Document:

EXHIBIT 10(h)

 

 

AMENDMENT
TO COMPENSATORY ARRANGEMENT WITH NON-EMPLOYEE DIRECTORS

 

Effective January 1, 2006, the annual cash
retainer paid to non-employee members of the Board of Directors is $75,000. The
retainer is prorated for directors elected during the calendar year.EXHIBIT 10(i)

 

PACCAR
INC SAVINGS INVESTMENT PLAN

Amendment and Restatement Effective April 1, 2005

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1

  	
  PURPOSE AND SCOPE

  	
   

  
	
  1.1

  	
  Purpose
  of Plan

  	
   

  
	
  1.2

  	
  Scope
  of Plan

  	
   

  
	
  1.3

  	
  PACCAR
  Inc Administers for Participating Subsidiaries; Allocation of Cost

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  DEFINITIONS AND
  CONSTRUCTION

  	
   

  
	
  2.1

  	
  General Definitions

  	
   

  
	
   

  	
  (a)

  	
  “Accounts”

  	
   

  
	
   

  	
  (b)

  	
  “Aggregate 401(k)
  Contributions”

  	
   

  
	
   

  	
  (c)

  	
  “Aggregate 401(m)
  Contributions”

  	
   

  
	
   

  	
  (d)

  	
  “Beneficiary”

  	
   

  
	
   

  	
  (e)

  	
  “Benefit”

  	
   

  
	
   

  	
  (f)

  	
  “Company”

  	
   

  
	
   

  	
  (g)

  	
  “Company Contributions”

  	
   

  
	
   

  	
  (h)

  	
  “Company Contributions
  Account”

  	
   

  
	
   

  	
  (i)

  	
  “Compensation”

  	
   

  
	
   

  	
  (j)

  	
  “Current or
  Accumulated Earnings and Profits”

  	
   

  
	
   

  	
  (k)

  	
  “Eligible Employee”

  	
   

  
	
   

  	
  (l)

  	
  “Employee”

  	
   

  
	
   

  	
  (m)

  	
  “Employee Accounts”

  	
   

  
	
   

  	
  (n)

  	
  “ERISA”

  	
   

  
	
   

  	
  (o)

  	
  “Excess Aggregate
  Contributions”

  	
   

  
	
   

  	
  (p)

  	
  “Excess Contributions”

  	
   

  
	
   

  	
  (q)

  	
  “Excess Deferrals”

  	
   

  
	
   

  	
  (r)

  	
  “Fiduciary”

  	
   

  
	
   

  	
  (s)

  	
  “Highly Compensated
  Employee”

  	
   

  
	
   

  	
  (t)

  	
  “Investment Options”

  	
   

  
	
   

  	
  (u)

  	
  “Investment Manager”

  	
   

  
	
   

  	
  (v)

  	
  “IRC”

  	
   

  
	
   

  	
  (w)

  	
  “Layoff”

  	
   

  
	
   

  	
  (x)

  	
  “Member”

  	
   

  

 

i

 

	
   

  	
  (y)

  	
  “Member Contributions”

  	
   

  
	
   

  	
  (z)

  	
  “Nonhighly Compensated
  Employee”

  	
   

  
	
   

  	
  (aa)

  	
  “Normal Retirement Age”

  	
   

  
	
   

  	
  (bb)

  	
  “PACCAR Stock”

  	
   

  
	
   

  	
  (cc)

  	
  “PACCAR Stock Fund”

  	
   

  
	
   

  	
  (dd)

  	
  Period of Service

  	
   

  
	
   

  	
  (ee)

  	
  “Plan”

  	
   

  
	
   

  	
  (ff)

  	
  “Plan
  Year”

  	
   

  
	
   

  	
  (gg)

  	
  “Required Beginning Date”

  	
   

  
	
   

  	
  (hh)

  	
  “Restricted Member”

  	
   

  
	
   

  	
  (ii)

  	
  “Retirement”

  	
   

  
	
   

  	
  (jj)

  	
  “Retirement
  Plan”

  	
   

  
	
   

  	
  (kk)

  	
  “Rollover Contributions”

  	
   

  
	
   

  	
  (ll)

  	
  “Salary Deferrals”

  	
   

  
	
   

  	
  (mm)

  	
  “Salary Deferral Account”

  	
   

  
	
   

  	
  (nn)

  	
  “Section 414(s)
  Compensation”

  	
   

  
	
   

  	
  (oo)

  	
  “Subsidiary”

  	
   

  
	
   

  	
  (pp)

  	
  “Top-Paid Group”

  	
   

  
	
   

  	
  (qq)

  	
  “Total Compensation”

  	
   

  
	
   

  	
  (rr)

  	
  “Totally Disabled”

  	
   

  
	
   

  	
  (ss)

  	
  “Trust Agreement”

  	
   

  
	
   

  	
  (tt)

  	
  “Trust Fund”

  	
   

  
	
   

  	
  (uu)

  	
  “Trustee”

  	
   

  
	
   

  	
  (vv)

  	
  “USERRA”

  	
   

  
	
   

  	
  (ww)

  	
  “Valuation Date”

  	
   

  
	
  2.2

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  ELIGIBILITY AND MEMBERSHIP

  	
   

  
	
  3.1

  	
  Commencement of Membership

  	
   

  
	
  3.2

  	
  Enrollment Procedures

  	
   

  
	
  3.3

  	
  Termination of Membership

  	
   

  

 

ii

 

	
  3.4

  	
  Restricted Membership

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  SALARY
  DEFERRALS AND ROLLOVER CONTRIBUTIONS

  	
   

  
	
  4.1

  	
  Amount of Salary Deferrals

  	
   

  
	
  4.2

  	
  Involuntary
  Reduction of Salary Deferral Rate

  	
   

  
	
  4.3

  	
  Voluntary
  Change of Salary Deferral Rate

  	
   

  
	
  4.4

  	
  Voluntary
  Suspension of Salary Deferrals

  	
   

  
	
  4.5

  	
  Return of Excess Deferrals

  	
   

  
	
  4.6

  	
  Average Deferral
  Percentage Limitation

  	
   

  
	
  4.7

  	
  Allocation
  of Excess Contributions to Highly Compensated Employees

  	
   

  
	
  4.8

  	
  Distribution of
  Excess Contributions

  	
   

  
	
  4.9

  	
  Qualified Company
  Contributions

  	
   

  
	
  4.10

  	
  Special
  Rules

  	
   

  
	
  4.11

  	
  Allocation of Salary
  Deferrals

  	
   

  
	
  4.12

  	
  Diversification
  of Salary Deferral Account or Employee Account

  	
   

  
	
  4.13

  	
  Rollover Contributions

  	
   

  
	
  4.14

  	
  Age 50 Catch-Up Rules

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  COMPANY CONTRIBUTIONS

  	
   

  
	
  5.1

  	
  Amount of Company
  Contributions

  	
   

  
	
  5.2

  	
  Allocation of
  Company Contributions

  	
   

  
	
  5.3

  	
  Average
  Contribution Percentage Limitation

  	
   

  
	
  5.4

  	
  Allocation
  of Excess Aggregate Contributions to Highly Compensated Employees

  	
   

  
	
  5.5

  	
  Distribution
  of Excess Aggregate Contributions

  	
   

  
	
  5.6

  	
  Use of Salary Deferrals

  	
   

  
	
  5.7

  	
  Special Rules

  	
   

  
	
  5.8

  	
  Company
  Contributions Paid From Earnings and Profits; Other Limitations on Company
  Contributions

  	
   

  
	
  5.9

  	
  Company
  Contributions in PACCAR Stock

  	
   

  
	
  5.10

  	
  Diversification
  of Company Contributions Account After Age 50

  	
   

  
	
  5.11

  	
  Return of Company
  Contributions

  	
   

  

 

iii

 

	
  ARTICLE 6

  	
  THE TRUSTEE AND THE
  TRUST FUND

  	
   

  
	
  6.1

  	
  The Trustee and
  Investment Managers

  	
   

  
	
  6.2

  	
  Investment Funds

  	
   

  
	
  6.3

  	
  Voting of PACCAR Stock

  	
   

  
	
  6.4

  	
  Other Instructions by
  Members

  	
   

  
	
  6.5

  	
  Trust
  Fund Investment Losses: Interest in Trust Fund

  	
   

  
	
  6.6

  	
  ERISA 404(c) Requirements

  	
   

  
	
  6.7

  	
  Expenses of Plan and Trust

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  7

  	
  ACCOUNTS AND VALUATIONS

  	
   

  
	
  7.1

  	
  Types of Accounts

  	
   

  
	
  7.2

  	
  Valuation of Accounts

  	
   

  
	
  7.3

  	
  Statements for Members

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  8

  	
  AMOUNT AND
  DISTRIBUTION OF BENEFITS

  	
   

  
	
  8.1

  	
  Vesting and Amount of
  Benefits

  	
   

  
	
  8.2

  	
  Normal Time of Distribution

  	
   

  
	
  8.3

  	
  Time of Distribution

  	
   

  
	
  8.4

  	
  Special Rules
  Regarding Distribution

  	
   

  
	
  8.5

  	
  Reemployment

  	
   

  
	
  8.6

  	
  Available Forms of
  Distribution

  	
   

  
	
  8.7

  	
  Election of a Form
  of Distribution

  	
   

  
	
  8.8

  	
  Small Benefits

  	
   

  
	
  8.9

  	
  Survivors’ Benefits

  	
   

  
	
  8.10

  	
  No
  Alienation of Benefits; Qualified Domestic Relations Order

  	
   

  
	
  8.11

  	
  Facility of Payment

  	
   

  
	
  8.12

  	
  Unclaimed Benefits

  	
   

  
	
  8.13

  	
  Payments
  Discharge Plan; Adverse Claims

  	
   

  
	
  8.14

  	
  Direct Rollovers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  9

  	
  LOANS

  	
   

  
	
  9.1

  	
  Amount of Loans

  	
   

  
	
  9.2

  	
  Aggregate Loan Limitation

  	
   

  

 

iv

 

	
  9.3

  	
  Terms of Loans

  	
   

  
	
  9.4

  	
  Company Consent

  	
   

  
	
  9.5

  	
  Source of Loans

  	
   

  
	
  9.6

  	
  Disbursement of Loans

  	
   

  
	
  9.7

  	
  Valuation Date

  	
   

  
	
  9.8

  	
  Loan Fees

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  10

  	
  WITHDRAWALS

  	
   

  
	
  10.1

  	
  Regular Withdrawals

  	
   

  
	
  10.2

  	
  Source of Withdrawals

  	
   

  
	
  10.3

  	
  Application
  for Withdrawals: Time and Form of Distribution

  	
   

  
	
  10.4

  	
  Limitations on Withdrawals

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  11

  	
  SALE OF STOCK TO TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  12

  	
  PLAN ADMINISTRATION

  	
   

  
	
  12.1

  	
  Company as Plan
  Administrator

  	
   

  
	
  12.2

  	
  Carrying out Fiduciary
  Duties

  	
   

  
	
  12.3

  	
  Appointment of Public
  Accountant

  	
   

  
	
  12.4

  	
  Reliance
  on Plan Records; Member’s Duty to Notify

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  13

  	
  CLAIMS AND REVIEW
  PROCEDURES

  	
   

  
	
  13.1

  	
  Applications for Benefits

  	
   

  
	
  13.2

  	
  Denial of Applications

  	
   

  
	
  13.3

  	
  Requests for Review

  	
   

  
	
  13.4

  	
  Decision on Review

  	
   

  
	
  13.5

  	
  Exhaustion
  of Administrative Remedies; Limitations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  14

  	
  GENERAL
  PROVISIONS

  	
   

  
	
  14.1

  	
  Information and
  Reports to Members

  	
   

  
	
  14.2

  	
  Compliance With USERRA

  	
   

  
	
  14.3

  	
  Applicable Law

  	
   

  
	
  14.4

  	
  No Employment Rights
  Conferred

  	
   

  
	
  14.5

  	
  Service
  Upon Plan; Limitations on Actions Against Plan

  	
   

  
	
  14.6

  	
  Plan Office; Records

  	
   

  

 

v

 

	
  14.7

  	
  Form
  of Applications, Elections and Other Communications

  	
   

  
	
  14.8

  	
  Spousal Consents

  	
   

  
	
  14.9

  	
  Merger,
  Consolidation and Transfer of Assets or Liabilities

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  15

  	
  CONTRIBUTION LIMITATIONS

  	
   

  
	
  15.1

  	
  Basic Limitation

  	
   

  
	
  15.2

  	
  Effect on Future
  Contributions

  	
   

  
	
  15.3

  	
  Effect on Prior
  Contributions

  	
   

  
	
  15.4

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  16

  	
  AMENDMENT OR
  TERMINATION OF PLAN

  	
   

  
	
  16.1

  	
  Plan May Be Amended
  or Terminated

  	
   

  
	
  16.2

  	
  Amendments
  Cannot Reduce Accrued Benefits

  	
   

  
	
  16.3

  	
  Procedure Upon Plan
  Terminations

  	
   

  
	
  16.4

  	
  Partial Terminations

  	
   

  
	
  16.5

  	
  Intent to Comply with ERISA

  	
   

  
	
  16.6

  	
  Fiduciary
  Powers Continue Until Distribution Complete

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  17

  	
  PRIOR PROFIT SHARING PLAN

  	
   

  
	
  17.1

  	
  No Reduction of Accrued
  Benefit

  	
   

  
	
  17.2

  	
  Full Vesting

  	
   

  
	
  17.3

  	
  Continuing Distributions

  	
   

  
	
  17.4

  	
  Beneficiary Designations

  	
   

  
	
  17.5

  	
  Company Contributions

  	
   

  
	
  17.6

  	
  Effective Date

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  18

  	
  SPECIAL TOP-HEAVY RULES

  	
   

  
	
  18.1

  	
  Determination of
  Top-Heavy Status

  	
   

  
	
  18.2

  	
  Minimum Allocations

  	
   

  
	
  18.3

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  19

  	
  EXECUTION

  	
   

  

 

vi

 

PACCAR
INC SAVINGS INVESTMENT PLAN

(As Amended and Restated Effective April 1, 2005)

 

Effective January 1, 1955, Pacific Car and
Foundry Company, the corporate predecessor of PACCAR Inc (a Delaware
corporation), adopted the Pacific Car and Foundry Company Profit Sharing Plan
and executed a Trust Agreement to provide profit-sharing benefits for its
salaried employees.

 

The Plan has been subsequently amended and restated
and has been renamed the “PACCAR Inc Savings Investment Plan.”  Effective April 1, 2005, PACCAR Inc
further amended and restated the Plan to provide that a portion of the Plan
will constitute an employee stock ownership plan within the meaning of IRC section 4975(e)(7) and
to make certain other amendments as set forth herein.  Certain provisions, which are specifically
identified, have a different effective date.

 

The Pacific Car and Foundry Company Profit Sharing
Trust, which was established by Trust Agreement effective January 1, 1955,
and replaced by Trust Agreement dated December 30, 1972, was amended and
restated as of July 1, 1978, and again on January 22, 2001, as well
as the Trust Agreement Between PACCAR Inc and Fidelity Management Trust
Company, established December 31, 1993, and restated as of February 1,
1994, are intended to implement this amended and restated Plan.

 

ARTICLE 1

PURPOSE AND SCOPE

 

1.1                                 Purpose
of Plan

 

The purposes of this
amended and restated Plan are:

 

(a)                                  To
encourage systematic savings and investment by Eligible Employees as a means of
building financial security;

 

(b)                                 To
increase the identification of Eligible Employees with the Company’s financial
success;

 

(c)                                  To
provide Eligible Employees with a flexible savings and investment program
enabling them to make decisions concerning the rate of return and relative risk
of the investments made for their Accounts, as their personal or economic
conditions change; and

 

(d)                                 To
offer additional inducements which will attract and retain Eligible Employees
with the knowledge and skills necessary for the Company’s success.

 

The Plan provides for
contributions to be made by the Company to aid in accomplishing these purposes.

 

1

 

The Plan and the Trust
Agreement are intended to meet the requirements of IRC sections 401(a), 401(k)
and 501(a).  The assets of the Plan are
held in trust and are invested for the exclusive purpose of providing benefits
to Members of the Plan and their Beneficiaries.

 

The Plan is intended to
qualify as an eligible individual account plan under section 407(d)(3) of
ERISA, which is permitted to acquire and hold any amount of qualifying employer
securities, and a portion of the Plan is intended to qualify as an employee
stock ownership plan under IRC section 4975(e)(7), which portion is
designed to invest primarily in PACCAR Stock.

 

1.2                                 Scope
of Plan

 

The Plan, as set forth
herein, applies to Members who are in employment as Employees on or after April 1,
2005.  The rights and benefits, if any,
of a former Employee shall be determined in accordance with the provisions of the
Plan as in effect on the date when his employment terminated.

