DANA CORPORATION 10-K

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DEvI11vm/xtYJ2OWi3fbE4Qs01jXEgn6CzUk1p34vtOMdfSX/uT7TGYVPXPH1IA+ Fx+FISRIoa0zA6etolsPQg== 0000950152-07-002289.txt : 20070320 0000950152-07-002289.hdr.sgml : 20070320 20070319215648 ACCESSION NUMBER: 0000950152-07-002289 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070320 DATE AS OF CHANGE: 20070319 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANA CORP CENTRAL INDEX KEY: 0000026780 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 344361040 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01063 FILM NUMBER: 07704993 BUSINESS ADDRESS: STREET 1: 4500 DORR ST CITY: TOLEDO STATE: OH ZIP: 43615 BUSINESS PHONE: 4195354500 MAIL ADDRESS: STREET 1: PO BOX 1000 CITY: TOLEDO STATE: OH ZIP: 43697 10-K 1 l24221ae10vk.htm DANA CORPORATION 10-K DANA CORPORATION 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2006

Commission file number 1-1063

Dana Corporation

(Exact name of registrant as specified in its charter)


Virginia		34-4361040
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

4500 Dorr Street, Toledo, Ohio		43615
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (419) 535-4500

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


Title of each class		Name of each exchange on which registered

Common stock, $1 par value		None

Securities registered pursuant to section 12(g) of the Act:

None

(Title of Class)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

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

The aggregate market value of the voting common stock held by non-affiliates of the registrant computed by reference to the average high and low trading prices of the common stock on the OTC Bulletin Board as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2006) was approximately $409,000,000.

There were 150,346,688 shares of registrant’s common stock, $1 par value, outstanding at March 1, 2007.

DANA CORPORATION — FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

TABLE OF CONTENTS


			10-K Pages

	Cover
Table of Contents				1
Forward-Looking Information				2

PART I
	Item 1	Business		3
	Item 1A	Risk Factors		12
	Item 1B	Unresolved Staff Comments		15
	Item 2	Properties		16
	Item 3	Legal Proceedings		16
	Item 4	Submission of Matters to a Vote of Security Holders		17

PART II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		18
	Item 6	Selected Financial Data		19
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk		53
	Item 8	Financial Statements and Supplementary Data		55
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		123
	Item 9A	Controls and Procedures		123
	Item 9B	Other Information		126

PART III
	Item 10	Directors, Executive Officers and Corporate Governance		127
	Item 11	Executive Compensation		129
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		151
	Item 13	Certain Relationships and Related Transactions, and Director Independence		154
	Item 14	Principal Accounting Fees and Services		154

PART IV
	Item 15	Exhibits, and Financial Statement Schedules		156
Signatures				157
Exhibit Index				159
Exhibits				167
EX-10(J)
EX-10(K)
EX-10(Q)
EX-21
EX-23
EX-24
EX-31(A)
EX-31(B)
EX-32

FORWARD-LOOKING INFORMATION

Statements in this report that are not entirely historical constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forwarding-looking statements are indicated by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “estimates,” “projects” and similar expressions. These statements represent the present expectations of Dana Corporation (Dana, we or us) based on our current information and assumptions. Forward-looking statements are inherently subject to risks and uncertainties. Our plans, actions and actual results could differ materially from our present expectations due to a number of factors, including the following and those discussed in Items 1A, 7 and 7A and elsewhere in this report (our 2006 Form 10-K), and in our other filings with the Securities and Exchange Commission (SEC).

Bankruptcy-Related Risk Factors


	•	Our ability to continue as a going concern, operate pursuant to the terms of our debtor-in-possession credit facility, obtain court approval with respect to motions in the bankruptcy proceedings from time to time and develop and implement a plan of reorganization;

	•	Our ability to fund and execute our business plan;

	•	Our ability to obtain and maintain satisfactory terms with our customers, vendors and service providers and to maintain contracts that are critical to our operations;

	•	Our ability to attract, motivate and/or retain key employees; and

	•	Our ability to successfully implement the reorganization initiatives discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report.

Risk Factors in the Vehicle Markets We Serve


	•	High fuel prices and interest rates;

	•	The cyclical nature of the heavy-duty commercial vehicle market;

	•	Shifting consumer preferences in the United States (U.S.) from pickup trucks and sport utility vehicles (SUVs) to cross-over vehicles (CUVs) and passenger cars;

	•	Market share declines and production cutbacks by our larger customers, including Ford Motor Company (Ford), General Motors Corporation (GM) and DaimlerChrysler AG (Chrysler);

	•	High costs of commodities used in our manufacturing processes, such as steel, other raw materials and energy, particularly costs that cannot be recovered from our customers;

	•	Competitive pressures on our sales from other vehicle component suppliers; and

	•	Adverse effects that could result from consolidations or bankruptcies of our customers, vendors and competitors.

Company-Specific Risk Factors


	•	Changes in business relationships with our major customers and/or in the timing, size and duration of their programs for vehicles with Dana content;

	•	Price reduction pressures from our customers;

	•	Our vendors’ ability to maintain projected production levels and furnish us with critical components for our products and other necessary goods and services;

	•	Our ability to successfully complete previously announced asset sales;

	•	Our ability to renegotiate expiring collective bargaining agreements with U.S. and Canadian unionized employees on satisfactory terms;

	•	Adverse effects that could result from enactment of U.S. federal legislation relating to asbestos personal injury claims; and

	•	Adverse effects that could result from increased costs of environmental compliance.

PART I

(Dollars in millions, except per share amounts)


Item 1.	*Business*

General

Dana Corporation, a Virginia corporation organized in 1904, is headquartered in Toledo, Ohio. We are a leading supplier of axle, driveshaft, structural, and sealing and thermal management products for global vehicle manufacturers. Our people design and manufacture products for every major vehicle producer in the world. We employ approximately 45,000 people and operate 121 major facilities in 28 countries.

Reorganization Proceedings under Chapter 11 of the Bankruptcy Code

On March 3, 2006 (the Filing Date), Dana and forty of our wholly-owned domestic subsidiaries (collectively, the Debtors) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). These Chapter 11 cases are collectively referred to as the “Bankruptcy Cases.” Neither Dana Credit Corporation (DCC) and its subsidiaries nor any of our non-U.S. affiliates are Debtors.

While we continue our reorganization under Chapter 11 of the Bankruptcy Code, investments in our securities are highly speculative. Although shares of our common stock continue to trade on the OTC Bulletin Board under the symbol “DCNAQ,” the trading prices of the shares may have little or no relationship to the actual recovery, if any, by the holders under any eventual court-approved reorganization plan. The opportunity for any recovery by holders of our common stock under such reorganization plan is uncertain, and shares of our common stock may be cancelled without any compensation pursuant to such plan.

The Bankruptcy Cases are being jointly administered, with the Debtors managing their business in the ordinary course as debtors in possession subject to the supervision of the Bankruptcy Court. We are continuing normal business operations during the Bankruptcy Cases while we evaluate our businesses both financially and operationally and implement comprehensive improvements to enhance performance. We are proceeding with previously announced divestiture and reorganization plans, which include the sale of several non-core businesses, the closure of certain facilities and the shift of production to lower-cost locations. In addition, we are taking steps to reduce costs, increase efficiency and enhance productivity so that we can emerge from bankruptcy as a stronger, more viable company. We have the exclusive right to file a plan of reorganization in the Bankruptcy Cases until September 3, 2007, by order of the Bankruptcy Court.

In March 2006, the Bankruptcy Court granted final approval of our debtor-in-possession (DIP) credit facility (DIP Credit Agreement) under which we may borrow up to $1,450, consisting of a $750 revolving credit facility and a $700 term loan facility. The DIP Credit Agreement provides funding to continue our operations without disruption to our obligations to suppliers, customers and employees during the Chapter 11 reorganization process. In January 2007, the Bankruptcy Court approved an amendment to the DIP Credit

Agreement to increase the term loan facility by $200, subject to certain terms and conditions discussed below under “DIP Credit Agreement” in Item 7. Also, in January 2007, we permanently reduced the aggregate commitment under the revolving credit facility from $750 to $650.

The Bankruptcy Court has also entered a variety of orders designed to permit us to continue to operate on a normal basis post-petition (i.e., after the Filing Date). These include orders authorizing us to continue our consolidated cash management system, pay employees their accrued pre-petition (i.e., before the Filing Date) wages and salaries, honor our obligations to our customers and pay some of the pre-petition claims of foreign vendors and certain suppliers that are critical to our continued operation, subject to certain restrictions.

Official committees of the Debtors’ unsecured creditors (Creditors Committee or UCC) and retirees not represented by unions (Retiree Committee) have been appointed in the Bankruptcy Cases. Among other things, the Creditors Committee consults with the Debtors regarding the administration of the Bankruptcy Cases; investigates matters relevant to these cases or to the formulation of a plan of reorganization, participates in the formulation of, and advises the unsecured creditors regarding, such plan; and generally performs other services in the interest of the Debtors’ unsecured creditors. The Retiree Committee acts as the authorized representative of those persons receiving certain retiree benefits who are not covered by an active or expired collective bargaining agreement in instances where the Debtors seek to modify or not pay certain retiree benefits. The Debtors are required to bear certain of the committees’ costs and expenses, including those of their counsel and other professional advisors. An official committee of Dana’s equity security holders had been appointed but was disbanded effective February 9, 2007.

Under the Bankruptcy Code, the Debtors have the right to assume or reject executory contracts (i.e., contracts that are to be performed by the contract parties after the Filing Date) and unexpired leases, subject to Bankruptcy Court approval and other limitations. In this context, “assuming” an executory contract or unexpired lease means that the Debtors will agree to perform their obligations and cure certain existing defaults under the contract or lease and “rejecting” it means that the Debtors will be relieved of their obligations to perform further under the contract or lease, which may give rise to a pre-petition claim for damages for the breach thereof. Since the Filing Date, the Bankruptcy Court has authorized the Debtors to reject certain unexpired leases and executory contracts.

The Debtors filed their initial schedules of assets and liabilities existing on the Filing Date with the Bankruptcy Court in June 2006 and have since then made amendments to these schedules. In July 2006, the Bankruptcy Court set September 21, 2006 as the general bar date (the date by which most entities that wished to assert a pre-petition claim against a Debtor had to file a proof of claim in writing). Asbestos-related personal injury and wrongful death claimants were not required to file proofs of claim by the bar date, and such claims will be addressed as part of the Chapter 11 proceedings. The Debtors are now in the process of evaluating the claims that were submitted and establishing procedures to reconcile and resolve them. The Debtors have objected to multiple claims and expect to file additional claim objections with the Bankruptcy Court. Our Liabilities subject to compromise represent our current estimate of claims under generally accepted accounting principles in the United States (GAAP or U.S. GAAP) expected to be resolved by the Bankruptcy Court based on our evaluation to date. See Note 2 to our consolidated financial statements in Item 8 for more information about Liabilities subject to compromise.

In August 2006, the Bankruptcy Court entered an order establishing procedures for trading in claims and equity securities which is designed to protect the Debtors’ potentially valuable tax attributes (such as net operating loss carryforwards). Under the order, holders or acquirers of 4.75% or more of Dana stock are subject to certain notice and consent procedures prior to acquiring or disposing of Dana common shares. Holders of claims against the Debtors that would entitle them to more than 4.75% of the common shares of reorganized Dana under a confirmed plan of reorganization utilizing the tax benefits provided under Section 382(l)(5) of the Internal Revenue Code may be subject to a requirement to sell down the excess claims if necessary to implement such a plan of reorganization.

We anticipate that substantially all of the Debtors’ liabilities as of the Filing Date will be resolved under, and treated in accordance with, a plan of reorganization to be proposed to and voted on by creditors in

accordance with the provisions of the Bankruptcy Code. Although we intend to file and seek confirmation of such a plan by September 3, 2007, there is no assurance that we will file the plan by that date or that the plan will be confirmed by the Bankruptcy Court and consummated. Additionally, there is no assurance that we will be successful in achieving our reorganization goals, or that any measures that are achievable will result in sufficient improvement to our financial position to make our business sustainable. Accordingly, until the time that the Debtors emerge from bankruptcy, there will be no certainty about our ability to continue as a going concern. If a reorganization is not completed, we could be forced to sell a significant portion of our assets to retire outstanding debt or, under certain circumstances, to cease operations.

Our Business

Markets

We serve three primary markets:


	•	Light vehicle market — In the light vehicle market, we design and manufacture light axles, driveshafts, structural products, chassis, steering, and suspension components, engine sealing products, thermal management products and related service parts for light trucks (including pick-up trucks, SUVs, vans and CUVs) and passenger cars.

	•	Commercial vehicle market — In the commercial vehicle market, we design and manufacture axles, driveshafts, brakes, chassis and suspension modules, ride controls and related modules and systems, engine sealing products, thermal management products, and related service parts for medium and heavy duty trucks, buses and other commercial vehicles.

	•	Off-Highway market — In the off-highway market, we design and manufacture axles, transaxles, driveshafts, brakes, suspension components, transmissions, electronic controls, related modules and systems, engine sealing products and related service parts for construction machinery and leisure/utility vehicles and outdoor power, agricultural, mining, forestry and material handling equipment and for a variety of non-vehicular, industrial applications.

We have two primary business units: the Automotive Systems Group (ASG), which sells products mostly into the light vehicle market, and the Heavy Vehicle Technologies and Systems Group (HVTSG), which sells products to the commercial vehicle and off-highway markets. ASG is organized into individual operating segments specializing in product lines, while HVTSG is organized to serve specific markets.

Segments

Following our bankruptcy filing, senior management and our Board of Directors (Board) began to review our various operations within our primary business units for actions to drive our reorganization initiatives. In the fourth quarter of 2006, senior management and our Board began to formally review these operations as operating segments under the two primary business units. Accordingly, we have expanded our disclosure throughout the 2006 Form 10-K to include the operating segments identified in this section.

ASG recorded sales of $5,567 in 2006, with Ford, GM and Chrysler among its largest customers. At December 31, 2006, ASG employed 25,900 people and had 96 facilities in 19 countries. ASG operates with five segments focusing on specific product lines: Light Axle Products (Axle), Driveshaft Products (Driveshaft), Sealing Products (Sealing), Thermal Products (Thermal) and Structural Products (Structures).

HVTSG generated sales of $2,914 in 2006. HVTSG is comprised of two operating segments: Commercial Vehicle and Off-Highway, each of which focuses on specific markets. In 2006, the largest Commercial Vehicle customers were PACCAR Inc (PACCAR), Navistar International Inc (Navistar) and Volvo Truck Corporation (Volvo Truck). The largest Off-Highway customers included Deere & Company, Caterpillar, and AGCO Corporation. At December 31, 2006, HVTSG employed 7,600 people and had 21 facilities in 8 countries.

The operating segments of our ASG and HVTSG business units provide the core products shown below.


Business Unit	Segment	Products	Market

ASG	Axle	Front and rear axles, differentials, torque couplings, and modular assemblies	Light vehicle
ASG	Driveshaft	Driveshafts*	Light and commercial vehicle
ASG	Sealing	Gaskets, cover modules, heat shields, and engine sealing systems	Light and commercial vehicle and off-highway
ASG	Thermal	Cooling and heat transfer products	Light and commercial vehicle and off-highway
ASG	Structures	Frames, cradles, and side rails	Light vehicle
HVTSG	Commercial Vehicle	Axles, driveshafts, steering shafts, brakes, suspensions, tire management systems,*	Commercial vehicle
HVTSG	Off-Highway	Axles, transaxles, driveshafts and end-fittings, transmissions, torque converters, electronic controls, and brakes	Off-highway


*		The Driveshaft segment of ASG supplies product directly to original equipment commercial vehicle customers. It also supplies our Commercial Vehicle and Off-Highway segments with these parts for original equipment off-highway customers and replacement part customers in both the commercial vehicle and off-highway markets.

These segments also provide a variety of important ancillary products and systems that serve the needs of our global customers in the automotive, commercial vehicle and off-highway markets.

Alliances

We have strategic alliances that strengthen our marketing, manufacturing and product-development capabilities, broaden our product portfolio, and help us to better serve our diverse and global customer base. Among them are:


	•	Bendix Commercial Vehicle Systems LLC (Bendix) — Bendix Spicer Foundation Brake LLC is a joint venture formed by Bendix and Dana that integrates the braking systems expertise from Bendix and its parent, the Knorr-Bremse Group, with the axle and brake integration capability of Dana to offer a full portfolio of advanced wheel-end braking systems components and technologies.

	•	Eaton Corporation — Eaton and Dana together offer the Roadranger^® solution, a combination of drivetrain, chassis and safety components and services for the commercial vehicle market backed by sales, service and technical consultants called the Roadrangers.

	•	GETRAG GmbH & Cie KG (GETRAG) — At December 31, 2006 we had a 30% equity stake in GETRAG, the parent company of the GETRAG group of companies, and a 49% share of GETRAG’s North American operations. In 2004, the two companies bought a 60% share of Volvo Car Corporation’s chassis operations in Koping, Sweden, to form GETRAG All Wheel Drive AB. In March


		2007, we sold our 30% equity stake in GETRAG to the holders of the 70% majority interest. See Note 4 to our consolidated financial statements in Item 8 for additional information.


	•	GKN plc — GKN and Dana, through Chassis Systems Limited, offer full-perimeter hydroformed frames for SUVs.

Divestitures

In March 2007, we sold our engine hard parts business to MAHLE GmbH (MAHLE). Of the $97 of cash proceeds, $5 has been escrowed pending completion of closing conditions in certain countries which are expected to occur in 2007, and $20 was escrowed pending completion of customary purchase price adjustments and indemnification provisions.

We are currently in negotiations with parties interested in purchasing the fluid products business and our pump products business. The sale of the pump products business is not subject to Bankruptcy Court approval since the business is located outside the U.S. and held by a non-Debtor. We expect to complete the sale of the fluid products and pump businesses during the second quarter of 2007.

During January 2007, we completed the sale of our trailer axle manufacturing business to Hendrickson USA L.L.C., a subsidiary of The Boler Company. This business generated sales of approximately $150 in 2006 and employed about 180 people.

We were previously a large supplier of light vehicle products to the North American aftermarket. Nearly all of our automotive aftermarket operations were conducted through our Automotive Aftermarket Group (AAG). The sale of substantially all of AAG was completed in November 2004.

DCC

We have been a provider of lease financing services in selected markets through DCC. However, in 2001, we determined that the sale of DCC’s businesses would enable us to more sharply focus on our core businesses. Over the last five years, DCC has sold significant portions of its asset portfolio and we recorded asset impairments, reducing this portfolio from $2,200 in December 2001 to approximately $200 at the end of 2006. In September 2006, DCC adopted a plan of liquidation providing for the disposition of substantially all its assets over an 18 to 24 month period, and in December 2006, DCC signed a Forbearance Agreement with its Noteholders which allows DCC to sell its remaining asset portfolio and use the proceeds to pay the forbearing noteholders a pro rata share of the cash generated. See Notes 2 and 10 to our consolidated financial statements in Item 8 for additional information.

Presentation

The engine hard parts, fluid products and pump products businesses are presented in our financial statements as discontinued operations, as was the aftermarket business prior to its sale. The trailer axle business and DCC did not meet the requirements for treatment as discontinued operations. Consequently their results are included with continuing operations. See Note 4 to our consolidated financial statements in Item 8 for additional information on discontinued operations.

Geographic

We maintain administrative organizations in four regions — North America, Europe, South America and Asia Pacific — to facilitate financial and statutory reporting and tax compliance on a worldwide basis and to support our business units. Our operations are located in the following countries:


North America	Europe		South America	Asia Pacific

Canada	Austria	Slovakia	Argentina	Australia
Mexico	Belgium	Spain	Brazil	China
United States	France	Sweden	Colombia	India
	Germany	Switzerland	South Africa	Japan
	Hungary	United Kingdom	Uruguay	South Korea
	Italy		Venezuela	Taiwan
				Thailand
				Turkey

Our international subsidiaries and affiliates manufacture and sell products similar to those we produce in the U.S. Operations outside the U.S. may be subject to a greater risk of changing political, economic and social environments, changing governmental laws and regulations, currency revaluations and market fluctuations than our domestic operations.

Non-U.S. sales were $4,300 of our 2006 consolidated sales of $8,504. Non-U.S. net loss for 2006 was $51 while on a consolidated basis we had a net loss of $739. Non-U.S. net income includes $13 of equity in earnings of international affiliates. A summary of sales and long-lived assets by region can be found in Note 20 to our consolidated financial statements in Item 8.

Customer Dependence

We have thousands of customers around the world and have developed long-standing business relationships with many of them. Our ASG segments are largely dependent on North American light vehicle original equipment manufacturer (OEM) customers, while our HVTSG segments have a broader and more geographically diverse customer base, including machinery and equipment manufacturers in addition to medium and heavy duty vehicle OEM customers.

Ford and GM were the only individual customers accounting for 10% or more of our consolidated sales in 2006. We have been supplying products to these companies and their subsidiaries for many years. As a percentage of total sales from continuing operations, our sales to Ford were approximately 23% in 2006 and 26% in each of 2005 and 2004, and our sales to General Motors were approximately 10% in 2006 and 11% in each of 2005 and 2004.

We also have significant sales to Chrysler. As a percentage of total sales from continuing operations, our sales to Chrysler were 6% in 2006, 5% in 2005 and 8% in 2004. In 2006, PACCAR and Navistar became our third and fourth largest customers. PACCAR, Navistar, Toyota Motor Corporation (Toyota), the Renault-Nissan Alliance (Renault-Nissan), and Volvo Truck collectively accounted for approximately 24% of our revenues in 2006, 20% in 2005 and 18% in 2004.

Loss of all or a substantial portion of our sales to Ford, GM or other large volume customers would have a significant adverse effect on our financial results until such lost sales volume could be replaced and there is no assurance that any such lost volume would be replaced. We continue to work to diversify our customer base and geographic footprint.

Products

The mix of our sales by product for the last three years is as follows:


	Percentage of Consolidated Sales
	2006			2005			2004

ASG
Axle		25.9	%		28.0	%		28.9	%
Driveshaft		13.6			13.1			13.4
Sealing		8.0			7.7			7.9
Thermal		3.3			3.6			4.0
Structures		13.8			14.9			14.2
Other		0.9			1.7			0.8

Total ASG		65.5			69.0			69.2
HVTSG
Axle		23.4			23.5			22.4
Driveshaft		2.2			3.4			3.4
Other		8.6			3.8			3.8

Total HVTSG		34.2			30.7			29.6
Other Operations		0.3			0.3			1.2

TOTAL		100.0	%		100.0	%		100.0	%

See Note 20, “Segments, Geographical Areas and Major Customer Information,” in Item 8 for additional segment information including revenues from external customers, segment profitability, capital spending, depreciation and amortization and total assets.

Sources and Availability of Raw Materials

We use a variety of raw materials in the production of our products, including steel and products containing steel, stainless steel, forgings, castings and bearings. Other commodity purchases include aluminum, brass, copper and plastics. Prior to 2005, our operating units purchased most of the raw materials they required from suppliers located within their local geographic regions. Since then, we have been combining and centralizing our purchases to give us greater leverage with our suppliers in order to manage and reduce our production costs. These materials are usually available from multiple qualified sources in quantities sufficient for our needs. However, some of our operations remain dependent on single sources for certain raw materials. While our suppliers have generally been able to support our needs, our operations may experience shortages and delays in the supply of raw material from time to time, due to strong demand, capacity limitations and other problems experienced by the suppliers. A significant or prolonged shortage of critical components from any of our suppliers could adversely impact our ability to meet our production schedules and to deliver our products to our customers when they have requested them.

High steel and other raw material costs, primarily resulting from limited capacity and high demand, had a major adverse effect on our results of operations in recent years, as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7.

Our bankruptcy has created supplier concerns over non-payment for pre-petition services and products and other uncertainties. To date, this has not had a significant effect on our ability to negotiate new contracts and terms with our suppliers on an ongoing basis. However, some supplier relationships have been strained as a result of our bankruptcy filing, our non-payment of their pre-petition billings and the related ongoing uncertainty.

Seasonality

Our businesses are generally not seasonal. However, our sales are closely related to the production schedules of our OEM customers and, historically, those schedules have been weakest in the third quarter of the year due to a large number of model year change-overs which occur during this period. Additionally, third quarter production schedules in Europe are typically impacted by the summer holiday schedules and fourth quarter production by year end holidays.

Backlog

Our products are not sold on a backlog basis since most orders may be rescheduled or modified by our customers at any time. Our product sales are dependent upon the number of vehicles that our customers actually produce as well as the timing of such production. A substantial amount of the new business we are awarded by OEMs is granted well in advance of a program launch. These awards typically extend through the life of the given program. We estimate future revenues from new business on the projected volume under these programs. See “New Business” in Item 7 for additional explanations related to new business awarded.

Competition

Within each of our markets, we compete with a variety of independent suppliers and distributors, as well as with the in-house operations of certain OEMs. We compete primarily on the basis of price, product quality, technology, delivery and service.

Automotive Systems Group

We are one of the primary independent suppliers in axle and driveshaft technologies, structural solutions (frames) and system integration technologies (including advanced modularity concepts and systems). Our primary competitors in the Axle segment are American Axle, in-house operations of Chrysler and Ford, Magna International Inc. (Magna) and ZF Friedrichshafen AG (ZF Group). Our primary competitor in the Driveshaft segment is GKN Driveline, and in the Structures segment, our primary competition is from Magna and Tower Automotive Inc. (Tower Automotive).

We are also one of the leading independent suppliers of sealing systems (gaskets, seals and cover modules) and thermal management products (heat exchangers, valves and small radiators). On a global basis, our primary competitors in the Sealing segment are Elring Klinger, Federal-Mogul and Freudenberg NOK. Competitors in the Thermal segment are Behr GmbH & Co., Delphi Corporation (Delphi), Modine Manufacturing Company and Valeo.

Heavy Vehicle Technologies and Systems Group

We are one of the primary independent suppliers of axles, driveshafts and other products for both the medium- and heavy-truck markets, as well as various specialty and off-highway segments. We also specialize in the manufacture of off-highway transmissions. Our primary competitor in North America is ArvinMeritor in the medium- and heavy-truck markets. Major competitors in Europe include OEMs’ vertically integrated operations in the heavy-truck markets, as well as Carraro Group, ZF Group and OEMs’ vertically integrated operations in the off-highway markets.

Patents and Trademarks

Our proprietary drivetrain, engine parts, chassis, structural components, fluid power systems and industrial power transmission product lines have strong identities in the markets we serve. Throughout these product lines, we manufacture and sell our products under a number of patents that have been obtained over a period of years and expire at various times. We consider each of these patents to be of value and aggressively protect our rights throughout the world against infringement. We are involved with many product lines, and the loss or expiration of any particular patent would not materially affect our sales and profits.

We own or have licensed numerous trademarks that are registered in many countries, enabling us to market our products worldwide. For example, our Spicer^®, Victor Reinz^® and Long^® trademarks are widely recognized in their market segments.

Research and Development

From our introduction of the automotive universal joint in 1904, Dana has been focused on technological innovation. Our objective is to be an essential partner to our customers and remain highly focused on offering superior product quality, technologically advanced products and competitive prices. To enhance quality and reduce costs, we use statistical process control, cellular manufacturing, flexible regional production and assembly, global sourcing and extensive employee training.

We engage in ongoing engineering, research and development activities to improve the reliability, performance and cost-effectiveness of our existing products and to design and develop innovative products that meet customer requirements for new applications. We are integrating related operations to create a more innovative environment, speed product development, maximize efficiency and improve communication and information sharing among our research and development operations. At December 31, 2006, ASG had four technical centers and HVTSG had one. Our spending on engineering, research and development and quality control programs was $221 in 2006, $275 in 2005 and $269 in 2004.

Our engineers are helping to develop and commercialize our fuel cell components and sub-systems by working with a number of leading light-vehicle manufacturers. Specifically, we are developing fuel-cell stack components, such as metallic and composite bipolar plates; balance-of-plant technologies, particularly thermal management sub-systems with heat exchangers and electric pumps; and fuel-processor components and sub-systems.

Employment

Our worldwide employment (including consolidated subsidiaries) was approximately 45,000 at December 31, 2006 including 2,500 employees of the Mexican operations that we acquired in the third quarter of 2006. Also included are approximately 9,800 employees in the businesses which have been or will be divested in 2007.

Environmental Compliance

We make capital expenditures in the normal course of business as necessary to ensure that our facilities are in compliance with applicable environmental laws and regulations. The cost of environmental compliance was not a material part of our capital expenditures and did not have a materially adverse effect on our earnings or competitive position in 2006. We do not anticipate that future environmental compliance costs will be material. See Notes 1 and 17 to our consolidated financial statements in Item 8 for additional information.

Executive Officers of the Registrant

We currently have six executive officers:


	•	Michael J. Burns, age 55, has been our Chief Executive Officer (CEO), President and a director of Dana since March 2004, and our Chairman of the Board and Chief Operating Officer since April 2004. He was previously President of General Motors Europe (the European operations of GM) from 1998 to 2004.

	•	Michael L. DeBacker, age 60, has been a Vice President of Dana since 1994 and our General Counsel and Secretary since 2000.

	•	Richard J. Dyer, age 51, has been a Vice President of Dana since December 2005 and our Chief Accounting Officer since March 2005. He was Director of Corporate Accounting from 2002 to 2005 and Manager, Corporate Accounting from 1997 to 2002.


	•	Kenneth A. Hiltz, age 54, has been our Chief Financial Officer (CFO) since March 2006. He previously served as CFO at Foster Wheeler Ltd. (a global provider of engineering services and products) from 2003 to 2004 and as Chief Restructuring Officer and CFO of Hayes Lemmerz International, Inc. (a global supplier of automotive and commercial wheels, brakes, powertrain, suspension, structural and other lightweight components) from 2001 to 2003. Mr. Hiltz has been a Managing Director of AlixPartners LLP (a financial advisory firm specializing in performance improvement and corporate turnarounds) since 1991.

	•	Paul E. Miller, age 55, has been our Vice President — Purchasing since joining Dana in May 2004. He was formerly employed by Delphi Corporation (a global supplier of vehicle electronics, transportation components, integrated systems and modules and other electronic technology), where he was part of Delphi Packard Electric Systems as Business Line Executive, Electrical/Electronic Distribution Systems from 2002 to 2004, and of Delphi Delco Electronics Systems as General Director — Sales, Marketing and Service from 2001 to 2002.

	•	Nick L. Stanage, age 48, has been President — Heavy Vehicle Products since December 2005. He joined Dana in August 2005 as Vice President and General Manager of our Commercial Vehicle Group. He was formerly employed by Honeywell International (a diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials), where he served as Vice President and General Manager of the Engine Systems & Accessories Division during 2005, and in the Customer Products Group as Vice President, Integrated Supply Chain & Technology from 2003 to 2005 and Vice President, Operations from 2001 to 2003.

Our executive officers were designated as such by our Board.

Messrs. Burns, DeBacker, Hiltz, Miller and Stanage are also among the members of Dana’s Executive Committee, which is responsible for our corporate strategies and partnership relations and for the development of our people, policies and philosophies.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) are available on or through our Internet website (http://www.dana.com/investors) as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. We also post our Board Governance Principles, Directors’ Code of Conduct, Board Committee membership lists and charters, Standards of Business Conduct and other corporate governance materials at this website address. Copies of these posted materials are available in print, free of charge, to any shareholder upon request from: Investor Relations Department, P.O. Box 1000, Toledo, Ohio 43697 or via telephone at 419-535-4635 or e-mail at InvestorRelations@dana.com.

Item 1A. Risk Factors

General

We are impacted by events and conditions that affect the light vehicle, commercial vehicle and off-highway industries that we serve, as well as by factors specific to our company. Among the risks that could materially adversely affect our business, financial condition or results of operations are the following, many of which are interrelated.

Bankruptcy-Related Risk Factors

We are operating under Chapter 11 of the Bankruptcy Code and are subject to the risks and uncertainties of bankruptcy

For the duration of the Bankruptcy Cases, our operations and our ability to execute our business strategy will be subject to the risks and uncertainties associated with bankruptcy, including our ability to (i) operate within the restrictions and the liquidity limitations of our DIP Credit Agreement; (ii) resolve issues with creditors and other third parties whose interests may differ from ours; (iii) obtain Bankruptcy Court approval with respect to motions we file from time to time, including timely approval of transactions outside the ordinary course of business that may present opportunities for us; (iv) resolve the claims made against us in bankruptcy for amounts not exceeding our recorded liabilities subject to compromise; (v) attract and retain customers; (vi) retain critical suppliers and service providers on acceptable terms; (vii) attract, motivate and retain key employees; (viii) fund and execute our business plan; and (ix) develop, prosecute, confirm and consummate a plan of reorganization. Because of these risks and uncertainties, we cannot predict the ultimate outcome of the reorganization process and there is no certainty about our ability to continue as a going concern.

As a result of our bankruptcy filing, realization of our assets and liquidation of our liabilities are subject to uncertainty. During the bankruptcy proceedings, we may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in our consolidated financial statements with Bankruptcy Court approval or as permitted in the normal course of business. Further, our plan of reorganization could materially change the amounts and classifications reported in our historical consolidated financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

We may be unable to emerge from bankruptcy as a sustainable, viable business unless we successfully implement our reorganization initiatives

It is critical to our successful emergence from bankruptcy that we (i) achieve positive margins for our products by obtaining substantial price increases from our customers; (ii) recover or otherwise provide for increased material costs through renegotiation or rejection of various customer programs; (iii) restructure our wage and benefit programs to create an appropriate labor and benefit cost structure; (iv) address the excessive cash requirements of the legacy pension and other postretirement benefit liabilities that we have accumulated over the years; and (v) achieve a permanent reduction and realignment of our overhead costs. We are taking actions to achieve those objectives, but there is no assurance that we will be successful.

We may be unable to comply with the financial covenants in our DIP Credit Agreement unless we improve our profitability

Our DIP Credit Agreement contains financial covenants that require us to achieve certain levels of earnings before interest, taxes, depreciation, amortization and restructuring and reorganization related costs (EBITDAR), as defined in the agreement. If we are unable to achieve the results that are contemplated in our business plan, we may be unable to comply with the EBITDAR covenants. A failure to comply with these or other covenants in the DIP Credit Agreement could, if we were unable to obtain a waiver or an amendment of the covenant terms, cause an event of default that would accelerate our loans under the agreement.

Risk Factors in the Vehicle Markets We Serve

We may be adversely impacted by changes in national and international economic conditions

Our sales depend, in large part, on economic conditions in the global light vehicle, commercial vehicle and off-highway original equipment (OE) markets that we serve. Demand in these markets fluctuates in response to overall economic conditions, including changes in general economic indicators, interest rate levels and, in our vehicular markets, fuel costs. For example, higher gasoline prices in 2006 contributed to

weaker demand in North America for certain vehicles for which we supply products, especially full-size SUVs. If gasoline prices remain high or continue to rise, the demand for such vehicles could weaken further and recent consumer interest in passenger cars and CUVs, in preference to SUVs, could be accelerated. This would have an adverse effect on our business, as our product content on CUVs is less significant than our content on SUVs.

We may be adversely affected by evolving conditions in the supply base for light and commercial vehicles

The competitive environment among suppliers to the global OE vehicle manufacturers has been changing in recent years, as these manufacturers seek to outsource more components, modules and systems and to develop low-cost suppliers, primarily outside the U.S. As a result, suppliers in these sectors have experienced substantial consolidation and new or larger competitors may emerge who could significantly impact our business.

In addition, an increasing number of North American suppliers are now operating in bankruptcy and supplier bankruptcies could disrupt the supply of components to our OEM customers and adversely affect their demand for our products.

Company-Specific Risk Factors

We could be adversely impacted by the loss of any of our significant customers or changes in their requirements for our products

We are reliant upon sales to a few significant customers. Sales to Ford and GM were 32% of our overall revenue in 2006, while sales to Chrysler, PACCAR, Navistar, Renault-Nissan, Volvo Truck and Toyota in the aggregate accounted for another 30%. Changes in our business relationships with any of our large customers or in the timing, size and continuation of their various programs could have an adverse impact on us. The loss of any of these customers, the loss of business with respect to one or more of their vehicle models on which we have a high component content, or a further significant decline in the production levels of such vehicles would impact our business, results of operations and financial condition. We are continually bidding on new business with these customers, as well as seeking to diversify our customer base, but there is no assurance that our efforts will be successful.

We could be adversely affected if we are unable to recover portions of our high commodity costs (including costs of steel, other raw materials, and energy) from our customers

For some time, high commodity costs have significantly impacted our earnings, as well as the results of others in our industry. As part of our reorganization initiatives, we are working with our customers to recover a greater portion of our commodity costs. While we have achieved some success in these efforts to date, there is no assurance that commodity costs will not continue to adversely impact our profitability.

We could be adversely affected if we experience shortages of components from our suppliers

We spend over $4,000 annually for purchased goods and services. To manage and reduce these costs, we have been consolidating our supply base. As a result, we are dependent on single sources of supply for some components of our products. We select our suppliers based on total value (including price, delivery and quality), taking into consideration their production capacities and financial condition, and we expect that they will be able to support our needs. However, there is no assurance that strong demand, capacity limitations or other problems experienced by our suppliers will not result in occasional shortages or delays in their supply of components to us. If we were to experience a significant or prolonged shortage of critical components from any of our suppliers, particularly those who are sole sources, and were unable to procure the components from other sources, we would be unable to meet our production schedules for some of our key products and to ship such products to our customers in timely fashion, which would adversely affect our revenues, margins and customer relations.

We may be unable to complete the divestiture of our non-core fluid products and pump products businesses as contemplated

We announced plans to divest our fluid products and pump products businesses and classified them as discontinued operations in our financial statements in 2005. The abundance of assets currently available for sale in the light vehicle industry could affect our ability to complete these divestitures and/or impact the proceeds that we receive. Moreover, during our bankruptcy proceedings, there may be limitations on the terms and conditions that we can offer to potential purchasers of these operations. Failure to complete these strategic divestitures would place further pressure on our profitability and cash flow and would divert our focus from our core businesses.

We may be unable to renegotiate expiring collective bargaining agreements with U.S. and Canadian unionized employees on satisfactory terms

The achievement of our reorganization goals will depend in large part on the labor and benefits costs that we are able to reduce through negotiations with our U.S. and Canadian union organizations and through the bankruptcy process. There is no assurance that we will be able to reduce this significant part of our cost structure. In addition, our efforts to secure these cost savings could result in work stoppages by our unionized employees or similar disturbances which could disrupt our ability to meet our customers’ supply requirements.

We could be adversely affected by the costs of our asbestos-related product liability claims

We have exposure to asbestos-related claims and litigation because some of our automotive products in the past contained asbestos. At the end of 2006, we had approximately 73,000 active pending asbestos-related product liability claims, including 6,000 that were settled and awaiting documentation and payment. A substantial increase in the costs to resolve these claims or changes in the amount of available insurance could adversely impact us, as could the enactment of U.S. federal legislation relating to asbestos personal injury claims.

We could be adversely impacted by the costs of environmental compliance

Our operations are subject to environmental laws and regulations in the U.S. and other countries that govern emissions to the air; discharges to water; the generation, handling, storage, transportation, treatment and disposal of waste materials; and the cleanup of contaminated properties. Currently, environmental costs with respect to our former and existing operations are not material. However, there is no assurance that the costs of complying with current environmental laws and regulations, or those that may be adopted in the future, will not increase and adversely impact us.


Item 1B.	*Unresolved Staff Comments*

-None-


Item 2.	*Properties*

Facilities by Segment and Geographic Region


	North				South		Asia/
Type of Facility	America		Europe		America		Pacific		Total

Administrative Offices		5								5
Axle
Manufacturing/Distribution		14		2		7		6		29
Engineering		1								1
Driveshaft
Manufacturing/Distribution		11		5		1		5		22
Engineering								1		1
Sealing
Manufacturing/Distribution		10		3				1		14
Engineering		1								1
Thermal
Manufacturing/Distribution		9		1						10
Engineering		1								1
Structures
Manufacturing/Distribution		10				4		2		15
Engineering		1								1
Commercial Vehicle
Manufacturing/Distribution		8		1		1				11
Engineering		1								1
Off Highway
Manufacturing/Distribution		3		5				1		9

Total Dana		75		17		13		16		121

At December 31, 2006, we had 121 major manufacturing/distribution, engineering and office facilities in 28 countries worldwide. While we lease 39 manufacturing and distribution operations, we own the remainder of our facilities. We believe that all of our property and equipment is properly maintained. We have significant excess capacity in our facilities based on our current manufacturing and distribution needs, especially in the United States. Accordingly, we are taking steps to address this as discussed in Item 7, under “Business Strategy.”

Our corporate headquarters facilities are located in Toledo, Ohio and include three office facilities housing functions that have global responsibility for finance and accounting, treasury, risk management, legal, human resources, procurement and supply chain management and information technology. Our obligations under the DIP Credit Agreement are secured by, among other things, mortgages on all of our domestic plants that we own.


Item 3.	*Legal Proceedings*

We and forty of our wholly owned subsidiaries are operating under Chapter 11 of the Bankruptcy Code. Under the Bankruptcy Code, the filing of the petitions for reorganization automatically stayed most actions against the Debtors, including most actions to collect on pre-petition indebtedness or to exercise control over the property of the bankruptcy estates. Substantially all of our pre-petition liabilities will be addressed under our plan of reorganization, if not otherwise addressed pursuant to orders of the Bankruptcy Court.

As previously reported and as discussed in Item 7 and in Note 17 to our consolidated financial statements in Item 8, we are a party to a pending pre-petition securities class action and pending shareholder

derivative actions, as well as various pending judicial and administrative proceedings that arose in the ordinary course of business (including both pre-petition and subsequent proceedings), and we are cooperating with a formal investigation by the SEC with respect to matters related to the restatement of our financial statements for the first two quarters of 2005 and fiscal years 2002 through 2004. After reviewing the currently pending lawsuits and proceedings (including the probable outcomes, reasonably anticipated costs and expenses, availability and limits of our insurance coverage and surety bonds and our established reserves for uninsured liabilities), we do not believe that any liabilities that may result are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations.


Item 4.	*Submission of Matters to a Vote of Security Holders*

-None-

PART II


Item 5.	*Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*

Since March 3, 2006, our common stock has been traded on the OTC Bulletin Board under the symbol “DCNAQ.” Our stock was formerly traded on the New York and Pacific Exchanges. At March 1, 2007, there were approximately 39,100 shareholders of record.

The following table shows the quarterly ranges of our stock price during 2005 and 2006. Dividends were declared and paid during 2005 at a rate of $0.12 per share for the first three quarters, and $0.01 per share for the fourth quarter. No dividends were declared or paid in 2006. The terms of our DIP Credit Agreement do not allow the payment of dividends on shares of capital stock and we do not anticipate paying any dividends while we are in reorganization. We anticipate that any earnings will be retained to finance our operations and reduce debt during this period.


	Quarterly
High and Low Prices Per Share of Common Stock	High Price		Low Price

As Reported by the New York Stock Exchange:
First Quarter 2005	$	17.56	$	12.23
Second Quarter 2005		15.45		10.90
Third Quarter 2005		17.03		8.86
Fourth Quarter 2005		9.53		5.50

First Quarter 2006 (through March 2, 2006)		8.05		1.02
Bid Prices per OTC Bulletin Board Quotations:*
First Quarter 2006 (beginning March 3, 2006)	$	2.03	$	0.65
Second Quarter 2006		3.52		1.27
Third Quarter 2006		2.83		0.84
Fourth Quarter 2006		2.02		1.05


*		OTC market quotations reflect inter-dealer prices, without retail markup, markdown or commission and may not necessarily represent actual transactions.

We purchased no Dana equity securities during the quarter ended December 31, 2006.

A stock performance graph has not been provided in this report because it need not be provided in any filings other than an annual report to security holders required by Exchange Act Rule 14a-2 that precedes or accompanies a proxy statement relating to an annual meeting of security holders at which directors are to be elected.


Item 6.	*Selected Financial Data*


For the Years Ended December 31,	2006			2005			2004			2003		2002

Net sales	$	8,504		$	8,611		$	7,775		$	6,714	$	6,276
Income (loss) from continuing operations before income taxes	$	(571	)	$	(285	)	$	(165	)	$	62	$	(85	)
Income (loss) from continuing operations	$	(618	)	$	(1,175	)	$	72		$	155	$	18
Income (loss) from discontinued operations*		(121	)		(434	)		(10	)		73		49
Effect of change in accounting					4								(220	)

Net income (loss)	$	(739	)	$	(1,605	)	$	62		$	228	$	(153	)

Earnings (loss) per common share — basic
Continuing operations	$	(4.11	)	$	(7.86	)	$	0.48		$	1.05	$	0.12
Discontinued operations*		(0.81	)		(2.90	)		(0.07	)		0.49		0.33
Effect of change in accounting					0.03								(1.49	)

Net income (loss)	$	(4.92	)	$	(10.73	)	$	0.41		$	1.54	$	(1.04	)

Earnings (loss) per common share — diluted
Continuing operations	$	(4.11	)	$	(7.86	)	$	0.48		$	1.04	$	0.12
Discontinued operations*		(0.81	)		(2.90	)		(0.07	)		0.49		0.33
Effect of change in accounting					0.03								(1.48	)

Net income (loss)	$	(4.92	)	$	(10.73	)	$	0.41		$	1.53	$	(1.03	)

Cash dividends per common share	$	—		$	0.37		$	0.48		$	0.09	$	0.04
Common Stock Data
Average number of shares outstanding (in millions)
Basic		150			150			149			148		148
Diluted		150			151			151			149		149
Stock price
High	$	8.05		$	17.56		$	23.20		$	18.40	$	23.22
Low		0.65			5.50			13.86			6.15		9.28


	As of December 31,
	2006			2005		2004		2003		2002

Summary of Financial Position
Total assets	$	6,734		$	7,358	$	9,019	$	9,485		9,515
Short-term debt		293			2,578		155		493		287
Long-term debt		722			67		2,054		2,605		3,215
Total shareholders’ equity (deficit)		(834	)		545		2,411		2,050		1,450
Book value per share		(5.55	)		3.63		16.19		13.85		9.79


*		The provisions of Statement of Financial Accounting Standards (SFAS) No. 144 are generally prospective from the date of adoption and therefore do not apply to divestitures announced prior to January 1, 2002. Accordingly, the disposal of selected subsidiaries of DCC that were announced in October 2001 and completed at various times thereafter were not considered in our determination of discontinued operations.

We adopted SFAS Nos. 123(R) and 158 in 2006. SFAS 123(R), “Share-Based Payment,” requires that we measure compensation cost arising from the grant of share-based awards to employees at fair value and recognize such costs in income over the period during which the service is provided. The adoption of SFAS No. 158, “Employers’ Accounting for Defined-Benefit Pension and Other Postretirement Plans,” resulted in a

decrease in total shareholders’ equity of $818 as of December 31, 2006. For further information regarding the impact of the adoption of SFAS No. 158, see Note 15 to our consolidated financial statements in Item 8.

We previously reported a change in accounting for warranty expense in 2005 and also adopted new accounting guidance related to recognition of asset retirement obligations.

See Note 1 to our consolidated financial statements in Item 8 for additional information related to these changes in accounting, as well as a discussion regarding our ability to continue as a going concern.


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions)*

General

We are a leading supplier of axle, driveshaft, structures, sealing and thermal products, and we design and manufacture products for every major vehicle producer in the world. We are focused on being an essential partner to automotive, commercial truck and off-highway vehicle customers. We employ 45,000 people in 28 countries. Our world headquarters are in Toledo, Ohio. Our Internet address is www.dana.com.

Dana and forty of our wholly-owned domestic subsidiaries are currently operating under Chapter 11 of the Bankruptcy Code. The Bankruptcy Cases are discussed in detail in Note 2 to our consolidated financial statements in Item 8. Our reorganization goals are to maximize enterprise value during the reorganization process and to emerge from Chapter 11 as soon as practicable as a sustainable, viable company.

Business Strategy

Since the commencement of the Chapter 11 proceedings, we have been evaluating our strategy and thoroughly analyzing our business to identify the changes necessary to achieve our reorganization goals. We are utilizing the reorganization process to improve our distressed U.S. operations by effecting fundamental change. This is critical to us, as our worldwide operations are highly integrated for the manufacture and assembly of our products. A significant portion of the production of our non-Debtor operations overseas is comprised of components that are assembled by our U.S. operations. Therefore, while we are continuing to grow overseas, our long-term viability depends on our ability to return our U.S. operations to sustainable profitability.

Our U.S. operations are currently generating significant losses and consuming significant cash. This situation will not improve in 2007. Even with significantly improved domestic operating results, we will be dependent upon realizing expected divestiture proceeds, repatriating available cash from our overseas operations, and loans under our DIP Credit Agreement to meet our liquidity needs in 2007. While we currently believe that asset sales and repatriation of overseas cash will address our liquidity needs for 2007, such sources cannot be relied upon in future periods.

Our successful reorganization as a sustainable, viable business will require the simultaneous implementation of several distinct reorganization initiatives and the cooperation of all of our key business constituencies — customers, vendors, employees and retirees. It is critical to our success that we:


	•	Achieve improved margins for our products by obtaining substantial price increases from our customers;

	•	Restructure our wage and benefit programs to create an appropriate labor and benefit cost structure;

	•	Address the excessive costs and funding requirements of the legacy pension and other postretirement benefit liabilities that we have accumulated over the years, in part from prior divestitures and closed operations; and

	•	Achieve a permanent reduction and realignment of our overhead costs.

In the long term, we also must eliminate the costs and inefficiencies associated with our historically decentralized manufacturing operations and optimize our manufacturing “footprint” by substantially repositioning our production to lower cost countries.

Achievement of our objectives has been made more pressing by the significantly curtailed production forecasts of some of our largest domestic customers in recent months, particularly in the production of SUVs and pickup trucks that are the primary market for our products in the U.S. These production cuts have already adversely impacted our sales in 2007 in the light vehicle market. Weaker demand in the U.S. heavy-duty and medium-duty truck markets in 2007 as a result of pre-buying in 2006 ahead of new emissions rules will also negatively impact our 2007 performance. We must, therefore, accelerate our efforts to achieve viable long-term U.S. operations in an increasingly troubled U.S. automotive industry and a cyclical commercial vehicle market.

Our reorganization strategy contemplates the following initiatives, which will require significant contributions from each of the constituents referred to above in the form of gross margin improvements or cost base reduction. If successful, we estimate that these initiatives will ultimately result in an aggregate annual pre-tax income improvement of $405 to $540.


	•	Product Profitability

Our products have a high commodity material content, and absorbing the significant inflation in the costs of these materials over the past several years has contributed significantly to the decline in our profitability. In addition, we have granted many of our customers downward price adjustments, consistent with their demands and industry practices. In the Bankruptcy Cases, we will have to determine whether to assume or reject certain customer contracts. Since the filing date, we have undertaken a detailed review of our product programs to identify unprofitable contracts and determine appropriate price modifications to address this issue. We have analyzed our pricing needs for each major customer and have held meetings with our customers and their advisors to resolve under-performing programs and obtain appropriate adjustments. Through pricing modifications and contract rejections with customers, we expect to improve our annual pre-tax profit by $175 to $225.

Through February 2007, we have reached agreements with customers resulting in price increases of approximately $75 on an annualized basis. The pricing agreements generally extend through the duration of the applicable programs. The pricing agreements are, in some instances, conditioned upon assumption of the existing contracts, as amended for pricing and other terms and conditions through the bankruptcy proceedings. We expect to substantially complete the contract pricing agreements and our decisions as to assumption of contracts, as amended, in the second quarter of 2007. To date, we have not moved to reject any customer contracts. However, we may ultimately be forced to seek rejections of certain contracts if we are unable to reach agreements with our customers. The successful resolution of this initiative is key to our performance in 2007 and our timely emergence from bankruptcy.


	•	Labor and Benefit Costs

Our current labor and benefit costs, especially in the U.S., impair our financial position and are a significant impediment to our successful reorganization.

We have taken steps since late 2005 to reduce our benefit programs and costs. We have reduced the company’s share of the costs of our U.S. medical benefits programs, suspended or limited wage and salary increases worldwide, suspended matching contributions to our U.S. and Canadian defined contribution plans, suspended our educational reimbursement program, eliminated service award programs and modified our severance programs. We have also identified and implemented numerous initiatives at non-union plants to obtain savings while offering appropriate and competitive wages, terms and conditions. These initiatives include modification of overtime pay, two-tier wage and fringe benefits for new hires, health benefit changes, and elimination of gainshare programs.

We provide defined contribution and defined benefit pension plans for many of our U.S. employees. We are taking steps to modify the defined benefit pension plans — which were approximately 95% funded at December 31, 2006 — to reduce our pension costs. As of December 31, 2006, we merged most of our numerous U.S. defined benefit pension plans into the Dana Corporation Retirement Plan (our CashPlus Plan) to reduce our funding requirements over the next several years. We expect to freeze participation and future benefit accruals in our U.S. defined benefit pension plans by July 1, 2007, subject to collective bargaining requirements, where applicable. We have proposed to provide a limited employer contribution to our U.S. defined contribution plans for those whose benefit accruals are frozen.

We intend to take additional steps — subject to applicable collective bargaining and bankruptcy procedures and Bankruptcy Court approval with respect to union employees — including the elimination of previously granted but not yet effective wage increases, freezing of future wage increases, modification of our short-term disability program, elimination of our existing long term disability insurance program, establishment of inflation limits on the company-paid portion of healthcare programs and reduction in company-provided life insurance. We expect that these labor and benefit cost actions for the union and non-union populations will generate annual cost savings of $60 to $90.

We have apprised the primary unions representing our active U.S. employees — the United Auto Workers (UAW), the United Steel Workers (USW) and the International Association of Machinists (IAM) — of our labor cost reduction goals and are engaged in discussions with them about these matters. In motions filed with the Bankruptcy Court in February 2007, we asked the court to permit us to reject our collective bargaining agreements in the event an agreement on proposed changes is not reached. A hearing on this matter began on March 12, 2007 and is set to resume on March 26, 2007. Prior to the March 12 hearing, we resolved our outstanding collective bargaining issues with the IAM and agreed to a new three-year collective bargaining agreement covering hourly employees at our Robinson, Illinois plant. The UAW and USW have objected to our motion to reject their collective bargaining agreements and indicated that their members may strike if we reject their collective bargaining agreements. Our Master Agreement with the UAW, which covers hourly employees in our Lima, Ohio and Pottstown, Pennsylvania plants, has already expired and union workers at those plants are currently working on a day-to-day basis. Prolonged strikes by the UAW and/or USW would not only impact our earnings adversely, but could also prevent us from reorganizing successfully.


	•	Other Postemployment Benefits

We also provide other postemployment benefits (OPEB), including medical and life insurance, for many U.S. retirees. We have accumulated an OPEB obligation that is disproportionate to the scale of our current business, in part by assuming retiree obligations in the course of acquiring businesses and retaining such obligations when divesting businesses. In addition, the rising cost of providing an extensive retiree healthcare program has become prohibitive to us. At December 31, 2006, we had approximately $1,500 in unfunded OPEB obligations under our domestic postretirement healthcare plans. We estimate that these obligations will require an average cash outlay of $119 in each of the next six years unless they are restructured.

To address this issue, we are seeking to terminate our sponsorship of retiree healthcare programs and the funding of ongoing retiree healthcare costs associated with those plans. We anticipate that the elimination of future annual OPEB costs and modification of our U.S. pension programs for union and non-union populations will result in annual cost savings of $70 to $90.

In our motions filed with the Bankruptcy Court in February 2007, we asked the court to authorize Dana to exercise its unilateral right to eliminate retiree healthcare benefits for non-union populations in the U.S., both active and retired. On March 12, 2007, the Bankruptcy Court approved the elimination of retiree healthcare benefits coverage for non-union, active employees effective April 1, 2007. We are also negotiating with our unions and the Retiree Committee about these matters. On March 12, 2007, we reached a tentative agreement with the Retiree Committee which provides that we will contribute cash of $78 to a trust for non-pension retiree benefits in exchange for the Debtors being released from

obligations for post-retirement health and welfare benefits for non-union retirees. This tentative agreement is subject to approval by the Bankruptcy Court.

On March 12, 2007, we reached a settlement with the IAM union, which represents 215 hourly employees at Dana’s Robinson, Illinois, Sealing Products plant. The IAM settlement, which is subject to Bankruptcy Court approval, includes a payment of $2.25 by Dana to resolve all IAM claims for non-pension retiree benefits with respect to retirees and active employees represented by the union. For those who are covered by the settlement and currently receive such benefits, Dana will not terminate these benefits prior to July 1, 2007. In addition, the parties have agreed to a new three-year collective bargaining agreement covering the Robinson plant.


	•	Overhead Costs

Due to our historically decentralized operating model and the reduction in the overall size of our business resulting from recent and planned divestitures, our overhead costs are too high. Our U.S. headcount was reduced by approximately 9% during 2006 as a result of a general hiring freeze and attrition attributable to our bankruptcy filing. We are in various stages of analysis and implementation with respect to several initiatives in a continuing effort to reduce overhead costs. Additional reductions in overhead will occur as a result of our ongoing divestitures and reorganization activities. We expect our reductions in overhead spending to contribute annual expense savings of $40 to $50.


	•	Manufacturing Footprint

Overcapacity and high operating costs at our facilities in the U.S. and Canada are burdening our performance and negatively affecting our financial results. We have completed an analysis of our North American manufacturing footprint and identified a number of manufacturing and assembly plants that carry an excessive cost structure or have excess capacity. We have committed to the closure of certain locations and consolidation of their operations into lower cost facilities in other countries or into U.S. facilities that currently have excess capacity. These actions included moving driveshaft machining operations from Bristol, Virginia, to our recently acquired operations in Mexico and moving axle assembly operations from Buena Vista, Virginia, to our Dry Ridge, Kentucky and Columbia, Missouri facilities. We also began the process of closing three Sealing and Thermal facilities in the U.S. and one in Canada, a Driveshaft facility in Charlotte, North Carolina, and a Structures plant in Canada.

During the fourth quarter of 2006, we announced additional closures of two Axle facilities in Syracuse, Indiana, and Cape Girardeau, Missouri, and two Structures facilities in Guelph and Thorold, Ontario. In the first quarter of 2007, we also announced closure of a Driveshaft plant in Renton, Washington, which will be integrated into our Louisville, Kentucky operation. We expect to close four additional facilities, with announcements expected later in 2007. While these plant closures will result in closure costs in the short term and require near-term cash expenditures, they are expected to yield savings and improved cash flow in later years. Long term, we expect the manufacturing footprint actions to reduce our annual operating costs by $60 to $85.

The reorganization initiatives referred to above, when fully implemented, are expected to result in annual pre-tax profit improvement of $405 to $540. We began phasing these actions in during 2007 and expect them to contribute between $150 and $200 to our base plan forecast for 2007. The phased-in 2007 contributions from reorganization actions exclude any contributions from reductions of benefits related to employees covered by collective bargaining agreements which are the subject of the March 2007 Bankruptcy Court hearings.

We are also continuing to pursue previously announced divestitures and alliances and, as we implement our reorganization initiatives, we may identify additional opportunities to help return our U.S. operations to sustainable viability.

On March 9, 2007, we closed the sale of our engine hard parts business to MAHLE. Of the $97 of cash proceeds, $5 has been escrowed pending completion of closing conditions in certain countries which are expected to occur in 2007, and $20 was escrowed pending completion of customary purchase price

adjustments and indemnification provisions. We are currently in negotiations with parties interested in purchasing the fluid and pump products businesses. The sale of the pump products business is not subject to Bankruptcy Court approval since the business is located outside the U.S. and held by a non-Debtor. We expect to complete the sale of the fluid products and pump businesses during the second quarter of 2007.

In January 2007, we sold our trailer axle business to Hendrickson USA L.L.C. for $31 in cash. In March 2007, we sold our 30% equity interest in GETRAG to our joint venture partner for approximately $205 in cash. See Note 4 to our consolidated financial statements in Item 8 for additional information on these sales.

In addition to the above actions, in February 2007 we announced the restructuring of the pension liabilities of our United Kingdom (U.K.) operations. On February 27, 2007, ten of our subsidiaries located in the U.K. and the trustees of four U.K. defined benefit pension plans entered into an Agreement as to Structure of Settlement and Allocation of Debt to compromise and settle the liabilities owed by our U.K. operating subsidiaries to the pension plans. The agreement provides for the trustees of the plans to release the operating subsidiaries from all such liabilities in exchange for an aggregate cash payment of approximately $93 and the transfer of 33% equity interest in our axle manufacturing and driveshaft assembly businesses in the U.K. for the benefit of the pension plan participants. The agreement was necessitated in part by our planned divestitures of several non-core U.K. businesses which, upon completion, would have resulted in unsustainable pension funding demands on the operating subsidiaries under U.K. pension law, in addition to their ongoing funding obligations. We expect to record a settlement charge in the range of $150 to $170 (including a cash charge of $93) in connection with these transactions. Remaining employees in the U.K. operations will receive future pension benefits pursuant to a defined contribution arrangement similar to our intended actions in the U.S.

DCC Notes

DCC is a non-Debtor subsidiary of Dana. At the time of our bankruptcy filing, DCC had outstanding notes (the DCC Notes) in the amount of approximately $399. The holders of a majority of the outstanding principal amount of the DCC Notes formed an Ad Hoc Committee which asserted that the DCC Notes had become immediately due and payable. In addition, two DCC noteholders that were not part of the Ad Hoc Committee sued DCC for nonpayment of principal and accrued interest on their DCC Notes. In December 2006, DCC made a payment of $7.7 to these two noteholders in full settlement of their claims. Also in that month, DCC and the holders of most of the DCC Notes executed a Forbearance Agreement and, contemporaneously, Dana and DCC executed a Settlement Agreement relating to claims between them. Together, these agreements provide, among other things, that (i) the forbearing noteholders will not exercise their rights or remedies with respect to the DCC Notes for a period of 24 months (or until the effective date of Dana’s reorganization plan), during which time DCC will endeavor to sell its remaining asset portfolio in an orderly manner and will use the proceeds to pay down the DCC Notes, and (ii) Dana stipulated to a general unsecured pre-petition claim by DCC in the Bankruptcy Cases in the amount of $325 in exchange for DCC’s release of certain claims against the Debtors. Under the Settlement Agreement, Dana and DCC also terminated their intercompany tax sharing agreement under which they had formerly computed tax benefits and liabilities with respect to their U.S. consolidated federal tax returns and consolidated or combined state tax returns. Dana’s stipulation to a DCC claim of $325 was approved by the Bankruptcy Court. Under the Forbearance Agreement, DCC agreed to pay the forbearing noteholders their pro rata share of any excess cash in the U.S. greater than $7.5 on a quarterly basis and, in December 2006, it made a $155 payment to such noteholders, consisting of $125.4 of principal, $28.1 of interest, and a one-time $1.5 prepayment penalty.

Business Units

We manage our operations globally through two business units — ASG and HVTSG. ASG focuses on the automotive market and primarily supports light vehicle OEMs, with products for light trucks, SUVs, CUVs, vans and passenger cars. ASG also manufactures driveshafts for the Commercial Vehicle and Off-Highway segments of HVTSG. ASG has five operating segments focusing on specific products for the automotive market: Axle, Driveshaft, Structures, Sealing and Thermal.

HVTSG supports the OEMs of medium-duty (Classes 5-7) and heavy-duty (Class 8) commercial vehicles (primarily trucks and buses) and off-highway vehicles (primarily wheeled vehicles used in construction and agricultural applications). HVTSG has two operating segments focused on specific markets: Commercial Vehicle and Off-Highway.

Trends in Our Markets

North American Light Vehicle Market

Production Levels

Light vehicle production in North America was approximately 15.3 million units in 2006, down from 15.8 million units in 2005. Overall production levels in this market in the first half of 2006 were comparable to those in the first six months of 2005, but this was attributable to increased passenger car production, as light truck production was down about 4%. In the third quarter of 2006, two of our largest light vehicle customers announced significant production cuts for the remainder of the year. In August 2006, Ford announced production cuts of 20,000 units in the third quarter and 168,000 units in the fourth quarter, and in September, Chrysler announced production cuts of 90,000 units in the third quarter and 45,000 units in the fourth quarter. Largely as a result of these cutbacks, North American light truck production in the third and fourth quarters of 2006 was down about 15% and 14% compared to the same periods in 2005 (source: Global Insight).

The production cuts by Ford and Chrysler were heavily weighted toward medium and full size pick-up trucks and SUVs, where inventories had built up due to consumer concerns about high fuel prices and increased preferences for models with better fuel economy, such as CUVs and, to a lesser extent, passenger cars. The cuts were mostly on platforms for vehicles on which we have higher content. During the third quarter of 2006, production of the specific platforms with significant Dana content was about 21% lower than in 2005 and, in the fourth quarter, it was down about 25% from 2005.

Overall North American light vehicle production in 2007 is forecasted to be approximately 15.2 million units, about the same as in 2006 (source: Global Insight). We anticipate continued consumer focus on fuel economy and do not expect to see production levels of our key platforms rebound significantly in 2007. We expect that 2007 production on these platforms will be down about 12% from 2006.

OEM Pricing Pressures

The declining sales of light vehicles (especially light trucks, which generally have a higher profit margin than passenger cars) in North America, as well as losses of market share to competitors such as Toyota and Nissan, are putting increased pressure on the financial performance of three of our largest customers: Ford, GM and Chrysler. As a result, these OEMs are continuing to seek pricing concessions from their suppliers, including us. In addition, GM, Ford and Chrysler reported significant losses for 2006. These issues will make it more challenging for us to achieve our reorganization goal of improving product profitability by obtaining price modifications from these and other customers.

Commodity Costs

Another challenge we face is the high cost of steel and other raw materials, which has had a significant adverse impact on our results, and those of other North American automotive suppliers, for more than two and a half years. Steel suppliers began assessing price surcharges and increasing base prices during the first half of 2004, and prices remained high throughout 2005 and 2006.

Two commonly-used market-based indicators — a Tri Cities Scrap Index, for #1 bundled (which represents the monthly average costs in the Chicago, Cleveland, and Pittsburgh ferrous scrap markets, as posted by American Metal Market, and is used by our domestic steel suppliers to determine our monthly surcharge) and the spot market price for hot-rolled sheet steel illustrate the impact. As compared to average prices in 2003, average scrap steel prices on the Tri Cities index during 2006 were more than 70% higher, and spot market hot-rolled sheet steel prices during 2006 were up more than 100% over 2003. At current consumption levels, we estimate that our annualized cost of raw steel is approximately $140 higher than it

would have been using prices at the end of 2003. We have taken actions to mitigate the impact of these increases, including consolidating purchases, taking advantage of our customers’ resale programs where possible, finding new global steel sources, identifying alternative materials and re-designing our products to be less dependent on higher cost steel grades.

During the latter part of 2005 and throughout 2006, cost increases for raw materials other than steel have also been significant. Average prices for nickel (which is used to manufacture stainless steel) and aluminum for 2006 were up about 60% and 37% over 2005, resulting in an annualized cost increase to us of about $17 in 2006 at our current consumption levels. In addition, copper and brass prices have increased significantly, impacting, in particular, our businesses that are for sale and classified as discontinued operations. Average prices for these materials in 2006 were up more than 80% against the same period in 2005, resulting in a year-over-year increase in annualized cost to us at current consumption levels of about $22.

As discussed above, our reorganization initiatives include working with our customers to recover a greater portion of our commodity materials costs.

Automotive Supplier Bankruptcies

Several major U.S. automotive suppliers, in addition to Dana, have filed for protection under Chapter 11 of the Bankruptcy Code since early 2005, Tower Automotive, Inc., Collins & Aikman Corporation, Delphi Corporation, and, most recently, Dura Automotive Systems, Inc. These bankruptcy filings indicate stress in the North American light vehicle market which could lead to further filings or to competitor or customer reorganizations or consolidations that could impact the marketplace and our business.

North American Commercial Vehicle Market

Production Cyclicality

The North American commercial vehicle market was strong during 2006, primarily due to pre-buying of heavy-duty (Class 8) and medium-duty (Class 5-7) trucks in advance of the more stringent U.S. emission regulations that took effect at the beginning of 2007 and increased the prices of these trucks. As a result, North American heavy-duty truck build is expected to be approximately 190,000 units in 2007, compared to 369,000 units in 2006 and 334,000 units in 2005, and medium-duty truck build is forecasted at about 200,000 units in 2007, compared to 265,000 units in 2006 and 244,000 units in 2005 (source: ACT).

Compared to the same periods in 2005, production of Class 8 vehicles in North America was up about 13% in the fourth quarter of 2006 and 10% for all of 2006, and Class 5-7 production was up about 7% in the fourth quarter of 2006 and about 9% for all of 2006. As a result of the pre-buying in 2006, we anticipate decreases of approximately 49% in North American Class 8 build and 25% in Class 5-7 build for the full year 2007, as compared to 2006.

Commodity Costs

The high commodity costs affecting the North American light vehicle market have also impacted the commercial vehicle market, but this impact has been partially mitigated by our ability to recover material cost increases from our Commercial Vehicle customers.

New Business

A continuing major focus for us is growing our revenue through new business. In the light vehicle industry, new business is generally awarded to suppliers well in advance of the expected start of production of a new vehicle model/platform. The specific amount of lead-time varies based on the nature of the supplier’s component, size of the program and required start-up investment. The awarding of new business usually coincides with model changes by the OEMs. Given the OEMs’ cost and service concerns associated with changing suppliers, we expect to retain any awarded business over the model/platform life, typically several years.

Net new business is expected to contribute approximately $313 and $126 to our sales in 2007 and 2008. While continuing to support Ford, GM and Chrysler, we are striving to diversify our sales across a broader customer base. We already serve substantially all of the major vehicle makers in the world in the light vehicle, commercial vehicle and off-highway markets. Approximately 80% of our current book of net new business involves customers other than Ford, GM and Chrysler, and approximately 70% of this business is with other automotive manufacturers based outside North America. We have achieved double-digit sales growth with European and Asian light vehicle manufacturers over the past several years. These customers account for six of the top ten product launches for ASG in 2006. Our success on this front has been achieved, in part, through our expanding global operations and affiliates. Our people and facilities around the world are actively supporting the global platforms of our foreign-based customers today. Our Commercial Vehicle segment, which currently operates predominantly in North America, is pursuing sales outside this region, and we expect our joint venture in China with Dongfeng Motor Company, Ltd., when fully implemented, to provide an opportunity to grow the non-U.S. sales in this business. Approximately two-thirds of our Off-Highway sales already occur outside North America, and we are continuing to aggressively pursue new business in this market.

United States Profitability

Our U.S. operations have generated losses before income taxes during the past five years aggregating more than $2,000. While numerous factors have contributed to our lack of profitability in the U.S., paramount among them are those discussed earlier in this report:


	•	Customer price reductions

In the normal course of our business, our major U.S. customers expect prices from their suppliers to decrease over the term of a typical contract due to the “learning-curve” benefits associated with long production runs. Moreover, over the past several years, our major U.S. customers have experienced declining market share and excess assembly capacity. As their profitability has come under pressure, they have intensified their demands for additional price reductions from us and other suppliers. In order to retain existing business and obtain new business, in many cases, we have provided significant price decreases which have significantly reduced our annual gross margin.


	•	Low-cost country suppliers

The quality of products now available to vehicle manufacturers from suppliers in countries with lower labor costs has improved significantly over the past several years. The emergence of this supply base has put downward pressure on our pricing to customers.


	•	Retiree healthcare costs

We have accumulated retiree healthcare costs disproportionate to the scale of our current business. In 2006, our U.S. operations absorbed retiree healthcare costs of more than $100. Our pool of retirees in the U.S. has grown disproportionately as a result of our acquisitions and divestitures, magnifying the impact that inflation in the costs of healthcare has had on us.


	•	Increased raw material costs

In 2003, our raw material costs began to increase significantly. Given the cost pressures facing our major U.S. customers in the light vehicle market, we have absorbed most of these higher costs, and the relief we have received has been mostly outside the U.S.

We have taken significant restructuring actions in an effort to improve our U.S. profitability. In 2001 and 2002, we undertook the largest restructuring program in our history, taking after-tax restructuring charges of $445, closing 39 facilities and reducing the workforce by 20%. Additional restructuring initiatives have been taken in subsequent years. A substantial portion of these actions were directed specifically at our U.S. operations. While these actions were undertaken to improve our profitability, they have been insufficient to offset the downward profit pressures, in large part due to the factors cited above.

The current financial performance of the Debtor operations is reported in Note 2 to our consolidated financial statements in Item 8. During 2006, the Debtors experienced before tax losses of $443, which included realignment and impairment charges of $56 and net reorganization costs of $117. After adjusting for the reorganization items, the losses are indicative of our current and ongoing U.S. losses at current sales levels, underscoring the urgency of successfully pursuing the initiatives discussed in “Business Strategy” above.

Results of Operations — Summary


	For the Years Ended December 31,
										2006 to			2005 to
	2006			2005			2004			2005 Change			2004 Change

Net sales	$	8,504		$	8,611		$	7,775		$	(107	)	$	836
Cost of sales		8,166			8,205			7,189			(39	)		1,016

Gross margin		338			406			586			(68	)		(180	)
Selling, general and administrative expenses		419			500			416			(81	)		84

Gross Margin less SG&A*		(81	)		(94	)		170			13			(264	)
Other costs and expenses
Realignment charges		92			58			44			34			14
Impairment of goodwill		46			53						(7	)		53
Impairment of other assets		234									234
Other income (expense)		140			88			(85	)		52			173

Total other costs and expenses	$	(232	)	$	(23	)	$	(129	)	$	(209	)	$	106
Income (loss) from continuing operations before interest, reorganization items and income taxes	$	(313	)	$	(117	)	$	41		$	(196	)	$	(158	)

Income (loss) from continuing operations	$	(618	)	$	(1,175	)	$	72		$	557		$	(1,247	)
Income (loss) from discontinued operations	$	(121	)	$	(434	)	$	(10	)	$	313		$	(424	)

Net income (loss)	$	(739	)	$	(1,605	)	$	62		$	866		$	(1,667	)


*		Gross margin less SG&A is a non-GAAP financial measure derived by excluding realignment charges, impairments and other income, net from the most closely related GAAP measure which is income from continuing operations before interest, reorganization items and income taxes. We believe this non-GAAP measure is useful for an understanding of our ongoing operations because it excludes other income and expense items which are generally not expected to be part of our ongoing business.

Results of Operations (2006 versus 2005)

Geographic Sales, Operating Segment Sales and Gross Margin Analysis (2006 versus 2005)

Geographic Sales Analysis


								Amount of Change Due To
					Increase/			Currency			Acquisitions/			Organic
	2006		2005		(Decrease)			Effects			Divestitures			Change

North America	$	5,171	$	5,410	$	(239	)	$	52		$	32		$	(323	)
Europe		1,856		1,596		260			18						242
South America		854		835		19			29			(17	)		7
Asia Pacific		623		770		(147	)		(5	)					(142	)

Total	$	8,504	$	8,611	$	(107	)	$	94		$	15		$	(216	)

Sales decreased $107, or 1.2%, from 2005 to 2006. Currency movements increased 2006 sales by $94 due to an overall weaker U.S. dollar compared to a number of the major currencies in other global markets where we conduct business. Sales in 2006 also benefited from net acquisitions, primarily the purchase of the axle and driveshaft businesses previously owned by Spicer S.A., our equity affiliate in Mexico. Excluding currency and acquisition effects, we experienced an organic sales decline of $216, or 2.5%, in 2006 compared to 2005. Organic change is the period-on-period measure of sales volume that excludes the effects of currency movements, acquisitions and divestitures.

Regionally, North American sales were down $239 in 2006, or 4.4%. A stronger Canadian dollar increased sales as did the acquisition of the axle and driveshaft businesses of our previous equity affiliate in Mexico. Excluding the effect of these increases, organic sales were down $323, or 6.0%, principally due to lower production levels in the North American light vehicle market. In our primary market — light trucks — production levels in 2006 were down about 9%. Within this market, production levels on vehicles with significant Dana content — primarily pickups and SUVs — were down about 12%. Partially offsetting the effects of lower light truck production levels was net new business of approximately $240 which came on stream during 2006 and a stronger commercial vehicle market, where Class 8 heavy duty production was up 10% and Class 5-7 medium duty production was up 9%.

Sales in Europe increased $260, mostly due to increases from net new business. Production levels in two of our key markets — the European light vehicle market and the off-highway market — were somewhat stronger in 2006 than in 2005. In South America, comparable year-over-year production levels in our major vehicular markets led to relatively comparable year-over-year sales. In Asia Pacific, sales declined significantly from 2005, by $147, due primarily to expiration of an axle program in Australia with Holden Ltd., a subsidiary of GM.

Operating Segment Sales Analysis


								Amount of Change Due To
					Increase/			Currency			Acquisitions/			Organic
	2006		2005		(Decrease)			Effects			Divestitures			Change

ASG
Axle	$	2,202	$	2,407	$	(205	)	$	10		$	35		$	(250	)
Driveshaft		1,152		1,129		23			22			25			(24	)
Sealing		679		661		18			5						13
Thermal		283		312		(29	)		12						(41	)
Structures		1,174		1,288		(114	)		28						(142	)
Other		77		144		(67	)		(1	)		(45	)		(21	)

Total ASG		5,567		5,941		(374	)		76			15			(465	)
HVTSG
Commercial Vehicle		1,683		1,540		143			6						137
Off-Highway		1,231		1,100		131			12						119

Total HVTSG		2,914		2,640		274			18						256
Other Operations		23		30		(7	)								(7	)

Total	$	8,504	$	8,611	$	(107	)	$	94		$	15		$	(216	)

By operating segment, the organic sales declines occurred in the segments of ASG. The North American light truck market, where production levels were down about 9% in 2006, is a major market for each of the ASG operating segments. The sales decrease in the Axle segment also reflects the expiration of the Holden Ltd. axle program in Australia. Increased sales from new axle programs in 2006 helped mitigate the reduced sales from lower North America production levels and the loss of the Australian business. Our Driveshaft segment serves both light vehicle and commercial vehicle original equipment customers. As such, the stronger commercial vehicle market in 2006 in North America helped to offset the reduced sales from lower production on the light truck side of the business. Our Sealing segment, like Driveshaft, supplies product to the commercial vehicle and off-highway markets as well as the consumer-based light vehicle markets, thereby offsetting the impact of lower 2006 North American light vehicle production. In the Thermal segment, we are more heavily concentrated on the North American market. Consequently, our sales decline here is largely driven by the lower production of North American light vehicles. Similarly, in Structures, a number of our key programs involve light truck platforms for the North American market, driving the lower sales in this segment.

In the HVTSG, our Commercial Vehicle segment is primarily focused on North America — where Class 8 heavy duty production was up 10% in 2006 and Class 5-7 medium duty production was up 9%. Our Off-Highway segment, on the other hand, has significant business in Europe, as well as in North America. Each of these markets remained relatively strong in 2006, with the production requirements of our major customers up slightly or relatively comparable year-over-year. Sales in this segment also benefited from net new business in 2006.

Margin Analysis


	As a Percentage of Sales						Increase /
	2006			2005			(Decrease)

Gross margin:
ASG		4.5	%		6.0	%		(1.5	)%
Axle		0.1			1.6			(1.5	)
Driveshaft		10.6			12.1			(1.5	)
Sealing		13.3			14.6			(1.3	)
Thermal		12.9			21.3			(8.4	)
Structures		0.3			2.0			(1.7	)
HVTSG		7.7			7.3			0.4
Commercial Vehicle		5.2			4.7			0.5
Off-Highway		10.9			10.6			0.3

Selling, general and administrative expenses:
ASG		3.6	%		3.6	%		0.0	%
Axle		2.4			1.9			0.5
Driveshaft		3.8			3.8			0.0
Sealing		6.4			6.8			(0.4	)
Thermal		4.0			3.2			0.8
Structures		1.9			2.2			(0.3	)
HVTSG		3.2			4.8			(1.6	)
Commercial Vehicle		3.1			5.2			(2.1	)
Off-Highway		2.6			3.4			(0.8	)

Gross margin less SG&A:*
ASG		0.9	%		2.4	%		(1.5	)%
Axle		(2.3	)		(0.3	)		(2.0	)
Driveshaft		6.8			8.3			(1.5	)
Sealing		6.9			7.8			(0.9	)
Thermal		8.9			18.1			(9.2	)
Structures		(1.6	)		(0.2	)		(1.4	)
HVTSG		4.5			2.5			2.0
Commercial Vehicle		2.1			(0.5	)		2.6
Off-Highway		8.3			7.2			1.1
Consolidated		(0.9	)		(1.1	)		0.2


*		Gross margin less SG&A is a non-GAAP financial measure derived by excluding realignment charges, impairments and other income, net from the most closely related GAAP measure, which is income from continuing operations before interest, reorganization items and income taxes. We believe this non-GAAP measure is useful for an understanding of our ongoing operations because it excludes other income and expense items which are generally not expected to be part of our ongoing business.

Automotive Systems

In ASG, gross margin less SG&A declined 1.5%, from 2.4% in 2005 to 0.9% in 2006. Lower sales of $374 contributed to the margin decline, as we were unable to proportionately reduce fixed costs.

In the Axle segment, the net margin decline was 2.0%. The margin decline resulted in part from lower sales relative to fixed costs. Additionally, the acquired Mexican axle operations of our previous equity affiliate contributed losses of $3. Higher premium freight costs to prevent disruption to customer schedules — mostly during the first half of the year when we were managing the business disruption in the aftermath of our bankruptcy filing — and manufacturing inefficiencies in our Venezuelan foundry operations resulted in higher cost of $12. Partially offsetting these reductions to Axle margins in 2006 were lower warranty expenses of $15, primarily due to two programs which required higher provisions in 2005, and lower overall material costs in 2006 — mostly due to reduced steel cost.

The Driveshaft segment experienced a margin decline of 1.5% despite a year-over-year sales increase. The acquired Mexican driveshaft operations from our previous equity affiliate contributed losses of $6. Launch costs and competitive pricing on a new light truck program in 2006 resulted in losses of approximately $7.

Margins in the Sealing segment were down 0.9%, primarily due to higher material costs of $4 — mostly due to the higher costs of stainless steel, a major material component for this business. Also contributing to the margin decline were facility closure and asset impairment costs of $3.

Our Thermal segment experienced a significant sales decline in 2006, resulting in lower sales relative to fixed costs. Additionally, higher material costs — mostly due to the high content of aluminum in this business — reduced margins by $6.

In our Structures segment, the margin decline was largely attributed to an 8.8% reduction in sales, with the margin reduction on the lost sales not offset by proportionate fixed cost reductions. Program start-up costs were also higher in 2006. Partially offsetting these margin reductions was lower overall material costs, principally due to savings from more steel purchases under customer re-sale programs.

Heavy Vehicle Technology and Systems

Unlike the ASG business, Heavy Vehicle gross margins less SG&A benefited in 2006 from stronger sales levels, increasing 2.0% from 2.5% in 2005 to 4.5% in 2006. Commercial Vehicle segment margins improved 2.6%. In addition to the contribution from higher sales, Commercial Vehicle margins benefited from price increases of $18, largely to help defray the higher costs absorbed in previous years due to increased material costs. Margins also increased in 2006 as realignments of the operations and other improvements addressed the manufacturing inefficiencies which negatively impacted this business in 2005. Lower overall material cost, due in part to more effective use of steel grades and resourcing to lower cost steel suppliers, also benefited margins slightly in this business. In the Off-Highway segment, margins improved 1.1%. Higher sales relative to fixed costs contributed to some of the margin improvement, with most of the remaining improvement coming from reductions in material cost.

Consolidated

Consolidated gross margin less SG&A includes corporate expenses and other costs not allocated to the business units of $262, or 3.1% of sales, in 2006 as compared to $303, or 3.5% of sales, in 2005. This improvement in consolidated margins of .4% largely reflects our overall efforts to reduce overhead through headcount reduction, limited wage increases, suspension of benefits and cutbacks in discretionary spending.

Impairment of goodwill and other assets

As discussed in Note 4 to our consolidated financial statements in Item 8, an impairment charge of $165 was recorded in the third quarter of 2006 to reduce lease and other assets in DCC to their fair value less cost to sell. Additional impairment charges in 2006 of $11 were recorded based on the planned sales of specific DCC investments. DCC reviews its investments for impairment on a quarterly basis. An impairment charge of $58 was recorded in the fourth quarter to adjust our equity investment in GETRAG to fair value based on an other-than-temporary decline in value related to the March 2007 sale of this investment.

As discussed in Notes 4 and 7 to our consolidated financial statements in Item 8, a $46 charge was taken in 2006 to write off the goodwill in our Axle business. In 2005, we wrote off the remaining goodwill of our Structures and Commercial Vehicles businesses.

Realignment charges

Realignment charges are discussed in Note 4 to our consolidated financial statements in Item 8. These charges relate primarily to employee separation and exit costs associated with facility closures.

Other income (expense)

Other income for 2006 was up $52 compared to 2005. The increase was due primarily to $28 in losses from divestitures and joint venture dissolutions in 2005, and the inclusion of gains of $10 from such activities in 2006. Additionally, DCC income, net of gains and losses on asset sales, was $14 higher in 2006 than 2005.

Interest expense

As a result of our Chapter 11 reorganization process, a substantial portion of our debt obligations is now subject to compromise. Since the Filing Date, we have not accrued interest on these obligations. The post-petition interest expense not recognized in 2006 on these obligations amounted to $89.

Reorganization items

Reorganization items are primarily expenses directly attributed to our Chapter 11 reorganization process. See Note 2 to our consolidated financial statements in Item 8 for a summary of these costs. Reorganization items reported in 2006 included professional advisory fees, lease rejection costs, debt valuation adjustments on pre-petition liabilities and underwriting fees related to the DIP Credit Agreement. The debt valuation adjustments and DIP Credit Agreement underwriting fees were one-time charges associated with the initial phase of the reorganization.

Income tax benefit (expense)

The primary factor resulting in income tax expense of $66 during 2006, as compared to a tax benefit of $200 that would be expected based on the 35% U.S. statutory income tax rate, was the discontinued recognition of tax benefits on U.S. losses. Also impacting this rate differential was $46 of goodwill impairment charges which are not deductible for income tax purposes.

The 2005 results included a charge of $817 for placing a valuation allowance against our net U.S. deferred tax assets. Additional valuation allowances of $13 were also provided in 2005 against net deferred tax assets in the U.K. These provisions were the principal reason for tax expense of $924 recognized in 2005 differing from a tax benefit of $100 that would be expected at a 35% federal U.S. tax rate.

Discontinued operations

Losses from discontinued operations were $121 and $434 in 2006 and 2005. Discontinued operations in both years included the engine hard parts, fluid routing and pump products businesses held for sale at the end of 2006 and 2005. The net losses included pre-tax impairment charges of $137 in 2006 and $411 in 2005 that were required to reduce the net book value of these businesses to expected fair value less cost to sell. See Note 4 to our consolidated financial statements in Item 8 for additional information relating to the discontinued operations.

Results of Operations (2005 versus 2004)

Business Unit and Geographic Sales and Gross Margin Analysis

Geographic Sales Analysis


							Amount of Change Due To
					Increase/		Currency			Acquisitions/			Organic
	2005		2004		(Decrease)		Effects			Divestitures			Change

North America	$	5,410	$	5,218	$	192	$	62		$	(19	)	$	149
Europe		1,596		1,322		274		(3	)					277
South America		835		542		293		86			(6	)		213
Asia Pacific		770		693		77		21			42			14

Total	$	8,611	$	7,775	$	836	$	166		$	17		$	653

Organic sales in 2005 increased $653, or 8.4%, primarily as a result of net new business that came on stream in 2005 and a stronger heavy vehicle market. Net new business increased 2005 sales by approximately $320 in ASG and $180 in HVTSG. The remaining increase in 2005 was driven primarily by increased production levels in the heavy vehicle market. In commercial vehicles, most of our sales are to the North American market. Production levels of Class 8 commercial trucks increased 27% in 2005, while medium duty Class 5-7 truck production was up about 12%.

Regionally, North American sales increased $192, or 3.7%. A stronger Canadian dollar accounted for $63 of the increase, with divestitures reducing 2005 sales by $19. Net of currency and divestitures, the organic sales increased $148, or 2.8%. Higher production levels in the North American commercial vehicle market and contributions from net new business were the primary factors generating the higher sales in North America. Sales in our largest market, the North American light truck market, were lower as production levels declined about 2% year-over-year, with sales of the vehicles having larger Dana content being down even more.

Sales in our European region benefited from contributions from net new business and a stronger off-highway market. Production levels in the European light vehicle market were relatively flat compared to 2004. In South America, organic sales were higher as a result of net new business as well as higher light vehicle production levels. A stronger Brazilian real also contributed to the higher sales in South America. In our Asia Pacific region, sales increased primarily because of a weaker dollar against currencies in this region and the 2004 acquisition of a majority interest in a joint venture, which resulted in the sales of the joint venture being consolidated.

Operating Segment Sales Analysis


								Amount of Change Due To
					Increase/			Currency		Acquisitions/			Organic
	2005		2004		(Decrease)			Effects		Divestitures			Change

ASG
Axle	$	2,407	$	2,245	$	162		$	54	$	—		$	108
Driveshaft		1,129		1,041		88			33					55
Sealing		661		615		46			6		42			(2	)
Thermal		312		314		(2	)		14					(16	)
Structures		1,288		1,108		180			45					135
Other		144		61		83								83

Total ASG		5,941		5,384		557			152		42			363

HVTSG
Commercial Vehicle		1,540		1,359		181			11					170
Off-Highway		1,100		940		160			4					156

Total HVTSG		2,640		2,299		341			15					326
Other Operations		30		92		(62	)				(25	)		(37	)

Total	$	8,611	$	7,775	$	836		$	167	$	17		$	652

ASG sales increased $557, or 10.3%, over 2004. A weaker U.S. dollar against a number of currencies in the major international markets where we do business accounted for higher sales of $152, or 2.8%. Excluding currency and net acquisition effects, organic sales in ASG increased $363, or 6.7%. In our Axle segment, sales increased $162. Net new business added $220 of sales. This was partially offset by reduced sales due to lower production levels in the North American light truck market. Our Driveshaft segment experienced higher sales of $88. This unit also sells to original equipment commercial vehicle customers. As such, the higher production levels in the North American commercial vehicle market added to sales in this segment. This, along with some added sales from net new business and higher light truck production levels outside the U.S., more than offset the lower sales due to production declines in the North American light truck market. Sales in our Sealing segment increased largely due to the acquisition of a majority interest in a Japanese gasket joint venture. This segment also sells to the commercial vehicle market which was much stronger in 2005. Our Thermal segment experienced increased sales due to currency — primarily the Canadian dollar, as this segment is heavily focused on the North American market. As such, the organic sales decline is due primarily to the lower production levels in the North American light truck market. Structures sales increased primarily due to net new business which came on stream in 2005 and to higher production levels of certain key platforms with structures content.

In the Heavy Vehicle group, sales increased due to stronger markets and contributions from net new business. Our Commercial Vehicle segment is focused primarily on North America. As such, the sales in this segment increased principally due to the increased North American production levels of Class 5-8 vehicles. Our Off-Highway segment serves the European as well as the North American markets. Sales in this segment benefited from higher global production in our primary markets of about 4%, as well as from the addition of new customer programs in 2005.

Margin Analysis


	As a Percentage of Sales						Increas/
	2005			2004			(Decrease)

Gross margin:
ASG		6.0	%		8.1	%		(2.1	)%
Axle		1.6			4.3			(2.7	)
Driveshaft		12.1			14.1			(2.0	)
Sealing		14.6			17.5			(2.9	)
Thermal		21.3			25.6			(4.3	)
Structures		2.0			(0.6	)		2.6
HVTSG		7.3			12.2			(4.9	)
Commercial Vehicle		4.7			11.6			(6.9	)
Off-Highway		10.6			12.7			(2.1	)

Selling, general and administrative expenses:
ASG		3.6	%		3.4	%		0.2	%
Axle		1.9			1.9			0.0
Driveshaft		3.8			3.8			0.0
Sealing		6.8			6.8			0.0
Thermal		3.2			3.6			(0.4	)
Structures		2.2			2.2			0.0
HVTSG		4.8			5.3			(0.5	)
Commercial Vehicle		5.2			6.0			(0.8	)
Off-Highway		3.4			3.7			(0.3	)

Gross margin less SG&A:
ASG		2.4	%		4.7	%		(2.3	)%
Axle		(0.3	)		2.4			(2.7	)
Driveshaft		8.3			10.3			(2.0	)
Sealing		7.8			10.7			(2.9	)
Thermal		18.1			22.0			(3.9	)
Structures		(0.2	)		(2.8	)		2.6
HVTSG		2.5			6.9			(4.4	)
Commercial Vehicle		(0.5	)		5.6			(6.1	)
Off-Highway		7.2			9.0			(1.8	)
Consolidated		(1.1	)		2.2			(3.3	)


*		Gross margin less SG&A is a non-GAAP financial measure derived by excluding realignment charges, impairments and other income, net from the most closely related GAAP measure, which is income from continuing operations before interest, reorganization items and income taxes. We believe this non-GAAP measure is useful for an understanding of our ongoing operations because it excludes other income and expense items which are generally not expected to be part of our ongoing business.

