10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    To                    

Commission file number 1-9618

NAVISTAR INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-3359573
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4201 Winfield Road, P.O. Box 1488, Warrenville, Illinois	60555
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (630) 753-5000

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  x    No  ¨.

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

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨

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

As of July 31, 2008, the number of shares outstanding of the registrant’s common stock was 71,174,848, net of treasury shares.

Documents incorporated by reference: None.

NAVISTAR INTERNATIONAL CORPORATION FORM 10-Q

INDEX

		Page
PART I
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Consolidated Statements of Operations for the three and nine months ended July 31, 2008 and 2007	3
	Consolidated Balance Sheets as of July 31, 2008 and October 31, 2007	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2008 and 2007	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
PART II
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 6.	Exhibits	62
	Signature	63

2

PART I

Item 1. Condensed Consolidated Financial Statements

Navistar International Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended July 31,						Nine Months Ended July 31,
	2008			2007			2008			2007
(in millions, except per share data)
Sales and revenues
Sales of manufactured products, net	$	3,879		$	2,852		$	10,592		$	8,802
Finance revenues		75			104			265			292
Sales and revenues, net		3,954			2,956			10,857			9,094
Costs and expenses
Costs of products sold		3,115			2,428			8,762			7,505
Selling, general and administrative expenses		386			368			1,071			1,010
Engineering and product development costs		108			86			289			284
Interest expense		88			125			357			367
Other income, net		(5	)		(34	)		(10	)		(21	)
Total costs and expenses		3,692			2,973			10,469			9,145
Equity in income of non-consolidated affiliates		18			22			63			62
Income before income tax		280			5			451			11
Income tax expense		(8	)		(9	)		(17	)		(28	)
Net income (loss)	$	272		$	(4	)	$	434		$	(17	)
Basic earnings (loss) per share	$	3.85		$	(0.05	)	$	6.16		$	(0.24	)
Diluted earnings (loss) per share	$	3.68		$	(0.05	)	$	5.92		$	(0.24	)
Weighted average shares outstanding
Basic		70.8			70.3			70.5			70.3
Diluted		74.0			70.3			73.3			70.3

See Notes to Condensed Consolidated Financial Statements

3

Navistar International Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	As of
	July 31, 2008			October 31, 2007
(in millions, except per share data)
ASSETS
Current assets
Cash and cash equivalents	$	678		$	777
Marketable securities		18			6
Finance and other receivables (net of allowance for losses of $74 and $60 as of July 31, 2008 and October 31, 2007, respectively)		3,051			2,941
Inventories		1,544			1,412
Deferred taxes, net		116			115
Other current assets		171			194
Total current assets		5,578			5,445
Restricted cash and cash equivalents		687			419
Finance and other receivables (net of allowance for losses of $28 and $41 as of July 31, 2008 and October 31, 2007, respectively)		2,246			2,478
Investments in and advances to non-consolidated affiliates		177			154
Property and equipment (net of accumulated depreciation and amortization of $2,347 and $2,199 as of July 31, 2008 and October 31, 2007, respectively)		1,963			2,086
Goodwill		378			353
Intangible assets (net of accumulated amortization of $71 and $53 as of July 31, 2008 and October 31, 2007, respectively)		273			286
Pension assets		143			103
Deferred taxes, net		31			35
Other noncurrent assets		81			89
Total assets	$	11,557		$	11,448
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities
Current liabilities
Notes payable and current maturities of long-term debt	$	803		$	798
Accounts payable		2,049			1,770
Other current liabilities		1,225			1,423
Total current liabilities		4,077			3,991
Long-term debt		5,730			6,083
Postretirement benefits liabilities		1,220			1,327
Other noncurrent liabilities		758			781
Total liabilities		11,785			12,182
Stockholders’ deficit
Series D convertible junior preference stock		4			4
Common stock and additional paid in capital (par value $0.10 per share, 75.4 shares issued as of July 31, 2008 and October 31, 2007)		2,103			2,101
Accumulated deficit		(2,091	)		(2,519	)
Accumulated other comprehensive loss		(105	)		(155	)
Common stock held in treasury, at cost (4.2 and 5.1 shares as of July 31, 2008 and October 31, 2007, respectively)		(139	)		(165	)
Total stockholders’ deficit		(228	)		(734	)
Total liabilities and stockholders’ deficit	$	11,557		$	11,448

See Notes to Condensed Consolidated Financial Statements

4

Navistar International Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended July 31,
	2008			2007
(in millions)
Cash flows from operating activities
Net income (loss)	$	434		$	(17	)
Adjustments to reconcile net income (loss) to cash provided by operating activities
Depreciation and amortization		241			229
Depreciation of equipment held for or under lease		44			41
Deferred taxes		(3	)		(6	)
Amortization of debt issuance costs		15			7
Stock-based compensation		2			6
Provision for doubtful accounts		51			23
Equity in income of non-consolidated affiliates		(63	)		(62	)
Dividends from non-consolidated affiliates		54			74
Gain on sales of affiliates		(4	)		(9	)
Loss on sale of property and equipment		—			8
Loss on repurchases of debt		—			31
Changes in other assets and liabilities		(124	)		(258	)
Total adjustments		213			84
Net cash provided by operating activities		647			67
Cash flows from investing activities
Purchases of marketable securities		(43	)		(178	)
Sales or maturities of marketable securities		31			309
Net change in restricted cash and cash equivalents		(268	)		69
Capital expenditures		(145	)		(207	)
Purchase of equipment held for or under lease		(47	)		(41	)
Proceeds from sale of property and equipment		22			16
Investments and advances to non-consolidated affiliates		(12	)		(5	)
Proceeds from sales of affiliates		20			26
Business acquisitions, net of cash acquired		—			(7	)
Other investing activities		5			6
Net cash used in investing activities		(437	)		(12	)
Cash flows from financing activities
Proceeds from issuance of securitized debt		1,057			885
Principal payments on securitized debt		(1,448	)		(1,068	)
Proceeds from issuance of non-securitized debt		161			1,566
Principal payments on non-securitized debt		(15	)		(1,558	)
Net decrease in notes and debt outstanding under revolving credit facilities		(46	)		(357	)
Principal payments under financing arrangements and capital lease obligations		(60	)		(36	)
Debt issuance costs		(11	)		(24	)
Proceeds from exercise of stock options		26			—
Net cash used in financing activities		(336	)		(592	)
Effect of exchange rate changes on cash and cash equivalents		27			54
Decrease in cash and cash equivalents		(99	)		(483	)
Cash and cash equivalents at beginning of period		777			1,157
Cash and cash equivalents at end of the period	$	678		$	674

See Notes to Condensed Consolidated Financial Statements

5

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of significant accounting policies

Organization and Description of the Business

Navistar International Corporation (“NIC”), incorporated under the laws of the state of Delaware in 1993, is a holding company whose principal operating subsidiaries are Navistar, Inc. and Navistar Financial Corporation (“NFC”). References herein to the “company,” “we,” “our,” or “us” refer collectively to NIC, its subsidiaries, and certain variable interest entities (“VIEs”) of which we are the primary beneficiary. We operate in four principal industry segments: Truck, Engine, Parts (collectively called “manufacturing operations”), and Financial Services. The Financial Services segment consists of NFC and our foreign finance operations (collectively called “financial services operations”).

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements include the assets, liabilities, revenues, and expenses of our manufacturing operations, majority owned dealers, wholly-owned financial services subsidiaries, and VIEs of which we are the primary beneficiary. The effects of transactions among consolidated entities have been eliminated to arrive at the consolidated amounts. Certain reclassifications were made to prior year’s amounts to conform to the 2008 presentation.

We prepared the accompanying unaudited condensed consolidated financial statements in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for comprehensive annual financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting policies described in the Annual Report on Form 10-K for the year ended October 31, 2007 and should be read in conjunction with the disclosures therein. In our opinion, these interim financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of annual operating results.

Accounting Changes

As of November 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109. See Note 9, Income taxes, for more information.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, pension and other postretirement benefits, allowance for losses, sales of receivables, income tax contingency accruals and valuation allowances, product warranty accruals, asbestos accruals, asset impairment, and litigation-related accruals. Actual results could differ from our estimates.

6

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Concentration Risks

Our financial position, results of operations, and cash flows are subject to concentration risks related to concentrations of union employees and two customers. As of July 31, 2008, approximately 6,300, or 64%, of our hourly workers and approximately 700, or 9%, of our salaried workers are represented by labor unions and are covered by collective bargaining agreements. See Note 13, Segment reporting, for discussions of customer concentration.

Revenue Recognition

Our manufacturing operations recognize revenue when we meet four basic criteria: (i) persuasive evidence that a customer arrangement exists, (ii) the price is fixed or determinable, (iii) collectability is reasonably assured, and (iv) delivery of product has occurred or services have been rendered.

Truck sales are generally recognized when risk of ownership passes. Sales to fleet customers and governmental entities are recognized in accordance with the terms of each contract. Revenue on certain customer requested bill and hold arrangements is not recognized until after the customer is notified that the product (i) has been completed according to customer specifications, (ii) has passed our quality control inspections, and (iii) is ready for delivery based upon the established delivery terms. Engine sales are generally recognized at the time of shipment or delivery in accordance with the shipping terms.

Parts sales are recognized at the time of shipment. Parts sales to governmental entities are recognized in accordance with the terms of each contract. An allowance for sales returns is recorded as a reduction to revenue based upon estimates using historical information about returns. For the sale of service parts that include a core component, we record revenue on a gross basis including the fair market value of the core. A core component is the basic forging or casting, such as an engine block, that can be remanufactured by a certified remanufacturing supplier. When a dealer returns a core within the specified eligibility period, we provide a core return credit. At times, we may mark up the core charge beyond the amount we are charged by the supplier. This mark up is recorded as a liability, as it represents the amount that will be paid to the dealer upon return of the core component and is in excess of the fair value to be received from the supplier.

Concurrent with our recognition of revenue, we recognize price allowances and the cost of incentive programs in the normal course of business based on programs offered to dealers. Estimates are made for sales incentives on certain vehicles in dealer stock inventory when special programs that provide a specific incentive to the dealer are offered in order to facilitate a sale to the end customer.

Truck sales to the U.S. government, of non-commercial products manufactured to the government’s specifications, are recognized using the units-of-delivery measure under the percentage-of-completion accounting method as units are delivered and accepted by the government. Revenue from service contracts with the U.S. government is generally recorded on a straight-line basis over the period of contract performance, unless otherwise agreed that the obligations are fulfilled upon achievement of an agreed milestone or occurrence of a specified event.

Modifications to U.S. government contracts, referred to as “change orders,” may be unpriced; that is, the work to be performed is defined, but the resulting contract price adjustment is to be negotiated at a later date. Revenue related to unpriced change orders is recognized when the price has been agreed with the government. Costs related to unpriced change orders are deferred when it is probable that the costs will be recovered through a contract price adjustment.

7

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Shipping and handling amounts billed to our customers are included in Sales of manufactured products, net and the related shipping and handling costs incurred are included in Costs of products sold.

Financial services operations recognize revenue from retail notes, finance leases, wholesale notes, retail accounts, and wholesale accounts as Finance revenues over the term of the receivables utilizing the effective interest method. Certain direct origination costs and fees are deferred and recognized as an adjustment to yield and are reported as part of Finance revenues over the life of the receivable. Loans are considered to be impaired when we conclude there is a high likelihood the customer will not be able to make full payment after reviewing the customer’s financial performance, payment ability, capital-raising potential, management style, economic situation, etc. The accrual of interest on such loans is discontinued when the collection of the account becomes doubtful (“non-accrual status loans”). When the accrual of interest is discontinued, all unpaid accrued interest is charged against Finance revenues. Finance revenues on these loans are recognized only to the extent cash payments are received. We resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured.

Operating lease revenues are recognized on a straight-line basis over the life of the lease. Recognition of revenue is suspended when management determines the collection of future income is not probable. Income recognition is resumed if collection again becomes probable.

Selected receivables are securitized and sold to public and private investors with limited recourse. Our financial services operations continue to service the sold receivables and receive fees for such services. Gains or losses on sales of receivables that qualify for sales accounting treatment are credited or charged to Finance revenues in the period in which the sale occurs. Discount accretion is recognized on an effective yield basis and is included in Finance Revenues.

Product Warranty Liability

Accrued product warranty and deferred warranty revenue activity is as follows:

	Nine Months Ended July 31,
	2008			2007
(in millions)
Balance, at beginning of period	$	677		$	777
Costs accrued and revenues deferred		147			182
Adjustments to pre-existing warranties(A)		10			25
Payments and revenues recognized		(264	)		(265	)
Balance, at end of period	$	570		$	719

(A) Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods.

The amount of deferred revenue related to extended warranty programs as of July 31, 2008 and October 31, 2007 was $124 million and $127 million, respectively. Revenue recognized under our extended warranty programs was $12 million and $10 million, and $35 million and $21 million for the three months and nine months ended July 31, 2008 and 2007, respectively.

8

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

New Accounting Pronouncements

Accounting pronouncements issued by various standard setting and governmental authorities that have not yet become effective with respect to our condensed consolidated financial statements are described below, together with our assessment of the potential impact they may have on our financial position, results of operations, or cash flows:

Pronouncement	Effective Date	Impact on Our Financial Condition and Results of Operations
Emerging Issues Task Force Issue No. 08-3, Accounting by Lessees for Nonrefundable Maintenance Deposits	Effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Early adoption is not permitted. Our effective date is November 1, 2009.	We are evaluating the potential impact, if any.
FASB Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets	Effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Our effective date is November 1, 2009.	We are evaluating the potential impact, if any.
FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133	Effective for fiscal years and interim reporting periods beginning after November 15, 2008. Our effective date is February 1, 2009.	When effective, we will comply with the disclosure provisions of this Statement.
FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51	Effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. Our effective date is November 1, 2009.	We are evaluating the potential impact, if any.
FASB Statement No. 141(R), Business Combinations	Applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. Our effective date is November 1, 2009.	We will adopt this Statement on a prospective basis.
Emerging Issues Task Force Issue No. 07-03, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities	Effective for financial statements issued for fiscal years beginning after December 15, 2007. Our effective date is November 1, 2008.	We are evaluating the potential impact, if any.

9

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Pronouncement	Effective Date	Impact on Our Financial Condition and Results of Operations
FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities	Effective as of the beginning of the first fiscal year beginning after November 15, 2007. If we adopt the Fair Value Option, our effective date is November 1, 2008.	We are evaluating the potential impact, if any. We have not determined whether to adopt the fair value option.
FASB Statement No. 157, Fair Value Measurements	Effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. Our effective date is November 1, 2008.	We are evaluating the potential impact, if any.

2. Disposal of business

In December 2007, we sold all of our interests in a heavy duty truck parts remanufacturing business. In connection with the sale, we received gross proceeds of $22 million, including liabilities assumed, resulting in a gain of $4 million.

3. Finance and other receivables, net

Information regarding impaired finance receivables is as follows:

	As of
	July 31, 2008		October 31, 2007
(in millions)
Outstanding balances with specific loss reserves	$	59	$	52
Specific loss reserves		13		11
Outstanding balances on non-accrual status loans		45		39
Average balance of impaired finance receivables		55		42
Outstanding balances with payments over 90 days past due		28		120

Impaired receivables include accounts identified as “critical accounts” as a result of financial difficulties and accounts that are on a non-accrual status. In certain cases, we continue to collect payments on our impaired receivables.

10

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

The activity related to our allowance for losses for finance and other receivables is summarized as follows:

	Three Months Ended July 31,						Nine Months Ended July 31,
	2008			2007			2008			2007
(in millions)
Balance, at beginning of period	$	93		$	80		$	101		$	75
Provision for doubtful accounts		34			8			52			23
Charge-off of accounts, net of recoveries		(25	)		(6	)		(51	)		(16	)
Balance, at end of period	$	102		$	82		$	102		$	82

Repossessions

We repossess leased and sold trucks on defaulted finance receivables and leases, and place them into Inventories. We liquidate these repossessions to partially recover the credit losses in our portfolio. Losses, recognized at the time of repossession and charged against the allowance for losses, for the three months ended July 31, 2008 and 2007 were $10 million and $4 million, and for the nine months ended July 31, 2008 and 2007 were $26 million and $11 million, respectively. Losses, recognized upon the sale of repossessed vehicles, for the three months ended July 31, 2008 and 2007 were $2 million and $1 million, and for the nine months ended July 31, 2008 and 2007 were $7 million and $2 million, respectively. Impairment losses on repossessed vehicles for the three and nine months ended July 31, 2008 were $2 million and $5 million, respectively. No impairments were recorded on repossessed vehicles in 2007.

A summary of the activity related to repossessed vehicles is as follows:

	Three Months Ended July 31,						Nine Months Ended July 31,
	2008			2007			2008			2007
(in millions)
Repossessed vehicles, at beginning of period	$	48		$	17		$	25		$	6
Repossessions		25			9			84			32
Liquidations		(30	)		(10	)		(66	)		(22	)
Repossessed vehicles, at end of period	$	43		$	16		$	43		$	16

4. Sales of receivables

The primary business of our financial services operations is to provide wholesale, retail, and lease financing for new and used trucks sold by us and our dealers and, as a result, our finance receivables and leases have a significant concentration in the trucking industry. On a geographic basis, there is not a disproportionate concentration of credit risk in any area of the U.S. or other countries where we have financial service operations. We retain as collateral an ownership interest in the equipment associated with leases and, on behalf of the various trusts we maintain, a security interest in equipment associated with wholesale notes and retail notes.

NFC finances receivables through Navistar Financial Retail Receivables Corporation (“NFRRC”), Navistar Financial Securities Corporation (“NFSC”), Truck Retail Accounts Corporation (“TRAC”), Truck Retail Instalment Paper Corporation (“TRIP”), and International Truck Leasing Corporation (“ITLC”), which are all special purpose, wholly-owned subsidiaries (“SPEs”) of NFC. In accordance with FASB Statement No. 140,

11

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, these transactions are accounted for either as a sale with gain or loss recorded at the date of sale and a retained interest recorded, or as secured borrowings. We provide limited recourse for all subordinated receivables. The recourse is limited to our retained interest and relates to credit risk only.

Off-Balance Sheet Securitizations

The NFSC trust owned $848 million of wholesale notes, which includes $122 million of receivables with dealer operations (“Dealcors”), and $66 million of marketable securities as of July 31, 2008, and $1.1 billion of wholesale notes which includes $171 million of receivables with Dealcors and $85 million of marketable securities as of October 31, 2007. In the three months ended July 31, 2008, the NFSC trust repaid $200 million of an investor certificate that expired in July 2008.

Components of available wholesale note trust funding certificates related to NFSC were as follows:

		As of
	Maturity	July 31, 2008			October 31, 2007
(in millions)
Investor certificate	July 2008	$	—		$	200
Investor certificate	February 2010		212			212
Variable funding certificate	November 2008		800			800
Total funding available			1,012			1,212
Funding utilized			(762	)		(982	)
Unutilized funding		$	250		$	230

All of the unutilized funding is related to the variable funding certificate (“VFC”). Our retained interest was $152 million and $200 million as of July 31, 2008 and October 31, 2007, respectively.

The TRAC trust owned $125 million of retail accounts and $23 million of marketable securities as of July 31, 2008, and $155 million of retail accounts and $26 million of marketable securities as of October 31, 2007.

The amount of available retail accounts funding related to TRAC was as follows:

		As of
	Maturity	July 31, 2008			October 31, 2007
(in millions)
Funding conduit	October 2008	$	100		$	100
Funding utilized			(35	)		(60	)
Unutilized funding		$	65		$	40

In August 2008, the TRAC funding conduit, which was due to expire in August 2008, was extended to October 7, 2008.

Our retained interest was $111 million and $119 million as of July 31, 2008 and October 31, 2007, respectively.

12

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

For the three months ended July 31, 2008 and 2007, proceeds from the sale of finance receivables with off-balance sheet treatment were $1.2 billion and $1.1 billion, respectively. For the nine months ended July 31, 2008 and 2007, proceeds from the sale of finance receivables with off-balance sheet treatment were $3.0 billion and $3.9 billion, respectively.

Retained Interests

The SPEs’ assets are available to satisfy their creditors’ claims prior to such assets becoming available for the SPEs’ own uses or to NFC or affiliated companies. NFC is under no obligation to repurchase any sold receivable that becomes delinquent in payment or otherwise is in default. The terms of receivable sales generally require NFC to provide credit enhancements in the form of excess seller’s interest and/or cash reserves with the trusts and conduits. The use of such cash reserves by NFC is restricted under the terms of the securitized sales agreements. The maximum exposure under all receivable sale recourse provisions was $263 million and $319 million as of July 31, 2008 and October 31, 2007, respectively.

The following is a summary of amounts due from sales of receivables (retained interest):

	As of
	July 31, 2008		October 31, 2007
(in millions)
Excess seller’s interest	$	248	$	296
Interest only strip		6		11
Restricted cash reserves		9		12
Total amounts due from sales of receivables	$	263	$	319

The key economic assumptions used in valuing our retained interests are as follows:

	As of
	July 31, 2008		October 31, 2007
Discount rate (annual)	10.6 to 18.5	%	10.3 to 18.8	%
Estimated credit losses	0 to 0.18	%	0 to 0.18	%
Payment speed (percent of portfolio per month)	10.3 to 83.0	%	9.9 to 69.2	%

The lower end of the discount rate assumption range and the upper end of the payment speed assumption range were used to value the $111 million retained interests in the TRAC retail account securitization The upper end of the discount rate assumption range and the lower end of the payment speed assumption range were used to value the $152 million retained interests in the NFSC wholesale note securitization facility.

13

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

The following tables reconcile the total serviced portfolio to NFC’s on-balance sheet portfolio, net of unearned income:

	Retail Notes		Finance Leases		Wholesale Notes			Accounts Receivable			Total
(in millions)
As of July 31, 2008
Total portfolio	$	2,549	$	126	$	881		$	291		$	3,847
Less: Sold receivables and retained interest		—		—		(726	)		(125	)		(851	)
Total on balance sheet	$	2,549	$	126	$	155		$	166		$	2,996
As of October 31, 2007
Total portfolio	$	3,012	$	157	$	1,025		$	424		$	4,618
Less: Sold receivables and retained interest		—		—		(919	)		(155	)		(1,074	)
Total on balance sheet	$	3,012	$	157	$	106		$	269		$	3,544

Securitization Income

The following table sets forth the activity related to off-balance sheet securitizations, which are reported in Finance revenues:

	Three Months Ended July 31,						Nine Months Ended July 31,
	2008			2007			2008			2007
(in millions)
Fair value adjustments to retained interests	$	—		$	5		$	5		$	11
Excess spread income		4			10			15			41
Servicing fees revenue		2			3			8			11
Losses on sales of receivables		(5	)		(1	)		(12	)		(6	)
Investment revenue		1			2			4			5
Securitization income	$	2		$	19		$	20		$	62

5. Inventories

The components of inventories are as follows:

	As of
	July 31, 2008		October 31, 2007
(in millions)
Finished products	$	831	$	851
Work in process		190		210
Raw materials		438		293
Costs deferred related to unpriced change orders		25		—
Supplies		60		58
Total inventories	$	1,544	$	1,412

14

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

6. Investments in and advances to non-consolidated affiliates

Investments in and advances to non-consolidated affiliates is comprised of a 49 percent ownership interest in Blue Diamond Parts (“BDP”), a 51 percent ownership interest in Blue Diamond Truck (“BDT”), and fourteen other partially-owned affiliates. We do not control these affiliates, but have the ability to exercise significant influence over their operating and financial policies. Our ownership percentages in the fourteen other affiliates range from 9.9 percent to 51 percent. Our investment in these affiliates is an integral part of our operations, and we account for them using the equity method of accounting.

Presented below is summarized financial information for BDP, which is considered a significant unconsolidated affiliate. BDP manages sourcing, merchandising, and distribution of various replacement parts. The following table summarizes results of operations information of BDP:

	Three Months Ended July 31,				Nine Months Ended July 31,
	2008		2007		2008		2007
(in millions)
Net service revenue	$	51	$	49	$	159	$	158
Net expenses		8		8		24		26
Income before tax expense		43		41		135		132
Net income		43		41		134		131

7. Debt

NFC’s Revolving Credit Agreement (“Credit Agreement”), as amended in March 2007, has two primary components, a term loan of $620 million and a revolving bank loan of $800 million. The latter has a Mexican sub-revolver ($100 million), which may be used by NIC’s Mexican financial services operations.

The Credit Agreement requires both NIC and NFC to file with the SEC and provide to NFC’s lenders copies of their respective Annual Reports on Form 10-K for each year, their Quarterly Reports on Form 10-Q for each of the first three quarters of each year, and the related financial statements on or before the dates specified in the Credit Agreement. Failure to do so results in a default under the Credit Agreement, during which NFC may not incur any additional indebtedness under the Credit Agreement until the default is cured or waived, and which would give rise to a cross-default to NIC’s $1.5 billion five-year term loan facility and synthetic revolving facility.

NFC received a series of waivers extending through December 31, 2007, which waived any default or event of default that would result solely from NFC’s and NIC’s failure to meet the filing requirements of Sections 13 and 15 of the Securities Exchange Act of 1934, as amended, with respect to their Annual Reports on Form 10-K for 2005 and 2006 and certain of their Quarterly Reports on Form 10-Q.

In December 2007, NFC received a fifth waiver to the Credit Agreement extending the waiver period through November 30, 2008. This waiver expands the scope of certain reporting default conditions to include the Annual Report on Form 10-K for 2007 and the Quarterly Reports on Form 10-Q for 2008. The fifth waiver continues the 0.25% rate increase through the waiver’s expiration.

In November and December 2007, NFC obtained waivers for the private retail securitizations and the VFC portion of the wholesale note securitizations. These waivers are similar in scope to the Credit Agreement waivers and expire upon the earlier of November 30, 2008, or the date on which NIC and NFC each shall have timely filed a report on Form 10-K or Form 10-Q with the SEC, which will occur on the filing of this Form 10-Q.

15

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

In February 2008, April 2008, and July 2008, NFC completed separate securitization transactions for the sale of retail notes and issued secured borrowings related to these transactions in the amount of $536 million, $247 million, and $239 million, respectively. These transactions do not qualify for sale treatment under FASB Statement No. 140. Through July 31, 2008, NFC also utilized an additional $252 million of the bank revolving credit facility.

In March 2008, NFC received an Acknowledgement and Consent from the lenders under the Credit Agreement, whereby the filing of the audited financial statements for 2006 on a Current Report on Form 8-K filed March 6, 2008 was deemed satisfactory by the lenders.

In April 2008, NFC received a second Acknowledgement and Consent from the lenders under the Credit Agreement acknowledging that the method used in calculating various financial covenants was in accordance with the Credit Agreement.

We are required under certain agreements with public and private lenders of NFC to ensure that NFC and its subsidiaries maintain consolidated income before interest expense and income tax at not less than 125% of their interest expense. Under these agreements, if NFC and its subsidiaries consolidated income before interest expense and income taxes is less than 125% of their interest expense, NIC or Navistar, Inc. must make payments to NFC to achieve the required ratio. In May 2008, NFC received a third Acknowledgement and Consent from the lenders under the Credit Agreement that clarified certain definitions used to measure the fixed charge coverage ratio. This Acknowledgement and Consent allows NFC to include contributions made by NIC in NFC’s calculation of consolidated income before interest expense and income taxes. During July 2008, $25 million of such payments were required and made from Navistar, Inc. to NFC to maintain compliance with the covenant. No such contributions were made during the three and nine month periods ended July 31, 2007.

8. Postretirement benefits

Defined Benefit Plans

Generally, our pension plans are non-contributory. Our policy is to fund the pension plans in accordance with applicable U.S. and Canadian government regulations and to make additional contributions from time to time. For the three months and nine months ended July 31, 2008, we contributed $6 million and $27 million, respectively, to our pension plans to meet regulatory minimum funding requirements. For the three and nine months ended July 31, 2007, we contributed $6 million and $21 million, respectively, to meet minimum funding requirements. We currently anticipate additional contributions of approximately $67 million during the remainder of 2008.

On December 16, 2007, the majority of company employees represented by the United Automobile, Aerospace and Agriculture Implement Workers of America (“UAW”) voted to ratify a new contract that will run through September 30, 2010. Among the changes from the prior contract was the cessation of annual lump sum payments that had been made to certain retirees. We accounted for these payments as a defined benefit plan based on the historical substance of the underlying arrangement. The elimination of these payments and other changes resulted in a net settlement and curtailment of the plan resulting in income of $42 million, which is presented as a reduction of Selling, general and administrative expenses, for the nine months ended July 31, 2008.

16

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

We primarily fund other post-employment benefit (“OPEB”) obligations, such as retiree medical, in accordance with a 1993 legal agreement, which requires us to fund a portion of the plans’ annual service cost. For the three months and nine months ended July 31, 2008, we contributed $1 million and $3 million, respectively, to our OPEB plans to meet legal funding requirements. For the three and nine months ended July 31, 2007, we contributed $1 million and $4 million, respectively, to our OPEB plans to meet legal funding requirements. We currently anticipate additional contributions of approximately $1 million during the remainder of 2008.

Components of Net Postretirement Benefits (Income) Expense

Net postretirement benefits (income) expense included in our consolidated statements of operations is composed of the following:

	Three Months Ended July 31,												Nine Months Ended July 31,
	Pension Benefits						Health and Life Insurance Benefits						Pension Benefits						Health and Life Insurance Benefits
	2008			2007			2008			2007			2008			2007			2008			2007
(in millions)
Service cost for benefits earned during the period	$	6		$	6		$	3		$	4		$	18		$	19		$	9		$	12
Interest on obligation		56			55			28			28			168			165			85			84
Amortization of net cumulative losses		3			15			—			5			10			45			—			16
Amortization of prior service cost (benefit)		1			1			(1	)		(2	)		2			3			(3	)		(6	)
Settlements and curtailments		—			—			—			—			(42	)		—			(1	)		—
Premiums on pension insurance		—			—			—			—			1			—			—			—
Expected return on assets		(81	)		(69	)		(17	)		(14	)		(243	)		(208	)		(51	)		(42	)
Net postretirement benefits (income) expense	$	(15	)	$	8		$	13		$	21		$	(86	)	$	24		$	39		$	64

Defined Contribution Plans

Our defined contribution plans cover a substantial portion of domestic salaried employees and certain domestic represented employees. The defined contribution plans contain a 401(k) feature and provide most participants with a matching contribution from the company. Many participants covered by the plan receive annual company contributions to their retirement account based on an age-weighted percentage of the participant’s eligible compensation for the calendar year.

Defined contribution expense pursuant to these plans was $7 million and $6 million for the three months ended July 31, 2008 and 2007, respectively, and $19 million and $18 million for the nine months ended July 31, 2008 and 2007, respectively.

9. Income taxes

Under Accounting Principles Board Opinion No. 28, Interim Financial Reporting, we compute on a quarterly basis an estimated annual effective tax rate considering ordinary income and related income tax expense. Ordinary income refers to income before income tax expense excluding significant unusual or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs. For our domestic tax jurisdictions, we cannot reliably estimate annual projected taxes. Therefore taxes on ordinary income for such jurisdictions are reported in the period in which they are

17

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

incurred. Other items included in income tax expense in the periods in which they occur include the cumulative effect of changes in tax laws or rates, foreign exchange gains and losses, adjustments to our accruals for uncertain tax positions, and adjustments to our valuation allowance due to changes in our judgment regarding the realizability of deferred tax assets in future years.

We have assessed the need to maintain a valuation allowance for deferred tax assets based on an assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. Due to our recent history of U.S. operating and taxable losses, the inconsistency of U.S. profits, and the uncertainty of our U.S. financial outlook, we continue to maintain a full valuation allowance against our domestic deferred tax assets.

On November 1, 2007, we adopted FASB Interpretation No. 48, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FASB Interpretation No. 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FASB Interpretation No. 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods. Upon adoption, we increased our liability for uncertain tax positions by $5 million, resulting in a comparable increase to Accumulated deficit. As of November 1, 2007, after adoption of FASB Interpretation No. 48, the amount of the liability for uncertain tax positions was $107 million, $105 million of which, if recognized, would favorably affect the income tax rate. This liability was subsequently reduced by $18 million as the result of a settlement of a foreign audit.

We recognize interest and penalties related to uncertain tax positions as part of Income tax expense. Total interest and penalties recognized in the consolidated balance sheet at November 1, 2007 were $15 million.

While it is probable that the liability for uncertain tax positions may increase or decrease during the next 12 months, we do not expect any such change would have a material effect on our financial condition or results of operations.

We have open tax years from 1993 to 2007 with significant tax jurisdictions in the U.S., Canada, Mexico, and Brazil.

Congress recently enacted the Housing Assistance Tax Act of 2008, which provides a one-time refund of a portion of cumulative research tax credits and alternative minimum tax credits. Through the third quarter, we reported a $2 million tax benefit from these refundable credits.

10. Fair value of financial instruments

In January 2007, we signed a definitive loan agreement for a five-year senior unsecured term loan facility and synthetic revolving facility in the aggregate principal amount of $1.5 billion (“Facilities”). The Facilities were arranged by JP Morgan Chase Bank and a group of lenders that included Credit Suisse, Banc of America Securities, and Citigroup Global Markets. The Facilities are guaranteed by Navistar, Inc. The outstanding balance of the Facilities as of July 31, 2008 and October 31, 2007 was $1.3 billion. The fair value of the Facilities as of

18

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

July 31, 2008 and October 31, 2007 was $1.2 billion and $1.3 billion, respectively, resulting in a decline in the fair value of $103 million over the nine month period. This decline in the fair value is due to the increase in the discount rate as a result of current credit market conditions.

11. Financial instruments

We use derivative financial instruments as part of our overall interest rate and foreign currency risk management strategy to reduce our interest rate exposure, to potentially increase the return on invested funds, and to reduce exchange rate risk for transactional exposures denominated in currencies other than the functional currency. From time to time, we also use commodity forward contracts to manage variability related to exposure to certain commodity price risk.

Our financial services operations manage exposure to fluctuations in interest rates by limiting the amount of fixed rate assets funded with variable rate debt. This is accomplished by funding fixed rate receivables utilizing a combination of fixed rate debt and variable rate debt and derivative financial instruments. These derivative financial instruments may include interest rate swaps, interest rate caps, and forward contracts. The fair value of these instruments is estimated based on quoted market prices and is subject to market risk, as the instruments may become less valuable due to changes in market conditions or interest rates. Notional amounts of derivative financial instruments do not represent exposure to credit loss.

In connection with a sale of retail notes, our financial services operations entered into additional interest rate swap agreements during the nine month period ending July 31, 2008. The purpose and structure of these swaps is to convert the floating rate portion of the asset-backed securities into fixed rate swap interest to match the interest basis of the receivables pool sold to the owner trust and to protect our financial services operations from interest rate volatility.

As of July 31, 2008, the net fair value of our derivative financial instruments was $37 million, consisting of $39 million recorded in Other noncurrent assets, $75 million in Other noncurrent liabilities and $1 million in Other current liabilities. The net fair value of our derivatives as of October 31, 2007 was $18 million, consisting of $20 million recorded in Other noncurrent assets, $37 million in Other noncurrent liabilities, and $1 million in Other current liabilities. The maturities of these derivatives range from 2008 through 2018.

Interest expense includes mark to market (gains) losses under our interest rate swap agreements of $1 million and $40 million for the three month and nine month periods ended July 31, 2008, respectively, and $(1) million and $(2) million for the three month and nine month periods ended July 31, 2007, respectively.

12. Commitments and contingencies

Legal Proceedings

Overview

We are subject to various claims arising in the ordinary course of business, and are parties to various legal proceedings that constitute ordinary, routine litigation incidental to our business. The majority of these claims and proceedings relate to commercial, product liability, and warranty matters. In our opinion, apart from the actions set forth below, the disposition of these proceedings and claims, after taking into account recorded accruals and the availability and limits of our insurance coverage, will not have a material adverse effect on our business or our results of operations, cash flows, or financial condition.

19

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Ford Litigation

In January 2007, a complaint was filed against us in Oakland County Circuit Court in Michigan by Ford Motor Company (“Ford”) claiming damages relating to warranty and pricing disputes with respect to certain engines purchased by Ford from us. While Ford’s complaint did not quantify its alleged damages, we estimate that Ford may be seeking in excess of $500 million, and that this amount may increase (i) as we continue to sell engines to Ford at a price that Ford alleges is too high and (ii) as Ford pays its customers’ warranty claims, which Ford alleges are attributable to us. We disagree with Ford’s position and are defending ourselves vigorously in this litigation. We have filed an answer to the complaint denying Ford’s allegations in all material respects. We have also asserted affirmative defenses to Ford’s claims, as well as counterclaims alleging that, among other things, Ford has materially breached contracts between it and us in several different respects. Based on our investigation to date, we believe we have meritorious defenses to this matter. There can be no assurance, however, that we will be successful in our defense, and an adverse resolution of the lawsuit could have a material adverse effect on our results of operations, cash flows, or financial condition. In June 2007, we filed a separate lawsuit against Ford in the Circuit Court of Cook County, Illinois, for breach of contract relating to the manufacture of new diesel engines for Ford for use in vehicles including the F-150 pickup truck. In that case, we are seeking unspecified damages. In September 2007, the judge dismissed our lawsuit against Ford, directing us to proceed with mediation. In February 2008, we re-filed the lawsuit against Ford because the parties were unable to resolve the dispute through mediation.

Securities and Exchange Commission Investigations

In October 2004, we received a request from the staff of the SEC to voluntarily produce certain documents and information related to our accounting practices with respect to defined benefit pension plans and other postretirement benefits. We are fully cooperating with this request. Based on the status of the inquiry, we are not able to predict the final outcome of this matter.

In January 2005, we announced that we would restate our financial results for 2002 and 2003 and the first three quarters of 2004. Our restated Annual Report on Form 10-K was filed in February 2005. The SEC notified us on February 9, 2005, that it was conducting an informal inquiry into our restatement. On March 17, 2005, we were advised by the SEC that the status of the inquiry had been changed to a formal investigation. On April 7, 2006, we announced that we would restate our financial results for 2002 through 2004 and for the first three quarters of 2005. We were subsequently informed by the SEC that it was expanding the investigation to include that restatement. Our 2005 Annual Report on Form 10-K, which included the restated financial statements, was filed in December 2007. We have been providing information to and fully cooperating with the SEC on this investigation. Based on the status of the investigation, we are not able to predict its final outcome.

Litigation Relating to Accounting Controls and Financial Restatement

In December 2007, a complaint was filed against us by Norfolk County Retirement System and Brockton Contributory Retirement System (collectively “Norfolk”). In March 2008, an additional complaint was filed by Richard Garza. Each of these matters is pending in the United States District Court, Northern District of Illinois.

The plaintiffs in the Norfolk case allege they are shareholders suing on behalf of themselves and a class of other shareholders who purchased shares of the company’s common stock between February 14, 2003 and July 17, 2006. The complaint alleges that the defendants, which include the company, one of its executive officers, two of its former executive officers, and the company’s former independent accountants, Deloitte & Touche LLP, violated federal securities laws by making false and misleading statements about the company’s

20

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

financial condition during that period. In March 2008, the court appointed Norfolk County Retirement System and the Plumbers Local Union 519 Pension Trust as joint lead plaintiffs. The plaintiffs’ in this matter seek compensatory damages and attorneys’ fees among other relief.

The plaintiff in the Garza case brought a derivative claim on behalf of the company against one of the company’s executive officers, two of its former executive officers, and certain of its directors, alleging that (i) all of the defendants violated their fiduciary obligations under Delaware law by willfully ignoring certain accounting and financial reporting problems at the company; thereby knowingly disseminating false and misleading financial information about the company, (ii) that certain of the defendants were unjustly enriched in connection with their sale of company stock during the December 2002 to January 2006 period, and (iii) that defendants violated Delaware law by failing to hold an annual meeting of shareholders. In connection with this last allegation, the plaintiff seeks an order requiring defendants to schedule an annual meeting of shareholders. Otherwise, the plaintiffs in this matter seek compensatory damages, disgorgement of the proceeds of defendants’ profits from the sale of company stock, attorneys’ fees, and other equitable relief.

We strongly dispute the allegations in these complaints and will vigorously defend ourselves.

Guarantees

We occasionally provide guarantees that could obligate us to make future payments if the primary entity fails to perform under its contractual obligations. As described below, we have recognized liabilities for some of these guarantees in our consolidated balance sheets as they meet the recognition and measurement provisions of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of the Indebtedness of Others. In addition to the liabilities that have been recognized as described below, we are contingently liable for other potential losses under various guarantees. We do not believe that claims that may be made under such guarantees would have a material effect on our financial position, results of operations, or cash flows.

We have issued residual value guarantees in connection with various leases that extend through 2010. The amounts of the guarantees are estimated and recorded as liabilities, and were $25 million as of July 31, 2008. Our guarantees are contingent upon the fair value of the leased assets at the end of the lease term.

We obtain certain stand-by letters of credit and surety bonds from third party financial institutions in the ordinary course of business when required under contracts or to satisfy insurance-related requirements. Outstanding stand-by letters of credit and surety bonds were $50 million at July 31, 2008.

As of July 31, 2008, our Canadian operating subsidiary was contingently liable for the residual value, calculated at inception, of $23 million of retail customers’ contracts and $42 million of retail leases that are financed by a third party. These amounts approximate the estimated future resale market value of the collateral underlying these contracts and leases at their inception. As of July 31, 2008, we have recorded accruals totaling $5 million and $7 million for potential losses on the retail customers’ contracts and retail leases, respectively.

We extend credit commitments to certain truck fleet customers, which allow them to purchase parts and services from participating dealers. The participating dealers receive accelerated payments from us with the result that we carry the receivables and absorb the credit risk related to these customers. As of July 31, 2008, we have $41 million of unused credit commitments outstanding under this program.

21

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

In addition, we have entered into various guarantees for purchase commitments, credit guarantees, and contract cancellation fees with various expiration dates through 2012 totaling $61 million at July 31, 2008. In the ordinary course of business, we also provide routine indemnifications and other guarantees, the terms of which range in duration and often are not explicitly defined. We do not believe these will result in claims that would have a material impact on our financial position, results of operations, or cash flows.

Environmental Liabilities

We have been named a potentially responsible party (“PRP”), in conjunction with other parties, in a number of cases arising under an environmental protection law, the Comprehensive Environmental Response, Compensation, and Liability Act, popularly known as the Superfund law. These cases involve sites that allegedly received wastes from current or former company locations. Based on information available to us which, in most cases, consists of data related to quantities and characteristics of material generated at current or former company locations, material allegedly shipped by us to these disposal sites, as well as cost estimates from PRPs and/or federal or state regulatory agencies for the cleanup of these sites, a reasonable estimate is calculated of our share, if any, of the probable costs and accruals are recorded in our condensed consolidated financial statements. These accruals are generally recognized no later than completion of the remedial feasibility study and are not discounted to their present value. We review all accruals on a regular basis and believe that, based on these calculations, our share of the potential additional costs for the cleanup of each site will not have a material effect on our financial position, results of operations, or cash flows.

Four sites formerly owned by us, Wisconsin Steel in Chicago, Illinois, Solar Turbines in San Diego, California, West Pullman Plant in Chicago, Illinois, and the Canton Plant in Canton, Illinois, were identified as having soil and groundwater contamination. While investigations and cleanup activities continue at all sites, we believe that we have adequate accruals to cover costs to complete the cleanup of these sites.

In 2007, a former facility location in the City of Springfield, Ohio, which we voluntarily demolished in 2004 and conducted environmental sampling on, was sold to the City of Springfield. The city has obtained funds from the U.S. Environmental Protection Agency and the State of Ohio to address relatively minor soil contamination prior to commercial/industrial redevelopment of the site.

Also in 2007, we engaged the City of Canton, Illinois in a remediation plan for the environmental clean-up of a former company facility. We anticipate that execution of this plan will not have a material effect on our financial position, results of operations, or cash flows.

We have accrued $17 million and $22 million for these environmental matters, which are included within Other current liabilities and Other noncurrent liabilities, as of July 31, 2008 and October 31, 2007, respectively. As of July 31, 2008, the majority of these accrued liabilities are expected to be paid out during the period from 2008 through 2011.

Along with other vehicle manufacturers, we have been subject to an increase in the number of asbestos-related claims in recent years. In general, these claims relate to illnesses alleged to have resulted from asbestos exposure from component parts found in older vehicles, although some cases relate to the alleged presence of asbestos in our facilities. In these claims, we are not the sole defendant, and the claims name as defendants numerous manufacturers and suppliers of a wide variety of products allegedly containing asbestos. We have strongly disputed these claims, and it has been our policy to defend against them vigorously. Historically, the

22

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

actual damages paid out to claimants have not been material in any year to our financial position, results of operations, or cash flows. It is possible that the number of these claims will continue to grow, and that the costs for resolving asbestos related claims could become significant in the future.

13. Segment reporting

The following is a description of our four reporting segments:

• Our Truck segment manufactures and distributes a full line of class 4 through 8 trucks, buses under the International and IC Bus, LLC (“IC”) brands, and Navistar Defense military vehicles. We also produce chassis for motor homes and commercial step-van vehicles under the Workhorse Custom Chassis, LLC (“WCC”) brand. In an effort to strengthen and maintain our dealer network, this segment occasionally acquires and operates dealer locations for the purpose of transitioning ownership or providing temporary operational assistance.

• Our Engine segment designs and manufactures diesel engines for use primarily in our class 6 and 7 medium trucks and buses and selected class 8 heavy truck models, and for sale to original equipment manufacturers (“OEMs”) primarily in North America. In addition, we produce diesel engines in Brazil primarily for distribution in South America under the MWM International (“MWM”) brand and for sale to OEMs.

• Our Parts segment provides customers with products needed to support the International truck, IC bus, WCC chassis, Navistar Defense military vehicle, and the MaxxForce^TM engine lines, together with a wide selection of other standard truck, trailer, and engine aftermarket parts.

• Our Financial Services segment provides retail, wholesale, and lease financing of products sold by the Truck segment and its dealers within the U.S. and Mexico as well as financing for wholesale accounts and selected retail accounts receivable.

Corporate contains those items that do not fit into our four segments.

23

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Segment Profit (Loss)

We define segment profit (loss) as adjusted earnings (loss) before income tax. Our results for interim periods are not necessarily indicative of results for a full year. Beginning in 2008, the sales from the Parts segment to the Truck segment, specifically our Dealcors, are recorded as intersegment sales, which are eliminated within “Corporate and Eliminations.” Previously, such sales were eliminated within the Truck segment’s external sales and revenues. As such, the Parts and Truck segment sales and revenues, in the amounts of $62 million and $187 million for the three months and nine months ended July 31, 2007, respectively, have been revised to conform to the 2008 presentation. Selected financial information is as follows:

	Truck			Engine		Parts		Financial Services(A)			Corporate and Eliminations			Total
(in millions)
Three Months Ended July 31, 2008
External sales and revenues, net	$	2,921		$	580	$	378	$	75		$	—		$	3,954
Intersegment sales and revenues		1			228		66		20			(315	)		—
Total sales and revenues, net	$	2,922		$	808	$	444	$	95		$	(315	)	$	3,954
Depreciation and amortization	$	46		$	40	$	2	$	6		$	5		$	99
Interest expense		—			—		—		57			31			88
Equity in income (loss) of non-consolidated affiliates		(3	)		20		1		—			—			18
Segment profit (loss)		357			5		51		(1	)		(132	)		280
Capital expenditures		17			21		1		25			(2	)		62
Three Months Ended July 31, 2007
External sales and revenues, net	$	1,714		$	795	$	343	$	104		$	—		$	2,956
Intersegment sales and revenues		1			176		62		29			(268	)		—
Total sales and revenues, net	$	1,715		$	971	$	405	$	133		$	(268	)	$	2,956
Depreciation and amortization	$	41		$	40	$	2	$	5		$	4		$	92
Interest expense		—			—		—		74			51			125
Equity in income of non-consolidated affiliates		2			18		1		—			1			22
Segment profit (loss)		7			65		43		40			(150	)		5
Capital expenditures		46			24		1		6			3			80

24

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

		Truck			Engine		Parts		Financial Services(A)			Corporate and Eliminations			Total
(in millions)
Nine Months Ended July 31, 2008
External sales and revenues, net	$	7,521		$	1,965	$	1,106	$	265		$	—		$	10,857
Intersegment sales and revenues		1			568		177		63			(809	)		—
Total sales and revenues, net	$	7,522		$	2,533	$	1,283	$	328		$	(809	)	$	10,857
Depreciation and amortization	$	132		$	116	$	6	$	16		$	15		$	285
Interest expense		—			—		—		243			114			357
Equity in income (loss) of non-consolidated affiliates		(6	)		66		3		—			—			63
Segment profit (loss)		591			90		156		(7	)		(379	)		451
Capital expenditures		85			60		3		42			2			192
Nine Months Ended July 31, 2007
External sales and revenues, net	$	5,755		$	2,081	$	966	$	292		$	—		$	9,094
Intersegment sales and revenues		5			491		187		104			(787	)		—
Total sales and revenues, net	$	5,760		$	2,572	$	1,153	$	396		$	(787	)	$	9,094
Depreciation and amortization	$	117		$	120	$	6	$	15		$	12		$	270
Interest expense		—			—		—		220			147			367
Equity in income of non-consolidated affiliates		3			55		3		—			1			62
Segment profit (loss)		132			71		120		124			(436	)		11
Capital expenditures		157			46		5		29			11			248
As of July 31, 2008
Segment assets		3,051			2,267		617		5,131			491			11,557
As of October 31, 2007
Segment assets		2,696			2,151		550		5,292			759			11,448

(A) Total sales and revenues in the Financial Services segment include interest revenues of $91 million and $303 million for the three months and nine months ended July 31, 2008, respectively, and $112 million and $330 million for the same periods in 2007, respectively.

Following is information about our two customers from which we derive more than 10% of our consolidated Sales and revenues, net:

• Sales of vehicles and service parts to the U.S. government were 32% and 27% of consolidated sales and revenues for the three months and nine months ended July 31, 2008, respectively, and 3% for the same periods in 2007. U.S. government receivable balances, related to sales of vehicle and service parts, totaled $446 million and $93 million as of July 31, 2008 and October 31, 2007, respectively.

• Sales of diesel engines to Ford were 5% and 9% of consolidated sales and revenues for the three months and nine months ended July 31, 2008, and 17% and 14% for the same periods in 2007, respectively. Ford accounted for 31.8% and 47.6% of our diesel unit volume (including intercompany transactions) for the three months and nine months ended July 31, 2008, and 60.4% and 59.2% for the same periods in 2007, respectively. Ford receivable balances totaled $52 million and $245 million as of July 31, 2008 and October 31, 2007, respectively.

25

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

In May 2008, Ford announced that it planned to reduce its pickup truck production levels due to current economic conditions. Due to the reduction in Ford’s pickup production levels, which has resulted in a decrease of our engine shipments to Ford, the Engine segment’s Indianapolis Plant has laid off over 400 employees during the third quarter of 2008. This has resulted in $10 million of employee benefit expenses recorded in the third quarter of 2008. A prolonged reduction in Ford’s demand for our engines or the early termination or non-renewal of our agreement with Ford could have a material impact on our financial position, results of operations, or cash flows.

Strategic Agreements

In June 2008, we announced that we entered into a memorandum of understanding with Caterpillar Inc. to pursue a strategic alliance, involving our Truck and Engine segments, in the mutual development of on-highway truck business opportunities and global truck collaboration. The strategic alliance would include the cooperative development of mid-range diesel engines and access to global distribution centers. This transaction is subject to completion of due diligence, execution of definitive agreements, and regulatory approvals.

14. Comprehensive income

Total comprehensive income is summarized as follows:

	Three Months Ended  July 31,					Nine Months Ended  July 31,
	2008		2007			2008			2007
(in millions)
Net income (loss)	$	272	$	(4	)	$	434		$	(17	)
Other comprehensive income (loss)
Foreign currency translation adjustments		38		32			53			50
Pension amortization and settlements, net of tax		3		—			(3	)		—
Other		—		1			—			5
Total other comprehensive income		41		33			50			55
Total comprehensive income	$	313	$	29		$	484		$	38

15. Stockholders’ deficit

In July 2008, we announced a share repurchase program as authorized by our Board of Directors to acquire up to $36 million of our common stock. This repurchase program expires in July 2009. As of July 31, 2008, we have not repurchased any of our common stock under the program.

In the third quarter of 2008, certain current and former employees of the company exercised 1,289,302 stock options. As a result of these exercises, we received proceeds of $26 million, retained 357,226 shares as settlements in lieu of cash, and issued 932,076 shares of treasury stock. As of July 31, 2008, Stockholders’ deficit decreased by $21 million, due to the exercise of these options.

26

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

16. Earnings (loss) per share

The following table shows the information used in the calculation of our basic and diluted earnings (loss) per share:

	Three Months Ended July 31,					Nine Months Ended July 31,
	2008		2007			2008		2007
(in millions, except per share data)
Numerator:
Net income (loss) available to common stockholders	$	272	$	(4	)	$	434	$	(17	)
Denominator:
Weighted average shares outstanding Basic		70.8		70.3			70.5		70.3
Effect of dilutive securities		3.2		—			2.8		—
Diluted		74.0		70.3			73.3		70.3
Basic earnings (loss) per share	$	3.85	$	(0.05	)	$	6.16	$	(0.24	)
Diluted earnings (loss) per share	$	3.68	$	(0.05	)	$	5.92	$	(0.24	)

Shares not included in the computation of diluted earnings (loss) per share, as they would be anti-dilutive, were 3.3 million and 1.9 million for the three months and nine months ended July 31, 2007, respectively. There were no anti-dilutive shares in 2008.

17. Stock-based compensation plans

We have various stock-based compensation plans, approved by the Compensation Committee of the Board of Directors, which provide for granting of stock awards and options to employees and directors for purchase of our common stock at the fair market value of the stock on the date of grant. The grants generally have a 10-year contractual life.

Since March 1, 2006, we have been subject to the blackout trading rules of Regulation BTR of the SEC, which prohibits our directors or Section 16 officers from acquiring or selling any equity security of the company (other than exempt securities) during a “blackout period” as defined in Regulation BTR (“Blackout Period”). The Blackout Period started as a result of the delay in filing the NIC Annual Report on Form 10-K for the year ended October 31, 2005 and will extend until the decision of the independent fiduciary appointed for our 401(k) Plans is made to lift the Blackout Period.

In April 2008, the Board of Directors approved the 2008 Emergence Long-Term Incentive Grant, under the 2004 Performance Incentive Plan, to certain employees, consultants, and non-employee directors. The grant will take the form of restricted stock units or restricted stock and will vest 25% on the first anniversary of the grant date, 25% on the second anniversary, and 50% on the third anniversary. The grant is expected to be made to an estimated 250 participants five business days following the expiration of the Blackout Period and is estimated to include approximately 510,000 units or shares to be granted at the market price of the stock on the date of grant. The Long-Term Incentive Grant is primarily to replace equity-based compensation forgone during the Blackout Period.

27

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

18. Condensed consolidating guarantor and non-guarantor financial information

The following tables set forth condensed consolidating balance sheets as of July 31, 2008 and October 31, 2007, condensed consolidating statements of operations for the three months and nine months ended July 31, 2008 and 2007, and condensed consolidating statements of cash flows for the nine months ended July 31, 2008 and 2007. The information is presented as a result of Navistar, Inc.’s guarantee, exclusive of its subsidiaries, of NIC’s indebtedness under its 7.5% Senior Notes due 2011. Navistar, Inc. is a direct wholly-owned subsidiary of NIC. None of NIC’s other subsidiaries guarantee any of these notes. The guarantee is full and unconditional. Separate financial statements and other disclosures concerning Navistar, Inc. have not been presented because management believes that such information is not material to investors. Within this disclosure only, “NIC” includes the consolidated financial results of the parent company only, with all of its wholly-owned subsidiaries accounted for under the equity method. Likewise, “Navistar, Inc.,” for purposes of this disclosure only, includes the consolidated financial results of its wholly-owned subsidiaries accounted for under the equity method. “Non-Guarantor Subsidiaries” includes the combined financial results of all other non-guarantor subsidiaries. “Eliminations and Other” includes all eliminations and reclassifications to reconcile to the condensed consolidated financial statements. NIC files a consolidated U.S. federal income tax return that includes Navistar, Inc. and its U.S. subsidiaries, and NIC’s U.S. subsidiaries. Navistar, Inc. is party to a tax allocation agreement (“Tax Agreement”) with NIC which requires Navistar, Inc. to compute its separate federal income tax liability and remit any resulting tax liability to NIC. Tax benefits that may arise from net operating losses of Navistar, Inc. are not refunded to Navistar, Inc. but may be used to offset future required tax payments under the Tax Agreement. The effect of the Tax Agreement is to allow NIC, the parent company, rather than Navistar, Inc., to realize the benefit of current U.S. taxable losses of Navistar, Inc. and all other direct or indirect subsidiaries of NIC.

	NIC			Navistar, Inc.		Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Three Months Ended July 31, 2008
Sales and revenues, net	$	—		$	2,047	$	3,655		$	(1,748	)	$	3,954
Costs of products sold		—			1,834		2,989			(1,708	)		3,115
All other operating expenses (income)		(13	)		411		202			(23	)		577
Total costs and expenses		(13	)		2,245		3,191			(1,731	)		3,692
Equity in income (loss) of non-consolidated affiliates		262			426		18			(688	)		18
Income (loss) before income tax		275			228		482			(705	)		280
Income tax benefit (expense)		(3	)		6		(11	)		—			(8	)
Net income (loss)	$	272		$	234	$	471		$	(705	)	$	272

28

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

	NIC			Navistar, Inc.		Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2008
Sales and revenues, net	$	—		$	5,566	$	9,752		$	(4,461	)	$	10,857
Costs of products sold		—			5,053		8,100			(4,391	)		8,762
All other operating expenses (income)		(124	)		1,126		655			50			1,707
Total costs and expenses		(124	)		6,179		8,755			(4,341	)		10,469
Equity in income (loss) of non-consolidated affiliates		313			860		62			(1,172	)		63
Income (loss) before income tax		437			247		1,059			(1,292	)		451
Income tax benefit (expense)		(3	)		1		(15	)		—			(17	)
Net income (loss)	$	434		$	248	$	1,044		$	(1,292	)	$	434

	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Balance Sheet as of July 31, 2008
Assets
Cash, cash equivalents, and marketable securities	$	304		$	43		$	1,036		$	—		$	1,383
Finance and other receivables, net		—			288			5,015			(6	)		5,297
Inventories		—			614			992			(62	)		1,544
Goodwill		—			—			378			—			378
Property and equipment, net		—			794			1,173			(4	)		1,963
Investments in and advances to non-consolidated affiliates		(2,230	)		3,859			243			(1,695	)		177
Deferred taxes, net		55			114			(20	)		(2	)		147
Other		20			204			443			1			668
Total assets	$	(1,851	)	$	5,916		$	9,260		$	(1,768	)	$	11,557
Liabilities and stockholders’ equity (deficit)
Debt	$	1,345		$	337		$	5,080		$	(229	)	$	6,533
Postretirement benefits liabilities		—			1,062			159			(1	)		1,220
Amounts due to (from) affiliates		(4,078	)		5,743			(1,713	)		48			—
Other liabilities		1,110			1,220			1,800			(98	)		4,032
Total liabilities		(1,623	)		8,362			5,326			(280	)		11,785
Stockholders’ equity (deficit)		(228	)		(2,446	)		3,934			(1,488	)		(228	)
Total liabilities and stockholders’ equity (deficit)	$	(1,851	)	$	5,916		$	9,260		$	(1,768	)	$	11,557

29

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Cash Flows for the Nine Months Ended July 31, 2008
Net cash provided by (used in) operations	$	107		$	743		$	925		$	(1,128	)	$	647
Cash flow from investment activities
Net change in restricted cash and cash equivalents		1			7			(276	)		—			(268	)
Net increase in marketable securities		(12	)		—			—			—			(12	)
Capital expenditures		—			(20	)		(172	)		—			(192	)
Other investing activities		(226	)		(909	)		(148	)		1,318			35
Net cash provided by (used in) investment activities		(237	)		(922	)		(596	)		1,318			(437	)
Cash flow from financing activities
Net borrowings (repayments) of debt		—			169			(366	)		(165	)		(362	)
Other financing activities		26			—			25			(25	)		26
Net cash provided by (used in) financing activities		26			169			(341	)		(190	)		(336	)
Effect of exchange rate changes on cash and cash equivalents		—			—			27			—			27
Cash and cash equivalents
Increase (decrease) during the period		(104	)		(10	)		15			—			(99	)
At beginning of the period		391			47			339			—			777
Cash and cash equivalents at end of the period	$	287		$	37		$	354		$	—		$	678

	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Three Months Ended July 31, 2007
Sales and revenues, net	$	—		$	1,625		$	2,299		$	(968	)	$	2,956
Costs of products sold		—			1,437			1,943			(952	)		2,428
All other operating expenses (income)		(25	)		295			203			72			545
Total costs and expenses		(25	)		1,732			2,146			(880	)		2,973
Equity in income (loss) of non-consolidated affiliates		(29	)		14			19			18			22
Income (loss) before income tax		(4	)		(93	)		172			(70	)		5
Income tax benefit (expense)		—			4			(13	)		—			(9	)
Net income (loss)	$	(4	)	$	(89	)	$	159		$	(70	)	$	(4	)

30

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2007
Sales and revenues, net	$	—		$	5,356		$	6,959		$	(3,221	)	$	9,094
Costs of products sold		—			4,835			5,829			(3,159	)		7,505
All other operating expenses (income)		(39	)		871			617			191			1,640
Total costs and expenses		(39	)		5,706			6,446			(2,968	)		9,145
Equity in income (loss) of non-consolidated affiliates		(58	)		166			55			(101	)		62
Income (loss) before income tax		(19	)		(184	)		568			(354	)		11
Income tax benefit (expense)		2			—			(30	)		—			(28	)
Net income (loss)	$	(17	)	$	(184	)	$	538		$	(354	)	$	(17	)

	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Balance Sheet as of October 31, 2007
Assets
Cash, cash equivalents, and marketable securities	$	396		$	60		$	746		$	—		$	1,202
Finance and other receivables, net		—			179			5,253			(13	)		5,419
Inventories		—			560			910			(58	)		1,412
Goodwill		—			—			353			—			353
Property and equipment, net		—			889			1,199			(2	)		2,086
Investments in and advances to non-consolidated affiliates		(2,503	)		2,239			149			269			154
Deferred taxes, net		(1	)		171			(19	)		(1	)		150
Other		26			204			442			—			672
Total assets	$	(2,082	)	$	4,302		$	9,033		$	195		$	11,448
Liabilities and stockholders’ equity (deficit)
Debt	$	1,345		$	390		$	5,375		$	(229	)	$	6,881
Postretirement benefits liabilities		—			1,170			157			—			1,327
Amounts due to (from) affiliates		(3,272	)		4,900			(1,657	)		29			—
Other liabilities		579			1,291			2,193			(89	)		3,974
Total liabilities		(1,348	)		7,751			6,068			(289	)		12,182
Stockholders’ equity (deficit)		(734	)		(3,449	)		2,965			484			(734	)
Total liabilities and stockholders’ equity (deficit)	$	(2,082	)	$	4,302		$	9,033		$	195		$	11,448

31

Navistar International Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Cash Flows for the Nine Months Ended July 31, 2007
Net cash provided by (used in) operations	$	(837	)	$	(483	)	$	981		$	406		$	67
Cash flow from investment activities
Net change in restricted cash and cash equivalents		—			29			40			—			69
Net decrease in marketable securities		104			—			27			—			131
Capital expenditures		—			(65	)		(183	)		—			(248	)
Other investing activities		240			(138	)		(435	)		369			36
Net cash provided by (used in) investment activities		344			(174	)		(551	)		369			(12	)
Cash flow from financing activities
Net borrowings (repayments) of debt		(78	)		778			(514	)		(778	)		(592	)
Other financing activities		—			—			—			—			—
Net cash provided by (used in) financing activities		(78	)		778			(514	)		(778	)		(592	)
Effect of exchange rate changes on cash and cash equivalents		—			—			51			3			54
Cash and cash equivalents
Increase (decrease) during the period		(571	)		121			(33	)		—			(483	)
At beginning of the period		814			20			323			—			1,157
Cash and cash equivalents at end of the period	$	243		$	141		$	290		$	—		$	674

32

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements; Risk Factors

Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see Item 1A. Risk Factors in PART II of this Form 10-Q and Item 1A. Risk Factors included within our Form 10-K for the year ended October 31, 2007, which was filed on May 29, 2008. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide information that is supplemental to, and should be read together with, our consolidated financial statements and the accompanying notes contained in the “Financial Statements and Supplementary Data” section of our 2007 Annual Report on Form 10-K. Information in this Item is intended to assist the reader in obtaining an understanding of our condensed consolidated financial statements, information about our business segments and how the results of those segments impact our results of operations and financial condition as a whole, and how certain accounting principles affect the company’s condensed consolidated financial statements. Our MD&A includes the following sections:

• Executive Summary

• Results of Operations and Segment Results of Operations

• Liquidity and Capital Resources

• Other Information

• Critical Accounting Policies

• New Accounting Pronouncements

Executive Summary

We are an international manufacturer of International brand commercial trucks, IC brand buses, MaxxForce and MWM brand diesel engines, WCC brand chassis for motor homes and step vans, Navistar Defense military vehicles, and a provider of service parts for all makes of trucks and trailers. Additionally, we are a private-label designer and manufacturer of diesel engines for the pickup truck, van, and SUV markets. We also provide retail, wholesale, and lease financing of our trucks, and financing for our wholesale accounts and selected retail accounts receivable. We operate in four industry segments: Truck, Engine, Parts (referred to as our “manufacturing segments”), and Financial Services. Corporate contains those items that do not fit into our four segments. Selected financial data for each segment can be found in Note 13, Segment reporting, to the accompanying condensed consolidated financial statements.

