Document:

Form of 6% Convertible Note, December 21,2004

  
 Exhibit 10.2

  
 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I)
SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES ARE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933. 
  
 6% CONVERTIBLE NOTE 
  

			
	 US$                    
	 	December 21, 2004

  
 FOR VALUE RECEIVED,
Velocity Express Corporation, a Delaware corporation (the “Company”), hereby unconditionally promises to pay to the order of
                             (the “Holder”), having an address at
                            , at such address or at such other place as may be designated in writing
by the Holder, or its assigns, the aggregate principal sum of                              United
States Dollars ($                    ), together with interest from the date set forth above on the unpaid principal balance of this Note
outstanding at a rate equal to six percent (6.0%) (computed on the basis of the actual number of days elapsed in a 360-day year) per annum, compounding annually, and continuing on the outstanding principal until this 6% Convertible Note (the
“Note”) is converted into Series M Preferred Stock as provided herein or indefeasibly and irrevocably paid in full by the Company. Subject to the other provisions of this Note, the principal of this Note and all accrued and unpaid
interest hereon shall mature and become due and payable on the earlier of (i) April 30, 2005 or (ii) the date on which the Company’s stockholders vote not to approve the conversion of this Note (the earlier of such dates, the “Stated
Maturity Date”). Except as provided herein, all payments of principal and interest by the Company under this Note shall be made in United States dollars in immediately available funds to an account specified by the Holder. 
  
 From and after the Stated Maturity Date, all amounts due and owing under this
Note shall automatically, and without action by any party hereto, bear interest at an annual rate of nineteen percent (19%). In no event shall any interest charged, collected or reserved under this Note exceed the maximum rate then permitted by
applicable law and if any such payment is paid by the Company, then such excess sum shall be credited by the Holder as a payment of principal. 
  
 The obligations of the Company under this Note are secured by security interests in certain collateral granted by the Company pursuant to the terms of a
Security Agreement of even date herewith. 
  
 1.
Definitions. Unless otherwise defined herein, capitalized terms used herein have the respective meanings ascribed thereto in the Purchase Agreement. Unless the context otherwise requires, when used herein the following terms shall have the
meaning indicated: 
  
 “Amendment” has the meaning set forth in Section 5(a). 
  

 “BET” means BET Associates, L.P. 
  
 “Business Day” other than a Saturday or
Sunday, on which banks in New York City are open for the general transaction of business. 
  
 “Certificate of Designations” means the Certificate of Designation of Preferences and Rights of Series M Convertible
Preferred Stock attached as Exhibit A to the Purchase Agreement. 
  
 “Change of Control” means, at any time (i) any Person or any Persons acting together that would constitute a “group” for purposes of Section 13(d) under the Exchange Act, or any successor
provision thereto, shall acquire beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision thereto) (excluding TH Lee Putnam Ventures, L.P. and its Affiliates) in a single transaction or a series of
related transactions, of more than 50% of the aggregate voting power of the Company; or (ii) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction; or (iii) the Company sells or transfers its assets, as an
entirety or substantially as an entirety, to another Person; or (iv) any “change of control” or similar event under any loan agreement, mortgage, indenture or other agreement relating to any indebtedness for borrowed money of the Company
shall occur; or (v) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by the shareholders of the Company was proposed by a
vote of the majority of directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of
the Board of Directors then in office. 
  
 “Common Stock” shall mean the Common Stock, par value $0.004 per share, of the Company, and any securities into which the Common Stock is hereafter reclassified. 
  
 “Common Stock Equivalents” means any
securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument (but excluding options or warrants with an
exercise price of $0.51 or more) that are at any time convertible into or exchangeable for, or otherwise entitle the holder thereof to receive, Common Stock. 
  

“Company” shall have the meaning ascribed to such term in the first paragraph herein. 
  
 “Conversion Date” has the meaning set forth
in Section 5(a). 
  
 “Conversion
Price” shall mean such price per share determined as follows: $.0737, multiplied by a fraction, the numerator of which shall be the number of shares of the Company’s Common Stock, on a fully-diluted, as-converted basis (including
Common Stock and Common Stock Equivalents) existing as of the date of this Note, and the denominator of which shall be the number of shares of the Company’s Common Stock, on a fully-diluted, as-converted basis (including Common Stock and Common
Stock Equivalents) existing as of the Conversion Date. 
  

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 “Designated Event Repurchase Date” has the meaning set forth in Section
4(a). 
  
 “Designated Event Repurchase
Notice” has the meaning set forth in Section 4(c). 
  
 “Designated Event Repurchase Price” has the meaning set forth in Section 4(a). 
  
 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
  
 “Event of Default” shall have the meaning
ascribed to such term in Section 6 herein. 
  
 “Holder” shall have the meaning ascribed to such term in the first paragraph herein. 
  
 “Intercreditor Agreement” means the Intercreditor and Subordination Agreement, dated as of November 26, 2003, among BET,
the Company, Velocity Express, Inc. and Fleet Capital Corporation. 
  
 “Investors” shall have the meaning ascribed to such term in the Purchase Agreement. 
  
 “Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including
any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any of the foregoing). 
  
 “Note” shall have the meaning ascribed to such term in the first paragraph herein. 
  
 “Person” means an individual, corporation,
partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

  
 “Purchase Agreement” shall
mean the Purchase Agreement, dated as of December 21, 2004, and as that agreement may be amended from time to time, by and among the Company and the Investors. 
  

“Registration Rights Agreement” shall mean the Registration Rights Agreement, dated as of December 21, 2004, and as
that agreement may be amended from time to time, by and among the Company and the Investors. 
  
 “Series M Preferred Stock” means the Series M Convertible Preferred Stock, par value $0.004 per share, of the Company
having the relative rights, preferences and designations set forth in the Certificate of Designations. 
  
 “Stated Maturity Date” shall have the meaning ascribed to such term in the first paragraph herein. 
  
 “Stockholder Approvals” means the approval
of the Proposals (as defined in the Purchase Agreement) by the stockholders of the Company in accordance with applicable law and the applicable requirements of any stock exchange or market on which the Common Stock is traded or quoted. 

 
 “Subsidiary” of any Person means another
Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting 

  

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interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person. 
  
 2. Purchase Agreement. This Note is one of the several 6% Convertible
Notes of the Company issued pursuant to the Purchase Agreement. This Note is subject to the terms and conditions of, and entitled to the benefit of, the provisions of the Purchase Agreement. This Note is transferable and assignable to any person to
whom such transfer is permissible under the Purchase Agreement and applicable law. The Company agrees to issue from time to time a replacement Note in the form hereof to facilitate such transfers and assignments. In addition, after delivery of an
indemnity in form and substance reasonably satisfactory to the Company, the Company also agrees to promptly issue a replacement Note if this Note is lost, stolen, mutilated or destroyed. 
  
