<SUBMISSION>
<ACCESSION-NUMBER>0001193125-09-162644
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20090731
<ITEMS>1.01
<ITEMS>9.01
<FILING-DATE>20090804
<DATE-OF-FILING-DATE-CHANGE>20090803
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>VELOCITY EXPRESS CORP
<CIK>0001002902
<ASSIGNED-SIC>4513
<IRS-NUMBER>870355929
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0701
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>000-28452
<FILM-NUMBER>09981507
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>ONE MORNINGSIDE DRIVE NORTH
<STREET2>BUILDING B SUITE 300
<CITY>WESTPORT
<STATE>X1
<ZIP>06880
<PHONE>203-349-4160
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>ONE MORNINGSIDE DRIVE NORTH
<STREET2>BUILDING B SUITE 300
<CITY>WESTPORT
<STATE>X1
<ZIP>06880
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>UNITED SHIPPING & TECHNOLOGY INC
<DATE-CHANGED>19990512
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>U SHIP INC
<DATE-CHANGED>19960313
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d8k.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML><HEAD>
<TITLE>Form 8-K</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>UNITED STATES </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="3"><B>WASHINGTON, DC 20549 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>FORM 8-K </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>CURRENT REPORT
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>PURSUANT TO SECTION 13 OR 15(d) OF THE </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="3"><B>SECURITIES EXCHANGE ACT OF 1934 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Date of report (Date of earliest event reported): July&nbsp;31,
2009 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P
STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="6"><B>VELOCITY EXPRESS CORPORATION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Exact
Name of Registrant as Specified in Charter) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="34%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Delaware</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>0-28452</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>87-0355929</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(State or Other Jurisdiction</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="1"><B>of Incorporation)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Commission File Number)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(IRS Employer</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="1"><B>Identification No.)</B></FONT></P></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="48%"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>One Morningside Drive North</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>Bldg. B, Suite 300</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Westport, Connecticut</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>06880</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Address of Principal Executive Offices)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Zip Code)</B></FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Registrants&#146; telephone number, including area code: (203)&nbsp;349-4160 </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Not Applicable </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Former Name or
Former Address, if Changed Since Last Report) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Check the appropriate box if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </FONT></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>Item&nbsp;1.01</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>Entry into a Material Definitive Agreement. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><U>Status of Sale
Process </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">As previously reported, on March&nbsp;13, 2009, pursuant to the terms of the Fifth Supplemental Indenture modifying the
Indenture governing the Company&#146;s Senior Secured Notes (the &#147;Notes&#148;), the Company was required to initiate a process to attempt to sell the Company or all or substantially all of its assets or the Notes. The current principal balance
due on the Notes is approximately $102 million. The Company appointed a special board committee of independent directors (the &#147;Committee&#148;) to oversee the sale process. On June&nbsp;23, 2009 the Company announced that it had entered into a
letter of intent for such a transaction with a management buyout group led by Vincent A. Wasik, Chief Executive Officer of the Company and his private equity firm, MCG Global, LLC (the &#147;Management Group&#148;). </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">As of July&nbsp;31, 2009, the Company and the Management Group entered into a Recapitalization Agreement setting forth the terms of a transaction that
would satisfy the conditions of the Fifth Supplemental Indenture. The Recapitalization Agreement presumes that an entity formed by the Management Group, MCG Acquisition LLC (&#147;Newco&#148;) will be successful in (a)&nbsp;securing financing, and
(b)&nbsp;entering into agreements with holders of the Company&#146;s Notes to purchase the Notes and the related warrants held by the Note holders, for an aggregate purchase price, assuming all Notes are purchased, of $10 million in cash plus, if
the Recapitalization Transactions are consummated, shares of Common Stock of the Company equal to 10% of the Common stock of the Company outstanding after giving effect to the Recapitalization Transactions. The Recapitalization Transactions consist
of issuances of shares of Common Stock of the Company in exchange for (i)&nbsp;delivery of the Notes and related warrants by Newco and (ii)&nbsp;delivery of all series of Preferred Stock such that, post-transaction, ownership of the Company would be
as follows (on a fully diluted basis but subject to possible adjustments for certain outstanding options and warrants): (a)&nbsp;68.5% of the Common Stock would be held by the Management Group and its financing source; (b)&nbsp;10.0% of the Common
Stock of the Company would be held by the current Note holders; (c)&nbsp;19.9% of the Common Stock of the Company would be held by the holders of all series of the Company&#146;s outstanding Preferred Stock, and (d)&nbsp;1.6% of the Common Stock
would be retained by existing Common Stockholders and certain option or warrant holders, so the percentage ownership of the Company&#146;s existing Common Stockholders would be substantially diluted. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Management Group has informed the Company that it currently has consents from a majority of the holders of its Preferred Stock to a transaction
consistent with the Recapitalization Transactions, and execution of the Restructuring Agreement to reaffirm that consent by Preferred Holders with sufficient authority to effect the Recapitalization Transaction is a condition to the Recapitalization
Agreement. Further, the Management Group has informed the Company that it has entered into purchase agreements with the holders of a substantial majority of the Notes on terms consistent with the purchase price for the Notes and related warrants
described above. However, until the Management Group actually has closed on its financing and consummated purchases of at least two-thirds of the outstanding Notes, the Company may terminate the Recapitalization Agreement if there is a Superior
Proposal, as determined in good faith by the Committee, in which case the Note holders would be released from their obligation to sell. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The transaction is subject to a number of conditions, including but not limited to financing, closing of the Note purchases by Newco, consent of the Company&#146;s senior secured lender and consent or reaffirmation of consent of the
Company&#146;s preferred stockholders. There is no obligation on the part of the Company to negotiate exclusively with the Management Group, but the Management Group will be entitled to expense reimbursement, up to a maximum of $150,000, if another
transaction is accepted and a break up fee of $750,000 if another transaction is consummated. The Recapitalization Agreement also contains customary representations, warranties, covenants and termination provisions. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-2- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">There can be no assurances that the Management Group will be successful in securing all required
financing, or securing all requisite consents. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><U>Forward Looking Statements </U></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">This Current Report on Form 8-K contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, including statements with respect to its new senior financing. Forward-looking statements typically are identified by use of terms such as &#147;may,&#148; &#147;will,&#148; &#147;should,&#148; &#147;plan,&#148;
&#147;expect,&#148; &#147;anticipate,&#148; &#147;estimate&#148; and similar words, although some forward-looking statements are expressed differently. Forward-looking statements, such as the Company&#146;s ability to complete a transaction, or
obtain financing or requisite consents, or with respect to the value of its securities if a transaction is consummated, represent the Company&#146;s management&#146;s judgment regarding future events. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, the Company can give no assurance that such expectations will prove to be correct. All statements other than statements of historical fact included in this Current Report on
Form 8-K are forward-looking statements. The Company cannot guarantee the accuracy of the forward-looking statements, and you should be aware that the Company&#146;s actual results could differ materially from those contained in the forward-looking
statements due to a number of factors, including the statements under the heading &#147;Risk Factors&#148; contained in the Company&#146;s filings with the Securities and Exchange Commission. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>Item&nbsp;9.01</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>Financial Statements and Exhibits. </B></FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="95%"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">10.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Recapitalization Agreement dated as of July&nbsp;31, 2009.</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-3- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>SIGNATURES </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="13%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="86%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2"><B>VELOCITY EXPRESS CORPORATION</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Edward W. Stone</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Edward W. Stone</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Chief Financial Officer</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Date: August&nbsp;3, 2009 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-4- </FONT></P>

</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>dex101.htm
<DESCRIPTION>RECAPITALIZATION AGREEMENT
<TEXT>
<HTML><HEAD>
<TITLE>Recapitalization Agreement</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.1 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>RECAPITALIZATION AGREEMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>among </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>VELOCITY EXPRESS CORPORATION, </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>CERTAIN OF ITS PREFERRED STOCKHOLDERS </B>
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>and </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>MCG ACQUISITION
