DEF 14A 1 nav-2019xdef14a.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._ )
 
Filed by the Registrant:
 
X
 
 
 
Filed by a Party other than the Registrant:
 
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Check the appropriate box:
 
 
 
_______
  
Preliminary Proxy Statement
 
 
_______
  
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
 
X
  
Definitive Proxy Statement
 
 
_______
  
Definitive Additional Materials
 
 
_______
  
Soliciting Material Pursuant to §240.14a-12
 
Navistar International Corporation
 
 
 
(Name of Registrant as Specified In Its Charter)
 
 
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
 
  
 
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No fee required.
 
  
 
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 
 
  
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On the Cover

Representatives of the Navistar engineering team responsible for the development of the A26 engine.

(left to right)
Darren Gosbee, Vice President, Engineering
Laura Ricart, Chief Engineer, Vehicle Performance Integration
Jim Nachtman, A26 Design Lead Engineer
Joao Silva, A26 Chief Engineer (in front)
Artur Dudzik, Technical Specialist, Engine Validation
Lee Tran, Chief Engineer, Controls and Software
Sabrina Niemann, Chief Engineer, Engine & OBD Calibration






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NAVISTAR INTERNATIONAL CORPORATION
2701 NAVISTAR DRIVE
LISLE, ILLINOIS 60532
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Date:    Tuesday, February 12, 2019, 11:00 A.M. — Central Time

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

December 19, 2018
To our stockholders:

On behalf of the Board of Directors of Navistar International Corporation, you are cordially invited to attend our 2019 Annual Meeting of Stockholders, which will be held on Tuesday, February 12, 2019 at 11:00 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;

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 19, 2018. 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 2019 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 17, 2018.

Your vote is important. Whether or not you plan to attend the 2019 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 12, 2019: THE ANNUAL REPORT AND PROXY STATEMENT
ARE AVAILABLE AT HTTP://WWW.NAVISTAR.COM/NAVISTAR/INVESTORS


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2019 Proxy Statement



TABLE OF CONTENTS
 
 
Proposal 3 - Ratification of Independent Registered Public Accounting Firm
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 Aon Hewitt US TCM Total Compensation Executive & Senior Management Level Wise Survey - Participant List
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CEO Pay Ratio Disclosure
 
 
 
 
 
 
 
 
 



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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 17, 2018. 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 12, 2019
11:00 A.M. Central Time
Navistar Corporate Headquarters
2701 Navistar Drive, Lisle, Illinois 60532


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Director Nominees

Our Board of Directors (the "Board") recommends that you 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 14 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
63
April 2013
 
 
José María Alapont
 
 
 
 
Former Chairman, President and Chief
Executive Officer of Federal-Mogul Corporation
68
October 2016
X
Finance and Nominating & Governance (Chair)
Stephen R. D'Arcy
 
 
 
 
Partner, Quantum Group LLC
64
October 2016
X
Audit (Chair)
Vincent J. Intrieri
 
 
 
 
Founder, President and Chief Executive Officer, VDA Capital Management LLC
62
October 2012
X
Finance (Co-Chair) and Nominating & Governance
Raymond T. Miller
 
 
 
 
Principal, MHR Fund Management LLC
34
April 2018
X
Audit and Compensation
Mark H. Rachesky, M.D.
 
 
 
 
Founder and President, MHR
Fund Management LLC
59
October 2012
X
Finance (Co-Chair) and Nominating & Governance
Andreas H. Renschler
 
 
 
 
Chief Executive Officer, TRATON AG
60
February 2017
X
Compensation and Nominating & Governance
Christian Schulz
 
 
 
 
Chief Financial Officer, TRATON AG
41
August 2018
X
Finance
Kevin M. Sheehan
 
 
 
 
Former President and Chief Executive Officer, Scientific Games
65
October 2018
X
Audit and Compensation
Dennis A. Suskind
 
 
 
 
Retired General Partner, Goldman Sachs & Company
76
October 2016
X
Compensation (Chair) and Nominating & Governance


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Business Strategy
Our 2018 Accomplishments
    Sales Momentum and Increased Market Share
    Launched Truck and Bus Products and Product Features Important to Key Markets
    Implemented the TRATON Strategic Alliance
    Improved Quality and Uptime
    Expanded OnCommand Connection Telematics
    Focus on Cost Management
     Our Expectations Going Forward
   Customer-Centric Focus
   Drive Operational Excellence
   Grow the Core Business
   Embrace Business Transformation
   Develop the TRATON Strategic Alliance
   Enhance Our Cross-Functional Teamwork and Winning Culture

Corporate Governance Highlights

ü
10 of 11 directors are independent under our corporate governance guidelines and the New York Stock Exchange (‘‘NYSE’’) listing standards.

ü
We have Co-Independent Lead Directors.

ü
We have Board standing committees that are composed of 100% independent directors.

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 to re-coup incentive-based compensation in the event of an accounting restatement or intentional misconduct.

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
Our executives and directors are prohibited from engaging in short sales, derivatives trading and hedging transactions, and we impose restrictions on pledges and margin account use.


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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 2018 Accomplishments

We continue to show positive progress on our top priorities as we move from a turn-around phase to a growth phase. In 2018, we ended with a significant volume increase and we were the only brand to increase Class 8 market share.

Sales: In 2018, we increased our Class 8 market share in a strong industry environment by nearly 2%, and our Core chargeout volumes ended at 73,900. Overall Class 6-8 retail market share was higher than the prior year. Our all-makes Fleetrite® brand experienced double-digit growth year over year for our overall Parts segment (U.S., Canada, Mexico and export).

Product Launches: We focused on our Core markets and investing in product development to increase customer value, improve our customers’ business and enhance customer experience.
Truck: In January 2018, we announced the International® HV™ Series Mid-Range Diesel which includes a bridge formula truck for the concrete industry. In March 2018, we announced the International® MV™ Series Mid-Range Diesel model, our new medium-duty truck.
Bus: In February 2018, we announced the newly updated IC Bus™ RE Series Type D school bus featuring remote diagnostics connectivity solutions. In July 2018, IC Bus™ became the first school bus original equipment manufacturer (OEM) to make electronic stability control and collision mitigation standard on all IC Bus models with air brakes.

Strategic Alliance: Our strategic alliance with TRATON Group continues to progress. Within the strategic alliance, the parties formed a joint venture to make recommendations for sourcing, evaluating and negotiating joint procurement opportunities.
Ÿ
The procurement joint venture has continued to give us access to global scale to achieve significant cost reductions. To date, our procurement joint venture has delivered over 90% of the target the parent companies had set for the first 24 months. It has identified a pipeline of additional projects to deliver the cumulative savings projected over the first five years.
 

The rest of the strategic alliance is on plan to deliver technology and other synergies:
Pursuing medium-duty vehicle electric powertrain.
Collaborating on fully integrated, next generation diesel big bore powertrains.
Collaborating on connected vehicle hardware and service solutions.

Quality and Uptime: Our focus on improving quality and uptime can best be seen in the reduction of dealer dwell time through improvements in diagnostic and repair procedures.
Ÿ
Warranty expense as a percentage of manufacturing revenue has decreased to 1.7%, from 2.4% in the prior year.
Ÿ
Our new product command center (“Command Center”) focuses on dwell time improvement for our new products. In 2018, the percent of repairs completed in 24 hours for our new A26 engine improved by 10 percentage points.

OnCommand Connection (“OCC”): OCC is our unique open architecture, all-brands remote diagnostics system focusing on improving vehicle uptime for our customers.

