Exhibit 10.1


 


MANAGEMENT COMPENSATION AGREEMENT


 


THIS MANAGEMENT
COMPENSATION AGREEMENT (“Agreement”) is effective October 1, 2004, (“Effective
Date”) by and between MAIR Holdings, Inc.,
a Minnesota corporation, (“the Company”),
and Paul F. Foley, 19 Tall Pines
Drive, Weston, CT 06883, (“Executive”).


 


ARTICLE 1


 


EMPLOYMENT


 


1.01                           Employment.  The Company hereby agrees to continue to
employ Executive as its President and Chief Executive Officer and Executive
hereby accepts and agrees to such employment from and after the Effective Date
of this Agreement based upon the terms and conditions stated herein.  During the Term of Executive’s employment, he
shall be eligible to receive the compensation and benefits as set forth in Article 3
of this Agreement.


 


1.02                           Duties.  Executive shall generally have the authority,
responsibilities, and perform such duties as are customarily held and performed
by the President and Chief Executive Officer in comparable companies,
including, among other things, developing and implementing the Company’s
strategic and operational plans, recruiting and developing strong senior
management, allocating resources to achieve the Company’s strategic and
financial objectives, establishing effective financial controls and management,
managing external and internal communications and relationships, and ensuring a
strong relationship with the Company’s Board of Directors (“Board”).  Executive shall also render such additional
services and duties as may reasonably be requested of Executive from time to
time by the Board.


 


1.03                           Best
Efforts.  Executive agrees that he
will devote his full time and attention to, and at all times faithfully,
industriously, loyally, and to the best of his ability, experience, and talents
perform, all of the duties that may be required of and from him pursuant to the
express and implicit terms of this Agreement, to the reasonable satisfaction of
the Company.


 


1.04                           Reporting.  Executive shall report to the Board, and any
committee thereof as the Board shall direct, and shall generally be subject to
the direction, orders and advice of the Board.


 


ARTICLE 2


 


TERM OF EMPLOYMENT AND AGREEMENT


 


2.01                           Term.  The Term of this Agreement and Executive’s
employment with the Company hereunder shall be four (4) years from the
Effective Date through September 30, 2008, subject to the provisions set
forth in Articles 4, 5, and 6 of this Agreement.


 





















 


ARTICLE 3


 


COMPENSATION AND BENEFITS


 


3.01                           Base
Salary.  Executive will be paid an
annualized base salary of Three Hundred Fifty Thousand and no/100 Dollars
($350,000.00).  Executive’s base salary
shall be payable in equal semi-monthly installments pursuant to the Company’s
normal payroll procedures and dates and subject to applicable withholdings.


 


3.02                           Incentive
Bonus.  Executive shall be eligible
to receive annual discretionary incentive bonus compensation in an amount up to
100% of Executive’s annualized base salary, based upon achievement of personal
and overall Company goals as are determined and approved by the Board’s
Compensation Committee (“Compensation Committee”).  The payment schedule of any such bonus
and the target goals may be changed within the Compensation Committee’s
discretion.  Any dispute between
Executive and the Company as to the amount of, or entitlement to, any bonus
shall be promptly addressed by the Compensation Committee.


 


3.03                           Special
One-Time Bonus.  Upon execution of
this Agreement, and conditioned on Executive remaining employed by the Company
throughout the four-year Term of this Agreement, Executive will be paid a
Special One-Time Bonus of Five Hundred Thousand and no/100 Dollars
($500,000.00), less applicable withholdings. 
Subject to the provisions of Articles 5 and 6 of this Agreement,
Executive agrees that if his employment terminates during the Term pursuant to Section 4.01
or Section 4.05 hereof, he will be obligated to repay to the Company a
portion of the Special One-Time Bonus according to the following schedule:


 


	
  Period In Which 

  Termination Occurs

  	
   

  	
  Amount of 

  Repayment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  From the Effective Date through the first
  anniversary of the Effective Date

  	
   

  	
  $

  	
  200,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  From the first day following the first anniversary
  of the Effective Date through the second anniversary of the Effective Date

  	
   

  	
  $

  	
  150,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  From the first day following the second anniversary
  of the Effective Date through the third anniversary of the Effective Date

  	
   

  	
  $

  	
  100,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  From the first day following the third anniversary
  of the Effective Date through the fourth anniversary of the Effective Date

  	
   

  	
  $

  	
  50,000.00

  	
   

  



 


Executive shall
repay such amount to the Company within one (1) month after termination of his
employment.  Executive agrees that,
subject to applicable law, the Company may offset any amounts owing by
Executive under this Section 3.03 against any amount owed by the Company
to Executive at the time of separation.


 


2





















 


3.04                           Vesting
Retention Bonus.  Conditioned upon
Executive remaining employed by the Company during the four-year Term of this
Agreement, Executive will be paid a Vesting Retention Bonus of Four Hundred
Thousand and no/100 Dollars ($400,000.00), subject to applicable
withholdings.  If Executive remains then
employed by the Company, this Vesting Retention Bonus shall vest and be paid in
three installments as follows: $100,000.00 upon the second anniversary of the
Effective Date of this Agreement; $100,000.00 upon the third anniversary of the
Effective Date of this Agreement; and $200,000.00 upon the fourth anniversary
of the Effective Date of this Agreement. 
Subject to the provisions of Articles 5 and 6 of this Agreement, if
Executive’s employment terminates prior to conclusion of the Term of this
Agreement, any unvested portion of this Vesting Retention Bonus shall be
unearned and unpaid.


