11.	SHARE BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS :

Employee Stock Purchase Plan

The Company’s

2004

Employee Stock Purchase Plan, as amended and restated (the “Employee Stock Purchase Plan”) allows eligible employees to contribute up to

$10,625

of their base earnings every

six

months toward the semi-annual purchase of the Company’s Class A Common Stock. The employee’s purchase price is

85%

of the lesser of the closing price of the Class A Common Stock on the

first

business day or the last business day of the semi-annual offering period, as reported by The NASDAQ Global Select Market. Employees

may

purchase shares having a fair market value of up to

$25,000

(measured as of the

first

day of each semi-annual offering period) for each calendar year. Under the Employee Stock Purchase Plan, there are approximately

331,000

shares remaining of the

1,400,000

shares of the Company’s Class A Common Stock that have been reserved for issuance. The Company issued

84,192

shares under the Employee Stock Purchase Plan during the year ended

December 31, 2018

and

112,754

shares during the year ended

December 31, 2017.

Of the

7,214

employees eligible to participate, approximately

1,495

elected to participate in the plan as of

December 31, 2018.

Non-Employee Director Stock Option Plan

The Rush Enterprises, Inc.

2006

Non-Employee Director Stock Option Plan, as amended and restated (the “Director Plan”), reserved

500,000

shares of Class A Common Stock for issuance upon exercise of any awards granted under the plan. The Director Plan is designed to attract and retain highly qualified non-employee directors. Currently, each non-employee director receives a grant of the Company’s Class A Common Stock, or up to

40%

cash, equivalent to a compensation value of

$125,000.

2018,

two

non-employee directors received a grant of

2,926

shares of the Company’s Class A Common Stock,

one

non-employee director received a grant of

2,048

shares of the Company’s Class A Common Stock and

$37,500

cash and

two

non-employee director received a grant of

1,756

shares of the Company’s Class A Common Stock and

$50,000

cash, for total compensation equivalent to

$125,000

each. In

2017,

two

non-employee directors received a grant of

3,307

shares of the Company’s Class A Common Stock,

one

non-employee director received a grant of

1,984

shares of the Company’s Class A Common Stock and

$50,000

cash,

one

non-employee director received a grant of

2,315

shares of the Company’s Class A Common Stock and

$37,500

cash, and

one

non-employee director received a grant of

2,480

shares of the Company’s Class A Common Stock and

$31,250

cash, for total compensation equivalent to

$125,000

each. Under the Director Plan, there are approximately

140,300

shares remaining for issuance of the

500,000

shares of the Company’s Class A Common Stock that have been reserved for issuance. The Company granted

11,412

shares of Class A Common Stock under the Director Plan during the year ended

December 31, 2018

and

13,393

shares of Class A Common Stock under the Director Plan during the year ended

December 31, 2017.

Employee

Incentive

Plans

May 2007,

the Board of Directors and shareholders adopted the Rush Enterprises, Inc.

2007

Long-Term Incentive Plan (the

“2007

Incentive Plan”). The

2007

Incentive Plan provides for the grant of stock options (which

may

be nonqualified stock options or incentive stock options for tax purposes), stock appreciation rights issued independent of or in tandem with such options (“SARs”), restricted stock awards and performance awards. The

2007

Incentive Plan was amended and restated on

May 20, 2014

and again on

May 16, 2017

to increase the number of shares available for issuance under the plan to

7,800,000

shares of Class A Common Stock and

2,200,000

shares of Class B Common Stock and to make certain other changes intended to bring the

2007

Incentive Plan into conformance with current best practices.

The aggregate number of shares of common stock subject to stock options or SARs that

may

be granted to any

one

participant in any year under the

2007

Incentive Plan is

100,000

shares of Class A Common Stock or

100,000

shares of Class B Common Stock. Each option granted pursuant to the

2007

Incentive Plan has a

ten

year term from the grant date and vests in

three

equal annual installments beginning on the

third

anniversary of the grant date. The Company has

7,800,000

shares of Class A Common Stock and

2,200,000

shares of Class B Common Stock reserved for issuance upon exercise of any awards granted under the Company’s

2007

Incentive Plan. As of

December 31, 2018,

approximately

1,781,000

shares of Class A Common Stock and

762,000

shares of Class B Common Stock are available for issuance upon the exercise of any awards granted under the Company’s

2007

Incentive Plan. The Company issues new shares of its Class A or Class B Common Stock upon the exercise of stock options or vesting of restricted stock units. During the year ended

December 31, 2018,

the Company granted

459,663

options to purchase Class A Common Stock and

306,590

restricted Class B Common Stock units under the

2007

Incentive Plan. During the year ended

December 31, 2017,

the Company granted

472,463

options to purchase Class A Common Stock and

274,390

restricted Class B Common Stock units under the

2007

Incentive Plan.

Valuation and Expense Information

Stock-based compensation expense related to stock options, restricted stock awards, restricted stock units and employee stock purchases was

$18.1

million for the year ended

December 31, 2018,

$15.6

million for the year ended

December 31, 2017,

and

$12.9

million for the year ended

December 31, 2016.

Cash received from options exercised and shares purchased under all share-based payment arrangements was

$5.7

million for the year ended

December 31, 2018,

$24.8

million for the year ended

December 31, 2017,

and

$6.5

million for the year ended

December 31, 2016.

