XATA Xrs Corporation (MM)

Xata Corporation
965 Prairie Center Drive
Eden Prairie, MN 55344
(952) 707-5600

December 16, 2010

Dear Shareholder:

     You are cordially invited to attend the Annual Meeting of Shareholders of XATA Corporation to be held on Wednesday February 2, 2011, at the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota, at 3:00p.m.

     This year you are presented with proposals to:

	1.		elect nine directors;
	2.		to approve the advisory (non-binding) resolution related to the Company’s executive officer compensation as disclosed in the proxy statement for this meeting;
	3.		advisory (non-binding) vote on the desired frequency of seeking approval of the Company’s executive officer compensation; and
	4.		transact such other business as may properly come before the meeting or any adjournments thereof.

     Following the formal business of the meeting, we will report on the affairs of the Company and respond to questions of general interest to shareholders.

     We look forward to greeting personally those of you who are able to be present at the meeting. However, whether or not you plan to attend, it is important that your shares be represented, regardless of the number of shares that you hold. Accordingly, you are requested to sign and date the enclosed proxy and mail it in the envelope provided at your earliest convenience.

XATA CORPORATION
965 Prairie Center Drive
Eden Prairie, MN 55344
(952) 707-5600

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, FEBRUARY 2, 2011

To the Shareholders of XATA Corporation:

     The Annual Meeting of Shareholders of XATA Corporation (the “Company”) will be held on Wednesday, February 2, 2011, at the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota, at 3:00 p.m., for the following purposes:

	1.		To elect nine directors to serve for a one-year term expiring when their successors are elected and qualified at the annual meeting in 2012.
			Only 8 of the 9 directors will be elected by the holders of our common and preferred stock. The one remaining director will be elected by the holders of our Series B Preferred Stock, voting as a class.
	2.		To approve the advisory (non-binding) resolution related to the Company’s executive officer compensation as disclosed in the proxy statement for this meeting;
	3.		Advisory (non-binding) vote on the desired frequency of seeking approval of the Company’s executive officer compensation; and
	4.		To transact such other business as may properly come before the meeting or any adjournments thereof.

     We have fixed the close of business on December 13, 2010 as the record date for the determination of shareholders entitled to receive notice of and to vote at the Annual Meeting. Our transfer books will not be closed.

     Whether or not you expect to be present personally at the Annual Meeting, please complete, date, sign, and return the accompanying Proxy in the enclosed, self-addressed envelope at your earliest convenience. This will insure your participation in the decisions to be made by the shareholders. We sincerely hope that all shareholders who can attend the Annual Meeting will do so.

TABLE OF CONTENTS

GENERAL INFORMATION			1
RECORD DATE AND VOTING			2
RECOMMENDATIONS OF THE BOARD OF DIRECTORS			3
PRINCIPAL SHAREHOLDERS AND OWNERSHIP OF MANAGEMENT			4
PROPOSAL 1 — ELECTION OF DIRECTORS			7
PROPOSAL 2 — APPROPRIATENESS OF EXECUTIVE COMPENSATION			14
PROPOSAL 3 — FREQUENCY OF VOTE ON APPROPRIATENESS OF EXECUTIVE COMPENSATION			15
EXECUTIVE COMPENSATION			16
AUDIT COMMITTEE REPORT			23
EQUITY COMPENSATION PLAN INFORMATION			25
PROPOSALS FOR THE ANNUAL MEETING IN 2012			25
FORM OF PROXY

XATA CORPORATION
965 Prairie Center Drive
Eden Prairie, MN 55344
(952) 707-5600

PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY FEBRUARY 2, 2011

GENERAL INFORMATION

     This proxy statement is furnished to shareholders by the Board of Directors of XATA Corporation (the “Company”) for solicitation of proxies for use at the Annual Meeting of Shareholders to be held on Wednesday, February 2, 2011, at the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota, at 3:00 p.m., and at all adjournments thereof. The purposes of the meeting and the matter to be acted upon are set forth in the preceding Notice of Annual Meeting of Shareholders. We are not currently aware of any other matters that will come before the meeting.

     A copy of our annual report, which includes our report on Form 10-K for the fiscal year ended September 30, 2010, is enclosed for your information. It is not a part of the proxy solicitation material. The report describes the financial condition of the Company as of September 30, 2010. This proxy statement and the annual report are being mailed to shareholders beginning on or about December 30, 2010.

     We have asked brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy material to the beneficial owners of our common stock and we will reimburse them for their expenses in so doing. To ensure adequate representation at the meeting, our officers, agents and employees may communicate with shareholders, banks, brokerage houses and others by telephone, facsimile, or in person to request that proxies be furnished. We will bear all expenses incurred in connection with this solicitation.

     The following proxy materials and related information are available for you to review online at www.proxydocs.com/xata :

	•		the Company’s Notice of Annual Meeting of Shareholders and Proxy Statement;
	•		the Company’s Form 10-K for the fiscal year ended September 30, 2010;
	•		the form of Proxy;
	•		the Letter to Shareholders; and
	•		directions to the Annual Meeting of Shareholders.

RECORD DATE AND VOTING

     We have fixed December 13, 2010 as the record date for the determination of shareholders entitled to receive notice of and to vote at the Annual Meeting. As of the close of business on the record date, we had issued and outstanding 10,626,404 shares of our common stock, par value $.01 per share, 2,126,362 shares of our Series B Preferred Stock, 1,269,036 shares of our Series C Preferred Stock, 1,566,580 shares of our Series D Preferred Stock, 1,355,857 shares of our Series F Preferred Stock and 10,066,663 Series G Preferred Stock. The Series B, Series C, Series D, Series F and Series G Preferred Stock are referred to collectively as the “Preferred Stock.” Each share of common stock and Preferred Stock is entitled to one vote on each proposal to be presented at the meeting and one vote in each applicable class vote on such proposal. In addition, the Series B Preferred Stock votes separately as a class with respect to the election of one of the nine nominees for election as directors, and certain of the other Proposals require separate class votes of our common stock and each series of the Preferred Stock. There is no right of cumulative voting.

     The presence at the Annual Meeting in person or by proxy of the holders of a majority of the outstanding shares entitled to vote constitutes a quorum for the transaction of business. Directors are elected by a plurality of the votes cast at a meeting at which a quorum is present. Therefore, the individuals who receive the largest number of votes cast are elected as directors up to the maximum number of directors to be chosen at the meeting. Consequently, any shares not voted have no impact on the election of directors.

     Similarly, the presence at the Annual Meeting in person or by proxy of a majority of the outstanding shares of a series of our Preferred Stock is required before a class vote of any such series of our Preferred Stock will become effective.

HOW TO VOTE		By signing and returning the enclosed proxy card, you will be giving your proxy to our Chairman and Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) and authorizing either of them to vote your shares.
HOW YOUR PROXY WILL BE VOTED		Unless revoked, all properly executed proxies will be voted as specified. Proxies that are signed but that lack any specification will, subject to the following, be voted FOR each director nominee and FOR each Proposal. If any other matters properly come before the Annual Meeting, or if any of the persons named to serve as directors should decline or be unable to serve, then the persons named in the proxy will vote in accordance with their discretion.
		All common stock and Preferred Stock of the Company held by you will be voted in each class and series for which such stock is entitled to vote as directed in your proxy.
HOW TO REVOKE YOUR PROXY		You have the power to revoke your proxy at any time before the convening of the Annual Meeting. Revocations of proxy will be honored if received by us, at the Company, addressed to the attention of Mark E. Ties, Chief Financial Officer, on or before February 1, 2011. In addition, on the day of the meeting, prior to the convening thereof, revocations may be delivered to the tellers who will be seated at the door of the meeting room. Note that any proxy received by the Company prior to the Annual Meeting will revoke any prior proxy given by the shareholder.

ABSTENTIONS		If you abstain from voting as to any matter, your shares shall be deemed present at the meeting for purposes of determining a quorum and for purposes of calculating the vote with respect to such matter, but shall not be deemed to have been voted in favor of such matter.
BROKER NON-VOTES		If a broker turns in a “non-vote” proxy, indicating a lack of voting instruction by the beneficial holder of the shares and a lack of discretionary authority on the part of the broker to vote on a particular matter, then the shares covered by such non-vote proxy will be considered present at the meeting for purposes of determining a quorum but will not be considered to be represented at the meeting for purposes of calculating the vote required for approval of such matter.
DISSENTERS’ RIGHTS		No other shareholders are entitled to any dissenters’ rights with respect to any matters to be acted upon at the Annual Meeting.

