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                                                                   Exhibit 10.38

                              EMPLOYMENT AGREEMENT

        This employment agreement ("Agreement") is made and entered into
effective January 12, 2004 by and between Velocity Express, Inc., hereinafter
referred to as "the Company" or "Velocity", and Robert B. Lewis, hereinafter
referred to as "Employee".

        Article 1. Employment and Term
        1.01. The Company hereby agrees to employ Employee in the capacity of
Chief Financial Officer and Employee hereby accepts and agrees to such
employment from and after the date of this Agreement, on the terms and
conditions of this Agreement. Subject to the termination provisions herein, the
term of this Agreement will be for two years from the date hereof and will be
renewed only at the discretion of the Company.
        1.02. Employee shall generally have the authority, responsibilities, and
perform such duties as are customarily performed by a Chief Financial Officer
and senior executive in other or similar businesses as those engaged in by the
Company. Employee shall also render such additional services and duties as may
be reasonably requested of him from time to time by the Company.
        1.03. Employee shall report to Vincent Wasik, the Company's Chairman and
CEO unless otherwise agreed to by Employee and the Company.
        1.04. For purposes of this Agreement, EBITDA shall be defined as set
forth in Exhibit C hereto. This definition will remain consistent for the term
of the Agreement.

        Article 2. Best Efforts
        2.01. Employee agrees that he will at all times faithfully,
industriously, and to the best of his ability, experience, and talents, perform
all of the duties that may be required of and from him pursuant to the express
and implicit terms of this Agreement, to the reasonable satisfaction of the
Company.

        Article 3. Compensation and Benefits
        3.01 Subject to the adjustments provided for herein, Employee will be
paid a base salary of Three-Hundred Thousand Dollars ($300,000), pursuant to the
Company's normal payroll procedures and dates. Employee's base salary shall be
increased to $350,000 in the event that the Company achieves an EBITDA as a
percentage of revenue of 5.0% for any fiscal quarter during the term of this
Agreement. Any increase in Employee's base salary shall be made consistent with
the directions of the Compensation Committee of the Company's Board of
Directors.
        3.02 Upon execution of this Agreement, Employee shall be entitled to
receive a bonus of $150,000 to be paid in the form of 100,000 shares of the
Company's Series I Preferred Stock or other comparable security (initially equal
to 1,000,000 shares of common stock). Additionally, upon execution of this
agreement, Employee shall be eligible to purchase 200,000 shares of the
Company's Series I Preferred Stock or other comparable security (initially equal
to 2,000,000 shares of common stock) at an aggregate purchase price of $300,000.
Such purchase shall be subject to any required shareholder approvals and shall
have Registration Rights for the above referenced securities,

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consistent with those provided for in connection with the private placement of
the Company's Series I Convertible Preferred Stock.

        3.03 Cash Bonus. Employee shall be eligible to receive the following
cash bonus payments subject to achieving the respective requirements:

        (a)     $100,000 annual bonus in the event that the Company achieves an
                EBITDA, as defined in section 1.04, as a percentage of revenue
                of 2.5%. This bonus will be $50,000 if the Company achieves
                EBITDA, as defined in section 1.04, as a percentage of revenue
                of 2.5% in either of the final two quarters of the Company's
                fiscal year during the term of this Agreement;
        (b)     $200,000 annual bonus in the event that the Company achieves an
                EBITDA, as defined in section 1.04, as a percentage of revenue
                of 3.5%. This bonus will be $100,000 if the Company achieves
                EBITDA, as defined in section 1.04, as a percentage of revenue
                of 3.5% in either of the final two quarters of the Company's
                fiscal year during the term of this Agreement;
        (c)     $300,000 annual bonus in the event that the Company achieves an
                EBITDA, as defined in section 1.04, as a percentage of revenue
                of 5.0%. This bonus will be $150,000 if the Company achieves
                EBITDA, as defined in section 1.04, in either of the two
                quarters of the Company's fiscal year during the term of this
                Agreement.
        (d)     If a new bonus plan is not developed and implemented by the
                Company's Compensation Committee prior to June 30, 2004, the
                bonus plan set forth in 3.03 (a)-(c) will remain in place for
                the following fiscal year.
        3.04 During the term of this Agreement, Employee shall be entitled to
receive a warrant to purchase up to a total of 2,000,000 shares of the Company's
common stock subject to the Company achieving the EBITDA, as defined in section
1.04, targets set forth in Section 304 (a)-(c) below. All warrants will have an
exercise price equal to the 20-day trailing average of the Company's common
stock as of the date warrant is earned. These warrants will be exercisable for a
period of at least ten (10) years from the date they are earned, which is deemed
to be the last day of the second consecutive quarter that the EBITDA, as defined
in section 1.04, targets where achieved. In addition, these Warrants shall have
Registration Rights described in Section 3.02 herein.