 

1.3                                 PACCAR
Inc Administers for Participating Subsidiaries; Allocation of Cost

 

All acts required of the
Company hereunder shall be performed by PACCAR Inc for itself and each of its
participating Subsidiaries.  The cost of
the Plan shall be apportioned equitably among PACCAR Inc and its participating
Subsidiaries; provided that if a Subsidiary is prevented from making any
contribution which it otherwise would have made under the Plan by reason of
having insufficient Current or Accumulated Earnings and Profits, then the
contribution which such Subsidiary would have made shall be made by PACCAR Inc
and its other participating Subsidiaries in such proportions as PACCAR Inc may
determine, and in accordance with and subject to the deductible contribution
limitations of IRC section 404 and the provisions of Article 5.

 

ARTICLE 2

DEFINITIONS AND CONSTRUCTION

 

2.1                                 General
Definitions

 

The following words and
phrases when used herein shall have the following meanings, unless the context
otherwise requires:

 

(a)                                  “Accounts” means a Member’s Employee, Salary
Deferral and Company Contributions Accounts (to the extent applicable).

 

(b)                                 “Aggregate 401(k) Contributions”
means, for any Plan Year, the sum of the following: (1) the Member’s
Salary Deferrals for the Plan Year; and (2) the Company Contributions
allocated to the Member’s Accounts as of a date within the Plan Year, to the
extent that such Company Contributions are aggregated with Salary Deferrals
pursuant to Section 4.9.  The
foregoing Paragraph (1) to the contrary notwithstanding, Aggregate 401(k)
Contributions shall not include Age 50 Catch-Up Deferrals and the Excess
Deferrals of a Nonhighly Compensated Employee that are refunded to such
Nonhighly Compensated Employee pursuant to Section 4.5,

 

2

 

provided that such Excess
Deferrals are solely attributable to elective deferrals (within the meaning of section 402(g)(3) of
the IRC) under a plan or plans (including the Plan) maintained by PACCAR Inc or
any Subsidiary (as defined in Section 2.1(oo) without regard to the last
sentence thereof).

 

(c)                                  “Aggregate 401(m) Contributions”
means, for any Plan Year, the sum of the following: (1) the Company
Contributions allocated to the Member’s Accounts as of a date within the Plan
Year; and (2) the Member’s Salary Deferrals for the Plan Year, to the
extent that such Salary Deferrals are aggregated with Company Contributions
pursuant to Section 5.6.

 

(d)                                 “Beneficiary” means a person designated pursuant
to Section 8.9(c) who is entitled to receive all or part of a Member’s
Benefit under the Plan in the event of such Member’s death prior to the total
distribution of such Benefit.

 

(e)                                  “Benefit” means the nonforfeitable balance in a
Member’s Accounts (reduced by the amount of any loan balance that remains
outstanding under Article 9 at the time such Benefit is paid or at the
time of the Member’s death, whichever is earlier, and reduced by any prior
distribution to the Member) which is distributable to such Member under the
Plan, determined pursuant to Article 8.

 

(f)                                    “Company” means (1) PACCAR Inc and (2) all
of its Subsidiaries which have been designated to participate in the Plan by
PACCAR Inc and which have accepted such designation in writing, while such
designation is in effect.

 

(g)                                 “Company Contributions” means amounts
contributed to the Plan by the Company pursuant to Article 5.

 

(h)                                 “Company Contributions Account”
means the account to which is credited a Member’s share of Company
Contributions pursuant to Article 5, as more specifically described in Article 7.

 

(i)                                     “Compensation” means “wages” paid to a Member
by the Company while such Member is an Eligible Employee, and includes the
amounts described in section 3401(a) of the IRC for purposes of
income tax withholding at the source, but determined:

 

(1)                                  Without
regard to any rules that limit the remuneration included in “wages” based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in section 3401(a)(2) of the
IRC);

 

(2)                                  By
including elective deferrals excludable from the Member’s gross income under section 125,
section 132(f)(4) or section 402(e)(3) of the IRC and made
to a plan maintained by the Company, including amounts contributed to the Plan
as Salary Deferrals;

 

(3)                                  By
excluding reimbursements or other expense allowances (such as, for example,
hardship allowances, currency allowances, housing allowances, education
allowances, car allowances, tuition reimbursement, tax equalization

 

3

 

payments to relocated
Employees or Employees on foreign service, cost-of-living allowances to
Employees on foreign service), fringe benefits (cash and non-cash), moving
expenses, deferred compensation, payments received under an extended or
long-term disability plan maintained by the Company, welfare benefits, payments
received under the Company’s Long Term Incentive Plan or any similar plan and
amounts realized from the exercise, sale, exchange or other disposition of a
stock option or stock appreciation right; and

 

(4)                                  By
excluding amounts in excess of $200,000, as adjusted by the Commissioner of the
Internal Revenue to reflect increases in the cost-of-living in accordance with section 401(a)(17)(B).  If the Plan Year is less than 12 consecutive
months, the compensation limit shall be prorated accordingly.  With respect to Salary Deferrals, the
$200,000 indexed limitation shall be applied as follows: the percentage deferral
elected by the Member under Section 4.1 shall apply to his or her entire
Compensation for the payroll period (even if on an annualized basis
Compensation would exceed $200,000 as indexed), provided, however, that
aggregate Salary Deferrals for the Plan Year shall not exceed the lesser of (i) the
dollar limitation under section 402(g) of the IRC (described in Section 4.5)
or (ii) the dollar amount determined by multiplying the $200,000 indexed
amount by the maximum deferral percentage permitted under Section 4.1.

 

(j)                                     “Current or Accumulated Earnings
and Profits” of any corporation participating in the Plan means
current or accumulated net income or profits, as determined by it upon the
basis of its books of account in accordance with generally accepted accounting
practices, without any deduction for taxes based on income or for Company
Contributions made by such corporation under the Plan, and before consolidation
of its financial statements with any other corporation affiliated with it.

 

(k)                                  “Eligible Employee” means any Employee of
the Company who is receiving Compensation, as defined in Section 2.1(i).  “Eligible Employee” does not include (1) any
individual whose employment is covered by a collective-bargaining agreement
(unless the collective-bargaining agreement expressly provides for the
individual’s participation in the Plan), (2) any individual classified as
a commissioned salesman, (3) any individual who is neither a resident nor
citizen of the United States, (4) any “leased employee” (within the meaning
of section 414(n) of the IRC) or any individual who would be a leased
employee but for the period-of-service requirement under section 414(n) of
the IRC, (5) any individual who is not classified by the Company as an
Employee (but, for example, is classified as an “independent contractor”) even
if such individual is later determined to be an Employee, and (6) any
individual who is subject to a written agreement that provides that such
individual shall not be eligible to participate in the Plan.  If, during any period, the Company has not
treated an individual as an Employee and, for that reason, has not withheld
employment taxes with respect to that individual, then that individual shall
not be an Eligible Employee for that period, even in the event that the
individual is determined, retroactively, to have been an Employee during all or
any portion of that period.

 

4

 

(l)                                     “Employee” means any individual who (1) is a
common-law employee of PACCAR Inc or any of its Subsidiaries under the
customary employer-employee relationship or (2) is, with respect to PACCAR
Inc or any of its Subsidiaries, a “leased employee” (within the meaning of section 414(n)
of the IRC).

 

(m)                               “Employee Accounts” means the account to which
a Member’s Member Contributions were credited, as further described in Section 7.1(c),
and which is adjusted for any distributions and withdrawals by the Member.

 

(n)                                 “ERISA” means the Employee Retirement Income Security
Act of 1974 (P.L. 93-406) and includes subsequent amendments of such Act.  Reference to a section of ERISA shall
include such section and any comparable section of any future
legislation amending, supplementing or superseding such section.

 

(o)                                 “Excess Aggregate Contributions”
means the amount by which the Aggregate 401(m) Contributions of Highly
Compensated Employees are reduced pursuant to Section 5.5.

 

(p)                                 “Excess Contributions” means the amount
by which the Aggregate 401(k) Contributions of Highly Compensated Employees are
reduced pursuant to Section 4.8.

 

(q)                                 “Excess Deferrals” means the amount of a
Member’s Salary Deferrals and elective deferrals (within the meaning of section 402(g)(3) of
the IRC), other than Age 50 Catch-Up Deferrals, that exceed the limits set
forth in Section 4.5.

 

(r)                                    “Fiduciary” means a person having specific
fiduciary responsibilities for Plan or Trust Fund administration, as further
described in Article 12.

 

(s)                                  “Highly Compensated Employee”
means any active Employee who:

 

(1)                                  Was
a five-percent owner (as defined in Section 416 of the IRC taking into
account the attribution rules as defined in Section 318(a) of
the IRC) at any time during the Plan Year or the preceding Plan Year; or

 

(2)                                  For
the preceding Plan Year:

 

(i)                                     Received
Total Compensation from PACCAR Inc and any Subsidiary (as defined in Section 2.1(oo)
without regard to the last sentence thereof) of more than $85,000 (or such
larger amount as may be provided on account of cost of living adjustments
pursuant to sections 414(q) and 415(d) of the IRC); and

 

(ii)                                  Provided
the Company elects to apply this rule in accordance with the consistency
and other requirements in regulations, was a member of the Top-Paid Group.

 

The term “Highly
Compensated Employee” shall also include a former Employee who separated from
service (or was deemed to have separated) prior to the

 

5

 

determination year,
performs no service for PACCAR Inc or any Subsidiary (as defined in Section 2.1(oo)
without regard to the last sentence thereof) during the determination year, and
was a Highly Compensated Employee as an active Employee for either the
separation year or any determination year ending on or after the Employee’s
55th birthday.

 

The determination of who
is a Highly Compensated Employee, including the determinations of the number
and identity of Employees in the Top-Paid Group, will be made in accordance
with section 414(q) of the IRC and regulations thereunder.

 

(t)                                    “Investment Options” means with respect to
any Plan Year or portion of a Plan Year, the investment media selected by the
Company and established under the Trust Fund for investment of one or more
types of contributions under the Plan.

 

(u)                                 “Investment Manager” means any person
(other than the Trustee appointed pursuant to Article 6 and the Company):

 

(1)                                  Who
has the power to manage, acquire or dispose of any assets of the Plan;

 

(2)                                  Who
is (i) registered as an investment adviser under the Investment Advisers
Act of 1940; (ii) a bank, as defined in such Act; or (iii) an
insurance company qualified to perform services described in (1) above
under the laws of more than one state; and

 

(3)                                  Who
has acknowledged in writing that he (it) is a Fiduciary with respect to the
Plan.

 

(v)                                 “IRC” means the United States Internal Revenue Code of
1986 and includes subsequent amendments of such Code.  Reference to a section of the IRC shall
include such section and any comparable section of any future
legislation amending, supplementing or superseding such section

 

(w)                               “Layoff” means one of the following types of layoff
for lack of work: (1) layoff due to the closure of a plant or other
facility, (2) layoff due to job elimination on account of technological
change, change in business focus or similar change, without reassignment of
duties to another position (all as determined by the Company), (3) layoff
due to a general or limited manpower reduction program mandated by the Company
or (4) layoff due to the sale or other transfer of all or substantially
all of the assets of a division, facility or line of business to a buyer other
than a Subsidiary.

 

(x)                                   “Member” means an individual who is included in Plan
membership pursuant to Article 3. 
“Member” includes a Restricted Member, unless the Plan otherwise
provides or the context otherwise requires.

 

(y)                                 “Member Contributions” means any amounts
contributed to the Plan by a Member prior to February 1, 1983.

 

6

 

(z)                                   “Nonhighly Compensated Employee”
for any Plan Year means any active Employee who is not a Highly Compensated
Employee.

 

(aa)                            “Normal Retirement Age” means age 65.

 

(bb)                          “PACCAR Stock” means the common stock of PACCAR
Inc and warrants or rights with respect thereto.

 

(cc)                            “PACCAR Stock Fund” is described in Section 6.2.

 

(dd)                          Period of Service

 

An Employee’s “Period of
Service” shall commence on his Employment Date or Reemployment Date (as the
case may be) and shall end when he quits, retires, is discharged, or dies.  In determining whether an Employee has
completed a 12-month Period of Service, the following rules shall apply:

 

(1)                                  Bridging
Rule

 

In the case of an
Employee who quit, retired or was discharged, his Period of Service shall
include the period following such quit, retirement or discharge, if he is
rehired as an Employee within 12 months after the date when he first became
absent from active employment (whether by reason of such quit, retirement or
discharge or for any other reason).

 

(2)                                  Aggregation
Method

 

In the case of a
reemployed Employee, all of his separate Periods of Service shall be aggregated
and treated as a single continuous Period of Service.  When partial months are aggregated, 30 days
shall be deemed to equal one full month.

 

(3)                                  Service
Records; Additional Credit

 

An Employee’s Period of
Service shall be determined by the Company on the basis of employment records
or on such other reasonable and nondiscriminatory basis as it may adopt.  The Company, pursuant to written rules, may
recognize as a Period of Service any period of time not otherwise described in
this Section, subject to such conditions and limitations as it may adopt.

 

(4)                                  Definitions

 

As used in this Section,
the following words and phrases shall have the following meanings:

 

(A)                              “Employment
Date” means the date on which the Employee’s active employment as an
Employee commences.

 

7

 

(B)                                “Reemployment
Date” means the date on which the Employee’s active employment as an
Employee recommences following an absence which is not included in the Employee’s
aggregate Period of Service under (a) above.

 

(ee)                            “Plan” means this PACCAR Inc Savings Investment Plan, as
amended from time to time.

 

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

 

(gg)                          “Required Beginning Date” means, with
respect to a Member:

 

(1)                                  if
he attains or attained age 701⁄2 before January 1, 1999 (and after January 1,
1989), April 1 of the calendar year following the calendar year in which
he attains or attained age 701⁄2;

 

(2)                                  if
he attains age 701⁄2 on or after January 1, 1999, and is not a five-percent
owner (as defined in Section 416 of the IRC and taking into account any
modifications under Section 401(a)(9) of the IRC), April 1 of
the calendar year following the later of the calendar year in which he ceases
to be an Employee or the calendar year in which he attains age 701⁄2; and

 

(3)                                  if
he attains age 701⁄2 on or after January 1, 1999, and is a five-percent
owner (as defined in Section 416 of the IRC and taking into account any
modifications under Section 401(a)(9) of the IRC), April 1 of
the calendar year following the calendar year in which he attains age 701⁄2.

 

(hh)                          “Restricted Member” means a Member who has
limited membership rights under the Plan, as further described in Section 3.4.

 

(ii)                                  “Retirement” means termination of employment as
an Employee (for a reason other than death) after a Member has fulfilled all
requirements for a normal or early retirement benefit under any Retirement
Plan.

 

(jj)                                  “Retirement Plan” means the PACCAR Inc
Retirement Plan, the PACCAR Inc Retirement Plan for Weekly Paid Salaried Employees
in effect prior to June 1, 1989, or any other defined-benefit or
defined-contribution plan (other than this Plan) maintained by PACCAR Inc or
any of its Subsidiaries which covers a Member and which is intended primarily
to provide retirement income to its members, as determined and designated by
the Company.

 

(kk)                            “Rollover Contributions” means any
amounts contributed to the Plan by an Eligible Employee under Section 4.13.

 

(ll)                                  “Salary Deferrals” means amounts paid to the
Plan by the Company on a Member’s behalf pursuant to Section 4.1.

 

8

 

(mm)                      “Salary Deferral Account” means the
account to which a Member’s Salary Deferrals are credited, as further described
in Section 7.1(b), and which is adjusted for any distributions and
withdrawals by the Member.

 

(nn)                          “Section 414(s) Compensation”
means any one of the following definitions of compensation received by an
Employee from PACCAR Inc and any Subsidiary (as defined in Section 2.1(oo)
without regard to the last sentence thereof):

 

(1)                                  Compensation
as defined in section 1.415-2(d) and (d)(3) of the Income Tax
Regulations or any successor thereto;

 

(2)                                  Compensation
as defined in Income Tax Regulation section 1.415-2(d)(10) or any
successor thereto.

 

(3)                                  “Wages”
within the meaning of section 3401(a) and all other payments of
compensation (in the course of such employer’s trade or business) for which
such employer is required to furnish the Employee a written statement under
sections 6041(d), 6051(a)(3), and 6052, but determined without regard to any rules under
section 3401(a) that limit the remuneration included in wages based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in section 3401(a)(2)).  (Generally, this option is wages as reflected
on the taxable federal wages box of the Form W-2 of the Employee.)

