<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
PACCAR INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of PACCAR Inc will be held at 10:30 a.m.
on Tuesday, April 29, 1997, at the Meydenbauer Center, 11100 N.E. 6th Street,
Bellevue, Washington for these purposes:
1. To elect three directors to serve three-year terms ending in 2000.
2. To amend the Certificate of Incorporation to increase the authorized
common shares from 100,000,000 to 200,000,000 and to decrease their par
value from $12 to $1 per share.
3. To approve amendments to the PACCAR Inc 1991 Long Term Incentive Plan
("LTI Plan") to allow the Company to preserve the tax deduction for
performance based compensation payments, to increase the number of common
shares authorized for awards from 1,199,182 to 3,000,000, and to make
other changes.
4. To approve the PACCAR Inc Senior Executive Incentive Plan ("SEI Plan")
to allow the Company to preserve the tax deduction for the annual bonus
paid to certain executives.
5. To transact such other business as may properly come before the meeting.
Pursuant to Section 3 of Article VI of the Bylaws, stockholders entitled to
notice of and to vote at this meeting are those of record as of the close of
business on March 5, 1997.
IMPORTANT: The vote of each stockholder is important regardless of the
number of shares held. Whether or not you plan to attend the meeting, you are
requested to date and sign the enclosed proxy card and return it promptly in the
enclosed postpaid envelope.
DIRECTIONS TO THE MEYDENBAUER CENTER CAN BE FOUND ON THE BACK COVER OF THE
ATTACHED PROXY STATEMENT.
By order of the Board of Directors
/s/ J. M. D'Amato
SECRETARY
Bellevue, Washington
March 20, 1997
<PAGE>
------------
PROXY STATEMENT
------------
The Board of Directors of PACCAR Inc (the "Company") solicits the
accompanying proxy for use at the Annual Meeting of Stockholders of the Company
to be held April 29, 1997, at the Meydenbauer Center, 11100 N.E. 6th Street,
Bellevue, Washington. Execution of the proxy will not in any way affect a
stockholder's right to attend the meeting or prevent voting in person. A proxy
may be revoked by later dated proxy or by notice to the Secretary of the Company
at any time before it is voted.
The executive offices of the Company are located in the PACCAR Building, 777
- -106th Avenue N.E., Bellevue, Washington 98004. This proxy statement and proxy
card were first sent to stockholders about March 20, 1997.
Expenses for solicitation of proxies will be paid by the Company.
Solicitation will be by mail except for any facsimile, telephone, or personal
solicitation by directors, officers, and employees of the Company which may be
made without additional compensation. The Company will request banks and brokers
to solicit proxies from their customers and will reimburse those banks and
brokers for reasonable out-of-pocket costs for this solicitation.
VOTING RIGHTS
Stockholders eligible to vote at the meeting are those of record at the
close of business on March 5, 1997. Each outstanding share of common stock, par
value $12 per share, is entitled to one vote on all matters to be presented at
the meeting. As of the close of business on March 5, 1997, the Company had
outstanding 38,884,797 shares of common stock.
STOCK OWNERSHIP
CERTAIN OWNERS
The following persons are known to the Company to be the beneficial owner of
more than five percent of the Company's common stock at December 31, 1996:
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED(a) OF CLASS
- -------------------------------------------------------------- --------------- --------
<S> <C> <C>
BankAmerica Corporation 3,678,366(b) 9.5
555 California Street
San Francisco, California 94104
Charles M. Pigott 2,305,343(c)(d) 5.9
P.O. Box 1518
Bellevue, Washington 98009
</TABLE>
1
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following tabulation sets forth the shares of common stock beneficially
owned by each director and Named Officer (as defined below) and by all directors
and executive officers as a group at December 31, 1996:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED(a) OF CLASS
- -------------------------------------------------------------- --------------- --------
<S> <C> <C>
John M. Fluke, Jr............................................. 1,699 *
Carl H. Hahn.................................................. 835 *
Harold J. Haynes.............................................. 4,150 *
David J. Hovind............................................... 27,620(d)(f) *
Charles M. Pigott............................................. 2,305,343(c)(d) 5.9
James C. Pigott............................................... 1,883,471(d)(e) 4.8
Mark C. Pigott................................................ 373,686(d)(g) *
John W. Pitts................................................. 2,490(d) *
Thomas E. Plimpton............................................ 4,552(f) *
Michael A. Tembreull.......................................... 16,222(f) *
James H. Wiborg............................................... 15,678(h) *
Total of all directors and executive officers as a group (15
individuals)................................................ 3,827,148(i) 9.8
</TABLE>
- ------------
* does not exceed one percent.
(a) Amounts shown are rounded to whole share amounts.
(b) Of the 3,678,366 shares, BankAmerica Corporation and/or its subsidiaries
have sole voting power as to 3,340,183 shares, sole dispositive power as to
3,257,765 shares, shared voting power as to 900 shares and shared
dispositive power as to 226,022 shares.
(c) Includes 15,126 shares allocated in the Company's Savings Investment Plan
for which he has sole voting power and as of January 1, 1997 dispositive
power, 69,704 stock units accrued for a deferred contingent cash award under
the LTI Plan and options to purchase 23,769 shares. Also includes 699,167
shares held by a charitable trust of which he is co-trustee and shares
voting and dispositive power, and 134,228 shares held by a corporation over
which he has sole voting power and sole dispositive power over 114,480 of
such shares.
(d) Does not include shares held in the name of a spouse and/or children to
which beneficial ownership is disclaimed.
(e) Includes the same 699,167 shares referenced in note (c) held by a charitable
trust of which he is a co-trustee and shares voting and dispositive power.
(f) Includes shares allocated in the Company's Savings Investment Plan for which
the participant has sole voting power over all shares and dispositive power
as follows: D. J. Hovind (7,530 total/3,508 dispositive), T. E. Plimpton
(2,215 total/425 dispositive), and M. A. Tembreull (5,071 total/2,000
dispositive). Includes stock units accrued for deferred contingent cash
awards under the LTI Plan as follows: D. J. Hovind (2,691), T. E. Plimpton
(139), and M. A. Tembreull (3,360). Also includes options to purchase shares
as follows: D. J. Hovind (7,437), T. E. Plimpton (2,198), and M. A.
Tembreull (6,290).
(g) Includes 3,417 shares allocated in the Company's Savings Investment Plan for
which he has sole voting power and dispositive power over 990 shares, and
the same 134,228 shares owned by the corporation referenced in note (c) over
which he has no voting or dispositive power. Also includes options to
purchase 4,385 shares.
2
<PAGE>
(h) Includes 5,200 shares held in trust for which he is a trustee and shares
voting and dispositive power, but not 1,190 shares owned by a university on
whose investment subcommittee of the board of trustees he sits.
(i) Reflects elimination of duplicate reporting of 699,167 shares referenced in
notes (c) and (e) and 134,228 shares referenced in notes (c) and (g).
ITEM 1. ELECTION OF DIRECTORS
Three directors, constituting Class II Directors, are to be elected at the
meeting. The persons named below have been designated by the Board as nominees
for election as Class II Directors for a term expiring at the Annual Meeting of
Stockholders in 2000. All of the nominees are currently serving as directors of
the Company.
Under Delaware law, directors are elected by a plurality of the votes cast
for the election of directors. Shares that are not voted affirmatively for the
election of directors (whether because authority to vote is withheld, the
stockholder does not return a proxy, the broker holding the shares does not vote
or otherwise) will not count in determining the total number of votes for each
nominee. Unless otherwise instructed, signed proxies which are returned will be
voted for the three nominees for Class II Directors.
If any of the nominees is unable to act as a director because of an
unexpected occurrence, the holders of the proxies, in their discretion, may vote
the proxies for another person. In the alternative, the Board of Directors may
make an appropriate reduction in the number of directors to be elected. The
Class I and Class III Directors named below have terms which expire in 1999 and
1998, respectively.
NOMINEES FOR TERMS EXPIRING AT THE ANNUAL MEETING IN 2000 (CLASS II DIRECTORS):
HAROLD J. HAYNES, age 71, has been senior counselor for Bechtel Group, Inc.,
an international engineering and construction company, since 1981. He was
chairman, chief executive officer and a director of Standard Oil Company of
California (now Chevron Corporation), an integrated petroleum company, from 1974
until his retirement in 1981. Mr. Haynes has served as a director of the Company
since 1981. He is also a director of The Boeing Company.
JAMES C. PIGOTT, age 60, has been president of Pigott Enterprises, Inc.,
private investments, since 1983 and president and/or chairman and chief
executive officer of Management Reports & Services, Inc., a provider of business
services, since February 1986. He was president, chief executive officer and a
director of Stetson-Ross, Inc., a woodworking machinery manufacturer, from 1976
to 1983. He has served as a director of the Company since 1972. He is also a
director of Americold Corporation. Mr. Pigott is the brother of Charles M.
Pigott and the uncle of Mark C. Pigott, both directors of the Company.
MARK C. PIGOTT, age 43, became Chairman and Chief Executive Officer of the
Company on January 1, 1997. He served as a Vice Chairman of the Company since
January 1995, Executive Vice President since December 1993, Senior Vice
President since January 1990 and was previously Vice President. Mr. Pigott has
served as a director of the Company since July 1994. Mr. Pigott is the son of
Charles M. Pigott and nephew of James C. Pigott, both directors of the Company.
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 1999 (CLASS I DIRECTORS):
JOHN M. FLUKE, JR., age 54, is chairman of Fluke Capital Management, L.P.,
private investments. He was chairman of Fluke Corporation (formerly John Fluke
Mfg. Co., Inc.), a manufacturer of electronic test and measurement equipment,
from 1984 to 1990. He was chief executive officer of that company from 1983 to
1987 and has been a director since 1976. He has served as a director of the
Company since 1984.
DAVID J. HOVIND, age 56, became President and a director of the Company in
January 1992. He was Executive Vice President of the Company from July 1987 to
January 1992, Senior Vice President from December 1985 to July 1987, and Vice
President from September 1985 to December 1985.
3
<PAGE>
MICHAEL A. TEMBREULL, age 50, became a Vice Chairman of the Company in
January 1995. He served as Executive Vice President from January 1992 to January
1995, Senior Vice President from September 1990 to January 1992, and was
previously general manager of the Company's Peterbilt Motors Company division.
Mr. Tembreull became a director of the Company in July 1994.
JAMES H. WIBORG, age 72, was chairman of Univar Corporation, a distributor
of chemicals, from September 1986 until his retirement in August 1996. He was
also chairman and chief strategist of VWR Scientific Products Corporation from
March 1986 to his retirement in August 1996. He was chairman and chief executive
officer of Univar from 1983 to 1986 and he was president and chief executive
officer from 1966 to 1983. He has served as a director of the Company since
1975. He is also a director of PrimeSource Corporation. (He is retiring from the
Board of Directors of the Company effective April 28, 1997.)
