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                                                                   EXHIBIT 10.29

                        SEPARATION AGREEMENT AND RELEASE

         This is a Separation Agreement and Release ("Separation Agreement")
between XATA Corporation (the "Company") and William P. Flies ("Employee"),
providing for Employee's separation from employment with the Company.

         A. Employee and the Company are parties to an Executive Employment
         Agreement dated October 1, 2002 ("Employment Agreement") pursuant to
         which Employee serves as the Company's Chief Technology Officer ("CTO")
         and as Chairman of the Board of Directors of the Company.

         B. The Employment Agreement contains certain provisions relating to
         confidentiality, competition, enticement, inventions and related items,
         and Company property that survive the termination of Employee's
         employment with the Company. These provisions are listed in Paragraph
         15, below, and are referred to in this Separation Agreement as
         Continuing Obligations under the Employment Agreement.

         C. The Company and Employee have decided to terminate the Employment
         Agreement, except for the Continuing Obligations and the employment
         relationship that currently exists between them.

         D. The Company desires to provide Employee valuable economic benefits
         that Employee is not otherwise entitled to receive in order to assist
         Employee and to achieve an amicable and peaceful termination of
         Employee's employment with the Company.

        NOW, THEREFORE, in consideration of the foregoing premises and for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and Employee make the following Separation Agreement
and Release:

         1. Termination of Employment. Pursuant to 30 days' advance written
notice of termination under Sections 4.3 and 4.7 of the Employment Agreement,
Employee's employment with the Company will terminate effective June 20, 2003
(the "Termination Date"). As of the Termination Date, Employee will have no
further job duties with the Company. The Company will pay Employee for all
services rendered to the Company through the Termination Date, for all submitted
expenses reimbursable under the Company's policies, and for all accrued vacation
or paid time off pursuant to the Company's regular payroll schedule and
procedures. Between the date of this Separation Agreement and the Termination
Date, Employee will perform his duties under the Employment Agreement at a
location or locations other than the principal executive office of the Company
in Burnsville, Minnesota.

         2. Severance Payments. From the Termination Date through September 30,
2004, the Company will pay Employee an amount equivalent to the salary Employee
would have received if employed by the Company for the same period, including
any bonus compensation due in accordance with Exhibit A to the Employment
Agreement. Payments shall be made pursuant to the Company's regular payroll
schedule and procedures and mandatory withholdings shall be made in accordance
with documents on file with the Company as of the Termination Date. The
Company's obligation to make these severance payments is contingent upon
Employee's execution of this Separation Agreement, the expiration of the
rescission period set forth in Paragraph 9 below without a rescission and
nullification, and Employee's compliance with all terms of this Separation
Agreement and the Continuing Obligations under the Employment Agreement.

         3. Health, Dental and Life Insurance Continuation Rights and Payment of
Premiums. After the Termination Date, Employee will be provided the opportunity
for group health, dental and life insurance continuation under applicable laws.
If Employee elects to continue such group health, dental and life insurance
coverage, the Company will pay its portion of the premiums for such coverage on
the same basis as now paid by the Company through September 30, 2004, or until
Employee is eligible for such coverage through another employer, whichever is
earlier, subject to the conditions set forth in this Paragraph. After September
30, 2004, all expenses for such insurance continuation shall be paid by
Employee. This agreement of the Company to pay its portion of premiums for such
continued insurance coverage through September 30, 2004 is subject to the
execution and delivery of this Separation Agreement by Employee to the Company
and completion of the rescission period provided in Paragraph 10 below without
rescission and nullification, and is further subject to Employee's compliance
with the provisions of this Separation Agreement and the Continuing Obligations
under the Employment Agreement.

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         4. Other Benefits. Employee will receive the additional benefits listed
below. All other benefits not specifically mentioned in this Separation
Agreement and Release will cease as of the Termination Date, including, but not
limited to, any entitlement to any bonuses, incentive payments, or other
compensation or benefits.

                  (a) The Company will reimburse Employee for outplacement
         expenses up to $10,000, which amount shall be payable for services
         provided within the first 12 months following the Termination Date upon
         submission to the Company of appropriate documentation evidencing
         Employee's payment for such services.

