Exhibit 10.78

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE SYMBOL “[***]” HAS BEEN INSERTED IN PLACE OF THE PORTIONS SO
OMITTED.

Execution Copy

PURCHASE AND RELEASE AGREEMENT

PINNACLE AIRLINES CORP. (“Client”), and [***] hereby agree as follows:

    Client currently holds the auction-rate security positions listed in Exhibit
A hereto in [***] Account No. [***] (“Client’s Account”) (each such position, in
the amount set forth in Exhibit A, a “Position” and collectively the
“Positions”).

1.  
Sale of Positions and Client Purchase Option

 
 
(a)
[***] will purchase each Position from Client for a purchase price equal to the
Purchase Price Percentage for such Position (as set forth in Exhibit A)
multiplied by the outstanding principal amount of such Position, plus accrued
unpaid interest (as determined by [***] consistent with bond market
practice).  Settlement of such purchase shall take place within 3 business days
of the date of execution of this Purchase and Release Agreement (the
“Agreement”) on a delivery-versus-payment basis upon [***]’s crediting funds in
the amount of the purchase price to Client’s Account and simultaneously debiting
the Positions from Client’s Account; provided that the aggregate purchase price
in respect of all Positions shall be immediately applied to the repayment of all
amounts that are (or upon demand or acceleration would be) payable in respect of
Client’s Loan Obligations (as defined in the Loan) under the Amended and
Restated Loan Agreement, dated as of November 5, 2008, as amended by Amendment
No. 1 thereto dated as of March 2, 2009, between [***] and Client (the “Loan”)
as of such settlement date and any balance of such aggregate purchase price
remaining after such application will be available as a credit balance in
Client’s Account (subject to any applicable margin, lending or lending-related
or other agreements governing Client's Account).  Upon settlement of such
purchase, [***]’s obligation to make advances under the Loan shall terminate
and, if such aggregate purchase price is sufficient to satisfy in full all Loan
Obligations outstanding as of such settlement date, [***]’s security interest
and lien in the Collateral (as defined in the Loan) shall be released and the
rights and obligations of the parties under the Loan shall terminate (other than
the rights and obligations of the parties under the indemnification provisions
of Section 12 of the Loan, the arbitration provisions of Section 14 of the Loan
and any other provisions of the Loan that are expressly stated to survive
termination of the Loan).  [***] shall have all of the incidents of ownership of
the Positions, including without limitation the right to transfer the Positions
to others (subject to any restrictions under applicable law or the terms of the
securities constituting the Positions) and the right to receive cash
distributions, if any, vote, provide consent or take any similar action with
respect to the Positions.

 
(b)
At any time following settlement of the purchase of any Position pursuant to
Section 1(a) and on or before August 21, 2012, upon written notice (“Exercise
Notice”) to [***], Client may purchase from [***] [***] Option Securities
corresponding to any such Position for an amount equal to the product of (A) the
Adjusted Exercise Percentage and (B) the sum of the Exercise Price for such
Position plus the amount of any accrued unpaid interest (as determined by [***]
consistent with bond market practice) on the Option Securities corresponding to
such Position.  The Exercise Notice shall specify (i) the Position or Positions
with respect to which Client is exercising the option pursuant to this paragraph
1(b) and (ii) the Exercise Percentage for each Position specified in such
Exercise Notice.