GERALD GRINSTEIN, 64, served as chairman of Burlington Northern Santa Fe
Corp., a railroad transportation company, until his retirement in 1995. He was
chairman and chief executive officer of Burlington Northern Inc. from 1990 to
1995. Before joining Burlington Northern in 1987 he was chairman of Western
Airlines from 1983 to 1987 and a partner in the law firm of Preston,
Thorgrimson, Ellis and Holman from 1969 to 1983. He is a director of Delta Air
Lines, Inc., Browning-Ferris Industries, Inc., Sunstrand Corp. and Imperial
Holly Corp. (Elected by the Board to serve for the remainder of J.H. Wiborg's
term as a Class I director).
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 1998 (CLASS III
DIRECTORS):
CARL H. HAHN, age 70, served as chairman of the board of management of
Volkswagen AG from 1982 until his retirement at the end of 1992. He is a
director of Perot Systems Corp. and TRW Inc. He also serves as a member of the
supervisory boards of a number of major European companies, including Volkswagen
AG, Thyssen AG, and Gerling.
CHARLES M. PIGOTT, age 67, became Chairman Emeritus upon his retirement from
the Company on January 1, 1997. He was elected President of the Company in 1965,
Chief Executive Officer in 1968, and served as Chairman from 1986 to 1996 and
has served as director since 1961. He is also a director of The Boeing Company,
Chevron Corporation, and Seattle Times Company. Mr. Pigott is the brother of
James C. Pigott, and the father of Mark C. Pigott, both directors of the
Company.
JOHN W. PITTS, age 70, was president, chief executive officer and a director
of MacDonald, Dettwiler and Associates Ltd., a systems engineering company, from
1982 until his retirement in 1995. He was chairman, president, chief executive
officer and a director of Okanagan Helicopters Ltd., a helicopter charterer,
from 1970 to 1982. He has served as a director of the Company since 1964. He is
also a director of BC Sugar Refinery Limited, BC TELECOM Inc., and Radarsat
International, Inc.
The Board recommends a vote FOR the election of H. J. Haynes, J. C. Pigott,
and M. C. Pigott as directors.
STOCKHOLDER PROPOSALS
A stockholder proposal must be received at the principal executive offices
of the Company, P.O. Box 1518, Bellevue, Washington 98009 by November 20, 1997
to be considered for inclusion in the proxy materials for the Company's 1998
Annual Meeting.
BOARD COMMITTEES AND MEETINGS
AUDIT COMMITTEE--The Board of Directors has a standing Audit Committee.
Members of the Audit Committee are J. M. Fluke, Jr., J. C. Pigott, and J. W.
Pitts. The functions of the Audit Committee include review of the independent
accountant's report, modification of audit procedures as may be appropriate, and
performance of such other responsibilities as the Board of Directors may
prescribe. The Committee met once in 1996.
4
<PAGE>
COMPENSATION COMMITTEE--The Board of Directors has a standing Compensation
Committee. Members of the Compensation Committee are H. J. Haynes, J. W. Pitts,
and J. H. Wiborg. The functions of the Compensation Committee include reviewing
and approving compensation of certain executives. The Committee also administers
the Company's LTI Plan and the Deferred Compensation Plan. The Committee met
three times in 1996.
EXECUTIVE COMMITTEE--The Board of Directors has a standing Executive
Committee. Members of the Executive Committee are C. M. Pigott, J. W. Pitts, and
J. H. Wiborg. The function of the committee is to act on routine Board matters
when the Board is not in session. The Committee did not meet in 1996.
The Company does not have a Nominating Committee.
The Board of Directors met four times during 1996, and each member attended
at least 75% of the aggregate of meetings of the Board of Directors and the
committees of the Board on which he served.
COMPENSATION OF EXECUTIVE OFFICERS AND RELATED MATTERS
The information in the following table relates to the annual and long term
compensation for service in all capacities to the Company for the fiscal years
ended December 31, 1996, 1995 and 1994 of those persons who were, during 1996
and at December 31, 1996, (a) the Chief Executive Officer and (b) the other four
most highly compensated executives of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
ANNUAL COMPENSATION LONG-TERM COMPENSATION COMPENSATION(a)
-------------------------------------- -------------------------- -----------------
AWARDS PAYOUTS
------------- -----------
SECURITIES
OTHER UNDERLYING LONG-TERM
ANNUAL OPTIONS/SARS INCENTIVE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (SHARES) PAYOUTS(b)
- ---------------------------- --------- --------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
C. M. Pigott................ 1996 $1,100,000 $ (c) (d) 56,156 $ 506,250 $ 7,500
Chairman and Chief 1995 980,000 667,388 (d) 53,637 434,813 7,500
Executive Officer 1994 897,116 693,000 (d) 6,441 451,238 7,500
D. J. Hovind................ 1996 550,000 (c) (d) 23,398 219,938 7,500
President 1995 520,000 307,292 (d) 24,832 192,525 7,500
1994 476,808 281,725 (d) 2,605 138,740 7,500
M. A. Tembreull............. 1996 498,077 (c) (d) 21,271 141,075 7,500
Vice Chairman 1995 399,039 228,000 (d) 19,865 60,584 7,500
1994 329,385 196,020 (d) 1,627 84,780 7,500
M. C. Pigott................ 1996 498,077 (c) (d) 21,271 90,000 7,500
Vice Chairman 1995 398,558 212,000 (d) 19,865 72,400 7,500
1994 298,269 160,650 (d) 1,443 61,776 7,500
T. E. Plimpton.............. 1996 269,615 (c) (d) 5,956 70,875 7,500
Senior Vice President 1995 230,769 109,613 (d) 6,258 50,186 7,500
1994 206,961 106,604 (d) 816 0 7,500
</TABLE>
- ------------
(a) Amounts of All Other Compensation represent Company matching contributions
to the Company's Savings Investment Plan.
(b) Represents cash awards which were paid, or were payable but deferred at the
Named Officer's election, during 1994, 1995, and 1996 and earned during the
1991-1993, 1992-1994 and 1993-1995 LTI Plan performance cycles,
respectively.
(c) Amounts of bonuses earned in 1996 to be paid in 1997 were not determined on
the date this proxy statement was prepared.
5
<PAGE>
(d) The aggregate amount of perquisites and other personal benefits was less
than the required reporting threshold (the lesser of $50,000 or 10% of the
total of annual salary and bonus for the Named Officer).
OPTION GRANTS--Shown below is information on grants of stock options
pursuant to the LTI Plan in 1996 to the Named Officers which are also reflected
in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR(A)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR BASE PRICE DATE VALUE (b)
- ------------------------------------------------ ----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
C. M. Pigott.................................... 56,156 18.1% $ 49.50 4/30/2006 $ 767,653
D. J. Hovind.................................... 23,398 7.5 49.50 4/30/2006 319,851
M. A. Tembreull................................. 21,271 6.8 49.50 4/30/2006 290,775
M. C. Pigott.................................... 21,271 6.8 49.50 4/30/2006 290,775
T. E. Plimpton.................................. 5,956 1.9 49.50 4/30/2006 81,419
</TABLE>
- ------------
(a) The date that all options granted in 1996 become exercisable is January 1,
1999. This date may be accelerated in the event of a Change in Control of
the Company (as defined in the 1991 LTI Plan).
(b) The grant date present value was determined by using a variation of the
Black-Scholes option pricing model with the following assumptions: (i)
34.40% expected share price volatility, (ii) 6.81% risk-free rate of return,
(iii) an expected dividend yield of 4.15%, (iv) a ten-year exercise period,
and (v) a five year expected life.
OPTION EXERCISES AND FISCAL YEAR-END VALUES--Shown below is information
concerning the exercise of stock appreciation rights and options to purchase the
Company's common stock under the 1981 Long Term Incentive Plan and the LTI Plan
by the Named Officers in 1996 or held by them at December 31, 1996:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
SHARES ACQUIRED VALUE OPTIONS/SARS AT FY-END SARS AT FY-END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------- ----------------- ------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
C. M. Pigott............. 6,246 $ 214,425 17,328 / 116,234 $ 499,318 / $2,504,098
D. J. Hovind............. 7,545 179,616 4,832 / 50,835 111,839 / 1,102,360
M. A. Tembreull.......... 1,249 48,811 4,663 / 42,763 132,875 / 918,375
M. C. Pigott............. 0 0 2,942 / 42,579 83,536 / 914,059
T. E. Plimpton........... 0 0 1,382 / 13,030 31,804 / 282,650
</TABLE>
LONG TERM INCENTIVE PLANS--All stock-based awards under the 1981 Long Term
Incentive Plan and the LTI Plan are shown in the Option Grant and Option
Exercise tables set forth above. Shown below is information with respect to
non-stock price-based awards made in 1996 under the LTI Plan:
6
<PAGE>
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
OTHER PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
MATURATION OR -----------------------------------
NAME PAYOUT THRESHOLD TARGET MAXIMUM
- -------------------------- ------------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
C. M. Pigott.............. 1/1/96 - 12/31/98 $ 45,045 $ 495,000 $ 990,000
D. J. Hovind.............. 1/1/96 - 12/31/98 18,769 206,250 412,500
M. A. Tembreull........... 1/1/96 - 12/31/98 17,063 187,500 375,000
M. C. Pigott.............. 1/1/96 - 12/31/98 17,063 187,500 375,000
T. E. Plimpton............ 1/1/96 - 12/31/98 2,389 52,500 105,000
</TABLE>
Payments of awards under the LTI Plan are tied to achieving Company, business
unit, and individual goals over a three-year performance period. Goals
established for Company performance are based on the Company's financial
performance relative to a selected group of companies with similar business
characteristics. Goals established for business unit and individual performance
are based on financial and strategic objectives approved by the Compensation
Committee on an individual basis.
RETIREMENT BENEFITS--The following table shows the estimated annual
retirement benefit payable to participating employees, including the Named
Officers, under the Company's noncontributory retirement plan and Supplemental
Retirement Plan:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------------------------ --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
$ 400,000..................... $ 87,932 $ 117,242 $ 146,553 $ 175,864 $ 205,174
500,000..................... 110,432 147,242 184,053 220,864 257,674
600,000..................... 132,932 177,242 221,553 265,864 310,174
700,000..................... 155,432 207,242 259,053 310,864 362,674
800,000..................... 177,932 237,242 296,553 355,864 415,174
900,000..................... 200,432 267,242 334,053 400,864 467,674
1,200,000.................... 267,932 357,242 446,553 535,864 625,174
1,400,000.................... 312,932 417,242 521,553 625,864 730,174
1,600,000.................... 357,932 477,242 596,553 715,864 835,174
1,700,000.................... 380,432 507,242 634,053 760,864 887,674
</TABLE>
The Company has a noncontributory retirement plan which has been in effect
since 1947. Named Officers participate in this plan on the same basis as other
salaried employees. The plan provides benefits based on years of service and
salary. The benefit for each year of service, up to a maximum of 35 years, is
equal to 1% of salary plus 0.5% of salary in excess of the Social Security
Covered Compensation level. Salary is defined as the average of the highest 60
consecutive months of an employee's cash compensation, which includes those
amounts reported in the "Salary" and "Bonus" columns of the Summary Compensation
Table, but it excludes compensation under the LTI Plan. Years of credited
service as of December 31, 1996 for the Named Officers are: C. M. Pigott, 35
years; D. J. Hovind, 32 years; M. A. Tembreull, 26 years; M. C. Pigott, 18
years; and T. E. Plimpton, 20 years.