        (a)     a warrant to purchase 500,000 shares of common stock if the
                Company achieves an EBITDA as a percentage of revenue of 2.5%
                for two consecutive fiscal quarters;
        (b)     a warrant to purchase an additional 500,000 shares of common
                stock if the Company achieves an EBITDA as a percentage of
                revenue of 3.5% for two consecutive fiscal quarters;
        (c)     a warrant to purchase an additional 1,000,000 shares of common
                stock if the Company achieves an EBITDA as a percentage of
                revenue of 5.0% for two consecutive fiscal quarters;
        3.05. Employee shall be eligible to receive such fringe benefits as are,
and may be, made available to other employees of the Company from time to time
in the exclusive discretion of the Company's Board of Directors. Such benefits
may include, but are not limited to, a medical and dental plan, short-term
disability plan, long term disability plan, and a life insurance plan. The

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Company is not obligated to provide or continue any of these benefits and may,
without any prior notice, discontinue any benefit already provided or as may be
provided in the future, within the exclusive discretion of the Company's Board
of Directors.

        Article 4. Vacation and Leave
        4.01. Employee is entitled to four (4) weeks of paid vacation per year
consistent with the Company's policy, in addition to the Company's normal
holidays. Vacation time will be scheduled taking into account the Employee's
duties and obligations at the Company. Sick leave, holiday pay and all other
leaves of absence will be in accordance with the Company's stated personnel
policies.

        Article 5. Termination
        5.01. Employee may resign his position and terminate his/her employment
by giving the Company thirty (30) days written notice of his intention to
resign. The Company may, at its option, waive the remaining notice period and
terminate Employee immediately without any notice period or severance
obligations. If requested by the Company, Employee agrees to cooperate in
training his successor until his actual termination. In the event of such
resignation, Employee shall receive only that compensation earned through his
last day of employment and all or a portion of any bonus due Employee pursuant
to any bonus plan or arrangement established prior to termination, to the extent
earned or performed based upon the requirements or criteria of such plan or
arrangement, as the Board shall in good faith determine. Subject to the thirty
(30) day notice period provide for in this section, Employee may resign his
position and be entitled to severance benefits outlined in section 5.05 if the
resignation is for "Good Reason", as defined in Exhibit B.
        5.02. The Company may, subject to applicable law, terminate this
Agreement by giving Employee two (2) months notice if Employee, due to sickness
or injury, is prevented from carrying out his essential job functions for a
period of six (6) months or longer. In the event of such termination, Employee
shall receive the compensation and benefits provided for in Section 5.05 for the
remaining period of the contract but, in no event, for a period longer than
one-year or shorter than six-months.
        5.03. Employee's employment and this Agreement will be deemed terminated
upon the death of the Employee. In the event of such termination, the Employee's
heir(s), as identified on the Employee's life insurance beneficiary card, shall
receive only compensation earned through the date of termination provided,
however, that Employee, or his estate, shall be entitled to all or a portion of
any bonus due Employee pursuant to any bonus plan or arrangement established
prior to termination, to the extent earned or performed based upon the
requirements or criteria of such plan or arrangement, as the Board shall in good
faith determine.
        5.04. Any other provision of this Agreement notwithstanding, the Company
may terminate Employee's employment without notice if the termination is based
on any of the following events that constitute Cause:

        (a)     Any conviction or nolo contendere plea by Employee to a felony
                or gross misdemeanor, or misdemeanor involving moral turpitude;
                or

        (b)     Any fraud, misappropriations or embezzlement, breach of
                confidentiality, noncompetition, fiduciary duty or other
                obligation to Company, by Employee or intentional material
                damage to the property or business of the Company.