As used herein, the term “Option Securities” means, as of any date of
determination and with respect to any Position, securities or other property
(excluding any securities or other property distributed in respect of interest
and excluding all cash) of the same class and in the same amount as a holder of
such Position would own in respect of its holding such Position, assuming such
holder became a holder of such Position on the settlement date of the purchase
of such Position pursuant to Section 1(a) and held such securities and property
(excluding cash) from such execution date to and including such date of
determination (such holder, a “Reference Holder”); provided that if the
composition of the Option Securities would depend on any election or other
action taken by such Reference Holder, then [***] shall be entitled to
determine, in its absolute discretion, what elections or actions such Reference
Holder shall be deemed to have made; and provided further that if the
composition of the Option Securities would depend on any election, action,
redemption (including without limitation any randomly-allocated partial
redemption made by an issuer of Option Securities), exchange, distribution or
other event that, in each case, was not available to all holders of the Option
Securities generally (a “Non-Pro Rata Event”), then such Non-Pro Rata Event
shall not be taken into account unless such Non-Pro Rata Event (whether by
itself or in conjunction with preceding Non-Pro Rata Events) has resulted (as
determined by [***] in its reasonable discretion) in the redemption, liquidating
distribution or similar event with respect to all or substantially all of the
securities of the same class as the Option Securities.  Upon any exercise of
Client’s option pursuant to this paragraph 1(b), the Option Securities shall
thereafter no longer include the Pro-Rata Portion of the Option Securities
subject to such exercise.  For the avoidance of doubt, the Option Securities
shall not include any cash, whether received as interest, principal or
otherwise, or any proceeds or returns deemed to be received thereon or any
investments thereof.

[***]

As used herein, the term “Exercise Percentage” means, with respect to a
Position, an amount expressed as a percentage not to exceed 100%, as specified
in the Exercise Notice; provided that [***] may adjust such percentage in a
commercially reasonable manner to take account of the minimum transfer
denominations and unit sizes of the securities and property comprised in the
Option Securities (as so adjusted, the “Adjusted Exercise Percentage”).

Client acknowledges and agrees that the consequences of Non-Pro Rata Events
under this Agreement may differ from (and Non-Pro Rata Events are likely to
result in no or reduced allocations of issuer partial redemptions in comparison
with) what Client would have experienced had it not sold the Positions to [***]
and, accordingly, there can be no assurance that any adjustments of the Option
Securities or the Exercise Price in respect of Non-Pro Rata Events will be made
pursuant to this Agreement.

Client is urged to consult with its own legal, regulatory, tax, business,
investment, financial and accounting advisors in connection with any decision to
exercise its rights pursuant to this paragraph 1(b).  Absent exercise, Client
will not be entitled to vote the Option Securities and Client may not be able to
participate in any future opportunity to sell or tender any Option Securities to
the same extent as if Client had exercised such rights.  In particular, absent
such exercise, Cash Redemption Amounts, if any, will be reflected through an
adjustment to the Exercise Price and will not result in cash payments to Client
unless and until the cumulative Cash Redemption Amounts with respect to a
Position exceed the Exercise Price during the period when Client may exercise
its rights under paragraph 1(b).  

As used herein, the term “Exercise Price” means, as of any date of determination
and with respect to any Position, the Initial Exercise Price for such Position
(as set out in Exhibit A), as reduced (but not below zero) by (i) the amount of
any Cash Redemption Amounts received on or prior to such date of determination
in respect of the Option Securities corresponding to such Position and (ii) an
amount equal to the sum of the products, with respect to each exercise, if any,
of Client’s option pursuant this paragraph 1(b) with respect to such Position
that occurred prior to such date of determination, of the Exercise Price
multiplied by the Adjusted Exercise Percentage, in each case, with respect to
such exercise and such Position.

As used herein, the term “Cash Redemption Amounts” means the amount of any cash
received by a Reference Holder of Option Securities in redemption of, or as a
repayment of principal (including any payment on liquidation that discharges
principal) on, the Option Securities; provided that if such cash amount would
depend on any election or other action taken by such Reference Holder, then
[***] shall be entitled to determine, in its absolute discretion, what elections
or actions such Reference Holder shall be deemed to have made; and provided
further that if such cash amount would depend on any Non-Pro Rata Event, then
such Non-Pro Rata Event shall not be taken into account unless such Non-Pro Rata
Event (whether by itself or in conjunction with preceding Non-Pro Rata Events)
has resulted (as determined by [***] in its reasonable discretion) in the
redemption, liquidating distribution or similar event with respect to all or
substantially all of the securities of the same class as the Option Securities.