 

(4)                                  “Wages”
as defined in section 3401(a) of the IRC for purposes of income tax
withholding at the source, but determined without regard to any rules that
limit the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in section 3401(a)(2) of the IRC);

 

(5)                                  Any
of the definitions of Section 414(s) Compensation set forth in Paragraphs
(1), (2), (3) and (4) above, reduced by all of the following items
(even if includable in gross income): reimbursements or other expense
allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation
and welfare benefits;

 

(6)                                  Any
of the definitions of Section 414 (s) Compensation set forth in Paragraphs
(1), (2), (3), (4) and (5) above, modified to include any elective
contributions made by a member of the Affiliated Group on behalf of the Employee
that are not includable in gross income under section 125, 132(f)(4),
402(e)(3), 402(h) or 403(b) of the IRC; or

 

(7)                                  Any
reasonable definition of compensation that does not by design favor Highly
Compensated Employees and that satisfies the nondiscrimination requirement set
forth in section 1.414(s)-1T(d)(2) of the Income Tax Regulations or
the successor thereto.

 

Any definition of Section 414(s)
Compensation shall be used consistently to define the compensation of all
Employees taken into account in satisfying the requirements

 

9

 

of an applicable
provision of this Plan for the relevant determination period.  Section 414(s) Compensation shall not
include compensation paid to an Employee for a Plan Year in excess of $200,000
(as adjusted by the Commissioner of Internal Revenue to reflect increases in
the cost-of-living in accordance with section 401(a)(17)(B)).  For purposes of these limitations, if the
Plan Year is less than 12 consecutive months, the limitation shall be prorated
accordingly.

 

(oo)                          “Subsidiary” means any corporation which is a
member of a “controlled group of corporations” (within the meaning of IRC section 1563(a),
determined without regard to IRC sections 1563(a)(4) and 1563(e)(3)(C)) of
which group PACCAR Inc is also a member, while such a corporation.  “Subsidiary” also means, to the extent and
for the purposes specified by the Company from time to time, any other
corporation in which PACCAR Inc, or one or more of its Subsidiaries or
affiliated corporations, has an ownership interest.

 

(pp)                          “Top-Paid Group” for any Plan Year means the
top 20 percent (in terms of Total Compensation) of all Employees of PACCAR Inc
and its Subsidiaries (as defined in Section 2.1(oo) without regard to the
last sentence thereof) on a U.S. dollar payroll, excluding the following:

 

(1)                                  Any
Employee covered by a collective bargaining agreement except to the extent
otherwise provided under Income Tax Regulation 1.414(q)-1T;

 

(2)                                  Any
Employee who has not completed six-month Period of Service at the end of the
Plan Year;

 

(3)                                  Any
Employee who normally works less than 171⁄2 hours per week;

 

(4)                                  Any
Employee who normally works no more than six months during any year; and

 

(5)                                  Any
Employee who has not attained the age of 21 at the end of the Plan Year.

 

(qq)                          “Total Compensation” means “wages” as
defined in section 3401(a) of the IRC for purposes of income tax
withholding at the source, but determined:

 

(1)                                  Without
regard to any rules that limit the remuneration included in “wages” based
on the nature of location of the employment of the services performed (such as
the exception for agricultural labor in section 3401(a)(2) of the
IRC); and

 

(2)                                  By
including amounts deferred but not refunded under a cafeteria plan, as such
term is defined in section 125(c) of the IRC and under a plan,
including this Plan, qualified under section 401(k) of the IRC, and
amounts excludable from a Member’s gross income under section 132(f)(4) of
the IRC.

 

(rr)                                “Totally Disabled” or “Total Disability”
means, that because of injury or sickness the Member (1) has been paid
long-term disability benefits for a period of at least 24

 

10

 

months under the PACCAR
Inc Long-Term Disability Plan or any other long-term disability plan maintained
by the Company or any of its subsidiaries, and continues to be eligible for
such benefits under such long-term disability plan, (2) is eligible to
receive disability benefits under the federal Social Security program, or (3) has
a life expectancy of 24 months or less which has been certified in writing by
an attending physician and approved by the Company.

 

(ss)                            “Trust Agreement” means the trust agreement
or agreements entered into by the Company and a Trustee pursuant to Section 6.1.

 

(tt)                                “Trust Fund” means the assets of the Plan held in
trust by a Trustee pursuant to a Trust Agreement.

 

(uu)                          “Trustee” means the corporate Fiduciary or
Fiduciaries appointed from time to time by the Company to hold the assets of
the Plan in trust pursuant to a Trust Agreement.

 

(vv)                          “USERRA” means the Uniformed Services Employment and
Reemployment Rights Act of 1994, as amended.

 

(ww)                      “Valuation Date” means each business day.

 

Certain other defined
terms used in particular provisions of the Plan are defined where used.

 

2.2                                 Construction

 

Any gender, where
appearing in the Plan, shall be deemed to include the other gender, the
singular shall include the plural, and the plural shall include the singular,
unless the context otherwise requires. 
Titles are for reference only.  In
the event of a conflict between a title and the text of the Plan, the text of
the Plan shall control.  In the event of
a conflict between the text of the Plan and any summary, description or other
information regarding the Plan, the text of the Plan shall control.

 

ARTICLE 3

ELIGIBILITY AND MEMBERSHIP

 

3.1                                 Commencement
of Membership

 

Only an Eligible Employee
may become a Member of the Plan.  Any
other individual is excluded from becoming a Member until such time as he becomes
an Eligible Employee.  An Eligible
Employee may elect to become a Member as soon as reasonably practicable as of
or after the date he has completed a 30-day Period of Service, provided that he
is then an Eligible Employee.  An
Eligible Employee who does not elect to become a Member when he is first
eligible to do so may elect to become such a Member at any time thereafter.

 

11

 

3.2                                 Enrollment
Procedures

 

An Eligible Employee who
wishes to become a Member shall apply for membership in such manner as
specified under the Company’s written procedures.  In filing an application for membership, an
Eligible Employee shall agree to abide by the terms and conditions of the Plan
and to provide such elections, designations or other information as the Company
deems necessary for the proper administration of the Plan.  An application to become a Member shall be
implemented as soon as reasonably practicable after its receipt by the Company.

 

3.3                                 Termination
of Membership

 

An Eligible Employee,
having become a Member, shall cease to be such a Member upon the termination of
his employment as an Eligible Employee (although he will continue as a
Restricted Member until the earlier of (a) his death or (b) the full
distribution of any Benefit to which he is entitled under the Plan).

 

3.4                                 Restricted
Membership

 

(a)                                  Status
as Restricted Member

 

As long as any portion of
the Benefit to which a Member is entitled under the Plan has not been
distributed, such Member (while living) shall have the status of a Restricted
Member for any period with respect to which:

 

(1)                                  The
Member is contributing no Salary Deferrals under the Plan, whether as a result
of a suspension of contributions pursuant to Section 4.4, as a result of a
determination by the Company pursuant to Section 4.2, because the Member
is receiving no Compensation, or for other reasons;

 

(2)                                  The
Member fails to qualify as an Eligible Employee, whether by reason of a change
in employment status, a transfer to a Subsidiary which does not participate in
the Plan, or for other reasons, but remains an Employee; or

 

(3)                                  Employment
as an Employee has terminated but the distribution of any Benefit to which the
Member is entitled has not been completed.

 

An Employee (while
living) shall also have the status of a Restricted Member if he is not a Member
for all purposes of the Plan but has made a Rollover Contribution and such
Contribution has not been fully distributed.

 

(b)                                 Effect
of Restricted Membership

 

The following rules shall
apply to Restricted Members and their Accounts with respect to periods during
which they are Restricted Members:

 

(1)                                  Except
as provided in Section 5.2, no Company Contributions shall be credited to
a Restricted Member’s Company Contributions Account; and

 

12

 

(2)                                  No
Salary Deferrals shall be contributed to a Restricted Member’s Salary Deferral
Accounts.

 

ARTICLE 4

SALARY DEFERRALS AND ROLLOVER CONTRIBUTIONS

 

4.1                                 Amount
of Salary Deferrals

 

Salary Deferrals are required
of all Members other than Restricted Members. 
Subject to Section 4.14 and the limitations of this Article 4
and Article 15, any such Member may elect to contribute Salary Deferrals
equal to any whole percentage of his Compensation received each pay period
after becoming a Member, but not in excess of 35 percent of such
Compensation.  Salary Deferrals are not
permitted to be made by a Member for any payday on which such Member is not an
Eligible Employee.

 

The amount of a Member’s
Salary Deferrals shall be withheld by the Company from his Compensation on each
payday.  All Salary Deferrals so withheld
shall be paid by the Company to the Trustee as soon as reasonably practicable,
but in no event later than the 15th day of the month next following the month
in which they would otherwise have been payable to the Member in cash.  Salary Deferrals shall be fully vested and
nonforfeitable at all times.

 

For Federal income tax
purposes (and, wherever permitted, for state and local tax purposes), Salary
Deferrals shall be deemed to be employer contributions to the Plan, and a
Member’s election to commence or continue his membership in the Plan shall
constitute an election to have his taxable compensation reduced by the amount
of all of his Salary Deferrals.

 

On or after February 1,
1983, no Member shall make any Member Contributions to the Plan.  However, Member Contributions made before February 1,
1983, shall remain credited to the Member’s Employee Accounts until they are
withdrawn or distributed pursuant to the provisions of the Plan.

 

4.2                                 Involuntary
Reduction of Salary Deferral Rate

 

At any time prior to or
during a Plan Year, the Company (at its sole discretion) may reduce the maximum
rate at which any Member may contribute Salary Deferrals to the Plan for such
Plan Year or during the remainder of such Plan Year, or the Company may require
that any Member discontinue all Salary Deferrals for the remainder of such Plan
Year, for the purpose of meeting the special nondiscrimination rules under
the IRC.  Any reduction or discontinuance
of Salary Deferrals may be applied selectively to individual Members or to
particular classes of Members, as the Company may determine.  In addition to requiring a prospective
reduction or discontinuance of Salary Deferrals, the Company may distribute to
any Member such portion of the Salary Deferrals that he already contributed for
a Plan Year as it determines is necessary to meet the special nondiscrimination
rules under the IRC for such year, as provided in Sections 4.5, 4.8 and
15.3 below.

 

13

 

4.3                                 Voluntary
Change of Salary Deferral Rate

 

A Member may elect at any
time to change the rate of his Salary Deferrals prospectively to any other
percentage permitted under this Article 4. 
Any election pursuant to this Section 4.3 shall be made in
accordance with the Company’s written procedures applicable at the time of the
election.

 

4.4                                 Voluntary
Suspension of Salary Deferrals

 

A Member may elect to
suspend all Salary Deferrals at any time, thereby becoming a Restricted Member
pursuant to Section 3.4.  Any such
election shall be made in accordance with the Company’s written
procedures.  Any election to resume
Salary Deferrals shall become effective as soon as reasonably practicable after
it is received by the Company, but in no event earlier than the date 180 days
after the effective date of the election to suspend Salary Deferrals.

 

When a Member resumes
Salary Deferrals following such suspension, he may make new elections under
this Article 4 regarding the amount and allocation thereof; provided,
however, that if he does not make such new elections, his previous elections
shall be applicable.

 

4.5                                 Return
of Excess Deferrals

 

Subject to Section 4.14,
the aggregate Salary Deferrals of any Member for any calendar year, together
with his or her elective deferrals under any other plan or arrangement to which
section 402(g) of the IRC applies and that is maintained by PACCAR
Inc or any Subsidiary (as defined in Section 2.1(oo) without regard to the
last sentence thereof), shall not exceed $11,000 (or such larger amount as may
be adopted by the Commissioner of Internal Revenue to reflect a cost-of-living
adjustment).  In the event that such
aggregate Salary Deferrals and elective deferrals of any Member for any
calendar year exceed $11,000 (or such larger amount as may be adopted by the
Commissioner of Internal Revenue to reflect a cost-of-living adjustment), then
such portion of the Excess Deferrals, and any income or loss allocable to such
portion, shall be refunded to the Member not later than the April 15 next
following the close of such calendar year.

 

In the event that a
Member’s elective deferrals (within the meaning of section 402(g)(3) of
the IRC) for a calendar year exceed $11,000 (or such larger amount as may be
adopted by the Commissioner of Internal Revenue to reflect a cost-of-living
adjustment) solely because such Member participated in this Plan and a plan or
arrangement maintained by an employer other than PACCAR Inc or any Subsidiary
(as defined in Section 2.1(oo) without regard to the last sentence
thereof), then such Member may designate all or a portion of such Excess
Deferrals as attributable to this Plan and may request a refund of such portion
by notifying the Company in writing on or before the March 1 next
following the close of such calendar year. 
If timely notice is received, then such a Member’s Excess Deferrals, and
any income or loss allocable thereto, shall be refunded to the Member from this
Plan no later than the April 15 next following the close of such calendar
year.

 

14

 

Income (and loss)
allocable to Excess Deferrals for the calendar year, but not for the period
between the end of the calendar year and the date of distribution of such
Excess Deferrals, shall be determined pursuant to the provisions for allocating
income (and loss) to a Participant’s Accounts under Section 7.2 of the
Plan.

 

4.6                                 Average
Deferral Percentage Limitation

 

The Plan shall be deemed
to satisfy the average deferral percentage test for any Plan Year for which the
Company Contributions under the Plan satisfies the requirements of section 401(k)(12)
of the IRC.  Otherwise, the Plan shall
satisfy the average deferral percentage test provided in section 401(k)(3) of
the IRC and section 1.401(k)-1 of the Income Tax Regulations issued
thereunder.  Subject to the special rules described
in Section 4.10, the Aggregate 401(k) Contributions of Highly Compensated
Employees shall not exceed the limits described below:

 

(a)                                  An
Actual Deferral Percentage shall be determined for each Highly Compensated
Employee who, at any time during the Plan Year, is a member (including a
suspended Member) or is eligible to participate in the Plan, which Actual
Deferral Percentage shall be the ratio, computed to the nearest one-hundredth
of one percent, of the Highly Compensated Employee’s Aggregate 401(k)
Contributions for the Plan Year to the Highly Compensated Employee’s Section 414(s)
Compensation for the Plan Year;

 

(b)                                 If
the Company elects (in accordance with applicable law) to apply this Subsection (b),
an Actual Deferral Percentage shall be determined for each Nonhighly
Compensated Employee who, at any time during the Plan Year, is a Member
(including a suspended Member) or is eligible to participate in the Plan, which
Actual Deferral Percentage shall be the ratio, computed to the nearest
one-hundredth of one percent, of the Nonhighly Compensated Employee’s Aggregate
401(k) Contributions for the Plan Year to the Nonhighly Compensated Employee’s Section 414(s)
Compensation for the Plan Year;

 

(c)                                  Provided
the Company has not elected (in accordance with applicable law) to apply Subsection (b) rather
than this Subsection (c), an Actual Deferral Percentage shall be
determined for each Nonhighly Compensated Employee who, at any time during the
preceding Plan Year, was a member (including a suspended Member) or who was
eligible to participate in the Plan, which Actual Deferral Percentage shall be
the ratio, calculated to the nearest one-hundredth of one percent, of the
Nonhighly Compensated Employee’s Aggregate 401(k) Contributions for the
preceding Plan Year to the Nonhighly Compensated Employee’s Section 414(s)
Compensation for the preceding Plan Year;

 

(d)                                 The
Actual Deferral Percentages (including zero percentages) of Highly Compensated
Employees and Nonhighly Compensated Employees shall be separately averaged to
determine each group’s Average Deferral Percentage; and

 

(e)                                  The
Aggregate 401(k) Contributions of Highly Compensated Employees shall constitute
Excess Contributions and shall be reduced, pursuant to Sections 4.7 and

 

15

 

4.8, to the extent that
the Average Deferral Percentage of Highly Compensated Employees exceeds the greater
of (1) 125 percent of the Average Deferral Percentage of Nonhighly
Compensated Employees or (2) the lesser of (A) 200 percent of the
Average Deferral Percentage of Nonhighly Compensated Employees or (B) the
Average Deferral Percentage of Nonhighly Compensated Employees plus two
percentage points.

 

4.7                                 Allocation
of Excess Contributions to Highly Compensated Employees

 

Any Excess Contributions
for a Plan Year shall be allocated to Highly Compensated Employees by use of a
leveling process, whereby the Aggregate 401(k) Contributions of the Highly
Compensated Employee with the highest dollar amount of Aggregate 401(k)
Contributions are reduced to the extent required to (a) eliminate all
Excess Contributions or (b) cause such Highly Compensated Employee’s Aggregate
401(k) Contributions to equal the Aggregate 401(k) Contributions of the Highly
Compensated Employee with the next-highest Aggregate 401(k) Contributions.  Such leveling process shall be repeated until
all Excess Contributions for such Plan Year are allocated to Highly Compensated
Employees.

 

4.8                                 Distribution
of Excess Contributions

 

Excess Contributions
allocated to Highly Compensated Employees for the Plan Year pursuant to Section 4.7,
together with any income or loss allocable to such Excess Contributions, shall
be distributed to such Highly Compensated Employees not later than the March 15
next following the close of such Plan Year, if possible, and in any event no
later than 12 months following the close of such Plan Year.  Any Salary Deferrals distributed pursuant to
this Section 4.8 shall not be included in the Salary Deferrals that
attract a Company Contribution under Section 5.2.