In ASG, despite higher sales in 2005, gross margins less SG&A declined 2.3%. Higher costs of steel and other metals were a principal factor. Higher steel costs, net of customer recoveries, alone reduced 2005 before-tax profit in ASG as compared to 2004 by approximately $67 — accounting for 1.1% of the margin decline from the previous year. In addition to higher raw material prices, increased energy costs also negatively impacted ASG margins. In the automotive market, we have had very limited success passing these

higher costs on to customers. In fact, margins continued to be adversely affected by price reductions to customers. Also negatively impacting ASG 2005 margins were start-up and launch costs associated with a new Slovakian actuation systems operation. This operation reduced margins in 2005 by approximately $16. Quality and warranty related issues resulted in higher warranty expense which reduced year-over-year margins by about $30, with the fourth quarter of 2005 including charges of $19 for two specific recall programs. While ASG margins continued to benefit from cost savings from programs like lean manufacturing and value engineering, production inefficiencies associated with overtime and freight dampened margins.

In the Axle segment, margins declined 2.7% despite a sales increase of 7.1%. Higher steel cost of about $46 was a major factor, accounting for 2.1% of the margin reduction. Additionally, the higher warranty costs referred to above were principally in this segment. These two items more than offset any margin improvement associated with the higher sales level. Margins in the Driveshaft segment similarly declined 2.0% on higher sales of 8%. Like with Axle, steel is an important component of material cost in the Driveshaft operation. Higher steel cost of $24 resulted in margin reduction of about 2.3%. Along with steel, other material price increases, higher warranty expense, increased energy costs and higher premium freight more than offset the margin benefits of the higher sales level. In our Sealing segment, negatively impacting margins were higher steel costs of $3, customer price reductions of $8 and higher warranty expense of $2. Our Thermal segment is a heavy user of aluminum, the price of which, like steel, increased significantly, negatively impacting our margins in this business. Customer price reductions in Thermal reduced margins by $7. Whereas the other segments of ASG experienced margin declines, our Structures business had margin improvement in 2005. In this segment, many of our programs benefit from steel being purchased through customer supported programs. As such, this segment did not experience the steel cost related margin deterioration experienced by our other ASG segments. In addition to the improvements associated with higher sales levels, margins improved in Structures as a result of operating improvements at facilities that were incurring atypically higher costs in 2004 because of inefficiencies associated with relatively recent new program launches.

Margins in the Heavy Vehicle group were 4.4% lower in 2005 despite stronger sales. As with ASG, higher steel costs significantly impacted HVTSG performance in 2005. Steel costs, net of customer recoveries, reduced this group’s before-tax profit by an additional $45 — accounting for 2.0% of the 4.4% margin decline. Of the steel cost increase, $28 was in the Commercial Vehicle segment and $17 in the Off-Highway segment — reducing margins in these units by about 2.1% and 1.8%. Raw material prices other than steel and higher energy costs also negatively impacted the HVTSG segments in 2005. While higher sales in the commercial vehicle market would normally benefit margins, the stronger sales volume actually created production inefficiencies as our principal assembly facility in Henderson, Kentucky experienced capacity constraints. With the production inefficiencies, to meet customer demand, we incurred premium freight, higher overtime, additional warehousing and outsourced certain activities previously handled internally — all of which resulted in higher costs. Commercial Vehicle margins during the first six months of 2005 were also negatively impacted by component shortages. Additional costs resulted from alternative sourcing as well as production inefficiencies. Margins in the Off-Highway operations in 2005 were negatively impacted by restructuring actions associated with the closure of the Statesville, North Carolina manufacturing facility, the downsizing of the Brugge, Belgium operation and the relocation of certain production activities to operations in Mexico.

Corporate expenses and other costs not allocated to the business units reduced gross margins less SG&A by 3.5% in 2005 and 3.2% in 2004. One factor contributing to the higher costs in 2005 was higher professional fees and related costs associated with an independent investigation surrounding the restatement of our financial statements for the first half of 2005 and prior years. Other factors included a pension settlement charge in the fourth quarter of 2005 triggered by higher lump sum distributions from one of our pension plans, higher insurance premiums and higher costs associated with our long-term disability and workers’ compensation programs.

Other income (expense)

Other income (expense) was $88 and $(85) in 2005 and 2004. Other income in 2005 was primarily lease financing revenue, interest income and other miscellaneous income. Other expense in 2004 included a $157

before tax charge associated with the repurchase of approximately $900 of debt during the fourth quarter of 2004 at a premium to face value.

Realignment and impairment charges

These costs were $111 and $44 in 2005 and 2004. The 2005 realignment and impairment costs include $53 for write-off of the remaining goodwill in our Structures and Commercial Vehicle businesses. The realignment cost in 2005 and 2004 related primarily to facility closures and discontinuance of product programs.

Interest expense

Interest expense was $168 and $206 in 2005 and 2004. Interest expense in 2005 was lower due to lower average debt levels.

Income tax benefit (expense)

Income tax benefit (expense) for continuing operations was $(924) and $205 in 2005 and 2004. Income tax expense in 2005 includes a charge of $817 for a valuation allowance against deferred tax assets at the beginning of the year in the U.S. and U.K., where the likelihood of future taxable income was determined to no longer be sufficient to ensure asset realization. This valuation allowance was the predominant factor in tax expense of $924 being higher than the $100 tax benefit that would normally be expected at the customary U.S. federal tax rate of 35%. The 2005 provision for income taxes included expenses related to countries where we continue to incur income taxes. Other factors contributing to the variance to the 35% rate were goodwill impairment charges that are not deductible for tax purposes and a write-off of deferred tax assets for net operating losses in the state of Ohio in connection with the enactment of a new gross receipts tax system.

In 2004, we experienced income tax benefits that resulted in a net tax benefit significantly greater than the tax provision normally expected at a customary tax rate of 35%. Tax benefits exceeded the amount expected by applying 35% to the loss before income taxes by $147. During 2004, income tax benefits of $85 were recognized through release of valuation allowances against capital loss carryforwards related to certain DCC sale transactions. Additionally, tax benefits of $37 were recognized through release of valuation allowances previously recorded against net operating losses in certain jurisdictions where future profitability no longer required such allowances.

Discontinued Operations

Losses from discontinued operations were $434 in 2005 and $10 in 2004. Discontinued operations included the results of the engine hard parts, fluid products and pump products businesses held for sale at the end of 2005. The 2005 net loss of $434 includes pre-tax impairment charges of $411 that were required to reduce the net book value of these businesses to their fair value less cost to sell. In 2004, discontinued operations also included the AAG business that we sold in November 2004. The automotive aftermarket operation accounted for $5 of the discontinued operations loss, including a $43 charge recognized at the time of the sale. See Note 4 of our consolidated financial statements in Item 8 for additional information relating to the discontinued operations.

Cash Flow

Cash and cash equivalents for the years ended December 31, 2006, 2005 and 2004 is shown in the following table:


	2006			2005			2004

Cash flow summary
Cash and cash equivalents at beginning of period	$	762		$	634		$	731

Cash provided by (used in) operating activities		52			(216	)		73
Cash provided by (used in) investing activities		(71	)		(54	)		916
Cash provided by (used in) financing activities		(49	)		398			(1,090	)

Increase (decrease) in cash and cash equivalents		(68	)		128			(101	)
Impact of foreign exchange and discontinued operations		25						4

Cash and cash equivalents at end of period	$	719		$	762		$	634


Cash Flows from Operating Activities:	2006			2005			2004

Net income (loss)	$	(739	)	$	(1,605	)	$	62
Depreciation and amortization		278			310			358
Goodwill, asset impairment and other related charges		405			515			55
Reorganization items, net		143
Payment of reorganization items		(91	)
Loss on note repurchases								96
Deferred income taxes		(41	)		751			(125	)
Minority interest		7			(16	)		13
Unremitted earnings of affiliates		(26	)		(40	)		(36	)
Other		(83	)		39			(56	)

		(147	)		(46	)		367
Increase (decrease) from working capital		199			(170	)		(294	)

Cash flows from operating activities	$	52		$	(216	)	$	73

Cash of $52 was generated by operating activities in 2006 as compared to a use of $216 in 2005 and a source of $73 in 2004.

Although working capital was a source of $199 cash in 2006, this was primarily a consequence of relief provided through the bankruptcy process. An increase in accounts receivable consumed cash of $62. Accounts payable and other components of working capital provided the primary source of the cash flow increase. This was due primarily to the non-payment of accounts payable and other current liabilities owed at the time of our bankruptcy filing which are now classified as Liabilities subject to compromise. Accounts payable and other current liabilities at December 31, 2006 subject to compromise approximated $503. As such, had it not been for bankruptcy relief, working capital cash flow would have included payment of these liabilities, and cash flow from operating activities would have reflected a use of approximately $451.

In 2005, working capital consumed cash of $170. Reductions of receivables and inventories provided cash of $146 and $81. The consumption of cash was primarily due to a decrease in accounts payable of approximately $260. After announcing the reduction in our earnings forecast for the second half of 2005 and the decision to provide a valuation allowance against our U.S. deferred tax asset, we accelerated payments to certain key suppliers to insure that deliveries would not be delayed. Additionally, 2005 cash flow included a payment to settle prior-year tax returns offset by the reimbursement of claims by our insurers. In 2004, working capital used cash of $294, due primarily to increased sales levels compared to 2003 which increased receivables and inventories.

Excluding the working capital change, operating cash flows were a use of $147 in 2006, a use of $46 in 2005 and a source of $367 in 2004. The operating cash flow use the past two years primarily reflects our reduced operating profit. Sales net of cost of sales and SG&A expense in 2006 amounted to an $81 loss, compared to a $94 loss in 2005 and a $170 profit in 2004. In 2006, operating cash flows included a use of $91 for reorganization expenses directly related to the bankruptcy process.


Cash Flows from Investing Activities:	2006			2005			2004

Purchases of property, plant and equipment	$	(314	)	$	(297	)	$	(329	)
Acquisition of business, net of cash acquired		(17	)					(5	)
Divestitures, aftermarket business								968
Proceeds from sales of other assets		54			22			61
Proceeds from sales of leasing subsidiary assets		141			161			289
Other		65			60			(68	)

Cash flows from investing activities	$	(71	)	$	(54	)	$	916

Cash used for the purchase of property, plant and equipment in 2006 was higher than 2005 due to the timing of new customer program requirements and to the delay of certain expenditures in 2005. Proceeds from sales of leasing subsidiary assets reflect our continued sale of DCC assets following our announcement in 2001 to divest this business. The divestiture proceeds in 2004 relate to sale of the automotive aftermarket businesses which occurred in November 2004.


Cash Flows from Financing Activities:	2006			2005			2004

Net change in short-term debt	$	(551	)	$	492		$	(31	)
Proceeds from debtor-in-possession facility		700
Issuance of long-term debt		7			16			455
Payments and repurchases of long-term debt		(205	)		(61	)		(1,457	)
Dividends paid					(55	)		(73	)
Other					6			16

Cash flows from financing activities	$	(49	)	$	398		$	(1,090	)

In 2006, we borrowed $700 under the $1,450 DIP Credit Agreement. A portion of these proceeds were used to pay off debt obligations outstanding under our prior five-year bank facility and the interim DIP revolving credit facility, the proceeds of which had been used to pay off the balances of lending arrangements under our accounts receivable securitization program. In December 2006, in connection with a forbearance agreement between DCC and its noteholders, DCC made a cash payment of $125 of remaining principal owed to its noteholders.

During 2005, we made draws on the accounts receivable securitization program and the five-year revolving credit facility to meet our working capital needs. We also refinanced a secured note due in 2007 related to a DCC investment to a non-recourse note due in August 2010 and increased the principal outstanding from $40 to $55. The remainder of our debt transactions in 2005 was generally limited to $61 of debt repayments, including a $50 scheduled payment at DCC.

In December 2004, we used $1,086 of cash, including a portion of the proceeds from the sale of the automotive aftermarket businesses and the issuance of $450 of new notes, to repurchase $891 face value of our March 2010 and August 2011 notes. Prior to the fourth quarter, we had used available cash to meet scheduled maturities of long-term debt of $239 on the manufacturing side and $166 within DCC.

We maintained a quarterly dividend rate of $.12 per share during the first three quarters of 2005 and all of 2004 before decreasing the fourth quarter 2005 dividend to $.01.

Cash Availability — At December 31, 2006, cash and cash equivalents held in the U.S. amounted to $232, including $73 of cash deposits to provide credit enhancement for certain lease agreements and to

support surety bonds that allow us to self-insure our workers’ compensation obligations and $15 held by DCC, whose cash is restricted by the forbearance agreement discussed in Notes 2 and 10 to our consolidated financial statements in Item 8.

At December 31, 2006, cash and cash equivalents held outside the U.S. amounted to $487, including $20 of cash deposits to provide credit enhancements for certain lease agreements and to support surety bonds that allow us to self-insure our workers’ compensation obligations. In addition, a substantial portion of our cash and equivalents balance represents funds held in overseas locations that need to be retained for working capital and other operating purposes. Several countries also have local regulatory requirements that significantly restrict the ability of the Debtors to access cash. Another $74 was held by operations that are majority owned and consolidated by Dana, but which have third party minority ownership with varying levels of participation rights involving cash withdrawals. Beyond these restrictions, there are practical limitations on repatriation of cash from certain countries because of the resulting tax cost.

Over the years, certain of our international operations have received cash or other forms of financial support from the U.S. to finance their activities. These international operations had intercompany loan obligations to the U.S. of $617, including accrued interest, at December 31, 2006. We are working on developing additional credit facilities in certain of these foreign domains to generate cash which could be used for intercompany loan repayment or other methods of repatriation. In March 2007, we established a European receivables loan agreement and completed certain divestitures. A significant portion of the proceeds from these actions is expected to be repatriated to the U.S. in 2007.

Pre-petition and DIP Interim Financing — Before the Filing Date, we had a five-year bank facility maturing on March 4, 2010, which provided $400 of borrowing capacity, and an accounts receivable securitization program that provided up to a maximum of $275 to meet our periodic needs for short-term financing. The obligations under the accounts receivable securitization program was paid-off with the proceeds of an interim DIP revolving credit facility. The proceeds of the term loan under the DIP Credit Agreement were used to pay off the borrowing under the interim DIP revolving credit facility and the five-year bank facility.

DIP Credit Agreement — Dana, as borrower, and our Debtor U.S. subsidiaries, as guarantors, are parties to a Senior Secured Superpriority Debtor-in-Possession Credit Agreement (the DIP Credit Agreement) with Citicorp North America, Inc., as agent, initial lender and an issuing bank, and with Bank of America, N.A. and JPMorgan Chase Bank, N.A., as initial lenders and issuing banks. The DIP Credit Agreement, as amended, was approved by the Bankruptcy Court in March 2006. The aggregate amount of the facility at December 31, 2006 was $1,450, and included a $750 revolving credit facility (of which $400 was available for the issuance of letters of credit) and a $700 term loan facility.

All of the loans and other obligations under the DIP Credit Agreement are due and payable on the earlier of 24 months after the effective date of the DIP Credit Agreement or the consummation of a plan of reorganization under the Bankruptcy Code. Prior to maturity, Dana is required to make mandatory prepayments under the DIP Credit Agreement in the event that loans and letters of credit exceed the available commitments, and from the proceeds of certain asset sales, unless reinvested. Such prepayments, if required, are to be applied first to the term loan facility and second to the revolving credit facility with a permanent reduction in the amount of the commitments thereunder. Interest for both the term loan facility and the revolving credit facility under the DIP Credit Agreement accrues, at our option, at either the London interbank offered rate (LIBOR) plus a per annum margin of 2.25% or the prime rate plus a per annum margin of 1.25%. Amounts borrowed at December 31, 2006, were at a rate of 7.55% (LIBOR plus 2.25%). We are paying a fee for issued and undrawn letters of credit in an amount per annum equal to the LIBOR margin applicable to the revolving credit facility, a per annum fronting fee of 25 basis points and a commitment fee of 0.375% per annum for unused committed amounts under the revolving credit facility.

The DIP Credit Agreement is guaranteed by substantially all of our domestic subsidiaries, excluding DCC. As collateral, we and each of our guarantor subsidiaries have granted a security interest in, and lien on, effectively all of our assets, including a pledge of 66% of the equity interests of each material foreign subsidiary directly or indirectly owned by us.

Under the DIP Credit Agreement, Dana and each of our subsidiaries (other than certain excluded subsidiaries) are required to comply with customary covenants for facilities of this type. These include (i) affirmative covenants as to corporate existence, compliance with laws, insurance, payment of taxes, access to books and records, use of proceeds, retention of a restructuring advisor and financial advisor, maintenance of cash management systems, use of proceeds, priority of liens in favor of the lenders, maintenance of properties and monthly, quarterly, annual and other reporting obligations, and (ii) negative covenants, including limitations on liens, additional indebtedness (beyond that permitted by the DIP Credit Agreement), guarantees, dividends, transactions with affiliates, claims in the bankruptcy proceedings, investments, asset dispositions, nature of business, payment of pre-petition obligations, capital expenditures, mergers and consolidations, amendments to constituent documents, accounting changes, and limitations on restrictions affecting subsidiaries and sale-leasebacks.

Additionally, the DIP Credit Agreement requires us to maintain a minimum amount of consolidated earnings before interest, taxes, depreciation, amortization, restructuring and reorganization costs (EBITDAR) based on rolling 12-month cumulative EBITDAR requirements for Dana and our direct and indirect subsidiaries, on a consolidated basis, beginning on March 31, 2007 and ending on February 28, 2008, at levels set forth in the DIP Credit Agreement. We must also maintain minimum availability of $100 at all times. The DIP Credit Agreement provides for certain events of default customary for debtor-in-possession financings of this type, including cross default with other indebtedness. Upon the occurrence and during the continuance of any event of default under the DIP Credit Agreement, interest on all outstanding amounts would be payable on demand at 2% above the then applicable rate. We were in compliance with the requirements of the DIP Credit Agreement at December 31, 2006.

As of March 2006, we had borrowed $700 under the $1,450 DIP Credit Agreement. We used a portion of these proceeds to pay off debt obligations outstanding under our prior five-year bank facility and certain other pre-petition obligations, as well as to provide for working capital and general corporate expense needs. We also used the proceeds to pay off the interim DIP revolving credit facility which had been used to pay off our accounts receivable securitization program and certain other pre-petition obligations, as well as to provide for working capital and general corporate expenses. Based on our borrowing base collateral, we had availability under the DIP Credit Agreement at December 31, 2006 of $521 after deducting the $100 minimum availability requirement. We had utilized $242 of this for letters of credit, leaving unused availability of $279.

In January 2007, the Bankruptcy Court authorized us to amend the DIP Credit Agreement to:


	•	increase the term loan commitment by $200 to enhance our near-term liquidity and to mitigate timing and execution risks associated with asset sales and other financing activities in process;

	•	increase the annual rate at which interest accrues on amounts borrowed under the term facility by 0.25%;

	•	reduce the minimum global EBITDAR covenant levels and increase the annual amount of cash restructuring charges excluded in the calculation of EBITDAR;

	•	implement a corporate reorganization of our European subsidiaries to facilitate the establishment of a European credit facility and improve treasury and cash management operations; and

	•	receive and retain proceeds from the trailer axle asset sale that closed in January 2007, without potentially triggering a mandatory repayment to the lenders of the amount of proceeds received.

In connection with the January 2007 amendment, we reduced the aggregate commitment under the revolving credit facility of the DIP Credit Agreement from $750 to $650 to correspond with the lower availability in our collateral base. We expect to reduce the revolving credit facility by up to an additional $50 as we continue to divest our non-core businesses.

certain of our European subsidiaries (the Selling Entities) will sell accounts receivable to Dana Europe Financing (Ireland) Limited, a limited liability company incorporated under the laws of Ireland (an Irish special purpose entity). The Irish special purpose entity, as Borrower, will pledge those receivables as collateral for short-term loans from GE Leveraged Loans Limited, as Administrative Agent, and other participating lenders. The receivables will be purchased by the Irish special purpose entity in part from funds provided through subordinated loans from Dana Europe S.A. Dana International Luxembourg SARL (one of our wholly-owned subsidiaries) will act as Performance Undertaking Provider and as the master servicer of the receivables owned by the Irish special purpose entity. The Selling Entities will act as sub-servicers for the accounts receivable sold by them. The accounts receivable purchased by the Irish special purpose entity will be included in our consolidated financial statements because the Irish special purpose entity does not meet certain accounting requirements for treatment as a “qualifying special purpose entity” under GAAP. Accordingly, the sale of the accounts receivable and subordinated loans from Dana Europe S.A. will be eliminated in consolidation and any loans to the Irish special purpose entity from participating lenders will be reflected as short-term borrowing in our consolidated financial statements. The amounts available under the program are subject to reduction for various reserves and eligibility requirements related to the accounts receivable being sold, including adverse characteristics of the underlying accounts receivable and customer concentration levels. The amounts available under the program are also subject to reduction for failure to meet certain levels of a fixed charge financial covenant calculation.

Under the program, the Selling Entities will individually be required to comply with customary affirmative covenants for facilities of this type, including covenants as to corporate existence, compliance with laws, insurance, payment of taxes, access to books and records, use of proceeds and priority of liens in favor of the lenders, and on an aggregated basis, will also be required to comply with daily, monthly, annual and other reporting obligations. These Selling Entities will also be required to comply individually with customary negative covenants for facilities of this type, including limitations on liens, and on an aggregated basis, will also be required to comply with customary negative covenants for facilities of this type, including limitations on additional indebtedness, dividends, transactions with affiliates outside of the Selling Entity group, investments, asset dispositions, mergers and consolidations and amendments to constituent documents.

Canadian Credit Agreement — In June 2006, Dana Canada Corporation (Dana Canada), as borrower, and certain of Dana Canada’s affiliates, as guarantors, entered into a Credit Agreement (the Canadian Credit Agreement) with Citibank Canada as agent, initial lender and an issuing bank, and with JPMorgan Chase Bank, N.A., Toronto Branch and Bank of America, N.A., Canada Branch as initial lenders and issuing banks. The Canadian Credit Agreement provides for a $100 revolving credit facility, of which $5 is available for the issuance of letters of credit. At December 31, 2006, there were no borrowings and no utilization of the net availability under the facility for the issuance of letters of credit.

All loans and other obligations under the Canadian Credit Agreement will be due and payable on the earlier of (i) 24 months after the effective date of the Canadian Credit Agreement or (ii) the termination of the DIP Credit Agreement.

Interest under the Canadian Credit Agreement will accrue, at Dana Canada’s option, either at (i) LIBOR plus a per annum margin of 2.25% or (ii) the Canadian prime rate plus a per annum margin of 1.25%. Dana Canada will pay a fee for issued and undrawn letters of credit in an amount per annum equal to 2.25% and is paying a commitment fee of 0.375% per annum for unused committed amounts under the facility.

The Canadian Credit Agreement is guaranteed by substantially all of the Canadian affiliates of Dana Canada. Dana Canada and each of its guarantor affiliates has granted a security interest in, and lien on, effectively all of their assets, including a pledge of 100% of the equity interests of each direct foreign subsidiary owned by Dana Canada and each of Dana Canada’s affiliates.

Under the Canadian Credit Agreement, Dana Canada and its affiliates are required to comply with customary affirmative covenants for facilities of this type, including covenants as to corporate existence, compliance with laws, insurance, payment of taxes, access to books and records, use of proceeds, maintenance of cash management systems, priority of liens in favor of the lenders, maintenance of properties and monthly, quarterly, annual and other reporting obligations. Dana Canada and each of its Canadian

affiliates are also required to comply with customary negative covenants for facilities of this type, including limitations on liens, additional indebtedness, guarantees, dividends, transactions with affiliates, investments, asset dispositions, nature of business, capital expenditures, mergers and consolidations, amendments to constituent documents, accounting changes, restrictions affecting subsidiaries, and sale and lease-backs. In addition, Dana Canada must maintain a minimum availability under the Canadian Credit Agreement of $20.

The Canadian Credit Agreement provides for certain events of default customary for facilities of this type, including cross default with the DIP Credit Agreement. Upon the occurrence and continuance of an event of default, Dana Canada’s lenders may have the right, among other things, to terminate their commitments under the Canadian Credit Agreement, accelerate the repayment of all of Dana Canada’s obligations thereunder and foreclose on the collateral granted to them.

Debt Reclassification — Our bankruptcy filing triggered the immediate acceleration of our direct financial obligations (including, among others, outstanding non-secured notes issued under our Indentures dated as of December 15, 1997, August 8, 2001, March 11, 2002 and December 10, 2004) and DCC’s obligations under the DCC Notes. The amounts accelerated under our Indentures are characterized as unsecured debt for purposes of the reorganization proceedings. Obligations of $1,585 under our indentures have been classified as Liabilities subject to compromise, and the unsecured DCC notes have been classified as part of the current portion of long-term debt in our Consolidated Balance Sheet. See Note 2 to our consolidated financial statements in Item 8. In connection with the December 2006 sale of DCC’s interest in a limited partnership, $55 of DCC non-recourse debt was assumed by the buyer.

DCC Notes — At December 31, 2006, long-term debt at DCC included notes totaling $266, including $187 outstanding under a $500 Medium Term Note Program established in 1999. The DCC Notes are general unsecured obligations of DCC. In December 2006, DCC entered into the Forbearance Agreement discussed above and in Note 10 of our consolidated financial statements in Item 8.

Swap Agreements — At the Filing Date, we had two interest rate swap agreements scheduled to expire in August 2011, under which we had agreed to exchange the difference between fixed rate and floating rate interest amounts on notional amounts corresponding with the amount and term of our August 2011 notes. As of December 31, 2005, the interest rate swap agreements provided for us to receive a fixed rate of 9.0% on a notional amount of $114 and pay variable rates based on LIBOR, plus a spread. The average variable rate under these contracts approximated 9.4% at the end of 2005. As a result of our bankruptcy filing, the two swap agreements were terminated, resulting in a termination payment of $6 on March 30, 2006.

Cash Obligations — Under various agreements, we are obligated to make future cash payments in fixed amounts. These payments include payments under our long-term debt agreements, rent payments required under operating lease agreements and payments for equipment, other fixed assets and certain raw materials. We are not able to determine the amounts and timing of our contractual cash obligations or estimated obligations under our retiree health programs, as the timing and amounts of future payments are expected to be modified as part of our reorganization under Chapter 11. Accordingly, the table and commentary below reflect scheduled payments and maturities based on the original payment terms specified in the underlying agreements and contracts and exclude Liabilities subject to compromise which will be disbursed in accordance with our plan of reorganization. Due to the uncertainty of what portion, if any, of our interest obligations will be resolved in the bankruptcy proceedings, we are also not able to determine the amounts and timing of our future interest obligations. Accordingly we have shown no interest obligations in the table.


			Payments Due by Period
			Less than		1 - 3		4 - 5		After
Contractual Cash Obligations	Total		1 Year		Years		Years		5 Years

Principal of long-term debt	$	995	$	273	$	713	$	7	$	2
Operating leases		492		71		126		80		215
Unconditional purchase obligations		149		131		11		7
Other long-term liabilities		3,495		346		697		700		1,752

Total contractual cash obligations	$	5,131	$	821	$	1,547	$	794	$	1,969

The unconditional purchase obligations are principally comprised of commitments for procurement of fixed assets and the purchase of raw materials.

We have a number of sourcing agreements with suppliers for various components used in the assembly of our products, including certain outsourced components that we had manufactured ourselves in the past. These agreements do not contain any specific minimum quantities that we must order in any given year, but generally require that we purchase specific components exclusively from the suppliers over the terms of the agreements. Accordingly, our cash obligations under these agreements are not fixed. However, if we were to estimate volumes to be purchased under these agreements based on our production forecasts for 2007 and assume that the volumes were constant over the respective supply periods, the amounts of annual purchases under those agreements where we estimate the annual purchases would exceed $20 would be as follows: $415, $430, $461, $368 and $2,012 in 2007, 2008, 2009, 2010 and 2011 and thereafter.

Other long-term liabilities include estimated obligations under our retiree healthcare programs, our estimated 2007 contributions to our U.S. defined benefit pension plans and payments under our long-term agreement with IBM for the outsourcing of certain human resource services that began in 2005. Obligations under the retiree healthcare programs are not fixed commitments and will vary depending on various factors, including the level of participant utilization and inflation. Our estimates of the payments to be made through 2010 took into consideration recent payment trends and certain of our actuarial assumptions. We have not estimated pension contributions beyond 2006 due to uncertainty resulting from our bankruptcy filing.

In connection with certain of our pre-petition divestitures, there may be future claims asserted and proceedings instituted against us related to liabilities arising during the period of our ownership or pursuant to our indemnifications or guarantees provided in connection with the respective transactions. The estimated maximum potential amount of payments under these obligations is not determinable due to the significant number of divestitures and lack of a stipulated maximum liability for certain matters, and because these obligations are subject to compromise as pre-petition obligations. In some cases, we have insurance coverage available to satisfy claims related to the divested businesses. We believe that payments, if any, in excess of amounts provided or insured, related to such matters are not reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations.

Contingencies

Impact of Our Bankruptcy Filing — Under the Bankruptcy Code, the filing of our petition on March 3, 2006 automatically stayed most actions against us. Substantially all of our pre-petition liabilities will be addressed under our plan of reorganization, if not otherwise addressed pursuant to orders of the Bankruptcy Court.

Class Action Lawsuit and Derivative Actions — There is a consolidated securities class action (Howard Frank v. Michael J. Burns and Robert C. Richter) pending in the U.S. District Court for the Northern District of Ohio naming our CEO, Mr. Burns, and our former CFO, Mr. Richter, as defendants. The plaintiffs in this action allege violations of the U.S. securities laws and claim that the price at which Dana’s shares traded at various times between February 2004 and November 2005 was artificially inflated as a result of the defendants’ alleged wrongdoing.

There is also a shareholder derivative action (Roberta Casden v. Michael J. Burns, et al.) pending in the same court naming our current directors, certain former directors and Messrs. Burns and Richter as defendants. The derivative claim in this case, alleging breaches of the defendants’ fiduciary duties to Dana, has been stayed. The plaintiff in the Casden action has also asserted class action claims alleging a breach of duties that purportedly forced Dana into bankruptcy.

The defendants moved to dismiss or stay the class action claims in these cases, and a hearing on these motions to dismiss was held on January 30, 2007. The court has not yet ruled on the motions. A second shareholder derivative suit (Steven Staehr v. Michael Burns, et al.) remains pending but is stayed.

Due to the preliminary nature of these lawsuits, we cannot at this time predict their outcome or estimate Dana’s potential exposure. While we have insurance coverage with respect to these matters and do not currently believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations, there can be no assurance that any uninsured loss would not be material.

SEC Investigation — In September 2005, we reported that management was investigating accounting matters arising out of incorrect entries related to a customer agreement in our Commercial Vehicle operations, and that our Audit Committee had engaged outside counsel to conduct an independent investigation of these matters, as well. Outside counsel informed the SEC of the investigation, which ended in December 2005. In January 2006, we learned that the SEC had issued a formal order of investigation with respect to matters related to our restatements. The SEC’s investigation is a non-public, fact-finding inquiry to determine whether any violations of the law have occurred. This investigation has not been suspended as a result of our bankruptcy filing. We are continuing to cooperate fully with the SEC in the investigation.

Tax Matters — In the ordinary course of business, we are involved in transactions for which the related tax regulations are relatively new and/or subject to interpretation. A number of years may elapse before a particular matter is audited and a tax adjustment is proposed by the taxing authority. The years with open tax audits vary depending on the tax jurisdiction. We establish a liability when the payment of additional taxes related to certain matters is considered probable and the amount is reasonably estimable. We adjust these liabilities, including the related interest and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. These liabilities are recorded in Other accrued liabilities in our Consolidated Balance Sheet. Favorable resolution of tax matters for which a liability had previously been recorded would result in a reduction of income tax expense when payment of the tax is no longer considered probable.

Legal Proceedings Arising in the Ordinary Course of Business — We are a party to various pending judicial and administrative proceedings arising in the ordinary course of business. These include, among others, proceedings based on product liability claims and alleged violations of environmental laws. We have reviewed these pending legal proceedings, including the probable outcomes, our reasonably anticipated costs and expenses, the availability and limits of our insurance coverage and surety bonds and our established reserves for uninsured liabilities. We do not believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations. Further discussion of these matters follows.

Asbestos-Related Product Liabilities — Under the Bankruptcy Code, our pending asbestos-related product liability lawsuits, as well as any new lawsuits against us alleging asbestos-related claims, have been stayed during our reorganization process. However, some claimants have filed proofs of asbestos-related claims in the Bankruptcy Cases. The September 21, 2006 claims bar date did not apply to claimants alleging asbestos-related personal injury claims, but it was the deadline for claimants who are not allegedly injured individuals or their personal representatives (including insurers) to file proofs of claim with respect to other types of asbestos-related claims. Our obligations with respect to asbestos claims will be addressed in our plan of reorganization, if not otherwise addressed pursuant to orders of the Bankruptcy Court.

We had approximately 73,000 active pending asbestos-related product liability claims at December 31, 2006, compared to 77,000 at December 31, 2005, including approximately 6,000 and 10,000 claims, that were settled but awaiting final documentation and payment. We had accrued $61 for indemnity and defense costs for pending asbestos-related product liability claims at December 31, 2006, compared to $98 at December 31, 2005. Starting with the fourth quarter of 2006, we projected indemnity and defense cost for pending cases using the same methodology we use for projecting potential future liabilities. The decrease in the liability for pending asbestos-related claims is due primarily to revised assumptions in that methodology regarding expected compensable claims. This assumption regarding fewer compensable cases is consistent with the current asbestos tort system and our strategy in recent years of aggressively defending all cases, and in particular meritless claims. In 2006, we determined that the more recent experience was sufficient to utilize as the basis for estimating the indemnity cost of pending claims.

Generally accepted methods of projecting future asbestos-related product liability claims and costs require a complex modeling of data and assumptions about occupational exposures, disease incidence, mortality, litigation patterns and strategy and settlement values. Although we do not believe that our products have ever caused any asbestos-related diseases, for modeling purposes we combined historical data relating to claims filed against us with labor force data in an epidemiological model, in order to project past and future disease incidence and resulting claims propensity. Then we compared our claims history to historical incidence estimates and applied these relationships to the projected future incidence patterns, in order to estimate future compensable claims. We then established a cost for such claims, based on historical trends in claim settlement amounts. In applying this methodology, we made a number of key assumptions, including labor force exposure, the calibration period, the nature of the diseases and the resulting claims that might be made, the number of claims that might be settled, the settlement amounts and the defense costs we might incur. Given the inherent variability of our key assumptions, the methodology produced a potential liability through 2021 within a range of $80 to $141. Since the outcomes within that range are equally probable, the accrual at December 31, 2006 represents the lower end of the range. While the process of estimating future demands is highly uncertain beyond 2021, we believe there are reasonable circumstances in which our expenditures related to asbestos-related product liability claims after that date would be de minimis. Our estimated liability for future asbestos-related product claims at December 31, 2005 was $70 to $120.

At December 31, 2006, we had recorded $72 as an asset for probable recovery from our insurers for the pending and projected claims, compared to $78 recorded at December 31, 2005. The asset recorded reflects our assessment of the capacity of our current insurance agreements to provide for the payment of anticipated defense and indemnity costs for pending claims and projected future demands. These recoveries assume elections to extend existing coverage which we intend to exercise in order to maximize our insurance recovery. The asset recorded does not represent the limits of our insurance coverage, but rather the amount we would expect to recover if we paid the accrued indemnity and defense costs.

Prior to 2006, we reached agreements with some of our insurers to commute policies covering asbestos-related claims. We apply proceeds from insurance commutations first to reduce any recorded recoverable amount. Proceeds from commutations in excess of our estimated receivable recorded for pending and future claims are recorded as a liability for future claims. There were no commutations of insurance in 2006. At December 31, 2006 the liability totaled $11.

related product liability claims, including billings in progress and amounts subject to alternate dispute resolution proceedings with some of our insurers. As a result of the stay in our asbestos litigation during the reorganization process, we do not expect to make any asbestos payments in the near term. However, we are continuing to pursue insurance collections with respect to asbestos-related amounts paid prior to the Filing Date.

Other Product Liabilities — We had accrued $7 for non-asbestos product liability costs at December 31, 2006, compared to $13 at December 31, 2005, with no recovery expected from third parties at either date. We estimate these liabilities based on assumptions about the value of the claims and about the likelihood of recoveries against us, derived from our historical experience and current information.

Environmental Liabilities — We had accrued $64 for environmental liabilities at December 31, 2006, compared to $63 at December 31, 2005. We estimate these liabilities based on the most probable method of remediation, current laws and regulations and existing technology. Estimates are made on an undiscounted basis and exclude the effects of inflation. If there is a range of equally probable remediation methods or outcomes, we accrue the lower end of the range. The difference between our minimum and maximum estimates for these liabilities was $1 at both dates.

Included in these accruals are amounts relating to the Hamilton Avenue Industrial Park site in New Jersey, where we are presently one of four potentially responsible parties (PRPs) under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund). We review our estimate of our liability for this site quarterly. There have been no material changes in the facts underlying our estimate since December 31, 2005 and, accordingly, our estimated liabilities for the three operable units at this site at December 31, 2006 remained unchanged and were as follows:


	•	Unit 1 — $1 for future remedial work and past costs incurred by the United States Environmental Protection Agency (EPA) relating to off-site soil contamination, based on the remediation performed at this unit to date and our assessment of the likely allocation of costs among the PRPs;

	•	Unit 2 — $14 for future remedial work relating to on-site soil contamination, taking into consideration the $69 remedy proposed by the EPA in a Record of Decision issued in September 2004 and our assessment of the most likely remedial activities and allocation of costs among the PRPs; and

	•	Unit 3 — Less than $1 for the costs of a remedial investigation and feasibility study (RI/FS) pertaining to groundwater contamination, based on our expectations about the study that is likely to be performed and the likely allocation of costs among the PRPs.

Our liability has been estimated based on our status as a passive owner of the property during a period when some of the contaminating activity occurred. As such, we have assumed that the other PRPs will be able to honor their fair share of liability for site related costs. As with any Superfund matter, should this not be the case, our actual costs could increase.

Following our bankruptcy filing, we discontinued the remedial investigation/feasibility study (RI/FS) we had been conducting at Unit 3 of the site and informed EPA that since our alleged liabilities at this site occurred before the Filing Date, we believe they constitute pre-petition liabilities subject to resolution in the bankruptcy proceedings. In September 2006, EPA filed claims exceeding $200 with the Bankruptcy Court, as an unsecured creditor, for all unreimbursed past and future response costs at this site; civil penalties, punitive damages and stipulated damages in connection with our termination of the RI/FS; and damages to natural resources. We expect that EPA’s claims will be resolved either through a negotiated settlement or through the claims process in the Bankruptcy Proceedings, where the validity and amounts of the asserted claims will have to be substantiated. The support behind the EPA’s claim provides no cost studies or other information which we have not already assessed in establishing the liability above. Based on the information presently known by us, we do not believe there is a probable and estimable liability beyond that which we have recorded.

Other Liabilities Related to Asbestos Claims — Until 2001, most of our asbestos-related claims were administered, defended and settled by the Center for Claims Resolution (CCR), which settled claims for its member companies on a shared settlement cost basis. In 2001, the CCR was reorganized and discontinued negotiating shared settlements. Since then, we have independently controlled our legal strategy and settlements using Peterson Asbestos Consulting Enterprise (PACE), a unit of Navigant Consulting, Inc., to administer our claims, bill our insurance carriers and assist us in claims negotiation and resolution. When some former CCR members defaulted on the payment of their shares of some of the CCR-negotiated settlements, some of the settling claimants sought payment of the unpaid shares from Dana and the other companies that were members of the CCR at the time of the settlements. We have been working with the CCR, other former CCR members, our insurers and the claimants for some time to resolve these issues. Through December 31, 2006, we had paid $47 to claimants and collected $29 from our insurance carriers with respect to these claims. At December 31, 2006, we had a net receivable of $13 that we expect to recover from available insurance and surety bonds relating to these claims. We are continuing to pursue insurance collections with respect to asbestos-related claims paid prior to the filing date.

Assumptions — The amounts we have recorded for asbestos-related liabilities and recoveries are based on assumptions and estimates reasonably derived from our historical experience and current information. The actual amount of our liability for asbestos-related claims and the effect on us could differ materially from our current expectations if our assumptions about the outcome of the pending unresolved bodily injury claims, the volume and outcome of projected future bodily injury claims, the outcome of claims relating to the CCR-negotiated settlements, the costs to resolve these claims and the amount of available insurance and surety bonds prove to be incorrect, or if U.S. federal legislation impacting asbestos personal injury claims is enacted. Although we have projected our liability for future asbestos-related product liability claims based upon historical trend data that we deem to be reliable, there can be no assurance that our actual liability will not differ from what we currently project.

Critical Accounting Estimates

The following discussion of accounting estimates is intended to supplement the Summary of Significant Accounting Policies presented as Note 1 to our consolidated financial statements in Item 8. These estimates are broadly applicable within our operations and can be subject to a range of values because of inherent imprecision that may result from applying judgment to the estimation process. The expenses and accrued liabilities or allowances related to certain of these policies are based on our best estimates at the time of original entry in our accounting records. Adjustments are recorded when our actual experience differs from the expected experience underlying the estimates. Adjustments can be material if our experience changes significantly in a short period of time. We make frequent comparisons of actual experience and expected experience in order to mitigate the likelihood of material adjustments.

Long-lived Asset and Goodwill Impairment — We perform periodic impairment analyses on our long-lived assets (such as property, plant and equipment, carrying amount of investments and goodwill) whenever events and circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of long-lived assets is determined by comparing the forecasted undiscounted net cash flows of the operations to which the assets relate to their carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, the long-lived assets (excluding goodwill) are written down to fair value, as determined based on discounted cash flows or other methods providing best estimates of value. In assessing the recoverability of goodwill recorded by a reporting unit, projections regarding estimated future cash flows and other factors are made to determine the fair value of the reporting unit. By their nature, these assessments require estimates and judgment.

During the third quarter of 2006, as described in Note 4 to our consolidated financial statements in Item 8, lower expected sales resulting from production cutbacks by major customers within certain of our businesses and a weaker near term outlook for sales in these businesses triggered goodwill and long-lived asset impairment assessments. Based on our estimates of expected future cash flows relating to these businesses, we determined that we could not support the carrying value of the goodwill in our Axle segment. Accordingly,

we took a $46 charge in the third quarter to writeoff this goodwill. Based on our assessments of other long-lived assets, no impairment charges were determined to be required.

Our Axle and Structures segments within ASG are presently at the greatest risk of incurring future impairment of long-lived assets should they be unable to meet their forecasted cash flow targets. These businesses derive a significant portion of their sales from the domestic light vehicle manufacturers, making them susceptible to future production decreases. These operations are also likely to be impacted by some of the manufacturing footprint actions referred to in the “Business Strategy” section.

Following the write-off in the third quarter of 2006 of the remaining goodwill in the Axle segment, there is no additional goodwill being carried for the Axle and Structures segments. The net book value of property, plant and equipment in the Axle and Structures segments approximated $530 and $333 at December 31, 2006.

Although our assessments at December 31, 2006 support the remaining amount of goodwill carried by our businesses, our Thermal segment presents the greatest risk of incurring future impairment of goodwill given the margin erosion in this business in recent years resulting from the higher costs of commodities, especially aluminum. We evaluated Thermal goodwill of $119 for impairment at December 31, 2006 using its internal plan developed in connection with our reorganization activities. The plan assumes annual sales growth over the next six years of about 8%, some of which is expected to come from non-automotive applications. Margins as a percent of sales are forecast to improve by about 3%, in part, as this business improves its cost competitiveness by repositioning its manufacturing base in lower cost countries. We also considered comparable market transactions, and the appeal of this business to other strategic buyers in assessing the fair value of the business. Market conditions or operational execution impacting any of the key assumptions underlying our estimated cash flows could result in potential future goodwill impairment in this business.

We evaluated the Axle and Structures segments for long-lived asset impairment at December 31, 2006 by estimating their expected cash flows over the remaining average life of their long-lived assets, which was 7.5 years for Axle and 4.3 years for Structures, assuming that (i) there will be no growth in sales except for new business already awarded that enters production in 2007, (ii) pre-tax profit margins, except for the contributions from product profitability and our manufacturing footprint actions will be comparable to 2007, (iii) these businesses will achieve 50% of the expected annual profit improvements from product profitability and our manufacturing footprint actions which are applicable to them (i.e., a half year of profit improvement in 2007 and the full annual improvement commencing in 2008) and no improvements from the other reorganization initiatives, (iv) future sales levels in these segments will not be negatively impacted by significant reductions in market demand for the vehicles on which they have significant content, and (v) these businesses will retain existing significant customer programs through the normal program lives. We utilized conservative asset salvage values for property, plant and equipment at the end of their average lives. Variations in any of these key assumptions could result in potential future asset impairments.

Asset impairments often result from significant actions like the discontinuance of customer programs and facility closures. In the “Management Overview” section, we discuss a number of reorganization actions that are in process or planned, which include customer program evaluations and manufacturing footprint assessments. While at present no final decisions have been made which require asset impairment recognition, future decisions in connection with the reorganization plan could result in future asset impairment losses.

Our DCC business, as described in Note 4 to our consolidated financial statements in Item 8, recognized an asset impairment charge of $176 in 2006 to reduce the carrying values of certain assets to their estimated fair value less cost to sell. These estimates of fair value were based, in part, on expected future cash flows, expected rates of return on comparable investments, current indicative offers for the assets and discussions with potential purchasers of the assets. DCC reviews its investments for impairment on a quarterly basis.

The remaining DCC assets, having a net book value of $200, are primarily equity investments. The underlying assets of these equity investments have not been impaired by the investees, and there is not a

readily determinable market value for these investments. However, at current internally estimated fair values, DCC expects that the future sale of these assets could result in a loss on sale in the range of $30 to $40. These impairment charges may be recorded in future periods if DCC enters into agreements for the sale of these investments at the estimated fair value or we obtain other evidence that there has been an other-than-temporary decline in fair value.

Inventories — Inventories are valued at the lower of cost or market. Cost is generally determined on the last-in, first-out basis for U.S. inventories and on the first-in, first-out or average cost basis for non-U.S. inventories. Where appropriate, standard cost systems are utilized for purposes of determining cost; the standards are adjusted as necessary to ensure they approximate actual costs. Estimates of lower of cost or market value of inventory are determined at the plant level and are based upon the inventory at that location taken as a whole. These estimates are based upon current economic conditions, historical sales quantities and patterns and, in some cases, the specific risk of loss on specifically identified inventories.

We also evaluate inventories on a regular basis to identify inventory on hand that may be obsolete or in excess of current and future projected market demand. For inventory deemed to be obsolete, we provide a reserve on the full value of the inventory. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates our estimate of future demand.

Warranty — In June 2005, we changed our method of accounting for warranty liabilities from estimating the liability based only on the credit issued to the customer, to accounting for the warranty liabilities based on our total costs to settle the claim. Management believes that this is a change to a preferable method in that it more accurately reflects the cost of settling the warranty liability. In accordance with GAAP, the $6 pre-tax cumulative effect of the change was effective as of January 1, 2005 and was reflected in the financial statements for the three months ended March 31, 2005. In the third quarter of 2005, the previously recorded tax expense of $2 was offset by the valuation allowance established against our U.S. net deferred tax assets.

Estimated costs related to product warranty are accrued at the time of sale and included in cost of sales. These costs are then adjusted, as required, to reflect subsequent experience. Warranty expense totaled $49, $64 and $35 in 2006, 2005 and 2004. No warranty expense was incurred in discontinued operations in 2006. Warranty charges in discontinued operations amounted to $1 in 2004 and $3 in 2003. Accrued liabilities for warranty obligations were $90 and $91 at December 31, 2006 and 2005.

Pension and Postretirement Benefits Other Than Pensions — Annual net periodic expense and benefit liabilities under our defined benefit plans are determined on an actuarial basis. Each year, we compare the actual experience to the more significant assumptions used; if warranted, we make adjustments to the assumptions. The healthcare trend rates are reviewed with our actuaries based upon the results of their review of claims experience. Discount rates are based upon amounts determined by matching expected benefit payments to a yield curve for high-quality fixed-income investments. Pension benefits are funded through deposits with trustees and satisfy, at a minimum, the applicable funding regulations. The expected long-term rates of return on fund assets are based upon actual historical returns modified for known changes in the markets and any expected changes in investment policy. Postretirement benefits are funded as they become due.

Certain accounting guidance, including the guidance applicable to pensions, does not require immediate recognition in the statement of operations of the effects of a deviation between actual and assumed experience or the revision of an estimate. This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted in the balance sheet. As a result of the adoption of SFAS No. 158 at the end of 2006, the unamortized loss is reported in Accumulated other comprehensive loss. We had unamortized losses related to our pension plans of $633 and $746 at the end of 2006 and 2005. The changes in the actuarial loss for the past two years are primarily attributed to changing the discount rate, as discussed below. A portion of the December 31, 2006 actuarial loss will be amortized into earnings in 2007. The effect on years after 2007 will depend in large part on the actual experience of the plans in 2007 and beyond.

Our pension plan discount rate assumption is evaluated annually. Long-term interest rates on high quality debt instruments, which provide a proxy for the discount rate, were up slightly in 2006 after declining slightly in 2005. Accordingly, we increased the discount rate used to determine our pension benefit obligation on our U.S. plans 23 basis points in 2006 as compared to a 10 basis point decline in 2005. We utilized a composite discount rate of 5.88% at December 31, 2006 compared to a rate of 5.65% at December 31, 2005 and 5.75% at December 31, 2004. In addition, the weighted average discount rate utilized by our non-U.S. plans was also increased, moving to 5.03% at December 31, 2006 from 4.65% and 5.54% at December 31, 2005 and 2004. A change in the discount rate of 25 basis points would result in a change in our U.S. obligation of approximately $51 and a change in pension expense of approximately $3.

Besides evaluating the discount rate used to determine our pension obligation, we also evaluate our assumption relating to the expected return on U.S. plan assets annually. The rate of return assumption for U.S. plans as of December 31, 2006, 2005 and 2004 was 8.25%, 8.50% and 8.75%. The weighted average expected rate of return assumption used for determining pension expense of our non-U.S. plans at December 31, 2006, 2005 and 2004 was 6.32%, 6.38% and 6.66%. The weighted average expected rate of return assumption as of the end of the year is used to determine pension expense for the subsequent year. A 25 basis point change in the U.S. rate of return would change pension expense by approximately $5.

We expect that the 2007 pension expense of U.S. plans, after considering all relevant assumptions, will increase slightly when compared to the $19 recognized in 2006, excluding $29 of termination and settlement charges.

Assumptions are also a key determinant in the amount of the obligation and expense recorded for postretirement benefits other than pension (OPEB). Nearly 94% of the total obligation for these postretirement benefits relates to U.S. plans. The discount rate used to determine the obligation for these benefits increased to 5.86% at December 31, 2006 from 5.60% at December 31, 2005. If there were a 25 basis point change in the discount rate, our OPEB expense in the U.S. would change by $1 and our obligation would change by $36. The healthcare costs trend rate is an important assumption in determining the amount of the OPEB obligation. We increased the initial weighted healthcare cost trend rate to 10.00% at December 31, 2006 from 9.00% and 10.31% at December 31, 2005 and 2004. Similar to the accounting for pension plans, actuarial gains and unamortized losses related to OPEB liabilities are now reported in Accumulated other comprehensive income. These unamortized OPEB losses totaled $564 and $634 at the end of 2006 and 2005.

The OPEB obligation decreased to $1,609 at December 31, 2006 from $1,669 at December 31, 2005. Plan amendments and actuarial gains combined to reduce the obligation by $40 in 2006. Plan amendments reduced our obligation by $35 in 2005 and final regulations to implement the new prescription drug benefits under Part D of Medicare caused a further reduction of $43.

OPEB expense was $130, $131 and $143 in 2006, 2005 and 2004. If there were a 100 basis point increase in the assumed healthcare trend rates, our OPEB expense would increase by $7 and our obligation would increase by $105. If there were a 100 basis point decrease in the trend rates, our OPEB expense would decrease by $6 and our obligation would decrease by $87.

Our “Business Strategy” section above includes a discussion of initiatives which are intended to address the future obligations under our pension and OPEB plans. We expect these initiatives to reduce our costs and funding requirements of these plans.

Income Taxes — Accounting for income taxes involves matters that require estimates and the application of judgment. These include an evaluation of the realization of the recorded deferred tax benefits and assessment of potential tax liability relating to areas of potential dispute with various taxing regulatory agencies. We have operations in numerous jurisdictions around the world, each with its own unique tax laws and regulations. This adds further complexity to the process of accounting for income taxes. Our income tax estimates are adjusted in light of changing circumstances, such as the progress of our tax audits and our evaluations of the realization of our tax assets.

In 2005, we recorded a non-cash charge of $825 to establish a full valuation allowance against our net deferred tax assets in the U.S. and U.K. This charge included $817 of net deferred tax assets of continuing operations and $8 of deferred tax assets of discontinued operations as of the beginning of the year.

In assessing the need for additional valuation allowances during 2005, we considered the impact of the revised outlook of our profitability in the U.S. on our 2005 operating results. The revised outlook profitability was due in part to the lower than previously anticipated levels of performance resulting from manufacturing inefficiencies and our failure to achieve projected cost reductions, as well as higher-than-expected costs for steel, other raw materials and energy which we did not expect to recover fully. In light of these developments, there was sufficient negative evidence and uncertainty as to our ability to generate the necessary level of U.S. taxable earnings to realize our deferred tax assets in the U.S. for us to conclude, in accordance with the requirements of SFAS No. 109 and our accounting policies, that a full valuation allowance against the net deferred tax asset was required. Additionally, we concluded that an additional valuation allowance was required for deferred tax assets in the U.K. where recoverability was also considered uncertain. In reviewing our results for the fourth quarter of 2005 and subsequent periods, we have concluded that no further changes were necessary to our previous assessments as to the realization of our other deferred tax assets.

Our deferred tax assets include benefits expected from the utilization of net operating loss, capital loss and credit carryforwards in the future. Due to time limitations on the ability to realize the benefit of the carryforwards, additional portions of these deferred tax assets may become unrealizable in the future. See additional discussion of our deferred tax assets and liabilities in Note 16 to our consolidated financial statements.

Contingency Reserves — We have numerous other loss exposures, such as environmental claims, product liability and litigation. Establishing loss reserves for these matters requires the use of estimates and judgment in regards to risk exposure and ultimate liability. We estimate losses under the programs using consistent and appropriate methods; however, changes to our assumptions could materially affect our recorded liabilities for loss.


Item 7A.	*Quantitative and Qualitative Disclosures About Market Risk*

We are exposed to various types of market risks including fluctuations in foreign currency exchange rates, adverse movements in commodity prices for products we use in our manufacturing and adverse changes in interest rates. To reduce our exposure to these risks, we maintain risk management controls to monitor these risks and take appropriate actions to attempt to mitigate such forms of market risks.

Foreign Currency Exchange Rate Risks — Our operating results may be impacted by buying, selling and financing in currencies other than the functional currency of our operating companies. We focus on natural hedging techniques which include the following: (i) structuring foreign subsidiary balance sheets with appropriate levels of debt to reduce subsidiary net investments and subsidiary cash flow subject to conversion risk; (ii) avoidance of risk by denominating contracts in the appropriate functional currency and (iii) managing cash flows on a net basis (both in timing and currency) to minimize the exposure to foreign currency exchange rates.

After considering natural hedging techniques, some portions of remaining exposure, especially for anticipated inter-company and third party commercial transaction exposure in the short term, are hedged using financial derivatives, such as foreign currency exchange rate forwards. Some of our foreign entities were party to foreign currency contracts for anticipated transactions in U.S. dollars, British pounds, Swedish krona, euros, South African rand, Singapore dollars and Australian dollars at the end of 2006.

In addition to the transactional exposure discussed above, our operating results are impacted by the translation of our foreign operating income into U.S. dollars (translation exposure). We do not enter into foreign exchange contracts to mitigate translation exposure.

Interest Rate Risk — Our interest rate risk relates primarily to our exposure on borrowing under the DIP Credit Agreement. We believe our exposure is mitigated by the relatively short duration of this credit facility. The remainder of our debt consists of both fixed and variable interest rates.

Risk from Adverse Movements in Commodity Prices — We purchase certain raw materials, including steel and other metals, which are subject to price volatility caused by fluctuations in supply and demand as well as other factors. Higher costs of raw materials and other commodities used in the production process have had a significant adverse impact on our operating results over the last three years. We continue to take actions to mitigate the impact of higher commodity prices, including cost-reduction programs, consolidation of our supply base and negotiation of fixed price supply contracts with our commodity suppliers. In addition, the sharing of increased raw material costs has been, and will continue to be, the subject of negotiations with our customers. No assurances can be given that the magnitude and duration of increased commodity costs will not have a material impact on our future operating results. We had no derivatives in place at December 31, 2006 to hedge commodity price movements.


Item 8.	*Financial Statements and Supplementary Data*

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Dana Corporation

We have completed integrated audits of Dana Corporation’s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Dana Corporation (Debtor-in-Possession) and its subsidiaries at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company voluntarily filed for Chapter 11 bankruptcy protection on March 3, 2006. This action, which was taken primarily as a result of liquidity issues as discussed in Note 2 to the consolidated financial statements, raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to this matter is also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 18 to the consolidated financial statements, the Company changed its method of accounting for warranty liabilities effective January 1, 2005. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for asset retirement obligations effective December 31, 2005, its method of accounting for share-based compensation effective January 1, 2006, and its method of accounting for defined benefit pension and other postretirement plans effective December 31, 2006.

Internal control over financial reporting

Also, we have audited management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that Dana Corporation (Debtor-in-Possession) did not maintain effective internal control over financial reporting as of December 31, 2006, because of the effect of the material weaknesses relating to: (1) the financial and accounting organization not being adequate to support its financial accounting and reporting needs, (2) the lack of effective controls over the completeness and accuracy of certain revenue and expense accruals, (3) the lack of effective controls over reconciliations of certain financial statement accounts, (4) the lack of effective controls over the valuation and accuracy of long-lived assets and goodwill, and (5) the lack of effective segregation of duties over transaction processes, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weaknesses have been identified and included in management’s assessment as of December 31, 2006:

(1) The Company’s financial and accounting organization was not adequate to support its financial accounting and reporting needs. Specifically, the Company did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience with the Company and training in the application of GAAP commensurate with its financial reporting requirements. The lack of a sufficient complement of personnel with an appropriate level of accounting knowledge, experience with the Company and training contributed to the control deficiencies noted in items 2 through 5 below.

(2) The Company did not maintain effective controls over the completeness and accuracy of certain revenue and expense accruals. Specifically, the Company failed to identify, analyze, and review certain accruals at period end relating to certain accounts receivable, accounts payable, accrued liabilities (including restructuring accruals), revenue, and other direct expenses to ensure that they were accurately, completely and properly recorded.

(3) The Company did not maintain effective controls over reconciliations of certain financial statement accounts. Specifically, the Company’s controls over the preparation, review and monitoring of account reconciliations primarily related to certain inventory, accounts payable, accrued expenses and the related income statement accounts were ineffective to ensure that account balances were accurate and supported with appropriate underlying detail, calculations or other documentation.

(4) The Company did not maintain effective controls over the valuation and accuracy of long-lived assets and goodwill. Specifically, the Company did not maintain effective controls to ensure certain plants

maintained effective controls to identify impairment of idle assets in a timely manner. Further, the Company did not maintain effective controls to ensure goodwill impairment calculations were accurate and supported with appropriate underlying documentation, including the determination of fair value of reporting units.

(5) The Company did not maintain effective segregation of duties over transaction processes. Specifically, certain personnel with financial transaction initiating and reporting responsibilities had incompatible duties that allowed for the creation, review and processing of certain financial data without adequate independent review and authorization. This control deficiency primarily affected revenue, accounts receivable and accounts payable.

Each of the control deficiencies described in 1 through 3 above resulted in the restatement of the Company’s annual consolidated financial statements for 2004, each of the interim periods in 2004 and the first and second quarters of 2005, as well as certain adjustments, including audit adjustments, to the Company’s third quarter 2005 consolidated financial statements. The control deficiency described in 4 above resulted in audit adjustments to the 2005 and 2006 annual consolidated financial statements. The control deficiency described in 2 above resulted in audit adjustments to the 2006 annual consolidated financial statements. Additionally, each of the control deficiencies described in 1 through 5 above could result in a misstatement of the aforementioned accounts or disclosures that would result in a material misstatement in the Company’s annual or interim consolidated financial statements that would not be prevented or detected.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2006 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded the Mexican Axle and Driveshaft operations (Dana Mexico Holdings) from its assessment of internal control over financial reporting as of December 31, 2006 because it was acquired by the Company in a purchase business combination during 2006. We have also excluded Dana Mexico Holdings from our audit of internal control over financial reporting. Dana Mexico Holdings is comprised of wholly-owned subsidiaries whose total assets and total revenues each represent less than 2% of the related consolidated financial statement amounts as of and for the year ended December 31, 2006.

In our opinion, management’s assessment that Dana Corporation did not maintain effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the COSO. Also, in our opinion, because of the effects of the material weaknesses described above on the achievement of the objectives of the control criteria, Dana Corporation has not maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO.

/s/ PricewaterhouseCoopers

Toledo, Ohio

March 19, 2007

Dana Corporation (Debtor in Possession)
Consolidated Statement of Operations
For the years ended December 31, 2006, 2005 and 2004
(In millions except per share amounts)


	2006			2005			2004

Net sales	$	8,504		$	8,611		$	7,775
Costs and expenses
Cost of sales		8,166			8,205			7,189
Selling, general and administrative expenses		419			500			416
Realignment charges, net		92			58			44
Impairment of goodwill		46			53
Impairment of other assets		234
Other income (expense), net		140			88			(85	)

Income (loss) from continuing operations before interest, reorganization items and income taxes		(313	)		(117	)		41
Interest expense (contractual interest of $204 for the year ended December 31, 2006)		115			168			206
Reorganization items, net		143

Loss from continuing operations before income taxes		(571	)		(285	)		(165	)
Income tax benefit (expense)		(66	)		(924	)		205
Minority interests		(7	)		(6	)		(5	)
Equity in earnings of affiliates		26			40			37

Income (loss) from continuing operations		(618	)		(1,175	)		72
Income (loss) from discontinued operations before income taxes		(142	)		(441	)		17
Income tax benefit (expense)		21			7			(27	)

Loss from discontinued operations		(121	)		(434	)		(10	)

Income (loss) before effect of change in accounting		(739	)		(1,609	)		62
Effect of change in accounting					4

Net income (loss)	$	(739	)	$	(1,605	)	$	62

Basic earnings (loss) per common share
Earnings (loss) from continuing operations before effect of change in accounting	$	(4.11	)	$	(7.86	)	$	0.48
Loss from discontinued operations		(0.81	)		(2.90	)		(0.07	)
Effect of change in accounting					0.03

Net income (loss)	$	(4.92	)	$	(10.73	)	$	0.41

Diluted earnings (loss) per common share
Earnings (loss) from continuing operations before effect of change in accounting	$	(4.11	)	$	(7.86	)	$	0.48
Loss from discontinued operations		(0.81	)		(2.90	)		(0.07	)
Effect of change in accounting					0.03

Net income (loss)	$	(4.92	)	$	(10.73	)	$	0.41

Cash dividends declared and paid per common share	$	—		$	0.37		$	0.48
Average shares outstanding — Basic		150			150			149
Average shares outstanding — Diluted		150			151			151

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

Dana Corporation (Debtor in Possession)
Consolidated Balance Sheet
December 31, 2006 and 2005
(In millions)


	2006			2005

Assets
Current assets
Cash and cash equivalents	$	719		$	762
Accounts receivable
Trade, less allowance for doubtful accounts of $23 — 2006 and $22 — 2005		1,131			1,064
Other		235			244
Inventories		725			664
Assets of discontinued operations		392			521
Other current assets		122			142

Total current assets		3,324			3,397
Goodwill		416			439
Investments and other assets		663			1,074
Investments in equity affiliates		555			820
Property, plant and equipment, net		1,776			1,628

Total assets	$	6,734		$	7,358


Liabilities and shareholders’ equity (deficit)
Current liabilities
Notes payable, including current portion of long-term debt	$	293		$	2,578
Accounts payable		886			948
Accrued payroll and employee benefits		225			378
Liabilities of discontinued operations		195			201
Taxes on income		165			284
Other accrued liabilities		322			475

Total current liabilities		2,086			4,864
Liabilities subject to compromise		4,175
Deferred employee benefits and other noncurrent liabilities		504			1,798
Long-term debt		22			67
Debtor-in-possession financing		700
Commitments and contingencies (Note 17)
Minority interest in consolidated subsidiaries		81			84

Total liabilities		7,568			6,813
Total shareholders’ equity (deficit)		(834	)		545

Total liabilities and shareholders’ equity (deficit)	$	6,734		$	7,358

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

Dana Corporation (Debtor in Possession)
Consolidated Statement of Cash Flows
For the years ended December 31, 2006, 2005 and 2004
(In millions)


	2006			2005			2004

Net cash flows provided by (used for) operating activities	$	52		$	(216	)	$	73

Cash flows — investing activities:
Purchases of property, plant and equipment		(314	)		(297	)		(329	)
Acquisition of business, net of cash received		(17	)					(5	)
Divestiture proceeds								968
Proceeds from sales of other assets		54			22			61
Proceeds from sales of leasing subsidiary assets		141			161			289
Changes in investments and other assets		17			11			(80	)
Payments received on leases and loans		16			68			13
Other		32			(19	)		(1	)

Net cash flows provided by (used for) investing activities		(71	)		(54	)		916

Cash flows — financing activities:
Net change in short-term debt		(551	)		492			(31	)
Payments on and repurchases of long-term debt		(205	)		(61	)		(1,457	)
Proceeds from debtor-in-possession facility		700
Issuance of long-term debt		7			16			455
Dividends paid					(55	)		(73	)
Other					6			16

Net cash flows provided by (used for) financing activities		(49	)		398			(1,090	)

Net increase (decrease) in cash and cash equivalents		(68	)		128			(101	)
Cash and cash equivalents — beginning of year		762			634			731
Effect of exchange rate changes on cash balances held in foreign countries		25
Net change in cash of discontinued operations								4

Cash and cash equivalents — end of year	$	719		$	762		$	634

Reconciliation of net income (loss) to net cash flows — operating activities:
Net income (loss)	$	(739	)	$	(1,605	)	$	62
Depreciation and amortization		278			310			358
Loss (gain) on note repurchases								96
Asset impairment and other related charges		405			515			55
Reorganization items, net		143
Payments on reorganization items		(91	)
Minority interest		7			(16	)		13
Deferred income taxes		(41	)		751			(125	)
Unremitted earnings of affiliates		(26	)		(40	)		(36	)
Change in accounts receivable		(62	)		146			(275	)
Change in inventories		10			81			(155	)
Change in other operating assets		29			(93	)		(312	)
Change in operating liabilities		222			(304	)		448
Effect of change in accounting					(4	)
Other		(83	)		43			(56	)

Net cash flows provided by (used for) operating activities	$	52		$	(216	)	$	73

Income taxes paid were $87, $127 and $43 in 2006, 2005 and 2004. Interest paid was $124, $164 and $237 in 2006, 2005 and 2004.

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

Dana Corporation (Debtor in Possession)
Consolidated Statement of Shareholders’ Equity (Deficit)
and Comprehensive Income (Loss)
(In millions)


								Accumulated Other
								Comprehensive Income (Loss)
			Additional					Foreign						Shareholders’
	Common		Paid-In		Retained			Currency			Postretirement			Equity
	Stock		Capital		Earnings			Translation			Benefits			(Deficit)

Balance, December 31, 2003	$	149	$	171	$	2,490		$	(488	)	$	(272	)	$	2,050
Comprehensive income:
Net income for 2004						62									62
Foreign currency translation									223						223
Minimum pension liability												129			129

Other comprehensive income									223			129			352

Total comprehensive income						62			223			129			414
Cash dividends declared						(73	)								(73	)
Issuance of shares for equity compensation plans, net		1		19											20

Balance, December 31, 2004		150		190		2,479			(265	)		(143	)		2,411
Comprehensive income:
Net loss for 2005						(1,605	)								(1,605	)
Foreign currency translation									(125	)					(125	)
Minimum pension liability												(152	)		(152	)
Reclassification adjustment									67						67

Other comprehensive loss									(58	)		(152	)		(210	)

Total comprehensive loss						(1,605	)		(58	)		(152	)		(1,815	)
Cash dividends declared						(55	)								(55	)
Issuance of shares for equity compensation plans, net				4											4

Balance, December 31, 2005		150		194		819			(323	)		(295	)		545
Comprehensive income (loss):
Net loss for 2006						(739	)								(739	)
Foreign currency translation									135						135
Minimum pension liability												36			36

Other comprehensive income									135			36			171

Total comprehensive loss						(739	)		135			36			(568	)
Adjustment to initially apply SFAS No. 158 for pension and OPEB												(818	)		(818	)
Issuance of shares for equity compensation plans, net				7											7

Balance, December 31, 2006	$	150	$	201	$	80		$	(188	)	$	(1,077	)	$	(834	)

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

Dana Corporation (Debtor in Possession)
Index to Notes to Consolidated
Financial Statements

1. Organization and Summary of Significant Accounting Policies

2. Reorganization Under Chapter 11 of the Bankruptcy Code

3. Acquisition of Spicer S.A. Subsidiaries

4. Impairments, Discontinued Operations, Divestitures and Realignment of Operations

5. Inventories

6. Components of Certain Balance Sheet Amounts

7. Goodwill

8. Investments in Equity Affiliates

9. Cash Deposits

10. Short-Term Debt and Credit Facilities

11. Fair Value of Financial Instruments

12. Preferred Shares

13. Common Shares

14. Equity-Based Compensation

15. Pension and Postretirement Benefit Plans

16. Income Taxes

17. Commitments and Contingencies

18. Warranty Obligations

19. Other Income (Expense), Net

20. Segment, Geographical Area and Major Customer Information

Notes to Consolidated Financial Statements
(In millions, except share and per share amounts)


Note 1.	Organization and Summary of Significant Accounting Policies

Organization — Dana serves the majority of the world’s vehicular manufacturers as a leader in the engineering, manufacture and distribution of original equipment systems and components. Although we divested the majority of our automotive aftermarket businesses in 2004, we continue to manufacture and supply a variety of service parts. We have also been a provider of lease financing services in selected markets through our wholly-owned subsidiary, Dana Credit Corporation (DCC). Over the last five years, DCC has sold significant portions of its asset portfolio, and in September 2006 adopted a plan of liquidation of substantially all its remaining assets.

Estimates — The preparation of these consolidated financial statements in accordance with GAAP requires estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. Some of the more significant estimates include: valuation of deferred tax assets and inventories; restructuring, environmental, product liability and warranty accruals; valuation of post-employment and postretirement benefits; valuation, depreciation and amortization of long-lived assets; valuation of goodwill; residual values of leased assets and allowances for doubtful accounts. Actual results could differ from those estimates.

Principles of Consolidation — Our consolidated financial statements include all subsidiaries in which we have the ability to control operating and financial policies. Affiliated companies (20% to 50% ownership) are generally recorded in the statements using the equity method of accounting, as are certain investments in partnerships and limited liability companies in which we may have an ownership interest of less than 20%. Certain of the equity affiliates engaged in lease financing activities qualify as Variable Interest Entities (VIEs). In addition certain leveraged leases qualify as VIEs but are not required to be consolidated under Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN No. 46). Accordingly, these leveraged leases are not consolidated and are included with other investments in equity affiliates. Other investments in leveraged leases that qualify as VIEs are required to be consolidated.

Operations of affiliates accounted for under the equity method of accounting are generally included for periods ended within one month of our year-end. Our less-than 20%-owned companies are included in the financial statements at the cost of our investment. Dividends, royalties and fees from these cost basis affiliates are recorded in income when received.

Discontinued Operations — In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we classify a business component that either has been disposed of or is classified as held for sale as a discontinued operation if the cash flow of the component has been or will be eliminated from our ongoing operations and we will no longer have any significant continuing involvement in the component. The results of operations of our discontinued operations through the date of sale, including any gains or losses on disposition, are aggregated and presented on two lines in the income statement. SFAS No. 144 requires the reclassification of amounts presented for prior years to effect their classification as discontinued operations. The amounts presented in the income statement for years prior to 2006 were reclassified to comply with SFAS No. 144.

With respect to the consolidated balance sheet, the assets and liabilities not subject to compromise relating to our discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations following the decision to dispose of the components. The balance sheets at December 31, 2005 and 2006 reflect our announced plan to sell our engine hard parts, fluid products and pump products businesses. In the consolidated statement of cash flows, the cash flows of discontinued operations are included in the applicable line items with continued operations. See Note 4 for additional information regarding our discontinued operations.

Foreign Currency Translation — The financial statements of subsidiaries and equity affiliates outside the U.S. located in non-highly inflationary economies are measured using the currency of the primary economic

environment in which they operate as the functional currency, which typically is the local currency. Transaction gains and losses resulting from translating assets and liabilities of these entities into the functional currency are included in Other income. When translating into U.S. dollars, income and expense items are translated at average monthly rates of exchange, while assets and liabilities are translated at the rates of exchange at the balance sheet date. Translation adjustments resulting from translating the functional currency into U.S. dollars are deferred and included as a component of Comprehensive income in Shareholders’ equity. For affiliates operating in highly inflationary economies, non-monetary assets are translated into U.S. dollars at historical exchange rates and monetary assets are translated at current exchange rates. Translation adjustments included in net income for these affiliates were $2 in 2006, 2005 and 2004.

Cash and Cash Equivalents — For purposes of reporting cash flows, we consider highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Our marketable securities satisfy the criteria for cash equivalents and are classified accordingly.

At December 31, 2006, we maintained cash deposits of $93 to provide credit enhancement for certain lease agreements and to support surety bonds that allow us to self-insure our workers’ compensation obligations. These financial arrangements are typically renewed each year. The deposits can generally be withdrawn if we provide comparable security in the form of letters of credit. Our banking facilities provide for the issuance of letters of credit, and the availability at December 31, 2006 was adequate to cover the amounts on deposit.

Our ability to move cash among operating locations is subject to the operating needs of those locations in addition to locally imposed restrictions on the transfer of funds in the form of dividends or loans. In addition, we must meet distributable reserve requirements. Restricted net assets related to our consolidated subsidiaries totaled $116 as of December 31, 2006. Of this amount, $81 is attributable to our Venezuelan operations and is subject to strict governmental limitations on our subsidiaries’ ability to transfer funds outside the country, and $20 is attributable to cash deposits required by certain of our Canadian subsidiaries in connection with credit enhancements on lease agreements and the support of surety bonds. The remaining $15 is cash held by DCC which is restricted by the Forebearance Agreement discussed in Notes 4 and 10.

“Condensed financial information of registrant (Parent company information)” is required to be included in reports on Form 10-K when a registrant’s proportionate share of restricted net assets (as defined in Rule 4-08(e) of Regulation S-X) exceeds 25% of total consolidated net assets. The purpose of this disclosure is to provide information on restrictions which limit the payment of dividends by the registrant. We have not provided Schedule I for the following reasons. First, as a debtor in possession in a Chapter 11 bankruptcy proceeding, we are precluded from paying dividends to our shareholders and therefore other restrictions are not significant. Second, the amount of our restricted net assets of consolidated subsidiaries in relation to the assets of our consolidated subsidiaries without restrictions is not material. At December 31, 2006, we had a consolidated shareholders’ deficit and, as discussed above, $116 of restricted distributable net assets in consolidated subsidiaries. Third, the debtor company financial information in Note 2 provides information as of and for the year ended December 31, 2006, that is more meaningful than the information that would be contained in Schedule I. While the debtor company financial information includes both the parent company and the subsidiaries included in the bankruptcy filing, there are no restrictions on asset distributions from these subsidiaries to the parent company.

Debtor financial information for 2005 and 2004 is not presented in Note 2 because it is not required. However, for the reasons described above, we do not believe the information from earlier periods is relevant to the users of our financial statements. During 2006, 2005 and 2004, the parent company received dividends from consolidated subsidiaries of $81, $238 and $543. Dividends from unconsolidated subsidiaries and less than 50% owned affiliates in each of the last three years was $1 or less.

Inventories — Inventories are valued at the lower of cost or market. Cost is generally determined on the last-in, first-out (LIFO) basis for U.S. inventories and on the first-in, first-out (FIFO) or average cost basis for non-U.S. inventories.

Goodwill — In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” we test goodwill for impairment on an annual basis as of December 31 unless conditions arise that warrant a more frequent valuation. In assessing the recoverability of goodwill, projections regarding estimated future cash flows and other factors are made to determine the fair value of the respective assets. If these estimates or related projections change in the future, we may be required to record additional goodwill impairment charges.

Pre-Production Costs Related to Long-Term Supply Arrangements — The costs of tooling used to make products sold under long-term supply arrangements are capitalized as part of property, plant and equipment and amortized over their useful lives if we own the tooling or if we fund the purchase but our customer owns the tooling and grants us the irrevocable right to use the tooling over the contract period. If we have a contractual right to bill our customers, costs incurred in connection with the design and development of tooling are carried as a component of other accounts receivable until invoiced. Design and development costs related to customer products are deferred if we have an agreement to collect such costs from the customer; otherwise, they are expensed when incurred. At December 31, 2006, the machinery and equipment component of property, plant and equipment included $10 of our tooling related to long-term supply arrangements and $2 of our customers’ tooling which we have the irrevocable right to use, while trade and other accounts receivable included $29 of costs related to tooling which we have a contractual right to collect from our customers.

Lease Financing — Lease financing consists of direct financing leases, leveraged leases and operating leases on equipment. Income on direct financing leases is recognized by a method that produces a constant periodic rate of return on the outstanding investment in the lease. Income on leveraged leases is recognized by a method that produces a constant rate of return on the outstanding net investment in the lease, net of the related deferred tax liability, in the years in which the net investment is positive. Initial direct costs are deferred and amortized using the interest method over the lease period. Operating leases for equipment are recorded at cost, net of accumulated depreciation. Income from operating leases is recognized ratably over the term of the leases. In 2006, we adopted a plan to accelerate the sale of these leases and recorded an impairment charge of $176 (see Note 4).

Allowance for Losses on Lease Financing — Provisions for losses on lease financing receivables are determined based on loss experience and assessment of inherent risk. Adjustments are made to the allowance for losses to adjust the net investment in lease financing to an estimated collectible amount. Income recognition is generally discontinued on accounts that are contractually past due and where no payment activity has occurred within 120 days. Accounts are charged against the allowance for losses when determined to be uncollectible. Accounts where asset repossession has started as the primary means of recovery are classified within other assets at their estimated realizable value.

Properties and Depreciation — Property, plant and equipment is recorded at historical costs unless impaired. Depreciation is recognized over the estimated useful lives using primarily the straight-line method for financial reporting purposes and accelerated depreciation methods for federal income tax purposes. Long-lived assets are reviewed for impairment whenever events and circumstances indicate they may be impaired. When appropriate, carrying amounts are adjusted to fair market value less cost to sell. Useful lives for buildings and building improvements, machinery and equipment, tooling and office equipment, furniture and fixtures principally range from twenty to thirty years, five to ten years, three to five years and three to ten years.

Revenue Recognition — Sales are recognized when products are shipped and risk of loss has transferred to the customer. We accrue for warranty costs, sales returns and other allowances based on experience and other relevant factors, when sales are recognized. Adjustments are made as new information becomes available. Shipping and handling fees billed to customers are included in sales, while costs of shipping and handling are included in cost of sales. We record taxes collected from customers on a net basis (excluded from revenues).

Supplier agreements with our OEM customers generally provide for fulfillment of the customers’ purchasing requirements over vehicle program lives, which generally range from three to ten years. Prices for product shipped under the programs are established at inception, with subsequent pricing adjustments

mutually agreed through negotiation. Pricing adjustments are occasionally determined retroactively based on historical shipments and either paid or received, as appropriate, in lump sum to effectuate the price settlement. Retroactive price increases are generally deferred upon receipt and amortized over the remaining life of the appropriate program, unless the retroactive price increase was determined to have been received under contract or legal provisions in which case revenue is recognized upon receipt.

Income Taxes — Current tax liabilities and assets are recognized for the estimated taxes payable or refundable on the tax returns for the current year. Deferred income taxes are provided for temporary differences between the recorded values of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws and regulations. Deferred income taxes are also provided for net operating loss, tax credit and other carryforwards. Amounts are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

In accordance with SFAS No. 109, “Accounting for Income Taxes,” we periodically assess whether it is more likely than not that we will generate sufficient future taxable income to realize our deferred income tax assets. This assessment requires significant judgment and, in making this evaluation, we consider all available positive and negative evidence. Such evidence includes historical results, trends and expectations for future U.S. and non-U.S. pre-tax operating income, the time period over which our temporary differences and carryforwards will reverse and the implementation of feasible and prudent tax planning strategies. While the assumptions require significant judgment, they are consistent with the plans and estimates we are using to manage the underlying business.

We provide a valuation allowance against our deferred tax assets if, based upon available evidence, we determine that it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. Creating a valuation allowance serves to increase income tax expense during the reporting period. Once created, a valuation allowance against deferred tax assets is maintained until realization of the deferred tax asset is judged more likely than not to occur. Reducing a valuation allowance against deferred tax assets serves to reduce income tax expense unless the reduction occurs due to the expiration of the underlying loss or tax credit carryforward period. See Note 16 for an explanation of the valuation allowance adjustments made for our net deferred tax assets.

Financial Instruments — The reported fair values of financial instruments are based on a variety of factors. Where available, fair values represent quoted market prices for identical or comparable instruments. Where quoted market prices are not available, fair values are estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of credit risk. Fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future.

Derivative Financial Instruments — We enter into forward currency contracts to hedge our exposure to the effects of currency fluctuations on a portion of our projected sales and purchase commitments. The changes in the fair value of these contracts are recorded in cost of sales and are generally offset by exchange gains or losses on the underlying exposures. We may also use interest rate swaps to manage exposure to fluctuations in interest rates and to adjust the mix of our fixed and floating rate debt. We do not use derivatives for trading or speculative purposes and we do not hedge all of our exposures.

We follow SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Transactions.” These Statements require, among other things, that all derivative instruments be recognized on the balance sheet at fair value. Forward currency contracts have not been designated as hedges and the effect of marking these instruments to market has been recognized in the results of operations.

Environmental Compliance and Remediation — Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to existing conditions caused by past operations that do not contribute to our current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Estimated costs are based upon current laws and regulations, existing technology and

the most probable method of remediation. The costs are not discounted and exclude the effects of inflation. If the cost estimates result in a range of equally probable amounts, the lower end of the range is accrued.

Settlements with Insurers — In certain circumstances we commute policies that provide insurance for asbestos-related bodily injury claims. Proceeds from commutations in excess of our estimated receivable recorded for pending and future claims are generally deferred.

Pension Benefits — Annual net pension benefits/expenses under defined-benefit pension plans are determined on an actuarial basis. Our policy is to fund these costs through deposits with trustees in amounts that, at a minimum, satisfy the applicable funding regulations. Benefits are determined based upon employees’ length of service, wages or a combination of length of service and wages.

Postretirement Benefits Other than Pensions — Annual net postretirement benefits expense under the defined-benefit plans and the related liabilities are determined on an actuarial basis. Our policy is to fund these benefits as they become due. Benefits are determined primarily based upon employees’ length of service and include applicable employee cost sharing.

Postemployment Benefits — Annual net post-employment benefits expense under our benefit plans and the related liabilities are accrued as service is rendered for those obligations that accumulate or vest and can be reasonably estimated. Obligations that do not accumulate or vest are recorded when payment of the benefits is probable and the amounts can be reasonably estimated.

Equity-Based Compensation — Effective January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment” (SFAS No. 123(R)). We measure compensation cost arising from the grant of share-based awards to employees at fair value and recognize such costs in income over the period during which the service is provided, usually the vesting period. We adopted SFAS No. 123R using the modified prospective transition method, and recognized compensation expense for all awards granted after December 31, 2005 and for the unvested portion of outstanding awards at the date of adoption. See Note 14 for additional information.

Recent Accounting Pronouncements — In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an Amendment of FASB Statement No. 115.” SFAS No. 159 permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions in SFAS No. 159 are elective; however, the amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” applies to all entities with available-for-sale and trading securities. The fair value option established by SFAS No. 159 permits companies to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. We are currently in the process of evaluating the effect, if any, SFAS No. 159 will have on our consolidated financial statements in 2008.

In September 2006, the FASB Emerging Issues Task Force (EITF) promulgated Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” This Issue specifies that if a company provides a benefit to an employee under an endorsement split-dollar life insurance arrangement that extends to postretirement periods, it would have to recognize a liability and related compensation costs. We will adopt EITF 06-4 effective in the first quarter of 2008, and are currently in the process of evaluating the effect, if any, this Issue will have on our consolidated financial statements in 2008.

In September 2006, the EITF promulgated Issue No. 06-5, “Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance.” Companies can choose to purchase life insurance policies to fund the cost of employee benefits or to protect against the loss of key persons, and receive tax-free death benefits. These policies are commonly referred to as corporate-owned life insurance (COLI). This Issue clarifies whether the policyholder should consider additional amounts from the policy other than the cash surrender value in determining the amount that could be realized under the insurance contract, or whether a policyholder should consider the contractual ability to surrender all individual

life policies at the same time in determining the amount that could be realized under the insurance contract. We will adopt EITF 06-5 effective in the first quarter of 2007 and it is not expected to materially impact our consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 provides guidance on quantifying and evaluating the materiality of unrecorded misstatements. The method established by SAB No. 108 requires each of a company’s financial statements and the related financial statement disclosures to be considered when quantifying and assessing the materiality of any misstatement. SAB No. 108 is effective for annual financial statements covering the first fiscal year ending after November 15, 2006, with earlier application encouraged. We adopted this guidance effective December 31, 2006. This adoption did not have an effect on our 2006 consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined-Benefit Pension and Other Postretirement Plans.” SFAS No. 158 requires an employer that sponsors one or more defined benefit pension plans or other postretirement plans to (i) recognize the funded status of a plan, measured as the difference between plan assets at fair value and the benefit obligation, in the balance sheet; (ii) recognize in shareholders’ equity as a component of accumulated other comprehensive loss, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not yet recognized as components of net periodic benefit cost; (iii) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end balance sheet; and (iv) disclose in the notes to the financial statements additional information about the effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. We adopted SFAS No. 158 effective December 31, 2006. The adoption of SFAS No. 158 resulted in a decrease in total shareholders’ equity of $818 as of December 31, 2006. For further information regarding the impact of the adoption of SFAS 158, see Note 15.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value under U.S. GAAP and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently in the process of evaluating the effect, if any, SFAS No. 157 will have on our consolidated financial statements for 2008 and subsequent periods.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently in the process of evaluating our tax positions and anticipate that the interpretation will not have a significant impact on our results of operations.

In July 2006, the FASB issued FASB Staff Position No. 13-2 (FSP 13-2), “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction,” which requires companies to recalculate the income recognition for a leveraged lease if there is a change or projected change in the timing of income tax cash flows directly related to the leveraged lease. FSP 13-2 is effective for fiscal years beginning after December 15, 2006. We currently comply with FSP 13-2, and there has been no impact on our consolidated financial statements.


Note 2.	Reorganization Under Chapter 11 of the Bankruptcy Code

Bankruptcy Cases

Cases.” Neither Dana Credit Corporation (DCC) and its subsidiaries nor any of our non-U.S. affiliates are Debtors.

The wholly-owned subsidiaries included in the Bankruptcy Cases are Dakota New York Corp., Brake Systems, Inc., BWDAC, Inc., Coupled Products, Inc., Dana Atlantic LLC f/k/a Glacier Daido America, LLC, Dana Automotive Aftermarket, Inc., Dana Brazil Holdings I LLC f/k/a Wix Filtron LLC, Dana Brazil Holdings LLC f/k/a, Dana Realty Funding LLC, Dana Information Technology LLC, Dana International Finance, Inc., Dana International Holdings, Inc., Dana Risk Management Services, Inc., Dana Technology Inc., Dana World Trade Corporation, Dandorr L.L.C., Dorr Leasing Corporation, DTF Trucking, Inc., Echlin-Ponce, Inc., EFMG LLC, EPE, Inc., ERS LLC, Flight Operations, Inc., Friction, Inc., Friction Materials, Inc., Glacier Vandervell, Inc., Hose & Tubing Products, Inc., Lipe Corporation, Long Automotive LLC, Long Cooling LLC, Long USA LLC, Midland Brake, Inc., Prattville Mfg., Inc., Reinz Wisconsin Gasket LLC, Spicer Heavy Axle & Brake, Inc., Spicer Heavy Axle Holdings, Inc., Spicer Outdoor Power Equipment Components LLC, Torque-Traction Integration Technologies, LLC, Torque-Traction Manufacturing Technologies, LLC, Torque-Traction Technologies, LLC and United Brake Systems Inc. While we continue our reorganization under Chapter 11 of the United States Bankruptcy Code, investments in our securities are highly speculative. Although shares of our common stock continue to trade on the OTC Bulletin Board under the symbol “DCNAQ,” the trading prices of the shares may have little or no relationship to the actual recovery, if any, by the holders under any eventual court-approved reorganization plan. The opportunity for any recovery by holders of our common stock under such reorganization plan is uncertain and shares of our common stock may be cancelled without any compensation pursuant to such plan.

The Bankruptcy Cases are being jointly administered, with the Debtors managing their business in the ordinary course as debtors in possession subject to the supervision of the Bankruptcy Court. We are continuing normal business operations during the Bankruptcy Cases while we evaluate our businesses both financially and operationally and implement comprehensive improvements to enhance performance. We are proceeding with previously announced divestiture and reorganization plans, which include the sale of several non-core businesses, the closure of certain facilities and the shift of production to lower-cost locations. In addition, we are taking steps to reduce costs, increase efficiency and enhance productivity so that we emerge from bankruptcy as a stronger, more viable company. We have the exclusive right to file a plan of reorganization in the Bankruptcy Cases until September 3, 2007, by order of the Bankruptcy Court.

Our continuation as a going concern is also contingent upon our ability (i) to comply with the terms and conditions of the DIP Credit Agreement described below; (ii) to obtain confirmation of a plan of reorganization under the Bankruptcy Code (iii) to generate sufficient cash flow from operations; and (iv) to obtain financing sources to meet our future obligations. These matters create uncertainty relating to our ability to continue as a going concern.

The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability of assets and classification of liabilities that might result from the outcome of these uncertainties. In addition, our plan of reorganization could materially change the amounts reported in our consolidated financial statements. Our consolidated financial statements as of December 31, 2006 do not give effect to all the adjustments to the carrying value of assets and liabilities that may become necessary as a consequence of reorganization under Chapter 11.

Our bankruptcy filing triggered the immediate acceleration of certain direct financial obligations, including, among others, an aggregate of $1,623 in principal and accrued interest on currently outstanding non-secured notes issued under our Indentures dated as of December 15, 1997, August 8, 2001, March 11,

2002 and December 10, 2004. Such amounts are characterized as unsecured debt for purposes of the reorganization proceedings, and the related obligations have been classified as liabilities subject to compromise in our Consolidated Balance Sheet as of December 31, 2006. In addition, the Chapter 11 filing created an event of default under certain of our lease agreements. The ability of our creditors to seek remedies to enforce their rights under the indentures and lease agreements described above is automatically stayed as a result of our bankruptcy filings, and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.

As required by SOP 90-7, in the first quarter of 2006 we recorded the Debtors’ pre-petition debt instruments at the allowed claim amount, as defined by SOP 90-7. Accordingly, we accelerated the amortization of the related deferred debt issuance costs, the original issuance discounts and the valuation adjustment related to the termination of interest rate swaps, which resulted in a pre-tax expense of $17 during March 2006 that is included in reorganization items in our Consolidated Statement of Operations. Official committees of (a) the Debtors’ unsecured creditors (Creditors Committee) and (b) retirees not represented by unions (Retiree Committee) have been appointed in the Bankruptcy Cases. Among other things, the Creditors Committee consults with the Debtors regarding the administration of the Bankruptcy Cases, investigates matters relevant to these cases or to the formulation of a plan of reorganization, participates in the formulation of, and advises the unsecured creditors regarding, such plan and generally performs any other services as are in the interest of the Debtors’ unsecured creditors. The Retiree Committee acts as the authorized representative of those persons receiving certain retiree benefits who are not covered by an active or expired collective bargaining agreement in instances where Dana seeks to modify or eliminate certain retiree benefits. The Debtors are required to bear certain of the committees’ costs and expenses, including those of their counsel and other professional advisors. An official committee of Dana’s equity security holders had been appointed but was disbanded effective February 9, 2007.

