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Exhibit 4.1    
    


 
 

RUSH ENTERPRISES, INC.    
    
    LONG-TERM INCENTIVE PLAN    
    


ARTICLE
I: GENERAL 


        SECTION
1.1    Purpose of the Plan.    The Long-Term Incentive Plan (the "Plan") of Rush
Enterprises, Inc. (the "Company") is intended to advance the best interests of the Company, its subsidiaries and its shareholders in order to attract, retain and motivate employees by providing
them with additional incentives through (i) the grant of options ("Options") to purchase shares of Common Stock, par value $.01 per share, of the Company ("Common Stock"), (ii) the grant
of stock appreciation rights ("Stock Appreciation Rights"), (iii) the award of shares of restricted Common Stock ("Restricted Stock") and (iv) the award of units payable in cash or
shares of Common Stock based on performance ("Performance Awards"), thereby increasing the personal stake of such employees in the continued success and growth of the Company. 



        SECTION
1.2    Administration of the Plan.    (a) The Plan shall be administered by the Compensation Committee
or other designated committee (the "Committee") of the Board of Directors of the Company (the "Board of Directors") which shall consist of at least two Outside Directors. The Committee shall have
authority to interpret conclusively the provisions of the Plan, to adopt such rules and regulations for carrying out the Plan as it may deem advisable, to decide conclusively all questions of fact
arising in the application of the Plan, to establish performance criteria in respect of Awards (as defined herein) under the Plan, to certify that Plan requirements have been met for any participant
in the Plan, to submit such matters as it may deem advisable to the Company's shareholders for their approval, and to make all other determinations and take all other actions necessary or desirable
for the administration of the Plan. The Committee is expressly authorized to adopt rules and regulations limiting or eliminating its discretion in respect of certain matters as it may deem advisable
to comply with or obtain preferential treatment under any applicable tax or other law rule, or regulation. All decisions and acts of the Committee shall be final and binding upon all affected Plan
participants. 


        For
purposes of this Plan, "Outside Director" shall mean a non-employee director of the Company who is "disinterested" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 



        (b)   The
Committee shall designate the eligible employees, if any, to be granted Awards and the type and amount of such Awards and the time when Awards will be granted. All
Awards granted under the Plan shall be on the terms and subject to the conditions determined by the Committee consistent with the Plan. 


        SECTION
1.3    Eligible Participants.    Employees, including officers, of the Company and its subsidiaries (all such
subsidiaries being referred to as "Subsidiaries") shall be eligible for Awards under the Plan. 



        SECTION
1.4    Awards Under the Plan.    Awards to employees may be in the form of (i) Options,
(ii) Stock Appreciation Rights, which may be issued independent of or in tandem with Options, (iii) shares of Restricted Stock, (iv) Performance Awards, or (v) any
combination of the foregoing (collectively, "Awards"). 


        SECTION
1.5    Shares Subject to the Plan.    The aggregate number of shares of Class A Common Stock that may
be issued under the Plan shall be 2,600,000. The aggregate number of shares of Class B Common Stock that may be issued under the Plan shall be 1,400,000. In addition, as of January 1 of
each year the Plan is in effect, if the total number of shares of Common Stock issued and outstanding, not including any shares issued under the Plan, exceeds the total number of shares of Common
Stock issued and outstanding as of January 1 of the preceding year (or, for 1996, as of the commencement of the Plan), the number of shares that may be issued under the Plan shall be increased
by an amount 










such
that the total number of shares of Common Stock available for issuance under the Plan equals 5% of the total number of shares of Common Stock outstanding, not including any shares issued under
the Plan. Shares distributed pursuant to the Plan may consist of authorized but unissued shares or treasury shares of the Company, as shall be determined from time to time by the Board of Directors. 