Our business is heavily influenced by the overall performance of the “traditional” medium and heavy truck markets within U.S. and Canada, which includes vehicles in weight classes 6 through 8, including school buses. Sales from foreign locations are considered rest of world (“ROW”) sales, which allows us to expand our sales while leveraging existing resources. The U.S., Canadian, and ROW markets are typically cyclical in nature but in

33

certain years they have also been impacted by accelerated purchases of trucks (“pre-buy”) in anticipation of higher prices due to stricter emissions standards imposed by various domestic and foreign federal regulatory agencies, as was particularly evident throughout the U.S. in 2006. In turn, the U.S. market has experienced corresponding periods of delayed purchases of trucks during the last three quarters of 2007 and into 2008. In addition, beginning in 2008, the inefficient credit markets and the challenging economic environment in the U.S. began to impact customer purchases, further decreasing demand for new trucks. To minimize the impact of the “traditional” markets cyclicality, our continuing strategy incorporates further growth in U.S. military sales, our Parts segment, and an increased presence in “expansion” markets such as the non-U.S. military, recreational vehicle, commercial step-van, and export markets. We have placed emphasis on building strategic alliances and joint ventures to strengthen and expand into existing and global economies. In addition, within the “traditional” markets, we continue to focus on market share expansion to further mitigate the impact of “traditional” markets volatility. Furthermore, we continue to focus on improving the cost structure in our Truck and Engine segments while delivering products of distinction and evaluating opportunities to contain our legacy costs, utilize our deferred tax assets, and return to a more conventional capital structure.

In December of 2007, we entered into a non-binding memorandum of understanding with GM to purchase certain assets, intellectual property, and distribution rights for the GMC and Chevrolet class 4 through 8 truck business, as well as related GM service parts business. Due to significant marketplace and economic changes, we have mutually decided not to renew the non-binding memorandum of understanding, which has expired.

We experienced a decline in unit volumes in both the Truck and Engine segments during the nine month period ended July 31, 2008 compared to the same period in 2007 despite an increase in unit volumes within the Truck segment for the third quarter of 2008, primarily due to growth in U.S. military units. Worldwide Truck segment units invoiced to customers were 27,000 (an increase of 9.8%) and 73,500 (a decrease of 15.1%) for the quarter and the nine month period ended July 31, 2008, respectively, compared to the same three month and nine month periods in 2007. Total Engine segment units were 79,300 (a decrease of 26.7%) and 267,600 (a decrease of 12.8%) during the third quarter and year-to-date 2008, respectively, which compares to 108,200 and 307,000 in the same periods of 2007, primarily due to a decrease in Ford’s production requirements. During the third quarter of 2008, to match Ford’s production schedules, the Engine segment’s Indianapolis plant laid off over 400 employees. A prolonged reduction in Ford’s demand for our engines or the early termination or non-renewal of our agreement with Ford could have a material impact on our financial position, results of operations, or cash flows.

During the quarter ended July 31, 2008, the “traditional” truck retail industry, as well as the heavy duty pickup market, remained depressed, which is reflected in the 62,700 retail units sold during this period compared to 63,300 units sold in the third quarter of 2007. Total “traditional” truck industry units sold during the nine month period ended July 31, 2008 amounted to 181,000 compared to 255,300 units for the same nine month period in 2007. The depressed sales in the retail truck industry and heavy duty diesel pick-up truck market decreased our total engine volumes in the third quarter of 2008 but were partially offset by volume growth with OEMs other than Ford.

Despite the continuation of the downturn experienced throughout the “traditional” truck markets during the third quarter of 2008, we attained consolidated net sales and revenues for the quarter and the nine month period ended July 31, 2008 of $4.0 billion and $10.9 billion, respectively, which compares with $3.0 billion and $9.1 billion for the same respective periods in 2007. Growth in our U.S. military sales, the introduction of new products, competitive pricing strategies, and an increase in sales in our ROW markets contributed to overall sales and revenue growth during the third quarter and year-to-date 2008 compared to the same periods in 2007. U.S. military sales included in our consolidated net sales and revenues were $1.2 billion and $2.8 billion in the third quarter and year-to-date 2008, respectively, compared to $59 million and $166 million for the comparable periods in 2007.

Excluding the $42 million net gain from the settlement and curtailment of one plan that was recognized in the first quarter of 2008, we recognized income of $2 million and $5 million for the third quarter and year-to-date

34

periods ended July 31, 2008, compared to an expense of $29 million and $88 million for the same periods in 2007. This benefit resulted from better than expected return on assets and a significant reduction in the projected benefit obligation resulting from fully insuring our Medicare eligible population in our largest postretirement medical plan.

Included in the change in our results were professional, consulting, and auditing expenses of $33 million in the third quarter of 2008 as compared to expense of $54 million in the same period in 2007. Included in the change in our results were the following significant items in the year-to-date ended July 31, 2008: non-cash mark to market charge on our interest rate swap agreements of $40 million during the nine months ended July 31, 2008 as compared to a benefit of $2 million in the same period in 2007, a $42 million reduction in postretirement expense due to a net settlement and curtailment gain due to changes in our UAW agreement, professional, consulting, and auditing expenses of $138 million in the nine months ended July 31, 2008 as compared to expenses of $140 million in the same period in 2007, and debt refinancing and restructuring costs of $31 million that did not recur in the nine months ended July 31, 2008.

For the quarter and nine month period ended July 31, 2008, we realized net income of $ 272 million and $434 million, respectively, compared to net losses of $4 million and $17 million for the respective periods in 2007. Our diluted earnings were $3.68 per share for the quarter ended July 31, 2008 compared to a diluted loss of $0.05 per share for the same period in 2007. Our diluted earnings were $5.92 per share for the nine month period ended July 31, 2008 compared to a diluted loss of $0.24 per share for the same period in 2007. During the third quarter and year-to-date 2008, we incurred an expense of $8 million and $17 million, respectively, for state, local, and foreign income taxes.

A summary of our condensed results of operations, including diluted earnings (loss) per share, is as follows:

	Three Months Ended July 31,					Nine Months Ended July 31,
	2008		2007			2008		2007
(in millions, except per share data)
Sales and revenues, net	$	3,954	$	2,956		$	10,857	$	9,094
Total costs and expenses		3,692		2,973			10,469		9,145
Equity in income of non-consolidated affiliates		18		22			63		62
Income before income tax		280		5			451		11
Net income (loss)		272		(4	)		434		(17	)
Diluted earnings (loss) per share		3.68		(0.05	)		5.92		(0.24	)

Results of Operations and Segment Results of Operations

The following tables summarize our consolidated statements of operations and illustrate the key financial indicators used to assess the consolidated financial results. Financial information is presented for the quarters and nine month periods ended July 31, 2008 and 2007, as prepared in accordance with U.S. GAAP for interim financial information.

35

Results of Operations

	Three Months Ended July 31,						Change			Percentage Change
	2008			2007
(in millions, except per share data and percentage change)
Sales and revenues, net	$	3,954		$	2,956		$	998		33.8
Costs of products sold		3,115			2,428			687		28.3
Selling, general and administrative expenses		386			368			18		4.9
Engineering and product development costs		108			86			22		25.6
Interest expense		88			125			(37	)	(29.6	)
Other income, net		(5	)		(34	)		29		(85.3	)
Total costs and expenses		3,692			2,973			719		24.2
Equity in income of non-consolidated affiliates		18			22			(4	)	(18.2	)
Income before income tax		280			5			275		N.M.
Income tax expense		(8	)		(9	)		1		(11.1	)
Net income (loss)	$	272		$	(4	)	$	276		N.M.
Diluted earnings (loss) per share	$	3.68		$	(0.05	)	$	3.73		N.M.

	Nine Months Ended July 31,						Change			Percentage Change
	2008			2007
(in millions, except per share data and percentage change)
Sales and revenues, net	$	10,857		$	9,094		$	1,763		19.4
Costs of products sold		8,762			7,505			1,257		16.7
Selling, general and administrative expenses		1,071			1,010			61		6.0
Engineering and product development costs		289			284			5		1.8
Interest expense		357			367			(10	)	(2.7	)
Other income, net		(10	)		(21	)		11		(52.4	)
Total costs and expenses		10,469			9,145			1,324		14.5
Equity in income of non-consolidated affiliates		63			62			1		1.6
Income before income tax		451			11			440		N.M.
Income tax expense		(17	)		(28	)		11		(39.3	)
Net income (loss)	$	434		$	(17	)	$	451		N.M.
Diluted earnings (loss) per share	$	5.92		$	(0.24	)	$	6.16		N.M.

N.M. Not meaningful.

Net Sales and Revenues

Our net sales and revenues are comprised of the following:

	Three Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Sales of manufactured products, net – U.S. and Canada	$	3,155	$	2,293	$	862		37.6
Sales of manufactured products, net – ROW		724		559		165		29.5
Total sales of manufactured products, net		3,879		2,852		1,027		36.0
Finance revenues		75		104		(29	)	(27.9	)
Sales and revenues, net	$	3,954	$	2,956	$	998		33.8

36

	Nine Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Sales of manufactured products, net – U.S. and Canada	$	8,722	$	7,296	$	1,426		19.5
Sales of manufactured products, net – ROW		1,870		1,506		364		24.2
Total sales of manufactured products, net		10,592		8,802		1,790		20.3
Finance revenues		265		292		(27	)	(9.2	)
Sales and revenues, net	$	10,857	$	9,094	$	1,763		19.4

Our Truck segment was our largest segment as measured in net sales and revenues, representing 73.9% and 58.0% of total consolidated net sales and revenues for the third quarter of 2008 and 2007, respectively, and 69.3% and 63.3% of total consolidated net sales and revenues for the nine month period ended July 31, 2008 and 2007, respectively. Net sales and revenues increased within this segment by $1.2 billion or 70.4% during the third quarter of 2008 as compared to the same period in 2007. Net sales and revenues increased by $1.8 billion or 30.6% for the nine month period ended July 31, 2008 as compared to the same period in 2007. Contributing to the increase in net sales and revenues were the combination of growth in our U.S. military sales, the success of our ProStar products, and ROW sales all of which offsets weakness in our “traditional” school bus, Class 6 and 7 medium trucks, and Class 8 heavy trucks markets. While our share of retail deliveries by “traditional” truck class fluctuated in 2008 and 2007, the Truck segment’s bus, Class 6 and 7 medium and Class 8 severe service trucks continue to lead their markets with the greatest relative retail market share in each of their classes by brand.

Our Engine segment was our second largest segment in net sales and revenues with $808 million and $2.5 billion in the third quarter and year-to-date 2008 that compares with $971 million and $2.6 billion for the same respective periods in 2007. Due to the decrease in demand for heavy duty pickup trucks, engine units shipped to Ford in North America during the quarter ended July 31, 2008 decreased by 40,900 units or 68.3% compared to the prior year quarter ended July 31, 2007, and the nine months ended July 31, 2008 decreased by 56,300 units or 34.1% as compared to the nine month period ended July 31, 2007. The Engine segment was able to partially mitigate the third quarter 2008 reduction in shipments to Ford North America through growth of MWM shipments of 10.9% or 3,600 units as compared to the same period in 2007. Intersegment sales began to recover in the third quarter of 2008 primarily due to shipments to the truck segment for sales to the U.S. military.

Our Parts segment grew net sales 9.6% and 11.3% in the quarter and nine month period ended July 31, 2008 as compared to the same respective periods in 2007. This increase was primarily due to growth in our U.S. military sales and improved pricing.

Our Financial Services segment net revenues declined by 28.6% and 17.2% in the third quarter and year-to-date 2008 as compared to the same respective periods in 2007. Revenue for the three and nine month periods ended July 31, 2007 included higher levels of revenue related to the financing of dealer inventory. In the three and nine month periods ended July 31, 2008, there were reduced financing opportunities resulting from fewer purchases of vehicles and components due to reduced customer demand, which we attribute to higher interest rates, current tightening of the credit markets, and increased diesel fuel prices.

37

Costs and Expenses

The following tables summarize the key components of Costs of products sold:

	Three Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Costs of products sold, excluding items presented separately below	$	3,067	$	2,369	$	698		29.5
Postretirement benefits expense allocated to costs of products sold		1		11		(10	)	(90.9	)
Product warranty costs		47		48		(1	)	(2.1	)
Total costs of products sold	$	3,115	$	2,428	$	687		28.3

	Nine Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Costs of products sold, excluding items presented separately below	$	8,617	$	7,312	$	1,305		17.8
Postretirement benefits expense allocated to costs of products sold		11		35		(24	)	(68.6	)
Product warranty costs		134		158		(24	)	(15.2	)
Total costs of products sold	$	8,762	$	7,505	$	1,257		16.7

Costs of products sold increased 28.3% and 16.7% for the quarter and nine month period ended July 31, 2008, respectively, as compared to the same respective periods in 2007. As a percentage of net sales of manufactured products, Costs of products sold decreased to 80.3% and 82.7% for the quarter and nine month period ended July 31, 2008 from 85.1% and 85.3% for the same respective periods in 2007. Product warranty costs, including extended warranty program costs and net of vendor recoveries (“product warranty costs”), were $47 million and $134 million for the third quarter and year-to-date 2008, respectively, and $48 million and $158 million for the comparable periods of 2007. Postretirement benefits expense included in Costs of products sold, inclusive of company 401(k) contributions, was $1 million and $11 million for the quarter and nine month period ended July 31, 2008 that compares with $11 million and $35 million for the same respective periods in 2007. Apart from product warranty costs and postretirement benefits expense, Costs of products sold as a percentage of net sales of manufactured products decreased to 79.1% and 81.4% during the third quarter and year-to-date 2008 from 83.1% for both of the same respective periods in 2007. The decrease in costs of products sold as a percentage of net sales of manufactured products between the quarters and the nine month periods ended July 31, 2008 and 2007 was primarily due to increased sales in U.S. military and ProStar vehicles, improved pricing, and improvement in manufacturing performance.

Product warranty costs decreased by $1 million for the three months ended July 31, 2008 and by $24 million for the nine month period ended July 31, 2008 as compared to the same respective periods in 2007. The decrease in product warranty costs for the three and nine months ended July 31, 2008 as compared to the same respective period in 2007 was primarily the result of lower volumes, lower per unit costs, and the impact of changes to pre-existing warranties partially offset by an increase in extended warranty program costs. During the third quarter and year-to-date 2008, we incurred $6 million and $10 million of warranty expense associated with adjustments to pre-existing warranties compared to a nominal amount and $25 million in expense for the same respective periods in 2007. These adjustments reflect changes in our estimate of warranty costs for sales recognized in prior years associated with products at the Truck and Engine segments attributed to eliminating or rectifying warranty related issues earlier in the product life cycle. For more information regarding product warranty costs, see Note 1, Summary of significant accounting policies, to the accompanying condensed consolidated financial statements.

38

Our direct material costs have been impacted by industry-wide increases in commodity and fuel prices, which affected all of our manufacturing operations. We believe our costs related to steel, precious metals, resins, and petroleum products increased by $22 million during the quarter ended July 31, 2008 and $42 million on a year-to-date basis. However, we believe we generally have been able to mitigate the effects by our efforts to reduce costs through a combination of design changes, material substitution, alternative supplier resourcing, global sourcing, and price performance. We expect our direct material costs will increase or decrease in price as the global demand for these commodities change.

Selling, general and administrative expenses, including certain key items, are highlighted in the following tables:

	Three Months Ended July 31,					Change			Percentage Change
	2008			2007
(in millions, except percentage change)
Selling, general and administrative expenses, excluding items presented separately below	$	248		$	215	$	33		15.3
Professional consulting and auditing fees		33			54		(21	)	(38.9	)
Postretirement benefits expense allocated to selling, general and administrative expenses		3			21		(18	)	N.M.
Dealcor expenses		45			70		(25	)	(35.7	)
Incentive compensation and profit-sharing		23			—		23		N.M.
Provision for losses on receivables		34			8		26		N.M.
Total selling, general and administrative expenses	$	386		$	368	$	18		4.9
	Nine Months Ended July 31,					Change			Percentage Change
	2008			2007
(in millions, except percentage change)
Selling, general and administrative expenses, excluding items presented separately below	$	689		$	579	$	110		19.0
Professional consulting and auditing fees		138			140		(2	)	(1.4	)
Postretirement benefits (income) expense allocated to selling, general and administrative expenses		(41	)		62		(103	)	N.M.
Dealcor expenses		165			207		(42	)	(20.3	)
Incentive compensation and profit-sharing		68			—		68		N.M.
Provision for losses on receivables		52			22		30		136.4
Total selling, general and administrative expenses	$	1,071		$	1,010	$	61		6.0

Selling, general and administrative expenses amounted to $386 million and $1.1 billion for the quarter and nine month period ended July 31, 2008, respectively, that compares to $368 million and $1.0 billion for the same respective periods in 2007. Our Truck segment occasionally acquires and operates dealer locations for the purpose of transitioning ownership or providing temporary operational assistance, which may increase or decrease Selling, general and administrative expenses in the period of acquisitions and disposals. Provision for losses on receivables is primarily driven by our Financial services segment. We provide for certain losses related to the potential repossession and liquidation of collateral underlying finance receivables with dealers and retail customers. We have experienced an increase in repossessions and delinquencies due to the weakness in the trucking economy coupled with the sub-prime mortgage crisis resulting in an increase in our provision for losses on receivables. Our ratio of Selling, general and administrative expenses to net sales and revenues decreased by 2.6 percentage points to 9.8% for the quarter ended July 31, 2008 as compared to 12.4% for the same period in 2007. This ratio of Selling, general and administrative expenses as a percentage of net sales and revenues

39

decreased by 1.2 percentage points to 9.9% for the nine month period ended July 31, 2008 compared to 11.1% for the same period in 2007. After separating the effects of professional, consulting, and auditing fees, postretirement benefits (income) expense, Dealcor expenses, incentive compensation and profit sharing, and provision for losses on receivables, Selling, general and administrative expenses as a percentage of net sales and revenues decreased from 7.3% during the quarter ended July 31, 2007 to 6.3% for the same period in 2008 and decreased from 6.4% for the nine month period ended July 31, 2007 to 6.3% for the same period in 2008. The remaining differences that impacted Selling, general and administrative expenses were increases in new business development, litigation expenses, and overhead and infrastructure enhancements in support of the company’s growth initiatives. It is not uncommon for Selling, general and administrative expenses as a percentage of net sales to increase in periods of lower sales and to decrease in periods of higher sales.

Engineering and product development costs increased by 25.6% during the third quarter of 2008 and by 1.8% during the nine month period ended July 31, 2008 as compared to the same respective periods in 2007. Engineering and product development costs were primarily incurred by our Truck and Engine segments for product innovation and cost reduction, and to provide our customers with product and fuel-usage efficiencies. Engineering and product development costs incurred at our Engine segment increased $21 million or 50.0% and $19 million or 13.4% during the third quarter and year-to-date 2008, respectively, as compared to the same respective periods in 2007. This increase in costs is a result of our efforts to develop 2010 emissions-compliant engines, new engine products, and MWM Euro IV emission-compliant engines. Engineering and product development costs incurred at the Truck segment were $45 million and $128 million for the third quarter and year-to-date 2008, which compares to the $41 million and $132 million incurred in the same respective periods of 2007, and relate primarily to the further development of our ProStar class 8 long-haul truck. In addition, the Truck segment also incurred costs, to a lesser extent, in 2007 related to the development and roll-out of our 2007 emissions-compliant products and the development of the LoneStar class 8 tractor.

The following tables present the amounts of postretirement benefits (income) expenses allocated between Costs of products sold, Selling, general and administrative expenses, and Engineering and product development costs:

	Three Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Postretirement benefits expense included in:
Cost of products sold	$	1	$	11	$	(10	)	(90.9	)
Selling, general and administrative expenses		3		21		(18	)	(85.7	)
Engineering and product development costs		1		3		(2	)	(66.7	)
Total postretirement benefits expense	$	5	$	35	$	(30	)	(85.7	)

	Nine Months Ended July 31,					Change			Percentage Change
	2008			2007
(in millions, except percentage change)
Postretirement benefits (income) expense included in:
Cost of products sold	$	11		$	35	$	(24	)	(68.6	)
Selling, general and administrative expenses (income) expense		(41	)		62		(103	)	N.M.
Engineering and product development costs		2			9		(7	)	(77.8	)
Total postretirement benefits (income) expense	$	(28	)	$	106	$	(134	)	N.M.

40

Total postretirement benefits (income) expense includes defined benefit plans (pensions and post-employment benefits primarily health and life insurance) and defined contribution plans (401(k) contributions for active employees) as described in Note 8, Postretirement benefits, to the accompanying condensed consolidated financial statements.

We recognized income related to our postretirement benefits from defined benefit plans of $2 million in the third quarter of 2008 compared to an expense of $29 million for the same period in 2007. The $31 million reduction in defined benefit plan expense resulted from better than expected return on assets and a significant reduction in the projected benefit obligation resulting from fully insuring our Medicare eligible population in our largest postretirement medical plan. Each of these actions occurred in 2007 and represent variances from prior actuarial estimates. These variances significantly reduced the cumulative loss pool during 2007. Such costs amortize into income in the subsequent years as a component of postretirement benefits (income) expense. Amortization of the loss pool for pension and health and welfare plans was $3 million in the third quarter of 2008 compared to $20 million for the same period in 2007. Additionally, the growth in the asset base from the better than expected asset returns during 2007 had the effect of increasing the expected return on plan assets in 2008 (another component of postretirement benefits (income) expense). The expected return on plan assets for pension and health and welfare plans in the first quarter of 2008 was $98 million compared to $83 million for the same period in 2007. See Note 8, Postretirement benefits, to the accompanying condensed consolidated financial statements for further information on postretirement benefits.

We recognized income related to our postretirement benefits from defined benefit plans of $47 million in the nine months ended July 31, 2008 compared to an expense of $88 million for the same period in 2007. On December 16, 2007, the majority of company employees represented by the UAW voted to ratify a new contract that will run through September 30, 2010. Among the changes from the prior contract was the cessation of annual lump sum payments that had been made to certain retirees. We previously accounted for these payments as a defined benefit plan based on the historical substance of the underlying arrangement. The elimination of these payments and other changes resulted in a net settlement and curtailment of the plan resulting in income of $42 million during the three months ended January 31, 2008.

Excluding the effects of the plan settlement and curtailment described above, postretirement benefits income from defined benefit plans was $5 million in the nine months ended July 31, 2008. The $93 million reduction in defined benefit plan expense resulted from better than expected returns and a significant reduction in the projected benefit obligation resulting from fully insuring our Medicare eligible population in our largest postretirement medical plan. Each of these actions took place in 2007 and represent variances from prior actuarial estimates. These variances significantly reduced the cumulative loss pool during 2007. Such costs amortize into income in the subsequent years as a component of postretirement benefits (income) expense. Amortization of the loss pool for pension and health and welfare plans was $10 million for the nine months ended July 31, 2008 compared to $61 million for the same period in 2007. Additionally, the growth in the asset base from the better than expected returns during 2007 had the effect of increasing the expected return on plan assets in 2008 (another component of postretirement benefits (income) expense). The expected return on plan assets for pension and health and welfare plans for the nine months ended July 31, 2008 was $294 million compared to $250 million for the same period in 2007. See Note 8, Postretirement benefits, of the condensed consolidated financial statements for further information on postretirement benefits.

Postretirement benefits expense resulting from the defined contribution plans was $7 million and $6 million for the three months ended July 31, 2008 and 2007, respectively, and $19 million and $18 million for the nine months ended July 31, 2008 and 2007, respectively.

41

The following tables represent the components of Interest expense:

	Three Months Ended July 31,					Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Manufacturing operations debt	$	31	$	51		$	(20	)	(39.2	)
Financial Services operations debt		56		75			(19	)	(25.3	)
Non-cash mark to market charge (income) on our interest rate swaps agreements		1		(1	)		2		N.M.
Total Interest expense	$	88	$	125		$	(37	)	(29.6	)

	Nine Months Ended July 31,					Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Manufacturing operations debt	$	114	$	147		$	(33	)	(22.4	)
Financial Services operations debt		203		222			(19	)	(8.6	)
Non-cash mark to market charge (income) on our interest rate swaps agreements		40		(2	)		42		N.M.
Total Interest expense	$	357	$	367		$	(10	)	(2.7	)

The overall decrease in the three month period ended July 31, 2008, compared to the same period in 2007, was primarily due to a decrease in interest rates and lower debt balances. The overall decrease for the nine month period ended July 31, 2008, compared to the same period in 2007, was primarily due to a decrease in interest rates and lower debt balances at the Financial Services segment partially offset by non-cash mark to market adjustments in our interest rate swap agreements in the Financial Services segment. For more information, see Note 10, Debt, included in the Annual Report on Form 10-K for 2007 and see Note 11, Financial instruments, to the accompanying condensed consolidated financial statements.

Other income, net amounted to $5 million and $10 million for the quarter and nine month period ended July 31, 2008, respectively, and compares with $34 million and $21 million of other income for the quarter and nine month period ended July 31, 2007, respectively. The primary drivers in Other income, net were foreign exchange gain and interest income. Foreign exchange gain decreased by $17 million and $24 million during the third quarter and year-to-date ended July 31, 2008, as compared to the same periods in 2007, respectively. Interest income decreased by $6 million and $12 million during the third quarter and year-to-date ended July 31, 2008, respectively, as compared to same periods in 2007. In addition, included in Other income, net for the nine month period ended July 31, 2007 was $31 million of expense related to the early extinguishment of debt, which did not recur in the same comparable period in 2008.

Equity in income of non-consolidated affiliates

Income and losses reported in Equity in income of non-consolidated affiliates are derived from our ownership interest in BDP, BDT, and fourteen other partially-owned affiliates. We reported $18 million and $63 million of income for the quarter and nine month period ended July 31, 2008 as compared to $22 million and $62 million for the quarter and nine month period ended July 31, 2007 with a majority of the income throughout these periods being derived from BDP. For more information, see Note 6, Investments in and advances to non-consolidated affiliates, to the accompanying condensed consolidated financial statements.

Income tax expense

Income tax expense, primarily consisting of foreign taxes, was $8 million and $17 million for the third quarter and year-to-date 2008 as compared to $9 million and $28 million for the comparable periods in 2007. Our

42

income tax expense each quarter is affected by various items, including deferred tax asset valuation allowances, research and development credits, Medicare reimbursements, and other items. We have $1.0 billion of U.S. federal net operating losses as of October 31, 2007. We are able to offset our current U.S. federal taxable income with these net operating losses, which should result in minimal U.S. federal income tax cash payments. For additional information, see Note 9, Income taxes, to the accompanying condensed consolidated financial statements.

Net income (loss) and Diluted earnings (loss) per share

For the quarter and nine month period ended July 31, 2008, we recorded net income of $272 million and $434 million, respectively, which compares to net losses of $4 million and $17 million for the quarter and nine month period ended July 31, 2007, respectively. Diluted earnings for the quarter and nine month period ended July 31, 2008 were $3.68 and $5.92 per share, respectively, calculated on approximately 74.0 and 73.3 million shares, respectively. For the quarter and nine month period ended July 31, 2007, our diluted loss was $0.05 and $0.24 per share, respectively, calculated on approximately 70.3 million shares for both periods. Diluted shares reflect the impact of common stock options in accordance with the treasury stock method.

Segment Results of Operations

We define segment profit (loss) as adjusted income (loss) before income tax. Our results for interim periods are not necessarily indicative of results for a full year. Beginning in 2008, the sales from the Parts segment to the Truck segment, specifically our Dealcors, are recorded as intersegment sales, which are eliminated within “Corporate and Eliminations.” Previously, such sales were eliminated within the Truck segment’s external sales and revenues. As such, the Parts and Truck segments sales and revenues in the amounts of $62 million and $187 million for the three months and nine months ended July 31, 2007, respectively, have been restated to conform to the 2008 presentation. The following sections analyze operating results as they relate to our four industry segments.

Truck Segment

The following tables summarize our Truck segment’s financial and key operating results:

	Three Months Ended July 31,				Change		Percentage Change
	2008		2007
(in millions, except percentage change)
Segment sales	$	2,922	$	1,715	$	1,207	70.4
Segment profit		357		7		350	N.M.

	Nine Months Ended July 31,				Change		Percentage Change
	2008		2007
(in millions, except percentage change)
Segment sales	$	7,522	$	5,760	$	1,762	30.6
Segment profit		591		132		459	N.M.

43

Chargeouts are defined by management as trucks that have been invoiced to customers with units held in dealer inventory primarily representing the difference between retail deliveries and chargeouts. The following tables reflect our chargeouts in units:

	Three Months Ended July 31,		Change		Percentage Change
	2008	2007
“Traditional” Markets (U.S. and Canada)
School buses	2,700	3,200	(500	)	(15.6	)
Class 6 and 7 medium trucks	5,800	5,600	200		3.6
Class 8 heavy trucks	4,500	2,600	1,900		73.1
Class 8 severe service trucks(A)	5,100	3,900	1,200		30.8
Sub-total combined class 8 trucks	9,600	6,500	3,100		47.7
Total “Traditional” Markets	18,100	15,300	2,800		18.3
Total “Expansion” Markets	8,900	9,300	(400	)	(4.3	)
Total Worldwide Units	27,000	24,600	2,400		9.8

(A) Includes 1,800 and 400 units in the three months ended July 31, 2008 and 2007, respectively, related to U.S. military contracts.

	Nine Months Ended July 31,		Change		Percentage Change
	2008	2007
“Traditional” Markets (U.S. and Canada)
School buses	9,100	10,700	(1,600	)	(15.0	)
Class 6 and 7 medium trucks	15,800	22,100	(6,300	)	(28.5	)
Class 8 heavy trucks	11,000	14,100	(3,100	)	(22.0	)
Class 8 severe service trucks(B)	14,200	11,800	2,400		20.3
Sub-total combined class 8 trucks	25,200	25,900	(700	)	(2.7	)
Total “Traditional” Markets	50,100	58,700	(8,600	)	(14.7	)
Total “Expansion” Markets	23,400	27,900	(4,500	)	(16.1	)
Total Worldwide Units	73,500	86,600	(13,100	)	(15.1	)

(B) Includes 5,100 and 1,100 units in the nine months ended July 31, 2008 and 2007, respectively, related to U.S. military contracts.

Truck segment sales

	Three Months Ended July 31,				Change		Percentage Change
	2008		2007
(in millions, except percentage change)
Truck segment sales of manufactured products, net – U.S. and Canada	$	2,562	$	1,415	$	1,147	81.1
Truck segment sales of manufactured products, net – ROW		360		300		60	20.0
Total truck segment sales of manufactured products, net	$	2,922	$	1,715	$	1,207	70.4

44

	Nine Months Ended July 31,				Change		Percentage Change
	2008		2007
(in millions, except percentage change)
Truck segment sales of manufactured products, net – U.S. and Canada	$	6,593	$	4,893	$	1,700	34.7
Truck segment sales of manufactured products, net – ROW		929		867		62	7.2
Total truck segment sales of manufactured products, net	$	7,522	$	5,760	$	1,762	30.6

During the three months and nine months ended July 31, 2008, the Truck segment’s net sales increased from the same respective periods in 2007 primarily due to sales growth in U.S. military, ProStar, and a slight increase in ROW.

We observed that the “traditional” markets began to experience a downturn at the end of our first quarter of 2007 and continued into 2008. Strongly influencing this downturn was a combination of the industry-wide increase in demand for vehicles containing the pre-2007 emissions-compliant engines ahead of the implementation of stricter engine emissions requirements and a challenging economic environment. Strength in our U.S. military sales, partially offset by the weakness across the industry, are the key drivers in the change in sales between our third quarter and year-to-date 2008 and 2007 results. “Traditional” market retail deliveries for the three and nine months ended July 31, 2008 and 2007 are categorized by relevant class in the tables below. The Truck segment “traditional” retail units sold increased by 1,800 units or 10.5% and decreased by 11,700 units or 18.0% during the third quarter and year-to-date 2008, as compared to same periods in 2007, respectively.

The following tables summarize industry retail deliveries, in the “traditional” truck markets in the U.S. and Canada, in units, according to Wards Communications and A.C.T. Research Company, LLC (“ACT”):

	Three Months Ended July 31,		Change		Percentage Change
	2008	2007
“Traditional” Markets (U.S. and Canada)
School buses	5,600	5,400	200		3.7
Class 6 and 7 medium trucks	15,300	18,600	(3,300	)	(17.7	)
Class 8 heavy trucks	26,400	24,900	1,500		6.0
Class 8 severe service trucks	15,400	14,400	1,000		6.9
Sub-total combined class 8 trucks	41,800	39,300	2,500		6.4
Total “Traditional” Truck Markets	62,700	63,300	(600	)	(0.9	)

	Nine Months Ended July 31,		Change		Percentage Change
	2008	2007
“Traditional” Markets (U.S. and Canada)
School buses	16,800	17,900	(1,100	)	(6.1	)
Class 6 and 7 medium trucks	46,200	68,400	(22,200	)	(32.5	)
Class 8 heavy trucks	75,100	119,500	(44,400	)	(37.2	)
Class 8 severe service trucks	42,900	49,500	(6,600	)	(13.3	)
Sub-total combined class 8 trucks	118,000	169,000	(51,000	)	(30.2	)
Total “Traditional” Truck Markets	181,000	255,300	(74,300	)	(29.1	)

45

The following tables summarize our retail delivery market share percentages based on market-wide information from Wards Communications and ACT:

	Three Months Ended July 31,
	2008	2007
“Traditional” Markets (U.S. and Canada)
School buses	48.2	59.3
Class 6 and 7 medium trucks	39.2	34.4
Class 8 heavy trucks	18.9	15.3
Class 8 severe service trucks	34.4	26.4
Sub-total combined class 8 trucks	24.6	19.3
Total “Traditional” Truck Markets	30.3	27.2
Impact of excluding U.S. military deliveries
Class 8 severe service trucks, exclusive of U.S. military deliveries	25.7	24.3
Sub-total combined class 8 trucks, exclusive of U.S. military deliveries	21.3	18.5
Total “Traditional” Truck Markets, exclusive of U.S. military deliveries	28.2	26.7

	Nine Months Ended July 31,
	2008	2007
“Traditional” Markets (U.S. and Canada)
School buses	54.2	59.8
Class 6 and 7 medium trucks	35.9	35.2
Class 8 heavy trucks	16.6	14.6
Class 8 severe service trucks	35.2	25.9
Sub-total combined class 8 trucks	23.4	17.9
Total “Traditional” Truck Markets	29.4	25.5
Impact of excluding U.S. military deliveries
Class 8 severe service trucks, exclusive of U.S. military deliveries	26.5	24.2
Sub-total combined class 8 trucks, exclusive of U.S. military deliveries	19.9	17.3
Total “Traditional” Truck Markets, exclusive of U.S. military deliveries	27.4	25.1

For the three months and nine months ended July 31, 2008, our school bus, class 6 and 7 medium class, and severe service brands all led their markets with the greatest retail market share in each of their categories. Our continuing strategy is to maintain and grow these market share positions at our required margins while aggressively pursuing market share gains in the heavy truck market, the category in which we have the lowest market share. We continue to demonstrate our long-term commitment to the heavy truck market through our 2008 introduction of the LoneStar class 8 long-haul truck.

Our market share in the school bus class was 48.2% and 54.2% for the three months and nine months ended July 31, 2008, respectively, and 59.3% and 59.8% for the same respective periods in 2007. Market share in the school bus class declined over the reporting period as a result of competitive pricing strategies and our desire to collect for the intrinsic value of our product. We believe the school bus market share will return to our normalized share due to our recent sales agreement with the largest student transportation company. Market share in class 6 and 7 medium increased to 39.2% from 34.4% during the third quarter of 2008 compared to the respective quarter in 2007 and increased slightly during the nine months period ended July 31, 2008 and the same respective period in 2007. We have been able to mitigate the impact of new entrants into this class and discount programs instituted by our competitors due to our brand value and extensive dealer network. Our class 8 heavy truck market share rose by 3.6 and 2.0 percentage points for the three months and nine months ended July 31, 2008, respectively, compared to the same periods in 2007, due to our reengagement in this class with new models, re-established scale, and increased supplier relationships. Our severe service class market share

46

increased 8.0 and 9.3 percentage points during the third quarter and year-to-date 2008, respectively, as compared to the three months and nine months ended July 31, 2007, despite the industry downturn in residential and non-residential construction, primarily due to an increase in U.S. military sales.

Net chargeouts declined during the third quarter and year-to-date 2008 in our “expansion” markets when compared to the same respective periods in 2007. The “expansion” markets include Mexico, international export, non-U.S. military, recreational vehicle, commercial step-van, and other truck and bus classes. Products such as the Low-Cab Forward vehicle, class 4 and 5 small bus, and our recreational vehicle products, as well as our entrance into the military market contributed to incremental sales within these quarters in addition to our traditional markets. It is our goal to continue to diversify into these “expansion” markets in future periods. The Mexican truck market increased 8.9% and decreased 5.3% in the three months and nine months ended July 31, 2008, respectively, compared to the same respective periods in 2007. Our Mexican truck market share was 36.1% and 22.3% for the quarters ended July 31, 2008 and 2007, respectively, and 33.4% and 31.3% for the nine months ended July 31, 2008 and 2007, respectively.

Truck segment costs and expenses

	Three Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Costs of products sold, excluding items presented separately below	$	2,314	$	1,481	$	833		56.2
Postretirement benefits expenses allocated to costs of products sold		5		9		(4	)	(44.4	)
Product warranty costs		35		36		(1	)	(2.8	)
Total costs of products sold	$	2,354	$	1,526	$	828		54.3

	Nine Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Costs of products sold, excluding items presented separately below	$	6,204	$	4,898	$	1,306		26.7
Postretirement benefits expenses allocated to costs of products sold		14		27		(13	)	(48.1	)
Product warranty costs		94		107		(13	)	(12.2	)
Total costs of products sold	$	6,312	$	5,032	$	1,280		25.4

Our Costs of products sold as a percentage of net sales of manufactured products decreased to 80.6% and 83.9% in the third quarter and year-to-date 2008, respectively, from 89.0% and 87.4% during the same respective periods in 2007. Product warranty costs are included in Costs of products sold. We generally offer one- to five-year warranty coverage for our trucks, although the terms and conditions can vary. Product warranty costs at the Truck segment were 1.5% of Truck segment’s costs of products sold for both the three months and nine months ended July 31, 2008, respectively, compared to 2.4% and 2.1% of Truck segment’s costs of products sold for the same respective periods in 2007. We accrue warranty related costs under standard warranty terms and for claims that we may choose to pay in an effort to strengthen and grow relationships with our customer base even though we are not contractually obligated to do so (“out-of-policy”). Our warranty costs declined primarily as a result of a reduction in truck shipments and quality improvements for the nine month period ended July 31, 2008, as compared to the same respective period in 2007. In addition to quality improvements, we achieved reductions in the levels of adjustments related to pre-existing warranties of $6 million and $18 million during the third quarter and year-to-date 2008, and reduced levels of out-of-policy claims have allowed us to mitigate our warranty cost for the third quarter and year-to-date 2008. Our Costs of products sold as a percentage of net sales of manufactured products, exclusive of product warranty costs and postretirement benefits expenses, decreased by 7.2 percentage points for the third quarter of 2008 compared to the same period in 2007 primarily due to

47

increased sales in U.S. military and ProStar vehicles, improved pricing and operating efficiency. Our Costs of products sold as a percentage of net sales of manufactured products, exclusive of product warranty costs and postretirement benefits expense, decreased by 2.6 percentage points for the year-to-date period ended July 31, 2008 compared to the same period in 2007 primarily due to sales in U.S. military and ProStar vehicles, improved pricing mitigating the impact of lower volumes and the associated decline in operating efficiency.

	Three Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Selling, general and administrative expenses, excluding items presented separately below	$	104	$	84	$	20		23.8
Postretirement benefits expense allocated to selling, general and administrative expenses		—		2		(2	)	(100.0	)
Dealcor selling, general and administrative expenses		45		70		(25	)	(35.7	)
Provision for losses on receivables		10		3		7		233.3
Total selling, general and administrative expenses	$	159	$	159	$	—		—

	Nine Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Selling, general and administrative expenses, excluding items presented separately below	$	282	$	239	$	43		18.0
Postretirement benefits expense allocated to selling, general and administrative expenses		—		6		(6	)	(100.0	)
Dealcor selling, general and administrative expenses		165		207		(42	)	(20.3	)
Provision for losses on receivables		13		8		5		62.5
Total selling, general and administrative expenses	$	460	$	460	$	—		—

The Truck segment’s Selling, general and administrative expenses amounted to $159 million and $460 million for both the three months and nine months ended July 31, 2008 and 2007, respectively. Dealcor’s Selling, general and administrative expenses decreased primarily due to dispositions and changes in ownership composition of Dealcors and expenses related to the decrease in sales volumes. Our relative ratio of Selling, general and administrative expenses to net sales and revenues, exclusive of postretirement benefits expense, Dealcor expenses and provision for losses on receivables decreased to 3.6% from 4.9% for the three month periods ended July 31, 2008 and 2007, respectively, but decreased to 3.7% compared to 4.1% for the nine month periods ended July 31, 2008 and 2007, respectively. Selling, general and administrative expenses, exclusive of items presented separately above, for the Truck segment include expenses primarily attributable to new business development and additional segment overhead and infrastructure enhancements in support of sales activity.

For the three month and nine month periods ended July 31, 2008, the Truck segment’s Engineering and product development costs approximated $45 million and $128 million, respectively, which compares to $41 million and $132 million for the same respective periods in 2007. Approximately half of our total consolidated Engineering and product development costs were incurred at the Truck segment during the three months and nine months ended July 31, 2008 and 2007, respectively. During this time, our top developmental priority was establishing our ProStar and LoneStar class 8 long-haul trucks and redeveloping our emissions-compliant vehicles, both of which required significant labor, material, outside engineering, and prototype tooling. Besides innovation, we also focus resources on continuously improving our existing products as a means of streamlining our manufacturing process, minimizing warranty costs, and providing our customers with product and fuel-usage efficiencies.

48

Truck segment profit

The Truck segment increased profitability for the quarter and nine month period ended July 31, 2008 by $350 million and $459 million, respectively, to $357 million and $591 million, respectively, compared to $7 million and $132 million for the comparable periods in 2007. This increase in profitability for the three months and nine months ended July 31, 2008 was primarily attributable to growth in our sales in U.S. military and ProStar vehicles, new truck pricing performance, and improved operational efficiencies.

Engine Segment

The following tables summarize our Engine segment’s financial results and sales data:

	Three Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions)
Segment sales	$	808	$	971	$	(163	)	(16.8	)
Segment profit		5		65		(60	)	(92.3	)
Sales data (in units):
Ford sales		25,200		65,400		(40,200	)	(61.5	)
Other OEM sales – U.S. and Canada		4,800		1,600		3,200		200.0
Other OEM sales – ROW		30,300		27,500		2,800		10.2
Intercompany sales		19,000		13,700		5,300		38.7
Total sales		79,300		108,200		(28,900	)	(26.7	)
	Nine Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions)
Segment sales	$	2,533	$	2,572	$	(39	)	(1.5	)
Segment profit		90		71		19		26.8
Sales data (in units):
Ford sales		127,500		181,600		(54,100	)	(29.8	)
Other OEM sales – U.S. and Canada		10,800		7,100		3,700		52.1
Other OEM sales – ROW		81,700		69,400		12,300		17.7
Intercompany sales		47,600		48,900		(1,300	)	(2.7	)
Total sales		267,600		307,000		(39,400	)	(12.8	)

Engine segment sales

	Three Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Engine segment sales of manufactured products, net – U.S. and Canada	$	472	$	735	$	(263	)	(35.8	)
Engine segment sales of manufactured products, net – ROW		336		236		100		42.4
Total engine segment sales of manufactured products, net	$	808	$	971	$	(163	)	(16.8	)

49

	Nine Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Engine segment sales of manufactured products, net – U.S. and Canada	$	1,667	$	1,997	$	(330	)	(16.5	)
Engine segment sales of manufactured products, net – ROW		866		575		291		50.6
Total engine segment sales of manufactured products, net	$	2,533	$	2,572	$	(39	)	(1.5	)

The Engine segment continues to be our second largest segment as measured in net sales and revenues, representing 20.4% and 23.3% of total consolidated net sales and revenues for the three months and nine months ended July 31, 2008, respectively, compared to 32.8% and 28.3% of total consolidated net sales and revenues for the same respective periods in 2007. The Engine segment experienced a decrease in net sales for the three months and nine months ended July 31, 2008 compared to the same respective periods in 2007. The primary drivers in the decrease in revenues for the three months and nine months ended July 31, 2008 compared to the same respective periods in 2007 were decreased product volumes in the U.S. and Canada, primarily Ford, and was partially offset by increased ROW volumes and improved pricing. Sales of engines to Ford represented 31.8% and 47.6% of our unit volume for the third quarter and year-to-date 2008, respectively, compared to 60.4% and 59.2% of our unit volume for the same respective periods in 2007.

Sales to non-Ford customers, including intercompany sales, increased approximately 11,300 and 14,700 units during the third quarter and year-to-date 2008 compared to the same respective periods in 2007 largely attributed to the increase in South American volumes and improvements in certain categories of the Truck segment.

Engine segment costs and expenses

	Three Months Ended July 31,					Change			Percentage Change
	2008			2007
(in millions, except percentage change)
Costs of products sold, excluding items presented separately below	$	725		$	847	$	(122	)	(14.4	)
Postretirement benefits (income) expenses allocated to costs of products sold		(1	)		5		(6	)	N.M.
Product warranty costs		13			11		2		18.2
Total costs of products sold	$	737		$	863	$	(126	)	(14.6	)

	Nine Months Ended July 31,				Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Costs of products sold, excluding items presented separately below	$	2,259	$	2,299	$	(40	)	(1.7	)
Postretirement benefits expenses allocated to costs of products sold		—		15		(15	)	N.M.
Product warranty costs		39		52		(13	)	(25.0	)
Total costs of products sold	$	2,298	$	2,366	$	(68	)	(2.9	)

For the three months ended July 31, 2008, Costs of products sold as a percentage of net sales of manufactured products increased to 91.2% compared to 88.9% for the same period in 2007, primarily attributable to the lower production volumes and the corresponding loss of operational efficiencies, temporary layoffs at our Indianapolis plant and partially offset by increased selling prices. For the nine months ended July 31, 2008, Costs of products sold as a percentage of net sales of manufactured products decreased to 90.7% compared to 92.0% for the same period in 2007, as a result of improved manufacturing performance due to the change over in

50

production to the 2007 emission-compliant engines and increased selling prices. A significant driver of the decrease in Costs of products sold for the three month and nine month period ended July 31, 2008 compared to the same respective periods in 2007 was a reduction in the shipments of engines to Ford partially offset by an increase in commodity costs, primarily steel and precious metals, and diesel fuel prices.

The decrease in Ford shipments was due to a reduction in the production of heavy duty pickup trucks built by Ford that contain diesel engines. As a result of the reduction in shipments to Ford, the Engine segment’s Indianapolis plant laid off over 400 employees during the third quarter of 2008 to match Ford’s production schedules. This resulted in recognizing an accrual of $10 million for employee benefit layoff expense within the third quarter of 2008 in Costs of products sold. A prolonged reduction in Ford’s demand for our engines or the early termination or non-renewal of our agreement with Ford could have a material impact on our financial position, results of operations, or cash flows.

Product warranty costs for the three months and nine months ended July 31, 2008 approximated 1.8% and 1.7% of the Engine segment’s cost of product sold compared to 1.3% and 2.2% of the Engine segment’s cost of product sold for the same respective periods of 2007. The increase in the three months ended July 31, 2008 product warranty costs, as compared to 2007, was primarily attributable to shipments to other OEM customers, intercompany sales, and adjustments to increase the accrual for pre-existing warranties totaling $8 million. The decrease in the nine months ended July 31, 2008 in product warranty costs, as compared to 2007, at the Engine segment was attributable to a combination of lower per unit costs and adjustments to increase the accrual for pre-existing warranties in 2007 compared to 2008. The Engine segment’s changes in pre-existing warranty were due to changes in our estimates of warranty costs for products sold in prior years. Progressive improvements in per unit product warranty costs were also achieved by focusing on controlling the reliability and quality of our emissions-compliant engines as evidenced by the level of spending incurred during previous quarters and periods within Engineering and product development costs. Costs are accrued per unit based on expected warranty claims that incorporate historical information and forward assumptions about the nature, frequency, and average cost of warranty claims.

Selling, general and administrative expenses incurred during the third quarter and nine month period ended July 31, 2008 were $44 million and $105 million, respectively, and compared to $34 million and $90 million for the comparable periods in 2007 and increased primarily due to litigation expenses.

Engineering and product development costs incurred during the third quarter and nine month period ended July 31, 2008 were $63 million and $161 million, respectively, and compare to $42 million and $142 million for the comparable periods in 2007. The Engine segment’s Engineering and product development costs represented approximately half of our total consolidated Engineering and product development costs for the third quarter and year-to-date in both 2008 and 2007. Our top developmental priorities focus on further design changes to our diesel engines, the development of our MaxxForce Big-Bore engines, and on new products to meet the requirements of the 2010 emissions regulations.

Equity in income of non-consolidated affiliates

The Engine segment has made substantial investments in various affiliated entities and joint ventures. The most significant Engine segment joint venture in terms of income is BDP. We account for these entities using the equity method of accounting, and our percentage share of the income associated with these affiliates amounted to $20 million and $66 million for the third quarter and year-to-date 2008 and compares to $18 million and $55 million for the same respective periods in 2007.

Engine segment profit

As a result of the above items, the Engine segment recognized a profit of $5 million and $90 million for the three months and nine months ended July 31, 2008 that compares to a profit of $65 million and $71 million for the same respective periods in 2007.

51

Parts Segment

The following tables summarize our Parts segment’s financial results:

	Three Months Ended July 31,				Change		Percentage Change
	2008		2007
(in millions)
Segment sales	$	444	$	405	$	39	9.6
Segment profit		51		43		8	18.6

	Nine Months Ended July 31,				Change		Percentage Change
	2008		2007
(in millions)
Segment sales	$	1,283	$	1,153	$	130	11.3
Segment profit		156		120		36	30.0

Parts segment sales

For the three month and nine month periods ended July 31, 2008, the Parts segment revenue growth was due primarily to an increase in new U.S. military sales and improved pricing. The Parts segment’s revenues are primarily driven by the U.S. and Canadian markets.

Parts segment profit

Selling, general and administrative expenses amounted to $43 million and $122 million for the three and nine months ended July 31, 2008, respectively, compared to $40 and $119 for the three months and nine months ended July 31, 2007, respectively. The Parts segment’s relative ratio of Selling, general and administrative expenses to net sales and revenues were approximately 9.7% and 9.5% for the quarter and nine months ended July 31, 2008, respectively, compared to 9.9% and 10.3% for the comparable periods in 2007.

During the three month and nine month periods ended July 31, 2008, a large portion of our increase in profitability was due to volume growth primarily with the U.S. military while containing our Selling, general and administrative expenses.

Financial Services Segment

The following tables summarize this segment’s financial results:

	Three Months Ended July 31,					Change			Percentage Change
	2008			2007
(in millions)
Segment revenues	$	95		$	133	$	(38	)	(28.6	)
Segment profit		(1	)		40		(41	)	N.M.

	Nine Months Ended July 31,					Change			Percentage Change
	2008			2007
(in millions)
Segment revenues	$	328		$	396	$	(68	)	(17.2	)
Segment profit (loss)		(7	)		124		(131	)	N.M.

52

Financial Services segment revenues

The Financial Services segment revenues include revenues from retail notes and finance leases, operating lease revenues, wholesale notes, retail and wholesale accounts, and securitization income. Our Financial Services revenues are primarily composed of retail and finance lease revenues of $93 million and $308 million for the three months and nine months ended July 31, 2008, respectively, and compares with $114 million and $334 million for the comparable periods in 2007. In addition, securitization income included in our Financial Services revenues was $2 million and $20 million for the three months and nine months ended July 31, 2008, respectively, and compares with $19 million and $62 million for the comparable periods in 2007. The Financial Services segment revenues declined during the third quarter and year-to-date 2008 compared to the same periods in 2007 due to lower interest rates on receivables, lower average balances on receivables, and fewer originations. The decline in revenues was primarily due to a decrease in financing of dealer inventory and a reduction in customer financing opportunities of purchases for vehicles and components due to the difficult credit environment and historically high diesel fuel prices.

The Financial Services segment also receives interest income from the Truck and Parts segments relating to financing of wholesale notes, wholesale accounts, and retail accounts. This income is eliminated upon consolidation of financial results. Substantially all revenues earned on wholesale and retail accounts are received from other segments. Aggregate interest revenue provided by the Truck and Parts segments was $20 million and $63 million for the three months and nine months ended July 31, 2008, respectively, and compares with $29 million and $104 million for the comparable periods in 2007.

Financial Services segment profit (loss)

The following tables present the components of Interest expense:

	Three Months Ended July 31,					Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Interest expense related to debt	$	56		75			(19	)	(25.3	)
Non-cash mark to market charge (income) on our interest rate swaps agreements		1	$	(1	)	$	2		N.M.
Total interest expense	$	57	$	74		$	(17	)	(23.0	)

	Nine Months Ended July 31,					Change			Percentage Change
	2008		2007
(in millions, except percentage change)
Interest expense related to debt	$	203		222			(19	)	(8.6	)
Non-cash mark to market charge (income) on our interest rate swaps agreements		40	$	(2	)	$	42		N.M.
Total interest expense	$	243	$	220		$	23		10.5

In connection with our retail securitization transactions we enter into various derivative financial instruments, primarily interest rate swaps and caps to convert our interest rate exposure on both the finance receivables we originate and then sell as well as the notes issued as secured borrowings. Our intent is to convert our interest rate exposure related to our secured borrowings from a floating rate to a fixed rate in order to better match the cash flow of our fixed rate finance receivables so that the net margin spread over the life of the securitization is more predictable. Given the dramatic decrease in interest rates from October 31, 2007 to July 31, 2008, the required periodic mark to market of the derivative financial instruments resulted in a non-cash charge of $1 million and $40 million in our consolidated statements of operations for the third quarter and the

53

year-to-date ended July 31, 2008, respectively, compared to a benefit of $1 million and $2 million in the same periods in 2007. While these derivative instruments provide us with an economic hedge of the expected future interest cash flows associated with the secured borrowings, they do not qualify for hedge accounting under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, thus the non-cash charge (gain). Further movement in interest rates could change the mark to market adjustments of the fair values of the derivatives in future periods.

Repossessions and delinquencies increased during the third quarter and year-to-date 2008 compared to the same respective periods in 2007 driven primarily by weakness in the underlying trucking economy, which is currently impacting our overall customer portfolio. Decreases in tonnage hauled, suppressed freight rates driven by excess capacity, increased fuel costs, and the sub-prime mortgage market crisis have all contributed to the distress of our customers. We provide for certain losses related to the potential repossession and liquidation of collateral underlying finance receivables with dealers and retail customers. During the third quarter and year-to-date 2008, our provision for losses on receivables was increased by $13 million and $19 million, respectively, when compared to the same respective periods in 2007.

In addition to the above items, we experienced margin compression, a reduction in the net interest rate spread between our financing rates and the cost of our borrowings, due to the challenging credit market and timing of customer financing compared to our funding of the related debt. The Financial Services segment recognized a loss of $1 million and $7 million for the three months and nine months ended July 31, 2008 that compares to a profit of $40 million and $124 million for the same respective periods in 2007.

Liquidity and Capital Resources

Cash Requirements

We generate cash flow primarily from the sale of trucks, diesel engines, and parts. In addition, we generate cash flow from product financing provided to our dealers and retail customers by the Financial Services segment. It is our opinion that, in the absence of significant unanticipated cash demands, current and forecasted cash flow from our manufacturing operations, financial services operations, and financing capacity will provide sufficient funds to meet anticipated operating requirements, capital expenditures, equity investments, and strategic acquisitions. We also believe that collections on the outstanding receivables portfolios as well as funds available from various funding sources will permit the financial services operations to meet the financing requirements of our dealers and retail customers. The manufacturing operations are generally able to access sufficient sources of financing to support our business plan. At July 31, 2008 our manufacturing operations had a total of $339 million available under committed credit facilities that mature in 2012.

Sources and Uses of Cash

	Nine Months Ended July 31,
	2008			2007
(in millions)
Net cash provided by operating activities	$	647		$	67
Net cash used in investing activities		(437	)		(12	)
Net cash used in financing activities		(336	)		(592	)
Effect of exchange rate changes on cash and cash equivalents		27			54
Decrease in cash and cash equivalents		(99	)		(483	)
Cash and cash equivalents at beginning of period		777			1,157
Cash and cash equivalents at end of the period	$	678		$	674

54

Cash Flow from Operating Activities

Cash provided by operating activities was $647 million for the nine months ended July 31, 2008 compared with cash provided by operating activities of $67 million for the nine months ended July 31, 2007. The increase in cash provided by operating activities for the nine months ended July 31, 2008 compared with the same period in 2007 was due primarily to higher net income and a positive change in net working capital. The changes in net income and net working capital were primarily attributed to growth in our military and export business, primarily related to Mine-Resistant Ambush Protected vehicles, as well as better pricing performance as a result of the introduction of our ProStar products. Net income for the nine months ended July 31, 2008 was $434 million compared with net loss of $17 million for the nine months ended July 31, 2007.

Cash paid for interest, net of amounts capitalized, was $310 million for the nine months ended July 31, 2008 versus $383 million for the nine months ended July 31, 2007. The decrease was due primarily to lower average interest rates and lower debt balances for the nine months of 2008 compared with the nine months of 2007. During the nine months of 2008, $162 million was paid for certain fees associated with the ongoing consulting and other professional services related to the preparation of our public filing documents and documentation and assessment of internal control over financial reporting. Cash paid during the nine months of 2008 for income taxes, net of refunds, was $17 million lower than the nine months of 2007 due to decreased income in foreign jurisdictions.

Cash Flow from Investing Activities

Cash used in investing activities was $437 million for the nine months ended July 31, 2008 compared with net cash used in investing activities of $12 million for the nine months ended July 31, 2007. The increase in cash used in investing activities for the nine months of 2008 compared with the nine months of 2007 was due primarily to an increase in net purchases of marketable securities and a net increase in restricted cash and cash equivalents for the nine months of 2008 compared with a net decrease in restricted cash and cash equivalents for the nine months of 2007. The net increase in restricted cash and cash equivalents for the nine months of 2008 compared with the same period in 2007 resulted from timing of transactions at one of our financial services subsidiaries. At the end of July 2008, this subsidiary’s assets were all restricted cash equivalents rather than a combination of restricted cash, notes receivable, and leases receivable.

Cash Flow from Financing Activities

Cash flow used in financing activities was $336 million and $592 million for the nine months ended July 31, 2008 and 2007, respectively. The decrease in cash used in financing activities for the nine months of 2008 compared with the nine months of 2007 was due primarily to an increase in the net payments on securitized debt at our financial services operations.

Credit Markets

In the late summer and early fall of 2007, the financial markets began a correction and period of credit tightening precipitated by large losses in the sub-prime mortgage market that bled over into other sectors of the market. The effects of this credit tightening manifested themselves primarily in our financial services operations. Pricing and liquidity were impacted in the asset-backed securitization market, a source of funding within our financial services operations. Substantial increases in the spreads on borrowing rates were seen at all credit rating levels. As a result, although we continue to believe that we will have sufficient liquidity to fund our financial services operations, future borrowings could be more costly than in the past.

Other Information

Critical Accounting Policies

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our condensed consolidated financial statements, we use estimates and make judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue,

55

expenses, and the related disclosures. Our assumptions, estimates, and judgments are based on historical experience, current trends, and other factors we believe are relevant at the time we prepare our condensed consolidated financial statements. Our significant accounting policies and critical accounting estimates are consistent with those described in Note 1, Summary of significant accounting policies, accompanying the condensed consolidated financial statements and the MD&A section of our 2007 Annual Report on Form 10-K. There are no significant changes in our application of our critical accounting policies in the nine months ended July 31, 2008 with the exception of the adoption of FASB Interpretation No. 48, as further described in Note 9, Income taxes, to the accompanying condensed consolidated financial statements.

To aid in fully understanding and evaluating our reported results, we have identified the following accounting policies as our most critical because they require us to make difficult, subjective, and complex judgments.

• Pension and Other Postretirement Benefits

• Allowance for Losses

• Sales of Receivables

• Income Taxes

• Impairment of Long-Lived Assets

• Contingent Liabilities

• Product Warranty

• Goodwill and Intangible Assets

56

New Accounting Pronouncements

Accounting pronouncements issued by various standard setting and governmental authorities that have not yet become effective with respect to our condensed consolidated financial statements are described below, together with our assessment of the potential impact they may have on our financial position, results of operations or cash flows:

Pronouncement	Effective Date	Impact on Our Financial Condition and Results of Operations
Emerging Issues Task Force Issue No. 08-3, Accounting by Lessees for Nonrefundable Maintenance Deposits	Effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Early adoption is not permitted. Our effective date is November 1, 2009.	We are evaluating the potential impact, if any.
FASB Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets	Effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Our effective date is November 1, 2009.	We are evaluating the potential impact, if any.
FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133	Effective for fiscal years and interim reporting periods beginning after November 15, 2008. Our effective date is February 1, 2009.	When effective, we will comply with the disclosure provisions of this Statement.
FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51	Effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. Our effective date is November 1, 2009.	We are evaluating the potential impact, if any.
FASB Statement No. 141(R), Business Combinations	Applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. Our effective date is November 1, 2009.	We will adopt this Statement on a prospective basis.
Emerging Issues Task Force Issue No. 07-03, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities	Effective for financial statements issued for fiscal years beginning after December 15, 2007. Our effective date is November 1, 2008.	We are evaluating the potential impact, if any.

57

Pronouncement	Effective Date	Impact on Our Financial Condition and Results of Operations
FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities	Effective as of the beginning of the first fiscal year beginning after November 15, 2007. If we adopt the Fair Value Option, our effective date is November 1, 2008.	We are evaluating the potential impact, if any. We have not determined whether to adopt the fair value option.
FASB Statement No. 157, Fair Value Measurements	Effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. Our effective date is November 1, 2008.	We are evaluating the potential impact, if any.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in our exposure to market risk since October 31, 2007. For further information, see Note 10, Fair value of financial instrument, and Note 11, Financial instruments, to the accompanying condensed consolidated financial statements, and Item 7A. of our Annual Report on Form 10-K for the year ended October 31, 2007.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act was performed under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer. The purpose of disclosure controls and procedures is to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

As previously disclosed under “Item 9A—Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2007, we concluded that our internal control over financial reporting was not effective based on the material weaknesses identified. Based on those material weaknesses, which we view as an integral part of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the quarter ended July 31, 2008, our disclosure controls and procedures were not effective. Nevertheless, based on a number of factors, including the performance of additional procedures by management designed to ensure the reliability of our financial reporting, we believe that the condensed consolidated financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with GAAP.

Management’s Remediation Initiatives

We continue to make progress toward achieving the effectiveness of our disclosure controls and procedures. Remediation generally requires making changes to how controls are designed and then adhering to those changes for a sufficient period of time such that the effectiveness of those changes is demonstrated with an appropriate amount of consistency. We believe that we have made significant improvements in our internal control over financial reporting and are committed to remediating our material weaknesses. Our Sarbanes Oxley compliance function is responsible for helping develop and monitor our short- and long-term remediation plans. In addition,

58

we have assigned executive owners to each material weakness to oversee the necessary remedial changes to the overall design of our internal control environment and to address the root causes of our material weaknesses.

Our remediation initiatives summarized below are intended to further address our specific material weaknesses and to continue to enhance our internal control over financial reporting.

• Our leadership team remains committed to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity. This commitment will continue to be communicated to and reinforced with our employees.

• We continue to foster awareness and understanding of standards and principles for accounting and financial reporting. This includes the implementation and clarification of specific accounting policies and procedures and effective execution of our newly designed accounting development program.

• We continue to enhance the development, communication, and monitoring of processes and controls to ensure that appropriate account reconciliations and journal entry controls are performed, documented, and reviewed as part of our standardized procedures.

• We continue to invest in modifications of our information systems to improve the reliability of our financial reporting and increase the completeness and consistency of the controls around logical access, program change, and computer operations.

