S-3

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As filed with the Securities and Exchange Commission on May 7, 2002

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-3

REGISTRATION STATEMENT
Under the Securities Act of 1933

Navistar International Corporation
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization) 36-3359573
(I.R.S. Employer
Identification No.)

4201 Winfield Road
P.O. Box 1488
Warrenville, Illinois 60555
(630) 753-5000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Navistar Financial Corporation
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization) 36-2472404
(I.R.S. Employer
Identification No.)

2850 West Golf Road
Rolling Meadows, Illinois 60008
(847) 734-4000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Steven Covey, Esq.
Navistar Financial Corporation
Vice President and General Counsel
2850 West Golf Road
Rolling Meadows, Illinois 60008
(847) 734-4000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including communications sent to agent for service, should be sent to:

Jeffrey S. O'Connor, Esq.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2000

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

          If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ý

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price per Unit	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
4.75% Subordinated Exchangeable Notes due 2009 of Navistar Financial Corporation	$220,000,000	100%	$220,000,000	$20,240
Common Stock of Navistar International Corporation, par value $.10 per share	3,947,605(1)	(2)	(2)	(2)

(1)

There are being registered hereunder 3,947,605 shares of common stock of Navistar International Corporation required at the initial exchange price for exchange of the notes being registered hereunder.

(2)

Pursuant to Rule 457(i), no registration fee is payable with respect to the Navistar International Corporation common stock underlying the notes since the Navistar International Corporation common stock will be issued for no separate consideration, but will be issued only upon the exchange of the notes at the initial exchange price of $55.73 per share, subject to adjustment in certain cases.

          The registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

SUBJECT TO COMPLETION—MAY 7, 2002

The information in this prospectus is not complete and may be changed. We may not sell these securities or accept any offer to buy these securities until we deliver this prospectus to you in final form. We are not using this prospectus to offer to sell these securities or to solicit offers to buy these securities in any place where the offer or sale is not permitted.

PROSPECTUS

$220,000,000
Navistar Financial Corporation
4.75% Subordinated Exchangeable Notes due 2009

Navistar International Corporation
3,947,605 Shares of Common Stock

        This prospectus relates to $220,000,000 aggregate principal amount of 4.75% Subordinated Exchangeable Notes due 2009 of Navistar Financial Corporation ("Navistar Financial"), a Delaware corporation and wholly-owned subsidiary of Navistar International Corporation ("Navistar"), a Delaware corporation, and the 3,947,605 shares of Navistar common stock, par value $.10 per share, issuable upon exchange of the notes.

        Navistar Financial originally issued the notes in a private placement in March 2002. Selling securityholders may use this prospectus to resell their notes and the Navistar common stock issuable upon exchange of their notes. In addition, Navistar may use this prospectus to offer and sell its common stock issuable upon exchange of the notes to subsequent transferees of the notes who did not receive their notes from the initial purchasers' in the original private placement.

        The notes are exchangeable prior to maturity into Navistar common stock at an initial exchange price of $55.73 per share, subject to adjustment. Navistar Financial will pay interest on the notes on April 1 and October 1 of each year, beginning October 1, 2002. The notes will mature on April 1, 2009, unless earlier exchanged or redeemed.

        Navistar Financial may redeem any or all of the notes on or after April 1, 2005. In addition, the holders may require Navistar Financial to repurchase the notes upon a fundamental change prior to April 1, 2009.

        The notes are general unsecured obligations of Navistar Financial and are subordinated in right of payment to all of Navistar Financial's existing and future senior indebtedness. As of January 31, 2002, Navistar Financial had senior indebtedness outstanding in the aggregate principal amount of $599 million. The notes also are effectively subordinated to all of Navistar Financial's secured indebtedness and all liabilities, including trade payables, of Navistar Financial's subsidiaries.

        Navistar's common stock is listed on the New York Stock Exchange under the symbol "NAV." The last reported price of its common stock on May 6, 2002 was $38.34 per share.

Investing in the notes involves risks. See "Risk Factors" beginning on page 4.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated                        , 2002.

        In making your investment decision, you should rely only on the information contained in or incorporated by reference in this prospectus. Neither Navistar nor Navistar Financial have authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Navistar's and Navistar Financial's business, financial condition, results of operations and prospects may have changed since that date. Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances imply that the information herein is correct as of any date subsequent to the date on the cover of this prospectus.

TABLE OF CONTENTS

	Page
SUMMARY	1
RISK FACTORS	4
USE OF PROCEEDS	10
PRICE RANGE OF NAVISTAR COMMON STOCK AND DIVIDEND POLICY	10
CAPITALIZATION	11
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA OF NAVISTAR	13
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA OF NAVISTAR FINANCIAL	16
STATISTICAL DATA OF NAVISTAR FINANCIAL	19
BUSINESS	22
DESCRIPTION OF NOTES	29
DESCRIPTION OF NAVISTAR CAPITAL STOCK	45
SELLING SECURITYHOLDERS	48
DESCRIPTION OF OTHER FINANCING ARRANGEMENTS	50
FEDERAL INCOME TAX CONSIDERATIONS	61
PLAN OF DISTRIBUTION	67
LEGAL MATTERS	69
EXPERTS	69
WHERE YOU CAN FIND MORE INFORMATION	69
INCORPORATION BY REFERENCE AND DELIVERY OF CERTAIN DOCUMENTS	70

        Unless the context indicates otherwise, as used in this prospectus, the term "Navistar" refers to Navistar International Corporation and its subsidiaries, the term "International" refers to International Truck and Engine Corporation, Navistar's principal operating subsidiary, and its subsidiaries, and the term "Navistar Financial" refers to Navistar Financial Corporation, a wholly-owned finance subsidiary of International, and its subsidiaries. The terms "us," "we" and "our" refer to Navistar and its subsidiaries, including International and Navistar Financial. The fiscal years of Navistar and Navistar Financial end on October 31. Fiscal years are identified according to the calendar year in which they end. For example, the fiscal year ended October 31, 2001 is referred to as "fiscal 2001."

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that are subject to risks and uncertainties. You should not place undue reliance on those statements because they only speak as of the date of this prospectus. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include:

•

general economic or business conditions affecting the markets in which we operate being less favorable than expected;



•

our failure to develop or successfully introduce new products;



•

increased competition in the North American truck market;



•

unforseen problems associated with international sales, including gains and losses from foreign currency exchange;



•

implementation of or changes in the laws, regulations or policies governing manufacturers of trucks and engines that could negatively affect the automotive components supply industry;



•

changes in general economic conditions in the United States, Canada, Mexico and Brazil; and



•

various other factors beyond our control.

        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 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 obligation 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. You should also read carefully the factors described in the "Risk Factors" section of this prospectus.

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SUMMARY

Navistar is a holding company whose principal operating subsidiary is International Truck and Engine Corporation, or International. Navistar Financial is a wholly-owned finance subsidiary of International. Navistar Financial previously issued and sold the 4.75% subordinated exchangeable notes due 2009 in March of 2002. Holders of these notes may deliver the notes to Navistar, which will issue Navistar common stock to the holders in exchange for the notes. Navistar does not guarantee payment of principal or interest on the notes. The notes are not obligations of Navistar or any of Navistar's affiliates, other than Navistar Financial.

        Navistar is a leading producer and marketer of medium trucks, school buses, heavy trucks, severe service vehicles and parts and services sold under the International® brand. We sell our truck products to the common carrier, private carrier, government/service, leasing, construction, energy/petroleum and student transportation markets. We also are the leading producer of mid-range (160-300 horsepower) diesel engines. We sell our diesel engines under the International® brand as well as producing them for other original equipment manufacturers, or OEMs, principally Ford Motor Company, or Ford. Our diesel engines are used in our Class 5-7 medium trucks and school buses and selected Class 8 heavy truck models and sold to Ford and other OEMs for use in medium trucks, pick-up trucks, vans and SUVs and, to a lesser extent, for industrial, agricultural and marine applications. Our consolidated operations had revenues of $1.5 billion and EBITDA (as defined) of $4 million for the three months ended January 31, 2002, and revenues of $6.7 billion and EBITDA (as defined) of $332 million for fiscal 2001.

        Navistar Financial is a commercial financing organization that provides wholesale, retail and lease financing in the United States for sales of new and used trucks, truck chassis, buses and trailers, service parts and engines by International and retail and lease financings for sales of such products by International's dealers and their customers, which we refer to as "receivables." We also finance sales of new products (including trailers) of other manufacturers regardless of whether those new products are designed or customarily sold for use with International's trucks. Navistar Financial had revenues of $72 million and income before taxes of $27 million for the three months ended January 31, 2002, and revenues of $304 million and income before taxes of $72 million for fiscal 2001. Navistar Financial had a ratio of earnings to fixed charges of 2.8x for the three months ended January 31, 2002, and a ratio of earnings to fixed charges of 1.7x for the three months ended January 31, 2001.

        Navistar's principal executive office is located at 4201 Winfield Road, P.O. Box 1488, Warrenville, Illinois 60555, and its telephone number is (630) 753-5000. Navistar Financial's principal executive office is located at 2850 West Golf Road, Rolling Meadows, Illinois 60008, and its telephone number is (847) 734-4000.

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The Offering

        The following is a brief summary of certain terms of the notes. For a more complete description of the terms of the notes, see "Description of Notes." Capitalized terms used but not defined in this summary shall have the meanings given to such terms elsewhere in this prospectus.

Issuer of the Notes	Navistar Financial Corporation.
Notes Offered	$220,000,000 aggregate principal amount of 4.75% Subordinated Exchangeable Notes due 2009 of Navistar Financial.
Offering Price	100% of the principal amount of the notes, plus accrued interest from March 25, 2002.
Maturity	April 1, 2009, subject to earlier exchange, repurchase or redemption provisions described below.
Interest	Interest on outstanding notes is payable semiannually in arrears on April 1 and October 1 of each year, beginning October 1, 2002.
Exchange	Holders may deliver their notes to Navistar in exchange for shares of Navistar common stock at an initial exchange price of $55.73 per share at any time following issuance of the notes, unless Navistar Financial has previously repurchased the notes or unless the notes have matured. The exchange price is subject to adjustment upon the occurrence of specified events. Navistar may, at its election, either (1) hold notes tendered for exchange or (2) contribute the notes as an investment in Navistar Financial for cancellation. The exchange of the notes for shares of common stock of Navistar will be a taxable disposition of the notes for U.S. federal income tax purposes. See "Federal Income Tax Considerations."
Optional Redemption	On and after April 1, 2005, Navistar Financial may redeem part or all of the notes at the redemption prices described in the section "Description of Notes—Optional Redemption."

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Purchase of the Notes by Navistar Financial at the Option of Holders upon the Occurrence of a Fundamental Change	Upon a Fundamental Change (as defined in "Description of Notes") that occurs prior to the maturity of the notes, each holder may require Navistar Financial to repurchase all or a portion of such holder's notes at a repurchase price equal to 100% of the principal amount of the notes plus accrued and unpaid interest to (but excluding) the date of repurchase. See "Description of Notes—Fundamental Change Permits Holders to Require Navistar Financial to Repurchase Notes" for the complete definition of the term "Fundamental Change."
Assumption by Navistar	Navistar may, at its option, assume the obligations of Navistar Financial under the notes and the indenture subject to the satisfaction of specified conditions. See "Description of Notes—Assumption of Notes by Navistar."
Subordination	The notes are general unsecured obligations of Navistar Financial and are subordinated in right of payment to all of Navistar Financial's existing and future senior indebtedness. As of January 31, 2002, Navistar Financial had senior indebtedness outstanding in the aggregate principal amount of $599 million. The notes also are effectively subordinated to all of Navistar Financial's secured indebtedness and all liabilities, including trade payables, of Navistar Financial's subsidiaries. See "Description of Notes—Subordination" for a discussion of liabilities of Navistar Financial's subsidiaries. The indenture under which the notes were issued contains no limitation on the amount of indebtedness, including senior and secured indebtedness, that Navistar Financial or its subsidiaries may issue or guarantee.
Use of Proceeds	Neither Navistar nor Navistar Financial will receive any of the proceeds from the sale by any selling securityholder of the notes or the underlying Navistar common stock. However, if holders tender notes to Navistar in exchange for common stock, Navistar will receive such notes, which it may hold or contribute as an investment in Navistar Financial.
Trading	Navistar's common stock is listed on the New York Stock Exchange under the symbol "NAV."

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RISK FACTORS

        You should read and consider carefully each of the following risk factors, as well as the other information contained in or incorporated by reference into this prospectus, before making a decision to invest in the notes or the Navistar common stock.

Risks Relating to Navistar and our Markets

Our Profitability Could Suffer Due to the Considerable Volatility of the Markets in Which We Compete

        Our ability to be profitable depends in part on the varying conditions in the medium truck, heavy truck, severe service vehicles, school bus, mid-range diesel engine and service parts markets. See "Business." The markets in which we compete are subject to considerable volatility. Such markets move in response to cycles in the overall business environment and are particularly sensitive to the industrial sector, which generates a significant portion of the freight tonnage hauled. Truck and engine demand also depend on general economic conditions, interest rate levels and fuel costs.

        Truck sales in 2000 and early 2001 were adversely affected by a number of factors including higher fuel prices, driver shortages, higher interest rates, increased new and used truck inventories, higher insurance costs and the general economic slowdown. The demand for new trucks reflected these adverse conditions as the number of new truck orders dropped significantly throughout 2000 and early 2001, reducing our U.S. and Canadian order backlog as of January 31, 2002 to 19,300 units, significantly lower than the 22,300 units as of January 31, 2001. The current demand for new trucks continues to reflect these adverse conditions.

We Operate in the Highly Competitive North American Truck Market, Which May Require Us to Discount Our Prices, Thereby Lowering Our Margins

        The North American truck market in which we compete is highly competitive. Our major U.S. domestic competitors include PACCAR, Ford and General Motors Corporation, as well as foreign-controlled domestic manufacturers, such as Freightliner (Daimler Chrysler), Sterling (Daimler Chrysler) and Mack/Volvo. In addition, manufacturers from Japan such as Hino (Toyota), Isuzu, Nissan and Mitsubishi, are attempting to increase their North American sales levels. The intensity of this competition, which is expected to continue, results in price discounting and margin pressures throughout the industry and adversely affects our ability to increase or maintain vehicle prices. Many of our competitors have greater financial resources than we have, which may place us at a competitive disadvantage in responding to substantial industry changes. These industry changes may include changes in governmental regulations that require major additional capital expenditures. In addition, certain of our competitors may have lower overall labor costs.

Our Business May be Adversely Impacted by Work Stoppages and Other Labor Relations Matters

        We are subject to risk of work stoppages and other labor relations matters because our workforce is highly unionized. As of January 31, 2002, we employed 8,300 hourly workers and 6,200 salaried workers in the U.S. and Canada. Approximately 90% of the hourly workers and 20% of the salaried workers are represented by unions. Of these represented employees, 93% of the hourly workers and 95% of the salaried workers are represented by the United Automobile, Aerospace and Agriculture Implement Workers of America, or UAW, or the National Automobile, Aerospace and Agriculture Implement Workers of Canada, or CAW. Our current master contract with the UAW expires on October 1, 2002. The collective bargaining agreement with the CAW expires on June 1, 2002. Any prolonged work stoppage or strike at any one of our principal manufacturing facilities could have a negative impact on our business, financial condition and results of operations.

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The Loss of Ford, our Largest Customer, Would Have a Negative Impact on Our Business, Financial Condition and Results of Operations

        Ford accounted for approximately 21% of our revenues during fiscal 2001, 18% for fiscal 2000 and 17% for fiscal 1999. In addition, Ford accounted for approximately 82%, 76% and 75% of our diesel engine unit volume in fiscal 2001, fiscal 2000 and fiscal 1999, respectively. Although we have agreements with Ford that continue through 2012, these agreements provide that we will supply Ford's requirements for particular models, rather than for manufacturing a specific quantity of products. The loss of Ford as a customer or a significant decrease in demand for the models or a group of related models that utilize our products would have a negative impact on our business, financial condition and results of operations.

The Failure to Meet Our Future Capital Requirements Would Hinder Our Product Development Initiatives

        Our current product development initiatives, including our next generation vehicle, or NGV, and next generation diesel engine, or NGD, programs, will require significant capital to fund development activities and capital expenditures. Capital expenditures for fiscal 2002 are expected to be approximately $250 million, of which $37 million is to be spent for the NGV program and $95 million is to be spent on the NGD program. From October 31, 2001, we estimate $130 million and $140 million in capital spending and $100 million and $120 million in development expenses through fiscal 2004 for the NGV and NGD programs, respectively. Historically, we have relied on cash balances, cash provided by operations and borrowings to meet our funding requirements. The amount of cash generated by our business varies with industry volumes in the medium and heavy truck markets. No assurance can be given that we will have the cash balances necessary to implement the NGV or NGD programs and to meet our other capital requirements or that financing will be available or, if available, that it will be available on satisfactory terms. The future availability of financing will depend on many factors, including our earnings, credit ratings, the outlook for truck industry demand and the capital resources of financial institutions. In addition, restrictive covenants in our financing agreements may limit how much debt financing we can raise, and a need to preserve our net operating losses may limit our ability to raise equity financing. If adequate funds are not available, we may be required to cut back or discontinue our product development or capital improvement programs.

The Costs Associated With Complying With Environmental and Safety Regulations Could Lower Our Margins

        Truck and engine manufacturers continue to face heavy governmental regulation of their products, especially in the areas of environment and safety. As a diesel engine manufacturer, we have incurred research, development and tooling costs to design our engine product lines to meet new United States Environmental Protection Agency, or EPA, and California Air Resources Board, or CARB, emission standards. In addition, we expect to continue to incur research, design and tooling costs to: (1) achieve further reductions in ozone-causing exhaust emissions by 2004 in accordance with the settlement agreement we entered into with the EPA and CARB and (2) satisfy the 1998 Clean Fuel Fleet Vehicle requirements and California's emission standards in 2002 for engines used in medium-size vehicles. We expect that our diesel engines will be able to meet all of these standards within the required time frames.

        Truck manufacturers also are subject to various noise standards imposed by federal, state and local regulations, and to the National Traffic and Motor Vehicle Safety Act and Federal Motor Vehicle Safety Standards promulgated by the National Highway Traffic Safety Administration. We believe we are in compliance with such standards.

        Complying with such laws and regulations has added and will continue to add to the cost of our products, and increases the capital-intensive nature of our business. If the present level of price

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competition continues, it may become increasingly difficult for manufacturers of engines and trucks to recover these costs and, accordingly, lower margins may result.

Navistar Has Significant Underfunded Postretirement Obligations

        We have significant underfunded postretirement obligations. The underfunded portion of our accumulated benefit obligation was $512 million and $90 million for pension benefits at October 31, 2001 and 2000, respectively, and $1,473 million and $1,246 million for postretirement healthcare benefits at October 31, 2001 and 2000, respectively.

        In the event our pension plans are terminated for any reason and plan assets are insufficient to meet guaranteed liabilities, the Pension Benefit Guaranty Corporation, or PBGC, may have a right to take over these plans as their administrator and trustee. In this event, the actual present value of guaranteed pension liabilities may be determined in a manner different from that used by us to determine our unfunded vested pension liability, which determinations could result in a higher level of underfunding. Subject to certain limitations, the PBGC would have a claim against us to the extent that plan assets were not sufficient to meet the actuarial present value of guaranteed liabilities, which claim against us may by law, under certain circumstances, be senior to that of the notes.

Our Ability to Use Net Operating Loss Carryovers to Reduce Future Tax Payments may be Limited if There is a Change in Ownership of Navistar

        As of October 31, 2001, we had $1,016 million of domestic and $76 million of foreign net operating loss, or NOL, carryovers. Currently there is no annual limitation on our ability to use NOLs to reduce future income taxes. However, if an ownership change as defined in Section 382 of the Internal Revenue Code of 1986, as amended, occurs with respect to our capital stock, our ability to use NOLs would be limited to specific annual amounts. Generally, an ownership change occurs if certain persons or groups increase their aggregate ownership by more than 50 percentage points of our total capital stock in any three-year period.

        If an ownership change occurs, our ability to use domestic NOLs to reduce income taxes is limited to an annual amount based on our fair market value immediately prior to the ownership change multiplied by the long-term tax-exempt interest rate. The long-term tax-exempt interest rate is published monthly by the Internal Revenue Service. As of the date of this prospectus, the rate is approximately 5.0%. NOLs that exceed the Section 382 limitation in any year continue to be allowed as carryforwards for the remainder of the 15- or 20-year carryforward period and can be used to offset taxable income for years within the carryover period subject to the limitation in each year. Our use of new NOLs arising after the date of an ownership change would not be affected.

        It is impossible for us to ensure that an ownership change will not occur in the future. In addition, we may decide in the future that it is necessary or in our interest to take certain actions which result in an ownership change. If a more than 50% ownership change were to occur, use of our NOLs to reduce payments of federal income tax may be deferred to later years within the 15- or 20-year carryover period, or, if the carryover period for any loss year expires, the use of the remaining NOLs for the loss year will be prohibited.

Risks Related to Navistar Financial and the Notes

As a Wholly-Owned Finance Subsidiary of International, Navistar Financial is Substantially Dependent on the Volume of Sales of both International and its Dealers

        As a wholly-owned finance subsidiary of International, Navistar Financial's level of financing activity is substantially dependent on the volume of sales of both International and International dealers. Any material reduction in the amount of these sales could have a negative impact on Navistar

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Financial's business. In addition, the financial condition of International's dealers is to varying degrees dependent on the financial condition of International. Any material change in International's financial condition could have a negative impact on certain International dealers, which in turn could have a negative impact on Navistar Financial's business.

A Failure to Satisfy Navistar Financial's Significant Liquidity Requirements Could have a Negative Impact on It, International and Navistar

        Navistar Financial has significant liquidity requirements. It traditionally has obtained the funds to provide financing to International dealers and retail customers from sales of receivables, commercial paper, medium- and long-term debt and equity capital and from short- and long-term bank borrowings. It expects to incur additional short- and long-term debt in the future. The nature and amounts of such indebtedness can be expected to vary from time to time as a result of the volume of its business, market conditions and other factors. In addition, it expects to continue to sell and securitize receivables. Navistar Financial believes that cash generated by its operations, borrowings under its senior credit agreement, commercial paper program and funds generated by sales and securitizations of receivables will be sufficient to satisfy its ongoing cash needs. However, if cash provided by operations, bank borrowing, continued sales and securitizations of receivables and the placement of term debt does not provide the necessary liquidity, Navistar Financial would be required to restrict its financing of International products and International dealers. A significant reduction in financing support could have a negative impact on Navistar, Navistar Financial and International. In addition, an impairment of Navistar Financial's ability to sell or securitize its receivables, a reduction in International's sales, and a variety of other factors could affect Navistar Financial's ability to meet its debt obligations, including its obligations with respect to the notes.

Your Right to Receive Payments on These Notes is Junior to Navistar Financial's Existing Senior and Secured Indebtedness, the Debt of its Subsidiaries and Possibly All of Navistar Financial's Future Borrowings

        These notes rank behind all of Navistar Financial's existing senior indebtedness and all of its future borrowings, except any future indebtedness that expressly provides that it ranks equal with, or subordinated in right of payment to, the notes. These notes also are effectively subordinated to all of Navistar Financial's secured indebtedness and all debt issued by Navistar Financial's subsidiaries. As a result, upon any distribution to Navistar Financial's creditors in a bankruptcy, liquidation, reorganization or similar proceeding relating to Navistar Financial or its property, the holders of Navistar Financial's senior indebtedness will be entitled to be paid in full before any payment may be made with respect to these notes.

        In the event of a bankruptcy, liquidation, reorganization or similar proceeding relating to Navistar Financial, holders of the notes will participate with trade creditors and all other holders of Navistar Financial's subordinated indebtedness in the assets remaining after Navistar Financial has paid all of its senior indebtedness. However, because the indenture requires that amounts otherwise payable to holders of the notes in a bankruptcy or similar proceeding be paid to holders of senior debt instead, holders of the notes may receive less, ratably, than holders of trade payables in any such proceeding. In any of these cases, Navistar Financial may not have sufficient funds to pay all of its creditors and holders of notes may receive less, ratably, than the holders of its senior or secured indebtedness.

        These notes are general unsecured obligations of Navistar Financial. Therefore, in the event of a bankruptcy, liquidation or reorganization or similar proceeding, Navistar Financial's secured indebtedness obligations, even if pari passu or junior to the notes, may be paid prior to payment of these notes to the extent that these other obligations are secured.

        Navistar Financial conducts certain of its funding operations through its subsidiaries. Accordingly, Navistar Financial's ability to meet its cash obligations is dependent in part upon the ability of its

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subsidiaries to make cash distributions to Navistar Financial. The ability of its subsidiaries to make cash distributions to Navistar Financial is and will continue to be restricted by, among other limitations, applicable provisions of law. The right of Navistar Financial to participate in the assets of any subsidiary, and thus, the ability of the holders of the notes to benefit indirectly from such assets, is generally subject to the prior claims of creditors, including trade creditors, of subsidiaries of Navistar Financial with respect to the assets of that subsidiary. The notes, therefore, are structurally subordinated to creditors, including trade creditors, of subsidiaries of Navistar Financial with respect to the assets of the subsidiaries against which those creditors have a claim.

        Assuming we had completed this offering on January 31, 2002, these notes would have been subordinated to $599 million of senior debt of Navistar Financial. See "Description of Notes—Subordination" for a discussion of liabilities of Navistar Financial's subsidiaries. Navistar Financial and its subsidiaries will be permitted to borrow additional debt, including senior indebtedness, in the future under the terms of the indenture.

There is No Established Trading Market for the Notes and No Guarantee that a Market Will Develop or that You Will Be Able to Sell Your Notes

        There is no established trading market for the notes and the notes are not listed on any securities exchange or quotation system. We cannot assure you that a market will develop or that you will be able to resell your notes. Navistar Financial does not intend to apply for listing of the notes on any securities exchange or to arrange for any quotation system to quote them. We cannot assure you that a market will develop or that you will be able to resell your notes. Future trading prices of the notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. Generally, the liquidity of, and trading market for, the notes may also be materially and adversely affected by declines in the market for similar debt securities. Such a decline may materially and adversely affect such liquidity and trading independent of our financial performance and prospects.

Navistar Financial May be Unable to Repurchase Your Notes Upon the Occurrence of a Fundamental Change

        Upon the occurrence of a Fundamental Change, as defined in "Description of Notes," you will have the right, at your option, to require Navistar Financial to repurchase all or any portion of your notes. If a Fundamental Change were to occur, there can be no assurance that Navistar Financial would have sufficient funds to pay the purchase price for all the notes tendered by the holders of the notes. In addition, although Navistar Financial is not currently subject to any limitations on its ability to repurchase the notes, its repurchase of notes as a result of the occurrence of a Fundamental Change may in the future be prohibited or limited by, or create an event of default under, the terms of agreements related to borrowings which Navistar Financial currently has in effect or may enter into from time to time.

Risks Related to the Common Stock of Navistar

Anti-takeover Effect of Certain Charter and Statutory Provisions

        Navistar's certificate of incorporation provides that the affirmative vote of holders of the greater of (a) a majority of the voting power of all common stock or (b) at least 85% of the shares of common stock present at a meeting is required to approve certain mergers and consolidations or a sale of all or substantially all of Navistar's assets, or a supermajority transaction. Accordingly, any holder of 15% or more of the aggregate outstanding common stock represented at any meeting of shareowners will be able to block any supermajority transaction. Navistar's certificate of incorporation and by-laws also contain provisions which (1) permit Navistar to issue so-called "flexible" preferred stock, (2) provide for a classified board of directors (which has the effect under Delaware law of precluding shareowners

8

from removing directors without cause), (3) limit the filling of board vacancies to the remaining directors, and (4) prohibit shareowners from taking action by written consent or calling special meetings. Navistar also is subject to Section 203 of the Delaware General Corporation Law, or DGCL, which restricts Navistar from engaging in certain business combinations with "interested stockholders." The fact that Navistar's utilization of its net operating losses could be adversely affected by a change of control also could have an anti-takeover effect.

        Although not intended, the foregoing provisions may adversely affect the marketability of the common stock by discouraging potential investors from acquiring stock of Navistar. In addition, these provisions could delay or frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving Navistar, or impede an attempt to acquire a significant or controlling interest in Navistar, even if such events might be beneficial to Navistar and its shareowners. See "Description of Navistar Capital Stock—Certain Certificate of Incorporation and By-laws Provisions; Certain Provisions of Delaware Law."

Possible Volatility of Navistar Share Price Increases the Risk of Your Investment

        Numerous factors may significantly affect the market price for the Navistar common stock. Such factors include the announcement of new products or other strategic initiatives by Navistar or its competitors, technological innovations by Navistar or its competitors, the growth and expansion of Navistar's business, trends and uncertainties affecting the truck manufacturing industry as a whole, issuances and repurchases of common stock, quarterly variations in Navistar's operating results or the operating results of Navistar's competitors, investors' expectations of Navistar's prospects, changes in earnings estimates by analysts or reported results that vary materially from such estimates and general economic and other conditions, including the cyclical nature of Navistar's business. In addition, in recent years the stock market has experienced extreme price fluctuations. This volatility has had a substantial effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of the common stock. See "Price Range of Navistar Common Stock and Dividend Policy."

9

USE OF PROCEEDS

        When this prospectus is used by selling securityholders to resell their notes and Navistar common stock, neither Navistar Financial nor Navistar will receive any proceeds from the sale of the notes or Navistar common stock by the selling stockholders. However, if holders tender notes to Navistar in exchange for common stock, Navistar will receive such notes, which it may hold or contribute as an investment in Navistar Financial.

PRICE RANGE OF NAVISTAR COMMON STOCK AND DIVIDEND POLICY

        The common stock of Navistar is listed on the New York, Chicago and Pacific Stock Exchanges under the symbol "NAV." The table below sets forth the high and low sales prices of the common stock on the NYSE Composite Transactions Tape as reported in The Wall Street Journal during the indicated time periods.

		Price Range
		High		Low
Fiscal 2000
	First Quarter ended January 31	$	48.00	$	35.50
	Second Quarter ended April 30		41.19		31.63
	Third Quarter ended July 31		37.00		29.63
	Fourth Quarter ended October 31		40.38		29.81
Fiscal 2001
	First Quarter ended January 31		35.50		18.25
	Second Quarter ended April 30		30.69		21.78
	Third Quarter ended July 31		34.00		25.81
	Fourth Quarter ended October 31		37.05		24.40
Fiscal 2002
	First Quarter ended January 31		40.75		30.97
	Second Quarter ended April 30		47.38		36.90

        For a recent sales price of the common stock on the NYSE, see the cover page of this prospectus. At January 31, 2002, Navistar's common stock was held by approximately 31,400 holders of record.

        Navistar has not paid cash dividends on its common stock since 1980. At present, Navistar does not expect to pay cash dividends on its common stock in the foreseeable future. Any future determination to pay cash dividends will be made by the board of directors in light of Navistar's earnings, financial position, capital requirements and such other factors as the board of directors deems relevant at such time. The indentures under which Navistar issues its $100 million 7% Senior Notes, the $250 million 8% Senior Subordinated Notes and the $400 million 9³/8% Senior Notes contain restrictions on Navistar's ability to pay cash dividends on its common stock.

10

CAPITALIZATION

Navistar International Corporation

        The following table sets forth as of January 31, 2002 Navistar's cash, cash equivalents and marketable securities and consolidated capitalization on an as adjusted basis to give effect to the issuance of the notes. This table should be read in conjunction with Navistar's consolidated financial statements and notes thereto, incorporated by reference in this prospectus, and assumes that no notes have been exchanged for Navistar common stock.

				As of January 31, 2002
				(in millions of dollars)
Cash, cash equivalents and marketable securities(1)				$	1,121
Total debt (including current portion):
Manufacturing operations:
	Capitalized leases and other obligations			$	200
	9.375% senior notes due 2006				400
	7.0% senior notes due 2003				100
	8.0% senior subordinated notes due 2008				250
		Total manufacturing operations debt			950
Financial services operations(2)					1,933
			Total debt		2,883
Shareowners' equity:
	Series D convertible junior preference stock (liquidation preference $4)				4
	Common stock (110 authorized; 60 issued and outstanding)				2,139
	Retained earnings (deficit)				(232	)
	Accumulated other comprehensive loss				(339	)
	Common stock held in Treasury, at cost				(494	)
			Total shareowners' equity		1,078
		Total capitalization		$	3,961

(1)

Includes cash and cash equivalents of Navistar Financial of $208 million.

(2)

Includes debt of Navistar Financial of $1,675 million. For a more detailed discussion, see "Capitalization—Navistar Financial Corporation" below.

11

Navistar Financial Corporation

        The following table sets forth as of January 31, 2002 Navistar Financial's cash and cash equivalents and consolidated capitalization on an as adjusted basis to give effect to the issuance of the notes. This table should be read in conjunction with Navistar Financial's consolidated financial statements and notes thereto incorporated by reference in this prospectus, and assumes that no notes have been exchanged for Navistar common stock.

		As of January 31, 2002
		(in millions of dollars)
Cash and cash equivalents(1)		$	208
Senior debt:
Senior credit agreement		$	499
Capital lease obligations			356
Revolving retail facility			500
	Total senior debt		1,355
Subordinated debt:
9% Senior subordinated notes due 2002			100
Notes offered hereby(1)			220
	Total subordinated debt		320
	Total debt		1,675
Shareowner's equity			349
	Total capitalization	$	2,024

(1)

The cash and cash equivalents amount reflects the net estimated proceeds of the original issuance of the notes. In addition, the net estimated proceeds have been reduced by the fair market value of the Navistar common stock exchange option valued at $51 million that was recorded as a bond discount.

12

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA OF NAVISTAR

        The following selected historical consolidated financial information for the five-year period ended October 31, 2001 has been derived from Navistar's audited consolidated financial statements and notes to the consolidated financial statements. The selected consolidated financial information for Navistar for the three months ended January 31, 2002 and 2001 was derived from the unaudited consolidated financial statements included in Navistar's Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2002, which financial statements, in the opinion of management, reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of such information. Results for the interim periods are not necessarily indicative of the results that might be expected for any other interim period or for an entire year. This information should be read in conjunction with the consolidated financial statements and notes to the financial statements and "Management's Discussion and Analysis of Results of Operations and Financial Condition," included in Navistar's Annual Report on Form 10-K for the fiscal year ended October 31, 2001 and Navistar's Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2002, each of which is incorporated by reference in this prospectus.

			Three Months Ended January 31,						Fiscal Year Ended October 31,
			2002			2001			2001			2000			1999			1998			1997
			(in millions of dollars, except share data)
Selected Income Statement Data:
Sales and revenues:
Sales of manufactured products			$	1,389		$	1,433		$	6,423		$	8,119		$	8,326		$	7,629		$	6,147
Finance and insurance revenue(1)				77			76			256			288			256			201			174
Other income				6			7			43			44			60			55			50
		Total sales and revenues		1,472			1,516			6,722			8,451			8,642			7,885			6,371
Costs and expenses:
Costs of products and services sold				1,256			1,285			5,600			6,774			6,862			6,498			5,292
Cost of products sold related to restructuring(2)				—			—			11			20			—			—			—
		Total cost of products and services sold		1,256			1,285			5,611			6,794			6,862			6,498			5,292
Restructuring and loss on anticipated sale of business(2)				(1	)		—			(10	)		286			—			—			—
Postretirement benefits				58			46			171			146			216			174			215
Engineering and research expense				64			65			253			280			281			192			124
Sales, general and administrative expense				134			121			547			488			486			427			365
Interest expense				40			41			161			146			135			105			74
Other expense				11			14			36			87			71			79			59
		Total costs and expenses		1,562			1,572			6,769			8,227			8,051			7,475			6,129
Income (loss) before income taxes				(90	)		(56	)		(47	)		224			591			410			242
Income tax (expense) benefit(3)				34			21			24			(65	)		(47	)		(111	)		(92	)
Net income (loss)				(56	)		(35	)		(23	)		159			544			299			150
Less dividends on Series G preferred stock				—			—			—			—			—			11			29
Net income (loss) applicable to common stock			$	(56	)	$	(35	)	$	(23	)	$	159		$	544		$	288		$	121
Earnings (loss) per share:
	Basic		$	(.93	)	$	(.58	)	$	(.39	)	$	2.62		$	8.34		$	4.16		$	1.66
	Diluted(4)		$	(.93	)	$	(.58	)	$	(.39	)	$	2.58		$	8.20		$	4.11		$	1.65
Average number of shares outstanding:
	Basic			59.8			59.5			59.5			60.7			65.2			69.1			73.1
	Diluted			59.8			59.5			59.5			61.5			66.4			70.0			73.6

Table continued on following page.

13

			As of January 31,				As of October 31,
			2002		2001		2001		2000		1999		1998		1997
			(in millions of dollars)
Selected Balance Sheet Data:
Total assets(5)			$	6,572	$	6,638	$	7,067	$	6,851	$	6,847	$	6,104	$	5,425
Debt:
	Manufacturing operations		$	950	$	645	$	966	$	572	$	476	$	450	$	92
	Financial services operations			1,713		1,881		1,914		2,058		1,791		1,672		1,224
		Total debt	$	2,663	$	2,526	$	2,880	$	2,630	$	2,267	$	2,122	$	1,316
Total shareowners' equity			$	1,078	$	1,280	$	1,127	$	1,314	$	1,291	$	769	$	1,020

		Three Months Ended January 31,						Fiscal Year Ended October 31,
		2002			2001			2001			2000			1999			1998			1997
		(in millions of dollars, except share data)
Selected Other Financial Data:
EBITDA(6)		$	4		$	38		$	332		$	875		$	900		$	674		$	436
Capital expenditures			70			64			326			553			427			302			169
Depreciation and amortization			55			53			217			199			174			159			120
Interest expense (net of capitalized interest)(7)			40			41			161			146			135			105			74
Selected Operating Data:
Number of employees:
	Worldwide		16,400			17,100			16,700			17,000			18,600			17,600			16,200
	United States		13,400			14,100			13,600			14,600			15,000			14,500			13,600
United States and Canadian retail deliveries of trucks and school buses			16,100			19,800			82,400			118,200			119,300			113,900			99,500
United States and Canadian market share(8)			26.3	%		24.9	%		26.3	%		26.9	%		25.6	%		29.1	%		28.3	%
Unit shipments:
	Trucks and school buses		16,700			19,800			89,600			124,900			129,000			127,500			104,400
	OEM engines		78,000			73,500			324,900			304,400			286,500			213,700			184,000

(1)

Includes revenues of Navistar Financial as well as Navistar's other financial service subsidiaries.

(2)

In fiscal 2000, Navistar recorded a pretax restructuring charge of $306 million as part of an overall plan to restructure its manufacturing and corporate operations. Of the pretax restructuring charge of $306 million, $157 million represents cash charges, of which $8 million was paid in fiscal 2000, $59 million was paid in fiscal 2001, and $4 million was paid in the first quarter of 2002 and a majority of the remaining $86 million is expected to be paid in the next two years. For more information regarding this restructuring charge, see "Management's Discussion and Analysis of Results of Operations and Financial Condition," Note 11 to our 2001 consolidated financial statements and Note I to our first quarter 2002 consolidated financial statements, incorporated by reference in this prospectus.

(3)

In fiscal years 1999 and 1998, Navistar benefitted from reductions to its deferred tax asset valuation allowance of $178 million and $45 million, respectively.

14

(4)

Diluted earnings per share excluding the restructuring charge and tax valuation allowance adjustments for the fiscal years 2001 to 1997 were $(.38), $5.67, $5.52, $3.47 and $1.65, respectively.

(5)

Due to the sale of Harco National Insurance Company, or Harco, Navistar Financial's wholly-owned insurance subsidiary, on November 30, 2001, total assets for all periods presented reflects the reclassification of Harco's net assets and liabilities to other current assets. For more information regarding this reclassification, see Note 11 to our 2001 annual consolidated financial statements incorporated by reference in this prospectus.

(6)

EBITDA represents consolidated income before interest expense, taxes on income, depreciation and amortization expense and restructuring charges of $(1) million as of January 31, 2002, and $1 million and $306 million in fiscal 2001 and fiscal 2000, respectively. We believe EBITDA provides additional information for measuring our ability to generate funds for liquidity and capital requirements. This information is presented as a supplement to the other data provided because it provides information which we believe is useful for additional analysis. EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operating activities and other consolidated operations or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. Further, EBITDA, as we calculate it, may not be comparable to calculations of similarly-titled measures by other companies.

(7)

Capitalized interest for first quarter 2002 and 2001, and for fiscal 2001, 2000, 1999, 1998 and 1997 was $4 million, $11 million, $42 million, $31 million, $15 million, $12 million and $2 million, respectively.

(8)

Based on retail deliveries of medium trucks (Classes 5, 6 and 7), including school buses, and heavy trucks (Class 8) in the United States and Canada by Navistar and its dealers, compared to the industry total in the United States and Canada of retail deliveries.

15

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA OF NAVISTAR FINANCIAL

        The following selected historical consolidated financial data of Navistar Financial for the five-year period ended October 31, 2001 has been derived from Navistar Financial's audited consolidated financial statements and notes to the consolidated financial statements. The selected historical consolidated financial information for Navistar Financial for the three months ended January 31, 2002 and 2001 was derived from the unaudited consolidated financial statements and notes thereto contained in Navistar Financial's Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2002, which financial statements, in management's opinion, reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of such information. Results for the interim periods are not necessarily indicative of the results that might be expected for any other interim period or for an entire year. This information should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Navistar Financial's Annual Report on Form 10-K for the fiscal year ended October 31, 2001 and Navistar Financial's Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2002, each of which is incorporated by reference into this prospectus.

			Three Months Ended January 31,				Fiscal Year Ended October 31,
			2002		2001		2001			2000			1999			1998			1997
			(in millions of dollars)
Selected Income Statement Data:
Revenues:
	Retail notes		$	29	$	21	$	81		$	79		$	85		$	79		$	70
	Lease financing			22		26		99			94			76			57			36
	Wholesale notes			7		13		46			64			63			43			36
	Accounts			5		9		28			43			36			33			31
	Servicing fee income			6		8		27			27			22			22			20
	Marketable securities			3		8		23			1			—			—			—
	Total			72		85		304			308			282			234			193
Expenses:
	Cost of borrowing:
		Interest expense		15		30		93			104			89			81			66
		Other		2		2		9			6			6			7			7
	Total			17		32		102			110			95			88			73
	Credit, collection and administrative			10		11		41			39			41			36			31
	Provision for losses on receivables			4		6		28			12			6			1			2
	Depreciation expense and other			14		15		61			55			44			30			18
	Total			45		64		232			216			186			155			124
	Income before taxes			27		21		72			92			96			79			69
	Taxes on income			10		8		26			36			37			30			27
	Income from continuing operations			17		13		46			56			59			49			42
	Gain (loss) on disposal of discontinued operations(1)			1		—		8			(11	)		—			—			—
	Income from discontinued operations(1)			—		—		—			1			3			4			4
	Income (loss) from discontinued operations			1		—		8			(10	)		3			4			4
	Net income			18		13		54			46			62			53			46
	Dividends paid			—		—		(26	)		(23	)		(60	)		(57	)		(40	)
	Net income (loss) retained		$	18	$	13	$	28		$	23		$	2		$	(4	)	$	6

Table continued on following page.

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		As of January 31,						As of October 31,
		2002			2001			2001			2000			1999			1998			1997
		(in millions of dollars)
Selected Balance Sheet Data:
Cash and cash equivalents		$	45		$	82		$	22		$	42		$	39		$	14		$	11
Finance receivables:
	Retail notes		367			324			634			1,051			852			775			607
	Lease financing		213			223			212			224			188			141			99
	Wholesale notes		36			58			32			82			529			225			46
	Accounts		133			217			215			322			507			383			471
	Total		749			822			1,093			1,679			2,076			1,524			1,223
	Allowance for losses		(14	)		(9	)		(13	)		(13	)		(13	)		(13	)		(12	)
Finance receivables, net			735			813			1,080			1,666			2,063			1,511			1,211
Other assets(2)			1,223			1,191			1,009			811			668			601			494
	Total assets	$	2,003		$	2,086		$	2,111		$	2,519		$	2,770		$	2,126		$	1,716
Senior debt		$	1,355		$	1,572		$	1,553		$	1,774		$	1,576		$	1,429		$	889
Subordinated debt			100			100			100			100			100			182			194
Other liabilities(3)			199			97			127			341			814			233			345
Shareowner's equity			349			317			331			304			280			282			288
	Total liabilities and shareowner's equity	$	2,003		$	2,086		$	2,111		$	2,519		$	2,770		$	2,126		$	1,716

	Three Months Ended January 31,				Fiscal Year Ended October 31,
	2002		2001		2001		2000		1999		1998		1997
Selected Other Data:
Ratio of earnings to fixed charges(4)	2.8	x	1.7	x	1.7	x	1.9	x	2.0	x	1.9	x	2.0	x
Ratio of debt to equity(3)	4.2		5.3		5.0		6.2		6.1		5.8		4.3
Ratio of senior debt to capital funds(3)(5)	3.0		3.8		3.6		4.4		4.2		3.1		2.1
Net losses as a percentage of average gross balance of all outstanding receivables(6)	0.40	%	0.42	%	0.50	%	0.30	%	0.12	%	0.00	%	0.06	%

Table continued on following page.

17

		As of January 31,						As of October 31,
		2002			2001			2001			2000			1999			1998			1997
		(in millions of dollars)
Selected Portfolio Analysis:(7)
Serviced retail notes		$	2,612		$	3,064		$	2,791		$	3,129		$	2,864		$	2,517		$	2,302
Serviced lease financing			249			261			247			264			219			166			119
Serviced wholesale notes			750			991			817			1,114			1,226			1,040			691
Marketable securities sold to wholesale trust			225			91			154			—			—			—			—
Accounts			333			402			415			402			507			383			471
	Total serviced receivables		4,169			4,809			4,424			4,909			4,816			4,106			3,583
Less:
	Sold retail notes		(2,042	)		(2,692	)		(2,065	)		(1,910	)		(1,889	)		(1,619	)		(1,591	)
	Sold wholesale notes		(812	)		(887	)		(812	)		(887	)		(600	)		(700	)		(545	)
	Subordinated interest		(127	)		(137	)		(127	)		(145	)		(97	)		(115	)		(100	)
	Sold accounts		(200	)		(185	)		(200	)		(80	)		—			—			—
	Unearned finance charges		(239	)		(86	)		(127	)		(208	)		(154	)		(148	)		(124	)
	Total finance receivables	$	749		$	822		$	1,093		$	1,679		$	2,076		$	1,524		$	1,223

(1)

On November 30, 2000, Navistar Financial's board of directors approved management's plan for the sale of Harco. On November 30, 2001, Navistar Financial completed the sale of all of the stock of Harco to IAT Reinsurance Syndicate Ltd., a Bermuda reinsurance company. Cash proceeds of $63.3 million were received from the sale. The Harco insurance segment is accounted for as a discontinued operation, and accordingly, amounts in the consolidated financial statements and notes thereto for all periods shown have been restated to reflect discontinued operations accounting.

(2)

Includes restricted marketable securities as of January 31, 2002 and 2001, and October 31, 2001 and 2000 of $456 million, $395 million, $214 million and $85 million, respectively. In the event that retail note and lease balances pledged to the revolving retail facility fall below $500 million, Navistar Financial is required to invest in marketable securities, which are restricted and mature in three months or less.

(3)

Includes short-term debt as of October 31, 1999, 1998 and 1997 of $35 million, $22 million and $141 million.

(4)

The ratio of earnings to fixed charges is determined by dividing pretax income from continuing operations, adjusted for the cumulative effect of changes in accounting policy, interest expense, debt expense amortization and the portion of rental expense (25%) deemed representative of the interest factor by the sum of interest expense, debt expense amortization and the portion of rental expense deemed representative of the interest factor.

(5)

Capital funds represent the sum of subordinated debt and shareowner's equity.

(6)

January 31 amounts have been annualized.

(7)

Unless otherwise indicated, information is presented on the basis of gross balances, which for retail notes include unearned finance charges. Information presented regarding serviced receivables includes receivables owned by Navistar Financial and receivables which Navistar Financial has sold but continues to service.

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STATISTICAL DATA OF NAVISTAR FINANCIAL

Gross Finance Receivables Acquired

        The following table shows the volume of gross balance of finance receivables acquired by Navistar Financial during each of the periods indicated:

		Three Months Ended January 31,				Fiscal Year Ended October 31,
		2002		2001		2001		2000		1999		1998		1997
		(in millions of dollars)
Wholesale notes		$	584	$	637	$	2,804	$	4,119	$	4,189	$	3,813	$	2,773
Retail notes and leases:
	New		236		286		963		1,561		1,520		1,358		976
	Used		50		48		228		269		286		309		270
Total		$	870	$	971	$	3,995	$	5,949	$	5,995	$	5,480	$	4,019

Credit Loss Experience

        The following table provides information about Navistar Financial's loss experience (on both a gross and net basis) during each of the periods indicated for its serviced portfolio, which includes finance receivables that have been sold:

		Three Months Ended January 31,						Fiscal Year Ended October 31,
		2002			2001			2001			2000			1999			1998			1997
		(in millions of dollars, except ratios)
Net losses (recoveries):
	Retail notes and leases	$	4.2		$	5.1		$	23.4		$	12.2		$	5.5		$	0.2		$	2.2
	Wholesale notes		0.1			0.3			0.6			—			(0.2	)		(0.3	)		(0.2	)
	Accounts		—			—			—			(0.1	)		0.1			—			—
	Total	$	4.3		$	5.4		$	24.0		$	12.1		$	5.4		$	(0.1	)	$	2.0
Net losses (recoveries) as a percentage of liquidations minus net losses:
	Retail notes and leases		1.05	%		1.29	%		1.52	%		0.82	%		0.41	%		0.02	%		0.18	%
	Wholesale notes		0.02			0.03			0.02			—			—			(0.01	)		(0.01	)
	Total		0.41			0.46			0.52			0.21			0.10			—			0.05
Net losses (recoveries) as a percentage of average gross balance of all outstanding receivables:(1)
	Retail notes and leases		0.52	%		0.56	%		0.68	%		0.36	%		0.18	%		0.01	%		0.09	%
	Wholesale notes		0.05			0.10			0.06			—			(0.02	)		(0.04	)		(0.02	)
	Accounts		—			—			—			(0.02	)		0.02			—			—
	Total		0.40			0.42			0.50			0.30			0.12			—			0.06

(1)

January 31 amounts have been annualized.

Delinquencies, Repossessions and Net Losses

        Set forth below is selected information concerning Navistar Financial's and International's, as applicable, experience in the United States pertaining to delinquencies, repossessions and net losses on

19

all Retail Notes and Leases owned or serviced by Navistar Financial. Although Navistar Financial believes retail delinquencies, repossessions and net losses are particularly sensitive to the industrial sector, which generates a significant portion of the freight tonnage hauled, Navistar Financial does not track such data and is unable to ascertain the specific causes of such fluctuations. The performance of Navistar Financial's serviced portfolio declined during the fiscal year ended October 31, 2001. The delinquency, repossession and loss percentages for this period exceed the levels for any of the other fiscal year periods shown below. Delinquencies, repossessions and net losses for the fiscal quarter ended January 31, 2002 continue to exceed levels for the fiscal years 1997 through 2000, but have improved in comparison to the fiscal quarter ended January 31, 2001. Navistar Financial believes that the significant increase in delinquencies beginning in 2000 is due to lower operating margins realized by trucking companies, resulting from a number of factors, including higher fuel cost and insurance costs, as well as reductions in overall freight shipments. If these factors continue, they may further impact the financial strength of the obligors. Since fiscal 2000, net losses have been significantly higher than for other periods shown. Navistar Financial attributes this increase principally to higher repossession frequency and to industry-wide lower resale values for used trucks. As a result of the bankruptcy of one of Navistar Financial's largest obligors, a combined charge of $10.9 million was taken in 1996 by Navistar Financial and International, $3.8 million of which was reversed in 1998 by Navistar Financial. There can be no assurance that future delinquency, repossession and net loss experience of Navistar Financial and International, as applicable, will be comparable to that set forth below. Due to rounding, the amounts shown for Navistar Financial and International separately in this table may not add to the amount shown for Navistar Financial and International combined.

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        The following table provides an analysis of the delinquencies and losses with respect to serviced retail notes and leases during each of the periods indicated:

		Three Months Ended January 31,						Fiscal Year Ended October 31,
		2002			2001			2001			2000			1999			1998			1997
		(in millions of dollars, except percentages)
New and used vehicle contracts:
Gross balance of retail notes and leases outstanding at end of period		$	3,134		$	3,568		$	3,251		$	3,620		$	3,311		$	2,865		$	2,525
Gross balance of retail notes and leases with payments past due by over 60 days as a percentage of gross balance outstanding at end of period			1.56	%		1.82	%		1.16	%		1.39	%		0.56	%		0.60	%		0.68	%
Average gross balance of retail notes and leases		$	3,196		$	3,595		$	3,456		$	3,417		$	3,061		$	2,671		$	2,456
Net losses:
	Navistar Financial	$	4		$	5		$	23		$	12		$	6		$	—		$	2
	International(1)		9			11			37			23			3			11			10
	Combined	$	13		$	16		$	60		$	35		$	9		$	11		$	12
Liquidations minus combined net losses(2)		$	390		$	383		$	1,503		$	1,470		$	1,337		$	1,295		$	1,175
Net losses as a percentage of Liquidations minus combined net losses:
	Navistar Financial		1.07	%		1.32	%		1.55	%		0.83	%		0.41	%		0.02	%		0.19	%
	International		2.30			2.75			2.48			1.53			0.26			0.83			0.87
	Combined		3.37	%		4.07	%		4.03	%		2.36	%		0.67	%		0.85	%		1.06	%
Net losses as a percentage of average gross balance(3):
	Navistar Financial		0.52	%		0.56	%		0.68	%		0.36	%		0.18	%		0.01	%		0.09	%
	International		1.12			1.17			1.07			0.66			0.11			0.40			0.41
	Combined		1.64	%		1.73	%		1.75	%		1.02	%		0.29	%		0.41	%		0.50	%
Repossessions as a percentage of average gross balance(3)			3.01	%		4.01	%		4.47	%		2.80	%		1.82	%		2.26	%		2.69	%

(1)

Represents losses incurred by International on disposal of units acquired from Navistar Financial under certain repurchase arrangements. Certain of the financial arrangements between International and Navistar Financial are governed by the terms of a master intercompany agreement between Navistar Financial and International.

(2)

Combined net losses include both Navistar Financial and International net losses.

(3)

January 31 amounts have been annualized.