 


3.05                           Fringe
Benefits.  Executive shall be
eligible to receive such fringe benefits as are, and may be, made available to
other senior executive employees of the Company from time to time in the
exclusive discretion of the Compensation Committee.  Such benefits may include, but are not
limited to, a medical and dental plan, short term disability plan, long term
disability plan, supplemental disability insurance, life insurance plan,
supplemental executive life insurance plan, and qualified and nonqualified
401(k) plans.  The Company may, without
any prior notice, discontinue or modify any benefit already provided or as may
be provided in the future, within the exclusive discretion of the Compensation
Committee, only if such benefits are uniformly discontinued or modified for all
senior executives of the Company.


 


3.06                           Vacation,
Holidays and Other Leaves of Absence. 
Executive shall be eligible for vacation, holidays, sick leave and all
other leaves of absence in accordance with the Company’s stated standard
personnel policies.


 


3.07                           Business
Expenses.  The Company shall
reimburse Executive, in accordance with its policies and procedures in effect
from time to time, for all reasonable out-of-pocket business expenses which are
incurred by Executive in connection with the performance by him of his duties
hereunder.


 


3.08                           Living
Expense Allowance.  The Company shall
provide Executive with an annual living expense allowance in the amount of
$75,000.00 (Seventy-Five Thousand and No/100 Dollars), so long as Executive
maintains his legal residence in Westin, Connecticut or another location
similarly beyond a reasonable commuting distance from the Company’s
headquarters.


 


3.09                           Flight
Benefits.  Executive shall be
eligible to receive flight passes for business or personal use entitling
Executive, his spouse and dependents under age 21 to travel without charge on
Mesaba and Northwest Airlines at the highest level of priority then available
to senior executives of the Company. 
Executive acknowledges that the Company cannot provide him any assurance
that Northwest Airlines will continue to provide flight benefits to the Company’s
senior executives.


 


3.10                           Stock
Based Awards.  Pursuant to the terms
and conditions of the Company’s 2000 Stock Incentive Plan or such successor
plan as may then be in effect, Executive shall be eligible to receive, and the
Compensation Committee in its sole discretion may from time to time 


 


3





















 


grant,
options to purchase shares of the Company’s common stock, awards of restricted
stock, stock appreciation rights or other stock based awards.


 


ARTICLE 4


 


TERMINATION


 


4.01                           By The Executive. 
Executive may resign his position and terminate his employment and this
Agreement by giving the Board one (1) month written notice of his intention to
resign.  If requested by the Board,
Executive agrees to cooperate in training his successor until his actual
separation date.  In the event of such
resignation, and subject to the provisions of Article 6 of this Agreement,
the only compensation payable to Executive shall be his base salary earned, and
any installment of his Vesting Retention Bonus vested under Section 3.04,
as of the effective date of his resignation. 
Executive shall not be entitled to or paid any pro-rated or other
portion of any bonus under Section 3.02.


 


4.02                           By The Company Upon Executive’s Inability to Perform.  The Company may, subject to applicable law,
terminate this Agreement and Executive’s employment by giving Executive one (1)
month written notice if Executive, due to sickness or injury, is prevented from
carrying out his essential job functions for a period of six (6) months or
longer.  In the event of such
termination, the only compensation payable to Executive shall be his base
salary earned, and any installment of his Vesting Retention Bonus vested under Section 3.04,
as of the effective date of his termination; provided, however, that Executive
may, as the Compensation Committee may in its discretion determine, receive a
pro-rated or other portion of any bonus to which Executive was otherwise
eligible under Section 3.02.


 


4.03                           Upon
Executive’s Death.  Executive’s
employment and this Agreement will be deemed terminated upon the death of the
Executive.  In the event of such
termination, the only compensation payable to Executive shall be his base
salary earned, and any installment of his Vesting Retention Bonus vested under Section 3.04,
as of the effective date of his termination; provided, however, that Executive’s
estate may, as the Compensation Committee may in its discretion determine,
receive a pro-rated or other portion of any bonus to which Executive was
otherwise eligible under Section 3.02.


 


4.04                           By The Company Without Cause.  The Company may, subject to the provisions of
Article 5 of this Agreement, terminate this Agreement and Executive’s
employment by giving Executive one (1) month written notice.


 


4.05                           By The Company For Cause. 
Any other provision of this Agreement notwithstanding, the Company may
terminate Executive’s employment and this Agreement without notice if the
termination is based on any of the following events, which shall constitute
Cause:


 


(a)                                  Executive
embezzles funds or otherwise misappropriates the assets of the Company, is
convicted in a court of law of or pleads guilty or no contest to a felony or
any criminal activity involving dishonesty, fraud, breach of trust or involving
money or property of 


 


4





















 


the
Company, or engages in any public conduct that has a material detrimental effect
on the Company; or


 


(b)                                 Executive
materially (i) breaches any of the provisions of this Agreement or (ii) fails
to perform Executive’s duties and responsibilities consistent with the lawful
directions of the Board; provided, however, that the Company shall first have
given Executive written notice of his breach of the terms of this Agreement or
failure to perform and Executive shall have failed to remedy such violation
within 30 calendar days of the receipt of such notice.