RECOMMENDATIONS OF THE BOARD OF DIRECTORS

     OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” ELECTION OF EACH NOMINEE FOR DIRECTOR NAMED IN THIS PROXY STATEMENT AND “FOR” EACH OF THE OTHER PROPOSALS.

PRINCIPAL SHAREHOLDERS AND OWNERSHIP OF MANAGEMENT

     The following table sets forth as of December 13, 2010 the record and beneficial ownership of common stock held by (i) each person who is known by us to be the beneficial owner of more than 5% of our common stock; (ii) each of the current directors and nominees; (iii) each Named Executive Officer (as defined in “EXECUTIVE COMPENSATION”); and (iv) all of our executive officers and directors as a group.

     Securities reported as “beneficially owned” include (a) securities over which the named person may exercise voting power or investment power, alone or with others, and (b) the number of shares that the named person has the right to acquire within sixty (60) days after December 13, 2010.

		Number of Shares Owned (1)(2)(3)				Percentage(4)
Karen T. Beckwith (5)(6)			7,500				*
John J. Coughlan (5)(6)			1,0063,235				9.5	%
Donald R. Dixon (5)(6)(7)			8,247,849	(9)			43.8	%
Thomas G. Hudson (5)(6)			50,225				*
Roger W. Kleppe (5)(6)			101,210				*
Chad M. Lindbloom (5)(6)			22,500				*
Christopher P. Marshall (5)(6)			11,971,766	(10)(11)(12)			53.1	%
Michael J. Paxton(5)(6)			24,999				*
Bharat S. Vedak (5)(6)			—				*
Mark E. Ties			373,477				3.4	%
David A Gagne			357,991				3.3	%
All executive officers, current directors as a group (12 persons)			22,286,487				69.6	%
Technology Crossover Ventures 528 Ramona Street Palo Alto CA 94301			11,924,166				52.9	%
Trident Capital Management-V, L.L.C. (8) 505 Hamilton Avenue, Suite 200 Palo Alto CA 94301			8,240,349	(10)			43.8	%
John Deere Special Technologies Group, Inc. (8) 300 Grimes Bridge Road Roswell GA 30075			2,144,060				20.2	%
Ashford Capital Management P.O. Box 4172 Wilmington DE 19807			1,375,658				12.9	%
Weber Capital Management, LLC 340 Pine St., Suite 300 San Francisco, CA 94104			874,087	(13)			7.8	%
William and Linda Flies, JT 28822 Lake Avenue Way Frontenac MN 55026			587,550				5.5	%

		Series B								Series C								Series D								Series F								Series G
		Preferred								Preferred								Preferred								Preferred								Preferred
		Stock				Warrants				Stock				Warrants				Stock				Warrants				Stock				Warrants				Stock				Warrants
Trident Capital Fund-V, L.P.			1,904,871				—				1,136,849				335,939				1,403,400				421,020				907,942				272,382				746,350				223,959
Trident Capital Fund-V Affiliates Fund, L.P.			11,071				—				6,607				1,953				8,156				2,447				5,277				1,583				4,338				1,301
Trident Capital Fund-V Affiliates Fund (Q), L.P.			10,564				—				6,305				1,863				7,783				2,335				5,036				1,511				4,140				1,242
Trident Capital Fund-V Principals Fund, L.P.			55,135				—				32,905				9,723				40,620				12,186				26,279				7,884				21,607				6,482
Trident Capital Parallel Fund-V, C.V.			144,721				—				86,370				25,522				106,621				31,986				68,980				20,694				56,716				17,014

		Series G
		Preferred Stock				Warrants
TCV VII, L.P.			5,996,276				1,798,883
TCV VII (A), L.P.			3,114,008				934,202
TCV Member Fund, L.P.			56,382				16,915

		Series F								Series G
		Preferred Stock				Warrants				Preferred Stock				Warrants
Weber Capital Partners II, L.P.			225,225				67,568				—				—
GW 2001 Fund, L.P.			90,090				27,027				66,666				19,999

PROPOSAL 1

ELECTION OF DIRECTORS

     Our Bylaws provide that the number of directors shall be fixed by resolution of the shareholders or the Board of Directors. The current number of directors is fixed at nine. The nine nominees for election as directors at the Annual Meeting are as follows:

Nominees to be Voted on by Holders of Common and Preferred Stock
Karen T. Beckwith
John J. Coughlan
Thomas G. Hudson
Roger W. Kleppe
Chad M. Lindbloom
Christopher P. Marshall
Michael J. Paxton
Bharat S. Vedak

Nominee to be Voted on by Holders of Series B Preferred Stock Only
Donald R. Dixon

     All of the nominees are currently members of the Board of Directors.

     Six of the nine nominees for election as directors at the Annual Meeting were selected by the Governance and Nominating Committee of the Board of Directors. These nominees are Karen T. Beckwith, John J. Coughlan, Thomas G. Hudson, Roger W. Kleppe, Chad M. Lindbloom, and Michael J. Paxton.

     Bharat S. Vedak is a nominee of John Deere Special Technologies Group, Inc. (“JDSTG”), Donald R. Dixon is a nominee of Trident Capital Management — V, L.L.C. (“Trident”), and Christopher P. Marshall is a nominee of Technology Crossover Ventures (“TCV”). Currently, JDSTG has the right to nominate three directors and Trident has the right to nominate two directors (one of whom must be independent of Trident and approved by our Governance and Nominating Committee of the Board of Directors if the total number of directors is seven or less). These rights were negotiated in connection with their respective investments in the Company. Each of JDSTG and Trident has designated just one nominee (Bharat S. Vedak and Donald R. Dixon, respectively) for election at the Annual Meeting.

     The following current members of the Board of Directors (comprising a majority of the current Board) are “independent,” as defined by NASDAQ listing standards related to Board membership:

Karen T. Beckwith
Donald R. Dixon
Thomas G. Hudson
Roger W. Kleppe
Chad M. Lindbloom
Christopher P. Marshall
Michael J. Paxton
Bharat S. Vedak

     The directors elected at this Annual Meeting, and at annual meetings thereafter, unless otherwise determined by the Board of Directors or the shareholders, will serve a one-year term expiring upon the election of their successors at the next annual meeting.

     In the event any nominee should be unavailable to stand for election at the time of the Annual Meeting, the proxies may be voted for a substitute nominee selected by the Board of Directors.

JOHN J. COUGHLAN		Director since October 2006

     (Chairman of the Board of Directors, Chief Executive Officer and President of the Company)

     Mr. Coughlan has been Chairman, Chief Executive Officer and President since joining the Company in October 2006. Prior to joining the Company, he was involved in a business consulting practice. He previously served as president and CEO of Lawson Software, Minnesota’s largest software company, through June 2005. Mr. Coughlan joined Lawson Software in 1987 and became CEO in February 2001 prior to the company’s initial public offering in December of 2001. In addition to his responsibilities at the Company, Mr. Coughlan is an active regional business advocate and serves on the board of directors for several local organizations, including Securian Financial Group, Inc. Mr. Coughlan is 52 years old.

     Mr. Coughlan has significant prior experience managing software companies and brings broad expertise in the development, marketing and selling of software products and services. He also provides the Company with leadership for employee motivation and development.

KAREN T. BECKWITH		Director since May 2010

     Ms. Beckwith is currently owner of MKB CEO, LLC, a financial advisory and interim CEO services company. Prior to starting MKB CEO, LLC, Ms. Beckwith was the President and CEO of Gelco Information Network, a SaaS based software company providing expense management solutions and trade promotion management services. She previously served in various capacities with Ceridian Corporation and Deluxe Corporation prior to joining Gelco Information Network. Ms. Beckwith currently serves on the board of Associated Banc-Corp. Ms. Beckwith is 51 years old.

     Ms. Beckwith provides the Board with overall business and financial experience in various industries. Ms. Beckwith has gained extensive knowledge of the software industry with a focus on SaaS based companies.