• We plan to redesign our period end closing and financial statement preparation process in order to improve both its effectiveness and efficiency.

• We continue to support our Disclosure Committee and our internal Management Representation Letter process, both of which have been re-designed to ensure the timely assessment of accounting and disclosure matters requiring our attention.

Collectively, these and other actions are improving the foundation of our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

As of the quarter ended July 31, 2008, we completed remediation of the following two previously reported material weaknesses:

• Control Environment. Our remediation actions included:

• Executive and senior management have increased their communications about the importance of internal controls, ethics, and acting with integrity across the Company.

• Executive and senior management are directly sponsoring the remediation of our material weaknesses through regular discussions with action owners about the short- and long-term remediation plans and the progress to sustain solid internal control over financial reporting.

• We restructured and realigned our accounting and finance organization.

• We significantly invested in our accounting and finance resources to strengthen our expertise, including hiring new leadership and experienced employees as well as implementing a formal accounting development program.

• We established and filled the role of Chief Ethics Officer to focus on implementing best practices for communications and activities related to ethics company-wide.

• Internal Audit. Our remediation action included:

• Under the direction of the Audit Committee of our Board of Directors we fully outsourced our internal audit function to improve the function’s effectiveness. An independent public accounting

59

firm is responsible for the internal audit risk assessment and planning process, performing monitoring of our key business risks under the direction of the Audit Committee, and utilizing resources with the appropriate skill sets and expertise.

• The new internal audit function has completed 15 audits, maintained consistency in reporting to the Audit Committee, is currently developing the 2009 audit plan, and has integrated its scope and approach with the SOX team and the external auditors.

There were no other material changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15 and 15d-15 that occurred during the quarter ended July 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

60

PART II—OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for our fiscal year ended October 31, 2007 other than (i) the deletion of the risk factor relating to maintaining existing business and a reduction in our credit rating, (ii) the deletion of the risk factor relating to being traded on the Over-the-Counter market, (iii) the addition of a risk factor related to government contracting, (iv) changes to the risk factor related to NFC’s ability to access sufficient capital to engage in its financing activities, and (v) changes to include the impairment of our assets and incurring other cost due to the loss of or a significant reduction in Ford business. Except for the deletion of the risk factors (namely (i) and (ii) above) these other revisions are set forth below.

Current credit market conditions may impair NFC’s access to sufficient capital to engage in its financing activities.

NFC supports our manufacturing operations by providing financing to a significant portion of our dealers and retail customers. NFC traditionally obtains the funds to provide such financing from sales of receivables, medium and long-term debt, and equity capital and from short and long-term bank borrowings. However, the deterioration of credit market conditions has made it difficult for finance companies to obtain the funds necessary to conduct normal operations. If cash provided by operations, bank borrowings, continued sales and securitizations of receivables, and the placement of term debt does not provide the necessary liquidity, NFC may restrict its financing of our products both at the wholesale and retail level, which may have a significant negative effect on our liquidity and results of operations.

Our business may be adversely affected by government contracting risks.

We derived approximately 27% of our revenues from the U.S. government for the nine months ended July 31, 2008 and approximately 3% for the nine months ended July 31, 2007. Our existing U.S. government contracts could extend over multiple years and are conditioned upon the continuing availability of congressional appropriations. Congress usually appropriates funds on a fiscal-year basis and if the congressional appropriations for a program under which we are contractors are not made, or are reduced or delayed, our contract could be cancelled or government purchases under the contract could be reduced or delayed, which could adversely affect our financial condition, results of operations, or cash flows. In addition, U.S. government contracts generally permit the contracting government agency to terminate the contract, in whole or in part, either for the convenience of the government or for default based on our failure to perform under the contract. If a contract is terminated for convenience, we would generally be entitled to the payment of our allowable costs and an allowance for profit on the work performed. If one of our government contracts were to be terminated for default, we could be exposed to liability and our ability to obtain future contracts could be adversely affected.

The loss of business from Ford, one of our largest customers, could have a negative impact on our business, financial condition, and results of operations.

We derived approximately 9% of our revenues from Ford for the nine months ended 2008, approximately 14% of our revenues for the year ended 2007, and approximately 12% of our revenues for the year end 2006. In addition, Ford accounted for approximately 48%, 61%, and 68% of our diesel engine unit volume (including intercompany transactions) for the nine months ended 2008, and years ended 2007 and 2006, respectively, primarily relating to the sale of our V-8 diesel engines. See Note 12, Commitments and contingencies, to the accompanying condensed consolidated financial statements, for information related to our pending litigation with Ford. The loss of or a significant reduction in business from Ford or the early termination or non-renewal of our agreement with Ford may also cause an impairment of certain of our assets and potentially subject us to other costs that may be material.

61

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In May 2008, we issued 4,167 shares of restricted stock to a former executive upon exercise of a stock option award. The aggregate offering price of these shares was $145,880. All of these shares were issued without registration under the Securities Act in reliance on Section 4(2) based on the former executive’s financial sophistication and knowledge of the company and Regulation D.

The following table sets forth information with respect to purchases of shares of the company’s common stock made during the quarter ended July 31, 2008, by or on behalf of the company:

Issuer Purchase of Equity Securities

Period	Total Number of Shares (or Units) Purchased(1)	Average Price Paid Per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
5/1/2008 – 5/31/2008	—	$	—	—	—
6/1/2008 – 6/30/2008	—		—	—	—
7/1/2008 – 7/31/2008	1,573		67.425	—	—
Total:	1,573	$	67.425	—	—

(1) The total number of shares purchased is due to shares delivered to or withheld by the company in connection with employee payroll tax withholding upon vesting of restricted stock.

Item 6. Exhibits

Exhibit:		Page
(3)	Articles of Incorporations and By-Laws	E-1
(10)	Material Contracts	E-18
(31.1)	CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	E-153
(31.2)	CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	E-154
(32.1)	CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	E-155
(32.2)	CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	E-156
(99.1)	Additional Financial Information (Unaudited)	E-157

All exhibits other than those indicated above are omitted because of the absence of the conditions under which they are required or because the information called for is shown in the financial statements and notes thereto in the Quarterly Report on Form 10-Q for the period ended July 31, 2008.

62

NAVISTAR INTERNATIONAL CORPORATION

AND CONSOLIDATED SUBSIDIARIES

SIGNATURE

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.

September 3, 2008

NAVISTAR INTERNATIONAL CORPORATION

(Registrant)

/s/    JOHN P. WALDRON        

John P. Waldron

Vice President and Controller

(Principal Accounting Officer)

63

EX-3

EXHIBIT 3

NAVISTAR INTERNATIONAL CORPORATION

AND CONSOLIDATED SUBSIDIARIES

ARTICLES OF INCORPORATION AND BY-LAWS

	The following documents of Navistar International Corporation are incorporated herein by reference:
3.1	Restated Certificate of Incorporation of Navistar International Corporation effective July 1, 1993. Filed as Exhibit 3.2 to Annual Report on Form 10-K for the period ended October 31, 1993, which was dated and filed on January 27, 1994. Commission File No. 1-9618, and amended as of May 4, 1998.
3.2	Certificate of Retirement of Stock filed with the Secretary of State for the State of Delaware effective July 30, 2003 retiring the Class B common stock of Navistar International Corporation in accordance with the Restated Certificate of Incorporation of Navistar International Corporation. Filed as Exhibit 3.2 to Quarterly Report on Form 10-Q for the period ended July 31, 2003, which was dated and filed on September 12, 2003. Commission File No. 001-09618.
	The following documents of Navistar International Corporation are filed herewith:
3.3	The Amended and Restated By-Laws of Navistar International Corporation effective August 26, 2008 (marked to indicate all changes from the June 17, 2008 version).

E-1

EXHIBIT 3.3

AMENDED AND RESTATED

BY-LAWS

OF

NAVISTAR INTERNATIONAL CORPORATION

Incorporated Under the Laws

of the State of Delaware

(Effective June 17,August 26, 2008)

E-2

AMENDED AND RESTATED

BY-LAWS

OF

NAVISTAR INTERNATIONAL CORPORATION

ARTICLE I.

Meetings of Stockholders

Section 1. Annual Meetings. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on such date as shall be fixed by the Board of Directors and at such time and place, within or without the State of Delaware, as may be designated in the notice of meeting. If the day fixed for the annual meeting shall fall on a legal holiday, the meeting shall be held on the next succeeding day not a legal holiday. If the annual meeting is omitted on the day herein provided, a special meeting may be held in place thereof, and any business transacted at such special meeting in lieu of annual meeting shall have the same effect as if transacted or held at the annual meeting. At the discretion of the Board of Directors, the meeting may be conducted by remote communication to the extent permitted by law.

Section 2. Special Meetings. A special meeting of the stockholders for any purpose or purposes, unless otherwise prescribed by statute, may be called at any time by the Chair of the Board or by the Board of Directors.

Section 3. Time and Place of Meetings. All meetings of the stockholders shall be held at such times and places, within or without the State of Delaware, as may from time to time be fixed by the Board of Directors, or as shall be specified or fixed in the respective notices or waivers of notice thereof.

Section 4. Notice of Meetings. Except as otherwise expressly required by law or by the Certificate of Incorporation of Navistar International Corporation (“Corporation”), written notice of each meeting of the stockholders, stating the date, hour and place and, in the case of a special meeting of the stockholders, the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote at such meeting by mail, or if authorized by the Board of Directors, by a form of electronic transmission permitted by law. In the case of an annual meeting, such notice shall be given not less than fifteen (15) days before the date on which the meeting is to be held and, in the case of a special meeting, such notice shall be given not less than ten (10) days before the date on which the meeting is to be held. Any such notice shall be deemed given if by mail, when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s last post office address appearing on the stock records of the Corporation or, if by electronic transmission, as follows: (a) if by facsimile telecommunications, when directed to a number at which the stockholder has consented to receive notice; (b) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (c) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (1) such posting and (2) the giving of such separate notice; and (d) if by any other form of electronic transmission, when directed to the stockholder. Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. At special meetings of stockholders no business other than that specified in the notice of the meeting or germane thereto shall be transacted at such meeting. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given.

Section 5. Quorum. At each meeting of the stockholders, except as otherwise expressly required by law, stockholders holding one-third (1/3) of the shares of stock of the Corporation, issued and outstanding, and entitled to be voted thereat, shall be present in person or by proxy to constitute a quorum for the transaction of business. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, a majority in voting interest of those present in person or by proxy and entitled to vote thereat, or in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such

E-3

meeting from time to time until stockholders holding the amount of stock requisite for a quorum shall be present or represented. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally called.

Section 6. Organization. At each meeting of the stockholders, one of the following shall chair the meeting and preside thereat, in the following order of precedence:

(a) the Chair of the Board;

(b) the Chief Executive Officer;

(c) an Executive Officer in order of rank of office and by seniority within the same rank; or

(d) a stockholder of record of the Corporation who shall be chosen to chair such meeting by a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat.

The Secretary, or, if he or she shall be absent from such meeting, the person (who shall be an Assistant Secretary, if an Assistant Secretary shall be present thereat) whom the chair of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof.

Section 7. Order of Business. The order of business at each meeting of the stockholders shall be determined by the chair of such meeting, but such order of business at any meeting at which a quorum is present may be changed by the vote of a majority in voting interest of those present in person or by proxy at such meeting and entitled to vote thereat.

Section 8. Notice of Stockholder Nomination and Stockholder Business. At a meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. Nominations for the of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Restated Certificate of Incorporation of the Corporation. Nominations of persons for election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Other matters to be properly brought before the meeting must be: (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, including matters covered by Rule 14a-8 of the Exchange Act of 1934, as amended, of the United States Securities and Exchange Commission; (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors; or (c) otherwise properly brought before the meeting by a stockholder. to the Board of Directors may be made at any annual meeting of stockholders (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of giving of the notice provided for in this Section 8 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 8.

A notice of the intent of a stockholder to make a nomination or to bring any other matter before the meeting shall be made in writing and received by the Secretary In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice to the Secretary of the Corporation must be received at the principal executive offices of the Corporation not more than 180 days, and not less than 120 days, in advance of the annual meeting, or in the event of a special meeting of stockholders, such notice shall be received by the Secretary of the Corporation not later than the earlier of (i) the close of the fifteenth day following the day on which notice of the meeting is first mailed to stockholders, or (ii) the close of the day next first anniversary of the preceding the year’s annual meeting; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to, or delayed by more than 30 days after, from the date of the first anniversary of the preceding year”’s annual meeting, notice by the stockholder to be timely must be so delivered received not later than the close of business on the later of (i) the 120^th day prior to such annual meeting or (ii) the 10^th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public disclosure of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.

E-4

Every such notice by a stockholder shall set forth:

(a) the name and residence address of the stockholder of the Corporation who intends to make a nomination or bring up any other matter;

(b) a representation that the stockholder is a holder of the Corporation’s voting stock and intends to appear in person or by proxy at the meeting to make the nomination or bring up the matter specified in the notice;

(c) with respect to notice of an intent to make a nomination, a description of all arrangements or understandings among the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;

(d) with respect to notice of an intent to make a nomination, such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the United States Securities and Exchange Commission had each nominee been nominated by the Board of Directors of the Corporation; and

(e) with respect to notice of an intent to bring up any other matter, a description of the matter, and any material interest of the stockholder in the matter.

Notice of intent to make a nomination shall be accompanied by the written consent of each nominee to serve as director of the Corporation if so elected. To be in proper written form, a stockholder’s notice to the Secretary must set forth as to each person whom the stockholder proposes to nominate for election as a director and as to the stockholder giving the notice and any Stockholder Associated Person (as defined below): (i) the name, age, business address, residence address and record address of such person; (ii) the principal occupation or employment of such person; (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such person; (iv) any information relating to such person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and the rules and regulations promulgated thereunder; (v) the nominee holder for, and number of, shares owned beneficially but not of record by such person; (vi) whether and the extent to which any transaction or series of transactions has been made or entered into by or on behalf of such persons in relation to any share of stock of the Corporation, including, without limitation, any hedging or any other agreement, arrangement or understanding (including any derivative or short positions, profit interests, options or borrowed or loaned shares) the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such person with respect to any share of stock of the Corporation; (vii) to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the nominee for election or reelection as a director on the date of such stockholder’s notice; (viii) a description of all arrangements or understandings between or among such persons pursuant to which the nomination(s) are to be made by the stockholder and any relationship between or among the stockholder giving notice and any Stockholder Associated Person, on the one hand, and each proposed nominee, on the other hand; and (ix) a representation that the stockholder intends to appear in person or by proxy at the meeting to nominate the person(s) named in its notice. Any information required pursuant to this paragraph shall be supplemented by the stockholder giving the notice not later than 10 days after such record date for the meeting as of the record date. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. The Corporation may require any proposed nominee to furnish such other information as may be reasonably required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.

At the meeting of stockholders, the chair shall declare out of order and disregard any nomination or other matter not presented in accordance with this section.

No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 8 (including the provision of the information required pursuant to the

E-5

immediately preceding paragraph). If the Chairman of the annual meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare at such annual meeting that the nomination was defective and such defective nomination shall be disregarded.

For purposes of Article I, Section 8 and 9 of these By-Laws, “Stockholder Associated Person” of any stockholder shall mean (a) any person acting in concert, directly or indirectly, with such stockholder and (b) any person controlling, controlled by or under common control with such stockholder or any Stockholder Associated Person.

Section 9. Notice of Stockholder Proposals of Business. No business (other than nominations for election to the Board of Directors pursuant to Section 8 of Article I of these By-laws) may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 9.

In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice to the Secretary of the Corporation must be received at the principal executive offices of the Corporation not more than 180 days and not less than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is advanced or delayed by more than 30 days from the date of the first anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of (i) the 120^th day prior to such annual meeting or (ii) the 10^th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public disclosure of an adjournment of an annual meeting commence a new time period for giving of a stockholder’s notice as described above.

To be in proper written form, a stockholder’s notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting, a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting and as to the stockholder giving the notice and any Stockholder Associated Person: (i) the name and record address of such person; (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such person; (iii) the nominee holder for, and number of, shares owned beneficially but not of record by such person; (iv) whether and the extent to which any transaction or series of transactions has been made or entered into by or on behalf of such persons in relation to any share of stock of the Corporation, including, without limitation, any hedging or any other agreement, arrangement or understanding (including any derivative or short positions, profit interests, options or borrowed or loaned shares) the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such person with respect to any share of stock of the Corporation; (v) to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the proposal of business on the date of such stockholder’s notice; (vi) a description of all arrangements or understandings between or among such persons in connection with the proposal of such business by such stockholder and any material interest in such business; and (vii) a representation that the stockholder giving the notice intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. Any information required pursuant to this paragraph shall be supplemented by the stockholder giving the notice not later than 10 days after the record date for the meeting as of the record date.

No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 9 (including the provision of the

E-6

information required pursuant to the immediately preceding paragraph); provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of the annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare at such annual meeting that the business was not properly brought before the meeting and such business shall not be transacted.

Section 10. Voting. Each stockholder shall, at each meeting of the stockholders, be entitled to one vote in person or by proxy for each share of stock of the Corporation held by the stockholder and registered in the stockholder’s name on the books of the Corporation on the date fixed or determined pursuant to the provisions of Section 5 of Article VI of these By-laws as the record date for the determination of stockholders who shall be entitled to receive notice of and to vote at such meeting.

Shares of its own stock belonging to the Corporation shall not be voted directly or indirectly. Any vote on stock of the Corporation may be given at any meeting of the stockholders by the stockholder entitled thereto in person or by the stockholder’s proxy appointed by an instrument in writing delivered to the Secretary or an Assistant Secretary of the Corporation or to the secretary of the meeting. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless the stockholder shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At all meetings of the stockholders all matters, except as otherwise provided in these By-laws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat, a quorum being present. Except in the case of votes for the election of directors, the vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chair of the meeting. On a vote by ballot each ballot shall be signed by the stockholder voting, or by the stockholder’s proxy, if there be such proxy. If authorized by the Board of Directors, such a requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

Section 10. 11. List of Stockholders. It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger to prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to said meeting either at a place within the city where said meeting is to be held and which place shall be specified in the notice of said meeting, or, if not so specified, at the place where said meeting is to be held, and such list shall be produced and kept at the time and place of said meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger or such list or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

Section 11.12. Inspectors or Judges. The Board of Directors, in advance of any meeting of stockholders, may appoint one or more inspectors or judges to act at such meeting or any adjournment thereof. If the inspectors or judges shall not be so appointed, or if any of them shall fail to appear or act, the chair of such meeting shall appoint the inspectors or judges, or such replacement or replacements therefor, as the case may be. Such inspectors or judges, before entering on the discharge of their duties, shall take and sign an oath or affirmation faithfully to execute the duties of inspectors or judges at meetings for which they are appointed. At such meeting, the inspectors or judges shall receive and take in charge the proxies and ballots and decide all questions touching the qualification of voters and the validity of proxies and the acceptance or rejection of votes. An inspector or judge need not be a stockholder of the Corporation, and any officer of the Corporation may be an inspector or judge on any question other than a vote for or against his or her election to any position with the Corporation.

E-7

ARTICLE II.

Board of Directors

Section 1. General Powers. The business and affairs of the Corporation shall be managed by the Board of Directors.

Section 2. Number and Time of Holding office. Subject to the requirements of the laws of the State of Delaware, the Board may from time to time by the vote of the majority of the whole Board determine the number of directors. Until the Board shall otherwise so determine, the number of directors shall not exceed eighteen (18). Each of the directors of the Corporation shall hold office until the expiration of his or her term and until his or her successor shall be elected. Directors need not be stockholders.

Section 3. Election of Directors. Except as otherwise provided in the Certificate of Incorporation of the Corporation, at each meeting of the stockholders for the election of directors, at which a quorum is present, the persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the directors. Such election shall be by ballot; provided, however, a nomination shall be accepted and votes cast for a nominee shall be counted by the inspectors or judges of the election, only if the Secretary of the Corporation has received at least 24 hours prior to the meeting a statement over the signature of the nominee that he or she consents to being a nominee and, if elected, intends to serve as a director.

Section 4. Organization and Order of Business. At its last meeting before, or first meeting after, the Annual Meeting of Stockholders the Board of Directors shall elect one of its members to be Chair of the Board. The Chair of the Board may be but does not have to be an officer, executive or employee of the Corporation. The Chair of the Board shall preside at meetings of the Board, lead the Board in carrying out its responsibilities to manage the business and affairs of the Corporation and perform other duties as requested by the Board of Directors.

At each meeting of the Board, one of the following shall chair the meeting and preside thereat, in the following order of precedence:

(a) the Chair of the Board;

(b) the Chief Executive Officer; or

(c) any director chosen by a majority of the directors present thereat.

The Secretary, or in case of his or her absence, the person whom the chair of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. The order of business at each meeting of the Board of Directors shall be determined by the chair of such meeting.

Section 5. Resignations. Any director may resign at any time by giving written notice of his or her resignation to the Chair of the Board or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective shall not be specified therein, then it shall take effect when accepted by action of the Board of Directors. Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective.

Section 6. Vacancies, etc. Except as otherwise provided in the Certificate of Incorporation of the Corporation, in case of any vacancy on the Board, or in case of any newly created directorship, a director to fill the vacancy or the newly created directorship for the unexpired portion of the term being filled may be elected by the holders of shares of stock of the Corporation entitled to vote in respect thereof at an annual or special meeting of said holders or by a majority of the directors of the Corporation then in office though less than a quorum.

Section 7. Place of Meeting. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution determine or as shall be specified or fixed in the respective notices or waivers of notice thereof; provided, that all meetings, regular or special, shall be held at the chief executive office of the Corporation in Warrenville, Illinois, unless otherwise ordered or approved by a majority of the whole Board.

E-8

Section 8. First Meeting. As soon as practicable after each annual election of directors, the Board shall meet for the purpose of organization, the election of officers and the transaction of other business. Such meeting shall be held at the time and place theretofore fixed by the Board for the next regular meeting of the Board and no notice thereof need be given; provided, however, that the Board may determine that such meeting shall be held at a different place and time but notice thereof shall be given in the manner hereinafter provided for special meetings of the Board.

Section 9. Regular Meetings. Regular meetings of the Board shall be held at such times as the Board shall from time to time determine. Notices of regular meetings need not be given. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be postponed until the same hour on the same day of the next succeeding week in which such day shall not be a legal holiday at such place, or at such other time and place as the Board shall determine in which event notice thereof shall be given.

Section 10. Special Meetings; Notice. Special meetings of the Board shall be held whenever called by the Chair of the Board, the Chief Executive Officer or one-third (1/3) of the directors at the time in office. The Secretary shall give notice to each director as hereinafter in this Section provided of each such special meeting, in which shall be stated the time and place of such meeting. Notice of each such meeting shall be mailed to each director, addressed to the director at his or her residence or usual place of business, at least two (2) days before the day on which such meeting is to be held; or shall be sent addressed to him or her at such place by telegraph, cable, wireless or other form of recorded communication, or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held. Notice of any meeting of the Board need not, however, be given to any director, if waived by him or her in writing or by telegraph, cable, wireless or other form of recorded communication, before, during or after such meeting, or if he or she shall be present at such meeting; and any meeting of the Board shall be a legal meeting without any notice thereof having been given if all the directors of the Corporation then in office shall be present thereat.

Dividends may be declared upon the stock of the Corporation at any special meeting of the Board of Directors; provided, that the notice of said special meeting states specifically the fact that dividend action is to be considered. Any and all other business may be transacted at a special meeting unless notice of the meeting specifically states that action will be taken only upon the matters listed in the notice.

Section 11. Quorum and Manner of Acting. Except as otherwise provided in these By-laws or by law, a majority of directors at the time in office shall be present in person at any meeting of the Board of Directors in order to constitute a quorum for the transaction of business at such meeting, and the affirmative vote of at least a majority of the directors present at any such meeting, at which a quorum is present, shall be necessary for the passage of any resolution or act of the Board. In the absence of a quorum from any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present thereat. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such.

Section 12. Action by Consent. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee.

Section 13. Committees. The Board of Directors may appoint standing committees of its members. Such committees shall be composed of such number of Directors and shall have such powers as are conferred by the By-laws or determined by the Board of Directors. The members of all standing committees shall be appointed annually at the first meeting of the Board of Directors after the annual meeting of the stockholders and shall continue as members until their successors are appointed, subject to the power of the Board to remove any member of a committee at any time and to appoint a successor.

E-9

A majority of the members of each standing committee shall constitute a quorum. The chair of each standing committee shall preside at the committee’s meetings. If the chair is absent, then the meeting shall be chaired by the Committee member present at the meeting who has been a director for the longest period of time.

Each committee chair shall report regularly to the Board as to the committee’s reviews, actions and recommendations.

Section 14. Meeting by Remote Communication. Members of the Board of Directors or any committee appointed by the Board of Directors, may participate in a meeting of the Board of Directors or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

ARTICLE III.

Executive Committee

Section 1. Number, Appointment, Term of Office. There shall be an Executive Committee consisting of not less than three (3) and not more than eight (8) regular members appointed from and by the Board of Directors. A majority of the members of the Executive Committee shall be Independent Directors, as defined by the Board. In addition to the regular members, the Chair of the Board and the Chief Executive Officer shall be members ex officio. The regular members of the Committee shall be appointed by the affirmative vote of a majority of the whole Board and shall hold office until the first meeting of the Board after the next annual meeting of the stockholders until their successors are appointed. A vacancy in a regular membership may be filled by the Board at any time.

Any appointed regular member of the Executive Committee shall be subject to removal at any time by the affirmative vote of a majority of the whole Board.

Section 2. Functions and Powers. The Executive Committee shall represent the Board of Directors between meetings for the purpose of consulting with the officers and giving special consideration to matters of importance affecting the policies, financing, management and operations of the business, and taking action thereon or making recommendations to the Board. The Board of Directors reserves to itself alone the power to elect and remove officers, to determine the number of directors, to fill any vacancies on the Board of Directors, to declare dividends, issue stock, recommend to shareholders any action requiring their approval, change the membership of any committee at any time, and discharge any committee either with or without cause at any time. Subject to the foregoing limitations, the Executive Committee shall possess and may exercise all other powers of the Board of Directors during the intervals between meetings of the Board of Directors.

Section 3. Meetings. The Executive Committee shall meet as often as may be deemed necessary and expedient. Meetings may be called by standing resolution of the Committee, or at the request of the Chair of the Board, the Chief Executive Officer or of any two (2) members of the Committee. The Secretary shall notify each member of the Committee of each meeting, giving at least two (2) days’ notice by mail or one (1) day’s notice by telegraph or telephone, but such notice may be waived by any member. The purposes of a meeting need not be specified in the notice or waiver of notice of any meeting.

At each meeting of the Board of Directors the Committee shall make a report to the Board of all action taken since its last report. Such reports may be made orally or in writing and only such matters need be recorded in the minutes of the Executive Committee as the Committee deems proper or the Board of Directors may require.

E-10

Section 4. Organization. A majority of the Executive Committee shall constitute a quorum. The Chair of the Board shall serve as Chair of the Executive Committee. The Chair of the Board, or in his or her absence, the Chief Executive Officer shall preside at meetings of the Executive Committee. If the Chair of the Board and the Chief Executive Officer are absent, the Committee shall appoint a temporary Chair from among the members present. In other respects the Committee shall fix its own rules of procedures.

ARTICLE IV.

Officers

Section 1. Election, Appointment, Term of Office. The Executive Officers of the Corporation shall consist of a Chief Executive Officer, a President and such number of other Executive Officers as the Board of Directors may determine from time to time. There shall also be a General Counsel, a Treasurer, a Controller and a Secretary, any of whom may also be an Executive Officer.

The Board of Directors may also appoint such other officers and agents as it may deem necessary, who shall have such authority and perform such duties as may be prescribed by the Board.

All Executive Officers and other officers of the Corporation shall be regularly elected or appointed by the majority vote of the whole Board of Directors at its first meeting after the annual meeting of the stockholders and shall hold office until the first meeting of the Board after the next annual meeting of the stockholders, and until their successors are elected or appointed.

If additional officers are elected or appointed during the year, they shall hold office until the next annual meeting of the Board of Directors at which officers are regularly elected or appointed and until their successors are elected or appointed.

A vacancy in any office may be filled for the unexpired portion of the term in the same manner as provided for election or appointment to such office.

All officers and agents elected or appointed by the Board of Directors shall be subject to removal at any time by the Board of Directors.

Section 2. Chief Executive Officer. The Chief Executive Officer shall have the powers and perform the duties incident to that position. Subject to the Board of Directors, he or she shall be in general and active charge of the entire business and all the affairs of the Corporation, and shall be its chief policy-making officer. He or she shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these Bylaws.

Section 3. President. The President shall have such powers and perform such duties as may be prescribed by the Board of Directors at the time of his or her election and such other powers and duties as may be assigned to him or her from time to time by the Chief Executive Officer or the Board of Directors.

Section 4. Executive Officers. Each Executive Officer shall have such powers, duties and titles as shall be prescribed by the Board of Directors at the time of his or her election and such other powers and duties as may be assigned to him or her from time to time by the Chief Executive Officer or the Board of Directors.

Section 5. General Counsel. The General Counsel shall have charge of all matters of legal import concerning the Corporation and of the department relating to such matters. He or she shall have such other powers and duties as may be assigned to him or her by the Chief Executive Officer or the Board of Directors.

Section 6. Treasurer. The Treasurer shall be responsible for safeguarding the cash and securities of the Corporation and the formulation of the investment and financial policies of the Corporation. He or she shall have such other powers and duties as may be assigned to him or her by the Chief Executive Officer or the Board of Directors.

E-11

Section 7. Controller. The Controller shall be in charge of the accounts of the Corporation and the maintenance of adequate accounting procedure and records of the Corporation. He or she shall have such other powers and duties as may be assigned to him or her by the Chief Executive Officer or the Board of Directors.

Section 8. Secretary. The Secretary shall keep the records of all meetings of the stockholders and of the Board of Directors and of its committees. He or she shall affix the seal of the Corporation to all deeds, contracts, bonds or other instruments requiring the corporate seal when the same have been signed on behalf of the Corporation by a duly authorized officer. He or she shall perform such other duties as may be assigned to him or her from time to time by the Chief Executive Officer or the Board of Directors.

ARTICLE V.

Contracts, Checks, Drafts, Bank Accounts, Etc.

Section 1. Execution of Documents by Officers. All of the Executive Officers of the Corporation elected as provided in Section 1 of Article IV of the By-laws, shall have power to execute and deliver any deeds, contracts, mortgages, bonds, debentures and other documents for and in the name of the Corporation.

All appointed officers shall have such powers with respect to execution and delivery of deeds, contracts, mortgages, bonds, debentures and other documents as may be assigned to them by the Board of Directors.

Section 2. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board of Directors, the Chief Executive Officer or the Treasurer shall direct in such banks, trust companies or other depositories as the Board of Directors may select or as may be selected by any officer or officers or agent or agents of the Corporation to whom power in that respect shall have been delegated by the Board of Directors. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer or agent of the Corporation.

Section 3. Proxies in Respect of Stock or Other Securities of Other Corporations. Unless otherwise provided by resolution adopted by the Board, each of the Executive Officers of the Corporation elected as provided in Section 1 of Article IV of these By-laws may from time to time appoint an attorney or attorneys or agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other corporation to vote or consent in respect of such stock or other securities, may instruct the person or persons so appointed as to the manner of exercising such powers and rights, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies, powers of attorney or other instruments as such Executive Officer may deem necessary or proper in order that the Corporation may exercise its said powers and rights.

ARTICLE VI.

Shares and Their Transfers

Examination of Books

Section 1. Certificates for Stock. Shares of stock of the Corporation may be certificated or uncertificated, as provided under the General Corporation Law of the State of Delaware. Every holder of stock of the Corporation shall be entitled to have a certificate or certificates, in such form as the Board shall prescribe, certifying the number of shares of stock of the Corporation owned by the stockholder. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the person who was at the time of signing the Chief Executive Officer or an Executive Officer

E-12

and by the person who was at the time of signing the Treasurer or an Assistant Treasurer and its seal may be affixed thereto; provided, however, that the signature of such Executive Officer of the Corporation and of such Treasurer or Assistant Treasurer and the seal of the Corporation may be facsimile. In case any officer or officers of the Corporation who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be such officer or officers. A record shall be kept of the respective names of the persons, firms or corporations owning the stock of the Corporation, the number of shares held by such persons, firms or corporations, and the respective dates of issuance, and in case of cancellation, the respective dates of cancellation. Every share of stock surrendered to the Corporation for exchange or transfer shall be canceled and neither a new certificate or certificates nor uncertificated shares of stock shall be issued in exchange thereof until such stock shall have been so canceled except in cases provided for in Section 4 of this Article VI.

Section 2. Transfers of Stock. Transfers of shares of the stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, or with a transfer clerk or a transfer agent appointed as in Section 3 of this Article VI provided, and upon payment of all taxes thereon and, in the case of certificated shares, surrender of the certificate or certificates for such shares properly endorsed or, in the case of uncertificated shares of stock, compliance with appropriate procedures for transferring shares in uncertificated form. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation.

Section 3. Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with these By-laws, concerning the issue, transfer and registration of shares of stock of the Corporation. The Board may appoint or authorize any officer or officers to appoint one or more transfer clerks, any of whom may be employees of the Corporation, or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them; provided, however, that the signature of any transfer clerk, transfer agent, or registrar may be facsimile. In case any transfer clerk, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such transfer clerk, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such transfer clerk, transfer agent, or registrar at the date of issue.

Section 4. Lost, Destroyed and Mutilated Certificates. The owner of any certificated shares of stock of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Corporation may issue a new certificate of stock or uncertificated shares of stock in the place of any certificate theretofore issued by it, alleged to have been lost or destroyed, and the Board may, in its discretion, require the owner of the lost or destroyed certificate, or his or her legal representatives, to give the Corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties, as the Board shall in its uncontrolled discretion determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate, or the issuance of such new certificate or uncertificated shares of stock.

Section 5. Record Date. To determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If no record date is fixed by the Board of Directors:

(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given.

E-13

(b) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting unless the Board of Directors shall fix a new record date for the adjourned meeting.

Section 6. Examination of Books by Stockholders. The Board may determine, from time to time, whether and to what extent, at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware or as authorized by resolution adopted by the Board or by the stockholders of the Corporation entitled to vote in respect thereof.

ARTICLE VII.

Offices, Etc.

Section 1. Registered Office. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the name of the resident agent in charge thereof shall be The Corporation Trust Company.

Section 2. Other Offices. The Corporation also may have an office or offices other than said principal office at such place or places, either within or without the State of Delaware, as provided in these By-laws or as the Board may from time to time appoint or as the business of the Corporation may require.

Section 3. Books and Records. Except as otherwise required by law, the Certificate of Incorporation or these By-laws, the Corporation may keep the books and records of the Corporation in such place or places within or without the State of Delaware as the Board may from time to time by resolution determine or the business of the Corporation may require; provided, however, the principal accounting books and records of the Corporation, including the records of meetings of the Board of Directors, shall be kept at the chief executive office of the Corporation in Warrenville, Illinois, unless otherwise determined by resolution of the Board of Directors.

ARTICLE VIII.

Dividends

Subject to the provisions of law, of the Certificate of Incorporation of the Corporation and of these By-laws, the Board may declare and pay dividends upon the shares of the stock of the Corporation either (a) out of its net assets in excess of its capital as computed in accordance with the provisions of the laws of the State of Delaware or (b) in case there shall be no such excess, out of its net profits for the fiscal year then current and/or the preceding fiscal year, whenever and in such amounts as, in the opinion of the Board, the condition of the affairs of the Corporation shall render it advisable. Dividends upon the shares of stock of the Corporation may be declared at any regular meeting of the Board of Directors and also at a special meeting, if notice of such proposed action is given as provided Section 10 of Article II of these By-laws.

ARTICLE IX.

Seal

The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation and the words and figures “Incorporated 1993 Delaware”, or words and figures of similar import. The seal or a facsimile thereof may be impressed or affixed or reproduced or other use made thereof by the Secretary or any Assistant Secretary or any other officer authorized by the Board.

E-14

ARTICLE X.

Fiscal Years

The fiscal year of the Corporation shall end on the thirty-first day of October in each year.

ARTICLE XI.

Waiver of Notices

Whenever any notice whatever is required to be given by these By-laws or by the Certificate of Incorporation of the Corporation or by the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE XII.

Indemnification

Section 1. Coverage. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (each a “proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation (which term shall include any predecessor corporation of the Corporation) or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (each an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators; provided however, that, except as provided in Section 2 of this Article XII with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Article XII shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Article XII or otherwise.

Section 2. Claims. If a claim under Section 1 of this Article XII is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for expenses incurred in defending a proceeding in advance of its final disposition, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the Corporation to recover payments by the Corporation of expenses incurred by an indemnitee in defending in his or her capacity as a director or officer, a proceeding in advance of its final disposition, the indemnitee shall be

E-15

entitled to be paid also the expense of prosecuting or defending such claim. In any action brought by the indemnitee to enforce a right to indemnification hereunder (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) or by the Corporation to recover payments by the Corporation of expenses incurred by an indemnitee in defending, in his or her capacity as a director or officer, a proceeding in advance of its final disposition, the burden of proving that the indemnitee is not entitled to be indemnified under this Article XII or otherwise shall be on the Corporation. Neither the failure of the Corporation (including the Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including the Board of Directors, independent legal counsel or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall be a presumption that the indemnitee has not met the applicable standard of conduct, or in the case of such an action brought by the indemnitee, be a defense to the action.

Section 3. Rights Not Exclusive. The rights conferred on any person by Sections 1 and 2 of this Article XII shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.

Section 4. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

Section 5. Employees. Persons who are not included as indemnities under Section 1 of this Article XII but are employees of the Corporation or any subsidiary may be indemnified to the extent authorized at any time or from time to time by the Board of Directors.

ARTICLE XIII.

Amendments

These By-laws as they shall be at any time may be amended, altered or repealed by the Board of Directors at any regular meeting of the Board of Directors or at any special meeting if the proposed amendment, alteration or repeal is stated in the notice of the special meeting; but any by-laws made by the Board may be altered, amended or repealed by the stockholders in the manner provided in the Certificate of Incorporation of the Corporation.

ARTICLE XIV.

National Emergency

Section 1. Definition and Application. For the purposes of this Article XIV the term “national emergency” is defined as an emergency situation resulting from an attack upon the United States, a nuclear disaster within the United States, a catastrophe, or other emergency condition, as a result of which attack, disaster, catastrophe or emergency condition a quorum of the Board of Directors cannot readily be convened for action. Persons not directors of the Corporation may conclusively rely upon the determination by the Board of Directors of the Corporation, at a meeting held or purporting to be held pursuant to this Article XIV that a national emergency as hereinabove defined exists regardless of the correctness of such determination made or purporting to be made as hereinafter provided. During the existence of a national emergency the provisions of this Article XIV shall become operative, but, to the extent not inconsistent with such provisions, the other provisions of these By-laws shall remain in effect during any national emergency and upon its termination the provisions of this Article XIV shall cease to be operative.

E-16

Section 2. Meetings, etc. When it is determined in good faith by any director that a national emergency exists, special meetings of the Board of Directors may be called by such director. The director calling any such special meeting shall make a reasonable effort to notify all other directors of the time and place of such special meeting, and such effort shall be deemed to constitute the giving of notice of such special meeting, and every director shall be deemed to have waived any requirement, of law or otherwise, that any other notice of such special meeting be given. At any such special meeting two directors shall constitute a quorum for the transaction of business including without limiting the generality hereof the filling of vacancies among directors and officers of the Corporation and the election of additional Executive Officers, Assistant Controllers, Assistant Secretaries and Assistant Treasurers. The act of a majority of the directors present thereat shall be the act of the Board of Directors. If at any such special meeting of the Board of Directors there shall be only one director present, such director present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given of any such adjournment.

The directors present at any such special meeting shall make reasonable effort to notify all absent directors of any action taken thereat, but failure to give such notice shall not affect the validity of the action taken at any such meeting. All directors, officers, employees and agents of, and all persons dealing with, the Corporation, if acting in good faith, may conclusively rely upon any action taken at any such special meeting.

Section 3. Amendment. The Board of Directors shall have the power to alter, amend, or repeal any of these By-laws by the affirmative vote of at least two-thirds (2/3) of the directors present at any special meeting attended by two (2) or more directors and held in the manner prescribed in Section 2 of this Article XIV, if it is determined in good faith by said two-thirds (2/3) that such alteration, amendment or repeal would be conducive to the proper direction of the Corporation’s affairs.

Section 4. Chair of the Board and Executive Officers. If during the existence of a national emergency, the Chair of the Board becomes incapacitated, cannot by reasonable effort be located or otherwise is unable or unavailable to perform the duties of his or her office, the Board shall elect one of its members to be Chair of the Board. The Chair of the Board may, but need not be an officer of or employed in an executive or any other capacity by the Corporation. If, during the existence of a national emergency, the Chief Executive Officer becomes incapacitated or unavailable to perform the duties of his or her office, the Chair of the Board is hereby designated also as Chief Executive Officer and will act as both Chair of the Board and Chief Executive Officer.

Section 5. Substitute Directors. To the extent required to constitute a quorum at any meeting of the Board of Directors during a national emergency, the officers of the Corporation who are present shall be deemed, in order of rank of office and within the same rank in order of election or appointment of such offices, directors for such meeting.

E-17

EX-10

EXHIBIT 10

NAVISTAR INTERNATIONAL CORPORATION

AND CONSOLIDATED SUBSIDIARIES

MATERIAL CONTRACTS

	The following documents of Navistar International Corporation, its principal subsidiary Navistar, Inc., and its indirect subsidiary Navistar Financial Corporation are incorporated herein by reference:
10.1	Pooling and Servicing Agreement dated as of June 8, 1995, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Chemical Bank, as 1990 Trust Trustee, and The Bank of New York, as Master Trust Trustee. Filed as Exhibit 4.1 to Navistar Financial Securities Corporation’s Form 8-K dated and filed December 12, 2003. Commission File No. 033-87374.
10.2	First Amendment to the Pooling and Servicing Agreement dated as of September 12, 1995, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller and The Bank of New York, as Master Trust Trustee. Filed as Exhibit 10.103 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.3	Second Amendment to the Pooling and Servicing Agreement dated as of March 27, 1996, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller and The Bank of New York, as Master Trust Trustee. Filed as Exhibit 10.104 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.4	Third Amendment to the Pooling and Servicing Agreement dated as of July 17, 1998, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller and The Bank of New York, as Master Trust Trustee. Filed as Exhibit 10.105 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.5	Fourth Amendment to the Pooling and Servicing Agreement dated as of June 2, 2000, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller and The Bank of New York, as Master Trust Trustee. Filed as Exhibit 4.7 to Navistar Financial Securities Corporation’s Form S-3/A dated and filed June 12, 2000. Commission File No. 333-32960.
10.6	Fifth Amendment to the Pooling and Servicing Agreement dated as of July 13, 2000, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller and The Bank of New York, as Master Trust Trustee. Filed as Exhibit 4.2 to Navistar Financial Dealer Note Master Trust’s Form 8-K dated July 13, 2000 and filed July 14, 2000. Commission File No. 033-36767-03.
10.7	Sixth Amendment to the Pooling and Servicing Agreement dated as of October 31, 2003, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller and The Bank of New York, as Master Trust Trustee. Filed as Exhibit 4.7 to Navistar Financial Dealer Note Master Owner Trust’s Form S-3/A dated and filed December 23, 2003. Commission File No. 333-104639-01.
10.8	Seventh Amendment to the Pooling and Servicing Agreement dated as of June 10, 2004, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller and The Bank of New York, as Master Trust Trustee. Filed as Exhibit 4.6 to Navistar Financial Dealer Note Master Owner Trust’s Form 8-K dated June 10, 2004 and filed June 14, 2004. Commission File No. 333-104639-01.
10.9	Series 1998-1 Supplement to the Pooling and Servicing Agreement dated as of July 17, 1998, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, and the Bank of New York, as Master Trust Trustee on behalf of the Series 1998-1 Certificateholders. Filed as Exhibit 4.1 to Navistar Financial Securities Corporation’s Form 8-K dated and filed December 4, 2003. Commission File No. 033-87374.

E-18

10.10	Series 2000-VFC Supplement to the Pooling and Servicing Agreement, dated as of January 28, 2000, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, and the Bank of New York, as Master Trust Trustee on behalf of the Series 2000-VFC Certificateholders. Filed as Exhibit 10.71 to Navistar Financial Corporation’s Form 10-Q for the period ended January 31, 2005, which was dated and filed April 19, 2005. Commission File No. 001-04146.
10.11	Amendment No. 1 to the Series 2000-VFC Supplement to the Pooling and Servicing Agreement, dated as of January 22, 2003, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, and the Bank of New York, as Master Trust Trustee. Filed as Exhibit 10.72 to Navistar Financial Corporation’s Form 10-Q for the period ended January 31, 2005, which was dated and filed April 19, 2005. Commission File No. 001-04146.
10.12	Certificate Purchase Agreement, dated as of January 28, 2000, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Receivables Capital Corporation, as the Conduit Purchaser and Bank of America, National Association, as Administrative Agent for the Purchasers, and as a Committed Purchaser. Filed as Exhibit 1.1 to Navistar Financial Securities Corporation’s Form 8-K dated and filed February 24, 2000. Commission File No. 033-87374.
10.13	Extension to the Certificate Purchase Agreement, dated as of January 25, 2001, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Receivables Capital Corporation, as the Conduit Purchaser and Bank of America, National Association, as a Committed Purchaser. Filed as Exhibit 10.106 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.14	Extension and Amendment to the Certificate Purchase Agreement, dated as of January 23, 2002, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Receivables Capital Corporation, as the Conduit Purchaser and Bank of America, National Association, as a Committed Purchaser. Filed as Exhibit 10.107 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.15	First Amendment to the Certificate Purchase Agreement, dated as of January 27, 2003, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Receivables Capital Corporation, as the Conduit Purchaser and Bank of America, National Association, as Administrative Agent for the Purchasers and as a Committed Purchaser. Filed as Exhibit 10.108 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.16	Amended and Restated Certificate Purchase Agreement, dated as of December 27, 2004, among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Kitty Hawk Funding Corporation, as a Conduit Purchaser, Liberty Street Funding Corp., as a Conduit Purchaser, Bank of America, National Association, as Administrative Agent for the Purchasers, a Managing Agent, and as a Committed Purchaser and the Bank of Nova Scotia, as a Committed Purchaser and as a Managing Agent. Filed as Exhibit 10.73 to Navistar Financial Corporation’s Form 10-Q for the period ended January 31, 2005, which was dated and filed April 19, 2005. Commission File No. 001-04146.
10.17	Extension to Amended and Restated Certificate Purchase Agreement, dated as of December 19, 2005, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Kitty Hawk Funding Corporation, as a Conduit Purchaser, Liberty Street Funding Corporation, as a Conduit Purchaser, Bank of America, National Association, as Administrative Agent for the Purchasers and as a Managing Agent and as a Committed Purchaser and the Bank of Nova Scotia, as a Committed Purchaser and as a Managing Agent. Filed as Exhibit 10.109 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.

E-19

10.18	Amendment dated October 31, 2006 to the Amended and Restated Certificate Purchase Agreement, dated as of December 27, 2004, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Kitty Hawk Funding Corporation, as a Conduit Purchaser, Bank of America, National Association, as Administrative Agent for the Purchasers and as a Managing Agent and as a Committed Purchaser and the Bank of Nova Scotia, as a Committed Purchaser and as a Managing Agent. Filed as Exhibit 10.132 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.19	Amendment, Wavier and Extension dated March 24, 2006 to the Amended and Restated Certificate Purchase Agreement, dated as of December 27, 2004, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Kitty Hawk Funding Corporation, as a Conduit Purchaser, Liberty Street Funding Corporation, as a Conduit Purchaser, Bank of America, National Association, as Administrative Agent for the Purchasers and as a Managing Agent and as a Committed Purchaser and the Bank of Nova Scotia, as a Committed Purchaser and as a Managing Agent. Filed as Exhibit 10.133 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.20	Amendment, Waiver and Extension to Amended and Restated Certificate Purchase Agreement, dated as of May 26, 2006, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Kitty Hawk Funding Corporation, as a Conduit Purchaser, Liberty Street Funding Corporation, as a Conduit Purchaser, Bank of America, National Association, as Administrative Agent for the Purchasers and as a Managing Agent and as a Committed Purchaser and the Bank of Nova Scotia, as a Committed Purchaser and as a Managing Agent. Filed as Exhibit 10.110 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.21	Amendment, Waiver and Extension to Amended and Restated Certificate Purchase Agreement, dated as of January 31, 2007, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Kitty Hawk Funding Corporation, as a Conduit Purchaser, Liberty Street Funding Corporation, as a Conduit Purchaser, Bank of America, National Association, as Administrative Agent for the Purchasers and as a Managing Agent and as a Committed Purchaser and the Bank of Nova Scotia, as a Committed Purchaser and as a Managing Agent. Filed as Exhibit 10.111 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.22	Master Owner Trust Agreement dated as of June 10, 2004, between Navistar Financial Securities Corporation, as Seller and Chase Manhattan Bank USA, N.A. as Master Owner Trust Trustee. Filed as Exhibit 4.5 to Navistar Financial Dealer Note Master Owner Trust’s Form 8-K dated June 10, 2004 and filed June 14, 2004. Commission File No. 333-104639-01.
10.23	Indenture, dated as of June 10, 2004, between Navistar Financial Dealer Notes Master Owner Trust, as Issuer and the Bank of New York, as Indenture Trustee. Filed as Exhibit 4.2 to Navistar Financial Dealer Note Master Owner Trust’s Form 8-K dated June 10, 2004 and filed June 14, 2004. Commission File No. 333-104639-01.
10.24	Series 2005-1 Indenture Supplement to the Indenture, dated as of February 28, 2005, between Navistar Financial Dealer Note Master Owner Trust, as Issuer, and The Bank of New York, as Indenture Trustee. Filed as Exhibit 4.1 to Navistar Financial Dealer Note Master Owner Trust’s Form 8-K dated March 3, 2005 and filed March 4, 2005. Commission File No. 333-104639-01.
10.25	Receivables Purchase Agreement, dated as of April 8, 2004, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, Bank One, NA, as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.112 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.

E-20

10.26	Amendment No. 1 to Receivables Purchase Agreement, dated as of March 31, 2005, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, Bank One, NA, as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.123 to Navistar Financial Corporation’s Form 10-K dated and December 10, 2007. Commission File No. 001-04146.
10.27	Amendment No. 2 to Receivables Purchase Agreement, dated as of August 14, 2005, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, Bank One, NA, as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.124 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.28	Amendment No. 3 to Receivables Purchase Agreement, dated as of August 11, 2006, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, Bank One, NA, as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.125 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.29	Amendment No. 4 to Receivables Purchase Agreement, dated as of August 10, 2007, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (as successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.128 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.30	Amendment No. 5 to Receivables Purchase Agreement, dated as of August 15, 2007, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (as successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.135 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.31	Waiver No. 1 to Receivables Purchase Agreement, dated as of January 28, 2005, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, Bank One, NA, as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.114 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.32	Waiver No. 2 to Receivables Purchase Agreement, dated as of March 14, 2005, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, Bank One, NA, as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.115 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.33	Waiver No. 3 to Receivables Purchase Agreement, dated as of April 14, 2005, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.116 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.34	Waiver No. 4 to Receivables Purchase Agreement, dated as of July 20, 2005, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.117 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.35	Waiver No. 5 to Receivables Purchase Agreement, dated as of January 17, 2006, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.118 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.

E-21

10.36	Waiver No. 6 to Receivables Purchase Agreement, dated as of March 21, 2006, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.119 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.37	Waiver No. 7 to Receivables Purchase Agreement, dated as of January 31, 2007, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.120 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.38	Receivables Sale Agreement, dated as of April 8, 2004, between Navistar Financial Corporation, as Transferor, and Truck Retail Accounts Corporation, as Transferee. Filed as Exhibit 10.113 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.39	Waiver No. 1 to Receivables Sale Agreement, dated as of March 21, 2006, between Navistar Financial Corporation, as Transferor, and Truck Retail Accounts Corporation, as Transferee. Filed as Exhibit 10.121 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.40	Waiver No. 2 to Receivables Sale Agreement, dated as of January 31, 2007, between Navistar Financial Corporation, as Transferor, and Truck Retail Accounts Corporation, as Transferee. Filed as Exhibit 10.122 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
*10.41	Navistar International Corporation 1988 Non-Employee Director Stock Option Plan amended as of March 20, 1996. Filed as Exhibit 10.19 to Form 10-K for the period ended October 31, 1997, which was dated and filed December 22, 1997. Commission File No. 001-09618.
*10.42	Navistar International Corporation 1994 Performance Incentive Plan, as amended. Filed as Exhibit 10.31 to Form 10-Q for the period ended January 31, 2002, which was dated and filed March 11, 2002. Commission File No. 001-09618.
*10.43	Navistar International Corporation 1998 Supplemental Stock Plan, as amended and supplemented by the Restoration Stock Option Program. Filed as Exhibit 10.32 to Form 10-Q for the period ended January 31, 2002, which was dated and filed March 11, 2002 Commission File No. 1-9618.
*10.44	Navistar International Corporation Amended and Restated Executive Stock Ownership Program dated September 1, 2004. Filed as Exhibited 99.1 to Form 8-K dated and filed August 31, 2004. Commission File No. 1-9618.
*10.45	Board of Directors resolution amending the 1994 Performance Incentive Plan, the 1998 Supplemental Stock Plan and the 1998 Non-Employee Director Stock Option Plan to prohibit the repricing and discounting of options. Filed as Exhibit 10.36 to Form 10-K for the period ended October 31, 2003, which was dated December 18, 2003 and filed December 19, 2003. Commission File No. 001-09618.
*10.46	Board of Directors resolution terminating the 1998 Non-Employee Directors Plan. Filed as Exhibit 10.39 to Form 10-Q for the period ended April 30, 2004, which was dated and filed June 9, 2004. Commission File No. 001-09618.
*10.47	Navistar International Corporation’s offer of employment to William Caton, a new executive officer of Navistar, which contains the terms and conditions of certain compensation awards. Filed as Exhibit 10.1 to Form 8-K dated and filed October 4, 2005. Commission File No. 001-09618.
*10.48	Navistar International Corporation Non-Employee Director’s Deferred Fee Plan, as amended and restated January 1, 2005. Filed as Exhibit 10.65 to Form 8-K dated and filed December 16, 2005. Commission File No. 001-09618.

E-22

10.49	Credit Agreement dated February 22, 2006 among Navistar International Corporation, as Borrower, the Subsidiary Guarantors party thereto, the Lenders party thereto, Credit Suisse, as administrative agent for the Lenders, and the other Agents party thereto. Filed as Exhibit 99(B)(1) to Form SC TO-I filed February 24, 2006. Commission File No. 005-39182. PLEASE NOTE THIS CREDIT AGREEMENT IS NO LONGER IN EFFECT AND HAS BEEN REFINANCED WITH THE CREDIT AGREEMENT REFERENCE IN 10.52 BELOW.
10.50	Amendment No 1. dated August 2, 2006 to that certain Credit Agreement dated February 22, 2006 among Navistar International CORPORATION, as Borrower, the Subsidiary Guarantors party thereto, the Lenders party thereto, Credit Suisse, as administrative agent for the Lenders, and the other Agents party thereto. Filed as Exhibit 99(B)(2) to Form SC TO-I/A filed August 3, 2006. Commission File No. 005-39182. PLEASE NOTE THIS CREDIT AGREEMENT IS NO LONGER IN EFFECT AND HAS BEEN REFINANCED WITH THE CREDIT AGREEMENT REFERENCE IN 10.52 BELOW.
*10.51	Compensation Committee of the Board of Directors resolutions approving the Annual Incentive Plan Criteria for 2007 for named executive officers. Filed as Exhibit 10.57 to Form 8-K dated and filed October 24, 2006. Commission File No. 001-09618.
10.52	Credit Agreement dated January 19, 2007 among Navistar International Corporation, as Borrower, the Subsidiary Guarantors party thereto, the Lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent for the Lenders, and the other Agents party thereto. Filed as Exhibit 10.59 to Form 8-K/A dated and filed January 25, 2007. Commission File No. 001-09618.
*10.53	Board of Directors resolution approving an amended to Navistar International Corporation’s Amended and Restated Executive Stock Ownership Program dated September 1, 2004 to toll the time period in which a participant has for meeting the stock ownership requirements of, and ability to earn premium shares under, the program. Filed as Exhibit 10.68 to Form 8-K dated and filed February 26, 2007. Commission File No. 001-09618.
*10.54 &10.55	Compensation Committee and Board of Directors resolutions approving certain technical amendments to Navistar’s 1994 Performance Incentive Plan, 1998 Supplemental Stock Plan, 1998 Interim Stock Plan, 1998 Non-Employee Directors Stock Option Plan and 2004 Performance Incentive Plan. Filed as Exhibits 10.69 and 10.70 to Form 8-K dated and filed April 20, 2007. Commission File No. 001-09618.
*10.56 &10.57	Compensation Committee and Board of Directors resolutions approving certain change of control amendments to Navistar’s 2004 Performance Incentive Plan, 1998 Non-Employee Directors Stock Option Plan, 1988 Non-Employee Directors Stock Option Plan, 1994 Performance Incentive Plan, 1998 Supplemental Stock Plan and 1998 Interim Stock Plan. Filed as Exhibits 10.72 and 10.73 to Form 8-K dated and filed June 22, 2007. Commission File No. 001-09618.
10.58	Amended and Restated Credit Agreement dated July 1, 2005 among Navistar Financial Corporation, Arrendadora Financiera Navistar, S.A. De C.V., Servicios Financieros Navistar, S.A. De C.V. and Navistar Comercial, S.A. De C.V., as Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., as the Syndication Agent, the Bank of Nova Scotia, as Documentation Agent, J.P Morgan Securities Inc. and Banc of America Securities, LLC, as Joint Book Managers and Joint Lead Arrangers and the lenders party thereto. Filed as Exhibit 10.01 to Navistar Financial Corporation’s Form 8-K dated and filed September 1, 2005. Commission File No. 001-04146.
10.59	Amended and Restated Security, Pledge and Trust Agreement dated as of July 1, 2005, between Navistar Financial Corporation and Deutsche Bank Trust Company Americas, as Trustee, pursuant to the terms of the Credit Agreement. Filed as Exhibit 10.02 to Navistar Financial Corporation’s Form 8-K dated and filed July 1, 2005. Commission File No. 001-04146.

E-23

10.60	First Waiver and Consent dated January 17, 2006 to Amended and Restated Credit Agreement dated July 1, 2005 among Arrendadora Financiera Navistar, S.A. De C.V., Organizacion Auxiliar del Credito, Servicios Financieros Navistar, S.A. De C.V., Sociedad Financiera De Objecto Limitado, Navistar Comercial, S.A. De C.V., the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent and The Bank of Nova Scotia, as documentation agent. Filed as Exhibit 99.1 to Navistar Financial Corporation’s Form 8-K dated and filed March 8, 2006. Commission File No. 001-04146.
10.61	Second Waiver and Consent dated March 2, 2006 to Amended and Restated Credit Agreement dated July 1, 2005 among Arrendadora Financiera Navistar, S.A. De C.V., Organizacion Auxiliar del Credito, Servicios Financieros Navistar, S.A. De C.V., Sociedad Financiera De Objecto Limitado, Navistar Comercial, S.A. De C.V., the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent and The Bank of Nova Scotia, as documentation agent. Filed as Exhibit 99.2 to Navistar Financial Corporation’s Form 8-K dated and filed March 8, 2006. Commission File No. 001-04146.
10.62	Third Waiver and Consent dated November 16, 2006 to Amended and Restated Credit Agreement dated July 1, 2005 among Arrendadora Financiera Navistar, S.A. De C.V., Organizacion Auxiliar del Credito, Servicios Financieros Navistar, S.A. De C.V., Sociedad Financiera De Objecto Limitado, Navistar Comercial, S.A. De C.V., the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent and The Bank of Nova Scotia, as documentation agent. Filed as Exhibit 10.1 to Navistar Financial Corporation’s Form 8-K dated and filed November 20, 2006. Commission File No. 001-04146.
10.63	First Amendment dated March 28, 2007 to Amended and Restated Credit Agreement dated July 1, 2005 among Arrendadora Financiera Navistar, S.A. De C.V., Organizacion Auxiliar del Credito, Servicios Financieros Navistar, S.A. De C.V., Sociedad Financiera De Objecto Limitado, Navistar Comercial, S.A. De C.V., the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent and The Bank of Nova Scotia, as documentation agent. Filed as Exhibit 10.1 to Navistar Financial Corporation’s Form 8-K dated March 28, 2007 and filed April 3, 2007. Commission File No. 001-04146.
10.64	ABL Credit Agreement dated June 15, 2007 among International Truck and Engine Corporation and four of its other manufacturing subsidiaries, namely, IC Corporation, IC of Oklahoma, LLC, SST Truck Company LP and International Diesel of Alabama, LLC, the lenders thereto, Credit Suisse, as administrative agent, Bank of America, N.A., as collateral agent, Banc of America Securities LLC and JPMorgan Chase Bank, N.A., as co-syndication agents, General Electric Capital Corporation and Wachovia Capital Finance Corporation (Central), as co-documentation agents, Credit Suisse Securities (USA) LLC, Banc of America Securities LLC and J.P. Morgan Securities Inc. as joint lead bookrunners, and Credit Suisse Securities (USA) LLC and Banc of America Securities LLC, as joint lead arrangers. Filed as Exhibit 10.71 to Form 8-K dated and filed June 19, 2007. Commission File No. 001-09618.
10.65	Second Amendment and Fourth Waiver dated October 23, 2007 to Amended and Restated Credit Agreement dated July 1, 2005 among Arrendadora Financiera Navistar, S.A. De C.V., Organizacion Auxiliar del Credito, Servicios Financieros Navistar, S.A. De C.V., Sociedad Financiera De Objecto Limitado, Navistar Comercial, S.A. De C.V., the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent and The Bank of Nova Scotia, as documentation agent. Filed as Exhibit 10.1 to Navistar Financial Corporation’s Form 8-K dated and filed October 23, 2007. Commission File No. 001-04146.

E-24

*10.66	Compensation Committee of the Board of Directors resolution recommending the appointment of Mr. William A. Caton as Executive Vice President and Chief Financial Officer of Navistar, increasing his annual base salary by $95,000 to $625,000, authorizing the award of a discretionary cash bonus in an amount not to exceed $200,000 and providing Mr. Caton certain other benefits commensurate with his Chief Financial Officer position. Filed as Exhibit 10.101 to Form 10-K for the period ended October 31, 2005, which was dated December 7, 2007 and filed December 10, 2007. Commission File No. 001-09618.
*10.67	Board of Directors resolutions (i) providing for a cash payment in the amount of $43,200 to each non-employee director in lieu of the 2006 annual grant to each director of 4,000 shares of company common stock as part of the company’s overall director compensation, (ii) suspending the requirement that each director receive at least one-fourth of their annual retainer in the form of restricted stock during such period in which Regulation BTR applies (accordingly, each director will receive the entire annual retainer of $60,000 in four equal quarterly cash payments) and (iii) suspending for calendar year 2007 each director’s ability to elect to receive stock in lieu of a cash payment in accordance with the Non-Employee Directors Deferred Fee Plan. Filed as Exhibit 10.102 to Form 10-K for the period ended October 31, 2005, which was dated December 7, 2007 and filed December 10, 2007. Commission File No. 001-09618.
*10.68	Agreement between Navistar International Corporation and Mr. John Correnti (a director of Navistar) to cancel the extension of the expiration date of an option to purchase 2,000 shares of Navistar Common Stock as previously disclosed on Form 8-K dated October 23, 2006. Please refer to Navistar’s Form 8-K dated and filed April 20, 2007 for more information on this subject. Commission File No. 001-09618. Filed as Exhibit 10.103 to Form 10-K for the period ended October 31, 2005, which was dated December 7, 2007 and filed December 10, 2007. Commission File No. 001-09618.
10.69	Amended and Restated Parents’ Side Agreement dated July 1, 2005 among Navistar International Corporation and JPMorgan Chase Bank, N.A., as Administrative Agent for the lenders indicated therein in respect of Navistar Financial Corporation’s Amended and Restated Credit Agreement dated July 1, 2005. Filed as Exhibit 10.104 to Form 10-K for the period ended October 31, 2005, which was dated December 7, 2007 and filed December 10, 2007. Commission File No. 001-09618.
10.70	Amended and Restated Parent Guarantee dated July 1, 2005 among Navistar International Corporation and JPMorgan Chase Bank, N.A., as Administrative Agent for the lenders indicated therein in respect of Navistar Financial Corporation’s Amended and Restated Credit Agreement dated July 1, 2005. Filed as Exhibit 10.105 to Form 10-K for the period ended October 31, 2005, which was dated December 7, 2007 and filed December 10, 2007. Commission File No. 001-09618.
*10.71	Compensation Committee of the Board of Directors resolutions approving the Annual Incentive Plan Criteria for 2008 for named executive officers. Filed as Exhibit 10.106 to Form 8-K dated and filed December 14, 2007. Commission File No. 001-09618.
*10.72	Form of revised Executive Severance Agreement which is executed with all executive officers dated December 31, 2007. Filed as Exhibit 10.107 to Form 8-K dated and filed December 14, 2007. Commission File No. 001-09618.
10.73	Fifth Waiver dated November 28, 2007 to Amended and Restated Credit Agreement dated July 1, 2005 among Arrendadora Financiera Navistar, S.A. De C.V., Organizacion Auxiliar del Credito, Servicios Financieros Navistar, S.A. De C.V., Sociedad Financiera De Objecto Limitado, Navistar Comercial, S.A. De C.V., the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent and The Bank of Nova Scotia, as documentation agent. Filed as Exhibit 10.1 to Navistar Financial Corporation’s Form 8-K dated and filed December 14, 2007. Commission File No. 001-04146.