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BUSINESS

        Navistar is a holding company whose principal operating subsidiary is International Truck and Engine Corporation, or International. Navistar Financial is a wholly-owned finance subsidiary of International. Navistar Financial has issued the 4.75% subordinated exchangeable notes due 2009. Holders of these notes may deliver the notes to Navistar, which will issue Navistar common stock to the holders in exchange for the notes. Navistar does not guarantee payment of principal or interest on the notes. The notes are not obligations of Navistar or any of Navistar's affiliates, other than Navistar Financial.

Navistar International Corporation

        We are a leading producer and marketer of medium trucks, school buses, heavy trucks, severe service vehicles and parts and services sold under the International® brand. Our truck products are sold to the common carrier, private carrier, government/service, leasing, construction, energy/petroleum and student transportation markets. We also are the leading producer of mid-range (160-300 horsepower) diesel engines. Our diesel engines are sold under the International® brand as well as produced for other original equipment manufacturers, or OEMs, principally Ford. Our diesel engines are used in our Class 5-7 medium trucks and school buses and selected Class 8 heavy truck models and sold to Ford and other OEMs for use in medium trucks, pick-up trucks, vans and SUVs and, to a lesser extent, for industrial, agricultural and marine applications. Our consolidated operations had revenues of $1.5 billion and EBITDA (as defined) of $4 million for the three months ended January 31, 2002, and revenues of $6.7 billion and EBITDA (as defined) of $332 million for fiscal 2001.

        Set forth below is certain information regarding our principal product lines:

Product Line Description		Fiscal 2001 Revenues		% of Fiscal 2001 Mfg. Revenues		Fiscal 2001 Retail Deliveries	Estimated Market Share(1)		Typical End-Use/User
		(in millions)
Medium Trucks (Class 5-7)		$	1,582	25	%	39,752	33	%	Local and regional delivery/beverage, refrigeration, utilities, towing, municipalities and emergency rescue
School Buses		$	865	13	%	16,702	60	%	School districts
Severe Service Vehicles		$	438	7	%	7,755	17	%	Construction, waste management and other on-off highway applications
Heavy Trucks (Class 8)		$	992	15	%	18,172	15	%	Long-haul, local and regional delivery/fleets and owner operators
	Total Trucks	$	3,877	60	%	82,381	26	%
Mid-Range Diesel Engines		$	1,617	25	%	NA	NA		Ford and other OEMs
Service Parts		$	929	15	%	NA	NA		All end-users listed in this table

(1)

Combined United States and Canadian markets for fiscal 2001.

        We market our truck products and service parts through the largest dealer network in the United States and Canada specializing in medium trucks and heavy trucks, which included 879 dealer locations as of January 31, 2002. In addition, we have a dealer network consisting of 71 locations in Mexico, 17 locations in Brazil and 70 locations in 58 other countries, each as of January 31, 2002. Service and customer support also are supplied at these locations. In the United States and Canada, we operate seven regional parts distribution centers that allow 24-hour availability and same-day shipment of the

22

parts most frequently requested by dealers and customers. We also operate a parts distribution center in each of Mexico and Brazil.

Our Competitive Strengths

        We believe our key competitive strengths include the following:

•

Strong Market Positions.  We believe our strong market positions in the Class 5 through 8 truck and the mid-range diesel engine markets in the United States and Canada provide us with a significant competitive advantage. In fiscal 2001, our combined market share of the Class 5 through 8 truck market in the United States and Canada was approximately 26%. We are the leader in the medium truck (Class 5-7) and school bus chassis markets, with a market share of approximately 33% and 60%, respectively, in fiscal 2001. In addition, we are the leading supplier of mid-range diesel engines in the 160-300 horsepower range to the pick-up and van segment, the Class 5-7 truck segment and school bus segment with a diesel engine market share of approximately 63%, 40% and 55%, respectively, in calendar year 2001. We also believe that we are the largest supplier of service parts to the heavy and medium truck and bus aftermarket.



•

Newly Launched High Performance Truck.  In February 2001, we successfully launched our first two High Performance truck models. Our High Performance truck program is the product of several years of development and over $900 million of investment and development costs resulting in the most substantial transformation of our product line in the last 25 years. We believe that our High Performance trucks will offer our customers increased driver control, enhanced vehicle reliability, durability and fuel economy, better stability and handling, a smoother ride, an automotive quality finish and reduced cost of ownership. Based on our internal studies, we believe that our new High Performance truck will decrease an owner's annual downtime by approximately 50% and reduce an owner's annual maintenance costs by approximately 20% as compared to our previous model. In developing this new product line, we also made significant changes to simplify our manufacturing operations thereby reducing overall labor, materials handling and scheduling costs, improving scale in our truck business operations, reducing prices for purchased components and improving the quality of our products. We believe that our product innovations and improvements will provide us with significant opportunities to improve our market share.



•

Well-Positioned Mid-Range Diesel Engine Business.  Over the last ten fiscal years, our OEM diesel engine unit volume has grown at a compound annual growth rate of 16%. We believe that our mid-range diesel engine business enjoys several competitive advantages due to our technological leadership, strong relationship with Ford and environmental emissions leadership.



•

Leadership in Diesel Engine Technology.  We are a leader in the development of diesel engine technology having incurred an aggregate of $542 million in our last three fiscal years in investment and development costs in connection with our NGD engines. Each of our NGD engines (V-8 and V-6) will provide improvements over our existing V-8 diesel engine in terms of size, performance, fuel economy, sound quality, emissions, reliability and cost. We recently have developed electronic multiport fuel injection diesel valve technology that provides enhanced fuel efficiency with a quieter ride. Our advanced diesel engine technology enables our engines to have emissions, acceleration and performance characteristics which compare favorably to alternative fuel technologies while being economically less expensive to operate due to greater fuel efficiency.



•

Strong Relationship with Ford.  We are currently the exclusive supplier of V-8 diesel engines to Ford for use in its over 8,500 lbs. gross vehicle weight, or GVW, pick-up trucks, vans and Excursion SUVs for sale in the United States and Canada. We have been supplying diesel engines to Ford since 1982 and currently have agreements with Ford to supply our existing V-8 diesel engine through 2002 and, commencing in 2002, to supply a newly designed, advanced technology successor V-8 diesel engine through 2012. In fiscal 2000, we finalized

23

an additional agreement with Ford for the future supply of a newly designed, advanced technology V-6 diesel engine primarily for use in applications under 8,500 lbs. GVW.

•

Environmental Emissions Leadership.  We are an industry leader in the development of new diesel technology that improves engine performance while meeting environmental emissions standards. For example, in 1996 we became the first diesel engine manufacturer to demonstrate that we could meet federal emission standards that are set to go into effect in 2004. In 1998, we were the only U.S. diesel engine manufacturer to receive 100% approval from the EPA for our 1999 model engines meeting EPA emission standards. In 2000, International supported the EPA's new rule that will limit the sulfur content in diesel fuel to 15 parts per million beginning in mid-2006 and significantly reduce emissions from heavy-duty diesel engines starting in 2007. Then, in 2001, we became the first company to deliver diesel-engine technology based on the new fuel standard (currently available in some locations in the U.S.) when both the EPA and the CARB certified an International® engine as meeting the 2007 standards for particulate and hydrocarbon emissions. This Green Diesel Technology™ is used in school buses which already have been purchased by school districts in California.





•

Large Installed Customer Base Serviced by Extensive Dealer Network.  As a result of our long operating history and strong market positions, we have a substantial installed customer base that provides us with significant recurring aftermarket revenues from the sale of truck and engine replacement parts. We estimate that there are currently over one million International® trucks in operation throughout the world. To service these customers and to attract new customers, we maintain the largest retail dealer network in North America specializing in medium and heavy trucks. In recent years, we have dedicated substantial resources to developing our comprehensive service parts program as it is vital to the maintenance of our relationships with our customers and dealers. We currently operate seven regional parts distribution centers in the United States and Canada, enabling us to offer 24-hour availability and same day shipment of the parts most frequently requested by our customers.

Our Business Strategy

        Over the past several years, we have developed, and are currently implementing, a comprehensive series of strategic initiatives designed to increase revenues and improve the operating performances of our truck and engine operations. The primary components of each of these strategies include the following:

Truck Strategy

•

Continue to Introduce Additional High Performance Truck Models.  We successfully introduced the first two models in our High Performance truck line in February 2001. Later in the year and in early 2002 we also launched the 7000 series for severe service and the 8000 series for regional haul. Overall, we plan to introduce by the end of 2004 a full line of High Performance medium trucks, school buses, severe service and conventional heavy trucks.



•

Reduce Costs and Improve Manufacturing Efficiency.  Our truck strategy includes our ongoing efforts to reduce costs and improve manufacturing efficiency. Our principal efforts include the following:



•

Continue to Focus Manufacturing Facilities.  We believe we can achieve additional improvements in manufacturing efficiency by continuing to focus each of our truck manufacturing facilities on producing a limited number of truck types. To date, we have made significant progress in our production realignment efforts and, when completed, our Springfield, Ohio facility will focus on medium truck and bus chassis production, our Conway, Arkansas and Tulsa, Oklahoma facilities will focus on bus manufacturing (body and chassis), our Chatham, Ontario facility will focus on heavy trucks and our Garland, Texas

24

facility will focus on severe service heavy trucks. As part of this realignment, we have made substantial investments in state of the art production equipment, such as a computer-controlled cab assembly line at our Springfield, Ohio facility, which has substantially automated our new High Performance medium truck production process. We believe that our production realignment efforts and investment in new equipment will result in improved product quality, reduced model changeover times, improved employee utilization and lower overall labor costs through lower direct hours per unit.

•

Simplify Product Design.  We believe that we can increase our manufacturing and purchasing efficiency and improve product quality by reducing the complexity of our product offerings. Historically, we offered thousands of options and a separate chassis design for each truck model we manufactured, which led to significant manufacturing and purchasing inefficiencies. Over the last several years, we have introduced several new programs designed to rationalize the number of possible option combinations by developing pre-packaged option groups based upon the most popular preferences of our customers and to reduce the number of chassis used in the production of our trucks. Upon the full introduction of our High Performance truck models, we will have reduced the number of chassis used in the production of our heavy trucks and medium trucks from 9 to 2 and reduced power train combinations from over 800 to 34. This standardization of option and chassis groups combined with increased use of modular components throughout the assembly process is expected to lead to significant operating cost savings from increased manufacturing simplicity and improve pricing for purchased components. In addition, we believe that this will result in an overall improvement in product quality, reliability and value for our customers.



•

Continue to Increase Scale.  In September 2001, we formed a joint venture with Ford. The joint venture operates through two operating companies named Blue Diamond Truck, S. de R.L. de C.V., and Blue Diamond Parts, LLC. Initially, the joint venture will produce Class 6 and 7 medium commercial trucks at our plant in Escobedo, Mexico and manage medium-truck and diesel engine parts distribution to Ford dealers in North America. In subsequent years, Blue Diamond plans to expand the range of commercial trucks for both companies. In addition to broadening our relationship with Ford, we believe this joint venture gives us the opportunity to increase the speed of new product development and improve economies of scale in engineering, manufacturing and parts procurement.

Engine Strategy

•

Continue Diesel Engine Technology Leadership.  We believe that continued technological innovations will allow our diesel engines to be used in a broader range of applications and to increasingly be used instead of gas and natural gas engines due primarily to greater fuel efficiency. For example, the technological advancements of our next generation V-6 diesel engine will enable Ford to offer it in a larger number of models, including the popular F-150 pick-up, Ford Expedition and Lincoln Navigator, none of which are currently offered with a diesel engine in North America. The percentage of medium trucks (Class 5-7) and heavy-duty pick-up trucks (over 8,500 lbs. GVW) powered by diesel engines in North America have generally increased over time and currently are approximately 93% and 40%, respectively, as compared to approximately 50% and 10%, respectively, in 1983. We believe that this trend is the result of the increased reliability and fuel economy offered by diesel engines. We further believe that this trend will continue with respect to these truck categories and that our next generation V-6 diesel engine will provide us with a potentially larger opportunity with respect to light pick-up trucks and SUVs (less than 8,500 lbs. GVW).



•

Continue to Expand Ford Relationship.  Our relationship with Ford has grown over the last several years. For example, shipments to Ford of our 7.3L V-8 diesel engine have increased significantly

25

from 149,000 units in fiscal 1995 to 277,300 units in fiscal 2001. We believe that there are a number of opportunities to further broaden our relationship with Ford. Our Blue Diamond joint venture with Ford will manage medium truck and diesel engine parts distribution to Ford dealers in North America and explore additional opportunities for advanced diesel truck engine products for global markets. In addition, as Ford's preferred global supplier of commercial truck diesel engines, we are exploring other opportunities for potential application of diesel engines in Ford's full range of truck products.

•

Expand Strategic Supplier Alliances.  Over the last five years, we have formed four strategic alliances with suppliers in an effort to improve product performance and reduce our manufacturing costs. For example, we have formed a strategic alliance with Siemens Automotive Performance Group to develop and manufacture technologically advanced NGD fuel injectors utilizing Navistar's electro-hydraulic system expertise and Siemens Automotive's fuel delivery technology and high volume manufacturing capability. We believe that there are additional opportunities to form similar strategic alliances in an effort to reduce our overall manufacturing costs, gain access to advanced technology and expand into new markets.

Business Environment

        We believe that over the long-term the demand for Class 5 through 8 trucks and diesel engines will continue to increase and that we are well-positioned to compete in these markets. Demand for Class 5 through 8 trucks, however, has historically been cyclical, being affected by such economic and other factors as industrial production, construction, demand for consumer durable goods, interest rates and the earnings and cash flow of dealers and customers. Truck sales in 2001 and early 2002 were hindered by a number of factors including the general economic slowdown, increased new and used truck inventories and higher insurance costs.

        The current demand for new trucks continues to reflect these adverse conditions. As a result, we currently project U.S. and Canadian heavy truck (Class 8) demand to be 144,000 units in 2002, down 12% from 2001. We project that Class 5-7 medium truck demand in these markets, excluding school buses, to be 112,500 units in 2002, 7% lower than 2001, and the demand for school buses to be 28,000 in 2002 consistent with 2001. We estimate that mid-range diesel engine shipments by us to other OEMs in 2002 will be 326,400 units, slightly higher than 2001.

        During late 2000, industry used truck inventory levels increased above historical levels thereby depressing prices on new and used trucks, particularly heavy truck sleepers. As compared to our competitors, heavy truck sleepers constitute a significantly smaller percentage of our overall truck business and, as a result, we believe that our used truck inventories are significantly lower than those of our competitors and contain a larger percentage of medium trucks, which have not suffered the same degree of pricing pressure as heavy truck sleepers.

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Navistar Financial Corporation

        Navistar Financial is a commercial financing organization that is a wholly-owned subsidiary of International, which is itself a wholly-owned subsidiary of Navistar. Navistar Financial provides wholesale, retail and lease financing in the United States for sales of new and used trucks, truck chassis, buses and trailers, service parts and engines by International and retail and lease financings for sales of such products by International's dealers and their customers, which we refer to as "receivables." Sales of new products (including trailers) of other manufacturers are also financed regardless of whether designed or customarily sold for use with International's trucks. Navistar Financial provided wholesale financing for 96% of the new truck units sold by International to International dealers in the United States during each of fiscal 2001 and 2000. Navistar Financial also provided retail financing in fiscal 2001 for 15.4% of the new truck units sold by International and International dealers compared to approximately 22.8% and 16.9% for the three months ended January 31, 2002 and 2001, respectively.

Our Business Strategy

        Navistar Financial has built its strategy around sound proven credit standards combined with products and services that we believe our customers value. Fundamental to this strategy are four primary strategic themes:

•

Support the Sales of International® Brand Vehicles



•

Be the Preferred Supplier to International Dealers



•

Offer Competitive Comprehensive Financial Products



•

Create an Ease of Doing Business with Navistar Financial

        Support the Sales of International® Brand Vehicles:    We believe that the overall value of the International® brand is enhanced through the financial support of Navistar Financial. By focusing its resources on the wholesale and retail needs of the International customers and dealers and providing a consistent market presence throughout the business cycle, Navistar Financial is an important element of the International truck strategy.

        Be the Preferred Supplier to International Dealers:    Dealers value a finance source that is willing to work with them to understand the business environment, that is a dependable source of financing throughout the cycle, and that enhances their sales and profitability. Navistar Financial's field organization delivers this value and plans to continue to leverage its relationship with the International dealers.

        Offer Competitive Comprehensive Financial Products:    Dealers and customers value a financing source that can customize its services to meet the diverse needs of the transportation industry. Navistar Financial plans to continue to offer a wide range of financing products at competitive rates and terms.

        Create an Ease of Doing Business with Navistar Financial:    Navistar Financial is a financing source that understands the unique needs of truck dealers and customers and is capable of meeting those needs in a timely and efficient manner over the business cycle. We believe that simplifying the financing process and making it easy to do business with us, while maintaining our credit standards, will keep the International customers and dealers coming to Navistar Financial for business.

Current Business Environment

        Retail deliveries of Class 5 through 8 trucks, including school buses, in the U.S. in fiscal 2002 is forecasted to decrease approximately 9% from 2001. The competitive commercial financing market will continue to put pressure on Navistar Financial's retail and wholesale financing activity. Increased volatility in the capital markets is likely to put additional pressure on the funding rates available to

27

Navistar Financial in the asset-backed public market, commercial paper markets and other debt financing markets.

Business Outlook

        Navistar Financial's management believes that collections on the outstanding receivables portfolio plus cash available from Navistar Financial's various funding sources will permit it to meet the financing requirements of International's dealers and retail customers through 2002 and beyond.

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DESCRIPTION OF NOTES

        Navistar Financial issued the notes under an indenture dated as of March 25, 2002 among Navistar Financial, Navistar and BNY Midwest Trust Company, as trustee. A copy of the indenture referred to below is available as set forth below under "—Additional Information." The following is a summary of certain provisions of the indenture and does not purport to be complete. Reference should be made to all provisions of the indenture, including the definitions of certain terms contained therein.

        As used in this "Description of Notes" section, references to "Navistar Financial" refer solely to Navistar Financial Corporation and not its subsidiaries and references to "Navistar" refer solely to Navistar International Corporation and not its subsidiaries.

General

        The notes:

•

are Navistar Financial's general unsecured obligations and are effectively subordinated to all of Navistar Financial's secured debt and all liabilities, including trade payables, of Navistar Financial's subsidiaries;



•

are subordinated in right of payment to all of Navistar Financial's existing and future senior debt;



•

are limited to $220,000,000 aggregate principal amount;



•

will mature on April 1, 2009; and



•

were issued in denominations of $1,000 and integral multiples of $1,000 in fully registered form.

        The notes accrue interest at a rate of 4.75% per annum from March 25, 2002, or from the most recent interest payment date to which interest has been paid or duly provided for. Navistar Financial will pay accrued and unpaid interest semi-annually in arrears on April 1 and October 1 of each year, beginning October 1, 2002. Navistar Financial will pay interest to the person in whose name a note is registered at the close of business on the March 15 or September 15 (which we refer to as the "record dates") immediately preceding the relevant interest payment date. However, in the case of a note or portion of a note redeemed or repurchased in connection with a Fundamental Change on a repurchase date during the period from a record date to (but excluding) the next succeeding interest payment date, accrued interest will be payable (unless such note or portion is exchanged) to the holder of the note or portion of a note redeemed or repurchased. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months and the actual number of days elapsed in any partial month.

        Principal of and interest on the notes will be payable at the office or agency maintained for such purpose or, at Navistar Financial's option, payment of interest may be made by check mailed to the holders of the notes at their respective addresses set forth in the register of holders of notes. Until otherwise designated by Navistar Financial, the office or agency maintained for such purpose will be the principal corporate trust office of the trustee.

Exchange

        Subject to the conditions described below, holders may deliver their notes to Navistar, which will, in exchange for the notes, deliver shares of its common stock at an initial exchange price of $55.73 per share at any time following issuance of the notes, unless Navistar Financial has previously repurchased the notes or unless the notes have matured. A holder may exchange fewer than all of such holder's notes so long as the notes exchanged are an integral multiple of $1,000 principal amount. The right to exchange notes called for redemption will terminate at the close of business on the business day preceding the applicable redemption date.

29

        Upon exchange of any notes, Navistar may, at its election, either (1) hold notes tendered for exchange or (2) contribute the notes to Navistar Financial. If Navistar elects to contribute the notes to Navistar Financial, then Navistar Financial would retire such notes.

        Except as described below, interest accrued but unpaid on such notes will be forfeited upon exchange of any notes. If notes are exchanged after a record date for the payment of interest and prior to the next succeeding interest payment date, they must be accompanied by funds equal to the interest payable on such succeeding interest payment date on the principal amount so exchanged.

        The right of exchange attaching to any note may be exercised by the holder by delivering the note to Navistar at the specified office of an exchange agent, accompanied by a duly signed and completed notice of exchange, together with any funds that may be required. Such notice of exchange can be obtained from the trustee. Beneficial owners of interests in a global note may exercise their right of exchange by delivering to the DTC the appropriate instruction form for exchange pursuant to DTC's exchange program. The exchange date will be the date on which the note, the duly signed and completed notice of exchange and any funds that may be required as described above shall have been so delivered. A holder delivering a note for exchange will be required to pay any tax or duty which may be payable in respect of the issuance or delivery of Navistar common stock on that exchange and in respect of any transfer involved in the issue or delivery of the Navistar common stock by Navistar in a name other than the holder of the note. Certificates representing shares of Navistar common stock will not be issued or delivered by Navistar unless all taxes and duties, if any, payable by the holder have been paid.

        Navistar is not required to deliver fractional shares of Navistar common stock upon exchange of notes and, in lieu of such fractional shares, Navistar will pay cash equal to the market price of Navistar common stock on the business day prior to the exchange date.

        The exchange price is subject to adjustment (under formulae set forth in the indenture) in certain events, including:

(1)

the issuance of Navistar common stock as a dividend or distribution on such common stock;



(2)

certain subdivisions and combinations of the Navistar common stock;



(3)

the issuance to all or substantially all holders of Navistar common stock of certain rights or warrants to purchase such common stock at a price per share less than the current market price (as defined in the indenture);



(4)

the dividend or other distribution to all holders of common stock of shares of Navistar capital stock (other than common stock) or evidences of its indebtedness or assets (including securities, but excluding those rights, warrants, dividends and distributions referred to above or paid exclusively in cash);



(5)

dividends or other distributions consisting exclusively of cash (excluding any cash portion of distributions referred to in clause (4) or cash distributed upon a merger, share exchange or consolidation to which the succeeding paragraph applies) to all holders of Navistar common stock to the extent such distributions, combined together with:



•

all such all-cash distributions made within the preceding 12 months in respect of which no adjustment has been made plus



•

any cash and the fair market value of other consideration payable in respect of any tender offers by Navistar or any of its subsidiaries for common stock concluded within the preceding 12 months in respect of which no adjustment has been made,

30

exceeds 10% of Navistar's market capitalization (being the product of the then current market price of the common stock times the number of shares of common stock then outstanding) on the record date for such distribution; and

(6)

the purchase of common stock pursuant to a tender offer made by Navistar or any of its subsidiaries to the extent that the aggregate consideration, together with:



•

any cash and the fair market value of any other consideration payable in any other tender offer expiring within 12 months preceding such tender offer in respect of which no adjustment has been made plus



•

the aggregate amount of any such all-cash distributions referred to in clause (5) above to all holders of Navistar common stock within the 12 months preceding the expiration of such tender offer in respect of which no adjustments have been made,

exceeds 10% of Navistar's market capitalization on the expiration of such tender offer.

        Navistar may, instead of making any required adjustment in the exchange price under clause (4) or (5), make proper provision so that each holder of notes who exchanges a note shall be entitled to receive upon exchange, in addition to the shares of Navistar common stock, the amount and kind of distributions that the holder would have been entitled to receive if the holder had exchanged the note immediately prior to the date fixed for determining the shareholders entitled to receive the distribution and, in the case of clause (5), interest accrued as a consequence of the investment, in U.S. Government obligations with a maturity of not more than three months, of the cash amount that the holder would have been so entitled to receive.

        In the case of:

•

any reclassification or change of Navistar's common stock; or



•

a consolidation, merger, share exchange or combination involving Navistar or a sale or conveyance to another person of Navistar's property and assets as an entirety or substantially as an entirety,

in each case as a result of which holders of Navistar's common stock will be entitled to receive stock, other securities, other property or assets (including cash) with respect to or in exchange for Navistar's common stock, the holders of the notes then outstanding will be entitled thereafter to exchange such notes into the kind and amount of shares of stock, other securities or other property or assets, which they would have owned or been entitled to receive upon such reclassification, change, consolidation, merger, share exchange, combination, sale or conveyance, had such notes been exchanged into Navistar common stock immediately prior to such reclassification, change, consolidation, merger, share exchange, combination, sale or conveyance (assuming, in a case in which Navistar's shareholders may exercise rights of election, that a holder of notes would not have exercised any rights of election as to the stock, other securities or other property or assets receivable in connection therewith and received per share the kind and amount received per share by a plurality of non-electing shares). Certain of the foregoing events may also constitute or result in a Fundamental Change requiring Navistar Financial to offer to repurchase the notes. See "—Fundamental Change Permits Holders to Require Navistar Financial to Repurchase Notes."

        In the event of a taxable distribution to holders of Navistar common stock, or other transaction, that results in any adjustment of the exchange price, the holders of notes may, in certain circumstances, be deemed to have received a distribution subject to United States income tax as a dividend; in certain other circumstances, the absence of such an adjustment may result in a taxable dividend to the holders of the common stock. See "Federal Income Tax Considerations."

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        Navistar may, from time to time, to the extent permitted by law, reduce the exchange price of the notes by any amount for any period of at least 20 days, in which case Navistar shall give at least 15 days' notice of such decrease, if its board of directors has made a determination that such decrease would be in its best interests, which determination will be conclusive. Navistar may, at its option, make such reductions in the exchange price, in addition to those set forth above, as its board of directors deems advisable to avoid or diminish any income tax to holders of Navistar common stock resulting from any dividend or distribution of stock or rights to acquire stock or from any event treated as such for income tax purposes. See "Federal Income Tax Considerations."

        No adjustment in the exchange price will be required unless such adjustment would require a change of at least 1% of the exchange price then in effect. However, any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. Except as stated above, the exchange price will not be adjusted for the issuance of Navistar common stock or any securities convertible into or exchangeable for such common stock or carrying the right to purchase any of the foregoing.

Optional Redemption

        At any time on and after April 1, 2005, Navistar Financial may redeem some or all of the notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount), set forth below plus accrued and unpaid interest and liquidated damages, if any, on the notes redeemed, to (but excluding) the applicable redemption date, if redeemed during the twelve-month period beginning on April 1 of the years indicated below:

Year	Redemption Price
2005	102.036	%
2006	101.357	%
2007	100.679	%
2008 and thereafter	100.000	%

Fundamental Change Permits Holders to Require Navistar Financial to Repurchase Notes

        If a Fundamental Change (as defined below) occurs prior to the maturity of the notes, each holder has the right to require Navistar Financial to repurchase any or all of the holder's notes. The notes may be repurchased in multiples of $1,000 principal amount. The repurchase price will be equal to 100% of the principal amount of the notes plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase.

        A "Fundamental Change" occurs if:

•

the common stock of Navistar (or its successor under the indenture) is no longer traded on a U.S. national securities exchange or approved for trading on the NASDAQ Stock Market;



•

(a) Navistar consolidates with or merges into another person (other than a direct or indirect wholly-owned subsidiary) and the holders of the common stock of Navistar immediately prior to the transaction receive for their common stock shares of the resulting or surviving entity (or its parent) which in the aggregate represent less than a majority of the total voting power of all classes of voting stock that are normally entitled to vote in the election of directors of the resulting or surviving entity (or its parent) immediately after the transaction or (b) Navistar Financial consolidates with or merges into another person (other than a direct or indirect wholly-owned subsidiary of Navistar);



•

(a) any person (other than a direct or indirect wholly-owned subsidiary) consolidates with or merges into Navistar and the holders of the common stock of Navistar immediately prior to the

32

transaction beneficially own shares of the resulting or surviving entity which in the aggregate represent less than a majority of the total voting power of all classes of voting stock that are normally entitled to vote in the election of directors of the resulting or surviving entity (or its parent) immediately after the transaction or (b) any person (other than a direct or indirect wholly-owned subsidiary of Navistar) consolidates with or merges into Navistar Financial and Navistar Financial ceases to be a direct or indirect wholly-owned subsidiary of Navistar (or its successor under the indenture);

•

(a) Navistar, or Navistar together with its subsidiaries taken as a whole, sells, conveys, transfers or leases all or substantially all of their properties and assets to any person or group in one or a series of transactions other than (1) to one or more of its direct or indirect wholly-owned subsidiaries, (2) in a Permitted Joint Venture or (3) a transaction in which the holders of the common stock of Navistar immediately prior to the transaction receive for their common stock shares of the transferee or lessee (or its parent) which in the aggregate represent a majority of the total voting power of all classes of voting stock that are normally entitled to vote in the election of directors of the transferee or lessee (or its parent) immediately after the transaction or (b) Navistar Financial, or Navistar Financial together with its subsidiaries taken as a whole, sells, conveys, transfers or leases all or substantially all of their properties and assets to any person (other than (1) to one or more of its direct or indirect wholly-owned subsidiaries or (2) receivables and related assets and interests therein in connection with a Qualified Securitization Transaction);



•

any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act) other than (1) Navistar or one or more of its direct or indirect wholly-owned subsidiaries or (2) employee or retirement benefit plans or trusts sponsored or established by Navistar or its subsidiaries is or becomes after the issue date of the notes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act) of shares representing more than 50% of the combined voting power of the then outstanding voting stock that is normally entitled to vote in the election of directors of Navistar or Navistar Financial;



•

so long as Navistar or Navistar Financial is bound to the terms of the indenture, it adopts a plan relating to its liquidation or dissolution; or



•

the outstanding common stock of Navistar is reclassified into, exchanged for or converted into the right to receive any other property or security;

provided, however, that (a) none of these circumstances with respect to Navistar will be a Fundamental Change if at least 90% of the aggregate fair market value (as determined by Navistar's board of directors) of the property and securities received or retained by holders of Navistar's common stock in respect of such common stock in such transaction, other than cash payments for fractional shares, consists of shares of voting common stock of the successor person (or its parent) that are, or upon issuance will be, traded on a U.S. national securities exchange or approved for trading on the NASDAQ Stock Market and (b) none of these circumstances with respect to Navistar Financial will be a Fundamental Change so long as there is no Ratings Decline (as defined below).

        "Ratings Decline" means that at any time within 30 days (which period will be extended so long as the rating of the notes is under publicly announced consideration for possible downgrade by either of the rating agencies named below) after the date of public notice of the Fundamental Change, or of the intention of Navistar Financial or of any person to effect a Fundamental Change, the rating of the notes is decreased by either of Standard & Poor's Rating Services or Moody's Investors Service, Inc. and as a result of such decrease is less than BB-/Ba2.

        "Permitted Joint Venture" means any person which is, directly or indirectly, through its subsidiaries or otherwise, engaged principally in any business in which Navistar or its subsidiaries is engaged, or a

33

reasonably related business, and the capital stock or other equity interests of which is owned directly or indirectly by Navistar and one or more persons other than Navistar and its affiliates.

        "Qualified Securitization Transaction" means any transaction or series of transactions that have been or may be entered into by Navistar Financial or any of its subsidiaries in connection with or reasonably related to a transaction or series of transactions in which Navistar Financial or any of its subsidiaries may sell, convey or otherwise transfer to (1) a Securitization Subsidiary or (2) any other person, or may grant a security interest in, any receivables and related assets or interests therein secured by the goods or services financed thereby (whether such receivables and related assets are then existing or arising in the future) of Navistar Financial or any of its subsidiaries, and any assets reasonably related thereto including, without limitation, all security interests in goods or services financed thereby, the proceeds of such receivables, and other assets which are customarily sold or in respect of which security interests are customarily granted in connection with securitization transactions involving such assets.

        "Securitization Subsidiary" means a wholly-owned subsidiary of Navistar Financial which engages in no activities other than those reasonably related to or in connection with the entering into of securitization transactions and which is designated by the Board of Directors of Navistar Financial (as provided below) as a Securitization Subsidiary (a) no portion of the indebtedness or any other obligations (contingent or otherwise) of which (1) is guaranteed by Navistar Financial or any other subsidiary of Navistar Financial other than pursuant to Standard Securitization Undertakings, (2) is recourse to or obligates Navistar Financial or any other subsidiary of Navistar Financial in any way other than pursuant to Standard Securitization Undertakings or (3) subjects any property or asset of Navistar Financial or any other subsidiary of Navistar Financial, directly or indirectly, contingently or otherwise, to any lien or to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither Navistar Financial nor any other subsidiary of Navistar Financial (1) provides any credit support (for the avoidance of doubt, no loan agreement between Navistar Financial and its subsidiaries shall be deemed to constitute "credit support") or (2) has any contract, agreement, arrangement or understanding other than on terms that are fair and reasonable and that are no less favorable to Navistar Financial or such subsidiary than could be obtained from an unrelated person (other than Standard Securitization Undertakings and intercompany notes relating to the sale of receivables and related assets to such Securitization Subsidiary) and (c) with which neither Navistar Financial nor any subsidiary of Navistar Financial has any obligation to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Any such designation by the board of directors of Navistar Financial shall be evidenced by resolutions of the board of directors of Navistar Financial giving effect to such designation.

        "Standard Securitization Undertakings" means customary representations, warranties and covenants (including those relating to servicing) and entered into in the ordinary course of business in connection with a Qualified Securitization Transaction.

        On or before the 30th day after the occurrence of a Fundamental Change, Navistar Financial will deliver to the trustee, and the trustee shall mail such notice to all holders of record of the notes (and to beneficial owners as required by law), a notice of the occurrence of the Fundamental Change and of the resulting repurchase right. The notice will state among other things:

•

a brief description of the events causing the Fundamental Change;



•

the repurchase price and date; and



•

the procedures that holders must follow to require Navistar Financial to repurchase their notes.

34

        To exercise the repurchase right, holders of notes must deliver, on or before the 60th day after the date of our notice of a Fundamental Change, a repurchase notice electing to require Navistar Financial to repurchase notes which shall state:

•

the certificate numbers of the holder's notes to be delivered for repurchase; and



•

the portion of the principal amount of notes to be repurchased, which must be $1,000 or an integral multiple of $1,000.

        Any repurchase notice may be withdrawn by the holder by a written notice of withdrawal delivered to the paying agent prior to the close of business on the repurchase date.

        The notice of withdrawal shall state:

•

the principal amount being withdrawn;



•

the certificate numbers of the notes being withdrawn; and



•

the principal amount of the notes that remains subject to the repurchase notice, if any.

        In connection with the repurchase of the notes in the event of a Fundamental Change, Navistar Financial will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Securities Exchange Act which may then be applicable.

        Payment of the repurchase price for a note for which a repurchase notice has been delivered and not validly withdrawn is conditioned upon book-entry transfer or delivery of the note, together with necessary endorsements, to the paying agent at any time after delivery of the repurchase notice. Payment of the repurchase price for the notes will be made promptly following the later of the repurchase date or the time of book-entry transfer or physical delivery of the notes.

        If the paying agent holds money sufficient to pay the repurchase price of a note on the business day following the repurchase date in accordance with the terms of the indenture, then, immediately after the repurchase date, the note will cease to be outstanding and interest on such note will cease to accrue, whether or not book-entry transfer is made or the note is delivered to the paying agent. Thereafter, all other rights of the holder shall terminate other than the right to receive the purchase price upon delivery of the note.

        The repurchase rights of the holders of notes could discourage a potential acquiror of Navistar. The Fundamental Change repurchase feature, however, is not the result of management's knowledge of any specific effort to obtain control of Navistar by any means or part of a plan by management to adopt a series of anti-takeover provisions.

        The term Fundamental Change is limited to specified transactions and may not include other events that might adversely affect the financial condition of either Navistar or Navistar Financial. In addition, the requirement that Navistar Financial offer to repurchase the notes upon a Fundamental Change may not protect noteholders in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving Navistar or Navistar Financial.

        Navistar Financial's ability to repurchase notes may be limited by the terms of its then existing indebtedness or financial agreements.

        No notes may be repurchased at the option of holders upon a Fundamental Change if there has occurred and is continuing an event of default described under "—Events of Default and Remedies" below. However, notes may be repurchased if the event of default is in the payment of the Fundamental Change repurchase price with respect to the notes.

35

Merger and Consolidation

        The indenture provides that neither Navistar nor Navistar Financial shall, in a single transaction or a series of related transactions, consolidate or merge with or into, or effect a share exchange with (whether or not it is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another corporation, person or entity as an entirety or substantially as an entirety (other than to one or more direct or indirect wholly-owned subsidiaries or, in the case of Navistar, in a Permitted Joint Venture, or, in the case of Navistar Financial, other than receivables and related assets or interests therein in connection with a Qualified Securitization Transaction) unless:

•

either (1) it shall be the surviving or continuing corporation of that merger, consolidation or share exchange or (2) if it shall not be the surviving or continuing corporation, the entity or person formed by or surviving any such consolidation, merger or share exchange (or its parent) or the entity or person which acquires by sale, assignment, transfer, lease, conveyance or other disposition our properties and assets substantially as an entirety (or its parent) (a) is a corporation organized and validly existing under the laws of the United States, any State thereof or the District of Columbia and (b) assumes the obligations of the predecessor under the notes, if any, and the indenture and the performance of each of the predecessor's covenants under the notes and the indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the trustee;



•

immediately after such transaction no default or event of default exists; and



•

it or such successor person shall have delivered to the trustee an officers' certificate and an opinion of counsel, each stating that such transaction and the supplemental indenture comply with the indenture and that all conditions precedent in the indenture relating to such transaction have been satisfied.

        For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more of an entity's subsidiaries, the capital stock of which constitutes all or substantially all of the properties and assets of that entity, will be deemed to be the transfer of all or substantially all of that entity's properties and assets.

        Upon any such consolidation, merger, share exchange, sale, assignment, conveyance, lease, transfer or other disposition in accordance with the foregoing, the successor person formed by such consolidation or share exchange or into which the predecessor is merged or to which such sale, assignment, conveyance, lease, transfer or other disposition is made will succeed to, and be substituted for the predecessor, and may exercise the predecessor's right and power, under the indenture with the same effect as if the successor had been named as the predecessor in the indenture, and thereafter the predecessor corporation will be relieved of all further obligations and covenants under the indenture and the notes.

Assumption of Notes by Navistar

        Navistar may at its option assume the obligations of Navistar Financial under the notes and the indenture provided that:

•

no Ratings Decline will result;



•

no event of default under the indenture shall have occurred and be continuing or shall result from the assumption;



•

Navistar assumes the obligations of Navistar Financial under the notes and the indenture and the performance of each of Navistar Financial's covenants under the notes and the indenture

36

(except as provided below) pursuant to a supplemental indenture in a form reasonably satisfactory to the trustee; and

•

Navistar shall have delivered to the trustee an officer's certificate and an opinion of counsel, each stating that such transaction and the supplemental transaction comply with the indenture and all conditions precedent in the indenture relating to such transaction have been satisfied.

Upon the assumption, the notes will be general unsecured obligations of Navistar and will be subordinated in right of payment to all of Navistar's existing and future senior indebtedness, and Navistar will succeed to, and be substituted for Navistar Financial, and may exercise Navistar Financial's right and power, under the indenture with the same effect as if Navistar had been named as Navistar Financial in the indenture and all references in the indenture to Navistar Financial shall be to Navistar, except that (1) clause (b) of each of the second, third and fourth bullet points of the definition of Fundamental Change shall not apply to Navistar as successor and (2) Navistar, as successor, shall be permitted to effect a Permitted Joint Venture notwithstanding the prohibition on Navistar Financial from selling, assigning, transferring, leasing, conveying or otherwise disposing of all or substantially all of its assets, and thereafter, Navistar Financial will be relieved of all further obligations and covenants under the notes and the indenture.

Subordination

        The notes are subordinate in right of payment to all of Navistar Financial's existing and future senior indebtedness. The indenture does not restrict the amount of senior indebtedness or other debt that Navistar Financial or its subsidiaries can incur. As of January 31, 2002, the notes would have been subordinated to $599 million of Navistar Financial's senior indebtedness. In addition, the notes are effectively subordinated to all of Navistar Financial's secured indebtedness and all liabilities, including trade payables, of Navistar Financial's subsidiaries. See "Capitalization—Navistar Financial Corporation" and the notes accompanying the financial statements for Navistar Financial incorporated by reference into this prospectus for information regarding these liabilities. See "Risk Factors—Your Right to Receive Payments on These Notes is Junior to Navistar Financial's Existing Senior and Secured Indebtedness, the Debt of its Subsidiaries and Possibly All of Navistar Financial's Future Borrowings."

        The payment of the principal of, interest on or any other amounts due on the notes is subordinated in right of payment to the prior payment in full of all of Navistar Financial's existing and future senior indebtedness. No payment may be made on account of principal of, interest on or any other amounts due on the notes, except in Permitted Junior Securities, if:

•

a payment default on Designated Senior Indebtedness occurs and is continuing beyond any applicable grace period, or Payment Default; or



•

any default, other than a Payment Default, occurs and is continuing on senior indebtedness that permits holders of the senior indebtedness to accelerate its maturity and the trustee for the notes receives a notice of such default, or Payment Blockage Notice, from Navistar Financial or any other persons permitted to give such notice under the indenture.

        Navistar Financial may resume payments and distributions on the notes:

•

in the case of a Payment Default, upon the date on which such default is cured or waived; and



•

in case of a nonpayment default, the earliest of (1) the date on which such nonpayment default is cured or waived, (2) the date the applicable Payment Blockage Notice is rescinded or (3) 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any senior indebtedness has been accelerated.

37

        Notwithstanding the foregoing, no new Payment Blockage Notice with respect to the same event of default or any other events of default existing or continuing at the time of a Payment Blockage Notice on the same issue of senior indebtedness may be given and no new payment blockage period may be commenced by the holders of such senior indebtedness unless 365 consecutive days have elapsed since the initial effectiveness of the immediately preceding Payment Blockage Notice.

        The holders of Navistar Financial senior indebtedness are entitled to receive payment in full of all existing and future senior indebtedness due (including interest after the commencement of any such proceeding at the rate specified in the applicable senior indebtedness instrument) before the holders of notes are entitled to receive any payment with respect to the notes in the event of any distribution to creditors of Navistar Financial:

•

in a liquidation or dissolution or other winding-up of Navistar Financial;



•

in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to Navistar Financial or its property;



•

in an assignment for the benefit of creditors; or



•

in any marshalling of Navistar Financial's assets and liabilities.

        If the payment of the notes is accelerated because of an event of default, Navistar Financial or the trustee shall promptly notify the holders of senior indebtedness or the trustee(s) for the senior indebtedness of the acceleration.

        As a result of these subordination provisions, in the event of Navistar Financial's insolvency, holders of the notes may recover ratably less than the holders of Navistar Financial's senior indebtedness and general creditors.

        If the trustee or any holder of notes receives any payment or distribution of Navistar Financial's assets of any kind in contravention of any of the terms of the indenture, whether in cash, property or securities, in respect of the notes before all senior indebtedness is paid in full, then the payment or distribution will be held by the recipient in trust for the benefit of holders of senior indebtedness, and will be immediately paid over or delivered to the holders of senior indebtedness or their representative or representatives to the extent necessary to make payment in full of all senior indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution, or provision, to or for the holders of senior indebtedness.

        "Designated Senior Indebtedness" means:

•

senior indebtedness outstanding on the date of the indenture and, if there shall be a merger, consolidation or share exchange of Navistar Financial or a successor shall assume the obligation of Navistar Financial under the indenture, the date of such merger, consolidation, share exchange or assumption of the surviving entity; and



•

Navistar Financial's obligations under any particular senior indebtedness in which the instrument creating or evidencing the same or the assumption or guarantee thereof, or related agreements or documents to which Navistar Financial is a party, expressly provides that such indebtedness shall be Designated Senior Indebtedness for purposes of the indenture.

        "Permitted Junior Securities" means:

•

shares of stock of any class of Navistar Financial other than Disqualified Stock; or



•

securities of Navistar Financial other than Disqualified Stock that are subordinated in right of payment to all senior indebtedness that may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the notes are so subordinated pursuant to the terms of the indenture.

38

        "Disqualified Stock" means any capital stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the capital stock), or upon the happening of any event, matures or its mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the capital stock, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature.

Events of Default and Remedies

        Each of the following constitutes an event of default under the indenture:

•

Navistar Financial fails to pay the principal amount or Fundamental Change repurchase price with respect to any note when such amount becomes due and payable;



•

Navistar Financial fails to pay interest on the notes when due and such failure continues for 30 days;



•

Navistar or Navistar Financial fails to pay liquidated damages owing under the registration rights agreement to the original purchasers of the notes and such failure continues for 30 days;



•

Navistar Financial fails to provide the trustee with timely notice of a Fundamental Change;



•

Navistar Financial fails to comply with any of its other agreements in the notes or the indenture and such failure continues for 60 days after it receives a written notice of such default by the trustee or by holders of not less than 25% in aggregate principal amount of the notes then outstanding;



•

specified events of bankruptcy or insolvency affecting Navistar Financial occur; or



•

Navistar Financial or any of its subsidiaries fails to pay, at final maturity, indebtedness (other than indebtedness incurred in connection with a Qualified Securitization Transaction) in excess of $50 million principal amount, or acceleration resulting from an event of default of any indebtedness (other than indebtedness incurred in connection with a Qualified Securitization Transaction) of Navistar Financial or any of its subsidiaries in an aggregate principal amount in excess of $50 million.

        If an event of default (other than an event of default specified in the second to last bullet point above) occurs and is continuing, then and in every such case the trustee, by written notice to Navistar Financial, or the holders of not less than 25% in aggregate principal amount of the then outstanding notes, by written notice to Navistar Financial and the trustee, may declare the unpaid principal of and accrued and unpaid interest on all the notes then outstanding to be due and payable. Upon such declaration, such principal amount and accrued and unpaid interest will become immediately due and payable, notwithstanding anything contained in the indenture or the notes to the contrary. If any event of default specified in the second to last bullet point above occurs with respect to Navistar Financial, all unpaid principal of, and premium, if any, and accrued and unpaid interest on the notes then outstanding will automatically become due and payable without any declaration or other act on the part of the trustee or any holder of notes.

        Holders of the notes may not enforce the indenture or the notes except as provided in the indenture. Subject to the provisions of the indenture relating to the duties of the trustee, the trustee is under no obligation to exercise any of its rights or powers under the indenture at the request, order or direction of any of the holders, unless such holders have offered to the trustee a security or an indemnity satisfactory to it against any cost, expense or liability. Subject to all provisions of the indenture and applicable law, the holders of a majority in aggregate principal amount of the then outstanding notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee. If a default or event of default occurs and is continuing and is known to the trustee, the indenture requires

39

the trustee to mail a notice of default or event of default to each holder within 60 days of the occurrence of such default or event of default. However, the trustee may withhold from the holders notice of any continuing default or event of default (except a default or event of default in the payment of principal of and interest on the notes) if it determines in good faith that withholding notice is in their interest. The holders of a majority in aggregate principal amount of the notes then outstanding by notice to the trustee may rescind any acceleration of the notes and its consequences if all existing events of default (other than the nonpayment of principal of and interest on the notes that has become due solely by virtue of such acceleration) have been cured or waived and if the rescission would not conflict with any judgment or decree of any court of competent jurisdiction. No such rescission will affect any subsequent default or event of default or impair any right consequent thereto.

        The holders of a majority in aggregate principal amount of the notes then outstanding may, on behalf of the holders of all the notes, waive any past default or event of default under the indenture and its consequences, except default in the payment of principal of, or interest on the notes (other than the non-payment of principal of and interest on the notes that has become due solely by virtue of an acceleration that has been duly rescinded as provided above) or in respect of a covenant or provision of the indenture that cannot be modified or amended without the consent of all holders of notes.

        Navistar Financial is required to deliver to the trustee annually a statement regarding compliance with the indenture and Navistar Financial is required, upon becoming aware of any default or event of default, to deliver to the trustee a statement specifying such default or event of default.

Book-Entry; Delivery and Form

        DTC has advised us as follows: DTC is a limited purpose trust company organized under the laws of the State of New York Uniform Commercial Code and a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of institutions that have accounts with DTC (which we refer to as "participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers (which may include the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, whether directly or indirectly.

        Upon the issuance of the global note at the original issuance of the notes, DTC credited, on its book-entry registration and transfer system, the respective principal amount of the individual beneficial interests represented by the global note to the accounts of participants. The accounts credited were designated by the initial purchasers of such beneficial interests. Ownership of beneficial interests in the global note will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the global note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by DTC (with respect to participants' interests) and such participants (with respect to the owners of beneficial interests in the global note other than participants).

        So long as DTC or its nominee is the registered holder and owner of the global note, DTC or such nominee, as the case may be, will be considered the sole legal owner of the notes represented by the global note for all purposes under the indenture and the notes. Except as set forth below, owners of beneficial interests in the global note will not be entitled to receive notes in definitive form and will not be considered to be the owners or holders of any notes under the global note. Navistar Financial understands that under existing industry practice, in the event an owner of a beneficial interest in the

40

global note desires to take any actions that DTC, as the holder of the global note, is entitled to take, DTC would authorize the participants to take such action, and that participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. No beneficial owner of an interest in the global note will be able to transfer the interest except in accordance with DTC's applicable procedures, in addition to those provided for under the indenture and, if applicable, those of Euroclear and Clearstream.

        Payments of the principal of, premium, if any, and interest on the notes represented by the global note registered in the name of and held by DTC or its nominee will be made to DTC or its nominee, as the case may be, as the registered owner and holder of the global note.

        Navistar Financial expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of the global note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the global note as shown on the records of DTC or its nominee. Navistar Financial also expects that payments by participants to owners of beneficial interests in the global note held through such participants will be governed by standing instructions and customary practices as is now the case with securities held for accounts of customers registered in the names of nominees for such customers. Such payments, however, will be the responsibility of such participants and indirect participants, and neither Navistar Financial, the trustee nor any paying agent will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the global note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between DTC and its participants or the relationship between such participants and the owners of beneficial interests in the global note.

        Unless and until it is exchanged in whole or in part for notes in definitive form, the global note may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC.

        Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.

        Cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the global note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream.

        Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in the global note from a DTC participant will be credited during the securities settlement processing day (which must be a business day for Euroclear or Clearstream, as the case may be) immediately following the DTC settlement date, and such credit of any transactions interests in the global note settled during such processing day will be reported to the relevant Euroclear or Clearstream participant on such day. Cash received in Euroclear or Clearstream as a result of sales of interests in the global note by or through a Euroclear or Clearstream participant to a DTC participant

41

will be received with value on the DTC settlement date, but will be available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in DTC.

        Navistar Financial expects that DTC will take any action permitted to be taken by a holder of notes (including the presentation of notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in the global note is credited and only in respect of such portion of the aggregate principal amount of the notes as to which such participant or participants has or have given such direction. However, if there is an event of default under the notes, DTC will exchange the global note for notes in definitive form, which it will distribute to its participants. These notes in definitive form will be subject to certain restrictions on registration of transfers described under "Notice to Investors," and will bear the legend set forth thereunder.

        Although Navistar Financial expects that DTC, Euroclear and Clearstream will agree to the foregoing procedures in order to facilitate transfers of interests in the global note among participants of DTC, Euroclear, and Clearstream, DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither Navistar Financial nor the trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

        If DTC is at any time unwilling to continue as a depositary for the global note and a successor depositary is not appointed by us within 90 days, Navistar Financial will issue notes in fully registered, definitive form in exchange for the global note. Such notes in definitive form will be subject to certain restrictions on registration of transfers described under "Notice to Investors," and will bear the legend set forth thereunder.

Amendment, Supplement and Waiver

        Except as provided in the next two succeeding paragraphs, the indenture or the notes may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for notes), and any existing default or compliance with any provision of the indenture or the notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding notes (including consents obtained in connection with a tender offer or exchange offer for notes).

        Without the consent of each holder affected, an amendment or waiver may not:

•

reduce the percentage of the principal amount of notes whose holders must consent to an amendment, supplement or waiver;



•

reduce the principal of or change the fixed maturity of any note;



•

reduce the rate of or change the time for payment of interest on any notes;



•

waive a default or event of default in the payment of principal of or interest on the notes (except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount of the notes and a waiver of the payment default that resulted from such acceleration);



•

make any note payable in money other than that stated in the indenture and the notes;



•

make any change in the provisions of the indenture relating to waivers of past defaults or the rights of holders of notes to receive payments of principal of or interest on the notes;



•

except as permitted by the indenture, increase the exchange price or modify the provisions of the indenture relating to exchange of the notes in a manner adverse to the holders; or

42

•

make any change to the abilities of holders of notes to enforce their rights under the indenture or the foregoing provisions or this provision.

        Notwithstanding the foregoing, without the consent of any holder of notes, Navistar, Navistar Financial and the trustee may amend or supplement the indenture or the notes to:

•

cure any ambiguity, defect or inconsistency or make any other changes in the provisions of the indenture which they may deem necessary or desirable, provided such amendment does not materially and adversely affect the notes;



•

provide for uncertificated notes in addition to or in place of certificated notes;



•

provide for the assumption of Navistar Financial's obligations to holders of notes in the circumstances required under the indenture as described under "—Merger and Consolidation;"



•

provide for exchange rights of holders of notes in certain events such as Navistar's consolidation or merger or the sale of all or substantially all of its assets;



•

reduce the exchange price;



•

evidence and provide for the acceptance of the appointment under the indenture of a successor trustee;



•

make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any such holder; or



•

comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939.

Satisfaction and Discharge

        Other than the obligation to exchange the notes for Navistar common stock and to register transfers, Navistar and Navistar Financial may discharge their obligations under the indenture while notes remain outstanding if all outstanding notes will become due and payable at their scheduled maturity within one year and they have:

•

deposited with the trustee an amount sufficient to pay and discharge all outstanding notes on the date of their scheduled maturity; and



•

paid all other sums then payable by Navistar and Navistar Financial under the indenture.

Governing Law

        The indenture will provide that the notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law.

Transfer and Exchange

        A holder may transfer or exchange notes in accordance with the indenture. The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents, and we may require a holder to pay any taxes and fees required by law or permitted by the indenture. We are not required to transfer or exchange any note for which a holder has delivered a Fundamental Change repurchase notice.

        The registered holder of a note will be treated as the owner of it for all purposes.

