Document:

exhibit10-31

                                                                                               EXHIBIT 10.31

                                  NAVISTAR 1994 PERFORMANCE INCENTIVE PLAN
                                     (Amended as of December 11, 2001)

                                                 SECTION I
                                         ESTABLISHMENT OF THE PLAN

      The Board of  Directors  of Navistar  International  Corporation  approved  the  establishment  of the
Navistar  1994  Performance  Incentive  Plan  ("Plan").  The Plan  replaces  the Navistar  1988  Performance
Incentive Plan,  which  consolidated  and modified the  Corporation's  Annual  Incentive Plan, the Long Term
Incentive Plan and the 1984 Stock Option Plan into one plan.

                                                 SECTION II
                                            PURPOSE OF THE PLAN

      The  purpose of the Plan is to enable  the  Corporation  and its  subsidiaries  to attract  and retain
highly  qualified  personnel,  to provide key  employees  who hold  positions  of major  responsibility  the
opportunity  to earn  incentive  awards  commensurate  with  the  quality  of  individual  performance,  the
achievement of performance goals and ultimately the increase in shareowner value.

                                                SECTION III
                                                DEFINITIONS

      For the purposes of the Plan, the following words and phrases shall have the meanings  described below
in this Section III unless a different meaning is plainly required by the context.

(1)      "Annual  Incentive  Award" means an award of cash approved by the  Committee  based on the level of
         achievement  attained against annual performance goals approved by the Committee on or prior to the
         commencement of the applicable Fiscal year.

(2)      "Award" means an award made under the Plan.

(3)      "Board of Directors" means the Board of Directors of Navistar International Corporation.

(4)      "Change in Control"  shall be deemed to have occurred if (A) any "Person" or "group" (as such terms
         are used in Section 13 (d) and 14 (d) of the  Securities  Exchange Act of 1934) other than employee
         or retiree  benefit  plans or trusts  sponsored  or  established  by the  Corporation  or  Navistar
         International  Transportation  Corp.  ("NITC") is or becomes the "beneficial  owner" (as defined in
         Rule 13d-3 under the Securities  Exchange Act of 1934),  directly or  indirectly,  of securities of
         the Corporation  representing  25% or more of the combined voting power of the  Corporation's  then
         outstanding  securities,  (B) as the result  of, or in  connection  with,  any cash  tender  offer,
         exchange  offer,  merger  or  other  business  combination,   sale  of  assets,  proxy  or  consent
         solicitation,  contested election or substantial stock accumulation (a "Control Transaction"),  the
         members  of the  Board of  Directors  of the  Corporation  immediately  prior to the  first  public
         announcement  relating to such Control  Transaction  shall  immediately  thereafter,  or within two
         years,  cease to  constitute  a majority of the Board of Directors  of the  Corporation  or (C) any
         dissolution or  liquidation of the  Corporation or NITC or an agreement for the sale or disposition
         of all or  substantially  all (more  than 50%) of the  assets of the  Corporation  or NITC  occurs.
         Notwithstanding  the  foregoing,  the sale or  disposition  of any or all of the assets or stock of
         Navistar Financial Corporation shall not be deemed a Change in Control.

                                                         E-9

                                                                                   EXHIBIT 10.31 (CONTINUED)

(5)      "Committee" means the Committee on Compensation and Governance of the Board of Directors.

(6)      "Common Stock" means the common stock of the Corporation.

(7)      "Corporation" means Navistar International Corporation.

(8)      "Employee"  means  a  person  regularly  employed  by  the  Corporation  or any  subsidiary  of the
         Corporation, including its officers.

(9)      "Fair Market  Value" means the average of the high and the low prices of a share of Common Stock on
         the effective  date of grant as set forth in the New York Stock  Exchange - Composite  Transactions
         listing  published  in the  Midwest  Edition of The Wall  Street  Journal or  equivalent  financial
         publication.

(10)     "Fiscal Year" means the fiscal year of the Corporation.

(11)     "Incentive  Stock Option" means a right,  as evidenced by an agreement  between the Participant and
         the Company in a form approved by the  Committee,  to purchase a certain number of shares of Common
         Stock at Fair Market Value for a period of ten (10) years from the date of grant which  options are
         designed to meet the requirements set out under Section 422 of the Internal Revenue Code.

(12)     "Long-term  Incentive Award" means an award of Restricted  Shares for a long-term cycle, the amount
         of the award and the length of the cycle will be determined by the Committee.

(13)     "Nonqualified  Stock Option" means a right,  as evidenced by an agreement  between the  Participant
         and the Company in a form  approved  by the  Committee,  to purchase a certain  number of shares of
         Common  Stock at Fair  Market  Value  for a period  of ten (10)  years and one day from the date of
         grant on which options are stated not to be qualified as incentive  stock options under Section 422
         of the U.S. Internal Revenue Code.

(14)     "Participant" means an Employee selected by the Corporation for participation in the Plan.

(15)     "Plan"  means the Navistar  1994  Performance  Incentive  Plan as set forth herein and as it may be
         amended hereafter from time to time.

