90 days following the end of the performance period and upon payment in full of all taxes due with respect to such Units. Notwithstanding the foregoing, if this Award provides that the Units will be settled in cash, but the Company has satisfied all registration, qualification or other legal requirements necessary to permit the settlement of the Units in Shares in the Participant’s jurisdiction without adverse legal, tax, financial or accounting consequences to the Company or its Affiliates, then the Units will instead be settled in Shares and the Participant will have no right to receive cash.

5. Alienation of Award . The Participant (or beneficiary) shall not have any right to assign, transfer, sell, pledge or otherwise encumber this Award.

6. No Voting Rights . The Participant shall not have any voting rights with respect to the number of Shares underlying the Units until such Shares have been earned and issued.

7. Termination of Employment – Risk of Forfeiture.

 

  a. Retirement, Death or Disability . If, prior to the settlement of the Units, the Participant’s employment with the Company and its Affiliates terminates due to Retirement on or after the last day of the calendar year following the calendar year in which the Award of Units is made, or due to death or Disability, in each case at a time when the Participant’s employment could not have been terminated for Cause, then the Participant shall be eligible to earn a number of Units at the end of the performance period based on actual performance but prorated based on the number of days of employment during the performance period.

 

Terms for Performance Units – 2016 Plan    - 2 -   


Notwithstanding the foregoing, if the Participant engages in Inimical Conduct, as determined by the Administrator, the Participant’s right to receive any Units shall automatically be forfeited as of the date of the Administrator’s determination.

 

  b. Other Termination. If the Participant’s employment terminates for any reason not described above prior to the settlement of the Units, then this Award shall automatically be forfeited in its entirety immediately upon such termination of employment. The Company may suspend payment or delivery of Shares (without liability for interest thereon) pending the Committee’s determination of whether the Participant’s employment was or should have been terminated for Cause or whether the Participant has engaged in Inimical Conduct.

8. Withholding. The Participant agrees to remit to the Company any foreign, U.S. federal, state and/or local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to the Units or the issuance of Shares under this Award. Unless the Company otherwise determines, the Company will satisfy any withholding obligations in connection with this Award by withholding from cash or Shares otherwise payable or issuable under this Award in the amount needed to satisfy any withholding obligations; provided that, in the case of Shares, the amount withheld may not exceed the Participant’s minimum statutory tax withholding obligations associated with the transaction to the extent needed for the Company and its Affiliates to avoid an accounting charge until Accounting Standards Update 2016-09 applies to the Company, after which time the amount withheld may not exceed the total maximum statutory tax rates associated with the transaction. Alternatively, the Company may require the Participant to pay to the Company, in cash, promptly on demand, amounts sufficient to satisfy such tax obligations or make other arrangements satisfactory to the Company regarding the payment to the Company of the aggregate amount of any such tax obligations, or the Company may withhold from cash or other property payable or issuable to the Participant or from Shares no longer subject to restrictions in the amount needed to satisfy any withholding obligations.

9. No Claim for Forfeiture . Neither the Award nor any benefit accruing to the Participant from the Award will be considered to be part of the Participant’s normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments. Notwithstanding anything to the contrary in this Award, in no event may the Award or any benefit accruing to the Participant from the Award be considered as compensation for, or relating in any way to, past services for the Company or any Affiliate, nor shall the Participant have at any time a legally binding right to compensation under this Award unless and until the Committee approves, in its discretion, the number of Units earned at the completion of the performance period. In consideration of the Award, no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from termination of the Participant’s employment by the Company or any Affiliate (for any reason whatsoever and whether or not in breach of local labor laws) and the Participant irrevocably releases the Company and its Affiliates from any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the grant, the Participant shall have been deemed irrevocably to have waived any entitlement to pursue such claim.

10. Electronic Delivery . The Company or its Affiliates may, in its or their sole discretion, decide to deliver any documents related to current or future participation in the Plan or related to this Award by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. The Participant hereby agrees that all on-line acknowledgements shall have the same force and effect as a written signature.

 

Terms for Performance Units – 2016 Plan    - 3 -   


11. Securities Compliance. The Company may place a legend or legends upon the certificates for Shares issued under the Plan and may issue “stop transfer” instructions to its transfer agent in respect of such Shares as it determines to be necessary or appropriate to (a) prevent a violation of, or to obtain an exemption from, the registration requirements of the Securities Act of 1933, as amended, applicable state securities laws or other legal requirements, or (b) implement the provisions of the Plan, this Award or any other agreement between the Company and the Participant with respect to such Shares.

12. Successors. All obligations of the Company under this Award shall be binding on any successor to the Company. The terms of this Award and the Plan shall be binding upon and inure to the benefit of the Participant and his or her heirs, executors, administrators or legal representatives.

13. Legal Compliance. The granting of this Award and the issuance of Shares under this Award shall be subject to all applicable laws, rules, and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required.

14. Governing Law; Arbitration. This Award and the rights and obligations hereunder shall be governed by and construed in accordance with, except to the extent preempted by other applicable laws (a) with respect to the corporate law requirements applicable to the Company, the validity and authorization of the issuance of Shares under the Plan and similar matters, the internal laws of Ireland (without reference to conflict of law principles thereof) and (b) with respect to all other matters relating to the Plan and Awards, the internal laws of the State of New York (without reference to conflict of law principles thereof). Arbitration will be conducted, to the extent applicable, per the provisions in the Plan.

15. Data Privacy and Sharing . As a condition of the granting of the Award, the Participant acknowledges and agrees that it is necessary for some of the Participant’s personal identifiable information to be provided to certain employees of the Company, the third party data processor that administers the Plan and the Company’s designated third party broker in the United States. These transfers will be made pursuant to a contract that requires the processor to provide adequate levels of protection for data privacy and security interests in accordance with the EU Data Privacy Directive 95/46 EC and the implementing legislation of the Participant’s home country. By accepting the Award, the Participant acknowledges having been informed of the processing of the Participant’s personal identifiable information described in the preceding paragraph and consents to the Company collecting and transferring to the Company’s Total Rewards Department or Shareholder Services Department, and its independent benefit plan administrator and third party broker, the Participant’s personal data that are necessary to administer the Award and the Plan. The Participant understands that his or her personal information may be transferred, processed and stored outside of the Participant’s home country in a country that may not have the same data protection laws as his or her home country, for the purposes mentioned in this Award.

This Award, including the Summary of Terms and Conditions and any Award Notice delivered to the Participant, and any other documents expressly referenced in this Award contain all of the provisions applicable to the Award and no other statements, documents or practices may modify, waive or alter such provisions unless expressly set forth in writing, signed by an authorized officer of the Company and delivered to the Participant.

 

Terms for Performance Units – 2016 Plan    - 4 -   


The Company has caused this Award to be executed by one of its authorized officers as of the date of grant.

ADIENT PLC

[Placeholder for signature]

Neil E. Marchuk

Executive Vice President - Human Resources

 

Terms for Performance Units – 2016 Plan    - 5 -   

Exhibit 10.13

ADIENT US LLC

RETIREMENT RESTORATION PLAN

As Amended and Restated Effective November 7, 2016

ARTICLE 1.

PURPOSE AND DURATION

Section 1.1. Purpose . The purpose of this Retirement Restoration Plan is to (a) provide retirement benefits to certain participants in the Company’s savings plans, including those whose benefits under said plans are limited by reason of Code Section 401(a)(17), and/or by reason of the election of such employees to defer income or reduce compensation pursuant to this Plan or to defer annual incentive payments pursuant to the Adient US LLC Executive Deferred Compensation Plan, and (b) govern the treatment of certain liabilities transferred from the Johnson Controls Retirement Restoration Plan to this Plan with respect to those Company employees who had account balances or deferral elections in effect under such plan immediately prior to the Effective Date.

This Plan is completely separate from the tax-qualified plans maintained by the Company and is not funded or qualified for special tax treatment under the Code. The Plan is intended to be an unfunded plan covering a select group of management and highly compensated employees for purposes of ERISA.

Section 1.2. Duration of the Plan . The Plan is effective on the Effective Date. The Plan shall remain in effect until terminated pursuant to Article 8.

ARTICLE 2.

DEFINITIONS AND CONSTRUCTION

Section 2.1. Definitions . Wherever used in the Plan, the following terms shall have the meanings set forth below and, where the meaning is intended, the initial letter of the word is capitalized:

(a) “Account” means the record keeping account or accounts maintained to record the interest of each Participant under the Plan. An Account is established for record keeping purposes only and not to reflect the physical segregation of assets on the Participant’s behalf, and may consist of such subaccounts or balances as the Administrator may determine to be necessary or appropriate. Effective on the Effective Date, each Participant shall have a beginning Account balance equal to the balance credited to a Participant under the Prior Plan as of immediately prior to the Effective Date.

(b) “Administrator” means the Employee Benefits Policy Committee of Adient plc.

 


(c) “Affiliate” means each entity that is required to be included in the Company’s controlled group of corporations within the meaning of Code Section 414(b), or that is under common control with the Company within the meaning of Code Section 414(c); provided that for purposes of determining when a Participant has incurred a Separation from Service, the phrase “at least 50 percent” shall be used in place of “at least 80 percent” in each place that phrase appears in the regulations issued thereunder.

(d) “Allocation Period” means such period of time (for example, the calendar year or a payroll period) for which an allocation of employer contributions is made under the Savings Plan.

(e) “Annual Incentive Plan” means the Adient plc Annual Incentive Performance Plan as from time to time amended and in effect and any successor to such plan maintained by the Company. In addition, with respect to calendar year 2016, the term “Annual Incentive Plan” shall include the Johnson Controls International plc Annual Incentive Plan for those Participants who were covered under the Prior Plan immediately prior to the Spin Date.

(f) “Beneficiary” means the person(s) or entity(ies) entitled to receive the vested balance of the Participant’s Account following the Participant’s death, as determined pursuant to Section 6.2 hereof.

(g) “Board” means the Board of Directors of Adient plc.

(h) “Code” means the Internal Revenue Code of 1986, as interpreted by regulations and rulings issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Code shall be deemed to include reference to any successor provision thereto.

(i) “Committee” means the Compensation Committee of the Board.

(j) “Company” means Adient US LLC and its successors as provided in Article 13.

(k) “Effective Date” means October 31, 2016.

(l) “ERISA” means the Employee Retirement Income Security Act of 1974, as interpreted by regulations and rulings issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of ERISA shall be deemed to include reference to any successor provision thereto.

(m) “Exchange Act” means the Securities Exchange Act of 1934, as interpreted by regulations and rules issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Exchange Act shall be deemed to include reference to any successor provision thereto.

(n) “Fair Market Value” means with respect to a Share, except as otherwise provided herein, the closing sales price on the New York Stock Exchange (or such other national securities exchange that is the primary exchange on which the Shares are listed) as of 4:00 p.m. EST on the date in question (or the immediately preceding trading day if the date in question is not a trading day), and with respect to any other property, such value as is determined by the Administrator.

 

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(o) “Investment Options” means the Share Unit Account and any other options made available by the Administrator, which shall be used for the purpose of measuring hypothetical investment experience attributable to a Participant’s Account.

(p) “Participant” means an employee of the Company or an Affiliate who is eligible to participate in the Savings Plan and has been selected by the Committee to participate in the Plan. At the time of selecting an employee for participation herein, the Committee shall specify whether such individual is to participate in Appendix A or Appendix B. “Participant” shall also mean an employee who participated in the Prior Plan as of immediately prior to the Effective Date and who is employed by the Company or one of its Affiliates on the Effective Date. The Committee shall limit the foregoing group of eligible employees to a select group of management and highly compensated employees, as determined by the Committee in accordance with ERISA. Where the context so requires, a Participant also means a former employee entitled to receive a benefit hereunder.

(q) “Prior Plan” means the Johnson Controls International plc Retirement Restoration Plan, as in effect immediately prior to the Effective Date.

(r) “Savings Plan” means the Adient US LLC Savings and Investment (401k) Plan, a defined contribution plan, and any successor to such plan maintained by the Company.

(s) “Separation from Service” means a Participant’s cessation of service for the Company and all Affiliates within the meaning of Code Section 409A, including the following rules:

 

  (1) If a Participant takes a leave of absence from the Company or an Affiliate for purposes of military leave, sick leave or other bona fide leave of absence, the Participant’s employment will be deemed to continue for the first six (6) months of the leave of absence, or if longer, for so long as the Participant’s right to reemployment is provided by either by statute or by contract; provided that if the leave of absence is due to the Participant’s medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of six (6) months or more, and such impairment causes the Participant to be unable to perform the duties of his or her position with the Company or an Affiliate or a substantially similar position of employment, then the leave period may be extended for up to a total of twenty-nine (29) months. If the period of the leave exceeds the time periods set forth above and the Participant’s right to reemployment is not provided by either statute or contract, the Participant will be considered to have incurred a Separation from Service on the first day following the end of the time periods set forth above.

 

  (2) A Participant will be presumed to have incurred a Separation from Service when the level of bona fide services performed by the Participant for the Company and its Affiliates permanently decreases to a level that equal to twenty percent (20%) or less of the average level of services performed by the Participant for the Company and its Affiliates during the immediately preceding thirty-six (36) month period (or such lesser period of service).

 

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  (3) The Participant will be presumed not to have incurred a Separation from Service while the Participant continues to provide bona fide services to the Company or an Affiliate in any capacity (whether as an employee or independent contractor) at a level that at least fifty percent (50%) of the average level of services performed by the Participant for the Company and its Affiliates during the immediately preceding 36 month period (or such lesser period of service).

(t) “Share” means an ordinary share of Adient plc, and where the context so requires, an ordinary share of Johnson Controls International plc.

(u) “Share Unit Account” means the portion of the Participant’s Account that is deemed invested in Shares.

(v) “Share Units” means the hypothetical Shares that are credited to the Share Unit Accounts in accordance with Section 3.3.

(w) “Spouse” means the person to whom a Participant is lawfully married as recognized under U.S. federal law.

(x) “Valuation Date” means each day when the United States financial markets are open for business, as of which the Administrator will determine the value of each Account and will make allocations to Accounts.

Section 2.2. Construction . Wherever any words are used in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used in the singular or the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. Titles of articles and sections are for general information only, and the Plan is not to be construed by reference to such items.

Section 2.3. Severability . In the event any provision of the Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

ARTICLE 3.

ADMINISTRATION

Section 3.1. General . The Committee shall have overall discretionary authority with respect to administration of the Plan, provided that the Administrator shall have discretionary authority and responsibility for the general operation and daily administration of the Plan and to decide claims and appeals as specified herein. If at any time the Committee shall not be in existence, then the administrative functions of the Committee shall be assumed by the Board (with the assistance of the Administrator), and any references herein to the Committee shall be deemed to include references to the Board.

 

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Section 3.2. Authority and Responsibility . In addition to the authority specifically provided herein, the Committee and the Administrator shall have the discretionary authority to take any action or make any determination deemed necessary for the proper administration of the Plan with regard to the respective duties of each, including but not limited to the power and authority to: (a) prescribe rules and regulations for the administration of the Plan; (b) prescribe forms (including electronic forms) for use with respect to the Plan; (c) interpret and apply all of the Plan’s provisions, reconcile inconsistencies or supply omissions in the Plan’s terms; (d) make appropriate determinations, including factual determinations, and calculations; and (e) prepare all reports required by law. Any action taken by the Committee shall be controlling over any contrary action of the Administrator. The Committee and the Administrator may delegate their ministerial duties to third parties and to the extent of such delegation, references to the Committee or Administrator hereunder shall mean such delegates, if any.

Section 3.3. Decisions Binding . The Committee’s and the Administrator’s determinations shall be final and binding on all parties with an interest hereunder, unless determined by a court to be arbitrary and capricious.

Section 3.4. Procedures for Administration . The Committee’s determinations must be made by not less than a majority of its members present at the meeting (in person or otherwise) at which a quorum is present, or by written majority consent, which sets forth the action, is signed by the members of the Committee and filed with the minutes for proceedings of the Committee. A majority of the entire Committee shall constitute a quorum for the transaction of business. Service on the Committee shall constitute service as a director of the Company so that the Committee members shall be entitled to indemnification, limitation of liability and reimbursement of expenses with respect to their Committee services to the same extent that they are entitled under the Company’s limited liability company agreement (or equivalent governing documents), and the laws of the State of Michigan and any other applicable laws for their services as directors of the Company. The Administrator’s determinations shall be made in accordance with procedures it establishes.

Section 3.5. Restrictions to Comply with Applicable Law . All transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act. The Committee and the Administrator shall administer the Plan so that transactions under the Plan will be exempt from or comply with Section 16 of the Exchange Act, and shall have the right to restrict or rescind any transaction, or impose other rules and requirements, to the extent it deems necessary or desirable for such exemption or compliance to be met.

Section 3.6. Administrative Expenses . Costs of establishing and administering the Plan will be paid by the Company and its participating Affiliates.

 

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Section 3.7. Accelerated Vesting . Notwithstanding anything to the contrary herein, if a Participant’s employment with the Company or any of its Affiliates terminates (including as a result of the Participant’s employer ceasing to be an Affiliate) in connection with a sale transaction affecting such employer, then the Participant shall become fully vested in his or her benefits hereunder, unless otherwise determined by the Committee (with respect to Participants who are officers of Adient plc) or by an executive officer of the Company (with respect to Participants who are not officers of Adient plc) prior to the date of such termination of employment. In addition, the Committee (with respect to Participants who are officers of Adient plc) and an executive officer of the Company (with respect to Participants who are not officers of Adient plc) shall have the discretion to vest any Participant in his or her benefits hereunder, in whole or in part, upon the Participant’s termination of employment from the Company and its Affiliates in any other circumstances.

ARTICLE 4.

SAVINGS PLAN SUPPLEMENT AND HYPOTHETICAL INVESTMENT OPTIONS

Section 4.1. Eligibility for and Amount of Benefits . Participants shall be eligible for benefits in accordance with the terms of the applicable Appendix.

Section 4.2. Investment Election . Amounts credited to a Participant’s Account shall reflect the investment experience of the Investment Options selected by the Participant. The Participant may make an initial investment election at the time of enrollment in the Plan.

The investment elections in effect for a Participant under the Prior Plan, if any, as of immediately prior to the Effective Date, shall apply to the Participant’s Account hereunder on the Effective Date, without action by the Participant; provided that (a) a Participant’s investment election with respect to an Investment Option that is not offered under the Savings Plan on the Effective Date shall be automatically changed to the default fund specified for the Savings Plan, and (b) a Participant’s election with respect to Share Units will be automatically cancelled on the Effective Date, and such investment election shall be automatically changed to the default fund specified for the Savings Plan. A Participant must affirmatively elect, after the Effective Date, to allocate contributions into, or re-allocate his or her Account into, Share Units as they exist thereafter.

A Participant may also elect to reallocate the balance in his or her Account, and may elect to allocate any future deferrals, among the various Investment Options from time to time. Such investment elections shall remain in effect until changed by the Participant. All investment elections shall become effective as soon as practicable after receipt of such election, and must be made in the form and manner and within such time periods as the Administrator may prescribe in order to be effective. In the absence of an effective election, the Participant’s Account shall be deemed invested in the default fund specified for the Savings Plan. Deferrals will be deemed invested in an Investment Option as of the date on which the deferrals are allocated under the Plan as described in the Appendices.

On each Valuation Date, the Administrator or its delegate shall credit the deemed investment experience with respect to the selected Investment Options to each Participant’s Account.

Notwithstanding anything herein to the contrary, the Company retains the right to allocate actual amounts hereunder without regard to a Participant’s request.

 

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Section 4.3. Valuation of Share Unit Account . When any amounts are to be allocated to a Share Unit Account (whether in the form of deferrals or amounts that are deemed transferred from another Investment Option), such amount shall be converted to whole and fractional Share Units, by dividing the amount to be allocated by the Fair Market Value of a Share on the effective date of such allocation. If any dividends or other distributions are paid on Shares while a Participant has Share Units credited to his or her Account, such Participant shall be credited with a dividend award equal to the amount of the cash dividend paid or Fair Market Value of other property distributed on one Share, multiplied by the number of Share Units credited to his or her Share Unit Account on the date the dividend is declared. The dividend award shall be converted into additional Share Units as provided above using the Fair Market Value of a Share on the date the dividend is paid or distributed. Any other provision of this Plan to the contrary notwithstanding, if a dividend is declared on Shares in the form of a right or rights to purchase shares of capital stock of the Company or any entity acquiring the Company, no additional Share Units shall be credited to the Participant’s Share Unit Account with respect to such dividend, but each Share Unit credited to a Participant’s Share Unit Account at the time such dividend is paid, and each Share Unit thereafter credited to the Participant’s Share Unit Account at a time when such rights are attached to Shares, shall thereafter be valued as of any point in time on the basis of the aggregate of the then Fair Market Value of one Share plus the then Fair Market Value of such right or rights then attached to one Share.

With respect to Share Units credited as part of the opening balance of a Participant’s Account hereunder on the Effective Date, such Share Units shall be credited as a combination of Johnson Controls International plc ordinary shares and Adient plc ordinary shares, in accordance with the Employee Matters Agreement by and between Johnson Controls, Inc. and Adient plc. Thereafter, the Share Units relating to Johnson Controls International plc ordinary shares shall be allocated to a separate subaccount, which shall be subject to the terms and conditions of this Plan (including the right to receive additional Share Units with respect to Johnson Controls International plc ordinary shares whenever a dividend is declared on Johnson Controls International plc ordinary shares), except that a Participant may only elect to re-allocate out of the subaccount relating to Johnson Controls International plc ordinary shares.

In the event of any merger, share exchange, reorganization, consolidation, recapitalization, stock dividend, stock split or other change in corporate structure of Adient plc (or, if applicable, Johnson Controls International plc) affecting Shares, the Committee may make appropriate equitable adjustments with respect to the Share Units credited to the Share Unit Account of each Participant, including without limitation, adjusting the date as of which such units are valued and/or distributed, as the Committee determines is necessary or desirable to prevent the dilution or enlargement of the benefits intended to be provided under the Plan.

Section 4.4. Securities Law Restrictions . Notwithstanding anything to the contrary herein, all elections under this Article by a Participant who is subject to Section 16 of the Exchange Act are subject to review by the Administrator prior to implementation. The Administrator may restrict additional transactions, rescind transactions, or impose other rules and procedures, to the extent deemed desirable by the Administrator in order to comply with the Exchange Act, including, without limitation, application of the review and approval provisions of this Section 4.4 to Participants who are not subject to Section 16 of the Exchange Act.

 

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Section 4.5. No Shareholder Rights With Respect to Share Units . Participants shall have no rights as a stockholder pertaining to Share Units credited to their Accounts.

Section 4.6. Accounts are For Record Keeping Purposes Only . The Accounts and the record keeping procedures described herein serve solely as a device for determining the amount of benefits accumulated by a Participant under the Plan, and shall not constitute or imply an obligation on the part of the Company or any Affiliate to fund such benefits.

Section 4.7. Payment of Benefits . Upon a Participant’s Separation from Service for any reason, the Participant shall be entitled to payment of the vested balance of the Participant’s Account in cash in the manner specified in the applicable Appendix.

Section 4.8. Death Benefit .

(a) In the event of the Participant’s death prior to receiving all payments due under this Article 4, the vested balance of the Participant’s Account shall be paid to the Participant’s Beneficiary in a cash lump sum in the first calendar quarter of the year or the third calendar quarter of the year, whichever first occurs after the Participant’s death. Notwithstanding the foregoing, if the Administrator cannot make payment at such time because the Administrator has not received all information needed to authorize such payment (such as a copy of the Participant’s death certificate), then the Administrator shall make payment to the Beneficiary as soon as practicable after it has received all information necessary to make such payment, provided that payment in all events must be made by December 31 of the year following the year of the Participant’s death in order to avoid additional taxes under Code Section 409A.

(b) Each Participant may designate a Beneficiary in such form and manner and within such time periods as the Administrator may prescribe. Notwithstanding the foregoing, the beneficiary designation in effect under the Prior Plan on the date prior to the Effective Date shall automatically apply for purposes of this Plan on the Effective Date. A Participant can change his or her beneficiary designation at any time, provided that each beneficiary designation shall revoke the most recent designation, and the last designation received by the Administrator (or its delegate) while the Participant was alive shall be given effect. If a Participant designates a Beneficiary without providing in the designation that the beneficiary must be living at the time of each distribution, the designation shall vest in the Beneficiary all of the distribution whether payable before or after the Beneficiary’s death, and any distributions remaining upon the Beneficiary’s death shall be made to the Beneficiary’s estate. In the event there is no valid beneficiary designation in effect at the time of the Participant’s death, or in the event the Participant’s designated Beneficiary does not survive the Participant, or in the event that the beneficiary designation provides that the Beneficiary must be living at the time of each distribution and such designated Beneficiary does not survive to a distribution date, the Participant’s estate will be deemed the Beneficiary and will be entitled to receive payment. If a Participant designates his or her Spouse as a Beneficiary, such beneficiary designation automatically shall become null and void on the date of the Participant’s divorce or legal separation from such Spouse, provided the Administrator has notice of such divorce or legal separation prior to payment.

 

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ARTICLE 5.

