Exhibit
10(b)


 





 


DEFERRED COMPENSATION PLAN


(Effective January 1, 2009)


 


SECTION 1.  ESTABLISHMENT AND
PURPOSE.


 


The
PACCAR Inc Deferred Compensation Plan was adopted effective as of January 1,
2005, to provide certain employees with an opportunity (a) to defer
payment of all or part of their bonuses payable under the Incentive Plan and (b) to
defer all or part of any LTIP Award payable under the LTIP.  The Plan is hereby amended and restated,
effective January 1, 2009, and is intended to satisfy the requirements of,
and shall be implemented and administered in a manner consistent with, Section 409A
of the Code.


 


As of December 31,
2004, the Prior Plans were frozen.  Such
Prior Plans cover the deferred awards accrued by participants as of December 31,
2004, that are not subject to Section 409A of the Code.  The deferral of amounts earned and payable
under the Incentive Plan, and of cash awards earned and vested under the LTIP,
on or after January 1, 2005, shall be pursuant to this Plan.


 


SECTION 2.  DEFINITIONS.


 


(a)  “Account” means each bookkeeping
account established pursuant to Section 6 on behalf of an Executive who
elects to participate in the Plan.  Each
Account may consist of two subaccounts: 
an Income Account and a Stock Account.


 


(b)  “Beneficiary” means the person
or persons who shall receive payment of the Participant’s Account(s) in
the event of the death of the Participant.


 


(c)  “Board” means the Board of
Directors of the Company, as constituted from time to time.


 


(d)  “Cause” means (i) an act of
embezzlement, fraud or theft, (ii) the deliberate disregard of the rules of
the Company or a Subsidiary, (iii) any unauthorized disclosure of any of
the secrets or confidential information of the Company or a Subsidiary, (iv) any
conduct which constitutes unfair competition with the Company or a Subsidiary
or (v) inducing any customers of the Company or a Subsidiary to breach any
contracts with the Company or a Subsidiary.


 


(e)  “Code” means the Internal
Revenue Code of 1986, as amended.


 


(f)  “Company” means PACCAR Inc, a
Delaware corporation, or its successor.


 


(g)  “Committee” means the
Compensation Committee of the Board.


 


(h)  “Common Stock” means the common
stock of the Company.


 

















 


(i)  “Deferred Award” means the
particular Incentive Award and/or LTIP Award that is deferred pursuant to the
Plan.


 


(j)  “Eligible Award” means the
Incentive Awards and/or LTIP Awards that are eligible for deferral pursuant to
the Plan.  The Incentive Awards and the
LTIP Awards qualify as “performance-based compensation” as such term is defined
by Section 409A of the Code and the Treasury regulations promulgated
thereunder.


 


(k)  “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.


 


(l)  “Executive” means an employee of the
Company or a Subsidiary who is eligible to participate in the Incentive Plan or
the LTIP.


 


(m) “Incentive Award” means a bonus earned and
payable to an Executive under the Incentive Plan that is eligible for deferral
pursuant to the Plan.  The “2005”
Incentive Awards are the first Incentive Awards eligible for deferral under the
Plan.


 


(n)  “Incentive Plan” means (i) the
PACCAR Inc Senior Executive Yearly Incentive Compensation Plan or (ii) the
PACCAR Inc Incentive Compensation Program, as they may be amended from time to
time.


 


(o)  “Income Account” means the
subaccount under a Participant’s Account which shall include all or part of a
Deferred Award that is credited with interest as set forth in Section 5.


 


(p)  “LTIP” means the PACCAR Inc Long
Term Incentive Plan, as such plan may be amended from time to time.


 


(q)  “LTIP Award” means a long term
cash award earned and payable to an Executive under the LTIP that is eligible
for deferral pursuant to the Plan.  The “2002-2004
Cycle” LTIP Awards (payable in 2005) are the first LTIP Awards eligible for
deferral under the Plan.


 


(r)  “Participant” means a current or
former Executive with an unpaid Account(s) under the Plan.


 


(s)  “Permanent and Total Disability”
means a “disability” as defined in Section 409A of the Code and the Treasury
regulations promulgated thereunder.


 


(t)  “Plan” means this PACCAR Inc
Deferred Compensation Plan, as it may be amended from time to time.


 


(u)  “Plan Year” means the calendar
year.


 


(v)  “Prior Plans” means the PACCAR
Inc Deferred Incentive Compensation Plan, and Section 6 of the
Administrative Guidelines of the PACCAR Inc Long Term Incentive Plan.