The Debtors have received approval from the Bankruptcy Court to pay or otherwise honor certain of their pre-petition obligations, subject to certain restrictions, including employee wages, salaries, certain benefits and other employee obligations; claims of foreign vendors and certain suppliers that are critical to our continued operation; and certain customer program and warranty claims.

Plan of Reorganization

We anticipate that substantially all of the Debtors’ liabilities as of the Filing Date will be addressed under, and treated in accordance with, a plan of reorganization to be proposed to and voted on by creditors in accordance with the provisions of the Bankruptcy Code. Although we intend to file and seek confirmation of such a plan by September 3, 2007, there can be no assurance as to when the plan will be filed or that the plan will be confirmed by the Bankruptcy Court and consummated. Additionally, there cannot be any assurance

that we will be successful in achieving our reorganization goals, or that any measures that are achievable will result in sufficient improvement to our financial position. Accordingly, until the time that the Debtors emerge from bankruptcy, there will be no certainty about our ability to continue as a going concern. If a reorganization is not completed, we could be forced to sell a significant portion of our assets to retire debt outstanding or, under certain circumstances, to cease operations.

Pre-petition Claims

On June 30, 2006, the Debtors filed their schedules of the assets and liabilities existing on the Filing Date with the Bankruptcy Court. Since then, the Debtors made certain amendments to these schedules. In July 2006, the Bankruptcy Court set September 21, 2006 as the general bar date (the date by which most entities that wished to assert a pre-petition claim against a Debtor had to file a proof of claim in writing). Asbestos-related personal injury and wrongful death claimants were not required to file proofs of claim by the bar date, and such claims will be addressed as part of the Chapter 11 proceedings.

As required by SOP 90-7, the amount of the Liabilities subject to compromise represents our estimate of known or potential pre-petition claims to be addressed in connection with the Bankruptcy Cases. Such claims are subject to future adjustments. Adjustments may result from, among other things, negotiations with creditors, rejection of executory contracts and unexpired leases and orders of the Bankruptcy Court.

Approximately 14,800 proofs of claim, totaling approximately $26,100 and alleging a right to payment from the Debtors, were filed with the Bankruptcy Court in connection with the September 21, 2006 bar date. Upon initial review of the filed claims, we have identified approximately 2,200 of these claims, totaling approximately $20,300 which we believe should be disallowed by the Bankruptcy Court, primarily because they appear to be amended, duplicative or solely equity-based. Of those identified for objection, approximately 500, totaling approximately $250, have been expunged by the Bankruptcy Court pursuant to the 1st Omnibus Objection ordered on or about January 10, 2007.

We have also identified approximately 2,000 claims, totaling approximately $700, related to asbestos, environmental and litigation claims. We will address asbestos-related personal injury and wrongful death claims in the future as part of the Chapter 11 cases. We are continuing our evaluation of approximately 10,600 claims, totaling approximately $5,100, alleging rights to payment for financing, trade debt, employee obligations, tax liabilities and other matters. Amounts and payment terms for these claims, if applicable, will be established in connection with the Bankruptcy Cases. The Debtors expect to file additional claim objections with the Bankruptcy Court.

DIP Credit Agreement

In March 2006, the Bankruptcy Court approved our $1,450 Senior Secured Superpriority Debtor-in-Possession Credit Agreement (the DIP Credit Agreement), consisting of a $750 revolving credit facility and a $700 term loan facility. This facility provides funding to Dana to continue our operations without disruption and meet our obligations to suppliers, customers and employees during the Chapter 11 reorganization process. In January 2007, the Bankruptcy Court approved an amendment to the DIP Credit Agreement to increase the term loan facility by $200, subject to certain terms and conditions discussed in Note 10. Also in January 2007 we permanently reduced the aggregate commitment under the revolving credit facility from $750 to $650. As a result of these actions the DIP Credit facility is now $1,550.

DCC Notes

Dana and DCC executed a Settlement Agreement relating to claims between them. Together, these agreements provide, among other things, that (i) the forbearing noteholders will not exercise their rights or remedies with respect to the DCC Notes for a period of 24 months (or until the effective date of Dana’s reorganization plan), during which time DCC will endeavor to sell its remaining asset portfolio in an orderly manner and will use the proceeds to pay down the DCC Notes, and (ii) Dana stipulated to a general unsecured pre-petition claim by DCC in the Bankruptcy Cases in the amount of $325 in exchange for DCC’s release of certain claims against the Debtors. Under the Settlement Agreement, Dana and DCC also terminated their intercompany tax sharing agreement under which they had formerly computed tax benefits and liabilities with respect to their U.S. consolidated federal tax returns and consolidated or combined state tax returns. Dana’s stipulation to a DCC claim of $325 was approved by the Bankruptcy Court. Under the Forbearance Agreement, DCC agreed to pay the forbearing noteholders their pro rata share of any excess cash in the U.S. greater than $7.5 on a quarterly basis, and in December 2006, it made a $155 payment to such noteholders, consisting of $125.4 of principal, $28.1 of interest, and a one-time $1.5 prepayment penalty.

Financial Statement Presentation

Our consolidated financial statements have been prepared in accordance with SOP 90-7 and on a going-concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of our bankruptcy filing, such realization of assets and liquidation of liabilities is subject to uncertainty. While operating as debtors in possession under the protection of Chapter 11 of the Bankruptcy Code, all or some of the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the consolidated financial statements, subject to Bankruptcy Court approval or as otherwise permitted in the ordinary course of business. Further, our plan of reorganization could materially change the amounts and classification of items reported in our historical consolidated financial statements.

Substantially all of the Debtors’ pre-petition debt is now in default due to the bankruptcy filing. As described below, the accompanying consolidated financial statements present the Debtors’ pre-petition debt of $1,585 within Liabilities subject to compromise. In accordance with SOP 90-7, following the Filing Date, we discontinued recording interest expense on debt classified as Liabilities subject to compromise. Contractual interest on all debt, including the portion classified as Liabilities subject to compromise, amounted to $204 for the year ended December 31, 2006.

Liabilities Subject to Compromise

The Liabilities subject to compromise in the Consolidated Balance Sheet include the Liabilities subject to compromise of the discontinued operations and consist of the following at December 31, 2006:


Accounts payable	$	290
Pension and postretirement plan obligations		1,687
Debt (including accrued interest of $38)		1,623
Other		575

Consolidated Liabilities subject to compromise		4,175
Payables to non-Debtor subsidiaries		402

Debtor Liabilities subject to compromise	$	4,577

Other includes accrued liabilities for environmental, asbestos and other product liability, income tax, deferred compensation, other postemployment benefits and lease rejection claims. Liabilities subject to compromise may change due to reclassifications, settlements or reorganization activities that give rise to claims or increases in existing claims. During the fourth quarter of 2006, we determined that customer warranty obligations were not likely to be compromised and we reclassified $38 to liabilities not subject to compromise. Payables to non-Debtor subsidiaries includes $325 relating to DCC.

Reorganization Items

Professional advisory fees and other costs directly associated with our reorganization are reported separately as reorganization items pursuant to SOP 90-7. Professional fees include underwriting fees paid in connection with the DIP Credit Agreement and other financings undertaken as part of the reorganization process. Reorganization items also include provisions and adjustments to reflect the carrying value of certain pre-petition liabilities at their estimated allowable claim amounts. The debt valuation adjustments and the underwriting fees related to the DIP Credit Agreement and other financings generally represent one-time charges. Certain actions within the non-Debtor companies have occurred as a result of the Debtors’ bankruptcy proceedings. The costs associated with these actions are also reported as reorganization items. The non-Debtor loss on settlement of claims was recorded by DCC in connection with settlement of intercompany amounts with Dana (discussed in the preceding “DCC Notes” section). A corresponding gain was recorded by Dana in the Debtor reorganization items. The reorganization items in the Consolidated Statement of Operations for year ended December 31, 2006 consisted of the following items:


	Year Ended
	December 31,
	2006

Debtor reorganization items
Professional fees	$	114
Debt valuation adjustments		17
Loss on rejection of leases		12
Investment income		(6	)
Gain on settlement of claims		(20	)

Debtor reorganization items		117
Non-Debtor reorganization items
Professional fees		10
Loss on settlement of claims		16

Total reorganization items	$	143

Debtor in Possession Financial Information

In accordance with SOP 90-7, aggregate financial information of the Debtors is presented below as of and for the year ended December 31, 2006. Intercompany balances between Debtors and non-Debtors are not eliminated. The investment in non-Debtor subsidiaries is accounted for on an equity basis and, accordingly, the net loss reported in the Debtor In Possession Statement of Operations is equal to the consolidated net loss.

DANA CORPORATION
DEBTOR-IN-POSSESSION STATEMENT OF OPERATIONS
(Non-debtor entities, principally non-U.S. subsidiaries, reported as equity earnings)


	Year Ended
	December 31, 2006

Net sales
Customers	$	4,180
Non-debtor subsidiaries		250

Net sales		4,430
Costs and expenses
Cost of sales		4,531
Selling, general and administrative expenses		270
Realignment and impairment		56
Other income (expense), net		174

Loss from operations before interest, reorganization items and income taxes		(253	)
Interest expense (contractual interest of $162 for the year ended December 31, 2006)		73
Reorganization items, net		117

Loss before income taxes		(443	)
Income tax expense*		56
Equity in earnings of affiliates		5

Loss from continuing operations		(494	)
Loss from discontinued operations		(72	)
Equity in losses of non-debtor subsidiaries		(173	)

Net loss	$	(739	)


*		Income tax expense is reported in the Debtor-in-Possession Statement of Operations as a result of DCC (a non-Debtor) being reported in this statement on an equity basis. Within DCC’s results, which are included in Equity in losses of non-Debtor subsidiaries in this statement, are net tax benefits of $68 which were recognized in accordance with DCC’s Tax Sharing Agreement (TSA) with Dana. Because DCC is included in Dana’s consolidated U.S. federal tax return and Dana is unable to recognize U.S. tax benefits due to the valuation allowance against its U.S. deferred tax assets, a tax provision is required in the Dana parent company financial statements to offset the tax benefits recorded by DCC. The TSA was cancelled in December 2006 in connection with the Settlement Agreement between DCC and Dana. DCC’s tax liabilities totaling $86 at the time of the TSA cancellation were treated as a capital contribution by Dana.

DANA CORPORATION
DEBTOR-IN-POSSESSION BALANCE SHEET
(Non-debtor entities, principally non-U.S. subsidiaries, reported as equity investments)


	December 31, 2006

Assets
Current assets
Cash and cash equivalents	$	216
Accounts receivable
Trade		460
Other		71
Inventories		243
Assets of discontinued operations		237
Other current assets		15

Total current assets		1,242
Investments and other assets		875
Investments in equity affiliates		110
Investments in non-debtor subsidiaries		2,292
Property, plant and equipment, net		689

Total assets	$	5,208

Liabilities and Shareholders’ Deficit
Current liabilities
Accounts payable	$	294
Liabilities of discontinued operations		50
Other accrued liabilities		343

Total current liabilities		687
Liabilities subject to compromise		4,577
Deferred employee benefits and other noncurrent liabilities		76
Debtor-in-possession financing		700
Minority interest in consolidated subsidiaries		2
Shareholders’ deficit		(834	)

Total liabilities and shareholders’ deficit	$	5,208

DANA CORPORATION
DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS
(Non-debtor entities, principally non-U.S. subsidiaries, reported as equity investments)


	Year Ended
	December 31,
	2006

Operating activities
Net income (loss)	$	(739	)
Depreciation and amortization		127
Equity in losses of non-Debtor affiliates		173
Deferred income taxes		56
Charges related to divestitures and asset sales		18
Reorganization charges		117
Payment of reorganization charges		(91	)
Working capital		46
Other		95

Net cash flows used for operating activities		(198	)

Investing activities
Purchases of property, plant and equipment		(150	)
Other		(46	)

Net cash flows used for investing activities		(196	)

Financing activities
Proceeds from debtor-in-possession facility		700
Payments on long-term debt		(21	)
Net change in short-term debt		(355	)

Net cash flows provided by financing activities		324

Net decrease in cash and cash equivalents		(70	)
Cash and cash equivalents — beginning of period		286

Cash and cash equivalents — end of period	$	216


Note 3.	Acquisition of Spicer S.A. Subsidiaries

In July 2006, we completed the dissolution of Spicer S.A. de C.V. (Spicer S.A.), our Mexican joint venture with Desc Automotriz, S.A. de C.V. (Desc). The transaction included the sale of our 49% interest in Spicer S.A. to Desc and our acquisition of the Spicer S.A. subsidiaries in Mexico that manufacture and assemble axles, driveshafts, gears, forgings and castings (in which we previously held an indirect 49% interest). Desc, in turn, acquired full ownership of the subsidiaries that hold the transmission and aftermarket gasket operations in which it previously held a 51% interest. Prior to the sale, we loaned $20 to two subsidiaries of Spicer S.A. that we later acquired. For the sale of our 49% interest in Spicer S.A. we received a $166 note receivable and $15 of cash from Desc. The aggregate proceeds of $181 exceeded our investment in Spicer S.A. by $19, including $9 related to the transmission and gasket operations. The $9 was recognized as a gain on sale of assets in our results of operations in the quarter ended September 30, 2006, along with $4 of related tax expense. The remainder of the excess of the proceeds over our investment ($10) relates to the assets we ultimately retained and was recorded as a reduction of the basis of those assets.

The aggregate purchase price for the subsidiaries we acquired was $166, which we satisfied through the return of the $166 note receivable from Desc. The $166 assigned to the net assets acquired has been

reduced by the remaining excess of the proceeds over our investment of $10 and by $3 for the cash acquired, resulting in net assets acquired of $153.

In December 2006, we determined that tax benefits of net operating losses for these operations can be utilized before their expiration based on revised projections. We recorded these deferred tax assets of $13 and included them in the assets acquired. Since the acquisition price was less than the fair value of acquired assets, we further reduced Property, plant and equipment net, by this amount.

The following table presents the assets acquired and liabilities assumed at their adjusted fair value, net of $3 of cash acquired and net of the assumption of the intercompany loans noted above.


	Final
	Purchase Price
	Allocation
	December 31, 2006

Current assets
Accounts receivable	$	73
Inventories		33
Other current assets		3
Other assets		20
Property, plant and equipment, net		118

Total assets acquired		247

Accounts payable		40
Other current liabilities		24
Intercompany payables		20
Pension obligations		10

Total liabilities assumed		94

Net assets acquired	$	153

The operating results of the five manufacturing subsidiaries that Dana acquired have been included in our results of operations since July 1, 2006. These units had total 2005 sales of $296, a substantial portion of which was to Dana. The incremental 2006 sales impact of the acquired operations is not significant given that a substantial portion of the acquired Spicer S.A. operations’ revenues were intercompany sales to Dana. In addition, the earnings impact in 2005 and 2006 is not material since Spicer S.A. has operated near break-even in recent years, and 49% of the income (loss) was previously included in our Equity in earnings of affiliates. We expect to benefit from the addition of these technologically advanced operations that support our core axle and driveshaft businesses and from the manufacturing cost efficiencies that will come from expanding our global presence in this key competitive location.

Note 4. Impairments, Discontinued Operations, Divestitures and Realignment of Operations

Impairments

In accordance with SFAS No. 144, “Impairment of Long-lived Assets” (SFAS No. 144), we review long-lived assets, including goodwill, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, the long-lived assets of the operation (excluding goodwill) are written down to fair value. Fair value is determined based on discounted cash flows, or other methods providing best estimates of value.

As a result of DCC’s adopting a plan to proceed with a more accelerated sale of substantially all of its remaining assets, we also recognized an asset impairment charge of $176 in 2006. DCC’s investments are

reviewed for impairment on a quarterly basis and adjusted to current estimated fair value less cost to sell. Based on our assessments of other long-lived assets and goodwill at December 31, 2006, no impairment charges were determined to be required.

Certain remaining DCC assets, having a net book value of $115, are equity investments. The underlying assets of these equity investments have not been impaired by the investees and there is not a readily determinable market value for these investments. Based upon current internally estimated market value, DCC expects that the future sale of these assets could result in a loss on sale in the range of $30 to $40. These impairment charges may be recorded in future periods if DCC enters into agreements for the sale of these investments at the estimated fair value or we obtain other evidence that there has been an other-than-temporary decline in fair value.

Our Axle and Structures segments within the Automotive Systems Group are presently at the greatest risk of incurring future impairment of long-lived assets should they be unable to achieve their forecasted cash flow. These businesses derive a significant portion of their sales from the domestic automotive manufacturers making them susceptible to future production decreases. These operations are also being impacted by some of the manufacturing footprint actions referred to in the “Business Strategy” section of Item 7. The net book value of property, plant and equipment in the Axle and Structures segments approximates $530 and $333 at December 31, 2006.

We evaluated the Axle and Structures segments for long-lived asset impairment at December 31, 2006 by estimating their expected cash flows over the remaining average life of their long-lived assets, which was 7.5 years for Axle and 4.3 years for Structures, assuming that: (i) there will be no growth in sales except for new business already awarded that comes on stream in 2007; (ii) pre-tax profit margins, except for the contributions from product profitability and our manufacturing footprint actions will be comparable to our estimates for 2007; (iii) these businesses will achieve 50% of the expected annual profit improvements from the product profitability and manufacturing footprint actions which are planned (i.e., a half year of profit improvement in 2007 and the full annual improvement commencing in 2008) and no improvements from the other reorganization initiatives; (iv) future sales levels in these segments will not be negatively impacted by significant reductions in market demand for the vehicles on which they have significant content; and (v) these businesses will retain existing significant customer programs through the normal program lives. Variations in any of these key assumptions could result in potential future asset impairments.

Asset impairments often result from significant actions like the discontinuance of customer programs and facility closures. We have a number of reorganization actions that are in process or planned, which include customer program evaluations and manufacturing footprint assessments. While at present no final decisions have been made which require asset impairment recognition, future decisions in connection with the reorganization plan could result in future asset impairment losses.

See Note 7 for information about goodwill impairment assessment.

Divestitures

Since 2001, DCC has sold its assets in individually structured transactions and achieved further reductions through normal portfolio runoff. DCC had reduced its assets to approximately $200 at December 31, 2006 through asset sales, normal portfolio runoff and the impairment discussed in the previous section.

During 2005, we recorded an aggregate after-tax charge of approximately $18 for the following four transactions:


	•	We dissolved our joint venture with The Daido Metal Company, which manufactured engine bearings and related materials in Atlantic, Iowa and Bellefontaine, Ohio. We previously had a 70% interest in the joint venture, which was consolidated for financial reporting purposes. During the third quarter, we acquired the remaining minority interests, sold the Bellefontaine operations, and assumed full ownership of the Atlantic facility.


	•	We sold our domestic fuel-rail business, consisting of a production facility in Angola, Indiana.

	•	We sold our South African electronic engine parts distribution business.

	•	We sold our Lipe business, a manufacturer and re-manufacturer of heavy-duty clutches, based in Haslingden, Lancashire, United Kingdom.

In November 2004, we completed the sale of our automotive aftermarket businesses to The Cypress Group for approximately $1,000, including cash of $950 and a note with a face amount of $75. In connection with this transaction, we recorded an after-tax loss of $30 in discontinued operations in the fourth quarter of 2004, with additional related after-tax charges of $13 having been reported in discontinued operations previously in 2004. The note is recorded at a discounted value that represents the amounts receivable under the prepayment provisions of the note. The note matures in 2019 and has a carrying value of $64 at December 31, 2006.

Subsequent Events

During January 2007, we completed the sale of our trailer axle business manufacturing assets to Hendrickson USA L.L.C., a subsidiary of The Boler Company, for $31 in cash. In connection with this sale, we recorded a gain of $13 in 2007.

In March 2007, we closed the sale of our engine hard parts business to MAHLE. Of the $97 of cash proceeds, $5 has been escrowed pending completion of closing conditions in certain countries which are expected to occur in 2007, and $20 was escrowed pending completion of customary purchase price adjustments and indemnification obligations. We expect to record non-cash, pre-tax charges of $30 to $35 upon completion of these transactions. The engine hard parts business is reported in discontinued operations as discussed below.

In March 2007, we sold our 30% equity interest in GETRAG. We received proceeds from the sale of approximately $205. An impairment charge of $58 was recorded in the fourth quarter of 2006 to adjust our equity investment to fair value based on an other-than-temporary decline in value.

Discontinued Operations

On October 17, 2005, as previously noted, our Board approved the plan to sell the engine hard parts, fluid products and pump products businesses. Since that date, these businesses have been treated as “held for sale” and were classified as discontinued operations.

Although not held for sale at September 30, 2005, we determined that the sale of these businesses were likely at that time. Accordingly, we assessed the long-lived assets of the businesses for potential impairment and recorded a non-cash charge of $207 in the third quarter of 2005 to reduce property, plant and equipment of these businesses to their estimated fair value. The $207 was comprised of $165 related to our engine hard parts business and $42 related to the fluid routing business. Additionally, we recorded a charge of $83 to reduce goodwill related to the fluid routing business to its estimated fair value. There is no goodwill associated with the engine hard parts and pump products businesses. A tax benefit of $15, related to the charges associated with certain non-U.S. operations, was recorded resulting in an after-tax charge of $275 being incurred in the third quarter of 2005.

Additional charges of $121, to reduce the businesses to fair value less cost to sell on a held for sale basis, were recognized in the fourth quarter of 2005, including cumulative translation adjustment write-offs of $67. The $121 was comprised of $67 related to our engine hard parts business, $53 to the pump business and $1 to our fluid routing business. A tax expense of $2 was recognized, resulting in a fourth quarter 2005 after-tax impairment of $123.

The $411 combined before-tax charge was comprised of $232 for the engine hard parts business, $126 for the fluid products business and $53 for the pump business. The $411 pre-tax and $398 after-tax charge are included in income (loss) from discontinued operations before income taxes and income (loss) from discontinued operations in the Consolidated Statement of Operations for the year ended December 31, 2005.

During 2006, we monitored changes in both the expected proceeds and the value of the underlying net assets of these discontinued operations to determine whether additional adjustments were appropriate. Due to softening demand in the North American light vehicle market and to higher raw material prices, the near term profit outlook for our discontinued businesses continued to be challenged. Based on our discussions with potential buyers, our updated profit outlook, and the expected sale proceeds, we recorded additional provisions of $137 in 2006 to adjust the net assets of the discontinued operations to their fair value less cost to sell. These valuation adjustments were recorded as an impairment of assets in the results of discontinued operations with $75 relating to engine hard parts, $44 to fluid routing and $18 to pump products. Tax benefits of these adjustments related primarily to the non-U.S. entities and were $21 in the year ended December 31, 2006.

The following table summarizes the results of our discontinued operations for 2006, 2005 and 2004. 2004 includes the automotive aftermarket business and 2006, 2005 and 2004 include the ASG engine, fluid and pump operations:


	2006			2005			2004

Sales	$	1,220		$	1,221		$	3,216
Cost of sales		1,172			1,173			2,843
Selling, general and administrative expenses		68			78			293
Realignment and impairment charges		137			411			39
Other income (expense)		15						(24	)

Income (loss) before income taxes		(142	)		(441	)		17
Income tax benefit (expense)		21			7			(27	)

Loss from discontinued operations	$	(121	)	$	(434	)	$	(10	)

The effective income tax rate differs from the U.S. federal income tax rate primarily due to the valuation allowance established against U.S. deferred tax assets in 2005 and the mix of taxable income in non-U.S. locations versus the mix of U.S. losses on which no tax benefit is recorded in 2006, 2005 and 2004.

At December 31, 2006, we had reduced the net assets of the engine hard parts and pump products businesses to the extent permitted by GAAP. At the sale price for engine hard parts and the expected selling price for pump products, we expect to record additional pre-tax charges of $30 to $35, in 2007.

The sales and net income of our discontinued operations consisted of the following:


Sales	2006		2005		2004

AAG	$	—	$	—	$	1,943

ASG
Engine		657		671		723
Fluid		463		454		468
Pump		100		96		82

Total ASG		1,220		1,221		1,273

Total discontinued operations	$	1,220	$	1,221	$	3,216


Net Income (Loss)	2006			2005			2004

AAG	$	—		$	—		$	(5	)

ASG
Engine		(63	)		(234	)		(14	)
Fluid		(57	)		(150	)		4
Pump		2			(50	)		5

Total ASG		(118	)		(434	)		(5	)

Other		(3	)

Total discontinued operations	$	(121	)	$	(434	)	$	(10	)

The assets and liabilities of the businesses currently held for sale are aggregated and presented as assets and liabilities of discontinued operations at December 31, 2006 and 2005.

The assets and liabilities of discontinued operations reported in the consolidated balance sheet as of December 31, 2006 and 2005 included the following:


	2006		2005

Assets of discontinued operations:
Accounts receivable	$	223	$	212
Inventories		123		142
Cash and other current assets		11		7
Investments and other assets		29		104
Investments in leases		6		8
Property, plant and equipment				48

Total assets of discontinued operations	$	392	$	521

Liabilities of discontinued operations*
Accounts payable	$	95	$	123
Accrued payroll and employee benefits		41		40
Other current liabilities		51		30
Other noncurrent liabilities		8		8

Total liabilities of discontinued operations	$	195	$	201


*		Liabilities subject to compromise of discontinued operations are included in the consolidated Liabilities subject to compromise.

In the consolidated statement of cash flows, the cash flows of discontinued operations are not separately classified or aggregated. They are reported in the respective categories of the consolidated statement of cash flows as if they were continuing operations.

Realignment of Operations

Additional realignment of our manufacturing operations is an essential component of our bankruptcy reorganization plans. In December 2006, we announced the closure of four North American production facilities. Two Axle facilities in Syracuse, Indiana and Cape Girardeau, Missouri employing 245 people will be closed. The Syracuse facility is expected to be closed by the end of 2007 and the Cape Girardeau facility by mid-2008. Two Structures facilities in Guelph, Ontario and Thorold, Ontario employing 251 people are scheduled for closure — the Guelph facility in early 2007 and the Thorold facility by the end of 2007. Realignment charges of $27 related to severance costs were recorded in 2006 for these closures.

At December 31, 2006, we had committed to additional facility closure and work force reduction actions, most of which have not been announced as of the current date. Since most of these actions involve people with existing contractual severance arrangements, we have recorded a realignment charge for the probable separation cost that will result upon closure. Announcements of these actions are expected in 2007, with closures to occur in late 2007 or 2008. The realignment charge recorded in 2006 for these actions was $54.

During 2005, our Board approved a number of operational initiatives to enhance our financial performance. The actions described below, along with other items, resulted in total realignment charges of $64 in 2005.

In December 2005, we announced plans to consolidate our North American Thermal operations to reduce operating and overhead costs and strengthen our competitiveness. Three facilities, located in Danville, Indiana; Sheffield, Pennsylvania; and Burlington, Ontario, employing 200 people, were closed. We also announced workforce reductions of approximately 500 people at our Structures plant in Thorold, Ontario and approximately 300 people at three Axle facilities in Australia, resulting from the expiration of supply agreements for truck frames and rear axle modules. We recorded expenses of $31 related to these actions.

During the second quarter of 2005, we reviewed the status of our plan to reduce the workforce within our Off-Highway segment, which was announced in the fourth quarter of 2004 and resulted in charges of $34 in connection with the closure of the Statesville, North Carolina facility and workforce reductions in Brugge, Belgium. These actions were to eliminate approximately 300 jobs. We concluded that completion of the plan was no longer probable within the required timeframe due to subsequent changes in the related markets; accordingly, we reversed the accrual for employee termination benefits.

During the fourth quarter of 2004, the engine hard parts business recorded realignment charges of $18 in connection with signing a long-term supply agreement with Federal-Mogul Corporation to supply us with gray iron castings. The foundry operation in Muskegon, Michigan that previously supplied these materials was closed in the third quarter of 2005, eliminating 240 jobs.

The following table summarizes the charges for the restructuring activity recorded in our continuing operations in the last three years:


	Employee			Long-Lived
	Termination			Asset			Exit
	Benefits			Impairment			Costs			Total

Balance at December 31, 2003	$	29		$	—		$	12		$	41
Activity during the year
Charges to expense		37			14			11			62
Adjustments of accruals		(14	)					(4	)		(18	)
Cash payments		(22	)					(5	)		(27	)
Write-off of assets					(14	)					(14	)

Balance at December 31, 2004		30						14			44
Activity during the year
Charges to expense		30			23			11			64
Adjustments of accruals		(6	)								(6	)
Cash payments		(13	)					(10	)		(23	)
Write-off of assets					(23	)					(23	)

Balance at December 31, 2005		41						15			56
Activity during the year
Charges to expense		78			4			15			97
Adjustments of accruals		(4	)					(1	)		(5	)
Cash payments		(31	)					(13	)		(44	)
Transfer of balances		(20	)					(6	)		(26	)
Write-off of assets					(4	)					(4	)

Balance at December 31, 2006	$	64		$	—		$	10		$	74

The transfer of balances involves liabilities subject to compromise that will be settled in bankruptcy and pension obligations resulting from curtailments. Because it is not practicable to isolate the related pension payments, which occur over an extended period or time, we have transferred the accrual from our restructuring accruals to the related liability accounts.

Employee terminations relating to the plans within our continuing operations were as follows:


	2006			2005			2004

Total estimated		2,630			1,276			563
Less terminated:
2004								(76	)
2005					(25	)		(411	)
2006		(460	)		(382	)		(12	)

Balance at December 31,		2,170			869			64

At December 31, 2006, $74 of restructuring charges remained in accrued liabilities. This balance was comprised of $64 for the reduction of approximately 3,100 employees to be completed over the next two years and $10 for lease terminations and other exit costs. The estimated annual cash expenditures will be approximately $35 in 2007 and $39 thereafter. Our liquidity and cash flows will be materially impacted by these actions. It is anticipated that our operations over the long term will further benefit from these realignment strategies through reduction of overhead and certain material costs.

Completion of realignment initiatives generally occurs over multiple reporting periods. The following table provides project-to-date and estimated future expenses for completion of our realignment initiatives by business segment.


	Expense Recognized								Future
	Prior to								Cost to
	2006			2006			Total		Complete

ASG
Axle	$	19		$	23		$	42	$	(4	)
Driveshaft		(2	)		33			31		57
Sealing					3			3		1
Thermal		2			2			4
Structures		16			29			45		74

Total ASG		35			90			125		128
HVTSG
Commercial Vehicles					5			5		4
Off-Highway		34			(3	)		31

Total HVTSG		34			2			36		4
Other		17						17

Total continuing operations	$	86		$	92		$	178	$	132

The remaining costs to complete includes estimated non-contractual separation payments, lease cancellations, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.

Note 5. Inventories

The components of inventory are as follows:


	December 31,
	2006		2005

Raw materials	$	274	$	250
Work in process and finished goods		451		414

Total	$	725	$	664

Inventories of $36 are included in 2006 as a result of the acquisition of the Spicer S.A. plants in the third quarter of 2006. Inventories amounting to $240 and $252 at December 31, 2006 and 2005 were valued using the LIFO method. If all inventories were valued at replacement cost, reported values would be increased by $115 and $109 at December 31, 2006 and 2005. During 2006, we experienced reductions in certain inventory quantities which caused a liquidation of LIFO inventory values and reduced our net loss by $9. See Note 4 for inventories reclassified to discontinued operations.

Note 6. Components of Certain Balance Sheet Amounts

The following items comprise the amounts indicated in the respective balance sheet captions:


	December 31,
	2006		2005

Other current assets
Prepaid expense	$	121	$	140
Other		1		2

Total	$	122	$	142


	December 31,
	2006		2005

Investments and other assets
Prepaid pension expense	$	106	$	364
Deferred tax benefits		293		189
Investment in leveraged leases		63		208
Notes receivable		81		96
Amounts recoverable from insurers		70		67
Other		50		150

Total	$	663	$	1,074

Property, plant and equipment, net
Land and improvements to land	$	117	$	81
Buildings and building fixtures		619		629
Machinery and equipment		3,537		2,950

Total		4,273		3,660
Less: Accumulated depreciation		2,497		2,032

Total	$	1,776	$	1,628

Deferred employee benefits and other noncurrent liabilities*
Postretirement other than pension	$	108	$	906
Pension		297		407
Product liabilities				182
Postemployment		2		115
Environmental		12		49
Compensation				16
Other noncurrent liabilities		85		123

Total	$	504	$	1,798


*	Significant changes are attributable to reclassification of balances to Liabilities subject to compromise.

The components of the net investment in leveraged leases are as follows:


	December 31,
	2006			2005

Rental receivables	$	739		$	1,516
Residual values		80			135
Nonrecourse debt service		(535	)		(1,244	)
Unearned income		(145	)		(199	)
Lease impairment reserve		(76	)

Total investments		63			208
Less: deferred taxes arising from leverage leases		54			170

Net investments	$	9		$	38


Note 7.	Goodwill

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill is required to be tested for impairment annually as of December 31 at the reporting unit level. In addition, goodwill must be

tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its related carrying value. Fair value is approximated using a combination of discounted future cash flow and market multiples.

During the third quarter of 2005, management determined that we were likely to divest our engine hard parts, fluid products and pump products businesses within ASG. Although these operations were considered “held for use” at September 30, 2005, the likelihood of divesting these businesses triggered a review of goodwill and other long-lived assets relating to these operations. Goodwill of $86 related to these businesses was written off as impaired.

In connection with the 2005 annual assessment completed as of December 31, management determined that $53 of goodwill was impaired, including $28 related to Structures, $8 related to Commercial Vehicle, $7 related to a DCC investment and $10 related to a joint venture based in the U.K. These amounts are reported as impairment of goodwill in continuing operations in the Consolidated Statement of Operations.

During the third quarter of 2006, lower expected sales resulting from production cutbacks by major customers within certain of our businesses and a weaker near term outlook for sales in these businesses triggered goodwill and long-lived asset impairment assessments. Based on our estimates of expected future cash flows relating to these businesses, we determined that we could not support the carrying value of the goodwill in our Axle segment. Accordingly, we recorded a $46 charge in the third quarter to write-off this goodwill.

Our assessments at December 31, 2006 support the remaining amount of goodwill carried by our businesses.

Our Thermal business currently presents the greatest risk of incurring future impairment of goodwill given the margin erosion in this business in recent years resulting from the higher costs of commodities, especially aluminum. We evaluated Thermal goodwill of $119 for impairment at December 31, 2006 using its internal plan developed in connection with our reorganization activities. The plan assumes annual sales growth over the next six years of about 8%, some of which is expected to come from non-automotive applications. Margins as a percent of sales are forecast to improve by about 3%, in part, as this business improves its cost competitiveness by repositioning its manufacturing base in lower cost countries. We also considered comparable market transactions and the appeal of this business to other strategic buyers in assessing the fair value of the business. Market conditions or operational execution impacting any of the key assumptions underlying our estimated cash flows could result in potential future goodwill impairment in this business.

Changes in goodwill during the years ended December 31, 2006 and 2005, by segment, were as follows:


									Effect of
	Beginning		Discontinued						Currency			Ending
	Balance		Operations			Impairments			and Other			Balance

2006
ASG:
Axle	$	43	$	—		$	(46	)	$	3		$	—
Driveshaft		143								15			158
Sealing		22								2			24
Thermal		120								(1	)		119

Total		328					(46	)		19			301
HVTSG:
Off-Highway		111								4			115

Total	$	439	$	—		$	(46	)	$	23		$	416

2005
ASG:
Axle	$	44	$	—		$	—		$	(1	)	$	43
Driveshaft		158								(15	)		143
Sealing		18								4			22
Thermal		119								1			120
Structures		27					(28	)		1
Other		97		(86	)		(10	)		(1	)

Total		463		(86	)		(38	)		(11	)		328

HVTSG:
Commercial Vehicle		7					(8	)		1
Off-Highway		116								(5	)		111

Total		123					(8	)		(4	)		111

DCC		7					(7	)

Total	$	593	$	(86	)	$	(53	)	$	(15	)	$	439


Note 8.	Investments in Equity Affiliates

Equity Affiliates

At December 31, 2006, we had a number of investments in entities that engage in the manufacture of vehicular parts, primarily axles, driveshafts, wheel-end braking systems, all wheel drive systems and transmissions, supplied to OEMs. In addition, DCC had a number of investments in entities, primarily general and limited partnerships and limited liability companies that are special purpose entities engaged in financing transactions for the benefit of third parties.

Our retained earnings includes undistributed income of our non-consolidated manufacturing and leasing affiliates accounted for under the equity method of $209 and $315 at December 31, 2006 and 2005.

Dividends received from equity affiliates were $1 or less in each of the last three years.

Manufacturing Affiliates

The principal components of our investments in equity affiliates engaged in manufacturing activities at December 31, 2006 (those with an investment balance exceeding $5) were as follows:


Investment	Ownership

Bendix Spicer Foundation Brake LLC		19.8	%
GETRAG Getriebe-und Zahnradfabrik Hermann Hagenmeyer GmbH & Cie		30.0
GETRAG Corporation of North America		49.0
GETRAG Dana Holding GmbH		42.0

As discussed in Note 4, in March 2007, we sold our 30% interest above in GETRAG. At December 31, 2006, the investment in the affiliates presented above was $422, out of an aggregate investment of $440 in all affiliates that engage in manufacturing activities. Summarized combined financial information for all of our equity affiliates engaged in manufacturing activities follows:


	2006		2005		2004

Statement of Operations Information:
Net sales	$	1,752	$	2,205	$	2,198
Gross profit		206		259		256
Net income		29		56		57
Dana’s share of net income		17		30		29
Financial Position Information:
Current assets	$	694	$	717
Noncurrent assets		1,060		1,181

Current liabilities		510		520
Noncurrent liabilities		606		500
Net worth		638		878
Dana’s share of net worth	$	438	$	611

The principal components of DCC’s investments in equity affiliates engaged in leasing and financing activities (those with an investment balance exceeding $20) at December 31, 2006 follow:


Investment	Ownership

Indiantown Cogeneration LP		75.2	%
Terabac Investors LP		79.0
Pasco Cogen Ltd.		50.1

At December 31, 2006, DCC’s investment in the affiliated entities presented above was $75 of an aggregate investment of $115 in DCC affiliates that engage in financing activities. Summarized combined financial information of all of DCC’s equity affiliates engaged in lease financing activities follows:


	2006		2005		2004

Statement of Operations Information:
Lease finance and other revenue	$	64	$	73	$	97
Net income		27		25		25
DCC’s share of net income		14		16		12
Financial Position Information:
Lease financing and other assets	$	182	$	383
Total liabilities		38		114

Net worth	$	144	$	269

DCC’s share of net worth	$	115	$	207

Variable Interest Entities (VIEs)

Included in the equity affiliates engaged in lease financing activities in the table above are certain affiliates that qualify as VIEs, where DCC is not the primary beneficiary. DCC also has an investment in a leveraged lease that qualifies as a VIE but is not required to be consolidated; this leveraged lease has been included with other investments in equity affiliates. The following summarizes information relating to this investment:


	December 31
	2006			2005

Investment in leveraged lease
Total minimum lease payments	$	472		$	499
Residual values		63			63
Nonrecourse debt service		(265	)		(292	)
Unearned income		(133	)		(141	)

		137			129
Less — Deferred income taxes		(73	)		(68	)

Net investment in leveraged lease	$	64		$	61

DCC’s ownership interest in lease	$	25		$	31

The net investment in this leveraged lease at December 31, 2006 relates to an entity that has a leveraged lease in a power generation facility. DCC’s maximum exposure to loss from its investments in VIEs is limited to its share of the net worth of the VIEs, net investment in leveraged leases and outstanding balance of loans to the VIEs, less any established reserves.

Dana has equity investments in three entities engaged in manufacturing activities that qualify as VIEs. These entities’ assets, liabilities, revenue and net income as of December 31, 2006 and for the year then ended were not material. Our total investment at risk in these VIEs at December 31, 2006, including loans, was $22. We also have a business relationship with a supplier of manufactured components that qualifies as a VIE and for which we are the primary beneficiary. We did not include this entity in our consolidated financial statements as the impact is immaterial. Our total loss exposure for this VIE is $20 at December 31, 2006.

Dongfeng Joint Venture

In March 2005, Dana Mauritius Limited (Dana Mauritius), a wholly owned non-Debtor subsidiary of Dana, entered into a Sale and Purchase Agreement with Dongfeng Motor Co., Ltd. (Dongfeng Motor) and certain of its affiliates. This agreement provided for Dana Mauritius to purchase 50% of the registered capital of Dongfeng Axle Co., Ltd. (Dongfeng Axle) for approximately $60, with the remaining 50% of the Dongfeng Axle stock continuing to be held by Dongfeng Motor. In addition, the parties entered certain ancillary agreements, including a contract between Dana Mauritius and Dongfeng Motor regulating the operation of the joint venture. Certain terms of the transaction have been renegotiated since our bankruptcy filing. On March 14, 2007, the Sale and Purchase Agreement was amended to provide for Dana Mauritius to purchase the 50% equity interest in Dongfeng Axle in two stages. Pursuant to the amendment, Dana Mauritius will purchase a 4% equity interest in Dongfeng Axle for approximately $5 following certain Chinese government approvals (which are expected by the end of the first quarter of 2007) and the remaining 46% equity interest for approximately $55 (subject to certain adjustments) after April 1, 2008 and within three years following those government approvals. The ancillary agreements were also amended to reflect the revised share purchase arrangement.


Note 9.	Cash Deposits

equivalents. In most jurisdictions, these cash deposits can be withdrawn if we provide comparable security in the form of letters of credit. Our banking facilities provide for the issuance of letters of credit, and the availability at December 31, 2006 was adequate to cover the amounts on deposit.

At December 31, 2006, cash and cash equivalents held outside the U.S. amounted to $487 including $20 of cash deposits to provide credit enhancement for certain lease agreements and to support surety bonds that allow us to self-insure our workers’ compensation obligations. Several countries have local regulatory requirements that significantly restrict the ability of the Debtors to access the cash. In addition, $74 was held by operations that are majority owned and consolidated by Dana, but which have third party minority ownership with varying levels of participation rights involving cash withdrawals. Beyond these restrictions, there are practical limitations on repatriation of cash from certain countries because of the resulting tax cost.

At December 31, 2006 cash and cash equivalents held in the U.S. amounted to $232 including $73 of cash deposits to provide credit enhancement for certain lease agreements and to support surety bonds that allow us to self-insure our workers’ compensation obligations and $15 held by DCC, a non-Debtor subsidiary, whose cash is restricted by the Forbearance Agreement discussed in Notes 4 and 10.


Note 10.	Short-Term Debt and Credit Facilities

DIP Credit Agreement — Dana, as borrower, and our Debtor U.S. subsidiaries, as guarantors, are parties to a Senior Secured Superpriority Debtor-in-Possession Credit Agreement (the DIP Credit Agreement) with Citicorp North America, Inc., as agent, initial lender and an issuing bank, and with Bank of America, N.A. and JPMorgan Chase Bank, N.A., as initial lenders and issuing banks. The DIP Credit Agreement, as amended, was approved by the Bankruptcy Court in March 2006. The aggregate amount of the facility at December 31, 2006 was $1,450, and included a $750 revolving credit facility (of which $400 was available for the issuance of letters of credit) and a $700 term loan facility.

All of the loans and other obligations under the DIP Credit Agreement are due and payable on the earlier of 24 months after the effective date of the DIP Credit Agreement or the consummation of a plan of reorganization under the Bankruptcy Code. Prior to maturity, Dana is required to make mandatory prepayments under the DIP Credit Agreement in the event that loans and letters of credit exceed the available commitments, and from the proceeds of certain asset sales, unless reinvested. Such prepayments, if required, are to be applied first to the term loan facility and second to the revolving credit facility with a permanent reduction in the amount of the commitments thereunder. Interest for both the term loan facility and the revolving credit facility under the DIP Credit Agreement accrues, at our option, at either the London interbank offered rate (LIBOR) plus a per annum margin of 2.25% or the prime rate plus a per annum margin of 1.25%. Amounts borrowed at December 31, 2006 were at a rate of 7.55% (LIBOR plus 2.25%). We are paying a fee for issued and undrawn letters of credit in an amount per annum equal to the LIBOR margin applicable to the revolving credit facility, a per annum fronting fee of 25 basis points and a commitment fee of 0.375% per annum for unused committed amounts under the revolving credit facility.

expenditures, mergers and consolidations, amendments to constituent documents, accounting changes, and limitations on restrictions affecting subsidiaries and sale-leasebacks.

Additionally, the DIP Credit Agreement requires us to maintain a minimum amount of consolidated earnings before interest, taxes, depreciation, amortization, restructuring and reorganization costs (EBITDAR), based on rolling 12-month cumulative EBITDAR requirements for Dana and our direct and indirect subsidiaries, on a consolidated basis, beginning on March 31, 2007 and ending on February 28, 2008, at levels set forth in the DIP Credit Agreement. We must also maintain minimum availability of $100 at all times. The DIP Credit Agreement provides for certain events of default customary for debtor-in-possession financings of this type, including cross default with other indebtedness. Upon the occurrence and during the continuance of any event of default under the DIP Credit Agreement, interest on all outstanding amounts would be payable on demand at 2% above the then applicable rate. We were in compliance with the requirements of the DIP Credit Agreement at December 31, 2006.

As of March 2006, we had borrowed $700 under the $1,450 DIP Credit Agreement. We used a portion of these proceeds to pay off debt obligations outstanding under our prior five-year bank facility and certain other pre-petition obligations, as well as to provide for working capital and general corporate expenses. We also used the proceeds to pay off the interim DIP revolving credit facility which had been used to pay off our accounts receivable securitization program. Based on our borrowing base collateral, we had availability under the DIP Credit Agreement at December 31, 2006 of $521 after deducting the $100 minimum availability requirement. We had utilized $242 of this for letters of credit, leaving unused availability of $279.

In January 2007, the Bankruptcy Court authorized us to amend the DIP Credit Agreement to:


	•	increase the term loan commitment by $200 to enhance our near-term liquidity and to mitigate timing and execution risks associated with asset sales and other financing activities in process;

	•	increase the annual rate at which interest accrues on amounts borrowed under the term facility by 0.25%;

	•	reduce the minimum global EBITDAR covenant levels and increase the annual amount of cash restructuring charges excluded in the calculation of EBITDAR;

	•	implement a corporate reorganization of our European subsidiaries to facilitate the establishment of a European credit facility and improve treasury and cash management operations; and

	•	receive and retain proceeds from the trailer axle asset sales that closed in January 2007, without potentially triggering a mandatory repayment to the lenders of the amount of proceeds received.

In January 2007, we reduced the aggregate commitment under the revolving credit facility of the amended DIP Credit Agreement from $750 to $650 to correspond with the lower availability in our collateral base. We expect to reduce the revolving credit facility by up to an additional $50 as we continue to divest our non-core businesses.

European Receivables Loan Facility — In March 2007, certain of our European subsidiaries received a commitment from GE Leveraged Loans Limited for the establishment of a five-year accounts receivable securitization program, providing up to the euro equivalent of $225 in available financing. Under the financing program, certain of our European subsidiaries (the Selling Entities) will sell accounts receivable to Dana Europe Financing (Ireland) Limited, a limited liability company incorporated under the laws of Ireland (an Irish special purpose entity). The Irish special purpose entity, as Borrower, will pledge those receivables as collateral for short-term loans from GE Leveraged Loans Limited, as Administrative Agent, and other participating lenders. The receivables will be purchased by the Irish special purpose entity in part from funds provided through subordinated loans from Dana Europe S.A. Dana International Luxembourg SARL (one of our wholly-owned subsidiaries) will act as Performance Undertaking Provider and as the master servicer of the receivables owned by the Irish special purpose entity. The Selling Entities will act as sub-servicers for the accounts receivable sold by them. The accounts receivable purchased by the Irish special purpose entity will be included in our consolidated financial statements because the Irish special purpose entity does not meet certain accounting requirements for treatment as a “qualifying special purpose

entity” under GAAP. Accordingly, the sale of the accounts receivable and subordinated loans from Dana Europe S.A. will be eliminated in consolidation and any loans to the Irish special purpose entity from participating lenders will be reflected as short-term borrowing in our consolidated financial statements. The amounts available under the program are subject to reduction for various reserves and eligibility requirements related to the accounts receivable being sold, including adverse characteristics of the underlying accounts receivable and customer concentration levels. The amounts available under the program are also subject to reduction for failure to meet certain levels of a fixed charge financial covenant calculation.

Canadian Credit Agreement — In June 2006, Dana Canada Corporation (Dana Canada), as borrower, and certain of its Canadian affiliates, as guarantors, entered into a Credit Agreement (the Canadian Credit Agreement) with Citibank Canada as agent, initial lender and an issuing bank, and with JPMorgan Chase Bank, N.A., Toronto Branch and Bank of America, N.A., Canada Branch, as initial lenders and issuing banks. The Canadian Credit Agreement provides for a $100 revolving credit facility, of which $5 is available for the issuance of letters of credit. At December 31, 2006, there were no borrowings and no utilization of the net availability under the facility for the issuance of letters of credit.

Under the Canadian Credit Agreement, Dana Canada and each of its Canadian affiliates are required to comply with customary affirmative covenants for facilities of this type, including covenants as to corporate existence, compliance with laws, insurance, payment of taxes, access to books and records, use of proceeds, maintenance of cash management systems, priority of liens in favor of the lenders, maintenance of properties and monthly, quarterly, annual and other reporting obligations.

Dana Canada and each of its Canadian affiliates are also required to comply with customary negative covenants for facilities of this type, including limitations on liens, additional indebtedness, guarantees, dividends, transactions with affiliates, investments, asset dispositions, nature of business, capital expenditures, mergers and consolidations, amendments to constituent documents, accounting changes, restrictions affecting subsidiaries, and sale and lease-backs. In addition, Dana Canada must maintain a minimum availability under the Canadian Credit Agreement of $20.

under the Canadian Credit Agreement, accelerate the repayment of all of Dana Canada’s obligations thereunder and foreclose on the collateral granted to them.

Debt Reclassification — Our bankruptcy filing triggered the immediate acceleration of our direct financial obligations (including, among others, outstanding non-secured notes issued under our Indentures dated as of December 15, 1997, August 8, 2001, March 11, 2002 and December 10, 2004) and DCC’s obligations under the DCC Notes. The amounts accelerated under our Indentures are characterized as unsecured debt for purposes of the reorganization proceedings. Obligations of $1,585 under our Indentures have been classified as Liabilities subject to compromise, and the unsecured DCC notes have been classified as part of the current portion of long-term debt in our Consolidated Balance Sheet. In connection with the December 2006 sale of DCC’s interest in a limited partnership, $55 of DCC non-recourse debt was assumed by the buyer.

DCC Notes — DCC is a non-Debtor subsidiary of Dana. At the time of our bankruptcy filing, DCC had outstanding notes (the DCC Notes) in the amount of approximately $399. The holders of a majority of the outstanding principal amount of the DCC Notes formed an Ad Hoc Committee which asserted that the DCC Notes had become immediately due and payable. In addition, two DCC noteholders that were not part of the Ad Hoc Committee sued DCC for nonpayment of principal and accrued interest on their DCC Notes. In December 2006, DCC made a payment of $7.7 to these two noteholders in full settlement of their claims. Also in that month, DCC and the holders of most of the DCC Notes executed a Forbearance Agreement and, contemporaneously, Dana and DCC executed a Settlement Agreement relating to claims between them. Together, these agreements provide, among other things, that (i) the forbearing noteholders will not exercise their rights or remedies with respect to the DCC Notes for a period of 24 months (or until the effective date of Dana’s reorganization plan), during which time DCC will endeavor to sell its remaining asset portfolio in an orderly manner and will use the proceeds to pay down the DCC Notes, and (ii) Dana stipulated to a general unsecured pre-petition claim by DCC in the Bankruptcy Cases in the amount of $325 in exchange for DCC’s release of certain claims against the Debtors. Under the Settlement Agreement, Dana and DCC also terminated their intercompany tax sharing agreement under which they had formerly computed tax benefits and liabilities with respect to their U.S. consolidated federal tax returns and consolidated or combined state tax returns. Dana’s stipulation to a DCC claim of $325 was approved by the Bankruptcy Court. Under the Forbearance Agreement, DCC agreed to pay the forbearing noteholders their pro rata share of any excess cash in the U.S. greater than $7.5 on a quarterly basis, and in December 2006, it made a $155 payment to such noteholders, consisting of $125.4 of principal, $28.1 of interest, and a one-time $1.5 prepayment penalty.

Pre-petition Short-term Debt — Our accounts receivable securitization program provided up to a maximum of $275 at December 31, 2005 to meet periodic demand for short-term financing. Under the program, certain of our divisions and subsidiaries either sold or contributed accounts receivable to Dana Asset Funding LLC (DAF), a special purpose entity. DAF funded its accounts receivable purchases by pledging the receivables as collateral for short-term loans from participating banks.

The securitized account receivables were owned in their entirety by DAF. DAF’s receivables were included in our consolidated financial statements solely because DAF did not meet certain accounting requirements for treatment as a “qualifying special purpose entity” under GAAP. Accordingly, the sales and contributions of the account receivables were eliminated in consolidation and any loans to DAF were reflected as short-term borrowings in our consolidated financial statements. The amounts available under the program were subject to reduction based on adverse changes in our credit ratings or those of our customers, customer concentration levels or certain characteristics of the underlying accounts receivable.

Fees are paid to the banks for providing committed lines, but not for uncommitted lines. We paid fees of $30, $10 and $6 in 2006, 2005 and 2004 in connection with our committed facilities. Amortization of bank commitment fees totaled $37, $7 and $7 in 2006, 2005 and 2004.

Selected details of consolidated short-term borrowings are as follows:


			Weighted
			Average
			Interest
	Amount		Rate

Balance at December 31, 2006	$	20		5.6	%
Average during 2006		168		7.8
Maximum during 2006 (month end)		635		7.2

Balance at December 31, 2005	$	587		6.5	%
Average during 2005		400		4.5
Maximum during 2005 (month end)		587		6.5

Details of our consolidated long-term debt are as follows:


	December 31,
	2006		2005

Indebtedness of Dana, excluding consolidated subsidiaries —
DIP-Term Loan
Variable rate note, due March 3, 2008	$	700	$	—
Unsecured notes, fixed rates —
6.5% notes, due March 15, 2008				150
7.0% notes, due March 15, 2028				164
6.5% notes, due March 1, 2009				349
7.0% notes, due March 1, 2029				266
9.0% notes, due August 15, 2011				115
9.0% euro notes, due August 15, 2011				9
10.125% notes, due March 15, 2010				74
5.85% notes, due January 15, 2015				450
Valuation adjustments				5
Indebtedness of DCC —
Unsecured notes, fixed rates, 2.00% — 8.375%, due 2007 to 2011		266		400
Nonrecourse notes, fixed rates, 5.2%, due 2007 to 2010		9		55
Indebtedness of other consolidated subsidiaries		20		21

Total		995		2,058
Less: Amount reclassified to current liabilities				1,898
Less: Current maturities		273		93

Total long-term debt	$	722	$	67

The total maturities of all long-term debt, excluding debt recorded as liabilities subject to compromise, for the next five years and after are as follows: 2007, $273; 2008, $709; 2009, $4; 2010, $4; 2011, $3 and beyond, $2.

An additional $1,585 of debt is included in Liabilities subject to compromise and will be paid in accordance with the ultimate claims resolution in the Bankruptcy Cases.

Swap Agreements — In 2006, we terminated two interest rate swap agreements scheduled to expire in August 2011, under which we had agreed to exchange the difference between fixed rate and floating rate interest amounts on notional amounts corresponding with the amount and term of our August 2011 notes. Converting the fixed interest rate to a variable rate was intended to provide a better balance of fixed and variable rate debt. Both swap agreements had been designated as fair value hedges of the August 2011

notes. Upon approval by the Bankruptcy Court of the DIP Credit Agreement, these swap agreements were terminated with a payment of $6 on March 30, 2006.


Note 11.	Fair Value of Financial Instruments

The estimated fair values of our financial instruments are as follows:


	December 31,
	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value

Financial assets
Cash and cash equivalents	$	719	$	719	$	762	$	762
Notes receivable		81		81		96		96
Loans receivable (net)						18		14
Investment securities						8		8
Currency forwards		1		1		2		2
Financial liabilities
Short-term debt	$	20	$	19	$	587	$	587
Long-term debt		995		1,013		2,058		1,705
Interest rate swaps						4		4
Currency forwards						3		3

At December 31, 2006, the carrying value of Dana’s debt included in Liabilities subject to compromise was $1,585. The fair market value at that time, based on quoted prices, was $1,167. Amounts and payment terms, if applicable, will be established in connection with the Bankruptcy Cases.


Note 12.	Preferred Shares

We have 5,000,000 shares of preferred stock authorized, without par value, including 1,000,000 shares reserved for issuance under the Rights Agreement referred to below. No shares of preferred stock have been issued.

Pursuant to our Rights Agreement dated as of April 25, 1996, we have a preferred share purchase rights plan designed to deter coercive or unfair takeover tactics. Under the Rights Agreement, one right has been issued on each share of our common stock outstanding on and after July 25, 1996. Under certain circumstances, the holder of each right may purchase 1/1000th of a share of our Series A Junior Participating Preferred Stock, no par value, for the exercise price of $110 (subject to adjustment as provided in the Rights Agreement). The rights have no voting privileges and will expire on July 25, 2016, unless exercised, redeemed or exchanged sooner.

Generally, the rights cannot be exercised or transferred apart from the shares to which they are attached. However, if any person or group acquires (or commences a tender offer that would result in acquiring) 15% or more of our outstanding common stock, the rights not held by the acquirer will become exercisable unless our Board postpones their distribution date. In that event, instead of purchasing 1/1000th of a share of the Participating Preferred Stock, the holder of each right may elect to purchase from us the number of shares of our common stock that have a market value of twice the right’s exercise price (in effect, a 50% discount on our stock). Thereafter, if we merge with or sell 50% or more of our assets or earnings power to the acquirer or engage in similar transactions, any rights not previously exercised (except those held by the acquirer) can also be exercised. In that event, the holder of each right may elect to purchase from the acquiring company the number of shares of its common stock that have a market value of twice the right’s exercise price (in effect, a 50% discount on the acquirer’s stock).

Our Board may authorize the redemption of the rights at a price of $.01 each before anyone acquires 15% or more of our common shares. After that, and before the acquirer owns 50% of our outstanding shares,

the Board may authorize the exchange of each right (except those held by the acquirer) for one share of our common stock.


Note 13.	Common Shares

Shares Outstanding

Common stock transactions during the last three years were as follows:


	2006			2005		2004

Shares outstanding at beginning of year		150.5			149.9		148.6
Issued for equity compensation plans, net of forfeitures		(0.2	)		0.6		1.3

Shares outstanding at end of year		150.3			150.5		149.9

Certain of our equity plans provide that participants may tender stock to satisfy the purchase price of the shares and/or the income taxes required to be withheld on the transaction. In connection with these plans, we repurchased 81,744, 635 and 4,914 shares of common stock in 2006, 2005 and 2004.

The following table reconciles the average shares outstanding used in determining basic earnings per share to the number of shares used in the diluted earnings per share calculation:


	2006		2005		2004

Average shares outstanding for the year — basic		149.7		149.6		148.8
Plus: Incremental shares from:
Deferred compensation units		0.6		0.6		0.4
Restricted stock				0.2		0.3
Stock options				0.6		1.1

Potentially dilutive shares		0.6		1.4		1.8

Average shares outstanding for the year — diluted		150.3		151.0		150.6

We excluded the potentially dilutive shares shown above from the computation of earnings per share for the years ended December 31, 2006 and 2005 as the loss from continuing operations for these periods caused the shares to have an anti-dilutive effect.

In addition, we excluded potential common shares of 12.8 million and 13.6 million for the 2006 and 2005 periods from the computation of earnings per share, as the effect of including them would be anti-dilutive. These shares represent stock options with exercise prices higher than the average per share trading price of our stock during the respective periods.

Dividends

Dividends were declared and paid during 2005 at a rate of $0.12 per share for the first three quarters and $0.01 per share for the fourth quarter. No dividends were declared or paid in 2006. The terms of our DIP Credit Agreement do not allow the payment of dividends on shares of capital stock and we do not anticipate paying any dividends while we are in reorganization. We anticipate that any earnings will be retained to finance our operations and reduce debt during this period.


Note 14.	Equity-Based Compensation

Employee Plans — Under our Stock Incentive Plan, the Compensation Committee of our Board may grant stock options to our employees. All outstanding options have been granted at exercise prices equal to the market price of our underlying common shares on the dates of grant. Generally, the grant terms provide that the options are exercisable in cumulative 25% increments at each of the first four anniversary dates of the grant and expire ten years from the date of grant. The vesting of most outstanding options has been accelerated as described in Note 1 and below.

When we merged with Echlin Inc. in 1998, we assumed Echlin’s 1992 Stock Option Plan for employees and the underlying Echlin shares were converted to our stock. At the time of the merger, there were options outstanding under this plan for the equivalent of 1,692,930 shares. No options were granted under this plan after the merger. The plan expired in 2002 and the options outstanding at the date of expiration remained exercisable according to their terms. All options outstanding under this plan will expire no later than 2008, if not exercised before then. There were no stock options granted in 2006 and none were exercised.

The following table summarizes the stock option activity under these two plans in the last three years:


				Weighted
				Average
	Number of			Exercise
	Shares			Price

Outstanding at December 31, 2003		17,470,433		$	26.57
Granted — 2004		2,018,219			22.03
Exercised — 2004		(958,964	)		12.13
Cancelled — 2004		(2,351,475	)		31.10

Outstanding at December 31, 2004		16,178,213			26.20
Granted — 2005		2,368,570			14.87
Exercised — 2005		(166,233	)		10.12
Cancelled — 2005		(3,079,852	)		30.17

Outstanding at December 31, 2005		15,300,698			23.83
Cancelled — 2006		(2,979,629	)		25.71

Outstanding at December 31, 2006		12,321,069		$	23.37

The following table summarizes information about the stock options outstanding under these plans at December 31, 2006:


	Outstanding Options						Exercisable Options
			Weighted
			Average		Weighted				Weighted
Range of			Remaining		Average				Average
Exercise	Number of		Contractual		Exercise		Number of		Exercise
Prices	Options		Life in Years		Price		Options		Price

$ 8.34-$18.81		5,135,992		6.7	$	13.31		4,518,966	$	13.72
20.19- 33.08		4,918,298		5.1		23.39		4,918,298		23.39
37.52- 52.56		2,266,779		1.2		46.12		2,266,779		46.12

		12,321,069		5.1	$	23.37		11,704,043	$	24.06

Director Plans — Some of our non-management directors have outstanding options granted under our 1998 Directors’ Stock Option Plan, which we terminated in 2004. Under the plan, options for 3,000 common shares had been granted annually to each non-management director. The option price was the market value of the stock at the date of grant. The options outstanding on the termination date remained exercisable in accordance with their terms. All options outstanding under this plan will expire no later than 2013, if not

exercised or cancelled before then. The following is a summary of the stock option activity of this plan in the last three years:


	Number of			Weighted Average
	Shares			Exercise Price

Outstanding at December 31, 2003		231,000		$	29.63
Cancelled — 2004		(42,000	)		33.66

Outstanding at December 31, 2004		189,000			28.73
Cancelled — 2005		(15,000	)		24.81

Outstanding at December 31, 2005		174,000			29.07
Cancelled — 2006		(15,000	)		32.25

Outstanding at December 31, 2006		159,000		$	28.77

The following table summarizes information about the stock options outstanding under this plan at December 31, 2006:


	Outstanding Options						Exercisable Options
			Weighted
			Average		Weighted				Weighted
Range of			Remaining		Average				Average
Exercise	Number of		Contractual		Exercise		Number of		Exercise
Prices	Options		Life in Years		Price		Options		Price

$8.52 – $21.53		81,000		5.4	$	15.56		81,000	$	15.56
28.78 – 31.81		39,000		1.9		30.18		39,000		30.18
50.25 – 60.09		39,000		1.8		54.79		39,000		54.79

		159,000		3.7	$	28.77		159,000	$	28.77

Director Deferred Fee Plan — Prior to February 2006, our non-management directors could elect to defer payment of their retainers and fees for Board and Committee service. Deferred amounts were credited to an Interest Equivalent Account and/or a Stock Account. The number of stock units credited to the Stock Account were based on the amount deferred and the market price of our stock. Stock Accounts were credited with additional stock units when cash dividends were paid on our stock, based on the number of units in the Stock Account and the amount of the dividend. Prior to 2006, non-management directors were also credited with an annual grant of units to their Stock Accounts equal in value to the number of shares of our stock that could have been purchased with $75,000, assuming a stock purchase price based on the average of the high and low trading prices of our stock on the grant date. The annual grants were suspended in 2006. The plan provides that distributions will be made when the directors retire, die or terminate service with us, in the form of cash and/or our stock. Following our bankruptcy filing, directors with pre-petition deferred compensation under this plan have general creditors’ claims for the deferred amounts.

Equity-Based Compensation — In accordance with our accounting policy for stock-based compensation, we had not recognized any compensation expense relating to our stock options prior to 2006. The table below sets forth the amounts that would have been recorded as stock option expense for the years ended December 31, 2005 and 2004 if we had used the fair value method of accounting, the alternative policy set out in SFAS No. 123, “Accounting for Stock-Based Compensation.”


	Year Ended December 31,
	2005			2004

Stock compensation expense, as reported	$	6		$	3
Stock option expense, pro forma		37			8

Stock compensation expense, pro forma	$	43		$	11

Net income (loss), as reported	$	(1,605	)	$	62
Net income (loss), pro forma		(1,642	)		54
Basic earnings per share
Net income (loss), as reported	$	(10.73	)	$	0.41
Net income (loss), pro forma		(10.98	)		0.36
Diluted earnings per share
Net income (loss), as reported	$	(10.73	)	$	0.41
Net income (loss), pro forma		(10.98	)		0.36

As a result of our providing a valuation allowance against our U.S. net deferred tax assets as of the beginning of 2005, no tax benefit related to stock compensation expense was recorded for the year ended December 31, 2005. A tax benefit of $5 was recorded for 2004.

Accelerated Option Vesting — On December 1, 2005, the Compensation Committee approved the immediate vesting of all unvested stock options and stock appreciation rights (SARs) granted to employees under the Amended and Restated Stock Incentive Plan with an option exercise price of $15.00 or more per share or an SAR grant price of $15.00 or more. As a result, unvested stock options granted under the plan to purchase 3,584,646 shares of our common stock, with a weighted average exercise price of $18.23 per share, and 11,837 unvested SARs, with a weighted average grant price of $21.97 per share, became exercisable on December 1, 2005 rather than on the later dates when they would have vested in the normal course.

The decision to accelerate the vesting of these stock options and SARs was made to reduce the compensation expense that we would otherwise have been required to record in future periods following our adoption of SFAS No. 123(R). We adopted SFAS No. 123(R) in January 2006. If the vesting of these stock options and SARs had not been accelerated, we would have expected to recognize an incremental share-based compensation expense of approximately $19 in the aggregate from 2006 through 2009. The resulting pro forma share-based expense of $19 is included in the pro forma 2005 expense reflected in the table above. As a result of the accelerated vesting, we will recognize approximately $4 of share-based compensation through 2008, in the aggregate, with respect to the options and SARs that remained unvested at December 31, 2005. For the year ended December 31, 2006, we recognized $2 of stock option expense.

Option Valuation Methods — During the first quarter of 2005, we changed the method used to value stock option grants from the Black-Scholes method to the binomial method, which provides a fair value more representative of our historical exercise and termination experience because it considers the possibility of early exercises of options. We have valued stock options granted prior to January 1, 2005 using the Black-Scholes method and stock options granted thereafter using the binomial method.

The weighted average fair value of the 2,368,570 options and SARs granted in 2005 was $4.04 per share under the binomial method, using a weighted average market value at date of grant of $14.87 and the following weighted average assumptions: risk-free interest rate of 3.91%, a dividend yield of 2.69%, volatility of 30.8% to 31.5%, expected forfeitures of 17.93% and an expected option life of 6.8 years. No options were granted in 2006.

The assumptions used in 2004 under the Black-Scholes method were as follows:


		2004

Risk-free interest rate		3.29%
Dividend yield		2.22%
Expected life		5.4 years
Stock price volatility		51.84%

Other Equity Grants — Our Stock Incentive Plan also provides for the issuance of restricted stock units, restricted shares, stock awards and performance shares and SARs, which historically could be granted separately or in conjunction with options. During 2005, we granted 66,625 restricted stock units, 17,000 restricted shares, 342,104 stock-denominated performance shares, 67,250 shares as stock awards and 7,960 SARs. The vesting periods for these grants, where applicable, range from one to five years. Charges to expense related to these incentive awards totaled $3 in 2005. There were no grants under this program in 2006. At December 31, 2006, there were 8,594,758 shares available for future grants of options and other types of awards under this plan.

Other Compensation Plans

Additional Compensation Plan — Historically, we had numerous additional compensation plans under which we paid our employees for increased productivity and improved performance. One such plan was our Additional Compensation Plan, under which key management employees selected by our Compensation Committee could earn annual cash bonuses if pre-established annual corporate and/or other performance goals were attained. Prior to 2005, the participants in this plan could elect whether to defer the payment of their bonuses, whether the deferred amounts would be credited to a Stock Account and/or an Interest Equivalent Account and whether payment of the deferred awards would be made in cash and/or stock. Amounts deferred in a Stock Account were credited in the form of units, each equivalent to a share of our stock, and the units were credited with the equivalent of dividends on our stock and adjusted in value based on the market value of the stock. The bonus deferral feature was eliminated in 2005; however, plan accounts established before 2005 remain in effect. Expense related to the Stock Accounts is charged or credited in connection with increases or decreases in the value of the units in those accounts. Amounts deferred in the Interest Equivalent Accounts were credited quarterly with interest earned at a rate tied to the prime rate until 2006, when interest accruals stopped after the Filing Date.

Activity for the last three years related to the compensation deferred under this plan was as follows:


	2006			2005			2004

Accrued for bonuses	$	—		$	—		$	9
Dividends and interest credited to participants’ accounts								1
Mark-to-market adjustments		(2	)		(3	)		1

Plan expense (credit)	$	(2	)	$	(3	)	$	11

In order to satisfy a portion of our deferred compensation obligations to retirees and other former employees under this plan, we distributed shares totaling 12,599, 318,641 and 229,058 in 2006, 2005 and 2004.

Restricted Stock Plans — Our Compensation Committee may grant restricted common shares to key employees under our 1999 Restricted Stock Plan. The shares are subject to forfeiture until the restrictions lapse or terminate. Generally, for outstanding restricted shares, the employee must remain employed with us for three to five years after the date of grant to avoid forfeiting the shares. Dividends on restricted shares have historically been credited in the form of additional restricted shares. Participants historically could elect to convert their unvested restricted stock into an equal number of restricted stock units under certain conditions. This conversion feature was eliminated in 2005. There were no restricted shares converted to restricted stock units in 2005 and the number of restricted shares converted to restricted stock units was 4,397 in 2004. The

100

units, which were credited with the equivalent of dividends, are payable in unrestricted stock upon retirement or termination of employment unless subject to forfeiture.

Under the 1999 Restricted Stock Plan, we granted no shares in 2006 and 345,436 and 129,500 in 2005 and 2004. At December 31, 2006, there were 618,352 shares available for future grants and dividend accruals under this plan.

Grants were made under the predecessor 1989 Restricted Stock Plan through February 1999, at which time the authorization to grant restricted stock under this plan lapsed. At December 31, 2006, there were 488,789 shares available for issuance in connection with dividend accruals under this plan. Expenses for these plans were $1 for 2006 and $2 in 2005 and 2004.

Employees’ Stock Purchase Plan — Our Employees’ Stock Purchase Plan, which had been in effect for many years, was discontinued effective November 1, 2005.

Under the plan, full-time employees of Dana and our wholly-owned subsidiaries and some part-time employees of our non-U.S. subsidiaries had been able to authorize payroll deductions of up to 15% of their earnings. These deductions were deposited with an independent plan custodian. We matched up to 50% of the participants’ contributions in cash over a five-year period, beginning with the year the amounts were withheld. To get the full 50% match, shares purchased by the custodian for any given year had to remain in the participant’s account for five years.

The custodian used the payroll deductions and matching contributions to purchase our stock at current market prices. As record keeper for the plan, we allocated the purchased shares to the participants’ accounts. Shares were distributed to the participants from their accounts on request in accordance with the plan’s withdrawal provisions.

In the last two years of the plan, 2005 and 2004, the custodian purchased 1,447,001 and 1,460,940 shares in the open market. Expenses for our matching contributions were $5 and $8 in 2005 and 2004.

We were also authorized to issue up to 4,500,000 shares to sell to the custodian in lieu of open market purchases. No shares were issued for this purpose.


Note 15.	Pension and Postretirement Benefit Plans

Pension — We provide defined contribution and defined-benefit, qualified and nonqualified, pension plans for certain employees. We also provide other postretirement benefits including medical and life insurance for certain employees upon retirement.

Under the terms of the defined contribution retirement plans, employee and employer contributions may be directed into a number of diverse investments. None of these defined contribution plans allow direct investment in our stock.

On September 29, 2006, the FASB issued FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” Effective December 31, 2006, we adopted SFAS No. 158, which requires that the Consolidated Balance Sheet include the funded status of the pension and postretirement plans. The funded status of the plans is measured as the difference between the plan assets at fair value and the projected benefit obligation. We have recorded the aggregate excess assets of all overfunded plans in Investments and other assets and the aggregate excess obligation of all underfunded plans in Deferred employee benefits and other noncurrent liabilities and Liabilities subject to compromise. In addition, the portion of the benefits payable in the next year which exceeds the fair value of plan assets is reported in Accrued payroll and employee benefits. SFAS No. 158 did not change the existing criteria for measurement of periodic benefit costs, plan assets or benefit obligations.

101

The following table reflects the impact of the adoption of SFAS No. 158 on our Consolidated Balance Sheet at December 31, 2006:


	Before Application						After Application
	of SFAS No. 158			Adjustments			of SFAS No. 158

Investments and other assets	$	1,003		$	(340	)	$	663
Accrued payroll and employee benefits		217			8			225
Liabilities subject to compromise		3,766			409			4,175
Deferred employee benefits and other noncurrent liabilities		443			61			504
Accumulated other comprehensive loss		(259	)		(818	)		(1,077	)

Also at December 31, 2006, previously unrecognized differences between actual amounts and estimates based on actuarial assumptions are included in Accumulated other comprehensive loss in our Consolidated Balance Sheet as required by SFAS No. 158. In future reporting periods, the difference between actual amounts and estimates based on actuarial assumptions will be recognized in Other comprehensive loss in the period in which they occur.

Amounts recognized in the Consolidated Balance Sheet consist of:


	Pension Benefits												Other Benefits
	2006						2005						2006						2005
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.

Noncurrent assets	$	82		$	24		$	251		$	113		$	—		$	—		$	—		$	—
Current liabilities		(1	)		(8	)		(10	)		(37	)		(119	)		(7	)		(123	)		(7	)
Noncurrent liabilities		(184	)		(297	)		(217	)		(190	)		(1,375	)		(108	)		(856	)		(50	)
Accumulated other comprehensive loss								320			81

Net amount recognized	$	(103	)	$	(281	)	$	344		$	(33	)	$	(1,494	)	$	(115	)	$	(979	)	$	(57	)

Amounts recognized in Accumulated other comprehensive loss in 2006 consist of:


	Pension Benefits						Other Benefits
	2006						2006
	U.S.			Non-U.S.			U.S.			Non-U.S.

Net actuarial loss	$	429		$	204		$	630		$	47
Prior service cost		4			4			(116	)
Transition asset					1						3

Gross amount recognized		433			209			514			50
Deferred tax benefits		(93	)		(22	)					(17	)
Minority and equity interests					3

Net amount recognized	$	340		$	190		$	514		$	33

The estimated prior service cost and net actuarial loss for the defined benefit pension plans that will be amortized from Accumulated other comprehensive loss into benefit cost in 2007 are $1 and $21 for our U.S. plans and $1 and $11 for our non-U.S. plans. The net actuarial loss related to the other postretirement benefit plans that will be amortized from Accumulated other comprehensive loss into benefit cost in 2007 is $34 for our U.S. plans and $3 for our non-U.S. plans. The 2007 U.S. benefit cost will be reduced by an estimated $12 of amortization of prior service credit related to other postretirement benefit plans.

102

The following tables provide a reconciliation of the changes in the defined benefit pension plans’ and other postretirement plans’ benefit obligations and fair value of assets over the two-year period ended December 31, 2006, and a statement of the funded status and schedules of the net amounts recognized in the balance sheet at December 31, 2006 and 2005 for both continuing and discontinued operations.


	Pension Benefits												Other Benefits
	2006						2005						2006						2005
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.

Reconciliation of benefit obligation:
Obligation at January 1	$	2,151		$	1,077		$	2,159		$	938		$	1,543		$	126		$	1,643		$	104
Service cost		31			20			31			15			9			2			9			2
Interest cost		119			53			121			47			84			7			87			6
Employee contributions					2						2
Plan amendments											1									(35	)
Actuarial (gain) loss		(41	)		(36	)		92			180			(26	)		(3	)		(28	)		23
Benefit payments		(265	)		(52	)		(248	)		(42	)		(119	)		(5	)		(133	)		(4	)
Settlements, curtailments and terminations		29			(6	)		8			4			3			(14	)
Other																							(7	)
Acquisitions and divestitures					12			(12	)								2
Translation adjustments					102						(68	)											2

Obligation at December 31	$	2,024		$	1,172		$	2,151		$	1,077		$	1,494		$	115		$	1,543		$	126

The measurement date for the amounts in these tables was December 31 of each year presented:


	Pension Benefits
	2006						2005
	U.S.			Non-U.S.			U.S.			Non-U.S.

Reconciliation of fair value of plan assets:
Fair value at January 1	$	1,985		$	796		$	2,015		$	728
Actual return on plan assets		167			55			190			111
Acquisitions and divestitures					2
Employer contributions		34			27			41			40
Employee contributions					2						2
Benefit payments and transfers		(265	)		(52	)		(261	)		(42	)
Settlements					(8	)
Translation adjustments					69						(43	)

Fair value at December 31	$	1,921		$	891		$	1,985		$	796

103

The following table presents information regarding the aggregate funding levels of our defined benefit pension plans:


	December 31,
	2006				2005
	U.S.		Non-U.S.		U.S.		Non-U.S.

Plans with fair value of plan assets in excess of obligations:
Accumulated benefit obligation	$	558	$	405	$	558	$	442
Projected benefit obligation		562		416		562		450
Fair value of plan assets		643		442		624		460
Plans with obligations in excess of fair value of plan assets:
Accumulated benefit obligation	$	1,460	$	703	$	1,584	$	560
Projected benefit obligation		1,462		756		1,589		627
Fair value of plan assets		1,278		449		1,361		336

The weighted average asset allocations of our pension plans at December 31 follow:


	U.S.						Non-U.S.
Asset Category	2006			2005			2006			2005

Equity securities		38	%		40	%		43	%		46	%
Controlled-risk debt securities		34			33			53			47
Absolute return strategies investments		24			26
Real estate								2			2
Cash and short-term securities		4			1			2			5

Total		100	%		100	%		100	%		100	%

Our target asset allocations of U.S. pension plans for equity securities, controlled-risk debt securities, absolute return strategies investments and cash and other assets at December 31, 2006 and 2005 were 40%, 35%, 20% and 5%. Our U.S. pension plan target asset allocations are established through an investment policy, which is updated periodically and reviewed by the Finance Committee of the Board of Directors.

Our policy recognizes that the link between assets and liabilities is the level of long-term interest rates and that properly managing the relationship between assets of the pension plans and pension liabilities serves to mitigate the impact of market volatility on our funding levels.

Given our U.S. plans’ demographics, an important component of our asset/liability modeling approach is the use of what we refer to as “controlled-risk assets”; for the U.S. fund these assets are long duration U.S. government fixed-income securities. Such securities are a positively correlated asset class to pension liabilities and their use mitigates interest rate risk and provides the opportunity to allocate additional plan assets to other asset categories with low correlation to equity market indices.

Our investment policy permits plan assets to be invested in a number of diverse investment categories, including “absolute return strategies” investments such as hedge funds. Absolute return strategies investments are currently limited to not less than 10% nor more than 30% of total assets. At December 31, 2006, approximately 24% of our U.S. plan assets were invested in absolute return strategies investments, primarily in U.S. and international hedged directional equity funds. The cash and other short-term debt securities provide adequate liquidity for anticipated near-term benefit payments.

The weighted-average asset allocation targets for our non-U.S. plans at December 31, 2006 were 46% equity securities, 49% controlled-risk sovereign debt securities and 5% cash and other assets. The following

104

table presents the funded status of our pension and other retirement benefit plans and the amounts recognized in the balance sheet as of December 31, 2005.


	Pension Benefits						Other Benefits
	2005						2005
	U.S.			Non-U.S.			U.S.			Non-U.S.

Funded status:
Balance at December 31	$	(166	)	$	(281	)	$	(1,543	)	$	(126	)
Unrecognized transition obligation					1						3
Unrecognized prior service cost		5			6			(128	)
Unrecognized loss		505			241			692			66

Prepaid expense (accrued cost)	$	344		$	(33	)	$	(979	)	$	(57	)

Amounts recognized in the balance sheet consist of:
Prepaid benefit cost	$	247		$	108		$	—		$	—
Accrued benefit liability		(13	)		(151	)		(979	)		(57	)
Intangible assets		4			5
Additional minimum liability		(214	)		(76	)
Accumulated other comprehensive loss		320			81

Net amount recognized	$	344		$	(33	)	$	(979	)	$	(57	)

The amounts recorded in other comprehensive income (loss) were a pre-tax credit of $39 in 2006 that decreased the Accumulated other comprehensive loss by $36 and a pre-tax charge of $157 in 2005 that increased the Accumulated other comprehensive loss by $152.

Benefit obligations of the U.S. non-qualified and certain non-U.S. pension plans, amounting to $185 at December 31, 2006, and the other postretirement benefit plans of $1,609 are not funded.

The initial effect of the Medicare Part D subsidy was a $68 reduction in our APBO at January 1, 2004 and a corresponding actuarial gain, which we deferred in accordance with our accounting policy related to retiree benefit plans. In January 2005, the final regulations to implement the new prescription drug benefits were released. The final regulations resulted in a further reduction of $43 in the APBO in 2005. Amortization of the related actuarial gain, along with a reduction in service and interest costs, decreased expense by $11, $13 and $8 in 2006, 2005 and 2004.

Expected benefit payments by our pension plans and other retirement plans for each of the next five years and for the period 2012 through 2016 are presented in the following table.


					Other Benefits
	Pension Benefits				U.S.
					Gross before				Net after
					Medicare		Medicare		Medicare
	U.S.		Non-U.S.		Part D		Part D		Part D		Non-U.S.

Year
2007	$	170	$	50	$	126	$	7	$	119	$	7
2008		168		51		131		7		124		7
2009		166		52		128		7		121		8
2010		165		53		129		8		121		8
2011		167		56		129		8		121		9
2012-2016		825		314		609		44		565		48

Total	$	1,661	$	576	$	1,252	$	81	$	1,171	$	87

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Projected contributions to be made to our defined benefit pension plans in 2007 (excluding the contributions related to our U.K. pension liabilities discussed at the end of this note) are $36 for our U.S. plans and $26 for our non-U.S. plans.

Components of net periodic benefit costs for the last three years are as follows:


	Pension Benefits
	2006						2005						2004
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.

Service cost	$	31		$	20		$	31		$	15		$	38		$	21
Interest cost		119			52			121			47			128			50
Expected return on plan assets		(158	)		(51	)		(173	)		(45	)		(173	)		(42	)
Amortization of transition obligation																	(1	)
Amortization of prior service cost		1			3			2			2			4			4
Recognized net actuarial loss (gain)		26			16			18			6			13			6

Net periodic benefit cost		19			40			(1	)		25			10			38
Curtailment loss					3						4			2
Settlement loss		13			2			13						9			6
Termination cost		16			2

Net periodic benefit cost after curtailment and settlements	$	48		$	47		$	12		$	29		$	21		$	44


	Other Benefits
	2006					2005					2004
	U.S.			Non-U.S.		U.S.			Non-U.S.		U.S.			Non-U.S.

Service cost	$	9		$	2	$	9		$	2	$	9		$	4
Interest cost		85			6		87			6		96			6
Amortization of prior service cost		(13	)				(12	)				(12	)
Recognized net actuarial loss		37			4		37			2		38			2

Net periodic benefit cost		118			12		121			10		131			12
Settlement gain															(1	)
Termination cost												1

Net periodic benefit cost after curtailment and settlements	$	118		$	12	$	121		$	10	$	132		$	11

The weighted average assumptions used in the measurement of pension benefit obligations are as follows:


	U.S. Plans
	2006			2005			2004

Discount rate		5.88	%		5.65	%		5.75	%
Expected return on plan assets		8.25	%		8.50	%		8.75	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%

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	Non-U.S. Plans
	2006			2005			2004

Discount rate		5.03	%		4.65	%		5.54	%
Expected return on plan assets		6.32	%		6.38	%		6.68	%
Rate of compensation increase		2.98	%		3.25	%		3.46	%

The assumptions and expected return on plan assets for the U.S. plans presented in the table above are used to determine pension expense for the succeeding year.

Our pension plan discount rate assumption is evaluated annually. Long-term interest rates on high quality debt instruments, which are used to determine the discount rate, rose modestly in 2006 after declining ten basis points in 2005. Using a discounted bond portfolio analysis, the year-end discount rate was selected to determine our pension benefit obligation on our U.S. plans in both years. Overall, a change in the discount rate of 25 basis points would result in a change in our obligation of approximately $51 and a change in pension expense of approximately $3.

We select the expected rate of return on plan assets on the basis of a long-term view of asset portfolio performance of our pension plans. Since 1985, our asset/liability management investment policy has resulted in a compound rate of return of 11.7%. Our two-year, five-year and ten-year compounded rates of return through December 31, 2006 were 10.3%, 10.7% and 9.2%. We assess the appropriateness of the expected rate of return on an annual basis and when necessary revise the assumption. Our rate of return assumption for U.S. plans was lowered to 8.25% as of December 31, 2006, based in part on our expectation of lower future rates of return.

The weighted average assumptions used in the measurement of other postretirement benefit obligations in the U.S. are as follows:


	2006			2005			2004

Discount rate		5.86	%		5.60	%		5.76	%
Initial weighted health care costs trend rate		10.00	%		9.00	%		10.31	%
Ultimate health care costs trend rate		5.00	%		5.00	%		4.98	%
Years to ultimate		5			6			7

The assumptions presented in the table above are used to determine expense for the succeeding year. Assumed healthcare costs trend rates have a significant effect on the healthcare plan.

A one-percentage-point change in assumed healthcare costs trend rates would have the following effects for 2006:


	1% Point		1% Point
	Increase		Decrease

Effect on total of service and interest cost components	$	7	$	(6	)
Effect on postretirement benefit obligations		105		(87	)

Subsequent event — In February 2007, we announced the restructuring of the pension liabilities of our United Kingdom (U.K.) operations. On February 27, 2007, ten of our subsidiaries located in the U.K. and the trustees of four U.K. defined benefit pension plans entered into an Agreement as to Structure of Settlement and Allocation of Debt to compromise and settle the liabilities owed by our U.K. operating subsidiaries to the pension plans. The agreement provides for the trustees of the plans to release the operating subsidiaries from all such liabilities in exchange for an aggregate cash payment of approximately $93 and the transfer of 33% equity interest in our axle manufacturing and driveshaft assembly businesses in the U.K. for the benefit of the pension plan participants. The agreement was necessitated in part by our planned divestitures of several non-core U.K. businesses which, upon completion, would have resulted in unsustainable pension funding demands on the operating subsidiaries under U.K. pension law, in addition to their ongoing funding obligations. We expect to record a settlement charge in the range of $150 to $170 (including a cash charge

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of $93) in connection with these transactions. Remaining employees in the U.K. operations will receive future pension benefits pursuant to a defined contribution arrangement similar to our intended actions in the U.S.


Note 16.	Income Taxes

Income tax expense (benefit) applicable to continuing operations consists of the following components:


	Year Ended December 31
	2006			2005			2004

Current
U.S. federal	$	—		$	67		$	61
U.S. state and local		(6	)		(19	)		(4	)
Non-U.S.		89			141			31

Total Current		83			189			88

Deferred
U.S. federal and state		3			776			(298	)
Non-U.S.		(20	)		(41	)		5

Total Deferred		(17	)		735			(293	)

Total expense (benefit)	$	66		$	924		$	(205	)

Income (loss) before income taxes from continuing operations consists of the following:


	Year Ended December 31
	2006			2005			2004

U.S. operations	$	(634	)	$	(736	)	$	(445	)
Non-U.S. operations		63			451			280

Total loss before income taxes	$	(571	)	$	(285	)	$	(165	)

U.S. operations include those of the debtor companies and DCC, a non-debtor company.

Deferred income taxes are provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws and regulations, as well as net operating loss, tax credit and other carryforwards. SFAS No. 109, “Accounting for Income Taxes”, requires that deferred tax assets be reduced by a valuation allowance if, based an all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.

The current income tax expense includes changes in the amount of income taxes currently payable or receivable. Although our current operating results, as discussed below, did not generate federal income taxes payable in the U.S., the current federal income tax expense in 2004 and 2005 generally reflects estimated amounts payable as a result of Internal Revenue Service examinations of the years 1997 through 2002 — periods for which NOLs were not available.

During the third quarter of 2005, we recorded a non-cash charge of $918 to establish a full valuation allowance against our net deferred tax assets in the U.S. and U.K. This charge represents the valuation allowance against the applicable net deferred tax assets at July 1, 2005, which included $817 of net deferred tax assets as of the beginning of the year.

In assessing the need for additional valuation allowances during 2005, we considered the impact of the revised outlook of our profitability in the U.S. on our future operating results. The revised outlook of profitability was due in part to the lower than previously anticipated levels of performance, resulting from manufacturing inefficiencies and our failure to achieve projected cost reductions, as well as higher-than-expected costs for steel, other raw materials and energy which we have not been able to recover fully. In light of these developments, there was sufficient negative evidence and uncertainty as to our ability to generate the

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necessary level of U.S taxable earnings to realize our deferred tax assets in the U.S. for us to conclude, in accordance with the requirements of SFAS No. 109 and our accounting policies, that a full valuation allowance against the net deferred tax asset was required. Additionally, we concluded that an additional valuation allowance was required for the deferred tax assets in U.K. where recoverability was also considered uncertain. In reviewing our results for the fourth quarter of 2006 and beyond, we concluded that there were no further changes to our previous assessments as to the realization of our other deferred tax assets.

Deferred tax benefits (liabilities) consist of the following:


	December 31
	2006			2005

Postretirement benefits other than pensions	$	620		$	409
Pension accruals		98
Postemployment benefits		54			48
Other employee benefits		2			8
Capital loss carryforward		216			226
Net operating loss carryforwards		592			583
Foreign tax credits recoverable		108			187
Other tax credits recoverable		56			60
Inventory reserves		24			21
Expense accruals		183			156
Goodwill		49			54
Research and development costs		212			116
Other		56			29

Total		2,270			1,897
Valuation allowances		(1,971	)		(1,535	)

Deferred tax benefits		299			362

Leasing activities		(69	)		(183	)
Depreciation — non-leasing		(28	)		(63	)
Pension accruals					(21	)
Unremitted equity earnings					(11	)

Deferred tax liabilities		(97	)		(278	)

Net deferred tax benefits	$	202		$	84

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Our deferred tax assets include benefits expected from the utilization of net operating loss, capital loss and credit carryforwards in the future. The following table identifies the various deferred tax asset components and the related allowances that existed at December 31, 2006. Due to time limitations on the ability to realize the benefit of the carryforwards, additional portions of these deferred tax assets may become unrealizable in the future.


	Deferred					Earliest
	Tax		Valuation		Carryforward	Year of
	Asset		Allowance		Period	Expiration

Net operating losses
U.S. federal	$	317	$	319	20	2023
U.S. state		136		136	Various	2006
Germany		39		22	Unlimited
France		17			Unlimited
U.K		32		32	Unlimited
Other non-U.S.		51		7	Various	2007

Total		592		516
Capital losses		216		201	Various	2007
Foreign tax credit		108		108	10	2010
Other credits		56		56	20	2021

Total	$	972	$	881

A valuation allowance is not required on $15 of the capital loss benefit since the settlement of the IRS examinations for the years prior to 1999 enable us to recover these amounts through capital loss carryback provisions.

We have not provided for U.S. federal income and non-U.S. withholding taxes on $938 of undistributed earnings from non-U.S. operations as of December 31, 2006 because such earnings are intended to be re-invested indefinitely outside of the U.S. Where excess cash has accumulated in our non-U.S. subsidiaries and it is advantageous for business operations, tax or cash reasons, subsidiary earnings are remitted to the U.S. parent. We are currently examining opportunities for cash repatriation to the U.S. from international operations in 2007. At present, we expect that most of the repatriated funds will be structured as repayment of intercompany borrowings or distributions of 2007 earnings. If these earnings were distributed, our net operating loss and foreign tax credit carryforwards available under current law would reduce or eliminate the resulting U.S. income tax liability.

