EXHIBIT 10.19
NAVISTAR 1994 PERFORMANCE INCENTIVE PLAN
Amended as of October 13, 1998
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.
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(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.
(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.
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(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.
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.
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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 which 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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(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 which 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.
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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 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.
(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 stock brokers,
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
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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.
(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 or 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,
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the date on which the option becomes exercisable with respect to
such shares, but not after the expiration of the term of the
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
which 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.
(3) All Restricted Share certificates awarded under the Plan are to
be delivered to the Participant with an appropriate legend
imprinted on the certificate.
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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
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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.
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.
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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.
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
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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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