EXHIBIT 10.1
IN MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON THEIR OWN EXAMINATION
OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
XATA CORPORATION
COMMON STOCK WARRANT AND SERIES D PREFERRED STOCK
PURCHASE AGREEMENT
June 18, 2007

 

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Table Of Contents

                              Page   SECTION 1.  
AUTHORIZATION OF SALE OF THE SECURITIES
    1   SECTION 2.  
AGREEMENT TO SELL AND PURCHASE THE SECURITIES
    1     2.1    
Sale of Shares
    1     2.2    
Issuance of Warrants
    1   SECTION 3.  
CLOSING AND DELIVERY
    1     3.1    
Closing
    1     3.2    
Delivery of the Shares and the Warrants at the Closing
    2   SECTION 4.  
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
    2     4.1    
Organization and Qualification
    2     4.2    
Capitalization
    2     4.3    
Authorization of Securities
    3     4.4    
Governmental Consents
    3     4.5    
Due Authorization, Execution and Delivery of Agreement and Investor Rights
Agreement
    3     4.6    
No Conflicts
    4     4.7    
Title to Assets
    4     4.8    
Permits
    4     4.9    
Legal Actions
    5     4.10    
Labor
    5     4.11    
No Violations
    5     4.12    
Insurance
    5     4.13    
Company Contracts
    5     4.14    
SEC Documents
    6     4.15    
Related Party Transactions
    6     4.16    
Financial Statements
    6     4.17    
Receivables
    7     4.18    
Intellectual Property
    7     4.19    
Nasdaq Compliance
    7     4.20    
Taxes
    8     4.21    
No Integration or General Solicitation
    8  

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Table Of Contents
(continued)

                              Page     4.22    
No Registration
    8     4.23    
No Material Changes
    9     4.24    
Accounting Controls
    9     4.25    
Form S-3 Qualification
    9     4.26    
No Anti-Dilution Event
    9     4.27    
Registration Rights
    10     4.28    
Investment Company Act
    10     4.29    
Sarbanes-Oxley Act
    10     4.30    
Audit Committee
    10     4.31    
Foreign Corrupt Practices Act
    11     4.32    
Loans to Officers and Directors
    11     4.33    
Employee Benefits
    11     4.34    
Nasdaq Listing
    11     4.35    
Qualified Small Business
    11     4.36    
Broker’s Fee
    12     4.37    
Complete Disclosure
    12   SECTION 5.  
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
    12   SECTION 6.  
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
    13   SECTION 7.  
CONDITIONS TO COMPANY’S OBLIGATIONS AT THE CLOSING
    13     7.1    
Receipt of Payment
    13     7.2    
Representations and Warranties Correct
    13     7.3    
Covenants Performed
    13   SECTION 8.  
CONDITIONS TO PURCHASERS’ OBLIGATIONS AT THE CLOSING
    13     8.1    
Representations and Warranties Correct
    13     8.2    
Covenants Performed
    13     8.3    
Reservation of Conversion Shares and Warrant Shares
    13     8.4    
Investor Rights Agreement
    14  

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Table Of Contents
(continued)

                              Page     8.5    
Intentionally Omitted
    14     8.6    
Legal Opinion
    14     8.7    
Intentionally Omitted
    14     8.8    
Intentionally Omitted
    14     8.9    
Secretary’s Certificate
    14     8.10    
Transfer Agent Instructions
    14     8.11    
Certificate of Designation
    14     8.12    
No Material Adverse Effect
    14     8.13    
Proceedings and Documents
    14   SECTION 9.    
REGISTRATION OF THE CONVERSION SHARES AND THE WARRANT SHARES; COMPLIANCE WITH
THE SECURITIES ACT
    15     9.1    
Registration Procedures
    15     9.2    
Transfer of Shares After Registration; Suspension; Damages
    17     9.3    
Expenses of Registration
    19     9.4    
Delay of Registration; Furnishing Information
    19     9.5    
Indemnification
    20     9.6    
Agreement to Furnish Information
    22     9.7    
Assignment of Registration Rights
    22     9.8    
Rule 144 Reporting
    23     9.9    
S-3 Eligibility
    23     9.10    
Termination of Registration Rights
    23     9.11    
Amendment of Registration Rights
    23     9.12    
Legends
    24   SECTION 10.    
COMPANY COVENANTS
    24     10.1    
Reservation of Shares and Common Stock
    24     10.2    
Subsequent Registration Rights
    24   SECTION 11.  
BROKER’S FEE
    24   SECTION 12.  
NOTICES
    25   SECTION 13.  
MISCELLANEOUS
    25     13.1    
Waivers and Amendments
    25  

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Table Of Contents
(continued)

                              Page     13.2    
Headings
    25     13.3    
Severability
    25     13.4    
Governing Law
    26     13.5    
Counterparts
    26     13.6    
Successors and Assigns
    26     13.7    
Entire Agreement
    26     13.8    
Payment of Fees and Expenses
    26  

ATTACHMENTS:

         
Exhibit 1
  –   Certificate of Designation of Preferences of Series D Preferred Stock
Exhibit 2.1
  –   Schedule of Purchasers
Exhibit 2.2
  –   Form of Common Stock Warrant
Exhibit 4.5
  –   Investor Rights Agreement
Exhibit 8.6
  –   Opinion of Company Counsel
Exhibit 8.10
  –   Form of Transfer Agent Instructions

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COMMON STOCK WARRANT AND SERIES D PREFERRED STOCK
PURCHASE AGREEMENT
     This Common Stock Warrant and Series D Preferred Stock Purchase Agreement
(the “Agreement”) is made as of the 18th day of June, 2007 (the “Effective
Date”), by and among Xata Corporation, a Minnesota corporation with its
principal place of business at 151 E. Cliff Road, Suite 10, Burnsville, MN 55337
(the “Company”) and each of those persons and entities, severally and not
jointly, listed as a Purchaser on the Schedule of Purchasers attached as
Exhibit 2.1 hereto (each, a “Purchaser” and collectively, the “Purchasers”).
AGREEMENT
     In consideration of the mutual covenants contained in this Agreement, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and each Purchaser (severally and not jointly) hereby
agree as follows:
     SECTION 1. Authorization of Sale of the Securities. Subject to the terms
and conditions of this Agreement, the Company has or before the Closing Date (as
defined in Section 3) will have authorized (a) the sale and issuance of
1,566,580 shares of its Series D Preferred Stock (the “Shares”) having rights,
preferences and privileges as set forth in the Company’s Certificate of
Designation of Preferences of Series D Preferred Stock (the “Certificate of
Designation”) attached hereto as Exhibit 1, (b) the issuance of shares of common
stock (the “Common Stock”) to be issued upon conversion of the Shares (the
“Conversion Shares”), (c) the issuance of warrants to purchase 469,974 shares of
Common Stock (the “Warrants”) and (d) the issuance of shares of Common Stock to
be issued upon exercise of the Warrants (the “Warrant Shares”). The Shares, the
Conversion Shares, the Warrants and the Warrant Shares shall be referred to
herein as the “Securities.”
SECTION 2. Agreement to Sell and Purchase the Shares and the Warrants.
     2.1 Sale of Shares. At the Closing (as defined in Section 3), the Company
will sell and issue to each Purchaser, and each Purchaser will purchase from the
Company at a purchase price per Share equal to $3.83, the number of Shares set
forth next to such Purchaser’s name on the Schedule of Purchasers attached
hereto as Exhibit 2.1 (the “Schedule of Purchasers”).
     2.2 Issuance of Warrants. At the Closing (as defined in Section 3), the
Company will sell and issue to each Purchaser, and each Purchaser will purchase
from the Company a Warrant in the form attached hereto at Exhibit 2.2
exercisable into the number of Warrant Shares set forth next to such Purchaser’s
name on the Schedule of Purchasers with a purchase price equal to $0.125 per
Warrant Share.
SECTION 3. Closing and Delivery.
     3.1 Closing. The closing of the purchase and sale of the Shares and the
Warrants to be sold pursuant to this Agreement shall be held immediately
following the satisfaction of the closing conditions contained herein, at the
offices of Faegre & Benson LLP, 2200 Wells Fargo Center, Minneapolis, Minnesota,
or on such other date and place as may be agreed to by the