Notwithstanding the foregoing definitions of “Option Securities”, “Exercise
Price” and “Cash Redemption Amounts”, [***] may elect at any time to treat all
or any portion of the Option Securities corresponding to a Position (the
“Removed Portion”) as having been redeemed for cash at [***] percent of the
outstanding principal amount thereof, in which event (i) the term “Option
Securities” shall thereafter no longer include such Removed Portion and (ii) the
amount of cash deemed to have been received in redemption of such Removed
Portion shall be treated as a Cash Redemption Amount.

Unless otherwise agreed by the parties, settlement of any purchase of Option
Securities under this Section 1(b) shall take place not later than the 10th
business day following [***]’s receipt of the Exercise Notice on a
delivery-versus-payment basis upon [***]’s crediting the Pro-Rata Portion of the
Option Securities to Client’s Account and simultaneously debiting from Client’s
Account an amount equal to the product of (A) the Adjusted Exercise Percentage
and (B) the sum of the Exercise Price for such Position plus the amount of any
accrued unpaid interest (as determined by [***] consistent with bond market
practice) on the Option Securities corresponding to such Position; provided that
it shall be a condition of [***]’s obligation to make such delivery that
sufficient funds are available in Client’s Account.  [***] Upon settlement of
such exercise, Client shall have all of the incidents of ownership of the
purchased Pro-Rata Portion of the Option Securities, including without
limitation the right to transfer such purchased Pro-Rata Portion of the Option
Securities to others (subject to any applicable margin, lending or
lending-related or other agreements governing Client's Account and to any
restrictions under applicable law or the terms of the Option Securities) and the
right to receive cash distributions, if any, vote, provide consent or take any
similar action with respect to such purchased Pro-Rata Portion of the Option
Securities.

 
(c)
If on any date on or before August 21, 2012 the Exercise Price with respect to
any Position becomes zero, then Client’s option pursuant to Section 1(b) to
purchase the Option Securities corresponding to such Position shall be deemed to
have been automatically exercised on such date with an Exercise Percentage of
100%.  Unless otherwise agreed by the parties, settlement of such automatic
exercise shall take place within 15 business days of the date of such automatic
exercise by [***]’s crediting to Client’s Account the Option Securities and any
Excess Cash Redemption Amounts with respect to such Position.  As used herein,
the term “Excess Cash Redemption Amounts” means, with respect to any Position,
the amount, if any, by which (x) all Cash Redemption Amounts received with
respect to such Position after Client’s most recent exercise of its option
pursuant to paragraph 1(b) with respect to such Position exceed (y) the Exercise
Price with respect to such Position that was in effect immediately following
such most recent exercise or, if Client has not previously delivered an Exercise
Notice with respect to such Position, the amount by which all Cash Redemption
Amounts with respect to such Position exceed the Initial Exercise Price with
respect to such Position.  Upon settlement of such exercise, Client shall have
all of the incidents of ownership of the Option Securities, including without
limitation the right to transfer the Option Securities to others (subject to any
applicable margin, lending or lending-related or other agreements governing
Client’s Account and to any restrictions under applicable law or the terms of
the Option Securities) and the right to receive cash distributions, if any,
vote, provide consent or take any similar action with respect to such Option
Securities.

 
(d)
Until August 21, 2012 or such earlier time at which the Option Securities in
respect of all Positions have been purchased by Client, [***] will use all
reasonable efforts to forward to Client on a timely basis copies of the issuer
redemption and voluntary action notifications it receives from The Depository
Trust Company for any Option Securities still outstanding and subject to the
rights and obligations set forth in Section 1(b) or Section 1(c) above.

2.  
Release

 
Except for the obligations created by, and the rights expressly reserved under,
this Agreement, Client hereby releases and forever discharges [***], its past
and present predecessors and affiliates, officers, directors, agents and
employees, and their respective heirs, executors, administrator, successors and
assigns, (including Morgan Stanley Smith Barney LLC) (hereinafter collectively
referred to as the “Releasee”) from all actions, causes of action, suits, debts,
dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims, and demands whatsoever, in law,
admiralty or equity, known or unknown, fixed or contingent, based upon or
relating to the Loan or to Client’s investment in, holding of, delivery of, or
any past, present or future difficulties Client may have experienced or may
experience in disposing of,  auction rate securities sold by [***] (collectively
“Released Matters”).