 3. No Right of Prepayment or Redemption. This Note shall not be prepayable or redeemable by the Company prior to the
Stated Maturity Date. 
  
 4. Repurchase of the Note at the
Option of the Holder Upon Certain Events. 
  
 If a Change of Control occurs, this Note shall be purchased by the Company, at the option of the Holder thereof, at a cash purchase price (the “Designated Event Repurchase Price”) equal to the greater of (A) the amount that
the Holder of this Note would have received had the principal of this Note and all accrued interest thereon been converted into Series M Preferred Stock and such shares of Series M Preferred Stock been converted into Common Stock immediately prior
to the Change of Control; provided, however, that this clause (A) would only apply to a Change of Control of the type specified in clauses (i), (ii) and (iii) of the definition of “Change of Control”; or (B) 101% of the principal amount of
this Note, plus accrued and unpaid interest to, but not including, the date that is ten (10) days following the date of the notice of a Change of Control delivered by the Company pursuant to clause (b) below (the “Designated Event Repurchase
Date”), in each case subject to satisfaction by or on behalf of the Holder of the requirements set forth in clause (c) below. 
  
 (a) No later than one (1) Business Day after the occurrence of a Designated Event, the Company shall give written notice thereof to the
Holder, which notice shall include a form of repurchase notice to be completed by the Holder and shall (i) state briefly, the events causing a Change of Control and the date of such Change of Control, (ii) specify the Designated Event Repurchase
Price and (iii) the Designated Event Repurchase Date. 
  
 (b) The Holder may exercise its rights specified in this Section 4 upon delivery to the Company of (i) a written notice of purchase (a “Designated Event Repurchase Notice”) to the Company at any time on or prior to 5:00
p.m., New York time, on the Designated Event Repurchase Date stating the portion of the Note which the Holder will deliver to be purchased, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000, and irrevocably
agreeing that such principal amount of the Note shall be purchased by the Company as of the Designated Event Repurchase Date and (ii) this Note. 
  
 (c) In the event that this Note is repurchased in part, upon surrender of this Note, the Company shall execute and deliver to the Holder a
new Note equal in principal amount to the unpurchased portion of the Note surrendered. 
  

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 5. Conversion. 
  
 (a) Prior to receipt of the Stockholder Approvals, this Note shall not be convertible. Following receipt of
the Stockholder Approvals, this Note shall automatically and with no action on the part of the Holder convert into fully paid and nonassessable shares of Series M Preferred Stock upon satisfaction of the requirements of this Section 5. Promptly upon
receipt of the Stockholder Approvals, but in no event more than two (2) Business Days thereafter, the Company shall file the Certificate of Designations and an appropriate amendment to the Company’s Certificate of Incorporation to effect the
Capital Increase (the “Amendment”), which, by their terms, shall become effective upon filing with the Secretary of State of Delaware. Upon the effectiveness of the Certificate of Designations and the Amendment, the Company shall
notify the Holder of such effectiveness. Within one (1) Business Day after the Certificate of Designations and the Amendment become effective, the Company shall deliver to the Holder (i) evidence that the Conversion Shares (as defined in the
Certificate of Designations) have been approved for listing on the Nasdaq SmallCap Market upon official notice of issuance, (ii) an opinion of counsel to the Company, in form and substance reasonably acceptable to the Holder and addressing the
status of the Series M Preferred Stock and such other legal matters as the Holder may reasonably request and (iii) updates of the certificates delivered by the Company pursuant to Section 6.1(h) and (i) of the Purchase Agreement. The date on which
all of such deliveries are made is hereinafter referred to as the “Conversion Date”. On the Conversion Date, this Note and all interest accrued thereon shall be automatically converted into such number of fully paid and
nonassessable shares of Series M Preferred Stock as is obtained by: (i) adding (A) the principal amount of this Note and (B) the amount of any accrued but unpaid interest on this Note and (ii) dividing the result obtained pursuant to clause (i)
above by the Conversion Price then in effect. 
  
 (b) Promptly after the Conversion Date, the Holder of this Note shall deliver this Note to the Company (or, in lieu thereof, an appropriate lost security affidavit in the event this Note shall have been lost or destroyed) to the Company at
its principal office (or such other office or agency of the Company as the Company may designate by notice in writing to the Holder), together with a statement of the name or names (with address) in which the certificate or certificates for shares
of Series M Preferred Stock shall be issued. Promptly following the surrender of this Note (receipt of the written notice referred to in Section 5(a) above and surrender of this Note (or, in lieu thereof, delivery of an appropriate lost security
affidavit in the event this Note shall have been lost or destroyed) as aforesaid, but in no event more than three (3) Business Days thereafter, the Company shall issue and deliver, or cause to be issued and delivered, to the Holder, registered in
such name or names as the Holder may direct in writing, a certificate or certificates for the number of whole shares of Series M Preferred Stock issuable upon the conversion of this Note. To the extent permitted by law, such conversion shall be
deemed to have been effected, and the Conversion Price shall be determined, as of the close of business on the Conversion Date, and at such time, the rights of the Holder shall cease with respect to the Note being converted, and the Person or
Persons in whose name or names any certificate or certificates for shares of Series M Preferred Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby.

  

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 (c) No fractional shares shall be issued upon any conversion of this Note into Series M
Preferred Stock. If any fractional share of Series M Preferred Common Stock would, except for the provisions of the first sentence of this Section 5(c), be delivered upon such conversion, the Company, in lieu of delivering such fractional share,
shall pay to the Holder an amount in cash equal to the Liquidation Amount (as defined in the Certificate of Designations) multiplied by such fractional share amount. 
  
 (d) Prior to the earlier of (i) the Stated Maturity or (ii) the Conversion Date, the Company shall not and
shall not agree to or obligate itself to effect or approve any issuance of its capital stock (other than with respect to Convertible Securities which are outstanding prior to the date hereof (provided such Convertible Securities are not amended
after the date hereof)), stock split, reverse stock split, stock dividend or other reclassification or combination of any class or series of its capital stock. 
  

(e) Prior to the Conversion Date, the Company shall not take any action or agree or obligate itself to take any action that would
require the approval of the holders of the Series M Preferred Stock pursuant to Section 6 of the Certificate of Designations if such Certificate of Designations were in effect. 
  