E-25

10.74	Amendment, Waiver and Extension dated December 7, 2007 to the Amended and Restated Certificate Purchase Agreement, dated as of December 27, 2004, by and among Navistar Financial Corporation, as Servicer, Navistar Financial Securities Corporation, as Seller, Kitty Hawk Funding Corporation, as a Conduit Purchaser, Liberty Street Funding LLC (f/k/a Liberty Street Funding Corporation), as a Conduit Purchaser, Bank of America, National Association, as Administrative Agent for the Purchasers and as a Managing Agent and as a Committed Purchaser and the Bank of Nova Scotia, as a Committed Purchaser and as a Managing Agent. Filed as Exhibit 10.6 to Navistar Financial Corporation’s Form 8-K dated and filed December 14, 2007. Commission File No. 001-04146.
10.75	Wavier No. 3 dated October 23, 2007 to the Receivables Sale Agreement dated as of April 8, 2004, between Navistar Financial Corporation, as Transferor, and Truck Retail Accounts Corporation, as Transferee. Filed as Exhibit 10.151 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.76	Waiver No. 8 dated October 23, 2007 to Receivables Purchase Agreement, dated as of April 8, 2004, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.150 to Navistar Financial Corporation’s Form 10-K dated and filed December 10, 2007. Commission File No. 001-04146.
10.77	Wavier No. 4 dated November 28, 2007 to the Receivables Sale Agreement dated as of April 8, 2004, between Navistar Financial Corporation, as Transferor, and Truck Retail Accounts Corporation, as Transferee. Filed as Exhibit 10.11 to Navistar Financial Corporation’s Form 8-K dated and filed December 14, 2007. Commission File No. 001-04146.
10.78	Waiver No. 9 dated November 28, 2007 to Receivables Purchase Agreement, dated as of April 8, 2004, among Truck Retail Accounts Corporation, as Seller, Navistar Financial Corporation, as Servicer, JP Morgan Chase Bank, N.A. (successor by merger to Bank One, NA), as Agent, and Jupiter Securitization Corporation, as Conduit. Filed as Exhibit 10.11 to Navistar Financial Corporation’s Form 8-K dated and filed December 14, 2007. Commission File No. 001-04146
*10.79	Form of Indemnification Agreement which is executed with all non-employee directors dated December 11, 2007. Filed as Exhibit 10.93 to Form 10-K for the period ended October 31, 2007, which was dated and filed May 29, 2008. Commission File No. 001-09618.
*10.80	Board of Directors resolution approving an additional retainer for the lead director of the Board of Directors. Filed as Exhibit 10.94 to Form 10-K for the period ended October 31, 2007, which was dated and filed May 29, 2008. Commission File No. 001-09618.
*10.81	Compensation Committee and Board of Directors approval of 2008 long term emergence incentive grants to non-employee directors and named executive officers. Filed as Exhibit 10.95 to Form 10-Q for the period ended April 30, 2008, which was dated and filed June 27, 2008. Commission File No. 001-09618.
	The following documents of Navistar International Corporation, its principal subsidiary Navistar, Inc., and its indirect subsidiary Navistar Financial Corporation are filed herewith:
*10.82	Navistar, Inc. Supplemental Executive Retirement Plan, as amended and restated effective as of January 1, 2005 (including amendment through July 31, 2008).
*10.83	Navistar, Inc. Managerial Retirement Objective Plan, as amended and restated effective as of January 1, 2005 (including amendments through July 31, 2008).
*10.84	Navistar Financial Corporation Managerial Retirement Objective Plan, as amended and restated effective as of January 1, 2005 (including amendments through July 31, 2008).

E-26

*10.85	Navistar, Inc. Supplemental Retirement Accumulation Plan, effective as of January 1, 2005 (including amendments through July 31, 2008).
*10.86	Navistar International Corporation 2004 Performance Incentive Plan, as amended and restated as of May 27, 2008.
*10.87	Form of Incentive Stock Option Award Agreement.
*10.88	Form of Supplement to Incentive Stock Option Award Agreement.
*10.89	Form of Non-Qualified Stock Option Award Agreement.
*10.90	Form of Supplement to Non-Qualified Stock Option Award Agreement.
*10.91	Form of Restoration Stock Option Award Agreement.
*10.92	Form of Supplement to Restoration Stock Option Award Agreement.
*10.93	Form of Non-Employee Director Stock Option Award Agreement.
*10.94	Form of Supplement to Non-Employee Director Stock Option Award Agreement.
*10.95	Form of Restricted Stock Award Agreement.
*10.96	Form of Premium Share Unit Certificate.
*10.97	Form of Deferred Share Unit Certificate.
*10.98	Board of Directors resolution amending the 1998 Non-Employee Director Stock Option Plan to permit net settlement of shares.
*10.99	Compensation Committee resolutions amending the Navistar’s 1994 Performance Incentive Plan, 1998 Interim Stock Plan, 1998 Supplemental Stock Plan, 2004 Performance Incentive Plan and the 1998 Non-Employee Director Stock Option Plan, to permit net settlement of shares.
*10.100	Amendment No. 1 to William A. Caton’s Executive Severance Agreement.
*10.101	Form of Restricted Stock Unit Award Agreement.

* Indicates a management contract or compensatory plan or arrangement required to be filed or incorporated by reference as an exhibit to this report.

E-27

EXHIBIT 10.82

NAVISTAR, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

As Amended and Restated Effective as of January 1, 2005

(including amendments through July 31, 2008)

E-28

TABLE OF CONTENTS

		Page
Section 1    Plan Name and Definitions		E-31
1.1	Plan Name	E-31
1.2	Annual Compensation	E-31
1.3	Actual Retirement Date	E-31
1.4	Board	E-31
1.5	Code	E-32
1.6	Committee	E-32
1.7	Company	E-32
1.8	Credited Service	E-32
1.9	Early Retirement Date	E-32
1.10	Employee	E-32
1.11	Final Average Compensation	E-32
1.12	Grandfathered Amount	E-32
1.13	Managerial Objective Plan	E-33
1.14	Non-Grandfathered Amount	E-33
1.15	Normal Retirement Date	E-33
1.16	Participant	E-33
1.17	Participating Company	E-33
1.18	Retire or Retires or Retired	E-33
1.19	RPSE	E-33
1.20	Social Security Benefit	E-33
1.21	Specified Employee	E-33
1.22	Vacation Service	E-33
Section 2    Eligibility for Participation		E-34
Section 3    Retirement Dates and Conditions		E-34
3.1	Normal Retirement	E-34
3.2	Early Retirement	E-34
3.3	Disability Retirement	E-34
Section 4    Amount and Payment of Benefits		E-35
4.1	Normal Retirement Benefit	E-35
4.2	Early Retirement Benefit	E-36
4.3	Disability Retirement Benefit	E-36
4.4	Survivor Benefit – Before Retirement	E-36
4.5	Survivor Benefit – After Retirement	E-36
4.6	Form of Benefit Payments	E-36
4.7	Time of Benefit Payments	E-36
4.8	Benefits Unfunded	E-37
4.9	Tax Withholding	E-37
4.10	Errors in Distributions	E-37
Section 5    Administration		E-37
5.1	Duties of Committee	E-37
5.2	Finality of Decisions	E-37
Section 6    Amendment and Termination		E-38
6.1	Amendment and Termination	E-38
6.2	Contractual Obligation	E-38

E-29

TABLE OF CONTENTS

(Continued)

		Page
Section 7    Miscellaneous		E-38
7.1	No Employment Rights	E-38
7.2	Assignment	E-38
7.3	Applicable Law	E-38
7.4	Facility of Payment; Missing Persons	E-38
7.5	Validity	E-39
7.6	Claims Procedure	E-39
7.7	Responsibility For Legal Effect	E-39
Section 8    Involuntary Termination		E-39
Section 9    Change in Control		E-40

E-30

NAVISTAR, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

As Amended and Restated Effective As of January 1, 2005,

(including amendments through July 31, 2008)

Introduction

The Plan and Its Effective Date

Navistar, Inc. (named International Truck and Engine Corporation immediately prior to February 27, 2008 and formerly named Navistar International Transportation Corp. immediately prior to February 23, 2000) maintains the Supplemental Executive Retirement Plan, which was established effective November 1, 1985 for the benefit of its eligible employees. The Plan has been amended from time to time thereafter. The provisions of this document shall be applicable to Employees, as hereinafter defined, who retire or otherwise terminate employment on or after January 1, 2005. With regard to employees who retired or otherwise terminated employment with the Company prior to such date, the provisions of the Plan as in effect at the time of such retirement or termination shall apply.

Compliance with Code Section 409A

The Plan is designed to comply in all respects with Code Section 409A. Accordingly, the Plan is hereby amended and restated, effective as of January 1, 2005, to conform to the requirements of Code Section 409A, and final Treasury regulations issued thereunder, with respect to any Non-Grandfathered Amount, as hereinafter defined, under the Plan. Notwithstanding the foregoing or any other provision of the Plan to the contrary, prior to January 1, 2009, it is intended that the Plan be construed and administered with respect to any Non-Grandfathered Amount both pursuant to and in accordance with a good faith interpretation of Code Section 409A and in a manner consistent with published guidance and other applicable authorities promulgated thereunder. Treatment of any Non-Grandfathered Amount under the Plan pursuant to and in accordance with any transition rules provided under such published guidance and other applicable authorities shall be expressly authorized hereunder and shall be administered in accordance with procedures established by the Committee, as hereinafter defined.

Section 1

Plan Name and Definitions

1.1 Plan Name. This plan, as may be amended from time to time, shall be known as the Navistar, Inc. Supplemental Executive Retirement Plan (known as the International Truck and Engine Corporation Supplemental Executive Retirement Plan immediately prior to February 27, 2008 and formerly known as the Navistar International Transportation Corp. Supplement Executive Retirement Plan immediately prior to February 23, 2000), hereinafter referred to as the “Plan.” Notwithstanding the foregoing, to the extent (and only to the extent) required under Code Section 409A with respect to a Participant’s Non-Grandfathered Amount, the term “Plan” shall also mean any other plan with which the Plan is required to be aggregated under Code Section 409A. This Plan is intended to constitute a non-account balance plan, as defined in Treasury regulation §1.409A-1(c)(2)(i)(c).

1.2 “Annual Compensation” shall mean the Participant’s annual base salary plus incentive compensation, as used for purposes of determining “Final Average Compensation” under the Managerial Retirement Objective Plan.

1.3 “Actual Retirement Date” shall mean the first day of the month coincident with or next following the date on which a Participant actually Retires.

1.4 “Board” shall mean the Board of Directors of Navistar International Corporation, the parent corporation of the Company, and each successor thereto.

E-31

1.5 “Code” shall mean the Internal Revenue Code of 1986, as amended, including any applicable regulations, authorities, or such other guidance of general applicability promulgated thereunder.

1.6 “Committee” shall mean the Compensation Committee of the Board (formerly named the Committee on Compensation and Governance), or any successor committee thereto. To the extent the Committee considers necessary and advisable to properly carry out the administration of the Plan, it shall have discretionary authority to employ and rely upon information and opinions of agents, attorneys, accountants or other persons (who also may be employed by the Company) and to delegate to them any or all of the powers, rights and duties conferred on the Committee under the Plan. Any reference in the Plan to the term “Committee” with respect to any such delegation of powers, rights, and duties shall be deemed a reference to the Committee’s respective delegate.

1.7 “Company” shall mean Navistar, Inc. (named International Truck and Engine Corporation immediately prior to February 27, 2008 and formerly named Navistar International Transportation Corp. immediately prior to February 23, 2000) and any entity succeeding to its business which shall acquire its rights and assume its obligations under the Plan and, to the extent not specifically provided in the Plan, includes any Participating Company for purposes of Sections 1.22, 3, 4, 7.1, 7.4, 7.5, and 7.7; provided that, to the extent (and only to the extent) required under Code Section 409A with respect to any Non-Grandfathered Amount, the term “Company” shall mean the entity for whom the Participant performs services and with respect to whom the legally binding right to payments under the Plan arises, and all entities with whom such entity would be considered a single employer under Code Section 414(b) or 414(c).

1.8 “Credited Service” shall mean Credited Service as used for purposes of the Managerial Retirement Objective Plan.

1.9 “Early Retirement Date” shall mean the first day of the month prior to the Participant’s Normal Retirement Date and coincident with or next following a Participant’s attainment of age 55 and completion of 5 years of Credited Service.

1.10 “Employee” shall mean any person employed full time by the Company or a Participating Company.

1.11 “Final Average Compensation” shall mean the Participant’s Annual Compensation in the highest consecutive 60-month period during the 120-month period prior to his/her Actual Retirement Date, as used for purposes of the Managerial Retirement Objective Plan; provided, however, that with regard to a Participant who, as of January 1, 1990, has both attained age 55 and completed 5 years of Credited Service, “Final Average Compensation” shall never be less than the Participant’s Annual Compensation in the highest consecutive 36-month period during the 60-month period prior to January 1, 1990, as used for purposes of the Managerial Retirement Objective Plan.

1.12 “Grandfathered Amount” shall mean, with respect to each Participant, the present value of the benefits, if any, to which he/she would have been entitled under the Plan if he/she voluntarily terminated services without cause on December 31, 2004 and received a payment of such benefits on the earliest possible date allowed under the Plan to receive a payment of such benefits following termination of services, and received such benefits in the form with the maximum value, each determined by reference to the terms of the Plan in effect as of October 3, 2004, but only to the extent such Plan terms have not been materially modified (within the meaning of Treasury Regulation §1.409A-6(a)(4)) after October 3, 2004. Notwithstanding the foregoing, for any subsequent taxable year of the Participant, the Grandfathered Amount may increase to (a) equal the present value of the benefits the Participant actually becomes entitled to, in the form and at the time actually paid, determined under the terms of the Plan, as in effect on October 3, 2004, without regard to any further services rendered by the Participant after December 31, 2004, or any other events affecting the amount of or the entitlement to such benefits (other than a Participant election with respect to the time or form of an available benefit, if applicable), and (b) include any earnings (within the meaning of Treasury Regulation §1.409A-6(a)(4)) attributable thereto due solely to the passage of time; provided that in no event shall the Participant’s Grandfathered Amount exceed

E-32

the present value of the benefits to which he would have been entitled under the Plan. For purposes of calculating the present value of each Participant’s Grandfathered Amount, if any, reasonable actuarial assumptions and methods shall be used. Whether actuarial assumptions and methods are reasonable for this purpose shall be determined as of each date the Participant’s benefits are valued for purposes of determining the Grandfathered Amount; provided that any reasonable actuarial assumptions and methods that were used by the Company with respect to such benefits as of December 31, 2004 will continue to be treated as reasonable assumptions and methods for this purpose; provided further that actuarial assumptions and methods shall be presumed reasonable if they are the same as those used to value benefits under the RPSE (or such other a “qualified” plan sponsored by the Company the benefits under which are part of the benefit formula under, or otherwise impact the amount of a Participant’s benefits under, the Plan).

1.13 “Managerial Objective Plan” shall mean the Company’s Managerial Retirement Objective Plan or the Navistar Financial Corporation Managerial Retirement Objective Plan, whichever is applicable, as may be amended from time to time.

1.14 “Non-Grandfathered Amount” shall mean, with respect to each Participant, the present value of the benefits to which he/she is entitled under the Plan less any portion of such benefits constituting his/her Grandfathered Amount.

1.15 “Normal Retirement Date” shall mean the first day of the month coincident with or next following a Participant’s attainment of age 65 and completion of 5 years of Credited Service.

1.16 “Participant” shall mean any Employee who participates in the Plan as provided in Section 2, and further, the term Participant shall be deemed to include any Employee who has Retired under the Plan.

1.17 “Participating Company” shall mean any corporation which is a member of the group of corporations under common control with the Company and which elects to be included under the Plan with the consent of the Company, and each successor thereto.

1.18 “Retire” or “Retires” or “Retired” shall mean an Eligible Employee’s termination of employment with the Company and all of its affiliates (other than by reason of death) on or after his/her Normal Retirement Date, Early Retirement Date, or Disability Retirement Date, whichever is applicable; provided that with respect to a Participant’s Non-Grandfathered Amount, such Participant’s termination of employment must be deemed a “separation from service” within the meaning of Treasury Regulation §1.409A-1(h) (using a percentage of 80% to determine the controlled group of corporations and businesses under common control).

1.19 “RPSE” shall mean the Company’s Retirement Plan for Salaried Employees (named the International Truck and Engine Corporation Retirement Plan for Salaried Employees immediately prior to February 27, 2008 and formerly named the Navistar International Transportation Corp. Retirement Plan for Salaried Employees immediately prior to February 23, 2000) or the Navistar Financial Corporation Retirement Plan for Salaried Employees, whichever is applicable, as may be amended from time to time.

1.20 “Social Security Benefit” shall mean the annual amount of Primary Social Security Benefit payable to the Participant at Actual Retirement Date or earliest commencement date, if later, as used for purposes of the RPSE. It shall also include any amounts (annual) payable to the Participant under the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP) and the Canadian Old Age Security Act, if applicable.

1.21 “Specified Employee” shall mean any Participant who is a “specified employee,” as defined in Treasury Regulation §1.409A-1(i), including any elections described in Treasury Regulation §1.409A-1(i)(2) through (7) made by the Company.

1.22 “Vacation Service” shall mean Company service accumulated from the most recent date of hire by the Company as used for purposes of determining the amount of vacation for which the Employee is eligible under Company policy, as determined by the Company.

E-33

Section 2

Eligibility for Participation

The following Employees shall be eligible for participation in the Plan, effective as of the dates specified herein:

(a) All Employees whose job classification on January 1, 1990 or, if hired subsequent to that date, on the date of hire is in Organization Level 9 or above (or its equivalent under prior or future organization structures) are eligible to participate in the Plan upon attainment of age 55 or, if later, upon such Employee’s date of hire,

(b) All persons who are Employees on or after June 16, 2008 and whose job classification on the date of hire is not Organization Level 9 or above (or its equivalent under prior or future organization structures), but whose job classification due to promotion becomes Organization Level 9 or above (or its equivalent under prior or future organization structures) subsequent to the date of hire, are eligible to participate in the Plan upon attainment of age 55 or, if later, upon the date on which such Employee’s job classification becomes Organization Level 9 or above (or its equivalent under prior or future organization structures) subsequent to the date of hire, or

(c) Such other Employees as the Committee may approve from time to time.

Section 3

Retirement Dates and Conditions

3.1 Normal Retirement

A Participant who reaches his/her Normal Retirement Date while in the employment of the Company may elect to Retire, unless the Committee determines otherwise, and shall be entitled to receive a Normal Retirement Benefit as specified in Section 4.1.

3.2 Early Retirement

A Participant who reaches his/her Early Retirement Date while in the employment of the Company may elect to Retire. In the event of such Early Retirement, the Participant shall be entitled to receive an Early Retirement Benefit as specified in Section 4.2.

3.3 Disability Retirement

(a) A Participant who has completed 5 years of Credited Service and who thereafter while in the employment of the Company is determined to be totally and permanently disabled, as defined in paragraph (b) below, prior to reaching his/her Normal Retirement Date, and who has not elected to Retire under Section 3.2 upon reaching his/her Early Retirement Date, may elect to Retire on his/her Disability Retirement Date and shall be entitled to receive a Disability Retirement Benefit as specified in Section 4.3. A Participant’s “Disability Retirement Date” shall be the later of (1) or (2) below:

(1) the first day of the month following the month in which required evidence of disability is received, except that the notification under subparagraph (b) (2) will be deemed to have been received in the month the Social Security disability award is effective; or

(2) the first day of the month next following the date that is six months after the commencement date of such disability.

(b) A Participant shall be deemed to be “totally and permanently disabled” when:

(1) on the basis of objective medical evidence, it is determined by the Company that he/she is wholly and permanently prevented from engaging in any occupation or employment for wage or profit (except for

E-34

purposes of rehabilitation) as a result of bodily injury or disease, either occupational or non-occupational in cause, but excluding disabilities resulting from service in the armed forces of any country for which he/she receives a military pension, and

(2) notification is received that the Participant is eligible for and receiving disability income benefits under the Federal Social Security Act.

Section 4

Amount and Payment of Benefits

4.1 Normal Retirement Benefit

The monthly Normal Retirement Benefit for a Participant who Retires under Section 3.1 shall be an amount, commencing as of the Participant’s Actual Retirement Date, equal to one-twelfth of the quantity (a) minus (b) minus (c), below:

(a) Final Average Compensation multiplied by the lesser of (1) below or (2) below:

(1) the sum of (i), (ii), (iii) and (iv) below:

(i) 1/2% for each year of age up to age 55; plus

(ii) 1/2% for each year of Credited Service earned prior to age 55; plus

(iii) 1% for each additional year of age beyond age 55; plus

(iv) 1% for each additional year of Credited Service earned after age 55, or

(2) 50%,

(b) 50% of the Participant’s Social Security Benefit (as defined in Section 1.20),

(c) The sum of the annual amounts of the following benefits payable to the Participant under:

(1) the RPSE,

(2) the Managerial Retirement Objective Plan,

(3)(i) any other plan or program of the Company providing defined benefit retirement benefits, including individual special deferred compensation or special retirement benefit arrangements,

(ii)(on an actuarial equivalent basis) the Company’s Retirement Accumulation Plan, to the extent of benefits arising from Company contributions other than salary reduction contributions and matching contributions described in Code Sections 401(k) and 401(m), respectively,

(iii)(on an actuarial equivalent basis) the Company’s 401(k) Retirement Savings Plan, to the extent of benefits arising from Company contributions made on or after January 1, 2005 other than salary reduction contributions and matching contributions described in Code Sections 401(k) and 401(m), respectively, and

(iv) effective January 1, 2005, (on an actuarial equivalent basis) any non-qualified account balance type plan or program of the Company,

(4) any defined benefit pension plan (qualified or non-qualified) of a prior employer, and

(5)(on an actuarial equivalent basis) benefits arising from employer contributions under any defined contribution pension plan (qualified or non-qualified) of a prior employer which is an integral part of its overall retirement program, excluding salary reduction contributions and matching contributions described in Code Sections 401(k) and 401(m), respectively, and other benefit arrangements which in the opinion of the Committee should not be considered.

E-35

4.2 Early Retirement Benefit

The Early Retirement Benefit for a Participant who Retires under Section 3.2 shall be computed as in Section 4.1 based on his/her Annual Compensation and Credited Service up to his/her Actual Retirement Date, and shall be (1) payable in the full, unreduced amount, if his/her Actual Retirement Date is on or after his/her 62^nd birthday, or (2) reduced 1/4% for each month or partial month a Participant’s age at his/her Actual Retirement Date is less than age 62; such reduction shall be applied to the amount determined in Section 4.1(a), prior to the reduction by the amounts in paragraphs (b) and (c) of Section 4.1. For purposes of determining the Social Security Benefit offset under paragraph (b) of Section 4.1, it will be assumed that there are no Social Security earnings after the Actual Retirement Date.

4.3 Disability Retirement Benefit

The Disability Retirement Benefit for a Participant who Retires under Section 3.3 shall be computed as in Section 4.1, based on the Participant’s Annual Compensation and Credited Service up to the Participant’s Disability Retirement Date, without reduction because of commencement of benefit payments before the Participant’s Normal Retirement Date; provided, however, such benefit shall be reduced by the amount of any other benefit the Participant is eligible to receive from the Company’s Salary Continuation program, Long Term Disability program or any other program or arrangement provided by the Company as the result of such disability.

4.4 Survivor Benefit – Before Retirement

The surviving spouse of a Participant who dies after becoming eligible to Retire under Section 3.1 or 3.2, whichever is applicable, but who dies before he/she actually Retires, shall be entitled to receive a monthly Survivor Benefit equal to 55% of the monthly benefit determined in accordance with the provisions of Section 4.1 or 4.2, as applicable, that the Participant would have been entitled to receive had the Participant Retired immediately prior to his/her death. The benefit so determined shall be reduced by the amount of any monthly benefits the surviving spouse is eligible to receive under the Company’s Survivor Income Program. A surviving spouse who was not married to the deceased Participant for at least one year at the date of death shall not be eligible for the benefit under this Section 4.4.

4.5 Survivor Benefit – After Retirement

The surviving spouse of a Participant who dies after the commencement date of his/her monthly benefit under the Plan shall be entitled to receive a monthly Survivor Benefit equal to 55% of the Participant’s monthly Normal, Early or Disability Retirement Benefit as determined under Section 4.1, 4.2, or 4.3, respectively (or deferred vested benefit as determined under Section 9). The benefit so determined shall be payable only to the person who is the Participant’s spouse at the commencement date of his/her monthly benefit under the Plan and, if not married to the deceased Participant for at least one year at the date of his/her death, such surviving spouse shall not be eligible for the benefit under this Section 4.5.

4.6 Form of Benefit Payments

The benefit payable under Section 4.1, 4.2, or 4.3 shall be payable for the life of the Participant. Benefits payable under Section 4.4 or 4.5 shall be payable for the life of the surviving spouse.

4.7 Time of Benefit Payments

The benefits payable under Section 4.1, 4.2, or 4.3 shall be payable in monthly installments commencing on the Participant’s Actual Retirement Date. Such benefits shall cease with the payment made on the first of the month in which the Participant’s death occurs, except to the extent payments after death are provided by the form of benefit which is then in effect. Notwithstanding the foregoing or any other provision of the Plan to the contrary, in the event the Participant is a Specified Employee, no portion of his/her benefits under the Plan that constitutes a Non-Grandfathered Amount shall be paid before the end of the six-month period following the

E-36

Participant’s Actual Retirement Date, except in the event of the Participant’s death before the end of such period; provided that on the first date on which such benefit payments may be paid to the Participant at the end of such six-month period, the Participant shall receive payment of all monthly benefit payments due from his/her Actual Retirement Date, with an appropriate adjustment for interest for delayed payment (computed in a manner consistent with computing interest adjustments for delayed pension payments under the RPSE).

The benefits payable under Section 4.4 or 4.5 shall be payable in monthly installments for the lifetime of the surviving spouse and the timing and amount of such benefit shall determined in the same manner that the corresponding survivor benefit would be determined under the Managerial Retirement Objective Plan (or, in the event the surviving spouse is not eligible to receive such corresponding survivor benefit under the Managerial Retirement Objective Plan, determined as if the surviving spouse was so eligible to receive such survivor benefit).

4.8 Benefits Unfunded

The benefits payable under this Plan shall be paid by the Company each year out of its general assets and shall not be funded in any manner.

4.9 Tax Withholding

To the extent required by law in effect at the time distribution is made from the Plan (or at such earlier date on which any taxes are due, as prescribed by law), the Company shall withhold any taxes required to be withheld by federal, state or local taxing authorities.

4.10 Errors in Distributions

In the event of an error in a distribution, the Participant’s or his/her beneficiary’s benefits under the Plan shall, immediately upon the discovery of such error, be adjusted to reflect such underpayment or overpayment and, if possible, the next distribution shall be adjusted upward or downward, as appropriate, to correct such prior error. If the remaining benefits owed to the Participant or his/her beneficiary is insufficient to cover an erroneous overpayment, the Company may, at its complete and sole discretion, offset other amounts payable to the Participant from the Company or bring a lawsuit or proceeding against the Participant or his/her beneficiary to recoup the amount of any such overpayment and any costs and expenses, including, without limitation, court costs and reasonable attorneys’ fees, incurred by the Plan, the Company, or the Committee, in connection with recouping any such overpayment.

Section 5

Administration

5.1 Duties of Committee

This Plan shall be administered by the Committee in accordance with its terms and purposes. The Committee shall have discretionary authority to construe the terms of the Plan and determine eligibility for and the amount and manner of payment of benefits due to or on behalf of each Participant from this Plan and shall cause them to be paid by the Company accordingly.

5.2 Finality of Decisions

The decisions made by and the actions taken by the Committee in the administration of this Plan shall be final and conclusive on all persons.

E-37

Section 6

Amendment and Termination

6.1 Amendment and Termination

While the Company intends to maintain this Plan for as long as necessary, the Company reserves the right to amend and/or terminate it at any time for whatever reasons it may deem appropriate, except that any such amendment and/or termination shall not reduce the accrued benefit under this Plan for any Participant who has completed 5 years of Credited Service as of the date of such amendment and/or termination.

Supplements may be added to the Plan. Each Supplement will form a part of the Plan, and will modify the terms of the Plan as applied to those employees or groups of employees identified in that Supplement.

6.2 Contractual Obligation

Notwithstanding Section 6.1, the Company hereby makes a contractual commitment to pay the benefits accrued under this Plan to the extent it is financially capable of meeting such obligations.

Section 7

Miscellaneous

7.1 No Employment Rights

Nothing contained in this Plan shall be construed as a contract of employment between the Company and an Employee, or as a right of any Employee to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge any of its Employees, with or without Cause (as defined in Section 9.3).

7.2 Assignment

The benefits payable under this Plan may not be assigned or alienated.

7.3 Applicable Law

This Plan shall be construed and administered in accordance with applicable federal laws and, to the extent not inconsistent therewith or preempted thereby, with the laws of the State of Illinois, determined without regard to the choice of law rules of any jurisdiction. Without limiting the generality and applicability of the foregoing and notwithstanding any provision in the Plan to the contrary, if and to the extent that the payment of any Plan benefits would otherwise violate the requirements of Code Section 409A, such Plan benefits shall be paid under such other conditions determined by the Committee that cause the payment of such benefits to comply with Code Section 409A and the Plan shall be construed and administered accordingly to achieve that objective, and in the event of any inconsistency between the terms of the Plan and Code Section 409A, the terms of Code Section 409A shall prevail and govern.

7.4 Facility of Payment; Missing Persons

When a person entitled to benefits under the Plan is under legal disability, or, in the Committee’s opinion, is in any way incapacitated so as to be unable to manage his/her financial affairs, the Committee may, in its sole discretion, direct payment of benefits to such person’s legal representative or estate, to any person who is judicially appointed or authorized to receive payment of benefits for such person’s benefit, or to a relative or friend of such person for such person’s benefit, or the Committee may direct the application of such benefits for the benefit of such person. Any payment made in accordance with the preceding sentence shall be a full and complete discharge of any liability for such payment under the Plan.

E-38

Neither the Committee nor the Company is required to search for or locate any person entitled to benefits under the Plan. If the Committee attempts to notify a person that he/she is entitled to benefits under the Plan, and such person fails to claim his/her benefits or make his/her whereabouts known to the Committee within a reasonable period of time after the notification is sent to such person, the benefits payable to such person shall be forfeited; provided that such benefits shall be reinstated if the person entitled thereto subsequently makes a claim for the forfeited benefits.

7.5 Validity

If any provision of the Plan is deemed invalid, illegal, or unenforceable by appropriate authority under the law of any jurisdiction applicable to the Plan, the same shall not affect, in any respect whatsoever, the validity, legality, or enforceability of any other provision of the Plan, and the Plan shall continue, to the fullest extent permitted by law, as if such invalid, illegal, or unenforceable provision were omitted and/or modified by such appropriate authority so as to preserve its validity, legality, or enforceability, unless such omission or modification would substantially impair the rights or benefits under the Plan of any affected Participant or beneficiary, the Company, or the Committee.

7.6 Claims Procedure

The Committee will provide notice in writing to any Participant or beneficiary whose claim for benefits under the Plan is denied, and the Committee shall also afford such Participant or beneficiary a full and fair review of its decision if so requested. The Committee has discretionary authority and responsibility to construe and interpret the provisions of the Plan and make factual determinations thereunder, including the power to determine the rights or eligibility of Employees or Participants and any other persons, and the amounts of their benefits under the Plan, and to remedy ambiguities, inconsistencies or omissions. Each such determination by the Committee shall be binding on all parties. Any interpretation of the provisions of the Plan and any decisions on any matter within the discretion of the Committee made in good faith shall be final and binding on all persons. Benefits under the Plan will be paid only if the Committee decides in its discretion that the applicant is entitled to them.

7.7 Responsibility For Legal Effect

No representations or warranties, express or implied, are made by the Company or the Committee and neither the Company nor the Committee assumes any responsibility concerning the legal, tax, or other implications or effects of the Plan.

Section 8

Involuntary Termination

8.1 Except as provided in Section 8.3, an Employee who is otherwise eligible to participate in the Plan except for not having attained the age of 55, whose employment with the Company and all of its affiliates is terminated by the Company for reasons other than “Cause” and whose age plus continuous Vacation Service as of the date of termination total 55 or more shall be eligible to “Grow In” to Early Retirement under Section 3.2 of the Plan, with benefits based on the Plan as in effect on the date of such termination, provided:

(a) the Employee has accrued at least 10 years of Credited Service as of his/her date of retirement,

(b) the Employee does not experience a break in service under the RPSE by reason of retirement under the RPSE, death, voluntary election to break such service or the elapse of a period of time equal to the Employee’s continuous Vacation Service prior to his/her date of retirement, and

(c) the Employee is not rehired by the Company or an affiliated company prior to his/her date of retirement.

E-39

8.2 For purposes of this Section 8, the term “Grow-In” means that a former Employee will be treated for purposes of the Plan as if he/she were on layoff for purposes of the RPSE. Such terminated Employee who, by virtue of aging and/or accruing additional Credited Service in accordance with the provisions of the RPSE subsequent to termination of employment, meets the age, service and other requirements for early retirement under Section 3.2 of the Plan, except for being an Employee of the Company on his/her early retirement date, shall be eligible for Early Retirement Benefits under Section 4.2 of the Plan, shall be deemed to have Retired under Section 3.2 upon such early retirement date, and, with respect to any Non-Grandfathered Amount, shall be deemed to have elected an Actual Retirement Date on the earliest date on which he/she could otherwise have elected to Retire under Section 3.2 of the Plan, unless and to the extent the Employee elects to defer commencement in accordance with the requirements of Code Section 409A.

8.3 Notwithstanding the foregoing, such “Grow-In” shall not apply to an Employee who refuses a reasonable offer of employment from the purchaser of a business or facility unless the Employee had the option to refuse the offer by the terms of the sale agreement or without breaking his/her continuity of service under the applicable Company policy with respect to the particular sale; provided, further, however, that an Employee who is employed by or is offered a reasonable position with such a purchaser, but is not eligible to participate in a plan of the purchaser which is the same as or substantially comparable to the RPSE and which plan of the purchaser provides that the Employee will receive credit for all service recognized under the Company’s plan, will be eligible for “Grow-In.”

8.4 The term “Cause” means termination by the Company for willful misconduct involving an offense of a serious nature, for conviction of a felony as defined by the state in which the act was committed or for continued intentional failure to perform required duties with the Company after written notice of such failure.

Section 9

Change in Control

9.1 In the event of a “Change in Control,” as defined in Section 9.3, the Company makes a contractual commitment to pay the benefits under the Plan (1) in accordance with Section 8.1 with respect to an Employee who meets the requirements of said section and whose employment is terminated by the Company within two years following a Change in Control, and (2) in accordance with Section 9.2.

9.2 An Employee who is otherwise eligible to participate in the Plan except for not having attained the age of 55, whose employment with the Company and all of its affiliates is terminated by the Company for reasons other than “Cause” within two years following a Change of Control, who is not eligible to “Grow In” to early retirement in accordance with Section 8, and who has accrued at least 5 years of Credited Service will be provided a deferred vested benefit under the Plan, commencing on the first day of the month coincident with or next following the later of his/her attainment of age 55 or the date he/she terminates employment with the Company and all of its affiliates, which date shall be deemed to be his/her Actual Retirement Date, computed in the same manner as is used to compute a deferred vested pension under the RPSE, except that the deferred vested benefit so computed shall be reduced by 50% of the individual’s Social Security Benefit, in lieu of the percentage specified in the RPSE, and shall be further reduced by the amounts in Section 4.1(c) of the Plan. With respect to a Participant’s Non-Grandfathered Amount, any benefits otherwise payable under this Section 9 on account of an Employee’s termination of employment must be deemed a “separation from service” within the meaning of Treasury Regulation §1.409A-1(h) (using a percentage of 80% to determine the controlled group of corporations and businesses under common control).

9.3 For purposes of this Section 9, a “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 NIC or the Company is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly

E-40

or indirectly, of securities of NIC representing 25% or more of the combined voting power of NIC’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 NIC 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 NIC or (C) any dissolution or liquidation of NIC or the Company or an agreement for the sale or disposition of all or substantially all (more than 50%) of the assets of NIC or the Company occurs. Notwithstanding the foregoing, the sale or disposition of any or all of the assets or stock of Navistar Financial Corporation, and each successor thereto, shall not be deemed a Change in Control.

E-41

EXHIBIT 10.83

NAVISTAR, INC.

MANAGERIAL RETIREMENT OBJECTIVE PLAN

As Amended and Restated Effective As of January 1, 2005

(including amendments through July 31, 2008)

E-42

TABLE OF CONTENTS

		Page
Section 1    Plan Name and Definitions		E-45
1.1	Plan Name	E-45
1.2	Actual Retirement Date	E-45
1.3	Code	E-46
1.4	Company	E-46
1.5	Credited Service	E-46
1.6	Early Retirement Date	E-46
1.7	Eligible Employee	E-46
1.8	Employee	E-46
1.9	Final Average Compensation	E-46
1.10	Formula Benefit Service	E-46
1.11	Grandfathered Amount	E-46
1.12	NIC	E-47
1.13	Non-Grandfathered Amount	E-47
1.14	Normal Retirement Date	E-47
1.15	Participant	E-47
1.16	Participating Company	E-47
1.17	Plan Administrator	E-47
1.18	Retire or Retired or Retires	E-47
1.19	RPSE	E-47
1.20	Social Security Benefit	E-47
1.21	Specified Employee	E-47
1.22	Vacation Service	E-48
Section 2    Eligibility for Participation		E-48
2.1	Eligible Employees	E-48
2.2	Newly Hired Employees Not Eligible to Participate	E-48
2.3	Closure of Plan to Future Promoted, Hired, or Rehired Employees and Elimination of Eligibility to Participate for Employees Whose Dates of Birth Are Subsequent to January 1, 1960	E-48
Section 3    Retirement Dates and Conditions		E-49
3.1	Normal Retirement	E-49
3.2	Early Retirement	E-49
3.3	Employees Eligible for Long Term Disability Benefits	E-49
Section 4    Amount and Payment of Benefits		E-49
4.1	Normal Retirement Allowance	E-49
4.2	Early Retirement Allowance	E-50
4.3	Final Average Compensation	E-51
4.4	No Decrease in Plan Benefits	E-52
4.5	Assumptions and Adjustments in Computing Benefits	E-52
4.6	Preservation of Benefits Accrued As of December 31, 1988	E-52
4.7	Payment of Retirement Allowances	E-53
4.8	Allowances Unfunded	E-53
4.9	Enhancement to Retirement Allowances for Certain Participants	E-53
4.10	Special Recalculation of MRO Payments for Certain Participants Whose Actual Retirement Dates are On or After February 1, 2006 and Prior to May 1, 2008	E-54
4.11	Tax Withholding	E-54
4.12	Errors in Distributions	E-54

E-43

TABLE OF CONTENTS

(Continued)

		Page
Section 5    Survivor Benefits		E-54
5.1	Survivor Allowance – Before Retirement	E-54
5.2	Survivor Allowance – After Retirement	E-55
5.3	Survivor Allowance Election After Retirement	E-55
Section 6    Employee Contribution Requirements		E-56
6.1	Employee Contribution Requirements For the Period Prior to January 1, 1979	E-56
6.2	Adjustments to Formula Benefit Service For 1976	E-56
Section 7    General Conditions		E-57
7.1	Forfeitures	E-57
7.2	Applicability	E-57
7.3	Amendment and Termination	E-57
7.4	Contractual Obligation	E-57
7.5	Interpretation of the Plan	E-58
7.6	Special Considerations	E-58
Section 8    Miscellaneous		E-58
8.1	No Employment Rights	E-58
8.2	Assignment	E-58
8.3	Applicable Law	E-59
8.4	Facility of Payment; Missing Persons	E-59
8.5	Validity	E-59
8.6	Claims Procedure	E-59
8.7	Responsibility For Legal Effect	E-60
Section 9    Involuntary Termination		E-60
Section 10    Change in Control		E-61
SUPPLEMENT A		E-62

E-44

NAVISTAR, INC.

MANAGERIAL RETIREMENT OBJECTIVE PLAN

As Amended and Restated Effective As of January 1, 2005,

(including amendments through July 31, 2008)

Introduction

The Plan and Its Effective Date

Navistar, Inc. (named International Truck and Engine Corporation immediately prior to February 27, 2008 and formerly named Navistar International Transportation Corp. immediately prior to February 23, 2000) has provided retirement income for employees (previously classified as managerial or professional) for many years under various Company plans and policies. In particular, it has provided for a retirement income objective under its Managerial Retirement Objective (MRO) Policy that was restated to include amendments effective as of January 1, 1965 and June 1, 1965. The Policy has been amended from time to time thereafter, including an amendment and complete restatement as of January 1, 1990. The Policy was subsequently amended from time to time and this document constitutes a further amendment and restatement as of January 1, 2005, with further amendments through and including July 31, 2008. The provisions of this document shall be applicable to Employees, as hereinafter defined, who retire or otherwise terminate employment on or after January 1, 2005. With regard to employees who retired or otherwise terminated employment with the Company prior to such date, the provisions of such Policy as in effect at the time of such retirement or termination shall apply.

Compliance with Code Section 409A

The Plan is designed to comply in all respects with Code Section 409A. Accordingly, the Plan is hereby amended and restated, effective as of January 1, 2005, to conform to the requirements of Code Section 409A, and final Treasury regulations issued thereunder, with respect to any Non-Grandfathered Amount, as hereinafter defined, under the Plan. Notwithstanding the foregoing or any other provision of the Plan to the contrary, prior to January 1, 2009, it is intended that the Plan be construed and administered with respect to any Non-Grandfathered Amount both pursuant to and in accordance with a good faith interpretation of Code Section 409A and in a manner consistent with published guidance and other applicable authorities promulgated thereunder. Treatment of any Non-Grandfathered Amount under the Plan pursuant to and in accordance with any transition rules provided under such published guidance and other applicable authorities shall be expressly authorized hereunder and shall be administered in accordance with procedures established by the Plan Administrator, as hereinafter defined.

Section 1

Plan Name and Definitions

1.1 Plan Name. This plan, as may be amended from time to time, shall be known as the Navistar, Inc. Managerial Retirement Objective (MRO) Plan (known as the International Truck and Engine Corporation Managerial Retirement Objective (MRO) Plan immediately prior to February 27, 2008 and formerly known as the Navistar International Transportation Corp. Managerial Retirement Objective (MRO) Plan immediately prior to February 23, 2000), hereinafter referred to as the “Plan.” The Plan also has been known as the Navistar International Transportation Corp. Managerial Retirement Objective (MRO) Policy. Notwithstanding the foregoing, to the extent (and only to the extent) required under Code Section 409A with respect to a Participant’s Non-Grandfathered Amount, the term “Plan” shall also mean any other plan with which the Plan is required to be aggregated under Code Section 409A. This Plan is intended to constitute a non-account balance plan, as defined in Treasury regulation §1.409A-1(c)(2)(i)(c).

1.2 “Actual Retirement Date” shall mean the first day of the month coincident with or next following the date on which an Eligible Employee actually Retires.

E-45

1.3 “Code” shall mean the Internal Revenue Code of 1986, as amended, including any applicable regulations, authorities, or such other guidance of general applicability promulgated thereunder.

1.4 “Company” shall mean Navistar, Inc. (named International Truck and Engine Corporation immediately prior to February 27, 2008 and formerly named Navistar International Transportation Corp. immediately prior to February 23, 2000) and any entity succeeding to its business which shall acquire its rights and assume its obligations under the Plan and, to the extent not specifically provided in the Plan, includes any Participating Company for purposes of Sections 1.22, 3, 4, 7.1, 7.2, 8.1, 8.4, 8.5, and 8.7; provided that, to the extent (and only to the extent) required under Code Section 409A with respect to any Non-Grandfathered Amount, the term “Company” shall mean the entity for whom the Participant performs services and with respect to whom the legally binding right to payments under the Plan arises, and all entities with whom such entity would be considered a single employer under Code Section 414(b) or 414(c).

1.5 “Credited Service” shall mean Credited Pension Service as used for purposes of the RPSE.

1.6 “Early Retirement Date” shall mean the first day of any month prior to an Eligible Employee’s Normal Retirement Date and coincident with or next following the later of his/her attainment of age 55 and completion of 10 years of Credited Service.

1.7 “Eligible Employee” shall mean any Employee who has met the eligibility requirements of Section 2 (including through application of Section 9 or 10) and, with regard to earnings or periods of service before January 1, 1979, the contribution requirements of Section 6.1.

1.8 “Employee” shall mean any person employed full time by the Company or a Participating Company.

1.9 “Final Average Compensation” shall mean the Participant’s annual base salary plus eligible incentive compensation, as prescribed in Section 4.3, in the highest consecutive 60-month period during the 120-month period prior to his/her Actual Retirement Date, determined in accordance with Section 4.3. “Enhanced Final Average Compensation” shall have the meaning assigned to that term in Section 4.3.

1.10 “Formula Benefit Service” shall mean an Employee’s Formula Benefit Service as determined under the provisions of the RPSE, as modified in Section 6.2.

1.11 “Grandfathered Amount” shall mean, with respect to each Participant, the present value of the benefits, if any, to which he/she would have been entitled under the Plan if he/she voluntarily terminated services without cause on December 31, 2004 and received a payment of such benefits on the earliest possible date allowed under the Plan to receive a payment of such benefits following termination of services, and received such benefits in the form with the maximum value, each determined by reference to the terms of the Plan in effect as of October 3, 2004, but only to the extent such Plan terms have not been materially modified (within the meaning of Treasury Regulation §1.409A-6(a)(4)) after October 3, 2004. Notwithstanding the foregoing, for any subsequent taxable year of the Participant, the Grandfathered Amount may increase to (a) equal the present value of the benefits the Participant actually becomes entitled to, in the form and at the time actually paid, determined under the terms of the Plan, as in effect on October 3, 2004, without regard to any further services rendered by the Participant after December 31, 2004, or any other events affecting the amount of or the entitlement to such benefits (other than a Participant election with respect to the time or form of an available benefit, if applicable), and (b) include any earnings (within the meaning of Treasury Regulation §1.409A-6(a)(4)) attributable thereto due solely to the passage of time; provided that in no event shall the Participant’s Grandfathered Amount exceed the present value of the benefits to which he would have been entitled under the Plan. For purposes of calculating the present value of each Participant’s Grandfathered Amount, if any, reasonable actuarial assumptions and methods shall be used. Whether actuarial assumptions and methods are reasonable for this purpose shall be determined as of each date the Participant’s benefits are valued for purposes of determining the Grandfathered Amount; provided that any reasonable actuarial assumptions and methods that were used by the Company with

E-46

respect to such benefits as of December 31, 2004 will continue to be treated as reasonable assumptions and methods for this purpose; provided further that actuarial assumptions and methods shall be presumed reasonable if they are the same as those used to value benefits under the RPSE (or such other a “qualified” plan sponsored by the Company the benefits under which are part of the benefit formula under, or otherwise impact the amount of a Participant’s benefits under, the Plan).

1.12 “NIC” shall mean Navistar International Corporation, the parent corporation of the Company, and each successor thereto.

1.13 “Non-Grandfathered Amount” shall mean, with respect to each Participant, the present value of the benefits to which he/she is entitled under the Plan less any portion of such benefits constituting his/her Grandfathered Amount.

1.14 “Normal Retirement Date” shall mean the first day of the month coincident with or next following an Eligible Employee’s attainment of age 65 and completion of 10 years of Credited Service.

1.15 “Participant” shall mean any Eligible Employee who participates in the Plan as provided in Section 2, and further, the term “Participant” shall be deemed to include any Employee who is or becomes eligible for an allowance under the Plan pursuant to Section 9 or 10.

1.16 “Participating Company” shall mean any corporation which is a member of the group of corporations under common control with the Company and which elects to be included under the Plan with the consent of the Company, and each successor thereto.

1.17 “Plan Administrator” shall mean the Company. To the extent the Plan Administrator considers necessary and advisable to properly carry out the administration of the Plan, it shall have discretionary authority to employ and rely upon information and opinions of agents, attorneys, accountants or other persons (who also may be employed by the Company) and to delegate to them any or all of the powers, rights and duties conferred on the Plan Administrator under the Plan. Any reference in the Plan to the term “Plan Administrator” with respect to any such delegation of powers, rights, and duties shall be deemed a reference to the Plan Administrator’s respective delegate.

1.18 “Retire” or “Retired” or “Retires” shall mean an Eligible Employee’s termination of employment with the Company and all of its affiliates (other than by reason of death) on or after his/her Normal Retirement Date or Early Retirement Date, whichever is applicable; provided that with respect to a Participant’s Non-Grandfathered Amount, such Participant’s termination of employment must be deemed a “separation from service” within the meaning of Treasury Regulation §1.409A-1(h) (using a percentage of 80% to determine the controlled group of corporations and businesses under common control).

1.19 “RPSE” shall mean the Navistar, Inc. Retirement Plan for Salaried Employees (named the International Truck and Engine Corporation Retirement Plan for Salaried Employees immediately prior to February 27, 2008 and formerly named the Navistar International Transportation Corp. Retirement Plan for Salaried Employees immediately prior to February 23, 2000), as may be amended from time to time.

1.20 “Social Security Benefit” shall mean the annual amount of Primary U.S. Social Security Benefit payable to the Participant at Actual Retirement Date or earliest commencement date, if later, as used for purposes of the RPSE. It shall also include any amounts (annual) payable to the Participant under the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP) and the Canadian Old Age Security Act, if applicable.

1.21 “Specified Employee” shall mean any Participant who is a “specified employee,” as defined in Treasury Regulation §1.409A-1(i), including any elections described in Treasury Regulation §1.409A-1(i)(2) through (7) made by the Company.

E-47

1.22 “Vacation Service” shall mean Company service accumulated from the most recent date of hire by the Company as used for purposes of determining the amount of vacation for which the Employee is eligible under Company policy, as determined by the Company.

Section 2

Eligibility for Participation

2.1 Eligible Employees

All Eligible Employees who are in Organization Levels 5 and above at their Actual Retirement Date are eligible for participation in the Plan upon their Actual Retirement Date. Any Employee who was in Organization Level 12 or above and continues in employment with the Company or a Participating Company in a position for which an Organization Level is not in effect on the Employee’s Actual Retirement Date will be eligible for participation in the Plan upon his/her Actual Retirement Date.

2.2 Newly Hired Employees Not Eligible to Participate

Notwithstanding any other provision of the Plan, a person who first becomes an Employee of the Company or a Participating Company after December 31, 1995 is not eligible to participate in the Plan. In the case of any former Eligible Employee who is reemployed after December 31, 1995 by the Company or a Participating Company after a break in service, benefits shall accrue with respect to service after December 31, 1995 only if otherwise provided by the terms of the Plan. For further clarity, and subject to the provisions of Section 2.3:

(a) A person who first becomes an Employee after December 31, 1995 of the Company or a Participating Company by direct transfer from Navistar Financial Corporation or an employer participating in the Navistar Financial Corporation Managerial Retirement Objective Plan (the “NFC MRO Plan”), who at the time of such transfer was an Eligible Employee in the NFC MRO Plan (as defined therein), shall at the time of such transfer become an Eligible Employee in the Plan and cease being an Eligible Employee in the NFC MRO Plan.

(b) In the case of any former Eligible Employee who is reemployed by the Company or a Participating Company by direct transfer subsequent to December 31, 2005, from a member of the controlled group of corporations that includes the Company that is not an employer participating in the Plan or in the NFC MRO Plan at the time of such transfer, such former Eligible Employee shall not become an Eligible Employee and shall not recommence active participation under the Plan following the date of such transfer and no benefits shall accrue with respect to service or compensation subsequent to the date of such transfer.

2.3 Closure of Plan to Future Promoted, Hired, or Rehired Employees and Elimination of Eligibility to Participate for Employees Whose Dates of Birth Are Subsequent to January 1, 1960

Subject to Section 7.3, notwithstanding any provision of the Plan to the contrary, effective December 31, 2004, eligibility to participate in the Plan upon Actual Retirement Date is limited to Eligible Employees whose dates of birth are on or before January 1, 1960, and who, as of December 31, 2004 (or as of their last day worked, in the case of individuals described in subparagraph (1) or (2) below):

(a) are employed in Organization Level 7 or above (or were employed in Organization Level 12 or above prior to December 31, 2004, and continued in employment with the Company or a Participating Company in a position for which an Organization Level is not in effect on said date), or

(b) are employed in Organization Level 5 or 6 and who either are described in Section 6.2 of the Plan, or, during the period beginning January 1, 1995 and ending December 31, 2004, received a short-term incentive award of the type recognized for purposes of the Plan pursuant to Section 4.3;

E-48

provided, however, that this Section 2.3 shall not apply to an Employee or former Employee who, as of December 31, 2004:

(1) is receiving (or is eligible to receive) a long term disability benefit under a program of the Company or a Participating Company (as described in Section 3.3), or

(2) has been involuntarily terminated and is eligible for “Grow In” to early retirement under Section 3.2 of the Plan pursuant to Section 9,

unless and until such Employee or former Employee returns to active employment with the Company or a Participating Company.

No allowance shall be payable under the Plan with respect to any Employee (including a rehired former Employee) who is not eligible to participate in the Plan pursuant to this Section 2.3.

Section 3

Retirement Dates and Conditions

3.1 Normal Retirement

An Eligible Employee who reaches his/her Normal Retirement Date while in the employment of the Company may elect to Retire and shall be entitled, subject to the forfeiture provisions of Sections 7.1 and 8.4, to receive a Normal Retirement Allowance as specified in Section 4.1.

3.2 Early Retirement

An Eligible Employee who reaches his/her Early Retirement Date while in the employment of the Company may elect to Retire. In the event of such Early Retirement with Company consent and approval, an Eligible Employee shall be entitled, subject to the forfeiture provisions of Sections 7.1 and 8.4, to receive an Early Retirement Allowance as specified in Section 4.2. In the absence of such consent and approval, an Employee may retire and will be entitled only to such benefits as may be provided under the RPSE.

3.3 Employees Eligible for Long Term Disability Benefits

An Employee who is receiving (or is eligible to receive) a long term disability benefit which commences on or after November 1, 1979 under a benefit program of the Company or a Participating Company shall not be eligible to Retire under Section 3.1 or 3.2, whichever is applicable, until the expiration of (or the cessation of eligibility for) such long term disability benefits. Accordingly, on or after November 1, 1979, no allowance shall be payable under the Plan with respect to any such period during which an Employee is receiving or is eligible to receive a long term disability benefit under a benefit program of the Company or a Participating Company.

Section 4

Amount and Payment of Benefits

4.1 Normal Retirement Allowance

The monthly Normal Retirement Allowance of a Participant who Retires under Section 3.1 shall be an amount, commencing as of the Participant’s Actual Retirement Date, equal to one-twelfth of the quantity (a) the Managerial Retirement Objective (“MRO”) below, minus (b) the Social Security Offset below, minus (c) below:

(a) The MRO shall be equal to Final Average Compensation multiplied by the lesser of (1) or (2), below:

(1) the sum of (i) and (ii):

(i) 2.4% for each year of Formula Benefit Service accrued prior to January 1, 1989,

E-49

(ii) 1.7% for each year of Formula Benefit Service accrued on or after January 1, 1989, or

(2) 60% minus 2.4% for each year prior to 1979 that the Employee failed to make or repay the required employee contributions pursuant to Section 6.

(b) The Social Security Offset shall be equal to the Participant’s Social Security Benefit (as defined in Section 1.20) multiplied by the lesser of (1) or (2), below:

(1) 1.7% for each year of Formula Benefit Service, or

(2) 60%

(c) Other Offsets

The sum of the annual amounts of the following benefits payable to the Participant under:

(1) the RPSE,

(2) any plan or program of Navistar Canada, Inc. (named International Truck and Engine Corporation Canada immediately prior to February 20, 2008), and each successor thereto, providing defined benefit retirement benefits,

(3) the following former deferred profit sharing plans: Employees’ Retirement Savings and Profit Sharing Plan of the Frank G. Hough Co.; Solar Aircraft Company Employees’ Profit Sharing Retirement Plan; or former Navistar International Transportation Corp. Profit Sharing Plan for Eligible Employees, with such amounts determined on the basis of the actuarial equivalent of distributions related to account balances thereunder;

(4) any other pension plan or program of the Company or of its foreign or domestic subsidiaries providing defined benefit retirement benefits, but excluding the Navistar, Inc. Supplemental Executive Retirement Plan (named the International Truck and Engine Corporation Supplemental Executive Retirement Plan immediately prior to February 27, 2008),

(5) any foreign social security program, excluding amounts defined in Section 1.20. (In cases where the Employee is eligible for U.S. Social Security Benefits and has not been compensated for his/her contributions to the foreign social security programs, only the estimated Company-purchased portion of foreign social security benefits shall be used. In cases where the Employee is not eligible for U.S. Social Security Benefits, the entire amount of foreign social security shall be used.), and

(6) any severance or termination benefits required by a foreign government.

The determination of the retirement benefits that the Participant is eligible to receive from the retirement plan of the foreign subsidiary or affiliated company and foreign social security benefits shall be made at time of the Employee’s Actual Retirement Date or the first date the Participant is eligible to receive such benefits, if later, and shall not be subject to change thereafter for purposes of determining the Allowance under the Plan.

4.2 Early Retirement Allowance

The Early Retirement Allowance for a Participant who Retires under Section 3.2 on or after his/her 62nd birthday shall be the amount computed under Section 4.1, with the amount computed under Section 4.1(a) unreduced for commencement of benefits prior to Normal Retirement Date.

The Early Retirement Allowance for a Participant who Retires under Section 3.2 on or after his/her 55th birthday but prior to his/her 62nd birthday shall be the amount computed under Section 4.1(a) reduced by 1/4 of 1% for each month or partial month his/her age at Actual Retirement Date is less than age 62, then further reduced by the amounts under paragraphs (b) and (c) of Section 4.1. For purposes of determining the Social Security Offset under paragraph (b) of Section 4.1, it will be assumed there are no Social Security earnings after the Actual Retirement Date.

E-50

4.3 Final Average Compensation

“Final Average Compensation” shall mean an Employee’s average annual base salary plus certain short-term incentive awards, as designated by the Plan Administrator in its discretion, in the highest consecutive 60-month period during the 120-month period prior to his/her Actual Retirement Date, except as provided in (a) and (b), below. Except as provided in Section 4.10, such incentive awards will relate to the month in which payment is actually made. No more than five annual awards or twenty quarterly awards (or equivalent combination thereof) shall be included within any 60-month period and, except as provided in Section 4.10, only such incentive awards paid before a Participant’s Actual Retirement Date shall be considered. In the event more than five annual or twenty quarterly awards (or equivalent combination thereof) occur within any given 60-month period, only the five annual or twenty quarterly awards (or equivalent combination thereof) which are in consecutive sequence with one another and which produce the highest resulting average, as indicated above, will be considered. The short-term incentive awards recognized for purposes of the Plan are Annual Incentive Awards or their equivalent and certain sales and marketing incentive compensation programs (excluding compensation for contests and other forms of sales promotions) as designated by the Plan Administrator from time to time in its discretion.

Annual Incentive Awards for fiscal year 1999 and each subsequent year shall be taken into account only to the extent of the ratio specified below for the Organization Level of each Employee as of the last day of each fiscal year for which an Award is payable.

Organization Level On Last Day of Fiscal Year	Ratio
CEO (without Organization Level)	50/100
13	50/65
12	50/65
11	45/55
10	40/50
9	35/40

Annual Incentive Awards for fiscal year 2000 and each subsequent year shall be taken into account only to the extent of the ratio specified below for the Organization Level of each Employee as of the last day of each fiscal year for which an Award is payable, and shall not exceed the amount set out as the “Cap” for the fiscal year.

Organization Level On Last Day of Fiscal Year	Ratio	Cap (As a Percentage of Annualized Base Salary On Last Day of Fiscal Year)
CEO (without Organization Level)	50/110	75.0	%
13	50/75	75.0	%
12	50/75	75.0	%
11	45/65	67.5	%
10	40/55	60.0	%
9	35/40	52.5	%

Long Term Incentive Awards, cash profit sharing/enhanced profit sharing payments, and “lump-sum” increase and recognition awards (excluded from base salary) are specifically excluded.

(a) For an Employee described in Section 3.3, the 120-month period described above shall be the 120-month period prior to the expiration of salary continuation, and

(b) For an Employee described in Section 9.1, the 120-month period described above shall be the 120-month period prior to the last day worked.

E-51

For the purpose of this Section 4.3, compensation shall not include incentive compensation attributable to fiscal year 2001 and thereafter which compensation:

(i) is attributable to service while the Employee was in Organization Level 5 or 6, or

(ii) is attributable to service while the Employee is in Organization Level 7 or 8, and is attributable to an incentive compensation program other than the Annual Incentive Award program (or an equivalent award program), to the extent such incentive compensation paid for a fiscal year exceeds 37.5% of the annualized base salary as of the end of that fiscal year for an Employee in Organization Level 7 and 45.0% of the annualized base salary as of the end of that fiscal year for an Employee in Organization Level 8.

“Enhanced Final Average Compensation” shall mean, for certain Participants as described in Section 4.9, the Participant’s Final Average Compensation determined in accordance with the foregoing provisions of this Section 4.3 by substituting for the “120-month period” described above the “period from January 1, 1995 to the Participant’s Actual Retirement Date”; provided, however, that for purposes of applying paragraph (a), above, in determining the Enhanced Final Average Compensation, such substituted 120-month period shall instead be the “period from January 1, 1995 to the expiration of salary continuation” and for purposes of applying paragraph (b), above, in determining the Enhanced Final Average Compensation, such substituted 120-month period shall instead be the “period from January 1, 1995 to the last day worked.”

4.4 No Decrease in Plan Benefits

There will be no decrease in the amount of monthly benefits payable in the case of (a) a Participant or beneficiary who is receiving benefits or (b) an Eligible Employee whose employment is terminated by the Company for reasons other than Cause (as defined in Section 9.3) and who has a nonforfeitable right to (deferred) benefits pursuant to Section 9 or 10, by reason of any general increase in the benefit levels payable under Title II of the Social Security Act, or under the comparable acts related to the CPP or QPP or under the Canadian Old Age Security Act or any increase in the wage base under such Act(s), or any post-retirement increase in the amounts in Section 4.1(c) subsequent to the Participant’s Actual Retirement Date or the Participant’s termination from employment with the Company, respectively.

4.5 Assumptions and Adjustments in Computing Benefits

(a) If an Eligible Employee elects (or is deemed to have elected) an optional form of payment of retirement or survivor income, such as the Survivor Benefit or the Qualified Pre-Retirement Survivor Annuity (QPSA) under the RPSE, the amounts in 4.1(c), above, will be computed as if the option had not been elected.

(b) Contributory benefits under the RPSE, non-contributory benefits under the RPSE, and annuity benefits under other Company plans under which annuities are provided will be deemed to have commenced (on a reduced basis, to the extent such benefits would be subject to reduction if commencement occurred on the Actual Retirement Date) as of the Actual Retirement Date.

(c) Social Security Benefits will be taken into account in determining any MRO allowance under this Plan even though the Participant either does not apply for, or loses part or all of such payments through delay in not applying for them, by entering into employment, or otherwise.

4.6 Preservation of Benefits Accrued As of December 31, 1988

Notwithstanding the foregoing, the amount of a Participant’s allowance determined under Section 4.1 or 4.2, whichever is applicable, shall not be less than an amount determined by substituting both the “Preserved MRO” in paragraph (a), below, for the MRO in Section 4.1(a) and the “Preserved Social Security Offset” in paragraph (b), below, for the Social Security Offset in Section 4.1(b).

E-52

(a) The “Preserved MRO” shall be equal to the “Preserved Final Average Compensation” multiplied by the lesser of

(1) 2.4% for each year of Formula Benefit Service accrued prior to January 1, 1989, or

(2) 60% minus 2.4% for each year prior to 1979 that the Employee failed to make or repay the required employee contributions pursuant to Section 6.

