AUTOLIV INC (Form: 10-Q, Received: 07/23/2010 10:41:14)

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 June 30, 2010

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.)

World Trade Center,
Klarabergsviadukten 70,
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 requirement 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 proceeding 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.


Large accelerated filer:	x	Accelerated filer:	¨

Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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 July 19, 2010, there were 88,486,476 shares of common stock of Autoliv, Inc., par value $1.00 per share, outstanding.

FORWARD-LOOKING STATEMENTS

This 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 are 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, including 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,” “projects,” “plans,” “intends,” “believes,” “might,” “will,” “should,” or the negative of these terms and other comparable terminology, although not all forward-looking statements are so identified.

All such forward-looking statements, including without limitation, management’s examination of historical operating trends and data, are based upon our current expectations, various assumptions, data available from third parties and apply only as of the date of this report. 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 these assumptions are inherently subject to risks and uncertainties and contingencies which are difficult or impossible to predict and are beyond our control.

Because these forward-looking statements involve risks and uncertainties, the outcome 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 restructuring and cost reduction initiatives discussed herein and the market reaction thereto, changes in general industry and market conditions, increased competition, higher raw material, fuel and energy costs, changes in consumer and customer preferences for end products, customer losses, customer bankruptcies, consolidations or restructuring, divestiture of customer brands, fluctuation of foreign currencies, fluctuation in vehicle production schedules for which the Company is a supplier, 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, increased costs, supply issues, product liability, warranty and recall claims and other litigation, possible adverse results of pending or future litigation or infringement claims, tax assessments by governmental authorities, legislative or regulatory changes, political conditions, dependence on customers and

suppliers, as well as the risks identified in Item 1A “Risk Factors” in this quarterly report and the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2009. Except for the Company’s ongoing obligation to disclose information under the U.S. federal securities laws, the Company undertakes no obligation to update publicly or revise any forward-looking statements whether as a result 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

1.1		Basis of Presentation
1.2		New Accounting Pronouncements
1.3		Business Acquisitions
1.4		Fair Value Measurement
1.5		Income Taxes
1.6		Inventories
1.7		Restructuring
1.8		Product-Related Liabilities
1.9		Retirement Plans
1.10		Comprehensive Income (Loss)
1.11		Equity and Equity Units Offerings
1.12		Non-Controlling Interest
1.13		Contingent Liabilities
1.14		Earnings Per Share
1.15		Subsequent Events

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

ITEM 4T. CONTROLS AND PROCEDURES

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 4. [Removed and Reserved]

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in millions, except per share data)


	Three months ended						Six months ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Net sales
- Airbag products	$	1,206.5		$	755.1		$	2,352.5		$	1,341.6
- Seatbelt products		595.0			438.3			1,169.8			778.5

Total net sales		1,801.5			1,193.4			3,522.3			2,120.1
Cost of sales		(1,389.5	)		(1,007.0	)		(2,726.8	)		(1,853.4	)

Gross profit		412.0			186.4			795.5			266.7
Selling, general & administrative expenses		(81.8	)		(73.6	)		(162.9	)		(145.6	)
Research, development & engineering expenses, net		(93.7	)		(84.0	)		(185.3	)		(159.2	)
Amortization of intangibles		(4.6	)		(5.8	)		(8.9	)		(11.6	)
Other income (expense), net		(2.8	)		(35.3	)		(13.9	)		(51.3	)

Operating income (loss)		229.1			(12.3	)		424.5			(101.0	)
Equity in earnings of affiliates		3.2			1.1			2.0			2.0
Interest income		0.8			0.9			1.6			3.8
Interest expense		(13.3	)		(17.6	)		(27.8	)		(36.0	)
Loss on extinguishment of debt		(12.1	)		—			(12.1	)		—
Other financial items, net		(1.8	)		(0.0	)		(3.1	)		(0.2	)

Income (loss) before income taxes		205.9			(27.9	)		385.1			(131.4	)
Income tax (expense) benefit		(58.5	)		7.4			(109.5	)		46.8

Net income (loss)	$	147.4		$	(20.5	)	$	275.6		$	(84.6	)
Less net income (loss) attributable to non-controlling interests		0.9			0.2			2.6			(0.5	)

Net income (loss) attributable to controlling interest	$	146.5		$	(20.7	)	$	273.0		$	(84.1	)
Net earnings (loss) per share – basic	$	1.69		$	(0.24	)	$	3.18		$	(1.08	)
Net earnings (loss) per share – diluted	$	1.60		$	(0.24	)	$	2.99		$	(1.08	)
Weighted average number of shares outstanding, net of treasury shares (in millions)		86.6			85.1			85.9			77.8
Weighted average number of shares outstanding, assuming dilution and net of treasury shares (in millions)		91.6			85.1			91.2			77.8
Number of shares outstanding, excluding dilution and net of treasury shares (in millions)		88.5			85.1			88.5			85.1
Cash dividend per share – declared	$	0.30		$	—		$	0.30		$	—
Cash dividend per share – paid	$	—		$	—		$	—		$	0.21

See “Notes to unaudited condensed consolidated financial statements”.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)


	As of
	June 30, 2010		December 31, 2009
	(unaudited)
Assets
Cash & cash equivalents	$	459.4	$	472.7
Receivables, net		1,358.9		1,053.1
Inventories, net		505.7		489.0
Other current assets		131.5		164.8

Total current assets		2,455.5		2,179.6
Property, plant & equipment, net		962.1		1,041.8
Investments and other non-current assets		227.6		235.5
Goodwill		1,601.2		1,614.4
Intangible assets, net		117.3		114.3

Total assets	$	5,363.7	$	5,185.6
Liabilities and equity
Short-term debt	$	169.6	$	318.6
Accounts payable		948.4		771.7
Accrued expenses		456.9		440.4
Other current liabilities		218.8		162.8

Total current liabilities		1,793.7		1,693.5
Long-term debt		708.8		820.7
Pension liability		113.4		109.2
Other non-current liabilities		126.3		126.2

Total non-current liabilities		948.5		1,056.1
Total parent shareholders’ equity		2,617.6		2,388.2
Non-controlling interests		3.9		47.8

Total equity		2,621.5		2,436.0
Total liabilities and equity	$	5,363.7	$	5,185.6

See “Notes to unaudited condensed consolidated financial statements”.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(Dollars in millions)


	Six months ended
	June 30, 2010			June 30, 2009
Operating activities
Net income (loss)	$	275.6		$	(84.6	)
Depreciation and amortization		144.7			149.8
Other, net		33.7			7.8
Changes in operating assets and liabilities		(54.2	)		45.5

Net cash provided by operating activities		399.8			118.5
Investing activities
Capital expenditures		(86.2	)		(69.4	)
Proceeds from sale of property, plant and equipment		3.2			3.5
Acquisitions of businesses and other, net		(68.2	)		2.9

Net cash used in investing activities		(151.2	)		(63.0	)
Financing activities
Net (decrease) increase in short-term debt		(121.3	)		(143.2	)
Issuance of long-term debt		—			513.5
Repayments and other changes in long-term debt		(50.8	)		(814.8	)
Dividends paid		—			(14.8	)
Cash paid for extinguishment of debt		(8.3	)		—
Common stock and purchase contract issue, net		—			236.8
Common stock options exercised		6.4			0.5
Non-controlling interests’ share of dividends paid		—			(0.2	)
Acquisition of subsidiary shares from non-controlling interest		(63.7	)		(4.6	)

Net cash used in financing activities		(237.7	)		(226.8	)
Effect of exchange rate changes on cash and cash equivalents		(24.2	)		(6.2	)

Decrease in cash and cash equivalents		(13.3	)		(177.5	)
Cash and cash equivalents at beginning of period		472.7			488.6

Cash and cash equivalents at end of period	$	459.4		$	311.1

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)

June 30, 2010

1.1 Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the financial statements. All such adjustments are of a normal recurring nature. Certain prior-year amounts have been reclassified to conform to current year presentation.

The condensed consolidated balance sheet at December 31, 2009 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles 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 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, 2009, filed on February 19, 2010.

The Company’s filings with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, management certifications, current reports on Form 8-K and other documents, can be obtained free of charge from Autoliv at the Company’s address. These documents are also available at the SEC’s web site at www.sec.gov and at the Company’s corporate website at www.autoliv.com.

1.2 New Accounting Pronouncements

The following accounting guidance has been issued and will be effective for the Company in or after fiscal year 2010:

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement No.167, Amendments to FASB Interpretation No.46(R) , primarily codified into Accounting Standards Codification (ASC) Topic 810, Consolidation . This guidance requires that the assessment of whether an entity has a controlling financial interest in a variable interest entity (VIE) must be performed on an ongoing basis. This guidance also requires that the assessment to determine if an entity has a controlling financial interest in a VIE must be qualitative in nature, and eliminates the quantitative assessment required in FIN 46(R). This guidance is effective for fiscal years beginning after November 15, 2009. The Company adopted this guidance on January 1, 2010. The adoption of this guidance had no effect on the Company’s consolidated financial statements for the three and six month periods ended June 30, 2010.

1.3 Business Acquisitions

As of March 31, 2010, Autoliv acquired Delphi’s occupant protection systems operations in Korea and China for $71 million. The assets and liabilities assumed from these businesses were included in the Company’s consolidated financial statements as of March 31, 2010. The purchase price allocation is preliminary as of June 30, 2010. The results from the operations have been included in the consolidated financial statements from April 1, 2010.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

1.4 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 use of such derivatives is in accordance with the strategies contained in the Company’s overall financial policy. No derivatives have a maturity beyond 2019. Certain derivatives are designated either as fair value hedges or cash flow hedges in line with the hedge accounting criteria in FASB ASC 815, Derivatives and Hedging . However, in certain cases 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 Operations 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 Operations when the hedge transaction effects net earnings. There were no material reclassifications from OCI to the Consolidated Statement of Operations during the three and six month periods ended June 30, 2010 and, likewise, no material reclassifications are expected for the next twelve months. Any ineffectiveness has been immaterial.

The Company records derivatives at fair value. Any gains and losses on derivatives recorded at fair value are reflected in the Consolidated Statement of Operations with the exception of cash flow hedges where an immaterial portion of the fair value is reflected in other comprehensive income in the balance sheet. 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 asset 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 table summarizes the valuation of the Company’s derivatives by the above noted pricing observability levels:


			Fair Value Measurements at June 30, 2010
			Using
Description	Total carrying amount in Consolidated Balance Sheet June 30, 2010		Level 1	Level 2		Level 3
Assets
Derivatives	$	16.8	—	$	16.8	—
Total Assets	$	16.8	—	$	16.8	—
Liabilities
Derivatives	$	14.4	—	$	14.4	—
Total Liabilities	$	14.4	—	$	14.4	—

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010


			Fair Value Measurements at December 31, 2009
			Using
Description	Total carrying amount in Consolidated Balance Sheet Dec. 31, 2009		Level 1	Level 2		Level 3
Assets
Derivatives	$	17.3	—	$	17.3	—
Total Assets	$	17.3	—	$	17.3	—
Liabilities
Derivatives	$	13.1	—	$	13.1	—
Total Liabilities	$	13.1	—	$	13.1	—

The tables below present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2010 and December 31, 2009.


			Fair Value Measurements at June 30, 2010
Description	Nominal volume		Derivative asset		Derivative liability		Balance sheet location
Derivatives designated as hedging instruments
Cross currency interest rate swaps, less than 1 year (cash flow hedge)	$	50.5	$	0.7	$	6.9	Other current assets/ current liabilities
Interest rate swaps, less than 10 years (fair value hedge)		60.0		11.5		—	Other non current asset
Total derivatives designated as hedging instruments	$	110.5	$	12.2	$	6.9
Derivatives not designated as hedging instruments
Cross currency interest rate swaps, less than 1 year	$	20.3	$	—	$	0.7	Other current liabilities
Cross currency interest rate swaps, less than 2 years		40.3		—		1.4	Other non-current liabilities
Foreign exchange swaps, less than 6 months		830.8		4.6		5.4	Other current assets/ liabilities
Total derivatives not designated as hedging instruments	$	891.4	$	4.6	$	7.5
Total derivatives	$	1,001.9	$	16.8	$	14.4

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010


			Fair Value Measurements at December 31, 2009
Description	Nominal volume		Derivative asset		Derivative liability		Balance sheet location
Derivatives designated as hedging instruments
Cross currency interest rate swaps, less than 1 year (cash flow hedge)	$	52.5	$	2.3	$	4.5	Other current assets/ current liabilities
Interest rate swaps, less than 10 years (fair value hedge)		60.0		6.5		—	Other non-current asset
Total derivatives designated as hedging instruments	$	112.5	$	8.8	$	4.5
Derivatives not designated as hedging instruments
Cross currency interest rate swaps, less than 1 year	$	20.3	$	0.5	$	—	Other current assets
Cross currency interest rate swaps, less than 2 years		40.3		1.1		—	Other non-current assets
Foreign exchange swaps, less than 6 months		1,379.3		6.9		8.6	Other current assets/ liabilities
Total derivatives not designated as hedging instruments	$	1,439.9	$	8.5	$	8.6
Total derivatives	$	1,552.4	$	17.3	$	13.1


			Amount gain (loss) recognized in Consolidated Statement of Operations April-June 2010
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
Cross currency interest rate swaps, less than 1 years (cash flow hedge)	$	50.5	$	(3.5	)	$	—	$	—	$	0.2	$	—
Interest rate swaps, less than 10 years (fair value hedge)		60.0		—			4.4		—		—		—
Total derivatives designated as hedging instruments	$	110.5

			Amount gain (loss) recognized in Consolidated Statement of Operations January-June 2010
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
Cross currency interest rate swaps, less than 1 years (cash flow hedge)	$	50.5	$	(4.5	)	$	—	$	—	$	0.4	$	—
Interest rate swaps, less than 10 years (fair value hedge)		60.0		—			5.0		—		—		—
Total derivatives designated as hedging instruments	$	110.5

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

The hedged item related to the fair value hedge consists of a $60 million debt note which matures in 2019. The fair value change related to this note of $(5.0) million has increased interest expense for the first six months 2010 and thus fully off-sets the $5.0 million fair value change related to the hedging instrument disclosed in the table above.


			Amount gain (loss) recognized in Consolidated Statement of Operations April-June 2009
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
Cross currency interest rate swaps, less than 1 year (cash flow hedge)	$	—	$	—	$	—		$	—	$	—	$	—
Cross currency interest rate swaps, less than 2 years (cash flow hedge)		50.9		—		—			—		—	$	(0.1	)
Interest rate swaps, less than 11 years (fair value hedge)		60.0		—		(4.6	)		—		—		—
Total derivatives designated as hedging instruments	$	110.9

			Amount gain (loss) recognized in Consolidated Statement of Operations January-June 2009
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
Cross currency interest rate swaps, less than 1 year (cash flow hedge)	$	—	$	—	$	—		$	—	$	—	$	—
Cross currency interest rate swaps, less than 2 years (cash flow hedge)		50.9		—		—			—		—		(0.2	)
Interest rate swaps, less than 11 years (fair value hedge)		60.0		—		(7.6	)		—		—		—
Total derivatives designated as hedging instruments	$	110.9

F-12

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

The hedged item related to the fair value hedge consists of a $60 million debt note which matures in 2019. The fair value change related to this note of $7.6 million has decreased interest expense for the first six months 2009 and thus fully off-sets the $(7.6) million fair value change related to the hedging instrument disclosed in the table above.


			Amount gain (loss) recognized in Consolidated Statement of Operations April-June 2010
Description	Nominal Volume		Other Financial Items, net			Interest Expense		Interest Income
Derivatives not designated as hedging instruments
Cross currency interest rate swaps, less than 1 year	$	20.3	$	(1.2	)	$	—	$	0.0
Cross currency interest rate swaps, less than 2 years		40.3		(2.5	)		—		0.0
Foreign exchange swaps, less than 6 months		830.8		(1.0	)		—		0.5
Total Derivatives not designated as hedging instruments	$	891.4

			Amount gain (loss) recognized in Consolidated Statement of Operations January-June 2010
Description	Nominal Volume		Other Financial Items, net			Interest Expense		Interest Income
Derivatives not designated as hedging instruments
Cross currency interest rate swaps, less than 1 year	$	20.3	$	(1.2	)	$	—	$	0.0
Cross currency interest rate swaps, less than 2 years		40.3		(2.5	)		—		0.0
Foreign exchange swaps, less than 6 months		830.8		0.8			—		0.1
Total Derivatives not designated as hedging instruments	$	891.4

			Amount gain (loss) recognized in Consolidated Statement of Operations April-June 2009
Description	Nominal Volume		Other Financial Items, net			Interest Expense		Interest Income
Derivatives not designated as hedging instruments
Cross currency interest rate swaps, less than 3 years	$	60.6	$	0.9		$	—	$	0.0
Foreign exchange swaps, less than 6 months		993.2		(3.3	)		0.2		—
Total Derivatives not designated as hedging instruments	$	1,053.8

			Amount gain (loss) recognized in Consolidated Statement of Operations January-June 2009
Description	Nominal Volume		Other Financial Items, net			Interest Expense		Interest Income
Derivatives not designated as hedging instruments
Cross currency interest rate swaps, less than 3 years	$	60.6	$	(0.7	)	$	—	$	0.1
Foreign exchange swaps, less than 6 months		993.2		(30.0	)		0.0		—
Total Derivatives not designated as hedging instruments	$	1,053.8

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

All amounts recognized in the Consolidated Statement of Operations related to derivatives, not designated as hedging instruments, relate to economic hedges and thus have been materially off-set by an opposite statement of operations 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 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


Long-term debt	June 30, 2010 Carrying value ¹⁾		June 30, 2010 Fair value		Dec. 31, 2009 Carrying value ¹⁾		Dec. 31, 2009 Fair value
Commercial paper	$	56.0	$	56.0	$	117.6	$	117.6
U.S. Private placement		411.5		442.4		406.5		413.0
Medium-term notes		117.3		124.3		124.8		131.8
Notes ²⁾		97.2		118.0		146.4		181.5
Other long-term debt		26.8		26.8		25.4		25.5
Total	$	708.8	$	767.5	$	820.7	$	869.4


Short-term debt
Overdrafts and other short-term debt	$	117.8	$	117.8	$	54.1	$	54.1
Short-term portion of long-term debt		51.8		51.8		264.5		264.5
Total	$	169.6	$	169.6	$	318.6	$	318.6

1)	Debt as reported in balance sheet.

2)	Issued as part of the equity units offering (for further information, see Note 1.11).

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 1.7).

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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

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 are discounted if the payments are expected to extend beyond one year.

As of June 30, 2010 the Company had $71 million of restructuring reserves which were measured at fair value upon initial recognition of the associated liability (see Note 1.7). For the six months ended June 30, 2010 in connection with restructuring activities in Japan and Australia the Company has recorded impairment charges on certain of its long-lived assets, mainly machinery and equipment (for further information, see Note 1.7 Restructuring below). The impairment charges have reduced the carrying value of the assets to their fair value, as summarized in the table below.


			Fair Value Measurements Using
Description	Fair Value Period Ended June 30, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
Long-lived assets held for use	$	0.0	$	—	$	—	$	0.0	$	(0.7	)
Total losses	$	0.0	$	—	$	—	$	0.0	$	(0.7	)

Machinery and equipment with a carrying amount of $0.7 million was written down to its fair value of $0.0 million, resulting in an impairment charge of $0.7 million, which was included in the earnings for the three and six month periods ended June 30, 2010. There will be no future identifiable cash flows related to this group of impaired assets. No other significant impairment charges have been recorded during the three and six month periods ended June 30, 2010.

1.5 Income Taxes

For the first six months of 2010 the effective tax rate was 28.5%, compared with an effective tax benefit rate of 35.6% in the first six months of 2009. In the first six months of 2010, the impact of discrete tax items caused a 1.1% decrease to the effective tax rate. The net impact of discrete tax items in the first three months of 2010 was not material. The net impact of discrete tax items in the first six months of 2009 caused a 4.2% increase to the effective tax benefit rate. The net impact of discrete tax items in the second quarter of 2010 caused a 2.3% decrease to the effective tax rate for the quarter.

The Company files income tax returns in the United States federal jurisdiction and various states and foreign jurisdictions. At any given time, the Company is undergoing tax audits in several tax jurisdictions covering multiple years. The Company is no longer subject to income tax examination by the U.S. Federal tax authorities for years prior to 2003. With few exceptions, the Company is also no longer subject to income tax examination by U.S. state or local tax authorities for tax years prior to 2003. In addition, with few exceptions, the Company is no longer subject to income tax examinations by non-U.S. tax authorities for years before 2003. The Internal Revenue Service (IRS) began an examination of the Company’s 2003-2005 U.S. income tax returns in the second quarter of 2006. On March 31, 2009, the IRS field examination team issued an examination report in which the examination team proposed to increase the Company’s U.S. taxable income due to alleged incorrect transfer pricing in transactions between a U.S. subsidiary and other subsidiaries during the period 2003 through 2005. The Company, after consultation with its tax counsel, filed a protest to the examination report to seek review of the examination report by the Appeals Office of the IRS. By letter dated June 1, 2010, the Appeals Office team assigned to review the examination report informed the Company that it had concluded that the IRS should withdraw all of the adjustments that would have increased the Company’s taxable income due to alleged incorrect transfer pricing. Aspects of that decision are subject to review by the Appeals Technical Guidance Coordinator with responsibility for one of the principal transfer pricing issues that the examination report raised. In addition, the U.S. Congress Joint Committee on Taxation will review the proposed resolution in the context of its review of a refund the Company is claiming for this same period. The Company is neither able to estimate when these reviews will be completed nor assure their satisfactory outcome.

In addition, the IRS began an examination of the Company’s 2006-2008 U.S. income tax returns in the third quarter 2009. The Company is also undergoing tax audits in several non-U.S. jurisdictions covering multiple years. As of June 30, 2010, as a result of those tax examinations, the Company is not aware of any material proposed income tax adjustments.

The Company expects the completion of certain tax audits in the near term. If completed with satisfactory outcomes, which cannot be assured, it is reasonably possible that the completion of those audits and the determinations that could be made in other current audits would decrease by up to $22 million the unrecognized tax benefits in some future period or periods. In addition other audits could result in additional increases or decreases to the unrecognized tax benefits in some future period or periods.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

During the second quarter 2010, the Company recorded an increase of $0.5 million to income tax reserves for unrecognized tax benefits based on tax positions related to the current and prior years, including accruing additional interest in 2010 related to unrecognized tax benefits of prior years. During the first quarter 2010, the Company recorded an increase of $0.4 million to income tax reserves for unrecognized tax benefits based on tax positions related to the current and prior years, including accruing additional interest in 2010 related to unrecognized tax benefits of prior years. Of the total unrecognized tax benefits of $47.6 million recorded at June 30, 2010, $28.8 million is classified as current tax payable and $18.8 million is classified as non-current tax payable on the condensed consolidated balance sheet.

1.6 Inventories

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


	As of
	June 30, 2010		December 31, 2009
Raw materials	$	197.9	$	194.9
Work in progress		192.0		189.5
Finished products		115.8		104.6

Total	$	505.7	$	489.0

1.7 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 an adverse impact on its liquidity position. The tables below summarize the change in the balance sheet position of the restructuring reserves from December 31, 2008 to June 30, 2010.

Second quarter 2010

The employee-related restructuring provisions in the second quarter 2010 mainly relate to headcount reductions in Europe. The cash payments mainly relate to high-cost countries in Europe. The fixed asset impairment charges mainly relate to machinery and equipment in Japan and Australia. The changes in the employee-related reserves were charged against Other income (expense), net in the Consolidated Statements of Operations. The fixed asset impairments were charged against Cost of Sales in the Consolidated Statements of Operations. The table below summarizes the change in the balance sheet position of the restructuring reserves from March 31, 2010 to June 30, 2010.


	March 31, 2010		Provision/ Charge		Provision/ Reversal			Cash payments			Non- cash			Translation difference			June 30, 2010
Restructuring employee-related	$	92.1	$	4.6	$	(2.1	)	$	(17.9	)	$	—		$	(5.6	)	$	71.1
Fixed asset impairment		—		0.7		—			—			(0.7	)		—			—
Other		0.3		—		—			—			—			—			0.3
Total reserve	$	92.4	$	5.3	$	(2.1	)	$	(17.9	)	$	(0.7	)	$	(5.6	)	$	71.4

First quarter 2010

The employee-related restructuring provisions in the first quarter 2010 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 Operations. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2009 to March 31, 2010.


	December 31, 2009		Provision/ Charge		Cash payments			Translation difference			March 31, 2010
Restructuring employee-related	$	100.1	$	15.0	$	(18.2	)	$	(4.8	)	$	92.1
Other		0.2		0.2		(0.1	)		—			0.3
Total reserve	$	100.3	$	15.2	$	(18.3	)	$	(4.8	)	$	92.4

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

2009

In 2009, the employee-related restructuring provisions, made on a case by case basis, related mainly to headcount reductions throughout North America, South America, Europe, Japan and Australia. Reversals in 2009 mainly relate to 2008 restructuring reserves in North America and Europe. These reversals were due to customer program cancellations which were not as severe as originally communicated and final settlement of employee-related amounts were less than initial restructuring plan estimates. The cash payments mainly relate to high-cost countries in North America and Europe and in Japan. The changes in the employee-related reserves have been charged against Other income (expense), net in the Consolidated Statements of Operations. Impairment charges mainly relate to machinery and equipment impaired in connection with restructuring activities in North America. The fixed asset impairments have been charged against Cost of sales in the Consolidated Statements of Operations. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2008 to December 31, 2009.


