EXHIBIT 10.31
NAVISTAR 1994 PERFORMANCE INCENTIVE PLAN
(Amended as of December 11, 2001)
SECTION I
ESTABLISHMENT OF THE PLAN
The Board of Directors of Navistar International Corporation approved the establishment of the
Navistar 1994 Performance Incentive Plan ("Plan"). The Plan replaces the Navistar 1988 Performance
Incentive Plan, which consolidated and modified the Corporation's Annual Incentive Plan, the Long Term
Incentive Plan and the 1984 Stock Option Plan into one plan.
SECTION II
PURPOSE OF THE PLAN
The purpose of the Plan is to enable the Corporation and its subsidiaries to attract and retain
highly qualified personnel, to provide key employees who hold positions of major responsibility the
opportunity to earn incentive awards commensurate with the quality of individual performance, the
achievement of performance goals and ultimately the increase in shareowner value.
SECTION III
DEFINITIONS
For the purposes of the Plan, the following words and phrases shall have the meanings described below
in this Section III unless a different meaning is plainly required by the context.
(1) "Annual Incentive Award" means an award of cash approved by the Committee based on the level of
achievement attained against annual performance goals approved by the Committee on or prior to the
commencement of the applicable Fiscal year.
(2) "Award" means an award made under the Plan.
(3) "Board of Directors" means the Board of Directors of Navistar International Corporation.
(4) "Change in Control" shall be deemed to have occurred if (A) any "Person" or "group" (as such terms
are used in Section 13 (d) and 14 (d) of the Securities Exchange Act of 1934) other than employee
or retiree benefit plans or trusts sponsored or established by the Corporation or Navistar
International Transportation Corp. ("NITC") is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of
the Corporation representing 25% or more of the combined voting power of the Corporation's then
outstanding securities, (B) as the result of, or in connection with, any cash tender offer,
exchange offer, merger or other business combination, sale of assets, proxy or consent
solicitation, contested election or substantial stock accumulation (a "Control Transaction"), the
members of the Board of Directors of the Corporation immediately prior to the first public
announcement relating to such Control Transaction shall immediately thereafter, or within two
years, cease to constitute a majority of the Board of Directors of the Corporation or (C) any
dissolution or liquidation of the Corporation or NITC or an agreement for the sale or disposition
of all or substantially all (more than 50%) of the assets of the Corporation or NITC occurs.
Notwithstanding the foregoing, the sale or disposition of any or all of the assets or stock of
Navistar Financial Corporation shall not be deemed a Change in Control.
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EXHIBIT 10.31 (CONTINUED)
(5) "Committee" means the Committee on Compensation and Governance of the Board of Directors.
(6) "Common Stock" means the common stock of the Corporation.
(7) "Corporation" means Navistar International Corporation.
(8) "Employee" means a person regularly employed by the Corporation or any subsidiary of the
Corporation, including its officers.
(9) "Fair Market Value" means the average of the high and the low prices of a share of Common Stock on
the effective date of grant as set forth in the New York Stock Exchange - Composite Transactions
listing published in the Midwest Edition of The Wall Street Journal or equivalent financial
publication.
(10) "Fiscal Year" means the fiscal year of the Corporation.
(11) "Incentive Stock Option" means a right, as evidenced by an agreement between the Participant and
the Company in a form approved by the Committee, to purchase a certain number of shares of Common
Stock at Fair Market Value for a period of ten (10) years from the date of grant which options are
designed to meet the requirements set out under Section 422 of the Internal Revenue Code.
(12) "Long-term Incentive Award" means an award of Restricted Shares for a long-term cycle, the amount
of the award and the length of the cycle will be determined by the Committee.
(13) "Nonqualified Stock Option" means a right, as evidenced by an agreement between the Participant
and the Company in a form approved by the Committee, to purchase a certain number of shares of
Common Stock at Fair Market Value for a period of ten (10) years and one day from the date of
grant on which options are stated not to be qualified as incentive stock options under Section 422
of the U.S. Internal Revenue Code.
