Stock Compensation

2012 Omnibus Incentive Plan

Our 2012 Omnibus Incentive Plan (the Plan), as approved by our stockholders, authorizes the grant of stock options, stock appreciation rights (SARs), RSUs and performance share units (PSUs) through April 2022. Cash-settled awards do not count against the maximum aggregate number. At December 31, 2014, there were 5.0 million shares available for future grants.

Award activity — (shares in millions)



	Options				SARs				RSUs				PSUs
			Weighted- Average				Weighted- Average				Weighted- Average Grant-Date			Weighted- Average Grant-Date
Outstanding at	Shares		Exercise Price		Shares		Exercise Price		Shares		Fair Value		Shares	Fair Value
December 31, 2013	2.6		$	13.85	0.5		$	15.46	1.3		$	16.29	—	$	—
Granted									0.7		21.20		0.3	24.36
Exercised or vested	(0.6	)	11.48		(0.1	)	16.49		(0.4	)	16.99
Forfeited or expired	(0.1	)	15.89						(0.1	)	14.91
December 31, 2014	1.9		$	14.46	0.4		$	15.18	1.5		$	18.18	0.3	$	24.36



	2014		2013		2012
Weighted-average per share grant-date fair value
Stock options	N/A		$	7.46	$	7.88
SARs	N/A		7.45		7.84
Intrinsic value of awards exercised or vested
Stock options / SARs	$	7	$	14	$	18
RSUs / PSUs	8		5		11

Compensation expense is generally measured based on the fair value at the date of grant and is recognized on a straight-line basis over the vesting period. For options and SARs, we use an option-pricing model to estimate fair value. For RSUs and PSUs, the fair value is based on the closing market price of our common stock at the date of grant. Awards that are settled in cash are subject to liability accounting. Accordingly, the fair value of such awards is remeasured at the end of each reporting period until settled or expired. We had accrued $6 and $5 for cash-settled awards at December 31, 2014 and 2013.

We recognized total stock compensation expense of $16, $16 and $19 during 2014, 2013 and 2012. The total fair value of awards vested during 2014, 2013 and 2012 was $13, $10 and $18. We received $7, $15 and $10 of cash from the exercise of stock options and we paid $2, $4 and $2 of cash to settle SARs, RSUs and PSUs during 2014, 2013 and 2012. We issued 0.3 million in RSUs in 2014 based on vesting. At December 31, 2014, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $20. This cost is expected to be recognized over a weighted-average period of 1.8 years.

Stock options and stock appreciation rights — The exercise price of each option or SAR equals the closing market price of our common stock on the date of grant. Options and SARs generally vest over three years and their maximum term is ten years. Shares issued upon the exercise of options are recorded as common stock and additional paid-in capital at the option price. SARs are settled in cash for the difference between the market price on the date of exercise and the exercise price.

We estimated fair values for options and SARs at the date of grant using the following key assumptions as part of the Black-Scholes option pricing model. The expected term was estimated using the simplified method because the limited period of time our common stock had been publicly traded provided insufficient historical exercise data. The risk-free rate was based on U.S. Treasury security yields at the time of grant. The dividend yield was calculated by dividing the expected annual dividend by the average stock price of our common stock over the prior year. The expected volatility was estimated using a combination of the historical volatility of similar entities and the implied volatility of our exchange-traded options.



	Options				SARs
	2013		2012		2013		2012
Expected term (in years)	6.00		6.00		6.00		6.00
Risk-free interest rate	1.07	%	1.24	%	1.07	%	1.24	%
Dividend yield	1.41	%	1.33	%	1.41	%	1.33	%
Expected volatility	55.80	%	59.90	%	55.80	%	59.90	%

Restricted stock units and performance shares units — Each RSU or PSU granted represents the right to receive one share of Dana common stock or, at the election of Dana (for units awarded to board members) or for employees located outside the U.S. (for employee awarded units), cash equal to the market value per share. All RSUs contain dividend equivalent rights. RSUs granted to non-employee directors vest on the first anniversary date of the grant and those granted to employees generally cliff vest fully after three years. PSUs granted to employees are awarded if specified performance goals are achieved during the respective performance period.

The number of PSUs that ultimately vest is contingent on achieving specified return on invested capital targets and specified total shareholder return targets relative to peer companies. For the portion of the award based on the return on invested capital performance metric, we estimated the fair value of the PSUs at grant date based on the closing market price of our common stock at the date of grant adjusted for the value of assumed dividends over the period because the award is not dividend protected. For the portion of the award based on shareholder returns, we estimated the fair value of the PSUs at grant date using various assumptions as part of a Monte Carlo simulation. The expected term represents the period from the grant date to the end of the three-year performance period. The risk-free interest rate of 0.64% was based on U.S. Treasury constant maturity rates at the grant date. The dividend yield of 1.02% was calculated by dividing the expected annual dividend by the average stock price over the prior year. The expected volatility of 43.6% was based on historical volatility over the prior three years using daily stock price observations.

Outstanding awards expected to vest and exercisable or convertible at December 31, 2014 — (shares in millions)



	Equity Awards Outstanding Expected to Vest						Equity Awards Outstanding That are Exercisable or Convertible
				Weighted-Average						Weighted-Average
	Shares	Aggregate Intrinsic Value		Exercise Price		Remaining Contractual Life in Years	Shares	Aggregate Intrinsic Value		Exercise Price		Remaining Contractual Life in Years
Options / SARs	2.3	$	16	$	14.56	6.9	1.4	$	12	$	13.64	6.3
RSUs / PSUs	1.8	39		—		1.3	0.1	1		—		0.2

Annual cash incentive awards — Our 2012 Omnibus Incentive Plan provides for cash incentive awards. We make awards annually to certain eligible employees designated by Dana, including certain executive officers. Awards under the plan are based on achieving certain financial target performance goals. The performance goals of the plan are established annually by the Board of Directors.

Under the 2014, 2013 and 2012 programs, participants were eligible to receive annual cash awards based on achieving earnings and cash flow performance goals, with our 2013 program also including a component based on reduction of inventory days. Our long-term incentive programs include a performance-based cash award that consists of three individual annual awards with the related annual performance objectives established at the beginning of each year. Amounts earned under the three individual annual awards of the 2014, 2013 and 2012 long-term incentive programs cliff vest at the end of the respective three year periods covered by the long-term incentive programs. Our 2014, 2013 and 2012 long-term incentive programs included a cash-settled component which provided for payment if we achieved a certain return on invested capital. We accrued $44, $47 and $40 of expense in 2014, 2013 and 2012 for the expected cash payments under these programs.