(16)     "Qualified  Retirement"  means  a  retirement  from  employment  of the  Corporation  or any of its
         subsidiaries  at any time after the attainment of age fifty-five  (55) with at least ten (10) years
         of credited service as defined by the applicable retirement plan.

(17)     "Restricted  Share" means a share of Common Stock awarded to a Participant by the Committee without
         payment by the  Participant  which is  restricted  as to sale or transfer and subject to forfeiture
         pursuant to terms established by the Committee at the time of issuance.

(18)     "Stock Option" means either an Incentive Stock Option or a Nonqualified Stock Option.

                                                    E-10

                                                                                   EXHIBIT 10.31 (CONTINUED)

                                                     SECTION IV
                                                     ELIGIBILITY

         Management  will,  from time to time,  select and recommend to the  Committee  Employees who are to
         become  Participants  in the Plan.  Such  Employees will be selected from those who, in the opinion
         of  management,   have  substantial  responsibility  in  a  managerial  or  professional  capacity.
         Employees  selected for  participation  in the Plan may not  concurrently  participate in any other
         annual  performance,  long-term  performance,  sales  incentive  or  profit  sharing  plan  of  the
         Corporation or any of its subsidiaries except as specifically approved by the Committee.

                                                      SECTION V
                                               ANNUAL INCENTIVE AWARDS

(1)      On or before the  commencement  of each Fiscal Year, the Committee will approve  performance  goals
         for corporate  achievement for such Fiscal Year, and the amount of the Annual  Incentive Awards for
         such Fiscal Year will be based on the level of achievement  attained  against  previously  approved
         performance  goals.  The  Committee  also will approve an award  percentage  for each  organization
         level for each performance goal.

(2)      Performance  goals for Annual  Incentive  Awards will not be increased or decreased within a Fiscal
         Year except for extraordinary circumstances approved by the Committee.

(3)      An Annual Incentive Award  determination  will be made by the Committee when the financial  results
         and performance levels for a Fiscal Year are presented to the Committee by management.

(4)      Payment  of an  Annual  Incentive  Award  will  be  made  in  cash  to the  Participant  as soon as
         practicable  after an  Annual  Incentive  Award  determination  has been made by the  Committee.  A
         Participant  who is not an  Employee  at the end of a Fiscal Year will not be entitled to an Annual
         Incentive Award for that Fiscal Year unless the Committee determines otherwise.

                                                     SECTION VI
                                             LONG TERM INCENTIVE AWARDS

(1)      On or before the  commencement  of each Fiscal Year, the Committee will approve  performance  goals
         for corporate  achievement for a long-term cycle as determined by the Committee.  The amount of any
         Long Term  Incentive  Award earned shall be based on the cumulative  level of performance  attained
         against the approved performance goals.

(2)      Criteria for Long Term Incentive  Awards will not be increased or decreased for any long-term cycle
         that has begun except for extraordinary circumstances approved by the Committee.

(3)      Separate Long-term Incentive Award  determinations will be made by the Committee for each long-term
         cycle.

                                                    E-11

                                                                                   EXHIBIT 10.31 (CONTINUED)

(4)      Restricted  Shares will be awarded by the Committee to each  Participant  approved by the Committee
         at the  beginning of each cycle  unless to do so would  present a  substantial  risk of causing the
         Corporation to undergo an ownership  change, as such term is defined in Section 382 of the Internal
         Revenue Code,  in which event the  Committee  shall delay the award until there is no longer such a
         risk.  The amount to be awarded will be pursuant to a formula  approved by the Committee  that will
         be based on the ability of the  Participant to contribute to the efforts to achieve the performance
         goals approved by the Committee for the  applicable  cycle.  The Committee  shall  designate  which
         shares shall be subject to performance  goals.  The Committee will make the final  Long-Term  Award
         determination.  No fractional  shares will be issued.  A Participant who quits or is  involuntarily
         separated will forfeit any Restricted  Shares.  Any Restricted  Shares forfeited shall be forfeited
         (i) to the  Company or (ii) if the  forfeiture  to the  Company  creates a  substantial  risk of an
         ownership  change under Section 382 of the Internal  Revenue Code,  then to the salaried and hourly
         pension trusts of the Corporation's  principal  operating  subsidiary pro rata based on assets held
         in the  trusts  as of the  beginning  of the  prior  plan  year.  If a  Participant  dies,  becomes
         permanently and totally disabled, or retires pursuant to a Qualified Retirement,  Restricted Shares
         previously  awarded which are subject to performance  goals,  will be retained until the shares are
         earned or forfeited for failure to meet the performance goals.

