Exhibit 10.27


                                                        
                           MASTER SECURITY AGREEMENT


         THIS MASTER  SECURITY  AGREEMENT (the  AAgreement@)  is made as of the
12th day of November,  1998, by and among GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation with an address at One Lincoln Centre, 5400 LBJ Freeway,
Suite 525,  Dallas,  Texas 75240  (together with is successors and assigns,  if
any, ASecured Party@), and KJ TRANSPORTATION, INC., a corporation organized and
existing  under  the laws of the  State of New York  with its  chief  executive
offices located at 6070 Collette Road, Farmington,  New York 14424 (AKJT@), and
J&L TRUCKING LEASING OF FARMINGTON,  INC., a corporation organized and existing
under  the laws of the  State of New York  with  its  chief  executive  offices
located at 6070 Collette Road,  Farmington,  New York 14224 (J&L),  jointly and
severally (together with KJT being collectively referred to as ADebtor@).

         In consideration of the promises herein contained and of certain other
good and  valuable  consideration,  the  receipt and  sufficiency  of which are
hereby acknowledged, Debtor and Secured Party hereby agree as follows:

1.       CREATION OF SECURITY INTEREST.

         Debtor  hereby  gives,  grants  and  assigns  to  Secured  Party,  its
successors and assigns forever,  a security interest in and against any and all
property listed on any collateral  schedule now or hereafter  annexed hereto or
made a part  hereof  (ACollateral  Schedule@),  and in and  against any and all
additions,  attachments,  accessories  and  accessions  thereto,  any  and  all
substitutions,  replacements or exchanges  therefor,  and any and all insurance
and/or  other  proceeds  thereof  (all  of  the  foregoing  being   hereinafter
individually and collectively  referred to as the ACollateral@).  The foregoing
security interest is given to secure the payment and performance of any and all
debts,   obligations  and  liabilities  of  any  kind,  nature  or  description
whatsoever  (whether primary,  secondary,  direct,  contingent,  sole, joint or
several,  or otherwise,  and whether due or to become due) of Debtor to Secured
Party,  now existing or  hereafter  arising,  including  but not limited to the
payment  and  performance  of  certain  Promissory  Notes  from  time  to  time
identified on any Collateral Schedule (collectively ANotes@ and each a ANote@),
and any renewals,  extensions and modifications of such debts,  obligations and
liabilities  (all  of  the  foregoing  being  hereinafter  referred  to as  the
AIndebtedness@). Notwithstanding the foregoing, and notwithstanding anything to
the contrary contained elsewhere in this Agreement,  to the extent that Secured
Party  asserts a purchase  money  security  interest in any items of Collateral
(APMSI Collateral@):  (i) the PMSI Collateral shall secure only that portion of
the  Indebtedness  which has been advanced by Secured Party to enable Debtor to
purchase,  or acquire rights in or the use of such PMSI  Collateral  (the APMSI
Indebtedness@),   and  (ii)  no  other   Collateral   shall   secure  the  PMSI
Indebtedness.

2.       REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.

         Debtor hereby represents, warrants and covenants as of the date hereof
and as of the date of execution of each Collateral Schedule hereto that:

         (a) Debtor is, and will remain,  duly organized,  existing and in good
standing  under the laws of the State set forth in the first  paragraph of this
Agreement,  has its chief  executive  offices at the location set forth in such
paragraph,  and is, and will  remain,  duly  qualified  and  licensed  in every
jurisdiction wherever necessary to carry on its business and operations;

         (b) Debtor has  adequate  power and  capacity  to enter  into,  and to
perform  its  obligations,  under  this  Agreement,  each  Note  and any  other
documents evidencing, or given in connection with, any of the Indebtedness (all
of the foregoing,  together with any guaranty executed in connection  herewith,
being hereinafter referred to as the ADebt Documents@);

         (c) This  Agreement  and the  other  Debt  Documents  have  been  duly
authorized,  executed and delivered by Debtor and constitute  legal,  valid and
binding agreements,  jointly and severally enforceable against Debtor under all
applicable laws in accordance  with their terms,  except to the extent that the
enforcement  of  remedies  may  be  limited  under  applicable  bankruptcy  and
insolvency laws;

         (d) No approval, consent or withholding of objections is required from
any governmental  authority or instrumentality  with respect to the entry into,
or performance by, Debtor of any of the Debt Documents, except such as may have
already been obtained;

         (e) Except as specified on Schedule A attached hereto, the entry into,
and  performance  by, Debtor of the Debt  Documents will not (i) violate any of
the  organizational  documents  of  Debtor  or  any  judgment,  order,  law  or
regulation  applicable to Debtor, or (ii) result in any breach of, constitute a
default under,  or result in the creation of any lien,  claim or encumbrance on
any of Debtor's  property (except for liens in favor of Secured Party) pursuant
to, any indenture  mortgage,  deed of trust, bank loan,  credit  agreement,  or
other agreement or instrument to which Debtor is a party;