LLC </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Dated as of July&nbsp;31, 2009 </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>Table of Contents </U></B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="10%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="87%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Page</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">ARTICLE&nbsp;I</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Definitions</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">ARTICLE&nbsp;II</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Recapitalization Transactions</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;2.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Transactions at Closing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;2.2</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Closing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">ARTICLE&nbsp;III</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Representations and Warranties</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;3.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Representations and Warranties of the Company</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;3.2</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Representations and Warranties of the Investors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">ARTICLE&nbsp;IV</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Conditions to Closing</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;4.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Conditions to the Obligations of Each Party</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;4.2</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Conditions to the Obligations of Newco</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">14</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;4.3</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Conditions to Obligations of the Company</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">15</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">ARTICLE&nbsp;V</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Covenants and Agreements</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">15</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Forbearance</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">15</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.2</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Conduct of Business</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">15</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.3</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Actions by the Parties</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">16</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.4</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Acquisition Proposals.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">16</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.5</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Stockholders Meeting; Proxy Statement.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">18</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.6</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Agreement of Preferred Holders.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">18</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.7</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Stockholder Litigation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">20</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">ARTICLE&nbsp;VI</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Termination</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">20</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;6.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Termination of Obligations to Effect Closing; Effects.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">20</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;6.2</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Effect of Termination.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">22</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">ARTICLE&nbsp;VII</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Miscellaneous</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">22</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Survival</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">22</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.2</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Successors and Assigns</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">23</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.3</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Counterparts; Faxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">23</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.4</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Titles and Subtitles</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">23</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.5</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Notices</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">23</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.6</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.7</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Amendments and Waivers</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.8</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Publicity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.9</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Severability</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.10</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Entire Agreement</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">25</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.11</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Further Assurances</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">25</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.12</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Remedies Cumulative; Specific Performance</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">25</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.13</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Governing Law; Consent to Jurisdiction; Waiver of Jury Trial</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">25</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.14</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT FACE="Times New Roman" SIZE="2">Independent Nature of Obligations and Rights</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">25</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-i- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>RECAPITALIZATION AGREEMENT </U></B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">RECAPITALIZATION AGREEMENT, made as of the 31st day of July, 2009 (this &#147;<U>Agreement</U>&#148;), by and between Velocity Express Corporation (the
&#147;<U>Company</U>&#148;), MCG Acquisition LLC (&#147;<U>Newco</U>&#148;) and the holders of preferred stock of the Company whose names appear on the signature page hereto (the &#147;<U>Preferred Holders</U>&#148;). </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;"><FONT FACE="Times New Roman" SIZE="2">WHEREAS, Newco is a party to certain Bondholder Sale Agreements, dated as of the date hereof (the &#147;<U>Bondholder Sale
Agreements</U>&#148;), by and between Newco and the holders of at least <FONT SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;2</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT
FACE="Times New Roman" SIZE="2">rds of the Notes and Warrants (the Notes and Warrants being defined in the aggregate as the &#147;<U>Securities</U>&#148;) parties thereto (the &#147;<U>Bondholders</U>&#148;), pursuant to which Newco has agreements
to purchase at least <FONT SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;2</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2">rds of the outstanding Securities and
expects to have agreements to purchase all of the outstanding Securities in exchange for an aggregate amount equal to the Securities Purchase Price; </FONT></FONT></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">WHEREAS, Newco has agreed to exchange the Securities for shares of common stock, par value $0.04, of the Company (the &#147;<U>Common Stock</U>&#148;) equal to 78.5% of the Common Stock outstanding on a fully diluted
basis after giving effect to the Recapitalization Transactions (as defined below) (including the shares of Common Stock required to be delivered by Newco to the Bondholders pursuant to the Bondholder Sale Agreements), upon the terms and subject to
the conditions set forth herein and in full satisfaction of the Securities (the &#147;<U>Exchange</U>&#148;); </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">WHEREAS, in connection and
simultaneously with the consummation of the Exchange, at least 62.5% of each class of the Preferred Holders have agreed, and Newco expects that the remaining Preferred Holders will agree, to convert or exchange all of the issued and outstanding
Preferred Stock into shares of Common Stock equal to 19.9% of the Common Stock outstanding on a fully diluted basis (see Annex A regarding treatment of outstanding options and warrants) after giving effect to the Recapitalization Transactions upon
the terms and subject to the conditions set forth herein (the &#147;<U>Conversion</U>&#148; and, together with the Exchange and the other transactions contemplated by this Agreement, which will result in Newco owning 78.5% of the Common Stock
(including the shares of Common Stock required to be delivered by Newco to the Bondholders pursuant to the Bondholder Sale Agreements) outstanding on a fully diluted basis and the Preferred Holders owning 19.9% of the Common Stock outstanding on a
fully diluted basis, such that ownership of the Company is as set forth on Annex A. (the &#147;<U>Recapitalization Transactions</U>&#148;); </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">WHEREAS, the Company, Newco and over 62.5% of the Preferred Holders have agreed to terminate all the other existing agreements, arrangements and understandings between the Company and the Preferred Holders (other than the Transaction
Documents), (the &#147;<U>Preferred Holder Agreements</U>&#148;); </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">WHEREAS, the Company, Newco and the Preferred Holders are executing and
delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D, as promulgated by the U.S. Securities and Exchange Commission (the &#147;<U>SEC</U>&#148;) under the 1933 Act;
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-1- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">WHEREAS, over 62.5% of the Preferred Holders have delivered Consents to Newco acknowledging that they
have agreed to the terms and conditions set forth herein and that execution of this Agreement by the Preferred Holders shall constitute a reaffirmation of the terms and conditions previously agreed to in such Consents; and </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound, the parties agree as follows: </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ARTICLE I </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>Definitions </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">For the purposes
of this Agreement, the following terms shall have the meanings set forth below: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Acquisition Proposal</U>&#148; means, other than
the Recapitalization Transactions, any proposal or offer from any Person (other than the Investors) or &#147;group&#148; (as defined in Section&nbsp;13(d) of the 1934 Act) for (i)&nbsp;the direct or indirect acquisition of assets of the Company
equal to 20% or more of the Company&#146;s consolidated assets, (ii)&nbsp;the acquisition from the Company of 20% or more of the outstanding equity securities of the Company (calculated on a fully diluted, as converted basis), (iii)&nbsp;a tender
offer or exchange offer that if consummated would result in any Person or &#147;group&#148; (as defined in Section&nbsp;13(d) of the Exchange Act) beneficially owning 20% or more of the equity securities of the Company or (iv)&nbsp;a merger,
consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the
Company&#146;s consolidated assets (other than (1)&nbsp;mergers, consolidations, recapitalizations, share exchanges or other business combinations involving solely the Company and/or one or more of its Subsidiaries and (2)&nbsp;mergers,
consolidations, recapitalizations, share exchanges or other business combinations that if consummated would result in the holders of the outstanding shares of Common Stock immediately prior to such transaction owning more than 90% of the equity
securities of the Company, or any successor or acquiring entity, immediately thereafter). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Affiliate</U>&#148; means, with respect
to any Person, any other Person which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such Person. For purposes of this definition, &#147;control&#148; (including the terms
&#147;controlling&#148;, &#147;controlled by&#148; or &#147;under common control with&#148;) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Bankruptcy Event</U>&#148; means any of the following events:
(a)&nbsp;any action is taken by or against the Company or any Subsidiary (other than by Newco or its Affiliates or by any Person acting on behalf of Newco or its Affiliates) under any bankruptcy, reorganization, winding up, arrangement,
restructuring, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Subsidiary thereof; (b)&nbsp;the Company or any Subsidiary is adjudicated by a court of
competent jurisdiction insolvent or bankrupt or any order of relief or other order approving any such case or </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-2- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">proceeding is entered; (c)&nbsp;any custodian, receiver, trustee or any similar official is appointed for the Company or any Subsidiary or any substantial
part of the Company&#146;s or any Subsidiary&#146;s property; (d)&nbsp;under applicable law the Company or any Subsidiary makes a general assignment for the benefit of creditors; or (e)&nbsp;the directors of the Company vote for or direct the
winding down of the affairs of such entity. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Board Resignation Request</U>&#148; has the meaning set forth in
<U>Section&nbsp;4.2(c)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Bondholder Sale Agreements</U>&#148; has the meaning set forth in the Recitals to this Agreement.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Bondholders</U>&#148; has the meaning set forth in the Recitals to this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Break-up Fee</U>&#148; means $750,000.00. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">&#147;<U>Business Day</U>&#148; means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">&#147;<U>Closing</U>&#148; has the meaning set forth in <U>Section&nbsp;2.2</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Closing
Date</U>&#148; has the meaning set forth in <U>Section&nbsp;2.2</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Company Releasees</U>&#148; means the Company, its
Subsidiaries and each of their respective officers and directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Company Requisite Vote</U>&#148; has the meaning set forth in
<U>Section&nbsp;3.1(g)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Consent</U>&#148; means the instrument delivered by over 62.5% of the Preferred Holders evidencing