(5)      A Participant  may elect,  subject to the provisions of Section VII (2), to pay any withholding tax
         due on Stock  Options or on  Restricted  Shares  awarded  pursuant  to the Plan  either (i) by cash
         including a personal  check made payable to the  Corporation  or (ii) by  delivering at Fair Market
         Value  unrestricted  Common Stock already owned by the  Participant or (iii) by any  combination of
         cash or  unrestricted  Common Stock.  If the  Participant is an officer of the  Corporation  who is
         subject to Section  16(b) of the  Securities  Exchange Act of 1934,  he or she may make an election
         pursuant  to (ii)  or  (iii)  above  only if it is made in  writing  (a) at  least  six (6)  months
         following  the date of grant of an option or an award and at least six (6) months prior to the date
         on which the  amount of the  minimum  required  withholding  tax  related to the option or award is
         determined  or (b) within a ten-day  period  following the release of the  Corporation's  annual or
         quarterly  financial  results.  Once an officer,  who is subject to Section 16(b) of the Securities
         Exchange Act of 1934, makes an election  pursuant to (ii) or (iii) above with respect to a specific
         option or award,  it shall be  irrevocable  unless the election is  disapproved by the Committee at
         its next meeting  following the election.  If the  redemption of shares by the  Corporation  to pay
         withholding  taxes would  present a substantial  risk of causing an ownership  change under Section
         382 of the Internal  Revenue Code, the  Corporation  may refuse the  redemption.  In such a case of
         refusal to redeem by the Corporation,  the Participant would be permitted to sell sufficient shares
         to pay any withholding taxes due.

                                                     SECTION VII
                                                    STOCK OPTIONS

(1)      The Committee may grant  Nonqualified  Stock Options or Incentive Stock Options or a combination of
         both to  Participants  in the amount and at the time that the  Committee  approves.  Option  grants
         shall be limited to a maximum of 50,000 shares per year for any  Participant.  The Board may in its
         discretion  grant  options in addition to the options  subject to the  limitation  contained in the
         proceeding  sentence,  provided that option grants shall be considered as made under the proceeding
         sentence  to the extent the  limitation  is not  exceeded,  and any option  grants in excess of the
         limitation  contained in the  proceeding  sentence shall be considered as made under this sentence,
         and any  option  grants  made  under  this  sentence  shall  not be  treated  as  performance-based
         compensation for tax purposes.

                                                    E-12

                                                                                   EXHIBIT 10.31 (CONTINUED)

(2)      Unless  otherwise  determined by the  Committee,  a Stock Option granted under the Plan will become
         exercisable in whole or in part after the  commencement of the second year of the term of the Stock
         Option to the extent of one third of the  shares,  to the  extent of one third of the shares  after
         commencement of the third year, and to the extent of one third of the shares after  commencement of
         the fourth year.  The  Committee  will be authorized to establish the manner of exercise of a Stock
         Option.  The effective  date of the grant of a Stock Option will,  unless the  Committee  expressly
         determines  otherwise,  be the business day on which the Committee approves the grant of such Stock
         Option,  provided  that such grant will expire if a written  option  agreement is not signed by the
         Participant  receiving a Stock Option and delivered to the  Corporation  within thirty (30) days of
         such approval by the  Committee.  The option can be exercised in whole or in part through  cashless
         exercises  or  other  arrangements  through  agents,  including  stockbrokers,  under  arrangements
         established  by the  Corporation  by paying the  amounts  required  by  instructions  issued by the
         Secretary of the  Corporation  for the  exercise of the  options.  If an exercise is not covered by
         instructions  issued by the Corporate  Secretary,  the purchase  price is to be paid in full to the
         Corporation  upon the exercise of a Stock Option either (i) by cash including a personal check made
         payable to the  Corporation;  (ii) by  delivering  at Fair Market Value  unrestricted  Common Stock
         already  owned by the  Participant,  for six months or more if acquired  from the  Corporation,  or
         (iii) by any combination of cash and  unrestricted  Common Stock, and in either case, by payment to
         the  Corporation  of any  withholding  tax. In no event may successive  simultaneous  pyramiding be
         used to exercise an Option.  If  permitting  the  exercise of a Stock  Option at the time notice of
         intent is given by the Participant to the Corporation  would present a substantial  risk of causing
         an ownership  change under Section 382 of the Internal  Revenue Code, the Corporation may refuse to
         permit the exercise in which event as soon as the Corporation  determines  that a substantial  risk
         of causing an  ownership  change no longer  exists,  it will issue  shares of Common Stock equal in
         value to the  difference  between the exercise price per share and the market price per share times
         the  number of shares  covered by the  exercise  plus  interest  on the total for the period of the
         delay  calculated  at the composite  prime rate of interest to corporate  borrowers as published in
         The Wall Street Journal.  The Committee  also will be authorized in its discretion to prescribe in
         the option  agreement  for the  exercise  of the Stock  Option in  specific  installments.  A Stock
         Option  granted  under  the Plan will be  exercisable  during  such  period  as the  Committee  may
         determine,  and will be  subject to  earlier  termination  as  hereinafter  provided.  In no event,
         however,  may a Stock Option  governed by the Plan be exercised  after the  expiration of its term.
         Except as provided herein,  no Stock Option may be exercised at any time unless the Participant who
         holds the Stock  Option is then an  Employee.  The  Participant  who holds a Stock Option will have
         none of the rights of a shareowner  with respect to the shares subject to a Stock Option until such
         shares are issued upon the exercise of a Stock Option.  Shares which  otherwise  would be delivered
         to the  holder  of a  Stock  Option  may  be  delivered,  at the  election  of the  holder,  to the
         Corporation in payment of Federal,  state and/or local  withholding taxes due in connection with an
         exercise.