         (f) Except as  specified on Schedule A attached  hereto,  there are no
suits or proceedings  pending or threatened in court or before any  commission,
board or other  administrative  agency against or affecting Debtor which could,
in the aggregate,  have a Material  Adverse Effect.  As used herein,  AMaterial
Adverse  Effect@  shall mean (1) a materially  adverse  effect on the business,
condition  (financial or otherwise),  operations,  performance or properties of
Debtor  or  Guarantor  (as  hereinafter  defined),  taken as a whole,  or (2) a
material impairment of the ability of Debtor or Guarantor, taken as a whole, to
perform  its  obligations  under  or to  remain  in  compliance  with  the Debt
Documents.  Further, Debtor is not in default under any obligation for borrowed
money,  for the  deferred  purchase  price of property  or any lease  agreement
which,  either  individually  or in the  aggregate,  would  have the same  such
effect;

         (g) All financial  statements delivered to Secured Party in connection
with the Indebtedness have been prepared in accordance with generally  accepted
accounting principles  consistently applied (AGAAP@), and since the date of the
most recent financial statement, there has been no material adverse change;

         (h)      The  Collateral  is not,  and will not be,  used by Debtor 
for  personal,  family  or  household purposes;

         (i)      The  Collateral  is, and will  remain,  in good  condition  
and  repair  and  Debtor  will not be negligent in the care and use thereof;

         (j)  Debtor  is, and will  remain,  the sole and  lawful  owner of the
Collateral,  and has the sole right and lawful  authority to grant the security
interest described in this Agreement;

         (k) Debtor is, and will remain, in possession of the Collateral except
as and to the extent that any item of the  Collateral is rented on a short-term
lease  (that is,  for a lease  with a term of less than  thirty  (30)  days;  a
AShort-term Lease@) entered into in the ordinary course of business of Debtor;

         (l) The Collateral  is, and will remain,  free and clear of all liens,
claims and encumbrances of every kind,  nature and description,  except for (i)
liens in favor of Secured Party,  (ii) liens for taxes not yet due or for taxes
being  contested  in good  faith and which do not  involve,  in the  reasonable
judgment of Secured Party,  any risk of the sale,  forfeiture or loss of any of
the Collateral, and (iii) inchoate materialmen's,  mechanic's,  repairmen's and
similar  liens arising by operation of law in the normal course of business for
amounts which are not delinquent (all of such permitted liens being hereinafter
referred to as APermitted Liens@);

         (m) Debtor has reviewed  the areas within its business and  operations
which could be  adversely  affected by, and has  developed  or is  developing a
program to address on a timely  basis,  the AYear 2000  Problem@  (that is, the
risk that computer  applications  used by Debtor may be unable to recognize and
perform properly date-sensitive  functions involving certain dates prior to and
any date on or after  December  31,  1999).  Based on such review and  program,
Debtor  believes that the AYear 2000 Problem@ will not have a Material  Adverse
Effect.  From time to time,  at the  request of  Secured  Party,  Debtor  shall
provide to Secured  Party  such  updated  information  or  documentation  as is
requested regarding the status of its efforts to address the Year 2000 Problem;
and

         (n) So long as any Indebtedness  remains  outstanding,  Transit Group,
Inc. and its  subsidiaries  shall maintain a Fixed Charge Coverage Ratio of not
less  than  1.1:1.0,  determined  as of the  last  day of each  fiscal  quarter
calculated on a rolling four (4) quarter basis.  As used herein,  AFixed Charge
Coverage  Ratio@ shall mean the ratio of (X) the  consolidated  earnings before
income taxes,  depreciation  and  amortization  of Transit Group,  Inc. and its
subsidiaries, minus non-financed capital expenditures, minus cash taxes paid by
Transit Group,  Inc. and its subsidiaries on a consolidated  basis,  divided by
(Y) principal  payments on indebtedness  plus cash interest  expense of Transit
Group,  Inc. and its  subsidiaries on a consolidated  basis.  All  calculations
hereunder shall be made in accordance with GAAP.

3.       COLLATERAL.

         (a) Until the  declaration  of any  default  hereunder,  Debtor  shall
remain  in  possession  of the  Collateral,  except  to  the  extent  that  the
Collateral  is then subject to a Short-term  Lease entered into in the ordinary
course of business of Debtor; provided,  however, that Secured Party shall have
the right to possess (i) any chattel  paper or  instrument  that  constitutes a
part of the  Collateral,  and (ii) any other  Collateral  which  because of its
nature may require that Secured Party's security  interest therein be perfected
by possession.  Secured Party, its successors and assigns, and their respective
agents,  shall have the right to examine and inspect any of the  Collateral  at
any time during normal  business  hours.  Upon any request from Secured  Party,
Debtor shall provide Secured Party with notice of the then current  location of
the Collateral.