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Company and the Purchasers. The date of the closing of the purchase and sale of
the Shares and the Warrants is referred to herein as the “Closing Date”, and
such closing is referred to as the “Closing.”
     3.2 Delivery of the Shares and the Warrants at the Closing. At the Closing,
the Company shall deliver to each Purchaser (i) a stock certificate registered
in the name of such Purchaser, or in such nominee name(s) as designated by such
Purchaser, representing the Shares to be purchased by such Purchaser at the
Closing as set forth in the Schedule of Purchasers and (ii) a Warrant registered
in the name of such Purchaser or in such nominee name(s) as designated by such
Purchaser representing the Warrant Shares issuable to such Purchaser as set
forth in the Schedule of Purchasers.
SECTION 4. Representations, Warranties and Covenants of the Company.
     Except as set forth in the Schedule of Exceptions dated as of even date
herewith and provided to the Purchasers separately from this Agreement, the
Company hereby represents and warrants to, and covenants with, the Purchasers as
follows:
     4.1 Organization and Qualification. Each of the Company and each Subsidiary
(as defined below) has been duly incorporated and is a validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, with requisite corporate power and authority to own its
properties and conduct its business as presently conducted. The Company and each
Subsidiary are duly qualified to do business as foreign corporations in good
standing in each jurisdiction in which their ownership or lease of property or
the conduct of their businesses require such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect on the
Company. The Company has furnished representatives of the Purchasers with
correct and complete copies of the charter and by-laws of the Company, both as
amended and currently in effect. Except as set forth in the Schedule of
Exceptions, the Company does not presently own, directly or indirectly, any of
the stock or other equity interests in any entity. “Subsidiary” shall mean any
corporation or other entity of which a majority of the capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by the Company. For the purposes of this Agreement,
a “Material Adverse Effect” means with respect to the Company, any change or
effect that is or reasonably could be materially adverse to the business,
properties, results of operations and condition (financial or other) or
anticipated future results of operations or condition (financial or other) of
the Company and the Subsidiaries, or that has or reasonably could have a
material adverse effect on the transactions contemplated by this Agreement.
     4.2 Capitalization.
          (a) The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, par value $0.01 per share and 10,000,000 shares of
preferred stock, with no stated par value, of which (a) 8,496,861 shares of
Common Stock are issued and outstanding, (b) 2,250,000 shares of the preferred
stock are designated as Series B Preferred Stock, 1,851,024 of which are issued
and outstanding, (c) 1,400,000 shares of the preferred stock are designated as
Series C Preferred Stock, 1,269,036 of which are issued and outstanding,
(d) options to purchase

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0 shares of Common Stock are outstanding under the Company’s 1991 Long Term
Incentive and Stock Option Plan and no additional shares of Common Stock
available for issuance pursuant to such plan, (e) options to purchase 0 shares
of Common Stock are outstanding under the Company’s 2001 Interim Incentive and
Stock Option Plan and no additional shares of Common Stock available for
issuance pursuant to such plan, (f) options to purchase 659,301 shares of Common
Stock are outstanding under the Company’s 2002 Long Term Incentive and Stock
Option Plan and no additional shares of Common Stock are available for issuance
pursuant to such plan, (g) options to purchase 423,000 shares of Common Stock
are outstanding under the Company’s 2007 Long-term Incentive Stock Option Plan
and an additional 54,500 shares of Common Stock are available for issuance
pursuant to such plan, (h) options to purchase an additional 150,000 shares of
Common Stock are outstanding, which options were issued outside of any equity
incentive plan of the Company, (i) 1,538,201 shares of Common Stock have been
reserved for issuance upon the exercise of warrants to purchase Common Stock
(including the Warrants), and (j) 1,600,000 shares of the preferred stock are
designated as Series D Preferred Stock, none of which are issued or outstanding
prior to the Closing Date. Other than the Series B, Series C or Series D
Preferred Stock, there are no other authorized or designated series of preferred
stock. The Series D Preferred Stock has the rights, preferences and privileges
set forth in the Certificate of Designation. All outstanding shares of the
Company have been duly authorized, validly issued, fully paid and are
non-assessable and free of any liens or encumbrances created by the Company.
Other than as contemplated by this Agreement or under the stock plans described
in this Section 4.2(d), (e), (f), (g) and (h), and except as described in this
Section 4.2, there are no other options, warrants, calls, rights, commitments,
preemptive rights, rights of first refusal or other rights or agreements to
which the Company is a party or by which it is bound obligating the Company to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement.
          (b) All of the issued and outstanding capital stock of each Subsidiary
has been duly authorized and validly issued and is fully paid and nonassessable
and is owned of record by the Company, free and clear of any lien, charge,
security interest, encumbrance or claim.
     4.3 Authorization of Securities. The Securities have been duly authorized
and when (i) the Shares have been delivered and paid for in accordance with this
Agreement and (ii) the Warrant Shares have been delivered and paid for in
accordance with the Warrants, such Shares and Warrant Shares will have been
validly issued, fully paid and non-assessable. None of the Securities are or
will be subject to any preemptive right or any right of refusal.
     4.4 Governmental Consents. No consent, approval, authorization, or order
of, or filing with, any governmental agency or body or any court is required for
the consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Shares by the Company, except for
the filing of a Form D with the Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “Securities Act”), and such
similar filings as may be required following the Closing under state securities
laws.
     4.5 Due Authorization, Execution and Delivery of Agreement and Investor
Rights Agreement. This Agreement and the Investor Rights Agreement attached
hereto as

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Exhibit 4.5 (the “Investor Rights Agreement”) have been duly authorized,
executed and delivered by the Company. All corporate action on the part of the
Company and its directors and officers necessary for the authorization,
execution and delivery of this Agreement and the Investor Rights Agreement, the
performance of all the Company’s obligations hereunder and thereunder and for
the authorization, issuance or reservation for issuance, sale and delivery of
the Securities has been taken, except only that the Certificate of Designation,
the form of which is attached hereto as Exhibit 1 which has been duly approved
by the Board of Directors of the Company, has not yet been filed with the
Secretary of State of the State of Minnesota and will be so filed prior to the
Closing. No approval by the stockholders of the Company is required for the
authorization, execution and delivery of this Agreement, the performance of all
the Company’s obligations hereunder and thereunder and for the authorization,
issuance or reservation for issuance, sale and delivery of the Securities. This
Agreement and the Investor Rights Agreement constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (iii) the
limitations imposed by applicable federal or state securities laws on the
indemnification provisions contained in the Investor Rights Agreement.
     4.6 No Conflicts. The execution, delivery and performance of this Agreement
and the Investor Rights Agreement, and the issuance and sale of the Securities,
will not conflict with, or result in a breach or violation of (i) any of the
terms and provisions of the charter or bylaws of the Company or any Subsidiary,
(ii) any statute, rule, regulation or order of any governmental agency or body,
any court, domestic or foreign, or any self-regulatory organization having
jurisdiction over the Company or any Subsidiary or any of their respective
properties, or (iii) any of the terms and provisions of, or constitute a default
(with or without notice or lapse of time) under, or give to any third party a
right of termination, amendment, acceleration or cancellation (with or without
notice or lapse of time) of, any agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or any Subsidiary is bound or
to which any of the properties of the Company or any Subsidiary is subject. The
Company has full power and authority to authorize, issue and sell the Securities
as contemplated by this Agreement.
     4.7 Title to Assets. The Company and each Subsidiary have good and
marketable title to all real properties and all other properties and assets
owned by it that are material to the operation of the business of the Company or
each Subsidiary, in each case free from liens and defects that would materially
affect the value thereof or materially interfere with the use made or to be made
thereof by them; and the Company and each Subsidiary hold all leased real and
personal property that are material to the operation of their respective
businesses under valid and enforceable leases with no exceptions that would
materially interfere with the use made or to be made thereof by them.
     4.8 Permits. The Company and each Subsidiary possess all certificates,
authorizations and permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and to own, lease,
license and use their respective properties in the manner so owned, leased,
licensed and used, except to the extent that the failure to so possess could not
individually or in the aggregate reasonably be expected to have or result in a
Material Adverse Effect. Neither the Company nor any Subsidiary has received any
notice of