Ÿ
OCC supports the Command Center using proactive diagnostics and predictive tools.
Ÿ
We have over 600,000 vehicles actively reporting in OCC of which over 75% report via telematics.
Ÿ
We continue to add telematics partners to our portfolio.
Ÿ
In 2018, we launched OCC Telematics which includes access to the OCC Portal as a standard feature on our RH™, LT™ and Lonestar products.

Cost Management: Focus on lowering material costs in our procurement and engineering organizations has resulted in improved margins.




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Our Expectations Going Forward

Going forward, we believe we are well-positioned and have the right strategic vision in place to build upon our 2018 accomplishments. We intend to be the number one choice and the most customer focused, innovative and value driven truck and bus solution provider in the Americas. To do that, we will prioritize and focus on closing the gaps before setting the new standard. The strategic vision includes areas of focus centered around:
Ÿ
Customer-Centric
Ÿ
Operational Excellence
Ÿ
Core Business
Ÿ
Business Transformation
Ÿ
Strategic Alliance with TRATON Group and
Ÿ
Cross-Functional Teamwork and a Winning Culture






 
By focusing on customer and market segmentation, we believe we will be able to better align our efforts with customer-specific applications and product requirements. We plan to continue to drive improvement of key performance metrics and we are committed to enhance customer value. We are operating with great care to execute flawless launches. We will further investigate electrification and build our eCommerce business to support our ease of doing business initiative. Together with our strategic alliance partner, TRATON Group, we expect to have a fully integrated proprietary powertrain as early as 2020, expect to launch the next generation connectivity module allowing feature sharing, and will launch an electric medium-duty truck and electric school bus. We intend to further develop our team-based organization, enhance collaborative work environments, and utilize visual management tools. We expect our financial performance to continue to improve due to savings from expected cost reduction actions and revenue growth.
TRATON Strategic Alliance
 

In February 2017, we entered into a strategic alliance with TRATON AG , formerly Volkswagen Truck & Bus AG ("TRATON") pursuant to a Stock Purchase Agreement dated as of September 5, 2016, by and among TRATON and us (“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 TRATON purchased 16.2 million shares of our common stock for an aggregate purchase price of $256 million at $15.76 per share (the "Share Issuance"), equal to a 19.9% stake in the Company at that time (16.8% on a fully-diluted basis as of December 17, 2018).

Also on September 5, 2016, we entered into a Stockholder Agreement with TRATON (the "Stockholder Agreement") which governs the rights and obligations of the parties with respect to TRATON's holdings in the Company following the Share Issuance, including the
 
right of TRATON to nominate two directors to serve on our Board. The Board approved the Share Issuance for purposes of Section 203 of the Delaware General Corporation Law ("DGCL") and the Company and TRATON entered into an agreement which permits TRATON 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").

During 2018 we continued the implementation of our alliance with TRATON by entering into additional commercial agreements under the License and Supply Framework Agreement, expanding the scope of the Procurement JV Framework Agreement and entering into certain other commercial agreements. A description of the transactions between the Company and TRATON during 2018 is set forth in the Related Party Transactions and Approval Policy portion of the Corporate Governance section of this proxy statement.

Changes in the Composition of our Board
 

General (Retired) Stanley A. McChrystal did not stand for reelection at the 2018 Annual Meeting. Michael F. Sirignano resigned from the Board in April 2018 and was immediately replaced as an MHR Group (as definedbelow) nominee by Raymond T. Miller. Matthias Gründler resigned from the Board in May 2018 and was replaced as a TRATON nominee in August of 2018 by
 
Christian Schulz. Daniel A. Ninivaggi resigned from the Board in October 2018 and was immediately replaced as an Icahn Group (as defined below) nominee by Kevin M. Sheehan. With these changes, there was a 25% refreshment in the composition of our Board during 2018. During 2017, the two initial TRATON nominees replaced retiring directors Michael N. Hammes and James H.

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Keyes, Jeffrey A. Dokho replaced Dennis D. Williams as the UAW appointed member and Daniel A. Ninivaggi replaced Samuel J. Merksamer as an Icahn Group nominee Currently, a twelfth director position remains open. Given a 33% and 25% refreshment in Board composition during 2017 and 2018, respectively, the
 
Board is assessing its current mix of skills and attributes and is uncertain when the twelfth director position will be filled. At the appropriate time for onboarding a twelfth director, the Board will take into consideration the need to strengthen the Board by providing a diversity of expertise, age, gender, race, ethnicity, education, and other attributes which contribute to diversity.

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 current Icahn Group nominees serving as members of our Board are Vincent J. Intrieri and Kevin M. Sheehan. The current MHR Group nominees serving

 

as members of our Board are Dr. Mark H. Rachesky and Raymond T. Miller. Mr. Intrieri, Mr. Sheehan, Dr. Rachesky and Mr. Miller are nominated for re-election. In addition, pursuant to the Stockholder Agreement, TRATON 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 current TRATON nominees serving as members of our Board are Andreas H. Renschler and Christian Schulz. Mr. Renschler and Mr. Schulz are nominated for re-election. As a result, three (3) of our largest stockholders have Board representation and collectively hold six (6) of the eleven (11) seats currently filled on our twelve (12) seat Board.
Corporate Governance
 

During 2018, 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. Currently, Vincent J. Intrieri and Mark H. Rachesky serve as Co-Independent Lead Directors. 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 are independent under our Corporate Governance Guidelines and the NYSE listing standards.

We have Co-Independent Lead Directors.

We have Board standing committees that are composed of 100% independent directors.

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 to recoup incentive-based compensation in the event of an accounting restatement or intentional misconduct.

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.

Our executives and directors are prohibited from engaging in short sales, derivatives trading and hedging transactions, and we impose restrictions on pledges and margin account use.


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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 70% 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. 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 2017 we met our annual incentive metrics and accordingly, awards were paid at 119.8% of target. For 2018, Navistar met or exceeded the 2018 annual incentive plan targets for many of the performance goals while the Company was below target on other
 
goals, which will yield an overall payout percentage of 112.4% of target.

For a summary of our commitment to best practices in executive compensation and changes made in 2018, please see the Executive Summary section of the Compensation, Discussion and Analysis section of this proxy statement.

Highlights of the changes made in 2018 include:

Retained an Annual Incentive ("AI") plan that leverages our scorecard approach, retained the adjusted EBITDA multiplier, the individual performance factor, and market share and cost metrics, removed the EBIT (Parts EBIT) metric, added a quality metric and replaced Free Cash Flow with Operating Cash Flow

Key differentiators in our 2018 Long-Term Incentive ("LTI") plan include transitioning from an annual to a 3-year performance cycle and replacing the Market Share metric with Revenue Growth while retaining the current vehicles and mix of performance-based and time-based equity as well as retaining the use of adjusted EBITDA and the relative Total Shareholder Return ("TSR") multiplier
    

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, 2018. 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.




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Available Information
 

We are subject to the reporting and information requirements of the Exchange Act and as a result, we 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, 2018. 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

Why did I receive a Notice of Internet Availability of Proxy Materials?

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 2019 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.

What is the purpose of the Annual Meeting?

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 — the ratification of the appointment of KPMG LLP (‘‘KPMG’’) as the Company’s independent registered public accounting firm, and (iv) 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.

How does the Board recommend that I vote?

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 ratification of the appointment of KPMG as our independent registered public accounting firm (Proposal 3).