(14) "Participant" means an Employee selected by the Corporation for participation in the Plan.
(15) "Plan" means the Navistar 1994 Performance Incentive Plan as set forth herein and as it may be
amended hereafter from time to time.
(16) "Qualified Retirement" means a retirement from employment of the Corporation or any of its
subsidiaries at any time after the attainment of age fifty-five (55) with at least ten (10) years
of credited service as defined by the applicable retirement plan.
(17) "Restricted Share" means a share of Common Stock awarded to a Participant by the Committee without
payment by the Participant which is restricted as to sale or transfer and subject to forfeiture
pursuant to terms established by the Committee at the time of issuance.
(18) "Stock Option" means either an Incentive Stock Option or a Nonqualified Stock Option.
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EXHIBIT 10.31 (CONTINUED)
SECTION IV
ELIGIBILITY
Management will, from time to time, select and recommend to the Committee Employees who are to
become Participants in the Plan. Such Employees will be selected from those who, in the opinion
of management, have substantial responsibility in a managerial or professional capacity.
Employees selected for participation in the Plan may not concurrently participate in any other
annual performance, long-term performance, sales incentive or profit sharing plan of the
Corporation or any of its subsidiaries except as specifically approved by the Committee.
SECTION V
ANNUAL INCENTIVE AWARDS
(1) On or before the commencement of each Fiscal Year, the Committee will approve performance goals
for corporate achievement for such Fiscal Year, and the amount of the Annual Incentive Awards for
such Fiscal Year will be based on the level of achievement attained against previously approved
performance goals. The Committee also will approve an award percentage for each organization
level for each performance goal.
(2) Performance goals for Annual Incentive Awards will not be increased or decreased within a Fiscal
Year except for extraordinary circumstances approved by the Committee.
(3) An Annual Incentive Award determination will be made by the Committee when the financial results
and performance levels for a Fiscal Year are presented to the Committee by management.
(4) Payment of an Annual Incentive Award will be made in cash to the Participant as soon as
practicable after an Annual Incentive Award determination has been made by the Committee. A
Participant who is not an Employee at the end of a Fiscal Year will not be entitled to an Annual
Incentive Award for that Fiscal Year unless the Committee determines otherwise.
SECTION VI
LONG TERM INCENTIVE AWARDS
(1) On or before the commencement of each Fiscal Year, the Committee will approve performance goals
for corporate achievement for a long-term cycle as determined by the Committee. The amount of any
Long Term Incentive Award earned shall be based on the cumulative level of performance attained
against the approved performance goals.
(2) Criteria for Long Term Incentive Awards will not be increased or decreased for any long-term cycle
that has begun except for extraordinary circumstances approved by the Committee.
(3) Separate Long-term Incentive Award determinations will be made by the Committee for each long-term
cycle.
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EXHIBIT 10.31 (CONTINUED)
(4) Restricted Shares will be awarded by the Committee to each Participant approved by the Committee
at the beginning of each cycle unless to do so would present a substantial risk of causing the
Corporation to undergo an ownership change, as such term is defined in Section 382 of the Internal
Revenue Code, in which event the Committee shall delay the award until there is no longer such a
risk. The amount to be awarded will be pursuant to a formula approved by the Committee that will
be based on the ability of the Participant to contribute to the efforts to achieve the performance
goals approved by the Committee for the applicable cycle. The Committee shall designate which
shares shall be subject to performance goals. The Committee will make the final Long-Term Award
determination. No fractional shares will be issued. A Participant who quits or is involuntarily
separated will forfeit any Restricted Shares. Any Restricted Shares forfeited shall be forfeited
(i) to the Company or (ii) if the forfeiture to the Company creates a substantial risk of an
ownership change under Section 382 of the Internal Revenue Code, then to the salaried and hourly
pension trusts of the Corporation's principal operating subsidiary pro rata based on assets held
in the trusts as of the beginning of the prior plan year. If a Participant dies, becomes
permanently and totally disabled, or retires pursuant to a Qualified Retirement, Restricted Shares
previously awarded which are subject to performance goals, will be retained until the shares are
earned or forfeited for failure to meet the performance goals.
