DEF 14A 1 nav-2018xdef14a.htm DEF 14A Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No._ )
 
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Definitive Proxy Statement
 
 
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Definitive Additional Materials
 
 
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Navistar International Corporation
 
 
 
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NAVISTAR INTERNATIONAL CORPORATION
2701 NAVISTAR DRIVE
LISLE, ILLINOIS 60532
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Date:    Tuesday, February 13, 2018, 9:00 A.M. — Central Time

Location:    Navistar Corporate Headquarters
2701 Navistar Drive, Lisle, Illinois 60532

December 20, 2017
To our stockholders:

On behalf of the Board of Directors of Navistar International Corporation, you are cordially invited to attend our 2018 Annual Meeting of Stockholders, which will be held on Tuesday, February 13, 2018 at 9:00 A.M. Central Time at our corporate headquarters located at 2701 Navistar Drive, Lisle, Illinois 60532. At our annual meeting, our stockholders will be asked to:

Elect as directors the nominees named in the accompanying proxy statement;

Act on an advisory vote on executive compensation as disclosed in the accompanying proxy statement;

Approve the material terms of the performance measures and goals set forth in our 2013 Performance Incentive Plan;

Ratify the appointment of our independent registered public accounting firm; and

Act upon any other matters properly brought before the annual meeting.

We plan to send a Notice of Internet Availability of Proxy Materials on or about December 20, 2017. The Notice of Internet Availability of Proxy Materials contains instructions on how to access our materials on the Internet, as well as instructions on obtaining a paper copy of the proxy materials. The Notice of Internet Availability of Proxy Materials is not a form for voting and presents only an overview of the proxy materials. In order to attend our 2018 Annual Meeting of Stockholders, you must have an admission ticket. Procedures for requesting an admission ticket are detailed in the accompanying proxy statement. Attendance and voting is limited to stockholders of record at the close of business on December 18, 2017.

Your vote is important. Whether or not you plan to attend the 2018 Annual Meeting of Stockholders, please vote your proxy either by mail, telephone, mobile device or over the Internet.

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By Order of the Board of Directors,
 
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Richard E. Bond
Secretary

IMPORTANT NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS
MEETING TO BE HELD ON FEBRUARY 13, 2018: THE ANNUAL REPORT AND PROXY STATEMENT
ARE AVAILABLE AT HTTP://WWW.NAVISTAR.COM/NAVISTAR/INVESTORS

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2018 Proxy Statement





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2018 Proxy Statement



TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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2018 Proxy Statement
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PROXY SUMMARY
This summary highlights information collected elsewhere in this proxy statement or in our corporate governance documents published on our website: http://www.navistar.com/navistar/investors/corporategovernance/

We encourage you to read this proxy statement in its entirety before voting.
How to Vote
Your vote is important. Please exercise your right as a stockholder and submit your proxy as soon as possible. You may vote if you were a stockholder at the close of business on December 18, 2017. Stockholders may vote in person at the meeting, or submit a proxy by the Internet, mail, mobile device or telephone as follows:
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Via the Internet:
 
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By Telephone (toll free):
http://www.proxyvote.com
 
1-800-690-6903
 
 
 
 
 
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By Mail:
 
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In Person:
Complete, sign and mail the enclosed proxy card.
 
Stockholders who obtain an admission ticket can attend and vote at the annual meeting.
 
 
 
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By Scanning Your QR Code:
 
 
 
Vote with your mobile device.
 
 
Annual Meeting Location
February 13, 2018
9:00 A.M. Central Time
Navistar Corporate Headquarters
2701 Navistar Drive, Lisle, Illinois 60532
Stockholder Action
Proposals for Your Vote
Board Voting Recommendation
Page
FOR each nominee
FOR
Proposal 3: Approval of the Material Terms of the Performance Measurements and Goals Set Forth in our 2013 Performance Incentive Plan
FOR
FOR


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Director Nominees

We ask you to vote "for" all of the director nominees listed below. Set forth below is summary information about each director nominee, with more detailed information about the qualifications and experience of each director nominee contained under Proposal 1 - Election of Directors beginning on page 16 of this proxy statement.
Nominee and Principal Occupation

Age

Director Since

Independent

Current Committee Membership

Troy A. Clarke
 
 
 
 
President and Chief
Executive Officer of Navistar
62
April 2013
 
 
José María Alapont
 
 
 
 
Former Chairman, President and Chief
Executive Officer of Federal-Mogul Corporation
67
October 2016
X
Finance
Stephen R. D'Arcy
 
 
 
 
Partner, Quantum Group LLC
63
October 2016
X
Audit (Chair)
Matthias Gründler
 
 
 
 
Chief Financial Officer, Volkswagen Truck & Bus GmbH
52
February 2017
X
Finance
Vincent J. Intrieri
 
 
 
 
Founder, President and Chief Executive Officer, VDA Capital Management LLC
61
October 2012
X
Finance (Co-Chair) and Nominating & Governance
Daniel A. Ninivaggi
 
 
 
 
Chief Executive Officer, Icahn Automotive Group LLC
53
August 2017
X
Audit and
Compensation
Mark H. Rachesky, M.D.
 
 
 
 
Founder and President, MHR
Fund Management LLC
58
October 2012
X
Finance (Co-Chair) and Nominating & Governance
Andreas H. Renschler
 
 
 
 
Chief Executive Officer, Volkswagen Truck & Bus GmbH
59
February 2017
X
Compensation and Nominating & Governance
Michael F. Sirignano
 
 
 
 
Principal, MHR
Fund Management LLC
36
March 2014
X
Compensation (Chair) and Audit
Dennis A. Suskind
 
 
 
 
Retired General Partner, Goldman Sachs & Company
75
October 2016
X
Compensation


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Business Strategy
Our 2017 Accomplishments
    Consummated the Previously Announced Volkswagen Truck and Bus Alliance
    Launched Products and Product Features Important to Key Markets
    Improved Quality and Uptime
    Delivered on Our Plan to Reduce Costs
    Built Sales Momentum
    Sought New Sources of Revenue
ò Evaluated Non-Core Activities













l Realized new sources of revenue


Our Expectations Going Forward
   Grow the Core Business
   Drive Operational Excellence
   Pursue Innovative Technology Solutions
   Leverage the Volkswagen Truck and Bus Strategic Alliance
   Enhance Our Winning Culture
   Improve Our Financial Performance

Corporate Governance Highlights

ü
10 of 11 directors who are expected to continue following the 2018 Annual Meeting of Stockholders are independent under our corporate governance guidelines and the New York Stock Exchange (‘‘NYSE’’) listing standards.

ü
We have an Independent Lead Director.

ü
We have 100% independent Board of Directors (the "Board") standing committees.

ü
We have a declassified Board.

ü
We have stockholder representation on all of our Board committees.

ü
We have a director resignation policy for directors who fail to obtain a majority vote.

ü
We have no super-majority voting provisions to approve transactions, including a merger.

ü
We have a claw-back policy.

ü
We do not provide tax gross-ups for perquisites and other similar benefits to officers who are subject to Section 16 (the ‘‘Section 16 Officers’’) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). Additionally, we do not provide tax gross-ups for any cash or equity awards for any employees.

ü
We have ‘‘double trigger’’ change in control benefits.

ü
Our Named Executive Officers ("NEOs") and directors are subject to stock ownership guidelines and stock retention requirements.

ü
We impose restrictions on short selling, trading in derivatives, pledges, hedges and margin account use by our executives and directors.


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EXECUTIVE SUMMARY

Navistar International Corporation (‘‘we,’’ ‘‘our’’, the ‘‘Company’’ or ‘‘Navistar’’), incorporated under the laws of the State of Delaware in 1993, is a holding company whose principal operating entities are Navistar, Inc. (‘‘Navistar, Inc.’’) and Navistar Financial Corporation (‘‘NFC’’). Navistar’s fiscal year ends October 31 and as such all references to a year refer to the applicable fiscal year unless stated otherwise.

Business Strategy
Our 2017 Accomplishments
We have continued to make substantial progress on our top priorities:
Consummated Volkswagen Truck & Bus Alliance: In February 2017, we consummated our previously announced strategic alliance with Volkswagen Truck & Bus GmbH ("VW T&B") pursuant to a Stock Purchase Agreement dated as of September 5, 2016, by and among us and VW T&B (“the Stock Purchase Agreement”), a License and Supply Framework Agreement and a Procurement JV Framework Agreement. Pursuant to the Stock Purchase Agreement, we issued and VW T&B purchased 16.2 million shares of our common stock for an aggregate purchase price of $256 million at $15.76 per share, equal to a 19.9% stake in the Company (16.6% on a fully-diluted basis).
Launched products and product features: In 2017, we remained committed to focusing on our Core markets and investing in product development to increase customer value. We expect to continue to announce a new or redesigned product, on average, every four to six months through 2018. By the end of 2018, our entire portfolio will consist of newly designed trucks.
In February 2017, we introduced our new International® A26 diesel engine, an all-new 12.4L engine design which we believe offers improved fuel economy and will deliver the uptime that our customers demand. In July 2017, we fulfilled customer shipments of our first on-highway vehicles powered by the International® A26 engine.
In April 2017, we introduced the International® RH™ Series, our new Class 8 regional haul tractor powered by the new International® A26 engine. The RH Series is designed to deliver further improvements in vehicle uptime and driver productivity.
In June 2017, we announced an IC Bus® gas powertrain offering to provide school bus customers additional powertrain options.
In July 2017, we made our OnCommand Connection (“OCC”) Telematics solution available for purchase. We also announced OCC Marketplace, a new, open-architecture, cloud-based technology platform; OCC Electronic Driver Log (“EDL”), which automates federal hours of service compliance requirements. During the year, we also introduced electronic Driver Vehicle Inspection Reporting, fuel tax reporting, and over-the-air programming for Cummins engines.
In September 2017, we introduced the International® HV™ Series, our new Class 8 severe service truck powered by the new International® A26™ diesel engine.
In September 2017, we also announced the launch of an electric medium-duty truck in North America by late 2019 with our partner VW T&B. We also expect to launch an IC electric bus as early as 2019. The IC electric bus chargE™ was unveiled in late 2017.
Improved quality and uptime: We continued our relentless focus on improving quality and uptime in 2017.
We have reduced dealer dwell time through improvements in diagnostics and repair procedures. An increasing number of service locations have achieved certification under the Diamond Edge™ certified program, which is a dealer service performance program that is based on rigorous adherence to exacting parts and service metrics.
We have made great strides in improving the quality of components manufactured by our supply base. The quality performance of our supply base has improved to the point that over the last four years, there has been a reduction of more than 70% in supplier-related internal defects observed at our manufacturing facilities. We expect that the continued reduction in supplier-related internal defects will have a positive impact on the uptime and performance of our vehicles.
Warranty expense continued to decline as a result of our improved product quality and reliability. Excluding pre-existing charges, warranty expense as a percentage of manufacturing revenue was 2.4% in 2017, versus 2.7% in 2016.

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Our new product Command Center has been in place since August 2017 focused on new products dwell time improvement. The goal is a maximum 24 hours dwell time for 80% of the vehicles and 48 hours dwell time for 100% of the vehicles.  OCC will support Command Center goals through proactive diagnostics and predictive tools.
Delivered on our plan to reduce costs: In 2017, we continued cost management practices that are improving margins.
Procurement and engineering design processes remain focused on lowering material costs.
We revised our used truck strategy in the second quarter of 2017 which accelerated our sales and drove lower inventories in the second half of the year.
We rationalized 9/10-liter engine production at our plant in Melrose Park, Illinois (the "Melrose Park Facility") and made the decision to cease production beginning in the second quarter of 2018.
The VW T&B alliance is on plan to deliver procurement, technology and other synergies.
Built sales momentum: Our Class 6-8 retail market share is gaining momentum, growing by over 150 share points over the course of 2017.
Customer acceptance of new heavy duty products is growing steadily compared to 2016.
Our share of rental and leasing business is increasing, boosting our share in the Medium truck segment.
At the North American Commercial Vehicle ("NACV") show in September 2017, we launched the new International® LoneStar®, International HV™, and the International A26 engine in our International HX™ series.
Our all-makes Fleetrite® and remanufactured ReNEWed® parts sales are growing compared to 2016.
Sought New Sources of Revenue: We continue to seek new sources of revenue.
In March 2017, we announced that Navistar Defense, LLC ("ND"), was awarded two foreign military contracts by the U.S. Army Contracting Command. Under the first contract, ND will produce and support MaxxPro® Dash DXM™ Mine Resistant Ambush Protected (“MRAP”) vehicles for Pakistan. Under the second contract, ND will reset, upgrade and support MaxxPro® MRAP Excess Defense Article vehicles for the United Arab Emirates (“U.A.E.”). The majority of the work will take place at our West Point, Mississippi assembly plant. Delivery is planned to be completed for Pakistan in calendar year 2017 and for U.A.E. in calendar year 2018.
We ramped up contract manufacturing for General Motors Company ("GM") in our Springfield, Ohio plant.
We announced a strategic relationship with Education Logistics, Inc. (“Edulog”), a recognized industry leader in pupil transportation solutions, which will offer additional comprehensive telematics solutions to the school bus market using our OCC remote diagnostics and telematics solution for all makes and models.
Evaluated non-Core activities: We also continue to evaluate our portfolio of assets to optimize our cost structure. In May 2017, we completed the sale of a fuel injector business line that had been included in our Parts segment. During August 2017, we also sold our fabrication business in Conway, Arkansas.
Our Expectations Going Forward
Going forward, we will focus on implementing our customer-centric strategy which we believe will enable us to improve sales and market share by offering more value for our customers. Our strategy includes plans to:
Grow the Core Business;
Drive operational excellence with enhanced focus on quality and reliability;
Pursue innovative technology solutions;
Leverage the VW T&B strategic alliance;
Enhance our winning culture; and
Improve our financial performance
Grow the Core Business: We will continue to focus on leveraging our investments and assets to generate revenue growth.
New Product Launches - Our product development pipeline is full for 2018. In the first half of 2018, we will launch the International® HX™ series with the International® A26 engine to complete the HX family. We will also launch the RE bus with the Cummins ISL, the International® HV™ Series vocational truck with the A26 engine, the gasoline-powered CE bus and an updated International® LoneStar® truck. In the first half of 2018, we will introduce the International® MV™ series, our new medium-duty truck. To support Greenhouse Gas (“GHG”) emissions requirements, we will continue to introduce features that further improve fuel economy. We will also enter the Class 4/5 market in the second half of 2018 with a vehicle that will be distributed separately through GM and our dealer networks.

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Distribution Effectiveness - We will continue to invest in the dealer organization to improve customer reach, sales effectiveness and customer uptime. Recruitment and training of salespeople, improved operating practices, and comprehensive internal sales support are central to this strategy.
Focus on the Customer - We will also continue our focus to align around customer needs. We will implement uptime best practices, such as managing repairs in real time to reduce dwell time and utilizing OCC data and its advanced diagnostic and prognostic capabilities. New initiatives in 2018 are targeted to raise uptime to the next level.
Parts - Our growth initiatives focus on strengthening sales and dealer capability and loyalty; expansion outside the dealer channel with the continued reach of the successful Fleetrite all makes parts offering, increasing share of late-in-lifecycle products including remanufactured offerings; and leveraging our connected vehicle platform and other technologies to accelerate the growth of parts and services.
Drive Operational Excellence: We will continue to drive improvement of key performance metrics such as product, manufacturing, structural costs, quality, and uptime. We are also continuing our focus to identify and prioritize needed asset sustainment in our manufacturing and engineering facilities. A relentless focus on operational excellence is essential to delivering on our commitment to enhance customer value.
Pursue Innovative Technology Solutions: We plan to leverage our assets and capabilities to pursue innovative technology solutions for our customers.
New Technologies - We are well positioned to participate in the three emerging technology themes impacting the North American transportation industry. These include Advanced Driver Assistance ("ADAS") autonomous driving, platooning, the digital supply chain and electrification. We have emerging relationships with first movers in all of these areas. We have announced the planned introduction of the series of electric vehicles in the medium duty and school bus classes.
OnCommand Connection - The requirement to use Electronic Logging Devices ("ELDs") starting in the first quarter of 2018 is an opportunity for revenue growth. In addition to remote diagnostics, we have broadened our OCC offering to include cellular telematics, EDLs and driver behavior. OCC product investments in 2018 will focus on new service solutions and tools that will enhance our current offerings as well as differentiate the International brands. In addition, OCC is a ready-to-go alternative as a digital backbone for autonomous driving systems and supply chain digitization efforts.
Leverage the VW T&B Strategic Alliance: The alliance is valuable to us across many areas.
Products and Technology - We and VW T&B have a similar vision of the role of technology, including the importance of driver-focused, open architecture solutions. The alliance will be a source of powertrain options and other high-value technologies, including advanced driver assistance systems; connected vehicle solutions, including platooning and autonomous technologies; electric vehicles; and cab and chassis subsystems. We plan to introduce a medium-duty vehicle electric powertrain in North America by late 2019 with our strategic partner, VW T&B. We also expect to launch the IC Electric Bus chargeE™ as early as 2019.
Digital Brands - We are also collaborating on fully integrated, next generation diesel big bore powertrains and the convergence of our OCC and VW T&B's RIO digital brands.
Market Confidence - The strategic alliance with VW T&B solidifies us as a long term player in North America.
Parts - The alliance creates new parts sales and growth opportunities afforded by vertically integrated systems.
Costs - The alliance leverages global scale to achieve significant cost reduction synergies and drive more efficient research and development spend. To date, the alliance's procurement joint venture is delivering expected synergies.
Enhance our Winning Culture: We will align our people strategy with our capabilities to ensure we have the skill sets, personnel and organizational structure necessary to take our business to the next level. We will advance a team-based organization, enhance collaborative work environments, and utilize visual management tools.
Improve Financial Performance: Our financial performance continues to improve due to savings from cost reduction actions and revenue growth. The Class 6-8 truck industry has improved in the second half of 2017, a trend that is expected to continue in 2018. We anticipate that 2018 will be a year of further revenue and earnings growth combined with prudent investments to build a solid base for the longer term.