3.  
Representations and Warranties

 
Client hereby represents and warrants that: (i) Client has all requisite power
and authority to execute and deliver this Agreement and perform its obligations
hereunder; and (ii) any and all consents and approvals required for Client to
enter into this Agreement have been obtained; and (iii) Client’s execution and
performance of its obligation under this Agreement do not violate any material
agreements or obligations of Client.  Client further represents and warrants
that it is the sole and the lawful owner of the Positions and of all rights,
title and interest in and to all Released Matters set forth in Section 2, and
that it has not heretofore assigned or transferred or purported to assign or
transfer to any other person or entity the Positions or any such Released
Matters or any part or portion of them.  Client represents and warrants that
this Agreement is binding upon it as well as any of its successors in interest.

Client further represents and warrants that (i) it is an “accredited investor”
as such term is defined in Regulation D as promulgated under the Securities Act
of 1933 (the “Securities Act”); and (ii) at all times until August 21, 2012 or
such earlier time at which the Option Securities in respect of all Positions
have been purchased by Client, Client is not, and is not acting on behalf of,
(A) an “employee benefit plan” that is subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), (B) a “plan”
within the meaning of Section 4975 of the Internal Revenue Code of 1986, as
amended (the “Code”), (C) a person or entity the underlying assets of which
include plan assets by reason of Department of Labor Regulation Section
2510.3-101, as amended by Section 3(42) of ERISA, or otherwise, or (D) a
federal, state or local governmental plan or non-U.S. plan that is subject to
any federal, state or local law that is materially similar to the provisions of
Section 406 of ERISA or Section 4975 of the Code. Client acknowledges and agrees
that any disposition of its rights or interests in or under this Agreement is
restricted under this Agreement, the Securities Act and state securities laws.

[***]

[***] hereby represents and warrants that: (i) [***] has all requisite power and
authority to execute and deliver this Agreement and perform its obligations
hereunder; (ii) any and all consents and approvals required for [***] to enter
into this Agreement have been obtained; and (iii) this Agreement is binding upon
it as well as any of its successors in interest.

Each party hereby represents and warrants that in connection with the
negotiation of, entry into, and performance of its obligations and exercise of
its rights under, this Agreement:  (i) the other party is not acting as a
fiduciary or financial or investment advisor for it; (ii) it is not relying upon
any representations (whether written or oral) of the other party other than the
representations expressly set forth in this Agreement; and (iii) it has
consulted with its own legal, regulatory, tax, business, investment, financial,
and accounting advisors to the extent it has deemed necessary, and it has made
and will make its own decisions based upon its own judgment and upon any advice
from such advisors as it has deemed necessary and not upon any view expressed by
the other party.  Client acknowledges and agrees that [***] has no obligation to
provide indicative quotations or valuations with respect to the Positions, the
Option Securities or the option rights of Client pursuant to Section 1(b) or
Section 1(c), that traded instruments corresponding to such option rights may
not exist and that, consequently, it may be difficult for Client to establish an
independent value for such option rights.  [***]  The option rights of Client
pursuant to Section 1(b) and Section 1(c), and rights under Section 1(d) may not
be assigned, pledged, sold or otherwise transferred without the prior written
consent of [***].

4.  
Acknowledgement

 
The parties acknowledge that they have entered into this Agreement in
consideration of and in reliance upon the fact that all rights and obligations
hereunder constitute a single business and contractual relationship between the
parties and have been made in consideration of each other. Furthermore, the
parties intend for this Agreement to be a “securities contract” as defined in
Section 741(7) of the United States Bankruptcy Code (the “Bankruptcy Code”) and
all payments and transfers of securities, cash or other property hereunder to be
“margin payments”, “settlement payments” or “transfers” (as defined in the
Bankruptcy Code).
 