        If
any Award under the Plan shall expire, terminate or be cancelled (including cancellation upon an Option holder's exercise of a related Stock Appreciation Right) for any reason without
having been exercised in full, or if any Award shall be forfeited to the Company, the unexercised or forfeited Award shall not count against the above limits and shall again become available for
Awards under the Plan (unless the holder of such Award received dividends or other economic benefits with respect to such Award, which dividends or other economic benefits are not forfeited, in which
case the Award shall count against the above limits). Shares of Common Stock equal in number to the shares surrendered in payment of the option price, and shares of Common Stock which are withheld in
order to satisfy
Federal, state or local tax liability, shall count against the above limits. Only the number of shares of Common Stock actually issued upon exercise of a Stock Appreciation Right shall count against
the above limits, and any shares which were estimated to be used for such purposes and were not in fact so used shall again become available for Awards under the Plan. Cash exercises of Stock
Appreciation Rights and cash settlement of other Awards will not count against the above limits. 


        The
aggregate number of shares of Common Stock subject to Options or Stock Appreciation Rights that may be granted to any one participant in any one year under the Plan shall be 100,000.
The aggregate number of shares of Common Stock that may be granted to any one participant in any one year in respect of Restricted Stock shall be 100,000. The aggregate number of shares of Common
Stock that may be received by any one participant in any one year in respect of a Performance Award shall be 100,000 and the aggregate amount of cash that may be received by any one participant in any
one year in respect to a Performance Award shall be $500,000. 


        The
total number of Awards (or portions thereof) settled in cash under the Plan, based on the number of shares covered by such Awards (e.g., 100 shares for a Stock Appreciation Right
with respect to 100 shares), shall not exceed a number equal to (i) the number of shares initially available for issuance under the Plan plus (ii) the number of shares that have become
available for issuance under the Plan pursuant to the first paragraph of this Section 1.5. 


        The
aggregate number of shares of Common Stock that are available under the Plan for Options granted in accordance with Section 2.4(i) ("ISOs") is 1,000,000, subject to
adjustments as provided in Section 5.2 of the Plan. 


        SECTION
1.6    Other Compensation Programs.    Nothing contained in the Plan shall be construed to preempt or limit
the authority of the Board of Directors to exercise its corporate rights and powers, including, but not by way of limitation, the right of the Board of Directors (i) to grant incentive awards
for proper corporate purposes otherwise than under the Plan to any employee, officer, director or other person or entity or (ii) to grant incentive awards to, or assume incentive awards of, any
person or entity in connection with the acquisition (whether by purchase, lease, merger, consolidation or otherwise) of the business or assets (in whole or in part) of any person or entity. 


ARTICLE
II: STOCK OPTIONS AND STOCK APPRECIATION RIGHTS 


        SECTION
2.1    Terms and Conditions of Options.    Subject to the following provisions, all Options granted under the
Plan to employees of the Company and its Subsidiaries shall be in such form and shall have such terms and conditions as the Committee, in its discretion, may from time to time determine consistent
with the Plan. 


        (a)   Option
Price. The option price per share shall be determined by the Committee, except that in the case of an Option granted in accordance with
Section 2.4(i) the option price per share shall not be less than the fair market value of a share of Common Stock (as determined by the Committee) on the date the Option is granted
(other than in the case of substitute or assumed Options to the extent required to qualify such Options for preferential tax treatment under the Code as in effect at the time of such grant). 










        (b)   Term
of Option. The term of an Option shall be determined by the Committee, except that in the case of an ISO the term of the Option shall not exceed ten years from the
date of grant, and, notwithstanding any other provision of this Plan, no Option shall be exercised after the expiration of its term. 



        (c)   Exercise
of Options. Options shall be exercisable at such time or times and subject to such terms and conditions as the Committee shall specify in the Option grant.
Unless the Option grant specifies otherwise, the Committee shall have discretion at any time to accelerate such time or times and otherwise waive or amend any conditions in respect of all or any
portion of the Options held by any optionee. An Option may be exercised in accordance with its terms as to any or all shares purchasable thereunder. 