DONALD R. DIXON		Director since February 2010

     Don Dixon is a co-founder of Trident Capital and has been a Managing Director since 1993. From 1988 to 1993, Mr. Dixon was Co-President of Partech International, a private equity fund manager associated with Banque Paribas. From 1983 to 1988, he was a Managing Director of Alex. Brown & Sons. Earlier in his career, Don was a Vice President of Morgan Stanley & Co. and a Senior Account Officer at Citibank, N.A. Mr. Dixon serves as a director of AccountNow, Advanced Payment Solutions, Amprius, ByteMobile, Clarus Systems, eGistics, Inc., Merchant e-Solutions, Neohapsis, Profex, Qualys, RoyaltyShare, Solexant, Syndero and Tiandi Energy. He is also on the investment committee of Mustang Ventures, an affiliated China fund of Trident Capital Fund VI. Don’s past directorships include Affiliated Computer Services (ACS), Anasazi Inc. (acquired by Pegasus Solutions Inc.), BankAmerica Merchant Services, Inc. (BPI), BlueStar Solutions (acquired by ACS), CSG Systems International, Inc (CSGS), Epicor Software Corporation (EPIC), Epoch Partners (acquired by Goldman Sachs), Evolving Systems, Inc. (EVOL), InfoUSA, Inc. (IUSA), Pegasus Systems, Inc. (PEGS), Signio (acquired by Verisign), Sygate Technologies (acquired by Symantec) and Unison Software, Inc. (acquired by IBM). Mr. Dixon earned his B.S.E. in Mechanical and Aerospace Engineering from Princeton University and his M.B.A. from Stanford Graduate School of Business. Mr. Dixon is Co-Chairman of the Advisory Committee of the Princeton University School of Engineering and Applied Sciences. Mr. Dixon is 63 years old.

     Mr. Dixon brings to the Board business leadership, corporate strategy and operating expertise, and a strong background in the software industry. In particular, he has extensive experience in growing software

businesses, launching new products, brand building, innovation, marketing, customers and sales channels. Mr. Dixon also lends an investor perspective based on his leadership role as a managing director of a private equity group.

ROGER W. KLEPPE		Director since September 1995

     Mr. Kleppe is the former senior vice president of human resources, real estate and facility services for Blue Cross and Blue Shield of Minnesota. He had been with Blue Cross since March 1994 until his retirement. Mr. Kleppe previously served on the Blue Cross board of trustees and on the corporate member board, each for two years. Prior to March 1994, Mr. Kleppe was vice president of human resources and administrative resources for National Business Systems, Inc. He has extensive human resources experience and has been involved with many business community organizations, such as the Minnesota Chamber of Commerce. He had served on the board of directors for Prime Therapeutics, Inc., a for-profit pharmacy benefit management company. Mr. Kleppe also had served as president of the Human Resources Executive Council, a professional association of human resource executives from the largest companies in the Twin Cities, and had served as a member of the board of advisors for the Executive Development Center, Carlson School of Management, at the University of Minnesota. Mr. Kleppe is 61 years old.

     Mr. Kleppe brings to the Board business leadership, corporate strategy and operating expertise. In particular, he has extensive experience in human resources from his leadership role at Blue Cross and involvement in several other companies and community organizations.

CHRISTOPHER P. MARSHALL		Director since December 2003

     Mr. Marshall joined TCV in 2008 as a General Partner and has been in the venture capital industry since 1995. His primary investment focus is the payments, internet and business services industries. Prior to joining TCV, Mr. Marshall spent 12 years at Trident Capital, focused on the software, business services and internet markets. Earlier in his career, Mr. Marshall worked for Banque Paribas and the Chase Manhattan Bank. Mr. Marshall earned his B.A. from Hamilton College and his M.B.A. from the J. L. Kellogg Graduate School of Management at Northwestern University. Mr. Marshall also serves on the board of TheStreet.com. Mr. Marshall is 42 years old.

     Mr. Marshall brings to the Board business leadership, corporate strategy and operating expertise, and a strong background in the software industry. In particular, he has extensive experience in growing software businesses, launching new products, brand building, innovation, marketing, customers and sales channels. Mr. Marshall also lends an investor perspective based on his leadership role as a managing director of a private equity group.

THOMAS G. HUDSON		Director since October 2007

     Mr. Hudson is the retired Chairman and Chief Executive Officer, Muve, Inc., a Mayo Clinic IP company that provides tools, software (SAAS) technology and coaching services to help individuals lose weight. Before joining Muve, Inc., Mr. Hudson was the Chief Executive Officer of Global Capacity, a start-up company that provides integrated communications logistics software solutions worldwide. Prior to joining Global Capacity in June of 2005, Mr. Hudson served as Chairman and Chief Executive Officer of CNT, a provider of wide area storage networks, since June 1996, as a director since August 1996 and as Chairman of the board of directors since May 1999. From 1993 to June 1996, Mr. Hudson served as Senior Vice President of McGraw Hill Companies, a leading information services provider, serving also as General Manager of its F.W. Dodge Division, and as Senior Vice President, Corporate Development. From 1968 to 1993, Mr. Hudson served as Vice President and General Manager in a number of management positions at IBM Corporation. Mr. Hudson is a graduate of the University of Notre Dame with a bachelor’s in electrical engineering and New York University with an MBA in

finance. Mr. Hudson attended the Harvard Advanced Management Program in 1990. Mr. Hudson previously served on the board of directors of CGSY, CNT, McData Corp, Lawson Software, Ciprico, Plat Software, Incentra Solutions, all publicly traded companies and two private companies, Wyndstrom and MQSoftware. Mr. Hudson is 64 years old.

     Mr. Hudson brings to the Board business leadership, corporate strategy and operating expertise, and a strong background in software technologies. In particular, he has extensive experience in launching new technologies, brand building and marketing.

CHAD M. LINDBLOOM		Director since February 2008

     Mr. Lindbloom is currently Senior Vice President and Chief Financial Officer of C.H. Robinson Worldwide, Inc. C.H. Robinson Worldwide, Inc. provides worldwide freight transportation services and logistics solutions to companies of all sizes, in a wide variety of industries. Mr. Lindbloom has served in various roles with C.H. Robinson Worldwide, Inc. since joining the company in 1990. Mr. Lindbloom currently serves on the board of directors of Children’s Hospitals and Clinics of Minnesota. Mr. Lindbloom holds a Bachelor of Science degree and a Masters of Business Administration from the Carlson School of Management at the University of Minnesota. Mr. Lindbloom is 46 years old.

     Mr. Lindbloom brings to the Board financial leadership and business strategy expertise. In particular, he has extensive experience in the transportation industry as well as mergers and acquisitions. Mr. Lindbloom also provides a compliance perspective from his leadership role of a publicly traded company.

MICHAEL J. PAXTON		Director since May 2008

     Mr. Paxton is President and CEO of Chamilia, Inc., a leading designer and manufacturer of high quality, personalized jewelry. Mr. Paxton is also Chairman of the board of directors of Transport Corporation of America and previously served as that company’s CEO and President from 2001 to 2007. Transport America is a national truckload carrier and logistics service company based in Eagan, Minnesota. From 1998 to 2001, Mr. Paxton was the President and CEO of the Sunbeam Health and Safety Company, a subsidiary of Sunbeam. Beginning in 1996, he served as Chairman, President, and CEO of O-Cedar Holdings, Inc., the leading brand of consumer household cleaning tools in the United States. The majority of Mr. Paxton’s career was spent in senior management positions with Pillsbury and Grand Metropolitan PLC (Diageo), the parent company. In 1992, he was appointed as President and CEO of the Haagen-Dazs Company. Prior to Pillsbury, Mr. Paxton held progressive sales and marketing positions with Safeco Insurance Company, The Drackett Products Company, and Miles Laboratories. He currently serves on the board of directors of Transport Corporation of America, Inc.; Azteca Foods, Inc.; Foster Farms, Inc.; and Gemini, Inc. Mr. Paxton is 64 years old.

     Mr. Paxton brings to the Board business leadership, corporate strategy and operating expertise, and a strong background in consumer-packaged goods. Mr. Paxton has extensive experience in the transportation industry as well as launching new products, brand building, innovation and marketing.