The Company's unfunded Supplemental Retirement Plan provides a retirement
benefit to those affected by the maximum benefit limitations permitted for
qualified plans by the Internal Revenue Code and to those deferring incentive
compensation bonuses. The benefit is equal to the amount of normal pension
benefit reduction resulting from the application of maximum benefit and salary
limitations and the exclusion of deferred incentive compensation bonuses from
the retirement plan benefit formula.
The Pension Plan Table illustrates approximate retirement benefits at age 65
and are based on single life annuity amounts. They are not subject to any
deduction for Social Security or other offset amounts.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION--The Compensation
Committee of the Board of Directors has furnished the following report on
executive compensation:
Under the supervision of the Compensation Committee, the Company has
designed its executive pay programs to provide a direct link between Company
performance and executive compensation. These programs have been in use for a
number of years. The compensation of Company executives under these programs is
determined annually by the Compensation Committee.
The Company believes that its overall executive compensation package should
be sufficient to attract and retain highly qualified executives and should
provide meaningful incentives for measurably superior performance. The Company's
executive compensation program is comprised of three main components: (i) base
salaries; (ii) annual cash bonuses intended to focus maximum effort on achieving
profitability, individually assigned objectives, and the highest level of
product quality; and (iii) long term incentives in the form of stock options and
cash awards intended to focus efforts on achieving long term growth in net
income, return on sales, and return on capital.
BASE SALARIES. Base salaries are compared with independent salary surveys,
and consultants are utilized from time to time to assure that the overall
compensation package is competitive with the average compensation packages
offered by similar companies, including some of the selected companies described
in the long term incentive plan discussed below (the "Selected Companies"). The
most recent survey compared the compensation packages of 319 companies with
which the Company competes in the market for executive talent.
The base salaries of the Company's executive officers and the Chief
Executive Officer were generally above the average salaries paid by the surveyed
companies. Among the companies included in the survey were nine of the twelve
companies which comprise the Standard & Poor's indices used in the performance
graph set forth later in this proxy statement.
ANNUAL CASH BONUSES. Annual cash bonuses may range up to 77% of the
executive's base salary. In general, from 50% to 60% of these bonuses are based
on the Company's performance compared to an overall profit goal approved by the
Compensation Committee. The balance of the executives' bonus calculation is
based upon the attainment, in the subjective judgment of the Compensation
Committee, of one or more individual goals. In general, these goals involve
factors such as the financial performance of the business units for which the
executive has direct responsibility, such as profitability or return on
investment, as well as non-financial performance criteria such as market share
improvement, product quality, new product development, production efficiencies
and similar specific individual assignments. The individual goals are changed
annually, and a level of importance is assigned to each goal on a percentage
basis. The calculation of the bonus takes into account both the level of
achievement and the assigned importance of the goal. The achievement of each
goal is determined separately, and no bonus for a specific goal is paid unless
at least 70% of that goal is achieved.
The bonuses paid in 1996 reflect an achievement in excess of 100% of the
Company's overall profit goal for 1995. The amounts of bonuses earned in 1996
(to be paid in 1997) were not determined on the date this proxy statement was
prepared.
LONG TERM INCENTIVES. Given the cyclical nature of the Company's business,
long term incentives are based on a three-year performance period and are
provided through annual grants of stock options and cash incentives. The
Compensation Committee determines a target award for each executive officer,
expressed as a percentage of salary at the date the award is granted. The target
award is allocated 85% to stock options and 15% to the cash incentive award.
Stock options automatically become exercisable at the end of the three-year
performance period and are intended to link the interests of key employees
directly with stockholders' interests through increased individual stock
ownership. After considering the long term incentives available to executive
officers in equivalent positions in similar companies, the Compensation
Committee increased the amount of the target award and the percentage of the
award allocated to stock
8
<PAGE>
options for the 1995-97 and subsequent performance cycles. At the same time,
however, the exercise price of the stock options was increased to market price
at the time of grant.
A significant portion (50% to 100%) of the long term cash incentive award is
based on overall Company performance measured in terms of the Company's ranking
in compound growth of net income, return on sales, and return on capital
(weighted equally) when compared to the Selected Companies, a group of Fortune
500 companies in similar industries. The Selected Companies have been used for
this comparison for a number of years; these companies have been selected
because, in the judgment of the Company's compensation consultants and the
Compensation Committee, they are the most directly comparable in size and nature
of business to the Company. The Selected Companies include seven of the twelve
companies which make up the published Standard & Poor's indices in the
performance graph set forth below.
The balance of the executives' long term cash incentive award is based upon
each executive's meeting business unit and individual objectives. These
objectives are established on the same basis as the types of individual goals
described above for the annual cash bonus, but they are measured over a
three-year performance cycle. The actual amount of each individual's cash
incentives related to the executive's business unit financial performance and
other individual objectives is determined by the Compensation Committee at the
end of a rolling three-year performance cycle, based on the Committee's
subjective evaluation of each executive's performance during the preceding three
years. The target amount will be earned if Company financial performance ranks
above at least half of the Selected Companies and business unit and individual
performance are at 100% of goal. The maximum award amount will be earned if
Company financial performance ranks above all of the comparison companies and
business unit and individual performance are at least 150% of goal. No award
will be earned if Company financial performance ranks below 75% or more of the
Selected Companies and business unit and individual performance is below 75% of
goal.
For the three-year cycle that ended in 1995, the Company achieved in excess
of 100% of the comparative performance goal. The incentive cash awards for each
executive officer for the three-year cycle ended in 1996 were not determined on
the date this proxy statement was prepared.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. The Chief Executive Officer's
compensation is comprised of the same components as other executives: (i) base
salary; (ii) an annual cash bonus; and (iii) a long term incentive in the form
of stock options and a cash award. However, the CEO's annual cash bonus is based
entirely on the Company's profit goal as established by the Compensation
Committee. The bonus earned in 1995 and paid in 1996 reflects an achievement in
excess of 100% of the goal for 1995. The bonus earned in 1996 to be paid in 1997
was not determined on the date this proxy statement was prepared. The cash
portion of the long term incentive is likewise based entirely on the Company's
performance during the three-year cycle as compared to the Selected Companies.
For the three-year cycle ended in 1995, the Company achieved in excess of 100%
of this goal. The incentive cash award for the three-year cycle ended in 1996
was not determined on the date this proxy statement was prepared. As with other
executives, the size of the stock option award is determined on the basis of
salary and not on the amount and terms of options already held.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the Company's executive officers. The Compensation Committee has
approved changes to the LTI Plan and the annual cash bonus program for 1997 to
allow the Company to preserve tax deductions for performance based executive
compensation. The plans proposed are intended to operate in a similar manner to
the existing plans to the extent permitted by law. The changes are set forth in
Items 3 and 4 of this proxy.
OVERALL COMPENSATION. The overall compensation package (base salary, annual
cash bonuses and long term incentives) for each of the Company's executive
officers and the Chief Executive Officer was generally equivalent to the average
compensation of executive officers in comparable positions of similar
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companies surveyed. The Compensation Committee believes that the overall
compensation package for the Company's key executives meets the objective of
providing significant individual performance incentives.
MEMBERS OF THE
COMPENSATION COMMITTEE
H. J. Haynes
J. W. Pitts
J. H. Wiborg
ITEM 2. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED
COMMON SHARES AND TO DECREASE PAR VALUE OF COMMON SHARES
It is recommended that the stockholders adopt an amendment to the Fourth
Article of the Certificate of Incorporation to increase the authorized number of
shares of common stock of the Company from 100,000,000 to 200,000,000 and to
decrease the par value of the common stock from $12 to $1 per share. The
authorized number and par value of shares of preferred stock will not change.
The proposed amendment and the language currently in effect are set forth as
Exhibits A and B, respectively, to this proxy statement. As in the past, each
share of common stock will be entitled to one vote and no holder of common stock
will have any preemptive rights.
As of December 31, 1996, the authorized capital stock of the Company
consisted of 100,000,000 shares of common stock, of which 38,871,278 shares were
issued and outstanding, and 1,000,000 shares of preferred stock, of which no
shares were issued. (See chart below).
AUTHORIZED CAPITAL STOCK
<TABLE>
<CAPTION>
CURRENTLY PAR VALUE AFTER AMENDMENT PAR VALUE
- ------------------------ --------------- ---------------- --------------
<S> <C> <C> <C>
Preferred 1,000,000 no par 1,000,000 no par
Common 100,000,000 $12 per share 200,000,000 $1 per share
</TABLE>
Management believes it is desirable to increase the number of authorized
common shares. This action will provide the Company with flexibility in the
future by assuring availability of sufficient authorized but unissued common
stock for possible acquisitions, stock splits, financing requirements and other
corporate purposes without the necessity of further stockholder action. The
Board of Directors has publicly announced its intention to approve a 100% stock
split upon approval of this amendment.
Currently, 1,199,182 shares (as adjusted for dilution under Article 10 of
LTI Plan) of the common stock are reserved for stock option awards granted or to
be granted under the LTI Plan. If Item 3 is adopted by shareholders, the number
of shares of common stock reserved under the LTI Plan will be increased to
3,000,000 (subject to adjustment for dilution under Article 10 of LTI Plan). The
Company has no other plans, proposals, agreements or understandings to issue the
newly authorized common stock. Likewise, the Company is not aware of any effort
to accumulate the Company's stock or to obtain control of the Company.
Management's proposal to increase the number of authorized common shares is not
the result of any knowledge of any specific effort to accumulate the Company's
securities or to obtain control of the Company by means of a merger, tender
offer, solicitation in opposition to management or otherwise.
With respect to declaration of a 100% stock split under present accounting
rules and Delaware law, the par value of shares to be issued must be transferred
to the common stock account from the additional paid in capital account. If the
paid in capital account is less than the amount to be transferred, the
difference would be transferred from the retained earnings account. By
decreasing the par value of the
10
<PAGE>
common stock from $12 to $1 as proposed, there will be no reduction in retained
earnings resulting from the announced stock split.
It is possible that the issuance of additional common stock may result in
some dilution of the voting rights of existing stockholders as the shares become
more widely distributed. It could make an unsolicited acquisition more
difficult. The Certificate of Incorporation presently contains the following
provisions previously approved by stockholders which may discourage unsolicited
takeover attempts: (1) the affirmative vote of two-thirds of the outstanding
shares entitled to vote is required to approve a merger, consolidation,
dissolution or sale of substantially all the Company's assets or to change the
Bylaws or the Certificate of Incorporation; (2) a person who acquires 20% of the
Company's outstanding common stock must purchase remaining shares in any
subsequent merger or other business combination at the highest price paid for
any of the initial shares acquired; (3) the Board of Directors is approximately
divided into three equal classes, each class being elected annually for a
three-year term; (4) directors may be removed only with the approval of
two-thirds vote of outstanding common shares entitled to vote; and (5)
stockholder action may be taken only during a duly called meeting of
stockholders.