        (d)   Payment
for Shares. The Committee may authorize payment for shares as to which an Option is exercised to be made in cash, shares of Common Stock, a combination thereof,
by "cashless exercise" or in such other manner as the Committee in its discretion may provide. 


        (e)   Shareholder
Rights. The holder of an Option shall, as such, have none of the rights of a shareholder. 


        (f)    Termination
of Employment. The Committee shall have discretion to specify in the Option grant, or, with the consent of the optionee, an amendment thereof, provisions
with respect to the period, not extending beyond the term of the Option, during which the Option may be exercised following the optionee's termination of employment. 



        SECTION
2.2    Stock Appreciation Rights in Tandem with Options.    


        (a)   The
Committee may, either at the time of grant of an Option or at any time during the term of the Option, grant Stock Appreciation Rights ("Tandem SARs") with respect to
all or any portion of the shares of Common Stock covered by such Option. A Tandem SAR may be exercised at any time the Option to which it relates is then exercisable, but only to the extent the Option
to which it relates is exercisable, and shall be subject to the conditions applicable to such Option. When a Tandem SAR is exercised, the Option to which it relates shall cease to be exercisable to
the extent of the number of shares with respect to which the Tandem SAR is exercised. Similarly, when an Option is exercised, the Tandem SARs relating to the shares covered by such Option exercise
shall terminate. Any Tandem SAR which is outstanding on the last day of the term of the related Option (as determined pursuant to Section 2.1(b)) shall be automatically exercised on such date
for cash without any action by the optionee. 


        (b)   Upon
exercise of a Tandem SAR, the holder shall receive, for each share with respect to which the Tandem SAR is exercised, an amount (the "Appreciation") equal to the
difference between the option price per share of the Option to which the Tandem SAR relates and the fair market value (as determined by the Committee) of a share of Common Stock on the date of
exercise of the Tandem SAR. The Appreciation shall be payable in cash, Common Stock, or a combination of both, at the option of the Committee, and shall be paid within 30 days of the exercise
of the Tandem SAR. 


        SECTION
2.3    Stock Appreciation Rights Independent of Options.    Subject to the following provisions, all Stock
Appreciation Rights granted independent of Options ("Independent SARs") under the Plan to employees of the Company and its Subsidiaries shall be in such form and shall have such terms and conditions
as the Committee, in its discretion, may from time to time determine consistent with the Plan. 


        (a)   Exercise
Price. The exercise price per share shall be determined by the Committee on the date the Independent SAR is granted. 


        (b)   Term
of Independent SAR. The term of an Independent SAR shall be determined by the Committee, and, notwithstanding any other provision of this Plan, no Independent SAR
shall be exercised after the expiration of its term. 










        (c)   Exercise
of Independent SARs. Independent SARs shall be exercisable at such time or times and subject to such terms and conditions as the Committee shall specify in the
Independent SAR grant. Unless the Independent SAR grant specifies otherwise, the Committee shall have discretion at any time to accelerate such time or times and otherwise waive or amend any
conditions in respect of all or any portion of the Independent SARs held by any participant. Upon exercise of an Independent SAR, the holder shall receive, for each share specified in the Independent
SAR grant, an amount (the "Appreciation") equal to the difference between the exercise price per share specified in the Independent SAR grant and the fair market value (as determined by the Committee)
of a share of Common Stock on the date of exercise of the Independent SAR. The Appreciation shall be payable in cash, Common Stock, or a combination of both, at the option of the Committee, and shall
be paid within 30 days of the exercise of the Independent SAR. 


        (d)   Shareholder
Rights. The holder of an Independent SAR shall, as such, have none of the rights of a shareholder. 


        (e)   Termination
of Employment. The Committee shall have discretion to specify in the Independent SAR grant, or, with the consent of the holder, an amendment thereof,
provisions with respect to the period, not extending beyond the term of the Independent SAR, during which the Independent SAR may be exercised following the holder's termination of employment. 