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The effective income tax rate for continuing operations differs from the U.S. federal income tax rate for the following reasons:


	Year Ended December 31,
	2006			2005			2004

U.S. federal income tax rate		(35	)%		(35	)%		(35	)%
Increases (reductions) resulting from:
State and local income taxes, net of federal income tax benefit		(3	)		(7	)		(9	)
Non-U.S. income		9			12			(3	)
General business tax credits		(1	)		(4	)		(5	)
Goodwill impairment		3			5
Ohio legislation					4
Provision to return adjustments		1			3			(1	)
Miscellaneous items		2			(1	)		(1	)

Impact of continuing operations before valuation allowance adjustments on effective tax rate		(24	)		(23	)		(54	)
Capital gain								48
Valuation allowance adjustments		36			346			(118	)

Effective income tax rate — continuing operations		12	%		323	%		(124	)%

Going forward, the need to maintain a valuation allowance against deferred tax assets in the U.S. and other foreign countries will cause variability in our effective tax rate. Dana will maintain full valuation allowances against our net deferred tax assets in the U.S., U.K. and other applicable countries until sufficient positive evidence exists to reduce or eliminate the valuation allowance.


Note 17.	Commitments and Contingencies

Impact of Our Bankruptcy Filing

Under the Bankruptcy Code, the filing of our petition on March 3, 2006 automatically stayed most actions against us. Substantially all of our pre-petition liabilities will be addressed under our plan of reorganization, if not otherwise addressed pursuant to orders of the Bankruptcy Court.

Class Action Lawsuit and Derivative Actions

There is a consolidated securities class action (Howard Frank v. Michael J. Burns and Robert C. Richter) pending in the U.S. District Court for the Northern District of Ohio naming our CEO, Mr. Burns, and our former CFO, Mr. Richter, as defendants. The plaintiffs in this action allege violations of the U.S. securities laws and claim that the price at which Dana’s shares traded at various times between February 2004 and November 2005 was artificially inflated as a result of the defendants’ alleged wrongdoing.

There is also a shareholder derivative action (Roberta Casden v. Michael J. Burns, et al.) pending in the same court naming our current directors, certain former directors and Messrs. Burns and Richter as defendants. The derivative claim in this case, alleging breaches of the defendants’ fiduciary duties to Dana, has been stayed. The plaintiff in the Casden action has also asserted class action claims alleging a breach of duties that purportedly forced Dana into bankruptcy.

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currently believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations, there can be no assurance that any uninsured loss would not be material.

SEC Investigation

In September 2005, we reported that management was investigating accounting matters arising out of incorrect entries related to a customer agreement in our Commercial Vehicle operations, and that our Audit Committee had engaged outside counsel to conduct an independent investigation of these matters as well. Outside counsel informed the SEC of the investigation, which ended in December 2005. In January 2006, we learned that the SEC had issued a formal order of investigation with respect to matters related to our restatements. The SEC’s investigation is a non-public, fact-finding inquiry to determine whether any violations of the law have occurred. This investigation has not been suspended as a result of our bankruptcy filing. We are continuing to cooperate fully with the SEC in the investigation.

Legal Proceedings Arising in the Ordinary Course of Business

We are a party to various pending judicial and administrative proceedings arising in the ordinary course of business. These include, among others, proceedings based on product liability claims and alleged violations of environmental laws. We have reviewed these pending legal proceedings, including the probable outcomes, our reasonably anticipated costs and expenses, the availability and limits of our insurance coverage and surety bonds and our established reserves for uninsured liabilities. We do not believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations.

Asbestos-Related Product Liabilities

Under the Bankruptcy Code, our pending asbestos-related product liability lawsuits, as well as any new lawsuits against us alleging asbestos-related claims, have been stayed during our reorganization process. However, some claimants may still file proofs of asbestos-related claims in the Bankruptcy Cases. The September 21, 2006 claims bar date did not apply to claimants alleging asbestos-related personal injury claims, but it was the deadline for claimants (including insurers) who are not one of the allegedly injured individuals or their personal representatives to file proofs of claim with respect to other types of asbestos-related claims. Our obligations with respect to asbestos claims will be addressed in our plan of reorganization, if not otherwise addressed pursuant to orders of the Bankruptcy Court.

We had approximately 73,000 active pending asbestos-related product liability claims at December 31, 2006, compared to 77,000 at December 31, 2005, including approximately 6,000 and 10,000 claims that were settled but awaiting final documentation and payment. We had accrued $61 for indemnity and defense costs for pending asbestos-related product liability claims at December 31, 2006, compared to $98 at December 31, 2005. Starting with the fourth quarter of 2006, we projected indemnity and defense cost for pending cases using the same methodology we use for projecting potential future liabilities. The decrease in the liability for pending asbestos-related claims is due primarily to revised assumptions in that methodology regarding expected compensable claims. This assumption regarding fewer compensable cases is consistent with the current asbestos tort system and our strategy in recent years of aggressively defending all cases, and in particular meritless claims. In 2006, we determined that the more recent experience was sufficient to utilize as the basis for estimating the indemnity cost of pending claims.

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estimates and applied these relationships to the projected future incidence patterns, in order to estimate future compensable claims. We then established a cost for such claims, based on historical trends in claim settlement amounts. In applying this methodology, we made a number of key assumptions, including labor force exposure, the calibration period, the nature of the diseases and the resulting claims that might be made, the number of claims that might be settled, the settlement amounts and the defense costs we might incur. Given the inherent variability of our key assumptions, the methodology produced a potential liability through 2021 within a range of $80 to $141. Since the outcomes within that range are equally probable, the accrual at December 31, 2006 represents the lower end of the range. While the process of estimating future demands is highly uncertain beyond 2021, we believe there are reasonable circumstances in which our expenditures related to asbestos-related product liability claims after that date would be de minimis. Our estimated liability for future asbestos-related product claims at December 31, 2005 was $70 to $120.

In addition, we had a net amount recoverable from our insurers and others of $14 at December 31, 2006, compared to $15 at December 31, 2005. This recoverable represents reimbursements for settled asbestos-related product liability claims, including billings in progress and amounts subject to alternate dispute resolution proceedings with some of our insurers. As a result of the stay in our asbestos litigation during the reorganization process, we do not expect to make any asbestos payments in the near term. However, we are continuing to pursue insurance collections with respect to asbestos-related amounts paid prior to the Filing Date.

Other Product Liabilities

We had accrued $7 for non-asbestos product liability costs at December 31, 2006, compared to $13 at December 31, 2005, with no recovery expected from third parties at either date. We estimate these liabilities based on assumptions about the value of the claims and about the likelihood of recoveries against us, derived from our historical experience and current information.

Environmental Liabilities

We had accrued $64 for environmental liabilities at December 31, 2006, compared to $63 at December 31, 2005. We estimate these liabilities based on the most probable method of remediation, current laws and regulations and existing technology. Estimates are made on an undiscounted basis and exclude the effects of inflation. If there is a range of equally probable remediation methods or outcomes, we accrue the lower end of the range. The difference between our minimum and maximum estimates for these liabilities was $1 at both dates.

Included in these accruals are amounts relating to the Hamilton Avenue Industrial Park Superfund site in New Jersey, where we are presently one of four potentially responsible parties (PRPs). We review our estimate of our liability for this site quarterly. There have been no material changes in the facts underlying our estimate

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since December 31, 2005 and, accordingly, our estimated liabilities for the three operable units at this site at December 31, 2006 remained unchanged and were as follows:


	•	Unit 1 — $1 for future remedial work and past costs incurred by the United States Environmental Protection Agency (EPA) relating to off-site soil contamination, based on the remediation performed at this unit to date and our assessment of the likely allocation of costs among the PRPs;

	•	Unit 2 — $14 for future remedial work relating to on-site soil contamination, taking into consideration the $69 remedy proposed by the EPA in a Record of Decision issued in September 2004 and our assessment of the most likely remedial activities and allocation of costs among the PRPs; and

	•	Unit 3 — less than $1 for the costs of a remedial investigation and feasibility study (RI/FS) pertaining to groundwater contamination, based on our expectations about the study that is likely to be performed and the likely allocation of costs among the PRPs.

Following our bankruptcy filing, we discontinued the remedial investigation/feasibility study (RI/FS) we had been conducting at unit 3 of the site and informed EPA that since our alleged liabilities at this site occurred before the Filing Date, we believe they constitute pre-petition liabilities subject to resolution in the bankruptcy proceedings. In September 2006, EPA filed claims exceeding $200 with the Bankruptcy Court, as an unsecured creditor, for all unreimbursed past and future response costs at this site; civil penalties, punitive damages and stipulated damages in connection with our termination of the RI/FS; and damages to natural resources. We expect that EPA’s claims will be resolved either through a negotiated settlement or through the claims process in the bankruptcy proceedings, where the validity and amounts of the asserted claims will have to be substantiated. The support behind the EPA’s claim provides no cost studies or other information which we have not already assessed in establishing the liability above. Based on the information presently known by us, we do not believe there is a probable and estimable liability beyond that which we have recorded.

Other Liabilities Related to Asbestos Claims

Until 2001, most of our asbestos-related claims were administered, defended and settled by the CCR, which settled claims for its member companies on a shared settlement cost basis. In 2001, the CCR was reorganized and discontinued negotiating shared settlements. Since then, we have independently controlled our legal strategy and settlements, using Peterson Asbestos Consulting Enterprise (PACE), a unit of Navigant Consulting, Inc., to administer our claims, bill our insurance carriers and assist us in claims negotiation and resolution. Some former CCR members defaulted on the payment of their shares of some of the CCR-negotiated settlements and some of the settling claimants have sought payment of the unpaid shares from Dana and the other companies that were members of the CCR at the time of the settlements. We have been working with the CCR, other former CCR members, our insurers and the claimants over a period of several years in an effort to resolve these issues. Through December 31, 2006, we had paid $47 to claimants and collected $29 from our insurance carriers with respect to these claims. At December 31, 2006, we had a net receivable of $13 that we expect to recover from available insurance and surety bonds relating to these claims. We are continuing to pursue insurance collections with respect to asbestos-related claims paid prior to the Filing Date.

Assumptions

The amounts we have recorded for asbestos-related liabilities and recoveries are based on assumptions and estimates reasonably derived from our historical experience and current information. The actual amount of our liability for asbestos-related claims and the effect on us could differ materially from our current expectations if our assumptions about the outcome of the pending unresolved bodily injury claims, the

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volume and outcome of projected future bodily injury claims, the outcome of claims relating to the CCR-negotiated settlements, the costs to resolve these claims and the amount of available insurance and surety bonds prove to be incorrect, or if U.S. federal legislation impacting asbestos personal injury claims is enacted. Although we have projected our liability for future asbestos-related product liability claims based upon historical trend data that we consider to be reliable, there can be no assurance that our actual liability will not differ from what we currently project.

Lease Commitments

Cash obligations under future minimum rental commitments under operating leases and net rental expense are shown in the table below;


	2007		2008		2009		2010		2011		Thereafter		Total

Lease Commitments	$	71	$	70	$	56	$	47	$	33	$	215	$	492


	2006		2005		2004

Rental Expense	$	121	$	136	$	146


Note 18.	Warranty Obligations

We record a liability for estimated warranty obligations at the dates our products are sold. Adjustments are made as new information becomes available. Changes in our warranty liabilities in 2005 and 2006 were as follows:


	Year Ended December 31,
	2006			2005

Balance, beginning of period	$	91		$	80
Amounts accrued for current period sales		51			61
Adjustments of prior accrual estimates		(2	)		3
Change in accounting					(6	)
Settlements of warranty claims		(53	)		(44	)
Foreign currency translation		3			(3	)

Balance, end of period	$	90		$	91

In June 2005, we changed our method of accounting for warranty liabilities from estimating the liability based on the credit issued to the customer, to accounting for the warranty liabilities based on our costs to settle the claim. Management believes that this is a change to a preferable method in that it more accurately reflects the cost of settling the warranty liability. In accordance with U.S. GAAP, the $6 pre-tax cumulative effect of the change was effective as of January 1, 2005 and was reflected in the financial statements for the three months ended March 31, 2005. In the third quarter of 2005, the previously recorded tax expense of $2 was offset by the valuation allowance established against our U.S. net deferred tax assets. Warranty obligations are reported as current liabilities in the consolidated balance sheet.

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Note 19.	Other Income (expense), net

Other income (expense), net included:


	Year Ended December 31,
	2006		2005			2004

Interest income	$	37	$	41		$	13
DCC other income		34		16			(10	)
DCC lease financing revenue		11		15			18
Gains (losses) from divestures and other asset sales		10		(28	)		5
Government grants		13		15			8
Debt repurchase expenses							(157	)
Other, net		35		29			38

Other income (expense), net	$	140	$	88		$	(85	)


Note 20.	Segments, Geographical Area and Major Customer Information

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for reporting information about operating segments and related disclosures about products and services and geographic locations. SFAS No. 131 requires reporting on a single basis of segmentation. The components that management establishes for purposes of making decisions about an enterprise’s operating matters are referred to as “operating segments.” We currently have seven operating segments within two manufacturing business units (ASG and HVTSG).

We had previously reported the two business units, ASG and HVTSG as our operating segments. In the fourth quarter of 2006, senior management and our Board determined that ongoing formal performance review of the seven operating segments under the two primary business units was appropriate. Accordingly, we have expanded our disclosure of operating segments to include the additional segments identified in this note and discussed throughout this report.

ASG consists of five operating segments: Axle, Driveshaft, Sealing, Thermal and Structures.

HVTSG consists of two operating segments: Commercial Vehicle and Off-Highway.

Management also monitors shared services and other operations that are not part of the operating segments. These operations include businesses unrelated to the segments, transportation operations, other shared services, trailing liabilities of closed operations and other administrative costs.

Management evaluates DCC as if it were accounted for under the equity method of accounting rather than on the fully consolidated basis used for external reporting. This approach is followed because DCC is not homogeneous with our manufacturing operations in that its financing activities do not support the sales of our other operating segments, its financial and performance measures are inconsistent with those of our other operating segments, and it is in the process of liquidating all of its investments as discussed in Note 4. In addition, the financial covenants contained in the DIP Credit Agreement are measured with DCC accounted for on an equity basis. DCC is included as a reconciling item between the segment results and our loss before income tax.

Earnings before interest and taxes (EBIT) is the key internal measure of performance used by management as a measure of profitability for our segments. EBIT, a non-GAAP financial measure, represents earnings before interest and taxes, and excludes equity in earnings of affiliates. It includes sales less cost of sales less SG&A plus Other income (expense), net. Certain nonrecurring and unusual items like goodwill impairment, realignment charges and divestiture gains and losses are excluded from segment EBIT. It is a critical component of EBITDAR which is the measure used to determine compliance with our DIP Credit Agreement covenants. See Note 10 for information concerning the DIP Credit Agreement and covenants contained therein.

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Information used to evaluate our operating segments is as follows:


			Inter-
	External		Segment			Segment			Net		Capital		Depreciation/
2006	Sales		Sales			EBIT			Assets		Spend		Amortization

ASG
Axle	$	2,202	$	62		$	(43	)	$	1,131	$	89	$	71
Driveshaft		1,152		168			92			591		46		37
Sealing		679		31			49			256		27		25
Thermal		283		5			26			194		18		9
Structures		1,174		27			(15	)		416		58		63
Eliminations and other		77		(168	)		(42	)		18		1		3

Total ASG		5,567		125			67			2,606		239		208

HVTSG
Commercial Vehicle		1,683		7			39			444		19		35
Off-Highway		1,231		38			109			377		23		18
Administration and eliminations				(37	)		(8	)

Total HVTSG		2,914		8			140			821		42		53

Other Operations		23					(3	)		280		5		7
Eliminations				(133	)

Total Segments	$	8,504	$	—		$	204		$	3,707	$	286	$	268


			Inter-
	External		Segment			Segment			Net			Capital		Depreciation/
2005	Sales		Sales			EBIT			Assets			Spend		Amortization

ASG
Axle	$	2,407	$	52		$	6		$	979		$	39	$	66
Driveshaft		1,129		162			112			493			36		35
Sealing		661		27			56			251			25		23
Thermal		312		3			58			187			9		10
Structures		1,288		41			2			460			63		63
Eliminations and other		144		(167	)		(60	)		(15	)		7		8

Total ASG		5,941		118			174			2,355			179		205

HVTSG
Commercial Vehicle		1,540		6			(7	)		396			52		31
Off-Highway		1,100		37			85			320			20		16
Administration and eliminations				(38	)		(6	)

Total HVTSG		2,640		5			72			716			72		47

Other Operations		30					(39	)		236			13		5
Eliminations				(123	)

Total Segments	$	8,611	$	—		$	207		$	3,307		$	264	$	257

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			Inter-
	External		Segment			Segment			Net		Capital		Depreciation/
2004	Sales		Sales			EBIT			Assets		Spend		Amortization

ASG
Axle	$	2,245	$	51		$	67		$	1,011	$	71	$	66
Driveshaft		1,041		159			125			507		23		36
Sealing		615		29			75			271		17		20
Thermal		314		7			71			198		8		10
Structures		1,108		40			(14	)		470		64		54
Eliminations and other		61		(131	)		(24	)		629		2		8

Total ASG		5,384		155			300			3,086		185		194

HVTSG
Commercial Vehicle		1,359		8			75			313		50		31
Off-Highway		940		26			92			357		10		17
Administration and eliminations				(29	)		(6	)

Total HVTSG		2,299		5			161			670		60		48

Other Operations		92					(28	)
Eliminations				(160	)					381		8		8

Total Segments	$	7,775	$	—		$	433		$	4,137	$	253	$	250

The following table reconciles segment EBIT to the consolidated Loss from continuing operations before income tax:


	2006			2005			2004

Segment EBIT	$	204		$	207		$	433
Shared services and administrative		(208	)		(243	)		(187	)
Closed or divested operations’ costs		(25	)		(33	)		(30	)
DCC EBIT		7			10			10
Impairment of goodwill		(46	)		(53	)
Impairment of other assets		(234	)
Reorganization items, net		(141	)
Interest expense		(115	)		(168	)		(206	)
Realignment charges, not in segments		(81	)		(47	)		(48	)
Sale of automotive aftermarket business								(46	)
Other income not in segments		55			17			75
Repurchase of notes								(157	)
Other		13			25			(9	)

Loss from continuing operations before income tax	$	(571	)	$	(285	)	$	(165	)

Net assets at the business unit level are intended to correlate with invested capital. The amount includes accounts receivable, inventories, prepaid expenses (excluding taxes), goodwill, investments in affiliates, net property, plant and equipment, accounts payable and certain accrued liabilities, but excludes assets and liabilities of discontinued operations.

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Net assets differ from consolidated total assets as follows:


	2006		2005

Net assets	$	3,707	$	3,307
Accounts payable and other current liabilities		1,308		1,679
DCC’s assets in excess of equity		296		658
Other current and long-term assets		1,031		1,193
Assets of discontinued operations		392		521

Consolidated total assets	$	6,734	$	7,358

Although accounting for discontinued operations does not result in the reclassification of prior balance sheets, our segment reporting excludes the assets of our discontinued operations for all periods presented based on the treatment of these items for internal reporting purposes.

The differences between operating capital spend and depreciation shown by business unit and purchases of property, plant and equipment and depreciation shown on the cash flow statement result from the exclusion from the segment table of the amounts related to discontinued operations and our equity method of measuring DCC for operating purposes. DCC has no capital spending and depreciation is not included in the operating segment measures. DCC purchased equipment for lease to our manufacturing operations through 2002 and continues to lease that equipment to the business units. These operating leases have been included in the consolidated statements as purchases of assets and the assets are being depreciated over their useful lives.

Certain expenses incurred in connection with our realignment activities are included in the respective segment operating results, as are credits to earnings resulting from the periodic adjustments of our restructuring accruals to reflect changes in our estimates of the total cost remaining on uncompleted restructuring projects and gains and losses realized on the sale of assets related to realignment

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Geographic Information

For consolidated net sales, no countries other than the U.S. and Canada account for 10% and only Brazil, Italy, Germany and Australia account for more than 5%. Sales are attributed to the location of the product entity recording the sale. Long-lived assets include property, plant and equipment, goodwill and equity investments in joint ventures. They do not include certain other non-current assets.


	Net Sales						Long-Lived Assets
	2006		2005		2004		2006		2005		2004

North America
United States	$	4,204	$	4,421	$	4,093	$	1,131	$	1,265	$	1,738
Canada		757		853		995		123		169		183
Mexico		210		136		130		138		185		161

Total North America		5,171		5,410		5,218		1,392		1,619		2,082
Europe
Italy		674		563		468		73		84		94
Germany		408		387		396		477		484		555
Other Europe		774		646		458		363		252		392

Total Europe		1,856		1,596		1,322		913		820		1,041
South America
Brazil		433		440		418		97		113		113
Other South America		421		395		124		112		111		126

Total South America		854		835		542		209		224		239
Asia Pacific
Australia		323		488		480		101		96		103
Other Asia Pacific		300		282		213		132		101		105

Total Asia Pacific		623		770		693		233		197		208

Total	$	8,504	$	8,611	$	7,775	$	2,747	$	2,860	$	3,570


	Net Sales
Sales to Major Customers	2006			2005			2004

Ford	$	1,936		$	2,234		$	2,051
		23	%		26	%		26	%
General Motors	$	807		$	990		$	839
		10	%		11	%		11	%

Export sales from the U.S. to international locations were $840, $939 and $278 in 2006, 2005 and 2004.

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Quarterly Results (Unaudited)


	For the 2006 Quarters Ended
	March 31			June 30			September 30			December 31

Net sales	$	2,197		$	2,300		$	2,009		$	1,998

Gross profit	$	104		$	143		$	60		$	31

Net income (loss)	$	(126	)	$	(28	)	$	(356	)	$	(229	)

Net income (loss) per share
Basic	$	(0.84	)	$	(0.19	)	$	(2.38	)	$	(1.51	)
Fully diluted	$	(0.84	)	$	(0.19	)	$	(2.38	)	$	(1.51	)


	For the 2005 Quarters Ended
	March 31		June 30		September 30			December 31

Net sales	$	2,149	$	2,297	$	2,119		$	2,046

Gross profit	$	129	$	156	$	104		$	17
Net income (loss)	$	16	$	30	$	(1,272	)	$	(379	)
Net income (loss) per share
Basic	$	0.11	$	0.20	$	(8.50	)	$	(2.54	)
Fully diluted	$	0.11	$	0.20	$	(8.50	)	$	(2.54	)

Net loss in the third quarter of 2006 included a goodwill impairment charge of $46 and an impairment charge of $165 to reduce lease investments and other assets in DCC to their fair value less cost to sell. Net loss in the fourth quarter of 2006 included an impairment charge of $58 in connection with the sale of our 30% interest in GETRAG and $90 of realignment charges.

Net loss in the third quarter of 2005 includes a valuation allowance against deferred tax assets of $918 (including $817 related to the deferred tax asset balance at the beginning of the year) and includes an impairment charge of $275 for the three businesses that became held for sale in the fourth quarter of 2005. Net loss in the fourth quarter of 2005 includes goodwill impairments of $53 and realignment charges and long-lived asset impairments of $45 and includes a $123 charge to adjust the three businesses held for sale to their fair value less cost to sell.

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DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


									Adjustments
									arising
			Amounts						from change
	Balance at		charged						in currency			Balance at
	beginning		(credited)			Allowance			exchange rates			end of
Description	of period		to income			utilized			and other items			period

For the Year Ended December 31, 2006
Allowances Deducted from Assets
Allowance for Doubtful Receivables	$	22	$	3		$	(7	)	$	5		$	23
Allowance for Credit Losses — Lease Financing		17		(17	)								—
Valuation Allowance for Deferred Tax Assets		1,535		182			(4	)		258			1,971
Allowance for Loan Losses		9		(3	)					(6	)		—

Total Allowances Deducted from Assets	$	1,583	$	165		$	(11	)	$	257		$	1,994

For the Year Ended December 31, 2005
Allowances Deducted from Assets
Allowance for Doubtful Receivables	$	36	$	1		$	(8	)	$	(7	)	$	22
Allowance for Credit Losses — Lease Financing		12		3						2			17
Valuation Allowance for Deferred Tax Assets		387		1,191						(43	)		1,535
Allowance for Loan Losses		3		6									9

Total Allowances Deducted from Assets	$	438	$	1,201		$	(8	)	$	(48	)	$	1,583

For the Year Ended December 31, 2004
Allowances Deducted from Assets
Allowance for Doubtful Receivables	$	38	$	2		$	(9	)	$	5		$	36
Allowance for Credit Losses — Lease Financing		26		(10	)		(1	)		(3	)		12
Valuation Allowance for Deferred Tax Assets		609		82			(304	)					387
Allowance for Loan Losses		3		(2	)		(1	)		3			3

Total Allowances Deducted from Assets	$	676	$	72		$	(315	)	$	5		$	438


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*

-None-


Item 9A.	*Controls and Procedures*

Disclosure Controls and Procedures — We maintain disclosure controls and procedures that are designed to ensure that the information disclosed in the reports we file with the SEC under the Exchange Act of 1934 as amended (the Exchange Act) is recorded, processed, summarized and reported within the

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time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Management, including our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures, as of December 31, 2006, in accordance with Rules 13a-15(b) and 15d-15(b) of the Exchange Act. Based on that evaluation and the existence of certain material weaknesses discussed below under “Management’s Report on Internal Control Over Financial Reporting,” our CEO and CFO concluded that our disclosure controls and procedures were not effective as of December 31, 2006.

Management’s Report on Internal Control Over Financial Reporting — Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and the oversight of the board of directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Under the supervision of our CEO and CFO, management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006, using the criteria set forth in the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected. Management identified the following material weaknesses in our internal control over financial reporting as of December 31, 2006:


	(1)	Our financial and accounting organization was not adequate to support our financial accounting and reporting needs. Specifically, we did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience with Dana and training in the application of GAAP commensurate with our financial reporting requirements. The lack of a sufficient complement of personnel with an appropriate level of accounting knowledge, experience with Dana and training contributed to the control deficiencies noted in items 2 through 5 below.

	(2)	We did not maintain effective controls over the completeness and accuracy of certain revenue and expense accruals. Specifically, we failed to identify, analyze, and review certain accruals at period end relating to certain accounts receivable, accounts payable, accrued liabilities (including restructuring accruals), revenue, and other direct expenses to ensure that they were accurately, completely and properly recorded.

	(3)	We did not maintain effective controls over reconciliations of certain financial statement accounts. Specifically, our controls over the preparation, review and monitoring of account reconciliations primarily related to certain inventory, accounts payable, accrued expenses and the related income statement accounts were ineffective to ensure that account balances were accurate and supported with appropriate underlying detail, calculations or other documentation.

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	(4)	We did not maintain effective controls over the valuation and accuracy of long-lived assets and goodwill. Specifically, we did not maintain effective controls to ensure certain plants maintained effective controls to identify impairment of idle assets in a timely manner. Further, we did not maintain effective controls to ensure goodwill impairment calculations were accurate and supported with appropriate underlying documentation, including the determination of fair value of reporting units.

	(5)	We did not maintain effective segregation of duties over transaction processes. Specifically, certain personnel with financial transaction initiation and reporting responsibilities had incompatible duties that allowed for the creation, review and processing of certain financial data without adequate independent review and authorization. This control deficiency primarily affects revenue, accounts receivable and accounts payable.

Each of the control deficiencies described in Items 1 through 3 resulted in the restatement of our annual consolidated financial statements for 2004, each of the interim periods in 2004 and the first and second quarters of 2005 and 2006, as well as certain adjustments, including audit adjustments, to our third quarter 2005 consolidated financial statements. The control deficiency described in 4 above resulted in audit adjustments to the 2005 annual consolidated financial statements. The control deficiency described in 2 above resulted in audit adjustments to the 2006 annual consolidated financial statements. Additionally, each of the control deficiencies described in 1 through 5 above could result in a misstatement in our annual or interim consolidated financial statements that would not be prevented or detected. Management has determined that each of the control deficiencies described in Items 1 through 5 constitutes a material weakness.

In conducting our evaluation of the effectiveness of our internal control over financial reporting, management has excluded the Mexican Axle and Driveshaft operations (Dana Mexico Holdings) from its assessment of internal control over financial reporting as of December 31, 2006 because they were acquired by us in purchase business combinations during 2006. Dana Mexico Holdings is a wholly-owned subsidiary whose total assets represent less than 2%, and whose total revenues represent less than 2% of the related consolidated financial statement amounts, as of and for the year ended December 31, 2006.

As a result of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report, which appears in Item 8 of this Annual Report on Form 10-K.

Remediation of 2005 Material Weakness — We believe the actions discussed below along with personnel changes have remediated our material weakness in the control environment at the Commercial Vehicle business unit as of December 31 2006.

Plan for Remediation of Material Weaknesses — We believe the steps described below, some of which we have already taken as noted herein, together with others that we plan to take, will remediate the material weaknesses which existed at December 31, 2006. Specifically, we believe the actions outlined below will address the material weaknesses.


	•	We are committed to continuing a strong ethical and controls climate and ensuring that any employee concerned with activity believed to be improper will bring his or her concerns to the prompt attention of management, either directly or anonymously through our Ethics and Compliance Helpline. During 2006, we instituted an updated Standards of Business Conduct Online training program. This training program is mandatory and every employee must participate in the training as a condition of their employment with Dana. The training serves to renew our employees’ acknowledgment of their commitment to adhere to Dana’s Standards of Business Conduct.

	•	We have augmented the GAAP training that is regularly part of our periodic controller conferences, web casts and outside continuing education programs by updating our GAAP training course. We held GAAP training sessions for financial personnel in the fall of 2006 and we will continue this training

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		throughout 2007. Key areas of instruction for 2006 focused on Fixed Assets, Impairment of Long-Lived Assets, Inventory, Revenue Recognition, Contingencies and a general overview of GAAP. The training also included a brief overview of the reporting and other requirements under Chapter 11 of the Bankruptcy Code.

We have taken or plan to take the following additional steps to improve our internal control over financial reporting:


	•	During 2006, we continued to augment the resources in our corporate accounting department, and in 2007 we will continue to add to the department’s staff and utilize external resources as appropriate;

	•	Outside of the corporate accounting department, we will continue to add financial personnel as necessary throughout Dana to provide adequate resources with appropriate levels of experience and GAAP knowledge;

	•	Continued emphasis is being placed by senior management in operations and information technology to develop specific remediation plans for all the control deficiencies, concentrating initially on those pertaining to the segregation of duties and other operations-based matters identified as material weaknesses;

	•	We implemented central oversight for certain financial functions, including customer owned tooling and account reconciliations, and plans for additional areas of central oversight to process transactions which require specialized accounting knowledge are underway;

	•	We are currently recruiting to replace the human resource professional assigned in 2006 to focus on the organizational development needs of the Finance group and to track the training and career paths of our finance personnel, reassess the competency requirements for our key financial positions and determine our overall financial staffing needs;

	•	We continued the deployment of the account reconciliation software to additional facilities to allow for the access and review of reconciliations from a central location and will continue our training on and utilization of this tool by our management group;

	•	We enhanced our corporate accounting policies in certain areas, including long-lived assets and goodwill, and will deploy additional policies globally;

	•	As part of the ongoing transformation of our finance function, we will continue to centralize control and responsibility for routine, high-volume accounting activities in shared service centers or with third-party providers; and

	•	We broadened the nature and extent of work that our internal audit department performs by increasing the size of the department and enhancing the competency of its people. However, due to the continued challenges of attracting and maintaining the optimal resources, we outsourced the internal audit services to Ernst & Young beginning in January 2007.

Changes in Internal Control Over Financial Reporting — Our management, with the participation of our CEO and CFO, evaluates any changes in our internal control over financial reporting that occurred during each fiscal quarter that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting. There was no change in internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during the fourth quarter of 2006 that materially affected or was reasonably likely to materially affect our internal control over financial reporting:

CEO and CFO Certifications — The Certifications of our CEO and CFO, which are attached as Exhibits 31-A and 31-B to this report, include information about our disclosure controls and procedures and internal control over financial reporting. These Certifications should be read in conjunction with the information contained in this Item 9A for a more complete understanding of the matters covered by the Certifications.


Item 9B.	*Other Information*

-None-

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PART III


Item 10.	*Directors, Executive Officers and Corporate Governance*

Directors

We currently have nine non-management directors and one management director:


	•	A. Charles Baillie, age 67, retired, was Chairman of the Board of The Toronto-Dominion Bank, a Canadian chartered bank which, with its subsidiaries, offers a full range of financial products and services, from 1998 to 2003, and Chief Executive Officer of Toronto-Dominion from 1997 to 2002. He has been a Dana director since 1998 and is also a director of Canadian National Railway Company and TELUS Corporation.

	•	David E. Berges, age 57, has been Chairman of the Board and Chief Executive Officer of Hexcel Corporation, a leading advanced structural materials producer for composites used in aerospace and industrial applications, since 2001. He was also President of Hexcel from 2002 to February 2007. He has been a Dana director since 2004.

	•	Michael J. Burns, age 55, has been Chief Executive Officer, President and a director of Dana since March 2004, and Chairman of the Board and Chief Operating Officer of Dana since April 2004. He was previously President of General Motors Europe, the European operations of General Motors, from 1998 to 2004. He is also a director of United Parcel Service, Inc.

	•	Edmund M. Carpenter, age 65, retired, was President and Chief Executive Officer of Barnes Group Inc., a diversified international company serving a range of industrial and transportation markets, from 1998 to 2006. He has been a Dana director since 1991 and is also a director of Campbell Soup Company.

	•	Richard M. Gabrys, age 65, has been Dean of the School of Business of Wayne State University since 2006 and President and Chief Executive Officer of Mears Investments LLC, a personal family investment company, since 2004. He was Vice Chairman of Deloitte & Touche LLP, a professional services firm providing audit and financial advisory services, from 1995 to 2004. He has been a Dana director since 2004 and is also a director of CMS Energy Corporation, La-Z-Boy Incorporated and TriMas Corporation.

	•	Samir G. Gibara, age 67, retired, was Chairman of the Board of The Goodyear Tire & Rubber Company, which manufactures and markets tires and rubber, chemical and plastic products for the transportation industry and industrial and consumer markets, from 1996 to 2003, and Chief Executive Officer of Goodyear from 1996 to 2002. He has been a Dana director since 2004 and is also a director of International Paper Company.

	•	Cheryl W. Grisé, age 54, has been Executive Vice President of Northeast Utilities, a regional provider of energy products and services, since 2005. She was Chief Executive Officer of Northeast Utilities’ principal operating subsidiaries from 2002 to January 2007, and President of Northeast Utilities’ Utility Group from 2001 through January 2007. She has been a Dana director since 2002 and is also a director of MetLife, Inc.

	•	James P. Kelly, age 63, retired, was Chairman of the Board and Chief Executive Officer of United Parcel Service, Inc., a package delivery company and global provider of specialized transportation and logistics services, from 1997 to 2002. He has been a Dana director since 2002 and is also a director of AT&T Inc. and United Parcel Service, Inc.

	•	Marilyn R. Marks, age 54, has been Chairman of the Board and Chief Executive Officer of Corporate Marks, LLC, a management advisory and consulting services company, since 2005. She has been a Dana director since 1994.

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	•	Richard B. Priory, age 60, retired, was Chairman of the Board and Chief Executive Officer of Duke Energy Corporation, a supplier of energy and related services, from 1997 to 2003. He has been a Dana director since 1996.

Under our By-Laws, each director will hold office until the election and qualification of a successor at an annual meeting of shareholders or until his or her earlier resignation or removal from the Board.

Executive Officers

For information about our executive officers, see “Executive Officers of the Registrant” in Item 1 of this report.

Section 16(a) Beneficial Ownership Reporting Compliance

Under Section 16(a) of the Exchange Act, our directors, executive officers and persons who own more than 10% of our stock are required to file initial stock ownership reports and reports of changes in their ownership with the SEC. Under SEC rules, we must be furnished with copies of these reports. Based on our review of these reports and the representations made to us by such persons, we do not know of any failure by such persons to file a report required by Section 16(a) on a timely basis during 2006.

Code of Ethics

Our Standards of Business Conduct (the Standards) constitute the code of ethics that we have adopted for our employees, including our principal executive, financial and accounting officers. The Standards are designed to deter wrongdoing and to promote (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules and regulations; (iv) prompt internal reporting of violations of the Standards to the persons identified therein; and (v) accountability for adherence to the Standards. A copy of the Standards is posted on our Internet website at http://www.dana.com/Investors, at the link to “Corporate Governance.” Copies are also available, at no charge, upon written request addressed to Dana Office of Business Conduct, P.O. Box 1000, Toledo, Ohio 43697.

If we adopt a substantive amendment to the Standards or grant a waiver or implicit waiver of any provision of the Standards relating to the above elements to our principal executive, financial or accounting officers, we will post a notice at the above Internet website address within four business days, describing the nature of the amendment or waiver (and, in the case of a waiver, the name of the person to whom it was granted and the date). For this purpose, our approval of a material departure from a provision of the Standards constitutes a “waiver” and our failure to take action within a reasonable period of time regarding a material departure from a provision of the Standards that has been made known to one of our executive officers constitutes an “implicit waiver.”

Procedures to Recommend Nominees to the Board

There have been no changes in the procedures for security holders to recommend nominees to our Board from those set out in our Proxy Statement dated March 18, 2005.

Audit Committee and Audit Committee Financial Expert

Our Board has a separately designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act to oversee our accounting and financial reporting processes and the audits of our financial statements. All members of our Audit Committee are non-management directors who meet the independence requirements of Section 303A.02 of the Listed Company Manual of The New York Stock Exchange. The current members of our Audit Committee are Mr. Gabrys (Chairman), Mr. Carpenter, Mr. Gibara, Ms. Grisé and Ms. Marks. Our Board has determined that each of these individuals is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K under the Exchange Act.

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Item 11.	*Executive Compensation*

Compensation Discussion and Analysis

This section contains management’s discussion and analysis of Dana’s executive compensation program, including the objectives of the program, how the program is administered, and the elements of compensation paid to our CEO and named executive officers.

Objectives and Overview

It is an underlying premise of our executive compensation program that the caliber, motivation and leadership of our senior management team make a significant difference in Dana’s performance. Historically, we have designed our programs to attract and retain highly qualified senior executives committed to Dana’s long-term success and have included incentives linked to our strategic business objectives. Before our bankruptcy filing, the program was comprised of three elements targeted at the median of those for selected peer group companies: (i) base salaries, (ii) short-term cash incentives linked to annual corporate, operating unit and/or individual performance objectives, and (iii) long-term equity-based incentives comprised of a mix of stock options or stock appreciation rights and performance shares that derived their value from corporate performance over multi-year periods and service-based restricted stock and restricted stock units.

Since our Chapter 11 filing, our executive compensation program has been designed to motivate our senior management team to attain performance goals that will allow us to continue as a going concern and to develop a reorganization plan that will enable us to emerge from bankruptcy positioned for long-term profitability and growth. During our reorganization proceedings, certain aspects of our executive compensation program are subject to the requirements of the Bankruptcy Code, as determined by the Bankruptcy Court.

Until we emerge from bankruptcy, the base salaries of our CEO, the named executive officers, and other senior executives participating in our Annual Incentive Plan, discussed under “Grants of Plan-Based Awards,” are generally frozen at the amounts in effect on March 1, 2006. During our reorganization proceedings, we have suspended long-term equity-based incentive grants and our executive stock ownership guidelines. We are continuing to provide our senior executives with annual cash incentives linked to corporate, product group and individual performance objectives under our Annual Incentive Plan.

Administration

Our Compensation Committee (also referred to in this section as the Committee) has overall responsibility for our executive compensation program. The Committee (i) reviews our executive compensation philosophy and strategy, (ii) sets the base salary and incentive opportunities for the CEO and a small group of key senior executives designated by the CEO (historically, 10 to 20 individuals) and the salary levels and incentive compensation opportunity levels for certain other executives designated by the CEO (historically, 40 to 60 individuals), (iii) establishes incentive compensation performance objectives for the CEO and executives designated by the CEO, and (iv) determines whether the performance objectives have been achieved and the incentive compensation has been earned. The Committee also (i) recommends to the Board, employment or consulting agreements, severance arrangements, change in control arrangements, perquisites and special, supplemental or non-qualified benefits for the CEO, and (ii) approves such agreements or benefits for key senior executives designated by the CEO.

The Board appoints the chairman and members of the Compensation Committee annually. Under its Charter, the Committee must have at least three members. All members must be non-management directors who meet applicable independence requirements under the Exchange Act, the SEC’s rules and regulations, and the requirements of the New York Stock Exchange (on which our stock was listed prior to our bankruptcy filing). They must also qualify as “non-employee directors” within the meaning of Exchange Act Rule 16b-3 and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code. Currently, the Committee members are Messrs. Priory (Chairman), Baillie, Berges, and Kelly.

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The Compensation Committee has authority to retain outside compensation, legal, accounting and other advisors to assist it in performing its functions, at Dana’s expense and without Board approval. For some time, Frederic W. Cook & Co., Inc. (Cook) has served as the Committee’s independent compensation advisor.

In making compensation decisions, the Compensation Committee considers the advice of Cook; competitive market data provided by our outside compensation advisor, Mercer Human Resource Consulting, Inc. (Mercer); and the recommendations of our CEO (except with respect to his own compensation) and our Vice President, Human Resources. Mercer’s data compares our executive compensation levels and the relationship between our compensation levels and corporate performance to those of companies selected by the Committee, from time to time, with national and international operations and lines of business comparable to ours. The peer group currently consists of American Axle & Manufacturing, Inc.; ArvinMeritor, Inc.; BorgWarner Inc.; Caterpillar Inc.; Cooper Tire & Rubber Company; Cummins Inc.; Deere & Company; Delphi Corporation; Eaton Corporation; The Goodyear Tire and Rubber Company; Johnson Controls, Inc.; Lear Corporation; Magna International Inc.; Navistar International Corporation; Tenneco Inc.; TRW Automotive; and Visteon Corporation. While we are in bankruptcy, the Compensation Committee and management are also comparing our executive compensation to that in other large manufacturing companies undergoing Chapter 11 reorganizations. During 2006, comparisons were made to six manufacturing companies with more than $3.5 billion in sales: Armstrong World Industries, Inc.; Calpine Corporation; Collins & Aikman Corporation; Federal-Mogul Corporation; Owens Corning; and USG Corporation.

Base Salaries

The Compensation Committee sets the base salaries for the CEO and the key senior executives designated by the CEO annually. The Committee makes these salary determinations on an individual basis, taking the following factors into consideration without weighing them: the individual’s responsibilities, performance, contributions to Dana’s success, current salary, and tenure in the job; internal equity among positions; pay practices for comparable positions within the peer group companies; and, for the key senior executives designated by the CEO, the recommendations of the CEO and our Vice President, Human Resources. The Committee approves the salary levels for other senior executives designated by the CEO annually, based on the recommendations of the CEO and our Vice President, Human Resources. In recent years, salary determinations have been made at the Committee’s February meeting (the first scheduled meeting in the year and a time when results from the prior year are known to the Committee) and the base salaries have taken effect on March 1.

In February 2006, in light of our financial condition, the Compensation Committee set the 2006 annual base salaries for Messrs. Burns, Richter, DeBacker and Miller in the same amounts as they received in 2005. However, the Committee increased Mr. Stanage’s base salary from $280,000 to $336,000 in recognition of his promotion to President — Heavy Vehicle Products in late 2005. The Committee also froze the base salaries of other senior executives participating in our Annual Incentive Plan, except in the case of promotions or where local law mandates salary adjustments.

For 2007 and during our bankruptcy proceedings, the annual base salaries of our CEO, the named executive officers, and two other key members of Dana’s management team will be fixed at the salary levels in effect on March 1, 2006, under an Order of the Bankruptcy Court dated December 18, 2006 that is discussed below.

Annual Incentive Plan

For 2006, performance-based cash incentives were provided to critical and key employees of Dana and our subsidiaries (including Mr. Burns and the other named executive officers) under the Annual Incentive Plan, which was recommended by the Compensation Committee and approved by our Board in February 2006. This plan replaced our previous short-term incentive plan, the Additional Compensation Plan. For a discussion of the features of the Annual Incentive Plan and the 2006 performance objectives and payouts, see “Grants of Plan-Based Awards.” The adoption of the Annual Incentive Plan enabled us to redefine the

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categories of employees to whom award opportunities are available, provide incentives for interim (six-month) as well as full-year performance, and eliminate the deferral feature of the previous plan that was no longer viable as a result of U.S. tax law changes in 2004 applicable to nonqualified deferred compensation arrangements.

Performance-based incentives will be provided again in 2007 under the Annual Incentive Plan to critical and key employees of Dana and our subsidiaries (including Messrs. Burns, DeBacker, Miller and Stanage), based on the achievement of corporate EBITDAR performance goals that will be attainable at the target performance level if we achieve the benefits that we expect in 2007 from our reorganization initiatives. Participants with product group responsibilities will have, in addition to the corporate EBITDAR goals, product group performance goals that will be attainable at the target performance level if the groups achieve their projected results in 2007.

Long-Term Equity Compensation

In February 2004, the Compensation Committee restructured our long-term equity incentive program to move from fixed-share to dollar value grants based on market-competitive target values that it established for each of the executive pay grades. The Committee granted long-term equity incentives to senior executives (including Messrs. Richter and DeBacker, but not Messrs. Burns, Miller and Stanage, who had not then joined Dana). Following consultation with management, Mercer and Cook regarding the most effective mix of incentives, the Committee determined that the grants should consist of (i) stock options (50% of the target value) that vest over a four-year period and expire in 10 years; (ii) service-based restricted shares (20% of the target value) that vest in five years; and (iii) and performance shares (30% of the target value) that vest if we achieve a cumulative absolute earnings per share performance goal and/or a relative ROIC performance goal compared to our peer group companies over a three-year period (2004-2006). Subsequently, when they joined Dana, the Board approved long-term equity incentives for Mr. Burns and the Compensation Committee approved long-term equity incentives for Mr. Miller. Mr. Burns received the following long-term equity grants under his employment agreement (some of which were replacement grants designed to make up for compensation from his prior employer that was forfeited when he joined Dana): (i) 510,000 stock options (including 360,000 replacement options) that were to vest over a four-year period and expire in 10 years, (ii) 18,432 performance shares for the 2004-2006 performance period at the threshold payout level, and (iii) 165,687 restricted stock units, 141,110 of which had a three-year restricted period and have now vested and 24,577 of which had a five-year restricted period and will vest in 2009. Mr. Miller received (i) 83,403 stock options that were to vest over a four-year period and expire in 10 years, (ii) 5,151 restricted shares with a three-year restricted period, (iii) 15,187 restricted shares with a five-year restricted period, and (iv) 3,888 performance shares at the threshold payout level for the 2004-2006 performance period.

In February 2005, the Compensation Committee determined to continue the same formula for long-term equity incentives as in the prior year and granted senior executives (including Messrs. Burns, Richter, DeBacker and Miller) (i) stock options (50% of the target value) that were to vest over a four-year period and expire in 10 years; (ii) service-based restricted shares (20% of the target value) that vest in five years; and (iii) and performance shares (30% of the target value) that vest if we achieve a cumulative absolute earnings per share performance goal and/or a relative ROIC performance goal compared to our peer group companies over a three-year period (2005-2007). Subsequently, when Mr. Stanage joined Dana, the Committee approved the following long-term equity incentives for him: (i) 50,000 stock options that were to vest over a four-year period and expire in 10 years, (ii) 17,000 restricted shares with a three-year restricted period, and (iii) 2,500 performance shares for the 2005-2007 performance period at the threshold payout level.

In December 2005, for the reasons discussed in Note 14 to our consolidated financial statements under Item 8, the Compensation Committee approved the immediate vesting of all outstanding stock options with an exercise price of $15.00 or more per share. Consequently, all options granted in 2004 and 2005 have now vested.

In February 2006, the Compensation Committee determined that short-term cash incentives would be more appropriate than long-term equity incentives given our financial position. Consequently, long-term

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equity-based grants were suspended in 2006. However, in determining the amounts of the 2006 cash award opportunities to be granted to critical and key leaders under the Annual Incentive Plan, the Committee factored in a portion of the value of long-term equity-based awards that would have been granted under past practices.

The Compensation Committee has reviewed our results for the 2004-2006 performance period and determined that the performance goals for the period were not achieved. Consequently, all performance shares granted for the 2004-2006 period have been forfeited. Moreover, based on our results to date in the 2005-2007 performance period, we do not expect to achieve the performance goals for that period either and we expect that the performance shares for that period will also be forfeited.

Executive Agreements

Prior to our bankruptcy filing, Mr. Burns had built a core management team consisting of Mr. DeBacker (Vice President, General Counsel and Secretary with responsibility for the Risk Management, Environmental Services, Government Affairs and Corporate Communications Departments); Mr. Miller (Vice President — Purchasing, with responsibility for our supply chain management system and for containing and reducing our costs of purchased goods and services); Mr. Stanage (President — Heavy Vehicle Products, with responsibility for our worldwide commercial and off-highway vehicle manufacturing and assembly operations); Thomas Stone (President — Traction Group, with global responsibility for our axle manufacturing and assembly operations); and Ralf Goettel (who leads our Sealing Products group on a worldwide basis and serves as the senior executive for our operations in Europe).

Following our bankruptcy filing, the Board charged the Compensation Committee with determining how best to motivate Mr. Burns and this team to achieve an expedient and successful reorganization and compensate them appropriately for their efforts during the demanding reorganization process. During our Chapter 11 process, in addition to their business responsibilities, this team is negotiating with our bondholders, creditors, customers, vendors, labor unions, and retirees — which constituencies, at times, have conflicting interests and agenda for the reorganized Dana — and developing a plan of reorganization for the Debtors.

The Compensation Committee prepared a proposal for the terms under which Mr. Burns and the other five members of his core management team would be compensated during the reorganization proceedings. In developing the proposal, the Committee, through its Chairman, Mr. Priory, considered the individuals’ responsibilities, their pre-petition compensation arrangements, and the range of reasonableness for our industry peers and similar Chapter 11 debtors (based on relevant compensation data developed by Mercer) and reviewed its proposal with the Committee’s independent advisor, Cook.

Following extensive negotiations with the UCC and other of the Debtors’ constituencies on the original proposal and subsequent revisions, as well as court hearings on the matter, on December 18, 2006, the Bankruptcy Court authorized us to enter into an amendment to Mr. Burns’ 2004 employment agreement and executive agreements with Messrs. DeBacker, Miller and Stanage on the terms discussed under the caption “Executive Agreements.”

Perquisites

In 2004, the Compensation Committee reviewed the costs of Dana’s executive perquisite program and the results of a Mercer survey of perquisites offered by 16 companies in the automotive parts and equipment industry. The survey indicated that our perquisite program was somewhat more generous than the typical practices of the survey respondents. As a result, commencing in 2005, we took steps to reduce the number and cost of perquisites available to our executives. Currently, we offer the following perquisites to approximately 50 active executives (including Mr. Burns and the other named executive officers except Mr. Hiltz): a vehicle allowance; life insurance with a policy value of three times salary; accidental death and dismemberment insurance; professional financial, tax and estate planning services; and reimbursement for taxes payable by the executives on the value of these perquisites (except for the vehicle allowance and accidental death and dismemberment insurance). In addition, Messrs. Burns, DeBacker and Miller have company-

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provided home security systems for which we pay the system monitoring costs and we reimburse them for the costs of home Internet access. Mr. Richter had all of the foregoing benefits before his retirement.

Retirement Benefits

The Compensation Committee takes retirement benefits provided by Dana into account in determining total compensation for our senior executives. The retirement benefits available to Mr. Burns and the other named executive officers are discussed under “Pension Benefits.”

Change of Control Arrangements

Historically, our CEO and a limited number of senior executives have had individual agreements with Dana providing for severance payments and other benefits in the event of a change of control of the company. Messrs. Burns, DeBacker and Miller had individual change of control agreements at the end of 2006. From 2003 through 2006, the Dana Corporation Change of Control Severance Plan provided for severance payments and benefits to designated senior managers, key leaders and corporate staff (other than those executives with individual agreements) in the event of a change of control of Dana. Mr. Stanage participated in that plan, which expired at the end of 2006.

Adjustment of Performance-Based Compensation

In 2005, the Board adopted a policy regarding the adjustment of performance-based compensation in the event of a restatement of our financial results. The policy provides for the Compensation Committee to review all bonuses and other compensation paid or awarded to our executive officers based on the achievement of corporate performance goals during the period covered by a restatement. If the amount of such compensation paid or payable to any executive officer based on the originally reported financial results differs from the amount that would have been paid or payable based on the restated financial results, the Committee makes a recommendation to the independent members of the Board about whether to seek recovery from the officer of any compensation exceeding that to which he or she would have been entitled based on the restated results or to pay to the officer additional amounts to which he or she would have been entitled based on the restated results, as the case may be.

Pursuant to this policy, following the restatement of our financial statements for the first and second quarters of 2005 and fiscal years 2002 through 2004, the Compensation Committee reviewed the performance-based compensation that had been paid or awarded to our executive officers based on the achievement of corporate performance goals during the periods covered by these restatements. Based on that review, the Committee determined that the restatements affected award payments under our equity-based plans in only one year, and in an immaterial amount in that year. Consequently, the Committee recommended that there be no adjustments to the performance-based compensation of the executive officers and the independent Board members concurred with this recommendation.

Impact of Accounting and Tax Treatments

Deductibility of Executive Compensation — Historically, it has been a tenet of our executive compensation philosophy that performance-based compensation provided to the CEO and other senior managers who are “covered employees” under Section 162(m) of the Internal Revenue Code (the Code) should comply with the Code requirements that qualify such compensation as tax-deductible for Dana, unless the Compensation Committee determines that it is in Dana’s best interests in individual circumstances to provide compensation that is not tax-deductible. From time to time, the Committee approves compensation that does not meet the Section 162(m) requirements in order to ensure competitive levels of compensation for our senior executives. For 2006, the amount of base salary shown in the Summary Compensation Table for Mr. Burns in excess of $1,000,000 and all of his incentive compensation under the Annual Incentive Plan were not deductible for federal income tax purposes.

Nonqualified Deferred Compensation — The American Jobs Creation Act of 2004 changed the tax rules applicable to nonqualified deferred compensation arrangements, including those under our Additional

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Compensation Plan, Director Deferred Fee Plan, Stock Incentive Plan, 1999 Restricted Stock Plan, and certain individual compensation arrangements. While the final regulations have not become effective yet, if any payment under these programs or arrangements would result in the imposition of tax on Dana under these rules, we may modify the payment to avoid the imposition of the tax, to the extent permitted under applicable law.

Accounting for Stock-Based Compensation — Since January 1, 2006, we have accounted for stock-based payments under our equity-based plans in accordance with the requirements of SFAS No. 123(R). There is more information about this accounting treatment in Note 14 to our consolidated financial statements in Item 8.

Summary Compensation Table

The following table shows the compensation for 2006 earned by or paid to our principal executive officer, our principal financial officers, and our three other most highly compensated executive officers serving at the end of the year (collectively, the named executive officers) for services rendered during the year in all capacities to Dana and our subsidiaries. None of the named executive officers received Dana stock awards or stock options in 2006.


								Change in
								Pension
								Value and
								Nonquali-
								fied
						Non-Equity		Deferred		All Other
Name and						Incentive Plan		Compensation		Compensation		Total
Principal Position	Year		Salary ($)			Compensation ($)(1)		Earnings ($)(2)		($)(3)		($)(4)

Michael J. Burns,		2006		1,035,000			1,035,000		597,222		221,778		2,889,000
Chairman and Chief
Executive Officer
Kenneth A. Hiltz,		2006		0	(5)		0		0		3,694		3,694
Chief Financial
Officer (appointed effective March 6, 2006)
Robert C. Richter,		2006		91,667	(6)		0		0		477,633		569,300
Chief Financial Officer (retired effective March 1, 2006)
Michael L. DeBacker,		2006		405,000			243,000		275,591		151,530		1,075,121
General Counsel and Secretary
Paul E. Miller,		2006		375,000			225,000		187,738		49,300		837,038
Vice President — Purchasing
Nick L. Stanage,		2006		326,667			168,000		69,066		30,758		594,491
President — Heavy Vehicle Products


(1)		This column shows the cash incentive awards earned for first-half 2006 performance under our Annual Incentive Plan, as discussed under the caption “Grants of Plan-Based Awards.” Messrs. Hiltz and Richter did not participate in that plan. We report cash incentive awards in the year in which they are earned, regardless of whether payment is made then or in the following year or deferred for future distribution.

(2)		This column shows the aggregate increase in the actuarial present value of the named executive officers’ accumulated benefits under all defined benefit and actuarial pension plans from December 31, 2005 to December 31, 2006, the pension plan measurement dates used for financial reporting purposes with

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		respect to our audited consolidated financial statements for fiscal years 2005 and 2006. The table below provides further details. Mr. Hiltz does not participate in our pension plans.


Name	Plan or Arrangement	Change in Value

Mr. Burns	Individual Supplemental Executive Retirement Plan	$	597,222
Mr. DeBacker	Dana Corporation Retirement Plan (CashPlus)		48,605
	Dana Corporation Excess Benefits Plan		41,513
	Dana Corporation Supplemental Benefits Plan		185,473
Mr. Miller	Individual Supplemental Executive Retirement Plan		187,738
Mr. Stanage	Individual Supplemental Executive Retirement Plan		69,066

The change in pension value shown for Mr. Burns consists of $263,453 in service credits based on his 2006 earnings, plus $340,465 in interest credits on his notional account, less a $6,696 offset for the portion of the increase in his account balance under the SavingsWorks Plan attributable to employer contributions. The value of the service credits was calculated based on the 30 years of service with Dana that Mr. Burns is deemed to have under his employment agreement. If the value of the service credits had been calculated based on Mr. Burns’ actual years of service with Dana (two years), it would have been $61,747 (rather than $263,453).

The present value of Mr. DeBacker’s accumulated benefits under the Supplemental Benefits Plan was calculated based on the assumption that he will take early retirement on December 31, 2009, since no benefits will be payable to him under this plan if he retires after 2009.


(3)		This column shows the aggregate value of all compensation earned by the named executive officers during 2006 and not reported elsewhere in the Summary Compensation Table. The total values shown for the individuals include the following perquisites and benefits:


	•	Mr. Burns — $88,726 for aggregate tax reimbursements (related to supplemental life insurance premiums, professional services and personal use of a company vehicle); $83,480 for supplemental life insurance premiums; and amounts for personal financial planning services, a vehicle allowance for part of the year, use of a company vehicle for part of the year, use of company aircraft, company contributions to his SavingsWorks Plan 401(k) account, costs of monitoring a home security system and providing communications equipment and home Internet access, an accidental death and dismemberment insurance premium and a matching gift to an educational institution under the Dana Foundation Matching Gifts Program, discussed under “Director Compensation.”

	•	Mr. Hiltz — the incremental cost of providing housing in company facilities while he is working at Dana’s corporate offices.

	•	Mr. Richter — $350,000 for consulting fees (post-retirement through December 31, 2006); $62,364 for supplemental life insurance premiums; $54,485 for aggregate tax reimbursements (related to supplemental life insurance premiums and professional services); and amounts for personal financial and tax planning services, a car allowance, an accidental death and dismemberment insurance premium and costs of monitoring a home security system and providing home Internet access.

	•	Mr. DeBacker — $73,805 for supplemental life insurance premiums; $63,379 for aggregate tax reimbursements (related to supplemental life insurance premiums); and amounts for a vehicle allowance, an accidental death and dismemberment insurance premium and costs of monitoring a home security system and providing communications equipment and home Internet access.

	•	Mr. Miller — amounts for a vehicle allowance; personal financial planning services; aggregate tax reimbursements (related to professional services); supplemental life insurance premiums; company contributions to his SavingsWorks Plan 401(k) account; relocation expenses; and amounts for an accidental death and dismemberment insurance premium and costs of monitoring a home security system and providing communications equipment and home Internet access.

	•	Mr. Stanage — amounts for a vehicle allowance; personal financial planning services; aggregate tax reimbursements (related to professional services); company contributions to his SavingsWorks Plan

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		401(k) account; and amounts for supplemental life and accidental death and dismemberment insurance premiums.


(4)		This column shows the sum of the amounts reported in the preceding four columns.

(5)		Mr. Hiltz is a temporary Dana employee and did not receive a salary from Dana in 2006. He is serving as our Chief Financial Officer pursuant to an agreement between Dana and APServices LLP (APS) under which APS is providing his services in that capacity for a monthly fee of $125,000, plus out-of-pocket expenses. This agreement has been approved by the Bankruptcy Court.

(6)		This column shows Mr. Richter’s salary up to his retirement. His consulting fees for the remainder of 2006 are included in the “All Other Compensation” column.

Grants of Plan-Based Awards

The following table contains information about the non-equity incentive awards received by Messrs. Burns, Miller, DeBacker and Stanage in 2006 under our Annual Incentive Plan. Messrs. Richter and Hiltz did not participate in the Annual Incentive Plan. None of our named executive officers received equity-based incentive awards, stock awards, or stock options in 2006.


	Estimated Future Payouts Under Non-Equity Incentive Plan Awards
	Threshold		Target		Maximum
Name	($)		($)		($)

Mr. Burns		1,035,000		2,070,000		4,140,000
Mr. Hiltz		—		—		—
Mr. Richter		—		—		—
Mr. DeBacker		243,000		486,000		972,000
Mr. Miller		225,000		450,000		900,000
Mr. Stanage		168,000		336,000		672,000

The Annual Incentive Plan was approved by our Board in February 2006. It is intended to provide performance-based incentives for 2006 and 2007 to key employees of Dana and our subsidiaries. Award opportunities under the plan are available to three groups of employees. These are “Critical Leaders” (individuals with a significant impact on our overall performance, whose efforts are required to meet our financial goals) and “Key Leaders” (individuals with operational or administrative responsibilities that are vital to the results of our product groups or the management of our corporate support functions) who are designated by the Compensation Committee and “Dana Leaders” (individuals with operational or administrative responsibilities important to the results of specific facilities within our product groups or specific corporate support functions) who are designated by Mr. Burns. For 2006, the Compensation Committee designated 16 individuals (including Messrs. Burns, DeBacker, Miller and Stanage) as Critical Leaders and 34 individuals as Key Leaders, and Mr. Burns designated approximately 1,500 individuals as Dana Leaders.

Payout opportunities for participants under the Annual Incentive Plan are based on first-half and full-year performance measures and goals established by the Board, upon the recommendation of the Compensation Committee, for awards at threshold, target and superior performance levels.

For 2006, the Board selected EBITDAR as the corporate performance objective to correlate with the measure of financial performance that we and our lenders track under our financing arrangements. For purposes of the plan, “EBITDAR” was defined as (i) the sum of net income (or net loss); interest expense and facility fees, unused commitment fees, letter of credit fees and similar fees; income tax expense; depreciation expense; amortization expense; non-recurring, transactional or unusual losses deducted in calculating net income, less non-recurring, transactional or unusual gains added in calculating net income; cash “Restructuring Charges” (non-recurring and other one-time costs incurred in connection with the reorganization or discontinuation of Dana’s and our subsidiaries’ businesses, operations and structures resulting from facility closures and the consolidation, relocation or elimination of operations and related employee severance, termination, relocation and training costs), to the extent deducted in computing net income and settled in cash during the year in an aggregate amount not to exceed $75 million; non-cash Restructuring Charges and

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related non-cash losses and other non-cash charges resulting from the write-down in the valuation of any assets of Dana and our subsidiaries; “Professional Fees” (legal, appraisal, financing, consulting and other advisor fees incurred in connection with the Debtors’ bankruptcy proceedings, reorganization and the DIP Credit Agreement); and minority interest expense; less (ii) equity earnings of affiliates and interest income. The EBITDAR calculations were made on a consolidated basis for Dana and its subsidiaries (other than DCC, which was accounted for on an equity basis for the purpose of these calculations) and included discontinued operations.

The 2006 EBITDAR goals were (i) $141.6 million at the threshold payout level and $170.9 million at the target payout level for the first six months of the year and (ii) $290 million at the threshold payout level, $350 million at the target payout level, and $440 million at the maximum payout level for the full year. The corporate goals applied to all plan participants except those in businesses to be divested, who had goals based solely on the performance of their businesses. In addition, a portion of the incentive opportunity for participants in Dana’s continuing product groups was based on the achievement of performance goals set for their groups.

Under the Annual Incentive Plan, the amount of potential payouts varies depending on the extent to which the performance goals are achieved. For 2006, the payout opportunities for achievement at the target EBITDAR level ranged from 12% to 200% of the participants’ annual base salaries as of March 1, 2006, depending upon their responsibilities. The payout opportunities for the named executive officers at the target level were: for Mr. Burns, 200% of his salary; for Messrs. DeBacker and Miller, 120% of their salaries; and for Mr. Stanage, 100% of his salary. The payout opportunities for the named executive officers at the threshold level were 50% of the target payouts and the payout opportunities for superior performance were 200% of the target payouts. Under the plan, the Compensation Committee may make discretionary adjustments to any full-year awards payable to Critical Leaders or Key Leaders based on the achievement of pre-established individual performance goals, and Mr. Burns has the same authority to make discretionary adjustments to full-year awards payable to Dana Leaders, provided that all such discretionary adjustments in any plan year are within the Board’s total incentive compensation budget for the plan for the year.

Under the Annual Incentive Plan, payouts are calculated and paid (if earned) semi-annually. Amounts earned and paid for six-month performance are not returned if full-year performance goals are not achieved. For 2006, payment opportunities for the first six months were based on performance in that period and capped at 100% of the six-month target payout. Payout opportunities for the full year were based on full-year performance and capped at 200% of the target payout, less amounts previously paid for six-month performance. For the first six months of 2006, Dana’s EBITDAR, calculated under the plan definition, was $185.9 million. Since this return exceeded the six-month EBITDAR threshold goal, plan participants with corporate goals (including those in product groups that achieved their first-half goals) received payouts for first-half 2006 performance. Participants in businesses to be divested also received first-half awards in those cases where the businesses achieved their first-half goals. The payouts received by Messrs. Burns, DeBacker, Miller and Stanage for first-half 2006 performance are shown in the Summary Compensation Table. For full-year 2006, Dana’s EBITDAR, calculated under the plan definition, was $265 million. Since this return did not meet the full-year threshold EBITDAR goal, there were no further payouts for full-year 2006 performance for any participants with corporate goals and no opportunities for discretionary adjustments for such participants under the plan. Two businesses to be divested achieved at least threshold performance of their full-year goals and participants in those businesses received payouts for full-year 2006 performance.

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Outstanding Equity Awards at 2006 Fiscal Year-End

The following table contains information about unexercised Dana stock options, unvested restricted shares and restricted stock units, and unvested equity incentive plan awards held by our named executive officers as of December 31, 2006. Mr. Hiltz has no Dana equity awards. Mr. Richter retired during 2006 and had no equity awards at the end of the year. None of the named executive officers had any unearned options at the end of the year.

Option Awards

Stock Awards

Equity

Incentive

Plan

Equity

Awards:

Incentive

Market or

Plan

Payout

Awards:

Value of

Number

Unearned

Number of

Number

Market

of Unearned

Shares,

Number of

Securities

of Shares

Value of

Shares,

Units or

Securities

Underlying

or Units

Shares

Units or

Other

Underlying

Unexer-

of Stock

Other

Rights

Unexer-

cised

Option

That Have

Rights

That

cised

Options (#)

Exercise

Option

Not

That Have

Have Not

Options (#)

Unexer-

Price

Expira-

Vested

Not Vested

Vested

Name

Exercisable

cisable(1)

($)

tion Date

(#)(2)

($)(3)

(#)(4)

($)(5)

Mr. Burns

510,000

21.82

02/28/14

127,508

177,236

37,641

52,321

321,543

15.94

02/13/15

Mr. Hiltz

Mr. Richter

Mr. DeBacker

12,000

38.44

07/20/07

19,249

26,756

7,102

9,872

12,000

52.56

07/19/08

12,000

45.50

07/18/09

15,000

23.06

07/16/10

36,000

25.05

07/15/11

36,000

15.33

07/15/12

27,000

9,000

8.34

04/20/13

22,000

22.34

02/08/14

60,622

15.94

02/13/15

Mr. Miller

83,403

20.19

05/02/14

31,046

43,154

7,102

9,872

60,662

15.94

02/13/15

Mr. Stanage

12,500

37,500

13.35

05/29/15

17,164

23,858

2,500

3,475


(1)		Of the options shown in this column, Mr. DeBacker’s 9,000 options will vest on April 21, 2007, and Mr. Stanage’s 37,500 options will vest in three installments of 12,500 options each on August 29, 2007, 2008 and 2009, subject to acceleration upon a change in control of Dana.

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(2)		This column shows unvested restricted shares and restricted stock units granted under our 1999 Restricted Stock Plan and/or our Stock Incentive Plan, including additional shares or units accrued in lieu of cash dividends. The table below shows the vesting dates for these shares and units, subject to pro rata acceleration upon a change in control of Dana.


	Number of
	Shares or
	Units of
	Stock That
Name	Have Not Vested		Vesting Date

Mr. Burns		50,034 units		03/01/07
		25,915 units		03/01/09
		51,559 shares		02/14/10
Mr. DeBacker		4,252 shares		04/16/07
		5,271 shares		02/09/09
		9,726 shares		02/14/10
Mr. Miller		5,396 shares		05/03/07
		15,924 shares		05/03/09
		9,726 shares		02/14/10
Mr. Stanage		17,164 shares		08/29/08


(3)		The aggregate values in this column were computed by multiplying (i) the number of unvested restricted shares and restricted stock units in the preceding column by (ii) the closing price of our stock on the OTC Bulletin Board (OTCBB) on December 29, 2006 (the last trading day of the year).

(4)		This column shows unearned performance shares granted under our Stock Incentive Plan for the 2005-2007 performance period at the threshold performance level.

(5)		The aggregate values in this column were computed by multiplying (i) the number of performance shares in the preceding column by (ii) the closing price of our stock on the OTCBB on December 29, 2006. We do not expect that the goals for the 2005-2007 performance period will be achieved, but if earned, Mr. Burns’ performance shares will be paid in shares of Dana stock and the performance shares of the other named executive officers will be paid in cash in an amount equal to the fair market value of Dana stock on December 31, 2007.

Option Exercises and Stock Vested

The following table contains information about the stock awards for the named executive officers that vested in 2006. Mr. Hiltz has no Dana stock options or stock awards. None of the other named executive officers exercised any Dana stock options during 2006.


	Stock Awards
	Number of Shares
	Acquired on Vesting		Value Realized
Name	(#)(1)		on Vesting ($)(2)

Mr. Burns		50,035		92,565
Mr. Hiltz
Mr. Richter		27,684		92,765
Mr. DeBacker		8,761		11,652
Mr. Miller
Mr. Stanage


(1)		For Mr. Burns, this column shows restricted stock units, including additional units credited in lieu of cash dividends, which vested on March 1, 2006, upon the expiration of the restricted period. Mr. Burns elected in 2004 to defer the distribution of the shares that he would otherwise have received upon the vesting of these restricted stock units until the date of his termination of employment with Dana for any reason and to

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		take a lump sum distribution of the shares at that time. As a result of our bankruptcy filing, Mr. Burns has an unsecured creditor’s claim for these shares.

For Mr. Richter, this column shows (i) 17,987 restricted shares, including additional shares credited in lieu of cash dividends, which vested on February 12, 2006, upon the expiration of the restricted period, and (ii) 9,697 restricted shares and the related restricted stock units into which they had been deferred, including additional shares and units credited in lieu of cash dividends, which vested on March 1, 2006, upon his retirement from Dana.

For Mr. DeBacker, this column shows restricted shares, including additional shares credited in lieu of cash dividends, which vested on April 17, 2006, upon the expiration of the restricted period.


(2)		The aggregate values in this column were computed, in each case, by multiplying the number of vested shares or stock units by the closing price of Dana stock on the principal U.S. market for the stock on the vesting date or the last prior business day.

Pension Benefits

The following table contains information with respect to the plans that provide for payments or other benefits to our named executive officers at, following, or in connection with retirement. The number of years of credited service and the actuarial present values in the table are computed as of December 31, 2006, the pension plan measurement date used for reporting purposes with respect to our consolidated financial statements in Item 8. Mr. Hiltz does not participate in our pension plans. Mr. Richter retired from Dana during 2006 and received the lump sum distributions of his pension benefits that are shown in the table.

Present

Number

Value of

Payments

of Years

Accumulated

During

Credited

Benefit

2006

Name

Plan Name

Service (#)

($)

Mr. Burns

Individual Supplemental Executive Retirement Plan

7,384,973

Mr. Hiltz

—

Mr. Richter

Dana Corporation Retirement Plan (CashPlus)

319,491

Dana Corporation Excess Benefits Plan

726,784

Dana Corporation Supplemental Benefits Plan

368,475

Mr. DeBacker

Dana Corporation Retirement Plan (CashPlus)

514,237

Dana Corporation Excess Benefits Plan

261,813

Dana Corporation Supplemental Benefits Plan

411,424

Mr. Miller

Individual Supplemental Executive Retirement Plan

463,070

Mr. Stanage

Individual Supplemental Executive Retirement Plan

90,618

Supplemental Executive Retirement Plans

Mr. Burns is eligible to receive a supplemental retirement benefit under his employment agreement, which is discussed under “Executive Agreements.” Under this arrangement, in 2004, Dana established a notional account on Mr. Burns’ behalf and credited $5,900,000 to that account. The initial credit was intended to provide Mr. Burns with the non-qualified retirement benefit that he forfeited when he terminated his prior employment to join Dana. Annual service-based credits and interest credits are made to this account each year as if Mr. Burns were participating in the CashPlus Plan (discussed below), without regard to certain legal limits on compensation and benefits that apply to the CashPlus Plan. For the purpose of determining the annual service-based credits, Mr. Burns is deemed to have completed 30 years of service with Dana. As a result, the annual service-based credit Mr. Burns earns each year is equal to 6.4% of his earnings, up to one-fourth of the social security wage base for the year ($94,200 for 2006), plus an additional 12.8% of his earnings in excess of this threshold. Interest credits to his notional account were credited for 2006 at the same 5.0% rate used for interest credits under the tax-qualified CashPlus Plan. (See Note 2 to the Summary Compensation Table for information about the difference in the value of Mr. Burns’ 2006 service credits based on his 30 years of deemed service compared to the value based on his two years of actual service.) The

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benefit payable to Mr. Burns under this arrangement will be offset by the vested account balance he has under our SavingsWorks Plan, other than the portion of such balance attributable to his elective deferrals. The balance credited to Mr. Burns’ notional account is subject to a five-year vesting requirement (with partial acceleration in the event of termination of his employment by Dana without cause or by Mr. Burns for good reason, or his death or disability).

In connection with our reorganization, on December 18, 2006, the Bankruptcy Court authorized us to assume Mr. Burns’ employment agreement with certain modifications to his supplemental retirement benefit. As modified, (i) Dana will assume 60% of the benefit accrued for Mr. Burns as of March 3, 2006, upon our consummation of a plan of reorganization and (ii) the remaining 40% of his accrued benefit will remain an allowed general unsecured claim in the Bankruptcy Cases, unless Dana terminates its defined benefit pension plans. In that event, 100% of Mr. Burns’ supplemental benefit will remain a general unsecured claim in the Bankruptcy Cases. In addition, all service credits and interest accrued to Mr. Burns’ notional account after March 3, 2006, will be allowed as an administrative claim in the Bankruptcy Cases.

Messrs. Miller and Stanage have individual Supplemental Executive Retirement Plans designed to provide them with certain non-qualified retirement benefits forfeited when they terminated their prior employment to join Dana.

Under the terms of Mr. Miller’s plan, if he continues employment with Dana to his normal retirement age (age 62), he will receive a normal retirement benefit of $2,283,000 payable in a lump sum, as well as an additional lump sum payment of $200,000 in consideration for retiree healthcare protection he forfeited upon joining Dana. If Mr. Miller dies, becomes disabled or is involuntarily terminated from employment by Dana for any reason other than “cause” (as defined in the plan) before he reaches age 62, he (or his estate) will be entitled to a portion of his normal retirement benefit (not exceeding 100%) equal to the greater of (i) his normal retirement benefit multiplied by a fraction, the numerator of which is his years of credited service (as shown in the above table) and the denominator of which is 10, or (ii) 75% of his normal retirement benefit. If, after May 3, 2009, but prior to age 62, Mr. Miller elects to retire or resign voluntarily or his employment is terminated by Dana for cause, in lieu of any other benefit payable under the plan, he will be entitled to a pro rata portion (not exceeding 100%) of his normal retirement benefit, calculated by multiplying his normal retirement benefit by a fraction, the numerator of which is his years of credited service and the denominator of which is 10. Mr. Miller’s retirement benefit and the payment in lieu of his prior retiree healthcare benefit will become fully vested in the event of a “change in control” of Dana (as defined in the plan and subject to Internal Revenue Code Section 409A) and he will be entitled to a lump sum payment within 30 days.

Under the terms of Mr. Stanage’s plan, if he continues employment with Dana to his normal retirement age (age 62), he will receive a normal retirement benefit of $2,095,500, payable in a lump sum. If Mr. Stanage dies, becomes disabled or is involuntarily terminated from employment by Dana for any reason other than “cause” (as defined in the plan) before he reaches age 62, he (or his estate) will be entitled to a portion of his normal retirement benefit (not exceeding 100%) equal to the greater of (i) his normal retirement benefit multiplied by a fraction, the numerator of which is his years of credited service (as shown in the above table) and the denominator of which is 15-4/12, or (ii) 50% of his normal retirement benefit. If, after August 29, 2010, but prior to age 62, Mr. Stanage elects to retire or resign voluntarily or his employment is terminated by Dana for cause, in lieu of any other benefit payable under the plan, he will be entitled to a pro rata portion (not exceeding 100%) of his normal retirement benefit, calculated by multiplying his normal retirement benefit by a fraction, the numerator of which is his years of credited service and the denominator of which is 15-4/12. Mr. Stanage’s normal retirement benefit will become fully vested in the event of a “change in control” of Dana (as defined in the plan and subject to Internal Revenue Code Section 409A) and he will be entitled to a lump sum payment within 30 days.

In connection with our reorganization, on December 18, 2006, the Bankruptcy Court authorized Dana to assume Messrs. Miller’s and Stanage’s supplemental retirement benefits unless Dana terminates its defined benefit pension plans. In that event, their supplemental benefits will remain allowed general unsecured claims in the Bankruptcy Cases.

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Dana Corporation Retirement Plan (the CashPlus Plan)

The Dana Corporation Retirement Plan is a cash balance plan (a type of non-contributory defined benefit pension plan in which the participants’ benefits are expressed as individual accounts). Management employees (and most other non-union employees) first employed by Dana before January 1, 2003, participate in this plan. Mr. DeBacker is currently the only named executive officer who participates in this plan.

The normal retirement age under this plan is 65. Benefits under the plan are computed as follows. During each year of participation in the plan, a participating employee earns a service credit equal to a specified percentage of his or her earnings (as defined in the plan) up to one-quarter of the Social Security taxable wage base, plus a specified percentage of his or her earnings above one-quarter of the taxable wage base. The percentages increase with the length of Dana service. A participant with 30 or more years of service receives the maximum credit (6.4% of earnings up to one-quarter of the taxable wage base, plus 12.8% of earnings over one-quarter of the taxable wage base).

A participant employed by Dana on July 1, 1988 (when this plan was converted to a cash balance plan) also earns a transition benefit designed to provide a retirement benefit under this plan comparable to the benefit that would have been received under the predecessor plan. A participant earns this transition benefit ratably over the period from July 1, 1988, to his or her 62nd birthday, except that in the event of a change in control of Dana (as defined in the plan), the participant will be entitled to the entire transition benefit. The accumulated service credits and the transition benefit are credited with interest annually, in an amount (generally not less than 5%) established by our Board.

We are not currently contemplating any changes to this plan, as a result of our bankruptcy filing, that would effect the payment of benefits already accrued thereunder. However, we expect to freeze benefit accruals under this plan by July 1, 2007, so that no additional service credits will accrue thereafter.

Dana Corporation Excess Benefits Plan

U.S. federal tax law imposes maximum payment and covered compensation limitations on tax-qualified pension plans. Dana has an Excess Benefits Plan which covers all employees eligible to receive retirement benefits under any funded tax-qualified defined benefit plan of the company, including the CashPlus Plan, whose pension benefits are affected by these limitations. Mr. DeBacker is currently the only named executive officer who participates in this plan. This plan provides that Dana will pay from its general funds any amounts that exceed the federal limitations and any amounts that are not paid under the CashPlus Plan due to earnings being reduced by deferred bonus payments. In the event of a change of control of Dana (as defined in the plan), participants will receive lump-sum payments of all benefits previously accrued and will be entitled to continue to accrue benefits thereunder. Claims for benefits accrued under this non-qualified plan prior to our bankruptcy filing are pre-petition claims and there can be no assurance that such amounts will be paid. At this time, we have made no decision about whether to assume this plan as part of our reorganization.

Dana Corporation Supplemental Benefits Plan

Dana also has a Supplemental Benefits Plan that covers certain U.S.-based senior management who participated in the predecessor to the CashPlus Plan as of June 30, 1988. Mr. DeBacker is currently the only named executive officer who participates in this plan. Under this plan, a participant who retires before the end of 2009, will be entitled to receive the difference between the aggregate benefits that he or she will receive under the CashPlus and Excess Benefits Plans and, if greater, a percentage of the benefit that he or she would have been entitled to receive under the predecessor plan to the CashPlus Plan in effect before July 1, 1988. That percentage is 70% in the event of retirement in the years 2005 through 2009. The predecessor plan formula is based on 1.6% of final monthly earnings (as defined in the plan) for each year of credited service, less 1.6% of a participant’s Social Security benefit for each year of accredited service up to 25 years. In the event of a change of control of Dana (as defined in the plan), participants will receive lump-sum payments of all benefits previously accrued and will be entitled to continue to accrue benefits thereunder. Claims for benefits accrued under this non-qualified plan prior to our bankruptcy filing are pre-petition claims

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and there can be no assurance that such amounts will be paid. At this time, we have made no decision about whether to assume this plan as part of our reorganization.

Non-Qualified Deferred Compensation

Historically, our non-qualified Additional Compensation Plan, discussed in Note 14 to our consolidated financial statements in Item 8, provided an opportunity for key employees of Dana, our subsidiaries and affiliates who were designated by our Compensation Committee to earn annual cash bonuses and to elect to defer the receipt of such bonuses. The deferral feature of this plan was suspended effective January 1, 2005. Starting in 2006, cash bonus opportunities have been provided under the Annual Incentive Plan, rather than under the Additional Compensation Plan.

Messrs. Burns, Richter, Miller and DeBacker were eligible to defer compensation under the Additional Compensation Plan before January 1, 2005, and Messrs. Richter and DeBacker elected to do so. Both deferred their compensation into stock accounts under the plan. During 2006, there were no contributions to these stock accounts, no earnings on the accounts, and no withdrawals or distributions from the accounts. At December 31, 2006, the units in Mr. Richter’s stock account were valued at $38,043 and the units in Mr. DeBacker’s account were valued at $9,503. We calculated these values assuming that each unit is equal to one share of Dana stock and using the closing price of our stock on the OTCBB on December 29, 2006 (the last trading day of the year). Following our bankruptcy filing, Messrs. Richter and DeBacker have general unsecured creditors’ claims with respect to these units and there can be no assurance that they will receive full or any payment of the deferred amounts.

Historically, we reported any amounts earned by our named executive officers under the Additional Compensation Plan in the Summary Compensation Table in the year in which such amounts were earned, whether payment was made in that year or deferred for future distribution.

Executive Agreements

Michael J. Burns

We entered into an employment agreement with Mr. Burns when he joined the company in 2004. Pursuant to this agreement, Mr. Burns is entitled to receive various compensation and benefits (including annual salary, other annual incentive compensation and long-term incentive equity grants) and is eligible to receive a supplemental retirement benefit, as discussed under “Pension Benefits.”

In an Order dated December 18, 2006, the Bankruptcy Court authorized us to assume Mr. Burns’ employment agreement, with certain conditions and limitations, subject to the execution of documentation reasonably acceptable to the Creditors Committee (UCC), among others. Mr. Burns’ agreement, as assumed, will be amended to provide, among other things, for the continuation of his pre-petition salary, the continuation of his participation in our Annual Incentive Plan, and his participation in a long-term incentive compensation program that will be subject to the achievement of certain EBITDAR targets in 2007 and 2008, subject to the limitation that his annual incentive compensation and his long-term incentive compensation may not exceed $5.5 million in any year while we are in bankruptcy. We expect to enter into an amendment to Mr. Burns’ employment agreement consistent with this Order.

Mr. Burns’ employment agreement, will continue in effect until it is terminated due to death or disability, by us with or without cause, or by Mr. Burns with or without good reason. Upon a termination of employment without cause by us or a termination by Mr. Burns for good reason, Mr. Burns will be entitled to severance payments equal to the maximum amount permissible under the Bankruptcy Code, determined consensually with the UCC, or if no consensus is reached, as determined by the Bankruptcy Court.

We also have an agreement with Mr. Burns that will become operative upon a “change of control” of Dana (as defined in the agreement) if he is then employed by us. If this agreement becomes operative, Mr. Burns will continue to receive not less than his total compensation in effect at the time the agreement became operative and will continue to participate in our executive incentive plans with at least the same

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reward opportunities and with perquisites, fringe benefits and service credits for benefits at least equal to those that were provided prior to the date the agreement became operative.

If Mr. Burns is terminated by Dana without cause or terminates his employment for good reason after a change of control, he will be entitled to receive a lump sum payment equal to the lesser of the amount which is equal to three years of his compensation or the amount of compensation which he would have received before he reaches age 65. For the purpose of calculating the lump sum payment, compensation means his base salary plus the greater of the average of his highest annual bonus over the three preceding years or his target annual bonus as of the date of termination. In addition, he will be entitled to continue his participation under our employee benefit plans and programs for a period of three years, unless benefit coverage is provided by another employer, and will be entitled to certain outplacement benefits.

Under this agreement, if an excise tax is imposed under Internal Revenue Code Section 4999 on payments received by Mr. Burns due to a change of control of Dana, we will generally pay him an amount that will net him the amount he would have received if the excise tax had not been imposed. However, if the change of control payments do not exceed 110% of the highest amount that would not trigger the excise tax under Treasury Department regulations, the amount of such payments will be reduced to the amount necessary to avoid the imposition of the excise tax entirely.

Under this agreement, following a change of control of Dana, Mr. Burns has agreed not to disclose any confidential information about the company to others while employed by Dana or thereafter and not to engage in competition with Dana for three years following his termination of employment (or for one year if he is terminated by Dana without “cause” or if he terminates his employment for “good reason,” as these terms are defined in the agreement).

Michael L. DeBacker

Mr. DeBacker has a change of control agreement with Dana that is substantially similar to Mr. Burns’ change of control agreement, discussed above.

Paul E. Miller

Mr. Miller has a Supplemental Executive Retirement Plan which is discussed under “Pension Benefits” and a change of control agreement with Dana that is substantially similar to Mr. Burns’ change of control agreement, discussed above.

Mr. Miller also has a non-competition and severance agreement with Dana. Under this agreement, if, after May 3, 2006, we terminate his employment without “cause” (as defined in the agreement), we will pay him (i) a pro-rata portion of his target annual bonus for the year in which the termination occurs; (ii) any accrued but unpaid salary, vacation pay and previously deferred salary; and (iii) for a period of 12 months, a monthly payment equal to one-twelfth of the sum of his annual base salary immediately prior to the date of termination and his target annual bonus for the year in which the termination occurs, less any other amounts payable to him in respect of salary or bonus continuation under any of our severance plans or policies. In addition, for the period of 12 months following the date of such termination, we will provide Mr. Miller and his eligible dependents with continued participation in all welfare benefits under the welfare plans in which he participated immediately prior to termination and service credit for vesting purposes under his Supplemental Executive Retirement Plan as if he had remained employed during the 12-month period. Under this agreement, Mr. Miller has agreed to certain confidentiality, non-disclosure and non-competition obligations. In addition, as a condition precedent to the receipt of the foregoing benefits, Mr. Miller must execute a release, releasing Dana from all claims arising out of his employment and the termination of his employment.

Nick L. Stanage

Mr. Stanage has a Supplemental Executive Retirement Plan which is discussed under “Pension Benefits.”

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Agreements for Messrs. DeBacker, Miller and Stanage

In accordance with its December 18, 2006 Order, the Bankruptcy Court authorized us to enter into agreements with Messrs. DeBacker, Miller and Stanage providing, among other things, for the continuation of pre-petition salary for each executive, continuation of participation in our Annual Incentive Plan, and participation in a long-term incentive program similar to the program described above for Mr. Burns, subject to the limitation that the annual incentive compensation and long-term incentive compensation for these executives (plus Messrs. Stone and Goettel) may not exceed a combined total of $7.01 million in any year while we are in bankruptcy. We expect to enter into agreements with these executives consistent with this Order.

Robert C. Richter

As previously discussed in our SEC reports, Mr. Richter entered into a Consulting Agreement with Dana in connection with his retirement from the company on March 1, 2006. Under this agreement, Mr. Richter served in an advisory and consulting capacity to Dana following his retirement until March 1, 2007. He received a consulting fee of $35,000 per month for such services and was reimbursed for his out-of-pocket business expenses.

Potential Payments upon Termination or Change-in-Control

The section contains information about potential payments to the named executive officers in the event of termination of employment with Dana or a change of control of Dana. In each case, we assumed that the triggering event took place on December 29, 2006, and for the purpose of valuing equity compensation, we used the closing price of Dana common stock on the OTCBB on that date. Information is not provided with respect to (i) potential payments under arrangements that were available generally to all salaried employees and did not discriminate in favor of the executive officers (such as our vacation accrual policy, disability programs, health care programs, severance plan, and tax-qualified defined contribution SavingsWorks and SavingsPlus Plans) and (ii) options to acquire Dana common stock held by the named executive officers (since the exercise price of all such options exceeded the closing price of our stock on December 29, 2006). Potential payments indicated in the event of the named executive officer’s death would have been made to his estate or beneficiary. The information in this section does not take into account the impact of our bankruptcy filing on the ability of the named executive officers to realize any or all of the value of their pre-petition arrangements.

Michael J. Burns

Retirement Benefits — The retirement benefits due to Mr. Burns under certain qualifying terminations of employment are described under the heading “Pension Benefits.” Under the terms of Mr. Burns’ employment agreement, in the event of his death, disability, termination by Dana without cause, or termination by Mr. Burns for good reason, he would have received a lump sum payment of $6,581,874, representing a supplemental retirement benefit payable from the notional account established by Dana on his behalf when he joined the company. In exchange for these and the severance benefits discussed below, Mr. Burns agreed not to disclose any confidential information about Dana to others while employed by the company or thereafter; not to engage in competition with Dana for two years following his termination of employment; and not to make or publish any statements in the two years following termination that would disparage Dana (including our subsidiaries and affiliates) or our directors, officers, employees, products or operations.

Severance Compensation — Under Mr. Burns’ employment agreement, in the event of his termination other than for cause, death or disability, he would have been entitled to receive (i) monthly severance payments for two years, each equal to one-twelfth of his annual base salary and his target annual bonus (a total of $6,210,000) and (ii) medical, dental, disability and life insurance benefits for himself and/or his dependents and beneficiaries for two years, comparable to those benefits provided to other senior executives (an estimated value of $150,194). In the event of his termination due to disability, he would have been entitled

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to receive the monthly severance payments for a period of six months (a total of $1,552,500), less any payments received under any disability or pension plan of the company.

Change of Control — Under Mr. Burns’ change of control agreement with Dana, in the event of his termination for any reason other than death, disability or cause following a change in control of Dana and upon executing a release of certain claims against Dana, he would have been entitled to receive a (i) lump sum cash payment of severance compensation in the amount of $9,315,000, representing three years of annual salary and annual bonuses; (ii) health, welfare and other benefits for three years, comparable to those provided to similarly situated Dana senior executives, their dependents and family members prior to termination (an estimated value of $225,292); (iii) service credits for his supplemental executive retirement benefit for three years (an estimated total value of $790,359); (iv) continued financial, estate and tax planning services for three years (an estimated total value of $45,000); and (v) outplacement services fees (up to $35,000). In the event of Mr. Burns’ death or disability during the three years following a change of control, he would be entitled to the severance benefits through the end of the month of his death or for up to six months following his disability, as applicable. In exchange for these benefits, Mr. Burns agreed not disclose any confidential information about Dana to others either while employed by the company or thereafter; not to engage in competition with Dana for three years following the event of termination; and not to make or publish any statements within the year following his termination that would disparage Dana (including our subsidiaries and affiliates) or our directors, officers, employees, products or operations.

Under his employment agreement, in the event of a termination of employment by Mr. Burns for good reason following a change of control of Dana, he would have been entitled to a lump sum cash payment of $7,384,973, the balance in his notional account.

Restricted Shares — Under the terms of his grants, in the event of Mr. Burns’ death, disability, retirement or termination by Dana without cause, he would have been entitled to receive a pro rata portion of his restricted Dana shares equal to 18,905 shares (valued at $26,278).