 


(w)  “Separation From Service” means
a “separation from service” as defined in Section 409A of the Code and the
Treasury regulations promulgated thereunder.


 


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(x)  “Service” means employment with
the Company or any Subsidiary.


 


(y)  “Specified Employee” means a
Participant who is a “specified employee” as such term is defined in Section 409A
of the Code.  The Committee shall
determine if a Participant is a Specified Employee as of the date of the
Participant’s Separation From Service, in accordance with Section 409A of
the Code and the Treasury regulations promulgated thereunder.


 


(z)  “Stock Account” means the
subaccount under a Participant’s Account which shall include all or part of a
Deferred Award that is credited with shares of Common Stock as set forth in Section 6.


 


(aa) “Subsidiary” means any corporation
(other than the Company) in an unbroken chain of corporations beginning with
the Company if each of the corporations (other than the last corporation in the
unbroken chain) owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.


 


SECTION 3.  ADMINISTRATION.


 


The
Committee shall have the authority to administer the Plan in its sole
discretion.  To this end, the Committee
is authorized to construe and interpret the Plan, to promulgate, amend and
rescind rules relating to the implementation of the Plan and to make all
other determinations necessary or advisable for the administration of the
Plan.  Subject to the requirements of
applicable law, the Committee may designate persons other than members of the
Committee to carry out its responsibilities and may prescribe such conditions
and limitations as it may deem appropriate. 
Any determination, decision or action of the Committee in connection
with the construction, interpretation or administration of the Plan shall be
final, conclusive and binding upon all persons participating in the Plan and
any person validly claiming under or through persons participating in the Plan.


 


SECTION 4.  PARTICIPATION.


 


An
Executive who wishes to defer an Eligible Award must make a deferral election
with respect to such Eligible Award at least six months before the end of the
performance period during which such Eligible Award is earned.  A newly eligible Executive who wishes to
defer an Eligible Award also may make a deferral election with respect to such
Eligible Award within thirty days of the date the Executive first becomes
eligible to participate in the Plan. 
Except as otherwise provided in the Plan, an Executive’s deferral
election is irrevocable and cannot be amended.


 


SECTION 5.  TIME AND MANNER OF
PAYMENT OF ACCOUNTS.


 


(a)  Time of Payment.  Each deferral election must specify the time
of payment of the Deferred Award. 
Payment may be made on account of: 
(1) the Participant’s Separation From Service or (2) a
specific payment date(s), as described in the deferral election forms
prescribed by the Committee.  If the
Participant elects to be paid a Deferred Award upon his or her Separation From
Service and the Account established with respect to such Deferred Award is paid
on account of the Participant’s Separation From Service, then payment shall be
made or commence in the first January following the Participant’s
Separation From Service (or, if the 


 


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Participant is a Specified Employee, on the first day
of the month immediately following the date that is at least six (6) months
following the Participant’s Separation From Service).  In addition, if the Participant fails to
specify the timing of payment of a Deferred Award, then the Account established
with respect to such Deferred Award shall be paid in the first January following
the Participant’s Separation From Service (or, if the Participant is a
Specified Employee, on the first day of the month immediately following the
date that is at least six (6) months following the Participant’s
Separation From Service).


 


(b)  Manner of Payment.


 


(i)  Income Account.  The Participant must specify in each deferral
election the manner in which the particular Income Account shall be paid.  A Participant may elect to have his or her
Income Account paid either (1) in a single cash lump sum, or (2) in
substantially equal annual cash installments (not to exceed fifteen),
calculated by dividing the balance remaining in such Income Account by the number
of installments then remaining to be distributed.  If the Participant fails to specify the
manner of payment for his or her Income Account, such Income Account shall be
paid in a single cash lump sum.


 


(ii)  Stock Account.  The Participant’s Stock Account shall be paid
in a single lump sum distribution of whole shares of Common Stock.  Any fractional shares of Common Stock in the
Participant’s Stock Account shall be paid in a cash lump sum.


 


(c)  Changes to Deferral Elections.  A Participant may change the time and manner
of payment of a particular Account; provided that (i) the new election
shall not become effective for 12 months from the date it is made and (ii) the
new payment date is at least five years later than the original payment
date.  Notwithstanding the foregoing, a
change in the time and/or manner of payment of the particular Account under
this Section 5(c) shall not accelerate payment of such Account,
except as allowed by Section 409A of the Code and the Treasury regulations
promulgated thereunder.