        SECTION
2.4    Statutory Options.    Subject to the limitations on Option terms set forth in Section 2.1, the
Committee shall have the authority to grant (i) ISOs within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) Options containing
such terms and conditions as shall be required to qualify such Options for preferential tax treatment under the Code as in effect at the time of such grant, including, if then applicable, limits with
respect to minimum exercise price, duration and amounts and special limitations applicable to any individual who, at the time the Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any affiliate. Options granted pursuant to this Section 2.4 may contain such other terms and conditions permitted by
Article II of this Plan as the Committee, in its discretion, may from time to time determine (including, without limitation, provision for Stock Appreciation Rights), to the extent that such
terms and conditions do not cause the Options to lose their preferential tax treatment. If an Option intended to be an ISO ceases or is otherwise not eligible to be an ISO, such Option (or portion
thereof necessary to maintain the status of the remaining portion of the Option as an ISO) shall remain valid but be treated as an Option other than an ISO. 


ARTICLE
III: RESTRICTED STOCK 


        SECTION
3.1    Terms and Conditions of Restricted Stock Awards.    Subject to the following provisions, all Awards of
Restricted Stock under the Plan to employees of the Company and its Subsidiaries shall be in such form and shall have such terms and conditions as the Committee, in its discretion, may from time to
time determine consistent with the Plan. 


        (a)   Restricted
Stock Award. The Restricted Stock Award shall specify the number of shares of Restricted Stock to be awarded, the price, if any, to be paid by the recipient
of the Restricted Stock, and the date or dates on which the Restricted Stock will vest. The vesting and number of shares of Restricted Stock may be conditioned upon the completion of a specified
period of service with the Company or its Subsidiaries, upon the attainment of specified performance objectives, or upon such other criteria as the Committee may determine in accordance with the
provisions hereof. Performance objectives will be based on increases in share prices, operating income, net income or cash flow thresholds, return on common equity or any combination of the foregoing. 


        (b)   Restrictions
on Transfer. Stock certificates representing the Restricted Stock granted to an employee shall be registered in the employee's name. Such certificates shall
either be held by the Company on behalf of the employee, or delivered to the employee bearing a legend to restrict transfer of the certificate until the Restricted Stock has vested, as determined by
the Committee. The Committee shall determine whether the employee shall have the right to vote and/or receive dividends 










on
the Restricted Stock before it has vested. No share of Restricted Stock may be sold, transferred, assigned, or pledged by the employee until such share has vested in accordance with the terms of
the Restricted Stock Award. Unless the grant of a Restricted Stock Award specifies otherwise, in the event of an employee's termination of employment before all the employee's Restricted Stock has
vested, or in the event other conditions to the vesting of Restricted Stock have not been satisfied prior to any deadline for the satisfaction of such conditions set forth in the Award, the shares of
Restricted Stock that have not vested shall be forfeited and any purchase price paid by the employee shall be returned to the employee. At the time Restricted Stock vests (and, if the employee has
been issued legended certificates of Restricted Stock, upon the return of such certificates to the Company), a certificate for such vested shares shall be delivered to the employee or the employee's
estate, free of all restrictions. 


        (c)   Accelerated
Vesting. Notwithstanding the vesting conditions set forth in the Restricted Stock Award, unless the Restricted Stock grant specifies otherwise, the Committee
may in its discretion at any time accelerate the vesting of Restricted Stock or otherwise waive or amend any conditions of a grant of Restricted Stock. 


ARTICLE
IV: PERFORMANCE AWARDS 


        SECTION
4.1    Terms and Conditions of Performance Awards.    The Committee shall be authorized to grant Performance
Awards, which are payable in stock, cash or a combination thereof, at the discretion of the Committee. 


        (a)   Performance
Period. The Committee shall establish with respect to each Performance Award a performance period over which the performance goal of such Performance Award
shall be measured. The performance period for a Performance Award shall be established prior to the time such Performance Award is granted and may overlap with performance periods relating to other
Performance Awards granted hereunder to the same employee. 