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Volkswagen Truck and Bus Strategic Alliance

On February 28, 2017, pursuant to the terms of the Stock Purchase Agreement, we issued to VW T&B 16,242,012 shares of our common stock, equal to 19.9% of our common stock issued and outstanding as of September 5, 2016 (16.6% on a fully-diluted basis) for a purchase price of $15.76 per share and an aggregate purchase amount of $255,974,109 (the "Share Issuance"). Also on September 5, 2016, we entered into a Stockholder Agreement with VW T&B (the "Stockholder Agreement") which governs the rights and obligations of the parties with respect to VW T&B's holdings in the Company following the Share Issuance, including the right of VW T&B to nominate two directors to serve on our Board (the "VW T&B Nominees"). The Board approved the Share Issuance for purposes of Section 203 of the Delaware General Corporation Law ("DGCL") and the Company and VW T&B entered into an agreement which permits VW T&B to acquire up to 20% of the Company without triggering the restrictions that would otherwise be imposed under Section 203 of the DGCL (the "Section 203 Agreement").

In addition to the agreements governing the Share Issuance, our primary operating subsidiary, Navistar, Inc., concurrently entered into a (i) Framework Agreement Concerning Technology Licensing and Supply (the "License and Supply Framework Agreement") and (ii) a Procurement Joint Venture Framework Agreement (the "Procurement JV Framework Agreement") with VW T&B. Pursuant to the License and Supply Framework Agreement, the parties have entered into individual contracts in respect of the licensing and supply of certain engines and technologies, are conducting feasibility studies in order to investigate the feasibility of sharing certain technologies and are engaging in continuing discussions on possible collaboration with respect to certain power-train combinations and other strategic initiatives. Navistar, Inc. and VW T&B have also formed a joint venture focused on sourcing, evaluating, negotiating and recommending joint procurement opportunities, and the parties may enter into other commercial arrangements.

Changes in the Composition of our Board

Andreas H. Renschler and Matthias Gründler joined the Board on February 28, 2017 as the VW T&B Nominees, filling the vacancies created by the planned retirement from the Board of Michael N. Hammes and James H.Keyes, who did not stand for re-election at our 2017 Annual Meeting of Stockholders. On April 18, 2017, Jeffrey A. Dokho replaced Dennis D. Williams as the UAW's appointed member to the Board. Lastly, on August 14, 2017, Daniel A. Ninivaggi was elected to the Board to fill a vacancy created by the resignation of Samuel J. Merksamer. With these changes, there was a 33% refreshment in the composition of our Board during 2017.

Continued Stockholder Representation on our Board

Pursuant to amendments to settlement agreements (the ‘‘Settlement Agreement Amendments’’) we entered into with two of our largest stockholders, Carl C. Icahn and several entities controlled by him (collectively, the ‘‘Icahn Group’’) and Mark H. Rachesky, MD and several entities controlled by him (collectively, the ‘‘MHR Group’’), we granted each of the Icahn Group and the MHR Group the right to nominate two directors to serve on our Board, effective as of March 10, 2014, the date of our 2014 Annual Meeting of Stockholders (the ‘‘2014 Annual Meeting’’). The Icahn Group’s nominees were Mr. Vincent J. Intrieri and Mr. Samuel J. Merksamer. The MHR Group nominees were Dr. Mark H. Rachesky and Mr. Michael Sirignano. Daniel A. Ninivaggi replaced Mr. Merksamer as an Icahn Group nominee on August 14, 2017. Mr. Intrieri, Mr. Ninivaggi, Dr. Rachesky and Mr. Sirignano currently serve as members of our Board and are nominated for re-election. In addition, pursuant to the Stockholder Agreement, VW T&B was granted the right to nominate two directors to serve on our Board effective as of February 28, 2017, the date of the Share Issuance. The VW T&B Nominees were Andreas H. Renschler and Matthias Gründler. Mr. Renschler and Mr. Gründler currently serve as members of our Board and are nominated for re-election. As a result, three (3) of our largest stockholders have Board representation and collectively hold six (6) seats on our current twelve (12) person Board.

Corporate Governance

During 2017, we strove to maintain effective governance practices and policies, and to solicit and consider input from our stockholders. Beginning with the 2014 Annual Meeting, the Board was declassified and all directors became subject to annual election to one-year terms. In February 2017, upon the election of Troy A Clarke, our Chief Executive Officer, as Chairman, the Board appointed General (Retired) Stanley A. McChrystal as the independent Lead Director.



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In addition to these actions, we believe that the following items, among others, contribute to a strong governance and compensation profile:

10 of 11 directors who are expected to continue following the 2018 Annual Meeting of Stockholders are independent under our Corporate Governance Guidelines and the NYSE listing standards.

We have an independent Lead Director.

We have 100% independent Board standing committees.

We have a declassified Board.

We have stockholder representation on all of our Board committees.

We have a director resignation policy for directors who fail to obtain a majority vote.

We have no super-majority voting provisions to approve transactions, including a merger.

We have a claw-back policy.

We do not have a shareholder rights plan.

We do not provide tax gross-ups for perquisites and other similar benefits to Section 16 Officers and we do not provide tax gross-ups for any cash or equity awards for any employees.

We have ‘‘double trigger’’ change in control benefits.

Our NEOs and directors are subject to stock ownership guidelines and stock retention requirements.

We impose restrictions on short selling, trading in derivatives, pledges, hedges and margin account use by our executives and directors.

Stockholder Communication and Compensation Policies

The Company has a robust stockholder outreach and engagement program in place. We engage in regular contact with our stockholders throughout the year. Approximately 72% of our stock is held by five of our stockholders. Three of these stockholders have representation on our Board as discussed in our Executive Summary and Proposal One-Election of Directors. These stockholders, through their representatives on our Board, also are members of our Compensation Committee and are integrally involved in our compensation decisions and policies, with Mr. Sirignano being the Chairman of our Compensation Committee. We also engage in regular dialogue with our two remaining largest stockholders without representatives on our Board. We maintain open lines of communication with corporate governance advisory institutions and with our top 25 stockholders on an annual basis in order to solicit their feedback. We continuously work to improve these efforts and place importance on the feedback provided to us during this process.

We continue to focus on, and are aware of, investor concerns regarding the link between pay and performance.  In 2016, we did not reach our performance targets and, consistent with our pay for performance compensation philosophy, our annual incentive metrics and awards were negatively impacted. In 2017 we met our annual incentive metrics and accordingly, awards will be paid at 119.8% of target.

For a summary of our commitment to best practices in executive compensation and changes made in 2017, please see the Executive Summary section of the Compensation, Discussion and Analysis section of this proxy statement.

Highlights of the changes made in 2017 include:

Retained an Annual Incentive ("AI") plan that leverages our scorecard approach, reduced the number of performance metrics, retained the adjusted EBITDA multiplier, and retained the individual performance factor


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Added a Total Shareholder Return ("TSR") multiplier to our 2017 Long-Term Incentive ("LTI") plan while retaining a mix of performance-based and time-based equity
    
Disclosure Regarding Forward-Looking Statements

Information provided and statements contained in this proxy statement that are not purely historical are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements only speak as of the date of this proxy statement and Navistar assumes no obligation to update the information included herein.

Such forward-looking statements often include words such as "may," "will," "believe," "expect," "anticipate," "intend," "plan," "estimate," "future," or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. 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 or financial condition to differ materially from those expressed or implied in the forward-looking statements. Factors that could cause or contribute to differences in our future financial results include, but are not limited to, those discussed in Item 1A, Risk Factors, set forth in Part 1 of our Annual Report on Form 10-K for the year ended October 31, 2017. You should not place undue reliance on forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained herein or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.

Available Information

We are subject to the reporting and information requirements of the Exchange Act and as a result, are obligated to file annual, quarterly, and current reports, proxy statements, and other information with the U.S. Securities and Exchange Commission (the "SEC"). We make these filings available free of charge on our website (http://www.navistar.com) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. Information on our website does not constitute part of this proxy statement or our Annual Report on Form 10-K for the year ended October 31, 2017. In addition, the SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly, and current reports, proxy and information statements, and other information we electronically file with, or furnish to, the SEC. Any materials we file with, or furnish to, the SEC may also be read and/or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

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FREQUENTLY ASKED QUESTIONS REGARDING ATTENDANCE AND VOTING
Q:
Why did I receive a Notice of Internet Availability of Proxy Materials?

A:
Pursuant to the rules of the SEC, we have elected to provide access to our proxy materials over the internet. Accordingly, we have sent you a Notice of Internet Availability of Proxy Materials (the ‘‘Notice’’) because the Board is soliciting your proxy to vote your shares at our 2018 Annual Meeting of Stockholders (the ‘‘Annual Meeting’’). This proxy statement includes information that we are required to provide to you under the rules of the SEC and is designed to assist you in voting your shares. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy can be found in the Notice.

Q:
What is the purpose of the Annual Meeting?

A:
The purpose of the Annual Meeting is to have stockholders consider and act upon the matters outlined in the notice of Annual Meeting and this proxy statement, which include (i) Proposal 1 — the election of the nominees named in this proxy statement as directors, (ii) Proposal 2 — an advisory vote on executive compensation, a so-called ‘‘Say-on-Pay’’ proposal, (iii) Proposal 3 — approval of the material terms of the performance measurements and goals set forth in our 2013 Performance Incentive Plan, (iv) Proposal 4 — the ratification of the appointment of KPMG LLP (‘‘KPMG’’), the Company’s independent registered public accounting firm, and (v) any other matters properly brought before the Annual Meeting. In addition, management may report on the performance of the Company and respond to appropriate questions from stockholders.

Q:
How does the Board recommend that I vote?

A.
The Board recommends that you vote:

FOR the election of each of the director nominees (Proposal 1);

FOR the approval of the advisory vote on executive compensation (Proposal 2);

FOR the approval of the material terms of the performance measurements and goals set forth in our 2013 Performance Incentive Plan (Proposal 3); and

 
FOR the ratification of the appointment of KPMG as our independent registered public accounting firm (Proposal 4).

Q:
Who can attend the Annual Meeting?

A:
Anyone wishing to attend the Annual Meeting must have an admission ticket issued in his or her name. Admission is limited to:

Stockholders of record on December 18, 2017;

An authorized proxy holder of a stockholder of record on December 18, 2017; or

An authorized representative of a stockholder of record who has been designated to present a properly-submitted stockholder proposal.

You must provide evidence of your ownership of shares with your ticket request. The specific requirements for obtaining an admission ticket are specified in the Admission and Ticket Request Procedure section of this proxy statement.

Q:
What is a stockholder of record?

A:
A stockholder of record or registered stockholder is a stockholder whose ownership of our common stock (‘‘Common Stock’’) is reflected directly on the books and records of our transfer agent, Computershare Investor Services (the ‘‘Transfer Agent’’). If you hold Common Stock through a bank, broker or other nominee, you hold your shares in ‘‘street name’’ and are not a stockholder of record. For shares held in street name, the stockholder of record of the shares is your bank, broker or other nominee. The Company only has access to ownership records for stockholders of record. So, if you are not a stockholder of record, for the purpose of requesting an admission ticket to attend the Annual Meeting, you must present us with additional documentation to evidence your stock ownership as of the record date, such as, a copy of your brokerage account statement, a letter from your broker, bank or other nominee or a copy of your voting instruction card from your broker, bank or other nominee.










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Q:
When is the record date and who is entitled to vote?

A:
The Board has set December 18, 2017, as the record date for the Annual Meeting. Holders of shares of Common Stock on that date are entitled to one vote per share. As of December 18, 2017, there were approximately 98,449,166 shares of Common Stock outstanding. If you hold shares of our Common Stock as a participant in any of the Company’s 401(k) or retirement savings plans, your proxy card will represent the number of shares of Common Stock allocated to your account under the plan and will serve as a direction to the plan’s trustee as to how the shares in your account are to be voted.

A list of all registered stockholders will be available for examination by stockholders during normal business hours at the place of the Annual Meeting at least ten (10) days prior to the Annual Meeting and will also be available for examination at the Annual Meeting.

Q:
How do I vote?

A:
For stockholders of record:  You may vote by any of the following methods:
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in person — stockholders who obtain an admission ticket (following the specified procedures) and attend the Annual Meeting in person may cast a ballot received at the Annual Meeting.
 
 
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by Internet — stockholders may access the internet at www.proxyvote.com and follow the instructions on the proxy card or in the Notice.
 
 
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by scanning your QR code — to vote with your mobile device.
 
 
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by phone — stockholders may call toll-free 1-800-690-6903 and follow the instructions on the proxy card or in the Notice.
 
 
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by mail — if you requested and received your proxy materials by mail, you may complete, sign, date and mail the enclosed proxy card.

For holders in street name: You will receive instructions from your bank or broker that you must follow in order for your shares to be voted.




 
Q:
How can I change or revoke my proxy?

A:
For stockholders of record:  You may change or revoke your proxy at any time before it is exercised by (i) submitting a written notice of revocation to Navistar c/o the Corporate Secretary at 2701 Navistar Drive, Lisle, Illinois 60532, (ii) signing and returning a new proxy card with a later date, (iii) validly submitting a later-dated vote via the Internet, by scanning your QR code or by telephone on or before 11:59 pm EST on February 12, 2018 or (iv) attending the Annual Meeting and voting in person. For all methods of voting, the last vote properly cast will supersede all previous votes.

For holders in street name: You may change or revoke your voting instructions by following the specific directions provided to you by your bank or broker.

Q:
Is my vote confidential?

A:
Yes. Proxy cards, ballots and voting tabulations that identify stockholders are kept confidential. There are exceptions for contested proxy solicitations or when necessary to meet legal requirements. Broadridge Financial Solutions, Inc., the independent proxy tabulator appointed by the Company for the Annual Meeting, will count the votes and act as the inspector of elections for the Annual Meeting.

Q:
Will my shares be voted if I do not provide my proxy?

A:
For stockholders of record:  If you are the stockholder of record and you do not vote by proxy card, by telephone or via the internet or in person at the Annual Meeting, your shares will not be voted at the Annual Meeting.

For holders in street name:  If your shares are held in street name, under certain circumstances, your shares may be voted even if you do not provide the bank or brokerage firm with voting instructions. Under NYSE rules, your broker may vote shares held in street name on certain ‘‘routine’’ matters without your instruction. NYSE rules consider the ratification of the appointment of KPMG as our independent registered public accounting firm (Proposal 4) to be a routine matter. As a result, your broker is permitted to vote your shares on that matter at its discretion without instruction from you. When a proposal is not a routine matter, such as the election of directors (Proposal 1), the Say-On-Pay proposal (Proposal 2) and the incentive plan performance measures approval proposal (Proposal 3), and you have not provided voting instructions to the bank or brokerage firm with respect to that proposal, the bank or brokerage firm cannot vote the

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shares on that proposal. The missing votes for these non-routine matters are called ‘‘broker non-votes.’’

Q:
What is the quorum requirement for the Annual Meeting?

A:
Under the Company’s Third Amended and Restated By-Laws (the ‘‘By-Laws’’), holders of at least one-third of the shares of Common Stock outstanding on the record date must be present in person or represented by proxy in order to constitute a quorum for voting at the Annual Meeting. Abstentions and broker non-votes are counted as present for purposes of establishing a quorum.

Q:
What vote is necessary for action to be taken on proposals?

A:
It will depend on each proposal.

Proposal 1 (election of directors) requires a plurality vote of the shares present or represented by proxy at the Annual Meeting and entitled to vote, meaning that the director nominees with the greatest number of affirmative votes are elected to fill the available seats. As outlined in our Corporate Governance Guidelines, any director who receives more ‘‘withheld’’ votes than ‘‘for’’ votes in an uncontested election is required to tender his resignation to the Nominating and Governance Committee for consideration and recommendation to the Board.

Proposal 2 (Say-On-Pay proposal) represents an advisory vote and the results will not be binding on the Board or the Company. The affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter will constitute the stockholders’ non-binding approval with respect to our executive compensation programs. Our Board will review the voting results and take them into consideration when making future decisions regarding executive compensation.

Proposal 3 (incentive plan performance measures approval proposal) requires an affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter.

Proposal 4 (ratification of the appointment of KPMG as our independent registered public accounting firm) requires the affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote.

 
With respect to Proposals 2, 3 and 4 you may vote FOR, AGAINST or ABSTAIN. If you abstain from voting on any of these proposals, the abstention will have the same effect as an AGAINST vote. With respect to Proposal 1, you may vote FOR all nominees, WITHHOLD your vote as to all nominees, or FOR all nominees except those specific nominees from whom you WITHHOLD your vote. A properly executed proxy card marked WITHHOLD with respect to the election of one or more directors will not be voted with respect to the director or directors indicated. Proxies may not be voted for more than ten directors and stockholders may not cumulate votes in the election of directors. If you abstain from voting on Proposal 1, the abstention will not have an effect on the outcome of the vote. Broker non-votes will not affect the outcome on a proposal that requires a plurality vote (Proposal 1) or on a proposal that requires the approval of at least a majority of the shares present in person or represented by proxy and entitled to vote (Proposal 2, 3 and 4).

Votes submitted by mail, telephone or Internet will be voted by the individuals named on the proxy and/or voting instruction card (or the individual properly authorized) in the manner indicated. If you do not specify how you want your shares voted, they will be voted in accordance with management’s recommendations. If you hold shares in more than one account, you must vote each proxy and/or voting instruction card you receive to ensure that all shares you own are voted.

Q:
What is householding?