 

4.9                                 Qualified
Company Contributions

 

The Company, in its sole
discretion, may include all or a portion of the Company Contributions for a
Plan Year in Aggregate 401(k) Contributions taken into account in applying the
Average Deferral Percentage limitation described in Section 4.6 for such
Plan Year, provided that the requirements of section 1.401(k)-1(b)(5) of
the Income Tax Regulations are satisfied.

 

4.10                           Special
Rules

 

The following special rules shall
apply for purposes of this Article 4:

 

(a)                                  The
amount of Excess Deferrals to be distributed to a Member for a calendar year
pursuant to Section 4.5 shall be reduced by the amount of any Excess
Contributions previously distributed to such Member for the Plan Year ending
within such calendar year;

 

(b)                                 The
amount of Excess Contributions to be distributed to a Member for a Plan Year
pursuant to Section 4.8 shall be reduced by the amount of any Excess
Deferrals previously distributed to such Member for the calendar year ending
with such Plan Year;

 

16

 

(c)                                  For
purposes of applying the limitation described in Section 4.6, the Actual
Deferral Percentage of any Highly Compensated Employee who is eligible to make
Salary Deferrals and to make elective deferrals (within the meaning of section 402(g)(3) of
the IRC) under any other plans, contracts or arrangements maintained by PACCAR
Inc or any Subsidiary (as defined in Section 2.1(oo) without regard to the
last sentence thereof) shall be determined as if all such Salary Deferrals and
elective deferrals were made under a single arrangement (other than those plans
that may not be permissively aggregated); provided, however, that if such plans
have different plan years, the plans are aggregated with respect to the plan
years ending with or within the same calendar year;

 

(d)                                 In
the event that this Plan is aggregated with one or more other plans in order to
satisfy the requirements of IRC section 401(a)(4), 401(k) or 410(b), then
all such aggregated plans, including the Plan, shall be treated as a single
plan for all purposes under all such IRC sections (except for purposes of the
average benefit percentage provisions of IRC section 410(b)(2)(A)(ii));

 

(e)                                  In
the event that the mandatory disaggregation rules of Treasury Regulation section 1.401(k)-1(g)(11)
apply to the Plan, or to the Plan and other plans with which it is aggregated
as described in Subsection (d) above, then the limitation described
in Section 4.6 shall be applied as if each mandatorily disaggregated
portion of the Plan (or aggregated plans) were a single arrangement

 

(f)                                    Provided
this limit is applied uniformly in determining the Average Deferral Percentage
limitation for the Plan Year, the Company may limit Section 414(s)
Compensation to the amount of such compensation paid to the Eligible Employee
during the portion of the Plan Year that such Member was an Eligible Employee;

 

(g)                                 If
the Plan permits participation in the 401(k) portion of the Plan prior to an
Eligible Employee’s satisfaction of the minimum age and service requirements of
section 410(a)(1)(A) of the IRC and if section 410(b)(4)(B) of
the IRC is applied in determining whether the 401(k) portion of the Plan meets
the requirements of section 410(b) of the IRC, then for purposes of
performing the average deferral percentage test, the test may be performed
separately with regard to Eligible Employees who have not met the minimum age
and service requirements of section 410(a)(1)(A) of the IRC or,
alternatively, Eligible Employees who have not met the minimum age and service
requirements of section 410(a)(1)(A) of the IRC may instead be
excluded in the determination of the Average Deferral Percentage for Nonhighly
Compensated Employees, but not in the determination of the Average Deferral
Percentage for Highly Compensated Employees; and

 

(h)                                 Income
(and loss) allocable to Excess Contributions for the Plan Year, but not for the
period between the end of the Plan Year and the date of distribution of such
Excess Contributions, shall be determined pursuant to Section 7.2.

 

17

 

4.11                           Allocation
of Salary Deferrals

 

A Member shall elect to
allocate his Salary Deferrals among the Investment Options designated by the
Company.  Each Eligible Employee shall
elect, when he enrolls in the Plan, to allocate Salary Deferrals to one or more
Investment Options in any whole percentage increment.  A Member who is an Employee may elect to
change the relative amounts of future Salary Deferrals being allocated to one
or more Investment Options in any whole percentage increment.

 

4.12                           Diversification
of Salary Deferral Account or Employee Account

 

Any Member may elect to
transfer any whole percentage of the amount of the Member’s Salary Deferral
Account or Employee Account then invested in one Investment Option to another
Investment Option as permitted by the Company’s written procedures.

 

An election under this Section 4.12
may be made at any time to be effective as soon as reasonably practicable after
it is received by the Company.  Any
election under this Section 4.12 shall be made in accordance with the
Company’s written procedures.

 

4.13                           Rollover
Contributions

 

With the Company’s prior
written approval, any Eligible Employee may make one or more Rollover
Contributions to the Plan.  An Eligible
Employee who makes a Rollover Contribution at a time when he or she is not a
Member for other purposes shall become a Restricted Member.  A Rollover Contribution shall be permitted
only if it meets all of the following conditions:

 

(a)                                  The
contribution must be made entirely in the form of U.S. dollars;

 

(b)                                 The
Eligible Employee must demonstrate to the Company’s satisfaction that the
contribution is attributable to the Eligible Employee’s participation (or the
participation of the Eligible Employee’s deceased spouse, or the participation
of the Eligible Employee’s former spouse and the Eligible Employee is an
alternate payee as to such former spouse under such other plan pursuant to a
qualified domestic relations order under section 414(p) of the IRC) in
another employer’s retirement plan, or in an individual retirement account or
annuity described in section 408(a) or 408(b) of the IRC, and
that the contribution qualifies as a rollover distribution from a plan that
meets the requirements of section 401(a) or 403(a) of the IRC,
an annuity contract described in section 403(b) of the IRC, an
eligible plan under section 457(b) of the IRC which is maintained by
a state, political subdivision of a state or any agency or instrumentality of a
state or political subdivision of a state, or an individual retirement account
or annuity described in section 408(a) or 408(b) of the IRC; and

 

(c)                                  The
contribution is not attributable to employee after-tax contributions.

 

A Rollover Contribution
shall be paid to the Company in a lump sum in cash.  Each approved Rollover Contribution shall be
transferred to the Trustee as soon as reasonably practicable after it was paid
to the Company.  The Rollover
Contribution shall be allocated among one or more Investment Options in any
whole percentage increment as the Member

 

18

 

may elect.  Such election shall be made in accordance
with the Company’s written procedures.

 

4.14                           Age
50 Catch-Up Rules

 

Effective January 1,
2002, eligible Members (as defined in Section 4.14(a) below) may make
additional Salary Deferrals (“Age 50 Catch-Up Deferrals”) up to the amounts
specified in Section 4.14(b) below.

 

(a)                                  For
purposes of this Section 4.14, “Eligible Member” means a Member who meets
the following requirements:

 

(1)                                  The
Member has attained the age of 50 before the close of the Plan Year.

 

(2)                                  The
Member may make no other Salary Deferrals due to the limit described in Section 4.5
or the limits imposed under Section 4.1 or Section 15.

 

(b)                                 The
maximum amount of Age 50 Catch-Up Deferrals an Eligible Member may make during
a Plan Year shall not exceed the lesser of:

 

(1)                                  the
Age 50 Catch-Up Amount; or

 

(2)                                  the
excess, if any, of (i) the Eligible Member’s Compensation for the Plan
Year, over (ii) any other Salary Deferrals made on behalf of the Eligible
Member for such Plan Year without regard to this Section 4.14.

 

(c)                                  The
“Age 50 Catch-Up Amount” for each Plan Year shall be the amount set forth in section 414(v)(2)(B)(i) of
the IRC.  For Plan Years beginning after
2006, the Age 50 Catch-Up Amount specified in this Section 4.14(c) shall
be adjusted as provided in section 414(v)(2)(C) of the IRC.

 

Age 50 Catch-Up Deferrals made pursuant to this Section 4.14
shall not be taken into account for purposes of the provisions of the Plan
implementing the limitations of section 402(g) and section 415
of the IRC.  The Plan shall not be
treated as failing to satisfy the provisions of the Plan implementing the
requirements of sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or 416
of the IRC by reason of such Age 50 Catch-Up Deferrals.

 

ARTICLE 5

COMPANY CONTRIBUTIONS

 

5.1                                 Amount
of Company Contributions

 

The Company shall make
one or more Company Contributions during each Plan Year with respect to Members’
Salary Deferrals (other than Age 50 Catch-Up Deferrals).  Company Contributions initially may be paid
to a suspense account maintained by the Trustee as part of the Plan.  The aggregate amount of Company Contributions
for each Plan Year shall be equal to the sum of the amounts allocated for such
Plan Year to Members pursuant to Section 5.2.

 

19

 

5.2                                 Allocation
of Company Contributions

 

Company Contributions,
determined under Section 5.1, shall be allocated as of the last day of
each Plan Year to the Company Contributions Account of each Member who has
completed a 12-month Period of Service on or before the last day of such Plan
Year and who is an Employee on such date or who terminated employment during
such Plan Year due to:

 

(a)                                  Death;

 

(b)                                 Total
Disability;

 

(c)                                  Entry
into the armed forces of the United States;

 

(d)                                 Layoff;

 

(e)                                  Retirement
(as defined in Section 2.1(ii)); or

 

(f)                                    The
Company’s decision to relocate the Member’s spouse who is also an Employee of
the Company, if the Member relocates with the spouse and is not offered a job
with the Company at the new location,

 

if the Member defers
distribution of his Plan Benefit to a date later than the last day of the Plan
Year in which he separates from service.

 

The allocation shall be
in an amount equal to the lesser of (1) 100 percent of the aggregate
Salary Deferrals (other than Age 50 Catch-Up Deferrals) made by him during the
Plan Year, not including Salary Deferrals returned to the Member pursuant to
Sections 4.5, 4.8 or 15.3, or (2) five percent of Compensation received
during the portion of the Plan Year that the individual is an Eligible
Employee, a Member (including a Restricted Member) and has completed a 12-month
Period of Service (in the current or a prior Plan Year).  Company Contributions shall be allocated in
the form of PACCAR Stock which shall be valued for allocation purposes on the
basis of the average price per share of all shares of PACCAR Stock paid to the
Plan as part of the Company Contributions and acquired with suspense-account
funds during the Plan Year.

 

5.3                                 Average
Contribution Percentage Limitation

 

The Plan shall be deemed
to satisfy the average contribution percentage test for any Plan Year for which
the Company Contributions meets the requirements of section 401(m)(11) of
the IRC.  Otherwise, the Plan shall
satisfy the average contribution percentage test provided in section 401(m)(2) of
the IRC and section 1.401(m)-1 of the regulations issued thereunder.  Subject to the special rules described
in Section 5.7, the Aggregate 401(m) Contributions of Highly Compensated
Employees shall not exceed the limits described below:

 

(a)                                  An
Actual Contribution Percentage shall be determined for each Highly Compensated
Employee who is eligible to receive an allocation of Company Contributions
under Section 5.2 (assuming, for this purpose, that Salary Deferrals have
been allocated to such individual’s Accounts), which Actual Contribution

 

20

 

Percentage shall be the
ratio, computed to the nearest one-hundredth of one percent, of the Highly
Compensated Employee’s Aggregate 401(m) Contributions for the Plan Year to the
Highly Compensated Employee’s Section 414(s) Compensation for the Plan
Year;

 

(b)                                 If
the Company elects (in accordance with applicable law) to apply this Subsection (b),
an Actual Contribution Percentage shall be determined for each Nonhighly
Compensated Employee who, at any time during the Plan Year, is a Member
(including a suspended Member) or is eligible to participate in the Plan, which
Actual Contribution Percentage shall be the ratio, computed to the nearest
one-hundredth of one percent, of the Nonhighly Compensated Employee’s Aggregate
401(m) Contributions for the Plan Year to the Nonhighly Compensated Employee’s Section 414(s)
Compensation for the Plan Year;

 

(c)                                  Provided
the Company has not elected (in accordance with applicable law) to apply Subsection (b) rather
than this Subsection (c), an Actual Contribution Percentage shall be
determined for each Nonhighly Compensated Employee who, at any time during the
preceding Plan Year, was a Member (including a suspended Member) or who was
eligible to participate in the Plan, which Actual Contribution Percentage shall
be the ratio, calculated to the nearest one-hundredth of one percent, of the
Nonhighly Compensated Employee’s Aggregate 401(m) Contributions for the
preceding Plan Year to the Nonhighly Compensated Employee’s Section 414(s)
Compensation for the preceding Plan Year;

 

(d)                                 The
Actual Contribution Percentages (including zero percentages) of Highly
Compensated Employees and Nonhighly Compensated Employees shall be separately
averaged to determine each group’s Average Contribution Percentage; and

 

(e)                                  The
Aggregate 401(m) Contributions of Highly Compensated Employees shall constitute
Excess Aggregate Contributions and shall be reduced, pursuant to Sections 5.4
and 5.5, to the extent that the Average Contribution Percentage of Highly
Compensated Employees exceeds the greater of (1) 125 percent of the
Average Contribution Percentage of Nonhighly Compensated Employees or (2) the
lesser of (A) 200 percent of the Average Contribution Percentage of
Nonhighly Compensated Employees or (B) the Average Contribution Percentage
of Nonhighly Compensated Employees plus two percentage points.

 

5.4                                 Allocation
of Excess Aggregate Contributions to Highly Compensated Employees

 

Any Excess Aggregate
Contributions for a Plan Year shall be allocated to Highly Compensated
Employees by use of a leveling process, whereby the Aggregate 401(m)
Contributions of the Highly Compensated Employee with the highest Aggregate 401(m)
Contributions are reduced to the extent required to (a) eliminate all
Excess Aggregate Contributions or (b) cause such Highly Compensated
Employee’s Aggregate 401(m) Contributions to equal the Aggregate 401(m)
Contributions of the Highly Compensated Employee with the next-highest
Aggregate 401(m) Contributions.  Such
leveling process shall be repeated until all Excess Aggregate Contributions for
such Plan Year are allocated to Highly Compensated Employees.

 

21

 

5.5                                 Distribution
of Excess Aggregate Contributions

 

Excess Aggregate
Contributions allocated to Highly Compensated Employees for the Plan Year
pursuant to Section 5.4, together with any income or loss allocable to
such Excess Aggregate Contributions, shall be distributed to such Highly
Compensated Employees not later than the March 15 next following the close
of such Plan Year, if possible, and in any event no later than 12 months
following the close of such Plan Year.

 

5.6                                 Use
of Salary Deferrals

 

The Company, in its sole
discretion, may include all or a portion of the Salary Deferrals (other than
Age 50 Catch-Up Deferrals) for a Plan Year in Aggregate 401(m) Contributions
taken into account in applying the Average Contribution Percentage limitation
described in Section 5.3 for such Plan Year, provided that the
requirements of section 1.401(m)-1(b)(4) of the Income Tax
Regulations are satisfied.

 

5.7                                 Special
Rules

 

The following special rules shall
apply for purposes of this Article 5:

 

(a)                                  For
purposes of applying the limitation described in Section 5.3, the Actual
Contribution Percentage of any Highly Compensated Employee who is eligible to
participate in the Plan and to make employee contributions or receive an
allocation of matching contributions (within the meaning of section 401(m)(4)(A) of
the IRC) under any other plans, contracts or arrangements maintained by PACCAR
Inc or any Subsidiary (as defined in Section 2.1(oo) without regard to the
last sentence thereof) shall be determined as if Company Contributions
allocated to such Highly Compensated Employee’s Accounts and all such employee
contributions and matching contributions were made under a single arrangement
(other than those plans that may not be permissively aggregated); provided,
however, that if such plans have different plan years, the plans are aggregated
with respect to the plan years ending with or within the same calendar year;

 

(b)                                 In
the event that this Plan is aggregated with one or more other plans in order to
satisfy the requirements of IRC section 401(a)(4), 401(m) or 410(b), then
all such aggregated plans, including the Plan, shall be treated as a single
plan for all purposes under all such IRC sections (except for purposes of the
average benefit percentage provisions of IRC section 410(b)(2)(A)(ii));

 

(c)                                  In
the event that the mandatory disaggregation rules of Treasury Regulation section 1.401(k)-1(g)(11)
apply to the Plan, or to the Plan and other plans with which it is aggregated
as described in Subsection (b) above, then the limitation described
in Section 5.3 shall be applied as if each mandatorily disaggregated
portion of the Plan (or aggregated plans) were a single arrangement;

 

(d)                                 Provided
this limit is applied uniformly in determining the Actual Contribution
Percentage limitation for the Plan Year, the Company may limit Section 414(s)
Compensation to the amount of such compensation paid to the Eligible Employee

 

22

 

during the portion of the
Plan Year that such Member was an Eligible Employee; and

 

(e)                                  If
the Plan permits participation in the 401(m) portion of the Plan prior to an
Eligible Employee’s satisfaction of the minimum age and service requirements of
section 410(a)(1)(A) of the IRC and if section 410(b)(4)(B) of
the IRC is applied in determining whether the 401(m) portion of the Plan meets
the requirements of section 410(b) of the IRC, then for purposes of
performing the average contribution percentage test, the test may be performed
separately with regard to Eligible Employees who have not met the minimum age
and service requirements of section 410(a)(1)(A) of the IRC or,
alternatively, Eligible Employees who have not met the minimum age and service
requirements of section 410(a)(1)(A) of the IRC may instead be
excluded in the determination of the Average Contribution Percentage for
Nonhighly Compensated Employees, but not in the determination of the Average
Contribution Percentage for Highly Compensated Employees; and

 

(f)                                    Income
(and loss) allocable to Excess Aggregate Contributions for the Plan Year, but
not for the period between the end of the Plan Year and the date of
distribution of such Excess Aggregated Contributions shall, be determined
pursuant to Section 7.2.