        (b)   Performance
Objectives. The Committee shall establish a minimum level of acceptable achievement for the holder at the time of each Award. Each Performance Award shall be
contingent upon future performances and achievement of objectives described either in terms of Company-wide performance or in terms that are related to performance of the employee or of
the division, subsidiary, department or function within the Company in which the employee is employed. The Committee shall have the authority to establish the specific performance objectives and
measures applicable to such objectives. Such objectives, however, shall be based on increases in share prices, operating income, net income or cash flow thresholds, sales results, return on common
equity or any combination of the foregoing. 


        (c)   Size,
Frequency and Vesting. The Committee shall have the authority to determine at the time of the Award the maximum value of a Performance Award, the frequency of
Awards and the date or dates when Awards vest. 


        (d)   Payment.
Following the end of each performance period, the holder of each Performance Award will be entitled to receive payment of an amount, not exceeding the maximum
value of the Performance Award, based on the achievement of the performance measures for such performance period, as determined by the Committee. If at the end of the performance period the specified
objectives have been attained, the employee shall be deemed to have fully earned the Performance Award. If the employee exceeds the specified minimum level of acceptable achievement but does not fully
attain such objectives, the employee shall be deemed to have partly earned the Performance Award, and shall become entitled to receive a portion of the total Award, as determined by the Committee. If
a Performance Award is granted after the start of a performance period, the Award shall be reduced to reflect the portion of the performance period during which the Award was in effect. Unless the
Award specifies otherwise, including restrictions in order to satisfy the conditions under Section 162(m) of the Code, the Committee may adjust the payment of Awards or the performance
objectives if events occur or circumstances arise which would cause a particular payment or set of performance objectives to be inappropriate, as determined by the Committee. 










        (e)   Termination
of Employment. A recipient of a Performance Award who, by reason of death, disability or retirement, terminates employment before the end of the applicable
performance period shall be entitled to receive, to the extent earned, a portion of the Award which is proportional to the portion of the performance period during which the employee was employed. A
recipient of a Performance Award who terminates employment for any other reason shall not be entitled to any part of the Award unless the Committee determines otherwise; however, the Committee may in
no event pay the employee more than that portion of the Award which is proportional to his or her period of actual service. 


        (f)    Accelerated
Vesting. Notwithstanding the vesting conditions set forth in a Performance Award, unless the Award specifies otherwise, the Committee may in its discretion
at any time accelerate vesting of the Award or otherwise waive or amend any conditions (including but not limited to performance objectives) in respect of a Performance Award. 



        (g)   Shareholder
Rights. The holder of a Performance Award shall, as such, have none of the rights of a shareholder. 


ARTICLE
V: ADDITIONAL PROVISIONS 


        SECTION
5.1    General Restrictions.    Each Award under the Plan shall be subject to the requirement that, if at any
time the Committee shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state
or Federal law, or (ii) the consent or approval of any government regulatory body, or (iii) an agreement by the recipient of an Award with respect to the disposition of shares of Common
Stock, is necessary or desirable (in connection with any requirement or interpretation of any Federal or state securities law, rule or regulation) as a condition of, or in connection with, the
granting of such Award or the issuance, purchase or delivery of shares of Common Stock thereunder, such Award may not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee. 


        SECTION
5.2    Adjustments for Changes in Capitalization.    In the event of any stock dividends, stock splits,
recapitalizations, combinations, exchanges of shares, mergers, consolidation, liquidations, split-ups, split-offs, spin-offs, or other similar changes in
capitalization, or any distribution to shareholders, including a rights offering, other than regular cash dividends, changes in the outstanding stock of the Company by reason of any increase or
decrease in the number of issued shares of Common Stock resulting from a split-up or consolidation of shares or any similar capital adjustment or the payment of any stock dividend, any
share repurchase at a price in excess of the market price of the Common Stock at the time such repurchase is announced or other increase or decrease in the number of such shares, the Committee shall
make appropriate adjustment in the number and kind of shares authorized by the Plan (including shares available for ISOs), in the number, price or kind of shares covered by the Awards and in any
outstanding Awards under the Plan; provided, however, that no such adjustment shall increase the aggregate value of any outstanding Award. 