(5) A Participant may elect, subject to the provisions of Section VII (2), to pay any withholding tax
due on Stock Options or on Restricted Shares awarded pursuant to the Plan either (i) by cash
including a personal check made payable to the Corporation or (ii) by delivering at Fair Market
Value unrestricted Common Stock already owned by the Participant or (iii) by any combination of
cash or unrestricted Common Stock. If the Participant is an officer of the Corporation who is
subject to Section 16(b) of the Securities Exchange Act of 1934, he or she may make an election
pursuant to (ii) or (iii) above only if it is made in writing (a) at least six (6) months
following the date of grant of an option or an award and at least six (6) months prior to the date
on which the amount of the minimum required withholding tax related to the option or award is
determined or (b) within a ten-day period following the release of the Corporation's annual or
quarterly financial results. Once an officer, who is subject to Section 16(b) of the Securities
Exchange Act of 1934, makes an election pursuant to (ii) or (iii) above with respect to a specific
option or award, it shall be irrevocable unless the election is disapproved by the Committee at
its next meeting following the election. If the redemption of shares by the Corporation to pay
withholding taxes would present a substantial risk of causing an ownership change under Section
382 of the Internal Revenue Code, the Corporation may refuse the redemption. In such a case of
refusal to redeem by the Corporation, the Participant would be permitted to sell sufficient shares
to pay any withholding taxes due.
SECTION VII
STOCK OPTIONS
(1) The Committee may grant Nonqualified Stock Options or Incentive Stock Options or a combination of
both to Participants in the amount and at the time that the Committee approves. Option grants
shall be limited to a maximum of 50,000 shares per year for any Participant. The Board may in its
discretion grant options in addition to the options subject to the limitation contained in the
proceeding sentence, provided that option grants shall be considered as made under the proceeding
sentence to the extent the limitation is not exceeded, and any option grants in excess of the
limitation contained in the proceeding sentence shall be considered as made under this sentence,
and any option grants made under this sentence shall not be treated as performance-based
compensation for tax purposes.
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EXHIBIT 10.31 (CONTINUED)
(2) Unless otherwise determined by the Committee, a Stock Option granted under the Plan will become
exercisable in whole or in part after the commencement of the second year of the term of the Stock
Option to the extent of one third of the shares, to the extent of one third of the shares after
commencement of the third year, and to the extent of one third of the shares after commencement of
the fourth year. The Committee will be authorized to establish the manner of exercise of a Stock
Option. The effective date of the grant of a Stock Option will, unless the Committee expressly
determines otherwise, be the business day on which the Committee approves the grant of such Stock
Option, provided that such grant will expire if a written option agreement is not signed by the
Participant receiving a Stock Option and delivered to the Corporation within thirty (30) days of
such approval by the Committee. The option can be exercised in whole or in part through cashless
exercises or other arrangements through agents, including stockbrokers, under arrangements
established by the Corporation by paying the amounts required by instructions issued by the
Secretary of the Corporation for the exercise of the options. If an exercise is not covered by
instructions issued by the Corporate Secretary, the purchase price is to be paid in full to the
Corporation upon the exercise of a Stock Option either (i) by cash including a personal check made
payable to the Corporation; (ii) by delivering at Fair Market Value unrestricted Common Stock
already owned by the Participant, for six months or more if acquired from the Corporation, or
(iii) by any combination of cash and unrestricted Common Stock, and in either case, by payment to
the Corporation of any withholding tax. In no event may successive simultaneous pyramiding be
used to exercise an Option. If permitting the exercise of a Stock Option at the time notice of
intent is given by the Participant to the Corporation would present a substantial risk of causing
an ownership change under Section 382 of the Internal Revenue Code, the Corporation may refuse to
permit the exercise in which event as soon as the Corporation determines that a substantial risk
of causing an ownership change no longer exists, it will issue shares of Common Stock equal in
value to the difference between the exercise price per share and the market price per share times
the number of shares covered by the exercise plus interest on the total for the period of the
delay calculated at the composite prime rate of interest to corporate borrowers as published in
The Wall Street Journal. The Committee also will be authorized in its discretion to prescribe in
the option agreement for the exercise of the Stock Option in specific installments. A Stock
Option granted under the Plan will be exercisable during such period as the Committee may
determine, and will be subject to earlier termination as hereinafter provided. In no event,
however, may a Stock Option governed by the Plan be exercised after the expiration of its term.