	December 31, 2008		Provision/ Charge		Provision/ Reversal			Cash payments			Non- cash			Translation difference		December 31, 2009
Restructuring employee-related	$	55.3	$	133.6	$	(5.7	)	$	(85.1	)	$	–		$	2.0	$	100.1
Fixed asset impairment		—		5.3		—			—			(5.3	)		—		—
Other		0.4		—		—			(0.2	)		—			—		0.2
Total reserve	$	55.7	$	138.9	$	(5.7	)	$	(85.3	)	$	(5.3	)	$	2.0	$	100.3

Action Program

The action program initiated in July 2008 (the Action Program) was finalized as of December 31, 2008 and the remaining reserves at the end of 2008 have substantially been paid during 2009. The Company has not initiated additional restructuring activities under this comprehensive program. The table above includes the cash payments and remaining reserves associated with the Action Program and such payments and remaining reserve are also separately disclosed in the table below.


	December 31, 2008		Provision/ Charge		Provision/ Reversal			Cash payments			Non- cash		Translation difference		December 31, 2009
Restructuring employee-related	$	46.4	$	—	$	(3.8	)	$	(35.4	)	$	—	$	0.1	$	7.3
Other		0.2		—		—			(0.2	)		—		—		—
Total reserve	$	46.6	$	—	$	(3.8	)	$	(35.6	)	$	—	$	0.1	$	7.3

1.8 Product-Related Liabilities

The Company maintains reserves for product risks. Such reserves relate 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 the 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. Cash payments have been made, in the past, for recall and warranty-related issues in connection with a variety of different products and customers. For further explanation, see Note 1.13 Contingent Liabilities below.

The table below summarizes the change in the balance sheet position of the product-related liabilities. The provisions and cash paid for the three and six month periods ended June 30, 2010 mainly relate to recalls, while in 2009 provisions mainly relate to recalls and cash paid to warranty related issues.


	Three months ended						Six months ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Reserve at beginning of the period	$	30.7		$	16.5		$	30.6		$	16.7
Provision		2.2			9.0			4.6			10.7
Cash payments		(6.6	)		(1.5	)		(8.4	)		(2.8	)
Translation difference		(0.6	)		0.5			(1.1	)		(0.1	)

Reserve at end of the period	$	25.7		$	24.5		$	25.7		$	24.5

1.9 Retirement Plans

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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

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 Consolidated Financial Statements of the Company for the three and six month periods ended June 30, 2010 and June 30, 2009, respectively.

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, 2009.

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


	Three months ended						Six months ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Service cost	$	3.3		$	3.7		$	6.7		$	7.3
Interest cost		3.9			3.8			7.7			7.4
Expected return on plan assets		(3.1	)		(2.7	)		(6.2	)		(5.2	)
Amortization prior service cost (credit)		(0.3	)		(0.2	)		(0.5	)		(0.4	)
Amortization of (gain) loss		1.2			1.5			2.4			3.0

Net Periodic Benefit Cost	$	5.0		$	6.1		$	10.1		$	12.1

1.10 Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) for the period and items charged directly to equity.


	Three months ended						Six months ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Net income (loss)	$	147.4		$	(20.5	)	$	275.6		$	(84.6	)
Pension liability		2.1			0.8			2.2			1.7
Net change in cash flow hedges		0.2			(0.1	)		0.4			(0.2	)
Translation of foreign operations		(45.6	)		57.5			(73.5	)		6.9

Other comprehensive income (loss)		(43.3	)		58.2			(70.9	)		8.4
Comprehensive income (loss)	$	104.1		$	37.7		$	204.7		$	(76.2	)
Less Comprehensive income (loss) attributable to non-controlling interest		3.0			1.5			2.5			(1.2	)
Comprehensive income (loss) attributable to controlling interest	$	101.1		$	36.2		$	202.2		$	(75.0	)

1.11 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 (either a Note or a Treasury Security, as described below) is used by the holder to secure the forward purchase contract. 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 Settlement Rate is based on the applicable market value of the Company’s common stock on the settlement date. The minimum and maximum number of shares to be issued under the purchase contracts is approximately 5.5 million and 6.6 million, respectively (giving effect to the exchange of Equity Units discussed below).

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

The Notes will be remarketed between January 12, 2012 and March 31, 2012 whereby the interest rate on the Senior Notes will be reset and certain other terms of the Senior Notes may be modified in order to generate sufficient remarketing proceeds to satisfy the Equity Unit holders’ obligations under the purchase contract. If the Senior Notes are not successfully remarketed, then a put right of holders of the notes will be automatically exercised unless such holders (a) notify the Company of their intent to settle their obligations under the purchase contracts in cash, and (b) deliver $25 in cash per purchase contract, by the applicable dates specified by the purchase contracts. Following such exercise and settlement, the Equity Unit holders’ obligations to purchase shares of Common Stock under the purchase contracts will be satisfied in full, and the Company will deliver the shares of Common Stock to such holders.

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 will be amortized using the interest method. Accordingly, the difference between the stated rate (i.e. cash payments of interest) and the effective interest rate will be credited to the value of the notes. Thus, at the end of the three years, the notes will be stated on the balance sheet at their face amount. The Company has 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 current market conditions and the Company’s current credit rating. The deferred charges will be amortized over the life of the note (until remarketing day) using the interest method. The remaining underwriting commissions (5%) were allocated to the equity forward and recorded as a reduction to paid-in capital.

In May and early June, pursuant to separately negotiated exchange agreements with holders representing an aggregate of approximately 2.3 million Equity Units, the Company issued an aggregate of approximately 3.1 million shares of Autoliv’s common stock from the treasury and paid an aggregate of approximately $7.4 million in cash to these holders in exchange for their Equity Units. While the remaining aggregate interest coupons for each Equity Unit amounts to $4, the average cost in these transactions was $3.14 per unit, a discount of 22%. Each of the separately negotiated exchanges is exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 3(a)(9) thereof. Following the exchanges, approximately 4.3 million Equity Units remain outstanding.

As a result of these transactions, the Company recognized approximately $12 million of debt extinguishment costs within its Consolidated Statement of Operations for the three months ended June 30, 2010.

1.12 Non-Controlling Interest


	Equity attributable to
	Parent			Non-controlling interest			Total
Balance at December 31, 2009	$	2,388.2		$	47.8		$	2,436.0
Total Comprehensive Income:
Net income		273.0			2.6			275.6
Net change in cash flow hedges		0.4			—			0.4
Foreign currency translation		(73.4	)		(0.1	)		(73.5	)
Pension liability		2.2			—			2.2

Total Comprehensive Income		202.2			2.5			204.7
Purchase of non-controlling interest by parent		(12.1	)		(46.4	)		(58.5	)
Common Stock incentives		7.7			—			7.7
Cash dividends declared		(25.6	)		—			(25.6	)
Common stock Issue		57.2			—			57.2

Balance at June 30, 2010	$	2,617.6		$	3.9		$	2,621.5

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

1.13 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, it is the opinion of management that the various lawsuits 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.

In 1997, Autoliv AB (a wholly-owned subsidiary of Autoliv, Inc.) acquired Marling Industries plc (“Marling”). At that time, Marling was involved in a litigation relating to the sale in 1992 of a French subsidiary. In the litigation, the plaintiff has sought damages of €40 million (approximately $50 million) from Marling, claiming that Marling and another entity then part of the Marling group, had failed to disclose certain facts in connection with the 1992 sale and that such failure was the proximate cause of losses in the amount of the damages sought. In May 2006, a French court ruled that Marling (now named Autoliv Holding Limited) and the other entity had failed to disclose certain facts in connection with the 1992 sale and appointed an expert to assess the losses suffered by the plaintiff. Autoliv has appealed the May 2006 court decision and believes it has meritorious grounds for such appeal. While the appeal is pending, the financial expert appointed by the lower court has delivered his report. The report does not address the issue of the proximate cause of the losses, but assessed the losses to a maximum of €10 million (approximately $13 million). In our opinion it is not possible to give any meaningful estimate of any financial impact that may arise from the claim but it is possible (while we do not believe it is probable) that the final outcome of this litigation will result in a loss that will have to be recorded by Autoliv, Inc.

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.

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 our businesses based on past experience. Autoliv cannot be assured 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. Also such claims could be material.

On April 19, 2010, SEVA Technologies SA (“SEVA”) initiated actions against several employees and wholly-owned subsidiaries of Autoliv, Inc. in a French Court. In the actions, SEVA alleges that following preliminary acquisition discussions with SEVA starting in 2006, Autoliv’s subsidiaries misappropriated SEVA’s confidential information disclosed to such subsidiaries under a non-disclosure agreement in order to obtain a patent. SEVA is principally seeking to have SEVA declared the owner of the patent and certain former SEVA employees declared the inventors of the patent. SEVA has also alleged injuries of €22 million (approximately $28 million). Autoliv is investigating the matter but, to date, has not found any basis for any of SEVA’s claims.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

June 30, 2010

The table in Note 1.8 Product-Related Liabilities above summarizes the change in the balance sheet position of the product related liabilities for the three and six month periods ended June 30, 2010 and June 30, 2009, respectively.

1.14 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 and for common stock issued upon conversion of the equity units.

For the three and six month periods ended June 30, 2010, 4.5 million and 4.8 million shares, respectively, were included in the dilutive weighted average share amount related to the equity units. The potential number of shares which will be converted in the future related to the equity units varies between 5.5 million, if the Autoliv share price is $19.20 or higher, and 6.6 million, if the price is $16.00 or less, giving effect to the exchange of Equity Units discussed in Note 1.11.

Approximately 0.6 million common shares related to the Company’s Stock Incentive Plan, that could potentially dilute basic EPS in the future, are not included in the computation of the diluted EPS for the three and six month periods ended June 30, 2010 (see table below).

During the first six months of 2010 approximately 0.3 million shares from the treasury stock have been utilized by the Stock Incentive Plan.

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


(In millions)	Three months ended			Six months ended
	June 30, 2010	June 30, 2009		June 30, 2010	June 30, 2009
Weighted average shares basic	86.6	85.1		85.9	77.8
Effect of dilutive securities: - stock options/share awards	0.5	—		0.5	—
- equity units	4.5	—		4.8	—

Weighted average shares diluted	91.6	85.1	¹⁾	91.2	77.8	¹⁾

¹⁾	No dilution for the first three and six month periods ended June 2009 due to net loss position.

1.15 Subsequent Events

There are no subsequent events noted.

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

The following discussion should be read in conjunction with our Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with our 2009 Annual Report on Form 10-K filed with the SEC on February 19, 2010. Unless otherwise noted, all dollar amounts are in millions.

Autoliv is the world’s largest automotive safety system supplier with sales to all the leading vehicle manufacturers in the world. Autoliv develops, markets and manufactures airbags, seatbelts, safety electronics, steering wheels, anti-whiplash systems, child safety systems as well as night vision systems and other active safety systems. Autoliv accounts for more than one third of its market. Autoliv has manufacturing facilities in 29 vehicle-producing countries.

Autoliv is a Delaware holding corporation with principal executive offices in Stockholm, Sweden, which owns two principal subsidiaries, Autoliv AB (“AAB”) and Autoliv ASP, Inc. (“ASP”). AAB, a Swedish corporation, is a leading developer, manufacturer and supplier to the automotive industry of car occupant restraint systems. Starting with seat belts in 1956, AAB expanded its product lines to include seat belt pretensioners (1989), frontal airbags (1991), side-impact airbags (1994), steering wheels (1995) and seat sub-systems (1996). ASP, an Indiana corporation, pioneered airbag technology in 1968 and has since grown into one of the world’s leading producers of airbag modules and inflators. ASP designs, develops and manufactures airbag inflators, modules and airbag cushions, seat belts and steering wheels. It sells inflators and modules for use in driver, passenger, side-impact and knee bolster airbag systems for worldwide automotive markets.

Shares of Autoliv common stock are traded on the New York Stock Exchange under the symbol “ALV” and Swedish Depositary Receipts representing shares of Autoliv common stock trade on the NASDAQ OMX Nordic Exchange in Stockholm under the symbol “ALIV”. Options in Autoliv shares are traded in Philadelphia and AMSE under the symbol “ALV”. Corporate Units from the Company’s Equity Unit offering in 2009 are traded on the New York Stock Exchange under the symbol ALV.PrZ.

Non-GAAP financial measures

Some of the following discussions refer to non-GAAP financial measures: see “Organic sales”, “Operating working capital”, “Net debt”, “Leverage ratio” and “Interest coverage ratio”. Management believes that these non-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-GAAP financial measures in addition to, rather than as a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures have been identified as applicable in each section of this report with a tabular presentation reconciling them to 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 following table shows some of the 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 our MD&A discussion below and should be read in conjunction with the consolidated financial statements in our annual report and the unaudited condensed consolidated financial statements in this quarterly report.

KEY RATIOS

(Dollars in millions)


	Three months ended or as of June 30					Six months ended or as of June 30
	2010		2009			2010		2009
Operating working capital ¹⁾	$	405	$	447		$	405	$	447
Capital employed ⁷⁾	$	3,038	$	3,240		$	3,038	$	3,240
Net debt ¹⁾	$	417	$	917		$	417	$	917
Net debt to capitalization, % ^{1, 2)}		14		28			14		28
Gross margin, % ³⁾		22.9		15.6			22.6		12.6
Operating margin, % ⁴⁾		12.7		(1.0	)		12.1		(4.8	)
Return on total equity, % ⁸⁾		22.9		(3.6	)		21.8		(7.5	)
Return on capital employed, % ⁹⁾		30.0		(1.4	)		27.5		(6.0	)
No. of employees at period-end ¹⁰⁾		31,983		29,868			31,983		29,868
Headcount at period-end ¹¹⁾		41,099		33,369			41,099		33,369
Days receivables outstanding ⁵⁾		70		71			72		78
Days inventory outstanding ⁶⁾		30		39			31		43

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

2)	Net debt in relation to net debt and total equity (including non-controlling interest)

3)	Gross profit relative to sales

4)	Operating income (loss) relative to sales

5)	Outstanding receivables relative to average daily sales

6)	Outstanding inventory relative to average daily sales

7)	Total equity and net debt

8)	Net income (loss) relative to average total equity

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

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

11)	Employees plus temporary, hourly workers

THREE MONTHS ENDED JUNE 30, 2010 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2009

Market overview

During the three-month period April - June 2010, global light vehicle production (LVP) is estimated by IHS (CSM) to have increased by 29% compared to the same quarter 2009. This was 8 percentage points better than IHS (CSM) expected at the beginning of the quarter. LVP in the Triad (i.e. North America, Europe and Japan), where Autoliv generates almost 80% of its sales, is estimated to have risen by 31%.

In Europe, where Autoliv derives close to 40% of its revenues, LVP is estimated to have recovered by 13% from the low level in the same quarter 2009. In Western Europe, the increase was 12% and in Eastern Europe 18%.

In North America, which accounts for nearly 30% of revenues, LVP recovered by 73%. Production of passenger cars recovered by 52% and production of light trucks by 93%. Chrysler nearly quadrupled its production, while General Motors (GM) and Ford increased their production by 89% and 46%, respectively. Asian and European vehicle manufacturers increased their production in the region by 47%.

In Japan, which accounts for one tenth of Autoliv’s consolidated sales, LVP recovered by 31%. The recovery was especially strong for vehicles for export to markets in North America and Western Europe.

In the Rest of the World (RoW), which accounts for more than 20% of sales, LVP grew by 27%, primarily due to increases of 24% in China and 32% in India. LVP in the important Korean market, where the average safety content per vehicle is higher than in India and China, increased by 35%.

Consolidated Sales

The Company has substantial operations outside the United States and currently more than 80% 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. 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 reconciliation below presents the change in “Organic sales” reconciled to the change in the total net sales as can be derived from our unaudited financial statements.


	Reconciliation of the change in “Organic sales” to GAAP financial measure
	Components of net sales increase (decrease) Three months ended June 30, 2010 (Dollars in millions)
	Europe				North America		Japan		RoW		Total
	%		$		%	$	%	$	%	$	%		$
Organic sales change	12.8		81.8		81.7	208.7	79.7	76.6	55.7	112.9	40.2		480.0
Effect of exchange rates	(4.9	)	(31.4	)	1.4	3.6	5.6	5.5	5.6	11.4	(0.8	)	(10.9	)
Impact of acquisitions/divestments	0.7		4.2		19.8	50.7	—	—	41.5	84.1	11.6		139.0
Reported net sales change	8.6		54.6		102.9	263.0	85.3	82.1	102.8	208.4	51.0		608.1

Consolidated net sales increased by 51% to $1,802 million compared to the same quarter in 2009. Acquisitions added 12% (see Other Significant Events), while currency effects had a negative impact of 1%. Consequently, organic sales (non-U.S. GAAP measure, see table above) increased by 40%.

In April, organic sales were expected to grow by at least 30%. However, the recovery in global LVP was sharper than expected. In addition, it included a more favorable mix than anticipated. Autoliv’s outperformance relative to LVP was therefore stronger than expected.

Sales to GM, Ford and Nissan contributed the most to the growth in the Company’s sales revenues, while the highest growth rates were recorded in the sales to Chrysler, Mitsubishi, GM, Hyundai/KIA and Nissan.

Sales by Product

Sales of airbag products (including steering wheels and electronics) rose by 60% to $1,207 million. Acquisitions added 15%, while currency effects reduced sales by 1%. Consequently, organic sales of airbag products grew by 46%, which was 15 percentage points higher than the increase in LVP in the Triad, which is the main market for airbags. Autoliv’s strong performance was due to new business with Hyundai/KIA, GM, Chrysler and Ford, as well as to a strong sales recovery in Japan, especially with Nissan, Mitsubishi and Honda.

Sales of seatbelt products (including seat sub-systems) increased by nearly 36% to $595 million. Acquisitions added 6%, while currency effects reduced sales by less than 1%. Consequently, organic sales of seatbelt products rose by 30% compared to the 29% increase in global LVP. Autoliv’s sales were driven by a positive LVP mix and new business with Hyundai/KIA and GM, as well as strong sales recoveries with Honda, Renault, Nissan, Chrysler and Mitsubishi.

Sales by Region

Sales from Autoliv’s European companies increased by 9% to $694 million. Acquisitions added 1%, while currency effects had a negative impact of 5%. Organic sales therefore rose by 13%, in line with the recovery in European LVP. Autoliv’s sales were mainly driven by new business for Renault’s Fluence and high demand for Mercedes’s E-class and C-class, BMW’s 5-Series and for Volvo’s XC90.

Sales from Autoliv’s North American companies increased by 103% to $519 million primarily due to the strong recovery in LVP. Acquisitions added 20% and currency effects 1% due to a stronger Mexican peso. Organic sales growth of 82% was 9 percentage points higher than the recovery in the North American light vehicle production. Autoliv’s better-than-the-market performance was due to a favorable mix mainly as a result of GM’s and Chrysler’s strong recoveries as well as Ford’s outperformance of North American LVP. Significant contributors to Autoliv’s sales performance were Chevrolet’s Silverado, Equinox and Traverse; Ford’s Escape, E-series and F-series Super Duty; and Jeep’s Patriot, Compass and Grand Cherokee.

Sales from Autoliv’s companies in Japan rose by 85% to $178 million. Currency effects added almost 6%. Organic sales growth of nearly 80% was 2.5 times higher than the recovery in Japanese LVP. This was mainly due to the strong recovery in the production of vehicles that had dropped the most last year. These were premium cars, SUVs and other vehicles with high safety content for the North American and West European markets. Autoliv benefited particularly from strong recoveries for Mitsubishi’s Outlander and the launch of the new Mitsubishi RVR and recoveries for Toyota’s larger SUVs and from the ramp up of production of the Prius, Alphard and Mark X. Sales were also driven by strong demand for Lexus’s LX470 and GX; Subaru’s Legacy; Honda’s StepWagon, Accord, CRV and Freed; Mazda’s 2, 3, 6 and CX; and Nissan’s Serena, Rogue, X-Trail, Tiida, and Safari.

Sales from Autoliv’s companies in the Rest of the World (RoW) increased by 103% to $411 million. Acquisitions and currency effects added almost 42% and almost 6%, respectively. The organic sales increase of nearly 56% was more than twice as high as the increase in the region’s LVP. Autoliv’s strong performance reflects organic sales increases of 75% in China and 29% in South America, which was 51 percentage points and 16 points, respectively, higher than the LVP growth in these markets. In China, sales were driven by new business for Geely’s Emgrand EC7; Great Wall’s CoolBear, Hover, I7 and Voleex C30; FAW’s Besturn; and Jianghuai’s Rein. In South America, sales were mainly driven by Volkswagen’s Gol and sales to Scania.

Earnings for the Three-Month Period Ended June 30, 2010

For the second quarter 2010, Autoliv reported the highest quarterly gross profit, gross margin, operating income, operating margin, income before taxes, net income as well as earning per share in the Company’s history. These records reflect our ongoing restructuring efforts.

Gross profit more than doubled to $412 million from $186 million in the second quarter 2009. Gross margin improved to 22.9% from 15.6%. The margin improvement reflects higher sales (especially of products with higher value-added), as well as the positive result of our restructuring efforts and savings in component sourcing. Gross profit and gross margin were boosted by a $4 million one-time revenue for subcontracting services.

Operating income improved by $241 million to $229 million due to the gross profit increase of $226 million and $29 million lower restructuring charges. These positive effects were partially offset by $10 million higher Research, Development and Engineering (RD&E) expense, net and $8 million higher Selling, General & Administrative (SG&A) expense. However, in relation to sales, SG&A expense was reduced to 4.5%, one of the lowest levels ever. Operating margin improved to 12.7%, which is a new all-time-high exceeding our previous record of 11.4% recorded in the first quarter this year.

Income before taxes improved by $234 million to $206 million due to the $241 million improvement in operating income. This was partially offset by an approximately $12 million negative effect from accelerated exchanges of equity units (see Other Significant Events below), while lower interest expense, net had a $4 million favorable effect.

Net income attributable to controlling interest improved by $167 million to $146 million from a loss of $21 million in the second quarter 2009. Income tax expense was $58 million which resulted in an effective tax rate of 28.4%. In the second quarter of 2009, there was an income tax benefit of $7 million.

Earnings per share rose by $1.84 to $1.60 assuming dilution, primarily as a result of the swing in pre-tax earnings from a loss in the second quarter 2009. The weighted average number of shares outstanding rose by 8% to 91.6 million from the same quarter 2009 when there was no dilution due to the loss.

SIX MONTHS ENDED JUNE 30, 2010 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2009

Market overview

During the six-month period January - June 2010, light vehicle production (LVP) increased by 39% globally and by 40% in the Triad.

In Europe, light vehicle production increased by 24%. In Western Europe the increase was 24% and in Eastern Europe 25%.

In North America, light vehicle production recovered by 72%, primarily due to GM, Ford and Chrysler increasing their LVP by 81%. Asian and European vehicle manufacturers increased their LVP in North America by 61%.

In Japan, light vehicle production increased by 42% in the six-month period.

In the Rest of the World (RoW) light vehicle production increased by 39%.

Consolidated Sales

Reconciliation of the change in “Organic sales” to GAAP financial measure

Components of net sales increase (decrease)

Six months ended June 30, 2010

(Dollars in millions)


	Europe		North America		Japan		RoW		Total
	%	$	%	$	%	$	%	$	%	$
Organic sales change	20.0	227.9	89.6	412.2	97.1	175.6	75.3	257.2	50.6	1,072.9
Effect of Production days	3.9	44.4	3.9	17.9	3.9	7.1	3.9	13.3	3.9	82.7
Effect of exchange rates	0.5	5.3	2.3	10.5	4.4	7.9	7.7	26.4	2.4	50.1
Impact of acquisitions/ divestments	0.7	8.5	22.6	103.9	—	—	24.6	84.1	9.3	196.5
Reported net sales change	25.1	286.1	118.4	544.5	105.4	190.6	111.5	381.0	66.2	1,402.2

For the year’s first six months, consolidated sales increased by 66% to $3,522 million. Currency effects added 2% and acquisitions 9%. Additionally, three more production days in the first quarter added 4% (“the production day effect”). Consequently, organic sales increased by 51% which was 12 percentage points higher than the increase in global LVP.

Sales by Product

Sales of airbag products increased by 75% to $2,353 million. Currency effects added 2%, the production day effect added 4% and acquisitions 12%. The organic sales increase of 57% was 17 percentage points higher than LVP increase in the Triad.

Sales of seatbelt products rose by 50% to $1,170 million including the production day effect of 4%. Currency effects added 3% and acquisitions 4%. The organic growth of almost 40% was in line with the increase in global LVP.

Sales by Region

Sales from Autoliv’s European companies increased by 25% to $1,424 million. Currency effects and acquisition effects added an aggregate of 1%. The production day effect was 4%. Organic sales therefore increased by 20%.

Sales from Autoliv’s North American companies increased by 118% to $1,004 million. Currency effects added 2%, the production day effect 4% and acquisition effect 23%. Organic sales increase of nearly 90% was 18 percentage points higher than the increase in North American LVP. This was mainly due to new business for Ford, Chrysler and Chevrolet.

Sales from Autoliv’s companies in Japan increased by 105% to $371 million including favorable currency effects of 4% and the production day effect of 4%. Organic sales growth of 97% was 55 percentage points higher than the Japanese LVP increase due to higher market share and a sharper recovery in the production of vehicles with higher safety content than for low-end vehicles.

Sales from Autoliv’s companies in the RoW increased by 112% to $723 million including the production day effect of 4%, favorable currency effects of 8% and acquisition effect of 25%. The organic sales increase of 75% was 36 percentage points higher than the growth in LVP, mainly due to the Chinese market and a favorable LVP mix primarily as a result of recent launches with Geely, GreatWall, GM, Honda, Peugeot and Citroën.

Earnings for the Six-Month Period Ended June 30, 2010

Gross profit increased by $529 million to $796 million and gross margin to 22.6% from 12.6% due to higher sales and savings effects from our restructuring activities and other cost reduction efforts.

Operating income improved by $526 million to $425 million from a loss of $101 million. Operating margin improved to 12.1% from (4.8%) for the same period 2009.

Income before taxes increased by $517 million to $385 million due to the $526 million improvement in operating income. This improvement was partially offset by the $12 million negative effect from the equity unit exchange. Lower interest expense, net due to lower net debt had a favorable effect of $6 million.