                  (b) All unvested stock options, consisting of those options
         described on Schedule A, attached, shall be fully vested and
         exercisable, commencing July 1, 2003, without regard to whether any
         applicable performance criteria have been satisfied by Employee. Such
         options shall remain exercisable for a period of 90 days after the
         Termination Date, in accordance with the terms of said options.

                  (c) Employee shall retain all rights in his account under the
         Company's 401(k) Plan, although the Company will make no additional
         contributions.

         5. Non-Disparagement. Employee agrees that Employee will not disparage
or criticize the Company or any of its owners, shareholders, officers,
directors, managers, employees or agents in any manner. The Company agrees that
no officer of the Company shall disparage or criticize Employee in any manner.
Nothing in this paragraph shall limit the right of Employee or any
representative of the Company to give truthful testimony in a court of competent
jurisdiction or to a governmental agency, when required to do so by subpoena,
court order, law or administrative regulation.

         6. No Other Remuneration. Employee agrees that Employee is not entitled
to any remuneration from the Company, except as provided in this Separation
Agreement. This includes back pay, sick pay, vacation pay, bonuses, incentive
compensation, separation pay or any other compensation.

         7. Release of the Company. Employee releases and discharges the Company
and its past, present and future shareholders, directors, managers, officers,
employees and agents, and their affiliated entities, and its or their successors
and assigns, to the fullest extent allowable by law, of and from any and all
claims pertaining to Employee's employment with the Company or the termination
of Employee's employment, whether in law or in equity, contract or tort, known
or unknown, that arose prior to the date of execution of this Separation
Agreement by Employee. This release includes, but is not limited to, any and all
claims for payment of wages, commissions, bonuses or other compensation or
benefits; discrimination under Title VII of the Civil Rights Act of 1964, as
amended, the Americans with Disabilities Act, the Age Discrimination in
Employment Act, as amended, the Minnesota Human Rights Act, and any other
violation of any federal, state or local civil rights laws based on protected
status; breach of contract; breach of fiduciary duty; fraud or
misrepresentation; expense reimbursement; defamation; intentional or negligent
infliction of emotional distress; breach of a covenant of good faith and fair
dealing; promissory estoppel; negligence; wrongful termination of employment;
any other unlawful employment practices; or recovery under any other theory,
whether legal or equitable, in tort, contract or equity. This release includes
all present losses and all future developments therefrom.

         Employee promises not to sue any party or person that Employee released
above from any claim that arose prior to the date of this Separation Agreement
relating to Employee's employment or the termination thereof. Employee further
promises that Employee will not seek or accept individual remedies or damages on
any action or administrative proceeding filed with the Equal Employment
Opportunity Commission or other governmental agency.

         Employee acknowledges and agrees that Employee is being provided
consideration for the waiver of Employee's rights and claims pursuant to this
Separation Agreement which is in addition to anything of value to which Employee
is already entitled.

         8. Review Period and Representation. Employee understands that Employee
has twenty-one (21) days from the day that Employee receives this Separation
Agreement, not counting the day upon which Employee receives it, to consider
whether Employee wishes to sign this Separation Agreement. Employee acknowledges
that if Employee signs this Separation Agreement before the end of the
twenty-one (21) day period, it will be Employee's personal, voluntary decision
to do so. The parties agree that modifications to this Separation Agreement,
whether material or immaterial, do not restart the running of the twenty-one
(21) day period.

         Employee understands and acknowledges that Employee has been advised to
consult with Employee's own attorney prior to signing this Separation Agreement
and has or could have done so. Employee acknowledges the decision whether to
sign this Separation Agreement is Employee's own voluntary decision made with
full knowledge.

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         9. Rescission Period. Within seven (7) calendar days after signing this
Separation Agreement, Employee has the right to rescind that portion of the
Separation Agreement that releases claims pursuant to the Age Discrimination in
Employment Act. Within fifteen (15) calendar days after signing this Separation
Agreement, Employee has the right to rescind that portion of the Separation
Agreement that releases claims pursuant to the Minnesota Human Rights Act. To be
effective, the rescission must be in writing and delivered within the relevant
time period to John G. Lewis, CFO, XATA Corporation, 151 East Cliff Road, Suite
10, Burnsville, MN 55337. If delivered by mail, the rescission must be
postmarked within the relevant rescission period and sent by certified mail,
return receipt requested to the above address.