4

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proceedings relating to the revocation or modification of any such certificate,
authorization or permit that, if determined adversely to the Company or the
Subsidiary would individually or in the aggregate have a Material Adverse
Effect.
     4.9 Legal Actions. There are no pending legal, governmental or
administrative actions, suits or proceedings against or affecting the Company or
any Subsidiary or any of their respective properties or any director, officer or
employee (related to any such person’s services as a director, officer or
employee of the Company or any Subsidiary) that, if determined adversely to the
Company or the Subsidiary would individually or in the aggregate have a Material
Adverse Effect, or could materially and adversely affect the ability of the
Company to perform its obligations under this Agreement, or which are otherwise
material in the context of the sale of the Shares and the Warrants and, to the
knowledge of the Company’s executive officers, no such actions, suits or
proceedings are threatened or contemplated. Neither the Company nor any
Subsidiary has initiated and neither has any plan to initiate any action, suit
or proceeding.
     4.10 Labor. No material labor dispute exists or, to the knowledge of the
Company’s executive officers, is imminent with respect to any of the employees
of the Company or any Subsidiary.
     4.11 No Violations. Neither the Company nor any Subsidiary is (i) in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time could reasonably be expected to result
in a default by the Company or the Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any agreement or instrument to which it is a party or by which
it or any of its properties is bound, (ii) in violation of any order of any
court, arbitrator, governmental body or self-regulatory organization, or
(iii) in violation of any statute, rule or regulation of any governmental
authority or self-regulatory organization, including, without limitation, any
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as would not, individually or
in the aggregate, reasonably be expected to have or result in a Material Adverse
Effect.
     4.12 Insurance. The Company maintains insurance and in such coverage
amounts as is customary in the business in which the Company is engaged. The
Company believes that such insurance is sufficient against such losses and risks
and in such amounts as are reasonably necessary for the business in which the
Company is engaged.
     4.13 Company Contracts. Except as filed under the SEC Documents (defined
below), neither the Company nor any Subsidiary is a party to any material
contract, as such contracts are defined in Reg. § 601(a)(10) of Regulation S-B
under the Securities Act (each such contract, a “Company Contract”). To the
knowledge of the executive officers of the Company, each Company Contract is
valid, binding and in full force and effect and is enforceable by the Company or
the Subsidiary in accordance with its terms subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
affecting creditors’ rights generally and to general equitable principles. As of
the date hereof, no party to any such Company Contract has notified the Company
or any Subsidiary that it intends to terminate such

5

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Company Contract. The Company and each Subsidiary have performed, in all
respects, all obligations required to be performed by it to date under the
Company Contracts, as amended, and neither the Company nor any Subsidiary is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any respect thereunder and, to the knowledge of the executive
officers of the Company, no other party to any of the Company Contracts, as of
the date hereof, is (with or without the lapse of time or the giving of notice,
or both) in breach or default in any respect thereunder, except in each case to
the extent that such breach or default could not reasonably likely result in a
Material Adverse Effect.
     4.14 SEC Documents. The Company has made available to representatives of
the Purchasers all registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Company
or any affiliate of the Company with the SEC since January 1, 2006, including
copies of all the exhibits referenced therein (the “SEC Documents”). All
statements, reports, schedules, forms and other documents required to have been
filed by the Company with the SEC since January 1, 2006 have been so timely
filed. As of their respective dates (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such amendment or
superseding filing): (i) each of the SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the case
may be, and the rules and regulations thereunder; and (ii) none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
     4.15 Related Party Transactions. Except as set forth in the SEC Documents,
none of the officers or directors of the Company and, to the knowledge of the
executive officers of the Company, none of the employees of the Company is
presently a party to any transaction with the Company (other than customary
transactions involving reasonable amounts for services as employees, officers
and directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the executive
officers of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
     4.16 Financial Statements. The financial statements included in the SEC
Documents present fairly the financial position of the Company as of the dates
shown and its results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States applied on a consistent
basis (except as may be indicated in the audit report or notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC, and except that the unaudited financial statements may not have
contained footnotes and were subject to normal and recurring year-end
adjustments which were not, or are not reasonably expected to be, individually
or in the aggregate, material in amount), and complied as to form in all
material respects with the published rules and regulations of the SEC applicable
thereto at the time of filing. Except as and to the extent disclosed or reserved
against in the financial statements of the Company and the notes thereto
included in the SEC Documents, neither the

6

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Company nor any Subsidiary has any liability, debt or obligation, whether
accrued, absolute, contingent or otherwise, and whether due or to become due
which, individually or in the aggregate, are material to the Company and the
Subsidiaries, taken as a whole. Neither the Company nor any Subsidiary has
incurred any liabilities, debts or obligations of any nature whatsoever which
are, individually or in the aggregate, material to the Company and the
Subsidiaries, taken as a whole, other than those incurred in the ordinary course
of its business, other than as disclosed in the SEC Documents.
     4.17 Receivables. The accounts receivable reflected on the balance sheet of
the Company as of March 31, 2007 represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary course
of business and, to the knowledge of the Company, will be collected in full no
later than 90 days after the respective date on which each such receivable is
due (without any counterclaim or set off).
     4.18 Intellectual Property. The Company and each Subsidiary own or possess,
or can acquire on reasonable terms that could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, sufficient
legal rights to all patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
propriety or confidential information, systems or procedures), trademarks,
service marks and trade names (collectively, “Intellectual Property Rights”)
necessary to conduct its business as now operated by it and as currently
proposed to be operated by it. To the knowledge of the executive officers of the
Company, the methods, products, services, works, technologies, systems and
processes employed by the Company to conduct its business do not infringe upon
or misappropriate any Intellectual Property Rights of any person or entity
anywhere in the world, except for Intellectual Property Rights which the Company
can acquire on reasonable terms that could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect. No claims or written
notice (i) challenging the validity, effectiveness or ownership by the Company
or the Subsidiary of any of the Intellectual Property Rights of the Company or
the Subsidiary, or (ii) to the effect that the use, distribution, licensing,
sublicensing, sale or any other exercise of rights in any product, service,
work, technology or process as now used or offered or proposed for use,
licensing, sublicensing, sale or other manner of commercial exploitation by the
Company or the Subsidiary infringes or will infringe on any Intellectual
Property Rights of any person or entity have been asserted or, to the knowledge
of the executive officers of the Company, are threatened by any person or
entity, nor are there, to the knowledge of the executive officers of the
Company, any valid grounds for any bona fide claim of any such kind except as
can be cured by the Company by procurement of Intellectual Property Rights which
the Company can acquire on reasonable terms that could not individually or in
the aggregate reasonably be expected to have a Material Adverse Effect. There
has been no material default (nor does any set of circumstances exist that will
cause such a default) with respect to any license granting Intellectual Property
Rights to the Company or any Subsidiary. No employee or third party is or has
been infringing or using without authorization any Intellectual Property Rights
of the Company or any Subsidiary. The Company and each Subsidiary use and have
used, best efforts to maintain the confidentiality of its trade secrets.
     4.19 Nasdaq Compliance. As of the Closing (after taking into account the
investment by the Purchasers), the Company will be in compliance with the
continued listing and maintenance requirements of The Nasdaq Capital Market
(“Nasdaq”). The Company has no