 

5.8                                 Company
Contributions Paid From Earnings and Profits; Other Limitations on Company
Contributions

 

(a)                                  Company
Contributions Paid From Earnings and Profits

 

Section 5.1
notwithstanding, Company Contributions, whether paid in cash or other property,
shall be paid only out of the Current or Accumulated Earnings and Profits of
any corporation participating in the Plan.

 

(b)                                 Suspension
or Reduction of Company Contributions

 

Section 5.1 and (a) above
notwithstanding, if for any fiscal year of PACCAR Inc it is determined that
Earnings for such year are less than eight percent of the Capital Base, then
Company Contributions may be suspended in whole or in part for a period of up
to 12 months.  For purposes of this Subsection (b),
“Earnings” for any fiscal year is defined as the sum of (1) total income
before taxes of PACCAR Inc and consolidated subsidiaries and (2) interest
expense on manufacturing long-term debt and Company Contributions to the Plan;
and “Capital Base” means the sum of (1) stockholders’ equity and (2) manufacturing
long-term debt of PACCAR Inc and consolidated subsidiaries (determined as of
the end of the fiscal year preceding the fiscal year for which Earnings are
measured); in each case as such amounts are determined from the annual audited
financial statements (or related supporting documentation) for PACCAR Inc and
subsidiaries for such fiscal year.

 

(c)                                  Effect
of Suspension or Reduction on Salary

 

If the Company suspends
or reduces Company Contributions pursuant to this Section 5.8, it shall
notify the Trustee and all Members.  Each
Member shall then have the right, by giving notice to the Company on the
prescribed form within the

 

23

 

notice period prescribed
by the Company, to suspend his Salary Deferrals for the period with respect to
which Company Contributions are reduced or suspended.  A suspension under such circumstances and for
such period shall not be treated as a voluntary suspension of Salary Deferrals
under Section 4.4.  A Member may
also continue to contribute Salary Deferrals to the Plan, notwithstanding a
reduction or suspension of Company Contributions by reason of this Section 5.8.  Company Contributions made with respect to
any Plan Year in a reduced amount shall be allocated to Members in proportion
to their Salary Deferrals for such Plan Year.

 

(d)                                 Effect
of Suspension or Reduction on Future Company Contributions

 

If the Company suspends
or reduces Company Contributions to the Plan pursuant to this Section 5.8,
the Company shall be under no obligation at any future date to make additional
Company Contributions with respect to any period of suspended or reduced
Company Contributions, whether or not any Members have elected to continue
their Salary Deferrals during such period of suspension or reduction of Company
Contributions.

 

5.9                                 Company
Contributions in PACCAR Stock

 

The Company may elect to
pay all or part of any Company Contribution in the form of PACCAR Stock.  For purposes of determining the amount of the
Company’s deduction under section 404 of the IRC, shares of PACCAR Stock
so contributed shall be valued at the last-transaction price quoted by the
National Market System of the National Association of Securities Dealers and
reported by The Wall Street Journal with respect to the date on which such
shares are paid to the Plan.

 

5.10                           Diversification
of Company Contributions Account After Age 50

 

Each Member who is age 50
or older and who has completed a Period of Service of five years or more may
elect at any time to transfer any whole percentage of the amount of the Member’s
Company Contributions Account then invested in one Investment Option (including
the PACCAR Stock Fund) to another Investment Option (including the PACCAR Stock
Fund) in accordance with the Company’s written procedures.  Any future Company Contributions allocated to
such Member shall continue to be allocated to the Member’s Company
Contributions Account in the form of PACCAR Stock.

 

5.11                           Return
of Company Contributions

 

Any other provision of
the Plan notwithstanding, each Company Contribution under Section 5.1 is
expressly conditioned upon the deductibility of such contribution under Section 404
of the IRC.  If the deductibility of a
Company Contribution is denied, then the amount for which a deduction is
disallowed (reduced by any losses incurred with respect to such amount) shall
be returned to the Company within 12 months after the date of the
disallowance.  In addition, if all or
part of a Company Contribution is attributable to a mistake of fact, then the
excess of such Company Contribution over the amount which would have been
contributed in the absence of the mistake of fact (reduced by any losses

 

24

 

incurred with respect to
such excess) shall be returned to the Company within 12 months after the date
of such Company Contribution.

 

ARTICLE 6

THE TRUSTEE AND THE TRUST FUND

 

6.1                                 The
Trustee and Investment Managers

 

The exclusive authority
and discretion to manage and control the Trust Fund shall be vested in the
Trustee, except to the extent that the Trust Agreement provides that the
Trustee is subject to the directions of the Company or an Investment Manager
appointed by the Company.  Accordingly,
subject to the provisions of the Plan, the Company shall enter into one or more
Trust Agreements in such form and containing such provisions as the Company may
deem appropriate, including (without limitation) constraints on the investment
of the Trust Fund and the power and authority of the Trustee to amend the Trust
Agreement or to terminate the trust.  All
Salary Deferrals, Rollover Contributions and Company Contributions under the
Plan shall be paid by the Company to the Trustee to be held, invested and
distributed subject to the terms and conditions of the Plan and the Trust
Agreement.

 

The Company from time to
time may appoint one or more Investment Managers with respect to all or any
portion of the Trust Fund and may enter into an investment management agreement
with any Investment Manager so appointed. 
Each Investment Manager so appointed shall have the exclusive authority
and discretion to manage and control the assets of the Trust Fund assigned to
him (it), except to the extent that the applicable investment management
agreement provides that such Investment Manager is subject to the directions of
the Company or a Trustee.

 

6.2                                 Investment
Funds

 

The Trust Fund shall
consist of the PACCAR Stock Fund and one or more Investment Options selected by
the Company.  For purposes of investment,
the Trustee may divide any part of the Trust Fund into one or more sub-funds.  The Trustee may physically segregate the
assets of any sub-fund, invest the assets of such sub-fund separately, and
account separately for the income, gains, expenses and losses of such sub-fund.

 

The “PACCAR Stock Fund”
shall be invested in PACCAR Stock.  The
PACCAR Stock Fund shall consist of all PACCAR Stock held by the Trustee, and
all cash held by the Trustee which is derived from dividends on PACCAR Stock,
Company Contributions to be invested in PACCAR Stock, Salary Deferrals by
Members that are to be invested in PACCAR Stock, Member Contributions that are
to be invested in PACCAR Stock, Rollover Contributions that are to be invested
in PACCAR Stock, and proceeds from sales of PACCAR Stock (except while such
cash may be otherwise invested as provided under the Trust Agreement).  All dividends on PACCAR Stock and all
proceeds from the sale of PACCAR Stock shall be invested in the PACCAR Stock
Fund, except as otherwise provided in the Plan.

 

25

 

6.3                                 Voting
of PACCAR Stock

 

Trust Fund assets
invested in PACCAR Stock may be registered in the name of the Trustee or any
nominee; provided that the Trustee’s records evidence the interest of the Trust
Fund therein.  Each Member shall be
entitled to vote the whole number of shares of PACCAR Stock credited to him in
his Company Contributions Account, Salary Deferral Account, and Employee
Account as of the most recent practicable Valuation Date prior to the record
date for each meeting of shareholders of PACCAR Inc.  Each Member, prior to such meeting, shall be
furnished with the proxy statement for such meeting, together with a form to be
sent to the Trustee on which may be set forth the Member’s instructions as to
the manner of voting such shares of PACCAR Stock.  Upon receipt of such instructions (which the
Trustee shall hold in confidence), the Trustee shall vote such shares in
accordance therewith.  The Trustee shall
vote all shares of PACCAR Stock held by it upon any matter as to which no
instructions were given by Members within such reasonable period of time prior
to any shareholder meeting as may be specified by the Trustee, or which cannot
be voted pursuant to Members’ instructions, in direct proportion to the shares
of PACCAR Stock with respect to which it has received timely voting
instructions by Members.

 

6.4                                 Other
Instructions by Members

 

In the event that any
person or group of persons makes a tender offer subject to section 14(d) of
the Securities Exchange Act of 1934 to acquire all or part of the outstanding
shares of PACCAR Stock, including the PACCAR Stock held in the Trust Fund
(“Acquisition Offer”), each Member shall be entitled to direct the Trustee
confidentially to tender all or part of those shares of PACCAR Stock that would
then be subject to such Member’s voting instructions under Section 6.3.  If the Trustee receives an instruction by the
date communicated by the Company to Members, the Trustee shall tender such
shares in accordance with such instruction. 
Any PACCAR Stock as to which the Trustee does not receive timely
instructions shall not be tendered by the Trustee.  The Company shall distribute to each Member
all appropriate materials pertaining to the Acquisition Offer, including the
statement of the position of the Company with respect to such offer issued
pursuant to Rule 14e-2 under the Securities Exchange Act of 1934, as soon
as practicable after such materials are issued; provided, however, that if the
Company fails to issue such statement within five business days after the commencement
of such offer, the Company shall distribute such materials to each Member
without the statement by the Company and shall separately distribute such
statement as soon as practicable after it is issued.

 

6.5                                 Trust
Fund Investment Losses:  Interest in
Trust Fund

 

All payments of Benefits
shall be made solely from the assets of the Trust Fund.  No Fiduciary guarantees the Trust Fund or any
Company Contributions, Salary Deferrals, Rollover Contributions or Member
Contributions in any manner against investment loss or depreciation in asset
value.  Except only as expressly provided
by the Plan, and then only to the extent of his Benefit payable under the Plan
from the assets of the Trust Fund, no person shall have any right to, or
interest in, any assets of the Trust Fund.

 

26

 

6.6                                 ERISA
404(c) Requirements

 

The Plan is intended to
comply with section 404(c) of ERISA with respect to Salary Deferral
Accounts.  Accordingly, with respect to
the investment of such Accounts, the Plan shall satisfy, among other
requirements, Subsections (a), (b) and (c) below.

 

(a)                                  Choice
of Broad Range of Investment Alternatives. 
The Member shall be able to choose from at least three “core” investment
alternatives.  Each core investment
alternative shall be diversified, shall demonstrate materially different risk
and return characteristics from each other core investment alternative and
shall, when combined with other Investment Options, tend to minimize through
diversification the overall risk of the Member’s portfolio.  In the aggregate, the three core investment
alternatives shall constitute a broad range of alternatives such that, by
choosing among them, a Member may achieve a portfolio with risk and return
characteristics at any point within the range normally appropriate to the
Member’s portfolio.

 

(b)                                 Frequency
of Investment Instructions.  The
Member shall be able to give investment instructions to a person designated by
the Company as an agent for this purpose. 
The person shall be obligated to comply with the instructions of the
Member, except as otherwise permitted by law. 
The Member shall be able to give investment instructions for each
investment alternative as frequently as is appropriate given the volatility of
the investment, but no less frequently than once within every three-month
period.

 

(c)                                  Provision
of Sufficient Information to Member or Beneficiary.  The Member shall be provided information
sufficient to make informed decisions regarding the Plan’s Investment Options.  Such information shall include:

 

(1)                                  An
explanation that the Plan is intended to be in compliance with ERISA section 404(c) and
that Plan fiduciaries may be relieved of liability for losses that arise from
the Member’s investment choices;

 

(2)                                  A
description of all Investment Options, including a general description of the
investment objectives of each and the level of diversification in each;

 

(3)                                  An
explanation that Members may review any prospectuses or similar materials made
available to the Plan for each Investment Option;

 

(4)                                  The
identification of any designated investment manager;

 

(5)                                  An
explanation of the circumstances under which a Member may give investment
instructions, together with any limitations on those instructions;

 

(6)                                  A
description of any transaction fees, charges or expenses to a Member’s Account
in connection with the purchase or sale of any Investment Option;

 

(7)                                  The
name, address and telephone number of the Plan fiduciary responsible for
providing information on request with a description of such information
available upon request;

 

27

 

(8)                                  An
explanation of the established procedures designed to provide for the
confidentiality of information concerning the purchase, holding or sale of
PACCAR Stock;

 

(9)                                  A
copy of the most recent prospectus in the case of an initial purchase in an
Investment Option subject to the Securities Act of 1933; and

 

(10)                            Any
materials provided to the Plan that relate to the exercise of voting, tender or
similar rights passed through to Members.

 

Information that must be
provided on request in accordance with Department of Labor Regulation 2550.404c-1(b)(2) includes
certain information relating to financial reports of Investment Options,
operating expenses of the portfolio assets of the Investment Options, overall
investment performance of the Investment Options and information relating to
the shares of an investment in the requesting Members’ Account.  Additional information may be available upon
request.

 

The Beneficiary of a
Member shall have the same investment rights as herein described where such
Beneficiary becomes entitled to a Member’s Salary Deferral Account under the
Plan.

 

6.7                                 Expenses
of Plan and Trust

 

The fees of the Trustee
and any Investment Manager, and the expenses of administering the Trust Fund
and the Plan, shall be paid by the Trustee out of the Trust Fund pursuant to
the terms of the Trust Agreement, except such expenses as are paid by the
Company.

 

ARTICLE 7

ACCOUNTS AND VALUATIONS

 

7.1                                 Types
of Accounts

 

The Company shall
establish and maintain Accounts for each Member which reflect his interest in
contributions made under the Plan and the investment experience thereof.  A Member’s interest in the Plan shall consist
of one or more of the following Accounts:

 

(a)                                  Company
Contributions Account

 

A Company Contributions
Account, reflecting Company Contributions made on behalf of a Member with
respect to periods after June 30, 1978 and earnings, losses and expenses
attributable to such Company Contributions.

 

(b)                                 Salary
Deferral Accounts

 

A Salary Deferral
Account, reflecting Salary Deferrals (including Age 50 Catch-Up Deferrals) and
Rollover Contributions made by a Member to the Plan and earnings, losses and
expenses attributable to such Salary Deferrals (including Age 50 Catch-Up
Deferrals) and Rollover Contributions.  A
Salary Deferral Account may also include

 

28

 

amounts transferred from
a Prior Profit Sharing Account effective July 1, 1987, and earnings,
losses and expenses attributable to such amounts.

 

(c)                                  Employee
Accounts

 

An Employee Account,
reflecting Member Contributions made by a Member to the Plan prior to February 1,
1983 and earnings, losses and expenses attributable to such Member
Contributions.

 

Such separate Accounts
are maintained for accounting purposes and shall not require a segregation of
Trust Fund assets to each Account.

 

7.2                                 Valuation
of Accounts

 

As of each Valuation
Date, the Company shall determine the fair market value and balance of each
Member’s Accounts, as provided in (a), (b), (c) and (d) below.  The Company may use any lawful procedure for
determining the fair market value and balance of Accounts; provided that such
procedure is consistent with this Section 7.2.

 

(a)                                  Valuation
of Trust Fund

 

The Company shall
ascertain from the Trustee the fair market value of the assets of each portion
of the Trust Fund as of the valuation Date. 
The fair market value of PACCAR Stock shall be the last-transaction
price quoted by the National Market System of the National Association of
Securities Dealers and reported by The Wall Street Journal with respect to the
Valuation Date.

 

(b)                                 Contributions
Credited

 

The Company shall credit
to each Member’s Company Contributions Account the amount of any Company
Contributions allocated as of the last day of the Plan Year.  The Company shall credit to each Member’s
Salary Deferral Accounts the amount of Salary Deferrals withheld, transfers
from Company Contributions Accounts received and Rollover Contributions
received in such calendar month.

 

29

 

(c)                                  Charges
Against Accounts

 

The Company shall charge
against each Member’s Company Contributions, Salary Deferral and Employee
Accounts, as applicable, the amount of any transfers, withdrawals, loans and
distributions of Benefits effected during the calendar month ending with the
Valuation Date.

