**Exhibit10.17**

 

**ExecutionVersion**

 

**AGREEMENT**

 

**THIS AGREEMENT**(“Agreement”)dated as of April 18, 2006 between MAIR Holdings, Inc., a Minnesota corporation(“MAIR”), and UMB Bank, N.A. as trustee for the $14,000,000 KentonCounty Airport Board Special Facilities Revenue Bonds,1999 Series A (MesabaAviation, Inc. Project) (the “Trustee”).

 

**WITNESSETH:**

 

**WHEREAS**, theTrustee is the successor trustee for those certain $14,000,000 Kenton CountyAirport Board Special Facilities Revenue Bonds,1999 Series A (Mesaba Aviation,Inc. Project) (the “Bonds”) and has claims on the Bonds that areevidenced by various documents (the “Bond Documents”) including, withoutlimitation, (i) that certain Trust Indenture by and between the Kenton CountyAirport Board and Norwest Bank Minnesota, National Association, as trustee,dated as of July 1, 1999 (the “Indenture”); and (ii) that certain LeaseAgreement by and Between Kenton County Airport Board and Mesaba Aviation, Inc.dated as of July 1, 1999 (the “Lease Agreement”); and

 

**WHEREAS**, MAIRguarantees obligations of its wholly-owned subsidiary, Mesaba Aviation, Inc. (“Mesaba”)with respect to the Bond Documents pursuant to that certain Guaranty Agreementdated as of July 1, 1999 (the “Guaranty”), including, without limitationthe full and prompt payment of the principal, premium, if any, and interest,when and as the same shall become due and payable as provided in the Indentureand Mesaba’s full and prompt performance of all obligations under the LeaseAgreement, all as more fully provided for in the Guaranty; and

 

**WHEREAS**, MAIRhas been making certain payments to the Trustee since October 13, 2005, thedate on which Mesaba filed for bankruptcy protection under Chapter 11 of theUnited States Bankruptcy Code including: $91,927.61 on November 2, 2005,$91,927.55 on December 6, 2005, $91,927.61 on December 30, 2005, $91,927.61 onJanuary 31, 2006, $91,927.61 on February 27, 2006 and $91,927.61 on March 1,2006; and

 

**WHEREAS**, onFebruary 15, 2006, the Trustee declared the liability of MAIR for all sums owedto the Trustee under the Bond Documents and Guaranty to be immediately due andpayable, demanded the immediate payment in full in cash of all such sums, anddemanded arrangements for the payment of any other charges due under the Bond Documentsand Guaranty (including the Trustee’s costs of collection), all as more fullyset forth in that certain demand letter dated February 15, 2006; and

 

**WHEREAS**, theTrustee has agreed to forbear the acceleration and payment of amounts due underthe Bond Documents and Guaranty in exchange for MAIR delivering a letter ofcredit for the benefit of the Trustee and certain other agreements between theparties, and the parties have agreed to memorialize the terms and conditions oftheir agreement,

 

**NOW, THEREFORE**,in consideration of the premises and of the covenants herein contained, and forother good and valuable consideration, the receipt and adequacy of which arehereby acknowledged, the parties hereto hereby agree as follows:

 

1.             **Executionand Delivery of Letter of Credit.**Contemporaneously with theexecution of this Agreement, MAIR shall deliver to the Trustee a letter ofcredit (the “LOC”) from a bank acceptable to the Trustee (the “IssuingBank”), effective as of the date of this Agreement, in form and substanceacceptable to the Trustee, that names the Trustee as beneficiary, and insubstantially the form attached hereto. The LOC shall be in the amount of$13,110,000 representing: (i) the $13,015,000 principal amount of the Bonds asof the date of this Agreement; (ii) the approximate amount of the payments forone month

 

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described in Section 4.03(a)(y) and (a)(z) ofthe Lease Agreement; and (iii) an additional amount to cover the Trustee’scollection costs of the LOC.

 

2.             **Obligationto Maintain Letter of Credit.**From and after the date of thisAgreement, MAIR shall ensure that until all obligations required by the BondDocuments and Guaranty are indefeasibly satisfied in full, in cash, MAIR shallmaintain an LOC meeting the requirements described in this Agreement.

 

3.             **Paymentof Amounts Under Bond Documents.**From and after the date of thisAgreement, MAIR shall pay the Trustee, in cash, all amounts required under theBond Documents when and as the same would become due absent a default under anyof the Bond Documents, including, without limitation, all amounts requiredunder Section 4.03 of the Lease Agreement. MAIR shall also pay the Trustee, incash, the Trustee’s costs, attorney’s fees, charges and expenses as required bythe Bond Documents and Guaranty.