A:
If you and other residents at your mailing address own shares of Common Stock in street name, your broker or bank may notify you that your household will receive only one annual report and proxy statement for the Company if you hold shares through that broker or bank. In this practice known as ‘‘householding,’’ you were deemed to have consented to receiving only one annual report and proxy statement for your household. Householding benefits both you and the Company because it reduces the volume of duplicate information received at your household and helps the Company to reduce expenses. Accordingly, the Company and your broker or bank will send one copy of the Notice (or our annual report and proxy statement if you have requested a physical copy) to your address. Each stockholder will continue to be entitled to vote a separate proxy and/or voting instruction card. We will promptly deliver an additional copy of either document to you if you call or write us at the following address or phone number: Investor Relations, Navistar International Corporation, 2701 Navistar Drive, Lisle,

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Illinois 60532, (331) 332-2143. If you and other residents at your mailing address are receiving multiple copies of the Notice (or our annual report and proxy statement), and you prefer to receive only a single copy of each, you may so request by writing to us or contacting us at the address and phone number referred to above.

Q:
What does it mean if I receive more than one proxy card or more than one Notice?

A:
Whenever possible, shares of Common Stock, including shares held of record by a participant in any of the Company’s 401(k) or retirement savings plans, for multiple accounts for the same registered stockholder will be combined into the same Notice or proxy card. Shares with different, even though similar, registered stockholders cannot be combined, and as a result, the stockholder may receive more than one Notice or proxy card. For example, shares registered in the name of John Doe will not be combined on the same proxy card as shares registered jointly in the name of John Doe and his wife. Shares held in street name are not combined with shares registered in the name of an individual stockholder or for a participant in any of the Company’s 401(k) or retirement savings plans and may result in the stockholder receiving more than one proxy and/or voting instruction card. For example, shares held in street name by a broker for John Doe will not be combined with shares registered in the name of John Doe.

If you hold shares in more than one account, you must vote each proxy and/or voting instruction card you receive to ensure that all shares you own are voted. If you receive more than one proxy and/or voting instruction card for accounts that you believe could be combined because the stockholder is the same, contact our Transfer Agent (for shares held by registered stockholders) or your broker (for shares held in street name) to request that the accounts be combined for future mailings.


Q:
Who pays for the solicitation of proxies?

A:
This solicitation is being made by the Company. Accordingly, the Company pays the cost of soliciting proxies. This solicitation is being made by mail, but also may be made by telephone, e-mail or in person. We have hired Alliance Advisors, LLC (‘‘Alliance Advisors’’) to assist in the solicitation of proxies. Alliance Advisors’ fees for their assistance in the solicitation of proxies are estimated to be $15,000, plus out-of-pocket expenses. Proxies may also be solicited by our directors, officers and employees who will not
 
receive any additional compensation for those activities. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to stockholders and obtaining their votes.

Q:
When are stockholder proposals or nominations due for the 2019 Annual Meeting of Stockholders?

A:
In order to be included in the Company’s proxy materials for our 2019 annual meeting of stockholders pursuant to SEC Rule 14a-8 under the Exchange Act, any such stockholder proposal must be received by the Company’s Corporate Secretary no later than August 22, 2018. Any proposal may be included in next year’s proxy statement only if such proposal complies with the Company’s By-Laws and the rules and regulations promulgated by the SEC, specifically Rule 14a-8.

In addition, the Company’s By-Laws require that the Company be given advance written notice of nominations for election to the Board and other matters that stockholders wish to present for action at an annual meeting of stockholders (other than matters included in the Company’s proxy materials in accordance with Rule 14a-8 under the Exchange Act). For matters to be presented at the 2019 annual meeting of stockholders, the Company’s Corporate Secretary must receive such notice no earlier than September 16, 2018, and no later than October 16, 2018.

The notice must contain, and be accompanied by, certain information as specified in the Company’s By-Laws. The Company recommends that any stockholder wishing to nominate a director at, or bring any other item before, an annual meeting of stockholders review the Company’s By-Laws, which are available on the Company’s website at http://www.navistar.com/navistar/investors/corporategovernance/documents. All stockholder proposals and director nominations must be delivered to Navistar by mail c/o the Corporate Secretary at 2701 Navistar Drive, Lisle, Illinois 60532.

Q:
Are there any matters to be voted on at the Annual Meeting that are not included in the proxy?

A:
We do not know of any matters to be acted upon at the Annual Meeting other than those discussed in this proxy statement. If any other matter is properly presented, proxy holders will vote on the matter in their discretion.

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Q:
May stockholders ask questions at the Annual Meeting?

A:
Yes. During the Annual Meeting, stockholders may ask questions or make remarks directly related to the matters being voted on. In order to ensure an orderly meeting, we ask that stockholders direct questions and comments to the Chairman of the meeting. In order to provide the opportunity to every stockholder who wishes to speak, each stockholder’s remarks will be limited to two minutes. Stockholders may speak a second time only after all other stockholders who wish to speak have had their turn.

Q:
How can I find the voting results of the Annual Meeting?

A:
Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a Current Report on Form 8-K to be filed with the SEC within four business days after the Annual Meeting. If the official voting results are not available at that time, we will provide preliminary voting results in the Form 8-K and will provide the final voting results in an amendment to the Form 8-K as soon as they become available.


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PROPOSAL 1 ELECTION OF DIRECTORS

At the Annual Meeting, ten directors will be nominated for election. An eleventh director is appointed by the United Automobiles, Aerospace and Agricultural Implement Workers of America (the ‘‘UAW‘‘) pursuant to a 1993 settlement agreement we entered into in connection with the restructuring of our postretirement health care and life insurance benefits and is not elected by the stockholders. A twelfth director position will become vacant as a result of the decision of General (Retired) Stanley A. McChrystal to not stand for re-election at the Annual Meeting. The Board intends to conduct a search process to identify the best candidate to fill this twelfth Board seat. All directors elected at the Annual Meeting will be elected for a one-year term.

If a nominee is unavailable for election, proxy holders will vote for another nominee proposed by the Board or, as an alternative, the Board may reduce the number of directors to be elected at the Annual Meeting. We know of no reason why any nominee would be unable to accept nomination or election. All nominees have consented to be named in this proxy statement and to serve if elected.

As discussed in the Executive Summary, during 2014 and pursuant to the Settlement Agreement Amendments we entered into with two of our largest stockholders, (namely, the Icahn Group and the MHR Group) we granted each of the Icahn Group and the MHR Group the right to nominate two directors to serve on our Board effective as of March 10, 2014, the date of our 2014 Annual Meeting. The Icahn Group’s current nominees are Mr. Vincent J. Intrieri and Mr. Daniel A. Ninivaggi. The MHR Group's current nominees are Dr. Mark H. Rachesky and Mr. Michael F. Sirignano. Moreover, in connection with the VW T&B alliance, and pursuant to the terms of the Stockholder Agreement, two persons nominated by VW T&B were elected to our Board effective February 28, 2017 upon consummation of the Share Issuance. The VW T&B nominees were, and continue to be, Mr. Andreas H. Renschler and Mr. Matthias Gründler.

The following summarizes additional information about each of the nominees and the continuing director as of the date of this proxy statement, including their business experience, public company director positions held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that qualify our nominees and the continuing director to serve as directors of the Company. The nominees were evaluated and recommended by the Nominating and Governance Committee in accordance with the process for nominating directors as found in the Nominating Directors section of this proxy statement.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE ‘‘FOR’’ THE NOMINEES PRESENTED IN PROPOSAL 1.
 
 
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Troy A. Clarke

Age: 62

Director since: April 2013
Biographical Information

Mr. Clarke has served as President and Chief Executive Officer of Navistar since April 2013. Prior to this position, Mr. Clarke served as President and Chief Operating Officer of Navistar since August 2012, as President of the Truck and Engine Group of Navistar, Inc. from June 2012 to August 2012, as President of Asia-Pacific Operations of Navistar, Inc. from 2011 to 2012, and as Senior Vice President of Strategic Initiatives of Navistar, Inc. from 2010 to 2011. Prior to joining Navistar, Inc., Mr. Clarke held various positions at General Motors, including President of General Motors North America from 2006 to 2009 and President of General Motors Asia Pacific from 2003 to 2006. Over the course of his career with GM, he held several additional leadership roles, including President and Managing Director of GM de Mexico and Director of Manufacturing for GM de Mexico. On June 1, 2009, General Motors filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. Mr. Clarke received a bachelor’s degree in engineering from the General Motors Institute in 1978 and a master’s degree in business administration from the University of Michigan in 1982.

Skills and Qualifications

Mr. Clarke’s vast experience in the automotive industry over the past 40 years is invaluable to the Board in evaluating and directing the Company’s future. As a result of his professional and other experiences, Mr. Clarke possesses particular knowledge and experience in a variety of areas, including corporate governance, engineering, manufacturing (international and domestic), mergers and acquisitions, sales (international and domestic) and union/labor relations, which strengthens the Board’s collective knowledge, capabilities and experience and well qualifies him to serve on our Board.

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José María Alapont*

Age: 67

Director since: October 2016

Committees: Finance
Biographical Information

Mr. Alapont served as President and Chief Executive Officer of Federal-Mogul Corporation, a supplier of automotive powertrain and safety components, from March 2005 to March 2012, and as its Chairman of the Board from 2005 to 2007, and continued to serve as a director of the company until 2013. He is the former Chief Executive Officer and a director of Fiat Iveco, S.p.A., a leading global manufacturer of commercial trucks and vans, buses, recreational, off-road, firefighting, defense and military vehicles of the Fiat Group, from 2003 to 2005. Mr. Alapont has held executive, Vice President and President positions for more than 30 years at other leading global vehicle manufacturers and suppliers such as Delphi Corporation, Valeo S.A., and Ford Motor Company. He has been a director of Manitowoc Corporation, a public crane manufacturing company, since March 2016 and Hinduja Automotive Limited, a private automotive group, since November 2014. He has been a director of Ashok Leyland, a public commercial trucks, buses and defense manufacturing company since January 2017.

Skills and Qualifications

As a result of these professional and other experiences, including his experience as a member of other public company boards of directors, Mr. Alapont possesses particular knowledge and experience in a variety of areas, including accounting, corporate governance, distribution, engineering, finance, human resources, manufacturing (domestic and international), marketing, mergers and acquisitions, military and government contracting, purchasing, sales (domestic and international), tax and treasury matters and union and labor relations, all of which strengthens the Board’s collective knowledge, capabilities and experience. Likewise, his experience and leadership in serving in executive capacities at several different companies within the automotive manufacturing business for more than 30 years well qualifies him to serve on our Board.

 
 
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Stephen R. D'Arcy*

Age: 63

Director since: October 2016

Committees: Audit (Chair)
Biographical Information

Mr. D'Arcy has been a Partner of Quantum Group LLC, an investment and consulting firm, since 2010. Previously he was a partner at PricewaterhouseCoopers LLP., a multinational professional services firm, for 34 years, serving most recently as Global Automotive Leader from 2002 to 2010. He served on the Board of Directors of Vanguard Health Systems Inc., a company previously listed on the NYSE, from 2011 to 2013 and currently serves as a director of Premier, Inc., a public healthcare improvement company, since October 2013 and Penske Corporation, a private, diversified, on-highway, transportation services company, since 2011.

Skills and Qualifications

Mr. D'Arcy has broad experience as a member of other public and private company boards of directors, including as chairman of an audit committee. He possesses strong skills and experience in accounting, corporate governance, finance and mergers and acquisitions matters, which well qualifies him to serve on our Board.


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Matthias Gründler*

Age: 52

Director since: February 2017

Committees: Finance

Biographical Information

Mr. Gründler has been Chief Financial Officer and a member of the board of VW T&B, a leading commercial vehicle manufacturer, since 2015. In 2013, Mr. Gründler was appointed a member of the Divisional Board Daimler Trucks & Buses and Chief Financial Officer of Daimler Trucks & Buses, a commercial vehicle manufacturer. In 2012, he became Chief Financial Officer of Daimler Trucks & Buses at Daimler AG. In 2011, Mr. Gründler was appointed Head of Procurement Trucks and Buses, Business Development Powertrain, and Head of Product Platforms, Sales & Quality Powertrain. From 1999 to 2011, he held various senior positions in Africa and Asia, including Chief Financial Officer at DaimlerChrysler in Bangkok, Thailand and Chief Financial Officer of Mercedes-Benz South Africa. In 2008, he became a member of Mitsubishi Fuso’s Management Board in Tokyo, Japan. In 1986, Mr. Gründler joined Daimler Benz AG, with positions in supply chain management, sales planning and controlling.

Skills and Qualifications

Mr. Gründler has broad experience as a chief financial officer in the automotive manufacturing business and possesses strong skills and experience in accounting, corporate governance, distribution (domestic and international), finance, human resources, compensation, employee benefits, manufacturing (domestic and international), mergers and acquisitions, and treasury matters, which strengthens the Board's collective knowledge, capabilities and experience and well qualifies him to serve on our Board.




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Vincent J. Intrieri*

Age: 61

Director since: October 2012

Committees: Finance (Co-Chair) and Nominating & Governance

Biographical Information

In January 2017, Mr. Intrieri founded VDA Capital Management LLC, a private investment firm, where he currently serves as President and Chief Executive Officer. Mr. Intrieri was employed by Icahn related entities from October 1998 to December, 2016 in various investment related capacities. Mr. Intrieri served as Senior Managing Director of Icahn Capital LP, the entity through which Carl C. Icahn manages private investment funds from January 2008 to December 2016. In addition, Mr. Intrieri was a Senior Managing Director of Icahn Onshore LP, the general partner of Icahn Partners LP, and Icahn Offshore LP, the general partner of Icahn Partners Master Fund LP, entities through which Mr. Icahn invests in securities from November 2004 to December 2016. Mr. Intrieri has been a director of: Ferrous Resources Limited, a private iron ore mining company with operations in Brazil, since June 2015; Hertz Global Holdings, Inc., a public company engaged in the car rental business, since September 2014; Transocean Ltd., a public provider of offshore contract drilling services for oil and gas wells, since May 2014 and Conduent Incorporated, a business process services company that was launched on January 3, 2017 following its separation from Xerox, since January 2017. Mr. Intrieri was previously: a director of Chesapeake Energy Corporation, an oil and gas exploration and production company, from June 2012 to September 2016; a director of CVR Refining, LP, an independent downstream energy limited partnership, from September 2012 to September 2014; a director of Forest Laboratories, Inc., a supplier of pharmaceutical products, from June 2013 to June 2014; a director of CVR Energy, Inc., a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries, from May 2012 to May 2014; a director of Federal-Mogul Holdings Corporation, a supplier of automotive powertrain and safety components, from December 2007 to June 2013; a director of Icahn Enterprises L.P. (a diversified holding company engaged in a variety of businesses, including investment, automotive, energy, gaming, railcar, food packaging, metals, real estate and home fashion) from July 2006 to September 2012, and was Senior Vice President of Icahn Enterprises L.P. from October 2011 to September 2012; a director of Dynegy Inc., a company primarily engaged in the production and sale of electric energy, capacity and ancillary services, from March 2011 to September 2012; chairman of the board and a director of PSC Metals Inc., a metal recycling company, from December 2007 to April 2012; a director of Motorola Solutions, Inc., a provider of communication products and services, from January 2011 to March 2012; a director of XO Holdings, a competitive provider of telecom services, from February 2006 to August 2011; a director of National Energy Group, Inc., a company that was engaged in the business of managing the exploration, production and operations of natural gas and oil properties, from December 2006 to June 2011; a director of American Railcar Industries, Inc., a railcar manufacturing company, from August 2005 until March 2011, and was a Senior Vice President, the Treasurer and the Secretary of American Railcar Industries from March 2005 to December 2005; a director of WestPoint Home LLC, a home textiles manufacturer, from November 2005 to March 2011; and chairman of the board and a director of Viskase Companies, Inc., a meat casing company, from April 2003 to March 2011. Ferrous Resources Limited, CVR Refining, CVR Energy, Federal−Mogul, Icahn Enterprises, PSC Metals, XO Holdings, National Energy Group, American Railcar Industries, WestPoint Home and Viskase Companies each are or previously were indirectly controlled by Carl C. Icahn. Mr. Icahn also has or previously had non−controlling interests in Hertz, Transocean, Forest Laboratories, Navistar, Chesapeake Energy, Dynegy and Motorola Solutions. Mr. Intrieri graduated in 1984 with distinction, from The Pennsylvania State University (Erie Campus) with a B.S. in Accounting and was a certified public accountant.

Skills and Qualifications

Mr. Intrieri possesses strong skills and experience in accounting, corporate governance, finance, mergers and acquisitions and treasury matters. Mr. Intrieri’s significant experience as a director of various companies enables him to understand complex business and financial issues, which contributes greatly to the capabilities and composition of our Board and well qualifies him to serve on our Board.