ADDITIONAL PAYMENT PROVISIONS

Section 5.1. Acceleration of Payment . Notwithstanding the foregoing,

(a) If an amount deferred under this Plan is required to be included in income under Code Section 409A prior to the date such amount is actually distributed, a Participant shall receive a distribution, in a lump sum within ninety (90) days after the date the Plan fails to meet the requirements of Code Section 409A, of the amount required to be included in the Participant’s income as a result of such failure.

(b) If an amount under the Plan is required to be immediately distributed in a lump sum under a domestic relations order within the meaning of Code Section 414(p)(1)(B), it may be distributed according to the terms of such order, provided the Participant holds the Committee and the Administrator harmless with respect to such distribution. The Plan shall not distribute amounts required to be distributed under a domestic relations order other than in the limited circumstance specifically stated herein.

Section 5.2. Delay in Payment . Notwithstanding the foregoing,

(a) If a distribution required under the terms of this Plan would jeopardize the ability of the Company or of an Affiliate to continue as a going concern, the Company or the Affiliate shall not be required to make such distribution. Rather, the distribution shall be delayed until the first date that making the distribution does not jeopardize the ability of the Company or of an Affiliate to continue as a going concern. Any distribution delayed under this provision shall be treated as made on the date specified under the terms of this Plan.

(b) If a distribution will violate the terms of Section 16(b) of the Exchange Act or other U.S. federal securities laws, or any other applicable law, then the distribution shall be delayed until the earliest date on which making the distribution will not violate such law.

ARTICLE 6.

NON-ALIENATION OF PAYMENTS

Except as specifically provided herein, benefits payable under the Plan shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefit payment, whether currently or thereafter payable, shall not be recognized by the Administrator or the Company. Any benefit payment due hereunder shall not in any manner be liable for or subject to the debts or liabilities of any Participant or other person entitled thereto. If any such person shall attempt to alienate, sell, transfer, assign, pledge or encumber any benefit payments to be made to that person under the Plan or any part thereof, or if by reason of such person’s bankruptcy or other event happening at any time, such payments would devolve upon anyone else or would not be enjoyed by such person, then the Administrator, in its discretion, may terminate such person’s interest in any such benefit payment, and hold or apply it to or for the benefit of that person, the spouse, children or other dependents thereof, or any of them, in such manner as the Administrator deems proper.

 

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ARTICLE 7.

LIMITATION OF RIGHTS

Section 7.1. No Right to Employment . Participation in this Plan, or any modifications thereof, or the payments of any benefits hereunder, shall not be construed as giving to any person any right to be retained in the service of the Company or any Affiliate, limiting in any way the right of the Company or any Affiliate to terminate such person’s employment at any time, evidencing any agreement or understanding that the Company or any Affiliate will employ such person in any particular position or at any particular rate of compensation or guaranteeing such person any right to receive any other form or amount of remuneration from the Company or any Affiliate.

Section 7.2. No Right to Benefits .

(a) Unsecured Claim . The right of a Participant, his or her Spouse or his or her Beneficiary to receive a distribution hereunder shall be an unsecured claim, and neither the Participant, his or her Spouse nor any Beneficiary shall have any rights in or against any amount credited to his or her Account or any other specific assets of the Company or an Affiliate. The right of a Participant or beneficiary to the payment of benefits under this Plan shall not be assigned, encumbered, or transferred, except as permitted under Section 4.8. The rights of a Participant hereunder are exercisable during the Participant’s lifetime only by him or her or his or her guardian or legal representative.

(b) Contractual Obligation . The Company or an Affiliate may authorize the creation of a trust or other arrangements to assist it in meeting the obligations created under the Plan, subject to the restrictions on such funding such trust or arrangement imposed by Code Section 409A(b)(2) or (3). However, any liability to any person with respect to the Plan shall be based solely upon any contractual obligations that may be created pursuant to the Plan. No obligation of the Company or an Affiliate shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company or any Affiliate. Nothing contained in this Plan and no action taken pursuant to its terms shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company or an Affiliate and any Participant, Spouse or Beneficiary, or any other person.

ARTICLE 8.

AMENDMENT OR TERMINATION

Section 8.1. Amendment . The Committee may at any time amend the Plan, including but not limited to modifying the terms and conditions applicable to (or otherwise eliminating) deferrals to be made on or after the amendment date to the extent not prohibited by Code Section 409A; provided, however , that no amendment may reduce or eliminate any vested Account balance accrued under Article 4 to the date of such amendment (except as such Account balance may be reduced as a result of investment losses allocable to such account) without a Participant’s consent except as otherwise specifically provided herein; and provided further that the Board must approve any amendment that is required to be approved by the Board by any applicable law or the listing requirements of the national securities exchange upon which the ordinary shares of Adient plc are then traded. In addition, the Administrator may at any time amend the Plan to make administrative or ministerial changes or changes necessary to comply with applicable law.

 

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Section 8.2. Termination . The Committee may terminate the Plan in accordance with the following provisions. Upon termination of the Plan, any deferral elections then in effect shall be cancelled to the extent permitted by Code Section 409A. Upon termination of the Plan, the Committee may authorize the payment of all vested Account balances under the Plan in a single lump sum payment without regard to any distribution election then in effect, only in the following circumstances:

 

  (1) The Plan is terminated within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1)(A). In such event, the single lump sum payment must be distributed by the latest of: (A) the last day of the calendar year in which the Plan termination occurs, (B) the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (C) the first calendar year in which payment is administratively practicable.

 

  (2) The Plan is terminated at any other time, provided that such termination does not occur proximate to a downturn in the financial health of the Company or an Affiliate, and all other plans required to be aggregated with this Plan under Code Section 409A are also terminated and liquidated. In such event, the single sum payment shall be paid no earlier than twelve (12) months (and no later than twenty-four (24) months) after the date of the Plan’s termination. Notwithstanding the foregoing, any payment that would otherwise be paid during the twelve (12)-month period beginning on the Plan termination date pursuant to the terms of the Plan shall be paid in accordance with such terms. In addition, the Company or any Affiliate shall be prohibited from adopting a similar arrangement within three (3) years following the date of the Plan’s termination.

Section 8.3. Modification of Savings Plan . Nothing herein shall be construed in any way to limit the right of the Company to amend or modify the Savings Plan.

ARTICLE 9.

SPECIAL RULES APPLICABLE IN THE EVENT OF A

CHANGE OF CONTROL

Section 9.1. Acceleration of Payments . Notwithstanding any other provision of this Plan, each Participant (or any Spouse or Beneficiary thereof entitled to receive payments hereunder), including Participants (or Spouses or Beneficiaries) receiving installment payments under the Plan, shall receive a lump sum payment in cash of all amounts accumulated in such Participant’s Account within ninety (90) days following a Change of Control.

 

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In determining the amount accumulated in a Participant’s Share Unit Account related to Shares of Adient plc, each Share Unit shall have a value equal to the higher of (a) the highest reported sales price, regular way, of such a Share on the Composite Tape for New York Stock Exchange Listed Stocks (or such other national securities exchange that is the primary exchange on which the Shares are listed) during the sixty-day period prior to the date of the Change of Control and (b) if the Change of Control is the result of a transaction or series of transactions described in Section 9.2(a), the highest price per Share paid in such transaction or series of transactions.

Section 9.2. Definition of a Change of Control . A Change of Control means any of the following events, provided that each such event would constitute a change of control within the meaning of Code Section 409A:

(a) The acquisition by any Person (as defined below) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-five percent (35%) or more of either (1) the then-outstanding Shares of Adient plc (the “Outstanding Adient Ordinary Shares”) or (2) the combined voting power of the then-outstanding voting securities of Adient plc entitled to vote generally in the election of directors (the “Outstanding Adient Voting Securities”); provided, however , that the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from Adient plc, (B) any acquisition by Adient plc, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Adient plc or any Affiliate or (D) any acquisition by any corporation pursuant to a transaction that complies with subsections (c)(1)-(3);

(b) Any time at which individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however , that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Adient plc’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(c) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction, whether by way of scheme of arrangement or otherwise, involving Adient plc or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of Adient plc, or the acquisition of assets or shares of another entity by Adient plc or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Adient Ordinary Shares and the Outstanding Adient Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then-outstanding common or ordinary shares and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of

 

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directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns Adient plc or all or substantially all of Adient plc’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Adient Ordinary Shares and the Outstanding Adient Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Adient plc or an Affiliate or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty-five percent (35%) or more of, respectively, the then-outstanding shares of common or ordinary shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(d) Approval by the shareholders of Adient plc of a complete liquidation or dissolution of Adient plc.

For purposes hereof, the term “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

Section 9.3. Maximum Payment Limitations .

(a) Limit on Payments . Except as provided in subsection (b) below, if any portion of the payments or benefits described in this Plan or under any other agreement with or plan of the Company or an Affiliate (in the aggregate, “Total Payments”), would constitute an “excess parachute payment”, then the Total Payments to be made to the Participant shall be reduced such that the value of the aggregate Total Payments that the Participant is entitled to receive shall be one dollar ($1) less than the maximum amount which the Participant may receive without becoming subject to the tax imposed by Section 4999 of the Code or which the Company may pay without loss of deduction under Section 280G(a) of the Code. The terms “excess parachute payment” and “parachute payment” shall have the meanings assigned to them in Section 280G of the Code, and such “parachute payments” shall be valued as provided therein. Present value shall be calculated in accordance with Section 280G(d)(4) of the Code. Within forty (40) days following delivery of notice by the Company to the Participant of its belief that there is a payment or benefit due the Participant which will result in an excess parachute payment, the Participant and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel selected by the Company’s independent auditors and acceptable to the Participant in his or her sole discretion (which may be regular outside counsel to the Company), which opinion sets forth (1) the amount of the Base Period Income, (2) the amount and present value of Total Payments and (3) the amount and present value of any excess parachute payments determined without regard to the limitations of this Section. As used in this Section, the term “Base Period Income” means an amount equal to the Participant’s “annualized includible compensation for the base period” as defined in Section

 

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280G(d)(1) of the Code. For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code, which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Participant. Such opinion shall be addressed to the Company and the Participant and shall be binding upon the Company and the Participant. If such opinion determines that there would be an excess parachute payment, the payments hereunder that are includible in Total Payments or any other payment or benefit determined by such counsel to be includible in Total Payments shall be reduced or eliminated as specified by the Participant in writing delivered to the Company within thirty days of his or her receipt of such opinion or, if the Participant fails to so notify the Company, then as the Company shall reasonably determine, so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. If such legal counsel so requests in connection with the opinion required by this Section, the Participant and the Company shall obtain, at the Company’s expense, and the legal counsel may rely on in providing the opinion, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Participant. If the provisions of Sections 280G and 4999 of the Code are repealed without succession, then this Section shall be of no further force or effect.

(b) Employment Contract Governs . The provisions of subsection (a) above shall not apply to a Participant whose employment is governed by an employment contract that provides for Total Payments in excess of the limitation described in subsection (a) above.

ARTICLE 10.

ERISA PROVISIONS

Section 10.1. Claims Procedures.

(a) Initial Claim . If a Participant, Spouse or Beneficiary (the “claimant”) believes that he or she is entitled to a benefit under the Plan that is not provided, the claimant or his or her legal representative shall file a written claim for such benefit with the Administrator within ninety (90) days of the date the payment that is in dispute should have been made. The Administrator shall review the claim and render a decision within ninety (90) days following the receipt of the claim; provided that the Administrator may determine that an additional ninety (90) day extension is necessary due to circumstances beyond the Administrator’s control, in which event the Administrator shall notify the claimant prior to the end of the initial period that an extension is needed, the reason therefore, and the date by which the Administrator expects to render a decision. If the claimant’s claim is denied in whole or part, the Administrator shall provide written notice to the claimant of such denial. The written notice shall include the specific reason(s) for the denial; reference to specific Plan provisions upon which the denial is based; a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and a description of the Plan’s review procedures (as set forth in subsection (b)) and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse determination upon review.

 

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(b) Request for Appeal . The claimant has the right to appeal the Administrator’s decision by filing a written appeal to the Administrator within sixty (60) days after the claimant’s receipt of the Administrator’s decision, although to avoid penalties under Code Section 409A, the claimant’s appeal must be filed within one hundred eighty (180) days of the date payment could have been timely made in accordance with the terms of the Plan and pursuant to Regulations promulgated under Code Section 409A. The claimant will have the opportunity, upon request and free of charge, to have reasonable access to and copies of all documents, records and other information relevant to the claimant’s appeal. The claimant may submit written comments, documents, records and other information relating to his or her claim with the appeal. The Administrator will review all comments, documents, records and other information submitted by the claimant relating to the claim, regardless of whether such information was submitted or considered in the initial claim determination. The Administrator shall make a determination on the appeal within sixty (60) days after receiving the claimant’s written appeal; provided that the Administrator may determine that an additional sixty (60)-day extension is necessary due to circumstances beyond the Administrator’s control, in which event the Administrator shall notify the claimant prior to the end of the initial period that an extension is needed, the reason therefor and the date by which the Administrator expects to render a decision. If the claimant’s appeal is denied in whole or part, the Administrator shall provide written notice to the claimant of such denial. The written notice shall include the specific reason(s) for the denial; reference to specific Plan provisions upon which the denial is based; a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claimant’s claim; and a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA. If the claimant does not receive a written decision within the time period(s) described above, the appeal shall be deemed denied on the last day of such period(s).

Section 10.2. ERISA Fiduciary . For purposes of ERISA, the Committee shall be considered the named fiduciary under the Plan and the plan administrator, except with respect to claims and appeals, for which the Administrator shall be considered the named fiduciary.

ARTICLE 11.

TAX WITHHOLDING

The Company or any Affiliate shall have the right to deduct from any deferral or payment made hereunder, or from any other amount due a Participant, the amount of cash sufficient to satisfy the Company’s or Affiliate’s foreign, federal, state or local income tax withholding obligations with respect to such deferral (or vesting thereof) or payment. In addition, if prior to the date of distribution of any amount hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due, the Company may distribute from the Participant’s Account balance the amount needed to pay the Participant’s portion of such tax, plus an amount equal to the withholding taxes due under federal, state or local law resulting from the payment of such FICA tax, and an additional amount to pay the additional income tax at source on wages attributable to the pyramiding of the Code Section 3401 wages and taxes, but no greater than the aggregate of the FICA amount and the income tax withholding related to such FICA tax amount.

 

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ARTICLE 12.

OFFSET

The Company or any Affiliate shall have the right to offset from any amount payable hereunder (at the time such amount would have otherwise been paid) any amount that the Participant owes to the Company or any Affiliate without the consent of the Participant (or his or her Spouse or Beneficiary, in the event of the Participant’s death).

ARTICLE 13.

SUCCESSORS

All obligations of the Company or any Affiliate under the Plan shall be binding on any successor to the Company or such Affiliate, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company or such Affiliate.

ARTICLE 14.

DISPUTE RESOLUTION

Section 14.1. Governing Law . This Plan is intended to be a plan of deferred compensation maintained for a select group of management or highly compensated employees as that term is used in ERISA, and shall be interpreted so as to comply with the applicable requirements thereof. In all other respects, the Plan is to be construed and its validity determined according to the laws of the State of New York, without reference to conflict of law principles thereof, to the extent such laws are not preempted by federal law.

Section 14.2. Limitation on Actions . Any action or other legal proceeding under ERISA with respect to the Plan may be brought only after the claims and appeals procedures of Article 10 are exhausted and only within the period ending on the earlier of (a) one year after the date the claimant receives notice of a denial or deemed denial upon appeal under Section 10.1(b), or (b) the expiration of the applicable statute of limitations period under applicable federal law. Any action or other legal proceeding not adjudicated under ERISA must be arbitrated in accordance with the provisions of Section 14.3.

Section 14.3. Arbitration .

(a) Application . Notwithstanding any employee agreement in effect between a Participant and the Company or any Affiliate, if a Participant, Spouse or Beneficiary brings a claim that relates to benefits under this Plan that is not covered under ERISA, and regardless of the basis of the claim (including but not limited to, actions under Title VII, wrongful discharge, breach of employment agreement, etc.), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association (“AAA”) and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

(b) Initiation of Action . Arbitration must be initiated by serving or mailing a written notice of the complaint to the other party. Normally, such written notice should be provided to the other party within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint. However, this time frame

 

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may be extended if the applicable statute of limitation provides for a longer period of time. If the complaint is not properly submitted within the appropriate time frame, all rights and claims that the complaining party has or may have against the other party shall be waived and void. Any notice sent to the Company shall be delivered to:

Office of General Counsel

Adient US LLC

833 East Michigan Street, Suite 1100

Milwaukee, WI 53202

The notice must identify and describe the nature of all complaints asserted and the facts upon which such complaints are based. Notice will be deemed given according to the date of any postmark or the date of time of any personal delivery.

(c) Compliance with Personnel Policies . Before proceeding to arbitration on a complaint, the Participant, Spouse or beneficiary must initiate and participate in any complaint resolution procedure identified in the Company’s or Affiliate’s personnel policies. If the claimant has not initiated the complaint resolution procedure before initiating arbitration on a complaint, the initiation of the arbitration shall be deemed to begin the complaint resolution procedure. No arbitration hearing shall be held on a complaint until any applicable Company or Affiliate complaint resolution procedure has been completed.

(d) Rules of Arbitration . All arbitration will be conducted by a single arbitrator according to the Employment Dispute Arbitration Rules of the AAA. The arbitrator will have authority to award any remedy or relief that a court of competent jurisdiction could order or grant including, without limitation, specific performance of any obligation created under policy, the awarding of punitive damages, the issuance of any injunction, costs and attorney’s fees to the extent permitted by law, or the imposition of sanctions for abuse of the arbitration process. The arbitrator’s award must be rendered in a writing that sets forth the essential findings and conclusions on which the arbitrator’s award is based.

(e) Representation and Costs . Each party may be represented in the arbitration by an attorney or other representative selected by the party. The Company or Affiliate shall be responsible for its own costs, the AAA filing fee and all other fees, costs and expenses of the arbitrator and AAA for administering the arbitration. The claimant shall be responsible for his or her attorney’s or representative’s fees, if any. However, if any party prevails on a statutory claim which allows the prevailing party costs and/or attorneys’ fees, the arbitrator may award costs and reasonable attorneys’ fees as provided by such statute.

(f) Discovery; Location; Rules of Evidence . Discovery will be allowed to the same extent afforded under the Federal Rules of Civil Procedure. Arbitration will be held at a location selected by the Company. AAA rules notwithstanding, the admissibility of evidence offered at the arbitration shall be determined by the arbitrator who shall be the judge of its materiality and relevance. Legal rules of evidence will not be controlling, and the standard for admissibility of evidence will generally be whether it is the type of information that responsible people rely upon in making important decisions.

 

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(g) Confidentiality . The existence, content or results of any arbitration may not be disclosed by a party or arbitrator without the prior written consent of both parties. Witnesses who are not a party to the arbitration shall be excluded from the hearing except to testify.

 

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APPENDIX A

 

1. Eligibility . This Appendix A covers Participants whom the Committee has selected to be covered hereunder. A Participant shall commence participation hereunder on the date such individual is selected by the Committee for participation in this Appendix A or on the date such individual becomes employed in a position that has been previously approved for participation hereunder by the Committee.

 

2. Savings Plan Supplement .

(a) Before-Tax Contributions Allocation . For each calendar year, each Participant may elect that, in the event the Participant’s ability to make Before-Tax Matched Contributions under the Savings Plan is expected to be limited by reason of Sections 401(k), 402(g) or 415 of the Code and/or the limit on considered compensation under Section 401(a)(17) of the Code, then the difference between the amount of Before-Tax Matched Contributions that the Participant could have made under the Savings Plan for any calendar year (assuming the Participant elected the maximum amount of Before-Tax Matched Contributions for the calendar year and did not change his or her election during the calendar year) and the amount that would have been contributed as Before-Tax Matched Contributions but for such limits shall be credited, as of December 31 of such year or such other dates as may be specified by the Administrator, to the Participant’s Account. A Participant’s election shall be made prior to the first day of the calendar year to which it relates, and shall be irrevocable as of the first day of such year.

Notwithstanding the foregoing:

 

  (i) if an employee is newly hired during the calendar year into a position covered by this Appendix A, he or she may elect, within the first thirty (30) days after being hired, whether to defer his or her compensation for the remainder of the calendar year. If such election is made, it shall apply to base salary earned starting with the first pay period after the election is filed with the Company, and shall apply to pro-rated bonus compensation determined in accordance with Code Section 409A; and

 

  (ii) if an employee is newly promoted during the calendar year into a position covered by this Appendix A, he or she may not make an election for the remainder of the calendar year of such promotion. Such an individual will be eligible to make his or her first deferral election for the following calendar year in accordance with the first paragraph of this subsection (a).

A Participant’s election shall be effective only for the calendar year (or remainder of the calendar year) to which the election relates, and shall not carry over from year to year. An election under this subsection (a) shall constitute an election by the Participant to reduce the Participant’s compensation by the amount determined under this subsection. The Participant’s election shall be made in the form and manner and within such timeframes as the Administrator may prescribe.

 

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A Participant’s election as in effect on the date prior to the Effective Date under Appendix A of the Prior Plan shall automatically apply hereunder for the remainder of 2016.

(b) Matching Contributions Allocation . Each Allocation Period, a Participant’s Account shall also be credited with an amount equal to the difference between the amount of Matching Contributions actually credited to the Participant’s Savings Plan account for such period and the amount of Matching Contributions that would have been so credited if the amount determined under subsection (a) had actually been contributed to the Savings Plan (determined without regard to the limitations imposed by Sections 401(m) and 415 of the Code), but only with respect to the period the Participant is covered by this Plan (and the Prior Plan with respect to 2016); provided the Participant has met the eligibility requirements to receive a Matching Contribution under the Savings Plan for such period. The Matching Contributions credited hereunder shall be allocated to the Participant’s Account at the same time as Matching Contributions are allocated under the Savings Plan, and shall be subject to the same vesting requirements as are imposed on matching contributions under the Savings Plan, except that vesting will not be accelerated as a result of the Participant’s death while employed.

(c) Retirement Income Allocation . Each Allocation Period, a Participant’s Account shall be credited with an amount equal to the difference between the amount of Retirement Income Contributions actually credited to the Participant’s Savings Plan account for such Allocation Period and the amount of Retirement Income Contributions that would have been so credited if the limit on considered compensation under Section 401(a)(17) of the Code did not apply; provided the Participant has met the eligibility requirements to receive a Retirement Income Contribution under the Savings Plan for such Allocation Period. The Retirement Income Contributions credited hereunder shall be allocated to the Participant’s Account at the same time as Retirement Income Contributions are allocated under the Savings Plan, and shall be subject to the same vesting requirements as are imposed on Retirement Income Contributions under the Savings Plan, except that vesting will not be accelerated as a result of the Participant’s death while employed.

(d) Modification of Compensation . Notwithstanding the foregoing, when determining a Participant’s compensation for purposes of subsections (a), (b) and (c), the only bonus that may be included is the amount a Participant receives (or would receive but for a deferral election) under the Annual Incentive Plan. For purposes of calculating the amount of the Retirement Income Contributions for calendar year 2016 under subsection (c), base salary and Annual Incentive Plan compensation shall include such amounts that were paid during 2016 prior to the Effective Date while the Participant was employed with Johnson Controls, Inc. or any successor thereto or affiliate thereof.

 

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(e) Distribution Election .

 

  (1) If a Participant was previously participating under Appendix B, then the portion of the Participant’s Account that is credited under Appendix B (as adjusted for earnings or losses thereon) shall be paid in a lump sum.

 

  (2) The amounts deferred hereunder in the first year of participation (as adjusted for earnings and losses thereon), if any, shall be paid in a lump sum.

 

  (3) With respect to amounts deferred after the first year of participation, a Participant may make a distribution election specifying whether distributions shall be made in a single lump sum or in annual installments of from two (2) to ten (10) years. Such election must be submitted by the deadline established by the Administrator, which cannot be later than December 31 of the prior year, and shall be made in such form and manner as the Administrator may prescribe. Such election shall be irrevocable. If no valid election is in effect, distribution shall be made in ten (10) annual installments.

 

  (4) With respect to any Participant on the Effective Date who was a participant in the Prior Plan immediately prior to the Effective Date, (i) the distribution elections applicable to such individual’s account under the Prior Plan will continue to apply to the Participant’s sub-account established with respect to the 2016 calendar year, and (ii) the Participant shall be permitted to make a different distribution election with respect to amounts deferred in 2017 and later, consistent with paragraph (3) above.

(f) Manner of Distribution . The Participant’s Account (or any sub-account established to reflect a different form of distribution) shall be paid in cash in the following manner:

 

  (1) Lump Sum . If payment is to be made in a lump sum,

 

  (A) for those Participants whose Separation from Service occurs from January 1 through June 30 of a year, payment shall be made in the first calendar quarter of the following year, and

 

  (B) for those Participants whose Separation from Service occurs from July 1 through December 31 of a year, payment shall be made in the third calendar quarter of the following year.

The lump sum payment shall equal the vested balance of the Participant’s Account (or sub-account, if applicable) as of the Valuation Date immediately preceding the distribution date.

