AUTOLIV INC (Form: 10-Q, Received: 10/24/2013 12:40:43)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15 (d)

of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013

Commission File No.: 001-12933

AUTOLIV, INC.

(Exact name of registrant as specified in its charter)


Delaware		51-0378542
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Vasagatan 11, 7 ^th floor, SE-111 20,
Box 70381,
SE-107 24 Stockholm, Sweden		N/A
(Address of principal executive offices)		(Zip Code)

+46 8 587 20 600

(Registrant’s telephone number, including area code)

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: x 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: x No: ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ¨ No: x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of October 17, 2013, there were 95,892,944 shares of common stock of Autoliv, Inc., par value $1.00 per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are not historical facts but rather forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that address activities, events or developments that Autoliv, Inc. (“Autoliv,” the “Company” or “we”) or its management believes or anticipates may occur in the future. For example, forward-looking statements include, without limitation, statements relating to industry trends, business opportunities, sales contracts, sales backlog, and on-going commercial arrangements and discussions, as well as any statements about future operating performance or financial results.

In some cases, you can identify these statements by forward-looking words such as “estimates,” “expects,” “anticipates,” “foresee,” “projects,” “plans,” “intends,” “believes,” “may,” “might,” “will,” “should,” or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words.

All forward-looking statements, including without limitation, management’s examination of historical operating trends and data, are based upon our current expectations, various assumptions and data available from third parties. Our expectations and assumptions are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements.

Because these forward-looking statements involve risks and uncertainties, the outcomes could differ materially from those set out in the forward-looking statements for a variety of reasons, including without limitation, changes in and the successful execution of our capacity alignment, restructuring and cost reduction initiatives discussed herein and the market reaction thereto; changes in general industry market conditions or regional growth or declines; loss of business from increased competition; higher raw material, fuel and energy costs; changes in consumer and customer preferences for end products; customer losses; changes in regulatory conditions; customer bankruptcies; consolidations or restructuring; divestiture of customer brands; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; fluctuation in vehicle production schedules for which the Company is a supplier; component shortages; market acceptance of our new products; costs or difficulties related to the integration of any new or acquired businesses and technologies; continued uncertainty in program awards and performance; the financial results of companies in

which Autoliv has made technology investments or joint-venture arrangements; pricing negotiations with customers; our ability to be awarded new business; product liability, warranty and recall claims and other litigation and customer reactions thereto; higher expenses for our pension and other postretirement benefits including higher funding requirements of our pension plans; work stoppages or other labor issues at our facilities or at the facilities of our customers or suppliers; possible adverse results of pending or future litigation or infringement claims; negative impacts of antitrust investigations or other governmental investigations and associated litigation relating to the conduct of our business (including securities or other litigation); tax assessments by governmental authorities; dependence on key personnel; legislative or regulatory changes limiting our business; political conditions; dependence on customers and suppliers; and other risks and uncertainties identified in Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2012. The Company undertakes no obligation to update publicly or revise any forward-looking statements in light of new information or future events.

For any forward-looking statements contained in this or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we assume no obligation to update any such statement.

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


1	Basis of Presentation	9
2	New Accounting Pronouncements	9
3	Fair Value Measurement	9
4	Income Taxes	16
5	Inventories	16
6	Restructuring	16
7	Product-Related Liabilities	17
8	Retirement Plans	18
9	Equity and Equity Units Offering	18
10	Non-Controlling Interest	19
11	Contingent Liabilities	20
12	Earnings Per Share	22
13	Subsequent Events	23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		24

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		33

ITEM 4. CONTROLS AND PROCEDURES		33

PART II - OTHER INFORMATION		33

ITEM 1. LEGAL PROCEEDINGS		33

ITEM 1A. RISK FACTORS		33

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		34

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		34

ITEM 4. MINE SAFETY DISCLOSURES		34

ITEM 5. OTHER INFORMATION		34

ITEM 6. EXHIBITS		35

CONSOLIDATED STATEMENTS OF NET INCOME (UNAUDITED)

(Dollars in millions, except per share data)


	Three months ended						Nine months ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012

Net sales	$	2,119.0		$	1,947.1		$	6,451.5		$	6,214.8

Cost of sales		(1,714.1	)		(1,559.5	)		(5,201.8	)		(4,964.0	)

Gross profit		404.9			387.6			1,249.7			1,250.8

Selling, general & administrative expenses		(93.8	)		(88.8	)		(286.7	)		(276.3	)
Research, development & engineering expenses, net		(120.2	)		(96.8	)		(379.7	)		(350.0	)
Amortization of intangibles		(5.1	)		(4.8	)		(15.3	)		(14.5	)
Other income (expense), net		(3.5	)		(9.8	)		(9.3	)		(78.9	)

Operating income		182.3			187.4			558.7			531.1

Equity in earnings of affiliates, net of tax		1.8			1.8			5.4			5.3
Interest income		0.9			0.9			2.5			2.4
Interest expense		(8.1	)		(10.9	)		(24.3	)		(32.6	)
Other financial items, net		(0.3	)		(4.1	)		(2.9	)		(7.6	)

Income before income taxes		176.6			175.1			539.4			498.6

Income tax expense		(51.7	)		(57.1	)		(150.0	)		(153.0	)

Net income	$	124.9		$	118.0		$	389.4		$	345.6

Less: net income attributable to non-controlling interests		1.0			0.5			3.3			1.2

Net income attributable to controlling interest	$	123.9		$	117.5		$	386.1		$	344.4

Net earnings per share – basic	$	1.29		$	1.23		$	4.03		$	3.71
Net earnings per share – diluted	$	1.29		$	1.23		$	4.02		$	3.63

Weighted average number of shares outstanding, net of treasury shares (in millions)		95.8			95.4			95.7			92.8

Weighted average number of shares outstanding, assuming dilution and net of treasury shares (in millions)		96.2			95.7			96.0			94.9

Number of shares outstanding, excluding dilution and net of treasury shares (in millions)		95.9			95.4			95.9			95.4

Cash dividend per share – declared	$	0.50		$	0.50		$	1.50		$	1.44
Cash dividend per share – paid	$	0.50		$	0.47		$	1.50		$	1.39

See “Notes to unaudited condensed consolidated financial statements.”

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in millions)


	Three months ended						Nine months ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012

Net income	$	124.9		$	118.0		$	389.4		$	345.6

Foreign currency translation adjustments		39.0			45.5			(15.6	)		24.3
Defined benefit pension plan		2.8			2.0			7.9			5.6

Other comprehensive (loss), before tax		41.8			47.5			(7.7	)		29.9

Income tax expense related to defined benefit pension plan		(1.0	)		(0.7	)		(2.8	)		(2.0	)

Other comprehensive (loss), net of tax		40.8			46.8			(10.5	)		27.9

Comprehensive income	$	165.7		$	164.8		$	378.9		$	373.5

Less: comprehensive income attributable to non-controlling interest		1.0			0.8			3.6			1.3

Comprehensive income attributable to controlling interest	$	164.7		$	164.0		$	375.3		$	372.2

See “Notes to unaudited condensed consolidated financial statements.”

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)


	As of
	September 30, 2013			December 31, 2012
	(unaudited)			December 31, 2012
Assets
Cash & cash equivalents	$	1,134.7		$	977.7
Receivables, net		1,710.8			1,509.3
Inventories, net		642.4			611.0
Other current assets		221.0			191.2

Total current assets		3,708.9			3,289.2

Property, plant & equipment, net		1,291.8			1,232.8
Investments and other non-current assets		328.3			341.3
Goodwill		1,608.5			1,610.8
Intangible assets, net		82.7			96.2

Total assets	$	7,020.2		$	6,570.3

Liabilities and equity
Short-term debt	$	216.4		$	69.8
Accounts payable		1,114.1			1,055.9
Accrued expenses		621.9			497.1
Other current liabilities		215.6			227.0

Total current liabilities		2,168.0			1,849.8

Long-term debt		423.5			562.9
Pension liability		263.9			255.4
Other non-current liabilities		132.5			126.1

Total non-current liabilities		819.9			944.4

Common stock		102.8			102.8
Additional paid-in capital		1,329.3			1,329.3
Retained earnings		2,914.9			2,672.5
Accumulated other comprehensive income		(51.3	)		(40.5	)
Treasury stock		(284.1	)		(305.5	)

Total parent shareholders’ equity		4,011.6			3,758.6
Non-controlling interests		20.7			17.5

Total equity		4,032.3			3,776.1

Total liabilities and equity	$	7,020.2		$	6,570.3

See “Notes to unaudited condensed consolidated financial statements.”

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in millions)


	Nine months ended
	September 30, 2013			September 30, 2012

Operating activities
Net income	$	389.4		$	345.6
Depreciation and amortization		210.6			204.0
Other, net		38.4			13.4
Changes in operating assets and liabilities		(99.7	)		(115.7	)


Net cash provided by operating activities		538.7			447.3

Investing activities
Expenditures for property, plant and equipment		(271.2	)		(264.2	)
Proceeds from sale of property, plant and equipment		3.8			2.9
Acquisitions and divestitures of businesses and other, net		(1.0	)		3.5


Net cash used in investing activities		(268.4	)		(257.8	)

Financing activities
Net increase (decrease) in short-term debt		147.8			(26.6	)
Issuance of long-term debt		—			32.5
Repayments and other changes in long-term debt		(135.0	)		(8.9	)
Dividends paid to non-controlling interest		(0.4	)		(0.8	)
Dividends paid		(143.5	)		(129.9	)
Common stock issue, net		—			106.3
Common stock options exercised		16.0			12.1
Other, net		0.9			(1.0	)


Net cash used in financing activities		(114.2	)		(16.3	)

Effect of exchange rate changes on cash and cash equivalents		0.9			(4.2	)


Increase in cash and cash equivalents		157.0			169.0

Cash and cash equivalents at beginning of period		977.7			739.2


Cash and cash equivalents at end of period	$	1,134.7		$	908.2

See “Notes to unaudited condensed consolidated financial statements.”

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all amounts are presented in millions of dollars, except for per share amounts)

September 30, 2013

1 Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, unaudited condensed consolidated financial statements have been prepared on the same basis as the prior year audited financial statements and all adjustments considered necessary for a fair presentation have been included in the financial statements. All such adjustments are of a normal recurring nature. The result for the interim period is not necessarily indicative of the results to be expected for any future period or for the fiscal year ending December 31, 2013. Certain prior-year amounts have been reclassified to conform to current year presentation.

The condensed consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP for complete financial statements.

Statements in this report that are not of historical fact are forward-looking statements that involve risks and uncertainties that could affect the actual results of the Company. A description of the important factors that could cause Autoliv’s actual results to differ materially from the forward-looking statements contained in this report may be found in this report and Autoliv’s other reports filed with the Securities and Exchange Commission (the “SEC”). For further information, refer to the consolidated financial statements, footnotes and definitions thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February 22, 2013.

2 New Accounting Pronouncements

The following accounting guidance has been issued and is effective for the Company in or after fiscal year 2013:

In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, “ Disclosures about Offsetting Assets and Liabilities ”, which requires disclosure of financial instruments and derivatives that are either offset on the balance sheet in accordance with Accounting Standards Codification (ASC) 210-20-45 or ASC 815-10-45, or subject to a master netting arrangement, irrespective of whether they are offset on the balance sheet. ASU No. 2011-11 is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. Entities should provide the disclosures required by this ASU retrospectively for all comparative periods presented. Subsequent to the issuance of ASU 2011-11, the FASB issued in January 2013 ASU 2013-01 and limited the scope of the new balance sheet offsetting disclosure requirements to certain derivatives, repurchase agreements and securities lending arrangements. The adoption of ASU 2011-11 and ASU 2013-01 had an impact on the Company’s disclosures about its financial instruments in the consolidated financial statements.

3 Fair Value Measurement

Assets and liabilities measured at fair value on a recurring basis

The Company uses derivative financial instruments, “derivatives”, as part of its debt management to mitigate the market risk that occurs from its exposure to changes in interest and foreign exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial policy. The derivatives outstanding at September 30, 2013 are foreign exchange swaps. All swaps principally match the terms and maturity of the underlying debt and no swaps have a maturity beyond six months. All derivatives are recognized in the consolidated financial statements at fair value. Certain derivatives are from time to time designated either as fair value hedges or cash flow hedges in line with the hedge accounting criteria. For certain other derivatives hedge accounting is not applied either because non-hedge accounting treatment creates the same accounting result or the hedge does not meet the hedge accounting requirements, although entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest and foreign exchange rates.

When a hedge is classified as a fair value hedge, the change in the fair value of the hedge is recognized in the Consolidated Statement of Net Income along with the off-setting change in the fair value of the hedged item. When a hedge is classified as a cash flow hedge, any change in the fair value of the hedge is initially recorded in

equity as a component of Other Comprehensive Income, (OCI), and reclassified into the Consolidated Statement of Net Income when the hedge transaction affects net earnings. There were no reclassifications from OCI to the Consolidated Statement of Net Income during the three and nine months ended September 30, 2013 and September 30, 2012 and, likewise, no reclassifications are expected for the next twelve months. Any ineffectiveness has been immaterial. During the first quarter of 2013 the Company closed a $60 million interest rate swap and the amount received was included in the debt balance and will be amortized over the remaining life of the underlying debt. No fair value adjustments were made as a consequence of the close-out.

The Company records derivatives at fair value. Any gains and losses on derivatives recorded at fair value are reflected in the Consolidated Statement of Net Income with the exception of cash flow hedges where an immaterial portion of the fair value is reflected in other comprehensive income. The degree of judgment utilized in measuring the fair value of the instruments generally correlates to the level of pricing observability. Pricing observability is impacted by a number of factors, including the type of asset or liability, whether the asset or liability has an established market and the characteristics specific to the transaction. Derivatives with readily active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, assets rarely traded or not quoted will generally have less, or no, pricing observability and a higher degree of judgment utilized in measuring fair value.

Under existing GAAP, there is a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by the hierarchy are as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level 3 - Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

The following tables summarize the valuation of the Company’s derivatives by the above noted pricing observability levels:


			Fair Value Measurements at September 30, 2013
			Using
Description	Total carrying amount in Consolidated Balance Sheet September 30, 2013		Level 1		Level 2		Level 3

Assets
Derivatives ^a)	$	0.4		—	$	0.4		—
Total Assets	$	0.4		—	$	0.4		—

Liabilities
Derivatives	$	0.2		—	$	0.2		—
Total Liabilities	$	0.2		—	$	0.2		—

^a)

The decrease from year end is explained by the closure of a $60 million interest rate swap in Q1 of 2013.


			Fair Value Measurements at December 31, 2012
			Using
Description	Total carrying amount in Consolidated Balance Sheet December 31, 2012		Level 1		Level 2		Level 3

Assets
Derivatives	$	16.5		—	$	16.5		—
Total Assets	$	16.5		—	$	16.5		—

Liabilities
Derivatives	$	0.7		—	$	0.7		—
Total Liabilities	$	0.7		—	$	0.7		—

The tables below present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. Although the Company is party to close-out netting agreements with all derivative counterparties, the fair values in the tables below and in the Consolidated Balance Sheets at September 30, 2013 and December 31, 2012, have been presented on a gross basis. The net amounts subject to netting agreements that the Company choose not to offset are presented in footnotes. According to the close-out netting agreements, transaction amounts payable to a counterparty on the same date and in the same currency can be netted.


				Fair Value Measurements at September 30, 2013
Description	Nominal volume			Derivative asset			Derivative liability			Balance sheet location
Derivatives designated as hedging instruments
Interest rate swaps, less than 7 years (fair value hedge) ^a)	$	—		$	—		$	—		Other non-current asset
Total derivatives designated as hedging instruments	$	—		$	—		$	—

Derivatives not designated as hedging instruments

Foreign exchange swaps, less than 6 months	$	512.1	¹⁾	$	0.4	²⁾	$	0.2	³⁾	Other current assets/ liabilities

Total derivatives not designated as hedging instruments	$	512.1		$	0.4		$	0.2

Total derivatives	$	512.1		$	0.4		$	0.2

1)	Net amount after deducting for offsetting swaps $468.3 million.

2)	Net amount after deducting for offsetting swaps $0.4 million.

3)	Net amount after deducting for offsetting swaps $0.2 million.

a)	The decrease from year end is explained by the closure of a $60 million interest rate swap in Q1 of 2013.


				Fair Value Measurements at December 31, 2012
Description	Nominal volume			Derivative asset			Derivative liability			Balance sheet location
Derivatives designated as hedging instruments
Interest rate swaps, less than 7 years (fair value hedge)	$	60.0		$	15.8		$	—		Other non-current asset
Total derivatives designated as hedging instruments	$	60.0		$	15.8		$	—

Derivatives not designated as hedging instruments

Foreign exchange swaps, less than 6 months	$	700.8	¹⁾	$	0.7	²⁾	$	0.7	³⁾	Other current assets/ liabilities

Total derivatives not designated as hedging instruments	$	700.8		$	0.7		$	0.7

Total derivatives	$	760.8		$	16.5		$	0.7

1)	Net amount after deducting for offsetting swaps $569.9 million.

2)	Net amount after deducting for offsetting swaps $0.6 million.

3)	Net amount after deducting for offsetting swaps $0.6 million.

Amount of gain (loss)
recognized in Consolidated
Statement of Net Income Three
months ended September 30,
2013

Description

Nominal
Volume

Other
Financial
Items,
net

Interest
Expense

Interest
Income

Amount of gain
(loss)
recognized in
OCI on
derivative
effective
portion

Amount of
gain (loss)
reclassified
from
accumulated
OCI into
interest
expense

Derivatives designated as hedging instruments

Interest rate swap, less than 7 years (fair value hedge) ^a)

—

Hedged item (fair value hedge)

Fixed rate private placement debt due 2019

—

Total gain(loss) in Consolidated Statement of Net Income

0.0

a)	The decrease from year end is explained by the closure of a $60 million interest rate swap in Q1 of 2013.


			Amount of gain (loss) recognized in Consolidated Statement of Net Income Nine months ended September 30, 2013
Description	Nominal Volume		Other Financial Items, net		Interest Expense			Interest Income		Amount of gain (loss) recognized in OCI on derivative effective portion		Amount of gain (loss) reclassified from accumulated OCI into interest expense
Derivatives designated as hedging instruments
Interest rate swap, less than 7 years (fair value hedge) ^a)	$	—	$	—	$	(1.3	)	$	—	$	—	$	—
Hedged item (fair value hedge)
Fixed rate private placement debt due 2019	$	—	$	—	$	1.3		$	—	$	—	$	—
Total gain(loss) in Consolidated Statement of Net Income					$	0.0

a)	The decrease from year end is explained by the closure of a $60 million interest rate swap in Q1 of 2013.


			Amount of gain (loss) recognized in Consolidated Statement of Net Income Three months ended September 30, 2012
Description	Nominal volume		Other financial items, net		Interest expense			Interest income		Amount of gain (loss) recognized in OCI on derivative effective portion		Amount of gain (loss) reclassified from accumulated OCI into interest expense
Derivatives designated as hedging instruments
Interest rate swap, less than 8 years (fair value hedge)	$	60.0	$	—	$	0.6		$	—	$	—	$	—
Total derivatives designated as hedging instruments	$	60.0
Hedged item (fair value hedge)
Fixed rate private placement debt due 2019	$	60.0	$	—	$	(0.6	)	$	—	$	—	$	—
Total gain(loss) in Consolidated Statement of Net Income					$	0.0


			Amount of gain (loss) recognized in Consolidated Statement of Net Income Nine months ended September 30, 2012
Description	Nominal volume		Other financial items, net		Interest expense			Interest income		Amount of gain (loss) recognized in OCI on derivative effective portion		Amount of gain (loss) reclassified from accumulated OCI into interest expense
Derivatives designated as hedging instruments
Interest rate swap, less than 8 years (fair value hedge)	$	60.0	$	—	$	1.5		$	—	$	—	$	—
Total derivatives designated as hedging instruments	$	60.0
Hedged item (fair value hedge)
Fixed rate private placement debt due 2019	$	60.0	$	—	$	(1.5	)	$	—	$	—	$	—
Total gain(loss) in Consolidated Statement of Net Income					$	0.0


				Amount of gain (loss) recognized in Consolidated Statement of Net Income Three months ended September 30, 2013
Description	Nominal Volume			Other Financial Items, net		Interest Expense			Interest Income
Derivatives not designated as hedging instruments
Foreign exchange swaps	$	512.1	¹⁾	$	0.3	$	(0.0	)	$	—
Total derivatives not designated as hedging instruments	$	512.1

1)	Net amount after deducting for offsetting swaps $468.3 million.


				Amount of gain (loss) recognized in Consolidated Statement of Net Income Nine months ended September 30, 2013
Description	Nominal Volume			Other Financial Items, net		Interest Expense		Interest Income
Derivatives not designated as hedging instruments
Foreign exchange swaps	$	512.1	¹⁾	$	0.3	$	0.0	$	—
Total derivatives not designated as hedging instruments	$	512.1

1)	Net amount after deducting for offsetting swaps $468.3 million.


				Amount of gain (loss) recognized in Consolidated Statement of Net Income Three months ended September 30, 2012
Description	Nominal Volume			Other Financial Items, net		Interest Expense		Interest Income
Derivatives not designated as hedging instruments
Foreign exchange swaps	$	1,272.8	¹⁾	$	1.4	$	0.0	$	—
Total derivatives not designated as hedging instruments	$	1,272.8

1)	Net amount after deducting for offsetting swaps $715.7 million.


				Amount of gain (loss) recognized in Consolidated Statement of Net Income Nine months ended September 30, 2012
Description	Nominal Volume			Other Financial Items, net			Interest Expense			Interest Income
Derivatives not designated as hedging instruments
Foreign exchange swaps	$	1,272.8	¹⁾	$	(8.5	)	$	(0.0	)	$	—
Total derivatives not designated as hedging instruments	$	1,272.8

1)	Net amount after deducting for offsetting swaps $715.7 million.

All amounts recognized in the Consolidated Statement of Net Income related to derivatives, not designated as hedging instruments, relate to economic hedges and thus have been materially off-set by an opposite Consolidated Statement of Net Income effect of the related financial liabilities or financial assets.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities and short-term debt approximate their fair value because of the short term maturity of these instruments. The fair value of long-term debt is determined either from quoted market prices as provided by participants in the secondary market or for long-term debt without quoted market prices, estimated using a discounted cash flow method based on the Company’s current borrowing rates for similar types of financing. The fair value of derivatives is estimated using a discounted cash flow method based on quoted market prices. The fair value and carrying value of debt is summarized in the table below. The Company has determined that each of these fair value measurements of debt reside within Level 2 of the fair value hierarchy. The discount rates for all derivative contracts are based on bank deposit or swap interest rates. Credit risk has been considered when determining the discount rates used for the derivative contracts, which when aggregated by counterparty, are in a liability position.

Fair Value of Debt


	September 30,		September 30,		December 31,		December 31,
	2013		2013		2012		2012
	Carrying		Fair		Carrying		Fair
Long-term debt	value ¹⁾		value		value ¹⁾		value
U.S. Private placement	$	303.2	$	325.9	$	305.8	$	329.5
Medium-term notes		101.1		100.6		99.8		99.4
Notes		—		—		107.6		108.9
Other long-term debt		19.2		19.2		49.7		49.7

Total	$	423.5	$	445.7	$	562.9	$	587.5


Short-term debt
Overdrafts and other short-term debt	$	82.6	$	82.6	$	60.3	$	60.3
Short-term portion of long-term debt		133.8		135.5		9.5		9.5

Total	$	216.4	$	218.1	$	69.8	$	69.8

1)	Debt as reported in balance sheet.

Assets and liabilities measured at fair value on a non-recurring basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a non-recurring basis. Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, including investments in affiliates, and restructuring liabilities (see Note 6).

The Company has determined that the fair value measurements included in each of these assets and liabilities rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets and settlements of liabilities, as observable inputs are not available. The Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy. To determine the fair value of long-lived assets, the Company utilizes the projected cash flows expected to be generated by the long-lived assets, then discounts the future cash flows over the expected life of the long-lived assets. For restructuring obligations, the amount recorded represents the fair value of the payments expected to be made, and such provisions are discounted if the payments are expected to extend beyond one year.

As of September 30, 2013 the Company had $68.9 million of restructuring reserves which were measured at fair value upon initial recognition of the associated liability (see Note 6). For the three and nine months ended September 30, 2013, the Company did not record any impairment charges on its long-lived assets.

4 Income Taxes

For the first nine months of 2013, the effective tax rate was 27.8%, compared with an effective tax rate of 30.7% in the first nine months of 2012. In the first nine months of 2013, the net impact of discrete tax items caused a 0.5% decrease to the effective tax rate. The net impact of discrete tax items in the first nine months of 2012 caused a 1.7% increase to the effective tax rate.

The Company files income tax returns in the United States federal jurisdiction, various state jurisdictions and foreign jurisdictions. At any given time, the Company is undergoing tax audits in several tax jurisdictions covering multiple years. The Company is effectively no longer subject to income tax examination by the U.S. Federal tax authorities for years prior to 2009. In addition, with few exceptions, the Company is also no longer subject to income tax examination by U.S. state and local and non-U.S. tax authorities for years prior to 2004.

The Company is undergoing tax audits in several jurisdictions covering multiple years. As of September 30, 2013, as a result of those tax examinations, the Company is not aware of any proposed income tax adjustments that would have a material impact on the Company’s financial statements. The conclusion of such audits could result in additional increases or decreases to unrecognized tax benefits in some future period or periods.

During the third quarter of 2013, the Company recorded a net increase of $2.6 million to income tax reserves for unrecognized tax benefits based on tax positions related to the current and prior years, including accruing additional interest related to unrecognized tax benefits of prior years. Of the total unrecognized tax benefits of $23.1 million recorded at September 30, 2013, $2.3 million is classified as current tax payable and $20.8 million is classified as non-current tax payable on the Condensed Consolidated Balance Sheet.

5 Inventories

Inventories are stated at the lower of cost (principally FIFO) or market. The components of inventories were as follows:


	As of
	September 30, 2013			December 31, 2012
Raw materials	$	313.7		$	287.7
Work in progress		233.8			225.9
Finished products		182.4			180.9

Inventories		729.9			694.5
Inventory valuation reserve		(87.5	)		(83.5	)

Total inventories, net of reserve	$	642.4		$	611.0

6 Restructuring

Restructuring provisions are made on a case-by-case basis and primarily include severance costs incurred in connection with headcount reductions and plant consolidations. The Company expects to finance restructuring programs over the next several years through cash generated from its ongoing operations or through cash available under existing credit facilities. The Company does not expect that the execution of these activities will have a material adverse impact on its liquidity position.