 

4.             **DollarAmount of Letter of Credit**. So long as no Event of Default (asdefined below) exists, each July 15 commencing July 15, 2006, MAIR may reducethe dollar amount of the LOC by the amount described in Schedule 4.0 (attachedto this Agreement). MAIR shall ensure that notwithstanding any provision ofthis Agreement, the dollar amount of the LOC shall at all times meet or exceedthe mandatory minimum remaining dollar amounts described in Schedule 4.0. Inthe event that any applicable LOC does not contain terms that automaticallyreduce the dollar amount of the LOC by the amount described in Schedule 4.0,then MAIR shall give the Trustee notice (in the manner described below) notless than fifteen days before any change in the dollar amount of the LOCbecomes effective. For the avoidance of doubt, the terms of the LOC shall nototherwise be changed without the Trustee’s express written consent.

 

5.             **Forbearanceof Acceleration.**In consideration for MAIR delivering the LOCand complying with the other requirements of this Agreement, for so long as noEvent of Default (as defined below) exists, the Trustee shall not demandacceleration and payment of the amounts due from MAIR to the Trustee under theBond Documents and/or Guaranty.

 

6.             **Events ofDefault.**The occurrence of any of the following events shallconstitute an “Event of Default”:

 

(a)           MAIRfails to make any payment when due to the Trustee under the Bond Documents orthe Guaranty;

 

(b)           MAIRfails to provide the Trustee satisfactory evidence that the LOC has beenrenewed within forty-five (45) days prior to any expiration of the LOC then ineffect;

 

(c)           TheLOC is not renewed within forty-five (45) days prior to any expiration of theLOC then in effect;

 

(d)           TheIssuing Bank for the LOC notifies the Trustee (in the manner required by theLOC) of the Issuing Bank’s intent not to renew the LOC;

 

(e)           AllBonds then outstanding become subject to mandatory redemption under theIndenture;

 

(f)            MAIRfails to comply with any other term of this Agreement; and/or

 

(g)           MAIRcommits any “Event of Default” as that term is used in the Guaranty.

 

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7.             **Remedieson Default**. Upon the occurrence of an Event of Default, theTrustee, may, in its sole discretion, without any further action required underthis Agreement or otherwise, and without notice to MAIR or any opportunity tocure:

 

(a)                                  make an immediate draw on the LOC;

 

(b)                                 without terminating this Agreement, treat theTrustee’s obligations to MAIR under this Agreement as terminated (whileretaining all rights against MAIR);

 

(c)                                  pursue any other remedy provided by the BondDocuments and/or the Guaranty; and/or

 

(d)                                 pursue any remedy provided by applicable law.

 

8.             **Notices.**All notices, requests, claims, demands and other communications hereundershall be in writing and shall be given (and shall be deemed to have been dulyreceived if so given) by hand delivery, facsimile (with receipt confirmed bytelephone), or by any courier service, such as Federal Express, providing proofof delivery. All communications hereunder shall be delivered to the respectiveparties at the following addresses:

 
| If  to Trustee:  |   | UMB Bank, N.A., as Trustee                           |
|------------------|--------|------------------------------------------------------|
|             |   | Corporate Trust Division                             |
|             |   | 2401 Grand Blvd., Suite  200                         |
|             |   | Kansas City, MO 64108                                |
|             |   | Facsimile: (816) 860-3029                            |
|             |   | Attention: Anthony Hawkins                           |
|             |   |                                                 |
| With  copies to: |   | Mintz,  Levin, Cohn, Ferris, Glovsky and Popeo, P.C. |
|             |   | One  Financial Center                                |
|             |   | Boston,  MA 02111                                    |
|             |   | Facsimile:  (617) 542-2241                           |
|             |   | Attention: Kevin J. Walsh                            |
|             |   |                                                 |
|             |   | And                                                  |
|             |   |                                                 |
|             |   | Oppenheimer Funds, Inc.                              |
|             |   | 350 Linden Oaks                                      |
|             |   | Rochester, NY 14625                                  |
|             |   | Attention:  Angela Uttaro                            |
|             |   |                                                 |
|             |   | And                                                  |

 

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|        |   | Merrill  Lynch Investment Managers |
|-------------|--------|------------------------------------|
|        |   | 800  Scudders Mill Road            |
|        |   | Section  1B                        |
|        |   | Plainsboro,  NJ 08536              |
|        |   | Attention: Christopher Fornal      |
|        |   |                               |
| If to MAIR: |   | MAIR  Holdings, Inc.               |
|        |   | 150  South 5th Street              |
|        |   | Suite  1360                        |
|        |   | Minneapolis,  MN 55402             |
|        |   | Facsimile:  (612) 333-0590         |
|        |   | Attention: General Counsel         |

 

orto such other address as the person to whom notice is given may have previouslyfurnished to the others in writing in the manner set forth above.

