Compensation Committee

This report has been prepared by Messrs. Brian R. Blackmarr, Chairman, W. Mike Baggett and Leroy Hallman, serving as the Company's Compensation Committee during 2003. Each member is an Independent Director. We are responsible for overseeing the development and administration of all compensation policies and programs for Executive Officers of the Company.

We seek to design compensation programs that align the interests of such officers with the Company's shareholders. We have implemented compensation programs we believe will enhance the profitability of the Company, and reward such officers for efforts to achieve enhanced profitability. We believe the compensation programs allow the Company to attract, motivate, and retain the services of its Executive Officers.

The executive compensation package is designed to retain senior management by providing total compensation comparable to the Company's competitors. To align the interests of the Company's executives with the interests of shareholders, a substantial portion of each executive's compensation is provided through annual and long-term incentive plans. Such plans place a substantial portion of the executives' compensation packages at risk and serve as an integral component of the Company's executive compensation philosophy. We believe the executives' attentions are better balanced between achieving short-term business goals and increasing the long-term value of the Company with a "pay-at-risk" policy. The programs reward Executive Officers for successful leadership when certain levels of Company performance are achieved. The Company's Executive Officer compensation program also provides base salary, supplemental retirement benefits and other benefits, including medical and retirement plans generally available to all Company employees.

We periodically retain the services of an outside consulting firm to review the Company's executive compensation practices. Such a review of base salary, short-term bonus and long-term incentives was completed in February of 2004. These reviews also cover retirement benefits for the Company's executive officers as measured against the competitive pay practices of a peer group of publicly-traded trucking companies. The major components of executive compensation are detailed below.

Base Salary
As part of the review performed by outside consultants, base salary levels of the executives are reviewed to ensure comparability with other publicly-traded trucking companies. Base salary levels of executive officers have been set below the market median of the amounts paid to such peer group executives in the past. We directed our outside consultants to compare compensation practices with a peer group of twelve publicly traded companies with operations most similar to the Company's. Based on this study and our recommendations, the Board approved a 10% increase in Mr. Stubbs base salary effective January 1, 2004.

Annual Incentive/bonus Compensation
The Company's shareholders reapproved the incentive compensation program in 1999. The program is designed to reward key employees for the Company's performance based on the achievement of performance goals established prior to the particular year. Components of annual incentive compensation include an Incentive Bonus Plan (the "Incentive Plan") covering all full-time FFE employees (including Executive Officers) and the FFE Transportation Services, Inc. 1999 Executive Bonus and Phantom Stock Plan (the "Executive Plan"), which covers only the key employees. Both plans focus on operational efficiencies. An Executive Officer's total cash compensation rises above the peer group market median as the Company's performance rises above the median performance of the Company's peer group. For 2002 and 2003, reflecting Company performance, no cash bonuses were awarded under these plans.

Other Compensation
The Company has previously entered into Split Dollar Agreements with each of the Stubbs Irrevocable 1995 Trust and the Robertson Irrevocable 1995 Trust for the benefit of Stoney M. Stubbs, Jr. ("Stubbs") and Charles G. Robertson ("Robertson"). Under the Agreements, the Company agreed to pay certain premium payments under split dollars life insurance policies, and the Trusts agreed to repay such premiums to the Company on the earlier of surrender or cancellation of each policy for its cash value or upon payment of death benefits. Due to changes in the law and other pertinent factors, the Board terminated such obligation to pay premiums. Awards to offset adverse consequences resulting from the revised arrangement for fiscal year 2003 are disclosed in the "Summary Compensation Table".

Long-term Incentive Compensation
The Company's long-term incentive compensation is comprised of stock options and phantom equity programs. These serve to align the interests of the executive officers and other key employees with shareholder interests by linking executive pay with shareholder return. These programs also act as a counter-balance to the short-term goals and responsibilities of the Incentive Plan and Executive Plan.

The 2002 Incentive and Nonstatutory Option Plan, (the "2002 Plan") as approved by shareholders, provides that the exercise price for incentive stock options may not be less than the fair market value of the Common Stock on the date of grant. We or the Board determine the exercise price of nonstatutory stock options under the 2002 Plan. The exercise price may not be less than 50% of the fair market value of a share of the Common Stock on the date of grant. Options granted under the 2002 Plan may not be outstanding for more than ten years. On May 14, 2003, Mr. Stubbs was granted an option to purchase 90,000 shares of common stock under the 2002 Plan.

Supplemental Executive Retirement and 401(k) Wrap Plans
To provide supplemental retirement benefits to Executive Officers and other key members of management, the Company maintains the SERP and 401(k) Wrap Plans, respectively. The SERP provides benefits limited by the Code by awarding phantom stock units. The 401(k) Wrap Plan supplements the Company's 401(k) Plan by allowing benefits supplemental to those limited by the Code.

Both the SERP and the 401(k) Wrap Plan are unfunded deferred compensation arrangements not subject to the annual reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974. Awards under both the SERP and the Wrap Plan for fiscal year 2003 are disclosed in the "Summary Compensation Table".

Compensation for the Chief Executive Officer
During 2003, Mr. Stubbs served as the Chairman of the Board, President and Chief Executive Officer of the Company. For 2003, 2002 and 2001, Mr. Stubbs' base salary was approximately $318,000. For 2003, Mr. Stubbs did not receive payments under the Company's Incentive Plan or Executive Plan. As disclosed in the "Summary Compensation Table", Mr. Stubbs received approximately $307,000 in other compensation, $296,000 of which relates to an award to offset a portion of the adverse consequences associated with the revised split-dollar life arrangement referred to above.

We evaluate Mr. Stubbs' performance by the same criteria established for all Company executives. We made an assessment of Mr. Stubbs' contributions to enhancing the Company's performance, his individual performance, and the compensation paid to chief executive officers of the Company's peer group to determine Mr. Stubbs' total compensation.

Deductibility of Executive Compensation
The Company has entered into Change in Control Agreements ("Agreements") with each of the Executive Officers whereby such individuals will be entitled to receive payments if they are terminated without cause or resign with good reason within specified periods following the occurrence of certain events deemed to involve a change in control of the Company. See "Change in Control Agreements". under Section 162(m) of the Code, the federal income tax deduction for certain types of compensation paid to the chief Executive Officer and up to four of the other most highly compensated Executive Officers of publicly-held companies is limited to $1 million per officer per fiscal year unless such compensation meets certain requirements. In determining the amount of compensation paid to the chief executive officer or the four other most highly compensated executive officers, "performance-based compensation" under Section 162(m) of the Code is disregarded. Additionally, Section 280G of the Code disallows a deduction for certain compensation paid upon a change in control of the Company. We are aware of the limitations of Section 162(m) and 280G of the Code and believe that no compensation paid by the Company will exceed these limitations, except possibly a portion of the sums payable pursuant to the Agreements in the event of a change in control of the Company, if paid.

The undersigned members of the Compensation Committee have submitted this Report to the Board of Directors.