 


In the event of such
termination, and notwithstanding any contrary provision otherwise stated, the
only compensation payable to Executive shall be Executive’s base salary earned
through the date of termination.


 


4.06                           Resignation
of Officer and Director Status.  Upon
termination of employment hereunder for any reason, Executive shall be deemed
to have resigned from all employment, officer and director positions he then
holds with the Company or with any affiliated entity.


 


4.07                           Non-disparagement.  Upon termination of employment hereunder for
any reason, Executive agrees that he shall not disparage or defame the Company,
its directors, officers, employees, services or products.  The provisions of this Section 4.07
shall survive termination of this Agreement indefinitely.


 


4.08                           Cooperation.  Upon termination of employment hereunder for
any reason, Executive agrees to be reasonably available for consultation with
and provide assistance to Company representatives with respect to matters and
issues within Executive’s job responsibilities or knowledge during Executive’s
employment.  This reasonable cooperation
will include without limitation transfer and identification of all business
files and status reports on matters under Executive’s responsibility.  Executive also agrees that he shall reasonably
assist the Company with any litigation brought by or against the Company
involving matters occurring during the period of his employment hereunder.  Similarly, Executive agrees that he will not
voluntarily assist any third party regarding claims or litigation involving the
Company.  The provisions of this Section 4.08
shall survive termination of this Agreement indefinitely.


 


ARTICLE 5


 


SEVERANCE


 


5.01                           Termination
Prior to Completion of the Term.  If
the Company terminates Executive’s employment without Cause prior to completion
of the Term pursuant to Section 4.04 above,  the
Company shall:


 


(a)                                  pay
Executive (i) his base salary earned through the effective date of termination
and (ii) a pro-rated or other portion of any bonus to which Executive was
otherwise eligible under Section 3.02;


 


(b)                                 pay Executive as severance pay, each month for twelve (12)
consecutive months following Executive’s termination, two (2) times Executive’s
monthly base salary in 


 


5





















 


effect
at the time of separation, less applicable withholdings, beginning one (1)
month after termination;


 


(c)                                  if
Executive timely elects to continue Executive’s group health and dental
insurance coverage pursuant to applicable COBRA/continuation law and the terms
of the respective benefit plans, continue to pay on Executive’s behalf the
Company’s customary share of premiums for such coverage for the lesser of
eighteen (18) months or such time as Executive’s COBRA/continuation rights
expire;


 


(d)                                 waive its right to the repayment provision set forth in Section 3.03
regarding Executive’s Special One-Time Bonus;


 


(e)                                  pay Executive the remainder of his Vesting Retention Bonus
set forth in Section 3.04 as though fully vested;


 


(f)                                    cause
all unvested stock options held by Executive to immediately vest and be
exercisable for a period to be determined by the Compensation Committee; and


 


(g)                                 continue Executive’s flight benefits under Section 3.09
for the twelve (12) month period immediately following the termination of
Executive’s employment.


 


5.02                           Termination
On or After Completion of the Term. 
If Executive (i) is terminated without Cause upon completion of the Term
or (ii) remains employed by the Company upon completion of the Term and
thereafter is terminated without Cause,  the Company
shall:


 


(a)                                  pay
Executive (i) his base salary earned through the effective date of termination
and (ii) a pro-rated or other portion of any bonus to which Executive was
otherwise eligible under Section 3.02; and


 


(b)                                 pay
Executive as severance pay, each month for twelve (12) consecutive months
following Executive’s termination, two (2) times Executive’s monthly base
salary in effect at the time of separation, less applicable withholdings,
beginning one (1) month after termination;


 


(c)                                  if
Executive timely elects to continue Executive’s group health and dental
insurance coverage pursuant to applicable COBRA/continuation law and the terms
of the respective benefit plans, continue to pay on Executive’s behalf the
Company’s customary share of premiums for such coverage for the lesser of
eighteen (18) months or such time as Executive’s COBRA/continuation rights
expire;


 


(d)                                 cause
all unvested stock options held by Executive to immediately vest and be
exercisable for a period to be determined by the Compensation Committee; and


 


(e)                                  continue Executive’s flight benefits under Section 3.09
for the twelve (12) month period immediately following the termination of
Executive’s employment.


 


6





















 


5.03                           No
Other Payments.  Executive agrees
that the payment of severance under this Article 5 shall be in lieu of any
other compensation to which he might claim entitlement as a result of the
termination of his employment.


 


5.04                           Executive
Must Sign Release.  Executive
understands and agrees that, notwithstanding any other provision of this
Agreement, the Company’s obligation to make payment under this Article 5
is expressly conditioned upon Executive signing and delivering to the Company a
release of claims in the form attached hereto as Appendix A, as may be modified
in conformance with applicable law.  No
payments shall be made until Executive has signed the release and any
rescission periods stated therein have expired without any such rescission by
Executive.