Net income attributable to controlling interest improved by $357 million to $273 million from a loss of $84 million. Income tax expense was $110 million, net of discrete items of $4 million, resulting in an effective tax rate of 28.5%. For the six-month period last year, income taxes were a benefit of $47 million including $6 million from discrete items.

Earnings per share improved by $4.07 to $2.99 assuming dilution from a loss of $1.08 in the same period 2009. The average number of shares outstanding increased by 17% to 91.2 million, primarily as a result of the sale of treasury shares in March 2009 and an increased dilutive effect from the equity units. The higher number of shares outstanding had a 52 cent negative effect on earnings per share.

LIQUIDITY AND SOURCES OF CAPITAL

Cash flow from operations during the second quarter 2010 amounted to $251 million. This was the second highest level ever despite payments of $18 million for restructuring activities. During the same quarter 2009, cash flow was $127 million including restructuring payments of $21 million. During the first six months 2010, operations generated $400 million in cash and $249 million before financing compared to $119 million and $56 million during the first six months 2009. Capital expenditures, net amounted to $83 million and depreciation and amortization to $145 million during the first six months 2010, compared to $66 million and $150 million, respectively, last year.

Acquisitions and other, net was $9 million in the second quarter 2010, compared to divestitures of $1 million in the second quarter 2009. Capital expenditures, net of $47 million were $15 million more in the second quarter 2010 than during the same quarter 2009, but $24 million less than depreciation and amortization in the quarter.

The Company uses the non-GAAP measure “Operating working capital” as defined in the table below in its communication with investors and for management 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 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)
	June 30, 2010			March 31, 2010			December 31, 2009			June 30, 2009
Total current assets	$	2,455.5		$	2,289.0		$	2,179.6		$	1,831.6
Total current liabilities		(1,793.7	)		(1,698.5	)		(1,693.5	)		(1,224.5	)

Working capital		661.8			590.5			486.1			607.1
Cash and cash equivalents		(459.4	)		(302.3	)		(472.7	)		(311.1	)
Short-term debt		169.6			134.5			318.6			150.9
Derivative (asset) and liability, current		7.7			2.8			3.4			(3.2	)
Dividends payable		25.6			—			—			2.9

Operating working capital	$	405.3		$	425.5		$	335.4		$	446.6

During the second quarter 2010, operating working capital (non-U.S. GAAP measure, see table above) decreased to 6.2% of sales from 7.2%, despite payments of $18 million from restructuring reserves. The Company has the policy that working capital in relation to last 12-month sales should not exceed 10%. The low working capital ratio is partially a reflection of higher-than-normal restructuring reserves.

Account receivables decreased in relation to days sales outstanding to 70 from 72 days on March 31, and days inventory outstanding to 30 from 32 days.

The Company uses the non-GAAP measure “Net debt” as defined in the table below in its communication with investors regarding its capital structure and as the relevant metric monitoring its overall debt management. The reconciling items used to derive this measure are managed as part of overall debt management. This non-GAAP measure is a supplemental measure to the GAAP measure of total debt.

In addition, 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. The most notable DRD’s were entered into in connection with the 2007 issue of U.S. Private Placements (see page 38 of the Company’s 2009 Annual Report on Form 10-K filed with the SEC on February 19, 2010). Creditors and credit rating agencies use net debt adjusted for DRD’s in their analyses of the Company’s debt and therefore we provide this non-U.S. GAAP measure. By adjusting for DRD’s, the total economic liability of net debt is disclosed without grossing it up with currency or interest fair market values that are offset by DRD’s reported in other balance sheet captions.


Reconciliation of “Net debt” to GAAP financial measure (Dollars in millions)
	June 30, 2010			March 31, 2010			December 31, 2009			June 30, 2009
Short-term debt	$	169.6		$	134.5		$	318.6		$	150.9
Long-term debt		708.8			792.5			820.7			1,088.3

Total debt		878.4			927.0			1,139.3			1,239.2
Cash and cash equivalents		(459.4	)		(302.3	)		(472.7	)		(311.1	)
Debt-related derivatives		(2.2	)		(5.4	)		(4.5	)		(10.9	)

Net debt	$	416.8		$	619.3		$	662.1		$	917.2

The Company’s net debt (non-U.S. GAAP measure, see table above) declined by $202 million to $417 million at the end of the second quarter 2010 despite total acquisition payments of $58 million, restructuring payments of $18 million and $8 million for exchange of equity units. Gross interest-bearing debt was reduced by $49 million to $878 million at the end of June 2010. The sharp debt reductions reflect both the strong cash flow and a $54 million effect from the exchange of equity units.

The non-GAAP measure net debt is also used in the non-GAAP measure “Leverage ratio” which together with the non-GAAP measure “Interest coverage ratio” constitute the Company’s debt limitation policy. Management uses this measure to analyze the amount of debt the Company should incur. This policy also provides guidance to credit and equity investors regarding the extent to which the Company would be prepared to leverage its operations. These measures corresponded, until December 2004, to the financial covenants in the Company’s Revolving Credit Facility. Although these covenants no longer exist, the Company believes investors remain interested in these measures. For details on leverage ratio and interest coverage ratio, refer to the tables below that reconcile these two non-GAAP measures to GAAP measures.


Reconciliation of “Leverage ratio” to GAAP financial measure (Dollars in millions)

	June 30, 2010			June 30, 2009			Dec 31, 2009
Net debt ²⁾	$	416.8		$	917.2		$	662.1
Senior notes ³⁾		(97.2	)		(142.2	)		(146.4	)
Pension liabilities		113.4			109.0			109.2
Net debt per the policy	$	433.0		$	884.0		$	624.9
Income before income taxes ⁴⁾	$	522.0		$	(130.8	)	$	5.5
Plus: Interest expense, net ^{1, 4, 5)}		68.4			63.5			62.2
Depreciation and amortization of intangibles (incl. impairment write-offs) ⁴⁾		309.2			326.3			314.3
EBITDA per the Policy ⁴⁾	$	899.6		$	259.0		$	382.0
Net debt to EBITDA ratio		0.5			3.4			1.6

1)	Interest expense, net, is interest expense less interest income.

2)	Net debt is short- and long-term debt and debt-related derivatives less cash and cash equivalents.

3)	Debt portion of the equity units offering (for further information see Note 1.11).

4)	Latest 12-months.

5)	Includes loss on extinguishment of debt.


Reconciliation of “Interest coverage ratio” to GAAP financial measure (Dollars in millions)

	June 30, 2010		June 30, 2009			Dec 31, 2009
Operating income ²⁾	$	594.4	$	(70.0	)	$	68.9
Amortization of intangibles (incl. impairment write-offs) ²⁾		20.4		23.3			23.1
Operating profit per the Policy ²⁾	$	614.8	$	(46.7	)	$	92.0
Interest expense, net ^{1, 2, 3)}		68.4		63.5			62.2
Interest coverage ratio		9.0		(0.7	)		1.5

1)	Interest expense, net, is interest expense less interest income.

2)	Latest 12-months.

3)	Includes loss on extinguishment of debt.

Autoliv’s policy is to maintain a leverage ratio significantly below 3.0 times and an interest-coverage ratio significantly above 2.75 times. The Company’s leverage ratio was 0.5 times on June 30, while interest coverage ratio was 9.0 times. Leverage ratio is measured as adjusted net debt in relation to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Interest coverage is defined as operating income (excluding amortization of intangibles) in relation to interest expense, net (including cost for extinguishment of debt). Adjusted net debt includes pension liabilities but excludes the debt from equity units since these funds are regarded as equity by Standard & Poor’s due to the fact that the purchase contracts of the equity units are binding and not revocable. Net debt to capitalization ratio declined to 14% from 20% at the end of previous quarter. Due to the strong cash flow and the exchange of equity units, net debt decreased by $245 million to $417 million during the first six months 2010, despite total acquisition payments of $137 million. Gross interest-bearing debt decreased by $261 million during the first six months 2010. Net debt to capitalization was 14% compared to 21% at the beginning of the year.

Total equity improved by $88 million to $2,621 million during the second quarter 2010, mainly due to net income of $147 million and the exchange of equity units of $57 million. This was partially offset by currency effects of $46 million, by $50 million from acquiring the non-controlling interest in Norma and by $26 million due to an accrual for the third-quarter dividend. Total parent shareholders’ equity was $2,618 million corresponding to $29.58 per share. The exchange of equity units increased the number of shares outstanding by 3 million to 88.5 million during the second quarter 2010. Total equity increased by $186 million during the first six months 2010, mainly as a result of the $276 million net income and the $57 million effect of the equity unit exchange. During the first six months 2010 the equity was negatively affected primarily by $73 million from currency effects, by $50 million from acquiring the non-controlling interest in Norma and by $26 million from an accrual for the third-quarter dividend.

For the first six months 2010 the return on total equity was 22% and return on capital employed 28%. These levels were the highest returns recorded in the Company’s history.

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

Total headcount (permanent employees and temporary personnel) increased by 1,400 during the quarter to 41,100 and by 3,200 during the first six months (600 was due to acquisitions). During the quarter, headcount in high-cost countries increased by 400, despite the sharp sales recoveries in North America, Europe and Japan. Virtually all of these new associates were temporary personnel for manufacturing. Although a few associates were hired in R,D&E or production overhead, none were permanent employees. Headcount in S,G&A declined slightly.

Currently, 60% of total headcount is in low-cost countries, 70% are direct workers in manufacturing and 22% are temporary personnel which increases our flexibility in the cyclical automotive industry. A year ago, these ratios were 55%, 63% and 10%, respectively.

Outlook

The latest forecasts from IHS (CSM) indicate an increase in global LVP of 7% in the third quarter compared to the same quarter 2009 with an increase of 23% in North America, but with a decrease of 7% in Europe. For the remaining six months of the year, IHS (CSM) predicts a 2% increase in global LVP compared to the same period 2009 but a 7% sequential dip, largely traditional seasonality effects, compared to this year’s first six months,.

Based on IHS’s forecast and customer call-offs for the third quarter and IHS’s forecast for the rest of the year, Autoliv’s organic sales are expected to continue to outperform global LVP by growing at least 20% in the quarter and by approximately 28% for the full year. Acquisitions are expected to add 9% both in the quarter and for the full year, while currency effects are expected to have a negative impact of 6% in the quarter and 3% for the full year. Consequently, consolidated sales are expected to increase close to 25% in the third quarter and, based on the current IHS production forecast, the Company indicates a net sales increase of close to 35% for the full year. The production day effect will have a negative impact in the fourth quarter offsetting the positive effect from the first quarter.

An operating margin of at least 10% is expected for the third quarter, while the indication for the full year is an operating margin of more than 11%, given current assumptions.

The projected effective tax rate for the remainder of the year is estimated to be around 30%.

OTHER RECENT EVENTS

Launches in the 2nd quarter 2010

•

Audi’s new A1; Driver airbag with steering wheel and passenger airbag

•

Dacia’s new Duster; Side airbags and seatbelts with pretensioners

•

Ford’s new Figo; Driver airbag with steering wheel, passenger airbag and seatbelts

•

Jeep’s new Grand Cherokee; Passenger airbag, driver knee airbags, side airbags, inflatable curtains and active safety electronics (anti-collision radar)

•

KIA’s new Sportage; Driver airbag, passenger airbag, side airbags, inflatable curtains, seatbelts with pretensioners and safety electronics

•

Nissan’s new Juke; Seatbelts with pretensioners

•

Opel’s new Meriva; Side airbags, inflatable curtains and safety electronics

•

Saab’s new 9-5; Driver airbag with steering wheel and passenger airbag

•

Volvo’s new S60; Passenger airbag, side airbags, inflatable curtains, seatbelts with pretensioners and seat structures

Other Significant Events

•

The company has accelerated the exchange of 36% of the equity units resulting in the issuance of 3,058,735 shares of Autoliv’s common stock from its treasury, and the payment of $8 million in cash. This reduced net debt by $54 million and increased equity by $57 million. As a result of these transactions, the Company recorded a $12 million financial expense in the quarter but will save $16 million in interest expense through April 2012.

•

The quarter has been favorably impacted by the fact that former Delphi contracts in Asia, North America and Europe were re-sourced to Autoliv towards the end of last year and in the first quarter this year. Autoliv also acquired certain assets related to these airbag, steering wheel and seatbelt contracts. These contracts are expected to add $275 million to consolidated sales during the remaining six months of the year.

•

Autoliv has also made two other acquisitions. In Japan, the remaining 40% of the shares in Autoliv’s inflator subsidiary were acquired. This consolidated subsidiary has sales of $35 million to other Autoliv companies. Also in the first quarter, Autoliv acquired Visteon’s automotive radar business, which has sales of approximately $2 million.

•

In the second quarter, Autoliv acquired the remaining 49% of the shares in its Estonian subsidiary AS Norma for $50 million.

•

In June, Autoliv signed the agreements for two new revolving credit facilities equivalent to approximately $450 million with maturities of five to seven years.

Dividend Resumption and Next Report

As previously announced, the Company has decided to resume the payments of dividends to shareholders by declaring a quarterly dividend of 30 cents per share for the third quarter 2010. The dividend will be payable on September 2 to shareholders of record on August 5. The ex-date, when the shares will trade without the right to the dividend, will be August 3.

Autoliv intends to publish the quarterly report for the third quarter 2010 on Tuesday October 26.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

As of June 30, 2010, the Company’s future contractual obligations have not changed materially from the amounts reported in the 2009 Annual Report on Form 10-K filed with SEC on February 19, 2010.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2010, 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 2009 Annual Report on Form 10-K filed with the SEC on February 19, 2010.

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.

ITEM 4T.

CONTROLS AND PROCEDURES

Not applicable.

PART II—OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

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.

For further discussion of legal proceedings, see Note 1.13 Contingent Liabilities to the Unaudited Consolidated Financial Statements – Legal Proceedings included in this quarterly report on Form 10-Q.

ITEM 1A.

RISK FACTORS

The risk factor set forth below is 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, 2009, filed with the SEC on February 19, 2010, which includes a detailed discussion of risk factors that could materially affect our business, financial condition or results of operations, and is herein incorporated by reference.

We could experience disruption in our supply or delivery chain which could cause one or more of our customers to halt production.

We, as most other component manufactures in the automotive industry, ship products to the vehicle assembly plants so they are delivered on a “just in time” basis in order to maintain low inventory levels. Our suppliers also use a similar method. However, this “just in time” method makes the logistics supply chain in our industry very vulnerable to disruptions. Such disruptions could be caused by any one of a myriad of potential problems, including logistical complications due to natural disasters, such as the recent volcanic eruption in Iceland. The lack of even a small single subcomponent necessary to manufacture one of our products, for whatever reason, could force us to cease production, even for a prolonged period; our customers may halt their production for same reason. When we cease timely deliveries, we have to carry our own costs for identifying and solving the “root cause” problem as well as expeditiously producing replacement components or products. Generally, we must also carry the costs associated with “catching up”, such as over-time and premium freight. Additionally, if we are the cause for a customer being forced to halt production, the customer may seek to recoup all of its losses and expenses from us. These losses could be very significant, and may include consequential losses such as lost profits. Where a customer halts production because of another supplier failing to deliver on time, we may not be fully compensated, if at all.

In April, Mount Eyjafjöll, a volcano in Iceland, began erupting causing widespread and unprecedented delays in air travel throughout and/ to and from Europe. Such disruptions were they to resume, could cause significant delays and complications to our ability to ship our products to customers, as well as receive shipments from our suppliers. Also, similar difficulties for other suppliers may force our customers to halt production which may in turn impact our sales shipments to such customers. It is impossible for us to predict if and when disruptions of air transport will occur again and, if so, what impact such disruptions will have. While we are taking precautions and will seek to mitigate the impact of any such disruptions, they could very severely impact our operations and/or those of our customers and force us to halt production for prolonged periods of time and/or to absorb very significant costs to avoid disruption our customers’ operations.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock repurchase program

During the second quarter of 2010, Autoliv made no stock repurchases. Since the repurchasing program was adopted in 2000, Autoliv has bought back 34.3 million shares at an average cost of $42.93 per share. Under the existing authorizations, another 3.2 million shares may be repurchased. We have suspended our share repurchases since we believe it is prudent to preserve cash in order to maintain a strong cash position in the current uncertain financial and business environment as well as to possibly take advantage of potential market opportunities.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.

[REMOVED AND RESERVED]

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.

3.2		Autoliv’s Restated By-Laws incorporated herein by reference to Exhibit 3.2 to the Quarterly Report on form 10-Q, filed on May 14, 1997.

4.1		Senior Indenture, dated March 30, 2009, between Autoliv 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 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).

4.3		Purchase Contract and Pledge Agreement, dated March 30, 2009, among Autoliv 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).

10.21*		Facility Agreement, dated June 22, 2010, between Autoliv AB, a wholly owned Swedish subsidiary of Autoliv, Inc., and Nordea.

10.22*		Facility Agreement, dated June 22, 2010, between Autoliv AB, a wholly owned Swedish subsidiary of Autoliv, Inc., and Swedish Export Credit Corporation and SEB.

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 June 30, 2010, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Operations; (ii) the Consolidated Balance Sheets; (iii) the Consolidated Statements of Cash Flows; and (iv) the Notes to the Consolidated Financial Statements, tagged as blocks of text.

*	Filed herewith.

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: July 23, 2010

AUTOLIV, INC.

(Registrant)


By:		/ S / M ATS W ALLIN
		Mats Wallin
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

EXHIBIT 10.21

SEK 2,000,000,000 Revolving Credit Facility Agreement

made between

Autoliv AB (publ)

as Borrower

Autoliv, Inc.

as Parent

and

Nordea Bank AB (publ)

as Bank

21 June 2010

CONTENTS


Clause		Page
1.	Interpretation	3
2.	FacilitY	9
3.	Purpose	9
4.	Conditions Precedent	9
5.	LoanS	10
6.	Repayment	10
7.	Prepayment and Cancellation	10
8.	Interest Periods	12
9.	Interest	13
10.	Payments	14
11.	Taxes	15
12.	Market Disruption	16
13.	Increased Costs	17
14.	Illegality	18
15.	Guarantee	18
16.	Representations and Warranties	20
17.	Undertakings	25
18.	Default	32
19.	Fees	35
20.	Expenses	36
21.	Stamp Duties	36
22.	Indemnities	36
23.	Evidence and Calculations	37
24.	Amendments and Waivers	38
25.	Changes to the Parties	38
26.	Disclosure of Information	39
27.	Disclosure of Information to EKN	39
28.	Set-Off	39
29.	Severability	40
30.	Counterparts	40
31.	Notices	40
32.	Jurisdiction	41
33.	Governing Law	42
34.	Waiver of Jury Trial	42
Schedule 1		43
Conditions Precedent Documents		43
Schedule 2		44
Form of Request		44
Schedule 3		45
Form of Compliance Certificate		45
Signatories		46

THIS AGREEMENT is dated 21 June, 2010 and made between:

(1)	Autoliv AB (publ) (registration number 556036-1981) as borrower (the Borrower ) ,

(2)	Autoliv, Inc. (incorporated under the laws of the State of Delaware, U.S.A.) as guarantor (the Parent ); and

(3)	Nordea Bank AB (publ) as lender (the Bank );

IT IS AGREED as follows:

1.	INTERPRETATION

1.1

Definitions

In this Agreement:

Affiliate means a Subsidiary or a holding company of a person or any other Subsidiary of that holding company.

Availability Period means the period from and including the date of this Agreement to and including the date one month before the Maturity Date.

Board means the Board of Governors of the Federal Reserve System of the United States of America or any successor thereof.

Business Day means a day (other than a Saturday or Sunday) on which banks are open for general banking business in Stockholm.

Code means the United States Internal Revenue Code of 1986, as amended, and any rule or regulation issued thereunder from time to time in effect.

Commitment means SEK 2,000,000,000 to the extent not cancelled or reduced under this Agreement.

Credit Guarantee means a working capital guarantee nominated in SEK and issued by EKN at the request of the Bank, covering 75 per. cent. of the Commitment in relation to the Bank and in the form and substance satisfactory to the Bank.

Dangerous Substance means any radioactive emissions and any natural or artificial substance (whether in solid or liquid form or in the form of a gas or vapour and whether alone or in combination with any other substance) capable of causing harm to man or any other living organism or damaging the environment or public health or welfare including but not limited to any controlled, special, hazardous, toxic, radioactive or dangerous waste.

Default means an Event of Default or an event which, with the giving of notice, lapse of time, determination of materiality or fulfilment of any other applicable condition (or any combination of the foregoing), would constitute an Event of Default.

Drawdown Date means the date of the advance of a Loan.

EKN means the Swedish Export Credits Guarantee Board (Sw: Exportkreditnämnden ).

Environmental Claim means any claim by any person as a result of or in connection with any violation of Environmental Law or any Environmental Contamination which could give rise to any remedy or penalty (whether interim or final) or liability for any Obligor or any Bank which could reasonably be expected to have a material adverse effect.

Environmental Contamination means each of the following and their consequences:

(a)

any release, emission, leakage, or spillage of any Dangerous Substance into any part of the environment; or

(b)

any accident, fire, explosion or sudden event which is directly or indirectly caused by or attributable to any Dangerous Substance; or

(c)

any other pollution of the environment.

Environmental Law means any national or supranational law, regulation or directive concerning the protection of human health or the environment or concerning Dangerous Substances.

Environmental License means any authorization by any Environmental Law.

ERISA means the United States Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate means each trade or business, whether or not incorporated, that would be treated as a single employer with any Obligor under section 414 of the United States Internal Revenue Code of 1986, as amended. When any provision of this Agreement relates to a past event, the term ERISA Affiliate includes any person that was an ERISA Affiliate of an Obligor at the time of that past event.

Event of Default means an event specified as such in Clause 18.1 (Events of Default).

Facility means the SEK 2,000,000,000 revolving credit facility made available under this Agreement as set out in Clause 2.1 (Revolving Credit Facility).

Finance Document means this Agreement or any other document designated as such by the Bank and the Parent.

Financial Indebtedness means any indebtedness in respect of:

(a)

monies borrowed;

(b)

any debenture, bond, note, loan stock or other security;

(c)

any acceptance credit;

(d)

receivables sold or discounted (otherwise than on a non-recourse basis);

(e)

the acquisition cost of any asset to the extent payable before or 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 that asset;

(f)

any lease entered into primarily as a method of raising finance or financing the acquisition of the asset leased;

(g)

any currency swap or interest swap, cap or collar arrangement or other derivative instrument (and when calculating the value of any such transaction, only the marked-to-market value shall be taken into account);

(h)

any amount raised under any other transaction having the commercial effect of a borrowing or raising of money; or

(i)

any guarantee, indemnity or similar assurance against financial loss of any person.

Group means the Parent and its Subsidiaries.

Interest Period means each period determined in accordance with Clause 8 (Interest Periods).

Loan means, subject to Clause 8 (Interest Periods), the principal amount of each borrowing by the Borrower under this Agreement or the principal amount outstanding of that borrowing.

Major Credit Facility means any credit facility pursuant to which an Obligor is a party in a principal amount equal to or greater than € 300,000,000 (or its equivalent in any other currency).

Margin means one point forty (1.40) per cent. per annum,

Margin Stock has the meaning assigned to such term in Regulation U of the Board.

Material Group Member means any Subsidiary of the Parent:


(a)	(i)	the book value of whose assets (consolidated if it itself has Subsidiaries) equals or exceeds 3 per cent. of the book value of the consolidated total assets of the Group; or

	(ii)	whose revenues (consolidated if it itself has Subsidiaries) equal or exceed 3 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 or exceed 3 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; or

(b)

any Subsidiary of the Parent 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)(a), (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 Clause 17.2 (Financial information), any Subsidiary of the Parent 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 Material Group Member.

Material Subsidiary means Autoliv ASP, Inc., the Borrower, Autoliv Holding AB, and any other Subsidiary of the Parent:


(a)		(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; or

(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 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; or

(b)

(c)

Maturity Date means the date falling 84 (eighty four) months after date of this Agreement.

Multiemployer Plan means a “multiemployer plan” within the meaning of section 3(37) or 4001(a)(3) of ERISA.

Obligor means the Parent and the Borrower

Original SEK Amount means in relation to a Loan the amount of that Loan.

Original Group Accounts means the audited consolidated accounts of the Group for the year ended 31 December 2009.

Party means a party to this Agreement.

Plan means an “employee benefit plan” within the meaning of section 3(3) of ERISA maintained by the Parent or any ERISA Affiliate currently or at any time within the last five years, or to which the Parent or any ERISA Affiliate is required to make payments or contributions or has made payments or contributions within the past five years.

Rate Fixing Day means the second Business Day before the first day of an Interest Period for a Revolving Loan or such other day as is generally treated as the rate fixing day by market practice in the Relevant Interbank Market for leading banks to give quotations for deposits in the relevant currency for delivery on the first day of the relevant Interest Period, as determined by the Bank.

Reference Banks means Nordea Bank AB (publ), Svenska Handelsbanken AB (publ) and Skandinaviska Enskilda Banken AB (publ) or such other banks chosen by the Bank in consultation with the Borrower.

Relevant Interbank Market means Stockholm interbank market.

Reportable Event means any of the events set forth in section 4043 of ERISA or the related regulations.

Request means a request made by the Borrower for a Loan, substantially in the form of Schedule 2 (Request).

Restricted Margin Stock means Margin Stock owned by the Parent or any member of the Group, which represents not more than 33 ¹ / 3 per cent. of the aggregate value (determined in accordance with Regulation U of the Board), on a consolidated basis, of the assets of the Parent and all members of the Group (other than Margin Stock) that are subject to the provisions of Clause 17 (Undertakings) (including, without limitation, Clauses 17.8 (Negative pledge) and 17.9 (Transactions similar to security)).

Rollover Loan means a Loan made or to be made on the same day that a maturing Loan is due to be repaid and with an amount of which is equal to or less than the maturing Loan.

Screen Rate means, in relation to STIBOR, the appropriate rate for the relevant period, displayed on the appropriate page of Reuters. If the relevant page is replaced or the service ceases to be available, the Bank may (after consultation with the Borrower) specify another page or service displaying the appropriate rate.