Restricted Stock Units — Under the terms of Mr. Burns’ grants, in the event of his death, disability, termination by Dana without cause, termination by Mr. Burns for good reason, or a change of control of Dana, he would have been entitled to receive a pro rata portion of his units equal to 154,482 Dana shares (valued at $214,730).

Performance Shares — Under the terms of Mr. Burns’ 2005 grant, in the event of his death, he would have been entitled to receive a pro rata portion (at target level) of his performance shares for the 2005-2007 performance period equal to 50,188 Dana shares (valued at $69,761). In the event of his disability or retirement, or in the event of his termination by Dana without cause and upon his execution of a release in favor of Dana, he would have been entitled to receive a distribution by May 1, 2008, of a pro rata portion of his performance shares based on Dana’s actual performance during the 2005-2007 performance period, measured at the end of the period.

Robert C. Richter

Mr. Richter retired from service with Dana effective March 1, 2006. The compensation paid to him in connection with his retirement is set out and discussed in the tables and accompanying notes in Item 11.

Kenneth A. Hiltz

Mr. Hiltz is not entitled to receive any compensation from Dana upon termination of his engagement as our CFO. Under our agreement with APServices LLP (APS), if Mr. Hiltz is terminated for any reason other than cause, APS will be entitled to receive a pro rata portion of the $125,000 monthly fee we pay for his services, based on services completed up to the termination date.

Michael L. DeBacker

Deferred Compensation — Under the terms of the Additional Compensation Plan, in the event of Mr. DeBacker’s retirement, termination of service or death, he would have been entitled to receive the value of

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the 6,837 units ($9,503) in his stock account under the plan, payable in the form of cash and/or Dana stock and in a lump sum payment or installments at his election. In the event of a change of control of Dana, he would have been entitled to receive the value of the units in a lump sum cash payment.

Retirement Benefits — The retirement benefits due to Mr. DeBacker under certain qualifying terminations of employment are described under the heading “Pension Benefits.” In the event of Mr. DeBacker’s retirement, under the Excess Benefits Plan, he would have been entitled to receive either a lump sum payment of $274,875 or monthly annuity payments of $1,755, at his election. Under the Supplemental Benefits Plan, he would have been entitled to receive either a lump sum payment of $620,827 or monthly annuity payments of $3,324, at his election. In the event of a change of control of Dana, he would have been entitled to receive the foregoing lump sum payments under those plans.

Change of Control — Under Mr. DeBacker’s Change of Control Agreement with Dana, in the event of his termination following a change of control of Dana and upon executing a release of certain claims against Dana, he would have been entitled to receive (i) a lump sum payment in the amount of $2,673,000; (ii) benefits under Dana’s benefit plans for a period of three years (an estimated value of $204,120), unless benefit coverage was provided by another employer; (iii) continued financial, estate planning and tax planning services for three years (an estimated value of $30,000); and (iv) outplacement services fees (up to $35,000). In the event of Mr. DeBacker’s death or disability during the three years following a change of control, he would be entitled to the severance benefits through the end of the month of his death or for up to six months following his disability, as applicable. In exchange for these benefits, Mr. DeBacker agreed not to disclose any confidential information about the company to others while employed by Dana following a change of control or thereafter; not to engage in competition with the company for a period of one to three years following termination of employment, depending on the circumstances of termination; and not to make or publish any statements within the year following his termination that would disparage Dana (including our subsidiaries and affiliates) or our directors, officers, employees, products or operations.

Restricted Shares — Under the terms of his grants, in the event of Mr. DeBacker’s death, disability, retirement or termination by Dana without cause, he would have been entitled to receive a pro rata portion of his Dana restricted shares equal to 10,520 shares (valued at $14,623).

Performance Shares — Under the terms of Mr. DeBacker’s 2005 grant, in the event of his death, he would have been entitled to receive a cash payment of $13,161, representing a pro rata portion of his performance shares (at target level) for the 2005-2007 performance period. In the event of his disability or retirement, or in the event of his termination by Dana without cause and upon his execution of a release in favor of Dana, he would have been entitled to receive a distribution by May 1, 2008, of a pro rata portion of his performance shares based on Dana’s actual performance during the 2005-2007 performance period, measured at the end of the period.

Paul E. Miller

Retirement Benefits — The retirement benefits due to Mr. Miller under certain qualifying terminations of employment are described under the heading “Pension Benefits.” Under the terms of Mr. Miller’s Supplemental Executive Retirement Plan, in the event of his death, disability, or involuntary termination by Dana other than for cause, he would have been entitled to receive a lump sum payment of $1,712,250. In the event of a change in control of Dana, he would have been entitled to receive a lump sum payment of $2,483,000.

Severance Compensation — Under the terms of Mr. Miller’s Non-Competition and Severance Agreement with Dana, in the event of his termination by Dana without cause, he would have been entitled to receive (i) monthly severance payments for one year, each equal to one-twelfth of his annual base salary and his target annual bonus (a total of $825,000), reduced by any amounts payable to him under other Dana severance plans or arrangements; (ii) welfare benefits for himself and/or his dependents for one year, comparable to those provided to him immediately prior to termination (an estimated value of $9,971); and (iii) benefits due to him under his Supplemental Executive Retirement Plan (valued at $1,712,250). In exchange for these benefits, Mr. Miller agreed not to disclose any confidential information about Dana to others while employed by the company or thereafter; not to compete with or make disparaging statements about Dana while employed by the

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company and for one year after termination; and not to make or publish any statements within the year following his termination that would disparage Dana (including our subsidiaries and affiliates) or our directors, officers, employees, products or operations.

Change of Control — Under Mr. Miller’s Change of Control Agreement with Dana, in the event of his termination by Dana without cause or by Mr. Miller for good reason following a change in control of Dana, he would have been entitled to receive (i) annual lump sum severance payments for three years, based on his salary and target annual bonus prior to termination (a total of $2,475,00), reduced by any amounts payable to him with respect to salary and bonus under other Dana severance plans or arrangements; (ii) health and welfare benefits for himself and his family for three years, comparable to those he received prior to termination or those available to other senior executives of the company, whichever was most favorable to him (an estimated value of $29,912), secondary to benefits provided by another employer; (iii) financial, estate planning and tax services comparable to those received prior to termination or by other executives after termination (an estimated value of $30,000); and (iv) outplacement services (up to $35,000). Under this agreement, Mr. Miller agreed not to disclose any confidential information about Dana to others while employed by the company or thereafter and not to engage in competition with the company for a period of one to three years following termination of employment (depending on the circumstances of termination).

Restricted Shares — Under the terms of his grants, in the event of Mr. Miller’s death, disability, retirement or termination by Dana without cause, he would have been entitled to receive a pro rata portion of his Dana restricted shares equal to 16,439 shares (valued at $22,850).

Performance Shares — Under the terms of Mr. Miller’s 2005 grant, in the event of his death, he would have been entitled to receive a cash payment of $13,161, representing a pro rata portion of his performance shares (at target level) for the 2005-2007 performance period. In the event of his disability or retirement, or in the event of his termination by Dana without cause and upon his execution of a release in favor of Dana, he would have been entitled to receive a distribution by May 1, 2008, of a pro rata portion of his performance shares based on Dana’s actual performance during the 2005-2007 performance period, measured at the end of the period.

Nick L. Stanage

Retirement Benefits — The retirement benefits due to Mr. Stanage under certain qualifying terminations of employment are described under the heading “Pension Benefits.” Under the terms of Mr. Stanage’s Supplemental Executive Retirement Plan, in the event of his death, disability, or involuntary termination by Dana other than for cause, he would have been entitled to receive a lump sum payment of $1,047,750. In the event of a change in control of Dana, he would have been entitled to receive a lump sum payment of $2,095,500.

Severance Compensation — Under Dana’s Change of Control Severance Plan (which expired on December 31, 2006), following a change of control of Dana and upon his execution of a release of certain claims against Dana, in the event of Mr. Stanage’s death, disability, termination by Dana without cause or termination by Mr. Stanage for good reason, he would have been entitled to receive a (i) separation payment in the amount of $1,344,000, based his annual base salary and annual bonus target and (ii) health and welfare benefits for two years, at the level provided to active employees (an estimated value of $31,188).

Restricted Shares — Under the terms of Mr. Stanage’s grant, in the event of his death, disability, retirement or termination by Dana without cause, he would have been entitled to receive a pro rata portion of his Dana restricted shares equal to 7,628 shares (valued at $10,603).

Performance Shares — Under the terms of Mr. Stanage’s 2005 grant, in the event of his death, he would have been entitled to receive a cash payment of $4,633, representing a pro rata portion of his performance shares (at target level) for the 2005-2007 performance period. In the event of his disability or retirement, or in the event of his termination by Dana without cause and upon his execution of a release in favor of Dana, he would have been entitled to receive a distribution by May 1, 2008, of a pro rata portion of his performance

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shares based on Dana’s actual performance during the 2005-2007 performance period, measured at the end of the period.

Director Compensation

The following table contains information about the compensation of our non-management directors for 2006. Mr. Burns, the Chairman of the Board, is not included in this table as his compensation for 2006 is fully reflected in the Summary Compensation Table. None of our non-management directors received any Dana stock awards or option awards in 2006 and none of them participates in our pension plans.


			Non-Equity
	Fees Earned or		Incentive Plan		All Other
	Paid in Cash		Compensation		Compensation		Total
Name	($)(1)		($)(2)		($)(3)		($)

A.C. Baillie		144,528		45,000		1,560		191,088
D.E. Berges		159,000		45,000		3,600		207,600
E.M. Carpenter		140,757		45,000		4,600		190,357
R.M. Gabrys		184,757		45,000		98		229,855
S.G. Gibara		154,000		45,000		2,603		201,603
C.W. Grisé		155,757		45,000		3,100		203,857
J.P. Kelly		145,451		45,000		100		190,551
M.R. Marks		150,500		45,000		99		195,599
R.B. Priory		204,500		45,000		106		249,606


(1)		This column shows the aggregate fees earned or paid in cash in 2006 for services on our Board and Board committees, as discussed in the text below.

(2)		This column shows “completion compensation” earned in 2006, as discussed in the text below. While there can be no assurance that the performance conditions for the payment of this compensation will be met, we believe that achievement of the conditions is probable.

(3)		We furnish our non-management directors with $25,000 in group term life insurance. This column includes insurance premiums of $60 per director for this coverage and reimbursements to all directors (except Mr. Baillie, who is a Canadian citizen) averaging $41 each for the related taxes paid by U.S. citizens.

Under the Dana Foundation Matching Gifts Program, the Dana Foundation matches gifts to accredited U.S. educational institutions made by current and retired Dana directors and certain full-time employees and retirees. In the Foundation’s fiscal year ending March 31, 2006, annual aggregate matches of up to $7,500 per donor were permitted. Currently, the maximum annual aggregate match for new gifts is $2,500 per donor. During 2006, the Foundation matched gifts to educational institutions under this program in the amounts of $1,500 for Mr. Baillie, $3,500 for Mr. Berges, $4,500 for Mr. Carpenter, $2,500 for Mr. Gibara, and $3,000 for Ms. Grisé.

Fees for Board Service

Each of our non-management directors receives an annual retainer of $70,000 for Board service. The annual retainer was increased from $40,000 in June 2006 pursuant to authorization from the Bankruptcy Court in order to replace annual equity-based awards valued at $75,000, which were formerly granted under the Director Deferred Fee Plan (discussed in Note 14 to our consolidated financial statements in Item 8), and suspended in 2006.

In April 2006, our Board appointed Mr. Priory as its Presiding Director. His responsibilities as such include chairing the executive sessions of the independent directors and providing feedback to Mr. Burns, the Board Chairman, with respect to matters discussed in those sessions. He also advises Mr. Burns regarding the agenda and scheduling of Board meetings. Mr. Priory receives an annual fee of $30,000 for services as the

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Presiding Director, plus a payment of $3,000 for each full or partial day when he is performing such services out of town and not at the time performing other services for the Board or its committees.

The Chairmen of our Audit Committee and Compensation Committee receive annual retainers of $15,000 for such service and the other committee members receive annual retainers of $5,000. The Chairmen of our Finance Committee and Governance and Nominating Committee receive annual retainers of $10,000 for such service and the other committee members receive annual retainers of $2,500.

Our non-management directors receive fees of $1,500 for each Board and committee meeting attended in person and $1,000 for each meeting attended telephonically. They may attend all committee meetings, whether or not they are members of the committee. In addition, they are reimbursed for their expenses in connection with travel to and from, and attendance at, Board and committee meetings.

Completion Compensation

Pursuant to authorization from the Bankruptcy Court in June 2006, our non-management directors will receive cash payments of $45,000 per annum as “completion compensation” upon Dana’s emergence from Chapter 11 or the occurrence of other circumstances specified for the payment of “completion” fees to the financial professionals retained by the Debtors in the Bankruptcy Cases under Section 328(a) of the Bankruptcy Code. Payment of the completion compensation is subject to the right of the U.S. Trustee and the statutory committees appointed in the Bankruptcy Cases to object to the reasonableness of the amount. If any non-management directors have resigned at the payment date, they will be paid on a pro rata basis as and when the directors serving through the payment date are compensated.

Compensation Committee Interlock and Insider Participation

During 2006, (i) no member of our Compensation Committee was an officer or employee (or former officer or employee) of Dana or had any relationship requiring disclosure under Item 404 of Regulation S-K of the SEC, and (ii) no executive officer of Dana served as a member of the board of directors or the compensation committee of another entity, one of whose executive officers served on our Board or Compensation Committee.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this report. Based on such review and discussions, the Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this report.

Compensation Committee

Richard B. Priory, Chairman

A. Charles Baillie

David E. Berges

James P. Kelly

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Item 12.	*Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*

Equity Compensation Plan Information

The following table contains information as of December 31, 2006, about shares of stock which may be issued under our equity compensation plans, all of which have been approved by our shareholders.

Number of Securities to

be Issued Upon

Weighted Average

Exercise of

Exercise Price of

Number of Securities

Outstanding Options,

Remaining Available

Plan Category

Warrants and Rights(1)

Warrants and Rights(2)

for Future Issuance(3)

Equity compensation plans approved by security holders

12,853,669

23.44

10,204,221

Equity compensation plans not approved by security holders

Total

12,853,669

23.44

10,204,221


(1)		This column includes (i) 12,480,069 shares subject to options and SARs outstanding under our Stock Incentive Plan, 1993 and 1998 Directors Stock Option Plans, and Echlin Inc. 1992 Stock Option Plan, (ii) securities to be issued relating to an aggregate of 298,318 restricted stock units outstanding under our Stock Incentive Plan and 1989 and 1999 Restricted Stock Plans, and (iii) 75,282 performance shares granted to Mr. Burns at the target performance level under our Stock Incentive Plan for the 2005-2007 performance period which, if earned, will be distributed in the form of Dana stock. Based on results to date, we do not expect that the goals for this performance period will be achieved or that these performance shares will vest.

		This column does not include (i) 254,287 units credited to employees’ stock accounts under our Additional Compensation Plan and 217,075 units credited to non-management directors’ stock accounts under our Director Deferred Fee Plan, all of which units may be distributed in the form of cash and/or stock according to the terms of those plans, or (ii) 361,364 performance shares granted to participants other than Mr. Burns at target under our Stock Incentive Plan for the 2005-2007 performance period which, if earned, will be distributed in the form of cash according to the terms of the grants.

(2)		In calculating the weighted average exercise price in this column, we excluded the restricted stock units and performance shares referred to in Note 1, since they have no exercise price.

(3)		This column includes the following shares of stock available for future issuance under our equity compensation plans: 271,615 shares under our Additional Compensation Plan; 230,707 shares under our Director Deferred Fee Plan; 488,789 shares under our 1989 Restricted Stock Plan (as dividend equivalents to be credited on outstanding grants); 618,352 shares under our 1999 Restricted Stock Plan; and 8,594,758 shares under our Stock Incentive Plan.

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Security Ownership of More Than 5% Beneficial Owners

The following persons have filed reports with the SEC indicating that they beneficially own more than 5% of our common stock.


	Number of Shares		Percent
Name and Address of Beneficial Owner	Beneficially Owned		of Class

Appaloosa Investment Limited Partnership I(1)		22,500,000		14.8	%
26 Main Street
Chatham, NJ 07928
Brandes Investment Partners, L.P.(2)		11,045,488		7.35	%
11988 El Camino Real, Suite 500
San Diego, CA 92130
Harbinger Capital Partners Master Fund I, Ltd.		8,701,000		5.8	%
c/o International Fund Services (Ireland) Limited
Third Floor, Bishop’s Square, Redmond’s Hill
Dublin 2, Ireland(3)


(1)		In a Schedule 13G dated March 7, 2006, Appaloosa Investment Limited Partnership I reported that it beneficially owned 11,992,500 Dana shares, with shared voting and dispositive powers for all such shares and that Palomino Fund Ltd. beneficially owned 10,507,500 Dana shares, with shared voting and dispositive powers for all such shares and Appaloosa Management L.P., Appaloosa Partners Inc., and David A. Tepper each beneficially owned 22,500,000 Dana shares, with shared voting and dispositive powers for all such shares.

(2)		In a Schedule 13G dated February 14, 2007, Brandes Investment Partners, L.P. reported that it, Brandes Investment Partners, Inc., Brandes Worldwide Holdings, L.P., Charles H. Brandes, Glenn R. Carlson, and Jeffrey A. Busby each beneficially owned 11,045,488 Dana shares, with shared voting power for 8,591,566 of such shares and shared dispositive power for all of them.

(3)		In a Schedule 13D dated June 5, 2006, Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Offshore Manager, L.L.C. reported that they and HMC Investors, L.L.C., Harbert Management Corporation, Philip Falcone, Raymond J. Harbert, and Michael D. Luce each beneficially owned 8,701,000 Dana shares, with shared voting and dispositive powers for such shares.

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Security Ownership of Directors and Executive Officers

The following table shows information about beneficial ownership of our common stock as of March 1, 2007, by our directors, named executive officers, and directors and executive officers as a group, as furnished to us by such persons. The address of these beneficial owners is 4500 Dorr Street, Toledo, Ohio 43615. The number of shares beneficially owned by any director and by our directors and executive officers as a group did not exceed 1% of our shares outstanding on March 1, 2007.


			Stock Units
	Number of Shares		Representing Deferred
Name of Beneficial Owner	Beneficially Owned(1)		Compensation(2)

Non-Management Directors
A. Charles Baillie		20,000		31,055
David E. Berges		4,000		14,264
Edmund M. Carpenter		25,453		52,858
Richard M. Gabrys		1,000		6,721
Samir G. Gibara		0		10,521
Cheryl W. Grisé		6,000		11,368
James P. Kelly		8,000		27,082
Marilyn R. Marks		27,500		24,658
Richard B. Priory		29,000		38,548
Named Executive Officers
Michael J. Burns		888,776		148,136
Kenneth A. Hiltz		0		0
Robert C. Richter		0		27,369
Michael L. DeBacker		257,579		6,837
Paul E. Miller		176,922		0
Nick L. Stanage		30,876		0
Directors and executive officers as a group(16 persons)		1,489,783		399,417


(1)		All shares shown in this column are beneficially owned directly, and each beneficial owner has sole voting and dispositive power for such shares, except that Mr. Priory shares voting and dispositive powers for 3,000 shares owned by his children and Mr. DeBacker shares voting and dispositive powers for 4,668 shares owned jointly with his spouse.

		The shares shown in this column include the following unvested restricted shares granted to the executive officers under our 1999 Restricted Stock Plan or our Stock Incentive Plan, including additional shares accrued in lieu of cash dividends, for which the owners have voting power: Mr. Burns, 51,559 shares; Mr. DeBacker, 19,249 shares; Mr. Miller, 31,046 shares; Mr. Stanage, 17,164 shares; and the executive officers as a group, 120,038 shares.

		The shares shown in this column also include the following shares subject to options exercisable within 60 days from March 1, 2007 granted to the non-management directors under the 1998 Directors’ Stock Option Plan and to the executive officers under our Stock Incentive Plan: Mr. Baillie, 15,000 shares; Mr. Carpenter, 21,000 shares; Ms. Grisé, 3,000 shares; Mr. Kelly, 6,000 shares; Ms. Marks, 21,000 shares; Mr. Priory, 21,000 shares; Mr. Burns, 831,543 shares; Mr. DeBacker, 232,662 shares; Mr. Miller 144,065 shares; Mr. Stanage, 12,500 shares; and the directors and executive officers as a group, 1,319,010 shares.

(2)		The units shown in this column for Mr. Burns are vested restricted stock units granted in 2004 under his employment agreement, including additional units accrued in lieu of cash dividends, for which he elected to defer distribution until his termination of employment with Dana. The units shown for the other individuals are stock units representing deferred compensation credited to their stock accounts (under

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		the Director Deferred Fee Plan for non-management directors and under the Additional Compensation Plan for executive officers), including additional units accrued in lieu of cash dividends, which units may be distributed in the form of Dana stock and/or cash according to the terms of the plans. The owners have no voting or dispositive powers for any shares that may ultimately be distributed in settlement of these units.


Item 13.	*Certain Relationships and Related Transactions, and Director Independence*

Transactions With Related Persons

Mr. Hiltz is serving as our CFO pursuant to an agreement between Dana and APServices LLP (APS) under which APS is providing his services in that capacity and Dana is compensating APS at the rate of $125,000 per month, plus out-of-pocket expenses. This agreement has been approved by the Bankruptcy Court. We are also providing housing in company facilities for Mr. Hiltz when he is working at our corporate offices.

Review, Approval or Ratification of Transactions With Related Persons

Our Board has adopted written polices with respect to the approval or ratification of related party transactions with Dana or our subsidiaries. Under these policies, (i) directors are required to seek the prior approval of the disinterested members of the Board when practicable (and the subsequent ratification by the disinterested members when prior approval is not practicable) of any transaction or relationship with Dana or our subsidiaries in which they have a financial or personal interest or which involves the use of Dana’s assets or competition against Dana and (ii) executive officers may not enter into any transaction or relationship with Dana or its subsidiaries in which they have a financial or personal interest without the prior approval of the Board. Both directors and executive officers must inform the members of their immediate families that if the family member (or any person, entity or organization with which the family member is affiliated or associated) intends to engage in any transaction or enter into any relationship with Dana or our subsidiaries, the family member should provide notice of the proposed transaction or relationship to both the Chairman of the Board and the director or executive officer, as the case may be.

Director Independence

Pursuant to a written policy, our Board determines whether each director qualifies as an “independent director” when he or she is first elected to the Board and thereafter from time to time as may be appropriate due to changes in circumstances. Under this policy, if a director has a relationship with Dana (either directly or as a partner, shareholder or officer of an organization that has a relationship with Dana), the Board considers all relevant facts and circumstances in determining whether the relationship will interfere with the exercise of the director’s independence from Dana and our management, taking into account, among other things, the significance of the relationship to Dana, to the director, and to the persons or organizations with which the director is affiliated.

For purposes of these determinations, a director is deemed to be an “independent director” if he or she meets the independence requirements set out in Section 303A of the Listed Company Manual of the New York Stock Exchange and does not have any “material relationship” with Dana. The beneficial ownership of Dana stock in any amount, by itself, and any commercial, industrial, banking, consulting, legal, accounting, charitable, familial or other relationship which is not required to be reported in our annual report on Form 10-K under Item 404 of Regulation S-K under the Exchange Act, are deemed categorically to be “immaterial relationships.”

The Board has determined that all of our current non-management directors are independent.


Item 14.	*Principal Accounting Fees and Services*

Audit Committee Pre-Approval Policy

Our Audit Committee pre-approves the audit and non-audit services performed by our independent registered public accounting firm, PricewaterhouseCoopers LLC (PwC), in order to assure that the provision

153

of such services does not impair PwC’s independence. The Audit Committee annually determines which audit services, audit-related services, tax services and other permissible non-audit services to pre-approve and creates a list of the pre-approved services and pre-approved cost levels. Unless a type of service to be provided by PwC has received general pre-approval, it requires specific pre-approval by the Audit Committee or the Audit Committee Chairman or a member whom he or she has designated. Any services exceeding pre-approved cost levels also require specific pre-approval by the Audit Committee. Management monitors the services rendered by PwC and the fees paid for the audit, audit-related, tax and other pre-approved services and reports to the Audit Committee on these matters at least quarterly.

PwC’s Fees

PwC’s aggregate fees for professional services rendered to Dana worldwide were approximately $12.7 million and $13.7 million in the fiscal years ended December 31, 2006 and 2005. The following table shows details of these fees, all of which were pre-approved by our Audit Committee.


Service	2006 Fees		2005 Fees
	(In millions)

Audit Fees
Audit and review of consolidated financial statements	$	11.6	$	11.5
Securities Act filings and registrations				0.1

Total Audit Fees	$	11.6	$	11.6

Audit-Related Fees
Other audit services, including audits in connection with divestitures, joint venture and debt agreements	$	0.5	$	0.3
Financial due diligence related to acquisitions and divestitures		0.1		0.6
Employee benefit plan audits		0.2		0.8
Tax attestation in non-US jurisdictions		0.1		0.1

Total Audit-Related Fees	$	0.9	$	1.8

Tax Fees
Transition to other service provider	$	0.1	$	0.2

Total Tax Fees	$	0.1	$	0.2

All Other Fees
Subscriptions to PWC knowledge libraries	$	0.1	$	0.1

Total All Other Fees	$	0.1	$	0.1

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PART IV


Item 15.	*Exhibits and Financial Statement Schedule*


		10-K Pages

(a) The following documents are filed as part of this report:
Consolidated Financial Statements:
	Report of Independent Registered Public Accounting Firm		55
	Consolidated Statement of Operations for each of the three years in the period ended December 31, 2006		58
	Consolidated Balance Sheet at December 31, 2005 and 2006		59
	Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 2006		60
	Consolidated Statement of Shareholders’ Equity for each of the three years in the period ended December 31, 2006		61
	Notes to Consolidated Financial Statements		62
	Unaudited Quarterly Financial Information		121
Financial Statement Schedule:
	Valuation and Qualifying Accounts and Reserves (Schedule II)		122
	All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto
	Exhibits listed in the Exhibit Index		158

Exhibits Nos. 10-A through 10-N are management contracts or compensatory plans or arrangements required to be filed pursuant to Section 15(b) of this report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.



	Dana Corporation (Registrant)

Date: March 19, 2007	By:	/s/ Michael L. DeBacker Michael L. DeBacker Vice President, General Counsel and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.


Date: March 19, 2007		/s/ Michael J. Burns Michael J. Burns, Chairman of the Board and Chief Executive Officer

Date: March 19, 2007		/s/ Kenneth A. Hiltz Kenneth A. Hiltz,Chief Financial Officer

Date: March 19, 2007		/s/ Richard J. Dyer Richard J. Dyer, Chief Accounting Officer

Date: March 19, 2007		* /s/ A. C. Baillie A. C. Baillie, Director

Date: March 19, 2007		* /s/ D. E. Berges D. E. Berges, Director

Date: March 19, 2007		* /s/ E. M. Carpenter E. M. Carpenter, Director

Date: March 19, 2007		* /s/ R. M. Gabrys R. M. Gabrys, Director

Date: March 19, 2007		* /s/ S. G. Gibara S. G. Gibara, Director

Date: March 19, 2007		* /s/ C. W. Grisé C. W. Grisé, Director

Date: March 19, 2007		* /s/ J. P. Kelly J. P. Kelly, Director

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Date: March 19, 2007		* /s/ M. R. Marks M. R. Marks, Director

Date: March 19, 2007		* /s/ R. B. Priory R. B. Priory, Director

Date: March 19, 2007		* /s/ Michael L. DeBacker Michael L. DeBacker, Attorney-in-Fact

157

EXHIBIT INDEX


No.	Description	Method of Filing or Furnishing

2-A	Stock and Asset Purchase Agreement by and between AAG Opco Corp. and Dana Corporation, dated as of July 8, 2004	Filed by reference to Exhibit 2-A to our Form 10-Q for the quarter ended June 30, 2004

2-A(1)	Amendment No. 1, dated as of November 1, 2004, to the Stock and Asset Purchase Agreement filed as Exhibit 2-A	Filed by reference to Exhibit 99.1 to our Form 8-K filed on November 2, 2004

2-A(2)	Amendment No. 2, dated as of November 30, 2004, to the Stock and Asset Purchase Agreement filed as Exhibit 2-A	Filed by reference to Exhibit 99.1 to our Form 8-K filed on December 2, 2004

3-A	Restated Articles of Incorporation	Filed by reference to Exhibit 3-A to our Form 10-Q for the quarter ended June 30, 1998

3-B	By-Laws, adopted April 20, 2004	Filed by reference to Exhibit 3-B to our Form 10-Q for the quarter ended March 31, 2004

4-A	Specimen Single Denomination Stock Certificate	Filed by reference to Exhibit 4-B to our Registration Statement No. 333-18403 filed December 20, 1996

4-B	Rights Agreement, dated as of April 25, 1996, between Dana and The Bank of New York, Rights Agent, as successor to ChemicalMellon Shareholder Services, L.L.C.	Filed by reference to Exhibit 1 to our Form 8-A filed May 1, 1996

4-B(1)	Amendment No. 2, effective as of July 18, 2006, to the Rights Agreement, as amended, by and between Dana and The Bank of New York, Rights Agent	Filed by reference to Exhibit 99.1 to our Form 8-K dated July 21, 2006

4-C	Indenture for Senior Securities between Dana and Citibank, N.A., Trustee, dated as of December 15, 1997	Filed by reference to Exhibit 4-B to our Registration Statement No. 333-42239 filed December 15, 1997

4-C(1)	First Supplemental Indenture between Dana, as Issuer, and Citibank, N.A., Trustee, dated as of March 11, 1998	Filed by reference to Exhibit 4-B-1 to our Report on Form 8-K dated March 12, 1998

4-C(2)	Form of 6.5% Notes due March 15, 2008 and 7.00% Notes due March 15, 2028	Filed by reference to Exhibit 4-C-1 to our Report on Form 8-K dated March 12, 1998

4-C(3)	Second Supplemental Indenture between Dana, as Issuer, and Citibank, N.A., Trustee, dated as of February 26, 1999	Filed by reference to Exhibit 4.B.1 to our Form 8-K dated March 2, 1999

158


No.	Description	Method of Filing or Furnishing


4-C(4)	Form of 6.25% Notes due 2004, 6.5% Notes due 2009, and 7.0% Notes due 2029	Filed by reference to Exhibit 4.C.1 to our Form 8-K dated March 2, 1999

4-E	Note Agreement dated April 8, 1997, by and between Dana Credit Corporation and Metropolitan Life Insurance Company for 7.18% notes due April 8, 2006, in the principal amount of $37 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

4-F	Note Agreement dated April 8, 1997, by and between Dana Credit Corporation and Texas Life Insurance Company for 7.18% notes due April 8, 2006, in the principal amount of $3 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

4-G	Note Agreement dated April 8, 1997, by and between Dana Credit Corporation and Nationwide Life Insurance Company for 6.93% notes due April 8, 2006, in the principal amount of $35 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

4-H	Note Agreement dated August 28, 1997, by and between Dana Credit Corporation and The Northwestern Mutual Life Insurance Company for 6.88% notes due August 28, 2006, in the principal amount of $20 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

4-I	Note Agreements (four) dated August 28, 1997, by and between Dana Credit Corporation and Sun Life Assurance Company of Canada for 6.88% notes due August 28, 2006, in the aggregate principal amount of $9 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

4-J	Note Agreement dated August 28, 1997, by and between Dana Credit Corporation and Massachusetts Casualty Insurance Company for 6.88% notes due August 28, 2006, in the principal amount of $1 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

4-K	Note Agreements (four) dated December 18, 1998, by and between Dana Credit Corporation and Sun Life Assurance Company of Canada for 6.59% notes due December 1, 2007, in the aggregate principal amount of $12 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

159


No.	Description	Method of Filing or Furnishing


4-L	Note Agreements (five) dated December 18, 1998, by and between Dana Credit Corporation and The Lincoln National Life Insurance Company for 6.59% notes due December 1, 2007, in the aggregate principal amount of $25 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

4-M	Note Agreement dated August 16, 1999, by and between Dana Credit Corporation and Connecticut General Life Insurance Company for 7.91% notes due August 16, 2006, in the principal amount of $15 million	This exhibit is not filed. We agree to furnish a copy of this exhibit to the Commission upon request.

4-O	Indenture between Dana, as Issuer, and Citibank, N.A., as Trustee and as Registrar and Paying Agent for the Dollar Securities, and Citibank, N.A., London Branch, as Registrar and a Paying Agent for the Euro Securities, dated as of August 8, 2001, relating to $575 million of 9% Notes due August 15, 2011 and 200 million euros of 9% Notes due August 15, 2011	Filed by reference to Exhibit 4-I to our Form 10-Q for the quarter ended June 30, 2001

4-O(1)	Form of Rule 144A Dollar Global Notes, Rule 144A Euro Global Notes, Regulation S Dollar Global Notes, and Regulation S Euro Global Notes (form of initial securities)	Filed by reference to Exhibit A to Exhibit 4-I to our Form 10-Q for the quarter ended June 30, 2001

4-O(2)	Form of Rule 144A Dollar Global Notes, Rule 144A Euro Global Notes, Regulation S Dollar Global Notes, and Regulation S Euro Global Notes (form of exchange securities)	Filed by reference to Exhibit B to Exhibit 4-I to our Form 10-Q for the quarter ended June 30, 2001

4-O(3)	First Supplemental Indenture between Dana Corporation, as Issuer, and Citibank, N.A., as Trustee, dated as of December 1, 2004	Filed by reference to Exhibit 4-R(3) to our Form 10-K/A for the fiscal year ended December 31, 2004

4-O(4)	Second Supplemental Indenture between Dana Corporation, as Issuer, and Citibank, N.A., as Trustee, dated as of December 6, 2004	Filed by reference to Exhibit 4-R(4) to our Form l0-K/A for the fiscal year ended December 31, 2004

4-P	Indenture between Dana, as Issuer, and Citibank, N.A., as Trustee, Registrar and Paying Agent, dated as of March 11, 2002, relating to $250 million of 101/8% Notes due March 15, 2010	Filed by reference to Exhibit 4-NN to our Form 10-Q for the quarter ended March 31, 2002

160


No.	Description	Method of Filing or Furnishing


4-P(1)	Form of Rule 144A Global Notes and Regulation S Global Notes (form of initial securities) for 101/8% Notes due March 15, 2010	Filed by reference to Exhibit 4-NN(1) to our Form 10-Q for the quarter ended March 31, 2002

4-P(2)	Form of Rule 144A Global Notes and Regulation S Global Notes (form of exchange securities) for 101/8% Notes due March 15, 2010	Filed by reference to Exhibit 4-NN(2) to our Form 10-Q for the quarter ended March 31, 2002

4-P(3)	First Supplemental Indenture between Dana Corporation, as Issuer, and Citibank, N.A., as Trustee, Registrar and Paying Agent, dated as of December 1, 2004	Filed by reference to Exhibit 4-S(3) to our Form 10-K/A for the fiscal year ended December 31, 2004

4-Q	Indenture for Senior Securities between Dana Corporation, as Issuer, and Citibank, N.A., as Trustee, dated as of December 10, 2004	Filed by reference to Exhibit 4-T to Amendment No. 1 to our Registration Statement No. 333-123924 filed on April 25, 2005

4- Q(1)	First Supplemental Indenture between Dana Corporation, as Issuer, and Citibank, N.A., as Trustee, dated as of December 10, 2004	Filed by reference to Exhibit 4-T(1) to Amendment No. 1 to our Registration Statement No. 333-123924 filed on April 25, 2005

4-Q(2)	Form of Rule 144A Global Notes and Regulation S Global Notes (form of initial securities) for 5.85% Notes due January 15, 2015	Filed by reference to Exhibit 4-T(2) to Amendment No. 1 to our Registration Statement No. 333-123924 filed on April 25, 2005

10-A*	Additional Compensation Plan, as amended and restated	Filed by reference to Exhibit A to our Proxy Statement dated March 12, 2004

10-A(1)*	First Amendment to the Additional Compensation Plan	Filed by reference to Exhibit 99.1 to our Form 8-K filed on December 6, 2005

10-B*	Annual Incentive Plan	Filed by reference to Exhibit 10-S to our Form 10-K for the fiscal year ended December 31, 2005

10-C*	Amended and Restated Stock Incentive Plan	Filed by reference to Exhibit B to our Proxy Statement dated March 5, 2003

10-C(1)*	First Amendment to the Amended and Restated Stock Incentive Plan	Filed by reference to Exhibit 10-B(1) to our Form 10-K for the fiscal year ended December 31, 2003

10-C(2)*	Second Amendment to the Amended and Restated Stock Incentive Plan	Filed by reference to Exhibit C to our Proxy Statement dated March 12, 2004

161


No.	Description	Method of Filing or Furnishing


10-C(3)*	Form of Award Certificate for Stock Options Granted Under the Amended and Restated Stock Incentive Plan	Filed by reference to Exhibit 99.1 to our Form 8-K filed on February 18, 2005

10-C(4)*	Form of Award Certificate for Performance Stock Awards Granted Under the Amended and Restated Stock Incentive Plan	Filed by reference to Exhibit 99.4 to our Form 8-K filed on February 18, 2005

10-D*	Excess Benefits Plan	Filed by reference to Exhibit 10-F to our Form 10-K for the year ended December 31, 1998

10-D(1)*	First Amendment to the Excess Benefits Plan	Filed by reference to Exhibit 10-C(1) to our Form 10-Q for the quarter ended September 30, 2000

10-D(2)*	Second Amendment to the Excess Benefits Plan	Filed by reference to Exhibit 10-C(2) to our Form 10-Q for the quarter ended June 30, 2002

10-D(3)*	Third Amendment to the Excess Benefits Plan	Filed by reference to Exhibit 10-C(3) to our Form 10-K for the fiscal year ended December 31, 2003

10-D(4)*	Fourth Amendment to the Excess Benefits Plan	Filed by reference to Exhibit 10-C(4) to our Form 10-K for the fiscal year ended December 31, 2003

10-E*	Director Deferred Fee Plan, as amended and restated	Filed by reference to Exhibit C to our Proxy Statement dated March 5, 2003

10-E(1)	First Amendment to the Director Deferred Fee Plan, as amended and restated	Filed by reference to Exhibit 10-D(1) to our Form 10-Q for the quarter ended March 31, 2004

10-E(2)*	Second Amendment to the Director Deferred Fee Plan, as amended and restated	Filed by reference to Exhibit 10-D(2) to our Form 10-Q for the quarter ended September 30, 2004

10-E(3)*	Third Amendment to the Director Deferred Fee Plan, as amended and restated	Filed by reference to Exhibit 99.1 to our Form 8-K filed on April 12, 2005

10-F*	Supplemental Benefits Plan	Filed by reference to Exhibit 10-H to our Form 10-Q for the quarter ended September 30, 2002

10-F(1)*	First Amendment to the Supplemental Benefits Plan	Filed by reference to Exhibit 10-H(1) to our Form 10-K for the fiscal year ended December 31, 2003

162


No.	Description	Method of Filing or Furnishing


10-G*	1999 Restricted Stock Plan, as amended and restated	Filed by reference to Exhibit A to our Proxy Statement dated March 5, 2002

10-G(1)*	First Amendment to the 1999 Restricted Stock Plan, as amended and restated	Filed by reference to Exhibit 10-I(1) to our Form 10-K for the fiscal year ended December 31, 2003

10-G(2)*	Form of Award Certificate for Restricted Stock Granted Under the 1999 Restricted Stock Plan	Filed by reference to Exhibit 99.2 to our Form 8-K filed on February 18, 2005

10-H*	1998 Directors’ Stock Option Plan	Filed by reference to Exhibit A to our Proxy Statement dated February 27, 1998

10-H(1)*	First Amendment to the 1998 Directors’ Stock Option Plan	Filed by reference to Exhibit 10-J(1) to our Form 10-Q for the quarter ended June 30, 2002

10-I*	Employment Agreement between Dana and Michael J. Burns, dated February 3, 2004	Filed by reference to Exhibit 10-E(2) to our Form 10-K for the fiscal year ended December 31, 2003

10-J*	Non-Competition and Severance Agreement between Dana and Paul E. Miller, dated May 3, 2004	Filed with this Report

10-K*	Change of Control Agreement between Dana and Paul E. Miller, dated May 3, 2004	Filed with this Report

10-L*	Supplemental Executive Retirement Plan for Nick Stanage, effective as of August 29, 2005	Filed by reference to Exhibit 99.1 to our Form 8-K filed on January 9, 2006

10-M*	Consulting Agreement dated March 1, 2006, between Dana Corporation and Robert C. Richter	Filed by reference to Exhibit 99.1 to our Form 8-K filed on March 6, 2006

10-N*	Agreement dated March 6, 2006 between Dana Corporation and AP Services, LLC	Filed by reference to Exhibit 10-T to our Form 10-K for the fiscal year ended December 31, 2005

10-O	Sale and Purchase Agreement for the Acquisition of Fifty Percent (50%) of the Registered Capital of Dongfeng Axle Co., Ltd. among Dongfeng Motor Co., Ltd., Dongfeng (Shiyan) Industrial Company, Dongfeng Motor Corporation and Dana Mauritius Limited, dated March 10, 2005	Filed by reference to Exhibit 10-U(1) to our Form 10-Q/A for the quarter ended March 31, 2005

163


No.	Description	Method of Filing or Furnishing


10-O(1)	Equity Joint Venture Contract between Dongfeng Motor Co., Ltd. and Dana Mauritius Limited, dated March 10, 2005	Filed by reference to Exhibit 10-U(2) to our Form 10-Q/A for the quarter ended March 31, 2005

10-P	Human Resources Management and Administration Master Services Agreement between Dana Corporation and International Business Machines Corporation, dated March 31, 2005	Filed by reference to Exhibit 10-V to our Form 10-Q/A for the quarter ended March 31, 2005

10-Q	Amended and Restated Senior Secured Superpriority Debtor-In-Possession Credit Agreement, dated as of April 13, 2006, among Dana Corporation, as Borrower; the Guarantors Party Thereto; Citicorp North America, Inc., as Administrative Agent and Initial Swing Lender; Bank of America, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents and Initial Issuing Banks; Morgan Stanley Senior Funding, Inc. and Wachovia Bank, National Association, as Co-Documentation Agents; and Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Banc of America Securities LLC as Joint Lead Arrangers and Joint Bookrunners	Filed with this Report

10-Q(1)	Amendment No. 1, dated January 25, 2007, to the Amended and Restated Senior Secured Superpriority Debtor-In-Possession Credit Agreement filed as Exhibit 10-T	Filed by reference to Exhibit 99.1 to our Form 8-K filed on January 30, 2007

10-R	Settlement Agreement and Release between Dana Corporation and its affiliated debtors and debtors in possession and Dana Credit Corporation and its direct and indirect subsidiaries, made as of December 18, 2006, with the form of Forbearance Agreement between Dana Credit Corporation and the Forbearing Noteholders attached as Exhibit A	Filed by reference to Exhibit 99.1 to our first Form 8-K filed on December 21, 2006

10-S	Master Share Purchase Relating to the Dissolution of the Spicer Joint Venture by and among Desc Automatrix, S.A. de C.V., Inmobiliaria Unik, S.A. de C.V., Spicer, S.A. de C.V., Dana Corporation, and Dana Holdings Mexico, S. de R.L. de C.V., dated as of May 31, 2006	Filed by reference to Exhibit 10-Y to our Form 10-Q for the quarter ended June 30, 2006

164


No.	Description	Method of Filing or Furnishing


10-T	Asset Purchase Agreement between Hendrickson USA, L.L.C., Purchaser, and Dana Corporation, Debtor Seller, as of September 11, 2006	Filed by reference to Exhibit 99.1 to our second Form 8-K filed on December 21, 2006

10-T(1)	First Amendment, dated as of September 29, 2006, to the Asset Purchase Agreement filed as Exhibit 10-T	Filed by reference to Exhibit 99.2 to our second Form 8-K filed on December 21, 2006

10-T(2)	Second Amendment, dated as of October 17, 2006, to the Asset Purchase Agreement filed as Exhibit 10-T	Filed by reference to Exhibit 99.3 to our second Form 8-K filed on December 21, 2006

10-U	Stock and Asset Purchase Agreement by and between MAHLE GmbH and Dana Corporation, dated as of December 1, 2006	Filed by reference to Exhibit 99.1 to our Form 8-K filed on March 1, 2007

21	Subsidiaries of Dana	Filed with this Report

23	Consent of PricewaterhouseCoopers LLP	Filed with this Report

24	Power of Attorney	Filed with this Report

31-A	Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer	Filed with this Report

31-B	Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer	Filed with this Report

32	Section 1350 Certifications	Furnished with this Report


*		Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 15(b) of Form 10-K.

165

EX-10.J 2 l24221aexv10wj.htm EX-10(J) EX-10(J)

Exhibit 10-J

NON-COMPETITION AND SEVERANCE AGREEMENT

between

DANA CORPORATION

and

PAUL MILLER

dated May 3, 2004

THIS NON-COMPETITION AND SEVERANCE AGREEMENT (the “Agreement”), dated as of May 3, 2004, by and between, Dana Corporation, a Virginia corporation, whose principal place of business is located at 4500 Dorr Street, Toledo, Ohio (the “Corporation”), and Paul E. Miller (the “Executive”);

WHEREAS, the Corporation has offered to employ the Executive as its Vice President of Purchasing and the Executive has accepted such offer of employment;

WHEREAS, the Executive desires to be employed by the Corporation, and to forego opportunities elsewhere during his period of employment;

WHEREAS, the Corporation’s offer of employment requires the Executive to be subject to its customary non-competition, non-disparagement and confidentiality covenants and also provides for certain severance benefits to be payable under certain circumstances, as more fully set forth herein; and

WHEREAS, the parties intend for this Agreement to operate until terminated in accordance with the terms hereof as more fully set forth herein.

NOW, THEREFORE, IN CONSIDERATION of the mutual promises, covenants and agreements set forth below, it is hereby agreed as follows:

1. Definitions. All defined terms in this Agreement shall have the meanings set forth below:

	(a)		“Agreement” shall mean this Non-Competition and Severance Agreement.

	(b)		“Board” shall mean the Board of Directors of the Corporation.

	(c)		“Cause” shall mean (i) termination of employment as the result of the Executive’s conviction of, or plea of guilty or nolo contendere to, the charge of having committed a felony (whether or not such conviction is later reversed for any reason); or (ii) failure by the Executive to devote his full time and undivided attention during normal business hours to the business and affairs of the Corporation or one of its subsidiaries except for reasonable vacations and except for illness or incapacity; but nothing herein shall preclude the Executive from devoting reasonable periods required for (A) serving as director or member of a committee of any organization involving no conflict of interest with the interests of the Corporation or its subsidiaries; (B) delivering lectures, fulfilling speaking engagements, teaching at educational institutions; (C) engaging in charitable and community activities and (D) managing his personal investments, so long as such activities do not materially interfere with the regular performance of his duties and responsibilities to the Corporation or its subsidiaries; or (iii) disclosure by the Executive at any time, to any person not employed by the Corporation or one of its subsidiaries, or not engaged to render services to the Corporation or one of its subsidiaries, except with the prior written

			consent of an officer authorized to act in the matter by the Board, of any confidential information of the Corporation, its subsidiaries and affiliates obtained by him while in the employ of the Corporation, including, without limitation, information related to any of the Corporation’s inventions, processes, formulae, plans, devices, compilations of information, methods of distribution, customers, suppliers, client relationships, marketing strategies or trade secrets; provided, however, that this provision shall not preclude the Executive from use or disclosure of information known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Corporation or from disclosure required by law, regulation or court order; (iv) the willful engaging by the Executive in misconduct that is injurious to the Corporation or its subsidiaries, monetarily or otherwise; or (v) negligence or incompetence on the part of the Executive in the performance of his assigned duties.

	(d)		“Competition” shall have the meaning set forth in Section 2(b).

	(e)		“Corporation” mean Dana Corporation.

	(f)		“Date of Termination” shall mean the date on which the Executive elects to retire, voluntarily resigns, dies or is released from employment by the Corporation.

	(g)		“Employment Period” shall have the meaning set forth in Section 2(a).

	(h)		“Executive” shall mean Paul E. Miller.

	(i)		“Non-competition Period” shall mean (i) upon the Executive’s termination of employment with the Corporation or any of its subsidiaries or affiliates for any reason on or before May 3, 2006, the twenty four (24) month period following such termination of employment, or (ii) upon the Executive’s termination of employment with the Corporation or any of its subsidiaries or affiliates for any reason after May 3, 2006, the twelve (12) month period following such termination of employment.

2. Non-Competition.

(a) The Executive agrees that he will not engage in Competition at any time (i) during his employment by the Corporation or any of its subsidiaries or affiliates (the “Employment Period”) or (ii) during the Non-competition Period. In addition, during the Non-competition Period, the Executive agrees that he will not make or publish any statement which is, or may reasonably be considered to be, disparaging of the Corporation or any of its subsidiaries or affiliates, or directors, officers, employees or the operations or products of the Corporation or any of its subsidiaries or affiliates.

(b) The word “Competition” for the purposes of this Agreement shall mean:

	(i)		taking a management position with or control of a business engaged in the design, development, manufacture, marketing or distribution of products, which constituted 15% or more of the sales of the Corporation and its subsidiaries and affiliates during the last fiscal year of the Corporation preceding the termination of the Executive’s employment, in any geographical area in which the Corporation, its subsidiaries or affiliates is at the time engaging in the design, development, manufacture, marketing or distribution of such products; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons, standing alone, be deemed Competition with the Corporation within the meaning of this Section 2;

	(ii)		soliciting any person who is a customer of the businesses conducted by the Corporation and its subsidiaries and affiliates, or any business in which the Executive has been engaged on behalf of the Corporation and its subsidiaries or affiliates at any time during the Employment Period on behalf of a business described in clause (i) of this Section 2(b); or

	(iii)		inducing or attempting to persuade any employee of the Corporation or any of its subsidiaries or affiliates to terminate his employment relationship in order to enter into employment with a business described in clause (i) of this Section 2(b).

(c) If, at any time, the provisions of this Section 2 shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to area, duration or scope, the provisions of this Section 2 shall be divisible and shall become immediately amended to cover only such area, duration or scope as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and the Executive agrees that Section 2 as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

3. Confidential Information.

(a) The Executive agrees not to disclose, either while in the Corporation’s employ or at any time thereafter, to any person not employed by the Corporation or one of its subsidiaries, or not engaged to render services to the Corporation or one of its subsidiaries, except with the prior written consent of an officer authorized to act in the matter by the Board, any confidential information of the Corporation, its subsidiaries and affiliates obtained by him while in the employ of the Corporation, including, without limitation, information relating to any of the Corporation’s inventions, processes, formulae, plans, devices, compilations of information, methods of distribution, customers, suppliers, client relationships, marketing strategies or trade secrets; provided, however, that this provision shall not preclude the Executive from use or disclosure of information

known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Corporation or from disclosure required by law or court order. The agreement herein made in this Section 3(a) shall be in addition to, and not in limitation or derogation of, any obligations otherwise imposed by law upon the Executive in respect of confidential information and trade secrets of the Corporation, its subsidiaries and affiliates.

(b) The Executive also agrees that upon leaving the Corporation’s employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board, and he will surrender to the Corporation any record, list, drawing, blueprint, specification or other document or property of the Corporation, its subsidiaries and affiliates, together with any copy and reproduction thereof, mechanical or otherwise, which is of a confidential nature relating to the Corporation, its subsidiaries and affiliates, or, without limitation, relating to its or their methods of distribution, client relationships, marketing strategies or any description of any formulae or secret processes, or which was obtained by him or entrusted to him during the course of his employment with the Corporation.

4. Covenants Reasonable. The Executive hereby acknowledges that the business of the Corporation is highly competitive. The Executive further acknowledges that his service to the Corporation will be of a special and unique character, and that he will be identified personally with the Corporation. The Executive also acknowledges that his employment with the Corporation will require that he have access to some of the Corporation’s most highly confidential business information, trade secrets and proprietary information. The parties therefore acknowledge that the restrictions contained in Sections 2 and 3 hereof are a reasonable and necessary protection of the immediate interests of the Corporation, and any violation of these restrictions would cause substantial injury to the Corporation and that the Corporation would not have entered into this Agreement and the employment relationship with the Executive without receiving the additional consideration offered by the Executive in binding himself to any of these restrictions.

5. Severance.

(a) If at any time on or before May 3, 2006, the Executive’s employment with the Corporation or any of its subsidiaries or affiliates is terminated by the Corporation or any of its subsidiaries or affiliates without Cause, then the Corporation shall pay to the Executive, (i) a pro-rata portion of the Executive’s target annual bonus for the fiscal year in which the Date of Termination occurs (based on the portion of the performance period that has elapsed prior to the date of such termination and assumed achievement at the target level of performance); (ii) any accrued but unpaid amounts of the Executive’s salary and vacation pay and previously deferred salary; and (iii) for a period of twenty four (24) months, a monthly payment equal to one-twelfth (1/12) the sum of the Executive’s annual base salary immediately prior to the Date of Termination and the Executive’s target annual bonus for the fiscal year in which such termination occurs; provided, however, that such payments shall be reduced (but not below zero) to reflect any other amounts payable to the Executive in respect of salary or bonus continuation to be received by the Executive under

any severance plan, policy or arrangement of the Corporation. Except to the extent limited by Section 5(c) below, in the event of such a termination, for the period of twenty four (24) months following the Date of Termination, the Company shall also provide to the Executive (and, as applicable, his eligible dependents), (A) continued participation in all welfare benefits under the welfare plans in which the Executive participated immediately prior to the Date of Termination; and (B) service credit for vesting purposes under the Supplemental Executive Retirement Plan for Paul Miller as if the Executive had remained employed during such twenty four (24) month period.

(b) If at any time after May 3, 2006, the Executive’s employment with the Corporation or any of its subsidiaries or affiliates is terminated by the Corporation or any of its subsidiaries or affiliates without Cause, then the Corporation shall pay or provide to the Executive the payments and benefits specified in Section 5(a) above, provided, however, that the payments specified in clause (iii) of Section 5(a), and the benefits and service credit specified in the final sentence of Section 5(a), shall be made during the twelve (12) month period following the Date of Termination and not for the above referenced twenty-four (24) month period.

(c) Nothing in this Section 5 shall preclude the Corporation from amending or terminating any employee benefit plan, policy or practice during the Employment Period. In the event that the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits provided pursuant to Section 5(a) or 5(b) above shall be secondary to those provided under such other plan during such applicable period of eligibility. To the extent that the benefits and service credit to which the Executive is entitled pursuant to Section 5(a) or 5(b) above are not permitted by the terms of the Corporation’s plans or by applicable law, the Executive shall be entitled to substantially equivalent coverage under an alternative arrangement. Further, any continuation of the Executive’s retirement benefits pursuant to Section 5(a) or 5(b) above shall be made under non-qualified arrangement and shall be payable from the general assets of the Corporation.

(d) Upon the termination of the Executive’s employment with the Corporation or any of its subsidiaries or affiliates for any reason, all of the Executive’s outstanding equity awards from the Corporation shall be treated in accordance with the plans and agreements evidencing such awards and shall remain subject to the terms and conditions contained therein.

(e) If at any time on or before May 3, 2006, the Executive’s employment with the Corporation or any of its subsidiaries or affiliates is terminated by the Executive or is terminated by the Corporation for Cause, then the Corporation shall have no obligation to pay the Executive the severance payments described in Sections 5(a) or (b) above, but shall pay the Executive any accrued but unpaid amounts of the Executive’s salary and vacation pay and previously deferred compensation as well as other benefits accrued by the Executive through the date of termination, to the extent payable under the terms of the relevant agreements and plans.

(f) If at any time on or before May 3, 2006, the Executive’s employment with the Corporation or any of its subsidiaries or affiliates is terminated by reason of the Executive’s death or disability, then the Corporation shall have no obligation to pay to the Executive the severance payments described in Sections 5(a) or (b) above, but shall pay the Executive any accrued but unpaid amounts of the Executive’s salary and vacation pay and previously deferred compensation as well as other benefits accrued by the Executive through (I) in the case of death, the end of the month in which the death occurs, or (II) in the case of disability for the period of such disability (but not to exceed 6 months), to the extent payable under the terms of the relevant agreements and plans. For this purpose, disability shall be determined under the definition of this term in Section 4(a)(2) of the Executive’s Change of Control Agreement.

6. Release. As a condition to the receipt of any benefit under Section 5 hereof, the Executive shall first execute a release, substantially in the form attached hereto as Exhibit A, releasing the Corporation, its subsidiaries, affiliates, shareholders, partners, officers, directors, employees and agents from any and all claims and from any and all causes of action of any kind or character, including but not limited to all claims or causes of action arising out of the Executive’s employment with the Corporation or the termination of such employment.

7. Governing Law; Consent to Jurisdiction; Injunctive Relief. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Ohio, without regard to its conflict of laws provisions. The Executive hereby irrevocably submits to the sole jurisdiction of any Ohio or Federal court sitting in the City of Toledo in any action or proceeding to enforce the provisions of this Agreement, and waives the defense of inconvenient forum to the maintenance of any such action or proceeding. In the event of a breach or threatened breach by the Executive of any of these restrictions, the Corporation shall be entitled to apply to any court of competent jurisdiction for an injunction restraining the Executive from such breach or threatened breach; provided, however, that the right to apply for an injunction shall not be construed as prohibiting the Corporation from pursuing any other available remedies for such breach or threatened breach.

8. Notices. Unless otherwise provided herein, any notice, exercise of rights or other communication required or permitted to be given hereunder shall be in writing and shall be given by overnight delivery service such as Federal Express, telecopy (or like transmission) or personal delivery against receipt, or mailed by registered or certified mail (return receipt requested), to the party to whom it is given at such party’s address set forth below such party’s name on the signature page or such other address as such party may hereafter specify by notice to the other party hereto. Any notice or other communication shall be deemed to have been given as of the date so personally delivered or transmitted by telecopy or like transmission or on the next business day when sent by overnight delivery service.

9. Amendment. This Agreement may be amended, modified, superseded or canceled, and the terms and covenants hereof may be waived, only by a written instrument executed by both of the parties hereto, or in the case of a waiver, by the party waiving compliance.

The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same.

10. Binding Effect. This Agreement is not assignable by the Executive. This Agreement shall be binding upon and inure to the benefit of the Corporation and any successor organizations which shall succeed to the Corporation by merger or consolidation or operation of law or otherwise, or by acquisition of all or substantially all of the assets of the Corporation.

11. Severability. If any provision of this Agreement shall for any reason be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby and such remaining provisions of this Agreement shall remain in full force and effect. Moreover, if any one or more of the provisions of this Agreement shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent allowable by applicable law.

12. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same instrument.

13. Entire Agreement. This Agreement sets forth the entire agreement, and supersedes all prior agreements and any other agreement between the parties and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement shall not affect or supercede the Change of Control Agreement between Dana Corporation and the Executive, dated May 3, 2003 (the “Change of Control Agreement”), which shall supercede this Agreement upon the occurrence of a Change of Control as defined in the Change of Control Agreement.

14. Titles and Headings. Titles and headings to Sections herein are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of any of the provisions of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Non-Competition and Severance Agreement as of the date first written above.



	/s/ Paul E. Miller
	Name:	Paul E. Miller
	Address: [Address] Facsimile:


		DANA CORPORATION

		By:		/s/ Michael J. Burns

		Name:		Michael J. Burns
		Title:		Chairman & CEO
		Address:		P O Box 1000, Toledo, OH

		Facsimile:
		Attn:

Exhibit A

Made as of , 20___ Between
Dana Corporation and Paul E. Miller

RELEASE AGREEMENT

This Release Agreement (“Release”) is entered into as of this day of , hereinafter “Execution Date”, by and between Paul E. Miller (hereinafter “Executive”), and Dana Corporation and its successors and assigns (hereinafter, the “Corporation”). The Executive and the Corporation are sometimes collectively referred to as the “Parties”.

1.		The Executive’s employment with the Corporation is terminated effective [Month, Day, Year] (hereinafter “Termination Date”). The Corporation agrees to provide the Executive the severance benefits provided for in his Non-Competition and Severance Agreement with the Corporation, dated as of May 3, 2004 (the “Non-Competition Agreement”), after he executes this Release and the Release becomes effective pursuant to its terms and does not revoke it as permitted in Section 3 below, the expiration of such revocation period being the “Effective Date”.

2.		Executive represents that he has not filed, and will not file, any complaints, lawsuits, administrative complaints or charges relating to his employment with, or resignation from, the Corporation; provided, however, that nothing contained in this Section 2 shall prohibit Executive from bringing a claim to challenge the validity of the ADEA Release in Section 3 herein. In consideration of the benefits described in Section 1, for himself and his heirs, administrators, representatives, executors, successors and assigns (collectively, “Releasers”), Executive agrees to release the Corporation, its subsidiaries, affiliates, and their respective parents, direct or indirect subsidiaries, divisions, affiliates and related companies or entities, regardless of its or their form of business organization, any predecessors, successors, joint ventures, and parents of any such entity, and any and all of their respective past or present shareholders, partners, directors, officers, employees, consultants, independent contractors, trustees, administrators, insurers, agents, attorneys, representatives and fiduciaries, including without limitation all persons acting by, through, under or in concert with any of them (collectively, the “Released Parties”), from any and all claims, charges, complaints, causes of action or demands relating to his employment or termination of employment that Executive and his Releasers now have or have ever had against the Released Parties, whether known or unknown. This Release specifically excludes claims, charges, complaints, causes of action or demand that (a) arise after the date of this Release , (b) relate to unemployment compensation claims, (c) involve rights to benefits in which Executive is vested as of the Termination Date under any employee benefit plans and arrangements of the Corporation, or (d) involve obligations owed to Executive by the Corporation under the Non-Competition Agreement, subject to the effectiveness of this Release.

3.		In further recognition of the above, Executive hereby voluntarily and knowingly waives all rights or claims that he may have against the Released Parties arising under the Age Discrimination in Employment Act of 1967, as amended (“ADEA”),

		other than any such rights or claims that may arise after the date of execution of this Release. Executive specifically agrees and acknowledges that: (A) the release in this Section 3 was granted in exchange for the receipt of consideration that exceeds the amount to which he would otherwise be entitled to receive upon termination of his employment; (B) he has hereby been advised in writing by the Corporation to consult with an attorney prior to executing this Release; (C) the Corporation has given him a period of up to twenty-one (21) days within which to consider this Release, which period shall be waived by the Executive’s voluntary execution prior to the expiration of the twenty-one day period, and he has carefully read and voluntarily signed this Release with the intent of releasing the Released Parties to the extent set forth herein; and (D) following his execution of this Release he has seven (7) days in which to revoke his release as set forth in this Section 3 only and that, if he chooses not to so revoke, the Release in this Section 3 shall then become effective and enforceable and the payment listed above shall then be made to him in accordance with the terms of this Release. To cancel this Release, Executive understands that he must give a written revocation to the General Counsel of the Corporation at 4500 Dorr Street, Toledo, Ohio 43615, either by hand delivery or certified mail within the seven-day period. If he rescinds the Release, it will not become effective or enforceable and he will not be entitled to any benefits from the Corporation.

4.		If any provision of this Release is held invalid, the invalidity of such provision shall not affect any other provisions of this Release. This Release is governed by, and construed and interpreted in accordance with the laws of the State of Ohio, without regard to principles of conflicts of law. Executive consents to venue and personal jurisdiction in the State of Ohio for disputes arising under this Release. This Release represents the entire understanding with the Parties with respect to subject matter herein, and no other inducements or representations have been made or relied upon by the Parties. This Release shall be binding upon and inure to the benefit of Executive, his heirs and legal representatives, and the Corporation and its successors as provided in this Section 4. Any modification of this Release must be made in writing and be signed by Executive and the Corporation.

ACCEPTED AND AGREED TO:

Paul E. Miller
Dated:

DANA CORPORATION

By:
Name:
Title:
Dated:

EX-10.K 3 l24221aexv10wk.htm EX-10(K) EX-10(K)

Exhibit 10-K

CHANGE OF CONTROL AGREEMENT

BETWEEN

DANA CORPORATION

AND

PAUL E. MILLER

DATED MAY 3, 2004

TABLE OF CONTENTS


SECTION	PAGE
Recitals		1
1. OPERATION OF AGREEMENT; EMPLOYMENT AND TERM		1
2. POSITION AND DUTIES OF THE EXECUTIVE		2
(A) Position		2
(B) Duties		3
(C) Location Of Office		3
3. COMPENSATION		3
(A) Salary		3
(B) Additional Compensation		4
(C) Incentive, Stock And Savings Plans		4
(D) Retirement And Welfare Benefit Plans		4
(E) Expenses		5
(F) Fringe Benefits		5
(G) Office And Support Staff		5
(H) Vacation And Other Absences		5
(I) Benefits Shall Not Be Reduced Under Certain Circumstances		5
(J) Certain Retirement And Severance Definitions		6
4. TERMINATION OF EMPLOYMENT		6
(A) Death Or Disability		6
(B) Cause		7
(C) Good Reason		8
(D) Notice Of Termination		9
(E) Date Of Termination		9
5. OBLIGATIONS OF THE CORPORATION UPON TERMINATION		10
(A) Termination Other Than For Cause		10
(B) [intentionally left blank]		12
(C) Cause; Other Than For Good Reason		12
(D) Death Or Disability		12
(E) Resolution Of Disputes		13
(1) Right Of Election By Executive To Arbitrate Or Sue		13
(2) Third-Party Stakeholder		13
6. NON-EXCLUSIVITY OF RIGHTS		14
7. FULL SETTLEMENT		14
8. CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION		14
9. CONFIDENTIAL INFORMATION		17
10. COMPETITION		18
11. SUCCESSORS		19
12. CERTAIN DEFINITIONS		19
(A) Beneficiary		19
(B) Change Of Control		19
(C) Change Of Control Date		21
13. AMENDMENT OR MODIFICATION; WAIVER		21
14. MISCELLANEOUS		21
Exhibit A
Exhibit B

DEFINED TERMS


DEFINED TERMS^A	SECTION	PAGE
Accounting Firm	8(B)	15
Accrued Obligations	5(A)(1)(c)	10
ACP	3(B)	4
Affiliate	2(A)(5)	2
Affiliated Companies	3(A)	3
Agreement	Introduction	1
Annual Base Salary	3(A)	3
Annual Bonus	3(B)	4
Beneficial Owner	12(B)	21
Beneficiary	12(A)	19
Board	3(A)	3
Business Combination	12(B)(3)	19
Cause	4(B)	7
Change of Control	12(B)	20
Change of Control Date	12(C)	21
COC Employment Period	1(B)	1
Code	8(B)	16
Competition	10(B)	18
Corporation	Introduction	1
	14(E)	22
Date of Termination	4(E)	9
Disability	4(A)(2)	6
Disability Effective Date	4(A)(2)	6
Exchange Act	12(B)	21
Excise Tax	8(F)(1)	17
Executive	Introduction	1
Good Reason	4(C)	8
Gross-Up Payment	8(A)	14

Incumbent Board	12(B)(2)	20
Notice of Termination	4(D)	9
Other Benefits	5(A)(5)	12
Parachute Value	8(F)(2)	17
Payment	8(F)(3)	17

Person	12(B)	21
Prior Voting Securities	12(B)(3)	20
Renewal Date	1(D)	1
Safe Harbor Amount	8(F)(4)	17


^A		Each listed term is intended to include both the singular and plural form of the term.


DEFINED TERMS	SECTION	PAGE
Service	3(J)(2)	6
Severance Compensation	3(J)(1)	6
Short-Term Award	3(B)	4
Spinoff	12(B)	20
Subsidiary	2(A)(5)	2
Terminal Date	1(A)	1
Termination	5(A)	10
Termination Period	5(A)(2)	10
Underpayment	8(B)	15
Value	8(F)(5)	17

iii

THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”) made and entered into as of this 3rd day of May, 2004, by and between DANA CORPORATION, a Virginia corporation whose principal place of business is located at 4500 Dorr Street, Toledo, Ohio (the “Corporation”), and Paul E. Miller (the “Executive”);

WHEREAS, the Executive is a principal executive officer of the Corporation and an integral part of its management; and

WHEREAS, the Corporation wishes to assure both itself and the Executive of continuity of management in the event of any actual or threatened Change of Control of the Corporation; and

WHEREAS, this Agreement is not intended to alter materially the compensation and benefits that the Executive could reasonably expect in the absence of a Change of Control of the Corporation, and, accordingly, this Agreement, though taking effect upon execution thereof, will be operative only upon a Change of Control of the Corporation, as that term is hereafter defined;

NOW, THEREFORE, IN CONSIDERATION of the mutual promises, covenants and agreements set forth below, it is hereby agreed as follows:

1. OPERATION OF AGREEMENT; EMPLOYMENT AND TERM.

(A) This Agreement shall be effective immediately upon its execution by the parties hereto but, anything in this Agreement to the contrary notwithstanding, neither the Agreement nor any provision thereof, except for this Section 1(A), Section 1(D), Section 2(A)(2), Section 11, Section 12(B), Section 13, and Sections 14(A), (B), (C), (F), (N) and (O), shall be operative unless and until there has been a Change of Control of the Corporation, as defined in Section 12(B) below, prior to December 31, 2006 or such later date as shall result from the operation of Section 1(D) below (the “Terminal Date”) and while the Executive is in the employ of the Corporation. Upon such a Change of Control of the Corporation, this Agreement and all provisions thereof shall become operative immediately.

(B) The Corporation hereby agrees to continue the employment of the Executive, and the Executive hereby agrees to remain in the employ of the Corporation, in accordance with the terms and provisions of this Agreement, for the period set forth below (the “COC Employment Period”).

(C) The COC Employment Period under this Agreement shall commence on the date this Agreement becomes operative pursuant to the provisions of Sections 1(A) above and, subject only to the provisions of Section 4 below relating to termination of employment, shall continue until the third anniversary of a Change of Control of the Corporation.

(D) Commencing on December 31, 2004, and on each anniversary of such date (such date and each such annual anniversary thereof, the “Renewal Date”), the Terminal Date set forth in Section 1(A) above shall be extended so as to occur three (3) years from the Renewal Date unless either party shall have given notice to the other party that the Terminal Date is not to be extended or further extended.

2. POSITION AND DUTIES OF THE EXECUTIVE.

(A) Position.

(1) It is contemplated that during the COC Employment Period the Executive will continue to serve as a principal officer of the Corporation and as a member of its Board of Directors if serving as a member of the Board of Directors immediately prior to a Change of Control, as defined in Section 12(B) below, with the office(s) and title(s), reporting responsibility and duties and responsibilities of the Executive on the date of this Agreement, as the same may be changed from time to time after the date of this Agreement and prior to the date this Agreement becomes operative pursuant to the provisions of Section 1(A) above.

(2) The office(s), title(s), reporting responsibility, duties and responsibilities of the Executive on the date of this Agreement, as the same may be changed from time to time after the date of this Agreement and prior to the date this Agreement becomes operative pursuant to the provisions of Section 1(A) above, shall be summarized in Exhibit A to this Agreement, it being understood and agreed that if, as when the office(s), title(s), reporting responsibility, duties and responsibilities of the Executive shall be changed prior to the date this Agreement becomes operative pursuant to the provisions of Section 1(A) above, Exhibit A shall be deemed to be and shall be updated by the parties to reflect such change; provided, however, that Exhibit A is intended only as memorandum for the convenience of the parties and shall be disregarded if and to the extent that, at the time this Agreement becomes operative, Exhibit A shall fail to reflect accurately the office(s), title(s), reporting responsibility, duties or responsibilities of the Executive at the time because the parties shall have failed to update Exhibit A as aforesaid after the last such change prior to the date this Agreement shall have become operative.

(3) At all times during the COC Employment Period, the Executive shall hold a position of responsibility and importance and a position of scope, with the functions, duties and responsibilities attached thereto, at least equal in responsibility and importance and in scope to and commensurate with his position described in general terms above in this Section 2(A) and intended to be summarized in Exhibit A to this Agreement.

(4) During the COC Employment Period the Executive shall, without compensation other than that herein provided, also serve and continue to serve, if and when elected and re-elected, as an officer or director, or both, of any United States Subsidiary, division or Affiliate of the Corporation.

(5) For all purposes of this Agreement, (1) a “Subsidiary” shall mean a corporation or other entity, of which 50% or more of the voting securities or other equity interests is owned directly, or indirectly through one or more intermediaries, by the Corporation, and (2) an “Affiliate” shall mean a corporation or other entity which is not a Subsidiary and which directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Corporation. For the purpose of this definition, the terms “control”, “controls” and “controlled” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and poli-

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cies of a corporation or other entity, whether through the ownership of voting securities, by contract, or otherwise.

(B) Duties. Throughout the COC Employment Period the Executive shall devote his full time and undivided attention during normal business hours to the business and affairs of the Corporation except for reasonable vacations and except for illness or incapacity, but nothing in this Agreement shall preclude the Executive from devoting reasonable periods required for:

(1) serving as a director or member of a committee or any organization involving no conflict of interest with the interests of the Corporation;

(2) delivering lectures, fulfilling speaking engagements, teaching at educational institutions;

(3) engaging in charitable and community activities; and

(4) managing his personal investments;

provided, that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.

(C) Location Of Office. During the COC Employment Period, the office of the Executive shall be located at the principal offices of the Corporation, within the greater Toledo, Ohio area, and the Executive shall not be required to locate his office elsewhere without his prior written consent, nor shall he be required to be absent therefrom on travel status or otherwise more than thirty (30%) of the working days in any calendar year nor for more than ten (10) consecutive days at any one time.

3. COMPENSATION.

The Executive shall receive the following compensation for his services:

(A) Salary. So long as the Executive is employed by the Corporation, he shall be paid an annual base salary, payable not less often than monthly, at the rate of not less than $29,583.33 per month with such increases as shall be awarded from time to time in accordance with the Corporation’s regular administrative practices of other salary increases applicable to executives of the Corporation, subject to any and all required withholdings and deductions for Social Security, income taxes and the like (the “Annual Base Salary”). The Board of Directors of the Corporation (the “Board”) may from time to time direct such upward adjustments to Annual Base Salary as the Board deems to be necessary or desirable; provided, however, that during the COC Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time but not less often than annually and shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other senior executives of the Corporation and its “Affiliated Companies” (a term which, as used in this Agreement, shall mean a Subsidiary or Affiliate of the Corporation) and, in addition, shall be adjusted effective as of January lst of each calendar year commencing in the COC Employment Period to reflect increases in the cost of living during the preceding calendar year. Annual Base Salary shall not be reduced after any increase thereof pursuant to this Section 3(A).

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Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation of the Corporation under this Agreement.

(B) Additional Compensation. So long as the Executive is employed by the Corporation, he shall be eligible to receive annual short-term incentive awards or bonuses (such award or bonus is hereinafter referred to as “Short-Term Award” or “Annual Bonus”) from the Dana Corporation Additional Compensation Plan, and from any successor or replacement plan (the Dana Corporation Additional Compensation Plan and such successor or replacement plans being referred to herein collectively as the “ACP”), in accordance with the terms thereof; provided, however, that, with respect to each fiscal year of the Corporation ending during the COC Employment Period, the Executive shall be awarded (whether under the terms of the ACP or otherwise) an Annual Bonus in an amount that shall not be less than sixty percent (60%) of his Annual Base Salary rate in effect on the last day of such fiscal year (which amount shall be prorated if such fiscal year shall be less than 12 months). Each Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the receipt of such Annual Bonus is deferred in accordance with the terms of the ACP.

(C) Incentive, Stock And Savings Plans. So long as the Executive is employed by the Corporation, he shall be and continue to be a full participant in the Dana Corporation Amended and Restated Stock Incentive Plan, the ACP (providing for Short-Term Awards) and in any and all other incentive, stock, savings, practices or policies in which executives of the Corporation participate that are in effect on the date hereof and that may hereafter be adopted, including, without limitation, any stock option, stock purchase or stock appreciation plans, or any successor plans that may be adopted by the Corporation with, except in the case of the ACP after the commencement of the COC Employment Period, at least the same reward opportunities, if any, that have heretofore been provided to the Executive. Nothing in this Agreement shall preclude improvement of reward opportunities in such plans or other plans in accordance with the practices in effect on the first day of the calendar month that this Agreement becomes operative. Any provision of the ACP or of this Agreement to the contrary notwithstanding, any Short-Term Awards made to the Executive (whether for services rendered prior to or after the date this Agreement becomes operative) shall be paid wholly in cash as soon as practicable after the awards are made.

(D) Retirement And Welfare Benefit Plans. The Executive, his dependents and Beneficiary, including, without limitation, any beneficiary applicable to the payment of benefits under the Supplemental Executive Retirement Plan for Paul Miller, shall be entitled to all payments and benefits and service credit for benefits during the COC Employment Period (1) under the Supplemental Executive Retirement Plan for Paul Miller and (2) to which other senior executives of the Corporation, their dependents and their beneficiaries are entitled under the terms of employee retirement and welfare benefit plans and practices of the Corporation, including, without limitation, the Corporation’s SavingsWorks Plan, its Stock Purchase Plan, its Income Protection Plan for Management and Certain Other Employees providing layoff and severance benefits, its 1989 and 1999 Restricted Stock Plans, its death benefit plans (consisting of its Group Insurance Plan for Management Employees providing life insurance, accidental death and dismemberment insurance, and travel accident insurance), its disability benefit plans (consisting of its salary continuation, sickness and accident and long-term disability benefits programs), its medical, dental and health and welfare plans and other present or equivalent successor plans and practices of the

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Corporation, its Subsidiaries and divisions, for which officers, their dependents and beneficiaries, are eligible, and to all payments or other benefits under any such plan or practice subsequent to the COC Employment Period as a result of participation in such plan or practice during the COC Employment Period.

(E) Expenses. So long as the Executive is employed by the Corporation, he shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the polices, practices and procedures of the Corporation and its Affiliated Companies from time to time in effect, commensurate with his position and on a basis at least comparable to that of other senior executives of the Corporation.

(F) Fringe Benefits. So long as the Executive is employed by the Corporation, he shall be entitled to fringe benefits, including, without limitation, the business and personal use of an automobile, and payment or reimbursement of club initiation fees and dues, in accordance with the plans, practices, programs and policies of the Corporation and its Affiliated Companies from time to time in effect, commensurate with his position and at least comparable to those received by other senior executives of the Corporation.

(G) Office And Support Staff. So long as the Executive is employed by the Corporation, he shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, commensurate with his position and at least comparable to those received by other senior executives of the Corporation.

(H) Vacation And Other Absences. So long as the Executive is employed by the Corporation, he shall be entitled to paid vacation and such other paid absences whether for holidays, illness, personal time or any similar purposes, in accordance with the plans, policies, programs and practices of the Corporation and its Affiliated Companies in effect from time to time, commensurate with his position and at least comparable to those received by other senior executives of the Corporation.

(I) Benefits Shall Not Be Reduced Under Certain Circumstances. Nothing in this Agreement shall preclude the Corporation from amending or terminating any employee benefit or welfare plan or practice, but, it being the intent of the parties that the Executive shall continue to be entitled during the COC Employment Period to perquisites as set forth in this Section 3 and to benefits and service credit for benefits under Section 3(D) above at least equal to those attached to his position on the date of this Agreement, and except as provided in the last sentence of this Section 3(I), nothing in this Agreement shall operate or be construed to reduce, or authorize a reduction without the Executive’s written consent in, the level of such perquisites, benefits or service credit for benefits; in the event of any such reduction, by amendment or termination of any plan or practice or otherwise, the Executive, his dependents and Beneficiary, shall continue to be entitled to perquisites, benefits and service credit for benefits at least equal to the perquisites, benefits and service credit for benefits under such plans or practices that he or his dependents and Beneficiary would have received if such reduction had not taken place. If and to the extent that such perquisites, benefits and service credits are not payable or provided under any such plans or practices by reason of such amendment or termination thereof, the Corporation itself shall pay or provide therefor. Notwithstanding the foregoing provisions of this Section 3(I), the Executive hereby waives the benefit of the foregoing minimum benefit protection only as it

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applies to the Dana Corporation SavingsWorks Plan, and to its medical, dental and health plans. The Executive expressly does not waive the application of the foregoing minimum benefit protection to any of the other benefit plans, programs or practices enumerated in Section 3 above, including, without limitation, the Supplemental Executive Retirement Plan for Paul Miller, the Corporation’s death benefit plans, its disability benefit plans, and its Income Protection Plan for Management and Certain Other Employees. The Executive reserves the right to cancel the above waiver, prospectively, at any future time by giving written notice to the Corporation of such cancellation. Nothing in this Section 3(I) shall be construed to prohibit the Corporation from amending or terminating any employee benefit or welfare plan or practice to reduce benefits, so long as such reduction applies to all salaried Corporation employees covered by such plan or practice equally and such reduction is adopted prior to the Change of Control Date.

(J) Certain Retirement And Severance Definitions.

(1) The term “Severance Compensation” shall mean the sum of (1) one-twelfth (1/12) of the Annual Base Salary provided in Section 3(A) at the rate being paid at the time the Executive’s termination of employment occurred, and (2) one-twelfth (1/12) of the greater of (x) the average of the highest Annual Bonuses payable to the Executive for any three (3) consecutive full or partial fiscal years during his employment by the Corporation or (y) the Executive’s target annual bonus (currently 60%) in effect under the ACP as of the Date of Termination (which, for purposes of this Section 3(J) and notwithstanding any reduction following the Change of Control Date, shall not be less than the Executive’s target annual bonus as of immediately prior to the Change of Control Date).

(2) The term “Service” shall mean employment as an employee by the Corporation, any Subsidiary or Affiliate thereof or any corporation the capital stock or assets of which have been acquired by, or which has been merged into or consolidated with the Corporation or any Subsidiary or Affiliate thereof.

4. TERMINATION OF EMPLOYMENT.

(A) Death Or Disability.

(1) The Executive’s employment shall terminate automatically upon the Executive’s death during the COC Employment Period.

(2) If the Corporation determines in good faith that the Disability (as defined below) of the Executive has occurred during the COC Employment Period, it may give to the Executive written notice in accordance with Section 14(B) below of its intention to terminate the Executive’s employment. In such event, the COC Employment Period shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided, that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Corporation on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined

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to be total and permanent by a physician selected by the Corporation or its insurers and acceptable to the Executive or the Executive’s legal representative (such agreement as to acceptability not to be withheld unreasonably).

(B) Cause. The Corporation may terminate the Executive’s employment during the COC Employment Period for Cause. For purposes of this Agreement, the termination of the Executive’s employment shall be deemed to have been for “Cause” only

(1) if termination of his employment shall have been the result of his conviction of, or plea of guilty or nolo contendere to, the charge of having committed a felony (whether or not such conviction is later reversed for any reason), or

(2) if there has been a breach by the Executive during the COC Employment Period of the provisions of Section 2(B), relating to the time to be devoted to the affairs of the Corporation, or of Section 9, relating to confidential information, and such breach results in demonstrably material injury to the Corporation, and, with respect to any alleged breach of Section 2(B) hereof, the Executive shall have either failed to remedy such alleged breach within thirty days from his receipt of written notice from the Secretary of the Corporation pursuant to resolution duly adopted by the Board of Directors of the Corporation after notice to the Executive and an opportunity to be heard demanding that he remedy such alleged breach, or shall have failed to take all reasonable steps to that end during such thirty-day period and thereafter;

provided, that there shall have been delivered to the Executive a certified copy of a resolution of the Board of Directors of the Corporation adopted by the affirmative vote of not less than three-fourths of the entire membership of the Board of Directors called and held for that purpose and at which the Executive was given an opportunity to be heard, finding that the Executive was guilty of conduct set forth in subparagraph (1) or (2) above, specifying the particulars thereof in detail.

Anything in this Section 4(B) or elsewhere in this Agreement to the contrary notwithstanding, the employment of the Executive shall in no event be considered to have been terminated by the Corporation for Cause if termination of his employment took place

(1) as the result of bad judgment or negligence on the part of the Executive, or

(2) because of an act or omission believed by the Executive in good faith to have been in or not opposed to the interests of the Corporation, or

(3) for any act or omission in respect of which a determination could properly be made that the Executive met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under (A) the Bylaws of the Corporation, or (B) the laws of the State of Virginia, or (C) the directors’ and officers’ liability insurance of the Corporation, in each case either

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as in effect at the time of this Agreement or in effect at the time of such act or omission, or

(4) as the result of an act or omission which occurred more than twelve calendar months prior to the Executive’s having been given notice of the termination of his employment for such act or omission unless the commission of such act or such omission could not at the time of such commission or omission have been known to a member of the Board of Directors of the Corporation (other than the Executive, if he is then a member of the Board of Directors), in which case more than twelve calendar months from the date that the commission of such act or such omission was or could reasonably have been so known, or

(5) as the result of a continuing course of action which commenced and was or could reasonably have been known to a member of the Board of Directors of the Corporation (other than the Executive, if he is then a member of the Board of Directors) more than twelve calendar months prior to notice having been given to the Executive of the termination of his employment.

(C) Good Reason. The Executive may terminate his employment during the COC Employment Period for Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence (without the Executive’s express written consent) of any of the following events, unless in the case of any act or failure to act described in clauses (1), (2), (3), (4) or (5) below, such act or failure to act is corrected by the Corporation within 30 days after receipt by the Corporation of written notice from the Executive in respect of such event:

(1) Failure to elect or reelect the Executive to the Board of Directors of the Corporation, if the Executive shall have been a member of the Board of Directors on the date of this Agreement or at any time thereafter during the COC Employment Period, or a substantial diminution in the Executive’s title(s) or office(s) described in Section 2(A) above and intended to be summarized in Exhibit A to this Agreement, or the removal of Executive from any such positions.

(2) A material change or diminution in the position, duties, responsibilities or status of the Executive that is adversely inconsistent with the position, duties, responsibilities or status attached to the position described in Section 2 above and intended to be summarized in Exhibit A to this Agreement.

(3) The Executive’s compensation, annual bonus opportunity or benefit entitlements as in effect immediately prior to the Change of Control or as increased following the Change of Control are reduced.

(4) A breach by the Corporation of any provision of this Agreement not embraced within the foregoing clauses (1), (2) and (3) of this Section 4(C).

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(5) The liquidation, dissolution, consolidation or merger of the Corporation or transfer of all or a significant portion of its assets unless a successor or successors (by merger, consolidation or otherwise) to which all or a significant portion of its assets have been transferred shall have assumed all duties and obligations of the Corporation under this Agreement but without releasing the corporation that is the original party to this Agreement;

provided, that in any event set forth in this Section 4(C), the Executive shall have elected to terminate his employment under this Agreement, upon not less than ten and not more than ninety days’ advance written notice to the Corporation, attention of the Secretary, given, except in the case of a continuing breach, within three calendar months after (A) failure to be so elected or reelected, or removal, (B) expiration of the 30-day cure period with respect to such event, or (C) the closing date of such liquidation, dissolution, consolidation, merger or transfer of assets, as the case may be. The Executive’s mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect the Executive’s ability to terminate employment for Good Reason.

An election by the Executive to terminate his employment for Good Reason under the provisions of this Section 4(C) shall not be deemed a voluntary termination of employment by the Executive for the purpose of this Agreement or any plan or practice of the Corporation.

(D) Notice Of Termination. Any termination by the Corporation for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(B) below. For purposes of this Agreement, a “Notice of Termination” means a written notice which

(1) indicates the specific termination provision in this Agreement relied upon,

(2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and

(3) if the Date of Termination (as defined in Section 4(E) below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen days after the giving of such notice).

(E) Date Of Termination. “Date of Termination” means

(1) if the Executive’s employment is terminated by the Corporation for Cause, or by the Executive for Good Reason, the later of (a) the date of receipt of the Notice of Termination or any later date specified therein, as the case may be or (b) the end of any applicable 30-day cure period described in Section 4(C),

(2) if the Executive’s employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination and

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(3) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

5. OBLIGATIONS OF THE CORPORATION UPON TERMINATION.

(A) Termination Other Than For Cause. If, during the COC Employment Period, the Corporation shall terminate the Executive’s employment other than for Cause or the Executive shall terminate his employment following a Change of Control for Good Reason (termination in any such case referred to as “Termination”) and subject to the Executive entering into and not revoking a release (unless the Corporation determines not to request such release) substantially in the form set forth as Exhibit B hereto:

(1) the Corporation shall pay the Executive in a lump sum in cash within 30 days after the Date of Termination the sum of

	(a)		the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid,

	(b)		to the extent that the Annual Bonus has not been paid to the Executive in respect of the fiscal year in which the Date of Termination occurs, the product of (x) the Executive’s target annual bonus in effect under the ACP as of the Date of Termination (which, for purposes of Section 3(J) and notwithstanding any reduction following the Change of Control Date, shall not be less than the Executive’s target annual bonus as of immediately prior to the Change of Control Date) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and

	(c)		any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (a), (b), and (c) shall be hereinafter referred to as the “Accrued Obligations”); and

(2) The Corporation shall pay the Executive in a lump sum in cash within 30 days after the Date of Termination an amount equal to the Executive’s Severance Compensation for the period from the Date of Termination until the earlier of (x) the third anniversary of the Date of Termination and (y) the date upon which the Executive attains the age of sixty-five (65) years (the “Termination Period”); provided, however, that such amount would be reduced by any other amounts payable to the Executive in respect of salary or bonus continuation to be received by the Executive under any severance plan, policy or arrangement of the Corporation; and

(3) During the Termination Period, or such longer period as any plan, program, practice or policy may provide, the Corporation shall continue benefits to the Executive and/or the Executive’s family at least equal to those which would have been pro-

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vided to them in accordance with the plans, programs, practices and policies described in Section 3(D) above if the Executive’s employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Corporation and its Affiliated Companies as in effect and applicable generally to other senior executives of the Corporation and its Affiliated Companies and their families during the 90-day period immediately preceding the Date of Termination or, if more favorable to the Executive, as in effect at any time thereafter or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other senior executives of the Corporation and its Affiliated Companies and their families or, if more favorable to the Executive, as in effect immediately prior to the Change of Control, if applicable, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility of the Executive for retirement benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Termination Period and to have retired on the date of the end of the Termination Period. To the extent that any benefits referred to in this Section 5(A)(3) shall not be payable or provided under any such plan by reason of the Executive’s no longer being an employee of the Corporation as the result of Termination, the Corporation shall itself pay, or provide for payment of, such benefits and the service credit for benefits provided for in Section 5(A)(4) below, to the Executive, his dependents and Beneficiary; and

(4) The period from the Date of Termination until the end of the Termination Period shall be considered:

	(a)		Service with the Corporation for the purpose of continued credits under the employee benefit plans referred to in Section 3(D) above and all other benefit plans of the Corporation applicable to the Executive or his Beneficiary as in effect immediately prior to Termination but prior to any reduction of benefits thereunder as the result of amendment or termination during the COC Employment Period, and

	(b)		Employment with the Corporation for purposes of determining payments and other rights in respect of awards made or accrued and award opportunities granted prior to Termination under the executive incentive plans referred to in Section 3(C) above and all other incentive plans of the Corporation in which the Executive was a participant prior to Termination; and

(5) In addition to the severance and other benefits described in Sections 5(A)(1) through 5(A)(4) above, to the extent not theretofore paid or provided, the Corporation shall timely pay or provide to the Executive and/or the Executive’s dependents and/or heirs any other amounts or benefits required to be paid or provided to such individuals under any plan, program, policy or practice or contract or agreement of the Corporation and its Affiliated Companies as in effect and applicable generally to other senior

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executives of the Corporation and its Affiliated Companies and their families during the 90-day period immediately preceding the Date of Termination or, if more favorable to the Executive, as in effect generally thereafter with respect to other senior executives of the Corporation and its Affiliated Companies and their families (such other amounts and benefits shall be referred to below as the “Other Benefits”); and

(6) During the Termination Period, the Corporation shall continue to provide to the Executive the financial, estate and tax planning services that were provided to the Executive during the 90-day period immediately prior to the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other senior executives of the Corporation and its Affiliated Companies; and

(7) The Corporation shall pay on behalf of Executive the fee of an independent outplacement firm selected by the Executive for outplacement services in an amount equal to the actual fee for such service up to a total of $35,000.

(B) [intentionally left blank]

(C) Cause; Other Than For Good Reason. If the Executive’s employment shall be terminated for Cause during the COC Employment Period, the Corporation shall have no further obligations to the Executive under this Agreement other than the obligation to pay the Executive’s Annual Base Salary, any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon), and accrued vacation pay through the Date of Termination, in each case to the extent not theretofore paid, and any other amounts or benefits to which the Executive and/or the Executive’s family is otherwise entitled under the terms of any employee benefit or incentive plan of the Corporation. If the Executive terminates employment during the COC Employment Period, excluding a termination for Good Reason following a Change of Control, the Corporation shall have no further obligations to the Executive, other than to pay the Executive’s Annual Base Salary, any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon), and accrued vacation pay through the termination date, in each case to the extent not theretofore paid, any other benefits to which the Executive and/or the Executive’s family is otherwise entitled under the terms of any employee benefit or incentive plan of the Corporation.