(b) The “Preserved Social Security Offset” shall be equal to 65% of the Participant’s Social Security Benefit determined as of December 31, 1988, using the Social Security law as then in effect and assuming there are no Social Security earnings after such date, but based on the Employee’s age at Actual Retirement Date rather than his/her age on December 31, 1988.

(c) The “Preserved Final Average Compensation” shall mean Final Average Compensation determined under Section 4.3 as if the Participant’s Actual Retirement Date were January 1, 1989 and by substituting “36-month” and “60-month,” respectively, for “60-month” and “120-month” and by substituting “three” and “twelve,” respectively, for “five” and “twenty,” wherever they occur in that Section.

4.7 Payment of Retirement Allowances

A Participant’s allowances under the Plan, subject to Sections 7.1 and 8.4, are payable in monthly installments commencing on the Participant’s Actual Retirement Date. Allowances cease with the payment made on the first day of the month in which the Participant’s death occurs, except to the extent payments after death are provided by the form of allowance which is then in effect. Notwithstanding the foregoing or any other provision of the Plan to the contrary, in the event the Participant is a Specified Employee, no portion of his/her benefits under the Plan that constitutes a Non-Grandfathered Amount shall be paid before the end of the six-month period following the Participant’s Actual Retirement Date, except in the event of the Participant’s death before the end of such period; provided that on the first date on which such benefit payments may be paid to the Participant at the end of such six-month period, the Participant shall receive payment of all monthly benefit payments due from his/her Actual Retirement Date, with an appropriate adjustment for interest for delayed payment (computed in a manner consistent with computing interest adjustments for delayed pension payments under the RPSE).

4.8 Allowances Unfunded

The allowances payable under this Plan shall be paid by the Company each month out of its general assets and shall not be funded in any manner.

4.9 Enhancement to Retirement Allowances for Certain Participants

With regard to certain Participants, as further provided in this Section 4.9, whose dates of birth are on or before January, 1, 1955, and who Retire or otherwise terminate employment with the Company and all of its affiliates on or after December 31, 2005, such Participants shall receive enhancements to their allowances otherwise determined under the Plan without regard to this Section 4.9. The amount of such enhancements, which shall constitute a Non-Grandfathered Amount and shall be subject to Code Section 409A, shall be equal to the excess, if any, by which the allowances determined by substituting the Participant’s Enhanced Final Average Compensation for the Participant’s Final Average Compensation exceed the allowances otherwise determined under the Plan absent this Section 4.9. Such enhancements to the allowances of a Participant or of a Participant’s surviving spouse, if applicable, shall be paid at the same time and in the same frequency, form and manner, and for the same duration as such Participant’s or surviving spouse’s allowances are otherwise payable under the Plan, except to the extent otherwise required by law.

The above provisions of this Section 4.9 shall not apply to a Participant who, as of December 31, 2005:

(a) is receiving (or is eligible to receive) a long term disability benefit under a program of the Company or a Participating Company (as described in Section 3.3), or

E-53

(b) has been involuntarily terminated and is eligible for “Grow In” to early retirement under Section 3.2 of the Plan pursuant to Section 9,

unless and until such Participant returns to active employment with the Company.

4.10 Special Recalculation of MRO Payments for Certain Participants Whose Actual Retirement Dates are On or After February 1, 2006 and Prior to May 1, 2008

A Participant whose Actual Retirement Date is on or after February 1, 2006 and prior to May 1, 2008, and who Retired prior to the payment of his or her Achievement Bonus attributable to the fiscal year ending October 31, 2005 and/or the payment of his/her Annual Incentive Award for the fiscal year ending October 31, 2006, will have his/her amounts under this Section 4 recalculated as soon as administratively practicable after the payment of any such awards. The recalculation will recognize such awards in the determination of such Participant’s Final Average Compensation and Enhanced Final Average Compensation under Section 4.3 and, such award(s) will be considered as having been paid during the last month of the applicable “120-month period” with respect to Final Average Compensation and of the comparable period with respect to Enhanced Final Average Compensation described in Section 4.3, but only to the extent that such award(s) were paid after the end of such applicable periods. Any net increases in such Participant’s allowances under the Plan resulting from such recalculation shall be effective retroactive to such Participant’s Actual Retirement Date, shall constitute a Non-Grandfathered Amount, and shall be subject to Code Section 409A.

4.11 Tax Withholding

To the extent required by law in effect at the time distribution is made from the Plan (or at such earlier date on which any taxes are due, as prescribed by law), the Company shall withhold any taxes required to be withheld by federal, state or local taxing authorities.

4.12 Errors in Distributions

In the event of an error in a distribution, the Participant’s or his/her beneficiary’s benefits under the Plan shall, immediately upon the discovery of such error, be adjusted to reflect such underpayment or overpayment and, if possible, the next distribution shall be adjusted upward or downward, as appropriate, to correct such prior error. If the remaining benefits owed to the Participant or his/her beneficiary is insufficient to cover an erroneous overpayment, the Company may, at its complete and sole discretion, offset other amounts payable to the Participant from the Company or bring a lawsuit or proceeding against the Participant or his/her beneficiary to recoup the amount of any such overpayment and any costs and expenses, including, without limitation, court costs and reasonable attorneys’ fees, incurred by the Plan, the Company, or the Plan Administrator, in connection with recouping any such overpayment.

Section 5

Survivor Benefits

5.1 Survivor Allowance – Before Retirement

The surviving spouse of an Eligible Employee (i) who dies after attaining age 55 and after becoming eligible to Retire, but before he/she actually Retires, and (ii) who if he/she had Retired at the date of his/her death, would have been eligible for the survivor benefits under Section 5.2, shall be entitled to a monthly “Automatic Survivor Allowance” during the spouse’s lifetime, terminating with the last monthly payment before the spouse’s death. The monthly allowance payable to the surviving spouse shall be the amount such spouse would have been entitled to receive under Section 5.2 if the Employee had Retired under Section 3.1 or 3.2, whichever is applicable, on the date of his/her death with allowances commencing the first of the following month with the Survivor Benefit under Section 5.2 in effect. A surviving spouse who was not married to the deceased Employee for at least one year at the date of death shall not be eligible for this Automatic Survivor Allowance.

E-54

5.2 Survivor Allowance – After Retirement

(a) For a married Employee who elects to Retire with an allowance payable pursuant to Section 4.1 or 4.2, whichever is applicable, (or for a married Employee who commences his/her deferred vested allowance pursuant to Section 10) whose designated spouse shall be living at the Employee’s death after the effective date in paragraph (b) below, a Survivor Allowance shall be payable to such spouse during the spouse’s further lifetime.

(b) The provisions of paragraph (a) shall become effective on the later of (i) the commencement date of the Employee’s monthly allowance, or (ii) the first day of the month in which the Employee has been married one year if he/she is married when such Survivor Allowance provisions would otherwise become effective but such marriage has been in effect less than one year at that date.

(c) The beneficiary of a Survivor Allowance shall be only the person who is the Employee’s spouse at the effective date of the Survivor Allowance and who has been his/her spouse for at least one year immediately prior to such date.

(d) The Survivor Allowance provided in this Section 5.2 shall not be applicable upon the death of the Employee or his/her designated spouse, or both, prior to the effective date of the Survivor Allowance.

(e) For an Employee for whom and during the period in which a Survivor Allowance is in effect, the monthly allowance otherwise payable to the Employee shall be decreased by one-half of one percent (1/2%) for each full year in excess of ten (10) years that the spouse’s age is less than the Employee’s age (the age of each for purposes hereof being the age at his/her last birthday prior to the effective date of the Survivor Allowance); except that, in the case of an Employee who Retires under Section 3.2 prior to age 62, the amount of reduction in his/her monthly benefit before age 62 attributable to the Survivor Allowance shall be based on the monthly allowance payable to such Employee after age 62.

(f) In the event the spouse for whom a Survivor Allowance is in effect predeceases the Employee or they are divorced by court decree, the Survivor Allowance shall be cancelled on the date of such death or court decree. Any reduction pursuant to (e) above shall be eliminated effective the first day of the third month following the month in which the Company receives evidence satisfactory to the Company of the spouse’s death or of a final decree of divorce.

(g) The Survivor Allowance payable to the surviving spouse of a Participant who dies after both the commencement date of his/her monthly allowance and the effective date of the Survivor Allowance shall be a monthly allowance for the further lifetime of such surviving spouse equal to 55% of the amount of such Participant’s monthly allowance payable after age 62 after any applicable reduction pursuant to paragraph (e) above.

(h) An Employee whose allowance would be reduced under paragraph (e) above may revoke the Survivor Allowance otherwise provided in this Section 5.2 by executing and filing with the Company at or prior to the commencement date of his/her monthly allowance a specific written election, which (for elections other than elections changing a previous revocation) includes the written consent of the Employee’s spouse witnessed by a Plan representative or notary public, on a form approved by the Company.

5.3 Survivor Allowance Election After Retirement

A Participant who Retires with an allowance pursuant to Section 4.1 or 4.2, whichever is applicable, and for whom no Survivor Allowance is in effect pursuant to Section 5.2 may file a written application with the Company for a Survivor Allowance provided:

(i) the Participant was not married at a time when the Survivor Allowance would otherwise have been available pursuant to Section 5.2 and has subsequently married, or

(ii) the Participant had a Survivor Allowance in effect pursuant to Section 5.2 which is no longer in effect and has remarried.

E-55

Such Survivor Allowance shall be provided under the terms and conditions of Section 5.2 and shall become effective on the first day of the month following the month in which the Company receives a completed application on a form approved by the Company, but in no event before the first day of the month following the month in which the Participant has been married to the designated spouse for one year. No Survivor Allowance provided hereunder shall become effective for a Participant whose application form is received by the Company after the first day of the month in which the Participant has been married to the designated spouse for one year. Notwithstanding the foregoing or any other provision of the Plan to the contrary, any such application by a Participant for such Survivor Allowance with respect to that portion of his/her benefits under the Plan that constitutes a Non-Grandfathered Amount shall be permitted only to the extent the provision of such Survivor Allowance does not otherwise violate the requirements of Code Section 409A.

Section 6

Employee Contribution Requirements

6.1 Employee Contribution Requirements For the Period Prior to January 1, 1979

In addition to the requirements under Sections 2 and 3, to be eligible for benefits under the Plan upon an Eligible Employee’s Actual Retirement Date, an Employee must have regularly contributed to the Contributory Annuity Plan (“CAP”) or the RPSE (Part B), whichever was applicable, with regard to earnings and periods of service prior to January 1, 1979, on the following bases: (1) If the Employee was not a member of the CAP on December 21, 1950, but was a managerial employee over age 30 and had two years of credited pension service, he/she must have joined the CAP within 60 days after that date (that is before February 20, 1951), and contributed continuously thereafter, to the extent permitted by his/her earnings; (2) If the Employee was not so eligible for membership in the CAP on December 21, 1950, he/she must have joined within 60 days after becoming eligible, within 60 days after being promoted to a managerial position, or by age 30, whichever is later; and have contributed continuously thereafter, to the extent permitted by his/her earnings. (The two-year service requirement for CAP participation was eliminated on January 1, 1965 for an Employee age 30 and over. The age 30 requirement was changed to age 25 effective August 1, 1977.); and (3) If a managerial employee was participating in the CAP or the RPSE (Part B), whichever is applicable, and prior to August 1, 1977 requested discontinuance of contributions after reaching age 30, or on or after August 1, 1977 requested discontinuance of contributions after reaching age 25, such Employee is ineligible for benefits under the Plan.

Ineligible managerial Employees on January 1, 1976 who by June 30, 1977 agreed to make special contributions in amounts equal to the contributions which they would have made had they elected to contribute in eligible years prior to 1977 shall become eligible for benefits under the Plan with respect to service prior to January 1, 1976. However, failure to continuously contribute thereafter in any year prior to 1979 in which such Employee was eligible to do so will make such Employee ineligible for benefits under the Plan.

No Employee contributions are required or permitted with regard to earnings or periods of service on or after January 1, 1979.

6.2 Adjustments to Formula Benefit Service For 1976

For an Employee who at any time during the period January 1, 1976 through July 31, 1977 had attained the age of 25 but not 30 and who, solely on account of not making contributions to the RPSE during such period but prior to attaining the age of 30 incurred a reduction on account of the year 1976 in the determination of such Employee’s Formula Benefit Service under the provisions of the RPSE shall have such reduction on account of the year 1976 disregarded for all purposes of the Plan.

E-56

Section 7

General Conditions

7.1 Forfeitures

Subject to Section 10.1, if, without the written consent of the Company, a Participant engages in a business, whether as owner, partner, officer, employee or otherwise, which is in competition with the Company or one of its affiliates, and if the Participant’s participation in such a business is deemed by the Company to be detrimental to the best interests of the Company, any allowance otherwise payable thereafter to or on account of him/her under the Plan will be forfeited, notwithstanding any other provisions of this Plan. The determination as to whether such business is in competition with the Company or any of its affiliates, and whether such participation by such person is detrimental to the best interests of the Company, shall be made by the Company in its absolute discretion, and the decision of the Company with respect thereto, including its determination as to when the participation in such competitive business commenced, shall be conclusive.

7.2 Applicability

This Plan shall not apply to Employees of any division or operation to the extent and during the time excluded by the Company because of the existence or establishment of a separate pattern of benefits within a particular area or industry.

7.3 Amendment and Termination

The Company expects to continue the Plan indefinitely, but reserves the right to modify or discontinue the Plan if, in its judgment, such a change should be deemed necessary or desirable. However, even if the Company should modify or discontinue the Plan, the allowances already granted to Eligible Employees who Retired under Section 3.1 or 3.2, whichever is applicable, will be continued under the terms of the Plan as in effect when the Eligible Employee so Retired.

In the event the Company were to modify or discontinue the Plan, any such modification or discontinuance shall not reduce the “accrued objective” under the Plan for an Eligible Employee in Organization Level 5 or above who has attained the age of 55 and accrued at least ten years of Credited Service as of the effective date of such modification or discontinuance; and as of the date the Employee actually Retires under Section 3.1 or 3.2, whichever is applicable, the Company shall pay such Employee an allowance which together with the amounts computed under Section 4.1(b) and (c) shall be sufficient to bring such Employee’s total retirement income up to such accrued objective. For purposes of this provision, an Employee’s “accrued objective” shall be the MRO computed under Section 4.1(a) as if the Employee had Retired under Section 3.1 or 3.2, whichever is applicable, on the effective date of such modification or discontinuance, based on the provisions of the Plan as in effect immediately prior to such amendment. In the event the Employee Retired under Section 3.2, such accrued objective shall be reduced in accordance with Section 4.2, based on the provisions of the Plan as in effect immediately prior to such amendment (as if Section 4.2 had continued in effect until Actual Retirement Date) and on the Employee’s age at Actual Retirement Date.

Supplements may be added to the Plan. Each Supplement will form a part of the Plan, and will modify the terms of the Plan as applied to those employees or groups of employees identified in that Supplement.

7.4 Contractual Obligation

Notwithstanding any provision (other than Section 7.1 or 8.4) to the contrary, the Company hereby makes a contractual commitment to pay the allowances under and in accordance with the Plan with respect to an Eligible Employee in Organization Level 5 or above who has attained the age of 55 and accrued at least ten years of Credited Service.

E-57

7.5 Interpretation of the Plan

The Plan Administrator is granted discretionary authority to determine eligibility for and the amount of allowances, and to construe the terms of the Plan, and such determinations by the Plan Administrator shall be final and binding on all persons.

7.6 Special Considerations

It is recognized that retirements of Eligible Employees may involve unusual circumstances or conditions which do not meet all of the provisions of this Plan. Only the Compensation Committee (or any successor committee thereto) of the Board of Directors of NIC shall have the power and authority to review such cases and to determine whether or not the unusual circumstances or conditions warrant granting an exception to the provisions.

Section 8

Miscellaneous

8.1 No Employment Rights

Nothing contained in this Plan shall be construed as a contract of employment between the Company and an Employee, or as a right of any Employee to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge any of its Employees, with or without Cause (as defined in Section 9.3).

8.2 Assignment

(a) The benefits payable under this Plan may not be assigned or alienated, except that with respect to benefits being paid to Participants, all or a portion of such benefits may be paid in accordance with the provisions of a Qualified Domestic Relations Order (“QDRO”) as defined by the Retirement Equity Act of 1984, in which case, the amount of any benefits otherwise payable under the Plan shall be reduced accordingly by the value of any benefits paid or payable to any alternate payee(s) pursuant to such QDRO.

(b) A Participant or beneficiary may direct that any portion of his/her Plan benefit be paid to a third party (which includes the Company and affiliates) in payment of amounts such as federal, state, or local tax withholding; a direct deposit to an account in a bank, savings and loan association, or credit union; and contributions under a life insurance, medical, or other employee benefit plan; provided that:

(1) Such payment direction will be revocable by the Participant or beneficiary at any time prior to the payment being made;

(2) The payment is for a category of payments for which the Plan Administrator has authorized payment direction; and

(3) Payments to third parties shall not exceed in the aggregate 10% of any benefit payment, except that the following payments shall not individually or in the aggregate be subject to the 10% limitation:

(i) Payments (including but not limited to contributions under a life insurance, medical, or other employee benefit plan) directed to be made to a third party who has filed a written acknowledgment with the Plan Administrator stating that the third party has no enforceable right in, or to, any Plan benefit payment or portion thereof (except to the extent of payments actually received pursuant to the terms of the payment direction);

(ii) Any arrangement for the withholding of federal, state, or local tax;

(iii) Any arrangement for the recovery by the Plan of overpayments of benefits previously made to a Participant or beneficiary; and

(iv) Any arrangement for direct deposit to an account in a bank, savings and loan association, or credit union.

E-58

8.3 Applicable Law

This Plan shall be construed and administered in accordance with applicable federal laws and, to the extent not inconsistent therewith or preempted thereby, with the laws of the State of Illinois, determined without regard to the choice of law rules of any jurisdiction. Without limiting the generality and applicability of the foregoing and notwithstanding any provision in the Plan to the contrary, if and to the extent that the payment of any Plan benefits would otherwise violate the requirements of Code Section 409A, such Plan benefits shall be paid under such other conditions determined by the Plan Administrator that cause the payment of such benefits to comply with Code Section 409A and the Plan shall be construed and administered accordingly to achieve that objective, and in the event of any inconsistency between the terms of the Plan and Code Section 409A, the terms of Code Section 409A shall prevail and govern.

8.4 Facility of Payment; Missing Persons

When a person entitled to benefits under the Plan is under legal disability, or, in the Plan Administrator’s opinion, is in any way incapacitated so as to be unable to manage his/her financial affairs, the Plan Administrator may, in its sole discretion, direct payment of benefits to such person’s legal representative or estate, to any person who is judicially appointed or authorized to receive payment of benefits for such person’s benefit, or to a relative or friend of such person for such person’s benefit, or the Plan Administrator may direct the application of such benefits for the benefit of such person. Any payment made in accordance with the preceding sentence shall be a full and complete discharge of any liability for such payment under the Plan.

Neither the Plan Administrator nor the Company is required to search for or locate any person entitled to benefits under the Plan. If the Plan Administrator attempts to notify a person that he/she is entitled to benefits under the Plan, and such person fails to claim his/her benefits or make his/her whereabouts known to the Plan Administrator within a reasonable period of time after the notification is sent to such person, the benefits payable to such person shall be forfeited; provided that such benefits shall be reinstated if the person entitled thereto subsequently makes a claim for the forfeited benefits.

8.5 Validity

If any provision of the Plan is deemed invalid, illegal, or unenforceable by appropriate authority under the law of any jurisdiction applicable to the Plan, the same shall not affect, in any respect whatsoever, the validity, legality, or enforceability of any other provision of the Plan, and the Plan shall continue, to the fullest extent permitted by law, as if such invalid, illegal, or unenforceable provision were omitted and/or modified by such appropriate authority so as to preserve its validity, legality, or enforceability, unless such omission or modification would substantially impair the rights or benefits under the Plan of any affected Participant or beneficiary, the Company, or the Plan Administrator.

8.6 Claims Procedure

The Plan Administrator will provide notice in writing to any Participant or beneficiary whose claim for benefits under the Plan is denied, and the Plan Administrator shall also afford such Participant or beneficiary a full and fair review of its decision if so requested. The Plan Administrator has discretionary authority and responsibility to construe and interpret the provisions of the Plan and make factual determinations thereunder, including the power to determine the rights or eligibility of Employees or Participants and any other persons, and the amounts of their benefits under the Plan, and to remedy ambiguities, inconsistencies or omissions. Each such determination by the Plan Administrator shall be binding on all parties. Any interpretation of the provisions of the Plan and any decisions on any matter within the discretion of the Plan Administrator made in good faith shall be final and binding on all persons. Except to the extent reserved under Section 7.6, benefits under the Plan will be paid only if the Plan Administrator decides in its discretion that the applicant is entitled to them.

E-59

8.7 Responsibility For Legal Effect

No representations or warranties, express or implied, are made by the Company or the Plan Administrator and neither the Company nor the Plan Administrator assumes any responsibility concerning the legal, tax, or other implications or effects of the Plan.

Section 9

Involuntary Termination

9.1 Except as provided in Section 9.2, an Eligible Employee in Organization Level 5 or above whose employment with the Company and all of its affiliates is terminated by the Company for reasons other than “Cause” and whose age plus continuous Vacation Service as of the date of termination total 55 or more shall be eligible to “Grow-In” to early retirement under Section 3.2 of the Plan, with benefits based on the Plan as in effect on the date of such termination, provided:

(a) the Employee has accrued at least ten years of Credited Service as of his/her date of retirement,

(b) the Employee does not experience a break in service under the RPSE by reason of retirement under the RPSE, death, voluntary election to break such service or the elapse of a period of time equal to the Employee’s continuous Vacation Service prior to his/her date of retirement, and

(c) the Employee is not rehired by the Company or an affiliated company prior to his/her date of retirement.

9.2 Notwithstanding the foregoing, such “Grow-In” shall not apply to an Employee who refuses a reasonable offer of employment from the purchaser of a business or facility unless the Employee had the option to refuse the offer by the terms of the sale agreement or without breaking his/her continuity of service under the applicable Company policy with respect to the particular sale; provided, further, however, that an Employee who is employed by or is offered a reasonable position with such a purchaser, but is not eligible to participate in a plan of the purchaser which is the same as or substantially comparable to the RPSE and which plan of the purchaser provides that the Employee will receive credit for all service recognized under the Company’s plan, will be eligible for “Grow-In.”

9.3 The term “Cause” means termination by the Company for willful misconduct involving an offense of a serious nature, for conviction of a felony as defined by the state in which the act was committed or for continued intentional failure to perform required duties with the Company after written notice of such failure.

9.4 The term “Grow-In” means that the former Employee will be treated for purposes of the Plan as if he/she were on layoff for purposes of the RPSE. Such terminated Employee who, by virtue of aging and/or accruing additional Credited Service in accordance with the provisions of the RPSE subsequent to termination of employment, meets the age, service and other requirements for early retirement under Section 3.2 of the Plan, except for being an Employee of the Company on his/her early retirement date, shall be eligible for an Early Retirement Allowance under Section 4.2 of the Plan, shall have Retired under Section 3.2 upon such early retirement date, and, with respect to any Non-Grandfathered Amount, shall be deemed to have elected an Actual Retirement Date on the earliest date on which he/she could have otherwise elected to Retire under Section 3.2 of the Plan, unless and to the extent the Employee elects to defer commencement in accordance with the requirements of Code Section 409A.

E-60

Section 10

Change in Control

10.1 In the event of a “Change in Control,” as defined in Section 10.2:

(a) the Company makes a contractual commitment to pay the allowances under the Plan (1) in accordance with Section 9, with respect to an Employee who meets the requirements of said Section and whose employment is terminated by the Company within two years following a Change in Control, and (2) in accordance with paragraph (c) of this Section 10.1,

(b) eligibility for Early Retirement Allowances shall not require the consent or approval of the Company, of NIC, or of any officer, committee or board of said companies,

(c) an Eligible Employee in Organization Level 5 or above whose employment with the Company and all of its affiliates is terminated by the Company for reasons other than Cause (as defined in Section 9.3) within two years following a Change in Control, who is not eligible to “Grow-In” to early retirement in accordance with Section 9, and who has accrued at least 5 years of Credited Service will be provided a deferred vested allowance under the Plan, commencing on the first day of the month coincident with or next following the later of his/her attainment of age 55 or the date he/she terminates employment with the Company and all of its affiliates, which date shall be deemed to be his/her Actual Retirement Date, computed in the same manner as is used to compute a deferred vested pension under the RPSE, except that “annual base salary plus the annual average of the short-term incentive compensation paid to the Employee during the 60-month period prior to the date of termination” shall be used in lieu of “annual base salary,” and the deferred vested allowance so computed shall be reduced by the amount of the deferred vested pension under the RPSE (without regard to an Employee’s election of a cash refund under the RPSE) and such other amounts under Section 4.1(c). With respect to a Participant’s Non-Grandfathered Amount, any benefits otherwise payable under this Section 10 on account of an Employee’s termination of employment must be deemed a “separation from service” within the meaning of Treasury Regulation §1.409A-1(h) (using a percentage of 80% to determine the controlled group of corporations and businesses under common control).

(d) Section 7.1 will not apply.

10.2 For purposes of this Section 10, a “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 NIC or the Company 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 NIC representing 25% or more of the combined voting power of NIC’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 NIC 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 NIC or (C) any dissolution or liquidation of NIC or the Company or an agreement for the sale or disposition of all or substantially all (more than 50%) of the assets of NIC or the Company 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.

E-61

SUPPLEMENT A

IC Corporation (Conway) Supplement

Article I—Purpose and Background

1.1 Purpose, Use of Terms. The purpose of this Supplement A is to set forth the special provisions that apply to certain former employees of the Company’s wholly-owned subsidiary, IC Corporation, in Conway, Arkansas. The special provisions set forth in this Supplement A shall be subject to Code Section 409A. Except where the context indicates to the contrary, terms used and defined in the Plan shall have the same respective meanings for purposes of this Supplement A.

1.2 Background. IC Corporation (“Conway”) is not a Participating Company. Due to the unique circumstances of two individuals who were employed by Conway, however, participation in and benefits under the Plan will be provided to such persons in accordance with the respective special provisions of this Supplement A. These individuals are identified in this Supplement A by Participant numbers, which identification for the respective individuals is contained in Company records concerning the Plan.

1.3 Effective Date of this Supplement. With respect to Participant No. 1 described in Section 2.1, below, this Supplement A shall be effective as of June 1, 2004. With respect to Participant No. 2 described in Section 3.1, below, this Supplement A shall be effective as of January 1, 2004.

1.4 Conflicts between the Plan and this Supplement. This Supplement A together with the Plan comprises the Plan with respect to the employees covered under this Supplement. In the event of any inconsistencies between the provisions of the Plan and the provisions of this Supplement A, the terms and provisions of this Supplement A shall supersede the other provisions of the Plan to the extent necessary to eliminate such inconsistencies.

Article II—Participant No. 1

2.1 Participant No. 1. Participant No. 1 was a former employee of the Company and was eligible to participate in the Plan prior to becoming an employee of Conway, who was transferred to and re-employed by the Company and resumed active participation in the Plan subsequent to his Conway employment. For purposes of determining Participant No. 1’s benefits under the Plan, the following special provisions will apply.

2.2 Service. The period of employment by Conway will be recognized as Credited Service and Formula Benefit Service under Sections 1.5 and 1.10 of the Plan, respectively, in a manner similar to the service crediting provisions of the RPSE, as if Participant No. 1 had participated in said plan during his Conway employment, provided that there shall be no duplication of such service under the Plan by virtue of this provision.

2.3 Compensation. Compensation received during periods of employment with the Company will be treated as if such periods of employment had been contiguous, and no compensation received from Conway shall be recognized as compensation for purposes of the Plan, including, but not limited to, Sections 1.9, 4.3 and 4.9 of the Plan.

2.4 Offsets. The Retirement Plan for Employees of IC Corporation, as may be amended from time to time, shall specifically be included among the plans and programs described in Section 4.1(c)(4) of the Plan.

E-62

Article III—Participant No. 2

3.1 Participant No. 2, Prospective Participation. Participant No. 2 was an employee of Conway, who was provided participation in the Plan on a limited basis as described below. Among other things, Participant No. 2’s participation in the Plan, in general, is prospective only, commencing January 1, 2004, as further described in the following special provisions.

3.2 Service. In general, only the period of employment by Conway on and after January 1, 2004 will be recognized as Credited Service and Formula Benefit Service under Sections 1.5 and 1.10 of the Plan, respectively, in a manner similar to the service crediting provisions of the RPSE, as if Participant No. 2 had participated in said plan during his Conway employment, including, but not limited to, for purposes of determining the amount of benefits under the Plan pursuant to Sections 4.1, 4.2 and 9 of the Plan. The entire period of employment by Conway, however, will be recognized for purposes of determining eligibility for benefits under the Plan pursuant to the provisions of Sections 1.6, 1.14, 3.1, 3.2 and 9.1 of the Plan.

3.3 Compensation. Only compensation received during periods of employment by Conway on and after January 1, 2004 will be recognized as compensation for purposes of the Plan, including, but not limited to, Sections 1.9 and 4.3 of the Plan. Specifically, the provisions of Section 4.9 of the Plan will not be applicable to Participant No. 2.

3.4 Offsets. The Retirement Plan for Employees of IC Corporation, as may be amended from time to time, (the “Conway Pension Plan”) shall specifically be included among the plans and programs described in Section 4.1(c)(4) of the Plan; provided, however, that only a pro rata amount of the Participant’s benefit under the Conway Pension Plan, attributable to the period on and after January 1, 2004, shall be used as an offset under the Plan. Likewise, only a pro rata amount of the Participant’s Social Security Offset described in Section 4.1(b) of the Plan, attributable to the period on and after January 1, 2004, shall be used as an offset under the Plan.

E-63

EXHIBIT 10.84

NAVISTAR FINANCIAL CORPORATION

MANAGERIAL RETIREMENT OBJECTIVE PLAN

As Amended and Restated Effective As of January 1, 2005

(including amendments through July 31, 2008)

E-64

TABLE OF CONTENTS

		Page
Section 1    Plan Name and Definitions		E-67
1.1	Plan Name	E-67
1.2	Actual Retirement Date	E-67
1.3	Code	E-67
1.4	Company	E-67
1.5	Credited Service	E-68
1.6	Early Retirement Date	E-68
1.7	Eligible Employee	E-68
1.8	Employee	E-68
1.9	Final Average Compensation	E-68
1.10	Formula Benefit Service	E-68
1.11	Grandfathered Amount	E-68
1.12	NIC	E-68
1.13	Non-Grandfathered Amount	E-69
1.14	Normal Retirement Date	E-69
1.15	Participant	E-69
1.16	Participating Company	E-69
1.17	Plan Administrator	E-69
1.18	Retire or Retired or Retires	E-69
1.19	RPSE	E-69
1.20	Social Security Benefit	E-69
1.21	Specified Employee	E-69
1.22	Vacation Service	E-69
Section 2    Eligibility for Participation		E-69
2.1	Eligible Employees	E-69
2.2	Newly Hired Employees Not Eligible to Participate	E-70
2.3	Closure of Plan to Future Promoted, Hired, or Rehired Employees and Elimination of Eligibility to Participate for Employees Whose Dates of Birth Are Subsequent to January 1, 1960	E-70
Section 3    Retirement Dates and Conditions		E-71
3.1	Normal Retirement	E-71
3.2	Early Retirement	E-71
3.3	Employees Eligible for Long Term Disability Benefits	E-71
Section 4    Amount and Payment of Benefits		E-71
4.1	Normal Retirement Allowance	E-71
4.2	Early Retirement Allowance	E-72
4.3	Final Average Compensation	E-72
4.4	No Decrease in Plan Benefits	E-74
4.5	Assumptions and Adjustments in Computing Benefits	E-74
4.6	Preservation of Benefits Accrued As of December 31, 1988	E-74
4.7	Payment of Retirement Allowances	E-75
4.8	Allowances Unfunded	E-75
4.9	Enhancement to Retirement Allowances for Certain Participants	E-75
4.10	Special Recalculation of MRO Payments for Certain Participants Whose Actual Retirement Dates are On or After February 1, 2006 and Prior to May 1, 2008	E-75
4.11	Tax Withholding	E-76
4.12	Errors in Distributions	E-76

E-65

TABLE OF CONTENTS

(Continued)

		Page
Section 5    Survivor Benefits		E-76
5.1	Survivor Allowance – Before Retirement	E-76
5.2	Survivor Allowance – After Retirement	E-76
5.3	Survivor Allowance Election After Retirement	E-77
Section 6    Employee Contribution Requirements		E-78
6.1	Employee Contribution Requirements For the Period Prior to January 1, 1979	E-78
6.2	Adjustments to Formula Benefit Service For 1976	E-78
Section 7    General Conditions		E-78
7.1	Forfeitures	E-78
7.2	Applicability	E-79
7.3	Amendment and Termination	E-79
7.4	Contractual Obligation	E-79
7.5	Interpretation of the Plan	E-79
7.6	Special Considerations	E-79
Section 8    Miscellaneous		E-80
8.1	No Employment Rights	E-80
8.2	Assignment	E-80
8.3	Applicable Law	E-80
8.4	Facility of Payment; Missing Persons	E-81
8.5	Validity	E-81
8.6	Claims Procedure	E-81
8.7	Responsibility For Legal Effect	E-81
Section 9    Involuntary Termination		E-82
Section 10    Change in Control		E-82

E-66

NAVISTAR FINANCIAL CORPORATION

MANAGERIAL RETIREMENT OBJECTIVE PLAN

As Amended and Restated Effective As of January 1, 2005

(including amendments through July 31, 2008)

Introduction

Navistar Financial Corporation has provided retirement income for employees (previously classified as managerial or professional) for many years under various Company plans and policies. In particular, it has provided for a retirement income objective under its Managerial Retirement Objective (MRO) Plan that was adopted effective as of January 1, 1982. The Plan has been amended from time to thereafter, including an amendment and complete restatement as of January 1, 1990. The Plan was subsequently amended from time to time and this document constitutes a further amendment and restatement as of January 1, 2005, with further amendments through and including July 31, 2008. The provisions of this document shall be applicable to Employees, as hereinafter defined, who retire or otherwise terminate employment on or after January 1, 2005. With regard to employees who retired or otherwise terminated employment with the Company prior to such date, the provisions of such Plan as in effect at the time of such retirement or termination shall apply.

Compliance with Code Section 409A

The Plan is designed to comply in all respects with Code Section 409A. Accordingly, the Plan is hereby amended and restated, effective as of January 1, 2005, to conform to the requirements of Code Section 409A, and final Treasury regulations issued thereunder, with respect to any Non-Grandfathered Amount, as hereinafter defined, under the Plan. Notwithstanding the foregoing or any other provision of the Plan to the contrary, prior to January 1, 2009, it is intended that the Plan be construed and administered with respect to any Non-Grandfathered Amount both pursuant to and in accordance with a good faith interpretation of Code Section 409A and in a manner consistent with published guidance and other applicable authorities promulgated thereunder. Treatment of any Non-Grandfathered Amount under the Plan pursuant to and in accordance with any transition rules provided under such published guidance and other applicable authorities shall be expressly authorized hereunder and shall be administered in accordance with procedures established by the Plan Administrator, as hereinafter defined.

Section 1

Plan Name and Definitions

1.1 Plan Name. This plan, as may be amended from time to time, shall be known as the Navistar Financial Corporation Managerial Retirement Objective (MRO) Plan, hereinafter referred to as the “Plan.” The Plan also has been known as the Navistar Financial Corporation Managerial Retirement Objective (MRO) Policy. Notwithstanding the foregoing, to the extent (and only to the extent) required under Code Section 409A with respect to a Participant’s Non-Grandfathered Amount, the term “Plan” shall also mean any other plan with which the Plan is required to be aggregated under Code Section 409A. This Plan is intended to constitute a non-account balance plan, as defined in Treasury regulation §1.409A-1(c)(2)(i)(c).

1.2 “Actual Retirement Date” shall mean the first day of the month coincident with or next following the date on which an Eligible Employee actually Retires.

1.3 “Code” shall mean the Internal Revenue Code of 1986, as amended, including any applicable regulations, authorities, or such other guidance of general applicability promulgated thereunder.

1.4 “Company” shall mean Navistar Financial Corporation and any entity succeeding to its business which shall acquire its rights and assume its obligations under the Plan and, to the extent not specifically provided in the

E-67

Plan, includes any Participating Company for purposes of Sections 1.22, 3, 4, 7.1, 7.2, 8.1, 8.4, 8.5, and 8.7; provided that, to the extent (and only to the extent) required under Code Section 409A with respect to any Non-Grandfathered Amount, the term “Company” shall mean the entity for whom the Participant performs services and with respect to whom the legally binding right to payments under the Plan arises, and all entities with whom such entity would be considered a single employer under Code Section 414(b) or 414(c).

1.5 “Credited Service” shall mean Credited Pension Service as used for purposes of the RPSE.

1.6 “Early Retirement Date” shall mean the first day of any month prior to an Eligible Employee’s Normal Retirement Date and coincident with or next following the later of his/her attainment of age 55 and completion of 10 years of Credited Service.

1.7 “Eligible Employee” shall mean any Employee who has met the eligibility requirements of Section 2 (including through application of Section 9 or 10) and, with regard to earnings or periods of service before January 1, 1979, the contribution requirements of Section 6.1.

1.8 “Employee” shall mean any person employed full time by the Company or a Participating Company.

1.9 “Final Average Compensation” shall mean the Participant’s annual base salary plus eligible incentive compensation, as prescribed in Section 4.3, in the highest consecutive 60-month period during the 120-month period prior to his/her Actual Retirement Date, determined in accordance with Section 4.3. “Enhanced Final Average Compensation” shall have the meaning assigned to that term in Section 4.3.

1.10 “Formula Benefit Service” shall mean an Employee’s Formula Benefit Service as determined under the provisions of the RPSE, as modified in Section 6.2.

1.11 “Grandfathered Amount” shall mean, with respect to each Participant, the present value of the benefits, if any, to which he/she would have been entitled under the Plan if he/she voluntarily terminated services without cause on December 31, 2004 and received a payment of such benefits on the earliest possible date allowed under the Plan to receive a payment of such benefits following termination of services, and received such benefits in the form with the maximum value, each determined by reference to the terms of the Plan in effect as of October 3, 2004, but only to the extent such Plan terms have not been materially modified (within the meaning of Treasury Regulation §1.409A-6(a)(4)) after October 3, 2004. Notwithstanding the foregoing, for any subsequent taxable year of the Participant, the Grandfathered Amount may increase to (a) equal the present value of the benefits the Participant actually becomes entitled to, in the form and at the time actually paid, determined under the terms of the Plan, as in effect on October 3, 2004, without regard to any further services rendered by the Participant after December 31, 2004, or any other events affecting the amount of or the entitlement to such benefits (other than a Participant election with respect to the time or form of an available benefit, if applicable), and (b) include any earnings (within the meaning of Treasury Regulation §1.409A-6(a)(4)) attributable thereto due solely to the passage of time; provided that in no event shall the Participant’s Grandfathered Amount exceed the present value of the benefits to which he would have been entitled under the Plan. For purposes of calculating the present value of each Participant’s Grandfathered Amount, if any, reasonable actuarial assumptions and methods shall be used. Whether actuarial assumptions and methods are reasonable for this purpose shall be determined as of each date the Participant’s benefits are valued for purposes of determining the Grandfathered Amount; provided that any reasonable actuarial assumptions and methods that were used by the Company with respect to such benefits as of December 31, 2004 will continue to be treated as reasonable assumptions and methods for this purpose; provided further that actuarial assumptions and methods shall be presumed reasonable if they are the same as those used to value benefits under the RPSE (or such other a “qualified” plan sponsored by the Company the benefits under which are part of the benefit formula under, or otherwise impact the amount of a Participant’s benefits under, the Plan).

1.12 “NIC” shall mean Navistar International Corporation, the parent corporation of the Company, and each successor thereto.

E-68

1.13 “Non-Grandfathered Amount” shall mean, with respect to each Participant, the present value of the benefits to which he/she is entitled under the Plan less any portion of such benefits constituting his/her Grandfathered Amount.

1.14 “Normal Retirement Date” shall mean the first day of the month coincident with or next following an Eligible Employee’s attainment of age 65 and completion of 10 years of Credited Service.

1.15 “Participant” shall mean any Eligible Employee who participates in the Plan as provided in Section 2, and further, the term Participant shall be deemed to include any Employee who is or becomes eligible for an allowance under the Plan pursuant to Section 9 or 10.

1.16 “Participating Company” shall mean any corporation which is a member of the group of corporations under common control with the Company and which elects to be included under the Plan with the consent of the Company, and each successor thereto.

1.17 “Plan Administrator” shall mean the Company. To the extent the Plan Administrator considers necessary and advisable to properly carry out the administration of the Plan, it shall have discretionary authority to employ and rely upon information and opinions of agents, attorneys, accountants or other persons (who also may be employed by the Company) and to delegate to them any or all of the powers, rights and duties conferred on the Plan Administrator under the Plan. Any reference in the Plan to the term “Plan Administrator” with respect to any such delegation of powers, rights, and duties shall be deemed a reference to the Plan Administrator’s respective delegate.

1.18 “Retire” or “Retired” or “Retires” shall mean an Eligible Employee’s termination of employment with the Company and all of its affiliates (other than by reason of death) on or after his/her Normal Retirement Date or Early Retirement Date, whichever is applicable; provided that with respect to a Participant’s Non-Grandfathered Amount, such Participant’s termination of employment must be deemed a “separation from service” within the meaning of Treasury Regulation §1.409A-1(h) (using a percentage of 80% to determine the controlled group of corporations and businesses under common control).

1.19 “RPSE” shall mean the Company’s Retirement Plan for Salaried Employees, as may be amended from time to time.

1.20 “Social Security Benefit” shall mean the annual amount of Primary U.S. Social Security Benefit payable to the Participant at Actual Retirement Date or earliest commencement date, if later, as used for purposes of the RPSE. It shall also include any amounts (annual) payable to the Participant under the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP) and the Canadian Old Age Security Act, if applicable.

1.21 “Specified Employee” shall mean any Participant who is a “specified employee,” as defined in Treasury Regulation §1.409A-1(i), including any elections described in Treasury Regulation §1.409A-1(i)(2) through (7) made by the Company.

1.22 “Vacation Service” shall mean Company service accumulated from the most recent date of hire by the Company as used for purposes of determining the amount of vacation for which the Employee is eligible under Company policy, as determined by the Company.

Section 2

Eligibility for Participation

2.1 Eligible Employees

All Eligible Employees who are in Organization Levels 5 and above at their Actual Retirement Date are eligible for participation in the Plan upon their Actual Retirement Date.

E-69

2.2 Newly Hired Employees Not Eligible to Participate

Notwithstanding any other provision of the Plan, a person who first becomes an Employee of the Company or a Participating Company after December 31, 1995 is not eligible to participate in the Plan. In the case of any former Eligible Employee who is reemployed after December 31, 1995 by the Company or a Participating Company after a break in service, benefits shall accrue with respect to service after December 31, 1995 only if otherwise provided by the terms of the Plan. For further clarity, and subject to the provisions of Section 2.3:

(a) A person who first becomes an Employee after December 31, 1995 of the Company or a Participating Company by direct transfer from Navistar, Inc. (named International Truck and Engine Corporation immediately prior to February 27, 2008 and formerly named Navistar International Transportation Corp. immediately prior to February 23, 2000), or each successor thereto, or an employer participating in the Navistar, Inc. Managerial Retirement Objective Plan (known as the International Truck and Engine Corporation Managerial Retirement Objective Plan immediately prior to February 27, 2008 and formerly known as the Navistar International Transportation Corp. Managerial Retirement Objective Plan immediately prior to February 23, 2000) (the “Navistar, Inc. MRO Plan”), who at the time of such transfer was an Eligible Employee in the Navistar, Inc. MRO Plan (as defined therein), shall at the time of such transfer become an Eligible Employee in the Plan and cease being an Eligible Employee in the Navistar, Inc. MRO Plan.

(b) In the case of any former Eligible Employee who is reemployed by the Company or a Participating Company by direct transfer subsequent to December 31, 2005, from a member of the controlled group of corporations that includes the Company that is not an employer participating in the Plan or in the Navistar, Inc. MRO Plan at the time of such transfer, such former Eligible Employee shall not become an Eligible Employee and shall not recommence active participation under the Plan following the date of such transfer and no benefits shall accrue with respect to service or compensation subsequent to the date of such transfer.

2.3 Closure of Plan to Future Promoted, Hired, or Rehired Employees and Elimination of Eligibility to Participate for Employees Whose Dates of Birth Are Subsequent to January 1, 1960

Subject to Section 7.3, notwithstanding any provision of the Plan to the contrary, effective December 31, 2004, eligibility to participate in the Plan upon Actual Retirement Date is limited to Eligible Employees whose dates of birth are on or before January 1, 1960, and who, as of December 31, 2004 (or as of their last day worked, in the case of individuals described in subparagraph (1) or (2) below):

(a) are employed in Organization Level 7 or above (or were employed in Organization Level 12 or above prior to December 31, 2004, and continued in employment with the Company or a Participating Company in a position for which an Organization Level is not in effect on said date), or

(b) are employed in Organization Level 5 or 6 and who either are described in Section 6.2 of the Plan, or, during the period beginning January 1, 1995 and ending December 31, 2004, received a short-term incentive award of the type recognized for purposes of the Plan pursuant to Section 4.3;

provided, however, that this Section 2.3 shall not apply to an Employee or former Employee who, as of December 31, 2004:

(1) is receiving (or is eligible to receive) a long term disability benefit under a program of the Company or a Participating Company (as described in Section 3.3), or

(2) has been involuntarily terminated and is eligible for “Grow In” to early retirement under Section 3.2 of the Plan pursuant to Section 9,

unless and until such Employee or former Employee returns to active employment with the Company or a Participating Company.

No allowance shall be payable under the Plan with respect to any Employee (including a rehired former Employee) who is not eligible to participate in the Plan pursuant to this Section 2.3.

E-70

Section 3

Retirement Dates and Conditions

3.1 Normal Retirement

An Eligible Employee who reaches his/her Normal Retirement Date while in the employment of the Company may elect to Retire and shall be entitled, subject to the forfeiture provisions of Sections 7.1 and 8.4, to receive a Normal Retirement Allowance as specified in Section 4.1.

3.2 Early Retirement

An Eligible Employee who reaches his/her Early Retirement Date while in the employment of the Company may elect to Retire. In the event of such Early Retirement with Company consent and approval, an Eligible Employee shall be entitled, subject to the forfeiture provisions of Sections 7.1 and 8.4, to receive an Early Retirement Allowance as specified in Section 4.2. In the absence of such consent and approval, an Employee may retire and will be entitled only to such benefits as may be provided under the RPSE.

3.3 Employees Eligible for Long Term Disability Benefits

An Employee who is receiving (or is eligible to receive) a long term disability benefit which commences on or after November 1, 1979 under a benefit program of the Company or a Participating Company shall not be eligible to Retire under Section 3.1 or 3.2, whichever is applicable, until the expiration of (or the cessation of eligibility for) such long term disability benefits. Accordingly, on or after November 1, 1979, no allowance shall be payable under the Plan with respect to any such period during which an Employee is receiving or is eligible to receive a long term disability benefit under a benefit program of the Company or a Participating Company.

Section 4

Amount and Payment of Benefits

4.1 Normal Retirement Allowance

The monthly Normal Retirement Allowance of a Participant who Retires under Section 3.1 shall be an amount, commencing as of the Participant’s Actual Retirement Date, equal to one-twelfth of the quantity (a) the Managerial Retirement Objective (“MRO”) below, minus (b) the Social Security Offset below, minus (c) below:

(a) The MRO shall be equal to Final Average Compensation multiplied by the lesser of (1) or (2), below:

(1) the sum of (i) and (ii):

(i) 2.4% for each year of Formula Benefit Service accrued prior to January 1, 1989

(ii) 1.7% for each year of Formula Benefit Service accrued on or after January 1, 1989

(2) 60% minus 2.4% for each year prior to 1979 that the Employee failed to make or repay the required employee contributions pursuant to Section 6.

(b) The Social Security Offset shall be equal to the Participant’s Social Security Benefit (as defined in Section 1.20) multiplied by the lesser of (1) or (2), below:

(1) 1.7% for each year of Formula Benefit Service

(2) 60%

(c) Other Offsets

The sum of the annual amounts of the following benefits payable to the Participant under:

(1) the RPSE,

E-71

(2) any plan or program of Navistar Canada, Inc. (named International Truck and Engine Corporation Canada immediately prior to February 20, 2008), and each successor thereto, providing defined benefit retirement benefits,

(3) the following former deferred profit sharing plans: Employees’ Retirement Savings and Profit Sharing Plan of the Frank G. Hough Co.; Solar Aircraft Company Employees’ Profit Sharing Retirement Plan; or former Navistar International Transportation Corp. Profit Sharing Plan for Eligible Employees, with such amounts determined on the basis of actuarial equivalent of distributions related to account balances thereunder;

(4) any other pension plan or program of the Company, of an affiliated company, or of its foreign or domestic subsidiaries providing defined benefit retirement benefits, but excluding the Navistar, Inc. Supplemental Executive Retirement Plan (named the International Truck and Engine Corporation Supplemental Executive Retirement Plan immediately prior to February 27, 2008),

(5) any foreign social security program, excluding amounts defined in Section 1.20. (In cases where the Employee is eligible for U.S. Social Security Benefits and has not been compensated for his/her contributions to the foreign social security programs, only the estimated Company-purchased portion of foreign social security benefits shall be used. In cases where the Employee is not eligible for U.S. Social Security Benefits, the entire amount of foreign social security shall be used.), and

(6) any severance or termination benefits required by a foreign government.

The determination of the retirement benefits that the Participant is eligible to receive from the retirement plan of the foreign subsidiary or affiliated company and foreign social security benefits shall be made at time of the Employee’s Actual Retirement Date or the first date the Participant is eligible to receive such benefits, if later, and shall not be subject to change thereafter for purposes of determining the Allowance under the Plan.

4.2 Early Retirement Allowance

The Early Retirement Allowance for a Participant who Retires under Section 3.2 on or after his/her 62nd birthday shall be the amount computed under Section 4.1, with the amount computed under Section 4.1(a) unreduced for commencement of benefits prior to Normal Retirement Date.

The Early Retirement Allowance for a Participant who Retires under Section 3.2 on or after his/her 55th birthday but prior to his/her 62nd birthday shall be the amount computed under Section 4.1(a) reduced by 1/4 of 1% for each month or partial month his/her age at Actual Retirement Date is less than age 62, then further reduced by the amounts under paragraphs (b) and (c) of Section 4.1. For purposes of determining the Social Security Offset under paragraph (b) of Section 4.1, it will be assumed there are no Social Security earnings after the Actual Retirement Date.

4.3 Final Average Compensation

“Final Average Compensation” shall mean an Employee’s average annual base salary plus certain short-term incentive awards, as designated by the Plan Administrator in its discretion, in the highest consecutive 60-month period during the 120-month period prior his/her Actual Retirement Date, except as provided in (a) and (b), below. Except as provided in Section 4.10, such incentive awards will relate to the month in which payment is actually made. No more than five annual awards or twenty quarterly awards (or equivalent combination thereof) shall be included within any 60-month period and, except as provided in Section 4.10, only such incentive awards paid before a Participant’s Actual Retirement Date shall be considered. In the event more than five annual or twenty quarterly awards (or equivalent combination thereof) occur within any given 60-month period, only the five annual or twenty quarterly awards (or equivalent combination thereof) which are in consecutive sequence with one another and which produce the highest resulting average, as indicated above, will be considered. The short-term incentive awards recognized for purposes of the Plan are Annual Incentive Awards

E-72

or their equivalent and certain sales and marketing incentive compensation programs (excluding compensation for contests and other forms of sales promotions) as designated by the Plan Administrator from time to time in its discretion.

Annual Incentive Awards for fiscal year 1999 and each subsequent year shall be taken into account only to the extent of the ratio specified below for the Organization Level of each Employee as of the last day of each fiscal year for which an Award is payable.

Organization Level On Last Day of Fiscal Year	Ratio
13	50/65
12	50/65
11	45/55
10	40/50
9	35/40

Annual Incentive Awards for fiscal year 2000 and each subsequent year shall be taken into account only to the extent of the ratio specified below for the Organization Level of each Employee as of the last day of each fiscal year for which an Award is payable, and shall not exceed the amount set out as the “Cap” for the fiscal year.

Organization Level On Last Day of Fiscal Year	Ratio	Cap (As a Percentage of Annualized Base Salary On Last Day of Fiscal Year)
13	50/75	75.0%
12	50/75	75.0%
11	45/65	67.5%
10	40/55	60.0%
9	35/40	52.5%

Long Term Incentive Awards, cash profit sharing/enhanced profit sharing payments, and “lump-sum” increase and recognition awards (excluded from base salary) are specifically excluded.

(a) For an Employee described in Section 3.3, the 120-month period described above shall be the 120-month period prior to the expiration of salary continuation, and

(b) For an Employee described in Section 9.1, the 120-month period described above shall be the 120-month period prior to the last day worked.

For the purpose of this Section 4.3, compensation shall not include incentive compensation attributable to fiscal year 2001 and thereafter which compensation:

(i) is attributable to service while the Employee was in Organization Level 5 or 6, or

(ii) is attributable to service while the Employee is in Organization Level 7 or 8, and is attributable to an incentive compensation program other than the Annual Incentive Award program (or an equivalent award program), to the extent such incentive compensation paid for a fiscal year exceeds 37.5% of the annualized base salary as of the end of that fiscal year for an Employee in Organization Level 7 and 45.0% of the annualized base salary as of the end of that fiscal year for an Employee in Organization Level 8.

“Enhanced Final Average Compensation” shall mean, for certain Participants as described in Section 4.9, the Participant’s Final Average Compensation determined in accordance with the foregoing provisions of this Section 4.3 by substituting for the “120-month period” described above the “period from January 1, 1995 to the Participant’s Actual Retirement Date”; provided, however, that for purposes of applying paragraph (a), above, in determining the Enhanced Final Average Compensation, such substituted 120-month period shall instead be the

E-73

“period from January 1, 1995 to the expiration of salary continuation” and for purposes of applying paragraph (b), above, in determining the Enhanced Final Average Compensation, such substituted 120-month period shall instead be the “period from January 1, 1995 to the last day worked.”

4.4 No Decrease in Plan Benefits

There will be no decrease in the amount of monthly benefits payable in the case of (a) a Participant or beneficiary who is receiving benefits or (b) an Eligible Employee whose employment is terminated by the Company for reasons other than Cause (as defined in Section 9.3) and who has a nonforfeitable right to (deferred) benefits pursuant to Section 9 or 10, by reason of any general increase in the benefit levels payable under Title II of the Social Security Act, or under the comparable acts related to the CPP or QPP or under the Canadian Old Age Security Act or any increase in the wage base under such Act(s), or any post-retirement increase in the amounts in Section 4.1(c) subsequent to the Participant’s Actual Retirement Date or the Participant’s termination from employment with the Company, respectively.

4.5 Assumptions and Adjustments in Computing Benefits

(a) If an Eligible Employee elects (or is deemed to have elected) an optional form of payment of retirement or survivor income, such as the Survivor Benefit or the Qualified Pre-Retirement Survivor Annuity (QPSA) under the RPSE, the amounts in 4.1(c), above, will be computed as if the option had not been elected.

(b) Contributory benefits under the RPSE, non-contributory benefits under the RPSE, and annuity benefits under other Company plans under which annuities are provided will be deemed to have commenced (on a reduced basis, to the extent such benefits would be subject to reduction if commencement occurred on the Actual Retirement Date) as of the Actual Retirement Date.

(c) Social Security Benefits will be taken into account in determining any MRO allowance under this Plan even though the Participant either does not apply for, or loses part or all of such payments through delay in not applying for them, by entering into employment, or otherwise.

4.6 Preservation of Benefits Accrued As of December 31, 1988

Notwithstanding the foregoing, the amount of a Participant’s allowance determined under Section 4.1 or 4.2, whichever is applicable, shall not be less than an amount determined by substituting both the “Preserved MRO” in paragraph (a), below, for the MRO in Section 4.1(a) and the “Preserved Social Security Offset” in paragraph (b), below, for the Social Security Offset in Section 4.1(b).

(a) The “Preserved MRO” shall be equal to the “Preserved Final Average Compensation” multiplied by the lesser of

(1) 2.4% for each year of Formula Benefit Service accrued prior to January 1, 1989, or

(2) 60% minus 2.4% for each year prior to 1979 that the Employee failed to make or repay the required employee contributions pursuant to Section 6.

(b) The “Preserved Social Security Offset” shall be equal to 65% of the Participant’s Social Security Benefit determined as of December 31, 1988, using the Social Security law as then in effect and assuming there are no Social Security earnings after such date, but based on the Employee’s age at Actual Retirement Date rather than his/her age on December 31, 1988.

(c) The “Preserved Final Average Compensation” shall mean Final Average Compensation determined under Section 4.3 as if the Participant’s Actual Retirement Date were January 1, 1989 and by substituting “36-month” and “60-month,” respectively, for “60-month” and “120-month” and by substituting “three” and “twelve,” respectively, for “five” and “twenty,” wherever they occur in that Section.

E-74

4.7 Payment of Retirement Allowances

A Participant’s allowances under the Plan, subject to Sections 7.1 and 8.4, are payable in monthly installments commencing on the Participant’s Actual Retirement Date. Allowances cease with the payment made on the first day of the month in which the Participant’s death occurs, except to the extent payments after death are provided by the form of allowance which is then in effect. Notwithstanding the foregoing or any other provision of the Plan to the contrary, in the event the Participant is a Specified Employee, no portion of his/her benefits under the Plan that constitutes a Non-Grandfathered Amount shall be paid before the end of the six-month period following the Participant’s Actual Retirement Date, except in the event of the Participant’s death before the end of such period; provided that on the first date on which such benefit payments may be paid to the Participant at the end of such six-month period, the Participant shall receive payment of all monthly benefit payments due from his/her Actual Retirement Date, with an appropriate adjustment for interest for delayed payment (computed in a manner consistent with computing interest adjustments for delayed pension payments under the RPSE).

4.8 Allowances Unfunded

The allowances payable under this Plan shall be paid by the Company each month out of its general assets and shall not be funded in any manner.

4.9 Enhancement to Retirement Allowances for Certain Participants

With regard to certain Participants, as further provided in this Section 4.9, whose dates of birth are on or before January, 1, 1955, and who Retire or otherwise terminate employment with the Company and all of its affiliates on or after December 31, 2005, such Participants shall receive enhancements to their allowances otherwise determined under the Plan without regard to this Section 4.9. The amount of such enhancements, which shall constitute a Non-Grandfathered Amount and shall be subject to Code Section 409A, shall be equal to the excess, if any, by which the allowances determined by substituting the Participant’s Enhanced Final Average Compensation for the Participant’s Final Average Compensation exceed the allowances otherwise determined under the Plan absent this Section 4.9. Such enhancements to the allowances of a Participant or of a Participant’s surviving spouse, if applicable, shall be paid at the same time and in the same frequency, form and manner, and for the same duration as such Participant’s or surviving spouse’s allowances are otherwise payable under the Plan, except to the extent otherwise required by law.

The above provisions of this Section 4.9 shall not apply to a Participant who, as of December 31, 2005:

(a) is receiving (or is eligible to receive) a long term disability benefit under a program of the Company or a Participating Company (as described in Section 3.3), or

(b) has been involuntarily terminated and is eligible for “Grow In” to early retirement under Section 3.2 of the Plan pursuant to Section 9,

unless and until such Participant returns to active employment with the Company.

4.10 Special Recalculation of MRO Payments for Certain Participants Whose Actual Retirement Dates are On or After February 1, 2006 and Prior to May 1, 2008

A Participant whose Actual Retirement Date is on or after February 1, 2006 and prior to May 1, 2008, and who Retired prior to the payment of his or her Achievement Bonus attributable to the fiscal year ending October 31, 2005 and/or the payment of his/her Annual Incentive Award for the fiscal year ending October 31, 2006, will have his/her amounts under this Section 4 recalculated as soon as administratively practicable after the payment of any such awards. The recalculation will recognize such awards in the determination of such Participant’s Final Average Compensation and Enhanced Final Average Compensation under Section 4.3 and,

E-75

such award(s) will be considered as having been paid during the last month of the applicable “120-month period” with respect to Final Average Compensation and of the comparable period with respect to Enhanced Final Average Compensation described in Section 4.3, but only to the extent that such award(s) were paid after the end of such applicable periods. Any net increases in such Participant’s allowances under the Plan resulting from such recalculation shall be effective retroactive to such Participant’s Actual Retirement Date, shall constitute a Non-Grandfathered Amount, and shall be subject to Code Section 409A.

4.11 Tax Withholding

To the extent required by law in effect at the time distribution is made from the Plan (or at such earlier date on which any taxes are due, as prescribed by law), the Company shall withhold any taxes required to be withheld by federal, state or local taxing authorities.

4.12 Errors in Distributions

In the event of an error in a distribution, the Participant’s or his/her beneficiary’s benefits under the Plan shall, immediately upon the discovery of such error, be adjusted to reflect such underpayment or overpayment and, if possible, the next distribution shall be adjusted upward or downward, as appropriate, to correct such prior error. If the remaining benefits owed to the Participant or his/her beneficiary is insufficient to cover an erroneous overpayment, the Company may, at its complete and sole discretion, offset other amounts payable to the Participant from the Company or bring a lawsuit or proceeding against the Participant or his/her beneficiary to recoup the amount of any such overpayment and any costs and expenses, including, without limitation, court costs and reasonable attorneys’ fees, incurred by the Plan, the Company, or the Plan Administrator, in connection with recouping any such overpayment.

Section 5

Survivor Benefits

5.1 Survivor Allowance – Before Retirement

The surviving spouse of an Eligible Employee (i) who dies after attaining age 55 and after becoming eligible to Retire, but before he/she actually Retires, and (ii) who if he/she had Retired at the date of his/her death, would have been eligible for the survivor benefits under Section 5.2, shall be entitled to a monthly “Automatic Survivor Allowance” during the spouse’s lifetime, terminating with the last monthly payment before the spouse’s death. The monthly allowance payable to the surviving spouse shall be the amount such spouse would have been entitled to receive under Section 5.2 if the Employee had Retired under Section 3.1 or 3.2, whichever is applicable, on the date of his/her death with allowances commencing the first of the following month with the Survivor Benefit under Section 5.2 in effect. A surviving spouse who was not married to the deceased Employee for at least one year at the date of death shall not be eligible for this Automatic Survivor Allowance.

5.2 Survivor Allowance – After Retirement

(a) For a married Employee who elects to Retire with an allowance payable pursuant to Section 4.1 or 4.2, whichever is applicable, (or for a married Employee who commences his/her deferred vested allowance pursuant to Section 10) whose designated spouse shall be living at the Employee’s death after the effective date in paragraph (b) below, a Survivor Allowance shall be payable to such spouse during the spouse’s further lifetime.

(b) The provisions of paragraph (a) shall become effective on the later of (i) the commencement date of the Employee’s monthly allowance, or (ii) the first day of the month in which the Employee has been married one year if he/she is married when such Survivor Allowance provisions would otherwise become effective but such marriage has been in effect less than one year at that date.

(c) The beneficiary of a Survivor Allowance shall be only the person who is the Employee’s spouse at the effective date of the Survivor Allowance and who has been his/her spouse for at least one year immediately prior to such date.

E-76

(d) The Survivor Allowance provided in this Section 5.2 shall not be applicable upon the death of the Employee or his/her designated spouse, or both, prior to the effective date of the Survivor Allowance.

(e) For an Employee for whom and during the period in which a Survivor Allowance is in effect, the monthly allowance otherwise payable to the Employee shall be decreased by one-half of one percent (1/2%) for each full year in excess of ten (10) years that the spouse’s age is less than the Employee’s age (the age of each for purposes hereof being the age at his/her last birthday prior to the effective date of the Survivor Allowance); except that, in the case of an Employee who Retires under Section 3.2 prior to age 62, the amount of reduction in his/her monthly benefit before age 62 attributable to the Survivor Allowance shall be based on the monthly allowance payable to such Employee after age 62.

(f) In the event the spouse for whom a Survivor Allowance is in effect predeceases the Employee or they are divorced by court decree, the Survivor Allowance shall be cancelled on the date of such death or court decree. Any reduction pursuant to (e) above shall be eliminated effective the first day of the third month following the month in which the Company receives evidence satisfactory to the Company of the spouse’s death or of a final decree of divorce.

(g) The Survivor Allowance payable to the surviving spouse of a Participant who dies after both the commence date of his/her monthly allowance and the effective date of the Survivor Allowance shall be a monthly allowance for the further lifetime of such surviving spouse equal to 55% of the amount of such Participant’s monthly allowance payable after age 62 after any applicable reduction pursuant to paragraph (e) above.