Security Interest means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.

SEK and Swedish Kronor means the lawful currency for the time being of Sweden.

STIBOR means for an Interest Period of any Loan or overdue amount in Swedish Kronor:

(a)

the applicable Screen Rate; or

(b)

if no Screen Rate is available for that Interest Period of that Loan or overdue amount, the arithmetic mean (rounded upwards to four decimal places) of the rates as supplied to the Bank at its request quoted by Reference Banks to leading banks in the Relevant Interbank Market,

as at 11.00 a.m. on the Rate Fixing Day for the offering of deposits in Swedish Kronor for a period comparable to that Interest Period.

Subsidiary means an entity from time to time of which a person has direct or indirect control or owns directly or indirectly more than fifty per cent. (50%) of the share capital or similar right of ownership.

Syndication Agreement means the US$ 1,100,000,000 Facilities Agreement dated 7 November, 2005 for the Parent, the Borrower and Autoliv ASP, Inc.

Unrestricted Margin Stock means any Margin Stock owned by either Parent or any member of the Group which is not Restricted Margin Stock.

U.S.A. means the United States of America.

1.2

Construction

(a)

In this Agreement, unless the contrary intention appears, a reference to:

(i)

an amendment includes a supplement, novation or re-enactment and amended is to be construed accordingly;

assets includes present and future properties, revenues and rights of every description;

an authorization includes an authorization, consent, approval, resolution, licence, exemption, filing, registration and notarization;

control means the power to direct the management and policies of an entity by controlling 50 per cent. or more of voting capital, whether through the ownership of voting capital, by contract or otherwise;

know your customer requirements are the identification checks that a Bank requests in order to meet its obligations under any applicable law or regulation to identify a person who is (or is to become) its customer;

a material adverse effect means:

(A)

a material adverse effect on the business or financial condition of the Parent or the Group as a whole; or

(B)

a material adverse effect on the ability of the Parent to perform its obligations under any of the Finance Documents.

a month is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(A)

if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that calendar month; or

(B)

if an Interest Period commences on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which it is to end;

a person includes any individual, company, unincorporated association or body of persons (including a partnership, joint venture or consortium), government, state, agency, international organisation or other entity;

a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, inter-governmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

winding up also includes amalgamation, reconstruction, reorganisation, administration, dissolution, liquidation, merger or consolidation and any equivalent or analogous procedure under the law of any jurisdiction (but, for the avoidance of doubt, reorganisation does not include a mere transfer of assets from one member of the Group to another whether the transferor continues to exist);

(ii)

a provision of law is a reference to that provision as amended or re-enacted;

(iii)

a Clause or a Schedule is a reference to a clause of or a schedule to this Agreement;

(iv)

a person includes its successors, transferees and assigns;

(v)

a Finance Document or another document is a reference to that Finance Document or other document as amended; and

(vi)

a time of day is a reference to Stockholm time.

(b)

Unless the contrary intention appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(c)

The index to and the headings in this Agreement are for convenience only and are to be ignored in construing this Agreement.

2.	FACILITY

2.1

Revolving Credit Facility

Subject to the terms of this Agreement, the Bank grants to the Borrower a revolving credit facility under which the Bank will make Loans to the Borrower denominated in SEK.

2.2

Facility Limits

The Original SEK Amount of the outstanding Loan shall not at any time exceed the Commitment.

3.	PURPOSE

The Borrower shall apply each Loan towards purposes having a direct or indirect connection to export or otherwise supporting the Borrower’s international business in accordance with the confirmation from EKN regarding the limit for credit guarantees ( Sw: Limit för enskilda kreditgarantier ) with reference number 2009-10206-003.

4.	CONDITIONS PRECEDENT

4.1

Documentary conditions precedent

The Borrower may not deliver the first Request until the Bank has notified the Borrower that it has received all of the documents set out in Schedule 1 (Condition Precedent Documents) in form and substance satisfactory to it.

4.2

Further conditions precedent

The obligation of the Bank to advance any Loan is subject to the further conditions precedent that:

(a)

on both the date of the Request and the Drawdown Date:

(i)

the representations and warranties in Clause 16 (Representations and warranties) to be repeated on those dates are correct and will be correct immediately after the Loan is made; and

(ii)

in case of a Rollover Loan, no Event of Default is outstanding or might result from the proposed Loan and, in case of any other Loan, no Default is outstanding or might result from the Loan;

(b)

the making of the Loan would not cause Clause 2.2 (Facility Limits) to be contravened; and

(c)

the making of the Loan would not result in more than one Loan being outstanding at any one time.

LOANS

5.1

Drawdown

The Borrower may borrow a Loan if the Bank receives from the Borrower, not later than 9.00 a.m. two Business Days before the proposed Drawdown Date, a duly completed Request. Each Request is irrevocable.

5.2

Completion of Requests

A Request will not be regarded as having been duly completed unless:

(a)

the Drawdown Date is a Business Day falling within the Availability Period;

(b)

the amount of the Loan is:

(i)

a minimum of SEK 50,000,000 and an integral multiple of SEK 25,000,000, or

(ii)

the balance of the undrawn Commitment; or

(iii)

such other amount as the Bank may agree;

(c)

the amount selected under paragraph (b) above does not cause Clause 2.2 (Facility Limits) to be contravened; and

(d)

the Interest Period selected complies with Clause 8 (Interest Periods) and does not extend beyond the Maturity Date.

5.3

Advance of Loans

Subject to as otherwise provided for in this Agreement, each Loan shall be made available on the Drawdown Date to the Borrower by paying the same to such bank account of the Borrower as it shall specify to the Bank for this purpose in the Request.

6.	REPAYMENT

6.1

Repayment

The Borrower shall repay each Loan in full, on the last day of its Interest Period, to the Bank.

6.2

Re-borrowing

Subject to the other terms of this Agreement, any amounts repaid under Clause 6.1 (Repayment) may be re-borrowed.

7.	PREPAYMENT AND CANCELLATION

7.1

Automatic cancellation

The Commitment shall, to the extent not already voluntarily cancelled under Clause 7.2 (Voluntary cancellation) or Clause 7.4 (Additional right of prepayment and cancellation) be automatically cancelled in full on the Maturity Date.

7.2

Voluntary cancellation

The Borrower may, by giving not less than 30 days’ prior written notice to the Bank (or such shorter period of notice as the Bank may agree), cancel in whole or in part the undrawn amount of the Commitment (but the cancellation in part shall be in a minimum of SEK 100,000,000 and an integral multiple of SEK 100,000,000) subject to that the Credit Guarantee is reduced pro rata with the amount to be cancelled.

7.3

Voluntary prepayments of Loans

The Borrower may, if it gives the Bank not less than five (5) Business Days’ prior notice, prepay the whole or any part of any Loan (but, if in part, being an amount that reduces the amount of the Loan by a minimum amount of SEK 100,000,000 and subject to that no more than two (2) prepayments may be made under this clause during each calendar year).

7.4

Additional right of prepayment and cancellation

If:

(a)

the Borrower is required to pay to the Bank any additional amounts under Clause 11 (Taxes); or

(b)

the Borrower is required to pay to the Bank any amount under Clause 13 (Increased Costs); or

(c)

Clause 12 (Market Disruption) is in operation but no agreement has been reached under Clause 12.3 (Substitute basis),

then, without prejudice to the obligations of the Borrower under those Clauses, the Borrower may, whilst the relevant circumstances continue, serve a notice of prepayment and cancellation on the Bank. On the date falling five Business Days after the date of service of the notice:

(i)

the Borrower shall prepay to the Bank the outstanding Loan; and

(ii)

the Commitment shall be cancelled.

7.5

Mandatory Prepayment

If, at any time after the date of this Agreement:

(a)

it is or becomes unlawful for any Obligor to perform any of its obligations under the Finance Documents; or

(b)

the Borrower is not or ceases to be a Subsidiary of the Parent; or

(c)

any single person, or group of persons acting in concert, acquires control of the Parent, or

(d)

the guarantee of the Parent is not effective or alleged by any Obligor to be ineffective for any reason,

(e)

then the Bank may by notice to the Borrower:

(i)

cancel the Commitment; and/or

(ii)

demand that all or part of the Loan, together with accrued interest and all other amounts accrued under the Finance Documents, be repaid forthwith, whereupon they shall be repaid forthwith.

7.6

Mandatory prepayment – request by EKN

(a)

The Bank must notify the Borrower promptly upon receipt of a written notice from EKN requesting the Bank to declare the Loan due and payable due to that:

(i)

any Financial Indebtedness or other obligation of the Borrower in an amount equal to or greater than USD 3,000,000 in relation to the Bank (other than under this Agreement) has become due and payable prior to the specified maturity thereof as a result of a default thereunder; or

(ii)

the Facility has been utilised in whole or in a non-negligible part for any other purpose than that stated in the application for the Credit Guarantee or in the confirmation from EKN regarding the limit for credit guarantees ( Sw: Limit för enskilda kreditgarantier ) with reference number 2009-10206-003.

(b)

After notification under paragraph (a) above:

(i)

the Borrower must immediately repay or prepay the Bank the Loan made to it; and

(ii)

the Commitment will be immediately cancelled.

7.7

Miscellaneous provisions

(a)

Any notice of prepayment and cancellation or notice of cancellation under this Agreement is irrevocable.

(b)

All prepayments under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to Clause 22.2 (Other indemnities), without premium or penalty. All cancellations under this Agreement shall be made without penalty.

(c)

No prepayment or cancellation is permitted except in accordance with the express terms of this Agreement.

(d)

No amount of the Commitment which is cancelled under this Agreement may subsequently be reinstated.

(e)

No amount prepaid, unless in accordance with Clause 7.3 (Voluntary prepayment of Loans), under this Agreement may subsequently be re-borrowed.

8.	INTEREST PERIODS

8.1

General

Each Loan has one Interest Period only.

8.2

Selection

(a)

The Borrower may select an Interest Period for a Loan in the relevant Request. Each Interest Period for a Loan will commence on its Drawdown Date.

(b)

Each Interest Period for a Loan will be one, two, three or six months or any other period agreed by the Borrower and the Bank. The number of Interest Periods having duration of one month may not exceed three in a calendar year.

8.3

Non-Business Days

If an Interest Period for a Loan would otherwise end on a day which is not a Business Day, that Interest Period shall instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

8.4

Overrunning of the Maturity Date

If an Interest Period in respect of a Loan borrowed under the Facility would otherwise overrun the Maturity Date, it shall be shortened so that it ends on the Maturity Date.

9.	INTEREST

9.1

Interest rate

(a)

The rate of interest on each Loan for its Interest Period is the rate per annum determined by the Bank to be the aggregate of the applicable:

(i)

Margin; and

(ii)

STIBOR.

9.2

Due dates

Except as otherwise provided in this Agreement, accrued interest on each Loan is payable by the Borrower on the last day of the Interest Period for that Loan and also, if the Interest Period is longer than six months, on the dates falling at six monthly intervals after the first day of that Interest Period.

9.3

Default interest

(a)

If an Obligor fails to pay any amount payable by it under the Finance Documents, it shall forthwith on demand by the Bank pay interest on the overdue amount from the due date up to the date of actual payment, as well after as before judgment, at a rate (the default rate ) determined by the Bank to be one per cent. per annum above the higher of:

(i)

the rate on the overdue amount under Clause 9.1 (Interest rate) immediately before the due date (if of principal) and;

(ii)

the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for such successive Interest Periods of such duration as the Bank may determine (each a Designated Interest Period ).

(b)

The default rate will be determined on each Business Day or the first day of, or two Business Days before the first day of, the relevant Designated Interest Period, as appropriate.

(c)

If the Bank determines that deposits in the currency of the overdue amount are not at the relevant time being made available by the Reference Banks to leading banks in the Relevant Interbank Market, the default rate will be determined by reference to the cost of funds to the Bank from whatever sources it may select.

(d)

Default interest will be compounded at the end of each Designated Interest Period.

9.4

Notification of rates of interest

The Bank shall promptly notify the Borrower of the determination of a rate of interest under this Agreement.

10.

PAYMENTS

10.1

Place

All payments by an Obligor under the Finance Documents shall be made to the Bank to its account at such office or bank in the principal financial centre of the country of the relevant currency as it may notify to the for this purpose.

10.2

Funds

Payments under the Finance Documents to the Bank shall be made for value on the due date at such times and in such funds as the Bank may specify as being customary at the time for the settlement of transactions in the relevant currency in the place for payment.

10.3

Currency

(a)

A repayment or prepayment of a Loan or any part of a Loan is payable in the currency in which the Loan is denominated on its due date.

(b)

Interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated.

(c)

Amounts payable in respect of costs, expenses and taxes and the like are payable in the currency in which they are incurred.

(d)

Any other amount payable under the Finance Documents is, except as otherwise provided in the Finance Documents, payable in SEK.

10.4

Set-off and counterclaim

All payments made by an Obligor under the Finance Documents shall be made without set-off or counterclaim.

10.5

Non-Business Days

(a)

If a payment under the Finance Documents is due on a day which is not a Business Day, the due date for that payment shall instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

(b)

During any extension of the due date for payment of any principal under this Agreement interest is payable on that principal at the rate payable on the original due date.

10.6

Partial payments

(a)

If the Bank receives a payment insufficient to discharge all the amounts then due and payable an Obligor under the Finance Documents, the Bank shall apply that payment towards the obligations of an Obligor under the Finance Documents in the following order:

(i)

first , in or towards payment of any unpaid, fees, costs and expenses of the Bank under the Finance Documents;

(ii)

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

(iii)

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

(iv)

fourthly , in or towards payment of any other sum due but unpaid under the Finance Documents.

(b)

Paragraphs (a) above will override any appropriation made by an Obligor.

11.

TAXES

11.1

Gross-up

All payments by an Obligor under the Finance Documents shall be made without any deduction and free and clear of and without any deduction for or on account of any taxes, except to the extent that the Obligor is required by law to make payment subject to any taxes. If any tax or amounts in respect of tax must be deducted, or any other deductions must be made, from any amounts payable or paid by an Obligor under the Finance Documents, the Obligor shall pay such additional amounts as may be necessary to ensure that the Bank receives a net amount equal to the full amount which it would have received had payment not been made subject to tax or any other deduction.

11.2

Tax receipts

All taxes required by law to be deducted or withheld by an Obligor from any amounts paid or payable under the Finance Documents shall be paid by the relevant Obligor when due and the Obligor shall, within 15 days of the payment being made, deliver to the Bank evidence satisfactory to the Bank (including all relevant tax receipts) that the payment has been duly remitted to the appropriate authority.

11.3

Tax indemnity

(a)

Without prejudice to the provisions of Clause 11.1 (Gross-up), if the Bank on its behalf is required to make any payment on account of a Nonexcluded Tax on or in relation to any amounts paid or payable from any Obligor under the Finance Documents (including, without limitation, any sum received or receivable under this Clause 11) or any such liability in respect of any such payment is asserted, imposed, levied or assessed against the Bank, such Obligor shall, upon demand of the Bank, promptly indemnify the Bank against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith, except and to the extent that:

(i)

such liability or interest, penalties or expenses arises as a result of failure by the Bank to make any payment by the latest date legally permitted; or

(ii)

such liability or interest, penalties or expenses arises out of a failure to comply with the relevant filing, certification or other reporting requirements stipulated by the relevant tax authority in the jurisdiction of the Bank in connection with such requirement to make any such payment on account of tax.

(b)

For the purposes of paragraph (a) above, Nonexcluded Tax shall mean all taxes (including withholding taxes collected at source of payment) other than:

(i)

taxes imposed on net income;

(ii)

taxes imposed by the jurisdiction in which the Bank is organised by virtue of such party being organised in such jurisdiction; and

(iii)

taxes imposed by the jurisdiction in which the Bank is located or doing business by virtue of such party being so located or doing business.

11.4

Indemnity claims

If the Bank intends to make a claim pursuant to Clause 11.3 (Tax indemnity) it shall, promptly upon becoming aware of the circumstances giving rise to such claim, notify the relevant Obligor thereof.

12.

MARKET DISRUPTION

12.1

Absence of quotations

If STIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply an offered rate by 11.30 a.m. on a Rate Fixing Day, the applicable STIBOR shall, subject to Clause 12.2 (Market disruption), be determined on the basis of the quotations of the remaining Reference Banks.

12.2

Market disruption

(a)

If a Market Disruption Event occurs in relation to the Loan for any Interest Period, then the rate of interest on the Loan for the Interest Period shall be the percentage rate per annum which is the sum of:

(i)

the Margin; and

(ii)

the rate notified to the Borrower as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to the Bank of funding the Loan from whatever source it may reasonably select (such calculation of cost shall be certified in reasonable detail and disclosed to the Borrower)

(b)

In this Agreement Market Disruption Event means:

(i)

at or about 11.30 a.m. on the Rate Fixing Date for the relevant Interest Period STIBOR is not available and none or only one of the Reference Banks supplies a rate to the Bank to determine STIBOR for the relevant Interest Period; or

(ii)

on the Rate Fixing Date for the relevant Interest Period STIBOR does not accurately reflect the cost of the Bank of obtaining matching deposits on the Relevant Interbank Market.

12.3

Substitute basis

If a Market Disruption Event occurs then the Bank shall notify the Borrower thereof without delay and, if the Borrower so requires, the Bank and the Borrower shall enter into negotiations (for a period of not more than ten Business Days) with a view of agreeing substitute basis for determining the rate of interest. If no agreement is reached with ten Business Days the Borrower shall pay interest in accordance with clause 12.2(a).

13.

INCREASED COSTS

13.1

Increased costs

(a)

Subject to Clause 13.2 (Exceptions), the Borrower shall forthwith on demand by the Bank pay to the Bank the amount of any increased cost incurred by it or any of its Affiliates as a result of:

(i)

the introduction of, or any change in, or any change in the interpretation of, any law or regulation; or

(ii)

compliance with any regulation made after the date of this Agreement,

(including any law or regulation relating to taxation, change in currency of a country, or reserve asset, special deposit, cash ratio, liquidity or capital adequacy requirements or any other form of banking or monetary control).

(b)

In this Agreement increased cost means:

(i)

an additional cost incurred by the Bank or any of its Affiliates as a result of it having entered into, or performing, maintaining or funding its obligations under, this Agreement; or

(ii)

a reduction in any amount payable to the Bank or any of its Affiliates or the effective return to the Bank or any of its Affiliates under this Agreement or (to the extent that it is attributable to this Agreement) on its capital; or

(iii)

the amount of any payment made by the Bank or any of its Affiliates, or the amount of any interest or other return foregone by the Bank or any of its Affiliates, calculated by reference to any amount received or receivable by the Bank or any of its Affiliates from any other Party under this Agreement.

(c)

As soon as practicable after becoming aware that the Borrower is liable, or will become liable, to pay any amount in accordance with the provisions of paragraph (a) above, the Bank will notify the Borrower accordingly.

13.2

Exceptions

Clause 13.1 (Increased costs) does not apply to any increased cost:

(a)

compensated for by the operation of Clause 11 (Taxes); or

(b)

attributed to any change in the rate of, or change in the basis of calculating, tax on the overall net income of the Bank (or the overall net income of a division or branch of the Bank) imposed in the jurisdiction in which its principal office for the time being is situate.

13.3

Claims

If the Bank intends to make a claim for an Increased Cost it must provide the Borrower with a certificate confirming the amount of, and the events giving rise to, the claim.

14.

ILLEGALITY

If it is or becomes unlawful in any jurisdiction for the Bank to give effect to any of its obligations as contemplated by this Agreement or to fund or maintain any Loan, then:

(a)

that Bank may notify the Borrower accordingly; and

(b)

(i) the Borrower shall forthwith prepay the outstanding Loan; and

(ii) the Commitment of the Bank shall forthwith be cancelled.

15.

GUARANTEE

15.1

Guarantee

The Parent irrevocably and unconditionally, as for a debt of its own (Sw. så som för egen skuld ), guarantees to the Bank prompt performance by the Borrower of all its payments obligations under the Finance Documents and undertakes to indemnify the Bank on demand against any loss or liability suffered by it if any obligations guaranteed by the Parent is or becomes unenforceable, invalid or illegal.

15.2

Continuing guarantee

This guarantee is a continuing guarantee and will extend to the ultimate balance of all sums payable by the Borrower under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part. This guarantee is a guarantee of payment and not of collectability.

15.3

Reinstatement

(a)

Where any discharge (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, the liability of the Parent under this Clause 15 shall continue as if the discharge or arrangement had not occurred.

(b)	The Bank may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.

15.4

Waiver of defences

The obligations of the Parent under this Clause 15 will not be affected by an act, omission, matter or thing which, but for this provision, would reduce, release or prejudice any of its obligations under this Clause 15 or prejudice or diminish those obligations in whole or in part, including (whether or not known to it or the Bank):

(a)

any time or waiver granted to, or composition with, the Borrower or other person;

(b)

the release of the Borrower or any other person under the terms of any composition or arrangement with any creditors of any member of the Group;

(c)

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the Borrower or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d)

any incapacity or lack of powers, authority or legal personality of or dissolution or change in the members or status of the Borrower or any other person;

(e)

any variation (however fundamental) or replacement of a Finance Document or any other document or security so that references to that Finance Document in this Clause 15 shall include each variation or replacement;

(f)

any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security, to the intent that the Parent’s obligations under this Clause 15 shall remain in full force and its guarantee be construed accordingly, as if there were no unenforceability, illegality or invalidity; or

(g)

any postponement, discharge, reduction, non-provability or other similar circumstance affecting any obligation of the Borrower under a Finance Document resulting from any insolvency, liquidation or dissolution proceedings or from any law, regulation or order so that each such obligation shall for the purposes of the Parent’s obligations under this Clause 15 be construed as if there were no such circumstance.

15.5

Immediate recourse

The Parent waives any right it may have of first requiring the Bank (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Parent under this Clause 15.

15.6

Appropriations

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, the Bank (or any trustee or agent on its behalf) may:

(a)

refrain from applying or enforcing any other monies, security or rights held or received by the Bank (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such a manner and order as it sees fit (whether against those amounts or otherwise) and the Parent shall not be entitled to the benefit of the same; and

(b)

hold in a suspense account any monies received from the guarantor or on account of the guarantor’s liability under this Clause 15, without liability to pay interest on those monies.

15.7

Non-competition

Until all amounts which may be or become payable by the Borrower under or in connection with the Finance Documents have been irrevocably paid in full, the Parent shall not, after a claim has been made or by virtue of any payment or performance by it under this Clause 15:

(a)

be subrogated to any rights, security or monies held, received or receivable by the Bank (or any trustee or agent on its behalf) or be entitled to any right of contribution or indemnity in respect of any payment made or monies received on account of the Parent’s liability under this Clause 15;

(b)

claim, rank, prove or vote as a creditor of the Borrower or its estate in competition with the Bank (or any trustee or agent on its behalf); or

(c)

receive, claim or have the benefit of any payment, distribution or security from or on account of the Borrower, or exercise any right of set-off as against the Borrower,

unless the Bank otherwise directs. The Parent shall hold in trust for and forthwith pay or transfer to the Bank any payment or distribution or benefit of security received by it contrary to this Clause 15.7 or as directed by the Bank.

15.8

Additional security

This guarantee is in addition to and is not in any way prejudiced by any other security now or subsequently held by the Bank.

15.9

Consideration and enforceability

(a)

The Parent represents warrants and agrees that:

(i)

it will receive valuable direct and indirect benefits as a result of the transactions financed by the Loans; and

(ii)

these benefits will constitute “reasonably equivalent value” and “fair consideration” as those terms are used in the fraudulent transfer laws.

(b)

The Parent acknowledges and agrees that the Bank has acted in good faith in connection with the guarantee granted under this Clause 15, and the transactions contemplated by this Agreement.

(c)

This Clause 15 shall be enforceable against the Parent to the maximum extent permitted by the fraudulent transfer laws.

(d)

The Parent’s liability under this Clause 15 shall be limited so that no obligation of, or transfer by, the Parent under this Clause 15 is subject to avoidance and turnover under the fraudulent transfer laws.

(i)

For the purposes of this Clause, “fraudulent transfer laws” means applicable United States bankruptcy and state fraudulent transfer and conveyance statutes and the related case law.

16.

REPRESENTATIONS AND WARRANTIES

16.1

Representations and warranties

Each Obligor makes the representations and warranties set out in this Clause 16 to the Bank.

16.2

Status

(a)

It is a limited liability company, duly incorporated and validly existing under the laws of the jurisdiction of its incorporation; and

(b)

each Material Group Member has the power to own its assets and carry on its business as it is being conducted.

16.3

Powers and authority

It has the power to enter into and perform, and has taken all necessary action to authorize the entry into, performance and delivery of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents.

16.4

Legal validity

Each Finance Document to which it is or will be party constitutes, or when executed in accordance with its terms will constitute, its legal, valid and binding obligation enforceable in accordance with its terms.

16.5

Non-conflict

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents to which it is a party do not and will not:

(a)

conflict with any law or regulation or judicial or official order; or

(b)

conflict with the constitutional documents of it; or

(c)

conflict with any document which is binding upon it or any of its asset.

16.6

No default

(a)

No Default is outstanding or might result from the making of any Loan; and

(b)

no other event is outstanding which constitutes (or with the giving of notice, lapse of time, determination of materiality or the fulfilment of any other applicable condition or any combination of the foregoing, would constitute) a default under any document which is binding on any member of the Group or any asset of any member of the Group to an extent or in a manner which could reasonably be expected to have a material adverse effect.

16.7

Authorizations

(a)

All authorizations which would reasonably be considered to be required in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, the Finance Documents to which it is a party have been obtained or effected (as appropriate) and are in full force and effect.

(b)

All acts, conditions and things required to be done, fulfilled and performed under the laws of the United States of America in order to make the Finance Documents admissible in evidence in the United States of America have been done, fulfilled and performed.

