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Exhibit 10.5
 
[Date]

[__________________]
c/o Knight Transportation, Inc.
5601 West Buckeye Rd.
Phoenix, Arizona 85043

 
Re:
Knight Transportation, Inc.:  Incentive Stock Option and Non-Qualified Option
Grant Agreement

Dear [__________________]:

As of [Date], the Compensation Committee (the "Committee") of the Board of
Directors (the “Board”) of Knight Transportation, Inc., an Arizona corporation
(the "Company"), granted you, as [a Director][an employee] of the Company, a
Stock Option (“the Option”) to purchase [_________] shares of the Company's
common stock, $0.01 par value (the “Shares”), at an exercise price (the
“Exercise Price”) of $[______] per Share, which is the fair market value of the
Shares as of the date of grant.  This Option is granted to award you for your
service to the Company and to encourage your continued employment with the
Company.  This letter agreement (the “Agreement”) confirms the grant of the
Option.  This Option is granted as of the date set forth above, subject to the
following terms and conditions.
 
1. Definitions; Option Subject to Plan.  The Option has been granted to you
pursuant to the Company's [2003 Stock Option Plan dated June 1, 2003 (the
"Plan")][2012 Equity Compensation Plan effective as of May 18, 2012 (the “Plan”)
and may consist of both an incentive stock option ("ISO") and a non-statutory
stock option ("NSO"), as such terms are defined in the Plan].  The capitalized
terms used in the Agreement have the same meaning as specified in the Plan,
except as provided herein.  By accepting this Agreement, you acknowledge having
received a copy of the Plan.  This Agreement is subject to all the terms and
conditions set forth in the Plan and to any rules and regulations of general
application now or hereafter adopted by the Committee responsible for
administrating the Plan.  This Agreement shall be construed consistently with
the Plan, which is incorporated herein by this reference.
 
2. Exercise and Expiration of Option.  Shares subject to this Option may be
exercised only in accordance with the following schedule, except as otherwise
provided by the Plan and in this Agreement:  [___]% of the Shares may be
exercised on or after [Date]; [___]% Shares may be exercised after [Date];
[___]% Shares may be exercised after [Date]; [___]% Shares may be exercised
after [Date]; and  [___]% Shares may be exercised after [Date].  Your exercise
rights are cumulative, and this Option may be exercised in whole or in part with
respect to Shares for which any exercise rights then exist.  To exercise this
Option, as provided above, you must be [a Director][an employee] of the
Company.  However, if your [Directorship][employment] ceases due to your
retirement, you may exercise this Option [not later than the last day of the
ninety (90) day period following][within three (3) months of] the date your
employment ceases due to retirement.  If your [Directorship][employment] ceases
due to [permanent and total] disability, you may exercise this Option within one
(1) year period of the date your [Directorship][employment] ceases due to [a
permanent and total] disability.  If you should die, your estate (or personal
representative) may exercise this Option within the one (1) year period
following the date of your death.
 
The Option must be exercised in full not later than [Date] (but in no event more
than ten (10) years after the grant date of this Option but, if the optionee
owns more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, not more than five (5) years after grant date
of this Option).  If this Option is not exercised within the term provided in
the preceding sentence, the Option will expire and be of no further force or
effect.
 
3. Notice of Exercise.  To exercise this Option, you must give written notice of
exercise to the Company, accompanied by full payment in cash or immediately
available funds, or previously purchased stock of the Company (together with
fully executed stock powers separate from certificates), or a combination
thereof, for the full Exercise Price of the Shares for which the Option is
exercised.
 
 
 

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4. [Issuance of Certificate.  Upon the Company's receipt of full payment of the
Exercise Price, a certificate for Shares purchased through your exercise will be
issued to you.][Book Entry Form.  The Shares will be issued to you in book entry
form (non-certificated), unless you request issuance of a certificate.]  All
Shares issued to you pursuant to the exercise of the Option are subject to, and
will be restricted in accordance with, the terms and conditions of the Plan and
this Agreement.
 