 
 


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Daniel A. Ninivaggi*

Age: 53

Director since: August 2017

Committees: Audit and Compensation

Biographical Information

Mr. Ninivaggi is Chief Executive Officer of Icahn Automotive Group LLC and Managing Director, Icahn Enterprises L.P.’s Automotive Segment. From February 2014 until March 7, 2017, Mr. Ninivaggi served as Co-Chief Executive Officer and Co-Chairman of the Board of Directors of Federal-Mogul Holdings Corporation, and Chief Executive Officer, Federal-Mogul Motorparts, based in Southfield, Michigan. Mr. Ninivaggi joined Federal-Mogul, an $8 billion global supplier of automotive powertrain and safety components, in 2010, initially serving as a member of the Board of Directors. In February 2014, he was appointed Co-Chief Executive Officer and, in May 2015, Co-Chairman of Federal-Mogul. Mr. Ninivaggi previously served as President of Icahn Enterprises L.P. and its general partner, Icahn Enterprises G.P. Inc., from April 2010 to February 2014; as its Chief Executive Officer from August 2010 to February 2014; and as a director from March 2012 until May 2015. From January 2011 until May 2012, Mr. Ninivaggi also served as Interim President and Chief Executive Officer of Tropicana Entertainment Inc., an affiliate of Icahn Enterprises engaged in the business of operating casinos and resorts. Icahn Enterprises is a diversified holding company with over $30 billion in assets engaged in a variety of businesses, including investment management, automotive, energy, gaming, railcar, food packaging, metals, real estate and home fashion. Icahn Enterprises is listed on NASDAQ and majority-owned by investor, Carl C. Icahn. From 2003 until July 2009, Mr. Ninivaggi served in a variety of executive positions at Lear Corporation, an $18 billion global supplier of automotive seating and electrical power management systems and components, including as General Counsel from 2003 through 2007, as Senior Vice President from 2004 until 2006, and most recently as Executive Vice President and Chief Administrative Officer from 2006 to 2009. Prior to joining Lear Corporation, from 1998 to 2003, Mr. Ninivaggi was a partner with the law firm of Winston & Strawn LLP, specializing in corporate finance, mergers and acquisitions, and corporate governance. Mr. Ninivaggi also served as Counsel to Winston & Strawn LLP from July 2009 to March 2010. Mr. Ninivaggi has been a director of numerous public and private companies, including CVR Energy, Inc., an independent petroleum refiner and marketer of high value transportation fuels, from May 2012 to February 2014; CVR GP, LLC, the general partner of CVR Partners LP, a nitrogen fertilizer company, from May 2012 to February 2014; Viskase Companies, Inc., a food packaging company, from June 2011 to February 2014; XO Holdings, a competitive provider of telecom services, from August 2010 to February 2014; Motorola Mobility Holdings, Inc., a provider of mobile communication devices, video and data delivery solutions, from December 2010 to May 2012; Tropicana Entertainment Inc. from January 2011 to December 2015; CIT Group Inc., a bank holding company, from December 2009 to May 2011; and Hertz Holdings Corporation, a rental car, equipment leasing and travel company, from September 2014 to the present. Mr. Ninivaggi received a bachelor of arts degree in history from Columbia University in 1986, a master's degree in business administration from the University of Chicago in 1988, and a law degree from Stanford University Law School in 1991.

Skills and Qualifications

Mr. Ninivaggi possesses vast experience as a CEO and executive officer of multiple companies involved in automotive and commercial vehicle component manufacturing (domestic and international), logistics and marketing. He has a legal background in mergers and acquisitions, corporate finance and corporate governance. In addition, he has significant experience in purchasing and sales (domestic and international). Mr. Ninivaggi's knowledge and skill set well qualify him to serve on our Board.



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Mark H. Rachesky, M.D.*

Age: 58

Director since: October 2012

Committees: Finance (Co-Chair) and Nominating & Governance
Biographical Information

Dr. Rachesky is the founder and President of MHR Fund Management LLC, an investing firm that manages approximately $5 billion of assets and utilizes a private equity approach to investing in middle market companies with an emphasis on special situation and distressed investments. Dr. Rachesky is the chairman of the board of directors of Loral Space & Communications Inc., a public satellite communications company, Lions Gate Entertainment Corp., a public entertainment company and Telesat Canada, a private satellite company. He has served as a director of Loral Space & Communications Inc. since 2005, Lions Gate Entertainment Corp. since 2009 and Telesat Canada since 2007. In addition, Dr. Rachesky has served on the Board of Directors of Titan International, Inc., a public wheel, tire and undercarriage systems and components company, since 2014, and Emisphere Technologies, Inc., a public biopharmaceutical company, since 2005. He also served as a member and chairman of the board of Leap Wireless International, Inc., a public digital wireless company, from 2004 until its acquisition by AT&T in March 2014. Dr. Rachesky holds a B.S. in molecular aspects of cancer from the University of Pennsylvania, an M.D. from the Stanford University School of Medicine and an M.B.A. from the Stanford University School of Business.

Skills and Qualifications

Dr. Rachesky brings significant corporate finance and business expertise to our Board due to his background as an investor and fund manager. Dr. Rachesky also has significant expertise and perspective as a member of the boards of directors of private and public companies engaged in a wide range of businesses. Dr. Rachesky’s broad and insightful perspectives relating to economic, financial and business conditions affecting the Company and its strategic direction well qualify him to serve on our Board.
 
 
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Andreas H. Renschler*

Age: 59

Director since: February 2017

Committees: Compensation and Nominating & Governance

Biographical Information

Mr. Renschler has been Chief Executive Officer of VW T&B, a leading commercial vehicle manufacturer, since February 2015. He has also served as a member of the Board of Management of Volkswagen AG since February 2015. He served as a member of the Daimler AG Board of Management in charge of Manufacturing and Procurement at Mercedes-Benz Cars & Mercedes-Benz Vans from April 2013 to January 2014. Mr. Renschler began his career at Daimler-Benz AG in 1988. Following various posts at Daimler-Benz AG, he led the M Class unit, serving as President and CEO of Mercedes-Benz US. Later he served as Senior Vice President, Executive Management Development, at DaimlerChrysler AG and President of smart GmbH in the same year. He was assigned to Mitsubishi Motors in Japan in 2004 and was subsequently named a member of the Daimler AG Board of Management with responsibility for the Daimler Trucks Division.

Skills and Qualifications

Mr. Renschler has broad experience as a CEO, executive officer and board member of other automotive manufacturing companies. He possesses strong skills and experience in accounting, corporate governance, distribution (domestic and international), finance, human resources, compensation, employee benefits, manufacturing (domestic and international), marketing, mergers and acquisitions, purchasing, sales (domestic and international) and union/labor relations matters, which well qualifies him to serve on our Board.







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Michael F. Sirignano*

Age: 36

Director since: March 2014

Committees: Audit and Compensation (Chair)
Biographical Information

Mr. Sirignano has served as a Principal at MHR Fund Management LLC, an investing firm that manages approximately $5 billion of assets and utilizes a private equity approach to investing in middle market companies with an emphasis on special situation and distressed investments, since 2012 where he is responsible for sourcing and managing investments and portfolio companies. From 2006 to 2011, Mr. Sirignano was at Owl Creek Asset Management, L.P., a value-oriented investment firm. Mr. Sirignano held various titles, most recently Senior Analyst. Mr. Sirignano was focused primarily on equities and distressed debt in the industrial, housing, metals and mining, telecommunication and technology sectors. Prior to that, Mr. Sirignano was a member of the Rothschild & Co. restructuring group where he worked on restructurings, refinancing transactions and sale processes for distressed companies. Mr. Sirignano holds a B.A. in Economics, with honors, from Williams College.

Skills and Qualifications

Mr. Sirignano brings significant corporate finance and business expertise to our Board due to his experience as an analyst across a number of industries and his focus on equity and debt securities.
 
 
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Dennis A. Suskind*

Age: 75

Director since: October 2016

Committees: Compensation
Biographical Information

Mr. Suskind is a retired general partner of Goldman Sachs & Company, a multinational finance company that engages in global investment banking. Mr. Suskind served as Vice Chairman of NYMEX, Vice Chairman of COMEX, a member of the board of the Futures Industry Association, a member of the Board of International Precious Metals Institute, and a member of the boards of the Gold and Silver Institutes in Washington, D.C. He has been serving as a director of CME Group, Inc., since August 2008 where he Chairs the Risk Committee and also serves on the Audit Committee. Mr Suskind has also served on the Board of Bridge Bancorp Inc. since July 2002 where he is Vice Chairman and Chairs the Governance Committee


Skills and Qualifications

Mr. Suskind has broad experience as a member of other public company boards of directors, including as chairman of a risk committee and a governance committee. He possesses strong skills and experience in accounting, corporate governance, finance, human resources, marketing and mergers and acquisitions matters, which well qualifies him to serve on our Board. 

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Jeffrey A. Dokho* **

Age: 43

Director since: April 2017

Committees: Audit and Finance
Additional Director Who Is Not Elected by the Stockholders
                                                                                                                 Biographical Information
                                                                                                                                                                                                                   
Mr. Dokho is currently the Assistant Director of the United Automotive Workers' (UAW) Research Department, where he directs a group of financial analysts and oversees the union’s financial research and analysis. Mr. Dokho has worked on many high-profile contract negotiations between the UAW and large multinational companies and plays a leading role in the development and implementation of profit sharing plans, including those currently in place for UAW members at General Motors Company, Ford Motor Company and Fiat Chrysler Automobiles N.V. Before joining the UAW in 2006, Mr. Dokho was a Senior Analyst at Lear Corporation, a Tier 1 supplier to the automotive industry. While at Lear, Mr. Dokho focused largely in mergers & acquisitions and joint ventures. From 2000 to 2002, Mr. Dokho provided both audit and business risk consulting to clients in a wide range of industries, including defense and manufacturing while at Ernst & Young, a global public accounting firm. Prior to Ernst & Young, Mr. Dokho conducted regulatory compliance audits at the National Futures Association,
the self-regulatory organization for the U.S. derivatives industry. Mr. Dokho received a B.A. in Accounting from Michigan State University and is a licensed CPA in the state of Michigan.

Skills and Qualifications

Mr. Dokho possesses a broad range of experience in accounting, financial analysis, business risk consulting, mergers and acquisitions and profit-sharing plan design and implementation, including in the automotive sector.

*
Indicates each director deemed independent in accordance with our Corporate Governance Guidelines and Section 303A of the NYSE Listed Company Manual Corporate Governance Standards.

**
In July 1993, we restructured our postretirement health care and life insurance benefits pursuant to a settlement agreement, which required, among other things, the addition of a seat on our Board. The director’s seat is filled by a person appointed by the UAW. This director is not elected by stockholders at the Annual Meeting.

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CORPORATE GOVERNANCE

Corporate Governance Guidelines

Our Board has adopted Corporate Governance Guidelines, which are available on the Investor Relations section of our website at http://www.navistar.com/navistar/investors/corporategovernance/documents. These guidelines reflect the Board’s commitment to oversee the effectiveness of policy and decision-making both at the Board and management level, with a view to enhancing stockholder value.

Related Party Transactions and Approval Policy

Our Policy and Procedures with Respect to Related Person Transactions governs the review, approval and ratification of transactions involving the Company and related persons where the amount involved exceeds $120,000. Related persons include our executive officers, directors, director nominees, 5% stockholders and immediate family members of such persons, and entities in which one of these persons has a direct or indirect material interest. Under this policy, prior to entering into any related-person transaction, the General Counsel or Corporate Secretary of Navistar is to be notified of the facts and circumstances of the proposed transaction, including: (i) the related person’s relationship to the Company and interest in the transaction; (ii) the material facts of the proposed transaction, including the proposed aggregate value of such transaction or, in the case of indebtedness, the amount of principal that would be involved; (iii) the benefits to the Company of the proposed transaction; (iv) if applicable, the availability of other sources of comparable products or services; and (v) an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally.

The General Counsel or Corporate Secretary then assesses whether the proposed transaction is a related-person transaction for purposes of the policy and SEC rules. If the General Counsel or Corporate Secretary determines that the proposed transaction is a related-person transaction for such purposes, the proposed transaction is then submitted to the Audit Committee of the Board for its consideration. The Audit Committee considers all of the relevant facts and circumstances available, including (if applicable) but not limited to: (i) the benefits to the Company; (ii) the impact on a director’s independence, in the event a person involved with, or connected to, the proposed transaction is a director; (iii) the availability of other sources for comparable products or services; (iv) the terms of the transaction; and (v) the terms available to unrelated third parties or to employees generally. No member of the Audit Committee shall participate in any review, consideration or approval of any related-person transaction with respect to which such member or any of his or her immediate family members is the related person. The Audit Committee will then make a recommendation to the Board. The Board approves only those proposed transactions that are in, or are not inconsistent with, the best interests of the Company and its stockholders, as determined by the Board in good faith. In the event that the Company becomes aware of a related-person transaction that has not been previously approved or ratified by the Board or the Audit Committee, a similar process will be undertaken by the Board and the Audit Committee in order to determine if the existing transaction should continue or be terminated and/or if any disciplinary action is appropriate. The General Counsel or Corporate Secretary may also develop, implement and maintain from time to time certain administrative procedures to ensure the effectiveness of this policy.

A copy of our Policy and Procedures with Respect to Related Person Transactions is available on the Investor Relations section of our website at http://www.navistar.com/navistar/investors/corporategovernance/documents.

Since the beginning of 2017, the following related-person transactions occurred:

Carl Icahn. As a 17.0% stockholder of the Company as of December 18, 2017, Carl Icahn is a related person. Mr. Icahn owns 100% of Federal-Mogul Corporation (‘‘Federal-Mogul’’). Navistar purchased goods and services from Federal-Mogul throughout 2017 that amounted to approximately $12,309,992. Navistar received standard terms and conditions and received no unique payment terms or special concessions. Because Mr. Icahn owns Federal-Mogul, Mr. Icahn has an indirect material interest in this transaction. The Audit Committee and the Board considered the factors described above and in December 2017 the Board, upon the recommendation of the Audit Committee, ratified the ongoing transactions with Federal-Mogul on the basis that the Navistar/Icahn/Federal-Mogul relationship is in the best interests of the Company.

VW T&B, Andreas H. Renschler and Matthias Gründler. The Company and its subsidiaries have historically had a series of commercial relationships with VW T&B and its subsidiaries, and the parties entered into additional

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transactions during 2017. The total aggregate value of these transactions amounted to approximately $122,133,881 during 2017. As of December 18, 2017, VW T&B is a 16.9% stockholder of the Company and is therefore a related person. Messrs. Renschler and Gründler, who are members of our Board, are also the Chief Executive Officer and Chief Financial Officer, respectively, of VW T&B. By virtue of their positions as officers of VW T&B, Messrs. Renschler and Grűndler are deemed to have an indirect material interest in the Company's transactions with VW T&B. The related person transactions existing between the Company and VW T&B prior to 2017 and continuing during 2017 ("the Pre-Existing Transactions") are as follows:

1. Navistar pays MAN Truck & Bus AG ("MAN"), an indirect subsidiary of VW T&B, a royalty for the use of certain base technology associated with our current A26 diesel engine and our discontinued 13 liter diesel engine. The royalty payment for 2017 was 1,075,400 (US$1,274,327);

2.MWM International Motores, S.A. ("MWM"), one of our Brazil operating subsidiaries, purchases various parts from MAN. In 2017, the amount paid for such parts was R$117,419 (US$36,128);

3.MWM contract manufactures the D08 engine (6.9 and 4.6 liter) for MAN Latin America Indústria e Comérci de Veículos Ltda. ("MAN Latin America"), an indirect subsidiary of VW T&B, sells loose engines to MAN Latin America and sells various spare parts to MAN Latin America and Volkswagen AG. The net revenue associated with this relationship during 2017 was approximately R$385,638,000 (US$118,654,742).

During 2017 and the first two months of 2018, the Company and VW T&B entered into, or are currently proposing to enter into, the following related person transactions (the "New Transactions"):

1.Global Truck & Bus Procurement LLC (the "Procurement JV"), a joint venture entity, was formed and commenced operations. Owned 51% by Volkswagen Truck & Bus LLC ("VW T&B LLC"), a subsidiary of VW T&B, and 49% by International Truck and Engine Investments Corporation ("ITEIC"), an indirect subsidiary of the Company, the purpose of the Procurement JV is to make sourcing recommendations to VW T&B and Navistar. VW T&B LLC and ITEIC made initial capital contributions of $408,000 and $392,000, respectively, and the Procurement JV's annual operating budget is funded on a cost plus basis. In 2017 , the parties each made operating cost payments to the Procurement JV in the amount of $1,084,333.

2.Certain of our subsidiaries have entered into agreements, or are currently proposing to enter into agreements, with certain indirect subsidiaries of VW T&B with respect to the supply to us of D38 diesel engines with aftertreatment, a prototype Battery Electric Vehicle system and certain consulting engineering services in connection with our development and building of a prototype electric school bus, and transmissions for use with A26 engines. No payments were made by us under these agreements in 2017, but we have agreed to pay up to an aggregate of approximately $58 million pursuant to these existing or currently proposed agreements for certain costs associated with the development of these products.

Each of the Pre-Existing Transactions and the New Transactions between the Company and VW T&B was the result of arms-length negotiations with no unique concessions on pricing or other terms and conditions, and certain of the transactions are of long-term strategic importance to the Company. The Audit Committee and the Board considered these factors and in December 2017 the Board, upon the recommendation of the Audit Committee and with Messrs. Renschler and Gründler not participating, approved and ratified the Pre-Existing Transactions and the New Transactions with VW T&B, and in which Messrs. Renschler and Gründler have an indirect material interest, on the basis that the Navistar/VW T&B relationship is in the best interests of the Company.

Director Independence Determinations

We believe that a substantial majority of the members of our Board should be independent non-employee directors. Our Board has affirmatively determined that ten of our eleven directors who are expected to continue following the Annual Meeting, namely Messrs. Alapont, D'Arcy, Dokho, Gründler, Intrieri, Ninivaggi, Rachesky, Renschler, Sirignano and Suskind, qualify as ‘‘independent directors’’ in accordance with the NYSE’s independence requirements and our own internal guidelines for determining director independence. Each of these directors, including the ten nominees, has also been determined to be financially literate. All of the members of our Audit Committee, Compensation Committee, Finance Committee and the Nominating and Governance Committee are independent and financially literate.


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Both the NYSE requirements and our own guidelines include a series of objective tests for determining the independence of a director, such as that the director or his family members is not an employee of Navistar and has not engaged in various types of commercial or charitable relationships with Navistar. A copy of our existing guidelines for determining director independence, as included in our Corporate Governance Guidelines, is available on the Investor Relations section of our website at http://www.navistar.com/navistar/investors/corporategovernance/documents. Our Board has made a determination as to each independent director that no relationship exists which, in the opinion of the Board, would interfere with the exercise of the director’s independent judgment in carrying out his responsibilities as a director. In making these determinations, our Board reviewed and discussed information provided by the directors and Navistar with regard to each director’s business and personal activities as they may relate to Navistar, its management and/or its independent registered public accounting firm.