 

(d)                                 Allocation
of Dividends

 

Notwithstanding any other
provision of the Plan, a Member may, in accordance with procedures established
by the Company, elect to have any cash dividends paid on PACCAR Stock that is
held in the Member’s Company Contributions Account, Salary Deferral Account or
Employee Account, as applicable, paid directly to such Member in cash or
allocated to the Member’s Account(s) and re-invested in PACCAR Stock.  In the absence of a proper election by the
Member, any such cash dividend shall be allocated to the Member’s Account(s)
and re-invested in PACCAR Stock.

 

7.3                                 Statements
for Members

 

A statement for each
Member shall be prepared and distributed to the Member annually or more
frequently, as determined by the Company. 
Such statement shall reflect the status (including the fair market
value) of the Member’s Accounts and shall contain such other information as the
Company may determine.

 

ARTICLE 8

AMOUNT AND DISTRIBUTION OF BENEFITS

 

8.1                                 Vesting
and Amount of Benefits

 

Each Member’s interest in
his Accounts is 100 percent vested at all times.  In the case of a reemployed Member who previously
incurred a forfeiture from his Company Contributions Account under the Plan as
in effect prior to January 1, 1989, any such forfeiture may be restored to
the Member’s Company Contributions Account if the Member satisfies the
requirements of the Plan as in effect prior to January 1, 1989, concerning
the repayment of prior forfeitures. 
Benefits to which a Member is entitled are distributable to such Member
or his Beneficiary, as the case may be, as further provided in this Article 8.  The amount distributable to the Member shall
be determined as of the later of (a) the Valuation Date coinciding with or
immediately following the date of the Member’s termination of employment or (b) the
Valuation Date coinciding with or immediately preceding the distribution date
elected by the Member under Section 8.2.

 

8.2                                 Normal
Time of Distribution

 

Subject to Sections 8.3,
8.4 and 8.8, a Member’s Benefit shall be distributed to him on (or as soon as
reasonably practicable after) the date that he has elected.  The distribution election shall be made in
accordance with the Company’s written procedures, and where applicable,

 

30

 

such procedures shall
require the consent (written, if necessary) of the Member to the distribution
of his Benefit before he attains age 65.

 

8.3                                 Time
of Distribution

 

A Member who is Totally
Disabled may elect to receive his Plan Benefit in accordance with the Company’s
written procedures.  In the case of a
Member who is not Totally Disabled, the Benefit shall not be distributed before
the later of the following dates:

 

(a)                                  The
date when the Member ceases to be an Employee; or

 

(b)                                 The
date when the Company receives the election.

 

Notwithstanding the
preceding provisions of this Section 8.3 and subject to Section 8.4,
a Member’s Benefit shall be paid or commenced by his Required Beginning
Date.  If the Member fails to file a
timely distribution election form, Section 8.7 shall apply and Section 8.12
(relating to unclaimed Benefits) may apply.

 

8.4                                 Special
Rules Regarding Distribution

 

(a)                                  If
a Member other than a five-percent owner (as defined in section 416 of the
IRC and taking into account any modifications under section 401(a)(9) of
the IRC) is still an Employee as of his Required Beginning Date, he may elect
(in the manner specified under the Company’s written procedures) to defer
payment or commencement of his Benefit to the date he ceases to be an Employee,
in which case the Company shall pay or commence his Benefit as soon as
reasonably practicable thereafter, but not later than April 1 of the
calendar year following the calendar year in which he ceases to be an Employee.

 

(b)                                 All
distributions under the Plan shall be made in accordance with the Income Tax
Regulations under Section 401(a)(9) of the IRC, including Income Tax
Regulation Section 1.401(a)(9)-2 or its successor.  Such regulations are incorporated in the Plan
by reference and shall override any inconsistent provisions of the Plan.  For purposes of Section 401(a)(9), life
expectancy(ies) under this Plan shall not be recalculated.

 

8.5                                 Reemployment

 

In the event that a
Member is reemployed and becomes a Member of the Plan prior to the distribution
of his entire Benefit relating to his earlier period of employment, then (a) any
election of a deferred distribution date under Section 8.2 shall be
disregarded; (b) any installment payments in process shall be
discontinued, and the undistributed portion of the Member’s Accounts which
formerly had been in his PACCAR Stock Fund (if any) shall be retransferred to
his PACCAR Stock Fund; and (c) the Member’s entire Benefit, including the
Benefit relating to the period following his reemployment, shall be distributed
in accordance with the latest distribution election form filed by the Member,
after his reemployment, pursuant to Section 8.2.

 

31

 

8.6                                 Available
Forms of Distribution

 

A Member whose employment
as an Employee terminates on or after his 55th birthday may elect to have his
Benefit distributed in one of the following forms:

 

(a)                                  A
lump sum consisting of the whole shares of PACCAR Stock held in the Member’s
Company Contributions Account, Salary Deferral Account and Employee Account as
of the Valuation Date coincident with or immediately preceding distribution of
the Member’s Benefit, and cash equal to the balance of the Member’s Benefit;

 

(b)                                 A
lump sum consisting entirely of cash;

 

(c)                                  For
distributions commencing prior to May 1, 2003, annual cash installments
payable in accordance with a predetermined distribution schedule, over a period
of time not exceeding the Member’s life expectancy as of the date when payments
commence (as determined under actuarial tables adopted by the Company); or

 

(d)                                 For
distributions commencing prior to May 1, 2003, any combination of the
forms described in (b) and (c) above.

 

A Member whose employment
as an Employee terminates prior to his 55th birthday may only elect to have his
Benefit distributed in one of the forms described in (a) or (b) above.

 

8.7                                 Election
of a Form of Distribution

 

(a)                                  General
Rule

 

A Member entitled to a
Benefit shall elect a form of distribution under Section 8.6 in accordance
with the Company’s written procedures. 
Such election shall include such information as the Company may
reasonably require and, if the distribution is to be made prior to the Member’s
attainment of age 65, the election shall be made no more than 90 days prior to
the distribution date elected by the Member.

 

(b)                                 Member
Who Fails to Elect Payment Form

 

If a Member’s Benefit must
be paid after he ceases to be an Employee on account of his Required Beginning
Date, he shall elect a form of distribution under Section 8.6 for this
Benefit.  If the Member fails to elect
any form of distribution for such benefit before his Required Beginning Date,
then such Benefit shall be distributed in the form of a lump sum consisting
entirely of cash.

 

8.8                                 Small
Benefits

 

Any other provision of
this Article 8 notwithstanding, effective for distributions made on or
after March 28, 2005, if the value of a Member’s entire Benefit equals
$1,000 or less before the first payment of such Benefit is made, then the
Benefit automatically shall be paid to such Member (or, in the case of his
termination as a result of his death, to his Beneficiary) in a single lump sum
in cash as soon as administratively practicable after the Member’s termination
and without his consent.  The foregoing
notwithstanding, (a) in the case of a

 

32

 

Member who has made the
election described in Section 5.2, the determination of whether the value
of the Member’s entire Benefit equals $1,000 or less shall be made immediately
following the last day of the Plan Year in which such Member terminated
employment and (b) in the event of termination of a Member’s employment
due to a Layoff, payment shall be made as soon as administratively practicable
following the last day of the Plan Year following the Plan Year in which the
termination of employment occurred.  If
the value of a benefit payable to an alternate payee pursuant to a qualified
domestic relations order (as defined in section 414(p) of the IRC)
(“QDRO”) is not more than $1,000 and payment of such benefit has not commenced,
such benefit shall be paid automatically to such alternate payee in a single
lump sum in cash as soon as administratively practicable after the QDRO is
received by the Plan and without the alternate payee’s consent.

 

8.9                                 Survivors’
Benefits

 

(a)                                  Member
Dies After Installments Commence

 

This Subsection (a) shall
apply only in the event that a Member elected to receive all or a portion of
his Benefit in annual installments under Section 8.6(c) and then dies
after installment payments have commenced but before such payments are
completed.  The remaining installments of
such Member’s Benefit ordinarily shall be paid to his Beneficiary in accordance
with the predetermined distribution schedule originally established for
him by the Company.  However, a
Beneficiary may make a request, subject to the Company’s consent, to accelerate
the distribution of any or all unpaid installments to which such Beneficiary is
entitled.  The request shall be made in
accordance with the Company’s written procedures.

 

(b)                                 Member
Dies Before Benefit Distribution

 

This Subsection (b) shall
apply in the event that a Member dies before his Benefit is distributed and (a) above
does not apply.  Such Member’s Benefit
ordinarily shall be paid to his Beneficiary in the form of a single lump sum in
cash, and the distribution ordinarily shall be made as soon as reasonably
practicable after the Member’s death.  A
Beneficiary may, however, make request to defer the distribution of the Benefit
to which such Beneficiary is entitled. 
However, the distribution shall in no event be made later than five
years after the Member’s death.  A
Beneficiary shall make the request to receive the Benefit to which such
Beneficiary is entitled or to defer receipt in accordance with the Company’s
written procedures.

 

(c)                                  Designating
a Beneficiary

 

Upon commencement of
membership, each Member shall name one or more persons as the Beneficiary who
will receive any distribution payable under the Plan in the event of the Member’s
death.  The designation shall be
registered with the Company in accordance with the Company’s written procedures.  If the Member has not made an effective
designation of a Beneficiary or if none of the named Beneficiaries is living
when any distribution is to be made, then (1) the spouse of the deceased
Member

 

33

 

shall be the Beneficiary
or (2) if the Member has no spouse living at the time of such
distribution, then the living children of the deceased Member shall be the
Beneficiaries in equal shares or (3) if the Member has neither spouse nor
children living at the time of such payment, the estate of the Member shall be
the Beneficiary.  The Member may change
his designation of a Beneficiary from time to time in accordance with
procedures established by the Company. 
Any other provision of this Subsection (c) notwithstanding, in
the case of a married Member, any designation of a person other than his spouse
as Beneficiary shall be effective only if the spouse consents to the
designation in writing and such written consent is witnessed by a notary
public.

 

8.10                           No
Alienation of Benefits; Qualified Domestic Relations Order

 

No benefit payable under
the Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary, prior to actually being
received by the person entitled to such benefit under the terms of the Plan;
and any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge or otherwise dispose of any right to a benefit payable
hereunder shall be void.  However,
neither of the following shall constitute a violation of this Section 8.10:

 

(a)                                  The
creation or recognition of a right in an alternate payee to any pension payable
with respect to a Member pursuant to a qualified domestic relations order (as
defined in IRC Section 414(p)), as determined in accordance with
procedures established by the Company, and the payment of benefits in
accordance with the applicable requirements of such order; or

 

(b)                                 The
Trustee’s compliance with instructions from the Company to reduce a Member’s
benefit by amounts the Member is ordered or required to pay the Plan, where
such order or requirement: (i) arises under a judgment of conviction for a
crime involving the Plan, under a civil judgment (including a consent order or
decree) entered by a court on or after August 5, 1997 in an action brought
in connection with a violation of part 4 of subtitle B of title I of ERISA or
under a settlement entered into on or after August 5, 1997 with the
Department of Labor asserting a violation of part 4 of subtitle B of title I of
ERISA; and (ii) the judgment, order, decree or settlement expressly
provides for the offset of all or part of the amount ordered or required to be
paid to the Plan against the Member’s benefits provided under the Plan.

 

Pursuant to a qualified
domestic relations order, the Plan may distribute any benefit payable to an
alternate payee in the form of a single lump sum in cash prior to the earliest
date upon which the Member could receive his Benefit.  To the extent that a qualified domestic
relations order creates, assigns, or recognizes the right of an alternate payee
to any portion of the Benefit otherwise payable to or with respect to a Member,
such portion shall not thereafter be taken into account in determining the
Benefit payable to or with respect to that Member under the Plan.

 

34

 

8.11                           Facility
of Payment

 

Whenever, in the Company’s
opinion, a person entitled to receive any distribution of a Benefit or
installment thereof is under a legal disability or is physically or mentally
incapacitated in any way so as to be unable to manage his financial affairs,
the Company may direct the Trustee to make distribution to such person or to
his legal representative or to a relative or friend of such person for his
benefit; or the Company may direct the Trustee to apply the payment for the
benefit of such person in such manner as the Company considers advisable.

 

8.12                           Unclaimed
Benefits

 

If any Benefit, or a
portion thereof, becomes distributable under the Plan and the Company is unable
to locate the Member or Beneficiary to whom the distribution is payable for
three consecutive Plan Years, then the Member’s Accounts shall be closed after
the third consecutive Plan Year during which such distribution is payable but
the Member or Beneficiary cannot be found. 
The amount of the unpaid Benefit shall be applied to reduce Company
Contributions (unless mandatory provisions of applicable escheat laws require
other application, in which case such Benefit shall be applied as such
mandatory laws require), as determined by the Company.  If, however, the Member or Beneficiary
subsequently makes a proper claim to the Company for any Benefit applied to
reduce Company Contributions, then such Benefit (without income, gains or other
adjustment) shall be restored to the Member’s Accounts from contributions made
by the Company for this purpose, without regard to Current or Accumulated
Earnings and Profits.  The Benefit shall
thereafter be distributable in accordance with the terms of the Plan.

 

8.13                           Payments
Discharge Plan; Adverse Claims

 

Any payment or
distribution made to any person in full compliance with the terms of the Plan
shall fully discharge the Company, the Plan and any Trustee or insurance
company making such payment from all adverse claims thereto respecting which
prior written notice has not been given to any such entity making or directing
the payment or distribution.  If the
Company has received actual written notice of any adverse claim to any payment
or distribution not yet made, the Company may suspend distribution and take
such other action as it deems necessary or advisable to protect the Plan or its
Members and Beneficiaries, until the respective rights of all interested
persons have been determined to the satisfaction of the Company.

 

8.14                           Direct
Rollovers

 

(a)                                  Direct
Rollover Option

 

Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a Distributee’s
election under this Section, a Distributee may elect, at the time and in the
manner prescribed by the Company, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.

 

35

 

(b)                                 Definition
of Eligible Rollover Distribution

 

An Eligible Rollover
Distribution is any distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover Distribution does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or
life expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee’s designated beneficiary,
or for a specified period of 10 years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the IRC; the
portion of any distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities), except to the extent that such portion is directly rolled
over to a qualified trust described in section 401(a) of the IRC
which is a defined contribution plan and which agrees to separately account for
the after-tax portion of the rolled over amount, or such portion is rolled over
to an individual retirement account or annuity described in section 408(a) or
408(b) of the IRC; and a distribution which is made upon hardship of the
Distributee.

 

(c)                                  Definition
of Eligible Retirement Plan

 

An Eligible Retirement
Plan is an individual retirement account described in section 408(a) of
the IRC; an individual retirement annuity described in section 408(b) of
the IRC; an annuity plan described in section 403(a) of the IRC; an
annuity contract described in Section 403(b) of the IRC; an eligible
plan under Section 457(b) of the IRC maintained by a state, political
subdivision of a state, or any agency or instrumentality of a state or
political subdivision of a state, that agrees to account separately for the
Eligible Rollover Distribution; or a qualified defined contribution plan
described in section 401(a) of the IRC that accepts the Distributee’s
Eligible Rollover Distribution.  With
respect to the portion of an Eligible Rollover Distribution that is not
includible in gross income (if it were paid to the Distributee), an “Eligible
Retirement Plan” is limited to an individual retirement account or annuity
described in section 408(a) or 408(b) of the IRC, or a qualified
defined contribution plan described in section 401(a) of the Code
that agrees to account separately for the portion which is includible in gross
income and the portion which is not so includible.

 

(d)                                 Definition
of Distributee

 

A Distributee includes an
Employee or former Employee.  In
addition, the Employee’s or former Employee’s surviving spouse and the Employee’s
or former Employee’s spouse or former spouse who is the Alternate Payee under a
qualified domestic relations order are Distributees with regard to the interest
of the spouse or former spouse.

 

(e)                                  Definition
of Direct Rollover

 

A Direct Rollover is a
payment by the Plan directly to the Eligible Retirement Plan specified by the
Distributee.

 

36

 

(f)                                    Waiver
of Waiting Period

 

An Eligible Rollover
Distribution may commence less than 30 days after the notice required under
Income Tax Regulation section 1.411(a)-11(c) and section 402 (f) is
given; provided that (1) the Company clearly informs the Member that the
Member has the right to a period of at least 30 days after receiving the notice
to consider the decision of whether or not to elect a distribution (and, if
applicable, the particular distribution option), and (2) the Member, after
receiving the notice, affirmatively elects a distribution.

 

ARTICLE 9

LOANS

 

9.1                                 Amount
of Loans

 

A Member or Restricted
Member who is an Employee, and an Employee who is not a Member but who is a
Restricted Member as a result of making one or more Rollover Contributions to
the Plan, may obtain a cash loan from his Employee and Salary Deferral
Accounts; provided, however, that (a) he or she shall not be permitted to
obtain a loan under the Plan if, at any time in the prior 12 months, he or she
defaulted on a Plan loan (as determined by the Company), and (b) effective
April 1, 2002, he or she shall not be permitted to obtain more than two
new loans in any Plan Year.  The minimum
amount of the loan shall be $1,000.  The
maximum amount of the loan shall be subject to the limitations of Section 9.2.  All loan amounts not evenly divisible by $100
shall be rounded down to the nearest $100.