5.  
Notices

 
Any notices given hereunder shall be sent by facsimile, or email, with a
courtesy confirmation copy via overnight courier to the following addresses (or
such other address as a party may designated as a notice address in a prior
written notice to the other party) and shall be deemed delivered when received
(or if received on a weekend or holiday or after  the close of business, on the
next business day); providedthat failure to deliver a confirmation copy via
overnight courier shall not invalidate any such notice and [***] shall not be
required to deliver confirmation copies of any notices given pursuant to Section
1(d) above: 

If to Client:

Pinnacle Airlines Corp.
1689 Nonconnah Boulevard, Suite 111
Memphis, TN  38132

Attention: Chief Financial Officer (with copy to General Counsel)
Fax: [***]
Email: [***]

If to [***]:

[***]

With a copy to:
[***]

6.  
Amendment; Counterparts

 
This Agreement may only be amended by written agreement of Client and
[***].  This Agreement may be executed in counterparts and each counterpart,
when duly executed, shall be effective as an original and all counterparts taken
together shall constitute one and the same agreement.

7.  
Governing Law

 
This Agreement and all matters arising herein or in connection herewith will be
governed by, and construed and enforced in accordance with, the law of the State
of New York, including Section 5-1401 and Section 5-1402 of the General
Obligations Law, but otherwise without reference to choice of law doctrine.

8.  
Arbitration

 
This Agreement contains a pre-dispute arbitration clause. By signing this
Agreement, the parties agree as follows:

(a) All parties to this Agreement are giving up the right to sue each other in
court, including the right to a trial by jury, except as provided by the rules
of the arbitration forum in which a claim is filed.

(b) Arbitration awards are generally final and binding; a party’s ability to
have a court reverse or modify an arbitration award is very limited.

(c) The ability of the parties to obtain documents, witness statements and other
discovery is generally more limited in arbitration than in court proceedings.

(d) The arbitrators do not have to explain the reason(s) for their award.

(e) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry, unless Client is a
member of the organization sponsoring the arbitration facility, in which case
all arbitrators may be affiliated with the securities industry.

(f) The rules of some arbitration forums may impose time limits for bringing a
claim in arbitration.  In some cases, a claim that is ineligible for arbitration
may be brought in court.

(g) The rules of the arbitration forum in which the claim is filed, and any
amendments thereto, shall be incorporated into this agreement.  Client agrees
that any and all controversies that may arise between Client and [***],
including, but not limited to, those arising out of or relating to the
transactions contemplated hereby and any activity or claim related to the
construction, performance, or breach of this Agreement shall be determined by
arbitration conducted before FINRA Dispute Resolution (“FINRA-DR”) or, if
FINRA-DR declines to hear the matter, before the American Arbitration
Association, in accordance with their arbitration rules then in force. The award
of the arbitrator shall be final, and judgment upon the award rendered may be
entered in any court, state or federal, having jurisdiction.  No person shall
bring a putative or certified class action to arbitration, nor seek to enforce
any pre-dispute arbitration agreement against any person who has initiated in
court a putative class action or who is a member of a putative class who has not
opted out of the class with respect to any claims encompassed by the putative
class action until: (i) the class certification is denied; (ii) the class is
decertified; or (iii) the Client is excluded from the class by the court.  Such
forbearance to enforce an agreement to arbitrate shall not constitute a waiver
of any rights under this Agreement except to the extent stated herein.

 
 
 

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In Witness Whereof, Client and [***] have executed this Agreement effective as
of the 21st day of August  2009.

 
 
PINNACLE AIRLINES CORP.
 
By: ____________________________
Name:  Peter D. Hunt
Title:  Vice President and Chief Financial Officer
CITIGROUP GLOBAL MARKETS  INC.
 
By: _____________________________
Name:  [***]
Title: [***]

 
 

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EXHIBIT A

Position
Purchase Price Percentage
 
Initial Exercise Price
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]

 
 

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