Exhibit (10)(b)


 





 


DEFERRED INCENTIVE
COMPENSATION PLAN


 


(Amended and
Restated as of December 31, 2004)


 


	
   

  	
   

  	
  SECTION 1.     ESTABLISHMENT
  AND PURPOSE.

  
	
   

  	
   

  	
   

  
	
   

  	
  The Plan was adopted by
  the Company on November 25, 1991, to provide certain employees with an
  opportunity to defer payment of their bonuses under the Company’s year-end
  Incentive Compensation Program. The Plan is also intended to establish a
  method of paying bonus awards that will assist the Company in attracting and
  retaining employees of outstanding achievement and ability.

  
	
   

  	
   

  	
   

  
	
   

  	
  This Plan was frozen as
  of December 31, 2004, and covers only the deferred Bonus Awards accrued
  by participating Executives as of December 31, 2004 that are not subject
  to Section 409A of the Code. Bonuses Awards deferred under the Company’s
  year-end Incentive Compensation Program after 2004 are covered under the
  PACCAR Inc Deferred Compensation Plan that complies with Section 409A of
  the Code.

  
	
   

  	
   

  
	
   

  	
   

  	
  SECTION 2.     DEFINITIONS.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (A)

  	
  “Account” means
  the bookkeeping account established pursuant to Section 6 on behalf of
  an Executive who elects to participate in the Plan.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (B)

  	
  “Beneficiary”
  means the person or persons designated by the Executive or by the Plan to
  receive payment of the Executive’s Income and/or PACCAR Stock Account in the
  event of the death of the Executive.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (C)

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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (D)

  	
  “Bonus Award”
  means the amount of compensation awarded by the Company to an Executive as a
  bonus under the Company’s year-end Incentive Compensation Program.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (E)

  	
  “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.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (F)

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

  



 


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  (G)

  	
  “Company” means
  PACCAR Inc, a Delaware corporation.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (H)

  	
  “Committee”
  means the Compensation Committee of the Board.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (I)

  	
  “Executive”
  means an employee of the Company or a Subsidiary who is eligible to
  participate in the Plan under Section 4.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (J)

  	
  “Incentive
  Compensation Program” refers to the incentive plan for executives of
  PACCAR Inc and its eligible subsidiaries who are in grades 41 and above.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (K)

  	
  “Permanent and Total
  Disability” is as defined under PACCAR’s Long Term Disability Plan.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (L)

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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (M)

  	
  “Service” means
  employment with the Company or any Subsidiary. A transfer among the Company
  and its Subsidiaries shall not be considered a termination of Service.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (N)

  	
  “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.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (O)

  	
  “Year” means a
  calendar year.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  The Plan was frozen as
  of December 31, 2004, and no Executive can commence participation in the
  Plan after that date. Those Executives (or their Beneficiaries) who
  participated in the Plan as of that date shall continue to participate in the
  Plan until they no longer have an Income and/or PACCAR Stock Account under
  the Plan.

  



 


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  SECTION 5.     ESTABLISHMENT
  AND TREATMENT OF ACCOUNT.

  
	
   

  	
   

  
	
   

  	
  Prior to January 1,
  2005, the Company established an Account for each Executive who made a timely
  deferral election with respect to a Bonus Award (Deferred Award). The Account
  has been credited with amounts equal to that portion of the Bonus Award that
  is not payable currently to the Executive because of the terms of the
  deferral election. A separate Account has been maintained for each Bonus
  Award deferred by an Executive, except as the Company may otherwise have
  determined.

  
	
   

  	
   

  
	
   

  	
  Participants may elect
  to have their Deferred Award allocated to one or both of the two unfunded
  accounts described below:

  
	
   

  
	
  (a)

  	
  Income
  Account. Means a bookkeeping entry established on behalf of
  the Executive who elected to participate in the Plan. A

  
	
   

  	
   

  	
  Deferred Award shall be
  credited to the Income Account as of January next following the Year in
  which such Bonus Award was earned. Interest shall be credited on the balance
  in each Income Account, commencing with the date as of which any amount is
  credited to the Income Account and continuing up to the close of the calendar
  quarter immediately preceding the date when the last payment from the Income
  Account is made. Such interest for each calendar quarter during the deferral
  period shall be credited 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. Such interest shall become a part of the Income
  Account and shall be paid at the same time or times as the principal balance
  of the Income Account.