 

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  (2) Installments . If payment is to be made in annual installments, the first annual payment shall be made:

 

  (A) for those Participants whose Separation from Service occurs from January 1 through June 30 of a year, in the first calendar quarter of the following year, and

 

  (B) for those Participants whose Separation from Service occurs during the period from July 1 through December 31 of a year, in the third calendar quarter of the following year.

The amount of the first annual payment shall equal the value of 1/10 th (or 1/9 th , 1/8 th , 1/7 th , etc. depending on the number of installments elected) of the vested balance of the Participant’s Account (or sub-account, if applicable) as of the Valuation Date immediately preceding the distribution date. All subsequent annual payments shall be made on or around the anniversary of the initial payment date of each subsequent calendar year, and shall be equal the value of 1/9 th (or 1/8 th , 1/7 th , 1/6 th , etc. depending on the number of installments elected) of the vested balance of the Participant’s Account (or sub-account) as of the Valuation Date immediately preceding the distribution date. The final annual installment payment shall equal the then remaining vested balance of such Account as of the Valuation Date preceding such final payment date.

Notwithstanding the foregoing, if the vested balance of a Participant’s entire Account as of the Valuation Date immediately preceding a distribution date is $50,000 or less, then the entire vested balance of the Participant’s Account shall be paid in a single lump sum on such distribution date.

 

22


APPENDIX B

 

1. Eligibility . This Appendix B covers Participants whom the Committee has selected to be covered hereunder and whose Retirement Income Contribution under the Savings Plan is limited by reason of the application of Code Section 401(a)(17).

 

2. Participation Date . A Participant shall commence participation hereunder on the later of the date such individual is selected by the Committee for participation in this Appendix B (or the date such Participant becomes employed in a position that has been previously approved for participation hereunder by the Committee) and the date the Participant’s compensation first exceeds the Code Section 401(a)(17) limit. For this purpose, the only bonus that may be included in compensation is the amount a Participant receives (or would receive but for a deferral election) under the Annual Incentive Plan for the calendar year.

 

3. Vesting . The Account established under this Appendix B shall be subject to the same vesting requirements as are imposed on Retirement Income Contributions under the Savings Plan, except that vesting will not be accelerated as a result of the Participant’s death while employed.

 

4. Retirement Income Allocation . Each Allocation Period, a Participant’s Account shall be credited with an amount equal to the difference between the amount of Retirement Income Contributions actually credited to the Participant’s account under the Savings Plan for such Allocation Period and the amount of Retirement Income Contributions that would have been so credited if the limit on considered compensation under Section 401(a)(17) of the Code did not apply and by including all amounts of cash compensation which the Participant would have received under the Annual Incentive Plan for such period but for a deferral election; provided the Participant has met the eligibility requirements to receive a Retirement Income Contribution under the Savings Plan for such period. The Retirement Income Contributions will be allocated to a Participant’s Account at the same time as Retirement Income Contributions are allocated under the Savings Plan.

 

5. Manner of Distribution . Amounts credited under this Appendix B (plus earnings thereon) shall be paid in a cash lump sum as follows: (a) for those Participants whose Separation from Service occurs from January 1 through June 30 of a year, payment shall be made in the first calendar quarter of the following year, and (b) for those Participants whose Separation from Service occurs from July 1 through December 31 of a year, payment shall be made in the third calendar quarter of the following year.

The lump sum payment shall equal the vested balance of the Participant’s Account as of the Valuation Date immediately preceding the distribution date.

 

23

Exhibit 10.15

ADIENT PLC

EXECUTIVE INCENTIVE COMPENSATION

RECOUPMENT POLICY

 

1. Scope of this Document . This policy applies to all performance incentives awarded on or after October 31, 2016 (the “Effective Date”) to all persons (“Covered Recipients”) who, at the time of such award, are Section 16(b) officers of Adient plc (the “Company”) elected by the Board of Directors of the Company (the “Board”). Any performance incentives awarded prior to the Effective Date are not subject to this policy, but remain subject to the Company’s ability to recover amounts pursuant to applicable legal or equitable remedies under state and federal law.

For purposes hereof, “performance incentive” means:

 

  (a) Any compensation payable in cash tied to performance metrics that is intended to serve as incentive for performance to occur over a period of a year or more; and

 

  (b) Any performance units granted under the Company’s 2016 Omnibus Incentive Plan (or any successor plan thereto), whether settled in cash, the Company’s ordinary shares (“Shares”) or a combination thereof.

A performance incentive is “awarded” on the date the Company grants the award, not on the date the award amount is ultimately determined or paid.

While in effect, this policy overrides any contrary provisions of any compensation plans or arrangements that the Company adopted or implemented before the Effective Date and any such plans or arrangements subsequently adopted or implemented, as well as any contrary provisions in any award agreements under such plans or arrangements.

The Company may recoup incentive compensation hereunder regardless of whether the Covered Recipient who received the compensation that is subject to recoupment is still employed by the Company or an affiliate on the date reimbursement or other payment is required.

 

2. Recoupment of Incentive Compensation . All performance incentives awarded after the Effective Date are subject to recoupment hereunder. The Compensation Committee of the Board (the “Committee”) will, unless prohibited by applicable law, require reimbursement from any Covered Recipient of (a) an amount equal to the amount of any overpayment of any such incentive paid to such Covered Recipient or (b) any excess number of Shares delivered to such Covered Recipient (or the fair market value of such excess number of Shares), with respect to a performance period if the following conditions are met:

 

    The payment or the delivery of Shares was predicated upon the achievement of certain financial results with respect to the applicable performance period that were subsequently the subject of a material restatement other than a restatement due to changes in accounting policy;

 

    In the Committee’s view the Covered Recipient engaged in conduct that caused or partially caused the need for the restatement; and


    A lower payment would have been made, or fewer Shares delivered, to the Covered Recipient based upon the restated financial results.

The amount required to be reimbursed shall be, in the case of a performance incentive payable in cash, the excess of the gross incentive payment made over the gross payment that would have been made if the original payment had been determined based on the restated financial results or, in the case of a performance incentive payable in Shares, the excess number of Shares delivered over the number of Shares that would have been delivered if the original number had been determined based on the restated financial results (or a cash amount equal to the fair market value of such excess number of Shares at the time of the reimbursement).

Unless prohibited by applicable law, the Company will also be entitled to, and the Committee will seek, payment by the Covered Recipient of (i) a reasonable rate of interest on any incentive that becomes subject to reimbursement hereunder and (ii) the costs of collection.

Following any accounting restatement that the Company is required to prepare due to its material noncompliance, as a result of misconduct, with any financial reporting requirement under the securities laws, the Company will also seek to recover any compensation received by its Chief Executive Officer and Chief Financial Officer that is required to be reimbursed under Section 304 of the Sarbanes-Oxley Act of 2002.

The Company will determine, in its sole discretion, the method for obtaining reimbursement and other payment from the Covered Recipient, which, subject to compliance with applicable law, may include, but is not limited to: (i) by offsetting the amount from any compensation owed by the Company or any subsidiary to the Covered Recipient (including without limitation amounts payable under a deferred compensation plan at such time as is permitted by Section 409A of the Internal Revenue Code of 1986, as amended), (ii) by reducing or eliminating future salary increases, cash incentive awards or equity awards, or (iii) by requiring the Covered Recipient to pay the amount or deliver an amount of Shares to the Company upon its written demand for such payment or delivery of Shares.

 

  3. Administration . The Committee will have sole discretion in making all determinations hereunder, including whether the conduct of a Covered Recipient has caused or partially caused the need for a restatement.

 

  4. Binding on Successors . This policy shall be binding upon and enforceable against the Covered Recipients and their heirs, executors, administrators and legal representatives.

 

  5. Amendment . The Committee and the Board, in their discretion, may modify or amend, in whole or in part, any or all of the provisions of this policy, and may suspend any provision hereof from time to time.

 

  6. Governing Law . This policy, and all rights and obligations hereunder, shall be governed by, except to the extent preempted by other applicable laws (a) with respect to the corporate law requirements of the Company and similar matters, the internal laws of Ireland (without reference to conflict of law principles thereof) and (b) with respect to all other matters arising hereunder, the internal laws of the State of New York (without reference to conflict of law principles thereof).

*    *    *

 

2

Exhibit 10.18

ADIENT FLEXIBLE PERQUISITES PROGRAM

Effective October 1, 2016

The Flexible Perquisite Program is designed for employees in bands E0, E1 and E2 (referred to herein as participants) as part of their compensation.

Flexible Perquisites Allowance

An amount equal to 5% of the participant’s gross base salary for the pay period will be added to the participant’s paycheck each pay period. The intent is that the participant use this amount to cover private club dues, personal tax preparation or other financial planning expenses, and other personal expenses that are not reimbursable under the company’s business expense reimbursement policy. Unless requested by the company, the participant need not submit proof to the company regarding how the 5% allowance is spent. For participants subject to U.S. taxation, this amount is considered compensation to the participant, will be reported on the participant’s Form W-2 and withholding taxes will apply. For participants subject to taxation outside the U.S., the 5% amount will be reportable compensation and taxes will be withheld to the extent required by applicable tax rules.

Upon termination of employment for any reason, the participant’s final paycheck will include this 5% amount with respect to base salary earned through the last day of employment, and no further amounts hereunder will be due or payable.

Corporate Aircraft

Corporate aircraft usage for personal flights for the following eligible participants is permitted if it does not conflict with the availability of corporate aircraft for business purposes, subject to the following limits:

 

Eligible Executives

  

Maximum Use Per Calendar Year

E0 (CEO)    Unlimited
Direct reports of CEO    Subject to approval by CEO

Personal usage of the plane is limited to trips on which the eligible participant and his/her guests are on the flight. All personal trips require advance approval by the CEO. Exceptions such as a spouse flying alone also must be pre-approved by the CEO.

Upon termination of employment for any reason, the participant will not be permitted to use the corporate aircraft, even if a personal flight previously has been scheduled and approved.

It is the responsibility of the Aviation Department to report personal aircraft usage under this program to the Total Rewards Department promptly during the calendar year in which it occurs. For participants subject to U.S. taxation, imputed income (determined according to Internal Revenue Service rules) for the value of the flight is considered compensation to the participant, will be reported on the participant’s Form W-2 and withholding taxes will apply. For participants subject to taxation outside the U.S., the value of the flight will be reportable as compensation and taxes will be withheld to the extent required by applicable tax rules.

Executive Physical

Participants are encouraged to obtain a physical each year. The company will reimburse the participant for the cost of the physical, capped at $3,000 per calendar year. The participant must provide a copy of the physician’s bill to the Vice President – Total Rewards in order to obtain reimbursement. This benefit will be reportable as taxable compensation and taxes will be withheld to the extent required by applicable tax rules.

Upon termination of employment for any reason, this benefit will cease. If a participant has incurred expenses for a physical that was performed before the date of termination of employment, and if such expenses have not yet been reimbursed as of the date of such termination, then such expenses will be reimbursed up to the maximum described above.


Car Leasing

All participants are eligible for a company-provided car through the separate car leasing policy. Please refer to that policy for details.

Effect of Program Amounts on Other Plans

Any payments made under the program, or any program benefit treated as compensation pursuant to applicable tax rules, will not be counted for purposes of any bonus calculation and is not considered “pensionable earnings.”

Changes to Program

The Compensation Committee of the Board of Directors reserves the right to modify or terminate this program at any time.

Exhibit 10.19

ADIENT PLC

COMPENSATION SUMMARY AND OWNERSHIP GUIDELINES FOR NON-EMPLOYEE DIRECTORS

Compensation for non-employee members of the Board of Directors (the “Board”) of Adient plc (the “Company”), effective as of October 1, 2016, consists of the payment of:

(i) a retainer at the annual rate of USD $290,000 to each non-employee director in the form of USD $145,000 in cash (the “Cash Retainer Amount”) and USD $145,000 in ordinary shares of the Company (the “Share Retainer Amount”),

(ii) a Committee Chair fee at the annual rate of USD $10,000 in cash to each non-employee chair and successor chair for the Audit, Corporate Governance, and Compensation Committees of the Board (the “Committee Chair Fee”), and

(iii) a Lead Director fee at the annual rate of USD $30,000 in cash to a non-employee lead director and successor lead director (the “Lead Director Fee”), provided that the non-employee lead director shall not also receive a Committee Chair Fee as described above.

Payment of the Share Retainer Amount . Beginning with the Company’s annual shareholders meeting in 2017, the Company will issue ordinary shares for the Share Retainer Amount on (or as soon as practicable following) the date of each annual shareholders meeting to each non-employee director then in office, subject to the following:

 

    If a director is retiring from the Board as of the date of such annual shareholders meeting, then the director will not be entitled to receive any ordinary shares for the Share Retainer Amount.

If as of the date of such annual shareholders meeting a director has announced his or her intention to retire from the Board prior to the next annual shareholders meeting, then, rather than receiving the full Share Retainer Amount, the director will receive ordinary shares with an aggregate value of (x) the number of days between the annual shareholders meeting and the intended effective date of the director’s retirement divided by (y) 365, multiplied by the Share Retainer Amount, representing payment for the period of the director’s service from the annual shareholders meeting until the intended effective date of the director’s retirement.

 

    If a director is appointed as a director between annual shareholders meetings, then, in addition to the ordinary shares for the full Share Retainer Amount paid at the first annual shareholders meeting following the director’s appointment, the director will be entitled to receive additional ordinary shares upon the effective date of the director’s appointment with an aggregate value equal to (x) the number of days in the period from the effective date of the director’s appointment or election to the Board through the such first annual shareholders meeting divided by (y) 365, multiplied by the Share Retainer Amount, representing payment for the period of the director’s service from the director’s appointment as a director until such annual shareholders meeting.

The ordinary shares shall be issued under the Adient plc 2016 Director Share Plan, as in effect from time to time.


Payment of the Cash Retainer Amount and the Committee Chair Fee or Lead Director Fee . The Company will pay the Cash Retainer Amount and the Committee Chair Fee or Lead Director Fee in the form of a quarterly payment in arrears for a quarter, as soon as practicable after the last day of such quarter, to each director in office on the last day of such quarter.

If a director served in the relevant position for the entire quarter, then the quarterly cash payment shall equal USD $36,250 for the Cash Retainer Amount, USD $2,500 for the Committee Chair Fee and USD $7,500 for the Lead Director Fee, as applicable.

If a director is either elected or appointed to the Board or is appointed as a Committee Chair (or successor to a Committee Chair) or Lead Director (or successor to a Lead Director) at any time during the fiscal year after the first business day of a quarter, then such director will receive at the regularly scheduled payment date for the quarter in which such election or appointment is effective, a prorated amount of the Cash Retainer Amount and/or any Committee Chair Fee or Lead Director Fee with such amount to be determined in the manner set forth below, as applicable:

 

    Cash Retainer Amount : The non-employee director shall receive a cash amount equal to (x) the number of days from the effective date of the appointment or election to the last day of the quarter divided by (y) 90, multiplied by USD $36,250; and

 

    Committee Chair or Lead Director Fee : The non-employee director shall receive a cash amount equal to (x) the number of days from the effective date of the appointment or election to the last day of the quarter divided by (y) 90, multiplied by USD $2,500 for a Committee Chair or USD $7,500 for the Lead Director.

The Company will not pay any fees for attendance at meetings of the Board or any committee.

The Company will also reimburse non-employee directors for any reasonable expenses related to their service on the Board.

Ownership of Company Ordinary Shares . All non-employee directors are required to hold an amount of Company ordinary shares equal to five times the Cash Retainer Amount within five years of being elected or appointed to the Board.

 

2

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-214320) of Adient plc of our report dated June 20, 2017 relating to the consolidated financial statements of Yanfeng Adient Seating Co., Ltd. (formerly known as “Shanghai Yanfeng Johnson Controls Seating Co., Ltd.”), which appears in this Form 10-K/A.

/s/ PricewaterhouseCoopers Zhong Tian LLP

PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

June 29, 2017

Exhibit 31.3

Certification of Chief Financial Officer Pursuant to

Securities Exchange Act Rules 13a-14(a) and 15d-14(a)

as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, R. Bruce McDonald, certify that:

 

1. I have reviewed this Amendment to the Annual Report on Form 10-K/A of Adient plc for the year ended September 30, 2016;

 

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; and

 

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.

 

By:  

/s/ R. Bruce McDonald

  R. Bruce McDonald
  Chief Executive Officer
Date:   June 29, 2017

Exhibit 31.4

Certification of Chief Financial Officer Pursuant to

Securities Exchange Act Rules 13a-14(a) and 15d-14(a)

as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey M. Stafeil, certify that:

 

1. I have reviewed this Amendment to the Annual Report on Form 10-K/A of Adient plc for the year ended September 30, 2016;

 

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; and

 

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.

 

By:  

/s/ Jeffrey M. Stafeil

  Jeffrey M. Stafeil
  Executive Vice President and Chief Financial Officer
Date:   June 29, 2017

Exhibit 32.2

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with Amendment to the Annual Report on Form 10-K/A of Adient plc for the year ended September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), R. Bruce McDonald, as Chief Executive Officer of Adient plc, and Jeffrey M. Stafeil, as Chief Financial Officer of Adient plc, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2 The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Adient plc.

 

Adient plc
By:  

/s/ R. Bruce McDonald

  R. Bruce McDonald
  Chief Executive Officer
Date:   June 29, 2017
By:  

/s/ Jeffrey M. Stafeil

  Jeffrey M. Stafeil
  Executive Vice President and Chief Financial Officer
Date:   June 29, 2017

A signed original of this written statement required by Section 906 has been provided to Adient plc and will be retained by Adient plc and furnished to the Securities and Exchange Commission or its staff upon request.

Table of Contents

Exhibit 99.1

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR’S REPORT

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR’S REPORT

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014

 

Contents    Page

Independent Auditor’s Report

   1 - 2

Consolidated balance sheets

   1 - 2

Consolidated income statements

   3

Consolidated cash flow statements

   4

Consolidated statements of changes in owners’ equity

   5

Notes to the consolidated financial statements

   6 - 70


Table of Contents

Independent Auditor’s Report

To the Board of Directors of Yanfeng Adient Seating Co., Ltd.:

We have audited the accompanying consolidated financial statements of Yanfeng Adient Seating Co., Ltd. (formerly known as “Shanghai Yanfeng Johnson Controls Seating Co., Ltd.”) and its subsidiaries, which comprise the consolidated balance sheets as of 31 December 2016 and 2014, and the related consolidated statements of income, changes in owners’ equity and cash flow for the years then ended.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the requirements of Accounting Standards for Business Enterprises in the People’s Republic of China; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

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Table of Contents

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Yanfeng Adient Seating Co., Ltd. (formerly known as “Shanghai Yanfeng Johnson Controls Seating Co., Ltd.”) and its subsidiaries as of 31 December 2016 and 2014, and the results of their operations and their cash flows for the years then ended in accordance with the requirements of Accounting Standards for Business Enterprises in the People’s Republic of China.

Other Matters

The accompanying consolidated balance sheet of Yanfeng Adient Seating Co., Ltd. (formerly known as “Shanghai Yanfeng Johnson Controls Seating Co., Ltd.”) as of 31 December 2015, and the related consolidated statements of income, changes in owners’ equity and cash flow for the year then ended are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2015 financial statements to be audited and they are, therefore, not covered by this report.

Accounting Standards for Business Enterprises in the People’s Republic of China vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 14 to the consolidated financial statements.

/s/ PricewaterhouseCoopers Zhong Tian LLP

PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

20 June 2017

 

- 2 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

CONSOLIDATED BALANCE SHEETS AS AT 31 DECEMBER 2016, 2015 AND 2014

(AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

ASSETS

   Note     31 December 2016
Consolidated
     31 December 2015
Consolidated
(Unaudited)
     31 December 2014
Consolidated
 

Current assets

          

Cash at bank and on hand

     7(1)       6,469,119,196        3,939,894,113        3,165,627,901  

Notes receivable

     7(2)       1,686,686,411        1,198,378,148        1,030,656,745  

Accounts receivable

     7(3(a))       5,851,806,068        5,697,029,340        4,688,450,612  

Advances to suppliers

     7(4)       120,306,449        130,127,043        162,716,875  

Interest receivable

       5,550,044        1,678,489        394,637  

Dividends receivable

       12,071,405        16,336,555        —    

Other receivables

     7(3(b))       315,785,308        228,573,927        464,461,266  

Inventories

     7(5)       797,678,665        701,202,676        638,115,225  

Other current assets

     7(6)       160,712,360        352,709,670        49,714,736  
    

 

 

    

 

 

    

 

 

 

Total current assets

       15,419,715,906        12,265,929,961        10,200,137,997  
    

 

 

    

 

 

    

 

 

 

Non-current assets

          

Long-term equity investments

     7(7)       190,255,274        158,752,993        76,331,842  

Fixed assets

     7(8)       1,719,813,378        1,778,145,645        1,537,142,169  

Construction in progress

     7(9)       442,223,123        334,405,828        485,022,530  

Intangible assets

     7(10)       294,578,758        290,139,232        362,271,077  

Goodwill

     7(11)       71,566,642        71,566,642        71,566,642  

Long-term prepaid expenses

     7(12)       196,028,241        195,116,898        202,556,024  

Deferred tax assets

     7(13(a))       831,379,541        546,116,880        335,832,409  

Other non-current assets

     7(14)       57,461,692        99,787,600        53,009,636  
    

 

 

    

 

 

    

 

 

 

Total non-current assets

       3,803,306,649        3,474,031,718        3,123,732,329  
    

 

 

    

 

 

    

 

 

 

TOTAL ASSETS

       19,223,022,555        15,739,961,679        13,323,870,326  
    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

CONSOLIDATED BALANCE SHEETS AS AT 31 DECEMBER 2016, 2015 AND 2014 (CONTINUED)

(AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

LIABILITIES AND OWNERS’ EQUITY

   Note     31 December 2016
Consolidated
     31 December 2015
Consolidated
(Unaudited)
    31 December 2014
Consolidated
 

Current liabilities

         

Short-term borrowings

     7(15)       408,884,232        75,000,000       100,000,000  

Notes payable

     7(16)       666,979,006        457,179,867       441,557,489  

Accounts payable

     7(17)       9,860,133,825        8,468,879,463       6,510,519,647  

Advances from customers

       31,006,431        55,982,936       50,804,021  

Employee benefits payable

     7(18)       792,960,721        621,152,813       548,588,559  

Taxes payable

     7(19)       709,246,804        560,021,549       407,355,491  

Dividends payable

       —          —         36,552,986  

Other payables

     7(20)       2,354,357,460        1,546,190,411       1,652,806,503  

Current portion of Long-term borrowings

     7(21)       5,398,000        5,398,000       5,398,000  
    

 

 

    

 

 

   

 

 

 

Total current liabilities

       14,828,966,479        11,789,805,039       9,753,582,696  
    

 

 

    

 

 

   

 

 

 

Non-current liabilities

         

Long-term borrowings

     7(21)       8,107,000        13,505,000       18,903,000  

Provisions

       3,937,103        4,206,400       4,037,176  

Deferred income

       9,995,949        7,402,636       5,440,000  

Deferred tax liabilities

     7(13(d))       —          241,500       18,599,893  
    

 

 

    

 

 

   

 

 

 

Total non-current liabilities

       22,040,052        25,355,536       46,980,069  
    

 

 

    

 

 

   

 

 

 

Total liabilities

       14,851,006,531        11,815,160,575       9,800,562,765  
    

 

 

    

 

 

   

 

 

 

Owners’ equity

         

Paid-in capital

       439,853,380        439,853,380       439,853,380  

Other comprehensive income/(loss)

     7(32(b))       983,955        (307,041     (32,010

Surplus reserve

     7(22)       376,736,592        329,063,052       284,833,010  

Undistributed profits

     7(23)       3,005,135,145        2,635,032,872       2,354,813,576  

Total equity attributable to equity

holders of the Company

       3,822,709,072        3,403,642,263       3,079,467,956  

Minority interest

       549,306,952        521,158,841       443,839,605  
    

 

 

    

 

 

   

 

 

 

Total owners’ equity

       4,372,016,024        3,924,801,104       3,523,307,561  
    

 

 

    

 

 

   

 

 

 

TOTAL LIABILITIES AND OWNERS’ EQUITY

       19,223,022,555        15,739,961,679       13,323,870,326  
    

 

 

    

 

 

   

 

 

 

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He    Principal in charge of accounting: Haifeng Mao    Head of accounting department: Jianjun Chu

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014

(AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

Item

   Note     2016
Consolidated
    2015
Consolidated
(Unaudited)
    2014
Consolidated
 

Revenue

     7(24)       29,122,501,178       26,572,050,764       24,485,129,870  

Less:

   Cost of sales      7(24)(27)       (24,215,383,432     (22,023,017,968     (20,287,565,383
   Taxes and surcharges      7(25)       (162,720,549     (119,877,553     (85,497,846
   Selling and distribution expenses      7(27)       (205,949,433     (175,878,437     (174,129,174
   General and administrative expenses      7(27)       (1,961,292,873     (1,838,254,817     (1,834,888,595

Add:

   Financial income—net      7(26)       61,250,943       59,098,880       25,205,319  

Less:

   Asset impairment losses      7(28)       (63,734,715     (9,380,519     (4,671,239

Add:

