August 6, 2001



Mr. Donald A. Orr
2213 Woodfield Road
Bloomington, IL  61704

Dear Don:

     We are very pleased to offer you the position of Executive  Vice  President
and Chief Operating Officer of Smithway Motor Xpress Inc. ("Smithway").  You are
highly  regarded in the industry and I am confident  that working  together,  we
will return  Smithway to  profitability.  The following  sets forth the terms of
your employment.

     1.   During the time you remain employed, you will be paid a base salary at
          the annualized  rates indicated below. The base salary will be payable
          pursuant to Smithway's normal payroll practices.

                     Year                         Annualized Base Salary
              ----------------------       ----------------------------------
                     2001                                $190,000
                     2002                                $199,500
                     2003                                $209,475
                     2004                                $219,948

     2.   For each year you are employed at December 31,  commencing  with 2001,
          you  will  receive  an  annual  bonus  equal to 1% of  Smithway's  net
          earnings  for the year,  as  reported in  Smithway's  year end audited
          financial statements. Each year's bonus payment will be distributed at
          the same time Smithway distributes other executive bonuses.

     3.   You will be granted an option to purchase 210,000 shares of Smithway's
          common  stock at a price per share equal to the closing  price on your
          first day of employment.  The option will vest in increments of 35,000
          shares on each of the first  through  the sixth  anniversaries  of the
          grant date,  or  immediately  in the event of a  change-in-control  of
          Smithway.  The  form of  option  agreement  evidencing  the  grant  is
          attached as Exhibit A.

     4.   A company  vehicle  will be  provided  for use during your tenure as a
          Smithway executive.  You will be responsible for taxes on any personal
          use.  Smithway will pay all expenses  associated with your use of this
          vehicle,   including  payments,  fuel,  maintenance,   insurance,  and
          licenses.


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Mr. Donald A. Orr
August 6, 2001
Page 2

     5.   Smithway will reimburse you for all out-of-pocket moving expenses.

     6.   You will receive paid  vacation  leave,  health  insurance,  and other
          benefits at levels  provided  to other  senior  executive  officers of
          Smithway.

     7.   You agree not to compete with  Smithway or any  successor or affiliate
          following  the  term  of  your  employment  as  outlined  herein.   In
          consideration  for your  employment and without further  payment,  you
          agree  not to  solicit  or  divert  customers,  employees,  or  owner-
          operators of Smithway or any successor or affiliate for the benefit of
          yourself  or any other  person or  entity  for a period of six  months
          following  your last day of employment.  In addition,  Smithway or any
          successor or affiliate  may bind you to the  Noncompetition  Agreement
          attached as Exhibit B, pursuant to the terms of such agreement.

     8.   This letter  addresses only the terms of employment while the at-will"
          employment  relationship  continues  and does not create any  specific
          duration of employment or a right to continuing employment.

     9.   In addition to the employment terms discussed above, we are pleased to
          have you join the SMXC board of  directors  effective  with your first
          day of employment.

     10.  You  will be  indemnified  as an  officer  and  director  against  all
          liabilities  and  expenses  reasonably  incurred  in  connection  with
          service for or on behalf of the  company as  provided in the  Articles
          and Bylaws of Smithway and SMXC.

     11.  You shall be entitled to an immediate  lump sum payment  equal to your
          annual  salary as of the date of a change in control of  Smithway  if,
          following  a change in control of  Smithway,  (i) you are  assigned to
          duties  substantially  inconsistent  with  your  position,  duties  or
          responsibilities  with  Smithway  immediately  prior to the  change in
          control or your duties or responsibilities  are substantially  reduced
          as compared with such duties and responsibilities immediately prior to
          the  change in  control;  (ii)  your base  salary,  annual  bonus,  or
          benefits are materially  reduced as compared to  immediately  prior to
          the  change  in  control;  or  (iii)  Smithway  fails  to  obtain  the
          assumption  of  its  obligations  to  perform  this  Agreement  by any
          successor.  For purposes of this  Agreement,  a "change in control" of
          Smithway shall include, but not be limited to, the circumstances where
          (i) any "person" (within the meaning ascribed to such term in Sections
          13(d) and 14(d) of the Securities  Exchange Act of 1934 (the "Exchange
          Act"), as in effect on the date of this Agreement), other than William
          G. and/or Marlys L. Smith, or entities controlled by either or both of
          them (the "Smiths), becomes the "beneficial owner" (as defined in Rule
          13d-3  promulgated under the Exchange Act, as in effect on the date of
          this  Agreement),  directly or  indirectly,  of securities of Smithway
          representing  50% or more of the combined  voting power of  Smithway's
          then issued and outstanding securities;  (ii) during any period of two
          consecutive years,

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Mr. Donald A. Orr
August 6, 2001
Page 3

          individuals  who at the beginning of such period  constitute the Board
          of Directors of Smithway cease for any reason to constitute a majority
          thereof,  unless the  election,  or the  nomination  for  election  by
          Smithway's  stockholders,  of each new director was approved by either
          the  Smiths or a vote of a  majority  of the  directors  then still in
          office who were  directors at the  beginning of the period or who were
          nominated  by such  directors;  (iii)  the  stockholders  of  Smithway
          approve a merger,  consolidation,  or share  exchange of Smithway with
          any other corporation,  other than a merger,  consolidation,  or share
          exchange  which  would  result in the voting  securities  of  Smithway
          outstanding  immediately prior thereto continuing to represent (either
          by remaining  outstanding or by being converted into voting securities
          of the surviving entity) more than 50% of the combined voting power of
          the voting securities of Smithway or such surviving entity outstanding
          immediately   after  such  merger  or   consolidation;   or  (iv)  the
          stockholders  of Smithway  approve a plan of complete  liquidation  of
          Smithway or an agreement  for the sale or  disposition  by Smithway of
          all or  substantially  all of  Smithway's  assets,  in each  case  (i)
          through (iv) except for a transaction that is in substance an internal
          reorganization.  Payment  of such lump sum  amount  shall  extend  the
          Noncompetition   Obligations,   as  defined   and   provided   in  the
          Noncompetition  Agreement  attached  hereto as Exhibit B; provided,  a
          successor's   election   as  to  the  length  of  the   Noncompetition
          Obligations  shall in no way impair the successor's  obligation to pay
          the lump sum amount  described in this  paragraph 11, such  obligation
          being absolute and unconditional.

     12.  Smithway  agrees to reimburse  you for all  reasonable  attorney  fees
          incurred in the drafting and negotiation of this letter  agreement and
          the attached exhibits, with the understanding that such fees shall not
          exceed One Thousand Dollars ($1,000.00).

         Please indicate your agreement with the terms of employment outlined
above by signing below.

                                  Best regards,


                                  /s/ William G. Smith
                                  William G. Smith
                                  Chairman, President, and CEO


AGREED AND ACCEPTED
August 6, 2001

/s/ Donald A. Orr
------------------------
Donald A. Orr