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        In the event of such termination, and not withstanding any contrary
provision otherwise stated, Employee shall receive only his base salary earned
through the date of termination.

        5.05 During the two (2) year period of this Agreement, if the Company
terminates Employee's employment for any reason other than those listed in
Sections 5.02, 5.03 or 5.04 above, the Company, its successors or assigns,
shall:

        (a)     pay Employee as severance pay each month for twelve (12)
                consecutive months following his termination his monthly base
                salary in effect at the time of separation, less customary
                withholdings, in addition to his ordinary benefits, beginning
                one (1) month after termination; and
        (b)     if Employee timely elects to continue his group health and
                dental insurance coverage pursuant to applicable
                COBRA/continuation law and the terms of the respective benefit
                plans, pay on Employee's behalf the premiums for such coverage
                for the lesser of (i) Severance Period, (ii) such time as
                Employee's COBRA/continuation rights expire, and (iii) the date
                on which Employee becomes eligible to participate in any other
                health and welfare benefit program with comparable benefits; and
        (c)     in addition, any bonus will be paid pro rata at the time of
                termination if the Company has, based upon audited results,
                achieved the bonus related goals.

        5.06 At the termination of this Agreement, the Company may, in its sole
discretion, extend, renew or renegotiate the Agreement. Any such renewal or
extension must be in writing. In the event that the Company elects to not renew
or extend this Agreement, the Company shall offer to Employee severance for a
period of twelve (12) month (the "Severance Option") in exchange for Employee
executing a restrictive covenant as set forth in Exhibit A, hereto. If the
Company offers, and Employee accepts the Severance Option, the Company will pay
the severance benefits set forth in Section 5.05 hereof, beginning one (1) month
after termination.
        5.07 Change of Control. In the event of a Change of Control, as defined
herein, Employee shall be entitled to resign his position, subject to the
limitations and obligations of Section 5.01 hereof, and will be entitled to
receive the severance and benefits provided for under Section 5.05 hereof.
Immediately preceding a Change of Control, all unvested Warrants will be deemed
earned and vested as if all targets were achieved. The strike price of such
Warrants not previously vested shall be the 20-day average immediately preceding
the Change of Control. In addition a bonus will be paid as though the full year
target was earned. Change of Control shall mean that (i) Vincent Wasik shall
cease to hold his position as the Company's Chairman of the Board, or (ii) TH
Lee Putnam Ventures, and its related entities, shall sell more that twenty
percent (20%) of the securities of Velocity Express Corporation owned by it as
of the date of this Agreement, or (iii) Employee is required to use as his main
office a location outside of Fairfield County Connecticut or Manhattan, New
York.

        Article 6. Nondisclosure
        6.01. Except as permitted or directed by the Company or as may be
required in the proper discharge of Employee's employment hereunder, Employee
shall not, during the Term or at any time thereafter, as defined in section
6.03,divulge, furnish or make accessible to anyone or use in any way

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any confidential, trade secret or proprietary information of the Company,
including without limitation, customer lists, customer files or information,
planning and financial information, contracts, sales and marketing information,
business strategy or opportunities for new or developing business, which
Employee has prepared, acquired or become acquainted with during his employment
by the Company. Upon termination of Employee's employment for any reason,
Employee shall promptly return to the Company all such confidential, trade
secret and proprietary information, including all copies thereof, then in
Employee's possession, control or influence, whether prepared by Employee or
others.
        6.02. The Employee understands and agrees that any violation of this
Article 6 while employed by the Company may result in immediate disciplinary
action by the Company, including termination of employment.
        6.03. The provisions of this Article 6 shall survive termination of this
Agreement and will continue during the period of any severance or termination
payments.