5. Incentive Stock Option.  This Option, to the extent that it meets the
qualifications of Section 422 of the Internal Revenue Code of 1986, as amended
(the “Code”) and all applicable regulations is intended to be an ISO.  This
Option incorporates herein by this reference the requirements of such statutes
and regulations [with respect to that portion of the Option that qualifies for
incentive stock option treatment under Section 422 of the Code.  To the extent
the aggregate fair market value of stock with respect to which this Option is
exercisable for the first time during any calendar year exceeds $100,000, this
Option shall be treated as an NSO with respect to Shares in excess of that
dollar limitation].  The Option shall remain a valid option grant, even if it
fails to qualify as an ISO, or if any Shares are disposed of in a manner that
disqualifies their treatment as an ISO.
 
The Company recommends that you obtain independent advice concerning the federal
and state tax aspects of the grant of the Option and its exercise.  Your
exercise of this Option may subject you to payment of the alternative minimum
tax presently applicable under the Code.
 
6. Option Not Transferable.  This Option is not transferable except by will or
the laws of descent and distribution.  This Option is exercisable during your
lifetime only by you, or the conservator of your estate during your lifetime if
you are under a legal disability.
 
7. Termination of Option.  Any other provision of this Agreement
notwithstanding, this Option will automatically terminate upon the termination
of your [Directorship][employment] with the Company, [including upon your
election to become a part-time employee of independent contractor, ]unless
termination of employment occurs by reason of your death, retirement (with the
consent of the Company) or becoming [permanently and totally] disabled (within
the meaning of Section 22(e)(3) of the Code and Section [8.3][10.4] of the
Plan).  [Your employment will be considered to be terminated if you become a
part-time or casual employee or independent contractor of the Company.  If your
employment terminates due to retirement, you must exercise this Option within
ninety (90) days after the date your employment is terminated.  If your
employment terminates due to disability, you must exercise this Option within
one (1) year after the date your employment is terminated.] For purposes of this
Agreement, the Company may require you to furnish evidence that a condition of
[your disability][permanent and total disability] is continuing.  To establish
[permanent and total ]disability, you must be under the care of a licensed
physician acceptable to the Company and must provide the Company with a
certificate signed by such physician that a condition of [permanent and total
]disability exists and is likely to continue.
 
8. [Repayment Obligation.  In consideration of the grant of this Option and the
Company’s agreement to allow you, through the exercise of this Option, to become
a shareholder of the Company, you agree to repay to the Company an amount equal
to [__________] percent [___]% of any gains realized from the exercise of your
Option granted under the Plan during the twenty-four (24) months preceding the
date of your termination of employment (regardless of the reason for
termination) , if at any time during the twelve (12) months following the
termination of your employment with the Company you:  (i) become employed by, or
obtain an interest as an owner, shareholder, partner, limited partner or member
in, any business or corporation that competes with the Company (as such
competition is defined below); (ii) on your own behalf, or on behalf of any
other person with whom you may be employed or with whom you may be associated,
you solicit or divert from the Company the business of any person who is either
currently a customer of the Company at the time of your employment or was
identified as a potential customer of the Company; or (iii) you solicit, divert
or encourage any person who is an employee of the Company to leave employment
and to become employed by a person who competes with the Company.  For purposes
of the preceding sentence “gains realized” are calculated as (i) the fair market
value of the Shares you acquired by your exercise of this and any other Option
granted to you by the Company, as reflected by the closing price of the
Company’s common stock, as reported on NYSE on the later of the date of sale of
such stock or the date you exercised your Option (ii) less the Exercise Price of
such options.  Your agreement to repay the Company the gains realized from your
Option exercises, as stated above, is absolute and applies even if you have sold
the Shares you acquired through the exercise of your Options.  For purposes of
this Section 8, a person, business or corporation “competes with” the Company if
it is engaged in the truckload business and operates in the same traffic lanes
in which the Company has a substantial presence or in which the Company has
internally identified as a planned area of operation or expansion of its
business as of the date your employment with the Company terminates.]
 
 
 

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9. Adjustments to Optioned Shares.  The number of Shares subject to the Option
granted hereby are subject to adjustment to the extent provided in Section 3.2
of the Plan in the event of any stock dividend, split-up, reverse stock split,
reorganization, reclassification or other adjustment described in the Plan.
 