 


5.05                           Survival.  The payment obligations of this Article 5
resulting from Executive’s termination under Section 5.02 shall survive
termination of this Agreement.


 


ARTICLE 6


 


CHANGE IN CONTROL


 


6.01                           Change
In Control Severance Compensation.  If within one (1) year after a Change in
Control, Executive resigns his employment pursuant to Section 4.01, then
the Company, its successors or assigns, shall, in lieu of any severance pay
under Article 5 of this Agreement:


 


(a)                                  pay
Executive (i) his base salary earned through the effective date of termination
and (ii) a pro-rated or other portion of any bonus to which Executive was
otherwise eligible under Section 3.02;


 


(b)                                 pay
Executive as severance pay, each month for twelve (12) consecutive months
following his termination, two (2) times Executive’s monthly base salary in
effect at the time of separation, less applicable withholdings, beginning one
(1) month after termination;


 


(c)                                  if
Executive timely elects to continue Executive’s group health and dental
insurance coverage pursuant to applicable COBRA/continuation law and the terms
of the respective benefit plans, continue to pay on Executive’s behalf the
Company’s customary share of premiums for such coverage for the lesser of
eighteen (18) months or such time as Executive’s COBRA/continuation rights
expire;


 


(d)                                 waive its right to the repayment provision set forth in Section 3.03
regarding Executive’s Special One-Time Bonus;


 


(e)                                  pay Executive the remainder of his Vesting Retention Bonus
set forth in Section 3.04 as though fully vested;


 


(f)                                    cause
all unvested stock options held by Executive to immediately vest and be
exercisable for a period to be determined by the Compensation Committee; and


 


7





















 


(g)                                 continue Executive’s flight benefits under Section 3.09
for the twelve (12) month period immediately following the termination of
Executive’s employment.


 


6.02                           Change In Control Defined.  For the purposes of this Agreement, “Change
in Control” shall mean any one or more of the following that occurs during the
Term of this Agreement:


 


(a)                                  The
shareholders of the Company approve any consolidation, merger, or
reorganization of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which the outstanding voting securities or
other capital interests of the Company would be converted into cash,
securities, or other property, other  than a consolidation,
merger, or reorganization in which 75% or more of the outstanding voting and
equity securities or other capital interests of the surviving, resulting, or
acquiring corporation or other legal entity are owned immediately after such
event, by the holders of the Company’s voting securities in substantially
proportionate amounts to their respective ownership of voting securities of the
Company immediately prior to such event;


 


(b)                                 The
Company sells, leases, exchanges, or transfers (in one transaction or a series
of transactions) all or substantially all of its business or assets to any
other corporation or other legal entity of which less than 75% of the
outstanding voting and equity securities or other capital interests of such
corporation or other legal entity in the aggregate is owned directly or
indirectly, immediately after such sale, by holders of the Company’s voting
securities, in substantially proportionate amounts to their respective
ownership of voting securities of the Company immediately prior to such sale;


 


(c)                                  The
shareholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company;


 


(d)                                 Any
person other than (i) the Company, (ii) a subsidiary of the Company, (iii) any
employee benefit plan sponsored by the Company, or (iv) Northwest Airlines
Corporation or any “affiliate” or “associate” of Northwest Airlines Corporation
as such terms are defined under the Securities Exchange Act of 1934 (the “Exchange
Act”), has become the beneficial owner (as defined under Rule 13d-3 or any
successor rule) of 25% or more of the combined voting power of the Company’s then
outstanding voting securities ordinarily having the right to vote in the
election or directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases, whether or not directly from the
Company, or otherwise;


 


(e)                                  Northwest
Airlines Corporation, or any “affiliate” or “associate” (as such terms are
defined under the Exchange Act) of Northwest Airlines Corporation, has become
the beneficial owner (as defined under Rule 13d-3 or any successor rule) of 51%
or more of the combined voting power of the Company’s then outstanding voting
securities ordinarily having the right to vote in the election of directors as
a result of a tender or exchange offer, open market purchases, privately
negotiated purchases, whether or not directly from the Company, or otherwise;
or


 


8





















 


(f)                                    At
any time during any period of 24 consecutive months, individuals who at the
beginning of any such 24-month period constitute the directors of the Company
cease for any reason to constitute at least a majority of the directors of the
Company, unless the election or the nomination for election by the Company’s
shareholders of each new director of the Company was approved by (i) a
nominating committee of the Board that is independent within the meaning of the
Qualitative Listing Requirements for Nasdaq National Market Issuers or (ii) a
vote of at least three-fourths of the directors of the corporation then still
in office who were directors of the Company at the beginning of any such
24-month period.


 


6.03                           Successors
Or Assigns Defined.  For purposes of
this Article 6, “successors or assigns” shall mean a corporation or other
entity or person acquiring all or substantially all the stock, assets, and/or
business of the Company whether by agreement, operation of law, or otherwise.


 


6.04                           No
Other Payments.  Executive agrees
that the payment of Change in Control severance benefits under this Article 6
shall be in lieu of any other compensation to which he might claim entitlement
as a result of the termination of his employment prior to completion of the
Term.