(3)      Neither  the  Corporation  nor  any  subsidiary  may  directly  or  indirectly  lend  money  to any
         Participant  for the purpose of assisting the  individual to acquire  shares of Common Stock issued
         upon the exercise of Stock Options granted under the Plan.

                                                    E-13

                                                                                   EXHIBIT 10.31 (CONTINUED)

(4)      In the event of the termination of the employment of a Participant  who holds an outstanding  Stock
         Option,  other than by reason of death, total and permanent  disability or a Qualified  Retirement,
         the Participant may (unless the Stock Option shall have been  previously  terminated)  exercise the
         Stock  Option at any time  within  three  (3)  months  after  such  termination,  but not after the
         expiration of the term of the grant,  to the extent of the number of shares which were  exercisable
         at the date of the  termination  of  employment.  Stock  Options  governed  by the Plan will not be
         affected by any change of employment so long as the Participant continues to be an Employee.

(5)      Except as provided in the last two  sentences  of this  Section  VII(5),  in the event of Qualified
         Retirement a  Participant  who holds an  outstanding  Stock Option may exercise the Stock Option to
         the extent the option is exercisable  or becomes  exercisable  under its terms,  at any time during
         the term of the option grant, and in the event of a total and permanent  disability,  a Participant
         who holds an  outstanding  Stock Option may exercise the Stock Option,  to the extent the option is
         exercisable  or becomes  exercisable  under its terms,  at any time  within  three years after such
         termination  or, if later,  the date on which the option becomes  exercisable  with respect to such
         shares,  but not after the  expiration of the term of the option  grant.  In the event of the death
         of a Participant  who holds an  outstanding  Stock  Option,  the Stock Option may be exercised by a
         legatee,  or by the personal  representatives  or distributees,  at any time within a period of two
         (2) years after  death,  but not after the  expiration  of the term of the grant.  If death  occurs
         while employed by the  Corporation or a subsidiary,  or during the three-year  period  specified in
         the first  sentence of this  paragraph,  options may be  exercised  to the extent of the  remaining
         shares covered by Stock Options  whether or not such shares were  exercisable at the date of death.
         If death occurs  during the  three-month  period  specified in Section  VII(4) Stock Options may be
         exercised  to the  extent  of the  number of shares  that  were  exercisable  at the date of death.
         Notwithstanding  the other provisions of this Section VII(5), no option which is not exercisable at
         the time of a retirement  shall become  exercisable  after such  retirement if, without the written
         consent of the  Corporation,  a  Participant  engages  in a  business,  whether as owner,  partner,
         officer,  employee,  or  otherwise,  which is in  competition  with the  Corporation  or one of its
         affiliates,  and if the  Participant's  participation in such business is deemed by the Corporation
         to be detrimental to the best interests of the  Corporation.  The  determination as to whether such
         business  is in  competition  with the  Corporation  or any of its  affiliates,  and  whether  such
         participation  by such person is  detrimental to the best  interests of the  Corporation,  shall be
         made by the  Corporation  in its  absolute  discretion,  and the decision of the  Corporation  with
         respect  thereto,  including its  determination  as to when the  participation  in such competitive
         business commenced, shall be conclusive.

                                                    SECTION VIII
                                                  RESTRICTED SHARES

(1)      In addition to the Restricted  Shares which the Committee may award pursuant to Section VI(4),  the
         Committee  also may award  Restricted  Shares to  individuals  recommended by management for either
         retention or performance purposes or as part of an employment agreement.

(2)      The  Participant  will be entitled to all  dividends  paid with  respect to all  Restricted  Shares
         awarded  under the Plan  during the period of  restriction  and will not be  required to return any
         such dividends to the  Corporation in the event of the  forfeiture of the  Restricted  Shares.  The
         Participant also will be entitled to vote Restricted Shares during the period of restriction.

                                                    E-14

                                                                                   EXHIBIT 10.31 (CONTINUED)

(3)      All Restricted  Share  certificates  awarded under the Plan are to be delivered to the  Participant
         with an appropriate legend imprinted on the certificate.

                                                     SECTION IX
                                     ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

      Notwithstanding  any other provision of the Plan, the option agreements may contain such provisions as
the Committee determines to be appropriate for the adjustment of the number and class of shares,  subject to
each outstanding Stock Option,  the option prices in the event of changes in, or distributions  with respect
to, the outstanding Common Stock by reason of stock dividends,  recapitalizations,  mergers, consolidations,
split-ups,  combinations  or  exchanges  of shares,  spinoffs  and the like,  and,  in the event of any such
changes in, or distribution  with respect to, the outstanding  Common Stock,  the aggregate number and class
of shares available under the Plan shall be  appropriately  adjusted by the Committee,  whose  determination
shall be conclusive.