A summary of the Company’s stock option activity and related information for the year ended

December 31, 2018,

follows:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
Options	Shares			Price		Life (in Years)		Value

Balance of Outstanding Options at January 1, 2018		2,724,308		$	24.78
Granted		459,663			42.99
Exercised		(126,027	)		21.77
Forfeited		(73,664	)		28.21
Balance of Outstanding Options at December 31, 2018		2,984,280		$	27.63		6.04	$	24,290,404
Expected to vest after December 31, 2018		1,750,298		$	30.62		7.63	$	10,524,034
Vested and exercisable at December 31, 2018		1,187,924		$	23.15		3.64	$	13,457,583

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the weighted-average of the closing price as of

December 31, 2018,

of the Company’s Class A Common Stock of

$34.48.

The total intrinsic value of options exercised was

$2.7

million during the year ended

December 31, 2018,

$25.0

million during the year ended

December 31, 2017,

and

$4.8

million during the year ended

December 31, 2016.

A summary of the status of the number of shares underlying Company’s non-vested stock options as of

December 31, 2018,

and changes during the year ended

December 31, 2018,

is as follows:

				Weighted
				Average
	Number of			Grant Date
Non-vested Shares	Shares			Fair Value

Non-vested at January 1, 2018		1,836,062		$	11.12
Granted		459,663			15.46
Vested		(430,040	)		13.26
Forfeited		(69,329	)		10.73

Non-vested at December 31, 2018		1,796,356		$	11.74

The total fair value of vested options was

$5.7

million during the year ended

December 31, 2018,

$6.3

million during the year ended

December 31, 2017,

and

$5.6

million during the year ended

December 31, 2016.

The weighted-average grant date fair value of options granted was

$15.46

per share during the year ended

December 31, 2018,

$12.33

per share during the year ended

December 31, 2017,

and

$6.54

per share during the year ended

December 31, 2016.

Stock Awards

The Company granted restricted stock units to certain of its employees under the

2007

Incentive Plan and unrestricted stock awards to its non-employee directors under the Director Plan during the year ended

December 31, 2018.

The restricted stock units granted to employees vest in

three

equal installments on the first,

second

and

third

anniversary of the grant date and are forfeited in the event the recipient’s employment or relationship with the Company is terminated prior to vesting, except as a result of retirement or under certain circumstances associated with a change of control or involuntary termination, as further described in the Company’s executive transition plan. The fair value of the restricted stock units to the Company’s employees is amortized to expense on a straight-line basis over the restricted stock’s vesting period. The shares granted to non-employee directors are expensed on the grant date.

The following table presents a summary of the Company’s non-vested restricted stock units outstanding at

December

31,

2018:

				Weighted
				Average				Weighted
				Remaining		Aggregate		Average
				Contractual		Intrinsic		Grant Date
Stock Awards and Units	Shares			Life (in Years)		Value		Fair Value

Outstanding non-vested shares at January 1, 2018		540,132						$	25.71
Granted		306,590							40.46
Vested		(267,588	)						24.57
Forfeited		(6,000	)						33.62

Outstanding non-vested at December 31, 2018		573,134			8.6	$	20,402,823	$	34.07

Expected to vest after December 31, 2018		571,974			8.6	$	20,361,531

The total fair value of the shares issued upon the vesting of stock awards during the year ended

December 31, 2018

was

$6.6

million. The weighted-average grant date fair value of stock awards and units granted was

$40.46

per share during the year ended

December 31, 2018,

$31.37

per share during the year ended

December 31, 2017

and

$17.57

per share during the year ended

December 31, 2016.

As of

December 31, 2018,

the Company had

$8.1

million of unrecognized compensation expense related to non-vested employee stock options to be recognized over a weighted-average period of

3.3

years and

$7.1

million of unrecognized compensation cost related to non-vested restricted stock units to be recognized over a weighted-average period of

1.9

years.

Defined Contribution Plan

The Company has a defined contribution plan (the “Rush

401k

Plan”), which is available to all Company employees. Each employee who has completed

days of continuous service is entitled to enter the Rush

401k

Plan on the

first

day of the following month. Participating employees

may

contribute from

50%

of total gross compensation. However, certain highly compensated employees are limited to a maximum contribution of

15%

of total gross compensation. For the

first

10%

of an employee’s contribution, the Company contributes an amount equal to

20%

of the employees’ contributions for those employees with less than

five

years of service and an amount equal to

40%

of the employees’ contributions for those employees with more than

five

years of service. The Company incurred expenses related to the Rush

401k

Plan of approximately

$8.9

million during the year ended

December 31, 2018,

$7.0

million during the year ended

December 31, 2017

and

$6.5

million during the year ended

December

31,

2016.

Deferred Compensation Plan

November 6, 2010,

the Board of Directors of the Company adopted the Rush Enterprises, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) pursuant to which selected employees and directors

may

elect to defer a portion of their annual compensation. The Deferred Compensation Plan also provides the Company with the discretion to make matching contributions to participants’ accounts. The Company established a rabbi trust to finance obligations under the Deferred Compensation Plan with corporate-owned variable life insurance contracts. Participants are

100%

vested in their respective deferrals and the earnings thereon. The

first

deferral election period began on

January 1, 2011.

The Company’s liability related to the Deferred Compensation Plan was

$11.1

million on

December 31, 2018

and

$9.8

million on

December 31, 2017.

The related cash surrender value of the life insurance contracts was

$8.9

million on

December 31, 2018

and

$9.6

million on

December 31, 2017.

The Company currently does

not

provide any post-retirement benefits nor does it provide any post-employment benefits.