         (b) Debtor shall (i) use the Collateral only in its trade or business,
(ii) maintain all of the Collateral in good condition and working order,  (iii)
use and maintain the Collateral only in compliance with all material applicable
laws, (iv) keep all of the Collateral  free and clear of all liens,  claims and
encumbrances  (except  for  Permitted  Liens),  and (v) allow  only  qualified,
properly  licensed  personnel  selected,  employed and  controlled by Debtor to
operate any motor vehicle comprising a portion of the Collateral (except to the
extent  that any such motor  vehicle  is then  subject  to a  Short-term  Lease
entered into in the ordinary course of business of Debtor).

         (c) Debtor  shall not,  without the prior  written  consent of Secured
Party,  (i) part with  possession of any of the  Collateral  (except to Secured
Party or for  maintenance  and repair),  (ii) remove any of the Collateral from
the continental United States and Canada, or (iii) sell, rent, lease, mortgage,
grant a security  interest in or  otherwise  transfer  or encumber  (except for
Permitted  Liens) any of the  Collateral;  except,  in each case, to the extent
that the  Collateral  is  subject to a  Short-term  Lease  entered  into in the
ordinary course of business of Debtor.

         (d)  Debtor  shall pay  promptly  when due all  taxes,  license  fees,
assessments  and public and  private  charges  levied or assessed on any of the
Collateral,  on the use thereof,  or on this Agreement or any of the other Debt
Documents.  At its option,  Secured Party may discharge taxes, liens,  security
interests or other  encumbrances at any time levied or placed on the Collateral
and may pay for the  maintenance,  insurance and preservation of the Collateral
or to effect  compliance  with the terms of this  Agreement or any of the other
Debt Documents.  Debtor shall reimburse  Secured Party, on demand,  for any and
all costs and expenses  incurred by Secured Party in  connection  therewith and
agrees that such reimbursement obligation shall be secured hereby.

         (e) Debtor shall, at all times,  keep accurate and complete records of
the Collateral, and upon two (2) business days= (as hereinafter defined) notice
Secured Party, its successors and assigns,  and their respective agents,  shall
have the right to  examine,  inspect,  and make  extracts  from all of Debtor's
books and records relating to the Collateral at any time during normal business
hours.

         (f) If agreed by the parties, Secured Party may, but shall in no event
be obligated to, accept  substitutions  and exchanges of property for property,
and additions to the property,  constituting all or any part of the Collateral.
Such  substitutions,  exchanges and additions shall be accomplished at any time
and from time to time, by the substitution of a revised Collateral Schedule for
the  Collateral  Schedule now or hereafter  annexed.  Any property which may be
substituted,  exchanged or added as aforesaid shall constitute a portion of the
Collateral  and shall be  subject  to the  security  interest  granted  herein.
Additions to, reductions or exchanges of, or substitutions for, the Collateral,
payments on account of any obligation or liability secured hereby, increases in
the obligations and liabilities  secured hereby,  or the creation of additional
obligations  and liabilities  secured hereby,  may from time to time be made or
occur without  affecting the  provisions of this Agreement or the provisions of
any obligation or liability which this Agreement secures.

         (g) Any third  person at any time and from time to time holding all or
any  portion  of the  Collateral  shall  be  deemed  to,  and  shall,  hold the
Collateral as the agent of, and as pledge  holder for,  Secured  Party.  At any
time and from time to time,  Secured  Party may give notice to any third person
holding all or any portion of the Collateral  that such third person is holding
the Collateral as the agent of, and as pledge holder for, the Secured Party.

4.       INSURANCE.

         The Collateral shall at all times be held at Debtor's risk, and Debtor
shall  keep it insured  against  loss or damage by fire and  extended  coverage
perils, theft,  burglary, and for any or all Collateral which are vehicles, for
risk of loss by collision,  and where requested by Secured Party, against other
risks  as  required  thereby,  for the full  replacement  value  thereof,  with
companies,  in amounts  and under  policies  reasonably  acceptable  to Secured
Party.  Debtor shall,  if Secured  Party so requires,  deliver to Secured Party
policies or  certificates of insurance  evidencing  such coverage.  Each policy
shall name Secured Party as loss payee  thereunder,  shall provide for coverage
to  Secured  Party  regardless  of the  breach  by Debtor  of any  warranty  or
representation  made therein,  shall not be subject to co-insurance,  and shall
provide  for  thirty  (30)  days  written   notice  to  Secured  Party  of  the
cancellation or material modification  thereof.  Debtor hereby appoints Secured
Party as its attorney in fact to make proof of loss,  claim for  insurance  and
adjustments with insurers,  and to execute or endorse all documents,  checks or
drafts in  connection  with  payments  made as a result  of any such  insurance
policies.  Proceeds of  insurance  shall be  applied,  at the option of Secured
Party, to repair or replace the Collateral or to reduce any of the Indebtedness
secured hereby.