 


(d)  Small Accounts.  Notwithstanding a Participant’s election
under this Section 5, if the total value of all of a Participant’s
Accounts under the Plan is less than $50,000 at the time the Participant is
scheduled to receive his or her first payment, then all of such Participant’s
Accounts under the Plan shall be paid in a single lump sum at that time.  Notwithstanding the foregoing, if the first
scheduled payment date is based on the Participant’s Separation From Service
and the Participant is a Specified Employee, then such Participant’s Accounts
shall not be paid earlier than the first day of the month immediately following
the date that is at least six (6) months following the Participant’s
Separation From Service.


 


(e)  Early Separation From Service.  Notwithstanding a Participant’s election
under this Section 5, if a Participant incurs a Separation From Service
(for any reason other than death or a Permanent and Total Disability) before
attaining age 55 and completing 15 years of Service, then all of such
Participant’s Accounts shall be paid in a single lump sum in the first month immediately following the such Separation
From Service.  However, if such
Participant is a Specified Employee, then all of such Participant’s Accounts
shall be paid in a single lump sum on the first day of the month immediately
following the date that is at least six months following the Participant’s
Separation From Service.


 


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(f)  Age 701⁄2 Payment.  Notwithstanding any other provision of the
Plan to the contrary, payment of a Participant’s Accounts shall be made or
commence no later than the January immediately following the calendar year
in which the Participant attains age 701⁄2.


 


(g)  Withholding.  To the extent required by law in effect at
the time payment is made from the Plan, the Company or its agents shall have
the right to withhold or deduct from any payment under the Plan any taxes
required to be withheld by federal, state or local governments.


 


SECTION 6.  PARTICIPANT ACCOUNTS


 


(a)  Establishment of Accounts.  The Committee shall establish and maintain an
Account for an Executive with respect to each Incentive Award or LTIP Award
deferred under the Plan.  Each Account
shall be credited with an amount equal to that portion of the Incentive Award
and/or LTIP Award that is not payable currently to the Executive because of the
terms of a deferral election.  Separate
Accounts will be maintained for each Deferred Award, except as the Committee
may otherwise have determined.


 


(b)  Investment of Accounts.  An Executive must specify in each deferral
election how the Deferred Award is to be invested and allocated between an
Income Account and a Stock Account.


 


(i)  Income Account.  The Committee shall credit each Income
Account with an initial account balance equal to all or part of the Deferred
Award as the Executive shall specify in the deferral election.  That portion of the Deferred Award shall be
credited as of the January next following the performance period in which
such Deferred Award was earned. 
Commencing with that date, and continuing up to the close of the
calendar quarter immediately preceding the date when the last payment from such
account is made, each Income Account shall be credited with interest on the
account balance.  Interest shall be
credited each calendar quarter during the deferral period at a rate equal to the simple combined average of the
monthly Aa Industrial Bond yield average for the immediately preceding calendar
quarter, as reported in Moody’s Bond Record. 
Such interest shall be compounded quarterly.


 


(ii)  Stock Account.  The Committee shall credit each Stock Account
with an initial account balance equal to all or part of the Deferred Award as
the Executive shall specify in the deferral election.  A deferred Incentive Award that is invested
in a Stock Account shall be credited as of the January next following the
performance period in which such Incentive Award was earned.  The initial account balance shall be equal to
the number of shares of Common Stock that such portion of the Incentive Award
could have purchased at the average closing price of a share of Common Stock
for the first five (5) days in January in which the Common Stock is
actively traded.  A deferred LTIP Award
that is invested in a Stock Account shall be credited as of the date such LTIP
Award is payable under the terms of the LTIP. 
The initial account balance shall be the number of shares of Common
Stock that such portion of the LTIP Award could have purchased at the closing
price of a share of Common Stock on the date the deferred LTIP Award is
credited into the Stock Account. 
Thereafter, any dividends earned on the initial shares of Common Stock
in a Stock Account will be treated as if those dividends had been invested in
additional shares of Common Stock at the closing price on the date the
dividends are paid.  Each Stock Account
will be adjusted pursuant to Article 10 of the LTIP.


 


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(c)  Account Statements.  As soon as practicable after July 1 of
each Plan Year (and after such other dates as the Committee may determine), the
Committee shall cause to be prepared and delivered to each Participant a
written statement showing the balance in his or her Account(s) as of the
applicable date.


 


SECTION 7.  DEATH BENEFITS.


