<PAGE>

                                                                    Exhibit 10.3

                              EMPLOYMENT AGREEMENT
                              --------------------

     THIS AGREEMENT made effective as of the First day of January, 2002 by and
between P.A.M. TRANSPORTATION SERVICES, INC., a Delaware corporation
(hereinafter referred to as "P.A.M. or "COMPANY") and Larry J. Goddard
(hereinafter referred to as "EMPLOYEE").


                                    RECITALS:

     The following is a recital of facts underlying this Agreement and it
replaces, survives and eliminates all prior agreements and is a continuation of
employment.

     P.A.M. is a holding company which owns various subsidiary corporations
which operate as motor common carriers and desires to encourage EMPLOYEE to use
his best efforts to further develop such business. Hereinafter, P.A.M. and its
subsidiaries (whether or not now existing) shall be referred to collectively as
"COMPANY".

     EMPLOYEE is the Chief Financial Officer and Secretary/Treasurer of P.A.M.
and desires to continue to perform employment services as an employee and
fiduciary of P.A.M.

     NOW, THEREFORE, in consideration of the mutual covenants and agreement of
the parties set forth herein, the parties hereto hereby agree as follows:

     1.   EMPLOYMENT OF EMPLOYEE. P.A.M. hereby continues to employ EMPLOYEE
          ----------------------
and EMPLOYEE hereby continues in the same employment of P.A.M. for the business
conducted by COMPANY for a term commencing on 1 January 2002 and ending at the
close of business on December 31, 2004. If EMPLOYEE is terminated due to medical
disability, EMPLOYEE'S compensation shall be continued for twelve (12) months
thereafter from the determination of disability.

     2.   DUTIES OF EMPLOYEE. EMPLOYEE shall make himself available to serve as
          ------------------
of P.A.M. and, at the request of the Board of Directors, as an officer of its
various subsidiaries, with such specific duties, responsibilities and authority
as may from time to time be assigned to him by the Board of Directors of P.A.M.
which may include, but shall not necessarily be limited to, overall
responsibility for operation of the business of COMPANY in a manner which will
maximize COMPANY'S profits. EMPLOYEE shall devote all of his time, attention,
knowledge and skills solely to the business of COMPANY and EMPLOYEE shall obey
and comply with all rules, regulations and orders issued from time to time by
the P.A.M. Board of Directors. COMPANY shall be entitled to all of the benefits,
profits, or other issues arising from or incident to all work, services, and
advise of EMPLOYEE. EMPLOYEE shall thus devote his full attention to the
operation of the COMPANY and shall not be engaged in any other business or
operation that in any way would inhibit EMPLOYEE from devoting his full
attention to the operation of the company, EMPLOYEE shall be allowed to pursue
other business interests unrelated to the transportation industry as long as the
EMPLOYEE'S participation in the unrelated business does not inhibit the
EMPLOYEE'S ability to devote his full attention to the operation of the COMPANY.

     3.   BASE COMPENSATION AND BONUS. P.A.M. shall pay EMPLOYEE as base
          ---------------------------
compensation for all services to be rendered by EMPLOYEE compensation of
$175,000 Thousand Dollars for the period 1 Jan. 2002 through 31 Dec. 2002 ,
$185,000 Thousand Dollars for the period 1 Jan. 2003 through 31 Dec. 2003 and
$195,000 for the period 1 Jan. 2004 through 31 Dec. 2004 . Each base
compensation amount is respective and specific to the time period of which the
EMPOYEE'S service

<PAGE>

is rendered. Each amount of base compensation for the expressly mentioned time
periods is payable in equal bi-weekly payments. Any increase of EMPLOYEE'S base
compensation shall be at the sole discretion of the Board of Directors of P.A.M.
P.A.M. shall also provide EMPLOYEE with the use of a COMPANY car, as approved by
the P.A.M. Board of Directors, with full reimbursements to EMPLOYEE for business
use upon the submission to COMPANY of proper documentation and shall be entitled
to the fringe benefit package available to executive employees of P.A.M.
EMPLOYEE shall be entitled to all bonuses or bonus programs of which he
participated in prior to entering into this agreement. All future and additional
forms and amounts of bonus compensation shall be determined at the full
discretion of P.A.M. Board of Directors.