 


6.05                           Executive
Must Sign Release.  Executive
understands and agrees that, notwithstanding any other provision of this
Agreement, the Company’s obligation to make payment under this Article 6
is expressly conditioned upon Executive signing and delivering to the Company a
release of claims in the form attached hereto as Appendix A, as may be modified
in conformance with applicable law.  No
payments shall be made until Executive has signed the release and any
rescission periods stated therein have expired without any such rescission by
Executive.


 


6.06                           Section 280G
Parachute Payments.  If the Change in
Control severance compensation under this Article 6, either alone or
together with other payments to Executive from the Company or its subsidiaries,
would constitute a “parachute payment” as defined in Internal Revenue Code (“Code”)
Section 280G, such severance compensation shall be reduced to the largest
amount as will result in no portion of the severance compensation payments
under this Article 6 being subject to the excise tax imposed by the
provisions of Code Section 4999 or being disallowed as deductions to the
Company under Code Section 280G. 
The determination of any reduction in the severance compensation
payments under this Article 6 pursuant to the foregoing provision shall be
made by the Company’s independent public accountants in good faith after
consultation with the Company and Executive, and such determination shall be
conclusive and binding.  The Company
shall cooperate in good faith with the independent public accountants and
Executive in making such determination and in providing the necessary
information for this purpose.


 


6.07                           Survival.  The payment obligations of this Article 6
resulting from Executive’s resignation following a Change in Control shall
survive termination of this Agreement.


 


9





















 


ARTICLE 7


 


NONDISCLOSURE


 


7.01                           Disclosure
Prohibited.  Except as permitted or
directed by the Company or as may be required in the proper discharge of
Executive’s employment hereunder, Executive shall not, during the Term or at
any time thereafter, divulge, furnish or make accessible to anyone or use in
any way any confidential, trade secret, privileged or proprietary information
of the Company or its subsidiaries, including without limitation, whether or
not reduced to writing, customer lists, customer files or information, planning
and financial information, contracts, sales and marketing information, business
strategy or opportunities for new or developing business, which Executive has
prepared, acquired or become acquainted with during his employment by the
Company.  Executive acknowledges that the
above-described knowledge or information is the property of the Company or its
subsidiaries that constitutes a unique and valuable asset and represents a
substantial investment by the Company or its subsidiaries, and that any
disclosure or other use of such knowledge or information, other than for the
sole benefit of the Company, would be wrongful and would cause irreparable harm
to the Company.  Executive agrees to at
all times maintain the confidentiality of such knowledge or information, to
refrain from any acts or omissions that would reduce its value to the Company
or its subsidiaries, and to take and comply with reasonable security measures
to prevent any accidental or intentional disclosure or misappropriation.  Upon termination of Executive’s employment
for any reason, Executive shall promptly return to the Company all such
confidential, trade secret, privileged or proprietary information, including
all copies thereof, then in Executive’s possession, control or influence,
whether prepared by Executive or others.


 


7.02                           Public
Information.  The foregoing
obligations of confidentiality shall not apply to any knowledge or information
the entirety of which is published or becomes generally publicly known, other
than as a direct or indirect result of the breach of this Agreement by
Executive or a breach of a confidentiality obligation owed to the Company by
any third party.


 


7.03                           Remedies
For Breach. 
In the event of a breach or threatened breach by Executive of the
provisions of this Article 7, the Company shall be entitled to an
injunction restraining Executive from directly or indirectly disclosing,
disseminating, lecturing upon, publishing or using such confidential, trade
secret, privileged or proprietary information (whether in whole or in part) and
restraining Executive from rendering any services or participating with any
person, firm, corporation, association or other entity to whom such knowledge
or information (whether in whole or in part) has been disclosed, without the
posting of a bond or other security. 
Nothing herein shall be construed as prohibiting the Company from
pursuing any other equitable or legal remedies available to it for such breach
or threatened breach, including the recovery of damages from Executive and
suspension or termination of the severance payments being made to the Executive
under Articles 5 or 6.  Executive and the
Company agree that in the event of a disputed proceeding regarding Executive’s
compliance with the provisions of this Article 7, the prevailing party
shall be entitled to recover his or its costs of litigation and reasonable
attorney fees incurred as a result.


 


10





















 


7.04                           Disciplinary
Action.  The Executive understands
and agrees that any violation of this Article 7 while employed by the
Company may result in immediate disciplinary action by the Company, including
termination of employment pursuant to Section 4.05 hereof.


 


7.05                           Survival.  The provisions of this Article 7 shall
survive termination of this Agreement indefinitely.


 


ARTICLE 8


 


NONCOMPETITION AND
NON-RECRUITMENT


 


8.01                           Bases
For Restriction. 
The Company and Executive recognize and agree that: (i) Executive’s
services are of special, unique and extraordinary value to the Company, (ii)
Executive has received, and will in the future receive, substantial amounts of
highly confidential and proprietary information concerning the Company, its
business, customers and employees; and (iii) provision for non-competition and
non-recruitment obligations by Executive is critical to the Company’s continued
economic well-being and protection of the Company’s confidential and
proprietary business information.  In
light of these considerations, this Article 8 sets forth the terms and
conditions of Executive’s obligations of non-competition and non-recruitment
during the Term of, and subsequent to, the termination of this Agreement and/or
Executive’s employment for any reason.