Third quarter of 2013

The employee-related restructuring provisions in the third quarter of 2013 mainly relate to headcount reductions in Europe. The cash payments mainly relate to high-cost countries in Europe. The changes in the employee-related reserves were charged against Other income (expense), net in the Consolidated Statements of Net Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from June 30, 2013 to September 30, 2013.


	June 30, 2013		Provision/ Charge		Provision/ Reversal			Cash payments			Translation difference		September 30, 2013
Restructuring employee-related	$	70.2	$	1.0	$	(0.1	)	$	(5.0	)	$	2.3	$	68.4
Other		0.5		—		—			(0.0	)		0.0		0.5

Total reserve	$	70.7	$	1.0	$	(0.1	)	$	(5.0	)	$	2.3	$	68.9

Second quarter of 2013

The employee-related restructuring provisions in the second quarter of 2013 mainly relate to headcount reductions in Europe. The cash payments mainly relate to high-cost countries in Europe. The changes in the employee-related reserves were charged against Other income (expense), net in the Consolidated Statements of Net Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from March 31, 2013 to June 30, 2013.


	March 31, 2013		Provision/ Charge		Provision/ Reversal			Cash payments			Translation difference		June 30, 2013
Restructuring employee-related	$	70.1	$	3.0	$	(0.1	)	$	(4.1	)	$	1.3	$	70.2
Other		0.5		—		—			(0.0	)		0.0		0.5

Total reserve	$	70.6	$	3.0	$	(0.1	)	$	(4.1	)	$	1.3	$	70.7

First quarter of 2013

The employee-related restructuring provisions in the first quarter of 2013 mainly relate to headcount reductions in Europe. The cash payments mainly relate to high-cost countries in Europe. The changes in the employee-related reserves were charged against Other income (expense), net in the Consolidated Statements of Net Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2012 to March 31, 2013.


	December 31, 2012		Provision/ Charge		Provision/ Reversal			Cash payments			Translation difference			March 31, 2013
Restructuring employee-related	$	74.9	$	2.3	$	(0.1	)	$	(4.7	)	$	(2.3	)	$	70.1
Other		0.9		—		—			(0.4	)		0.0			0.5

Total reserve	$	75.8	$	2.3	$	(0.1	)	$	(5.1	)	$	(2.3	)	$	70.6

2012

In 2012, the employee-related restructuring provisions mainly related to headcount reductions throughout Europe. The cash payments mainly related to high-cost countries in Europe. The changes in the employee-related reserves have been charged against Other income (expense), net in the Consolidated Statements of Net Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2011 to December 31, 2012.


	December 31, 2011		Provision/ Charge		Provision/ Reversal			Cash payments			Translation difference		December 31, 2012
Restructuring employee-related	$	31.4	$	76.6	$	(1.8	)	$	(33.3	)	$	2.0	$	74.9
Other		0.9		0.3		(0.3	)		(0.0	)		—		0.9

Total reserve	$	32.3	$	76.9	$	(2.1	)	$	(33.3	)	$	2.0	$	75.8

7 Product-Related Liabilities

The Company has reserves for product risks. Such reserves are related to product performance issues including recall, product liability and warranty issues.

The Company records liabilities for product-related risks when probable claims are identified and when it is possible to reasonably estimate costs. Provisions for warranty claims are estimated based on prior experience, likely changes in performance of newer products and the mix and volume of the products sold. The provisions are recorded on an accrual basis. For further explanation, see Note 11 Contingent Liabilities below.

The table below summarizes the change in the balance sheet position of the product-related liabilities. The provisions for the three months ended September 30, 2013 mainly relate to warranty related issues and the nine months ended September 30, 2013 mainly relate to recall related issues. The cash paid for the three and nine months ended September 30, 2013 related mainly to warranty related issues. The provisions and cash paid for the three and nine months ended September 30, 2012 mainly related to warranty related issues.


	Three months ended						Nine months ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Reserve at beginning of the period	$	37.1		$	31.6		$	29.9		$	33.0
Change in reserve		2.9			3.5			16.4			13.3
Cash payments		(2.8	)		(4.5	)		(8.5	)		(15.3	)
Translation difference		0.6			0.7			(0.0	)		0.3

Reserve at end of the period	$	37.8		$	31.3		$	37.8		$	31.3

8 Retirement Plans

The Company has contributory and non-contributory defined benefit pension plans covering employees at most operations in the United States and in certain other countries. The main plan is the U.S. plan for which the benefits are based on an average of the employee’s earnings in the years preceding retirement and on credited service. Certain supplemental funded and unfunded plan arrangements also provide retirement benefits to specified groups of participants.

The Company has frozen participation in the U.S. pension plans to include only those employees hired as of December 31, 2003. The U.K. defined benefit plan is the most significant individual non-U.S. pension plan and the Company has frozen participation to include only those employees hired as of April 30, 2003.

The Net Periodic Benefit Costs related to Other Post-retirement Benefits were not significant to the Condensed Consolidated Financial Statements of the Company for the three and nine months ended September 30, 2013 and September 30, 2012.

For further information on Pension Plans and Other Post-retirement Benefits, see Note 18 to the Consolidated Financial Statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on February 22, 2013.

The components of total Net Periodic Benefit Cost associated with the Company’s defined benefit retirement plans are as follows:


	Three months ended						Nine months ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Service cost	$	5.6		$	4.9		$	16.9		$	14.6
Interest cost		4.9			4.7			14.8			14.1
Expected return on plan assets		(3.9	)		(3.5	)		(11.7	)		(10.5	)
Amortization prior service credit		(0.2	)		(0.3	)		(0.6	)		(0.7	)
Amortization of actuarial loss		3.1			2.3			9.2			6.7

Net Periodic Benefit Cost	$	9.5		$	8.1		$	28.6		$	24.2

9 Equity and Equity Units Offering

On March 30, 2009, the Company sold, in an underwritten registered public offering, approximately 14.7 million common shares from treasury stock and 6.6 million equity units (the Equity Units), listed on the NYSE as Corporate Units, for an aggregate stated amount and public offering price of $235 million and $165 million, respectively. “Equity Units” is a term that describes a security that is either a Corporate Unit or a Treasury Unit, depending upon what type of note is used by the holder to secure the forward purchase contract (either a Note or a Treasury Security, as described below). The Equity Units initially consisted of a Corporate Unit which is (i) a forward purchase contract obligating the holder to purchase from the Company for a price in cash of $25, on the purchase contract settlement date of April 30, 2012, subject to early settlement in accordance with the terms of the Purchase Contract and Pledge Agreement, a certain number (at the Settlement Rate outlined in the Purchase Contract and Pledge Agreement) of shares of Common Stock and (ii) a 1/40, or 2.5%, undivided beneficial ownership interest in a $1,000 principal amount of the Company’s 8% senior notes due 2014 (the “Senior Notes”).

The Company allocated proceeds received upon issuance of the Equity Units based on relative fair values at the time of issuance. The fair value of the purchase contract at issuance was $3.75 and the fair value of the note was $21.25. The discount on the notes is amortized using the effective interest rate method. Accordingly, the difference between the stated rate (i.e. cash payments of interest) and the effective interest rate is credited to the value of the notes. Thus, at the end of the three years, the notes were stated on the balance sheet at their face amount. The Company allocated 1% of the 6% of underwriting commissions paid to the debt as deferred charges based on commissions paid for similar debt issuances, but including factors for market conditions at the time of the offering and the Company’s credit rating. The deferred charges were being amortized over the life of the note (until the remarketing settlement date on March 15, 2012) using the effective interest rate method. The remaining underwriting commissions of 5% were allocated to the equity forward and recorded as a reduction to paid-in capital. The fees associated with the remarketing were allocated the same way and the deferred charges will be similarly amortized over the life of the notes until April 30, 2014. Following separately negotiated accelerated exchanges with holders representing an aggregate of approximately 2.3 million Equity Units in the second quarter 2010, 4,250,920 Equity Units remained outstanding prior to settlement on April 30, 2012.

The Company successfully completed the remarketing of the Senior Notes in March 2012, pursuant to which the interest rate on the Senior Notes was reset and certain other terms of the Senior Notes were modified. On March 15, 2012, the coupon was reset to 3.854% with a yield of 2.875% per annum which will be applicable until final maturity on April 30, 2014. Autoliv did not receive any proceeds from the remarketing until the settlement of the forward stock purchase contracts on April 30, 2012. On April 30, 2012, Autoliv settled the purchase contracts by issuing approximately 5.8 million shares of common stock in exchange for $106,273,000 in proceeds generated by the maturity of the U.S. Treasury securities purchased following the remarketing. The settlement of the purchase contracts concluded Autoliv’s equity obligations under the Equity Units.

10 Non-Controlling Interest


	July-September 2013									July-September 2012
	Equity attributable to									Equity attributable to
	Parent			Non-controlling interest			Total			Parent			Non-controlling interest		Total

Balance at beginning of period	$	3,886.1		$	19.7		$	3,905.8		$	3,565.6		$	15.3	$	3,580.9

Total Comprehensive Income:
Net income		123.9			1.0			124.9			117.5			0.5		118.0

Foreign currency translation		39.0			0.0			39.0			45.2			0.3		45.5
Defined benefit pension plan		1.8			—			1.8			1.3			—		1.3

Total Comprehensive Income		164.7			1.0			165.7			164.0			0.8		164.8
Common Stock incentives		8.8			—			8.8			3.6			—		3.6
Cash dividends declared		(48.0	)		—			(48.0	)		(47.7	)		—		(47.7	)
Common stock issuance, net		—			—			—			—			—		—
Dividends paid to non-controlling interests on subsidiary shares		—			(0	)		(0	)		—			—		—


Balance at end of period	$	4,011.6		$	20.7		$	4,032.3		$	3,685.5		$	16.1	$	3,701.6


	January-September 2013									January-September 2012
	Equity attributable to									Equity attributable to
	Parent			Non-controlling interest			Total			Parent			Non-controlling interest			Total

Balance at beginning of period	$	3,758.6		$	17.5		$	3,776.1		$	3,333.4		$	15.6		$	3,349.0

Total Comprehensive Income:
Net income		386.1			3.3			389.4			344.4			1.2			345.6

Foreign currency translation		(15.9	)		0.3			(15.6	)		24.2			0.1			24.3
Defined benefit pension plan		5.1			—			5.1			3.6			—			3.6

Total Comprehensive Income		375.3			3.6			378.9			372.2			1.3			373.5
Common Stock incentives		21.4			—			21.4			12.5			—			12.5
Cash dividends declared		(143.7	)		—			(143.7	)		(137.4	)		—			(137.4	)
Common stock issuance, net		—			—			—			104.8			—			104.8
Dividends paid to non-controlling interests on subsidiary shares		—			(0.4	)		(0.4	)		—			(0.8	)		(0.8	)


Balance at end of period	$	4,011.6		$	20.7		$	4,032.3		$	3,685.5		$	16.1		$	3,701.6

11 Contingent Liabilities

Legal Proceedings

Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability and other matters. Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, and with the exception of losses resulting from the antitrust proceedings described below, it is the opinion of management that the various legal proceedings and investigations to which the Company currently is a party will not have a material adverse impact on the consolidated financial position of Autoliv, but the Company cannot provide assurance that Autoliv will not experience material litigation, product liability or other losses in the future.

General Litigation

In 2009, Autoliv initiated a closure of its Normandy Precision Components (“NPC”) plant located in France. Most of the former NPC-employees that were not “protected” (i.e. not union representatives) filed claims in a French court claiming damages in an aggregate amount of €12 million (approximately $16 million) and/or other remedies. In February 2012, the French court ruled in favor of plaintiffs in an aggregate amount of €5.6 million (approximately $7.5 million), while rejecting certain other claims. As required under French law, Autoliv had previously paid the €5.6 million award while appealing the matter. On appeal, the court reduced the amount owed by Autoliv to some employees and increased the amount to be paid to others. The court also assessed the compensation to be paid to the French government for past unemployment payments, for a total additional cost of approximately €1.0 million (approximately $1.3 million).

Antitrust Matters

Authorities in several jurisdictions are currently conducting broad, and in some cases, long-running investigations of suspected anti-competitive behavior among parts suppliers in the global automotive vehicle industry. These investigations include, but are not limited to, segments in which the Company operates. In addition to pending matters, authorities of other countries with significant light vehicle manufacturing or sales may initiate similar investigations. It is the Company’s policy to cooperate with governmental investigations.

On February 8, 2011, a Company subsidiary received a grand jury subpoena from the Antitrust Division of the U.S. Department of Justice (“DOJ”) related to its investigation of anti-competitive behavior among suppliers of occupant safety systems. On June 6, 2012, the Company entered into a plea agreement with the DOJ and

subsequently pled guilty to two counts of antitrust law violations involving a Japanese subsidiary and paid a fine of $14.5 million. Under the terms of the agreement the Company will continue to cooperate with the DOJ in its investigation of other suppliers, but the DOJ will not otherwise prosecute Autoliv or any of its subsidiaries, present or former directors, officers or employees for the matters investigated (the DOJ did reserve the option to prosecute three specific employees, none of whom is a member of the senior management of the Company).

On June 7-9, 2011, representatives of the European Commission (“EC”), the European antitrust authority, visited two facilities of a Company subsidiary in Germany to gather information for a similar investigation. The investigation is still pending and the Company remains unable to estimate the financial impact such investigation will have or predict the reporting periods in which such financial impact may be recorded and has consequently not recorded a provision for loss as of September 30, 2013. However, management has concluded that it is probable that the Company’s operating results and cash flows will be materially adversely impacted for the reporting periods in which the EC investigation is resolved or becomes estimable.

On October 3, 2012, the Company received a letter from the Competition Bureau of Canada (“CBC”) related to the subjects investigated by the DOJ and EC, seeking the voluntary production of certain corporate records and information related to sales subject to Canadian jurisdiction. The Company cooperated with CBC’s request. Based on information from the CBC, the Company currently does not anticipate an adverse outcome from the CBC related to sales subject to Canadian jurisdiction.

On November 6, 2012, the Korean Fair Trade Commission visited one of the Company’s South Korean subsidiaries to gather information for a similar investigation. The Company cannot predict the duration, scope or ultimate outcome of this investigation and is unable to estimate the financial impact it may have, or predict the reporting periods in which any such financial impacts may be recorded. Consequently, the Company has not recorded a provision for loss as of September 30, 2013 with respect to this investigation. Also, since the Company’s plea agreement with the DOJ involved the actions of employees of a Japanese subsidiary of the Company, the Japan Fair Trade Commission is evaluating whether to initiate an investigation.

The Company is also subject to civil litigation alleging anti-competitive conduct. Notably, the Company, several of its subsidiaries and its competitors are defendants in a total of sixteen purported antitrust class action lawsuits filed between July 2012 and July 2013. Thirteen of these lawsuits, brought by direct purchasers, auto dealers and end-payors, have been consolidated in the Occupant Safety Systems (OSS) segment of the Automobile Parts Antitrust Litigation, a Multi-District Litigation (MDL) proceeding in the United States District Court for the Eastern District of Michigan. Based on current schedules, substantive discovery in the OSS segment of the MDL, which includes Autoliv, is not likely to begin before May 2014. The other three lawsuits are pending in Canada (Sheridan Chevrolet Cadillac Ltd. et al. v. Autoliv, Inc. et al., filed in the Ontario Superior Court of Justice on January 18, 2013; M. Serge Asselin v. Autoliv, Inc. et al., filed in the Superior Court of Quebec on March 14, 2013; and Ewert v. Antoliv, Inc. et al ., filed in the Supreme Court of British Columbia on July 18, 2013). The Canadian cases assert claims on behalf of putative classes of auto dealers and end-payors. Substantive discovery in those cases will likely be deferred pending a ruling in an unrelated case by the Supreme Court of Canada on whether indirect purchasers can sue for antitrust damages.

Plaintiffs in the above U.S. and Canadian civil antitrust class actions generally allege that the defendants have engaged in long-running global conspiracies to fix the prices of occupant safety systems or components thereof in violation of various antitrust laws and unfair or deceptive trade practice statutes. Plaintiffs seek to represent purported classes of direct purchasers, auto dealers and end-payors (e.g. consumers) who purchased occupant safety systems or components either directly from a defendant or indirectly through purchases of new vehicles containing such systems. Plaintiffs seek injunctive relief, treble damages and attorneys’ fees. The plaintiffs in these cases make allegations that extend significantly beyond the specific admissions of the plea discussed above. The Company denies these overly broad allegations and intends to actively defend itself against the same. While it is probable that the Company will incur losses as a result of these antitrust cases, the duration or ultimate outcome of these cases currently cannot be predicted or estimated and no provision for a loss has been recorded as of September 30, 2013.

On April 17, 2013, the Construction Laborers Pension Trust of Greater St. Louis (“Plaintiff”) filed a purported class action securities lawsuit against Autoliv and two of its officers in the United States District Court for the Southern District of New York (Civil Action File No. 13-CIV-2546). On October 21, 2013, Plaintiff filed an amended complaint in that lawsuit, adding as a third individual defendant an employee of one of the Company’s subsidiaries. The amended complaint alleges misrepresentations or failures to disclose material facts that artificially inflated the Company’s stock price in violation of the federal securities laws, in particular Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended, and failed to disclose prior to June 6, 2012 that employees had engaged in certain price fixing activity in violation of the law and that the Company’s prior financial results allegedly had been inflated as a result of the anti-competitive activity. Plaintiff purports to bring this lawsuit on behalf of a class of purchasers of common stock of the Company between October 26, 2010 and July 21, 2011. Plaintiff seeks to recover damages in an unspecified amount. The Company and its two officers deny any wrongdoing, believe the claims are baseless, and will defend accordingly.

Product Warranty, Recalls and Intellectual Property

Autoliv is exposed to various claims for damages and compensation if products fail to perform as expected. Such claims can be made, and result in costs and other losses to the Company, even where the product is eventually found to have functioned properly. Where a product (actually or allegedly) fails to perform as expected the Company faces warranty and recall claims. Where such (actual or alleged) failure results, or is alleged to result, in bodily injury and/or property damage, the Company may also face product-liability claims. There can be no assurance that the Company will not experience material warranty, recall or product (or other)

liability claims or losses in the future, or that the Company will not incur significant costs to defend against such claims. The Company may be required to participate in a recall involving its products. Each vehicle manufacturer has its own practices regarding product recalls and other product liability actions relating to its suppliers. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. A warranty, recall or product-liability claim brought against the Company in excess of its insurance may have a material adverse effect on the Company’s business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some, or all, of the repair or replacement costs of products when the product supplied did not perform as represented by us or expected by the customer. Accordingly, the future costs of warranty claims by the customers may be material. However, the Company believes its established reserves are adequate to cover potential warranty settlements. Autoliv’s warranty reserves are based upon the Company’s best estimates of amounts necessary to settle future and existing claims. The Company regularly evaluates the appropriateness of these reserves, and adjusts them when appropriate. However, the final amounts determined to be due related to these matters could differ materially from the Company’s recorded estimates.

In addition, the global platforms and procedures used by vehicle manufacturers have led to quality performance evaluations being conducted on an increasingly global basis. Any one or more quality, warranty or other recall issue(s) (including those affecting few units and/or having a small financial impact) may cause a vehicle manufacturer to implement measures such as a temporary or prolonged suspension of new orders, which may have a material impact on the Company’s results of operations.

The Company believes that it is currently reasonably insured against recall and product liability risks, at levels sufficient to cover potential claims that are reasonably likely to arise in the Company’s businesses based on past experience. Autoliv cannot assure that the level of coverage will be sufficient to cover every possible claim that can arise in our businesses, now or in the future, or that such coverage always will be available should we, now or in the future, wish to extend or increase insurance.

In its products, the Company utilizes technologies which may be subject to intellectual property rights of third parties. While the Company does seek to identify the intellectual property rights of relevance to its products, and to procure the necessary rights to utilize such intellectual property rights, we may fail to do so. Where the Company so fails, the Company may be exposed to material claims from the owners of such rights. Where the Company has sold products which infringe upon such rights, our customers may be entitled to be indemnified by us for the claims they suffer as a result thereof. Such claims could be material.

The table in Note 7 Product-Related Liabilities above summarizes the change in the balance sheet position of the product related liabilities for the three and nine months ended September 30, 2013 and September 30, 2012, respectively.

12 Earnings per share

The Company calculates basic earnings per share (EPS) by dividing net income attributable to controlling interest by the weighted-average number of common shares outstanding for the period (net of treasury shares). When it would not be antidilutive (such as during periods of net loss), the diluted EPS also reflects the potential dilution that could occur if common stock were issued for awards under the Stock Incentive Plan.

For the three and nine months ended September 30, 2013, approximately 0.0 million and 0.0 million common shares, respectively, were not included in the computation of the diluted EPS, which could potentially dilute basic EPS in the future.

During the nine months ended September 30, 2013 and September 30, 2012 approximately 0.4 million and 0.4 million shares, respectively, from the treasury stock have been utilized by the Stock Incentive Plan.

Actual weighted average shares used in calculating earnings per share were:


(In millions)	Three months ended				Nine months ended
	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012
Weighted average shares basic		95.8		95.4		95.7		92.8
Effect of dilutive securities:
- stock options/share awards		0.4		0.3		0.3		0.3
- equity units ¹⁾		—		0.0		—		1.8

Weighted average shares diluted		96.2		95.7		96.0		94.9

¹⁾

For the three and nine months ended September 30, 2012, 0.0 million and 1.8 million shares, respectively, were included in the dilutive weighted average share amount related to the Equity Units. The number of shares that were issued on April 30, 2012, related to the final settlement of the Equity Units, was approximately 5.8 million. This reflects the effect from the exchange of Equity Units discussed in Note 9 and takes into account all previously paid dividends, including the dividend paid in the first quarter 2012.

13 Subsequent Events

There were no reportable events subsequent to September 30, 2013.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the United States Securities and Exchange Commission (the “SEC”) on February 22, 2013. Unless otherwise noted, all dollar amounts are in millions.

Autoliv, Inc. (“Autoliv” or the “Company”) is a Delaware corporation with its principal executive offices in Stockholm, Sweden. It was created from the merger of Autoliv AB (“AAB”) and the automotive safety products business of Morton International, Inc., in 1997. The Company functions as a holding corporation and owns two principal subsidiaries, AAB and Autoliv ASP, Inc. (“ASP”).

AAB and ASP are leading developers, manufacturers and suppliers to the automotive industry of automotive safety systems with a broad range of product offerings, including modules and components for passenger and driver-side airbags, side-impact airbag protection systems, seatbelts, steering wheels, safety electronics, whiplash protection systems and child seats, including components for such systems, as well as vision and night vision systems, radar and other active safety systems.

Autoliv’s filings with the SEC, which include this Quarterly Report on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, insider transaction reports on Forms 3 and 4 and all related amendments, are made available free of charge on our corporate website at www.autoliv.com and are available as soon as reasonably practicable after they are electronically filed with the SEC.

Shares of Autoliv common stock are traded on the New York Stock Exchange under the symbol “ALV”. Swedish Depository Receipts representing shares of Autoliv common stock (“SDRs”) trade on NASDAQ OMX Stockholm under the symbol “ALIV SDB”, and options in SDRs trade on the same exchange under the name “Autoliv SDB”. Options in Autoliv shares are traded on NASDAQ OMX Philadelphia and NYSE Amex Options under the symbol “ALV”. Our fiscal year ends on December 31.

Non-U.S. GAAP financial measures

Some of the following discussions refer to non-U.S. GAAP financial measures: see “Organic sales”, “Operating working capital” and “Net (cash) debt”. Management believes that these non-U.S. GAAP financial measures assist investors in analyzing trends in the Company’s business. Additional descriptions regarding management’s use of these financial measures are included below. Investors should consider these non-U.S. GAAP financial measures in addition to, rather than as a substitute for, financial reporting measures prepared in accordance with U.S. GAAP. These historical non-U.S. GAAP financial measures have been identified as applicable in each section of this report with a tabular presentation reconciling them to U.S. GAAP. It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies.

RESULTS OF OPERATIONS

Overview

The Company had a solid quarter, delivering strong growth and better than expected margins. As in the previous quarter, China and Active Safety products contributed significantly to Autoliv’s strong growth, while operational issues and currencies negatively affected our margins.

The Company recently held an opening ceremony for our new propellant plant in China, the Company’s biggest investment to date, which will start production in the beginning of 2014. This is another important step in the Company’s investment strategy, a strategy which will support Autoliv’s strong growth and build long term competitive advantage as we continue to build the most geographically dispersed global footprint in our industry.

Looking forward, the Company expects strong growth to continue into the fourth quarter, again driven largely by China and Active Safety, but also by important model launches and production ramp-ups in Europe, Japan and Brazil. In addition to the Company’s strong growth in Active Safety, it targets to achieve the long term Company margin range of 8% to 9% for this business in the next two to three years. Based on strong order intake over the last few years the Company further believes it is gaining market share in certain product areas.

In parallel with these positive developments, the Company is challenged to continue the transition of its European footprint at the highest possible pace. An increasing part of the Company’s growth is also coming from Europe where it has a currently unfavorable situation and from Brazil where it has supply chain challenges. These challenges in combination with the Company’s investments in Active Safety will continue to put pressure on its margins leading into 2014.

The Company’s current growth shows that it has the right strategy and as it executes towards its strategic targets as outlined at its capital markets day and completes its current company transformation, we will build an even stronger Autoliv. In the future the Company envisions that its products and systems will save 150,000 lives every year.

The following table shows some of the Company’s key ratios. Management uses these measures internally as a means of analyzing the Company’s current and future financial performance and our core operations as well as identifying trends in our financial conditions and results of operations. We have provided this information to investors to assist in meaningful comparisons of past and present operating results and to assist in highlighting the results of ongoing core operations. These ratios are more fully explained in this Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012 and the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

KEY RATIOS

(Dollars in millions, except per share data)


	Three months ended or as of September 30						Nine months ended or as of September 30
	2013			2012			2013			2012
Total parent shareholders’ equity per share	$	41.83		$	38.63		$	41.83		$	38.63
Operating working capital ¹⁾	$	670		$	633		$	670		$	633
Capital employed ⁶⁾	$	3,524		$	3,437		$	3,524		$	3,437
Net (cash) debt ¹⁾	$	(508	)	$	(265	)	$	(508	)	$	(265	)

Gross margin, % ²⁾		19.1			19.9			19.4			20.1
Operating margin, % ³⁾		8.6			9.6			8.7			8.5

Return on total equity, % ⁷⁾		12.6			13.0			13.4			13.1
Return on capital employed, % ⁸⁾		21.0			22.5			21.7			21.4

No. of employees at period-end ⁹⁾		45,475			40,213			45,475			40,213
Headcount at period-end ¹⁰⁾		55,511			50,413			55,511			50,413
Days receivables outstanding ⁴⁾		73			73			73			69
Days inventory outstanding ⁵⁾		31			32			31			31

1)	See tabular presentation reconciling this non-U.S.GAAP measure to U.S.GAAP below under the heading “Liquidity and Sources of Capital”

2)	Gross profit relative to sales

3)	Operating income relative to sales

4)	Outstanding receivables relative to average daily sales

5)	Outstanding inventory relative to average daily sales

6)	Total equity and net debt

7)	Net income relative to average total equity

8)	Operating income and equity in earnings of affiliates, relative to average capital employed

9)	Employees with a continuous employment agreement, recalculated to full time equivalent heads

10)

Employees plus temporary, hourly workers

THREE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2012

Market overview

During the three month period from July-September 2013, global Light Vehicle Production (LVP) is estimated by IHS to have increased by almost 4% compared to the same quarter in 2012. This was a slightly larger increase than the 3% growth expected by IHS in July.