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The Trustee

        The indenture will provide that, except during the continuance of an event of default, the trustee will perform only such duties as are specifically set forth in the indenture. In case an event of default shall occur (and shall not be cured) and holders of the notes have notified the trustee, the trustee will be required to exercise its powers with the degree of care and skill of a prudent person in the conduct of such person's own affairs. Subject to such provisions, the trustee is under no obligation to exercise any of its rights or powers under the indenture at the request of any of the holders of notes, unless they shall have offered to the trustee security and indemnity satisfactory to it.

        The indenture will contain certain limitations on the rights of the trustee, should it become a creditor of Navistar or Navistar Financial, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions, provided, however, that if it acquires any conflicting interest, it must eliminate such conflict or resign.

No Recourse Against Others

        None of Navistar's or Navistar Financial's directors, officers, employees, shareholders or affiliates, as such, shall have any liability or any obligations under the notes or the indenture or for any claim based on, in respect of or by reason of such obligations or the creation of such obligations. Each holder by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for the notes.

Additional Information

        Anyone who purchases notes or the Navistar common stock issuable upon exchange of the notes may obtain a copy of the indenture without charge by request directed to Navistar at the following address and telephone number: Navistar International Corporation, 4201 Winfield Road, P.O. Box 1488, Warrenville, Illinois 60555, Attn: Investor Relations, Telephone Number: (630) 753-5000.

44

DESCRIPTION OF NAVISTAR CAPITAL STOCK

        Navistar's authorized capital stock consists of 150 million shares, of which 110 million shares are designated as common stock, with a par value of $.10 per share, 30 million shares are designated as preferred stock, with a par value of $1.00 per share and 10 million shares are designated as preference stock, with a par value of $1.00 per share. The following summary of Navistar's capital stock is qualified in its entirety by reference to Navistar's certificate of incorporation, which is incorporated by reference in this prospectus.

Common Stock

        The authorized common stock consists of 110 million shares, of which 59.7 million shares were outstanding at February 28, 2002 and were held by approximately 31,400 holders of record as of such date.

        Dividend Rights and Restrictions.    Holders of common stock are entitled to receive dividends when and as declared by the board of directors out of funds legally available therefor, provided that, so long as any shares of preferred stock and preference stock are outstanding, no dividends (other than dividends payable in common stock) or other distributions (including purchases) may be made with respect to the common stock unless full cumulative dividends, if any, on the shares of preferred stock and preference stock have been paid. Under the DGCL, dividends may only be paid out of surplus or out of net profits for the fiscal year in which the dividend is declared or the preceding fiscal year, and no dividend may be paid on common stock at any time during which the capital of outstanding preferred stock or preference stock exceeds the net assets of Navistar.

        Navistar does not expect to pay cash dividends on the common stock in the foreseeable future, and is subject to restrictions under the indentures for its $100 million 7% Senior Notes, $250 million 8% Senior Subordinated Notes and $400 million 9.375% Senior Notes on the amount of cash dividends Navistar may pay. See "Price Range of Navistar Common Stock and Dividend Policy."

        Voting Rights.    Holders of shares of Navistar common stock are entitled to one vote for each share for the election of directors and on any question arising at any shareowners meeting. The UAW, as holder of the series B preference stock, is entitled to elect one member to Navistar's board of directors. See "—Preferred Stock and Preference Stock."

        Liquidation Rights.    In the event of the voluntary or involuntary dissolution, liquidation or winding up of Navistar, holders of common stock are entitled to receive after satisfaction in full of the prior rights of creditors (including holders of Navistar's indebtedness) and holders of preferred stock and preference stock, all the remaining assets of Navistar available for distribution.

        Miscellaneous.    The holders of common stock are not entitled to preemptive, redemption or subscription rights. Mellon Investor Services is the transfer agent and the registrar for the common stock.

Preferred Stock and Preference Stock

        Navistar is authorized to issue preferred stock and preference stock, which may be issued from time to time in one or more series upon authorization by Navistar's board of directors. The board of directors, without further approval of the shareowners, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights and terms, liquidation preferences, and any other rights, preferences, privileges and restrictions applicable to each series of preferred stock and preference stock. The issuance of preferred stock and preference stock, while providing flexibility in connection with possible acquisitions and other corporate purposes could, among other things, adversely affect the voting power of the holders of common stock and, under certain circumstances,

45

make it more difficult for a third party to gain control of Navistar, discourage bids for the common stock at a premium or otherwise adversely affect the market price of the common stock. Navistar has no present plans to issue any additional series of preferred stock or preference stock.

        Two series of preference stock are currently outstanding. Three million shares of convertible junior preference stock, series D are authorized, of which 161,000 shares were outstanding as of February 28, 2002. One share of nonconvertible junior preference stock, series B is authorized and held by the UAW.

        Series D Preference Stock.    Holders of shares of series D preference stock are entitled to receive accrued dividends, if any, if and when declared by the board of directors, in the amount of 120 percent of the dividend (on an as-converted basis) declared on common stock, other than a dividend payable solely in shares of common stock. Holders of series D preference stock have the right at their option to convert shares of the series D preference stock into shares of common stock at any time at a conversion rate of 0.3125 of a share of common stock for each share of series D preference stock, subject to adjustment in certain events. The series D preference stock is redeemable at any time, in whole or in part, at the option of Navistar upon at least 30 days' advance written notice at the price of $25 per share plus accrued dividends. Generally, holders of series D preference stock do not have any voting powers, except as provided by law and except that holders of at least two-thirds of the number of shares outstanding must approve any adverse amendment, alteration or repeal of the preferences, special rights or powers of series D preference stock. Before any distribution to holders of common stock or of any other stock of Navistar ranking junior upon liquidation to the series D preference stock upon any liquidation, dissolution or winding up of Navistar, holders of the series D preference stock are entitled to receive $25 per share plus accrued dividends.

        Series B Preference Stock.    In connection with a 1993 restructuring of Navistar's post-retirement health care and life insurance benefits pursuant to a settlement agreement, the UAW was issued the series B preference stock. As the holder of the series B preference stock, the UAW is entitled to elect one member of Navistar's board of directors, the UAW Director, until such time as Navistar has fully funded its liability under the health care and life insurance benefits program (subject to such right revesting if such funding falls below 85% of the fully funded amount). The series B preference stock is not transferable by the UAW, does not have any voting rights other than as described above or as required by law, does not have the right to receive dividends or distributions and is redeemable for a nominal price at such time as the UAW has not been entitled to elect a director for five consecutive years.

Certain Certificate of Incorporation and By-law Provisions; Certain Provisions of Delaware Law

        General.    Certain provisions of Navistar's certificate of incorporation and by-laws could have an anti-takeover effect. These provisions are intended to enhance the likelihood of continuity and stability in the composition of Navistar's board of directors and in the policies formulated by the board of directors. Navistar is also subject to Section 203 of the DGCL. As described above under "—Preferred Stock and Preference Stock," the ability of the board of directors to issue so-called "flexible" preferred stock may also have an anti-takeover effect. The fact that Navistar's utilization of its NOLs could be adversely affected by a change of control could have an anti-takeover effect.

        Classified Board; Board Vacancies.    The certificate of incorporation provides for the board of directors to be divided into three classes of directors serving staggered three year terms, excluding the director elected by the UAW as the holder of Navistar's series B preference stock. See "Preferred Stock and Preference Stock." The overall effect of the provisions in the certificate of incorporation with respect to the staggered board may be to render more difficult a change in control of Navistar or the removal of incumbent directors. Under the DGCL, since Navistar has a classified board, the shareowners may only remove the directors for cause. A majority of the remaining directors elected by the holders of common stock then in office (and not shareowners), though less than a quorum, is

46

empowered to fill any vacancy on the board of directors. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred or preference stock issued by Navistar have a preference over the common stock as to dividends or upon liquidation have the right, voting separately by class or series, to elect directors (such as the holder of the series B preference stock), the number, election, term of office, filling of vacancies, terms of removal and other features of such directorships are governed by the terms relating to such rights.

        Special Meetings of Shareowners; Action by Written Consent.    The certificate of incorporation provides that no action may be taken by shareowners except at an annual or special meeting of shareowners, and prohibits action by written consent in lieu of a meeting. Navistar's by-laws provide that special meetings of shareowners of Navistar may be called only by the chairman of the board and chief executive officer or by the board of directors. This provision will make it more difficult for shareowners to take action opposed by the board of directors.

        Approval of Supermajority Transactions.    As a result of the settlement agreement relating to the 1993 restructuring of its post-retirement health care and life insurance benefits, Navistar's certificate of incorporation provides that the affirmative vote of holders of the greater of (a) a majority of the voting power of all common stock or (b) at least 85% of the shares of common stock present at a meeting is required to approve a supermajority transaction. Accordingly, any holder of 15% or more of the aggregate outstanding common stock represented at any meeting of shareowners will be able to block any supermajority transaction.

        Certain Provisions of Delaware Law.    Navistar is governed by the provisions of Section 203 of the DGCL. In general, the law prohibits a public Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. "Business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. An "interested stockholder" is a person who, together with affiliates and associates, owns (or within three years, did own) 15% or more of the corporation's voting stock.

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SELLING SECURITYHOLDERS

        Navistar Financial originally issued the notes in a private placement in March 2002. Selling securityholders may offer and sell the notes and the underlying Navistar common stock pursuant to this prospectus.

        The following table contains information with respect to the selling securityholders and the principal amount of notes and the underlying Navistar common stock beneficially owned by each selling securityholder that may be offered using this prospectus.

Name	Principal Amount at Maturity of Notes Beneficially Owned That May Be Sold		Percentage of Notes Outstanding		Shares of Common Stock that May be Sold(1)	Percentage of Common Stock Outstanding(2)
Alpine Associates	$	7,050,000	3.2	%	126,503	*
Alpine Partners, L.P.		950,000	*		17,046	*
Context Convertible Arbitrage Fund, LP		500,000	*		8,972	*
Morgan Stanley Dean Witter Convertible Securities Trust		1,000,000	*		17,944	*
Nicholas Applegate Global Holdings, LP		30,000	*		538	*
Wake Forest University		320,000	*		5,742	*
Nomura Securities International Inc.		4,000,000	1.8	%	71,775	*
Lincoln National Convertible Securities Fund		1,000,000	*		17,944	*
Federated Equity Income Fund, Inc.		20,000,000	9.1	%	358,873	*
Federated Equity Income II		930,000	*		16,688	*
Federated GVIT Equity Income Fund		560,000	*		10,048	*
Ohio National Fund		110,000	*		1,974	*
TD Securities (USA) Inc.		1,000,000	*		17,944	*
National Fuel Gas Co. Retirement Plan		50,000	*		897	*
B.C. McCabe Foundation		100,000	*		1,794	*
Total Fina EIF Financial U.S.A., Inc.		100,000	*		1,794	*
Oxford, Lord Abbott & Co.		750,000	*		13,458	*
UFJ Investments Asia Limited		500,000	*		8,922	*
Grace Brothers Management L.L.C.		1,250,000	*		22,430	*
WPG Convertible Arbitrage Overseas Master Fund, L.P.		2,500,000	1.1	%	44,859	*
Any other holder of notes or future transferee, pledgee, donor or successor of any holder(3)(4)

*

Less than 1%.

(1)

Assumes exchange of all of the holders' notes at an exchange price of $55.73 per share of Navistar common stock. However, this exchange price will be subject to adjustment as described under "Description of Notes—Exchange." As a result, the amount of Navistar common stock issuable upon exchange of the notes may increase or decrease in the future.

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(2)

Calculated based on Rule 13d-3(d)(1) of the Exchange Act using 60,056,516 shares of Navistar common stock outstanding as of May 3, 2002. Assumes the number of shares of Navistar common stock issuable upon exchange of all of that particular holder's notes are outstanding. However, this does not include the exchange of any other holder's notes.

(3)

Information about other selling securityholders will be set forth in amendments and prospectus supplements.

(4)

Assumes that the other holders, or any future transferees, pledgees, donees or successors of or from any such other holders of notes, do not beneficially own Navistar common stock other than the common stock issuable upon exchange of the note at the initial exchange rate.

        Navistar Financial and Navistar prepared this table based on the information supplied to them by the selling securityholders named in the table.

        The selling securityholders listed in the above table may have sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their notes since the date on which the information in the above table is presented. Information about the selling securityholders may change over time. Any change in this information will be set forth in prospectus supplements, if required.

        Because the selling securityholders may offer all or some of their notes or the underlying Navistar common stock from time to time, neither Navistar Financial nor Navistar estimate the amount of the notes or underlying Navistar common stock that will be held by the selling securityholders upon the termination of any particular offering. See "Plan of Distribution."

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DESCRIPTION OF OTHER FINANCING ARRANGEMENTS

7% Senior Notes and 8% Senior Subordinated Notes

        Navistar's 7.0% senior notes were issued under an indenture dated as of February 4, 1998, between Navistar and BNY Midwest Trust Company, as trustee, and Navistar's 8.0% senior subordinated notes were issued under an indenture dated as of February 4, 1998, between Navistar and The Bank of New York, as trustee. In connection with the issuance of the 9³/8% Senior Notes, International executed indenture supplements pursuant to which International guaranteed Navistar's obligations under the senior notes and the senior subordinated notes. The senior notes and senior subordinated notes are sometimes collectively referred to herein as the "existing notes" and senior notes indenture and the senior subordinated notes indenture are sometimes collectively referred to herein as the "existing indentures."

        The senior notes are general unsecured obligations of Navistar, limited to $100 million aggregate principal amount, and rank pari passu in right of payment with all existing and future unsubordinated indebtedness of Navistar and senior in right of payment to all existing and future subordinated indebtedness of Navistar. The senior notes are effectively subordinated to all secured indebtedness of Navistar, if any. The senior notes mature on February 1, 2003 and bear interest at a rate equal to 7%. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.

        The senior subordinated notes are general unsecured obligations of Navistar, limited to $250 million aggregate principal amount, and are subordinated in right of payment to all existing and future senior indebtedness of Navistar. The senior subordinated notes mature on February 1, 2008 and bear interest at a rate equal to 8.0% per annum. Interest is computed on the basis of the 360-day year comprised of twelve 30-day months.

        The existing notes are effectively subordinated to all existing and future liabilities (including liabilities owed to trade creditors) of the subsidiaries of Navistar to the extent of the assets of each subsidiary of Navistar. Any right of Navistar to participate in any distribution of the assets of its subsidiaries upon the liquidation, reorganization or insolvency thereof (and the consequent right of the holders to benefit from those assets) will be subject to the claims of creditors (including trade creditors) of such subsidiary, except to the extent that claims of Navistar itself as a creditor of such subsidiary may be recognized, in which case the claims of Navistar would still be subordinate to any security interest in the assets of such subsidiary and any indebtedness of such subsidiary senior to that held by Navistar.

        The existing notes do not have the benefit of any sinking fund.

        International unconditionally guarantees on a senior, unsecured basis Navistar's obligations under the existing notes. This International guarantee will rank equally in right of payment with all existing and future liabilities of International that are not subordinated. The International guarantee will effectively rank junior to any secured indebtedness of International to the extent of the value of the assets securing such indebtedness. The obligations of International under this guarantee will be limited as required to prevent violation of fraudulent transfer or fraudulent conveyance laws. Under limited circumstances specified in the indenture, International will be released from its obligations under the guarantee.

        The senior notes are not redeemable at the option of Navistar prior to maturity. The senior subordinated notes may be redeemed on or after February 1, 2003, at any time, in whole or in part, at the option of Navistar, at the redemption prices (expressed as percentages of the principal amount) set

50

forth below, if redeemed during the 12 month period beginning February 1 of the year indicated below, in each case together with interest accrued to the redemption date:

Year	Percentage
2003	104.00	%
2004	102.67	%
2005	101.33	%
2006 and thereafter	100.00	%

        The existing indentures provide that, upon the occurrence of a change of control, each holder will have the right to require Navistar to purchase all or a portion of their existing notes, at a purchase price equal to 101% of the principal amount thereof plus accrued interest thereon. The term "change of control" is defined in the existing indentures to include one or more of the following events:

(a)

any "person" or "group," other than employee or retiree benefit plans or trusts sponsored or established by Navistar or International, is or becomes the "beneficial owner," of securities of Navistar representing 35% or more of the combined voting power of Navistar's then outstanding voting stock;



(b)

the following individuals cease for any reason to constitute more than two-thirds of the number of directors then serving on the board of directors of Navistar: individuals who, on the issue date of the existing notes, constitute the board of directors and any new director whose appointment or election by the board of directors or nomination for election by Navistar's stockholders was approved (A) by the vote of at least a majority of the directors then still in office or whose appointment, election or nomination was previously so approved or recommended or (B) with respect to directors whose appointment or election to the board of directors was made by the holders of Navistar's nonconvertible junior preference stock, series B, by the holders of such preference stock;



(c)

the shareholders of Navistar shall approve any plan of liquidation (whether or not otherwise in compliance with the provisions of the existing indentures);



(d)

Navistar consolidates with or merges with or into another person, other than a merger or consolidation of Navistar in which the holders of the common stock of Navistar outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the common stock of the surviving corporation immediately after such consolidation or merger; or



(e)

subject to certain exceptions, Navistar or any restricted subsidiary of Navistar, directly or indirectly, sells, assigns, conveys, transfers, leases or otherwise disposes of, in one transaction or a series of related transactions, all or substantially all of the property or assets of Navistar and the restricted subsidiaries of Navistar (determined on a consolidated basis) to any person.

        The events of default under the existing indentures are summarized below:

(a)

default in the payment of principal of, or premium, if any, on any senior note or senior subordinated note, as the case may be;



(b)

default in the payment of interest on any senior note or senior subordinated note, as the case may be, when due and continuance of such default for 30 days or more;



(c)

failure to observe, perform or comply with any of the restrictions on merger and consolidation;



(d)

default in the performance of, or breach of, any other covenant or warranty of Navistar or of any restricted subsidiary in the existing indentures or in the existing notes and failure to

51

remedy such default or breach within a period of 30 days after written notice from the relevant trustee or the holders of at least 25% in aggregate principal amount of the then outstanding senior notes or senior subordinated notes, as the case may be;

(e)

default under any indebtedness for money borrowed by Navistar or any restricted subsidiary of Navistar, which default results in the acceleration of such indebtedness prior to its express maturity and the principal amount of any such indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $20 million or more and such acceleration has not been rescinded or annulled or such indebtedness discharged in full within 30 days;



(f)

the entry by a court of competent jurisdiction of one or more judgments, orders or decrees against Navistar or any subsidiary of Navistar or any of their respective property or assets in an aggregate amount in excess of $20 million, which judgments, orders or decrees have not been vacated, discharged, satisfied or stayed pending appeal within 30 days from the entry thereof and with respect to which legal enforcement proceedings have been commenced; or



(g)

certain events of bankruptcy, insolvency or reorganization involving Navistar or any material subsidiary of Navistar.

        The existing indentures contain covenants for the benefit of the holders of the existing notes that, among other things, limit the ability of Navistar and any of its restricted subsidiaries to:

(a)

enter into transactions with affiliates;



(b)

pay dividends or make other restricted payments;



(c)

consummate asset sales;



(d)

incur indebtedness;



(e)

issue preferred stock of its restricted subsidiaries;



(f)

incur liens;



(g)

impose restrictions on the ability of a restricted subsidiary to pay dividends or make payments to Navistar and its restricted subsidiaries;



(h)

merge or consolidate with any other person;



(i)

sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of Navistar;



(j)

engage in specified sale-leaseback transactions; or



(k)

enter into guarantees.

        These limitations are, however, subject to a number of important qualifications and exceptions.

        Because specified conditions were satisfied, Navistar and its restricted subsidiaries are no longer subject to the limitations described in paragraphs (a), (b), (c), (d) and (g) above under the senior notes indenture. Navistar remains subject to those limitations under the senior subordinated notes indenture.

        The foregoing summary of the material provisions of the existing indentures is qualified in its entirety by reference to all of the provisions of the existing indentures, which have been filed with the SEC. See "Where You Can Find More Information."

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9³/8% Senior Notes

        Navistar's $400 million 9³/8% senior notes were issued under an indenture dated as of May 31, 2001, between Navistar, International and BNY Midwest Trust Company, as trustee. Although the senior notes were offered in an aggregate principal amount of $400 million, the indenture governing the senior notes allows Navistar to issue up to an additional $100 million in aggregate principal amount of notes with the same terms as the senior notes so that the additional notes will form a single series with the senior notes. The senior notes are general unsecured obligations of Navistar, limited to $500 million aggregate principal amount, and rank pari passu in right of payment with all existing and future unsubordinated indebtedness of Navistar and senior in right of payment to all existing and future subordinated indebtedness of Navistar. The senior notes are effectively subordinated to all secured indebtedness of Navistar, if any. The senior notes mature on June 1, 2006 and bear interest at the rate of 9³/8%. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.

        Interest is payable semiannually (to holders of record of the senior notes at the close of business on May 15 or November 15 immediately preceding the interest payment date) on June 1 and December 1 of each year, respectively, commencing on December 1, 2001.

        The senior notes are effectively subordinated to all existing and future liabilities (including liabilities owed to trade creditors) of the subsidiaries of Navistar to the extent of the assets of each subsidiary of Navistar. Any right of Navistar to participate in any distribution of the assets of its subsidiaries upon the liquidation, reorganization or insolvency thereof (and the consequent right of the holders to benefit from those assets) will be subject to the claims of creditors (including trade creditors) of such subsidiary, except to the extent that claims of Navistar itself as a creditor of such subsidiary may be recognized, in which case the claims of Navistar would still be subordinate to any security interest in the assets of such subsidiary and any indebtedness of such subsidiary senior to that held by Navistar.

        The senior notes do not have the benefit of any sinking fund.

        International unconditionally guarantees on a senior, unsecured basis Navistar's obligations under the senior notes. This International guarantee will rank equally in right of payment with all existing and future liabilities of International that are not subordinated. The International guarantee will effectively rank junior to any secured indebtedness of International to the extent of the value of the assets securing such indebtedness. The obligations of International under this guarantee will be limited as required to prevent violation of fraudulent transfer or fraudulent conveyance laws. Under limited circumstances specified in the indenture, International will be released from its obligations under the guarantee.

        The senior notes are redeemable at the option of Navistar in whole at any time or in part from time to time, on at least 30 days but not more than 60 days' prior notice at a redemption price equal to the greater of (i) 100% of their principal amount plus accrued but unpaid interest to the date of redemption or (ii) the sum of (a) the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date of maturity (except for currently accrued but unpaid interest) discounted to the date of redemption, on a semiannual basis at the treasury rate, plus 50 basis points, and (b) accrued but unpaid interest to the date of redemption.

        The indenture contains covenants for the benefit of the holders of the senior notes that, among other things, limit the ability of Navistar and any of its restricted subsidiaries to:

(a)

enter into transactions with affiliates;



(b)

pay dividends or make other restricted payments;



(c)

consummate asset sales;

53

(d)

incur indebtedness;



(e)

issue preferred stock of its restricted subsidiaries;



(f)

incur liens;



(g)

impose restrictions on the ability of a restricted subsidiary to pay dividends or make payments to Navistar and its restricted subsidiaries;



(h)

merge or consolidate with any other person;



(i)

sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of Navistar;



(j)

engage in specified sale/leaseback transactions; or



(k)

enter into guarantees.

        These limitations are, however, subject to a number of important qualifications and exceptions.

        The indenture provides that, after the senior notes have been assigned an investment grade rating by Standard & Poor's Rating Services and Moody's Investors Services Inc., Navistar and its restricted subsidiaries will no longer be subject to the limitations described above regarding incurrence of indebtedness, asset disposition, restricted payments, preferred stock of restricted subsidiaries, transactions with affiliates, payment restrictions affecting restricted subsidiaries, merger and consolidation and sale-leaseback transactions.

        The indenture provides that, in the event of a change of control, Navistar will offer to repurchase all or a portion of the notes at a purchase price equal to 101% of the principal amount of the notes then outstanding, plus accrued and unpaid interest through the purchase date.

        The term "change of control" is defined in the indenture to include one or more of the following events:

(a)

any "person" or "group," other than employee or retiree benefit plans or trusts sponsored or established by Navistar or International, is or becomes the "beneficial owner," of securities of Navistar representing 35% or more of the combined voting power of Navistar's then outstanding voting stock;



(b)

the following individuals cease for any reason to constitute more than two-thirds of the number of directors then serving on the board of directors of Navistar: individuals who, on the issue date of the senior notes, constitute the board of directors and any new director whose appointment or election by the board of directors or nomination for election by Navistar's stockholders was approved (A) by the vote of at least a majority of the directors then still in office or whose appointment, election or nomination was previously so approved or recommended or (B) with respect to directors whose appointment or election to the board of directors was made by the holders of Navistar's nonconvertible junior preference stock, series B, by the holders of such preference stock;



(c)

the shareholders of Navistar shall approve any plan of liquidation (whether or not otherwise in compliance with the provisions of the existing indentures);



(d)

Navistar consolidates with or merges with or into another person, other than a merger or consolidation of Navistar in which the holders of the common stock of Navistar outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the common stock of the surviving corporation immediately after such consolidation or merger; or

54

(e)

subject to certain exceptions, Navistar or any restricted subsidiary of Navistar, directly or indirectly, sells, assigns, conveys, transfers, leases or otherwise disposes of, in one transaction or a series of related transactions, all or substantially all of the property or assets of Navistar and the restricted subsidiaries of Navistar (determined on a consolidated basis) to any person.

        The events of default under the indenture are as follows:

(a)

default in the payment of principal or, or premium, if any, or liquidated damages on any senior note when due;



(b)

default in the payment of any installment of interest on any senior note when due and continuance of such default for 30 days or more;



(c)

failure to observe, perform or comply with any of the restrictions on merger and consolidation;



(d)

default in the performance of, or breach of, any other covenant or warranty of Navistar or of any restricted subsidiary in the indenture or senior notes and failure to remedy such default within 30 days;



(e)

default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured any indebtedness for money borrowed by Navistar or any subsidiary, which default is caused by a failure to pay principal or premium on such indebtedness and the failure to repay results in acceleration of an aggregate amount of $20 million and such acceleration is not rescinded in full in 30 days;



(f)

entry by a court of a judgement against Navistar or a subsidiary or any of their property or assets in an aggregate amount in excess of $20 million, which judgments have not been vacated within 30 days from their entry; or



(g)

certain events of bankruptcy, insolvency or reorganization involving Navistar or any material subsidiary.

        The foregoing summary of the material provisions of the indenture is qualified in its entirety by reference to all of the provisions of the existing indenture, which have been filed with the SEC. See "Where You Can Find More Information."

Navistar Financial Revolving Credit Agreement

        In December 2000, Navistar Financial entered into a senior credit agreement with certain lenders, including The Chase Manhattan Bank, as administrative agent. The revolving credit agreement matures in 2005. It provides for aggregate borrowings of $820 million, up to $100 million of which may also be borrowed by Navistar's three Mexican finance subsidiaries. Such borrowings by the Mexican finance subsidiaries are guaranteed by Navistar and Navistar Financial. In addition, Navistar Financial is permitted to lend up to $50 million to International. Outstanding obligations under the credit agreement are secured by a perfected first priority security interest in substantially all of Navistar Financial's tangible and intangible assets.

        Two interest rate options are available, at Navistar Financial's option, for borrowings under the credit agreement: (1) ABR rate loans or (2) adjusted LIBO rate loans, based on the offered rate of the Eurodollar deposits in the London interbank market for certain periods, in each case plus a margin based on Navistar Financial's long-term credit rating. The ABR rate is the higher of: (1) the rate announced by Chase as its prime lending rate, (2) the prevailing secondary market rate for three-month certificates of deposit plus 1.0% or (3) the federal funds effective rate from time to time plus 0.5%.

        The credit agreement includes a number of restrictive covenants. For example, Navistar Financial is required to maintain consolidated interest expense, preferred stock dividends and consolidated

55

income before income taxes at least equal to 125% of its fixed charges (consisting of consolidated interest expense and preferred stock dividends). In addition, the ratio of Navistar Financial's total consolidated debt to consolidated tangible net worth (both as defined in the credit agreement) may not exceed 7 to 1. Navistar Financial may not prepay subordinated debt, except in accordance with the terms contained in the credit agreement.

        The credit agreement requires that Navistar Financial comply with its intercompany agreements. Navistar Financial is prohibited from engaging in transactions with affiliates (except in certain limited circumstances) that are not on an arm's-length basis and in the ordinary course of business.

        The credit agreement restricts Navistar Financial's ability to enter new lines of business, limits the types of investments that Navistar Financial may make and contains a negative pledge which prevents Navistar Financial from incurring or suffering to exist liens on its assets, except in certain limited circumstances. The credit agreement also contains customary covenants regarding reporting, insurance, conduct of business, maintenance of existence and compliance with laws.

        Events of default under the credit agreement include:

(a)

failure to pay principal or interest (subject to a grace period) when due;



(b)

breach of a covenant or representation or warranty (subject to certain limited cure periods);



(c)

default on certain other indebtedness;



(d)

certain change of control events;



(e)

certain events of bankruptcy;



(f)

certain judgments against Navistar Financial; or



(g)

certain other events of default.

Securitization Programs

        Navistar Financial presently uses various securitization programs, which have structures and sources of financing that were designed to obtain the most favorable financing available, to fund a substantial portion of its acquisitions of receivables. As a general matter, Navistar Financial believes that securitization programs provide it with funding at rates that are much lower than Navistar Financial could obtain through issuing its own unsecured or secured corporate debt obligations. Navistar Financial anticipates continuing to use securitization programs to fund its acquisitions of receivables.

        Navistar Financial securitizes receivables using both "liquidating pool" and "revolving pool" structures. A liquidating pool structure involves the sale or pledge of a fixed pool of receivables. The entire pool may be sold or pledged at closing, or, in a "pre-funded transaction," additional receivables may be sold or pledged over a pre-funding period, not exceeding a six-month period. The additional receivables are paid for with a portion of the proceeds of the issuance, which portion is held in a "pre-funding account" pending such use. In a liquidating pool structure, including pre-funded transactions, the outstanding principal balance of the pool of sold or pledged receivables declines as receivables are collected, become defaulted or otherwise are removed from the pool. The initial pool of receivables will not be augmented with additional receivables, except through subsequent sales in pre-funded transactions. In a liquidating pool structure, substantially all of the collections are used to repay the unrecovered investments of the investors in the transaction, with the result that the amount of financing declines substantially in tandem with the amount of outstanding receivables in the pool.

56

        In a revolving pool structure, by contrast, new receivables are generally transferred into the pool on a periodic basis during a "revolving period" that is longer than a "pre-funding" period—for example, on a daily basis in the wholesale notes securitization described below. During the revolving period, principal collections on the receivables are reinvested in the new receivables or retained within the structure, rather than being paid out to investors. Interest owing to the investors is paid on a monthly basis. Principal payments are generally made to investors after the end of the revolving period according to the terms of their respective agreements. Navistar Financial uses revolving pool structures for the securitization of short-term receivables or as "warehouse" financing for medium-term receivables until a more permanent form of securitization program can be established for such receivables.

        The source of financing for Navistar Financial's securitization programs varies with market conditions and other considerations at the time each securitization program was structured and established. Currently, Navistar Financial uses securitization programs that obtain financing from the sale of notes or certificates in transactions under Rule 144A or public securities offerings of medium term asset-backed securities, which we refer to as "capital markets" transactions, and bank conduit facilities, which we refer to as "bank conduit" transactions. A bank conduit provides financing by issuing commercial paper through a special purpose vehicle administered by a commercial bank or other financial institution. In addition, a bank conduit facility will generally have available a back-up credit facility with one or more commercial banks that would provide financing in the event the special purpose vehicle was unable to issue commercial paper.

        The following is a summary of securitization programs currently utilized by Navistar Financial.

Securitization of Wholesale Notes

        Since 1990, Navistar Financial has securitized its wholesale notes through investor certificates (five of which are currently outstanding) issued by Navistar Financial Securities Corporation, or NFSC, a wholly owned special purpose subsidiary of Navistar Financial. Each day Navistar Financial generally sells all newly originated wholesale notes (except those wholesale notes which do not meet the specified eligibility criteria) to NFSC. NFSC, in turn, sells the wholesale notes to a trust. The trust effectively reinvests collections on the outstanding wholesale notes by using such collections to purchase the newly originated wholesale notes. Collections are retained in the trust to the extent the required minimum trust balance exceeds the balance of wholesale notes owned by the trust. NFSC retains an interest in the trust, a portion of which is subordinated to the investor certificates. At January 31, 2002, NFSC's retained interest in the trust constituted $137 million, of which $127 million was subordinated to claims of investor certificateholders.

Securitization of Retail Notes and Leases

        Liquidating Pool Structures

        Since 1993, Navistar Financial has securitized a significant portion of its retail notes. Periodically, Navistar Financial sells a pool of retail notes, certain monies due or received thereunder, security interests in the vehicles and equipment financed thereby and certain other property to Navistar Financial Retail Receivables Corporation, or NFRRC. Immediately thereafter, NFRRC transfers the same property to either (a) a trust formed specifically for such transaction in exchange for either asset-backed notes and certificates issued by such trust or (b) a bank conduit. Navistar Financial retains the option under certain circumstances to repurchase the remaining pool of retail notes from any liquidating pool structure once monies due and payable thereunder constitute 10% or less of aggregate amount due and payable under such retail notes when initially sold into the securitization. NFRRC retains a residual interest in each liquidating pool structure.

57

        As of January 31, 2002, trusts formed by NFRRC and bank conduits have financed approximately $8.9 billion in aggregate principal balance of retail notes through the issuance of term asset-backed securities and commercial paper. At January 31, 2002, asset-backed securities from nine securitized transactions originated by NFRRC remained outstanding and had a remaining aggregate principal balance of approximately $2.3 billion.

        Navistar Financial is exposed to interest rate risk relating to changes in market interest rates. As part of its overall strategy to manage the level of exposure to the risk of interest rates adversely affecting net interest income or expense, Navistar Financial uses interest rate swap agreements, interest rate caps, and forward contracts. Navistar Financial is also occasionally required by third parties to use derivative instruments to make financing possible under sold note arrangements. These derivatives are used in asset-backed transactions in order to absorb some portfolio-related risks. Navistar Financial's policy prohibits the use of derivative financial instruments for speculative purposes.

        Revolving Retail Warehouse Facility

        In October 2000, Navistar Financial established a revolving retail warehouse facility for its retail notes and retail leases, other than fair market value leases. Under this facility, Truck Retail Instalment Paper Corp., or TRIP, a wholly owned special purpose subsidiary of Navistar Financial, issued $475 million of a senior class and $25 million of a subordinate class of floating rate asset-backed notes. The senior and subordinated notes are priced at one-month LIBOR plus 0.34% and one-month LIBOR plus 0.55%, respectively, and have a targeted final payment date of October 17, 2005. The proceeds from the sale of the senior and subordinated notes are used by TRIP to purchase new retail notes and retail leases from Navistar Financial, which TRIP holds until Navistar Financial decides to effect a permanent financing in the capital markets or through a bank conduit at which point TRIP's assets will once again consist principally of cash rather than receivables. TRIP's assets, which are retail receivables or cash or a combination of both, are pledged to the indenture trustee as collateral for the senior and subordinated notes issued by TRIP.

Securitization of Retail Accounts

        In August 2000, Navistar Financial securitized the retail accounts that arise out of sales of trucks on open account by International. On a regular basis, International sells the receivables to Navistar Financial, which in turn sells the receivables to Truck Retail Accounts Corporation, or TRAC, a wholly-owned, special purpose subsidiary of Navistar Financial. TRAC, in turn, sells an undivided interest in the retail accounts to a bank conduit. This transaction is structured on a revolving basis and provides for up to $100 million of funding. TRAC retains an interest in the retail accounts, which is subordinated to the bank conduit's investment as protection against losses, dilution and carrying costs. This facility matures in August 2002 but can be renewed by mutual consent on a year to year basis in accordance with its terms.

        In November 2000, Navistar Financial securitized its unsecured trade receivables generated by the sale of diesel engines and engine service parts from International to Ford, which we refer to as "engine receivables." Navistar Financial purchases the engine receivables from International and sells the engine receivables to Truck Engine Receivables Financing Co., or TERFCO, a wholly owned special purpose subsidiary of Navistar Financial. TERFCO established a trust which issued approximately $100 million of floating rate asset-backed notes in November 2000, which will begin to mature in November 2005. TERFCO retains a residual interest in the trust.

Common Elements of Securitization Programs

        The securitizations of receivables effected by Navistar Financial share a number of structural features. Except for the case of retail leases, in the first step of each securitization, the receivables are sold by Navistar Financial to its subsidiary (NFSC, NFRRC, TRIP, TRAC or TERFCO, as applicable)

58

in a transaction intended to qualify as a true sale under applicable law to transfer Navistar Financial's entire ownership interest in the receivables so that such receivables would not constitute part of Navistar Financial's estate in the event of a bankruptcy of Navistar Financial. Each of these subsidiaries is a special purpose corporation, or SPC, whose activities are limited to participating in the securitization and related transactions. Navistar Financial has taken steps to maximize the likelihood that each SPC is a bankruptcy remote entity and minimize the risk that the voluntary or involuntary application for relief by Navistar Financial under the United States Bankruptcy Code or similar applicable state laws, or Insolvency Laws, will result in consolidation of the assets and liabilities of the SPC with those of Navistar Financial.

        The SPC either (in the case of NFSC, NFRRC, TRAC and TERFCO) transfers its interest in the receivables to the related trust or conduit, which purchases and holds the receivables, or (in the case of TRIP) transfers a security interest in the receivables to an indenture trustee for the benefit of asset-backed security holders, which makes a loan to TRIP secured by the receivables.

        In all of these transactions, the SPC retains interests in the trusts or assets held by the bank conduit or the trustee, which may be in the form of residual interests, spread accounts or rights to excess spread on the receivables. These residual interests provide the initial level of protection to investors against credit losses on the sold receivables.

        In each securitization, Navistar Financial is appointed as the servicer of the receivables. Navistar Financial can be replaced as servicer in any securitization upon a material default in the performance of its duties. In each securitization, Navistar Financial makes certain representations and warranties with respect to the receivables it sells to an SPC, and Navistar Financial remains obligated to repurchase any receivables with respect to which it breaches such representations or warranties.

        The sales of receivables in each of the securitizations, other than the revolving retail warehouse facility, constitute sales under generally accepted accounting principles, with the result that the sold receivables are removed from Navistar Financial's balance sheet and the investors' interests in the related trust or conduit are not reflected as liabilities. However, the SPCs' residual interests in the related trusts or assets held by the conduit are reflected on Navistar Financial's consolidated balance sheet as assets.

Sale-Leasebacks

        Currently, Navistar Financial finances the majority of its retail leases through sale and leaseback transactions entered into from time to time. Typically, in this type of transaction Harco Leasing Company, a wholly-owned subsidiary of Navistar Financial, directs a titling trust, which holds such retail leases and the leased vehicles as trust assets, to transfer a portfolio interest representing the trust assets to a third party lessor, which in some limited instances is an affiliate of Navistar Financial. Harco Leasing then leases the portfolio interest representing the trust assets back from the third party lessor under a lease agreement. In this type of transaction, Harco Leasing typically pledges the associated retail leases to the lessor as collateral for its obligations under the lease agreement. As of January 31, 2002, $356 million of lease obligations originated by Navistar Financial were financed under these transactions. Navistar Financial expects to effect additional sale-leasebacks in the future.

9% Senior Subordinated Notes

        Navistar Financial's 9% senior subordinated notes were issued pursuant to an indenture, dated as of May 30, 1997, between Navistar Financial and The Chase Manhattan Bank (as successor to The Fuji Bank & Trust Company), as trustee. The subordinated notes are limited to $100 million aggregate principal amount and mature on June 1, 2002. Interest on the subordinated notes accrues at a rate of 9% per annum and is payable on June 1 and December 1 of each year. The subordinated notes are not

59

redeemable by Navistar Financial prior to maturity and are not subject to any mandatory sinking fund payments.

        The indenture pursuant to which the subordinated notes were issued contains certain covenants that, among other things, limit the ability of Navistar Financial or any of its subsidiaries to maintain or incur indebtedness, create liens, enter into certain transactions with affiliates, or consummate certain merger, consolidation or asset sale transactions. In addition, Navistar Financial is required to maintain a consolidated fixed charge coverage ratio of at least 1.25 to 1.0 (as of the end of any fiscal quarter) under that indenture, provided that such ratio is reduced to 1.10 to 1.0 for any fiscal quarter in which the subordinated notes are rated investment grade. These covenants are subject to certain exceptions and qualifications.

        The subordinated notes are general obligations of Navistar Financial and are subordinated to all senior indebtedness of Navistar Financial. The subordinated notes rank pari passu with all senior subordinated indebtedness of Navistar Financial and rank senior to subordinated indebtedness of Navistar Financial (including the notes offered hereby). As a result of the restrictive covenants contained in the subordinated notes indenture and pursuant to the existing bank credit agreement, holders of the subordinated notes are secured, subject to the subordination provisions contained in the Indenture, equally and ratably with the holders of the senior indebtedness of Navistar Financial, by a lien on substantially all of the assets of Navistar Financial. Such lien and security interest is subject to release without prior notice to, or the consent of, the holders of the subordinated notes.

        Upon a Change of Control Triggering Event (as defined in the subordinated notes indenture), Navistar Financial will, subject to certain conditions, make an offer to purchase all outstanding subordinated notes at a purchase price of 101% of the principal amount thereof plus accrued and unpaid interest to the redemption date. The existing bank credit agreement imposes certain limitations on the purchase of the subordinated notes upon a Change of Control Triggering Event.

Other Financial Services Borrowing

        Navistar's three Mexican finance subsidiaries presently support their operations by borrowings under the Navistar Financial Revolving Credit Agreement, a 500 million Mexican Peso ($55 million equivalent) Medium Term Promissory Notes Program established in November 2001, and various bank credit facilities. Such borrowings are guaranteed in whole or in part by Navistar and Navistar Financial. As of January 31, 2002, such borrowings had an aggregate principal balance of $259 million, of which $51 million was guaranteed by Navistar and Navistar Financial, $55 million was guaranteed by Navistar Financial, and $153 million was guaranteed by Navistar.

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FEDERAL INCOME TAX CONSIDERATIONS

General

        The following is a general discussion of the material U.S. federal income tax considerations for a holder with respect to the purchase, ownership and disposition of the securities as of the date hereof. This summary is generally limited to holders who will hold the notes and the shares of Navistar common stock as capital assets and does not deal with special situations including those that may apply to particular holders such as tax-exempt organizations, holders subject to the U.S. federal alternative minimum tax, dealers in securities, traders in securities who elect to apply a mark-to-market method of accounting, financial institutions, insurance companies, regulated investment companies, certain former citizens or former long-term residents of the United States, partnerships or other pass-through entities, holders whose "functional currency" is not the U.S. dollar and persons who hold the notes or shares of Navistar common stock in connection with a "straddle," "hedging," "exchange" or other risk reduction transaction. This discussion does not address the tax consequences to non-U.S. holders of notes or Navistar common stock that are engaged in a trade or business within the United States and does not discuss the tax consequences under any state, local or foreign law. In addition, this summary does not consider the effect of the U.S. federal estate or gift tax laws.

        The U.S. federal income tax considerations set forth below are based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder, court decisions, and rulings and pronouncements of the Internal Revenue Service, referred to as the "IRS," now in effect, all of which are subject to change. Prospective investors should particularly note that any such change could have retroactive application so as to result in U.S. federal income tax consequences different from those discussed below. We have not sought any ruling from the IRS with respect to statements made and conclusions reached in this discussion and there can be no assurance that the IRS will agree with such statements and conclusions.

        As used herein, the term "U.S. holder" means a beneficial owner of a note (or Navistar common stock acquired upon exchange of a note) that is for U.S. federal income tax purposes:

•

an individual who is a citizen or resident of the United States;



•

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;



•

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or



•

a trust, if a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have authority to control all of its substantial decisions, or if the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

        As used herein, a "non-U.S. holder" means a holder that is not a U.S. holder and that is not engaged in a U.S. trade or business. Non-U.S. holders are subject to special U.S. federal income tax provisions, some of which are discussed below.

        If a partnership is a beneficial owner of a note (or Navistar common stock acquired upon exchange of a note), the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A beneficial owner that is a partnership and partners in such a partnership should consult their tax advisors about the U.S. federal income tax consequences of the ownership and disposition of the notes (or Navistar common stock acquired upon exchange of a note).

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U.S. Holders

Payments of Interest

        U.S. holders will be required to recognize as ordinary income any interest paid or accrued on the notes in accordance with their regular method of tax accounting.

Market Discount

        If a U.S. holder purchases a note for an amount that is less than its stated redemption price at maturity (i.e., the stated principal amount of the notes), the amount of the difference will be treated as "market discount" unless such difference is less than a specified de minimis amount. The market discount provisions of the Code generally require a U.S. holder who acquires a note at a market discount to treat as ordinary income any gain recognized on the taxable disposition of the note to the extent of the "accrued market discount" on the note at the time of disposition, unless the U.S. holder elects to include accrued market discount in income currently as it accrues. This election to include market discount in income currently, once made, applies to all market discount obligations acquired on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. A U.S. holder who acquires a note at a market discount and who does not elect to include accrued market discount in income currently may be required to defer the deduction of a portion of the interest on any indebtedness incurred or maintained to purchase or carry the note until the note is disposed of in a taxable transaction. If a U.S. holder acquires a note with market discount and receives Navistar common stock upon exchange of the note, the amount of accrued market discount not previously included in income with respect to the exchanged note through the date of exchange will be treated as ordinary income upon exchange.

Amortizable Premium

        A U.S. holder who purchases a note at a premium over its stated principal amount, plus accrued interest, generally may elect to amortize such premium as an offset to interest income on the note from the purchase date to the note's maturity date under a constant-yield method, but subject to special rules to account for call premium and provided that amortizable premium will not include any premium attributable to a note's exchange feature. Bond premium on a note held by a U.S. holder that does not make the election to amortize will decrease the gain or increase the loss otherwise recognized upon a taxable disposition of the note. The election to amortize premium on a constant yield method, once made, applies to all debt obligations held or subsequently acquired by the electing U.S. holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS.

Sale, Exchange, or Repurchase

        Except as set forth above under "—Market Discount," U.S. holders generally will recognize capital gain or loss upon the sale, exchange, repurchase or other taxable disposition of the notes or Navistar common stock in an amount equal to the difference between:

•

the U.S. holder's adjusted tax basis in the notes or Navistar common stock (as the case may be); and



•

the sum of the cash plus the fair market value of any property received from such disposition (other than amounts attributable to accrued but unpaid interest on the notes not previously included in income, which will be treated as interest for U.S. federal income tax purposes).

        Because no adjustment is made for accrued interest payable by Navistar Financial on exchange of any note for Navistar common stock, such accrued interest is effectively forfeited and should not be treated as income to the holder. However, accrued interest paid to a holder upon exercise of the

62

holder's right to require Navistar Financial to repurchase the notes upon the occurrence of a Fundamental Change will be treated as interest. Any liquidated damages paid to a holder at such time will be treated as income to the holder.

        A U.S. holder's adjusted tax basis in a note generally will equal the cost of the note to such U.S. holder, increased by (i) market discount previously included in income by the U.S. holder and (ii) accrued but unpaid interest (provided the holder included such interest in income as it accrued) and reduced by any amortized premium.

        A U.S. holder's tax basis in Navistar common stock received on exchange of a note for Navistar common stock will be equal to the fair market value of the Navistar common stock at the time of exchange. The holding period for the common stock received on exchange will not include the holding period of the note that was exchanged.

Prospective investors should consult their tax advisers regarding the treatment of capital gains (which may be taxed at lower rates than ordinary income for taxpayers who are individuals, trusts or estates and have held their notes for more than one year) and losses (the deductibility of which is subject to limitations).

Exchange Rate Adjustments

        The exchange price of the notes is subject to adjustment under certain circumstances, see "Description of Notes—Exchange." Certain adjustments to (or the failure to make such adjustments to) the exchange price of the notes that increase the proportionate interest of a U.S. holder in Navistar's assets or earnings and profits may result in a constructive distribution taxable as a dividend to the U.S. holders of the notes, whether or not the U.S. holders ever exchange the notes. Moreover, if there is an adjustment (or a failure to make an adjustment) to the exchange price of the notes that increases the proportionate interest of the holders of Navistar common stock in Navistar's assets or earnings and profits, then such increase in the proportionate interest of the holders of the Navistar common stock generally will be treated as a constructive distribution to such holders, taxable as a dividend. As a result, U.S. holders of notes and Navistar common stock could have taxable income as a result of an event pursuant to which they receive no cash or property.

Dividends on Navistar Common Stock

        Distributions made on Navistar common stock will constitute dividends for U.S. federal income tax purposes to the extent of Navistar's current or accumulated earnings and profits as determined under U.S. federal income tax principles. To the extent that a U.S. holder receives distributions on shares of Navistar common stock that would otherwise constitute dividends for U.S. federal income tax purposes but that exceed Navistar's current and accumulated earnings and profits, such distributions will be treated first as a non-taxable return of capital reducing the holder's basis in the shares of Navistar common stock. Any such distributions in excess of the holder's basis in the shares of Navistar common stock generally will be treated as capital gain. Subject to applicable limitations, dividends paid to holders that are U.S. corporations will qualify for the dividends-received deduction so long as Navistar has sufficient earnings and profits.

Backup Withholding and Information Reporting

        Certain noncorporate U.S. holders may be subject to IRS information reporting and backup withholding on payments of interest on the notes, dividends on Navistar common stock and proceeds from the sale or other disposition of the notes or Navistar common stock. Backup withholding will only be imposed where the noncorporate U.S. holder (1) fails to furnish its social security number or other taxpayer identification number, referred to as a "TIN"; (2) furnishes an incorrect TIN; (3) is notified by the IRS that he or she has failed to properly report payments of interest or dividends; or (4) under

63

certain circumstances, fails to certify, under penalties of perjury, that he or she has furnished a correct TIN and has not been notified by the IRS that he or she is subject to backup withholding.

        The backup withholding rate is 30% for payments in 2002. The rate of backup withholding is scheduled to be reduced over time to 28% in 2006. The amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the U.S. holder's federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the IRS.

Non-U.S. Holders

Payments of Interest

        Generally, payments of interest on the notes to, or on behalf of, a non-U.S. holder will be considered "portfolio interest" and will not be subject to U.S. federal income or withholding tax if (1) such non-U.S. holder does not actually or constructively own 10% or more of the total combined voting power of all classes of Navistar Financial stock entitled to vote; (2) such non-U.S. holder is not a controlled foreign corporation for U.S. federal income tax purposes that is related to us through stock ownership; (3) such non-U.S. holder is not a bank whose receipt of interest on the notes is pursuant to a loan agreement entered into in the ordinary course of business; and (4) the certification requirements, as described below, are satisfied.

        To satisfy the certification requirements referred to above, either (1) the beneficial owner of a note must certify, under penalties of perjury, to us or our paying agent, as the case may be, that such owner is a non-U.S. person and must provide such owner's name and address, and TIN, if any on IRS Form W-8 BEN (or successor form), or (2) a securities clearing organization, bank or other financial institution that holds customer securities in the ordinary course of its trade or business and holds the note on behalf of the beneficial owner thereof must certify, under penalties of perjury, to Navistar Financial or its paying agent, as the case may be, that it has received a properly executed IRS Form W-8BEN (or successor form) from the beneficial holder. Special certification rules apply for notes held by a foreign partnership and other intermediaries.

        Interest on notes owned by a non-U.S. holder and not excluded from U.S. federal withholding tax under the portfolio interest rule described above generally will be subject to withholding at a 30% rate, except where (1) a non-U.S. holder can claim the benefits of an applicable tax treaty to reduce or eliminate such withholding tax and such non-U.S. holder provides Navistar Financial with a properly executed IRS Form W-8 BEN (or successor form) claiming such exemption or reduction or (2) the interest paid to a non-U.S. holder is effectively connected with such non-U.S. holder's conduct of a trade or business in the United States, and such holder provides Navistar Financial with a properly executed IRS Form W-8 ECI (or successor form).

Sale, Exchange, or Repurchase

        A non-U.S. holder generally will not be subject to U.S. federal income or withholding tax on gain (or interest) realized on the exchange, sale, repurchase or other taxable disposition of a note or Navistar common stock received upon exchange thereof unless:

•

the holder is an individual who was present in the United States for 183 days or more during the taxable year and (a) such holder has a "tax home" in the United States or (b) the gain is attributable to an office or other fixed place of business maintained in the United States by such holder; or



•

Either Navistar or Navistar Financial is or has been a U.S. real property holding corporation ("USRPHC") at any time within the shorter of the five-year period preceding such disposition or such holder's holding period.

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        Neither Navistar nor Navistar Financial believes that it is a USRPHC for U.S. federal income tax purposes. Although unlikely based on Navistar and Navistar Financial's current business plans and operations, either Navistar or Navistar Financial (or both) may become a USRPHC in the future. If either company were to become a USRPHC, a non-U.S. holder might be subject to U.S. federal income tax with respect to gain realized on the disposition of Navistar Financial notes or shares of Navistar common stock.

Distributions on Navistar Common Stock

        Distributions made on Navistar common stock constitute a dividend for U.S. federal income tax purposes to the extent of Navistar's current or accumulated earnings and profits as determined under U.S. federal income tax principles. Except as described below, dividends paid on Navistar common stock held by a non-U.S. holder will be subject to U.S. federal withholding tax at a rate of 30% (or lower treaty rate, if applicable). A non-U.S. holder generally will be required to satisfy certain IRS certification requirements in order to claim a reduction of or exemption from withholding under a tax treaty by filing IRS Form W-8BEN (or successor form) upon which the non-U.S. holder certifies, under penalties of perjury, its status as a non-U.S. person and its entitlement to the lower treaty rate with respect to such payments. Distributions to a non-U.S. holder that are effectively connected to such holder's conduct of a trade or business in the United States will not be subject to withholding if the holder provides Navistar with a properly executed IRS form W-8 ECI (or successor form).

Exchange Rate Adjustments

        The exchange price of the notes is subject to adjustment in certain circumstances. Certain such adjustments could give rise to a deemed distribution to non-U.S. holders of the notes. See "U.S. Holders—Exchange Rate Adjustments" above. In such case, the deemed distribution would be subject to the rules above regarding withholding of U.S. federal tax on dividends in respect of Navistar common stock. See "—Distributions on Navistar common stock" above.

Backup Withholding and Information Reporting

        We must report annually to the IRS and to each non-U.S. holder on IRS form 1042-S the amount of interest paid by Navistar Financial on a note and the amount of any dividend paid by Navistar on Navistar common stock, regardless of whether withholding was required, and any tax withheld with respect to the interest or dividend. Under the provisions of an income tax treaty and other applicable agreements, copies of these returns may be made available to the tax authorities of the country in which the non-U.S. holder resides.