        Article 7. Miscellaneous
        7.01. Governing Law. This Agreement shall be governed and construed
according to the laws of the State of Connecticut without regard to conflicts of
law provisions. The parties further agree that all legal actions hereunder shall
only be brought in an appropriate Connecticut court and both parties hereby
consent to such exclusive jurisdiction.
        7.02. Successors. This Agreement is personal to Employee and Employee
may not assign or transfer any part of his rights or duties hereunder, or any
compensation due to him hereunder, to any other person or entity. This Agreement
may be assigned by the Company and the Company may require any successors or
assigns to expressly assume and agree to perform the Company's obligations under
this Agreement.
        7.03. Waiver. The waiver by the Company of the breach or nonperformance
of any provision of this Agreement by Employee will not operate or be construed
as a waiver of any future breach or nonperformance under any such provision of
this Agreement or any similar agreement with any other employee.
        7.04. Modification. This Agreement supersedes and replaces any and all
prior oral or written understandings or agreements, if any, between the parties
relating to the subject matter of this Agreement, which are hereby revoked.
Additionally, the severance provisions of Article 5 supersede and replace all
rights Employee may otherwise have under the Company's regular severance or
termination policies. The parties agree that this Agreement (a) is the entire
understanding and agreement between the parties and (b) is the complete and
exclusive statement of the terms and conditions thereof, and there are no other
written or oral agreements in regard to the subject matter of this Agreement.
This Agreement shall not be changed or modified except by a written document
signed by the parties hereto.

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        IN WITNESS WHEREOF the following parties have executed the above
instrument the day and year first above written.

                                             Velocity Express, Inc.


                                             By:
                                                  ------------------------------

                                             -----------------------------------
                                             Employee

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                                    Exhibit A

        In the event Employee is offered and accepts the Severance Option under
Article 7.02 of this Agreement, he will sign a restrictive covenant that
includes the following terms.

Restrictive Covenants
        The Company and Employee recognize and agree that: (i) Employee has
received, and will in the future receive, substantial amounts of highly
confidential and proprietary information concerning the Company, its business,
customers and employees; (ii) as a consequence of using or associating himself
with the Company 's name, goodwill, and reputation, Employee will develop
personal and professional relationships with the Company 's current and
prospective customers and clients; and (iii) provision for non-competition and
non-recruitment obligations by Employee is critical to the Company 's continued
economic well-being and protection of the Company 's confidential and
proprietary business information. In light of these considerations, this section
sets forth the terms and conditions of Employee's obligations of non-competition
and non-recruitment during the Term of and subsequent to the termination of this
Agreement and/or Employee's employment for any reason.
        Unless the obligation is waived or limited by the Company as set forth
herein, Employee agrees that during the term of Employee's employment pursuant
to this Agreement and for a period of twelve (12) months following termination
of Employee's employment by the Company for which severance is paid, Employee
will not directly or indirectly (a) solicit or do competitive business with any
person or entity that is or was a customer or vendor of the Company within the
twelve (12) months prior to the date of termination, or (b) engage within the
North American markets in which the Company engages in business at the time of
termination, in any similar or related business activity in competition with the
Company 's direct line of business as conducted at the time of Employee's
termination. Among all other competitive actions that are likewise restricted,
Employee shall not cause or attempt to cause any existing or prospective
customer, client or account who then has a relationship with the Company for
current or prospective business to divert, terminate, limit or in any adverse
manner modify, or fail to enter into any actual or potential business with the
Company.
        At its sole option, the Company may, by express written notice to
Employee, waive or limit the time and/or geographic area in which Employee
cannot engage in competitive activity or the scope of such competitive activity.
        For a period of twelve (12) months following termination of Employee's
employment by the Company for which severance is paid, Employee will not
initiate or actively participate in any other employer's recruitment or hiring
of any of the Company 's employees.
        Employee agrees that breach by him of the provisions of this article
will cause the Company irreparable harm that is not fully remedied by monetary
damages. In the event of a breach or threatened breach by Employee of the
provisions of this article, the Company shall be entitled to an injunction
restraining Employee from directly or indirectly competing or recruiting as
prohibited herein, without posting a bond or other security. Nothing herein
shall be construed as prohibiting the Company from pursuing any other equitable
or legal remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. Employee agrees that the
Company shall be entitled to recover its costs of litigation and attorney fees
incurred in enforcing this Agreement. In the event there is a finding in favor
of the Employee, the Company agrees to reimburse

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the Employee for all costs of litigation and attorney's fees incurred in the
course of defending or enforcing this Agreement.