In Europe , where Autoliv generates more than 30% of its sales, LVP is estimated to have grown by over 2%. This was 5 pp better than IHS’s expectations in July. In Western Europe, the LVP is estimated to have grown by 2% compared to the 3% decline expected at the beginning of the quarter. In Eastern Europe the LVP is estimated to have grown by over 3% compared to a 2% decline expected at the beginning of the quarter.

In the Americas , which constitutes roughly 35% of Autoliv’s sales, LVP increased by 6%, which was in line with IHS’s expectations in July. In North America the increase was 6%, more than 1 pp lower than the previous expectation. In South America the increase was over 4%, a 5 pp improvement compared to the July estimate.

In China, which accounts for more than 15% of Autoliv’s sales, LVP grew by 8%, an improvement of 1 pp compared to the July expectations.

In Japan, which accounts for almost 10% of Autoliv’s sales, LVP grew by almost 2%, 2 pp better than expected.

In the Rest of Asia (RoA), which represents approximately 10% of Autoliv’s sales, LVP was flat compared to the 3% increase expected in July. Virtually the entire difference came from South Korea, where LVP increased by 2% compared to a previously expected increase of 14%.

Consolidated Sales

The Company has substantial operations outside the United States and at the present time approximately 75% of its sales are denominated in currencies other than the U.S. dollar. This makes the Company and its performance in regions outside the United States sensitive to changes in U.S. dollar exchange rates when translated. The measure “Organic sales” presents the increase or decrease in the Company’s overall U.S. dollar net sales on a comparative basis, allowing separate discussion of the impacts of acquisitions/divestments and exchange rate fluctuations and our ongoing core operations and results. The tabular reconciliations below for “Sales by Product” and “Sales by Region” present the change in “Organic sales” reconciled to the change in the total net sales for the three months ended September 30, 2013 as can be derived from our unaudited condensed consolidated financial statements set forth in this Quarterly Report on Form 10-Q.

Compared to the third quarter of 2012, consolidated sales increased by close to 9% to $2,119 million. This consolidated sales growth compares favorably to the growth of around 5% expected at the beginning of the quarter. Currency effects were negligible, giving organic sales (non-U.S. GAAP measure, see reconciliation tables below) growth of close to 9%. The reason that Autoliv exceeded its quarterly guidance was higher than expected organic sales growth in all regions, primarily in Europe where LVP volumes were higher than previously expected. Favorable vehicle mix in China also contributed to our sales growth.

Sales by Product

Sales of airbag products (including steering wheels and passive safety electronics) increased by over 7% to $1,364 million compared to the same quarter in 2012. Excluding negative currency effects, airbag sales grew by 8% organically (non-U.S. GAAP measure, see reconciliation table below). Sales were particularly strong in Asia with 15% organic growth (non-U.S. GAAP measure) and with knee airbags which globally grew by around 50% organically (non-U.S. GAAP measure).

Sales of seatbelt products increased by 6% to $659 million compared to the same quarter in 2012. Excluding positive currency effects of around 1%, organic sales (non-U.S. GAAP measure, see reconciliation table below) grew by 5%. The strongest growth came from well-performing platforms and production ramp-ups of active seatbelts in Europe as well as production ramp-ups in China.

Sales of active safety products (automotive radars, night vision systems and vision cameras with driver assist systems) grew by around 69% to $96 million compared to the same quarter in 2012. Excluding close to 2 pp positive currency effects, organic sales (non-U.S. GAAP measure, see reconciliation table below) grew by 67%. This strong growth was primarily driven by the continued roll-out of Collision Prevention Assist for Mercedes and the start of production of Mercedes’ new S-Class. Production ramp-ups within several GM brands also contributed to the growth.


	Reconciliation of the change in “Organic sales” to GAAP financial measure Components of net sales increase (decrease) Three months ended September 30, 2013 (Dollars in millions)
	Airbag products						Seatbelt products				Active safety products				Total
	%			$			%		$		%		$		%		$
Organic sales change		8.0			101.3			4.9		30.5		66.9		38.2		8.7		170.0
Effect of exchange rates		(0.5	)		(6.1	)		1.2		7.1		1.7		0.9		0.1		1.9
Impact of acquisitions/divestments		—			—			—		—		—		—		—		—

Reported net sales change		7.5			95.2			6.1		37.6		68.6		39.1		8.8		171.9

Sales by Region

Autoliv’s third quarter sales outgrew the global LVP with 5%. All regions grew faster organically (non-U.S. GAAP measure) than the LVP, Europe by more than 2%, the Americas by close to 4% and Asia by close to 8%.

Consolidated sales from Autoliv’s European companies increased by 10% to $645 million. This included positive currency effects of more than 5%, resulting in an organic sales (non-U.S. GAAP measure, see reconciliation table below) growth of close to 5%. Autoliv’s strong performance primarily resulted from higher sales to well-performing premium brands such as BMW, Jaguar/Land Rover and Maserati. Strong sales for several other high Autoliv content vehicles such as Renault’s Clio, Peugeot’s 2008 and Volvo’s V40 also contributed.

Consolidated sales from Autoliv’s companies in the Americas increased by over 9% to $757 million. Currency effects were negligible resulting in over 9% organic sales (non-U.S. GAAP measure, see reconciliation table below) growth. In North America Autoliv’s growth was mainly due to Collision Prevention Assist related sales to Mercedes. Growth also came from high sales of Ford’s Fusion, as well as Nissan’s Pathfinder and recently launched Sentra.

Consolidated sales from Autoliv’s companies in China increased by close to 21% to $342 million. Excluding positive currency effects of close to 4%, organic sales (non-U.S. GAAP measure, see reconciliation table below) growth was around 17%. This strong performance in China was driven by continued strong demand for high Autoliv content vehicles, especially with Chinese OEMs such as Great Wall’s Haval H6 and Jianghuai Auto’s Refine S5, as well as Ford’s Kuga and Hyundai’s Santa Fe.

Consolidated sales from Autoliv’s companies in Japan declined by close to 14% to $173 million. Excluding a 21% negative currency effect, organic sales (non-U.S. GAAP measure, see reconciliation table below) grew by 7%. The sales increase was primarily related to the ramp-up of Mazda’s CX-5, Toyota’s Land Cruiser Prado and RAV 4, all successful export models.

Consolidated sales from Autoliv’s companies in RoA increased by 9% to $202 million. Excluding a 1% positive effect from currencies, organic sales (non-U.S. GAAP measure, see reconciliation table below) increased by 8%. This increase was driven by sales increases in South Korea for Hyundai’s ix35 and Kia’s Sportage and in India by increases with Suzuki, especially A-Star, and Hyundai’s recently launched i10. This increase was also due to production ramp-ups in Thailand for Mitsubishi’s Mirage and Montero Sport.


	Reconciliation of the change in “Organic sales” to GAAP financial measure Components of net sales increase (decrease) Three months ended September 30, 2013 (Dollars in millions)
	Europe				Americas				Japan						China				RoA				Total
	%		$		%		$		%			$			%		$		%		$		%		$
Organic sales change		4.7		27.4		9.3		64.6		7.1			14.1			17.2		48.6		8.2		15.3		8.7		170.0
Effect of exchange rates		5.3		31.4		0.1		0.7		(20.9	)		(41.8	)		3.5		10.0		0.9		1.6		0.1		1.9
Impact of acquisitions/divestments		—		—		—		—		—			—			—		—		—		—		—		—

Reported net sales change		10.0		58.8		9.4		65.3		(13.8	)		(27.7	)		20.7		58.6		9.1		16.9		8.8		171.9

Earnings

For the third quarter 2013 gross profit amounted to $405 million and gross margin to 19.1%, compared to $388 million and 19.9% respectively, during the same quarter last year. The higher gross profit was mainly driven by our sales growth, while the decline in gross margin was mainly due to operational inefficiencies in Europe and adverse currency effects.

Operating income was $182 million, or 8.6% of sales, compared to $187 million, or 9.6% of sales for the third quarter of 2012. Research, Development and Engineering (R, D&E) net, was more than $23 million higher, due to higher costs and unusually high engineering income in the third quarter of 2012. Costs related to antitrust investigations and capacity alignments of $3 million reduced the operating margin by almost 0.2 pp.

Excluding these costs, operating margin was 8.8% (non-U.S. GAAP measure) for the quarter compared to our expectation of “around 8.5%”. This improvement is driven by the higher than expected organic sales (non-U.S. GAAP measure) growth in the quarter.

Income before taxes increased by $2 million to $177 million, despite the lower operating income. Income attributable to controlling interest was $124 million, compared to $117 million for the third quarter of 2012. The effective tax rate was 29.3% compared to 32.6% for the same quarter of 2012. In the third quarter of 2012 discrete tax items, net increased the tax rate by 4.1 pp. This quarter the discrete tax items, net are negligible.

Earnings Per Share (EPS) assuming dilution improved by 6 cents, or 5%, to $1.29, mainly due to a lower effective tax rate and lower interest expense, net. The weighted average number of shares outstanding assuming dilution increased by 0.5% to 96.2 million from 95.7 million during the same quarter of 2012.

NINE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2012

Market overview

During the nine-month period from January – September 2013, global LVP is estimated by IHS to have increased by more than 2%.

In Europe, LVP decreased by more than 1%. In Western Europe the decline was 3%, while LVP in Eastern Europe increased by 1%.

In the Americas, LVP increased by 6%. In North America the increase was 5% and in South America 11%.

In China, LVP grew by 11% and in the RoA by 1%.

In Japan, LVP declined by more than 8% compared to the same period in 2012, partly due to the 2012 build-up phase after the 2011 earthquake and tsunami affecting the comparison.

Consolidated Sales

The Company has substantial operations outside the United States and at the present time approximately 75% of its sales are denominated in currencies other than the U.S. dollar. This makes the Company and its performance in regions outside the United States sensitive to changes in U.S. dollar exchange rates when translated. The measure “Organic sales” presents the increase or decrease in the Company’s overall U.S. dollar net sales on a comparative basis, allowing separate discussion of the impacts of acquisitions/divestments and exchange rate fluctuations and our ongoing core operations and results. The tabular reconciliations below for “Sales by Product” and “Sales by Region” present the change in “Organic sales” reconciled to the change in the total net sales for the nine months ended September 30, 2013 as can be derived from our unaudited condensed consolidated financial statements set forth in this Quarterly Report on Form 10-Q.

For the first nine months of 2013, consolidated sales increased by close to 4% to $6,452 million, compared to the same period in 2012. Sales were negatively impacted by $20 million from adverse currency effects and by $17 million from a divestiture in 2012. Excluding these negative effects the organic sales (non-U.S. GAAP measure, see reconciliation tables below) increase was more than 4%.

Sales by Product

Sales of airbag products grew by close to 3% to $4,167 million. Excluding adverse currency effects organic sales (non-U.S. GAAP measure, see reconciliation table below) grew by over 3%.

Sales of seatbelt products grew by 2% to $2,041 million. Excluding positive currency effects and a negative effect from a small divestiture in 2012, organic sales (non-U.S. GAAP measure, see reconciliation table below) grew by more than 2%.

Sales of active safety products increased by close to 59% to $244 million. Excluding a positive currency effect of 1%, organic sales (non-U.S. GAAP measure, see reconciliation table below) increased by close to 58%.


	Reconciliation of the change in “Organic sales” to GAAP financial measure Components of net sales increase (decrease) Nine months ended September 30, 2013 (Dollars in millions)
	Airbag products						Seatbelt products						Active safety products				Total
	%			$			%			$			%		$		%			$
Organic sales change		3.4			137.3			2.4			47.8			57.5		88.5		4.4			273.6
Effect of exchange rates		(0.8	)		(32.4	)		0.5			10.5			1.0		1.6		(0.3	)		(20.3	)
Impact of acquisitions/divestments		—			—			(0.8	)		(16.6	)		—		—		(0.3	)		(16.6	)

Reported net sales change		2.6			104.9			2.1			41.7			58.5		90.1		3.8			236.7

Sales by Region

Sales from Autoliv’s European companies increased by 1% to $2,040 million. Excluding positive currency effects of close to 3% and the negative effect from a 2012 divestiture, organic sales (non-U.S. GAAP measure, see reconciliation table below) decreased by almost 1%.

Sales from Autoliv’s companies in the Americas increased by close to 7% to $2,301 million. Excluding positive currency effects, the organic sales (non-U.S. GAAP measure, see reconciliation table below) growth was 6%.

Sales from Autoliv’s companies in China increased by over 21% to $969 million. Excluding positive currency effects, the organic sales (non-U.S. GAAP measure, see reconciliation table below) growth was 19%.

Sales from Autoliv’s companies in Japan decreased by 22%, to $505 million. Excluding negative currency effects of 18%, the organic sales (non-U.S. GAAP measure, see reconciliation table below) decrease was close to 5%.

Sales from Autoliv’s companies in the RoA increased by 7% to $637 million. Excluding positive currency effects of close to 2%, the organic sales (non-U.S. GAAP measure, see reconciliation table below) growth was over 5%.


	Reconciliation of the change in “Organic sales” to GAAP financial measure Components of net sales increase (decrease) Nine months ended September 30, 2013 (Dollars in millions)
	Europe						Americas				Japan						China				RoA				Total
	%			$			%		$		%			$			%		$		%		$		%			$
Organic sales change		(0.7	)		(13.9	)		6.3		134.8		(4.6	)		(29.8	)		18.9		150.8		5.3		31.7		4.4			273.6
Effect of exchange rates		2.7			55.3			0.5		12.0		(17.8	)		(116.3	)		2.3		18.6		1.7		10.1		(0.3	)		(20.3	)
Impact of acquisitions/divestments		(0.8	)		(16.6	)		—		—		—			—			—		—		—		—		(0.3	)		(16.6	)

Reported net sales change		1.2			24.8			6.8		146.8		(22.4	)		(146.1	)		21.2		169.4		7.0		41.8		3.8			236.7

Earnings

Gross profit amounted to $1,250 million and gross margin to 19.4% compared to $1,251 million and 20.1%, respectively, in the first nine months of 2012. The decline in gross margin was mainly due to operational inefficiencies in Europe and adverse currency effects.

Operating income increased by $28 million to $559 million. Operating margin increased by 0.2 pp to 8.7%. Costs for the capacity alignment program were over $7 million and costs related to the antitrust investigations were $6 million. These costs were $66 million lower than in the same period of 2012. Excluding these costs the operating margin (non-U.S. GAAP measure) was 8.9% compared to 9.8% for the same period last year, primarily affected by $30 million higher R, D&E net, operational inefficiencies and adverse currency effects.

Income before taxes increased by $41 million to $539 million, which was $13 million more than the increase in operating income, mainly due to lower interest expense.

Net income attributable to controlling interest amounted to $386 million compared to $344 million for the same period in 2012. Income tax expense was $150 million. The effective tax rate was 27.8% compared to 30.7% for the same nine month period last year. Discrete tax items, net caused a decrease in the tax rate in 2013 of 0.5 pp versus an increase of 1.7 pp for the same period last year. The country mix effect in 2013 compared favorably to 2012.

Earnings Per Share (EPS) amounted to $4.02 assuming dilution compared to $3.63 for the same period of 2012. EPS was positively affected by 51 cents from lower costs related to antitrust investigations and capacity alignments, by 16 cents from a lower effective tax rate and 6 cents from lower interest expense, net. This was partly offset by a 28 cent decrease from lower underlying operating profit and by a 5 cent decrease from having a higher number of shares outstanding. The average number of shares outstanding increased by 1% to approximately 96 million assuming dilution.

LIQUIDITY AND SOURCES OF CAPITAL

Cash flow from operations amounted to $206 million during the quarter, compared to $131 million for the same period last year. The strong improvement was mainly due to timing-related effects in working capital.

Cash flow provided by operating activities less used in investing activities amounted to $112 million during the quarter, compared to $32 million during the same quarter of 2012. During the first nine months operations generated $539 million in cash, compared to $447 million for the same period in 2012. Cash flow provided by operating activities less used in investing activities for the first nine months amounted to $270 million, compared to $189 million for the same period in 2012.

Capital expenditures, net of $93 million were $22 million more than depreciation and amortization expense in the quarter and $5 million less than capital expenditures during the same quarter of 2012. During the quarter capital expenditures, net were 4.4% of sales, down from 5.0% in the third quarter of 2012. During the first nine months capital expenditures, net amounted to $267 million and depreciation and amortization to $211 million compared to $261 million and $204 million, respectively, in the same period in 2012.

Operating working capital (non-U.S. GAAP measure, see reconciliation table below) decreased to 7.9% of sales compared to 8.0% at the end of the previous quarter. The Company has a target that working capital in relation to the last 12 month sales, should not exceed 10%.

Account receivables increased in relation to sales to 73 days outstanding from 72 days on June 30, 2013 and was unchanged compared to September 30, 2012. Days inventory outstanding increased to 31 days from 29 days on June 30, 2013, but decreased from 32 days on September 30, 2012.

The Company uses the non-U.S. GAAP measure “Operating working capital,” as defined in the table below, in its communications with investors and for management’s review of the development of the working capital cash generation from operations. The reconciling items used to derive this measure are, by contrast, managed as part of the Company’s overall cash and debt management, but they are not part of the responsibilities of day-to-day operations’ management.


	Reconciliation of “Operating working capital” to GAAP financial measure (Dollars in millions)
	September 30, 2013			June 30, 2013			December 31, 2012			September 30, 2012
Total current assets	$	3,708.9		$	3,595.1		$	3,289.2		$	3,302.3
Total current liabilities		(2,168.0	)		(2,117.2	)		(1,849.8	)		(1,972.0	)

Working capital		1,540.9			1,477.9			1,439.4			1,330.3
Cash and cash equivalents		(1,134.7	)		(1,042.4	)		(977.7	)		(908.2	)
Short-term debt		216.4			183.8			69.8			158.1
Derivative (asset) and liability, current		(0.2	)		(0.0	)		0.0			4.6
Dividends payable		47.9			47.8			47.7			47.7

Operating working capital	$	670.3		$	667.1		$	579.2		$	632.5

The Company’s net cash position (non-U.S. GAAP measure, see reconciliation table below) increased by $76 million during the quarter to $508 million on September 30, 2013. Gross interest-bearing debt was up $16 million to $640 million. During the quarter the Company paid out dividends of $48 million. The Company’s net cash position (non-U.S. GAAP measure, see reconciliation table below) increased to $508 million on September 30, 2013 from $361 million nine months earlier, despite dividend payments of $144 million. Gross interest bearing debt increased by $7 million to $640 million.

As part of efficiently managing the Company’s overall cost of funds, we routinely enter into “debt-related derivatives” (DRD) as part of our debt management. Creditors and credit rating agencies use net debt adjusted for DRD in their analyses of the Company’s debt. Included in the DRD is also the unamortized fair value adjustment related to a discontinued fair value hedge which will be amortized over the remaining life of the debt. By adjusting for DRD, the total economic liability of net debt is disclosed without grossing it up with currency or interest fair values.


	Reconciliation of “Net (cash) debt” to GAAP financial measure (Dollars in millions)
	September 30, 2013			June 30, 2013			December 31, 2012			September 30, 2012
Short-term debt	$	216.4		$	183.8		$	69.8		$	158.1
Long-term debt		423.5			440.2			562.9			497.4

Total debt		639.9			624.0			632.7			655.5
Cash and cash equivalents		(1,134.7	)		(1,042.4	)		(977.7	)		(908.2	)
Debt-related derivatives		(13.5	)		(13.8	)		(15.8	)		(12.1	)

Net cash	$	(508.3	)	$	(432.2	)	$	(360.8	)	$	(264.8	)

During the quarter total equity increased by $127 million to $4,032 million, due to net income of $125 million, positive currency effects of $39 million, common stock incentives of $9 million and pension liabilities of $2 million, offset by dividends of $48 million. During the first nine months total equity increased by $256 million due to $389 million from net income, $21 million from common stock incentives and $5 million from pension liabilities. This was partially offset by dividends of $144 million and negative currency effects of $15 million.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on its financial position, results of operations or cash flows.

Headcount

Compared to the end of the previous quarter, total headcount (permanent employees and temporary personnel) increased by 1,956 persons to 55,511 on September 30, 2013. More than 1,800 of these additions were in low cost countries.

Currently, 72% of Autoliv’s total headcount are direct workers in manufacturing, 71% are in low cost countries and 18% are temporary personnel. A year ago these ratios were 71%, 68% and 20%, respectively.

Outlook

For the fourth quarter Autoliv’s consolidated sales are expected to grow by around 9% compared to the same quarter of 2012. Excluding negative currency effects organic sales are expected to grow by more than 9%. The operating margin is expected to be around 9%, excluding costs related to antitrust investigations and capacity alignments. The impact from operational inefficiencies, adverse currency effects and higher R, D&E costs are expected to offset the positive margin effect from the higher organic sales.

Full year 2013 organic sales growth is expected to be more than 5%, which is more than 1 pp above the previous indication for growth of around 4%. Consolidated sales growth is expected to be around 5% as currency effects and the effect from a 2012

divestiture are expected to have a combined negative effect of about 0.5 pp. The operating margin expectation remains unchanged at around 9%, excluding costs related to the antitrust investigations and capacity alignments, as the effects from adverse currency movements, and operational inefficiencies, are expected to offset the benefit from the higher organic sales.

The costs for the capacity alignment program are now expected to be within the $20 to $40 million range, compared to the previous indication of $25 to $50 million. We now expect the effective tax rate for the full year to be around 28% (excluding any discrete items), up from the previous expectation of around 27%. This increase is primarily due to a shift in mix, where proportionately more earnings are generated from countries with higher tax rates. Operations are expected to generate approximately $0.7 billion of cash flow and capital expenditures are expected to be around 4.5% of sales in 2013, both unchanged from previous indication.

OTHER RECENT EVENTS

Launches in the 3 ^rd quarter 2013

•

Nissan’s new X-Trail/Rouge : Inflatable curtains, side airbags and safety electronics.

•

BMW’s new X5: Active seatbelts with pretensioners, night vision and vision system.

•

Hyundai’s new i10: Driver airbag, passenger airbag, inflatable curtains, side airbags and safety electronics.

•

Honda’s new Jade: Side airbags and seatbelts with pretensioners.

•

Guangzhou Auto’s new GA3: Driver airbag with steering wheel, passenger airbag, inflatable curtains, side airbags and seatbelts with pretensioners.

•

BMW’s new i3 and i8: Passenger airbag, side airbags, knee airbag, seatbelts with pretensioners and vision system.

•

Peugeot’s new 308: Driver airbag with steering wheel, passenger airbag, seatbelts with pretensioners and safety electronics.

•

BMW’s new 4-series: Inflatable curtains, side airbags, active seatbelts with pretensioners and vision system.

•

Honda’s new Fit : Inflatable curtains.

Other Events

•

On August 13, 2013, Autoliv’s Board of Directors renewed the Company’s previous mandate to repurchase up to 3.2 million common shares. Autoliv’s management can, subject to legal requirements, now initiate buybacks of Autoliv shares opportunistically at their own discretion. In addition to the required filings with the SEC, purchases under the buyback program would be communicated by the Company on its corporate website ( www.autoliv.com/shares ) shortly after the end of the calendar month in which the transactions were made.

•

In conjunction with the Frankfurt Auto show in September, Autoliv announced a new adaptable seatbelt for improved safety for all occupants, especially children. This unique new seatbelt can substantially reduce the load on small occupants while also improving the protection for larger occupants. It is a purely mechanical solution that offers adaptability to the occupant size and the severity of a crash at a reasonable cost.

•

Autoliv further introduced the world’s first Night Vision Fusion System with high definition (HD) and enhanced pedestrian and animal detection. Debuting on the Mercedes’ new S-Class, the dual-infrared camera system combines the advantages of a far infrared camera with the benefits of a near infrared camera to deliver the most advanced and effective night vision system ever featured on an automobile.

Dividend

The Company will pay, as previously announced, a quarterly dividend of 50 cents per share for the fourth quarter on Thursday, December 5, 2013 to Autoliv stockholders of record on the close of business on Wednesday, November 20, 2013. The ex-date when the shares will trade without the right to the dividend will be Monday, November 18, 2013.

Next Report

Autoliv intends to publish its quarterly earnings report for the fourth quarter 2013 on Friday, January 31, 2014.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

As of September 30, 2013, the Company’s future contractual obligations have not changed materially from the amounts reported in the Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on February 22, 2013.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2013, there have been no material changes to the information related to quantitative and qualitative disclosures about market risk that was provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on February 22, 2013.

ITEM 4. CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures

An evaluation has been carried out, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

(b)	Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For further discussion of legal proceedings, see Note 11 Contingent Liabilities – Legal Proceedings to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, it is the opinion of management that the litigation to which the Company is currently a party will not have a material adverse impact on the consolidated financial position of Autoliv. The Company may, however, experience material product liability or other losses in the future.

The Company believes that it is currently adequately insured against product and other liability risks at levels sufficient to cover potential claims. The level of coverage may, however, be insufficient in the future or unavailable on the market.

ITEM 1A. RISK FACTORS

The risk factors set forth below are in addition to the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February 22, 2013, which includes a detailed discussion of risk factors that could materially affect our business, financial condition or results of operations, and are incorporated herein by reference.

We are subject to securities class action litigation in the U.S. and may be subject to additional litigation in the U.S. or elsewhere, including stockholder derivative actions or other claims, that could negatively impact our business

We are subject to a securities class action in the United States alleging a failure to disclose, or misrepresentation of material facts relating to, antitrust violations. The Company may be subject to additional, similar actions in the future, including stockholder derivative actions or other claims relating to antitrust or other issues. These types of lawsuits could require significant management time and attention and could result in significant expenses as well as unfavorable outcomes that could have a material adverse impact on our customer relationships, business prospects, reputation, operating results, cash-flows or financial results. Currently the duration or ultimate outcome of the securities litigation cannot be predicted or estimated.