        A non-U.S. holder generally will not be subject to backup withholding with respect to payments of interest on the notes or dividends on Navistar common stock and proceeds from the sale or other disposition of the notes or Navistar common stock to or through a U.S. office of a broker, as long as (1) the income associated with such payments is otherwise exempt from U.S. federal income tax, (2) the payor or broker does not have actual knowledge or reason to know that the holder is a U.S. person, and (3) the holder has furnished to the payor or broker a valid IRS Form W-8BEN (or successor form) certifying, under penalties of perjury, its status as a non-U.S. person or otherwise establishes an exemption.

        The payment of the proceeds from the sale or other disposition of the notes or Navistar common stock to or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale or disposition of the notes or Navistar common stock will be subject to information reporting, if it is to or through a foreign office of a broker that is a "U.S. related broker" unless the broker does not have actual knowledge or reason to know that the holder is a U.S. person and the documentation requirements described above are met or the holder otherwise

65

establishes an exemption. Backup withholding will apply if the sale or disposition is subject to information reporting and the broker has actual knowledge that you are a U.S. person. Under applicable Treasury regulations, a broker is a "U.S. related broker" if it is (1) a U.S. person, (2) a controlled foreign corporation for U.S. federal income tax purposes, (3) a foreign person 50% or more of whose gross income is effectively connected with the conduct of a U.S. trade or business for a specified three-year period, or (4) a foreign partnership, if at any time during its tax year one or more of its partners are U.S. persons, as defined in Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or such foreign partnership is engaged in the conduct of a U.S. trade or business.

        Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder will be allowed as a credit against such holder's U.S. federal income tax liability, if any, or will otherwise be refundable, provided that the requisite procedures are followed and the proper information is filed with the IRS on a timely basis. Non-U.S. holders of the notes or Navistar common stock should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedure for obtaining such an exemption, if applicable.

        THIS DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. ACCORDINGLY, YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO YOU OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND NAVISTAR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.

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PLAN OF DISTRIBUTION

        Neither Navistar Financial nor Navistar will receive any of the proceeds of the sale by selling securityholders of the notes and the underlying Navistar common stock offered by this prospectus. The notes and the underlying Navistar common stock may be sold by selling securityholders from time to time to purchasers:

•

directly by the selling securityholders;



•

through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers of the notes and the underlying Navistar common stock.

        The selling securityholders and any broker-dealers or agents who participate in the distribution of the notes and the underlying Navistar common stock may be deemed to be "underwriters." As a result, any profits on the sale of the notes and underlying Navistar common stock by selling securityholders and any discounts, commissions or concessions received by any broker-dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. If the selling securityholders were to be deemed underwriters, the selling securityholders may be subject to statutory liabilities of, including, but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.

        If the notes and underlying Navistar common stock are sold by selling securityholders through underwriters or broker-dealers, the selling securityholders will be responsible for underwriting discounts or commissions or agent's commissions.

        The notes and underlying Navistar common stock may be sold by selling securityholders in one or more transactions at:

•

fixed prices;



•

prevailing market prices at the time of sale;



•

varying prices determined at the time of sale; or



•

negotiated prices.

        These sales may be effected in transactions:

•

on any national securities exchange or quotation service on which the notes and underlying Navistar common stock may be listed or quoted at the time of the sale, including the NYSE in the case of Navistar common stock;



•

in the over-the-counter market;



•

in transactions otherwise than on such exchanges or services or in the over-the-counter market;



•

through the writing of options; or



•

through the distribution by a selling securityholder to its partners, members or shareholders.

These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade.

        In connection with sales of the notes and underlying Navistar common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the notes and underlying Navistar common stock in the course of hedging their positions. The selling securityholders may also sell the notes and underlying Navistar common stock short and deliver notes and underlying Navistar common stock to close out short

67

positions, or loan or pledge notes and underlying Navistar common stock to broker-dealers that in turn may sell the notes and underlying Navistar common stock.

        To Navistar Financial's and Navistar's knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriter, broker-dealer or agent regarding the sale of the notes and the underlying Navistar common stock by the selling securityholders. In addition, neither Navistar Financial nor Navistar can assure you that any selling securityholder will not transfer, devise or gift the notes and the underlying Navistar common stock by other means not described in this prospectus.

        Navistar common stock trades on the NYSE under the symbol "NAV." Neither Navistar Financial nor Navistar intend to apply for listing of the notes on any securities exchange or for quotation through NYSE. Accordingly, no assurance can be given as to the development of liquidity or any trading market for the notes.

        There can be no assurance that any selling securityholder will sell any or all of the notes or underlying Navistar common stock pursuant to this prospectus. In addition, any notes or underlying Navistar common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.

        The selling securityholders and any other persons participating in such distribution will be subject to the Exchange Act. The rules under the Exchange Act without limitation, Regulation M, which may limit the timing of purchases and sales of any of the notes and the underlying Navistar common stock by the selling securityholders and any other such person. In addition, Regulation M may restrict the ability of any person engaged in the distribution of the notes and the underlying Navistar common stock to engage in market-making activities with respect to the particular notes and the underlying Navistar common stock being distributed for a period of up to five business days prior to the commencement of such distribution. This may affect the marketability of the notes and the underlying Navistar common stock and the ability of any person or entity to engage in market-making activities with respect to the notes and the underlying Navistar common stock.

        In addition, Navistar may use this prospectus to offer and sell its common stock to noteholders who did not receive their notes from the initial purchasers in Navistar Financial's original private placement of the notes. Navistar does not have an agreement with any underwriter or other third party for the distribution of the common stock it would offer in such event. In this event, Navistar would offer and sell its common stock through this prospectus and no commissions or other remunerations will be paid to any person for the exchange of the notes.

        Persons who are affiliates of Navistar who acquire notes or common stock upon exchange of the notes may be deemed to be "issuers" under the Securities Act of 1933, as amended, and, therefore, may be required to deliver a copy of this prospectus, including a prospectus supplement, to any person who purchases notes or shares of common stock acquired by such affiliate through exhange of the notes. Persons who purchase notes or shares of common stock from affiliates of Navistar are deemed to be purchasing "restricted securities."

        Pursuant to the registration rights agreement filed as an exhibit to this registration statement, Navistar Financial, Navistar and the selling securityholders will be indemnified by the other against certain liabilities, including certain liabilities under the Security Act, or will be entitled to contribution in connection with these liabilities.

        Navistar Financial has agreed to pay substantially all of the expenses incidental to the registration, offering and sale of the notes and underlying Navistar common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents.

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LEGAL MATTERS

        Certain legal matters regarding the issuance of the securities will be passed upon for us by Kirkland & Ellis, Chicago, Illinois (a partnership which includes professional corporations).

EXPERTS

        The consolidated financial statements of Navistar International Corporation and Navistar Financial Corporation as of October 31, 2001 and 2000 and for each of the three years in the period ended October 31, 2001, incorporated by reference in this prospectus from each respective company's Annual Report on Form 10-K for the year ended October 31, 2001 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports incorporated by reference in this registration statement, and are incorporated by reference in reliance upon the reports of such firm given their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

        Navistar and Navistar Financial are subject to the informational requirements of the Securities Exchange Act of 1934, and, in accordance therewith, file reports and other information with the SEC. The reports and other information filed by them with the SEC in accordance with the Exchange Act may be inspected and copied at the public reference facilities maintained by the SEC at room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material or part thereof may also be obtained by mail from the Public Reference Section of the SEC, 450 Fifth Street, Washington, D.C. 20549 at prescribed rates or accessed electronically by means of the SEC's home page on the Internet at http://www.sec.gov.

        We have agreed that, whether or not we are required to do so by the rules and regulations of the SEC, for so long as any of the notes remain outstanding, we will furnish to the holders of the notes and file with the SEC (unless the SEC will not accept the filing) copies of the financial and other information that would be contained in the annual report and quarterly reports that we are required to file with the SEC under the periodic reporting requirements of the Exchange Act. We will also make such reports available to prospective purchasers of the notes and the registered notes, as applicable, and to notes analysts and broker-dealers upon their request. In addition, we have agreed to furnish to holders of the notes, and prospective purchasers of the notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as we have exchanged the notes for registered notes or the shelf registration statement relating to the notes has been declared effective by the SEC.

        Each purchaser of the notes from the initial purchasers will be furnished with a copy of this prospectus and any related amendments or supplements to this prospectus. Each person receiving this prospectus acknowledges that (a) such person has been afforded an opportunity to request from us, and to review and has received, all additional information considered by it to be necessary to verify the accuracy and completeness of the information herein, (b) such person has not relied on the initial purchasers or any person affiliated with the initial purchasers in connection with its investigation of the accuracy of such information or its investment decision and (c) except as provided pursuant to (a) above, no person has been authorized to give any information or to make any representation concerning the securities offered hereby other than those contained herein and, if given or made, such other information or representation should not be relied upon as having been authorized by us or the initial purchasers.

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INCORPORATION BY REFERENCE AND DELIVERY OF CERTAIN DOCUMENTS

        The information incorporated by reference is an important part of this prospectus, and documents that Navistar and Navistar Financial file later with the SEC will automatically update and replace this information. You may read and copy any materials that Navistar or Navistar Financial file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Furthermore, the SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information. We incorporate by reference the documents listed below and any future filings Navistar or Navistar Financial make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended prior to the termination of the offering:

•

Annual Report on Form 10-K for the fiscal year ended October 31, 2001 of Navistar;



•

Annual Report on Form 10-K for the fiscal year ended October 31, 2001 of Navistar Financial;



•

Quarterly Report on Form 10-Q for the quarter ended January 31, 2002 of Navistar;



•

Quarterly Report on Form 10-Q for the quarter ended January 31, 2002 of Navistar Financial;



•

Current Report on Form 8-K filed by Navistar on March 15, 2002; and



•

Proxy Statement, dated January 17, 2002, of Navistar.

        You may request a copy of any or all of the documents incorporated by reference herein (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents) and certain other documents referred to herein, at no cost to you, by writing or telephoning us at our principal executive offices at the following address:

Navistar International Corporation
4201 Winfield Road
P.O. Box 1488
Warrenville, Illinois 60555
Attn: Investor Relations
Telephone Number: (630) 753-5000 Navistar Financial Corporation
2850 West Golf Road
Rolling Meadows, Illinois 60008
Attn: Investor Relations
Telephone Number: (847) 734-4000

        You should rely only on the information incorporated by reference or provided in this prospectus. Any statement contained in the documents incorporated by reference will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in a subsequently dated document incorporated by reference or in this prospectus modifies or supersedes the statement. Information that we file later with the SEC will automatically update the information incorporated by reference and the information in this prospectus. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. We have not authorized anyone else to provide you with different or additional information. We are not making an offer of these securities in any state or country where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front cover of this document or the documents incorporated by reference herein.

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$220,000,000

Navistar Financial Corporation

4.75% Subordinated Exchangeable Notes due 2009

Navistar International Corporation

3,947,605 Shares of Common Stock

PROSPECTUS

                        , 2002

Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

        The following is a statement of expenses, to be paid solely by Navistar Financial Corporation, of the offering of the securities being registered hereby. All amounts are estimated, except the SEC registration fee.

Securities and Exchange Commission Registration Fee		$	20,240
NYSE Additional Share Listing Fee			14,000
Chicago Stock Exchange Additional Listing Fee			7,500
Pacific Stock Exchange Additional Listing Fee			7,500
Printing Expenses			250,000
Legal Fees and Expenses			250,000
Accounting Fees			100,000
Miscellaneous Expenses			150,000
	Total		799,240

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

General Corporation Law

        Section 145 of the General Corporation Law of the State of Delaware (the "Delaware Statute") provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), other than an action by or in the right of such corporation, by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise (an "indemnified capacity"). The indemnity may include expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was illegal. Similar provisions apply to actions brought by or in the right of the corporation, except that no indemnification shall be made without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred. Section 145 of the Delaware Statute further authorizes a corporation to purchase and maintain insurance on behalf of any indemnified person against any liability asserted against him and incurred by him in any indemnified capacity, or arising out of his status as such, regardless of whether the corporation would otherwise have the power to indemnify him under the Delaware Statute.

        In addition, Section 102 of the Delaware Statute allows a corporation to eliminate the personal liability of a director of a corporation to the corporation or to any of its stockholders for monetary damages for a breach of fiduciary duty as a director, except in the case where the director (i) breaches his duty of loyalty, (ii) fails to act in good faith, engages in intentional misconduct or knowingly violates a law, (iii) authorized the payment of a dividend or approves a stock repurchase or redemption in violation of the Delaware Statute or (iv) obtains an improper personal benefit.

II-1

Certificates of Incorporation and By-laws

        Navistar Financial's bylaws (Article XI) provide for the indemnification of directors and officers of Navistar Financial to the fullest extent permitted by Delaware law. Policies of insurance are maintained by Navistar Financial under which its directors and officers are insured, within the limits and subject to the limitations of the policies, against certain expenses in connection with the defense of certain actions, suits, or proceedings and certain liabilities which might be imposed as a result of certain actions, suits or proceedings, to which they are parties by reason of being or having been such directors or officers.

        Article Eighth of Navistar's certificate of incorporation includes a provision which eliminates directors' personal liability to the full extent permitted under the Delaware Statute. Under Article Ninth of Navistar's certificate of incorporation and Article XII of its by-laws, as amended, Navistar shall indemnify any person who was or is made a party or is threatened to be made party to or is otherwise involved in any action, suit or proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was a director or officer of Navistar (including any predecessor corporation of Navistar), or is or was serving at the request of Navistar as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith to the fullest extent authorized by the Delaware Statute. Such right of indemnification shall be a contract right and shall not be exclusive of any other right which such directors, officers or representatives may have or hereafter acquire under any statute, Navistar's certificate of incorporation, Navistar's by-laws, agreement, vote of stockholders or disinterested directors or otherwise. Navistar also maintains a policy of directors and officers liability insurance covering certain liabilities incurred by its directors and officers in connection with the performance of their duties.

ITEM 16. EXHIBITS.

        The attached Exhibit Index is incorporated herein by reference.

ITEM 17. UNDERTAKINGS.

        The undersigned Registrants each hereby undertake:

        (1)  To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.

        (2)  That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        (3)  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

        (4)  That, for purposes of determining any liability under the Securities Act, each filing of the Registrants' annual reports pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-2

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-3

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Rolling Meadows, Illinois, on May 1, 2002.

NAVISTAR FINANCIAL CORPORATION
By:	/s/  JOHN J. BONGIORNO
Name: John J. Bongiorno Title: President and Chief Executive Officer

POWER OF ATTORNEY

        Know all men by these presents, that each person whose signature appears below constitutes and appoints John J. Bongiorno, R. Wayne Cain and Steven Covey and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1993, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  JOHN J. BONGIORNO John J. Bongiorno	President and Chief Executive Officer; Director (Principal Executive Officer)	May 1, 2002
/s/  R. WAYNE CAIN R. Wayne Cain	Senior Vice President Finance; Director	May 1, 2002
/s/  ANDREW J. CEDEROTH Andrew J. Cederoth	Vice President and Treasurer; Director (Principal Financial Officer)	May 1, 2002
/s/  RONALD D. MARKLE Ronald D. Markle	Vice President and Controller; Director (Principal Accounting Officer)	May 1, 2002

II-4

/s/  PHYLLIS E. COCHRAN Phyllis E. Cochran	Vice President, Operations; Director	May 1, 2002
/s/  JOHN R. HORNE John R. Horne	Director	May 1, 2002
/s/  THOMAS M. HOUGH Thomas M. Hough	Director	May 1, 2002
/s/  ROBERT C. LANNERT Robert C. Lannert	Director	May 1, 2002
/s/  MARK T. SCHWETSCHENAU Mark T. Schwetschenau	Director	May 1, 2002

II-5

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Warrenville, Illinois, on May 1, 2002.

NAVISTAR INTERNATIONAL CORPORATION
By:	/s/  ROBERT C. LANNERT
Name: Robert C. Lannert Title: Vice Chairman and Chief Financial Officer           (Principal Financial Officer)

POWER OF ATTORNEY

        Each person whose signature appears below does hereby make, constitute and appoint John R. Horne, Robert C. Lannert, Daniel C. Ustian, and Mark T. Schwetschenau and each of them acting individually, true and lawful attorneys-in-fact and agents with power to act without the other and with full power of substitution, to execute, deliver and file, for and on such person's behalf, and in such person's name and capacity or capacities as stated below, any amendment, exhibit or supplement to this Registration Statement, making such changes in the Registration Statement as such attorney-in-fact deems appropriate.

        Pursuant to the requirements of the Securities Act of 1993, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  JOHN R. HORNE John R. Horne	Chairman and Chief Executive Officer and Director (Principal Executive Officer)	May 1, 2002
/s/  ROBERT C. LANNERT Robert C. Lannert	Vice Chairman and Chief Financial Officer and Director (Principal Financial Officer)	May 1, 2002
/s/  DANIEL C. USTIAN Daniel C. Ustian	President and Chief Operating Officer and Director	May 1, 2002
/s/  MARK T. SCHWETSCHENAU Mark T. Schwetschenau	Vice President and Controller (Principal Accounting Officer)	May 1, 2002
/s/  Y. MARC BELTON Y. Marc Belton	Director	May 1, 2002

II-6

/s/  JOHN D. CORRENTI John D. Correnti	Director	May 1, 2002
/s/  JERRY E. DEMPSEY Jerry E. Dempsey	Director	May 1, 2002
/s/  DR. ABBIE J. GRIFFIN Dr. Abbie J. Griffin	Director	May 1, 2002
/s/  ALLEN J. KROWE Allen J. Krowe	Director	May 1, 2002
/s/  DAVID MCALLISTER David McAllister	Director	May 1, 2002
/s/  WILLIAM F. PATIENT William F. Patient	Director	May 1, 2002

II-7

INDEX TO EXHIBITS

Exhibit No	Description of Exhibit
4.1	Indenture by and among Navistar Financial Corporation, Navistar International Corporation and BNY Midwest Trust Company dated as of March 25, 2002
4.2	Registration Rights Agreement by and among Navistar Financial Corporation, Navistar International Corporation, Salomon Smith Barney, Inc. and Banc of America Securities LLC
5.1	Opinion of Kirkland & Ellis*
8.1	Opinion re Tax Matters*
12.1	Statement re Computation of Ratios of Earnings to Fixed Charges
23.1	Consent of Deloitte & Touche, LLP
23.2	Consent of Kirkland & Ellis (included in Exhibit 5)*
25.1	Statement of Eligibility of Trustee

*

To be filed by amendment.

QuickLinks

TABLE OF CONTENTS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
SUMMARY
The Offering
RISK FACTORS
USE OF PROCEEDS
PRICE RANGE OF NAVISTAR COMMON STOCK AND DIVIDEND POLICY
CAPITALIZATION
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA OF NAVISTAR
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA OF NAVISTAR FINANCIAL
STATISTICAL DATA OF NAVISTAR FINANCIAL
BUSINESS
DESCRIPTION OF NOTES
DESCRIPTION OF NAVISTAR CAPITAL STOCK
SELLING SECURITYHOLDERS
DESCRIPTION OF OTHER FINANCING ARRANGEMENTS
FEDERAL INCOME TAX CONSIDERATIONS
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INCORPORATION BY REFERENCE AND DELIVERY OF CERTAIN DOCUMENTS
Part II INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ITEM 16. EXHIBITS.
ITEM 17. UNDERTAKINGS.

SIGNATURES
POWER OF ATTORNEY
SIGNATURES
POWER OF ATTORNEY
INDEX TO EXHIBITS

EX-4.1

                         NAVISTAR FINANCIAL CORPORATION

                                    AS ISSUER

                       NAVISTAR INTERNATIONAL CORPORATION

                                       AND

                                ----------------

                            BNY MIDWEST TRUST COMPANY

                                   AS TRUSTEE

                                ----------------

                                  $220,000,000

                 4.75% SUBORDINATED EXCHANGEABLE NOTES DUE 2009

                                ----------------

                                    INDENTURE

                           DATED AS OF MARCH 25, 2002



                                TABLE OF CONTENTS

                                                                                                  
ARTICLE 1 DEFINITIONS.................................................................................1

     SECTION 1.1    Definitions.......................................................................1

     SECTION 1.2    Other Definitions.................................................................8

     SECTION 1.3    Incorporation by Reference of Trust Indenture Act.................................9

     SECTION 1.4    Rules of Construction.............................................................9

ARTICLE 2 THE EXCHANGEABLE NOTES.....................................................................10

     SECTION 2.1    Form and Dating..................................................................10

     SECTION 2.2    Execution and Authentication.....................................................11

     SECTION 2.3    Registrar, Paying Agent and Exchange Agent.......................................11

     SECTION 2.4    Paying Agent To Hold Money in Trust..............................................12

     SECTION 2.5    Holder Lists.....................................................................12

     SECTION 2.6    Transfer and Exchange............................................................13

     SECTION 2.7    Replacement Exchangeable Notes...................................................14

     SECTION 2.8    Outstanding Exchangeable Notes...................................................15

     SECTION 2.9    When Exchangeable Notes Owned by the Company or an Affiliate are Disregarded.....15

     SECTION 2.10   Temporary Exchangeable Notes.....................................................16

     SECTION 2.11   Cancellation.....................................................................16

     SECTION 2.12   Defaulted Interest...............................................................17

     SECTION 2.13   CUSIP Number.....................................................................17

     SECTION 2.14   Regulation S.....................................................................17

ARTICLE 3 REDEMPTION.................................................................................17

     SECTION 3.1    Optional Redemption Prices.......................................................17

     SECTION 3.2    Notices to Trustee...............................................................18

     SECTION 3.3    Selection by Trustee of  Exchangeable Notes to be Redeemed.......................18

     SECTION 3.4    Notice of Redemption.............................................................18

     SECTION 3.5    Effect of Notice of Redemption...................................................20

     SECTION 3.6    Deposit of Redemption Price......................................................20

     SECTION 3.7    Securities Redeemed in Part......................................................20

ARTICLE 4 COVENANTS..................................................................................20

     SECTION 4.1    Payment of Exchangeable Notes....................................................20

     SECTION 4.2    Rule 144A Information; Periodic Reports to the Trustee...........................21



                                       -i-


                                TABLE OF CONTENTS
                                   (continued)



                                                                                                   PAGE
                                                                                                  
     SECTION 4.3    Compliance Certificate...........................................................21

     SECTION 4.4    Maintenance of Office or Agency..................................................22

     SECTION 4.5    Continued Existence..............................................................22

     SECTION 4.6    Repurchase Upon Fundamental Change...............................................22

     SECTION 4.7    Appointments to Fill Vacancies in Trustee's Office...............................25

     SECTION 4.8    Stay, Extension and Usury Laws...................................................25

     SECTION 4.9    Taxes............................................................................25

     SECTION 4.10   Investment Company Act...........................................................25

ARTICLE 5  SUCCESSORS................................................................................26

     SECTION 5.1    When the Company and Navistar May Merge, Etc.....................................26

     SECTION 5.2    Successor Corporation Substituted................................................27

     SECTION 5.3    Purchase Option on Fundamental Change............................................27

ARTICLE 6  DEFAULTS AND REMEDIES.....................................................................27

     SECTION 6.1    Events of Default................................................................27

     SECTION 6.2    Acceleration.....................................................................28

     SECTION 6.3    Other Remedies...................................................................29

     SECTION 6.4    Waiver of Past Defaults..........................................................29

     SECTION 6.5    Control by Majority..............................................................29

     SECTION 6.6    Limitation on Suits..............................................................30

     SECTION 6.7    Rights of Holders to Receive Payment.............................................30

     SECTION 6.8    Collection Suit by Trustee.......................................................30

     SECTION 6.9    Trustee May File Proofs of Claim.................................................31

     SECTION 6.10   Priorities.......................................................................31

     SECTION 6.11   Undertaking for Costs............................................................32

ARTICLE 7  THE TRUSTEE...............................................................................32

     SECTION 7.1    Duties of the Trustee............................................................32

     SECTION 7.2    Rights of the Trustee............................................................33

     SECTION 7.3    Individual Rights of the Trustee.................................................34

     SECTION 7.4    Trustee's Disclaimer.............................................................35

     SECTION 7.5    Notice of Defaults...............................................................35

     SECTION 7.6    Reports by the Trustee to Holders................................................35


                                      -ii-


                                TABLE OF CONTENTS
                                   (continued)



                                                                                                   PAGE
                                                                                                  
     SECTION 7.7    Compensation and Indemnity.......................................................35

     SECTION 7.8    Replacement of the Trustee.......................................................36

     SECTION 7.9    Successor Trustee by Merger, Etc.................................................37

     SECTION 7.10   Eligibility, Disqualification....................................................38

     SECTION 7.11   Preferential Collection of Claims Against Company................................38

ARTICLE 8  SATISFACTION AND DISCHARGE OF INDENTURE...................................................38

     SECTION 8.1    Discharge of Indenture...........................................................38

     SECTION 8.2    Deposited Monies to be Held in Trust by Trustee..................................38

     SECTION 8.3    Paying Agent to Repay Monies Held................................................39

     SECTION 8.4    Return of Unclaimed Monies.......................................................39

     SECTION 8.5    Reinstatement....................................................................39

ARTICLE 9  AMENDMENTS................................................................................40

     SECTION 9.1    Without the Consent of Holders...................................................40

     SECTION 9.2    With the Consent of Holders......................................................40

     SECTION 9.3    Compliance With the Trust Indenture Act..........................................42

     SECTION 9.4    Revocation and Effect of Consents................................................42

     SECTION 9.5    Notation on or Exchange of Exchangeable Notes....................................42

     SECTION 9.6    Trustee Protected................................................................43

ARTICLE 10 SUBORDINATION.............................................................................43

     SECTION 10.1   Agreement to Subordinate.........................................................43

     SECTION 10.2   Terms and Conditions of Subordination............................................43

     SECTION 10.3   Distribution on Acceleration or Notes, Dissolution and Reorganization............45

     SECTION 10.4   Subrogation......................................................................48

     SECTION 10.5   Trustee to Effectuate Subordination..............................................49

     SECTION 10.6   Notice by the Company............................................................49

     SECTION 10.7   Rights of the Trustee, Holders of Senior Indebtedness............................50

     SECTION 10.8   Subordination may not be Impaired................................................51

ARTICLE 11 GENERAL PROVISIONS........................................................................51

     SECTION 11.1   Trust Indenture Act Controls.....................................................51

     SECTION 11.2   Notices..........................................................................51


                                      -iii-


                                TABLE OF CONTENTS
                                   (continued)



                                                                                                   PAGE
                                                                                                  
     SECTION 11.3   Communication by Holders With Other Holders......................................52

     SECTION 11.4   Certificate and Opinion as to Conditions Precedent...............................52

     SECTION 11.5   Statements Required in Certificate or Opinion....................................52

     SECTION 11.6   Rules by Trustee and Agents......................................................53

     SECTION 11.7   Legal Holidays...................................................................53

     SECTION 11.8   No Recourse Against Others.......................................................53

     SECTION 11.9   Counterparts.....................................................................54

     SECTION 11.10  Other Provisions.................................................................54

     SECTION 11.11  Governing Law....................................................................55

     SECTION 11.12  No Adverse Interpretation of Other Agreements....................................55

     SECTION 11.13  Successors.......................................................................55

     SECTION 11.14  Severability.....................................................................55

     SECTION 11.15  Table of Contents, Headings, Etc.................................................55

ARTICLE 12 EXCHANGE OF EXCHANGEABLE NOTES............................................................55

     SECTION 12.1   Right to Exchange................................................................55

     SECTION 12.2   Exercise of Exchange Privilege; Issuance of Common Stock On Exchange; No
                    Adjustment for Interest or Dividends.............................................56

     SECTION 12.3   Cash Payments in Lieu of Fractional Shares.......................................57

     SECTION 12.4   Exchange Price...................................................................58

     SECTION 12.5   Adjustment of Exchange Price.....................................................58

     SECTION 12.6   Effect of Reclassification, Consolidation, Merger or Sale........................66

     SECTION 12.7   Taxes on Shares Issued...........................................................67

     SECTION 12.8   Reservation of Shares; Shares to Be Fully Paid; Listing of Common Stock..........67

     SECTION 12.9   Responsibility of Trustee........................................................67

     SECTION 12.10  Notice to Holders Prior to Certain Actions.......................................68

     SECTION 12.11  Restriction on Common Stock Issuable Upon Exchange...............................69

ARTICLE 13 ASSUMPTION................................................................................70

     SECTION 13.1   Assumption of the Notes..........................................................70


                                      -iv-


                             CROSS-REFERENCE TABLE*



Trust Indenture                                                                             Indenture
Act Section                                                                                   Section
- ---------------                                                                             ---------
                                                                                   
310(a)(1).......................................................................                 7.10
       (a)(2)...................................................................          7.10, 10.10
       (a)(3)...................................................................                  n/a
       (a)(4)...................................................................                  n/a
       (a)(5)...................................................................                  n/a
       (b)......................................................................      7.8, 7.10, 11.2
       (c)......................................................................                  n/a

311(a)..........................................................................                 7.11
       (b)......................................................................                 7.11
       (c)......................................................................                  n/a

312(a)..........................................................................                  2.5
       (b)......................................................................                 11.3
       (c)......................................................................                 11.3

313(a)..........................................................................                  7.6
       (b)(1)...................................................................                  n/a
       (b)(2)...................................................................                  7.6
       (c)......................................................................            7.6, 11.2
       (d)......................................................................                  7.6

314(a)..........................................................................            4.2, 11.2
       (b)......................................................................                  n/a
       (c)(1)...................................................................                 11.4
       (c)(2)...................................................................                 11.4
       (c)(3)...................................................................                  n/a
       (d)......................................................................                  n/a
       (e)......................................................................                 11.5
       (f)......................................................................                  n/a

315(a)..........................................................................                7.1(b)
       (b)......................................................................            7.5, 11.2
       (c)......................................................................                7.1(a)
       (d)......................................................................                7.1(c)
       (e)......................................................................                 6.11

316(a)(last sentence)...........................................................                  2.9
       (a)(1)(A)................................................................                  6.5
       (a)(1)(B)................................................................                  6.4
       (a)(2)...................................................................                  n/a
       (b)......................................................................                  6.2
       (c)......................................................................                  9.4

317(a)(1).......................................................................                  6.8
       (a)(2)...................................................................                  6.9
       (b)......................................................................                  2.4

318(a)..........................................................................                 11.1
       (b)......................................................................                  n/a
       (c)......................................................................                 11.1


- ----------
"n/a" means not applicable.
*This Cross-Reference Table shall not, for any purpose, be deemed to be a part
of the Indenture.

                                       -v-


     THIS INDENTURE, dated as of March 25, 2002, is by and among Navistar
Financial Corporation, a Delaware corporation (the "Company"), Navistar
International Corporation, a Delaware corporation ("Navistar"), and BNY Midwest
Trust Company, an Illinois trust company (the "Trustee"). The Company has duly
authorized the creation of its 4.75% Subordinated Exchangeable Notes due 2009
(the "Exchangeable Notes"), and to provide therefor the Company and the Trustee
have duly authorized the execution and delivery of this Indenture. Each party
agrees as follows for the benefit of the other party and for the equal and
ratable benefit of the holders from time to time of the Exchangeable Notes:

                                    ARTICLE 1

                                   DEFINITIONS

SECTION 1.1    Definitions.

     "Additional Provisions" has the meaning provided in Section 10.1.

     "Affiliate" means, when used with reference to any person, any other person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such person. For the purposes of this definition, "control"
when used with respect to any specified person means the power to direct or
cause the direction of management or policies of the referent person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise. The terms "controlling" and "controlled" have meanings correlative
of the foregoing.

     "Agent" means any Registrar, Paying Agent, Exchange Agent or co- registrar.

     "Agent Member" means any member of, or participant in, the Depositary.

     "Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Global Security to the extent applicable
to such transaction and as in effect from time to time.

     "Average Sale Price" of the Common Stock means, with respect to any
Exchange Date, the average of the Sales Prices of the Common Stock for each
Trading Day in the five Trading Day period immediately following the date on
which the Company delivers the notice described in Section 12.2.

     "Board of Directors" means the Board of Directors of the Company or
Navistar, as the case may be, or in either case, any duly authorized committee
of the Board of Directors.

     "Capital Stock" of any person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, but excluding any debt
securities exchangeable into such equity.

     "Change of control" means the occurrence of one or more of the following
events: (1)(a) Navistar consolidates with or merges into another person (other
than a direct or indirect wholly-owned subsidiary) and the holders of the common
stock of Navistar immediately prior to the transaction receive for their common
stock shares of the resulting or surviving entity (or its



parent) which in the aggregate represent less than a majority of the total
voting power of all classes of voting stock that are normally entitled to vote
in the election of directors of the resulting or surviving entity (or its
parent) immediately after the transaction or (b) the Company consolidates with
or merges into another person (other than a direct or indirect wholly-owned
subsidiary of Navistar); (2)(a) any person (other than a direct or indirect
wholly-owned subsidiary) consolidates with or merges into Navistar and the
holders of the common stock of Navistar immediately prior to the transaction
beneficially own shares of the resulting or surviving entity which in the
aggregate represent less than a majority of the total voting power of all
classes of voting stock that are normally entitled to vote in the election of
directors of the resulting or surviving entity (or its parent) immediately after
the transaction or (b) any person (other than a direct or indirect wholly owned
subsidiary of Navistar) consolidates with or merges into the Company and the
Company ceases to be a direct or indirect wholly-owned subsidiary of Navistar
(or its successor under the indenture); (3)(a) Navistar, or Navistar together
with its subsidiaries taken as a whole, sells, conveys, transfers or leases all
or substantially all of their properties and assets to any person or group in
one or a series of transactions other than (i) to one or more of its direct or
indirect wholly-owned subsidiaries, (ii) in a Permitted Joint Venture or (iii) a
transaction in which the holders of the common stock of Navistar immediately
prior to the transaction receive for their common stock shares of the transferee
or lessee (or its parent) which in the aggregate represent a majority of the
total voting power of all classes of voting stock that are normally entitled to
vote in the election of directors of the transferee or lessee (or its parent)
immediately after the transaction or (b) the Company, or the Company together
with its subsidiaries taken as a whole, sells, conveys, transfers or leases all
or substantially all of their properties and assets to any person (other than
(i) to one or more of its direct or indirect wholly-owned subsidiaries or (ii)
receivables and related assets and interests therein in connection with a
Qualified Securitization Transaction); (4) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act) other
than (i) Navistar or one or more of its direct or indirect wholly-owned
subsidiaries or (ii) employee or retirement benefit plans or trusts sponsored or
established by Navistar or its subsidiaries is or becomes after the issue date
of the notes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act) of shares representing more than 50% of the
combined voting power of the then outstanding voting stock that is normally
entitled to vote in the election of directors of Navistar or the Company; (5)
the outstanding common stock of Navistar is reclassified into, exchanged for or
converted into the right to receive any other property or security; PROVIDED,
HOWEVER, that a Change of Control shall not be deemed to have occurred (a) with
respect to Navistar if at least 90% of the aggregate fair market value (as
determined by Navistar's Board of Directors) of the property and securities
received or retained by holders of the Common Stock (excluding cash payments for
fractional shares) in the transaction or transactions constituting the Change of
Control consists of shares of common stock of the surviving person (or its
parent) that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on the NASDAQ Stock Market and (b)
with respect to the Company, if there is no Ratings Decline.

     "Commission" means the Securities and Exchange Commission.

     "Common Stock" means any stock of any class of Navistar (as defined below)
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
Navistar and which is not subject to

                                        2


redemption by Navistar. Subject to the provisions of Section 12.6, however,
shares issuable on exchange of Exchangeable Notes shall include only shares of
the class designated as Common Stock of Navistar at the date of this Indenture
or shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of Navistar and which are not subject to redemption by
Navistar; provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.

     "Company" means the party named as such above until a successor replaces it
in accordance with Article 5 and thereafter means the successor. References to
the Company shall not include any subsidiary.

     "Corporate Trust Office" means the corporate trust office of the Trustee at
which at any particular time the trust created by this Indenture shall
principally be administered; which as of the date hereof, is located at 2 North
LaSalle Street, Suite 1020, Chicago, Illinois 60602.

     "Default" means any event that is, or after notice or passage of time, or
both, would be, an Event of Default.

     "Depositary" means, with respect to any Global Securities, a clearing
agency that is registered as such under the Exchange Act and is designated by
the Company to act as Depositary for such Global Securities (or any successor
securities clearing agency so registered), which shall initially be DTC.

     "Designated Senior Indebtedness" means (a) Senior Indebtedness outstanding
on the date of this Indenture and, if there shall be a merger, consolidation or
share exchange of the Company or a successor shall assume the obligation of the
Company under this Indenture, the date of such merger, consolidation, share
exchange or assumption of the surviving entity and (b) the Company's obligations
under any particular Senior Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof, or related
agreements or documents to which the Company is a party, expressly provides that
such indebtedness shall be Designated Senior Indebtedness for purposes of this
Indenture.

     "Disqualified Stock" means any capital stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the capital stock), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the capital stock, in whole or in part, on or prior to the date that
is 91 days after the date on which the Exchangeable Notes mature.

     "DTC" means The Depository Trust Company, a New York corporation.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

                                        3


     "Exchangeable Notes" means the 4.75% Subordinated Exchangeable Notes due
2009 issued, authenticated and delivered under this Indenture.

     "Exchange Price" means the initial exchange price specified in the form of
Exchangeable Note in Paragraph 14 of such form, as adjusted in accordance with
the provisions of Article 12.

     "Fundamental Change" means the occurrence of a Change of Control, a
Termination of Trading or a Liquidation or Dissolution Plan.

     "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.

     "Global Security" means an Exchangeable Note that is registered in the
Register.

     "Global Securities Legend" means the legend labeled as such and that is set
forth in Exhibit A hereto.

     "Indenture" means this Indenture as amended or supplemented from time to
time.

     "Initial Purchasers" means Banc of America Securities LLC, Salomon Smith
Barney Inc., Credit Suisse First Boston Corporation, J.P. Morgan Securities,
Inc., Banc One Capital Markets, Inc. and Scotia Capital (USA) Inc.

     "Interest Payment Date" means April 1 and October 1 of each year.

     "Issue Date" means the date on which Exchangeable Notes are first issued
and authenticated under this Indenture.

     "Liquidated Damages" has the meaning specified in paragraph 15 of the form
of Exchangeable Note which is attached as Exhibit A hereto.

     "Liquidation or Dissolution Plan" means a plan adopted by either Navistar
or the Company relating to the liquidation or dissolution of either Navistar or
the Company while either are subject to this Indenture.

     "Maturity Date" means April 1, 2009.

     "Navistar" means Navistar International Corporation, a Delaware
corporation.

     "Note Custodian" means BNY Midwest Trust Company, as custodian with respect
to any Global Security, or any successor entity thereto.

     "Offering Memorandum" means the offering memorandum dated March 18, 2002,
relating to the Exchangeable Notes, including all amendments thereto.

                                        4


     "Officer" means the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, the Chief Accounting Officer, any
Executive Vice President, Senior Vice President or Vice President (whether or
not designated by a number or numbers or word or words before or after the title
"Vice President"), the Treasurer, the Secretary and any Assistant Treasurer or
any Assistant Secretary of the Company or Navistar, as the case may be.

     "Officers' Certificate" means a certificate signed by any two of the
following Officers of the Company or Navistar, as the case may be: the Chairman
of the Board, the Chief Executive Officer, the President, the Chief Financial
Officer, a Vice President, the Treasurer, the Controller or the Secretary, and
delivered to the Trustee. One of the officers giving an Officers' Certificate
given pursuant to Section 4.3 shall be the principal executive, financial or
accounting officer of the Company.

     "Opinion of Counsel" means a written opinion from legal counsel, who may be
an employee of or counsel to the Company, Navistar or the Trustee except to the
extent otherwise indicated in this Indenture, and shall be reasonably acceptable
to the Trustee.

     "Permitted Junior Securities" means (a) shares of stock of any class of the
Company other than Disqualified Stock or (b) securities of the Company other
than Disqualified Stock that are subordinated in right of payment to all Senior
Indebtedness that may be outstanding at the time of issuance or delivery of such
securities to substantially the same extent as, or to a greater extent than, the
Exchangeable Notes are so subordinated pursuant to the terms of this Indenture.

     A "person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization, limited liability company or
government or any agency or political subdivision thereof.

     "Permitted Joint Venture" means any person which is, directly or
indirectly, through its subsidiaries or otherwise, engaged principally in any
business in which Navistar or its subsidiaries is engaged, or a reasonably
related business, and the capital stock or other equity interests of which is
owned directly or indirectly by Navistar and one or more persons other than
Navistar and its affiliates.

     "Qualified Securitization Transaction" means any transaction or series of
transactions that have been or may be entered into by the Company or any of its
subsidiaries in connection with or reasonably related to a transaction or series
of transactions in which the Company or any of its subsidiaries may sell, convey
or otherwise transfer to (1) a Securitization Subsidiary or (2) any other
person, or may grant a security interest in, any receivables and related assets
or interests therein secured by the goods or services financed thereby (whether
such receivables and related assets are then existing or arising in the future)
of the Company or any of its subsidiaries, and any assets reasonably related
thereto including, without limitation, all security interests in goods or
services financed thereby, the proceeds of such receivables, and other assets
which are customarily sold or in respect of which security interests are
customarily granted in connection with securitization transactions involving
such assets.

     "Ratings Decline" means that at any time within 30 days (which period will
be extended so long as the rating of the notes is under publicly announced
consideration for possible

                                        5


downgrade by either of the rating agencies named below) after the date of public
notice of the Fundamental Change, or of the intention of the Company or of any
person to effect a Fundamental Change, the rating of the notes is decreased by
either of Standard & Poor's Rating Services or Moody's Investors Service, Inc.
and as a result of such decrease is less than BB-/Ba2.

     "Registration Agreement" means the Registration Rights Agreement relating
to the Exchangeable Notes and Common Stock issuable upon exchange of such
Exchangeable Notes dated as of March 25, 2002, by and among the Company,
Navistar and the Initial Purchasers, as such agreement may be amended, modified
or supplemented from time to time.

     "Regular Record Date" means the March 15 or September 15 immediately
preceding each Interest Payment Date.

     "Restricted Common Stock Legend" means the legend labeled as such and that
is set forth in Exhibit B hereto.

     "Restricted Securities Legend" means the legend labeled as such and that is
set forth in Exhibit A hereto.

     "Sale Price" of the Common Stock on any date means the closing sale price
per share (or, if no closing sale price is reported, the average of the bid and
ask prices or, if more than one in either case, the average of the average bid
and average ask prices) on such date as reported in the composite transactions
for the principal United States securities exchange on which the Common Stock is
traded or, if the Common Stock is not listed on a United States national or
regional securities exchange, as reported by the National Association of
Securities Dealers Automated Quotation System, appropriately adjusted to take
into account the occurrence after the applicable Exchange Date of an event that
would result in an adjustment of the Exchange Price.

     "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

     "Securitization Subsidiary" means a wholly-owned subsidiary of the Company
which engages in no activities other than those reasonably related to or in
connection with the entering into of securitization transactions and which is
designated by the Board of Directors of the Company (as provided below) as a
Securitization Subsidiary (a) no portion of the indebtedness or any other
obligations (contingent or otherwise) of which (1) is guaranteed by the Company
or any other subsidiary of the Company other than pursuant to Standard
Securitization Undertakings, (2) is recourse to or obligates the Company or any
other subsidiary of the Company in any way other than pursuant to Standard
Securitization Undertakings or (3) subjects any property or asset of the Company
or any other subsidiary of the Company, directly or indirectly, contingently or
otherwise, to any lien or to the satisfaction thereof, other than pursuant to
Standard Securitization Undertakings, (b) with which neither the Company nor any
other subsidiary of the Company (1) provides any credit support (for the
avoidance of doubt, no loan agreement between the Company and its subsidiaries
shall be deemed to constitute "credit support") or (2) has any contract,
agreement, arrangement or understanding other than on terms that are fair and
reasonable and that are no less favorable to the Company or such subsidiary than

                                        6


could be obtained from an unrelated person (other than Standard Securitization
Undertakings and intercompany notes relating to the sale of receivables and
related assets to such Securitization Subsidiary) and (c) with which neither the
Company nor any subsidiary of the Company has any obligation to maintain or
preserve such Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results. Any such designation by the board
of directors of the Company shall be evidenced by resolutions of the board of
directors of the Company giving effect to such designation.

     "Senior Indebtedness" means the principal, premium, if any, and interest on
(a) all indebtedness of the Company, whether outstanding on the date of the
issuance of subordinated debt securities or thereafter created, incurred or
assumed, which is for money borrowed, or which is evidenced by a note or similar
instrument given in connection with the acquisition of any business, properties
or assets, including securities, (b) any indebtedness of others of the kinds
described in clause (a) above for the payment of which the Company is
responsible or liable as guarantor or otherwise and (c) amendments, renewals,
extensions and refundings of any such indebtedness, unless in any instrument or
instruments evidencing or securing such indebtedness or pursuant to which the
same is outstanding, or in any such amendment, renewal, extension or refunding,
it is expressly provided that such indebtedness is not superior in right of
payment to subordinated debt securities.

     "Shelf Registration Statement" shall have the meaning set forth in the
Registration Agreement.

     "Standard Securitization Undertakings" means customary representations,
warranties and covenants (including those relating to servicing) and entered
into in the ordinary course of business in connection with a Qualified
Securitization Transaction.

     A "subsidiary" means, with respect to any person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
person or one or more of the other subsidiaries of that person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or managing
general partner of which is such person or a subsidiary of such person or (b)
the only general partners of which are such person or of one or more
subsidiaries of such person (or any combination thereof).

     "Termination of Trading" will be deemed to have occurred if the Common
Stock (or other common stock into which the Exchangeable Notes are then
exchangeable) is neither listed for trading on a U.S. national securities
exchange or approved for trading on the NASDAQ Stock National Market.

     "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-
77bbbb) as in effect on the date of execution of this Indenture, except as
provided in Sections 9.3 and 12.6.

     "Trading Day" shall mean (x) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such other
national securities exchange is open for business or (y) if the

                                        7


applicable security is quoted on the Nasdaq National Market, a day on which
trades may be made thereon or (z) if the applicable security is not so listed,
admitted for trading or quoted, any day other than a Saturday or Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.

     "Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor.

     "Trust Officer" means, when used with respect to the Trustee, any officer
within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this
Indenture.

     "U.S. Government Obligations" means direct obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged. In order to have money available on a payment date
to pay principal or interest on the Exchangeable Notes, the U.S. Government
Obligations shall be payable as to principal or interest on or before such
payment date in such amounts as will provide the necessary money. U.S.
Government Obligations shall not be callable at the issuer's option.

     "Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.

SECTION 1.2    Other Definitions.



                                                 Defined in Section
                                                     
      "Bankruptcy Law"                                   6.1
      "business day"                                    11.7
      "closing price"                                   12.5
      "Exchange Agent"                                   2.3
      "Exchange Date"                                   12.2
      "Current Market Price"                            12.5
      "Custodian"                                        6.1
      "Fundamental Change Date"                          4.6
      "Fundamental Change Offer"                         4.6
      "Fundamental Change Payment"                       4.6
      "Fundamental Change Payment Date"                  4.6
      "Event of Default"                                 6.1
      "Expiration Time"                                 12.5
      "fair market value"                               12.5
      "Legal Holiday"                                   11.7
      "non-electing share"                              12.5
      "Paying Agent"                                     2.3
      "Purchased Shares"                                12.5


                                        8


                                               
      "Record Date"                                     12.5
      "Redemption Date"                                  3.1
      "Redemption Price"                                 3.1
      "Registrar"                                        2.3
      "Register"                                         2.3
      "Securities"                                      12.5
      "Trigger Event"                                   12.5

      

SECTION 1.3    Incorporation by Reference of Trust Indenture Act.

     Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.

     The following TIA terms used in this Indenture have the following meanings:

             "Commission" means the Commission;

             "indenture securities" means the Exchangeable Notes;

             "indenture security holder" means a holder of an Exchangeable
             Note;

             "indenture to be qualified" means this Indenture;

             "indenture trustee" or "institutional trustee" means the Trustee;
             and

             "obligor" on the Exchangeable Notes means the Company or any
             other obligor on the Exchangeable Notes.

     All other terms in this Indenture that are defined by the TIA, defined by
TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.

SECTION 1.4    Rules of Construction.

     Unless the context otherwise requires:

           (1)   a term has the meaning assigned to it;

           (2)   an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;

           (3)   "or" is not exclusive;

           (4)   words in the singular include the plural, and in the plural
include the singular; and

           (5)   the male, female and neuter genders include one another.

                                        9


                                    ARTICLE 2

                             THE EXCHANGEABLE NOTES

SECTION 2.1    Form and Dating.

     (a)   GLOBAL SECURITIES. The Exchangeable Notes are being offered and sold
by the Company pursuant to a Purchase Agreement relating to the Exchangeable
Notes, dated March 25, 2002, among the Company, Navistar and the Initial
Purchasers (the "Purchase Agreement").

     The Exchangeable Notes are being offered and sold (i) in reliance on
Regulation S under the Securities Act ("Regulation S") or (ii) to "qualified
institutional buyers" as defined in Rule 144A ("QIBs") in reliance on Rule 144A
under the Securities Act ("Rule 144A"), each as provided in the Purchase
Agreement, and shall be issued in the form of one or more permanent global
securities in definitive, fully registered form without interest coupons with
the Global Securities Legend and Restricted Securities Legend set forth in
Exhibit A hereto (each, a "Global Security"). Any Global Security shall be
deposited on behalf of the purchasers of the Exchangeable Notes represented
thereby with the Trustee, as custodian for the Depositary, and registered in the
name of the Depositary or a nominee of the Depositary for the accounts of
participants in the Depositary (and, in the case of Exchangeable Notes held in
accordance with Regulation S, registered with the Depositary for the accounts of
designated agents holding on behalf of the Euroclear System ("Euroclear") or
Clearstream Banking, societe anonyme ("Clearstream")), duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of a Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depositary
or its nominee as hereinafter provided.

     (b)   BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.

     The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(b) and the written order of the Company, authenticate and deliver
initially one or more Global Securities that (i) shall be registered in the name
of Cede & Co. or other nominee of such Depositary and (ii) shall be delivered by
the Trustee to such Depositary or pursuant to such Depositary's instructions or
held by the Trustee as custodian for the Depositary pursuant to a FAST Balance
Certificate Agreement between the Depositary and the Trustee.

     Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary or by the Trustee as the custodian of the Depositary or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.

                                       10


     The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations and Instructions to Participants" of Clearstream shall be applicable
to interests in any Global Securities that are held by participants through
Euroclear or Clearstream. The Trustee shall have no obligation to notify holders
of any such procedures or to monitor or enforce compliance with the same.

     (c)   DEFINITIVE SECURITIES. Except as provided in Section 2.10, owners of
beneficial interests in Global Securities will not be entitled to receive
physical delivery of certificated Exchangeable Notes in definitive form. If
applicable, certificated Exchangeable Notes in definitive form will bear the
Restricted Securities Legend set forth on Exhibit A unless removed in accordance
with Section 2.6(c).

SECTION 2.2    Execution and Authentication.

     One Officer shall sign the Exchangeable Notes for the Company by manual or
facsimile signature.

     If an Officer whose signature is on an Exchangeable Note no longer holds
that office at the time the Exchangeable Note is authenticated, the Exchangeable
Note shall nevertheless be valid.

     An Exchangeable Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Exchangeable Note has been authenticated under this Indenture.

     Upon a written order of the Company signed by an Officer of the Company,
the Trustee shall authenticate Exchangeable Notes for original issue in an
aggregate principal amount of $220,000,000 to the Initial Purchasers. The
aggregate principal amount of Exchangeable Notes outstanding at any time may not
exceed that amount except as provided in Section 2.7.

     The Exchangeable Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 or any integral multiple thereof.

     The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Exchangeable Notes. An authenticating agent may authenticate
Exchangeable Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same right as an Agent to deal with the
Company or an Affiliate of the Company.

SECTION 2.3    Registrar, Paying Agent and Exchange Agent.

     The Company (and Navistar with respect to clause (iii)) shall maintain or
cause to be maintained in such locations as it shall determine, which may be the
Corporate Trust Office, an office or agency: (i) where Exchangeable Notes may be
presented for registration of transfer or for exchange into other Exchangeable
Notes("Registrar"); (ii) where Exchangeable Notes may be presented for payment
("Paying Agent"); (iii) where Exchangeable Notes may be presented for exchange
into Common Stock (the "Exchange Agent"); and (iv) where notices and demands to
or upon the Company in respect of Exchangeable Notes and this Indenture may be
served by

                                       11


the holders of the Exchangeable Notes. The Registrar shall keep a register
("Register") of the Exchangeable Note and of their transfer and exchange. The
Company may appoint one or more co-registrars, one or more additional paying
agents and one or more additional exchange agents. The term "Paying Agent"
includes any additional paying agent, and the term "Exchange Agent" includes any
additional Exchange Agent. The Company may change any Paying Agent, Registrar,
Exchange Agent or co-registrar without prior notice. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture
and shall enter into an appropriate agency agreement with any Registrar, Paying
Agent, Exchange Agent or co-registrar not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. The Company or any of its subsidiaries may act as Paying Agent,
Registrar, Exchange Agent or co-registrar, except that for purposes of Article 8
and Section 4.6, neither the Company nor any of its subsidiaries shall act as
Paying Agent. If the Company fails to appoint or maintain another entity as
Registrar, or Paying Agent or Exchange Agent, the Trustee shall act as such, and
the Trustee shall initially act as such.

SECTION 2.4    Paying Agent To Hold Money in Trust.

     The Company shall require each Paying Agent (other than the Trustee, who
hereby so agrees), to agree in writing that the Paying Agent will hold in trust
for the benefit of holders of the Exchangeable Notes or the Trustee all money
held by the Paying Agent for the payment of principal or interest (including
Liquidated Damages) on the Exchangeable Notes, and will notify the Trustee of
any default by the Company in respect of making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or a subsidiary of the Company) shall
have no further liability for the money. If the Company or a subsidiary of the
Company acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the holders of the Exchangeable Notes all money held by
it as Paying Agent. Upon written request from the Company to return unclaimed
funds to the Company, the Trustee shall from time to time deliver all unclaimed
funds held by it for two years in any capacity hereunder or as directed by
applicable escheat authorities. Any unclaimed funds held by the Trustee in any
capacity hereunder pursuant to this Section 2.4 shall be held uninvested and
without any liability for interest.

SECTION 2.5    Holder Lists.