Except as provided herein, no Stock Option may be exercised at any time unless the Participant who
holds the Stock Option is then an Employee. The Participant who holds a Stock Option will have
none of the rights of a shareowner with respect to the shares subject to a Stock Option until such
shares are issued upon the exercise of a Stock Option. Shares which otherwise would be delivered
to the holder of a Stock Option may be delivered, at the election of the holder, to the
Corporation in payment of Federal, state and/or local withholding taxes due in connection with an
exercise.
(3) Neither the Corporation nor any subsidiary may directly or indirectly lend money to any
Participant for the purpose of assisting the individual to acquire shares of Common Stock issued
upon the exercise of Stock Options granted under the Plan.
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EXHIBIT 10.31 (CONTINUED)
(4) In the event of the termination of the employment of a Participant who holds an outstanding Stock
Option, other than by reason of death, total and permanent disability or a Qualified Retirement,
the Participant may (unless the Stock Option shall have been previously terminated) exercise the
Stock Option at any time within three (3) months after such termination, but not after the
expiration of the term of the grant, to the extent of the number of shares which were exercisable
at the date of the termination of employment. Stock Options governed by the Plan will not be
affected by any change of employment so long as the Participant continues to be an Employee.
(5) Except as provided in the last two sentences of this Section VII(5), in the event of Qualified
Retirement a Participant who holds an outstanding Stock Option may exercise the Stock Option to
the extent the option is exercisable or becomes exercisable under its terms, at any time during
the term of the option grant, and in the event of a total and permanent disability, a Participant
who holds an outstanding Stock Option may exercise the Stock Option, to the extent the option is
exercisable or becomes exercisable under its terms, at any time within three years after such
termination or, if later, the date on which the option becomes exercisable with respect to such
shares, but not after the expiration of the term of the option grant. In the event of the death
of a Participant who holds an outstanding Stock Option, the Stock Option may be exercised by a
legatee, or by the personal representatives or distributees, at any time within a period of two
(2) years after death, but not after the expiration of the term of the grant. If death occurs
while employed by the Corporation or a subsidiary, or during the three-year period specified in
the first sentence of this paragraph, options may be exercised to the extent of the remaining
shares covered by Stock Options whether or not such shares were exercisable at the date of death.
If death occurs during the three-month period specified in Section VII(4) Stock Options may be
exercised to the extent of the number of shares that were exercisable at the date of death.
Notwithstanding the other provisions of this Section VII(5), no option which is not exercisable at
the time of a retirement shall become exercisable after such retirement if, without the written
consent of the Corporation, a Participant engages in a business, whether as owner, partner,
officer, employee, or otherwise, which is in competition with the Corporation or one of its
affiliates, and if the Participant's participation in such business is deemed by the Corporation
to be detrimental to the best interests of the Corporation. The determination as to whether such
business is in competition with the Corporation or any of its affiliates, and whether such
participation by such person is detrimental to the best interests of the Corporation, shall be
made by the Corporation in its absolute discretion, and the decision of the Corporation with
respect thereto, including its determination as to when the participation in such competitive
business commenced, shall be conclusive.
SECTION VIII
RESTRICTED SHARES
(1) In addition to the Restricted Shares which the Committee may award pursuant to Section VI(4), the
Committee also may award Restricted Shares to individuals recommended by management for either
retention or performance purposes or as part of an employment agreement.