(D) Death Or Disability.

(1) In the event of the death of the Executive during the COC Employment Period, the legal representative of the Executive shall be entitled to the compensation provided for in Sections 3(A) and 3(B) above for the month in which death shall have taken place, at the rate being paid at the time of death, and the COC Employment Period shall be deemed to have ended as of the close of business on the last day of the month in which death shall have occurred but without prejudice to any payments due in respect of the Executive’s death.

(2) In the event of the Disability of the Executive during the COC Employment Period, the Executive shall be entitled to the compensation provided for in Sections

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3(A) and 3(B) above, at the rate being paid on the Disability Effective Date, for the period of such Disability but not in excess of six months.

The amount of any payments due under this Section 5(D)(2) shall be reduced by any payments to which the Executive may be entitled for the same period because of disability under any disability or pension plan of the Corporation or of any Subsidiary or Affiliate thereof.

(E) Resolution Of Disputes.

(1) Right Of Election By Executive To Arbitrate Or Sue. In the event that the Executive’s employment shall be terminated by the Corporation during the COC Employment Period and such termination is alleged to be for Cause, or the Executive’s right to terminate his employment under Section 4(C) above shall be questioned by the Corporation, or the Corporation shall withhold payments or provision of benefits for any other reason, the Executive shall have the right, in addition to all other rights and remedies provided by law, at his election either to seek arbitration within the Toledo, Ohio area under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Corporation or to institute a judicial proceeding, in either case within ninety days after having received notice of termination of his employment or notice in any form that the termination of his employment under Section 4(B) above is subject to question or that the Corporation is withholding or proposes to withhold payments or provision of benefits.

(2) Third-Party Stakeholder. In the event that the Corporation defaults on any obligation set forth in Section 5(A) above, relating to Termination, and shall have failed to remedy such default within thirty (30) days after having received written notice of such default from the Executive, in addition to all other rights and remedies that the Executive may have as a result of such default, the Executive may demand and the Corporation shall thereupon be required to deposit, with the third-party stakeholder hereinafter described, an amount equal to the undiscounted value of any and all undischarged, future obligations of the Corporation under Section 5(A) above and such amount shall thereafter be held, paid, applied or distributed by such third-party stakeholder for the purpose of satisfying such undischarged, future obligations of the Corporation when and to the extent that they become due and payable. Any interest or other income on such amount shall be retained by the third-party stakeholder and applied, if necessary, by it to satisfy such obligations, provided, however, that any interest or other income that is earned on such undischarged, future obligations after the date that the third-party stakeholder determines, in its sole discretion, that such obligations are due and owing to the Executive, shall be paid to the Executive as earned. To the extent not theretofore expended, such amount (including any remaining unexpended interest or other income) shall be repaid to the Corporation at such time as the third-party stakeholder, in its sole discretion, reasonably exercised, determines, upon the advice of counsel and after consultation with the Corporation and the Executive or, in the event of his death, his Beneficiary, that all obligations of the Corporation under Section 5(A) above have been substantially satisfied.

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Such amount shall, in the event of any question, be determined jointly by the firm of certified public accountants regularly employed by the Corporation and a firm of certified public accountants selected by the Executive, in each case upon the advice of actuaries to the extent the certified public accountants consider necessary, and, in the event such two firms of accountants are unable to agree on a resolution of the question, such amount shall be determined by an independent firm of certified public accountants selected jointly by both firms of accountants.

The third-party stakeholder, the fees and expenses of which shall be paid by the Corporation, shall be a national or state bank or trust company having a combined capital, surplus and undivided profits and reserves of not less than Ten Million Dollars ($10,000,000) which is duly authorized and qualified to do business in the state in which the Executive resides at the time of such default.

6. NON-EXCLUSIVITY OF RIGHTS.

Except as provided in Sections 5(A)(2), 5(B) and 5(C) above, nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Corporation or any of its Affiliated Companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement entered into after the date hereof with the Corporation or any of its Affiliated Companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement entered into after the date hereof with, the Corporation or any of its Affiliated Companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.

7. FULL SETTLEMENT.

The Corporation’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 5(A)(3) above, such amounts shall not be reduced whether or not the Executive obtains other employment.

8. CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION.

(A) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Ex-

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cise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 8(A), if it shall be determined that the Executive is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Executive and the amounts payable under this Agreement shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 5(A)(2), unless an alternative method of reduction is elected by the Executive, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Executive. For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amount payable under this Agreement would not result in a reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable under the Agreement shall be reduced pursuant to this Section 8(A). The Corporation’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon the Executive’s termination of employment.

(B) Subject to the provisions of Section 8(C), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Corporation’s independent auditors as of the Change of Control or any earlier date of a determination hereunder (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Corporation and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control or the appointment of the Accounting Firm is not permitted by law, the Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Corporation to the Executive within 5 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Corporation and the Executive. As a result of the uncertainty in the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Corporation should have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Corporation exhausts its remedies pursuant to Section 8(C) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive.

(C) The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after the Executive is informed in writing of such claim. The Executive shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period follow-

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ing the date on which the Executive gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies the Executive in writing prior to the expiration of such period that the Corporation desires to contest such claim, the Executive shall:

(1) give the Corporation any information reasonably requested by the Corporation relating to such claim,

(2) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation,

(3) cooperate with the Corporation in good faith in order effectively to contest such claim, and

(4) permit the Corporation to participate in any proceedings relating to such claim;

provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(C), the Corporation shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either pay the tax claimed to the appropriate taxing authority on behalf of the Executive and direct the Executive to sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that, if the Corporation pays such claim and directs the Executive to sue for a refund, the Corporation shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties) imposed with respect to such payment or with respect to any imputed income in connection with such payment; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation’s control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(D) If, after the receipt by the Executive of a Gross-Up Payment or payment by the Corporation of an amount on the Executive’s behalf pursuant to Section 8(C), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to the Corporation’s complying with the requirements of Section 8(C), if applicable) promptly pay to the Corporation

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the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after payment by the Corporation of an amount on the Executive’s behalf pursuant to Section 8(C), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then the amount of such payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

(E) Notwithstanding any other provision of this Section 8, the Corporation may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the Executive hereby consents to such withholding.

(F) Definitions. The following terms shall have the following meanings for purposes of this Section 8.

(1) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

(2) “Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

(3) A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.

(4) The “Safe Harbor Amount” means 2.99 times the Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code.

(5) “Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.

9. CONFIDENTIAL INFORMATION.

(A) The Executive agrees not to disclose, either while in the Corporation’s employ or at any time thereafter, to any person not employed by the Corporation, or not engaged to render services to the Corporation, except with the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Corporation, any confidential information obtained by him while in the employ of the Corporation, including, without limitation, information relating to any of the Corporation’s inventions, processes, formulae, plans, devices, compilations of information, methods of distribution, customers, client relationships, marketing strategies or trade secrets; provided, however, that this provision shall not preclude the Executive from use or disclosure of information known generally to the public or of information not considered confi-

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dential by persons engaged in the business conducted by the Corporation or from disclosure required by law or Court order. The agreement herein made in this Section 9(A) shall be in addition to, and not in limitation or derogation of, any obligations otherwise imposed by law upon the Executive in respect of confidential information and trade secrets of the Corporation, its Subsidiaries and Affiliates.

(B) The Executive also agrees that upon leaving the Corporation’s employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Corporation, and he will surrender to the Corporation any record, list, drawing, blueprint, specification or other document or property of the Corporation, its Subsidiaries and Affiliates, together with any copy and reproduction thereof, mechanical or otherwise, which is of a confidential nature relating to the Corporation, its Subsidiaries and Affiliates, or, without limitation, relating to its or their methods of distribution, client relationships, marketing strategies or any description of any formulae or secret processes, or which was obtained by him or entrusted to him during the course of his employment with the Corporation.

10. COMPETITION.

(A) The Executive hereby agrees that he will not engage in Competition at any time (i) during the COC Employment Period, (ii) during the thirty-six (36) months immediately following any termination of his employment with the Corporation that is not a Termination and (iii) in the event of a Termination, during the twelve (12) months immediately following the Termination.

(B) The word “Competition” for the purposes of this Agreement shall mean:

(1) taking a management position with or control of a business engaged in the design, development, manufacture, marketing or distribution of products, which constituted 15% or more of the sales of the Corporation and its Subsidiaries and Affiliates during the last fiscal year of the Corporation preceding the termination of the Executive’s employment, in any geographical area in which the Corporation, its Subsidiaries or Affiliates is at the time engaging in the design, development, manufacture, marketing or distribution of such products; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons, standing alone, be deemed Competition with the Corporation within the meaning of this Section 10,

(2) soliciting any person who is a customer of the businesses conducted by the Corporation, or any business in which the Executive has been engaged on behalf of the Corporation and its Subsidiaries or Affiliates at any time during the term of this Agreement on behalf of a business described in clause (i) of this Section 10(B),

(3) inducing or attempting to persuade any employee of the Corporation or any of its Subsidiaries or Affiliates to terminate his employment relationship in order to enter into employment with a business described in clause (i) of this Subsection 10(B), or

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(4) making or publishing any statement which is, or may reasonably be considered to be, disparaging of the Corporation or any of its Subsidiaries or Affiliates, or directors, officers, employees or the operations or products of the Corporation or any of its Subsidiaries or Affiliates, except to the extent the Executive, during the COC Employment Period, makes the statement to employees or other representatives of the Corporation or any of its Subsidiaries or Affiliates in furtherance of the Corporation’s business and the performance of his services hereunder.

11. SUCCESSORS.

Except as otherwise provided herein,

(A) This Agreement shall be binding upon and shall inure to the benefit of the Executive, his heirs and legal representatives, and the Corporation and its successors as provided in this Section 11.

(B) This Agreement shall be binding upon and inure to the benefit of the Corporation and any successor of the Corporation, including, without limitation, any corporation or corporations acquiring, directly or indirectly, 50% or more of the outstanding securities of the Corporation, or all or substantially all of the assets of the Corporation, whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed embraced within the term “the Corporation” for the purposes of this Agreement), but shall not otherwise be assignable by the Corporation.

12. CERTAIN DEFINITIONS.

The following defined terms used in this Agreement shall have the meanings indicated:

(A) Beneficiary. The term “Beneficiary” as used in this Agreement shall, in the event of the death of the Executive, mean an individual or individuals and/or an entity or entities, including, without limitation, the Executive’s estate, duly designated on a form filed with the Corporation by the Executive to receive any amount that may be payable after his death or, if no such individual, individuals, entity or entities has or have been so designated, or is at the time in existence or able to receive any such amount, the Executive’s estate.

(B) Change Of Control. A “Change of Control” shall mean the first to occur of any of the following events:

(1) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Corporation or its Affiliates) representing 20% or more of the combined voting power of the Corporation’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with any acquisition pursuant to a transaction that complies with Sections 12(B)(3)(a), 12(B)(3)(b) and 12(B)(3)(c); or

(2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date of this Agreement,

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constitute the Board (the “Incumbent Board”) and any new director whose appointment or election by the Board or nomination for election by the Corporation’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended. For purposes of the preceding sentence, any director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Corporation, shall not be treated as members of the Incumbent Board; or

(3) there is consummated a merger, reorganization, statutory share exchange or consolidation or similar corporate transaction involving the Corporation or any direct or indirect Subsidiary of the Corporation, a sale or other disposition of all or substantially all of the assets of the Corporation, or the acquisition of assets or stock of another entity by the Corporation or any of its Subsidiaries (each a “Business Combination”), in each case unless, immediately following such Business Combination, (a) the voting securities of the Corporation outstanding immediately prior to such Business Combination (the “Prior Voting Securities”) continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity of the Business Combination or any parent thereof) at least 50% of the combined voting power of the securities of the Corporation or such surviving entity or any parent thereof outstanding immediately after such Business Combination, (b) no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation or the surviving entity of the Business Combination or any parent thereof (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Corporation or its Affiliates) representing 20% or more of the combined voting power of the securities of the Corporation or surviving entity of the Business Combination or any parent thereof, except to the extent that such ownership existed prior to the Business Combination and (c) at least a majority of the members of the board of directors of the Corporation or the surviving entity of the Business Combination or any parent thereof were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(4) the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation.

Notwithstanding the foregoing, any disposition of all or substantially all of the assets of the Corporation pursuant to a spinoff, splitup or similar transaction (a “Spinoff”) shall not be treated as a Change of Control if, immediately following the Spinoff, holders of the Prior Voting Securities immediately prior to the Spinoff continue to beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding securities of both entities resulting from such transaction, in substantially the same proportions as their ownership, immediately prior to such transaction, of the Prior Voting Securities; provided, that if another Business Combination involving the Corporation occurs in connection with or following a Spinoff, such Business Combination shall be analyzed separately for purposes of determining whether a Change of Control has occurred;

-20-

“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

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

“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Corporation or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation.

(C) Change Of Control Date. The “Change of Control Date” shall mean the first date on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Corporation is terminated or the Executive ceases to have the position with the Corporation set forth in Section 2(A) above prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination or cessation (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the “Change of Control Date” shall mean the date immediately prior to the date of such termination or cessation.

13. AMENDMENT OR MODIFICATION; WAIVER.

No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver shall be authorized by the Board of Directors of the Corporation or any authorized committee of the Board of Directors and shall be agreed to in writing, signed by the Executive and by an officer of the Corporation thereunto duly authorized. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same time or at any prior or subsequent time.

14. MISCELLANEOUS.

(A) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

(B) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

-21-


If to the Executive:		Copy to:

Paul E. Miller		Paul E. Miller
4500 Dorr Street		c/o Dana Corporation
Toledo, OH 43697		P.O. Box 1000
		Toledo, Ohio 43615

If to the Corporation:
Dana Corporation
4500 Dorr Street
Toledo, Ohio 43615
Attention: Secretary

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(C) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(D) The Corporation may withhold from any amounts payable under this Agreement such Federal, state or local taxes as it determines is required to be withheld pursuant to any applicable law or regulation.

(E) When used herein in connection with plans, programs and policies relating to the Executive, employees, compensation, benefits, perquisites, executive benefits, services and similar words and phrases, the word “Corporation” shall be deemed to include all wholly-owned Subsidiaries of the Corporation.

(F) This instrument contains the entire agreement of the parties concerning the subject matter, and all promises, representations, understandings, arrangements and prior agreements concerning the subject matter are merged herein and superseded hereby, including, without limitation, the agreement between the parties dated December 8, 1997.

(G) No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect.

(H) The Executive shall not have any right, title, or interest whatsoever in or to any investments which the Corporation may make to aid it in meeting its obligations under this Agreement.

(I) Subject to the provisions of Section 5(E) above, all payments to be made under this Agreement shall be paid from the general funds of the Corporation and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of amounts payable under this Agreement.

-22-

(J) The Corporation and the Executive recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained in this Agreement and, in the event of any such breach, the Corporation and the Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus or other appropriate remedy to enforce performance of such agreements.

(K) Subject to the provisions of Section 5(E) above, nothing contained in this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and the Executive or any other person.

(L) Subject to the provisions of Section 5(E) above, to the extent that any person acquires a right to receive payments from the Corporation under this Agreement, except to the extent provided by law such right shall be no greater than the right of an unsecured general creditor of the Corporation.

(M) In the event of the Executive’s death or a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his Beneficiary.

(N) If any event provided for in this Agreement is scheduled to take place on a legal holiday, such event shall take place on the next succeeding day that is not a legal holiday.

(O) This Agreement is not intended to and shall not infer or imply any right on the part of the Executive to continue in the employ of the Corporation, or any Subsidiary or Affiliate of the Corporation, prior to a Change of Control, and is not intended in any way to limit the right of the Corporation to terminate the employment of the Executive, with or without assigning a reason therefor, at any time prior to a Change of Control. Nor is this Agreement intended to nor shall it require or imply an obligation on the part of the Executive to continue in the employment of the Corporation, or any Subsidiary or Affiliate of the Corporation, prior to a Change of Control. Neither the Corporation nor the Executive shall incur any liability under this Agreement if the employment of the Executive shall be terminated by the Corporation or by the Executive prior to a Change of Control.

-23-

IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from its Board of Directors, the Corporation have caused this Agreement to be executed as of the day and year first above written.


		DANA CORPORATION

		By:		/s/ Michael J. Burns Michael J. Burns, Chairman & CEO

		/s/ Paul E. Miller

		Executive

-24-

Exhibit A to Agreement
Made as of May 3, 2004 Between
Dana Corporation and Paul E. Miller

As of May 3, 2004, for purposes of Section 2(A),

The office(s) and title(s) of the Executive are Vice- President of Purchasing of the Corporation;

The reporting responsibility of the Executive is to report directly to the [Chief Executive Officer and] Chairman of the Board of Directors (or acting Chairman of the Board of Directors); and

The duties and responsibilities of the Executive are:

Serves as Vice-President of Purchasing of the Corporation, in which capacity he has overall responsibility for the development and implementation of the Corporation’s product purchasing strategies.

Exhibit B To Agreement
Made as of May 3, 2004 Between
Dana Corporation and Paul E. Miller

FORM OF RELEASE AGREEMENT

This Release Agreement (“Release”) is entered into as of this ___day of ___, hereinafter “Execution Date”, by and between [Executive Full Name] (hereinafter “Executive”), and [Employer Full Name] and its successors and assigns (hereinafter, the “Corporation”). The Executive and the Corporation are sometimes collectively referred to as the “Parties”.

The Executive’s employment with the Corporation is terminated effective [Month, Day, Year] (hereinafter “Termination Date”). The Corporation agrees to provide the Executive the severance benefits provided for in his/her Change of Control Agreement with the Corporation, dated as of [ ] (the “COC Agreement”), after he/she executes this Release and the Release becomes effective pursuant to its terms [FOR 40+ and does not revoke it as permitted in Section 4 below, the expiration of such revocation period being the “Effective Date”)].

Executive represents that he has not filed, and will not file, any complaints, lawsuits, administrative complaints or charges relating to his employment with, or resignation from, the Corporation[; provided, however, that nothing contained in this Section 2 shall prohibit Executive from bringing a claim to challenge the validity of the ADEA Release in Section 4 herein]. In consideration of the benefits described in Section 1, for himself and his heirs, administrators, representatives, executors, successors and assigns (collectively, “Releasers”), Executive agrees to release the Corporation, its subsidiaries, affiliates, and their respective parents, direct or indirect subsidiaries, divisions, affiliates and related companies or entities, regardless of its or their form of business organization, any predecessors, successors, joint ventures, and parents of any such entity, and any and all of their respective past or present shareholders, partners, directors, officers, employees, consultants, independent contractors, trustees, administrators, insurers, agents, attorneys, representatives and fiduciaries, including without limitation all persons acting by, through, under or in concert with any of them (collectively, the “Released Parties”), from any and all claims, charges, complaints, causes of action or demands relating to his employment or termination of employment that Executive and his Releasers now have or have ever had against the Released Parties, whether known or unknown. This Release specifically excludes claims, charges, complaints, causes of action or demand that (a) post-date the Termination Date, (b) relate to unemployment compensation claims, (c) involve rights to benefits in which Executive is vested as of the Termination Date under any employee benefit plans and arrangements of the Corporation, (d) relate to claims for indemnification by Employee, or (e) involve obligations owed to Executive by the Corporation under the COC Agreement.

The Corporation, on its own behalf and on behalf of the Released Parties, hereby releases Executive from all claims, causes of actions, demands or liabilities which arose against the Executive on or before the time it signs this Agreement, whether known or unknown. This Paragraph, however, does not apply to or adversely affect any claims against Executive which allege or involve obligations owed by him to the Corporation under the COC Agree

		ment. The Corporation will indemnify Executive for reasonable attorneys’ fees, costs and damages which may arise in connection with any proceeding by the Corporation or any Released Party which is inconsistent with this Release by the Corporation and the Released Parties.

4.		[FOR EMPLOYEES OVER 40 ONLY — In further recognition of the above, Executive hereby voluntarily and knowingly waives all rights or claims that he/she may have against the Released Parties arising under the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), other than any such rights or claims that may arise after the date of execution of this Release. Executive specifically agrees and acknowledges that: (A) the release in this Section 4 was granted in exchange for the receipt of consideration that exceeds the amount to which he/she would otherwise be entitled to receive upon termination of his/her employment; (B) he/she has hereby been advised in writing by the Corporation to consult with an attorney prior to executing this Release; (C) the Corporation has given him/her a period of up to twenty-one (21) days within which to consider this Release, which period shall be waived by the Executive’s voluntary execution prior to the expiration of the twenty-one day period, and he/she has carefully read and voluntarily signed this Release with the intent of releasing the Released Parties to the extent set forth herein; and (D) following his/her execution of this Release he/she has seven (7) days in which to revoke his/her release as set forth in this Section 4 only and that, if he/she chooses not to so revoke, the Release in this Section 4 shall then become effective and enforceable and the payment listed above shall then be made to him/her in accordance with the terms of this Release. To cancel this Release, Executive understands that he/she must give a written revocation to the General Counsel of the Corporation at [ ]^A, either by hand delivery or certified mail within the seven-day period. If he/she rescinds the Release, it will not become effective or enforceable and he/she will not be entitled to any benefits from the Corporation.]

5.		If any provision of this Release is held invalid, the invalidity of such provision shall not affect any other provisions of this Release. This Release is governed by, and construed and interpreted in accordance with the laws of the State of [ ], without regard to principles of conflicts of law. Employee consents to venue and personal jurisdiction in the State of [ ] for disputes arising under this Release. This Release represents the entire understanding with the Parties with respect to subject matter herein, and no other inducements or representations have been made or relied upon by the Parties. This Release shall be binding upon and inure to the benefit of Employee, his heirs and legal representatives, and the Corporation and its successors as provided in this Section 5. Any modification of this Release must be made in writing and be signed by Executive and the Corporation.


^A Insert address.

ACCEPTED AND AGREED TO:


[Employer Full Name]		[Employee Full Name]

Dated:

EX-10.Q 4 l24221aexv10wq.htm EX-10(Q) EX-10(Q)

Exhibit 10-Q

$1,450,000,000

AMENDED AND RESTATED SENIOR SECURED SUPERPRIORITY
DEBTOR-IN-POSSESSION CREDIT AGREEMENT

Dated as of April 13, 2006

Among

DANA CORPORATION,
as Debtor and Debtor-in-Possession

as Borrower

and

THE GUARANTORS PARTY HERETO,
as Debtors and Debtors in Possession under Chapter 11 of the Bankruptcy Code

and

CITICORP NORTH AMERICA, INC.

as Administrative Agent

and

BANK OF AMERICA, N.A.

and

JPMORGAN CHASE BANK, N.A.

as Co-Syndication Agents

and

CITICORP NORTH AMERICA, INC.

as Initial Swing Line Lender

and

BANK OF AMERICA, N.A.,

CITICORP NORTH AMERICA, INC.

and

JPMORGAN CHASE BANK, N.A.

as Initial Issuing Banks
THE INITIAL LENDERS AND THE OTHER LENDERS PARTY HERETO

MORGAN STANLEY SENIOR FUNDING, INC.
and
WACHOVIA BANK, NATIONAL ASSOCIATION

as Co-Documentation Agents

CITIGROUP GLOBAL MARKETS INC., J.P. MORGAN SECURITIES INC.
and
BANC OF AMERICA SECURITIES LLC
as Joint Lead Arrangers and Joint Bookrunners

TABLE OF CONTENTS


	Page
ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Certain Defined Terms		2
Section 1.02 Computation of Time Periods		33
Section 1.03 Accounting Terms		33
Section 1.04 Terms Generally		33

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT

Section 2.01 The Advances		34
Section 2.02 Making the Advances		34
Section 2.03 Issuance of and Drawings and Reimbursement Under Letters of Credit		37
Section 2.04 Repayment of Advances		42
Section 2.05 Termination or Reduction of Commitments		42
Section 2.06 Prepayments		43
Section 2.07 Interest		44
Section 2.08 Fees		45
Section 2.09 Conversion of Advances		45
Section 2.10 Increased Costs, Etc		47
Section 2.11 Payments and Computations		48
Section 2.12 Taxes		49
Section 2.13 Sharing of Payments, Etc		51
Section 2.14 Use of Proceeds		52
Section 2.15 Defaulting Lenders		52
Section 2.16 Evidence of Debt		54
Section 2.17 Priority and Liens		54
Section 2.18 Payment of Obligations		55
Section 2.19 No Discharge: Survival of Claims		55

ARTICLE III

CONDITIONS TO EFFECTIVENESS

Section 3.01 Conditions Precedent to Effectiveness		56
Section 3.02 Conditions Precedent to Each Borrowing and Each Issuance of a Letter of Credit		58
Section 3.03 Conditions Precedent to the Term Borrowing		59
Section 3.04 Determinations Under Sections 3.01 and 3.03		60
Section 3.05 Conditions Precedent to the Amendment and Restatement Effective Date; Effect of Amendment and Restatement		60


	Page
ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01 Representations and Warranties of the Loan Parties 60

ARTICLE V
COVENANTS OF THE LOAN PARTIES
Section 5.01 Affirmative Covenants		64
Section 5.02 Negative Covenants		67
Section 5.03 Reporting Requirements		72
Section 5.04 Financial Covenants		75

ARTICLE VI

EVENTS OF DEFAULT

Section 6.01 Events of Default		76
Section 6.02 Actions in Respect of the Letters of Credit upon Default		79

ARTICLE VII

THE AGENTS

Section 7.01 Appointment and Authorization of the Agents		80
Section 7.02 Delegation of Duties		80
Section 7.03 Liability of Agents		81
Section 7.04 Reliance by Agents		81
Section 7.05 Notice of Default		81
Section 7.06 Credit Decision; Disclosure of Information by Agents		82
Section 7.07 Indemnification of Agents		82
Section 7.08 Agents in Their Individual Capacity		82
Section 7.09 Successor Agent		83
Section 7.10 Administrative Agent May File Proofs of Claim		83
Section 7.11 Collateral and Guaranty Matters		84
Section 7.12 Other Agents; Arrangers and Managers		84

ARTICLE VIII

SUBSIDIARY GUARANTY

Section 8.01 Subsidiary Guaranty		85
Section 8.02 Guaranty Absolute		85
Section 8.03 Waivers and Acknowledgments		86
Section 8.04 Subrogation		86
Section 8.05 Additional Guarantors		87
Section 8.06 Continuing Guarantee; Assignments		87
Section 8.07 No Reliance		88

iii


	Page
ARTICLE IX

SECURITY

Section 9.01 Grant of Security		88
Section 9.02 Further Assurances		92
Section 9.03 Rights of Lender; Limitations on Lenders’ Obligations		93
Section 9.04 Covenants of the Loan Parties with Respect to Collateral		94
Section 9.05 Performance by Agent of the Loan Parties’ Obligations		96
Section 9.06 The Administrative Agent’s Duties		97
Section 9.07 Remedies		97
Section 9.08 Modifications		100
Section 9.09 Release; Termination		101
Section 9.10 Certain Provisions in Respect of Mexican Inventory		101

ARTICLE X

MISCELLANEOUS
Section 10.01 Amendments, Etc.		102
Section 10.02 Notices, Etc		103
Section 10.03 No Waiver; Remedies		105
Section 10.04 Costs, Fees and Expenses		105
Section 10.05 Right of Set-off		107
Section 10.06 Binding Effect		107
Section 10.07 Successors and Assigns		107
Section 10.08 Execution in Counterparts		110
Section 10.09 Confidentiality; Press Releases and Related Matters		110
Section 10.10 Patriot Act Notice		111
Section 10.11 Jurisdiction, Etc		111
Section 10.12 Governing Law		111
Section 10.13 Waiver of Jury Trial		112

SCHEDULES


Schedule I	-	Commitments and Applicable Lending Offices
Schedule II	-	Intellectual Property
Schedule III	-	Material IP Agreements
Schedule IV	-	Initial Pledged Equity
Schedule V	-	Initial Pledged Debt
Schedule VI	-	Concentration Limits
Schedule 1.01(a)	-	Material Guarantors
Schedule 1.01(b)	-	Material Intellectual Property
Schedule 4.01	-	Equity Investments; Subsidiaries
Schedule 4.01(i)	-	Disclosures
Schedule 4.01(m)	-	Environmental Matters
Schedule 5.01(n)(iii)	-	Post-Closing Matters
Schedule 5.01(p)	-	Sale and Lease Backs

EXHIBITS


Exhibit A-1	-	Form of Term Note
Exhibit A-2	-	Form of Revolving Credit Note
Exhibit B	-	Form of Notice of Borrowing
Exhibit C	-	Form of Assignment and Acceptance
Exhibit D-1	-	Form of Opinion of Jones Day
Exhibit D-2	-	Form of Opinion of Hunton & Williams LLP
Exhibit D-3	-	Form of Opinion of Shumaker, Loop & Kendrick, LLP
Exhibit E	-	Interim Order
Exhibit F	-	Final Order
Exhibit G	-	Form of IP Security Agreement Supplement
Exhibit H	-	Form of Guaranty Supplement
Exhibit I	-	Form of Borrowing Base Certificate
Exhibit J	-	Form of Mexican Depositary Letter

AMENDED AND RESTATED SENIOR SECURED SUPERPRIORITY
DEBTOR-IN-POSSESSION CREDIT AGREEMENT

AMENDED AND RESTATED SENIOR SECURED SUPERPRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT (this “Agreement”) dated as of April 13, 2006 among DANA CORPORATION, a Virginia corporation and a debtor and debtor-in-possession in a case pending under chapter 11 of the Bankruptcy Code (as hereinafter defined) (the “Borrower”), and each of the direct and indirect subsidiaries of the Borrower signatory hereto (each, a “Guarantor”, and, collectively, together with any person that becomes a Guarantor hereunder pursuant to Section 8.05, the “Guarantors”), each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, the Initial Lenders (as hereinafter defined) and the other banks, financial institutions and other institutional lenders party hereto (each, a “Lender”, and collectively with the Initial Lenders and any other person that becomes a Lender hereunder pursuant to Section 10.07, the “Lenders”), BANK OF AMERICA, N.A. (“BofA”), CITICORP NORTH AMERICA, INC. (“CNAI”) and JPMORGAN CHASE BANK, N.A. (“JPM”), as the initial Issuing Banks (in such capacity, the “Initial Issuing Banks”), CNAI, as the initial Swing Line Lender (in such capacity, the “Initial Swing Line Lender”), CNAI, as administrative agent (or any successor appointed pursuant to Article VII, the “Administrative Agent”) for the Lender Parties and the other Secured Parties (each as hereinafter defined), JPMORGAN CHASE BANK, N.A. and BANK OF AMERICA, N.A., as co-syndication agents (the “Syndication Agents”), MORGAN STANLEY SENIOR FUNDING, INC. and WACHOVIA BANK, NATIONAL ASSOCIATION, as co-documentation agents, and CITIGROUP GLOBAL MARKETS INC., J.P. MORGAN SECURITIES INC. and BANC OF AMERICA SECURITIES LLC, as Joint Lead Arrangers and Joint Bookrunners (the “Lead Arrangers”).

PRELIMINARY STATEMENTS

(1) On March 3, 2006 (the “Petition Date”), the Borrower and the Guarantors filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) for relief, and commenced proceedings (the “Cases”) under Chapter 11 of the U.S. Bankruptcy Code (11 U.S.C. §§ 101 et seq.; the “Bankruptcy Code”) and have continued in the possession of their assets and in the management of their businesses pursuant to Sections 1107 and 1108 of the Bankruptcy Code.

(2) On March 3, 2006, the Borrower, Guarantors, Lenders and CNAI, as administrative agent, entered into the $1,450,000,000 Senior Secured Superpriority Credit Agreement dated as of March 3, 2006 (the “Original DIP Credit Agreement”) and the Original DIP Credit Agreement as amended by Amendment No. 1 and Amendment No. 2, each referred to below, the “Existing DIP Credit Agreement”), which provides for (i) term, revolving credit, swing line and letter of credit facilities (collectively, the “Facilities”) in an aggregate principal amount not to exceed $1,450,000,000 and (ii) all of the Borrower’s obligations thereunder to be guaranteed by the Guarantors.

(3) On March 30, 2006 the Borrower, the Guarantors, BofA, JPM and CNAI, as Lenders, and CNAI, as Administrative Agent, entered into Amendment No. 1 to Senior Secured Superpriority Credit Agreement (“Amendment No. 1”) and on April 12, 2006 the Borrower, the Guarantors, BofA, JPM and CNAI, as Lenders, , and CNAI, as Administrative Agent, entered into Amendment No. 2 to Senior Secured Superpriority Credit Agreement (“Amendment No. 2”).

(4) There are no Revolving Credit Advances outstanding under the Existing DIP Credit Agreement. There are (i) Term Advances outstanding under the Existing DIP Credit Agreement, which will be deemed to be Term Advances outstanding hereunder with interest periods as in effect on

the Amendment and Restatement Effective Date and (ii) letters of credit outstanding under the Existing DIP Credit Agreement, which will be deemed to be Letters of Credit outstanding hereunder.

(5) The Borrower, the Guarantors, the Lenders party hereto, the Initial Issuing Banks, the Administrative Agent and the Syndication Agents wish to amend and restate the Existing DIP Credit Agreement in its entirety in order to add additional Lenders to the facility and re-allocate Commitments accordingly and to effect certain other amendments to the Existing DIP Credit Agreement as set forth herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto agree that, as of the Amendment and Restatement Effective Date, the Existing DIP Credit Agreement is amended and restated in its entirety as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Account Collateral” has the meaning specified in Section 9.01(f).

“Account Debtor” means the Person obligated on an Account.

“Accounts” has the meaning set forth in the UCC.

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (i) the acquisition of all or substantially all of the assets of any Person, or any business or division of any Person, (ii) the acquisition or ownership of in excess of 50% of the Equity Interests in any Person, or (iii) the acquisition of another Person by a merger, consolidation, amalgamation or any other combination with such Person.

“Administrative Agent” has the meaning specified in the recital of parties to this Agreement.

“Administrative Agent’s Account” means the account of the Administrative Agent maintained by the Administrative Agent with Citibank, N.A. and identified to the Borrower and the Lender Parties from time to time.

“Advance” means a Term Advance, a Revolving Credit Advance, a Swing Line Advance or a Letter of Credit Advance.

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.

“After-Acquired Intellectual Property” has the meaning specified in Section 9.04(e)(v).

“Agent-Related Persons” means, the Agents, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Agents and Affiliates.

“Agents” means the Administrative Agent, the Syndication Agent and the Lead Arrangers.

“Agreement Value” means, for each Hedge Agreement, on any date of determination, an amount equal to: (a) in the case of a Hedge Agreement documented pursuant to the Master Agreement (Multicurrency-Cross Border) published by the International Swap and Derivatives Association, Inc. (the “Master Agreement”), the amount, if any, that would be payable by any Loan Party or any of its Subsidiaries to its counterparty to such Hedge Agreement, as if (i) such Hedge Agreement was being terminated early on such date of determination, (ii) such Loan Party or Subsidiary was the sole “Affected Party,” and (iii) the Administrative Agent was the sole party determining such payment amount (with the Administrative Agent making such determination pursuant to the provisions of the form of Master Agreement); (b) in the case of a Hedge Agreement traded on an exchange, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss or gain on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party to such Hedge Agreement based on the settlement price of such Hedge Agreement on such date of determination; or (c) in all other cases, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss or gain on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party to such Hedge Agreement determined as the amount, if any, by which (i) the present value of the future cash flows to be paid by such Loan Party or Subsidiary exceeds (ii) the present value of the future cash flows to be received by such Loan Party or Subsidiary pursuant to such Hedge Agreement; capitalized terms used and not otherwise defined in this definition shall have the respective meanings set forth in the above described Master Agreement.

“Amendment and Restatement Effective Date” shall have the meaning given such term in Section 3.05.

“Applicable Lending Office” means, with respect to each Lender Party, such Lender Party’s Domestic Lending Office in the case of a Base Rate Advance and such Lender Party’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.

“Applicable Margin” means (a) in respect of the Term Facility, 2.25% per annum, in the case of Eurodollar Advances, and 1.25% per annum, in the case of Base Rate Advances, (b) in respect of the Swing Line Facility, as set forth in clause (c) below for Base Rate Advances, and (c) in respect of the Revolving Credit Facility, 2.25% per annum, in the case of Eurodollar Rate Advances, and 1.25% per annum, in the case of Base Rate Advances.

“Appropriate Lender” means, at any time, with respect to (a) the Term Facility or the Revolving Credit Facility, a Lender that has a Commitment or Advances outstanding, in each case with respect to or under such Facility at such time, (b) the Letter of Credit Sublimit, (i) any Issuing Bank and (ii) if the Revolving Credit Lenders have made Letter of Credit Advances pursuant to Section 2.03(c) that are outstanding at such time, each such Revolving Credit Lender and (c) the Swing Line Facility, (i)the Swing Line Lender and (ii) if the Revolving Credit Lenders have made Swing Line Advances pursuant to Section 2.02(b) that are outstanding at such time, each Revolving Credit Lender.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 10.07 and in substantially the form of Exhibit C hereto.

“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).

“Availability” means at any time the excess of (a) the Revolving Credit Availability Amount at such time over (b) the sum of (i) the Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances outstanding at such time plus (ii) the aggregate Available Amount of all Letters of Credit outstanding at such time.

“Bankruptcy Code” has the meaning specified in the Preliminary Statements.

“Bankruptcy Court” has the meaning specified in the Preliminary Statements and means the United States District Court for the Southern District of New York when such court is exercising direct jurisdiction over the Cases.

“Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of:

(a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank N.A.’s base rate; and

(b) ¹/2 of 1% per annum above the Federal Funds Rate.

“Borrower” has the meaning specified in the recital of parties to this Agreement.

“Borrower’s Account” means the account of the Borrower maintained by the Borrower and specified in writing to the Administrative Agent from time to time.

“Borrowing” means a borrowing consisting of simultaneous Advances of the same Type made by the Appropriate Lenders.

“Borrowing Base” means (a) the sum of the Loan Values less (b) Reserves.

“Borrowing Base Amendment” means an amendment to this Agreement reasonably satisfactory to the Initial Lenders to be executed and delivered prior to entry of the Final Order pursuant to which aggregate availability under the Revolving Credit Facility will not be permitted to exceed the Borrowing Base.

“Borrowing Base Certificate” means a certificate in substantially the form of Exhibit I hereto (with such changes therein as may be required by the Administrative Agent or the Initial Lenders to reflect the components of, and reserves against, the Borrowing Base as provided for hereunder from time to time), executed and certified as accurate and complete by a Responsible Officer of the Borrower or by the controller of the Borrower, which shall include detailed

calculations as to the Borrowing Base as reasonably requested by the Administrative Agent or the Initial Lenders.

“Borrowing Base Deficiency” means, at any time, the failure of (a) the Borrowing Base at such time to equal or exceed (b) the sum of (i) the aggregate principal amount of the Revolving Credit and Swing Line Advances outstanding at such time plus (ii) the aggregate Available Amount under all Letters of Credit outstanding at such time.

“Business Day” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.

“Budget Variance Report” means a report calculated in accordance with the most recent Thirteen Week Forecast, in each case certified by a Responsible Officer of the Borrower, in form and substance reasonably satisfactory to the Initial Lenders, to be delivered concurrently with each Thirteen Week Forecast showing cash usage and borrowing variance for the period since the delivery of the last Thirteen Week Forecast.

“Canadian Revolving Facility” means the senior secured revolving credit facility in an aggregate principal amount up to $100,000,000 entered into by Dana Canada Holding Company and its Subsidiaries on or prior to the date of the entry of the Final Order, on terms reasonably acceptable to the Initial Lenders.

“Capital Expenditures” means, for any Person for any period, the sum (without duplication) of all expenditures made, directly or indirectly, by such Person or any of its Subsidiaries during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment on a Consolidated balance sheet of such Person. For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such proceeds, as the case may be.

“Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.

“Carve-Out” means (i) all fees required to be paid to the Clerk of the Bankruptcy Court and to the Office of the United States Trustee under Section 1930(a) of title 28 of the United States Code and (ii) an amount not exceeding $20,000,000 in the aggregate, which amount may be used after the occurrence and during the continuance of an Event of Default, to pay fees or expenses incurred by the Borrower and any Committee in respect of (A) allowances of compensation for services rendered or reimbursement or expenses awarded by the Bankruptcy Court to the Borrower’s or any Committee’s professionals, any chapter 11 or chapter 7 trustees or examiners appointed in these cases and (B) the reimbursement of expenses incurred by Committee members in the performance of their duties that are allowed by the Bankruptcy Court; provided, however, that the Borrower and each Guarantor shall be permitted to pay compensation and reimbursement of expenses allowed and payable under Sections 330 and 331 of the Bankruptcy Code, such dollar limitation on fees and disbursements shall not be reduced by the amount of any compensation and reimbursement of expenses paid or incurred (to the extent ultimately allowed by the Bankruptcy Court) prior to the occurrence of an Event of Default in

respect of which the Carve-Out is invoked or any fees, expenses, indemnities or other amounts paid to the Administration Agent or the Lenders and their respective attorneys and agents under this Agreement or otherwise; and provided further that nothing herein shall be construed to impair the ability of any party to object to any of the fees, expenses, reimbursement or compensation described in clauses (A) and (B) above.

“Cases” has the meaning specified in the Preliminary Statements.

“Cash Equivalents” means any of the following, to the extent owned by any Loan Party free and clear of all Liens other than Liens created under the Collateral Documents or claims or Liens permitted pursuant to this Agreement and having a maturity of not greater than 12 months from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System that issues (or the parent of which issues) commercial paper rated as described in clause (c), is organized under the laws of the United States or any state thereof and has combined capital and surplus of at least $500,000,000, (c) commercial paper in an aggregate amount of no more than $10,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any state of the United States and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P or (d) Investments, classified in accordance with GAAP, as current assets of the Borrower or any of its Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions that have the highest rating obtainable from either Moody’s or S&P and which are approved by the Bankruptcy Court, or (e) offshore overnight interest bearing deposits in foreign branches of Citibank, N.A., JP Morgan Chase Bank, N.A. or Bank of America, N.A.

“Cash Flow” means for any period, (a) EBITDAR for such period less (b) the sum of (i) Professional Fees accrued in connection with the Cases during such period and (ii) Capital Expenditures made during such period.

“Cash Management Obligations” means all Obligations of any Loan Party owing to a Lender Party (or a banking Affiliate of a Lender Party) in respect of any overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house transfers of funds.

“Change of Control” means and shall be deemed to have occurred upon the occurrence of any of the following events: (i) any Person or “group” (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, and regulations promulgated thereunder) shall have acquired beneficial ownership of more than 40% of the outstanding Equity Interests in the Borrower and (ii) after the Effective Date, the occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (A) nominated by the board of directors of the Borrower nor (B) appointed by the directors so nominated.

“CNAI” has the meaning specified in the recital of parties to this Agreement.

“Collateral” means all “Collateral” referred to in the Collateral Documents and all other property that is or is intended to be subject to any Lien in favor of the Administrative Agent for the benefit of the Secured Parties.

“Collateral Documents” means, collectively, the provisions of Article IX of this Agreement, the Intellectual Property Security Agreement and any other agreement that creates or purports to create a Lien in favor of the Administrative Agent for the benefit of the Secured Parties.

“Commitment” means a Term Commitment, a Revolving Credit Commitment, a Swing Line Commitment or a Letter of Credit Commitment.

“Committee” means any statutory committee appointed in the Cases.

“Company” means, collectively, the Borrower and its Subsidiaries.

“Computer Software” has the meaning specified in Section 9.01(g)(iv).

“Concentration Limit” means, as to each Account Debtor set forth on Schedule VI, the applicable percentage of Accounts owing from such Account Debtor.

“Confidential Information” means any and all material non-public information delivered or made available by any Loan Party or any Subsidiary relating to any Loan Party or any Subsidiary or their respective businesses, other than any such information that is or has been made available publicly by a Loan Party or any Subsidiary.

“Confidential Information Memorandum” means the confidential information memorandum that will be used by the Lead Arrangers in connection with the syndication of the Commitments.

“Consolidated” refers to the consolidation of accounts in accordance with GAAP which, for purposes of this Agreement, shall result in the treatment of DCC and its Subsidiaries on an equity basis.

“Conversion”, “Convert” and “Converted” each refers to the conversion of Advances from one Type to Advances of the other Type.

“Copyrights” has the meaning specified in Section 9.01(g)(iii).

“Credit Card Program” means the (i) Citibank Business Card Purchasing Card Agreement, dated August 31, 1994, between Citibank (South Dakota), N.A. and Dana Corporation, (ii) Citibank Purchasing Card Agreement, dated January 18, 2005, between Citibank International plc and Dana Corporation, and (iii) Citibank Corporate Card Agreement, dated January 24, 2005, between Citibank International plc and Dana Corporation, each as amended, restated, or otherwise modified from time to time, or any replacement of any of the foregoing for the same or substantially similar purposes.

“DCC” means Dana Credit Corporation, a Delaware corporation.

“DCC Entity” means DCC or any of its Subsidiaries.

“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all indebtedness of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar

instruments, (d) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under Capitalized Leases, (f) all obligations of such Person under acceptance, letter of credit or similar facilities, (g) all mandatory obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in cash in respect of any Equity Interests in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of Redeemable Preferred Interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all obligations of such Person in respect of Hedge Agreements, valued at the Agreement Value thereof, (i) all Guarantee Obligations and Synthetic Debt of such Person and (j) all indebtedness and other payment Obligations referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations.

“Debtor Relief Laws” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

“Defaulted Advance” means, with respect to any Lender at any time, the portion of any Advance required to be made by such Lender to the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time which has not been made by such Lender or by the Administrative Agent for the account of such Lender pursuant to Section 2.02(e) as of such time. In the event that a portion of a Defaulted Advance shall be deemed made pursuant to Section 2.15(a), the remaining portion of such Defaulted Advance shall be considered a Defaulted Advance originally required to be made pursuant to Section 2.01 on the same date as the Defaulted Advance so deemed made in part.

“Defaulted Amount” means, with respect to any Lender Party at any time, any amount required to be paid by such Lender Party to the Administrative Agent or any other Lender Party hereunder or under any other Loan Document at or prior to such time which has not been so paid as of such time, including, without limitation, any amount required to be paid by such Lender Party to (a) the Swing Line Lender pursuant to Section 2.02(b) to purchase a portion of the Swing Line Advance made by the Swing Line Lender, (b) any Issuing Bank pursuant to Section 2.03(d) to purchase a portion of a Letter of Credit Advance made by such Issuing Bank, (c) the Administrative Agent pursuant to Section 2.02(e) to reimburse the Administrative Agent for the amount of any Advance made by the Administrative Agent for the account of such Lender Party, (d) any other Lender Party pursuant to Section 2.13 to purchase any participation in Advances owing to such other Lender Party and (e) the Administrative Agent or any Issuing Bank pursuant to Section 7.07 to reimburse the Administrative Agent or such Issuing Bank for such Lender Party’s ratable share of any amount required to be paid by the Lender Parties to the Administrative Agent or such Issuing Bank as provided therein. In the event that a portion of a Defaulted Amount shall be deemed paid pursuant to Section 2.15(b), the remaining portion of such Defaulted Amount shall be considered a Defaulted Amount originally required to be paid

hereunder or under any other Loan Document on the same date as the Defaulted Amount so deemed paid in part.

“Defaulting Lender” means, at any time, any Lender Party that, at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take any action or be the subject of any action or proceeding under any Debtor Relief Law.

“DIP Budget” means a forecast heretofore delivered to the Initial Lenders, as supplemented as provided in Section 5.03(g), detailing the Borrower’s anticipated income statement, balance sheet and cash flow statement, each on a Consolidated basis for the Borrower and its Subsidiaries, together with a written set of assumptions supporting such statements, for 2006 and 2007 and setting forth the anticipated uses of the Commitments on a monthly basis.

“DIP Financing Orders” means the Interim Order and the Final Order.

“Domestic Lending Office” means, with respect to any Lender Party, the office of such Lender Party specified as its “Domestic Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent.

“EBITDAR” means, for any period, without duplication (a) the sum, determined on a Consolidated basis, of (i) net income (or net loss), (ii) interest expense and facility fees, unused commitment fees, letter of credit fees and similar fees, (iii) income tax expense, (iv) depreciation expense, (v) amortization expense, (vi) non-recurring, transactional or unusual losses deducted in calculating net income less non-recurring, transactional or unusual gains added in calculating net income, (vii) in each case without duplication, cash Restructuring Charges to the extent deducted in computing net income for such period and settled or to be settled in cash during such period in an aggregate amount not to exceed $75,000,000 in any twelve-month period, in each case of the Borrower and its Subsidiaries, determined in accordance with GAAP for such period, (viii) non-cash Restructuring Charges and related non-cash losses or other non-cash charges resulting from the writedown in the valuation of any assets in each case of the Borrower and its Subsidiaries, determined in accordance with GAAP for such period, (ix) without duplication, net losses from discontinued operations, (x) Professional Fees and (xi) minority interest expense, minus (b) (i) net income from discontinued operations, (ii) equity earnings of Affiliates and (iii) interest income.

“Effective Date” means the date on which this Agreement became effective pursuant to Section 3.01.

“Eligible Assignee” means with respect to any Facility (other than the Letter of Credit Facility), (i) a Lender Party; (ii) an Affiliate of a Lender Party; (iii) an Approved Fund; and (iv) any other Person (other than an individual) approved by (x) the Administrative Agent, (y) in the case of an assignment of a Revolving Credit Commitment, each Issuing Bank and (z) solely in the case of the Revolving Credit Facility, unless an Event of Default has occurred and is continuing, and except in the case of an assignment by an Initial Lender during the primary syndication of the Revolving Credit Facility, the Borrower (each such approval not to be unreasonably withheld or delayed); provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition.

“Eligible Inventory” means, at the time of any determination thereof, without duplication, the Inventory Value of the Loan Parties at such time that is not ineligible for inclusion in the

calculation of the Borrowing Base pursuant to any of clauses (a) through (o) below. Criteria and eligibility standards used in determining Eligible Inventory may be fixed and revised from time to time by the Administrative Agent in its reasonable discretion. Unless otherwise from time to time approved in writing by the Administrative Agent, no Inventory shall be deemed Eligible Inventory if, without duplication:

(a) a Loan Party does not have good, valid and unencumbered title thereto, subject only to Liens permitted under clause (i), (ii) or (iv) of the definition of Permitted Liens (“Permitted Collateral Liens”); or

(b) it is not located in the United States, Mexico or Canada; provided that in the case of Inventory located in Mexico or Canada, the Borrower provides evidence satisfactory to the Administrative Agent that there is an enforceable, perfected security interest under the laws of the applicable foreign jurisdiction in such Inventory in favor of the Administrative Agent; provided further that Availability in respect of Inventory located in Mexico shall be limited to an aggregate amount up to $25,000,000; or

(c) it is either (i) not located on property owned by a Loan Party or (ii) located at a third party processor or (except in the case of consigned Inventory, which is covered by clause (f) below) in another location not owned by a Loan Party (it being understood that the Borrower will provide its best estimate of the value of such Inventory to be agreed to by the Administrative Agent and reflected in the Borrowing Base Certificate), and either (A) is not covered by a Landlord Lien Waiver, (B) a Rent Reserve has not been taken with respect to such Inventory or, in the case of any third party processor, a Reserve has not been taken by the Administrative Agent in the exercise of its reasonable discretion or (C) is not subject to an enforceable agreement in form and substance reasonably satisfactory to the Administrative Agent pursuant to which the relevant Loan Party has validly assigned its access rights to such Inventory and property to the Administrative Agent; or

(d) it is operating supplies, labels, packaging or shipping materials, cartons, repair parts, labels or miscellaneous spare parts, nonproductive stores inventory and other such materials, in each case not considered used for sale in the ordinary course of business of the Loan Parties by the Administrative Agent in its reasonable discretion from time to time; or

(e) it is not subject to a valid and perfected first priority Lien in favor of the Administrative Agent subject only to Permitted Collateral Liens; or

(f) it is consigned at a customer, supplier or contractor location but still accounted for in the Loan Party’s inventory balance; or

(g) it is Inventory that is in-transit to or from a location not leased or owned by a Loan Party (it being understood that the Borrower will provide its best estimate of the value of all such Inventory, which estimate is to be reflected in the Borrowing Base Certificate) other than any such in-transit Inventory from a Foreign Subsidiary to a Loan Party that is physically in-transit within the United States and as to which a Reserve has been taken by the Administrative Agent in the exercise of its reasonable discretion; or

(h) it is obsolete, slow-moving, nonconforming or unmerchantable or is identified as a write-off, overstock or excess by a Loan Party, or does not otherwise conform to the

representations and warranties contained in this Agreement and the other Loan Documents applicable to Inventory; or

(i) it is Inventory used as a sample or prototype, display or display item; or

(j) to the extent of any portion of Inventory Value thereof attributable to intercompany profit among Loan Parties or their affiliates (it being understood that the Borrower will provide its best estimate of the value of such Inventory Value to be agreed by the Administrative Agent and reflected in the most recent Borrowing Base Certificate); or

(k) any Inventory that is damaged, defective or marked for return to vendor, has been deemed by a Loan Party to require rework or is being held for quality control purposes; or

(l) such Inventory does not meet all material applicable standards imposed by any Governmental Authority having regulatory authority over it; or

(m) any Inventory consisting of tooling the costs for which are capitalized by the Borrower and its Subsidiaries;

(n) any Inventory as to which the Borrower takes an unrecorded book to physical inventory reduction based on its most recent physical inventory or cycle counts to the extent of such reduction or as otherwise determined by the Administrative Agent in its reasonable discretion; or

(o) any Inventory as to which the Borrower takes a revaluation reserve whereby favorable variances shall be deducted from Eligible Inventory and unfavorable variances shall not be added to Eligible Inventory.

“Eligible Receivables” means, at the time of any determination thereof, each Account that satisfies the following criteria: such Account (i) has been invoiced to, and represents the bona fide amounts due to a Loan Party from, the purchaser of goods or services, in each case originated in the ordinary course of business of such Loan Party and (ii) is not ineligible for inclusion in the calculation of the Borrowing Base pursuant to any of clauses (a) through (s) below. In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (A) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that a Loan Party may be obligated to rebate to a customer pursuant to the terms of any written agreement or understanding), (B) the aggregate amount of all limits and deductions provided for in this definition and elsewhere in this Agreement, if any, and (C) the aggregate amount of all cash received in respect of such Account but not yet applied by a Loan Party to reduce the amount of such Account. Criteria and eligibility standards used in determining Eligible Receivables may be fixed and revised from time to time by the Administrative Agent in its reasonable discretion. Unless otherwise approved from time to time in writing by the Administrative Agent, no Account shall be an Eligible Receivable if, without duplication:

(a) (i) a Loan Party does not have sole lawful and absolute title to such Account (subject only to Liens permitted under clause (ii) or (iv) of the definition of Permitted Liens) or (ii) the goods sold with respect to such Account have been sold under a

purchase order or pursuant to the terms of a contract or other written agreement or understanding that indicates that any Person other than a Loan Party has or has purported to have an ownership interest in such goods; or

(b) (i) it is unpaid more than 90 days from the original date of invoice or 60 days from the original due date or (ii) it has been written off the books of a Loan Party or has been otherwise designated on such books as uncollectible; or

(c) more than 50% in face amount of all Accounts of the same Account Debtor are ineligible pursuant to clause (b) above; or

(d) the Account Debtor is insolvent or the subject of any bankruptcy case or insolvency proceeding of any kind (other than postpetition accounts payable of an Account Debtor that is a debtor-in-possession under the Bankruptcy Code and reasonably acceptable to the Administrative Agent); or

(e) (i) the Account is not payable in Dollars or Canadian Dollars or other currency as to which a Reserve has been taken by the Administrative Agent in the exercise of its reasonable discretion or (ii) the Account Debtor is either not organized under the laws of the United States of America, any state thereof, or the District of Columbia, or Canada or any province thereof or is located outside or has its principal place of business or substantially all of its assets outside the United States or Canada, unless, in each case, either (A) such Account is supported by a letter of credit from an institution and in form and substance satisfactory to the Administrative Agent in its sole discretion or (B) the Borrower provides evidence satisfactory to the Administrative Agent that there is an enforceable, perfected security interest under the laws of the applicable foreign jurisdiction in such Account in favor of the Administrative Agent; or

(f) the Account Debtor is the United States of America or any department, agency or instrumentality thereof, unless the relevant Loan Party duly assigns its rights to payment of such Account to the Administrative Agent pursuant to the Assignment of Claims Act of 1940, as amended, which assignment and related documents and filings shall be in form and substance reasonably satisfactory to the Administrative Agent; or

(g) the Account is subject to any security deposit (to the extent received from the applicable Account Debtor), progress payment, retainage or other similar advance made by or for the benefit of the applicable Account Debtor, in each case to the extent thereof; or

(h) (i) it is not subject to a valid and perfected first priority Lien in favor of the Administrative Agent, subject to no other Liens other than Liens permitted by this Agreement or (ii) it does not otherwise conform in all material respects to the representations and warranties contained in this Agreement and the other Loan Documents relating to Accounts; or

(i) (i) such Account was invoiced in advance of goods or services provided, (ii) such Account was invoiced twice or more, or (iii) the associated revenue has not been earned; or

(j) the sale to the Account Debtor is on a bill-and-hold, guaranteed sale, sale-and-return, ship-and-return, sale on approval or consignment or other similar basis or made pursuant to any other agreement providing for repurchases or return of any merchandise which has been claimed to be defective or otherwise unsatisfactory; or

(k) the goods giving rise to such Account have not been shipped and/or title has not been transferred to the Account Debtor, or the Account represents a progress-billing or otherwise does not represent a complete sale; for purposes hereof, “progress-billing” means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which the Account Debtor’s obligation to pay such invoice is conditioned upon the completion by a Loan Party of any further performance under the contract or agreement; or

(l) it arises out of a sale made by a Loan Party to an employee, officer, agent, director, Subsidiary or Affiliate of a Loan Party; or

(m) such Account was not paid in full, and a Loan Party created a new receivable for the unpaid portion of the Account, and other Accounts constituting chargebacks, debit memos and other adjustments for unauthorized deductions; or

(n) (A) the Account Debtor (i) has or has asserted a right of set-off, offset, deduction, defense, dispute, or counterclaim against a Loan Party (unless such Account Debtor has entered into a written agreement reasonably satisfactory to the Administrative Agent to waive such set-off, offset, deduction, defense, dispute, or counterclaim rights), (ii) has disputed its liability (whether by chargeback or otherwise) or made any claim with respect to the Account or any other Account of a Loan Party which has not been resolved, in each case of clauses (i) and (ii), without duplication, only to the extent of the amount of such actual or asserted right of set-off, or the amount of such dispute or claim, as the case may be (except to the extent that such right of set-off (x) may not be exercised as a result of the automatic stay pursuant to Section 362 of the Bankruptcy Code or (y) otherwise may not be currently exercised pursuant to the terms of the Final Order) or (iii) is also a creditor or supplier of the Loan Party (but only to the extent of such Loan Party’s obligations to such Account Debtor from time to time) or (B) the Account is contingent in any respect or for any reason; or

(o) the Account does not comply in all material respects with the requirements of all applicable laws and regulations, whether Federal, state or local, including without limitation, the Federal Consumer Credit Protection Act, Federal Truth in Lending Act and Regulation Z; or

(p) as to any Account, to the extent that (i) a check, promissory note, draft, trade acceptance or other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason or (ii) such Account is otherwise classified as a note receivable and the obligation with respect thereto is evidenced by a promissory note or other debt instrument or agreement; or

(q) the Account is created on cash on delivery terms, or on extended terms and is due and payable more than 90 days from the invoice date; or

(r) the Account represents tooling receivables related to tooling that has not been completed or received by a Loan Party and approved and accepted by the applicable customer; or

(s) Accounts designated by a Loan Party as convenience accounts.

Notwithstanding the forgoing, all Accounts of any single Account Debtor and its Affiliates which, in the aggregate, exceed (i) in respect of any Account Debtor, 20% of all Eligible Receivables or (ii) as to any Account Debtor set forth on Schedule VI, the Concentration Limit (provided that the Concentration Limit with respect to Eligible Receivables owing from Ford Motor Company shall be increased to 33% for four months of each year to be agreed between the Borrower and the Administrative Agent in the exercise of its reasonable discretion). In addition, in determining the aggregate amount from the same Account Debtor that is unpaid more than 90 days from the date of invoice or more than 60 days from the due date pursuant to clause (b) above there shall be excluded the amount of any net credit balances relating to Accounts due from an Account Debtor with invoice dates more than 90 days from the date of invoice or more than 60 days from the due date.

“Environmental Action” means any action, suit, written demand, demand letter, written claim, written notice of noncompliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit, any Hazardous Material, or arising from alleged injury or threat to public or employee health or safety, as such relates to exposure to Hazardous Material, or to the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

“Environmental Law” means any applicable federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction or decree, or judicial or agency interpretation, relating to pollution or protection of the environment, public or employee health or safety, as such relates to exposure to Hazardous Material, or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Equipment” has the meaning specified in the UCC.

“Equity Interests” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party (other than a DCC Entity), or under common control with any Loan Party (other than a DCC Entity), within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code.

“ERISA Event” means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any ERISA Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of an ERISA Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such ERISA Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to an ERISA Plan; (c) the provision by the administrator of any ERISA Plan of a notice of intent to terminate such ERISA Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any ERISA Plan; (g) the adoption of an amendment to an ERISA Plan requiring the provision of security to such ERISA Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate an ERISA Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such ERISA Plan.

“ERISA Plan” means a Single Employer Plan or a Multiple Employer Plan.

“Eurodollar Lending Office” means, with respect to any Lender Party, the office of such Lender Party specified as its “Eurodollar Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent.

“Eurodollar Rate” means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period (provided that, if for any reason such rate is not available, the term “Eurodollar Rate” shall mean, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period); provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates) by

(b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period.

“Eurodollar Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(ii).

“Eurodollar Rate Reserve Percentage” for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period.

“Events of Default” has the meaning specified in Section 6.01.

“Excluded Property” means property constituting withholdings required under any law (including but not limited to federal, state and local income, payroll and trust fund taxes and insurance payments of any nature, whether imposed on the employer or employee or otherwise) from any amounts due to any employee of a Loan Party, and any withholdings from an employee considered a “plan asset” under Title I of ERISA.

“Existing Credit Agreement” means the Five-Year Credit Agreement, dated as March 4, 2005, among the Borrower, Citicorp USA, Inc., as administrative agent and the other lenders signatory thereto from time to time, as amended, modified or supplemented prior to the date hereof.

“Existing Letter of Credit” means each Letter of Credit issued under the Existing DIP Credit Agreement prior to the Amendment and Restatement Effective Date.

“Existing Receivables Facility” means the sale and securitization of certain Accounts of the Borrower and certain of its Subsidiaries pursuant to the (a) Amended and Restated Purchase and Contribution Agreement, dated as of April 15, 2005, between Dana Corporation and Dana Asset Funding LLC, and (b) Amended and Restated Purchase and Contribution Agreement, dated as April 15, 2005, among Dana Asset Funding LLC, Dana Corporation, as collection agent, Falcon Asset Securitization Corporation and Blue Ridge Asset Funding Corp., as conduit purchasers, Wachovia Bank, N.A., as a committed purchaser, Blue Ridge Agent and JPMorgan Chase Bank, N.A., each as a committed purchaser and as agents in the capacities set forth therein, each agreement as amended, restated, or otherwise modified from time to time.

“Facility” means the Term Facility, the Revolving Credit Facility, the Swing Line Facility or the Letter of Credit Sublimit.

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day

that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.

“Fee Letter” means the fee letter dated March 2, 2006 among the Borrower, the Initial Lenders and the Lead Arrangers, as amended.

“Final Order” has the meaning specified in Section 3.02(i)(C).

“First Day Orders” means all orders entered by the Bankruptcy Court on the Petition Date or within five Business Days of the Petition Date or based on motions filed on the Petition Date.

“Fiscal Year” means a fiscal year of the Borrower and its Subsidiaries ending on December 31.

“Foreign Subsidiary” means, at any time, any of the direct or indirect Subsidiaries of the Borrower that are organized outside of the laws of the United States, any state thereof or the District of Columbia at such time.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“GAAP” has the meaning specified in Section 1.03.

“General Intangibles” has the meaning specified in the UCC.

“Granting Lender” has the meaning specified in Section 10.07(k).

“Guarantee Obligation” means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the primary obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Guarantee Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Guarantee Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

“Guaranteed Obligations” has the meaning specified in Section 8.01.

“Guarantor” has the meaning specified in the recital of parties to this Agreement, but shall exclude the Non-Filing Domestic Subsidiaries.

“Guaranty” has the meaning specified in Section 8.01.

“Hazardous Materials” means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls, mold and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous, toxic or words of similar import under any Environmental Law.

“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements.

“Hedge Bank” means any Lender Party or an Affiliate of a Lender Party in its capacity as a party to a Secured Hedge Agreement.

“Honor Date” has the meaning specified in Section 2.03(c).

“Indemnified Liabilities” has the meaning specified in Section 10.04(b).

“Indemnitees” has the meaning specified in Section 10.04(b).

“Initial Extension of Credit” means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder.

“Initial Issuing Banks” has the meaning specified in the recital of parties to this Agreement.

“Initial Lenders” means the banks, financial institutions and other institutional lenders listed on the signature pages to the Existing DIP Credit Agreement; provided that any such bank, financial institution or other institutional lender shall cease to be an Initial Lender on any date on which it ceases to have a Commitment.

“Initial Pledged Debt” means Debt in existence on the Petition Date which is evidenced by a promissory note payable to a Loan Party by a third party with a principal face amount in excess of $2,500,000 as listed opposite such Loan Party’s name on and as otherwise described in Schedule V hereto.

“Initial Pledged Equity” means the shares of stock and other Equity Interests in any Subsidiary of a Loan Party as set forth opposite each Loan Party’s name on and as otherwise described in Schedule IV hereto; provided that no Loan Party shall be required to pledge any shares of stock in any Foreign Subsidiary owned or otherwise held by such Loan Party which, when aggregated with all of the other shares of stock in such Foreign Subsidiary pledged by any Loan Party, would result in more than 66% of the shares of stock in such Foreign Subsidiary entitled to vote (within the meaning of Treasury Regulation Section 1.956(d)(2) promulgated under the Internal Revenue Code) (the “Voting Foreign Stock”) (on a fully diluted basis) being pledged to the Administrative Agent, on behalf of the Secured Parties, under this Agreement

(although all of the shares of stock in such Foreign Subsidiary not entitled to vote (within the meaning of Treasury Regulation Section 1.956-2(c)(2) promulgated under the Internal Revenue Code) (the “Non-Voting Foreign Stock”) shall be pledged by each of the Loan Parties that owns or otherwise holds any such Non-Voting Foreign Stock therein).

“Initial Swing Line Lender” has the meaning specified in the recital of parties to this Agreement.

“Insufficiency” means, with respect to any ERISA Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.

“Intellectual Property” has the meaning specified in Section 9.01(g).

“Intellectual Property Collateral” shall mean all Material Intellectual Property.

“Intellectual Property Security Agreement” has the meaning specified in Section 3.01(a)(vii).

“Interest Period” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that:

(a) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance under a Facility that ends after any principal repayment installment date for such Facility unless, after giving effect to such selection, the aggregate principal amount of Base Rate Advances and of Eurodollar Rate Advances having Interest Periods that end on or prior to such principal repayment installment date for such Facility shall be at least equal to the aggregate principal amount of Advances under such Facility due and payable on or prior to such date;

(b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration;

(c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and

(d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the

number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.

“Interim Order” means a certified copy of an order entered by the Bankruptcy Court in substantially the form of Exhibit E.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“Inventory” has the meaning specified in the UCC.

“Inventory Value” means with respect to any Inventory of a Loan Party at the time of any determination thereof, the standard cost determined on a first in first out basis and carried on the general ledger or inventory system of such Loan Party stated on a basis consistent with its current and historical accounting practices, in Dollars, determined in accordance with the standard cost method of accounting less, without duplication, (i) any markup on Inventory from an affiliate and (ii) in the event variances under the standard cost method are expensed, a reserve reasonably determined by the Administrative Agent as appropriate in order to adjust the standard cost of Eligible Inventory to approximate actual cost.

“Investment” means, with respect to any Person, (a) any direct or indirect purchase or other acquisition (whether for cash, securities, property, services or otherwise) by such Person of, or of a beneficial interest in, any Equity Interests or Debt of any other Person, (b) any direct or indirect purchase or other acquisition (whether for cash, securities, property, services or otherwise) by such Person of all or substantially all of the property and assets of any other Person or of any division, branch or other unit of operation of any other Person, (c) any direct or indirect loan, advance, other extension of credit or capital contribution by such Person to, or any other investment by such Person in, any other Person (including, without limitation, any arrangement pursuant to which the investor incurs indebtedness of the types referred to in clause (i) or (j) of the definition of “Debt” set forth in this Section 1.01 in respect of such other Person) and (d) any written agreement to make any Investment.

“Issuing Bank” means each Initial Issuing Bank and any other Revolving Credit Lender approved as an Issuing Bank by the Administrative Agent and any Eligible Assignee to which a Letter of Credit Commitment hereunder has been assigned pursuant to Section 7.09 or 10.07.

“Landlord Lien Waiver” means a written agreement that is reasonably acceptable to the Administrative Agent, pursuant to which a Person shall waive or subordinate its rights (if any, that are or would be prior to the Liens granted to the Administrative Agent for the benefit of the Lenders under the Loan Documents) and claims as landlord in any Inventory of a Loan Party for unpaid rents, grant access to the Administrative Agent for the repossession and sale of such inventory and make other agreements relative thereto.

“L/C Cash Collateral Account” means the account established by the Borrower in the name of the Administrative Agent and under the sole and exclusive control of the Administrative Agent that shall be used solely for the purposes set forth herein.

“L/C Obligations” means, as at any date of determination, the aggregate Available Amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all Letter of Credit Borrowings.

“Lead Arrangers” has the meaning specified in the recital of parties to this Agreement.

“Lender Party” means any Lender, any Issuing Bank or the Swing Line Lender.

“Lenders” has the meaning specified in the recital of parties to this Agreement.

“Letter of Credit” means any letter of credit issued hereunder.

“Letter of Credit Advance” means an advance made by any Issuing Bank or Revolving Credit Lender pursuant to Section 2.03(c).

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the applicable Issuing Bank.

“Letter of Credit Commitment” means with respect to any Issuing Bank, the amount set forth opposite such Issuing Bank’s name on Schedule I hereto under the caption “Letter of Credit Commitment” or if such Issuing Bank has entered into one or more Assignment and Acceptances, set forth (for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 10.07(d) as such Issuing Bank’s Letter of Credit Commitment,” as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“Letter of Credit Expiration Date” means the day that is five days prior to the Maturity Date, or such later date as the applicable Issuing Bank may, in its sole discretion, specify.

“Letter of Credit Sublimit” means an amount equal to the lesser of (a) the aggregate amount of the Issuing Banks’ Letter of Credit Commitments at such time and (b) $400,000,000 as such amount may be reduced from time to time pursuant to Section 2.05. The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Credit Commitments.

“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

“Loan Documents” means (i) this Agreement, (ii) the Notes, if any, (iii) the DIP Financing Orders, (iv) the Collateral Documents, (v) the Fee Letter, (vi) solely for purposes of the Collateral Documents, each Secured Hedge Agreement and (vii) any other document, agreement or instrument executed and delivered by a Loan Party in connection with the Facilities, in each case as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.

“Loan Parties” means, collectively, the Borrower and the Guarantors.

“Loan Value” means (a) with respect to Eligible Receivables, up to 85% of the value of Eligible Receivables and (b) with respect to Eligible Inventory, the lesser of (i) 65% of the value of Eligible Inventory and (ii) 85% of the Net Recovery Rate of Eligible Inventory (based on the then most recent independent inventory appraisal) on any date of determination.

“Margin Stock” has the meaning specified in Regulation U.

“Material Adverse Change” means any event or occurrence which has resulted in or would reasonably be expected to result in any material adverse change in the business, financial or other condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole (other than events publicly disclosed prior to the commencement of the Cases and the commencement and continuation of the Cases and the consequences that would normally result therefrom); provided that events, developments and circumstances disclosed in public filings and press releases of the Borrower and any other events of information made available in writing to the Lead Arrangers, in each case at least three days prior to the Effective Date, shall not be considered in determining whether a Material Adverse Change has occurred, although subsequent events, developments and circumstances relating thereto may be considered in determining whether or not a Material Adverse Change has occurred.

“Material Adverse Effect” means a material adverse effect on (a) the business, financial or other condition, operations or properties of the Borrower and its Subsidiaries, taken as a whole (other than events publicly disclosed prior to the commencement of the Cases and the commencement and continuation of the Cases and the consequences that would normally result therefrom), (b) the rights and remedies of the Administrative Agent or any Lender Party under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party; provided that events, developments and circumstances disclosed in public filings and press releases of the Borrower and any other events of information made available in writing to the Lead Arrangers, in each case at least three days prior to the Effective Date, shall not be considered in determining whether a Material Adverse Effect has occurred, although subsequent events, developments and circumstances relating thereto may be considered in determining whether or not a Material Adverse Effect has occurred.

“Material Guarantors” means, on any date of determination, (a) those Guarantors set forth on Schedule 1.01(a) and (b) any other Guarantor that is a Material Subsidiary, on such date, has (i) assets with a book value equal to or in excess of $1,000,000, (ii) annual net income in excess of $1,000,000 or (iii) liabilities in an aggregate amount equal to or in excess of $1,000,000; provided, however, that in no event shall Guarantors that are not Material Guarantors have (i) assets with an aggregate book value in excess of $5,000,000, (ii) aggregate annual net income in excess of $5,000,000 or (iii) liabilities in an aggregate amount in excess of $5,000,000.

“Material Intellectual Property” means the Intellectual Property set forth on Schedule 1.01(b).

“Material Subsidiary” means, on any date of determination, any Subsidiary of the Borrower that, on such date, has (i) assets with a book value equal to or in excess of $1,000,000, (ii) annual net income in excess of $1,000,000 or (iii) liabilities in an aggregate amount equal to or in excess of $1,000,000; provided, however, that in no event shall all Subsidiaries of the borrower that are not Material Subsidiaries have (i) assets with an aggregate book value in excess of $5,000,000, (ii) aggregate annual net income in excess of $5,000,000 or (iii) liabilities in an aggregate amount in excess of $5,000,000.

“Maturity Date” means the earlier of (i) the date that is twenty-four months following the Effective Date and (ii) the effective date of a Reorganization Plan in respect of the Cases.

“Mexican Collateral” has the meaning set forth in Section 9.10.

“Mexican Depository” shall mean each Subsidiary of the Borrower domiciled in Mexico that is at any time in possession of Inventory owned by any Loan Party and included in the

calculation of Elibigle Inventory, in each case in its capacity as depository of the Mexican Collateral, or any succesor depository thereof.

“Moody’s” means Moody’s Investor Services, Inc.

“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.

“Net Cash Proceeds” means, with respect to any sale, lease, transfer or other disposition of any asset of the Borrower or any of its Subsidiaries (other than any sale, lease, transfer or other disposition of assets pursuant to clauses (i), (ii), (iv) or (v) of Section 5.02(h) and, to the extent that the distribution to any Loan Party of any proceeds of any sale, transfer or other disposition of any asset of a Foreign Subsidiary would (1) result in material adverse tax consequences, (2) result in a breach of any agreement governing Debt of such Foreign Subsidiary permitted to exist or to be incurred by such Foreign Subsidiary under the terms of this Agreement and/or (3) be limited or prohibited under applicable local law, clause (x) of Section 5.02(h)), the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such sale, lease, transfer or other disposition (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Debt (other than Debt under the Loan Documents) that is secured by such asset and that is required to be repaid in connection with such sale, lease, transfer or other disposition thereof, (B) in the case of Net Cash Proceeds received by a Foreign Subsidiary, the principal amount of any Debt of Foreign Subsidiaries permanently prepaid or repaid with such proceeds, (C) the reasonable and customary out-of-pocket costs, fees (including investment banking fees), commissions, premiums and expenses incurred by the Borrower or its Subsidiaries, (D) federal, state, provincial, foreign and local taxes reasonably estimated (on a Consolidated basis) to be actually payable within the current or the immediately succeeding tax year as a result of any gain recognized in connection therewith, and (E) a reasonable reserve (which reserve shall be deposited into an escrow account with the Administrative Agent) for any purchase price adjustment or any indemnification payments (fixed and contingent) attributable to the seller’s obligations to the purchaser undertaken by the Borrower or any of its Subsidiaries in connection with such sale, lease, transfer or other disposition (but excluding any purchase price adjustment or any indemnity which, by its terms, will not under any circumstances be made prior to the Maturity Date); provided, however, that Net Cash Proceeds shall not include any such amounts to the extent (i) such amounts are reinvested in the business of the Borrower and its Subsidiaries within 180 days after the date of receipt thereof or (ii) a binding agreement with a third party to so invest is entered into by the Borrower and its Subsidiaries within 180 days after the date of receipt thereof and such amounts are invested within 270 days after the date of receipt thereof; provided, further, that Net Cash Proceeds shall not include the first $100,000,000 of cash receipts received after the Effective Date from sales, leases, transfers or other dispositions of assets by Foreign Subsidiaries permitted by Section 5.02(h)(x).

“Net Orderly Liquidation Value” shall mean, with respect to Inventory or Equipment, as the case may be, the orderly liquidation value with respect to such Inventory or Equipment, net of expenses estimated to be incurred in connection with such liquidation, based on the most recent third party appraisal in form and substance, and by an independent appraisal firm, reasonably satisfactory to the Administrative Agent.

“Net Recovery Rate” shall mean, with respect to Inventory at any time, the quotient (expressed as a percentage) of (i) the Net Orderly Liquidation Value of all Inventory owned by the Borrower and the Guarantors divided by (ii) the gross inventory cost of such Inventory, determined on the basis of the then most recently conducted third party inventory appraisal in form and substance, and performed by an independent appraisal firm, reasonably satisfactory to the Administrative Agent.

“Non-Filing Domestic Subsidiary” means Dana Asset Funding LLC and each other direct or indirect Subsidiary of the Borrower that is organized under the laws of the United States or any state or other political subdivision thereof that is not a party to a Case.

“Non-Loan Party” means any Subsidiary of a Loan Party that is not a Loan Party.

“Note” means a Term Note or a Revolving Credit Note.

“Notice of Borrowing” has the meaning specified in Section 2.02(a).

“Notice of Default” has the meaning specified in Section 7.05.

“Notice of Swing Line Borrowing” has the meaning specified in Section 2.02(b).

“Obligation” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding under any Debtor Relief Law. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, reasonable attorneys’ fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party.

“Other Taxes” has the meaning specified in Section 2.12(b).

“Outstanding Amount” means (i) with respect to Advances on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Advances, as the case may be, occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any Letter of Credit Borrowing occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the Available Amount of any Letter of Credit taking effect on such date.

“Patents” has the meaning specified in Section 9.01(g)(i).

“PBGC” means the Pension Benefit Guaranty Corporation (or any successor).

“Permitted Acquisition” means any Acquisition by the Borrower or any of its Subsidiaries; provided that (A) such Acquisition shall be in property and assets which are part of, or in lines of business that are, substantially the same lines of business as (or ancillary to) one or more of the businesses of the Borrower and its Subsidiaries in the ordinary course; (B) any determination of the amount of consideration paid in connection with such investment shall include all cash consideration paid, the aggregate amounts paid or to be paid under noncompete, consulting and other affiliated agreements with, the sellers of such investment, and the principal amount of all assumptions of debt, liabilities and other obligations in connection therewith; (C) immediately before and immediately after giving effect to any such purchase or other acquisition, no Default shall have occurred and be continuing and (2) immediately after giving effect to such purchase or other acquisition, the Borrower and its Subsidiaries shall be in pro forma compliance with all of the financial covenants set forth in Section 5.04 hereof, such compliance to be determined, in the case of any Permitted Acquisition involving consideration in excess of $10,000,0000, on the basis of audited financial statements (or, if such audited financial statements are unavailable, on the basis of such other historical financial information as is reasonably acceptable to the Administrative Agent) for such investment as though such investment had been consummated as of the first day of the fiscal period covered thereby.

“Permitted Lien” means (i) liens in favor of the Administrative Agent for the benefit of the Secured Parties and the other parties intended to share the benefits of the Collateral granted pursuant to any of the Loan Documents; (ii) liens for taxes and other obligations or requirements owing to or imposed by governmental authorities existing or having priority, as applicable, by operation of law which in either case (A) are not yet overdue or (B) are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted so long as appropriate reserves in accordance with GAAP shall have been made with respect to such taxes or other obligations; (iii) statutory liens of banks and other financial institutions (and rights of set-off), (iv) statutory liens of landlords, carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other liens imposed by law (other than any such lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by ERISA), in each case incurred in the ordinary course of business (A) for amounts not yet overdue or (B) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts; (v) liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security; (vi) liens, pledges and deposits to secure the performance of tenders, statutory obligations, performance and completion bonds, surety bonds, appeal bonds, bids, leases, licenses, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations; (vii) easements, rights-of-way, zoning restrictions, licenses, encroachments, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (viii) (A) any interest or title of a lessor or sublessor under any lease or sublease by the Borrower or any Subsidiary and (B) any leases or subleases by the Borrower or any Subsidiary to another Person(s) in the ordinary course of business; (ix) liens solely on any cash earnest money deposits made by the Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement entered into in connection with a Permitted Acquisition or another Investment permitted hereunder; (x) the filing of precautionary

UCC financing statements relating to leases entered into in the ordinary course of business and the filing of UCC financing statements by bailees and consignees in the ordinary course of business; (xi) liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xii) leases and subleases or licenses and sublicenses of patents, trademarks and other intellectual property rights granted by the Borrower or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of the Borrower or such Subsidiary; (xiii) liens arising out of judgments not constituting an Event of Default hereunder; (xiv) liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the proceeds and products thereof; and (xv) any right of first refusal or first offer, redemption right, or option or similar right in respect of any capital stock owned by the Borrower or any Subsidiary with respect to any joint venture or other Investment, in favor of any co-venturer or other holder of capital stock in such investment.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

“Petition Date” has the meaning specified in Preliminary Statement (1).

“Pledged Collateral” means, collectively, (i) the Initial Pledged Equity, (ii) the Initial Pledged Debt, (iii) Pledged Equity which is (x) all Equity Interests in any domestic Subsidiary of a Loan Party other than the Initial Pledged Equity that are acquired after the Petition Date or (y) all Equity Interests in any third party entities owned by any Loan Party which individually is valued (in accordance with GAAP) to be in excess of $1,000,000 and represents more than 10% ownership in such third party entity, (iv) Pledged Debt (other than the Initial Pledged Debt) which has a face principal amount in excess of $1,000,000 and which arises after the Petition Date and (v) any Pledged Investment Property (other than an Equity Interest) which has an individual value in excess of $1,000,000, subject in the case of each of the foregoing to the limitations and exclusions set forth in this Agreement.

“Pledged Debt” has the meaning specified in Section 9.01(e)(iv).

“Pledged Equity” has the meaning specified in Section 9.01(e)(iii).

“Pledged Investment Property” has the meaning specified in Section 9.01(e)(v).

“Pre-Petition Agent” means Citicorp USA, Inc. in its capacity as agent under the Pre-Petition Security Agreement.

“Pre-Petition Collateral” means the “Collateral” as defined in the Pre-Petition Security Agreement.

“Pre-Petition Debt” means Debt existing prior to the date of the Original DIP Credit Agreement.

“Pre-Petition Document” means each of the “Secured Documents” as defined in the Pre-Petition Security Agreement.

“Pre-Petition Payment” means a payment (by way of adequate protection or otherwise) of principal or interest or otherwise on account of any pre-petition Debt or trade payables or other pre-petition claims against the Borrower or any Guarantor.

“Pre-Petition Secured Creditors” means the Persons from time to time holding Pre-Petition Secured Indebtedness.

“Pre-Petition Secured Indebtedness” means all indebtedness and other Obligations of the Borrower and the Guarantors that are secured pursuant to the Pre-Petition Security Agreement.

“Pre-Petition Security Agreement” means the Security Agreement dated as of November 18, 2005 from Dana Corporation and the other grantors referred to therein to Citicorp USA, Inc., as Agent.

“Preferred Interests” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation.

“Priority Collateral” means, in respect of each of the Revolving Credit Facility and the Term Facility, in each case following satisfaction by the Loan Parties of the conditions set forth in Section 3.03, the Collateral securing such Facility on a first priority basis (subject solely to unavoidable pre-petition Liens and Liens permitted under Section 5.02(a) and the Carve-Out).

“Professional Fees” means legal, appraisal, financing, consulting, and other advisor fees incurred in connection with the Cases, the Restructuring and this Agreement.

“Pro Rata Share” of any amount means, with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender’s Commitment (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01, such Lender’s Commitment as in effect immediately prior to such termination) under the applicable Facility or Facilities at such time and the denominator of which is the amount of such Facility or Facilities at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01, the amount of such Facility or Facilities as in effect immediately prior to such termination).

“Redeemable” means, with respect to any Equity Interest, Debt or other right or Obligation, any such right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder.

“Reduction Amount” has the meaning specified in Section 2.06(b)(iv).

“Register” has the meaning specified in Section 10.07(d).

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Related Assets” means, all (i) all Related Security with respect to all Accounts, (ii) lockboxes, lockbox accounts or any collection account, in each case if and to the extent of any

such interest therein, (iii) proceeds of the foregoing, including all funds received by any Person in payment of any amounts owed (including invoice prices, finance charges, interest and all other charges, if any) in respect of any Accounts described above or Related Security with respect to any such Accounts, or otherwise applied to repay or discharge any such Accounts (including insurance payments applied in the ordinary course of business to amounts owed in respect of any such Accounts and net proceeds of any sale or other disposition of repossessed goods that were the subject of any such Accounts) or other collateral or property of any Person obligated to make payments under Accounts or any other party directly or indirectly liable for payment of such Account and (iv) records relating to the foregoing.

“Related Contracts” has the meaning specified in Section 9.01(c).

“Related Security” means, with respect to any Account, (i) all of the applicable Loan Party’s right, title and interest in and to the goods (including returned or repossessed goods), if any, relating to the sale which gave rise to such Account, (ii) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Account, whether pursuant to the obligation giving rise to such Account or otherwise, (iii) all guarantees and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Account whether pursuant to the obligation giving rise to such Account or otherwise, (iv) all records relating to the foregoing and (v) all proceeds of the foregoing.

“Rent Reserve” means, with respect to any plant, warehouse distribution center or other operating facility where any Inventory subject to landlords’ Liens or other Liens arising by operation of law is located, a reserve equal to three (3) month’s rent at such plant, warehouse distribution center, or other operating facility, and such other reserve amounts that may be determined by the Administrative Agent in its reasonable discretion.

“Reorganization Plan” shall mean a Chapter 11 plan of reorganization in any of the Cases of the Borrower or a Material Guarantor.

“Required Lenders” means, at any time, Lenders owed or holding at least a majority in interest of the sum of (a) the aggregate principal amount of the Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, (c) the aggregate Unused Term Commitments at such time and (d) the aggregate Unused Revolving Credit Commitment at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (A) the aggregate principal amount of the Advances owing to such Lender (in its capacity as a Lender) and outstanding at such time, (B) such Lender’s Pro Rata Share of the aggregate Available Amount of all Letters of Credit issued by such Lender and outstanding at such time, (C) the Unused Term Commitment of such Lender at such time and (D) the Unused Revolving Credit Commitment of such Lender at such time. For purposes of this definition, the aggregate amount of Swing Line Advances owing to any Swing Line Lender, the aggregate principal amount of Letter of Credit Advances owing to the Issuing Banks and the Available Amount of each Letter of Credit shall be considered to be owed to the Lenders ratably in accordance with their respective Revolving Credit Commitments.

“Reserves” means, at any time of determination, (a) Rent Reserves, (b) the Carve-Out and (c) such other reserves as determined from time to time in the reasonable discretion of the Administrative Agent to preserve and protect the value of the Collateral.

“Responsible Officer” means the chief executive officer, president, chief financial officer or treasurer of a Loan Party. Any document delivered hereunder or under any other Loan Document that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Restructuring” means the reorganization or discontinuation of the Borrower’s or any Subsidiary’s business, operations and structure in respect of (a) facility closures and the consolidation, relocation or elimination of operations and (b) related severance costs and other costs incurred in connection with the termination, relocation and training of employees.

“Restructuring Charges” means non-recurring and other one-time costs incurred by the Borrower or any Subsidiary in connection with the Restructuring.

“Revolving Credit Advance” has the meaning specified in Section 2.01(b).

“Revolving Credit Availability Amount” means (a) prior to the satisfaction of the conditions set forth in Section 3.02, the lesser of (i) $800,000,000 (as such amount may be reduced in accordance with the provisions of Section 2.05) and (ii) the aggregate amount permitted by the Interim Order and (b) thereafter, the lesser of (i) the Borrowing Base and (ii) the Revolving Credit Commitments at such time.

“Revolving Credit Collateral” means (a) all Accounts and Related Contracts, (b) all Inventory, (c) all Related Assets, (d) all Account Collateral and (e) Intellectual Property to the extent necessary to sell, transfer, convey or otherwise dispose of the Accounts and Inventory.

“Revolving Credit Commitment” means, with respect to any Lender at any time, the amount set forth for such time opposite such Lender’s name on Schedule I hereto under the caption “Revolving Credit Commitment” or, if such Lender has entered into one or more Assignments and Assignments, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 10.07(d) as such Lender’s “Revolving Credit Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“Revolving Credit Facility” means, at any time, the aggregate amount of the Lenders’ Revolving Credit Commitments at such time.

“Revolving Credit Lender” means any Lender that has a Revolving Credit Commitment.

“Revolving Credit Note” means a promissory note of the Borrower payable to the order of any Revolving Credit Lender, in substantially the form of Exhibit A-2 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances made by such Lender.

“S&P” means Standard & Poor’s, a division of The Mc-Graw Hill Companies, Inc.

“SEC” means the Securities and Exchange Commission or any governmental authority succeeding to any of its principal functions.

“Secured Credit Card Obligations” means any Obligations arising on and after the Petition Date under the Credit Card Program.

“Secured Hedge Agreement” means any Hedge Agreement required or permitted under Article V that is entered into by and between any Loan Party and any Hedge Bank, in each case solely to the extent that the obligations in respect of such Hedge Agreement are not cash collateralized or otherwise secured (other than pursuant to the Collateral Documents).

“Secured Obligation” has the meaning specified in Section 9.01.

“Secured Parties” means, collectively, the Administrative Agent, the Lender Parties, the Hedge Banks and the Affiliates of Lender Parties party to the Credit Card Program.

“Security Collateral” has the meaning specified in Section 9.01(e).

“Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.

“SPC” has the meaning specified in Section 10.07(k).

“Subagent” has the meaning specified in Section 9.06(b).

“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries; provided that, for purposes of the Loan Documents, no DCC Entity shall be a “Subsidiary” of the Borrower.

“Supermajority Lenders” means, at any time, Lenders owed or holding at least 66% in interest of the sum of (a) the aggregate principal amount of the Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, (c) the aggregate Unused Term Commitments at such time and (d) the aggregate Unused Revolving Credit Commitment at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (A) the aggregate principal amount of the Advances owing to such Lender (in its capacity as a Lender) and outstanding at such time, (B) such Lender’s Pro Rata Share of the aggregate Available Amount of all Letters of Credit issued by such Lender and outstanding at such time, (C) the Unused Term Commitment of such Lender at such time and (D) the Unused Revolving Credit Commitment of such Lender at such time. For purposes of this definition, the aggregate amount of Swing Line Advances owing to any Swing Line Lender, the aggregate principal amount of Letter of Credit Advances owing to the Issuing Banks and the Available Amount of each Letter of Credit shall be considered to be owed to the Lenders ratably in accordance with their respective Revolving Credit Commitments.

“Supermajority Revolving Credit Lenders” means, at any time, Lenders owed or holding at least 80% in interest of the sum of (a) the aggregate principal amount of the Revolving Credit Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, and (c) the aggregate Unused Revolving Credit Commitment at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (A) the aggregate principal amount of the Revolving Credit Advances owing to such Lender (in its capacity as a Lender) and outstanding at such time, (B) such Lender’s Pro Rata Share of the aggregate Available Amount of all Letters of Credit issued by such Lender and outstanding at such time, and (C) the Unused Revolving Credit Commitment of such Lender at such time. For purposes of this definition, the aggregate amount of Swing Line Advances owing to any Swing Line Lender, the aggregate principal amount of Letter of Credit Advances owing to the Issuing Banks and the Available Amount of each Letter of Credit shall be considered to be owed to the Lenders ratably in accordance with their respective Revolving Credit Commitments.

“Superpriority Claim” shall mean a claim against the Borrower or a Guarantor in any of the Cases that is a superpriority administrative expense claim having priority over any or all administrative expenses and other claims of the kind specified in, or otherwise arising or ordered under, any Sections of the Bankruptcy Code (including, without limitation, Sections 105, 326, 328, 330, 331, 503(b), 507(a), 507(b), 546(c) and/or 726 thereof), whether or not such claim or expenses may become secured by a judgment lien or other non-consensual lien, levy or attachment.