Board Leadership Structure

The Company’s Corporate Governance Guidelines require the Board to select the Chairman of the Board and the CEO and to determine from time to time whether the positions are combined and filled by one person or separated and filled by two persons. Prior to 2013, our CEO served as Chairman and we had an independent Lead Director. Beginning in April 2013, with the appointment of Mr. Clarke as our CEO, our Board decided to select one of our independent directors to serve as Chairman, and as such, elected James H. Keyes to this position. Subsequently, on February 14, 2017 upon Mr. Keyes' retirement at the 2017 Annual Meeting, the Board determined that it was an appropriate time to appoint Mr. Clarke as Chairman. Mr. Clarke would continue to serve as the CEO as well. Accordingly, also on February 14, 2017, General McChrystal was selected as the independent Lead Director. He also serves as the Chairman of the Board's Nominating and Governance Committee. General McChrystal, who has served on our Board for seven years, was previously a senior military leader and has served on the boards of directors of other public companies. The Board believes that this leadership structure is in the best interests of the Company and its stockholders. However, General McChrystal has elected to not stand for re-election at the Annual Meeting. Therefore, the Nominating and Governance Committee and the full Board intend to identify, consider and discuss potential candidates to serve as independent Lead Director and to chair the Nominating and Governance Committee upon General McChrystal's retirement. Also, upon the retirement of Mr. Keyes in February of 2017, the Board appointed Mr. D'Arcy to chair the Board's Audit Committee.

Risk Oversight

Our Board has overall responsibility for the oversight of risk management at our Company. Day-to-day risk management is the responsibility of management, which has implemented an Enterprise Risk Management process to identify, assess, manage and monitor risks that our Company faces. Enterprise Risk Management operates within our Internal Audit and Corporate Compliance department and coordinates its efforts with that department. Our Board, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our Company, and the steps we take to monitor and control such exposures.

While our Board has general oversight responsibility for risk at our Company, the Board has delegated some of its risk oversight duties to the various Board committees. In particular, the Audit Committee is responsible for generally reviewing and discussing the Company’s policies and guidelines with respect to risk assessment and risk management. It also focuses on the management of financial risk exposure and oversees risks related to the Company's financial statement compliance and control environment. The Nominating and Governance Committee oversees risks related to corporate governance, including risk related to the political environment. The Compensation Committee assists our Board in overseeing the management of risks arising from our compensation policies and programs and programs related to assessment, selection, succession planning, training and development of executives of the Company. Finally, the Finance Committee is responsible for overseeing policies with respect to financial risk assessment and financial risk management including, without limitation, risks relating to liquidity/access to capital and macroeconomic trends/environment risks. Each of the Board committees periodically reviews these risks and then discusses the process and results with the full Board.

Nominating Directors

You may recommend any person as a candidate for director for election at our 2019 annual meeting of stockholders by writing to our Corporate Secretary at 2701 Navistar Drive, Lisle, Illinois 60532 and complying with the procedures set forth in the Company’s By-Laws. Your letter must be received by Navistar’s Corporate Secretary no earlier than September 16, 2018, and no later than October 16, 2018, and must include all of the information required by the Company’s By-Laws including, but not limited to, the proposed nominee’s biographical information and principal occupation; the number of shares of capital

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stock of the Company which are owned by the proposed nominee, appropriate information about the proposed nominee that would be required to be included in a proxy statement under the rules of the SEC, the number of shares held by you, information about the relationship between the proposed nominee and you, any pending or threatened litigation in which the proposed nominee is a party and a representation that you intend to appear in person or by proxy at the meeting to nominate the proposed nominee. Your letter must be accompanied by the written consent of the proposed nominee to being named as a nominee and to serve as a director if elected. You may only recommend a candidate for director if you hold shares of Common Stock on the date you give the notice described above, on the record date for the annual meeting of stockholders at which you propose such nominee be elected and on the date of the annual meeting of stockholders at which you propose such nominee be elected.

The Nominating and Governance Committee identifies nominees for directors from various sources, including suggestions from Board members and management, and in the past has used third party consultants to assist in identifying and evaluating potential nominees. The Nominating and Governance Committee will consider persons recommended by the stockholders in the same manner as a committee-recommended nominee. The Nominating and Governance Committee has specified the following minimum qualifications that it believes must be met by a nominee for a position on the Board:

knowledge and contacts in the Company’s industry and other relevant industries;

positive reputation in the business community;

the highest personal and professional ethics and integrity and values that are compatible with the Company’s values;

experiences and achievements that provide the nominee with the ability to exercise good business judgment;

ability to make significant contributions to the Company’s success;

ability to work successfully with other directors;

willingness to devote the necessary time to the work of the Board and its committees which includes being available for the entire time of meetings;

ability to assist and evaluate the Company’s management;

involvement only in other activities or interests that do not create a conflict with his or her responsibilities to the Company and its stockholders;

understanding of and ability to meet his or her responsibilities to the Company’s stockholders, including the duty of care (making informed decisions) and the duty of loyalty (maintaining confidentiality and avoiding conflicts of interest); and

potential to serve on the Board for at least five years.

The Nominating and Governance Committee believes that consideration should also be given to having a diversity of backgrounds, skills, and perspectives among the directors. In addition, in selecting directors, the Nominating and Governance Committee will consider the need to strengthen the Board by providing a diversity of persons in terms of their expertise, age, gender, race, ethnicity, education, and other attributes which contribute to the Board’s diversity. Our Board diversity policy is contained within our Corporate Governance Guidelines.

The satisfaction of the above criteria is implemented and assessed through ongoing consideration of directors and nominees by the Nominating and Governance Committee and the Board, as well as through the Board’s self-evaluation process. Based upon these activities and its review of the current composition of the Board, the Nominating and Governance Committee and the Board believe that these criteria have been satisfied.

As outlined in our Corporate Governance Guidelines, any director who receives more ‘‘withheld’’ votes than ‘‘for’’ votes in an uncontested election is required to tender his resignation to the Nominating and Governance Committee for consideration and recommendation to the Board. The Board will publicly disclose its decision.



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Board Committees and Meetings

The Board documented its governance practices, policies and procedures in our Corporate Governance Guidelines. These governance standards embody many of our long-standing practices, policies and procedures, which are the foundation of our commitment to best practices. In October 2017, the Board conducted an evaluation of the committees and the Board.

The Board has four standing committees: an Audit Committee, a Compensation Committee, a Finance Committee and a Nominating and Governance Committee. Each of the committees is governed by a written charter, copies of which are available on the Investor Relations section of our website at http://www.navistar.com/navistar/investors/ corporategovernance/documents.

In 2017, the full Board met 10 times. In addition, the Board’s independent directors meet regularly in executive session without management present to, among other things, evaluate the performance of the CEO and discuss corporate strategies. The Chairmen of our Audit, Compensation, Nominating and Governance and Finance Committees of the Board each preside as the chair at meetings or executive sessions of independent directors at which the principal items to be considered are within the scope of the authority of his committee.

During 2017 each of the directors attended 75% or more of all the meetings of the Board and the committees on which he serves. The average attendance of all directors at meetings of the Board and the committees on which they served in 2017 was 95%. We encourage all Board members to attend all meetings, including the Annual Meeting. All of our directors who were directors at the time of our 2017 annual meeting of stockholders attended that meeting.

Below is a table indicating committee membership and a description of each committee of the Board.
Committee Membership
(as of December 20, 2017)
 
Audit
Compensation
Finance
Nominating & Governance
Troy A. Clarke
 
 
 
 
José María Alapont
 
 
ü
 
Stephen R. D'Arcy
ü*
 
 
 
Jeffrey A. Dokho
ü
 
ü
 
Matthias Gründler
 
 
ü
 
Vincent J. Intrieri
 
 
ü*
ü
Stanley A. McChrystal¹
 
ü
 
ü*
Daniel A. Ninivaggi
ü
ü
 
 
Mark H. Rachesky
 
 
ü*
ü
Andreas H. Renschler
 
ü
 
ü
Michael F. Sirignano
ü
ü*
 
 
Dennis A. Suskind
 
ü
 
 

*
Indicates the chair of the committee. Mr. Intrieri and Dr. Rachesky serve as co-chairs of the Finance Committee.
(1) 
General McChrystal will not stand for re-election at the Annual Meeting.

Audit Committee — The Audit Committee assists the Board in fulfilling its responsibility for oversight of the Company’s financial reporting process, the Company’s legal and regulatory compliance, the independence, qualifications and performance of the Company’s independent registered public accounting firm and the performance of the Company’s internal audit function and corporate compliance function. The Audit Committee reviews the audit plans of the Company’s independent registered public accounting firm and internal audit staff, reviews the audit of the Company’s accounts with the independent registered public accounting firm and the internal auditors, considers the adequacy of the audit scope and reviews and discusses with the auditors and management the auditors’ reports. The Audit Committee also reviews environmental reports and compliance activities for the Company’s facilities and the expense accounts of executive officers and directors. The Audit Committee reviews and decides on conflicts of interest and waivers of compliance with the Company’s Code of Conduct that may affect executive officers and directors and discusses policies and guidelines with respect to risk assessment and risk management. The Audit Committee reviews and recommends to the Board that the Board either approve, ratify, reject or take other action with respect to related person transactions and it prepares and approves the Audit Committee Report

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for inclusion in the Company’s proxy statement. Additional information on the roles and responsibilities of the Audit Committee is provided in the Audit Committee Report section of this proxy statement. All members of the Audit Committee who are expected to continue following the Annual Meeting are independent and the Board designated three of the four Audit Committee members, namely, Mr. Stephen R. D'Arcy, Mr. Jeffrey A. Dokho and Mr. Michael F. Sirignano, each as an ‘‘audit committee financial expert,’’ as defined by applicable law, rules and regulations. In 2017, the Audit Committee held 11 meetings. The Audit Committee conducted an evaluation of its performance in October 2017.

Compensation Committee — The Compensation Committee makes recommendations to the Board with respect to the appointment and responsibilities of all executive officers, reviews and approves the compensation of executive officers who are not also directors of the Company, reviews and approves the Company’s compensation strategy and any associated risks, recommends to the independent members of the Board the compensation of executive officers who also are directors of the Company, administers the Company’s equity and incentive compensation plans, engages the compensation consultants that advise the Compensation Committee and approves the consultants’ fees and terms of engagement, furnishes an annual Compensation Committee Report on executive compensation and reviews and discusses the Compensation Discussion & Analysis (‘‘CD&A’’) with management and recommends to the Board the inclusion of the CD&A in the Company’s proxy statement. Upon management’s recommendation, the Compensation Committee reviews basic changes to non-represented employees’ base compensation and incentive and benefit plans. The Compensation Committee also oversees the development and implementation of succession plans for senior executives (with the exception of our CEO). Additional information on the roles and responsibilities of the Compensation Committee is provided in the CD&A section of this proxy statement. The Compensation Committee held 7 meetings in 2017. The Compensation Committee conducted an evaluation of its performance in October 2017.

Finance Committee — The Finance Committee reviews the Company’s financing requirements, procedures by which projections and estimates of cash flow are developed, dividend policy and investment spending and capital expenditure budgets. The Finance Committee also oversees the Company’s policies with respect to financial risk assessment and financial risk management, including liquidity and access to capital and macroeconomic trends/environment risks. The Finance Committee held 10 meetings in 2017. The Finance Committee conducted an evaluation of its performance in October 2017.

Nominating and Governance Committee — The Nominating and Governance Committee is responsible for the organizational structure of the Board and its committees, recommending to the Board the directors to serve on the standing Board committees, reviewing and making recommendations to the Board concerning nominees for election as directors, CEO succession planning, reviewing and making recommendations to the Board concerning corporate governance practices and policies and changes to our Restated Certificate of Incorporation and our By-Laws and overseeing risks related to corporate governance and the political environment. In addition, the Nominating and Governance Committee leads the Board in its self-evaluation process and monitors compliance with the Corporate Governance Guidelines. The Nominating and Governance Committee held 7 meetings in 2017. The Nominating and Governance Committee conducted an evaluation of its performance in October 2017.

Communication with the Board

Interested parties may communicate with any of our directors, our Board as a group, our non-employee directors as a group or any committees of the Board by sending an e-mail to presiding.director@navistar.com or by writing to the Presiding Director, c/o the Corporate Secretary, at 2701 Navistar Drive, Lisle, Illinois 60532. The Board has given the Corporate Secretary the discretion to distribute communications to the director or directors, after ascertaining whether the communications are appropriate to the duties and responsibilities of the Board. Communications that relate to ordinary business matters that are not within the scope of the Board’s duties and responsibilities will be forwarded to the appropriate employee within the Company. Solicitations, junk email and obviously frivolous or inappropriate communications will not be forwarded. You will receive a written acknowledgment from the Corporate Secretary’s Office upon receipt of your communication.

Code of Conduct

Our Code of Conduct embodies a code of ethics (the ‘‘Code’’) applicable to all of our directors, officers and employees. The Code establishes the principles, policies, standards and conduct for professional behavior in the workplace. Every director, officer and employee is required to read and follow the Code. A copy of the Code is available on the Investor Relations section of our website at http://www.navistar.com/navistar/investors/corporategovernance/documents. Any waiver of the Code for executive officers or directors of the Company requires the approval of the Audit Committee and must be promptly

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disclosed to the Company’s stockholders. We intend to disclose on the Investor Relations section of our website (http://www.navistar.com/navistar/investors/corporategovernance/documents) any amendments to, or waivers from, the Code that is required to be publicly disclosed under the rules of the SEC.

The Audit Committee has established procedures for employees, vendors and other interested parties to communicate concerns with respect to our accounting, internal controls or financial reporting to the Audit Committee, which has responsibility for these matters. Concerns may be reported as follows:
Via the Navistar Business Abuse and
Compliance Hotline
Write to the Audit Committee
E-mail the Audit Committee
1-877-734-2548
or via the Internet at
https://iwf.tnwgrc.com/navistar/
Audit Committee
c/o Corporate Secretary
Navistar International Corporation
2701 Navistar Drive
Lisle, Illinois 60532
Audit.committee@navistar.com


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PERSONS OWNING MORE THAN FIVE PERCENT OF COMPANY COMMON STOCK

This table indicates, as of December 18, 2017, all persons we know to be beneficial owners of more than 5% of our Common Stock. This information is based, in part, on a review of Schedule 13D, Schedule 13G and Section 16 reports filed with the SEC by persons and entities listed in the table below, as well as on other available information.
Name and Address
Total Amount and
Nature of Beneficial
Ownership
Percent of  
Class(A)
Carl C. Icahn  
c/o Icahn Associates Corp., 
767 Fifth Avenue, Suite 4700  
New York, NY 10153
16,729,960(B)
17.0%
 Volkswagen Truck & Bus GmbH
 BraWo Park
 Willy-Brandt-Platz 19
 38102 Braunschweig
 Germany
16,629,667(C)
16.9%
Mark H. Rachesky, M.D.
40 West 57
th Street, 24th floor  
New York, NY 10019
16,279,634(D)
16.5%
Franklin Resources, Inc.  
One Franklin Parkway  
San Mateo, CA 94403-1906
11,763,374(E)
11.9%
GAMCO Investors, Inc. et. al.  
One Corporate Center  
Rye, NY 10580-1435
9,529,693(F)
9.7%

(A)
Applicable percentage ownership is based upon 98,449,166 shares of Common Stock outstanding as of December 18, 2017.

(B)
As reported in Amendment No. 22, to the Schedule 13D, as filed with the SEC on March 17, 2017, by High River Limited Partnership (‘‘High River’’), Hopper Investments LLC (‘‘Hopper’’), Barberry Corp. (‘‘Barberry’’), Icahn Partners Master Fund LP (‘‘Icahn Master’’), Icahn Offshore LP (‘‘Icahn Offshore’’), Icahn Partners LP (‘‘Icahn Partners’’), Icahn Onshore LP (‘‘Icahn Onshore’’), Icahn Capital LP (‘‘Icahn Capital’’), IPH GP LLC (‘‘IPH’’), Icahn Enterprises Holdings L.P. (‘‘Icahn Enterprises Holdings’’), Icahn Enterprises G.P. Inc. (‘‘Icahn Enterprises GP’’), Beckton Corp. (‘‘Beckton’’), and Carl C. Icahn (collectively, the ‘‘Icahn Reporting Persons’’). The Icahn Reporting Persons reported the following: High River has sole voting power and sole dispositive power with regard to 3,345,991 shares of Common Stock and each of Hopper, Barberry and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock; Icahn Master has sole voting power and sole dispositive power with regard to 5,446,990 shares of Common Stock and each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock; and Icahn Partners has sole voting power and sole dispositive power with regard to 7,936,979 shares of Common Stock and each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock. Barberry is the sole member of Hopper, which is the general partner of High River. Icahn Offshore is the general partner of Icahn Master. Icahn Onshore is the general partner of Icahn Partners. Icahn Capital is the general partner of each of Icahn Offshore and Icahn Onshore. Icahn Enterprises Holdings is the sole member of IPH, which is the general partner of Icahn Capital. Beckton is the sole stockholder of Icahn Enterprises GP, which is the general partner of Icahn Enterprises Holdings. Mr. Icahn is the sole stockholder of each of Barberry and Beckton. As such, Mr. Icahn is in a position indirectly to determine the investment and voting decisions made by each of the Icahn Reporting Persons. In addition, Mr. Icahn is the indirect holder of approximately 92.6% of the outstanding depositary units representing limited partnership interests in Icahn Enterprises L.P. (‘‘Icahn Enterprises’’). Icahn Enterprises GP is the general partner of Icahn Enterprises, which is the sole limited partner of Icahn Enterprises Holdings. See the Schedule 13D/A filed by the Icahn Reporting Persons for certain disclaimers of beneficial ownership.