(2) The Participant will be entitled to all dividends paid with respect to all Restricted Shares
awarded under the Plan during the period of restriction and will not be required to return any
such dividends to the Corporation in the event of the forfeiture of the Restricted Shares. The
Participant also will be entitled to vote Restricted Shares during the period of restriction.
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EXHIBIT 10.31 (CONTINUED)
(3) All Restricted Share certificates awarded under the Plan are to be delivered to the Participant
with an appropriate legend imprinted on the certificate.
SECTION IX
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the option agreements may contain such provisions as
the Committee determines to be appropriate for the adjustment of the number and class of shares, subject to
each outstanding Stock Option, the option prices in the event of changes in, or distributions with respect
to, the outstanding Common Stock by reason of stock dividends, recapitalizations, mergers, consolidations,
split-ups, combinations or exchanges of shares, spinoffs and the like, and, in the event of any such
changes in, or distribution with respect to, the outstanding Common Stock, the aggregate number and class
of shares available under the Plan shall be appropriately adjusted by the Committee, whose determination
shall be conclusive.
SECTION X
ADMINISTRATION OF THE PLAN
Full power and authority to construe, interpret and administer the Plan is vested in the Committee.
Decisions of the Committee will be final, conclusive and binding upon all parties, including the
Corporation, shareowners and employees. The foregoing will include, but will not be limited to, all
determinations by the Committee as to (a) the approval of Employees for participation in the Plan, (b) the
amount of the Awards, (c) the performance levels at which different percentages of the Awards would be
earned and all subsequent adjustments to such levels and (d) the determination of all Awards. Any person
who accepts any Award hereunder agrees to accept as final, conclusive and binding all determinations of the
Committee. The Committee will have the right, in the case of employees not employed in the United States,
to vary from the provision of the Plan to the extent the Committee deems appropriate in order to preserve
the incentive features of the Plan.
SECTION XI
NON-ASSIGNMENT
Awards under the Plan may not be assigned or alienated. In case of a Participant's death, the
amounts distributable to the deceased Participant under the Plan with respect to which a designation of
beneficiary has been made (to the extent it is valid and enforceable under applicable law) shall be
distributed in accordance with the Plan to the designated beneficiary or beneficiaries. The amount
distributable to a Participant upon death and not subject to such a designation shall be distributed to the
Participant's estate. If there is any question as to the right of any beneficiary to receive a
distribution under the Plan, the amount in question may be paid to the estate of the Participant, in which
event the Corporation will have no further liability to anyone with respect to such amount.
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EXHIBIT 10.31 (CONTINUED)
SECTION XII
RIGHTS OF PARTICIPANT
To the extent that any Participant, beneficiary or estate acquires a right to receive payments or
distributions under the Plan, such right will be no greater than the right of a general unsecured creditor
of the Corporation. All payments and distributions to be made hereunder will be paid from the general
assets of the Corporation. Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create any contracted right or trust of any kind or fiduciary relationship
between the Corporation and any Participant, beneficiary or estate.
SECTION XIII
MODIFICATION, AMENDMENT OR TERMINATION
The Committee may modify without the consent of the Participant (i) the Plan, (ii) the terms of any
option previously granted or (iii) the terms of Restricted Shares previously awarded at any time, provided
that, no such modification will, without the approval of the shareowners of the Corporation, increase the
number of shares of Common Stock available hereunder. The Committee may terminate the Plan at any time.
SECTION XIV
RESERVATION OF SHARES
Each fiscal year, there will be reserved for issue under the Plan one (1) percent of the outstanding
shares of Common Stock including Class B Common Stock of the Corporation as determined by the number of
shares outstanding as of the end of the immediately preceding fiscal year. No more than Five Hundred
Thousand (500,000) shares shall be granted as Incentive Stock Options in any calendar year. Such shares
may be in whole or in part, as the Board of Directors shall from time to time determine, authorized and
unissued shares of Common Stock or issued shares of Common Stock which shall have been reacquired by the
Corporation. If less than one (1) percent of the shares is granted or awarded in any fiscal year, the
difference will be available for use in the following year only and if not used in the following year,
those shares will no longer be available. Any shares available from the prior year will be the last shares
to be granted or awarded.