Who can attend the Annual Meeting?

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 17, 2018;

An authorized proxy holder of a stockholder of record on December 17, 2018; 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.

What is a stockholder of record?

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.

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

The Board has set December 17, 2018, 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 17, 2018, there were approximately 98,932,337 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

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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.

How do I vote?

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.

How can I change or revoke my proxy?

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 11, 2019 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.

Is my vote confidential?
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.

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

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 3) 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) and the Say-On-Pay proposal (Proposal 2), 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 shares on that proposal. The missing votes for these non-routine matters are called ‘‘broker non-votes.’’

What is the quorum requirement for the Annual Meeting?

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.

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

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 ‘‘withhold’’ votes than ‘‘for’’

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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 (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 and 3 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 (Proposals 2 and 3).

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 our Board'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.

What is householding?

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, 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.

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

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.

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Who pays for the solicitation of proxies?

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.

When are stockholder proposals or nominations due for the 2020 Annual Meeting of Stockholders?

In order to be included in the Company’s proxy materials for our 2020 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 21, 2019. 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 2020 annual meeting of stockholders, the Company’s Corporate Secretary must receive such notice no earlier than September 15, 2019, and no later than October 15, 2019.

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.

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

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.

May stockholders ask questions at the Annual Meeting?

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.

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

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. Currently, a twelfth director position is vacant. Given the substantial refreshment in Board composition during 2017 and 2018, the Board intends to conduct a search process to identify the best candidate to fill this twelfth Board seat at a future date. 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. Kevin M. Sheehan. The MHR Group's current nominees are Dr. Mark H. Rachesky and Mr. Raymond T. Miller. Moreover, in connection with the TRATON alliance, and pursuant to the terms of the Stockholder Agreement, two persons nominated by TRATON were initially elected to our Board effective February 28, 2017 upon consummation of the Share Issuance. TRATON's current nominees are Mr. Andreas H. Renschler and Mr. Christian Schulz.

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: 63

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: 68

Director since: October 2016

Committees: Finance and Nominating & Governance (Chair)
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 Federal-Mogul Corporation until 2013. He was the 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 Ferroglobe Plc., a public silicon, manganese and special alloys producer company since January 2018 and a director of Ashok Leyland, a public commercial trucks, vans, buses and defense manufacturing company since January 2017. Mr. Alapont also serves as a member of the board of Hinduja Investment and Project Services Limited, a private investment and service group, since 2016 and a director of Hinduja Automotive Limited, a private automotive holding group, since November 2014. He has served as a director of Manitowoc Company, a public crane manufacturing company, since March 2016 and was a director of Mentor Graphics Corp., a public electronic design automation company, from 2011 to 2012. Mr. Alapont holds a degree in Industrial Engineering from the Valencia Technical School and a degree in Philosophy from the University of Valencia, Spain.

Skills and Qualifications

Mr. Alapont brings broad executive and leadership experience of more than 30 years serving several automotive manufacturing companies, together with his significant experience as a member of other public and private company boards. Mr. Alapont's particular knowledge and experience in a variety of areas, including corporate finance, 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,well qualify him to serve on our Board.

 
 
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Stephen R. D'Arcy*

Age: 64

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 has served 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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Vincent J. Intrieri*

Age: 62

Director since: October 2012 (Co-Independent Lead Director since October 2018)

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. 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; chairman of the board and a director of Viskase Companies, Inc., a meat casing company, from April 2003 to March 2011; and a director of Conduent Incorporated, a business process services company that was launched following its separation from Xerox, from January 2017 to May 2018. 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 Mr. 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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Raymond T. Miller*

Age: 34

Director since: April 2018

Committees: Audit and Compensation

Biographical Information

Mr. Miller is a Principal at MHR Fund Management LLC, an investment 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, where he is responsible for sourcing and managing investments and portfolio companies. Prior to joining MHR Fund Management LLC in 2011, Mr. Miller spent five years at Guggenheim Partners Investment Management LLC investing across capital structures in a variety of industries. Mr. Miller currently serves as a director of Erickson, Inc., a leading aerospace manufacturer and global provider of aviation services, and holds a B.B.A, with high distinction, from the Stephen M. Ross School of Business at the University of Michigan.

Skills and Qualifications

Mr. Miller possesses strong corporate finance and business expertise which well qualifies him to serve on our Board.


 
 
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Mark H. Rachesky, M.D.*

Age: 59

Director since: October 2012 (Co-Independent Lead Director since October 2018)

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: 60

Director since: February 2017

Committees: Compensation and Nominating & Governance

Biographical Information

Mr. Renschler has been Chief Executive Officer of TRATON AG, 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 Chief Executive Officer, 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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Christian Schulz*

Age: 41

Director since: August 2018

Committees: Finance
Biographical Information

Mr. Schulz has been the Chief Financial Officer and a member of the Board of Management of TRATON AG since June 2018. Previously he was in charge of Corporate Development, Strategy and Mergers & Acquisitions at TRATON AG from January 2017 to June 2018. As part of this role, he led the advancement of both TRATON AG's strategic development and its strategic partnership.

Prior to joining TRATON AG, Mr. Schulz spent five years as Director of Controlling Operations worldwide at Mercedes-Benz Cars and its shareholdings abroad from 2011 to 2017. Mr. Schulz was the Controlling Director for Purchasing, Production, and R&D at Mitsubishi Fuso in Japan from 2008 to 2010. His previous roles included management responsibiIities in the fields of finance and controlling at Daimler Group, including serving as Chief Financial Officer of the transmissions plant in Gaggenau, Germany.

Skills and Qualifications

Mr. Schulz possesses strong financial expertise, having served in key management roles in fields of finance, controlling and business development within the automotive manufacturing business. His background and experience well qualify him to serve on our Board.


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Kevin M. Sheehan*

Age: 65

Director since: October 2018

Committees: Audit and Compensation
Biographical Information

From August 2016 to June 2018, Mr. Sheehan served as the President and Chief Executive Officer at Scientific Games a gaming and lottery company.  From February 2015 through August 2016, Mr. Sheehan taught full time as the John J. Phelan, Jr. Distinguished Visiting Professor of Business at Adelphi University. Mr. Sheehan previously held several senior positions with Norwegian Cruise Line Holdings Ltd., a global cruise company, from November 2007 to January 2015. These positions included President from August 2010 to January 2015; Chief Executive Officer from November 2008 to January 2015; and Chief Financial Officer from November 2007 to September 2010. Mr. Sheehan also previously served as Chairman of the Board and Chief Executive Officer of Cendant Corporation's Vehicle Services Division from March 2003 to March 2005, which included global responsibility for Avis Rent A Car, Budget Rent A Car, Budget Truck, PHH Vehicle Management, First Fleet and Wright Express.

Mr. Sheehan has served as a director of Hertz Global Holdings, Inc. since August 2018 where he currently serves on the Finance and IT committees, Dave & Buster’s, Inc. since 2013 where he currenty chairs the Audit Committee and serves on the Finance Committee, and New Media Investment Group Inc. since November 2013 where he chairs the Audit Committee and serves on the Compensation Committee.  From 2013 to 2017, he was a director of Bob Evans Farms, Inc. where he served on the Audit Committee.  Mr. Sheehan is a graduate of Hunter College and New York University Graduate School of Business and is a Certified Public Accountant.