                                                      SECTION X
                                             ADMINISTRATION OF THE PLAN

      Full power and authority to construe,  interpret and  administer  the Plan is vested in the Committee.
Decisions  of the  Committee  will be  final,  conclusive  and  binding  upon  all  parties,  including  the
Corporation,  shareowners  and  employees.  The  foregoing  will  include,  but will not be limited  to, all
determinations  by the Committee as to (a) the approval of Employees for  participation in the Plan, (b) the
amount of the Awards,  (c) the  performance  levels at which  different  percentages  of the Awards would be
earned and all subsequent  adjustments to such levels and (d) the  determination  of all Awards.  Any person
who accepts any Award hereunder agrees to accept as final,  conclusive and binding all determinations of the
Committee.  The Committee  will have the right,  in the case of employees not employed in the United States,
to vary from the provision of the Plan to the extent the Committee  deems  appropriate  in order to preserve
the incentive features of the Plan.

                                                 SECTION XI
                                               NON-ASSIGNMENT

      Awards  under  the Plan may not be  assigned  or  alienated.  In case of a  Participant's  death,  the
amounts  distributable  to the deceased  Participant  under the Plan with respect to which a designation  of
beneficiary  has been  made (to the  extent it is valid  and  enforceable  under  applicable  law)  shall be
distributed  in  accordance  with  the Plan to the  designated  beneficiary  or  beneficiaries.  The  amount
distributable to a Participant upon death and not subject to such a designation  shall be distributed to the
Participant's  estate.  If  there  is any  question  as to  the  right  of  any  beneficiary  to  receive  a
distribution  under the Plan, the amount in question may be paid to the estate of the Participant,  in which
event the Corporation will have no further liability to anyone with respect to such amount.

                                                    E-15

                                                                                   EXHIBIT 10.31 (CONTINUED)

                                                SECTION XII
                                           RIGHTS OF PARTICIPANT

      To the extent that any  Participant,  beneficiary  or estate  acquires a right to receive  payments or
distributions  under the Plan, such right will be no greater than the right of a general unsecured  creditor
of the  Corporation.  All  payments and  distributions  to be made  hereunder  will be paid from the general
assets of the  Corporation.  Nothing  contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create any contracted  right or trust of any kind or fiduciary  relationship
between the Corporation and any Participant, beneficiary or estate.

                                                SECTION XIII
                                   MODIFICATION, AMENDMENT OR TERMINATION

      The Committee may modify without the consent of the  Participant  (i) the Plan,  (ii) the terms of any
option previously granted or (iii) the terms of Restricted Shares previously  awarded at any time,  provided
that, no such modification  will,  without the approval of the shareowners of the Corporation,  increase the
number of shares of Common Stock available hereunder.  The Committee may terminate the Plan at any time.

                                                SECTION XIV
                                           RESERVATION OF SHARES

      Each fiscal year,  there will be reserved for issue under the Plan one (1) percent of the  outstanding
shares of Common Stock  including  Class B Common Stock of the  Corporation  as  determined by the number of
shares  outstanding  as of the end of the  immediately  preceding  fiscal  year.  No more than Five  Hundred
Thousand  (500,000)  shares shall be granted as Incentive  Stock Options in any calendar  year.  Such shares
may be in whole or in part,  as the Board of Directors  shall from time to time  determine,  authorized  and
unissued  shares of Common Stock or issued  shares of Common Stock which shall have been  reacquired  by the
Corporation.  If less than one (1)  percent of the shares is  granted  or  awarded in any fiscal  year,  the
difference  will be available  for use in the  following  year only and if not used in the  following  year,
those shares will no longer be available.  Any shares  available from the prior year will be the last shares
to be granted or awarded.

                                                 SECTION XV
                                             AGREEMENT TO SERVE

      Each Participant  receiving a Nonqualified  Stock Option or an Incentive Stock Option shall, as one of
the terms of the  option  agreement,  agree to remain in the  service  of the  Corporation  or of one of its
subsidiaries  for a period of at least one (1) year from the date of granting the option.  Such service will
(subject  to the  provisions  of any  contract  between  the  Corporation  or any such  subsidiary  and such
Participant)  be at the pleasure of the  Corporation or of such  subsidiary and at such  compensation as the
Corporation  or such  subsidiary  shall  determine from time to time.  Any  termination  of a  Participant's
service for any reason other than death,  permanent and total disability or Qualified Retirement during such
period  shall be  deemed a  violation  of the  Agreement  contained  in this  Section.  In the event of such
violation,  any Nonqualified  Stock Option or Incentive Stock Option held by the Participant  under the Plan
will  immediately be canceled.  Nothing in the Plan will confer on any  Participant any right to continue in
the employ of the  Corporation or any of its  subsidiaries or interfere with or prevent in any way the right
of the Corporation or any of its  subsidiaries  to terminate a Participant's  employment at any time for any
reason.

