Special Rules Regarding ISOs. Notwithstanding any provision of the Plan to the contrary, an Option granted in the form of an ISO to a Participant shall be subject to the following rules. An ISO may be granted solely to eligible Employees of the Company, a parent corporation, or a subsidiary, as defined in Code Section 422. An Award Agreement evidencing the grant of an ISO shall specify that such grant is intended to be an ISO. The Option Price for each grant of an ISO must be at least equal to 100% of the Fair Market Value of a Share as of the ISO’s Grant Date (in the case of 10% owners, within the meaning of Code Section 422, the Option Price may not be not less than 110% of such Fair Market Value), subject to adjustment provided for under Section 4.5. Any ISO granted to a Participant shall be exercisable during his or her lifetime solely by such Participant. The period during which a Participant may exercise an ISO shall not exceed ten years (five years in the case of a Participant who is a 10% owner within the meaning of Code Section 422) from its Grant Date. To the extent that the aggregate Fair Market Value of # the Shares with respect to which Options are designated as ISOs plus # the shares of stock of the Company, parent corporation and subsidiary with respect to which other ISOs are exercisable for the first time by a holder of such ISOs during any calendar year under all plans of the Company, any parent corporation, and any subsidiary exceeds $100,000, such Options shall be treated as Nonqualified Stock Options. For purposes of the preceding sentence, # Options shall be taken into account in the order in which they were granted, and # the Fair Market Value of the Shares shall be determined as of the time the Option or other ISO is granted. No more than 100,000,000 Shares shall be available under this Plan for delivery with respect to ISOs. No ISO may be granted more than ten years after the earlier of # adoption of this Plan by the Board and # the Effective Date. No ISO may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; provided, however, that at the discretion of the Committee, an ISO may be transferred to a grantor trust under which the Participant making the transfer is the sole beneficiary.

Special Rules Regarding ISOs. Notwithstanding any provision of the Plan to the contrary, an ISO granted to a Participant shall be subject to the following rules:

If a Member other than a five-percent owner of PACCAR stock (as defined in [section 416] of the IRC and taking into account any modifications under [section 401(a)(9)] of the IRC) is still an Employee as of the April 1 following the calendar year in which he attains age 70 1⁄2, in addition to the in-service withdrawal options available under Article 10, he may elect (in the manner specified under the Company’s administrative procedures) to receive or commence payment of his Benefit in the form described in Subsection # below. If he does not so elect, payment shall be deferred to the date he ceases to be an Employee, in which case his Benefit shall be paid or commence as soon as reasonably practicable thereafter, but not later than April 1 of the calendar year following the calendar year in which he ceases to be an Employee.

Special Rules. In the case of a Participant other than an Employee (or in the case of an Employee where the next payroll payment is not sufficient to satisfy such tax obligations, with respect to any remaining tax obligations), in the absence of any other arrangement and to the extent permitted under Applicable Law, the Participant shall be deemed to have elected to have the Company withhold from the Shares or cash to be issued pursuant to an Award that number of Shares having a Fair Market Value determined as of the applicable Tax Date (as defined below) or cash equal to the amount required to be withheld. For purposes of this Section 11, the Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined under the Applicable Law (the “Tax Date”).

Special Rules Unless the Participant has otherwise specified in the Participant’s Beneficiary designation, the following rules shall apply:

Special Rules. Notwithstanding anything herein to the contrary, the Administrator may adopt special rules applicable to the employees of a particular Designated Subsidiary, whenever the Administrator determines that such rules are necessary or appropriate for the implementation of the Plan in a jurisdiction where such Designated Subsidiary has employees; provided that such rules are consistent with the requirements of Section 423(b) of the U.S. Code. Any special rules established pursuant to this Section 13 shall, to the extent possible, result in the employees subject to such rules having substantially the same rights as other Participants in the Plan.

Special Election Rules. The Committee may permit # Participants to elect to have their Accounts allocated among available Reference Investment Funds in increments greater or lesser than 5 percent, # more options of Reference Investment Funds, # other election filing dates, and/or # any other variations as it considers proper, under regulations adopted by the Committee and published to Participants.

ISOs. The terms and conditions of ISOs granted hereunder shall be subject to the provisions of Section 422 of the Code and the terms, conditions, limitations and administrative procedures established by the Administrator from time to time in accordance with the Plan. At the discretion of the Administrator, ISOs may be granted only to an employee of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or a Subsidiary of the Company.

For purposes of the preceding paragraphs, the Company has elected to determine the compensation of an officer or One Percent Owner in accordance with [section 1.415(c)-2(d)(4)])] of the Treasury Regulations (i.e., W-2 wages plus amounts that would be includible in wages except for an election under section 125(a) of the Code (regarding cafeteria plan elections) under section 132(f) of the Code (regarding qualified transportation fringe benefits) or section 402(e)(3) of the Code (regarding [section 401(k)] plan deferrals)) without regard to the special timing rules and special rules set forth, respectively, in [sections 1.415(c)-2(e) and 2(g)])])] of the Treasury Regulations.

Special Rules Concerning the Self-Directed Brokerage Account. Notwithstanding any provision of the Plan to the contrary, # a Participant may not elect to invest in the self-directed brokerage account more than 20% of the aggregate contributions newly made for his or her benefit and # a Participant may not transfer any portion of the Participant’s existing Account from investment in funds other than the self-directed brokerage account to investment in the self-directed brokerage account if such transfer would cause more than 20% of the Participant’s existing Account to be invested in the self-directed brokerage account. Any transfer to the self-directed brokerage account shall be in an amount that is no less than $500 (for the avoidance of doubt, such $500 minimum investment shall not apply to new contributions directly invested in the self-directed brokerage account). Notwithstanding the foregoing, new contributions may be directly invested in the self-directed brokerage account only following the Participant’s establishment of the account and transfer to the account from other investment funds of an investment of no less than $500.