   Investment income      7(29)       54,019,531       48,357,857       13,897,472  
   Including: Share of profit of associates and joint ventures        54,019,531       40,459,106       13,897,472  
       

 

 

   

 

 

   

 

 

 

Operating profit

       2,628,690,650       2,513,098,207       2,137,480,424  
       

 

 

   

 

 

   

 

 

 

Add:

   Non-operating income      7(30(a))       76,222,382       45,819,087       45,272,000  
   Including: Gains on disposal of non-current assets        3,695,321       1,676,650       13,714,861  

Less:

   Non-operating expenses      7(30(b))       (25,091,655     (14,512,924     (14,525,030
   Including: Losses on disposal of non-current assets        (22,076,927     (4,669,157     (10,808,449
       

 

 

   

 

 

   

 

 

 

Total profit

       2,679,821,377       2,544,404,370       2,168,227,394  
       

 

 

   

 

 

   

 

 

 

Less:

   Income tax expenses      7(31)       (507,528,891     (463,389,635     (388,801,668
       

 

 

   

 

 

   

 

 

 

Net profit

       2,172,292,486       2,081,014,735       1,779,425,726  
       

 

 

   

 

 

   

 

 

 
   Attributable to equity owners of the Company        1,851,677,150       1,775,435,020       1,591,845,675  
   Minority interests        320,615,336       305,579,715       187,580,051  

Other comprehensive income/(loss), net of tax

     7(32(a))       1,290,996       (275,031     114,990  
  

Translation differences on translation of foreign currency

financial statements

       1,290,996       (275,031     114,990  
       

 

 

   

 

 

   

 

 

 

Total comprehensive income

       2,173,583,482       2,080,739,704       1,779,540,716  
       

 

 

   

 

 

   

 

 

 
   Attributable to equity owners of the Company        1,852,968,146       1,775,159,989       1,591,960,665  
   Attributable to minority interests        320,615,336       305,579,715       187,580,051  

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He    Principal in charge of accounting: Haifeng Mao    Head of accounting department: Jianjun Chu

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014

(AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

Item

   Note     2016
Consolidated
    2015
Consolidated
(Unaudited)
    2014
Consolidated
 

Cash flows from operating activities

        

Cash received from sales of goods or rendering of services

       34,235,663,913       30,668,864,213       28,945,292,864  

Refund of taxes and surcharges

       69,554,852       13,781,018       34,090,499  

Cash received relating to other operating activities

       124,863,278       74,044,037       43,456,279  
    

 

 

   

 

 

   

 

 

 

Sub-total of cash inflows

       34,430,082,043       30,756,689,268       29,022,839,642  
    

 

 

   

 

 

   

 

 

 

Cash paid for goods and services

       (24,673,063,749     (22,770,981,843     (22,077,186,618

Cash paid to and on behalf of employees

       (1,756,520,779     (1,553,146,820     (1,402,532,782

Payments of taxes and surcharges

       (1,915,679,241     (1,781,651,976     (1,434,245,412

Cash paid relating to other operating activities

       (2,126,466,694     (1,653,278,352     (1,441,512,528
    

 

 

   

 

 

   

 

 

 

Sub-total of cash outflows

       (30,471,730,463     (27,759,058,991     (26,355,477,340
    

 

 

   

 

 

   

 

 

 

Net cash flows from operating activities

     7(33(a))       3,958,351,580       2,997,630,277       2,667,362,302  
    

 

 

   

 

 

   

 

 

 

Cash flows from investing activities

        

Cash received from disposal of investments

       475,667,980       50,646,471       89,724,800  

Cash received from returns on investments

       35,749,485       16,244,436       3,070,735  

Net cash received from disposal of fixed assets, intangible assets and other long-term assets

       28,354,118       211,692,165       191,304,314  

Net cash received from disposal of subsidiaries and other business units

       21,500,000       13,510,827       —    
    

 

 

   

 

 

   

 

 

 

Sub-total of cash inflows

       561,271,583       292,093,899       284,099,849  
    

 

 

   

 

 

   

 

 

 

Cash paid to acquire fixed assets, intangible assets and other long-term assets

       (412,877,178     (476,099,495     (767,637,244

Cash paid to acquire investments

       (311,650,522     (315,000,000     (90,371,271

Net cash paid to acquire subsidiaries and other business units

       —         (62,298,600     —    
    

 

 

   

 

 

   

 

 

 

Sub-total of cash outflows

       (724,527,700     (853,398,095     (858,008,515
    

 

 

   

 

 

   

 

 

 

Net cash flows used in investing activities

       (163,256,117     (561,304,196     (573,908,666
    

 

 

   

 

 

   

 

 

 

Cash flows from financing activities

        

Cash received from borrowings

       718,055,869       75,855,064       400,000,000  
    

 

 

   

 

 

   

 

 

 

Sub-total of cash inflows

       718,055,869       75,855,064       400,000,000  
    

 

 

   

 

 

   

 

 

 

Cash repayments of borrowings

       (390,324,988     (105,496,657     (601,999,500

Cash payments for distribution of profits or interest expenses

       (1,684,947,936     (1,664,108,967     (1,567,648,168

Including: Cash payments for profits to minority shareholders of subsidiaries

       (291,750,289     (250,598,100     (142,793,799

Cash payments relating to other financing activities

       —         —         (87,504,313
    

 

 

   

 

 

   

 

 

 

Sub-total of cash outflows

       (2,075,272,924     (1,769,605,624     (2,257,151,981
    

 

 

   

 

 

   

 

 

 

Net cash flows used in financing activities

       (1,357,217,055     (1,693,750,560     (1,857,151,981
    

 

 

   

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

       —         —         —    
    

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     7(33(b))       2,437,878,408       742,575,521       236,301,655  

Add: Cash and cash equivalents at beginning of year

       3,741,333,102       2,998,757,581       2,762,455,926  
    

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of year

     7(33(c))       6,179,211,510       3,741,333,102       2,998,757,581  
    

 

 

   

 

 

   

 

 

 

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He    Principal in charge of accounting: Haifeng Mao    Head of accounting department: Jianjun Chu

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS’ EQUITY FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014

(AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

          Attributable to equity holders of the Company              

Item

  Note     Paid-in
capital
    Capital
surplus
    Surplus
reserves
    Undistributed
profits
    Other
comprehensive
income/(loss)
    Minority
interests
    Total owners’
equity
 

Balance at 1 January 2014

      439,853,380       1,148,851       242,136,006       2,266,775,854       (147,000     542,008,809       3,491,775,900  

Movements for the year ended 31 December 2014

               

Total Comprehensive income

               

Net profit

      —         —         —         1,591,845,675       —         187,580,051       1,779,425,726  

Other comprehensive income

               

Translation differences on translation of foreign currency financial statements

    7(32(a))       —         —         —         —         114,990       —         114,990  

Total Comprehensive income for the year

      —         —         —         1,591,845,675       114,990       187,580,051       1,779,540,716  

Capital contribution and withdrawal by owners

               

Disposal of subsidairies

      —         —         —         —         —         (34,123,771     (34,123,771

Transaction with minority interests

      —         (1,148,851     (2,189,800     —         —         (80,951,299     (84,289,950

Profit distribution

               

Appropriation to surplus reserves

      —         —         44,886,804       (44,886,804     —         —         —    

Profit distribution to equity owners

      —         —         —         (1,413,873,089     —         (170,346,785     (1,584,219,874

Appropriation to staff welfare and incentive funds

      —         —         —         (45,048,060     —         (327,400     (45,375,460

Balance at 31 December 2014

      439,853,380       —         284,833,010       2,354,813,576       (32,010     443,839,605       3,523,307,561  

Balance at 1 January 2015

      439,853,380       —         284,833,010       2,354,813,576       (32,010     443,839,605       3,523,307,561  

Movements for the year ended 31 December 2015 (Unaudited)

               

Total Comprehensive income

               

Net profit

      —         —         —         1,775,435,020       —         305,579,715       2,081,014,735  

Other comprehensive loss

               

Translation differences on translation of foreign currency

financial statements

    7(32(a))       —         —         —         —         (275,031     —         (275,031

Total Comprehensive income for the year

      —         —         —         1,775,435,020       (275,031     305,579,715       2,080,739,704  

Capital contribution and withdrawal by owners

               

Disposal of subsidairies

      —         —         —         —         —         (13,601,251     (13,601,251

Profit distribution

               

Appropriation to surplus reserves

      —         —         44,230,042       (44,230,042     —         —         —    

Profit distribution to equity owners

      —         —         —         (1,406,453,166     —         (214,045,114     (1,620,498,280

Appropriation to staff welfare and incentive funds

      —         —         —         (44,532,516     —         (614,114     (45,146,630

Balance at 31 December 2015 (Unaudited)

      439,853,380       —         329,063,052       2,635,032,872       (307,041     521,158,841       3,924,801,104  

Balance at 1 January 2016

      439,853,380       —         329,063,052       2,635,032,872       (307,041     521,158,841       3,924,801,104  

Movements for the year ended 31 December 2016

               

Total Comprehensive income

               

Net profit

      —         —         —         1,851,677,150       —         320,615,336       2,172,292,486  

Other comprehensive income

               

Translation differences on translation of foreign currency

financial statements

    7(32(a))       —         —         —         —         1,290,996       —         1,290,996  

Total Comprehensive income for the year

      —         —         —         1,851,677,150       1,290,996       320,615,336       2,173,583,482  

Profit distribution

               

Appropriation to surplus reserves

      —         —         47,673,540       (47,673,540     —         —         —    

Profit distribution to equity owners

      —         —         —         (1,385,874,680     —         (291,750,289     (1,677,624,969

Appropriation to staff welfare and incentive funds

      —         —         —         (48,026,657     —         (716,936     (48,743,593

Balance at 31 December 2016

      439,853,380       —         376,736,592       3,005,135,145       983,955       549,306,952       4,372,016,024  

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He    Principal in charge of accounting: Haifeng Mao    Head of accounting department: Jianjun Chu

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

1 General information

Yanfeng Adient Seating Co., Ltd. (formerly known as “Shanghai Yanfeng Johnson Controls Seating Co., Ltd.”, “the Company”) is a sino-foreign joint venture company set up by Yanfeng Automotive Trim Systems Co., Ltd. (“Yanfeng Trim” and formerly known as “Yanfeng Visteon Automotive Trim Systems Co., Ltd.”) and Johnson Controls International Inc. (“JCI”) on 18 December 1997. The approved operating period is 25 years and the registered capital is USD 24,770,700.

After several times of equity interest transfer till 8 November 2012, the investors of the Company were changed to Yanfeng Trim and Johnson Controls Asia Holding Co., Ltd., with 50.01% and 49.99% of equity interest respectively. The registered capital of the Company was changed to USD 62,000,000. On 2 February 2017, Johnson Controls Asia Holding Co., Ltd. was renamed as Adient Asia Holding Co., Ltd. (“Adient Asia”). In April 2017, the Company was renamed as “Yanfeng Adient Seating Co., Ltd.”.

The approved scope of business operation of the Company and its subsidiaries (together, “the Group”) is to develop and manufacture automobile seats and their spare parts, provide technical service for automobile seating, and sell its own products.

These financial statements are authorised for issue by the Company’s responsible person on 20 June 2017.

 

2 Basis of preparation

The financial statements are prepared in accordance with the Accounting Standard for Business Enterprises—Basic Standard, the specific accounting standards and other relevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter collectively referred to as “the Accounting Standard for Business Enterprises” or “CAS”). In addition, information relating to the nature and effect of significant differences between CAS and accounting principles generally accepted in the United States of America is presented in Note 14 to the consolidated financial statements of the Group.

The financial statements are prepared on a going concern basis.

 

3 Statement of compliance with the Accounting Standards for Business Enterprises

The financial statements of the Group for the years ended 31 December 2016, 2015 and 2014 are in compliance with the Accounting Standards for Business Enterprises, and truly and completely present the consolidated financial position of the Group as at 31 December 2016, 2015 and 2014 and of its financial performance, cash flows and other information for the years then ended.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates

 

(1) Accounting year

The Company’s accounting year starts on 1 January and ends on 31 December.

 

(2) Functional currency

The functional currency of the Company’s domestic subsidiaries is Renminbi (RMB) and the functional currency of the Company’s foreign subsidiaries is local currency.

 

(3) Foreign currency translation

 

(a) Foreign currency transactions

Foreign currency transactions are translated into RMB using the exchange rates prevailing at the dates of the transactions.

At the balance sheet date, monetary items denominated in foreign currencies are translated into RMB using the spot exchange rates on the balance sheet date. Exchange differences arising from these translations are recognised in profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for acquisition or construction of qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currencies that are measured at historical costs are translated at the balance sheet date using the spot exchange rates at the date of the transactions. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

 

(b) Translation of foreign currency financial statements

The asset and liability items in the balance sheets for overseas operations are translated at the spot exchange rates on the balance sheet date. Among the owners’ equity items, the items other than “undistributed profits” are translated at the spot exchange rates of the transaction dates. The income and expense items in the income statements of overseas operations are translated at the spot exchange rates of the transaction dates. The differences arising from the above translation are presented in other comprehensive income. The cash flows of overseas operations are translated at the spot exchange rates on the dates of the cash flows. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

 

(4) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn on demand, and short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(5) Financial assets

Financial assets are classified into the following categories at initial recognition: financial assets at fair value through profit or loss, receivables, available-for-sale financial assets and held-to-maturity investments. The classification of financial assets depends on the Group’s intention and ability to hold the financial assets. The financial assets held by the Group are mainly receivables.

 

(a) Receivables

Receivables, including accounts receivable and other receivables, are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market (Note 4(6)).

 

(b) Recognition and measurement

Financial assets are recognised at fair value on the balance sheet when the Group becomes a party to the contractual provisions of the financial instrument. In the case of financial assets at fair value through profit or loss, the related transaction costs incurred at the time of acquisition are recognised in profit or loss for the current period. For other financial assets, transaction costs that are attributable to acquisition of the financial assets are included in their initially recognised amounts. A financial asset is derecognised when the contractual rights to receive the cash flows from the financial asset have expired, or all the substantial risks and rewards of ownership of the financial asset have been transferred.

Receivables are subsequently measured at amortised cost by using the effective interest method.

 

(c) Impairment of financial assets

The Group assesses the carrying amounts of financial assets other than those at fair value through profit or loss at each balance sheet date. If there is objective evidence that a financial asset is impaired, an impairment loss is provided for.

When an impairment loss on a financial asset carried at amortised cost has occurred, the amount of the impairment loss is provided for at the difference between the asset’s carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred). If there is objective evidence that the value of the financial asset recovered and the recovery is related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and the amount of reversal is recognised in profit or loss.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(6) Receivables

Receivables comprise accounts receivable and other receivables. Accounts receivable arising from sale of goods or rendering of services are initially recognised at fair value of the contractual payments from the buyers or service recipients.

Receivables with amounts that are individually significant are subject to separate assessment for impairment. If there exists objective evidence that the Group will not be able to collect the amount under the original terms, a provision for bad debts of that receivable is made at the difference between its carrying amount and the present value of its estimated future cash flows.

Receivables with amounts that are not individually significant and those receivables that have been individually assessed for impairment and have not been found impaired are classified into certain groupings based on their credit risk characteristics. Provision for bad debts is determined based on the historical loss experience for groupings of receivables with similar credit risk characteristics, taking into consideration of the current circumstances.

When the Group transfers the accounts receivable to the financial institutions without recourse, the difference between the proceeds received from the transaction and their carrying amounts and the related taxes is recognised in profit or loss for the current period.

 

(7) Inventories

Inventories include raw materials, work in progress and finished goods, and are stated at the lower of cost and net realisable value.

Cost is determined using the weighted average method. The cost of finished goods and work in progress comprise raw materials, direct labour and systematically allocated production overhead based on the normal production capacity.

Provision for decline in the value of inventories is determined at the excess amount of the carrying amounts of the inventories over their net realisable value. Net realisable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes.

The Group adopts the perpetual inventory system.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(8) Long-term equity investments

Long-term equity investments comprise the Company’s long-term equity investments in its subsidiaries, and the Group’s long-term equity investments in its joint ventures and associates.

 

(a) Subsidiaries

Subsidiaries are the investees over which the Company is able to exercise control.

 

(b) Joint ventures and associates

A joint venture is a joint arrangement which is structured through a separate vehicle over which the Group has joint control together with other parties and only has rights to the net assets of the arrangement based on legal forms, contractual terms and other facts and circumstances; An associate is the investee over which the Group has significant influence on its financial and operating policy decisions.

Investments in joint ventures and associates are accounted for using the equity method. Where the initial investment cost exceeds the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the investment is initially measured at that cost. Where the initial investment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the difference is included in profit or loss for the current period and the cost of the long-term equity investment is adjusted upwards accordingly.

Under the equity method of accounting, the Group recognises the investment income according to its share of net profit or loss of the investee. The Group does not recognise further losses when the carrying amounts of the long-term equity investment together with any long-term interests that, in substance, form part of the Group’s net investment in investees are reduced to zero. However, if the Group has obligations for additional losses and the criteria with respect to recognition of provisions under the accounting standards on contingencies are satisfied, the Group continues recognising the investment losses and the provisions. The Group’s share of the changes in investee’s owner’s equity other than those arising from the net profit or loss, other comprehensive income and profit distribution is recognised in capital surplus with a corresponding adjustment to the carrying amounts of the long-term equity investment. The carrying amount of the investment is reduced by the Group’s share of the profit distribution or cash dividends declared by the investees. Unrealised gains or losses on transactions between the Group and its investees are eliminated to the extent of the Group’s equity interest in the investees, based on which the investment income or losses are recognised. Any losses resulting from transactions between the Group and its investees, which are attributable to asset impairment losses are not eliminated.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(9) Fixed assets

Fixed assets comprise buildings, machinery and equipment, motor vehicles, computers and electronic equipment, tooling and office equipment. Fixed assets purchased or constructed by the Group are initially measured at cost at the time of acquisition. Fixed assets contributed by the Chinese investor are initially recorded at their approved value upon its contribution to the Company.

Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Group and the related cost can be reliably measured. The carrying amount of the replaced part is derecognised. All the other subsequent expenditures are recognised in profit or loss for the period in which they are incurred.

Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets that have been provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.

The estimated useful lives, the estimated residual values expressed as a percentage of cost and the annual depreciation rates of fixed assets are as follows:

 

     Estimated useful
lives
     Estimated
residual values
    

Annual

depreciation rates

 

Buildings

     5-20 years        0%-10%        4.5%-20%  

Machinery and equipment

     3-15 years        0%-5%        6.33%-33.3%  

Motor vehicles

     3-6 years        0%-5%        15.83%-33.3%  

Computers and electronic

equipment and office

equipment

     3-7 years        0%-5%        13.57%-33.3%  

Tooling

     3-5 years        0%-5%        19%-33.3%  

The estimated useful life and the estimated residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at each year-end.

A fixed asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds from disposals on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(10) Construction in progress

Construction in progress is measured at actual cost. Actual cost comprises construction costs, installation costs, borrowing costs that are eligible for capitalisation and other costs necessary to bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation is charged starting from the following month.

 

(11) Intangible assets

Intangible assets include land use rights, patent rights and non-patented technology and software, and are measured at cost. Intangible assets also include identifiable assets acquired from business combinations involving enterprises not under common control, such as customer relationship, and are measured at fair value at the time of acquisition.

 

(a) Land use rights

Land use rights are amortised on the straight-line basis over their estimated useful lives. If the acquisition costs of the land use rights and the buildings located thereon cannot be reasonably allocated between the land use rights and the buildings, all of the acquisition costs are recognised as fixed assets.

 

(b) Patent rights and non-patented technology

Patent rights and non-patented technology are amortised on a straight-line basis over the patent protection period as stipulated by the laws.

 

(c) Software

Software is amortised on a straight-line basis over the period as stipulated by law.

 

(d) Customer relationship

Customer relationship acquired from business combination involving enterprises not under common control are amortised over their beneficial periods.

 

(e) Periodical review of useful life and amortisation method

For an intangible asset with a finite useful life, review of its useful life and amortisation method is performed at each year-end, with adjustment made as appropriate.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(12) Research and development

The expenditure on an internal research and development project is classified into expenditure on the research phase and expenditure on the development phase based on its nature and whether there is material uncertainty that the research and development activities can form an intangible asset at the end of the project.

Expenditure on the research phase is recognised in profit or loss in the period in which it is incurred; expenditure on the development phase is capitalised only if all of the following conditions are satisfied:

 

    it is technically feasible to complete the intangible asset so that it will be available for use or sale;

 

    management intends to complete the intangible asset and use or sell it;

 

    it can be demonstrated how the intangible asset will generate economic benefits;

 

    there are adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; and

 

    the expenditure attributable to the intangible asset during its development phase can be reliably measured.

Other development expenditures that do not meet the conditions above are recognised in profit or loss in the period in which they are incurred. Development costs previously recognised as expenses are not recognised as an asset in a subsequent period. Capitalised expenditure on the development phase is presented as development costs in the balance sheet and transferred to intangible assets at the date that the asset is ready for its intended use.

 

(13) Goodwill

Goodwill is recognised at the excess of the cost of a business combination involving enterprises not under common control over the interest in the fair value of the acquirees’ identifiable net assets acquired in the business combination as at the acquisition date.

 

(14) Long-term prepaid expenses

Long-term prepaid expenses include the expenditure for improvements to fixed assets held under operating leases, and other expenditures that have been incurred but should be recognised as expenses over more than one year in the current and subsequent periods. Long-term prepaid expenses are amortised on the straight-line basis over the expected beneficial period and are presented at actual expenditure net of accumulated amortisation.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(15) Impairment of long-term assets

Fixed assets, construction in progress, intangible assets with finite useful lives, long-term equity investments in subsidiaries, joint ventures and associates and long-term prepaid expenses are tested for impairment if there is any indication that the assets may be impaired at the balance sheet date; intangible assets that are not yet available for their intended use are tested for impairment at least annually, irrespective of whether there is any indication of impairment. If the result of the impairment test indicates that the recoverable amount of an asset is less than its carrying amount, a provision for impairment and an impairment loss are recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognised on the individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.

Goodwill that is separately presented in the financial statements is tested at least annually for impairment, irrespective of whether there is any indication that it may be impaired. In conducting the test, the carrying value of goodwill is allocated to the related asset group or groups of asset groups which are expected to benefit from the synergies of the business combination. If the result of the test indicates that the recoverable amount of an asset group or a group of asset groups, including the allocated goodwill, is lower than its carrying amount, the corresponding impairment loss is recognised. The impairment loss is first deducted from the carrying amount of goodwill that is allocated to the asset group or group of asset groups, and then deducted from the carrying amounts of other assets within the asset group or group of asset groups in proportion to the carrying amounts of assets other than goodwill.

Once the above asset impairment loss is recognised, it will not be reversed for the value recovered in the subsequent periods.

 

(16) Borrowing costs

The borrowing costs that are directly attributable to acquisition and construction of an asset that needs a substantially long period of time for its intended use commence to be capitalised and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use and the borrowing costs incurred thereafter are recognised in profit or loss for the current period. Capitalisation of borrowing costs is suspended during periods in which the acquisition or construction of an asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(17) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings of which the period is within one year (inclusive) are classified as the short-term borrowings, and the others are classified as long-term borrowings.

 

(18) Employee benefits

Employee benefits refer to all forms of consideration or compensation given by the Group in exchange for service rendered by employees or for termination of employment relationship, which include short-term employee benefits and post-employment benefits.

 

(a) Short-term employee benefits

Short-term employee benefits include wages or salaries, bonus, allowances and subsidies, staff welfare, premiums or contributions on medical insurance, work injury insurance and maternity insurance, housing funds, union running costs and employee education costs, short-term paid absences and etc. The short-term employee benefits actually occurred are recognised as a liability in the accounting period in which the service is rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets. Non-monetary benefits are measured at fair value.

 

(b) Post-employment benefits

The Group classifies post-employment benefit plans as defined contribution plans. Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into a separate fund and will have no obligation to pay further contributions. During the reporting period, the Group’s post-employment benefits mainly include the premiums or contributions on basic pensions and unemployment insurance, both of which belong to defined contribution plans.

Basic pensions

The Group’s employees participate in the basic pension plan set up and administered by local authorities of Ministry of Human Resource and Social Security. Monthly payments of premiums on the basic pensions are calculated according to the bases and percentage prescribed by the relevant local authorities. When employees retire, the relevant local authorities are obliged to pay the basic pensions to them. The amounts based on the above calculations are recognised as liabilities in the accounting period in which the service has been rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(19) Provisions

Provisions for product warranties and etc. are recognised when the Group has a present obligation, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time value of money, are taken into account as a whole in reaching the best estimate of a provision. Where the effect of the time value of money is material, the best estimate is determined by discounting the related future cash outflows. The increase in the discounted amount of the provision arising from passage of time is recognised as interest expense.

The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the current best estimate.

The provisions expected to be settled within one year since the balance sheet date are classified as current liabilities.

 

(20) Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognised based on the differences arising between the tax bases of assets and liabilities and their carrying amounts (temporary differences). Deferred tax asset is recognised for the deductible losses that can be carried forward to subsequent years for deduction of the taxable profit in accordance with the tax laws. No deferred tax liability is recognised for a temporary difference arising from the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognised for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled.