                                                    E-16

                                                                                   EXHIBIT 10.31 (CONTINUED)
                                                SECTION XVI
                                             CHANGE IN CONTROL

      Notwithstanding any provision  contained herein to the contrary,  in the event of a Change in Control,
all awarded  Restricted  Shares will immediately be free of all  restrictions and performance  contingencies
and will be deemed fully earned and not subject to forfeiture and all  outstanding  options  governed by the
Plan will be immediately  exercisable  and shall continue to be exercisable  for a period of three (3) years
from the date of the Change in Control  regardless of the original term or  employment  status,  except that
the term of any Incentive Stock Option shall not be extended beyond ten (10) years from the date of grant.

                                                SECTION XVII
                                           LIMITATION OF ACTIONS

      Every right of action by or on behalf of the Corporation or any shareowner  against any past,  present
or future member of the Board of  Directors,  officer or Employee  arising out of or in connection  with the
Plan will,  irrespective of the place where action may be brought and irrespective of the place of residence
of any such  director,  officer  or  employee,  cease and be barred by the  expiration  of three  years from
whichever  is the later of (a) the date of the act or  omission  in  respect  of which  such right of action
arises or (b) the first date upon which there has been made  generally  available to  shareowners  an annual
report of the  Corporation  and a proxy  statement  for the annual  meeting  of  shareowners  following  the
issuance of such annual report,  which annual report and proxy  statement  alone or together set forth,  for
the related period,  the aggregate amount of Awards under the Plan during such period; and any and all right
of action by an Employee (past,  present or future) against the Corporation  arising out of or in connection
with the Plan  shall,  irrespective  of the place where  action may be  brought,  cease and be barred by the
expiration  of three (3) years from the date of the act or omission in respect of which such right of action
arises.

                                               SECTION XVIII
                                               GOVERNING LAW
      The Plan will be governed by and interpreted pursuant to the laws of the State of Delaware,  the place
of incorporation of the Corporation.

                                                SECTION XIX
                                            SUBSIDIARIES' PLANS

      To the extent  determined by the Committee,  any  subsidiary  may,  without regard to the  limitations
under the Plan, have a separate  incentive plan or program.  The Committee will have exclusive  jurisdiction
and sole  discretion  to approve or  disapprove  any such plan or program and,  from time to time, to amend,
modify,  or  suspend  any such plan or  program.  Individuals  eligible  for  Awards  under any such plan or
program will not be considered  Employees eligible for Awards under the Plan, unless otherwise determined by
the  Committee.  No provision of any such plan or program will be included in, or  considered a part of, the
Plan and any awards made under any such plan or program  will not be charged  against the  aggregate  amount
available under the Plan unless otherwise determined by the Committee.

                                                 SECTION XX
                                               EFFECTIVE DATE

      The effective date of the Plan shall be December 16, 1993, if approved by the  shareowners at the 1994
Annual Meeting, and the Plan shall continue in effect for ten (10) years from the effective date.
                                                    E-17exhibit10-32

                                                                                                       EXHIBIT 10.32

                                       NAVISTAR 1998 SUPPLEMENTAL STOCK PLAN
              (As amended December 11, 2001, and supplemented by the Restoration Stock Option Program)

                                                     SECTION I
                                                PURPOSE OF THE PLAN

         The purpose of this Navistar  1998  Supplemental  Stock Plan ("Plan") is to provide an additional  plan for
the  issuance  of stock  options  and  restricted  stock for shares of the common  stock of  Navistar  International
Corporation to employees of Navistar International  Corporation and its subsidiaries  ("Corporation") to attract and
retain  highly  qualified  personnel,  to provide key  employees  who hold  positions  of major  responsibility  the
opportunity to earn incentive awards  commensurate  with the quality of individual  performance,  the achievement of
performance  goals and  ultimately  the increase in  shareowner  value.  This Plan is separate  from and intended to
supplement  the  Navistar  1994  Performance   Incentive  Plan  ("1994  Plan").   The  Plan  replaces  the  Navistar
International  Corporation  1998  Interim  Stock  Plan for  grants or awards of stock  made on and after the date of
adoption of this Plan.

                                                     SECTION II
                                                    DEFINITIONS

         The terms used in this Plan are defined as specified  in the 1994 Plan unless the context  indicates to the
contrary.

                                                    SECTION III
                                                    ELIGIBILITY

      Management  will, from time to time,  select and recommend to the Committee on Compensation  and Governance of
the Board of  Directors  of Navistar  International  Corporation  ("Committee")  (formerly  named the  Committee  on
Organization)  Employees who are to become  Participants in the Plan.  Employees will be selected from those who, in
the opinion of management,  have  substantial  responsibility  in a managerial or professional  capacity.  Employees
selected for  participation  in the Plan may also be participants in the 1994 Plan, and  participation  in this Plan
will not be considered participation in a plan that would affect their participation in the 1994 Plan.