5.       REPORTS.

         (a) Debtor shall promptly notify Secured Party within thirty (30) days
after (i) any change in the name of Debtor,  (ii) any  relocation  of its chief
executive offices,  (iii) any change in the location of the principal garage of
any motor vehicle  comprising a portion of the Collateral in the event that any
such motor vehicle fails to return to the originally specified principal garage
location  for a  period  of  ninety  (90)  consecutive  days,  (iv)  any of the
Collateral being lost, stolen, missing,  destroyed,  materially damaged or worn
out, (v) any lien, claim or encumbrance  attaching or being made against any of
the  Collateral  other than  Permitted  Liens,  or (vi) any  malfunction of the
hubodometer  or  odometer  of any motor  vehicle  comprising  a portion  of the
Collateral.

         (b)      Debtor will furnish  Secured  Party (1) within ninety (90) 
                  days after the end of each fiscal year of Debtor,  a 
                  consolidated  balance sheet of Transit Group,  Inc. and its 
                  subsidiaries as at the end of such year, and the related  
                  consolidated  statement of income and  consolidated statement
                  of cash  flows of  Debtor  for such  fiscal  year,  prepared 
                  in  accordance  with  GAAP,  all in reasonable  detail and  
                  certified by  independent  certified  public  accountants  of 
                  recognized standing  selected by Transit Group,  Inc. (which
                  shall be a "Big 6" accounting firm); (2) within ninety (90)
                  days after the end of each fiscal year of Transit Group, Inc.
                  and its  subsidiaries, a  consolidating  balance  sheet of 
                  Transit  Group,  Inc. and its  subsidiaries  as at the end of
                  such year, and the related  consolidating  statement of 
                  income and  consolidating  income of cash flows of Transit 
                  Group,  Inc. and its subsidiaries  for such fiscal year,  
                  prepared in accordance with GAAP;  (3) within  thirty  (30)
                  days after the end of each  fiscal  year of Debtor,  Transit
                  Group,  Inc.=s Board  approved  operating  plan for the next
                  fiscal year;  (4) within  forty-five (45) days after the end 
                  of each quarter,  an unaudited  balance sheet of Transit 
                  Group,  Inc. and its  subsidiaries  as at the end of such  
                  quarter,  and  the  related  statement  of  income  and
                  statement of cash flows of Transit Group,  Inc. and its 
                  subsidiaries  for such quarter,  prepared in  accordance  
                  with GAAP,  except for the absence of footnotes and year-end
                  adjustments;  (5)within  forty-five  (45) days after the end
                  of each  quarter,  a  consolidating  balance sheet of
                  Transit  Group,  Inc.  and  its  subsidiaries  as at the end
                  of such  quarter,  and the  related consolidating  statement 
                  of income and  consolidating  statement of cash flows of
                  Debtor for such quarter,  prepared in  accordance  with GAAP, 
                  except for the absence of  footnotes  and year-end
                  adjustments;  and (6) within ten (10) days  after the date on 
                  which they are filed,  all  regular periodic  reports,  forms 
                  and other  filings  required to be made by Transit  Group, 
                  Inc. to the Securities  and Exchange  Commission,  if any;
                  and (7)  contemporaneously  with the furnishing of  the 
                  financial  statements  required  pursuant  to Clauses  (1)
                  and (3) above,  a duly  completed compliance  certificate  
                  dated  the date of such  financial  statements  and  signed 
                  by the chief financial  officer of Transit Group,  Inc.,  
                  containing a computation of the financial  ratio set
                  forth in Section  2(m)  hereof and to the effect that such  
                  officer  has not become  aware of any default or Event of 
                  Default that has occurred and is  continuing  or, if there is
                  any such event,describing  it and the  steps,  if any, being  
                  taken to cure it.  Upon  two (2)  business  days=notice, 
                  Secured  Party may at any  reasonable  time  examine the 
                  books and records of Debtor and make copies thereof.