Skills and Qualifications

Mr. Sheehan has broad experience as a Chief Executive Officer of several large, diversified corporations and as a member of the board of directors of other public companies. He has experience as a Chief Financial Officer of several global businesses, has a Masters degree in finance and taxation, and is a certified public accountant. Mr.Sheehan possesses particular expertise, knowledge, and strong skills in accounting, corporate governance, finance, mergers and acquisitions, and treasury matters, which strengthens the Board's collective knowledge, capabilities, and experiences and well qualifies him to serve on our Board.
 
 
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Dennis A. Suskind*

Age: 76

Director since: October 2016

Committees: Compensation (Chair) and Nominating & Governance
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: 44

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 Certified Public Accountant 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 2018, the following related-person transactions occurred:

Carl C. Icahn. As a 16.9% stockholder of the Company as of December 17, 2018, Carl C. Icahn is a related person. During the first eleven months of 2018, Mr. Icahn owned 100% of Federal-Mogul Corporation (‘‘Federal-Mogul’’). Mr. Icahn sold his entire interest in Federal Mogul to a third party on or about October 1, 2018. Navistar purchased goods and services from Federal-Mogul throughout 2018 at a cost of approximately $16,401,884. Navistar received standard terms and conditions and received no unique payment terms or special concessions. Because Mr. Icahn owned Federal-Mogul in 2018, Mr. Icahn has an indirect material interest in this transaction. The Audit

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Committee and the Board considered the factors described above and in December 2018 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.

TRATON , Andreas H. Renschler and Christian Schulz. The Company and its subsidiaries have historically had a series of commercial relationships with TRATON and its affiliates and subsidiaries, and the parties entered into additional transactions prior to and during 2018. The total aggregate value of these transactions amounted to approximately $157,367,629 during 2018. As of December 17, 2018, TRATON is a 16.8% stockholder of the Company and is therefore a related person. Messrs. Renschler and Schulz, who are members of our Board, are also the Chief Executive Officer and Chief Financial Officer, respectively, of TRATON. By virtue of their positions as officers of TRATON , Messrs. Renschler and Schulz are deemed to have an indirect material interest in the Company's transactions with TRATON. The related person transactions which existed, were entered into or are currently being proposed between the Company and TRATON during 2018 and the first two months of 2019 ("the TRATON Transactions") are as follows:

1.
Navistar pays MAN Truck & Bus AG ("MAN"), an indirect subsidiary of TRATON, 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 2018 was €1,775,800 (US$2,108,738).

2.
MWM International Motores, S.A. ("MWM"), one of our Brazil operating subsidiaries, purchases various parts from MAN and its direct and indirect subsidiaries. In 2018, the amount paid for such parts, including commissions, was US$406,791.

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 TRATON, sells block cylinders and loose engines to MAN Latin America and sells various spare parts to MAN Latin America and Volkswagen AG. The revenue and deferred revenue associated with this relationship during 2018 was approximately US$146,205,319 and US$828,872, respectively.

4.
Global Truck & Bus Procurement LLC (the "Procurement JV"), a joint venture entity, was formed and commenced operations in 2017. Owned 51% by TRATON, LLC (formerly known
 
as Volkswagen Truck & Bus, LLC), a subsidiary of TRATON, 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 TRATON and Navistar. The Procurement JV's annual operating budget is funded on a cost plus basis. In 2018, the parties each made operating cost payments to the Procurement JV in the amount of $2,301,428.

5.
Certain of our subsidiaries have entered into agreements, or are currently proposing to enter into agreements, with certain indirect subsidiaries of TRATON with respect to supplying us with big bore diesel engines with after-treatment and transmissions; a prototype Battery Electric Vehicle system; and certain consulting and /or engineering services in connection with our development and building of a prototype electric school bus, an electric battery for medium duty trucks, and a transmission for use with A26 engines. Payments made by us under these agreements during 2018 totaled US$5,409,769.


Each of the TRATON Transactions 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 2018 the Board, upon the recommendation of the Audit Committee and with Messrs. Renschler and Schulz not participating since they have an indirect material interest, approved and ratified the TRATON Transactions on the basis that the Navistar/TRATON relationship is in the best interests of the Company.

Walter Borst. As an executive officer of the Company, Walter Borst is a related person. Mr. Borst currently serves as a trustee of Kettering University. The Company has pledged a charitable gift to Kettering University in the amount of $2,000,000 to be paid in five annual payments of $400,000. The gift will fund technology research, scholarships for STEM students, and the naming rights for Kettering University's corporate common space. In December 2018, the Audit Committee and the Board reviewed, approved and ratified the Kettering University charitable pledge.

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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, namely Dr. Rachesky and Messrs. Alapont, D'Arcy, Dokho, Intrieri, Miller, Renschler, Schulz, Sheehan 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 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.

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 member 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. This process included a review of the continuing development of Navistar's commercial relationships with TRATON for which Messrs. Renschler and Schulz serve as the Chief Executive Officer and Chief Financial Officer, respectively. More information on the TRATON relationship is set forth in the Related Party Transactions and Approval Policy portion of the Corporate Governance section of this proxy statement.

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. Upon that director's 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 at the 2017 Annual
 
Meeting, General Stanley McChrystal was selected as the Independent Lead Director. However, General McChrystal elected to not stand for re-election at the 2018 Annual Meeting. The Board continued to believe that this leadership structure was in the best interests of the Company and its stockholders, but it did not immediately identify a successor Independent Lead Director. After careful consideration and discussion by and among the Nominating and Governance Committee and the full Board, on October 16, 2018, Vincent J. Intrieri and Mark H. Rachesky were selected as the Co-Independent Lead Directors.


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

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reviewing and discussing the Company’s policies and guidelines with respect to risk assessment and risk management. It also focuses on the Company's 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 2020 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 15, 2019, and no later than October 15, 2019, 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 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.

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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.



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 2018, 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 2018, the full Board met 9 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 chairs 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 2018 each of the directors attended 75% or more of all the meetings of the Board and the committees on which he serves with the exception of Andreas H. Renschler. The average attendance of all directors at meetings of the Board and the committees on which they served in 2018 was 94%. We encourage all Board members to attend all meetings, including the Annual Meeting. Ten of our eleven directors who were directors at the time of our 2018 annual meeting of stockholders attended that meeting with two of the ten participating by teleconference.



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Below is a table indicating committee membership and a description of each committee of the Board.
Committee Membership
(as of December 19, 2018)
 
Audit
Compensation
Finance
Nominating & Governance
Troy A. Clarke
 
 
 
 
José María Alapont
 
 
ü
ü*

Stephen R. D'Arcy
ü*
 
 
 
Jeffrey A. Dokho
ü
 
ü
 
Vincent J. Intrieri
 
 
ü*
ü
 Raymond T. Miller
ü
ü
 
 
 Mark H. Rachesky
 
 
ü*
ü
Andreas H. Renschler
 
ü
 
ü
 Christian Schulz
 
 
ü
 
 Kevin M. Sheehan
ü
ü
 
 
Dennis A. Suskind
 
ü*
 
ü
* Indicates the chair of the committee. Mr. Intrieri and Dr. Rachesky serve as co-chairs of the Finance Committee.

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 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 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. Kevin M. Sheehan, each as an ‘‘audit committee financial expert,’’ as defined by applicable law, rules and regulations. In 2018, the Audit Committee held 9 meetings. The Audit Committee
 
conducted an evaluation of its performance in October 2018.

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 8 meetings in 2018. The Compensation Committee conducted an evaluation of its performance in October 2018.