such Preferred Holder&#146;s consent to the material terms and conditions set forth in this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Conversion</U>&#148; has
the meaning set forth in the Recitals to this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Credit Agreement</U>&#148; means that certain Loan and Security
Agreement, dated as of March&nbsp;13, 2009, as amended, among the Company, Velocity Express, Inc., Velocity Express Leasing, Inc., VXP Mid-West, Inc., VXP Leasing Mid-West, Inc., CD&amp;L, Inc., Clayton/National Courier Systems, Inc., Click
Messenger Service, Inc., Olympic Courier Systems, Inc., Securities Courier Corporation, Silver Star Express, Inc., Velocity Systems Franchising Corporation, the lenders parties thereto and Burdale Capital Finance, Inc., as administrative agent for
the lenders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Exchange</U>&#148; has the meaning set forth in the Recitals to this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Frustrating Transaction</U>&#148; has the meaning set forth in <U>Section&nbsp;5.6(b)</U>. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Governmental Entity</U>&#148; means any legislative, executive, judicial, regulatory or administrative unit of any governmental entity
(multinational, foreign, federal, state or local) or any department, commission, board, agency, bureau, ministry, official, arbitrator (public) or other similar body exercising executive, legislative, regulatory, administrative or judicial authority
or functions of or pertaining to government, including any authority or other quasi-governmental entity established by any of the foregoing to perform any such functions. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;
</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-3- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Indenture</U>&#148; means the Indenture, dated July&nbsp;3, 2006, between the Company and Wells
Fargo Bank, N.A., as trustee, with respect to the Notes, as amended by the Supplemental Indenture, dated as of August&nbsp;17, 2006, the Second Supplemental Indenture, dated as of December&nbsp;22, 2006 and the Third Supplemental Indenture, dated
July&nbsp;25, 2007, the Fourth Supplemental Indenture, dated May&nbsp;19, 2008, as amended, and the Fifth Supplemental Indenture, dated March&nbsp;13, 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">&#147;<U>Investors</U>&#148; means, collectively, Newco and the Preferred Holders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">&#147;<U>Liens</U>&#148; means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any
shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Material Adverse
Effect</U>&#148; means a material adverse effect on (i)&nbsp;the assets, liabilities, results of operations, condition (financial or otherwise) or business of the Company and its Subsidiaries taken as a whole, or (ii)&nbsp;the ability of the Company
to perform its obligations under the Transaction Documents; <I>provided, however</I>, that none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining
whether there has been or will be, a Material Adverse Effect: (A)&nbsp;any change, effect, event, occurrence or development (1)&nbsp;in the financial or securities markets or the economy in general or political conditions, (2)&nbsp;in the industries
in which the Company or any of its Subsidiaries operates in general, (3)&nbsp;related to or arising from changes following the date hereof in United States generally accepted accounting principles, (4)&nbsp;related to or arising from the
announcement or consummation of this Agreement and the Recapitalization Transactions, including a loss of customers, employees or independent contractors related to the announcement of this Agreement, (5)&nbsp;arising from losses of revenues or
deterioration in the performance of the business of the Company or its Subsidiaries, (6)&nbsp;related to or arising from changes following the date hereof in taxes or laws, rules or regulations of general applicability or interpretations thereof by
any Governmental Entity, or (7)&nbsp;related to or arising from any matter disclosed in the SEC Filings, or (B)&nbsp;any failure, in and of itself, by the Company to meet any internal or published projections, forecasts or revenue or earnings
predictions (it being understood that the facts or occurrences giving rise or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or would reasonably be expected to be, a Material
Adverse Effect. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Newco Expenses</U>&#148; means all of the reasonable documented out-of-pocket fees and expenses (including all
fees, expenses and disbursements of counsel, accountants, investment bankers, experts and consultants to Newco, its Affiliates and its Representatives) incurred by Newco on or prior to the termination of this Agreement in connection with the
Recapitalization Transactions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Newco Financing</U>&#148; means all requisite financing needed by Newco under and as contemplated
by the Bondholder Sale Agreements. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-4- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Newco Investors</U>&#148; means the Person or Persons who hereafter provide the Newco Financing.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Newco Investors Consent</U>&#148; has the meaning set forth in <U>Section&nbsp;4.2(e)</U>. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Newco Satisfaction and Release Documents</U>&#148; has the meaning set forth in <U>Section&nbsp;2.1(b)</U>. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Notes</U>&#148; means the Company&#146;s 12% Senior Secured Notes due 2010 issued under the Indenture. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Person</U>&#148; 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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">&#147;<U>Preferred Holder Agreements</U>&#148; has the meaning set forth in the Recitals to this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">&#147;<U>Preferred Holder Satisfaction and Release Documents</U>&#148; has the meaning set forth in <U>Section&nbsp;2.1(c)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">&#147;<U>Preferred Holders</U>&#148; has the meaning set forth in the Recitals to this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Preferred
Stock</U>&#148; means (i)&nbsp;the Series M Preferred Stock, par value $.004 per share of the Company (the &#147;<U>Series M Preferred</U>&#148;), (ii)&nbsp;the Series N Preferred Stock, par value $.004 per share of the Company (the &#147;<U>Series
N Preferred</U>&#148;), (iii)&nbsp;the Series O Preferred Stock, par value $.004 per share of the Company (the &#147;<U>Series O Preferred</U>&#148;), (iv)&nbsp;the Series P Preferred Stock, par value $.004 per share (the &#147;<U>Series P
Preferred</U>&#148;) and (v)&nbsp;the Series Q Preferred Stock, par value $.004 per share of the Company (the &#147;<U>Series Q Preferred</U>&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">&#147;<U>Preferred Stock Adjustment</U>&#148; has the meaning set forth in <U>Section&nbsp;2.1(c)(ii)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">&#147;<U>Prohibited Transaction</U>&#148; has the meaning set forth in <U>Section&nbsp;3.2(k)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Proxy
Statement</U>&#148; has the meaning set forth in <U>Section&nbsp;5.5(a)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Recapitalization Transactions</U>&#148; has the
meaning set forth in the Recitals to this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Recommendation</U>&#148; has the meaning set forth in
<U>Section&nbsp;5.5(a)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Representatives</U>&#148; has the meaning set forth in <U>Section&nbsp;5.4(a)</U>. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Securities</U>&#148; has the meaning set forth in the Recitals to this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Securities Purchase Price</U>&#148; means $10 million in cash plus, if the Recapitalization Transactions are consummated, shares of Common Stock
equal to ten percent (10%)&nbsp;of the Common Stock of the Company outstanding after giving effect to the Recapitalization Transactions. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-5- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>SEC</U>&#148; has the meaning set forth in the Recitals to this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>SEC Filings</U>&#148; has the meaning set forth in <U>Section&nbsp;3.1(e)</U>. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Shares</U>&#148; means the shares of Common Stock being acquired by Newco and the Preferred Holders hereunder (including, for the avoidance of
doubt, the Shares to be delivered by Newco to the Bondholders pursuant to the Bondholder Sale Agreements as part of the Securities Purchase Price). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">&#147;<U>Special Committee</U>&#148; means the committee of the Company&#146;s Board of Directors formed for the purpose of evaluating strategic options for the Company, including the transactions covered hereby. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Stockholders Meeting</U>&#148; has the meaning set forth in <U>Section&nbsp;5.5(a)</U>. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Subsidiary</U>&#148; of any Person means any corporation, partnership, joint venture or other legal entity of which such Person owns, directly
or indirectly, 50% or more of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Superior Proposal</U>&#148; means any bona fide proposal (on its most recently amended or modified terms, if amended or modified) made by any
Person to enter into an Acquisition Proposal which, if consummated, would result in such Person owning, directly or indirectly (A)&nbsp;assets that generate more than 50% of the consolidated total revenues of the Company and its Subsidiaries,
(B)&nbsp;assets that constitute more than 50% of the consolidated total assets of the Company and its Subsidiaries or (C)&nbsp;more than 50% of the total voting power of the equity securities of the Company, in each case that the Special Committee
in good faith determines would, if consummated, result in a transaction that is more favorable from a financial point of view to both the stockholders of the Company and the holders of the Company&#146;s outstanding indebtedness than the
transactions contemplated hereby. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Termination Date</U>&#148; has the meaning set forth in <U>Section&nbsp;6.1(a)(iv)</U>.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Trading Affiliates</U>&#148; has the meaning set forth in <U>Section&nbsp;3.2(k)</U>. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Transaction Documents</U>&#148; means this Agreement, the Bondholder Sale Agreements, the Newco Satisfaction and Release Documents, the Consents
of the Preferred Holders and the Preferred Holder Satisfaction and Release Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Transfer</U>&#148; has the meaning set
forth in <U>Section&nbsp;5.6(c)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Warrants</U>&#148; means the warrants to acquire shares of Common Stock (as amended on
May&nbsp;19, 2008), exercisable at $1.35 per share, and the warrants to acquire shares of Common Stock issued on May&nbsp;19, 2008, exercisable at $0.88 per share, in each case held by the Bondholders. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-6- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>1933 Act</U>&#148; means the Securities Act of 1933, as amended, or any successor statute, and
the rules and regulations promulgated thereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>1934 Act</U>&#148; means the Securities Exchange Act of 1934, as amended, or
any successor statute, and the rules and regulations promulgated thereunder. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ARTICLE II </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>Recapitalization Transactions </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">Section&nbsp;2.1 <U>Transactions at Closing</U>. On the terms and subject to the conditions set forth in this Agreement, at the Closing, the following transactions shall occur simultaneously: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) Newco shall surrender to the Company the Securities for Exchange pursuant to the terms hereof. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) Newco shall execute and deliver one or more written instruments effective as of the Closing, in form and substance reasonably satisfactory to the
Company (the &#147;<U>Newco Satisfaction and Release Documents</U>&#148;): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) terminating all obligations of the parties under the Notes,
Warrants and the Indenture, </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(ii) releasing all security interests Newco may have in the assets of the Company or its Subsidiaries under
the Notes or otherwise, </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(iii) permanently waiving any and all rights with respect to any event of default that may have existed under the
Notes at any time on or prior to the Closing, and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(iv) releasing the Company Releasees from all claims Newco or certain related parties
may have against any of the Company Releasees (other than claims arising under the Transaction Documents), and releasing Newco from all claims the Company and its Subsidiaries may have against Newco (other than claims arising under the Transaction
Documents). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(c) The Preferred Holders shall surrender to the Company stock certificates from each of the Preferred Holders representing