6.       FURTHER ASSURANCES.
         (a) Debtor shall,  upon request of Secured  Party,  furnish to Secured
Party such  further  information,  execute  and  deliver to Secured  Party such
documents and instruments  (including,  without limitation,  Uniform Commercial
Code financing  statements) and do such other acts and things, as Secured Party
may at any time reasonably  request relating to the perfection or protection of
the security  interest created by this Agreement or for the purpose of carrying
out the intent of this Agreement.  Without limiting the foregoing, Debtor shall
cooperate  and do all acts deemed  necessary or  advisable by Secured  Party to
continue  in  Secured  Party  a  perfected  first  security   interest  in  the
Collateral,  and shall obtain and furnish to Secured Party any  subordinations,
releases,  landlord, lessor, or mortgagee waivers, and similar documents as may
be from  time  to time  requested  by,  and  which  are in form  and  substance
satisfactory to, Secured Party.

         (b) Debtor  hereby  grants to Secured Party the power to sign Debtor's
name and generally to act on behalf of Debtor to execute and file  applications
for title, transfers of title, financing statements,  notices of lien and other
documents  pertaining to any or all of the  Collateral.  Debtor  shall,  if any
certificate of title be required or permitted by law for any of the Collateral,
obtain such certificate  showing the lien hereof with respect to the Collateral
and promptly deliver same to Secured Party.

         (c) Debtor  assumes and agrees to indemnify,  defend and keep harmless
Secured Party, and any assignee of Secured Party's rights,  obligations,  title
or interests under any Note, its agents and employees ("Indemnitees"), from and
against  any and all Claims (as  hereinafter  defined)  (other than such as may
directly and proximately result from a breach of the Debt Documents or material
violation  of  applicable  law by Secured  Party,  or the gross  negligence  or
willful misconduct of, such Indemnitees),  by paying (on an after-tax basis) or
otherwise discharging same, when and as such Claims shall become due, including
Claims arising on account of (1) any Debt Document,  or (2) the Collateral,  or
any part thereof, including the ordering,  acquisition,  delivery, installation
or rejection of the Collateral,  the possession,  maintenance,  use, condition,
ownership or operation of any item of Collateral, and by whomsoever owned, used
or  operated,  during  the  term of any  Note  with  respect  to  that  item of
Collateral,  the  existence  of  latent  and  other  defects  (whether  or  not
discoverable  by  Secured  Party or  Debtor)  any claim in tort for  negligence
(other than Secured Party=s negligence) or strict liability,  and any claim for
patent, trademark or copyright infringement,  or the loss, damage, destruction,
removal, return, surrender, sale or other disposition of the Collateral, or any
item thereof,  or for whatever  other reason  whatsoever  (other than the items
excluded herein). It is the express intention of both Secured Party and Debtor,
that the indemnity  provided for in this Section  includes Claims for which the
Indemnitees are strictly liable.  Secured Party shall give Debtor prompt notice
of any Claim hereby indemnified against and Debtor shall be entitled to control
the defense and any  settlement  thereof,  so long as no default or Default has
occurred and is then continuing;  provided,  however,  that Secured Party shall
have the right to approve  defense  counsel  selected by Debtor which  approval
will not be  unreasonably  withheld.  For the  purposes of this Debt,  the term
"Claims"  shall mean all  claims,  allegations,  harms,  judgments,  good faith
settlements entered into, suits, actions, debts, obligations,  damages (whether
incidental,    consequential   or   direct),    demands   (for    compensation,
indemnification,   reimbursement  or  otherwise),   losses,  penalties,  fines,
liabilities  (including  strict  liability),  charges  that  Secured  Party has
incurred or for which it is responsible,  in the nature of interest, Liens, and
costs  (including  attorneys'  fees and  disbursements  and any other  legal or
non-legal  expenses of  investigation  or defense of any Claim,  whether or not
such  Claim is  ultimately  defeated  or  enforcing  the  rights,  remedies  or
indemnities provided for hereunder,  or otherwise available at law or equity to
Secured Party), of whatever kind or nature, contingent or otherwise, matured or
unmatured, foreseeable or unforeseeable, by or against any person.

7.       EVENTS OF DEFAULT.

         Debtor shall be in default under this  Agreement and each of the other
Debt  Documents  upon  the  occurrence  of any of the  following  AEvent(s)  of
Default@:

         (a) Debtor fails to pay any  installment or other amount due or coming
due under any of the Debt Documents within ten (10) days after its due date;

         (b) Any  attempt  by  Debtor,  without  the prior  written  consent of
Secured Party,  to sell,  rent, or lease (except for Short-term  Leases entered
into in the ordinary course of business of Debtor)  mortgage,  grant a security
interest in, or otherwise transfer or encumber (except for Permitted Liens) any
of the Collateral;

         (c) Debtor fails to procure,  or maintain in effect at all times,  any
of the  insurance  on the  Collateral  in  accordance  with  Section  4 of this
Agreement;