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reason to believe that it will not in the foreseeable future following the
Closing continue to be in compliance with all such listing and maintenance
requirements. The issuance and sale of the securities hereunder does not
contravene the rules and regulations of Nasdaq.
     4.20 Taxes.
          (a) The Company and each Subsidiary have timely made or filed all
federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and have timely
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, and have set aside on
their books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. None of the Company’s or any Subsidiary’s
tax returns is presently being audited by any taxing authority.
          (b) All “nonqualified deferred compensation plans” (within the meaning
of Section 409A of the Code) to which the Company is a party and which is
subject to Section 409A complies with the requirements of paragraphs (2),
(3) and (4) of Section 409A(a) by its terms and has been operated in accordance
with such requirements during all periods in which Section 409A is applicable.
No event has occurred that would be treated by Section 409A(b) as a transfer of
property for purposes of Section 83 of the Code. The exercise price of all
Company employee stock options is at least equal to the fair market value of the
Company Common Stock on the date such options were granted, and the Company has
not incurred, and will not incur, any liability under Section 409A of the Code
upon the vesting of any such options based on the terms and conditions
applicable to the options as of the date of this Agreement..
     4.21 No Integration or General Solicitation. Neither the Company nor any
affiliate (as defined in Rule 501(b) of Regulation D under the Securities Act)
(an “Affiliate”) of the Company has, directly, or through any agent, (a) sold,
offered for sale, solicited any offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) which is or will be
integrated with the sales of the Securities in a manner that would require the
registration under the Securities Act of the Securities; or (b) offered,
solicited offers to buy or sold the Securities in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act; and the Company will not
engage in any of the actions described in subsections (a) and (b) of this
paragraph.
     4.22 No Registration. Subject to the accuracy of each of the Purchaser’s
representations herein, it is not necessary in connection with the offer, sale
and delivery of the Securities to the several Purchasers in the manner
contemplated by this Agreement to register the Securities under the Securities
Act or to qualify the Company’s issuance of the Securities under applicable
state securities laws.

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     4.23 No Material Changes. Except as disclosed in the SEC Documents, since
March 31, 2006, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or required to be disclosed in filings made with the SEC, (iii) the Company has
not altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option and stock purchase plans. Except as
disclosed in the SEC Documents, since March 31, 2006, no material off-balance
sheet liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings made with the
SEC which could individually or in the aggregate reasonably be expected to have
a Material Adverse Effect have been incurred. No material default exists with
respect to or under any obligations of the Company or any Subsidiary to repay
money borrowed (including, without limitation, all notes payable and drafts
accepted representing extensions of credit, all obligations under letters of
credit, all obligations evidenced by bonds, debentures, notes or other similar
instruments and all obligations upon which interest charges are customarily
paid) and all contractual obligations (whether absolute or contingent) of such
entity to repurchase goods sold and distributed or any instrument or agreement
relating thereto and no event or circumstance exists with respect thereto that
(with notice or the lapse of time or both) could give rise to such a default.
     4.24 Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. Since the date of the most recent evaluation of such
internal accounting controls, there has been no change in internal control over
financial reporting that occurred during the most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting, including any corrective actions with
regard to significant deficiencies and material weaknesses.
     4.25 Form S-3 Qualification. The Company satisfies the requirements for use
of Form S-3 for registration of the resale of the Securities as contemplated
herein. There exist no facts or circumstances that would prohibit or delay the
preparation or initial filing of the Registration Statement.
     4.26 No Anti-Dilution Event. The issuance of the Securities does not
constitute an anti-dilution event for any existing security holders of the
Company, pursuant to which such security holders would be entitled to additional
securities or a reduction in the applicable

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conversion price or exercise price of any securities due to any issuance
proposed to be conducted hereunder.
     4.27 Registration Rights. The Company has not granted or agreed to grant
any person or entity any rights (including “piggy–back” registration rights) to
require the Company to file a registration statement under the Securities Act
with respect to any securities, or to include such securities with the
Securities in any registration statement, except for such as have been satisfied
or waived.
     4.28 Investment Company Act. The Company is not, and upon the issuance and
sale of the Shares and the Warrants as herein contemplated and the application
of the net proceeds therefrom will not be an “investment company” as such term
is defined in the Investment Company Act of 1940, as amended (the “1940 Act”).
Furthermore, in the event that the SEC shall inform the Company that the SEC
believes that the Company is an “investment company” as such term is defined in
the 1940 Act, the Company shall manage its investments and promptly take such
other actions as is reasonably necessary such that the SEC shall no longer
consider the Company to be an “investment company” as such term is defined in
the 1940 Act.
     4.29 Sarbanes-Oxley Act. The Company has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-14 under
the 1934 Act), which (i) are designed to ensure that material information
relating to the Company, including its consolidated subsidiaries, is made known
to the Company’s principal executive officer and its principal financial officer
by others within those entities, particularly during the periods in which the
periodic reports required under the 1934 Act are being prepared; (ii) provide
for the periodic evaluation of the effectiveness of such disclosure controls and
procedures as of the end of the period covered by the Company’s most recent
annual or quarterly report filed with the SEC; and (iii) are effective in all
material respects to perform the functions for which they were established.
Based on the evaluation of its disclosure controls and procedures, the Company
is not aware of (i) any significant deficiency in the design or operation of
internal controls which could adversely affect the Company’s ability to record,
process, summarize and report financial data or any material weaknesses in
internal controls; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s
internal controls. The Chief Executive Officer and the Chief Financial Officer
of the Company have signed, and the Company has furnished to the SEC, all
certifications required by Section 906 and Section 302 of the Sarbanes-Oxley Act
of 2002 (the “Sarbanes-Oxley Act”); such certifications contain no
qualifications or exceptions to the matters certified therein, except as to
knowledge, and have not been modified or withdrawn; and neither the Company nor
any of its officers has received notice from any governmental entity questioning
or challenging the accuracy, completeness, content, form or manner of filing or
submission of such certifications.
     4.30 Audit Committee. The Company’s board of directors has validly
appointed an audit committee whose composition satisfies the requirements of
Rule 4350(d)(2) of the Rules of the National Association of Securities Dealers,
Inc. (the “NASD Rules”) and the Company’s board of directors and/or the audit
committee has adopted a charter that satisfies the requirements of Rule
4350(d)(1) of the NASD Rules. The audit committee has reviewed the adequacy of
its charter within the past twelve months. Neither the Company’s board of
directors nor the audit committee has been informed, nor is any director of the
Company aware, of (1) any significant

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deficiencies in the design or operation of the Company’s internal controls which
could adversely affect the Company’s ability to record, process, summarize and
report financial data or any material weakness in the Company’s internal
controls; or (2) any fraud, whether or not material, that involves management or
other employees of the Company who have a significant role in the Company’s
internal controls.
     4.31 Foreign Corrupt Practices Act. Neither the Company nor any of its
Subsidiaries has violated the Foreign Corrupt Practices Act. Without limiting
the foregoing, neither the Company nor any of its Subsidiaries has, to obtain or
retain business, directly or indirectly offered, paid or promised to pay, or
authorized the payment of, any money or other thing of value to: (a) any person
or entitiy who is an official, officer, agent, employee or representative of any
governmental body or of any existing or prospective customer (whether government
owned or non-government owned); (b) any political party or official thereof;
(c) any candidate for political or political party office; or (d) any other
person or entity while knowing or having reason to believe that all or any
portion of such money or thing of value would be offered, given or promised,
directly or indirectly, to any such official, officer, agent, employee,
representative, political party, political party official, candidate or person
or entity affiliated with such customer, political party or official or
political office.
     4.32 Loans to Officers and Directors. Since July 30, 2002, the Company has
not, directly or indirectly, including through any subsidiary, extended or
maintained credit, or arranged for the extension of credit, or renewed an
extension of credit, in the form of a personal loan to or for any of its
directors or executive officers in violation of Section 402 of the
Sarbanes-Oxley Act of 2002.
     4.33 Employee Benefits. Except as disclosed in the SEC Documents, a Change
of Control (as defined below) will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event that will or may result
(either alone or in connection with any other circumstance or event) in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee of the Company or any of its Subsidiaries
or any Affiliate of the Company.
     4.34 Nasdaq Listing. Prior to the Closing Date, the Company shall file with
Nasdaq an application or other document required by Nasdaq, if any, for the
listing of the Conversion Shares with Nasdaq and shall provide evidence of such
filing to the Purchasers. The Company shall use its best efforts to obtain the
listing, subject to official notice of issuance, of the Conversion Shares on
Nasdaq prior to the Closing Date. So long as the Purchasers beneficially owns
any Preferred Stock or Common Stock, the Company shall maintain the listing of
the Common Stock on the Nasdaq Stock Market or a registered national securities
exchange.
     4.35 Qualified Small Business. The Company represents and warrants to
Purchasers that the Company is a “qualified small business” within the meaning
of Section 1202(d) of the Internal Revenue Code of 1986, as amended (the
“Code”), as of the date hereof and the Shares should qualify as “qualified small
business stock” as defined in Section 1202(c) of the Code as of the date hereof.
The Company further represents and warrants that, as of the date hereof, it