 

9.             **Assignabilityand Binding Effect.**MAIR’s obligations under this Agreementshall not be assigned absent the Trustee’s express written consent, whichconsent shall be given or refused in the Trustee’s sole discretion. ThisAgreement shall inure to the benefit of and shall be binding upon the partieshereto and their respective successors and assigns.

 

10.           **Complete Understanding;Amendment.**This Agreement constitutes the complete understandingbetween the parties with respect to the subject matter hereof and supersedesall prior agreements, whether oral or written, by or among the parties hereto. ThisAgreement shall not be altered, modified, amended or terminated except bywritten instrument signed by each of the parties hereto.

 

11.           **Governing Law; Jury Waiver.**THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THELAWS OF THE STATE OF MASSACHUSETTS WITHOUT REGARD TO ITS CONFLICT OF LAWSPRINCIPLES. THE PARTIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL INANY SUIT INVOLVING THE CONSTRUCTION OR ENFORCEMENT OF THIS AGREEMENT.

 

12.           **Section Headings.**The Section headings contained in this Agreement are for reference purposesonly and shall not affect in any way the meaning or interpretation of thisAgreement.

 

13.           **Severability.**Ifany provision of this Agreement or the application of any such provision to anyparty or circumstances shall be determined by any court of competentjurisdiction to be invalid and unenforceable to any extent, the remainder ofthis Agreement or the application of such provision to such person orcircumstances other than those to which it is so determined to be invalid andunenforceable, shall not be affected thereby, and each provision hereof shallbe validated and shall be enforced to the fullest extent permitted by law.

 

14.           **Counterparts.**ThisAgreement may be executed in one or more counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the sameagreement.

 

15.           **Representations**.MAIR represents that this Agreement has been duly authorized by MAIR and thatMAIR has full corporate power and authority to undertake the requirements ofthis Agreement. The Trustee represents that this Agreement has been dulyauthorized by the Trustee and that the Trustee has full corporate power andauthority to undertake the requirements of this Agreement.

 

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16.           **Time of the Essence**.The parties agree to strictly observe the time limits described in thisAgreement, and that time is of the essence of this Agreement.

 

17.           **Mutual Negotiation.**Each party has been represented by counsel of its choice in negotiatingthis Agreement. This Agreement shall therefore be deemed to have beennegotiated and prepared at the joint request, direction and construction of theparties, at arm’s length, with the advice and participation of counsel, andwill be interpreted in accordance with its terms without favor to any party.

 

18.           **Non-Waiver**.The parties acknowledge that notwithstanding any other provision of thisAgreement: the provisions of this Agreement reflect only the Trustee’sagreement to forebear from exercising certain rights of the Trustee againstMAIR under the Guaranty; nothing in this Agreement shall be deemed to amend ormodify the Bond Documents, or the Guaranty; and nothing in this Agreement shallrestrict any rights of the Trustee under the Bond Documents, the Guarantyand/or under applicable law against any other party. The parties further agreethat waiver by either party hereto of any breach hereunder by the other partyshall not operate as a waiver of any other breach, whether similar to ordifferent from the breach waived.

 

19.           **Cumulative Remedies**. All rightsand remedies of either party hereto are cumulative of each other and of everyother right or remedy such party may otherwise have at law or in equity, andthe exercise of one or more rights or remedies shall not prejudice or impairthe concurrent or subsequent exercise of other rights or remedies.

 

20.           **Further Acts**.If at any time after this Agreement is signed any further action by any partyto this Agreement is reasonably necessary or desirable to carry out thepurposes of this Agreement, such party shall promptly take all such necessaryor desirable action or use such party’s best efforts to cause such action to betaken.