(h) An Employee whose allowance would be reduced under paragraph (e) above may revoke the Survivor Allowance otherwise provided in this Section 5.2 by executing and filing with the Company at or prior to the commencement date of his/her monthly allowance a specific written election, which (for elections other than elections changing a previous revocation) includes the written consent of the Employee’s spouse witnessed by a Plan representative or notary public, on a form approved by the Company.

5.3 Survivor Allowance Election After Retirement

A Participant who Retires with an allowance pursuant to Section 4.1 or 4.2, whichever is applicable, and for whom no Survivor Allowance is in effect pursuant to Section 5.2 may file a written application with the Company for a Survivor Allowance provided:

(i) the Participant was not married at a time when the Survivor Allowance would otherwise have been available pursuant to Section 5.2 and has subsequently married, or

(ii) the Participant had a Survivor Allowance in effect pursuant to Section 5.2 which is no longer in effect and has remarried.

Such Survivor Allowance shall be provided under the terms and conditions of Section 5.2 and shall become effective on the first day of the month following the month in which the Company receives a completed application on a form approved by the Company, but in no event before the first day of the month following the month in which the Participant has been married to the designated spouse for one year. No Survivor Allowance provided hereunder shall become effective for a Participant whose application form is received by the Company after the first day of the month in which the Participant has been married to the designated spouse for one year. Notwithstanding the foregoing or any other provision of the Plan to the contrary, any such application by a Participant for such Survivor Allowance with respect to that portion of his/her benefits under the Plan that constitutes a Non-Grandfathered Amount shall be permitted only to the extent the provision of such Survivor Allowance does not otherwise violate the requirements of Code Section 409A.

E-77

Section 6

Employee Contribution Requirements

6.1 Employee Contribution Requirements For the Period Prior to January 1, 1979

In addition to the requirements under Sections 2 and 3, to be eligible for benefits under the Plan upon an Eligible Employee’s Actual Retirement Date, an Employee must have regularly contributed to the Contributory Annuity Plan (“CAP”) or the RPSE (Part B), whichever was applicable, with regard to earnings and periods of service prior to January 1, 1979, on the following bases: (1) If the Employee was not a member of the CAP on December 21, 1950, but was a managerial employee over age 30 and had two years of credited pension service, he/she must have joined the CAP within 60 days after that date (that is before February 20, 1951), and contributed continuously thereafter, to the extent permitted by his/her earnings; (2) If the Employee was not so eligible for membership in the CAP on December 21, 1950, he/she must have joined within 60 days after becoming eligible, within 60 days after being promoted to a managerial position, or by age 30, whichever is later; and have contributed continuously thereafter, to the extent permitted by his/her earnings. (The two-year service requirement for CAP participation was eliminated on January 1, 1965 for an Employee age 30 and over. The age 30 requirement was changed to age 25 effective August 1, 1977.); and (3) If a managerial employee was participating in the CAP or the RPSE (Part B), whichever is applicable, and prior to August 1, 1977 requested discontinuance of contributions after reaching age 30, or on or after August 1, 1977 requested discontinuance of contributions after reaching age 25, such Employee is ineligible for benefits under the Plan.

Ineligible managerial Employees on January 1, 1976 who by June 30, 1977 agreed to make special contributions in amounts equal to the contributions which they would have made had they elected to contribute in eligible years prior to 1977 shall become eligible for benefits under the Plan with respect to service prior to January 1, 1976. However, failure to continuously contribute thereafter in any year prior to 1979 in which such Employee was eligible to do so will make such Employee ineligible for benefits under the Plan.

No Employee contributions are required or permitted with regard to earnings or periods of service on or after January 1, 1979.

6.2 Adjustments to Formula Benefit Service For 1976

For an Employee who at any time during the period January 1, 1976 through July 31, 1977 had attained the age of 25 but not 30 and who, solely on account of not making contributions to the RPSE during such period but prior to attaining the age of 30 incurred a reduction on account of the year 1976 in the determination of such Employee’s Formula Benefit Service under the provisions of the RPSE shall have such reduction on account of the year 1976 disregarded for all purposes of the Plan.

Section 7

General Conditions

7.1 Forfeitures

Subject to Section 10.1, if, without the written consent of the Company, a Participant engages in a business, whether as owner, partner, officer, employee or otherwise, which is in competition with the Company or one of its affiliates, and if the Participant’s participation in such a business is deemed by the Company to be detrimental to the best interests of the Company, any allowance otherwise payable thereafter to or on account of him/her under the Plan will be forfeited, notwithstanding any other provisions of this Plan. The determination as to whether such business is in competition with the Company or any of its affiliates, and whether such participation by such person is detrimental to the best interests of the Company, shall be made by the Company in its absolute discretion, and the decision of the Company with respect thereto, including its determination as to when the participation in such competitive business commenced, shall be conclusive.

E-78

7.2 Applicability

This Plan shall not apply to Employees of any division or operation to the extent and during the time excluded by the Company because of the existence or establishment of a separate pattern of benefits within a particular area or industry.

7.3 Amendment and Termination

The Company expects to continue the Plan indefinitely, but reserves the right to modify or discontinue the Plan if, in its judgment, such a change should be deemed necessary or desirable. However, even if the Company should modify or discontinue the Plan, the allowances already granted to Eligible Employees who Retired under Section 3.1 or 3.2, whichever is applicable, will be continued under the terms of the Plan as in effect when the Eligible Employee so Retired.

In the event the Company were to modify or discontinue the Plan, any such modification or discontinuance shall not reduce the “accrued objective” under the Plan for an Eligible Employee in Organization Level 5 or above who has attained the age of 55 and accrued at least ten years of Credited Service as of the effective date of such modification or discontinuance; and as of the date the Employee actually Retires under Section 3.1 or 3.2, whichever is applicable, the Company shall pay such Employee an allowance which together with the amounts computed under Section 4.1(b) and (c) shall be sufficient to bring such Employee’s total retirement income up to such accrued objective. For purposes of this provision, an Employee’s “accrued objective” shall be the MRO computed under Section 4.1(a) as if the Employee had Retired under Section 3.1 or 3.2, whichever is applicable, on the effective date of such modification or discontinuance, based on the provisions of the Plan as in effect immediately prior to such amendment. In the event the Employee Retired under Section 3.2, such accrued objective shall be reduced in accordance with Section 4.2, based on the provisions of the Plan as in effect immediately prior to such amendment (as if Section 4.2 had continued in effect until Actual Retirement Date) and on the Employee’s age at Actual Retirement Date.

Supplements may be added to the Plan. Each Supplement will form a part of the Plan, and will modify the terms of the Plan as applied to those employees or groups of employees identified in that Supplement.

7.4 Contractual Obligation

Notwithstanding any provision (other than Section 7.1 or 8.4) to the contrary, the Company hereby makes a contractual commitment to pay the allowances under and in accordance with the Plan with respect to an Eligible Employee in Organization Level 5 or above who has attained the age of 55 and accrued at least ten years of Credited Service.

7.5 Interpretation of the Plan

The Plan Administrator is granted discretionary authority to determine eligibility for and the amount of allowances, and to construe the terms of the Plan, and such determinations by the Plan Administrator shall be final and binding on all persons.

7.6 Special Considerations

It is recognized that retirements of Eligible Employees may involve unusual circumstances or conditions which do not meet all of the provisions of this Plan. Only the Compensation Committee (or any successor committee thereto) of the Board of Directors of NIC shall have the power and authority to review such cases and to determine whether or not the unusual circumstances or conditions warrant granting an exception to the provisions.

E-79

Section 8

Miscellaneous

8.1 No Employment Rights

Nothing contained in this Plan shall be construed as a contract of employment between the Company and an Employee, or as a right of any Employee to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge any of its Employees, with or without Cause (as defined in Section 9.3).

8.2 Assignment

(a) The benefits payable under this Plan may not be assigned or alienated, except that with respect to benefits being paid to Participants, all or a portion of such benefits may be paid in accordance with the provisions of a Qualified Domestic Relations Order (“QDRO”) as defined by the Retirement Equity Act of 1984, in which case, the amount of any benefits otherwise payable under the Plan shall be reduced accordingly by the value of any benefits paid or payable to any alternate payee(s) pursuant to such QDRO.

(b) A Participant or beneficiary may direct that any portion of his/her Plan benefit be paid to a third party (which includes the Company and affiliates) in payment of amounts such as federal, state, or local tax withholding; a direct deposit to an account in a bank, savings and loan association, or credit union; and contributions under a life insurance, medical, or other employee benefit plan; provided that:

(1) Such payment direction will be revocable by the Participant or beneficiary at any time prior to the payment being made;

(2) The payment is for a category of payments for which the Plan Administrator has authorized payment direction; and

(3) Payments to third parties shall not exceed in the aggregate 10% of any benefit payment, except that the following payments shall not individually or in the aggregate be subject to the 10% limitation:

(i) Payments (including but not limited to contributions under a life insurance, medical, or other employee benefit plan) directed to be made to a third party who has filed a written acknowledgment with the Plan Administrator stating that the third party has no enforceable right in, or to, any Plan benefit payment or portion thereof (except to the extent of payments actually received pursuant to the terms of the payment direction);

(ii) Any arrangement for the withholding of federal, state, or local tax;

(iii) Any arrangement for the recovery by the Plan of overpayments of benefits previously made to a Participant or beneficiary; and

(iv) Any arrangement for direct deposit to an account in a bank, savings and loan association, or credit union.

8.3 Applicable Law

This Plan shall be construed and administered in accordance with applicable federal laws and, to the extent not inconsistent therewith or preempted thereby, with the laws of the State of Illinois, determined without regard to the choice of law rules of any jurisdiction. Without limiting the generality and applicability of the foregoing and notwithstanding any provision in the Plan to the contrary, if and to the extent that the payment of any Plan benefits would otherwise violate the requirements of Code Section 409A, such Plan benefits shall be paid under such other conditions determined by the Plan Administrator that cause the payment of such benefits to comply with Code Section 409A and the Plan shall be construed and administered accordingly to achieve that objective, and in the event of any inconsistency between the terms of the Plan and Code Section 409A, the terms of Code Section 409A shall prevail and govern.

E-80

8.4 Facility of Payment; Missing Persons

When a person entitled to benefits under the Plan is under legal disability, or, in the Plan Administrator’s opinion, is in any way incapacitated so as to be unable to manage his/her financial affairs, the Plan Administrator may, in its sole discretion, direct payment of benefits to such person’s legal representative or estate, to any person who is judicially appointed or authorized to receive payment of benefits for such person’s benefit, or to a relative or friend of such person for such person’s benefit, or the Plan Administrator may direct the application of such benefits for the benefit of such person. Any payment made in accordance with the preceding sentence shall be a full and complete discharge of any liability for such payment under the Plan.

Neither the Plan Administrator nor the Company is required to search for or locate any person entitled to benefits under the Plan. If the Plan Administrator attempts to notify a person that he/she is entitled to benefits under the Plan, and such person fails to claim his/her benefits or make his/her whereabouts known to the Plan Administrator within a reasonable period of time after the notification is sent to such person, the benefits payable to such person shall be forfeited; provided that such benefits shall be reinstated if the person entitled thereto subsequently makes a claim for the forfeited benefits.

8.5 Validity

If any provision of the Plan is deemed invalid, illegal, or unenforceable by appropriate authority under the law of any jurisdiction applicable to the Plan, the same shall not affect, in any respect whatsoever, the validity, legality, or enforceability of any other provision of the Plan, and the Plan shall continue, to the fullest extent permitted by law, as if such invalid, illegal, or unenforceable provision were omitted and/or modified by such appropriate authority so as to preserve its validity, legality, or enforceability, unless such omission or modification would substantially impair the rights or benefits under the Plan of any affected Participant or beneficiary, the Company, or the Plan Administrator.

8.6 Claims Procedure

The Plan Administrator will provide notice in writing to any Participant or beneficiary whose claim for benefits under the Plan is denied, and the Plan Administrator shall also afford such Participant or beneficiary a full and fair review of its decision if so requested. The Plan Administrator has discretionary authority and responsibility to construe and interpret the provisions of the Plan and make factual determinations thereunder, including the power to determine the rights or eligibility of Employees or Participants and any other persons, and the amounts of their benefits under the Plan, and to remedy ambiguities, inconsistencies or omissions. Each such determination by the Plan Administrator shall be binding on all parties. Any interpretation of the provisions of the Plan and any decisions on any matter within the discretion of the Plan Administrator made in good faith shall be final and binding on all persons. Except to the extent reserved under Section 7.6, benefits under the Plan will be paid only if the Plan Administrator decides in its discretion that the applicant is entitled to them.

8.7 Responsibility For Legal Effect

No representations or warranties, express or implied, are made by the Company or the Plan Administrator and neither the Company nor the Plan Administrator assumes any responsibility concerning the legal, tax, or other implications or effects of the Plan.

E-81

Section 9

Involuntary Termination

9.1 Except as provided in Section 9.2, an Eligible Employee in Organization Level 5 or above whose employment with the Company and all of its affiliates is terminated by the Company for reasons other than “Cause” and whose age plus continuous Vacation Service as of the date of termination total 55 or more shall be eligible to “Grow-In” to early retirement under Section 3.2 of the Plan, with benefits based on the Plan as in effect on the date of such termination, provided:

(a) the Employee has accrued at least ten years of Credited Service as of his/her date of retirement,

(b) the Employee does not experience a break in service under the RPSE by reason of retirement under the RPSE, death, voluntary election to break such service or the elapse of a period of time equal to the Employee’s continuous Vacation Service prior to his/her date of retirement, and

(c) the Employee is not rehired by the Company or an affiliated company prior to his/her date of retirement.

9.2 Notwithstanding the foregoing, such “Grow-In” shall not apply to an Employee who refuses a reasonable offer of employment from the purchaser of a business or facility unless the Employee had the option to refuse the offer by the terms of the sale agreement or without breaking his/her continuity of service under the applicable Company policy with respect to the particular sale; provided, further, however, that an Employee who is employed by or is offered a reasonable position with such a purchaser, but is not eligible to participate in a plan of the purchaser which is the same as or substantially comparable to the RPSE and which plan of the purchaser provides that the Employee will receive credit for all service recognized under the Company’s plan, will be eligible for “Grow-In.”

9.3 The term “Cause” means termination by the Company for willful misconduct involving an offense of a serious nature, for conviction of a felony as defined by the state in which the act was committed or for continued intentional failure to perform required duties with the Company after written notice of such failure.

9.4 The term “Grow-In” means that the former Employee will be treated for purposes of the Plan as if he/she were on layoff for purposes of the RPSE. Such terminated Employee who, by virtue of aging and/or accruing additional Credited Service in accordance with the provisions of the RPSE subsequent to termination of employment, meets the age, service and other requirements for early retirement under Section 3.2 of the Plan, except for being an Employee of the Company on his/her early retirement date, shall be eligible for an Early Retirement Allowance under Section 4.2 of the Plan, shall have Retired under Section 3.2 upon such early retirement date, and, with respect to any Non-Grandfathered Amount, shall be deemed to have elected an Actual Retirement Date on the earliest date on which he/she could have otherwise elected to Retire under Section 3.2 of the Plan, unless and to the extent the Employee elects to defer commencement in accordance with the requirements of Code Section 409A.

Section 10

Change in Control

10.1 In the event of a “Change in Control,” as defined in Section 10.2:

(a) the Company makes a contractual commitment to pay the allowances under the Plan (1) in accordance with Section 9, with respect to an Employee who meets the requirements of said Section and whose employment is terminated by the Company within two years following a Change in Control, and (2) in accordance with paragraph (b) of this Section 10.1,

(b) eligibility for Early Retirement Allowances shall not require the consent or approval of the Company, of NIC, or of any officer, committee or board of said companies,

E-82

(c) with regard to an Eligible Employee in Organization Level 5 or above whose employment with the Company and all of its affiliates is terminated by the Company for reasons other than Cause (as defined in Section 9.3) within two years following a Change in Control, who is not eligible to “Grow-In” to early retirement in accordance with Section 9, and who has accrued at least 5 years of Credited Service will be provided a deferred vested allowance under the Plan, commencing on the first day of the month coincident with or next following the later of his/her attainment of age 55 or the date he/she terminates employment with the Company and all of its affiliates, which date shall be deemed to be his/her Actual Retirement Date, computed in the same manner as is used to compute a deferred vested pension under the RPSE, except that “annual base salary plus the annual average of the short-term incentive compensation paid to the Employee during the 60-month period prior to the date of termination” shall be used in lieu of “annual base salary,” and the deferred vested allowance so computed shall be reduced by the amount of the deferred vested pension under the RPSE (without regard to an Employee’s election of a cash refund under the RPSE) and such other amounts under Section 4.1(c). With respect to a Participant’s Non-Grandfathered Amount, any benefits otherwise payable under this Section 10 on account of an Employee’s termination of employment must be deemed a “separation from service” within the meaning of Treasury Regulation §1.409A-1(h) (using a percentage of 80% to determine the controlled group of corporations and businesses under common control).

(d) Section 7.1 will not apply.

10.2 For purposes of this Section 10, a “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 NIC or Navistar, Inc. (named International Truck and Engine Corporation immediately prior to February 27, 2008 and formerly named Navistar International Transportation Corp. immediately prior to February 23, 2000), or each successor thereto (“Navistar, Inc.”), 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 NIC representing 25% or more of the combined voting power of NIC’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 NIC 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 NIC or (C) any dissolution or liquidation of the NIC or Navistar, Inc. or an agreement for the sale or disposition of all or substantially all (more than 50%) of the assets of the NIC or Navistar, Inc. occurs. Notwithstanding the foregoing, the sale or disposition of any or all of the assets or stock of the Company shall not be deemed a Change in Control.

E-83

EXHIBIT 10.85

NAVISTAR, INC.

SUPPLEMENTAL RETIREMENT ACCUMULATION PLAN

Effective as of January 1, 2005

(including amendments through July 31, 2008)

E-84

TABLE OF CONTENTS

		Page
Article 1    Definitions		E-87
1.1	Account or Accounts	E-87
1.2	Administrator	E-87
1.3	Base Salary	E-87
1.4	Beneficiary or Beneficiaries	E-87
1.5	Board	E-88
1.6	Bonus	E-88
1.7	Change in Control	E-88
1.8	Code	E-88
1.9	Company	E-88
1.10	Compensation	E-88
1.11	Crediting Rate	E-88
1.12	Eligible Employee	E-88
1.13	Employer	E-89
1.14	Employer Contribution(s)	E-89
1.15	ERISA	E-89
1.16	Former MRO Participant	E-89
1.17	MRO	E-89
1.18	Parent	E-89
1.19	Participant	E-89
1.20	Participating Company	E-89
1.21	Plan	E-90
1.22	Plan Year	E-90
1.23	Points Factor Multiplier	E-90
1.24	Qualified Plan	E-90
1.25	Retirement	E-90
1.26	Retirement Eligibility Date	E-90
1.27	Settlement Date	E-90
1.28	Specified Employee	E-90
1.29	Spouse	E-90
1.30	Termination of Employment	E-90
1.31	Valuation Date	E-91
1.32	Years of Service	E-91
Article 2    Participation and Allocations		E-91
2.1	Enrollment	E-91
2.2	Discretionary Employer Contributions	E-91
2.3	Formula-Based Employer Contributions	E-91
Article 3    Accounts		E-92
3.1	Participant Accounts	E-92
3.2	Vesting of Accounts	E-92
3.3	Crediting Rate	E-92
3.4	Statement of Accounts	E-93
Article 4    Benefits		E-93
4.1	Retirement Benefit	E-93
4.2	Termination	E-94
4.3	Death Benefit	E-94
4.4	Effect of Payment	E-94

E-85

TABLE OF CONTENTS

(Continued)

		Page
Article 5    Amendment and Termination of Plan		E-94
5.1	Amendment or Termination of Plan	E-94
Article 6    Beneficiaries		E-95
6.1	Beneficiary Designation	E-95
6.2	Revision of Designation	E-95
6.3	Absence of Valid Designation	E-95
6.4	Doubt as to Beneficiary	E-95
6.5	Discharge of Obligations	E-96
Article 7    Administration and Claims Procedures		E-96
7.1	Administration	E-96
7.2	Claims Procedure	E-96
7.3	Appeals Procedure	E-96
Article 8    Conditions Related to Benefits		E-97
8.1	Nonassignability	E-97
8.2	No Right to Employer Assets	E-97
8.3	Protective Provisions	E-97
8.4	Contractual Obligation	E-98
8.5	Withholding	E-98
8.6	Assumptions and Methodology	E-98
8.7	Adoption by Participating Company	E-98
8.8	Trust	E-98
Article 9    Miscellaneous		E-98
9.1	Successors of the Employer	E-98
9.2	Employment Not Guaranteed	E-98
9.3	Gender, Singular and Plural	E-99
9.4	Captions	E-99
9.5	Validity	E-99
9.6	Waiver of Breach	E-99
9.7	Notice	E-99
9.8	Inability to Locate Participant or Beneficiary	E-99
9.9	Incompetence	E-99
9.10	Errors in Benefit Statement or Distributions	E-99
9.11	ERISA Plan	E-100
9.12	Effect on Other Plans	E-100
9.13	Applicable Law	E-100
9.14	Responsibility for Legal Effect	E-100

E-86

NAVISTAR, INC.

SUPPLEMENTAL RETIREMENT ACCUMULATION PLAN

Effective as of January 1, 2005

(including amendments through July 31, 2007)

Navistar, Inc. (named International Truck and Engine Corporation immediately prior to February 27, 2008), a Delaware corporation (the “Company”), on behalf of itself and each Participating Company, hereby establishes this Supplemental Retirement Accumulation Plan, effective January 1, 2005 (the “Effective Date”), for the purpose of attracting and retaining high-quality executives and promoting in its key executives an interest in the continued growth, development and future business success of the Company and each Participating Company. Except as otherwise authorized by the Company, the benefits provided under the Plan shall be provided in consideration for services to be performed by a Participant on or after the Effective Date and through his or her Retirement.

The Plan is designed to comply in all respects with Code Section 409A and those provisions of ERISA applicable to an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees.” Notwithstanding the foregoing or any other provision of the Plan to the contrary, with respect to any period prior to January 1, 2009, it is intended that the Plan be construed and administered both pursuant to and in accordance with a good faith interpretation of Code Section 409A and in a manner consistent with published guidance and other applicable authorities promulgated thereunder. Treatment of amounts deferred under the Plan pursuant to and in accordance with any transition rules provided under such published guidance and other applicable authorities shall be expressly authorized hereunder and shall be administered in accordance with procedures established by the Administrator.

Article I—

Definitions

For purposes of the Plan, the following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

1.1 Account or Accounts shall mean, depending on the context, the notional account or accounts established on behalf of a particular Participant pursuant to Article 3 of the Plan, or all such notional accounts in the aggregate established on behalf of all Participants. The Account may be a bookkeeping entry only and may be utilized solely as a device for the measurement and determination of the benefits to be paid to a Participant or, in the case of a Participant’s death, his or her Beneficiaries.

1.2 Administrator shall mean the Board, or such other person or persons appointed by the Board to administer the Plan pursuant to Article 7 of the Plan. The Board may, by writing, verbally, or otherwise, delegate to and allocate among any committee, subcommittee or any of its members, or to any employee, officer, or agent of the Company or a Participating Company, its authority to perform any act under the Plan, including, without limitation, those matters involving the exercise of discretion. Any such delegation or allocation of authority will be subject to revocation at any time at the discretion of the Board. Any reference in the Plan to the term “Administrator” with respect to such delegated or allocated authority shall be deemed a reference to the Board’s respective delegate or delegates.

1.3 Base Salary shall mean the base rate of cash compensation that is paid to the Participant by the Employer during the Plan Year for services rendered while an Eligible Employee during that Plan Year, excluding any Bonus and other non-regular or variable forms of compensation, before reductions for applicable tax withholding and contributions to or deferrals under any pension, deferred compensation or benefit plans sponsored by the Employer.

1.4 Beneficiary or Beneficiaries shall mean one or more persons, trusts, estates, or other entities, designated as such in accordance with Article 6 of the Plan, that are entitled to receive benefits under the Plan upon the death of a Participant.

E-87

1.5 Board shall mean the board of directors of the Company.

1.6 Bonus shall mean amounts paid to the Participant by the Employer during the Plan Year for services rendered while an Eligible Employee in the form of discretionary or incentive cash compensation, including, without limitation, the amounts paid under the Company’s annual incentive (AI) plan or any other bonus designated by the Administrator, before reductions for applicable tax withholding and contributions to or deferrals under any pension, deferred compensation or benefit plans sponsored by the Employer; provided, however, the term “Bonus” shall specifically exclude long-term incentive awards, “lump sum” increases, and recognition awards paid to the Participant by the Employer during the Plan Year.

1.7 Change in Control shall mean (a) a “change in ownership” of the Company or the Parent, (b) a “change in effective control” of the Parent, or (c) a “change in the ownership of a substantial portion of the assets” of the Company or the Parent. For purposes of this Section 1.7, the terms “change in ownership,” “change in effective control,” and “change in the ownership of a substantial portion of the assets” shall have the respective meanings assigned to such terms under Treasury Regulation §1.409A-3(i)(5); provided that a Change in Control shall not occur under any circumstance with respect to any acquisition of ownership of stock or assets of the Company or the Parent by an employee or retiree benefit plan or trust sponsored or established by the Employer; provided further that a change in the ownership of a substantial portion of the assets of the Parent shall be determined without regard to the sale or disposition of any or all of the assets of Navistar Financial Corporation, and each successor thereto. For the avoidance of doubt, the sale or disposition of any or all of the assets or stock of any subsidiary or affiliate of the Parent (other than the sale or disposition of all or substantially all of the assets or stock of the Company, as described above) shall not be deemed a Change in Control.

1.8 Code shall mean the Internal Revenue Code of 1986, as amended from time to time. Any reference in the Plan to a specific Section of the Code shall include such Section, any valid regulation, applicable authorities, or such other guidance of general applicability promulgated thereunder, and any comparable provision of any future legislation amending, supplementing, or superseding such Section of the Code.

1.9 Company shall mean Navistar, Inc. (named International Truck and Engine Corporation immediately prior to February 27, 2008), and each successor thereto.

1.10 Compensation shall mean (a) with respect to any Former MRO Participant, the sum of such Former MRO Participant’s Base Salary paid to him or her by the Employer during the Plan Year in excess of the Code Section 401(a)(17) compensation limit for such Plan Year plus Bonus paid to him or her by the Employer during the Plan Year, determined without regard to the Code Section 401(a)(17) compensation limit for such Plan Year, and (b) with respect to any Participant who is not a Former MRO Participant, the sum of such Participant’s Base Salary plus Bonus paid to him or her by the Employer during the Plan Year in excess of the Code Section 401(a)(17) compensation limit for such Plan Year.

1.11 Crediting Rate shall mean the applicable rate for crediting notional earnings, including gains or losses, on the Participant’s Account pursuant to and in accordance with Section 3.3 of the Plan.

1.12 Eligible Employee shall mean the Chief Executive Officer of the Company or the Parent or such other management employee of the Company or a Participating Company who is employed in Organization Level 7 or above (or equivalent, as determined by the Administrator), upon designation by the Board to be eligible to participate in the Plan; provided that, except as otherwise authorized by the Company, such individual is not eligible to participate under the MRO as of January 1, 2005 (determined without regard to whether such individual is eligible to actually retire under the MRO and receive benefits thereunder at any time on or after January 1, 2005). Except as otherwise authorized by the Company, a management employee of a Participating Company who is employed in Organization Level 7 or above (or equivalent, as determined by the Administrator) shall not be deemed an Eligible Employee with respect to any period during which his or her Employer was not a Participating Company. An individual’s status as an “employee” will be determined by the Administrator and such determination will be conclusive and binding on all persons notwithstanding any contrary determination of “employee” status by any court or governmental agency, including, without limitation, the Internal Revenue Service.

E-88

1.13 Employer shall mean, depending on the context, the Company or a Participating Company, as the case may be, that is the legal employer of the Participant, or all such entities in the aggregate; provided that to the extent (and only to the extent) required under Code Section 409A, the “Employer” shall mean the entity for whom the Participant performs services and with respect to whom the legally binding right to payments under the Plan arises, and all entities with whom such entity would be considered a single employer under Code Section 414(b) or 414(c).

1.14 Employer Contribution(s) shall mean the notional contributions by or on behalf of the Employer to a Participant’s Account pursuant to and in accordance with Article 2 of the Plan.

1.15 ERISA shall mean the Employee Retirement Income Security Act of 1974, as may be amended from time to time. Any reference in the Plan to a specific Section of ERISA shall include such Section, any valid regulation, applicable authorities, or such other guidance of general applicability promulgated thereunder, and any comparable provision of any future legislation amending, supplementing, or superseding such Section of ERISA.

1.16 Former MRO Participant shall mean any Participant (a) who was first hired by the Employer (other than IC Corporation, International Diesel of Alabama, LLC, IC of Oklahoma, LLC, SST Truck Company LLC, and each successor thereto, or such other Participating Companies designated by the Administrator, and each successor thereto) prior to January 1, 1996, (b) whose date of birth is subsequent to January 1, 1960, and (c) who is employed in Organization Level 7 or above (or equivalent, as determined by the Administrator) as of December 31, 2004.

1.17 MRO shall mean the Company’s Managerial Retirement Objective Plan or the Navistar Financial Corporation Managerial Retirement Objective Plan, as the case may be, as each may be amended from time to time.

1.18 Parent shall mean the Company’s parent corporation, Navistar International Corporation, and each successor thereto.

1.19 Participant shall mean an Eligible Employee who participates in the Plan pursuant to and in accordance with Section 2.1.

1.20 Participating Company shall mean the (a) Parent, (b) International Truck and Engine Export Corporation, (c) International Truck and Engine Overseas Corporation, (d) Indianapolis Casting Corporation, (e) Navistar Financial Corporation, (f) International Truck Intellectual Property Company, LLC, (g) International Engine Intellectual Property Company, LLC, (h) IC Bus, LLC, effective January 1, 2006 (named IC, LLC immediately prior to March 6, 2008 and formerly named IC Corporation immediately prior to October 31, 2007), (i) Navistar Diesel of Alabama, LLC, effective January 1, 2006 (named International Diesel of Alabama, LLC immediately prior to February 19, 2008), (j) IC Bus of Oklahoma, LLC, effective January 1, 2006 (named IC of Oklahoma, LLC immediately prior to February 19, 2008)), (k) SST Truck Company LLC, effective January 1, 2006 (named SST Truck Company, LP immediately prior to October 31, 2007), (l) Navistar International Employee Leasing Company, effective December 1, 2005, and (m) Navistar Defense, LLC, effective February 1, 2006 (named International Military and Government LLC immediately prior to February 19, 2008), and each successor thereto, and each other U.S. subsidiary and affiliate of the Company that would be considered a single employer with the Company under Code Section 414(b) or 414(c), and each successor thereto, but only to the extent each such other subsidiary or affiliate has been designated by the Administrator as a Participating Company and has adopted the Plan pursuant to Section 8.7 of the Plan; provided, however, that each such entity shall cease being a Participating Company for purposes of determining its employees’ eligibility both to participate in the Plan and to receive Employer Contributions hereunder with respect to any period during which such entity would not be considered a single employer with the Company under Code Section 414(b) or 414(c) or effective on such earlier date prescribed by the Administrator.

E-89

1.21 Plan shall mean the Navistar, Inc. Supplemental Retirement Accumulation Plan (named the International Truck and Engine Corporation Supplemental Retirement Accumulation Plan immediately prior to February 27, 2008), as set forth in this instrument and as hereafter amended from time to time, and, to the extent (and only to the extent) required under Code Section 409A, any other plan with which the Plan is required to be aggregated under Code Section 409A. The Plan is intended to constitute a nonelective account balance plan, as defined in Treasury Regulation §1.409A-1(c)(2)(i)(B).

1.22 Plan Year shall mean the calendar year, but limited to calendar years beginning on or after January 1, 2005.

1.23 Points Factor Multiplier shall mean (a) with respect to any Former MRO Participant, five (5) percentage points multiplied by the Participant’s age (in whole years) as of January 1, 2005, plus eight (8) percentage points multiplied by the Participant’s Years of Service (in whole and tenths of years) as of January 1, 2005, and (b) with respect to any Participant who is not a Former MRO Participant, one (1).

1.24 Qualified Plan shall mean (a) the Company’s 401(k) Retirement Savings Plan, (b) the Company’s Retirement Accumulation Plan, (c) the IC Bus, LLC 401(k) Plan (named the IC Corporation 401(k) Plan immediately prior to October 31, 2007), or (d) such other defined contribution plan qualified under Code Section 401(a) in which a Participant participates and which is sponsored by the Employer in the relevant Plan Year and designated by the Administrator to be taken into account for purposes of the calculation of Employer Contributions made to the Plan, as each may be amended from time to time.

1.25 Retirement shall mean the date on which either of the following events occur with respect to a Participant (a) the Participant’s Termination of Employment on or after his or her Retirement Eligibility Date, or (b) the Participant’s involuntary Termination of Employment within two (2) years following the date of a Change in Control.

1.26 Retirement Eligibility Date shall mean the date on which the Participant has both attained at least age fifty-five (55) and completed at least ten (10) Years of Service.

1.27 Settlement Date shall mean the date on which a Participant’s Account (or any portion thereof) is paid (or, in the case of annual installment payments, the date on which the first annual installment amount from the Participant’s Account (or any portion thereof) is paid) to the Participant or, in the case of the Participant’s death before any payment from his or her Account is made, his or her Beneficiaries. Except as otherwise provided in the Plan or as otherwise required or permitted under Code Section 409A, the Settlement Date shall be within ninety (90) days following the Valuation Date; provided that, in the case of any Participant who is a Specified Employee as of his or her Retirement (other than by reason of death), the Settlement Date shall be the Valuation Date.

1.28 Specified Employee shall mean any Participant who is a “specified employee,” as defined in Treasury Regulation §1.409A-1(i), including any elections described in Treasury Regulation §1.409A-1(i)(2) through (7) made by the Employer.

1.29 Spouse shall mean the person to whom the Participant is legally married under applicable law.

1.30 Termination of Employment shall mean the date on which the Participant’s employment with the Employer is terminated for any reason whatsoever, whether voluntary or involuntary, including, without limitation, as a result of the Participant’s Retirement or death; provided that such termination of employment with the Employer would otherwise be deemed a “separation from service” within the meaning of Treasury Regulation §1.409A-1(h) (using a percentage of 80% to determine the controlled group of corporations and businesses under common control). For purposes of this Section 1.30, except as otherwise required or permitted under Code Section 409A, (a) the employment relationship shall be treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of any such leave does not exceed six months, or if longer, so long as the Participant retains the right to reemployment with the Employer under an applicable statute or by contract, (b) a leave of absence constitutes a bona fide leave of

E-90

absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer, and (c) if the period of leave exceeds six months and the Participant does not retain a right to reemployment under an applicable law or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period.

1.31 Valuation Date shall mean, except as otherwise provided in the Plan, the later of (a) the last business day in March of the year immediately following the year in which the Participant’s Retirement occurs, or (b) in the case of any Participant who is a Specified Employee as of his or her Retirement (other than by reason of death), the last business day of the seventh month following the Participant’s Retirement; provided that the Valuation Date with respect to the annual installment portion of the payment option described in Section 4.1(a)(iii) shall mean the last business day in March of the second year following the year in which the Participant’s Retirement occurs.

1.32 Years of Service shall mean the years of service credited to the Participant for purposes of vesting under either the Qualified Plan or an Employer-sponsored defined benefit plan qualified under Code Section 401(a), whichever is greater.

Article II—

Participation and Allocations

2.1 Enrollment. An Eligible Employee shall automatically become a Participant in the Plan as of the date he or she becomes an Eligible Employee, and shall be eligible to receive Employer Contributions in accordance with this Article 2 with respect to any period of employment during which he or she is an Eligible Employee. An Eligible Employee shall cease being a Participant in the Plan as of the date on which all amounts credited to his or her Account have been fully distributed (or deemed fully distributed) in accordance with the terms of the Plan.

2.2 Discretionary Employer Contributions. The Employer shall have the discretion to make Employer Contributions to the Plan with respect to any Plan Year on behalf of any Participant. Employer Contributions shall be made in the complete and sole discretion of the Employer and no Participant shall have the right to receive any Employer Contribution regardless of whether Employer Contributions are made on behalf of any other Participant.

2.3 Formula-Based Employer Contributions. To the extent, and only to the extent, the Employer makes, in its complete and sole discretion, an Employer Contribution on behalf of a Participant with respect to a particular Plan Year, such Employer Contribution shall equal the excess of (a) over (b), below:

2.3.1 The product of the “applicable percentage” for such Plan Year, the Participant’s Compensation during such Plan Year, and the Participant’s applicable Points Factor Multiplier. For purposes of this paragraph (a), the “applicable percentage” for the applicable Plan Year shall be determined in accordance with the following table:

Participant’s Age on Last Day of Plan Year	Applicable Percentage
Under Age 30	2.0	%
At Least Age 30 and Under Age 40	3.5	%
At Least Age 40 and Under Age 50	5.0	%
Age 50 or Older	6.5	%

2.3.2 (i) With respect to any Former MRO Participant, the portion of the Former MRO Participant’s actual “employer retirement contribution” (as defined in the applicable Qualified Plan) attributable to his or her Bonus with respect to such Plan Year (determined by first attributing the Former MRO Participant’s Base Salary for such Plan Year) that is allocated on his or her behalf under the Qualified Plan for such Plan Year, and

(ii) With respect to any Participant who is not a Former MRO Participant, zero (0).

E-91

Article III—

Accounts

3.1 Participant Accounts. One Account (or multiple Accounts, as determined in the complete and sole discretion of the Administrator) shall be maintained for each Participant and credited with any Employer Contributions made on behalf of such Participant at the time specified by the Administrator. Each Account shall be deemed to be credited with notional earnings, including gains or losses, as provided in Section 3.3, from the date each such Employer Contribution is credited to such Account through the Valuation Date (or, in the case of annual installment payments, through the dates described in Section 4.1(c)).

3.2 Vesting of Accounts. All amounts credited to a Participant’s Account shall be vested and nonforfeitable upon the earlier of the Participant’s Retirement, the Participant’s Retirement Eligibility Date, upon a Change in Control, or, in the case of any Former MRO Participant, upon an involuntary Termination of Employment (for reasons other than Cause) occurring on or after January 1, 2008; provided that a Participant’s Account becoming vested and nonforfeitable upon a Change in Control shall be expressly conditioned upon such Participant’s involuntary Termination of Employment occurring within two (2) years following such Change in Control. Notwithstanding any other provision of the Plan to the contrary, in the event a Participant’s Termination of Employment occurs prior to becoming vested in his or her Account, all amounts credited to such Participant’s Account shall be immediately forfeited without any right to restoration whatsoever and the Participant shall be deemed to have received a lump sum payment of zero dollars ($0.00) as of his or her Termination of Employment. For purposes of this Section 3.2 and Section 4.2, the term “Cause” shall mean that the reason for the Participant’s involuntary Termination of Employment was (a) willful misconduct involving an offense of a serious nature that is demonstrably and materially injurious to any Employer, monetarily or otherwise, (b) conviction of, or entry of a plea of guilty or nolo contendere to, a felony as defined by the laws of the United States of America or by the laws of the State or other jurisdiction in which the Participant is so convicted, or (c) continued intentional failure to substantially perform required duties for the Employer after written demand to so perform by the Employer (other than a failure due to physical or mental disability). For purposes of determining whether “Cause” exists, no act, or failure to act, on the Participant’s part will be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s act, or failure to act, was in the best interest of the Employer.

3.3 Crediting Rate. The Crediting Rate on amounts credited to a Participant’s Account shall be the fixed rate of interest per annum, as determined by the Administrator in its complete and sole discretion, compounded daily (or over such other period, as determined by the Administrator, in its complete and sole discretion), for the three-year period beginning January 1, 2005 and ending December 31, 2007; provided that the Administrator, in its complete and sole discretion, may periodically revise and/or supplement the foregoing Crediting Rate anytime after the expiration of such three-year period. Absent any such revision or supplementation, such fixed Crediting Rate shall continue in effect unless and until so revised and/or supplemented by the Administrator. In lieu of and/or in addition to such fixed Crediting Rate, the Administrator may, in its complete and sole discretion, select one or more fixed Crediting Rates, investment Crediting Rates based on a rate of return on one or more predetermined investments, or a combination thereof; provided that if more than one Crediting Rate is selected by the Administrator, the Administrator may, in its complete and sole discretion and in accordance with procedures established by the Administrator, allow Participants to allocate their Accounts among such Crediting Rates. The Participant’s Account shall be increased or reduced, as the case may be, to reflect any notional earnings, including gains or losses, attributable to the applicable Crediting Rate. The Administrator’s choice of any investment shall be solely for purposes of calculation of the Crediting Rate. The Employer shall have no obligation to set aside or invest funds in any selected investment and, if the Employer elects to invest funds as directed by the Administrator or the Participant, as the case may be, the Participant shall have no more right to such investment than any other unsecured general creditor. The Participant’s Account shall continue to be credited at the Crediting Rate through the Valuation Date (or, in the case of annual installment payments, through the dates described in Section 4.1(c)).

E-92

3.4 Statement of Accounts. For each Plan Year, the Administrator shall provide each Participant with statements at least annually setting forth the Participant’s Account balance as of the end of each March 31 following the applicable Plan Year (or such other date specified by the Administrator, in its complete and sole discretion). Notwithstanding the foregoing, to the extent such statements are generated exclusively through electronic media (and not in paper form), the Administrator shall provide each Participant with periodic instructions (at least once per calendar year) regarding how to access the Participant’s Account balance.

Article IV—

Benefits

4.1 Retirement Benefit.

4.1.1 Form and Timing of Payment. In the event of the Participant’s Retirement, the Participant shall be entitled to receive a cash payment on the Settlement Date in an amount equal to the total balance of the Participant’s Account as of the Valuation Date (or, in the case of annual installment payments described in clause (ii) or (iii) below, a specified portion of the total balance of the Participant’s Account as of the Valuation Date, subject to any subsequent adjustments for prior installment payments and lump sum payment (if any), and notional earnings, including gains or losses, as described in Section 4.1(c)). A Participant may elect to receive such payment on the Settlement Date in any of the following optional forms of payment (i) in a lump sum payment, (ii) in annual installments over a period ranging from two (2) years to 20 years (in whole years), or (iii) a specified portion of the total balance of the Participant’s Account as of the Valuation Date payable in a lump sum payment, with any remaining balance of the Account as of such Valuation Date, subject to any subsequent adjustments for prior installment payments and such lump sum payment, and notional earnings, including gains or losses, as described in Section 4.1(c), payable in annual installments over a period ranging from two (2) years to 20 years (in whole years); provided that, notwithstanding any Participant form of payment election to the contrary and to the extent permitted under Code Section 409A, the total balance of the Participant’s Account (or any portion thereof) that was originally scheduled to be paid in the form of annual installments shall instead be paid on the Settlement Date in the form of a lump sum payment if the total balance of such Participant’s Account as of the Valuation Date (or, in the case of the payment option described in clause (iii) above, as of the Valuation Date applicable solely to the lump sum payment portion thereof) is less than one-hundred thousand dollars ($100,000). A Participant’s form of payment election shall be made by filing the appropriate election form(s) with the Administrator within thirty (30) days after the Participant initially becomes eligible to participate in the Plan (within the meaning of Treasury Regulation §1.409A-2(a)(7)) with respect to Compensation paid for services to be performed after the date on which such election is made, subject to the special election timing rule under Treasury Regulation §1.409A-2(a)(7)(iii) permitting such initial election to be effective retrospectively if made within thirty (30) days following the first year the Participant accrues a benefit under an excess benefit plan. Upon the expiration of the applicable thirty (30)-day election period described above, the Participant’s election shall become irrevocable, except as otherwise provided in Section 4.1(b). A Participant who fails to timely elect the form of payment shall be deemed to have elected to receive a lump sum payment under clause (i) of this paragraph (a).

4.1.2 Subsequent Change in the Form of Payment. Except to the extent otherwise required or permitted under Code Section 409A, the Participant shall not be permitted to change or revoke the form of payment with respect to his or her Account on or after the date on which such election would otherwise be irrevocable under Section 4.1(a) unless all of the following requirements are satisfied with respect to such Participant’s subsequent election to change the form of payment: (i) such election shall not take effect until twelve (12) months after the date on which the election is made; and (ii) except in the case of a payment on account of death, as described in Section 4.3, the payment with respect to which such election is must be deferred for a period of five (5) years from the date such payment would otherwise have been paid (or in the case of annual installment payments, five (5) years from the date the first annual installment payment would otherwise have been scheduled to be paid).

E-93

4.1.3 Amount and Timing of Annual Installment Payments. If the Participant elected and is entitled to receive annual installment payments in accordance with the provisions of this Section 4.1, the Participant’s first annual installment payment shall commence on the Settlement Date and shall equal the total balance of his or her Account as of the Valuation Date divided by the total number of years over which his or her annual installment payments are scheduled to be paid. Subject to the provisions of this Section 4.1, each subsequent annual installment payment shall be paid to the Participant within ninety (90) days of the last business day in March of each subsequent year following the year in which the Participant’s Settlement Date occurred, commencing in the year immediately following the year in which the Participant’s Settlement Date occurred and ending in the year in which the final annual installment payment is due. The amount of each subsequent annual installment payment shall be equal to the balance then credited to the Participant’s Account as of the last business day in March of each such subsequent year following the year in which the Participant’s Settlement Date occurred, which shall reflect both reductions for prior annual installment payments and lump sum payment (if any) made to the Participant, as described in this Section 4.1, and any adjustments for notional earnings, including gains or losses, as described in Section 3.3, divided by the total remaining number of years over which his or her annual installment payments are scheduled to be paid.

4.2 Termination. In the event of the Participant’s Termination of Employment, other than by reason of Retirement or, in the case of any Former MRO Participant, involuntary Termination of Employment (for reasons other than Cause) occurring on or after January 1, 2008, the Participant’s Account shall be forfeited in accordance with Section 3.2 and no benefits shall be payable or owed under the Plan to the Participant or, following such Participant’s death, his or her Beneficiaries.

4.3 Death Benefit. If the Participant dies on or after Retirement (including Termination of Employment as a result of the Participant’s death on or after his or her Retirement Eligibility Date), but prior to the date on which all amounts then credited to his or her Account have been fully distributed in accordance with the terms of the Plan, the Company shall pay to the Participant’s Beneficiaries a lump sum amount in cash equal to the remaining amount then credited to the Participant’s Account as of the last business day of the month in which the Participant’s death occurs, subject to any adjustments to the Participant’s Account through such date, as described in Section 4.1; provided that such date shall be deemed the Valuation Date in the case of the Participant’s death before any payment from his or her Account is made or shall be deemed a new Valuation Date in the case of the Participant’s death on or after any payment from his or her Account is made. Such lump sum amount shall be paid to the Participant’s Beneficiaries within ninety (90) days following the Participant’s date of death; provided that in the event any such Beneficiary survives the Participant but dies before the date on which such amount is paid to him or her, such amount shall be paid to that Beneficiary’s estate.

4.4 Effect of Payment. The full payment (including deemed full payment) of a Participant’s Account under the Plan shall completely discharge all obligations to a Participant and his or her Beneficiaries.

Article V—

Amendment and Termination of Plan

5.1 Amendment or Termination of Plan. The Company may, at any time, direct the Administrator to amend or terminate the Plan, in part or in its entirety, including, without limitation, with respect to any or all Participants and Employers, regardless of any resulting income tax or other consequences to Participants and their Beneficiaries, except that, unless and to the extent otherwise required by applicable law, no such amendment or termination may reduce the Account balance immediately preceding the date on which it is adopted or becomes effective, whichever is later, with respect to either any Participant who was vested in his or her Account as of such date in accordance with Section 3.2 or any Former MRO Participant. If the Company terminates the Plan, in part or its entirety, notwithstanding any other provision of the Plan to the contrary, (a) no additional Years of Service or age for any Participant (other than any Former MRO Participant) shall be credited under the Plan for the purpose of determining any affected Participant’s eligibility for Retirement with respect to any period after the effective date of such Plan

E-94

termination, (b) no additional amounts, including, without limitation, Employer Contributions under Article 2 and notional earnings, including gains and losses, under Section 3.3, shall be credited under the Plan with respect to any affected Participant’s Account for the purpose of calculating Plan benefits with respect to any period after the effective date of such Plan termination, and (c) the Company shall pay to each Participant the benefits such Participant would be entitled to receive under Section 4.1 of the Plan at the same time and in the same form such benefits would otherwise have been payable under the terms of the Plan. Notwithstanding the foregoing, to the extent (and only to the extent) permitted under Code Section 409A, the Company may, in its complete and sole discretion, accelerate distributions hereunder, whether or not in-pay status, to be paid in a lump sum upon the termination of the Plan, in part or its entirety, including where such Plan termination is due to a Change in Control, corporate dissolution taxed under Code Section 331, bankruptcy of the Company that is approved by a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), or such other events and conditions prescribed under Code Section 409A, in which case the terms of the Plan shall be deemed to be modified as necessary and appropriate to effectuate such accelerated distributions, including, without limitation, modification of the Valuation Date to mean the date on which the event or condition giving rise to such accelerated distributions occurs.

Article VI—

Beneficiaries

6.1 Beneficiary Designation. In accordance with procedures established by the Administrator, the Participant shall have the right, at any time during his or her lifetime, to designate Beneficiaries (both primary and contingent) to whom payment under the Plan shall be made in the event of the Participant’s death. The Beneficiary designation shall be effective upon receipt by the Administrator.

6.2 Revision of Designation. The submission of a new Beneficiary designation shall cancel all prior Beneficiary designations. The Administrator shall be entitled to rely upon the last Beneficiary designation made by the Participant and received by the Administrator prior to the Participant’s death. Any finalized divorce or marriage of a Participant subsequent to the date of a Beneficiary designation shall revoke such designation, unless in the case of divorce the previous Spouse was not designated as Beneficiary and unless in the case of marriage the Participant’s new Spouse has previously been designated as Beneficiary. Notwithstanding any provision of the Plan to the contrary and any Beneficiary designation filed with the Administrator in accordance with this Article 6, the Participant’s Account shall be payable in full to the Participant’s surviving Spouse in accordance with this Article 6 (treating such Spouse as the Participant’s sole designated Beneficiary), unless prior to the Participant’s death the following requirements were met: (a) the Participant elected that his or her Account (in whole or in part) be paid to a Beneficiary other than the Participant’s surviving Spouse; (b) the Participant’s surviving Spouse consented in writing to such election; (c) the surviving Spouse’s consent acknowledged the effect of such election; and (d) such election designates a Beneficiary that may not be changed without further spousal consent, unless the surviving Spouse executed a general written consent expressly permitting changes to the Participant’s Beneficiary designation without any requirement of further consent of the surviving Spouse; provided that consent of the Participant’s surviving Spouse shall not be required if (i) such Spouse cannot be located or (ii) the Participant is legally separated or has been abandoned (within the meaning of applicable local law), and the Participant has a court order to that effect.

6.3 Absence of Valid Designation. If a Participant fails to designate a Beneficiary as provided in this Article 6, or if the Beneficiary designation is revoked by marriage, divorce, or otherwise without substitution of a new Beneficiary designation, or if every person designated as a Beneficiary predeceases the Participant, then the Administrator shall direct the distribution of such benefits to the Participant’s estate.

6.4 Doubt as to Beneficiary. If the Administrator has any doubt as to the proper Beneficiary to receive payments pursuant to the Plan, the Administrator shall have the right, exercisable at its complete and sole discretion, to cause the Company to either withhold such payments until such matter is resolved to the Administration’s satisfaction, or pay such amount into any court of appropriate jurisdiction, with such court ordered payment completely discharging the liability of the Plan, the Company, each Employer, and the Administrator.

E-95

6.5 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge the Plan, the Company, each Employer, and the Administrator from all further obligations under the Plan with respect to that Beneficiary.

Article VII—

Administration and Claims Procedures

7.1 Administration. The Plan shall be administered by the Administrator, which shall have the exclusive right and full discretion (a) to interpret the Plan, (b) to decide any and all matters arising hereunder (including, without limitation, the right to remedy possible ambiguities, inconsistencies, or omissions), (c) to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, (d) consult with counsel, who may be counsel to the Company, and (e) to make all other determinations and resolve all questions of fact necessary or advisable for the administration of the Plan, including determinations regarding eligibility for benefits payable under the Plan; provided, however, that no individual who is serving on behalf of the Administrator shall vote or act on any matter relating solely to himself or herself. Benefits under the Plan will be paid only if the Administrator decides in its discretion that the applicant is entitled to them. All interpretations of the Administrator with respect to any matter hereunder shall be final, conclusive and binding on all persons affected thereby. The Administrator shall not be liable to any Participant or Beneficiary for any determination, decision, or action made in good faith with respect to the Plan. The Company will indemnify and hold harmless the Administrator from and against any and all liabilities, costs, and expenses incurred by such persons as a result of any act, or omission, in connection with the performance of such persons’ duties, responsibilities, and obligations under the Plan, other than such liabilities, costs, and expenses as may result from the gross negligence, bad faith, willful misconduct, or criminal acts of such persons.

7.2 Claims Procedure. Any Participant, former Participant or Beneficiary (or each such individual’s authorized representative) (each a “Claimant”) may file a written claim with the Administrator setting forth the nature of the benefit claimed, the amount thereof, and the basis for claiming entitlement to such benefit. The Administrator shall determine the validity of the claim and shall notify the Claimant of its decision not later than ninety (90) days after receipt of the claim, unless the Administrator determines that special circumstances require an extension of time (up to an additional ninety (90) days) for processing the claim. If the Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the expiration of the initial ninety (90)-day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Administrator expects to render its decision. Every claim for benefits which is denied shall be denied by written notice setting forth in a manner calculated to be understood by the Claimant (a) the specific reason or reasons for the denial, (b) specific reference to any provisions of the Plan on which the denial is based, (c) description of any additional material or information that is necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary, and (d) an explanation of the procedure for further reviewing the denial of the claim and of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse determination on review.

7.3 Appeals Procedure. Within sixty (60) days after the receipt of a denial of a claim, a Claimant may file a written appeal requesting a review of such denial. Such review shall be undertaken by the Administrator and shall be a full and fair review in accordance with Section 503 of ERISA, including (a) providing the Claimant the opportunity to submit written comments, documents, records, and other information relating to his or her claim, (b) providing the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim, and (c) providing a review that takes into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Administrator shall notify the Claimant of its decision not later than sixty (60) days after

E-96

receipt of a request for review from a Claimant, unless the Administrator determines that special circumstances require an extension of time (up to an additional sixty (60) days) for processing the claim. If the Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the expiration of the initial sixty (60)-day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Administrator expects to render the determination on review. The determination on review shall be in writing in a manner calculated to be understood by the Claimant and shall include (i) the specific reason or reasons for the adverse determination, (ii) reference to specific Plan provisions on which the determination is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits, and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following such adverse determination on appeal.

Article VIII—

Conditions Related to Benefits

8.1 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, any amounts payable under the Plan, or any part thereof, which are, and all rights to which are expressly declared to be, non-assignable and non-transferable. Except to the extent required by applicable law, no part of the amounts payable under the Plan shall be subject to execution, seizure, attachment, orders, decrees, levis, garnishment or sequestration for the payment of any debts, judgments, alimony, or separate maintenance owed by the Participant or any other person, or be transferable by operation of law, including, without limitation, a Participant’s or any other person’s bankruptcy or insolvency.

8.2 No Right to Employer Assets. The benefits paid under the Plan shall be paid from the general assets of the Employer, and Participants and their Beneficiaries, heirs, successors and assigns shall be no more than unsecured general creditors of the Employer with no special or prior right, interest, or claim to any assets of the Employer for payment of any obligations hereunder.

8.3 Protective Provisions. Notwithstanding any other provision of the Plan to the contrary, any benefit otherwise payable under the Plan to the Participant (or, in the case of the Participant’s death, his or her Beneficiaries) shall be forfeited if, without the written consent of the Company, a Participant, directly or indirectly (whether as owner, principal, agent, partner, officer, director, employee, consultant, investor, lender or otherwise), for the 12-month period immediately after the Participant’s Retirement, engages in any line of business that is the same as, similar to, or competitive with a material line of business of the Employer (determined by the Administrator, in its complete and sole discretion, as of the date of the Participant’s Retirement) in the cities, counties or other geographic areas anywhere within the United States of America in which the Employer is authorized to conduct such material lines of business during such 12-month period; provided that (a) such restriction shall not prohibit the Participant’s purchase or ownership of less than 5% of the outstanding voting stock of a publicly-held company, and (b) the Participant may be associated with an entity that consists of separate business units, one or more of which engages in a line of business that is the same as, similar to, or competitive with a material line of business of the Employer (determined by the Administrator, in its complete and sole discretion, as of the date of the Participant’s Retirement), as long as the business unit with which the Participant is associated does not engage in a line of business that is the same as, similar to, or competitive with such a material line of business of the Employer and the Participant is not associated in any respect whatsoever with (whether as owner, principal, agent, partner, officer, director, employee, consultant, investor, lender or otherwise, on a paid or unpaid basis) any line of business that is the same as, similar to, or competitive with such a material line of business of the Employer. Any determination made by the Administrator with respect to the foregoing restriction shall be final, conclusive and binding on all persons affected thereby. Further, the Participant shall cooperate with the Employer by furnishing any and all information requested by the Administrator in order to facilitate the payment of benefits hereunder, and by taking such other actions as may be

E-97

requested by the Administrator with respect to the administration of the Plan. If the Participant refuses to so cooperate, the Employer shall have no further obligation to the Participant under the Plan. For purposes of this Section 8.3, the Employer shall mean the Company and each Participating Company in the aggregate.

8.4 Contractual Obligation. Notwithstanding any provision (other than Sections 5.1, 8.2, and 8.3) of the Plan to the contrary, unless and to the extent otherwise required by applicable law, the Company hereby makes a contractual commitment to pay benefits under and in accordance with the Plan with respect to any Participant, but only to the extent any such Participant is then vested in his or her Account, as determined in accordance Section 3.2.

8.5 Withholding. The Participant shall make appropriate arrangements with the Employer for satisfaction of any federal, state or local income tax withholding requirements, Social Security and other employment tax or other requirements applicable to the granting, crediting, vesting or payment of benefits under the Plan. If no arrangement is made or if such arrangement is insufficient in satisfying such applicable requirements, the Employer may provide, at its complete and sole discretion, for such withholding, tax, and other payments as may be required, including, without limitation, by the reduction of amounts otherwise payable to the Participant. If the Employer pays such amounts on behalf of the Participant or a Beneficiary, the Employer shall be entitled to recover such amounts on demand with interest at the Wall Street Journal Prime Rate compounded monthly.

8.6 Assumptions and Methodology. The Administrator shall establish the assumptions and methodology of calculation used in determining the present or future value of benefits, earnings, payments, fees, expenses or any other amounts required to be calculated under the terms of the Plan. Such assumptions and methodology shall be made available to Participants upon request and may be changed from time to time by the Administrator.

8.7 Adoption by Participating Company. The Administrator may authorize any subsidiary or affiliate within the Company’s controlled group (within the meaning of Code Section 414(b) or 414(c)) to adopt the Plan and become a Participating Company. Except to the extent a subsidiary or affiliate of the Company is specifically identified as a Participating Company in Section 1.20, in order to become a Participating Company, such entity shall deliver to the Administrator a corporate resolution evidencing adoption of the Plan by the Board of Directors of the Participating Company, subject to the consent and approval of the Administrator. Each Participating Company, by adopting the Plan, agrees to comply with any requirements of the Administrator with respect to administration of the Plan and authorizes the Administrator and/or the Company to act as its agent in all transactions in which the Administrator believes such agency will facilitate administration of the Plan, including, without limitation, amendment or termination of the Plan. A Participating Company may independently terminate its participation in the Plan under the same terms and conditions provided in Article 5.

8.8 Trust. The Employer shall be responsible for the payment of all benefits under the Plan. At its discretion, the Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Employer’s creditors. Benefits paid to the Participant from any such trust or trusts shall be considered paid by the Employer for purposes of meeting the obligations of the Employer under the Plan.

Article IX—

Miscellaneous

9.1 Successors of the Employer. The rights and obligations of the Employer under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Employer.

9.2 Employment Not Guaranteed. Nothing contained in the Plan shall give any Participant the right to continued employment with the Employer or affect the right of the Employer to dismiss any Participant. The adoption and maintenance of the Plan will neither constitute a contract of employment between the Employer and any Participant nor constitute consideration for, or an inducement to or condition of, the employment or services of any Participant.

E-98

9.3 Gender, Singular and Plural. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.

9.4 Captions. The captions of the articles, paragraphs and sections of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

9.5 Validity. If any provision of the Plan is deemed invalid, illegal, or unenforceable by appropriate authority under the law of any jurisdiction applicable to the Plan, the same shall not affect, in any respect whatsoever, the validity, legality, or enforceability of any other provision of the Plan, and the Plan shall continue, to the fullest extent permitted by law, as if such invalid, illegal, or unenforceable provision were omitted and/or modified by such appropriate authority so as to preserve its validity, legality, or enforceability, unless such omission or modification would substantially impair the rights or benefits under the Plan of any affected Participant or Beneficiary, the Company, the Employer, or the Administrator.

9.6 Waiver of Breach. The waiver by the Employer of any breach of any provision of the Plan shall not operate or be construed as a waiver of any subsequent breach by that Participant or any other Participant.

9.7 Notice. Any notice or filing required or permitted to be given to the Administrator, the Employer, the Participant or his or her Beneficiaries under the Plan shall be sufficient if in writing and either (a) hand-delivered, (b) sent by facsimile or other electronic media, as determined to be acceptable to the Administrator or the Employer, or (c) sent by a private delivery service, U.S. first-class, registered or certified mail, in the case of the Administrator or the Employer, to the principal office of the Company, directed to the attention of the Administrator, and in the case of the Participant or Beneficiary, to the last known address of such Participant or Beneficiary appearing on the employment records of the Employer. Notice to the Administrator or the Employer shall be deemed given as of the date of actual receipt by the Administrator. Notice to the Participant or Beneficiary shall be deemed given: if delivery is made by hand as of the date of hand delivery; if delivery is made by facsimile or other acceptable electronic media, as of the date documented by the transmitting party of successful transmission; if notice is provided by a private delivery service, as of the date documented by the private delivery service of successful delivery; or, if notice is provided by U.S. first-class, registered, or certified mail, as of the date shown on the postmark (including postmark on the receipt for registration or certification).

9.8 Inability to Locate Participant or Beneficiary. It is the responsibility of the Participant and, upon the death of the Participant, his or her Beneficiary to apprise the Administrator of any change in address of the Participant or Beneficiary. Neither the Administrator nor the Company is required to search for or locate any person entitled to benefits under the Plan. If the Administrator attempts to notify a person that he or she is entitled to benefits under the Plan, and such person fails to claim his or her benefits or make his or her whereabouts known to the Administrator within a reasonable period of time after the notification is sent to such person, the benefits payable to such person shall be forfeited; provided that such benefits shall be reinstated if the person entitled thereto subsequently makes a claim for the forfeited benefits.

9.9 Incompetence. If the Administrator determines in its complete and sole discretion that a benefit under the Plan is to be paid to a minor, a person declared legally incompetent or to a person incapable of handing the disposition of that person’s property, the Administrator may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Administrator may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

9.10 Errors in Benefit Statement or Distributions. In the event an error is made in a benefit statement, such error shall be corrected on the next benefit statement following the date such error is discovered. In the event of an error in a distribution, the Participant’s Account shall, immediately upon the discovery of such error, be adjusted to reflect such under or over payment and, if possible, the next distribution shall be adjusted upward or

E-99

downward to correct such prior error. If the remaining balance of a Participant’s Account is insufficient to cover an erroneous overpayment, the Company may, at its complete and sole discretion, offset other amounts payable to the Participant from the Employer (including, without limitation, salary, bonuses, expense reimbursements, severance benefits or other employee compensation benefit arrangements, as allowed by law) or bring an action or proceeding against the Participant or Beneficiary to recoup the amount of such overpayment(s).

9.11 ERISA Plan. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that is unfunded and maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. The Plan shall be administered and interpreted in a manner consistent with such intent.

9.12 Effect on Other Plans. The benefits provided for a Participant and the Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program sponsored or maintained by the Employer. The Plan shall supplement and shall not supersede, modify, or amend any other such plan or program, except as may otherwise be expressly provided.

9.13 Applicable Law. The Plan shall be administered and construed in accordance with applicable federal laws and, to the extent not inconsistent therewith or preempted thereby, with the laws of the State of Illinois, determined without regard to the choice of law rules of any jurisdiction. Without limiting the generality and applicability of the foregoing and notwithstanding any provision in the Plan to the contrary, if and to the extent that the payment of any Plan benefits would otherwise violate the requirements of Code Section 409A, (a) such Plan benefits shall be paid under such other conditions determined by the Administrator that cause the payment of such benefits to comply with Code Section 409A and the Plan shall be construed and administered accordingly to achieve that objective, and (b) in the event of any inconsistency between the terms of the Plan and Code Section 409A, the terms of Code Section 409A shall prevail and govern.