 

9.2                                 Aggregate
Loan Limitation

 

No loan shall be granted
under the Plan if it would cause the aggregate balance of all loans which a
Member or Restricted Member thereafter has outstanding under this Plan or under
any other qualified plan maintained by any PACCAR Inc or any of its
Subsidiaries (determined without regard to the last sentence of Section 2.1(oo))
to exceed the least of the following:

 

(a)                                  $50,000,
less the highest outstanding loan balance during the period of 12 consecutive
months ending on the day before a new loan is made; or

 

(b)                                 One-half
of the value of the Member’s or Restricted Member’s Accounts (or such lesser
amount as may be required pursuant to Regulation 2550.408b-1(f) of the
Department of Labor).

 

9.3                                 Terms
of Loans

 

A loan to a Member or
Restricted Member shall be made on such terms and conditions as the Company may
determine, provided that the loan shall:

 

37

 

(a)                                  Be
evidenced by a promissory note signed by the Member or Restricted Member and
secured by one-half of the value of his Accounts (regardless of whether a
particular Account provided funds for the loan under Section 9.1);

 

(b)                                 Bear
interest at a fixed rate (determined by the Company) commensurate with the
interest rates charged for similar loans by commercial lenders;

 

(c)                                  Provide
for level amortization over its term with payments at monthly or more frequent
intervals, as determined by the Company;

 

(d)                                 Provide
for loan payments (1) to be withheld whenever possible through periodic
payroll deductions from the Member’s or Restricted Member’s compensation from
the Company or (2) to be paid by check or money order whenever payroll
withholding is not possible;

 

(e)                                  Provide
for repayment in full on or before the earlier of (1) the distribution
date elected by the Member pursuant to Section 8.2 or (2) the date
five years after the loan is made (or the date 15 years after the loan is made
if the loan is used to acquire a dwelling which, within a reasonable period of
time, is used as the principal residence of the Member);

 

(f)                                    Provide
that a Member or Restricted Member may not receive any distribution from any of
his Accounts under Article 8 until the loan obligation is repaid, except
to the extent that all or any part of such distribution is used to repay the
outstanding balance of the loan; and

 

(g)                                 Provide
that a Member’s or Restricted Member’s Accounts shall not be applied to the
satisfaction of the Member’s loan obligations before the Accounts become
distributable under Article 8, unless the Company determines that the loan
obligations are in default and takes such actions as the Company deems
necessary or appropriate to cause the Plan to realize on its security for the
loan.  Such actions may include (without
limitation) an involuntary withdrawal from the Member’s Accounts, first to the
extent permitted under Section 10.1 and second from other amounts credited
to the Member’s Accounts; provided that (1) such an involuntary withdrawal
attributable to Company Contributions made with respect to those Plan Years
that ended less than 24 months prior to the date of the withdrawal (adjusted to
reflect any earnings, appreciation or losses attributable to such Company
Contributions) and from amounts credited to Salary Deferral Accounts shall be
permitted only to the extent that the hardship requirements of section 401(k)(2)(B)(i)(IV)
of the IRC and of sections 1.401 (k) -1 (d)(2)(ii) and 1.401(k)-1(d)(2)(iii)(A) of
the Income Tax Regulations are met, and (2) no such involuntary withdrawal
shall be made from net unwithdrawn investment income credited to a Member’s
Salary Deferral Accounts except to the extent of such net unwithdrawn
investment income credited as of the last Valuation Date in the 1988 Plan
Year.  If an involuntary withdrawal
occurs, the Member shall not be permitted to obtain a loan under the Plan for a
period of 12 months, commencing as of the last day of the payroll period in
which the involuntary withdrawal occurs. 
The consent of the Member’s spouse shall not be required at the time of
any action taken by the Company under this Subsection (g).

 

38

 

9.4                                 Company
Consent

 

The Company, based on the
criteria set forth in this Article 9, may withhold its consent to any loan
or may consent only to the borrowing of a part of the amount requested by the
Member.  The Company shall act upon
requests for loans in a uniform and nondiscriminatory manner, consistent with
the requirements of section 401(a), section 401(k), section 4975
and related provisions of the IRC.

 

9.5                                 Source
of Loans

 

If a Member requests and
is granted a loan, the amount of the loan shall be disbursed from the Trust
Fund.  The promissory note executed by
the Member shall be held by the Trustee or by the Company as agent of the Trustee
and the promissory note shall be treated as an investment of the Trust Fund.

 

9.6                                 Disbursement
of Loans

 

A Member may request a
loan in accordance with the Company’s written procedures.  A loan shall be disbursed as soon as
reasonably practicable after the date on which the Company receives the
prescribed loan request (subject to the Company’s consent).

 

9.7                                 Valuation
Date

 

For purposes of this Article 9,
the value of a Member’s Accounts shall be determined as of the Valuation Date
coinciding with or next following the Company receives the prescribed loan
request.

 

9.8                                 Loan
Fees

 

A Member who obtains a
loan under this Article 9 shall be required to pay such fees as the
Company may impose in order to defray the cost of administering loans from the
Plan.

 

ARTICLE 10

WITHDRAWALS

 

10.1                           Regular
Withdrawals

 

Any Member who is an
Employee may withdraw any amount not in excess of the sum of the following:

 

(a)                                  The
previously unwithdrawn value of the Member’s Employee Accounts as of the last
Valuation Date in the 1988 Plan Year; and

 

(b)                                 The
previously unwithdrawn shares of PACCAR Stock allocated to the Member’s Company
Contributions Account as of the last Valuation Date in the 1988 Plan Year.

 

39

 

10.2                           Source
of Withdrawals

 

Withdrawals shall be paid
from the available sources in the following sequence, as necessary, until the
full amount has been satisfied:

 

(a)                                  First,
from the Member’s Member Contributions which were not previously withdrawn;

 

(b)                                 Second,
from other amounts credited to the Member’s Employee Accounts (to the extent
that the balance in the Member’s Employee Accounts exceeds his unwithdrawn
Member Contributions and to the extent that such amounts are available under Section 10.1(a));
and

 

(c)                                  Last,
from the Member’s Company Contributions Account (to the extent that the Company
Contributions Account is available under Section 10.1(b)).

 

Subject to the preceding
sentence and such other written ordering rules as the Company may adopt,
the withdrawal from a Member’s Member Account shall be taken from the
Investment Options in which such Account is invested on a pro rata basis.

 

10.3                           Application
for Withdrawals: Time and Form of Distribution

 

A Member who wishes to
make any withdrawal under this Article 10 shall request a withdrawal in
accordance with the Company’s written procedures.  The withdrawal distribution shall be paid as
soon as reasonably practicable after receipt of such request by the
Company.  Withdrawal distributions shall
be made only in cash.  The amount
available for withdrawal (including the value of any PACCAR Stock to be
converted to cash) shall be determined as of the Valuation Date coincident with
or next following the date on which the Company receives the withdrawal request
form.

 

10.4                           Limitations
on Withdrawals

 

The total value of any
withdrawal distribution shall not be less than $500, unless the aggregate
amount available for withdrawal is less than $500, in which event only such
aggregate amount may be withdrawn.

 

ARTICLE 11

SALE OF STOCK TO TRUSTEE

 

A Member or his Beneficiary may offer to sell to the
Trustee any shares of PACCAR Stock distributed from the Member’s Company
Contributions Account, Salary Deferral Account, or Employee Account as a
Benefit under Article 8.  Any such
offer shall be made in writing on the prescribed form.  To the extent that the Trustee has cash
available for investment in PACCAR Stock, it may purchase pursuant to the Trust
Agreement any shares of PACCAR Stock so offered at the last-transaction price quoted
by the National Market System of the National Association of Securities Dealers
and reported by The Wall Street Journal with respect to the trading day on
which such offer was received by the Trustee at the address prescribed by it
for this purpose.  No commission shall be
paid in connection with any such purchase.

 

40

 

ARTICLE 12

PLAN ADMINISTRATION

 

12.1                           Company
as Plan Administrator

 

The Company is the named
Fiduciary which has the discretionary authority to control and manage the
operation and administration of the Plan, and it is the “administrator” of the
Plan (as such term is used in ERISA). 
The Company shall make such regulations, rules, interpretations,
procedures and computations, and shall take such other action to administer the
Plan, as it may deem appropriate.  Any
regulations, rules and interpretations adopted by the Company shall be
conclusive and binding on all persons. 
Any regulations, rules and procedures of general application
established by the Company for the administration or operation of the Plan
shall be consistent with any applicable requirements of ERISA and the IRC.  In administering the Plan, the Company shall
act in a nondiscriminatory manner to the extent required by section 401(a) and
related provisions of the IRC and shall at all times discharge its duties with
respect to the Plan in accordance with the standards set forth in section 404(a)(1) of
ERISA.

 

12.2                           Carrying
out Fiduciary Duties

 

Any person or group of
persons may serve in more than one Fiduciary capacity with respect to the Plan,
and any Fiduciary may employ one or more persons to render advice with regard
to such Fiduciary’s responsibilities under the Plan.

 

The Company may
designate, by written instrument signed by both parties, one or more persons to
carry out the Company’s Fiduciary responsibilities (other than Trustee
responsibilities) under the Plan.  The
Company’s duties and responsibilities as administrator and sponsor of the Plan
which have not been delegated to others pursuant to the preceding sentence
shall be carried out by its directors, officers and employees.  Such directors, officers and employees shall
act on behalf and in the name of the Company in their respective capacities as
directors, officers and employees and not as individual Fiduciaries.

 

12.3                           Appointment
of Public Accountant

 

The Company shall engage
an independent qualified public accountant to conduct such examinations and to
express such opinions as may be required by section 103(a)(3) of
ERISA.  The Company in its discretion may
remove and discharge the person so engaged, but in such case it shall appoint a
successor independent qualified public accountant to perform such examinations
and to express such opinions.

 

12.4                           Reliance
on Plan Records; Member’s Duty to Notify

 

In connection with the
Company’s administration of the Plan, it is the responsibility of any person
having rights under the Plan to notify the Company in writing of the current
status of any matters affecting such rights, including (without limitation) the
designation of Beneficiaries, the exercise of elections, facts relevant to
employment and marital status, and the correct address to which matters
affecting such person shall be mailed or delivered.  The Company may rely solely on the records of
the Plan, as modified by any such written notice,

 

41

 

and on information
otherwise available to the Company, in its administration of the Plan.  The Company in administering the Plan may
further rely on information or advice furnished by the Trustee, actuaries,
counsel or other persons retained to advise or assist the Plan.

 

ARTICLE 13

CLAIMS AND REVIEW PROCEDURES

 

13.1                           Applications
for Benefits

 

Any application for
benefits under the Plan shall be submitted to the Company.  Any application shall be in writing on the
prescribed form and shall be addressed as follows:

 

Savings Investment Plan

PACCAR Inc

P.O. Box 1518

Bellevue, Washington 98009

 

13.2                           Denial
of Applications

 

In the event that any
application for benefits is denied in whole or in part, the Company shall
notify the applicant in writing of his right to an independent review of the
denial.  Such written notice shall set
forth, in a manner calculated to be understood by the applicant, specific
reasons for the denial, specific references to the Plan provisions on which the
denial is based, a description of any information or material necessary to
perfect the application, an explanation of why such material is necessary, an
explanation of the Plan’s review procedure, (including an explanation of the
applicant’s right to initiate a lawsuit under section 502(a) of ERISA
if the applicant’s appeal is denied), and, in the case of a Disability Claim
(defined below), each specific internal rule, guideline, protocol or other similar
criteria relied upon in making such denial (or a statement that such criteria
were relied upon and will be provided free of charge to the applicant upon
request), if any.  An application shall
be granted, or written notice of a denial shall be given to the applicant,
within 90 days (45 days in the case of a Disability Claim) after the Company
receives a proper application, unless special circumstances (which are matters
beyond the control of the Plan in the case of a Disability Claim) require an extension
of time for processing the application. 
In no event shall such an extension exceed a period of 90 days (30 days
in the case of a Disability Claim) from the end of the initial 90-day period
(45-day period in the case of a Disability Claim).  If such an extension is required, written
notice thereof shall be furnished to the applicant before the end of the
initial 90-day period (45-day period in the case of a Disability Claim)
indicating the circumstances requiring an extension of time and the date by which
the Company expects to render a decision. 
If the Company determines that a decision on a Disability Claim cannot
be rendered within the initial 30-day extension period due to matters beyond
the control of the Plan, the period for making a determination may be extended
for an additional 30 days, provided that written notice is furnished to the
applicant before the end of the initial 30-day extension period indicating the
circumstances requiring an additional extension of time and the date by which
the Company expects to render a decision. 
In the case of any extension with respect to a Disability Claim, the
notice of extension shall specifically explain the standards on which benefit
entitlement is based, the unresolved issues

 

42

 

that prevent a decision
on the Disability Claim, the additional information needed to resolve those
issues and that the applicant shall have a period of 45 days within which to
provide the specified information.  For
purposes of this Article 13, “Disability Claim” shall mean a claim for
benefits under the Plan based on an applicant’s Total Disability pursuant to Section 2.1(rr)(3) of
the Plan.

 

13.3                           Requests
for Review

 

Any person whose
application for benefits is denied in whole or in part (or such person’s duly
authorized representative) may appeal from the denial by submitting to the
Company a request for an independent review of such application within 60 days
(180 days in the case of a Disability Claim) after receiving written notice of
the denial.  Such independent review
shall take into consideration all relevant documents and other information
submitted by the applicant, whether or not such information was submitted in
the initial benefit determination and, in the case of a Disability Claim, shall
be conducted without deference to the initial determination.  The Company shall give the applicant (or such
applicant’s authorized representative), upon request and free of charge, copies
of and/or an opportunity to review pertinent documents (except legally
privileged materials) in preparing such request for review and an opportunity
to submit issues and comments in writing. 
In the case of a Disability Claim, the Company shall identify each medical
or vocational expert whose advice was obtained in connection with such denial,
whether or not such advice was relied upon in making the denial.  The request for review shall be in writing
and shall be addressed as follows:

 

Savings Investment Plan

PACCAR Inc

P.O. Box 1518

Bellevue, Washington 98009

 

The request for review
shall set forth all of the grounds on which it is based, all facts in support
of the request and any other matters which the applicant deems pertinent.  The Company may require the applicant to
submit such additional facts, documents or other material as it may deem
necessary or appropriate in making its review. 
Any review of a denied application shall be conducted in the name of the
Company by a panel of three or more individuals who did not take part in the
initial processing of such application and, in the case of a Disability Claim,
who are not subordinate to any person who took part in such initial
processing.  The review panel shall be
the named fiduciary that has the authority to act with respect to any appeal
from a denial of a claim for benefits. 
Any decision on appeal of a Disability Claim that is based in whole or
in part on a medical judgment shall be made in consultation with an appropriate
health care professional who did not take part in the initial processing of
such application and is not subordinate to any person who took part in such
initial processing.

 

13.4                           Decision
on Review

 

The Company shall act
upon each request for review within 60 days (45 days in the case of Disability
Claim) after receipt thereof, unless special circumstances require an extension
of time for processing, but in no event shall the decision on review be
rendered more than 120

 

43

 

days (90 days in the case
of a Disability Claim) after the Company receives a proper request for
review.  If such an extension is
required, written notice thereof shall be furnished to the applicant before the
end of the initial 60-day period (45-day period in the case of Disability
Claim).  The Company shall give prompt,
written notice of its decision to the applicant.  In the event that the Company confirms the
denial of the application for benefits in whole or in part, such notice shall
set forth, in a manner calculated to be understood by the applicant, the
specific reasons for such denial, specific references to the Plan provisions on
which the decision is based, a statement that the applicant (or the applicant’s
duly authorized representative) has the right, upon request and free of charge,
to receive copies of and/or to review all pertinent documents (other than
legally privileged documents), an explanation of the applicant’s right to
initiate a lawsuit under section 502(a) of ERISA, and, in the case of
a Disability Claim, each specific internal rule, guideline, protocol or other
similar criteria relied upon in making such denial (or a statement that such
criteria were relied upon and will be provided free of charge to the applicant
upon request).  In the case of a
Disability Claim, such notice shall also include the following statement:  “You and the Plan may have other voluntary
alternative dispute resolution options, such as mediation.  One way to find out what may be available is
to contact the local U.S. Department of Labor Office and your State insurance
regulatory agency.”

 

13.5                           Exhaustion
of Administrative Remedies; Limitations

 

No legal or equitable
action for benefits under the Plan shall be brought unless and until the
claimant (a) has submitted a written application for benefits in
accordance with Section 13.1, (b) has been notified that the
application is denied, (c) has filed a written request for an independent
review of the application in accordance with Section 13.3 and (d) has
been notified in writing that the Company has affirmed the denial of the
application; provided, however, that such an action may be brought after the
Company has failed to act on the claim within a time period prescribed by
Sections 13.2 or 13.4.