 6. Event of Default. The occurrence of any of following events shall constitute an “Event of
Default” hereunder: 
  
 (a) the failure
of the Company to make any payment of principal on this Note when due, whether at maturity, upon acceleration or otherwise; 
  
 (b) the failure of the Company to make any payment of interest on this Note, or any other amounts due under the Purchase Agreement or the
other Transaction Documents (other than the Consents and Waivers), whether at maturity, upon acceleration or otherwise, and such failure continues for more than five (5) days; 
  
 (c) the Company and/or its Subsidiaries fail to make a required payment or payments on indebtedness for
borrowed money of Five Hundred Thousand United States Dollars ($500,000) or more in aggregate principal amount and such failure continues for more than ten (10) days; provided, however, that no Event of Default under this Section 6(c) shall occur as
a result of Borrower not making a principal payment due on the Subordinated Obligations (as defined in the Intercreditor Agreement) on either January 31, 2005 or April 30, 2005 to the extent such payment is prohibited by Section 2.2(b) of the
Intercreditor Agreement, even if BET attempts to claim that such occurrence is an “Event of Default” under the Subordinated Loan Documents (as defined in the Intercreditor Agreement); 
  
 (d) there shall have occurred an acceleration of the stated
maturity of any indebtedness for borrowed money of the Company or its Subsidiaries of Five Hundred Thousand United States Dollars ($500,000) or more in aggregate principal amount (which acceleration is not rescinded, annulled or otherwise cured
within ten (10) days of receipt by the Company or a Subsidiary of notice of such acceleration); 
  
 (e) the Company makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they
become due; or an order, judgment or 

  

 -6- 

 
decree is entered adjudicating the Company as bankrupt or insolvent; or any order for relief with respect to the Company is entered under the Federal
Bankruptcy Code or any other bankruptcy or insolvency law; or the Company petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or of any substantial part of the assets of the
Company, or commences any proceeding relating to it under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Company and either (i) the Company by any act indicates its approval thereof, consents thereto or acquiescence therein or (ii) such petition application or proceeding is not dismissed within sixty (60) days;

  
 (f) a final, non-appealable judgment which,
in the aggregate with other outstanding final judgments against the Company and its Subsidiaries, exceeds Five Hundred Thousand United States Dollars ($500,000) shall be rendered against the Company or a Subsidiary and within sixty (60) days after
entry thereof, such judgment is not discharged or execution thereof stayed pending appeal, or within sixty (60) days after the expiration of such stay, such judgment is not discharged; 
  
 (g) any Lien created by the Security Agreement shall at any time not constitute a valid and perfected Lien
on the collateral intended to be covered thereby (to the extent perfection by filing, registration, recordation or possession is required herein or therein) in favor of the Investors free and clear of all other Liens, except for Liens securing
Senior Debt and Liens permitted by the Senior Debt or, except for expiration or termination in accordance with its terms, the Security Agreement shall for whatever reason be terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by the Company; 
  
 (h) the Company is in breach of the requirements of Section 7.9 of the Purchase Agreement or Sections 5(d) or 5(e) hereof; 
  
 (i) any representation or statement of fact made in the Purchase Agreement or furnished to the Holder at any time by or on behalf of the
Company proves to have been false in any material respect when made or furnished; 
  
 (j) the Company fails to observe or perform in any material respect any of its covenants contained in the Purchase Agreement or any other
Transaction Document (other than the Consents and Waivers) (other than any failure which is covered by Section 7(a), (b) or (h)), and such failure continues for thirty (30) days after receipt by the Company of notice thereof; or 
  
 (k) the Company fails to obtain the Stockholder Approvals on
or prior to the Stated Maturity Date. 
  
 Upon
the occurrence of any such Event of Default all unpaid principal and accrued interest under this Note shall become immediately due and payable (A) upon election of the Holder, with respect to (a) through (d) and (f) through (k), and (B)
automatically, with respect to (e). Upon the occurrence of an Event of Default, the Holder shall have the right to exercise any other right, power or remedy as may be provided herein or in the Security Agreement or as may be provided at law or in
equity. 
  

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 7. No waiver. No delay or omission on the part of the Holder in exercising any right under this
Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. 
  
 8. Amendments in Writing. None of the terms or provisions of this Note
may be excluded, modified or amended except by a written instrument duly executed by the Holder and the Company expressly referring to this Note and setting forth the provision so excluded, modified or amended. 
  
 9. Waivers. The Company hereby forever waives presentment, demand,
presentment for payment, protest, notice of protest, notice of dishonor of this Note and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note. 
  
 10. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Note shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof. The Company and, by accepting this Note, the Holder, each irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Note and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of
notices under the Purchase Agreement. The Company and, by accepting this Note, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Company
and, by accepting this Note, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS NOTE AND REPRESENTS THAT COUNSEL HAS
BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. 
  
 11.
Costs. If action is instituted to collect on this Note, the Company promises to pay all costs and expenses, including reasonable attorney’s fees, incurred in connection with such action. 
  
 12. Notices. All notices hereunder shall be given in writing and shall
be deemed delivered when received by the other party hereto at the address set forth in the Purchase Agreement or at such other address as may be specified by such party from time to time in accordance with the Purchase Agreement. 
  
 13. Successors and Assigns. This Note shall be binding upon the
successors or assigns of the Company and shall inure to the benefit of the successors and assigns of the Holder. 
  

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 [Remainder of Page Intentionally Left Blank] 
  

 -9- 

			
	 VELOCITY EXPRESS CORPORATION

		
	By:	 	 
	 	 	 Name:

	 	 	 Title:

  

 -10-Security Agreement dated December 21, 2004

  
 Exhibit 10.3

  
 SECURITY AGREEMENT 
  
 THIS SECURITY AGREEMENT, dated as of December
    , 2004 (this “Security Agreement”), is made by Velocity Express Corporation, a Delaware corporation and Velocity Express, Inc., a Delaware corporation (collectively with their subsidiaries, the
“Company,” or “Grantor”), in favor of those persons listed on the signature pages attached hereto (the “Secured Parties”). 
  
 RECITALS 
  
 WHEREAS, concurrently with this Security Agreement, the Secured Parties are entering into a securities purchase agreement (the “Purchase
Agreement”) by and among the Company and the Secured Parties; and 
  
 WHEREAS, pursuant to the Purchase Agreement, Secured Parties are purchasing from the Company secured convertible notes for an aggregate $21,000,000 (the “Notes”), which upon approval of the Proposals (as defined in the
Purchase Agreement), and the satisfaction of certain other conditions, shall automatically convert into shares of Series M Convertible Preferred Stock, par value $0.004 per share of the Company; and 
  
 WHEREAS, the Secured Parties have purchased the Notes, of even date
herewith, to be secured by the Company’ rights in and to the Collateral (as defined below); and 
  
 WHEREAS, as a condition to the performance by the Secured Parties of the conditions and obligations under the Notes, the Company is required to
execute and deliver this Security Agreement. 
  
 NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Secured Parties agree as follows: 
  
 AGREEMENT 
  

	ARTICLE	I. Definitions. 

  
 Section 1.1. Certain Terms. The following terms when used in this Security Agreement, including its preamble and recitals, shall have the following
meanings (such definitions to be equally applicable to the singular and plural forms thereof): 
  
 “Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute. 
  
 “BET” means BET Associates, L.P., a Delaware limited
partnership. 
  

 “BET Obligations” means all indebtedness of Borrower to BET provided for under the BET
Purchase Agreement. 
  