all of the issued and outstanding shares of Preferred Stock, together with properly completed notices accepting the Company&#146;s offer to exchange or notice of conversion relating thereto, sufficient to exchange the shares of Preferred Stock into
shares of Common Stock (provided, however, that upon consummation of the transactions, outstanding Preferred Stock certificates will represent only the Common Stock). In addition, each consenting Preferred Holder shall execute and deliver one or
more written instruments effective as of the Closing, in form and substance reasonably satisfactory to the Company (the &#147;<U>Preferred Holder Satisfaction and Release Documents</U>&#148;): </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) terminating all obligations of the parties under the Preferred Stock and the Preferred Holder Agreements, </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-7- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(ii) exchanging their shares of Preferred Stock for Common Stock or adjusting the conversion rates
applicable to the Preferred Stock or otherwise taking steps as required to implement the Recapitalization Transactions as set forth in <U>Annex A</U> hereto, agreeing to amend the Company&#146;s Certificate of Incorporation if necessary to effect
the foregoing adjustments (including any reverse stock split) and agreeing to exchange or convert at Closing all of the shares of Preferred Stock into Common Stock as contemplated by the Recapitalization Transactions (collectively, the
&#147;<U>Preferred Stock Adjustment</U>&#148;), </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(iii) permanently waiving any and all rights with respect to the Company under the
Preferred Stock or the Preferred Holder Agreements at any time on or prior to the Closing, and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(iv) releasing the Company Releasees from
all claims the Preferred Holders or certain related parties may have against any of the Company Releasees (other than claims arising under the Transaction Documents), and releasing the Preferred Holders and certain related parties from all claims
the Company and its Subsidiaries may have against the Preferred Holders or such related parties (other than claims arising under the Transaction Documents). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(d) The Company shall </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) deliver to Newco one or more certificates in the name of Newco or its nominee,
bearing appropriate restrictive legends (which shall permit the distribution to Newco&#146;s members and the Bondholders of the Shares issuable to Newco in connection with the Recapitalization Transactions), representing the Shares issued to Newco
hereunder, which shall include the Shares deliverable to the Bondholders by Newco pursuant to the Bondholder Sale Agreements as part of the Securities Purchase Price; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(ii) deliver one or more certificates to each of the Preferred Holders as set forth in <U>Annex B</U>, bearing appropriate restrictive legends as contemplated by Section&nbsp;3.2(g), representing the number of shares
of Common Stock which each Preferred Holder is entitled to in respect of such holder&#146;s shares of Preferred Stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;2.2
<U>Closing</U>. The closing (the &#147;<U>Closing</U>&#148;) of the Recapitalization Transactions shall take place at the offices of Lowenstein Sandler PC, 65 Livingston Ave., Roseland, New Jersey 07068, on the first business day after the
satisfaction or waiver of the conditions set forth in <U>Article IV</U>, or at such other location and on such other date as the parties hereto shall mutually agree. The date on which the Closing occurs is referred to herein as the &#147;<U>Closing
Date</U>&#148;. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ARTICLE III </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><B><U>Representations and Warranties </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;3.1 <U>Representations and Warranties of the Company</U>. The Company
represents and warrants to each Investor that, except as disclosed in the SEC Filings filed prior to the date of this Agreement (other than any forward-looking disclosures set forth in any risk factor section, any disclosures in any section relating
to forward-looking statements and any other similar disclosures included therein to the extent they are primarily predictive or forward-looking in nature): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(a) <U>Organization, Good Standing and Qualification</U>. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now conducted and to own its properties. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-8- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Authorization</U>. The Company has full power and authority and, except for the receipt of
agreements of the remaining Bondholders and Preferred Holders, and the Company Requisite Vote, has taken all requisite action on the part of the Company, its officers, directors and shareholders necessary for (i)&nbsp;the authorization, execution
and delivery of the Transaction Documents, (ii)&nbsp;the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii)&nbsp;the authorization, issuance and delivery of the Shares. The Transaction Documents
constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors&#146; rights generally. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(c) <U>Capitalization</U>. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) As of July&nbsp;31, 2009: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(A)
<U>Preferred Stock</U>. 299,515,270 shares of Preferred Stock were authorized, (1)&nbsp;7,500,000 of which have been designated as Series M Preferred, and 4,347,571 (687,736 common equivalent shares) of which are issued and outstanding (or were
earned pursuant to the accrued PIK dividend provision of the Certificate of Designations for such series but not yet issued (&#147;earned&#148;)), (2)&nbsp;2,544,098 of which have been designated as Series N Preferred, 946,138 (149,668 common
equivalent shares) of which were issued and outstanding or earned, (3)&nbsp;1,625,000 of which have been designated as Series O Preferred, 129,547 (22,245 common equivalent shares) of which were issued and outstanding or earned, (4)&nbsp;5,022,000
of which have been designated as Series P Preferred, 2,279,826 (544,030 common equivalent shares) of which were issued and outstanding or earned and (5)&nbsp;9,704,813 of which have been designated as Series Q Preferred, 5,245,115 (4,156,686 common
equivalent shares) of which were issued and outstanding or earned. No other shares of Preferred Stock were issued and outstanding as of July&nbsp;31, 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(B) <U>Common Stock</U>. 700,000,000 shares of Common Stock were authorized, of which 4,549,955 shares were issued and outstanding. As of the date hereof, no shares of Common Stock were held by the Company in its
treasury. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(C) <U>Options</U>. 24,601 shares of Common Stock were subject to outstanding options. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(D) <U>Warrants</U>. Warrants to purchase 2,437,764 shares of Common Stock were issued and outstanding. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-9- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(ii) Except as set forth in subsection (i)&nbsp;above, and except with respect to rights that will be
terminated as a result of the transactions described herein or as set forth on Annex B, no Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company, and there are no outstanding
warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any kind and except as contemplated by
this Agreement, neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of any equity securities of any kind. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">(iii) The issuance and sale of the Shares hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person and will not result in the adjustment of the exercise, conversion, exchange or reset
price of any outstanding security except for securities being exchanged or cancelled pursuant to the transactions described herein or as set forth on Annex B. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(iv) The Company does not have outstanding shareholder purchase rights, a &#147;poison pill&#148; or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon
the occurrence of certain events. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(d) <U>Valid Issuance</U>. The Shares have been duly and validly authorized and, when issued and paid
for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(e) <U>SEC Filings</U>. The Company has filed all forms, reports, statements, certifications and other
documents (including all exhibits and other information incorporated therein, amendments and supplements thereto) required to be filed by them with the SEC (all such forms, reports, statements, certificates and other documents filed, including any
amendments thereto, collectively, the &#147;<U>SEC Filings</U>&#148;) since June&nbsp;30, 2008. As of their respective dates the SEC Filings filed since June&nbsp;30, 2008 complied, and each of the SEC Filings filed subsequent to the date of this
Agreement will comply, in all material respects with the requirements of the 1933 Act, the 1934 Act and the Sarbanes-Oxley Act of 2002, as the case may be, and the applicable rules and regulations promulgated thereunder. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(f) <U>No Conflict, Breach, Violation or Default</U>. Subject to the receipt of consents from any Bondholders and Preferred Holders who have not yet
consented to the transactions, and the Company Requisite Vote, the execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Shares will not conflict with or result in a breach or violation of
any of the terms and provisions of, or constitute a default under (i)&nbsp;the Company&#146;s Certificate of Incorporation or Bylaws, both as in effect on the date hereof or (ii)(a) any statute, rule, regulation, order, judgment or decree of any
Governmental Entity, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(g) <U>Company
Requisite Vote</U>. Certain shareholder consents or approvals may be required to effectuate the transactions contemplated hereby, including but not limited to (x)&nbsp;if </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-10- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">the Company is listed on Nasdaq, the affirmative vote of a majority of the votes cast at the Stockholders Meeting by holders of outstanding shares of Company
Stock, treating the outstanding shares of Common Stock and the Preferred Stock together as a single class, with each holder of Series M Preferred, Series N Preferred and Series O Preferred being entitled to vote a number of votes equal to the ratio
of the Series M Preferred, Series&nbsp;N Preferred and Series O Preferred stated value to market price multiplied by the number of shares held by such holder, rounded down to the nearest whole number, and each share of Series P Preferred and Series
Q Preferred being entitled to one vote, the affirmative vote of (A)&nbsp;62.5% of the outstanding shares of Series M Preferred, (B)&nbsp;62.5% of the outstanding shares of Series N Preferred and (C)&nbsp;62.5% of the outstanding shares of Series O
Preferred, (y)&nbsp;such votes as are required to approve the amendments of the Preferred Stock conversion rights if the shares are converted rather than exchanged for Common Stock, and (z)&nbsp;any other shareholder votes required to approve the
share issuances, any reverse stock split and other matters under Delaware law and Nasdaq rules, if applicable (collectively, the &#147;<U>Company Requisite Vote</U>&#148;). </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;3.2 <U>Representations and Warranties of the Investors</U>. Each Investor hereby severally, and not jointly, represents and warrants to the
Company that: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) <U>Organization and Existence</U>. If it is not a natural person, it is a validly existing corporation, limited
partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Shares pursuant to this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Authorization</U>. The execution, delivery and performance by it of the Transaction Documents to which it is a party have been duly authorized and
each will constitute the valid and legally binding obligation of it, enforceable against it in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors&#146; rights generally. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(c) <U>Purchase Entirely for Own Account</U>. The Shares to be
received by it hereunder will be acquired for its own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and it has no present intention of selling, granting any
participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to its right at all times to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state
securities laws, it being understood that Newco intends to distribute a portion of the Shares to the Bondholders pursuant to the Bondholder Sale Agreements and may distribute the remaining Shares received by it in the Recapitalization Transactions
to its members. It is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be so registered. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(d) <U>Investment Experience</U>. It acknowledges that it can bear the economic risk and complete loss of its investment in the Shares and has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated hereby. It acknowledges it has had an opportunity to consult legal counsel regarding the terms and provisions of this Agreement. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-11- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(e) <U>Disclosure of Information</U>. It has had an opportunity to receive all information related to the
Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Shares. It acknowledges full access to copies of the SEC Filings.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(f) <U>Restricted Shares</U>. It understands that the Shares are characterized as &#147;restricted securities&#148; under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in
certain limited circumstances. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(g) <U>Legends</U>. It is understood that, except as provided below, certificates evidencing the Shares
shall bear the following or any similar legend: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) &#147;THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I)&nbsp;SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD WITHOUT RESTRICTION PURSUANT TO RULE 144, 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 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(ii) If required by the authorities of any state in connection with the issuance of sale of the Shares, the legend required by such state authority. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(h) <U>Accredited Investor</U>. It is an accredited investor as defined in Rule 501(a) of Regulation D. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) <U>No General Solicitation</U>. It did not learn of the investment in the Shares as a result of any general solicitation or general advertising.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(j) <U>Brokers and Finders</U>. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid
right, interest or claim against or upon the Company, any Subsidiary or it for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by it or on its behalf. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(k) <U>Prohibited Transactions</U>. Since the earlier of (A)&nbsp;such time as it was first contacted by the Company or any other Person acting on behalf
of the Company regarding the transactions contemplated hereby or (B)&nbsp;thirty (30)&nbsp;days prior to the date hereof, neither it nor any of its Affiliates which (1)&nbsp;had knowledge of the transactions contemplated hereby, (2)&nbsp;has or
shares discretion relating to its investments or trading or information concerning its investments, including in respect of the Shares, or (3)&nbsp;is subject to its review or input concerning such Affiliate&#146;s investments or trading
(collectively, &#147;<U>Trading Affiliates</U>&#148;) has, directly or indirectly, effected or agreed to effect any short sale, whether or not against the box, established any &#147;put equivalent position&#148; (as defined in Rule 16a-1(h) under
the 1934 Act) with respect to the Common Stock, granted any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-12- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">derived any significant part of its value from the Common Stock or otherwise sought to hedge its position in the Shares (each, a &#147;<U>Prohibited
Transaction</U>&#148;). Prior to the termination of this Agreement, it shall not, and shall cause its Trading Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction. It acknowledges that the representations, warranties and
covenants contained in this <U>Section&nbsp;3.2(k)</U> are being made for the benefit of the other parties hereto as well as the Company and that each of the other parties hereto shall have an independent right to assert any claims against it
arising out of any breach or violation of the provisions of this <U>Section&nbsp;3.2(k)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(l) <U>Ownership of Surrendered
Securities</U>. In the case of Newco, subject to receipt of the Newco Financing and consummation of the Bondholder Sale Agreements, it will own the Notes and the Warrants, and in the case of each Preferred Holder, it owns the shares of Preferred
Stock set forth opposite its name on <U>Annex B</U>, beneficially and of record, free and clear of any Liens, other than those created pursuant to the terms of the Transaction Documents and, in the case of the Preferred Holders, the Preferred Holder
Agreements, and those arising under applicable federal securities laws and state securities laws. Except as set forth in the Transaction Documents, and, in the case of the Preferred Holders, the Preferred Holder Agreements, there are no agreements
(i)&nbsp;granting any option, warrant or right of first refusal with respect to such securities to any Person, (ii)&nbsp;restricting its right to surrender such securities to the Company, or (iii)&nbsp;restricting any other of its rights with
respect to such securities. Subject to compliance with the requirements of the 1933 Act, it has the absolute and unrestricted right, power and capacity to sell, assign and surrender such securities to the Company free and clear of any Liens (except
for Liens created pursuant to the Transaction Documents and those arising under applicable federal and state securities laws). </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ARTICLE
IV </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>Conditions to Closing </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">Section&nbsp;4.1 <U>Conditions to the Obligations of Each Party</U>. The respective obligations of each party to effect the Recapitalization Transactions shall be subject to the satisfaction at or prior to the Closing
Date of the following conditions: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) This Agreement and the issuance of the Shares pursuant to the Recapitalization Transactions shall
have been approved by the stockholders of the Company by the Company Requisite Vote if required by the rules of the Nasdaq or otherwise (which condition may be waived if the Company certifies that no such vote is required). </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) No judgment, writ, order, injunction, award or decree of or by any Governmental Entity shall have been issued, and no action or proceeding shall have
been instituted by any Governmental Entity, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(c) The Company shall have obtained any consent or approval required under the Credit Agreement or any loan, guarantee of indebtedness, note, bond, mortgage, indenture, lease, agreement, contract, instrument, permit,
concession, franchise, right or license, to consummate the Recapitalization Transactions. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-13- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(d) The Agreement shall not have been terminated pursuant to Section VI. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;4.2 <U>Conditions to the Obligations of Newco</U>. All obligations of Newco hereunder are subject to its ability to secure the Newco
Financing and to thereafter acquire the Securities pursuant to the Bondholder Sale Agreements. The obligation of Newco to effect the Exchange and to execute and deliver the Newco Satisfaction and Release Documents at the Closing is subject to the
fulfillment, on or prior to the Closing Date, of the following conditions, any of which may be waived in writing by Newco: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) The
representations and warranties made by the Company in <U>Section&nbsp;3.1</U> hereof that are qualified as to materiality shall be true and correct in all respects and that are not so qualified shall be true and correct in all material respects, on
the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, except where the failure of any such
representations and warranties to be so true and correct, in the aggregate, has not had, and would not reasonably be expected to have, a Material Adverse Effect. The Company shall have performed in all material respects all obligations and covenants
herein required to be performed by it on or prior to the Closing Date. The Company shall have delivered a certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in this <U>Section&nbsp;4.2(a)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) The Company shall have executed and
delivered to Newco the Newco Satisfaction and Release Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(c) The Company shall, upon Newco&#146;s written request, submit to Newco
the resignations of the Board of Directors of the Company at or prior to the Closing (the &#147;<U>Board Resignation Request</U>&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">(d) Newco shall have obtained from the Newco Investors the Newco Financing to purchase the Securities for the Securities Purchase Price and to pay the Newco Expenses and such other sums as contemplated by the Bondholder Sale Agreements, and
the transactions contemplated by the Bondholder Sale Agreements shall have been consummated. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(e) The Newco Investors shall have executed
an instrument evidencing their consent to the terms and conditions set forth herein in form reasonably satisfactory to the Company. (Such consent by the Newco Investors is a condition subsequent to the effectiveness of this Agreement.) </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(f) A sufficient number of Preferred Holders shall have executed this Agreement and consented to the Recapitalization Transaction so as to enable it
to be effected without the consent of any additional Preferred Holders. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-14- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;4.3 <U>Conditions to Obligations of the Company</U>. The Company&#146;s obligation to
consummate the Recapitalization Transactions at the Closing is subject to the fulfillment on or prior to the Closing Date of the following conditions, any of which may be waived by the Company: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) The representations and warranties made by the Investors in <U>Section&nbsp;3.2</U> hereof that are qualified as to materiality shall be true and
correct in all respects and that are not so qualified shall be true and correct in all material respects on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct as of such earlier date. The Investors shall have performed in all material respects all obligations and covenants herein required to be performed by them on or prior to the Closing Date. The
Investors shall have delivered a certificate or certificates, executed on behalf of the Company by an authorized representative, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in this
<U>Section&nbsp;4.4(a)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) The consenting Preferred Holders shall have executed and delivered to the Company the Preferred Holder
Satisfaction and Release Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(c) Newco shall have executed and delivered to the Company the Newco Satisfaction and Release
Documents. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ARTICLE V </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><B><U>Covenants and Agreements </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.1 <U>Forbearance</U>. Until the earlier of (i)&nbsp;the termination of this
Agreement in accordance with its terms and (ii)&nbsp;the occurrence of any Bankruptcy Event prior to the Closing, Newco shall forbear from exercising the Warrants or exercising any of its rights or remedies under the Notes or taking any other action
with respect to the Company or any of its Affiliates as a result of any Event of Default or event which, with the giving of notice, the lapse of time, or both, would become an Event of Default under the Notes. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.2 <U>Conduct of Business</U>. Except as expressly permitted or required by the terms of this Agreement, from the date of this Agreement to
the Closing, the Company shall, and shall cause its Subsidiaries to, conduct its or their businesses in the usual, regular and ordinary course in substantially the same manner as previously conducted and, to the extent consistent therewith, shall
use all reasonable efforts to keep intact their respective businesses, keep available the services of their current employees and preserve their relationships with customers, suppliers, licensors, licensees, distributors and others with whom they
deal to the end that their businesses shall be unimpaired at the Closing. Except as expressly permitted or required by this Agreement, the Company shall not, and shall not permit any Subsidiary to, take any action that would, or that would
reasonably be expected to, result in any of the conditions to the consummation of the Recapitalization Transactions set forth in <U>Article IV</U> not being satisfied. In addition (and without limiting the generality of the foregoing), except as
expressly permitted or contemplated by the terms of this Agreement, the Company shall not, and the Company shall not permit any Subsidiary to, do any of the following without the prior written consent of Newco (which consent shall not be
unreasonably withheld): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) amend its certificate of incorporation or by-laws; </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(ii) sell, pledge, dispose of, grant, encumber, reclassify, combine, split, subdivide, redeem or otherwise acquire any shares of its capital stock or
issue any capital stock or any option, warrant or right relating thereto or any securities convertible into or exchangeable for any shares of capital stock; </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-15- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(iii) incur or assume any liabilities, obligations or indebtedness for borrowed money or guarantee any