SECTION XV
AGREEMENT TO SERVE
Each Participant receiving a Nonqualified Stock Option or an Incentive Stock Option shall, as one of
the terms of the option agreement, agree to remain in the service of the Corporation or of one of its
subsidiaries for a period of at least one (1) year from the date of granting the option. Such service will
(subject to the provisions of any contract between the Corporation or any such subsidiary and such
Participant) be at the pleasure of the Corporation or of such subsidiary and at such compensation as the
Corporation or such subsidiary shall determine from time to time. Any termination of a Participant's
service for any reason other than death, permanent and total disability or Qualified Retirement during such
period shall be deemed a violation of the Agreement contained in this Section. In the event of such
violation, any Nonqualified Stock Option or Incentive Stock Option held by the Participant under the Plan
will immediately be canceled. Nothing in the Plan will confer on any Participant any right to continue in
the employ of the Corporation or any of its subsidiaries or interfere with or prevent in any way the right
of the Corporation or any of its subsidiaries to terminate a Participant's employment at any time for any
reason.
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EXHIBIT 10.31 (CONTINUED)
SECTION XVI
CHANGE IN CONTROL
Notwithstanding any provision contained herein to the contrary, in the event of a Change in Control,
all awarded Restricted Shares will immediately be free of all restrictions and performance contingencies
and will be deemed fully earned and not subject to forfeiture and all outstanding options governed by the
Plan will be immediately exercisable and shall continue to be exercisable for a period of three (3) years
from the date of the Change in Control regardless of the original term or employment status, except that
the term of any Incentive Stock Option shall not be extended beyond ten (10) years from the date of grant.
SECTION XVII
LIMITATION OF ACTIONS
Every right of action by or on behalf of the Corporation or any shareowner against any past, present
or future member of the Board of Directors, officer or Employee arising out of or in connection with the
Plan will, irrespective of the place where action may be brought and irrespective of the place of residence
of any such director, officer or employee, cease and be barred by the expiration of three years from
whichever is the later of (a) the date of the act or omission in respect of which such right of action
arises or (b) the first date upon which there has been made generally available to shareowners an annual
report of the Corporation and a proxy statement for the annual meeting of shareowners following the
issuance of such annual report, which annual report and proxy statement alone or together set forth, for
the related period, the aggregate amount of Awards under the Plan during such period; and any and all right
of action by an Employee (past, present or future) against the Corporation arising out of or in connection
with the Plan shall, irrespective of the place where action may be brought, cease and be barred by the
expiration of three (3) years from the date of the act or omission in respect of which such right of action
arises.
SECTION XVIII
GOVERNING LAW
The Plan will be governed by and interpreted pursuant to the laws of the State of Delaware, the place
of incorporation of the Corporation.
SECTION XIX
SUBSIDIARIES' PLANS
To the extent determined by the Committee, any subsidiary may, without regard to the limitations
under the Plan, have a separate incentive plan or program. The Committee will have exclusive jurisdiction
and sole discretion to approve or disapprove any such plan or program and, from time to time, to amend,
modify, or suspend any such plan or program. Individuals eligible for Awards under any such plan or
program will not be considered Employees eligible for Awards under the Plan, unless otherwise determined by
the Committee. No provision of any such plan or program will be included in, or considered a part of, the
Plan and any awards made under any such plan or program will not be charged against the aggregate amount
available under the Plan unless otherwise determined by the Committee.
SECTION XX
EFFECTIVE DATE
The effective date of the Plan shall be December 16, 1993, if approved by the shareowners at the 1994
Annual Meeting, and the Plan shall continue in effect for ten (10) years from the effective date.
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Navistar International (NAV)
Filed: 11 Mar 02, 12:00am