Deferred tax assets are only recognised for deductible temporary differences, deductible losses and tax credits to the extent that it is probable that taxable profit will be available in the future against which the deductible temporary differences, deductible losses and tax credits can be utilised.

Deferred tax liabilities are recognised for temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. When it is probable that the temporary differences arising from investments in subsidiaries, associates and joint ventures will be reversed in the foreseeable future and that the taxable profit will be available in the future against which the temporary differences can be utilised, the corresponding deferred tax assets are recognised.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(20) Deferred tax assets and deferred tax liabilities (Cont’d)

Deferred tax assets and liabilities are offset when:

 

    the deferred taxes are related to the same tax payer within the Group and the same taxation authority; and,

 

    that tax payer within the Group has a legally enforceable right to offset current tax assets against current tax liabilities.

 

(21) Revenue recognition

The amount of revenue is determined in accordance with the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is stated net of rebates, discounts and returns.

Revenue is recognised when it’s probable that the economic benefits associated with the transaction will flow to the Group, the related revenue can be reliably measured, and the specific criteria of revenue recognition have been met for each type of the Group’s activities as described below:

 

(a) Sale of goods

Revenue is recognised when all the risks and rewards incidental to ownership of goods have been substantially transferred to the buyers with no more continuous management or control over the goods, the economic benefits associated with the transaction will flow to the Group, and the relevant revenue and cost can be reliably measured. Upon delivery of the products, the buyer has the right to sell products and takes the risks of any obsolescence and loss of the products.

 

(b) Rendering of services

Revenue is recognised when service is completed and it is probable that the associated economic benefits will flow to the Group and its total revenue and cost can be reliably measured.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(22) Government grants

Government grants refer to the monetary or non-monetary assets obtained by the Group from the government, including tax return, financial subsidy and etc.

Government grants are recognised when the grants can be received and the Group can comply with all attached conditions. If a government grant is a monetary asset, it will be measured at the amount received or receivable. If a government grant is a non-monetary asset, it will be measured at its fair value. If it is unable to obtain its fair value reliably, it will be measured at its nominal amount.

Government grants related to assets refer to government grants which are obtained by the Group for the purposes of purchase, construction or acquisition of the long-term assets. Government grants related to income refer to the government grants other than those related to assets.

Government grants related to assets will be recorded as deferred income and recognised evenly in profit or loss over the useful lives of the related assets. However, the government grants measured at their nominal amounts will be directly recorded in profit and loss for the current period.

Government grants related to income will be recorded as deferred income and recognised in profit or loss in the period in which the related expenses are recognised if the grants are intended to compensate for future expenses or losses, and otherwise recognised in profit or loss for the current period if the grants are used to compensate for expenses or losses that have been incurred.

 

(23) Leases

A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a lease other than a finance lease.

Lease payments under an operating lease are recognised on a straight-line basis over the period of the lease, and are either capitalised as part of the cost of related assets, or charged as an expense for the current period.

Rental income from an operating lease is recognised on a straight-line basis over the period of the lease.

 

(24) Profit distribution

Proposed profit distribution is recognised as a liability in the period in which it is approved by the Board of Directors’ meeting.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(25) Preparation of consolidated financial statements

The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries.

Subsidiaries are consolidated from the date on which the Group obtains control and are de-consolidated from the date that such control ceases. For a subsidiary that is acquired in a business combination involving enterprises under common control, it is included in the consolidated financial statements from the date when it, together with the Company, comes under common control of the ultimate controlling party. The portion of the net profits realised before the combination date is presented separately in the consolidated income statement.

In preparing the consolidated financial statements, where the accounting policies and the accounting periods of the Company and subsidiaries are inconsistent, the financial statements of the subsidiaries are adjusted in accordance with the accounting policies and the accounting period of the Company. For subsidiaries acquired from business combinations involving enterprises not under common control, the individual financial statements of the subsidiaries are adjusted based on the fair value of the identifiable net assets at the acquisition date.

All significant intra-group balances, transactions and unrealised profits are eliminated in the consolidated financial statements. The portion of subsidiaries’ owners’ equity and the portion of subsidiaries’ net profits and losses and comprehensive incomes for the period not attributable to the Company are recognised as minority interests, net profit attributed to minority interests and total comprehensive incomes attributed to minority interests, and presented separately in the consolidated financial statements under owners’ equity, net profits and total comprehensive income respectively. Unrealised profits and losses resulting from the sale of assets by the Company to its subsidiaries are fully eliminated against net profit attributable to owners of the parent. Unrealised profits and losses resulting from the sale of assets by a subsidiary to the Company are eliminated and allocated between net profit attributable to owners of the parent and net profit attributed to minority interests in accordance with the allocation proportion of the parent in the subsidiary. Unrealised profits and losses resulting from the sale of assets by one subsidiary to another are eliminated and allocated between net profit attributable to owners of the parent and net profit attributed to minority interests in accordance with the allocation proportion of the parent in the subsidiary.

If the accounting treatment of a transaction is inconsistent in the financial statements at the Group level and at the Company or its subsidiary level, adjustment will be made from the perspective of the Group.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

4 Summary of significant accounting policies and accounting estimates (Cont’d)

 

(26) Critical accounting estimates and judgments

The Group continually evaluates the critical accounting estimates and key judgments applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The critical accounting estimates and key assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

 

(i) Accounting estimates on impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment. The recoverable amount of asset groups and groups of asset groups is the present value of the future cash flows expected to be derived from them. These calculations require use of estimates (Note 7(11)).

If management revises the gross margin that is used in the calculation of the future cash flows of asset groups and groups of asset groups, and the revised gross margin is lower than the one currently used, the Group would need to recognise further impairment against goodwill.

If management revises the pre-tax discount rate applied to the discounted cash flows, and the revised pre-tax discount rate is higher than the one currently applied, the Group would need to recognise further impairment against goodwill.

If the actual gross margin/pre-tax discount rate is higher/lower than management’s estimates, the impairment loss of goodwill previously provided for is not allowed to be reversed by the Group.

 

(ii) Income taxes

The Group is subject to income taxes in numerous jurisdictions. There are some transactions and events for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgement is required from the Group in determining the provision for income taxes in each of these jurisdictions. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

 

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YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

5 Taxation

The main categories and rates of taxes applicable to the Group during the current year are set out below:

 

Type    Tax rate    Taxable base
Enterprise income tax (a)    25% and 20%    Taxable income
Value added tax (“VAT”) (b)    17%, 11%, 6% and others    Taxable value added amount (Tax payable is calculated using the taxable sales amount multiplied by the applicable tax rate less deductible VAT input of current period)
Business tax    5%    Taxable turnover amount
City maintenance and construction tax    7%, 5% and 1%    The payment amount of VAT and business tax

 

(a) In 2016, 2015 and 2014, the enterprise income tax rates applicable to the Company and its subsidiaries are as follows:

 

  (1) The Company is a foreign-invested production enterprise set up in Pudong New Area, Shanghai. It was certificated as the hi-technology enterprise by Shanghai Science and Technology Committee in 2014 (valid for 3 years). According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in year 2016, 2015 and 2014.

 

  (2) Shanghai Jixiang Automobile Roof Trimming Co., Ltd. (“Shanghai Jixiang Automobile”) is a domestic enterprise set up in Shanghai. It was certificated as the hi-technology enterprise by Shanghai Science and Technology Committee in 2012 (valid for 3 years) and 2015 (valid for 3 years), respectively. According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in year 2016, 2015 and 2014.

 

  (3) Guangzhou Dongfeng Johnson Controls Automotive Seating Co., Ltd. (“Guangzhou Dongfeng Johnson Seating”) is a foreign-invested production enterprise set up in coastal economic development zone. It was certificated as the hi-technology enterprise by Guangzhou Province Science and Technology Agency in 2014. According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in year 2016, 2015 and 2014.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

5 Taxation (Cont’d)

 

(a) In 2016, 2015 and 2014, the enterprise income tax rates applicable to the Company and its subsidiaries are as follows (Cont’d):

 

 

  (4) Wuhu Johnson Controls Yunhe Automotive Seating Co., Ltd. (“Wuhu Johnson Yunhe”) is a foreign-invested manufacturing enterprise set up in Wuhu Economic and Technological Development Zone. It was certificated as the hi-technology enterprise by Department of Science and Technology of Anhui Province, Department of Finance of Anhui province, National Tax Bureau of Anhui Province and Local Tax Bureau of Anhui Province on 21 October 2016 (valid for 3 years). According to the Guo Shui Han (2009) No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate of Wuhu Johnson Yunhe is 15% in 2016.

 

  (5) Hefei Johnson Controls Yunhe Automotive Seating Co., Ltd. (“Hefei Yunhe Johnson”) is a foreign-invested manufacturing enterprise set up in Hefei Economic and Technological Development Zone. It was certificated as the hi-technology enterprise by Hefei Science and Technology Committee in 2012 (valid for 3 years) and 2015 (valid for 3 years), respectively. According to the Guo Shui Han (2009) No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate of Hefei Yunhe Johnson is 15% in 2016, 2015 and 2014.

 

  (6) Shenyang Yanfeng Johnson Controls Seating Co., Ltd. (“Shenyang Yanfeng Johnson Seating”) is a domestic enterprise set up in Shenyang. It was certificated as the hi-technology enterprise by Liaoning Office of Science and Technology in 2013 (valid for 3 years) and 2016 (valid for 3 years), respectively. According to the Guo Shui Han (2009) No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate of Shenyang Yanfeng Johnson Seating is 15% in 2016, 2015 and 2014.

 

  (7) Chongqing Yanfeng Adient Automotive Components Co., Ltd. (“Chongqing Yanfeng Adient”, formerly known as “Chongqing Yanfeng Johnson Controls Automotive Components Co., Ltd.”) is a foreign-invested manufacturing enterprise set up in Chongqing. It was certificated as the hi-technology enterprise for the first time in July 2010, then it was certificated as the hi-technology enterprise again through the review in October 2013 (valid until December 2015) and July 2016, respectively. According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in 2016, 2015 and 2014.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

5 Taxation (Cont’d)

 

(a) In 2016, 2015 and 2014, the enterprise income tax rates applicable to the Company and its subsidiaries are as follows (Cont’d):

 

  (8) Daqing Yanfeng Adient Automotive Components Co., Ltd. (“Daqing Yanfeng Adient”, formerly known as “Daqing Yanfeng Jonhnson Controls Automotive Components Co., Ltd.”) is a domestic enterprise set up in Daqing in 2014. It was certificated as the hi-technology enterprise for the first time in 2015 (valid for 3 years). According to the Guo Shui Han (2009) No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate of Daqing Yanfeng Adient is 15% in 2016.

 

  (9) Chongqing Yanfeng Adient Fengao Automotive Components Co., Ltd. (“Chongqing Fengao”, formerly known as “Chongqing Yanfeng Johnson Controls Fengao Automotive Components Co., Ltd.”) is a domestic enterprise set up in Chongqing in 2015. Entitled to the preferential policy for development of the west regions, the applicable income tax rate of Chongqing Fengao is 15% in 2016.

 

  (10) Chengdu Yanfeng Adient Automotive Components Co., Ltd. (“Chengdu Yanfeng Adient”, formerly known as “Chengdu Yanfeng Johnson Controls Automotive Components Co., Ltd.”) is a domestic enterprise set up in Chengdu in 2016. Entitled to the preferential policy for development of the west regions, the applicable income tax rate of Chengdu Yanfeng Adient is 15% in 2016.

 

  (11) The applicable income tax rate of other domestic entities is 25% in year 2016, 2015 and 2014. And for Yanfeng Johnson Controls (Thailand) Co., Ltd., the applicable income tax is 20% in year 2016, 2015 and 2014.

 

(b) Pursuant to the ‘Circular on the Overall Promotion of Pilot Program of Levying VAT in place of Business Tax’ (Cai Shui [2016] 36) jointly issued by the Ministry of Finance and the State Administration of Taxation, revenue from service leasing of the subsidiary of the Group is subject to VAT from 1 May 2016, and the applicable tax rate is 11%, while the business tax was 5% before then.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

6 Subsidiaries

 

(1) Significant subsidiaries included in the consolidation scope as at 31 December 2016 are as follows:

 

    Place of
registration
 

Registered

capital

  Nature of business and principal activities   % interest held by
the Company
  % voting right held
by the Company
        Directly     Indirectly   Directly     Indirectly

Shenyang Yanfeng

Johnson Seating

  Shenyang  

RMB

30,000,000

  Develop, produce and sell automotive interior, automotive seating overhead systems and parts production and provide after-sale service. Self-management or agency of import and export of goods and technologies (excluding goods prohibited or restricted by the national authorities).     100       100  

Yantai Yanfeng

Johnson Controls

Seating Co., Ltd.

  Yantai   RMB 35,000,000   Production and sales of automotive seating assembly, parts and functional high molecule materials for automobile; import and export of goods and technologies.     100       100  

Nanjing Yanfeng

Johnson Controls

Seating Co., Ltd.

  Nanjing   RMB 45,000,000   Produce and sell automotive seating and provide after-sale service; import and export goods and service     60       60  

Shanghai Yanfeng

Johnson Controls

Anting Seating

Assembly Co., Ltd.

  Shanghai   RMB 15,000,000   Design, develop, produce and sell automotive seating and provide after-sale service; import and export goods.     100       100  

Chongqing Yanfeng

Adient

  Chongqing   USD 7,500,000   Design, produce and sale automotive seating, sunshades, auto roof trims and related parts and provide after-sale service.     50       62.50  

Wuhan Yanfeng

Johnson Controls

Seating Co., Ltd.

  Wuhan   RMB 45,000,000   Design, development, manufacture and sales of automotive seating, auto roof trims, sunshades, trim systems and related parts, provision of technical engineering service, import and export of goods (excluding goods prohibited or restricted by the national authorities).     100       100  

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

6 Subsidiaries (Cont’d)

 

(1) Significant subsidiaries included in the consolidation scope as at 31 December 2016 are as follows (Cont’d):

 

    Place of
registration
 

Registered

capital

  Nature of business and principal activities   % interest held by the
Company
  % voting right held by
the Company
        Directly   Indirectly   Directly   Indirectly

Ningbo Yanfeng

Johnson Controls

Seating Co., Ltd.

  Ningbo   RMB 35,000,000   Design, development, manufacture and provision of technical engineering service of automotive seating, auto roof trims, sunshades, trim systems and related parts, sales of self-manufactured products, import and export of self-run and agent products and technologies (excluding goods and technologies prohibited or restricted by the national authorities).   100%     100%  

Guangzhou

Donfeng Johnson

Seating

  Guangzhou   USD 4,066,330   Design, production and processing of automotive seating assembly and relevant parts, sales of self-manufactured products.   50%     62.5%  

(a) The newly established subsidiaries of the Group in 2016 included Ha’erbin Yanfeng Adient Automotive Components Co., Ltd, Chengdu Yanfeng Adient and Yanfeng Johnson GmbH. The newly established subsidiaries of the Group in 2015 included Yanfeng Johnson Controls America Seating, Inc., Chongqing Fengao. The newly established subsidiaries of the Group in 2014 included Nantong Yanfeng Johnson Controls Seating Components Co., Ltd., Langfang Yanfeng Johnson Controls Automotive Components Co., Ltd., Nanchang Yanfeng Johnson Controls Automotive Components Co., Ltd. and Hangzhou Yanfeng Johnson Controls Automotive Components Co., Ltd..

(b) In 2015, the Company disposed 50% equity interest of its subsidiary, Baoding Yanfeng Johnson Controls Seating Co., Ltd. to Great Wall Automobile Holding Co., Ltd..

(c) On 26 September 2014, the Company purchased 45% equity interest of its subsidiary Shanghai Johnson Controls Automotive Metal Components Co., Ltd. from JCI. After the acquisition, Shanghai Johnson Controls Automotive Metal Components Co., Ltd. became a wholly-owned subsidiary of the Company (Note 8(a)).

(d) On 21 February 2014, the Company’s former subsidiary Wuhan Johnson Controls Yunhe Automotive Seating Co., Ltd. was dissolved and liquidated.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

6 Subsidiaries (Cont’d)

 

(2) Information of non-wholly-owned subsidiaries

 

Total profit attributable to minority shareholders for the year ended 31 December 2016

  

Dividends paid to minority interests for the year ended

31 December 2016

   Accumulated minority interests as at 31 December 2016

320,615,336

   291,750,289    549,306,952

Total profit attributable to minority shareholders for the year ended 31 December 2015

(Unaudited)

  

Dividends paid to minority interests for the year ended

31 December 2015

(Unaudited)

  

Accumulated minority interests as at 31 December 2015

(Unaudited)

305,579,715

   214,045,114    521,158,841

Total profit attributable to minority shareholders for the year ended 31 December 2014

  

Dividends paid to minority interests for the year ended

31 December 2014

   Accumulated minority interests as at 31 December 2014

187,580,051

   170,346,785    444,472,126

There is no individually subsidiary with significant non-wholly-owned interest within the group. Considering all the subsidiaries are automobile industry related companies, their principal activities are production and sale of automotive parts as well as components and they all operate their business in China mainland, the summarised aggregated financial information for all the subsidiaries that have non-wholly-owned interests are set out below:

 

31 December 2016

Current assets   

Non-current

assets

   Total assets   

Current

liabilities

   Non-current
liabilities
   Total liabilities
6,094,461,705    1,056,890,738    7,151,352,443    5,884,416,455    18,133,103    5,902,549,558

31 December 2015

(Unaudited)

Current assets    Non-current assets    Total assets    Current liabilities    Non-current
liabilities
   Total liabilities
4,885,026,193    885,503,988    5,770,530,181    4,563,721,745    24,041,900    4,587,763,645

31 December 2014

Current assets    Non-current assets    Total assets    Current liabilities    Non-current
liabilities
   Total liabilities
4,424,732,193    835,075,697    5,259,807,890    4,196,754,935    33,892,988    4,230,647,923

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

6 Subsidiaries (Cont’d)

 

(2) Information of non-wholly-owned subsidiaries (Cont’d)

 

2016

Revenue    Net profit   

Total comprehensive

income

   Cash flows from
operating activities
10,755,375,494    678,043,346    678,043,346    1,156,481,663

2015

(Unaudited)

Revenue    Net profit   

Total comprehensive

income

   Cash flows from operating
activities
10,509,628,494    647,904,303    647,904,303    224,033,364

2014

Revenue    Net profit   

Total comprehensive

income

   Cash flows from
operating activities
9,535,246,058    415,106,959    415,106,959    781,707,192

 

7 Notes to the consolidated financial statements

 

(1) Cash at bank and on hand

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Cash on hand

     21,513        26,270        43,942  

Cash at bank

     6,179,189,997        3,741,306,832        2,998,713,639  

Other cash balances (a)

     289,907,686        198,561,011        166,870,320  
  

 

 

    

 

 

    

 

 

 
     6,469,119,196        3,939,894,113        3,165,627,901  
  

 

 

    

 

 

    

 

 

 

(a) As at 31 December 2016, 2015 and 2014, 289,907,686, 198,561,011 and 166,719,551 is pledged as guarantee for the Group to issue notes payable of 325,076,774, 228,819,635 and 235,486,021 (Note 7(16)).

(2) Notes receivable

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Bank acceptance notes

     1,686,686,411        1,198,378,148        1,030,656,745  
  

 

 

    

 

 

    

 

 

 

As at 31 December 2016, 2015 and 2014, notes receivable with amount of 152,544,483, 222,124,500 and 204,357,084 is pledged as guarantee for the Group to issue notes payable of 152,544,483, 221,724,500 and 206,071,468 (Note 7(16)).

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(3) Accounts receivable and other receivables

 

(a) Accounts receivable

 

    

31 December
2015

(Unaudited)

                 31 December
2016
 

Accounts receivable

     5,713,997,765            5,932,536,523  
          

Increase in

the current
year

   

Decrease in

the current
year

        

Less: Provision for bad debts

     (16,968,425     (63,787,666     25,636        (80,730,455
  

 

 

   

 

 

   

 

 

    

 

 

 
     5,697,029,340            5,851,806,068  
  

 

 

        

 

 

 

 

     31 December
2014
                

31 December
2015

(Unaudited)

 

Accounts receivable

     4,698,378,707            5,713,997,765  
          

Increase in

the current
year

   

Decrease in

the current
year

        

Less: Provision for bad debts

     (9,928,095     (7,056,982     16,652        (16,968,425
  

 

 

   

 

 

   

 

 

    

 

 

 
     4,688,450,612            5,697,029,340  
  

 

 

        

 

 

 

 

     31 December
2013
                 31 December
2014
 

Accounts receivable

     4,508,391,003            4,698,378,707  
          

Increase in

the current
year

   

Decrease in

the current
year

        

Less: Provision for bad debts

     (9,732,869     (713,560     518,334        (9,928,095
  

 

 

   

 

 

   

 

 

    

 

 

 
     4,498,658,134            4,688,450,612  
  

 

 

        

 

 

 

 

- 28 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(3) Accounts receivable and other receivables (Cont’d)

 

(a) Accounts receivable (Cont’d)

 

The aging of accounts receivable and related provisions for bad debts are analysed below:

 

    31 December 2016     31 December 2015
(Unaudited)
    31 December 2014  
    Amount     % of total
balance
    Provision for
bad debts
    Amount     % of total
balance
    Provision for
bad debts
    Amount     % of total
balance
    Provision for
bad debts
 

Within 1 year

    5,817,926,740       98.06     (19,287,472     5,442,373,758       95.25     (2,415,833     4,658,158,997       99.14     (806,662

1 to 2 years

    28,484,340       0.48     (8,404,214     244,636,126       4.28     (3,379,236     32,565,341       0.69     (3,305,603

2 to 3 years

    66,184,420       1.12     (33,097,746     19,388,759       0.34     (3,784,961     2,220,905       0.05     (463,760

Over 3 years

    19,941,023       0.34     (19,941,023     7,599,122       0.13     (7,388,395     5,433,464       0.12     (5,352,070
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    5,932,536,523       100.00     (80,730,455     5,713,997,765       100.00     (16,968,425     4,698,378,707       100.00     (9,928,095
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 29 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(3) Accounts receivable and other receivables (Cont’d)

 

(b) Other receivables

 

    

31 December
2015

(Unaudited)

                 31 December
2016
 

Related party cash pool lending

     —              150,982,542  

Receivables for modules paid-on- behalf of others

     147,645,565            102,700,877  

Deposits

     50,064,467            53,632,667  

Receivables from sales of fixed assets

     4,226            653,120  

Receivables from equity transfer

     21,500,000            —    

Others

     10,305,418            10,944,572  
  

 

 

        

 

 

 
     229,519,676            318,913,778  
          

Increase in

the current

year

   

Decrease in

the current

year

        

Less: Provision for bad debts

     (945,749     (2,182,721     —          (3,128,470
  

 

 

   

 

 

   

 

 

    

 

 

 
     228,573,927            315,785,308  
  

 

 

        

 

 

 

 

     31 December
2014
                 

31 December
2015

(Unaudited)

 

Receivables for modules paid-on- behalf of others

     200,755,931             147,645,565  

Deposits

     32,193,079             50,064,467  

Receivables from equity transfer

     —               21,500,000  

Receivables from sales of fixed assets

     160,032,610             4,226  

Related party cash pool lending

     50,646,471             —    

Others

     21,779,364             10,305,418  
  

 

 

         

 

 

 
     465,407,455             229,519,676  
          

Increase in

the current

year

    

Decrease in

the current

year

        

Less: Provision for bad debts

     (946,189     —          440        (945,749
  

 

 

   

 

 

    

 

 

    

 

 

 
     464,461,266             228,573,927  
  

 

 

         

 

 

 

 

- 30 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(3) Accounts receivable and other receivables (Cont’d)

 

(b) Other receivables (Cont’d)

 

     31 December
2013
                 31 December
2014
 

Receivables for modules paid-on- behalf of others

     81,666,069            200,755,931  

Receivables from sales of fixed assets

     160,193,792            160,032,610  

Related party cash pool lending

     —              50,646,471  

Deposits

     50,363,255            32,193,079  

Receivables from equity transfer

     30,909,408            —    

Others

     45,402,205            21,779,364  
  

 

 

        

 

 

 
     368,534,729            465,407,455  
          

Increase in

the current

year

   

Decrease in

the current

year

        

Less: Provision for bad debts

     (934,051     (12,138     —          (946,189
  

 

 

   

 

 

   

 

 

    

 

 

 
     367,600,678            464,461,266  
  

 

 

        

 

 

 

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(3) Accounts receivable and other receivables (Cont’d)

 

(b) Other receivables (Cont’d)

 

Other receivables and related provisions for bad debts are analysed below:

 

    31 December 2016     31 December 2015
(Unaudited)
    31 December 2014  
    Amount     % of total
balance
    Provision
for bad
debts
    Amount     % of total
balance
    Provision
for bad
debts
    Amount     % of total
balance
    Provision
for bad
debts
 

Within 1 year

    254,354,215       79.76     (2,194,859     196,262,868       85.51     —         288,793,103       62.05     (12,138

1 to 2 years

    42,589,819       13.35     —         24,176,246       10.53     (12,138     171,149,988       36.77     (440