         4.   CONFIDENTIALITY. EMPLOYEE shall not at any time or in any manner,
              ---------------
directly or indirectly, divulge, disclose or communicate to any firm, person,
corporation or entity, in any manner whatsoever, any information concerning or
relating to the business of COMPANY, including without limitation, COMPANY'S
customer list, or the methods used by COMPANY in conducting business or any
matter relating to the business of COMPANY, including without limitation, the
prices it obtains or has obtained from the sale of its service, its manner of
operation, its plans, processes or other data, without regard to whether all of
the foregoing matters will be deemed confidential, material or important.
Anything to the contrary notwithstanding, the parties hereto stipulate that any
and all knowledge, data and information gathered by EMPLOYEE through this
Agreement, his employment with P.A.M. and the operation of the business of
COMPANY is deemed important, material and confidential, and gravely affects the
effective and successful conduct of the business of COMPANY and COMPANY'S good
will and that any breach of the terms of this Paragraph 4 shall be deemed a
material breach of this Agreement. This Paragraph 4 shall continue in full force
and effect for the lesser of the three (3) years after the termination or
earlier cancellation of this Agreement or the longest period of time found to be
enforceable by a court of competent jurisdiction and venue as defined herein. In
recognition of the difficulty of determining damages for violation of this
covenant, COMPANY shall be entitled to injunctive relief for the violation
available to it at law, in equity, or under this Agreement (without the
necessity of posting a bond). All reasonable costs of any nature whatsoever
incurred by COMPANY in attempting to enforce this Paragraph 4, including without
limitation, attorneys fees, shall be paid by EMPLOYEE, provided that COMPANY
shall prevail in such proceedings or litigation. If EMPLOYEE shall prevail in
such proceedings or litigations, then COMPANY shall pay all reasonable costs of
any nature whatsoever incurred by EMPLOYEE in defending the proceeding or
litigation, including without limitation, attorneys fees. Any such attorneys
fees shall be calculated on a time and charge basis. If any provision hereunder
shall be determined to be contrary to law, the remainder of this provision shall
constitute the agreement between the parties. This Paragraph shall not be deemed
to prevent EMPLOYEE from making such public disclosures as a person in his
position is required to do from time to time.

         5.   RESTRICTION ON COMPETITION. As a material part of the
              --------------------------

consideration of this Agreement, EMPLOYEE agrees not to compete with COMPANY
during his employment and for one (1) year period following the period of
EMPLOYEE'S employment with COMPANY in the geographic and marketing areas
serviced and to be serviced by COMPANY. EMPLOYEE shall not directly or
indirectly, own, manage, operate, or be connected as an officer, employee,
partner, director, shareholder, adviser or, financially or otherwise, with
anyone else in the conduct of any business or businesses which compete with any
business conducted by the COMPANY. This covenant is restricted geographically to
(i) the United States, or if found to be unenforceable by a final, unappealable
order of a court of competent jurisdiction and venue as defined herein
(hereinafter referred to as "Unenforceable"), (ii) the states in which COMPANY
owns or leases and/or uses and/or has plans for using a business facility at any
time during the term of EMPLOYEE'S employment of if Unenforceable, (iii) within
a one hundred (100) mile radius of such facilities or if Unenforceable, (iv) the
largest geographic area such court will allow. This covenant also includes all
customers of COMPANY regardless of their geographic location. In recognition of
the