Finance Committee — The Finance Committee reviews the Company’s financing requirements, procedures by which projections and estimates of cash flow are

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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 7 meetings in 2018. The Finance Committee conducted an evaluation of its performance in October 2018.

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 8 meetings in 2018. The Nominating and Governance Committee conducted an evaluation of its performance in October 2018.


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 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 17, 2018, 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)
16.9%
 TRATON AG
 Dachauer Str. 641
 80995 Munich, Germany
16,629,667(C)
16.8%
Mark H. Rachesky, M.D.
40 West 57
th Street, 24th floor  
New York, NY 10019
16,282,835(D)
16.5%
Franklin Resources, Inc.  
One Franklin Parkway  
San Mateo, CA 94403-1906
11,354,911(E)
11.5%
GAMCO Investors, Inc. et. al.  
One Corporate Center  
Rye, NY 10580-1435
8,508,735(F)
8.6%

(A)
Applicable percentage ownership is based upon 98,932,337 shares of Common Stock outstanding as of December 17, 2018.

(B)
As reported in Schedule 13D/A, 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/A filed with the SEC on April 18, 2018, by Volkswagen Truck and Bus GmbH ("VW T&B") and Volkswagen AG ("Volkswagen" and together with VW T&B, the "Reporting Persons"). The Reporting Persons are each the beneficial owners of 16,629,667 shares of Common Stock. In August 2018, VW T&B changed its name to TRATON AG ("TRATON"). TRATON and Volkswagen have shared power to vote and to dispose of 16,629,667 shares of Common Stock. TRATON is a wholly-owned subsidiary of Volkswagen.

(D)
As reported in a Schedule 13D/A filed with the SEC on April 18, 2018 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 16,282,835 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) 25,934 shares of Common Stock held directly by Dr. Rachesky; (iii) 1,901 shares of Common Stock that may be obtained 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 a Schedule 13G/A filed with the SEC on February 7, 2018, 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

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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 February 16, 2018, by Gabelli Funds, LLC, GAMCO Asset Management, Inc., Teton Advisors, Inc., Gabelli & Company Investment Advisers, 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 2,747,509 shares of Common Stock, GAMCO Asset Management Inc. has sole voting power with regard to 5,322,926 shares of Common Stock and sole dispositive power with regard to 5,678,826 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 2,200 shares of Common Stock, MJG Associates, Inc. has sole voting and dispositive power with regard to 2,000 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 no voting or dispositive power with regard to any shares of Common Stock, GAMCO Investors, Inc. has no voting or dispositive power with regard to any shares of Common Stock, Associated Capital Group, Inc. has no voting or dispositive power with regard to any shares of common stock, and Mario J. Gabelli has sole voting and dispositive power with regard to 56,200 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, 2018 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
968


5,000

5,968

 
*
Walter G. Borst - EVP and CFO
62,969

10,366

96,850

170,185

 
*
Troy A. Clarke - Chairman, President & CEO
105,200

46,643

1,028,960

1,180,803

 
1.2
Stephen R. D'Arcy - Director
1,383


5,000

6,383

 
*
Jeffrey A. Dokho(C) - Director




 
*
Vincent J. Intrieri - Director
592

7,977

30,000

38,569

 
*
Curt A. Kramer - SVP and General Counsel
2,385


3,157

5,542

 
*
Persio V. Lisboa - EVP and COO
25,532

2,790

59,242

87,564

 
*
William V. McMenamin - President, Financial Services and Treasurer
21,051

12,496

21,034

54,581

 
*
Raymond T. Miller - Director

1,386


1,386

 
*
Mark H. Rachesky(D) - Director
16,250,934

1,901

30,000

16,282,835

 
16.5
Andreas H. Renschler - Director
703


1,667

2,370

 
*
Christian Schulz - Director




 
*
Kevin M. Sheehan - Director




 
*
Dennis A. Suskind - Director
1,383

1,918

5,000

8,301

 
*
All Directors and Executive Officers as a Group (17 persons)(E)
16,481,747

85,477

1,291,508

17,858,732

 
18.1

*
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, 2018, 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 2018 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 were entitled to defer their cash bonus into DSUs. If an executive officer elected 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 vested 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 vested in equal installments on each of the first three anniversaries of the date on which they were 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 2017 and 2018 annual meetings 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 97% and 99% 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:

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

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

The 2018 LTI performance targets are projected to be above target for Adjusted EBITDA and above target for Revenue Growth.

The 2018 AI awards will be paid out at 112.4% 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 2018 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 2018, 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)
Dennis A. Suskind, Chairman
José Marìa Alapont
Raymond T. Miller
Stephen R. D'Arcy
Andreas H. Renschler
Jeffrey A. Dokho
Kevin M. Sheehan
Vincent J. Intrieri
 
Mark H. Rachesky
 
Christian Schulz

(Approved by the members of the Compensation Committee and the other independent members of the Board on December 11, 2018.)

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 2019 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
Curt A. Kramer
Senior Vice President and General Counsel












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This Compensation section is organized into the following main categories:

Executive Summary
 

During 2018, we continued the implementation of our strategic alliance with TRATON AG, launching products valued by our customers, improving quality and uptime, and increasing Class 8 market share. We continue to make strong financial progress and are optimistic about 2019.

The Company has a robust stockholder outreach and engagement program in place. We engage in regular contact with our stockholders throughout the year. Approximately 70% 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. 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.

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 2018 the Company saw an improvement of approximately $244M in adjusted EBITDA. Also in 2018:
 

The Company approved 2018 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 2018 results, the 2018 LTI awards based on performance measures are projected to be above target for adjusted EBITDA and above target for Revenue Growth.

Based on 2018 performance measures of our short-term annual incentive ("AI") plan, 2018 AI awards will be paid at 112.4% of target.

For 2019, AI performance goals as determined by our Compensation Committee will include Market Share, Cost, Liquidity and Uptime with both an adjusted EBITDA multiplier and an individual performance factor.
 
In 2018, 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 prohibit short selling, trading in derivatives or engaging in hedging transactions by executives and directors. In addition, any pledging and margin account use must be pre-cleared through the Corporate Secretary or the General Counsel.

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 2018 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 2018, including progressing our strategic alliance with TRATON, launching products valued by our customers, improving quality and uptime, and increasing Class 8 market share. For 2018, AI awards will be paid out at 112.4% of target.


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With respect to LTI, the 2016, 2017 and 2018 LTI plans were 50% performance-based and 50% time-based. Based on Company results:

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


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

The 2018 LTI performance targets are projected to be above target for Adjusted EBITDA and above target for Revenue Growth.
The following table outlines the LTI awards granted to our NEOs other than our CEO for 2016, 2017 and 2018, and for our CEO in 2017 and 2018, along with the actual performance of those awards as of October 31, 2018.
 
 
Performance Cash Plan
Time-Based RSUs
FY2016
Exercise Price/Closing Price on Grant
$7.17
Stock Price as of October 31, 2018
$33.49
% Equity Award
50%
50%
Adjusted EBITDA Met?
Below Target
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, 2018
$33.49
% of Equity Award
50%
50%
Adjusted EBITDA and Relative TSR?
Above Target
N/A
Market Share and Relative TSR?
Target
N/A
 
 
Performance Cash Plan
Time-Based RSUs
FY2018

Exercise Price/Closing Price on Grant
$40.18
Stock Price as of October 31, 2018
$33.49
% of Equity Award
50%
50%
Adjusted EBITDA and Relative TSR?
Above Target
N/A
Revenue Growth and Relative TSR?
Above Target
N/A

In 2018, 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 112.4% 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 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 following charts which illustrate the alignment of Navistar’s executive pay and the external marketplace.