16.8

Accounts

(a)

In the case of the Parent, the audited consolidated accounts of the Group most recently delivered to the Bank (which, at the date of this Agreement, are the Original Group Accounts):

(i)

have been prepared in accordance with accounting principles and practices generally accepted in the U.S.A. consistently applied; and

(ii)

fairly represent the consolidated financial condition of the Group as at the date to which they were drawn up.

(b)

In the case of the Borrower, its audited accounts most recently delivered to the Bank:

(i)

have been prepared in accordance with accounting principles and practices generally accepted in the jurisdiction of its incorporation consistently applied; and

(ii)

fairly represent its financial condition as at the date to which they were drawn up.

16.9

Litigation

(a)

Other than as specifically disclosed to the Bank prior to the date of this Agreement, no litigation, arbitration or administrative proceedings are current or, to its knowledge, pending or threatened, which might, if adversely determined, have a material adverse effect.

(b)

In respect of any litigation, arbitration or administrative proceedings disclosed to the Bank prior to the date of this Agreement, there has been no development in the conduct of those proceedings which might have a material adverse effect.

16.10

Taxes on payments

It will not be required to make any deduction or withholding from any payment it may make to the Bank under the Finance Documents.

16.11

No immunity

In any proceedings taken in the United States of America, or any other relevant state or jurisdiction, in relation to the Finance Documents, it will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process.

16.12

Pari passu ranking

Its obligations under the Finance Documents will rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred solely by any bankruptcy, insolvency, liquidation or other similar laws of general application.

16.13

Winding up: re-organisation etc.

It has not taken any corporate action nor have any other steps been taken or legal proceedings been started or (to the best of its knowledge and belief) threatened against it for its winding-up, dissolution, administration or re-organisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues.

16.14

Environmental Law

Other than as specifically disclosed to the Bank prior to the date of this Agreement, it is and has been in compliance with all applicable Environmental Laws and Environmental Licences in all material respects and, so far as it is aware, there are no circumstances that may at any time prevent or interfere with continued compliance by it with all applicable Environmental Laws and Environmental Licences in all material respects. Other than as disclosed to the Bank prior to the date of this Agreement, no Environmental Claim is pending or, to the best of its knowledge, threatened against it or any of its properties.

16.15

ERISA

Each Plan of it and its respective ERISA Affiliates complies in all material respects with all applicable requirements of law and regulation. No Reportable Event has occurred with respect to any Plan which might have a material adverse effect, and no steps have been taken to terminate any Plan. It has not nor has any of its Subsidiary or ERISA Affiliate has had a complete or partial withdrawal from any Multiemployer Plan or initiated any steps to do so.

16.16

Investment Company Act

It is not an “investment company” or a company “controlled” by an “investment company”, within the meaning of the United States Investment Company Act of 1940, as amended.

16.17

Public Utility Holding Company and Federal Power Act

It is not a “holding company”, or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company”, within the meaning of, or otherwise subject to regulation under, the United States Public Utility Holding Company Act of 1935, as amended. It is not a “public utility” within the meaning of, or otherwise subject to regulation under, the United States Federal Power Act.

16.18

Other regulation

It is not subject to regulation under any United States Federal or State statute or regulation that limits its ability to incur or guarantee indebtedness.

16.19

Margin Stock

(a)

The proceeds of the Loans have been and will be used only for the purposes described in Clause 3 (Purpose).

(b)

It is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations U and X of the Board of Governors of the United States Federal Reserve System).

(c)

None of the transactions contemplated in this Agreement (including, without limitation, the borrowings hereunder and the use of the proceeds thereof) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934 (or any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X).

16.20

Solvency

(a)

The Parent has not incurred and does not intend to incur or believe it will incur debts beyond its ability to pay as they mature.

(b)

The Parent has made no transfer or incurred any obligation under this Agreement with the intent to hinder, delay or defraud any of its present or future creditors.

(c)

For purposes of this Clause 16.20:

(i)

debt means any liability on a claim;

(ii)

claim means (A) any right to payment, whether or not that right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (B) any right to an equitable remedy for breach of performance if that breach gives rise to payment, whether or not the right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured; and

(iii)

terms used in this Clause 16.20 shall be construed in accordance with the applicable United States bankruptcy and New York fraudulent conveyance statutes and the related case law.

16.21

Stamp duties

No stamp or registration duty or similar taxes or charges are payable in respect of any Finance Document.

16.22

No Security Interests

Other than as permitted by the provisions of Clause 17.8 (Negative pledge), no Security Interest exists over all or any of its present or future revenues or assets.

16.23

Material adverse change

There has been no material adverse change in the condition (financial or otherwise) of the Parent or the Group as a whole since the date of the Original Group Accounts.

16.24

Jurisdiction/governing law

(a)

Its:

(i)

irrevocable submission under this Agreement to the jurisdiction of the courts of Sweden;

(ii)

agreement that this Agreement is governed by Swedish law; and

(iii)

agreement not to claim any immunity to which it or its assets may be entitled,

are legal, valid and binding under the laws of its jurisdiction of incorporation; and

(b)

any judgment obtained in Sweden will be recognised and be enforceable by the courts of its jurisdiction of incorporation.

16.25

United States laws

(a)

In this Subclause:

Anti-Terrorism Law means each of:

(a)

Executive Order No. 13224 on Terrorist Financing: Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism issued September 23, 2001, as amended by Order 13268 (as so amended, the Executive Order );

(b)

the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (commonly known as the USA Patriot Act);

(c)

the Money Laundering Control Act of 1986, 18 U.S.C. sect. 1956; and

(d)

any similar law relating to terrorism or money laundering enacted in the United States of America subsequent to the date of this Agreement.

Restricted Party means any person listed:

(a)

in the Annex to the Executive Order;

(b)

on the “Specially Designated Nationals and Blocked Persons” list maintained by the Office of Foreign Assets Control of the United States Department of the Treasury; or

(c)

in any successor list to either of the foregoing.

(b)

To the best of its knowledge, neither it nor any of its Affiliates:

(i)

is, or is controlled by, a Restricted Party;

(ii)

has received funds or other property from a Restricted Party; or

(iii)

is in breach of or has been notified by any governmental or quasi-governmental, regulatory or judicial body or agency that it is the subject of any action or investigation under any Anti-Terrorism Law.

16.26

Times for making representations and warranties

The representations and warranties set out in this Clause 16:

(a)

are made on the date of this Agreement; and

(b)

(with the exception of Clauses 16.10 (Taxes on payments), 16.21 (Stamp duties) and 16.23 (Material adverse change)) are deemed to be repeated by each Obligor on the date of each Request and the first day of each Interest Period with reference to the facts and circumstances then existing.

17.

UNDERTAKINGS

17.1

Duration

The undertakings in this Clause 17 remain in force from the date of this Agreement for so long as any amount is or may be outstanding under this Agreement or any Commitment is in force.

17.2

Financial information

The Parent shall supply to the Bank:

(a)

as soon as the same are available (and in any event within 180 days of the end of each of its financial years (or, in the case of the Borrower, within 212 days))

(i)

its audited consolidated accounts for that financial year; and

(ii)

the audited accounts of the Borrower for that financial year;

(b)

as soon as the same are available (and in any event within 90 days of the end of the first half-year of each of its financial years) its unaudited consolidated accounts for that half-year;

(c)

as soon as the same are available (and in any event within 60 days of the end of each financial quarter) its unaudited consolidated accounts for that financial quarter.

17.3

Information - miscellaneous

Each Obligor shall supply to the Bank:

(a)

all documents despatched by it to its shareholders (or any class of them) or its creditors (or any class of them) at the same time as they are despatched; and

(b)

(unless already provided to the Bank) promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending, and which might, if adversely determined, have a material adverse effect on the financial condition of any Material Subsidiary or on the Group as a whole or on the ability of any of the Obligor to perform its obligations under this Agreement; and

(c)

promptly, such further information in the possession or control of any member of the Group regarding its financial condition and operations as the Bank may reasonably request.

17.4

Notification of Default

Each Obligor shall notify the Bank of any Default (and the steps, if any, being taken to remedy it) promptly upon its occurrence.

17.5

Compliance certificates

The Parent shall supply to the Bank:

(a)

within five Business Days of delivery of the accounts specified in Clause 17.2(a), (b) and (c) (Financial information); and

(b)

promptly at any other time, if the Bank so requests, a Compliance Certificate signed by one of its senior officers on its behalf (substantially in the form set out in Schedule 3 (Form of Compliance Certificate)):

(i)

setting out computations as to compliance with Clause 17.22 (Subsidiary Borrowings) as at the date at which the accounts referred to in paragraph (a) above were drawn up; and

(ii)

certifying that no Default is outstanding or, if a Default is outstanding, specifying the Default and the steps, if any, being taken to remedy it.

17.6

Authorizations

Each Obligor shall promptly:

(a)

obtain, maintain and comply with the terms of; and

(b)

supply certified copies to the Bank of,

any authorization required under any law or regulation to enable it to perform its obligations under, or for the validity or enforceability of, any Finance Document.

17.7

Pari passu ranking

Each Obligor shall procure that its obligations under the Finance Documents do and will rank at least pari passu with all its other present and future unsecured obligations, except for obligations mandatorily preferred by law applying to companies generally.

17.8

Negative pledge

(a)

No Obligor shall, and the Parent shall procure that no other member of the Group will, create or permit to subsist any Security Interest on any of its assets (other than Unrestricted Margin Stock).

(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 Agreement which secures Financial Indebtedness outstanding at the date of this Agreement;

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

(A)

the principal amount secured by such Security Interest and outstanding when the relevant company became a member of the 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 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); and

(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 Clause 17.8(b)(vii) (other than those permitted by subparagraphs 17.8(b)(i) - (vi) above), when taken together with the aggregate value of financing raised or the amount involved in the financing of an asset in transactions described in Clause 17.9 (Transactions similar to security), does not exceed 5 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 Group delivered pursuant to Clause 17.2 (Financial information).

17.9

Transactions similar to security

(a)

No Obligor shall, and the Parent shall procure that no other Material Subsidiary will:

(i)

sell, transfer or otherwise dispose 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 may be leased to or re-acquired or acquired by a member of the Group or any of its related entities; or

(ii)

sell, transfer or otherwise dispose 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 Clause 17.9 (Transactions similar to security) and (b) the Security Interests permitted by Clause 17.8(b)(vii) (Negative pledge), does not exceed 5 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 Group delivered pursuant to Clause 17.2 (Financial information). Paragraph (a) above does not apply to Unrestricted Margin Stock.

17.10

Disposals

(a)

No Obligor shall, and the Parent shall procure that no other Material Subsidiary will, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, sell, transfer, grant or lease or otherwise dispose of all or any substantial part of its assets.

(b)

Paragraph (a) does not apply to:

(i)

disposals made in the ordinary course of business of the disposing entity; or

(ii)

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

(iii)

disposals made on an arms length basis for full market consideration; or

(iv)

disposals made with the prior written consent of the Bank; or

(v)

any disposal of assets from:

(A)

an Obligor to the other Obligor or to Autoliv ASP Inc or Autoliv Holding AB; or

(B)

a Material Subsidiary (other than an Obligor) to an Obligor or any other Subsidiary; or

(C)

any other Subsidiary of the Parent to any member of the Group,

provided that all such disposals in this paragraph (v) are made for full market consideration,

17.11

Change of business

The Parent shall procure that no substantial change is made to the general nature or scope of the business of the Parent or of the Group from that carried on at the date of this Agreement.

17.12

Mergers

The Parent shall not, without the prior written consent of the Bank, finalise or effectuate any amalgamation, demerger, merger or reconstruction.

17.13

Insurances

Each Obligor shall, and the Parent will procure that the Group taken as a whole will, effect and maintain such insurance over and in respect of its property, assets and business with reputable underwriters or insurance companies and in such a manner and to such extent as is reasonable and customary for a business enterprise engaged in the same or similar businesses and in the same or similar localities.

17.14

Third party guarantees

No Obligor shall, and it will ensure that no other member of the Group shall, without the prior consent of the Bank, grant any guarantee, bond, indemnity, counter-indemnity or similar instrument in respect of any material obligation of a person other than a member of the Group, save for:

(a)

on the terms of the Syndication Agreement; or

(b)

any guarantee related to the purchase or supply of goods and/or services by such Obligor or a member of the Group or a consortium or a group of companies of which such Obligor or a member of the Group is a party, which guarantee is given in the ordinary course of business.

17.15

Environmental Matters

Each Obligor that directly or indirectly owns, leases, occupies or uses real property in the United States shall, in all material respects, comply with:

(a)

all applicable Environmental Law; and

(b)

the terms and conditions of all Environmental Licenses applicable to it,

and for this purpose will implement procedures to monitor compliance with and to prevent any liability under Environmental Law.

17.16

Notice requirements

Each Obligor will give the Bank prompt notice of the occurrence of any of the following events:

(a)

non-compliance in any material respect with any Environmental Law or Environmental License of which it is aware;

(b)

any Environmental Claim or any other claim, notice or other communication served on it in respect of any alleged breach of any Environmental Law or Environmental License which could reasonably be expected to have a material adverse effect;

(c)

any actual or suspected Environmental Contamination which might have a material adverse effect;

(d)

any Reportable Event;

(e)

termination of any Plan maintained or contributed by Obligor or any ERISA Affiliate or any action that might result in termination; or

(f)

complete or partial withdrawal from any Multiemployer Plan by the Obligor or any ERISA Affiliate or any action that might result in complete or partial withdrawal.

In each notice delivered under this Clause, the relevant Obligor will include reasonable details concerning the occurrence that is the subject of the notice as well as the Obligor’s proposed course of action, if any. Delivery of a notice under this Clause will not affect the Obligor’s obligations to comply with any other provision of this Agreement.

17.17

Investment Company Act

No Obligor will, either by act or omission, become or permit the other Obligor to become an “investment company” or a company “controlled” by an “investment company”, within the meaning of the United States Investment Company Act of 1940, as amended.

17.18

Public utility status

No Obligor will, either by act or omission, become or permit any other Obligor or, as a result of its obligations under this Agreement, the Bank to become subject to regulation under the United States Public Utility Holding Company Act of 1935, as amended, or the United States Federal Power Act.

17.19

ERISA

No Obligor will take any action or omit to take any action or permit any Subsidiary or ERISA Affiliate to take any action or omit to take any action with respect to any Plan that might result in the imposition of a lien or other Security Interest on any property of the Obligor or any Subsidiary or otherwise have a material adverse effect.

17.20

Margin Stock

including, without limitation, Regulations T, U and X). If requested by the Bank, the Parent will furnish to the Bank in connection with any Loan hereunder a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U.

17.21

Solvency

The Parent will, at all times, maintain sufficient capital to conduct its current and proposed business and operations, maintain its ability to pay its debts as they become due, and continue to own property having a value – both at fair valuation and at present fair saleable value – greater than the total amount of the probable liability of the Parent on its debts and obligations (including this Agreement).

17.22

Subsidiary Borrowings

In this Clause 17.22:

Borrowings means:

(a)

the outstanding principal amount of any monies borrowed;

(b)

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

(c)

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;

(d)

the principal amount, outstanding for more than 90 days on its original terms and created in connection with the payment of the acquisition price of any asset before or 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 fixed or minimum premium payable on the repayment or redemption of any instrument referred to in subparagraph (b) above; and

(f)

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

For the avoidance of doubt, the amount of any provision for pension liabilities made in the accounts delivered in accordance with Clause 17.2 (Financial information) shall not constitute Borrowings for the purposes of this definition.

Subsidiary Borrowings means, at any time, the aggregate amount of all Borrowings of the Parent’s Subsidiaries (other than the Borrower, Autoliv ASP, Inc. and Autoliv Holding AB) at that time (without double counting in relation to intra-Group Borrowings or guarantees given by one Subsidiary in relation to the Borrowings of another).

(a)

For the purposes of this Clause 17.22 figures shall be expressed in U.S. Dollars and, where any currency has to be converted into U.S. Dollars for this purpose, such conversion shall be made at the rate of exchange applied in the relevant financial accounts delivered under Clause 17.2 (Financial information).

(b)

The Parent shall procure that Subsidiary Borrowings shall at no time exceed U.S.$400,000,000 (or its equivalent).

17.23

Know your customer requirements

(a)

Each Obligor must promptly on the request of the Bank supply to the Bank documentation or other evidence which is reasonably requested by the Bank to enable the Bank to carry out and be satisfied with the results of all applicable know your customer requirements.

(b)

The Bank agrees that any information it receives under this clause 17.23 (Know your customer requirements) shall be kept confidential in accordance with clause 26 (Disclosure of Information).

17.24

Most Favoured Lender

If under any other Major Credit Facility under which an Obligor is a borrower, entered into after the date of this Agreement or amended after the date of this Agreement undertakings and covenants (a) comparable to those prescribed in Clause 17.22 of this Agreement or (b) in respect of financial covenants relating to interest expense, net worth, equity or net assets (howsoever expressed and whether stated as a ratio, as a fixed threshold, as an event of default or otherwise), are granted resulting in:

(i)

a lender is given a better position; or

(ii)

stricter provisions are prescribed for the Parent or the Group;

In each case compared to the provisions under this Agreement, the Borrower undertakes, without undue delay, to notify the Bank of the details of such other Major Credit Facility and, if so requested by the Bank, promptly to grant the equivalent (or the practical equivalent) of such better position or agree to prescribe such stricter provisions to itself and the Group by entering into any agreement or arrangement which the Bank deems necessary (acting reasonable) in order for the Bank to receive such better position or for the Parent and the Group to be subject to such stricter provisions.

18.

DEFAULT

18.1

Events of Default

Each of the events set out in this Clause 18 is an Event of Default (whether or not caused by any reason whatsoever outside the control of an Obligor or any other person).

18.2

Non-payment

An Obligor does not pay on the due date any amount payable by it under the Finance Documents at the place at and in the currency in which it is expressed to be payable and, if the non-payment is caused solely by administrative or technical error, or relates solely to non-payment of interest or fees, it is not remedied within three Business Days.

18.3

Breach of other obligations

An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 18.2 (Non-payment)), provided that, if such non-compliance is capable of remedy, such non-compliance remains unremedied for a period of 14 days.

18.4

Misrepresentation

A representation, warranty or statement made or repeated or deemed to be repeated in or in connection with any Finance Document or in any document delivered by or on behalf of an Obligor under or in connection with any Finance Document is incorrect in any material respect when made or repeated or deemed to be repeated.

18.5

Cross-default

(a)

Any Financial Indebtedness of a member of the Group is not paid when due or within any applicable grace period provided for in the relevant documentation; or

(b)

an event of default howsoever described occurs under any document relating to Financial Indebtedness of a member of the Group; or

(c)

any Financial Indebtedness of a member of the Group becomes prematurely due and payable or is placed on demand as a result of an event of default (howsoever described) under the document relating to that Financial Indebtedness; or

(d)

any commitment for, or underwriting of, any Financial Indebtedness of a member of the Group is cancelled or suspended as a result of an event of default (howsoever described) under the document relating to that Financial Indebtedness; or

(e)

any Security Interest securing Financial Indebtedness over any asset of a member of the Group becomes enforceable,

Provided that no Event of Default shall occur under this Clause 18.5 unless the aggregate amount of all the Financial Indebtedness with respect to which an event or events under paragraphs (a) to (e) (inclusive) above occurs or occur is at least U.S.$40,000,000 (or its equivalent in other currencies).

18.6

Insolvency

(a)

An Obligor or any Material Subsidiary is, or is deemed for the purposes of any law to be, unable to pay its debts as they fall due or to be insolvent, or admits inability to pay its debts as they fall due; or

(b)

An Obligor or any Material Subsidiary suspends making payments on all or any class of its debts or announces an intention to do so, or a moratorium is declared in respect of any of its indebtedness; or

(c)

An Obligor or any Material Subsidiary, by reason of financial difficulties, begins negotiations with one or more of its creditors with a view to the readjustment or rescheduling of any of its indebtedness.

18.7

Insolvency proceedings

(a)

Any step (including petition, proposal or convening a meeting) is taken with a view to a composition, assignment or arrangement with any creditors of an Obligor or any Material Subsidiary; or

(b)

a meeting of an Obligor or any Material Subsidiary is convened for the purpose of considering any resolution for (or to petition for) its winding-up or for its administration or any such resolution is passed; or

(c)

any person presents a petition for the winding-up or for the administration of an Obligor or any Material Subsidiary, other than a petition which is frivolous or vexatious, or which is dismissed within 30 days; or

(d)

an order for the winding-up or administration of an Obligor or any Material Subsidiary is made; or

(e)

any other step (including petition, proposal or convening a meeting) is taken with a view to the rehabilitation, administration, custodianship, liquidation, winding-up or dissolution of an Obligor or any Material Subsidiary or any other insolvency proceedings involving an Obligor or any Material Subsidiary, unless such step is taken by a third party and is frivolous or vexatious.

18.8

Appointment of receivers and managers

(a)

Any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or the like is appointed in respect of an Obligor or any Material Subsidiary or any part of its assets; or

(b)

the directors of an Obligor or any Material Subsidiary requests the appointment of a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or the like; or

(c)

any other steps are taken to enforce any Security Interest over any part of the assets of an Obligor or any Material Subsidiary, unless such steps are considered (in the reasonable opinion of the Bank) to be frivolous or vexatious.

18.9

Creditors’ process

Any attachment, sequestration, distress or execution affects any asset of an Obligor or any Material Subsidiary and is not discharged within 14 days.

18.10

Analogous proceedings

There occurs, in relation to an Obligor or any Material Subsidiary, any event anywhere which appears to correspond with any of those mentioned in Clauses 18.6 (Insolvency) to 18.9 (Creditors’ process) (inclusive).

18.11

Cessation of business

An Obligor or any Material Subsidiary ceases, or threatens to cease, to carry on all or a substantial part of its business.

18.12

U.S. Bankruptcy Laws

(a)

An Obligor makes a general assignment for the benefit of creditors; or

(b)

an Obligor commences a voluntary case or proceeding under the United States Bankruptcy Code of 1978, as amended, or under any other United States Federal or State bankruptcy, insolvency or other similar law (collectively U.S. Bankruptcy laws ); or

(c)

an involuntary case under any U.S. Bankruptcy Law is commenced against an Obligor and the petition is not controverted within 30 days and is not dismissed or stayed within 90 days after commencement of the case; or

(d)

a custodian, conservator, receiver, liquidator, assignee, trustee, sequestrator or other similar official is appointed under any U.S. Bankruptcy Law for or takes charge of, all or substantial part of the property of the Parent.

18.13

ERISA

(a)

Any event or condition occurs that presents a material risk that an Obligor or any ERISA Affiliate may incur a material liability to a Plan or to the United States Internal Revenue Service or to the United States Pension Benefit Guaranty Corporation; or

(b)

An “accumulated funding deficiency” occurs (as that term is defined in section 412 of the United States Internal Revenue Code of 1986, as amended, or section 302 of ERISA), whether or not waived, by reason of the failure of an Obligor or any ERISA Affiliate to make a contribution to a Plan.

18.14

Acceleration

(a)

Upon the occurrence of an Event of Default described in Clause 18.12 (U.S. Bankruptcy Laws):

(i)

the Commitment will immediately terminate; and

(ii)

the outstanding Loan, together with accrued interest, and all other amounts accrued under the Finance Documents, will be immediately due and payable.

(b)

On and at any time after the occurrence of an Event of Default (other than an Event of Default described in Clause 18.12 (U.S. Bankruptcy Laws)) the Bank may by notice to the Parent:

(i)

cancel the Commitment; and/or

(ii)

demand that all or part of the Loan, together with accrued interest and all other amounts accrued under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or

(c)

demand that all or part of the Loan be payable on demand, whereupon they shall immediately become payable on demand by the Bank.

19.

FEES

19.1

Arrangement fee

The Borrower shall within five Business Days of the date of this Agreement (or on the first Drawdown Date if the first Drawdown Date falls before the fifth Business Day after the date of this Agreement) pay to the Bank an arrangement fee in SEK equal to 0.05 % of the Commitment.

19.2

Commitment fee

(a)

The Borrower shall pay to the Bank a commitment fee in SEK computed at the rate of 0.63 per cent. per annum on the undrawn, uncancelled amount of the Commitment.

The Commitment fee will be payable on each day on which any Commitment is in force. For this purpose Loans shall be taken at its Original SEK Amount.

(b)

Commitment fee shall be payable quarterly in arrear from the date of this Agreement. Accrued commitment fee shall also be payable to the Bank on the cancelled amount of its Commitment at the time the cancellation comes into effect.

19.3

VAT

Any fee referred to in this Clause 19 is exclusive of any value added tax or any other direct tax which might be chargeable in connection with that fee. If any value added tax or other direct tax is so chargeable, it shall be paid by the Borrower at the same time as it pays the relevant fee.

20.

EXPENSES

20.1

Initial and special costs

The Borrower shall forthwith on demand pay the Bank the amount of all costs and expenses (including legal fees) reasonably incurred by it in connection with:

(a)

the negotiation, preparation, printing and execution of:

(i)

this Agreement and any other documents referred to in this Agreement; and

(ii)

any other Finance Document executed after the date of this Agreement; and

(b)

any amendment, waiver, consent or suspension of rights (or any proposal for any of the foregoing) requested by or on behalf of an Obligor and relating to a Finance Document or a document referred to in any Finance Document.

(c)

any other matter, not of an ordinary administrative nature, arising out of or in connection with a Finance Document.

20.2

Enforcement costs

The Borrower shall forthwith on demand pay to the Bank the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

21.

STAMP DUTIES

The Borrower shall pay and forthwith on demand indemnify the Bank against any liability it incurs in respect of, any stamp, registration and similar tax which is or becomes payable in connection with the entry into, performance or enforcement of any Finance Document.

22.