<PAGE>

difficulty of determining damages for violation of this covenant, COMPANY shall
be entitled to injunctive relief for the violation hereof, in addition to such
other relief as may be available to it at law, in equity, or under this
Agreement (without the necessity of posting a bond). All reasonable costs of any
nature whatsoever incurred by COMPANY in attempting to enforce this Paragraph 4,
including without limitation, attorneys fees, shall be paid by EMPLOYEE,
provided that COMPANY shall prevail in such proceedings or litigation. If
EMPLOYEE shall prevail in such proceedings or litigations, then COMPANY shall
pay all reasonable costs of any nature whatsoever incurred by EMPLOYEE in
defending the proceedings or litigation, including without limitation, attorneys
fees. Any such attorneys fees shall be calculated on a time and charges basis.
If any provision hereunder shall be deemed to be contrary to law, the remainder
of this provision shall constitute the agreement between the parties. Anything
to the contrary, notwithstanding, this Paragraph 5 shall survive the termination
or earlier cancellation of this Agreement. EMPLOYEE can own up to five (5%)
percent of the stock of publicly traded transportation companies as a passive
investor but shall take no part in the management or direction of such
companies. Additionally, EMPLOYEE shall be paid seventy-five (75%) percent of
base salary paid quarterly, following the termination of his service under this
Agreement and ceasing in (1) one year from that date or sooner if EMPLOYEE
secures a position with another firm or institution or is retained as a
consultant by the COMPANY.

         6.   REMEDIES UPON DEFAULT.
              ---------------------

         6.1  DEFAULT BY EMPLOYEE. EMPLOYEE acknowledges that his loyal,
              -------------------
faithful and effective performance of the employment provided for herein, is of
vital importance to the success of the COMPANY, and that EMPLOYEE'S commitment
to perform for the entire term of this Agreement is an essential inducement to
and condition of COMPANY'S employment of EMPLOYEE, and that premature
termination, abandonment or failure of performance by EMPLOYEE would in all
probability result in substantial damages to the COMPANY, and that EMPLOYEE
possesses peculiar knowledge and expertise important to the success of the
COMPANY. Accordingly, EMPLOYEE expressly warrants and represents to and
covenants with COMPANY that EMPLOYEE shall not voluntarily terminate his
employment with COMPANY or otherwise abandon the full and faithful performance
of his duties of employment prior to the expiration of the term of this
Agreement. In the event that EMPLOYEE shall breach any covenant set forth in
this Paragraph 6.1, COMPANY shall have the right to pursue and enforce any
remedies available to COMPANY by law, at equity or pursuant to this Agreement,
including without limitation, specific performance as a result of such breach.
COMPANY may commence a lawsuit for enforcement of its rights hereunder seeking
damages without waiving any other rights it may possess.

         6.2  DEFAULT BY COMPANY. In the event COMPANY shall terminate the
              ------------------
employment of EMPLOYEE prior to the expiration of the term of this Agreement for
reasons other than good cause, COMPANY'S liability to employee shall be limited
to an amount equal to one-hundred (100%) percent of EMPLOYEE'S compensation as
set forth in paragraph 3 herein for the remainder of the contract term in
complete discharge of any further obligations COMPANY may have to EMPLOYEE by
law, in equity or under this Agreement. If such termination is for good cause,
COMPANY shall pay to EMPLOYEE an amount equal to one month of EMPLOYEE'S annual
compensation and shall not be liable to EMPLOYEE for any further damages or
severance compensation whatsoever. COMPANY shall be deemed to have terminated
EMPLOYEE without good cause if COMPANY conditions EMPLOYEE'S further employment
upon changing his residence from northwest Arkansas.

         7.   EXCLUSIVE CONSULTING CONTRACT. Upon termination of EMPLOYEE'S
              -----------------------------
employment with COMPANY for any reason whatsoever, COMPANY shall have the right,
at its option, to retain EMPLOYEE as an independent consultant under an
exclusive consulting contract, for the performance by EMPLOYEE of such duties as
may be reasonably assigned by the Board of Directors of P.A.M. consistent with
the position of an independent consultant, and EMPLOYEE shall be bound by the
restrictions on competition set forth in Paragraphs 4 and 5 hereof. EMPLOYEE
shall be entitled to full compensation for his services under such consulting
contract to an annual fee equal to seventy-five (75%) percent of his average
total annual compensation hereunder, averaged over the term of his employment
with COMPANY from 1 Jan. 2002 and through 31 Dec. 2004 , payable in equal
monthly payments. The specific terms

<PAGE>

regarding the actual services to be performed, length of service and other
contractual terms not set forth in this paragraph, shall be mutually agreeable
to the EMPLOYEE and the COMPANY.