9.14 Responsibility for Legal Effect. No representations or warranties, express or implied, are made by any Employer or the Administrator, and neither any Employer nor the Administrator assumes any responsibility concerning the legal, tax, or other implications or effects of the Plan.

E-100

EXHIBIT 10.86

NAVISTAR INTERNATIONAL CORPORATION

2004 PERFORMANCE INCENTIVE PLAN

(AMENDED AND RESTATED AS OF MAY 27, 2008)

SECTION I

ESTABLISHMENT OF THE PLAN

The Board of Directors of Navistar International Corporation approved the establishment of the Navistar International Corporation 2004 Performance Incentive Plan (“Plan”) on October 21, 2003, and approved by Stockholders at the Corporation’s annual meeting held on February 17, 2004. The Plan replaces the Navistar 1994 Performance Incentive Plan and the Navistar 1998 Supplemental Stock Plan, each of which terminated December 16, 2003 under the terms of the plans, and the Plan replaces and supersedes the Navistar 1988 Non-Employee Directors Stock Option Plan. The Plan was amended on December 14, 2004 and approved by Stockholders at the Corporation’s annual meeting held on March 23, 2005. The Plan was subsequently amended on December 13, 2005, April 16, 2007 and June 18, 2007. The Plan is hereby further amended and restated as of May 27, 2008.

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 Employees, Consultants, and Non-Employee Directors, and additionally 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 determined by the Committee after the end of the Fiscal Year.

(2) “Award” means an award made under the Plan.

(3) “Award Agreement” means an agreement entered into by the Corporation and a Participant setting forth the terms and provisions applicable to an Award granted to a Participant.

(4) “Board of Directors” means the Board of Directors of Navistar International Corporation.

(5) “Change in Control” shall be deemed to have occurred if (i) 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 International Truck and Engine Corporation, 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, (ii) the following individuals cease for any reason to constitute more than three-fourths of the number of directors then serving on the Board of Directors of the Corporation: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial

E-101

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) whose appointment or election by the Board or nomination for election by the Corporation’s stockholders was approved by the vote of at least two-thirds (2/3) of the directors then still in office or whose appointment, election or nomination was previously so approved or recommended; (iii) any dissolution or liquidation of the Corporation or International Truck and Engine Corporation or sale or disposition of all or substantially all (more than 50%) of the assets of the Corporation or of International Truck and Engine Corporation occurs; or (iv) 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 with two (2) years, cease to constitute a majority of the Board of Directors of the Corporation.

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.

(6) “Code” or “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time.

(7) “Committee” means the Committee on Compensation and Governance of the Board of Directors.

(8) “Common Stock” means the common stock of the Corporation.

(9) “Consultant” means a person engaged under a written contract with the Corporation or any subsidiary of the Corporation that was executed by the Corporation’s Chief Executive Officer or Chief Financial Officer to provide consulting or advisory services (other than as an Employee or a Non-Employee Director) to such entity, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Corporation from offering or selling Common Stock to such person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under the Securities Act of 1933, as amended, or, if the Corporation is required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, registration on a Form S-8 (Registration Statement Under the Securities Act of 1933).

(10) “Corporation” means Navistar International Corporation.

(11) “Employee” means a person regularly employed by the Corporation or any subsidiary of the Corporation, including its officers.

(12) “Exercise Price” means the amount for which one share of Common Stock may be purchased upon exercise of a Stock Option, as specified in the applicable Award Agreement.

(13) “Fair Market Value” means the average of the high and the low prices of a share of Common Stock on the Grant Date 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.

(14) “Fiscal Year” means the fiscal year of the Corporation.

(15) “Freestanding SAR” means any SAR that is granted independently of any Stock Option.

(16) “Grant Date” means, as determined by the Board or authorized Committee, (i) the date as of which the Board or such Committee approves an Award, or (ii) such other date as may be specified by the Board or such Committee. The Grant Date 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.

E-102

(17) “Incentive Stock Option” means a right, as evidenced by an Award Agreement to purchase a certain number of shares of Common Stock at Fair Market Value for a period of no longer than ten (10) years from the date of grant which options are designed to meet the requirements set out under Section 422 of the Code.

(18) “Non-Employee Director” means as of the Grant Date of an Award an individual who is a director of the Corporation and is neither a Consultant nor an Employee of the Corporation or any of its subsidiaries.

(19) “Nonqualified Stock Option” means a right, as evidenced by an Award Agreement to purchase a certain number of shares of Common Stock at Fair Market Value for a period of not more than ten (10) years which options are stated not to be Incentive Stock Options under the Code.

(20) “Participant” means (a) an Employee selected by the Corporation for participation in the Plan, (b) with respect to Nonqualified Stock Options, SARs, Restricted Stock and Stock Units, a Consultant, and (c) with respect to Nonqualified Stock Options, Restricted Stock and Stock Units, a Non-Employee Director.

(21) “Performance-Based Exception” means the performance-based exception from the tax deductibility limitation imposed by Code Section 162(m) as set forth in Section 162(m)(4)(C).

(22) “Performance Measure” means the performance measurement provided by Section VI.

(23) “Performance Period” means the period during which performance goals must be met for purposes of the Performance Measure.

(24) “Plan” means the Navistar International Corporation 2004 Performance Incentive Plan as set forth herein and as it may be amended hereafter from time to time.

(25) “Qualified Retirement” means with respect to an Employee a termination from employment from the Corporation or any of its subsidiaries that occurs after the Employee attains age 55 and at the time of the termination the Employee has either: (i) 10 or more years of continuous service as a full-time Employee, or (ii) 10 or more years of service that would constitute credited service under the definition contained in the International Truck and Engine Corporation Retirement Plan for Salaried Employees (“RPSE”). Qualified Retirement for a Non-Employee Director means retirement under a retirement policy of the Board for Non-Employee Directors.

(26) “Restoration Stock Option” means a Nonqualified Stock Option granted pursuant to Section VII(7) and which is awarded upon the exercise of a Stock Option earlier awarded under the Plan or any other plan of the Corporation, including an earlier awarded Restoration Stock Option (an “Underlying Option”).

(27) “Restricted Stock” means a right to acquire one or more shares of Common Stock, as evidenced by an Award Agreement, that is restricted as to sale or transfer and, except as otherwise specified in Section XI(3), subject to a substantial risk of forfeiture.

(28) “Stock Appreciation Right” or “SAR” means an Award, granted either alone or in connection with a related Stock Option, pursuant to the terms of Section X of the Plan.

(29) “Stock Option” means either an Incentive Stock Option or a Nonqualified Stock Option.

(30) “Stock Units” mean units for Restricted Stock granted pursuant to Section XI.

(31) “Tandem SAR” means an SAR granted with respect to a share pursuant to Section X hereof in connection with a related Stock Option, under which: (a) the exercise of the SAR with respect to the share shall cancel the right to purchase such share under the related Stock Option, and (b) the purchase of the share under the related Stock Option shall cancel the right to exercise the SAR with respect to such share.

E-103

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. Similarly, management will, from time to time, select and recommend to the Committee Consultants who are to become Participants in the Plan for the purpose of Nonqualified Stock Option Awards, SARs, Restricted Stock and Stock Units. Such Consultants will be selected from those who, in the opinion of management, have substantial responsibility in an advisory or professional capacity. Non-Employee Directors shall also be Participants in the Plan for the purpose of Nonqualified Stock Option Awards, Restricted Stock and Stock Units.

SECTION V

ANNUAL INCENTIVE AWARDS

(1) As soon as practical following the end of the Fiscal Year, the Committee will certify performance achieved against the performance criteria established at the beginning of the Fiscal Year. The performance criteria shall be determined in the discretion of the Committee considering all factors relevant to the management of the Corporation, provided that an Award under this Section that is intended to qualify for the Performance-Based Exception shall satisfy the Performance Measures and the requirements of Section 162(m) of the Internal Revenue Code.

(2) The Committee, in its sole discretion, may reduce or eliminate any Award otherwise earned based on an assessment of individual performance, but in no event may any such reduction result in an increase of the Award. The Committee shall determine the amount of any such reduction by taking into account such factors as it deems relevant including, without limitation: (a) performance against other financial or strategic objectives; (b) its subjective assessment of the Participant’s overall performance for the year; and (c) prevailing levels of total compensation among similar companies.

(3) Performance criteria for Annual Incentive Awards will not be increased or decreased within a Fiscal Year except for extraordinary circumstances approved by the Committee.

(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 Award for that Fiscal Year unless the Committee determines otherwise.

(5) The Committee may permit the deferral of any Award and may permit payment on deferrals to be made subject to rules and procedures it may establish; provided that in the case of any Nonqualified Stock Option, the Committee may permit a feature that provides for the deferral of compensation, including, but not limited to, a feature that allows a holder of a Nonqualified Stock Option to elect deferred delivery of profit shares, only with respect to any Nonqualified Stock Option that was earned and vested on December 31, 2004, determined pursuant to and in accordance with Code Section 409A, as defined in Section XXII. These rules may include provisions crediting interest on deferred cash accounts.

(6) The Committee shall set the performance criteria for each year’s Annual Incentive Awards no later than the first 90 days of the Fiscal Year.

(7) It shall be presumed unless the Committee determines to the contrary, that all Awards to Employees under this Section are intended to qualify for Performance-Based Exception. If the Committee does not intend an Award to qualify for the Performance-Based Exception the Committee shall reflect its intent in its records in

E-104

such manner as the Committee determines to be appropriate. For the purpose of complying with the Performance-Based Exception rules of Section 162(m) of the Internal Revenue Code, the maximum Award under this Section of the Plan to any one Employee during any one Fiscal Year shall not exceed $4,000,000.

SECTION VI

PERFORMANCE MEASUREMENT

(1) Unless and until the Corporation’s stockholders approve a change in the general Performance Measures set forth in this Section VI, the attainment of which may determine the degree of payout and/or vesting with respect to Awards that are designed to qualify for the Performance-Based Exception, the Performance Measures to be used for purposes of such Awards may be measured at the Corporation level, at a subsidiary level, or at an operating unit level and shall be chosen from among: (a) income measures (including, but not limited to, gross profits, operation income, earnings before or after taxes, earnings per share, cost reductions); (b) return measures (including, but not limited to, return on assets, capital, investment, equity, or sales); (c) cash flow, cash flow return on investments, which equals net cash flows divided by owners equity; (d) gross revenues from operations; (e) total revenue; (f) cash value added; (g) economic value added; (h) share price (including, but not limited to, growth measures and total shareholder return); (i) sales growth; (j) market share; (k) the achievement of certain quantitatively and objectively determinable non-financial performance measures (including, but not limited to, growth strategies, strategic initiatives, product development, product quality, corporate development, and leadership development); and (l) any combination of, or a specified increase in, any of the foregoing.

(2) The Committee shall set the Performance Measures for each year’s Annual Incentive Awards no later than the first 90 days of the Fiscal Year.

(3) The Committee shall have the discretion to adjust the determination of the degree of attainment of the preestablished goals; provided that the Awards that are designated to qualify for Performance-Based Exception may not be adjusted upward (although the Committee shall retain the discretion to adjust such Awards downward). In no event shall the Performance Period for any performance-based equity Award be less than one year.

(4) In the case of any Award that is granted subject to the condition that a specific Performance Measure be achieved, no payment under such Award shall be made prior to the time the Committee certifies in writing that that the Performance Measure has been achieved. For this purpose, approved minutes of the Committee meeting at which the certification is made shall be treated as a written certification. No such certification is required, however, in the case of an Award that is based solely on an increase in the value of a share of Common Stock from the date the Award is made.

SECTION VII

STOCK OPTIONS FOR EMPLOYEES AND CONSULTANTS

(1) The Committee may grant Nonqualified Stock Options or Incentive Stock Options or a combination of both to Employee Participants in the amount and at the time that the Committee approves. The Committee may grant Nonqualified Stock Options to Consultant Participants in the amount and at the time that the Committee approves. In order to provide a limitation on the number of shares as provided for in Section 162(m) of the Internal Revenue Code and the regulations thereunder, Stock Option grants shall be limited to a maximum of 1,000,000 shares per year for any Employee Participant.

(2) The Committee will document the terms of the Stock Option in an Award Agreement to include the Grant Date and Exercise Price, as well as any other terms that it may desire. The Exercise Price under a Stock Option shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the Grant Date. Subject to adjustment pursuant to Section XII, the Exercise Price of outstanding Options fixed by the Committee shall not be modified.

E-105

(3) 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.

(4) 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 granted under this Section of the Plan to an Employee or Consultant may be exercised at any time unless the Participant who holds the Stock Option is then an Employee or Consultant, respectively. The option can be exercised in whole or in part through (i) cashless exercise, (ii) the Corporation withholding from the shares of Common Stock otherwise issuable upon exercise of the Stock Option a number of shares of Common Stock having a fair market value equal, as of the date of exercise, to the Exercise Price of the Stock Option multiplied by the number of shares of Common Stock in respect of which the Stock Option shall have been exercised (“Net-Exercise”), or (iii) 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 Stock 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 on the date of exercise unrestricted Common Stock already owned by the Participant, 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 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 payable in connection with an exercise.

(5) 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.

(6) 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.

(7) Provisions for Restoration Stock Options may be contained in the terms of options granted under the Plan. Restoration Stock Options may be granted under the Plan pursuant to the following terms: (a) Restoration Stock Options may be granted if the Participant elects to make a restoration option exercise of an Underlying Option, pays the exercise price by transferring to the Corporation Common Stock of the Corporation held by the Participant, and pays the withholding tax by transferring Common Stock or cash. The number of Restoration Stock Options that will be granted is equal to the number of shares used to pay the exercise price and the number of shares with value equal to the tax liability; (b) The Restoration Stock Options will have a term equal to the remaining term of the Underlying Option, will have an Exercise Price equal to the Fair Market Value of the stock on the date of grant of the Restoration Option, and will become exercisable in six months after grant (or, if sooner, one month before the end of the term of the Underlying Option), and otherwise will have the same general terms and conditions of Nonqualified Stock Options granted by the Corporation; (c) The shares that represent the difference between the Exercise Price of the Underlying Option and the value of the shares on the date of exercise, less withholding taxes, generally cannot be transferred for a period of three (3) years; and (d) To the extent permitted by the Committee under Section V(5), at the election of the Participant delivery of the shares may be deferred.

(8) In the event of the termination of the employment of an Employee who holds an outstanding Stock Option, other than by reason of death, total and permanent disability or a Qualified Retirement, the Employee 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

E-106

of the number of shares which were exercisable at the date of the termination of employment. In the event of termination of service as a Consultant who holds an outstanding Stock Option, other than by reason of death or total and permanent disability, the Consultant 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 service. Stock Options granted under this Section of the Plan to an Employee will not be affected by any change of employment so long as the Participant continues to be an Employee. Provided, however, if the Participant is terminated for cause as defined in the International Truck and Engine Corporation Income Protection Plan, or if the Participant is covered by a different severance plan or agreement, then as defined in such plan or agreement, the three-month period provided by this subsection shall not apply and the Stock Option shall cease to be exercisable and shall lapse as of the effective date of the termination of the Employee.

(9) Except as provided in Section VII(12), in the event of a Qualified Retirement an Employee 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.

(10) In the event of a total and permanent disability, as defined by the Corporation’s long term disability programs, an Employee or Consultant who holds an outstanding Stock Option may exercise the Stock Option, to the extent the Stock Option is exercisable or becomes exercisable under its terms, at any time within three (3) 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.

(11) In the event of the death of an Employee or Consultant 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 performing services as a Consultant, or after a Qualified Retirement, or during the three-year period specified in Section VII(10), Stock 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(8), Stock Options may be exercised to the extent of the number of shares that were exercisable at the date of death.

(12) Notwithstanding the other provisions of Sections VII(9) or VII(11), no Stock Option which is not exercisable at the time of a Qualified Retirement shall become exercisable after such Qualified 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.

(13) Notwithstanding any provision of the Plan to the contrary, (a) the exercise of a Stock Option granted under the Plan at any time on or after April 16, 2007 shall be settled solely in shares of Common Stock, and under no circumstances whatsoever shall a Stock Option be exercisable with respect to any period during which the exercise of such Stock Option would violate Applicable Law, as defined in Section XXII, and (b) in accordance with both the terms of the Prospectus for the Plan and the power and authority reserved to the Committee under Section XIII, and to the fullest extent permitted under Applicable Law, as defined in Section XXII, the exercise of a Stock Option granted under the Plan at any time before April 16, 2007 shall be settled solely in shares of Common Stock, and under no circumstances whatsoever shall a Stock Option be exercisable with respect to any period during which the exercise of such Stock Option would violate Applicable Law, as defined in Section XXII.

E-107

SECTION VIII

STOCK OPTIONS NON-EMPLOYEE DIRECTORS

(1) The Committee may grant Nonqualified Stock Options to Non-Employee Directors.

(2) The Committee will document the terms of the Stock Option to include the Grant Date and Exercise Price, as well as any other terms that it may desire. The Exercise Price under a Stock Option shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the Grant Date. Subject to adjustment pursuant to Section XII, the Exercise Price of outstanding Stock Options fixed by the Committee shall not be modified.

(3) Unless otherwise determined by the Committee, a Stock Option granted under this Section of 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.

(4) A Stock Option granted this Section of 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.

(5) Except as provided herein, no Stock Option granted under this Section of the Plan may be exercised at any time unless the Participant who holds the Stock Option is then a Non-Employee Director.

(6) A Stock Option granted under this Section of the Plan can be exercised in whole or in part through cashless exercise, Net-Exercise, as defined in Section VII(4), 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 on the date of exercise unrestricted Common Stock already owned by the Participant, 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 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 payable in connection with an exercise.

(7) The Non-Employee Director 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.

(8) Neither the Corporation nor any subsidiary may directly or indirectly lend money to any Non-Employee Director for the purpose of assisting the individual to acquire shares of Common Stock issued upon the exercise of Stock Options granted under the Plan.

(9) In the event of the termination of service as a Non-Employee Director, other than by reason of death, total and permanent disability or a Qualified Retirement, a Non-Employee Director who holds an outstanding Stock Option 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 service.

(10) Except as provided in Section VII(13), in the event of Qualified Retirement a Non-Employee Director who holds an outstanding Stock Option may exercise the Stock Option to the extent the Stock Option is exercisable or becomes exercisable under its terms, at any time during the term of the option grant.

E-108

(11) In the event of a total and permanent disability, as determined by the Committee, a Non-Employee Director 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 (3) years after such termination or, if later, the date on which the Stock Option becomes exercisable with respect to such shares, but not after the expiration of the term of the option grant.

(12) In the event of the death of a Non-Employee Director 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 the Participant is serving as a Non-Employee Director, or after a Qualified Retirement, or during the three-year period specified in Section VIII(11), Stock Options may be exercised to the extent of the remaining shares covered by the 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 VIII(9), Stock Options may be exercised to the extent of the number of shares that were exercisable at the date of death.

(13) Notwithstanding the other provisions of Sections VIII(10) or VIII(12), no option which is not exercisable at the time of a Qualified Retirement shall become exercisable after such Qualified Retirement if, without the written consent of the Corporation, a Non-Employee Director engages in a business, whether as owner, partner, officer, employee, or otherwise, or serves as a director for such business, which is in competition with the Corporation or one of its affiliates, and if the Non-Employee Director’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 IX

PROHIBITION ON REPRICING AND DISCOUNTED OPTIONS

Notwithstanding any other provision in the Plan, no Stock Option issued under the Plan may be amended or modified in any way that changes the Exercise Price of the Stock Option, and no Stock Option may be issued with an Exercise Price that is less than the Fair Market Value of one share of Common Stock on the Grant Date of the Stock Option or in any other way discounted. This provision shall not limit any adjustments provided by Section XII relating to adjustments upon changes in capitalization.

SECTION X

STOCK APPRECIATION RIGHTS AND OTHER AWARDS

(1) Subject to the terms of the Plan, the Committee may grant any types of Awards other than Stock Options provided for in Sections VII and VIII, and Restricted Stock provided for in Section XI, including but not limited to SARs. The Committee shall determine the terms and conditions of such Awards.

(2) The Committee may, subject to the terms of the Plan, grant SARs to Employee and Consultant Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination thereof. The Committee shall have complete discretion in determining the number of SARs, subject to the terms of the Plan, and to determine the terms of the SARs. The grant price of a Freestanding SAR shall equal the Fair Market Value of one share of Common Stock on the Grant Date. The Exercise Price of Tandem SARs shall equal the Exercise Price of the related Stock Option.

(3) Tandem SARs may be exercised for all or part of the shares subject to the related Stock Option upon the surrender of the right to exercise the equivalent portion of the related Stock Option. A related Stock Option is then exercisable.

E-109

(4) Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection with an Incentive Stock Option: (a) The Tandem SAR shall expire no later than the expiration than the expiration of the Incentive Stock Option; (b) The value of the payout with respect to the Tandem SAR shall not exceed the excess of the fair market value of the shares subject to Incentive Stock Option at the time the Tandem SAR is exercised over the Exercise Price under the Incentive Stock Option; and (c) The Tandem SAR may be exercised only when the fair market value on the date of exercise of the shares subject to the Incentive Stock Option exceed the Exercise Price of the Incentive Stock Option.

(5) Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its discretion, impose upon them, subject, however, to the terms of the Plan.

(6) The term of SARs shall be determined by the Committee, in its discretion; provided that such term shall not exceed 10 years.

(7) Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Corporation in an amount determined by multiplying: (a) the excess of fair market value of one share of Common Stock on the date of exercise over the Exercise Price, by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon exercise of a SAR may be in cash, in share equivalent fair market value, or in a combination thereof.

(8) It shall be presumed unless the Company determines to the contrary, that all awards to Employees under this Section are intended to qualify for Performance-Based Exception. If the Committee does not intend an Award to an Employee to qualify for the Performance-Based Exception the Committee shall reflect its intent in its records in such manner as the Committee determines to be appropriate. For the purpose of complying with the Performance-Based Exception rule of Section 162(m) of the Internal Revenue Code, the number of SARs that can be granted to any one Employee in any Fiscal Year shall not exceed 1,000,000 shares, less the number of stock options grant to such Employee during the year. Any Award the value of which is not solely dependent on value of the stock on which the award is based shall not exceed $4,000,000 for any Employee for the year.

SECTION XI

RESTRICTED STOCK

(1) Restricted Stock, or Stock Units, may be granted during a Fiscal Year or at any time thereafter. Awards under the Plan may be granted in the form of Restricted Stock, in the form of Stock Units, or in any combination of both. Restricted Stock or Stock Units may also be awarded in combination with Stock Options, and such an Award may provide that the Restricted Shares or Stock Units will be forfeited in the event that the terms of the Award Agreement are not fulfilled.

(2) Awards of Restricted Stock or Stock Units may be made under the Plan to Participants for meeting the stock ownership requirements as described in the Navistar Executive Stock Ownership Program, as may be amended from time to time by the Board of Directors, in their sole discretion, or for any other purpose.

(3) Each Award of Restricted Stock or Stock Units shall become vested, in full or in installments, upon satisfaction of the conditions specified in the Award Agreement. In no event will an Award of Restricted Stock or Stock Units granted under the Plan vest in full prior to the commencement of the third year anniversary of the Grant Date, except that any Award (or portion thereof) of Restricted Stock or Restricted Stock Units granted under the Plan representing a Non-Employee Director’s first quarterly retainer shall be immediately vested upon the Grant Date.

(4) The Participant will be entitled to all dividends paid with respect to all Restricted Stock 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 Stock. The Participant also will be entitled to vote Restricted Stock during the period of restriction.

E-110

(5) All Restricted Stock certificates awarded under the Plan are to be delivered to the Participant with an appropriate legend imprinted on the certificate.

(6) In the event a Participant dies while employed by the Corporation or a subsidiary, performing services as a Consultant, or serving as a Non-Employee-Director of the Corporation, or following a Qualified Retirement or total or permanent disability, the Restricted Stock or Stock Units will vest as of the date of death and all restrictions shall lapse and the Restricted Stock or Stock Units will be immediately transferable to the named beneficiary or to the Participant’s estate. Any Restricted Stock or Stock Units that becomes payable after the Participant’s death shall be distributed to the Participant’s beneficiary or beneficiaries. A beneficiary designation may be changed by filing the prescribed form with the Secretary of the Corporation at any time before the Participant’s death. If no beneficiary was designated or if no designated beneficiary survives the Participant, then any Restricted Stock or Stock Units that becomes payable after the Participant’s death shall be distributed to the Participant’s estate.

(7) In the event a Participant who holds unvested Restricted Stock or Stock Units, terminates employment or service as a Non-Employee Director with the Corporation by reason of Qualified Retirement or total and permanent disability, the Restricted Stock or Stock Units will continue to vest according to the terms of the Restricted Stock. In the event a Participant who holds unvested Restricted Stock or Stock Units, terminates service as a Consultant by reason of total and permanent disability, the Restricted Stock or Stock Units will continue to vest according to the terms of the Restricted Stock.

(8) In the event a Participant otherwise terminates employment or service as a Consultant or Non-Employee Director, any Restricted Stock or Stock Units that is not vested forfeits to the Corporation.

(9) Its shall be presumed unless the Committee determines to the contrary, that all awards to Employees under this Section of the Plan are intended to qualify for Performance-Based Exception. If the Committee does not intend an Award to an Employee to qualify for the Performance-Based Exception the Committee shall reflect its intent in its records in such manner as the Committee determines to be appropriate. For the purpose of complying with the Performance-Based Exception rules of Section 162(m) of the Internal Revenue Code, the maximum Award under this Section of the Plan to any one Employee during any one Fiscal Year shall not exceed 1,000,000 shares.

SECTION XII

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

Notwithstanding any other provision of the Plan, the Award 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 or SAR, the exercise 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 and the limits applicable to Awards under the Plan, in each case, shall be appropriately adjusted by the Committee, whose determination shall be conclusive.

SECTION XIII

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, Employee, Consultants, and Non-Employee Directors. The foregoing will include, but will not be limited to, all determinations by the Committee as to (a) the approval of Employees, Consultants, and Non-Employee Directors for participation in the Plan, (b) the amount of the Awards, (c) the performance levels at which different

E-111

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 or Consultants who are employed or engaged to perform services, respectively, outside the United States, or Non-Employee Directors not resident 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 XIV

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.

SECTION XV

WITHHOLDING TAXES

A Participant may elect, subject to the provisions of the applicable Sections of the Plan and the terms of the Award, to pay any withholding tax due in connection with the exercise of any Stock Option or SAR or upon the vesting of Restricted Stock or the settlement of any other Award either (i) by cash including a personal check made payable to the Corporation or (ii) by delivering at fair market value, on the date that the amount of tax to be withheld is determined, unrestricted Common Stock already owned by the Participant, or (iii) by any combination of cash or unrestricted Common Stock. In addition, the Committee may permit, in the Award Agreement or otherwise, that in the event that a Participant is required to pay to the Corporation any amount to be withheld in connection with the exercise, vesting or settlement of an Award denominated in shares, the Participant may satisfy such obligation (in whole or in part) by electing to have the Corporation withhold a portion of the shares of Common Stock otherwise to be issued upon exercise, vesting or settlement of such Award equal in value to the minimum amount required to be withheld. The value of the shares to be withheld shall be the fair market value on the date that the amount of tax to be withheld is determined.

SECTION XVI

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 XVII

MODIFICATION, AMENDMENT OR TERMINATION

The Committee may modify, amend, or terminate the Plan at any time, provided that, unless the requisite approval of stockholders is obtained, no amendment shall be made to the Plan if such amendment would (i) increase the number of shares of Common Stock available for issuance under the Plan or increase the limits applicable to Awards under the Plan, in each case, except as provided in Section XII; (ii) lower the Exercise Price

E-112

of the Stock Option or SAR grant value below 100% of the Fair Market Value of one share of Common Stock on the Grant Date, except as provided in Section XII; (iii) remove the repricing restriction set forth in Section IX; or (iv) require stockholder approval as a matter of law or under rules of the New York Stock Exchange. No Plan amendment shall, without the affected Participant’s consent, terminate or adversely affect any right or obligation under any Stock Option or other Award previously granted under the Plan. Without limiting the generality of the preceding sentence, in no event shall the Plan or any Award Agreement be amended to eliminate or otherwise adversely affect the election rights provided to a Participant pursuant to Section XX of the Plan without the written consent of the affected Participant.

SECTION XVIII

RESERVATION OF SHARES

(1) The total number of shares of Common Stock reserved and available for delivery pursuant to this Plan is 3,250,000 shares of Common Stock. The number of shares authorized and available shall be increased by shares of Common Stock subject to an option or award under this Plan or any other plan, including the Navistar 1994 Performance Incentive Plan, the Navistar 1998 Supplemental Stock Plan, or the 1998 Non-Employee Director Stock Option Plan, that is cancelled, expired, forfeited, settled in cash or otherwise terminated without a delivery of shares to the Participant of the plan, including shares used to pay the option exercise price of an option issued under the Plan or any other plan or to pay taxes with respect to such an option.

(2) In order to provide a limitation on the number of shares that may be issued as Incentive Stock Options as provided by the Code, no more than 1,000,000 shares of Common Stock, or if less the number of shares that may be issued under the Plan, 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.

(3) In order to provide a limitation on the number of shares that may be issued as Restricted Stock, Stock Units, SARs, and Awards other than Stock Options, no more than 1,000,000 shares of Common Stock that may be issued under the Plan shall be granted as Restricted Stock, Stock Units, SARs, or Awards other than Stock Options.

SECTION XIX

RIGHTS OF EMPLOYEES

Status as an Employee shall not be construed as a commitment that any one or more Awards will be made under this Plan to an Employee or to Employees generally. Status as a Participant shall not entitle the Participant to any additional future Awards. Nothing in the Plan will confer on any Employee or 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 an Employee or Participant’s employment at any time for any reason.

SECTION XX

CHANGE IN CONTROL

Notwithstanding any provision contained herein to the contrary, in the event of a Change in Control, all awarded Restricted Stock and Stock Units will immediately be free of all restrictions and performance contingencies and will be deemed fully earned and not subject to forfeiture and all outstanding Stock 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. Notwithstanding any provision of the Plan to the contrary, in the event of a Change in Control, each Participant

E-113

may elect, in a form and manner determined by the Corporation, that any Stock Option held by the Participant at the time of the Change in Control whose exercise in accordance with the terms of the Plan is prohibited at the time of the Change in Control by reason of the application of Federal or state securities laws shall be canceled effective as of the Change in Control in exchange for a cash payment from the Corporation equal to (i) (a) the excess (if any) of the value per share of Common Stock provided to stockholders of the Corporation generally in connection with the Change in Control (or, if none, the fair market value of a share of Common Stock on the date of the Change in Control or, if not a trading day, on the last trading day preceding the date of the Change in Control) over the Exercise Price under the Stock Option multiplied by (b) the number of shares of Common Stock subject to the Stock Option, less (ii) the statutory minimum withholding tax that may be due by reason of such payment, provided that this election will apply in respect of an Incentive Stock Option outstanding as of June 18, 2007 only if the holder of the Incentive Stock Option consents, during a period of less than 30 days following June 18, 2007, to its application to the Incentive Stock Option.

SECTION XXI

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 (3) 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, Consultant, or Non-Employee Director (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 XXII

GOVERNING LAW

The Plan will be governed by and construed in accordance with applicable Federal laws and, to the extent not inconsistent therewith or pre-empted thereby, with the laws of the State of Delaware (without regard to the conflicts of laws provisions of that State or any other jurisdiction), including applicable regulations, rules, and such other applicable authorities thereunder (“Applicable Law”). Accordingly, for the avoidance of doubt, the receipt, exercise, issuance, and disposition, as appropriate, of any Award, Common Stock, Stock Option, or other incentive or award under the Plan is expressly conditioned upon and subject to any and all limitations, restrictions, prohibitions, or such other conditions imposed by Applicable Law, including, but not limited to, applicable Federal and state securities law. Without limiting the generality and applicability of the foregoing and notwithstanding any provision of the Plan to the contrary, if and to the extent any amounts payable or benefits provided under this Plan are subject to, and would otherwise violate, the requirements of Section 409A of the Internal Revenue Code, including applicable regulations, rules, and such other applicable authorities thereunder (“Code Section 409A”), such amounts or benefits shall be paid or provided under such other conditions, determined by the Committee in its sole discretion, that cause the provision of such amounts or benefits to comply with, or not to be subject to, Code Section 409A and this Plan shall be construed and administered accordingly to achieve that objective.

E-114

SECTION XXIII

EFFECTIVE DATE

The effective date of the Plan shall be February 17, 2004 (the “Effective Date”), subject to approval by the stockholders at the Corporation’s Annual Meeting to be held on February 17, 2004, or any adjournment thereof. The Plan shall continue in effect for ten (10) years from the Effective Date, expiring February 16, 2014. No Awards may be granted under the Plan subsequent to February 16, 2014, but Awards theretofore granted may extend beyond that date in accordance with their terms.

E-115

EXHIBIT 10.87

NAVISTAR INTERNATIONAL CORPORATION

INCENTIVE STOCK OPTION AWARD AGREEMENT

NAVISTAR INTERNATIONAL CORPORATION

2004 PERFORMANCE INCENTIVE PLAN

OPTIONEE:

ADDRESS:

SOCIAL SECURITY NUMBER:

NUMBER OF SHARES:

EXERCISE PRICE PER SHARE:

DATE OF GRANT:

NUMBER OF SHARES:	EXERCISABLE ON OR AFTER [one year]
NUMBER OF SHARES:	EXERCISABLE ON OR AFTER [after two years]
NUMBER OF SHARES:	EXERCISABLE ON OR AFTER [three years]

EXPIRATION DATE: [ten years]

This is an award agreement (the “Award Agreement”) between Navistar International Corporation, a Delaware corporation (the “Corporation”), and the individual named above (the “Employee” or “Optionee”). The Corporation hereby grants to the Optionee the right and option (this “Option”) to purchase all or any part of an aggregate of the above-stated number of shares of Common Stock of the Corporation on the terms and conditions contained in the Corporation’s 2004 Performance Incentive Plan approved by the shareholders February 17, 2004, as amended from time to time (the “Plan”) and, further subject to the Incentive Stock Option Agreement Supplement which is attached hereto.

Subject to the terms and conditions of this Award Agreement, this Option is exercisable on or after the date set forth above; provided, however, that this Option shall expire on the Expiration Date set forth above and must be exercised, if at all, on or before the Expiration Date.

The Corporation and the Optionee hereby agree to the terms and conditions of this Award Agreement and have executed it as of the Date of Grant set forth above.

NAVISTAR INTERNATIONAL CORPORATION
By:
	Daniel C. Ustian
	Chairman, President and Chief
	Executive Officer

Attest:

Curt A. Kramer
Corporate Secretary
	Optionee

E-116

EXHIBIT 10.88

NAVISTAR INTERNATIONAL CORPORATION

INCENTIVE STOCK OPTION AGREEMENT SUPPLEMENT

1. This option shall be treated as an Incentive Stock Option. The option is granted under the terms of the Navistar International Corporation 2004 Performance Incentive Plan as may be amended from time to time (the “Plan”), as indicated in the Incentive Stock Option Award Agreement (the “Award Agreement”). The term of the option shall be for a period of ten (10) years from the date of grant, or such shorter period as is prescribed in paragraphs 3, 4, and 5 hereof; provided, however, that in the event of a Qualified Retirement in connection with which an employee receives a termination payment under an Executive Severance Agreement entered into between the employee and the Corporation or any of its subsidiaries (other than in connection with a Change in Control of the Corporation), the term of the option shall expire three (3) months after such termination of employment, but not after ten (10) years from the date hereof. The option shall be exercisable to the extent of the number of shares specified in the Award Agreement as exercisable one year after the date of grant, to the extent of the number of shares specified in the Award Agreement as exercisable two years after the date of grant, and to the extent of the number of shares specified in the Award Agreement as exercisable three years after the date of grant. The option may be exercised, at any time or from time to time during said term, as to all full shares that have become so purchasable. Except as provided in paragraphs 3, 4, and 6 hereof, the option may not be exercised unless the optionee shall, at the time of exercise, be an employee of the Navistar International Corporation (the “Corporation”) or a subsidiary thereof. The optionee shall have none of the rights of a shareowner with respect to any of the shares of Common Stock subject to the option until such shares shall be issued upon the exercise of the option.

2. The option shall not be transferable otherwise than by will or the laws of descent and distribution, and the option shall be exercisable, during the lifetime of the optionee, only by the optionee. Without limiting the generality of the foregoing, the option may not be assigned, transferred (except as aforesaid), pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the option contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the option shall be null and void and without effect.

3. In the event of the termination of the employment of the optionee otherwise than by reason of death, total and permanent disability or a Qualified Retirement as set forth in paragraph 4 hereof, the optionee may (subject to the provisions of paragraph 5 hereof) exercise the option to the extent that the optionee was entitled to do so pursuant to the provisions of paragraph 1 hereof at the time of such termination, at any time within three (3) months after such termination, but not after ten (10) years from the date hereof. The option shall not be affected by any change of employment so long as the optionee continues to be an employee of the Corporation or of a subsidiary thereof or by any temporary leave of absence approved, if for a period of not more than ninety (90) days, by an officer of the Corporation or the subsidiary thereof, as the case may be, by which the optionee is employed or, if for a period longer than ninety (90) days, approved by the Committee on Compensation and Governance of the Board of Directors of the Corporation (the “Committee”); provided, however, if the optionee is terminated for cause as defined in the International Truck and Engine Corporation Income Protection Plan or any successor plan thereto, as each may be amended from time to time, or if the optionee is covered by a different severance plan or agreement, then as defined in such plan or agreement, the three-month period provided by this subsection shall not apply and the option shall cease to be exercisable and shall lapse as of the effective date of the termination of the optionee. Nothing herein contained shall confer on the optionee any right to continue in the employ of the Corporation or any subsidiary or interfere in any way with the right of the Corporation or any subsidiary thereof to terminate the employment of the optionee at any time.

4. Except as provided in the last two sentences of this Section 4, in the event of a Qualified Retirement, which means with respect to an employee a termination from employment from the Corporation or any of its subsidiaries that occurs after the employee attains age 55 and at the time of the termination the employee has

E-117

either: (i) 10 or more years of continuous service as a full-time employee, or (ii) 10 or more years of service that would constitute credited service under the definition contained in the International Truck and Engine Corporation Retirement Plan for Salaried Employees, as may be amended from time to time (the “RPSE”), (a “Qualified Retirement”), the optionee may exercise the option to the extent the option is exercisable or becomes exercisable under its terms at any time during the term of the option grant. In the event of termination for total and permanent disability as defined in the Corporation’s long term disability programs, the optionee may exercise the option, to the extent the option is exercisable or becomes exercisable under its terms, at any time within three (3) years after termination for total and permanent disability, or, if later, within three (3) years after the date on which the option becomes exercisable with respect to such shares, but not after the term of the option. In the event of the death of the optionee while the option is outstanding, the option may be exercised by a legatee or legatees of the optionee under the optionee’s last Will, or by the personal representatives or distributees of the optionee, at any time within a period of two (2) years after the death of the optionee, but not after the term of the grant. If death occurs while employed by the Corporation or a subsidiary thereof, or after a Qualified Retirement, or during the three-year period following termination for total and permanent disability, the option may be exercised to the extent of the remaining shares covered by option whether or not such shares were exercisable at the date of death. If death occurs during the three-month period provided by Paragraph 3 following termination for other than death, total and permanent disability or Qualified Retirement, the option subject to such three-month period 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 Paragraph 4, no option which is not exercisable at the time of a Qualified Retirement shall become exercisable after such Qualified Retirement if, without the written consent of the Corporation, the optionee 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 optionee’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.

5. Any option which did not become exercisable and which cannot become exercisable under the terms of the option, and any option that ceased to be exercisable and cannot again become exercisable under the terms of the option shall terminate.

6. In the event of a Change in Control, all outstanding options will immediately become exercisable and shall be exercisable for a period of three (3) years from the date of Change in Control regardless of the original term or employment status, except the term of option that is an Incentive Stock Option as defined in the Plan shall not extend beyond ten (10) years from the date of grant. A Change in Control shall be deemed to have occurred if (i) 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, Inc. (formerly known as International Truck and Engine Corporation), 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, (ii) the following individuals cease for any reason to constitute more than three-fourths of the number of directors then serving on the Board of Directors of the Corporation: individuals who, on the date hereof, constitute the Board and any new director (other than a 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) whose appointment or election by the Board or nomination for election by the Corporation’s stockholders was approved by the vote of at least two-thirds (2/3) of the directors then still in office or whose appointment, election or nomination was previously so approved or recommended; (iii) any dissolution or liquidation of the Corporation or Navistar, Inc. (formerly known as International Truck and Engine Corporation) or sale or disposition of all or substantially all (more than 50%) of the assets of the Corporation or of Navistar, Inc. (formerly known as International Truck and Engine Corporation) occurs; or (iv) as the result of, or in connection with, any cash tender offer, exchange offer, merger

E-118

or other business combination, sale of assets, proxy or consent solicitation, contested election or substantial stock accumulation (each, 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 (2) years, cease to constitute a majority of the Board of Directors of the Corporation. 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. Further, in the event of a Change in Control, the optionee may elect, in a form and manner determined by the Corporation, that any option held by the optionee at the time of the Change in Control whose exercise in accordance with the terms of the Plan is prohibited at the time of the Change in Control by reason of the application of federal or state securities laws shall be canceled effective as of the Change in Control in exchange for a cash payment from the Corporation equal to (i) (a) the excess (if any) of the value per share of Common Stock provided to stockholders of the Corporation generally in connection with the Change in Control (or, if none, the fair market value of a share of Common Stock on the date of the Change in Control or, if not a trading day, on the last trading day preceding the date of the Change in Control) over the exercise price under the option multiplied by (b) the number of shares of Common Stock subject to the option, less (ii) the statutory minimum withholding tax that may be due by reason of such payment.

7. If all or any portion of the option is exercised subsequent to any stock dividend, stock split, recapitalization, combination or exchange of shares, reorganization (including, but not limited to, merger or consolidation), liquidation or other event occurring after the date hereof, as a result of which any shares or other securities of the Corporation or any other entity (including, but not limited to, any subsidiary of the Corporation) shall be issued in respect of the outstanding shares of Common Stock, or shares of Common Stock shall be changed into the same or a different number of shares or other securities of the same or any other class or classes, the person or persons so exercising the option shall receive, for the aggregate price paid upon such exercise, the class and aggregate number of shares or other securities which, if shares of Common Stock (as authorized at the date hereof) had been purchased on the date hereof for the same aggregate price (on the basis of the price per share) and had not been disposed of, such person or persons would be holding at the time of such exercise as a result of such purchase any and all such stock dividends, stock splits, recapitalizations, combinations or exchanges of shares, reorganizations, liquidations or other events. In the event of any corporate reorganization, separation or division (including, but not limited to, split-up, split off, spin-off or sale of assets) as a result of which any cash or shares or other securities of any entity other than the Corporation (including, but not limited to, any subsidiary of the Corporation), shall be distributed in respect of the outstanding shares of Common Stock, a committee of the Board shall make such adjustments in the terms of the option (including, but not limited to, the number of shares covered and the purchase price of such shares) as it may deem appropriate to provide equitably for the optionee’s interest in the option. Upon any adjustment as aforesaid, the minimum number of full shares that may be purchased upon any exercise of the option as specified in paragraph 1 shall be adjusted proportionately. No fractional shares shall be issued upon any exercise of the option, and the aggregate price paid shall be appropriately reduced on account of any fractional share not issued.

8. Subject to the terms and conditions contained herein, in the Award Agreement and the Plan, the option may be exercised by giving notice as provided in instructions issued by the Secretary for the exercise of options generally, which instructions may provide for the use of agents, including stock brokers, to effect exercise of options, or in the absence of such instructions, by written notice to the Secretary of the Corporation at the location of its principal office at the time of exercise, which is currently located at 4201 Winfield Road, Warrenville, Illinois 60555. Such notice shall state the election to exercise the option and the number of shares in respect of which it is being exercised, shall be signed by the person or persons so exercising the option and shall be accompanied by instructions to the Secretary to exercise, in whole or in part, through a cashless exercise, net-exercise (as defined in the Plan), or other arrangements through agents, including stockbrokers, under arrangements established by the Corporation for the exercise of the option, or, if not covered by such instructions, for payment of the full purchase price of said shares by cash, including a personal check made payable to the Corporation, or by delivering at fair market value on the date of exercise unrestricted Common Stock already owned by the optionee, or by any combination of cash and Common Stock, and in either case, by payment to the Corporation of any withholding tax. Shares which otherwise would be delivered to the holder of

E-119

an 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. In no event may successive simultaneous pyramiding be used to exercise an option. A certificate or certificates representing said shares shall be delivered as soon as practicable after the notice shall be received by the Corporation. The certificate or certificates for the shares as to which the option shall have been so exercised shall be registered in the name of the person or persons so exercising the option and shall be delivered as aforesaid to or upon the written order of the person or persons exercising the option. In the event that the option shall be exercised, pursuant to paragraph 4 hereof, by any person or persons other than the optionee, such notice shall be accompanied by appropriate proof of the right of such person or the persons to exercise the option. The date of exercise of the option shall be the date on which the aforesaid written notice, properly executed and accompanied as aforesaid, is received under the Secretary’s instructions or by the Secretary. The payment due to the optionee upon exercise of the option will be settled solely in Common Stock. All shares that shall be purchased upon the exercise of the option as provided herein shall be fully paid and non-assessable.

9. [Reserved]

10. The Corporation shall at all times during the term of the option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements contained herein, in the Award Agreement and in the Plan, shall pay all original issue and/or transfer taxes with respect to the issue and/or transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection therewith and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Corporation, shall be applicable thereto. If the Plan pursuant to which the option is exercised provides that only treasury stock will be used to satisfy the requirements of options, only treasury stock that has been listed on the exchange will be used.

11. As used herein, the term “subsidiary” shall mean any present and future subsidiary of the Corporation, and the term “Common Stock” shall mean the class of stock designated “Common Stock” in the Restated Certificate of Incorporation of the Corporation.

12. The terms and conditions contained herein and in the Award Agreement shall be subject to and governed by the terms of the Plan, a copy of which is being delivered herewith to the optionee. Optionee acknowledges that the Plan may be amended, prospectively or retroactively in order to comply with the requirements of the Internal Revenue Code governing deferred compensation, and optionee agrees to comply with the terms of the Plan as so amended from time to time.

E-120

EXHIBIT 10.89

NAVISTAR INTERNATIONAL CORPORATION

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

NAVISTAR INTERNATIONAL CORPORATION

2004 PERFORMANCE INCENTIVE PLAN

OPTIONEE:

ADDRESS:

SOCIAL SECURITY NUMBER:

NUMBER OF SHARES:

EXERCISE PRICE PER SHARE:

DATE OF GRANT:

NUMBER OF SHARES: [1/3rd]	EXERCISABLE ON OR AFTER [one year]
NUMBER OF SHARES: [1/3rd]	EXERCISABLE ON OR AFTER [two years]
NUMBER OF SHARES: [1/3rd]	EXERCISABLE ON OR AFTER [three years]

EXPIRATION DATE: [ten years]

This is an award agreement (the “Award Agreement”) between Navistar International Corporation, a Delaware corporation (the “Corporation”), and the individual named above (the “Employee” or “Optionee”). The Corporation hereby grants to the Optionee the right and option (this “Option”) to purchase all or any part of an aggregate of the above-stated number of shares of Common Stock of the Corporation on the terms and conditions of the Corporation’s 2004 Performance Incentive Plan approved by the shareholder February 17, 2004, as amended from time to time (the “Plan”) and, further subject to the Non-Qualified Stock Option Agreement Supplement which is attached hereto.

Subject to the terms and conditions of this Award Agreement, this Option is exercisable on or after the date set forth above; provided, however, that this Option shall expire on the Expiration Date set forth above and must be exercised, if at all, on or before the Expiration Date except as provided in paragraphs 6 and 9 of the supplement.

The Corporation and the Optionee hereby agree to the terms and conditions of this Award Agreement and have executed it as of the Date of Grant set forth above.

NAVISTAR INTERNATIONAL CORPORATION
By:
	Daniel C. Ustian
	Chairman, President and Chief
	Executive Officer

Attest:

Curt A. Kramer
Corporate Secretary
	Optionee

E-121

EXHIBIT 10.90

NAVISTAR INTERNATIONAL CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT SUPPLEMENT

1. This option shall be treated as a Nonqualified Stock Option. The option is granted under the terms of the Navistar International Corporation 2004 Performance Incentive Plan, as may be amended from time to time (the “Plan”), as indicated in the Non-Qualified Stock Option Award Agreement (the “Award Agreement”). The term of the option shall be for a period of ten (10) years from the date of grant, or such shorter period as is prescribed in paragraphs 3, 4, and 5 hereof; provided, however, that in the event of a Qualified Retirement in connection with which an employee receives a termination payment under an Executive Severance Agreement entered into between the employee and the Corporation or any of its subsidiaries (other than in connection with a Change in Control of the Corporation), the term of the option shall expire three (3) months after such termination of employment, but not after ten (10) years from the date hereof. The option shall be exercisable to the extent of the number of shares specified in the Award Agreement as exercisable one year after the date of grant, to the extent of the number of shares specified in the Award Agreement as exercisable two years after the date of grant, and to the extent of the number of shares specified in the Award Agreement as exercisable three years after the date of grant. The option may be exercised, at any time or from time to time during said term, as to all full shares that have become so purchasable. Except as provided in paragraphs 3, 4, and 6 hereof, the option may not be exercised unless the optionee, at the time of exercise, remains an employee, consultant, or non-employee director, respectively, of Navistar International Corporation (the “Corporation”) or a subsidiary thereof. The optionee shall have none of the rights of a shareowner with respect to any of the shares of Common Stock subject to the option until such shares shall be issued upon the exercise of the option.

2. The option shall not be transferable otherwise than by will or the laws of descent and distribution, and the option shall be exercisable, during the lifetime of the optionee, only by the optionee. Without limiting the generality of the foregoing, the option may not be assigned, transferred (except as aforesaid), pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the option contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the option shall be null and void and without effect.

3. In the event of the termination of the employment or service of the optionee otherwise than by reason of death, total and permanent disability or a Qualified Retirement as set forth in paragraph 4 hereof, the optionee may (subject to the provisions of paragraph 5 hereof) exercise the option to the extent that the optionee was entitled to do so pursuant to the provisions of paragraph 1 hereof at the time of such termination, at any time within three (3) months after such termination, but not after ten (10) years from the date hereof. The option shall not be affected by any change of an optionee’s employment so long as the optionee continues to be an employee of the Corporation or of a subsidiary thereof or by any temporary leave of absence approved, if for a period of not more than ninety (90) days, by an officer of the Corporation or the subsidiary, as the case may be, by which the optionee is employed or, if for a period longer than ninety (90) days, approved by the Committee on Compensation and Governance of the Board of Directors of the Corporation (the “Committee”); provided, however, that if the optionee is terminated for cause as defined in the International Truck and Engine Corporation Income Protection Plan or any successor plan thereto, as each may be amended from time to time, or if the optionee is covered by a different severance plan or agreement, then as defined in such plan or agreement, the three-month period provided by this subsection shall not apply and the option shall cease to be exercisable and shall lapse as of the effective date of the termination of the optionee. Nothing herein contained shall confer on the optionee any right to continue in the employ of the Corporation or any subsidiary thereof or interfere in any way with the right of the Corporation or any subsidiary thereof to terminate the employment or service of the optionee at any time.

E-122

4. Except as provided in the last two sentences of this Section 4, in the event of a Qualified Retirement, which means with respect to an employee a termination from employment from the Corporation or any of its subsidiaries that occurs after the employee attains age 55 and at the time of the termination the employee has either: (i) 10 or more years of continuous service as a full-time employee, or (ii) 10 or more years of service that would constitute credited service under the definition contained in the International Truck and Engine Corporation Retirement Plan for Salaried Employees, as may be amended from time to time (the “RPSE”), (a “Qualified Retirement”), the optionee may exercise the option to the extent the option is exercisable or becomes exercisable under its terms at any time during the term of the option grant. In the event of termination for total and permanent disability as defined in the Corporation’s long term disability programs, the optionee may exercise the option, to the extent the option is exercisable or becomes exercisable under its terms, at any time within three (3) years after termination for total and permanent disability, or, if later, within three (3) years after the date on which the option becomes exercisable with respect to such shares, but not after the term of the option. In the event of the death of the optionee while the option is outstanding, the option may be exercised by a legatee or legatees of the optionee under the optionee’s last Will, or by the personal representatives or distributees of the optionee, at any time within a period of two (2) years after the death of the optionee, but not after the term of the grant. If death occurs while employed by or performing services for the Corporation or a subsidiary thereof, or after a Qualified Retirement, or during the three-year period following termination for total and permanent disability, the option may be exercised to the extent of the remaining shares covered by the option, whether or not such shares were exercisable at the date of death. If death occurs during the three-month period provided by Paragraph 3 following termination for other than death, total and permanent disability or Qualified Retirement, the option subject to such three-month period 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 Paragraph 4, no option which is not exercisable at the time of a Qualified Retirement shall become exercisable after such Qualified Retirement if, without the written consent of the Corporation, the optionee 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 optionee’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.

5. Any option which did not become exercisable and which cannot become exercisable under the terms of the option, and any option that ceased to be exercisable and cannot again become exercisable under the terms of the option shall terminate.

6. In the event of a Change in Control, all outstanding options will immediately become exercisable and shall be exercisable for a period of three (3) years from the date of Change in Control regardless of the original term or employment status, except the term of option that is an Incentive Stock Option as defined in the Plan shall not extend beyond ten (10) years from the date of grant. A Change in Control shall be deemed to have occurred if (i) 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, Inc. (formerly known as International Truck and Engine Corporation), 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, (ii) the following individuals cease for any reason to constitute more than three-fourths of the number of directors then serving on the Board of Directors of the Corporation: individuals who, on the date hereof, constitute the Board and any new director (other than a 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) whose appointment or election by the Board or nomination for election by the Corporation’s stockholders was approved by the vote of at least two-thirds (2/3) of the directors then still in office or whose appointment, election or nomination was previously so

E-123

approved or recommended; (iii) any dissolution or liquidation of the Corporation or Navistar, Inc. (formerly known as International Truck and Engine Corporation) or sale or disposition of all or substantially all (more than 50%) of the assets of the Corporation or of Navistar, Inc. (formerly known as International Truck and Engine Corporation) occurs; or (iv) 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 (each, 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 (2) years, cease to constitute a majority of the Board of Directors of the Corporation. 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. Further, in the event of a Change in Control, the optionee may elect, in a form and manner determined by the Corporation, that any option held by the optionee at the time of the Change in Control whose exercise in accordance with the terms of the Plan is prohibited at the time of the Change in Control by reason of the application of federal or state securities laws shall be canceled effective as of the Change in Control in exchange for a cash payment from the Corporation equal to (i) (a) the excess (if any) of the value per share of Common Stock provided to stockholders of the Corporation generally in connection with the Change in Control (or, if none, the fair market value of a share of Common Stock on the date of the Change in Control or, if not a trading day, on the last trading day preceding the date of the Change in Control) over the exercise price under the option multiplied by (b) the number of shares of Common Stock subject to the option, less (ii) the statutory minimum withholding tax that may be due by reason of such payment.

7. If all or any portion of the option is exercised subsequent to any stock dividend, stock split, recapitalization, combination or exchange of shares, reorganization (including, but not limited to, merger or consolidation), liquidation or other event occurring after the date hereof, as a result of which any shares or other securities of the Corporation or any other entity (including, but not limited to, any subsidiary of the Corporation) shall be issued in respect of the outstanding shares of Common Stock, or shares of Common Stock shall be changed into the same or a different number of shares or other securities of the same or any other class or classes, the person or persons so exercising the option shall receive, for the aggregate price paid upon such exercise, the class and aggregate number of shares or other securities which, if shares of Common Stock (as authorized at the date hereof) had been purchased on the date hereof for the same aggregate price (on the basis of the price per share) and had not been disposed of, such person or persons would be holding at the time of such exercise as a result of such purchase any and all such stock dividends, stock splits, recapitalizations, combinations or exchanges of shares, reorganizations, liquidations or other events. In the event of any corporate reorganization, separation or division (including, but not limited to, split-up, split off, spin-off or sale of assets) as a result of which any cash or shares or other securities of any entity other than the Corporation (including, but not limited to, any subsidiary of the Corporation), shall be distributed in respect of the outstanding shares of Common Stock, a committee of the Board shall make such adjustments in the terms of the option (including, but not limited to, the number of shares covered and the purchase price of such shares) as it may deem appropriate to provide equitably for the optionee’s interest in the option. Upon any adjustment as aforesaid, the minimum number of full shares that may be purchased upon any exercise of the option as specified in paragraph 1 shall be adjusted proportionately. No fractional shares shall be issued upon any exercise of the option, and the aggregate price paid shall be appropriately reduced on account of any fractional share not issued.

8. Subject to the terms and conditions contained herein, in the Award Agreement and the Plan, the option may be exercised by giving notice as provided in instructions issued by the Secretary of the Corporation for the exercise of options generally, which instructions may provide for the use of agents, including stock brokers, to effect exercise of options, or in the absence of such instructions, by written notice to the Secretary of the Corporation at the location of its principal office at the time of exercise, which is currently located at 4201 Winfield Road, Warrenville, Illinois 60555. Such notice shall state the election to exercise the option and the number of shares in respect of which it is being exercised, shall be signed by the person or persons so exercising the option and shall be accompanied by instructions to the Secretary to exercise, in whole or in part, through a cashless exercise, net-exercise (as defined in the Plan), or other arrangements through agents, including stockbrokers, under arrangements established by the Corporation for the exercise of the option, or, if not covered

E-124

by such instructions, for payment of the full purchase price of said shares by cash, including a personal check made payable to the Corporation, or by delivering at fair market value on the date of exercise unrestricted Common Stock already owned by the optionee, or by any combination of cash and Common Stock, and in either case, by payment to the Corporation of any withholding tax. Shares which otherwise would be delivered to the holder of an 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. In no event may successive simultaneous pyramiding be used to exercise an option. A certificate or certificates representing said shares shall be delivered as soon as practicable after the notice shall be received by the Corporation. The certificate or certificates for the shares as to which the option shall have been so exercised shall be registered in the name of the person or persons so exercising the option and shall be delivered as aforesaid to or upon the written order of the person or persons exercising the option. In the event the option shall be exercised, pursuant to paragraph 4 hereof, by any person or persons other than the optionee, such notice shall be accompanied by appropriate proof of the right of such person or the persons to exercise the option. The date of exercise of the option shall be the date on which the aforesaid written notice, properly executed and accompanied as aforesaid, is received under the Secretary’s instructions or by the Secretary. The payment due to the optionee upon exercise of the option will be settled solely in Common Stock. All shares that shall be purchased upon the exercise of the option as provided herein shall be fully paid and non-assessable.

9. [Reserved]

10. The Corporation shall at all times during the term of the option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements contained herein, in the Award Agreement and in the Plan, shall pay all original issue and/or transfer taxes with respect to the issue and/or transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection therewith and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Corporation, shall be applicable thereto. If the Plan pursuant to which the Option is exercised provides that only treasury stock will be used to satisfy the requirements of options, only treasury stock that has been listed on the exchange will be used.

11. As used herein, the term “subsidiary” shall mean any present and future subsidiary of the Corporation, and the term “Common Stock” shall mean the class of stock designated “Common Stock” in the Restated Certificate of Incorporation of the Corporation.

12. The terms and conditions contained herein and in the Award Agreement shall be subject to and governed by the terms of the Plan, a copy of which is being delivered herewith to the optionee. Optionee acknowledges that the Plan may be amended, prospectively or retroactively in order to comply with the requirements of the Internal Revenue Code governing deferred compensation, and optionee agrees to comply with the terms of the Plan as so amended from time to time.

E-125

EXHIBIT 10.91

NAVISTAR INTERNATIONAL CORPORATION

RESTORATION STOCK OPTION AWARD AGREEMENT

NAVISTAR INTERNATIONAL CORPORATION

2004 PERFORMANCE INCENTIVE PLAN

OPTIONEE:

ADDRESS:

SOCIAL SECURITY NUMBER:

ORIGINAL OPTION

GRANT DATE:

SHARES EXERCISED:

SHARES RESTRICTED:

RESTRICTION ENDS:

RESTORATION OPTION

EXERCISE PRICE PER SHARE:

DATE OF GRANT:

NUMBER OF OPTIONS:

EXERCISABLE ON:      [six months or if sooner one month before expiration of original term]

EXPIRATION DATE:    [term of original option]

This is an award agreement (the “Award Agreement”) between Navistar International Corporation, a Delaware corporation (the “Corporation”), and the individual named above (the “Employee” or “Optionee”). The Corporation hereby grants to the Optionee the right and option (this “Option”) to purchase all or any part of an aggregate of the above-stated number of shares of Common Stock of the Corporation on the terms and conditions of the Corporation’s 2004 Performance Incentive Plan approved by the shareholders February 17, 2004, as amended from time to time (the “Plan”) and, further subject to the Restoration Stock Option Agreement Supplement which is attached to hereto.

Subject to the terms and conditions of this Award Agreement, this Option is exercisable on or after the date set forth above; provided, however, that this Option shall expire on the Expiration Date set forth above and must be exercised, if at all, on or before the Expiration Date except as provided in paragraphs 6 and 9 of the supplement.

The Corporation and the Optionee hereby agree to the terms and conditions of this Award Agreement and have executed it as of the Date of Grant set forth above.

NAVISTAR INTERNATIONAL CORPORATION
By:
	Daniel C. Ustian
	Chairman, President and CEO

Attest:

Curt A. Kramer
Corporate Secretary
	Optionee

E-126

EXHIBIT 10.92

NAVISTAR INTERNATIONAL CORPORATION

RESTORATION STOCK OPTION AGREEMENT SUPPLEMENT

1. This option shall be treated as a Nonqualified Stock Option. The option is granted under the terms of the Navistar International Corporation 2004 Performance Incentive Plan, as may be amended from time to time (the “Plan”), as indicated in the Restoration Stock Option Award Agreement (the “Award Agreement”). This restoration option is granted with respect to the exercise of another option held by the optionee that was previously granted under the Plan (other than an option that is a restoration option granted with respect to a non-restoration option granted before June 21, 2000 or an option that is an Incentive Stock Option), or granted under another plan of Navistar International Corporation (the “Corporation”), for which the optionee has agreed to make a restoration exercise (the “Original Option”). This restoration option relates to the number of shares for which the Original Option was exercised that represent: i) the purchase price paid on exercise of the option, and, ii) the amount of withholding tax (at the minimum applicable rates) for all taxes other than the Social Security (OASDI) portion of FICA (including withholding tax that will be due on a deferred exercise). The optionee will make such an agreement to make a restoration option exercise by notifying the Secretary of his intention to make a restoration option exercise of a designated option, paying the option price by the transfer of shares of common stock of the Corporation as provided by the Secretary, and paying the withholding tax by cash, by the Corporation withholding shares, or by the transfer of shares of common stock of the Corporation as provided by the Secretary, providing such additional information as requested by the Secretary, and by executing the Award Agreement.

The term of the option shall be the remaining term of the Original Option, or such shorter period as is prescribed in paragraphs 3, 4, and 5 hereof; provided, however, that in the event of a Qualified Retirement in connection with which an employee receives a termination payment under an Executive Severance Agreement entered into between the employee and the Corporation or any of its subsidiaries (other than in connection with a Change in Control of the Corporation), the term of the option shall expire three (3) months after such termination of employment, but not after the remaining term of the Original Option. The option shall be exercisable at the earlier of: i) six months from the date of grant, or, ii) one month prior to the expiration of the Original Option. The option may be exercised, at any time or from time to time during said term, as to all full shares that have become so purchasable. Except as provided in paragraphs 3, 4, and 6 hereof, the option may not be exercised unless the optionee shall, at the time of exercise, remain an employee or consultant respectively, of the Corporation or a subsidiary thereof. The optionee shall have none of the rights of a shareowner with respect to any of the shares of Common Stock subject to the option until such shares shall be issued upon the exercise of the option and delivered to the optionee.

2. The option shall not be transferable otherwise than by will or the laws of descent and distribution, and the option shall be exercisable, during the lifetime of the optionee, only by the optionee. Without limiting the generality of the foregoing, the option may not be assigned, transferred (except as aforesaid), pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the option contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the option shall be null and void and without effect.