BHARAT S. VEDAK		Director since February 2009

     Mr. Vedak is Vice President of John Deere Technology Center — India and Deliver Customer Value. In his role, he is responsible developing new capabilities for Deere to introduce competitive products in developing economies. Mr. Vedak first joined John Deere in 1974 at its Product Engineering Center. In 1983, he became Manager, Quality Engineering at the John Deere Engine Works, and eventually was appointed Vice President of Engineering for John Deere’s Rotary Engine Division. In 1990, he joined Cummins, Inc. as an executive engineer, and advanced to the position of Vice President, Industrial Customer Engineering. He returned to John Deere in 2005. Mr. Vedak has a bachelor’s degree in agricultural engineering from the Indian Institute of Technology in

Kharagpur, India, a master’s degree in agricultural engineering from North Carolina State University, and a MBA from the University of Northern Iowa. Mr. Vedak is a Fellow of SAE International. He has served on the advisory board of the Agricultural and Biological department at North Carolina State University and on the board of directors of SAE International. Currently, he is serving as the Vice President for the Commercial Vehicle sector of SAE International. Mr. Vedak is 62 years old.

Mr. Vedak brings to the Board a strong technology and business background. In particular, he has extensive experience in developing and launching new technologies from his various positions at John Deere.

Board Leadership Structure

     Our Company’s Board of Directors does not have a current requirement that the roles of Chief Executive Officer and Chairman of the Board be either combined or separated, because the Board believes it is in the best interests of our Company to make this determination based on the position and direction of our Company and the constitution of the Board and management team. The Board of Directors regularly evaluates whether the roles of Chief Executive Officer and Chairman of the Board should be combined or separated. The Board of Directors has determined that having our Company’s Chief Executive Officer serve as Chairman is in the best interest of our stockholders at this time. The Chief Executive Officer is responsible for the day-to-day management of our Company and the development and implementation of our Company’s strategy, and has access to the people, information and resources necessary to facilitate Board function. The Board of Directors believes that combining the roles of Chief Executive Officer and Chairman contributes to an efficient and effective Board.

     Our non-management directors facilitate the Board’s independence by meeting frequently as a group and fostering a climate of transparent communication. The Board of Directors elected Thomas G. Hudson to be the Lead Director for purposes of leading those meetings where Mr. Coughlan is not present. The high level of contact between our directors and our Chairman between Board meetings and the specificity contained in the Board’s delegation of authority parameters also serve to foster effective Board leadership.

Oversight of Risk Management

     Management is responsible for day-to-day risk assessment and mitigation activities, and our Company’s Board of Directors is responsible for risk oversight, focusing on our Company’s overall risk management strategy, our Company’s degree of tolerance for risk and the steps management is taking to manage our Company’s risks. While the Board as a whole maintains the ultimate oversight responsibility for risk management, the committees of the Board can be assigned responsibility for risk management oversight of specific areas.

     The Audit Committee reviews the Company’s portfolio of risk, discusses with management significant financial risks in conjunction with enterprise risk exposures, the Company’s policies with respect to risk assessment and risk management and the actions management has taken to limit, monitor or control financial and enterprise risk exposure.

     The Compensation Committee oversees risk management as it relates to our compensation plans, policies and practices in connection with structuring our executive compensation programs and reviewing our incentive compensation programs for other employees and has reviewed with management whether our compensation programs may create incentives for our employees to take excessive or inappropriate risks which could have a material adverse effect on the Company.

     The Governance and Nominating Committee has adopted a framework for the oversight of enterprise risk pursuant to which it works with management to identify, categorize and evaluate enterprise risks, and also to develop risk mitigation and response strategies.

Director Compensation

     For fiscal 2010, the non-employee directors received the following total compensation:

		Fees Earned								Option
		or Paid in Cash				Stock Awards				Awards
Name		($)				($)(1)				($)(2)(3)				Total ($)
Karen T. Beckwith			7,500				8,850				7,050				23,400
Donald R. Dixon			—				7,500				6,450				13,950
Thomas G. Hudson			11,250				7,500				6,450				25,200
Roger W. Kleppe			11,250				7,500				6,450				25,200
Chad M. Lindbloom			11,250				7,500				6,450				25,200
Christopher P. Marshall (4)			—				7,500				6,450				13,950
Michael J. Paxton			11,250				7,500				6,450				25,200
Bharat S. Vedak			—				—				—				—

     Non-employee directors (except Mr. Vedak, the JDSTG director, Mr. Dixon, the Trident Director of our Series B Preferred Stock and Mr. Marshall, the TCV Director), receive $15,000 annually to serve on the Board of Directors. This amount may be prorated based on actual time served on the Board of Directors during the fiscal year.

     Each non-employee director (except Mr. Vedak, the JDSTG director) receives upon re-election at each Annual Meeting a 5,000-share stock option grant and a 2,500 share stock award, both pursuant to the Company’s 2007 Long-Term Incentive and Stock Option Plan. This amount may be prorated based on actual time served on the Board of Directors during the fiscal year. The stock options are exercisable for ten years commencing at the date of grant at a price equal to the fair market value of the common stock on the date of grant. The stock award and stock options are fully vested at the time of award. At its discretion, the Company has the ability to offer a cash gross-up to offset the estimated tax liability incurred at the time of the stock award.

     Each director is reimbursed by the Company for his actual out-of-pocket expenses for telephone, travel, and miscellaneous items incurred on behalf of the Company.

      Board Meetings and Committees

     During the year ended September 30, 2010, the Board of Directors met seven times. Committees of the Board of Directors generally meet immediately prior to and/or after meetings of the Board of Directors. No director attended fewer than 75% of the aggregate of the meetings of the Board of Directors and of the meetings

of the Board committees on which they served. The Board of Directors does not have a policy regarding the attendance at annual meetings.

     The Board of Directors has established an Audit Committee, Compensation Committee, and Governance and Nominating Committee. During the fiscal year ended September 30, 2010, each committee was composed of all independent directors (under the NASDAQ standards applicable to such committees) as follows:

Audit Committee		Compensation Committee		Governance and Nominating Committee
Chad M Lindbloom (Chairman)		Roger W. Kleppe (Chairman)		Thomas G. Hudson (Chairman)
Thomas G. Hudson		Christopher P. Marshall		Roger W. Kleppe
Michael J. Paxton		Bharat S. Vedak		Michael J. Paxton

     The Board of Directors has unanimously determined that all Audit Committee members are financially literate under the NASDAQ listing standards and all members are qualified audit committee financial experts as defined in the regulations of the Securities and Exchange Commission (the “SEC”).

     The purpose of the Audit Committee includes (1) annually selecting a firm of independent public accountants as auditors of the books, records and accounts of the Company; (2) reviewing the scope of audits made by the independent public accountants; and (3) receiving and reviewing the audit reports submitted by the independent public accountants and taking such action in respect of such reports as the Audit Committee may deem appropriate to assure that the interests of the Company are adequately protected. See “Audit Committee Report.” During the year ended September 30, 2010, the Audit Committee met four times. The Company has established an Audit Committee Charter that sets forth the Audit Committee’s principal accountabilities. This Charter is available on our website, www.xata.com .

     The purpose of the Compensation Committee is to annually review and approve management’s overall compensation plan for the Company’s employees, excluding officers. The Committee also approves all incentive plans and sets officer annual salaries and incentives, including cash and non-cash remuneration. The Compensation Committee also determines all equity compensation that may be included in the compensation set forth for each individual. During the year ended September 30, 2010, the Compensation Committee met four times. The Company has established a Compensation Committee Charter that sets forth the Compensation Committee’s principal accountabilities. This Charter is available on our website, www.xata.com .

     The purpose of the Governance and Nominating Committee is to (1) oversee corporate governance matters; (2) approve director-nominees to be considered for election by shareholders and for election by the Board of Directors to fill any vacancy or newly created directorship; and (3) make recommendations to the Board concerning the appropriate size and composition of the Board of Directors and each Board committee, and the establishment of new Board committees. During the year ended September 30, 2010, the Governance and Nominating Committee met one time. The Company has established a Governance and Nominating Committee Charter that sets forth the Governance and Nominating Committee’s principal accountabilities. This Charter is available on our website, www.xata.com .

     We have adopted a code of ethics that applies to our chief executive officer, chief financial officer, and directors of finance, and persons performing similar functions. The Code is posted on our website at www.xata.com , and we will post on such website any amendment to, or waiver from, a provision of our Code within four business days following the date of such amendment or waiver.