         (d) Debtor breaches any of its other obligations under any of the Debt
Documents  and fails to cure the same within thirty (30) days after the earlier
of (1) actual knowledge  thereof by any officer of Transit Group,  Inc., or (2)
written notice thereof to Debtor by Secured Party;

         (e) Any warranty, representation or statement made by Debtor in any of
the Debt  Documents  or otherwise in  connection  with any of the  Indebtedness
shall be false or  misleading  in any material  respect at the time as of which
the facts  therein set forth were stated or  certified,  or having  omitted any
substantial contingent or unliquidated liability or Claim against Debtor;

         (f) Any of the  Collateral  being  subjected  to, or being  threatened
with,  attachment,  execution,  levy,  seizure  or  confiscation  in any  legal
proceeding or otherwise (unless such attachment,  execution,  levy,  seizure or
confiscation  is then  being  contested  in good  faith by  negotiations  or by
appropriate   proceedings   which  suspend  the  execution   thereof  and  such
proceedings  do not involve any  substantial  danger (as  determined in Secured
Party=s sole  reasonable  discretion)  of the sale,  forfeiture  or loss of the
Collateral);

         (g) Any  Default  or  Event of  Default  (as such  terms  are  defined
therein) by Debtor under any other agreement between Debtor and Secured Party;

         (h)  Debtor  or  any  guarantor  or  other  obligor  for  any  of  the
Indebtedness  (collectively  AGuarantor@) shall (1) be generally not paying its
debts as they become  due;  or (2) take action for the purpose of invoking  the
protection  of any  bankruptcy  or  insolvency  law, or any such law is invoked
against or with respect to Debtor or Guarantor  or its  property,  and any such
petition filed against  Debtor or Guarantor is not dismissed  within sixty (60)
days;

         (i)  Debtor  shall be in default  under any  material  obligation  for
borrowed  money,  for the  deferred  purchase  price of  property  or any lease
agreement,  and the  applicable  grace period with respect  thereto  shall have
expired, which in any case would have a Material Adverse Effect;

         (j) Any dissolution, termination of existence, merger or consolidation
of Debtor or any  Guarantor  (such  action  being  referred to as an  AEvent@),
unless not less than thirty  (30) days prior to such Event:  (x) such person is
organized and existing  under the laws of the United  States or any state,  and
executes and delivers to Secured  Party an  agreement  containing  an effective
assumption  by  such  person  of the  due  and  punctual  performance  of  this
Agreement;  and (y)  Secured  Party is  reasonably  satisfied  as to the credit
worthiness of such person;

         (k) Debtor  ceases to a  wholly-owned  subsidiary  of Transit  Group, 
Inc.  unless  merged  into  another subsidiary of Transit Group, Inc.; or

         (l) As a result of or in connection  with a change in the ownership of
fifty-one (51) percent or more of the capital stock of Transit Group, Inc., the
ratio of Consolidated  Total Liabilities to Consolidated  Tangible Net Worth of
Transit Group,  Inc.  equals or exceeds twice the ratio of  Consolidated  Total
Liabilities to Consolidated Tangible Net Worth of Transit Group, Inc. as of the
date of this Agreement,  without the prior written consent of Secured Party. As
used herein,  AConsolidated  Tangible Net Worth@ shall mean, on a  consolidated
basis of Transit  Group,  Inc.  and it  subsidiaries,  the excess of all assets
(including the sum of the par or stated value of all outstanding capital stock,
surplus and  undivided  profits,  less any amounts  attributable  to  goodwill,
patents, copyrights,  mailing lists, catalogues,  trademarks, bond discount and
underwriting  expenses,  organization  expense and other  intangibles) over all
liabilities,   as  determined  and  computed  in  accordance   with  GAAP;  and
AConsolidated Total Liabilities@ shall mean, on a consolidated basis of Transit
Group,  Inc. and its subsidiaries,  such liabilities  which, in accordance with
GAAP, would be included on the liability side of a consolidated balance sheet.

 8.      REMEDIES ON DEFAULT.

         (a) Upon the  occurrence of an Event of Default under this  Agreement,
the Secured Party, at its option,  may declare any or all of the  Indebtedness,
including  without  limitation the Notes,  to be  immediately  due and payable,
without  demand  or notice to Debtor  or any  Guarantor.  The  obligations  and
liabilities  accelerated thereby shall bear interest (both before and after any
judgment)  until paid in full at the lower of twelve percent (12%) per annum or
the maximum rate not prohibited by applicable law.