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meets the “active business requirement” of Section 1202(e) of the Code, and it
has made no “significant redemptions” within the meaning of
Section 1202(c)(3)(B) of the Code.
     4.36 Broker’s Fee. There are no brokers or finders (and similar agents)
entitled to compensation in connection with the sale of the Shares or the
Warrants.
     4.37 Complete Disclosure. All information provided to the Purchasers in
connection with the transactions contemplated hereby, or contained in this
Agreement and the SEC Documents with respect to the business, operations,
assets, results of operations and financial condition of the Company, and the
transactions contemplated by this Agreement, are true and complete in all
material respects and do not omit to state any material fact or facts necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 5. Representations, Warranties and Covenants of the Purchasers.
     Each Purchaser, severally and not jointly, represents and warrants to and
covenants with the Company that:
          (a) Purchaser, taking into account the personnel and resources it can
practically bring to bear on the purchase of the Securities contemplated hereby,
either alone or together with the advice of such Purchaser’s purchaser
representative, is knowledgeable, sophisticated and experienced in making, and
is qualified to make, decisions with respect to investments in shares presenting
an investment decision like that involved in the purchase of the Securities,
including investments in securities issued by the Company, and has requested,
received, reviewed and considered, either alone or with such Purchaser’s
purchaser representative, all information Purchaser deems relevant in making an
informed decision to purchase the Securities.
          (b) Purchaser is acquiring the Securities being acquired by Purchaser
pursuant to this Agreement in the ordinary course of its business and for its
own account for investment only and with no present intention of distributing
any of such Securities or any arrangement or understanding with any other
persons regarding the distribution of such Securities, except in compliance with
Section 5(c).
          (c) Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Securities purchased hereunder
except in compliance with the Securities Act of 1933, as amended (the
“Securities Act”), applicable blue sky laws, and the rules and regulations
promulgated thereunder.
          (d) Purchaser is an “accredited investor” within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act.
          (e) Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby and
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement. Upon the execution and delivery of this Agreement
by Purchaser, this Agreement shall constitute a valid

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and binding obligation of Purchaser, enforceable in accordance with its terms,
except (i) as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally, (ii) as limited by equitable principles
generally, including any specific performance, and (iii) as to those provisions
of Section 9.5 relating to indemnity or contribution.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
each Purchaser herein and in the certificates for the Shares and the Warrants
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchasers of the Shares and the Warrants being purchased and
the payment therefor for a period of two years following the Closing Date.
SECTION 7. Conditions to Company’s Obligations at the Closing. The Company’s
obligation to complete the sale and issuance of the Shares and the Warrants and
deliver the Shares and the Warrants to each Purchaser, individually, as set
forth in the Schedule of Purchasers, at the Closing shall be subject to the
following conditions to the extent not waived by the Company:
     7.1 Receipt of Payment. The Company shall have received payment, by check
or wire transfer of immediately available funds, in the full amount of the
purchase price for the number of Shares being purchased by such Purchaser at the
Closing as set forth in the Schedule of Purchasers.
     7.2 Representations and Warranties Correct. The representations and
warranties made by such Purchaser in Section 5 hereof shall be true and correct
in all material respects when made, and shall be true and correct in all
material respects on the date of the Closing.
     7.3 Covenants Performed. All covenants, agreements and conditions contained
herein to be performed by such Purchaser on or prior to the Closing shall have
been performed or complied with in all material respects.
SECTION 8. Conditions to Purchasers’ Obligations at the Closing. Each
Purchaser’s obligation to accept delivery of the Shares and the Warrants and to
pay for the Shares and the Warrants at the Closing shall be subject to the
following conditions to the extent not waived by such Purchaser:
     8.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 4 hereof shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on the Closing Date.
     8.2 Covenants Performed. All covenants, agreements and conditions contained
herein to be performed by the Company on or prior to the Closing shall have been
performed or complied with in all material respects.
     8.3 Reservation of Conversion Shares and Warrant Shares. The Conversion
Shares and Warrant Shares shall have been duly authorized and reserved for
issuance upon such conversion or exercise.

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     8.4 Investor Rights Agreement. The Investor Rights Agreement substantially
in the form attached hereto as Exhibit 4.5 shall have been executed and
delivered by the parties thereto.
     8.5 Intentionally Omitted.
     8.6 Legal Opinion. Each Purchaser must have received a customary opinion,
dated the Closing Date, from Faegre & Benson, LLP, counsel for the Company,
substantially in the form attached hereto as Exhibit 8.6.
     8.7 Intentionally Omitted
     8.8 Intentionally Omitted
     8.9 Secretary’s Certificate. Each Purchaser must have received a
certificate, dated the Closing Date, of the Secretary of the Company in
customary form having attached thereto (i) the bylaws of the Company, (ii) the
articles of incorporation of the Company, (iii) the resolutions of the Board of
Directors of the Company and any committee of the Board of Directors approving
the transactions contemplated by this Agreement and (iv) good standing
certificates (including tax good standing) with respect to the Company from the
applicable authority(ies) in Minnesota and any other jurisdiction in which the
Company is qualified to do business, dated as of (or reasonably close to) the
Closing Date.
     8.10 Transfer Agent Instructions. Prior to the Closing, the Company will
(i) execute and deliver to the Company’s Transfer Agent the Transfer Agent
Instruction in substantially the form of Exhibit 8.10 to this Agreement and
pursuant thereto irrevocably instruct the Transfer Agent to issue certificates
for the Common Stock from time to time upon conversion of the Shares or upon
exercise of the Warrants in such amounts as specified from time to time to the
Transfer Agent in the conversion notices surrendered in connection with such
conversions, (ii) appoint the Transfer Agent the conversion agent for the Shares
and authorize the Transfer Agent to issue Common Stock upon exercise of the
Warrants.
     8.11 Certificate of Designation. Each Purchaser shall have received
satisfactory confirmation of the filing with the Secretary of State of the State
of Minnesota of the Certificate of Designation.
     8.12 No Material Adverse Effect. No event that would constitute a Material
Adverse Effect to the Company shall have occurred subsequent to the date of the
filing of the Company’s last Quarterly Report on Form 10-Q.
     8.13 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to each
Purchaser.