Nomination of Director Candidates

Nominees for election to the Board of Directors of the Company are selected by the Governance and Nominating Committee, subject to the rights of JDSTG, Trident and TCV (see Notes 8, 9, 10, 11 of the table in “Principal

Shareholders and Ownership of Management” and “Election of Directors”). To date, all director nominees (other than nominees of JDSTG, Trident or TCV) have been identified by current directors or management. We do not have a formal policy regarding the consideration of diversity in identifying director nominees. The Governance and Nominating Committee does consider, among other things, a director nominee’s potential contribution to the diversity of background and experience of our Board of Directors, including with respect to age, gender, international background, race and specialized experience. We have never engaged a third party (for a fee or otherwise) to identify candidates and, other than nominees of JDSTG, Trident and TCV, we have never received a proposed candidate from a source outside of the Company. However, the Governance and Nominating Committee would consider any candidate proposed in good faith by a shareholder. To do so, a shareholder should send the candidate’s name, credentials, contact information, and his or her consent to be considered as a candidate to our Chairman and Chief Executive Officer, John J. Coughlan. The proposing shareholder should also include his or her contact information and a statement of his or her share ownership (how many shares owned and for how long). The Governance and Nominating Committee evaluates candidates based on financial literacy, knowledge of the Company’s industry or other background relevant to the Company’s needs, status as a stakeholder in the Company, “independence” for purposes of compliance with the rules of the SEC and NASDAQ, and willingness, ability, and availability for service.

Shareholder Communication with the Board

     We do not have a formal procedure for shareholder communication with our Board of Directors. In general, our officers are easily accessible by telephone or mail. Any matter intended for the Board, or for any individual member or members of the Board, should be directed to our chief executive officer or chief financial officer with a request to forward the same to the intended recipient. In the alternative, shareholders can direct correspondence to the Board to the attention of our Board Chairman, John J. Coughlan, or to the attention of the Chairman of our Audit Committee, Chad M. Lindbloom, in care of the Company at the Company address. All such communications will be forwarded unopened.

PROPOSAL 2

ADVISORY VOTE ON EXECUTIVE OFFICER COMPENSATION

     The Company seeks a non-binding advisory vote from its shareholders to approve the compensation of our executive officers as described under “EXECUTIVE COMPENSATION” and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement.

     This proposal gives our shareholders the opportunity to express their views on the Company’s executive officer compensation. Because your vote is advisory, it will not be binding upon the Board of Directors. However, the Compensation Committee will take into account the outcome of the vote when making future executive officer compensation decisions.

     As we discuss below in our Compensation Discussion and Analysis, we believe that our compensation policies and decisions are designed to assist the Compensation Committee meeting its objectives. The objectives of the Company’s executive compensation program are to:

	•		attract and retain top quality executive talent;
	•		establish and support a performance-driven culture and motivate executives to deliver strong business results; and
	•		ensure that executives are aligned with shareholder expectations by closely linking total compensation with short-term business objectives and creation of long-term shareholder value.

     Accordingly, we are presenting this proposal, which gives you, our shareholder, the opportunity to approve our executive officer compensation as disclosed in this proxy statement by voting for or against the following resolution:

RESOLVED, that the shareholders approve the compensation of the Company’s executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the Company’s Proxy Statement for its 2011 Annual Meeting.

OUR BOARD OF DIRECTORS BELIEVES THAT THE COMPENSATION OF OUR EXECUTIVE OFFICERS IS APPROPRIATE AND RECOMMENDS AN ADVISORY VOTE “FOR” THIS PROPOSAL.

PROPOSAL 3

ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE TO APPROVE OUR
EXECUTIVE OFFICER COMPENSATION PRACTICES

     The Company seeks a non-binding advisory vote from its shareholders regarding the desired frequency for holding a non-binding advisory vote to approve the compensation of our executive officers as described in our annual proxy statements.

     This proposal gives our shareholders the opportunity to express their views as to whether the non-binding advisory vote on our executive officer compensation practices should occur every one, two, or three years. Because your vote is advisory, it will not be binding upon the Board of Directors. However, the Board of Directors will take into account the outcome of the vote when deciding the frequency of the non-binding advisory vote on our future executive officer compensation decisions.

     We recommend that a non-binding advisory vote to approve the compensation of our executive officers as disclosed in our annual proxy statements occur once every two years. We believe holding that vote every two years provides the most effective timeframe because it allows our Board of Directors and Compensation Committee sufficient time to engage our shareholders following each such vote in order to understand any concerns they may have, and to respond with any changes to the compensation of our executive officers and/or related disclosure deemed appropriate in response to the results of a shareholder advisory vote. In addition, our compensation program objectives include establishing and supporting a performance-driven culture and motivating executives to deliver strong business results. Accordingly, we believe that a vote every two years would provide our shareholders with additional time to evaluate the effectiveness of our executive compensation philosophy as it relates to our performance. In the future we may determine that a more or less frequent advisory vote is appropriate, either in response to the vote of our shareholders on this Proposal 3 or for other reasons.

     While we believe our recommendation is appropriate at this time, the shareholders are not voting to approve or disapprove our recommendation, but are instead asked to provide an advisory vote on whether the non-binding advisory vote on the approval of our executive officer compensation practices should be held every one, two or three years. The option among those choices that obtains a plurality of votes cast by the shares present or represented by proxy and entitled to vote at the Annual Meeting will be deemed to have received the advisory approval of our shareholders.

OUR BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE FOR “2 YEARS” FOR THIS PROPOSAL.

EXECUTIVE COMPENSATION

Executive Officers

     Our current executive officers are as follows:

      John J. Coughlan, Chairman of the Board, Chief Executive Officer and President. Mr. Coughlan, age 52, has been Chairman, Chief Executive Officer and President since joining XATA in October 2006. Prior to joining XATA, he was involved in a business consulting practice. He previously served as president and CEO of Lawson Software, Minnesota’s largest software company, through June 2005. Mr. Coughlan joined Lawson Software in 1987 and became CEO in February 2001 prior to the company’s initial public offering in December of 2001. In addition to his responsibilities at XATA, Mr. Coughlan is an active regional business advocate and serves on the board of directors for several local organizations, including Securian Financial Group, Inc.

      Mark E. Ties, Chief Financial Officer and Treasurer. Mr. Ties, age 45, joined XATA in April 2005 as Chief Financial Officer. He is responsible for the Company’s finance, mergers & acquisitions, purchasing, and distribution functions. Before joining XATA, Mr. Ties was the chief financial officer and treasurer at Velocity Express Corporation, where he served as a member of the Company’s executive leadership team and was responsible for the Company’s financial activities, including capital raising activities, SEC compliance, financial planning and analysis, mergers and acquisitions, cash management, back-office process integration, corporate governance practices, and investor relations. Prior to Velocity, he served as a Senior Manager for Ernst & Young LLP in its entrepreneurial services and mergers and acquisitions departments and as a senior financial executive at a number of companies in varied industries. He has extensive financial management experience in the areas of financing, mergers and acquisitions, business integration and financial processes.

      David A. Gagne, Executive Vice President of Field Operations. Mr. Gagne, age 44, joined XATA in January 2007 as Executive Vice President of Field Operations. He is responsible for activities including planning, forecasting and development of strategies for increasing revenue of XATA’s products and services. He also develops go-to-market programs to increase the visibility and awareness in the marketplace. Prior to joining XATA, Mr. Gagne was vice president of strategic development at Lawson Software. He held several leadership positions while at Lawson Software including vice president of the healthcare client group. Mr. Gagne has over 15 years experience working with sales teams to meet their revenue objectives and build ongoing customer relationships. He has a B. S. in Business Administration from Boston University School of Management.

      Wesley C. Fredenburg, General Counsel and Secretary. Mr. Fredenburg, age 59, joined XATA in February 2008. Before joining XATA, he was the General Counsel for Vanguard Car Rental, the holding company for National and Alamo car rentals. At Vanguard, he and the executive team performed domestic and international merger and acquisition work, completed an S-1 in preparation for taking Vanguard public, and then, as an alternative, successfully sold the company to private investors. Previously, Mr. Fredenburg was the General Counsel at Velocity Express Corporation, where he assisted the company with its multiple debt and equity financings, corporate governance and NASDAQ compliance. Mr. Fredenburg also has extensive experience in real estate, risk management, human resources, international development and government relations. Prior to serving as in-house counsel, he was a partner at Crowe & Dunlevy, Oklahoma’s oldest and largest law firm.