10. Limitation on Disposition of Shares.  Shares acquired pursuant to an
incentive stock option (as that term is defined in Section 422(b) of the Code)
are eligible for special federal tax treatment only if no disposition of the
Shares is made within two (2) years from the date the Option is granted and one
(1) year after the Shares acquired by exercise of the Option are transferred to
you.  As long as you sell the Shares at least two (2) years after the Option was
granted and at least one (1) year after the Option was exercised, when you sell
the Shares, under present tax law, the difference between what you paid for the
Shares and the amount you receive on sale will be taxable to you as capital
gain.  [If you exercise this Option and sell or dispose of any of the Shares
before the holding period described above expires, the difference between the
Exercise Price and the value of the Shares on the date of your exercise will be
taxed to you as ordinary income.  To the extent this Option is treated as a
non-qualified stock option, upon whole or partial exercise of the Option, you
will, at minimum, be subject to tax upon ordinary income realized which, in
general, equals the difference between the Exercise Price and the fair market
value of the Shares at the date of exercise.]
 
11. No Representations or Warranties.  The Company makes no representations or
warranties of any kind as to the tax consequences of the Option, including,
without limitation, any representations that all or any portion of the Option
granted hereby will qualify as an incentive stock option under Sections 421 and
422 of the Code.
 
12. No Repurchase of Shares.  The Company is not obligated to repurchase any of
the Shares from you that you obtain through the exercise of this Option.
 
13. Tax Withholding.  By accepting this Option, you are responsible for
complying with any tax withholding requirements that may be applicable by virtue
of the exercise of the Option.  You hereby authorize the Company to make any
income tax or other withholding payments required of it in any manner
[(including making such withholding as a reduction in the total number of Shares
that are delivered to you following a whole or partial exercise of this Option)
]and from any source necessary to comply with applicable law.
 
14. Risks.  By accepting this Option, you acknowledge that [you have received
and read a copy of the Prospectus describing the Plan and the Company][the value
of the Shares may be adversely affected by changes in the United States’
economy; changes in the Company’s profitability, financial condition, business,
properties and prospects; a reduction in the Company’s growth rate; competition
from other truckload carriers; and other factors that are described more
particularly in the Company’s Annual Report on Form 10 K and in its reports on
Forms 10-Q and 8-K].  The Company does not promise you that the value of the
Shares will rise or that the Company will continue to grow or be profitable.
 
15. Compliance with Securities Laws; Share Restrictions.  You agree that any
Shares acquired pursuant to the exercise of this Option will be sold,
transferred, assigned, or otherwise disposed of only in compliance with any
applicable federal and state securities laws.
 
16. Successors.  This Agreement shall be binding on you, your spouse and any
successors and assigns.
 
17. Arbitration of Disputes.  You and the Company agree that the Federal
Arbitration Act shall apply to and governs the arbitration provisions of this
Agreement.  Any disputes between or among the parties with respect to the terms
of this Agreement, including, without limitation, the scope of this arbitration
provision, shall be subject to arbitration pursuant to the [rules of the
American Arbitration Association governing commercial disputes][laws of the
State of Arizona governing arbitration, excluding the revised Arizona
Arbitration Act].  Arbitration shall occur in Phoenix, Arizona.  Judgment on any
arbitration award may be entered in any court having jurisdiction.  A single
arbitrator shall have the power to render a maximum award of
$[300,000][500,000].  If any person asserts a claim in excess of
$[300,000][500,000], any party to the arbitration proceeding may request that
the arbitration be heard by a panel of three (3) arbitrators and, if so
requested, the arbitration decision shall be made by a majority of the three
arbitrators.  The Company shall pay the cost of arbitration, but if the Company
is the prevailing party in the arbitration, the Company shall have the right to
recover from you all costs of arbitration.  EACH OF THE PARTIES EXPRESSLY AGREES
TO ARBITRATION AND WAIVES ANY RIGHT TO TRIAL BY JURY EITHER PARTY MAY
HAVE.  Nothing in this Agreement shall limit or restrict any self-help remedy,
including, without limitation, any right of offset a party may have.  The party
prevailing in any arbitration shall be entitled to payment of all legal fees and
costs [(including court costs)]and all costs of arbitration, regardless of
whether such costs are recoverable under applicable law.
 