We are subject to civil antitrust litigation in the U.S. and Canada following the DOJ settlement and may be subject to additional civil antitrust litigation in the U.S. or elsewhere that could negatively impact our business

Following the Company’s guilty plea as part of the DOJ settlement, the Company and its competitors were sued in multiple purported class action lawsuits in the U.S. and Canada alleging violations of antitrust and related laws and seeking to recover treble damages for the alleged classes of direct purchasers, auto dealers and vehicle purchasers/lessees. The Company may be subject to additional civil antitrust lawsuits in the future in the U.S., Canada or in other countries that permit such civil claims, including lawsuits or other actions by our customers. These types of lawsuits require significant management time and attention and could result in significant expenses as well as unfavorable outcomes that could have a material adverse impact on our customer relationships, business prospects, reputation, operating results, cash-flows or financial results.

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

Stock repurchase program

Since September 15, 2008, Autoliv has made no share repurchases. Since the repurchase program was adopted in 2000, Autoliv has repurchased 34.3 million of its shares at an average cost of US $42.93 per share.

Under the existing authorizations, approximately another 3.2 million shares may be repurchased. We may from time to time repurchase our shares in the open market under the existing share repurchase program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6.

EXHIBITS


Exhibit No.		Description

3.1		Autoliv’s Restated Certificate of Incorporation incorporated herein by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q, filed on May 14, 1997 (File No. 001-12933).

3.2		Autoliv’s Restated By-Laws incorporated herein by reference to Exhibit 3.2 to the Annual Report on Form 10-K (File No. 001-12933, filing date February 23, 2012).

4.1		Senior Indenture, dated March 30, 2009, between Autoliv, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 to Autoliv’s Registration Statement on Form 8-A (File No. 001-12933, filing date March 30, 2009).

4.2		First Supplemental Indenture, dated March 30, 2009, between Autoliv, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.2 to Autoliv’s Registration Statement on Form 8-A (File No. 001-12933, filing date March 30, 2009).

4.3		Purchase Contract and Pledge Agreement, dated March 30, 2009, among Autoliv, Inc. and U.S. Bank National Association, as Stock Purchase Contract Agent, and U.S. Bank National Association, as Collateral Agent, Custodial Agent and Securities Intermediary, incorporated herein by reference to Exhibit 4.3 to Autoliv’s Registration Statement on Form 8-A (File No. 001-12933, filing date March 30, 2009).

4.4		General Terms and Conditions for Swedish Depository Receipts in Autoliv, Inc. representing common shares in Autoliv, Inc., effective as of August 1, 2011, with Skandinaviska Enskilda Banken AB (publ) serving as custodian, incorporated herein by reference to Exhibit 4.11 to Autoliv’s Registration Statement on Form S-3 (File No. 333-179948, filing date March 7, 2012).

4.5		Second Supplemental Indenture (including Form of Global Note), dated March 15, 2012, between Autoliv, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-12933, filing date March 15, 2012).

10.1*†		Finance Contract, dated July 16, 2013, among European Investment Bank, Autoliv AB (publ) and Autoliv Inc.

10.2*		Guarantee Agreement, dated July 16, 2013, between European Investment Bank and Autoliv Inc.

31.1*		Certification of the Chief Executive Officer of Autoliv, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2*		Certification of the Chief Financial Officer of Autoliv, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1*		Certification of the Chief Executive Officer of Autoliv, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of the Chief Financial Officer of Autoliv, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2013, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Net Income; (ii) the Condensed Consolidated Statements of Comprehensive Income: (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to the Condensed Consolidated Financial Statements.

*	Filed herewith.

†	Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities and Exchange Commission.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: October 24, 2013

AUTOLIV, INC.

(Registrant)


By:		/s/ Mats Wallin
		Mats Wallin
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

Exhibit 10.1

CONFIDENTIAL TREATMENT REQUESTED. Confidential portions of this document have been redacted and have been separately filed with the Securities and Exchange Commission.


		FI N° 82.624
		Serapis N° 20120517

Autoliv Safety Systems R&D II

(Sweden, Germany and France)

Finance Contract

between the

European Investment Bank

and

Autoliv AB (publ)

and

Autoliv Inc.

Stockholm, July 16 2013

Luxembourg, July 16 2013


INTERPRETATION AND DEFINITIONS		6

ARTICLE 1		13

1.01	A MOUNT OF C REDIT	13
1.02	D ISBURSEMENT PROCEDURE	13
1.03	C URRENCY OF DISBURSEMENT	14
1.04	C ONDITIONS OF DISBURSEMENT	14
1.05	D EFERMENT OF DISBURSEMENT	16
1.06	C ANCELLATION AND SUSPENSION	16
1.07	C ANCELLATION AFTER EXPIRY OF THE C REDIT	17
1.08	A PPRAISAL FEE	17
1.09	N ON - UTILISATION FEE	17
1.10	S UMS DUE UNDER A RTICLE 1	17

ARTICLE 2		18

2.01	A MOUNT OF L OAN	18
2.02	C URRENCY OF REPAYMENT , INTEREST AND OTHER CHARGES	18
2.03	C ONFIRMATION BY THE B ANK	18

ARTICLE 3		18

3.01	R ATE OF INTEREST	18
3.02	I NTEREST ON OVERDUE SUMS	19
3.03	M ARKET D ISRUPTION E VENT	19

ARTICLE 4		20

4.01	N ORMAL REPAYMENT	20
4.02	V OLUNTARY PREPAYMENT	20
4.03	C OMPULSORY PREPAYMENT	21
4.04	G ENERAL	23

ARTICLE 5		23

5.01	D AY COUNT CONVENTION	23
5.02	T IME AND PLACE OF PAYMENT	23
5.03	N O SET - OFF BY THE B ORROWER	24
5.04	D ISRUPTION TO P AYMENT S YSTEMS	24
5.05	A PPLICATION OF SUMS RECEIVED	24

ARTICLE 6		25

6.01	U SE OF L OAN AND AVAILABILITY OF OTHER FUNDS	25
6.02	C OMPLETION OF P ROJECT	25
6.03	I NCREASED COST OF P ROJECT	25
6.04	P ROCUREMENT PROCEDURE	25
6.05	C ONTINUING P ROJECT UNDERTAKINGS	25
6.06	D ISPOSAL OF ASSETS	26
6.07	C OMPLIANCE WITH LAWS	27
6.08	C HANGE IN BUSINESS	27
6.09	M ERGER	27
6.10	I NDEBTEDNESS FOR B ORROWED M ONEY	28
6.11	G ENERAL R EPRESENTATIONS AND W ARRANTIES	28
6.12	N O LOANS , CREDIT OR THIRD PARTY GUARANTEES	30

ARTICLE 7		31

7.01	G UARANTEE	31
7.02	N EGATIVE PLEDGE	31
7.03	T RANSACTIONS SIMILAR TO SECURITY	33
7.04	P ARI PASSU RANKING	34
7.05	C LAUSES BY I NCLUSION	34


ARTICLE 8		35

8.01	I NFORMATION CONCERNING THE P ROJECT	35
8.02	I NFORMATION CONCERNING THE B ORROWER AND THE G UARANTOR	36
8.03	V ISITS BY THE B ANK	37

ARTICLE 9		37

9.01	T AXES , DUTIES AND FEES	37
9.02	O THER CHARGES	37
9.03	I NCREASED COSTS , INDEMNITY AND SET - OFF	38

ARTICLE 10		38

10.01	R IGHT TO DEMAND REPAYMENT	38
10.02	O THER RIGHTS AT LAW	39
10.03	I NDEMNITY	40
10.04	N ON -W AIVER	40

ARTICLE 11		40

11.01	G OVERNING L AW	40
11.02	J URISDICTION	40
11.03	INTENTIONALLY LEFT BLANK	41
11.04	E VIDENCE OF SUMS DUE	41
11.05	I NVALIDITY	41
11.06	A MENDMENTS	41

ARTICLE 12		41

12.01	N OTICES TO EITHER PARTY	41
12.02	F ORM OF NOTICE	42
12.03	C HANGES TO PARTIES	42
12.04	R ECITALS , S CHEDULES AND A NNEXES	42

SCHEDULE A		44

SCHEDULE B		48

SCHEDULE C		52

SCHEDULE D		56

SCHEDULE E

ANNEX I		58

ANNEX II		59

THIS CONTRACT IS MADE BETWEEN:


The European Investment Bank having its seat at 100 boulevard Konrad Adenauer, L-2950 Luxembourg, Luxembourg, represented by		(the “ Bank ”)

Ms. Hanna Karczewska, Head of Division and

Mr. Jukka Luukkanen, Head of Division

of the first part;


Autoliv AB (publ), a public limited liability company incorporated in Sweden, having its business office at Vasagatan 11, 111 20 Stockholm, Sweden, registered under number 556036-1981, represented by		(the “ Borrower ”)

Amelie Heiner, Director

Lars Sjöbring, Director

of the second part; and


Autoliv Inc., a corporation incorporated in Delaware, USA, having its business office at Vasagatan 11, 111 20 Stockholm, Sweden, represented by		(the “ Guarantor ”)

Jan Carlson, President & CEO

Mats Wallin, CFO

of the third part.

WHEREAS:

(1)

The Borrower, indirectly a 100% owned subsidiary of the Guarantor, has stated that it is undertaking a project concerning the Borrower’s RDI activities to be carried out in Sweden, Germany and France for the development of innovative passive and active safety technologies for motor vehicles aiming at the enhancement of vehicle occupants’ and pedestrians’ safety, over the period 2013-2016, as more particularly described in the technical description (the “ Technical Description ”) set out in Schedule A (the “ Project ”).

The Guarantor, having its primary listing on the New York Stock Exchange and with Swedish depositary receipts on the Nasdaq OMX Nordic Exchange in Stockholm, is the parent company of the Autoliv group of companies.

(2)

The total cost of the Project, as estimated by the Bank, is EUR 425,400,000 (four hundred and twenty-five million, four hundred thousand euros) and the Borrower has stated that it intends to finance the Project as follows:


Source	Amount (EUR m)

Own funds and other funding sources		225.40

Credit from the Bank		200.00

TOTAL		425.40

(3)

In order to fulfil the financing plan set out in Recital (2), the Borrower has requested from the Bank a credit of EUR 200,000,000 (two hundred million euros) or the equivalent thereof.

(4)

The Bank considering that the financing of the Project falls within the scope of its functions, and having regard to the statements and facts cited in these Recitals, has decided to give effect to the Borrower’s request providing to it a credit in an amount EUR 200,000,000 (two hundred million euros) or the equivalent thereof under this finance contract (the “ Contract ”); provided that the amount of the Bank loan shall not, in any case, exceed 50% (fifty per cent) of the total cost of the Project set out in Recital (2).

(5)

The board of directors of the Borrower has authorised the borrowing of the sum of EUR 200,000,000 (two hundred million euros) or the equivalent thereof represented by this credit on the terms and conditions set out in this Contract in the form set out in Annex I.

(6)

The financial obligations of the Borrower under this Contract are to be guaranteed by the Guarantor under a guarantee by execution of a guarantee agreement (the “ Guarantee Agreement ”).

(7)

The Statute of the Bank provides that the Bank shall ensure that its funds are used as rationally as possible in the interests of the European Union; and, accordingly, the terms and conditions of the Bank’s loan operations must be consistent with relevant policies of the European Union.

(8)

The Bank considers that access to information plays an essential role in the reduction of environmental and social risks, including human rights violations, linked to the projects it finances and has therefore established its transparency policy, the purpose of which is to enhance the accountability of the EIB Group towards its stakeholders and the citizens of the European Union in general.

NOW THEREFORE it is hereby agreed as follows:

INTERPRETATION AND DEFINITIONS

(a) Interpretation

In this Contract:

(i)

References to Articles, Recitals, Schedules and Annexes are, save if explicitly stipulated otherwise, references respectively to articles of, and recitals, schedules and annexes to this Contract.

(ii)

References to a provision of law are references to that provision as amended or re-enacted.

(iii)

References to any other agreement or instrument are references to that other agreement or instrument as amended, novated, supplemented, extended or restated.

(b) Definitions

In this Contract:

“ Acceptance Deadline ” for a notice means:

(a)

16h00 Luxembourg time on the day of delivery, if the notice is delivered by 14h00 Luxembourg time on a Business Day; or

(b)

11h00 Luxembourg time on the next following day which is a Business Day, if the notice is delivered after 14h00 Luxembourg time on any such day or is delivered on a day which is not a Business Day.

“ Authorisation ” means an authorisation, permit, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

“ Accounting Date ” means end of 31 December 2012.

“ Borrower Group ” means the Borrower and its subsidiaries from time to time.

“ Borrower Material Subsidiary ” means:

(a)

any subsidiary of the Borrower:

(i)

the book value of whose assets (consolidated if it itself has subsidiaries) equals or exceeds 10 per cent of the book value of the consolidated total assets of the Borrower Group;

(ii)

whose revenues (consolidated if it itself has subsidiaries) equal or exceed 10 per cent of the revenues of the Borrower Group taken as a whole; or

(iii)

whose trading profits (consolidated if it itself has subsidiaries) before interest and tax equal to or exceed 10 per cent of the trading profits before interest and tax of the Borrower Group as a whole,

as determined by reference to the most recent accounts of the subsidiary and the most recent consolidated accounts of the Borrower Group;

(b)

any subsidiary of the Borrower which becomes a member of the Borrower Group after the date of the latest consolidated accounts of the Borrower Group at the time of determination and which would fulfil any of the tests in (a)(i), (ii) or (iii) above if tested on the basis of its latest accounts (consolidated if it itself has subsidiaries) and those latest accounts of the Borrower Group; or

(c)

prior to the delivery of each set of accounts pursuant to Article 8.02(a)(i) and (ii), any subsidiary of the Borrower to which has been transferred (whether by one transaction or a series of transactions, related or not) the whole or substantially the whole of the assets of a subsidiary which immediately prior to such transaction or any of such transactions was a Borrower Material Subsidiary.

“ Borrower Subsidiary Indebtedness for Borrowed Money ” has the meaning given to it Article 6.10.

“ Business Day ” means a day (other than a Saturday or Sunday) on which the Bank and commercial banks are open for general business in Luxembourg and Stockholm.

“ Change-of-Control Event ” has the meaning given to it in Article 4.03A(3).

“ Change-of-Law Event ” has the meaning given to it in Article 4.03A(4).

“ Contract ” has the meaning given to it in Recital (4).

“ Credit ” has the meaning given to it in Article 1.01.

“ Deferment Indemnity ” means an indemnity calculated on the amount of disbursement deferred or suspended at the percentage rate (if higher than zero) by which:

•

the interest rate net of the Margin that would have been applicable to such amount had it been disbursed to the Borrower on the Scheduled Disbursement Date

exceeds

•

the Relevant Interbank Rate (one month rate) less 0.125% (12.5 basis points), unless this value is less than zero, in which case it will be set at zero.

Such indemnity shall accrue from the Scheduled Disbursement Date to the Disbursement Date or, as the case may be, until the date of cancellation of the Notified Tranche in accordance with this Contract.

“ Disbursement Date ” means the date on which actual disbursement of a Tranche is made by the Bank.

“ Disbursement Notice ” means a notice from the Bank to the Borrower pursuant to and in accordance with Article 1.02C.

“ Disbursement Request ” means a notice substantially in the form set out in Schedule C.1.

“ Disruption Event ” means either or both of:

(a)

a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with this Contract; or

(b)

the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of either the Bank or the Borrower, preventing that party:

(i)

from performing its payment obligations under this Contract; or

(ii)

from communicating with other parties as relevant for this Contract,

and which disruption (in either such case as per (a) or (b) above) is not caused by, and is beyond the control of, the party whose operations are disrupted.

“ Environment ” means the following, in so far as they affect human health and social well-being:

(a)

fauna and flora;

(b)

soil, water, air, climate and the landscape; and

(c)

cultural heritage and the built environment,

and includes, without limitation, occupational and community health and safety.

“ Environmental Approval ” means any Authorisation required by Environmental Law.

“ Environmental Claim ” means any legal claim, proceeding, formal notice or formal investigation by any person in respect of any Environmental Law.

“ Environmental Law ” means:

(a)

European Union law and regulations;

(b)

French, German and Swedish national laws and regulations; and

(c)

applicable international treaties,

of which a principal objective is the preservation, protection or improvement of the Environment.

“ EURIBOR ” has the meaning given to it in Schedule B.

“ EUR ” or “ euro ” mean the lawful currency of the Member States of the European Union which adopt or have adopted it as their currency in accordance with the relevant provisions of the Treaty on European Union and the Treaty on the Functioning of the European Union or their succeeding treaties.

“ Event of Default ” means any of the circumstances, events or occurrences specified in Article 10.01.

“ Final Availability Date ” means the date which is 18 (eighteen) months from the date of signature of this Contract.

“ Fixed Rate ” means an annual interest rate determined by the Bank in accordance with the applicable principles from time to time laid down by the governing bodies of the Bank for loans made at a fixed rate of interest, denominated in the currency of the Tranche and bearing equivalent terms for the repayment of capital and the payment of interest. Fixed Rate shall include the Margin.

“ Fixed Rate Tranche ” means a Tranche on which Fixed Rate is applied.

“ Floating Rate ” means a fixed-spread floating interest rate, that is to say an annual interest rate determined by the Bank for each successive Floating Rate Reference Period equal to the Relevant Interbank Rate plus the Spread.

“ Floating Rate Reference Period ” means each period from one Payment Date to the next relevant Payment Date; the first Floating Rate Reference Period shall commence on the date of disbursement of the Tranche.

“ Floating Rate Tranche ” means a Tranche on which Floating Rate is applied.

“ GAAP ” means generally accepted accounting principles in Sweden and Delaware (as applicable), including IFRS (if applicable).

“ GBP ” means the lawful currency of the United Kingdom.

“ Group ” means the Guarantor and its subsidiaries from time to time.

“ Group Indebtedness for Borrowed Money ” has the meaning given to it in Article 6.10.

“ Guarantee Agreement ” has the meaning given to it in Recital (6).

“ Guarantor Group ” means the Guarantor and its subsidiaries (other than any member of the Borrower Group) from time to time.

“ Guarantor Material Subsidiary ” means:

(a)

any subsidiary of the Guarantor:

(i)

the book value of whose assets (consolidated if it itself has subsidiaries) equals or exceeds 10 per cent of the book value of the consolidated total assets of the Group;

(ii)

whose revenues (consolidated if it itself has subsidiaries) equal or exceed 10 per cent of the revenues of the Group taken as a whole; or

(iii)

whose trading profits (consolidated if it itself has subsidiaries) before interest and tax equal to or exceed 10 per cent of the trading profits before interest and tax of the Group as a whole,

as determined by reference to the most recent accounts of the subsidiary and the most recent consolidated accounts of the Group;

(b)

any subsidiary of the Guarantor which becomes a member of the Group after the date of the latest consolidated accounts of the Group at the time of determination and which would fulfil any of the tests in (a)(i), (ii) or (iii) above if tested on the basis of its latest accounts (consolidated if it itself has subsidiaries) and those latest accounts of the Group; or

(c)

prior to the delivery of each set of accounts pursuant to Article 8.02(a)(i) and (ii), any subsidiary of the Guarantor to which has been transferred (whether by one transaction or a series of transactions, related or not) the whole or substantially the whole of the assets of a subsidiary which immediately prior to such transaction or any of such transactions was a Guarantor Material Subsidiary.

“ Guarantor Subsidiary Indebtedness for Borrowed Money ” has the meaning given to it in Article 6.10.

“ Guarantor Group Indebtedness for Borrowed Money ” has the meaning given to it in Article 6.10.

“ Incorporated Provision ” has the meaning given to it in Article 7.04.

“ Indebtedness for Borrowed Money ” has the meaning given to it in Article 6.10.

“ IFRS ” means international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements.

“ Indemnifiable Prepayment Event ” means a Prepayment Event other than those specified in paragraphs 4.03A(1), 4.03A(2) or 4.03A(5).

“ Interest Revision/Conversion ” means the determination of new financial conditions relative to the interest rate, specifically the same interest rate basis (“revision”) or a different interest rate basis (“conversion”) which can be offered for the remaining term of a Tranche or until a next Interest Revision/Conversion Date, if any, for an amount which, at the proposed Interest Revision/Conversion Date, is not less than EUR 10,000,000 (ten million euros) or the equivalent thereof.

“ Interest Revision/Conversion Date ” means the date, which shall be a Payment Date, specified by the Bank pursuant to Article 1.02C in the Disbursement Notice or pursuant to Article 3 and Schedule D.

“ Interest Revision/Conversion Proposal ” means a proposal made by the Bank under Schedule D.

“ Interest Revision/Conversion Request ” means a written notice from the Borrower, delivered at least 75 (seventy-five) days before an Interest Revision/Conversion Date, requesting the Bank to submit to it an Interest Revision/Conversion Proposal. The Interest Revision/Conversion Request shall also specify:

(a)

Payment Dates chosen in accordance with the provisions of Article 3.01;

(b)

the preferred repayment schedule chosen in accordance with Article 4.01; and

(c)

any further Interest Revision/Conversion Date chosen in accordance with Article 3.01.

“ LIBOR ” has the meaning given to it in Schedule B.

“ Loan ” means the aggregate amount of Tranches disbursed from time to time by the Bank under this Contract.

“ Margin ” means the component of the rate of interest quantified in Article 3.01.

“ Market Disruption Event ” means any of the following circumstances:

(a)

there are, in the reasonable opinion of the Bank, events or circumstances adversely affecting the Bank’s access to its sources of funding;

(b)

in the opinion of the Bank, funds are not available from its ordinary sources of funding in order to adequately fund a Tranche in the relevant currency and/or for the relevant maturity and/or in relation to the reimbursement profile of such Tranche;

(c)

in relation to a Tranche in respect of which interest is or would be payable at Floating Rate:

(A)

the cost to the Bank of obtaining funds from its sources of funding, as determined by the Bank, for a period equal to the Floating Rate Reference Period of such Tranche (i.e. in the money market) would be in excess of the applicable Relevant Interbank Rate;

(B)

the Bank determines that adequate and fair means do not exist for ascertaining the applicable Relevant Interbank Rate for the relevant currency of such Tranche and it is not possible to determine the Relevant Interbank Rate in accordance with the definition contained in Schedule B.

“ Material Adverse Change means, in relation to the Guarantor or respectively the Borrower any event or change of condition affecting the Guarantor, the Borrower, or any other member of the Group, which, in the reasonable opinion of the Bank: (1) materially impairs the ability of the Borrower or respectively the Guarantor to perform its financial or any of its other obligations under this Contract or the Deed of Guarantee; or (2) materially impairs the business, prospects or financial condition of the Borrower, the Guarantor, or the Group as a whole.

“ Maturity Date ” means the last or sole repayment date of a Tranche specified pursuant to Article 4.01A(b)(iv) or Article 4.01B.

“ MFP Statement ” has the meaning given to it in Article 7.05.

“ More Favourable Provision ” has the meaning given to it in Article 7.05.

“ Negative Covenant ” has the meaning given to it in Article 7.05.

“ Notified Tranche ” means a Tranche in respect of which the Bank has issued a Disbursement Notice.

“ Other Person ” has the meaning given to it in Article 7.05.

“ Payment Date ” means the annual, semi-annual or quarterly dates specified in the Disbursement Notice until the Interest Revision/Conversion Date, if any, or the Maturity Date, save that, in case any such date is not a Relevant Business Day, it means:

(a)

for a Fixed Rate Tranche, the following Relevant Business Day, without adjustment to the interest due under Article 3.01 except for those cases where repayment is made in a single instalment according to Article 4.01B, when the preceding Relevant Business Day shall apply instead to this single instalment and to the final interest payment and only in this case, with adjustment to the interest due under Article 3.01; and

(b)

for a Floating Rate Tranche, the next day, if any, of that calendar month that is a Relevant Business Day or, failing that, the nearest preceding day that is a Relevant Business Day, in all cases with corresponding adjustment to the interest due under Article 3.01.

“ Prepayment Amount ” means the amount of a Tranche to be prepaid by the Borrower in accordance with Article 4.02A.

“ Prepayment Date ” means the date, which shall be a Payment Date, on which the Borrower proposes to effect prepayment of a Prepayment Amount.

“ Prepayment Event ” means any of the events described in Article 4.03A.

“ Prepayment Indemnity ” means in respect of any principal amount to be prepaid or cancelled, the amount communicated by the Bank to the Borrower as the present value (as of the Prepayment Date) of the excess, if any, of:

(a)

the interest net of the Margin that would accrue thereafter on the Prepayment Amount over the period from the Prepayment Date to the Interest Revision/Conversion Date, if any, or the Maturity Date, if it were not prepaid; over

(b)

the interest that would so accrue over that period, if it were calculated at the Redeployment Rate, less 0.15% (fifteen basis points).

The said present value shall be calculated at a discount rate equal to the Redeployment Rate, applied as of each relevant Payment Date.

“ Prepayment Notice ” means a written notice from the Bank to the Borrower in accordance with Article 4.02C.

“ Prepayment Request ” means a written request from the Borrower to the Bank to prepay all or part of the Loan, in accordance with Article 4.02A.

“ Principal Lending Agreement ” has the meaning given to it in Article 7.04.

“ Project ” has the meaning given to it in Recital (1).

“ Redeployment Rate ” means the Fixed Rate excluding the Margin in effect on the day of the indemnity calculation for fixed-rate loans denominated in the same currency and which shall have the same terms for the payment of interest and the same repayment profile to the Interest Revision/Conversion Date, if any, or the Maturity Date as the Tranche in respect of which a prepayment is proposed or requested to be made. For those cases where the period is shorter than 48 months (or 36 months in the absence of a repayment of principal during that period) the most closely corresponding money market rate equivalent will be used, that is the Relevant Interbank Rate minus 0.125% (12.5 basis points) for periods of up to 12 (twelve) months. For periods falling between 12 and 36/48 months as the case may be, the bid point on the swap rates as published by Reuters for the related currency and observed by the Bank at the time of calculation will apply.

“ Relevant Business Day ” means:

(a)

for EUR, a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007 (TARGET2) is open for the settlement of payments in EUR; and

(b)

for any other currency, a day on which banks are open for general business in the principal domestic financial centre of the relevant currency.

“ Relevant Interbank Rate ” means:

(a)

EURIBOR for a Tranche denominated in EUR;

(b)

LIBOR for a Tranche denominated in GBP or USD;

(c)

STIBOR for the Tranche denominated in SEK; and

(d)

the market rate and its definition chosen by the Bank and separately communicated to the Borrower, for a Tranche denominated in any other currency. If such other market rate is or becomes at any time less than zero, for the purposes of this Contract such other market rate shall be set at zero.

“ Restrictive Financial or Rating Covenant ” has the meaning given to it in Article 7.04.

“ Scheduled Disbursement Date ” means the date on which a Tranche is scheduled to be disbursed in accordance with Article 1.02C.

“ Security Interest ” means any mortgage, pledge, lien, charge, assignment, hypothecation, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“ SEK ” means the lawful currency of Sweden.