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

paymixa07.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;


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

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 2018.

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 Pay Governance's 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 2018, management recommended and the Compensation Committee approved two changes to our peer group. Joy Global, Inc. was acquired by Komatsu America and was removed from our peer group. Cooper-Standard Holdings, Inc. is similarly sized to Joy Global, Inc. and 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 the Aerospace and Defense, Construction Machinery and Heavy Trucks, Industrial Machinery, Auto Parts and Equipment, Tires and Rubber or Agricultural and Farm Machinery sub‐industries (i.e., primary industries), as defined by the S&P Global Industry Classification Standard (“GICS”);

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 2018 peer group consists of the following 20 companies:
Company Name
Trailing 12 Months Revenues ($ mil.)
Trailing 12 Months Assets ($ mil.)
Trailing 12 Months Enterprise Value ($ mil.)
Composite Percentile Rank
PACCAR Inc
$22,671
$25,103
$27,032
97%
Cummins Inc.
$23,121
$18,992
$23,797
93%
Illinois Tool Works Inc.
$14,817
$15,319
$48,600
87%
Parker-Hannifin Corporation
$14,417
$15,425
$24,186
83%
The Goodyear Tire & Rubber Company
$15,670
$17,591
$10,731
78%
Aptiv PLC
$14,239
$12,327
$23,773
72%
Textron Inc.
$14,239
$14,669
$15,746
72%
Lear Corporation
$21,570
$12,009
$9,590
68%
BorgWarner Inc.
$10,543
$9,716
$10,086
58%
Dover Corporation
$7,945
$8,462
$15,194
50%
Masco Corporation
$8,173
$5,610
$11,740
45%
Navistar International Corporation
$9,531
$6,924
$7,834
45%
AGCO Corporation
$9,287
$7,917
$6,090
42%
Tenneco Inc.
$9,874
$5,028
$4,193
33%
Trinity Industries, Inc.
$3,611
$9,405
$7,373
33%
Dana Incorporated
$8,007
$5,947
$4,077
30%
Oshkosh Corporation
$7,706
$5,294
$4,550
27%
Terex Corporation
$4,956
$3,339
$3,182
17%
Meritor, Inc.
$4,178
$2,726
$2,178
10%
Cooper-Standard Holdings Inc.
$3,695
$2,660
$1,998
5%
Visteon Corporation
$3,050
$1,998
$2,341
3%
 
 
 
 
 
75th Percentile
$14,417
$14,669
$15,746
Average
$11,014
$9,832
$12,585
Median
$9,531
$8,462
$9,590
25th Percentile
$7,706
$5,294
$4,193
Navistar Rank
50%
40%
45%
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 October 31, 2018 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 2018 our Compensation Committee reviewed total compensation levels and mix relative to the above-
 
described peer group and broader industry surveys published by Aon Hewitt. Survey market pay data has been size-adjusted to Navistar's revenues (corporate and unit-specific) and updated to January 1, 2019. Please refer to Appendix A of this proxy statement for a list of survey participants in Aon Hewitt’s 2017 U.S. Total Compensation Measurement (‘‘TCM’’) Executive & Senior Mgmt. Level Wise Survey.


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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 total direct compensation (base salary plus
 
target bonus plus the approved grant value of long-term incentives) 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 2018 include Market Share, Cost, Liquidity and Quality as well as an adjusted EBITDA multiplier
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 amount of the 2018 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") which was extended for two additional years in April 2016. Mr. Clarke's Employment Agreement was amended in April 2018 to extend the expiration of the Agreement for one year (the "2018 Employment Agreement Amendment"). The 2018 Employment Agreement Amendment includes a “service after term” provision under which, in summary, Mr. Clarke agrees to serve as Executive Chairman of the Board and/or as a senior advisor to Navistar for a period of not less than one year after he ceases serving as President and CEO.


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The following table summarizes certain material terms of the Employment Agreement, as amended in April 2018, as well as certain other benefits received by Mr. Clarke.

Pay Element
Contractual Terms
Annual Base Salary
$1,050,000
Short-term Annual Incentive or AI(1)
Target AI of 125% of Base Salary Maximum AI of 250% of Base Salary Includes pro-rata AI payment for
FY2019 AI (based on actual performance)
Long-Term Incentive or LTI
Value of $5,500,000 in 2018
Total Direct Compensation
$7,862,500
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 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 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 112.4% for 2018.


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 at the start of that prior 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 2018, the independent members of the Board discussed and evaluated Mr. Clarke's
 



accomplishments as CEO. These accomplishments include:

Leadership Accomplishments

Implementation of ’ ‘Lean Enterprise’ activities have resulted in increased speed, performance, and employee engagement
Changes to senior leadership to support the desired performance and organizational culture

Product Accomplishments
Completion of the Horizon product program which included the introduction of the MV

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(Medium Duty), HV (Vocational), and CV (New Class 4/5)
Market acceptance of the LT (On Highway Tractor)
Significant increase in share from the 12.4L A26 engine
Increase in Bus market share with the new gasoline powertrain

Operation Accomplishments

Significant improvements in quality, cost, and safety results across all manufacturing plants
Substantial progress toward the 24 month cost savings target from the procurement JV with TRATON

Commercial Accomplishments

Overall market share increase
Continued implementation of a more detailed and actionable customer segmentation model which has already generated significant results
Development of comprehensive plans to improve ‘Uptime’

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 112.4% of target or $1,475,250.

Mr. Clarke's primary goals for 2019 include the following:

Assess plans, actions, and reporting structure of Investor Relations;
Successful management of the alliance relationship, procurement JV, and technology programs
Improve 'Uptime'
Implement a product line profitability process to provide more detailed analysis and plans to manage mix, content, complexity and pricing
Implement ELT level organization structure creating a new after-sales organization to support dealer network transformation and customer segmentation plans
Create an e-Mobility business center and organization
Maintain succession plans for key leader positions



Summary of the Executive Salary Planning Approval Process

In December 2018, the Compensation Committee approved Mr. Clarke's CEO goals for 2019 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.

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 2018, base salary performance increases were based upon NEO and Company performance. The table below summarizes the base salaries for our NEOs in 2018 as well as their previous base salaries.


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NEO 2018 Base Salary
NEO
Current Base Salary
Effective Date
Previous
Base Salary
Effective Date
Troy A. Clarke (1)
$
1,050,000

April 16, 2018
$
1,000,000

April 22, 2016
Walter G. Borst(2)
$
772,335

February 1, 2018
$
749,840

February 1, 2016
Persio V. Lisboa(2)
$
729,000

February 1, 2018
$
675,000

March 1, 2017
William V. McMenamin(2) 
$
460,000

September 1, 2017
$
386,650

February 1, 2016
Curt A. Kramer(2)
$
440,800

February 1, 2018
$
380,000

April 1, 2017
.

(1)
Mr. Clarke received a base salary increase upon renewal of his Employment Agreement in April 2018.
(2)
Messrs. Borst, Lisboa, McMenamin and Kramer, received base salary increases due to performance.


 



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


Annual Incentive or "AI"

Navistar provides its executives with an annual incentive compensation opportunity through the Annual Incentive ("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 2018, 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.

2018 Annual Incentive

The AI plan for 2018 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 150%. 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.