                                                     SECTION IV
                                                   STOCK OPTIONS

      The Committee may grant  Nonqualified  Stock  Options to  Participants  in the amount and at the time that the
Committee  approves.  No Incentive  Stock Options  shall be granted under this Plan.  Options shall be granted under
the same terms and  conditions as options  granted under the 1994 Plan, as amended from time to time, but subject to
the  limitation on the number of shares  contained in this Plan,  and subject to the  limitation  that only treasury
shares, and not newly issued shares, may be used for any grant.

                                                     SECTION V
                                                 RESTRICTED SHARES

      The  Committee  may award  restricted  shares  for the  purposes  and under the same terms and  conditions  as
specified in Sections VI and VIII, and the other  provisions of the 1994 Plan, but subject to the limitations on the
number of shares  contained in this Plan, and subject to the  limitation  that only treasury  shares,  and not newly
issued shares, may be used for any award to an officer of the Corporation.

                                                        E-18

                                                                                           EXHIBIT 10.32 (CONTINUED)

                                                     SECTION VI
                                             ADMINISTRATION OF THE PLAN

      Full  power and  authority  to  construe,  interpret  and  administer  the Plan is  vested  in the  Committee.
Decisions of the  Committee  will be final,  conclusive  and binding upon all parties,  including  the  Corporation,
shareowners  and  employees.  The foregoing  will  include,  but will not be limited to, all  determinations  by the
Committee as to (i) the approval of Employees for  participation  in the Plan, (ii) the amount of the Awards,  (iii)
the performance levels at which different  percentages of the Awards would be earned and all subsequent  adjustments
to such levels and (iv) the  determination  of all Awards.  Any person who  accepts  any Award  hereunder  agrees to
accept as final,  conclusive and binding all determinations of the Committee.  The Committee will have the right, in
the case of employees  not employed in the United  States,  to vary from the provision of the Plan to the extent the
Committee deems appropriate in order to preserve the incentive features of the Plan.

                                                    SECTION VII
                                       MODIFICATION, AMENDMENT OR TERMINATION

      The Committee may modify  without the consent of the  Participant  (i) the Plan,  (ii) the terms of any option
previously  granted or (iii) the terms of Restricted Shares previously  awarded at any time,  provided that, no such
modification will, without the approval of the Board of Directors of the Corporation,  increase the number of shares
of Common Stock available hereunder.  The Committee may terminate the Plan at any time.

                                                    SECTION VIII
                                               RESERVATION OF SHARES

      The total number of shares of stock  reserved and  available  for delivery  pursuant to this Plan is 2 million
shares of common stock of Navistar International  Corporation.  The number of shares reserved and available shall be
increased  by shares of stock  subject to an option or award  under  this Plan or any other plan that is  cancelled,
expired,  forfeited,  settled in cash or otherwise terminated without a delivery of shares to the participant of the
plan,  including  shares used to pay the option exercised price of an option issued under the Plan or any other plan
or to pay taxes with respect to such an option.  Only treasury shares,  and not newly issued shares, may be reserved
and made available for delivery.

      Effective  December  11, 2001 the number of shares  remaining  to be issued under the plan is increased by 2.5
million shares.

                                                     SECTION IX
                                                  TERM OF THE PLAN

      The Plan shall be effective on the date of adoption by the Board of Directors  and continue  through  December
16, 2003.

                                                     SECTION X
                                                   GOVERNING LAW

      The Plan will be  governed by and  interpreted  pursuant  to the laws of the State of  Delaware,  the place of
incorporation of the Corporation.

                                                        E-19

                                                                                           EXHIBIT 10.32 (CONTINUED)

                                          RESTORATION STOCK OPTION PROGRAM

Restoration  options.  Restoration  stock options are additional  options  granted to an employee as a result of the
employee  exercising  another Navistar stock option if the form and manner of the exercise of the other stock option
qualify for the restoration option program.

Qualifying exercises.

o       The option being  exercised  (the  original  option) can be any employee  stock option  granted by Navistar,
        whether  granted before or after the  commencement or revision of the  restoration  option program.  Options
        that were granted as  restoration  options are not eligible for  restoration  option  grants if the original
        nonrestoration option was granted prior to June 21, 2000.  Incentive Stock Options (ISO) are not eligible.

o       No  restoration  option  exercise can be made during the  six-month  period  following  the revision of this
        program  unless  the  restoration  exercise  is made on a deferred  basis as  provided  for in this  program
        document.

o       The option price payable on exercise of the original  option must be paid by transferring to the Corporation
        Navistar  stock with a current  value equal to the option price.  The stock must be mature  stock,  i.e., if
        the stock was acquired from the Corporation, it must have been held at least six months.

o       The employee must either pay cash for the withholding tax,  transfer to the Corporation  Navistar stock with
        a current  value equal to the  withholding  tax, or request that the amount of stock  necessary to cover the
        withholding  tax be withheld  from the stock  otherwise  payable to the  employee.  The employee may request
        additional  withholding at a federal rate of up to 40%, if he presents to the Company mature shares equal in
        value to the additional  withholding.  The stock must be mature stock,  i.e., if the stock was acquired from
        the Corporation it must have been held at least six months.

o       The employee  must elect that the exercise be treated as a  restoration  exercise and sign an agreement  for
        the restoration option.