  
	
   

  	
   

  
	
  (b)

  	
  PACCAR
  Stock Account. Means
  a bookkeeping entry established on behalf of the Executive who elected to
  participate in the

  
	
   

  	
   

  	
  Plan. A Deferred Award
  shall be credited to the PACCAR Stock Account as of January next
  following the Year in which such Bonus Award was earned. The initial account
  balance will be equal to the number of shares of PACCAR Common Stock that the
  Deferred Award could have purchased at the average closing market price for
  the first five (5) business days the market is open in January. Thereafter,
  any dividends earned will be treated as if those dividends had been invested
  in additional shares at the closing market price on the date the dividends
  are paid. Account balances will be adjusted pursuant to Article 10 of
  the Long Term Incentive Plan.

  
	
   

  	
   

  
	
  (c)

  	
  Statements.
  As soon as practicable after July 1 of each Year (and after such other
  dates as the Company may determine), the

  
	
   

  	
   

  	
  Company shall prepare
  and deliver to each participating Executive a written statement showing the
  balance in his or her Income and/or PACCAR Stock Account as of the applicable
  date.

  



 


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  SECTION 6.     FORM AND
  TIME OF PAYMENT OF ACCOUNT.

  
	
   

  	
   

  
	
  (a)

  	
  Election
  of Form and Time of Payment. The rules in this Section 6
  apply to payments commencing after 2004. All elections must be made in
  writing to the Company. An Executive may elect to receive distribution
  of the Income and/or PACCAR Stock Account at the time and in the manner
  described in (i) and (ii) below. Any election of a time or form of
  payment must be made at least 12 months before the payments otherwise would
  have commenced, and payments under the election cannot commence earlier than
  12 months from the date the Executive makes the election.

  
	
   

  	
   

  
	
   

  	
  (i)

  	
   

  	
  Form of Payment.
  Payment of an Income Account shall be made in cash, either in a lump sum in a
  January, or in annual installments in January over a period not in
  excess of 15 years. The amount of any installment to be paid from an Income
  Account shall be determined by dividing the balance remaining in such Income
  Account by the number of installments then remaining to be distributed. Payment
  of the PACCAR Stock Account will be paid in shares of PACCAR Common Stock at
  the end of the deferral period. The source of shares for this plan will be
  the Long Term Incentive Plan.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
   

  	
  Time of Payment.
  Payment of the Income and/or PACCAR Stock Account shall occur or commence in
  any January, but not earlier than at least 12 months from the date the
  Executive makes the election, and not later than the first January after
  the year in which Executive attains age 70 1⁄2. In the event an Executive who
  elects installment payments is reemployed by the Company, all installments will
  be suspended until the Executive’s service ends.

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  Changing
  an Election. Any election that a time or form of
  payment be changed must be made at least 12 months before the payments
  otherwise would have commenced, and payments under the changed election must
  commence at least 12 months from the date the Executive makes the new
  election. Such election shall be made in writing to the Company.

  
	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
  Failing
  to Request. In the event that an Executive fails to make a
  timely election pursuant to Section 6(a), distribution of the Income
  and/or PACCAR Stock Account shall be made in full in the second January following
  the Executive’s termination of employment. In such case, the entire account
  balance in effect as of the distribution date will be distributed to the
  Executive.

  
	
   

  	
   

  
	
  (d)

  	
  Withholding
  Taxes. All payments under the Plan shall be subject to
  reduction to reflect the withholding of applicable taxes.

  
	
   

  	
   

  
	
  (e)

  	
  Resignation or Termination Without Cause. Notwithstanding Section 6(a), in the
  event of termination of employment by resignation of the participant or by
  termination by the Company without Cause as defined in 2(e), other than
  termination by reason of disability or retirement, all compensation deferred
  under this plan after 2001 and before December 31, 2003 will be paid as
  a

  
					



 


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  single
  lump sum payment of cash from the Income Account and shares of PACCAR stock
  from the PACCAR Stock Account in the first January following
  termination. All compensation deferred under this Plan after January 1,
  2004 will be paid as a single lump sum payment of cash from the income
  account and shares of PACCAR stock from the PACCAR Stock Account in the first
  month following termination.

  
	
   

  	
   

  
	
   

  	
   

  	
  SECTION 7.     EFFECT
  OF DEATH OF EXECUTIVE.

  
	
   

  	
   

  	
   

  
	
  (a)

  	
  Distribution
  of Account. Upon the death of a participating Executive,
  the amount (if any) remaining in his or her Income and/or PACCAR Stock
  Account shall be distributed to his or her Beneficiary. The distribution
  shall be made at the time(s) and in the form specified in the election
  filed by the Executive under Section 6. If the Executive did not file an
  election under Section 6 prior to his or her death, then the
  distribution to the Beneficiary shall be made in a lump sum as soon as
  practicable after the death of the Executive. If a designated Beneficiary
  dies before receiving payment of his or her entire share of the Executive’s
  Income and/or PACCAR Stock Account, then the remaining payments shall be made
  to such Beneficiary’s personal representative.