 “BET Purchase Agreement”
means the Note Purchase Agreement dated as of November 26, 2003 among Borrower and BET, as amended, restated, supplemented or otherwise modified from time to time. 
  
 “Borrower” means Velocity Express Corporation, a Delaware Corporation. 
  
 “Collateral” shall be as set forth on Exhibit A.

  
 “The Company” is defined in the preamble.

  
 “Discharge of Senior Obligations” and/or
“Discharge of BET Obligations” means (a) payment in full in cash of the principal of and interest (including interest accruing on or after the commencement of any Insolvency or Liquidation Proceeding at the rate set forth in the
Senior Loan Agreement or the BET Purchase Agreement, as applicable, whether or not such interest would be allowed in such Insolvency or Liquidation Proceeding) and premium, if any, on all Senior Obligations or BET Obligations, as applicable, (b)
payment in full in cash of all other Senior Obligations or BET Obligations, as applicable, that are due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (c) termination or cash collateralization (in an amount reasonably satisfactory to the
Senior Agent) of all letters of credit issued under the Senior Loan and (d) termination of all other commitments of the Senior Agent or Senior Secured Parties under the Senior Loan Agreement. 
  
 “Event of Default” shall mean an Event of Default under the
Notes. 
  
 “Insolvency or Liquidation Proceeding”
shall mean, with respect to any person, any (a) insolvency, bankruptcy, receivership, reorganization, readjustment, composition or other similar proceeding relating to such person or its property or creditors in such capacity, (b) proceeding for any
liquidation, dissolution or other winding up of such person, voluntary or involuntary, whether or not involving insolvency or proceedings under the Bankruptcy Code, whether partial or complete and whether by operation of law or otherwise, (c)
assignment for the benefit of creditors of such person or (d) other marshalling of the assets of such person. 
  
 “Loan Parties” means the Borrower and any guarantor of the Note Obligations. 
  
 “Note Obligations” shall mean all indebtedness, obligations
and liabilities of the Company to the Secured Parties arising under or in connection with the Notes, including, without limitation, principal and interest. 
  
 “Notes” are defined in the recitals. 
  

 2 

 “Person” means an individual, corporation, limited liability company, partnership,
trust, unincorporated association, joint venture, joint-stock company, governmental authority or any other entity. 
  
 “Purchase Agreement” is defined in the recitals. 
  

“Secured Parties” are defined in the preamble. 
  
 “Security Agreement” is defined in the preamble. 
  
 “Senior Agent” means Bank of America, N.A. 
  
 “Senior Loan Agreement” means the Loan and Security
Agreement dated as of November 26, 2003 among Senior Agent, Secured Parties and Senior Secured Parties, as amended, restated, supplemented or otherwise modified from time to time. 
  
 “Senior Obligations” means all Obligations as defined in the Senior Loan Agreement. 
  
 “Senior Secured Parties” means the lenders from time to time
party to the Senior Loan Agreement. 
  
 “Termination
Date” means the date on which all of the Note Obligations have been paid in full. 
  
 “UCC” means the New York Uniform Commercial Code, as amended, including its preamble and recitals. 
  
 UCC Definitions. Unless otherwise defined herein or in the Notes or the context otherwise requires, terms for which meanings are provided in the
UCC are used in this Security Agreement (whether or not capitalized herein), including its preamble and recitals, with such meanings. 
  
 ARTICLE II. Security Interest. 
  
 Section 2.1. Grant of Security Interest. In order to secure the full and punctual payment of the Note Obligations in accordance with the terms
thereof, and to secure the performance of all of the obligations of the Company hereunder, the Company hereby assigns, pledges, hypothecates, charges, mortgages, deliver and transfers to the Secured Parties, for their benefit, and hereby grants to
the Secured Parties, for their benefit, a continuing security interest in and to the Collateral, and all of its rights and privileges with respect thereto, and all proceeds therefrom and substitutions thereof. 
  
 Section 2.2. Security for Obligations. This Security Agreement and the
Collateral in which the Secured Parties are granted a security interest hereunder by the Company secures the payment of all Note Obligations of the Company now or hereafter existing. 
  

 3 

 Section 2.3. Delivery of Collateral. All Collateral shall be delivered to the Secured Parties by
the Company endorsed to the order of the Secured Parties, and accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Parties. 
  
 Section 2.4. Security Interest Absolute, etc. This Security Agreement
shall in all respects be a continuing, absolute, unconditional and irrevocable grant of security interest, and shall remain in full force and effect until the Termination Date. All rights of the Secured Parties and the security interests granted to
the Secured Parties for their benefit hereunder, and all obligations of the Company hereunder, shall, in each case, be absolute, unconditional, final and irrevocable irrespective of: 
  
 (a) the failure of the Secured Parties: 
  
 (i) to assert any claim or demand or to enforce any right or remedy against any obligor or any other Person,
or 
  
 (ii) to exercise any right or remedy
against any guarantor of, or collateral securing, any Note Obligations; 
  
 (b) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Note Obligations, or any other extension, compromise or renewal of any Note Obligation; 
  
 (c) any reduction, limitation, impairment or termination of
any Note Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Company hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Note Obligations or otherwise; 
  
 (d) any addition, exchange or release of any Collateral or
of any Person that is (or will become) a guarantor of the Note Obligations, or any surrender or non-perfection of any Collateral, or any amendment to or waiver or release or addition to, or consent to or departure from, any other guaranty held by
the Secured Parties securing any of the Note Obligations; or 
  
 (e) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any obligor, any surety or any guarantor. 
  
 Section 2.5. Subordination. 
  
 (a) Notwithstanding the date, manner or order of grant,
attachment or perfection of any Liens securing the Note Obligations granted on the Collateral or of any Liens securing the Senior Obligations or the BET Obligations granted on the Collateral and notwithstanding any provision of the UCC, or any
applicable law or the provisions of the 

  

 4 

 
Notes, the Purchase Agreement, or any other circumstance whatsoever, the Secured Parties each hereby agree that: (i) any Lien on the Collateral securing any
Senior Obligations or BET Obligations now or hereafter held by or on behalf of the Senior Agent, the Senior Secured Parties or BET or any agent or trustee therefor, regardless of how acquired, whether by judgment, grant, possession, statute,
operation of law, subrogation or otherwise, shall be senior in all respects and prior to any Lien on the Collateral securing any of the Note Obligations, regardless of how acquired, whether by judgment, grant, possession, statute, operation of law,
subrogation or otherwise and (ii) any Lien on the Collateral now or hereafter held by or on behalf of the Secured Parties or any agent or trustee therefor regardless of how acquired, whether by judgment, grant, possession, statute, operation of law,
subrogation or otherwise, shall be junior and subordinate in all respects to all Liens on the Collateral securing any Senior Obligations or BET Obligations. All Liens on the Collateral securing any Senior Obligations or BET Obligations shall be and
remain senior in all respects and prior to all Liens on the Collateral securing any Note Obligations for all purposes, whether or not such Liens securing any Senior Obligations or BET Obligations are subordinated to any Lien securing any other
obligation of Borrower or any other Person. Each Secured Party expressly agrees that any Lien purported to be granted on any Collateral as security for the Senior Obligations or BET Obligations shall be and remain senior in all respects and prior to
all Liens on the Collateral securing any Note Obligations for all purposes regardless of whether the Lien purported to be granted is found to be improperly granted, improperly perfected, a fraudulent conveyance or legally or otherwise deficient in
any manner. 
  