Compensation Committee Report

     The Compensation Committee reviewed and discussed the “Compensation Discussion and Analysis” section below with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis section below be included in this proxy statement and the Company’s Form 10-K for the fiscal year ended September 30, 2010.

The Compensation Committee:

Roger W. Kleppe (Chairman)
Christopher P. Marshall
Bharat S. Vedak

Compensation Discussion and Analysis

     This compensation discussion and analysis (“CD&A”) is intended to provide context for the decisions underlying the compensation reported in the executive compensation tables included in this proxy statement for the Company’s Chief Executive Officer (“CEO”) and the two other executive officers who had the highest “total compensation” for fiscal 2010, as set forth in the “Summary Compensation Table” below (these three executive officers are collectively referred to as the “Named Executive Officers” or the “NEO’s”). The Compensation Committee of the Company’s Board of Directors is responsible for policies and decisions regarding the compensation and benefits for NEO’s. Certain facts described in this CD&A reflect Compensation Committee deliberations about which management does not have personal knowledge, although the Compensation Committee has advised management that the information in this CD&A is accurate and materially complete.

Objectives of the Company’s Executive Compensation Program

The objectives of the Company’s executive compensation program are to:

	•		attract and retain top quality executive talent;
	•		establish and support a performance-driven culture and motivate executives to deliver strong business results; and
	•		ensure that executives are aligned with shareholder expectations by closely linking total compensation with short-term business objectives and creation of long-term shareholder value.

Attraction and retention of top quality executive talent

     The Compensation Committee strives to assess competitive compensation regarding XATA’s executives. To help ensure that XATA’s executive compensation is in-line with the market, the Compensation Committee benchmarks XATA’s compensation against comparable companies representing, among others, the market for executive talent most applicable to the Company. The Compensation Committee designs the executive compensation program to be performance-based in order to drive performance and to assure that strong performance is well rewarded, thus attracting and retaining high-performing, results-oriented executives. Long-term incentives are designed, in part, to provide retention incentive as well as to reward the creation of long-term shareholder value.

Linkage to short-term business objectives and creation of long-term shareholder value

     The Compensation Committee seeks to motivate executives to work conscientiously to achieve both short term and long term goals and, thereby, create shareholder value. A significant proportion of each NEO’s total compensation opportunity is performance-based variable compensation, which rewards executives for annual business performance against pre-determined financial goals. These rewards are balanced with long-term incentives to both drive short-term growth in shareholder value and to reward long-term decision-making, which results in sustainable growth in shareholder value.

Compensation Data and Analysis

     To assist it in meeting its objectives, the Compensation Committee reviewed data on executive compensation trends and competitive compensation analysis covering the Company’s officers using both survey data and a group of benchmark companies.

Benchmarking

     Benchmark data was used by the Compensation Committee to review and to help determine the appropriate amount of compensation for each NEO in fiscal 2010. Benchmark companies were selected by the Compensation Committee from a broad base of companies in selected industries, and the Compensation Committee selected a smaller group referred to as the Benchmark Companies. The companies in this group were selected to reflect similar offerings, targeted customer segments and the markets for executive talent most applicable to the Company. The Compensation Committee used the Benchmark Companies to verify and determine competitive pay levels for NEO’s positions.

Application of Benchmark Data

     The Compensation Committee examined the range of benchmark company data for each NEO position. Although the Compensation Committee used the mid-range of such data as a guide for determining compensation levels, actual values set for any individual NEO may, from time to time, deviate from mid-range because of year-to-year swings in market median data, and to maintain the desired internal equity among executive positions. Unless otherwise disclosed in the below sections on individual elements of direct compensation, the value of compensation paid or targeted for each NEO in fiscal 2010 was within the mid-range as determined by the benchmarking process. The Compensation Committee also consulted market data from the 2009 Culpepper Executive Compensation Survey and the 2009 Towers Watson study as additional sources to ensure that mid-range data from the Benchmark Companies is similarly reflected.

Elements of Direct Compensation for Executive Officers

     The Company uses a combination of cash salary, annual performance-based variable compensation (currently paid in the form of cash) and grants of long-term incentives (in the form of stock options and restricted stock units) as the three elements of total direct compensation for NEO’s. The proportion of total compensation that is dependent on the Company’s business performance (or is “at risk”) varies by position and increases with higher levels of responsibility. The methods by which the amounts of fiscal 2010 compensation for NEO’s were reviewed are described in the following sections for each element of direct compensation.

      Salary. The salaries reported in the “Summary Compensation Table” reflect actual cash paid for the fiscal 2010 fiscal year. The salary level for each NEO was established by the Compensation Committee considering both the benchmark data for equivalent positions in the Benchmark Companies and the survey data.

      Annual Performance—Based Variable Compensation. The performance-based variable compensation reported for each NEO (in the column of the “Summary Compensation Table” captioned “Non-Equity Incentive Plan Compensation”) represents compensation that was earned based on fiscal 2010 performance. The following describes the methodologies used by the Compensation Committee to determine the final annual performance-based variable compensation earned by each NEO:

      Selection of Performance Metrics. For fiscal 2010, the Compensation Committee designed a short-term incentive program (“STI”) driven by four performance measures that it determined were appropriate to drive desired business behavior for XATA and would correlate positively with total shareholder return. These measures were the Company’s results with respect to (1) total cumulative subscriptions, (2) software revenue, (3) total revenue, and (4) modified EBITDA, which is earnings before interest (net), taxes, depreciation, amortization,

stock based compensation and preferred stock dividends and deemed dividends, with each measure weighted at 20%, 20%, 20% and 40%, respectively. For payment of any bonuses, positive modified EBITDA had to be achieved. The Compensation Committee also approved a discretionary bonus pool for members of the management team in the amount of $400,000 toward the achievement of certain operational and financial goals relating to the Turnpike acquisition.

      Establishment of Incentive Goals and Payout Approach. The Compensation Committee designed the relationship between pay and performance to ensure that increasing levels of performance would be rewarded with increased payout levels. Similarly, performance that did not meet the goals would reduce the performance-based variable compensation payout to as low as zero in the case of failure to meet the pre-established minimum level of performance or positive modified EBITDA. In setting the performance levels, the Compensation Committee strived to establish challenging but achievable goals. The factors considered by the Compensation Committee in assessing the challenge inherent in the goals included:

	•		management’s internal operating plan; and
	•		expected industry performance.

     Three levels of achievement were established for each Company performance measure, which corresponded to a multiple of earned salary payout of the target performance-based variable compensation of 25%, 50% or 75% for executive management and 50%, 100%, 150% for the CEO.

      Payout Based on Performance Against Goals. For fiscal 2010 the Company’s performance, as evaluated by the Compensation Committee, lead to the determination that none of the STI performance metrics were achieved and therefore no payouts were made under the STI compensation plan.

     The Compensation Committee judged concluded that the Company’s overall software revenue growth, non-GAAP earnings improvement and free cash flow performance did warrant a bonus payout. As such, the Compensation Committee recommended and the Board approved a $400,000 discretionary award to be paid out to employees of the Company.

     The Company’s performance against the operational and financial goals relating to the Turnpike acquisition were achieved and the $400,000 discretionary pool was paid.

      Long Term Incentive Awards. In addition to the above, each of the Company’s executive officers is eligible to receive equity compensation in the form of stock option and/or restricted stock units under the Company’s 2007 Long Term Incentive and Stock Option Plan. It is believed that through the Company’s broad-based plan, the economic interests of all employees, including the executives, are more closely aligned to those of the shareholders. It is also believed that this approach will allow the Company to use equity as an incentive in a balanced manner that supports the recruitment and retention of top talent.

Benefit Plans Available to Executive Officers

     The Company’s practice is to make available to NEO’s essentially the same benefit plans generally available to other employees in the Company. A review of comparable company benefits offerings determined that the Company provides competitive benefit plans.