        In
the event of any adjustment in the number of shares covered by any Award, any fractional shares resulting from such adjustment shall be disregarded and each such Award shall cover
only the number of full shares resulting from such adjustment. 


        SECTION
5.3    Amendments.    (a) The Board of Directors may at any time and from time to time and in any
respect amend or modify the Plan; provided, however, that to the extent required to qualify the Plan under Rule 16b-3 promulgated under Section 16 of the Exchange Act, no
such action of the Board of Directors without approval of shareholders of the Company may (i) increase the total number of shares of Common Stock available under Section 1.5 for the
implementation of Awards under the Plan except as contemplated in Section 5.2, (ii) materially modify the requirements as to eligibility for participation under the Plan or
(iii) otherwise materially increase the benefits to participants under the Plan. 










        (b)   The
Committee shall have the authority to amend any Award to include any provision which, at the time of such amendment, is authorized under the terms of the Plan;
however, no outstanding Award may be revoked or altered in a manner unfavorable to the holder without the written consent of the holder. 



        SECTION
5.4    Cancellation of Awards.    Any Award granted under the Plan may be cancelled at any time with the
consent of the holder and a new Award may be granted to such holder in lieu thereof, which Award may, in the discretion of the Committee, be on more favorable terms and conditions than the cancelled
Award. 


        SECTION
5.5    Withholding.    Whenever the Company proposes or is required to issue or transfer shares of Common
Stock under the Plan, the Company shall have the right to require the holder to pay an amount in cash or to retain or sell without notice, or demand surrender of, shares of Common Stock in value
sufficient to satisfy any Federal, state or local withholding tax liability ("Withholding Tax") prior to the delivery of any certificate for such shares (or remainder of shares if Common Stock is
retained to satisfy such tax liability). Whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any federal, state or local withholding
tax liability. 


        Whenever
Common Stock is so retained or surrendered to satisfy Withholding Tax, the value of shares of Common Stock so retained or surrendered shall be determined by the Committee, and
the value of shares of Common Stock so sold shall be the net proceeds (after deduction of commissions) received by the Company from such sale, as determined by the Committee. 



        SECTION
5.6    Non-Assignability.    Except as expressly provided in the Plan, no Award under the Plan
shall be assignable or transferable by the holder thereof except by will or by the laws of descent and distribution. During the life of the holder, Awards under the Plan shall be exercisable only by
such holder or by the guardian or legal representative of such holder. 


        SECTION
5.7    Non-Uniform Determinations.    Determinations by the Committee under the Plan (including,
without limitation, determinations of the persons to receive Awards; the form, amount and timing of such Awards; the terms and provisions of such Awards and the agreements evidencing same; and
provisions with respect to termination of employment) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated. 


        SECTION
5.8    No Guarantee of Employment.    The grant of an Award under the Plan shall not constitute an assurance
of continued employment for any period or any obligation of the Board of Directors to nominate any director for reelection by the Company's shareholders. 


        SECTION
5.9    Duration and Termination.    (a) The Plan shall be of unlimited duration. Notwithstanding the
foregoing, no ISO (within the meaning of Section 422 of the Code) shall be granted under the Plan ten (10) years after the effective date of the Plan, but Awards granted prior to such
date may extend beyond such date, and the terms of this Plan shall continue to apply to all Awards granted hereunder. 


        (b)   The
Board of Directors may suspend, discontinue or terminate the Plan at any time. Such action shall not impair any of the rights of any holder of any Award outstanding
on the date of the Plan's suspension, discontinuance or termination without the holder's written consent. 



        SECTION
5.10    Effective Date.    The Plan shall be effective as of April 1, 1996. 











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Exhibit 4.1


RUSH ENTERPRISES, INC. LONG-TERM INCENTIVE PLAN