INDEMNITIES

22.1

Currency indemnity

(a)

If the Bank receives an amount in respect of an Obligor’s liability under the Finance Documents or if that liability is converted into a claim, proof, judgment or order in a currency other than the currency (the contractual currency ) in which the amount is expressed to be payable under the relevant Finance Document:

(i)

that Obligor shall indemnify the Bank as an independent obligation against any loss or liability arising out of or as a result of the conversion;

(ii)

if the amount received by the Bank, when converted into the contractual currency at a market rate in the usual course of its business is less than the amount owed in the contractual currency, the Obligor concerned shall forthwith on demand pay to the Bank an amount in the contractual currency equal to the deficit; and

(iii)

the Obligor shall forthwith on demand pay to the Bank forthwith on demand any exchange costs and taxes payable in connection with any such conversion.

(b)

Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.

22.2

Other indemnities

(a)

The Borrower shall forthwith on demand indemnify the Bank against any loss or liability which that Bank incurs as a consequence of:

(i)

the occurrence of any Default;

(ii)

the operation of Clause 18.14 (Acceleration);

(iii)

any payment of principal or an overdue amount being received from any source otherwise than on the last day of a relevant Interest Period or Designated Interest Period (as defined in Clause 9.3 (Default interest)) relative to the amount so received; or

(iv)

the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment or (other than by reason of negligence or default by the Bank) a Loan not being made after the Borrower has delivered a Request.

(b)

The Borrower’s liability in each case includes any loss of Margin or other loss or expense on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Loan.

(c)

The obligations of any Obligor incorporated in Sweden shall be limited, if (and only if) required by the mandatory provisions of the Swedish Companies Act ( Sw. Aktiebolagslagen (2005:551) ) regulating (i) unlawful distribution of assets (Chapter 17, Sections 1 to 4) (or its equivalent from time to time) and (ii) unlawful financial assistance and other prohibited loans and guarantees (Chapter 21, Section 5) (or its equivalent from time to time) and it is understood that the liability of each Swedish Obligor under this Agreement only applies to the extent permitted by the above mentioned provisions of the Swedish Companies Act.

23.

EVIDENCE AND CALCULATIONS

23.1

Accounts

Accounts maintained by the Bank in connection with this Agreement are prima facie evidence of the matters to which they relate.

23.2

Certificates and determinations

Any certification or determination by the Bank of a rate or amount under the Finance Documents is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

23.3

Calculations

Interest and the fee payable under Clause 19.2 (Commitment fee) accrue from day to day and are calculated on the basis of the actual number of days elapsed and a year of 360 days or, where market practice otherwise dictates, 365 days.

24.

AMENDMENTS AND WAIVERS

24.1

Procedure

Any term of the Finance Documents may be amended or waived with the agreement of the Obligors and the Bank. Any amendment, variation or supplement to the Finance Documents shall be made in writing and signed by the Parties.

24.2

Waivers and Remedies Cumulative

The rights of the Bank under the Finance Documents:

(a)

may be exercised as often as necessary;

(b)

are cumulative and not exclusive of its rights under the general law; and

(c)

may be waived only in writing and specifically.

Delay in exercising or non-exercise of any such right is not a waiver of that right.

25.

CHANGES TO THE PARTIES

25.1

Transfers by Obligors

No Obligor may not assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations under the Finance Documents.

25.2

Transfers by the Bank

(a)

The Bank may, subject to paragraph (b) below, at any time assign or transfer any of its Commitments and/or its rights and/or obligations under this Agreement to another bank or financial institution or EKN (the New Bank ). If the Bank should assign any of its rights and obligations according to this Clause 25, an amended and restated agreement on the same terms but reflecting the requirement for agency provisions and several lenders shall be entered into in replacement of this Agreement if the Bank so requires.

(b)

(i)

A transfer of part of the Commitment must be in a minimum amount of at least SEK 100,000,000 or the remaining Commitment, if less;

(ii)

the prior consent of the Borrower is required for any such assignment or transfer, unless the New Bank is an Affiliate of the Bank or unless an Event of Default has occurred which is continuing or paragraph (b) of Clause 7.6 (Mandatory prepayment – request by EKN) has become applicable. However, the prior consent of the Borrower must not be unreasonably withheld or delayed and will be deemed to have been given if, within ten (10) Business Days of receipt by the Borrower of an application for consent, it has not been expressly refused.

26.

DISCLOSURE OF INFORMATION

The Bank shall keep confidential any and all information made available to it by the Borrower pursuant to or in connection with the Finance Documents, other than information:

(a)

which at the relevant time is in the public domain; or

(b)

which, after such information has been made available to the Bank, becomes generally available to third parties by publication or otherwise through no breach of this Clause 26 by the Bank; or

(c)

which was lawfully in the possession of the Bank or its advisers prior to such disclosure (as evidenced by the Bank’s written records or the written records of the Bank’s advisers) and which was not acquired directly or indirectly from the Borrower; or

(d)

the disclosure of which is required by law or any competent regulatory body (to the extent of that requirement) or which is necessitated by any legal proceeding or audit requirement; or

(e)

the disclosure of which is made to an Affiliate of the Bank in circumstances where it is the Bank’s usual practice to make such disclosure or where such disclosure is required as part of the Bank’s management or reporting policies or where such disclosure is in the reasonable opinion of the Bank required to protect its position, or to assist in the recovery of amounts, hereunder; or

(f)

the disclosure of which is made to any person with whom it is proposing to enter, or has entered, into any kind of transfer, participation or other agreement in relation to this Agreement; or

(g)

the disclosure of which is made by the Bank to its professional advisers; or

(h)

which is disclosed to another party to this Agreement in the specific circumstances whereby it is made available to that party,

provided that, if the Bank makes such information available to any person in accordance with paragraphs (d), (e), (f) or (g) above, it takes reasonable endeavours to ensure that such party keeps that information confidential to the same extent as set out above.

27.

DISCLOSURE OF INFORMATION TO EKN

The Obligors hereby grant the Bank consent to disclose to EKN any information regarding the Obligors and the Facility which the Bank is obliged to deliver as a consequence of the Credit Guarantee.

28.

SET-OFF

The Bank may set off any matured obligation owed by an Obligor under the Finance Documents (to the extent beneficially owned by the Bank) against any obligation (whether or not matured) owed by the Bank to that Obligor, 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.

29.

SEVERABILITY

If a provision of any Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:

(a)

the validity or enforceability in that jurisdiction of any other provision of the Finance Documents; or

(b)

the validity or enforceability in other jurisdictions of that or any other provision of the Finance Documents.

30.

COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

31.

NOTICES

31.1

Giving of notices

All notices or other communications under or in connection with this Agreement shall be given in writing and, unless otherwise stated, may be made by letter or facsimile Any such notice will be deemed to be given as follows:

(a)

if by letter, when delivered personally or on actual receipt; and

(b)

if by facsimile, when received in legible form.

However, a notice given in accordance with the above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.

31.2

Addresses for notices

(a)

The address and facsimile number of the Parent are:

Autoliv, Inc,

Box 70381

SE-107 24 Stockholm

Sweden


Fax No:		+46 8 24 44 93
Attention:		Treasurer

With a copy to:


Fax No:		+46 85 87 20 633
Attention:		VP for Legal Affairs, General Counsel and Secretary

or such other as the Parent may notify to the Bank by not less than five Business Days’ notice.

(b)

The address and facsimile number of the Borrower are:

Autoliv AB

Box 70381

SE-107 24 Stockholm

Sweden


Fax No:		+46 8 24 44 93
Attention:		Treasurer

With a copy to:


Fax No:		+46 85 87 20 633
Attention:		VP for Legal Affairs, General Counsel and Secretary

or such other as the Borrower may notify to the Bank by not less than five Business Days’ notice

(c)

The address and facsimile number of the Bank are:

for operational matters:

Nordea Bank AB (publ)

H352

105 71 Stockholm

Sweden


Fax No:		+46 8 614 7630 or + 46 8 20 98 94
Attention:		Structured Loan Operations

for other matters:

Nordea Bank AB (publ)

Corporate Merchant Banking, S 53

105 71 Stockholm

Sweden


Fax No:		+46 8 614 7587
Attention:		Ulf Gilborne

or such other as the Bank may notify to the Obligors by not less than five Business Days’ notice.

32.

JURISDICTION

32.1

Submission

(a)

For the benefit of the Bank, the Obligors agree that the courts of Sweden have jurisdiction to settle any disputes in connection with any Finance Document and accordingly submits to the jurisdiction of the Swedish courts.

(b)

Without prejudice to paragraph (a) above and for the benefit of the Bank, the Obligors agree that any New York State court or Federal court sitting in New York City has jurisdiction to settle any disputes in connection with any Finance Document and accordingly submits to the jurisdiction of those courts.

32.2

Forum convenience and enforcement abroad

Each Obligor:

(a)

waives objection to the Swedish and New York State and Federal courts on grounds of inconvenient forum or otherwise as regards proceedings in connection with any Finance Document; and

(b)

agrees that a judgment or order of an Swedish or New York State or Federal court in connection with any Finance Document is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.

32.3

Non-exclusivity

Nothing in this Clause 32 limits the right of the Bank to bring proceedings against an Obligor in connection with any Finance Document:

(a)

in any other court of competent jurisdiction; or

(b)

concurrently in more than one jurisdiction.

33.

GOVERNING LAW

This Agreement is governed by Swedish law.

34.

WAIVER OF JURY TRIAL

THE OBLIGORS AND THE BANK WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED ON OR ARISING FROM ANY FINANCE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED BY THE FINANCE DOCUMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

SCHEDULE 1

CONDITIONS PRECEDENT DOCUMENTS

TO BE DELIVERED BEFORE THE FIRST REQUEST

1.	Each Obligor

(a)	A copy of the memorandum and articles of association and certificate of incorporation of each Obligor.

(b)	A copy of a resolution of the board of directors of each Obligor:

(i)

approving the terms of, and the transactions contemplated by, this Agreement and resolving that it execute this Agreement;

(ii)

authorizing a specified person or persons to execute this Agreement on its behalf; and

(iii)

authorizing a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement.

(c)	A specimen of the signature of each person authorized by the resolution referred to in paragraph (b) above.

(d)	A certificate of a director of each Obligor confirming that the borrowing or guaranteeing of the Commitment, as appropriate, would not cause any borrowing or guaranteeing limit binding on it to be exceeded.

2.	Other documents

(a)	A certificate of an authorized signatory of each Obligor certifying that each copy document specified in this Part 1 of Schedule 1 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

(b)	Confirmation from the Parent that it is not, to the best of its knowledge and belief after full and due enquiry, in breach of any other agreement to which it is a party.

(c)	The Credit Guarantee duly executed and delivered by EKN.

(d)	Evidence that all fees and expenses then due and payable from an Obligor under this Agreement have been or will be paid by the first Drawdown Date.

(e)	A copy of any other authorization or other document, opinion or assurance which the Bank considers to be necessary in connection with the entry into and performance of, and the transactions contemplated by, any Finance Document or for the validity and enforceability of any Finance Document.

3.	Legal opinion

(a)	A legal opinion from the VP for Legal Affairs, General Counsel and Secretary of the Parent.

SCHEDULE 2

FORM OF REQUEST


To:		Nordea Bank AB (publ)

From:		Autoliv AB (publ)

Date:		[ ]

SEK 2,000,000,000 Revolving Credit Facility Agreement dated 21 June, 2010

1.	We wish to utilise the Facility as follows:

(a)

Drawdown Date: [ ]

(b)

Amount: SEK [ ]

(c)

Interest Period: [ ]

(d)

Payment instructions: [ ]

2.	We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Request.

By:

Autoliv AB (publ)

Authorized Signatory

SCHEDULE 3

FORM OF COMPLIANCE CERTIFICATE


To:		Nordea Bank AB (publ)

From:		Autoliv, Inc.

Date: [ ]

SEK 2,000,000,000 Revolving Credit Facility Agreement dated 21 June, 2010 (the Agreement)

1.	This is the Compliance Certificate referred to in Clause 17.5 (Compliance certificates) of the Agreement.

2.	We confirm that as at [relevant Balance Sheet Date] Subsidiary Borrowings were [ ] (Covenant level requirement not more than U.S.$400,000,000).

3.	We confirm that no Default is outstanding as at the date of this Compliance Certificate. ¹

By:

AUTOLIV INC.

¹	If this statement cannot be made, the certificate should identify any Default that is outstanding and the steps, if any, being taken to remedy it.

SIGNATORIES

Parent

AUTOLIV, INC.

By:

Borrower

AUTOLIV AB (publ)

By:

Bank

NORDEA BANK AB (PUBL)

By:

EXHIBIT 10.22

FACILITY AGREEMENT

EUR 155,000,000

AUTOLIV INC

as Guarantor

and

AUTOLIV AB

as Borrower

and

AB SVENSK EXPORTKREDIT (publ)

as Lender

Guaranteed by

EXPORTKREDITNÄMNDEN

and

SKANDINAVISKA ENSKILDA BANKEN AB (publ)

21 June 2010

CONTENTS


Clause		Page

1.	Interpretation	3
2.	Facility	9
3.	Purpose	10
4.	Conditions Precedent	10
5.	Utilisation	10
6.	Repayment	11
7.	Prepayment and Cancellation	11
8.	Interest Periods	13
9.	Interest	13
10.	Payments	14
11.	Taxes	15
12.	Market Disruption	16
13.	Increased Costs	17
14.	Illegality	18
15.	Guarantee	18
16.	Representations and Warranties	21
17.	Undertakings	26
18.	Default	33
19.	Fees	36
20.	Expenses	37
21.	Stamp Duties	37
22.	Indemnities and break costs	37
23.	Evidence and Calculations	38
24.	Amendments and Waivers	39
25.	Changes to the Parties	39
26.	disclosure of information	40
27.	Set-Off	41
28.	Severability	41
29.	Counterparts	41
30.	Notices	41
31.	Language	43
32.	Force majeure	43
33.	Governing law	43
34.	Enforcement	43
35.	Integration	44

Schedule		Page

1.	Conditions Precedent Documents	45
2.	Form of Request	46
3.	Form of Compliance Certificate	47

Signatories		48

2(48)

LOGO

THIS AGREEMENT is dated 21 June 2010

BETWEEN :

(1)	AUTOLIV AB (incorporated under the laws of Sweden) ( the Borrower );

(2)	AUTOLIV, INC. (incorporated under the laws of the State of Delaware, U.S.A.) (in this capacity, the Parent );

(3)	AB SVENSK EXPORTKREDIT (publ), as lender (the Lender ).

(4)	SKANDINAVISKA ENSKILDA BANKEN AB (publ) as additional guarantor ( SEB ).

IT IS AGREED as follows:

1.	INTERPRETATION

1.1

Definitions

In this Agreement:

Affiliate means a Subsidiary or a holding company of a person or any other Subsidiary of that holding company.

Availability Period means the period from and including the date of this Agreement to and including the date one month before the Maturity Date.

Board means the Board of Governors of the Federal Reserve System of the United States of America or any successor thereof.

Break Costs means the amount (if any) which the Lender is entitled to receive under Clause 22.4 (Break costs) as compensation if any part of a Loan or overdue amount is repaid or prepaid.

Business Day means a day (other than a Saturday or a Sunday) on which banks are open for general business in Stockholm.

Code means the United States Internal Revenue Code of 1986, as amended, and any rule or regulation issued thereunder from time to time in effect.

Commitment means EUR 155,000,000, to the extent not cancelled, reduced or transferred under this Agreement.

Compliance Certificate has the meaning given to it in Clause 18.5.

Default means an Event of Default or an event which, with the giving of notice, lapse of time, determination of materiality or fulfilment of any other applicable condition or condition precedent under the Finance Documents (or any combination of the foregoing), would constitute an Event of Default.

3(48)

LOGO

Drawdown Date means the date of the advance of a Loan.

EKN means the Swedish Export Credits Guarantee Board (Sw: Exportkreditnämnden).

EKN documents means the Borrower’s application to EKN for credit guarantee (Sw: Ansökan om Garantiram för finansiering ) dated 13 February 2009, the Lender’s application to EKN for a credit guarantee (Sw: Ansökan om enskild kreditgaranti ) dated 11 May 2010, the offer from EKN to issue an individual credit guarantee, offer nr 2010-10539-001 (Sw: EKN:s Offert om utfärdande av enskild kreditgaranti offert nr 2010-10539-001 ) dated 3 June 2010, confirmation from EKN regarding the limit for credit guarantees (Sw: Limit för Enskilda kreditgarantier ) dated 24 April 2009 and 22 December 2009 and in the form provided by the Lender to the Obligors on the date of this Agreement, EKN’s General Conditions for Credit Guarantees (sw: Allmänna bestämmelser för enskild kreditgaranti ) applicable as of 24 April 2009 and Conditions for Individual Credit Guarantee in matter 2010-10539-001 (Sw: Villkor för enskild kreditgaranti i ärende 2010-10539-001 ).

EKN Guarantee means a working capital guarantee nominated in Euro and issued by EKN at the request of the Lender, covering at least 75 per. cent. of the Commitment in relation to the Lender.

Environmental Claim means any claim by any person as a result of or in connection with any violation of Environmental Law or any Environmental Contamination which could give rise to any remedy or penalty (whether interim or final) or liability for the Borrower or Lender which could reasonably be expected to have a material adverse effect.

Environmental Contamination means each of the following and their consequences:

(a)

any release, emission, leakage, or spillage of any Dangerous Substance into any part of the environment; or

(b)

any accident, fire, explosion or sudden event which is directly or indirectly caused by or attributable to any Dangerous Substance; or

(c)

any other pollution of the environment.

Environmental Law means any national or supranational law, regulation or directive concerning the protection of human health or the environment or concerning Dangerous Substances.

Environmental License means any authorization by any Environmental Law.

ERISA means the United States Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate means each trade or business, whether or not incorporated, that would be treated as a single employer with the Borrower under section 414 of the United States Internal Revenue Code of 1986, as amended. When any provision of this Agreement relates to a past event, the term

ERISA Affiliate includes any person that was an ERISA Affiliate of Borrower at the time of that past event.

EURIBOR means for an Interest Period of any Loan or overdue amount in Euro:

(a)

the applicable Screen Rate; or

(b)

if no such Screen Rate is available for the currency or Interest Period of the relevant Loan, the arithmetic mean of the rates (rounded upwards if necessary to the nearest four decimal places) as supplied to the Lender at its request quoted by the Reference Banks to leading banks in the European interbank market,

4(48)

LOGO

at or about 11.00 a.m. (Brussels time) on the Rate Fixing Day for the offering of deposits in Euros for a period comparable to the relevant Interest Period.

Event of Default means an event specified as such in Clause 18.1 (Events of Default).

Existing Syndicated Facility means the US$ 1,100,000,000 multicurrency revolving credit and swingline facility dated 7 November 2005 between inter alia the Borrower, the Parent and Skandinaviska Enskilda Banken AB (publ) as facility agent and swingline agent.

Facility means the EUR 155,000,000 revolving credit facility, made available under this Agreement as set out in Clause 2.1 (Revolving Credit Facility).

Finance Document means this Agreement or any other document designated as such by the Lender, SEB and the Borrower.

Financial Indebtedness means any indebtedness in respect of:

(a)

monies borrowed;

(b)

any debenture, bond, note, loan stock or other security;

(c)

any acceptance credit;

(d)

receivables sold or discounted (otherwise than on a non-recourse basis);

(e)

(f)

any lease entered into primarily as a method of raising finance or financing the acquisition of the asset leased;

(g)

(h)

any amount raised under any other transaction having the commercial effect of a borrowing or raising of money; or

(i)

any guarantee, indemnity or similar assurance against financial loss of any person.

Group means the Parent and its Subsidiaries.

Interest Period means each period determined in accordance with Clause 8 (Interest Periods).

Loan means, subject to Clause 8 (Interest Periods), the principal amount of each borrowing by the Borrower under this Agreement or the principal amount outstanding of that borrowing.

Major Credit Facility means any credit facility pursuant to which an Obligor is a party in a principal amount equal to or greater than € 300,000,000 (or its equivalent in any other currency).

Margin means 1.37 per cent. per annum.

5(48)

LOGO

Margin Stock has the meaning assigned to such term in Regulation U of the Board.

Material Group Member means any Subsidiary of the Parent:


(a)		(i)		the book value of whose assets (consolidated if it itself has Subsidiaries) equals or exceeds 3 per cent. of the book value of the consolidated total assets of the Group; or

(ii)

whose revenues (consolidated if it itself has Subsidiaries) equal or exceed 3 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 or exceed 3 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; or

(b)

(c)

Material Subsidiary means any Subsidiary of the Parent:


(a)		(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; or

(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 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; or

(b)

(c)

6(48)

LOGO

Maturity Date means the fifth (5.) anniversary of the date of this Agreement. .

Moody’s means Moody’s Investors Service, Inc.

Multiemployer Plan means a “multiemployer plan” within the meaning of section 3(37) or 4001(a)(3) of ERISA.

Obligor means the Parent and/or the Borrower.

Original Group Accounts means the audited consolidated accounts of the Group for the year ended 31 December 2009.

Party means a party to this Agreement.

Plan means an “employee benefit plan” within the meaning of section 3(3) of ERISA maintained by the Borrower or any ERISA Affiliate currently or at any time within the last five years, or to which the Borrower or any ERISA Affiliate is required to make payments or contributions or has made payments or contributions within the past five years.

Rate Fixing Day means the second Business Day before the first day of an Interest Period for a Loan or such other day as is generally treated as the rate fixing day by market practice in the relevant interbank market for leading banks to give quotations for deposits in the relevant currency for delivery on the first day of the relevant Interest Period, as determined by the Lender.

Rating Agency means Moody’s or Standard & Poor’s.

Reference Banks means the Lender, Svenska Handelsbanken AB (publ), Nordea AB (publ), and Skandinaviska Enskilda Banken AB (publ) and any other bank or financial institution appointed as such by the Lender and SEB (after consultation with the Borrower) under this Agreement.

Reportable Event means any of the events set forth in section 4043 of ERISA or the related regulations.

Request means a request made by the Borrower for a Loan, substantially in the form of Schedule 2.

Screen Rate means in relation to EURIBOR, the appropriate rate for the relevant period, displayed on the appropriate page of either the Reuters or the Bloomberg Screen (as selected by the Lender and notified to the Borrower). If the relevant page is replaced or the service ceases to be available, the Lender may (after consultation with the Borrower) specify another page or service displaying the appropriate rate.

SEB Guarantee means a working capital guarantee nominated in Euro and issued by SEB at the request of the Lender, covering 12.5 per. cent. of the Commitment in relation to the Lender in form and substance satisfactory to the Lender.

7(48)

LOGO

Security Interest means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.

Standard & Poor’s means Standard & Poor’s Rating Group, a division of McGraw-Hill Companies, Inc.

Unrestricted Margin Stock means any Margin Stock owned by any Obligor or any member of the Group which is not Restricted Margin Stock.

1.2

Construction

(a)

In this Agreement, unless the contrary intention appears, a reference to:

an amendment includes a supplement, or re-enactment and amended is to be construed accordingly;

assets includes present and future properties, revenues and rights of every description;

an authorization includes an authorization, consent, approval, resolution, licence, exemption, filing, registration and notarization;

know your customer requirements are the identification checks that the Lender requests in order to meet its obligations under any applicable law or regulation to identify a person who is (or is to become) its customer;

a material adverse effect means:

(A)

a material adverse effect on the business or financial condition of any Obligor or the Group as a whole; or

(B)

a material adverse effect on the ability of any Obligor to perform its payments obligations and/or, if applicable, its obligations in respect of financial covenants under any of the Finance Documents.

a month is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(A)

if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that calendar month; or

(B)

if an Interest Period commences on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which it is to end;

8(48)

LOGO

winding up also includes amalgamation, reconstruction, reorganisation, administration, bankruptcy, dissolution, liquidation, merger or consolidation and any equivalent or analogous procedure under the law of any jurisdiction (but, for the avoidance of doubt, reorganisation does not include a mere transfer of assets from one member of the Group to another whether the transferor continues to exist);

(ii)

a provision of law is a reference to that provision as amended or re-enacted;

(iii)

a Clause or a Schedule is a reference to a clause of or a schedule to this Agreement;

(iv)

a person includes its successors, transferees and assigns;

(v)

a Finance Document or another document is a reference to that Finance Document or other document as amended; and

(vi)

a time of day is a reference to Stockholm time.

(b)

(c)

The index to and the headings in this Agreement are for convenience only and are to be ignored in construing this Agreement.

2.	FACILITY

2.1

Revolving Credit Facility

Subject to the terms of this Agreement, the Lender grants to the Borrower a revolving credit facility in an aggregate amount equal to the Commitment.

2.2

EKN Override

No provisions in this Agreement shall be deemed to oblige the Lender to act (or omit to act) in a manner that is inconsistent with the terms of the EKN Guarantee and, in connection thereto:

the Lender shall take all such actions as it may deem necessary to ensure that the term of the EKN Guarantee are complied with; and

the Lender shall not be obliged to take any actions which in the Lender’s opinion could result in a breach of any term of the EKN Documents.

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3.	PURPOSE

(a)

The Borrower shall apply each Loan towards its general corporate purposes.

(b)

Without affecting the obligations of any Obligor in any way, the Lender is not bound to monitor or verify the application of any Loan.

4.	CONDITIONS PRECEDENT

4.1

Documentary conditions precedent

The Borrower may not deliver the first Request until the Lender has notified the Borrower that it has received all of the documents set out in Schedule 1 in form and substance satisfactory to it, and the Lender has received the documentation and other evidence requested by it under Clause 16.23(a) (Know your customer requirements).

4.2

Further conditions precedent

The obligation of the Lender to disburse any Loan is subject to the further conditions precedent that:

(a)

on both the date of the Request and the Drawdown Date:

(i)

the representations and warranties in Clause 15) to be repeated on those dates are correct and will be correct immediately after the Loan is made; and

(ii)

no Default is outstanding or might result from the Loan.

(iii)

the disbursement of the Loan will not cause the aggregate outstanding amount of the Loans to exceed the Commitment.

5.	UTILISATION

5.1

Drawdown

The Borrower may borrow a Loan if the Lender receives from the Borrower, not later than 10.00 a.m. three (3) Business Days before the proposed Drawdown Date a duly completed Request. Each Request is irrevocable.