        Employee understands and agrees that if Employee exercises any right of
rescission, the Company may at its option either nullify this Separation
Agreement in its entirety or keep it in effect as to all claims not rescinded in
accordance with the rescission provisions. In the event the Company opts to
nullify the entire Separation Agreement, the Separation Agreement will be null
and void in its entirety. Neither Employee nor the Company will have any rights
or obligations whatsoever under this Separation Agreement. Employee understands
and agrees that Employee will not be entitled to receive the payments or other
benefits provided in Paragraph 2 or Paragraph 4 or any of the other benefits of
this Separation Agreement. A rescission, however, will not and does not affect
the termination of Employee's employment with the Company as of the date set
forth in Paragraph 1.

         10. No Admission of Liability by the Company. Employee acknowledges
that the payment of consideration for this Separation Agreement by the Company
is not to be construed as an admission of any liability on the part of the
Company or any of its shareholders, directors, managers, officers, employees or
agents. Such liability is expressly denied by the Company and its shareholders,
directors, managers, officers, employees and agents.

         11. Confidentiality. Employee acknowledges that the Company may file
this Separation Agreement as a part of one or more reports filed with the U.S.
Securities and Exchange Commission.

         12. Return of Property. Employee shall return all property belonging to
the Company, including any keys and all documents containing Confidential
Information, as defined in the Employment Agreement, not later than the
Termination Date.

         13. Voluntary Agreement. The Company and Employee enter into this
Separation Agreement voluntarily, after having had the opportunity to review it
and consult with advisors of their choice.

         14. Representations. Employee acknowledges that Employee has not relied
upon any statements made by the Company, its agents, or its attorneys in
entering into this Separation Agreement.

         15. Entire Agreement; Continuing Obligations under the Employment
Agreement. This Separation Agreement supersedes any and all prior agreements
between the Company and Employee, except for the Continuing Obligations under
the Employment Agreement. This Separation Agreement and the Continuing
Obligations under the Employment Agreement contain all the agreements between
Employee and the Company.

         The following sections of the Employment Agreement survive the
termination of the Employment Agreement and are acknowledged by Employee as
continuing obligations in accordance with their terms ("Continuing
Obligations"):

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<Table>
<Caption>
   Section of
Employment Agreement                    Title                      Continues Until:
--------------------        ------------------------------        ------------------------------
<S>                         <C>                                   <C>
5.1                         Confidential Information              Indefinite

5.2                         Non-Competition                       One year from Termination Date

5.3                         Non-Enticement                        One year from Termination Date

5.4                         Non-Customer Interference             One year from Termination Date

5.5                         Non-Merger Interference               One year from Termination Date

5.6                         Interpretation                        Indefinite

5.7                         Remedies                              Indefinite

6.1                         Disclosure and Assignment of          One year from Termination Date
                            Inventions and Other Works
</Table>

         16. Amendment. This Separation Agreement and Release may not be
modified, altered or changed in any way except by written agreement signed by
both parties.

         17. Successors and Assigns. This Separation Agreement is personal to
Employee and may not be assigned by Employee without the written agreement of
the Company. The rights and obligation of this Separation Agreement shall inure
to the successors and assigns of the Company.

         18. Governing Law and Jurisdiction. This Separation Agreement and
Release will be governed by the laws of the State of Minnesota, without giving
effect to the principles of conflicts of laws thereof. The federal and state
courts located in the State of Minnesota shall have exclusive jurisdiction
regarding all disputes arising under this Separation Agreement or relating
hereto. Employee hereby consents to personal jurisdiction by the federal and
state courts located in the State of Minnesota in the event of any dispute
arising under this Separation Agreement or relating hereto.

         19. Counterparts. This Separation Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all such
counterparts together shall constitute but one and the same instrument.

Dated: June 11, 2003                 /s/ William P. Flies
       -------------                 -----------------------------
                                     William P. Flies

                                     XATA Corporation

Dated: June 11, 2003                 By /s/ Craig S. Fawcett
       -------------                    ---------------------------------
                                        Its  Chief Executive Officer
                                        ---------------------------------

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