“Swing Line Advance” means an advance made by (a) the Swing Line Lender pursuant to Section 2.01(d) or (b) any Revolving Credit Lender pursuant to Section 2.02(b).

“Swing Line Borrowing” means a borrowing consisting of a Swing Line Advance made by the Swing Line Lender pursuant to Section 2.01(d) or the Revolving Credit Lenders pursuant to Section 2.02(b).

“Swing Line Commitment” means, with respect to the Swing Line Lender, the amount set forth opposite its name on Schedule I hereto under the caption “Swing Line Commitment” or, if the Swing Line Lender has entered into an Assignment and Acceptance, set forth for the Swing Line Lender in the Register maintained by the Administrative Agent pursuant to Section 10.07(d) as the Swing Line Lender’s “Swing Line Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“Swing Line Facility” means, at any time, an amount equal to the aggregate amount of the Swing Line Lender’s Swing Line Commitment at such time, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“Swing Line Lender” means the Initial Swing Line Lender and any Eligible Assignee to which the Swing Line Commitment hereunder has been assigned pursuant to Section 10.07 so long as such Eligible Assignee expressly agrees to perform in accordance with their terms all obligations that by the terms of this Agreement are required to be performed by it as a Swing Line Lender and notifies the Administrative Agent of its Applicable Lending Office and the amount of its Swing Line Commitment (which information shall be recorded by the Administrative Agent in the Register), for so long as such Initial Swing Line Lender or Eligible Assignee, as the case may be, shall have a Swing Line Commitment.

“Syndication Agent” has the meaning specified in the recital of parties to this Agreement.

“Synthetic Debt” means, with respect to any Person as of any date of determination thereof, all Obligations of such Person in respect of transactions entered into by such Person that are intended to function primarily as a borrowing of funds (including, without limitation, any minority interest transactions that function primarily as a borrowing) but are not otherwise included in the definition of “Debt” or as a liability on the consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP.

“Taxes” has the meaning specified in Section 2.12(a).

“Term Advance” has the meaning specified in Section 2.01(a).

“Term Collateral” means all Collateral other than Revolving Credit Collateral.

“Term Commitment” means, with respect to any Term Lender at any time, the amount set forth opposite such Lender’s name on Schedule I hereto under the caption “Term Commitment” or, if such Lender has entered into one or more Assignments and Assignments, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 10.07(d) as such Lender’s “Term Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05. As of the Effective Date, the aggregate principal amount of the Term Commitments is $700,000,000.

“Term Facility” means, at any time, the aggregate amount of the Term Lenders’ Term Commitments at such time.

“Term Lender” means any Lender that has a Term Commitment.

“Term Note” means a promissory note of the Borrower payable to the order of any Term Lender, in substantially the form of Exhibit A-1 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from the Term Advance made by such Lender.

“Termination Date” means the earliest to occur of (i) the Maturity Date, (ii) the effective date of a Reorganization Plan and (iii) the date of termination in whole of the Commitments pursuant to Section 2.05 or 6.01.

“Thirteen Week Forecast” has the meaning set forth in Section 5.03(f).

“Tooling Program” means any program whereby tooling equipment is purchased or progress payments are made to facilitate production customer’s products and whereby the customer will ultimately repurchase the tooling equipment after the final approval by such customer.

“Total Outstandings” means the aggregate Outstanding Amount of all Advances and all L/C Obligations.

“Trade Secrets” has the meaning specified in Section 9.01(g)(v).

“Trademarks” has the meaning specified in Section 9.01(g)(ii).

“Type” refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate.

“UCC” means the Uniform Commercial Code as in effect, from time to time, in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

“Unused Revolving Credit Commitment” means, with respect to any Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender (in its capacity as a Lender) and outstanding at such time, plus (ii) such Lender’s Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Banks pursuant to Section 2.03(c) and outstanding at such time, and (C) the aggregate principal amount of all Swing Line Advances made by the Swing Line Lender pursuant to Section 2.01(d) at any time.

“Unused Term Commitment” means, with respect to any Lender at any time (a) such Lender’s Term Commitment at such time minus (b) the aggregate principal amount of all Term Advances made by such Lender (in its capacity as a Lender).

“Voting Stock” means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

“Welfare Plan” means a welfare plan, as defined in Section 3(1) of ERISA, that is maintained for employees of any Loan Party or in respect of which any Loan Party could have liability.

“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.

Section 1.02 Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

Section 1.03 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(f) (“GAAP”).

Section 1.04 Terms Generally. When any Reserve is to be established or a change in any amount, percentage, reserve, eligibility criteria or other item in the definitions of the terms “Borrowing Base”, “Eligible Inventory”, “Eligible Receivables” and “Rent Reserve” is to be determined in each case in the Administrative Agent’s “reasonable discretion”, such Reserve shall be implemented or such change shall become effective on the date of delivery of a written notice thereof to the Borrower (a “Borrowing Base Change Notice”), or immediately, without prior written notice, during the continuance of an Event of Default.

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT

Section 2.01 The Advances. (a) The Term Advances. Each Term Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance to the Borrower (a “Term Advance”) on any Business Day during the period from the date of the entry of the Final Order until such date as the Initial Lenders and the Borrower shall mutually determine, in an amount not to exceed such Lender’s Term Commitment at such time. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed.

(b) The Revolving Credit Advances. Each Revolving Credit Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each, a “Revolving Credit Advance”) to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date (i) in an amount for each such Advance not to exceed such Revolving Credit Lender’s Unused Revolving Credit Commitment at such time and (ii) in an aggregate amount for all such Advances not to exceed such Lender’s ratable portion (based on the aggregate amount of the Unused Revolving Credit Commitments at such time) of the Revolving Credit Availability Amount at such time; provided that the sum of (x) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances outstanding at such time plus (y) the aggregate Available Amount of all Letters of Credit outstanding at such time shall not exceed the Revolving Credit Availability Amount at any time.

(c) Borrowings. Each Borrowing shall be in a principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof (other than a Borrowing the proceeds of which shall be used solely to repay or prepay in full outstanding Swing Line Advances or Letter of Credit Advances) and shall consist of Advances made simultaneously by the Lenders under the applicable Facility ratably according to the Lenders’ Commitments under such Facility. Within the limits of each Lender’s Unused Revolving Credit Commitment in effect from time to time, the Borrower may borrow under Section 2.01(a), prepay pursuant to Section 2.06, and reborrow under Section 2.01(a).

(d) The Swing Line Advances. The Swing Line Lender severally agrees on the terms and conditions hereinafter set forth, to make Swing Line Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an aggregate amountowing to the Swing Line Lender not to exceed at any time outstanding the lesser of (i) the Swing Line Facility at such time and (ii) the Swing Line Lender’s Swing Line Commitment at such time; provided, however, that no Swing Line Borrowing shall exceed the aggregate of the Unused Revolving Credit Commitments of the Revolving Credit Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $500,000 or an integral multiple of $100,000 in excess thereof. Within the limits of the Swing Line Facility and within the limits referred to in the first sentence of this subsection (d), the Borrower may borrow under this Section 2.01(d), repay pursuant to Section 2.04(d) or prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(d). Immediately upon the making of a Swing Line Advance, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Advance in an amount equal to the product of such Lender’s Pro Rata Share times the principal amount of such Swing Line Advance.

Section 2.02 Making the Advances. (a) Except as otherwise provided in Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not later than 11:00 A.M.

(New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances, or the first Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telex or telecopier. Each such notice of a Borrowing (a “Notice of Borrowing”) shall be by telephone, confirmed immediately in writing, or telex or telecopier, in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) the Facility under which such Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Lender shall, before 11:00 A.M. (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent’s Account, in same day funds, such Lender’s ratable portion of such Borrowing in accordance with the respective Commitments of such Lender and the other Lenders. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower’s Account or such other account as the Borrower shall request; provided, however, that, in the case of Revolving Credit Advances, the Administrative Agent shall first apply such funds to prepay ratably the aggregate principal amount of any Swing Line Advances and Letter of Credit Advances outstanding on the date of such Borrowing, plus interest accrued and unpaid thereon to and as of such date.

(b) (i) Each Swing Line Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) on the date of the proposed Swing Line Borrowing, by the Borrower to the Swing Line Lender and the Administrative Agent. Each such notice of a Swing Line Borrowing (a “Notice of Swing Line Borrowing”) shall be by telephone, confirmed immediately in writing, or telecopier, specifying therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the seventh day after the requested date of such Borrowing). The Swing Line Lender will make the amount of the requested Swing Line Advances available to the Administrative Agent at the Administrative Agent’s Account, in same day funds. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower’s Account or such other account as the Borrower shall request.

(ii) The Swing Line Lender may, at any time in its sole and absolute discretion, request on behalf of the Borrower (and the Borrower hereby irrevocably authorizes the Swing Line Lender to so request on its behalf) that each Revolving Credit Lender make a Base Rate Advance in an amount equal to such Lender’s Pro Rata Share of the amount of Swing Line Advances then outstanding. Such request shall be deemed to be a Notice of Borrowing for purposes hereof and shall be made in accordance with the provisions of Section 2.02(a) without regard solely to the minimum amounts specified therein but subject to the satisfaction of the conditions set forth in Section 3.02 (except that the Borrower shall not be deemed to have made any representations and warranties). The Swing Line Lender shall furnish the Borrower with a copy of the Notice of Borrowing promptly after delivering such notice to the Administrative Agent. Each Revolving Credit Lender shall make an amount equal to its Pro Rata Share of the amount specified in such Notice of Borrowing available for the account of its Applicable Lending Office to the Administrative Agent for the account of such Swing Line Lender, by deposit to the Administrative Agent’s Account, in same date funds, not later than 3:00 P.M. on the day specified in such Notice of Borrowing.

(iii) If for any reason any Swing Line Advance cannot be refinanced by a Revolving Credit Borrowing as contemplated by Section 2.02(b)(ii), the request for Base Rate Advances submitted by the Swing Line Lender as set forth in Section 2.02(b)(ii) shall be deemed to be a request by such

Swing Line Lender that each of the Revolving Credit Lenders fund its risk participation in the relevant Swing Line Advance and each Revolving Credit Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.02(b)(ii) shall be deemed payment in respect of such participation.

(iv) If and to the extent that any Revolving Credit Lender shall not have made the amount of its Pro Rata Share of such Swing Line Advance available to the Administrative Agent in accordance with the provisions of Section 2.02(b)(ii), such Revolving Credit Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of the applicable Notice of Borrowing delivered by such Swing Line Lender until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate.

(v) Each Revolving Credit Lender’s obligation to make Revolving Credit Advances or to purchase and fund risk participations in a Swing Line Advance pursuant to this Section 2.02(b) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Credit Lender’s obligation to make Revolving Credit Advances pursuant to this Section 2.02(b) is subject to satisfaction of the conditions set forth in Section 3.02. No funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Advances, together with interest as provided herein.

(c) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for the initial Borrowing hereunder or for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.09 or 2.10 and (ii) the Revolving Credit Advances may not be outstanding as part of more than 15 separate Borrowings.

(d) Each Notice of Borrowing and each Notice of Swing Line Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any actual loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.

(e) Unless the Administrative Agent shall have received notice from any Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay or pay to the Administrative Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such

Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender’s Advance as part of such Borrowing for all purposes of this Agreement.

(f) The failure of any Lender to make the Advance to be made by it shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance or make available on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by it.

Section 2.03 Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) The Letter of Credit Commitment.

(i) Subject to the terms and conditions set forth herein, (A) each Issuing Bank agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Effective Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower or any of its Subsidiaries, and to amend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drafts under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower or any of its Subsidiaries; provided that the Issuing Banks shall not be obligated to issue any Letter of Credit, and no Lender shall be obligated to participate in any Letter of Credit if as of the date of such issuance, (x) the Available Amount for all Letters of Credit issued by such Issuing Bank would exceed the lesser of the Letter of Credit Sublimit at such time and such Issuing Bank’s Letter of Credit Commitment at such time, (y) the Available Amount of such Letter of Credit would exceed the Unused Revolving Credit Commitment or (z) the sum of (1) the aggregate principal amount of all Revolving Credit Advances plus Swing Line Advances and Letter of Credit Advances outstanding at such time plus (2) the aggregate Available Amount of all Letters of Credit outstanding at such time exceed the Borrowing Base at such time. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.

(ii) No Issuing Bank shall be under any obligation to issue any Letter of Credit if: (A) any order, judgment or decree of any governmental authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any law applicable to such Issuing Bank or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which such Issuing Bank in good faith deems material to it; (B) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Revolving Credit Lenders have approved such expiry date; (C) the issuance of such Letter of Credit would violate one or more policies of such Issuing Bank; or (D) such Letter of Credit is in an initial amount less than $100,000 (unless such Issuing Bank agrees otherwise), or is to be denominated in a currency other than U.S. dollars.

(iii) No Issuing Bank shall be under any obligation to amend any Letter of Credit if (A) such Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

(iv) Letters of Credit may be issued for the account of a Subsidiary that is not a Loan Party so long as such Subsidiary is primarily liable for its reimbursement obligations thereunder

pursuant to a separate reimbursement agreement entered into between such Subsidiary and the applicable Issuing Bank, to the extent practicable (in the Issuing Bank’s sole discretion).

(b) Procedures for Issuance and Amendment of Letters of Credit.

(i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the applicable Issuing Bank (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower or such Subsidiary for whose account such Letter of Credit is to be issued. Such Letter of Credit Application must be received by the applicable Issuing Bank and the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as such Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the applicable Issuing Bank: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as such Issuing Bank may reasonably require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the applicable Issuing Bank (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as such Issuing Bank may reasonably require.

(ii) Promptly after receipt of any Letter of Credit Application, the applicable Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such Issuing Bank will provide the Administrative Agent with a copy thereof. Upon receipt by such Issuing Bank of confirmation from the Administrative Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, such Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the Borrower or the applicable Subsidiary or enter into the applicable amendment, as the case may be, in each case in accordance with such Issuing Bank’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from such Issuing Bank a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Letter of Credit.

(iii) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the applicable Issuing Bank will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the applicable Issuing Bank shall notify the Borrower and the Administrative Agent thereof. Not later than 11:00 a.m. on the Business Day following any payment by the applicable Issuing Bank under a Letter of Credit, so long as the Borrower has received notice of such drawing by 10:00 a.m. on such following Business Day (each such date, an “Honor Date”), the Borrower

shall reimburse such Issuing Bank through the Administrative Agent in an amount equal to the amount of such drawing (together with interest thereon at the rate set forth in Section 2.07 for Revolving Credit Advances bearing interest at the Base Rate). If the Borrower fails to so reimburse the applicable Issuing Bank by such time, the Administrative Agent shall promptly notify each Revolving Credit Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Revolving Credit Lender’s Pro Rata Share thereof. In such event, the Borrower shall be deemed to have requested a Borrowing to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Borrowings, but subject to the amount of the Unused Revolving Credit Commitments and the conditions set forth in Section 3.02 (other than the delivery of a Notice of Borrowing). Any notice given by an Issuing Bank or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(ii) Each Revolving Credit Lender (including a Revolving Credit Lender acting as Issuing Bank) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the applicable Issuing Bank at the Administrative Agent’s Office in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Letter of Credit Advance to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the applicable Issuing Bank.

(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Borrowing because the conditions set forth in Section 3.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the applicable Issuing Bank a Letter of Credit Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Revolving Credit Lender’s payment to the Administrative Agent for the account of the applicable Issuing Bank pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a Letter of Credit Advance from such Revolving Credit Lender in satisfaction of its participation obligation under this Section 2.03.

(iv) Until each Revolving Credit Lender funds its Revolving Credit Advance or Letter of Credit Advance pursuant to this Section 2.03(c) to reimburse the applicable Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Revolving Credit Lender’s Pro Rata Share of such amount shall be solely for the account of such Issuing Bank.

(v) Each Revolving Credit Lender’s obligation to make Letter of Credit Advances to reimburse the applicable Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Revolving Credit Lender may have against such Issuing Bank, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing. No such making of a Letter of Credit Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the applicable Issuing Bank for the amount of any payment made by such Issuing Bank under any Letter of Credit, together with interest as provided herein.

(vi) If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the applicable Issuing Bank any amount required to be paid by such Revolving

Credit Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), such Issuing Bank shall be entitled to recover from such Revolving Credit Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the such Issuing Bank at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of the applicable Issuing Bank submitted to any Revolving Credit Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.

(d) Repayment of Participations.

(i) At any time after any Issuing Bank has made a payment under any Letter of Credit and has received from any Revolving Credit Lender such Revolving Credit Lender’s Letter of Credit Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent receives for the account of the applicable Issuing Bank any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Revolving Credit Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Credit Lender’s Letter of Credit Advance was outstanding) in the same funds as those received by the Administrative Agent.

(ii) If any payment received by the Administrative Agent for the account of the applicable Issuing Bank pursuant to Section 2.03(c)(i) is required to be returned under any circumstances (including pursuant to any settlement entered into by such Issuing Bank in its discretion), each Revolving Credit Lender shall pay to the Administrative Agent for the account of such Issuing Bank its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Revolving Credit Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.

(e) Obligations Absolute. The obligation of the Borrower to reimburse any Issuing Bank for each drawing under each Letter of Credit and to repay each Letter of Credit Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;

(ii) the existence of any claim, counterclaim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), such Issuing Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

(iv) any payment by the Issuing Bank under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or

any payment made by such Issuing Bank under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or

(v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.

The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will immediately notify the applicable Issuing Bank. The Borrower shall be conclusively deemed to have waived any such claim against the applicable Issuing Bank and its correspondents unless such notice is given as aforesaid.

(f) Role of Issuing Bank. Each Revolving Credit Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, no Issuing Bank shall have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the Issuing Banks, any Agent-Related Person nor any of the respective correspondents, participants or assignees of any Issuing Bank shall be liable to any Revolving Credit Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Revolving Credit Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower from pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the Issuing Banks, any Agent-Related Person, nor any of the respective correspondents, participants or assignees of any Issuing Bank, shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against an Issuing Bank, any related Agent-Related Person, any of their respective correspondents, participants or assignees of such Issuing Bank or any Agent-Related Person, and they may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such Issuing Bank’s, any such Agent-Related Person’s, or any of such respective correspondents, participants or assignees of such Issuing Bank or of any Agent-Related Person’s willful misconduct or gross negligence or such Issuing Bank’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the applicable Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and such Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

(g) Cash Collateral. Upon the request of the Administrative Agent, if, as of the Letter of Credit Expiration Date, any Letter of Credit may for any reason remain outstanding and partially

or wholly undrawn, the Borrower shall immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an amount equal to 105% of such Outstanding Amount determined as of the date of such Letter of Credit Borrowing or the Letter of Credit Expiration Date, as the case may be). For purposes hereof, “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Issuing Banks and the Revolving Credit Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the Issuing Banks (which documents are hereby consented to by the Revolving Credit Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Banks and the Revolving Credit Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Such cash collateral shall be maintained in the L/C Cash Collateral Account.

(h) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the applicable Issuing Bank and the Borrower when a Letter of Credit is issued, (i) the rules of the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the “ICC”) at the time of issuance (including the ICC decision published by the Commission on Banking Technique and Practice on April 6, 1998 regarding the European single currency (euro)) shall apply to each commercial Letter of Credit.

(i) Conflict with Letter of Credit Application. In the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control.

Section 2.04 Repayment of Advances. (a) Term Advances. The Borrower shall repay to the Administrative Agent for the ratable account of the Term Lenders on the Termination Date the aggregate outstanding principal amount of the Term Advances then outstanding.

(b) Revolving Credit Advances. The Borrower shall repay to the Administrative Agent for the ratable account of the Revolving Credit Lenders on the Termination Date the aggregate outstanding principal amount of the Revolving Credit Advances then outstanding.

(c) Swing Line Advances. The Borrower shall repay to the Administrative Agent for the account of the Swing Line Lender and each other Revolving Credit Lender that has made a Swing Line Advance the outstanding principal amount of each Swing Line Advance made by each of them on the earlier of the maturity date specified in the applicable Notice of Swing Line Borrowing (which maturity shall be no later than the seventh day after the requested date of such Borrowing) and the Termination Date.

(d) Letter of Credit Advances. The Borrower shall repay to the Administrative Agent for the account of the Issuing Banks and each Revolving Credit Lender that has made a Letter of Credit Advance the outstanding principal amount of each Letter of Credit Advance made by each of them on the earlier of (i) the date of demand therefor and (ii) the Termination Date.

Section 2.05 Termination or Reduction of Commitments. (a) Optional. The Borrower may, upon at least two Business Days’ notice to the Administrative Agent, terminate in whole or reduce in part the unused portions of the Swing Line Facility and the Letter of Credit Sublimit, the Unused Term Commitments and the Unused Revolving Credit Commitments; provided, however, that each partial reduction shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.

(b) Mandatory.

(i) Upon the making of the Term Advances pursuant to Section 2.01(a), the Term Commitments shall be automatically and permanently reduced to zero.

(ii) The Revolving Credit Facility shall be automatically and permanently reduced (A) upon the entry of the Final Order by an amount equal to $50,000,000 and (B) on each date (prior to the date on which the Loan Parties shall have satisfied the conditions set forth in Section 3.03) on which prepayment thereof is required to be made pursuant to clause (i) of Section 2.06(b), by an amount equal to the applicable Reduction Amount.

(iii) The Letter of Credit Sublimit shall be automatically and permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Letter of Credit Sublimit exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility.

(iv) The Swing Line Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Swing Line Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility.

(c) Application of Commitment Reductions. Upon each reduction of the Revolving Credit Facility pursuant to this Section 2.05, the Commitment of each of the Revolving Credit Lenders shall be reduced by such Revolving Credit Lender’s Pro Rata Share of the amount by which the Revolving Credit Facility is reduced in accordance with the Lenders’ respective Revolving Credit Commitments.

Section 2.06 Prepayments. (a) Optional. The Borrower may, upon at least one Business Day’s notice to the Administrative Agent received not later than 11:00 A.M. (New York, New York time) stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding aggregate principal amount of Advances, in whole or ratably in part, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid; provided, however, that each partial prepayment shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof or, if less, the aggregate outstanding principal amount of any Advance.

(b) Mandatory.

(i) The Borrower shall, within five Business Days after the date of receipt of any Net Cash Proceeds (or, (A) if the Borrower or its applicable Subsidiary has elected to reinvest such Net Cash Proceeds, on the 185^th day after receipt of such Net Cash Proceeds, to the extent any such Net Cash Proceeds remain uninvested or (B) if the Borrower or its applicable Subsidiary has entered into a binding agreement with a third party to reinvest such Net Cash Proceeds within 180 days following the date of receipt of such Net Cash Proceeds, on the 275^th day after receipt of such Net Cash Proceeds, to the extent any such Net Cash Proceeds remain uninvested) by any Loan Party or any of its Subsidiaries, prepay an aggregate principal amount of the Advances comprising part of the same Borrowings equal to such Net Cash Proceeds (or portion thereof); provided that the Borrower shall not be required to make any prepayment hereunder in respect of any transaction or series of related transactions as to which Net Cash Proceeds are not greater than $5,000,000 unless and until the aggregate amount of all Net Cash Proceeds that have not theretofore been applied to prepay the Advances pursuant to this Section 2.06(b)(i) exceeds

$10,000,000. Each such prepayment shall be applied first ratably to the outstanding Term Advances and second to the Revolving Credit Facility as set forth in clause (iv) below.

(ii) The Borrower shall, on each Business Day, if applicable, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Letter of Credit Advances and the Swing Line Advances or deposit an amount in the Collateral Account in an amount equal to the amount by which (A) the sum of (x) the aggregate principal amount of the Revolving Credit Advances, the Letter of Credit Advances and the Swing Line Advances then outstanding plus (y) the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the Revolving Credit Availability Amount.

(iii) The Borrower shall, on each Business Day, if applicable, pay to the Administrative Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in such L/C Cash Collateral Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Sublimit on such Business Day.

(iv) Prepayments of the Revolving Credit Facility made pursuant to clause (i) and (ii) above shall be first applied to prepay Letter of Credit Advances then outstanding, if any, until such Advances are paid in full, second applied to prepay Swing Line Advances then outstanding until such Advances are paid in full, third applied ratably to prepay Revolving Credit Advances then outstanding, if any, comprising part of the same Borrowings until such Advances are paid in full and third, if required under Section 2.03(g), deposited in the L/C Cash Collateral Account; and, in the case of any prepayment of the Revolving Credit Facility pursuant to clause (i) above, the amount remaining, if any, from the Revolving Credit Facility’s ratable portion of such Net Cash Proceeds after the prepayment of the Letter of Credit Advances and the Revolving Credit Advances then outstanding and any required cash collateralization of Letters of Credit then outstanding (the sum of such prepayment amounts, cash collateralization amounts and remaining amounts being referred to herein as the “Reduction Amount”) may be retained by the Borrower for use in its business and operations in the ordinary course. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the applicable Issuing Bank or Revolving Credit Lenders, as applicable.

(v) All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid.

Section 2.07 Interest. (a) Scheduled Interest. The Borrower shall pay interest on each Term Advance and each Revolving Credit Advance owing to each Lender from the date of such Term Advance and each Revolving Credit Advance until such principal amount shall be paid in full, at the following rates per annum:

(i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin in effect from time to time, payable in arrears monthly on the first Business Day of each month during such periods.

(ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such Interest Period for such Advance plus (B) the Applicable Margin in effect on the first day of such Interest Period, payable in arrears on the last Business Day of such Interest Period and, if such Interest Period has a duration of more than one

month, on the first Business Day of each month that occurs during such Interest Period every month from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full.

(b) Default Interest. Upon the occurrence and during the continuance of an Event of Default the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a) above and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a) and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Advances pursuant to clause (a)(i) above.

(c) Notice of Interest Rate. Promptly after receipt of a Notice of Borrowing pursuant to Section 2.02(a), the Administrative Agent shall give notice to the Borrower and each Lender of the interest rate determined by the Administrative Agent for purposes of clause (a) above.

Section 2.08 Fees. (a) Commitment Fees. The Borrower shall pay to the Administrative Agent for the account of the Revolving Credit Lenders a commitment fee, from the date hereof in the case of each such Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other such Lender until the Termination Date, payable in arrears on the Effective Date, thereafter monthly on the first day of each month and on the Termination Date, at the rate of 0.375% per annum on the average daily unused portion of the Unused Revolving Credit Commitment of such Lender; provided, however, that no commitment fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender.

(b) Letter of Credit Fees, Etc.

(i) The Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender a commission, payable in arrears on the first Business Day of each month, on the earliest to occur of the full drawing, expiration, termination or cancellation of any such Letter of Credit and on the Termination Date, on such Revolving Credit Lender’s Pro Rata Share of the average daily aggregate Available Amount during such month of all Letters of Credit outstanding from time to time at a rate per annum equal to the Applicable Margin for Eurodollar Rate Advances under the Revolving Credit Facility.

(ii) The Borrower shall pay to the Issuing Banks, for their own account, (A) a fronting fee, payable in arrears on the first Business Day of each month and on the Termination Date, on the average daily amount of its Letter of Credit Commitment during such month, from the Effective Date until the Termination Date, at the rate of 0.25% per annum and (B) the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the Issuing Banks.

(c) Initial Lender Fees. The Borrower shall pay to the Administrative Agent for the account of the Initial Lenders (and their respective Affiliates) such other fees as may be from time to time agreed among the Borrower and the Initial Lenders (and their respective Affiliates).

Section 2.09 Conversion of Advances. (a) Optional. The Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Section 2.10, Convert all or any portion of the Advances of one Type comprising the same Borrowing

into Advances of the other Type; provided, however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(c), no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c) and each Conversion of Advances comprising part of the same Borrowing shall be made ratably among the Lenders in accordance with their Commitments. Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower.

(b) Mandatory.

(i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Advances shall, at the end of the applicable Interest Period, automatically Convert into Base Rate Advances.

(ii) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance.

(iii) Upon the occurrence and during the continuance of any Event of Default, (x) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended.

Section 2.10 Increased Costs, Etc. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender Party of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining or participating in Letters of Credit or of agreeing to make or of making or maintaining Letter of Credit Advances (excluding, for purposes of this Section 2.10, any such increased costs resulting from (x) Taxes or Other Taxes (as to which Section 2.12 shall govern) and (y) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost; provided, however, that a Lender Party claiming additional amounts under this Section 2.10(a) agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error.

(b) If any Lender Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party’s commitment to lend or to issue or participate in Letters of Credit hereunder and other commitments of such type or the issuance or maintenance of or participation in the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender Party or such corporation (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party’s commitment to lend or to issue or participate in Letters of Credit hereunder or to the issuance or maintenance of or participation in any Letters of Credit. A certificate as to such amounts submitted to the Borrower by such Lender Party shall be conclusive and binding for all purposes, absent manifest error.

(c) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Lenders of making, funding or maintaining their Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist.

(d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or

maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) each Eurodollar Rate Advance will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist; provided, however, that, before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.

Section 2.11 Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes, irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.15), not later than 11:00 A.M. (New York, New York time) on the day when due (or, in the case of payments made by a Guarantor pursuant to Section 8.01, on the date of demand therefor) in U.S. dollars to the Administrative Agent at the Administrative Agent’s Account in same day funds. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrower is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the Notes to more than one Lender Party, to such Lender Parties for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lender Parties and (ii) if such payment by the Borrower is in respect of any Obligation then payable hereunder to one Lender Party, to such Lender Party for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 10.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.

(b) If the Administrative Agent receives funds for application to the Obligations under the Loan Documents under circumstances for which the Loan Documents do not specify the Advances to which, or the manner in which, such funds are to be applied, the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each Lender Party ratably in accordance with such Lender Party’s proportionate share of the principal amount of all outstanding Advances and the Available Amount of all Letters of Credit then outstanding, in repayment or prepayment of such of the outstanding Advances or other Obligations owed to such Lender Party, and for application to such principal installments, as the Administrative Agent shall direct.

(c) The Borrower hereby authorizes each Lender Party, if and to the extent payment owed to such Lender Party is not made when due hereunder or, in the case of a Lender, under the Note held by such Lender, to charge from time to time against any or all of the Borrower’s accounts with such Lender Party any amount so due. Each of the Lender Parties hereby agrees to notify the Borrower promptly after any such setoff and application shall be made by such Lender Party; provided, however, that the failure to give such notice shall not affect the validity of such charge.

(d) All computations of interest based on the Base Rate, of fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or the Federal Funds Rate shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual

number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error.

(e) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

(f) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender Party hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender Party on such due date an amount equal to the amount then due such Lender Party. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender Party together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Administrative Agent, at the Federal Funds Rate.

Section 2.12 Taxes. (a) Except as otherwise provided herein, any and all payments by any Loan Party to or for the account of any Lender Party or any Agent hereunder or under any other Loan Document shall be made, in accordance with Section 2.11 or the applicable provisions of such other Loan Document, if any, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and each Agent, (x) taxes, levies, imposts, deductions, charges or withholdings that are imposed on or measured by its overall net income and franchise taxes imposed in lieu thereof by the United States or by the state or foreign jurisdiction or any political subdivision thereof under the laws of which such Lender Party or such Agent, as the case may be, is organized or, in the case of each Lender Party, such Lender Party’s Applicable Lending Office is located or (y) any branch profit taxes imposed by the United States of America (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings being hereinafter referred to as “Taxes”). If any Loan Party shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Loan Document to any Lender Party or any Agent, subject to Section 2.12(f), (i) the sum payable by such Loan Party shall be increased as may be necessary so that after such Loan Party and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.12) such Lender Party or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make all such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law.

(b) In addition, each Loan Party shall pay any present or future stamp, documentary, excise, property, intangible, mortgage recording or similar taxes, charges or levies that arise from any payment made by such Loan Party hereunder or under any other Loan Documents or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement or the other Loan Documents (hereinafter referred to as “Other Taxes”).

(c) Except as otherwise provided herein, the Loan Parties shall indemnify each Lender Party and each Agent for and hold them harmless against the full amount of Taxes and Other

Taxes imposed on or paid by such Lender Party or such Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or such Agent (as the case may be) makes written demand therefor, which written demand shall be accompanied by copies of the applicable documentation evidencing the amount of such taxes.

(d) Within 30 days after the date of any payment of Taxes, the appropriate Loan Party shall furnish to the Administrative Agent, at its address referred to in Section 10.02, the original or a certified copy of a receipt evidencing such payment, to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Administrative Agent. In the case of any payment hereunder or under the other Loan Documents by or on behalf of a Loan Party through an account or branch outside the United States or by or on behalf of a Loan Party by a payor that is not a United States person, if such Loan Party determines that no Taxes are payable in respect thereof, such Loan Party shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of subsections (d) and (e) of this Section 2.12, the terms “United States person” shall have the meanings specified in Section 7701 of the Internal Revenue Code.

(e) Each Lender Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender Party and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter as reasonably requested in writing by the Borrower (but only so long thereafter as such Lender Party remains lawfully able to do so), provide each of the Administrative Agent and Borrower with two original properly completed Internal Revenue Service Forms W-8BEN, W-8IMY or W-8ECI, (in the case of a Lender Party that has certified in writing to the Administrative Agent that it is not (i) a “bank” (within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code), (ii) a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of any Loan Party or (iii) a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue Code), Internal Revenue Service Form W-8BEN,) as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the other Loan Documents or, in the case of a Lender Party that has certified that it is not a “bank” as described above, certifying that such Lender Party is a foreign corporation, partnership, estate or trust. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Lender Party becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) of this Section 2.12 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service Form W-8BEN, W-8IMY, W-8ECI or any successor, or the related certificate described above, that the applicable Lender Party reasonably considers to be confidential, such Lender Party shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information.

(f) For any period with respect to which a Lender Party has failed to provide the Borrower with the appropriate form, certificate or other document described in subsection (e) above (other than if such failure is due to a change in law, or in the interpretation or application thereof, occurring after the date on which a form, certificate or other document originally was required to be provided or if such form, certificate or other document otherwise is not required under subsection (e) above), such Lender Party shall not be entitled to increased payment or indemnification under subsection (a) or (c) of this Section 2.12 with respect to taxes imposed by the United States by reason of such failure; provided, however, that should a Lender Party become subject to taxes because of its failure to deliver a form, certificate or other document required hereunder, the Loan Parties shall take such steps as such Lender Party shall reasonably request to assist such Lender Party to recover such taxes.

(g) If any Lender Party determines, in its sole discretion, that it has actually and finally realized by reason of the refund of any Taxes paid or reimbursed by any Loan Party pursuant to subsection (a) or (c) above in respect of payments under the Loan Documents, a current monetary benefit that it would otherwise not have obtained, and that would result in the total payments under this Section 2.12 exceeding the amount needed to make such Lender Party whole, such Lender Party shall pay to the Borrower or other Loan Party, as the case may be, with reasonable promptness following the date on which it actually realizes such benefit, an amount equal to the lesser of the amount of such benefit or the amount of such excess, net of all out-of-pocket expenses in securing such refund.

Section 2.13 Sharing of Payments, Etc. If any Lender Party shall obtain at any time any payment, whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise (other than pursuant to Section 2.10, 2.12, 10.04 or 10.07), (a) on account of Obligations due and payable to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party at such time (other than pursuant to Section 2.10, 2.12, 10.04 or 10.07) to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party hereunder and under the Notes at such time (other than pursuant to Section 2.10, 2.12, 10.04 or 10.07) in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender Party at such time (other than pursuant to Section 2.10, 2.12, 10.04 or 10.07) to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time obtained by all of the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such participations in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that, if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party’s ratable share (according to the proportion of (i) the purchase price paid to such Lender Party to (ii) the aggregate purchase price paid to all Lender Parties) of such recovery together with an amount equal to such Lender Party’s ratable share (according to the proportion of (i) the amount of such other Lender Party’s required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower agrees that any Lender Party so purchasing a participation from another Lender Party pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such participation.

Section 2.14 Use of Proceeds. The proceeds of (a) the Revolving Credit Advances, the Swing Line Advances and the Letters of Credit shall only be utilized (i)(A) to refinance the Existing Receivables Facility and (B) to satisfy the obligations under the Credit Card Program as of the Petition Date in the ordinary course of business, (ii) to pay costs and expenses in connection with such refinancing and the Cases, and (iii) to provide financing for working capital, letters of credit, capital expenditures and other general corporate purposes of the Borrower and the Guarantors, provided that not more than $200,000,000 in Available Amount of Letters of Credit may be issued to provide credit support for Foreign Subsidiaries of the Borrower and (b) the Term Advances shall only be utilized (i) to refinance Pre-Petition Secured Indebtedness and to repay Revolving Credit Advances on the date of the Term Advance, (ii) to pay costs and expenses in connection such refinancing and (iii) for other general corporate purposes of the Loan Parties, provided, however, that no amounts shall be paid pursuant to this Section 2.14 for fees and disbursements incurred by any Loan Party in connection with any assertion or prosecution of claims or causes of action against the Agents or any Lender Party, including, without limitation, (x) any objection to, the contesting in any manner of, or the raising of any defenses to, the validity, perfection, priority or enforceability of the Obligations under this Agreement or the Administrative Agent’s Liens upon the Collateral, or (y) any other rights or interest of the Agents or the Lender Parties under the Loan Documents but not including assertions or prosecutions of claims and causes of action arising from an Agent’s or a Lender’s failure to perform hereunder; provided, further, that, the proceeds of the Advances shall be available, and the Borrower agrees that it shall use all such proceeds in a manner consistent with the most recent Thirteen Week Forecast.

Section 2.15 Defaulting Lenders. (a) In the event that, at any time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower shall be required to make any payment hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrower may, to the fullest extent permitted by applicable law, set off and otherwise apply the Obligation of the Borrower to make such payment to or for the account of such Defaulting Lender against the obligation of such Defaulting Lender to make such Defaulted Advance. In the event that, on any date, the Borrower shall so set off and otherwise apply its obligation to make any such payment against the obligation of such Defaulting Lender to make any such Defaulted Advance on or prior to such date, the amount so set off and otherwise applied by the Borrower shall constitute for all purposes of this Agreement and the other Loan Documents an Advance by such Defaulting Lender made on the date under the Facility pursuant to which such Defaulted Advance was originally required to have been made pursuant to Section 2.01. Such Advance shall be considered, for all purposes of this Agreement, to comprise part of the Borrowing in connection with which such Defaulted Advance was originally required to have been made pursuant to Section 2.01, even if the other Advances comprising such Borrowing shall be Eurodollar Rate Advances on the date such Advance is deemed to be made pursuant to this subsection (a). The Borrower shall notify the Administrative Agent at any time the Borrower exercises its right of set-off pursuant to this subsection (a) and shall set forth in such notice (A) the name of the Defaulting Lender and the Defaulted Advance required to be made by such Defaulting Lender and (B) the amount set off and otherwise applied in respect of such Defaulted Advance pursuant to this subsection (a). Any portion of such payment otherwise required to be made by the Borrower to or for the account of such Defaulting Lender which is paid by the Borrower, after giving effect to the amount set off and otherwise applied by the Borrower pursuant to this subsection (a), shall be applied by the Administrative Agent as specified in subsection (b) or (c) of this Section 2.15.

(b) In the event that, at any time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to the Administrative Agent or any of the other Lender Parties and (iii) the Borrower shall make any payment hereunder or under any other Loan Document to the Administrative Agent for the account of such Defaulting Lender, then the Administrative Agent may, on its behalf or on behalf of such other Lender Parties and to the fullest extent

permitted by applicable law, apply at such time the amount so paid by the Borrower to or for the account of such Defaulting Lender to the payment of each such Defaulted Amount to the extent required to pay such Defaulted Amount. In the event that the Administrative Agent shall so apply any such amount to the payment of any such Defaulted Amount on any date, the amount so applied by the Administrative Agent shall constitute for all purposes of this Agreement and the other Loan Documents payment, to such extent, of such Defaulted Amount on such date. Any such amount so applied by the Administrative Agent shall be retained by the Administrative Agent or distributed by the Administrative Agent to such other Lender Parties, ratably in accordance with the respective portions of such Defaulted Amounts payable at such time to the Administrative Agent and such other Lender Parties and, if the amount of such payment made by the Borrower shall at such time be insufficient to pay all Defaulted Amounts owing at such time to the Administrative Agent and the other Lender Parties, in the following order of priority:

(i) first, to the Administrative Agent for any Defaulted Amount then owing to the Administrative Agent in its capacity as Administrative Agent; and

(ii) second, to the Issuing Banks and the Swing Line Lender for any Defaulted Amounts then owing to them, in their capacities as such, ratably in accordance with such respective Defaulted Amounts then owing to the Issuing Banks and the Swing Line Lender; and

(iii) third, to any other Lender Parties for any Defaulted Amounts then owing to such other Lender Parties, ratably in accordance with such respective Defaulted Amounts then owing to such other Lender Parties.

Any portion of such amount paid by the Borrower for the account of such Defaulting Lender remaining, after giving effect to the amount applied by the Administrative Agent pursuant to this subsection (b), shall be applied by the Administrative Agent as specified in subsection (c) of this Section 2.15.

(c) In the event that, at any time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance or a Defaulted Amount and (iii) the Borrower, the Administrative Agent or any other Lender Party shall be required to pay or distribute any amount hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrower or such other Lender Party shall pay such amount to the Administrative Agent to be held by the Administrative Agent, to the fullest extent permitted by applicable law, in escrow or the Administrative Agent shall, to the fullest extent permitted by applicable law, hold in escrow such amount otherwise held by it. Any funds held by the Administrative Agent in escrow under this subsection (c) shall be deposited by the Administrative Agent in an account with Citibank, N.A., in the name and under the control of the Administrative Agent, but subject to the provisions of this subsection (c). The terms applicable to such account, including the rate of interest payable with respect to the credit balance of such account from time to time, shall be Citibank, N.A.’s standard terms applicable to escrow accounts maintained with it. Any interest credited to such account from time to time shall be held by the Administrative Agent in escrow under, and applied by the Administrative Agent from time to time in accordance with the provisions of, this subsection (c). The Administrative Agent shall, to the fullest extent permitted by applicable law, apply all funds so held in escrow from time to time to the extent necessary to make any Advances required to be made by such Defaulting Lender and to pay any amount payable by such Defaulting Lender hereunder and under the other Loan Documents to the Administrative Agent or any other Lender Party, as and when such Advances or amounts are required to be made or paid and, if the amount so held in escrow shall at any time be insufficient to make and pay all such Advances and amounts required to be made or paid at such time, in the following order of priority:

(i) first, to the Administrative Agent for any amount then due and payable by such Defaulting Lender to the Administrative Agent hereunder in its capacity as Administrative Agent;

(ii) second, to the Issuing Banks and the Swing Line Lender for any amounts then due and payable to them hereunder, in their capacities as such, by such Defaulting Lender, ratably in accordance with such respective amounts then due and payable to the Issuing Banks and the Swing Line Lender;

(iii) third, to any other Lender Parties for any amount then due and payable by such Defaulting Lender to such other Lender Parties hereunder, ratably in accordance with such respective amounts then due and payable to such other Lender Parties; and

(iv) fourth, to the Borrower for any Advance then required to be made by such Defaulting Lender pursuant to a Commitment of such Defaulting Lender.

In the event that any Lender Party that is a Defaulting Lender shall, at any time, cease to be a Defaulting Lender, any funds held by the Administrative Agent in escrow at such time with respect to such Lender Party shall be distributed by the Administrative Agent to such Lender Party and applied by such Lender Party to the Obligations owing to such Lender Party at such time under this Agreement and the other Loan Documents ratably in accordance with the respective amounts of such Obligations outstanding at such time.

(d) The rights and remedies against a Defaulting Lender under this Section 2.15 are in addition to other rights and remedies that the Borrower may have against such Defaulting Lender with respect to any Defaulted Advance and that the Administrative Agent or any Lender Party may have against such Defaulting Lender with respect to any Defaulted Amount.

Section 2.16 Evidence of Debt. (a) The Advances made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Advances made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Advances in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, amount and maturity of its Advances and payments with respect thereto.

(b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

Section 2.17 Priority and Liens. Subject to the limitations and exclusions set forth in Section 9.01(e)(iii) hereof, each of the Borrower and each Guarantor hereby covenants, represents and warrants that, upon entry of the Interim Order, the Obligations of the Borrower and such Guarantor hereunder and under the Loan Documents: (i) pursuant to Section 364(c)(1) of the Bankruptcy Code, shall at all times constitute an allowed Superpriority Claim; (ii) pursuant to Section 364(c)(2) of the

Bankruptcy Code, shall at all times be secured by a perfected first priority Lien on all unencumbered tangible and intangible property of the Borrower and such Guarantor and on all cash maintained in the L/C Cash Collateral Account and any investments of the funds contained therein, including any such property that is subject to valid and perfected Liens in existence on the Petition Date, which Liens are thereafter released or otherwise extinguished in connection with the satisfaction of the obligations secured by such Liens (excluding any avoidance actions under the Bankruptcy Code (but including the proceeds therefrom)); (iii) pursuant to Section 364(c)(3) of the Bankruptcy Code, shall be secured by a perfected Lien upon all real, personal and mixed property of the Borrower and such Guarantor that is subject to valid and perfected liens in existence on the Petition Date, junior to such valid and perfected Liens; and (iv) pursuant to Section 364(d)(1), shall be secured by a perfected priming Lien upon all tangible and intangible property of the Borrower and such Guarantor that presently secure the Pre-Petition Secured Indebtedness, subject and subordinated in each case with respect to clauses (i) through (iv) above, only to the Carve-Out. Except for the Carve-Out having priority over the Obligations, the Superpriority Claims shall at all times be senior to the rights of the Borrower, each Guarantor, any chapter 11 trustee and, subject to section 726 of the Bankruptcy Code, any chapter 7 trustee, or any other creditor (including, without limitation, post-petition counterparties and other post-petition creditors) in the Cases or any subsequent proceedings under the Bankruptcy Code, including, without limitation, any chapter 7 cases if any of the Borrower’s or the Guarantor’s cases are converted to cases under chapter 7 of the Bankruptcy Code.

Section 2.18 Payment of Obligations. Subject to the provisions of Section 6.01 and the DIP Financing Orders, upon the maturity (whether by acceleration or otherwise) of any of the Obligations under this Agreement or any of the other Loan Documents of the Borrower and the Guarantors, the Lender Parties shall be entitled to immediate payment of such Obligations without further application to or order of the Bankruptcy Court.

Section 2.19 No Discharge: Survival of Claims. Each of the Borrower and each Guarantor agree that (i) its obligations hereunder shall not be discharged by the entry of an order confirming any Reorganization Plan (and each of the Borrower and each Guarantor, pursuant to Section 1141(d)(4) of the Bankruptcy Code hereby waives any such discharge), (ii) the Superpriority Claim granted to the Administrative Agent and the Lender Parties pursuant to the Order and described in Section 2.17 and the Liens granted to the Administrative Agent and the Lender Parties pursuant to the Order and described in Section 2.17 shall not be affected in any manner by the entry of any order by the Bankruptcy Court, including an order confirming any Reorganization Plan, and (iii) notwithstanding the terms of any Reorganization Plan, its Obligations hereunder and under each other Loan Document shall be repaid in full in accordance with the terms hereof and the terms of each other Loan Document, the Interim Order, and the Final Order.

Section 2.20 Replacement of Certain Lenders.

In the event a Lender (“Affected Lender”) shall have (i) become a Defaulting Lender under Section 2.15, (ii) requested compensation from the Borrowers under Section 2.12 with respect to Taxes or Other Taxes or with respect to increased costs or capital or under Section 2.10 or other additional costs incurred by such Lender which, in any case, are not being incurred generally by the other Lenders, or (iii) delivered a notice pursuant to Section 2.10(d) claiming that such Lender is unable to extend Eurodollar Rate Advances to the Borrower for reasons not generally applicable to the other Lenders, then, in any case, the Borrower or the Administrative Agent may make written demand on such Affected Lender (with a copy to the Administrative Agent in the case of a demand by the Borrower and a copy to the Borrower in the case of a demand by the Administrative Agent) for the Affected Lender to assign, and such Affected Lender shall use commercially reasonable efforts to assign pursuant to one or more duly executed Assignments and Acceptances 5 Business Days after the date of such demand, to one or

more financial institutions that comply with the provisions of Section 10.07 which the Borrower or the Administrative Agent, as the case may be, shall have engaged for such purpose (“Replacement Lender”), all of such Affected Lender’s rights and obligations under this Agreement and the other Loan Documents (including, without limitation, its Commitment, all Advances owing to it, all of its participation interests in existing Letters of Credit, and its obligation to participate in additional Letters of Credit hereunder) in accordance with Section 10.07. The Administrative Agent is authorized to execute one or more of such Assignments and Acceptances as attorney-in-fact for any Affected Lender failing to execute and deliver the same within 5 Business Days after the date of such demand. Further, with respect to such assignment, the Affected Lender shall have concurrently received, in cash, all amounts due and owing to the Affected Lender hereunder or under any other Loan Document; provided that upon such Affected Lender’s replacement, such Affected Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.10 and 10.04, as well as to any fees accrued for its account hereunder and not yet paid, and shall continue to be obligated under Section 7.07 with respect to losses, obligations, liabilities, damages, penalties, actions, judgments, costs, expenses or disbursements for matters which occurred prior to the date the Affected Lender is replaced.

ARTICLE III

CONDITIONS TO EFFECTIVENESS

Section 3.01 Conditions Precedent to Effectiveness. The effectiveness of Original DIP Credit Agreement, the initial obligation of the Revolving Credit Lenders to make Revolving Credit Advances up to the Revolving Credit Availability Amount then in effect, the obligation of the Initial Swing Line Lender to make the initial Swing Line Advance and obligation of the Initial Issuing Banks to issue the initial Letter of Credit are, in each case, subject to the satisfaction of the following conditions precedent (other than those conditions specified in Schedule 5.01(n)(iii)):

(a) The Administrative Agent shall have received on or before the Effective Date the following, each dated such day (unless otherwise specified), in form and substance reasonably satisfactory to the Initial Lenders (unless otherwise specified) and (except for the Notes) in sufficient copies for each Initial Lender:

(i) The Notes payable to the order of the Lenders to the extent requested in accordance with Section 2.16(a).

(ii) Certified copies of the resolutions of the Boards of Directors of each of the Borrower and each Guarantor approving the execution and delivery of this Agreement, and of all documents evidencing other necessary constitutive action and, if any, governmental and other third party approvals and consents, if any, with respect to this Agreement and each other Loan Document other than any approval required and granted pursuant to the Interim Order.

(iii) A copy of the charter or other constitutive document of each Guarantor and each amendment thereto, certified (as of a date on or after November 15, 2005) by the Secretary of State of the jurisdiction of its incorporation or organization, as the case may be, thereof as being a true and correct copy thereof.

(iv) A certificate of each of the Borrower and each Material Guarantor signed on behalf of the Borrower and such Guarantor, respectively, by its President or a Vice President and its Secretary or any Assistant Secretary, dated the Effective Date (the

statements made in which certificate shall be true on and as of the Effective Date), certifying as to (A) the accuracy and completeness of the charter of the Borrower or such Guarantor and the absence of any changes thereto; (B) the accuracy and completeness of the bylaws of the Borrower or such Guarantor as in effect on the date on which the resolutions of the board of directors (or persons performing similar functions) of such Person referred to in Section 3.01(a)(ii) were adopted and the absence of any changes thereto (a copy of which shall be attached to such certificate); (C) the absence of any proceeding known to be pending for the dissolution, liquidation or other termination of the existence of the Borrower or any Guarantor; (D) the accuracy in all material respects of the representations and warranties made by the Borrower or such Guarantor in the Loan Documents to which it is or is to be a party as though made on and as of the Effective Date, before and after giving effect to all of the Borrowings and the issuance of all of the Letters of Credit to be made on such date and to the application of proceeds, if any, therefrom; and (E) the absence of any event occurring and continuing, or resulting from any of the Borrowings or the issuance of any of the Letters of Credit to be made on the Effective Date or the application of proceeds, if any, therefrom, that would constitute a Default.

(v) A certificate of the Secretary or an Assistant Secretary of each of the Borrower and each Material Guarantor certifying the names and true signatures of the officers of the Borrower and such Guarantor, respectively, authorized to sign this Agreement and the other documents to be delivered hereunder.

(vi) The following: (A) such certificates representing the Initial Pledged Equity of domestic entities referred to on Schedule V hereto, accompanied by undated stock powers, duly executed in blank, and such instruments evidencing the Initial Pledged Debt referred to on Schedule V hereto, duly indorsed in blank, as the Loan Parties may be able to deliver using their reasonable best efforts, (B) proper financing statements (Form UCC-1 or a comparable form) under the UCC of all jurisdictions that the Initial Lenders may deem necessary or desirable in order to perfect and protect the liens and security interest created or purported to be created under Article IX hereof, covering the Collateral described in Article IX hereof, in each case completed in a manner reasonably satisfactory to the Lender Parties, and (C) evidence of insurance as reasonably requested by the Initial Lenders.

(vii) An intellectual property security agreement (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the “Intellectual Property Security Agreement”), duly executed by each Loan Party, together with evidence that all actions that the Initial Lenders may deem reasonably necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Intellectual Property Security Agreement have been taken or will be taken in accordance with the terms of the Loan Documents.

(viii) A Thirteen Week Forecast detailing the Borrower’s anticipated cash receipts and disbursements reasonably satisfactory in form and substance to the Initial Lenders.

(ix) A Notice of Borrowing for any Borrowing to be made, and/or one or more Letter of Credit Applications for each Letter of Credit to be issued, on the Effective Date.

(x) A favorable opinion of (A) Jones Day, counsel to the Loan Parties, in substantially the form of Exhibit D-1 hereto, and addressing such other matters as the Initial Lenders may reasonably request, (B) Hunton & Williams LLP, Virginia and Delaware counsel to the Loan Parties, in substantially the form of Exhibit D-2 hereto, and addressing such other matters as the Initial Lenders may reasonably request and (C) Shumaker, Loop & Kendrick, LLP, Michigan counsel to the Loan Parties, in substantially the form of Exhibit D-3 hereto and addressing such other matters as the Initial Lenders may reasonably request .

(b) Interim Order. At the time of the Initial Extension of Credit, the Bankruptcy Court shall have entered an order in substantially the form of Exhibit E (the “Interim Order”) approving the Loan Documents and granting the Superpriority Claim status and the Liens described in Section 2.17.

(c) First Day Orders. All of the First Day Orders entered by the Bankruptcy Court at the time of commencement of the Cases shall be in form and substance reasonably satisfactory to the Initial Lenders.

(d) Payment of Fees. The Borrower shall have paid all accrued fees and expenses of the Lead Arrangers, the Administrative Agent and the Initial Lenders.

Section 3.02 Conditions Precedent to Each Borrowing and Each Issuance of a Letter of Credit. Each of (a) the obligation of each Appropriate Lender to make an Advance (other than a Letter of Credit Advance to be made by the Issuing Banks or a Lender pursuant to Section 2.03(c) and as set forth in Section 2.02(b) with respect to the Swing Line Advances made by a Lender) on the occasion of each Borrowing, and (b) the obligation of the Issuing Banks to issue a Letter of Credit (including the initial issuance of a Letter of Credit hereunder) or to renew a Letter of Credit and the right of the Borrower to request a Swing Line Borrowing, shall be subject to the further conditions precedent that on the date of such Borrowing, issuance or renewal:

(i) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Letter of Credit Application and the acceptance by the Borrower of the proceeds of such Borrowing or the issuance or renewal of such Letter of Credit, as the case may be, shall constitute a representation and warranty by the Borrower that both on the date of such notice and on the date of such Borrowing, issuance or renewal such statements are true):

(A) the representations and warranties contained in each Loan Document, are correct in all material respects on and as of such date, before and after giving effect to such Borrowing, issuance or renewal and to the application of the proceeds therefrom, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing, issuance or renewal, in which case as of such specific date;

(B) no event has occurred and is continuing, or would result from such Borrowing, issuance or renewal or from the application of the proceeds, if any, therefrom, that constitutes a Default; and

(C) the Interim Order is in full force and effect and has not been stayed, reversed, modified or amended in any respect without the prior written consent of the Initial Lenders, provided that at the time of the making of any Advance or the issuance of any Letter of Credit the amount of either of which, when added to the sum of the

aggregate Advances outstanding and the aggregate Available Amount of all Letters of Credit then outstanding, would exceed the amount authorized by the Interim Order (collectively, the “Additional Credit”), the Administrative Agent and each of the Lenders shall have received a copy of an order of the Bankruptcy Court in substantially the form of Exhibit F hereto (the “Final Order”), which, in any event, shall have been entered by the Bankruptcy Court no later than 45 days after entry of the Interim Order and at the time of the extension of any Additional Credit the Final Order shall be in full force and effect, shall authorize extensions of credit in respect of the Revolving Credit Facility and the Swing Line Facility in the aggregate amount up to the Revolving Credit Availability Amount and in respect of the Term Facility in the amount up to $700,000,000, and shall not have been stayed, reversed, modified or amended in any respect that is adverse to the Lender Parties without the prior written consent of the Initial Lenders; and if either the Interim Order or the Final Order is the subject of a pending appeal in any respect, neither the making of Advances nor the issuance of any Letter of Credit nor the performance by the Borrower or the Guarantor of any of their respective obligations under any of the Loan Documents shall be the subject of a presently effective stay pending appeal; and

(D) no Borrowing Base Deficiency will exist after giving effect to such Borrowing, issuance or renewal and to the application of the proceeds therefrom; and

(ii) the Lenders shall have received the Borrowing Base Certificate most recently required to be delivered pursuant to Section 5.03(q), the calculations contained in which shall be reasonably satisfactory to the Administrative Agent.

Section 3.03 Conditions Precedent to the Term Borrowing. The obligation of each Term Lender to make its Term Loan is subject to the satisfaction of the following conditions precedent:

(a) The Administrative Agent shall have received a Notice of Borrowing with respect to such Borrowing as required by Section 2.02.

(b) The Final Order shall have been entered by the Bankruptcy Court.

(c) The Borrower shall have furnished to the Administrative Agent (i) the DIP Budget, which shall be reasonably satisfactory to the Administrative Agent and the Initial Lenders and (ii) the unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2005, and the related unaudited Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the Fiscal Year then ended, each in form and substance reasonably satisfactory to the Initial Lenders.

(d) The Loan Parties and the Lenders shall have entered into the Borrowing Base Amendment.

(e) The Borrower shall have used commercially reasonable efforts to obtain debt ratings for the Facilities from each of Moody’s and S&P.

(f) The Borrower shall have paid to the Administrative Agent and the Lead Arrangers the then unpaid balance of all accrued and unpaid fees of the Administrative Agent and the Lead Arrangers, and the reasonable fees and out-of-pocket expenses of counsel to the Administrative Agent and the Lead Arrangers as to which invoices have been issued.

(g) The conditions set forth in Sections 3.01 and 3.02 shall have been satisfied.

Section 3.04 Determinations Under Sections 3.01 and 3.03. For purposes of determining compliance with the conditions specified in Sections 3.01 and 3.03, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the Effective Date specifying its objection thereto, and if a Borrowing occurs on the Effective Date, such Lender Party shall not have made available to the Administrative Agent such Lender Party’s ratable portion of such Borrowing.

Section 3.05 Conditions Precedent to the Amendment and Restatement Effective Date; Effect of Amendment and Restatement(a) . (a) This Agreement shall become effective upon the date (the “Amendment and Restatement Effective Date”) that the following conditions precedent are satisfied (or waived in accordance with Section 10.01):

(i) The Administrative Agent shall have received from each party hereto a counterpart of this Agreement signed on its behalf (which counterpart may be a facsimile of an original counterpart).

(ii) The Borrower shall have paid to the Administrative Agent and the Initial Lenders all fees that have accrued under the Existing DIP Credit Agreement for the period commencing on the Effective Date to the Amendment and Restatement Effective Date.

(b) On the Amendment and Restatement Effective Date, each Existing Letter of Credit shall be deemed, without further action by any party hereto, to be a Letter of Credit issued under this Agreement for all purposes of this Agreement and the other Loan Documents.

(c) On the Amendment and Restatement Effective Date, each Term Advance under the Existing DIP Credit Agreement shall be deemed, without further action by any party hereto, to be a Term Advance issued under this Agreement for all purposes of this Agreement and the other Loan Documents and the Interest Period with respect to such Term Advance shall continue as in effect on the Amendment and Restatement Effective Date.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01 Representations and Warranties of the Loan Parties. Each Loan Party represents and warrants as follows:

(a) Each of the Borrower and its Material Subsidiaries (i) is a corporation, partnership, limited liability company or other organization duly organized, validly existing and in good standing (or to the extent such concept is applicable to a non-U.S. entity, the functional equivalent thereof) under the laws of the jurisdiction of its incorporation or formation except where the failure to be in good standing (or the functional equivalent), individually or in the aggregate, would not have a Material Adverse Effect, (ii) is duly qualified as a foreign corporation (or other entity) and in good standing (or the functional equivalent thereof, if applicable) in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed, except where the failure to so qualify or be licensed and in good standing (or the functional equivalent thereof, if applicable), individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, and (iii) subject to the entry of the Interim Order by the Bankruptcy Court, has all requisite power and

authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted, except where the failure to have such power or authority, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. As of the Effective Date, all of the outstanding capital stock of each Loan Party (other than the Borrower) has been validly issued, is fully paid and non-assessable and is owned by the Persons listed on Schedule 4.01 hereto in the percentages specified on Schedule 4.01 hereto free and clear of all Liens, except those created under the Collateral Documents or otherwise permitted under Section 5.02(a) hereof.

(b) Set forth on Schedule 4.01 hereto is a complete and accurate list of all Subsidiaries of the Borrower (other than DCC and its Subsidiaries as of the Effective Date), showing as of the Effective Date (as to each such Subsidiary) the jurisdiction of its incorporation or organization, as the case may be, and the percentage of the Equity Interests owned (directly or indirectly) by the Borrower or its Subsidiaries.

(c) The execution, delivery and performance by each Loan Party of this Agreement, the Notes and each other Loan Document to which it is or is to be a party, and the consummation of each aspect of the transactions contemplated hereby, are within such Loan Party’s constitutive powers, have been duly authorized by all necessary constitutive action, and do not (i) contravene such Loan Party’s constitutive documents, (ii) subject to the entry of the Interim Order by the Bankruptcy Court, violate any applicable law (including, without limitation, the Securities Exchange Act of 1934), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, or any of their properties entered into by such Loan Party after the Petition Date except, in each case, other than any conflict, breach or violation which, individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect or (iv) except for the Liens created under the Loan Documents, the Interim Order and the Final Order, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries.

(d) Except for the entry of the DIP Financing Orders, filings or recordings already made or to be made pursuant to any federal law, rule or regulation or filings or recordings to be made in any jurisdiction outside of the United States, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Agreement, the Notes or any other Loan Document to which it is or is to be a party, or for the consummation of each aspect of the transactions contemplated hereby, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the requisite priority set forth in the DIP Financing Orders) or (iv) subject to the DIP Financing Orders, the exercise by the Administrative Agent or any Lender Party of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents.

(e) This Agreement has been, and each of the Notes, if any, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party thereto. This Agreement is, and each of the Notes and each other Loan Document when delivered hereunder will be, subject to the entry of the Interim Order by the Bankruptcy Court,

the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms.

(f) The Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2004, and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the Fiscal Year then ended, and the interim Consolidated balance sheets of the Borrower and its Subsidiaries as at March 31, 2005, June 30, 2005, and September 30, 2005 and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the respective periods then ended, in each case as restated, which have been furnished to each Lender Party present fairly the financial condition and results of operations of the Borrower and its Subsidiaries as of such dates and for such periods all in accordance with GAAP consistently applied (subject to year-end adjustments and in the case of unaudited financial statements, except for the absence of footnote disclosure). Since December 31, 2004, there has not occurred a Material Adverse Change.

(g) The DIP Budget and all projected Consolidated balance sheets, income statements and cash flow statements of the Borrower and its Subsidiaries delivered to the Lender Parties pursuant to Section 5.03(f) were prepared and will be prepared, as applicable, in good faith on the basis of the assumptions stated therein, which assumptions were fair and will be fair in the light of conditions existing at the time of delivery of such DIP Budget or projections, as the case may be, and represented and will represent, at the time of delivery, the Borrower’s best estimate of its future financial performance.

(h) Neither the Confidential Information Memorandum nor any other written information, exhibits and reports furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender Party on or after February 4, 2006 in connection with any Loan Document (other than to the extent that any such information, exhibits and reports constitute projections described in Section 4.01(g) above and any historical financial information delivered prior to the restatement thereof by the Borrower and its auditors) taken as a whole and in light of the circumstances in which made, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein, in light of the circumstances in which any such statements were made, not misleading.

(i) Except as set forth on Schedule 4.01(i) or as disclosed in any SEC filings, there is no action, suit, or proceeding affecting the Borrower or any of its Material Subsidiaries pending or, to the best knowledge of the Loan Parties, threatened before any court, governmental agency or arbitrator that (i) is reasonably expected to be determined adversely to the Loan Party and, if so adversely determined, would reasonably be expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Agreement, any Note or any other Loan Document.

(j) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance or any drawing under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.

(k) Other than the filing of the Cases and events related to such filing, no ERISA Event has occurred or is reasonably expected to occur with respect to any Plan that has resulted in or is reasonably expected to result in a Material Adverse Effect.

(l) The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan by an amount which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans by an amount which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower, its Material Subsidiaries, nor any ERISA Affiliates has incurred or is reasonably expected to incur any material withdrawal liability (as defined in Part I of Subtitle E of Title IV of ERISA) under any multiemployer plan.

(m) Except as set forth in Schedule 4.01(m) hereto, the operations and properties of each Loan Party and each of its Material Subsidiaries comply with all applicable Environmental Laws and Environmental Permits except for non-compliance that could not be reasonably likely to have a Material Adverse Effect, all past non compliance with such Environmental Laws and Environmental Permits has been resolved in a manner that could not be reasonably likely to have a Material Adverse Effect, and, to the knowledge of the Loan Parties after reasonable inquiry, no circumstances exist that would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Material Subsidiaries or any of their properties that could be reasonably likely to have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that could be reasonably likely to have a Material Adverse Effect.

(n) The DIP Financing Orders and the Collateral Documents create a valid and perfected security interest in the Collateral having the priority set forth therein securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable, as determined in the reasonable discretion of the Initial Lenders, to perfect and protect such security interest have been duly taken, except that the execution and delivery of local law governed pledge or analogous documentation with respect to Equity Interests in Subsidiaries of the Borrower organized in jurisdictions outside the United States, and the filing, notarization, registration or other publication thereof, and the taking of other actions, if any, required under local law of the relevant jurisdictions of organization for the effective grant and perfection of a Lien on such Equity Interests under laws of such jurisdictions of organization outside the United States, may be required in order to fully grant, perfect and protect such security interest under such local laws. The Loan Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the liens and security interests created or permitted under the Loan Documents.

(o) Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrowers, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of the Investment Company Act of 1940, as amended, or any rule, regulation or order of the Securities and Exchange Commission thereunder.

(p) Each Loan Party and each of its Subsidiaries has filed or caused to be filed all tax returns and reports (federal, state, local and foreign) which are required to have been filed and has paid or caused to be paid all taxes required to have been paid by it, together with applicable interest and penalties, except (a) taxes that are being contested in good faith by appropriate proceedings and for which such Borrower or such Subsidiary, as applicable, has set aside on its

books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

ARTICLE V

COVENANTS OF THE LOAN PARTIES

Section 5.01 Affirmative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, each Loan Party will:

(a) Corporate Existence. Preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except (i)(A) if in the reasonable business judgment of the Borrower or such Guarantor, as the case may be, it is in its best economic interest not to preserve and maintain such rights, privileges, qualifications, permits, licenses and franchises and the loss thereof is not materially disadvantageous to the Loan Parties, taken as a whole, and (B) such failure to preserve the same could not, in the aggregate, reasonably be expected to have a Material Adverse Effect, and (ii) as otherwise permitted by Section 5.02(h).

(b) Compliance with Laws. Comply with all laws, rules, regulations and orders of any governmental authority applicable to it or its property, such compliance to include without limitation, ERISA, Environmental Laws and The Racketeer Influenced and Corrupt Organizations Chapter of The Organized Crime Control Act of 1970, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.

(c) Insurance. Keep its insurable properties insured at all times, against such risks, including fire and other risks insured against by extended coverage, as is customary with companies of the same or similar size in the same or similar businesses (subject to deductibles and including provisions for self-insurance); and maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by the Borrower or any Guarantor, as the case may be, in such amounts and with such deductibles as are customary with companies of the same or similar size in the same or similar businesses and in the same geographic area and in each case with financially sound and reputable insurance companies (subject to provisions for self-insurance).

(d) Obligations and Taxes. Pay all its obligations arising after the Petition Date promptly and in accordance with their terms and pay and discharge and cause each of its Subsidiaries to pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property arising, or attributed to the period, after the Petition Date, before the same shall become in default, as well as all lawful claims for labor, materials and supplies or otherwise arising after the Petition Date which, if unpaid, would become a Lien or charge upon such properties or any part thereof; provided, however, that the Borrower and each Guarantor shall not be required to pay and discharge or to cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the (i) payment or discharge thereof shall be stayed by Section 362(a)(8) of the Bankruptcy Code, or (ii) the validity or amount thereof shall be contested in good faith by appropriate proceedings, in each case, if the Borrower and the Guarantors shall have set aside on their books adequate reserves therefor in conformity with GAAP.

(e) Access to Books and Records.

(i) Maintain or cause to be maintained at all times true and complete books and records in accordance with GAAP of the financial operations of the Borrower and the Guarantors; and provide the Lender Parties and their representatives access to all such books and records during regular business hours upon reasonable advance notice, in order that the Lender Parties may examine and make abstracts from such books, accounts, records and other papers for the purpose of verifying the accuracy of the various reports delivered by the Borrower or the Guarantors to any Agent or the Lenders pursuant to this Agreement or for otherwise ascertaining compliance with this Agreement and to discuss the affairs, finances and condition of the Borrower and the Guarantors with the officers and independent accountants of the Borrower; provided that the Borrower shall have the right to be present at any such visit or inspection.

(ii) Grant the Lender Parties access to and the right to inspect all reports, audits and other internal information of the Borrower and the Guarantors relating to environmental matters upon reasonable advance notice, but subject to appropriate limitations so as to preserve attorney-client privilege.

(iii) At any reasonable time and from time to time during regular business hours, upon reasonable notice, permit the Initial Lenders and/or any representatives designated by the Initial Lenders (including any consultants, accountants, lawyers and appraisers retained by the Initial Lenders) to visit the properties of the Borrower and the Guarantors to conduct evaluations, appraisals, environmental assessments and ongoing maintenance and monitoring in connection with the Borrower’s computation of the Borrowing Base and the assets included in the Borrowing Base and such other assets and properties of the Borrower or its Subsidiaries as the Initial Lenders may require, and to monitor the Collateral and all related systems; provided that the Borrower shall have the right to be present at any such visit and, unless an Event of Default has occurred and is continuing, such visits permitted under this clause (iii) shall be coordinated through the Administrative Agent and shall be made no more frequently than once in any fiscal quarter.

(iv) Permit third-party appraisals of Inventory; provided that such third-party appraisals may be conducted (i) no more than once per year or (ii) at any time upon the occurrence and continuance of an Event of Default.

(f) Use of Proceeds. Use the proceeds of the Advances solely for the purposes, and subject to the restrictions, set forth in Section 2.14.

(g) Restructuring Advisor; Financial Advisor. Retain at all times (i) a restructuring advisor and (ii) a financial advisor that, in each case, has substantial experience and expertise advising Chapter 11 debtors-in-possession in large and complex bankruptcy cases; provided that the Loan Parties shall be permitted to replace any such advisor with any another advisor satisfying the requirements of this subsection (g) and shall be permitted a period a time (not to exceed 10 Business Days) to file an application with the Bankruptcy Court to employ such replacement advisor.

(h) Priority. Acknowledge pursuant to Section 364(c)(1) of the Bankruptcy Code, the Obligations of the Loan Parties hereunder and under the other Loan Documents constitute allowed Superpriority Claims.

(i) Validity of Loan Documents. Use its best efforts to object to any application made on behalf of any Loan Party or by any Person to the validity of any Loan Document or the

applicability or enforceability of any Loan Document or which seeks to void, avoid, limit, or otherwise adversely affect the security interest created by or in any Loan Document or any payment made pursuant thereto.

(j) Maintenance of Cash Management System. Maintain a cash management system on terms reasonably acceptable to the Initial Lenders, it being acknowledged that the Cash Management System of the Borrower as in effect on the Effective Date is reasonably acceptable to the Initial Lenders.

(k) Account Control Agreements. (i) Maintain, with respect to lockbox or other blocked accounts maintained in connection with the Existing Receivables Facility immediately prior to the termination thereof, and (ii) obtain and deliver to the Administrative Agent no later than 60 days following the Effective Date (or such later date as the Initial Lenders may reasonably determine), with respect to all other lockbox and deposit accounts (other than disbursement accounts maintained in the ordinary course of business consistent with past practices), account control agreements with respect to all such lockboxes and other deposit accounts of the Borrower and each Guarantor in form and substance reasonably satisfactory to the Administrative Agent; provided, however, that this Section 5.01(k) shall not apply to (i) cash collateral accounts for Hedge Agreements, letters of credit, surety bonds and existing equipment leases (solely for purposes of collateralizing such letters of credit, surety bonds and existing equipment leases and solely to the extent permitted by Section 5.02(a)), (ii) payroll accounts maintained in the ordinary course of business, (iii) disbursement accounts maintained in the ordinary course of business for the prompt disbursement of amounts payable in the ordinary course of business, and (iv) deposit accounts to the extent the aggregate amount on deposit in each such deposit account does not exceed $1,000,000 at any time and the aggregate amount on deposit in all deposit accounts under this clause (iv) does not exceed $5,000,000 at any time.

(l) Additional Guarantors. Cause each Material Subsidiary that hereafter becomes party to a Case to execute a Guaranty Supplement within 10 days of becoming party thereto; provided, however, that notwithstanding the foregoing, no subsidiary will be required to become or remain a Guarantor or provide or maintain a lien on any of its assets as security for any of the Obligations (A) if such Subsidiary is not a wholly-owned Subsidiary; or (B) to the extent doing so would (1) result in any adverse tax consequences or (2) be prohibited by any applicable law.

(m) DIP Budget; Financial Statements. Furnish to the Administrative Agent (i) a DIP Budget which shall be reasonably satisfactory to the Administrative Agent and the Initial Lenders and (ii) the unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2005, and the related unaudited Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the Fiscal Year then ended, in each case not later than March 22, 2006.

(n) Further Assurances.

(i) Promptly upon reasonable request by any Agent, or any Lender Party through the Administrative Agent, correct, and cause each of its Subsidiaries promptly to correct, any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof

(ii) Promptly upon reasonable request by any Agent, or any Lender Party through the Administrative Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances,

pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as any Agent, or any Lender Party through the Administrative Agent, may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent permitted by applicable law, subject any Loan Party’s properties, assets, rights or interests to the Liens now or hereafter required to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens required to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so.

(iii) Promptly take, or cause to be taken, each action set forth in Schedule 5.01(n)(iii) to be taken by such Loan Party within the time period specified for such action to be taken on such schedule.

(o) Maintenance of Properties, Etc. Maintain and preserve all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted, and will from time to time make or cause to be made all appropriate repairs, renewals and replacements thereof except where failure to do so would not have a Material Adverse Effect; provided that, this subsection (o) shall not prohibit the sale, transfer or other disposition of any such property consummated in accordance with the other terms of this Agreement.

(p) Transfer of Receivables. Use commercially reasonable efforts to cause the Accounts subject to the Existing Receivables Facility to be transferred to the originator Loan Parties as promptly as practicable following payment in full of the Existing Receivables Facility.

Section 5.02 Negative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, no Loan Party will, at any time:

(a) Liens. Incur, create, assume or suffer to exist any Lien on any asset of the Borrower or any of its Material Subsidiaries now owned or hereafter acquired by any of the Borrower or the Guarantors, other than: (i) Liens existing on the Petition Date, (ii) Permitted Liens, (iii) Liens on assets of Foreign Subsidiaries to secure Debt permitted by Section 5.02(b)(vi), (iv) Liens in favor of the Administrative Agent and the Secured Parties, (v) Liens in connection with Debt permitted to be incurred pursuant to Section 5.02(b)(vii) so long as such Liens extend solely to the property (and improvements and proceeds of such property) acquired with the proceeds of such Debt or subject to the applicable Capitalized Lease, (vi) Liens in the form of cash collateral deposited to secure Obligations under Hedge Agreements provided and such cash is not in excess of $75,000,000, (vii) Liens arising pursuant to the Tooling Program and (viii) Liens on cash or Cash Equivalents to secure cash management obligations to Keybank National Association provided that such cash or cash equivalents are not in excess of $1,000,000.

(b) Debt. Contract, create, incur, assume or suffer to exist any Debt, or permit any of its Material Subsidiaries to contract, create, incur, assume or suffer to exist any Debt, except for (i) Debt under this Agreement and the other Loan Documents, (ii) Debt incurred prior to the

Petition Date (including any capital lease obligations assumed after the Petition Date), (iii) Debt arising from Investments among the Borrower and its Subsidiaries that are permitted hereunder, (iv) Debt in respect of any overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house transfers of funds; (v) Debt consisting of guaranties permitted by Section 5.02(c); (vi) Debt of Foreign Subsidiaries owing to third parties in an aggregate outstanding principal amount (together with the aggregate outstanding principal amount of all other Debt of Foreign Subsidiaries permitted under this subsection (b)) not in excess of $400,000,000 at any time outstanding and Debt of Canadian Subsidiaries of the Borrower under the Canadian Revolving Facility, (vii) Debt constituting purchase money debt and Capitalized Lease obligations (not otherwise included in subclause (ii) above) in an aggregate outstanding amount not in excess of $75,000,000, (viii)(x) Debt in respect of Hedge Agreements entered into in the ordinary course of business to protect against fluctuations in interest rates, foreign exchange rates and commodity prices and (y) Debt arising on and after the Petition Date under the Credit Card Program, provided that the aggregate amount of Debt in respect of (A) Secured Hedge Agreements and Secured Credit Card Obligations shall not exceed $50,000,000 at any time outstanding and (B) Hedge Agreements subject to Liens permitted under Section 5.02(a)(vi) shall not exceed $75,000,000 at any time outstanding, (ix) indebtedness which may be deemed to exist pursuant to any surety bonds, appeal bonds or similar obligations incurred in connection with any judgment not constituting an Event of Default, (x) indebtedness in respect of netting services, customary overdraft protections and otherwise in connection with deposit accounts in the ordinary course of business, (xi) payables owing to suppliers in connection with the Tooling Program, and (xii) Debt not otherwise permitted hereunder in an aggregate outstanding principal amount of $20,000,000.

(c) Guarantees and Other Liabilities. Contract, create, incur, assume or permit to exist, or permit any Material Subsidiary to contract, create, assume or permit to exist, any Guarantee Obligations, except (i) for any guaranty of Debt or other obligations of the Borrower or any Guarantor if the Borrower or such Guarantor could have incurred such Debt or obligations under this Agreement, (ii) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business and (iii) Guarantee Obligations constituting Investments of the Borrower and its Subsidiaries permitted hereunder.

(d) Chapter 11 Claims. Incur, create, assume, suffer to exist or permit any other Superpriority Claim that is pari passu with or senior to the claims of the Agents and the Secured Parties against the Borrower and the Guarantors except with respect to the Carve-Out.

(e) Dividends; Capital Stock. Declare or pay, directly or indirectly, any dividends or make any other distribution, or payment, whether in cash, property, securities or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of capital stock (or any options, warrants, rights or other equity securities or agreements relating to any capital stock) of the Borrower, or set apart any sum for the aforesaid purposes.

(f) Transactions with Affiliates. Enter into or permit any of its Material Subsidiaries to enter into any transaction with any Affiliate, other than on terms and conditions at least as favorable to the Borrower or such Subsidiary as would reasonably be obtained at that time in a comparable arm’s-length transaction with a Person other than an Affiliate, except for the following: (i) any transaction between any Loan Party and any other Loan Party or between any Non-Loan Party and any other Non-Loan Party; (ii) any transaction between any Loan Party and any Non-Loan Party that is at least as favorable to such Loan Party as would reasonably be obtained at that time in a comparable arm’s-length transaction with a Person other than an Affiliate; (iii) any transaction individually or of a type expressly permitted pursuant to the terms

of the Loan Documents; (iv) reasonable and customary director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements, in each case approved by the relevant Board of Directors; or (v) transactions in existence, or of a type in existence, on the Petition Date.

(g) Investments. Make or hold, or permit any of its Material Subsidiaries to make, any Investment in any Person, except for (i) (A) ownership by the Borrower or the Guarantors of the capital stock of each of the Subsidiaries listed on Schedule 4.01 and (B) other Investments existing on the Petition Date; (ii) Investments in Cash Equivalents and Investments by Foreign Subsidiaries in securities and deposits similar in nature to Cash Equivalents and customary in the applicable jurisdiction; (iii) advances and loans existing on the Petition Date among the Borrower and the Subsidiaries (including any refinancings or extensions thereof but excluding any increases thereof or any further advances of any kind in connection therewith); (iv) Investments or intercompany loans or advances made on or after the Petition Date (A) by any Loan Party to or in any other Loan Party, (B) by any Non-Loan Party to or in any Loan Party or (C) by any Non-Loan Party to or in any other Non-Loan Party; (v) investments (A) received in satisfaction or partial satisfaction thereof from financially troubled account debtors or in connection with the settlement of delinquent accounts and disputes with customers and suppliers, or (B) received in settlement of debts created in the ordinary course of business and owing to the Borrower or any Subsidiary or in satisfaction of judgments; (vi) Investments (A) in the form of deposits, prepayments and other credits to suppliers made in the ordinary course of business consistent with current market practices, (B) in the form of extensions of trade credit in the ordinary course of business, or (C) in the form of prepaid expenses and deposits to other Persons in the ordinary course of business; (vii) Investments made in any Person to the extent such investment represents the non-cash portion of consideration received for an asset sale permitted under the terms of the Loan Documents; (viii) loans or advance to directors, officers and employees for bona fide business purposes and in the ordinary course of business in an aggregate principal amount not to exceed $10,000,000 at any time outstanding; (ix) investments constituting guaranties permitted pursuant to Section 5.02(c)(i) or (ii) above; (x) Permitted Acquisitions in an amount not to exceed $75,000,000 in the case of the Borrower and its Subsidiaries during any Fiscal Year (provided that the Loan Parties may only make Permitted Acquisitions in an amount not to exceed $10,000,000 during any Fiscal Year); (xi) Investments in Spicer S.A. in an aggregate amount not in excess of the sum of $45,000,000 plus the aggregate amount of any transfers made to Spicer S.A. or any of its Subsidiaries in accordance with Section 5.02(h)(v) below, (xii) Investments in connection with the Tooling Program in an aggregate amount (together with any Investments in connection with the Tooling Program permitted under sub-clause (i)(B) above) not in excess of $135,000,000; (xiii) Investments by Loan Parties in Foreign Subsidiaries (A) in an aggregate amount not to exceed $50,000,000 at any time outstanding and (B) to the extent that Letters of Credit are permitted to be issued hereunder to provide credit support for third-party Debt of Foreign Subsidiaries; (xiv) Investments by Foreign Subsidiaries in other Foreign Subsidiaries and in the Loan Parties; and (xv) other Investments to the extent not permitted pursuant to any other subpart of this Section in an amount not to exceed $15,000,000 in any Fiscal Year.

(h) Disposition of Assets. Sell or otherwise dispose of, or permit any of its Material Subsidiaries to sell or otherwise dispose of, any assets (including, without limitation, the capital stock of any Subsidiary) except for (i) proposed divestitures publicly disclosed as of the Effective Date or otherwise disclosed to the Administrative Agent and the Lenders prior to the Effective Date; (ii) (x) sales of inventory or obsolete or worn-out property by the Borrower or any of its Subsidiaries in the ordinary course of business, (y) sales, leases or transfers of property by the Borrower or any of its Subsidiaries to the Borrower or a Subsidiary or to a third party in connection with the asset value recovery program to be established with GOIndustries, or (z)

sales by Non-Loan Parties of property no longer used or useful; (iii) the sale, lease, transfer or other disposition of any assets (A) by any Loan Party to any other Loan Party, (B) by any Non-Loan Party to any Loan Party or (C) by any Non-Loan Party to any other Non-Loan Party; (iv) sales, transfers or other dispositions of assets in connection with the Tooling Program; (v) the transfer by any US Loan Party of certain machinery, equipment and inventory to Spicer S.A. or any of its Subsidiaries so long as the aggregate value of all such assets transferred does not exceed $50,000,000; (vi) any sale, lease, transfer or other disposition made in connection with any Investment permitted under Sections 5.02(g)(ii), (v), (vi) or (ix) hereof; (vii) licenses, sublicenses or similar transactions of intellectual property in the ordinary course of business and the abandonment of intellectual property deemed no longer useful; (viii) equity issuances by any subsidiary to the Borrower or any other subsidiary to the extent such equity issuance constitutes an Investment permitted pursuant to Section 5.02(g)(iv); (ix) transfers of receivables and receivables related assets or any interest therein by any Foreign Subsidiary in connection with any factoring or similar arrangement, subject to compliance with Section 5.02(b)(vi); (x) other sales, leases, transfers or dispositions of assets for fair value at the time of such sale (as reasonably determined by Borrower) so long as (A) in the case of any sale or other disposition, not less than 75% of the consideration is cash, (B) no Default or Event of Default exists immediately before or after giving effect to any such sale, lease, transfer or other disposition, and (C) in the case of any sale, lease transfer or other disposition by any Loan Party, the fair value of all such assets sold, leased, transferred or otherwise disposed of in any fiscal year does not exceed an amount equal to $25,000,000.

(i) Nature of Business. Modify or alter, or permit any of its Material Subsidiaries to modify or alter, in any material manner the nature and type of its business as conducted at or prior to the Petition Date or the manner in which such business is currently conducted (except as required by the Bankruptcy Code), it being understood that sales permitted by Section 5.02(h) and discontinuing operations expressly identified as operations to be discontinued in the DIP Budget shall not constitute such a material modification or alteration.

(j) Limitation on Prepayments and Pre-Petition Obligations. Except as otherwise allowed pursuant to the Interim Order or the Final Order, (i) make any payment or prepayment on or redemption or acquisition for value (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) of any Pre-Petition Debt or other pre-Petition Date obligations of the Borrower or Guarantor, (ii) pay any interest on any Pre-Petition Debt of the Borrower or Guarantor (whether in cash, in kind securities or otherwise), or (iii) except as provided in the Interim Order, the Final Order or any order of the Bankruptcy Court and approved by the Required Lenders, make any payment or create or permit any Lien pursuant to Section 361 of the Bankruptcy Code (or pursuant to any other provision of the Bankruptcy Code authorizing adequate protection), or apply to the Court for the authority to do any of the foregoing; provided that (w) the Borrower may make payments pursuant to the Order approving Stipulation Among the Debtors, the Official Committee of Unsecured Creditors, the Debtors’ Postpetition Lenders and the Pension Benefit Guaranty Corporation Regarding the Debtors’ April 15, 2006 Pension Funding Payment entered by the Bankruptcy Court, (x) the Borrower may make payments for administrative expenses that are allowed and payable under Sections 330 and 331 of the Bankruptcy Code, (y) the Borrower may prepay the obligations under the Loan Documents and make payments permitted by the First Day Orders, and (z) the Borrower may make payments to such other claimants and in such amounts as may be consented to by the Initial Lenders and approved by the Bankruptcy Court. In addition, no Loan Party shall permit any of its Subsidiaries to make any payment, redemption or acquisition on behalf of such Loan Party which such Loan Party is prohibited from making under the provisions of this subsection (j).

(k) Capital Expenditures. Make, or permit any of its Subsidiaries to make, any Capital Expenditures that would cause the aggregate of all such Capital Expenditures made by the Borrower and its Subsidiaries during any fiscal year to exceed $325,000,000; provided, however, that if, for any year, the aggregate amount of capital expenditures made by the Borrower and its Subsidiaries is less than $325,000,000 (the difference between $325,000,000 and the amount of Capital Expenditures in such year (the “Excess Amount”), the Borrower shall be entitled to make additional Capital Expenditures in the immediately succeeding year in an amount equal to the Excess Amount, it being understood that the Excess Amount for any Fiscal Year shall be deemed the first amount used in any succeeding Fiscal Year.

(l) Mergers. Merge into or consolidate with any Person or permit any Person to merge into it, except (i) for mergers or consolidation constituting permitted Investments under Section 5.02(g) or asset dispositions permitted pursuant to Section 5.02(h), (ii) mergers, consolidations, liquidations or dissolutions (A) by any Loan Party (other than the Borrower) with or into any other Loan Party, (B) by any Non-Loan Party (other than a DCC Entity) with or into any Loan Party or (C) by any Non-Loan Party (other than a DCC Entity) with or into any other Non-Loan Party (other than a DCC Entity); provided that, in the case of any such merger or consolidation, the person formed by such merger or consolidation shall be a wholly owned Subsidiary of the Borrower, and provided further that in the case of any such merger or consolidation (x) to which the Borrower is a party, the Person formed by such merger or consolidation shall be the Borrower and (y) to which a Loan Party (other than the Borrower) is a party (other than a merger or consolidation made in accordance with subclause (D) above), the Person formed by such merger or consolidation shall be a Loan Party on the same terms; and (iii) the dissolution, liquidation or winding up of any subsidiary of the Borrower, provided that such dissolution, liquidation or winding up would not reasonably be expected to have a Material Adverse Effect and the assets of the Person so dissolved, liquidated or wound-up are distributed to its Borrower or to a Loan Party.

(m) Amendments of Constitutive Documents. Amend its constitutive documents, except for amendments that would not reasonably be expected to materially affect the interests of the Lenders.

(n) Accounting Changes. Make or permit any changes in (i) accounting policies or reporting practices, except as permitted or required by generally accepted accounting principles, or (ii) its Fiscal Year.

(o) Payment Restrictions Affecting Subsidiaries. Enter into or allow to exist, or allow any Material Subsidiary to enter into or allow to exist, any agreement prohibiting or conditioning the ability of the Borrower or any such Subsidiary to (i) create any lien upon any of its property or assets, (ii) make dividends to, or pay any indebtedness owed to, any Loan Party, (iii) make loans or advances to, or other investments in, any Loan Party, or (iv) transfer any of its assets to any Loan Party other than (A) any such agreement with or in favor of the Administrative Agent or the Lenders; (B) in connection with (1) any agreement evidencing any Liens permitted pursuant to Section 5.02(a)(iii), (v) or (vii) (so long as (x) in the case of agreements evidencing Liens permitted under Section (a)(iii), such prohibitions or conditions are customary for such Liens and the obligations they secure and (y) in the case of agreements evidencing Liens permitted under Section (a)(v) or (vii), such prohibitions or conditions relate solely to the assets that are the subject of such Liens) or (2) any Indebtedness permitted to be incurred under Sections 5.02(b)(vi), (vii), or (viii) above (so long as (x) in the case of agreements evidencing Indebtedness permitted under Section 5.02(b)(vi), such prohibitions or conditions are customary for such Indebtedness and (y) in the case of agreements evidencing Indebtedness permitted under

Section 5.02(b)(vii) or (viii), such prohibitions or conditions are limited to the assets securing such Indebtedness; (C) any agreement setting forth customary restrictions on the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract of similar property or assets; (D) any restriction or encumbrance imposed pursuant to an agreement that has been entered into by the Borrower or any Subsidiary for the disposition of any of its property or assets so long as such disposition is otherwise permitted under the Loan Documents; (E) any such agreement imposed in connection with consignment agreements entered into in the ordinary course of business; (F) customary anti-assignment provisions contained in any agreement entered into in the ordinary course of business; (G) any agreement in existence on the Petition Date and any assumption of any such agreement permitted hereunder so long as the terms or provisions in connection with any such assumption relating to liens are no more restrictive than the agreement in effect on the Petition Date; (H) any agreement in existence at the time a Subsidiary is acquired so long as such agreement was not entered into in contemplation of such acquisition; or (I) such encumbrances or restrictions required by applicable law.

(p) Sales and Lease Backs. Except as set forth on Schedule 5.02(p), become or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property, whether now owned or hereafter acquired (i) which such Loan Party has sold or transferred or is to sell or transfer to any other Person (other than another Loan Party) or (ii) which such Loan Party intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by a Loan Party to any Person (other than another Loan Party) in connection with such lease.

Section 5.03 Reporting Requirements. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will furnish to the Administrative Agent:

(a) Default Notice. As soon as possible and in any event within three Business Days after any Responsible Officer of the Borrower has knowledge of the occurrence of each Default or within five Business Days after any Responsible Officer of the Borrower has knowledge of the occurrence of any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of a Responsible Officer (or person performing similar functions) of the Borrower setting forth details of such Default or other event and the action that the Borrower has taken and proposes to take with respect thereto.