Further, the Company's Bylaws provide that a special stockholders' meeting
may be called by a majority of the Board of Directors. The Bylaws also require
stockholders to give timely notice prior to an annual meeting of any matter they
wish to present or nomination they wish to make for election to the Board.
Cumulative voting is allowed under Delaware law.
In December 1989, the Board of Directors approved a Rights Agreement
designed to protect the Company against abusive takeover attempts. A dividend of
one preferred share purchase right (the "Rights") was declared on each
outstanding share of common stock. The Rights become exercisable when a person
or group (an "Acquiring Person") publicly announces its intention to acquire or
acquires 10% or more of the Company's common stock. After such an announcement,
each Right entitles the holder to purchase, for $150, a fractional share of
Company preferred stock designed to have a market value equal to the market
value of a common share. If an Acquiring Person acquires 10% or more of the
common stock, a holder of a Right (other than the Acquiring Person) will then be
entitled to receive, upon exercise of the Right, shares of PACCAR common stock
having a market value of two times the exercise price of $150. In the event the
Company is acquired in a merger, each holder of a Right will be entitled to
receive upon exercise of the Right shares of common stock of the Acquiring
Company having a market value of two times the exercise price. At any time after
an Acquiring Person acquires more than 10% but less than 50% of the Company's
common stock, the Board of Directors may exchange the Rights, in whole or in
part, at a ratio of one common share per Right.
The affirmative vote of two-thirds ( 2/3) of the shares outstanding is
required for the adoption of an amendment of the Certificate of Incorporation.
If the "abstain" box on the proxy is checked it will count as a vote against the
proposal. Brokers who hold shares in accounts for their clients and are not
given instructions on how to vote on this proposal may not have discretion to
vote and may return the proxy unmarked on this Item 2 (a "broker nonvote").
Broker nonvotes will count as a vote against the proposal. Unless otherwise
instructed, proxies signed by the shareholder which are returned unmarked will
be voted in favor of the proposal.
The Board recommends a vote FOR the amendments to increase the authorized
capitalization of common shares and to decrease the par value of common shares,
as described in Item 2.
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<PAGE>
ITEM 3. PROPOSAL TO APPROVE AMENDMENTS TO THE 1991 LONG TERM INCENTIVE
COMPENSATION PLAN (LTI) TO PERMIT THE COMPANY TO PRESERVE TAX
DEDUCTIONS FOR PERFORMANCE BASED COMPENSATION PAYMENTS, TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR AWARDS, AND TO MAKE OTHER CHANGES
INTRODUCTION
The Board of Directors recommends to the shareholders the approval of
certain amendments to the LTI Plan. This LTI Plan was approved by shareholders
in 1991. The purpose of the LTI Plan is to encourage key employees of the
Company and its subsidiaries to focus on long range objectives, to attract and
retain key employees with exceptional qualifications, and to link key employees
to stockholder interests through equity ownership and cash awards. Employees
eligible to participate in the LTI Plan are key employees designated by the
Compensation Committee. There are approximately 142 employees who participate in
the LTI Plan including the executive officers shown in the table on page 5.
DESCRIPTION OF THE AMENDMENTS.
Under Section 162(m) of the Internal Revenue Code (the "Code"), publicly
held companies may not deduct compensation paid to certain executive officers in
excess of $1 million in any one year for each such officer. The Code provides an
exception for "performance-based" compensation. The purpose of the proposed
amendments is to qualify awards under the LTI Plan for the "performance-based"
exception to the Code as well as to increase the number of shares available for
awards. The amendments make the following substantive changes to the LTI Plan:
1. Article 2 is amended to state that the Compensation Committee consist of
two or more directors who qualify as "outside directors" as defined by
the Code and as exempt under Rule 16b-3 of the Securities and Exchange
Act.
2. Article 3 is amended to increase the number of Restricted Shares, Stock
Units and Stock Options available to be awarded under the LTI Plan from
1,199,182 (as adjusted for dilution under Article 10 of LTI Plan) to
3,000,000. As of 12-31-96 approximately 476,021 shares of the 1,199,182
authorized remain available for future awards.
3. Article 5.3 is amended to provide that the maximum number of common
shares awarded to any participant as stock options and/or stock
appreciation rights in any one year shall not exceed 150,000.
4. Article 11 is amended to provide for long term performance cash awards
based on the attainment of specified performance goals. Performance goals
for the Chief Executive Officer and the four other highest compensated
executives of the Company will be based on objective criteria
specifically defined by the Committee. The maximum amount that may be
paid to any participant in any year with respect to a long term
performance cash award is $1,500,000. In the event of a Change in Control
(as defined below), all cash awards would be immediately vested and
payable. A pro rata award would be made during a year in which a Change
of Control occurs.
NEW PLAN BENEFITS
Benefits payable under the LTI Plan will vary depending on the Company's
performance against selected business criteria. The following table describes
the benefits that would have been received under the amendments to the LTI Plan
had they been in effect during the last fiscal year. The cash payouts listed
were earned in the 1993-1995 performance period.
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<PAGE>
PACCAR INC 1991 LONG TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
SECURITIES LONG TERM
UNDERLYING INCENTIVE
NAME AND POSITION OPTIONS/SARS PAYOUTS
- ----------------------------------------------------------------- ------------- ------------
<S> <C> <C>
C. M. Pigott..................................................... 56,156 $ 506,250
Chairman
D. J. Hovind..................................................... 23,398 219,938
President
M. A. Tembreull.................................................. 21,271 141,075
Vice Chairman
M. C. Pigott..................................................... 21,271 90,000
Vice Chairman
T. E. Plimpton................................................... 5,956 70,875
Senior Vice President
All executive officers as a group................................ 149,566 1,260,380
All other employees (including officers who are not executive
officers) as a group............................................ 161,158 501,526
All non-executive directors as a group........................... 0 0
</TABLE>
Options granted in 1996 become fully exercisable January 1, 1999 and were
granted for a term of ten years subject to earlier termination upon termination
of employment. The closing trading price for Company common shares on March 5,
1997 was $71 5/8. The Company common shares trade on NASDAQ.
The text of the LTI Plan is set forth in Exhibit C to this Proxy Statement.
The following summary of the Plan's principal features does not purport to be
complete. It is subject to, and qualified in its entirety by, Exhibit C.
ADMINISTRATION. The LTI Plan is and will continue to be administered by the
Compensation Committee of the Board of Directors (the "Committee") who are
"outside directors" for purposes of Section 162(m) of the Internal Revenue Code
of 1986 and "nonemployee directors" under SEC Rule 16b-3. The Committee selects
the key employees who will receive awards, determines the amount, vesting
requirements and other conditions of each award, interprets the provisions of
the LTI Plan and makes all other decisions regarding the operation of the LTI
Plan. The Committee may adopt policies and procedures for the implementation of
the LTI Plan.
LIMITATION ON AWARDS. The total number of common stock authorized for
Restricted Shares, Stock Units and Options to be awarded as described below is
limited to 3,000,000 (subject to adjustment for dilution under Article 10 of LTI
Plan). If any Restricted Shares, Stock Units or Options are forfeited, or if
Options terminate for any other reason prior to exercise (other than exercise of
any related SAR), then they again become available for awards.
ELIGIBILITY. Persons eligible for awards under the LTI Plan consist of
managerial and key employees (including officers who are also Directors) of the
Company and its subsidiaries as determined by the Committee.
TYPES OF AWARDS AND TERMS. Awards under the LTI Plan may take the form of
Restricted Shares, Stock Units, Options, and cash. Options may include
Nonstatutory Stock Options ("NSOs") as well as Incentive Stock Options ("ISOs")
intended to qualify for special tax treatment. Both NSOs and ISOs may be granted
in combination with Stock Appreciation Rights ("SARs"), or SARs may be added to
outstanding NSOs at any time after the grant. Regular SARs are exercisable at
any time after the underlying NSO or ISO becomes exercisable, while Limited SARs
become exercisable only in the event of a Change in
13
<PAGE>
Control (as defined below) with respect to the Company. Any award under the LTI
Plan may include one of these elements or a combination of several elements. No
payment is required upon receipt of an award, except that the recipient of newly
issued Restricted Shares must pay the par value thereof to the Company.
In addition, long term performance awards granted under the LTI Plan may be
settled in stock issued under the LTI Plan.
When granting awards, the Committee establishes when the awards can be
exercised. Exercisability may be accelerated in the event of the participant's
death, disability or retirement or in the event of a Change in Control.
Moreover, the Committee may determine that outstanding options and SARs will
become fully exercisable if it has concluded that there is a reasonable
possibility of a Change in Control within six months.
STOCK OPTIONS. Each grant of an option shall be evidenced by a stock option
agreement specifying the number of shares and the exercise price. The maximum
number of shares awarded to any participant in any year shall not exceed
150,000. Stock options may be issued in the form of ISOs or NSOs. The exercise
price for an ISO must not be less than the fair market value of the common share
on the date of grant. The exercise price for an NSO must not be less than 85% of
the fair market value of a common share on the date of grant. No ISO may be
exercisable after ten years. Stock options are not transferrable except in the
case of the optionee's death.
The exercise price of an ISO or NSO may be paid in any lawful form permitted
by the Committee, including without limitation a promissory note or the
surrender of shares of common stock or Restricted Shares already owned by the
optionee.
RESTRICTED SHARES AND STOCK UNITS. Restricted Shares are shares of common
stock that are subject to forfeiture in the event that the applicable vesting
conditions are not satisfied; they are nontransferable prior to becoming
exercisable. Restricted Shares have the same voting and dividend rights as other
shares of common stock. A Stock Unit is an unfunded bookkeeping entry
representing the equivalent of one share of common stock; it is nontransferable
prior to the holder's death. A holder of Stock Units has no voting rights or
other privileges as a stockholder but is entitled to receive dividend
equivalents which may be converted into additional Stock Units or settled in the
form of cash, common stock or a combination of both.
When granting an award, the Committee determines the number of Stock Units
or Restricted Shares to be included in the award as well as the conditions
governing exercisability.
Stock Units, when vested, may be settled by distributing shares of common
stock or by a cash payment corresponding to the fair market value of an
equivalent number of shares of common stock, or a combination of both.
STOCK APPRECIATION RIGHTS. Under the LTI Plan, SARs may be granted in
tandem with any Options. An SAR permits the participant to elect to receive any
appreciation in the value of the optioned stock from the Company. The amount
payable on exercise of an SAR is measured by the difference between the market
value of the stock at exercise and the exercise price of the related option. The
optionee generally must recognize ordinary income on this amount and the Company
is entitled to a deduction.