(C)
As reported in a Schedule 13D filed with the SEC on March 10, 2017 by Volkswagen Truck and Bus GmbH ("VW T&B") and Volkswagen AG ("Volkswagen" and together with VW T&B, the "Reporting Persons") and as further supplemented by reports filed on Form 4 by VW T&B pursuant to Section 16(a) of the Securities Exchange Act of 1934. The Reporting Persons are each the beneficial owners of 16,629,667 shares of Common Stock. VW T&B has sole power to vote and dispose of 16,629,667 shares of Common Stock and Volkswagen has shared power to vote and to dispose of 16,629,667 shares of Common Stock. VW T&B is a wholly-owned subsidiary of Volkswagen.

(D)
As reported in a Schedule 13D/A filed with the SEC on March 3, 2017 by MHR Institutional Partners III LP, MHR Institutional Advisors III LLC, MHR Fund Management LLC, MHR Holdings LLC and Mark H. Rachesky, M.D. (collectively, the ‘‘MHR Reporting Persons’’), and as further supplemented by reports filed on Form 4 by Dr. Rachesky, pursuant to Section 16(a) of the Securities Exchange Act of 1934. The MHR Reporting Persons reported the following: MHR Institutional Partners III LP and MHR Institutional Advisors III LLC each has sole voting and dispositive power over 14,980,528 shares of Common Stock. MHR Fund Management LLC and MHR Holdings LLC each has sole voting and dispositive power over 16,225,000 shares of Common Stock. Dr. Rachesky has sole voting and dispositive power over 16,274,634 shares of Common Stock, which includes (i) 16,225,000 shares of Common Stock beneficially owned by Dr. Rachesky as the managing member of MHR Advisors LLC, MHR Institutional Advisors III LLC and MHR Holdings LLC; (ii) 22,277 shares of Common Stock held directly by Dr. Rachesky; (iii) 2,357 shares of Common Stock that may be obtained

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upon settlement of phantom stock units granted to Dr. Rachesky in his capacity as a director; and (iv) options to purchase 30,000 shares of Common Stock granted to Dr. Rachesky in his capacity as a director.

(E)
As reported in Schedule 13G/A filed with the SEC on December 11, 2017 by Franklin Resources, Inc. (‘‘FRI’’), Charles B. Johnson, Rupert H. Johnson, Jr. and Templeton Global Advisors Limited. These securities are beneficially owned by one or more open- or closed-end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of FRI. Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding common stock of FRI and are the principal stockholders of FRI. See the Schedule 13G/A for certain disclaimers of beneficial ownership.

(F)
As reported in a Schedule 13D/A filed with the SEC on March 7, 2017, by Gabelli Funds, LLC, GAMCO Asset Management, Inc., Teton Advisors, Inc., Gabelli & Company Investment Advisers, Inc., Gabelli Foundation, Inc., MJG Associates, Inc., MJG-IV Limited Partnership, GGCP, Inc., GAMCO Investors, Inc., Associated Capital Group, Inc., and Mario J. Gabelli (collectively, the ‘‘Gabelli Reporting Persons’’). The Gabelli Reporting Persons reported the following: Gabelli Funds LLC has sole voting and dispositive power with regard to 2,852,445 shares of Common Stock, GAMCO Asset Management Inc. has sole voting power with regard to 6,175,348 shares of Common Stock and sole dispositive power with regard to 6,548,348 shares of Common Stock, Teton Advisers, Inc. has sole voting and dispositive power with regard to 20,000 shares of Common Stock, Gabelli & Company Investment Advisers, Inc. has sole voting and dispositive power with regard to 4,000 shares of Common Stock, Gabelli Foundation, Inc. has sole voting and dispositive power with regard to 9,000 shares of Common Stock, MJG Associates, Inc. has sole voting and dispositive power with regard to 5,000 shares of Common Stock, MJG-IV Limited Partnership has sole voting and dispositive power with regard to 2,000 shares of Common Stock, GGCP, Inc. has sole voting and dispositive power with regard to 16,500 shares of Common Stock, GAMCO Investors, Inc. has sole voting and dispositive power with regard to 200 shares of Common Stock, and Mario J. Gabelli has sole voting and dispositive power with regard to 72,200 shares of Common Stock. Mr. Gabelli is deemed to have beneficial ownership of the shares of Common Stock owned beneficially by each of the foregoing entities due to the fact that he directly or indirectly controls or acts as chief investment officer for such entities. Gabelli & Company Investment Advisers, Inc. is deemed to have beneficial ownership of the Common Stock owned beneficially by G. research, Inc. Associated Capital Group, Inc. , GAMCO Investors, Inc. and GGCP, Inc. are deemed to have beneficial ownership of the shares of Common Stock owned beneficially by each of the Gabelli Reporting Persons other than Mr. Gabelli and the Gabelli Foundation, Inc. See the Schedule 13D/A filed by the Gabelli Reporting Persons for certain disclaimers of beneficial ownership.




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COMPANY COMMON STOCK OWNED BY EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of November 30, 2017 by: (i) each of our directors or nominees for director; (ii) each of our NEOs; and (iii) all of our directors, nominees for director, and executive officers as a group. In general, ‘‘beneficial ownership’’ includes those shares of Common Stock a director, nominee for director, NEO or other executive officer has the power to vote or transfer, stock units convertible into Common Stock within 60 days and stock options exercisable within 60 days. Except as noted, the persons named in the table below have the sole voting and investment power with respect to all shares of Common Stock beneficially owned by them.
Name/Group
Owned(A)
Number of 
DSUs, PSUs 
or RSUs 
Convertible
into Common
 
Stock(B)
Obtainable
Through
Stock
Option
Exercise
Total
 
Percent of
Class
José María Alapont - Director
568


1,667

2,235

 
*
Walter G. Borst - EVP & CFO
49,044

10,366

58,789

118,199

 
*
Troy A. Clarke - Director/President & CEO
79,325

6,113

977,248

1,062,686

 
1.1
Steven K. Covey - Former SVP & General Counsel
45,098


52,895

97,993

 
*
Stephen R. D'Arcy - Director
812


1,667

2,479

 
*
Jeffrey A. Dokho(C) - Director




 
*
Matthias Gründler - Director
303



303

 
*
Vincent J. Intrieri - Director
592

6,677

20,000

27,269

 
*
William R. Kozek - SVP Strategic Initiatives
14,108


27,045

41,153

 
*
Persio V. Lisboa - EVP & COO
14,772

2,790

44,650

62,212

 
*
Stanley A. McChrystal - Director
1,508

30,765

25,000

57,273

 
*
William V. McMenamin - President, Financial Services and Treasurer
16,426

1,681

17,465

35,572

 
*
Daniel A. Ninivaggi - Director

88


88

 
*
Mark H. Rachesky(D) - Director
16,247,277

2,357

20,000

16,269,634

 
16.5
Andreas Renschler - Director
303



303

 
*
Michael Sirignano - Director
18,959

3,296

10,000

32,255

 
*
Samara A. Strycker - SVP & Corporate Controller
3,281



3,281

 
*
Dennis A. Suskind - Director
812


1,667

2,479

 
*
All Directors and Executive Officers as a Group (19 persons)(E)
16,451,869

64,133

1,210,804

17,726,806

 
18.0

*
Percentage of shares beneficially owned does not exceed one percent.

(A)
The number of shares shown for each NEO (and all directors and executive officers as a group) includes the number of shares of Common Stock owned indirectly, as of November 30, 2017, by such executive officers in our Retirement Accumulation Plan, as reported to us by the Plan trustee.

(B)
For additional information on deferred share units (‘‘DSUs’’), premium share units (‘‘PSUs’’) and restricted stock units (‘‘RSUs’’) see below.

(C)
At the request of the UAW, the UAW representative director, Jeffrey Dokho, does not receive stock or stock option grant awards.

(D)
As reported in various Form 4’s filed with the SEC during 2017 by MHR Institutional Partners III LP, MHR Institutional Advisors III LLC, MHR Fund Management LLC, MHR Holdings LLC and Dr. Rachesky. See also Footnote D to the section Persons Owning More Than Five Percent of Navistar Common Stock in this proxy statement.

(E)
Includes all current directors and executive officers (including Section 16 Officers) as a group.



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DSUs PSUs and RSUs

Under our Executive Stock Ownership Program in effect for 2013 and prior years, executives may defer their cash bonus into DSUs. If an executive officer elects to defer a cash bonus, the number of shares shown for such NEO (and for all Executive Officers included in all Directors and Executive Officers as a group) includes these DSUs. These DSUs vest immediately. The number of shares shown as owned for each NEO (and for all Executive Officers included in all Directors and Executive Officers as a group) also includes PSUs that were awarded pursuant to the Executive Stock Ownership Program. PSUs vest in equal installments on each of the first three anniversaries of the date on which they are awarded. Effective November 1, 2013, our Executive Stock Ownership Program was amended and restated to, among other things, eliminate an executive’s ability to earn PSUs or defer their cash bonus into DSUs.

Under our Non-Employee Directors Deferred Fee Plan, directors may defer all or a portion of their annual retainer into DSUs. If a director elected to defer a portion of his annual retainer into DSUs, these DSUs are shown as owned for such director (and included in all Directors and Executive Officers as a group).

Certain of our executives have been awarded share settled RSUs under the 2013 Performance Incentive Plan. The RSUs vest in equal installments on each of the first three anniversaries of the date of grant or cliff vest as to 100% of the shares granted on the third anniversary of the date of grant, and are converted into our Common Stock on a one to one basis at time of vesting.


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PROPOSAL 2 — ADVISORY VOTE ON EXECUTIVE COMPENSATION

At our 2017 annual meeting of stockholders, a majority of our stockholders voted in favor of holding a non-binding advisory vote on executive compensation on an annual basis. In light of those results, our Board determined that the Company will continue to hold a non-binding advisory vote on executive compensation on an annual basis. The next required non-binding advisory vote regarding the frequency interval will be held at our 2023 annual meeting of stockholders.

The Company places importance on the feedback of our stockholders regarding our compensation practices. We are focused on continuously reviewing and improving such practices in order to best align executive pay with Company performance. At our 2016 and 2017 annual meeting of stockholders, our stockholders expressed their support of our executive compensation programs by approving our non-binding advisory vote on our executive compensation by approximately 98% and 97% of those voting, respectively. Since that time we have continued our stockholder outreach initiatives and our continuous efforts to best align executive pay with Company performance.

As described more fully in our Compensation, Discussion and Analysis ("CD&A"), our executive compensation programs for our NEOs, as well as other executives, are designed to closely align executive rewards with the total return to stockholders and both corporate and individual performance. As evidence of our commitment to align executive pay with Company performance:

For the 2015 LTI plan, one of the four metrics on Revenue Growth was met and the Adjusted EBITDA margin was below target but above threshold.

The 2016 LTI performance targets are projected to be below threshold for the performance-based portion of the award.

The 2017 LTI performance targets are projected to be below target for Adjusted EBITDA and above target for Market Share.
  
The 2017 AI awards will be paid out at 119.8% of target percentage due to our achievements.

The Board urges our stockholders to read the CD&A, which describes in more detail the changes made to the executive compensation programs and how the executive compensation programs are designed to support our Company and our business strategies in concert with our culture, compensation philosophies and guiding principles. We believe that the Company’s executive compensation programs appropriately align pay and performance and enable the Company to attract and retain talented executives within our industry.

We are asking our stockholders to indicate their support for our executive compensation as described in this proxy statement, as required pursuant to Section 14A of the Exchange Act. This proposal, commonly known as a ‘‘say-on-pay’’ proposal, gives you as a stockholder the opportunity to express your views on our 2017 executive compensation policies and procedures described in this proxy statement.

This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs as described in this proxy statement. Accordingly, we ask our stockholders to vote ‘‘FOR’’ the following resolution at the Annual Meeting:

RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the Company's proxy statement for the Annual Meeting.

Although this is an advisory vote that will not be binding on the Compensation Committee or the Board, we will carefully review the results of the vote, as we did last year. The Compensation Committee will consider our stockholders’ concerns and take into account the outcome of ‘‘say-on-pay’’ votes when designing future executive compensation programs. The Board recommends that you indicate your support for the Company’s executive compensation in 2017, as outlined in the above resolution.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE ‘‘FOR’’ PROPOSAL 2.

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COMPENSATION

Compensation Committee Report

The Compensation Committee reviewed and discussed the CD&A required by Item 402(b) of Regulation S-K with management, and based upon this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. The independent members of the Board reviewed and discussed the compensation of the CEO.
The Compensation Committee
Independent Board members  
(non-Compensation Committee members)
Michael F. Sirignano, Chairman
Jose Maria Alapont
Stanley A. McChrystal
Stephen R. D'Arcy
Daniel A. Ninivaggi
Jeffrey A. Dokho
Andreas H. Renschler
Matthias Gründler
Dennis A. Suskind
Vincent J. Intrieri
 
Mark H. Rachesky

(Approved by the members of the Compensation Committee and the other independent members of the Board on December 12, 2017.)

Compensation Discussion and Analysis (the "CD&A")

The Compensation Committee has the responsibility to approve and monitor all compensation and benefit programs for our executive officers (for purposes of this proxy statement, the term "executive officer" means the senior leadership of the Company, including Section 16 Officers and NEOs) and makes recommendations for the compensation and benefits of our CEO, which is then reviewed and approved by the independent members of our Board. As part of its responsibilities, the Compensation Committee reviews the performance of our executive officers and approves compensation based on the overall successes of the individual executive and the organization as a whole. The Compensation Committee is governed by a written charter, a copy of which is available on the Investor Relations section of our website at http://www.navistar.com/navistar/investors/ corporategovernance/documents.

The following table lists our 2018 NEOs that will be discussed throughout the CD&A.
NEO
Title
Troy A. Clarke
President and Chief Executive Officer
Walter G. Borst
Executive Vice President and Chief Financial Officer
Persio V. Lisboa
Executive Vice President and Chief Operating Officer
William V. McMenamin
President Financial Services and Treasurer
Samara A. Strycker
Senior Vice President and Corporate Controller
William R. Kozek(1)
Senior Vice President Strategic Initiatives and Former President, Truck and Parts
Steven K. Covey(2)
Former Senior Vice President and General Counsel

(1)
Mr. Kozek was previously a NEO as President, Truck & Parts. Due to a change in his role, Mr. Kozek is no longer an executive officer.
(2) Mr. Covey had a termination date of March 31, 2017.










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This Compensation section is organized into the following main categories:

Executive Summary

During 2017, we continued to focus on our business strategy which includes consummating our previously announced strategic alliance with VW T&B, launching new products and product features, improving quality and uptime, delivering on our plan to reduce costs, building sales momentum, seeking new sources of revenue and evaluating non-Core activities. We continue to make strong financial progress and are optimistic about 2018.

The Company has a robust stockholder outreach and engagement program in place. We engage in regular contact with our stockholders throughout the year. Approximately 72% of our stock as of December 18, 2017 is held by five of our stockholders. Three of these stockholders currently have representation on our Board as discussed in our Executive Summary and Proposal One-Election of Directors. These stockholders, through their representatives on our Board, also are members of our Compensation Committee and are integrally involved in our compensation decisions and policies, with Mr. Sirignano being the Chairman of our Compensation Committee. We also engage in regular dialogue with our two remaining largest stockholders who do not have representatives on our Board. We maintain open lines of communication with corporate governance advisory institutions and with our top 25 stockholders on an annual basis in order to solicit their feedback. We continuously work to improve these efforts and place importance on the feedback provided to us during this process.

An overall objective of our executive compensation program is to maintain a linkage between pay and performance, both long-term and short-term. Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA") is a key pay component linked to pay for performance and our short and long-term incentives. In 2017 the Company saw an incremental improvement of approximately $74M in adjusted EBITDA. Also in 2017:
The Company approved 2017 long-term equity awards ("LTI") for each executive based on an assessment of such executive's performance and scope of the executive's role.

Based on 2017 results, the 2017 LTI awards based on performance measures are projected to be below target for adjusted EBITDA and above target for Market Share.

Based on 2017 performance measures of our short-term annual incentive ("AI") plan, 2017 AI awards will be paid at 119.8% of target.

For 2018, AI performance goals as determined by our Compensation Committee will include Market Share, Cost, Liquidity and Quality with both an adjusted EBITDA multiplier and an individual performance factor.
 
In 2017, the Compensation Committee took the following actions with respect to the Company’s executive compensation program:

Maintained our clawback policy, which enables the Company to recover incentive-based compensation in the event of an accounting restatement due to material non-compliance with financial reporting requirements, as well as intentional misconduct; and

Continued to exclude pro-rata bonus from the calculation of any pension/retirement benefit under our Executive Severance Agreements




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Compensation Governance Measures
 
 
What We Do
What We Don't Do
We use multiple performance measures in our short-term and long-term incentive plans. These performance measures link pay to performance and stockholder interests.

The Company maintains policies that eliminate all tax gross-ups for perquisites and other similar benefits to Section 16 Officers, and prohibit tax gross-ups for any cash or equity awards for all employees.
The Compensation Committee reviews external market data when making compensation decisions.
We do not reprice stock options.

The Compensation Committee selects and engages its own independent advisor, Pay Governance LLC.
We have an anti-hedging policy, whereby employees and directors are prohibited from trading in puts, calls, options or other similar securities related to our common stock. We also restrict short selling, pledges and margin accounts used by executive officers and directors.
We maintain a clawback policy to recoup incentive-based compensation in the event of an accounting restatement.
We do not accelerate the vesting of long-term incentive awards, except in certain situations upon death.
Change in Control severance benefits are payable only upon a Change in Control (also referred to throughout as "CIC") with termination of employment ("double trigger").
We do not grant extra pension service with the exception of CIC as outlined in our Executive Severance Agreements.
To aid in aligning the interest of our shareholders and officers, all officers are subject to stock ownership requirements, ranging from 6x base pay for the CEO to 3x base pay for other senior executives - including a retention requirement.
 
Our 2017 long-term incentive plans includes both absolute and relative performance metrics.



Compensation Philosophy and Objectives

We believe the compensation of our executives should be closely tied to the performance and growth of the Company, so that their interests are aligned with the long-term interests of our stockholders. Consistent with this philosophy, the following guiding principles provide a framework for the Company’s executive compensation program:

Competitive Positioning:  Total remuneration is designed to attract and retain the executive talent necessary to achieve our goals through a market competitive total remuneration package.