     The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
holders of Exchangeable Notes and shall otherwise comply with TIA Section
312(a). If the Trustee is not the Registrar, the Company shall furnish to the
Trustee at least seven business days before each Interest Payment Date, and as
the Trustee may request in writing within fifteen (15) days after receipt by the
Company of any such request (or such lesser time as the Trustee may reasonably
request in order to enable it to timely provide any notice to be provided by it
hereunder), a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of holders of Exchangeable Notes.

                                       12


SECTION 2.6    Transfer and Exchange.

     (a)   When Exchangeable Notes are presented to the Registrar or a
co-registrar with a request to register a transfer or to exchange them for an
equal principal amount of Exchangeable Notes for other denominations, the
Registrar shall register the transfer or make the exchange if its requirements
for such transactions are met. To permit registrations of transfers and
exchanges, the Company shall issue, and the Trustee shall authenticate,
Exchangeable Notes at the Registrar's request, bearing registration numbers not
contemporaneously outstanding. No service charge shall be made to a holder for
any registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Company and the Registrar may require payment of a
sum sufficient to cover any transfer tax or other governmental charge payable
upon exchanges pursuant to Sections 2.7, 9.5 or 12.2.

     The Company or the Registrar shall not be required to register the transfer
of any Exchangeable Notes surrendered for repurchase pursuant to Section 4.6.

     All Exchangeable Notes issued upon any transfer or exchange of Exchangeable
Notes in accordance with this Indenture shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits under this
Indenture as the Exchangeable Notes surrendered upon such registration of
transfer or exchange.

     (b)   Notwithstanding any provision to the contrary herein, so long as a
Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, or of any
beneficial interest therein, shall only be made in accordance with Sections
2.1(b) and 2.10; provided, however, that beneficial interests in a Global
Security may be transferred to persons who take delivery thereof in the form of
a beneficial interest in the Global Security in accordance with the transfer
restrictions set forth under the heading "Notice to Investors" in the Offering
Memorandum and, if applicable, in the Restricted Securities Legend.

     Except for transfers or exchanges made in accordance with Section 2.10,
transfers of a Global Security shall be limited to transfers of such Global
Security in whole, but not in part, to nominees of the Depositary or to a
successor of the Depositary or such successor's nominee.

     In the event that a Global Security is exchanged for Exchangeable Notes in
definitive form pursuant to Section 2.10 prior to the effectiveness of a Shelf
Registration Statement with respect to such Exchangeable Notes, such exchange
may occur, and such Exchangeable Notes may be further exchanged or transferred,
only upon receipt by the Registrar of (1) such Global Security or such
Exchangeable Notes in definitive form, duly endorsed as provided herein, as
applicable, (2) instructions from the holder directing the Trustee to
authenticate and deliver one or more Exchangeable Notes in definitive form of
the same aggregate principal amount as the Global Security or the Exchangeable
Notes in definitive form (or portion thereof), as applicable, to be transferred,
such instructions to contain the name or names of the designated transferee or
transferees, the authorized denomination or denominations of the Exchangeable
Notes in definitive form to be so issued and appropriate delivery instructions,
and (3) such certifications or other information and, in the case of transfers
pursuant to Rule 144 under the Securities Act, legal opinions as the Company may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration

                                       13


requirements of the Securities Act (including the certification requirements
intended to ensure that such transfers comply with Rule 144A or Regulation S
under the Securities Act, as the case may be), and upon compliance with such
other procedures as may from time to time be adopted by the Company and the
Registrar.

     (c)   Except in connection with a Shelf Registration Statement contemplated
by and in accordance with the terms of the Registration Agreement, if
Exchangeable Notes are issued upon the registration of transfer, exchange or
replacement of Exchangeable Notes bearing a Restricted Securities Legend, or if
a request is made to remove such a Restrictive Securities Legend on Exchangeable
Notes, the Exchangeable Notes so issued shall bear the Restricted Securities
Legend, or a Restricted Securities Legend shall not be removed, as the case may
be, unless there is delivered to the Company such satisfactory evidence, which,
in the case of a transfer made pursuant to Rule 144 under the Securities Act,
may include an opinion of counsel given in accordance with the laws in the State
of New York, as may be reasonably required by the Company, that neither the
legend nor the restrictions on transfer set forth therein are required to ensure
that transfers thereof comply with the provisions of Rule 144A, Rule 144 or
Regulation S under the Securities Act or that such Exchangeable Notes are not
"restricted" within the meaning of Rule 144 under the Securities Act. Upon
provision to the Company of such satisfactory evidence, the Trustee, at the
written direction of the Company, shall authenticate and deliver Exchangeable
Notes that do not bear the legend. The Company shall not otherwise be entitled
to require the delivery of a legal opinion in connection with any transfer or
exchange of Securities.

     (d)   Neither the Trustee nor any Agent shall have any responsibility for
any actions taken or not taken by the Depositary.

     (e)   The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Exchangeable Notes (including any transfers between or among the
Depositary's participants or beneficial owners of interests in any Global
Security) other than to require delivery of such certificates and other
documentation as is expressly required by, and to do so if and when expressly
required by, the terms of this Indenture and to examine the same to determine
substantial compliance as to form with the express requirements hereof.

SECTION 2.7    Replacement Exchangeable Notes.

     If the holder of an Exchangeable Note claims that its Exchangeable Note has
been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Exchangeable Note if the Trustee's and
the Company's requirements are met. If required by the Trustee or the Company as
a condition of receiving a replacement Exchangeable Note, the holder of an
Exchangeable Note must provide a certificate of loss and an indemnity bond
sufficient, in the judgment of both the Company and the Trustee, to fully
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss, liability, cost or expense which any of them may suffer or incur if
the Exchangeable Note is replaced. The Company and the Trustee may charge the
relevant holder for their expenses in replacing any Exchangeable Note.

                                       14


     The Trustee or any authenticating agent may authenticate any such
substituted Exchangeable Note and deliver the same upon the receipt of such
security or indemnity as the Trustee, the Company and, if applicable, such
authenticating agent may require. Upon the issuance of any substituted
Exchangeable Note, the Company and the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses connected therewith. In case any
Exchangeable Note, which has matured or is about to mature, or which has been
submitted for repurchase pursuant to Section 4.6 or is about to be exchanged
into Common Stock pursuant to Article 12, shall become mutilated or be
destroyed, lost or stolen, the Company may, instead of issuing a substitute
Exchangeable Note, pay or authorize the payment of or exchange or authorize the
exchange of the same (without surrender thereof except in the case of a
mutilated Exchangeable Note), as the case may be, if the applicant for such
payment or exchange shall furnish to the Company, to the Trustee and, if
applicable, to the authenticating agent such security or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or connected with such substitution, and, in case of
destruction, loss or theft, evidence satisfactory to the Company, the Trustee
and, if applicable, any paying agent or exchange agent of the destruction, loss
or theft of such Exchangeable Note and of the ownership thereof.

     Every replacement Exchangeable Note is an additional obligation of the
Company and shall be entitled to all the benefits provided under this Indenture
equally and proportionately with all other Exchangeable Notes duly issued,
authenticated and delivered hereunder.

SECTION 2.8    Outstanding Exchangeable Notes.

     The Exchangeable Notes outstanding at any time are all the Exchangeable
Notes properly authenticated by the Trustee except for those canceled by the
Trustee, those delivered to it for cancellation, and those described in this
Section as not outstanding.

     If an Exchangeable Note is replaced pursuant to Section 2.7, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Exchangeable Note is held by a bona fide purchaser.

     If Exchangeable Notes are considered paid under Section 4.1 or exchanged
under Article 12, they cease to be outstanding, and interest (and Liquidated
Damages, if any) on them ceases to accrue.

     Subject to Section 2.9 hereof, an Exchangeable Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Exchangeable Note.

SECTION 2.9    When Exchangeable Notes Owned by the Company or an Affiliate
               are Disregarded.

     In determining whether the holders of the required principal amount of
Exchangeable Notes have concurred in any direction, waiver or consent,
Exchangeable Notes owned by the Company or an Affiliate of the Company shall be
considered as though they are not outstanding except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Exchangeable Notes which a Trust Officer of
the Trustee actually knows are so owned shall be so disregarded.

                                       15


SECTION 2.10   Temporary Exchangeable Notes.

     (a)   Until definitive Exchangeable Notes are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Exchangeable
Notes. Temporary Exchangeable Notes shall be substantially in the form of
definitive Exchangeable Notes but may have variations that the Company considers
appropriate for temporary Exchangeable Notes and shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Exchangeable Notes in exchange for
temporary Exchangeable Notes.

     (b)   A Global Security deposited with the Depositary or with the Trustee
as custodian for the Depositary pursuant to Section 2.1 shall be transferred to
the beneficial owners thereof in the form of certificated Exchangeable Notes in
definitive form only if such transfer complies with Section 2.6 and (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time such Depositary ceases to
be a "clearing agency" registered under the Exchange Act and a successor
Depositary is not appointed by the Company within 90 days of such notice, or
(ii) an Event of Default has occurred and is continuing.

     (c)   Any Global Security or interest therein that is transferable to the
beneficial owners thereof in the form of certificated Exchangeable Notes in
definitive form shall, if held by the Depository, be surrendered by the
Depositary to the Trustee, without charge, and the Trustee shall authenticate
and deliver, upon such transfer of each portion of such Global Security, an
equal aggregate principal amount of Exchangeable Notes of authorized
denominations in the form of certificated Exchangeable Notes in definitive form.
Any portion of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the Depositary shall
direct. Any Exchangeable Notes in the form of certificated Exchangeable Notes in
definitive form delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.6(c), bear the Restricted
Securities Legend set forth in Exhibit A hereto.

     (d)   Prior to any transfer pursuant to Section 2.10(b), the registered
holder of a Global Security may grant proxies and otherwise authorize any
person, including Agent Members and persons that may hold interests through
Agent Members, to take any action which a holder is entitled to take under this
Indenture or the Exchangeable Notes.

SECTION 2.11   Cancellation.

     The Company at any time may deliver Exchangeable Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Exchangeable Notes surrendered to them for registration of transfer, exchange
for other Exchangeable Notes, payment, replacement, repurchase or cancellation.
The Trustee and no one else may cancel Exchangeable Notes surrendered for
registration of transfer, exchange for other Exchangeable Notes, payment,
replacement, repurchase or cancellation. The Trustee shall dispose of canceled
Exchangeable Notes in accordance with its then customary procedures, unless the
Company shall request in writing that such cancelled Exchangeable Notes be
delivered to it. The Company may

                                       16


not issue new Exchangeable Notes to replace Exchangeable Notes that it has paid
or repurchased or that have been delivered to the Trustee for cancellation or
that any holder has (i) exchanged pursuant to Article 12 hereof or (ii)
submitted for repurchase pursuant to Section 4.6 hereof (unless revoked).

SECTION 2.12   Defaulted Interest.

     If the Company fails to make a payment of interest on the Exchangeable
Notes, it shall pay such defaulted interest plus, to the extent lawful, any
interest payable on the defaulted interest. It may pay such defaulted interest,
plus any such interest payable on it, to the persons who are holders of
Exchangeable Notes on a subsequent special record date. The Company shall fix
any such record date and payment date. At least 15 days before any such record
date, the Company shall mail to holders of the Exchangeable Notes a notice that
states the record date, payment date and amount of such interest to be paid.

SECTION 2.13   CUSIP Number.

     The Company in issuing the Exchangeable Notes may use a "CUSIP" number, and
if so, such CUSIP number shall be included in notices of repurchase as a
convenience to holders of Exchangeable Notes; PROVIDED, HOWEVER, that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Exchangeable Notes
and that reliance may be placed only on the other identification numbers printed
on the Exchangeable Notes; and PROVIDED FURTHER that neither the Trustee nor any
Registrar shall have any liability as to the correctness or accuracy of any
CUSIP number so printed in the notice. The Company will promptly notify the
Trustee of any change in the CUSIP number.

SECTION 2.14   Regulation S.

     The Company agrees that it will refuse to register any transfer of
Exchangeable Notes or any shares of Common Stock issued upon exchange of
Exchangeable Notes that is not made in accordance with the provisions of
Regulation S under the Securities Act, pursuant to a registration statement
which has been declared effective under the Securities Act or pursuant to an
available exemption from the registration requirements of the Securities Act;
provided that the provisions of this paragraph shall not be applicable to any
Exchangeable Notes which do not bear a Restricted Securities Legend or to any
shares of Common Stock evidenced by certificates which do not bear a Restricted
Common Stock Legend.

                                    ARTICLE 3

                                   REDEMPTION

SECTION 3.1    Optional Redemption Prices.

     The Exchangeable Notes are not redeemable before April 1, 2005. At any time
or from time to time on or after April 1, 2005 (any such date being a
"Redemption Date"), the Company may redeem some or all of the Exchangeable Notes
at prices set forth below (expressed as percentages of principal amount (the
"Redemption Price")) plus accrued and unpaid interest and

                                       17


Liquidated Damages, if any (if the Redemption Date is also an Interest Payment
Date, accrued interest and Liquidated Damages, if any, will be paid to the
holder of record on the preceding Record Date rather than included in the
Redemption Price), on the notes redeemed, to (but excluding) the applicable
redemption date, if redeemed during the twelve-month period beginning on April 1
of the following years:



         Year                                           Redemption Price
         ----                                           ----------------
                                                          
         2005                                                102.036%
         2006                                                101.357%
         2007                                                100.679%
         2008 and thereafter                                 100.000%


SECTION 3.2    Notices to Trustee.

     If the Company elects to redeem the Exchangeable Notes pursuant to the
provisions of Section 3.1 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before the Redemption Date, an Officers'
Certificate setting forth the Section of this Indenture pursuant to which the
redemption shall occur, the Redemption Date, the principal amount of the
Exchangeable Notes to be redeemed and the Redemption Price.

     If the Registrar is not the Trustee, the Company shall, concurrently with
each notice of redemption or repurchase, cause the Registrar to deliver to the
Trustee a certificate (upon which the Trustee may conclusively rely) setting
forth the principal amounts of the Exchangeable Notes held by each Holder.

SECTION 3.3    Selection by Trustee of Exchangeable Notes to be Redeemed.

     If less than all of the Exchangeable Notes are to be redeemed, the Trustee
shall select the Exchangeable Notes or portions thereof to be redeemed in
compliance with the requirements of the principal national securities exchange,
if any, on which the Exchangeable Notes are listed or, if the Exchangeable Notes
are not listed on a national securities exchange, by lot, pro rata or by such
other method as the Trustee shall deem fair and reasonable. In the event of
partial redemption by lot, the particular Exchangeable Notes or portions thereof
to be redeemed shall be selected, unless otherwise provided herein, not less
than 35 nor more than 60 days prior to the Redemption Date by the Trustee from
the outstanding Exchangeable Notes not previously called for redemption.

     The Trustee shall promptly notify the Company in writing of the
Exchangeable Notes or portions thereof selected for redemption and, in the case
of any Note selected for partial redemption, the principal amount thereof to be
redeemed. Exchangeable Notes and portions thereof selected shall be in amounts
of $1,000 or integral multiples of $1,000; except that if all of the
Exchangeable Notes of a Holder are to be redeemed, the entire outstanding amount
of Exchangeable Notes held by such Holder, even if not a multiple of $1,000,
shall be redeemed.

SECTION 3.4    Notice of Redemption.

     In the event the Exchangeable Notes are to be redeemed pursuant to Section
3.1 hereof, at least 30 days but not more than 60 days before the Redemption
Date, the Trustee shall mail a

                                       18


notice of redemption to each Holder whose Exchangeable Notes are to be redeemed
in whole or in part.

          The notice shall identify the Exchangeable Notes or portions thereof
(including (CUSIP number(s)) to be redeemed and shall state:

               (a) the Redemption Date;

               (b) the Redemption Price;

               (c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, upon surrender of such Note, a new Exchangeable Note or Exchangeable Notes
in principal amount equal to the unredeemed portion will be issued;

               (d) the name and address of the Paying Agent;

               (e) that the Exchangeable Notes called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price, Liquidated
Damages, if any, and, unless the Redemption Date is after a record date and or
before the succeeding interest payment date, accrued interest thereon to the
Redemption Date;

               (f) that, unless the Company defaults in making the redemption
payment, interest and any Liquidated Damages on the Exchangeable Notes called
for redemption will cease to accrue on and after the Redemption Date, and the
only remaining right of the Holders of such Exchangeable Notes is to receive
payment of the Redemption Price, any Liquidated Damages and, unless the
Redemption Date is after a record date and on or before the succeeding interest
payment date, accrued interest thereon to the Redemption Date upon surrender to
the Paying Agent of the Exchangeable Notes redeemed;

               (g) that in the case of a Redemption Date that is also an
Interest Payment Date, the interest payment and Liquidated Damages, if any, due
on such date shall be paid to the person in whose name the Exchangeable Note is
registered at the close of business on the Record Date immediately preceding
such Interest Payment Date;

               (h) if fewer than all the Exchangeable Notes are to be redeemed,
the identification of the particular Exchangeable Notes (or portions thereof) to
redeemed, as well as the aggregate principal amount of the Exchangeable Notes to
be redeemed and the aggregate principal amount of the Exchangeable Notes to be
outstanding after such partial redemption; and

               (i) the paragraph of the Exchangeable Notes pursuant to which the
Exchangeable Notes called for redemption are being redeemed.

          The Company shall deliver to the Trustee, at least 40 days prior to
the Redemption Date, an Officers' Certificate setting forth the information to
be stated in such notice as provided in the preceding paragraph.

                                       19


SECTION 3.5    Effect of Notice of Redemption.

     Once notice of redemption is mailed, Exchangeable Notes or portions thereof
called for redemption become due and payable on the Redemption Date at the
Redemption Price. Upon surrender to any Paying Agent, such Exchangeable Notes or
portions thereof shall be paid at the Redemption Price, plus Liquidated Damages,
if any, and accrued interest to the Redemption Date.

     Notwithstanding any other provision of this Indenture to the contrary, if
the Redemption Date is on or after the Record Date but prior to the related
Interest Payment Date, no payment of interest will be made to the holder of
record on the Interest Payment Date with respect to any Note redeemed but rather
will be included in the Redemption Price as described above.

SECTION 3.6    Deposit of Redemption Price.

     On or before 10 a.m., New York City time, each Redemption Date, the Company
shall irrevocably deposit with the Trustee or with the Paying Agent money
sufficient to pay the aggregate amount due on all Exchangeable Notes to be
redeemed on that date, including without limitation any accrued and unpaid
interest and Liquidated Damages, if any, to the Redemption Date. Upon written
request by the Company, the Trustee or the Paying Agent shall promptly return to
the Company any money not required for that purpose.

     Unless the Company defaults in making such payment, interest and any
Liquidated Damages on the Exchangeable Notes to be redeemed will cease to accrue
on the applicable Redemption Date, whether or not such Exchangeable Notes are
presented for payment. If any Note called for redemption shall not be so paid
upon surrender because of the failure of the Company to comply with the
preceding paragraph, interest will be paid on the unpaid principal, from the
applicable Redemption Date until such principal is paid, and on any interest not
paid on such unpaid principal, in each case at the rate provided in the
Exchangeable Notes and in Section 4.1 hereof.

SECTION 3.7    Securities Redeemed in Part.

     Upon surrender of a Note that is redeemed in part, the Company shall issue
and the Trustee shall authenticate for the Holder at the expense of the Company
a new Note equal in principal amount to portion of the Note surrendered that is
not to be redeemed or repurchased.

                                    ARTICLE 4

                                    COVENANTS

SECTION 4.1    Payment of Exchangeable Notes.

     The Company shall pay the principal of and interest (including Liquidated
Damages payable by it, if any, and Navistar will pay Liquidated Damages payable
by it, if any) on the Exchangeable Notes on the dates and in the manner provided
in the Exchangeable Notes. Principal, interest and the Fundamental Change
Payment shall be considered paid on the date due if the Trustee or Paying Agent
(other than the Company or a subsidiary of the Company) holds

                                       20


as of 10:00 a.m., New York City time, on that date immediately available funds
designated for and sufficient to pay all principal, interest (including
Liquidated Damages) or the Fundamental Change Payment then due. To the extent
lawful, the Company shall pay interest (including post- petition interest in any
proceeding under any Bankruptcy Law) on (i) overdue principal, at the rate borne
by Exchangeable Notes, compounded semiannually; and (ii) overdue installments of
interest (without regard to any applicable grace period) at the same rate,
compounded semiannually.

     Notwithstanding any other provision of this Indenture, it shall solely be
the obligation of Navistar to pay the portion of the Liquidated Damages payable
by it and the Company shall have no obligation to pay and no liability for the
nonpayment of such amounts, and in the event the Company shall pay any such
amounts, Navistar shall be obligated to repay the Company for such payments.

SECTION 4.2    Rule 144A Information; Periodic Reports to the Trustee.

     So long as any of the Exchangeable Notes or shares of Common Stock issuable
upon exchange of the Exchangeable Notes are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, each of the Company and
Navistar will, during any period in which it is not subject to and in compliance
with Section 13 or Section 15(d) of the Exchange Act, provide to each holder and
beneficial owner of such restricted securities and to each prospective purchaser
(as designated by such holder or beneficial owner) of such restricted
securities, upon the request of such holder or beneficial owner or prospective
purchaser, any information required to be provided by Rule 144A(d)(4) under the
Securities Act.

     The Company shall provide to the Trustee such documents, reports and
information as required by TIA Section 314 (if any) in the form, in the manner
and at the times required by TIA Section 314. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).

SECTION 4.3    Compliance Certificate.

     The Company and Navistar each shall deliver to the Trustee within 120 days
after the end of its respective fiscal year, an Officers' Certificate stating
that neither of the signers thereof has any knowledge, after due investigation
during the preceding fiscal year made under the supervision of the signing
officers, of any Default or Event of Default (or, if any Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge). As of the date hereof, the fiscal year
of each of the Company and Navistar ends on October 31.

     The Company shall, so long as any of the Exchangeable Notes are
outstanding, deliver to the Trustee, forthwith upon becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto.

                                       21


SECTION 4.4    Maintenance of Office or Agency.

     The Company shall maintain or cause to be maintained the office or agency
required under Section 2.3. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency not maintained by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, presentations, surrenders, notices and demands with
respect to the Exchangeable Notes may be made or served at the Corporate Trust
Office of the Trustee.

     The Company may also from time to time designate one or more other offices
or agencies where the Exchangeable Notes may be presented or surrendered for any
or all such purposes and may from time to time rescind such designation.

SECTION 4.5    Continued Existence.

     Subject to Article 5, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence.

SECTION 4.6    Repurchase Upon Fundamental Change.

     Following a Fundamental Change (the date of each such occurrence being the
"Fundamental Change Date") prior to the Maturity Date, the Company shall notify
the Trustee, and the Trustee shall notify holders of Exchangeable Notes in
writing, of such occurrence and shall make an offer (the "Fundamental Change
Offer") to repurchase all Exchangeable Notes then outstanding at a repurchase
price in cash (the "Fundamental Change Payment") equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any
(if the Fundamental Change Payment Date is also an Interest Payment Date,
accrued and unpaid interest and Liquidated Damages, if any, will be paid to the
holder of record of the Note on the Record Date rather than included in the
Fundamental Change Payment), to, but excluding, the Fundamental Change Payment
Date (as defined below).

     Notice of a Fundamental Change shall be mailed by the Trustee to the
holders of Exchangeable Notes as shown on the Register and to beneficial owners
as required by law not more than 30 days after the applicable Fundamental Change
Date at the addresses as shown on the Register of holders maintained by the
Registrar, with a copy to the Paying Agent. During the period specified in such
notice, holders of Exchangeable Notes may elect to tender their Exchangeable
Notes in whole or in part in integral multiples of $1,000 in exchange for cash.
Payment shall be made by the Company in respect of Exchangeable Notes properly
tendered pursuant to this Section on or before the day (the "Fundamental Change
Payment Date") which shall be the sixtieth day after the date of the notice of
the applicable Fundamental Change.

     The notice, which shall govern the terms of the Fundamental Change Offer,
shall include such disclosures as are required by law and shall state:

     (a)   that a Fundamental Change Offer is being made pursuant to this
Section 4.6 and that all Exchangeable Notes will be accepted for payment;

                                       22


     (b)   a brief description of the event, transaction or transactions that
constitute the Fundamental Change;

     (c)   the Fundamental Change Payment for each Exchangeable Note and the
Fundamental Change Payment Date;

     (d)   that any Exchangeable Note not accepted for payment will continue to
accrue interest and Liquidated Damages, if applicable, in accordance with the
terms thereof;

     (e)   that, unless the Company defaults on making the Fundamental Change
Payment, any Exchangeable Note accepted for payment pursuant to the Fundamental
Change Offer shall cease to accrue interest and Liquidated Damages, if
applicable, on the Fundamental Change Payment Date and no further interest or
Liquidated Damages shall accrue on or after such date;

     (f)   that holders electing to have Exchangeable Notes repurchased pursuant
to a Fundamental Change Offer will be required to deliver, no later than the
sixtieth day after the date of the notice described in this paragraph, a
repurchase notice electing to require the Company to repurchase all or some
portion of the Exchangeable Notes held by such holder, which notice shall state
(i) the name of the holder, (ii) the principal amount of Exchangeable Notes the
holder is delivering for purchase which must be $1,000 or an integral multiple
thereof and (iii) the Exchangeable Note certificate number (if any);

     (g)   that holders of Exchangeable Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York City
time, on the Fundamental Change Payment Date, a facsimile transmission or letter
setting forth (i) the name of the holder, (ii) the principal amount of
Exchangeable Notes the holder delivered for purchase, (iii) the Exchangeable
Note certificate number (if any) delivered, (iv) a statement that such holder is
withdrawing his election to have such Exchangeable Notes purchased, (v) the
principal amount of Exchangeable Notes being withdrawn, (vi) the Exchangeable
Note certificate number (if any) being withdrawn and (vii) the principal amount
of Exchangeable Notes that remains subject to the Fundamental Change Offer, if
any;

     (h)   that holders whose Exchangeable Notes are repurchased only in part
will be issued Exchangeable Notes equal in principal amount to the unpurchased
portion of the Exchangeable Notes surrendered provided that the unpurchased
portion shall be in an authorized denomination;

     (i)   the instructions that holders must follow in order to tender their
Exchangeable Notes; and

     (j)   that in the case of a Fundamental Change Payment Date that is also an
Interest Payment Date, the interest payment and Liquidated Damages, if any, due
on such date shall be paid to the person in whose name the Exchangeable Note is
registered at the close of business on the Record Date immediately preceding
such Interest Payment Date.

     Notwithstanding any other provision of this Indenture to the contrary, if
the Fundamental Change Payment Date is on or after the Record Date but prior to
the related Interest Payment Date, no payment of interest will be made to the
holder of record on the Interest Payment Date

                                       23


with respect to any Note redeemed but rather will be included in the Fundamental
Change Payment as described above.

     On the Fundamental Change Payment Date, the Company shall accept for
payment all Exchangeable Notes or portions thereof properly tendered pursuant to
the Fundamental Change Offer. Prior to 10:00 a.m. (local time in The City of New
York) on the business day following the Fundamental Change Payment Date, the
Company shall deposit with the Paying Agent money sufficient to pay the
Fundamental Change Payment with respect to all Exchangeable Notes or portions
thereof so tendered and accepted and deliver or cause to be delivered to the
Trustee the Exchangeable Notes so accepted together with an Officers'
Certificate setting forth the aggregate principal amount of Exchangeable Notes
or portions thereof tendered to and accepted for payment by the Company.
Promptly following the Fundamental Change Payment Date, the Paying Agent shall
mail or deliver the Fundamental Change Payment to the holders of Exchangeable
Notes so accepted and the Trustee shall as soon as reasonably practicable
authenticate and mail or cause to be transferred by book entry to such holders a
new Exchangeable Note equal in principal amount to any unpurchased portion of
the Exchangeable Note surrendered, if any; provided that such new Exchangeable
Notes will be in a principal amount of $1,000 or an integral multiple thereof.
Any Exchangeable Notes not so accepted shall be promptly mailed or delivered by
the Company to the holder thereof.

     In the case of any reclassification, change, consolidation, merger, share
exchange, combination or sale or conveyance to which Section 12.6 applies in
which the Common Stock of Navistar is changed or exchanged into the right to
receive stock, securities or other property or assets (including cash) which
includes shares of common stock of Navistar or another person that are, or upon
issuance will be, traded on a United States national securities exchange or
approved for trading on an established automated over- the-counter trading
market in the United States and such shares constitute at the time such change
or exchange becomes effective in excess of 90% of the aggregate fair market
value of such stock, securities or other property and assets (including cash)
(as determined by the Company, which determination shall be conclusive and
binding), then the person formed by such consolidation or resulting from such
merger or share exchange or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (which shall
comply with the TIA as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
holders of Exchangeable Notes to cause the Company to repurchase Exchangeable
Notes following a Fundamental Change, including the applicable provisions of
this Section 4.6 and the definitions of Fundamental Change, Change of Control
and Termination of Trading, as appropriate, as determined in good faith by the
Company (which determination shall be conclusive and binding), to make such
provision apply to such common stock and the issuer thereof if different from
Navistar and Common Stock of Navistar (in lieu of Navistar and the Common Stock
of Navistar).

     There shall be no purchase of any Exchangeable Notes pursuant to this
Section 4.6 if there has occurred (prior to, on or after, as the case may be,
the giving, by the holders of such Exchangeable Notes, of the required
Fundamental Change repurchase notice) and is continuing, an Event of Default
(other than a default in the payment of the Fundamental Change Payment with
respect to such Exchangeable Notes). The Paying Agent will promptly return to
the respective holders any Exchangeable Notes (x) with respect to which a
Fundamental Change

                                       24


repurchase notice has been withdrawn in compliance with this Indenture or (y)
held by it during the continuance of an Event of Default (other than a default
in the payment of the Fundamental Change Payment with respect to such
Exchangeable Notes) in which case upon such return the Fundamental Change
repurchase notice with respect thereto shall be deemed to have been withdrawn.

     The Fundamental Change Offer shall be made by the Company in compliance
with all applicable provisions of the Exchange Act, and all applicable tender
offer rules promulgated thereunder, to the extent such laws and regulations are
then applicable and shall include all instructions and materials that the
Company shall reasonably deem necessary to enable such holders of Exchangeable
Notes to tender their Exchangeable Notes.

SECTION 4.7    Appointments to Fill Vacancies in Trustee's Office.

     The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 7.8, a Trustee, so that
there shall at all times be a Trustee hereunder.

SECTION 4.8    Stay, Extension and Usury Laws.

     The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter enforced, that may affect the Company's
obligation to pay the Exchangeable Notes; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law insofar as such law applies to the Exchangeable Notes, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.

SECTION 4.9    Taxes.

     The Company shall, and shall cause each of its subsidiaries to, pay prior
to delinquency all taxes, assessments and government levies; provided, however,
that the Company shall not be required to pay or cause to be paid any such tax,
assessment or levy (A) if the failure to do so will not, in the aggregate, have
a material adverse impact on the Company and its subsidiaries taken as a whole,
or (B) if the amount, applicability or validity is being contested in good faith
by appropriate proceedings.

SECTION 4.10   Investment Company Act.

     As long as any Exchangeable Notes are outstanding, the Company will conduct
its business and operations so as not to become an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and will take all steps required in order for it to continue not
to be an "investment company" and not to be required to be registered under the
Investment Company Act, including, if necessary, redeployment of the assets of
the Company.

                                       25


                                    ARTICLE 5

                                   SUCCESSORS

SECTION 5.1    When the Company and Navistar May Merge, Etc.

     Neither the Company nor Navistar shall, in a single transaction or series
of related transactions, consolidate or merge with or into, or effect a share
exchange with (whether or not it is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets as an entirety or substantially as an entirety to, any
person or entity (other than to one or more direct or indirect wholly-owned
subsidiaries or, in the case of Navistar, in a Permitted Joint Venture, or, in
the case of the Company, other than receivables and related assets or interests
therein in connection with a Qualified Securitization Transaction) unless:

     (a)  either

          (i)  it shall be the surviving or continuing corporation or

          (ii) the entity or person (or its parent) formed by or surviving any
such consolidation or share exchange or into which the Company or Navistar is
merged (if other than the Company or Navistar) or the entity or person (or its
parent) which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company as an entirety or
substantially as an entirety

          (1)  shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and

          (2)  shall expressly assume, by supplemental indenture in form
reasonably satisfactory to the Trustee, executed and delivered to the Trustee,
the due and punctual payment of the principal of, and interest and Liquidated
Damages, if any, on, all of the Exchangeable Notes and the performance of every
covenant of the Exchangeable Notes and this Indenture and the Registration
Agreement on the part of the Company to be performed or observed, including,
without limitation, modifications to rights of holders to cause the repurchase
of Exchangeable Notes upon a Fundamental Change in accordance with the
penultimate paragraph of Section 4.6 and exchange rights in accordance with
Section 12.6 to the extent required by such Sections;

     (b)  immediately after giving effect to such transaction no Default and no
Event of Default shall have occurred and be continuing; and

     (c)  it or such person shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger, share exchange, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with this provision of this Indenture and that all conditions
precedent in this Indenture relating to such transaction have been satisfied.

     For purposes of this Section 5.1, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of

                                       26


one or more subsidiaries of the Company or Navistar, the capital stock of which
constitutes all or substantially all of the properties and assets of the Company
or Navistar, shall be deemed to be the transfer of all or substantially all of
the properties and assets of the Company or Navistar.

SECTION 5.2    Successor Corporation Substituted.

     Upon any such consolidation, merger, share exchange, sale, assignment,
conveyance, lease, transfer or other disposition in accordance with Section 5.1,
the successor person formed by such consolidation, or share exchange or into
which the Company or Navistar is merged or to which such assignment, conveyance,
lease, transfer or other disposition is made will succeed to, and be substituted
for, and may exercise every right and power of, the Company or Navistar under
this Indenture with the same effect as if such successor had been named as the
Company therein, and thereafter (except in the case of a sale, assignment,
transfer, lease, conveyance or other disposition) the predecessor corporation
will be relieved of all further obligations and covenants under this Indenture
and the Exchangeable Notes.

SECTION 5.3    Purchase Option on Fundamental Change.

     This Article 5 does not affect the obligations of the Company (including
without limitation any successor to the Company) under Section 4.6.

                                    ARTICLE 6

                              DEFAULTS AND REMEDIES

SECTION 6.1    Events of Default.

     An "Event of Default" with respect to any Exchangeable Notes occurs if:

     (a)  the Company defaults in the payment of principal of the
Exchangeable Notes when due at maturity, upon repurchase, upon acceleration or
otherwise;

     (b)  the Company or Navistar defaults in the payment of any installment
of interest or Liquidated Damages on the Exchangeable Notes when due (including
any interest or Liquidated Damages payable in connection with a repurchase
pursuant to Section 4.6) and continuance of such default for 30 days or more; or

     (c)  the Company defaults (other than a default set forth in clauses
(a) and (b) above and clauses (d) and (e) below) in the performance of, or
breaches, any other covenant or warranty of the Company set forth in this
Indenture or the Exchangeable Notes and fails to remedy such default or breach
within a period of 60 days after the receipt of written notice from the Trustee
or the holders of at least 25% in aggregate principal amount of the then
outstanding Exchangeable Notes; or

     (d)  the Company defaults in the payment of the Fundamental Change
Payment in respect of the Exchangeable Notes on the date therefor; or

                                       27


     (e)  the Company fails to provide timely notice of any Fundamental
Change in accordance with Section 4.6; or

     (f)  the Company, pursuant to or within the meaning of any Bankruptcy Law:

        (i)   commences a voluntary case,

        (ii)  consents to the entry of an order for relief against it in
an involuntary case,

        (iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property,

        (iv)  makes a general assignment for the benefit of its creditors;

        (v)   makes the admission in writing that it generally is unable to
pay its debts as the same become due;

     (g)  a court of competent jurisdiction enters a judgment, order or
decree under any Bankruptcy Law that:

        (i)   is for relief against the Company in an involuntary case,

        (ii)  appoints a Custodian of the Company, or

        (iii) orders the liquidation of the Company,

and in any case, the order or decree remains unstayed and in effect for 90 days;
or

     (h)  the Company or any of its subsidiaries fails to pay, at final
maturity, indebtedness (other than indebtedness incurred in connection with a
Qualified Securitization Transaction) that is in excess of $50 million principal
amount, or acceleration resulting from an Event of Default of any indebtedness
(other than indebtedness incurred in connection with a Qualified Securitization
Transaction) of the Company or any of its subsidiaries in an aggregate principal
amount in excess of $50 million.

     The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.

SECTION 6.2    Acceleration.

     If an Event of Default (other than an Event of Default with respect to the
Company specified in clauses (f) and (g) of Section 6.1) occurs and is
continuing, then and in every such case the Trustee, by written notice to the
Company, or the holders of at least 25% in aggregate principal amount of the
then outstanding Exchangeable Notes, by written notice to the Company and the
Trustee, may declare the unpaid principal of, and accrued and unpaid interest
and Liquidated Damages, if any, on, all the Exchangeable Notes then outstanding
to be due and payable. Upon such declaration such principal amount, and accrued
and unpaid interest and

                                       28


Liquidated Damages, if any, shall become immediately due and payable,
notwithstanding anything contained in this Indenture or the Exchangeable Notes
to the contrary. If any Event of Default with respect to the Company specified
in clauses (f) or (g) of Section 6.1 occurs, all unpaid principal of and
premium, if any, and accrued and unpaid interest and Liquidated Damages, if any,
on the Exchangeable Notes then outstanding shall become automatically due and
payable without any declaration or other act on the part of the Trustee or any
holder of Exchangeable Notes.

     The Holders of a majority in aggregate principal amount of the then
outstanding Exchangeable Notes by notice to the Trustee may rescind an
acceleration of the Exchangeable Notes and its consequences if all existing
Events of Default (other than nonpayment of principal of or interest and
Liquidated Damages, if any, on the Exchangeable Notes which has become due
solely by virtue of such acceleration) have been cured or waived, the amounts
payable to the Trustee under Section 7.7 shall have been paid and if the
rescission would not conflict with any judgment or decree of any court of
competent jurisdiction. No such rescission shall affect any subsequent Default
or Event of Default or impair any right consequent thereto.

SECTION 6.3    Other Remedies.

     If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of or interest or Liquidated Damages, if applicable, on the
Exchangeable Notes or to enforce the performance of any provision of the
Exchangeable Notes or this Indenture. The Trustee may maintain a proceeding even
if it does not possess any of the Exchangeable Notes or does not produce any of
them in the proceeding. A delay or omission by the Trustee or any holder of an
Exchangeable Note in exercising any right or remedy occurring upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. All remedies are cumulative to the extent
permitted by law.

SECTION 6.4    Waiver of Past Defaults.

     The holders of a majority in aggregate principal amount of the Exchangeable
Notes then outstanding may, on behalf of the holders of all the Exchangeable
Notes, waive an existing Default or Event of Default and its consequences,
except a Default or Event of Default in the payment of the principal of or
interest or Liquidated Damages, if any, on the Exchangeable Notes (other than
the non-payment of principal of and interest and Liquidated Damages, if any, on
the Exchangeable Notes which has become due solely by virtue of an acceleration
which has been duly rescinded as provided above), or in respect of a covenant or
provision of this Indenture which cannot be modified or amended without the
consent of all holders of Exchangeable Notes. When a Default or Event of Default
is waived, it is cured and stops continuing. No waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.

SECTION 6.5    Control by Majority.

     The holders of a majority in aggregate principal amount of the then
outstanding Exchangeable Notes may direct the time, method and place of
conducting any proceeding for

                                       29


any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other holders of Exchangeable Notes or that may involve the
Trustee in personal liability; provided that the Trustee shall have no duty or
obligation (subject to Section 7.1) to ascertain whether or not such actions or
forbearances are unduly prejudicial to such holders; provided, further, that the
Trustee may take any other action the Trustee deems proper that is not
inconsistent with such directions.

SECTION 6.6    Limitation on Suits.

     A holder of an Exchangeable Note may not pursue any remedy with respect to
this Indenture or the Exchangeable Notes unless:

          (1)  the holder gives to the Trustee notice of a continuing Event of
Default;

          (2)  the holders of at least 25% in principal amount of the then
outstanding Exchangeable Notes make a request to the Trustee to pursue the
remedy;

          (3)  such holder or holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense;

          (4)  the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and

          (5)  during such 60-day period the holders of a majority in principal
amount of the then outstanding Exchangeable Notes do not give the Trustee a
direction inconsistent with the request.

     A holder of an Exchangeable Note may not use this Indenture to prejudice
the rights of another holder or to obtain a preference or priority over another
holder.

SECTION 6.7    Rights of Holders To Receive Payment.

     Notwithstanding any other provision of this Indenture, the right of any
holder of an Exchangeable Note to receive payment of principal, interest and
Liquidated Damages, if any, on the Exchangeable Note, on or after the respective
due dates expressed in the Exchangeable Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, or to bring
suit for the enforcement of the right to exchange the Exchangeable Note shall
not be impaired or affected without the consent of the holder of an Exchangeable
Note.

SECTION 6.8    Collection Suit by Trustee.

     If an Event of Default specified in Section 6.1(a), (b) or (d) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest and Liquidated Damages, if any, remaining unpaid on the Exchangeable
Notes and interest on overdue principal and interest and Liquidated Damages, if
any, and such further amount as shall be sufficient to cover the costs and, to
the extent lawful, expenses of collection, including the reasonable
compensation, expenses,

                                       30



disbursements and advances of the Trustee, its agents and counsel, and all other
amounts due the Trustee under Section 7.7.

SECTION 6.9    Trustee May File Proofs of Claim.

     The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and the
holders of Exchangeable Notes allowed in any judicial proceedings relative to
the Company, its creditors or its property. The Trustee shall be entitled and
empowered, by intervention in such proceeding or otherwise:

     (a)  to file and prove a claim for the whole amount of the principal
of, and interest and Liquidated Damages, if any, on, the Exchangeable Notes and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and all other amounts due the Trustee under Section 7.7.) and of the
holders of the Exchangeable Notes allowed in such judicial proceedings; and

     (b)  to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any Custodian in
any such judicial proceeding is hereby authorized by each holder of Exchangeable
Notes to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the holder of
Exchangeable Notes, to pay the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7.

     Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any holder of an
Exchangeable Note any plan of reorganization, arrangement, adjustment or
composition affecting the Exchangeable Notes or the rights of any holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
holder in any such proceeding.

SECTION 6.10   Priorities.

     If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:

               First: to the Trustee for amounts due under Section 7.7,
               including payment of all compensation, expenses and liabilities
               incurred, and all advances made, by the Trustee, and the costs
               and expenses of collection;

               Second: to holders of Exchangeable Notes for amounts due and
               unpaid on the Exchangeable Notes for principal, interest and
               Liquidated Damages, if any, ratably, without preference or
               priority of any kind, according to the amounts due and payable on
               the Exchangeable Notes for principal, interest and Liquidated
               Damages, if any, respectively; and

                                       31


               Third: to the Company.

     Except as otherwise provided in Section 2.12, the Trustee may fix a record
date and payment date for any payment to holders of Exchangeable Notes.

SECTION 6.11   Undertaking for Costs.

     In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit, other than the Trustee, of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a suit
by a holder pursuant to Section 6.7 or a suit by holders of more than 10% in
principal amount of the then outstanding Exchangeable Notes.

                                    ARTICLE 7

                                   THE TRUSTEE

     The Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed. Whether or not
herein expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Article 7.

SECTION 7.1    Duties of the Trustee.

     (a)  If an Event of Default known to a Trust Officer of the Trustee has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

     (b)  Except during the continuance of an Event of Default known to the
Trustee:

           (1)  The duties of the Trustee shall be determined solely by the
express provisions of this Indenture, and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and

           (2)  In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any statements, certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture (but shall not be required to
confirm or investigate the accuracy of mathematical calculations or other facts
stated therein).

                                       32


     (c)  The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:

           (1)  This paragraph does not limit the effect of paragraph (b) or
paragraph (e) of this Section;

           (2)  The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer or any other officer of the Trustee to
whom such matter is referred, because of such person's knowledge of and
familiarity with the particular subject, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and

           (3)  The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 6.5.

     (d)  Whether or not therein expressly so provided, every provision of
this Indenture that is in any way related to the Trustee is subject to
paragraphs (a), (b), (c) and (e) of this Section 7.1.

     (e)  No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties or the exercise of any of its rights and powers
hereunder, if it shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk of liability is not
reasonably assured to it.

     (f)  The Trustee shall not be liable for interest on or the investment
of any money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.

SECTION 7.2    Rights of the Trustee.

     (a)  The Trustee may conclusively rely on and shall be protected in
acting or refraining from acting upon any resolution, Officers' Certificate, or
any other certificate, statement, instrument, opinion, report, notice, request,
consent, order, security or other document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter contained therein.

     (b)  Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof is herein specifically prescribed). In addition,
before the Trustee acts or refrains from acting, it may require an Officers'
Certificate, an Opinion of Counsel or both. The Trustee shall not be liable for
any action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel. The Trustee may consult with counsel of its
selection and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.

     (c)  The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through attorneys and
agents and other persons not

                                       33


regularly in its employ and shall not be responsible for the misconduct or
negligence of any attorney or agent appointed with due care.

     (d)  The Trustee shall not be liable for any action it takes or omits
to take in good faith without negligence or willful misconduct which it believes
to be authorized or within its discretion, rights or powers.

     (e)  Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
Officers of the Company.

     (f)  The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.

     (g)  The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the holders of Exchangeable Notes pursuant to the provisions of this
Indenture, unless such holders have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities which might be
incurred therein or thereby.

     (h)  The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, security or other document
unless requested in writing to do so by the holders of not less than a majority
in aggregate principal amount of the Exchangeable Notes then outstanding,
provided that if the Trustee determines in its discretion to make any such
investigation, then it shall be entitled, upon reasonable prior notice and
during normal business hours, to examine the books and records and the premises
of the Company, personally or by agent or attorney, and the reasonable expenses
of every such examination shall be paid by the Company or, if paid by the
Trustee or any predecessor Trustee, shall be reimbursed by the Company upon
demand.

     (i)  The permissive rights of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful misconduct.

     (j)  The Trustee shall not be responsible for the computation of any
adjustment to the Exchange Price or for any determination as to whether an
adjustment is required and shall not be deemed to have knowledge of any
adjustment unless and until it shall have received the notice from the Company
contemplated by Section 12.5(j).

     (k)  The rights, privileges, protections, immunities and benefits given to
the Trustee, including, but not limited to, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, whether as Agent or otherwise, and to each Agent, custodian and other
person employed to act hereunder.

SECTION 7.3    Individual Rights of the Trustee.

     Subject to Sections 7.10 and 7.11, the Trustee in its individual or any
other capacity may become the owner or pledgee of Exchangeable Notes with the
same rights it would have if it

                                       34


were not the Trustee and may otherwise deal with the Company or an Affiliate of
the Company and receive, collect, hold and retain collections from the Company
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.

SECTION 7.4    Trustee's Disclaimer.

     The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Exchangeable Notes. It shall
not be accountable for the Company's use of the proceeds from the Exchangeable
Notes or any money paid to the Company or upon the Company's direction under any
provision of this Indenture. It shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Exchangeable Notes or any other document in connection with the
sale of the Exchangeable Notes or pursuant to this Indenture other than its
certificate of authentication.

SECTION 7.5    Notice of Defaults.

     If a Default or Event of Default occurs and is continuing and if it is
known to a Trust Officer of the Trustee, the Trustee shall mail to each holder
of an Exchangeable Note a notice of the Default or Event of Default within 60
days after such Default or Event of Default occurs. A Default or an Event of
Default shall not be considered known to a Trust Officer of the Trustee unless
it is a Default or Event of Default in the payment of principal or interest when
due under Section 6.1(a), (b) (d) or (h) or a Trust Officer of the Trustee shall
have received written notice thereof, in accordance with this Indenture, from
the Company or from the holders of a majority in principal amount of the
outstanding Exchangeable Notes. Except in the case of a Default or Event of
Default in payment of principal or interest or Liquidated Damages, if any, on
any Exchangeable Note, the Trustee may withhold the notice if and so long as a
trust committee of its officers in good faith determines that withholding the
notice is in the interest of the holders of the Exchangeable Notes.

SECTION 7.6    Reports by the Trustee to Holders.

     Within 60 days after the reporting date stated in Section 11.10, the
Trustee shall mail to holders of Exchangeable Notes a brief report dated as of
such reporting date that complies with TIA Section 313(a) (but if no event
described in TIA Section 313(a) has occurred within twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports
as required by TIA Section 313(c).

     A copy of each report at the time of its mailing to holders of Exchangeable
Notes shall be filed, at the expense of the Company, by the Trustee with the
Commission and each stock exchange or securities market, if any, on which the
Exchangeable Notes are listed. The Company shall timely notify the Trustee when
the Exchangeable Notes are listed or quoted on any stock exchange or securities
market and of any delisting thereof.

SECTION 7.7    Compensation and Indemnity.

     The Company shall pay to the Trustee from time to time, and the Trustee
shall be entitled to, such compensation as the Company and the Trustee shall
agree in writing for its acceptance

                                       35


of this Indenture and its services hereunder. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by or on behalf of it in
addition to the compensation for its services. Such expenses may include the
reasonable compensation, disbursements and expenses of the Trustee's agents,
counsel and other persons not regularly in its employ.

     The Company shall indemnify, defend and hold the Trustee and its directors,
officers, employees and agents (collectively with the Trustee the "Indemnitees")
harmless from and against every loss, liability, damages, claim or expense,
including without limitation damages, fines, suits, actions, demands, penalties,
costs, out-of-pocket or incidental expenses, legal fees and expenses, and the
costs and expenses of defending any claim (whether asserted by the Company, a
holder of Exchangeable Notes or any other Person) (collectively, "Losses"), that
may be imposed on, incurred by, or asserted against, any Indemnitee for or in
respect of the Trustee's (i) execution and delivery of this Indenture, (ii)
compliance or attempted compliance with or reliance upon any instruction or
other direction upon which the Trustee is authorized to rely pursuant to the
terms of this Indenture and (iii) performance under this Indenture except as set
forth in the next paragraph. Any Indemnitee shall notify the Company promptly of
any claim for which it may seek indemnity under this Section.

     The Company does not need to reimburse any expense or indemnify against any
Loss incurred by the Trustee or any Indemnitee through its own negligence or
willful misconduct.

     The Trustee shall have a lien prior to the Exchangeable Notes on all money
or property held or collected by the Trustee to secure the Company's payment
obligations in this Section 7.7, except that held in trust to pay principal, the
Redemption Price, interest and Liquidated Damages, if any, on Exchangeable
Notes. Such liens and the Company's obligations under this Section 7.7 shall
survive the termination, satisfaction and discharge of this Indenture and the
resignation or removal of the Trustee for any reason.

     When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(f) or (g) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.

SECTION 7.8    Replacement of the Trustee.

     A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.

     The Trustee may resign at any time and be discharged from the trust hereby
created by so notifying the Company. The holders of a majority in principal
amount of the then outstanding Exchangeable Notes may remove the Trustee by so
notifying the Trustee and the Company in writing and may appoint a successor
Trustee. The Company may remove the Trustee if:

          (1)  the Trustee fails to comply with Section 7.10;

                                       36


          (2)  the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any Bankruptcy
Law;

          (3)  a Custodian or public officer takes charge of the Trustee or
its property; or

          (4)  the Trustee becomes incapable of acting.

     If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the holders
of a majority in principal amount of the then outstanding Exchangeable Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.

     If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the holders of at least 10% in principal amount of the then outstanding
Exchangeable Notes may petition, at the expense of the Company, any court of
competent jurisdiction for the appointment of a successor Trustee.

     If the Trustee after written request by any holder of an Exchangeable Note
who has been a holder for at least six months fails to comply with Section 7.10,
such holder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.

     A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to holders of
Exchangeable Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided that all sums owing to
the retiring Trustee hereunder have been paid and subject to the lien provided
for in Section 7.7. Notwithstanding the replacement of the Trustee pursuant to
this Section 7.8, the Company's obligations under Section 7.7 shall continue for
the benefit of the retiring Trustee with respect to expenses and liabilities
incurred by it prior to such replacement.

     Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
preceding paragraph.

SECTION 7.9    Successor Trustee by Merger, etc.

     If the Trustee consolidates with, merges or exchanges into, or transfers
all or substantially all of its corporate trust business (including the trust
created by this Indenture) to, another person, the resulting, surviving or
transferee person without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.

                                       37


SECTION 7.10   Eligibility, Disqualification.

     This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1). The Trustee shall always have a combined capital and
surplus as stated in Section 11.10. The Trustee is and shall always be subject
to TIA Section 310(b) regarding the disqualification of a trustee upon acquiring
a conflicting interest.

SECTION 7.11   Preferential Collection of Claims Against Company.

     The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship set forth in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.

                                   ARTICLE 8

                     SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 8.1    Discharge of Indenture.

     When (a) the Company delivers to the Trustee for cancellation all
Exchangeable Notes theretofore authenticated (other than any other Exchangeable
Notes which have been destroyed, lost or stolen and in lieu of or in
substitution for which other Exchangeable Notes have been authenticated and
delivered) and not theretofore canceled, or (b) all the Exchangeable Notes not
theretofore canceled or delivered to the Trustee for cancellation have become
due and payable, or by their terms will become due and payable within one year
and the Company deposits with the Trustee, in trust, amounts sufficient to pay
at maturity all of the Exchangeable Notes (other than any Exchangeable Notes
which have been mutilated, destroyed, lost or stolen and in lieu of or in
substitution for which other Exchangeable Notes have been authenticated and
delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal and interest and Liquidated Damages, if any,
due or to become due to such date of maturity, and if in either case the Company
also pays, or causes to be paid, all other sums payable hereunder by the
Company, then this Indenture shall cease to be of further effect (except as to
(i) rights of registration of transfer, substitution, replacement and exchange
and rights to exchange the Exchangeable Notes for Common Stock, (ii) rights
hereunder of holders of Exchangeable Notes to receive payments of principal of
and interest, and Liquidated Damages, if any, on, the Exchangeable Notes, (iii)
the obligations under Sections 2.3 and 8.5 hereof and (iv) the rights,
obligations and immunities of the Trustee hereunder), and the Trustee, on demand
of the Company accompanied by an Officers' Certificate and an Opinion of Counsel
as required by Section 11.4, and at the Company's cost and expense, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture; the Company, however, hereby agrees to reimburse the Trustee for any
costs or expenses thereafter reasonably and properly incurred by the Trustee and
to compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Exchangeable
Notes.

SECTION 8.2    Deposited Monies to be Held in Trust by Trustee.