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Below is a summary of the 2018 AI performance goals, associated performance metrics, and level of goal achievement.
2018 Performance Goal
Metric
% Allocation
Level Achieved
Market Share
Weighted Average Market Share
35%
Below Target
Cost
Total Cost Reduction
35%
Below Target
Liquidity
 Operating Cash Flow
20%
Distinguished
Quality
 First Time Quality
10%
Above Target

2018 Annual Incentive Target Award Percentages and Amount Earned

As seen in the table above, Navistar met or exceeded two of the 2018 AI plan targets for many of the performance goals while the Company was below target on other goals, yielding an overall payout percentage of 112.4% of target. Below are the NEO payment amounts.
Named Executive Officer
Target as %  of Base Salary
2018 AI Amount
Earned
Troy A. Clarke
125%
$1,475,250
Walter G. Borst
75%
$651,078
Persio V. Lisboa
75%
$614,547
William V. McMenamin
60%
$310,224
Curt A. Kramer
55%
$272,503


2019 Annual Incentive

In 2019, we intend to build on our progress and expect to be profitable by leveraging the TRATON 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, operational excellence and our business transformation.

Due to our success in driving business results in 2018, we created an AI plan that enables our strategy and drives results for our employees, customers and shareholders. The table below illustrates the 2019 AI performance goals and metrics.

2019 Annual Incentive Targets
2019 Performance Goal
Weighting
Description
Target
Market Share
30%
Segment-Weighted (Heavy/Severe, Medium & Bus)
18.4%
Cost
30%
Total Cost Reduction
$0 (Cost Neutral)
Liquidity
30%
Operating Cash Flow
$275 Million
Uptime
10%
24 Hour Repair Velocity
50%

2019 AI design features include:

Continuing to use Market Share, Cost and Liquidity metrics;

Replacing Quality metric with Uptime (24 Hour Repair Velocity) metric; and

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


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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 2018 for eligible plan participants in February 2018. LTI awards granted to NEOs in 2018 were comprised of performance-based RCUs, based on adjusted EBITDA and revenue growth 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.
 
2018 LTI Plan
Vesting
Performance Measures
Goals
Performance Vesting Criteria
 
Performance-Based RCUs(1) (2) 
3 year cliff
Adjusted EBITDA
(50%)
Cumulative 2018, 2019, 2020 EBITDA goal of $2.34B
      
Based on the Company's cumulative 2018-2020 EBITDA goal and TSR Modifier(3)
 
Revenue Growth (50%)
3 Year Annual + Cumulative Goal) (1) 2018 - 10% (2) 2019 - 6% (3) 2020 - 6% (4) Cumulative - 24%
Based on the Company's 4 performance goals and the 3-Year Relative Total Shareholder (TSR) multiplier: 2018 goal achieved for a future payout of 50% as determined in year 1 of the 3 year period and subject to the the TSR multiplier(5)
         
 
Time-Based Restricted Stock Units(4)
3 year cliff
N/A
N/A
N/A
 
 
Time-Based Stock Options
Ratably, annually, 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 2018-2020 were established by the Compensation Committee of the Board of Directors within 90 days of the beginning of the fiscal year 2018.
(3)
We have 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 and any payouts are subject to the TSR multiplier which can decrease the payment by as much as 25% or increase the payment by as much as 25%, depending on the value of the TSR at the end of fiscal year 2020.
(4)
These awards are share-settled.

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(5)
Revenue Growth payout is dependent on number of goals achieved (1 out of 4 goals is a 50% payout of the 50% Revenue Growth component,2 out of 4 goals is a 100% payout, 3 out of 4 goals is a 150% payout and 4 out of 4 goals is a 200% payout) and subject to the 3-Year Relative Total Shareholder Return (TSR) multiplier which can decrease the payment by as much as 25% or increase the payment by as much as 25%, depending on the value of the TSR at the end of fiscal year 2020.

2018 Long-Term Incentive Awards

The following table summarizes our 2018 long-term incentive grant for our NEOs.
NEO
Performance-Based RCUs
Time-Based Restricted Stock Units
Time-Based Stock Options
Targeted Economic
Value
Troy A. Clarke (1)
$2,750,000
40,530
56,497
$5,500,000
Walter G. Borst (1)
$1,050,000
15,679
22,617
$2,100,000
Persio V. Lisboa (1)
$800,000
11,946
17,232
$1,600,000
William V. McMenamin (1)
$250,000
3,733
5,385
$500,000
Curt A. Kramer (1)
$250,000
3,733
5,385
$500,000

(1) Long-term incentive awards for all NEOs were granted in February 2018 with the exception of Mr. Clarke. Mr. Clarke's long-term incentive awards were granted in April 2018.

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2016 Long Term Incentive - Performance Awards

The table below provides details on the performance awards our NEOs with the exception of Mr. Kramer were granted in 2016 and the actual amounts earned for the performance period ending October 31, 2018 upon the attainment of certain performance metrics as certified by the Compensation Committee in December 2018. The Performance-Based RCU payments will be made in February of 2019. The right to the awards are subject to service conditions being met.

Type of Award
Performance Measure
Performance Goals
Performance Result
Payout as % of Target
Performance-Based RCUs
Adjusted EBITDA

1 goal met - 50%
2 goals met - 100%
3 goals met - 150%
4 goals met - 200%(1)  

2016 - $600M
2016 - $508M
As 1 goal was met - payout was 50% of RCU Target
2017 - $650M
2017 - $582M
2018 - $700M
2018 - $825M
Cumulative - $2B
Cumulative - $1.915B
Performance-Based RCUs
Market Share

1 goal met - 50%
2 goals met - 100%
3 goals met - 150%
4 goals met - 200%(1)  


2016 -17.0%
2016 - 15.8%
0%
2017 - 18.0%
2017 - 17.3%
2018 - 19.0%
2018 - 17.5%
Average - 18.0%
Average - 16.9%
(1) There was no interpolation between points.

Due to Mr. Kramer's organizational level in fiscal year 2016, he did not receive a performance-based RCU grant. Instead he was granted time-based RCUs and subject to continued employment will vest and be paid in February 2019.
 







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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)

RAP
SRAP
SERP
Troy A. Clarke
Walter G. Borst
Persio V. Lisboa
William V. McMenamin
Curt A. Kramer
(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.
In addition, 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.
(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:

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 retiree medical coverage.
Supplemental Retirement Accumulation Plan (‘‘SRAP’’). This is our non-qualified deferred compensation
plan designed primarily to restore the age-weighted contributions that participants would otherwise have
received if the IRC Compensation limit 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.

Executive Perquisite — 2018
Named Executive Officer
Annual Flexible
Perquisite Payment ($)
Perquisite Payment ($)
Total
Perquisite Payment ($)
Troy A. Clarke
46,000(1)
16,524
62,524
Walter G. Borst
37,000
37,000
Persio V. Lisboa
37,000
37,000
William V. McMenamin
29,333(2)
29,333
Curt A. Kramer
20,000
20,000
(1) $16,524 was paid on behalf of Mr. Clarke for legal fees incurred during the amendment of his Employment Agreement.
(2) Mr. McMenamin's annual flexible perqisite payment is $28,000, however, he received an additional amount of $1,333.33 in May 2018. The additional amount was a payment due to Mr. McMenamin's promotion to the next organizational level in September 2017.

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 2018, our stock ownership guidelines applied to 35 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

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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.

All NEOs were in compliance with the program ownership requirement in 2018.