         (b) Upon such declaration of default,  Secured Party shall have all of
the rights and remedies of a Secured Party under the Uniform  Commercial  Code,
and under any other  applicable law.  Without  limiting the foregoing,  Secured
Party  shall have the right to (i) notify any  account  debtor of Debtor or any
obligor on any  instrument  which  constitutes  part of the  Collateral to make
payment to the Secured  Party,  (ii) with or without legal  process,  enter any
premises  where the Collateral  may be and take  possession  and/or remove said
Collateral  from said premises,  (iii) sell the Collateral at public or private
sale, in whole or in part, and have the right to bid and purchase at said sale,
and/or  (iv)  lease  or  otherwise  dispose  of all or part of the  Collateral,
applying proceeds therefrom to the obligations then in default. If requested by
Secured  Party,  Debtor  shall  promptly  assemble the  Collateral  and make it
available to Secured  Party at a place to be  designated by Secured Party which
is reasonably convenient to both parties.  Secured Party may also render any or
all of the Collateral unusable at the Debtor's premises and may dispose of such
Collateral on such  premises  without  liability for rent or costs.  Any notice
which Secured Party is required to give to Debtor under the Uniform  Commercial
Code of the time and  place of any  public  sale or the time  after  which  any
private sale or other  intended  disposition  of the  Collateral  is to be made
shall be deemed to constitute  reasonable notice if such notice is given to the
last  known  address of Debtor at least  five (5)  business  days prior to such
action.

         (c)  Proceeds  from any sale or  lease or other  disposition  shall be
applied:  first,  to  all  costs  of  repossession,  storage,  and  disposition
including without limitation  attorneys',  appraisers',  and auctioneers' fees;
second,  to discharge the obligations then in default;  third, to discharge any
other  Indebtedness of Debtor to Secured Party,  whether as obligor,  endorser,
guarantor,  surety or  indemnitor;  fourth,  to expenses  incurred in paying or
settling liens and claims against the  Collateral;  and lastly,  to Debtor,  if
there exists any surplus.
Debtor shall remain fully liable for any deficiency.

         (d) In the event this Agreement,  any Note or any other Debt Documents
are placed in the hands of an attorney for collection of money due or to become
due or to obtain performance of any provision hereof,  Debtor agrees to pay all
reasonable  attorneys' fees incurred by Secured Party,  and further agrees that
payment of such fees is secured hereunder.

         (e) Secured Party's rights and remedies hereunder or otherwise arising
are cumulative  and may be exercised  singularly or  concurrently.  Neither the
failure nor any delay on the part of the Secured  Party to exercise  any right,
power or privilege  hereunder shall operate as a waiver thereof,  nor shall any
single or partial exercise of any right,  power or privilege preclude any other
or  further  exercise  thereof or the  exercise  of any other  right,  power or
privilege.  Secured  Party shall not be deemed to have waived any of its rights
hereunder or under any other  agreement,  instrument  or paper signed by Debtor
unless such waiver be in writing and signed by Secured  Party.  A waiver on any
one  occasion  shall  not be  construed  as a bar to or  waiver of any right or
remedy on any future occasion.

         (f) DEBTOR HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF
ANY  CLAIM OR  CAUSE OF  ACTION  BASED  UPON OR  ARISING  OUT OF,  DIRECTLY  OR
INDIRECTLY,  THIS  AGREEMENT,  ANY  OF THE  OTHER  DEBT  DOCUMENTS,  ANY OF THE
INDEBTEDNESS  SECURED  HEREBY,  ANY DEALINGS  BETWEEN  DEBTOR AND SECURED PARTY
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP  THAT IS BEING  ESTABLISHED  BETWEEN DEBTOR AND SECURED
PARTY.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL  ENCOMPASSING OF ANY AND
ALL DISPUTES  THAT MAY BE FILED IN ANY COURT  (INCLUDING,  WITHOUT  LIMITATION,
CONTRACT CLAIMS,  TORT CLAIMS,  BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS).  THIS WAIVER IS IRREVOCABLE,  MEANING THAT IT MAY NOT BE
MODIFIED  EITHER  ORALLY  OR IN  WRITING,  AND THE  WAIVER  SHALL  APPLY TO ANY
SUBSEQUENT   AMENDMENTS,   RENEWALS,   SUPPLEMENTS  OR  MODIFICATIONS  TO  THIS
AGREEMENT,  ANY OTHER DEBT  DOCUMENTS,  OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING  TO THIS  TRANSACTION  OR ANY  RELATED  TRANSACTION.  IN THE  EVENT OF
LITIGATION,  THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

9.       MISCELLANEOUS.

         (a) This Agreement,  any Collateral Schedules,  any Note and/or any of
the other Debt Documents may be assigned, in whole or in part, by Secured Party
without notice to Debtor, and Debtor hereby waives any defense, counterclaim or
cross-complaint  by Debtor  against any  assignee,  agreeing that Secured Party
shall be solely  responsible  therefor.  Debtor agrees that if Debtor  receives
written  notice of an  assignment  from  Secured  Party,  Debtor  shall pay all
payments and other amounts due under the assigned Note and Collateral  Schedule
to such assignee or as instructed by Secured  Party.  Debtor  further agrees to
confirm in writing  receipt of the notice of  assignment  as may be  reasonably
requested by Assignee.