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SECTION 9. Registration of the Conversion Shares and the Warrant Shares;
Compliance with the Securities Act.
     9.1 Registration Procedures. The Company is obligated to do the following:
          (a) As soon as is reasonably practicable after the Closing Date, but
in no event later than sixty (60) calendar days after the Closing Date (the
“Filing Deadline”), the Company shall prepare and file with the SEC one or more
registration statements (collectively, the “Registration Statement”) on Form S-3
(unless the Company is not then eligible to register for resale on Form S-3, in
which case on another appropriate form) to register with the SEC the resale by
the Purchasers, from time to time, of the Conversion Shares and the Warrant
Shares and a reasonable estimate of any Common Stock to be issued as (or
issuable upon the conversion or exercise of any Preferred Stock, warrant, right
or other security that is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, the Conversion Shares or
the Warrant Shares (collectively, the “Registrable Securities”) through Nasdaq
or the facilities of any national securities exchange on which the Company’s
Common Stock is then traded, or in privately negotiated transactions. The
Company shall use its best efforts to cause the Registration Statement to be
declared effective as soon thereafter as possible, but in any event prior to one
hundred eighty (180) days after the Closing Date (the “Effectiveness Deadline”).
          (b) If a Registration Statement covering all of the Registrable
Securities has not been declared effective by the SEC on or prior to the
Effectiveness Deadline, then the Company shall issue an additional Warrant to
each Purchaser to purchase shares of Common Stock representing two and one-half
percent (2 1/2%) of the number of Shares purchased by such Purchaser at the
Closing for each aggregated thirty day period (or portion thereof) after the
Effectiveness Deadline for which such Registration Statement has not been
declared effective; provided, however, that the aggregate number of Warrant
Shares issuable upon exercise of additional Warrants issued to a Purchaser under
this subsection (b) shall not in the aggregate exceed ten percent (10%) of the
number of Shares purchased by such Purchaser at the Closing.
          (c) Not less than five (5) trading days prior to the filing of a
Registration Statement or any prospectus contained in a Registration Statement
(a “Prospectus”) or any amendment or supplement thereto, the Company shall,
(i) furnish to the Purchasers for their review copies of all such documents
proposed to be filed (including documents incorporated or deemed incorporated by
reference), and (ii) notify each Purchaser in writing of the information the
Company requires from each such Purchaser to be included in such Registration
Statement. The Company will cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as the
Purchasers shall deem reasonably necessary as soon as practicable after having
received such inquiries.
          (d) The Company shall (i) prepare and file with the SEC (x) such
amendments and supplements to each Registration Statement and the Prospectus
used in connection therewith, and (y) such other filings required by the SEC,
and (ii) take such other actions, in each case as may be necessary to keep the
Registration Statement continuously effective and so that such Registration
Statement will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and so that such Prospectus will not contain
an untrue statement of a material fact or

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omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, until the earlier of (A) the sixth (6th) anniversary of
the date of execution of this Agreement, and (B) such time as legal counsel to
the Company delivers a legal opinion to the Purchasers, the Company and the
Company’s transfer agent stating that all Registrable Securities then held by
the Purchasers can be sold without compliance with the registration requirements
of the Securities Act pursuant to Rule 144(k) under the Securities Act (the
“Effectiveness Period”). The Company shall not, during the Effectiveness Period,
voluntarily take any action that would result in the Purchasers not being able
to offer and sell Registrable Securities during that period, unless such action
is taken by the Company in good faith in compliance with Section 9.2(f) below.
          (e) (i) Furnish to the Purchasers with respect to the Registrable
Securities registered under the Registration Statement such number of copies of
the Registration Statement (including pre-effective and post-effective
amendments), Prospectuses (including supplemental prospectuses) and preliminary
versions of the Prospectus filed with the SEC (“Preliminary Prospectuses”) in
conformity with the requirements of the Securities Act and such other documents
as the Purchasers may reasonably request, to facilitate the public sale or other
disposition of all or any of the Registrable Securities by the Purchasers; and
(ii) upon request, inform each Purchaser who so requests that the Company has
complied with its obligations in Section 9.1(e)(i) (or that, if the Company has
filed a post-effective amendment to the Registration Statement which has not yet
been declared effective, the Company will notify the Purchaser to that effect,
will use its reasonable efforts to secure the effectiveness of such
post-effective amendment as promptly as reasonably possible and will promptly
notify the Purchaser pursuant to Section 9.1(e)(i) hereof when the amendment has
become effective).
          (f) Notify the Purchasers as promptly as reasonably possible and (if
requested by any such Person) confirm such notice in writing no later than one
trading day following the day (i) (A) when the SEC notifies the Company whether
there will be a review of a Registration Statement and whenever the SEC comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Purchasers); and (B) with respect to a Registration Statement or any
posteffective amendment, when the same has become effective; (ii) of any request
by the SEC for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement covering
any or all of the Registrable Securities or the initiation of any proceedings
for that purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; and (v) of the
occurrence of any event or passage of time that makes the financial statements
included in a Registration Statement ineligible for inclusion therein or any
statement made in such Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to such Registration Statement,
Prospectus or other documents so that, in the case of a Registration Statement,
such Registration Statement will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and so that such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or

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necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
          (g) File documents required of the Company for normal blue sky
clearance in states reasonably specified in writing by the Purchasers prior to
the effectiveness of the Registration Statement; provided, however, that the
Company shall not be required to qualify to do business or consent to service of
process in any jurisdiction in which it is not now so qualified or has not so
consented.
          (h) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption therefrom) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
          (i) Cooperate with the Purchasers to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to any transferee pursuant to any Registration Statement free of any restrictive
legends and in such denominations and registered in such names as the Purchasers
may reasonably request.
          (j) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Purchaser
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
          (k) In the event of any underwritten public offering, use its best
efforts to furnish, on the date that such Registrable Securities are delivered
to the underwriters for sale, if such securities are being sold through
underwriters, (i) an opinion, dated as of such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and (ii) a letter, dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters.
          (l) Cause all such Registrable Securities registered pursuant hereto
to be listed on Nasdaq, if the Common Stock is then listed on Nasdaq, and each
other securities exchange on which similar securities issued by the Company are
then listed.
          (m) The Company understands that each of the Purchasers disclaims
being an underwriter, but any Purchasers being deemed an underwriter by the SEC
shall not relieve the Company of any obligations it has hereunder.
     9.2 Transfer of Shares After Registration; Suspension; Damages.
          (a) Each Purchaser, severally and not jointly, agrees (i) that it will
not sell, offer to sell, solicit offers to buy, dispose of, loan, pledge or
grant any right with respect to the Registrable Securities or otherwise take an
action that would constitute a sale within the meaning of the Securities Act,
other than transactions exempt from the registration requirements of the

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Securities Act, except as contemplated in the Registration Statement referred to
in Section 9.1 and as described below, (ii) that it shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Purchaser that such Purchaser shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be required to effect the registration of such Registrable Securities and as
requested by the Company, (iii) that it shall execute such documents in
connection with such registration, that are customary for resale registration
statements, as the Company may reasonably request, (iv) to cooperate with the
Company as reasonably requested by the Company in connection with the
preparation and filing of any Registration Statement hereunder, unless such
Purchaser has notified the Company in writing of such Purchaser’s election to
exclude all of such Purchaser’s Registrable Securities from such Registration
Statement and (v) that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding the Purchaser or
its plan of distribution.
          (b) Subject to paragraph (c) below, in the event: (i) of any request
by the SEC or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement for amendments or
supplements to a Registration Statement or related Prospectus or for additional
information; (ii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose; or (iv) of any event or circumstance which
necessitates the making of any changes in the Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; then the Company shall promptly deliver a certificate in writing to
each Purchaser (a “Suspension Notice”) to the effect of the foregoing and, upon
receipt of such Suspension Notice, the Purchaser will refrain from selling any
Registrable Securities pursuant to the Registration Statement (a “Suspension”)
until the Purchaser’s receipt of copies of a supplemented or amended Prospectus
prepared and filed by the Company, or until it is advised in writing by the
Company that the current Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in any such Prospectus.
          (c) In the event of any Suspension, the Company shall cause the use of
the Prospectus so suspended to be resumed as soon as practicable but in any
event within thirty (30) days after delivery of the Suspension Notice to
Purchasers; provided, however, that Purchasers shall not be prohibited from
selling Registrable Securities under the Registration Statement as a result of
Suspensions on more than three occasions of not more than thirty (30) days each
and not more than ninety (90) days in the aggregate in any twelve month period.
Notwithstanding