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, trading in derivatives or engaging in hedging transactions. In addition, any pledges 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 (generally, the officers who are "named executive officers" in the summary compensation table in the issuer's proxy statement) that exceeds $1 million in any one taxable year. With respect to grants made prior to November 2, 2017, "qualified performance-based compensation" was not counted against the $1 million deductibility limit. The options, granted prior to this date, with an exercise price at least equal to 100% of the fair market value of the underlying shares at the date of grant may satisfy the requirements for treatment as "qualified performance-based compensation." In
 
addition LTI plan awards and awards under the AI plan, granted prior to November 2, 2017, that are conditioned upon achievement of certain performance goals may satisfy the requirements for treatment as "qualified performance-based compensation." Following the enactment of the Tax Cuts and Jobs Act, beginning with our 2019 fiscal year, the $1 million annual deduction limitation under Section 162(m) will apply to all compensation paid to these executive officers other than performance-based compensation paid under certain grants and awards made prior to November 2, 2017. Accordingly, the Company's ability to actually receive a corresponding deduction for the grants and awards described above may be limited by this tax law.

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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 2018, 2017 and 2016:

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
2018
1,027,183
1,649,976
1,099,997
2,350,250
593,454
202,289
6,923,149
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
Walter G. Borst 
Executive Vice President
and Chief Financial Officer
2018
766,711
629,982
419,998
1,018,578
4,644
123,455
2,963,368
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
Persio V. Lisboa
President, Operations

2018
715,500
479,990
319,998
859,547
398,058
109,850
2,882,943
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
William V. McMenamin
President Financial Services and Treasurer
2018
460,000
149,992
99,999
388,974
357,860
80,567
1,537,392
2017
398,875
149,986
100,448
330,648
147,201
69,456
1,196,614
Curt A. Kramer
Senior Vice President and General Counsel
2018
425,600
149,992
99,999
272,503
155,339
53,252
1,156,685

(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 2018 are set forth in the 2018 Grant of Plan Based Awards table on page 52. 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, 2018.
(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 Note17 to our audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2018. A description of stock options appears in the narrative text following the 2018 Grants of Plan-Based Awards table.
(3)
The amounts reported in this column represent the 2018 AI plan award payment based on an actual payout at 112.4% of target and performance-based RCUs earned in 2018 under the 2016 LTI. AI awards are projected to be paid in February 2019. The value of the 2018 AI Awards are as follows: Mr. Clarke $1,475,250, Mr. Borst $651,078, Mr. Lisboa $614,547, Mr. McMenamin $310,224, and Mr. Kramer $272,503. In addition, we reported the value of performance-based RCUs earned in fiscal year 2018 based on the probable outcome of such performance conditions, which was not maximum. The value of the performance-based RCUs for each NEO are as follows: Mr. Clarke $875,000, Mr. Borst $367,500, Mr. Lisboa $245,000, and Mr. McMenamin $78,750. Mr. Kramer did not receive performance-based RCUs in fiscal year 2016 due to his organizational level at that time .
(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 Managerial Retirement Objective("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 Kramer. The change in actuarial present value of Mr. Borst’s non-qualified pension from 10/31/2017 to 10/31/2018 is negative $35,327.  The increase in the SERP benefit for pay rate increase and service accrual was less than the decrease in present value due to increase in the discount rate.
(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 non-cash recognition awards; and legal fees for Mr. Clarke.


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NEO
Flexible
Perquisites
Perquisites(1)
Company
Paid Life
and AD&D Insurance
RAP
SRAP
Taxable
Spouse
Travel
Other Comp
Total
Clarke
$
46,000

$
16,524

$
29,310

$
27,125

$
83,038

$
213

$
80

$
202,289

Borst
$
37,000

$
0

$
12,050

$
27,125

$
47,201

$
0

$
80

$
123,456

Lisboa
$
37,000

$
0

$
7,788

$
26,870

$
36,755

$
1,437

$
0

$
109,850

McMenamin
$
29,333

$
0

$
8,883

$
27,125

$
15,226

$
0

$
0

$
80,567

Kramer
$
20,000

$
0

$
3,716

$
23,465

$
6,009

$
0

$
62

$
53,252

(1)
The amount reported for Mr. Clarke represent legal fees incurred during the amendment of his 2018 Employment Agreement and paid on Mr. Clarke's behalf.





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2019 Proxy Statement
51


Grants of Plan-Based Awards Table — 2018

The following table provides information for each of our NEOs with respect to annual and long-term incentive award opportunities, including the range of potential payouts under non-equity incentive plans for the year ended October 31, 2018. Specifically the table presents the 2018 grants of AI plan awards, performance RCUs, share settled RSUs, and stock options. All of the awards were granted under the 2013 PIP.
 
 
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
#(1)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2)
Exercise or
Base Price
of Option
Awards
($/Sh)
Grant
Date Fair
Value of
Stock and
Option
Awards
($)(3)
Name
Grant Date
Threshold
($)
Target
($)
Maximum
($)
Troy A. Clarke
 
 
 
 
 
 
 
 
Performance RCU - EBITDA(4)
4/16/2018
515,625

1,375,000

3,437,500

 
 
 
 
Performance RCU - Market Share(4)
4/16/2018
515,625

1,375,000

3,437,500

 
 
 
 
AI Plan Award - Cash(5)
 
131,250

1,312,500

2,460,937.5

 
 
 
 
RSU
4/16/2018
 
 
 
40,530

 
 
1,649,976

Stock Option
4/16/2018
 
 
 
 
56,497

40.71

1,099,997

Walter G. Borst
 
 
 
 
 
 
 
 
Performance RCU - EBITDA(4)
2/13/2018
196,875

525,000

1,312,500

 
 
 
 
Performance RCU - Market Share(4)
2/13/2018
196,875

525,000

1,312,500

 
 
 
 
AI Plan Award - Cash(5)
 
57,925.1

579,251

1,086,095.625

 
 
 
 
RSU
2/13/2018
 
 
 
15,679

 
 
629,982

Stock Option
2/13/2018
 
 
 
 
22,617

40.18
419,998

  Persio V. Lisboa
 
 
 
 
 
 
 
 
Performance RCU - EBITDA(4)
2/13/2018
150,000

400,000

1,000,000

 
 
 
 
Performance RCU - Market Share(4)
2/13/2018
150,000

400,000

1,000,000

 
 
 
 
AI Plan Award - Cash(5)
 
54,675

546,750

1,025,156.25

 
 
 
 
RSU
2/13/2018
 
 
 
11,946

 
 
479,990

Stock Option
2/13/2018
 
 
 
 
17,232

40.18

319,998

  William V. McMenamin
 
 
 
 
 
 
 
 
Performance RCU - EBITDA(4)
2/13/2018
46,875

125,000

312,500

 
 
 
 
Performance RCU - Market Share(4)
2/13/2018
46,875

125,000

312,500

 
 
 
 
AI Plan Award - Cash(5)
 
27,600

276,000

517,500

 
 
 
 
RSU
2/13/2018
 
 
 
3,733

 
 
149,992
Stock Option
2/13/2018
 
 
 
 
5,385

40.18
99,999
  Curt A. Kramer
 
 
 
 
 
 
 
 
Performance RCU - EBITDA(4)
2/13/2018
46,875

125,000

312,500

 
 
 
 
Performance RCU - Revenue Growth(4)
2/13/2018
46,875

125,000

312,500

 
 
 
 
AI Plan Award - Cash(5)
 
24,244

242,440

454,575

 
 
 
 
RSU
2/13/2018