 (b) So long as the Senior
Obligations and BET Obligations have not been paid in full, any Collateral or proceeds thereof received by any Secured Party shall be segregated and held in trust and forthwith paid over in the same form as received, with any necessary endorsements
or as a court of competent jurisdiction may otherwise direct (i) to the Senior Agent for the benefit of the Senior Secured Parties until the Senior Obligations have been paid in full, and then (ii) to BET until the BET Obligations have been paid in
full. The Senior Agent and BET are each hereby authorized to make any such endorsements as agent for the Secured Parties. This authorization is coupled with any interest and is irrevocable until such time as both the Senior Obligations and the BET
Obligations are paid in full. 
  
 This Section 2.5 and Section 6.5 (Insolvency or
Liquidation Proceedings) may not be amended, supplemented or otherwise modified without the prior written consent of Senior Agent and BET. 
  
 ARTICLE III. Representations and Warranties. 
  
 Section 3.1. In order to induce the Secured Parties to enter into and perform the Note Obligations, the Company represents and warrants to the Secured
Parties that as to the Collateral: 
  
 (a) The
Company is the legal and beneficial owners of such Collateral; 
  

 5 

 (b) the granting of the security interest pursuant to the terms of this Security
Agreement, together with the filing of appropriate financing statements, creates a valid and perfected lien on and security interest in such Collateral in favor of the Secured Parties; 
  
 (c) none of such Collateral is subject to any existing claim, lien, charge, security interest or other
encumbrance of any kind whatsoever (collectively, “Lien”), except for the perfected first security interest therein granted to Fleet Capital Corporation, a Rhode Island corporation and BET Associates, L.P., a Delaware limited partnership
(the “Permitted Encumbrances”), the security interest therein granted to the Secured Parties hereby, and except as otherwise permitted pursuant to the terms of this Security Agreement; 
  
 (d) the execution of this Security Agreement, the compliance
with its terms and the granting of the security interest set forth herein does not violate any contract between the Company and any other party; and 
  
 (e) this Security Agreement does not violate any agreement, instrument, document, judgment, injunction or writ by which the Company or
their assets are bound. 
  
 ARTICLE IV. Covenants.

  
 Section 4.1. Further Encumbrances. The Company
shall not, without the prior written consent of the Secured Parties, enter into any agreement or execute any document or perform or permit the performance of any act that would result in, give rise to or create any senior or pari passu
Lien on Secured Parties’ Collateral (with the sole exception of documents relating to and securing the Permitted Encumbrances). 
  
 Section 4.2. Further Assurances, etc. The Company agrees that, from time to time, at its own expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be necessary or that the Secured Parties may reasonably request, in order to perfect, preserve and protect any security interest granted or purported to be granted hereby or to
enable such Secured Parties to exercise and enforce its rights and remedies hereunder with respect to any Collateral. The Company agrees that it will not change (i) its name, identity or structure in any manner or (ii) its location unless it shall
have given the Secured Parties not less than ten (10) days’ prior notice thereof. 
  

 6 

 ARTICLE V. Voting Power and Dividends. Unless and until an Event of Default shall have
occurred and be continuing, the Company shall be entitled to exercise all voting powers in all corporate matters pertaining to the Collateral for any purpose not inconsistent with, or in violation of, the provisions of this Security Agreement, and
shall be entitled to receive any dividends or other distributions from the Company relating to such Collateral. If an Event of Default shall have occurred and be continuing, the Secured Parties shall have the right to the extent permitted by law,
and the Company shall take all such action as may be necessary or appropriate to give effect to such right, to exercise all voting powers in all corporate matters pertaining to the Collateral and shall be entitled to receive any dividends or other
distributions from the Company relating to such Collateral. 
  
 ARTICLE
VI. The Secured Parties. 
  
 Section
6.1. Secured Parties Appointed Attorney-in-Fact. The Company hereby irrevocably appoint the Secured Parties as its attorneys-in-fact, with full authority in the place and stead of the Company and in the name of the Company or otherwise, from
time to time in the Secured Parties’ discretion, following the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which the Secured Parties may deem necessary or advisable to
accomplish the purposes of this Security Agreement, including: 
  
 (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; 
  
 (b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a) immediately above; 
  
 (c) to file any claims or take any action or institute any proceedings which the Secured Parties may deem necessary or desirable for the
collection of any of their Collateral, or otherwise to enforce their rights with respect to any of their Collateral; 
  
 (d) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the
Secured Parties were the absolute owner thereof; and 
  
 (e) to perform the affirmative obligations of the Company hereunder. 
  
 The Company hereby acknowledges, consents and agrees that the powers of attorney granted pursuant to this Section 6.1 are irrevocable and coupled with an interest. 
  
 Section 6.2. Secured Parties May Perform. If the Company fails to perform any agreement contained herein, the Secured
Parties may perform, or cause performance of, such agreement, and the expenses of the Secured Parties incurred in connection therewith shall be payable by the Company. 
  

 7 

 Section 6.3. Secured Parties Have No Duty. The powers conferred on the Secured Parties hereunder
are solely to protect their interests in the Collateral, and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in their possession and the accounting for monies actually received by it
hereunder, the Secured Parties shall have no duty as to any Collateral or responsibility for: 
  
 (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any
investment property, whether or not the Secured Parties have or is deemed to have knowledge of such matters, or 
  
 (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. 
  
 Section 6.4. Reasonable Care. Beyond the exercise of reasonable care
in the custody thereof and the in the accounting for moneys actually received by them hereunder, the Secured Parties shall have no duty as to any Collateral in their possession or control or in the possession or control of any agent or bailee. The
Secured Parties shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which they accord its own property, and shall
not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any agent or bailee selected by the Secured Parties in good faith. 
  
 Section 6.5. Insolvency or Liquidation Proceedings. 
  
 (a) Finance and Sale Issues. Until the Discharge of
Senior Obligations and the BET Obligations has occurred, if the Borrower or any other Loan Party shall be subject to any Insolvency or Liquidation Proceeding and the Senior Agent shall desire to permit the use of cash collateral on which the Senior
Agent or any other creditor has a Lien or to permit the Borrower or any other Loan Party to obtain financing, whether from the Senior Secured Parties or any other entity, under Section 363 or Section 364 of Title 11 of the United States Code of any
similar Bankruptcy Law (each a “DIP Financing”), then the Secured Parties agree that they will raise no objection to such use of cash collateral or DIP Financing and will not request adequate protection or any other relief in connection
therewith (except as expressly agreed by the Senior Agent or to the extent permitted by Section 6.5(c)) and, to the extent the Liens securing the Senior Obligations and/or BET Obligations are subordinated or pari passu with such DIP Financing, the
Secured Parties will subordinate their Liens in the Collateral to the Liens securing such DIP Financing (and all obligations relating thereto). 
  