such liabilities, obligations or indebtedness, other than in the ordinary course of business; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(iv) sell, lease, license or otherwise
dispose of any of its assets that are material, individually or in the aggregate, to the Company and its Subsidiaries, taken as a whole; or </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">(v) authorize any of, or commit or agree to take, whether in writing or otherwise, any of, the foregoing actions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">Section&nbsp;5.3 <U>Actions by the Parties</U>. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties hereto will use its commercially reasonable efforts to take or cause to be taken all actions, and
to do, or cause to be done, all things necessary, proper or advisable under applicable law and regulations to consummate and make effective in the most expeditious manner practicable, the Recapitalization Transactions including (a)&nbsp;the
obtaining of all reasonably necessary actions and non-actions, waivers and consents, if any, from any Governmental Entity and the making of all necessary registrations and filings and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity; (b)&nbsp;the obtaining of all necessary consents, approvals or waivers from any other Person; (c)&nbsp;the defending of any claim, investigation, action,
suit or other legal proceeding, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby; and (d)&nbsp;the execution of additional instruments reasonably necessary to consummate the
Recapitalization Transactions. Each party will promptly consult with the other and provide necessary information (including copies thereof) with respect to all filings made by such party with any agency or authority in connection with this Agreement
and the transactions contemplated hereby </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.4 <U>Acquisition Proposals</U>. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) Notwithstanding anything in this Agreement to the contrary, the Company and its Subsidiaries and their respective directors, officers, employees,
investment bankers, financial advisors, attorneys, accountants, agents and other representatives (&#147;<U>Representatives</U>&#148;) shall have the right to, directly or indirectly: (i)&nbsp;initiate, solicit and encourage, whether publicly or
otherwise, the submission of any inquiries, proposals or offers or any other efforts or attempts that constitute or may reasonably be expected to lead to, any Acquisition Proposal, including by way of providing access to non-public information
pursuant to (but only pursuant to) an executed confidentiality agreement; <U>provided</U> that the Company shall promptly provide to Newco any material non-public information concerning the Company or its Subsidiaries that is provided to any person
given such access which was not previously provided or made available to the Investors; and (ii)&nbsp;enter into and maintain or continue discussions or negotiations with respect to Acquisition Proposals or otherwise facilitate any inquiries,
proposals, discussions or negotiations with respect to Acquisition Proposals. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-16- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) At any time prior to the later of (x)&nbsp;the date that Newco Financing is consummated and at least
two-thirds in principal amount of the Notes are purchased by Newco or (y)&nbsp;August&nbsp;14, 2009, the Company may terminate this Agreement if the following conditions are satisfied: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) the Company has received an Acquisition Proposal that the Special Committee has determined in good faith&nbsp;constitutes a Superior Proposal;
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(ii) prior to or concurrently with such termination the Company reimburses Newco in cash in immediately available funds for the Newco
Expenses in accordance with <U>Section&nbsp;6.2(b)</U> (provided that in no event shall the Company be required to reimburse more than $150,000.00 of Newco Expenses), and agree to pay the Break Up Fee as and when required under
<U>Section&nbsp;6.2(c)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">In connection with any such termination pursuant to this Section&nbsp;5.4(b), Newco shall release the Bondholders from any
obligations to consummate the transactions under the Bondholder Sale Agreements and shall not take any action to interfere with the Superior Proposal approved by the Special Committee (other than to make a new proposal which it believes to be
superior to the Superior Proposal). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(c) At any time prior to obtaining the Company Requisite Vote, the Company may terminate this
Agreement if the following conditions are satisfied: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) the Company has received an Acquisition Proposal that the Special Committee has
determined in good faith (a)&nbsp;constitutes a Superior Proposal, and (b)&nbsp;failure to take such action could reasonably be expected to be inconsistent with its fiduciary duties under applicable law; </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(ii) (1) the Company has provided Newco with not less than five (5)&nbsp;Business Days&#146; prior written notice that it intends to enter into a
definitive agreement implementing such Superior Proposal, attaching to such notice the most current version of such agreement as of the date of such written notice (it being agreed that, by itself, any determination by the Board of Directors of the
Company or the Special Committee to send such notice shall not constitute a breach of <U>Section&nbsp;5.4</U> or a termination event under this <U>Section&nbsp;5.4(c)</U>); and (2)&nbsp;during such five (5)&nbsp;Business Day period, the Company
shall have negotiated, and shall have made its directors and officers available to negotiate, with Newco should Newco elect to propose adjustments in the terms and conditions of this Agreement such that, after giving effect thereto, such Acquisition
Proposal no longer constitutes a Superior Proposal and at the end of such five (5)&nbsp;Business Day period the Special Committee shall have determined in good faith (after consultation with outside legal counsel and its financial advisor) that such
Acquisition Proposal remains a Superior Proposal after giving effect to all the adjustments which may be offered pursuant to this clause (ii); and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">(iii) prior to or concurrently with such termination the Company reimburses Newco in cash in immediately available funds for the Newco Expenses in accordance with <U>Section&nbsp;6.2(c)</U> (provided that in no event shall the Company be
required to reimburse more than $150,000.00 of Newco Expenses) and agree to pay the Break Up Fee as and when required under <U>Section&nbsp;6.2(c)</U>. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-17- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.5 <U>Stockholders Meeting; Proxy Statement</U>. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) If and to the extent required, the Company, acting through its Board of Directors, shall (i)&nbsp;as soon as reasonably practicable following the date
of this Agreement, take all action necessary to duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of approving the Recapitalization Transactions and any requisite reverse stock split (the &#147;<U>Stockholders
Meeting</U>&#148;), (ii)&nbsp;include in the proxy statement to be sent to the stockholders of the Company in connection with the Stockholders Meeting (such proxy statement, as amended or supplemented, the &#147;<U>Proxy Statement</U>&#148;) the
recommendation of the Board of Directors that the stockholders of the Company vote in favor of approving the Recapitalization Transactions (the &#147;<U>Recommendation</U>&#148;) and (iii)&nbsp;use its commercially reasonable efforts to obtain the
Company Requisite Vote; <U>provided</U> that the Board of Directors of the Company may fail to make and the Special Committee may withdraw, modify or change the Recommendation and/or may fail to use such efforts if it shall have determined in good
faith, after consultation with outside legal counsel to the Special Committee, that such action is necessary in order for the Board of Directors to act in a manner consistent with its fiduciary duties under applicable law. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) If and to the extent that shareholder approval is required, then as soon as reasonably practicable following the date of this Agreement, the Company
shall, with the assistance of Newco, prepare and file with the SEC the Proxy Statement. Newco and the Company will cooperate with each other in the preparation of the Proxy Statement. Without limiting the generality of the foregoing, each of Newco
and the Preferred Holders will furnish to the Company the information relating to it required by the 1934 Act and the rules and regulations promulgated thereunder to be set forth in the Proxy Statement. The Company shall not file the preliminary
Proxy Statement or any amendment or supplement thereto, without providing Newco a reasonable opportunity to review and comment thereon (which comments shall be reasonably considered by the Company). The Company shall use its commercially reasonable
efforts to resolve all SEC comments with respect to the Proxy Statement as promptly as practicable after receipt thereof and to cause the Proxy Statement in definitive form to be cleared by the SEC and mailed to the Company&#146;s stockholders as
promptly as reasonably practicable following filing with the SEC. The Company agrees to consult with Newco prior to responding to SEC comments with respect to the preliminary Proxy Statement. Each of the Preferred Holders, Newco and the Company
agree to correct any information provided by it for use in the Proxy Statement which shall have become false or misleading. The Company shall, as soon as reasonably practicable, notify Newco of the receipt of any comments from the SEC with respect
to the Proxy Statement and any request by the SEC for any amendment to the Proxy Statement or for additional information. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;5.6
<U>Agreement of Preferred Holders</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) Each Preferred Holder agrees to exchange its shares of Preferred Stock for Common Stock in
accordance with the formulas set forth on <U>Annex A</U> so as to effect the Recapitalization Transaction. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-18- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) If a shareholder vote is required, and provided that the Board of Directors has made the
Recommendation and the Special Committee has not withdrawn or changed the Recommendation in accordance with <U>Section&nbsp;5.5(a)</U>, at the Stockholders Meeting or at any adjournment thereof or in any other circumstances upon which a vote,
consent or other approval with respect to the Recapitalization Transactions is sought, each Preferred Holder shall vote (or cause to be voted) such Preferred Holder&#146;s Preferred Stock in favor of approving the Recapitalization Transactions and
any requisite reverse stock split. In furtherance of the foregoing, each Preferred Holder shall also vote (or cause to be voted) such Preferred Holder&#146;s Preferred Stock at any meeting of stockholders of the Company or at any adjournment thereof
or in any other circumstances upon which a Preferred Holder&#146;s vote, consent or other approval is sought with respect to the Preferred Stock Adjustment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
FACE="Times New Roman" SIZE="2">(c) Provided that the Board of Directors has made the Recommendation and the Special Committee has not withdrawn or changed the Recommendation in accordance with <U>Section&nbsp;5.5(a)</U>, at any meeting of
stockholders of the Company or at any adjournment thereof or in any other circumstances upon which a Preferred Holder&#146;s vote, consent or other approval is sought, such Preferred Holder shall vote (or cause to be voted) such Preferred
Holder&#146;s Preferred Stock against (A)&nbsp;any Acquisition Proposal other than the Recapitalization Transactions unless such Acquisition Proposal is determined by a majority of the Special Committee to constitute a Superior Proposal, and
(B)&nbsp;any amendment of the Company&#146;s Certificate of Incorporation or By-laws, which amendment would in any manner impede, frustrate, prevent or nullify the Recapitalization Transactions or change the voting rights of any class of capital
stock of the Company in a manner that would reasonably be expected to materially and adversely delay, impede or frustrate the Recapitalization Transactions (a &#147;<U>Frustrating Transaction</U>&#148;). Each Preferred Holder further agrees not to
commit or agree to take any action inconsistent with the foregoing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(d) Each Preferred Holder agrees not to (A)&nbsp;sell, transfer,
pledge, assign or otherwise dispose of (including by gift, merger or otherwise by operation of law) (collectively, &#147;<U>Transfer</U>&#148;), or enter into any contract, option or other arrangement (including any profit sharing arrangement) with
respect to the Transfer of, such Preferred Holder&#146;s Preferred Stock to any Person other than to an Investor that is a party hereto or (B)&nbsp;enter into any voting arrangement, whether by proxy, voting agreement or otherwise, in connection
with, directly or indirectly, the Recapitalization Transactions or an Acquisition Proposal. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(e) Each Preferred Holder hereby irrevocably