 


(a)  Participant’s Death.  Upon the death of a Participant, his or her
unpaid Account(s) shall be paid to his or her Beneficiary.  The payment shall be made at the time(s) and
in the manner specified in the election filed by the Participant.  If the Participant did not specify the
Beneficiary’s time of payment prior to his or her death, then the payment to
the Beneficiary shall be made as soon practicable after the death of the
Participant, but no later than 90 days after the Participant’s death.  If the Participant did not specify the
Beneficiary’s manner of payment, then the payment to the Beneficiary shall be
in a single lump sum.  If a designated
Beneficiary dies before full payment of his or her entire share of the
Participant’s Accounts, then the remaining payments shall be made to such
Beneficiary’s estate.


 


(b)  Designation of Beneficiary.  Upon commencement of participation in the
Plan, each Participant shall, by filing the applicable form as prescribed by
the Company, name a person or persons as the Beneficiary who will receive any
payments under the Plan in the event of the Participant’s death, in addition to
the time and manner of payment.  If the
Participant has not named a Beneficiary, then the Participant’s estate shall be
the Beneficiary.  The Participant may
change his or her Beneficiary designation from time to time.  Any designation of a Beneficiary (or an
amendment or revocation thereof) shall be effective only if it is made in
writing on the prescribed form and is received by the Committee (or its
delegate) prior to the Participant ‘s death. 
Notwithstanding any other provision of this Section 7 to the
contrary, in the case of a married Participant, any designation of a person
other than his or her spouse as the sole primary Beneficiary shall be valid only if the spouse
consented to such designation in writing.


 


SECTION 8.  FORFEITURE OF ACCOUNTS.


 


All of
a Participant’s Account shall be forfeited in the event that his or her
Separation From Service is for Cause or in the event that after a Separation
From Service for any other reason, the Participant fails or refuses to provide
advice or counsel to the Company or a Subsidiary when reasonably requested to
do so.  The Committee’s good-faith
determination of the existence of facts justifying forfeiture shall be
conclusive.


 


SECTION 9.  INCOMPETENCE.


 


If, in
the opinion of the Committee, any Participant (or Beneficiary, if applicable)
becomes unable to handle properly any payment made under the Plan, then the
Committee may make such arrangements for payment on such individual’s behalf as
it determines will be beneficial to such individual, including (without
limitation) payment to such individual’s guardian, conservator, spouse or
dependent.


 


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SECTION 10.  UNSECURED RIGHTS.


 


The
Plan is unfunded.  The interest under the
Plan of any Participant (or Beneficiary, if applicable) and the right to
receive payment shall be an unsecured claim against the general assets of the
Company.  The Accounts shall be
bookkeeping entries only, and no Participant (or Beneficiary, if applicable)
shall have an interest in or claim against any specific asset of the Company
pursuant to the Plan.


 


SECTION 11.  NONASSIGNABILITY OF INTERESTS.


 


The
interest and property rights of any Participant (or Beneficiary, if applicable)
under the Plan shall not be subject to option nor be assignable either by
voluntary or involuntary assignment or by operation of law, including (without
limitation) bankruptcy, garnishment, attachment or other creditor’s process,
and any act in violation of this Section 11 shall be void.


 


SECTION 12.  LIMITATION OF RIGHTS.


 


(a)  No Right to Eligible Awards.  Nothing in the Plan shall be construed to
give an Executive any right to receive an Incentive Award and/or be granted an
LTIP Award.


 


(b)  No Right to Employment.  Neither the Plan nor the deferral of an
Eligible Award, nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or
implied, that the Company or a Subsidiary will employ an Executive for any
period of time, in any position or at any particular rate of compensation.


 


SECTION 13.  DOMESTIC RELATIONS
ORDERS.


 


The
procedures established by the Company for the determination of the qualified
status of domestic relations orders and for making distributions under
qualified domestic relations orders, as provided in Section 206(d) of
ERISA, shall apply to the Plan.


 


SECTION 14.  CLAIMS AND INQUIRIES.


 


(a)  Application for Benefits.  Applications for benefits and inquiries
concerning the Plan (or concerning present or future rights to benefits under
the Plan) shall be submitted to the Committee in writing.  An application for benefits shall be submitted
on the prescribed form and shall be signed by the Participant or, in the case
of a benefit payable after his or her death, by the Beneficiary.