“ Spread ” means the fixed spread to the Relevant Interbank Rate (being either plus or minus) determined by the Bank including the Margin and notified to the Borrower in the relevant Disbursement Notice or Interest Revision/Conversion Proposal.

“ STIBOR ” has the meaning given to it in Schedule B.

“ Subsidiary ” means any subsidiary of the Borrower.

“ Subsidiary Indebtedness for Borrowed Money ” has the meaning given to it in Article 6.10

“ Tax ” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“ Technical Description ” has the meaning given to it in Recital (1).

“ Term Loan ” has the meaning given to it in Article 4.03A(2).

“ Tranche ” means each disbursement made or to be made under this Contract. In case no Disbursement Notice has been delivered, Tranche shall mean a Tranche as requested under Article 1.02B.

“ USD ” means the lawful currency of the United States of America.

ARTICLE 1

Credit and Disbursements

1.01

Amount of Credit

By this Contract the Bank establishes in favour of the Borrower, and the Borrower accepts, a credit in an amount of EUR 200,000,000 (two hundred million euros) or the equivalent thereof for the financing of the Project (the “ Credit ”).

1.02

Disbursement procedure

1.02A

Tranches

The Bank shall disburse the Credit in up to 4 (four) Tranches. The amount of each Tranche, if not being the undrawn balance of the Credit, shall be in a minimum amount of EUR 50,000,000 (fifty million euros) or the equivalent thereof.

1.02B

Disbursement Request

(a)

The Borrower may present to the Bank a Disbursement Request for the disbursement of a Tranche, such Disbursement Request to be received at the latest 15 (fifteen) days before the Final Availability Date. The Disbursement Request shall be in the form set out in Schedule C.1 and shall specify:

(i)

the amount and currency of the Tranche;

(ii)

the preferred disbursement date for the Tranche; such preferred disbursement date must be a Relevant Business Day falling at least 15 (fifteen) days after the date of the Disbursement Request and, in any event, on or before the Final Availability Date, it being understood that notwithstanding the Final Availability Date the Bank may disburse the Tranche up to 4 (four) calendar months from the date of the Disbursement Request;

(iii)

whether the Tranche is a Fixed Rate Tranche or a Floating Rate Tranche, each pursuant to the relevant provisions of Article 3.01;

(iv)

the preferred interest payment periodicity for the Tranche, chosen in accordance with Article 3.01;

(v)

the preferred terms for repayment of principal for the Tranche, chosen in accordance with Article 4.01;

(vi)

the preferred first and last dates for repayment of principal for the Tranche;

(vii)

the Borrower’s choice of Interest Revision/Conversion Date, if any, for the Tranche; and

(viii)

the IBAN code (or appropriate format in line with local banking practice) and SWIFT BIC of the bank account to which disbursement of the Tranche should be made in accordance with Article 1.02D.

(b)

If the Bank, following a request by the Borrower, has provided the Borrower, before the submission of the Disbursement Request, with a non-binding fixed interest rate or spread quotation to be applicable to the Tranche, the Borrower may also at its discretion specify in the Disbursement Request such quotation, that is to say:

(i)

in the case of a Fixed Rate Tranche, the aforementioned fixed interest rate previously quoted by the Bank; or

(ii)

in the case of a Floating Rate Tranche, the aforementioned spread previously quoted by the Bank,

applicable to the Tranche until the Maturity Date or until the Interest Revision/Conversion Date, if any.

(c)

Each Disbursement Request shall be accompanied by evidence of the authority of the person or persons authorised to sign it and the specimen signature of such person or persons.

(d)

Subject to Article 1.02C(b), each Disbursement Request is irrevocable.

1.02C

Disbursement Notice

(a)

Not less than 10 (ten) days before the proposed Scheduled Disbursement Date of a Tranche the Bank shall, if the Disbursement Request conforms to this Article 1.02, deliver to the Borrower a Disbursement Notice which shall specify:

(i)

the currency, amount and EUR equivalent of the Tranche;

(ii)

the Scheduled Disbursement Date;

(iii)

the interest rate basis for the Tranche, being: (i) a Fixed Rate Tranche; or (ii) a Floating Rate Tranche all pursuant to the relevant provisions of Article 3.01;

(iv)

the first interest Payment Date and the periodicity for the payment of interest for the Tranche;

(v)

the terms for repayment of principal for the Tranche;

(vi)

the first and last dates for repayment of principal for the Tranche;

(vii)

the applicable Payment Dates for the Tranche;

(viii)

the Interest Revision/Conversion Date, if requested by the Borrower, for the Tranche; and

(ix)

for a Fixed Rate Tranche the Fixed Rate and for a Floating Rate Tranche the Spread applicable to the Tranche until the Interest Revision/Conversion Date, if any or until the Maturity Date.

(b)

If one or more of the elements specified in the Disbursement Notice does not reflect the corresponding element, if any, in the Disbursement Request, the Borrower may following receipt of the Disbursement Notice revoke the Disbursement Request by written notice to the Bank to be received no later than 12h00 Luxembourg time on the next Business Day and thereupon the Disbursement Request and the Disbursement Notice shall be of no effect. If the Borrower has not revoked in writing the Disbursement Request within such period, the Borrower will be deemed to have accepted all elements specified in the Disbursement Notice.

(c)

If the Borrower has presented to the Bank a Disbursement Request in which the Borrower has not specified the fixed interest rate or spread as set out in Article 1.02B(b), the Borrower will be deemed to have agreed in advance to the Fixed Rate or Spread as subsequently specified in the Disbursement Notice.

1.02D

Disbursement Account

Disbursement shall be made to such account of the Borrower as the Borrower shall notify in writing to the Bank not later than 15 (fifteen) days before the Scheduled Disbursement Date (with IBAN code or with the appropriate format in line with local banking practice).

Only one account may be specified for each Tranche.

1.03

Currency of disbursement

Subject to availability, disbursement of each Tranche shall be made in EUR or any other currency that is widely traded on the principal foreign exchange markets.

For the calculation of the sums available to be disbursed in currencies other than EUR, and to determine their equivalent in EUR, the Bank shall apply the rate published by the European Central Bank in Frankfurt, available on or shortly before submission of the Disbursement Notice as the Bank shall decide.

1.04

Conditions of disbursement

1.04A

First Tranche

The disbursement of the first Tranche under Article 1.02 is conditional upon receipt by the Bank, in form and substance satisfactory to it, on or before the date falling 5 (five) Business Days before the Scheduled Disbursement Date, of the following documents or evidence:

(a)

evidence satisfactory to the Bank that the execution of this Contract by the Borrower has been duly authorised and that the person or persons signing the Contract on behalf of the Borrower is/are duly authorised to do so together with the specimen signature of each such person or persons;

(b)

evidence satisfactory to the Bank that the execution of this Contract by the Guarantor has been duly authorised and that the person or persons signing the Contract on behalf of the Guarantor is/are duly authorised to do so together with the specimen signature of each such person or persons;

(c)

the Guarantee Agreement duly executed;

(d)

an internal legal opinion that each of the Finance Contract, the Guarantee Agreement and the relevant documentation is legal, valid, binding and enforceable under Swedish law, and on the authority, capacity, due execution of the Finance Contract and the relevant documentation by the Borrower under Swedish law;

(e)

an external legal opinion on the authority, capacity, due execution, choice of law and jurisdiction of the Finance Contract, the Guarantee Agreement and on the relevant documentation by the Guarantor under Delaware (US) law; and

(f)

evidence of payment of the appraisal fee in full pursuant to Article 1.08.

1.04B

All Tranches

The disbursement of each Tranche under Article 1.02, including the first, is subject to the following conditions:

(a)

that the Bank has received, in form and substance satisfactory to it, on or before the date falling 5 (five) Business Days before the Scheduled Disbursement Date for the proposed Tranche, of the following documents or evidence:

(i)

a certificate from the Borrower and the Guarantor in the form of Schedule C.2, signed by an authorised representative of the Borrower or the Guarantor and dated no earlier than the date falling 10 (ten) days before the Scheduled Disbursement Date;

(ii)

evidence of the Guarantor’s consent to the Borrower’s presentation of the Disbursement Request;

(iii)

evidence of the authority of the person or persons authorised to sign the Guarantor’s consent under paragraph (ii) above and the specimen signature of such person or persons;

and

(iv)

a copy of any other Authorisation or other document, opinion or assurance which the Bank has notified the Borrower not less than 7 (seven ) Business Days before the Scheduled Disbursement Date is necessary in connection with the entry into and performance of, and the transactions contemplated by, this Contract or the validity and enforceability of the same;

(b)

that on the Disbursement Date for the proposed Tranche:

(i)

the representations and warranties which are repeated pursuant to Article 6.12 are correct in all material respects; and

(ii)

no event or circumstance which constitutes or would with the passage of time or giving of notice under this Contract constitute:

(aa)

an Event of Default; or

(bb)

a Prepayment Event;

has occurred and is continuing unremedied or unwaived or would result from the disbursement of the proposed Tranche.

1.05

Deferment of disbursement

1.05A

Grounds for deferment

Upon the written request of the Borrower, the Bank shall defer the disbursement of any Notified Tranche in whole or in part to a date specified by the Borrower being a date falling not later than 6 (six) months from its Scheduled Disbursement Date and not later than 60 days prior to the first repayment date of the Tranche indicated in the Disbursement Notice. In such case, the Borrower shall pay the Deferment Indemnity calculated on the amount of disbursement deferred.

Any request for deferment shall have effect in respect of a Tranche only if it is made at least 5 (five) Business Days before its Scheduled Disbursement Date.

If for a Notified Tranche any of the conditions referred to in Article 1.04 is not fulfilled as at the specified date and at the Scheduled Disbursement Date (or the date expected for disbursement in case of a previous deferment), disbursement will be deferred to a date agreed between the Bank and the Borrower falling not earlier than 5 (five) Business Days following the fulfilment of all conditions of disbursement (without prejudice to the right of the Bank to suspend and/or cancel the undisbursed portion of the Credit in whole or in part pursuant to Article 1.06B). In such case, the Borrower shall pay the Deferment Indemnity calculated on the amount of disbursement deferred.

1.05B

Cancellation of a disbursement deferred by 6 (six) months

The Bank may, by notice in writing to the Borrower, cancel a disbursement which has been deferred under Article 1.05A by more than 6 (six) months in aggregate. The cancelled amount shall remain available for disbursement under Article 1.02.

1.06

Cancellation and suspension

1.06A

Borrower’s right to cancel

The Borrower may at any time by notice in writing to the Bank cancel, in whole or in part and with immediate effect, the undisbursed portion of the Credit. However, the notice shall have no effect in respect of (i) a Notified Tranche which has a Scheduled Disbursement Date falling within 5 (five) Business Days of the date of the notice or (ii) a Tranche in respect of which a Disbursement Request has been submitted but no Disbursement Notice has been issued pursuant to Article 1.02C.

1.06B

Bank’s right to suspend and cancel

(a)

The Bank may, by notice in writing to the Borrower, suspend and/or cancel the undisbursed portion of the Credit in whole or in part at any time and with immediate effect upon the occurrence of a Prepayment Event or an Event of Default or an event or circumstance which would with the passage of time or giving of notice under this Contract constitute a Prepayment Event or an Event of Default.

(b)

The Bank may also suspend the portion of the Credit in respect of which it has not issued a Disbursement Notice with immediate effect in the case that a Market Disruption Event occurs.

(c)

Any suspension shall continue until the Bank ends the suspension (such suspension to be ended if any of the events set out in paragraph (a) or (b) above ceases to occur) or cancels the suspended amount.

1.06C

Indemnity for suspension and cancellation of a Tranche

1.06C(1)

SUSPENSION

If the Bank suspends a Notified Tranche, whether upon an Indemnifiable Prepayment Event or an Event of Default, the Borrower shall pay to the Bank the Deferment Indemnity calculated on the amount of disbursement suspended.

1.06C(2)

CANCELLATION

If pursuant to Article 1.06A, the Borrower cancels:

(a)

a Fixed Rate Tranche which is a Notified Tranche, it shall indemnify the Bank under Article 4.02B;

(b)

a Floating Rate which is a Notified Tranche or any part of the Credit other than a Notified Tranche, no indemnity is payable.

If the Bank cancels:

(i)

a Fixed Rate Tranche which is a Notified Tranche upon an Indemnifiable Prepayment Event or pursuant to Article 1.05B, the Borrower shall pay to the Bank the Prepayment Indemnity; or

(ii)

a Notified Tranche upon an Event of Default, the Borrower shall indemnify the Bank under Article 10.03.

Save in these cases, no indemnity is payable upon cancellation of a Tranche by the Bank.

The indemnity shall be calculated as if the cancelled amount had been disbursed and repaid on the Scheduled Disbursement Date or, to the extent that the disbursement of the Tranche is currently deferred or suspended, on the date of the cancellation notice.

1.07

Cancellation after expiry of the Credit

On the day following the Final Availability Date, and unless otherwise specifically agreed to in writing by the Bank, the part of the Credit in respect of which no Disbursement Request has been made in accordance with Article 1.02B shall be automatically cancelled, without any notice being served by the Bank to the Borrower and without liability arising on the part of either party.

1.08

Appraisal fee

The Borrower shall pay or cause to be paid to the Bank within 30 (thirty) days of the signature of the Contract an appraisal fee in respect of the appraisal conducted by the Bank in relation to the Project. The amount of the appraisal fee is EUR 200,000 (two hundred thousand euros).

1.09

Non-utilisation fee

The Borrower shall pay to the Bank a non-utilisation fee calculated on the daily undrawn uncancelled balance of the Credit, starting to accrue from the date of this Contract, at a rate of 50% (fifty per cent) of the Margin per annum, the accrued non-utilisation fee being payable:

(a)

on 20 December 2013 and 20 June 2014; and

(b)

on the Final Availability Date; or, if the Credit is cancelled in full under Article 1.06 prior to the Final Availability Date, on the date of cancellation.

If the date on which the non-utilisation fee is due to be paid is not a Relevant Business Day, payment shall be made on the next day, if any, of that calendar month that is a Relevant Business Day or, failing that, the nearest preceding day that is a Relevant Business Day, in all cases with a corresponding adjustment to the amount of non-utilisation fee due.

1.10

Sums due under Article 1

Sums due under Articles 1.05 and 1.06 shall be payable in the currency of the Tranche concerned. They shall be payable within 15 (fifteen) days of the Borrower’s receipt of the Bank’s demand or within any longer period specified in the Bank’s demand.

ARTICLE 2

The Loan

2.01

Amount of Loan

The Loan shall comprise the aggregate amount of Tranches disbursed by the Bank under the Credit, as confirmed by the Bank pursuant to Article 2.03.

2.02

Currency of repayment, interest and other charges

Interest, repayments and other charges payable in respect of each Tranche shall be made by the Borrower in the currency in which the Tranche is disbursed.

Any other payment shall be made in the currency specified by the Bank having regard to the currency of the expenditure to be reimbursed by means of that payment.

2.03

Confirmation by the Bank

Within 10 (ten) days after disbursement of each Tranche, the Bank shall deliver to the Borrower the amortisation table referred to in Article 4.01, if appropriate, showing the Disbursement Date, currency, the amount disbursed, the repayment terms and the interest rate of and for that Tranche.

ARTICLE 3

Interest

3.01

Rate of interest

For the purposes of this Contract “ Margin ” means 26 basis points (0.26%).

Fixed Rates and Spreads are available for periods of not less than 4 (four) years or, in the absence of a repayment of principal during that period, not less than 3 (three) years.

3.01A

Fixed Rate Tranches

The Borrower shall pay interest on the outstanding balance of each Fixed Rate Tranche at the Fixed Rate quarterly, semi-annually or annually in arrears on the relevant Payment Dates as specified in the Disbursement Notice, commencing on the first such Payment Date following the Disbursement Date of the Tranche. If the period from the Disbursement Date to the first Payment Date is 15 (fifteen) days or less then the payment of interest accrued during such period shall be postponed to the following Payment Date.

Interest shall be calculated on the basis of Article 5.01(a).

3.01B

Floating Rate Tranches

The Borrower shall pay interest on the outstanding balance of each Floating Rate Tranche at the Floating Rate quarterly, semi-annually or annually in arrears on the relevant Payment Dates, as specified in the Disbursement Notice commencing on the first such Payment Date following the Disbursement Date of the Tranche. If the period from the Disbursement Date to the first Payment Date is 15 (fifteen) days or less then the payment of interest accrued during such period shall be postponed to the following Payment Date.

The Bank shall notify the Floating Rate to the Borrower within 10 (ten) days following the commencement of each Floating Rate Reference Period.

If pursuant to Articles 1.05 and 1.06 disbursement of any Floating Rate Tranche takes place after the Scheduled Disbursement Date the Relevant Interbank Rate applicable to the first Floating Rate Reference Period shall apply as though the disbursement had been made on the Scheduled Disbursement Date.

Interest shall be calculated in respect of each Floating Rate Reference Period on the basis of Article 5.01(b). If the Floating Rate for any Floating Rate Reference Period is below zero, it will be set at zero.

3.01C

Revision or Conversion of Tranches

Where the Borrower exercises an option to revise or convert the interest rate basis of a Tranche, it shall, from the effective Interest Revision/Conversion Date (in accordance with the procedure set out in Schedule D) pay interest at a rate determined in accordance with the provisions of Schedule D.

3.02

Interest on overdue sums

Without prejudice to Article 10 and by way of exception to Article 3.01, if the Borrower fails to pay any amount payable by it under the Contract on its due date, interest shall accrue on any overdue amount payable under the terms of this Contract from the due date to the date of actual payment at an annual rate equal to the Relevant Interbank Rate plus the Margin plus 2% (200 basis points) and shall be payable in accordance with the demand of the Bank. For the purpose of determining the Relevant Interbank Rate in relation to this Article 3.02, the relevant periods within the meaning of Schedule B shall be successive periods of one month commencing on the due date.

However, interest on any overdue sum under a Fixed Rate Tranche shall be charged at the annual rate that is the sum of the rate defined in Article 3.01A plus 0.25% (25 basis points) if that annual rate exceeds, for any given relevant period, the rate specified in the preceding paragraph.

If the overdue sum is in a currency other than the currency of the Loan, the following rate per annum shall apply, namely the Relevant Interbank Rate that is generally retained by the Bank for transactions in that currency plus 2% (200 basis points), calculated in accordance with the market practice for such rate.

3.03

Market Disruption Event

If at any time (i) from the issuance by the Bank of the Disbursement Notice in respect of a Tranche, and (ii) until the date falling either 30 (thirty) calendar days for Tranches to be disbursed in EUR, GBP or USD, or, in the case of Tranches to be disbursed in any other currency, two Business Days prior to the Scheduled Disbursement Date, a Market Disruption Event occurs, the Bank may notify the Borrower that this clause has come into effect. In such case, the following rules shall apply:

(a)

In the case of a Notified Tranche to be disbursed in EUR, USD or GBP, the rate of interest applicable to such Notified Tranche until the Maturity Date or the Interest Revision/Conversion Date if any, shall be the percentage rate per annum which is the sum of:

•

the Margin; and

•

the rate (expressed as a percentage rate per annum) which is determined by the Bank to be the all-inclusive cost to the Bank for the funding of the relevant Tranche based upon the then applicable internally generated Bank reference rate or an alternative rate determination method reasonably determined by the Bank. The Borrower shall have the right to refuse in writing such disbursement within the deadline specified in the notification and shall bear charges incurred as a result, if any, in which case the Bank shall not effect the disbursement and the corresponding Credit shall remain available for disbursement under Article 1.02B. If the Borrower does not refuse the disbursement in time, the parties agree that the disbursement and the conditions thereof shall be fully binding for both parties.

(b)

In the case of a Notified Tranche to be disbursed in a currency other than EUR, USD or GBP, the Bank shall notify the Borrower the EUR equivalent to be disbursed on the Scheduled Disbursement Date and the relevant percentage rate as described above under paragraph (a) applicable to the Tranche until the Maturity Date or the Interest Revision/Conversion Date if any. The Borrower shall have the right to refuse in writing such disbursement within the deadline specified in the notification and shall

bear charges incurred as a result, if any, in which case the Bank shall not effect the disbursement and the corresponding portion of the Credit shall remain available for disbursement under Article 1.02B. If the Borrower does not refuse the disbursement in time, the parties agree that the disbursement in EUR and the conditions thereof shall be fully binding for both parties.

In each case the Spread or Fixed Rate previously notified by the Bank in the Disbursement Notice shall no longer be applicable.

ARTICLE 4

Repayment

4.01

Normal repayment

4.01A

Repayment by instalments

(a)

The Borrower shall repay each Tranche by instalments on the Payment Dates specified in the relevant Disbursement Notice in accordance with the terms of the amortisation table delivered pursuant to Article 2.03.

(b)

Each amortisation table shall be drawn up on the basis that:

(i)

in the case of a Fixed Rate Tranche without an Interest Revision/Conversion Date, repayment shall be made annually, semi-annually or quarterly by equal instalments of principal or constant instalments of principal and interest;

(ii)

in the case of a Fixed Rate Tranche with an Interest Revision/Conversion Date or a Floating Rate Tranche, repayment shall be made by equal annual, semi-annual or quarterly instalments of principal;

(iii)

the first repayment date of each Tranche shall be a Payment Date falling not earlier than 60 days from the Scheduled Disbursement Date and not later than the first Payment Date immediately following the third anniversary of the Scheduled Disbursement Date of the Tranche; and

(iv)

the last repayment date of each Tranche shall be a Payment Date falling not earlier than 4 (four) years and not later than 7 (seven) years from the Scheduled Disbursement Date.

4.01B

Single instalment

Alternatively, the Borrower may repay the Tranche in a single instalment on a Payment Date specified in the Disbursement Notice, being a date falling not less than 3 (three) years or more than 5 (five) years from the Scheduled Disbursement Date.

4.02

Voluntary prepayment

4.02A

Prepayment option

Subject to Articles 4.02B, 4.02C and 4.04, the Borrower may prepay all or part of any Tranche, together with accrued interest and indemnities if any, upon giving a Prepayment Request with at least 1 (one) month’s prior notice specifying (i) the Prepayment Amount, (ii) the Prepayment Date, (iii) if applicable, the choice of application method of the Prepayment amount in line with Article 5.05c(i) and (iv) the contract number (“FI No”) mentioned on the cover page of this Contract.

Subject to Article 4.02C the Prepayment Request shall be binding and irrevocable.

4.02B

Prepayment indemnity

4.02B(1)

FIXED RATE TRANCHE

Subject to Article 4.02B(3) below, if the Borrower prepays a Fixed Rate Tranche, the Borrower shall pay to the Bank on the Prepayment Date the Prepayment Indemnity in respect of the Fixed Rate Tranche which is being prepaid.

4.02B(2)

FLOATING RATE TRANCHE

Subject to Article 4.02B(3) below, the Borrower may prepay a Floating Rate Tranche without indemnity on any relevant Payment Date.

4.02B(3)

Unless the Borrower has accepted in writing a Fixed Rate in respect of an Interest Revision/Conversion Proposal pursuant to Schedule D, prepayment of a Tranche on its Interest Revision/Conversion Date as notified under Article 1.02C(a)(viii), or in accordance with Schedule C1 or D, as the case may be, may be effected without indemnity.

4.02C

Prepayment mechanics

Upon presentation by the Borrower to the Bank of a Prepayment Request, the Bank shall issue a Prepayment Notice to the Borrower, not later than 15 (fifteen) days prior to the Prepayment Date. The Prepayment Notice shall specify the Prepayment Amount, the accrued interest due thereon, the Prepayment Indemnity payable under Article 4.02B or, as the case may be, that no indemnity is due, the method of application of the Prepayment Amount and the Acceptance Deadline.

If the Borrower accepts the Prepayment Notice no later than by the Acceptance Deadline, it shall effect the prepayment. In any other case, the Borrower may not effect the prepayment.

The Borrower shall accompany the prepayment by the payment of accrued interest and indemnity, if any, due on the Prepayment Amount, as specified in the Prepayment Notice.

4.03

Compulsory prepayment

4.03A

Prepayment Events

4.03A(1)

PROJECT COST REDUCTION

If the total cost of the Project should be reduced from the figure stated in Recital (2) to a level at which the amount of the Credit exceeds 50% (fifty per cent) of such cost, the Bank may in proportion to the reduction forthwith, by notice to the Borrower, cancel such portion of the Credit and/or demand prepayment of such portion of the Loan so that the Credit or Loan does not exceed 50%(fifty per cent) of the cost of the Project.

4.03A(2)

PARI PASSU TO ANOTHER TERM LOAN

If the Guarantor or the Borrower or any other member of the Group voluntarily prepays a part or the whole of any other loan originally granted to it for a term of more than 3 (three) years (a “ Term Loan ”) otherwise than out of the proceeds of a loan having a term at least equal to the unexpired term of the Term Loan prepaid and, following such prepayment the amount outstanding under the Loan constitutes more than 20% (twenty per cent) of the aggregate outstanding loans to the Group, the Bank may, by notice to the Borrower, cancel the Credit and demand prepayment of the Loan, in such proportion as the prepaid amount of the Term Loan bears to the aggregate outstanding amount of all Term Loans.

The Bank shall address its notice to the Borrower within 30 (thirty) days of receipt of notice under Article 8.02(b)(iii).

For the purposes of this Article, “ loan ” includes any loan, bond or other form of financial indebtedness or any obligation for the payment or repayment of money.

4.03A(3)

CHANGE OF CONTROL

The Guarantor and the Borrower, respectively, shall promptly inform the Bank if a Change-of-Control Event has occurred or is likely to occur. In such case, or if the Bank has reasonable cause to believe that a Change-of-Control Event has occurred or is about to occur, the Bank may demand that the Guarantor or the Borrower consult with it. Such consultation shall take place within 30 (thirty) days from the date of the Bank’s demand. After the earlier of (a) the lapse of 30 (thirty) days from the date of such request for consultation the Bank in its sole discretion is of the reasonable opinion that the effects of the Change-of-Control Event cannot or will not be mitigated to its satisfaction or (b) the occurrence of the anticipated Change-of-Control Event, the Bank may, by notice to the Borrower, cancel the Credit and demand prepayment of the Loan, together with accrued interest and all other amounts accrued and outstanding under this Contract. The Borrower shall effect payment of the amount demanded on the date specified by the Bank, such date being a date falling not less than 30 (thirty) days from the date of the demand.

For the purposes of this Article:

(a)

a “ Change-of-Control Event ” occurs if:

(i)

any person or group of persons acting in concert gains control of the Guarantor;

(ii)

the Guarantor ceases to own, directly or indirectly through wholly owned subsidiaries, 100% (one hundred per cent) of the issued share capital of the Borrower or any (other) Guarantor Material Subsidiary; or

(iii)

the Borrower ceases to own 100% (one hundred per cent) of the issued share capital of any Borrower Material Subsidiary.