grants to, and appoints, Newco such Preferred Holder&#146;s proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Preferred Holder, to vote such Preferred Holder&#146;s Preferred Stock, or grant a
consent or approval in respect of such Preferred Stock, in accordance with, and subject to the limitations of, this <U>Section&nbsp;5.6</U>. The proxy set forth in this <U>Section&nbsp;5.6(d)</U> shall terminate automatically without any further
action by any party hereto upon the sooner of (i)&nbsp;termination of this Agreement in accordance with its terms or (ii)&nbsp;the Proxy Statement does not contain the Recommendation or the Special Committee withdraws or changes the Recommendation
in accordance with <U>Section&nbsp;5.5(a)</U>. Each Preferred Holder represents that any proxies heretofore given in respect of such Preferred Holder&#146;s Preferred Stock are not irrevocable, and that all such proxies have been heretofore or are
hereby revoked. Each Preferred Holder hereby affirms that the irrevocable proxy granted in this <U>Section&nbsp;5.6(d)</U> is given </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-19- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">in connection with the execution of this Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Preferred Holder
under this <U>Section&nbsp;5.6(d)</U>. Each Preferred Holder hereby further affirms that such irrevocable proxy is coupled with an interest and may under no circumstances be revoked. Each Preferred Holder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(f) Each Preferred Holder agrees that, in respect of any matter
other than those referred to in <U>Section&nbsp;5.6(a) to (e)</U>, including but not limited to approving any amendment of this Agreement that binds all Preferred Holders, the act of Preferred Holders holding a majority of the outstanding shares of
Preferred Stock (with each share of Preferred Stock being entitled to a single vote) shall be the act of all of the Preferred Holders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Section&nbsp;5.7 <U>Stockholder Litigation</U>. The Company shall give Newco the opportunity to participate in the defense or settlement discussions of any litigation against the Company and/or its directors relating to the transactions
contemplated by the Transaction Documents provided that such participation does not result in any waiver of the attorney-client privilege or prejudice the Company in such defense or settlement discussions. </FONT></P> <P
STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ARTICLE VI </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>Termination </U></B>
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;6.1 <U>Termination of Obligations to Effect Closing; Effects</U>. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) The obligations of the Company, Newco and the Preferred Holders to effect the Closing may be terminated and the transaction contemplate hereby
abandoned prior to the Closing as follows: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:13%"><FONT FACE="Times New Roman" SIZE="2">(i) Upon the mutual written consent of the Company and Newco; </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:13%"><FONT FACE="Times New Roman" SIZE="2">(ii) By either the Company or Newco at any time prior to the date that Newco certifies to the Company that it has received (a)&nbsp;executed Bondholder
Sale Agreements from holders of a sufficient amount of the Notes so as to enable Newco and the Company to effect the Exchange without acquiring any additional Notes; and (b)&nbsp;signature pages to this Agreement from any other Preferred Holders
with voting rights with respect to a sufficient number of shares so as to permit the Recapitalization Transactions to be effected without consent required from any other Preferred Holders. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:13%"><FONT FACE="Times New Roman" SIZE="2">(iii) by either the Company or Newco if any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling,
or taken any other action (including enactment of a statute, rule or regulation) restraining, enjoining or otherwise prohibiting any of the transactions contemplated by this Agreement; </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:13%"><FONT FACE="Times New Roman" SIZE="2">(iv) by either the Company or Newco if the Closing has not occurred on or prior to the date that is one hundred twenty (120)&nbsp;days following the
date of this Agreement, plus that number of additional days as shall equal the number of days elapsing between the time of the filing of the initial filing with the SEC of the Proxy Statement and the time the SEC notifies the Company it has no
further comments with respect thereto minus ten (10)&nbsp;days (the &#147;<U>Termination Date</U>&#148;); </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-20- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:13%"><FONT FACE="Times New Roman" SIZE="2">(v) by either the Company or Newco if the Stockholder Meeting shall have been convened and a vote with
respect to the adoption of this Agreement by the Company Requisite Vote shall not have been obtained (unless the Stockholder Meeting is adjourned or postponed to vote on the Recapitalization Transactions at a subsequent date, which in any event
shall not be later than five days prior to the Termination Date); </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(vi) By the Company </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(A) pursuant to and in accordance with <U>Section&nbsp;5.4(b) or (c)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:13%"><FONT
FACE="Times New Roman" SIZE="2">(B) if there shall have been a breach of any of the covenants or agreements or a failure to be true of any of the representations or warranties set forth in this Agreement on the part of Newco, which breach or failure
to be true, either individually or in the aggregate and, in the case of the representations and warranties, measured on the date of this Agreement or, if provided herein, as of any subsequent date (as if made on such date), would result in the
failure of the conditions set forth in Section&nbsp;4.1 or 4.3, as the case may be, and which is not cured within the earlier of (i)&nbsp;the Termination Date and (ii)&nbsp;thirty (30)&nbsp;days following written notice to Newco, or which by its
nature or timing cannot be cured within such time period;<I> provided, however,</I> that the Company shall not have the right to terminate this Agreement pursuant to this Section&nbsp;6.1(a)(vi)(B) if the Company is then in material breach of any of
its covenants or agreements contained in this Agreement and such breach has resulted in the circumstances giving rise to Newco&#146;s seeking to terminate its obligation to effect the Closing. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:13%"><FONT FACE="Times New Roman" SIZE="2">(C) if all the conditions set forth in Section&nbsp;4.1 and 4.2 have been satisfied and Newco has failed to consummate the Recapitalization Transactions
no later than ten (10)&nbsp;Business Days after the satisfaction of such conditions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(vii) By Newco </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(A) if there shall have been a breach of any of the covenants or agreements or a failure to be true of any of the representations or warranties set forth
in this Agreement on the part of the Company (except the covenants and agreements that provide a right of termination pursuant to Section&nbsp;5.4), which breach or failure to be true, either individually or in the aggregate and, in the case of the
representations and warranties, measured on the date of this Agreement or, if provided herein, as of any subsequent date (as if made on such date), would result in the failure of the conditions set forth in Section&nbsp;4.1 or 4.2, as the case may
be, and which is not cured within the earlier of (i)&nbsp;the Termination Date and (ii)&nbsp;thirty (30)&nbsp;days following written notice to the Company, or which by its nature or timing cannot be cured within such time period;<I> provided</I>,
<I>however,</I> that Newco shall not have the right to terminate this Agreement pursuant to this Section&nbsp;6.1(a)(vii)(A) if Newco is then in material breach of any of its covenants or agreements contained in this Agreement and such breach has
resulted in the circumstances giving rise to Newco&#146;s seeking to terminate its obligation to effect the Closing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(B) if all the
conditions set forth in Section&nbsp;4.1 and 4.3 have been satisfied and the Company has failed to consummate the Recapitalization Transactions no later than ten (10)&nbsp;Business Days after the satisfaction of such conditions. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-21- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) In the event of termination by the Company or Newco of its obligations to effect the Closing pursuant
to this <U>Section&nbsp;6.1</U>, written notice thereof shall forthwith be given to the other parties by the Company and the other parties shall have the right to terminate their obligations to effect the Closing upon written notice to the Company
and the other parties hereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;6.2 <U>Effect of Termination</U>. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) In the event of the termination of this Agreement as provided in <U>Section&nbsp;6.1</U>, written notice shall be given by the terminating party to
the other parties hereto and this Agreement shall forthwith become void and there shall be no liability on the part of the Investors or the Company, except that (i)&nbsp;the provisions of this <U>Section&nbsp;6.2</U> and <U>Article VII</U> shall
survive any such termination, and (ii)&nbsp;nothing herein will relieve any party from liability for fraud or for any willful breach of any representation or warranty or any willful breach prior to such termination of any covenant or agreement
contained herein or be deemed to waive any rights of specific performance of this Agreement available to a party by reason of any breach by the other party or parties of this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) Whether or not the Recapitalization Transactions are consummated, except as otherwise specifically provided herein, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">(c) Notwithstanding the foregoing, in the event that this Agreement is terminated by the Company pursuant to <U>Section&nbsp;5.4</U> or <U>Section&nbsp;6.1(a)(vi)(A)</U> on account of an Acquisition Proposal, then the Company shall
(i)&nbsp;reimburse Newco for the Newco Expenses by wire transfer of same-day funds concurrently with such termination (provided that in no event shall the Company be required to reimburse more than $150,000.00 of Newco Expenses, in the aggregate)
and (ii)&nbsp;in addition, in the event that the Company consummates a transaction contemplated by the Acquisition Proposal, pay to Newco the Break-up Fee by wire transfer of same-day funds concurrently with the consummation of such transaction. The
parties acknowledge that the agreements contained in this <U>Section&nbsp;6.2(c)</U> are an integral part of the Recapitalization Transactions, and that, without these agreements, the parties would not enter into this Agreement. The parties hereto
agree and understand that in no event shall the Company be required to pay the Break-Up Fee on more than one occasion. Payment of the fees described in this <U>Section&nbsp;6.2</U> shall not be in lieu of damages incurred in the event of a breach of
this Agreement described in the proviso to the first sentence of <U>Section&nbsp;6.2(a)</U>, but otherwise shall constitute the sole and exclusive remedy of the parties in connection with any termination of this Agreement, except for specific
performance or other equitable relief or as otherwise set forth herein. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ARTICLE VII </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>Miscellaneous </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.1
<U>Survival</U>. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties,
covenants and agreements, shall survive the Closing, except for (a)&nbsp;those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part after the Closing and (b)&nbsp;this <U>Article VII</U>.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-22- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.2 <U>Successors and Assigns</U>. This Agreement may not be assigned by a party hereto
without the prior written consent of the other parties hereto. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this
Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.3 <U>Counterparts; Faxes</U>. This Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile or pdf, which shall be deemed an original. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.4 <U>Titles and Subtitles</U>. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.5 <U>Notices</U>. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i)&nbsp;if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)&nbsp;if given by telex or
telecopier or e-mail, then such notice shall be deemed given upon receipt, (iii)&nbsp;if given by mail, then such notice shall be deemed given upon the earlier of (A)&nbsp;receipt of such notice by the recipient or (B)&nbsp;three days after such
notice is deposited in first class mail, postage prepaid, and (iv)&nbsp;if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier. All notices shall be
addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days&#146; advance written notice to the other parties: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">If to the Company: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Mark Carlesimo, Esq. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">25 Central Ave. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Teterboro, NJ 07608 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">If to Newco: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Garrett Stonehouse </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">1 Morningside Drive