5.2

Completion of Requests

A Request will not be regarded as having been duly completed unless:

(a)

the Drawdown Date is a Business Day falling within the Availability Period;

(b)

the amount of the Loan is:

(i)

a minimum of EUR 15,000,000 and an integral multiple of EUR 5,000,000; or

(ii)

the balance of the relevant undrawn Commitment; or

(iii)

such other amount as the Lender may agree;

(c)

the Interest Period selected complies with Clause 8 (Interest Periods) and does not extend beyond the Maturity Date; and

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(d)

the payment instructions comply with Clause 10 (Payments).

Each Request must specify one Loan only, but the Borrower may, subject to the other terms of this Agreement, deliver more than one Request on any one day.

6.	REPAYMENT

6.1

Repayment

The Borrower shall repay each Loan in full on the last day of its Interest Period.

6.2

Re-borrowing

Subject to the other terms of this Agreement, any amounts repaid under Clause 6.1 (Repayment) may be re-borrowed.

7.	PREPAYMENT AND CANCELLATION

7.1

Automatic cancellation

The Commitment shall, to the extent not already voluntarily cancelled under Clause 7.2 (Voluntary cancellation) or Clause 7.4 (Additional right of prepayment and cancellation), be automatically cancelled in full on the Maturity Date.

7.2

Voluntary cancellation

The Borrower may by giving not less than five days’ prior written notice to the Lender (or such shorter period of notice as the Lender may agree), cancel in whole or in part the undrawn amount of the Commitments (but the cancellation in part of either shall be in a minimum of EUR 15,000,000 and an integral multiple of EUR 5,000,000).

7.3

Voluntary prepayments of Loans

7.4

Additional right of prepayment and cancellation

If:

(a)

the Borrower is required to pay to the Lender any additional amounts under Clause 11 (Taxes); or

(b)

the Borrower is required to pay to the Lender any amount under Clause 13 (Increased Costs); or

(c)

Clause 12 (Market Disruption) is in operation but no agreement has been reached under Clause 12.3 (Substitute basis),

then, without prejudice to the obligations of the Borrower under those Clauses, the Borrower may, whilst the relevant circumstances continue, serve a notice of prepayment and cancellation on the Lender. On the date falling five Business Days after the date of service of the notice:

(i)

the Borrower shall prepay the Lender all the Loans; and

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(ii)

the Commitments shall be cancelled.

7.5

Mandatory Prepayment

If, at any time after the date of this Agreement:

(a)

it is or becomes unlawful for any Obligor to perform any of its obligations under the Finance Documents; or

(b)

the Borrower is not or ceases to be a Subsidiary of the Parent; or

(c)

any single person, or group of persons acting in concert, acquires control of the Parent; or

(d)

the guarantee of the Parent is not effective or is alleged by any Obligor to be ineffective for any reason,

then the Lender may by notice to the Borrower:

(i)

cancel the Commitment; and/or

(ii)

demand that all or part of the Loans, together with accrued interest and all other amounts accrued under the Finance Documents, be repaid forthwith, whereupon they shall be repaid forthwith.

7.6

Mandatory Prepayment – Request by EKN

(a)

The Lender must notify the Borrower promptly upon receipt of a written notice from EKN requesting the Lender to declare all Loans due and payable due to that:

(i)

any Financial Indebtedness or other obligation of the Borrower, in an amount equal to or greater than USD 3,000,000 in relation to the Lender (other than under this Agreement) has become due and payable prior to the specified maturity thereof as a result of a default there under; or

(ii)

the Facility has been utilised in whole or in a non-negligible part for any other purpose than that stated in the application for the EKN Guarantee.

(b)

After notification under paragraph (a) above:

(i)

the Borrower must immediately repay or prepay the Lender each Loan made to it; and

(ii)

the Commitment will be immediately cancelled.

7.7

Miscellaneous provisions

(a)

Any notice of prepayment and cancellation or notice of cancellation under this Agreement is irrevocable.

(b)

All prepayments under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs and Clause 22.2 (Other indemnities), without premium or penalty.

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(c)

No prepayment or cancellation is permitted except in accordance with the express terms of this Agreement.

(d)

No amount of a Commitment which is cancelled under this Agreement may subsequently be reinstated.

(e)

No amount prepaid under this Agreement may subsequently be re-borrowed.

8.	INTEREST PERIODS

8.1

General

Each Loan has one Interest Period only.

8.2

Selection

(a)

The Borrower may select an Interest Period for a Loan in the relevant Request. Each Interest Period for a Loan will commence on its Drawdown Date.

(b)

Subject to the following provisions of this Clause 8 each Interest Period for a Loan will be three, six or twelve months or any other period agreed by the Borrower and the Lender;

(c)

No more than five Loans with Interest Periods of three months may be outstanding at any time.

8.3

Non-Business Days

8.4

Overrunning of the Maturity Date

If an Interest Period in respect of a Loan borrowed under the Facility would otherwise overrun the Maturity Date, it shall be shortened so that it ends on the Maturity Date.

8.5

Notification

The Lender shall notify each relevant Party of the duration of each Interest Period promptly after ascertaining its duration.

9.	INTEREST

9.1

Interest rate

The rate of interest on each Loan for its Interest Period is the rate per annum determined by the Lender to be the aggregate of the applicable:

(i)

Margin; and

(ii)

EURIBOR.

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9.2

Due dates

9.3

Default interest

(a)

If an Obligor fails to pay any amount payable by it under the Finance Documents, it shall forthwith on demand by the Lender pay interest on the overdue amount from the due date up to the date of actual payment, as well after as before judgment, at a rate (the default rate ) determined by the Lender to be one per cent. per annum above the higher of:

(i)

the rate on the overdue amount under Clause 9.1 (Interest rate) immediately before the due date (if of principal) and the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan of the overdue amount for such successive Interest Periods of such duration as the Lender may determine (a Designated Interest Period ).

(b)

The default rate will be determined by reference to EURIBOR on each Business Day or the first day of, or two Business Days before the first day of, the relevant Designated Interest Period, as appropriate.

(c)

If the default rate is to be determined by reference to EURIBOR and the Lender determines that deposits in the currency of the overdue amount are not at the relevant time being made available by the Reference Banks to leading banks in the Stockholm interbank market, the default rate will be determined by reference to the cost of funds to the Lender from whatever sources it may select.

(d)

Default interest will be compounded at the end of each Designated Interest Period.

9.4

Notification of rates of interest

The Lender shall promptly notify the Borrower of the determination of a rate of interest under this Agreement.

10.

PAYMENTS

10.1

Place

All payments by an Obligor under the Finance Documents shall be made to the Lender to its account at such office or bank in Stockholm as it may notify to the Borrower for this purpose.

10.2

Funds

Payments under the Finance Documents to the Lender shall be made for value on the due date at such times and in such funds as the Lender may specify as being customary at the time for the settlement of transactions in EUR in the place for payment.

10.3

Distribution

The Lender may apply any amount received by it for an Obligor in or towards payment (on the date and funds of receipt) of any amount due from an Obligor under the Finance Documents.

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10.4

Currency

All amounts payable under the Finance Documents are payable in EUR.

10.5

Set-off and counterclaim

All payments made by an Obligor under the Finance Documents shall be made without set-off or counterclaim.

10.6

Non-Business Days

(a)

(b)

During any extension of the due date for payment of any principal under this Agreement interest is payable on that principal at the rate payable on the original due date.

10.7

Partial payments

(a)

If the Lender receives a payment insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Lender shall apply that payment towards the obligations of an Obligor under the Finance Documents in the following order:

(i)

first , in or towards payment of any unpaid, fees, costs and expenses of the Lender under the Finance Documents;

(ii)

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

(iii)

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

(iv)

fourthly , in or towards payment of any other sum due but unpaid under the Finance Documents.

(b)

Paragraphs (a) above will override any appropriation made by an Obligor.

11.

TAXES

11.1

Gross-up

All payments by an Obligor under the Finance Documents shall be made without any deduction and free and clear of and without any deduction for or on account of any taxes, except to the extent that an Obligor is required by law to make payment subject to any taxes. If any tax or amounts in respect of tax must be deducted, or any other deductions must be made, from any amounts payable or paid by an Obligor under the Finance Documents, an Obligor shall pay such additional amounts as may be necessary to ensure that the Lender receive a net amount equal to the full amount which it would have received had payment not been made subject to tax or any other deduction.

11.2

Tax receipts

All taxes required by law to be deducted or withheld by an Obligor from any amounts paid or payable under the Finance Documents shall be paid by an Obligor when due and an Obligor shall,

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within 15 days of the payment being made, deliver to the Lender evidence satisfactory to it (including all relevant tax receipts) that the payment has been duly remitted to the appropriate authority.

11.3

Tax indemnity

(a)

Without prejudice to the provisions of Clause 11.1 (Gross-up), if the Lender is required to make any payment on account of a Nonexcluded Tax on or in relation to any amounts paid or payable from an Obligor under the Finance Documents (including, without limitation, any sum received or receivable under this Clause 11) or any such liability in respect of any such payment is asserted, imposed, levied or assessed against such the Lender, an Obligor shall, upon demand of the Lender, promptly indemnify the Lender against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith, except and to the extent that:

(i)

such liability or interest, penalties or expenses arises as a result of failure by the Lender to make any payment by the latest date legally permitted; or

(ii)

such liability or interest, penalties or expenses arises out of a failure to comply with the relevant filing, certification or other reporting requirements stipulated by the relevant tax authority in the jurisdiction of the Lender in connection with such requirement to make any such payment on account of tax.

(b)

For the purposes of paragraph (a) above, Nonexcluded Tax shall mean all taxes (including withholding taxes collected at source of payment) other than:

(i)

taxes imposed on net income;

(ii)

taxes imposed by the jurisdiction in which the Lender is organised by virtue of such party being organised in such jurisdiction; and

(iii)

taxes imposed by the jurisdiction in which the Lender is located or doing business by virtue of such party being so located or doing business.

11.4

Indemnity claims

If the Lender is intending to make a claim pursuant to Clause 11.3 (Tax indemnity) it shall, promptly upon becoming aware of the circumstances giving rise to such claim, notify the Borrower thereof.

12.

MARKET DISRUPTION

12.1

Absence of quotations

If EURIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply an offered rate by 11.30 a.m. on a Rate Fixing Day, EURIBOR shall, subject to Clause 12.2 (Market disruption), be determined on the basis of the quotations of the remaining Reference Banks.

12.2

Market disruption

(a)

(i)

1.37 per cent. per annum.; and

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(ii)

the rate notified to the Borrower as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to the Lender of funding the Loan from whatever source it may reasonably select (such calculation of cost shall be certified in reasonable detail and disclosed to the Borrower).

(b)

In this Agreement Market Disruption Event means at or about 11.30 a.m. on the Rate Fixing Date for the relevant Interest Period EURIBOR is not available and none or only one of the Reference Banks supplies a rate to the Lender to determine EURIBOR for the relevant Interest Period.

12.3

Substitute basis

So long as any alternative basis is in force in accordance with Clause 12.2(a) above the Lender shall from time to time (but at least weekly) review whether or not the circumstances referred to in Clause 12.2(b) still prevail with a view to returning to the normal interest provisions of this Agreement with respect to future Interest Periods. If the Lender determines that such circumstances no longer prevail, it shall promptly notify the Borrower.

13.

INCREASED COSTS

13.1

Increased costs

(a)

Subject to Clause 13.2 (Exceptions), an Obligor shall forthwith on demand by the Lender pay to the Lender the amount of any increased cost incurred by it or any of its Affiliates as a result of:

(i)

the introduction of, or any change in, or any change in the interpretation of, any law or regulation; or

(ii)

compliance with any regulation made after the date of this Agreement,

(b)

In this Agreement increased cost means:

(i)

an additional cost incurred by the Lender or any of its Affiliates as a result of it having entered into, or performing, maintaining or funding its obligations under, this Agreement; or

(ii)

that portion of an additional cost incurred by the Lender or any of its Affiliates in making, funding or maintaining all or any advances comprised in a class of advances formed by the Loans made or to be made under this Agreement as is attributable to the Lender making, funding or maintaining those participations; or

(iii)

a reduction in any amount payable to the Lender or any of its Affiliates or the effective return to the Lender or any of its Affiliates under this Agreement or (to the extent that it is attributable to this Agreement) on its capital; or

(iv)

the amount of any payment made by the Lender or any of its Affiliates, or the amount of any interest or other return foregone by the Lender or any of its Affiliates, calculated by reference to any amount received or receivable by the Lender or any of its Affiliates from the Borrower under this Agreement.

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(c)

As soon as practicable after becoming aware that the Borrower is liable, or will become liable, to pay any amount in accordance with the provisions of paragraph (a) above, the Lender will notify the Borrower accordingly.

13.2

Exceptions

Clause 13.1 (Increased costs) does not apply to any increased cost:

(a)

compensated for by the operation of Clause 10 (Taxes); or

(b)

attributed to any change in the rate of, or change in the basis of calculating, tax on the overall net income of the Lender (or the overall net income of a division or branch of the Lender) imposed in the jurisdiction in which its principal office for the time being is situate.

13.3

Claims

If the Lender is intending to make a claim for an Increased Cost, it must provide the Borrower with a certificate confirming the amount of, and the events giving rise to, the claim.

14.

ILLEGALITY

If it is or becomes unlawful in any jurisdiction for the Lender to give effect to any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Loan, then:

(a)

the Lender may notify the Borrower accordingly; and


(b)		(i)		the Borrower shall forthwith prepay the participations of the Lender in all the Loans made to it; and

(ii)

the Commitments of the Lender shall forthwith be cancelled.

15.

GUARANTEE

15.1

Guarantee and indemnity

The Parent irrevocably and unconditionally:

(a) as for a debt of its own (Sw. så som för egen skuld ), guarantees to the Lender prompt performance by the Borrower of all its payments obligations under the Finance Documents; and

(b) indemnifies the Lender on demand against any loss or liability suffered by it if any obligation guaranteed by the Parent is or becomes unenforceable, invalid or illegal.

15.2

Continuing guarantee

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15.3

Reinstatement

(a)

Where any discharge (whether in respect of the obligations of the Borrower or any security for those obligations or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, the liability of the Parent under this Clause 15 shall continue as if the discharge or arrangement had not occurred.

(b)

The Lender may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.

15.4

Waiver of defences

(a)

any time or waiver granted to, or composition with, the Borrower or other person;

(b)

the release of any Obligor or any other person under the terms of any composition or arrangement with any creditors of any member of the Group;

(c)

(d)

any incapacity or lack of powers, authority or legal personality of or dissolution or change in the members or status of the Borrower or any other person;

(e)

(f)

(g)

15.5

Immediate recourse

The Parent waives any right it may have of first requiring the Lender (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Parent under this Clause 15.

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15.6

Appropriations

Until all amounts which may be or become payable by the Borrower under or in connection with the Finance Documents have been irrevocably paid in full, the Lender (or any trustee or agent on its behalf) may:

(a)

refrain from applying or enforcing any other monies, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such a manner and order as it sees fit (whether against those amounts or otherwise) and the Parent shall not be entitled to the benefit of the same; and

(b)

hold in a suspense account any monies received from the guarantor or on account of the guarantor’s liability under this Clause 15, without liability to pay interest on those monies.

15.7

Non-competition

(a)

be subrogated to any rights, security or monies held, received or receivable by the Lender (or any trustee or agent on its behalf) or be entitled to any right of contribution or indemnity in respect of any payment made or monies received on account of the Parent’s liability under this Clause 15;

(b)

claim, rank, prove or vote as a creditor of the Borrower or its estate in competition with the Lender (or any trustee or agent on its behalf); or

(c)

receive, claim or have the benefit of any payment, distribution or security from or on account of the Borrower, or exercise any right of set-off as against the Borrower,

unless the Lender otherwise directs. The Parent shall hold in trust for and forthwith pay or transfer to the Lender any payment or distribution or benefit of security received by it contrary to this Clause 15.7 or as directed by the Lender.

15.8

Additional security

This guarantee is in addition to and is not in any way prejudiced by any other security now or subsequently held by the Lender.

15.9

Consideration and enforceability

(a)

The Parent represents warrants and agrees that:

(i)

it will receive valuable direct and indirect benefits as a result of the transactions financed by the Loans; and

(ii)

these benefits will constitute “reasonably equivalent value” and “fair consideration” as those terms are used in the fraudulent transfer laws.

(b)

The Parent acknowledges and agrees that the Lender have acted in good faith in connection with the guarantee granted under this Clause 15, and the transactions contemplated by this Agreement.

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(c)

This Clause 15 shall be enforceable against the Parent to the maximum extent permitted by the fraudulent transfer laws.

(d)

(e)

For the purposes of this Clause, “fraudulent transfer laws” means applicable United States bankruptcy and state fraudulent transfer and conveyance statutes and the related case law.

16.

REPRESENTATIONS AND WARRANTIES

16.1

Representations and warranties

Each Obligor makes the representations and warranties set out in this Clause 15 to the Lender.

16.2

Status

(a)

It is a corporation, duly incorporated and validly existing under the laws of the jurisdiction of its incorporation; and

(b)

each Material Group Member has the power to own its assets and carry on its business as it is being conducted.

16.3

Powers and authority

16.4

Legal validity

Each Finance Document to which it is or will be a party constitutes, or when executed in accordance with its terms will constitute, its legal, valid and binding obligation enforceable in accordance with its terms.

16.5

Non-conflict

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents to which it is a party do not and will not:

(a)

conflict with any law or regulation or judicial or official order; or

(b)

conflict with its constitutional documents of; or

(c)

conflict with any document which is binding upon itr or any of its assets.

16.6

No default

(a)

No Default is outstanding or might result from the making of any Loan; and

(b)

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16.7

Authorizations

(a)

(b)

16.8

Accounts

The audited consolidated accounts of the Group most recently delivered to the Lender (which, at the date of this Agreement, are the Original Group Accounts):

(i)

have been prepared in accordance with accounting principles and practices generally accepted in the U.S.A. consistently applied; and

(ii)

fairly represent the consolidated financial condition of the Group as at the date to which they were drawn up.

16.9

Litigation

(a)

Other than as specifically disclosed to the Lender prior to the date of this Agreement, no litigation, arbitration or administrative proceedings are current or, to its knowledge, pending or threatened, which might, if adversely determined, have a material adverse effect.

(b)

In respect of any litigation, arbitration or administrative proceedings disclosed to the Lender prior to the date of this Agreement, there has been no development in the conduct of those proceedings which might have a material adverse effect.

16.10

Taxes on payments

It will not be required to make any deduction or withholding from any payment it may make to the Lender under the Finance Documents.

16.11

No immunity

16.12

Pari passu ranking

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16.13

Winding up: re-organisation etc.

16.14

Environmental Law

Other than as specifically disclosed to the Lender prior to the date of this Agreement, the Obligor is and has been in compliance with all applicable Environmental Laws and Environmental Licences in all material respects and, so far as it is aware, there are no circumstances that may at any time prevent or interfere with continued compliance by it with all applicable Environmental Laws and Environmental Licences in all material respects. Other than as disclosed to the Lender prior to the date of this Agreement, no Environmental Claim is pending or, to the best of its knowledge, threatened against it or any of its properties.

16.15

ERISA

Each Plan of the Obligor and their respective ERISA Affiliates complies in all material respects with all applicable requirements of law and regulation. No Reportable Event has occurred with respect to any Plan which might have a material adverse effect, and no steps have been taken to terminate any Plan. The Obligor has not, and no Subsidiary or ERISA Affiliate of the Obligor has, had a complete or partial withdrawal from any Multiemployer Plan or initiated any steps to do so.

16.16

Investment Company Act

The Obligor is neither an “investment company” nor a company “controlled” by an “investment company”, within the meaning of the United States Investment Company Act of 1940, as amended.

16.17

Federal Power Act

The Obligor is neither a “public utility” within the meaning of, nor otherwise subject to regulation under, the United States Federal Power Act of 1920, as amended.

16.18

Other regulation

The Obligor is not subject to regulation under any United States Federal or State statute or regulation that limits its ability to incur or guarantee indebtedness.

16.19

Margin Stock

(a)

The proceeds of the Loans have been and will be used only for the purposes described in Clause 3 (Purpose).

(b)

The Obligor is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations U and X of the Board of Governors of the United States Federal Reserve System).

(c)

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16.20

Solvency

(a)

The Obligor has not incurred and does not intend to incur or believe it will incur debts beyond its ability to pay as they mature.

(b)

The Obligor has made no transfer or incurred any obligation under this Agreement with the intent to hinder, delay or defraud any of its present or future creditors.

(c)

For purposes of this Clause 16.20:

(i)

debt means any liability on a claim;

(ii)

(iii)

terms used in this Clause 16.20 shall be construed in accordance with the applicable United States bankruptcy and New York fraudulent conveyance statutes and the related case law.

16.21

Stamp duties

No stamp or registration duty or similar taxes or charges are payable in respect of any Finance Document.

16.22

No Security Interests

Other than as permitted by the provisions of Clause 17.8 (Negative pledge), no Security Interest exists over all or any of its present or future revenues or assets.

16.23

Material adverse change

There has been no material adverse change in the condition (financial or otherwise) of the Obligor or the Group as a whole since the date of the Original Group Accounts.

16.24

Jurisdiction/governing law

(a)

Its:

(i)

irrevocable submission under this Agreement to the jurisdiction of the courts of Sweden;

(ii)

agreement that this Agreement is governed by Swedish law; and

(iii)

agreement not to claim any immunity to which it or its assets may be entitled,

are legal, valid and binding under the laws of its jurisdiction of incorporation; and

(b)

any judgment obtained in Sweden will be recognised and be enforceable by the courts of its jurisdiction of incorporation.

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16.25

United States laws

(a)

In this Sub clause:

Anti-Terrorism Law means each of:

(i)

(ii)

the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (commonly known as the USA Patriot Act);

(iii)

the Money Laundering Control Act of 1986, 18 U.S.C. sect. 1956; and

(iv)

any similar law relating to terrorism or money laundering enacted in the United States of America subsequent to the date of this Agreement.

Restricted Party means any person listed:

(i)

in the Annex to the Executive Order;

(ii)

on the “Specially Designated Nationals and Blocked Persons” list maintained by the Office of Foreign Assets Control of the United States Department of the Treasury; or

(iii)

in any successor list to either of the foregoing.

(b)

To the best of its knowledge, neither it nor any of its Affiliates:

(i)

is, or is controlled by, a Restricted Party;

(ii)

has received funds or other property from a Restricted Party; or

(iii)

16.26

Times for making representations and warranties

The representations and warranties set out in this Clause 15:

(a)

are made on the date of this Agreement; and

(b)

(with the exception of Clauses 16.10 (Taxes on payments), 16.21 (Stamp duties) and 16.23 (Material adverse change)) are deemed to be repeated by the Obligor on the date of each Request and the first day of each Interest Period with reference to the facts and circumstances then existing.

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17.

UNDERTAKINGS

17.1

Duration

The undertakings in this Clause 17 remain in force from the date of this Agreement for so long as any amount is or may be outstanding under this Agreement or any Commitment is in force.

17.2

Financial information

The Parent shall supply to the Lender:

(a)

as soon as the same are available (and in any event within 180 days, in the case of the Borrower, within 212 days, of the end of each of its financial years):

(i)

its audited consolidated accounts for that financial year; and

(ii)

the audited accounts of the Borrower for that financial year;

(b)

as soon as the same are available (and in any event within 90 days of the end of the first half-year of each of its financial years) its unaudited consolidated accounts for that half-year.

(c)

as soon as the same are available (and in any event within 60 days of the end of each financial quarter) its unaudited consolidated accounts for that financial quarter.

17.3

Information - miscellaneous

Each Obligor shall supply to the Lender:

(a)

all documents despatched by it to its shareholders (or any class of them) or its creditors (or any class of them) at the same time as they are despatched; and

(b)

(unless already provided to the Lender) promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending, and which might, if adversely determined, have a material adverse effect on the financial condition of any Material Subsidiary or on the Group as a whole or on the ability of the Obligor to perform its obligations under this Agreement; and

(c)

promptly, such further information in the possession or control of any member of the Group regarding its financial condition and operations as the Lender may reasonably request; and

(d)

immediately upon its occurrence, details of any change in the credit rating assigned to the Parent’s long term unsecured and unsubordinated debt by either or both of the Rating Agencies.

17.4

Notification of Default

Each Obligor shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon its occurrence.

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17.5

Compliance certificates

The Parent shall supply to the Lender:

(a)

within five Business Days of delivery of the accounts specified in Clause 17.2, (a), (b) and (c) (Financial information); and

(b)

promptly at any other time, if the Lender so requests, a Compliance Certificate signed by one of its senior officers on its behalf (substantially in the form set out in Schedule 3 (Form of Compliance Certificate)):

(i)

setting out computations as to compliance with Clause 17.22 (Subsidiary Borrowings) as at the date at which the accounts referred to in paragraph (a) above were drawn up;

(ii)

confirming the credit ratings which currently apply to the Lender’s long term unsecured and unsubordinated debt; and

(iii)

certifying that no Default is outstanding or, if a Default is outstanding, specifying the Default and the steps, if any, being taken to remedy it.

17.6

Authorizations

Each Obligor shall promptly:

(a)

obtain, maintain and comply with the terms of; and

(b)

supply certified copies to the Lender of,

any authorization required under any law or regulation to enable it to perform its obligations under, or for the validity or enforceability of, any Finance Document.

17.7

Pari passu ranking

17.8

Negative pledge

(a)

Each Obligor shall not, and shall procure that no member of the Group will, create or permit to subsist any Security Interest on any of its assets (other than Unrestricted Margin Stock).