     Subject to Section 8.4, all monies deposited with the Trustee pursuant to
Section 8.1 shall be held in trust and applied by it to the payment, either
directly or through the Paying Agent, to

                                       38


the holders of the particular Exchangeable Notes for the payment of which such
monies have been deposited with the Trustee, of all sums due and to become due
thereon for principal and interest, and Liquidated Damages, if any.

SECTION 8.3    Paying Agent to Repay Monies Held.

     Upon the satisfaction and discharge of this Indenture, all monies then held
by any Paying Agent (other than the Trustee) shall, upon the Company's demand,
be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be
released from all further liability with respect to such monies.

SECTION 8.4    Return of Unclaimed Monies.

     Subject to the requirements of applicable law, any monies deposited with or
paid to the Trustee for payment of the principal of or interest (including
Liquidated Damages) on Exchangeable Notes and not applied but remaining
unclaimed by the holders thereof for two years after the date upon which the
principal of or interest (including Liquidated Damages) on such Exchangeable
Notes, as the case may be, have become due and payable, shall be repaid to the
Company by the Trustee on demand; provided, however, that the Company, or the
Trustee at the request and expense of the Company, shall have first caused
notice of such payment to the Company to be mailed to each holder of an
Exchangeable Note entitled thereto no less than 30 days prior to such payment
and all liability of the Trustee shall thereupon cease with respect to such
monies; and the holder of any of the Exchangeable Notes shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
unless an applicable abandoned property law designates another person. In the
absence of a written request from the Company to return unclaimed funds to the
Company, as the case may be, the Trustee shall from time to time deliver all
unclaimed funds held by it in any capacity hereunder to or as directed by
applicable escheat authorities, as determined by the Trustee in its sole
discretion, in accordance with the customary practices and procedures of the
Trustee. Any unclaimed funds held by the Trustee in any capacity hereunder
pursuant to this Section 8.4 shall be held uninvested and without any liability
for interest.

SECTION 8.5    Reinstatement.

     If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 8.2 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Exchangeable
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 8.1 until such time as the Trustee or the Paying Agent is permitted
to apply all such money in accordance with Section 8.2; provided, however, that
if the Company makes any payment of interest (including Liquidated Damages) on
or principal of any Exchangeable Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the holders
thereof to receive such payment from the money held by the Trustee or Paying
Agent.

                                     39


                                    ARTICLE 9

                                   AMENDMENTS

SECTION 9.1    Without the Consent of Holders.

     The Company, Navistar and the Trustee may amend this Indenture or the
Exchangeable Notes without notice to or the consent of any holder of an
Exchangeable Note for the purposes of:

     (a)  curing any ambiguity or correcting or supplementing any defective
or inconsistent provision contained in this Indenture or making any other
changes in the provisions of this Indenture which the Company, Navistar and the
Trustee may deem necessary or desirable provided such amendment does not
materially and adversely affect the legal rights under the Indenture of the
holders of Exchangeable Notes;

     (b)  providing for uncertificated Exchangeable Notes in addition to or
in place of certificated Exchangeable Notes;

     (c)  evidencing the succession of another person to the Company and
providing for the assumption by such successor of the covenants and obligations
of the Company hereunder and in the Exchangeable Notes as permitted by Section
5.1;

     (d)  providing for exchange rights and/or repurchase rights of holders
of Exchangeable Notes in the event of consolidation, merger, share exchange or
sale of all or substantially all of the assets of the Company as required to
comply with Sections 5.1 and/or 12.6;

     (e)  reducing the Exchange Price;

     (f)  evidencing and providing for the acceptance of appointment under this
Indenture of a successor Trustee;

     (g)  making any changes that would provide the holders of the Exchangeable
Notes with any additional rights or benefits or that does not adversely affect
the legal rights under this Indenture of any such holder; or

     (h)  complying with the requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the TIA.

SECTION 9.2    With the Consent of Holders.

     Subject to Section 6.7, the Company and the Trustee may amend this
Indenture or the Exchangeable Notes with the written consent of the holders of
at least a majority in principal amount of the then outstanding Exchangeable
Notes (including consents obtained in connection with a tender offer or exchange
offer for Exchangeable Notes).

                                       40


     Subject to Sections 6.4 and 6.7, the holders of a majority in principal
amount of the Exchangeable Notes then outstanding may also waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Exchangeable Notes.

     However, without the consent of each holder of an Exchangeable Note
affected, an amendment or waiver under this Section 9.2 may not (with respect to
any Exchangeable Notes held by a non-consenting holder):

     (a)  reduce the principal amount of Exchangeable Notes whose holders must
consent to an amendment, supplement or waiver;

     (b)  reduce the principal of or change the fixed maturity of any
Exchangeable Note;

     (c)  reduce the rate of, or change the time for payment of, interest,
including defaulted interest, or Liquidated Damages on any Exchangeable Note;

     (d)  waive a Default or Event of Default in the payment of principal of,
interest or Liquidated Damages, if any, on the Exchangeable Notes (except a
rescission of acceleration of the Exchangeable Notes by the holders of at least
a majority in aggregate principal amount of the Exchangeable Notes then
outstanding and a waiver of the payment default that resulted from such
acceleration);

     (e) make the principal of, interest or Liquidated Damages on, any
Exchangeable Note payable in money other than as provided for herein and in the
Exchangeable Notes;

     (f)  make any change in the provisions of this Indenture relating to
waivers of past Defaults or Events of Default or the rights of holders of
Exchangeable Notes to receive payments of principal of, or interest or
Liquidated Damages on, the Exchangeable Notes;

     (g)  except as permitted herein (including Section 9.1(a)), increase
the Exchange Price or modify the provisions contained herein relating to
exchange of the Exchangeable Notes in a manner adverse to the holders thereof;

     (h)  waive a repurchase, upon the occurrence of a Fundamental Change,
with respect to any Exchange Note; or

     (i)  make any change to the abilities of holders of Exchangeable Notes to
enforce their rights hereunder or the provisions of clauses (a) through (h) of
this Section 9.2.

     To secure a consent of the holders of Exchangeable Notes under this Section
9.2, it shall not be necessary for such holders to approve the particular form
of any proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.

     After an amendment or waiver under this Section 9.2 becomes effective, the
Company shall mail to holders of Exchangeable Notes a notice briefly describing
the amendment or waiver.

                                       41


SECTION 9.3    Compliance with the Trust Indenture Act.

     Every amendment to this Indenture or the Exchangeable Notes shall be set
forth in a supplemental indenture that complies with the TIA as then in effect.

SECTION 9.4    Revocation and Effect of Consents.

     Until an amendment or waiver becomes effective, a consent to it by a holder
of an Exchangeable Note is a continuing consent by the holder and every
subsequent holder of an Exchangeable Note or portion of an Exchangeable Note
that evidences the same debt as the consenting holder's Exchangeable Note, even
if notation of the consent is not made on any Exchangeable Note. However, any
such holder or subsequent holder may revoke the consent as to his or her
Exchangeable Note or portion of an Exchangeable Note if the Trustee receives the
notice of revocation before the date on which the Trustee receives an Officers'
Certificate certifying that the holders of the requisite principal amount of
Exchangeable Notes have consented to the amendment or waiver.

     The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the holders of Exchangeable Notes entitled to consent to
any amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those persons who were
holders of Exchangeable Notes at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such amendment
or waiver or to revoke any consent previously given, whether or not such persons
continue to be holders after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
holders of the principal amount of Exchangeable Notes required hereunder for
such amendment or waiver to be effective shall have also been given and not
revoked within such 90-day period.

     After an amendment or waiver becomes effective it shall bind every holder
of an Exchangeable Note, unless it is of the type described in clauses (a) - (i)
of Section 9.2. In such case, the amendment or waiver shall bind each holder of
an Exchangeable Note who has consented to it and every subsequent holder of an
Exchangeable Note or portion of an Exchangeable Note that evidences the same
debt as the consenting holder's Exchangeable Note.

SECTION 9.5    Notation on or Exchange of Exchangeable Notes.

     Exchangeable Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article 9 may, and shall if required by
the Trustee, bear a notation in the form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Exchangeable Notes so modified as to conform, in the opinion of
the Company and the Trustee, to any such supplemental indenture may be prepared
and executed by the Company and authenticated and delivered by the Trustee in
exchange for outstanding Exchangeable Notes without charge to the holders of the
Exchangeable Notes, except as specified in Section 2.6.

                                       42


SECTION 9.6    Trustee Protected.

     The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article 9 if such amendment or supplemental indenture does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If such amendment or supplemental indenture does adversely affect the rights,
duties, liabilities or immunities of the Trustee, the Trustee may, but need not,
sign it. In signing such amendment or supplemental indenture, the Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms.

                                   ARTICLE 10

                                  SUBORDINATION

SECTION 10.1   Agreement to Subordinate.

     The Company covenants and agrees, and each holder of the Exchangeable Notes
issued hereunder or pursuant to a Board Resolution and Officers' Certificate
("Additional Provisions"), by such holder's acceptance thereof, likewise
covenants and agrees that all Exchangeable Notes shall be issued subject to the
provisions of this Article 10; and each holder of an Exchangeable Note, whether
upon original issue or upon transfer or assignment thereof, accepts and agrees
to be bound by such provisions.

     The payment by the Company of the principal of, any premium, Redemption
Price, Liquidated Damages and interest with respect to the Exchangeable Notes
and under any Additional Provisions shall, to the extent and in the manner
hereinafter set forth, be subordinate in right of payment to the prior payment
in full of all Senior Indebtedness, whether outstanding at the date of this
Indenture or thereafter incurred.

     No provision of this Article 10 shall prevent the occurrence of any default
or Event of Default hereunder.

SECTION 10.2   Terms and Conditions of Subordination.

     The Company, for itself and its successors, and each holder, by its
acceptance of Exchangeable Notes, agree that the payment of the principal of or
interest on or any other amounts due on the Exchangeable Notes is subordinated
in right of payment, to the extent and in the manner stated in this Article 10,
to the prior payment in full of all existing and future Senior Indebtedness of
the Company. The Exchangeable Notes shall rank pari passu with, and shall not be
senior in right of payment to, such other Indebtedness of the Company whether
outstanding on the date of this Indenture or hereafter created, incurred, issued
or guaranteed by the Company, where the instrument creating or evidencing such
Indebtedness expressly provides that such Indebtedness ranks pari passu with the
Exchangeable Notes.

     The Exchangeable Notes shall be subordinate in right of payment to all
existing and future Senior Indebtedness of the Company. The payment of the
principal of, Redemption Price,

                                       43


Liquidated Damages, interest on or any other amounts due on the Exchangeable
Notes is subordinated in right of payment to the prior payment in full of all
existing and future Senior Indebtedness. No payment on account of principal of,
redemption of, interest on or any other amounts due on the Exchangeable Notes,
including, without limitation, any payments on the Fundamental Change Offer, and
no redemption, purchase or other acquisition of the Exchangeable Notes may be
made, except payments comprised solely of Permitted Junior Securities, if:

     (1) a payment default on Designated Senior Indebtedness occurs and is
continuing beyond any applicable grace period, or Payment Default ("Payment
Default"); or

     (2) a default other than a Payment Default on any Designated Senior
Indebtedness occurs and is continuing that permits the holders of Designated
Senior Indebtedness to accelerate its maturity, and the trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or from
any holder of Designated Senior Indebtedness or such holder's representative (a
"Non-Payment Default"), but only for the period (the "Payment Blockage Period")
commencing on the date of receipt of the Payment Blockage Notice and ending
(unless earlier terminated by notice given to the Trustee by the holders of such
Designated Senior Indebtedness) (a) in the case of a Payment Default, upon the
date on which such Payment Default is cured or waived or ceases to exist, and
(b) in the case of a Non-Payment Default, the earliest of the date on which such
Non-Payment Default is cured or waived or ceases to exist, the date the
applicable Payment Blockage Notice is rescinded or 179 days from the date notice
is received, if the maturity of the Designated Senior Indebtedness has not been
accelerated. Upon termination of the Payment Blockage Period, payments on
account of principal of or interest on the Exchangeable Notes (other than,
subject to Section 10.03 hereof, amounts due and payable by reason of the
acceleration of the maturity of the Exchangeable Notes) and redemptions,
purchases or other acquisitions shall be made by or on behalf of the Company.

     Notwithstanding the foregoing, no new Payment Blockage Notice with respect
to the same event of default or any other events of default existing or
continuing at the time of notice on the same issue of Designated Senior
Indebtedness may be given and no new Payment Blockage Period may be commenced by
the holders of such Designated Senior Indebtedness unless 365 consecutive days
have elapsed since the initial effectiveness of the immediately preceding
Payment Blockage Notice.

     If the Trustee or any holder of Exchangeable Notes receives any payment or
distribution of the Company's assets of any kind in contravention of any of the
terms hereof, whether in cash, property or securities, in respect of the
Exchangeable Notes before all Senior Indebtedness is paid in full, then the
payment or distribution will be held by the recipient in trust for the benefit
of holders of Senior Indebtedness, and will be immediately paid over or
delivered to the holders of Senior Indebtedness or their representative or
representatives to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of Senior
Indebtedness.

                                       44


SECTION 10.3   Distribution on Acceleration or Notes, Dissolution and
               Reorganization.

     (a) If the Exchangeable Notes are declared due and payable because of the
occurrence of an Event of Default, the Company or the Trustee shall give prompt
written notice to the holders of all Senior Indebtedness or to the trustee(s)
for such Senior Indebtedness of such acceleration.

     (b) Upon (i) any acceleration of the principal amount due on the
Exchangeable Notes because of an Event of Default or (ii) any distribution of
assets of the Company upon any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or any other
dissolution, winding up, liquidation or reorganization of the Company):

          (1) the holders of all Senior Indebtedness shall first be entitled to
     receive payment in full of the principal thereof, the interest thereon and
     any other amounts due thereon before the holders are entitled to receive
     payment on account of the principal of or interest on or any other amounts
     due on the Exchangeable Notes, except payments comprised solely of
     Permitted Junior Securities;

          (2) any payment or distribution of assets of the Company of any kind
     or character, whether in cash, property or securities (other than Permitted
     Junior Securities), to which the holders or the Trustee would be entitled
     except for the provisions of this Article 10, shall be paid by the
     liquidating trustee or agent or other Person making such a payment or
     distribution, directly to the holders of Senior Indebtedness (or their
     representatives(s) or trustee(s) acting on their behalf), ratably according
     to the aggregate amounts remaining unpaid on account of the principal of or
     interest on and other amounts due on the Senior Indebtedness held or
     represented by each, to the extent necessary to make payment in full of all
     Senior Indebtedness remaining unpaid, after giving effect to any concurrent
     payment or distribution to the holders of such Senior Indebtedness; and

          (3) in the event that, notwithstanding the foregoing, any payment or
     distribution of assets of the Company of any kind or character, whether in
     cash, property or securities (other than payments comprised solely of
     Permitted Junior Securities), shall be received by the Trustee or the
     holders before all Senior Indebtedness is paid in full, such payment or
     distribution shall be held in trust for the benefit of, and be paid over to
     upon request by a holder of the Senior Indebtedness, the holders of the
     Senior Indebtedness remaining unpaid (or their representatives) or
     trustee(s) acting on their behalf, ratably as aforesaid, for application to
     the payment of such Senior Indebtedness until all such Senior Indebtedness
     shall have been paid in full, after giving effect to any concurrent payment
     or distribution to the holders of such Senior Indebtedness.

     Subject to the payment in full of all Senior Indebtedness, the Holders
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the principal of and interest on the
Exchangeable Notes shall be paid in full and, for purposes of such subrogation,
no such payments or distributions to the holders of Senior Indebtedness of cash,
property or securities which otherwise would have been payable or distributable
to Holders shall, as between the Company, its creditors other than the holders
of

                                       45


Senior Indebtedness, and the Holders, be deemed to be a payment by the Company
to or on account of the Senior Indebtedness, it being understood that the
provisions of this Article 10 are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
Senior Indebtedness, on the other hand.

     Nothing contained in this Article 10 or elsewhere in this Indenture, or in
the Exchangeable Notes is intended to or shall (i) impair, as between the
Company and its creditors other than the holders of Senior Indebtedness, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and interest on the Exchangeable Notes as and when the
same shall become due and payable in accordance with the terms of the
Exchangeable Notes or (ii) affect the relative rights of the Holders and
creditors of the Company other than holders of Senior Indebtedness or, as
between the Company and the Trustee, the obligations of the Company to the
Trustee, or (iii) prevent the Trustee or the Holders from exercising all
remedies otherwise permitted by applicable law upon default under the Indenture
and this Indenture, subject to the rights, if any, under this Article 10 of the
holders of Senior Indebtedness in respect of cash, property and securities of
the Company received upon the exercise of any such remedy.

     Upon distribution of assets of the Company referred to in this Article 10,
the Trustee, subject to the provisions of Sections 7.2 of this Indenture, and
the holders shall be entitled to rely upon a certificate of the liquidating
trustee or agent or other Person making any distribution to the Trustee or to
the Holders for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 10. The Trustee, however, shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness. Nothing contained in this
Article 10 or elsewhere in this Indenture or in any of the Exchangeable Notes,
shall prevent the good faith application by the Trustee of any moneys which were
deposited with it hereunder, prior to its receipt of written notice of facts
which would prohibit such application, for the purpose of the payment of or on
account of the principal of or interest on, the Exchangeable Notes unless, prior
to the date on which such application is made by the Trustee, the Trustee shall
be charged with notice under Section 10.3(d) hereof of the facts which would
prohibit the making of such application.

     (c)  The provisions of this Article 10 shall not be applicable to any cash,
properties or securities received by the Trustee or by any Holder when received
as a holder of Senior Indebtedness and nothing in the Indenture or this
Indenture shall deprive the Trustee or such Holder of any of its rights as such
holder.

     (d)  The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment of
money to or by the Trustee in respect of the Exchangeable Notes pursuant to the
provisions of this Article 10. The Trustee, subject to the provisions of Section
7.2 of this Indenture, shall be entitled to assume that no such fact exists
unless the Company or any holder of Senior Indebtedness or any trustee therefor
has given such notice to the Trustee. Notwithstanding the provisions of this
Article 10 or any other provisions of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any fact which would prohibit the
making of any payment of monies to or by the Trustee in

                                       46


respect of the Exchangeable Notes pursuant to the provisions in this
Article 10, unless, and until three Business Days after, the Trustee shall have
received written notice thereof from the Company or any holder or holders of
Senior Indebtedness or from any trustee therefor; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections 7.2
of this Indenture, shall be entitled in all respects conclusively to assume that
no such facts exist; provided that if on a date not less than three Business
Days immediately preceding the date upon which by the terms hereof any such
monies may become payable for any purpose (including, without limitation, the
principal of or interest on any Note), the Trustee shall not have received with
respect to such monies the notice provided for in this Section 10.3(d), than
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such monies and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such prior date.

     The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior Indebtedness
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Indebtedness (or a trustee on behalf of any such
holder or holders). In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Indebtedness to participate in any payment or distribution pursuant to
this Article 10, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article 10, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment; nor shall the Trustee be
charged with knowledge of the curing or waiving of any default of the character
specified in Section 10.2 or that any event or any condition preventing any
payment in respect of the Exchangeable Notes shall have ceased to exist, unless
and until the Trustee shall have received an Officers' Certificate to such
effect.

     (e)  The provisions of this Section 10.3 applicable to the Trustee shall
also apply to any Paying Agent for the Company.

     (f)  Each holder of a Note, by its acceptance thereof, authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article 10 and
appoints the Trustee its attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding up or liquidation or
reorganization under any applicable bankruptcy law of the Company (whether in
bankruptcy, insolvency or receivership proceedings or otherwise), the timely
filing of a claim for the unpaid balance of such holder's Exchangeable Notes in
the form required in such proceedings and the causing of such claim to be
approved. If the Trustee does not file a claim or proof of debt in the form
required in such proceedings prior to 30 days before the expiration of the time
to file such claims or proofs, then any Holder or holders of Senior Indebtedness
or their representative or representatives shall have the right to demand, sue
for, collect, receive and receipt for the payments and distributions in respect
of the Exchangeable Notes which are required to be paid or delivered to the
holders of Senior Indebtedness as provided in this Article 10 and to file and
prove all claims therefore and to take all such other action in the name of the
holders or

                                       47


otherwise, as such holders of Senior Indebtedness or representative thereof may
determine to be necessary or appropriate for the enforcement of the provisions
of this Article 10.

     For purposes of this Article 10, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other Corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article 10 with respect to
the Securities of the relevant series to the payment of all Senior Indebtedness
with respect to the Securities of such series that may at the time be
outstanding, provided that (i) such Senior Indebtedness is assumed by the new
Corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the
conveyance, transfer or lease of its property as an entirety, or substantially
as an entirety, to another Person upon the terms and conditions provided for in
Article 5 of this Indenture shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 10.3 if such
other Person shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article 5 of this Indenture.
Nothing in Section 10.2 or in this Section 10.3 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.7 of this Indenture.

SECTION 10.4   Subrogation.

     Subject to the payment in full of all Senior Indebtedness with respect to
Exchangeable Notes, the rights of the Holders of the Securities of such series
shall be subrogated to the rights of the holders of such Senior Indebtedness to
receive payments or distributions of cash, property or securities of the Company
applicable to such Senior Indebtedness until the principal of, any premium,
Redemption Price and interest on the Exchangeable Notes of such series shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash, property
or securities to which the holders or the Trustee would be entitled except for
the provisions of this Article 10, and no payment over pursuant to the
provisions of this Article 10 to or for the benefit of the holders of such
Senior Indebtedness by holders of the Exchangeable Notes or the Trustee, shall,
as between the Company, its creditors other than holders of such Senior
Indebtedness, and the holders of the Exchangeable Notes be deemed to be a
payment by the Company to or on account of such Senior Indebtedness. It is
understood that the provisions of this Article 10 are and are intended solely
for the purposes of defining the relative rights of the holders of the
Exchangeable Notes, on the one hand, and the holders of the Senior Indebtedness
with respect to the Exchangeable Notes on the other hand.

     Nothing contained in this Article 10 or elsewhere in this Indenture, in any
Additional Provisions or in the Securities of any series is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
Indebtedness with respect to the Exchangeable Notes, and the holders of the
Exchangeable Notes, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of Exchangeable Notes the principal of, any
premium, Redemption Price and interest on the Exchangeable Notes as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the holders of the Exchangeable Notes
and creditors of the Company,

                                       48


other than the holders of such Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or the holder of Exchangeable Notes from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article 10 of the
holders of such Senior Indebtedness in respect of cash, property or securities
of the Company, as the case may be, received upon the exercise of any such
remedy.

     Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee, subject to the provisions of Article 7 of this
Indenture, and the holders of the Exchangeable Notes shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the holders of the
Exchangeable Notes, for the purposes of ascertaining the Persons entitled to
participate in such distribution, the holders of Senior Indebtedness with
respect to the Exchangeable Notes and other indebtedness of the Company, as the
case may be, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
10.

SECTION 10.5   Trustee to Effectuate Subordination.

     Each holder of Exchangeable Notes, by such holder's acceptance thereof,
authorizes and directs the Trustee on such holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article 10 and appoints the Trustee such holder's attorney-in-fact for any
and all such purposes.

SECTION 10.6   Notice by the Company.

     The Company shall give prompt written notice to a Trust Officer of the
Trustee of any fact known to the Company that would prohibit the making of any
payment of monies to or by the Trustee in respect of the Exchangeable Notes
pursuant to the provisions of this Article 10. Notwithstanding the provisions of
this Article 10 or any other provision of this Indenture or any Additional
Provisions, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Exchangeable Notes pursuant to the provisions of this
Article 10, unless and until a Trust Officer of the Trustee shall have received
written notice thereof from the Company or a holder or holders of Senior
Indebtedness with respect to the Securities of such series or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Article 7 of this Indenture, shall be entitled in
all respects to assume that no such facts exist; PROVIDED, HOWEVER, that if the
Trustee shall not have received the notice provided for in this Section 10.6 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of, any premium or interest on, or any Additional
Amounts with respect to, any Security of such series), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary that
may be received by it within two Business Days prior to such date.

                                       49


     The Trustee, subject to the provisions of Article 7 of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness with
respect to the Exchangeable Notes (or a trustee on behalf of such holder), to
establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article 10, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article 10, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.

         Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the holders shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding-up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the holders of the Securities of
any series, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness with respect
to the Exchangeable Notes of such series and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10.

SECTION 10.7   Rights of the Trustee, Holders of Senior Indebtedness.

     The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article 10 in respect of any Senior Indebtedness with respect
to the Exchangeable Notes at any time held by it, to the same extent as any
other holder of such Senior Indebtedness, and nothing in this Indenture or any
Additional Provisions shall deprive the Trustee of any of its rights as such
holder.

     With respect to the holders of Senior Indebtedness with respect to the
Exchangeable Notes, the Trustee undertakes to perform or to observe only such of
its covenants and obligations as are specifically set forth in this Article 10,
and no implied covenants or obligations with respect to the holders of such
Senior Indebtedness shall be read into this Indenture or any Additional
Provisions against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of such Senior Indebtedness and, subject to the
provisions of Article 7 of this Indenture, the Trustee shall not be liable to
any holder of such Senior Indebtedness if it shall pay over or deliver to
holders of the Exchangeable Notes, the Company or any other Person money or
assets to which any holder of such Senior Indebtedness shall be entitled by
virtue of this Article 10 or otherwise.

     Nothing in this Article 10 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.

                                       50


SECTION 10.8   Subordination may not be Impaired.

     No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company,
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with.

     Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness with respect to the Exchangeable Notes may, at
any time and from time to time, without the consent of or notice to the Trustee
or the holders of Exchangeable Notes, without incurring responsibility to such
holders and without impairing or releasing the subordination provided in this
Article 10 or the obligations hereunder of the holders of the Exchangeable Notes
to the holders of such Senior Indebtedness, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, such Senior Indebtedness, or otherwise amend or
supplement in any manner such Senior Indebtedness or any instrument evidencing
the same or any agreement under which such Senior Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing such Senior Indebtedness; (iii) release any
Person liable in any manner for the collection of such Senior Indebtedness; and
(iv) exercise or refrain from exercising any rights against the Company and any
other Person.

                                   ARTICLE 11

                               GENERAL PROVISIONS

SECTION 11.1   Trust Indenture Act Controls.

     If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), such duties imposed by such section of the
TIA shall control. If any provision of this Indenture expressly modifies or
excludes any provision of the TIA that may be so modified or excluded, the
Indenture provision so modifying or excluding such provision of the TIA shall be
deemed to apply.

SECTION 11.2   Notices.

     Any notice or communication by the Company or the Trustee to the other
parties is duly given if in writing and delivered in person or mailed by
first-class mail, with postage prepaid (registered or certified, return receipt
requested), or sent by facsimile or overnight air couriers guaranteeing next day
delivery, to the other party's address as stated in Section 11.10. The Company
or the Trustee by notice to the other may designate additional or different
addresses for subsequent notices or communications.

     All notices and communications (other than those sent to holders of
Exchangeable Notes) shall be deemed to have been duly given at the time
delivered by hand if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; when transmission is
confirmed, if transmitted by facsimile; and the next business day after timely

                                       51


delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery. Notwithstanding the foregoing, all notices to the Trustee shall be
effective only upon receipt by a Trust Officer.

     Any notice or communication to a holder of an Exchangeable Note shall be
mailed by first-class mail, with postage prepaid, to his or her address shown on
the Register kept by the Registrar. Failure to mail a notice or communication to
a holder or any defect in the notice or communication shall not affect its
sufficiency with respect to other holders.

     If a notice or communication to a holder of an Exchangeable Note is sent in
the manner provided above within the time prescribed, it is duly given, whether
or not the addressee receives it.

     If the Company sends a notice or communication to holders of Exchangeable
Notes, it shall send a copy to the Trustee and each Agent at the same time.

     All notices or communications shall be in writing.

SECTION 11.3   Communication by Holders With Other Holders.

     Holders may communicate pursuant to TIA Section 312(b) with other holders
with respect to their rights under this Indenture or the Exchangeable Notes. The
Company, the Trustee, the Registrar and the Paying Agent shall have the
protection of TIA ss.312(c).

SECTION 11.4   Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any
action under this Indenture except in the case of the original issuance of the
Exchangeable Notes hereunder the Company, as the case may be, shall furnish to
the Trustee:

          (1)  an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5) stating that, in the opinion of such person, all conditions
precedent provided for in this Indenture (including any covenants, compliance
with which constitutes a condition precedent) relating to the proposed action
have been complied with; and

          (2)  an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5) stating that, in the opinion of such counsel, all such conditions
precedent (including any covenants, compliance with which constitutes a
condition precedent) have been complied with.

SECTION 11.5   Statements Required in Certificate or Opinion.

     Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture except in the case of the original
issuance of the Exchangeable Notes hereunder (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall include:

          (1)  a statement that the person making such certificate or
opinion has read such covenant or condition;

                                       52


          (2)  a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;

          (3)  a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

          (4)  a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

     Any Officers' Certificate may be based, insofar as it relates to legal
matters, upon an Opinion of Counsel, unless such Officer knows that the opinion
with respect to the matters upon which his or her certificate may be based as
aforesaid is erroneous. Any Opinion of Counsel may be based, insofar as it
relates to factual matters, upon certificates, statements or opinions of, or
representations by an officer or officers of the Company, or other persons or
firms deemed appropriate by such counsel, unless such counsel knows that the
certificates, statements or opinions or representations with respect to the
matters upon which his or her opinion may be based as aforesaid are erroneous.

     Any Officers' Certificate, statement or Opinion of Counsel may be based,
insofar as it relates to accounting matters, upon a certificate or opinion of or
representation by an accountant (who may be an employee of the Company), or firm
of accountants, unless such Officer or counsel, as the case may be, knows that
the certificate or opinion or representation with respect to the accounting
matters upon which his or her certificate, statement or opinion may be based as
aforesaid is erroneous.

SECTION 11.6   Rules by Trustee and Agents.

     The Trustee may make reasonable rules for action by, or a meeting of,
holders of Exchangeable Notes. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.

SECTION 11.7   Legal Holidays.

     A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York or the city in which the Corporate Trust
Office of the Trustee is located are not required to be open, and a "business
day" is any day that is not a Legal Holiday. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If any date specified in this Indenture is a Legal Holiday,
then such date shall be the next succeeding business day.

SECTION 11.8   No Recourse Against Others.

     No director, officer, employee, shareholder or Affiliate, as such, of the
Company or Navistar from time to time shall have any liability for any
obligations of the Company or Navistar under the Exchangeable Notes or this
Indenture or for any claim based on, in respect of,

                                       53


or by reason of such obligations or their creation. Each holder by accepting an
Exchangeable Note waives and releases all such liability. This waiver and
release are part of the consideration for the Exchangeable Notes. Each of such
directors, officers, employees, shareholders and Affiliates is a third party
beneficiary of this Section 11.8.

SECTION 11.9   Counterparts.

     This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.

SECTION 11.10  Other Provisions.

     The Company initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.

     The reporting date for Section 7.6 is May 15 of each year. The first
reporting date is the May 15 following the issuance of Exchangeable Notes
hereunder.

     The Trustee shall always have, or shall be a subsidiary of a bank or bank
holding company which has, a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.

     The Company's address is:

     Navistar Financial Corporation
     2850 West Golf Road
     Rolling Meadows, Illinois 60008
     Attention: Treasurer
     Facsimile: (847) 734-4087
     Telephone: (847) 734-4000

     Navistar International Corporation's address is:

     Navistar International Corporation
     4201 Winfield Road, P.O. Box 1488
     Warrenville, Illinois 60555
     Attention: Treasurer
     Facsimile: (630) 753-5000
     Telephone: (630) 753-5000

                                       54


     The Trustee's address is:

     BNY Midwest Trust Company
     2 North LaSalle Street
     Suite 1020
     Chicago, Illinois 60602
     Attention:  Dan Donovan
     Facsimile:  (312) 827-8542
     Telephone:  (312) 827-8547

SECTION 11.11  Governing Law.

     The laws of the State of New York (including without limitation Section
5-1401 of the New York General Obligations Law or any successor to such statute)
shall govern this Indenture and the Exchangeable Notes.

SECTION 11.12  No Adverse Interpretation of Other Agreements.

     This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any of their respective subsidiaries. Any such other
indenture, loan or debt agreement may not be used to interpret this Indenture.

SECTION 11.13  Successors.

     All agreements of the Company and Navistar in this Indenture and the
Exchangeable Notes shall bind their respective successors. All agreements of the
Trustee in this Indenture shall bind its successor.

SECTION 11.14  Severability.

     In case any provision in this Indenture or in the Exchangeable Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

SECTION 11.15  Table of Contents, Headings, etc.

     The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.

                                   ARTICLE 12

                         EXCHANGE OF EXCHANGEABLE NOTES

SECTION 12.1   Right to Exchange.

     Subject to and upon compliance with the provisions of this Indenture, each
holder of Exchangeable Notes shall have the right, at his or her option, at any
time on or before the close

                                       55


of business on the last Trading Day prior to the Maturity Date (except that, (a)
with respect to any Exchangeable Note or portion thereof subject to a duly
completed election for repurchase, such right shall terminate on the close of
business on the Fundamental Change Payment Date (unless the Company defaults in
the payment due upon repurchase or such holder elects to withdraw the submission
of such election to repurchase in accordance with section 4.6) or (b) with
respect to any Exchangeable Note or portion thereof subject to a notice of
redemption under Section 3.4 hereof, such right shall terminate on the close of
business on the business day preceding the applicable Redemption Date (unless
the Company defaults in the payment due upon redemption)) to exchange the
principal amount of any Exchangeable Note held by such holder, or any portion of
such principal amount which is $1,000 or an integral multiple thereof, into that
number of fully paid and non-assessable shares of Common Stock (as such shares
shall then be constituted) obtained by dividing the principal amount of the
Exchangeable Note or portion thereof to be exchanged by the Exchange Price in
effect at such time, by surrender of the Exchangeable Note so to be exchanged in
whole or in part in the manner provided in Section 12.2. Exchangeable Notes in
respect of which a holder has delivered a Fundamental Change repurchase notice
exercising the option of such holder to require the Company to repurchase such
Exchangeable Notes may be exchanged only if the Fundamental Change repurchase
notice is withdrawn in accordance with the terms of this Indenture. A holder of
Exchangeable Notes is not entitled to any rights of a holder of Common Stock
until such holder of Exchangeable Notes has exchanged his or her Exchangeable
Notes to Common Stock, and only to the extent such Exchangeable Notes are deemed
to have been exchanged to Common Stock under this Article 12.

SECTION 12.2   Exercise of Exchange Privilege; Issuance of Common Stock on
               Exchange; No Adjustment for Interest or Dividends.

     To exercise, in whole or in part, the exchange privilege with respect to
any Exchangeable Note, the holder of such Exchangeable Note shall surrender such
Exchangeable Note, duly endorsed, at an office or agency maintained by Navistar
pursuant to Section 4.4, accompanied by the funds, if any, required by the final
paragraph of this Section 12.2 and a duly signed and completed written notice of
exchange in the form provided on the Exchangeable Notes (or such other notice
which is acceptable to Navistar) to the office or agency that the holder of
Exchangeable Notes elects to exchange such Exchangeable Note or such portion
thereof specified in said notice. Such notice shall also state the name or names
(with address or addresses) in which the certificate or certificates for shares
of Common Stock which are issuable on such exchange shall be issued, and shall
be accompanied by transfer taxes or any witholding, if required pursuant to
Section 12.7. Each such Exchangeable Note surrendered for exchange shall, unless
the shares issuable on exchange are to be issued in the same name as the
registration of such Exchangeable Note, be duly endorsed by, or be accompanied
by instruments of transfer in form satisfactory to Navistar duly executed by,
the holder of Exchangeable Notes or his or her duly authorized attorney. The
holder of such Exchangeable Notes will be required to pay any withholding tax or
duty which may be payable in respect of the issue or delivery of Common Stock on
exchange. The date on which the holder of Exchangeable Notes satisfies each of
the requirements provided in this paragraph shall be referred to as the
"Exchange Date."

     Upon the exchange of the Exchangeable Notes for Common Stock (subject to
Section 12.3), Navistar shall issue and shall deliver to such holder at the
office or agency maintained by

                                       56


Navistar for such purpose pursuant to Section 4.4, (1) no later than the fifth
business day after the Exchange Date, a certificate or certificates for the
number of full shares of Common Stock issuable upon the exchange of such
Exchangeable Note and (2) a check or cash in an amount calculated pursuant to
Section 12.3 in respect of any fractional interest in respect of a share of
Common Stock arising upon such exchange no later than the tenth business day
after the Exchange Date.

     Certificates representing shares of Common Stock will not be issued or
delivered unless all withholdings, taxes and duties, if any, payable by the
holder have been paid. In case any Exchangeable Note of a denomination of an
integral multiple greater than $1,000 is surrendered for partial exchange, the
Company shall execute, and the Trustee shall authenticate and deliver to the
holder of the Exchangeable Note so surrendered, without charge to him or her, a
new Exchangeable Note or Exchangeable Notes in authorized denominations in an
aggregate principal amount equal to the unexchanged portion of the surrendered
Exchangeable Note.

     Each exchange shall be deemed to have been effected as to any such
Exchangeable Note (or portion thereof) on the applicable Exchange Date, and the
person in whose name any certificate or certificates for shares of Common Stock
are issuable upon such exchange shall be deemed to have become on the applicable
Exchange Date the holder of record of the shares represented thereby; provided,
however, that any such surrender on any date when Navistar's stock transfer
books are closed shall constitute the person in whose name the certificates are
to be issued as the record holder thereof for all purposes on the next
succeeding day on which such stock transfer books are open, but such exchange
shall be at the Exchange Price in effect on the date upon which such
Exchangeable Note is surrendered.

     Any Exchangeable Note or portion thereof surrendered for exchange during
the period from the close of business on the record date for any interest
payment through the close of business on the last Trading Day immediately
preceding such interest payment date shall be accompanied by payment, in funds
acceptable to the Company, of an amount equal to the interest and Liquidated
Damages, if any, otherwise payable on such interest payment date on the
principal amount being exchanged; provided however, that no such payment need be
made if there exists at the time of exchange a default in the payment of
interest or Liquidated Damages, if applicable, on the Exchangeable Notes. An
amount equal to such payment shall be paid by the Company on such interest
payment date to the holder of such Exchangeable Note at the close of business on
such record date; PROVIDED, HOWEVER, that if the Company defaults in the payment
of interest or Liquidated Damages, if applicable, on such interest payment date,
such amount shall be paid to the person who made such required payment. Except
as provided above in this Section 12.2, no adjustment shall be made for interest
and Liquidated Damages, if any, accrued on any Exchangeable Note exchanged or
for dividends on any shares issued upon the exchange of such Exchangeable Note
as provided in this Article 12.

SECTION 12.3   Cash Payments in Lieu of Fractional Shares.

     No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon exchange of Exchangeable Notes. If more than one
Exchangeable Note shall be surrendered for exchange at one time by the same
holder, the number of full shares which shall be issuable upon exchange shall be
computed on the basis of the aggregate principal amount of

                                       57


the Exchangeable Notes (or specified portions thereof to the extent permitted
hereby) so surrendered for exchange. If any fractional share of stock otherwise
would be issuable upon the exchange of any Exchangeable Note or Exchangeable
Notes, Navistar shall make an adjustment therefor in cash based upon the Sale
Price of the Common Stock as of the last Trading Day prior to the exchange date.

SECTION 12.4   Exchange Price.

     The Exchange Price shall be as specified in the form of Exchangeable Note
attached as Exhibit A hereto, subject to adjustment as provided in this Article
12.

SECTION 12.5   Adjustment of Exchange Price.

     The Exchange Price shall be adjusted from time to time as follows:

     (a)  If Navistar shall hereafter pay a dividend or make a distribution to
all holders of the outstanding Common Stock in shares of Common Stock, the
Exchange Price in effect at the opening of business on the date following the
date fixed for the determination of shareholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Exchange
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the Record Date (as defined
in Section 12.5(g)) fixed for such determination and the denominator shall be
the sum of such number of shares and the total number of shares constituting
such dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the Record Date.
If any dividend or distribution of the type described in this Section 12.5(a) is
declared but not so paid or made, the Exchange Price shall again be adjusted to
the Exchange Price which would then be in effect if such dividend or
distribution had not been declared.

     (b)  If the outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Exchange Price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, if the
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Exchange Price in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.

     (c)  If Navistar shall issue rights or warrants to all or substantially all
holders of its outstanding shares of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
Current Market Price (as defined in Section 12.5(g)) on the Record Date fixed
for the determination of shareholders entitled to receive such rights or
warrants, the Exchange Price shall be adjusted so that the same shall equal the
price determined by multiplying the Exchange Price in effect at the opening of
business on the date after such Record Date by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the Record Date plus the number of shares which the aggregate
offering price of the total number of shares so offered would

                                       58


purchase at such Current Market Price, and of which the denominator shall be the
number of shares of Common Stock outstanding on the close of business on the
Record Date plus the total number of additional shares of Common Stock so
offered for subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the Record Date
fixed for determination of shareholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not delivered pursuant
to such rights or warrants, upon the expiration or termination of such rights or
warrants the Exchange Price shall be readjusted to be the Exchange Price which
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. If such rights or warrants are not so
issued, the Exchange Price shall again be adjusted to be the Exchange Price
which would then be in effect if such date fixed for the determination of
shareholders entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to subscribe for
or purchase shares of Common Stock at less than such Current Market Price, and
in determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received for such rights or
warrants, with the value of such consideration, if other than cash, to be
determined by the Board of Directors.

     (d)  If Navistar shall, by dividend or otherwise, distribute to all holders
of its Common Stock shares of any class of capital stock of Navistar (other than
any dividends or distributions to which Section 12.5(a) applies) or evidences of
its indebtedness, cash or other assets (including securities, but excluding (i)
any rights or warrants of a type referred to in Section 12.5(c) and (ii)
dividends and distributions paid exclusively in cash) (the foregoing hereinafter
in this Section 12.5(d) called the "Securities"), then, in each such case, the
Exchange Price shall be reduced so that the same shall be equal to the price
determined by multiplying the Exchange Price in effect immediately prior to the
close of business on the Record Date (as defined in Section 12.5(g)) with
respect to such distribution by a fraction of which the numerator shall be the
Current Market Price (determined as provided in Section 12.5(g)) on such date
less the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors) on such date of the portion of the Securities so distributed
applicable to one share of Common Stock and the denominator shall be such
Current Market Price, such reduction to become effective immediately prior to
the opening of business on the day following the Record Date; provided, however,
that in the event the then fair market value (as so determined) of the portion
of the Securities so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the Record Date, in lieu of
the foregoing adjustment, adequate provision shall be made so that each holder
of Exchangeable Notes shall have the right to receive upon exchange of an
Exchangeable Note (or any portion thereof) the amount of Securities such holder
would have received had such holder exchanged such Exchangeable Note (or portion
thereof) immediately prior to such Record Date. If such dividend or distribution
is not so paid or made, the Exchange Price shall again be adjusted to be the
Exchange Price which would then be in effect if such dividend or distribution
had not been declared. If the Board of Directors determines the fair market
value of any distribution for purposes of this Section 12.5(d) by reference to
the actual or when issued trading market for any securities comprising all or
part of such distribution, it must in doing so consider the prices in such
market over the same period used in computing the Current Market Price pursuant
to Section 12.5(g) to the extent possible.

                                       59


     Notwithstanding any other provision of this Section 12.5(d) to the
contrary, rights, warrants, evidences of indebtedness, other securities, cash or
other assets (including, without limitation, any rights distributed pursuant to
any shareholder rights plan) shall be deemed not to have been distributed for
purposes of this Section 12.5(d) if Navistar makes proper provision so that each
holder of Exchangeable Notes who exchanges an Exchangeable Note (or any portion
thereof) after the date fixed for determination of shareholders entitled to
receive such distribution shall be entitled to receive upon such exchange, in
addition to the shares of Common Stock issuable upon such exchange, the amount
and kind of such distributions that such holder would have been entitled to
receive if such holder had, immediately prior to such determination date,
exchanged such Exchangeable Note into Common Stock.

     Rights or warrants distributed by Navistar to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase shares of Navistar's
capital stock (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events ("Trigger Event"):
(i) are deemed to be transferred with such shares of Common Stock; (ii) are not
exercisable; and (iii) are also issued in respect of future issuances of Common
Stock, shall be deemed not to have been distributed for purposes of this Section
12.5(d) (and no adjustment to the Exchange Price under this Section 12.5(d)
shall be required) until the occurrence of the earliest Trigger Event, whereupon
such rights and warrants shall be deemed to have been distributed and an
appropriate adjustment to the Exchange Price under this Section 12.5(d) shall be
made. If any such rights or warrants, including any such existing rights or
warrants distributed prior to the date of this Indenture, are subject to
subsequent events, upon the occurrence of each of which such rights or warrants
shall become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with respect to new rights or
warrants (and a termination or expiration of the existing rights or warrants
without exercise by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any Trigger
Event with respect thereto, that was counted for purposes of calculating a
distribution amount for which an adjustment to the Exchange Price under this
Section 12.5 was made, (1) in the case of any such rights or warrants which
shall all have been redeemed or repurchased without exercise by any holders
thereof, the Exchange Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of Common Stock with respect to
such rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such redemption
or repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the Exchange
Price shall be readjusted as if such rights and warrants had not been issued.

     For purposes of this Section 12.5(d) and Sections 12.5(a) and (c), any
dividend or distribution to which this Section 12.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which Section 12.5(c) applies (or both),
shall be deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other than
such shares of Common Stock or rights or warrants to which Section 12.5(c)
applies (and any Exchange Price reduction required by this Section 12.5(d) with
respect to such dividend or

                                       60


distribution shall then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants (and any
further Exchange Price reduction required by Sections 12.5(a) and (c) with
respect to such dividend or distribution shall then be made, except that (A) the
Record Date of such dividend or distribution shall be substituted as "the date
fixed for the determination of shareholders entitled to receive such dividend or
other distribution", "Record Date fixed for such determination" and "Record
Date" within the meaning of Section 12.5(a) and as "the date fixed for the
determination of shareholders entitled to receive such rights or warrants", "the
Record Date fixed for the determination of the shareholders entitled to receive
such rights or warrants" and "such Record Date" within the meaning of Section
12.5(c) and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of Section 12.5(a)).

     (e)  If Navistar shall, by dividend or otherwise, distribute cash to all
holders of its Common Stock (excluding any cash that is distributed upon a
merger, share exchange or consolidation to which Section 12.6 applies or as part
of a distribution referred to in Section 12.5(d)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such all-cash
distributions to all holders of its Common Stock within the 12 months preceding
the date of payment of such distribution, and in respect of which no adjustment
pursuant to this Section 12.5(e) has been made, and (2) the aggregate of any
cash plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors) of consideration payable in respect of any tender offer by Navistar
or any of its subsidiaries for all or any portion of the Common Stock concluded
within the 12 months preceding the date of payment of such distribution, and in
respect of which no adjustment pursuant to Section 12.5(f) has been made,
exceeds 10% of the product of the Current Market Price (determined as provided
in Section 12.5(g)) on the Record Date with respect to such distribution times
the number of shares of Common Stock outstanding on such date, then, and in each
such case, immediately after the close of business on such date, the Exchange
Price shall be reduced so that it shall equal the price determined by
multiplying the Exchange Price in effect immediately prior to the close of
business on such Record Date by a fraction (i) the numerator of which shall be
equal to the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 10% and (y) the
number of shares of Common Stock outstanding on the Record Date and (ii) the
denominator of which shall be equal to the Current Market Price on such Record
Date; provided, however, that if the portion of the cash so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of Exchangeable
Notes shall have the right to receive upon exchange of an Exchangeable Note (or
any portion thereof) the amount of cash such holder would have received had such
holder exchanged such Exchangeable Note (or portion thereof) immediately prior
to such Record Date. If such dividend or distribution is not so paid or made,
the Exchange Price shall again be adjusted to be the Exchange Price which would
then be in effect if such dividend or distribution had not been declared. Any
cash distribution to all holders of Common Stock as to which the Company makes
the election permitted by Section 12.5(m) and as to which the Company has
complied with the requirements of such Section shall be treated as not having
been made for all purposes of this Section 12.5(e).

                                       61


     (f)  If a tender offer made by Navistar or any of its subsidiaries for all
or any portion of the Common Stock expires and such tender offer (as amended
upon the expiration thereof) requires the payment to shareholders (based on the
acceptance (up to any maximum specified in the terms of the tender offer) of
Purchased Shares (as defined below)) of an aggregate consideration having a fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors) that,
combined together with (1) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors), as of the
expiration of such tender offer, of consideration payable in respect of any
other tender offers, by Navistar or any of its subsidiaries for all or any
portion of the Common Stock, expiring within the 12 months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to this Section 12.5(f) has been made and (2) the aggregate amount of any such
all-cash distributions to all holders of the Common Stock within 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to Section 12.5(e) has been made, exceeds 10% of the product
of the Current Market Price (determined as provided in Section 12.5(g)) as of
the last time (the "Expiration Time") tenders could have been made pursuant to
such tender offer (as it may be amended) times the number of shares of Common
Stock outstanding (including any tendered shares) on the Expiration Time, then,
and in each such case, immediately prior to the opening of business on the day
after the date of the Expiration Time, the Exchange Price shall be adjusted so
that the same shall equal the price determined by multiplying the Exchange Price
in effect immediately prior to close of business on the date of the Expiration
Time by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered shares) on the Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator shall be the sum of (x)
the fair market value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum specified in
the terms of the tender offer) of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) on the
Expiration Time and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction (if any) to become
effective immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Exchange Price shall again be adjusted to be the Exchange Price which would then
be in effect if such tender offer had not been made. If the application of this
Section 12.5(f) to any tender offer would result in an increase in the Exchange
Price, no adjustment shall be made for such tender offer under this Section
12.5(f).

     (g)  For purposes of this Section 12.5, the following terms shall have the
meaning indicated:

          (1)  "closing price" with respect to any securities on any day
means the closing price on such day or, if no such sale takes place on such day,
the average of the reported high and low prices on such day, in each case on the
Nasdaq National Market or New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national

                                       62


market or exchange, on the principal national securities exchange or quotation
system on which such security is quoted or listed or admitted to trading, or, if
not quoted or listed or admitted to trading on any national securities exchange
or quotation system, the average of the high and low prices of such security on
the over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or, if not so available, in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of Directors
for that purpose, or a price determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors.

         (2)   "Current Market Price" means the average of the daily closing
prices per share of Common Stock for the 10 consecutive Trading Days immediately
prior to the date in question; provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Exchange Price
pursuant to Sections 12.5(a), (b), (c), (d), (e) or (f) occurs during such 10
consecutive Trading Days, the closing price for each Trading Day prior to the
"ex" date for such other event shall be adjusted by multiplying such closing
price by the same fraction by which the Exchange Price is so required to be
adjusted as a result of such other event, (2) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Exchange Price pursuant to Section 12.5(a), (b),
(c), (d), (e) or (f) occurs on or after the "ex" date for the issuance or
distribution requiring such computation and prior to the day in question, the
closing price for each Trading Day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Exchange Price is so required to be adjusted as a
result of such other event, and (3) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (1) or (2) of
this proviso, the closing price for each Trading Day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair market
value (as determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of Sections 12.5(d) or (f), whose
determination shall be conclusive and described in a resolution of the Board of
Directors) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation under
Section 12.5(f), the Current Market Price on any date shall be deemed to be the
average of the daily closing prices per share of Common Stock for such day and
the next two succeeding Trading Days; provided, however, that if the "ex" date
for any event (other than the tender offer requiring such computation) that
requires an adjustment to the Exchange Price pursuant to Section 12.5(a), (b),
(c), (d), (e) or (f) occurs on or after the Expiration Time for the tender or
exchange offer requiring such computation and prior to the day in question, the
closing price for each Trading Day on and after the "ex" date for such other
event shall be adjusted by multiplying such Closing Price by the reciprocal of
the fraction by which the Exchange Price is so required to be adjusted as a
result of such other event. For purposes of this paragraph, the term "ex" date,
(1) when used with respect to any issuance or distribution, means the first date
on which the Common Stock trades regular way on the relevant exchange or in the
relevant market from which the closing price was obtained without the right to
receive such issuance or distribution, (2) when used with respect to any
subdivision or combination of shares of Common Stock, means the first date on
which the Common Stock trades regular way on such exchange or in such market
after the time at which such subdivision

                                       63


or combination becomes effective, and (3) when used with respect to any tender
or exchange offer means the first date on which the Common Stock trades regular
way on such exchange or in such market after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments to the Exchange
Price are called for pursuant to this Section 12.5, such adjustments shall be
made to the Current Market Price as may be necessary or appropriate to
effectuate the intent of this Section 12.5 and to avoid unjust or inequitable
results as determined in good faith by the Board of Directors.

          (3)  "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.

          (4)  "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or exchanged into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).

     (h)  The Company may make such reductions in the Exchange Price, in
addition to those required by Sections 12.5(a), (b), (c), (d), (e) and (f), as
the Board of Directors considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes.

     Navistar from time to time may, to the extent permitted by law, reduce the
Exchange Price by any amount for any period of at least 20 days, if the Board of
Directors has made a determination that such reduction would be in Navistar's
best interests, which determination shall be conclusive and described in a
resolution of the Board of Directors. The reduction in Exchange Price shall be
irrevocable during this period. Whenever the Exchange Price is reduced pursuant
to the preceding sentence, Navistar shall mail to the holders of Exchangeable
Notes at his or her last address appearing on the Register a notice of the
reduction at least 15 days prior to the date the reduced Exchange Price takes
effect, and such notice shall state the reduced Exchange Price and the period
during which it will be in effect.

     (i)  No adjustment in the Exchange Price shall be required unless such
adjustment would require an increase or decrease of at least 1% of the Exchange
Price then in effect; provided, however, that any adjustments which by reason of
this Section 12.5(i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Article 12 shall be made by Navistar and shall be made to the nearest cent or to
the nearest one hundredth of a share, as the case may be.

     No adjustment need be made for a change in the par value or no par value of
the Common Stock.

     (j)  Whenever the Exchange Price is adjusted as herein provided, Navistar
shall promptly file with the Trustee and any Exchange Agent other than the
Trustee an Officers' Certificate setting forth the Exchange Price after such
adjustment and setting forth a brief

                                       64


statement of the facts requiring such adjustment. Promptly after delivery of
such certificate, Navistar shall prepare a notice of such adjustment of the
Exchange Price setting forth the adjusted Exchange Price and the date on which
each adjustment becomes effective and shall mail such notice of such adjustment
of the Exchange Price to each holder of Exchangeable Notes at his or her last
address appearing on the Register of holders maintained for that purpose within
20 days of the effective date of such adjustment. Failure to deliver such notice
shall not affect the legality or validity of any such adjustment.