North </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Building B, Suite 300 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Westport, CT 06880 </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">If to a Preferred Holder: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">to the addresses set forth on the signature
pages or Annexes hereto. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-23- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Copies of all notices shall be simultaneously sent by the party providing such notice to the Special Committee at:
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Special Committee of the Board of Directors </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">c/o Richard
Kassar </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Freshpet Inc. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">400 Plaza Drive </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">1st Floor </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Secaucus, NJ 07904 </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">With a copy to: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">John Edwin Depke </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">DLA Piper LLP (US) </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">1251 Avenue of the Americas </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">New York, NY 10020 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.6 <U>Expenses</U>. Except
as provided in <U>Sections 5.4</U> and <U>6.2(c)</U>, the parties hereto shall pay their own costs and expenses in connection herewith. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">Section&nbsp;7.7 <U>Amendments and Waivers</U>. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company, Newco and the Preferred Holders. Any amendment or waiver effected in accordance with this paragraph shall be binding upon Newco and each holder of any Shares purchased under this
Agreement at the time outstanding, each Preferred Holder of all such Shares, and the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.8 <U>Publicity</U>. Except as
set forth below, no public release or announcement concerning the transactions contemplated hereby shall be issued by the Company, Newco or any Preferred Holder without the prior consent of the Company (in the case of a release or announcement by
Newco or any Preferred Holder) or Newco (in the case of a release or announcement by the Company) (which consents shall not be unreasonably withheld), except as such release or announcement may be required by law or the applicable rules or
regulations of any securities exchange or securities market, in which case the affected party shall allow the other parties hereto, to the extent reasonably practicable in the circumstances, reasonable time to comment on such release or announcement
in advance of such issuance. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.9 <U>Severability</U>. Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the
maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the
parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-24- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.10 <U>Entire Agreement</U>. This Agreement, including the Annexes, and the other
Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to
the subject matter hereof and thereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.11 <U>Further Assurances</U>. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.12 <U>Remedies Cumulative; Specific Performance</U>. The rights and remedies of the parties hereto shall be cumulative (and not
alternative). The parties hereto agree that: (a)&nbsp;in the event of any breach or threatened breach by any party of any covenant, obligation or other provision set forth in this Agreement, the other parties shall be entitled (in addition to any
other remedy that may be available to it) to (i)&nbsp;a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision, and (ii)&nbsp;an injunction restraining such
breach or threatened breach; and (b)&nbsp;such other parties shall not be required to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related action. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.13 <U>Governing Law; Consent to Jurisdiction; Waiver of Jury Trial</U>. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto 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 Agreement 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 this Agreement. Each of the parties hereto 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. Each party hereto 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. <B>EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT
TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. </B> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;7.14 <U>Independent
Nature of Obligations and Rights</U>. The obligations of each Person under any Transaction Document are several and not joint with the obligations of any other Person, and no Person shall be responsible in any way for the performance of the
obligations of any other Person under any Transaction Document. The decision of each Person to acquire Shares pursuant to the Transaction Documents has been made by such Person </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-25- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">independently of any other Person. Nothing contained herein or in any Transaction Document, and no action taken by any Person pursuant thereto, shall be
deemed to constitute the parties hereto as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the parties hereto are in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Person acknowledges that no other Person has acted as agent for such Person in connection with making its investment hereunder and that no Person will be acting as agent of such Person
in connection with monitoring its investment in the Shares or enforcing its rights under the Transaction Documents. Each Person shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out
of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Person to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the other parties hereto
has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple parties and not because it was required or requested to do so by any Person. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">[<I>signature page follows</I>] </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-26- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to
execute this Agreement as of the date first above written. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">VELOCITY EXPRESS CORPORATION</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">MCG ACQUISITION LLC</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR>
</TABLE></DIV> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">The undersigned hereby reaffirm the Consent previously given to the agreements set forth herein and agree to
all terms set forth herein. If there is any conflict between the consents and this Agreement, this Agreement shall control. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2"><B>PREFERRED HOLDERS</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR>
</TABLE></DIV> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-27- </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">ANNEX A </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2">PREFERRED STOCK CONVERSION OR EXCHANGE RATES </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Exchange Rates </B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="56%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Preferred<BR>Shares,<BR>July&nbsp;31<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Conversion<BR>Ratio,<BR>July&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Common&nbsp;Equivalent<BR>Shares,&nbsp;July&nbsp;31&nbsp;2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Exchange<BR>or<BR>Conversion<BR>Rate, Post</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Common<BR>Shares,</B></FONT><br><FONT FACE="Times New Roman" SIZE="1"><B>Post</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Series M</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4,347,571</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">0.15819</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">687,736</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1.71728</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,465,987</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Series N</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">946,138</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">0.15819</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">149,668</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1.71728</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,624,781</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Series O</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">129,547</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">0.17171</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">22,245</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1.86407</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">241,484</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Series P</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,279,826</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">0.23863</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">544,030</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2.59052</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,905,930</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Series Q</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,245,115</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">0.79249</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4,156,686</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8.60316</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">45,124,555</FONT></TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Velocity Express Corporation </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Capitalization Table </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Current&nbsp;-&nbsp;July&nbsp;31,&nbsp;2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Proposed</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Common&nbsp;Equivalent<BR>Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Common<BR>Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Common Stock</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>4,549,955</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>36.2</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>4,549,955</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>1.5</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Employee / Advisor Options, Warrants</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>398,421</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>3.2</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>188,847</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>0.1</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Preferred Stock <FONT FACE="Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">1</SUP></FONT><FONT FACE="Times New Roman" SIZE="2"></FONT></B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>5,560,364</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>44.2</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>60,362,736</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>19.9</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Note Holder Warrants Total</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>2,063,944</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>16.4</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>&#151;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>0.0</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Note Holder non-Voting Shares</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>30,333,033</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>10.0</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Management Group (Mgmt + Investor)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>207,895,761</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>68.5</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Total</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>12,572,685</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>100.0</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>303,330,333</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>100.0</B></FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>%&nbsp;</B></FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"></FONT><FONT FACE="Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">1</SUP></FONT><FONT FACE="Times New Roman" SIZE="2">
</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">Preferred Stock balances include PIK dividends issued plus earned and unissued through 7/31/09 </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Note: Certain of the Employee/Advisor Options and Warrants, including the warrants issued to THLPV in 2006 for 188,847 shares with a strike price of $0.04, have
anti-dilution protection. The Company intends to attempt to reduce such options and warrants to the number set forth in the Post-recapitalization column and to ask for waivers of anti-dilution rights, but no assurances can be given that such
reductions or waivers will be obtained, which may cause the numbers set forth herein to be subject to further adjustment. </FONT></P>
</BODY></HTML>
</TEXT>
</DOCUMENT>
</SUBMISSION>