        The Employee understands and agrees that any violation of this article
while employed by the Company may result in immediate disciplinary action by the
Company, including termination of employment.

        The obligations contained in this article shall survive the termination
of this Agreement and will continue during the period of any severance or
termination payments.

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                                    Exhibit B

"Good Reason" means, without Employee's express written consent, the occurrence
of any of the following events:

        (i)     the assignment to the Employee of any duties or responsibilities
                (including reporting responsibilities) that is inconsistent in
                any material and adverse respect with the Employee's
                position(s), duties, responsibilities or status with the Company
                or any material and adverse diminution of such duties or
                responsibilities (other than temporarily while incapacitated
                because of physical or mental illness) or (B) a material and
                adverse change in the Employee's titles or offices (including,
                if applicable, membership on the Board) with the Company;
        (ii)    A reduction by the Company in the Employee's rate of annual base
                compensation or annual target bonus opportunity (including any
                material and adverse change in the formula for such annual bonus
                target) as the same may be increased from time to time
                thereafter;
        (iii)   Any requirement by the Company that the Employee use as his
                primary office an office outside of Fairfield County,
                Connecticut or Manhattan, New York;
        (iv)    Any material breach of the Agreement by the Company.

Notwithstanding the foregoing, a Good Reason event shall not be deemed to have
occurred if the Company cures such action, failure or breach within ten (10)
days after receipt of written notice thereof by the given Employee. Employee's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any event or condition constituting Good Reason; provided however,
that the Employee must provide notice of termination of employment within ninety
(90) days following Employee's knowledge of an event constituting Good Reason or
such event shall not constitute Good Reason under this Agreement.

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                                    Exhibit C

EBITDA - with respect to any Person for any fiscal period, an amount equal to
(a) consolidated net income of such Person for such period, minus (b) the sum of
(i) income tax credits, (ii) interest income, (iii) gain from extraordinary
items for such period, (iv) any aggregate net gain (but not any aggregate net
loss) during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), and (v) any other non-cash gains which have been
added in determining consolidated net income, in each case to the extent
included in the calculation of consolidated net income of such Person for such
period in accordance with GAAP, but without duplication, plus (c) the sum of (i)
any provision for income taxes, (ii) Interest Expense, (iii) loss from
extraordinary items for such period, (iv) the amount of non-cash charges
(including depreciation and amortization) for such period, (v) amortized debt
discount for such period, and (vi) the amount of any deduction to consolidated
net income as the result of any grant to any members of the management of such
Person of any capital stock, SARs, options, warrants or capital stock
equivalents of such Person, in each case of (a), (b) and (c) to the extent
included in the calculation of consolidated net income of such Person for such
period in accordance with GAAP as modified by the following sentence, but
without duplication. For purposes of this definition, the following items shall
be excluded in determining consolidated net income of a Person: (1) the income
(or deficit) of any other Person accrued prior to the date it became a
Subsidiary of, or was merged or consolidated into, such Person or any of such
Person's Subsidiaries; (2) the income (or deficit) of any other Person (other
than a Subsidiary) in which such Person has an ownership interest, except to the
extent any such income has actually been received by such Person in the form of
cash dividends or distributions; (3) the undistributed earnings of any
Subsidiary of such Person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during the then current fiscal year; (5) any write-up of any
asset; (6) any net gain from the collection of the proceeds of life insurance
policies; (7) any net gain arising from the acquisition of any securities, or
the extinguishment, under GAAP, of any Indebtedness, of such Person; (8) in the
case of a successor to such Person by consolidation or merger or as a transferee
of its assets, any earnings of such successor prior to such consolidation,
merger or transfer of assets; and (9) any deferred credit representing the
excess of equity in any Subsidiary of such Person at the date of acquisition of
such Subsidiary over the cost to such Person of the investment in such
Subsidiary.

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