Upon exercise of an SAR, the corresponding portion of the related Option
must be surrendered and cannot thereafter be exercised. Conversely, upon
exercise of an Option to which an SAR is attached, the SAR may no longer be
exercised to the extent that the corresponding Option has been exercised.
LONG TERM PERFORMANCE CASH AWARDS. The Committee may grant long term
performance cash awards to any participant. Payment of cash awards will be based
on the attainment of specified performance goals over a designated period in
excess of one year. Performance goals for the Chief Executive Officer, and the
four other highest compensated executives of the Company and such other senior
executives as designated
14
<PAGE>
by the Committee will be based on objective criteria specifically defined by the
Committee on a company, business unit or peer group comparison basis. These
performance measures may include or exclude specified items of an unusual or
nonrecurring nature and are based on one or more of the following: net income,
return on assets, return on sales, return on capital, return on equity, cash
flow, cost reduction, total shareholder return, economic value added, cash flow
return on investment and cash value added. The Committee may reduce or eliminate
any award otherwise earned but such reduction may not result in an increase in
the award payable to any other participant. The maximum amount that may be paid
to any participant in any year with respect to a long term performance cash
award is $1,500,000. Performance awards may be paid in cash or in shares or any
combination thereof. In the event of a Change in Control, all cash awards would
be immediately vested and payable. A pro rata award would be made during a year
in which a Change of Control occurs.
PROTECTION AGAINST DILUTION. In the event of a stock split, a stock
dividend, an extraordinary cash dividend, or similar occurrence, a corresponding
adjustment will be made in the number of shares covered by the LTI Plan, the
number referred to in an outstanding award, the exercise price of each
outstanding option, and the annual limit on the number of shares.
CHANGE IN CONTROL. For purposes of the LTI Plan, the term "Change of
Control" means (1) the acquisition by any person of beneficial ownership of at
least 20% of the then outstanding common shares or the combined voting power of
the Company's outstanding securities with certain specified exceptions, or (2) a
change in the composition of the Board of Directors as a result of which the
incumbent directors or their duly elected successors with certain specified
exceptions cease to constitute a majority of the Board, or (3) a merger,
consolidation or other business combination unless the Company's stockholders
prior thereto retain 80% of the stock in the resulting corporation and at least
a majority of the directors of the resulting corporation were members of the
Company's Board or (4) a complete liquidation or sale of substantially all the
Company's assets with certain specified exceptions (see LTI Plan
text--"Definitions").
AMENDMENT OR TERMINATION. The LTI Plan became effective on August 15, 1991
and remains in effect until it is discontinued by the Board of Directors. ISOs
may be granted under the LTI Plan only until December 9, 2006. The Board of
Directors may amend or terminate the LTI Plan at any time and for any reason.
Stockholder approval for plan amendments is needed only to the extent required
by applicable law, regulations, or rules.
FEDERAL INCOME TAX CONSEQUENCES
a. NON-QUALIFIED OPTIONS. Under the applicable provisions of the Internal
Revenue Code, no tax will be payable by the recipient of an option at the time
of grant. Upon exercise of a non-qualified option, the excess, if any, of the
fair market value of the shares with respect to which the option is exercised
over the total option price of such shares will be treated for federal tax
purposes as ordinary income. Any profit or loss realized on the sale or exchange
of any share actually received will be treated as a capital gain or loss. The
Company will be entitled to deduct the amount, if any, by which the fair market
value on the date of exercise of the shares with respect to which the option was
exercised exceeds the exercise price.
b. INCENTIVE STOCK OPTIONS. With respect to an Incentive Stock Option
(ISO), generally no taxable gain or loss will be recognized when the option is
exercised (if the appreciation rights election is not made). ISOs exercised more
than three months after termination of employment will be taxed in the same
manner as non-qualified stock options described above. Generally, upon exercise
of an ISO, the spread between the fair market value and the exercise price will
be an item of tax preference for purposes of the alternative minimum tax.
If the shares acquired upon the exercise of an ISO are held for at least one
year, any gain or loss realized upon their sale will be treated as long term
capital gain or loss. The Company will not be entitled to a deduction. If the
shares are not held for the one-year period, ordinary income will be recognized
in an amount equal to the difference between the amount realized on the sale and
the price paid for the shares
15
<PAGE>
to the extent the exercise price exceeded the grant price. Remaining gain, if
any, would be capital gain. The Company will be entitled to a deduction equal to
the amount of any ordinary income so recognized. If the shares are not held for
the one-year period and the amount realized upon sale is less than the grant
price, such difference will be a capital loss.
c. STOCK APPRECIATION RIGHTS. Upon the grant of an SAR, no taxable income
is realized by the holder and no deduction is available to the Company. Upon
exercise of an option through an SAR, the tax consequences to the holder and the
Company are the same as for exercise of a non-qualified stock option.
d. EXERCISE-SELL ELECTION. The federal income tax consequences resulting
from an exercise-sell election are the same as those resulting from making an
SAR election.
Approval of the amendments to the LTI Plan requires the affirmative vote of
a majority of the votes cast on this Item 3. If the "abstain" box on the proxy
is checked it will count as a vote against the proposal. Brokers who hold shares
in accounts for their clients who are not given instructions on how to vote on
this proposal may return the proxy unmarked on this Item 3 (a "broker nonvote").
Broker nonvotes will not be counted as shares voted on this Item 3, and
consequently will not be counted in determining whether this proposal passed.
Unless otherwise instructed, proxies signed by the shareholder which are
returned unmarked will be voted in favor of the proposal.
The Board recommends a vote FOR the amendments to the LTI Plan, as described
in Item 3.
ITEM 4. PROPOSAL TO APPROVE SENIOR EXECUTIVE INCENTIVE PLAN TO ALLOW THE
COMPANY TO PRESERVE TAX DEDUCTIONS FOR ANNUAL BONUS PAID TO CERTAIN
EXECUTIVES
The Board of Directors recommends to the shareholders the approval of the
Senior Executive Incentive Plan (the "SEI Plan"). This SEI Plan replaces the
existing annual bonus program ("Incentive Compensation") for those executives
eligible to participate. The SEI Plan is intended to operate in a similar manner
to the existing Incentive Bonus Plan except as required to comply with tax law.
The complete text of this SEI Plan is set forth as Exhibit D.
Section 162(m) of the Internal Revenue Code limits the amount of
compensation a company may deduct in any tax year for certain of the company's
highest paid executive officers to $1,000,000 unless certain performance based
criteria are satisfied. The purpose of this SEI Plan is to preserve for the
Company the tax deductibility of the annual incentive compensation bonus for all
executive officers. The SEI Plan promotes the success of the Company by focusing
senior executives on achieving high quality performance, company profitability
and growth.
The following summary of the SEI Plan's principal features does not purport
to be complete. It is subject to and qualified in its entirety by Exhibit D.
ELIGIBILITY. Those persons eligible for participation in the SEI Plan are
the Company's Chief Executive Officer and the other four highest compensated
executives of the Company as defined in Internal Revenue Code 162(m) and up to
four other senior executives as designated by the Compensation Committee.
ADMINISTRATION. The SEI Plan will be administered by the Compensation
Committee of the Board of Directors. The Committee shall have the authority to
interpret the SEI Plan and adopt such rules or guidelines as it deems
appropriate to administer the Plan. The Committee may in its sole discretion
reduce or limit any award otherwise earned based on an assessment of individual
performance but in no event will such reduction result in an increase of the
award payable to any other participant.
PLAN BENEFITS. Participants are eligible to earn incentive cash awards
based solely on the attainment of specified performance goals established by the
Committee during the first 90 days of the SEI Plan year. Performance goals will
be based on objective criteria specifically defined by the Committee on a
Company,
16
<PAGE>
business unit or peer group comparison basis which may include or exclude
specified items of an unusual and nonrecurring nature and are based on one or
more of the following: net income, return on assets, return on sales, return on
capital, return on equity, sales growth, market share, cash flow, cost
reduction, total shareholder return, economic value added, cash flow return on
investment and cash value added. Actual goal attainment would be certified in
writing by the Committee before the payout period. The maximum amount that may
be paid to any eligible participant in any year under the SEI Plan is
$1,500,000.
CHANGE OF CONTROL. In the event of a change of control, each participant
will be entitled to the maximum award opportunity prorated on the basis of the
number of full or partial months completed prior to the change of control during
the SEI Plan year in which the change of control occurs. (Change of control is
defined in Section 10(b) of the SEI Plan document.)
AMENDMENT OR TERMINATION. The Board of Directors may amend or terminate the
SEI Plan at any time. An amendment of the SEI Plan shall be subject to the
approval of the Company stockholders only to the extent required by applicable
law, regulations, or rules. No award shall be earned under the SEI Plan after
the SEI Plan is terminated.
EMPLOYMENT RIGHTS. No action taken pursuant to the SEI Plan shall be
evidence that the Company will employ any individual for any period of time in
any position or at any particular rate of compensation.
TERMINATION OF EMPLOYMENT. Participants who retire, resign or are
terminated before the end of the SEI Plan year are not eligible for an award for
that SEI Plan year. In the event of death or disability, payout will be prorated
based on the actual goal achievement and salary received for the portion of the
year worked.
EFFECTIVE DATE. The SEI Plan shall be effective as of January 1, 1997,
subject to approval of the Company stockholders at the 1997 annual meeting. No
awards will be paid under this SEI Plan unless such approval is granted.
NEW PLAN BENEFITS. Benefits payable under the SEI Plan will vary depending
on the Company's performance against selected business criteria. However, the
following table sets forth the dollar amounts which would have been received
under the SEI Plan had it been in effect during the Company's last fiscal year
and earned in 1995.
<TABLE>
<CAPTION>
AWARD UNDER
NAME AND POSITION ANNUAL BONUS PROGRAM
- --------------------------------------------------------------------------------- ---------------------
<S> <C>
C. M. Pigott.....................................................................
Chairman $ 667,388
D. J. Hovind.....................................................................
President $ 307,292
M. A. Tembreull..................................................................
Vice Chairman $ 228,000
M. C. Pigott.....................................................................
Vice Chairman $ 212,000
T. E. Plimpton...................................................................
Senior Vice President $ 109,613
All executive officers as a group................................................ $ 1,860,203
All employees (other than executive officers) as a group......................... NA
All non-executive directors as a group........................................... NA
</TABLE>
FEDERAL TAX CONSEQUENCES. Awards under the SEI Plan constitute ordinary
income taxable to a participant in the year in which paid. Subject to Section
162(m) of the Code and regulations thereunder, the Company generally will be
entitled to a corresponding deduction for the year to which bonuses under the
Plan relate.