 (b) Adequate Protection. Secured Parties agree that none of them shall contest (or support any other person contesting) (a) any
request by the Senior Agent, Senior Secured Parties or BET for adequate protection, (b) any objection by Senior Agent, Senior Secured Parties or BET to any motion relief, action or proceeding based on Senior Agent, Senior Secured Parties or BET
claiming a lack of adequate protection or (c) the payment of interest, fees, expenses or other amounts to Senior Agent, Senior Secured Parties or 

  

 8 

 
BET under Section 506(b) or 506(c) of the Bankruptcy Code or otherwise. Notwithstanding the foregoing provisions in this Section 6.5(b), in any Insolvency or
Liquidation Proceeding, (i) if the Senior Agent, Senior Secured Parties or BET (or any subset thereof) are granted adequate protection in the form of additional collateral in connection with any DIP Financing, then the Secured Parties may seek or
request adequate protection in the form of a Lien on such additional collateral, which Lien will be subordinated to the Liens securing the Senior Obligations, the BET Obligations and such DIP Financing (and all obligations relating thereto) on the
same basis as the other Liens securing the Note Obligations are so subordinated to the Senior Obligations and the BET Obligations under this Agreement, and (ii) not in limitation of Section 6.5(a), in the event the Secured Parties seek or request
adequate protection in respect of Note Obligations and such adequate protection is granted in the form of additional collateral, then the Secured Parties agree that Senior Agent and BET shall also be granted a senior Lien on such additional
collateral as security for the Senior Obligations and the BET Obligations and for any such DIP Financing provided by the Senior Secured Parties and that any Lien on such additional collateral securing the Note Obligations shall be subordinated to
the Liens on such collateral securing the Senior Obligations and the BET Obligations and any such DIP Financing provided by the Senior Secured Parties (and all obligations relating thereto) and to any other Liens granted to the Senior Secured
Parties and/or BET as adequate protection on the same basis as the other Liens securing the Note Obligations are so subordinated to such Senior Secured Obligations and BET Obligations under this Agreement. Except as set forth in this Section 6.5(b),
the Secured Parties shall not be limited from seeking adequate protection with respect to their rights in the Collateral in any Insolvency or Liquidation Proceeding (including, without limitation, adequate protection in the form of cash payments of
interest or otherwise). 
  
 (c) Avoidance
Issues. If any Agent, a Senior Secured Party or BET is required in any Insolvency or Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of the Borrower or any other Loan Party any amount (a “Recovery”),
then such Agent, Senior Secured Party or BET, as applicable, shall be entitled to a reinstatement of Senior Secured Obligations or BET Obligations, as applicable, with respect to all such recovered amounts. If this Agreement shall have been
terminated prior to such Recovery or any finding of the invalidity of a Lien of Senior Agent or BET, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise
affect the obligations of the parties hereto from such date of reinstatement. 
  
 ARTICLE VII. Remedies. 
  
 Section
7.1. Certain Remedies. If an Event of Default shall have occurred and be continuing: 
  
 (a) The Secured Parties may exercise, in respect of the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to 

  

 9 

 
them, all the rights and remedies of a Secured Parties on default under the UCC (whether or not the UCC applies to the affected Collateral), and also may:

  
 (i) require the Company to, and the Company
hereby agrees that it will, at its own expense and upon request of the Secured Parties, assemble all or part of the Collateral as directed by the Secured Parties and make it available to the Secured Parties at a place to be designated by the Secured
Parties which is reasonably convenient to both parties; and 
  
 (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more portions at public or private sale, at the Secured Parties’ offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Secured Parties may deem commercially reasonable. The Company agrees that, to the extent notice of sale shall be required by law, at least thirty (30) days’ prior notice to the Company of the
time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Secured Parties shall not be obligated to make any sale of the Collateral regardless of notice of sale having been
given. The Secured Parties may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

  
 (b) All cash proceeds received by the Secured
Parties in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral, shall be applied by the Secured Parties against all or any part of the Company’s obligations to the Secured Parties. 

 
 (c) The Secured Parties may, in respect of the
Collateral: 
  
 (i) transfer all or any part of
the Collateral into the name of the Secured Parties or their respective nominees, with or without disclosing that such Collateral is subject to the lien hereunder; 
  
 (ii) notify the parties obligated on any of the Collateral to make payment to the Secured Parties of any
amount due or to become due thereunder; 
  
 (iii)
enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any
nature of any party with respect thereto; 
  
 (iv) endorse any checks, drafts, or other writings in the Company’s name to allow collection of the Collateral; 
  
 (v) take control of any proceeds of the Collateral; and 
  

 10 

 (vi) execute (in the name, place and stead of the Company) endorsements, assignments,
stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. 
  
 Section 7.2. Compliance with Restrictions. The Company agrees that in any sale of any of the Collateral, whenever an Event of Default shall have
occurred and be continuing, the Secured Parties are hereby authorized to comply with any limitation or restriction in connection with such sale as they may be advised by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to
Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by
any governmental authority or official, and the Company further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Secured Parties be liable
nor accountable to the Company for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. The Company will execute and deliver such documents and take such other action as
the Secured Parties deem necessary or advisable in order that any such sale may be made in compliance with law. 
  
 Section 7.3. Protection of Collateral. The Secured Parties may from time to time, at their option, perform any reasonable act which the Company
fails to perform after being requested in writing so to perform (it being understood that no such request need be given after the occurrence and during the continuance of an Event of Default), and the Secured Parties may from time to time take any
other action which the Secured Parties reasonably deem necessary for the maintenance, preservation or protection of any of the Collateral or of their security interest therein. 
  
 ARTICLE VIII. Miscellaneous. 
  

Section 8.1. Binding on Successors, Transferees and Assigns; Assignment. This Security Agreement shall remain in full force and effect until the
Termination Date has occurred, shall be binding upon the Company and their successors, transferees and assigns, and shall inure to the benefit of and be enforceable by the Secured Parties and their successors, transferees and assigns. The Company
may not assign any of its obligations under this Security Agreement without the prior written consent of the Secured Parties. 
  
 Section 8.2. Amendments, etc. No amendment to or waiver of any provision of this Security Agreement, nor consent to any departure by the Company
from its obligations under this Security Agreement, shall in any event be effective unless the same shall be in writing and signed by the Secured Parties and the Company to be bound thereby. 
  