(b)

“ acting in concert ” means acting together pursuant to an agreement or understanding (whether formal or informal); and

(c)

“ control ” means the power to direct the management and policies of an entity, whether through the ownership of voting capital, by contract or otherwise.

4.03A(4)

CHANGE OF LAW

The Guarantor and the Borrower, respectively, shall promptly inform the Bank if a Change-of-Law Event has occurred or is likely to occur. In such case, or if the Bank has reasonable cause to believe that a Change-of-Law Event has occurred or is about to occur, the Bank may demand that the Guarantor or the Borrower consult with it. Such consultation shall take place within 30 (thirty) days from the date of the Bank’s demand. If, after the earlier of (a) the lapse of 30 (thirty) days from the date of such request for consultation the Bank in its sole discretion is of the reasonable opinion that the effects of the Change-of-Control Event cannot or will not be mitigated to its satisfaction or (b) the occurrence of the anticipated Change-of-Law Event, the Bank may, by notice to the Borrower, cancel the Credit and demand prepayment of the Loan, together with accrued interest and all other amounts accrued and outstanding under this Contract. The Borrower shall effect payment of the amount demanded on the date specified by the Bank, such date being a date falling not less than 30 (thirty) days from the date of the demand.

For the purposes of this Article “ Change-of-Law Event ” means the enactment, promulgation, execution or ratification of or any change in or amendment to any law, rule, decree or regulation (or in the application or official interpretation of any law, rule, decree or regulation) that occurs after the date of this Contract which in the reasonable opinion of the Bank results in or is likely to result in a deterioration of the Guarantor’s, the Borrower’s or the Group’s, as a whole, credit standing.

4.03A(5)

ILLEGALITY

If it becomes unlawful in any applicable jurisdiction for the Bank to perform any of its obligations as contemplated in this Contract or to fund or maintain the Loan, the Bank shall promptly notify the Borrower and may immediately (i) suspend or cancel the undisbursed portion of the Credit and/or (ii) demand prepayment of the Loan, together with accrued interest and all other amounts accrued or outstanding under this Contract on the date indicated by the Bank in its notice to the Borrower.

4.03A(6)

GUARANTEE

If the Guarantor fails to comply with any material obligation under the Guarantee Agreement, the Bank may cancel the Credit or demand prepayment of the Loan. For the avoidance of doubt, the non-exercise by the Bank of the right to cancel the Credit or demand prepayment of the Loan shall not be deemed to be a waiver of any of the Bank’s rights hereunder.

4.03B

Prepayment mechanics

Any sum demanded by the Bank pursuant to Article 4.03A, together with any interest or other amounts accrued or outstanding under this Contract including, without limitation, any indemnity due under Article 4.03C and Article 4.04, shall be paid on the date indicated by the Bank which date shall fall not less than 30 (thirty) days from the date of the Bank’s notice of demand.

4.03C

Prepayment indemnity

In the case of an Indemnifiable Prepayment Event, the indemnity, if any, shall be determined in accordance with Article 4.02B.

4.04

General

A repaid or prepaid amount may not be reborrowed. This Article 4 shall not prejudice Article 10.

If the Borrower prepays a Tranche on a date other than a relevant Payment Date, the Borrower shall indemnify the Bank in such amount as the Bank shall certify is required to compensate it for receipt of funds otherwise than on a relevant Payment Date.

ARTICLE 5

Payments

5.01

Day count convention

Any amount due by way of interest, indemnity or fee from the Borrower under this Contract, and calculated in respect of a fraction of a year, shall be determined on the following respective conventions:

(a)

in respect of interest and indemnities due under a Fixed Rate Tranche, a year of 360 (three hundred and sixty) days and a month of 30 (thirty) days;

(b)

in respect of interest and indemnities due under a Floating Rate Tranche, a year of 360 (three hundred and sixty) days (but 365 (three hundred and sixty-five) days (invariable) for GBP) and the number of days elapsed;

(c)

in respect of fees, a year of 360 (three hundred and sixty) days (but 365 (three hundred and sixty-five) days (invariable) for fees due in GBP) and the number of days elapsed.

5.02

Time and place of payment

Unless otherwise specified in this Contract or in the Bank’s demand, all sums other than sums of interest, indemnity and principal are payable within 15 (fifteen) days of the Borrower’s receipt of the Bank’s demand.

Each sum payable by the Borrower under this Contract shall be paid to the relevant account notified by the Bank to the Borrower. The Bank shall notify the account not less than 15 (fifteen) days before the due date for the first payment by the Borrower and shall notify any change of account not less than 15 (fifteen) days before the date of the first payment to which the change applies. This period of notice does not apply in the case of payment under Article 10.

The Borrower shall indicate in each payment made hereunder the contract number (“FI No”) found on the cover page of this Contract.

A sum due from the Borrower shall be deemed paid when the Bank receives it.

5.03

No set-off by the Borrower

All payments to be made by the Borrower under this Contract shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

5.04

Disruption to Payment Systems

If either the Bank determines (in its discretion) that a Disruption Event has occurred or the Bank is notified by the Borrower that a Disruption Event has occurred:

(a)

the Bank may, and shall if requested to do so by the Borrower, consult with the Borrower with a view to agreeing with the Borrower such changes to the operation or administration of the Contract as the Bank may deem necessary in the circumstances;

(b)

the Bank shall not be obliged to consult with the Borrower in relation to any changes mentioned in paragraph (a) if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes; and

(c)

the Bank shall not be liable for any damages, costs or losses whatsoever arising as a result of a Disruption Event or for taking or not taking any action pursuant to or in connection with this Article 5.04, save in relation to its own gross negligence or wilful default.

5.05

Application of sums received

(a)

General

Sums received from the Borrower shall only discharge its payment obligations if received in accordance with the terms of this Contract.

(b)

Partial payments

If the Bank receives a payment that is insufficient to discharge all the amounts then due and payable by the Borrower under this Contract, the Bank shall apply that payment:

(i)

first, in or towards payment pro rata of any unpaid fees, costs, indemnities and expenses due under this Contract;

(ii)

secondly, in or towards payment of any accrued interest due but unpaid under this Contract;

(iii)

thirdly, in or towards payment of any principal due but unpaid under this Contract; and

(iv)

fourthly, in or towards payment of any other sum due but unpaid under this Contract.

(c)

Allocation of sums related to Tranches

(i)

In case of:

•

a partial voluntary prepayment of a Tranche that is subject to a repayment in several instalments, the Prepayment Amount shall be applied pro rata to each outstanding instalment, or, at the request of the Borrower, in inverse order of maturity,

•

a partial compulsory prepayment of a Tranche that is subject to a repayment in several instalments, the Prepayment Amount shall be applied in reduction of the outstanding instalments in inverse order of maturity.

(ii)

Sums received by the Bank following a demand under Article 10.01 and applied to a Tranche, shall reduce the outstanding instalments in inverse order of maturity. The Bank may apply sums received between Tranches at its discretion.

(iii)

In case of receipt of sums which cannot be identified as applicable to a specific Tranche, and on which there is no agreement between the Bank and the Borrower on their application, the Bank may apply these between Tranches at its discretion.

ARTICLE 6

Borrower undertakings and representations

The undertakings in this Article 6 remain in force from the date of this Contract for so long as any amount is outstanding under this Contract or the Credit is in force.

A. Project undertakings

6.01

Use of Loan and availability of other funds

The Borrower shall use all amounts borrowed by it under the Loan for the execution of the Project.

The Borrower shall ensure that it has available to it the other funds listed in Recital (2) and that such funds are expended, to the extent required, on the financing of the Project.

6.02

Completion of Project

The Borrower shall carry out the Project in accordance with the Technical Description as may be modified from time to time with the approval of the Bank, and complete it by the final date specified therein.

6.03

Increased cost of Project

If the total cost of the Project exceeds the estimated figure set out in Recital (2), the Borrower shall obtain the finance to fund the excess cost without recourse to the Bank, so as to enable the Project to be completed in accordance with the Technical Description. The plans for funding the excess cost shall be communicated to the Bank without delay.

6.04

Procurement procedure

The Borrower shall purchase equipment, secure services and order works for the Project (a) in so far as they apply to it or to the Project, in accordance with European Union law in general and in particular with the relevant European Union Directives and (b) in so far as European Union Directives do not apply, by procurement procedures which, to the satisfaction of the Bank, respect the criteria of economy and efficiency and, in case of public contracts, the principles of transparency, equal treatment and non-discrimination on the basis of nationality.

6.05

Continuing Project undertakings

The Borrower shall:

(a)

Maintenance : maintain, repair, overhaul and renew all property forming part of the Project as required to keep it in good working order;

(b)

Project assets : unless the Bank shall have given its prior consent in writing retain title to and possession of all or substantially all the assets comprising the Project or, as appropriate, replace and renew such assets and maintain the Project in substantially continuous operation in accordance with its original purpose; provided that the Bank may withhold its consent only where the proposed action would prejudice the Bank’s interests as lender to the Borrower or would render the Project ineligible for financing by the Bank under its Statute or under Article 309 of the Treaty on the Functioning of the European Union;

(c)

Insurance : insure all works and property forming part of the Project in accordance with the relevant industry practice for similar works and property;

(d)

Rights and Permits : maintain in force all rights of way or use and all Authorisations necessary for the execution and operation of the Project; and

(e)

Environment :

(i)

implement and operate the Project in compliance with Environmental Law;

(ii)

if required, obtain and maintain requisite Environmental Approvals for the Project; and

(iii)

comply with any such Environmental Approvals;

B. General undertakings

6.06

Disposal of assets

Guarantor Group

(a)

The Guarantor shall not, and the Guarantor shall procure that no member of the Guarantor Group will, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, sell, transfer, grant, lease or otherwise dispose (hereafter “ Disposal ”) of all or any part of its assets (including, but not limited to, businesses or undertakings).

(b)

Paragraph (a) above does not apply to:

(i)

Disposals made in the ordinary course of business of the disposing entity;

(ii)

Disposals of assets in exchange for other assets comparable or superior as to type, value and quality;

(iii)

Disposals made on an arm’s length basis for full market consideration;

(iv)

Disposals made with the prior written consent of the Bank;

(v)

Disposals of obsolete assets;

(vi)

any Disposal of assets from a member of the Guarantor Group to any other member of the Guarantor Group; or

(vii)

any Disposal of assets from a member of the Guarantor Group to any member of the Borrower Group, provided that the consideration may not exceed full market consideration.

Borrower Group

(a)

The Borrower shall not, and the Borrower shall procure that no member of the Borrower Group will, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily dispose of all or any part of its assets (including, but not limited to, businesses or undertakings).

(b)

Paragraph (a) above does not apply to:

(i)

Disposals made in the ordinary course of business of the disposing entity;

(ii)

Disposals of assets in exchange for other assets comparable or superior as to type, value and quality;

(iii)

Disposals made on an arm’s length basis for full market consideration during the life of the Contract up to an aggregate amount not exceeding 50% (fifty per cent) of fixed assets as disclosed in the consolidated accounts of the Borrower ending on the Accounting Date;

(iv)

Disposals made with the prior written consent of the Bank;

(v)

Disposals of obsolete assets;

(vi)

any Disposal of assets from a member of the Borrower Group to another member of the Borrower Group; or

(vii)

any Disposal of assets from a member of the Borrower Group to a member of the Guarantor Group for full market consideration.

(c)

Notwithstanding paragraph (b) above, no Disposal of (i) assets forming part of the Project or (ii) any shares in subsidiaries holding assets forming part of the Project is permitted without the prior written consent of the Bank.

(d)

For the avoidance of doubt, the Guarantor may not circumvent Article 6.06B(b)(iii) by firstly procuring that the Borrower makes a Disposal permitted pursuant to Article 6.06B(b)(vii) and then subsequently thereafter making a Disposal in accordance with Article 6.06A(b)(iii).

6.07

Compliance with laws

The Borrower and the Guarantor, respectively, (and the Guarantor under the Guarantee Agreement) shall comply in all respects with all laws to which it or the Project is subject where failure to do so results or is reasonably likely to result in a Material Adverse Change.

6.08

Change in business

Without the Bank’s prior written consent, the Guarantor and the Borrower, respectively, shall procure that no substantial change is made to the general nature of the business of (a) the Guarantor, (b) the Borrower, (c) the Borrower Group as a whole and (d) the Group as a whole, in each case from that carried on at the date of this Contract.

6.09

Merger

(a)

Without the Bank’s prior written consent, the Guarantor and the Borrower, respectively, shall not and the Guarantor shall ensure that no other member of the Group will enter into any amalgamation, demerger, merger or corporate reconstruction.

(b)

Paragraph (a) above does not apply to any merger between members of the Guarantor Group, provided that if the Guarantor is part of such merger it shall be the surviving entity.

(c)

Paragraph (a) above does not apply to any merger between members of the Borrower Group, provided that if the Borrower is part of such merger it shall be the surviving entity.

6.10

Indebtedness for Borrowed Money

Without the Bank’s prior written consent:

(a)

the Guarantor undertakes that at any time after the date hereof Guarantor Subsidiary Indebtedness for Borrowed Money must not be higher than USD 400 000 000 (or its equivalent); and

(b)

the Borrower undertakes that at any time after the date hereof Borrower Subsidiary Indebtedness for Borrowed Money must not be higher than USD 400 000 000 (or its equivalent).

For the purposes of this Contract:

“ Borrower Subsidiary Indebtedness for Borrowed Money ” shall mean the aggregate Indebtedness for Borrowed Money of each and every subsidiary of the Borrower other than Indebtedness for Borrowed Money owed by a subsidiary of the Borrower to another member of the Group;

“ Guarantor Subsidiary Indebtedness for Borrowed Money ” shall mean the aggregate Indebtedness for Borrowed Money of each and every subsidiary of the Group (other than the Borrower, Autoliv Asp Inc., Autoliv Holding AB) other than Indebtedness for Borrowed Money owed by a subsidiary of the Guarantor to another member of the Group; and

“ Indebtedness for Borrowed Money ” means:

(a)

the outstanding principal amount of any monies borrowed;

(b)

the outstanding principal amount of any acceptance under any acceptance credit opened by a bank or other financial institution and not attributable to goods or documents of title to goods in the ordinary course of documentary credit transactions;

(c)

the outstanding principal amount of any debenture, bond, note, loan stock or other security;

(d)

the principal amount, outstanding for more than 90 (ninety) days on its original terms and created in connection with the payment of the acquisition price of any asset before of after the time of acquisition or possession by the party liable, where the advance or deferred payment is arranged primarily as a method of raising finance or financing the acquisition of an asset;

(e)

any liability in respect of any lease or hire purchase contract which would, in accordance with US GAAP in respect of the Guarantor and IFRS in respect of the Borrower, be treated as a finance or capital lease;

(f)

any fixed or minimum premium payable on the repayment or redemption of any instrument referred to in paragraph (c) above; and

(g)

the outstanding principal amount of any indebtedness of any person of a type referred to in subparagraphs (a) – (f) above, which is the subject of a guarantee indemnity and/or other form of assurance against financial loss.

6.11

General Representations and Warranties

The Guarantor represents and warrants to the Bank that:

(a)

it is duly incorporated and validly existing corporation under the laws of Delaware, USA, and it has power to carry on its business as it is now being conducted and to own its property and other assets;

(b)

it has the power to execute, deliver and perform its obligations under this Contract and all necessary action has been taken to authorise the execution, delivery and performance of the same by it;

(c)

this Contract constitutes its legally valid, binding and enforceable obligations;

(d)

the execution and delivery of, the performance of its obligations under and compliance with the provisions of this Contract do not and will not contravene or conflict with any:

(i)

applicable law, statute, rule or regulation, or any judgement, decree or permit to which it is subject;

(ii)

agreement or other instrument binding upon it which might reasonably be expected to have a material adverse effect on its ability to perform its obligations under this Contract; and

(iii)

provision of its by laws;

(e)

the consolidated audited accounts of the Guarantor for the year ending on the Accounting Date have been prepared on a basis consistent with previous years and have been approved by its auditors as representing a true and fair view of the results of its operations for that year and accurately disclose or reserve against all the liabilities (actual or contingent) of the Borrower;

(f)

there has been no Material Adverse Change since the Accounting Date;

(g)

no event or circumstance which constitutes an Event of Default has occurred and is continuing unremedied or unwaived;

(h)

other than as disclosed to the Bank, no litigation, arbitration, administrative proceedings or investigation is current or to its knowledge is threatened or pending against it before any court, arbitral body or agency which has resulted or is likely to result in a Material Adverse Change, nor is there subsisting against it or any of its subsidiaries any unsatisfied judgement or award which constitutes a Material Adverse Change;

(i)

it has obtained all necessary consents, authorisations, licences or approvals of governmental or public bodies or authorities in connection with this Contract and the Guarantee Agreement and all such consents, authorisations, licences or approvals are in full force and effect and admissible in evidence; and

(j)

at the date of this Contract, no Security Interest exists over its assets or over those of the Group save as permitted by Article 7.02.

The representations and warranties set out above shall survive the execution of this Contract and are, except paragraphs (e) and (f) above, deemed repeated on each Scheduled Disbursement Date and each Payment Date.

The Borrower represents and warrants to the Bank that:

(a)

it is duly incorporated and validly existing as a company with limited liability under the laws of kingdom of Sweden and it has power to carry on its business as it is now being conducted and to own its property and other assets;

(b)

it has the power to execute, deliver and perform its obligations under this Contract and all necessary action has been taken to authorise the execution, delivery and performance of the same by it;

(c)

this Contract constitutes its legally valid, binding and enforceable obligations;

(d)

the execution and delivery of, the performance of its obligations under and compliance with the provisions of this Contract do not and will not contravene or conflict with any:

(i)

applicable law, statute, rule or regulation, or any judgement, decree or permit to which it is subject;

(ii)

agreement or other instrument binding upon it which might reasonably be expected to have a material adverse effect on its ability to perform its obligations under this Contract; and

(iii)

provision of its articles of association;

(e)

the consolidated audited accounts of the Borrower for the year ending on the Accounting Date have been prepared on a basis consistent with previous years and have been approved by its auditors as representing a true and fair view of the results of its operations for that year and accurately disclose or reserve against all the liabilities (actual or contingent) of the Borrower;

(f)

there has been no Material Adverse Change since the Accounting Date;

(g)

no event or circumstance which constitutes an Event of Default has occurred and is continuing unremedied or unwaived;

(h)

no litigation, arbitration, administrative proceedings or investigation is current or to its knowledge is threatened or pending against it before any court, arbitral body or agency which has resulted or is likely to result in a Material Adverse Change, nor is there subsisting against it or any of its subsidiaries any unsatisfied judgement or award which constitutes a Material Adverse Change;

(i)

it has obtained all necessary consents, authorisations, licences or approvals of governmental or public bodies or authorities in connection with this Contract and the Project and all such consents, authorisations, licences or approvals are in full force and effect and admissible in evidence;

(j)

at the date of this Contract, no Security Interest exists over its assets or over those of the Group save as permitted by Article 7.02; and

(k)

its payment obligations under this Contract rank not less than pari passu in right of payment with all other present and future unsecured and unsubordinated obligations under any of its debt instruments except for obligations mandatorily preferred by law applying to companies generally.

6.12

No loans, credit or third party guarantees

(a)

The Borrower shall not, and shall ensure that no other member of the Borrower Group will, without the prior written consent of the Bank, give any guarantee, bond, indemnity, counter-indemnity or similar instrument in respect of any obligation of any person, save for:

(i)

as permitted on the terms in this Contract, or

(ii)

any guarantee related to the purchase or supply of goods and/or services by a member of the Borrower Group, which guarantee is given in the ordinary course of business.

(b)

The Borrower shall not, and shall ensure that no other member of the Borrower Group will, without the prior written consent of the Bank, make any loan, grant any credit or otherwise voluntarily assume actual liability in respect of any obligation of any person, save for:

(i)

as permitted on the terms in this Contract,

(ii)

loans made or credit granted by a member of the Borrower Group to another member of the Borrower Group,

(iii)

loans made or credits granted by the Borrower or any other member of the Borrower Group to any member of the Guarantor Group to the extent such loans are included in the Section 956 (or such other law or regulations that may amend or replace such provision) computations made by the Guarantor for US tax purposes.

(c)

Notwithstanding paragraphs (a) and (b) above and for the avoidance of doubt, the Guarantor shall ensure that other than the Borrower no member of the Borrower Group shall, without the prior written consent of the Bank, (x) give any guarantee, bond, indemnity, counter-indemnity or similar instrument or (y) otherwise voluntarily assume actual liability, in respect of any obligation of the Borrower or any member of the Guarantor Group.

ARTICLE 7

Security

The undertakings in this Article 7 remain in force from the date of this Contract for so long as any amount is outstanding under this Contract or the Credit is in force.

7.01

Guarantee

The obligations of the Bank under this Contract are conditional upon the prior execution and delivery to the Bank of the Guarantee Agreement in form and substance satisfactory to it, whereby the Guarantor unconditionally guarantees, of the same nature as obligations for its own debts the due performance of the Borrower’s financial obligations under this Contract. The Borrower hereby acknowledges and consents to the terms of the Guarantee Agreement.

7.02

Negative pledge

A. Guarantor Group

(a)

The Guarantor shall not, and the Guarantor shall procure that no other member of the Guarantor Group will, create or permit to subsist any Security Interest on, or with respect to, any of its present or future business, undertaking, assets or revenues (including any uncalled capital).

(b)

Paragraph (a) does not apply to:

(i)

any lien arising by operation of law in the ordinary course of business and securing amounts not more than 30 days overdue;

(ii)

any Security Interest disclosed in writing to the Bank prior to the execution of this Contract which secures Indebtedness for Borrowed Money outstanding at the date of this Contract;

(iii)

any Security Interest arising in relation to set-off arrangements between cash balances and bank borrowings with the same bank which arise in the ordinary course of business;

(iv)

any Security Interest existing at the time of acquisition on or over any asset acquired by a member of the Guarantor Group after the date of this Contract which was not created in contemplation of or in connection with that acquisition, provided that the principal amount secured by such Security Interest and outstanding at the time of acquisition is not subsequently increased and the Security Interest is discharged within three months;

(v)

in the case of any company which becomes a member of the Guarantor Group after the date of this Contract, any Security Interest existing on or over its assets when it becomes a member of the Guarantor Group which was not created in contemplation of or in connection with it becoming a member of the Guarantor Group, provided that:

(A)

the principal amount secured by such Security Interest and outstanding when the relevant company became a member of the Guarantor Group is not increased;

(B)

no amount is secured by any such Security Interest which is not secured by the relevant Security Interest when the relevant company becomes a member of the Guarantor Group; and

(C)

the Security Interest is discharged within three months;

(vi)

any Security Interest replacing any of the Security Interests permitted by paragraphs (iv) and (v), provided that the amount secured by any replacement Security Interest shall not exceed the amount outstanding and secured by the original Security Interest at the time of the creation of the replacement Security Interest, the value of the replacement asset over which the replacement Security Interest is created does not exceed the value of the asset over which the original Security Interest was held, the replacement Security Interest secures the same obligations as the original Security Interest and such replacement Security Interest is discharged within the original three-month period specified in paragraphs (iv) and (v);

(vii)

any other Security Interest provided that at the time that the Security Interest is created, the aggregate amount of indebtedness secured by all Security Interests permitted under this Article 7.02A(b)(vii) (other than those permitted by subparagraphs 7.02A(b)(i) - (vi), when taken together with the aggregate value of financing raised or the amount involved in the financing of an asset in transactions described in Article 7.03A (Transactions similar to security)), does not exceed 5% (five per cent) of the book value of the consolidated total assets of the Group, as determined by reference to the most recent consolidated accounts of the Guarantor delivered pursuant to Article 8.02.

B. Borrower Group

(a)

The Borrower shall not, and the Borrower shall procure that no other member of the Borrower Group will, create or permit to subsist any Security Interest on, or with respect to, any of its present or future business, undertaking, assets or revenues (including any uncalled capital).

(b)

Paragraph (a) does not apply to:

(i)

any lien arising by operation of law in the ordinary course of business and securing amounts not more than 30 days overdue;

(ii)

any Security Interest disclosed in writing to the Bank prior to the execution of this Contract which secures Indebtedness for Borrowed Money outstanding at the date of this Contract;

(iii)

any Security Interest arising in relation to set-off arrangements between cash balances and bank borrowings with the same bank which arise in the ordinary course of business;

(iv)

any Security Interest existing at the time of acquisition on or over any asset acquired by a member of the Borrower Group after the date of this Contract which was not created in contemplation of or in connection with that acquisition, provided that the principal amount secured by such Security Interest and outstanding at the time of acquisition is not subsequently increased and the Security Interest is discharged within three months;

(v)

in the case of any company which becomes a member of the Borrower Group after the date of this Contract, any Security Interest existing on or over its assets when it becomes a member of the Borrower Group which was not created in contemplation of or in connection with it becoming a member of the Borrower Group, provided that:

(A)

the principal amount secured by such Security Interest and outstanding when the relevant company became a member of the Borrower Group is not increased;

(B)

no amount is secured by any such Security Interest which is not secured by the relevant Security Interest when the relevant company becomes a member of the Borrower Group; and

(C)

the Security Interest is discharged within three months;

(vi)

(vii)

any other Security Interest provided that at the time that the Security Interest is created, the aggregate amount of indebtedness secured by all Security Interests permitted under this Article 7.02B(b)(vii) (other than those permitted by subparagraphs 7.02B(b)(i) - (vi), when taken together with the aggregate value of financing raised or the amount involved in the financing of an asset in transactions described in Article 7.03B (Transactions similar to security)), does not exceed 5% (five per cent) of the book value of the consolidated total assets of the Borrower Group, as determined by reference to the most recent consolidated accounts of the Borrower Group delivered pursuant to Article 8.02.

7.03

Transactions similar to security

A. Guarantor Group

(a)

The Guarantor shall not, and shall procure that no other member of the Guarantor Group will:

(i)

make a Disposal of a material part of its assets (either in one transaction or a series of transactions, whether related or not) on terms whereby it is or will be leased to or re-acquired or acquired by a member of the Guarantor Group or any of its related entities; or

(ii)

make a Disposal of any of its receivables on recourse terms, except for the discounting of bills or notes in the ordinary course of trading,

(b)

in each case, in circumstances where the transaction is entered into primarily as a method of raising finance or of financing the acquisition of an asset, save where the aggregate of (a) financing raised or the amount involved in the financing of the acquisition of an asset in transactions described in this Article 7.03A and (b) the Security Interests permitted by Article 7.02A(b)(vii), does not exceed 5% (five per cent) of the book value of the consolidated total assets of the Group, as determined by reference to the most recent consolidated accounts of the Guarantor delivered pursuant to Article 8.02.