 


8.02                           Noncompetition
Agreement.  Unless the obligation is
waived or limited by the Company as set forth herein, Executive agrees that
during the Term of Executive’s employment pursuant to this Agreement and for a
period of twenty-four (24) months thereafter, Executive will not directly or
indirectly engage in or be interested in any competitive business which offers,
markets or sells its services or products within the territory in which the
Company and its subsidiaries engage, or actively propose to engage, in business
at the time of Executive’s termination. 
Executive shall be deemed to be engaged in or interested in a business
if Executive acts as a stockholder, director, officer, employee, salesman,
sales representative, agent, partner, individual proprietor, consultant or
otherwise, but not if such interest is limited solely to the ownership of 2% or
less of the equity or debt securities of any class of a corporation whose
shares are listed for trading on a national securities exchange or traded in
the over-the-counter market.  Among all
other competitive actions that are likewise restricted, Executive shall not
cause or attempt to cause any existing or prospective customer, vendor or
account who then has a relationship with the Company for current or prospective
business to divert, terminate, limit or in any adverse manner modify, or fail
to enter into any actual or potential business with the Company.


 


8.03                           Company
Waiver.  At its sole option, the
Company may, by express written notice to Executive, waive or limit the time
and/or geographic area in which Executive cannot engage in competitive activity
or the scope of such competitive activity.


 


8.04                           Non-recruitment
Agreement.  For a period of
twenty-four (24) months following termination of Executive’s employment for any
reason, Executive will not initiate or actively participate in any other
employer’s recruitment, solicitation, or hiring of any of the Company’s
employees.


 


11





















 


8.05                           Remedies
For Breach. 
Executive agrees that breach by him of the provisions of this Article 8
will cause the Company irreparable harm that is not fully remedied by monetary
damages.  In the event of a breach or
threatened breach by Executive of the provisions of this Article 8, the
Company shall be entitled to an injunction restraining Executive from directly
or indirectly competing or recruiting as prohibited herein, without posting a
bond or other security.  Nothing herein
shall be construed as prohibiting the Company from pursuing any other equitable
or legal remedies available to it for such breach or threatened breach,
including the recovery of damages from Executive and suspension or termination
of the severance payments being made to the Executive under Articles 5 or
6.  Executive and the Company agree that
in event of a disputed proceeding regarding Executive’s compliance with the
provisions of this Article 8, the prevailing party shall be entitled to
recover his or its costs of litigation and reasonable attorney fees incurred as
a result.  To the extent that the
Executive is in violation of any of the provisions contained in this Article 8,
the applicable period shall be tolled during such period of non-compliance, the
intent of which is to provide the Company with the full period of compliance as
stated herein.


 


8.06                           Disciplinary
Action.  The Executive understands
and agrees that any violation of this Article 8 while employed by the
Company may result in immediate disciplinary action by the Company, including
termination of employment pursuant to Section 4.05 hereof.


 


8.07                           Survival.  The obligations contained in this Article 8
shall survive the termination of this Agreement indefinitely.


 


ARTICLE 9


 


INTELLECTUAL PROPERTY


 


9.01                           Disclosure
and Assignment.  Executive will
promptly disclose in writing to the Company complete information concerning
each and every invention, discovery, improvement, device, design, apparatus,
practice, process, method or product, whether patentable or copyrightable or
not, made, developed, perfected, devised, conceived or first reduced to
practice by Executive, either solely or in collaboration with others, during the
period of Executive’s employment hereunder, whether or not during regular
working hours, relating either directly or indirectly to the business,
services, practices or techniques of the Company or its subsidiaries
(hereinafter referred to as “Developments”). 
Executive, to the extent that he has the legal right to do so, hereby
acknowledges that any and all of such Developments are the property of the
Company and hereby assigns and agrees to assign to the Company any and all of
Executive’s right, title and interest in and to any and all of such
Developments.


 


9.02                           Exclusion
Under Minnesota Law.  The provisions of Section 9.01 shall not
apply to any Development meeting the following conditions: (a) such Development
was developed entirely on Executive’s own time; and (b) such Development was
made without the use of any the Company’s equipment, supplies, facility or
trade secret information; and either (c) such Development does not result from
any work performed by Executive for the Company, or (d) such Development does
not relate (i) directly to the business of the Company or (ii) to the Company’s
actual or demonstrably anticipated research or development.


 


12





















 


9.03                           Assist
the Company.  Upon request and
whether during the period of Executive’s employment hereunder or thereafter,
Executive will do all lawful acts, including, but not limited to, the execution
of papers and lawful oaths and the giving of testimony, that in the opinion of
the Company, its successors and assigns, may be necessary or desirable in
obtaining, sustaining, reissuing, extending and enforcing United States and
foreign letters patent, including, but not limited to, design patents, or other
applicable registrations, on any and all of such Developments, and for
perfecting, affirming and recording the Company’s complete ownership and title
thereto, and to cooperate otherwise in all proceedings and matters relating
thereto.  Executive will not be entitled
to compensation for acts performed under this Section 9.03 (other than
reimbursement for all reasonable expenses) if the Employee is employed by the
Company at the time such acts are performed. 
If Executive is not employed by the Company at the time such acts are
performed, and if the performance by Executive of such acts causes Executive to
lose compensation from other sources, the Company will pay Executive reasonable
compensation for such acts.