  
	
   

  	
   

  
	
  (b)

  	
  Designation
  of Beneficiary. Upon commencement of participation in the
  Plan, each Executive shall, by filing the prescribed form with the
  Company, name a person or persons as the Beneficiary who will receive any
  distribution payable under the Plan in the event of the Executive’s death. If
  the Executive has not named a Beneficiary or if none of the named
  Beneficiaries survives the Executive, then the Executive’s personal
  representative shall be the Beneficiary. The Executive 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
  Company prior to the Executive’s death. Any other provision of this Subsection (b) notwithstanding,
  in the case of a married Executive, 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 an Executive’s
  Income and/or PACCAR Stock Accounts shall be forfeited in the event that his
  or her Service ends because of a discharge for Cause or in the event that he
  or she, after his or her Service ended for any other reason, 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.

  



 


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  SECTION 9.     INCOMPETENCE.

  
	
   

  	
   

  
	
   

  	
  If, in the opinion of
  the Committee, any individual becomes unable to handle properly any amount
  payable to such individual 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.

  
	
   

  	
   

  
	
   

  	
   

  	
  SECTION 10.     EXECUTIVES’
  RIGHTS UNSECURED.

  
	
   

  	
   

  
	
   

  	
  The Plan is unfunded. The
  interest under the Plan of any participating Executive, and such Executive’s
  right to receive a distribution of his or her Income and/or PACCAR Stock
  Account, shall be an unsecured claim against the general assets of the
  Company. The Income and/or PACCAR Stock Accounts shall be bookkeeping entries
  only, and no Executive 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 Executive 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 12
  shall be void.

  
	
   

  	
   

  
	
   

  	
   

  	
  SECTION 12.     LIMITATION
  OF RIGHTS.

  
	
   

  	
   

  
	
  (a)

  	
  No
  Right to Bonuses. Nothing in the Plan shall be construed to
  give an Executive any right to be granted a Bonus Award.

  
	
   

  	
   

  
	
  (b)

  	
  No
  Right to Employment. Neither the Plan nor the deferral of
  any Bonus 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.

  



 


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  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 Executive 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 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.

  



 


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  (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 Subsection (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
  Subsection (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 Subsections (b) and
  (d) above, respectively.

  
	
   

  	
   

  
	
   

  	
   

  	
  SECTION 15.     AMENDMENT
  OR TERMINATION OF THE PLAN.

  
	
   

  	
   

  
	
   

  	
  The Board or
  appropriate committee thereof, may amend, suspend or terminate the Plan
  at any time. In the event of a termination of the Plan, the Income and/or
  PACCAR Stock Accounts of participating Executives shall be paid at the
  time(s) and in the form determined under Sections 6 and 7.

  
	
   

  	
   

  
	
   

  	
   

  	
  SECTION 16.     CHANGE
  OF CONTROL.

  
	
   

  	
   

  
	
   

  	
  In the event of a
  Change of Control of the Company, as defined in the PACCAR Inc Long Term
  Incentive Plan Section 16.4(i) through (iv), each Executive shall
  be entitled to the lump sum payment of his or her Income and/or PACCAR Stock
  Account. This amount shall be paid within 30 days of the Change of Control.

  
	
   

  	
   

  
	
   

  	
   

  	
  SECTION 17.     CHOICE
  OF LAW.

  
	
   

  	
   

  
	
   

  	
  The validity,
  interpretation, construction and performance of the Plan shall be governed by
  the Employee Retirement Income Security Act of 1974 and, to the extent they
  are not preempted, by the laws of the State of Washington.

  
	
   

  	
   

  
	
   

  	
   

  	
  SECTION 18.     EXECUTION.

  
	
   

  	
   

  
	
   

  	
  To record the amendment
  and restatement of the Plan to read as set forth herein, PACCAR Inc by
  its Chairman, Compensation Committee, has executed this Plan on December 6,
  2005.

  



 


	
   

  	
  PACCAR Inc

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ David K. Newbigging 

  	
  12/06/05

  	
   

  
	
   

  	
   

  	
  David K. Newbigging

  	
  Date

  
	
   

  	
   

  	
  Chairman

  	
   

  
	
   

  	
   

  	
  Compensation Committee

  	
   

  



 


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