     (k)  In any case in which this Section 12.5 provides that an adjustment
shall become effective immediately after a Record Date for an event, Navistar
may defer until the occurrence of such event issuing to the holder of any
Exchangeable Note exchanged after such Record Date and before the occurrence of
such event the additional shares of Common Stock issuable upon such exchange by
reason of the adjustment required by such event over and above the Common Stock
issuable upon such exchange before giving effect to such adjustment.

     (l)  For purposes of this Section 12.5, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
Navistar but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. Navistar shall not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of Navistar.

     (m)  In lieu of making any adjustment to the Exchange Price pursuant to
Section 12.5(e), Navistar may elect to reserve the amount and kind of
distributions for distribution to the holders of Exchangeable Notes upon the
exchange of the Exchangeable Notes so that any such holder exchanging
Exchangeable Notes will receive upon such exchange, in addition to the shares of
Common Stock and other items to which such holder is entitled, the full amount
and kind of distributions which such holder would have received if such holder
had, immediately prior to the Record Date for such distribution, exchanged its
Exchangeable Notes into Common Stock, together with any interest accrued with
respect to such amount, in accordance with this Section 12.5(m). Navistar may
make such election by providing an Officers' Certificate to the Trustee to such
effect on or prior to the payment date for any such distribution and depositing
with the Trustee on or prior to such date an amount and kind of distribution
equal to the aggregate amount that the holders of Exchangeable Notes would have
received if such holders had, immediately prior to the Record Date for such
distribution, exchanged all of the Exchangeable Notes into Common Stock. Any
such funds so deposited by Navistar with the Trustee shall be invested by the
Trustee pursuant to arrangements reasonably satisfactory to the Trustee in U.S.
Government Obligations with a maturity not more than three (3) months from the
date of issuance. Upon exchange of Exchangeable Notes by a holder thereof, such
holder shall be entitled to receive, in addition to the Common Stock issuable
upon exchange, an amount of cash equal to the amount such holder would have
received if such holder had, immediately prior to the Record Date for such
distribution, exchanged its Exchangeable Note into Common Stock, along with such
holder's pro-rata share of any accrued interest earned as a consequence of the
investment of such funds. Promptly after making an election pursuant to this
Section 12.5(m), Navistar shall give or shall cause to be given notice to all
holders of Exchangeable Notes of such election, which notice shall state the
amount of cash per $1,000 principal amount of Exchangeable Notes such holders
shall be entitled to receive (excluding interest) upon exchange of the
Exchangeable Notes as a consequence of Navistar having made such election.

                                       65


SECTION 12.6   Effect of Reclassification, Consolidation, Merger or Sale.

     If any of the following events occur: (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger, share
exchange or combination of Navistar with another corporation as a result of
which holders of Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, or (iii) any sale or conveyance of the properties and assets
of Navistar as an entirety or substantially as an entirety to any other
corporation as a result of which holders of Common Stock shall be entitled to
receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock, then Navistar or the successor
or purchasing corporation, as the case may be, shall execute with the Trustee a
supplemental indenture (which shall comply with the TIA as in force at the date
of execution of such supplemental indenture if such supplemental indenture is
then required to so comply) providing that the Exchangeable Notes shall be
exchangeable into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, share exchange, combination, sale or conveyance
by a holder of a number of shares of Common Stock issuable upon exchange of the
Exchangeable Notes (assuming, for such purposes, a sufficient number of
authorized shares of Common Stock available to exchange all such Exchangeable
Notes) immediately prior to such reclassification, change, consolidation,
merger, share exchange, combination, sale or conveyance assuming such holder of
Common Stock did not exercise his or her rights of election, if any, as to the
kind or amount of securities, cash or other property receivable upon such
consolidation, merger, share exchange, sale or conveyance (provided that, if the
kind or amount of securities, cash or other property receivable upon such
consolidation, merger, share exchange, sale or conveyance is not the same for
each share of Common Stock in respect of which such rights of election have not
been exercised ("non- electing share"), then, for the purposes of this Section
12.6, the kind and amount of securities, cash or other property receivable upon
such consolidation, merger, share exchange, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Such supplemental indenture
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 12. If, in the case
of any such reclassification, change, consolidation, merger, share exchange,
combination, sale or conveyance, the stock or other securities and assets
receivable thereupon by a holder of shares of Common Stock includes shares of
stock or other securities and assets of a corporation other than the successor
or purchasing corporation, as the case may be, in such reclassification, change,
consolidation, merger, share exchange, combination, sale or conveyance, then
such supplemental indenture shall also be executed by such other corporation and
shall contain such additional provisions to protect the interests of the holders
of the Exchangeable Notes as the Board of Directors shall reasonably consider
necessary by reason of the foregoing.

     Navistar shall cause notice of the execution of such supplemental indenture
to be mailed to each holder of Exchangeable Notes at his or her address
appearing on the Register within 20 days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of such
supplemental indenture.

                                       66


     The above provisions of this Section 12.6 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, share exchanges,
combinations, sales and conveyances.

     If this Section 12.6 applies to any event or occurrence, Section 12.5 shall
not apply.

SECTION 12.7   Taxes on Shares Issued.

     The issue of stock certificates on exchanges of Exchangeable Notes shall be
made without charge to the exchanging holder except for any withholding, tax or
duty in respect of the issue thereof. Neither the Company nor Navistar shall,
however, be required to pay any withholding, tax or duty which may be required
in respect of any Exchangeable Note exchanged, and neither the Company nor
Navistar shall be required to issue or deliver any such stock certificate unless
and until the person or persons requesting the issue thereof shall have paid to
Navistar the amount of such withholding, tax or duty or shall have established
to the satisfaction of Navistar that such withholding, tax or duty has been
paid.

SECTION 12.8   Reservation of Shares; Shares to Be Fully Paid; Listing of
               Common Stock.

     Navistar shall provide, free from preemptive rights, out of its authorized
but unissued shares or shares held in treasury, sufficient shares to provide for
the exchange of the Exchangeable Notes from time to time as such Exchangeable
Notes are presented for exchange.

     Before taking any action which would cause an adjustment reducing the
Exchange Price below the then par value, if any, of the shares of Common Stock
issuable upon exchange of the Exchangeable Notes, Navistar shall take all
corporate action which may, in the opinion of its counsel, be necessary in order
that Navistar may validly and legally issue shares of such Common Stock at such
adjusted Exchange Price.

     Navistar covenants that all shares of Common Stock issued upon exchange of
Exchangeable Notes will be fully paid and non- assessable by Navistar and free
from all taxes, liens and charges with respect to the issue thereof.

     Navistar further covenants that no later than the date the Shelf
Registration Statmeent (as defined in the Registration Rights Agreement) is
declared effective and as long as the Common Stock is listed on the New York
Stock Exchange, or its successor, Navistar shall cause all Common Stock issuable
upon exchange of the Exchangeable Notes to be eligible for such listing in
accordance with, and at the times required under, the requirements of such
market, and if at any time thereafter the Common Stock becomes quoted on the
Nasdaq National Market or listed on any other national securities exchange,
Navistar shall cause all Common Stock issuable upon exchange of the Exchangeable
Notes to be so quoted or listed and kept so quoted or listed.

SECTION 12.9   Responsibility of Trustee.

     The Trustee shall not at any time be under any duty of responsibility to
any holders of Exchangeable Notes to determine whether any facts exist which may
require any adjustment of the Exchange Price, or with respect to the nature or
extent or calculation of any such adjustment when made, or with respect to the
method employed, or herein or in any supplemental indenture

                                       67


provided to be employed, in making the same. The Trustee shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the exchange of any Exchangeable Note; and the
Trustee makes no representations with respect thereto. Subject to the provisions
of Section 7.1, the Trustee shall not be responsible for any failure of the
Company or Navistar to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property or cash upon the surrender of
any Exchangeable Note for the purpose of exchange or to comply with any of the
duties, responsibilities or covenants of the Company or Navistar contained in
this Article 12. Without limiting the generality of the foregoing, the Trustee
shall not have any responsibility to determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to Section 12.6
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by holders of Exchangeable Notes upon the
exchange of their Exchangeable Notes after any event referred to in such Section
12.6 or to any adjustment to be made with respect thereto, but, subject to the
provisions of Section 7.1, may accept as conclusive evidence of the correctness
of any such provisions, and shall be protected in relying upon, the Officers'
Certificate and Opinion of Counsel (which Navistar shall be obligated to file
with the Trustee prior to the execution of any such supplemental indenture) with
respect thereto.

SECTION 12.10  Notice to Holders Prior to Certain Actions.

     If:

     (a)  Navistar declares a dividend (or any other distribution) on its Common
Stock (other than in cash out of retained earnings or other than a dividend that
results in an adjustment in the Exchange Price pursuant to Section 12.5 as to
which Navistar has made an election in accordance with Section 12.5(m));

     (b)  Navistar authorizes the granting to all or substantially all of the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any share of any class of Common Stock or any other rights or warrants (other
than rights or warrants referred to in the second paragraph of Section 12.5(d));

     (c)  there is any reclassification of the Common Stock (other than a
subdivision or combination of outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
any consolidation, merger or share exchange to which Navistar is a party and for
which approval of any shareholders of Navistar is required, or the sale or
transfer of all or substantially all of the assets of Navistar; or

     (d)  there is any voluntary or involuntary dissolution, liquidation or
winding-up of Navistar;

then Navistar shall cause to be filed with the Trustee and to be mailed to each
holder of Exchangeable Notes at his or her address appearing on the Register
maintained for that purpose as promptly as possible but in any event at least 15
days prior to the applicable date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants, or, if a record is not to be taken, the date
as of which

                                       68


the holders of Common Stock of record to be entitled to such dividend,
distribution or rights are to be determined, or (y) the date on which such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding-up. Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of such dividend, distribution, reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation or winding-up.

SECTION 12.11  Restriction on Common Stock Issuable Upon Exchange.

     (a)  Shares of Common Stock to be issued upon exchange of Exchangeable
Notes prior to the effectiveness of a Shelf Registration Statement shall be
physically delivered in certificated form to the holders exchanging such
Securities, and the certificate representing such shares of Common Stock shall
bear the Restricted Common Stock Legend unless removed in accordance with
Section 12.11(c).

     (b)  If (i) shares of Common Stock to be issued upon exchange of an
Exchangeable Note prior to the effectiveness of a Shelf Registration Statement
are to be registered in a name other than that of the holder of such
Exchangeable Note or (ii) shares of Common Stock represented by a certificate
bearing the Restricted Common Stock Legend are transferred subsequently by such
holder, then, unless the Shelf Registration Statement has become effective and
such shares are being transferred pursuant to the Shelf Registration Statement,
the holder must deliver to the transfer agent for the Common Stock a certificate
in substantially the form of Exhibit C as to compliance with the restrictions on
transfer applicable to such shares of Common Stock, and neither the transfer
agent nor the registrar for the Common Stock shall be required to register any
transfer of such Common Stock not so accompanied by a properly completed
certificate.

     (c)  Except in connection with a Shelf Registration Statement, if
certificates representing shares of Common Stock are issued upon the
registration of transfer, exchange or replacement of any other certificate
representing shares of Common Stock bearing the Restricted Common Stock Legend,
or if a request is made to remove such Restricted Common Stock Legend from
certificates representing shares of Common Stock, the certificates so issued
shall bear the Restricted Common Stock Legend, or the Restricted Common Stock
Legend shall not be removed, as the case may be, unless there is delivered to
Navistar such satisfactory evidence, which, in the case of a transfer made
pursuant to Rule 144 under the Securities Act, may include an opinion of counsel
as may be reasonably required by Navistar, that neither the legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under
the Securities Act or that such shares of Common Stock are securities that are
not "restricted" within the meaning of Rule 144 under the Securities Act. Upon
provision to Navistar of such reasonably satisfactory evidence, Navistar shall
cause the transfer agent for the Common Stock to countersign and deliver
certificates representing shares of Common Stock that do not bear the legend.

                                       69


                                   ARTICLE 13

                                   ASSUMPTION

SECTION 13.1   Assumption of the Notes

     Navistar may, at its option, assume the obligations of the Company under
the Exchangeable Notes and this Indenture provided that:

     (a)  no Ratings Decline will result;

     (b)  no Event of Default under this Indenture shall have occurred and be
continuing or shall result from the assumption;

     (c)  Navistar assumes the obligations of the Company under the Exchangeable
Notes and this Indenture and the performance of each of the Company's covenants
under the Exchangeable Notes and this Indenture except as provided below,
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; and

     (d)  Navistar shall have delivered to the Trustee an officers' certificate
and an Opinion of counsel, each stating that such transaction and the
supplemental transaction comply with the indenture and all conditions precedent
in the indenture relating to such transaction have been satisfied.

     Upon the assumption, the Exchangeable Notes will be general unsecured
obligations of Navistar and will be subordinated in right of payment to all of
the Company's existing and future senior indebtedness, and Navistar will succeed
to, and be substituted for the Company, and may exercise the Company's right and
power, under this Indenture with the same effect as if Navistar had been named
as the Company in this Indenture and all references in this Indenture to the
Company shall be to Navistar, except that (1) clauses (1)(b), (2)(b) and (3)(b)
in the definition of Change of Control shall not apply to Navistar as successor
and (2) Navistar, as successor, shall be permitted to effect a Permitted Joint
Venture notwithstanding the prohibition on the Company from selling, assigning,
transferring, leasing, conveying or otherwise disposing of all or substantially
all of its assets, and thereafter, the Company will be relieved of all further
obligations and covenants under the Exchangeable Notes and this Indenture.

                                       70


     IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed and attested, all as of the date first above written, signifying their
agreements contained in this Indenture.

                                        NAVISTAR FINANCIAL CORPORATION

                                        By: /s/ Andrew J. Cederoth
                                            ------------------------------------
                                        Name:  Andrew J. Cederoth
                                        Title: Vice President and Treasurer

                                        NAVISTAR INTERNATIONAL CORPORATION

                                        By: /s/ Thomas M. Hough
                                            ------------------------------------
                                        Name:  Thomas M. Hough
                                        Title: Vice President and Treasurer

                                        BNY MIDWEST TRUST COMPANY, as Trustee

                                        By: /s/ Daniel G. Donovon
                                            ------------------------------------
                                        Name:  Daniel G. Donovon
                                        Title: Assistant Vice President


                                    EXHIBIT A
                               (Face of Security)

                           [Global Securities Legend]

     [The following legend shall appear on the face of each Global Security:

     THIS EXCHANGEABLE NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY,
THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS EXCHANGEABLE NOTE
FOR ALL PURPOSES.]

     [The following legend shall appear on the face of each Global Security for
which The Depository Trust Company is to be the Depositary:

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY THE AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR REGISTERED
EXCHANGEABLE NOTES IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES
REFERRED TO IN THE INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT
AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OR SUCH
SUCCESSOR DEPOSITARY.]

                         [Restricted Securities Legend]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE
ISSUANCE HEREOF (OR ANY APPLICABLE PREDECESSOR SECURITY HEREOF) OR (Y) BY ANY
HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144 UNDER THE
SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE

                                       A-1


MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) IN AN OFFSHORE TRANSACTION
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER OR (2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
PARAGRAPH (k)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. IN
ANY CASE THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY
HEDGING TRANSACTION WITH REGARD TO THIS SECURITY OR ANY COMMON STOCK ISSUABLE
UPON EXCHANGE OF THIS SECURITY EXCEPT AS PERMITTED BY THE SECURITIES ACT.

                                       A-2


No. _______                                                         $
                                                               CUSIP ___________

                         NAVISTAR FINANCIAL CORPORATION

                 4.75 % SUBORDINATED EXCHANGEABLE NOTE DUE 2009

Navistar Financial Corporation promises to pay to

or registered assigns,

the principal sum of                           on April 1, 2009

Interest Payment Dates: April 1 and October 1, commencing October 1, 2002

Regular Record Dates: March 15, and September 15.

                                       NAVISTAR FINANCIAL CORPORATION

                                       By:
                                          --------------------------------------
                                       Title:

                          Certificate of Authentication

This is one of the Exchangeable Notes described in the within- mentioned
Indenture.

                                             BNY MIDWEST TRUST COMPANY,
                                             as Trustee

                                             By:
                                                --------------------------------
                                             Authorized Signatory
                                             Dated:

                                       A-3


                               (Back of Security)

                                       A-4


                         NAVISTAR FINANCIAL CORPORATION

                  4.75% SUBORDINATED EXCHANGEABLE NOTE DUE 2009

1.   INTEREST. Navistar Financial Corporation, a Delaware corporation (the
     "Company"), promises to pay interest on the principal amount of this
     Exchangeable Note at the rate per annum shown above. The Company will pay
     interest semi-annually in arrears on April 1 and October 1 of each year,
     beginning October 1, 2002. Interest on the Exchangeable Notes will accrue
     from the most recent interest payment date to which interest has been paid
     or, if no interest has been paid, from March 25, 2002. Interest (including
     any Liquidated Damages) will be computed on the basis of a 360-day year
     composed of twelve 30-day months and the actual number of days elapsed in
     any partial month.

2.   METHOD OF PAYMENT. The Company will pay interest (and Liquidated Damages
     payable by it and Navistar International Corporation ("Navistar") shall pay
     Liquidated Damages payable by it, if any) on the Exchangeable Notes (except
     defaulted interest) to the person in whose name each Exchangeable Note is
     registered at the close of business on the March 15 or September 15
     immediately preceding the relevant interest payment date (each a "Regular
     Record Date") (other than with respect to an Exchangeable Note or portion
     thereof redeemed or repurchased in connection with a Fundamental Change on
     a repurchase date, during the period from the close of business on a
     Regular Record Date to (but excluding) the next succeeding interest payment
     date, in which case accrued interest (and Liquidated Damages, if any) shall
     be payable (unless such Exchangeable Note or portion thereof is exchanged)
     to the holder of the Exchangeable Note or portion thereof redeemed or
     repurchased in accordance with the applicable repurchase provisions of the
     Indenture). The holder must surrender Exchangeable Notes to a Paying Agent
     to collect principal payments. The Company will pay the principal of, and
     interest (including Liquidated Damages payable by it and Navistar shall pay
     Liquidated Damages payable by it, if any) on, the Exchangeable Notes at the
     office or agency of the Company maintained for such purpose, in money of
     the United States that at the time of payment is legal tender for payment
     of public and private debts. Until otherwise designated by the Company, the
     Company's office or agency maintained for such purpose will be the
     principal Corporate Trust Office of the Trustee (as defined below).
     However, the Company may pay principal, and interest (including Liquidated
     Damages payable by it and Navistar shall pay Liquidated Damages payable by
     it, if any) by check payable in such money, and may mail such check to the
     holders of the Exchangeable Notes at their respective addresses as set
     forth in the Register of holders of Exchangeable Notes.

3.   PAYING AGENT AND REGISTRAR. BNY Midwest Trust Company (together with any
     successor Trustee under the Indenture referred to below, the "Trustee"),
     will act as Paying Agent and Registrar. The Company may change the Paying
     Agent, Registrar or co-registrar without prior notice. Subject to certain
     limitations in the Indenture, the Company or any of its subsidiaries may
     act in any such capacity.

4.   INDENTURE. The Company issued the Exchangeable Notes under an Indenture
     dated as of March 25, 2002 (the "Indenture") by and between the Company,
     Navistar and the Trustee. The terms of the Exchangeable Notes include those
     stated in the Indenture and

                                       A-5


     those made part of the Indenture by reference to the Trust Indenture Act of
     1939 (15 U.S. Code (Sections 77aaa-77bbbb) (the "TIA") as in effect on the
     date of the Indenture. The Exchangeable Notes are subject to, and qualified
     by, all such terms, certain of which are summarized hereon, and holders are
     referred to the Indenture and the TIA for a statement of such terms. The
     Exchangeable Notes are unsecured general obligations of the Company limited
     to (except as otherwise provided in the Indenture) $220,000,000 in
     aggregate principal amount. Capitalized terms not defined below have the
     same meaning as is given them in the Indenture.

5.   FUNDAMENTAL CHANGE. Upon the occurrence of a Fundamental Change, the
     Company shall make a Fundamental Change Offer to repurchase all outstanding
     Exchangeable Notes at a price equal to 100% of the aggregate principal
     amount of the Exchangeable Notes, plus (subject to paragraph 2) accrued and
     unpaid interest (and Liquidated Damages, if any) to, but excluding, the
     date of repurchase, such offer to be made as provided in the Indenture. To
     accept the Fundamental Change Offer, the holder hereof must comply with the
     terms thereof, including surrendering this Exchangeable Note, with the
     "Option of Holder to Elect Repurchase" portion hereof completed, to the
     Company, a depositary, if appointed by the Company, or a Paying Agent, at
     the address specified in the notice of the Fundamental Change Offer mailed
     to holders as provided in the Indenture, prior to termination of the
     Fundamental Change Offer.

6.   DENOMINATIONS, TRANSFER AND EXCHANGE. The Exchangeable Notes are in
     registered form without coupons in denominations of $1,000 and integral
     multiples of $1,000. The transfer of Exchangeable Notes may be registered
     and Exchangeable Notes may be exchanged as provided in the Indenture. As a
     condition of transfer, the Registrar and the Trustee may require a holder,
     among other things, to furnish appropriate endorsements and transfer
     documents, and the Company and the Registrar may require a holder to pay
     any taxes and fees required by law or permitted by the Indenture. The
     Company or the Registrar need not exchange or register the transfer of any
     Exchangeable Note or portion of an Exchangeable Note submitted for
     repurchase.

7.   PERSONS DEEMED OWNERS. The registered holder of an Exchangeable Note may be
     treated as its owner for all purposes.

8.   AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the
     Exchangeable Notes may be amended or supplemented with the consent of the
     holders of at least a majority in principal amount of the then outstanding
     Exchangeable Notes, and any existing default may be waived with the consent
     of the holders of a majority in principal amount of the then outstanding
     Exchangeable Notes.

     Without the consent of any holder, the Indenture or the Exchangeable Notes
may be amended to: (a) cure any ambiguity or correct or supplement any defective
or inconsistent provision contained in the Indenture, or make any other changes
in the provisions of the Indenture which the Company and the Trustee may deem
necessary or desirable provided such amendment does not materially and adversely
affect the legal rights under the Indenture of the holders of Exchangeable
Notes; (b) provide for uncertificated Exchangeable Notes in addition to or in
place of certificated Exchangeable Notes; (c) evidence the succession of another
person to

                                       A-6


the Company and providing for the assumption by such successor of the covenants
and obligations of the Company thereunder and in the Exchangeable Notes as
permitted by Section 5.1 of the Indenture; (d) provide for exchange rights
and/or repurchase rights of holders of Exchangeable Notes in the event of
consolidation, merger, share exchange or sale of all or substantially all of the
assets of the Company as required to comply with Sections 5.1 and/or 12.6 of the
Indenture; (e) reduce the Exchange Price; (f) evidence and provide for the
acceptance of the appointment under the Indenture of a successor Trustee; (g)
make any change that would provide any additional rights or benefits to the
holders of Exchangeable Notes or that does not adversely affect the legal rights
under the Indenture of any such holder; or (h) comply with the requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the TIA.

     Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Exchangeable Notes held by a non-consenting holder): (a)
reduce the principal amount of Exchangeable Notes whose holders must consent to
an amendment, supplement or waiver; (b) reduce the principal of or change the
fixed maturity of any Exchangeable Note; (c) reduce the rate of or change the
time for payment of interest, including defaulted interest, or Liquidated
Damages on any Exchangeable Notes; (d) waive a Default or Event of Default in
the payment of principal of, or interest or Liquidated Damages on, the
Exchangeable Notes (except a rescission of acceleration of the Exchangeable
Notes by the holders of at least a majority in aggregate principal amount of the
Exchangeable Notes and a waiver of the payment default that resulted from such
acceleration); (e) make the principal of, or interest or Liquidated Damages on,
any Exchangeable Note payable in money other than as provided for in the
Indenture and in the Exchangeable Notes; (f) make any change in the provisions
of the Indenture relating to waivers of past Defaults or the rights of holders
of Exchangeable Notes to receive payments of principal of, or interest or
Liquidated Damages, on the Exchangeable Notes; (g) except as permitted by the
Indenture (including Section 9.1(a)), increase the Exchange Price or modify the
provisions of the Indenture relating to exchange of the Exchangeable Notes in a
manner adverse to the holders thereof or (h) make any change to the ability of
holder of Exchangeable Notes to enforce their rights under the Indenture or the
provisions of clauses (a) through (h) of Section 9.2 of the Indenture.

9.   DEFAULTS AND REMEDIES. An Event of Default is: (a) default in payment of
     the principal of, the Exchangeable Notes, when due at maturity, upon
     repurchase, upon acceleration or otherwise; (b) default for 30 days or more
     in payment of any installment of interest or Liquidated Damages on the
     Exchangeable Notes; (c) default by the Company for 60 days or more after
     notice in the observance or performance of any other covenants in the
     Indenture; (d) default in the payment of the Fundamental Change Payment in
     respect of the Exchangeable Notes on the date therefor; (e) failure to
     provide timely notice of a Fundamental Change; (f) certain events involving
     bankruptcy, insolvency or reorganization of the Company; or (g) the Company
     or any of its subsidiaries fails to pay, at final maturity, indebtedness
     (other than indebtedness incurred in connection with a Qualified
     Securitization Transaction) that is in excess of $50 million principal
     amount, or acceleration resulting from an Event of Default of any
     indebtedness (other than indebtedness incurred in connection with a
     Qualified Securitization Transaction) of the Company or any of its
     subsidiaries in an aggregate principal amount in excess of $50 million. If
     an Event of Default occurs and is continuing, the Trustee or the holders of
     at

                                       A-7


     least 25% in principal amount of the then outstanding Exchangeable Notes
     may declare the unpaid principal of, and accrued and unpaid interest and
     Liquidated Damages, if any, on, all Exchangeable Notes then outstanding to
     be due and payable immediately, except that in the case of an Event of
     Default arising from certain events of bankruptcy, insolvency, or
     reorganization with respect to the Company, all outstanding Exchangeable
     Notes become due and payable without further action or notice. Holders of
     Exchangeable Notes may not enforce the Indenture or the Exchangeable Notes
     except as provided in the Indenture. The Trustee may require an indemnity
     satisfactory to it before it enforces the Indenture or the Exchangeable
     Notes. Subject to certain limitations, holders of a majority in principal
     amount of the then outstanding Exchangeable Notes may direct the Trustee in
     its exercise of any trust or power. The Trustee may withhold from holders
     notice of any continuing default (except a default in payment of principal,
     interest or Liquidated Damages, if applicable) if it determines that
     withholding notice is in their interests. The Company must furnish annual
     compliance certificates to the Trustee.

10.  TRUSTEE DEALINGS WITH THE COMPANY AND NAVISTAR. The Trustee or any of its
     Affiliates, in their individual or any other capacities, may make or
     continue loans to or guaranteed by, accept deposits from and perform
     services for the Company or Navistar or their respective Affiliates and may
     otherwise deal with the Company or Navistar or their respective Affiliates
     as if it were not Trustee.

11.  NO RECOURSE AGAINST OTHERS. No director, officer, employee, shareholder or
     Affiliate, as such, of the Company or Navistar shall have any liability for
     any obligations of the Company or Navistar under the Exchangeable Notes or
     the Indenture or for any claim based on, in respect of or by reason of such
     obligations or their creation. Each holder by accepting an Exchangeable
     Note waives and releases all such liability. The waiver and release are
     part of the consideration for the Exchangeable Notes.

12.  AUTHENTICATION. This Exchangeable Note shall not be valid until
     authenticated by the manual signature of the Trustee or an authenticating
     agent.

13.  ABBREVIATIONS. Customary abbreviations may be used in the name of a holder
     or an assignee, such as: TEN CO = tenants in common, TEN ENT = tenants by
     the entireties, JT TEN = joint tenants with right of survivorship and not
     as tenants in common, CUST = Custodian and U/G/M/A = Uniform Gifts to
     Minors Act.

14.  EXCHANGE. Subject to and upon compliance with the provisions of the
     Indenture, the registered holder of this Exchangeable Note has the right at
     any time on or before the close of business on the last Trading Day prior
     to the Maturity Date (or (a) in case this Exchangeable Note or any portion
     hereof is subject to a duly completed election for repurchase, on or before
     the close of business on the Fundamental Change Payment Date (unless the
     Company defaults in payment due upon repurchase or such holder elects to
     withdraw the submission of such election to repurchase) or (b) in case this
     Exchangeable Note or any portion hereof is subject to a notice of
     redemption under Section 3.4 of the Indenture, on or before the close of
     business on the business day preceding the applicable redemption date) to
     exchange the principal amount hereof, or any portion of such principal
     amount which is $1,000 or an integral multiple thereof, into that number of
     fully

                                       A-8


     paid and non-assessable shares of common stock of Navistar International
     Corporation, a Delaware corporation, ("Common Stock") obtained by dividing
     the principal amount of the Exchangeable Note or portion thereof to be
     exchanged by the Exchange Price of $55.73 per share, as adjusted from time
     to time as provided in the Indenture (the "Exchange Price"), upon surrender
     of this Exchangeable Note to Navistar at the office or agency maintained
     for such purpose (and at such other offices or agencies designated for such
     purpose by Navistar), accompanied by written notice of exchange duly
     executed (and if the shares of Common Stock to be issued on exchange are to
     be issued in any name other than that of the registered holder of this
     Exchangeable Note by instruments of transfer, in form satisfactory to the
     Company and Navistar, duly executed by the registered holder or its duly
     authorized attorney) and, in case such surrender shall be made during the
     period from the close of business on the Regular Record Date immediately
     preceding any Interest Payment Date through the close of business on the
     last Trading Day immediately preceding such Interest Payment Date, also
     accompanied by payment, in funds acceptable to the Company, of an amount
     equal to the interest and Liquidated Damages, if any, otherwise payable on
     such Interest Payment Date on the principal amount of this Exchangeable
     Note then being exchanged. Subject to the aforesaid requirement for a
     payment in the event of exchange after the close of business on a Regular
     Record Date immediately preceding an Interest Payment Date, no adjustment
     shall be made on exchange for interest or Liquidated Damages accrued hereon
     or for dividends on Common Stock delivered on exchange. The right to
     exchange this Exchangeable Note is subject to the provisions of the
     Indenture relating to exchange rights in the case of certain
     consolidations, mergers, share exchanges or sales or transfers of
     substantially all Navistar's assets.

     Navistar shall not issue fractional shares or scrip representing fractions
of shares of Common Stock upon any such exchange, but shall pay cash in lieu of
such fractional shares in the manner described in the Indenture.

15.  REGISTRATION AGREEMENT. The holder of this Exchangeable Note is entitled to
     the benefits of a Registration Agreement, dated as of March 25, 2002, by
     and among the Company, Navistar and the Initial Purchasers (the
     "Registration Agreement"). Pursuant to the Registration Agreement, the
     Company and Navistar have agreed for the benefit of the holders of the
     Exchangeable Notes and the Common Stock issued and issuable upon exchange
     of the Exchangeable Notes, that (i) they will, at their cost, within 90
     days after the Issue Date, file a shelf registration statement (the "Shelf
     Registration Statement") with the Securities and Exchange Commission (the
     "Commission") with respect to resales of the Exchangeable Notes and the
     Common Stock issuable upon exchange thereof, (ii) the Company and Navistar
     will use their reasonable best efforts to cause such Shelf Registration
     Statement to be declared effective by the Commission under the Securities
     Act within 210 days after the Issue Date and (iii) the Company and Navistar
     will use their reasonable best efforts to keep such Shelf Registration
     Statement continuously effective under the Securities Act until the
     earliest of (1) the latest of the second anniversary of (a) the Issue Date,
     (b) the last date on which any Exchangeable Notes are issued upon exercise
     of the Initial Purchasers' over-allotment option or (c) the last date on
     which any unregistered Navistar Common Stock is issued or issuable in
     exchange for Exchangeable Notes; (2) the date on which the Exchangeable
     Notes and the

                                       A-9


     unregistered Common Stock issuable upon their exchange may be sold by
     non-affiliates of Navistar and Navistar Financial pursuant to paragraph (k)
     of Rule 144 (or any successor provision) promulgated by the SEC under the
     Securities Act; (3) the date as of which all the Exchangeable Notes and the
     Common Stock issuable upon their exchange have been sold under Rule 144
     under the Securities Act (or any similar provision then in force) or (4)
     the date as of which all the Exchangeable Notes or the Common Stock
     issuable upon their exchange have been sold pursuant to the Shelf
     Registration.

     If the Shelf Registration Statement (i) is not filed with the Commission on
or prior to 90 days, or has not been declared effective by the Commission within
210 days, after the Issue Date or (ii) is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by a
replacement shelf registration statement filed and declared effective) or cease
to be usable (including, without limitation, as a result of a Suspension Period
as defined below) for the offer and sale of Transfer Restricted Securities (as
defined below) for a period of time (including any Suspension Period) which
shall exceed 60 days in the aggregate in any 12-month period during the period
beginning on the Issue Date and ending on the second anniversary of the latest
of (a) the Issue Date, (b) the second anniversary of the last date on which any
Exchangeable Notes are issued upon exercise of the Initial Purchasers'
over-allotment option and (c) the last date on which any unregistered Navistar
Common Stock is issued or issuable in exchange for the Exchange Notes (each such
event referred to in clauses (i) and (ii) being referred to herein as a
"Registration Default"), the Company will pay liquidated damages to each holder
of Transfer Restricted Securities that are Exchangeable Notes and Navistar will
pay liquidated damages to each holder of Transfer Restricted Securities that are
Common Stock (together, "Liquidated Damages") which has complied with its
obligations under the Registration Agreement. The amount of Liquidated Damages
payable during any period in which a Registration Default shall have occurred
and be continuing is that amount which is equal to one-quarter of one percent
(25 basis points) per annum per $1,000 principal amount of Exchangeable Notes
and $2.50 per annum per 17.944 shares of Common Stock (subject to adjustment
from time to time in the event of a stock split, stock recombination, stock
dividend and the like) constituting Transfer Restricted Securities for the first
90 days during which a Registration Default has occurred and is continuing and
one-half of one percent (50 basis points) per annum per $1,000 principal amount
of Exchangeable Notes and $5.00 per annum per 17.944 shares of Common Stock
(subject to adjustment as set forth above) constituting Transfer Restricted
Securities for any additional days during which such Registration Default has
occurred and is continuing. All accrued Liquidated Damages will be paid by check
on each Damages Payment Date (as defined in the Registration Agreement), and
Liquidated Damages will be calculated on the basis of a 360-day year consisting
of twelve 30-day months. Following the cure of a Registration Default,
Liquidated Damages will cease to accrue with respect to such Registration
Default.

     "Transfer Restricted Securities" means each Exchangeable Note and each
share of Common Stock issued on exchange thereof until the date on which such
Exchangeable Note or share, as the case may be, (i) has been transferred
pursuant to the Shelf Registration Statement or another registration statement
covering such Exchangeable Note or share which has been filed with the
Commission pursuant to the Securities Act, in either case after such
registration statement has become and while such registration statement is
effective under the Securities Act, (ii) has been transferred pursuant to Rule
144 under the Securities Act (or any similar provision

                                      A-10


then in force), or (iii) may be sold or transferred pursuant to Rule 144(k)
under the Securities Act (or any similar provision then in force).

     Pursuant to the Registration Agreement, the Company and Navistar may
suspend the use of the prospectus which is a part of the Shelf Registration
Statement for a period not to exceed 30 days in any three-month period or for
three periods not to exceed an aggregate of 60 days in any twelve-month period
under certain circumstances (each, a "Suspension Period"); provided that the
existence of a Suspension Period will not prevent the occurrence of a
Registration Default or otherwise limit the obligation of the Company or
Navistar to pay Liquidated Damages.

     The above description of certain provisions of the Registration Agreement
is qualified by reference to, and is subject in its entirety to, the more
complete description thereof contained in the Registration Agreement.

     The Company will furnish to any holder upon written request and without
charge a copy of the Indenture and the Registration Agreement. Requests may be
made to: Navistar Financial Corporation, 2850 West Golf Road, Rolling Meadows,
Illinois 60008, Attention: Investor Relations.

                                      A-11


                             FORM OF EXCHANGE NOTICE

To:  NAVISTAR INTERNATIONAL CORPORATION

     The undersigned beneficial owner of the Exchangeable Note hereby
irrevocably exercises the option to exchange this Exchangeable Note, or portion
hereof (which is $1,000 or an integral multiple thereof) below designated, into
shares of Common Stock of Navistar International Corporation in accordance with
the terms of the Indenture referred to in this Exchangeable Note, and directs
that the shares issuable and deliverable upon the exchange, together with any
check in payment for fractional shares and Exchangeable Notes representing any
unexchanged principal amount hereof, be issued and delivered to the beneficial
owner hereof unless a different name has been indicated below. If shares or any
portion of this Exchangeable Note not exchanged are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto. Any amount required to be paid by the undersigned
on account of interest, Liquidated Damages and taxes accompanies this
Exchangeable Note.

Dated:
Fill in for registration of shares if to be delivered, _________________________
   and Exchangeable Notes if to be issued, other
   than to and in the name of the beneficial owner     _________________________
   (Please Print):

                                                       _________________________
                                                       Signature(s)

                                                       Principal amount to be
                                                       exchanged (if less than
_____________________________________                  all);
            (Name)                                     _________________________
                                                                $___,000

_____________________________________                  _________________________
          (Street Address)                             Social Security or other
                                                       Taxpayer Identification
                                                       Number

____________________________________
     (City, State and Zip Code)

Signature Guarantee:

_____________________________________________
Signatures must be guaranteed by an eligible Guarantor Institution (banks,
brokers, dealers, savings and loan associations and credit unions) with
membership in an approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15 if shares are to be issued, or
Exchangeable Notes are to be delivered, other than to and in the name of the
registered holder(s).

                                      A-12


                                 ASSIGNMENT FORM

            To assign this Exchangeable Note, fill in the form below:
            (I) or (we) assign and transfer this Exchangeable Note to

________________________________________________________________________________
               (Insert assignee's social security or tax I.D. no.)

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint ____________________________________ agent to transfer
this Exchangeable Note on the books of the Company. The agent may substitute
another to act for him.

     Your Signature:    _______________________________________________
                        (Sign exactly as your name appears on the other
                                side of this Exchangeable Note)

     Date: ________________________________

     Medallion Signature Guarantee: _____________________________________ [FOR
INCLUSION ONLY IF THIS EXCHANGEABLE NOTE BEARS A RESTRICTED SECURITIES LEGEND]
In connection with any transfer of any of the Exchangeable Notes evidenced by
this certificate which are "restricted securities" (as defined in Rule 144 (or
any successor thereto) under the Securities Act), the undersigned confirms that
such Exchangeable Notes are being transferred:

     CHECK ONE BOX BELOW

     (1)       [_]    to the Company; or
     (2)       [_]    pursuant to and in compliance with Rule 144A under the
                      Securities Act of 1933; or
     (3)       [_]    pursuant to and in compliance with Regulation S under the
                      Securities Act of 1933; or
     (4)       [_]    pursuant to an exemption from registration under the
                      Securities Act of 1933 provided by Rule 144 thereunder.

                                      A-13


Unless one of the boxes is checked, the Registrar will refuse to register any of
the Exchangeable Notes evidenced by this certificate in the name of any person
other than the registered holder thereof; provided, however, that if box (3) or
(4) is checked, the Trustee may require, prior to registering any such transfer
of the Exchangeable Notes, such certifications and other information, and if box
(4) is checked such legal opinions, as the Company has reasonably requested in
writing, by delivery to the Trustee of a standing letter of instruction, to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933; provided that this paragraph shall not be applicable to any
Exchangeable Notes which are not "restricted securities" (as defined in Rule 144
(or any successor thereto) under the Securities Act).

Your Signature: _______________________________________________________
                      (Sign exactly as your name appears on the
                      other side of this Exchangeable Note)

Date: __________________________

Medallion Signature Guarantee: _________________________________

                                      A-14


                      OPTION OF HOLDER TO ELECT REPURCHASE

     If you wish to have this Exchangeable Note repurchased by the Company
pursuant to Section 4.6 of the Indenture, check the Box: [_]

     If you wish to have a portion of this Exchangeable Note purchased by the
Company pursuant to Section 4.6 of the Indenture, state the amount (in multiples
of $1,000): $_____.

Date: ________     Your Signature:______________________________________________
                   (Sign exactly as your name appears on the other side of this
                                 Exchangeable Note)

Medallion Signature Guarantee:________________________________________________

                                      A-15


                                    EXHIBIT B

                     FORM OF RESTRICTED COMMON STOCK LEGEND

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF NAVISTAR THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE
HEREOF (OR ANY APPLICABLE PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT
WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF
NAVISTAR AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE OTHER THAN (1) TO NAVISTAR, (2) IN AN OFFSHORE
TRANSACTION (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER OR (2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
PARAGRAPH (k)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. IN
ANY CASE THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY
HEDGING TRANSACTION WITH REGARD TO THIS SECURITY EXCEPT AS PERMITTED BY THE
SECURITIES ACT."

                                      B-1


                                    EXHIBIT C

                    FORM OF TRANSFER CERTIFICATE FOR TRANSFER
                           OF RESTRICTED COMMON STOCK

            (Transfers pursuant to Section 12.11(c) of the Indenture)

[NAME AND ADDRESS OF COMMON STOCK TRANSFER AGENT]

Re:  Navistar Financial Corporation 4.75% Subordinated Exchangeable Notes due
             2009 (the "Exchangeable Notes")

     Reference is hereby made to the Indenture dated as of March 25, 2002 (the
"Indenture") by and among Navistar Financial Corporation, Navistar International
Corporation and BNY Midwest Trust Company, as Trustee. Capitalized terms used
but not defined herein shall have the meanings given them in the Indenture.

     This letter relates to _________ shares of Common Stock represented by the
accompanying certificate(s) that were issued upon exchange of Exchangeable Notes
and which are held in the name of [name of transferor] (the "Transferor") to
effect the transfer of such Common Stock.

     In connection with the transfer of such shares of Common Stock, the
undersigned confirms that such shares of Common Stock are being transferred:

CHECK ONE BOX BELOW

     (1)       [_]    to Navistar; or
     (2)       [_]    pursuant to and in compliance with Regulation S under the
                      Securities Act of 1933; or
     (3)       [_]    pursuant to an exemption from registration under the
                      Securities Act of 1933 provided by Rule 144 thereunder.

                                       C-1


     Unless one of the boxes is checked, the transfer agent will refuse to
register any of the Common Stock evidenced by this certificate in the name of
any person other than the registered holder thereof; provided, however, that if
box (2) or (3) is checked, the transfer agent may require, prior to registering
any such transfer of the Common Stock such certifications and other information,
and if box (3) is checked such legal opinions, as the Company and Navistar have
reasonably requested in writing, by delivery to the transfer agent of a standing
letter of instruction, to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933.

                                              [Name of Transferor],

                                              By
                                                 -------------------------------

                                              Name:
                                                   -----------------------------

                                              Title:
                                                    ----------------------------

Dated:

                                      C-2

EX-4.2

                         NAVISTAR FINANCIAL CORPORATION

                 4.75% Subordinated Exchangeable Notes due 2009

                        Exchangeable for Common Stock of

                       NAVISTAR INTERNATIONAL CORPORATION

                          REGISTRATION RIGHTS AGREEMENT

                                                              New York, New York
                                                                  March 25, 2002

Salomon Smith Barney Inc.
Banc of America Securities LLC
  As Representatives of the Initial Purchasers
  Named in Schedule I to the Purchase Agreement
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

          Navistar Financial Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell (such issuance and sale, the "Initial
Placement") to the several parties named in Schedule I to the Purchase Agreement
(the "Initial Purchasers") for whom you (the "Representatives") are acting as
representatives, upon the terms set forth in a purchase agreement dated March
18, 2002 (the "Purchase Agreement"), $200,000,0000 aggregate principal amount
(plus up to an additional $20,000,000 aggregate principal amount to cover
over-allotments, if any) of its 4.75% Subordinated Exchangeable Notes due 2009
(the "Notes").

          Holders of the Notes may deliver their Notes to Navistar International
Corporation, a Delaware corporation ("Navistar"), which will, in exchange for
the Notes, deliver shares of Common Stock (as defined below), upon the terms and
subject to the conditions set forth in the Indenture (as defined below).

          As an inducement to you to enter into the Purchase Agreement and in
satisfaction of a condition to your obligations thereunder, the Issuers (as
defined herein) agree with you, (i) for your benefit and (ii) for the benefit of
the holders from time to time of the Notes and the Common Stock issuable upon
exchange of the Notes (including you), as follows:

          1.   DEFINITIONS. Capitalized terms used herein without definition
shall have the respective meanings set forth in the Purchase Agreement. As used
in this Agreement, the following capitalized terms shall have the following
meanings:

                                       A-1


          "Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.

          "Affiliate" of any specified person means any other person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities or by agreement or otherwise.

          "Broker-Dealer" means any broker or dealer registered as such under
the Exchange Act.

          "Business Day" has the meaning set forth in the Indenture.

          "Closing Date" means March 25, 2002.

          "Common Stock" means the common stock, par value $0.10 per share, of
Navistar, as it exists on the date of this Agreement and any other shares of
capital stock or other securities of Navistar into which such Common Stock may
be reclassified or changed, together with any and all other securities which may
from time to time be issuable upon exchange of Notes.

          "Default Rate" means 4.75% per annum.

          "DTC" means the Depository Trust Company or its successor.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.

          "Final Maturity Date" means April 1, 2009.

          "Holder" means a person who is a holder or beneficial owner (including
the Initial Purchasers) of any Notes or shares of Common Stock issued upon
exchange of Notes; provided that, unless otherwise expressly stated herein, only
registered holders of Notes or Common Stock issued on exchange of the Notes
shall be counted for purposes of calculating any proportion of holders entitled
to take any action or give notice pursuant to this Agreement.

          "Indenture" means the Indenture relating to the Notes dated as of
March 25, 2002, among the Company, Navistar and BNY Midwest Trust Company, as
trustee, as the same may be amended from time to time in accordance with the
terms thereof.

          "Initial Placement" has the meaning set forth in the preamble hereto.

          "Initial Purchasers" has the meaning set forth in the preamble hereto.

          "Interest Payment Date" shall mean April 1 and October 1.

                                       A-2


          "Issuers" means, collectively, the Company and Navistar.

          "Liquidated Damages" has the meaning set forth in Section 2(e) hereof.

          "Liquidated Damages Payment Date" means, with respect to the Notes or
the Common Stock issuable upon exchange of the Notes, as applicable, each
Interest Payment Date; and in the event that any Note, or portion thereof, is
called for redemption or surrendered for purchase by the Company and not
withdrawn pursuant to a Fundamental Change Offer (as defined in the Indenture),
the relevant redemption date or Fundamental Change Payment Date (as defined in
the Indenture), as the case may be, shall also be a Liquidated Damages Payment
Date with respect to such Note, or portion thereof, unless the Indenture
provides that accrued and unpaid interest on the Note (or portion thereof) to be
redeemed or repurchased, as the case may be, is to be paid to the person who was
the Record Holder thereof on a record date prior to such redemption date or
Fundamental Change Payment Date, as the case may be, in which case the relevant
Liquidated Damages Payment Date shall be the date on which interest is payable
to such Record Holder.

          "Losses" has the meaning set forth in Section 5(d) hereof.

          "Majority Holders" means the Holders of a majority of the then
outstanding aggregate principal amount of Notes registered under a Shelf
Registration Statement; PROVIDED that Holders of Common Stock issued upon
exchange of Notes shall be deemed to be Holders of the aggregate principal
amount of Notes from which such Common Stock was exchanged; and PROVIDED,
FURTHER, that Notes or Common Stock which have been sold or otherwise
transferred pursuant to the Shelf Registration Statement shall not be included
in the calculation of Majority Holders.

          "Majority Underwriting Holders" means, with respect to any
Underwritten Offering, the Holders of a majority of the then outstanding
aggregate principal amount of Notes registered under any Shelf Registration
Statement whose Notes are or are to be included in such Underwritten Offering;
PROVIDED that Holders of Common Stock issued upon exchange of the Notes shall be
deemed to be Holders of the aggregate principal amount of Notes from which such
Common Stock was exchanged.

          "Managing Underwriters" means the Underwriter or Underwriters that
shall administer an Underwritten Offering.

          "NASD" has the meaning set forth in Section 3(i) hereof.

          "Notice and Questionnaire" means a Selling Securityholder Notice and
Questionnaire substantially in the form of Exhibit A hereto.

          "Notice Holder" shall mean, on any date, any Holder of Transfer
Restricted Securities that has delivered a completed and signed Notice and
Questionnaire to the Company or Navistar on or prior to such date.

                                       A-3


          "Offering Memorandum" means the Final Memorandum as defined in the
Purchase Agreement.

          "Person" has the meaning set forth in the Indenture.

          "Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Notes or Common Stock issuable upon exchange of
the Notes covered by such Shelf Registration Statement, and all amendments and
supplements to such prospectus, including all documents incorporated or deemed
to be incorporated by reference in such prospectus.

          "Purchase Agreement" has the meaning set forth in the preamble hereto.

          "Record Holder" means (i) with respect to any Liquidated Damages
Payment Date which occurs on an Interest Payment Date, each person who is
registered on the books of the registrar as the holder of Notes at the close of
business on the record date with respect to such Interest Payment Date and (ii)
with respect to any Liquidated Damages Payment Date relating to the Common Stock
issued upon exchange of the Notes, each person who is a holder of record of such
Common Stock fifteen days prior to the Liquidated Damages Payment Date.

          "Registration Default" has the meaning set forth in Section 2(e)
hereof.

          "Representative" has the meaning set forth in the preamble hereto.

          "Rule 144" means Rule 144 (or any successor provision) under the Act.

          "SEC" means the Securities and Exchange Commission.

          "Shelf Registration" means a registration effected pursuant to Section
2 hereof.

          "Shelf Registration Period" has the meaning set forth in Section 2(c)
hereof.

          "Shelf Registration Statement" means a "shelf" registration statement
of the Company and Navistar filed pursuant to the provisions of Section 2 hereof
which covers some or all of the Notes and the Common Stock issuable upon
exchange of the Notes, as applicable, on Form S-3 or on another appropriate form
for an offering to be made on a delayed or continuous basis pursuant to Rule 415
under the Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all documents incorporated or deemed to be
incorporated by reference therein.

          "Suspension Period" has the meaning set forth in Section 2(d) hereof.

          "Transfer Restricted Securities" means each Note and each share of
Common Stock issuable or issued upon exchange of the Notes until the date on
which such Note or share

                                       A-4


of Common Stock, as the case may be, (i) has been transferred pursuant to the
Shelf Registration Statement or another registration statement covering such
Note or share of Common Stock which has been filed with the SEC pursuant to the
Act, in either case after such registration statement has become effective and
while such registration statement is effective under the Act, (ii) has been
transferred pursuant to Rule 144 under the Act (or any similar provision then in
force) or (iii) may be sold or transferred pursuant to Rule 144(k) under the Act
(or any successor provision then in force).

          "Trustee" means the trustee with respect to the Notes under the
Indenture.

          "Underwriter" means any underwriter of the Notes or Common Stock
issued upon exchange of the Notes in connection with an offering thereof under a
Shelf Registration Statement.

          "Underwritten Offering" means an offering in which the Notes or Common
Stock issued upon exchange of the Notes are sold to an Underwriter or with the
assistance of an Underwriter for reoffering to the public.

          All references in this Agreement to financial statements and schedules
and other information which is "contained," "included," or "stated" in the Shelf
Registration Statement, any preliminary Prospectus or Prospectus (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
or deemed to be incorporated by reference in such Shelf Registration Statement,
preliminary Prospectus or Prospectus, as the case may be; and all references in
this Agreement to amendments or supplements to the Shelf Registration Statement,
any preliminary Prospectus or Prospectus shall be deemed to mean and include any
document filed with the SEC under the Exchange Act, after the date of such Shelf
Registration Statement, preliminary Prospectus or Prospectus, as the case may
be, which is incorporated or deemed to be incorporated by reference therein.

          2.   SHELF REGISTRATION STATEMENT.

          (a)  The Issuers shall prepare and file with the SEC within 90 days
     following the Closing Date a Shelf Registration Statement with respect to
     resales of the Transfer Restricted Securities by the Holders from time to
     time in accordance with the methods of distribution contained in the Notice
     and Questionnaire elected by such Holders and set forth in such Shelf
     Registration Statement (subject to Section 3(u)) and, to the extent
     reasonably required under the Act, offers to exchange shares of Common
     Stock for Notes, and thereafter shall use their reasonable best efforts to
     cause such Shelf Registration Statement to be declared effective under the
     Act within 210 days after the Closing Date; PROVIDED that if any Notes are
     issued upon exercise of the over-allotment option granted to the Initial
     Purchasers in the Purchase Agreement and the date on which such Notes are
     issued occurs after the Closing Date, the Issuers will take such steps,
     prior to the effective date of the Shelf Registration Statement, to ensure
     that such Notes and Common Stock issuable upon exchange of the Notes are
     included in the Shelf Registration Statement on the same terms as the Notes
     issued on the Closing Date. The Issuers shall supplement or amend the Shelf
     Registration Statement if required by the

                                       A-5


     rules, regulations or instructions applicable to the registration form used
     by the Issuers for the Shelf Registration Statement, or by the Act, the
     Exchange Act or the SEC.

               (b)(i) Not less than 30 calendar days prior to the effectiveness
          of the Shelf Registration Statement, the Issuers shall mail the Notice
          and Questionnaire to the Holders of Transfer Restricted Securities.
          The Issuers shall take action to name each Holder that is a Notice
          Holder as of the date that is 10 calendar days prior to the
          effectiveness of the Shelf Registration Statement so that such Holder
          is named as a selling security holder in the Shelf Registration
          Statement at the time of its effectiveness and is permitted to deliver
          the Prospectus forming a part thereof as of such time to purchasers of
          such Holder's Transfer Restricted Securities in accordance with
          applicable law. The Issuers shall be under no obligation to name any
          Holder that is not a Notice Holder as a selling security holder in the
          Shelf Registration Statement.