 


9.04                           Keep
and Maintain Records.  Executive will
keep reasonably complete accounts, notes, data and records of all Developments
in the manner and form requested by the Company.  Such accounts, notes, data and records shall
be the property of the Company, and, upon its request, Executive will promptly
surrender same to it or, if not previously surrendered upon its request or
otherwise, Executive will surrender the same, and all but one copy thereof, to
the Company upon the conclusion of his employment.


 


9.05                           Remedies
For Breach. 
Executive agrees that breach by him of the provisions of this Article 9
will cause the Company irreparable harm that is not fully remedied by monetary
damages.  In the event of a breach or
threatened breach by Executive of the provisions of this Article 9, the
Company shall be entitled to an injunction restraining Executive from breach of
this Article 9, without posting a bond or other security.  Nothing herein shall be construed as
prohibiting the Company from pursuing any other equitable or legal remedies
available to it for such breach or threatened breach, including the recovery of
damages from Executive and suspension or termination of the severance payments
being made to the Executive under Articles 5 or 6.  Executive and the Company agree that in event
of a disputed proceeding regarding Executive’s compliance with the provisions of
this Article 9, the prevailing party shall be entitled to recover his or
its costs of litigation and reasonable attorney fees incurred as a result.


 


9.06                           Disciplinary
Action.  The Executive understands
and agrees that any violation of this Article 9 while employed by the
Company may result in immediate disciplinary action by the Company, including
termination of employment pursuant to Section 4.05 hereof.


 


9.07                           Survival.  The obligations contained in this Article 9
shall survive the termination of this Agreement indefinitely.


 


ARTICLE 10


 


MISCELLANEOUS


 


10.01                     Governing
Law.  This Agreement shall be
governed and construed according to the laws of the State of Minnesota without
regard to conflicts of law provisions.


 


13





















 


10.02                     Interpretation.  Pursuant to its authority previously granted
and delegated by the Board, the Compensation Committee has the discretion to
interpret, determine, and apply the provisions of this Agreement.


 


10.03                     Headings.  The captions and headings contained herein
are not part of this Agreement, but are only for the convenience of the parties
and do not in any way modify or amend any of the terms, covenants or conditions
of this Agreement.


 


10.04                     Successors.  This Agreement is personal to Executive and
Executive may not assign or transfer any part of his rights or duties
hereunder, or any compensation due to him hereunder, to any other person or
entity.  This Agreement may be assigned
by the Company and the Company shall require any successors or assigns as
defined in Section 6.03 to expressly assume and agree to perform the
Company’s obligations under this Agreement.


 


10.05                     Waiver.  The waiver by the Company of the breach or
nonperformance of any provision of this Agreement by Executive will not operate
or be construed as a waiver of any future breach or nonperformance under any
such provision of this Agreement or any similar agreement with any other
employee.


 


10.06                     Modification.  Other than Executive’s stock option
agreements with the Company as in existence as of the Effective Date of this
Agreement, this Agreement supercedes and replaces any and all prior oral or
written understandings, if any, between the parties relating to the subject
matter of this Agreement, which are hereby revoked.  The parties agree that this Agreement (a) is
the entire understanding and agreement between the parties and (b) is the
complete and exclusive statement of the terms and conditions thereof, and there
are no other written or oral agreements in regard to the subject matter of this
Agreement.  This Agreement shall not be
changed or modified except by a written document signed by the parties hereto.


 


10.07                     Severability
and Blue Penciling.  To the extent
that any provision of this Agreement shall be determined to be invalid or
unenforceable as written, the validity and enforceability of the remainder of
such provision and of this Agreement shall be unaffected.  If any particular provision of this Agreement
shall be adjudicated to be invalid or unenforceable, the Company and Executive
specifically authorize the tribunal making such determination to edit the
invalid or unenforceable provision to allow this Agreement, and the provisions
thereof, to be valid and enforceable to the fullest extent allowed by law or public
policy.


 


10.08                     Notice.  Any notice required or permitted to be given
under this Agreement shall be deemed to have been delivered on the date
following the day the notice is deposited in the United States mail, certified
or registered, postage prepaid, return receipt requested, and addressed as
follows:


 


	
  If to Executive:

  	
   

  	
  Paul F. Foley

  	
   

  
	
   

  	
   

  	
  19 Tall Pines Drive

  	
   

  
	
   

  	
   

  	
  Weston, CT 06883

  	
   

  



 


or
such other address as Executive elects by giving such to the Company with not
less than 30 days advance written notice.


 


14





















 


	
  If to the Company:

  	
   

  	
  MAIR Holdings,
  Inc.

  	
   

  
	
   

  	
   

  	
  Fifth Street Towers, Suite 1725

  	
   

  
	
   

  	
   

  	
  150 South Fifth Street

  	
   

  
	
   

  	
   

  	
  Minneapolis, MN 55402

  	
   

  
	
   

  	
   

  	
  Attn: Chief Financial Officer

  	
   

  



 


or
such other address as the Company elects by giving such to Executive with not
less than 30 days advance written notice.