(b) Monthly Financials. For each month, as soon as available and in any event on the later of (i) 30 days after the end of such month and (ii) the date on which the Bankruptcy Court shall require the delivery thereof (but in no event later than the 60^th days after the end of such month), in each case, the financial information required to be delivered to the Bankruptcy Court for such month, which information shall be in form and detail satisfactory to the Required Lenders, and, without duplication, a comparison of such financial information with the projections for such month in the DIP Budget and a schedule in form reasonably satisfactory to the Initial Lenders of the computations used in determining compliance with the covenants contained in Section 5.04, all in reasonable detail and duly certified by a Responsible Officer of the Borrower.

(c) Quarterly Financials. Commencing with the fiscal quarter ending March 31, 2006, as soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year (or such earlier date as the Borrower may be required by the SEC to deliver its Form 10-Q or such later date as the SEC may permit for the delivery of the Borrower’s Form 10-Q and in the case of the first quarter of 2006, by May 31, 2006), a Consolidated balance

sheet of the Borrower and its Subsidiaries as of the end of such quarter, and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous quarter and ending with the end of such quarter, and Consolidated statements of income cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth, in each case in comparative form the corresponding figures for the corresponding period of the immediately preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by a Responsible Officer of the Borrower as having been prepared in accordance with GAAP, together with a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto.

(d) Annual Financials. As soon as available and in any event no later than 90 days (or 120 days in the case of the Fiscal Year ending December 31, 2005) following the end of the Fiscal Year ending December 31, 2005, a copy of the annual audit report for such Fiscal Year, including therein a Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such Fiscal Year, in each case accompanied by (A) an opinion acceptable to the Initial Lenders of independent public accountants of recognized national standing acceptable to the Initial Lenders and (B) a certificate of a Responsible Officer of the Borrower stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto, together with a schedule in form reasonably satisfactory to the Initial Lenders of the computations used in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Sections 5.02(k) and 5.04; provided that, in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.02(k) and 5.04, a statement of reconciliation conforming such financial statements to GAAP.

(e) Annual Forecasts. No later than 30 days after the end of each fiscal year (commencing with the fiscal year ending December 31, 2006) annual forecasts of the Borrower and its Consolidated Subsidiaries on a monthly basis.

(f) Cash Flows. (i) No later than the last Business Day of each month, commencing March 31, 2006, a cash flow forecast detailing cash receipts and cash disbursements on a weekly basis for the next 13 weeks (a “Thirteen Week Forecast”), the information and calculations contained in which shall be reasonably satisfactory to the Initial Lenders and (ii) as promptly as possible following delivery of a Thirteen Week Forecast and in no event later than five Business Days following such delivery, a Budget Variance Report for the month then ended.

(g) DIP Budget Supplement. No later than December 31, 2006, and on any other date on which the Borrower may deliver the same to the Bankruptcy Court, a supplement to the DIP Budget setting forth on a monthly basis for the remainder of the term of the Facilities an updated forecast of the information contained in the DIP Budget for such period and a written set of supporting assumptions, all in form reasonably satisfactory to the Initial Lenders.

(h) ERISA Events and ERISA Reports. Promptly and in any event within 10 Business Days after any Loan Party or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred with respect to an ERISA Plan, a statement of a Responsible Officer of the Borrower describing such ERISA Event and the action, if any, that such Loan Party or such

ERISA Affiliate has taken and proposes to take with respect thereto, on the date any records, documents or other information must be furnished to the PBGC with respect to any ERISA Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information.

(i) Plan Terminations. Promptly and in any event within two Business Days after receipt thereof by any Loan Party or any ERISA Affiliate, copies of each notice from the PBGC stating its intention to terminate any ERISA Plan or to have a trustee appointed to administer any ERISA Plan.

(j) Actuarial Reports. Promptly upon receipt thereof by any Loan Party or any ERISA Affiliate, a copy of the annual actuarial valuation report for each Plan the funded current liability percentage (as defined in Section 302(d)(8) of ERISA) of which is less than 90% or the unfunded current liability of which exceeds $5,000,000.

(k) Multiemployer Plan Notices. Promptly and in any event within five Business Days after receipt thereof by any Loan Party or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (i) the imposition of Withdrawal Liability by any such Multiemployer Plan, (ii) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the amount of liability incurred, or that may be incurred, by such Loan Party or any ERISA Affiliate in connection with any event described in clause (i) or (ii) above.

(l) Litigation. Promptly after the commencement thereof, notice of each unstayed action, suit, investigation, litigation and proceeding before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries that (i) is reasonably likely to be determined adversely and if so determined adversely would be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Agreement, any Note, any other Loan Document or the consummation of the transactions contemplated hereby.

(m) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that the Borrower sends to its public stockholders, copies of all regular, periodic and special reports, and all registration statements, that the Borrower files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange; provided that such documents may be made available by posting on the Borrower’s website.

(n) Environmental Conditions. Promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any non-compliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that would reasonably be expected to (i) have a Material Adverse Effect or (ii) cause any real property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that could reasonably be expected to have a Material Adverse Effect.

(o) Bankruptcy Pleadings, Etc. Promptly after the same is available, copies of all pleadings, motions, applications, judicial information, financial information and other documents filed by or on behalf of any of the Loan Parties with the Bankruptcy Court in the cases, or distributed by or on behalf of any of the Loan Parties to any Official Committee appointed in the cases, providing copies of same to the Initial Lenders and counsel for Administrative Agent; provided that such documents may be made available by posting on a website maintained by the Borrower, and identified to the Lenders, in connection with the Cases.

(p) Other Information. Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as any Lender Party (through the Administrative Agent), the Administrative Agent or any of their advisors may from time to time reasonably request.

(q) Borrowing Base Certificate. A Borrowing Base Certificate substantially in the form of Exhibit I as of the date required to be delivered or so requested, in each case with supporting documentation (including, without limitation, the documentation described in Schedule 1 to Exhibit I) shall be furnished to the Initial Lenders: (i) as soon as available and in any event prior to the Initial Extension of Credit to be made after the date of entry of the Final Order, (ii)(A) after the Initial Extension of Credit, on or before the 15th day following the end of each fiscal month, which monthly Borrowing Base Certificate shall reflect the Accounts and Inventory updated as of the end of each such month and (B) in addition to such monthly Borrowing Base Certificates, (x) upon the occurrence and continuance of an Event of Default or if Availability is less than $150,000,000, on or before the third Business Day following the end of each week, which weekly Borrowing Base Certificate shall reflect the Accounts updated as of the immediately preceding Friday; provided that if Availability is equal to or greater than $250,000,000 for three consecutive Business Days, such Borrowing Base Certificate shall be delivered pursuant to clause (ii)(A) herein and (y) on or before the third Business Day of each week, weekly updates of Accounts, certified by a Responsible Officer, and (iii) if requested by the Initial Lenders at any other time when the Initial Lenders reasonably believe that the then existing Borrowing Base Certificate is materially inaccurate, as soon as reasonably available after such request, in each case with supporting documentation as the Initial Lenders may reasonably request (including without limitation, the documentation described on Schedule 1 to Exhibit I).

Section 5.04 Financial Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will:

(a) Minimum Global EBITDAR. Maintain Consolidated EBITDAR of the Borrower and its Subsidiaries as at the last day of each calendar month not less than the amount set forth below for each period set forth below, as determined for such period then ended:


Month	Period then Ended	EBITDAR
May 2006	3 months	$25,000,000
June 2006	4 months	$40,000,000
July 2006	5 months	$55,000,000
August 2006	6 months	$75,000,000
September 2006	7 months	$105,000,000
October 2006	8 months	$135,000,000
November 2006	9 months	$165,000,000
December 2006	10 months	$195,000,000


Month	Period then Ended	EBITDAR
January 2007	11 months	$230,000,000
February 2007	12 months	$250,000,000
March 2007	12 months	$250,000,000
April 2007	12 months	$250,000,000
May 2007	12 months	$250,000,000
June 2007	12 months	$250,000,000
July 2007	12 months	$250,000,000
August 2007	12 months	$250,000,000
September 2007	12 months	$250,000,000
October 2007	12 months	$250,000,000
November 2007	12 months	$250,000,000
December 2007	12 months	$250,000,000
January 2008	12 months	$250,000,000
February 2008	12 months	$250,000,000

(b) Minimum Availability. Not permit Availability to be less than $100,000,000 on any Business Day if Availability on the immediately preceding Business Day was less than $100,000,000.

ARTICLE VI

EVENTS OF DEFAULT

Section 6.01 Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing:

(a) the Borrower shall fail to pay any principal of any Advance or any unreimbursed drawing with respect to any Letter of Credit when the same shall become due and payable or any Loan Party shall fail to make any payment of interest on any Advance or any other payment under any Loan Document within three business days after the same becomes due and payable; or

(b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or

(c) any Loan Party shall fail to perform or observe (i) any term, covenant or agreement contained in Sections 2.14, 5.01(f), 5.02, 5.03 or 5.04 or (ii) any term, covenant or agreement (other than those listed in clause (i) above) contained in Article V hereof, if such failure shall remain unremedied for 5 Business Days; or

(d) any Loan Party shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 10 days; or

(e) (i) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of one or more items of Debt arising after the Petition Date of the Loan Parties and their Subsidiaries (excluding Debt outstanding hereunder) that is outstanding in an aggregate principal or notional amount (or, in the case of any Hedge Agreement, an Agreement Value) of at least $35,000,000 when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreements or instruments relating to all such Debt; or (ii) any other event shall occur or condition shall exist under the agreements or instruments relating to one or more items of Debt arising after the Petition Date of the Loan Parties and their Subsidiaries (excluding Debt outstanding hereunder) that is outstanding in an aggregate principal or notional amount of at least $35,000,000, and such other event or condition shall continue after the applicable grace period, if any, specified in all such agreements or instruments, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder thereof to cause, such Debt to mature; or (iii) one or more items of Debt arising after the Petition Date of the Loan Parties and their Subsidiaries (excluding Debt outstanding hereunder) that is outstanding in an aggregate principal or notional amount (or, in the case of any Hedge Agreement, an Agreement Value) of at least $35,000,000 shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled or required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or

(f) one or more final, non-appealable judgments or orders for the payment of money in excess of $35,000,000 (exclusive of any judgment or order the amounts of which are fully covered by insurance (less any applicable deductible) which is not in dispute) in the aggregate at any time, as an administrative expense of the kind specified in Section 503(b) of the Bankruptcy Code shall be rendered against any Loan Party or any of its Subsidiaries and enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or

(g) one or more nonmonetary judgments or orders shall be rendered against any Loan Party or any of its Subsidiaries that is reasonably likely to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(h) any provision of any Loan Document after delivery thereof pursuant to Section 3.01 or Section 3.03 shall for any reason cease to be valid and binding on or enforceable against any Loan Party intended to be a party to it, or any such Loan Party shall so state in writing; or

(i) any Collateral Document after delivery thereof pursuant to Section 3.01 shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected lien on and security interest in the Collateral purported to be covered thereby; or

(j) any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Loan Parties and the ERISA Affiliates related to such ERISA Event) is reasonably likely to have a Material Adverse Effect; or

(k) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $5,000,000 or requires payments exceeding $2,500,000 per annum; or

(l) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $2,000,000; or

(m) any of the Cases concerning the Borrower or Guarantors shall be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code or any Loan Party shall file a motion or other pleading or support a motion or other pleading filed by any other Person seeking the dismissal of any of the Cases concerning the Borrower or Material Guarantors under Section 1112 of the Bankruptcy Code or otherwise; a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, a responsible officer or an examiner with enlarged powers relating to the operation of the business (powers beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code shall be appointed in any of the Cases and the order appointing such trustee, responsible officer or examiner shall not be reversed or vacated within 30 days after the entry thereof; or an application shall be filed by the Borrower or any Guarantor for the approval of any other Superpriority Claim (other than the Carve-Out) in any of the Cases which is pari passu with or senior to the claims of the Administrative Agent and the Lenders against the Borrower or any Guarantor hereunder, or there shall arise or be granted any such pari passu or senior Superpriority Claim; or

(n) the Bankruptcy Court shall enter an order or orders granting relief from the automatic stay applicable under Section 362 of the Bankruptcy Code to the holder or holders of any security interest to permit foreclosure (or the granting of a deed in lieu of foreclosure or the like) on any assets of any of the Borrower or the Guarantors that have a value in excess of $10,000,000 in the aggregate, provided that this subsection (n) shall not apply to any order granting relief from the automatic stay pursuant to which a creditor exercises valid setoff rights pursuant to Section 553 of the Bankruptcy Code, the Interim Order, Final Order, the First Day Orders, pursuant to Section 5.02 (j), in connection with any Lien permitted pursuant to Section 5.02(a)(ii) through (vii) or in connection with any pre-petition Lien on cash collateral securing a performance obligation (other than indebtedness for borrowed money); or

(o) an order of the Bankruptcy Court shall be entered (i) reversing, amending, staying for a period in excess of 10 days or vacating either of the DIP Financing Orders, (ii) without the written consent of the Administrative Agent and the requisite Lenders (in accordance with the provisions of Section 10.01), otherwise amending, supplementing or modifying either of the DIP Financing Orders in a manner that is reasonably determined by the Administrative Agent to be adverse to the Agents and the Lenders or (iii) terminating the use of cash collateral by the Borrower or the Guarantors pursuant to the DIP Financing Orders; or

(p) default in any material respect shall be made by the Borrower or any Guarantor in the due observance or performance of any term or condition contained in any DIP Financing Order; or

(q) any Loan Party shall bring a motion in the Cases: (i) to obtain working capital financing from any Person other than Lenders under Section 364(d) of the Bankruptcy Code; or (ii) to obtain financing for such Loan Party from any Person other than the Lenders under Section 364(c) of the Bankruptcy Code (other than with respect to a financing used, in whole or part, to repay in full the Obligations); or (iii) to grant any Lien other than those permitted under Section 5.02(a) upon or affecting any Collateral; or (iv) to use Cash Collateral of the Administrative Agent or Lenders under Section 363(c) of the Bankruptcy Code without the prior written consent of the Required Lenders (as provided in Section 10.01); except to pay the Carve-Out or (v) to recover from any portions of the Collateral any costs or expenses of preserving or disposing of such Collateral under Section 506(c) of the Bankruptcy Code; or (vi) to effect any other action or actions adverse to the Administrative Agent or Lenders or their rights and remedies hereunder or their interest in the Collateral that would, individually or in the aggregate, have a Material Adverse Effect; or

(r) the entry of the Final Order shall not have occurred within 45 days of the entry of the Interim Order; or

(s) any challenge by any Loan Party to the validity of any Loan Document or the applicability or enforceability of any Loan Document or which seeks to void, avoid, limit, or otherwise adversely affect the security interest created by or in any Loan Document or any payment made pursuant thereto; or

(t) a Change of Control shall occur;

then, and in any such event, subject only to the giving of an “Enforcement Notice” under and as defined in the DIP Financing Orders to the parties entitled thereunder to receive such notice, without further order of or application to the Bankruptcy Court, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances (other than Letter of Credit Advances by the Issuing Banks or a Lender pursuant to Section 2.03(c) and Swing Line Advances by a Lender pursuant to Section 2.02(b)) and of the Issuing Banks to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower.

Section 6.02 Actions in Respect of the Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of

the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Administrative Agent on behalf of the Lender Parties in same day funds at the Administrative Agent’s office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to 105% of the aggregate Available Amount of all Letters of Credit then outstanding. If at any time the Administrative Agent determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Administrative Agent and the Lender Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Administrative Agent determines to be free and clear of any such right and claim.

ARTICLE VII

THE AGENTS

Section 7.01 Appointment and Authorization of the Agents. (a) Each Lender Party hereby irrevocably appoints, designates and authorizes each of the Agents to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, no Agent shall have any duties or responsibilities, except those expressly set forth herein, nor shall any Agent have or be deemed to have any fiduciary relationship with any Lender Party or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against such Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

(b) Each Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each Issuing Bank shall have all of the benefits and immunities (i) provided to each Agent in this Article VII with respect to any acts taken or omissions suffered by such Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term “Agent” as used in this Article VII and in the definition of “Agent-Related Person” included such Issuing Bank with respect to such acts or omissions, and (ii) as additionally provided herein with respect to such Issuing Bank.

(c) Citicorp North America, Inc. hereby appoints Citicorp USA, Inc. to act as “collateral agent” or as “administrative agent” solely for the purpose of negotiating, executing, accepting delivery of and otherwise acting pursuant to collateral access agreements, Landlord Lien Waivers or any other similar agreement.

Section 7.02 Delegation of Duties. Each Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such

duties. No Agent shall be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

Section 7.03 Liability of Agents. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender Party or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender Party or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof.

Section 7.04 Reliance by Agents. (a) Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by such Agent, as applicable. Each Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

(b) For purposes of determining compliance with the conditions specified in Section 3.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the relevant Agent or Agents shall have received notice from such Lender prior to the Effective Date specifying its objection thereto.

Section 7.05 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to any Agent for the account of the Lenders, unless such Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default and stating that such notice is a “Notice of Default.” The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent, in consultation with the Initial Lenders, shall take such action with respect to such Default as may be directed by the Required Lenders in accordance with Article VI; provided, however, that unless and until the Administrative Agent has received any such direction, it may (but shall not be obligated to) take such action, or refrain from taking such action, in each case, in consultation with the Initial Lenders, with respect to such Default as it shall deem advisable or in the best interest of the Lenders.

Section 7.06 Credit Decision; Disclosure of Information by Agents. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by any Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any Agent herein, such Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person.

Section 7.07 Indemnification of Agents. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted primarily from such Agent-Related Person’s own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse each Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by any Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that such Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive termination of the Commitments, the payment of all other Obligations and the resignation of each of the Agents. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 7.07 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Lender Party, its directors, shareholders or creditors and whether or not the transactions contemplated hereby are consummated.

Section 7.08 Agents in Their Individual Capacity. CNAI, JPM and BofA and their respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though CNAI, JPM and BofA, as the case may be, were not an Agent or Issuing Bank hereunder, as the case may be, and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such

activities, each of CNAI, JPM and BofA and each of their respective Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that each of CNAI, JPM and BofA and their respective Affiliates shall be under no obligation to provide such information to them. With respect to its Loans, each of CNAI, JPM and BofA and their respective Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not an Agent, the Swing Line Lender or an Issuing Bank, as the case may be, and the terms “Lender” and “Lenders” include CNAI, JPM and BofA in its individual capacity.

Section 7.09 Successor Agent. Each Agent may resign from acting in such capacity upon 30 days’ notice to the Lenders and the Borrower; provided that any such resignation by CNAI shall also constitute the resignation by CNAI as Issuing Bank. If an Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of such Agent, such Agent may appoint, after consulting with the Lenders, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, the Person acting as such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and Issuing Bank and the term “Agent” shall mean such successor agent, and the retiring Agent’s appointment, powers and duties as Agent shall be terminated and in the case of the Administrative Agent, the retiring Issuing Bank’s rights, powers and duties as such shall be terminated, without any other or further act or deed on the part of such retiring Agent or Issuing Bank, as the case may be, or any other Lender, other than the obligation of the successor Issuing Bank to issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or to make other arrangements satisfactory to the retiring Issuing Bank to effectively assume the obligations of the retiring with respect to such Letters of Credit. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Article VII and Section 10.04 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

Section 7.10 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Advance shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether any Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Advances and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Agents (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Agents and their respective agents and counsel and all other amounts due the Lenders and the Agents under Sections 2.08 and 10.04) allowed in such judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative

Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due to the Administrative Agent under Sections 2.08 and 10.04.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

Section 7.11 Collateral and Guaranty Matters. The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion,

(a) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon termination of the Commitments and payment in full of all Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit, (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (iii) subject to Section 10.01, if approved, authorized or ratified in writing by the Required Lenders;

(b) to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 5.02(a);

(c) to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder or if all of such Person’s assets are sold or liquidated as permitted under the terms of the Loan Documents and the proceeds thereof are distributed to the Borrower; and

(d) to acquire, hold and enforce any and all Liens on Collateral granted by and of the Loan Parties to secure any of the Secured Obligations, together with such other powers and discretion as are reasonably incidental thereto.

Upon request by the Administrative Agent at any time, the Required Lenders (acting on behalf of all the Lenders) will confirm in writing that the Administrative Agent’s authority to release Liens or subordinate the interests of the Secured Parties in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 7.11.

Section 7.12 Other Agents; Arrangers and Managers. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “book runner,” “documentation agent,” “arranger,” or “lead arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

ARTICLE VIII

SUBSIDIARY GUARANTY

Section 8.01 Subsidiary Guaranty. Each Guarantor, severally, unconditionally and irrevocably guarantees (the undertaking by each Guarantor under this Article VIII being the “Guaranty”) the punctual payment when due, whether at scheduled maturity or at a date fixed for prepayment or by acceleration, demand or otherwise, of all of the Obligations of each of the other Loan Parties now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premium, fees, indemnification payments, contract causes of action, costs, expenses or otherwise (such Obligations being the “Guaranteed Obligations”), and agrees to pay any and all expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Administrative Agent or any of the other Secured Parties solely in enforcing any rights under this Guaranty. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any of the other Loan Parties to the Administrative Agent or any of the other Secured Parties under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

Section 8.02 Guaranty Absolute. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any other Secured Party with respect thereto. The Obligations of each Guarantor under this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents, and a separate action or actions may be brought and prosecuted against such Guarantor to enforce this Guaranty, irrespective of whether any action is brought against any other Loan Party or whether any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of, and such Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any and all of the following:

(a) any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise;

(c) any taking, exchange, release or nonperfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any Subsidiary Guaranty or any other guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of Collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral for all or any of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents, or any other property and assets of any other Loan Party or any of its Subsidiaries;

(e) any change, restructuring or termination of the corporate structure or existence of any other Loan Party or any of its Subsidiaries;

(f) any failure of the Administrative Agent or any other Secured Party to disclose to any Loan Party any information relating to the financial condition, operations, properties or prospects of any other Loan Party now or hereafter known to the Administrative Agent or such other Secured Party, as the case may be (such Guarantor waiving any duty on the part of the Secured Parties to disclose such information);

(g) the failure of any other Person to execute this Guaranty or any other guarantee or agreement of the release or reduction of the liability of any of the other Loan Parties or any other guarantor or surety with respect to the Guaranteed Obligations; or

(h) any other circumstance (including, without limitation, any statute of limitations or any existence of or reliance on any representation by the Administrative Agent or any other Secured Party) that might otherwise constitute a defense available to, or a discharge of, such Guarantor, any other Loan Party or any other guarantor or surety other than payment in full in cash of the Guaranteed Obligations.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Administrative Agent or any other Secured Party or by any other Person upon the insolvency, bankruptcy or reorganization of any other Loan Party or otherwise, all as though such payment had not been made.

Section 8.03 Waivers and Acknowledgments. (a) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty, and any requirement that the Administrative Agent or any other Secured Party protect, secure, perfect or insure any Lien or any property or assets subject thereto or exhaust any right or take any action against any other Loan Party or any other Person or any Collateral.

(b) Each Guarantor hereby unconditionally waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

(c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by the Secured Parties which in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights to proceed against any of the other Loan Parties, any other guarantor or any other Person or any Collateral, and (ii) any defense based on any right of setoff or counterclaim against or in respect of such Guarantor’s obligations hereunder.

(d) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 8.02 and this Section 8.03 are knowingly made in contemplation of such benefits.

Section 8.04 Subrogation. Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or may hereafter acquire against any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of its Obligations under this Guaranty or under any other Loan Document, including, without limitation,

any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any other Secured Party against such other Loan Party or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from such other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, until such time as all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all of the Letters of Credit and all Secured Hedge Agreements shall have expired or been terminated and the Commitments shall have expired or terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of all of the Guaranteed Obligations and all other amounts payable under this Guaranty, (b) the latest date of expiration or termination of all Letters of Credit and all Secured Hedge Agreements, and (c) the Termination Date, such amount shall be held in trust for the benefit of the Administrative Agent and the other Secured Parties and shall forthwith be paid to the Administrative Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) any Guarantor shall pay to the Administrative Agent all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, (iii) all Letters of Credit and all Secured Hedge Agreements shall have expired or been terminated, and (iv) the Termination Date shall have occurred, the Administrative Agent and the other Secured Parties will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer of subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from the payment made by such Guarantor.

Section 8.05 Additional Guarantors. Upon the execution and delivery by any Person of a guaranty joinder agreement in substantially the form of Exhibit H hereto (each, a “Guaranty Supplement”), (i) such Person shall be referred to as an “Additional Guarantor” and shall become and be a Guarantor hereunder, and each reference in this Guaranty to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and each reference in any other Loan Document to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and (ii) each reference herein to “this Guaranty”, “hereunder”, “hereof” or words of like import referring to this Guaranty, and each reference in any other Loan Document to the “Guaranty”, “thereunder”, “thereof” or words of like import referring to this Guaranty, shall include each such duly executed and delivered Guaranty Supplement.

Section 8.06 Continuing Guarantee; Assignments. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of all of the Guaranteed Obligations and all other amounts payable under this Guaranty, (ii) the latest date of expiration or termination of all Letters of Credit and all Secured Hedge Agreements, and (iii) the Termination Date, (b) be binding upon each Guarantor and its successors and assigns and (c) inure to the benefit of, and be enforceable by, the Administrative Agent and the other Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, any Lender Party may assign or otherwise transfer all or any portion of its rights and obligations under this Agreement (including, without limitation, all or any portion of its Commitment or Commitments, the Advances owing to it and the Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender Party under this Article VIII or otherwise, in each case as provided in Section 10.07.

Section 8.07 No Reliance. Each Guarantor has, independently and without reliance upon any Agent or any Lender Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty and each other Loan Document to which it is or is to be a party, and such Guarantor has established adequate means of obtaining from each other Loan Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of such other Loan Party.

ARTICLE IX

SECURITY

Section 9.01 Grant of Security. To induce the Lenders to make the Advances, and the Issuing Banks to issue Letters of Credit, each Loan Party hereby grants to the Administrative Agent, for itself and for the ratable benefit of the Secured Parties, as security for the full and prompt payment when due (whether at stated maturity, by acceleration or otherwise) of the Obligations of such Loan Party under the Loan Documents, all Cash Management Obligations of such Loan Party, all Obligations of such Loan Party under Secured Hedge Agreements and all Secured Credit Card Obligations, and each agreement or instrument delivered by any Loan Party pursuant to any of the foregoing (whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, fees, premiums, penalties, indemnifications, contract causes of action, costs, expenses or otherwise) (collectively, the “Secured Obligations”) a continuing first priority Lien and security interest (subject only to certain Liens permitted pursuant to Section 5.02(a) and the Carve-Out as set forth in Section 2.17) in accordance with subsections 364(c)(2) and (3) of the Bankruptcy Code in and to all Collateral of such Loan Party. “Collateral” means, except as otherwise specified in the DIP Financing Orders, all of the property and assets of each Loan Party and its estate, real and personal, tangible and intangible, whether now owned or hereafter acquired or arising and regardless of where located, including but not limited to:

(a) all Equipment;

(b) all Inventory;

(c) all Accounts (and any and all such supporting obligations, security agreements, mortgages, Liens, leases, letters of credit and other contracts being the “Related Contracts”);

(d) all General Intangibles;

(e) the following (the “Security Collateral”):

(i) the Initial Pledged Equity and the certificates, if any, representing the Initial Pledged Equity, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Equity and all subscription warrants, rights or options issued thereon or with respect thereto;

(ii) the Initial Pledged Debt and the instruments, if any, evidencing the Initial Pledged Debt, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Debt;

(iii) all additional shares of stock and other Equity Interests from time to time acquired by such Loan Party in any manner (such shares and other Equity Interests, together with the Initial Pledged Equity, being the “Pledged Equity”), and the certificates, if any, representing such additional shares or other Equity Interests, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares or other Equity Interests and all subscription warrants, rights or options issued thereon or with respect thereto; provided that no Loan Party shall be required to pledge any Equity Interests in any Foreign Subsidiary (or any Equity Interests in any entity that is treated as a partnership or a disregarded entity for United States federal income tax purposes and whose assets are substantially only Equity Interests in Foreign Subsidiaries (a “Flow-Through Entity”) that own directly or indirectly through one or more other Flow-Through Entities, Equity Interests in any Foreign Subsidiaries) owned or otherwise held by such Loan Party which, when aggregated with all of the other Equity Interests in such Foreign Subsidiary (or Flow-Through Entity) pledged by any Loan Party, would result (or would be deemed to result for United States federal income tax purposes) in more than 66% of the total combined voting power of all classes of stock in a Foreign Subsidiary entitled to vote (within the meaning of Treasury Regulation Section 1.956-2(c)(2) promulgated under the Internal Revenue Code) (the “Voting Foreign Stock”) being pledged to the Administrative Agent, on behalf of the Secured Parties, under this Agreement (although all of the shares of stock in a Foreign Subsidiary not entitled to vote (within the meaning of Treasury Regulation Section 1.956-2(c)(2) promulgated under the Internal Revenue Code) (the “Non-Voting Foreign Stock”) shall be pledged by each of the Loan Parties that owns or otherwise holds any such Non-Voting Foreign Stock therein); provided further that, if, as a result of any change in the tax laws of the United States of America after the date of this Agreement, the pledge by such Loan Party of any additional shares of stock in any such Foreign Subsidiary to the Administrative Agent, on behalf of the Secured Parties, under this Agreement would not result in an increase in the aggregate net consolidated tax liabilities or in the reduction of any loss carryforward, tax basis or other tax attribute, of the Borrower and its Subsidiaries, then, promptly after the change in such laws, all such additional shares of stock shall be so pledged under this Agreement;

(iv) all additional indebtedness from time to time owed to such Loan Party (such indebtedness, together with the Initial Pledged Debt, being the “Pledged Debt”) and the instruments, if any, evidencing such indebtedness, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness; and

(v) all other investment property (including, without limitation, all (A) securities, whether certificated or uncertificated, (B) security entitlements, (C) securities accounts, (D) commodity contracts and (E) commodity accounts) in which such Loan Party has now, or acquires from time to time hereafter, any right, title or interest in any manner, and the certificates or instruments, if any, representing or evidencing such investment property, and all dividends, distributions, return of capital, interest, distributions, value, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such investment property and all subscription warrants, rights or options issued thereon or with respect thereto (the “Pledged Investment Property”);

(f) the following (collectively, the “Account Collateral”):

(i) all deposit and other bank accounts and all funds and financial assets from time to time credited thereto (including, without limitation, all Cash Equivalents), all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such funds and financial assets, and all certificates and instruments, if any, from time to time representing or evidencing such accounts;

(ii) all promissory notes, certificates of deposit, deposit accounts, checks and other instruments from time to time delivered to or otherwise possessed by the Administrative Agent for or on behalf of such Loan Party, including, without limitation, those delivered or possessed in substitution for or in addition to any or all of the then existing Account Collateral; and

(iii) all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral;

(g) the following (collectively, the “Intellectual Property”):

(i) all patents, patent applications, utility models and statutory invention registrations, all inventions claimed or disclosed therein and all improvements thereto (“Patents”);

(ii) all trademarks, service marks, domain names, trade dress, logos, designs, slogans, trade names, business names, corporate names and other source identifiers, whether registered or unregistered (provided that no security interest shall be granted in United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law), together, in each case, with the goodwill symbolized thereby (“Trademarks”);

(iii) all copyrights, including, without limitation, copyrights in Computer Software, internet web sites and the content thereof, whether registered or unregistered (“Copyrights”);

(iv) all computer software, programs and databases (including, without limitation, source code, object code and all related applications and data files), firmware and documentation and materials relating thereto, together with any and all maintenance rights, service rights, programming rights, hosting rights, test rights, improvement rights, renewal rights and indemnification rights and any substitutions, replacements, improvements, error corrections, updates and new versions of any of the foregoing (“Computer Software”);

(v) all confidential and proprietary information, including, without limitation, know-how, trade secrets, manufacturing and production processes and techniques, inventions, research and development information, databases and data, including, without limitation, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information (collectively, “Trade Secrets”), and all other intellectual, industrial

and intangible property of any type, including, without limitation, industrial designs and mask works;

(vi) all registrations and applications for registration for any of the foregoing, including, without limitation, those registrations and applications for registration in the United States (other than patent applications) set forth in Schedule II hereto (as such Schedule II may be supplemented from time to time by supplements to the IP Security Agreement, each such supplement being substantially in the form of Exhibit G hereto (an “IP Security Agreement Supplement”), executed by such Loan Party to the Administrative Agent from time to time), together with all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations thereof;

(vii) all tangible embodiments of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Loan Party accruing thereunder or pertaining thereto;

(viii) all agreements, permits, consents, orders and franchises relating to the license, development, use or disclosure of any of the foregoing to which such Loan Party, now or hereafter, is a party or a beneficiary, including, without limitation, the material and key agreements not entered into in the ordinary course of business set forth in Schedule III hereto (such scheduled agreements, the “IP Agreements”); and

(ix) any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages;

(h) all of the right, title and interest of the Loan Parties in all real property the title to which is held by the Loan Parties, or the possession of which is held by the Loan Parties pursuant to leasehold interest, and in all such leasehold interests, together in each case with all of the right, title and interest of the Loan Parties in and to all buildings, improvements, and fixtures related thereto, any lease or sublease thereof, all general intangibles relating thereto and all proceeds thereof (collectively, the “Real Property Collateral”);

(i) all proceeds of licenses granted to the Loan Parties by the Federal Communications Commission;

(j) all books and records (including, without limitation, customer lists, credit files, printouts and other computer output materials and records) of such Loan Party pertaining to any of the Collateral; and

(k) all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral (including, without limitation, proceeds, collateral and supporting obligations that constitute property of the types described in clauses (a) through (j) of this Section 9.01 and this clause (k)) and, to the extent not otherwise included, all (A) payments under insurance (whether or not the Administrative Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, (B) tort claims, including, without limitation, all commercial tort claims and (C) cash.

; provided, however, that Collateral shall not include any Excluded Property.

Section 9.02 Further Assurances. (a) Each Loan Party agrees that from time to time, at the expense of such Loan Party, such Loan Party will promptly execute and deliver, or otherwise authenticate, all further instruments and documents, and take all further action that may be necessary or desirable, or that any Agent may reasonably request, in order to perfect and protect any pledge or security interest granted or purported to be granted by such Loan Party hereunder or to enable such Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral of such Loan Party. Without limiting the generality of the foregoing, each Loan Party will promptly with respect to Collateral of such Loan Party: (i) if any such Collateral shall be evidenced by a promissory note or other instrument or chattel paper, upon request of the Administrative Agent, deliver and pledge to such Agent hereunder such note or instrument or chattel paper duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to such Agent; (ii) execute or authenticate and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as any Agent may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted by such Loan Party hereunder; (iii) at the request of any Agent, deliver to such Agent for benefit of the Secured Parties certificates representing Pledged Collateral that constitutes certificated securities, accompanied by undated stock or bond powers executed in blank; (iv) take all action necessary to ensure that such Agent has control of Pledged Collateral and of Collateral consisting of deposit accounts, electronic chattel paper, letter-of-credit rights and transferable records as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC and in Section 16 of the Uniform Electronics Transactions Act, as in effect in the jurisdiction governing such transferable record; (v) at the request of any Agent, take all necessary action to ensure that such Agent’s security interest is noted on any certificate of ownership related to any Collateral evidenced by a certificate of ownership; (vi) at the reasonable request of any Agent, take commercially reasonable efforts to cause such Agent to be the beneficiary under all letters of credit that constitute Collateral, with the exclusive right to make all draws under such letters of credit, and with all rights of a transferee under Section 5-114(e) of the UCC; and (vii) deliver to such Agent evidence that all other action that such Agent may deem reasonably necessary or desirable in order to perfect and protect the security interest created by such Loan Party under this Agreement has been taken. From time to time upon reasonable request by any Agent, each Loan Party will, at such Loan Party’s expense, cause to be delivered to such Agent, for the benefit of the Secured Parties, an opinion of counsel, from outside counsel reasonably satisfactory to such Agent, as to such matters relating to the transactions contemplated by this Article IX as such Agent may reasonably request.

(b) Each Loan Party hereby authorizes each Agent to file one or more financing or continuation statements, and amendments thereto, including, without limitation, one or more financing statements indicating that such financing statements cover all assets or all personal property (or words of similar effect) of such Loan Party, in each case without the signature of such Loan Party, and regardless of whether any particular asset described in such financing statements falls within the scope of the UCC or the granting clause of this Agreement. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. Each Loan Party ratifies its authorization for each Agent to have filed such financing statements, continuation statements or amendments filed prior to the date hereof.

(c) Each Loan Party will furnish to each Agent from time to time statements and schedules further identifying and describing the Collateral of such Loan Party and such other reports in connection with such Collateral as such Agent may reasonably request, all in reasonable detail.

(d) Notwithstanding subsections (a) and (b) of this Section 9.02, or any failure on the part of any Loan Party or any Agent to take any of the actions set forth in such subsections, the Liens and

security interests granted herein shall be deemed valid, enforceable and perfected by entry of the Interim Order and the Final Order, as applicable. No financing statement, notice of lien, mortgage, deed of trust or similar instrument in any jurisdiction or filing office need be filed or any other action taken in order to validate and perfect the Liens and security interests granted by or pursuant to this Agreement, the Interim Order or the Final Order.

Section 9.03 Rights of Lender; Limitations on Lenders’ Obligations. (a) Subject to each Loan Party’s rights and duties under the Bankruptcy Code (including Section 365 of the Bankruptcy Code), and anything herein to the contrary notwithstanding, (i) each Loan Party shall remain liable under the contracts and agreements included in such Loan Party’s Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Administrative Agent of any of the rights hereunder shall not release any Loan Party from any of its duties or obligations under the contracts and agreements included in the Collateral and (iii) no Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any other Loan Document, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Loan Party thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

(b) Except as otherwise provided in this subsection (b), each Loan Party will continue to collect, at its own expense, all amounts due or to become due such Loan Party under the Accounts and Related Contracts. In connection with such collections, such Loan Party may take (and, upon the occurrence and during the continuance of an Event of Default, at the Administrative Agent’s direction, will take) such action as such Loan Party or the Administrative Agent may deem necessary or advisable to enforce collection of the Accounts and Related Contracts; provided, however, that, subject to any requirement of notice provided in the DIP Financing Orders or in Section 6.01, the Administrative Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default, to notify the obligors under any Accounts and Related Contracts of the assignment of such Accounts and Related Contracts to the Administrative Agent and to direct such obligors to make payment of all amounts due or to become due to such Loan Party thereunder directly to the Administrative Agent and, upon such notification and at the expense of such Loan Party, to enforce collection of any such Accounts and Related Contracts, to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Loan Party might have done, and to otherwise exercise all rights with respect to such Accounts and Related Contracts, including, without limitation, those set forth in Section 9-607 of the UCC. Upon and during the exercise by the Administrative Agent on behalf of the Lenders of any of the remedies described in the proviso of the immediately preceding sentence, (i) any and all amounts and proceeds (including, without limitation, instruments) received by such Loan Party in respect of the Accounts and Related Contracts of such Loan Party shall be received in trust for the benefit of the Administrative Agent hereunder, shall be segregated from other funds of such Loan Party and shall be forthwith paid over to the Administrative Agent in the same form as so received (with any necessary endorsement) to be deposited in a collateral account maintained with the Administrative Agent and applied as provided in Section 9.07(b) and (ii) such Loan Party will not adjust, settle or compromise the amount or payment of any Account or amount due on any Related Contract, release wholly or partly any obligor thereof, or allow any credit or discount thereon. No Loan Party will permit or consent to the subordination of its right to payment under any of the Accounts and Related Contracts to any other indebtedness or obligations of the obligor thereof.

(c) Each Initial Lender shall have the right to make test verification of the Accounts (other than Accounts that any Loan Party is required to maintain as “classified”) in any manner and through any medium that it considers advisable in its reasonable discretion, and each Loan Party agrees to furnish all such assistance and information as any Initial Lender may reasonably require in connection therewith.

Section 9.04 Covenants of the Loan Parties with Respect to Collateral. Each Loan Party hereby covenants and agrees with the Administrative Agent that from and after the date of this Agreement and until the Secured Obligations (other than contingent indemnification obligations which are not then due and payable) are fully satisfied or cash collateralized:

(a) Delivery and Control of Pledged Collateral.

(i) All certificates or instruments representing or evidencing Pledged Collateral shall be delivered to and held by or on behalf of the Administrative Agent pursuant hereto at the request of the Administrative Agent, and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Administrative Agent. In addition, the Administrative Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations.

(ii) With respect to any Pledged Collateral in which any Loan Party has any right, title or interest and that constitutes an uncertificated security, upon the request of the Administrative Agent such Loan Party will cause the issuer thereof either (i) to register the Administrative Agent as the registered owner of such security or (ii) to agree in an authenticated record with such Loan Party and the Administrative Agent that such issuer will comply with instructions with respect to such security originated by the Administrative Agent without further consent of such Loan Party, such authenticated record to be in form and substance reasonably satisfactory to the Administrative Agent. With respect to any Pledged Collateral in which any Loan Party has any right, title or interest and that is not an uncertificated security, upon the request of the Administrative Agent, such Loan Party will notify each such issuer of Pledged Equity that such Pledged Equity is subject to the security interest granted hereunder.

(iii) Except as provided in Section 9.07, such Loan Party shall be entitled to receive all cash dividends paid in respect of the Initial Pledged Collateral (other than liquidating or distributing dividends) with respect to the Initial Pledged Equity. Any sums paid upon or in respect of any of the Pledged Equity upon the liquidation or dissolution of any issuer of any of the Initial Pledged Equity, any distribution of capital made on or in respect of any of the Initial Pledged Equity or any property distributed upon or with respect to any of the Initial Pledged Equity pursuant to the recapitalization or reclassification of the capital of any issuer of Initial Pledged Equity or pursuant to the reorganization thereof shall be delivered to the Administrative Agent to hold as collateral for the Secured Obligations.

(iv) Except as provided in Section 9.07, such Loan Party will be entitled to exercise all voting, consent and corporate rights with respect to Pledged Equity; provided, however, that no vote shall be cast, consent given or right exercised or other action taken by such Loan Party which would impair the Pledged Collateral or which would be inconsistent in any material respect with or result in any violation of any provision of this Agreement or any other Loan Document or, without prior notice to the Administrative Agent, to enable or take any other action to permit any issuer of Pledged Equity to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any issuer of Pledged Equity other than issuances, transfers and grants to a Loan Party.

(v) Such Loan Party shall not grant control over any investment property to any Person other than the Administrative Agent, except to the extent permitted pursuant to this Agreement.

(vi) In the case of each Loan Party which is an issuer of Pledged Equity, such Loan Party agrees to be bound by the terms of this Agreement relating to the Pledged Equity issued by it and will comply with such terms insofar as such terms are applicable to it.

(b) Maintenance of Records. Such Loan Party will keep and maintain, at its own cost and expense, satisfactory and complete records of the Collateral, in all material respects, including, without limitation, a record of all payments received and all credits granted with respect to the Collateral and all other material dealings concerning the Collateral. For the Administrative Agent’s further security, each Loan Party agrees that the Administrative Agent shall have a property interest in all of such Loan Party’s books and records pertaining to the Collateral and, upon the occurrence and during the continuation of an Event of Default, such Loan Party shall deliver and turn over any such books and records to the Administrative Agent or to its representatives at any time on demand of the Administrative Agent.

(c) Indemnification With Respect to Collateral. In any suit, proceeding or action brought by the Administrative Agent relating to any Collateral for any sum owing thereunder or to enforce any provision of any Collateral, such Loan Party will save, indemnify and keep the Secured Parties harmless from and against all expense, loss or damage suffered by the Secured Parties by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder, arising out of a breach by such Loan Party of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from such Loan Party, and all such obligations of such Loan Party shall be and remain enforceable against and only against such Loan Party and shall not be enforceable against the Administrative Agent.

(d) Limitation on Liens on Collateral. Such Loan Party will not create, permit or suffer to exist, and will defend the Collateral against and take such other action as is necessary to remove, any Lien on the Collateral except Liens permitted under Section 5.02(a) and will defend the right, title and interest of the Administrative Agent in and to all of such Loan Party’s rights under the Collateral against the claims and demands of all Persons whomsoever other than claims or demands arising out of Liens permitted under Section 5.02(a).

(e) As to Intellectual Property Collateral.

(i) Except as set forth in the last sentence of this clause (i), with respect to each item of its Intellectual Property Collateral, each Loan Party agrees to take, at its expense, all necessary steps, including, without limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other United States governmental authority, to (A) maintain the validity and enforceability of such Intellectual Property Collateral and maintain such Intellectual Property Collateral in full force and effect, and (B) pursue the registration and maintenance of each patent, trademark, or copyright registration or application, now or hereafter included in such Intellectual Property Collateral of such Loan Party, including, without limitation, the payment of required fees and taxes, the filing of responses to office actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or other governmental authorities, the filing of applications for renewal or extension, the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the filing of divisional, continuation, continuation-in-part, reissue and renewal applications or extensions, the payment of maintenance fees and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings. Except to the extent permitted pursuant to this Agreement, no Loan Party shall, without the written consent of the Administrative Agent,

discontinue use of or otherwise abandon any Intellectual Property Collateral, or abandon any right to file an application for patent, trademark, or copyright, unless such Loan Party shall have previously determined that such use or the pursuit or maintenance of such Intellectual Property Collateral is no longer desirable in the conduct of such Loan Party’s business and that the loss thereof would not be reasonably likely to have a Material Adverse Effect, in which case, such Loan Party will give notice quarterly of any such abandonment to the Administrative Agent.

(ii) Each Loan Party shall take all steps which it or the Administrative Agent deems reasonable and appropriate under the circumstances to preserve and protect each item of its Intellectual Property Collateral, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the Trademarks, consistent with the quality of the products and services as of the date hereof, and taking all steps necessary to ensure that all licensed users of any of the Trademarks use such consistent standards of quality.

(iii) Each Loan Party agrees that should it obtain a material ownership interest in any item of the type set forth in Section 9.01(g) that is not on the date hereof a part of the Intellectual Property Collateral (“After-Acquired Intellectual Property”) (i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired Intellectual Property and, in the case of trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual Property Collateral subject to the terms and conditions of this Agreement with respect thereto. At the end of each quarter, each Loan Party shall give prompt written notice to the Administrative Agent identifying the After-Acquired Intellectual Property (other than patent applications and trade secrets, the disclosure of which shall not be required until a patent is issued) acquired during such quarter, and such Loan Party shall execute and deliver to the Administrative Agent with such written notice, or otherwise authenticate, an IP Security Agreement Supplement covering such After-Acquired Intellectual Property and any newly issued patents, which IP Security Agreement Supplement may be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authorities necessary to perfect the security interest hereunder in such After-Acquired Intellectual Property.

Section 9.05 Performance by Agent of the Loan Parties’ Obligations. (a) Administrative Agent Appointed Attorney-in-Fact. Each Loan Party hereby irrevocably appoints the Administrative Agent such Loan Party’s attorney-in-fact after the occurrence and during the continuance of an Event of Default, with full authority in the place and stead of such Loan Party and in the name of such Loan Party or otherwise, from time to time, in the Administrative Agent’s discretion, to take any action and to execute any instrument that the Administrative Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:

(i) to obtain and adjust insurance required to be paid to the Administrative Agent pursuant to this Agreement,

(ii) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral,

(iii) to receive, indorse and collect any drafts or other instruments, documents and chattel paper, in connection with clause (i) or (ii) above, and

(iv) to file any claims or take any action or institute any proceedings that the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent with respect to any of the Collateral.

(b) Administrative Agent May Perform. If any Loan Party fails to perform any agreement contained herein, the Administrative Agent may, as the Administrative Agent deems necessary to protect the security interest granted hereunder in the Collateral or to protect the value thereof, but without any obligation to do so and without notice, itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by such Loan Party under Section 10.04.

(c) Performance of such Loan Party’s agreements as permitted under this Section 9.05 shall in no way constitute a violation of the automatic stay provided by Section 362 of the Bankruptcy Code and each Loan Party hereby waives applicability thereof. Moreover, the Administrative Agent shall in no way be responsible for the payment of any costs incurred in connection with preserving or disposing of Collateral pursuant to Section 506(c) of the Bankruptcy Code and the Collateral may not be charged for the incurrence of any such cost.

Section 9.06 The Administrative Agent’s Duties. (a) The powers conferred on the Administrative Agent hereunder are solely to protect the Secured Parties’ interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not any Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which it accords its own property.

(b) Anything contained herein to the contrary notwithstanding, the Administrative Agent may from time to time, when the Administrative Agent deems it to be necessary, appoint one or more subagents (each a “Subagent”) for the Administrative Agent hereunder with respect to all or any part of the Collateral. In the event that the Administrative Agent so appoints any Subagent with respect to any Collateral, (i) the assignment and pledge of such Collateral and the security interest granted in such Collateral by each Loan Party hereunder shall be deemed for purposes of this Security Agreement to have been made to such Subagent, in addition to the Administrative Agent, for the ratable benefit of the Secured Parties, as security for the Secured Obligations of such Loan Party, (ii) such Subagent shall automatically be vested, in addition to the Administrative Agent, with all rights, powers, privileges, interests and remedies of the Administrative Agent hereunder with respect to such Collateral, and (iii) the term “Administrative Agent,” when used herein in relation to any rights, powers, privileges, interests and remedies of the Administrative Agent with respect to such Collateral, shall include such Subagent; provided, however, that no such Subagent shall be authorized to take any action with respect to any such Collateral unless and except to the extent expressly authorized in writing by the Administrative Agent.

Section 9.07 Remedies. If any Event of Default shall have occurred and be continuing:

(a) Subject to and in accordance with the DIP Financing Orders, the Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default

under the UCC (whether or not the UCC applies to the affected Collateral) and also may: (i) require each Loan Party to, and each Loan Party hereby agrees that it will at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the Collateral as directed by the Administrative Agent and make it available to the Administrative Agent at a place and time to be designated by the Administrative Agent that is reasonably convenient to both parties; (ii) without notice except as specified below or in the DIP Financing Orders, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Administrative Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable; (iii) occupy any premises owned or leased by any of the Loan Parties where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Loan Party in respect of such occupation; and (iv) exercise any and all rights and remedies of any of the Loan Parties under or in connection with the Collateral, or otherwise in respect of the Collateral, including, without limitation, (A) any and all rights of such Loan Party to demand or otherwise require payment of any amount under, or performance of any provision of, the Accounts, the Related Contracts and the other Collateral, (B) withdraw, or cause or direct the withdrawal, of all funds with respect to the Account Collateral and (C) exercise all other rights and remedies with respect to the Accounts, the Related Contracts and the other Collateral, including, without limitation, those set forth in Section 9-607 of the UCC. Each Loan Party agrees that, to the extent notice of sale shall be required by law, at least 10 days’ notice to such Loan Party of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b) Any cash held by or on behalf of the Administrative Agent and all cash proceeds received by or on behalf of the Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Administrative Agent, be held by the Administrative Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Administrative Agent pursuant to Section 9.08) in whole or in part by the Administrative Agent for the ratable benefit of the Secured Parties against, all or any part of the Secured Obligations, in the following manner:

(i) first, paid ratably to each Agent for any amounts then owing to such Agent pursuant to Section 10.04 or otherwise under the Loan Documents; and

(ii) second:

(A) in the case of the Revolving Credit Collateral, first ratably (1) paid to the Revolving Credit Lenders for any amounts then owing to them, in their capacities as such, in respect of the Obligations under the Revolving Credit Facility ratably in accordance with such respective amounts then owing to such Revolving Credit Lenders, (2) paid to each Lender Party (or its applicable Affiliate) for any amounts then owing to such Lender Party (or such Affiliate) in respect of Secured Credit Card Obligations in an aggregate amount for all such obligations not to exceed $25,000,000, (3) paid to each Lender Party (or its applicable Affiliate) for any amounts then owing to such Lender Party (or such Affiliate) in respect of Cash Management Obligations and Secured Hedge Agreements in an aggregate amount for all such obligations not to exceed the sum of $25,000,000

plus the unused amount, if any, under the foregoing clause (2) and (4) deposited as Collateral in the L/C Cash Collateral Account up to an amount equal to 105% of the aggregate Available Amount of all outstanding Letters of Credit, provided that in the event that any such Letter of Credit is drawn, the Administrative Agent shall pay to the Issuing Bank that issued such Letter of Credit the amount held in the L/C Cash Collateral Account in respect of such Letter of Credit, provided further that, to the extent that any such Letter of Credit shall expire or terminate undrawn and as a result thereof the amount of the Collateral in the L/C Cash Collateral Account shall exceed 105% of the aggregate Available Amount of all then outstanding Letters of Credit, such excess amount of such Collateral shall be applied in accordance with the remaining order of priority set out in this Section 9.07(b) and second ratably paid to the Term Lenders for any amounts then owing to them, in their capacities as such, in respect of the Obligations under the Term Facility; and

(B) in the case of the Term Collateral, first ratably paid to the Term Lenders for any amounts then owing to them, in their capacities as such, in respect of the Obligations under the Term Facility and second ratably (1) paid to the Revolving Credit Lenders for any amounts then owing to them, in their capacities as such, in respect of the Obligations under the Revolving Credit Facility ratably in accordance with such respective amounts then owing to such Revolving Credit Lenders, (2) paid to each Lender Party (or its applicable Affiliate) for any amounts then owing to such Lender Party (or such Affiliate) in respect of Secured Credit Card Obligations in an aggregate amount for all such obligations not to exceed $25,000,000, (3) paid to each Lender Party (or its applicable Affiliate) for any amounts then owing to such Lender Party (or such Affiliate) in respect of Cash Management Obligations and Secured Hedge Agreements in an aggregate amount for all such obligations not to exceed the sum of $25,000,000 plus the unused amount, if any, under the foregoing clause (2) and (4) deposited as Collateral in the L/C Cash Collateral Account up to an amount equal to 105% of the aggregate Available Amount of all outstanding Letters of Credit, provided that in the event that any such Letter of Credit is drawn, the Administrative Agent shall pay to the Issuing Bank that issued such Letter of Credit the amount held in the L/C Cash Collateral Account in respect of such Letter of Credit, provided further that, to the extent that any such Letter of Credit shall expire or terminate undrawn and as a result thereof the amount of the Collateral in the L/C Cash Collateral Account shall exceed 105% of the aggregate Available Amount of all then outstanding Letters of Credit, such excess amount of such Collateral shall be applied in accordance with the remaining order of priority set out in this Section 9.07(b); and

(iii) third, ratably to each Lender Party (or its applicable Affiliate) for any amounts then owing to such Lender Party (or such Affiliate), to the extent not included in clause (ii) above, in respect of all remaining Cash Management Obligations, obligations under Secured Hedge Agreements and Secured Credit Card Obligations.

(c) All payments received by any Loan Party under or in connection with the Collateral shall be received in trust for the benefit of the Administrative Agent, and after the occurrence, continuance and declaration of an Event of Default, shall be segregated from other funds of such Loan Party and shall be forthwith paid over to the Administrative Agent in the same form as so received (with any necessary endorsement).

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(d) The Administrative Agent may, without notice to any Loan Party except as required by law or by the DIP Financing Orders and at any time or from time to time, charge, set off and otherwise apply all or any part of the Secured Obligations against any funds held with respect to the Account Collateral or in any other deposit account.

(e) In the event of any sale or other disposition of any of the Intellectual Property Collateral of any Loan Party, the goodwill symbolized by any Trademarks subject to such sale or other disposition shall be included therein, and such Loan Party shall supply to the Administrative Agent or its designee such Loan Party’s know-how and expertise, and documents and things relating to any Intellectual Property Collateral subject to such sale or other disposition, and such Loan Party’s customer lists and other records and documents relating to such Intellectual Property Collateral and to the manufacture, distribution, advertising and sale of products and services of such Loan Party.

(f) The Administrative Agent is authorized, in connection with any sale of the Pledged Collateral pursuant to this Section 9.07, to deliver or otherwise disclose to any prospective purchaser of the Pledged Collateral any information in its possession relating to such Pledged Collateral.

(g) To the extent that any rights and remedies under this Section 9.07 would otherwise be in violation of the automatic stay of section 362 of the Bankruptcy Code, such stay shall be deemed modified, as set forth in the Interim Order or Final Order, as applicable, to the extent necessary to permit the Administrative Agent to exercise such rights and remedies.

Section 9.08 Modifications. (a) Except as specifically contemplated in the Interim Order in respect of collateral arrangements between the Revolving Credit Facility and the Term Facility upon and following entry of the Final Order, the Liens, lien priority, administrative priorities and other rights and remedies granted to the Administrative Agent for the benefit of the Lenders pursuant to this Agreement and the DIP Financing Orders (specifically, including, but not limited to, the existence, perfection and priority of the Liens provided herein and therein and the administrative priority provided herein and therein) shall not be modified, altered or impaired in any manner by any other financing or extension of credit or incurrence of Debt by any of the Loan Parties (pursuant to Section 364 of the Bankruptcy Code or otherwise), or by any dismissal or conversion of any of the Cases, or by any other act or omission whatsoever (other than in connection with any disposition permitted hereunder). Without limitation, notwithstanding any such order, financing, extension, incurrence, dismissal, conversion, act or omission:

(i) except for the Carve-Out having priority over the Secured Obligations, no costs or expenses of administration which have been or may be incurred in any of the Cases or any conversion of the same or in any other proceedings related thereto, and no priority claims, are or will be prior to or on a parity with any claim of the Administrative Agent or the Lenders against the Loan Parties in respect of any Obligation;

(ii) the liens and security interests granted herein and in the DIP Financing Orders shall constitute valid and perfected first priority liens and security interests (subject only to (A) the Carve-Out, (B) valid and perfected liens, (C) Permitted Liens in existence on the Petition Date and junior to such valid and perfected Liens and Liens permitted pursuant to Section 5.02(a), and (D) only to the extent such post-petition perfection is expressly permitted by the Bankruptcy Code, valid, nonavoidable and enforceable Liens existing as of the Petition Date, but perfected after the Petition Date, in accordance with subsections 364(c)(2) and (3) and 364(d) of the Bankruptcy Code, and shall be prior to all other Liens and security interests (other than those set

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forth in sub-clauses (A) through (D) herein), now existing or hereafter arising, in favor of any other creditor or any other Person whatsoever (except that the execution and delivery of local law governed pledge or analogous documentation with respect to Equity Interests in Subsidiaries of the Borrower organized in jurisdictions outside the United States, and the filing, notarization, registration or other publication thereof, and the taking of other actions, if any, required under local law of the relevant jurisdictions of organization for the effective grant and perfection of a Lien on such Equity Interests under laws of such jurisdictions or organization outside the United States, may be required in order to fully grant, perfect and protect such security interests under such local laws); and

(iii) the liens and security interests granted hereunder shall continue valid and perfected without the necessity that financing statements be filed or that any other action be taken under applicable nonbankruptcy law.

(b) Notwithstanding any failure on the part of any Loan Party or the Administrative Agent or the Lenders to perfect, maintain, protect or enforce the liens and security interests in the Collateral granted hereunder, the Interim Order and the Final Order (when entered) shall automatically, and without further action by any Person, perfect such liens and security interests against the Collateral.

Section 9.09 Release; Termination. (a) Upon any sale, lease, transfer or other disposition of any item of Collateral of any Loan Party in accordance with the terms of the Loan Documents (other than sales of Inventory in the ordinary course of business), the Administrative Agent will, at such Loan Party’s expense, execute and deliver to such Loan Party such documents as such Loan Party shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of such request and such release no Default shall have occurred and be continuing, (ii) such Loan Party shall have delivered to the Administrative Agent, at least 5 Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price thereof and any expenses in connection therewith, together with a form of release for execution by the Administrative Agent and a certificate of such Loan Party to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Administrative Agent may request, and (iii) the proceeds of any such sale, lease, transfer or other disposition required to be applied, or any payment to be made in connection therewith, in accordance with Section 2.06 shall, to the extent so required, be paid or made to, or in accordance with the instructions of, the Administrative Agent when and as required under Section 2.06, and (iv) in the case of Collateral sold or disposed of, the release of a Lien created hereby will not be effective until the receipt by the Administrative Agent of the Net Cash Proceeds arising from the sale or disposition of such Collateral.

(b) Upon the latest of (i) the payment in full in cash of the Secured Obligations (other than contingent indemnification obligations which are not then due and payable), (ii) the Termination Date and (iii) the termination or expiration of all Letters of Credit, the pledge and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the applicable Loan Party. Upon any such termination, the Administrative Agent will, at the applicable Loan Party’s expense, execute and deliver to such Loan Party such documents as such Loan Party shall reasonably request to evidence such termination.

Section 9.10 Certain Provisions in Respect of Mexican Inventory. (a) For purposes of perfecting the first priority Lien and security interest on any Collateral held from time to time by any Mexican Depository in connection with the manufacture in Mexico of finished products by such Mexican Depository (the “Mexican Collateral”), each Loan Party hereby pledges to the Administrative Agent, for

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itself and for the ratable benefit of the Secured Parties, as security for the full and prompt payment when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Mexican Collateral in accordance with paragraph IV of Article 334 of the Mexican General Law of Negotiable Instruments and Credit Transactions (Ley General de Títulos y Operaciones de Crédito).

(b) Each Loan Party and the Administrative Agent hereby appoints each Mexican Depository as depository of the Mexican Collateral. The parties hereto agree that each Mexican Depository may from time to time in the ordinary course of business receive and maintain possession of the Mexican Collateral for the purpose of manufacturing finished products for sale by such Loan Party and shall act as depository for the benefit of the Administrative Agent, on behalf of itself and the Secured Parties, with respect to such Mexican Collateral, which shall at all times remain subject to the first priority Lien and security interest created hereunder. Each Loan Party acknowledges and agrees that each Mexican Depository shall hold any and all Mexican Collateral in its control or possession for the benefit of Administrative Agent, on behalf of itself and the Secured Parties, and that each Mexican Depository shall act upon the instructions of the Administrative Agent without the further consent of such Loan Party. The Administrative Agent agrees with the Loan Parties that it shall not give any such instructions unless an Event of Default has occurred and is continuing or would occur after taking into account any action by any Loan Party with respect to any Mexican Depository.

(c) If an Event of Default has occurred and is continuing, the Administrative Agent shall be entitled, without the consent of any Loan Party, to remove any Mexican Depository as depository and appoint a different depository. No Mexican Depository shall be released from its obligations hereunder, unless a replacement depository has been appointed in accordance with this Agreement and such replacement depository has assumed the obligations of such Mexican Depository hereunder, including without limitation, taking physical possession of the Mexican Collateral and executing the letter referred to in subsection (d) below.

(d) Upon the request of the Administrative Agent, each Loan Party shall deliver to the Administrative Agent, a letter from each Mexican Depository or any other entity acting as depository, acceptable to the Administrative Agent in substantially in the form of Exhibit J hereto.

ARTICLE X

MISCELLANEOUS

Section 10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders (or the Initial Lenders, as applicable) and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

(a) waive any condition set forth in Section 3.01(a) without the written consent of each Initial Lender;

(b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 2.05 or Section 6.01) without the written consent of such Lender;

(c) postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them)

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hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

(d) reduce the principal of, or the rate of interest specified herein on, any Advance, or any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

(e) change (i) Section 2.02(a) in a manner that would alter the pro rata nature of Borrowings required thereby, (ii) Section 2.13 in a manner that would alter the pro rata sharing of payments required thereby or (iii) Section 9.07(b) in a manner that would alter the pro rata sharing of cash and cash proceeds required thereby, in each case with respect to clauses (i), (ii) and (iii) of this Section 10.01(e), without the written consent of each Lender;

(f) change the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or grant any consent hereunder, without the written consent of each Lender;

(g) amend, restate, supplement or otherwise modify any provision of this Agreement or the DIP Financing Orders in any manner that would impair the interests of the Lenders in Priority Collateral under either the Revolving Credit Facility or the Term Facility, in each case without the consent of Lenders holding a majority in interest of the Obligations under such Facility;

(h) except in connection with a transaction permitted under this Agreement, release all or substantially all of the Guarantors from the Guaranty or release all or a material portion of the Collateral or release the superpriority claim without the written consent of each Lender;

(i) amend, modify or waive the provisions of Section 5.04(b) without the consent of the Supermajority Lenders; and

(j) change the definition of any of “Availability”, “Eligible Inventory”, “Eligible Receivables”, “Initial Lenders”, “Loan Value” or “Reserves”, in each case, without the written consent of the Initial Lenders; provided that any change in the definition of “Loan Value” or “Availability” that would result in an increase in either the Borrowing Base or Availability shall require the written consent of the Supermajority Revolving Credit Lenders;

and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender or the Issuing Banks, as the case may be, in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender or of the Issuing Banks, as the case may be, under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; and (ii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.

Section 10.02 Notices, Etc. (a) All notices and other communications provided for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered, if to the Borrower or any Guarantor, at the Borrower’s address at 4500 Dorr Street, Toledo, Ohio 43615, Attention: Treasurer, as well as to (i) the attention of the general counsel of

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the Borrower at the Borrower’s address, fax number (419) 535-4544, and (ii) Jones Day, counsel to the Loan Parties, at its address at 222 East 41^st Street, New York, New York 10017, Attention: Robert L. Cunningham, fax number (212) 755-7306; if to any Initial Lender or the Initial Issuing Banks, at its Applicable Lending Office, respectively, specified opposite its name on Schedule I hereto; if to any other Lender Party, at its Applicable Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender Party; if to the Administrative Agent, at its address at 388 Greenwich Street, New York, New York 10013, fax number (212) 816-2613, Attention: Hien Nugent, as well as to Shearman & Sterling, counsel to the Administrative Agent, at its address at 599 Lexington Avenue, New York, New York 10022, fax number (212) 848-7179, Attention: Maura O’Sullivan, Esq.; or, as to the Borrower, any Guarantor or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed or telecopied, be effective three Business Days after being deposited in the U.S. mails, first class postage prepaid, delivered to the telegraph company or confirmed as received when sent by telecopier, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III or VII shall not be effective until received by the Administrative Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.

(b) The Borrower hereby agrees that it will provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the Loan Documents, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a Conversion of an existing, Borrowing or other Extension of Credit (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Default or Event of Default under this Agreement or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any Borrowing or other Extension of Credit thereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to oploanswebadmin@citigroup.com. In addition, the Borrower agrees to continue to provide the Communications to the Administrative Agent in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent. The Borrower further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on IntraLinks or a substantially similar electronic transmission system (the “Platform”).

(c) THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER PARTY OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL,

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INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(d) The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender Party agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender Party for purposes of the Loan Documents. Each Lender Party agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender Party’s e-mail address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address. Nothing herein shall prejudice the right of the Administrative Agent or any Lender Party to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.

Section 10.03 No Waiver; Remedies. No failure on the part of any Lender Party or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

Section 10.04 Costs, Fees and Expenses. (a) The Borrower agrees (i) to pay or reimburse the Initial Lenders for all reasonable costs and expenses incurred in connection with the development, preparation, negotiation and execution of this Agreement (which shall be deemed to include any predecessor transaction contemplated to be entered into with the Initial Lenders) and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby (including the monitoring of, and participation in, all aspects of the Cases), including all fees, expenses and disbursements of one joint outside counsel for the Administrative Agent and the Initial Lenders, and (ii) to pay or reimburse the Initial Lenders (including, without limitation, CNAI in its capacity as Administrative Agent) for all reasonable costs and expenses incurred in connection with (A) the ongoing maintenance and monitoring of Availability and (B) enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any “workout” or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all reasonable fees, expenses and disbursements of outside counsel for the Initial Lenders (including, without limitation, CNAI in its capacity as Administrative Agent). The foregoing fees, costs and expenses shall include all search, filing, recording, title insurance, collateral review, monitoring, and appraisal charges and fees and taxes related thereto, and other reasonable out-of-pocket expenses incurred by the Initial Lenders and the cost of independent public accountants and other outside experts retained jointly by the Initial Lenders. All amounts due under this Section 10.04(a) shall be payable within ten Business Days after demand therefor accompanied by an appropriate invoice. The agreements in this Section shall survive the termination of the Commitments and repayment of all other Obligations.

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(b) Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold harmless each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents, advisors, attorneys-in-fact and representatives (collectively the “Indemnitees”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, fees and disbursements of counsel), joint or several that may be incurred by, or asserted or awarded against any Indemnitee, in each case arising out of or in connection with or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto arising out of or in connection with (i) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (ii) any Commitment, Advance or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by an Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Borrower or any other Loan Party, or any Liability related in any way to the Borrower or any other Loan Party in respect of Environmental Laws, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such claim, damage, loss, liability or expense is determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 10.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower or any of its Subsidiaries, any security holders or creditors of the foregoing an Indemnitee or any other Person, or an Indemnitee is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. No Indemnitee shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Borrower or any of its Subsidiaries for or in connection with the transactions contemplated hereby, except to the extent such liability is determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnitee’s gross negligence or willful misconduct. In no event, however, shall any Indemnitee be liable on any theory of liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings). No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement. All amounts due under this Section 10.04(b) shall be payable within two Business Days after demand therefor. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations.

(c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or if the Borrower fails to make any payment or prepayment of an Advance for which a notice of prepayment has been given or that is otherwise required to be made, whether pursuant to Section 2.04, 2.06 or 6.01 or otherwise, the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may

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reasonably incur as a result of such payment or Conversion or such failure to pay or prepay, as the case may be, including, without limitation, any actual loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance.

Section 10.05 Right of Set-off. Subject to the DIP Financing Orders, upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender Party and each of its respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender Party or such Affiliate to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing under this Agreement and the Note or Notes (if any) held by such Lender Party, irrespective of whether such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such obligations may be unmatured. Each Lender Party agrees promptly to notify the Borrower after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender Party and its respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender Party and its respective Affiliates may have.

Section 10.06 Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, the Guarantors, each Agent, the Initial Issuing Banks and the Initial Swing Line Lender and the Administrative Agent shall have been notified by each Initial Lender that such Initial Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and each Lender Party and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of each Lender Party.

Section 10.07 Successors and Assigns. (a) Each Lender may assign all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of any or all Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender, an Affiliate of any Lender or an Approved Fund of any Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, the aggregate amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $1,000,000 or, in the case of an assignment of the Revolving Credit Facility, $5,000,000 under each Facility for which a Commitment is being assigned, (iii) each such assignment shall be to an Eligible Assignee, and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes (if any) subject to such assignment and a processing and recordation fee of $3,500.

(b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the case may be, hereunder and (ii) the Lender or Issuing Bank assignor thereunder shall, to the extent that rights and

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obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.10, 2.12 and 10.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender’s or Issuing Bank’s rights and obligations under this Agreement, such Lender or Issuing Bank shall cease to be a party hereto).

(c) By executing and delivering an Assignment and Acceptance, each Lender Party assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be.

(d) The Administrative Agent, acting for this purpose (but only for this purpose) as the agent of the Borrower, shall maintain at its address referred to in Section 10.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agents and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Agent or any Lender Party at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof and a copy of such Assignment and Acceptance to the Borrower and each other Agent. In the case of any assignment by a Lender, within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes (if any) a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it

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under each Facility pursuant to such Assignment and Acceptance and, if any assigning Lender that had a Note or Notes prior to such assignment has retained a Commitment hereunder under such Facility, a new Note to the order of such assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1 or A-2 hereto, as the case may be.

(f) Each Issuing Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) each such assignment shall be to an Eligible Assignee and (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500.

(g) Each Lender Party may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and any Note or Notes held by it); provided, however, that (i) such Lender Party’s obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agents and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party’s rights and obligations under this Agreement, (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest (other than default interest) on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or release a substantial portion of the value of the Collateral or the value of the Guaranties and (vi) the participating banks or other entities shall be entitled to the benefit of Section 2.12 to the same extent as if they were a Lender Party but, with respect to any particular participant, to no greater extent than the Lender Party that sold the participation to such participant and only if such participant agrees to comply with Section 2.12(e) as though it were a Lender Party.

(h) Any Lender Party may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 10.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender Party by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender Party in accordance with Section 10.09 hereof.

(i) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time (and without the consent of the Administrative Agent or the Borrower) create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System

(j) Notwithstanding anything to the contrary contained herein, any Lender that is a fund that invests in bank loans may create a security interest in all or any portion of the Advances owing to it and the Note or Notes held by it to the trustee for holders of obligations owed, or securities issued, by such fund as security for such obligations or securities, provided, however, that unless and until such

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trustee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

(k) Notwithstanding anything to the contrary contained herein, any Lender Party (a “Granting Lender”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an “SPC”) the option to provide all or any part of any Advance that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided, however, that (i) nothing herein shall constitute a commitment by any SPC to fund any Advance, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Advance, the Granting Lender shall be obligated to make such Advance pursuant to the terms hereof. The making of an Advance by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Advance were made by such Granting Lender. Each party hereto hereby agrees that (i) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender Party would be liable, (ii) no SPC shall be entitled to the benefits of Sections 2.10 and 2.12 (or any other increased costs protection provision) and (iii) the Granting Lender shall for all purposes, including, without limitation, the approval of any amendment or waiver of any provision of any Loan Document, remain the Lender Party of record hereunder. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior Debt of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the contrary contained in this Agreement, any SPC may (i) with notice to, but without prior consent of, the Borrower and the Administrative Agent, assign all or any portion of its interest in any Advance to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Advances to any rating agency, commercial paper dealer or provider of any surety or guarantee or credit or liquidity enhancement to such SPC. This subsection (k) may not be amended without the prior written consent of each Granting Lender, all or any part of whose Advances are being funded by the SPC at the time of such amendment.

Section 10.08 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 10.09 Confidentiality; Press Releases and Related Matters. (a) No Agent or Lender Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (i) to such Agent’s or such Lender Party’s Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential, need-to-know basis, (ii) as requested or required by any law, rule or regulation or judicial process or (iii) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking.

(b) Each of the parties hereto and each party joining hereafter agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of any Lender or its Affiliates or referring to this Agreement or any of the other Loan Documents without at least 2 Business Days’ prior notice to such Lender and without the prior written consent of such Lender or

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unless (and only to the extent that) such party or Affiliate is required to do so under law and then, in any event, such party or Affiliate will consult with the Borrower, the Administrative Agent and such Lender before issuing such press release or other public disclosure. Each party consents to the publication by the Agents or any Lender Party of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement. The Agents reserve the right to provide to industry trade organizations such necessary and customary information needed for inclusion in league table measurements.

Section 10.10 Patriot Act Notice.(a) Each Lender Party and each Agent (for itself and not on behalf of any Lender Party) hereby notifies the Loan Parties that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender Party or such Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act. The Borrower shall, and shall cause each of its Subsidiaries to, provide the extent commercially reasonable, such information and take such actions as are reasonably requested by any Agents or any Lender Party in order to assist the Agents and the Lender Parties in maintaining compliance with the Patriot Act.

Section 10.11 Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction.

(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

Section 10.12 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York and, to the extent applicable, the Bankruptcy Code.

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Section 10.13 Waiver of Jury Trial. Each of the Guarantors, the Borrower, the Agents and the Lender Parties irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Advances or the actions of the Administrative Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.


DANA CORPORATION, a debtor and a debtor-in-possession, as Borrower
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Treasurer



By:	/s/ Michael L. DeBacker
	Name:	Michael L. DeBacker
	Title:	Vice President-General Counsel & Secretary

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BRAKE SYSTEMS, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

BWDAC, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

COUPLED PRODUCTS, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

DAKOTA NEW YORK CORP.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Treasurer

DANA ATLANTIC LLC FKA GLACIER DAIDO AMERICA, LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President

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DANA AUTOMOTIVE AFTERMARKET, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Treasurer

DANA BRAZIL HOLDINGS LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

DANA BRAZIL HOLDINGS I LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   President

DANA INFORMATION TECHNOLOGY LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

DANA INTERNATIONAL FINANCE, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   President

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DANA INTERNATIONAL HOLDINGS, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Treasurer

DANA RISK MANAGEMENT SERVICES, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President

DANA TECHNOLOGY INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Treasurer

DANA WORLD TRADE CORPORATION
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Treasurer

DANDORR L.L.C.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President

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DORR LEASING CORPORATION
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

DTF TRUCKING INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

ECHLIN-PONCE, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

EFMG LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

EPE, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

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ERS LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

FLIGHT OPERATIONS, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President

FRICTION INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

FRICTION MATERIALS, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

GLACIER VANDERVELL INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

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HOSE AND TUBING PRODUCTS, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

LIPE CORPORATION
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

LONG AUTOMOTIVE LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

LONG COOLING LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

LONG USA LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

119

MIDLAND BRAKE, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

PRATTVILLE MFG., INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

REINZ WISCONSIN GASKET LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President

SPICER HEAVY AXLE & BRAKE, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

SPICER HEAVY AXLE HOLDINGS, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Treasurer

120

SPICER OUTDOOR POWER EQUIPMENT COMPONENTS LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President

TORQUE-TRACTION INTEGRATION TECHNOLOGIES, INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

TORQUE-TRACTION MANUFACTURING TECHNOLOGIES LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

TORQUE-TRACTION TECHNOLOGIES LLC
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

UNITED BRAKE SYSTEMS INC.
As a debtor and a debtor-in-possession, and as a Guarantor

By:   /s/ Teresa Mulawa
Name:   Teresa Mulawa
Title:   Vice President & Treasurer

121

CITICORP NORTH AMERICA, INC., as Administrative Agent

By:   /s/ Shapleigh B. Smith
Name:   Shapleigh B. Smith
Title:   Managing Director

CITICORP NORTH AMERICA, INC., as Initial Issuing Bank

By:   /s/ Shapleigh B. Smith
Name:   Shapleigh B. Smith
Title:   Managing Director

CITICORP NORTH AMERICA, INC., as Initial Swing Line Lender

By:   /s/ Shapleigh B. Smith
Name:   Shapleigh B. Smith
Title:   Managing Director

CITICORP NORTH AMERICA, INC., as Initial Lender

By:   /s/ Shapleigh B. Smith
Name:   Shapleigh B. Smith
Title:   Managing Director

122

BANK OF AMERICA, N.A., as Initial Issuing Bank

By:   /s/ Brian J. Wright
Name:   Brian J. Wright
Title:   SVP

BANK OF AMERICA, N.A., as Initial Lender

By:   /s/ Brian J. Wright
Name:   Brian J. Wright
Title:   SVP

123

JPMORGAN CHASE BANK, N.A., as Initial Issuing
Bank

By:   /s/ Richard W. Duker
Name:   Richard W. Duker
Title:   Managing Director

JPMORGAN CHASE BANK, N.A., as Initial Lender

By:   /s/ Richard W. Duker
Name:   Richard W. Duker
Title:   Managing Director

EX-21 5 l24221aexv21.htm EX-21 EX-21

Exhibit 21

DANA CORPORATION
Consolidated Subsidiaries as of December 31, 2006*

Dana Corporation
4500 Dorr Street
Toledo, Ohio 43615


AMP Industrial e Comercio de Pecas Automotivas Ltda.		Brazil
Autometales S.A. de C.V.		Mexico
Automotive Motion Technology Limited		United Kingdom
BWDAC, Inc.		Delaware
C.A. Danaven		Venezuela
Cardanes S.A. de C.V.		Mexico
Cerro de los Medanos S.A.		Argentina
Corporacion Inmobiliaria de Mexico S.A. de C.V.		Mexico
Coupled Products, Inc.		Virginia
D.E.H. Holdings SARL		Luxembourg
Dakota New York Corp		New York
Dana (Deutschland) Grundstucksverwaltung GmbH		Germany
Dana (Wuxi) Technology Co. Ltd.		China
Dana Argentina S.A.		Argentina
Dana Asset Funding LLC		Delaware
Dana Atlantic LLC		Delaware
Dana Australia (Holdings) Pty. Ltd.		Australia
Dana Australia Pty. Ltd.		Australia
Dana Australia Trading Pty. Ltd.		Australia
Dana Austria GmbH		Austria
Dana Automocion, S.A.		Spain
Dana Automotive Limited		United Kingdom
Dana Automotive Systems GmbH		Germany
Dana Bedford 3 Limited		United Kingdom
Dana Belgium N.V.		Belgium
Dana Brazil Holdings 1 LLC		Virginia
Dana Brazil Holdings LLC		Delaware
Dana Canada Corporation		Canada
Dana Canada Holding Company		Canada
Dana Canada Limited		Canada
Dana Canada LP		Canada
Dana Capital Limited		United Kingdom
Dana Comercializadora, S. de R.L. de C.V.		Mexico
Dana Commercial Credit Corporation		Delaware
Dana Credit Corporation		Delaware
Dana do Brasil Ltda.		Brazil
Dana Emerson Actuator Systems (Technology) LLP		United Kingdom
Dana Emerson Actuator Systems LLP		United Kingdom
Dana Emerson Actuator Systems s.r.o.		Slovakia
Dana Equipamentos Ltda.		Brazil
Dana Europe Holdings B.V.		Netherlands
Dana Europe S.A.		Switzerland
Dana European Holdings Luxembourg SARL		Luxembourg
Dana Finance (Ireland) Limited		Ireland
Dana Fluid Products Slovakia, s.r.o.		Slovakia
Dana GmbH		Germany
Dana Heavy Axle Mexico S.A. de C.V.		Mexico
Dana Holding GmbH		Germany
Dana Holdings Limited		United Kingdom
Dana Holdings Mexico s. de r.l. de C.V.		Mexico
Dana Holdings SRL		Argentina
Dana Hong Kong Limited		Hong Kong
Dana Hungary Gyarto kft		Hungary
Dana India Private Limited		India
Dana India Technical Centre Limited		India
Dana Industrias Ltda.		Brazil
Dana Information Technology LLC		Delaware

DANA CORPORATION
Consolidated Subsidiaries as of December 31, 2006*


Dana International Finance Inc.		Delaware
Dana International Holdings, Inc.		Delaware
Dana Investment GmbH		Germany
Dana Investment UK Limited		United Kingdom
Dana Italia, SpA		Italy
Dana Japan, Ltd.		Japan
Dana Korea Co. Ltd.		Korea
Dana Law Department, Ltd.		United Kingdom
Dana Lease Finance Corporation		Delaware
Dana Limited		United Kingdom
Dana Manufacturing Group Pension Scheme Limited		United Kingdom
Dana Mauritius Limited		Mauritius
Dana New Zealand, Ltd.		New Zealand
Dana Risk Management Services, Inc.		Ohio
Dana S.A.S.		France
Dana San Juan S.A.		Argentina
Dana San Luis S.A.		Argentina
Dana Spicer (Thailand) Limited		Thailand
Dana Spicer Europe Ltd.		United Kingdom
Dana Spicer Limited		United Kingdom
Dana Technology, Inc.		Michigan
Dana Two SARL		France
Dana UK Common Investment Fund Limited		United Kingdom
Dana UK Holdings Limited		United Kingdom
Dana UK Pension Scheme Limited		United Kingdom
Dana World Trade Corporation		Delaware
Dana-Albarus Industria E Comercio De Autopecas Ltda.		Brazil
Danaven Rubber Products, C.A.		Venezuela
Dantean (Thailand) Company, Limited		Thailand
DCC Canada Inc.		Canada
DCC Fiber, Inc.		Delaware
DCC Project Finance Eighteen, Inc.		Delaware
DCC Project Finance Fifteen, Inc.		Delaware
DCC Project Finance Fourteen, Inc.		Delaware
DCC Project Finance Nineteen, Inc.		Delaware
DCC Project Finance Ten, Inc.		Delaware
DCC Project Finance Twelve, Inc.		Delaware
Direcspicer S.A. de C.V.		Mexico
Driveline Specialist Limited		United Kingdom
DTF Trucking, Inc.		Delaware
Echlin (Southern) Holding Ltd. (Jersey)		United Kingdom
Echlin Argentina S.A.		Argentina
Echlin Do Brasil Industria e Comercio Ltda.		Brazil
Echlin Europe Limited		United Kingdom
Echlin Taiwan Ltd.		Taiwan
EFMG LLC		Virginia
Ejes Tractivos S.A. de C.V.		Mexico
Energy Services Credit Corporation		Delaware
Engranajes Conicos S.A. de C.V.		Mexico
Flight Operations, Inc.		Delaware
Forjas Spicer S.A. de C.V.		Mexico
Fujian Spicer Drivetrain System Co., Ltd.		China
Gearmax (Pty) Ltd.		South Africa
Glacier Brasil Industria e Comercio de Autopecas Ltda		Brazil
Glacier Tribometal Slovakia a.s.		Slovakia
Glacier Vandervell Inc.		Michigan
Glacier Vandervell S.A.S.		France
Hobourn Group Pension Trust Company Limited		United Kingdom
Hose & Tubing Products, Inc.		Virginia
Industria De Ejes Y Transmissiones S.A.(Transejes)		Colombia
Letovon Rosehill One Pty Limited		Australia
Letovon Rosehill Two Pty Limited		Australia
Letovon St. Kilda One Pty Limited		Australia
Letovon St. Kilda Two Pty Limited		Australia
Lipe Rollway Mexicana S.A. de C.V.		Mexico

DANA CORPORATION
Consolidated Subsidiaries as of December 31, 2006*


Long Cooling LLC		Virginia
Long USA LLC		Virginia
Midwest Housing Investments J.V., Inc.		Delaware
Nippon Reinz Co. Ltd.		Japan
Nobel Plastiques Iberica S.A.		Spain
Nobel Plastiques S.A.S.		France
Perfect Circle Brasil Industria e Comercio de Autopecas Ltda		Brazil
Perfect Circle Europe S.A.S.		France
Pleasant View of North Vernon, L.P.		Indiana
PT Spicer Axle Indonesia		Indonesia
PT Spicer Indonesia		Indonesia
PTG Mexico, S. de R.L. de C.V		Mexico
PTG Servicios, S. de R.L.de C.V.		Mexico
QH Pension Trustee Limited		United Kingdom
Quinton Hazell Plc.		United Kingdom
Recap, Inc.		Delaware
Reinz Wisconsin Gasket LLC		Delaware
Reinz-Dichtungs-GmbH & Co KG		Germany
RENOVO Thirteen, Inc.		Delaware
RENOVO Twelve, Inc.		Delaware
ROC — Spicer Ltd.		Taiwan
ROC Spicer Investment Co. Ltd.		British Virgin Islands
Seismiq, Inc.		Delaware
Shannon Canada Inc.		Canada
Societe de Reconditionnement Industriel de Moteurs S.A.S. (S.R.I.M.)		France
Spicer Axle Australia Pty Ltd.		Australia
Spicer Axle Structural Components Australia Pty. Ltd.		Australia
Spicer Ayra Cardan S.A.		Spain
Spicer Ejes Pesados S.A.		Argentina
Spicer France SARL		France
Spicer Gelenkwellenbau GmbH		Germany
Spicer Heavy Axle & Brake, Inc.		Michigan
Spicer Heavy Axle Holdings, Inc.		Michigan
Spicer India Limited		India
Spicer Nordiska Kardan AB		Sweden
Spicer Off-Highway Belgium N.V.		Belgium
Spicer Off-Highway Parts & Distribution GmbH		Germany
Spicer Philippines Manufacturing Co.		Philipines
Spicer Servicios S.A. de C.V.		Mexico
Stieber Formsprag Limited		United Kingdom
SU Automotive Limited		United Kingdom
SU Pension Trustee Limited		United Kingdom
Suzuki Comercial Ltda.		Brazil
Taiguang Investment (BVI) Co., Ltd.		British Virgin Islands
Taiguang Investment Co., Ltd.		Taiwan
Taijie Investment Co., Ltd.		Taiwan
Taiying Investment Co., Ltd.		Taiwan
Talesol S.A.		Uruguay
Tecnologia de Mocion Controlada S.A. de C.V.		Mexico
Thermal Products Czech Republic, s.r.o.		Czech Republic
Thermal Products France S.A.S.		France
Torque-Traction Integration Technologies LLC		Delaware
Torque-Traction Manufacturing Technologies LLC		Delaware
Torque-Traction Technologies LLC		Delaware
Transejes C.D. Ltda.		Colombia
Transejes Transmisiones Homocineticas de Colombia S.A.(THC)		Colombia
Transmissiones Homocineticas Argentinas S.A.(THA)		Argentina
Tuboauto, C.A.		Venezuela
UBALI S.A.		Uruguay
Victor Reinz India Private Limited		India
Victor Reinz Valve Seals LLC		Indiana
Warner Electric do Brasil Ltda.		Brazil
Whiteley Rishworth Ltd.		United Kingdom
WOP Industrial e Comercio Bombas Ltda		Brazil
Wrenford Insurance Company Limited		Bermuda


*		Subsidiaries not shown by name in the above list, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.

EX-23 6 l24221aexv23.htm EX-23 EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-69449, 333-84417, 333-52773, 333-50919, 333-64198, 333-37435, 33-22050 and 333-59442) of Dana Corporation of our report dated March 19, 2007 relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting which appear in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Toledo, Ohio

March 19, 2007

166

EX-24 7 l24221aexv24.htm EX-24 EX-24

Exhibit 24

POWER OF ATTORNEY

The undersigned directors and/or officers of Dana Corporation hereby constitute and appoint Michael J. Burns, Michael L. DeBacker, Richard J. Dyer, M. Jean Hardman and Kenneth A. Hiltz, and each of them, severally, their true and lawful attorneys-in-fact with full power for and on their behalf to execute Dana Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, including any and all amendments thereto, in their names, places and stead in their capacity as directors and/or officers of Dana Corporation, and to file the same with the Securities and Exchange Commission on behalf of Dana Corporation under the Securities Exchange Act of 1934, as amended.

This Power of Attorney shall be effective as of March 1, 2007, and shall end automatically as to each undersigned upon the termination of his or her service as a director and/or officer of Dana Corporation.


/s/ A. C. Baillie A. C. Baillie		/s/ M. R. Marks M. R. Marks

/s/ D. E. Berges D. E. Berges		/s/ R. B. Priory R. B. Priory

/s/ E. M. Carpenter		/s/ M. J. Burns

E. M. Carpenter		M. J. Burns

/s/ R. M. Gabrys		/s/ M. L. DeBacker

R. M. Gabrys		M. L. DeBacker

/s/ S. G. Gibara		/s/ R. J. Dyer

S. G. Gibara		R. J. Dyer

/s/ C. W. Grisé		/s/ M. J. Hardman

C. W. Grisé		M. J. Hardman

/s/ J. P. Kelly		/s/ K. A. Hiltz

J. P. Kelly		K. A. Hiltz

EX-31.A 8 l24221aexv31wa.htm EX-31(A) EX-31(A)

Exhibit 31-A

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Michael J. Burns, certify that:

1. I have reviewed this Annual Report on Form 10-K of Dana Corporation;

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

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

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


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


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


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


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

5. The registrant’s other certifying officer(s) 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: March 19, 2007

/s/ Michael J. Burns

Michael J. Burns

Chief Executive Officer

167

EX-31.B 9 l24221aexv31wb.htm EX-31(B) EX-31(B)

Exhibit 31-B

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Kenneth A. Hiltz, certify that:

1. I have reviewed this Annual Report on Form 10-K of Dana Corporation;


	(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


	(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: March 19, 2007

/s/ Kenneth A. Hiltz

Kenneth A. Hiltz

Chief Financial Officer

168

EX-32 10 l24221aexv32.htm EX-32 EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report of Dana Corporation (Dana) on Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the undersigned officers of Dana certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:


	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Dana as of the dates and for the periods expressed in the Report.

Date: March 19, 2007

/s/ Michael J. Burns

Michael J. Burns

Chief Executive Officer

/s/ Kenneth A. Hiltz

Kenneth A. Hiltz

Chief Financial Officer

169

-----END PRIVACY-ENHANCED MESSAGE-----


BRAKE SYSTEMS, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


BWDAC, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


COUPLED PRODUCTS, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


DAKOTA NEW YORK CORP. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Treasurer


DANA ATLANTIC LLC FKA GLACIER DAIDO AMERICA, LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President


DANA AUTOMOTIVE AFTERMARKET, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Treasurer


DANA BRAZIL HOLDINGS LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


DANA BRAZIL HOLDINGS I LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	President


DANA INFORMATION TECHNOLOGY LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


DANA INTERNATIONAL FINANCE, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	President


DANA INTERNATIONAL HOLDINGS, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Treasurer


DANA RISK MANAGEMENT SERVICES, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President


DANA TECHNOLOGY INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Treasurer


DANA WORLD TRADE CORPORATION As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Treasurer


DANDORR L.L.C. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President


DORR LEASING CORPORATION As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


DTF TRUCKING INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


ECHLIN-PONCE, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


EFMG LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


EPE, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


ERS LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


FLIGHT OPERATIONS, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President


FRICTION INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


FRICTION MATERIALS, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


GLACIER VANDERVELL INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


HOSE AND TUBING PRODUCTS, INC. As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


LIPE CORPORATION As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


LONG AUTOMOTIVE LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


LONG COOLING LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer


LONG USA LLC As a debtor and a debtor-in-possession, and as a Guarantor
By:	/s/ Teresa Mulawa
	Name:	Teresa Mulawa
	Title:	Vice President & Treasurer