 

ARTICLE 14

GENERAL PROVISIONS

 

14.1                           Information
and Reports to Members

 

Each Member shall be
advised periodically of the general provisions and the financial condition of
the Plan and his Benefit hereunder, as required by law.  In addition, the Company shall also furnish
to any Member or Beneficiary, upon written request, such information respecting
the Plan and such person’s Benefit hereunder as may be required by law, but may
require payment of a reasonable charge covering the cost of providing such
data, as permitted by law.

 

14.2                           Compliance
With USERRA

 

Any other provision of
the Plan notwithstanding, effective October 13, 1996, with regard to an
Employee who after serving in the uniformed services is reemployed on or after December 12,
1994, within the time required by USERRA, contributions shall be made and
benefits and service credit shall be provided under the Plan with respect to
his or her

 

44

 

qualified military
service (as defined in section 414(u)(5) of the IRC) in accordance
with section 414(u) of the IRC. 
Furthermore, notwithstanding any provision of the Plan to the contrary,
Participant loan payments may be suspended during a period of qualified
military service.

 

14.3                           Applicable
Law

 

The Plan and the Trust
Agreement are intended to establish a profit-sharing plan and trust qualified
under IRC sections 401(a), 401(k) and 501 and maintained in conformity with
said sections and regulations issued thereunder, and in conformity with other
applicable provisions of Federal law and regulations governing profit-sharing plans
and trusts.  Subject to the preceding
sentence and to the extent not preempted by Federal law, the Plan shall be
governed and construed in accordance with the laws of the State of Washington
and shall be governed thereby.

 

14.4                           No
Employment Rights Conferred

 

Nothing in the Plan shall
be deemed to give any person any right to remain in the employ of the Company.

 

14.5                           Service
Upon Plan; Limitations on Actions Against Plan

 

Valid service of any
legal process upon the Company shall constitute service of process upon the
Plan.  Any legal proceedings against the
Plan shall be commenced within one year, or within any greater period allowed
by ERISA section 413, after the cause of action arises, and if not
commenced within the applicable period above described, shall be deemed
abandoned and forever barred.

 

14.6                           Plan
Office; Records

 

The records of the Plan
shall be maintained on a Plan Year basis. 
The principal office of the Plan, where all Plan records shall be kept,
shall be located at the principal office of PACCAR Inc.  Copies of all documents constituting a part
of the Plan and any related documents shall also be made available at other
locations, as may be required by law. 
The Company shall allow any Member or Beneficiary reasonable access to
any documents under which the Plan is established or operated, if a request for
such access is made in accordance with the Company’s written procedure.

 

14.7                           Form of
Applications, Elections and Other Communications

 

All applications,
authorizations, designations, elections, instructions or any other
communications required or permitted of any person under the Plan shall be
submitted to the Company in such form and manner and at such time as the
Company may require and, if the Company deems it necessary or advisable, shall
include the consent of such person’s spouse.

 

45

 

14.8                           Spousal
Consents

 

This Section 14.8
shall apply whenever the consent of a Member’s spouse is required for an
election, waiver or designation made by such Member under the Plan.  Any spousal consent shall be in writing and
shall be witnessed by a Plan representative (if permitted by the Company) or by
a notary public.  The spousal consent
shall acknowledge the effect of the Member’s action and shall, if applicable,
specify the non-spouse Beneficiary being designated (including any class of
Beneficiaries or contingent Beneficiaries). 
The spousal consent shall be irrevocable.  Any other provision of the Plan
notwithstanding, no spousal consent shall be required if (a) it is
established to the satisfaction of the Company that there is no spouse or that
the spouse cannot be located or (b) the Member is legally separated or has
been abandoned (within the meaning of local law) and has an appropriate court
order, unless a qualified domestic relations order provides otherwise.  If the spouse is legally incompetent to give
consent, the spouse’s legal guardian (including the Member) may give consent.

 

14.9                           Merger,
Consolidation and Transfer of Assets or Liabilities

 

The Plan may not be
merged or consolidated with any other plan, and no assets or liabilities of the
Trust Fund may be transferred to any other plan, unless each Member would (if
the Plan then terminated) receive a Benefit immediately after the merger, consolidation
or transfer which is equal to or greater than the Benefit such Member would
have been entitled to receive immediately before such merger, consolidation or
transfer (if the Plan had been terminated).

 

ARTICLE 15

CONTRIBUTION LIMITATIONS

 

15.1                           Basic
Limitation

 

A Member’s Annual
Addition with respect to any calendar year shall in no event exceed his
Contribution Limitation for such calendar year. 
In the event that a Member’s Contribution Limitation would be exceeded,
his Annual Addition shall be reduced to an amount equal to his Contribution
Limitation by reducing the components of his Annual Addition as necessary in
the order in which they are listed in Section 15.4(b).  Such reduction shall be made in accordance
with Sections 15.2 and 15.3 (where applicable).

 

15.2                           Effect
on Future Contributions

 

Articles 4 and 5
notwithstanding, the Salary Deferrals which a Member is permitted to contribute
and his share of Company Contributions shall be reduced prospectively to the
extent required by Section 15.1. 
The aggregate amount of the Company Contributions that otherwise would
be made under Article 5 shall be reduced accordingly.

 

15.3                           Effect
on Prior Contributions

 

If a Member’s Annual
Addition exceeds his Contribution Limitation, then such Excess Annual Additions
as are attributable to Salary Deferrals and Company Contributions shall be
eliminated as follows:

 

46

 

(a)                                  Excess
Annual Additions attributable to Salary Deferrals, including investment gains, shall
be distributed to the Member.

 

(b)                                 Excess
Annual Additions attributable to Company Contributions shall be transferred to
a suspense account.  Any earnings,
appreciation or losses attributable to the suspense account shall be allocated
to such account.  All amounts credited to
the suspense account shall be applied to reduce Company Contributions for the
next calendar year, and for succeeding calendar years if necessary.  Such amounts shall be allocated among Members
pursuant to Section 5.1 until the suspense account is exhausted (subject
to this Article 15).  No Company
Contributions shall be made as long as any amount remains in the suspense
account.

 

15.4                           Definitions

 

As used in this Article 15,
the following words and phrases shall have the following meanings:

 

(a)                                  “Affiliate”
means any corporation which is a member of a “controlled group of corporations”
(within the meaning of IRC section 1563(a), determined without regard to
IRC sections 1563(a)(4) and 1563(e)(3)(C), and as modified by IRC section 415(h))
of which group PACCAR Inc is also a member.

 

(b)                                 “Annual
Addition” with respect to any calendar year means the sum of the following:

 

(1)                                  Employee
contributions made by the Member under all qualified defined-contribution or
defined-benefit plans maintained by PACCAR Inc or any Affiliate during such
calendar year;

 

(2)                                  Employer
contributions and forfeitures allocated to the Member under all qualified
defined-contribution plans maintained by PACCAR Inc or any Affiliate, other
than this Plan, as of any date within such calendar year;

 

(3)                                  Salary
Deferrals contributed by the Member under this Plan during such calendar year;
and

 

(4)                                  Company
Contributions allocated to the Member under this Plan as of any date within
such calendar year.

 

Rollover Contributions
shall not be included in Annual Additions.

 

(c)                                  “Compensation”
for purposes of this Article 15 only, means “wages” as defined in section 3401(a) of
the IRC for purposes of income tax withholding at the source, but determined
without regard to any rules that limit the remuneration included in
“wages” based on the nature or location of the employment or the services
performed (such as the exception for agricultural labor in section 3401(a)(2) of
the IRC).  In addition, for each calendar
year commencing on and after January 1, 1998, Compensation shall include
elective deferrals excludable from the Member’s gross income under section 125
or section 402(e)(3) of the IRC and made to a plan

 

47

 

maintained by the Company
including amounts contributed to the Plan as Salary Deferrals, and effective January 1,
2001, shall include elective deferrals excludable from the Member’s gross
income under section 132(f)(4) of the IRC.

 

(d)                                 “Contribution
Limitation” with respect to any calendar year means the lesser of (1) 100
percent of the Member’s Compensation for such calendar year or (2) $40,000
(as adjusted by the Commissioner of the Internal Revenue to reflect increases
in the cost-of-living in accordance with section 415(d)(1)(C) of the
IRC).

 

ARTICLE 16

AMENDMENT OR TERMINATION OF PLAN

 

16.1                           Plan
May Be Amended or Terminated

 

It is the intention of
the Company that the Plan will continue indefinitely, but the Company may, at
any time and for any reason, by action of its Board of Directors, its Chairman
and Chief Executive Officer or a committee or individual(s) acting pursuant to
a valid delegation of authority, amend the Plan retroactively or prospectively,
terminate the Plan, or discontinue Company Contributions hereunder without
terminating the Trust Agreement or the other provisions of the Plan.  Any other provision hereof notwithstanding,
the Company shall have no obligation to continue to make contributions to the
Plan after the termination of the Plan.

 

16.2                           Amendments
Cannot Reduce Accrued Benefits

 

No amendment of the Plan
shall reduce the Benefit of any Member accrued under the Plan prior to the date
when the amendment is adopted, except to the extent that a reduction in accrued
benefits may be permitted by ERISA; and no amendment of the Plan nor any other
action taken by the Company shall divert any part of the assets of the Trust
Fund to purposes other than the exclusive purposes of providing benefits to
Members or Beneficiaries who have an interest in the Plan and of defraying the
reasonable expenses of administering the Plan and the Trust Fund, except as
provided in Section 5.11.

 

16.3                           Procedure
Upon Plan Terminations

 

Upon termination of the
Plan, the Company shall perform the procedures which would have been required
pursuant to the Plan had the Plan termination date been a Valuation Date.  Upon completion of such procedures, the
balances in each Member’s Accounts shall be distributed to such Member (or his
Beneficiary) as provided in Article 8. 
Upon termination of the Plan, no part of the Trust Fund shall revert to
the Company, except as provided in Section 5.11.

 

16.4                           Partial
Terminations

 

If any partial
termination (as determined by the Company in accordance with any applicable IRC
provisions) of the Plan occurs, then the balances in the Accounts of those
Members with respect to whom the Plan is so terminated shall be distributed as
provided in Section 16.3.

 

48

 

16.5                           Intent
to Comply with ERISA

 

It is the intent of
Sections 16.3 and 16.4 that a termination or partial termination of the Plan be
accomplished in accordance with ERISA section 403.  In the event that the provisions of ERISA section 403(d)(1) or
regulations adopted thereunder require that the assets of the Plan be allocated
or distributed in a different manner upon any termination of the Plan, then the
assets of the Plan shall instead be allocated or distributed as such provisions
may require.

 

16.6                           Fiduciary
Powers Continue Until Distribution Complete

 

Until the final
distribution of any Plan assets allocated on account of any termination or
partial termination of the Plan, the Trust Fund shall continue, and the Company
and the Trustee shall continue to have and may exercise all of the powers
conferred upon them by the Plan and the Trust Agreement.

 

ARTICLE 17

PRIOR PROFIT SHARING PLAN

 

The Plan amends and restates the PACCAR Inc Profit
Sharing Plan, as in effect on June 30, 1978.  The following rules apply with respect
to the rights and benefits of Members under the Plan on such date:

 

17.1                           No
Reduction of Accrued Benefit

 

No provision of the
amended and restated Plan is intended to reduce or limit any benefit which
accrued under the provisions of the Plan as in effect from time to time prior
to July 1, 1978.

 

17.2                           Full
Vesting

 

The balance in the Prior
Profit Sharing Account of a Member who was an Employee on July 1, 1978
(plus the Member’s share of any Company Contributions or forfeitures made or
imposed with respect to periods prior to July 1, 1978, but allocated
thereafter), shall be fully vested and nonforfeitable, effective as of July 1,
1978.  Such balance shall remain fully
vested and nonforfeitable on and after July 1, 1987, upon transfer of the
Prior Profit Sharing Account balance to the Member’s Salary Deferral Accounts.

 

17.3                           Continuing
Distributions

 

Amounts being paid to a
Member or Beneficiary in accordance with the provisions of the Plan in effect
from time to time prior to July 1, 1978, shall continue to be paid in
accordance with such provisions.

 

17.4                           Beneficiary
Designations

 

Any Beneficiary
designation in effect as of June 30, 1978, under the prior provisions of
the Plan shall be treated as a Beneficiary designation filed with the Company
under Section 8.9 (c) of the Plan and shall be subject to all of the
provisions and restrictions of Section 8.9(c).

 

49

 

17.5                           Company
Contributions

 

No Company contribution
shall be made to any Prior Profit Sharing Account with respect to any period
after June 30, 1978, but such a contribution may be made after June 30,
1978, with respect to a prior period.

 

17.6                           Effective
Date

 

With respect to periods
prior to July 1, 1978, the rights of any person regarding a Prior Profit
Sharing Account shall be determined and administered exclusively under the
provisions of the Plan as in effect at the applicable time.

 

ARTICLE 18

SPECIAL TOP-HEAVY RULES

 

18.1                           Determination
of Top-Heavy Status

 

Any other provision of
the Plan notwithstanding, this Article 18 shall apply to any Plan Year in
which the Plan is a Top-Heavy Plan.  The
Plan shall be considered a “Top-Heavy Plan” for a Plan Year if, as of the
Determination Date for such Plan Year, the Top-Heavy Ratio for the Aggregation Group
exceeds 60 percent.

 

18.2                           Minimum
Allocations

 

For any Plan Year during
which the Plan is a Top-Heavy Plan, Company Contributions allocated to the
Accounts of each Member who is not a Key Employee, but who is an Employee on
the last day of such Plan Year, shall not be less than the lesser of (a) three
percent of Wages or (b) the greatest allocation, expressed as a percentage
of Compensation made to any Member who is a Key Employee.  To the extent required by this Section 18.2,
the Company shall make additional Company Contributions without regard to the
limitations of Section 5.8.

 

This Section 18.2
shall not apply to any Member for a Plan Year during which the Member received
a minimum accrued benefit described in section 416(c)(1) of the IRC
under a qualified defined-benefit plan maintained by PACCAR Inc or any of its
Subsidiaries (determined without regard to the last sentence of Section 2.1(oo)).  However, this Section 18.2 shall apply
to any Eligible Employee who could become a Member under Section 3.1 but
who has not elected to do so.

 

18.3                           Definitions

 

For purposes of this Article 18
only, the following definitions shall apply:

 

(a)                                  “Aggregation
Group” means either the Required Aggregation Group or any Permissive
Aggregation Group, as the Company may elect.

 

(b)                                 “Determination
Date” means the last day of the Plan Year prior to the applicable Plan
Year.

 

50

 

(c)                                  “Key
Employee” means a key employee, as defined in section 416(i) of
the IRC.

 

(d)                                 “Permissive
Aggregation Group” means a group of qualified plans which includes (1) the
Required Aggregation Group and (2) one or more plans of the Company or a
Subsidiary which are not part of the Required Aggregation Group.  A Permissive Aggregation Group, when viewed
as a single plan, must satisfy the requirements of sections 401(a)(4) and
410 of the IRC.

 

(e)                                  “Required
Aggregation Group” means a group of qualified plans which includes (1) each
plan of the Company or a Subsidiary in which a Key Employee participates and (2) each
other plan of the Company or a Subsidiary which enables any plan in which a Key
Employee participates to meet the requirements of sections 401(a)(4) or
410 of the IRC.

 

(f)                                    “Top-Heavy
Ratio” means a percentage determined pursuant to section 416(g) of
the IRC.  In applying section 416(g) of
the IRC, the valuation date shall be the Determination Date.

 

(g)                                 “Wages”
means “wages” as defined in section 3401(a) of the IRC for purposes
of income tax withholding at the source, but determined without regard to any rules that
limit the remuneration included in “wages” based on the nature or location of
the employment or the services performed (such as the exception for
agricultural labor in section 3401(a)(2) of the IRC).  “Wages” does not include Salary Deferrals or
amounts in excess of $200,000 (as adjusted by the Commissioner of Internal
Revenue to reflect increases in the cost-of-living in accordance with section 401(a)(17)(B)).

 

ARTICLE 19

 

EXECUTION

 

To record the amendment and restatement of the Plan to
read as set forth herein, effective as of April 1, 2005, but subject to
approval by the Internal Revenue Service and to any amendments necessary to
obtain such approval and to comply with Department of Labor regulations and
applicable securities laws, PACCAR Inc by its Chairman and Chief Executive
Officer has executed this Plan on April 28, 2005.

 

	
   

  	
  PACCAR Inc

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mark C. Pigott

  
	
   

  	
   

  	
     Chairman
  and

  
	
   

  	
   

  	
  Chief Executive
  Officer

  

 

51

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