17
<PAGE>
Approval of the SEI Plan requires the affirmative vote of a majority of the
votes cast on this Item 4. If the "abstain" box on the proxy is checked it will
count as a vote against the proposal. Brokers who hold shares in accounts for
their clients who are not given instructions on how to vote on this proposal may
return the proxy unmarked on this Item 4 (a "broker nonvote"). Broker nonvotes
will not be counted as shares voted on this Item 4, and consequently will not be
counted in determining whether this proposal passed. Unless otherwise
instructed, proxies signed by the shareholder which are returned unmarked will
be voted in favor of the proposal.
The Board of Directors recommends a vote FOR approval of the SEI Plan, as
described in Item 4.
SHAREOWNER RETURN PERFORMANCE PRESENTATION--Set forth below is a line graph
comparing the yearly percentage change in the cumulative total shareowner return
on the Company's common stock to the cumulative total return of the Standard &
Poor's Composite - 500 Stock Index and an equally-weighted simple average of the
Standard & Poor's Heavy-Duty Trucks & Parts and the Standard & Poor's Machinery
(Diversified) indices (as reported on the Bloomberg data service) for the period
of five fiscal years commencing December 31, 1991 and ending on December 31,
1996. Management believes that the blending of these two indices provides a
better comparison than either of the indices alone because the Company's
performance can be compared to a larger number of comparable companies. The
comparison assumes that $100 was invested on December 31, 1991 in the Company's
common stock and in the stated indices and assumes reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PACCAR INC S & P 500 S & P INDICES
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 120.72 107.43 117.76
1993 133.37 118.11 159.88
1994 118.31 119.62 146.80
1995 123.33 164.02 169.37
1996 206.41 197.25 206.16
</TABLE>
18
<PAGE>
COMPENSATION OF DIRECTORS
In 1996, each director who was not an employee was entitled to an annual
retainer of $35,000 and a fee of $5,000 for each Board or committee meeting
attended. A single meeting attendance fee is paid when more than one meeting is
held on the same day.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young has performed the audit of the Company's financial statements
for the year 1996 and has been selected to perform this function for 1997.
Partners from the Seattle office of Ernst & Young LLP are expected to be present
at the stockholders' meeting with the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
OTHER BUSINESS
The Company knows of no other matters likely to be brought before the
meeting. However, if other proposals are presented, proxies will be voted in
respect thereof in accordance with the judgment of the person or persons voting
such proxies.
/s/ J. M. D'Amato
J. M. D'Amato
SECRETARY
March 20, 1997
19
<PAGE>
DIRECTIONS TO MEYDENBAUER CENTER:
[LOGO]
From I-405 take the N.E. 4th Street Exit, head west.
Turn right on 112th Avenue N.E. (heading north),
Turn left on N.E. 6th Street (heading west).
Parking garage entrance is on N.E. 6th Street
<PAGE>
EXHIBIT A
(PROPOSED AMENDMENT)
FOURTH: The Corporation is authorized to issue 201,000,000 shares of stock
of all classes, consisting of 200,000,000 shares of common stock having a par
value of $1.00 per share and 1,000,000 shares of preferred stock having no par
value. Each holder of record of shares of common stock shall be entitled to one
vote for each share of stock outstanding in his name of record on the books of
the Corporation. The holders of shares of preferred stock shall have no vote
other than as may be provided by resolution of the Board of Directors. Other
than as here expressly provided, the Board of Directors of the Corporation is
expressly granted the authority to fix by resolution or resolutions, the voting
power, designations, preferences and relative participating optional or other
special rights and the qualifications, limitations or restrictions thereof in
respect of any class or classes of stock or any shares of any class of stock of
the Corporation to the full extent permitted by the General Corporation Law of
the State of Delaware.
A-1
<PAGE>
EXHIBIT B
(CURRENT ARTICLE)
FOURTH: The Corporation is authorized to issue 101,000,000 shares of stock
of all classes, consisting of 100,000,000 shares of common stock having a par
value of $12.00 per share and 1,000,000 shares of preferred stock having no par
value. Each holder of record of shares of common stock shall be entitled to one
vote for each share of stock outstanding in his name of record on the books of
the Corporation. The holders of shares of preferred stock shall have no vote
other than as may be provided by resolution of the Board of Directors. Other
than as here expressly provided, the Board of Directors of the Corporation is
expressly granted the authority to fix by resolution or resolutions, the voting
power, designations, preference and relative participating optional or other
special rights and the qualifications, limitations or restrictions thereof in
respect of any class or classes of stock or any shares of any class of stock of
the Corporation to the full extent permitted by the General Corporation Law of
the State of Delaware.
B-1
<PAGE>
EXHIBIT C
PACCAR INC 1991 LONG TERM INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on February 11, 1991 and approved by the
Company's stockholders at the 1991 annual meeting of stockholders. The purpose
of the Plan is to promote the long term success of the Company and the creation
of stockholder value by (a) encouraging Key Employees to focus on critical long
range objectives, (b) encouraging the attraction and retention of Key Employees
with exceptional qualifications, and (c) linking Key Employees directly to
stockholder interests through increased stock ownership. The Plan seeks to
achieve this purpose by providing for Awards in the form of Restricted Shares,
Stock Units, Options (which may constitute incentive stock options or
nonstatutory stock options), stock appreciation rights, or cash. The Plan shall
be governed by and construed in accordance with the laws of the State of
Washington.
ARTICLE 2. ADMINISTRATION.
2.1 The Plan shall be administered by the Committee. The Committee shall
consist exclusively of two or more directors of the Company, who shall be
appointed by the Board. In addition, the composition of the Committee shall
satisfy:
(a) Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (as amended from time to time) under the Exchange
Act; and
(b) Such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code.
2.2 COMMITTEE RESPONSIBILITIES. The Committee shall (a) select the Key
Employees who are to receive Awards under the Plan, (b) determine the type,
number, vesting requirements, and other conditions of such Awards, (c) interpret
the Plan, and (d) make all other decisions relating to the operation of the
Plan. The Committee may adopt such rules or guidelines as it deems appropriate
to implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
Any Common Shares issued pursuant to the Plan may be authorized but unissued
shares or treasury shares. The aggregate number of Restricted Shares, Stock
Units and Options awarded under the Plan shall not exceed 3.0 million. If any
Restricted Shares, Stock Units, or Options are forfeited or if any Options
terminate for any other reason before being exercised, then such Restricted
Shares, Stock Units or Options shall again become available for Awards under the
Plan. If any Options under the 1981 Long Term Incentive Plan (the "Prior Plan")
are forfeited or terminated for any other reason before being exercised, then
such options shall become available for additional Awards under this Plan.
However, if Options are surrendered upon the exercise of related SARs, then such
Options shall not be restored to the pool available for Awards. Any dividend
equivalents distributed under the Plan shall not be applied against the number
of Restricted Shares, Stock Units, or Options available for Awards, whether or
not such dividend equivalents are converted into Stock Units. The limitation of
this Article 3 shall be subject to adjustment pursuant to Article 10.
ARTICLE 4. ELIGIBILITY.
Only Key Employees shall be eligible for designation as Participants. A Key
Employee who owns more than 10% of the total combined voting power of all
classes of outstanding stock of the Company or any of
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<PAGE>
its Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in section 422(c)(6) of the Code are satisfied.
ARTICLE 5. OPTIONS.
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The Stock
Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical.
5.2 AWARDS NONTRANSFERABLE. No Option granted under the Plan shall be
transferable by the Optionee other than by will, by a beneficiary designation
executed by the Optionee and delivered to the Company, or by the laws of descent
and distribution. An Option may be exercised during the lifetime of the Optionee
only by him or her or by his or her guardian or legal representative. No Option
or interest therein may be transferred, assigned, pledged, or hypothecated by
the Optionee during his or her lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process.
5.3 NUMBER OF SHARES. Each Stock Option Agreement shall specify the number
of Common Shares subject to the Option provided that the maximum number of
Common Shares awarded to any participant in any year shall be 150,000. The Stock
Option Agreement shall provide for the adjustment of such number including the
maximum number in accordance with Article 10.
5.4 EXERCISE PRICE. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price under an ISO shall not be less than 100% of the Fair
Market Value of a Common Share on the date of grant, and the Exercise Price
under an NSO shall not be less than 85% of the average closing price of a Common
Share for the five (5) trading days of the week immediately preceding the week
during which the Committee meeting is held at which the grant is made.
5.5 EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed 10 years from the date of grant. A
Stock Option Agreement may provide for accelerated exercisability in the event
of the Optionee's death, disability or retirement and may provide for expiration
prior to the end of its term in the event of the termination of the Optionee's
service. NSOs may also be awarded in combination with Restricted Shares or Stock
Units, and such an Award may provide that the NSOs will not be exercisable
unless the related Restricted Shares or Stock Units are forfeited.
5.6 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the time
of granting an Option or thereafter, that such Option (and any SARs included
therein) shall become fully exercisable as to all Common Shares subject to such
Option in the event that a Change in Control occurs with respect to the Company.
If the Committee finds that there is a reasonable possibility that, within the
next six months, a Change in Control will occur with respect to the Company,
then the Committee may determine that all outstanding Options (and any SARs
included therein) shall become fully exercisable as to all Common Shares subject
to such Options.
5.7 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding Options or may
accept the cancellation of outstanding Options (whether granted by the Company
or by another issuer) in return for the grant of new Options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
C-2
<PAGE>
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash at the time when such Common Shares
are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall be made
only pursuant to the express provisions of the applicable Stock Option
Agreement. The Stock Option Agreement may specify that payment may be made
in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time accept payment
in any form(s) described in this Article 6.
6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is applicable,
payment for all or any part of the Exercise Price may be made with Common Shares
which have already been owned by the Optionee for more than six months. Such
Common Shares shall be valued at their Fair Market Value on the date when the
new Common Shares are purchased under the Plan.
6.3 EXERCISE/SALE. To the extent that this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
6.4 EXERCISE/PLEDGE. To the extent that this Section 6.4 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Common Shares to a securities broker or lender
approved by the Company, as security for a loan, and to deliver all or part of
the loan proceeds to the Company in payment of all or part of the Exercise Price
and any withholding taxes.
6.5 PROMISSORY NOTE. To the extent that this Section 6.5 is applicable,
payment for all or any part of the Exercise Price may be made with a
full-recourse promissory note; provided that the par value of newly issued
Common Shares must be paid in lawful money of the U.S. at the time when such
Common Shares are purchased.
6.6 OTHER FORMS OF PAYMENT. To the extent that this Section 6.6 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations, and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 GRANT OF SARS. Each Option granted under the Plan may include an SAR.
Such SAR shall entitle the Optionee (or any person having the right to exercise
the Option after the Optionee's death) to surrender to the Company, unexercised,
all or any part of that portion of the Option which then is exercisable and to
receive from the Company Common Shares or cash, or a combination of Common
Shares and cash, as the Committee shall determine. If an SAR is exercised, the
number of Common Shares remaining subject to the related Option shall be reduced
accordingly, and vice versa. The amount of cash and/or the Fair Market Value of
Common Shares received upon exercise of an SAR shall, in the aggregate, be equal
to the amount by which the Fair Market Value (on the date of surrender) of the
Common Shares subject to the surrendered portion of the Option exceeds the
Exercise Price. In no event shall any SAR be exercised if such Fair Market Value
does not exceed the Exercise Price. An SAR may be included in an ISO only at the
time of grant but may be included in an NSO at the time of grant or at any
subsequent time.