                  (ii) After the Shelf Registration Statement has become
          effective, the Issuers shall, upon the request of any Holder of
          Transfer Restricted Securities, promptly send a Notice and
          Questionnaire to such Holder. From and after the date on which the
          Shelf Registration Statement has become effective, the Issuers shall
          (i) as promptly as is practicable after the date a completed and
          signed Notice and Questionnaire is delivered to the Issuers, and in
          any event within five Business Days after such date, prepare and file
          with the SEC (x) a supplement to the Prospectus or, if required by
          applicable law, a post-effective amendment to the Shelf Registration
          Statement and (y) any other document required by applicable law, so
          that the Holder delivering such Notice and Questionnaire is named as a
          selling security holder in the Shelf Registration Statement and is
          permitted to deliver the Prospectus to purchasers of such Holder's
          Transfer Restricted Securities in accordance with applicable law, and
          (ii) if the Issuers shall file a post-effective amendment to the Shelf
          Registration Statement, use their reasonable best efforts to cause
          such post-effective amendment to become effective under the Act as
          promptly as is practicable; PROVIDED, HOWEVER, that if a Notice and
          Questionnaire is delivered to the Issuers during a Suspension Period,
          the Issuers shall not be obligated to take the actions set forth in
          clauses (i) and (ii) until the applicable number of days after the
          termination of such Suspension Period.

          (c)  The Issuers shall use their reasonable best efforts to keep the
     Shelf Registration Statement continuously effective under the Act in order
     to permit the Prospectus forming a part thereof to be usable, subject to
     Section 2(d), by all Notice Holders until the earliest of (i) the latest of
     the second anniversary of (A) the issue date, (B) the last date on which
     any Notes are issued upon exercise of the Initial Purchaser's
     over-allotment option or (C) the last date on which any unregistered Common
     Stock is issued or issuable in exchange for Notes, (ii) the date on which
     all the Notes or Common Stock issued or issuable upon exchange of the Notes
     may be sold by non-affiliates ("affiliates" for such purpose having the
     meaning set forth in Rule 144) of the Issuers pursuant to paragraph (k) of
     Rule 144 (or any successor provision) promulgated by the

                                       A-6


     SEC under the Act, (iii) the date as of which all the Notes or unregistered
     Common Stock issued or issuable upon exchange of the Notes have been
     transferred pursuant to Rule 144 under the Act (or any similar provision
     then in force) and (iv) such date as of which all the Notes or the Common
     Stock issued or issuable upon exchange of the Notes have been sold pursuant
     to the Shelf Registration Statement (in any such case, such period being
     called the "Shelf Registration Period").

               The Issuers will, (x) subject to Section 2(d), prepare and file
     with the SEC such amendments and post-effective amendments to the Shelf
     Registration Statement as may be necessary to keep the Shelf Registration
     Statement continuously effective for the Shelf Registration Period, (y)
     subject to Section 2(d), cause the related Prospectus to be supplemented by
     any required supplement, and as so supplemented to be filed pursuant to
     Rule 424 (or any similar provisions then in force) under the Act and (z)
     comply in all material respects with the provisions of the Act with respect
     to the disposition of all securities covered by the Shelf Registration
     Statement during the applicable period in accordance with the intended
     methods of disposition by the sellers thereof set forth in such Shelf
     Registration Statement as so amended or such Prospectus as so supplemented.

          (d)  The Issuers may suspend the use of the Prospectus for a period
     not to exceed 30 days in any three-month period or for three periods not to
     exceed an aggregate of 60 days in any 12-month period (the "Suspension
     Period") for valid business reasons, to be determined by the Issuers in
     their sole reasonable judgment (not including avoidance of the Issuers'
     obligations hereunder), including, without limitation, the acquisition or
     divestiture of assets, public filings with the SEC, pending corporate
     developments and similar events; PROVIDED that the Issuers promptly
     thereafter comply with the requirements of Section 3(j) hereof, if
     applicable; PROVIDED, FURTHER, that the existence of a Suspension Period
     will not prevent the occurrence of a Registration Default or otherwise
     limit the obligation of the Issuers to pay Liquidated Damages.

          (e)  The Issuers and the Initial Purchasers agree that the Holders of
     Transfer Restricted Securities will suffer damages if the Issuers fail to
     fulfill their obligations under this Section 2 and that it would not be
     feasible to ascertain the extent of such damages with precision.
     Accordingly, the Issuers severally, and not jointly, agree to pay, as
     liquidated damages, additional interest on the Transfer Restricted
     Securities ("Liquidated Damages") under the following circumstances:

               If (i) the Shelf Registration Statement is not filed with the
     SEC on or prior to 90 days after the Closing Date, (ii) the Shelf
     Registration Statement has not been declared effective by the SEC within
     210 days after the Closing Date or (iii) the Shelf Registration Statement
     is filed and declared effective but shall thereafter cease to be effective
     (without being succeeded immediately by a replacement shelf registration
     statement filed and declared effective) or usable (including as a result of
     a Suspension Period) for the offer and sale of Transfer Restricted
     Securities for a period of time (including any Suspension Period) which
     exceeds 60 days in the aggregate in any 12-month period during the period
     beginning on the issue date and ending on or prior to the second
     anniversary of the latest of (A) such date, (B) the second anniversary of
     the last date on which any Notes are issued upon exercise of the Initial
     Purchasers' over-

                                       A-7


     allotment option and (c) the last date on which any unregistered Common
     Stock is issued or issuable in exchange for the Notes (each such event
     referred to in clauses (i) through (iii), a "Registration Default"), the
     Company and Navistar will pay Liquidated Damages to each Holder of Transfer
     Restricted Notes and Common Stock, respectively, who has complied with such
     Holder's obligations under this Agreement. The amount of Liquidated Damages
     payable during any period in which a Registration Default has occurred and
     is continuing is the amount which is equal to one quarter of one percent
     (25 basis points) per annum per $1,000 principal amount of Notes or $2.50
     per annum per 17.944 shares of Common Stock (subject to adjustment in the
     event of a stock split, stock recombination, stock dividend and the like)
     constituting Transfer Restricted Securities for the first 90 days during
     which a Registration Default has occurred and is continuing and one-half of
     one percent (50 basis points) per annum per $1,000 principal amount of
     Notes or $5.00 per annum per 17.944 shares of Common Stock (subject to
     adjustment as set forth above) constituting Transfer Restricted Securities
     for any additional days during which a Registration Default has occurred
     and is continuing (in each case subject to further adjustment from time to
     time in the event of a stock split, stock recombination, stock dividend and
     the like), it being understood that all calculations pursuant to this and
     the preceding sentence shall be carried out to five decimals. Following the
     cure of all Registration Defaults, Liquidated Damages will cease to accrue
     with respect to such Registration Default. Liquidated Damages shall cease
     to accrue in respect of any Transfer Restricted Security when it shall
     cease to be such. All accrued Liquidated Damages shall be paid by check by
     the Issuers on each Liquidated Damages Payment Date and Liquidated Damages
     will be calculated on the basis of a 360-day year consisting of twelve
     30-day months. In the event that any Liquidated Damages are not paid when
     due, then to the extent permitted by law, such overdue Liquidated Damages,
     if any, shall bear interest until paid at the Default Rate, compounded
     semi-annually. The parties hereto agree that the Liquidated Damages
     provided for in this Section 2(e) constitute a reasonable estimate of the
     damages that may be incurred by Holders by reason of a Registration
     Default.

          (f)  All of the Issuers' obligations (including, without limitation,
     the obligation to pay Liquidated Damages) set forth in the preceding
     paragraph which are outstanding or exist with respect to any Transfer
     Restricted Security at the time such security ceases to be a Transfer
     Restricted Security shall survive until such time as all such obligations
     with respect to such security shall have been satisfied in full.

          (g)  Immediately upon the occurrence or the termination of a
     Registration Default, the Issuers shall give the Trustee, in the case of
     notice with respect to the Notes, and the transfer and paying agent for the
     Common Stock, in the case of notice with respect to Common Stock issued or
     issuable upon exchange of the Notes, notice of such commencement or
     termination, of the obligation to pay Liquidated Damages with regard to the
     Notes and such Common Stock and the amount thereof and of the event giving
     rise to such commencement or termination (such notice to be contained in an
     Officers' Certificate (as such term is defined in the Indenture)), and
     prior to receipt of such Officers' Certificate the Trustee and such
     transfer and paying agent shall be entitled to assume that no such
     commencement or termination has occurred, as the case may be.

                                       A-8


          (h)  All Notes which are redeemed, purchased or otherwise acquired by
     the Issuers or any of their subsidiaries or affiliates (as defined in Rule
     144 (or any successor provision) under the Act) prior to the Final Maturity
     Date other than Notes acquired by Navistar or its successor upon exchange
     of the Notes shall be delivered to the Trustee for cancellation and the
     Issuers may not hold or resell such Notes or issue any new Notes to replace
     any such Notes. All shares of Common Stock issued upon exchange of the
     Notes which are repurchased or otherwise acquired by the Issuers or any of
     their subsidiaries or affiliates (as defined in Rule 144 (or any successor
     provision) under the Act) at any time while such shares are "restricted
     securities" within the meaning of Rule 144 shall not be resold or otherwise
     transferred except pursuant to a registration statement which has been
     declared effective under the Act.

          3.   REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement, the following provisions shall apply:

          (a)  The Issuers shall:

               (i)    furnish to the Representatives, prior to the filing
          thereof with the SEC, a copy of any Shelf Registration Statement, and
          each amendment thereof, and a copy of any Prospectus, and each
          amendment or supplement thereto (excluding amendments caused by the
          filing of a report under the Exchange Act); and

               (ii)   include information regarding the Notice Holders and the
          methods of distribution they have elected for their Transfer
          Restricted Securities provided to the Issuers in Notice and
          Questionnaires as necessary to permit such distribution by the methods
          specified therein.

          (b)  Subject to Section 2(d), the Issuers shall ensure that (i) any
     Shelf Registration Statement and any amendment thereto and any Prospectus
     forming a part thereof and any amendment or supplement thereto comply in
     all material respects with the Act and the rules and regulations
     thereunder, (ii) any Shelf Registration Statement and any amendment thereto
     does not, when it becomes effective, contain an untrue statement of a
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading and
     (iii) any Prospectus forming a part of any Shelf Registration Statement,
     and any amendment or supplement to such Prospectus, does not include an
     untrue statement of a material fact or omit to state a material fact
     necessary in order to make the statements therein, in light of the
     circumstances under which they were made, not misleading; PROVIDED that the
     Issuers make no representation with respect to information (A) with respect
     to any Underwriter or any Holder included in any Shelf Registration
     Statement or Prospectus pursuant to the Act or the rules and regulations
     thereunder and which information is included therein in reliance upon and
     in conformity with information furnished to the Issuers in writing by such
     Underwriter or Holder and (B) as the Majority of Holders provide or as the
     Managing Underwriters or the Majority Underwriting Holders reasonably agree
     should be included therein and provide to the Issuers in writing for
     inclusion in the Shelf Registration Statement or Prospectus.

                                       A-9


          (c)  The Issuers, as promptly as reasonably practicable, shall advise
     the Representatives and each Notice Holder and, if requested by you or any
     such Holder, confirm such advice in writing:

               (i)    when a Shelf Registration Statement and any amendment
          thereto has been filed with the SEC and when the Shelf Registration
          Statement or any post-effective amendment thereto has become
          effective;

               (ii)   of any request by the SEC for amendments or supplements to
          the Shelf Registration Statement or the Prospectus or for additional
          information (a copy of each written request and the Issuers' responses
          shall be promptly given to the Initial Purchasers and their counsel);

               (iii)  of the determination by the Issuers that a post-effective
          amendment to the Shelf Registration Statement would be appropriate;

               (iv)   of the commencement or termination of (but not the nature
          of or details concerning) any Suspension Period;

               (v)    of the  issuance  by the SEC of any stop  order suspending
          the effectiveness of the Shelf Registration Statement or the
          initiation of any proceedings for that purpose;

               (vi)   of the receipt by the Issuers of any notification with
          respect to the suspension of the qualification of the Transfer
          Restricted Securities included in any Shelf Registration Statement for
          sale in any jurisdiction or the initiation or threat of any proceeding
          for such purpose;

               (vii)  of the happening of (but not the nature of or details
          concerning) any event that requires the making of any changes in the
          Shelf Registration Statement or the Prospectus so that, as of such
          date, the statements therein are not misleading and the Shelf
          Registration Statement or the Prospectus, as the case may be, does not
          include an untrue statement of a material fact or omit to state a
          material fact required to be stated therein or necessary to make the
          statements therein (in the case of the Prospectus, in light of the
          circumstances under which they were made) not misleading; and

               (viii) of the Issuers' suspension of the use of the Prospectus
          as a result of any of the events or circumstances described in
          paragraphs (ii) through (vii) above, and of the termination of any
          such suspension.

          (d)  The Issuers shall use their reasonable best efforts to obtain the
     withdrawal of any order suspending the effectiveness of any Shelf
     Registration Statement or the lifting of any suspension of the
     qualification (or exemption from qualification) of any of the Transfer
     Restricted Securities for offer or sale in any jurisdiction at the earliest
     possible time.

                                      A-10


          (e)  The Issuers shall promptly furnish to each Notice Holder, without
     charge, at least one copy of any Shelf Registration Statement and any
     post-effective amendment thereto, including all exhibits (including those
     incorporated by reference but excluding the exhibits to those exhibits),
     financial statements and schedules.

          (f)  The Issuers shall, during the Shelf Registration Period, promptly
     deliver to each Initial Purchaser, each Notice Holder and any sales or
     placement agent or Underwriters acting on their behalf, without charge, as
     many copies of the Prospectus (including each preliminary Prospectus)
     included in any Shelf Registration Statement (excluding documents
     incorporated by reference), and any amendment or supplement thereto, as
     such person may reasonably request; and, except as provided in Sections
     2(d) and 3(s) hereof, the Issuers consent to the use of the Prospectus or
     any amendment or supplement thereto by each of the selling Holders in
     connection with the offering and sale of the Transfer Restricted Securities
     covered by the Prospectus or any amendment or supplement thereto.

          (g)  Prior to any offering of Transfer Restricted Securities pursuant
     to any Shelf Registration Statement, the Issuers shall register or qualify
     or cooperate with the Notice Holders and their respective counsel in
     connection with the registration or qualification (or exemption from such
     registration or qualification) of such Transfer Restricted Securities for
     offer and sale, under the securities or blue sky laws of such jurisdictions
     within the United States as any such Notice Holders reasonably request and
     shall maintain such qualification in effect so long as required and do any
     and all other acts or things necessary or advisable to enable the offer and
     sale in such jurisdictions of the Transfer Restricted Securities covered by
     such Shelf Registration Statement; PROVIDED, HOWEVER, that the Issuers will
     not be required to (A) qualify generally to do business as a foreign
     corporation or as a dealer in securities in any jurisdiction where they are
     not then so qualified or to (B) take any action which would subject them to
     service of process or taxation in any such jurisdiction where they are not
     then so subject.

          (h)  The Issuers shall cooperate with the Holders to facilitate the
     timely preparation and delivery of certificates representing Transfer
     Restricted Securities sold pursuant to any Shelf Registration Statement
     free of any restrictive legends and in such denominations permitted by the
     Indenture and registered in such names as Holders may request at least two
     Business Days prior to settlement of sales of Transfer Restricted
     Securities pursuant to such Shelf Registration Statement.

          (i)  Subject to the exceptions contained in (A) and (B) of
     Section 3(g) hereof, the Issuers shall use their reasonable best efforts to
     cause the Transfer Restricted Securities covered by the applicable Shelf
     Registration Statement to be registered with or approved by such other
     federal, state and local governmental agencies or authorities, and
     self-regulatory organizations in the United States as may be necessary to
     enable the Holders to consummate the disposition of such Transfer
     Restricted Securities as contemplated by the Shelf Registration Statement;
     without limitation to the foregoing, the Issuers shall make all filings and
     provide all such information as may be required by the National Association
     of Securities Dealers, Inc. (the "NASD") in connection with the offering
     under the Shelf Registration Statement of the Transfer Restricted
     Securities

                                      A-11


     (including, without limitation, such as may be required by NASD Rule 2710
     or 2720), and shall cooperate with each Holder in connection with any
     filings required to be made with the NASD by such Holder in that regard.

          (j)  Upon the occurrence of any event described in Section 3(c)(vii)
     hereof, the Issuers shall promptly prepare and file with the SEC a
     post-effective amendment to any Shelf Registration Statement or an
     amendment or supplement to the related Prospectus or any document
     incorporated therein by reference or file a document which is incorporated
     or deemed to be incorporated by reference in such Shelf Registration
     Statement or Prospectus, as the case may be, so that, as thereafter
     delivered to purchasers of the Transfer Restricted Securities included
     therein, the Shelf Registration Statement and the Prospectus, in each case
     as then amended or supplemented, will not include an untrue statement of a
     material fact or omit to state any material fact required to be stated
     therein or necessary in order to make the statements therein (in the case
     of the Prospectus in light of the circumstances under which they were made)
     not misleading and, in the case of a post-effective amendment, use its
     reasonable best efforts to cause it to become effective as promptly as
     practicable; PROVIDED that the Issuers' obligations under this paragraph
     (j) paragraph (j) shall be suspended if the Issuers have suspended the use
     of the Prospectus in accordance with Section 2(d) hereof and given notice
     of such suspension to Notice Holders, it being understood that the Issuers'
     obligations under this paragraph (j) shall be automatically reinstated at
     the end of such Suspension Period.

          (k)  The Issuers shall use their reasonable best efforts to provide,
     on or prior to the first Business Day following the effective date of any
     Shelf Registration Statement hereunder (i) a CUSIP number for the Transfer
     Restricted Securities registered under such Shelf Registration Statement
     and (ii) global certificates for such Transfer Restricted Securities to the
     Trustee, in a form eligible for deposit with DTC.

          (l)  The Issuers shall use their best efforts to comply with all
     applicable rules and regulations of the SEC and shall make generally
     available to their security holders as soon as practicable but in any event
     not later than 50 days after the end of a 12-month period after (i) the
     effective date of the applicable Shelf Registration Statement, (ii) the
     effective date of each post-effective amendment to any Shelf Registration
     Statement and (iii) the date of each filing by the Issuers with the SEC of
     an Annual Report on Form 10-K that is incorporated by reference or deemed
     to be incorporated by reference in the Shelf Registration Statement, an
     earnings statement satisfying the provisions of Section 11(a) of the Act
     and Rule 158 promulgated by the SEC thereunder.

          (m)  The Issuers shall use their reasonable best efforts to cause the
     Indenture to be qualified under the TIA (as defined in the Indenture) in a
     timely manner.

          (n)  The Issuers shall cause all Common Stock issued or issuable upon
     exchange of the Notes to be listed on each securities exchange or quotation
     system on which the Common Stock is then listed no later than the date the
     applicable Shelf Registration Statement is declared effective and, in
     connection therewith, to make such filings as may be required under the
     Exchange Act and to have such filings declared effective as and when
     required thereunder.

                                      A-12


          (o)  The Issuers may require each Holder of Transfer Restricted
     Securities to be sold pursuant to any Shelf Registration Statement to
     furnish to the Issuers such information regarding the Holder and the
     distribution of such Transfer Restricted Securities sought by the Notice
     and Questionnaire and such additional information as may, from time to
     time, be required by the Act and the rules and regulations promulgated
     thereunder, and the obligations of the Issuers to any Holder hereunder
     shall be expressly conditioned on the compliance of such Holder with such
     request.

          (p)  The Issuers shall, if requested, use their reasonable best
     efforts to promptly incorporate in a Prospectus supplement or
     post-effective amendment to a Shelf Registration Statement (i) such
     information as the Majority Holders provide or, if Transfer Restricted
     Securities are being sold in an Underwritten Offering, as the Managing
     Underwriters or the Majority Underwriting Holders reasonably agree should
     be included therein and provide to the Issuers in writing for inclusion in
     the Shelf Registration Statement or Prospectus, and (ii) such information
     as a Holder may provide from time to time to the Issuers in writing for
     inclusion in a Prospectus or any Shelf Registration Statement concerning
     such Holder and the distribution of such Holder's Transfer Restricted
     Securities and, in either case, shall make all required filings of such
     Prospectus supplement or post-effective amendment promptly after being
     notified in writing of the matters to be incorporated in such Prospectus
     supplement or post-effective amendment, provided that the Issuers shall not
     be required to take any action under this Section 3(p) that is not, in the
     reasonable opinion of counsel for the Issuers, in compliance with
     applicable law.

          (q)  The Issuers shall enter into such customary agreements (including
     underwriting agreements) and take all other appropriate actions as may be
     reasonably requested in order to expedite or facilitate the registration or
     the disposition of the Transfer Restricted Securities, and in connection
     therewith, if an underwriting agreement is entered into, the Issuers shall
     cause the same to contain indemnification and contribution provisions and
     procedures no less favorable than those set forth in Section 5 hereof (or
     such other reasonable and customary provisions and procedures acceptable to
     the Majority Underwriting Holders and the Managing Underwriters, if any,
     with respect to all parties to be indemnified pursuant to Section 5). The
     plan of distribution in the Shelf Registration Statement and the Prospectus
     included therein shall permit resales of Transfer Restricted Securities to
     be made by selling security holders through underwriters, brokers and
     dealers, and shall also include such other information as the
     Representative may reasonably request.

          (r)  The Issuers shall if reasonably requested in writing by Majority
     Holders, by Majority Underwriting Holders or by the Managing Underwriter:

               (i)    make reasonably available for inspection during normal
          business hours by any Underwriter participating in any disposition
          pursuant to such Shelf Registration Statement, and any attorney,
          accountant or other agent retained by any such Underwriter all
          relevant financial and other records, pertinent corporate documents
          and properties of the Issuers and their subsidiaries as is customary
          for due diligence examinations in connection with public offerings;

                                      A-13


               (ii)   cause the Issuers' officers, directors, employees,
          accountants and auditors to supply all relevant information reasonably
          requested by any such Underwriter, attorney, accountant or agent in
          connection with any such Shelf Registration Statement as is customary
          for similar due diligence examinations; PROVIDED, HOWEVER, that any
          information that is designated in writing by the Issuers, in good
          faith, as confidential at the time of delivery of such information
          shall be kept confidential by the Holders or any such Underwriter,
          attorney, accountant or agent, unless disclosure thereof is made in
          connection with a court, administrative or regulatory proceeding or
          required by law, or such information has become available to the
          public generally through the Issuers or through a third party without
          an accompanying obligation of confidentiality;

               (iii)  obtain opinions of counsel to the Issuers and updates
          thereof (which counsel and opinions, in form, scope and substance,
          shall be reasonably satisfactory to the Managing Underwriters, if any)
          addressed to each selling Holder and the Underwriters, if any,
          covering such matters as are customarily covered in opinions requested
          in public offerings;

               (iv)   obtain "cold comfort" letters and updates thereof from the
          current and former independent certified public accountants of the
          Issuers (and, if necessary, any other independent certified public
          accountants of any subsidiary of the Issuers or of any business
          acquired by the Issuers for which financial statements and financial
          data are, or are required to be, included in the Shelf Registration
          Statement), addressed to each selling Holder (provided such Holder
          furnishes the accountants, prior to the date such "cold comfort"
          letter is required to be delivered, with such representations as the
          accountants customarily require in similar situations) and the
          Underwriters, if any, in customary form and covering matters of the
          type customarily covered in "cold comfort" letters in connection with
          primary underwritten offerings; and

               (v)    deliver such documents and certificates as may be
          reasonably requested by the Majority Holders or, in the case of an
          Underwritten Offering, the Majority Underwriting Holders, and the
          Managing Underwriters, if any, including those to evidence compliance
          with Section 3(j) and with any customary conditions contained in the
          underwriting agreement or other agreement entered into by the Issuers
          in customary form and covering matters of the type customarily covered
          by such documents and certificates in connection with primary
          underwritten offerings.

               The foregoing actions set forth in clauses (iii), (iv), (v) and
          (vi) of this Section 3(r) shall be performed at (A) the effectiveness
          of such Shelf Registration Statement and each post-effective amendment
          thereto and (B) each closing under any underwriting or similar
          agreement as and to the extent required thereunder.

          (s)  Each Notice Holder agrees that, upon receipt of notice of the
     happening of an event described in Sections 3(c)(ii) through and including
     3(c)(vii), each Holder shall forthwith discontinue (and shall cause its
     agents and representatives to discontinue)

                                      A-14


     disposition of Transfer Restricted Securities and will not resume
     disposition of Transfer Restricted Securities until such Holder has
     received copies of an amended or supplemented Prospectus contemplated by
     Section 3(j) hereof, or until such Holder is advised in writing by the
     Issuers that the use of the Prospectus may be resumed or that the relevant
     Suspension Period has been terminated, as the case may be, provided that,
     the foregoing shall not prevent the sale, transfer or other disposition of
     Transfer Restricted Securities by a Notice Holder in a transaction which is
     exempt from, or not subject to, the registration requirements of the Act,
     so long as such Notice Holder does not and is not required to deliver the
     applicable Prospectus or Shelf Registration Statement in connection with
     such sale, transfer or other disposition, as the case may be; and PROVIDED,
     FURTHER, that the provisions of this Section 3(s) shall not prevent the
     occurrence of a Registration Default or otherwise limit the obligation of
     the Issuers to pay Liquidated Damages.

          (t)  The Issuers shall in connection with an Underwritten Offering use
     their reasonable best efforts (i) if the Notes have been rated prior to the
     initial sale of such Notes, to confirm that such ratings will apply to the
     Notes covered by the Shelf Registration Statement (but the Issuers shall
     have no obligation to take any action to increase the rating on the Notes);
     or (ii) if the Notes were not previously rated, to cause the Notes covered
     by the Shelf Registration Statement to be rated with at least one
     nationally recognized statistical rating agency, if so requested by the
     Majority Holders or by any Managing Underwriters.

          (u)  In the event that any Broker-Dealer shall underwrite any Notes or
     participate as a member of an underwriting syndicate or selling group or
     "assist in the distribution" (within the meaning of the NASD Rules)
     thereof, whether as a Holder of such Transfer Restricted Securities or as
     an underwriter, a placement or sales agent or a broker or dealer in respect
     thereof, or otherwise, the Issuers shall assist such Broker-Dealer in
     complying with the NASD Rules, including, without limitation, by:

               (i)    if the NASD Rules shall so require, engaging a "qualified
          independent underwriter" (as defined in the NASD Rules) to participate
          in the preparation of the Shelf Registration Statement, to exercise
          usual standards of due diligence with respect thereto and, if any
          portion of the offering contemplated by the Shelf Registration
          Statement is an Underwritten Offering or is made through a placement
          or sales agent, to recommend the price of such Transfer Restricted
          Securities;

               (ii)   indemnifying any such qualified independent underwriter to
          the extent of the indemnification of Underwriters provided in Section
          5 hereof; and

               (iii)  providing such information to such Broker-Dealer as may be
          required in order for such Broker-Dealer to comply with the
          requirements of the NASD Rules.

               (iv)   Anything herein to the contrary notwithstanding, the
          Issuers will not be required to pay the costs and expenses of, or to
          participate in the marketing

                                      A-15


          or "road show" presentations of, more than one Underwritten Offering
          initiated at the request of the Holders of Notes or shares of Common
          Stock issued or issuable upon exchange of the Notes, or to effect more
          than one Underwritten Offering at the request of such Holders. The
          Issuers will not be required to pay the costs and expenses of, or to
          participate in the marketing or "road show" presentations of, an
          Underwritten Offering unless Holders of at least the Minimum Amount
          (as defined below) of Notes and/or Common Stock issued or issuable on
          exchange of the Notes have requested that such Notes and/or shares of
          such Common Stock be included in such an Underwritten Offering. For
          purposes of this Agreement, the "Minimum Amount" means 50% of the
          aggregate principal amount of Notes originally issued under the
          Indenture; PROVIDED that, for purposes of computing the Minimum
          Amount, Holders of Common Stock issued upon exchange of Notes shall be
          deemed to be holders of the aggregate principal amount of Notes which
          were exchanged into those shares of Common Stock. Only Holders of
          Notes or shares of Common Stock issued or issuable upon exchange of
          the Notes which are Transfer Restricted Securities shall be entitled
          to include such Notes or shares of such Common Stock in an
          Underwritten Offering and only Transfer Restricted Securities shall be
          included in the computation of the Minimum Amount. The Underwritten
          Offering initiated by Holders as aforesaid shall include both Notes
          and such Common Stock if so requested by the Holders. Upon receipt by
          the Issuers, from Holders of at least the Minimum Amount of Notes
          and/or Common Stock issued or issuable upon exchange of the Notes, of
          a request for an Underwritten Offering, the Issuers will, within 10
          days thereafter, cause the Company to mail notice to all Holders of
          Notes and shares of Common Stock issued upon exchange of the Notes
          stating that: (1) the Company has received a request from the Holders
          of the requisite amount of Notes and/or Common Stock issued or
          issuable on exchange of the Notes to effect an Underwritten Offering
          on behalf of such Holders; (2) under the terms of this Agreement, all
          Holders of Notes and shares of such Common Stock issued or issuable
          upon exchange of the Notes which are Transfer Restricted Securities
          may include their Notes and shares of such Common Stock in such
          Underwritten Offering, subject to the terms and conditions set forth
          in this Agreement and subject to the right of the Managing
          Underwriters to reduce, in light of market conditions and other
          similar factors, the aggregate principal amount of Notes and number of
          shares of such Common Stock included in such Underwritten Offering;
          (iii) all Holders electing to include Notes or shares of such Common
          Stock in such Underwritten Offering must notify the Issuers in writing
          of such election (the "Election"), and setting forth an address and
          facsimile number to which such written elections may be sent and the
          deadline (which shall be 12:00 midnight on the 10th calendar day after
          such notice is mailed to Holders or, if not a Business Day, the next
          succeeding Business Day (the "Deadline")) by which such elections must
          be received by the Issuers; and (iv) setting forth such other
          instructions as shall be necessary to enable Holders to include their
          Notes and shares of such Common Stock in such Underwritten Offering.
          No Holder shall be entitled to participate in an Underwritten Offering
          unless such Holder notifies the Issuers of such Election by the
          Deadline. Notwithstanding anything to the contrary contained herein,
          if the

                                      A-16


          Managing Underwriters for an Underwritten Offering to be effected
          pursuant to this Section 3(u) advise the Holders of the Notes and
          shares of such Common Stock to be included in such Underwritten
          Offering that, because of aggregate principal amount of Notes and/or
          number of shares of such Common Stock that such Holders have requested
          be included in the Underwritten Offering, the success of the offering
          would likely be materially adversely affected by the inclusion of all
          of the Notes and shares of such Common Stock requested to be included,
          then the principal amount of Notes and the number of shares of such
          Common Stock to be offered for the accounts of Holders shall be
          reduced pro rata, according to the aggregate principal amount of Notes
          and number of shares of such Common Stock, respectively, requested for
          inclusion by each such Holder, to the extent necessary to reduce the
          size of the offering to the size recommended by the Managing
          Underwriter. Notwithstanding anything to the contrary contained
          herein, neither the Issuers nor any Person, other than a Holder of
          Notes or shares of such Common Stock issued or issuable upon exchange
          of the Notes and only with respect to its Transfer Restricted
          Securities, shall be entitled to include any securities in the
          Underwritten Offering.

          4.   REGISTRATION EXPENSES. The Issuers shall bear all expenses
incurred in connection with the performance of their obligations under Sections
2 and 3 hereof and shall reimburse the Holders for the reasonable fees and
disbursements of one firm or counsel designated by the Majority Holders to act
as counsel for the Holders in connection therewith. Notwithstanding the
provisions of this Section 4, each Holder shall bear the expense of any broker's
commission, agency fee or Underwriter's discount or commission.

          5.   INDEMNIFICATION AND CONTRIBUTION.

          (a)  Each of the Issuers, jointly and severally, agrees to indemnify
     and hold harmless each Holder of Transfer Restricted Securities covered by
     any Shelf Registration Statement (including each of the Initial
     Purchasers), the directors, officers, employees and agents of each such
     Holder and each person who controls any such Holder within the meaning of
     either the Act or the Exchange Act against any and all losses, claims,
     damages or liabilities, joint or several, to which they or any of them may
     become subject under the Act, the Exchange Act or other Federal or state
     law or regulation, at common law or otherwise, insofar as such losses,
     claims, damages or liabilities (or actions in respect thereof) arise out of
     or are based upon any untrue statement or alleged untrue statement of a
     material fact contained in the Shelf Registration Statement as originally
     filed or in any amendment thereof, or in any preliminary Prospectus or
     Prospectus, or in any amendment thereof or supplement thereto, or arise out
     of or are based upon the omission or alleged omission to state therein a
     material fact required to be stated therein or necessary to make the
     statements therein, in the light of the circumstances under which they were
     made, not misleading, and agrees to reimburse each such indemnified party,
     as incurred, for any legal or other expenses reasonably incurred by any of
     them in connection with investigating or defending any such loss, claim,
     damage, liability or action; PROVIDED, HOWEVER, that neither of the Issuers
     will be liable in any such case to the extent that any such loss, claim,
     damage or liability arises out of or is based upon (A) any

                                      A-17


     such untrue statement or alleged untrue statement or omission or alleged
     omission made therein in reliance upon and in conformity with written
     information furnished to the Issuers by or on behalf of any such Holder or
     any Initial Purchaser specifically for inclusion therein, (B) use of a
     Shelf Registration Statement or the related Prospectus during a period when
     use of such Prospectus has been suspended pursuant to Section 2(d) or
     Section 3(s) hereof; PROVIDED, FURTHER, in each case, that Holders received
     prior notice of such suspension, or (C) if the Holder fails to deliver a
     Prospectus, as then amended or supplemented, PROVIDED that the Issuers
     shall have delivered to such Holder such Prospectus, as then amended or
     supplemented. This indemnity agreement will be in addition to any liability
     which the Issuers may otherwise have.

          (b)  Each Holder of Transfer Restricted Securities covered by a Shelf
     Registration Statement (including the Initial Purchasers) severally and not
     jointly agrees to indemnify and hold harmless:

               (i)    the Issuers;

               (ii)   each of their directors;

               (iii)  each of their officers; and

               (iv)   each person who controls either of the Issuers within
                      the meaning of either the Act or the Exchange Act to
                      the same extent as the foregoing indemnity from the
                      Issuers to each such Holder,

     but only with reference to (A) written information relating to such Holder
     furnished to the Issuers by or on behalf of such Holder specifically for
     inclusion in the documents referred to in the foregoing indemnity, (B) the
     use by such Holder of a Shelf Registration Statement or the related
     Prospectus during a period when use of such Prospectus has been suspended
     pursuant to Section 2(d) or Section 3(s) hereof; PROVIDED, FURTHER, in each
     case, that such Holder received prior notice of such suspension or (C) the
     failure of such Holder to deliver a Prospectus, as then amended or
     supplemented, PROVIDED that the Issuers shall have delivered to such Holder
     such Prospectus, as then amended or supplemented.

     This indemnity agreement shall be in addition to any liability which any
     such Holder may otherwise have.

          (c)  Promptly after receipt by an indemnified party under this Section
     5 of notice of the commencement of any action, such indemnified party will,
     if a claim in respect thereof is to be made against the indemnifying party
     under this Section 5, notify the indemnifying party in writing of the
     commencement thereof; but the failure to so notify the indemnifying party
     will not relieve it from liability under paragraph (a) or (b) above unless
     and to the extent it did not otherwise learn of such action and such
     failure results in the forfeiture by the indemnifying party of substantial
     rights and defenses. The indemnifying party shall be entitled to appoint
     counsel of the indemnifying party's choice at the indemnifying party's
     expense to represent the indemnified party in any action for

                                      A-18


     which indemnification is sought (in which case the indemnifying party shall
     not thereafter be responsible for the fees and expenses of any separate
     counsel retained by the indemnified party or parties except as set forth
     below); PROVIDED, HOWEVER, that such counsel shall be reasonably
     satisfactory to the indemnified party. Notwithstanding the indemnifying
     party's election to appoint counsel to represent the indemnified party in
     an action, the indemnified party shall have the right to employ separate
     counsel (including local counsel), and the indemnifying party shall bear
     the reasonable fees, costs and expenses of one such separate counsel (in
     addition to any local counsel) if

               (i)    the use of counsel chosen by the indemnifying party to
          represent the indemnified party would present such counsel with a
          conflict of interest;

               (ii)   the actual or potential defendants in, or targets of, any
          such action include both the indemnified party and the indemnifying
          party and the indemnified party shall have reasonably concluded that
          there may be legal defenses available to it and/or other indemnified
          parties which are different from or additional to those available to
          the indemnifying party and that representation of the indemnified
          party by counsel chosen by the indemnifying party would be
          inappropriate due to actual or potential differing interests among the
          parties represented by such counsel;

               (iii)  the indemnifying party shall not have employed counsel
          reasonably satisfactory to the indemnified party to represent the
          indemnified party within a reasonable time after notice of the
          institution of such action; or

               (iv)   the indemnifying party shall authorize the indemnified
          party to employ separate counsel at the expense of the indemnifying
          party.

     Neither an indemnifying party nor an indemnified party will, without the
     prior written consent of the other parties, settle or compromise or consent
     to the entry of any judgment with respect to any pending or threatened
     claim, action, suit or proceeding in respect of which indemnification or
     contribution may be sought hereunder (whether or not such other parties are
     actual or potential parties to such claim or action) unless such
     settlement, compromise or consent includes an unconditional release of such
     other parties from all liability arising out of such claim, action, suit or
     proceeding. An indemnifying party shall not be liable for any losses,
     claims, damages or liabilities by reason of any settlement of any action or
     proceeding effected without such indemnifying party's prior written
     consent, which consent will not be unreasonably withheld.

          (d)  In the event that the indemnity provided in paragraph (a) or (b)
     of this Section 5 is unavailable to or insufficient to hold harmless an
     indemnified party for any reason, then each applicable indemnifying party
     shall have an obligation to contribute to the aggregate losses, claims,
     damages and liabilities (including legal or other expenses reasonably
     incurred in connection with investigating or defending same) (collectively
     "Losses"), as incurred, to which such indemnified party may be subject in
     such proportion as is appropriate to reflect the relative benefits received
     by such indemnifying party, on the one hand, and such indemnified party, on
     the other hand, from the Initial

                                      A-19


     Placement and any sales of Transfer Restricted Securities under the Shelf
     Registration Statement; PROVIDED, HOWEVER, that in no case shall the
     Initial Purchasers be responsible, in the aggregate, for any amount in
     excess of the purchase discount or commission applicable to the Notes, as
     set forth in the Purchase Agreement. If the allocation provided by the
     immediately preceding sentence is unavailable for any reason, the
     indemnifying party and the indemnified party shall contribute in such
     proportion as is appropriate to reflect not only such relative benefits but
     also the relative fault of such indemnifying party, on the one hand, and
     such indemnified party, on the other hand, in connection with the
     statements or omissions which resulted in such Losses as well as any other
     relevant equitable considerations. Benefits received by the Issuers shall
     be deemed to be equal to the sum of (x) the total net proceeds from the
     Initial Placement (before deducting expenses) and (y) the total amount of
     Liquidated Damages which the Issuers were not required to pay as a result
     of registering the Transfer Restricted Securities covered by the Shelf
     Registration Statement which resulted in such Losses. Benefits received by
     the Initial Purchasers shall be deemed to be equal to the total purchase
     discounts and commissions received in connection with the Initial
     Placement, and benefits received by any other Holders shall be deemed to be
     equal to the value of receiving Transfer Restricted Securities registered
     under the Act. Benefits received by any Underwriter shall be deemed to be
     equal to the total underwriting discounts and commissions, as set forth on
     the cover page of the Prospectus forming a part of the Shelf Registration
     Statement which resulted in such Losses. Relative fault shall be determined
     by reference to whether any untrue statement or omission or alleged untrue
     statement or omission relates to information provided by the indemnifying
     party, on the one hand, or by the indemnified party, on the other hand, the
     intent of the parties and their relative knowledge, access to information
     and opportunity to correct or prevent such untrue statement or omission.
     The parties agree that it would not be just and equitable if contribution
     were determined by pro rata allocation or any other method of allocation
     which does not take account of the equitable considerations referred to
     above. Notwithstanding the provisions of this Section 5(d), no person
     guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
     of the Act) shall be entitled to contribution from any person who was not
     guilty of such fraudulent misrepresentation. For purposes of this Section
     5, each person who controls a Holder within the meaning of either the Act
     or the Exchange Act and each director, officer, employee and agent of such
     Holder shall have the same rights to contribution as such Holder, and each
     person who controls either of the Issuers within the meaning of either the
     Act or the Exchange Act, each officer of either of the Issuers who signed
     the Shelf Registration Statement and each director of either of the Issuers
     shall have the same rights to contribution as the Issuers, and each person
     who controls an Underwriter within the meaning of either the Act or the
     Exchange Act and each officer and director of each Underwriter shall have
     the same rights to contribution as such Underwriter, subject in each case
     to the applicable terms and conditions of this paragraph (d).

          (e)  The provisions of this Section 5 will remain in full force and
     effect, regardless of any investigation made by or on behalf of any Holder,
     any Underwriter, the Issuers or any of the officers, directors or
     controlling persons referred to in Section 5

                                      A-20


     hereof, and will survive the sale by a Holder of Transfer Restricted
     Securities covered by a Shelf Registration Statement.

          6.   MISCELLANEOUS.

          (a)  NO INCONSISTENT AGREEMENTS. Neither of the Issuers has, as of
     the date hereof, entered into nor shall it, on or after the date hereof,
     enter into, any agreement with respect to its securities that is
     inconsistent with the rights granted to the Holders herein or otherwise
     conflicts with the provisions hereof.

          (b)  AMENDMENTS AND WAIVERS. The provisions of this Agreement,
     including the provisions of this sentence, may not be amended, qualified,
     modified or supplemented, and waivers or consents to departures from the
     provisions hereof may not be given, unless the Issuers have obtained the
     written consent of the Majority Holders; PROVIDED that with respect to any
     matter that directly or indirectly affects the rights of the Initial
     Purchasers hereunder, the Issuers shall obtain the written consent of each
     of the Initial Purchasers against which such amendment, qualification,
     supplement, waiver or consent is to be effective. Notwithstanding the
     foregoing (except the foregoing proviso), a waiver or consent to departure
     from the provisions hereof with respect to a matter that relates
     exclusively to the rights of Holders whose Transfer Restricted Securities
     are being sold pursuant to a Shelf Registration Statement and that does not
     directly or indirectly affect the rights of other Holders may be given by
     the Majority Holders, determined on the basis of the Transfer Restricted
     Securities being sold rather than registered under such Shelf Registration
     Statement.

          (c)  NOTICES. All notices and other communications provided for or
     permitted hereunder shall be made in writing by hand-delivery, first-class
     mail, telecopier or air courier guaranteeing overnight delivery:

               (i)    if to the Representative, initially at its address set
          forth in the Purchase Agreement;

               (ii)   if to any other Holder, at the most current address of
          such Holder maintained by the Registrar under the Indenture or the
          registrar of the Common Stock (provided that while the Notes or the
          Common Stock are in book-entry form, notice to the Trustee shall serve
          as notice to the Holders), or, in the case of the Notice Holder, the
          address set forth in its Notice and Questionnaire; and

               (iii)  if to the Issuers, initially at the Company's address set
          forth in the Purchase Agreement.

          All such notices and communications shall be deemed to have been duly
     given when received, if delivered by hand or air courier, and when sent, if
     sent by first-class mail or telecopier.

          The Initial Purchasers or the Issuers by notice to the other may
     designate additional or different addresses for subsequent notices or
     communications.

                                      A-21


          (d)  SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
     of and be binding upon the successors and assigns of each of the parties,
     including, without the need for an express assignment or any consent by the
     Issuers thereto, subsequent Holders. The Issuers hereby agree to extend the
     benefits of this Agreement to any Holder and Underwriter and any such
     Holder and Underwriter may specifically enforce the provisions of this
     Agreement as if an original party hereto. In the event that any other
     person shall succeed to the Issuers under the Indenture, then such
     successor shall enter into an agreement, in form and substance reasonably
     satisfactory to the Representative, whereby such successor shall assume all
     of the Issuers' obligations, as the case may be, under this Agreement.

          (e)  COUNTERPARTS. This Agreement may be executed in any number of
     counterparts and by the parties hereto in separate counterparts, each of
     which when so executed shall be deemed to be an original and all of which
     taken together shall constitute one and the same agreement.

          (f)  HEADINGS. The headings in this Agreement are for convenience of
     reference only and shall not limit or otherwise affect the meaning hereof.

          (g)  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
     IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
     AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.

          (h)  SEVERABILITY. In the event that any one or more of the provisions
     contained herein, or the application thereof in any circumstances, is held
     invalid, illegal or unenforceable in any respect for any reason, the
     validity, legality and enforceability of any such provision in every other
     respect and of the remaining provisions hereof shall not be in any way
     impaired or affected thereby, it being intended that all of the rights and
     privileges of the parties shall be enforceable to the fullest extent
     permitted by law.

          (i)  SECURITIES HELD BY THE ISSUERS, ETC. Whenever the consent or
     approval of Holders of a specified percentage of principal amount of Notes
     or the Common Stock issuable upon exchange of the Notes is required
     hereunder, Notes or the Common Stock issued upon exchange of the Notes held
     by the Issuers or their Affiliates (other than subsequent Holders of Notes
     or the Common Stock issued upon exchange of the Notes if such subsequent
     Holders are deemed to be Affiliates solely by reason of their holdings of
     such securities) shall not be counted in determining whether such consent
     or approval was given by the Holders of such required percentage.

          (j)  TERMINATION. This Agreement and the obligations of the parties
     hereunder shall terminate upon the end of the Shelf Registration Period,
     except for any liabilities or obligations under Sections 2(e), 4 or 5 to
     the extent arising prior to the end of the Shelf Registration Period.

                            [signature page follows]

                                      A-22


          Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and you.

                                      Very truly yours,
                                      NAVISTAR INTERNATIONAL CORPORATION

                                      By: /s/ Thomas M. Hough
                                         ---------------------------------------
                                          Name: Thomas M. Hough
                                          Title: Vice President and Treasurer

                                      NAVISTAR FINANCIAL CORPORATION

                                      By: /s/ Andrew J. Cederoth
                                         ---------------------------------------
                                          Name:  Andrew J. Cederoth
                                          Title: Vice President and Treasurer

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

SALOMON SMITH BARNEY INC
BANC OF AMERICA SECURITIES LLC

By:  Salomon Smith Barney Inc.

By: /s/ Randolph R. Kurtz
   --------------------------------------
   Name:  Randolph R. Kurtz
   Title: Managing Director

                                      A-23

EX-12.1

                         NAVISTAR FINANCIAL CORPORATION
                        RATIO OF EARNING TO FIXED CHARGES



                                                 JANUARY 31,                        OCTOBER 31,
                                               2002       2001       2001       2000       1999       1998       1997
                                               ---------------       ------------------------------------------------
                                                                      (in millions of dollars)
                                                                                            
Pretax income from continuing operations         27         21         72         92         96         79         69
Interest expense                                 14         30         93        104         89         81         66
Debt expense amortization                         1          1          4          2          2          3          2
Portion of rental expense (25%) deemed
  representative of the interest factor          --         --          1          1          1          1          1
                                                ---------------------------------------------------------------------

     Total earnings                              42         52        170        199        188        164        138

Interest expense                                 14         30         93        104         89         81         66
Debt expense amortization                         1          1          4          2          2          3          2
Portion of rental expense (25%) deemed
  representative of the interest factor
                                                 --         --          1          1          1          1          1
                                                ---------------------------------------------------------------------

     Total fixed charges                         15         31         98        107         92         85         69

Earnings to fixed charges ratio                 2.8        1.7        1.7        1.9        2.0        1.9        2.0

EX-23.1

                                                     EXHIBIT NO. 23.1










INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement of
Navistar International Corporation and Navistar Financial Corporation on Form
S-3 of our reports dated December 10, 2001, included and incorporated by
reference in the Annual Reports on Form 10-K of Navistar International
Corporation and Navistar Financial Corporation for the year ended October 31,
2001. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.




DELOITTE & TOUCHE LLP
Chicago, IL

May 6, 2002

EX-25.1

================================================================================

                                    FORM T-1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                              SECTION 305(b)(2) / /

                                   ----------

                            BNY MIDWEST TRUST COMPANY
                 (formerly known as CTC Illinois Trust Company)
               (Exact name of trustee as specified in its charter)

Illinois                                               36-3800435
(State of incorporation                                (I.R.S. employer
if not a U.S. national bank)                           identification no.)

2 N. LaSalle Street
Suite 1020
Chicago, Illinois                                      60602
(Address of principal executive offices)               (Zip code)

                                   ----------

                       Navistar International Corporation
               (Exact name of obligor as specified in its charter)

Delaware                                               36-3359573
(State or other jurisdiction of                        (I.R.S. employer
incorporation or organization)                         identification no.)

4201 Winfield Road
P.O. Box 1488
Warrenville, Illinois                                  60555
(Address of principal executive offices)               (Zip code)

                         Navistar Financial Corporation
               (Exact name of obligor as specified in its charter)

Delaware                                               36-2472404
(State or other jurisdiction of                        (I.R.S. employer
incorporation or organization)                         identification no.)

2850 West Golf Road
Rolling Meadows, Illinois                              60008
(Address of principal executive offices)               (Zip code)

                                   ----------

                 4.75% Subordinated Exchangeable Notes due 2009
                       (Title of the indenture securities)

================================================================================


1.   GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

     (a)  NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
          IT IS SUBJECT.

- --------------------------------------------------------------------------------
               Name                                    Address
- --------------------------------------------------------------------------------

     Office of Banks & Trust Companies of    500 E. Monroe Street
     the State of Illinois                   Springfield, Illinois 62701-1532

     Federal Reserve Bank of Chicago         230 S. LaSalle Street
                                             Chicago, Illinois 60603

     (b)  WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

     Yes.

2.   AFFILIATIONS WITH OBLIGOR.

     IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.

     None.

16.  LIST OF EXHIBITS.

     1.   A copy of Articles of Incorporation of BNY Midwest Trust Company
          (formerly CTC Illinois Trust Company, formerly Continental Trust
          Company) as now in effect. (Exhibit 1 to Form T-1 filed with the
          Registration Statement No. 333-47688.)

     2,3. A copy of the Certificate of Authority of the Trustee as now in
          effect, which contains the authority to commence business and a grant
          of powers to exercise corporate trust powers. (Exhibit 2 to Form T-1
          filed with the Registration Statement No. 333-47688.)

     4.   A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
          filed with the Registration Statement No. 333-47688.)

     6.   The consent of the Trustee required by Section 321(b) of the Act.
          (Exhibit 6 to Form T-1 filed with the Registration Statement No.
          333-47688.)

     7.   A copy of the latest report of condition of the Trustee published
          pursuant to law or to the requirements of its supervising or examining
          authority.


                                     - 2 -


                                    SIGNATURE

     Pursuant to the requirements of the Act, the Trustee, BNY Midwest Trust
Company, a corporation organized and existing under the laws of the State of
Illinois, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
Chicago, and State of Illinois, on the 11th day of April, 2002.


                                   BNY Midwest Trust Company

                                   By: /s/  D. DONOVAN
                                       -----------------------------------------
                                        Name:     D. DONOVAN
                                        Title:    ASSISTANT VICE PRESIDENT


                                     - 3 -


                         OFFICE OF BANKS AND REAL ESTATE
                       BUREAU OF BANKS AND TRUST COMPANIES

                        CONSOLIDATED REPORT OF CONDITION
                                       OF

                            BNY MIDWEST TRUST COMPANY
                           209 WEST JACKSON BOULEVARD
                                    SUITE 700
                             CHICAGO, ILLINOIS 60606

Including the institution's domestic and foreign subsidiaries completed as of
the close of business on December 31, 2001, submitted in response to the call of
the Office of Banks and Real Estate of the State of Illinois.



                    ASSETS                                       THOUSANDS OF DOLLARS
                    ------                                       --------------------
                                                                   
1. Cash and Due from Depository Institutions ........................  11,694

2. U.S. Treasury Securities .........................................   - 0 -

3. Obligations of States and Political Subdivisions .................   - 0 -

4. Other Bonds, Notes and Debentures ................................   - 0 -

5. Corporate Stock ..................................................   - 0 -

6. Trust Company  Premises,  Furniture,  Fixtures and Other
   Assets Representing Trust Company Premises .......................     363

7. Leases and Lease Financing Receivables ...........................   - 0 -

8. Accounts Receivable ..............................................   4,004

9. Other Assets .....................................................

                  (Itemize amounts greater than 15% of Line 9)

          Intangible Asset - Goodwill .......................  86,813

                                                                       86,882

10. TOTAL ASSETS .................................................... 102,943



                                                                     Page 1 of 3


                         OFFICE OF BANKS AND REAL ESTATE
                       BUREAU OF BANKS AND TRUST COMPANIES

                        CONSOLIDATED REPORT OF CONDITION
                                       OF

                            BNY MIDWEST TRUST COMPANY
                           209 WEST JACKSON BOULEVARD
                                    SUITE 700
                             CHICAGO, ILLINOIS 60606



                  LIABILITIES                                    THOUSANDS OF DOLLARS
                  -----------                                    --------------------
                                                                   
11. Accounts Payable ................................................   - 0 -

12. Taxes Payable ...................................................   - 0 -

13. Other Liabilities for Borrowed Money ............................  25,425

14. Other Liabilities ...............................................

                  (Itemize amounts greater than 15% of Line 14)

          Reserve for Taxes ..................................  3,128
          Taxes due to Parent Company ........................  1,923
          Accrued Expenses ...................................  1,058
                                                                        6,156

15. TOTAL LIABILITIES                                                  31,581

                EQUITY CAPITAL
                --------------

16. Preferred Stock .................................................   - 0 -

17. Common Stock ....................................................   2,000

18. Surplus .........................................................  62,130

19. Reserve for Operating Expenses ..................................   - 0 -

20. Retained Earnings (Loss) ........................................   7,232

21. TOTAL EQUITY CAPITAL ............................................  71,362

22. TOTAL LIABILITIES AND EQUITY CAPITAL ............................ 102,943



                                                                     Page 2 of 3


I,   Robert L. De Paola, Vice President
  ------------------------------------------------------------------------------
              (Name and Title of Officer Authorized to Sign Report)

of BNY Midwest Trust Company certify that the information contained in this
statement is accurate to the best of my knowledge and belief. I understand that
submission of false information with the intention to deceive the Commissioner
or his Administrative officers is a felony.

                                Robert L. DePaola
                ------------------------------------------------
                (Signature of Officer Authorized to Sign Report)

Sworn to and subscribed before me is 13th day of February, 2002.
                                     ----        --------  ----

My Commission expires May 15, 2003.
                      ------------

                                              Joseph A. Giacobino, Notary Public
                                              -------------------

(Notary Seal)

Person to whom Supervisory Staff should direct questions concerning this report.

     Christine Anderson                           (212) 503-4204
- --------------------------------------  ----------------------------------------
            Name                            Telephone Number (Extension)


                                                                     Page 3 of 3