 Section 8.3. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested 

  

 11 

 
(or by the most nearly comparable method if mailed from or to a location outside of the United States of America) or by Federal Express, Express Mail, or
mail nationally recognized overnight delivery or courier service, or delivered in person or by facsimile, or similar telecommunications equipment, against receipt therefor at the address of such party set forth in this Section (or to such other
address as the party shall have furnished in writing in accordance with the provisions of this Section 8.3). 
  
 Secured Parties: 
  
 [see addresses as set forth on the signature page(s) attached hereto] 
  
 The Company/Grantor: 
 Velocity Express Corporation 
 One Morningside Drive North 
 Building B — Suite 300 
 Westport, CT
06880 
 Tel: 
 Fax: 

 
 Such addresses may be changed by notice given as provided in this subsection. Notices
shall be effective upon the date of receipt; provided, however, that a notice sent via telecopier shall be deemed effective upon the date indicated on proof of transmittal; notice sent via overnight delivery shall be deemed effective two (2)
business days after deposit with such delivery service; and notice sent by U.S. certified mail shall be deemed effective five (5) business days after deposit with the U.S. mail. 
  
 Section 8.4. Termination; Release of Liens. Upon the Termination Date, the security interests granted herein shall
automatically terminate with respect to the Collateral. Upon any such termination and at the expense of the Company, the Secured Parties will promptly deliver to the Company all Collateral held by the Secured Parties, and execute and deliver to the
Company such documents as the Company shall reasonably request to evidence such termination, including without limitation any termination statements required under the UCC or otherwise. Following the Termination Date, the Secured Parties hereby
irrevocably appoint the Company as its attorneys-in-fact, with full authority in the place and stead of the Secured Parties, to take any action and to execute any instrument which the Company may deem necessary or advisable to accomplish the
termination of this Security Agreement with respect to the Collateral. 
  
 Section 8.5. No Waiver; Remedies. In addition to, and not in limitation of Section 2.3, no failure on the part of the Secured Parties to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 

 

 12 

 Section 8.6. Headings. The various headings of this Security Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this Security Agreement or any provisions thereof. 
  
 Section 8.7. Severability. Any provision of this Security Agreement, which is prohibited or unenforceable in any jurisdiction, shall, as to such
provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Security Agreement or affecting the validity or enforceability of such provision in any other
jurisdiction. 
  
 Section 8.8. Governing Law; Jurisdiction and
Venue. THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. The Company irrevocably and unconditionally consent to submit to the jurisdiction of the federal and state courts
located in New York City, New York in connection with any action or proceeding arising out of or relating to this Security Agreement, any document or instrument delivered pursuant to, in connection with, or simultaneously with this Security
Agreement, or a breach of this Security Agreement or any such document or instrument (and agrees not to commence any action or proceeding relating to any of the foregoing except in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to its respective address set forth in Section 8.3 shall be effective service of process for any action or proceeding brought against it in any such court. The Company irrevocably and
unconditionally waives, to the full extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Security Agreement brought in the courts of the State
of New York or of the United States of America in each case located in the County of New York, and further irrevocably and unconditionally waives, to the full extent permitted by law, any claim that any such action or proceeding brought in such
State or County has been brought in an inconvenient forum. 
  
 Section 8.9. Entire Agreement. This Security Agreement and the Notes constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior or contemporaneous
agreements, written or oral, with respect thereto. 
  
 Section
8.10. Counterparts. This Security Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. 

 
 [Signature Page to follow] 
  

 13 

 IN WITNESS WHEREOF, each of the parties hereto has this Security Agreement as of the date first above
written. 
  

			
	THE COMPANY:
	
	 VELOCITY EXPRESS CORPORATION

		
	By	 	 
	 Name:
	 	 
	 Title:
	 	 

  

			
	 VELOCITY EXPRESS, INC.

		
	By	 	 
	 Name:
	 	 
	 Title:
	 	 

  

									
	SECURED PARTIES:	 	 	 	 
	 	 	 	 	 SPECIAL SITUATIONS FUND III, L.P.

					
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 Austin W. Marxe

	 	 	 	 	 	 	 Title:
	 	 General Partner

  
 Address for Notice: 
 153 E. 53rd Street 
 55th Floor 
 New York, NY 10022 
  

 14 

			
	 SPECIAL SITUATIONS CAYMAN FUND, L.P.

		
	By:	 	 
	 Name:
	 	 Austin W. Marxe

	 Title:
	 	 General Partner

  
 Address for Notice: 

153 E. 53rd Street 
 55th Floor 
 New York, NY 10022 
  

			
	SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
		
	 By:
	 	 
	 Name:
	 	 Austin W. Marxe

	 Title:
	 	 General Partner

  
 153 E. 53rd Street 

55th Floor 
 New York, NY 10022 
  

 15 

			
	 SCORPION CAPITAL PARTNERS, L.P.

		
	By:	 	 
	 Name:
	 	 
	 Title:
	 	 

  
 Address for Notice: 

 

			
	 SCORPION ACQUISITION LLC

		
	By:	 	 
	 Name:
	 	 
	 Title:
	 	 

  
 Address for Notice: 

 

			
	 PEQUOT SCOUT FUND, L.P.
 By Pequot Capital Management, Inc.
 as Investment Manager

		
	 By:
	 	 
	 Name:
	 	 Aryeh Davis

	 Title:
	 	 General Counsel

  
 Address for Notice: 

 

 16 

			
	 PEQUOT NAVIGATOR ONSHORE FUND, L.P.
 By Pequot Capital Management, Inc.
 as Investment Manager

		
	 By:
	 	 
	 Name:
	 	 Aryeh Davis

	 Title:
	 	 General Counsel

  
 Address for Notice: 

 

			
	 PEQUOT NAVIGATOR OFFSHORE FUND, INC.
 By Pequot Capital Management, Inc.
 as Investment Advisor

		
	 By:
	 	 
	 Name:
	 	 Aryeh Davis

	 Title:
	 	 General Counsel

  
 Address for Notice: 

 

			
	 PREMIUM SERIES PCC LIMITED - CELL 33

		
	 By:
	 	 
	 Name:
	 	 Michael Griffin

	 Title:
	 	 Authorized Signatory

  
 Address for Notice: 

 

			
		
	 	 	 
	 	 	Jack Duffy

  
 Address for Notice: 

 

 17 

					
			
	  	 	 	 	  
	 	 	 	 	Dolph DiBiaso
	 Address for Notice:
	 	 	 	 
			
	  	 	 	 	  
	 	 	 	 	Vincent Wasik
	 Address for Notice:
	 	 	 	 
			
	  	 	 	 	  
	 	 	 	 	Mark Kesselman
	 Address for Notice:
	 	 	 	 

  

 18 

											
	 	 	 	 	 	 	 	 	 TH LEE PUTNAM VENTURES, L.P.