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the foregoing, if the Company ceases to be eligible to register the Registrable
Securities on Form S-3 and resolution of any Suspension requires the Company to
file a post-effective amendment on Form S-1, (i) the Company will use its best
efforts to cause the use of the Prospectus so suspended to be resumed as soon as
reasonably practicable but in any event within ninety (90) days after delivery
of a Suspension Notice to Purchasers, and (ii) the Purchasers shall not be
prohibited from selling Registrable Securities under the amended Registration
Statement on Form S-1 as a result of Suspensions on or after the date that the
Company ceases to be eligible to register the Registrable Securities on Form S-3
on more than three occasions of not more than thirty (30) days each and not more
than ninety (90) days in the aggregate in any twelve month period. In addition
to and without limiting any other remedies (including, without limitation, at
law or at equity) available to the Purchaser, the Purchaser shall be entitled to
specific performance in the event that the Company fails to comply with the
provisions of this Section 9.2(c).
          (d) Provided that a Suspension in accordance with paragraphs (b) and
(c) of this Section 9.2 is not then in effect, a Purchaser may sell Registrable
Securities under the Registration Statement, provided that it arranges for
delivery of a current Prospectus to the transferee of such Registrable
Securities. Upon receipt of a request therefor, the Company will provide an
adequate number of current Prospectuses to the Purchaser and to any other
parties requiring such Prospectuses.
          (e) If a Registration Statement ceases to be effective as to, or
ceases to be available to the Purchasers with respect to, all Registrable
Securities pursuant to subsections (b) or (c) of Section 9.2 for any reason
prior to the expiration of the Effectiveness Period (any such event, a
“Registration Default”), then the Company shall issue additional Warrants to
each Purchaser to purchase shares of Common Stock representing two and one-half
percent (2 1/2%) of the number of Shares purchased by each such Purchaser at the
Closing for each aggregated thirty day period (or portion thereof) for which a
Registration Default had continued; provided however, that the aggregate number
of Warrant Shares issuable upon exercise of Warrants issued to a Purchaser under
this subsection (e) shall not in the aggregate exceed ten percent (10%) of the
number of Shares purchased by such Purchaser at the Closing.
     9.3 Expenses of Registration. Except as specifically provided herein, all
expenses incurred by the Company in complying with Section 9 hereof, including,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and expenses of one counsel to the
Purchasers (which shall be in addition to any fees pursuant to Section 16.8 but
which shall not exceed $40,000), blue sky fees and expenses, fees and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company) (collectively, the “Registration Expenses”)
shall be borne by the Company. All underwriting discounts and selling
commissions applicable to a sale incurred in connection with any registrations
hereunder shall be borne by the holders of the securities so registered pro rata
on the basis of the number of shares so sold.
     9.4 Delay of Registration; Furnishing Information. The Purchasers shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be required to effect the

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registration of their Registrable Securities. Furthermore, each Purchaser,
severally and not jointly, agrees to promptly notify the Company of any changes
in the information set forth in a registration statement regarding such
Purchaser or its plan of distribution set forth in such registration statement.
     9.5 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 9.
          (a) The Company will indemnify and hold harmless each Purchaser, the
partners, officers and directors of each Purchaser, any underwriter (as defined
in the Securities Act) for such Purchaser and each person, if any, who controls
such Purchaser or underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a “Violation”): (i) any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such Registration Statement; and the
Company will pay as incurred to each such Purchaser, partner, officer, director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 9.5 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, unless such settlement (x) includes an
unconditional release of the Company from all liability on any claims that are
the subject matter of such action, and (y) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of the
Company; provided, further, that the Company shall not be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which (i) occurs in reliance upon and
in conformity with written information furnished expressly for inclusion in such
Registration Statement, prospectus, amendment or supplement by such Purchaser,
partner, officer, director, underwriter or controlling person of such Purchaser
or (ii) based upon a claim that a Preliminary Prospectus contained an untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, if such person was not
sent or given a copy of the Prospectus (or the Prospectus as amended or
supplemented) at or prior to the written confirmation of the sale of such
Registrable Securities to such person and the untrue statement contained in or
omission from such Preliminary Prospectus was corrected in the final Prospectus
(or the Prospectus as amended or supplemented) unless such failure is the result
of noncompliance by the Company of Section 9.1(b) or (e) hereof; provided,
further, that this indemnification agreement will be in addition to any
liability which the Company may otherwise have to the Purchasers.

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          (b) Each Purchaser will, if Registrable Securities held by such
Purchaser are included in the securities as to which such Registration
Statement, prospectus, amendment or supplement is being filed, severally and not
jointly, indemnify and hold harmless the Company, each of its directors, its
officers and each person, if any, who controls the Company within the meaning of
the Securities Act or Exchange Act, any underwriter and any other Purchaser
selling securities under such registration statement or any of such other
Purchaser’s partners, directors or officers or any person who controls such
Purchaser, against any losses, claims, damages or liabilities (joint or several)
to which the Company or any such director, officer, controlling person,
underwriter or other such Purchaser, or partner, director, officer or
controlling person of such other Purchaser may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs (i) in reliance upon and in conformity with written
information furnished by such Purchaser specifically for use in connection with
such Registration Statement, prospectus, amendment or supplement or (ii) as a
result of such Purchaser’s failure to deliver a Prospectus or Prospectus
supplement as contemplated by the Securities Act prior to the pertinent sale of
shares by such Purchaser; and each such Purchaser will pay as incurred any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other person registering shares
under such registration, or partner, officer, director or controlling person of
such other person registering shares under such Registration Statement in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 9.5 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Purchaser, which consent shall not be unreasonably withheld,
unless such settlement (x) includes an unconditional release of such Purchaser
from all liability on any claims that are the subject matter of such action, and
(y) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of such Purchaser; provided, further, that in
no event shall any indemnity or contribution under this Section 9.5 exceed in
the aggregate the dollar amount of the net proceeds to be received by such
Purchaser from the sale of such Purchaser’s Registrable Securities pursuant to
the Registration Statement.
          (c) Promptly after receipt by an indemnified party under this
Section 9.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9.5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel reasonably
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Section 9.5, unless and to the
extent that such failure is materially prejudicial to the indemnifying party’s
ability to defend such action, but

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the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 9.5.
          (d) If the indemnification provided for in this Section 9.5 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the sale of the Registrable Securities
pursuant to the Registration Statement, or (ii) if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits but also the relative fault of the indemnifying party
or parties on the one hand and the indemnified party on the other in connection
with the Violation(s) that resulted in such loss, claim, damage or liability, as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission; provided, that in no event shall
any indemnification or contribution by a Purchaser under this Section 9.5 exceed
in the aggregate the dollar amount of the net proceeds to be received by such
Purchaser from the sale of such Purchaser’s Registrable Securities pursuant to
the Registration Statement.
          (e) The obligations of the Company and the Purchasers under this
Section 9.5 shall survive completion of any offering of Registrable Securities
in a Registration Statement and the termination of this Agreement.
     9.6 Agreement to Furnish Information.
          (a) In connection with an underwritten registration in which such
Purchaser is participating, each Purchaser agrees to execute and deliver such
other agreements as may be reasonably requested by the Company or the
underwriter. In addition, if requested by the Company or the representative of
the underwriters of Common Stock (or other securities) of the Company, each
Purchaser shall provide such information related to such Purchaser as may be
required by the Company or such representative in connection with the completion
of any public offering of the Company’s securities pursuant to a registration
statement filed under the Securities Act.
     9.7 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 9 may be assigned (but
only with the related obligations) by a Purchaser, provided (i) each transfer to
each transferee or designee involves either (X) all Registrable Securities held
by such Purchaser, (Y) not less than twenty-five thousand (25,000) shares of
Preferred Stock, or (Z) an affiliate or a current or former partner or member of
such Purchaser or any affiliate, (ii) the Company is, within a reasonable time
after such transfer, furnished with written notice of the name and address of
such transferee or assignee, (iii) such transferee or assignee agrees in writing
to assume the obligations of this