         (b) All notices to be given in connection with this Agreement shall be
in writing, shall be addressed to the parties at their respective addresses set
forth  hereinabove  (unless and until a different address may be specified in a
written  notice to the other party),  and shall be deemed given (i) on the date
of receipt if delivered in hand or by facsimile transmission,  (ii) on the next
business day after being sent by express mail, and (iii) on the fourth business
day after being sent by regular,  registered or certified mail. As used herein,
the term  Abusiness  day@ shall mean and include any day other than  Saturdays,
Sundays,  or other  days on which  commercial  banks in New York,  New York are
required or authorized to be closed.

         (c) Secured  Party may correct  patent  errors  herein and fill in all
blanks herein or in any Collateral  Schedule  consistent  with the agreement of
the parties.

         (d) Time is of the essence  hereof.  This Agreement  shall be binding,
jointly and  severally,  upon all parties  described  as the ADebtor@ and their
respective heirs, executors, representatives, successors and assigns, and shall
inure to the benefit of Secured Party, its successors and assigns.

         (e) This Agreement and its Collateral  Schedules constitute the entire
agreement  between the parties  with respect to the subject  matter  hereof and
supersede all prior  understandings  (whether written,  verbal or implied) with
respect  thereto.  This  Agreement and its  Collateral  Schedules  shall not be
changed or  terminated  orally or by course of  conduct,  but only by a writing
signed by both parties  hereto.  Section  headings  contained in this Agreement
have been included for convenience  only, and shall not affect the construction
or interpretation hereof.

         (f) This  Agreement  shall continue in full force and effect until all
of the  Indebtedness has been  indefeasibly  paid in full to Secured Party. The
surrender, upon payment or otherwise, of any Note or any of the other documents
evidencing any of the Indebtedness  shall not affect the right of Secured Party
to retain the Collateral for such other Indebtedness as may then exist or as it
may be reasonably  contemplated will exist in the future.  This Agreement shall
automatically be reinstated in the event that Secured Party is ever required to
return or restore the payment of all or any portion of the Indebtedness (all as
though such payment had never been made).

         (g) THIS  AGREEMENT  AND THE OTHER DEBT  DOCUMENTS  AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, IN ALL RESPECTS,  BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,  THE INTERNAL LAWS OF THE STATE
OF NEW YORK (WITHOUT  REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE),
INCLUDING ALL MATTERS OF CONSTRUCTION,  VALIDITY AND PERFORMANCE, REGARDLESS OF
THE LOCATION OF THE COLLATERAL. The parties agree that any action or proceeding
arising out of or  relating to the Debt  Documents  shall be  commenced  in any
state or Federal court located in New York County,  City of New York,  State of
New York,  and that such courts shall have exclusive  jurisdiction  to hear and
determine any claims or disputes  between or among any of the parties hereto or
thereto  relating to the transaction  contemplated  by this Agreement,  and any
investigation,  litigation or proceeding  related to or arising out of any such
matters;  provided,  however,  that the  parties  hereto  acknowledge  that any
appeals  from  those  courts  may be heard by a court  located  outside of such
jurisdiction.  Each party hereto  expressly  submits and consents in advance to
such jurisdiction in any action or suit commenced in any such court, and hereby
waives any  objection  which  such  party may have based upon lack of  personal
jurisdiction,  improper venue or  inconvenient  form. The parties further agree
that a summons and  complaint  commencing  an action or  proceeding in any such
court shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address set forth herein, or as it
may provide in writing from time to time,  or as otherwise  provided  under the
laws of the State of New York.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
         IN WITNESS WHEREOF,  Debtor and Secured Party, intending to be legally
bound hereby,  have duly executed this Master Security Agreement in one or more
counterparts,  each of which shall be deemed to be an  original,  as of the day
and year first aforesaid.


SECURED PARTY:                            DEBTOR:

GENERAL ELECTRIC CAPITAL                  KJ TRANSPORTATION, INC.
CORPORATION


By: /s/ John E. Hanley                    By: /s/ Philip A. Belyew
Name: John E. Hanley                      Name: Philip A. Belyew
Title: Senior Riask Manager               Title:CEO



                                          J&L TRUCK LEASING OF FARMINGTON, INC.

                                          By:  /s/ Philip A. Belyew
                                          Name: Philip A. Belyew
                                          Title: CEO