Tax and Accounting Implications

      Deductibility of Executive Compensation. As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct compensation of more than $1,000,000 that is paid to certain

individuals. The Company believes that compensation paid under the management incentive plans is generally fully deductible for federal income tax purposes. However, in certain situations, the Compensation Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for its executive officers.

Summary Compensation Table

     The following table sets forth information about all compensation (cash and non-cash) awarded to, earned by, or paid to, our Named Executive Officers for the fiscal years ended September 30, 2010 and 2009.

																		Non-Equity
										Stock				Option				Incentive Plan				All Other
										Awards ($)				Awards ($)				Compensation				Compensation
Name and Principal Position		Year				Salary ($)				(1)				(2)				($) (3)				($)				Total ($)
John J. Coughlan			2010				300,000				69,360				218,014				207,896				5,272				800,541
Chairman and CEO			2009				300,000				72,000				129,000				207,747				5,455				714,201
Mark E. Ties			2010				250,000				38,532				57,373				86,623				1,805				434,332
CFO			2009				250,000				40,000				71,666				86,561				1,988				450,214
David A. Gagne			2010				245,000				37,764				124,039				84,491				1,847				425,326
Executive Vice President of			2009				243,846				39,200				70,234				84,430				1,976				439,685
Field Operations

Outstanding Equity Awards as of September 30, 2010

     The following table sets forth the number of shares covered by both exercisable and unexercisable stock options, and vested and unvested stock awards held by each of the Named Executive Officers as of September 30, 2010 as follows:

		Option Awards																Stock Awards (1)
		Number of Securities																				Market Value of
		Underlying Unexercised								Option				Option				Number of Shares of				Shares of Stock
		Options (#)								Exercise				Expiration				Stock That Have Not				That Have Not
		Exercisable				Unexercisable				Price ($)				Date				Vested				Vested ($)
John J. Coughlin			300,000				—				5.40				10/1/2016
			31,111				15,555	(2)			2.99				2/6/2018
			50,000				100,000	(3)			2.00				2/4/2019
			—				166,423	(4)			2.89				11/3/2019
																			7,650	(5)			19,125
																			15,978	(6)			39,945
																			7,778	(7)			19,445
																			12,000	(8)			30,000
																			16,000	(9)			40,000

		Option Awards																Stock Awards (1)
		Number of Securities																				Market Value of
		Underlying Unexercised								Option				Option				Number of Shares of				Shares of Stock
		Options (#)								Exercise				Expiration				Stock That Have Not				That Have Not
		Exercisable				Unexercisable				Price ($)				Date				Vested				Vested ($)
Mark E. Ties			89,000				—				5.12				9/27/2016
			100,000				—				5.03				2/26/2017
			15,555				7,778	(2)			2.99				2/6/2018
			27,778				55,555	(2)			2.00				2/4/2019
			—				43,796	(4)			2.89				11/3/2019
																			3,889	(7)			9,723
																			6,667	(8)			16,668
																			8,888	(9)			22,220
David A. Gagne			150,000				—				5.32				1/1/2017
			50,000				—				5.03				2/26/2017
			15,555				7,777	(2)			2.99				2/6/2018
			27,222				54,445	(2)			2.00				2/4/2019
			—				42,920	(4)			2.89				11/3/2019
																			3,890	(7)			9,725
																			6,534	(8)			16,355
																			8,711	(9)			21,778

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

     The Company executed an employment agreement with John J. Coughlan on October 1, 2006. This agreement provides for a minimum base salary, and an annual incentive bonus based on revenue, profitability and other objectives. The contract is for a period of two years and is annually automatically renewed for successive two-year periods unless terminated by ninety-day notice in advance of renewal. The contract automatically renewed on October 1, 2010. The agreement also contains provisions that prohibit the Company from materially altering position, duties, benefit plans or incentive plans. Under the agreement, in the event the Company terminates the executive’s employment without cause or if the executive terminates employment with good cause attributable to the Company, the executive is entitled to one year of salary continuation, an annual incentive bonus in the amount of fifty percent of base salary, accelerated vesting of certain equity rights, in addition to certain other benefits. The agreement restricts the executive from competing with the Company during and for a period of one year beyond employment with the Company, and restricts the executive from disclosing certain confidential information. The agreement provides for accelerated vesting of certain equity rights in the event of a “change of control” of the Company (as defined in the agreement).

     The Company has executed severance agreements with Mark E. Ties and David A. Gagne. Under the agreement, the executive is entitled to one year of salary continuation, in addition to certain other benefits, in the event that (a) the Company terminates the executive’s employment without cause, or (b) the employee terminates employment for “good reason”, or (c) the executive’s employment is terminated, for other than cause, within six-months of a change of control, as defined in the agreement. “Good Reason” includes materially altering the executive’s position, duties, benefit plans or incentive plans.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who beneficially own more than ten percent (10%) of the Company’s common stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (the “SEC”). Executive officers, directors and greater than ten percent (10%) beneficial owners are required by the SEC to furnish the Company with copies of all Section 16(a) forms they file.

     Based solely on a review of the reports furnished to the Company, or written representations from reporting persons that all reportable transaction were reported, the Company believes that during the fiscal year ended September 30, 2010 the Company’s officers, directors and greater than ten percent owners timely filed all reports they were required to file under Section 16(a); except that one report, covering a total of one transaction, was filed late by Mr. Roger Kleppe.

Indemnification of Directors and Officers

     Under Section 302A.521, Minnesota Statutes, the Company is required to indemnify its directors, officers, employees, and agents against liability under certain circumstances, including liability under the Securities Act of 1933, as amended (the “Act”). Article V of the Company’s Bylaws contain substantially similar provisions and, in addition, specifically authorize adoption of agreements for indemnification to the extent permitted by statute and purchase of insurance to meet the Company’s indemnification obligation. The general effect of such provisions is to relieve the directors and officers of the Company from personal liability that may be imposed for certain acts performed in their capacity as directors or officers of the Company, except where such persons have not acted in good faith. In addition, the Company has entered into indemnification agreements with Trident and its representatives who serve as directors on our Board of Directors, which may supplement the indemnification provisions available to them under Minnesota law. The Company has also entered into similar indemnification agreements with the TCV Purchasers.

     As permitted under Minnesota Statutes, the Articles of Incorporation of the Company provide that directors shall have no personal liability to the Company or to its shareholders for monetary damages arising from breach of the director’s duty of care in the affairs of the Company. Minnesota Statutes do not permit elimination of liability for breach of a director’s duty of loyalty to the Company or with respect to certain enumerated matters, including payment of illegal dividends, acts not in good faith, and acts resulting in improper personal benefit to the director.

Certain Relationships and Related Person Transactions

     Trident currently holds all of our outstanding Series B, Series C and Series D Preferred Stock and a portion of our outstanding Series F and Series G Preferred Stock. Donald R. Dixon is a Managing Director of Trident Capital and is its director designee for election to our Board of Directors at the Annual Meeting.

     Trident (as holders of Series B Preferred Stock) and JDSTG have rights to nominate directors, and in the case of Trident (as holders of Series B Preferred Stock), to vote separately as a class on their nominees. (See Notes 7, 9, and 10 of the table under “Principal Shareholders and Ownership of Management” and “Election of Directors.”) In addition, Trident has a right of first refusal on certain new stock issuances by the Company, which is intended to permit Trident to maintain its current percentage ownership.

     Christopher P. Marshall is a general partner of an entity affiliated with TCV, which participated in the Series G Preferred Stock. Mr. Marshall is also a former managing director of an entity affiliated with TCM-V and Trident and, therefore, was affiliated with Trident until 2008. At each of our annual meetings of shareholders held since December 2003 and prior to the 2010 Annual Meeting, Mr. Marshall was a nominee of Trident for election

to the Board of Directors. TCV has the right to nominate and elect one Series G Director as the majority holder of the issued and outstanding shares of our Series G Preferred Stock. TCV has nominated Christopher P. Marshall to serve as the Series G Director.

     We have an unwritten policy of reviewing financial transactions in which we are a participant and in which a related person has a direct or indirect interest in the transaction involving at least $120,000 in value. For purposes of this policy, related persons include all of our directors and executive officers, any nominee for director, any immediate family member of a director, nominee for director or executive officer of our company and any holder of more than 5% of our common stock, or an immediate family member of such holder. Generally, the Audit Committee of our Board of Directors has responsibility for reviewing such significant related party transactions. However, our board of directors may instead cause a special committee of directors to review such a transaction, provided that no member of the special committee has a direct or indirect interest in the transaction under review. Such a transaction will only be approved if the reviewing committee determines that the transaction is beneficial to our company and the terms of the transaction are fair to us in light of all circumstances surrounding the transaction.