 


(b)  Denial of Application.  In the event that an application for benefits
is denied in whole or in part, the Committee shall notify the applicant in
writing of the denial and of the right to a review of the denial.  The written notice shall set forth, in a
manner calculated to be understood by the applicant, specific reasons for the
denial, specific references to the provisions of the Plan on which the denial
is based, a description of any information or material necessary for the
applicant to perfect the application, an explanation of why the material is
necessary, and an explanation of the review procedure under the Plan.  The written notice shall be given to the
applicant within a reasonable period of time (not more than 90 days) after the
Committee received the application, unless special circumstances require
further time for processing and the 


 


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applicant is advised of the extension.  In no event shall the notice be given more
than 180 days after the Committee received the application.


 


(c)  Request for Review.  An applicant whose application for benefits was
denied in whole or in part, or the applicant’s duly authorized representative,
may appeal the denial by submitting to the Committee a request for a review of
the application within 90 days after receiving written notice of the denial
from the Committee.  The Committee shall
give the applicant or his or her representative an opportunity to review
pertinent materials, other than legally privileged documents, in preparing the
request for a review.  The request for a
review shall be in writing and addressed to the Committee.  The request for a review shall set forth all
of the grounds on which it is based, all facts in support of the request, and
any other matters that the applicant deems pertinent.  The Committee may require the applicant to
submit such additional facts, documents or other material as it may deem
necessary or appropriate in making its review.


 


(d)  Decision on Review.  The Committee shall act on each request for
an appeal within 60 days after receipt, unless special circumstances require
further time for processing and the applicant is advised of the extension.  In no event shall the decision on review be
rendered more than 120 days after the Committee received the request for a
review.  The Committee shall give prompt
written notice of its decision to the applicant.  In the event that the Committee confirms the
denial of the application for benefits in whole or in part, the notice shall
set forth, in a manner calculated to be understood by the applicant, the
specific reasons for the decision and specific references to the provisions of
the Plan on which the decision is based.


 


(e)  Rules and Interpretations.  The Committee shall adopt such rules,
procedures and interpretations of the Plan as it deems necessary or appropriate
in carrying out its responsibilities under this Section 14.


 


(f)  Exhaustion of Remedies.  No legal action for benefits under the Plan
shall be brought unless and until the claimant (i) has submitted a written
application for benefits in accordance with Section 14(a) above, (ii) has
been notified by the Committee that the application is denied, (iii) has
filed a written request for a review of the application in accordance with Section 14(c) above
and (iv) has been notified in writing that the Committee has affirmed the
denial of the application; provided, however, that legal action may be brought
after the Committee has failed to take any action on the claim within the time
prescribed by Sections 14(b) and 14(d) above, respectively.


 


SECTION 15.  AMENDMENT OR
TERMINATION OF THE PLAN.


 


(a)  The Board or Committee may amend (including
suspend) the Plan at any time.  In the
event all or any provision of the Plan is determined either (i) to violate
Section 409A of the Code (and the Treasury regulations thereunder) or (ii) to
cause any of the deferrals under the Prior Plans to fail to qualify for “grandfathered”
status treatment in accordance with Section 409A of the Code (and the
Treasury regulations promulgated thereunder), each Participant consents to the
adoption of such conforming amendments as the Board or Committee deems
necessary, in its sole discretion, to comply with Section 409A of the Code
(and the Treasury regulations promulgated thereunder) and to preserve the “grandfathered”
status of such deferrals.


 


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(b)  The Board or Committee may terminate
the Plan at any time, subject to the requirements of Section 409A of the
Code and the Treasury regulations promulgated thereunder.


 


SECTION 16.  CHANGE OF CONTROL.


 


The
Board or Committee may terminate the Plan in its entirety within the 30 days
preceding or the 12 months following a “change in control event” (as such term
is defined in the Treasury regulations promulgated pursuant to Section 409A
of the Code); provided, that all substantially similar arrangements also are
terminated and that the Participants receive the balance of their Accounts
within 12 months of the date the Plan is terminated.  The Board or Committee shall determine, in its
sole discretion, whether to terminate the Plan pursuant to this Section 16,
in accordance with Section 409A of the Code and the Treasury regulations
promulgated thereunder.


 


SECTION 17.  CHOICE OF LAW.


 


The
validity, interpretation, construction and performance of the Plan shall be
governed by ERISA and, to the extent they are not preempted, by the laws of the
State of Washington.


 


SECTION 18.  EXECUTION.


 


To
record the adoption of the Plan to read as set forth herein, PACCAR Inc by its
Chairman, Compensation Committee, has executed this Plan document on the eighth
of  December, 2008.


 


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