7.2 EXERCISE OF SARS. An SAR may be exercised to the extent that the
Option in which it is included is exercisable, subject to any restrictions
imposed by Rule 16b-3 (as amended from time to time) under the Exchange Act. If,
on the date when an Option expires, the Exercise Price under such Option is less
than the Fair Market Value on such date but any portion of such Option has not
been exercised or surrendered, then any SAR included in such Option shall
automatically be deemed to be exercised as of such date with
C-3
<PAGE>
respect to such portion. An Option granted under the Plan may provide that it
will be exercisable as an SAR only in the event of a Change in Control.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS.
8.1 TIME, AMOUNT, AND FORM OF AWARDS. Restricted Shares or Stock Units
with respect to an Award Year may be granted during such Award Year or at any
time thereafter. Awards under the Plan may be granted in the form of Restricted
Shares, in the form of Stock Units, or in any combination of both. Restricted
Shares or Stock Units may also be awarded in combination with NSOs, and such an
Award may provide that the Restricted Shares or Stock Units will be forfeited in
the event that the related NSOs are exercised.
8.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in the form
of newly issued Restricted Shares, the Award recipient shall be required to pay
the Company in lawful money of the U.S. an amount equal to the par value of such
Restricted Shares. To the extent that an Award is granted in the form of Stock
Units or treasury shares, no cash consideration shall be required of Award
recipients.
8.3 VESTING CONDITIONS. Each Award of Restricted Shares or Stock Units
shall become vested, in full or in installments, upon satisfaction of the
conditions specified in the Stock Award Agreement. A Stock Award Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability, or retirement. The Committee may determine, at the time of making an
Award or thereafter, that such Award shall become fully vested in the event that
a Change in Control occurs with respect to the Company.
8.4 FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested Stock
Units may be made in the form of cash, in the form of Common Shares, or in any
combination of both. Methods of converting Stock Units into cash may include
(without limitation) a method based on the average Fair Market Value of Common
Shares over a series of trading days. Vested Stock Units may be settled in a
lump sum or in installments. The distribution may occur or commence when all
vesting conditions applicable to the Stock Units have been satisfied or have
lapsed, or it may be deferred to any later date. The amount of a deferred
distribution may be increased by an interest factor or by dividend equivalents.
Until an Award of Stock Units is settled, the number of such Stock Units shall
be subject to adjustment pursuant to Article 10.
8.5 DEATH OF RECIPIENT. Any Stock Units Award that becomes payable after
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
8.6 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights other
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
ARTICLE 9. VOTING AND DIVIDEND RIGHTS.
9.1 RESTRICTED SHARES. The holders of Restricted Shares awarded under the
Plan shall have the same voting, dividend, and other rights as the Company's
other stockholders. A Stock Award Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid. Such additional Restricted Shares shall not reduce the
number of Common Shares available under Article 3.
9.2 STOCK UNITS. The holders of Stock Units shall have no voting rights.
Prior to settlement or forfeiture, any Stock Unit awarded under the Plan shall
carry with it a right to dividend equivalents. Such
C-4
<PAGE>
right entitles the holder to be credited with an amount equal to all cash
dividends paid on one Common Share while the Stock Unit is outstanding. Dividend
equivalents may be converted into additional Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Common Shares, or in
a combination of both. Prior to distribution, any dividend equivalents which are
not paid shall be subject to the same conditions and restrictions as the Stock
Units to which they attach.
ARTICLE 10. PROTECTION AGAINST DILUTION.
10.1 ADJUSTMENTS. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spinoff or a similar occurrence,
the Committee shall make appropriate adjustments in one or more of (a) the
number of Common Shares authorized, Options, Restricted Shares, and Stock Units
available for future Awards under Article 3, (b) the number of Stock Units
included in any prior Award which has not yet been settled, (c) the number of
Common Shares covered by each outstanding Option, (d) the Exercise Price under
each outstanding Option, or (e) the annual limit on the number of shares under
Article 5.3. Except as provided in this Article 10, a Participant shall have no
rights by reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
10.2 REORGANIZATIONS. In the event that the Company is a party to a merger
or other reorganization, outstanding Options, Restricted Shares, and Stock Units
shall be subject to the agreement of merger or reorganization. Such agreement
may provide, without limitation, for the assumption of outstanding Awards by the
surviving corporation or its parent, for their continuation by the Company (if
the Company is a surviving corporation), for accelerated vesting, or for
settlement in cash.
ARTICLE 11. LONG TERM PERFORMANCE AWARDS.
11.1 The Committee may grant long term performance cash awards to any
Participant in its sole discretion. Payment of cash awards will be based on the
attainment of specified performance goals over a designated performance period
in excess of one year. Performance goals for the Chief Executive Officer, the
other four highest compensated officers of the Company and such other senior
executives as designated by the Committee will be based on objective criteria
specifically defined by the Committee on a Company, business unit or peer group
comparison basis, which may include or exclude specified items of an unusual or
nonrecurring nature and are based on one or more of the following: net income,
return on assets, return on sales, return on capital, return on equity, cash
flow, cost reduction, total shareholder return, economic value added, cash flow
return on investment, and cash value added.
11.2 The Committee, in its sole discretion, may reduce or eliminate any
award otherwise earned based on an assessment of individual performance, but in
no event may any such reduction result in an increase of the award payable to
any other participant. The Committee shall determine the amount of any such
reduction by taking into account such factors as it deems relevant including,
without limitation: (i) performance against other financial or strategic
objectives; (ii) its subjective assessment of the executive's overall
performance for the year; and (iii) prevailing levels of total compensation
among similar companies. The maximum amount that may be paid to any eligible
Participant in any year with respect to a long term performance cash award is
$1,500,000.
11.3 In the event of a Change of Control of the Company, each participant
will be entitled to the maximum prorated award based on the number of full or
partial months completed prior to the Change of Control during the performance
period in which the Change of Control occurs.
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<PAGE>
11.4 The Company may grant long term performance awards under other plans
or programs consistent with the limitations described in Article 11. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall reduce the number of Common Shares
available under Article 3.
ARTICLE 12. LIMITATION ON RIGHTS.
12.1 EMPLOYMENT RIGHTS. Neither the Plan nor any Option granted under the
Plan shall be deemed to give any individual a right to remain an employee of the
Company or a Subsidiary. The Company and its Subsidiaries reserve the right to
terminate the service of any employee at any time, with or without cause,
subject only to a written employment agreement (if any).
12.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend rights,
voting rights, or other rights as a stockholder with respect to any Common
Shares covered by his or her Award prior to the issuance of a stock certificate
for such Common Shares, except as expressly provided in Section 9.1. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date when such certificate is issued, except as expressly
provided in Articles 8, 9, and 10.
12.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations, and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing,
or to an exemption from registration, qualification or listing.
ARTICLE 13. LIMITATION ON PAYMENTS.
13.1 BASIC RULE. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer by
the Company to or for the benefit of a Key Employee, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Plan or otherwise (a
"Payment"), would be nondeductible by the Company for federal income tax
purposes because of the provisions concerning "excess parachute payments" in
section 280G of the Code, then the aggregate present value of all Payments shall
be reduced (but not below zero) to the Reduced Amount (as defined below);
provided that the Committee, at the time of making an Award under this Plan or
at any time thereafter, may specify in writing that such Award shall not be so
reduced and shall not be subject to this Article 13. For purposes of this
Article 13, the "Reduced Amount" shall be the amount, expressed as a present
value, which maximizes the aggregate present value of the Payments without
causing any Payment to be nondeductible by the Company because of section 280G
of the Code.
13.2 REDUCTION OF PAYMENTS. If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Key Employee notice to that effect and a
copy of the detailed calculation thereof and of the Reduced Amount, and the Key
Employee may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Key Employee within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the Key
Employee promptly of such election. For purposes of this Article 13, present
value shall be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 13 shall be binding upon
the Company and the Key Employee and shall be made within
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60 days of the date when a payment becomes payable or transferable. As promptly
as practicable following such determination and the elections hereunder, the
Company shall pay or transfer to or for the benefit of the Key Employee such
amounts as are then due to him or her under the Plan and shall promptly pay or
transfer to or for the benefit of the Key Employee in the future such amounts as
become due to him or her under the Plan.
13.3 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Key Employee which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Key Employee which he or she shall repay to
the Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Key Employee to the Company if and to the extent that such
payment would not reduce the amount which is subject to taxation under section
4999 of the Code. In the event that the Auditors determine that an Underpayment
has occurred, such Underpayment shall promptly be paid or transferred by the
Company to or for the benefit of the Key Employee, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.
13.4 RELATED CORPORATIONS. For purposes of this Article 13, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 14. WITHHOLDING TAXES.
14.1 GENERAL. To the extent required by applicable federal, state, local,
or foreign law, the recipient of any payment or distribution under the Plan
shall make arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise by reason of the receipt or vesting of
such payment or distribution. The Company shall not be required to issue any
Common Shares or make any cash payment under the Plan until such obligations are
satisfied.
14.2 SHARE WITHHOLDING. The Committee may permit the recipient of any
payment or distribution under the Plan to satisfy all or part of his or her
withholding or income tax obligations by having the Company withhold a portion
of any Common Shares that otherwise would be issued to him or her or by
surrendering a portion of any Common Shares that previously were issued to him
or her. Such Common Shares shall be valued at their Fair Market Value on the
date when taxes otherwise would be withheld in cash. Any payment of taxes by
assigning Common Shares to the Company may be subject to restrictions, including
any restrictions required by rules of the Securities and Exchange Commission.
ARTICLE 15. ASSIGNMENT OR TRANSFER OF AWARDS.
Except as provided in Article 14, any Award granted under the Plan shall not
be anticipated, assigned, attached, garnished, optioned, transferred, or made
subject to any creditor's process, whether voluntarily, involuntarily, or by
operation of law. Any act in violation of this Article 15 shall be void.
However, this Article 15 shall not preclude a Participant from designating a
beneficiary who will receive any undistributed Awards in the event of the
Participant's death, nor shall it preclude a transfer by will or by the laws of
descent and distribution. In addition, neither this Article 15 nor any other
provision of the Plan shall preclude a Participant from transferring or
assigning Restricted Shares or Stock Units to (a) the trustee of a trust that is
revocable by such Participant alone, both at the time of the transfer or
assignment and at all times thereafter prior to such Participant's death, or (b)
the trustee of any other trust to the extent
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approved in advance by the Committee in writing. A transfer or assignment of
Restricted Shares or Stock Units from such trustee to any person other than such
Participant shall be permitted only to the extent approved in advance by the
Committee in writing, and Restricted Shares or Stock Units held by such trustee
shall be subject to all of the conditions and restrictions set forth in the Plan
and in the applicable Stock Award Agreement, as if such trustee were a party to
such Agreement.