Pay-for-Performance:  A substantial portion of each named NEO's compensation is performance-based with a direct link to Company as well as individual performance. It is designed to align the interests of executives and stockholders.

Ownership and Responsibility:  Compensation programs are designed to recognize individual contributions as well as link NEO and stockholder interests through programs that reward our NEOs, based on the financial success of the Company and increases to stockholder value.

The Company actively engages stockholders in Say-On-Pay discussions. Three of the largest stockholders are represented on the Board as well as the Compensation Committee. Other stockholder opinions are solicited in discussions throughout the year and the Company continues to align pay with performance throughout the organization based on best practices.

Pay for Performance

We continue to take actions that we believe will improve our efficiency and performance and continue to evaluate additional opportunities to enhance value to our customers. We had many accomplishments in 2017, including consummating our alliance with VW T&B, launching products desired by our customers, improving quality and uptime, and delivering on our plan to reduce costs while building sales momentum. For 2017, AI awards will be paid out at 119.8% of target.


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With respect to LTI, the 2015 LTI plan was 100% performance-based. After a review of the competitive peer data, internal ownership requirements and an assessment by our Compensation Consultant, the 2016 and 2017 LTI plans were 50% performance-based and 50% time-based. Based on Company results:

For the 2015 LTI plan, one of the four metrics on Revenue Growth was met and the Adjusted EBITDA margin was below target but above threshold, resulting in a payout of 41%.

The 2016 LTI performance targets are projected to be below threshold for the performance-based portion of the award.

The 2017 LTI performance targets are projected to be below target for Adjusted EBITDA and above target for Market Share.

The following table outlines the LTI awards granted to our NEOs for 2015, 2016 and 2017, and for our CEO in 2016 and 2017, along with the actual performance of those awards as of October 31, 2017.
 
 
Performance Options
Performance Share
Units
FY2015
Exercise Price/Closing Price on Grant
$27.67
Stock Price as of October 31, 2017
$42.31
% Equity Award
50%
50%
Adjusted EBITDA Margin Met?
Below Target
Below Target
Revenue Growth Met?
1 of 4 metrics met
1 of 4 metrics met
 
 
Performance Cash Plan
Time-Based RSUs
FY2016
Exercise Price/Closing Price on Grant
$7.17
Stock Price as of October 31, 2017
$42.31
% Equity Award
50%
50%
Adjusted EBITDA Met?
Below Threshold
N/A
Market Share Met?
Below Threshold
N/A
 
 
 
 
Performance Cash Plan
Time-Based RSUs
FY2017

Exercise Price/Closing Price on Grant
$27.48
Stock Price as of October 31, 2017
$42.31
% of Equity Award
50%
50%
Adjusted EBITDA and Relative TSR Met?
Below Target
N/A
Market Share and Relative TSR Met?
Above Target
N/A

In 2017,we continued to align pay with performance throughout the organization through:

50% performance-based LTI awards for the NEOs and the CEO, with grant sizes adjusted based on the performance of the individual and their scope within the organization.

An AI program designed to align with key Company performance targets which resulted in a payout at 119.8% of target.

Pay Mix

A key goal of our compensation philosophy and objectives, is the alignment of the pay mix for our CEO and top executives compared to the market. By pursuing that alignment, we can be assured that not only are the elements appropriate, but the overall package is properly designed. Although recommendations relative to each of these compensation elements are made

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separately, the Compensation Committee considers the total compensation and benefits package when making any compensation decision.

Working with an independent compensation advisor, we developed the charts below which illustrate the alignment of Navistar’s executive pay and the external marketplace.

The below charts present Navistar’s total direct compensation ("TDC") mix (excluding special grants) for the CEO and NEOs relative to the peer group mix, with the Navistar mix on the left and the peer group mix on the right.


paymix3a01.jpg





Detailed Review of Executive Compensation

Compensation Consultant

The Compensation Committee engages the services of an independent compensation consultant to assist with decisions regarding executive compensation plans and programs. The independent compensation consultant reports solely to the Compensation Committee. The Compensation Committee uses Pay Governance, LLC. to render the following services:

Attend committee meetings at the request of the Compensation Committee;

Advise the Compensation Committee on market trends, regulatory issues and developments and how these could impact our executive compensation programs;

Review the compensation strategy and executive compensation programs for alignment with our strategic business objectives;

Advise on the design of executive compensation programs to ensure the linkage between pay and performance;


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Provide market data analysis to the Company;

Advise the Compensation Committee and the Board on setting the CEO pay;

Review the annual compensation of the other NEOs as recommended by the CEO; and

Perform such other activities as requested by the Compensation Committee.

The Compensation Committee has the sole authority to approve the terms of Pay Governance's engagement. Pay Governance did not provide any services to the Company other than executive compensation consulting services during 2017.

In compliance with SEC and NYSE requirements regarding the independence of compensation consultants, Pay Governance provided the Compensation Committee with information regarding any personal, financial, or business relationships between Pay Governance and the Company, its management, or the members of the Compensation Committee that could impair its independence or present a conflict of interest. Based on its review of this information, the Compensation Committee determined that there were no relationships that impair the independence or create a material conflict of interest between Pay Governance, the Company and the partners, consultants, and employees who service the Compensation Committee on executive compensation matters and governance issues.

Compensation Peer Group

Annually, we conduct a peer company review to determine whether our comparator companies continue to meet our criteria for inclusion. For 2017, management recommended and the Compensation Committee approved two changes to our peer group. SPX Corp spun off a wholly-owned subsidiary into a separate publicly traded company and was removed from our peer group. Meritor, Inc. meets several of our criteria and was added to our peer group.

We continue to select companies similar in overall size to Navistar with consideration being given to companies that meet one or more of the following criteria:

Included in Navistar’s primary Global Industry Classification Standard (GICS®) sub-industry (Construction & Farm Machinery & Heavy Trucks — 20106010);

Midwest location;

Names Navistar as a peer group company;

Similar gross margins; or

Was included in the prior year’s peer group.

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Navistar’s 2017 peer group consists of the following 20 companies:
Company Name
Trailing 4Q Net Revenue
($ mil.)
Latest Quarter Total Assets
($ mil.)
9/30/17 Enterprise Value ($ mil.)
Composite Percentile Rank
PACCAR Inc
$17,262
$22,053
$31,031
95%
Cummins Inc.
$18,357
$16,260
$28,723
89%
Illinois Tool Works Inc.
$13,964
$15,922
$56,478
86%
Delphi Automotive PLC
$17,014
$13,056
$29,927
80%
The Goodyear Tire & Rubber Company
$14,973
$17,646
$13,780
76%
Parker-Hannifin Corporation
$12,029
$15,490
$28,265
71%
Textron Inc.
$13,773
$15,775
$17,329
71%
Lear Corporation
$19,292
$11,237
$12,618
69%
Dover Corporation
$7,292
$10,292
$17,463
56%
BorgWarner Inc.
$9,270
$9,289
$12,725
52%
Masco Corporation
$7,470
$5,489
$14,577
45%
Navistar International Corporation
$8,035
$6,080
$8,628
42%
AGCO Corporation
$7,648
$7,693
$7,481
41%
Trinity Industries, Inc.
$3,998
$9,452
$7,496
36%
Tenneco Inc.
$8,860
$4,881
$4,610
30%
Oshkosh Corporation
$6,622
$5,093
$6,634
29%
Dana Incorporated
$6,372
$5,597
$5,466
28%
Terex Corporation
$4,220
$3,760
$4,462
16%
Joy Global (nka Komatsu Mining Corp.)
$2,343
$3,446
$0
5%
Visteon Corporation
$3,170
$2,246
$3,653
5%
Meritor, Inc.
$3,153
$2,712
$3,103
3%
75th Percentile
$14,216
$15,561
$22,864
 
Mean
$9,854
$9,869
$16,096
Median
$8,254
$9,370
$12,725
25th Percentile
$5,834
$5,040
$6,050
Navistar Rank
49%
38%
40%

With respect to the above table:

All financial and market data are taken from Standard & Poor’s Capital IQ database.

All data is as of September 30, 2017 unless otherwise noted.

All data shown as reviewed by the Compensation Committee at the time of the peer group approval.

External Market Compensation Review

The Compensation Committee reviews various components of our executive compensation program to ensure that (i) pay opportunities are competitive with the external market, (ii) there is an appropriate link between performance and pay, and (iii) the program supports our stated compensation philosophy.

In 2017 our Compensation Committee reviewed total compensation levels and mix relative to the above-described peer group and broader industry surveys published by Aon Hewitt and Towers Watson. Survey market pay data has been size-adjusted to Navistar's revenues (corporate and unit-specific) and updated to January 1, 2018. Please refer to Appendices A and B of this proxy statement for a list of survey participants in Aon Hewitt’s 2016 U.S. Total Compensation Measurement

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(‘‘TCM’’) Executive Regression and Towers Watson’s 2016 CDB General Industry Executive Compensation Survey Report — U.S. Surveys.

We maintain our compensation philosophy of targeting the 50th percentile (market median) for base salary, short-term incentives, and long-term incentives, using a combination of peer group and market surveys. We consider a NEO to be within the competitive range if the NEO's base salary is within 80 to 120 percent of the market median. Under special circumstances, when we are recruiting for critical roles, we may target an NEO’s salary to a higher level.

Elements of Total Direct Executive Compensation
Pay Element
What it Does
Performance Measures
Base Salary
Provides competitive base salary, typically reviewed annually, and balances risk-taking concerns with stockholder interests
Job scope, experience, performance and market data
Short-term Annual Incentive or AI
Provides a competitive incentive opportunity and aligns individual, business unit and company performance
The goals established for 2017 include EBIT, Market Share, Cost and Liquidity
Long-Term Equity Incentives or LTI (including stock option grants)
Aligns executive and stockholder interests by tying compensation to share price appreciation, builds long-term stockholder value, and cultivates stock ownership
The sizing of the 2017 LTI awards were adjusted for each executive based upon an evaluation of both individual performance in addition to the scope of the position within the organization

Chief Executive Officer Total Direct Compensation or "TDC"

Troy A. Clarke was named as the President and CEO in April 2013. The Board, with the assistance of the independent compensation advisor, reviewed CEO pay levels of our peer group, as well as those of other manufacturing organizations with similar revenues. Consistent with our compensation philosophy and the market review for other company chief executive officers, the Compensation Committee targeted total compensation at the market median but believed the pay for the President and CEO should be weighted with the greatest emphasis on performance.

Mr. Clarke’s compensation is specifically structured to focus on performance over the longer term and was negotiated with significant input from our stockholder-nominated directors.

In general, our practice excludes the use of employment contracts for NEOs, except with respect to the Company's CEO. Previously, in connection with Mr. Clarke's appointment to President and CEO in April 2013, we entered into a three-year employment and services agreement with him (the "Employment Agreement"). Based on the Compensation Committee's evaluation of the performance of Mr. Clarke and the Company over this period, the Employment Agreement was renewed in April 2016 for another two years. The following table summarizes certain material terms of the 2016 Employment Agreement as well as certain other benefits received by Mr. Clarke.


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Pay Element
Contractual Terms
Annual Base Salary
$1,000,000
Short-term Annual Incentive or AI(1)
Target AI of 125% of Base Salary Maximum AI of 250% of Base Salary
Long-Term Incentive or LTI
Value of $4,500,000 in 2017 Eligible to participate in such grants in future years
Total Direct Compensation
$6,750,000
Other Benefits
Eligible to participate in the Company plans, policies, perquisites and arrangements that are applicable to other senior officers of the Company, including life insurance equal to five times base salary and vacation equal to four weeks
Severance Provisions
In the event that Mr. Clarke's employment is involuntarily terminated without Cause or due to constructive termination other than in connection with a CIC, he would receive severance of: (i) two times Mr. Clarke's base salary plus target AI award, (ii) a pro-rated portion of the AI award that would have been paid to Mr. Clarke had he remained employed at the time such payments are made to the employees generally, (iii) 12 months continued health care coverage with an option to purchase an additional 12 months at the cost of coverage rate, and (iv) continued life insurance for 24 months after termination.
In the event that Mr. Clarke's employment is involuntarily terminated without Cause or due to constructive termination within either 90 days prior to a CIC or within 24 months after a CIC, he would receive severance of: (i) two times Mr. Clarke's base salary plus target AI award, (ii) a pro-rated portion of the target AI award, (iii) 12 months continued health care coverage with an option to purchase an additional 12 months at the cost of coverage rate, and (iv) continued life insurance for 24 months after termination.

(1)
Actual payout at 85% of target for 2015; 43.8% of target for 2016 and 119.8% of target for 2017.


CEO Performance Evaluation

Traditionally, each year in December, the Compensation Committee and the independent members of the Board evaluate the CEO’s performance for the prior year. This review is based on the CEO’s achievement of goals set for the start of that year. The CEO presents information on the achievement of such goals solely to the independent members of the Board, who then discuss it in executive session without the CEO present. The independent members’ evaluation of the CEO’s performance then forms the basis for the decision on the CEO’s short-term incentive award under our AI plan for the prior year. The Chairman of the Compensation Committee then informs the CEO of the performance evaluation and any compensation decisions resulting from that evaluation.

In December 2017, the independent members of the Board discussed and evaluated Mr. Clarke's accomplishments as CEO. These accomplishments include:
The VW T&B alliance and GM commercial relationships
The successful launch of new products and quality improvements
The continued growth of OnCommand Connection
Continued cost reductions
Senior leadership growth and development




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Based upon the Compensation Committee's determination of Mr. Clarke's and the Company's performance against the applicable AI goals, the Compensation Committee recommended that Mr. Clarke receive an AI award in the amount of 119.8% of target or $1,497,500. Mr. Clarke's base salary remained unchanged under the 2016 Employment Agreement.
 
Mr. Clarke's primary goals for 2018 include the following:
Implement the VW T&B alliance
Improve the Company's financial performance
Successful product launches and quality improvements
Continued cost reductions
Continued senior leadership growth and development

In December 2017, the Compensation Committee approved Mr. Clarke's CEO goals for 2018 as noted above. The initiatives supporting the above goals include improving market share, pursuing strategic opportunities, strengthening the Company's balance sheet and focusing on the development of Navistar leadership.

Summary of the Executive Salary Planning Approval Process

The CEO makes base salary recommendations for the NEOs and most Section 16 Officers to the Compensation Committee. The CEO does not recommend nor is he involved in decisions regarding his own compensation.

The Compensation Committee reviews the salary for the CEO and reviews, approves and/or adjusts the CEO’s base salary recommendations for the other NEOs and Section 16 Officers included in the CEO's recommendation.

The Compensation Committee then recommends, and the independent members of the Board approve or adjust, the salary recommendation for the CEO.

Consistent with pay-for-performance principles, in 2017, base salary performance increases were based upon NEO and Company performance. The table below summarizes the base salaries for our NEOs in 2017 as well as their previous base salaries.

NEO 2017 Base Salary
NEO
Current Base Salary
Effective Date
Previous
Base Salary
Effective Date
Troy A. Clarke (1)
$
1,000,000

April 22, 2016
$
900,000

April 15, 2013
Walter G. Borst
$
749,840

February 1, 2016
$
721,000

February 11, 2015
Persio V. Lisboa(2)
$
675,000

March 1, 2017
$
551,250

February 1, 2016
William V. McMenamin(3) 
$
460,000

September 1, 2017
$
386,650

February 1, 2016
Samara A. Strycker
$
342,875

February 1, 2016
$
325,000

August 4, 2014
William R. Kozek(4)
$
598,000

February 1, 2016
$
575,000

February 11, 2015
Steven K. Covey(5) 
$
615,940

February 1, 2016
$
598,000

February 11, 2015
.

(1)
Mr. Clarke received a base salary increase upon renewal of his Employment Agreement in April 2016.
(2)
Mr. Lisboa received a base salary increase in 2017 due to his promotion to Executive Vice President and Chief Operating Officer.
(3) Mr. McMenamin received a base salary increase effective September 1, 2017 due to performance.
(4) Due to the role change described above, Mr. Kozek is no longer an executive officer, as of June 20, 2017.
(5) Mr. Covey had a termination date as of March 31, 2017.




Goal Setting For Incentive Plans

On an annual basis, the Board reviews a multi-year strategic plan developed and presented by the management team. Based on that plan, an operating plan is developed for the subsequent year and reviewed by the Board. The Compensation Committee approves the AI and LTI plan targets on the basis of the annual operating plan.


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The operating plan is based upon the goals of returning the Company to profitability and competitiveness with the market and the strategic plan incorporates long-term growth targets.

Annual Incentive

Navistar provides its executives with an annual incentive compensation opportunity through the AI plan, a short-term incentive plan designed to align a significant portion of their total cash compensation with the overall financial performance of the Company. Each executive’s target award is determined based on a percentage of their base pay and organization level. For 2017, Mr. Clarke’s target annual incentive opportunity is 125% of base salary. For other NEOs, target awards range from 55 to 75 percent of base salary.

2017 Annual Incentive

The AI plan for 2017 was based on the attainment of 100% corporate goals established and approved by the Compensation Committee. The AI plan was authorized under our stockholder approved 2013 Performance Incentive Plan (the "2013 PIP"). The AI plan has threshold, target, and distinguished goal ranges for NEOs from 40% to 125%. AI payout targets for NEOs ranged from 55% to 125% of base salary. Consolidated financial results between performance levels were interpolated on a straight-line basis to determine payment amounts.

Each AI financial performance metric is independent. Eligibility for payout is based on the attainment of each individual metric.

We use two design features: an adjusted EBITDA multiplier which scales the annual incentive up or down from the target level based upon actual financial performance of Navistar, and an individual performance factor.

We continue to leverage our AI scorecard using multiple performance metrics. This allows the NEOs to see how their individual achievements contribute to the overall effort and success of the Company.