 


10.09                     Arbitration.  All justiciable claims and disputes arising
out of or relating to Executive’s employment relationship with the Company, or
regarding the making or interpretation of this Agreement, including any claim
of fraud in the inducement, shall be decided by binding arbitration in
accordance with the Federal Arbitration Act and the rules of the American
Arbitration Association, unless the parties mutually agree in writing
otherwise.  Among such claims and
disputes, Employee and the Company agree that, to the extent permitted by law,
all those arising out of federal, state, or local statutes, ordinances or
regulations shall be decided by such binding arbitration, including without
limitation those claims and disputes arising under the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Americans with Disabilities Act, the Employee Retirement Income
Security Act of 1974 (ERISA), the Family and Medical Leave Act, each as may
have been amended, or any state or local discrimination law including the
Minnesota Human Rights Act.  This
agreement to arbitrate does not apply to any claims Executive may have for
workers compensation or unemployment compensation benefits or to any claims the
Company may have for injunctive relief.


 


IN WITNESS WHEREOF the following parties have executed
the above instrument the day and year indicated below.


 


 


	
  MAIR HOLDINGS, INC.

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert E.
  Weil

  	
   

  	
  /s/ Paul F.
  Foley

  	
   

  
	
   

  	
  Paul F. Foley

  	
   

  
	
   

  	
  Its:

  	
  Chief Financial
  Officer

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated: October
  21, 2004

  	
  Dated: October
  21, 2004

  
						



 


15





















 


APPENDIX A


 


RELEASE


 


Definitions.  Specific terms I use in this Release have the
following meanings:


 


1.                                       “I,”
“me,” and “my” include both me and anyone who has or obtains any legal rights
or claims through me.


 


2.                                       “Company”
means MAIR Holdings, Inc., its predecessors, successors, assigns, affiliates,
subsidiaries and related entities, and all of the foregoing entities’ owners,
officers, directors, shareholders, partners, employees, agents, consultants,
representatives, attorneys, trustees, and administrators, and each of their
affiliated entities.


 


3.                                       “My
Claims” means all rights, demands, actions, and causes of action seeking any
relief of any kind, including damages, costs, liabilities, expenses and
compensation of any nature, whether for compensatory or punitive damages,
including but not limited to claims arising under the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Americans with Disabilities Act, the Employee Retirement Income
Security Act of 1974 (ERISA), the Family and Medical Leave Act, each as may
have been amended, or any state or local discrimination law including the
Minnesota Human Rights Act, and those based on wrongful discharge, breach of an
implied or express contract, promissory estoppel, emotional distress,
defamation, misrepresentation, fraud, breach of public policy, common law, good
faith and fair dealing, invasion of privacy, negligence or other breach of
duty, retaliation, harassment or any other claim that I now have or that may
later arise out of the relationship between me and the Company to date, whether
known or unknown, foreseen or unforeseen, at the time of signing this
Release.  This Release shall not affect
my rights regarding acts occurring after the date I sign this Release or my
right to challenge the enforceability of this Release.


 


Agreement
to Release My Claims. 
I am receiving certain benefits from the Company that are separately
stated in my Management Compensation Agreement. 
In exchange for those benefits and by signing this Release, I am
agreeing to give up forever all My Claims against the Company.  The benefits I am receiving is full and fair payment for the release of all My
Claims.  I acknowledge that the Company
does not owe me anything, directly or indirectly, in addition to what I will be
receiving under my Management Compensation Agreement.


 


Agreement
to Not Sue.  I
also represent that I have not and will not institute any lawsuit against or
otherwise sue the Company based on My Claims. 
If I do sue the Company regarding My Claims, I agree that this Release
shall be a total and complete bar to any recovery or relief by me.


 


No Admissions.  I agree that the Company does not admit that
it is or may be in any way responsible or legally obligated to me in any way.


 


16





















 


Consideration
of Agreement.  I
agree that the Company allowed me up to 21 days from the day I received this
Release to review it and sign it.  I
understand that the Company told me that I could consult with a lawyer prior to
signing if I wanted to.


 


Right
to Rescind.  I
understand that I may rescind (that is, cancel) this Release within seven (7)
calendar days of signing it to reinstate any claims I believe I may have under
the federal Age Discrimination in Employment Act and within fifteen (15)
calendar days of signing it to reinstate any claims I believe I may have under
the Minnesota Human Rights Act.  My
Management Compensation Agreement severance payments will not be effective or
enforceable until these rescission periods expire without my having exercised
my right to rescind.  To be effective, my
rescission, if any, must be in writing and delivered to the Company to the
attention of Chief Financial Officer, MAIR Holdings, Inc., Fifth Street Towers,
Suite 1725, 150 South Fifth Street, Minneapolis, Minnesota 55402, either by
hand or by mail within the relevant rescission period.  If sent by mail, the rescission must be (a)
postmarked within the 7-day or 15-day period, (b) properly addressed to the
Company, and (c) sent by Certified Mail, Return Receipt Requested.


 


I have read this Release
carefully and understand all its terms. 
I have had an opportunity to discuss this Release with legal counsel of
my own choosing.  I am signing this Release
voluntarily and without duress.


 


 


	
  Dated:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Paul F. Foley

  



 


17