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Section 9 and (iv) such assignment shall be effective only if immediately
following such transfer the further disposition of such shares by the transferee
or assignee is restricted under the Securities Act (for purposes of this
statement, if the transferee, together with all affiliated persons is able to
sell all of the Restricted Securities held by such transferee pursuant to Rule
144(k) then further disposition will not be deemed to be restricted under the
Securities Act).
     9.8 Rule 144 Reporting. With a view to making available to the Purchasers
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
          (a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act;
          (b) Keep the Registration Statement effective at all times;
          (c) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
          (d) So long as a Purchaser owns any Registrable Securities, furnish to
such Purchaser forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
     9.9 S-3 Eligibility. The Company will use its best efforts to meet the
requirements for the use of Form S-3 for registration of the resale by the
Purchasers of the Registrable Securities. The Company will use its best efforts
to file all reports required to be filed by the Company with the SEC in a timely
manner and take all other necessary action so as to maintain such eligibility
for the use of Form S-3.
     9.10 Termination of Registration Rights. Subject to the rights of
transferees under Section 9.7 hereof, the Company’s obligations pursuant to this
Section 9 shall terminate with respect to each Purchaser severally upon the
earlier of (A) the date that such Purchaser has completed the distribution
related to such Purchaser’s Registrable Securities, (B) the sixth (6th)
anniversary of the date of execution of this Agreement, and (C) such time as
legal counsel to the Company delivers a legal opinion to the Purchasers stating
that all Registrable Securities then held by the Purchasers can be sold without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144(k) under the Securities Act (but only for so long as the shares may be
so sold). Following a termination of the Company’s obligations pursuant to the
preceding sentence with respect to a Purchaser, any Securities held by such
Purchaser shall not be deemed to be Registrable Securities thereafter, and the
obligations of such Purchaser pursuant to this Section 9 shall also terminate.
     9.11 Amendment of Registration Rights. Provisions of this Section 9 may be
amended and the observance thereof may be waived (either generally or in a
particular instance

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and either retroactively or prospectively), only with the written consent of the
Company and Purchasers who then hold not less than a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this
Section 9.11 shall be binding upon each Purchaser and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities.
     9.12 Legends. Each certificate representing Shares shall (unless such
Shares are then eligible for transfer pursuant to Rule 144(k) under the
Securities Act or as otherwise permitted under applicable law or the provisions
of the Agreement) be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN THE FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
Nothing in this Section 9.12 or elsewhere in this Agreement shall be deemed to
restrict the ability of the holder of any Securities to transfer any such
Securities to an affiliate, partner or former partner of such holder in
compliance with the Securities Act, nor shall any legal opinion be required in
connection therewith.
SECTION 10. Company Covenants.
     10.1 Reservation of Shares and Common Stock. The Company will at all times
reserve and keep available a sufficient number of shares of Common Stock, solely
for issuance and delivery upon the conversion of the Series D Preferred Stock
and upon exercise of the Warrants.
     10.2 Subsequent Registration Rights. In the event of a Change in Control
transaction (as such term is defined in Section 4(D) of the Certificate of
Designation) involving issuance of an acquiror’s securities (the “Acquisition
Securities”) and if such Change in Control transaction provides for the
registration of the Acquisition Securities, the Company shall specifically
provide in such Change of Control transaction agreements that the Acquisition
Securities issued or issuable to the Purchasers shall be included in any such
registration of the Acquisition Securities.
SECTION 11. Broker’s Fee. The Company and each Purchaser (severally and not
jointly) hereby represent that there are no brokers or finders (and similar
agents) entitled to compensation in connection with the sale of the Shares or
the Warrants, and shall indemnify each other for any such fees for which they
are responsible.

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SECTION 12. Notices. All notices required in connection with this Agreement
shall be in writing and shall be deemed effectively given upon the earlier of
actual receipt of: (a) personal delivery to the party to be notified, (b) one
business day after the date of confirmed transmission by facsimile, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) business day after the business day
of deposit with a nationally recognized overnight courier, specifying next day
delivery, freight prepaid, with written notification of receipt, and addressed
as follows:
          (a) if to the Company, to:
XATA Corporation
151 E. Cliff Road, Suite 10
Burnsville, MN 55337
Attention: Chief Financial Officer
Facsimile: (952) 894-2463
Email: mark.ties@xata.com
          with a copy so mailed to:
Faegre & Benson LLP
2200 Wells Fargo Center
Minneapolis, MN 55402
Attention: Michael Coddington
Facsimile: (612) 766-1600
Email: mcoddington@faegre.com
or to such other person at such other place as the Company shall designate to
the Purchasers in writing; and
          (b) if to the Purchasers, at the address as set forth below each
Purchaser’s name on the Schedule of Purchasers, or at such other address or
addresses as may have been furnished to the Company in writing.
SECTION 13. Miscellaneous.
     13.1 Waivers and Amendments. Neither this Agreement nor any provision
hereof may be changed, waived, discharged, terminated, modified or amended
except upon the written consent of the Company and holders of at least a
majority of the Shares then held by the Purchasers (including any shares of
Common Stock issued upon conversion of the Shares and then held by the
Purchasers).
     13.2 Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
     13.3 Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

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     13.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the corporate laws of the State of Minnesota and, with respect
to matters of law other than corporate law, the laws of the State of Minnesota
as applied to contracts entered into and performed entirely in Minnesota by
Minnesota residents, without regard to conflicts of law principles.
     13.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
     13.6 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
     13.7 Entire Agreement. This Agreement and other documents delivered
pursuant hereto, including the exhibits, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
     13.8 Payment of Fees and Expenses.
          (a) Each of the Company and the Purchasers shall bear its own expenses
and legal fees incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby; provided, however, that upon the Closing, the
Company shall pay the fees and expenses of Cooley Godward Kronish LLP, special
counsel for the Trident Purchasers, in an amount equal to $20,000.
          (b) If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney’s fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
[Signature page follows]

26

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In Witness Whereof, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.

            COMPANY:

XATA CORPORATION
      By:   /s/ Mark E. Ties               Mark E. Ties              Chief
Financial Officer     

INVESTORS:
Trident Capital Fund-V, L.P.
Trident Capital Fund-V Affiliates Fund, L.P.
Trident Capital Fund-V Affiliates Fund (Q), L.P.
Trident Capital Fund-V Principals Fund, L.P.
Trident Capital Parallel Fund-V, C.V.
Executed on behalf of the forgoing funds by the undersigned, as an authorized
signatory of the respective general partner of each such fund:

                  /s/ Christopher Marshall       (signature)                   
Christopher Marsall       (print name)           

 

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EXHIBIT 2.1
SCHEDULE OF PURCHASERS

                                                              Aggregate        
            No. of   Warrant     No. of   Aggregate   Warrant   Purchase Name  
Shares   Purchase Price   Shares   Price
Trident Capital Fund-V, L.P.
    1,403,400     $ 5,375,022.00       421,020     $ 52,627.50  
505 Hamilton Avenue
Suite 200
Palo Alto, CA 94301
                               
 
                               
Trident Capital Fund-V Affiliates
    8,156     $ 31,237.48       2,447     $ 305.88  
Fund, L.P.
505 Hamilton Avenue
Suite 200
Palo Alto, CA 94301
                               
 
                               
Trident Capital Fund-V Affiliates
    7,783     $ 29,808.89       2,335     $ 291.88  
Fund (Q), L.P.
505 Hamilton Avenue
Suite 200
Palo Alto, CA 94301
                               
 
                               
Trident Capital Fund-V Principals
    40,620     $ 155,574.60       12,186     $ 1,523.25  
Fund, L.P.
505 Hamilton Avenue
Suite 200
Palo Alto, CA 94301
                               
 
                               
Trident Capital Parallel Fund-V,
    106,621     $ 408,358.43       31,986     $ 3,998.24  
C.V.
505 Hamilton Avenue
Suite 200
Palo Alto, CA 94301
                               
 
                               
Total
    1,566,580     $ 6,000,001.40       469,974     $ 58,746.75