ARTICLE 16. FUTURE OF THE PLAN.
16.1 TERM OF THE PLAN. The Plan shall remain in effect until it is
terminated under Section 16.2, except that no ISOs shall be granted after
December 9, 2006.
16.2 AMENDMENT OR TERMINATION. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's stockholders only to the extent required by
applicable laws, regulations, or rules. No Awards shall be granted under the
Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Option previously granted under the
Plan.
ARTICLE 17. DEFINITIONS.
17.1 "AWARD" means any award of an Option (with or without a related SAR),
a Restricted Share, a Stock Unit or a long term performance cash award under the
Plan.
17.2 "AWARD YEAR" means a fiscal year with respect to which an Award may be
granted.
17.3 "BOARD" means the Company's Board of Directors, as constituted from
time to time.
17.4 "CHANGE IN CONTROL" means the occurrence of any of the following
events:
(a) The acquisition by any individual, entity or group (within the
meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding Common
Shares (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, (iv) any acquisition
by Theiline McCone and her natural children (the "Immediate Pigott Family"),
any trust or foundation to which any of the foregoing has transferred or may
transfer securities of the Company, the trusts at Seattle-First National
Bank holding outstanding Common Shares for descendants of Paul Pigott and
Theiline McCone, any trust established for the primary benefit of any member
of the Immediate Pigott Family or any of their respective heirs or legatees,
any trust of which any member of the Immediate Pigott Family serves as a
trustee (or any affiliate or associate (within the meaning of Rule 12b-2
promulgated under the Exchange Act) of any of the foregoing) (the "Exempted
Interests"), or (v) any acquisition by any corporation pursuant to a
transaction described in Clauses (i), (ii) and (iii) of Subsection (c)
below;
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors
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or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board;
(c) Approval by the stockholders of the Company of a reorganization,
merger, share exchange, or consolidation (a "Business Combination"), in each
case unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the outstanding company common stock and outstanding
company voting securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 80% of, respectively,
the then outstanding Common Shares and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as
a result of such transaction owns the Company through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the outstanding company
common stock and outstanding company voting securities, as the case may be,
(ii) no Person (excluding (A) any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business Combination
or (B) the Exempted Interests) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation with respect to which, following such sale or other
disposition, (A) more than 80% of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the outstanding company
common stock and outstanding company voting securities immediately prior to
such sale or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) less than 20% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by any Person (excluding (I) any employee benefit plan (or
related trust) of the Company or such corporation or (II) the Exempted
Interests), except to the extent that such Person owned 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities
prior to the sale or disposition, and (C) at least a majority of the members
of the board of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such sale or other disposition of assets
of the Company or were elected, appointed or nominated by the Board.
17.5 "CODE" means the Internal Revenue Code of 1986, as amended.
17.6 "COMMITTEE" means the Compensation Committee of the Board, as
described in Article 2.
17.7 "COMMON SHARE" means one share of the common stock of the Company.
17.8 "COMPANY" means PACCAR Inc, a Delaware corporation.
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17.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
17.10 "EXERCISE PRICE" means the amount for which one Common Share may be
purchased upon exercise of an Option, as specified in the applicable Stock
Option Agreement.
17.11 "FAIR MARKET VALUE" shall mean the closing price of a Common Share on
the trading day immediately preceding the day in question.
17.12 "ISO" means an incentive stock option described in section 422(b) of
the Code.
17.13 "KEY EMPLOYEE" means a key common law employee of the Company or of a
Subsidiary, as determined by the Committee.
17.14 "NSO" means an employee stock option not described in sections 422
through 424 of the Code.
17.15 "OPTION" means an ISO or NSO granted under the Plan and entitling the
holder to purchase one Common Share.
17.16 "OPTIONEE" means an individual or estate who holds an Option.
17.17 "PARTICIPANT" means an individual or estate who holds an Award.
17.18 "PLAN" means this PACCAR Inc 1991 Long Term Incentive Plan, as it may
be amended from time to time.
17.19 "RESTRICTED SHARE" means a Common Share awarded under the Plan.
17.20 "SAR" means a stock appreciation right granted under the Plan.
17.21 "STOCK AWARD AGREEMENT" means the agreement between the Company and
the recipient of a Restricted Share or Stock Unit which contains the terms,
conditions, and restrictions pertaining to such Restricted Share or Stock Unit.
17.22 "STOCK OPTION AGREEMENT" means the agreement between the Company and
an Optionee which contains the terms, conditions, and restrictions pertaining to
his or her Option.
17.23 "STOCK UNIT" means a bookkeeping entry representing the equivalent of
one Common Share awarded under the Plan.
17.24 "SUBSIDIARY" means any corporation, if the Company and/or one or more
other Subsidiaries own not less than 50% of the total combined voting power of
all classes of outstanding stock of such corporation. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
ARTICLE 18. EXECUTION.
To record the amendment and restatement of the Plan by the Board, the
Company has caused its duly authorized officer to affix the corporate name and
seal hereto.
PACCAR Inc
By: Mark C. Pigott
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
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EXHIBIT D
PACCAR INC
SENIOR EXECUTIVE INCENTIVE PLAN
1. PURPOSE
The purpose of the Senior Executive Incentive Plan is to promote the success
of the Company and the creation of shareholder value by (a) encouraging senior
executives to focus maximum effort on achieving high-quality performance
objectives, Company profitability, and continued Company growth, (b) encouraging
the attraction and retention of senior executives with exceptional
qualifications and (c) preserving for the Company the benefit of federal income
tax deductions with respect to annual incentive compensation paid to senior
executives.
2. ELIGIBILITY
The Company's chief executive officer, the other four highest compensated
officers of the Company as defined under Section 162(m) of the Code, and up to
four other senior executives as designated by the Committee shall be eligible to
participate in the Plan.
3. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the Board.
The Committee shall consist exclusively of two or more directors of the Company,
who shall be appointed by the Board. In addition, the composition of the
Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code.
The Committee shall have the authority to interpret the Plan and make all
other decisions relating to the operations of the Plan. The Committee may adopt
such rules or guidelines as it deems appropriate to administer the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.
4. AWARD DETERMINATION
Incentive cash awards paid under the Plan will be based solely on the
attainment of specified performance goals established by the Committee during
the first 90 days of the Plan Year. Performance goals will be based on objective
criteria specifically defined by the Committee on a Company, business unit or
peer group comparison basis, which may include or exclude specified items of an
unusual or non-recurring nature and are based on one or more of the following:
net income, return on assets, return on sales, return on capital, return on
equity, sales growth, market share, cash flow, cost reduction, total shareholder
return, economic value added, cash flow return on investment and cash value
added. Performance goals may include a minimum, maximum and target level of
performance with the size of individual awards, if any, based on the level
attained. Actual goal attainment will be certified in writing by the Committee
before payout.
The Committee, in its sole discretion, may reduce or eliminate any award
otherwise earned based on an assessment of individual performance, but in no
event may any such reduction result in an increase of the award payable to any
other participant. The Committee shall determine the amount of any such
reduction by taking into account such factors as it deems relevant including,
without limitation:
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(i) performance against other financial or strategic objectives; (ii) its
subjective assessment of the executives overall performance for the year; and
(iii) prevailing levels of total compensation among similar companies. The
maximum amount that may be paid to any eligible participant in any year under
the Plan is $1,500,000.
5. CHANGE OF CONTROL
In the event of a Change of Control of the Company, each participant will be
entitled to the maximum prorated award based on the number of full or partial
months completed prior to the Change of Control during the Plan Year in which
the Change of Control occurs.
6. TERMINATION OF EMPLOYMENT
Participants who retire, resign or are terminated before the end of the Plan
Year are not eligible for an award for that Plan Year. In the event of death or
disability, payout will be prorated based on actual goal achievement and salary
received for the portion of the year worked.
7. EMPLOYMENT RIGHTS
Neither the Plan, nor the payment of an award, nor any other action taken
pursuant to the Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company or a Subsidiary will employ
any individual for any period of time, in any position or at any particular rate
of compensation.
8. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may alter, amend or terminate the Plan at any time.
An amendment of the Plan shall be subject to the approval of the Company's
stockholders only to the extent required by applicable laws, regulations or
rules. No awards shall be granted under the Plan after the termination thereof.
9. EFFECTIVE DATE
The Plan shall be effective as of January 1, 1997 subject to its approval by
the Company's stockholders at the 1997 Annual Meeting of Stockholders. No awards
will be paid under this Plan unless such approval is granted.
10. DEFINITIONS
(a) "BOARD" means the Board of Directors of the Company, as constituted from
time to time.
(b) "CHANGE OF CONTROL" for purposes of this Plan means any of the events
described in Section 17.4 of the 1991 Long Term Incentive Plan.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means the Compensation Committee of the Board.
(e) "COMPANY" means PACCAR Inc, a Delaware Corporation.
(f) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(g) "PLAN" means the PACCAR Inc Senior Executive Incentive Plan, as it may
be amended from time to time.
(h) "PLAN YEAR" means a calendar year.
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(i) "SUBSIDIARY" means a corporation in which the Company and/or one or more
Subsidiaries of the Company own a majority of all classes of outstanding stock.
11. EXECUTION
To record the adoption of the Plan by the Board, the Company has caused its
duly authorized officer to affix the corporate name and seal hereto.
<TABLE>
<S> <C> <C>
PACCAR Inc
-------------------------------------------
By: Mark C. Pigott
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
</TABLE>
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PACCAR INC
777 - 106TH AVENUE N.E., BELLEVUE, WASHINGTON 98004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS APRIL 29, 1997
The undersigned hereby appoints Mark C. Pigott and John W. Pitts as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of PACCAR Inc held of record by the undersigned on March 5, 1997, at
the annual meeting of stockholders to be held on April 29, 1997, or any
adjournment thereof.
Election of three Class II Directors to serve three-year terms ending in 2000:
Harold J. Haynes, James C. Pigott, Mark C. Pigott
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE DESIGNATED
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
--------------------
SEE REVERSE
SIDE
--------------------
<PAGE>
/ / Please mark your
votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If properly signed and no direction is
made, this proxy will be voted FOR Items 1, 2, 3 and 4.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of / / / / 2. Amendment of / / / / / / 3. Amendment of 1991 / / / / / /
Directors Certificate of Long Term Incentive
(see reverse) Incorporation to Plan
increase authorized
FOR, except vote withheld from capitalization and
the following nominee(s): to decrease par
value
- ------------------------------
FOR AGAINST ABSTAIN
4. Approval of Senior / / / / / / 5. In their discretion, Proxies are
Executive Incentive authorized to vote upon such other
Plan matters as may properly come before
the meeting.
Please sign exactly as name appears in type. When shares are held by joint owners,
both should sign. When acting as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign full
corporate name by President or other authorized officer. If a partnership, please
sign partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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SIGNATURE(S) DATE
</TABLE>