Terms of the restoration option grant.

o       The number of shares for which the  restoration  option is  granted is the number of shares  required  to be
        paid to the Corporation on exercise of the original  option,  i.e., the number of shares required to pay the
                                                                      ----
        option price; and the number of shares with value equal to the tax liability.

o       The option  price under the  restoration  option will be the market  price of Navistar  stock on the date of
        exercise of the original option (the date of grant of the restoration option).

o       The term of the restoration option shall be for the remaining term of the original option.

o       The  restoration  option  will  become  exercisable  six months  after the date of grant of the  restoration
        option, or, if sooner, one month before the end of the term of the original option.

                                                            E-20

                                                                                           EXHIBIT 10.32 (CONTINUED)

o       The usual terms of Navistar  stock  options as  specified in the plans and  Committee  and Board action will
        apply to the restoration options where specific provisions  reflecting the nature of the restoration options
        are not  applicable.  For  example,  the  options  will  continue  to become  exercisable  after a qualified
        retirement and will be  exercisable  for three years after  becoming  exercisable;  on change in control the
        options  will  become  exercisable  immediately  and be  extended  for  three  years;  options  that are not
        exercisable will lapse if an employee quits before retirement.

Restriction  on profit  shares.  The profit  shares  received  on  exercise  of the  original  option are subject to
restriction  on transfer.  The profit  shares are the shares that  represent  the  difference  in value  between the
option price and the value of the stock on the date of exercise of the original option,  less any shares withheld to
pay the withholding taxes required on the exercise of the original option.

o       The profit shares cannot be transferred for three years following the exercise of the original option.

o       The restriction period ends immediately if the holder dies,  terminates employment on account of disability,
        or terminates employment under a qualified retirement as defined in the stock option plan.

o       Profit shares can be used to pay the option price on exercise of another  Navistar  stock option even though
        the shares are  subject  to the  transfer  restrictions.  The holder is treated as  transferring  his profit
        shares to the  Corporation,  and getting from the  Corporation in the exchange the same shares back from the
        Corporation.  The transfer  restriction  continues to apply to the  exchanged  shares for the balance of the
        three-year  period that started on the date of exercise of the first original option.  The profit shares can
        only be used if the option being  exercised  permits  their use. For  example,  the options  prohibit use of
        shares that have not been held for longer than six months if the shares were acquired from the Corporation.

Deferral  of Profit  Shares.  Each  employee  who makes a  restoration  exercise  of an option may elect to have the
Company  defer  delivery of the profit  shares due on the original  option for a period of years or an event such as
death,  disability  or  retirement.  The profit  shares are that number of shares for which the option was exercised
less the number of shares used to pay the option price.  An election will be made under  procedures  established  by
the Company that will provide for the following:

o       The  election  must be made six months in advance of  exercise  of an option,  and no options  for which the
        employee has made an election can be exercised  under the restoration  program during the six-month  period.
        However,  the six-month  restriction  period will not apply if the employee makes a deferral election within
        30 days of the revision of this program and pursuant to the election  exercises an option within 6 months of
        the revision.  During the deferral  period,  the employee  will have no right to vote the stock,  to receive
        any dividend  declared on the stock, and no other right as a shareholder.  The employee will be paid in cash
        the  equivalent of any dividend  payments.  If the dividend is an  extraordinary  dividend,  the Company may
        give additional units for shares instead of making a cash payment.

o       The employee must select the number of years for the deferral  period (between 1 and 20) and can select that
        the deferral period ends on death,  disability,  and/or retirement,  or a specified time after retirement. A
        deferral period can be extended on six-months  notice by a current employee or an employee who terminated by
        retirement or disability.  (The terms retirement and disability are defined in the stock options and plan.)

                                                            E-21

                                                                                           EXHIBIT 10.32 (CONTINUED)

o       The deferral period will end on change in control of the Company.  In the event of a transaction  that would
        cause an adjustment under the anti-dilution  provisions of the stock option, such as a stock split,  merger,
        spin off, a similar adjustment will be made to the deferred shares to preserve the value of the deferral.

o       The Company can terminate the deferral within three months for any employee who terminates  employment for a
        reason  other than death,  disability  or  retirement.  The  Company  can  terminate  the  deferral  for all
        employees if it determines it is in the best interests of the Company to do so.

o       The employee will be granted  restoration  options on the exercise date to cover future FIT,  state,  local,
        FICA and Medicare tax liabilities for all restorations.

Effect on share  ownership  requirement.  The profit shares  delivered to the employee and units for deferred shares
can be counted as fulfilling an employee's stock ownership requirement under the Navistar Stock Ownership Program.

Termination  of the program.  The program has been  established by resolution of the Committee on  Compensation  and
Governance  and the Board that  authorized the granting of  restoration  stock options.  The Committee and Board can
terminate the program at any time by resolution terminating the prior authorization.

                                                        E-22

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