EXHIBIT 10(b)


 





 


DEFERRED
INCENTIVE COMPENSATION PLAN


 


                                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.


 


                                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 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)            “Company” means PACCAR Inc, a Delaware
corporation.


 


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


 


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


 


 


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


 


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


 


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


 


                (l)            “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.


 


                (m)          “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.


 


                (n)           “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.
ELIGIBILITY.


 


                                An employee of
the Company or of a Subsidiary shall be eligible to participate in the Plan for
a Year if he or she:


 


(a)           Is eligible to be considered for a
bonus that will have been earned in such Year under the Company’s Incentive
Compensation Program; and


 


(b)           Has attained age 40 on or before
January 1 of such Year.


 


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                                SECTION 5.
ELECTION TO PARTICIPATE IN PLAN.


 


                                An Executive may
elect to participate in the Plan for a Year by filing with the Committee, on or
before December 15 of such Year, a written election to defer his or her
Bonus Award earned in such Year. The deferral election will become irrevocable
after December 15. The deferral election shall apply solely to the Bonus Award,
if any, to be earned in the Year in which the election is filed and shall
specify the amount or portion of such Bonus Award that is subject to the
election (Deferred Award). The amount of the Bonus Award earned in a given Year
shall be determined by the Company in the following year.


 


                                SECTION 6.
ESTABLISHMENT AND TREATMENT OF ACCOUNT.


 


                                In the event a
Bonus Award is made to an Executive who has filed a timely deferral election
with respect to such Bonus Award, the Company shall establish an Account for
the Executive. The Account shall be credited with an amount 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 shall be
maintained for each Bonus Award deferred by an Executive, except as the Company
may otherwise determine.


                                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 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.


 


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                                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
Stock Account as of the applicable date.


 


                                SECTION 7.
FORM AND TIME OF PAYMENT ACCOUNT.


 


                                Distribution of
the Income and/or PACCAR Stock Accounts shall be made at such time or times and
in such form as the Committee shall determine in its sole discretion. In order
to assist the Committee in making such determinations, the following procedures
are established:


 


                                (a) Request
of Form and Time of Payment. 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. For payment to be made or commence prior to
leaving the Company, a Payment election form must be completed at the time the
Deferral Election is made. Otherwise, elections shall be made by filing the
prescribed form with the Committee not later than the earlier of (A) 30 days
after the Executive’s termination of employment with the Company or (B)
December 1 of the year before the year in which distribution is to be made or
commence. Distribution will be made in accordance with the Executive’s election
unless the Committee has disapproved the election or has determined that the
distribution shall be made at some other time.


 


(i)            Form of Payment. Payment of
an Income Account shall be made in cash, either in a lump sum or in annual
installments 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 on any January,
but 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 a Request. Any
request that an approved method of payment be changed, or any request
subsequent to the deferral election for distribution prior to termination is
subject to approval by the Committee in its sole and absolute discretion. Such
request shall be in writing to the Committee and shall set forth the reasons
for the request.


 


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                                (c) Failing
to Request. In the event that an Executive fails to make a timely election
pursuant to Section 7 (a), distribution of the Income or Stock Account shall be
made in full in the first January following sixty (60) days after 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) Committee
Guidelines. From time to time, the Committee may establish guidelines for
its own use in determining what election made pursuant to Section 7 (a) or (b)
above shall be disapproved, but such guidelines shall not in any way limit the
Committee’s sole discretion to determine the terms and form of distribution of
the recipient’s Income and/or Stock Account.


 


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


 


                                (f) Resignation or
Termination Without Cause. Notwithstanding Section 7(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
single lump sum payment of cash from the income account and shares of PACCAR
stock from the 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 stock account in the first month following termination, unless
the Committee in its sole discretion determines that such payment should be
made at an earlier date.


 


                                SECTION 8.
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 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 7, unless the Committee
determines in its sole discretion that payment shall be made at an earlier date
or in a different form. If the Executive did not file an election under Section
7 prior to his or her death, then the distribution shall be made at the time(s)
and in the form determined by the Committee in its sole discretion. If a
designated Beneficiary dies before receiving payment of his or her entire share
of the Executive’s Income and/or Stock Account, then the remaining payments
shall be made to such Beneficiary’s personal representative.


 


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                                (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 9.
FORFEITURE OF ACCOUNTS.


 


                                All of an
Executive’s Income and/or 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.


 


                                SECTION 10.
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 11.
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 Stock
Account, shall be an unsecured claim against the general assets of the Company.
The Income and/or 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 12.
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.


 


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                                SECTION 13.
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 14. 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 15. 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


 


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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 15.


 


                (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 16. 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 Stock Accounts of
participating Executives shall be paid at the time(s) and in the form
determined under Sections 7 and 8, unless the Committee prescribes an earlier
time or different form for the payment of such Income and/or PACCAR Stock
Accounts.


 


                SECTION 17. CHANGE OF
CONTROL


 


                In the event of a Change of
Control of the Company, as defined in the PACCAR Supplemental Retirement Plan,
each Executive shall be entitled to the lump sum payment of his or her Income
and/or Stock Account. This amount shall be paid within 30 days of the Change of
Control.


 


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                SECTION 18. 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 19. 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 September 15, 2003.


 


 


 


	
   

  	
   

  	
  PACCAR Inc

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ G. Grinstein

  	
   

  	
  September 15, 2003

  
	
   

  	
   

  	
  G. Grinstein

  	
   

  	
  Date

  
	
   

  	
   

  	
  Chairman

  	
   

  	
   

  
	
   

  	
   

  	
  Compensation Committee

  	
   

  	
   

  



 


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