      AUDIT COMMITTEE REPORT

     The Audit Committee of our Board of Directors is comprised of three (3) directors, all of whom are “independent” under the listing standards of The NASDAQ Stock Market. The Board of Directors has determined that all Audit Committee members are financially literate under current NASDAQ listing standards and each member has financial management expertise. In addition, the Board of Directors has determined that all members are qualified audit committee financial experts as defined in the regulations of the Securities and Exchange Commission.

     The Committee is responsible for the selection of the Company’s independent accountants. Management is responsible for the Company’s internal controls and the financial reporting process; the independent accountants are responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards and for issuing a report thereon. The Committee’s responsibility is to monitor and oversee these processes. In this context, the Committee has met and held discussions with management and the independent accountants. The committee is also responsible for overseeing messages received on the Company’s whistleblower alert line and, in that regard, the chair of the Committee receives notices of all messages along with the general counsel.

     The Committee has received from the independent auditors the written disclosures and letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Committee concerning independence, and has discussed with the auditors their independence, and has satisfied itself as to the auditors’ independence.

     The Committee has discussed with management and the independent auditors the quality and adequacy of the Company’s internal controls. The Committee has also reviewed with the independent auditors their audit plans, audit scope and identification of audit risks.

     In addition, the Committee has discussed and reviewed with the independent auditors all communications required by generally accepted accounting standards, including those described in Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees” and, with and without management present, discussed and reviewed the results of the independent auditors’ examination of the financial statements.

     Based upon the Committee’s discussion with management and the independent accountants, the Committee’s review of the representation of management, and the report of the independent accountants to the Committee, the Committee recommended that the Board of Directors include the audited financial statements in the Company’s Form 10-K filed with the Securities and Exchange Commission for the year ended September 30, 2010.

Members of the Audit Committee:

Chad M. Lindbloom (Chairman)
Thomas G. Hudson
Michael J. Paxton

Principal Accountant

     The Audit Committee has selected Grant Thornton LLP as our principal accountant for the fiscal year ending September 30, 2011. Representatives of Grant Thornton LLP are expected to be present at our Annual Meeting to be held on February 2, 2011. They will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

Audit Fees

     Aggregate fees billed by Grant Thornton LLP in connection with the audit of our financial statements for the years ended September 30, 2010 and 2009, and for review of our quarterly financial statements included in our reports on Form 10-Q during each year totaled $163,000 and $166,000, respectively. No leased personnel were utilized by Grant Thornton LLP in connection with any audit services provided to us.

Audit Related Fees

     Aggregate fees billed by Grant Thornton LLP for assurance related services during the fiscal years ended September 30, 2010 and 2009 totaled $116,000 and $17,000, respectively. Fees in fiscal 2010 include audit services related to an acquisition and the Company’s 401k plan. Fees in fiscal 2009 relate to the audit of the Company’s 401k plan.

Tax Fees

     There were no fees billed by Grant Thornton LLP for tax compliance, advisory and planning services during the fiscal years ended September 30, 2010 and 2009 .

All Other Fees

     There were no fees billed by Grant Thornton LLP during the fiscal years ended September 30, 2010 and 2009 for products and services provided other than those disclosed above.

Auditor Fees Pre-approval Policy

     The Audit Committee has adopted a formal policy concerning approval of audit and non-audit services to be provided by the independent auditor to the Company. The policy requires that all services to be provided by Grant Thornton LLP, the Company’s independent auditor, including audit services and permitted audit-related and non-audit services in excess of $10,000, must be pre-approved by the Committee. The Committee approved all audit and non-audit services provided by Grant Thornton LLP during fiscal 2010.

EQUITY COMPENSATION PLAN INFORMATION

     The Company maintains the 2002 Long-Term Incentive and Stock Option Plan and the 2007 Long-Term Incentive and Stock Option Plan. Set forth below is information as of September 30, 2010 regarding shares that may be issued under the plans.

Number of

Securities

Number of

Remaining

Securities to be

Available for

Issued upon

Weighted Average

Future Issuance

Exercise of

Exercise Price of

Under Equity

Outstanding

Outstanding

Compensation

Plan Category

Options

Options

Plans

Equity compensation plans approved by security holders(1)

2,036,931

$

3.43

535,954

Equity compensation not approved by security holders

190,000

$

4.25

—

Total

2,226,931

$

3.55

535,954

PROPOSALS FOR FISCAL 2011 ANNUAL MEETING

     We currently anticipate that the next annual meeting, for the fiscal year ending September 30, 2011 (the “2012 Annual Meeting”) will be held on or around February 8, 2012. Under the SEC rules, if a stockholder wants us to include a proposal in our proxy statement and proxy card for our 2011 Annual Meeting, the proposal must be received by us no later than August 18, 2011, to be considered for inclusion in the proxy statement and proxy card for that meeting.

     Pursuant to Section 2.11 of our Bylaws, any other proposals to be brought before the 2012 Annual Meeting must be received no later than November 4, 2011 and provide the information required under Section 2.11 of our Bylaws.

     In addition, pursuant to the rules of the Securities and Exchange Commission, proxies solicited by our management for the 2012 Annual Meeting may grant management the authority to vote in its discretion on any proposal to be submitted by a shareholder otherwise than through inclusion in the proxy statement for the 2012 Annual Meeting, unless we have received notice of the shareholder proposal on or before December 1, 2011.

XATA CORPORATION

ANNUAL MEETING OF SHAREHOLDERS

Wednesday, February 2, 2011

3:00 P.M.

Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota

XATA CORPORATION
965 Prairie Center Drive
Eden Prairie MN 55344		PROXY

This proxy is solicited on behalf of the Board of Directors.

     The undersigned hereby appoints each of John J. Coughlan and Mark E. Ties as proxy, with full power of substitution, to vote all of the shares of Common Stock which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders of XATA Corporation (the “Company”) to be held Wednesday February 2, 2011, at the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota, at 3:00 p.m. or at any adjournment thereof, upon any and all matters that may properly come before the meeting or any adjournment thereof, hereby revoking all former proxies.

     THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES LISTED IN PROPOSAL 1, “FOR” PROPOSAL 2, “2 YEARS” FOR PROPOSAL 3, AND IN THE DISCRETION OF THE PROXY HOLDER ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

     All common stock and preferred stock of the Company held by you will be voted in each class and series for which such stock is entitled to vote as directed in your proxy.

See reverse for voting instructions

Please detach here

TO VOTE BY MAIL AS THE BOARD OF DIRECTORS
RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN,
DATE, AND RETURN THIS PROXY CARD

The Board of Directors Recommends a Vote FOR all nominees.

1.  Election of Directors duly		01  John J. Coughlan		06  Michael J. Paxton
nominated:		02  Thomas G. Hudson		07  Bharat S. Vedak
		03  Roger W. Kleppe		08  Karen T. Beckwith
		04  Chad M. Lindbloom		09  Donald R. Dixon *
		05  Christopher P. Marshall

o   FOR all nominees (except as marked)		o   Vote WITHHELD from all nominees

^* Donald R. Dixon is being voted on solely by the holders of the Series B Preferred Stock of the company.

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)

2.

To approve the advisory (non-binding) resolution related to the Company’s executive officer compensation as disclosed in the proxy statement for this meeting:

o   FOR		o   AGAINST		o   ABSTAIN

3.

Advisory (non-binding) vote on the desired frequency of seeking approval of the Company’s executive officer compensation:

o   1 YEAR		o   2 YEARS		o   3 YEARS		o   ABSTAIN

4.

The authority to vote, in his discretion, on all other business that may properly come before the meeting.

		Attending Meeting? Mark Box  o
Address change? Mark Box  o Indicate changes below:		Dated: ____________, 20___
		Signature(s) in Box
		PLEASE SIGN exactly as name appears below. When shares are held by joint tenants, both should sign. If signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or authorized officer. If partnership, please sign in partnership name by an authorized person.
		PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.

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