B. Borrower Group

(a)

The Borrower shall not, and the Borrower shall procure that no other member of the Borrower Group will:

(i)

(ii)

make a Disposal of any of its receivables on recourse terms, except for the discounting of bills or notes in the ordinary course of trading,

(b)

in each case, in circumstances where the transaction is entered into primarily as a method of raising finance or of financing the acquisition of an asset, save where the aggregate of (a) financing raised or the amount involved in the financing of the acquisition of an asset in transactions described in this Article 7.03B and (b) the Security Interests permitted by Article 7.02B(b)(vii), does not exceed 5% (five per cent) of the book value of the consolidated total assets of the Borrower Group, as determined by reference to the most recent consolidated accounts of the Borrower Group delivered pursuant to Article 8.02.

7.04

Pari passu ranking

The Borrower shall ensure that its payment obligations under this Contract rank, and will rank, not less than pari passu in right of payment with all other present and future unsecured and unsubordinated obligations under any of its debt instruments except for obligations mandatorily preferred by law applying to companies generally.

7.05

Clauses by Inclusion

The Guarantor confirms that at the time of signature of this Contract it is the policy of the Guarantor and each member of the Group, not to include any Restrictive Financial or Rating Covenants in any Principal Lending Agreement.

If, at any time while any part of the Loan is outstanding, any member of the Group has concluded or shall conclude with any other person (an “Other Person”) a Principal Lending Agreement that includes any:

(a)

Restrictive Financial or Rating Covenant; or

(b)

Negative Covenant,

(each such provision, a “ More Favourable Provision ”).

The Guarantor shall within 30 days from the date of any member of the Group concluding, or permitting any relevant amendment, modification, change, alteration or addition to, any Principal Lending Agreement notify the Bank of such More Favourable Provision(s) (the “ MFP Statement ”).

Upon receipt by the Bank of the MFP Statement, the Bank shall, within a reasonable period of time, notify the Guarantor or Borrower if it wishes to incorporate such More Favourable Provision(s) into this Contract or, in case of urgency, the Guarantor or, as the case may be, Borrower shall upon written request grant the same rights to the Bank as are available to the Other Person under the Principal Lending Agreement.

If the Bank wishes to incorporate such More Favourable Provision(s) into this Contract, then the More Favourable Provision(s) shall be deemed incorporated by reference in this Contract as if set forth fully herein, mutatis mutandis (each such provision, an “ Incorporated Provision ”).

Upon the Bank’s request, the Guarantor and the Borrower shall execute an agreement to amend this Contract to evidence the incorporation of such Incorporated Provision(s).

For the purpose of this Contract:

“ Negative Covenant ” means any negative covenant (including but not limited to a negative pledge clause or asset disposal clause) that is either more restrictive ((a) on the Guarantor, the relevant member of the Guarantor Group or the consolidated Guarantor Group or (b) on the Borrower, the relevant member of the Borrower Group or the consolidated Borrower Group) than any similar provision included in this Contract or materially more beneficial (to the Other Person) than any similar provision (for the benefit of the Bank) included in this Contract;

“ Restrictive Financial or Rating Covenant ” means any contractual provision that gives the Other Person the right to increase the financial cost (interest), to withdraw their credit facility, to accelerate repayment or to require provision of security, by reference in such provision to a financial key ratio of the Guarantor, the Borrower, the Guarantor Group or the Borrower Group, or to a particular state of the balance sheet of the Guarantor, the Borrower, the Guarantor Group or the Borrower Group, profit and loss account of the Guarantor, the Borrower, the Guarantor Group or the Borrower Group or cash flow statement of the Guarantor, the Borrower, the Guarantor Group or the Borrower Group, or to a rating of the Borrower or the Guarantor; and

“ Principal Lending Agreement ” means the USD 1 100 000 000 revolving facilities agreement dated 16 April 2011 (as amended from time to time) between amongst others the Guarantor, the Borrower, Autoliv ASP, Inc, Merchant Banking, Skandinaviska Enskilda Banken AB (publ), Mizuho Corporate Bank, Ltd. And Nordea Bank AB (publ) or any credit, facility agreement, indenture, note purchase agreement, debenture, trust deed or other similar financing agreement or instrument evidencing or governing indebtedness or a guarantee for any of the foregoing agreements or instruments in or for an amount equal to or exceeding EUR 10,000,000 (ten million euros).

ARTICLE 8

Information and Visits

8.01

Information concerning the Project

The Borrower shall:

(a)

deliver to the Bank:

(i)

the information in content and in form, and at the times, specified in Schedule A.2 or otherwise as agreed from time to time by the parties to this Contract; and

(ii)

any such information or further document concerning the financing, procurement, implementation, operation and environmental matters of or for the Project as the Bank may reasonably require within a reasonable time;

provided always that if such information or document is not delivered to the Bank on time, and the Borrower does not rectify the omission within a reasonable time set by the Bank in writing, the Bank may remedy the deficiency, to the extent feasible, by employing its own staff or a consultant or any other third party, at the Borrower’s expense and the Borrower shall provide such persons with all assistance necessary for the purpose;

(b)

submit for the approval of the Bank without delay any material change to the Project, also taking into account the disclosures made by the Borrower to the Bank in connection with the Project prior to the signing of this Contract, in respect of, inter alia , the price, design, plans, timetable or to the expenditure programme or financing plan for the Project;

(c)

promptly inform the Bank of:

(i)

any action or protest initiated or any genuine objection raised by any third party or any genuine complaint received by the Borrower or any material Environmental Claim that is to its knowledge commenced, pending or threatened against it with regard to environmental or other matters affecting the Project; and

(ii)

any fact or event known to the Borrower, which may substantially prejudice or affect the conditions of execution or operation of the Project;

(iii)

to the best of its knowledge, any non-compliance by it with any applicable Environmental Law applicable to the Project; and

(iv)

any suspension, revocation or modification of any Environmental Approval relating to the Project,

and set out the action to be taken with respect to such matters;

8.02

Information concerning the Borrower and the Guarantor

The Guarantor or, as the case may be, the Borrower shall:

(a)

deliver to the Bank:

(i)

as soon as they become available but in any event within 180 days after the end of each of the Guarantor’s the Borrower’s respective financial years the Guarantor’s and the Borrower’s consolidated and unconsolidated annual report, balance sheet, profit and loss account and auditor’s report for that financial year;

(ii)

as soon as they become available but in any event within 60 days after the end of each financial quarter of the Guarantor, the unaudited consolidated, balance sheet, profit and loss account of the Guarantor for that financial quarter; and

(iii)

from time to time, such further information on the Guarantor’s or the Borrower’s general financial situation as the Bank may reasonably require, having regard to what the Guarantor is permitted to disclose under all applicable laws and in particular, but without limitation, laws applicable to public listed companies and laws, rules and requirements of the relevant stock exchanges; and

and

(b)

inform the Bank immediately of:

(i)

any material alteration to the Guarantor’s by-laws/articles of association or the Borrower’s articles of association or shareholding structure (of the Guarantor or the Borrower) after the date of this Contract;

(ii)

any fact which obliges it or any other member of the Group to prepay any financial indebtedness or any European Union funding;

(iii)

as soon as it becomes aware, any event or decision that constitutes or may result in a Prepayment Event;

(iv)

any disposal not permitted under Article 6.06;

(v)

any substantial change to the general nature of the business of (x) the Guarantor or the Guarantor Group or (y) the Borrower or the Borrower Group, as a whole, not permitted under Article 6.08;

(vi)

any intention on its part or on the part of any other member of the Group to grant any security over any of its assets in favour of a third party not permitted under Article 7.02;

(vii)

any fact or event that is reasonably likely to prevent the fulfilment of any material obligation of the Guarantor or the Borrower under this Contract;

(viii)

immediately upon any member of the Group entering into a Principal Lending Agreement that includes a More Favourable Provision as referred to in Article 7.05;

(ix)

any Event of Default having occurred or, to the best of its knowledge, being threatened or anticipated; or

(x)

any litigation, arbitration or administrative proceedings or investigation which is current, or to the best of the knowledge of the Borrower and/or the Guarantor is threatened or pending which might if adversely determined result in a Material Adverse Change.

8.03

Visits by the Bank

The Borrower shall allow persons designated by the Bank, as well as persons designated by other institutions or bodies of the European Union when so required by the relevant mandatory provisions of European Union law to visit the sites, installations and works comprising the Project and to conduct such checks as they may wish, and shall provide the Bank, or ensure that the Bank is provided, with all necessary assistance for the purposes described in this Article.

The Borrower acknowledges that the Bank may be obliged to communicate information relating to the Borrower and the Project to any competent institution or body of the European Union in accordance with the relevant mandatory provisions of European Union law.

ARTICLE 9

Charges and expenses

9.01

Taxes, duties and fees

The Borrower shall pay all Taxes, duties, fees and other impositions of whatsoever nature, including stamp duty and registration fees, arising out of the execution or implementation of this Contract, the Guarantee Agreement or any related document and in the creation, perfection, registration or enforcement of any security for the Loan to the extent applicable.

The Borrower shall pay all principal, interest, indemnities and other amounts due under this Contract gross without deduction of any national or local impositions whatsoever; provided that, if the Borrower is obliged to make any such deduction, it will gross up the payment to the Bank so that after deduction, the net amount received by the Bank is equivalent to the sum due.

9.02

Other charges

The Borrower shall bear all reasonable charges and expenses, including professional, banking or exchange charges incurred in connection with the preparation, execution, implementation, enforcement and termination of this Contract and/or the f Guarantee Agreement or any related document, any amendment, supplement or waiver in respect of this Contract and/or the Guarantee Agreement or any related document, and in the amendment, creation, management, enforcement and realisation of the Guarantee Agreement and/or any security for the Loan.

If the Borrower is obliged to deduct any amount under this Article and the Bank subsequently recovers any sum or obtains any credit against any tax payable by it in respect of any such payment, the Bank shall promptly upon receiving such sum or obtaining such credit pay a corresponding amount to the Borrower; provided that the Bank is not obliged to seek any such recovery or credit.

9.03

Increased costs, indemnity and set-off

(a)

The Borrower shall pay to the Bank any sums or expenses incurred or suffered by the Bank as a consequence of the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or compliance with any law or regulation made after the date of signature of this Contract, in accordance with or as a result of which (i) the Bank is obliged to incur additional costs in order to fund or perform its obligations under this Contract, or (ii) any amount owed to the Bank under this Contract or the financial income resulting from the granting of the Credit or the Loan by the Bank to the Borrower is reduced or eliminated.

(b)

Without prejudice to any other rights of the Bank under this Contract or under any applicable law, the Borrower shall indemnify and hold the Bank harmless from and against any loss incurred as a result of any payment or partial discharge that takes place in a manner other than as expressly set out in this Contract.

(c)

Under this Contract, the Bank may set off any matured obligation due from the Borrower under this Contract or due from the Guarantor under the Guarantee Agreement (to the extent beneficially owned by the Bank) against any obligation (whether or not matured) owed by the Bank to the Borrower or the Guarantor regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Bank may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off. If either obligation is unliquidated or unascertained, the Bank may set off in an amount estimated by it in good faith to be the amount of that obligation.

(d)

Upon the Borrower’s request, the Bank shall provide to the Borrower a certificate in reasonable detail setting out the Bank’s increased costs and the basis of calculation thereof.

ARTICLE 10

Events of Default

10.01

Right to demand repayment

The Borrower shall repay all or part of the Loan (as requested by the Bank) forthwith, together with accrued interest and all other accrued or outstanding amounts under this Contract, upon written demand being made by the Bank in accordance with the following provisions.

10.01A

Immediate demand

The Bank may make such demand immediately:

(a)

if the Borrower fails on the due date to repay any part of the Loan, to pay interest thereon or to make any other payment to the Bank as provided in this Contract unless such failure is caused by a technical or administrative error and payment is made within 3 (three) Business Days after the due date;

(b)

if any information or document given to the Bank by or on behalf of the Guarantor or the Borrower or any representation or statement made or deemed to be made by the Guarantor or the Borrower in this Contract or in connection with the negotiation of this Contract is or proves to have been incorrect or misleading in any material respect;

(c)

if, following any default in relation thereto, the Guarantor, the Borrower or any other member of the Group is required or is capable of being required or will, following expiry of any applicable contractual grace period, be required or be capable of being required to prepay, discharge, close out or terminate ahead of maturity any other loan or obligation arising out of any financial transaction or any commitment for any other loan or obligation arising out of any financial transaction is cancelled or suspended which is in an aggregate principal amount in excess of USD 40,000,000 (forty million United States dollars) or equivalent;

(d)

if the Guarantor, the Borrower or any other member of the Group is unable to pay its debts as they fall due (considering any originally applicable grace period), or suspends its debts, or makes or, without prior written notice to the Bank, seeks to make a composition with its creditors;

(e)

if any corporate action, legal proceedings or other procedure or step is taken in relation to or an order is made or an effective resolution is passed for the winding up of the Guarantor, the Borrower or any other member of the Group, or if the Guarantor, the Borrower or any other member of the Group takes steps towards a substantial reduction in its capital, is declared insolvent or ceases or resolves to cease to carry on the whole or any substantial part of its business or activities;

(f)

if an encumbrancer takes possession of, or a receiver, liquidator, administrator, administrative receiver or similar officer is appointed, whether by a court of competent jurisdiction or by any competent administrative authority, of or over, any material part of the business or assets of the Guarantor, the Borrower or any other member of the Group or any property forming part of the Project;

(g)

if the Guarantor or the Borrower defaults in the performance of any obligation in respect of any other loan or financial instrument granted by the Bank or to the Bank;

(h)

if any distress, execution, sequestration or other process is levied or enforced upon any material part of the property of the Guarantor or the Borrower or any property forming part of the Project and is not discharged or stayed within 14 (fourteen) days;

(i)

if a Material Adverse Change occurs; or

(j)

if it is or becomes unlawful for the Guarantor or the Borrower to perform any of its obligations under this Contract or the Guarantee Agreement or this Contract or the Guarantee Agreement is not effective in accordance with its terms or is alleged by the Guarantor or the Borrower to be ineffective in accordance with its terms.

10.01B

Demand after notice to remedy

The Bank may also make such demand:

(a)

if the Guarantor or the Borrower fails to comply with any obligation under this Contract not being an obligation mentioned in Article 10.01A or the Guarantor fails to comply with any obligation under the Guarantee Agreement; or

(b)

if any fact stated in the Recitals materially alters and is not materially restored and if the alteration either prejudices the interests of the Bank as lender to the Borrower or adversely affects the implementation or operation of the Project,

unless the non-compliance or circumstance giving rise to the non-compliance is capable of remedy and is remedied within a reasonable period of time specified in a notice served by the Bank on the Borrower or the Guarantor.

10.02

Other rights at law

Article 10.01 shall not restrict any other right of the Bank at law to require prepayment of the Loan.

10.03

Indemnity

10.03A

Fixed Rate Tranches

In case of demand under Article 10.01 in respect of any Fixed Rate Tranche, the Borrower shall pay to the Bank the amount demanded together with the Prepayment Indemnity on any amount of principal due to be prepaid. Such Prepayment Indemnity shall accrue from the due date for payment specified in the Bank’s notice of demand and be calculated on the basis that prepayment is effected on the date so specified.

10.03B

Floating Rate Tranches

In case of demand under Article 10.01 in respect of any Floating Rate Tranche, the Borrower shall pay to the Bank the amount demanded together with a sum equal to the present value of 0.15% (fifteen basis points) per annum calculated and accruing on the amount of principal due to be prepaid in the same manner as interest would have been calculated and would have accrued, if that amount had remained outstanding according to the original amortisation schedule of the Tranche, until the Interest Revision/Conversion Date, if any, or the Maturity Date.

The value shall be calculated at a discount rate equal to the Redeployment Rate applied as of each relevant Payment Date.

10.03C

General

Amounts due by the Borrower pursuant to this Article 10.03 shall be payable on the date of prepayment specified in the Bank’s demand.

10.04

Non-Waiver

No failure or delay or single or partial exercise by the Bank in exercising any of its rights or remedies under this Contract shall be construed as a waiver of such right or remedy. The rights and remedies provided in this Contract are cumulative and not exclusive of any rights or remedies provided by law.

ARTICLE 11

Law and jurisdiction, miscellaneous

11.01

Governing Law

This Contract and any non-contractual obligations arising out of or in connection with it shall be governed by the laws of Sweden.

11.02

Jurisdiction

The parties hereby submit to the jurisdiction of the courts of Sweden, in the first instance the District Court of Stockholm (Sw.: Stockholms tingsrätt ), and the parties hereby submit to the jurisdiction of the said courts, provided that the Bank shall always be free to commence proceedings against the Borrower before any other proper jurisdiction in accordance with the Swedish Code of Procedure (Sw.: Rättegångsbalken ).

The Guarantor appoints the Borrower to be its attorney for the purpose of accepting service on its behalf of any writ, notice, order, judgment or other legal process.

11.03

INTENTIONALLY LEFT BLANK

11.04

Evidence of sums due

In any legal action arising out of this Contract the Borrower agrees that the certificate of the Bank as to any amount or rate due to the Bank under this Contract may, in the absence of manifest error, be submitted as prima facie evidence of such amount or rate.

11.05

Invalidity

If at any time any term of this Contract is or becomes illegal, invalid or unenforceable in any respect, or this Contract is or becomes ineffective in any respect, under the laws of any jurisdiction, such illegality, invalidity, unenforceability or ineffectiveness shall not affect:

(a)

the legality, validity or enforceability in that jurisdiction of any other term of this Contract or the effectiveness in any other respect of this Contract in that jurisdiction; or

(b)

the legality, validity or enforceability in other jurisdictions of that or any other term of this Contract or the effectiveness of this Contract under the laws of such other jurisdictions.

11.06

Amendments

Any amendment to this Contract shall be made in writing and shall be signed by the parties hereto.

ARTICLE 12

Final clauses

12.01

Notices to either party

Notices and other communications given under this Contract addressed to either party to this Contract shall be made to the address or facsimile number as set out below, or to such other address or facsimile number as a party previously notifies to the other in writing:


For the Bank		Attention: Ops A

		100 boulevard Konrad Adenauer L-2950 Luxembourg

		Facsimile no.: +352 4379 63697

For the Borrower		Attention: Treasurer

		Vasagatan 11 111 20 Stockholm, Sweden

		Facsimile no.: +46 8 24 44 93

For the Guarantor		Attention: Treasurer

		Vasagatan 11 111 20 Stockholm, Sweden

		Facsimile no.: +46 8 24 44 93

12.02

Form of notice

Any notice or other communication given under this Contract must be in writing.

Notices and other communications, for which fixed periods are laid down in this Contract or which themselves fix periods binding on the addressee, may be made by hand delivery, registered letter or facsimile. Such notices and communications shall be deemed to have been received by the other party on the date of delivery in relation to a hand-delivered or registered letter or on receipt of transmission in relation to a facsimile.

Other notices and communications may be made by hand delivery, registered letter or facsimile or, to the extent agreed by the parties by written agreement, by email or other electronic communication.

Without affecting the validity of any notice delivered by facsimile according to the paragraphs above, a copy of each notice delivered by facsimile shall also be sent by letter to the relevant party on the next following Business Day at the latest.

Notices issued by the Borrower or the Guarantor pursuant to any provision of this Contract shall, where required by the Bank, be delivered to the Bank together with satisfactory evidence of the authority of the person or persons authorised to sign such notice on behalf of the Borrower or, as the case may be, the Guarantor, and the authenticated specimen signature of such person or persons.

12.03

Changes to parties

Neither the Borrower nor the Guarantor may assign or transfer any of its rights or obligations under this Contract without the prior written consent of the Bank.

The Bank may assign all or part of its rights and benefits or transfer (by way of novation, sub-participation or otherwise) all or part of its rights, benefits and obligations under this Contract.

12.04

Recitals, Schedules and Annexes

The Recitals and following Schedules form part of this Contract:


Schedule A		Project Specification and Reporting

Schedule B		Definition of EURIBOR, LIBOR and STIBOR

Schedule C		Forms for Borrower/Guarantor

Schedule D		Interest Rate Revision and Conversion.

The following Annexes are attached hereto:


Annex I		Resolution of Board of Directors of the Borrower and authorisation of signatory

Annex II		Resolution of Board of Directors of the Guarantor and authorisation of signatory.

IN WITNESS WHEREOF the parties hereto have caused this Contract to be executed in 4 (four) originals in the English language and have respectively caused representatives of the Bank and the Borrower to initial each page of this Contract on their behalf.

At Stockholm, this 16th day of July 2013

At Luxembourg, this 16th day of July 2013


		Signed for and on behalf of						Signed for and on behalf of
		EUROPEAN INVESTMENT BANK						AUTOLIV AB (PUBL)

		/s/ Hanna Karczewska						/s/ Amelie Heiner

		Hanna Karczewska						Amelie Heiner

		/s/ Jukka Luukkanen						/s/ Lars Sjöbring

		Jukka Luukkanen						Lars Sjöbring


								Signed for and on behalf of
								AUTOLIV INC.

								/s/ Jan Carlson

								Jan Carlson

								/s/ Mats Wallin

								Mats Wallin

Schedule A

Project Specification and Reporting

A.1.

TECHNICAL DESCRIPTION

Purpose, Location

The project concerns RDI activities for the development of innovative passive and active safety technologies for motor vehicles aiming at the enhancement of vehicle passengers’ and pedestrians’ safety. The company’s objective is the development of integrated safety systems (passive elements, communicative/warning and preventive/autonomous operation functionalities) and in the mid to long term the development will focus in finding new solutions or ways to combine existing active and passive systems, capitalizing on the integration with different safety and vehicle dynamics electronics systems. In addition to the development of new and improved functionalities the project concerns improvements in the cost, the weight/size and the efficiency characteristics of safety systems.

Description

The project activities are carried out within the company’s Central Research, Global Development and Engineering organisations.

Central Research

The major activities concern research in the following areas:

•

Global Development

The project includes development activities in the areas of:

•

Seat belts *

•

Front Air bags *

•

Side Airbags *

•

Inflators *

•

Steering Wheel *

•

Initiators *

•

Textiles *

•

Passive Safety Electronics *

•

Active Safety Electronics *

•

Special Products: *

•

Systems *.

*	Confidential material redacted and filed separately with the Securities and Exchange Commission.

Engineering Activities

The Engineering activities in Sweden concern the customisation and adaptation of systems and technologies to vehicle platforms of a number of different OEMs. The main currently on-going projects are in the following areas: *.

Calendar

The project’s activities will be carried out in the period from January 2013 to December 2016.

*	Confidential material redacted and filed separately with the Securities and Exchange Commission.

A.2.

PROJECT INFORMATION TO BE SENT TO THE BANK AND METHOD OF TRANSMISSION

1. Dispatch of information: designation of the person responsible

The information below has to be sent to the Bank under the responsibility of:


Company		Autoliv Inc.
Contact person		Amelie Heiner
Title		Treasurer
Function / Department		Treasury
Address		Vasagatan 11 7th Floor SE 111 20 Stockholm (Sweden)
Phone		+46-8-587 20 600
Email		Amelie.Heiner@autoliv.com

The above-mentioned contact person(s) is (are) the responsible contact(s) for the time being.

The Borrower shall inform the EIB immediately in case of any change.

2. Information on the end of works and first year of operation

The Borrower shall deliver to the Bank the following information on project completion and initial operation at the latest by the deadline indicated below.


Document / information		Date of delivery to the Bank
Project Completion Report, including: • A brief description of the technical characteristics of the project as completed, explaining the reasons for any significant change; • The date of completion of each of the main project’s components, explaining reasons for any possible delay; • The final cost of the project, explaining reasons for any possible cost increases vs. initial budgeted cost; • The products resulting from the R&D project, their expected market introduction and acceptance; • The number of FTEs employed during the implementation of the R&D project (2013-2016); • The number of new jobs created (R&D, operations) as a result of the R&D project (if applicable): in Europe, outside Europe; • The following information: • The number of patent applications and patents granted (Autoliv) during the period 2013-2016 and the number of them specifically linked to the R&D project; • the number of publications in international journals (Autoliv) during the period 2013-2016 and the number of them specifically linked to the R&D project; • the percentage of sales from new product (out of total sales) in the period 2013-2016 (i.e. sales from products not sold before 2013); • the number and list of EU collaborations agreements with universities, research institutes, etc. • An update about the automotive safety market, competition, including Autoliv market share vs. its relevant competitors; please indicate any significant evolutions that have affected or may affect the promoter in the market segments where it competes; • An update about Autoliv strategy; • Autoliv key financial indicators in the period 2012-2016 (revenues, ebit, ebitda, ROIC, WACC); • An update about the outcome of the antitrust investigations ongoing at the date of project appraisal; • An update about any restructuring plan undertaken by the promoter in the period 2013-2016, indicating: the number of jobs reduced/created (i) at corporate level and (ii) within RD&E departments, with a breakdown per geographical region; • A description of any major issue with impact on the environment; • Any significant issue that has occurred and any significant risk that may affect the project’s operation; • Any legal action concerning the project that may be ongoing.		March 31 ^st , 2017

Language of reports		English

Schedule B

Definitions of STIBOR, EURIBOR and LIBOR

EURIBOR

“ EURIBOR ” means:

(a)

in respect of a relevant period of less than one month, the Screen Rate (as defined below) for a term of one month;

(b)

in respect of a relevant period of one or more months for which a Screen Rate is not available, the applicable Screen Rate for a term for the corresponding number of months; and

(c)

in respect of a relevant period of more than one month, for which a Screen Rate is not available, the Screen Rate resulting from a linear interpolation by reference to two Screen Rates, one of which is applicable for a period next shorter and the other for a next longer than the length of the relevant period,

(the period for which the rate is taken or from which the rates are interpolated being the “ Representative Period ”),

For the purposes of paragraphs (b) and (c) above, “available” means the rates that are calculated under the aegis of the EURIBOR FBE and EURIBOR ACI (or any successor to that function of the EURIBOR FBE and EURIBOR ACI as determined by the Bank) for given maturities. “ Screen Rate ” means the rate of interest for deposits in EUR for the relevant period as published at 11h00, Brussels time, or at a later time acceptable to the Bank on the day (the “ Reset Date ”) which falls 2 (two) Relevant Business Days prior to the first day of the relevant period, on Reuters page EURIBOR 01 or its successor page or, failing which, by any other means of publication chosen for this purpose by the Bank.

If such Screen Rate is not so published, the Bank shall request the principal euro-zone offices of four major banks in the euro-zone, selected by the Bank, to quote the rate at which EUR deposits in a comparable amount are offered by each of them as at approximately 11h00, Brussels time, on the Reset Date to prime banks in the euro-zone interbank market for a period equal to the Representative Period. If at least 2 (two) quotations are provided, the rate for that Reset Date will be the arithmetic mean of the quotations.