3. In the event of the termination of the employment or service of the optionee otherwise than by reason of death, total and permanent disability or a Qualified Retirement as set forth in paragraph 4 hereof, the optionee may (subject to the provisions of paragraph 5 hereof) exercise the option to the extent that the optionee was entitled to do so pursuant to the provisions of paragraph 1 hereof at the time of such termination, at any time within three (3) months after such termination, but not after ten (10) years from the date hereof. The option shall not be affected by any change of an optionee’s employment so long as the optionee continues to be an employee

E-127

of the Corporation or of a subsidiary thereof or by any temporary leave of absence approved, if for a period of not more than ninety (90) days, by an officer of the Corporation or the subsidiary, as the case may be, by which the optionee is employed or, if for a period longer than ninety (90) days, approved by the Committee on Compensation and Governance of the Board of Directors of the Corporation (the “Committee”); provided, however, that if the optionee is terminated for cause as defined in the International Truck and Engine Corporation Income Protection Plan or any successor plan thereto, as each may be amended from time to time, or if the optionee is covered by a different severance plan or agreement, then as defined in such plan or agreement, the three-month period provided by this subsection shall not apply and the option shall cease to be exercisable and shall lapse as of the effective date of the termination of the optionee. Nothing herein contained shall confer on the optionee any right to continue in the employ of the Corporation or any subsidiary or interfere in any way with the right of the Corporation or any subsidiary thereof to terminate the employment or service of the optionee at any time.

4. Except as provided in the last two sentences of this Section 4, in the event of a Qualified Retirement, which means with respect to an employee a termination from employment from the Corporation or any of its subsidiaries that occurs after the employee attains age 55 and at the time of the termination the employee has either: (i) 10 or more years of continuous service as a full-time employee, or (ii) 10 or more years of service that would constitute credited service under the definition contained in the International Truck and Engine Corporation Retirement Plan for Salaried Employees, as may be amended from time to time (the “RPSE”), (a “Qualified Retirement”), the optionee may exercise the option to the extent the option is exercisable or becomes exercisable under its terms at any time during the term of the option grant. In the event of termination for total and permanent disability as defined in the Corporation’s long term disability programs, the optionee may exercise the option, to the extent the option is exercisable or becomes exercisable under its terms, at any time within three (3) years after termination for total and permanent disability, or, if later, within three (3) years after the date on which the option becomes exercisable with respect to such shares, but not after the term of the option. In the event of the death of the optionee while the option is outstanding, the option may be exercised by a legatee or legatees of the optionee under the optionee’s last Will, or by the personal representatives or distributees of the optionee, at any time within a period of two (2) years after the death of the optionee, but not after the term of the grant. If death occurs while employed by the Corporation or a subsidiary thereof, or after a Qualified Retirement, or during the three-year period following termination for total and permanent disability, the option may be exercised to the extent of the remaining shares covered by the option whether or not such shares were exercisable at the date of death. If death occurs during the three-month period provided by Paragraph 3 following termination for other than death, total and permanent disability or Qualified Retirement, the option subject to such three-month period 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 Paragraph 4, no option which is not exercisable at the time of a Qualified Retirement shall become exercisable after such Qualified Retirement if, without the written consent of the Corporation, the optionee 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 optionee’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.

5. The optionee agrees that he will not transfer the profit shares received on exercise of the Original Option for a period of three (3) years form date of exercise of the Original Option. However, this restriction on transfer will terminate if the optionee terminates employment or service by reason of death, total and permanent disability, or a Qualified Retirement. The optionee acknowledges and agrees that as additional means to enforce this transfer restriction the Corporation may legend such stock to advise holders of this restriction, hold the stock in the Corporation’s offices, or otherwise take action it deems appropriate to enforce the transfer restriction. The transfer restriction established by this paragraph shall not prevent the transfer of the shares to the Corporation in payment of the option price on another option, if such transfer is permissible under the other option. The transfer

E-128

restriction shall not prevent the restricted shares obtained through a restoration option exercise from being considered toward fulfillment of any stock ownership requirement under the Corporation’s Executive Stock Ownership Program as permitted by the Corporation. Subject to the provisions of paragraph 3, the option will terminate if the optionee terminates employment or service with the Corporation, including its subsidiaries, otherwise than by reason of death, total and permanent disability or a Qualified Retirement. Any option which did not become exercisable and which cannot become exercisable under the terms of the option, and any option that ceased to be exercisable and cannot again become exercisable under the terms of the option shall terminate.

6. In the event of a Change in Control, all outstanding options will immediately become exercisable and shall be exercisable for a period of three (3) years from the date of Change in Control regardless of the original term or employment status, except the term of option that is an Incentive Stock Option as defined in the Plan shall not extend beyond ten (10) years from the date of grant. A Change in Control shall be deemed to have occurred if (i) 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, Inc. (formerly known as International Truck and Engine Corporation), 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, (ii) the following individuals cease for any reason to constitute more than three-fourths of the number of directors then serving on the Board of Directors of the Corporation: individuals who, on the date hereof, constitute the Board and any new director (other than a 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) whose appointment or election by the Board or nomination for election by the Corporation’s stockholders was approved by the vote of at least two-thirds (2/3) of the directors then still in office or whose appointment, election or nomination was previously so approved or recommended; (iii) any dissolution or liquidation of the Corporation or Navistar, Inc. (formerly known as International Truck and Engine Corporation) or sale or disposition of all or substantially all (more than 50%) of the assets of the Corporation or of Navistar, Inc. (formerly known as International Truck and Engine Corporation) occurs; or (iv) 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 (each, 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 (2) years, cease to constitute a majority of the Board of Directors of the Corporation. 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. Further, in the event of a Change in Control, the optionee may elect, in a form and manner determined by the Corporation, that any option held by the optionee at the time of the Change in Control whose exercise in accordance with the terms of the Plan is prohibited at the time of the Change in Control by reason of the application of federal or state securities laws shall be canceled effective as of the Change in Control in exchange for a cash payment from the Corporation equal to (i) (a) the excess (if any) of the value per share of Common Stock provided to stockholders of the Corporation generally in connection with the Change in Control (or, if none, the fair market value of a share of Common Stock on the date of the Change in Control or, if not a trading day, on the last trading day preceding the date of the Change in Control) over the exercise price under the option multiplied by (b) the number of shares of Common Stock subject to the option, less (ii) the statutory minimum withholding tax that may be due by reason of such payment.

7. If all or any portion of the option is exercised subsequent to any stock dividend, stock split, recapitalization, combination or exchange of shares, reorganization (including, but not limited to, merger or consolidation), liquidation or other event occurring after the date hereof, as a result of which any shares or other securities of the Corporation or any other entity (including, but not limited to, any subsidiary of the Corporation) shall be issued in respect of the outstanding shares of Common Stock, or shares of Common Stock shall be changed into the same or a different number of shares or other securities of the same or any other class or classes, the person or persons so exercising the option shall receive, for the aggregate price paid upon such exercise, the class and aggregate number of shares or other securities which, if shares of Common Stock (as authorized at the

E-129

date hereof) had been purchased on the date hereof for the same aggregate price (on the basis of the price per share) and had not been disposed of, such person or persons would be holding at the time of such exercise as a result of such purchase any and all such stock dividends, stock splits, recapitalizations, combinations or exchanges of shares, reorganizations, liquidations or other events. In the event of any corporate reorganization, separation or division (including, but not limited to, split-up, split off, spin-off or sale of assets) as a result of which any cash or shares or other securities of any entity other than the Corporation (including, but not limited to, any subsidiary of the Corporation), shall be distributed in respect of the outstanding shares of Common Stock, a committee of the Board shall make such adjustments in the terms of the option (including, but not limited to, the number of shares covered and the purchase price of such shares) as it may deem appropriate to provide equitably for the optionee’s interest in the option. Upon any adjustment as aforesaid, the minimum number of full shares that may be purchased upon any exercise of the option as specified in paragraph 1 shall be adjusted proportionately. No fractional shares shall be issued upon any exercise of the option, and the aggregate price paid shall be appropriately reduced on account of any fractional share not issued.

8. Subject to the terms and conditions contained herein, in the Award Agreement and the Plan, the option may be exercised by giving notice as provided in instructions issued by the Secretary for the exercise of options generally, which instructions may provide for the use of agents, including stock brokers, to effect exercise of options, or in the absence of such instructions, by written notice to the Secretary of the Corporation at the location of its principal office at the time of exercise, which is currently located at 4201 Winfield Road, Warrenville, Illinois 60555. Such notice shall state the election to exercise the option and the number of shares in respect of which it is being exercised, shall be signed by the person or persons so exercising the option and shall be accompanied by instructions to the Secretary to exercise, in whole or in part, through a cashless exercise, net-exercise (as defined in the Plan), or other arrangements through agents, including stockbrokers, under arrangements established by the Corporation for the exercise of the option, or, if not covered by such instructions, for payment of the full purchase price of said shares by cash, including a personal check made payable to the Corporation, or by delivering at fair market value on the date of exercise unrestricted Common Stock already owned by the optionee, or by any combination of cash and Common Stock, and in either case, by payment to the Corporation of any withholding tax. Shares which otherwise would be delivered to the holder of an 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. In no event may successive simultaneous pyramiding be used to exercise an option. A certificate or certificates representing said shares shall be delivered as soon as practicable after the notice shall be received by the Corporation. The certificate or certificates for the shares as to which the option shall have been so exercised shall be registered in the name of the person or persons so exercising the option and shall be delivered as aforesaid to or upon the written order of the person or persons exercising the option. In the event the option shall be exercised, pursuant to paragraph 4 hereof, by any person or persons other than the optionee, such notice shall be accompanied by appropriate proof of the right of such person or the persons to exercise the option. The date of exercise of the option shall be the date on which the aforesaid written notice, properly executed and accompanied as aforesaid, is received under the Secretary’s instructions or by the Secretary. The payment due to the optionee upon exercise of the option will be settled solely in Common Stock. All shares that shall be purchased upon the exercise of the option as provided herein shall be fully paid and non-assessable.

9. [Reserved]

10. The Corporation shall at all times during the term of the option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements contained herein, in the Award Agreement and in the Plan, shall pay all original issue and/or transfer taxes with respect to the issue and/or transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection therewith and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Corporation, shall be applicable thereto. If the Plan pursuant to which the option is exercised provides that only treasury stock will be used to satisfy the requirements of the option, only treasury stock that has been listed on the exchange will be used.

E-130

11. As used herein, the term “subsidiary” shall mean any present and future subsidiary of the Corporation, and the term “Common Stock” shall mean the class of stock designated “Common Stock” in the Certificate of Incorporation of the Corporation.

12. The terms and conditions contained herein and in the Award Agreement shall be subject to and governed by the terms of the Plan, a copy of which is being delivered herewith to the optionee. Optionee acknowledges that the Plan may be amended, prospectively or retroactively in order to comply with the requirements of the Internal Revenue Code governing deferred compensation, and optionee agrees to comply with the terms of the Plan as so amended from time to time.

E-131

EXHIBIT 10.93

NAVISTAR INTERNATIONAL CORPORATION

NON-EMPLOYEE DIRECTOR STOCK OPTION AWARD AGREEMENT

NAVISTAR INTERNATIONAL CORPORATION

2004 PERFORMANCE INCENTIVE PLAN

OPTIONEE:

ADDRESS:

SOCIAL SECURITY NUMBER:

NUMBER OF SHARES:

EXERCISE PRICE PER SHARE:

DATE OF GRANT:

NUMBER OF SHARES: [1/3rd]	EXERCISABLE ON OR AFTER [one year]
NUMBER OF SHARES: [1/3rd]	EXERCISABLE ON OR AFTER [two years]
NUMBER OF SHARES: [1/3rd]	EXERCISABLE ON OR AFTER [three years]

EXPIRATION DATE: [ten years]

This is an award agreement (the “Award Agreement”) between Navistar International Corporation, a Delaware corporation (the “Corporation”), and the Non-Employee Director named above (the “Director” or “Optionee”). The Corporation hereby grants to the Optionee the right and option (this “Option”) to purchase all or any part of an aggregate of the above-stated number of shares of Common Stock of the Corporation on the terms and conditions of the Corporation’s 2004 Performance Incentive Plan approved by the shareholders February 17, 2004, as amended from time to time, (the “Plan”) and, further subject to the Non-Employee Director Stock Option Agreement Supplement which is attached hereto (the “Supplement”).

Subject to the terms and conditions of this Award Agreement, this Option is exercisable on or after the date set forth above; provided, however, that this Option shall expire on the Expiration Date set forth above and must be exercised, if at all, on or before the Expiration Date except as otherwise provided in the Supplement.

The Corporation and the Optionee hereby agree to the terms and conditions of this Award Agreement and have executed it as of the Date of Grant set forth above.

NAVISTAR INTERNATIONAL CORPORATION
By:
	Daniel C. Ustian
	Chairman, President and Chief
	Executive Officer

Attest:
Curt A. Kramer
Corporate Secretary
	Optionee

E-132

EXHIBIT 10.94

NAVISTAR INTERNATIONAL CORPORATION

NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT SUPPLEMENT

1. This option shall be treated as a Nonqualified Stock Option. This option is granted under the terms of the Navistar International Corporation 2004 Performance Incentive Plan, as may be amended from time to time (the “Plan”), as indicated in the Non-Employee Director Stock Option Award Agreement (the “Award Agreement”). The term of the option shall be for a period of ten years from the date of grant, or such shorter period as is prescribed in paragraphs 3, 4, and 5 hereof. The option shall be exercisable to the extent of the number of shares specified in the Award Agreement as exercisable one year after the date of grant, to the extent of the number of shares specified in the Award Agreement as exercisable two years after the date of grant, and to the extent of the number of shares specified in the Award Agreement as exercisable three years after the date of grant. The option may be exercised, at any time or from time to time during said term, as to all full shares that have become so purchasable. Except as provided in paragraphs 3, 4, and 6 hereof, the option may not be exercised unless the optionee shall, at the time of exercise, be a Non-Employee Director (the “Director” or “Optionee”) of the Corporation or a subsidiary. The Optionee shall have none of the rights of a shareowner with respect to any of the shares of Common Stock subject to the option until such shares shall be issued upon the exercise of the option.

2. The option shall not be transferable otherwise than by will or the laws of descent and distribution, and the option shall be exercisable, during the lifetime of the Optionee, only by the Optionee. Without limiting the generality of the foregoing, the option may not be assigned, transferred (except as aforesaid), pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the option contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the option shall be null and void and without effect.

3. In the event of the termination of service of the Optionee otherwise than by reason of death, total and permanent disability or a Qualified Retirement as set forth in paragraph 4 hereof, the Optionee may (subject to the provisions of paragraph 5 hereof) exercise the option to the extent that the Optionee was entitled to do so pursuant to the provisions of paragraph 1 hereof at the time of such termination, at any time within three (3) months after such termination, but not after ten (10) years from the date hereof.

4. Except as provided in the last two sentences of this paragraph, in the event of a Qualified Retirement, which means a retirement under a retirement policy of the Board for Non-Employee Directors (a “Qualified Retirement”), the Optionee may exercise the option to the extent the option is exercisable or becomes exercisable under its terms at any time during the term of the option grant. In the event of termination for total and permanent disability as defined in Navistar International Corporation’s (the “Corporation”) long term disability programs, the Optionee may exercise the option, to the extent the option is exercisable or becomes exercisable under its terms, at any time within three (3) years after termination for total and permanent disability, or, if later, within three (3) years after the date on which the option becomes exercisable with respect to such shares, but not after the term of the option. In the event of the death of the Optionee while the option is outstanding, the option may be exercised by a legatee or legatees of the Optionee under the Optionee’s last Will, or by the personal representatives or distributees of the Optionee, at any time within a period of two (2) years after the death of the Optionee, but not after the term of the grant. If death occurs while the Optionee is performing services for the Corporation, or after a Qualified Retirement, or during the three-year period following termination for total and permanent disability, the option may be exercised to the extent of the remaining shares covered by the option, whether or not such shares were exercisable at the date of death. If death occurs during the three-month period provided by paragraph 3 following termination for other than death, total and permanent disability or Qualified Retirement, the option subject to such three-month period 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 paragraph 4, no option which is not exercisable at the time of a Qualified Retirement shall become exercisable after such Qualified

E-133

Retirement if, without the written consent of the Corporation, the Optionee 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 Optionee’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.

5. Any option which did not become exercisable and which cannot become exercisable under the terms of the option, and any option that ceased to be exercisable and cannot again become exercisable under the terms of the option shall terminate.

6. In the event of a Change in Control, all outstanding options will immediately become exercisable and shall be exercisable for a period of three (3) years from the date of Change in Control regardless of the original term or service status of the Optionee. Change in Control shall be deemed to have occurred if (i) 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, Inc. (formerly known as International Truck and Engine Corporation), 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, (ii) the following individuals cease for any reason to constitute more than three-fourths of the number of directors then serving on the Board of Directors of the Corporation: individuals who, on the date hereof, constitute the Board and any new director (other than a 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) whose appointment or election by the Board or nomination for election by the Corporation’s stockholders was approved by the vote of at least two-thirds (2/3) of the directors then still in office or whose appointment, election or nomination was previously so approved or recommended; (iii) any dissolution or liquidation of the Corporation or Navistar, Inc. (formerly known as International Truck and Engine Corporation) or sale or disposition of all or substantially all (more than 50%) of the assets of the Corporation or of Navistar, Inc. (formerly known as International Truck and Engine Corporation) occurs; or (iv) 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 (each 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 (2) years, cease to constitute a majority of the Board of Directors of the Corporation. 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. Further, in the event of a Change in Control, the Optionee may elect, in a form and manner determined by the Corporation, that any option held by the Optionee at the time of the Change in Control whose exercise in accordance with the terms of the Plan is prohibited at the time of the Change in Control by reason of the application of federal or state securities laws shall be canceled effective as of the Change in Control in exchange for a cash payment from the Corporation equal to (i) (a) the excess (if any) of the value per share of Common Stock provided to stockholders of the Corporation generally in connection with the Change in Control (or, if none, the fair market value of a share of Common Stock on the date of the Change in Control or, if not a trading day, on the last trading day preceding the date of the Change in Control) over the exercise price under the option multiplied by (b) the number of shares of Common Stock subject to the option, less (ii) the statutory minimum withholding tax that may be due by reason of such payment.

7. If all or any portion of the option is exercised subsequent to any stock dividend, stock split, recapitalization, combination or exchange of shares, reorganization (including, but not limited to, merger or consolidation), liquidation or other event occurring after the date hereof, as a result of which any shares or other securities of the Corporation or any other entity (including, but not limited to, any subsidiary of the Corporation)

E-134

shall be issued in respect of the outstanding shares of Common Stock, or shares of Common Stock shall be changed into the same or a different number of shares or other securities of the same or any other class or classes, the person or persons so exercising the option shall receive, for the aggregate price paid upon such exercise, the class and aggregate number of shares or other securities which, if shares of Common Stock (as authorized at the date hereof) had been purchased on the date hereof for the same aggregate price (on the basis of the price per share) and had not been disposed of, such person or persons would be holding at the time of such exercise as a result of such purchase any and all such stock dividends, stock splits, recapitalizations, combinations or exchanges of shares, reorganizations, liquidations or other events. In the event of any corporate reorganization, separation or division (including, but not limited to, split-up, split off, spin-off or sale of assets) as a result of which any cash or shares or other securities of any entity other than the Corporation (including, but not limited to, any subsidiary of the Corporation), shall be distributed in respect of the outstanding shares of Common Stock, a committee of the Board shall make such adjustments in the terms of the option (including, but not limited to, the number of shares covered and the purchase price of such shares) as it may deem appropriate to provide equitably for the Optionee’s interest in the option. Upon any adjustment as aforesaid, the minimum number of full shares that may be purchased upon any exercise of the option as specified in paragraph 1 shall be adjusted proportionately. No fractional shares shall be issued upon any exercise of the option, and the aggregate price paid shall be appropriately reduced on account of any fractional share not issued.

8. Subject to the terms and conditions contained herein, in the Award Agreement and the Plan, the option may be exercised by giving notice as provided in instructions issued by the Secretary for the exercise of options, which instructions may provide for the use of agents, including stock brokers, to effect exercise of options, or in the absence of such instructions, by written notice to the Secretary of the Corporation at the location of its principal office at the time of exercise, which is currently located at 4201 Winfield Road, Warrenville, Illinois 60555. Such notice shall state the election to exercise the option and the number of shares in respect of which it is being exercised, shall be signed by the person or persons so exercising the option and shall be accompanied by instructions to the Secretary to exercise, in whole or in part, through a cashless exercise, net-exercise (as defined in the Plan), or other arrangements through agents, including stockbrokers, under arrangements established by the Corporation for the exercise of the option, or, if not covered by such instructions, for payment of the full purchase price of said shares by cash, including a personal check made payable to the Corporation, or by delivering at fair market value on the date of exercise unrestricted Common Stock already owned by the Optionee, or by any combination of cash and Common Stock, and in either case, by payment to the Corporation of any withholding tax due with respect to any Optionee who is a citizen or resident of a foreign country or is otherwise then imposed effective as of the date of exercise by then applicable law. Shares which otherwise would be delivered to the holder of an option may be delivered, at the election of the holder, to the Corporation in payment of any such withholding taxes due in connection with an exercise. In no event may successive simultaneous pyramiding be used to exercise an option. A certificate or certificates representing said shares shall be delivered as soon as practicable after the notice shall be received by the Corporation. The certificate or certificates for the shares as to which the option shall have been so exercised shall be registered in the name of the person or persons so exercising the option and shall be delivered as aforesaid to or upon the written order of the person or persons exercising the option. In the event the option shall be exercised, pursuant to paragraph 4 hereof, by any person or persons other than the Optionee, such notice shall be accompanied by appropriate proof of the right of such person or the persons to exercise the option. The date of exercise of the option shall be the date on which the aforesaid written notice, properly executed and accompanied as aforesaid, is received under the Secretary’s instructions or by the Secretary. The payment due to the Optionee upon exercise of the option will be settled solely in Common Stock. All shares that shall be purchased upon the exercise of the option as provided herein shall be fully paid and non-assessable.

9. [Reserved]

E-135

10. The Corporation shall at all times during the term of the option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements contained herein, in the Award Agreement and in the Plan, shall pay all original issue and/or transfer taxes with respect to the issue and/or transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection therewith and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Corporation, shall be applicable thereto. If the Plan pursuant to which the option is exercised provides that only treasury stock will be used to satisfy the requirements of the option, only treasury stock that has been listed on the exchange will be used.

11. As used herein, the term “Common Stock” shall mean the class of stock designated “Common Stock” in the Restated Certificate of Incorporation of the Corporation.

12. The terms and conditions contained herein and in the Award Agreement shall be subject to and governed by the terms of the Plan, a copy of which is being delivered herewith to the Optionee. Optionee acknowledges that the Plan may be amended, prospectively or retroactively in order to comply with the requirements of the Internal Revenue Code governing deferred compensation, and Optionee agrees to comply with the terms of the Plan as so amended from time to time.

E-136

EXHIBIT 10.95

NAVISTAR INTERNATIONAL CORPORATION

RESTRICTED STOCK AWARD AGREEMENT

NAVISTAR INTERNATIONAL CORPORATION

2004 PERFORMANCE INCENTIVE PLAN

GRANTEE:

ADDRESS:

SOCIAL SECURITY NUMBER:

NUMBER OF SHARES OF RESTRICTED STOCK:

DATE OF GRANT:

This is an award agreement (the “Award Agreement”) between Navistar International Corporation, a Delaware corporation (the “Corporation”) and the individual named above (the “Employee” or “Grantee”). The Corporation hereby grants to the Grantee an aggregate of the above-stated number of shares of Common Stock of the Corporation on the terms and conditions contained herein and in the Corporation’s 2004 Performance Incentive Plan approved by the shareholders February 17, 2004 (the “Plan”). Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Plan.

1. Vesting of Restricted Stock. Subject to the terms and conditions of this Award Agreement and the Plan, the Restricted Stock shall vest as follows:

[ENTER EITHER SPECIFIC VESTING REQUIREMENTS WHICH MUST BE OVER NO LESS THAN A THREE YEAR PERIOD OR A STRICT THREE YEAR PERIOD VESTING SCHEDULE AS FOLLOWS:

NUMBER OF SHARES:                     VESTED ON OR AFTER [one year]

NUMBER OF SHARES:                     VESTED ON OR AFTER [after two years]

NUMBER OF SHARES:                     VESTED ON OR AFTER [three years]]

2. Stock Certificates. Certificates for the Restricted Stock shall be issued by the Corporation in the name of the Grantee and delivered to the Grantee at the time of grant. The certificate bear the following legend evidencing its restrictive nature as follows:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, FORFEITURE AND VESTING AS SET FORTH IN THE RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.

3. Effect of Termination of Employment. If the Grantee (i) quits, is involuntarily separated from the Corporation or otherwise terminates employment, then any Restricted Stock not vested as of such date will be forfeited to the Corporation, (ii) becomes totally and permanently disability or retires from the Corporation pursuant to a Qualified Retirement, such Restricted Stock will continue to vest according to the terms of grant, or (iii) dies while serving the Corporation or following a total and permanent disabled or Qualified Retirement, any such previously granted Restricted Stock shall vest as of the date of such Grantee’s death and all restrictions thereon shall lapse and the Restricted Stock shall be immediately transferable to the name beneficiary or to such Grantee’s estate.

4. Tax Withholding Obligations. The Grantee shall be required to deposit with the Corporation either (i) an amount of cash equal to the amount determined by the Corporation to be required with respect to any withholding taxes, FICA contributions, or the like under any federal, state or local statute, ordinance, rule or

E-137

regulation in connection with the grant or vesting of the Restricted Stock or (ii) a number of shares of the Corporation’s Common Stock otherwise deliverable having a Fair Market Value sufficient to satisfy the statutory minimum of all or part of the Grantee’s estimated total federal, state and local tax obligations associated with the grant or vesting of the Restricted Stock. The Corporation shall not deliver any of the shares of the Corporation’s Common Stock until and unless the Grantee has made the deposit required herein or proper provision for required withholding has been made.

5. Rights as Shareholder. The Grantee shall have all rights of a shareholder prior to the vesting of the Restricted Stock, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto.

6. Transferability. The Restricted Stock may not be transferred, assigned or made subject to any encumbrance, pledge or charge until such Restricted Stock has vested and any other restrictions or conditions on such Restricted Stock are removed, have been satisfied or expire.

7. No Employment Rights. Nothing in this Agreement will confer upon the Grantee any right to continue in the employ or service of the Corporation or any of its subsidiaries or affect the right of the Corporation to terminate the employment of the Grantee at any time with or without cause.

8. Change in Control of the Corporation. In the event of a Change in Control, all awarded Restricted Stock will immediately be free of all restrictions and performance contingencies and will be deemed fully earned and not subject to forfeiture.

9. Amendment. This Award Agreement may be amended only by a writing executed by the Corporation and the Grantee that specifically states that it is amending this Award Agreement. Notwithstanding the foregoing, this Award Agreement may be amended solely by the Committee by a writing which specifically states that it is amending this Award Agreement, so long as a copy of such amendment is delivered to the Grantee, and provided that no such amendment adversely affecting the rights of the Grantee hereunder may be made without the Grantee’s written consent. Without limiting the foregoing, the Committee reserves the right to change, by written notice to the Grantee, the provisions of the Restricted Stock or this Award Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling or judicial decisions, provided that any such change shall be applicable only to shares of Restricted Stock which are then subject to restrictions as provided herein.

10. Severability. If all or any part of this Award Agreement is declared by any court or government authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Award Agreement not declared to be unlawful or invalid. Any Section of this Award Agreement so declared to be unlawful or invalid shall, if possible, be construed in a manner that will give effect to the terms of such Section to the fullest extent possible while remaining lawful and valid.

11. Construction. The Restricted Stock is being issued pursuant to Section XI of the Plan and is subject to the terms of the Plan. A copy of the Plan has been given to the Grantee and additional copies of the Plan are available upon request during normal business hours at the principal executive officers of the Corporation. To the extent that any provisions of this Award Agreement violates or is inconsistent with an express provisions of the Plan, the Plan provision shall govern and any inconsistent provision in this Award Agreement shall be of no force or effect.

12. Binding Effect and Benefit. This Award Agreement shall be binding upon and, subject to the conditions hereof, inure to the benefit of the Corporation, its successors and assigns, and the Grantee and his successors and assigns.

13. Entire Understanding. This Award Agreement embodies the entire understanding and agreement of the parties in relation to the subject matter hereof, and no promise, condition, representation or warranty, expressed or implied, not herein stated, shall bind either party hereto.

E-138

14. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Illinois.

The Corporation and the Grantee hereby agree to the terms and conditions of this Award Agreement and have executed it as of the Date of Grant set forth above.

NAVISTAR INTERNATIONAL CORPORATION
By:
	Daniel C. Ustian
	Chairman, President and CEO

Attest:

Curt A. Kramer
Corporate Secretary
	Grantee

E-139

EXHIBIT 10.96

PREMIUM SHARE UNIT CERTIFICATE

NAVISTAR EXECUTIVE STOCK OWNERSHIP PROGRAM

ADOPTED AS OF FEBRUARY 17, 2004

GRANTEE:

ADDRESS:

SOCIAL SECURITY NUMBER:

TOTAL OF PREMIUM SHARE UNITS: DATE OF GRANT:                     TRANCHE             VESTING                        

DATE EARNED:

DATE UNITS VEST:                         NUMBER OF UNITS VESTED:

This is an award agreement (the “Award Agreement”) between Navistar International Corporation, a Delaware corporation (the “Corporation”), and the individual named above (the “Employee” or “Grantee”). The Corporation hereby credits to the Grantee’s account, the above-stated number of Premium Share Units, which are issuable as Common Stock of the Corporation in accordance with the terms and conditions of the Corporation’s 2004 Performance Incentive Plan approved by the shareholders February 17, 2004, as amended from time to time, (the “Plan”).

The Premium Share Units awarded hereunder are further subject to the terms and conditions of the Corporation’s Executive Stock Ownership Program, as amended and restated September 1, 2004, as amended from time to time (the “Program”), a copy of which is attached. Subject to the terms and conditions of the Program and the Plan, including the provisions regarding forfeiture of the shares and restrictions on transferability, these Premium Share Units will vest on the dates set forth above. Premium Share Units which have been fully vested will convert to the Corporation’s Common Stock and be distributed to the Grantee upon termination of employment or such other mutually agreed upon date if such termination of employment is through qualified retirement. These Premium Share Units shall have the same rights as Common Stock of the Corporation except the units shall be non-voting.

The Corporation and the Grantee hereby agree to the terms and conditions of this Award Agreement and have executed it as of the date set forth above.

NAVISTAR INTERNATIONAL CORPORATION
By:
	James M. Moran
	Vice President & Treasurer

Attest:
Curt A. Kramer
Corporate Secretary
	Grantee

E-140

EXHIBIT 10.97

DEFERRED SHARE UNIT CERTIFICATE

NAVISTAR EXECUTIVE STOCK OWNERSHIP PROGRAM

ADOPTED AS OF FEBRUARY 17, 2004

GRANTEE:

ADDRESS:

SOCIAL SECURITY NUMBER:

TOTAL OF DEFERRED SHARES:

DATE OF GRANT:

DATE VESTED:

This is an award agreement (the “Award Agreement”) between Navistar International Corporation, a Delaware corporation (the “Corporation”), and the individual named above (the “Employee” or “Grantee”). The Corporation hereby credits to the Grantee’s account, the above-stated number of Deferred Share Units, which are issuable as Common Stock of the Corporation in accordance with the terms and conditions of the Corporation’s 2004 Performance Incentive Plan approved by the shareholders February 17, 2004, as amended from time to time, (the “Plan”).

The Deferred Share Units awarded hereunder are further subject to the terms and conditions of the Corporation’s Executive Stock Ownership Program, as amended and restated September 1, 2004, as amended from time to time (the “Program”), a copy of which is attached. Subject to the terms and conditions of the Program and the Plan, including the provisions regarding forfeiture of the shares and restrictions on transferability, these Deferred Share Units will vest on the dates set forth above. Deferred Share Units which have been fully vested will convert to the Corporation’s Common Stock and be distributed to the Grantee upon termination of employment or such other mutually agreed upon date if such termination of employment is through qualified retirement. These Deferred Share Units shall have the same rights as Common Stock of the Corporation except the units shall be non-voting.

The Corporation and the Grantee hereby agree to the terms and conditions of this Award Agreement and have executed it as of the date set forth above.

	NAVISTAR INTERNATIONAL CORPORATION
	By:
		James M. Moran
		Vice President & Treasurer
Attest:
Curt A. Kramer
Corporate Secretary
	Grantee

E-141

EXHIBIT 10.98

Board of Director Resolutions

1998 Non-Employee Director Stock Option Plan

RESOLVED, that the Board of Directors hereby approves the following amendment to the Corporation’s 1998 Non-Employee Director Stock Option Plan substantially in the form presented below, together with any other amendments to such plan that any of the officers of the Corporation may, in their sole judgment, deem necessary, proper or advisable to conform such stock option plans to the amendments set forth below.

1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

WHEREAS, the Corporation maintains the Navistar 1998 Non-Employee Director Stock Option Plan, as it may be amended from time to time (the “1998 Directors Plan”); and

WHEREAS, the 1998 Directors Plan, in relevant part, generally reserves to the Board the right to modify the 1998 Directors Plan at any time, subject to limitations not applicable here.

NOW, THEREFORE, BE IT RESOLVED, that the Board hereby amends, effective as of the date of these resolutions, Section 7 of the 1998 Directors Plan by substituting the following text for the sixth sentence thereof:

“The option can be exercised in whole or in part through (i) cashless exercise, (ii) the Corporation withholding from the shares of Common Stock otherwise issuable upon exercise of the option a number of shares of Common Stock having a fair market value equal, as of the date of exercise, to the exercise price of the option multiplied by the number of shares of Common Stock in respect of which the option shall have been exercised (“Net-Exercise”), or (iii) 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 the option either (I) by cash including a personal check made payable to the Corporation, (II) by delivering at fair market value on the date of exercise unrestricted Common Stock already owned by the option holder, or (III) by any combination of cash and unrestricted Common Stock, and in either case, by payment to the Corporation of any withholding tax.”

E-142

EXHIBIT 10.99

Compensation Committee Resolutions

Equity Plan Amendments

RESOLVED, that the Committee of the Board hereby approves the following amendments to the Corporation’s stock option plans substantially in the form presented below, together with any other amendments to such plans that any of the officers of the Corporation, or any of them, may in their judgment deem necessary, proper or advisable to conform such stock option plans to the amendments set forth below.

1994 PERFORMANCE INCENTIVE PLAN

WHEREAS, the Corporation maintains the Navistar 1994 Performance Incentive Plan, as it may be amended from time to time (the “1994 Plan”); and

WHEREAS, the 1994 Plan, in relevant part, generally reserves to the Committee the right to modify the 1994 Plan at any time, subject to limitations not applicable here.

NOW, THEREFORE, BE IT RESOLVED, that the Committee hereby amends, effective as of the date of these resolutions, Paragraph (2) of Section VII of the 1994 Plan by substituting the following text for the fourth and fifth sentences thereof, to read as follows:

“The Stock Option can be exercised in whole or in part through (i) cashless exercise, (ii) the Corporation withholding from the shares of Common Stock otherwise issuable upon exercise of the Stock Option a number of shares of Common Stock having a fair market value equal, as of the date of exercise, to the exercise price of the Stock Option multiplied by the number of shares of Common Stock in respect of which the Stock Option shall have been exercised (“Net-Exercise”), or (iii) 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 Stock 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 on the date of exercise unrestricted Common Stock already owned by the Participant, or (III) by any combination of cash and unrestricted Common Stock, and in either case, by payment to the Corporation of any withholding tax.”

1998 INTERIM STOCK PLAN

WHEREAS, the Corporation maintains the Navistar International Corporation 1998 Interim Stock Plan, as it may be amended from time to time (the “1998 Interim Plan”); and

WHEREAS, the 1998 Interim Plan, in relevant part, generally reserves to the Committee the right to modify the 1998 Interim Plan at any time, subject to limitations not applicable here.

NOW, THEREFORE, BE IT RESOLVED, that the Committee hereby amends, effective as of the date of these resolutions, Section IV of the 1998 Interim Plan by adding the following text to the end thereof, to read as follows:

“The Nonqualified Stock Option can be exercised in whole or in part through (i) cashless exercise, (ii) Navistar International Corporation withholding from the shares of Common Stock otherwise issuable upon exercise of the Nonqualified Stock Option a number of shares of Common Stock having a fair market value equal, as of the date of exercise, to the exercise price of the Nonqualified Stock Option multiplied by

E-143

the number of shares of Common Stock in respect of which the Nonqualified Stock Option shall have been exercised (“Net-Exercise”), or (iii) other arrangements through agents, including stockbrokers, under arrangements established by Navistar International Corporation by paying the amounts required by instructions issued by its Secretary for the exercise of the Nonqualified Stock Options. If an exercise is not covered by instructions issued by the Corporate Secretary, the purchase price is to be paid in full to Navistar International Corporation upon the exercise of a Nonqualified Stock Option either (I) by cash including a personal check made payable to Navistar International Corporation; (II) by delivering at fair market value on the date of exercise unrestricted Common Stock already owned by the Participant, or (III) by any combination of cash and unrestricted Common Stock, and in either case, by payment to Navistar International Corporation of any withholding tax.”

1998 SUPPLEMENTAL STOCK PLAN

WHEREAS, the Corporation maintains the Navistar 1998 Supplemental Stock Plan, as it may be amended from time to time (the “1998 Supplemental Plan”); and

WHEREAS, the 1998 Supplemental Plan, in relevant part, generally reserves to the Committee the right to modify the 1998 Supplemental Plan at any time, subject to limitations not applicable here.

NOW, THEREFORE, BE IT RESOLVED, that the Committee hereby amends the 1998 Supplemental Plan, effective as of the date of these resolutions, as follows:

1. Section IV of the 1998 Supplemental Plan is hereby amended by adding the following text to the end thereof, to read as follows:

“The Nonqualified Stock Option can be exercised in whole or in part through (i) cashless exercise, (ii) Navistar International Corporation withholding from the shares of Common Stock otherwise issuable upon exercise of the Nonqualified Stock Option a number of shares of Common Stock having a fair market value equal, as of the date of exercise, to the exercise price of the Nonqualified Stock Option multiplied by the number of shares of Common Stock in respect of which the Nonqualified Stock Option shall have been exercised (“Net-Exercise”), or (iii) other arrangements through agents, including stockbrokers, under arrangements established by Navistar International Corporation by paying the amounts required by instructions issued by its Secretary for the exercise of the Nonqualified Stock Options. If an exercise is not covered by instructions issued by the Corporate Secretary, the purchase price is to be paid in full to Navistar International Corporation upon the exercise of a Nonqualified Stock Option either (I) by cash including a personal check made payable to Navistar International Corporation; (II) by delivering at fair market value on the date of exercise unrestricted Common Stock already owned by the Participant, or (III) by any combination of cash and unrestricted Common Stock, and in either case, by payment to Navistar International Corporation of any withholding tax.”

2. The terms of the Restoration Stock Option Program under the 1998 Supplemental Plan are hereby amended by deleting any and all references therein to the requirement that any share of stock acquired by the option holder from the Corporation, which are transferred to the Corporation in connection with an option exercise, to either cover, in whole or in part, the cost of exercise or tax withholding, be held by the option holder for at least six months.

2004 PERFORMANCE INCENTIVE PLAN

WHEREAS, the Corporation maintains the Navistar International Corporation 2004 Performance Incentive Plan, as it may be amended from time to time (the “2004 Plan”); and

E-144

WHEREAS, the 2004 Plan, in relevant part, generally reserves to the Committee the right to modify the 2004 Plan at any time, subject to limitations not applicable here.

NOW, THEREFORE, BE IT RESOLVED, that the Committee hereby approves, effective as of the date of these resolutions, the proposed amendments to the 2004 PIP as shown in bold text in the amended and restated 2004 PIP attached hereto as Exhibit A.

1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

RESOLVED, that the Committee hereby recommends that the Board approve the following preamble and resolutions:

“WHEREAS, the Corporation maintains the Navistar 1998 Non-Employee Director Stock Option Plan, as it may be amended from time to time (the “1998 Directors Plan”); and

WHEREAS, the 1998 Directors Plan, in relevant part, generally reserves to the Board the right to modify the 1998 Directors Plan at any time, subject to limitations not applicable here.

NOW, THEREFORE, BE IT RESOLVED, that the Board hereby amends, effective as of the date of these resolutions, Section 7 of the 1998 Directors Plan by substituting the following text for the sixth sentence thereof, to read as follows:

“The option can be exercised in whole or in part through (i) cashless exercise, (ii) the Corporation withholding from the shares of Common Stock otherwise issuable upon exercise of the option a number of shares of Common Stock having a fair market value equal, as of the date of exercise, to the exercise price of the option multiplied by the number of shares of Common Stock in respect of which the option shall have been exercised (“Net-Exercise”), or (iii) 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 the option either (I) by cash including a personal check made payable to the Corporation, (II) by delivering at fair market value on the date of exercise unrestricted Common Stock already owned by the option holder, or (III) by any combination of cash and unrestricted Common Stock, and in either case, by payment to the Corporation of any withholding tax.”

E-145

EXHIBIT 10.100

AMENDMENT

OF

EXECUTIVE SEVERANCE AGREEMENT

This agreement between and among Navistar International Corporation, a Delaware corporation (the “Company”), Navistar, Inc. (formerly known as International Truck and Engine Corporation), a Delaware corporation (“NAVISTAR, INC.”), and William A. Caton (the “Executive”) (each a “Party” and collectively, the “Parties”), hereby amends the Executive Severance Agreement entered into by the Parties and effective as of December 31, 2007 (the “ESA”). Subject to the amendment of the ESA expressly contained herein, each Party understands and agrees that the ESA shall continue in full force and effect in accordance with the terms and conditions specified therein.

WITNESSETH

WHEREAS, immediately prior to June 17, 2008, the Executive was employed with the Company and served as its Executive Vice President and Chief Financial Officer;

WHEREAS, effective as of June 17, 2008, the Executive remained employed with the Company, but at the request of the Company, ceased to serve as its Executive Vice President and Chief Financial Officer, and instead began to serve as its Executive Vice President and Chief Risk Officer (the “Transition”);

WHEREAS, within 10 days of the Transition, the Executive notified the Company that the Transition constituted a “Good Reason” event or condition within the meaning of the ESA; and

WHEREAS, the Company and NAVISTAR, INC. desire to retain the services of the Executive following the Transition and, to achieve that objective, further desire to amend the ESA to provide the Executive up to 24 months following the Transition to determine whether he wishes to either remain employed in his new position or voluntarily terminate employment due to Good Reason.

NOW, THEREFORE, pursuant to and in accordance with paragraph 13 of the ESA, the Company, NAVISTAR, INC., and the Executive mutually agree to amend the ESA as follows, effective as of the dates specified herein.

1. By substituting “Navistar, Inc.” for “International Truck and Engine Corporation” in each instance where the latter phrase appears in the ESA, effective February 27, 2008.

2. By substituting “NAVISTAR, INC.” for “INTERNATIONAL TRUCK AND ENGINE CORPORATION” in each instance where the latter phrase appears in the ESA, effective February 27, 2008.

3. By substituting “NIC” for “INTERNATIONAL” in each instance where the latter phrase appears in the ESA, effective February 27, 2008.

4. By amending in its entirety paragraph 4(a) of the ESA, effective June 17, 2008, to read as follows:

“(a) For purposes of this Agreement, subject to remaining provisions of this paragraph 4, a Termination under this paragraph 4(a) shall occur if, during the Agreement Period and either before the date on which a Change in Control occurs or more than 36 months after the date of the then-most recent Change in Control, (i) the Executive’s employment is involuntarily terminated by NIC for any reason other than Cause or (ii) a Good Reason occurs and the Executive both provides notice to the Company or NAVISTAR, INC. of the existence of the Good Reason within ten (10) days of its initial existence and, to the extent the Company or NAVISTAR, INC. either does not remedy such Good Reason within thirty (30) days of receiving such

E-146

notice from the Executive of the initial existence of such Good Reason (for purposes of this paragraph 4(a), the ‘Cure Period’) or notifies the Executive in writing prior to the expiration of the Cure Period of its unwillingness to remedy such event or condition, voluntarily terminates his or her employment with NIC within ten (10) days after either the expiration of such Cure Period or such earlier date prior to the expiration of the Cure Period on which the Executive was so notified in writing (or, solely with respect to the Good Reason that initially occurred on June 17, 2008 in connection with the Executive ceasing to serve as Executive Vice President and Chief Financial Officer, of the Company and instead, at the request of the Company, beginning to serve as its Executive Vice President and Chief Risk Officer, voluntarily terminates his or her employment with NIC within the 24-month period immediately following the initial occurrence of such Good Reason, except to the extent the Company or NAVISTAR, INC. otherwise remedies such Good Reason before the date on which the Executive so voluntarily terminates his or her employment with NIC), as the case may be. For purposes of this Agreement, ‘Good Reason’ means the occurrence, during the Agreement Period and either before the date on which a Change in Control occurs or more than 36 months after the date of the then-most recent Change in Control, of any of the following events or conditions: (A) NIC reduces the Executive’s base salary by ten percent (10%) or more (either upon one reduction or during a series of reductions over a period of time), provided that such reduction neither comprises a part of a general reduction for the Executive’s then-current peers as a group (determined as of the date immediately before the date on which the Executive becomes subject to such material reduction) nor results from a deferral of the Executive’s base salary, or (B) a material diminution in the Executive’s authority (including, but not limited to, the budget over which the Executive retains authority), duties, or responsibilities within NIC, except in connection with the involuntary termination of the Executive’s employment for Cause. In the event of a Termination under this paragraph 4(a), the Executive shall be paid the separation payments and benefits set forth in paragraph 5(a) below. For purposes of this Agreement, the term ‘Cause’ means that the reason for the Executive’s involuntary termination of employment was (I) willful misconduct involving an offense of a serious nature that is demonstrably and materially injurious to NIC, monetarily or otherwise, (II) conviction of, or entry of a plea of guilty or nolo contendere to, a felony as defined by the laws of the United States of America or by the laws of the State or other jurisdiction in which the Executive is so convicted, or (III) continued intentional failure to substantially perform required duties for NIC after written demand to so perform by NIC (other than a failure due to physical or mental disability). For purposes of determining whether ‘Cause’ exists, no act, or failure to act, on the Executive’s part will be deemed ‘willful’ unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of NIC. If the Executive’s involuntary termination of employment is for Cause, no separation payments or benefits shall be due or owing by the Company or NAVISTAR, INC. under paragraph 5(a) below.”

4. By amending in its entirety clause (A) of paragraph 5(a)(ii) of the ESA, effective June 17, 2008, to read as follows:

“(A) Continued healthcare coverage for the 12-month period (or, solely with respect to the Good Reason that initially occurred on June 17, 2008, as described in paragraph 4(a) of this Agreement, for the 36-month period) immediately after the date of Termination, with the same coverage option as in effect immediately before the date of Termination (or substantially similar coverage option in the event such prior coverage option is eliminated or unavailable) and under the same terms and conditions such coverage is otherwise made available to active employees of NIC after the Executive’s Termination, with such coverage being provided in lieu of any post-termination healthcare continuation coverage which the Executive and his or her covered spouse and dependents would otherwise have been entitled to receive on account of said Termination under applicable federal and state law (“COBRA Coverage”) and, further, with the period of such coverage in excess of the applicable period of COBRA Coverage (if any, determined as if the Executive elected such COBRA Coverage and paid the applicable premiums) being paid by the Executive on an after-tax basis;”

* * *

E-147

IN WITNESS WHEREOF, on the date or dates indicated below, the Executive has hereunto set his hand and, pursuant to the authorization from its respective Board of Directors, the Company and NAVISTAR, INC. have each caused this Amendment to be executed in its name on its behalf, effective as of the dates specified herein.

NAVISTAR INTERNATIONAL CORPORATION
By:	/s/ Daniel C. Ustian
	Chairman, President and
	Chief Executive Officer

Date Signed:

NAVISTAR, INC.
By:	/s/ Daniel C. Ustian
	Chairman, President and
	Chief Executive Officer

Date Signed:

EXECUTIVE
By:	/s/ William A. Caton
	Executive

Date Signed: 7/8/08

E-148

EXHIBIT 10.101

NAVISTAR INTERNATIONAL CORPORATION

RESTRICTED STOCK UNIT AWARD NOTICE AND AGREEMENT

NAVISTAR INTERNATIONAL CORPORATION

2004 PERFORMANCE INCENTIVE PLAN

GRANTEE:

ADDRESS:

NUMBER OF RESTRICTED STOCK UNITS:

DATE OF GRANT:

Navistar International Corporation, a Delaware corporation (the “Corporation”), is pleased to confirm that you (the “Grantee”) have been granted a Restricted Stock Unit Award (this “Award”), effective as of the Date of Grant set forth above (the “Grant Date”). This Award is subject to the terms and conditions of this Restricted Stock Unit Award Notice and Agreement (this “Agreement”) and is made under the Corporation’s 2004 Performance Incentive Plan, as may be amended from time to time (the “Plan”), which is incorporated into and made a part of this Agreement. Any capitalized terms used in this Agreement that are otherwise not defined herein shall have the same meaning prescribed under the Plan.

1. Acceptance of Terms and Conditions. By accepting this Award, the Grantee agrees to be bound by the terms and conditions of this Agreement, the Plan, and any and all conditions established by the Corporation in connection with Awards issued under the Plan, and understands that this Award does not confer any legal or equitable right (other than those constituting the Award itself) against the Corporation or any of its subsidiaries (collectively, the “Navistar Companies”), directly or indirectly, or give rise to any cause of action at law or in equity against the Navistar Companies.

2. Grant of Restricted Stock Units. Subject to the restrictions, limitations, terms and conditions specified in the Plan, the Prospectus for the Plan (the “Prospectus”), and this Agreement, the Corporation hereby grants this Award to the Grantee as of the Grant Date equal to the above-stated number of Restricted Stock Units (each, an “RSU” and collectively, the “RSUs”), with each such RSU representing the right to receive one share of the Corporation’s Common Stock, $0.10 par value per share (“Common Stock”).

3. Vesting of Restricted Stock Units. Subject to the terms and conditions of this Agreement, the Prospectus, and the Plan, the RSUs shall vest as follows:

[ENTER EITHER SPECIFIC VESTING REQUIREMENTS WHICH MUST BE OVER NO LESS THAN A THREE YEAR PERIOD OR A STRICT THREE YEAR PERIOD VESTING SCHEDULE AS FOLLOWS:

NUMBER OF SHARES:                         VESTED ON OR AFTER [one year]

NUMBER OF SHARES:                         VESTED ON OR AFTER [after two years]

NUMBER OF SHARES:                         VESTED ON OR AFTER [three years]]

4. No Dividends or Dividend Equivalents. The Grantee shall not receive dividends or dividend equivalents on the RSUs.

5. Conversion of Vested Restricted Stock Units; Issuance of Common Stock. To the extent, if any, the RSUs are vested pursuant to the terms of this Agreement or the Plan, shares of Common Stock shall be issued to or in respect of the Grantee on the earliest of the following dates: (a) the [INSERT THIRD ANNIVERSARY OF GRANT DATE FROM SECTION 3], (b) in the event all of the RSUs become vested upon the Grantee’s death pursuant to Section XI(6) of the Plan, the date of the Grantee’s death, or (c) in the event the Grantee

E-149

terminates employment or service before [INSERT THIRD ANNIVERSARY OF GRANT DATE FROM SECTION 3] and would otherwise forfeit a portion of the RSUs pursuant to Section XI(8) of the Plan, the date of the Grantee’s termination of employment or service with the Navistar Companies, but only if such termination would otherwise be deemed a “separation from service” within the meaning of Treasury Regulation §1.409A-1(h) (using a percentage of 80% to determine the controlled group of corporations and businesses under common control); provided, however, that in no event shall shares of Common Stock be issued before the date on which all other restrictions, limitations, or conditions on such RSUs are removed, have been satisfied, or lapse. On the date shares of Common Stock are to be so issued to or in respect of the Grantee, subject to Section 7 of this Agreement, the Corporation shall promptly cause to be issued in book-entry form, registered in the Grantee’s name, the appropriate number of shares of Common Stock in payment of such vested and unrestricted RSUs. If, however, the Grantee elects to defer payment of any such shares of Common Stock, if and to the extent permitted to so elect under Section 6 of this Agreement, such shares of Common Stock shall be issued pursuant to and in accordance with the deferral election agreement entered into between the Corporation and the Grantee. The value of whole RSUs shall be settled solely in shares of Common Stock. The value of any fractional RSUs shall be paid in cash at such time shares of Common Stock are delivered to the Grantee in payment of the RSUs.

6. Deferral Election. If and to the extent permitted by the Committee, and subject to any rules and procedures it may establish, the Grantee may elect to defer delivery of the shares of Common Stock that would otherwise be due under the terms of this Agreement. If the Grantee wishes to so elect to defer delivery of the shares of Common Stock, the Grantee must contact the Office of the Secretary for the proper deferral election form and further directions. To the extent the delivery of the shares of Common Stock that would otherwise be due under the terms of this Agreement is subject to U.S. tax law, any election to defer delivery of such shares shall comply with the requirements of U.S. tax law, including, without limitation, the requirements of Section 409A of the United States Internal Revenue Code of 1986, as amended, and applicable regulations and other applicable authorities issued thereunder.

7. Tax Withholding Obligations. The Grantee shall be required to deposit with the Corporation either (i) an amount of cash equal to the amount determined by the Corporation to be required with respect to any withholding taxes, FICA contributions, or the like under any federal, state or local statute, ordinance, rule or regulation in connection with the grant or vesting of the RSUs (the “Taxes”) or (ii) a number of shares of Common Stock otherwise deliverable hereunder having a fair market value sufficient to satisfy the statutory minimum of all or part of the Grantee’s estimated Taxes. The Corporation shall not deliver any of the shares of Common Stock until and unless the Grantee has made the deposit required herein or proper provision for required withholding has been made.

8. Rights as Shareholder. Subject to Section 4 of this Agreement, the Grantee shall have the same rights as a shareholder of the Corporation in respect to the RSUs, except that the RSUs shall not include the right to vote until and unless the RSUs have vested and ownership of shares of Common Stock represented by the RSUs have been transferred to (or on behalf of) the Grantee.

9. Transferability. Except to the extent provided in the Plan in the case of the Grantee’s death, the RSUs may neither be made subject to any encumbrance nor transferred by means of sale, assignment, exchange, pledge, or otherwise.

10. Extraordinary Item; Coordination with Local Law. By voluntarily acknowledging and accepting this Award, the Grantee acknowledges and understands that (a) the RSUs are an extraordinary item relating to compensation for future services to the Navistar Companies and are not under any circumstances to be considered compensation for past services; (b) the RSUs are not part of normal or expected compensation or salary for any purposes, including, without limitation, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, service-based awards, pension or retirement benefits or similar payments; and (c) notwithstanding any terms or conditions of the Plan or this Agreement to the contrary, in the event of the Grantee’s involuntary termination of employment with the Navistar Companies, the Grantee’s right to receive future Restricted Stock Units under the Plan and to vest in the RSUs shall terminate as of the date that

E-150

the Grantee is no longer actively employed and will not be extended by any notice period under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); provided, however, that to the extent the Grantee retains any right to continue to vest in the RSUs pursuant to and in accordance with the Plan and this Agreement following such termination, the right to so vest shall be measured from the date the Grantee terminates active employment with the Navistar Companies and shall not be extended by any notice period under local law.

11. Confidentiality. The Grantee agrees to not disclose the existence or terms of this Agreement to any other employees of the Navistar Companies or third parties with the exception of the Grantee’s accountants, attorneys, or spouse, and shall ensure that none of them discloses such existence or terms to any other person, except as required to comply with legal process.

12. Consent to Transfer Personal Data. By accepting this Award, the Grantee voluntarily acknowledges and consents to the collection, use, processing and transfer of personal data as described in this Section 12. The Grantee is not obliged to consent to such collection, use, processing and transfer of personal data. However, failure to provide the consent may affect the Grantee’s ability to participate in the Plan. The Corporation holds certain personal information about the Grantee, which may include the Grantee’s name, home address and telephone number, facsimile number, e-mail address, family size, marital status, sex, beneficiary information, emergency contacts, passport/visa information, age, language skills, drivers license information, date of birth, birth certificate, social security number or other employee identification number, nationality, C.V. (or resume), wage history, employment references, job title, employment or severance contract, current wage and benefit information, personal bank account number, tax related information, plan or benefit enrollment forms and elections, option or benefit statements, any shares of stock or directorships in the Corporation, details of all options or any other entitlements to shares of stock awarded, canceled, purchased, vested, unvested or outstanding in the Grantee’s favor, for the purpose of managing and administering the Plan (“Data”). The Navistar Companies will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of the Grantee’s participation in the Plan, and the Corporation may further transfer Data to any third parties assisting the Corporation in the implementation, administration and management of the Plan. These recipients may be located throughout the world, including the United States of America. The Grantee authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding of shares of Common Stock on the Grantee’s behalf to a broker or other third party with whom the Grantee may elect to deposit any shares of Common Stock acquired pursuant to the Plan. The Grantee may, at any time, review Data, require any necessary amendments to it or withdraw the consents herein in writing by contacting the Corporate Secretary for the Corporation; however, withdrawing the Grantee’s consent may affect the Grantee’s ability to participate in the Plan.

13. Amendment. Except as otherwise specified in this Agreement, this Agreement may be amended only by a writing executed by the Corporation and the Grantee that specifically states that it is so amending this Agreement. Notwithstanding the foregoing, this Agreement may be amended by the Committee, without the consent of the Grantee, by a writing that specifically states that it is so amending this Agreement, so long as a copy of such amendment is delivered to the Grantee, and provided that no such amendment that eliminates or adversely affects any right or obligation of the Grantee hereunder may be made without the Grantee’s consent. Without limiting the foregoing, the Committee reserves the right to change, by written notice to the Grantee, the provisions of the RSUs or this Agreement in any way it may deem necessary or advisable to carry out the purpose of the Award as a result of a mistake of fact or any change in applicable laws or regulations or any future law, regulation, ruling or judicial decisions, provided that any such change shall be applicable only to the RSUs that are then subject to terms or conditions of this Agreement.

14. Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by appropriate authority under the law of any jurisdiction applicable to this Agreement, the same shall not affect, in any respect whatsoever, the validity, legality, or enforceability of any other provision of this Agreement, and this

E-151

Agreement shall continue, to the fullest extent permitted by law, as if such invalid, illegal, or unenforceable provision were omitted and/or modified by such appropriate authority so as to preserve its validity, legality, or enforceability, unless such omission or modification would substantially impair the rights or benefits under this Agreement of the Grantee or the Corporation.

15. Construction. The RSUs are being issued pursuant to Section XI of the Plan and are subject to the terms of the Plan. A copy of the Plan has been given to the Grantee and additional copies of the Plan are available upon request during normal business hours at the principal executive offices of the Corporation or can be requested in writing sent to the Corporate Secretary, Navistar International Corporation, 4201 Winfield Road, Warrenville, Illinois 60555. To the extent that any provisions of this Agreement violates or is inconsistent with any provisions of the Plan, the Plan provision shall govern and any inconsistent provision in this Agreement shall be of no force or effect.

16. Interpretations. Any dispute, disagreement or question which arises under, or as a result of, or in any way relates to the interpretation, construction or application of the terms of this Agreement, the Plan, or the Prospectus will be determined and resolved by the Committee or its authorized delegate. Such determination or resolution by the Committee or its authorized delegate will be final, binding and conclusive on all persons for all purposes.

17. Successors and Assigns. This Agreement shall be binding upon and, subject to the conditions hereof, inure to the benefit of the Corporation, its successors and assigns, and the Grantee and his successors and assigns.

18. Entire Understanding. This Agreement embodies the entire understanding and agreement of the parties in relation to the subject matter hereof, and no promise, condition, representation or warranty, expressed or implied, not herein stated, shall bind either party hereto.

19. Governing Law. Subject to the terms of the Plan, all matters arising under this Agreement including matters of validity, construction and interpretation, shall be governed by the internal laws of the State of Illinois, without regard to the conflicts of law provisions of that State or any other jurisdiction. The Grantee and the Corporation agree that all claims in respect of any action or proceeding arising out of or relating to this Agreement shall be heard or determined in any state or federal court sitting in Illinois, and the Grantee agrees to submit to the jurisdiction of such courts, to bring all such actions or proceedings in such courts and to waive any defense of inconvenient forum to such actions or proceedings. A final judgment in any action or proceeding so brought shall be conclusive and may be enforced in any manner provided by law.

* * *

The Corporation and the Grantee hereby agree to the terms and conditions of this Agreement and have executed it as of the Grant Date.

NAVISTAR INTERNATIONAL CORPORATION
By:
	Daniel C. Ustian
	Chairman, President and CEO

	GRANTEE
Attest:
Curt A. Kramer
Corporate Secretary

E-152

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Daniel C. Ustian, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Navistar International 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 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 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: September 3, 2008

/s/    DANIEL C. USTIAN        

Daniel C. Ustian

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

E-153

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Terry M. Endsley, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Navistar International 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 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 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: September 3, 2008

/s/    TERRY M. ENDSLEY        

Terry M. Endsley

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

E-154

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Navistar International Corporation (the “Company”) on Form 10-Q for the period ended July 31, 2008 as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), I, Daniel C. Ustian, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(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 the Company.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Date: September 3, 2008

/s/    DANIEL C. USTIAN        

Daniel C. Ustian

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. This certification shall also not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

E-155

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Navistar International Corporation (the “Company”) on Form 10-Q for the period ended July 31, 2008 as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), I, Terry M. Endsley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(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 the Company.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Date: September 3, 2008

/s/    TERRY M. ENDSLEY        

Terry M. Endsley

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. This certification shall also not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

E-156

EX-99.1

EXHIBIT 99.1

Additional Financial Information (Unaudited)

The following additional financial information is provided based upon the continuing interest of certain stockholders and creditors to assist them in understanding our core manufacturing business with our financial services operations on a pre-tax equity basis. Our manufacturing operations, for this purpose, includes our Truck segment, Engine segment, Parts segment, and Corporate items. The manufacturing operations financial information represents non-GAAP financial measures. The reconciling difference between these non-GAAP financial measures and our GAAP financial statements in Item 1 to the accompanying condensed consolidated financial statements is our financial services operations, which is included on a pre-tax equity basis.

Condensed Statements of Operations

Navistar International Corporation (with financial services operations on a pre-tax equity basis)

		Three Months Ended July 31,						Nine Months Ended July 31,
		2008			2007			2008			2007
(in millions)
Sales of manufactured products, net		$	3,879		$	2,852		$	10,592		$	8,802
Cost of products sold			3,115			2,428			8,762			7,505
Selling, general and administrative expense			348			342			967			935
Engineering and product development costs			108			86			289			284
Other expense, net			27			31			116			191
Total costs and expenses			3,598			2,887			10,134			8,915
Income (loss) before income taxes	— Manufacturing operations		281			(35	)		458			(113	)
	— Financial services operations		(1	)		40			(7	)		124
Income before income taxes			280			5			451			11
Income tax expense			(8	)		(9	)		(17	)		(28	)
Net income (loss)		$	272		$	(4	)	$	434		$	(17	)

E-157

Condensed Statements of Assets, Liabilities, and Stockholders’ Deficit

Navistar International Corporation (with financial services operations on a pre-tax equity basis)

	As of
	July 31, 2008			October 31, 2007
(in millions)
Cash and cash equivalents	$	558		$	716
Marketable securities		18			6
Accounts receivables		1,245			788
Inventories		1,489			1,380
Investments in and advances to non-consolidated affiliates		177			154
Investments in and advances to financial services affiliates		398			397
Property and equipment, net		1,849			1,980
Goodwill and intangible assets, net		651			639
Other assets		320			325
Deferred taxes, net		122			123
Total assets	$	6,827		$	6,508
Accounts payable	$	2,116		$	1,888
Postretirement benefits liabilities		1,203			1,310
Debt—manufacturing operations		1,884			2,028
Other liabilities		1,852			2,016
Stockholders’ deficit		(228	)		(734	)
Total liabilities and stockholders’ deficit	$	6,827		$	6,508

E-158

Condensed Statements of Cash Activities

Navistar International Corporation (with financial services operations on a pre-tax equity basis)

	Nine Months Ended July 31,
	2008			2007
(in millions)
Cash flow from operating activities:
Net income (loss)	$	434		$	(17	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization		251			233
Depreciation of equipment held for or under lease		29			26
Deferred taxes		(5	)		20
Equity in loss (income) of financial services operations		7			(124	)
Equity in income of non-consolidated affiliates		(63	)		(62	)
Dividends from financial services operations		25			275
Dividends from non-consolidated affiliates		54			74
Other, net		(592	)		(605	)
Net cash provided by (used in) operating activities		140			(180	)
Cash flow from investing activities:
Purchases of marketable securities		(43	)		(178	)
Sales or maturities of marketable securities		31			309
Net change in restricted cash and cash equivalents		(1	)		—
Capital expenditures		(139	)		(206	)
Purchase of equipment held for or under lease		(11	)		(13	)
Acquisitions, net of cash acquired		—			(7	)
Other investment activities		20			30
Net cash used in investing activities		(143	)		(65	)
Net cash used in financing activities		(164	)		(287	)
Effect of exchange rate changes on cash and cash equivalents		9			56
Decrease in cash and cash equivalents		(158	)		(476	)
Cash and cash equivalents at beginning of the period		716			1,078
Cash and cash equivalents at end of the period	$	558		$	602

E-159