Below is a summary of the 2017 AI performance goals, associated performance metrics, and level of goal achievement.
2017 Performance Goal
Metric
% Allocation
Level Achieved
EBIT
Parts EBIT
10%
Below Threshold
Market Share
Weighted Average Market Share
30%
Distinguished
Cost
Total Cost Reduction
30%
Above Target
Liquidity
Free Cash Flow
30%
Distinguished

2017 Annual Incentive Target Award Percentages and Amount Earned

As seen in the table above, Navistar met or exceeded the 2017 AI plan targets for many of the performance goals while the Company was below target on other goals, yielding an overall payout percentage of 119.8% of target. Below are the NEO payment amounts.
Named Executive Officer
Target as %  of Base Salary
2017 AI Amount
Earned
Troy A. Clarke
125%
$
1,497,500

Walter G. Borst
75%
$
673,731

Persio V. Lisboa
75%
$
606,488

William V. McMenamin
60%
$
330,648

Samara A. Strycker
55%
$
225,920

William R. Kozek
75%
$
537,303

Steven K. Covey (1)
65%
$
199,847


(1) Mr. Covey received a prorated bonus for 2017.

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2018 Annual Incentive

In 2018, we intend to build on our progress and expect to achieve profitability by leveraging the VW T&B alliance, investing in high-quality products, and continuing to deliver and pursue innovative technology solutions. Our strategic direction continues to focus on our customer-centric strategy, new product launches, financial performance and profitable improvements in market share.

Due to our success in driving business results in 2017, we created an AI plan that enables our strategy and drives results for our employees, customers and shareholders. The table below illustrates the 2018 AI performance goals and metrics.

2018 Annual Incentive Targets
2018 Performance Goal
Weighting
Description
Target
Market Share
35%
Weighted Average (Heavy, Medium, Bus and Severe)
FY17 Actual +0.5%
Cost
35%
Total Cost Reduction
Break-Even
Liquidity
20%
Operating Cash Flow
$100 Million
Quality
10%
First Time Quality
FY17 Actual +4.0%

2018 AI design features include:

Continuing to use Market Share and Cost metrics;

Replacing Free Cash Flow with Operating Cash Flow;

Adding a quality metric; and

Continuing the use of the adjusted EBITDA multiplier and an individual performance factor.

The final payout as a percent of target will be calculated based upon level of attainment of the performance metrics multiplied by the adjusted EBITDA multiplier and the individual performance factor. Payout levels will be interpolated on a straight line basis between threshold, target, and distinguished levels.

Long-Term Incentives or "LTI"

Our objectives for including long-term incentives as part of our executive officer’s total compensation package include:

Aligning NEO and stockholder interests by tying compensation to share price appreciation;

Building long-term stockholder value; and

Cultivating stock ownership.

LTI awards are governed by the 2013 PIP, which is an omnibus plan that allows for various awards such as cash, time and performance based stock options, stock appreciation rights, time and performance-based RSUs, restricted cash units ("RCUs"), PSUs, DSUs and performance shares.

The Compensation Committee approved LTI awards under the 2013 PIP for 2017 for eligible plan participants in February 2017. LTI awards granted to NEOs in 2017 were comprised of performance-based RCUs, based on adjusted EBITDA and market share goals, time-based RSUs, and time-based stock options as indicated in the following table. The value of each NEO's LTI awards was split 50% in RCUs, 30% in RSUs and 20% in stock options.

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2017 LTI Plan
Vesting
Performance Measures
Goals
Performance Vesting Criteria
 
Performance-Based RCUs(1) 
3 year cliff
Adjusted EBITDA
(80%)
(1) 2017 - $600M (2) 2018 - $700M (3) 2019 - TBD(2)        
Based on the Company's annual EBITDA goals and TSR Modifier(3): Goal 1/3 - payout of 97%
 
Market Share (20%)
(1) 2017 - 16.3% (2) 2018 - 18.1% (3) 2019 - TBD(2)               
Based on the Company's annual market share goals and TSR Modifier: Goal 1/3 - payout of 108%
 
Time-Based Restricted Stock Units(4)
3 year cliff
N/A
N/A
N/A
 
 
Time-Based Stock Options
Ratably over 3 years
N/A
N/A
N/A
 

(1) The RCUs represent a cash plan with each RCU representing $1. Vesting and/or payment is subject to service and performance conditions.
(2) The performance targets for 2018 and 2019 are established by the Compensation Committee of the Board of Directors within the first 90
days of each fiscal year.
(3) In 2017 we added a 3-Year Relative Total Shareholder Return (TSR) "wrapper" around the annual goals in order to measure Navistar's stock price
against our proxy peer group.
(4) These awards are share-settled.

2017 Long-Term Incentive Awards

The following table summarizes our 2017 long-term incentive grant for our NEOs.
NEO
Restricted Stock Units
Performance-Based RCUs
Time-Based Stock Options
Targeted Economic
Value
Troy A. Clarke (1)
49,126
$2,250,000
68,233
$4,500,000
Walter G. Borst (1)
22,925
$1,050,000
31,842
$2,100,000
Persio V. Lisboa (1)
17,380
$800,000
24,147
$1,600,000
William V. McMenamin (1)
5,458
$250,000
7,581
$500,000
Samara A. Strycker (1)
5,458
$250,000
7,581
$500,000
William R. Kozek (1)
15,283
$700,000
21,228
$1,400,000
Steven K. Covey (1)(2)
 —
 —
 —
 —
(1) Long-term incentive awards for all NEOs were granted in February 2017; additionally, Mr. Lisboa received an additional grant in March 2017 on account
of his promotion; the performance-based awards are set forth at target.
(2) Mr. Covey did not receive any long-term incentive awards in 2017 because his departure was planned prior to the LTI grant.



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2015 Long Term Incentive - Performance Awards
The two tables below provide details on the performance equity awards our NEO's were granted in 2015 and the actual number of shares that were earned upon the attainment of certain performance metrics as certified by the Compensation Committee in December 2017. The right to the awards are subject to service conditions being met.

Type of Award
Performance Measure
Performance Result
Payout as % of Target
Stock Option
EBITDA Margin
Above Threshold
30%
Stock Option
Revenue Growth
1 of 4 Goals Met
25%
Performance Unit
EBITDA Margin
Above Threshold
60%
Performance Unit
Revenue Growth
1 of 4 Goals Met
50%
  
NEO (1)
Target Shares Awarded
Shares Earned
Payout as % of Target
Walter G. Borst
137,737

48,318
35%
Persion Lisboa
91,838

32,212
35%
William V. McMenamin
19,023

6,672
35%
Samara A Strycker
15,415

5,407
35%
William R. Kozek
91,838
32,212
35%
Steven K. Covey (2)
65,599
20,249
31%
         (1) Mr. Clarke did not receive long term incentive awards in FY 2015.
         (2) The number of performance units Mr. Covey received reflects a pro-rata amount based on the
number of days actually worked during the performance period.


Executive Benefits and Perquisites

The following table summarizes the executive benefits and perquisites we provide to our NEOs:
NEO
Life Insurance(1)
Executive Flexible Perquisite Program(2)
Pension/Retirement/401(k) Plans(3)
Retiree Medical Benefits and Retiree Life Benefits(4)
SEPP
MRO
RAP
SRAP
SERP
Troy A. Clarke
 
 
 
Walter G. Borst
 
 
 
Persio V. Lisboa
 
 
 
William V. McMenamin
 
 
 
Samara A. Strycker
 
 
 
William R. Kozek
 
 
 
Steven K. Covey
(1)
Life Insurance. We provide our executives Company-paid life insurance equal to five times base salary. The beneficiary of each individual policy is as designated by the executive.
(2)
Executive Flexible Perquisites. This provides a cash stipend to each of our NEOs, the amount of which varies by executive, based upon the executive’s organization level and is set forth in the table below. A spouse may accompany an NEO while he or she is traveling on Company business. Although this occurs on a limited basis, the spouse’s travel expense is included in taxable compensation of the NEO.




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Executive Flexible Perquisite — 2017
Named Executive Officer
Annual Flexible
Perquisite Payment ($)
Troy A. Clarke
46,000
Walter G. Borst
37,000
Persio V. Lisboa
37,000
William V. McMenamin
20,000
Samara A. Strycker
20,000
William R. Kozek
37,000
Steven K. Covey(5)
 —
(3)
Pension/Retirement/401(k) Plans
We began transitioning to defined contribution/401(k) plans as the primary retirement income program for all non-represented employees hired on or after January 1, 1996. These plans are as follows:

Salaried Employees Pension Plan (“SEPP”). This is our tax-qualified defined benefit pension plan for salaried employees hired prior to January 1, 1996 who were former participants in the Navistar, Inc. Retirement Plan for Salaried Employees. The SEPP is a new funded and tax-qualified defined benefit pension plan. The SEPP was established effective December 30. 2016 to accept the transfer of certain net sets and accumulated benefits applicable to non-represented participants spun off from the Retirement Plan for Employees of IC Bus, LLC. Immediately upon the beginning of the SEPP plan year that began January 1, 2017, the Navistar, Inc. Retirement Plan for Salaried Employees or "RPSE" merged with the SEPP.
Managerial Retirement Objective Plan (‘‘MRO’’). The MRO is our unfunded non-qualified defined benefit pension plan designed primarily to restore the benefits that executives, including our NEOs, would otherwise have received if the Internal Revenue Code ("IRC") limitations had not applied to the SEPP.
Retirement Accumulation Plan (‘‘RAP’’). This is our tax-qualified defined contribution/401(k) plan for salaried employees. Our NEOs receive age-weighted contributions and/or matching contributions depending on their eligibility for other retirement income programs and retiree medical coverage.
Supplemental Retirement Accumulation Plan (‘‘SRAP’’). This is our non-qualified deferred compensation plan designed primarily to restore the contributions that participants would otherwise have received if the IRC limitations had not applied to the RAP.
Supplemental Executive Retirement Plan (‘‘SERP’’). This is designed as a pension supplement to attract and retain key executives. The SERP is unfunded and is not qualified for tax purposes.

Additional information on the pension/401(k) plans are provided in the Pension Benefits, Non-Qualified Defined Contribution and Other Non-Qualified Deferred Compensation sections of this proxy statement.

(4)
Retiree Medical Benefits and Retiree Life Insurance Coverage. Certain represented and non-represented employees, including certain NEOs, are eligible for retiree medical benefits and retiree life insurance coverage as part of a 1993 court approved settlement restructuring of our postretirement health care and life insurance benefits. Non-represented employees hired on or after January 1, 1996, including all of our NEOs other than Mr. Covey, are not eligible for retiree medical benefits or retiree life insurance coverage under the 1993 settlement agreement or any other program.
(5)
Mr. Covey did not receive his perquisite payment due to his departure from Navistar.

Executive Stock Ownership Program

Our stock ownership guidelines are designed to increase an executive’s equity stake in Navistar and more closely align his or her financial interests with those of the Navistar’s stockholders. At year end 2017, our stock ownership guidelines applied to 32 executives, all of whom hold the title of vice president and above, including all of our NEOs.

Our Executive Stock Ownership Program requires stock ownership guideline multiples of six times salary for the President and CEO and three times salary for other senior executives and has the following features:

A requirement that an executive retain a certain amount of shares received pursuant to Company executive compensation programs (75% for the CEO and 50% for other executives) until the executive satisfies the stock ownership guideline multiples described above and;

A one-year holding period (75% for the CEO and 50% for other executives) of shares received pursuant to Company executive compensations programs after the executive satisfies the stock ownership guideline multiples described above.




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Hedging and Pledging

The Company considers it improper and inappropriate for executives to engage in short-term or speculative transactions in Company securities. Navistar’s policy on transactions in securities prohibits executives from short selling and trading in derivatives. All pledges, hedges, and margin account use must be pre-cleared through the Corporate Secretary or the General Counsel.

Recoupment (Clawback) Policy

The Company maintains a clawback policy. Under this policy, the Company may recover incentive-based compensation from an executive officer in the event of an accounting restatement due to material non-compliance with financial reporting requirements, as well as intentional misconduct.

Employment Contracts and Executive Severance Agreements

Except for our President and CEO, Troy A. Clarke, we do not have employment contracts with our executive officers. Employment with each of them is "at will." However, like many companies, to ensure stability and continuity of management, we provide our executive officers with an Executive Severance Agreement (an "ESA"), which provides for severance benefits in the event of a specified termination event such as an involuntary termination not for cause or a termination in connection with a change in control. Please refer to the Potential Payments Upon Termination or Change-in-Control section of this proxy statement for more information. A summary of Mr. Clarke’s Employment Agreement appears in the Chief Executive Officer Compensation section of this proxy statement.

Tax and Accounting Implications

Policy on Deductibility of Compensation

Section 162(m) of the Internal Revenue Code ("IRC") provides that a public company generally may not deduct the amount of non-performance based compensation paid to certain executive officers that exceeds $1 million in any one taxable year. However, this provision does not apply to performance-based compensation that satisfies certain legal requirements, including income from certain stock options and certain formula-driven compensation. In general, the Compensation Committee has considered the effect of the IRC limitation and has structured AI plan awards and LTI plan awards to NEOs in a manner intended to be exempt from the limitation. However, under certain circumstances, the Compensation Committee may decide to grant compensation that is outside of the limits.

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Executive Compensation Tables

The table below summarizes the total compensation paid to or earned by each of our NEOs for the years ending October 31 for 2017, 2016 and 2015:

Summary Compensation Table
Name and Principal  Position
Year
Salary
($)
Bonus
($)
Stock Awards 
($)(1)
Option Awards ($)(2)
Non-Equity
Incentive
Plan Comp
($)
(3)
Change in
Pension
Value & Non-
Qualified
Deferred  Comp
 
Earnings 
($)(4)
All Other
Comp
 
($)(5)
Total
($)
Troy A. Clarke 
President and Chief
Executive Officer
2017
1,000,000
1,349,982
904,087
1,497,500
615,235
181,594
5,548,398
2016
950,000
1,963,667
547,500
1,299,928
134,758
4,895,853
2015
900,000
688,500
334,546
159,605
2,082,651
Walter G. Borst 
Executive Vice President
and Chief Financial Officer
2017
749,840
629,979
421,907
673,731
54,965
130,173
2,660,595
2016
742,630
537,750
246,322
77,855
135,564
1,740,121
2015
715,750
1,049,994
1,052,996
459,638
219,993
141,668
3,640,039
Persio V. Lisboa
President, Operations

2017
633,750
479,972
321,407
606,488
209,173
107,585
2,358,375
2016
544,688
358,500
181,086
424,669
84,758
1,593,701
2015
525,000
699,996
701,998
334,688
179,996
76,331
2,518,009
William V. McMenamin
President Financial Services and Treasurer
2017
398,875
149,986
100,448
330,648
147,201
69,456
1,196,614
Samara A. Strycker
Senior Vice President and Corporate Controller
2017
342,875
149,986
100,448
225,920
20,705
53,437
893,371
William R. Kozek 
President, Truck and Parts
2017
598,000
419,977
281,271
537,303
80,379
112,401
2,029,331
2016
592,250
358,500
196,443
238,079
87,992
1,473,264
2015
575,000
699,996
701,998
366,563
570
107,830
2,451,957
Steven K. Covey(6)
Former Senior Vice President and General Counsel
2017
256,642
199,847
570
1,827,873
2,284,932
2016
611,455
256,069
175,358
144,319
85,644
1,272,845
2015
592,250
499,996
501,431
330,395
438
94,027
2,018,537

(1)
The amounts reported in this column reflect the aggregate fair value of stock-based awards (other than stock options) granted in the year computed in accordance with FASB ASC Topic 718. Generally the aggregate grant date fair value is the amount that the Company expects to expense for accounting purposes over the award's vesting schedule and does not correspond to the actual value that will be realized by the officers. The fair values of stock-based awards are estimated using the closing price of our stock on the grant date. Stock-based awards settle in common stock on a one-for-one basis, or the cash equivalent of the common stock. The grant date fair values of each individual stock based award in 2017 are set forth in the 2017 Grant of Plan Based Awards table on page 59. Additional information about these values is included in Note 17 to our audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2017.
(2)
The amounts reported in this column reflect the aggregate fair value of stock options granted in the year computed in accordance with FASB ASC Topic 718. These amounts reflect the Company's accounting expense and do not correspond to the actual value that will be realized by the officers. Assumptions used in the calculation of these values are included in Note 17 to our audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2017. A description of stock options appears in the narrative text on page 60 following the 2017 Grants of Plan-Based Awards table.
(3)
The amounts reported in this column represent the 2017 AI plan award payment based on an actual payout at 119.8% of target. Awards are projected to be paid in February 2018.
(4)
These amounts represent the difference in the market interest rate under the IRC and the interest credit rate of 7.5% per annum compounded on a daily basis on the SRAP. The 7.5% is the rate used to design the SRAP as a comparable replacement for the MRO. The interest credit rate constitutes an ‘‘above-market interest rate’’ under the IRC. These amounts also represent the change in actuarial present value of the SERP for Messrs. Clarke, Borst, Lisboa, McMenamin and Kozek as well as Ms. Strycker. The change in actuarial present value of Mr. Covey's SEPP and MRO is negative $222,209 and is reflected as $0 in the above table. Mr. Covey did not accrue any additional benefits under those plans and the discount rate increased making the actuarial present value on October 31, 2017 less than the actuarial present value on October 2017, providing a negative change in the actuarial present value from last year to this year.
(5)
"All Other Compensation" reflects the following items: flexible perquisite cash allowances; Company-paid life and accidental death and disability ("AD&D") insurance premiums; Company contributions to the RAP and the SRAP; taxable spouse travel; and in the case of Mr. Covey, other compensation related to a termination from the Company.

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(6) Mr. Covey's "NQDC Earnings" is through his termination date of March 31, 2017. The Change in PV for Mr. Covey is negative $222,209.

NEO
Flexible
Perquisites
Company
Paid Life
and AD&D Insurance
RAP
SRAP