2 to 3 years

    15,068,384       4.72     —         4,745,088       2.07     —         3,385,685       0.73     —    

Over 3 years

    6,901,360       2.17     (933,611     4,335,474       1.89     (933,611     2,078,679       0.45     (933,611
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    318,913,778       100.00     (3,128,470     229,519,676       100.00     (945,749     465,407,455       100.00     (946,189
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(4) Advances to suppliers

The ageing of advances to suppliers is analysed as follows:

 

     31 December 2016     31 December 2015
(Unaudited)
    31 December 2014  
     Amount      % of total
balance
    Amount      % of total
balance
    Amount      % of total
balance
 

Within 1 year

     115,464,553        95.98     125,531,008        96.47     151,640,917        93.19

1 to 2 years

     1,769,829        1.47     2,941,987        2.26     8,693,203        5.34

2 to 3 years

     1,516,302        1.26     132,283        0.10     2,382,755        1.47

Over 3 years

     1,555,765        1.29     1,521,765        1.17     —          —    
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
     120,306,449        100.00     130,127,043        100.00     162,716,875        100.00
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

- 32 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(5) Inventories

 

    

31 December
2015

(Unaudited)

                  31 December
2016
 

Cost -

          

Raw materials

     422,758,307             552,763,560  

Work in progress

     21,343,381             36,748,461  

Finished goods

     290,728,598             234,736,592  
  

 

 

         

 

 

 
     734,830,286             824,248,613  
  

 

 

         

 

 

 

Less: Provision for declines in the value of inventories

       

Reversal in
the current
year
 
 
 
   

Write-off in
the current
year
 
 
 
  

Raw materials

     (28,454,633      1,030,809       3,606,294        (23,817,530

Work in progress

     (873,759      839,603       2,492        (31,664

Finished goods

     (4,299,218      365,260       1,213,204        (2,720,754
  

 

 

    

 

 

   

 

 

    

 

 

 
     (33,627,610      2,235,672       4,821,990        (26,569,948
  

 

 

    

 

 

   

 

 

    

 

 

 
     701,202,676             797,678,665  
  

 

 

         

 

 

 
     31 December
2014
                 

31 December
2015

(Unaudited)

 

Cost -

          

Raw materials

     495,782,759             422,758,307  

Work in progress

     32,424,927             21,343,381  

Finished goods

     147,067,879             290,728,598  
  

 

 

         

 

 

 
     675,275,565             734,830,286  
  

 

 

         

 

 

 

Less: Provision for declines in the value of inventories

       



(Accrual

Reversal in
the current
year

)/ 

 
 
 

   

Write-off in
the current
year
 
 
 
  

Raw materials

     (31,190,832      (1,708,382     4,444,581        (28,454,633

Work in progress

     (805,118      22,032       (90,673      (873,759

Finished goods

     (5,164,390      (637,187     1,502,359        (4,299,218
  

 

 

    

 

 

   

 

 

    

 

 

 
     (37,160,340      (2,323,537     5,856,267        (33,627,610
  

 

 

    

 

 

   

 

 

    

 

 

 
     638,115,225             701,202,676  
  

 

 

         

 

 

 

 

- 33 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(5) Inventories (Cont’d)

 

     31 December
2013
                  31 December
2014
 

Cost -

          

Raw materials

     504,552,628             495,782,759  

Work in progress

     21,841,835             32,424,927  

Finished goods

     131,202,783             147,067,879  
  

 

 

         

 

 

 
     657,597,246             675,275,565  
  

 

 

         

 

 

 

Less: Provision for declines in the value of inventories

       



(Accrual

Reversal in
the current
year

)/ 

 
 
 

   

Write-off in
the current
year
 
 
 
  

Raw materials

     (31,728,613      (1,724,450     2,262,231        (31,190,832

Work in progress

     (1,248,134      443,016       —          (805,118

Finished goods

     (2,500,283      (2,664,107     —          (5,164,390
  

 

 

    

 

 

   

 

 

    

 

 

 
     (35,477,030      (3,945,541     2,262,231        (37,160,340
  

 

 

    

 

 

   

 

 

    

 

 

 
     622,120,216             638,115,225  
  

 

 

         

 

 

 

 

(6) Other current assets

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Input VAT to be

deducted

     151,229,616        31,452,580        42,212,988  

Prepaid income tax

     9,441,318        6,094,030        7,158,847  

Related party entrusted loans (Note 9(4(e)))

     —          315,000,000        —    

Others

     41,426        163,060        342,901  
  

 

 

    

 

 

    

 

 

 
     160,712,360        352,709,670        49,714,736  
  

 

 

    

 

 

    

 

 

 

 

- 34 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(7) Long-term equity investments

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Associates (a)

     140,094,694        108,432,277        76,331,842  

Joint venture (b)

     50,160,580        50,320,716        —    
  

 

 

    

 

 

    

 

 

 
     190,255,274        158,752,993        76,331,842  

Less: Provision for impairment of long-term equity investments

     —          —          —    
  

 

 

    

 

 

    

 

 

 
     190,255,274        158,752,993        76,331,842  
  

 

 

    

 

 

    

 

 

 

 

(a) Associates

Investments in associates are set out below:

 

31 December

2015

(Unaudited)

  

Increase in

investment

    

Share of net

profit under

equity method

    

Profit/Cash

dividends declared

by associates

    

31 December

2016

 

108,432,277

     —          54,179,667        (22,517,250      140,094,694  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

31 December

2014

  

Increase in

investment

    

Share of net

profit under

equity method

    

Profit/Cash

dividends declared

by associates

    

31 December

2015

(Unaudited)

 

76,331,842

     —          40,365,585        (8,265,150      108,432,277  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

31 December

2013

  

Increase in

investment

    

Share of net

profit under

equity method

    

Profit/Cash

dividends declared

by associates

    

31 December

2014

 

62,434,370

     —          13,897,472        —          76,331,842  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 35 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(7) Long-term equity investments (Cont’d)

 

(a) Associates (Cont’d)

 

General information of significant associates:

 

     Major
business
location
     Place of
registration
     Nature of business    Interest
held
    Whether
strategic to
the Group’s
activities
 

Wuhan Taiji Johnson Controls Seating Co., Ltd. (“Wuhan Taiji”) (i)

     Wuhan        Wuhan      Design, develop, produce and process auto key parts; sell the produced parts and provide after-sale service      20.00     Yes  

Dongfeng Johnson Automotive Seating Co., Ltd. (“Dongfeng Johnson Seating”)

     Wuhan        Wuhan      Design, develop, produce and process auto key parts; sell the produced parts and provide after-sale service      50.00     Yes  

 

(i) The Company holds 20% of the ownership interesting of, and the decisions on Wuhan Taiji’s relevant activities are made by the Board of Directors. As the Company has the right to designate 1 out of total 7 board members in Wuhan Taiji, the Company has the voting rights of 14.29% in Wuhan Taiji.

 

(b) Joint venture

Investments in joint ventures are set out below:

 

31 December

2015

(Unaudited)

  

Increase

in investment

    

Share of net profit

under equity

method

    

Profit/Cash

dividends declared

by associates

     31 December 2016  

50,320,716

     —          (160,136      —          50,160,580  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

31 December

2014

  

Increase

in investment

    

Share of net profit

under equity

method

    

Profit/Cash

dividends declared

by associates

    

31 December 2015

(Unaudited)

 

—  

     62,298,600        93,521        (12,071,405      50,320,716  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 36 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(7) Long-term equity investments (Cont’d)

 

(b) Joint venture (Cont’d)

 

General information of significant joint venture:

 

     Major
business
location
     Place of
registration
     Nature of business    Interest
held
    Whether
strategic to
the Group’s
activities
 

CRH Shenyang

     Shenyang        Shenyang      Design, develop, manufacture, sell auto seats frame and relevant parts; provide after-sale service; import and export goods (exclude those forbidden by the State or restricted by imports and exports).      50.00     Yes  

On 30 September 2015, the Company acquired 50% of the equity interest of CRH Shenyang from Johnson Controls Solingen Beteiligungs GmbH with the consideration of USD 9,800,000. After the acquisition, the Company owned 50% equity interest of CRH Shenyang, which is treated as a joint venture company.

 

- 37 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(8) Fixed assets

 

     Buildings    

Machinery and

equipment

   

Motor

vehicles

   

Computers and

electronic

equipment and

office equipment

    Tooling     Total  

Cost

            

31 December 2015 (Unaudited)

     806,451,196       1,578,270,298       11,203,963       257,206,427       163,297,902       2,816,429,786  

Transfer from construction in progress

     34,002,825       223,872,862       1,093,938       —         46,014,855       304,984,480  

Other increase in the current year

     —         —         —         38,872,721       —         38,872,721  

Decrease in the current year

     (9,484,015     (80,492,536     (1,568,282     (24,154,674     (30,838,177     (146,537,684

Transfer to long-term prepaid expenses

     (20,102,952     (1,221,416     —         (5,128     —         (21,329,496

Cost adjustment

     (33,346,512     (5,408,656     —         (1,349,765     —         (40,104,933

Reclassification

     (11,707,567     34,275,909       (3,890,694     (12,812,940     (5,864,708     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2016

     765,812,975       1,749,296,461       6,838,925       257,756,641       172,609,872       2,952,314,874  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation

            

31 December 2015 (Unaudited)

     (143,920,692     (625,119,801     (7,718,351     (144,230,691     (113,372,889     (1,034,362,424

Increase in the current year

     (49,375,221     (183,487,123     (1,512,307     (40,831,996     (35,416,622     (310,623,269

Decrease in the current year

     2,039,813       62,145,418       1,371,317       22,879,917       24,134,045       112,570,510  

Transfer to long-term prepaid expenses

     3,121,358       190,889       —         1,140       —         3,313,387  

Reclassification

     5,600,959       (18,396,550     1,459,163       7,757,857       3,578,571       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2016

     (182,533,783     (764,667,167     (6,400,178     (154,423,773     (121,076,895     (1,229,101,796
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for impairment loss

            

31 December 2015 (Unaudited)

     —         (3,168,540     —         —         (753,177     (3,921,717

Decrease in the current year

     —         52,424       —         —         469,593       522,017  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2016

     —         (3,116,116     —         —         (283,584     (3,399,700
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net book value

            

31 December 2016

     583,279,192       981,513,178       438,747       103,332,868       51,249,393       1,719,813,378  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 38 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(8) Fixed assets (Cont’d)

 

     Buildings    

Machinery and

equipment

   

Motor

vehicles

   

Computers and

electronic

equipment and

office equipment

    Tooling     Total  

Cost

            

31 December 2014

     664,843,579       1,402,641,847       11,092,134       219,404,616       143,136,647       2,441,118,823  

Transfer from construction in progress

     141,831,535       306,246,174       1,525,343       61,610,827       40,643,272       551,857,151  

Other increase in the current year

     53,000       24,471       —         454,101       159,025       690,597  

Decrease in the current year

     (276,918     (105,538,409     (1,413,514     (21,053,528     (20,641,042     (148,923,411

Transfer to construction in progress

     —         (25,103,785     —         (3,209,589     —         (28,313,374
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2015 (Unaudited)

     806,451,196       1,578,270,298       11,203,963       257,206,427       163,297,902       2,816,429,786  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation

            

31 December 2014

     (103,659,542     (556,410,903     (6,757,457     (126,368,066     (106,393,288     (899,589,256

Increase in the current year

     (40,528,317     (159,961,886     (1,953,950     (36,015,268     (22,608,860     (261,068,281

Decrease in the current year

     267,167       72,123,397       993,056       17,255,175       15,629,259       106,268,054  

Transfer to construction in progress

     —         19,129,591       —         897,468       —         20,027,059  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2015 (Unaudited)

     (143,920,692     (625,119,801     (7,718,351     (144,230,691     (113,372,889     (1,034,362,424
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for impairment loss

            

31 December 2014

     —         (3,363,932     —         —         (1,023,466     (4,387,398

Decrease in the current year

     —         195,392       —         —         270,289       465,681  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2015 (Unaudited)

     —         (3,168,540     —         —         (753,177     (3,921,717
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net book value

            

31 December 2015 (Unaudited)

     662,530,504       949,981,957       3,485,612       112,975,736       49,171,836       1,778,145,645  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 39 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(8) Fixed assets (Cont’d)

 

     Buildings    

Machinery and

equipment

   

Motor

vehicles

   

Computers and

electronic

equipment and

office equipment

    Tooling     Total  

Cost

            

31 December 2013

     519,463,143       1,358,811,728       10,844,001       173,411,318       147,725,780       2,210,255,970  

Transfer from construction in progress

     145,122,080       331,208,637       3,523,355       64,807,963       45,480,626       590,142,661  

Other increase in the current year

     15,001,081       6,465,285       210,256       3,923,914       1,395,301       26,995,837  

Decrease in the current year

     (14,742,725     (293,843,803     (3,485,478     (22,738,579     (51,465,060     (386,275,645
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2014

     664,843,579       1,402,641,847       11,092,134       219,404,616       143,136,647       2,441,118,823  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation

            

31 December 2013

     (77,872,259     (568,593,538     (7,193,895     (105,554,851     (117,369,709     (876,584,252

Increase in the current year

     (29,531,678     (127,840,535     (1,870,214     (32,105,787     (20,692,286     (212,040,500

Decrease in the current year

     3,744,395       140,023,170       2,306,652       11,292,572       31,668,707       189,035,496  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2014

     (103,659,542     (556,410,903     (6,757,457     (126,368,066     (106,393,288     (899,589,256
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for impairment loss

            

31 December 2013

     —         (4,916,956     —         (20,821     (1,151,027     (6,088,804

Decrease in the current year

     —         1,553,024       —         20,821       127,561       1,701,406  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2014

     —         (3,363,932     —         —         (1,023,466     (4,387,398
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net book value

            

31 December 2014

     561,184,037       842,867,012       4,334,677       93,036,550       35,719,893       1,537,142,169  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

31 December 2013

     441,590,884       785,301,234       3,650,106       67,835,646       29,205,044       1,327,582,914  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

In 2016, 2015 and 2014, the amount of depreciation expense charged to cost of sales were 246,862,381, 213,440,384 and 178,646,061, respectively.

In 2016, 2015 and 2014, the amount of depreciation expense charged to selling expenses were 24,687, 14,910 and 512, respectively.

In 2016, 2015 and 2014, the amount of depreciation expense charged to general and administrative expenses were 63,736,201, 47,612,987 and 33,393,927, respectively.

 

- 40 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(9) Construction in progress

 

Project name   

31 December
2015

(Unaudited)

    

Increase in

the current
year

    

Transfer to

fixed assets

   

Transfer to

long-term

prepaid expenses

    31 December
2016
 

Building and improvements

     118,710,057        90,173,145        (34,002,825     (21,361,808     153,518,569  

Machinery and equipment

     167,382,588        278,237,083        (223,872,862     (4,803,825     216,942,984  

Other projects

     48,313,183        70,846,066        (47,108,793     (288,886     71,761,570  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
     334,405,828        439,256,294        (304,984,480     (26,454,519     442,223,123  

Including: Capitalised borrowing cost

     —          —          —         —         —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Less: Provision for impairment of construction in progress

     —          —          —         —         —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
     334,405,828        439,256,294        (304,984,480     (26,454,519     442,223,123  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

Project name    31 December
2014
    

Increase in

the current
year

    

Transfer
from

fixed assets

    

Transfer to

fixed assets

   

Transfer to

long-term

prepaid expenses

    Decrease in
the current
year
   

31 December
2015

(Unaudited)

 

Building and improvements

     203,185,882        80,800,335        —          (141,831,535     (22,146,220     (1,298,405     118,710,057  

Machinery and equipment

     221,606,083        267,408,574        5,974,194        (306,246,174     (10,538,111     (10,821,978     167,382,588  

Other projects

     60,230,565        89,964,495        2,312,121        (103,779,442     (35,100     (379,456     48,313,183  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     485,022,530        438,173,404        8,286,315        (551,857,151     (32,719,431     (12,499,839     334,405,828  

Including: Capitalised borrowing cost

     —          —          —          —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Less: Provision for impairment of construction in progress

     —          —          —          —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     485,022,530        438,173,404        8,286,315        (551,857,151     (32,719,431     (12,499,839     334,405,828  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

- 41 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(9) Construction in progress (Cont’d)

 

Name of projects    31 December
2013
    

Increase in

the current year

    

Transfer to

fixed assets

   

Transfer to

long-term

prepaid expenses

    31 December
2014
 

Building and improvements

     100,579,204        325,973,833        (145,122,080     (78,245,075     203,185,882  

Machinery and equipment

     289,380,413        274,864,503        (331,208,637     (11,430,196     221,606,083  

Other projects

     63,260,774        110,781,735        (113,811,944     —         60,230,565  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
     453,220,391        711,620,071        (590,142,661     (89,675,271     485,022,530  

Including: Capitalised borrowing cost

     1,384,961        —          (1,384,961     —         —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Less: Provision for impairment of construction in progress

     —          —          —         —         —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
     453,220,391        711,620,071        (590,142,661     (89,675,271     485,022,530  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(10) Intangible assets

 

     Cost     

31 December 2015

(Unaudited)

    

Increase in

the current

year

    

Decrease in

the current

year

    Amortisation
charged in the
current year
   

31 December

2016

     Accumulated
amortisation
 

Land use rights

     306,589,892        252,203,150        30,335,209        (11,960,599     (7,359,588     263,218,172        (43,371,720

Patents

     495,000        335,055        —          —         (36,166     298,889        (196,111

Software

     142,802,642        37,601,027        16,866,097        —         (23,405,427     31,061,697        (111,740,945

Customer relationship

     825,411,900        —          —          —         —         —          (825,411,900
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
     1,275,299,434        290,139,232        47,201,306        (11,960,599     (30,801,181     294,578,758        (980,720,676
  

 

 

            

 

 

      

 

 

 

Less: Provision for impairment of intangible assets

        —          —          —           —       
     

 

 

    

 

 

    

 

 

     

 

 

    
        290,139,232        47,201,306        (11,960,599       294,578,758     
     

 

 

    

 

 

    

 

 

     

 

 

    

 

- 42 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(10) Intangible assets (Cont’d)

 

     Cost      31 December
2014
    

Increase in

the current

year

    

Decrease in

the current

year

    Amortisation
charged in the
current year
   

31 December

2015

(Unaudited)

     Accumulated
amortisation
 

Land use rights

     289,794,984        258,532,985        —          —         (6,329,835     252,203,150        (37,591,834

Patents

     495,000        375,666        —          —         (40,611     335,055        (159,945

Software

     125,936,545        29,698,801        26,618,345        (69,044     (18,647,075     37,601,027        (88,335,518

Customer relationship

     825,411,900        73,663,625        —          —         (73,663,625     —          (825,411,900
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
     1,241,638,429        362,271,077        26,618,345        (69,044     (98,681,146     290,139,232        (951,499,197
  

 

 

            

 

 

      

 

 

 

Less: Provision for impairment of intangible assets

        —          —          —           —       
     

 

 

    

 

 

    

 

 

     

 

 

    
        362,271,077        26,618,345        (69,044       290,139,232     
     

 

 

    

 

 

    

 

 

     

 

 

    
     Cost      31 December
2013
    

Increase in

the current

year

    

Decrease in

the current

year

    Amortisation
charged in the
current year
   

31 December

2014

     Accumulated
amortisation
 

Land use rights

     289,798,854        256,297,708        8,914,858        —         (6,679,581     258,532,985        (31,265,869

Patents

     495,000        411,833        —          —         (36,167     375,666        (119,334

Software

     103,367,028        17,985,768        26,959,569        (658,658     (14,587,878     29,698,801        (73,668,227

Customer relationship

     848,841,900        313,095,108        —          —         (239,431,483     73,663,625        (775,178,275
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
     1,242,502,782        587,790,417        35,874,427        (658,658     (260,735,109     362,271,077        (880,231,705
  

 

 

            

 

 

      

 

 

 

Less: Provision for impairment of intangible assets

        —          —          —           —       
     

 

 

    

 

 

    

 

 

     

 

 

    
        587,790,417        35,874,427        (658,658       362,271,077     
     

 

 

    

 

 

    

 

 

     

 

 

    

 

- 43 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(11) Goodwill

 

    

31 December
2015

(Unaudited)

    

Increase in

the current year

    

Decrease in

the current year

     31 December
2016
 

Goodwill

     71,566,642        —          —          71,566,642  

Less: Provision for impairment

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     71,566,642        —          —          71,566,642  
  

 

 

    

 

 

    

 

 

    

 

 

 
     31 December
2014
    

Increase in

the current year

    

Decrease in

the current year

    

31 December
2015

(Unaudited)

 

Goodwill

     71,566,642        —          —          71,566,642  

Less: Provision for impairment

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     71,566,642        —          —          71,566,642  
  

 

 

    

 

 

    

 

 

    

 

 

 
     31 December
2013
    

Increase in

the current year

    

Decrease in

the current year

     31 December
2014
 

Goodwill

     71,566,642        —          —          71,566,642  

Less: Provision for impairment

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     71,566,642        —          —          71,566,642  
  

 

 

    

 

 

    

 

 

    

 

 

 

The recoverable amount of asset groups and groups of asset groups is calculated using the estimated cash flows determined according to the five-year budget approved by management. The cash flows beyond the five-year period are calculated based on the following estimated growth rates.

The main assumptions applied in calculating discounted future cash flows are as follows:

 

Growth rate

     12.0

Gross margin

     20.0

Discount rate

     17.0

The weighted average growth rates applied by management are consistent with those estimated in the industry reports, and do not exceed the long-term average growth rates of each product. Management determines budgeted gross margin based on past experience and forecast on future market development. The discount rates used by management are the pre-tax interest rates that are able to reflect the risks specific to the related asset groups and groups of asset groups. The above assumptions are used to assess the recoverable amount of respective groups within the corresponding operating segment.

 

(12) Long-term prepaid expenses

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Improvements to fixed assets held under operating leases

     182,621,388        179,174,199        189,829,072  

Software

     147,650        584,334        2,509,712  

Others

     13,259,203        15,358,365        10,217,240  
  

 

 

    

 

 

    

 

 

 
     196,028,241        195,116,898        202,556,024  
  

 

 

    

 

 

    

 

 

 

 

- 44 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(13) Deferred tax assets and deferred tax liabilities

 

(a) Deferred tax assets

 

     31 December 2016      31 December 2015
(Unaudited)
     31 December 2014  
     Deferred tax
assets
     Deductible
temporary
difference
     Deferred tax
assets
     Deductible
temporary
difference
     Deferred tax
assets
     Deductible
temporary
difference
 

Provisions for asset impairment

     19,481,023        113,203,687        9,560,137        55,463,501        9,969,371        52,422,022  

Depreciation of fixed assets

     3,190,153        17,038,480        4,477,205        21,513,376        6,666,212        26,732,055  

Accrued expenses, accounts receivable and accounts payable

     778,137,801        3,919,738,157        502,335,531        2,486,895,028        288,981,601        1,454,697,632  

Accrued payroll

     27,160,131        168,946,288        19,049,565        119,149,427        16,308,003        107,641,939  

Deductible losses

     1,639,537        6,558,148        8,975,147        35,900,585        11,817,121        47,268,490  

Deferred income

     1,770,896        7,083,583        1,719,295        7,402,636        1,360,000        5,440,000  

Amortisation of intangible assets

     —          —          —          —          730,101        2,920,405  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     831,379,541        4,232,568,343        546,116,880        2,726,324,553        335,832,409        1,697,122,543  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Including:

 

  

Expected to be recovered within one year (inclusive)

     827,442,771           538,515,249           318,540,723     

Expected to be recovered after one year

     3,936,770           7,601,631           17,291,686     
  

 

 

       

 

 

       

 

 

    
     831,379,541           546,116,880           335,832,409     
  

 

 

       

 

 

       

 

 

    

 

(b) Deductible temporary differences and deductible losses that are not recognised as deferred tax assets are analysed as follows:

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Deductible temporary differences

     28,817,623        —          —    

Deductible losses

     16,702,985        4,495,525        7,609,676  
  

 

 

    

 

 

    

 

 

 
     45,520,608        4,495,525        7,609,676  
  

 

 

    

 

 

    

 

 

 

 

- 45 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(13) Deferred tax assets and deferred tax liabilities (Cont’d)

 

(c) Deductible losses that are not recognised as deferred tax assets will be expired as follows:

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Within 1 year

     —          4,495,525        3,114,151  

Between 1 to 2 years

     —          —          4,495,525  

Between 2 to 3 years

     —          —          —    

Between 3 to 4 years

     —          —          —    

Over 4 years

     16,702,985        —          —    
  

 

 

    

 

 

    

 

 

 
     16,702,985        4,495,525        7,609,676  
  

 

 

    

 

 

    

 

 

 

 

(d) Deferred tax liabilities

 

     31 December 2016    31 December 2015
(Unaudited)
   31 December 2014
     Deferred tax
liabilities
    

Taxable

temporary
difference

   Deferred tax
liabilities
    

Taxable

temporary
difference

   Deferred tax
liabilities
    

Taxable

temporary
difference

Business combinations involving

enterprises not under common control

     —             —             18,485,081      73,940,324

Depreciation of fixed assets

     —             241,500      965,999      114,812      459,248
  

 

 

    

 

  

 

 

    

 

  

 

 

    

 

     —             241,500      965,999      18,599,893      74,399,572
  

 

 

    

 

  

 

 

    

 

  

 

 

    

 

Including:

                 

Expected to be recovered within one year (inclusive)

     —             241,500           18,599,893     

Expected to be recovered after one year

     —             —             —       
  

 

 

       

 

 

       

 

 

    
     —             241,500           18,599,893     
  

 

 

       

 

 

       

 

 

    

 

- 46 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(14) Other non-current assets

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Prepayment for equipment

     39,899,868        50,533,076        30,967,176  

Rental deposits

     17,561,824        19,798,915        22,042,460  

Prepayment for land use right

     —          29,455,609        —    
  

 

 

    

 

 

    

 

 

 
     57,461,692        99,787,600        53,009,636  
  

 

 

    

 

 

    

 

 

 

 

(15) Short-term borrowings

 

     Currency    31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Unsecured

   RMB      408,884,232        75,000,000        100,000,000  
     

 

 

    

 

 

    

 

 

 

As at 31 December 2016, 2015 and 2014, the weighted average interest rate of short-term borrowings is 4.38%, 6.02% and 6.43% per annum, respectively.