         8.   OPTION TO EXTEND. COMPANY shall have the right to extend this
              ----------------
Agreement for an additional one (1) year beyond termination of this Agreement.
The EMPLOYEE'S annual salary for the one-year option period shall be $205,000
payable in equal bi-weekly payments. COMPANY may elect to exercise this
extension right at any time prior to

         9.   MISCELLANEOUS.
              -------------

         9.1  NON-WAIVER. No covenant or condition of this Agreement may be
              ----------
waived except by the written consent of the COMPANY. Forbearance or indulgence
by COMPANY in any regard whatsoever shall not constitute a waiver of the
covenants or conditions to be performed by EMPLOYEE to which the same may apply,
and, until complete performance by EMPLOYEE of said covenant or condition,
COMPANY shall be entitled to invoke any remedy available to COMPANY under this
Agreement or by law or in equity, despite said forbearance or indulgence.

         9.2  MODIFICATION OF AGREEMENT. This instrument constitutes the entire
              -------------------------
agreement between P.A.M. and EMPLOYEE and no modification, extension, waiver,
renewal or termination of the Agreement or any of the provisions hereof may be
binding upon either party unless made in writing and signed by each of the
parties. No modification of this Agreement may be signed by COMPANY, except upon
approval by the P.A.M. Board of Directors.

         9.3  NOTICES. Service of all notices under this Agreement shall be
              -------
sufficient if given personally or mailed by certified mail, return receipt
requested, with postage prepaid, addressed to the party involved at the address
set forth below or at such other address as such party shall provide in writing
from time to time. Any notice mailed to such address shall be effective when
deposited in the United States mail.

         COMPANY: P.A.M. Transportation Services, Inc.      Robert W.  Weaver
                  P.O. Box 188                         and  P.O. Box 188
                  Tontitown, AR  72770                      Tontitown, AR  72770



         EMPLOYEE: Larry Goddard
                   P.O. Box 576
                   Tontitown, AR  72770



         9.4  PARAGRAPH HEADINGS. The titles to the paragraphs of this Agreement
              ------------------
are for convenience of the parties only and shall not affect in any way the
meaning or construction of any Paragraph of this Agreement.

         9.5  SEVERABILITY. All agreements, terms and covenants contained herein
              ------------
are severable and in the event any of them, with the exception of those
contained in Paragraph I, shall be held to be invalid by a court of competent
jurisdiction and venue as defined herein, this Agreement shall be interpreted as
if such invalid agreements, terms or covenants were not contained herein unless
within thirty (30) days of the issuance of a final and unappealable Order of a
Court of competent jurisdiction and venue, COMPANY shall have tendered to
EMPLOYEE in the manner provided for notices hereunder, its election to cancel
this Agreement.

<PAGE>

         9.6  SUCCESSORS. This agreement shall be binding on any successor to
              ----------
the COMPANY and shall also remain binding on EMPLOYEE in the event the COMPANY
is acquired, merged, consolidated or a change in control occurs.

         9.7  TIME OF THE ESSENCE. Time is to be deemed of the essence of this
              -------------------
Agreement and each and all of its provisions.


         9.8  CONSTRUCTION. This Agreement shall be construed according to the
              ------------
laws of the State of Delaware and exclusive jurisdiction and venue shall be
deemed to lie within the Circuit or Chancery Courts of Washington County,
Arkansas.

         10.  BINDING EFFECTS. This Agreement shall, upon approval of the Board
              ---------------
of Directors of P.A.M. by corporate resolution, be binding upon the parties
hereto, their successors, assigns, heirs, estates or legal representatives and
shall ensure to the benefit of COMPANY and its successors and assigns. Each
subsidiary of P.A.M., of whether presently existing, shall be a third party
beneficiary of this Agreement. This Agreement contains the entire consideration
to EMPLOYEE during the tenure of this contract and supercedes all previous
agreements.

         IN WITNESS WHEREOF, the parties hereto have hereunto caused this
Agreement to be executed and delivered as of the date first above written.

P.A.M. TRANSPORTATION SERVICES, INC.,             EMPLOYEE
a Delaware corporation

BY: /s/ Robert W. Weaver        2/28/02       /s/ Larry J. Goddard      2/28/02
    ----------------------     ---------      --------------------     --------
    Title President              Date                                     Date