If fewer than 2 (two) quotations are provided as requested, the rate for that Reset Date will be the arithmetic mean of the rates quoted by major banks in the euro-zone, selected by the Bank, at approximately 11h00, Brussels time, on the day which falls 2 (two) Relevant Business Days after the Reset Date, for loans in EUR in a comparable amount to leading European Banks for a period equal to the Representative Period.

If the rate resulting from the above is below zero, EURIBOR will be deemed to be zero.

If no rate is available as provided above, EURIBOR shall be the rate (expressed as a percentage rate per annum) which is determined by the Bank to be the all-inclusive cost to the Bank for the funding of the relevant Tranche based upon the then applicable internally generated Bank reference rate or an alternative rate determination method reasonably determined by the Bank.

LIBOR USD

“ LIBOR ” means, in respect of USD:

(a)

in respect of a relevant period of less than one month, the Screen Rate for a term of one month;

(b)

in respect of a relevant period of one or more months for which a Screen Rate is not available, the applicable Screen Rate for a term for the corresponding number of whole months; and

(c)

in respect of a relevant period of more than one month for which a Screen Rate is not available, the Screen Rate resulting from a linear interpolation by reference to two Screen Rates, one of which is applicable for a period of whole months next shorter and the other for a period next longer than the length of the relevant period,

(the period for which the rate is taken or from which the rates are interpolated being the “ Representative Period ”),

For the purposes of paragraphs (b) and (c) above, “available” means the rates that are calculated under the aegis of the British Bankers Association (or any successor to that function of the British Bankers Association as determined by the Bank) for given maturities. “ Screen Rate ” means the rate of interest for deposits in USD for the relevant period as set by the British Bankers Association (or any successor to that function of the British Bankers Association as determined by the Bank) and released by financial news providers at 11h00, London time, or at a later time acceptable to the Bank on the day (the “ Reset Date ”) which falls 2 (two) London Business Days prior to the first day of the relevant period.

If such Screen Rate is not so released by any financial news provider acceptable to the Bank, the Bank shall request the principal London offices of 4 (four) major banks in the London interbank market selected by the Bank to quote the rate at which USD deposits in a comparable amount are offered by each of them at approximately 11h00, London time, on the Reset Date, to prime banks in the London interbank market for a period equal to the Representative Period. If at least 2 (two) such quotations are provided, the rate will be the arithmetic mean of the quotations provided.

If fewer than 2 (two) quotations are provided as requested, the Bank shall request the principal New York City offices of 4 (four) major banks in the New York City interbank market, selected by the Bank, to quote the rate at which USD deposits in a comparable amount are offered by each of them at approximately 11h00, New York City time, on the day falling 2 (two) New York Business Days after the Reset Date, to prime banks in the European market for a period equal to the Representative Period. If at least 2 (two) such quotations are provided, the rate will be the arithmetic mean of the quotations provided.

If the rate resulting from the above is below zero, LIBOR will be deemed to be zero.

If no rate is available as provided above, LIBOR shall be the rate (expressed as a percentage rate per annum) which is determined by the Bank to be the all-inclusive cost to the Bank for the funding of the relevant Tranche based upon the then applicable internally generated Bank reference rate or an alternative rate determination method reasonably determined by the Bank.

LIBOR GBP

“ LIBOR ” means, in respect of GBP:

(a)

in respect of a relevant period of less than one month, the Screen Rate for a term of one month;

(b)

in respect of a relevant period or of one or more months, for which a Screen Rate is not available, the applicable Screen Rate, the applicable Screen Rate for a term for the corresponding number of months; and

(c)

(the period for which the rate is taken or from which the rates are interpolated being the “ Representative Period ”),

For the purposes of paragraphs (b) and (c) above, “available” means the rates that are calculated under the aegis of the British Bankers Association (or any successor to that function of the British Bankers Association as determined by the Bank) for given maturities. “ Screen Rate ” means the rate of interest for deposits in GBP for the relevant period as set by the British Bankers Association (or any successor to that function of the British Bankers Association as determined by the Bank) and released by financial news providers at 11h00, London time, or at a later time acceptable to the Bank on the day (the “ Reset Date ”) on which the relevant period starts or, if that day is not a Business Day in London, on the next following day which is such a Business Day.

If such Screen Rate is not so released by any financial news provider acceptable to the Bank, the Bank shall request the principal London offices of 4 (four) major banks in the London interbank market, selected by the Bank, to quote the rate at which GBP deposits in a comparable amount are offered by each of them at approximately 11h00, London time, on the Reset Date, to prime banks in the London interbank market for a period equal to the Representative Period. If at least 2 (two) such quotations are provided, the rate will be the arithmetic mean of the quotations provided.

If fewer than 2 (two) quotations are provided as requested, the rate will be the arithmetic mean of the rates quoted at approximately 11h00, London time, on the Reset Date by major banks in London (selected by the Bank) for loans in GBP in a comparable amount to leading European banks for a period equal to the Representative Period.

If the rate resulting from the above is below zero, LIBOR will be deemed to be zero.

STIBOR

“ STIBOR ” means:

(a)

in respect of a relevant period of less than one month, the rate of interest for deposits in SEK for a term of one month;

(b)

in respect of a relevant period of one or more whole months, the rate of interest for deposits in SEK for a term for the corresponding number of whole months, and

(c)

in respect of a relevant period of more than one month (but not whole months), the rate resulting from a linear interpolation by reference to two rates for deposits in SEK, one of which is applicable for a period of whole months next shorter and the other for a period of whole months next longer than the length of the relevant period,

(the period for which the rate is taken or from which the rates are interpolated being the “ Representative Period ”),

as published at 11h00 Stockholm time or at a later time acceptable to the Bank on the day (the “ Reset Date ”) which falls 2 (two) Relevant Business Days prior to the first day of the relevant period, on Reuters Screen SIDE Page under the caption of “FIXINGS” or its successor page or, failing which, by any other means of publication chosen for this purpose by the Bank.

If such rate is not so published, the Bank shall request the principal offices of four major banks in Stockholm, selected by the Bank, to quote the rate at which SEK deposits in a comparable amount are offered by each of them as at approximately 11h00, Stockholm time, on the Reset Date to prime banks in the Stockholm interbank market for a period equal to the Representative Period. If at least 2 (two) quotations are provided, the rate for that Reset Date will be the arithmetic mean of the quotations.

If fewer than 2 (two) quotations are provided as requested, the rate for that Reset Date will be the arithmetic mean of the rates quoted by major banks in Stockholm, selected by the Bank, at approximately 11h00 Stockholm time on the day which falls 2 (two) Relevant Business Days after the Reset Date, for loans in SEK in a comparable amount to leading European Banks for a period equal to the Representative Period.

If the rate resulting from the above is below zero, STIBOR will be deemed to be zero.

If no rate is available as provided above, STIBOR shall be the rate (expressed as a percentage rate per annum) which is determined by the Bank to be the all-inclusive cost to the Bank for the funding of the relevant Tranche based upon the then applicable internally generated Bank reference rate or an alternative rate determination method reasonably determined by the Bank.

General

For the purposes of the foregoing definitions:

(a)	“ London Business Day ” means a day on which banks are open for normal business in London and “ New York Business Day ” means a day on which banks are open for normal business in New York.

(b)	All percentages resulting from any calculations referred to in this Schedule will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with halves being rounded up.

(c)	The Bank shall inform the Borrower without delay of the quotations received by the Bank.

(d)

If any of the foregoing provisions becomes inconsistent with provisions adopted under the aegis of EURIBOR FBE and EURIBOR ACI in respect of EURIBOR (or any successor to that function of the EURIBOR FBE and EURIBOR ACI as determined by the Bank) or of the British Bankers Association (or any successor to that function of the British Bankers Association as determined by the Bank) in respect of LIBOR, the Bank may by notice to the Borrower amend the provision to bring it into line with such other provisions.

Schedule C

Forms for Borrower

C.1 Form of Disbursement Request (Article 1.02B)

Disbursement Request

France, Germany and Sweden – Autoliv Safety Systems R&D II

Date:

Please proceed with the following disbursement:

Loan Name (*):

Signature Date (*):

Contract FI number:


Currency & amount requested		Proposed disbursement date:
Currency	Amount

Int. rate basis (Art. 3.01)

Reserved for the Bank

(contract currency)

Rate (% or Spread)

OR (please indicate only ONE)

_____________________

Total Credit Amount:

LOGO

Maximum Rate (% or Maximum Spread)

Frequency (Art. 3.01)

Annual ¨

Semi-annual ¨

Quarterly ¨

Disbursed to date:

Payment Dates (Art. 5)

Balance for disbursement:

Interest Revision/Conversion date (if any)

Current disbursement:

LOGO

Repayment frequency

Annual ¨

Semi-annual ¨

Quarterly ¨

Balance after disbursement:

Repayment methodology (Art. 4.01)

Equal instalments ¨

Constant annuities ¨

Single instalment ¨

Disbursement deadline:

First repayment date

Max. number of disbursements:

Maturity Date:

Minimum Tranche size:

Total allocations to date:

Conditions precedent:

Yes / No

Borrower’s account to be credited:

Acc. N ^o :

(please, provide IBAN format in case of disbursements in EUR, or appropriate format for the relevant currency)

Bank name, address:

Please transmit information relevant to:

Borrower’s authorised name(s) and signature(s):

CERTIFICATES TO BE PROVIDED BY THE BORROWER AND THE GUARANTOR (AS APPLICABLE)

C.2 Form of Certificate from Borrower (Article 1.04B)


To:	European Investment Bank

From:	Autoliv AB (publ) and Autoliv Inc.

Date:

Subject:	Finance Contract between European Investment Bank, Autoliv AB (publ) and Autoliv Inc. dated — (the “ Finance Contract ”)

	FI number 82.624	Serapis number 2012 0517

Dear Sirs, Terms defined in the Finance Contract have the same meaning when used in this letter.

For the purposes of Article 1.04 of the Finance Contract we hereby certify to you as follows:

(a)

(i) in respect of the Guarantor only, no Prepayment Event under Articles 4.03A(2)-(4) or 4.03A(6) has occurred and is continuing unremedied and (ii) in respect of the Borrower only, no Prepayment Event under Articles 4.03A(1)-(4) has occurred and is continuing unremedied;

(b)

(i) in respect of the Guarantor only, no security of the type prohibited under Article 7.02A has been created or is in existence and (b) in respect of the Borrower only, no security of the type prohibited under Article 7.02B has been created or is in existence;

(c)

in respect of the Borrower only, there has been no material change to any aspect of the Project or in respect of which the Borrower is obliged to report under Article 8.01, save as previously communicated by the Borrower;

(d)

(i) in respect of the Guarantor only, other than Articles 10.01A(a) or 10.01B(b) no event or circumstance which constitutes or would with the passage of time or giving of notice under the Finance Contract constitute an Event of Default has occurred and is continuing unremedied or unwaived and (ii) in respect of the Borrower only, no event or circumstance which constitutes or would with the passage of time or giving of notice under the Finance Contract constitute an Event of Default, has occurred and is continuing unremedied or unwaived;

(e)

no litigation, arbitration administrative proceedings or investigation is current or to our knowledge is threatened or pending against us before any court, arbitral body or agency which has resulted or is likely to result in a Material Adverse Change, nor is there subsisting against us or any of our subsidiaries any unsatisfied judgement or award which constitutes a Material Adverse Change;

(f)

the representations and warranties to be made or repeated by the Guarantor and the Borrower, respectively, under Article 6.11 are true in all material respects;

(g)

no Material Adverse Change has occurred, as compared with the situation at the date of the Finance Contract; and

(h)

no More Favourable Provision has been given or is in existence.


Yours faithfully,

For and on behalf of Autoliv AB (publ)

Date:

For and on behalf of Autoliv Inc.

Date:

Schedule D

Interest Rate Revision and Conversion

If an Interest Revision/Conversion Date has been included in the Disbursement Notice for a Tranche, the following provisions shall apply.

Mechanics of Interest Revision/Conversion

Upon receiving an Interest Revision/Conversion Request the Bank shall, during the period commencing 60 (sixty) days and ending 30 (thirty) days before the Interest Revision/Conversion Date, deliver to the Borrower an Interest Revision/Conversion Proposal stating:

(a)

the Fixed Rate and/or Spread that would apply to the Tranche, or the part thereof indicated in the Interest Revision/Conversion Request pursuant to Article 3.01; and

(b)

that such rate shall apply until the Maturity Date or until a new Interest Revision/Conversion Date, if any, and that interest is payable quarterly, semi-annually or annually in arrears on designated Payment Dates.

The Borrower may accept in writing an Interest Revision/Conversion Proposal by the deadline specified therein.

Any amendment to the Contract requested by the Bank in this connection shall be effected by an agreement to be concluded not later than 15 (fifteen) days prior to the relevant Interest Revision/Conversion Date.

Effects of Interest Revision/Conversion

If the Borrower duly accepts in writing a Fixed Rate or a Spread in respect of an Interest Revision/Conversion Proposal, the Borrower shall pay accrued interest on the Interest Revision/Conversion Date and thereafter on the designated Payment Dates.

Prior to the Interest Revision/Conversion Date, the relevant provisions of the Contract and Disbursement Notice shall apply to the entire Tranche. From and including the Interest Revision/Conversion Date onwards, the provisions contained in the Interest Revision/Conversion Proposal relating to the new interest rate or Spread shall apply to the Tranche (or part thereof) until the new Interest Revision/Conversion Date, if any, or until the Maturity Date.

Non-fulfilment of Interest Revision/Conversion

If the Borrower does not submit an Interest Revision/Conversion Request or does not accept in writing the Interest Revision/Conversion Proposal for the Tranche or if the parties fail to effect an amendment requested by the Bank pursuant to Paragraph A above, the Borrower shall repay the Tranche (or part thereof) on the Interest Revision/Conversion Date, without indemnity. The Borrower will repay on the Interest Revision/Conversion Date any part of a Tranche which is unaffected by the Interest Revision/Conversion.


To:	Autoliv AB (publ) and Autoliv Inc.

From:	European Investment Bank

Date:

Subject:	Finance Contract between European Investment Bank, Autoliv AB (publ) and Autoilv Inc. dated — ( (the “ Finance Contract ”)

	FI number 82.624	Serapis number 2012 0517

Dear Sirs, Terms defined in the Finance Contract have the same meaning when used in this letter.

Regarding Article 1.02B(a)(ii) ( Disbursement Request ): although the Bank has the right under this clause to disburse a Tranche up to 4 (four) calendar months from the date of the relevant Disbursement Request, we confirm that the Bank has not, to date, exercised this right under any of its loans, in respect of a tranche in any widely traded currency (for example EUR, GBP, USD, JPY or SEK).

Regarding Article 4.03A(2) ( Pari passu to another term loan ): it is not the policy of the Bank to unreasonably exercise its rights under the captioned article if prepayment (in part or in full) of a Term Loan is made out of the proceeds of a new loan having a term not less than the unexpired term of the Term Loan in question.

Regarding Article 6.10 (Indebtedness for Borrowed Money): in the event the Borrower would negotiate and agree a provision on indebtedness for borrowed money, under the USD 1 100 000 000 revolving facilities agreement dated 16 April 2011 (as amended from time to time) between amongst others the Guarantor, the Borrower, Autoliv ASP, Inc, Merchant Banking, Skandinaviska Enskilda Banken AB (publ), Mizuho Corporate Bank, Ltd. And Nordea Bank AB (publ), that is more favourable to the Borrower than Article 6.10 and subsequently the Borrower would approach the Bank with a request to align Article 6.10 with any such new provision, in good faith but in its full discretion the Bank would review and consider any such request from the Borrower.

4.	Regarding Article 8.03 (Visits by the Bank): under normal circumstances the Bank would plan any visit to take place during normal business hours and further the Bank would give the Borrower reasonable prior notice.

Regarding Article 9.01 (Taxes, duties and fees): the Bank is an international institution enjoying legal personality and governed by its Statute which is attached to the Treaty establishing the European Community, as amended and which has been ratified in Sweden. The Protocol on Privileges and Immunities which is annexed to the Treaty establishing a single Council and a single Commission of the European Communities sets out the tax-treatment of the Bank. It provides indeed in its Article 3 that the Communities, their assets, revenues and other property shall be exempt from all direct taxes. By virtue of Article 22 of the same Protocol, the latter is also applicable to the Bank.

Regarding Article 10.01A(e) ( Right to demand repayment ): In case a third party files a petition for bankruptcy against any borrower of (or guarantor to) the Bank, under normal circumstances it is the Bank’s practice to carefully examine the reasons for such petition and give due consideration to them before exercising its rights under the captioned clause.

Yours faithfully,

EUROPEAN INVESTMENT BANK

Annex I

[Resolution of Board of Directors of the Borrower and authorisation of signatory]

Annex II

[Resolution of Board of Directors of the Guarantor and authorisation of signatory]

Exhibit 10.2

E U R O P E A N I N V E S T M E N T B A N K

FI N° <\\> SE

SERAPIS N° 20120517

AUTOLIV SYSTEMS RDI II

(Sweden, Germany and France)

Guarantee Agreement

between

European Investment Bank

and

Autoliv Inc.

Stockholm, July 16 2013

Luxembourg, July 16 2013

THIS AGREEMENT IS MADE BETWEEN :


European Investment Bank having its Head Office at 100, boulevard Konrad Adenauer, Luxembourg-Kirchberg, Grand Duchy of Luxembourg,

Ms. Hanna Karczewska, Head of Division and

Mr. Jukka Luukkanen, Head of Division

hereinafter called:		“THE BANK”
of the first part, and

Autoliv Inc., a corporation incorporated in Delaware, USA, having its business office at Vasagatan 11, 111 20, Stockholm, Sweden,

Jan Carlson, President & CEO

Mats Wallin, CFO hereinafter called:		“THE GUARANTOR”

of the second part.

WHEREAS :

•

By an agreement (the “ Finance Contract ”) dated on or about <\\> 2013 and made between THE BANK and Autoliv AB (publ) (the “ Borrower ”) and THE GUARANTOR, THE BANK has agreed to establish in favour of the Borrower a credit equivalent to EUR 200 million (two hundred million euros);

•

The obligations of the Bank under the Finance Contract are conditional upon the prior execution and delivery by THE GUARANTOR of a guarantee of performance by the Borrower of its financial obligations under the Finance Contract;

•

The board of directors of THE GUARANTOR has determined that the issue of a guarantee of the Borrower’s financial obligations is a transaction in the interests of THE GUARANTOR and has approved the terms of this guarantee agreement (this “ Guarantee ”) and has authorised the signatory/signatories to execute it on THE GUARANTOR’S behalf (Annex I); and

•

The Borrower is indirectly a 100% owned subsidiary of THE GUARANTOR and THE GUARANTOR is the ultimate parent company of the Autoliv group of companies.

Unless otherwise defined herein, terms shall have the same meanings as ascribed thereto in the Finance Contract.

NOW THEREFORE it is hereby agreed as follows :

ARTICLE 1

Finance Contract

THE GUARANTOR has received notice of the terms, conditions and clauses of the Finance Contract.

ARTICLE 2

Guarantee

2.01

In consideration of THE BANK entering into the Finance Contract, THE GUARANTOR hereby irrevocably and unconditionally guarantees the payment of all principal moneys, interest (including interest on overdue sums), commission, charges, expenses and other moneys which may from time to time become payable by the Borrower to THE BANK by reason of the provisions of the Finance Contract and if and whenever the Borrower has defaulted in the payment of any such principal moneys, interest, commission, charges, expenses or other moneys, THE GUARANTOR undertakes on or before the third Business Day after written notice by THE BANK is given to THE GUARANTOR, showing the sum owed by the Borrower and stating that such sum was not paid on the due date, to pay the amount thereof to THE BANK in the currency, in the manner and at the place specified in the Finance Contract (a “Business Day” being a day on which banks are open for general business in Stockholm).

2.02

THE GUARANTOR will always have the right to pay any sum in respect of principal moneys, interest, commission, charges, expenses and other moneys on the due date or thereafter if the Borrower notifies THE GUARANTOR that it will not pay or has not paid any such amount on its due date.

2.03

Without limiting the provisions contained in Article 2.01, the obligations of THE GUARANTOR hereunder shall be of the same nature as obligations for its own debts (Sw.: proprieborgen ) and, subject to the provisions of Article 6, shall not be impaired or discharged by reason of any time or other indulgence granted by THE BANK or by reason of any arrangement entered into or composition accepted by THE BANK modifying (by operation of law or otherwise) the rights and remedies of THE BANK under the Finance Contract.

2.04

The guarantee hereby created shall continue and remain in full force and effect until all sums payable or repayable under the Finance Contract shall have been irrevocably paid or repaid in full.

ARTICLE 3

Enforcement of Guarantee

3.01

This guarantee shall be enforceable whenever the Borrower fails to perform any of its financial obligations guaranteed pursuant to Article 2.01 hereof.

3.02

THE GUARANTOR undertakes to perform any obligation hereby imposed upon it when so required by THE BANK in writing and to pay the sums due by it without any limitation, retention, set off or condition and without THE BANK having to furnish any special evidence in support of its requirement (other than the reason for the enforcement of the guarantee and information regarding the sum due as required by Article 2.01).

3.03

In the event of THE BANK enforcing this guarantee, THE GUARANTOR shall have the right to discharge immediately, all the financial obligations of the Borrower under the Finance Contract which are still outstanding at the time of such enforcement.

ARTICLE 4

Subrogation

4.01

Whenever THE GUARANTOR makes a payment to THE BANK, pursuant to the provisions of this guarantee, it shall be subrogated, to the extent of such payment, to the rights, remedies and privileges relating to the said payment that THE BANK has against the Borrower; this right of subrogation cannot be invoked to the detriment of the rights of THE BANK.

4.02

THE GUARANTOR shall not have the right to be discharged of any of its obligations hereunder by reason only that, due to some act or omission of THE BANK, THE GUARANTOR is not or may not be subrogated to any of the rights, remedies or privileges of THE BANK relating to the payment in question.

ARTICLE 5

Amendment to the Finance Contract

The Bank may agree to any amendment or variation to the Finance Contract if:

(a)

the amendment or variation does not increase the amounts payable by THE GUARANTOR under this Guarantee or change the conditions under which such amounts are payable; or

(b)

the amendment or variation consists in the extension of time for payment of a Guaranteed Sum of up to three months; or

(c)

THE GUARANTOR has given its prior written consent to the amendment or variation, provided that such consent may not unreasonably be refused or delayed.

ARTICLE 6

Taxes, Charges and Expenses

Any fiscal charges which may be payable and any expenses incurred in connection with the making, the performance or the enforcement of this guarantee shall be borne by THE GUARANTOR and THE GUARANTOR shall on demand indemnify THE BANK all such fiscal charges and expenses incurred by THE BANK.

ARTICLE 7

Law and Jurisdiction

7.01

The formation and validity of this guarantee agreement and the relations between the parties thereto shall be governed by Swedish law.

7.02

Any dispute which may arise between the parties hereto in connection with this Agreement shall be subject to the jurisdiction of Swedish courts, in the first instance the District Court of Stockholm (Sw.: Stockholms tingsrätt ), and the parties hereby submit to the jurisdiction of the said court, provided that THE BANK shall always be free to commence proceedings against THE GUARANTOR before any other proper jurisdiction in accordance with the Swedish Code of Procedure (Sw.: Rättegångsbalken ).

The Guarantor appoints the Borrower to be its attorney for the purpose of accepting service on its behalf of any writ, notice, order, judgment or other legal process.

7.03

In any legal action arising out of this Guarantee the Guarantor agrees that the certificate of the Bank as to any amount or rate due to the Bank under this Guarantee may, in the absence of manifest error, be submitted as prima facie evidence of such amount or rate.

ARTICLE 8

Final Clauses

8.01

Notices and other communications given hereunder shall be sent to the addressee at its address hereafter mentioned:


• for THE BANK:		100, boulevard Konrad Adenauer L–2950 Luxembourg

• for THE GUARANTOR:
		Attention: Treasurer Vasagatan 11
		SE – 111 20 Stockholm Sweden Facsimile no.: +46 8 24 44 93

Provided however that any notice or communication to THE BANK which arises out of or is preparatory to litigation shall be addressed to the following address where THE BANK elects domicile:

Sveriges Riksbank

Brunkebergstorg 11

S–103 37 Stockholm

No alteration to such addresses shall be valid until it has been communicated in writing by one party to this Agreement to the other.

8.02

Notices and other communications given hereunder shall be sent by registered letter. The delivery date recorded on any letter shall be deemed to be the date of delivery to the addressee.

8.03

The Recitals form part of this Agreement.

The following Annex is attached hereto:


• Annex I		Resolution of Board of Directors of THE GUARANTOR and authorisation of signatory

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed in three originals in the English language. Each page hereof has been initialled on behalf of THE GUARANTOR and on behalf of THE BANK by the undersigned or their representatives.

At Stockholm, this 16th day of July 2013

At Luxembourg, this 16th day of July 2013


Signed for and on behalf of the				Signed for and on behalf of the
EUROPEAN INVESTMENT BANK				AUTOLIV INC.

/s/ Hanna Karczewska				/s/ Jan Carlson

Hanna Karczewska				Jan Carlson

/s/ Jukka Luukkanen				/s/ Mats Wallin

Jukka Luukkanen				Mats Wallin

ANNEX I

[Resolution of Board of Directors of THE GUARANTOR

and authorisation of signatory]

Exhibit 31.1

Certification of Principal Executive Officer

I, Jan Carlson, certify that:

I have reviewed this report on Form 10-Q of AUTOLIV, INC.;

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;

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;

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

(a)

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

(b)

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

(c)

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

(d)

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

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

(a)

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

(b)

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

Date: October 24, 2013

/s/ Jan Carlson

Jan Carlson

President and Chief Executive Officer

Exhibit 31.2

Certification of Principal Financial Officer

I, Mats Wallin, certify that:

I have reviewed this report on Form 10-Q of AUTOLIV, INC.;

(a)

(b)

(c)

(d)

(a)

(b)

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

Date: October 24, 2013

/s/ Mats Wallin

Mats Wallin

Chief Financial Officer

Exhibit 32.1

Certification of CEO

Pursuant to 18 U.S.C Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of Autoliv, Inc. (the “Company”) for the period ended September 30, 2013, filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jan Carlson, as Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Jan Carlson
Name:		Jan Carlson
Title:		President and Chief Executive Officer
Date:		October 24, 2013

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification of CFO

Pursuant to 18 U.S.C Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of Autoliv, Inc. (the “Company”) for the period ended September 30, 2013, filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mats Wallin, as Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Mats Wallin
Name:		Mats Wallin
Title:		Chief Financial Officer
Date:		October 24, 2013

Large accelerated filer:

Accelerated filer:

Non-accelerated filer

Smaller reporting company