 

(16) Notes payable

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Bank acceptance notes

     666,979,006        457,179,867        441,557,489  
  

 

 

    

 

 

    

 

 

 

As at 31 December 2016, 2015 and 2014, bank acceptance notes of 325,076,774, 228,819,635 and 235,486,021 were secured with bank deposits of 289,907,686, 198,561,011 and 166,719,551 (Note 7(1)).

As at 31 December 2016, 2015 and 2014, bank acceptance notes of 152,544,483, 221,724,500 and 206,071,468 were secured with notes receivable of 152,544,483, 222,124,500 and 204,357,084 (Note 7(2)).

 

(17) Accounts payable

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Within 1 year

     9,748,879,362        8,346,912,180        6,459,349,263  

1 to 2 years

     85,196,150        108,949,525        40,263,804  

2 to 3 years

     22,907,089        9,008,700        7,786,083  

Over 3 years

     3,151,224        4,009,058        3,120,497  
  

 

 

    

 

 

    

 

 

 
     9,860,133,825        8,468,879,463        6,510,519,647  
  

 

 

    

 

 

    

 

 

 

 

- 47 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(18) Employee benefits payable

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Short-term employee benefits payable (a)

     771,593,541        606,859,311        538,637,755  

Defined contribution plans payable (b)

     21,367,180        14,293,502        9,950,804  
  

 

 

    

 

 

    

 

 

 
     792,960,721        621,152,813        548,588,559  
  

 

 

    

 

 

    

 

 

 

 

(a) Short-term employee benefits payable

 

    

31 December

2015

(Unaudited)

     Increase in the
current year
     Decrease in the
current year
    

31 December

2016

 

Wages and salaries, bonus, allowances and subsidies

     295,220,972        1,431,467,945        (1,315,012,971      411,675,946  

Staff welfare

     —          114,470,992        (114,470,992      —    

Social security contributions

     9,116,375        66,392,937        (66,045,693      9,463,619  
  

 

 

    

 

 

    

 

 

    

 

 

 

Including: Medical insurance

     4,891,372        58,270,190        (55,864,988      7,296,574  

Work injury insurance

     665,975        5,273,526        (5,180,324      759,177  

Maternity insurance

     3,559,028        2,849,221        (5,000,381      1,407,868  
  

 

 

    

 

 

    

 

 

    

 

 

 

Housing funds

     7,865,810        80,420,576        (76,883,388      11,402,998  

Labour union funds and

employee education funds

     17,081,193        29,525,357        (24,380,454      22,226,096  

Other short-term employee benefits

     318,558        1,037,775        (646,492      709,841  

Staff welfare and incentive funds

     277,256,403        48,743,593        (9,884,955      316,115,041  
  

 

 

    

 

 

    

 

 

    

 

 

 
     606,859,311        1,772,059,175        (1,607,324,945      771,593,541  
  

 

 

    

 

 

    

 

 

    

 

 

 
    

31 December

2014

     Increase in the
current year
     Decrease in the
current year
    

31 December

2015

(Unaudited)

 

Wages and salaries, bonus, allowances and subsidies

     260,619,279        1,132,303,027        (1,097,701,334      295,220,972  

Staff welfare

     —          87,717,100        (87,717,100      —    

Social security contributions

     14,377,485        83,877,705        (89,138,815      9,116,375  
  

 

 

    

 

 

    

 

 

    

 

 

 

Including: Medical insurance

     7,372,363        71,839,820        (74,320,811      4,891,372  

Work injury insurance

     2,255,176        4,984,132        (6,573,333      665,975  

Maternity insurance

     4,749,946        7,053,753        (8,244,671      3,559,028  
  

 

 

    

 

 

    

 

 

    

 

 

 

Housing funds

     9,213,678        95,555,097        (96,902,965      7,865,810  

Labour union funds and employee education funds

     16,874,496        25,619,638        (25,412,941      17,081,193  

Other short-term employee benefits

     1,086,076        3,157,495        (3,925,013      318,558  

Staff welfare and incentive funds

     236,466,741        45,146,630        (4,356,968      277,256,403  
  

 

 

    

 

 

    

 

 

    

 

 

 
     538,637,755        1,473,376,692        (1,405,155,136      606,859,311  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 48 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(18) Employee benefits payable (Cont’d)

 

(a) Short-term employee benefits payable (Cont’d)

 

    31 December
2013
     Increase in the
current year
     Decrease in the
current year
     31 December
2014
 

Wages and salaries, bonus, allowances and subsidies

    226,914,167        1,130,907,576        (1,097,202,464      260,619,279  

Staff welfare

    —          28,970,535        (28,970,535      —    

Social security contributions

    12,057,713        67,536,120        (65,216,348      14,377,485  
 

 

 

    

 

 

    

 

 

    

 

 

 

Including: Medical insurance

    6,641,342        57,526,220        (56,795,199      7,372,363  

Work injury insurance

    1,965,662        3,900,702        (3,611,188      2,255,176  

Maternity insurance

    3,450,709        6,109,198        (4,809,961      4,749,946  
 

 

 

    

 

 

    

 

 

    

 

 

 

Housing funds

    5,512,519        69,194,114        (65,492,955      9,213,678  

Labour union funds and employee education funds

    14,494,462        25,723,259        (23,343,225      16,874,496  

Other short-term employee benefits

    161,052        2,419,505        (1,494,481      1,086,076  

Staff welfare and incentive funds

    197,913,333        45,375,460        (6,822,052      236,466,741  
 

 

 

    

 

 

    

 

 

    

 

 

 
    457,053,246        1,370,126,569        (1,288,542,060      538,637,755  
 

 

 

    

 

 

    

 

 

    

 

 

 

In accordance with the Circular on Accounting Treatment of Enterprises Following the Implementation of the Company Law (Cai Qi [2006]67) issued by the Ministry of Finance on 15 March 2006, if the board of directors determines to continue the accrual for the staff welfare and incentive fund, the Company should specify the purposes of the fund, and the conditions and procedures for using the fund. The fund should be managed as a liability.

 

(b) Defined contribution plans payable

 

     2016  
     Amount payable      Ending balance  

Basic pensions

     147,378,646        19,608,691  

Unemployment insurance

     7,715,280        1,758,489  
  

 

 

    

 

 

 
     155,093,926        21,367,180  
  

 

 

    

 

 

 
     2015 (Unaudited)  
     Amount payable      Ending balance  

Basic pensions

     151,997,339        13,380,326  

Unemployment insurance

     10,391,553        913,176  
  

 

 

    

 

 

 
     162,388,892        14,293,502  
  

 

 

    

 

 

 
     2014  
     Amount payable      Ending balance  

Basic pensions

     108,658,194        6,489,804  

Unemployment insurance

     8,206,064        3,461,000  
  

 

 

    

 

 

 
     116,864,258        9,950,804  
  

 

 

    

 

 

 

 

- 49 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(19) Taxes payable

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Enterprise income tax payable

     439,098,114        302,092,879        194,557,016  

Unpaid VAT

     237,394,873        223,572,378        179,644,760  

Withholding individual income

tax payable

     8,695,828        9,871,414        5,188,415  

Others

     24,057,989        24,484,878        27,965,300  
  

 

 

    

 

 

    

 

 

 
     709,246,804        560,021,549        407,355,491  
  

 

 

    

 

 

    

 

 

 

 

(20) Other payables

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Accrued expenses

     1,945,410,740        1,270,897,055        1,353,331,749  

Modules fee payables

     202,794,863        88,193,425        60,145,386  

Payables for purchase of

property, plant and equipment    

     84,347,957        40,303,467        108,869,302  

Service fee payables

     50,534,097        62,195,223        19,364,734  

Other payables paid-on-behalf

of the Group by others

     18,096,164        33,294,050        60,349,267  

Transportation fee payables

     10,582,666        2,809,094        400,571  

Others

     42,590,973        48,498,097        50,345,494  
  

 

 

    

 

 

    

 

 

 
     2,354,357,460        1,546,190,411        1,652,806,503  
  

 

 

    

 

 

    

 

 

 

 

(21) Long-term borrowings

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Unsecured

     13,505,000        18,903,000        24,301,000  

Less: Current portion of long-

term borrowings

     (5,398,000      (5,398,000      (5,398,000
  

 

 

    

 

 

    

 

 

 
     8,107,000        13,505,000        18,903,000  
  

 

 

    

 

 

    

 

 

 

As at 31 December 2016, 2015 and 2014, the weighted average interest rate of long-term borrowings is 5.15%, 6.15% and 6.55% per annum, respectively.

 

- 50 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(22) Surplus reserve

 

    

31 December
2015

(Unaudited)

    

Increase in

the current
year

    

Decrease in

the current
year

     31 December
2016
 

Reserve Fund

     130,929,416        15,891,180        —          146,820,596  

Enterprise Expansion Fund

     198,133,636        31,782,360        —          229,915,996  
  

 

 

    

 

 

    

 

 

    

 

 

 
     329,063,052        47,673,540        —          376,736,592  
  

 

 

    

 

 

    

 

 

    

 

 

 
     31 December
2014
    

Increase in

the current
year

    

Decrease in

the current
year

    

31 December
2015

(Unaudited)

 

Reserve Fund

     116,186,069        14,743,347        —          130,929,416  

Enterprise Expansion Fund

     168,646,941        29,486,695        —          198,133,636  
  

 

 

    

 

 

    

 

 

    

 

 

 
     284,833,010        44,230,042        —          329,063,052  
  

 

 

    

 

 

    

 

 

    

 

 

 
     31 December
2013
    

Increase in

the current
year

    

Decrease in

the current
year

     31 December
2014
 

Reserve Fund

     103,413,601        14,962,268        (2,189,800      116,186,069  

Enterprise Expansion Fund

     138,722,405        29,924,536        —          168,646,941  
  

 

 

    

 

 

    

 

 

    

 

 

 
     242,136,006        44,886,804        (2,189,800      284,833,010  
  

 

 

    

 

 

    

 

 

    

 

 

 

In accordance with the Law of the PRC on Chinese Foreign Equity Joint Ventures and the Company’s Articles of Association, the Company appropriated 15,891,180, 14,743,347 and 14,962,268 to Reverse Fund for the years of 2016, 2015 and 2014, respectively, and 31,782,360, 29,486,695 and 29,924,536 to the Enterprise Expansion Fund for the years of 2016, 2015 and 2014, respectively.

 

(23) Undistributed profits

In accordance with the resolution at the Board of Directors’ meeting dated on 5 May 2016, 7 August 2015 and 12 May 2014, the Company proposed a dividend in the amount of 1,385,874,680, 1,406,453,166 and 1,413,873,089 to the investors, respectively.

 

- 51 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(24) Revenue and cost of sales

 

    2016     2015 (Unaudited)     2014  
    Revenue     Cost of sales     Revenue     Cost of sales     Revenue     Cost of sales  

Revenue from main operations

           

- sales of automotive spare parts

    28,543,605,353       (23,910,736,255     25,946,688,824       (21,576,248,882     23,300,080,576       (19,212,615,952

Revenue from other operations

           

- sales of raw materials

    366,746,804       (215,932,018     332,415,663       (307,126,311     1,088,884,852       (1,039,139,938

- service income

    191,903,654       (81,143,480     265,741,206       (120,826,588     49,801,832       (7,330,000

- others

    20,245,367       (7,571,679     27,205,071       (18,816,187     46,362,610       (28,479,493
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    29,122,501,178       (24,215,383,432     26,572,050,764       (22,023,017,968     24,485,129,870       (20,287,565,383
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(25) Taxes and surcharges

 

     2016     

2015

(Unaudited)

     2014  

City maintenance and construction tax

     69,269,617        59,994,242        38,920,905  

Educational surcharge

     62,249,763        53,004,452        36,606,013  

Others

     31,201,169        6,878,859        9,970,928  
  

 

 

    

 

 

    

 

 

 
     162,720,549        119,877,553        85,497,846  
  

 

 

    

 

 

    

 

 

 

 

(26) Financial income—net

 

     2016     

2015

(Unaudited)

     2014  

Interest income

     67,827,500        68,066,033        43,790,505  

Interest costs—borrowings

     (6,316,721      (7,057,701      (9,211,536

Charges for discounted notes receivable

     (173,065      (92,465      (53,771

Exchange gains/(losses)—net

     4,911,656        2,633,550        (5,828,481

Others

     (4,998,427      (4,450,537      (3,491,398
  

 

 

    

 

 

    

 

 

 
     61,250,943        59,098,880        25,205,319  
  

 

 

    

 

 

    

 

 

 

 

- 52 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(27) Expenses by nature

The cost of sales, selling expenses, general and administrative expenses in the income statements are listed as follows by nature:

 

     2016     

2015

(Unaudited)

     2014  

Changes in inventories of finished goods and work in progress

     40,586,926        (132,579,173      (26,448,188

Consumed raw materials and low value consumables, etc.

     22,059,980,339        20,489,628,165        18,518,827,158  

Employee benefits expenses

     1,878,409,508        1,590,618,954        1,441,615,367  

Research and development expenses

     391,857,460        266,918,928        290,649,240  

Depreciation and amortisation expenses

     391,254,028        398,139,629        502,251,363  

Rental expenses

     209,235,385        170,677,949        154,885,771  

Transportation and logistics fee

     181,107,054        181,461,700        186,555,000  

Utilities

     121,804,031        145,971,042        102,474,719  

After-sales service fee

     9,411,125        6,564,753        7,145,671  

Advertising expenses

     1,475,148        1,765,506        1,375,313  

Others

     1,097,504,734        917,983,769        1,117,251,738  
  

 

 

    

 

 

    

 

 

 
     26,382,625,738        24,037,151,222        22,296,583,152  
  

 

 

    

 

 

    

 

 

 

 

(28) Asset impairment losses

 

     2016     

2015

(Unaudited)

     2014  

Bad debts provision

     65,970,387        7,056,982        725,698  

(Reversal of)/Decline in the value of inventories

     (2,235,672      2,323,537        3,945,541  
  

 

 

    

 

 

    

 

 

 
     63,734,715        9,380,519        4,671,239  
  

 

 

    

 

 

    

 

 

 

 

(29) Investment income

 

     2016     

2015

(Unaudited)

     2014  

Share of net profit of investees under equity method

     54,019,531        40,459,106        13,897,472  

Gains on disposal of long-term equity Investments (a)

     —          7,898,751        —    
  

 

 

    

 

 

    

 

 

 
     54,019,531        48,357,857        13,897,472  
  

 

 

    

 

 

    

 

 

 

 

(a) Gain from disposal of long-term equity investments attributes to the disposal of 50% equity interest of Baoding Yanfeng Johnson Automotive Seating Co., Ltd. in 2015.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(30) Non-operating income and expenses

 

(a) Non-operating income

 

     2016     

2015

(Unaudited)

     2014  

Government grant

     70,847,989        34,676,251        27,429,208  

Gains on disposal of non-current assets

     3,695,321        1,676,650        13,714,861  

Others

     1,679,072        9,466,186        4,127,931  
  

 

 

    

 

 

    

 

 

 
     76,222,382        45,819,087        45,272,000  
  

 

 

    

 

 

    

 

 

 

 

(b) Non-operating expenses

 

     2016     

2015

(Unaudited)

     2014  

Losses on disposal of fixed assets

     22,076,927        4,669,157        10,808,449  

Others

     3,014,728        9,843,767        3,716,581  
  

 

 

    

 

 

    

 

 

 
     25,091,655        14,512,924        14,525,030  
  

 

 

    

 

 

    

 

 

 

 

(31) Income tax expenses

 

     2016     

2015

(Unaudited)

     2014  

Current income tax

     793,033,052        692,032,499        523,415,144  

Deferred income tax

     (285,504,161      (228,642,864      (134,613,476
  

 

 

    

 

 

    

 

 

 
     507,528,891        463,389,635        388,801,668  
  

 

 

    

 

 

    

 

 

 

The reconciliation from income tax calculated based on the applicable tax rates and total profit presented in the consolidated financial statements to the income tax expenses is listed below:

 

     2016     

2015

(Unaudited)

     2014  

Total profit

     2,679,821,377        2,544,404,370        2,168,227,394  
  

 

 

    

 

 

    

 

 

 

Income tax expenses calculated at applicable tax rates

     669,955,344        636,101,093        542,056,849  

Investment income under equity method

     (8,102,930      (6,068,866      (2,084,621

Effect of favourable tax rates

     (131,879,937      (146,627,863      (129,982,885

Additional deduction of research and development expenses

     (6,179,545      (9,984,951      (9,608,501

Effect of change in the tax rates

     1,190,062        1,336,323        (2,237,894

Costs, expenses and losses not deductible for tax purposes

     3,035,020        17,797,833        7,366,230  

Deductible losses and deductible temporary differences for which no deferred income tax asset was recognised

     6,541,466        —          778,538  

Reversal of previously recognised/(Utilisation of previously unrecognised) deductible losses and deductible temporary differences

     10,873,546        (52,862,590      (8,383,048

Prior year income tax reconciliation differences

     (37,904,135      23,698,656        (9,103,000
  

 

 

    

 

 

    

 

 

 

Income tax expenses

     507,528,891        463,389,635        388,801,668  
  

 

 

    

 

 

    

 

 

 

 

- 54 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(32) Other comprehensive income/(loss)

 

(a) Items of other comprehensive income / (loss) with the related income tax effect and the amount reclassified to profit or loss

 

     2016  
    

Amount

before tax

     Income tax     

Net amount

after tax

 

Other comprehensive income items which will be reclassified subsequently to profit or loss

        

Differences arising from translation of foreign currency financial statements

     1,290,996        —          1,290,996  

Less: Reclassification of previous other comprehensive income to profit or loss

     —          —          —    
  

 

 

    

 

 

    

 

 

 
     1,290,996        —          1,290,996  
  

 

 

    

 

 

    

 

 

 

 

     2015 (Unaudited)  
    

Amount

before tax

     Income
tax
    

Net amount

after tax

 

Other comprehensive loss items which will be reclassified subsequently to profit or loss

        

Differences arising from translation of foreign currency financial statements

     (275,031      —          (275,031

Less: Reclassification of previous other comprehensive income to profit or loss

     —          —          —    
  

 

 

    

 

 

    

 

 

 
     (275,031      —          (275,031
  

 

 

    

 

 

    

 

 

 

 

     2014  
    

Amount

before tax

     Income
tax
    

Net amount

after tax

 

Other comprehensive income items which will be reclassified subsequently to profit or loss

        

Differences arising from translation of foreign currency financial statements

     114,990        —          114,990  

Less: Reclassification of previous other comprehensive income to profit or loss

     —          —          —    
  

 

 

    

 

 

    

 

 

 
     114,900        —          114,900  
  

 

 

    

 

 

    

 

 

 

 

- 55 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(32) Other comprehensive income/(loss) (Cont’d)

 

(b) Reconciliation of other comprehensive income/(loss)

 

     Attributable to equity owners
of the Company
     Minority
interests
     Total  
     Differences
arising from
translation
of foreign
currency
financial
statements
     Sub-total                

31 December 2013

     (147,000      (147,000      —          (147,000

Movements for the year ended 31 December 2014

     114,990        114,990        —          114,990  
  

 

 

    

 

 

    

 

 

    

 

 

 

31 December 2014

     (32,010      (32,010      —          (32,010
  

 

 

    

 

 

    

 

 

    

 

 

 

Movements for the year ended 31 December 2015 (Unaudited)

     (275,031      (275,031      —          (275,031
  

 

 

    

 

 

    

 

 

    

 

 

 

31 December 2015 (Unaudited)

     (307,041      (307,041      —          (307,041
  

 

 

    

 

 

    

 

 

    

 

 

 

Movements for the year ended 31 December 2016

     1,290,996        1,290,996        —          1,290,996  
  

 

 

    

 

 

    

 

 

    

 

 

 

31 December 2016

     983,955        983,955        —          983,955  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 56 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

7 Notes to the consolidated financial statements (Cont’d)

 

(33) Notes to the consolidated cash flow statements

 

(a) Reconciliation from net profit to cash flows from operating activities

 

     2016     

2015

(Unaudited)

     2014  

Net profit

     2,172,292,486        2,081,014,735        1,779,425,726  

Add: Provisions for asset impairment

     63,734,715        9,380,519        4,671,239  

Depreciation of fixed assets

     310,623,269        261,068,281        212,040,500  

Amortisation of intangible assets

     30,801,181        98,681,146        260,735,109  

Amortisation of long-term prepaid expenses

     49,829,578        38,390,202        29,475,754  

Losses/(Gains) on disposal of fixed assets, intangible assets and other long-term assets

     18,381,606        2,992,507        (2,906,412

Financial (income)/expenses

     (3,032,122      (4,983,235      6,842,052  

Investment income

     (54,019,531      (48,357,857      (13,897,472

Increase in deferred tax assets

     (285,262,661      (210,718,377      (83,489,083

Decrease in deferred tax liabilities

     (241,500      (18,358,393      (51,124,393

Increase in inventories

     (94,240,317      (65,755,469      (17,678,319

Increase in operating receivables

     (871,936,802      (1,261,835,070      (415,978,727

Increase in operating payables

     2,621,421,678        2,116,111,288        959,246,328  
  

 

 

    

 

 

    

 

 

 

Net cash flows from operating activities

     3,958,351,580        2,997,630,277        2,667,362,302  
  

 

 

    

 

 

    

 

 

 

 

(b) Net increase in cash and cash equivalents

 

     2016     

2015

(Unaudited)

     2014  

Cash and cash equivalents at the end of the year

     6,179,211,510        3,741,333,102        2,998,757,581  

Less: Cash and cash equivalents at the beginning of the year

     (3,741,333,102      (2,998,757,581      (2,762,455,926
  

 

 

    

 

 

    

 

 

 

Net increase in cash and cash equivalents

     2,437,878,408        742,575,521        236,301,655  
  

 

 

    

 

 

    

 

 

 

 

(c) Cash and cash equivalents

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

Cash at bank and on hand (Note 7(1))

     6,469,119,196        3,939,894,113        3,165,627,901  

Less: Other restricted cash balances

     (289,907,686      (198,561,011      (166,870,320
  

 

 

    

 

 

    

 

 

 

Cash and cash equivalents at the end of the year

     6,179,211,510        3,741,333,102        2,998,757,581  
  

 

 

    

 

 

    

 

 

 

 

- 57 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

8 Business combination

 

(a) Equity transactions with minority interest

On 26 September 2014, the Company acquired 45% equity interest of its subsidiary, Shanghai Johnson Automotive Metal from JCI. After the acquisition, Shanghai Johnson Automotive Metal Components Co. Ltd. became a wholly-owned subsidiary of the Company. Capital surplus and surplus reserve adjustments of the deal are as follows:

 

Cost of combination -

  

Cash paid

     84,289,950  
  

 

 

 

Total combination cost

     84,289,950  

Less: the share of the subsidiary’s net identifiable assets continually calculated from the combination date based on the newly acquired equity ratio at the transaction day

     (80,951,299
  

 

 

 
     3,338,651  
  

 

 

 

Including: Capital surplus adjustment

     1,148,851  

Surplus reserve adjustment

     2,189,800  

 

9 Related parties and related party transactions

 

(1) The parent company and subsidiaries

The general information and other related information of the subsidiaries is set out in Note 6.

 

(a) General information of the parent company

 

     Place of registration    Nature of business
Yanfeng Trim    Shanghai, China    Development and production of plastic and decorating products used for automobiles, trucks and motorcycles, moulds, stamping parts, standard fasteners; sales of self-produced products, import and export of products and technologies, industrial investment; technical development, transfer, consultancy and service, and business information consultancy in the special area of auto parts; and self-owned house leasing.

 

The parent company is Yanfeng Trim and the ultimate holding company is Shanghai Automotive Industry Corporation.