 

**IN WITNESS WHEREOF**, the parties hereto set their hands as of the day and year first abovewritten.

 

 
| **MAIR  HOLDINGS, INC.** | **UMB BANK,  N.A., AS TRUSTEE** |
|--------------------------|---------------------------------|
|                     |                            |   |   |
|                     |                            |   |   |
| By:                      | /s/  Robert E. Weil             |   | By: | /s/  Anthony P. Hawkins |   |
|                     | Name:  Robert E. Weil           |   | Name: | Anthony  P. Hawkins |
|                     | Title:                          | Vice  President, Finance and |   | Title: | Vice  president |
|                     |                            | Chief  Financial Officer |   |   |
|                          |                                 |  |  |  |  |  |  |

 

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Schedule 4.0

 
| **Date on Which MAIR May Reduce Dollar  Amount of Letter of Credit (subject to  compliance with other requirements of the  Agreement)** | ** ** | **Dollar Amount by Which  LOC May Be Reduced** | ** ** | **Mandatory Remaining Minimum  Dollar Amount of LOC After Any  Reduction Described in Column  to Left is Taken** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| July 15, 2006                                                                                                                                                                                                                |       | $                                                                            | 235,000.00 |                                                                                                                                                                              | $          | 12,875,000.00 |   |
| July 15, 2007                                                                                                                                                                                                                |       | $                                                                            | 250,000.00 |                                                                                                                                                                              | $          | 12,625,000.00 |   |
| July 15, 2008                                                                                                                                                                                                                |       | $                                                                            | 265,000.00 |                                                                                                                                                                              | $          | 12,360,000.00 |   |
| July 15, 2009                                                                                                                                                                                                                |       | $                                                                            | 285,000.00 |                                                                                                                                                                              | $          | 12,075,000.00 |   |
| July 15, 2010                                                                                                                                                                                                                |       | $                                                                            | 305,000.00 |                                                                                                                                                                              | $          | 11,770,000.00 |   |
| July 15, 2011                                                                                                                                                                                                                |       | $                                                                            | 325,000.00 |                                                                                                                                                                              | $          | 11,445,000.00 |   |
| July 15, 2012                                                                                                                                                                                                                |       | $                                                                            | 345,000.00 |                                                                                                                                                                              | $          | 11,100,000.00 |   |
| July 15, 2013                                                                                                                                                                                                                |       | $                                                                            | 370,000.00 |                                                                                                                                                                              | $          | 10,730,000.00 |   |
| July 15, 2014                                                                                                                                                                                                                |       | $                                                                            | 395,000.00 |                                                                                                                                                                              | $          | 10,335,000.00 |   |
| July 15, 2015                                                                                                                                                                                                                |       | $                                                                            | 420,000.00 |                                                                                                                                                                              | $          | 9,915,000.00 |   |
| July 15, 2016                                                                                                                                                                                                                |       | $                                                                            | 445,000.00 |                                                                                                                                                                              | $          | 9,470,000.00 |   |
| July 15, 2017                                                                                                                                                                                                                |       | $                                                                            | 475,000.00 |                                                                                                                                                                              | $          | 8,995,000.00 |   |
| July 15, 2018                                                                                                                                                                                                                |       | $                                                                            | 510,000.00 |                                                                                                                                                                              | $          | 8,485,000.00 |   |
| July 15, 2019                                                                                                                                                                                                                |       | $                                                                            | 540,000.00 |                                                                                                                                                                              | $          | 7,945,000.00 |   |
| July 15, 2020                                                                                                                                                                                                                |       | $                                                                            | 575,000.00 |                                                                                                                                                                              | $          | 7,370,000.00 |   |
| July 15, 2021                                                                                                                                                                                                                |       | $                                                                            | 615,000.00 |                                                                                                                                                                              | $          | 6,755,000.00 |   |
| July 15, 2022                                                                                                                                                                                                                |       | $                                                                            | 655,000.00 |                                                                                                                                                                              | $          | 6,100,000.00 |   |
| July 15, 2023                                                                                                                                                                                                                |       | $                                                                            | 700,000.00 |                                                                                                                                                                              | $          | 5,400,000.00 |   |
| July 15, 2024                                                                                                                                                                                                                |       | $                                                                            | 745,000.00 |                                                                                                                                                                              | $          | 4,655,000.00 |   |
| July 15, 2025                                                                                                                                                                                                                |       | $                                                                            | 795,000.00 |                                                                                                                                                                              | $          | 3,860,000.00 |   |
| July 15, 2026                                                                                                                                                                                                                |       | $                                                                            | 850,000.00 |                                                                                                                                                                              | $          | 3,010,000.00 |   |
| July 15, 2027                                                                                                                                                                                                                |       | $                                                                            | 910,000.00 |                                                                                                                                                                              | $          | 2,100,000.00 |   |
| July 15, 2028                                                                                                                                                                                                                |       | $                                                                            | 970,000.00 |                                                                                                                                                                              | $          | 1,130,000.00 |   |

 

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