(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 Lender prior to the execution of this Agreement which secures Financial Indebtedness outstanding at the date of this Agreement;

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(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)

(v)

(A)

the principal amount secured by such Security Interest and outstanding when the relevant company became a member of the 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 Group; and

(C)

the Security Interest is discharged within three months;

(vi)

(vii)

17.9

Transactions similar to security

(a)

Each Obligor shall not, and shall procure that no Material Subsidiary will:

(i)

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(ii)

sell, transfer or otherwise dispose of any of its receivables on recourse terms, except for the discounting of bills or notes in the ordinary course of trading,

(b)

17.10

Disposals

(a)

Each Obligor shall not, and shall procure that no Material Subsidiary will, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, sell, transfer, grant or lease or otherwise dispose of all or any substantial part of its assets.

(b)

Paragraph (a) does not apply to:

(i)

disposals made in the ordinary course of business of the disposing entity; or

(ii)

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

(iii)

disposals made on an arms length basis for full market consideration; or

(iv)

disposals made with the prior written consent of the Lender; or

(v)

any disposal of assets from:

(A)

the Borrower to Autoliv ASP or Autoliv Holding AB or vice versa; or

(B)

a Material Subsidiary (other than the Borrower, Autoliv ASP or Autoliv Holding AB) to the Borrower, Autoliv ASP, Autoliv Holding AB, Autoliv AB or any other Subsidiary; or

(C)

any other Subsidiary of the Borrower to any member of the Group,

provided that all such disposals in this paragraph (v) are made for full market consideration,

17.11

Change of business

The Parent shall procure that no substantial change is made to the general nature or scope of the business of the Parent or of the Group from that carried on at the date of this Agreement.

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17.12

Mergers

The Parent shall not, without the prior written consent of the Lender, finalise or effectuate any amalgamation, demerger, merger or reconstruction.

17.13

Insurances

Each Obligor shall, and will procure that the Group taken as a whole will, effect and maintain such insurance over and in respect of its property, assets and business with reputable underwriters or insurance companies and in such a manner and to such extent as is reasonable and customary for a business enterprise engaged in the same or similar businesses and in the same or similar localities.

17.14

Third party guarantees

No Obligor shall, and will ensure that no member of the Group shall, without the prior consent of the Lender, grant any guarantee, bond, indemnity, counter-indemnity or similar instrument in respect of any material obligation of a person other than a member of the Group, save for:

(a)

on the terms of the Finance Documents; or

(b)

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

17.15

Environmental Matters

Each Obligor shall, if it directly or indirectly owns, leases, occupies or uses real property in the United States, in all material respects, comply with:

(a)

all applicable Environmental Law; and

(b)

the terms and conditions of all Environmental Licenses applicable to it,

and for this purpose will implement procedures to monitor compliance with and to prevent any liability under Environmental Law.

17.16

Notice requirements

Each Obligor will give the Lender prompt notice of the occurrence of any of the following events:

(a)

non-compliance in any material respect with any Environmental Law or Environmental License of which it is aware;

(b)

(c)

any actual or suspected Environmental Contamination which might have a material adverse effect;

(d)

any Reportable Event;

(e)

termination of any Plan maintained or contributed by the Obligor or any ERISA Affiliate or any action that might result in termination; or

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(f)

complete or partial withdrawal from any Multiemployer Plan by the Obligor or any ERISA Affiliate or any action that might result in complete or partial withdrawal.

In each notice delivered under this Clause, the Obligor will include reasonable details concerning the occurrence that is the subject of the notice as well as the Obligor’s proposed course of action, if any. Delivery of a notice under this Clause will not affect the Obligor’s obligations to comply with any other provision of this Agreement.

17.17

Investment Company Act

No Obligor will, either by act or omission, become an “investment company” or a company “controlled” by an “investment company”, within the meaning of the United States Investment Company Act of 1940, as amended.

17.18

Public utility status

No Obligor will, either by act or omission, become or, as a result of its obligations under this Agreement, the Lender to become subject to regulation under the United States Federal Power Act of 1920, as amended.

17.19

ERISA

17.20

Margin Stock

The Borrower will use the proceeds of the Loans only for the purpose described in Clause 3 (Purpose). No Obligor will engage in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations U and X issued by the Board of Governors of the United States Federal Reserve System). The Obligor shall procure that none of the proceeds of the Loans will be used for any purpose that will violate or result in the violation of Section 7 of the Securities Exchange Act of 1934 (or any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X). If requested by the Lender, the Obligor will furnish to the Lender in connection with any Loan hereunder a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U.

17.21

Solvency

Each Parent will, at all times, maintain sufficient capital to conduct its current and proposed business and operations, maintain its ability to pay its debts as they become due, and continue to own property having a value – both at fair valuation and at present fair saleable value – greater than the total amount of the probable liability of the Parent on its debts and obligations (including this Agreement).

17.22

Subsidiary Borrowings

In this Clause 17.22:

Borrowings means:

(a)

the outstanding principal amount of any monies borrowed;

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(b)

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

(c)

(d)

(e)

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

(f)

Subsidiary Borrowings means, at any time, the aggregate amount of all Borrowings of the Parent’s Subsidiaries (other than Autoliv ASP, Autoliv Holding AB and Autoliv AB) at that time (without double counting in relation to intra-Group Borrowings or guarantees given by one Subsidiary in relation to the Borrowings of another).

(a)

(b)

The Parent shall procure that Subsidiary Borrowings shall at no time exceed U.S.$ 400,000,000 (or its equivalent).

17.23

Know your customer requirements

(a)

Each Obligor must promptly on the request of the Lender supply to it documentation or other evidence which is reasonably requested by the Lender (or any prospective New Bank) to enable the Lender or prospective New Bank to carry out and be satisfied with the results of all applicable know your customer requirements.

(b)

The Lender agrees that any information it receives under this clause 16.23 (Know your customer requirements) shall be kept confidential in accordance with clause 26 (Disclosure of Information).

17.24

Most Favoured Lender

If under any other Major Credit Facility under which an Obligor is a borrower, entered into after the date of this Agreement or amended after the date of this Agreement undertakings and covenants (a) comparable to those prescribed in Clause 17.22 of this Agreement or (b) in respect of financial covenants relating to earnings, interest expense, net worth, equity or net assets (howsoever expressed and whether stated as a ratio, as a fixed threshold, as an event of default or otherwise), are granted resulting in:

(i)

a lender is given a better position; or

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(ii)

stricter provisions are prescribed for the Parent or the Group;

In each case compared to the provisions under this Agreement, the Borrower undertakes, without undue delay, to notify the Lender and SEB of the details of such other Major Credit Facility and, if so requested by the Lender and/or SEB, promptly to grant the equivalent (or the practical equivalent) of such better position or agree to prescribe such stricter provisions to itself and the Group by entering into any agreement or arrangement which the Lender and SEB deem necessary (acting reasonable) in order for the Lender and SEB to receive such better position or for the Parent and the Group to be subject to such stricter provisions.

17.25

Anti-Corruption

No Obligor will engage in any action which may be characterised as corruption.

18.

FOR THE PURPOSE OF THIS PROVISION “CORRUPTION” SHALL MEAN “THE OFFERING, PROMISING OR GIVING OF ANY PECUNIARY OR OTHER ADVANTAGE TO A PUBLIC OFFICIAL, TO INFLUENCE THE OFFICIAL TO ACT OR REFRAIN FROM ACTING IN RELATION TO OFFICIAL DUTIES WITH THE PURPOSE OF OBTAINING OR RETAINING BUSINESS OR OTHER IMPROPER ADVANTAGE.DEFAULT

18.1

Events of Default

Each of the events set out in this Clause 18 is an Event of Default (whether or not caused by any reason whatsoever outside the control of an Obligor or any other person).

18.2

Non-payment

18.3

Breach of other obligations

18.4

Misrepresentation

A representation, warranty or statement made or repeated or deemed to be repeated in or in connection with any Finance Document or in any document delivered by an Obligor under or in connection with any Finance Document is incorrect in any material respect when made or repeated or deemed to be repeated.

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18.5

Cross-default

(a)

Any Financial Indebtedness of a member of the Group is not paid when due or within any applicable grace period provided for in the relevant documentation; or

(b)

an event of default howsoever described occurs under any document relating to Financial Indebtedness of a member of the Group; or

(c)

(d)

(e)

any Security Interest securing Financial Indebtedness over any asset of a member of the Group becomes enforceable,

18.6

Insolvency

(a)

(b)

an Obligor or any Material Subsidiary suspends making payments on all or any class of its debts or announces an intention to do so, or a moratorium is declared in respect of any of its indebtedness; or

(c)

an Obligor or any Material Subsidiary, by reason of financial difficulties, begins negotiations with one or more of its creditors with a view to the readjustment or rescheduling of any of its indebtedness.

18.7

Insolvency proceedings

(a)

Any step (including petition, proposal or convening a meeting) is taken with a view to a composition, assignment or arrangement with any creditors of an Obligor or any Material Subsidiary; or

(b)

(c)

(d)

an order for the winding-up or administration of an Obligor or any Material Subsidiary is made; or

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(e)

18.8

Appointment of receivers and managers

(a)

(b)

(c)

18.9

Creditors’ process

Any attachment, sequestration, distress or execution affects any asset of an Obligor or any Material Subsidiary and is not discharged within 14 days.

18.10

Analogous proceedings

18.11

Cessation of business

An Obligor or any Material Subsidiary ceases, or threatens to cease, to carry on all or a substantial part of its business.

18.12

U.S. Bankruptcy Laws

(a)

An Obligor makes a general assignment for the benefit of creditors; or

(b)

(c)

(d)

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18.13

ERISA

(a)

Any event or condition occurs that presents a material risk that any Obligor or any ERISA Affiliate may incur a material liability to a Plan or to the United States Internal Revenue Service or to the United States Pension Benefit Guaranty Corporation; or

(b)

Any failure by a Plan subject to Title IV of ERISA to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA) whether or not waived.

18.14

Acceleration

(a)

Upon the occurrence of an Event of Default described in Clause 18.12 (U.S. Bankruptcy Laws):

(i)

the Commitments will immediately terminate; and

(ii)

the Loans, together with accrued interest, and all other amounts accrued under the Finance Documents, will be immediately due and payable.

(b)

On and at any time after the occurrence of an Event of Default (other than an Event of Default described in Clause 18.12 (U.S. Bankruptcy Laws)) the Lender may by notice to the Borrower:

(i)

cancel the Commitments; and/or

(ii)

demand that all or part of the Loans, together with accrued interest and all other amounts accrued under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or

(c)

demand that all or part of the Loans be payable on demand, whereupon they shall immediately become payable on demand by the Lender.

19.

FEES

19.1

Arrangement fee

The Borrower shall within five (5) Business Days of the date of this Agreement (or on the first Drawdown Date if the first Drawdown Date falls before the fifth Business Day after the date of this Agreement) pay to Lender an arrangement fee in EUR calculated at the rate of 0.15 per cent on the Commitment.

19.2

Commitment fee

(a)

The Borrower shall pay to the Lender a commitment fee in EUR computed at the rate of 0.58 per cent. per annum of the undrawn, uncancelled amount of the Commitment.

The Commitment fee will be payable on each day on which any Commitment is in force.

(b)

Commitment fee shall be payable quarterly in arrears from the date of this Agreement. Accrued commitment fee shall also be payable to the Lender on the cancelled amount of the Commitment at the time the cancellation comes into effect.

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19.3

VAT

20.

EXPENSES

20.1

Initial and special costs

The Borrower shall forthwith on demand pay the Lender and SEB the amount of all costs and expenses (including legal fees) reasonably incurred by any of them in connection with:

(a)

the negotiation, preparation, printing and execution of any Finance Document executed after the date of this Agreement.

(b)

any amendment, waiver, consent or suspension of rights (or any proposal for any of the foregoing) requested by the Borrower and relating to a Finance Document or a document referred to in any Finance Document.

(c)

any other matter, not of an ordinary administrative nature, arising out of or in connection with a Finance Document.

20.2

Enforcement costs

The Borrower shall forthwith on demand pay to the Lender and SEB the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

21.

STAMP DUTIES

The Borrower shall pay and forthwith on demand indemnify the Lender and SEB against any liability it incurs in respect of, any stamp, registration and similar tax which is or becomes payable in connection with the entry into, performance or enforcement of any Finance Document.

22.

INDEMNITIES AND BREAK COSTS

22.1

Currency indemnity

(a)

Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.

22.2

Other indemnities

Each Obligor shall forthwith on demand indemnify the Lender against any loss or liability which the Lender incurs as a consequence of:

(a)

the occurrence of any Default;

(b)

a change in the currency of a country or the operation of Clause 18.14 (Acceleration);

(c)

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(d)

a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment or (other than by reason of negligence or default by the Lender) a Loan not being made after the Borrower has delivered a Request.

An Obligor’s liability in each case includes any loss of Margin or other loss or expense on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Loan.

22.3

Indemnity – SEB

(a)

Each Obligor shall forthwith on SEB’s demand indemnify SEB, as an independent obligation, against any loss or liability as a consequence of the occurrence of any Default incurred by SEB in its capacity as additional guarantor under this Agreement.

(b)

22.4

Break Costs

(a)

The Borrower must pay to the Lender its Break Costs.

(b)

Break Costs are the amount (if any) determined by the Lender by which:

(i)

The interest which the Lender would have received for the period from the date of receipt of any part of a Loan or an overdue amount to the last day of the applicable Interest Period for that Loan or overdue amount if the principal or overdue amount received had been paid on the last day of that Interest Period;

exceeds

(ii)

the amount by which the Lender would be able to obtain by placing an amount equal to the amount received by it on deposit with a leading bank in Stockholm interbank market for a period starting on the Business Day following receipt and ending on the last day of the applicable Interest Period.

(c)

If requested by the Borrower, the Lender must supply to the Borrower details of the amount of any Break Costs claimed by it under this subclause.

23.

EVIDENCE AND CALCULATIONS

23.1

Certificates and determinations

Any certification or determination by the Lender of a rate or amount under the Finance Documents is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

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23.2

Calculations

Interest and the fees payable under Clause 19.1 (Commitment fee) accrue from day to day and are calculated on the basis of the actual number of days elapsed and a year of 360 days or, where market practice otherwise dictates, 365 days.

24.

AMENDMENTS AND WAIVERS

24.1

Procedure

Any term of the Finance Documents may be amended or waived with the agreement of the Borrower and the Lender.

24.2

Waivers and Remedies Cumulative

The rights of the Lender and/or SEB under the Finance Documents:

may be exercised as often as necessary;

are cumulative and not exclusive of its rights under the general law; and

may be waived only in writing and specifically.

Delay in exercising or non-exercise of any such right shall not be deemed as a waiver thereof.

24.3

Replacement of Existing Syndicate Facility

Notwithstanding any provisions in this Agreement, if after the date of this Agreement, any Obligor enters into a credit, loan or borrowing facility agreement that will renew, replace or extend the Existing Syndicated Facility (by syndication or by club deal arrangement) (the “ New Facility ”), and such New Facility prescribes provisions regarding undertakings, covenants, events of default and other obligations (including related definitions) for the Obligor and/or the Group, (as applicable) that are more favourable or stricter for the Obligor and/or the Group (as applicable) than the undertakings, covenants, events of defaults or obligations (including related definitions) contained in this Agreement, the Parties agrees to amend and modify this Agreement to reflect the undertakings, covenants, events of default and obligations (including related definitions) in the New Facility. The provisions in the foregoing sentence shall apply only if SEB will be a lender under such New Facility. For the sake of clarity, Section 17.24 shall however apply.

25.

CHANGES TO THE PARTIES

25.1

Transfers by Obligors

No Obligor may assign, transfer or dispose of any of, or any interest in, its rights and/or obligations under the Finance Documents.

25.2

Transfers by Lender

The Lender (the Existing Bank ) may, subject to paragraph (a) below, at any time assign or transfer any of its rights and/or obligations under this Agreement to another bank or financial institution or EKN (the New Bank ). If the Lender should assign any of its rights and obligations according to this Clause 25, an amended agreement on the same terms but reflecting the requirement for agency provisions and several lenders shall be entered into in replacement of this Agreement if the Lender so requires.

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25.3

Conditions of assignment or transfer

(a)

the prior consent of the Borrower is required for any such assignment or transfer, unless (i) the New Bank is SEB or an Affiliate of the Lender, (ii) an Event of Default has occurred which is continuing, or (iii) paragraph 7.5 (mandatory prepayment – Request by EKN) has become applicable. However, the prior consent of the Borrower must not be unreasonably withheld or delayed and will be deemed to have been given if, within ten (10) Business Days of receipt by the Borrower of an application for consent, it has not been expressly refused.

(b)

Nothing in this Agreement restricts the ability of the Lender to subcontract an obligation if the Lender remains liable under this Agreement for that obligation.

26.

DISCLOSURE OF INFORMATION

26.1

Disclosure of Information – General

The Lender shall keep confidential any and all information made available to it by an Obligor pursuant to or in connection with the Finance Documents, other than information:

(a)

which at the relevant time is in the public domain; or

(b)

which, after such information has been made available to the Lender, becomes generally available to third parties by publication or otherwise through no breach of this Clause 26 by the Lender; or

(c)

which was lawfully in the possession of the Lender or its advisers prior to such disclosure (as evidenced by the Lender’s written records or the written records of the Lender’s advisers) and which was not acquired directly or indirectly from an Obligor; or

(d)

the disclosure of which is required by law or any competent regulatory body (to the extent of that requirement) or which is necessitated by any legal proceeding or audit requirement; or

(e)

the disclosure of which is made to an Affiliate of the Lender in circumstances where it is the Lender’s usual practice to make such disclosure or where such disclosure is required as part of the Lender’s management or reporting policies or where such disclosure is in the reasonable opinion of the Lender required to protect its position, or to assist in the recovery of amounts, hereunder; or

(f)

the disclosure of which is made to any person with whom it is proposing to enter, or has entered, into any kind of transfer, participation or other agreement in relation to this Agreement (e.g. SEB in its capacity as additional guarantor); or

(g)

the disclosure of which is made by the Lender to its professional advisers; or

(h)

which is disclosed to another party to this Agreement in the specific circumstances whereby it is made available to that party, provided that, if the Lender makes such information available to any person in accordance with paragraphs (d), (e), (f) or (g) above, it takes reasonable endeavours to ensure that such party keeps that information confidential to the same extent as set out above.

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26.2

Disclosure of Information to EKN

The Obligors hereby grant the Lender consent to disclose to EKN any information regarding the Obligors and the Facility which the Lender is obliged to deliver as a consequence of the EKN Guarantee.

27.

SET-OFF

The Lender may set off any matured obligation owed by the Borrower under the Finance Documents (to the extent beneficially owned by the Lender) against any obligation (whether or not matured) owed by the Lender to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender 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 Lender may set off in an amount estimated by it in good faith to be the amount of that obligation.

28.

SEVERABILITY

If a provision of any Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:

(a)

the validity or enforceability in that jurisdiction of any other provision of the Finance Documents; or

(b)

the validity or enforceability in other jurisdictions of that or any other provision of the Finance Documents.

29.

COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

30.

NOTICES

30.1

Giving of notices

All notices or other communications under or in connection with this Agreement shall be given in writing and, unless otherwise stated, may be made by letter or facsimile or, in the case of information provided by an Obligor or the Lender in relation to Clauses 17.2 (Financial information) and 17.3 (Information—miscellaneous) only, by e-mail. Any such notice will be deemed to be given as follows:

(a)

if by letter, when delivered personally or on actual receipt; and

(b)

if by facsimile, when received in legible form.

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30.2

Addresses for notices

(a)

The address and facsimile number of the Parent are:

Autoliv, Inc,

Box 70381

SE-107 24 Stockholm

Sweden


Fax No:		+46 8 24 44 93
Attention:		Treasurer

With a copy to:


Fax No:		+46 85 87 20 633
Attention:		VP for Legal Affairs, General Counsel and Secretary

or such other as the Parent may notify to the other Parties by not less than five Business Days’ notice.

(b)

The address and facsimile number of the Borrower are:

Autoliv AB

World Trade Center

Klarabergsviadukten 70

PO Box 70381

SE-107 Stockholm


Fax No:		+46 824 44 93
Attention:		Treasurer

With a copy to:


Fax No:		+46 85 87 20 633
Attention:		VP for Legal Affairs, General Counsel and Secretary

or such other as that Borrower may notify to the other Parties by not less than five Business Days’ notice.

(c)

The address and facsimile number of the Lender:

AB Svensk Exportkredit

Västra Trädgårdsgatan 11 B

Box 16368

103 27 Stockholm

Fax: 08-203894

Attention: Credit Administration

or such other as that Lender may notify to the other Parties by not less than five Business Days’ notice.

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(d)

The address and facsimile number of SEB are:

Skandinaviska Enskilda Banken AB (publ)

Structured Credit Operations

106 40 Stockholm

Sweden


Fax No:		+46 8 611 0384
Attention:		Structured Credit Operations

or such other as SEB may notify to the other Parties by not less than five Business Days’ notice.

31.

LANGUAGE

(a)

Any notice given under or in connection with any Finance Document shall be in English.

(b)

All other documents provided under or in connection with any Finance Document shall be:

(i)

in English; or

(ii)

if not in English, accompanied by a certified English translation and, in this case, the English translation shall prevail unless the document is a statutory or other official document.

32.

FORCE MAJEURE

(a)

The Lender shall not be held responsible for any damage arising out of any Swedish or foreign legal enactment, or any measure undertaken by a Swedish or foreign public authority, or war, strike, lockout, boycott, blockade or any other similar circumstance. The reservation in respect of strikes, lockouts, boycotts and blockades applies even if the Lender takes such measures, or is subject to such measures.

(b)

Any damage that may arise in other cases shall not be indemnified by the Lender if it has observed normal care. The Lender shall not in any case be held responsible for any indirect damage, consequential damage and/or loss of profit.

(c)

Should there be an obstacle as described in paragraph (a) above for the Lender to take any action in compliance with this Agreement such action may be postponed until the obstacle has been removed.

33.

GOVERNING LAW

This Agreement is governed by Swedish law.

34.

ENFORCEMENT

34.1

Jurisdiction of Swedish courts

(a)

The courts of Sweden, and, in first instance the city court of Stockholm, have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (a Dispute ).

(b)

However, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction.

43(48)

LOGO

35.

INTEGRATION

The Finance Documents contain the complete agreement between the parties on the matters to which they relate and supersede all prior commitments, agreements and understandings, whether written or oral, on those matters.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

44(48)

LOGO

SCHEDULE 1

CONDITIONS PRECEDENT DOCUMENTS

TO BE DELIVERED BEFORE THE FIRST REQUEST

1.	The Lender

(a)	A copy of the memorandum and articles of association and certificate of incorporation of each Obligor.

(b)	A copy of a secretary certificate to the effect that the board of directors of each Obligor has:

(i)

approved the terms of, and the transactions contemplated by, this Agreement and resolving that it execute this Agreement;

(ii)

authorized a specified person or persons to execute this Agreement on its behalf; and

(iii)

authorized a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement.

(c)	A specimen of the signature of each person authorized by the resolution referred to in paragraph (b) above.

(d)	A certificate of a director of each Obligor confirming that the borrowing or guaranteeing, as appropriate, of the Commitment in full would not cause any borrowing or guaranteeing limits binding on it to be exceeded.

2.	Other documents

(a)	A certificate of an authorized signatory of each Obligor certifying that each copy document specified in this Schedule 1 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

(b)	Confirmation from each Obligor that it is not, to the best of its knowledge and belief after full and due enquiry, in breach of any other agreement to which it is a party.

(c)	EKN Guarantee duly executed and delivered by EKN.

(d)	SEB Guarantee duly executed and delivered by SEB.

(e)

A copy of any other authorization or other document, opinion or assurance which the Lender and SEB consider to be necessary in connection with the entry into and performance of, and the transactions contemplated by, any Finance Document or for the validity and enforceability of any Finance Document.

3.	Legal opinions

(a)	A legal opinion of the General Counsel of the Parent in form and substance satisfactory to the Lender.

45(48)

LOGO

SCHEDULE 2

FORM OF REQUEST


To:		AB Svensk Exportkredit as Lender

From:		Autoliv AB as Borrower

Date: [ ]

Autoliv AB.

EUR 155,000,000 Credit Agreement dated 21 June 2010

1.	We wish to utilise the Facility as follows:

(a)

Drawdown Date: [ ]

(b)

Amount: EUR [ ]

(c)

Interest Period: [ ]

(d)

Payment instructions: [ ]

2.	We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Request.

By:

Autoliv AB.

Authorized Signatory

46(48)

LOGO

SCHEDULE 3

FORM OF COMPLIANCE CERTIFICATE


To:		AB Svensk Exportkredit as Lender

From:		AUTOLIV INC.

Date: [ ]

Autoliv Inc.

EUR 155,000,000 Credit Agreement dated 21 June 2010 (the Agreement)

1.	This is the Compliance Certificate referred to in Clause 17.5 (Compliance certificates) of the Agreement.

2.	We confirm that as at [relevant Balance Sheet Date] Subsidiary Borrowings were [ ] (Covenant level requirement not more than U.S.$400,000,000).

3.	We confirm the credit ratings as at the date of this Compliance Certificate of the long term unsecured and unsubordinated debt of AUTOLIV INC. given by:

(a)

Moody’s was [ ]; and

(b)

Standard & Poor’s was [ ].

4.	We confirm that no Default is outstanding as at the date of this Compliance Certificate. ¹

By:


		AUTOLIV INC.

¹	If this statement cannot be made, the certificate should identify any Default that is outstanding and the steps, if any, being taken to remedy it.

47(48)

LOGO

SIGNATORIES

Parent

AUTOLIV, INC.

Borrower

AUTOLIV AB

Lender

AB SVENSK EXPORTKREDIT (PUBL)

SEB

SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)

48(48)

EXHIBIT 31.1

CERTIFICATIONS of CEO

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: July 23, 2010

/s/ Jan Carlson

Jan Carlson

President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS of CFO

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: July 23, 2010

/s/ Mats Wallin

Mats Wallin

Chief Financial Officer

EXHIBIT 32.1

Certification of CEO and 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 June 30, 2010, 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: July 23, 2010

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 CEO and 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 June 30, 2010, 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: July 23, 2010