 

- 58 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

9 Related parties and related party transactions (Cont’d)

 

(1) The parent company and subsidiaries (Cont’d)

 

(b) Registered capital and changes in registered capital of the parent company

 

    

31 December

2015

(Unaudited)

     Current year
changes
    

31 December

2016

 
     RMB         RMB  

Yanfeng Trim

     1,078,947,853        —          1,078,947,853  
  

 

 

    

 

 

    

 

 

 
    

31 December

2014

     Current year
changes
    

31 December

2015

(Unaudited)

 
     RMB         RMB  

Yanfeng Trim

     1,078,947,853        —          1,078,947,853  
  

 

 

    

 

 

    

 

 

 
    

31 December

2013

     Current year
changes
    

31 December

2014

 
     USD         RMB  

Yanfeng Trim

     139,233,200        —          1,078,947,853  
  

 

 

    

 

 

    

 

 

 

Note: Yanfeng Trim changed from foreign-invested production enterprise to domestic enterprise approved by Shanghai Municipal Commission of Commerce (Grant No: Shanghai Foreign Investment approve [2013] No.3573). After the registration changes in Shanghai Industrial and Commercial Bureau, the registered capital changed from USD 139,233,200 to RMB 1,078,947,853. The parent company obtained an updated business licence on 6 January 2014.

 

(c) The proportion of interests and voting rights in the Company held by the parent company

 

     31 December
2016
    31 December 2015
(Unaudited)
    31 December
2014
 
    

Share

holding

   

Voting

rights

   

Share

holding

   

Voting

rights

   

Share

holding

   

Voting

rights

 

Yanfeng Trim

     50.01     50.00     50.01     50.00     50.01     50.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 59 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

9 Related parties and related party transactions (Cont’d)

 

(2) Related parties that do not control or are not controlled by the Company

 

   Relationship with the Group
Guangzhou Dongfeng Johnson Seating (ii)    Associate
Wuhan Taiji (ii)    Associate
CRH Shenyang (ii)    Joint venture
Yanfeng Hainachuan Automotive Trim Systems Co., Ltd. (iii)    Subsidiary of the parent company
Yanfeng Automotive Trim Systems Liuzhou Co., Ltd. (iii)    Subsidiary of the parent company
Yanfeng Automotive Trim Systems Guangzhou Co., Ltd. (iii)    Subsidiary of the parent company

Yanfeng Gabriel (Shanghai) Automotive Safety Systems

Co., Ltd. (iii)

   Subsidiary of the parent company
Dongfeng Automotive Trim Systems Co., Ltd. (iii)    Subsidiary of the parent company

Yanfeng Johnson Controls Automotive Seating Mechanical

Parts Co., Ltd. (iii)

   Subsidiary of the parent company
Yanfeng Visteon Automotive Electronics Co., Ltd. (iii)    Joint venture of the parent company
SAIC Volkswagen Automotive Co., Ltd. (iii)    Joint venture of the ultimate holding company
SAIC General Motors Co., Ltd (iii)    Joint venture of the ultimate holding company

Shanghai GM (Shenyang) Norsom Motors

Co., Ltd. (iii)

   Joint venture of the ultimate holding company
SAIC General Motors Sales Co., Ltd. (iii)    Subsidiary of the ultimate holding company
SAIC GM Dong Yue Motors Co., Ltd. (iii)    Joint venture of the ultimate holding company

Shanghai TRW Automotive Safety Systems

Co., Ltd. (iii)

   Joint venture of the ultimate holding company
SAIC Finance Co., Ltd. (iii)    Subsidiary of the ultimate holding company
SAIC Motor Corporation Limited (iii)    Subsidiary of the ultimate holding company
Jiangsu ANJI Logistics Co., Ltd. (iii)    Subsidiary of the ultimate holding company
Shanghai Sanhuan Spring Co., Ltd. (iii)    Subsidiary of the ultimate holding company
Nanjing Automobile (Group) Corporation (iii)    Subsidiary of the ultimate holding company
Donghua Automotive Industrial Co., Ltd. (iii)    Subsidiary of the ultimate holding company
Nanjing Iveco Automobile Co., Ltd. (iii)    Joint venture of the ultimate holding company
SAIC GM Wuling Co., Ltd. (iii)    Subsidiary of the ultimate holding company
SAIC Activity Centre Co., Ltd. (iii)    Subsidiary of the ultimate holding company
SAIC Maxus Vehicle Co., Ltd. (iii)    Subsidiary of the ultimate holding company

Shanghai International Automotive City

Development Co., Ltd. (iii)

   Associate of the ultimate holding company
Shanghai Boze Auto Parts Co., Ltd. (iii)    Associate of the ultimate holding company
Pan Asia Technical Automotive Center Co., Ltd. (iii)    Joint venture of the ultimate holding company
SAIC Volkswagen Sales Co., Ltd. (iii)    Subsidiary of the ultimate holding company
Shanghai Koito Automotive Lamp Co., Ltd. (iii)    Joint venture of the ultimate holding company

Shanghai LEAR STEC Automotive Parts

Co., Ltd. (iii)

   Associate of the ultimate holding company

Shanghai Haitong International Automotive

Logistics Co., Ltd. (iii)

   Subsidiary of the ultimate holding company
Chongqing Zhonghai Spring Co., Ltd. (iii)    Subsidiary of the ultimate holding company
SAIC (Yantai) Industrial Co., Ltd. (iii)    Subsidiary of the ultimate holding company

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

9 Related parties and related party transactions (Cont’d)

 

(2) Related parties that do not control or are not controlled by the Company (Cont’d)

 

   Relationship with the Group
Adient plc (i) (iv)    Ultimate holding company of Adient Asia
Johnson Controls Automotive Interior Investment Co., Limited (iv)    Subsidiary of Johnson Controls International plc
Guangzhou Johnson Controls Automotive Interior Systems Co., Ltd. (iv)    Joint venture of Adient plc
Changsha Guangzhou Automobile Johnson Controls Automotive Interior Systems Co., Ltd. (iv)    Joint venture of Adient plc
Adient Bochum Ltd. & Co. KG (iv)    Subsidiary of Adient plc
Adient Hungary Kft. (iv)    Subsidiary of Adient plc
Kinryo Kogyo Co., Ltd. (iv)    Subsidiary of Adient plc
Other subsidiaries of Adient plc (iv)    Subsidiary of Adient plc

 

  (i) In 2016, Johnson Controls International plc, the former ultimate holding company of the Company’s investor Adient Asia, spin off its automotive seating business and interiors business including Adient Asia and established an independent company Adient plc which was listed in NYSE on 31 October 2016. Accordingly, Johnson Controls International plc and its subsidiaries are no longer related parties of Adient plc and its subsidiaries.

 

  (ii) The related parties are collectively referred to as “Associates and Joint ventures”.

 

  (iii) The related parties are collectively referred to as “SAIC, its subsidiaries, associates and joint ventures”.

 

  (iv) The related parties are collectively referred to as “Adient and JCI, its subsidiaries and joint ventures”.

 

(3) Related party transactions

 

(a) Pricing policies

The Group’s pricing on products sold to related parties, purchased from related parties, rendering of services and lease payments are negotiated by both parties and by making reference to the market price.

 

(b) Purchase of goods

 

     2016     

2015

(Unaudited)

     2014  

SAIC, its subsidiaries, associates and joint ventures

     6,498,294,883        6,040,834,033        4,237,372,070  

Associates and Joint ventures

     324,582,271        186,911,048        —    

Adient and JCI, its subsidiaries and joint ventures

     109,494,707        120,581,231        410,815,392  
  

 

 

    

 

 

    

 

 

 
     6,932,371,861        6,348,326,312        4,648,187,462  
  

 

 

    

 

 

    

 

 

 

 

- 61 -


Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

9 Related parties and related party transactions (Cont’d)

 

(3) Related party transactions (Cont’d)

 

(c) Sale of goods

 

     2016     

2015

(Unaudited)

     2014  

SAIC, its subsidiaries, associates and joint ventures

     18,688,195,185        16,507,946,364        15,798,341,005  

Adient and JCI, its subsidiaries and joint ventures

     629,760,415        630,717,292        1,206,475,766  

Associates and Joint ventures

     83,612,859        177,185,654        46,748,588  
  

 

 

    

 

 

    

 

 

 
     19,401,568,459        17,315,849,310        17,051,565,359  
  

 

 

    

 

 

    

 

 

 

 

(d) Technical service fee

 

     2016     

2015

(Unaudited)

     2014  

Adient and JCI, its subsidiaries and joint ventures

     54,457,867        11,094,631        25,794,485  

SAIC, its subsidiaries and joint ventures

     —          —          441,814  
  

 

 

    

 

 

    

 

 

 
     54,457,867        11,094,631        26,236,299  
  

 

 

    

 

 

    

 

 

 

 

(e) (Decrease)/Increase on entrusted loans and cash pool—net

 

     2016     

2015

(Unaudited)

     2014  

SAIC, its subsidiaries, associates and joint ventures

     (149,017,458      300,000,000        —    

Associates and Joint ventures

     (15,000,000      (35,646,471      646,471  
  

 

 

    

 

 

    

 

 

 
     (164,017,458      264,353,529        646,471  
  

 

 

    

 

 

    

 

 

 

 

(f) Interest income from entrusted loans and cash pool

 

     2016     

2015

(Unaudited)

     2014  

SAIC, its subsidiaries, associates and joint ventures

     8,782,308        11,903,333        —    

Associates and Joint ventures

     566,535        137,603        2,369,484  
  

 

 

    

 

 

    

 

 

 
     9,348,843        12,040,936        2,369,484  
  

 

 

    

 

 

    

 

 

 

 

(g) Transfer of fixed assets

 

             2016              2015
(Unaudited)
     2014  

SAIC, its subsidiaries, associates and joint ventures

     —          —          239,181,461  
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

9 Related parties and related party transactions (Cont’d)

 

(4) Receivables from and payables to related parties

 

(a) Accounts receivable

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     3,573,100,002        3,535,400,441        2,476,788,674  

Adient and JCI, its subsidiaries and joint ventures

     160,191,396        254,272,885        282,348,127  

Associates and Joint ventures

     68,419,242        67,727,656        68,544,572  
  

 

 

    

 

 

    

 

 

 
     3,801,710,640        3,857,400,982        2,827,681,373  
  

 

 

    

 

 

    

 

 

 

 

(b) Notes receivable

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     80,319,000        198,155,751        143,284,958  

Associates and Joint ventures

     —          11,764,000        36,075,000  
  

 

 

    

 

 

    

 

 

 
     80,319,000        209,919,751        179,359,958  
  

 

 

    

 

 

    

 

 

 

 

(c) Advances to suppliers

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     2,693,546        2,700,000        2,700,000  
  

 

 

    

 

 

    

 

 

 

 

(d) Other receivables

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     154,655,835        40,933,096        213,200,582  
  

 

 

    

 

 

    

 

 

 

 

(e) Other current assets

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     —          300,000,000        —    

Associates and Joint ventures

     —          15,000,000        —    
  

 

 

    

 

 

    

 

 

 
     —          315,000,000        —    
  

 

 

    

 

 

    

 

 

 

 

(f) Dividends receivable

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

Associates and Joint ventures

     12,071,405        16,336,555        —    
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

9 Related parties and related party transactions (Cont’d)

 

(4) Receivables from and payables to related parties (Cont’d)

 

(g) Cash at bank—deposit in SAIC, its subsidiaries, associates and joint ventures

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     1,509,271,765        385,533,629        112,121,166  
  

 

 

    

 

 

    

 

 

 

 

(h) Accounts payable

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     1,633,962,197        1,355,522,304        777,445,836  

Associates and Joint ventures

     109,748,062        76,470,959        —    

Adient and JCI, its subsidiaries and joint ventures

     32,727,281        22,165,380        48,256,121  
  

 

 

    

 

 

    

 

 

 
     1,776,437,540        1,454,158,643        825,701,957  
  

 

 

    

 

 

    

 

 

 

 

(i) Notes payable

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     89,010,000        21,133,578        36,513,000  
  

 

 

    

 

 

    

 

 

 

 

(j) Other payables

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

SAIC, its subsidiaries, associates and joint ventures

     4,535,939        —          —    
  

 

 

    

 

 

    

 

 

 

 

(5) Commitments in relation to related parties

The commitments in relation to related parties contracted for by the Group but not yet necessary to be recognised on the balance sheet as at the balance sheet date are as follows:

 

(a) Leases

 

     31 December
2016
    

31 December
2015

(Unaudited)

     31 December
2014
 

- Lessee

        

SAIC, its subsidiaries, associates and joint ventures

     49,120,982        36,939,538        41,311,628  
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

10 Commitments

 

(1) Capital commitments

Capital expenditures contracted for by the Group but are not yet necessary to be recognised on the balance sheet as at the balance sheet date are as follows:

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Buildings, machinery and equipment

     117,327,496        16,596,507        80,488,440  
  

 

 

    

 

 

    

 

 

 

 

(2) Operating lease commitments

The future minimum lease payments due under the signed irrevocable operating leases contracts are summarised as follows:

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Within 1 year

     140,730,559        132,460,943        131,592,517  

1 and 2 years

     108,597,927        120,530,998        113,931,992  

2 and 3 years

     98,372,305        114,024,576        105,257,607  

Over 3 years

     294,351,515        361,243,744        284,160,625  
  

 

 

    

 

 

    

 

 

 
     642,052,306        728,260,261        634,942,741  
  

 

 

    

 

 

    

 

 

 

 

11 Financial risk

The Group’s activities expose it to a variety of financial risks: market risk (primarily including currency risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

 

(1) Market risk

 

(a) Foreign exchange risk

The Group’s major operational activities are carried out in Mainland China and a majority of the transactions are denominated in RMB. The Group is exposed to foreign exchange risk arising from the recognised assets and liabilities, and future transactions denominated in foreign currencies, primarily with respect to US dollars. The Group’s finance department at its headquarters is responsible for monitoring the amount of assets and liabilities, and transactions denominated in foreign currencies to minimise the foreign exchange risk. Therefore, the Group may consider entering into forward exchange contracts or currency swap contracts to mitigate the foreign exchange risk.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

11 Financial risk (Cont’d)

 

(1) Market risk (Cont’d)

 

(a) Foreign exchange risk (Cont’d)

 

As at 31 December 2016, 2015 and 2014, the carrying amounts in RMB equivalent of the Group’s assets and liabilities denominated in foreign currencies are summarized below:

 

     31 December 2016  
     USD      Others      Total  

Financial assets denominated in foreign currency -

        

Cash at bank and on hand

     24,397,693        25,997,605        50,395,298  

Receivables

     158,187,444        259,685,501        417,872,945  
  

 

 

    

 

 

    

 

 

 
     182,585,137        285,683,106        468,268,243  
  

 

 

    

 

 

    

 

 

 

Financial liabilities denominated in foreign currency -

        

Payables

     56,922,242        116,890,582        173,812,824  
  

 

 

    

 

 

    

 

 

 

 

     31 December 2015
(Unaudited)
 
     USD      Others      Total  

Financial assets denominated in foreign currency -

        

Cash at bank and on hand

     43,742,685        21,370,564        65,113,249  

Receivables

     173,800,678        250,854,243        424,654,921  
  

 

 

    

 

 

    

 

 

 
     217,543,363        272,224,807        489,768,170  
  

 

 

    

 

 

    

 

 

 

Financial liabilities denominated in foreign currency -

        

Payables

     48,819,672        121,748,654        170,568,326  
  

 

 

    

 

 

    

 

 

 

 

     31 December 2014  
     USD      Others      Total  

Financial assets denominated in foreign currency -

        

Cash at bank and on hand

     53,521,080        24,670,080        78,191,160  

Receivables

     209,023,397        222,641,716        431,665,113  
  

 

 

    

 

 

    

 

 

 
     262,544,477        247,311,796        509,856,273  
  

 

 

    

 

 

    

 

 

 

Financial liabilities denominated in foreign currency -

        

Payables

     41,166,835        91,832,808        132,999,643  
  

 

 

    

 

 

    

 

 

 

As at 31 December 2016, 2015 and 2014, if the RMB had strengthened/weakened by 10% against the USD while all other variables had been held constant, the Group’s profit before tax for the years would have been approximately 12,566,290, 16,872,369 and 22,137,764 lower/higher for various financial assets and liabilities denominated in USD.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

11 Financial instrument and risk (Cont’d)

 

(1) Market risk (Cont’d)

 

(b) Interest rate risk

The Group’s interest rate risk mainly arises from related party entrusted loans and interest-bearing bank borrowings. Financial liabilities issued at floating rates expose the Group to cash flow interest rate risk. Financial liabilities issued at fixed rates expose the Group to fair value interest rate risk. The Group determines the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market conditions. As at 31 December 2016, 2015 and 2014, the Group’s long-term interest bearing borrowings were RMB-denominated with floating rates, amounting to 8,107,000, 13,505,000 and 18,903,000 (Note 7(21)).

The Group’s finance department at its headquarters continuously monitors the interest rate position of the Group. Increases in interest rates will increase the cost of new borrowing and the interest expenses with respect to the Group’s outstanding floating rate borrowings, and therefore could have a material adverse effect on the Group’s financial performance. The Group makes adjustments timely with reference to the latest market conditions and may enter into interest rate swap agreements to mitigate its exposure to interest rate risk. During 2016, 2015 and 2014, the Group did not enter into any interest rate swap agreements.

As at 31 December 2016, 2015 and 2014, if interest rates on the floating rate borrowings had risen/fallen by 50 basis points while all other variables had been held constant, the Group’s net profit would have decreased/increased by approximately 40,535, 67,525 and 94,515, respectively.

 

(2) Credit risk

Credit risk is managed on the grouping basis. Credit risk mainly arises from cash at bank, accounts receivable, other receivables and notes receivable etc.

The Group expects that there is no significant credit risk associated with cash at bank since they are deposited at state-owned banks, other medium or large size listed banks and related party. As at 31 December 2016, 2015 and 2014, cash deposited at state-owned banks, other medium or large size listed banks and related party were approximately 6,468 million, 3,934 million and 3,160 million, respectively. Management does not expect that there will be any significant losses from non-performance by these counterparties.

In addition, the Group has policies to limit the credit exposure on accounts receivable, other receivables and notes receivable. The Group assesses the credit quality of and sets credit limits on its customers by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The credit history of the customers is regularly monitored by the Group. In respect of customers with a poor credit history, the Group will use written payment reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Group is limited to a controllable extent.

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

11 Financial instrument and risk (Cont’d)

 

(3) Liquidity risk

Cash flow forecasting is performed by each subsidiary of the Group and aggregated by the Group’s finance department in its headquarters. The Group’s finance department at its headquarters monitors rolling forecasts of the Group’s short-term and long-term liquidity requirements to ensure it has sufficient cash that are readily convertible to cash to meet operational needs, while maintaining sufficient headroom on its undrawn committed borrowing facilities from major financial institution so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.

The financial liabilities of the Group at the balance sheet date are analysed by their maturity date below at their undiscounted contractual cash flow:

 

     31 December 2016  
     Within 1 year      1 to 5 years      Over 5 years      Total  

Short-term borrowings

     408,884,232        —          —          408,884,232  

Notes payable

     666,979,006        —          —          666,979,006  

Accounts payable

     9,860,133,825        —          —          9,860,133,825  

Interest payable

     12,410,831        231,970        —          12,642,801  

Other payables

     2,354,357,460        —          —          2,354,357,460  

Long-term borrowings

     5,398,000        8,107,000        —          13,505,000  
  

 

 

    

 

 

    

 

 

    

 

 

 
     13,308,163,354        8,338,970        —          13,316,502,324  
  

 

 

    

 

 

    

 

 

    

 

 

 
     31 December 2015
(Unaudited)
 
     Within 1 year      1 to 5 years      Over 5 years      Total  

Short-term borrowings

     75,000,000        —          —          75,000,000  

Notes payable

     457,179,867        —          —          457,179,867  

Accounts payable

     8,468,879,463        —          —          8,468,879,463  

Interest payable

     4,678,717        900,386        —          5,579,103  

Other payables

     275,293,356        —          —          275,293,356  

Long-term borrowings

     5,398,000        13,505,000        —          18,903,000  
  

 

 

    

 

 

    

 

 

    

 

 

 
     9,286,429,403        14,405,386        —          9,300,834,789  
  

 

 

    

 

 

    

 

 

    

 

 

 
     31 December 2014  
     Within 1 year      1 to 5 years      Over 5 years      Total  

Short-term borrowings

     100,000,000        —          —          100,000,000  

Notes payable

     441,557,489        —          —          441,557,489  

Accounts payable

     6,510,519,647        —          —          6,510,519,647  

Interest payable

     6,023,194        1,841,602        —          7,864,796  

Dividends payable

     36,552,986        —          —          36,552,986  

Other payables

     299,474,754        —          —          299,474,754  

Long-term borrowings

     5,398,000        18,903,000        —          24,301,000  
  

 

 

    

 

 

    

 

 

    

 

 

 
     7,399,526,070        20,744,602        —          7,420,270,672  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED

31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

12 Fair value estimates

 

(1) Financial assets and liabilities not measured at fair value

Financial assets and liabilities measured at amortised cost mainly include receivables, short-term borrowings, payables and long-term borrowings etc.

The carrying amount of the financial assets and liabilities not measured at fair value is a reasonable approximation of their fair value.

 

13 Capital management

The Group’s capital management policies aim to safeguard the Group’s ability to continue as a going concern in order to provide returns for investors and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to investors, refund capital to investors or sell assets to reduce debts.

The Group’s total capital is calculated as ‘owners’ equity’ as shown in the consolidated balance sheet. The Group is not subject to external mandatory capital requirements.

 

14 Reconciliation to United States generally accepted accounting principles

The financial statements have been prepared in accordance with Accounting Standards for Business Enterprises in the People’s Republic of China (“PRC GAAP”), which differ in certain respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). The significant differences are described in the reconciliation tables below. Other differences do not have a significant effect on either net profit or owners’ equity. The effects of the significant adjustments to net profit for the years ended 31 December 2016, 2015 and 2014 which would be required if U.S. GAAP were to be applied instead of PRC GAAP are summarized as follows:

 

     2016     

2015

(Unaudited)

     2014  

Net profit under PRC GAAP

     2,172,292,486        2,081,014,735        1,779,425,726  

Adjustments:

        

Inventory impairment reversals (a)

     (2,965,596      618,444        525,473  

Staff Welfare and Incentive Fund (b)

     (9,884,955      (4,356,968      (6,822,052

Tax effect of the reconciling items (c)

     444,839        (92,767      (78,821
  

 

 

    

 

 

    

 

 

 

Net profit under U.S. GAAP

     2,159,886,774        2,077,183,444        1,773,050,326  
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

YANFENG ADIENT SEATING CO., LTD.

(FORMERLY KNOWN AS “SHANGHAI YANFENG JOHNSON CONTROLS SEATING CO., LTD.”)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2016, 2015 AND 2014 (AMOUNTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)

 

14 Reconciliation to United States generally accepted accounting principles (Cont’d)

 

The effects of the significant adjustments to owners’ equity for the years ended 31 December 2016, 2015 and 2014 which would be required if U.S. GAAP were to be applied instead of PRC GAAP are summarized as follows:

 

     31 December 2016     

31 December 2015

(Unaudited)

     31 December 2014  

Owners’ equity under PRC GAAP

     4,372,016,024        3,924,801,104        3,523,307,561  

Adjustments:

        

Inventory impairment reversals (a)

     (3,130,580      618,444        525,473  

Staff Welfare and Incentive Fund (b)

     316,115,041        277,256,403        236,466,741  

Tax effect of the reconciling items (c)

     469,587        (92,767      (78,821
  

 

 

    

 

 

    

 

 

 

Owners’ equity under U.S. GAAP

     4,685,470,072        4,202,583,184        3,760,220,954  
  

 

 

    

 

 

    

 

 

 

 

(a) Inventory impairment reversals

Under PRC GAAP, reversals of inventory impairment charges (limited to the amounts of the original impairment) are required for subsequent recoveries. Impairments and any subsequent reversals are included in a separate profit and loss line item—“Asset impairment losses”, which is outside of cost of goods sold. Under U.S. GAAP, reversals of impairments are prohibited, as a write-down of inventories to the lower of cost or market creates a new cost basis that subsequently cannot be reversed.

 

(b) Staff Welfare and Incentive Fund

In accordance with the Law of the PRC on Chinese-Foreign Equity Joint Ventures and the Company’s Articles of Association, the Company appropriated the Staff Welfare and Incentive Fund of net profit after setting off accumulated losses of previous years and before profit distributions to the investors. The Staff Welfare and Incentive Fund is restricted to fund payments of special bonus to employees and for the collective welfare of employees. None of it is allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor can it be distributed except under liquidation.

Under PRC GAAP, appropriation of the Staff Welfare and Incentive Fund is a liability in nature and accounted for as a transfer from retained earnings to Staff Welfare and Incentive Fund, a liability account. Subsequent payments is accounted for as a release of the Company’s liability.

Under U.S. GAAP, appropriation to the Staff Welfare and Incentive Fund is accounted for as a transfer from retained earnings to the statutory reserves. Subsequent payment is accounted for as expenses or assets based on the usage of the payment, and proportionate retained earnings and the statutory reserves are reversed concurrently.

 

(c) Tax effect of the reconciling items

The applicable statutory tax rate used to calculate the tax effect of the reconciling items on the net profit reconciliation between PRC GAAP and U.S. GAAP for the year ended December 31, 2016, 2015 and 2014 was 15%.

 

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