 
 

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18. Access to Information.  [With respect to your purchase of Shares subject to
this Agreement, you acknowledge that you have reviewed a copy of the Company’s
Prospectus, which is a part of the Registration Statement, and that the Company
has delivered to you copies of its reports filed on Forms 8-K, 10-Q and 10-K and
any proxy or shareholder information materials filed with the United States
Securities and Exchange Commission.][The Company has filed a registration
statement with the United States Securities and Exchange Commission covering the
Option (and the Shares subject to the Option) issued pursuant to the Plan.  So
long as that registration statement is in effect, Shares issued pursuant to the
Plan will not be restricted as to transfer, except as provided in this
Agreement.  The Company does not provide any assurance that any registration
statement will continue to be maintained in effect with respect to the
Shares.  If for any reason, a registration statement is not in effect with
respect to the Shares, the Shares may not be sold or transferred except in
compliance with applicable securities laws.  With respect to this Option, you
acknowledge that you have reviewed  a copy of the Company’s Prospectus which is
a part of the Registration Statement, and that the Company has delivered to you,
or has provided to you through on-line access, for your examination copies of
its Prospectus for the Plan, and the Company’s reports filed on Forms 8-K, 10-Q
and 10-K and any proxy or shareholder information materials filed with the
United States Securities and Exchange Commission, and available through
EDGAR.  These materials may also be accessed on the Company’s website at
www.knighttrans.com.  A copy of these materials will also be mailed to you if
you request them in writing from the Company.]
 
19. WAIVER OF CERTAIN CLAIMS.  BY ACCEPTING THIS AGREEMENT AND ACCEPTING THE
OPTION GRANTED HEREBY, YOU AGREE THAT ANY CLAIM YOU MAY HAVE WITH RESPECT TO THE
GRANT OF THIS OPTION OR THE PURCHASE OF THE SHARES (OTHER THAN A CLAIM FOR THE
CONTRACTUAL BREACH OF THIS AGREEMENT) MUST BE ASSERTED NOT LATER THAN ONE (1)
YEAR FOLLOWING EXERCISE OF THIS OPTION AND NO CLAIMS (OTHER THAN FOR BREACH OF
CONTRACT) MAY BE BROUGHT AFTER THAT PERIOD.  YOU VOLUNTARILY AND KNOWINGLY WAIVE
ANY LONGER STATUTE OF LIMITATIONS IN CONSIDERATION FOR THE GRANT OF THIS
OPTION.  IN ADDITION, YOU AND THE COMPANY AGREE THAT ANY CLAIM MADE UNDER THIS
AGREEMENT OR THE PLAN, OR ARISING FROM OR IN CONNECTION WITH ANY OPTION GRANTED
OR EXERCISED PURSUANT TO THIS AGREEMENT OR THE PLAN, SHALL BE LIMITED TO THE
ACTUAL DAMAGES YOU MAY SUFFER AND PROVE AND THE RECOVERY OF ATTORNEYS’ FEES AND
COSTS OF COURT.  TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO RESCISSION
AND ANY RIGHT TO CLAIM OR RECOVER TREBLE DAMAGES, PUNITIVE DAMAGES, OR EXEMPLARY
DAMAGES, WHETHER SUCH RIGHTS ARE GRANTED BY STATUTE OR UNDER COMMON LAW, IS
HEREBY WAIVED AND RELEASED.  EACH PARTY AGREES AND ACKNOWLEDGES THAT THE WAIVER
AND RELEASE OF SUCH RIGHTS IS VOLUNTARY AND KNOWING AND THAT EACH PARTY HAS
RECEIVED, UNDER THIS AGREEMENT, FULL AND ADEQUATE CONSIDERATION FOR SUCH WAIVER.
 
20. Governing Law.  This Agreement is subject to, and is to be construed in
accordance with, the laws of the State of Arizona.
 
21. Acceptance.  [As a convenience to you, you may accept and agree to the terms
of this Agreement by notifying the Company via any electronic means of
communication made available to you by the Company.]Unless you indicate to us
either electronically or in writing within five (5) working days of receipt of
this Agreement that you do not accept and agree to the terms and conditions set
forth in this Agreement, by continuing [to serve as a Director of][employment
with] the Company, you will be deemed to have accepted and agreed to the terms
and conditions set forth in this Agreement and deemed to have acknowledged
receipt of a copy of the Plan [and Prospectus].  Such notification shall be sent
to the Company at 5601 West Buckeye Road, Phoenix, Arizona 85043,
Attention:  [Title].

Sincerely,

KNIGHT TRANSPORTATION, INC., an
Arizona corporation

By:________________________________
[Name]
[Title]

The foregoing is accepted and agreed to:

_________________________________
[Name]
[Director][Title]

Dated:  [Date]

Return to Form 10-K [form10k.htm]