					
	 	 	 	 	 	 	 	 	 By: TH Lee Putnam Fund Advisors, L.P.,

	 	 	 	 	 	 	 	 	 its General Partner

					
	 	 	 	 	 	 	 	 	 By: TH Lee Putnam Fund Advisors, LLC,

	 	 	 	 	 	 	 	 	 its General Partner

						
	  	 	  	 	  	 	 	 	By:	 	  
	 	 	 	 	 	 	 	 	 Name: James Brown

	 	 	 	 	 	 	 	 	 Title: Managing Director

		
	 Address for Notice:
	 	 TH Lee Putnam Ventures, L.P.
 200 Madison Avenue, Suite 1900
 New York, NY 10016

	 	 	 	 	 	 	 	 	 TH LEE PUTNAM PARALLEL VENTURES, L.P.

					
	 	 	 	 	 	 	 	 	 By: TH Lee Putnam Fund Advisors, L.P.,

	 	 	 	 	 	 	 	 	 its General Partner

					
	 	 	 	 	 	 	 	 	 By: TH Lee Putnam Fund Advisors, LLC,

	 	 	 	 	 	 	 	 	 its General Partner

						
	  	 	  	 	  	 	 	 	By:	 	  
	 	 	 	 	 	 	 	 	 Name: James Brown

	 	 	 	 	 	 	 	 	 Title: Managing Director

		
	 Address for Notice:
	 	 c/o TH Lee Putnam Ventures, L.P.
 200 Madison Avenue, Suite 1900
 New York, NY 10016

  

 19 

											
	 	 	 	 	 	 	 	 	 THLi COINVESTMENT PARTNERS, LLC

					
	 	 	 	 	 	 	 	 	By: TH Lee Putnam Fund Advisors, L.P.,
	 	 	 	 	 	 	 	 	 its General Partner

					
	 	 	 	 	 	 	 	 	By: TH Lee Putnam Fund Advisors, LLC,
	 	 	 	 	 	 	 	 	 its General Partner

						
	  	 	  	 	  	 	 	 	By:	 	  
	 	 	 	 	 	 	 	 	 Name: James Brown

	 	 	 	 	 	 	 	 	 Title: Managing Director

		
	 Address for Notice:
	 	 c/o TH Lee Putnam Ventures, L.P.
 200 Madison Avenue, Suite 1900
 New York, NY 10016

	 	 	 	 	 	 	 	 	 BLUE STAR I, LLC

						
	  	 	  	 	  	 	 	 	By:	 	  
	 	 	 	 	 	 	 	 	 Name: Thomas H. Lee

	 	 	 	 	 	 	 	 	 Title: Managing Member

		
	 Address for Notice:
	 	 c/o TH Lee Putnam Ventures, L.P.
 200 Madison Avenue, Suite 1900
 New York, NY 10016

  

 20 

  
 EXHIBIT A 

 
 Collateral 
  
 Velocity Express Corporation, a Delaware corporation and Velocity Express, Inc., a Delaware corporation (together with their
subsidiaries, the “Company”) grants Secured Parties a security interest in the Company’s property described hereafter (the “Collateral”) to secure the payment and performance of the Note Obligations, whether such Note
Obligations currently exist or are hereafter created or incurred, and whether such Note Obligations are or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, joint, several, or
joint and several. The Collateral shall include: 
  
 (i) (A) all
investment property in which the Company has an interest, and (B) all other capital securities which are interests in corporations, limited liability companies or partnerships in which the Company has an interest, in each case together with
dividends and distributions payable in respect of the Collateral described in the foregoing clauses (i)(A) and (i)(B); 
  
 (ii) all assets, including without limitation all goods, equipment and inventory in all of its forms of the Company; 
  
 (iii) all accounts, contracts, contract rights, chattel paper, documents,
instruments, promissory notes and general intangibles (including tax refunds and all payment intangibles) of the Company, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights of
the Company now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such accounts, contracts, contract rights, chattel paper, documents, instruments, promissory notes,
general intangibles and payment intangibles (all of the foregoing collectively referred to as the “Receivables”, and any and all such security agreements, guaranties, leases and other contracts collectively referred to as the “Related
Contracts”); 
  
 (iv) all Intellectual Property Collateral of
the Company; 
  
 (v) all deposit accounts of the Company;

  
 (vi) all of the Company’s letter of credit rights;

  
 (vii) all commercial tort claims in which the Company has
rights (including as a plaintiff); 
  
 (viii) all books, records,
writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing; 
  

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 (ix) all of the Company’s other property and rights of every kind and description and interests
therein; and 
  
 (x) all products, offspring, rents, issues,
profits, returns, income, supporting obligations and proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in clauses (i) through (x), and, to the extent not otherwise
included, all payments under insurance (whether or not a Secured Party is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral).

  
 “Intellectual Property Collateral” means, collectively, the
Copyright Collateral, the Trademark Collateral and the Trade Secrets Collateral. 
  
 “Copyright Collateral” means all copyrights of the Company, whether statutory or common law, registered or unregistered and whether published or unpublished, now or hereafter in force throughout the world including all of the
Company’s rights, titles and interests in and to all copyrights registered in the United States Copyright Office or anywhere else in the world and registrations and recordings thereof and all applications for registration thereof, whether
pending or in preparation, all copyright licenses, the right to sue for past, present and future infringements of any of the foregoing, all rights corresponding thereto, all extensions and renewals of any thereof and all proceeds of the foregoing,
including licenses, royalties, income, payments, claims, damages and proceeds of suit. 
  
 “Trademark Collateral” means: 
  

	 	(i)	all trademarks, trade names, corporate names, domain names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective
marks, logos and other source or business identifiers, and all goodwill of the business associated therewith, now existing or hereafter adopted or acquired, whether currently in use or not, all registrations and recordings thereof and all
applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and Trademark Office (including those trademarks listed on Schedule A attached
hereto) or in any office or agency of the United States of America or any State thereof or any other country or political subdivision thereof or otherwise, and all common law rights relating to the foregoing, and (ii) the right to obtain all
reissues, extensions or renewals of the foregoing (collectively referred to as the “Trademark”); 

  

	 	(ii)	all Trademark licenses for the grant by or to the Company of any right to use any Trademark; and 

  

	 	(iii)	all of the goodwill of the business connected with the use of, and symbolized by the items described in, clause (i), and to the extent applicable clause (ii);

  

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	 	(iv)	the right to sue third parties for past, present and future infringements of any Trademark Collateral described in clause (i) and, to the extent applicable, clause (ii); and

  

	 	(v)	all proceeds of, and rights associated with, the foregoing, including any claim by the Company against third parties for past, present or future infringement or dilution of any
Trademark, Trademark registration or Trademark license, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license and all rights corresponding thereto throughout the world.

  
 “Trade Secrets Collateral” means all common law and
statutory trade secrets and all other confidential, proprietary or useful information and all know-how obtained by or used in or contemplated at any time for use in the business of the Company (all of the foregoing being collectively called a
“Trade Secret”), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses,
and including the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license. 
  

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 SCHEDULE A 

 
 Trademarks 
  

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