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                                                                    EXHIBIT 10.7

                             RESTRUCTURING AGREEMENT

        As of this 31st day of December, 2002, this Agreement ("Agreement") is
made by and between Great Lakes Aviation, Ltd., an Iowa corporation with its
principal place of business at 1022 Airport Parkway, Cheyenne, Wyoming 82001
("Great Lakes"), and Raytheon Aircraft Credit Corporation, a Kansas corporation
with its principal place of business at 10511 East Central Avenue, Wichita,
Kansas 67206 ("RACC").

                                    RECITALS

A.      Great Lakes currently owns or leases under finance leases thirty-seven
        (37) Beech Model 1900D Airliners that have been financed or leased by
        RACC and leases from RACC under operating leases two (2) Beech Model
        1900C Airliners. These aircraft are identified and grouped as follows:

        (1)     the seven (7) 1900D Airliners having Manufacturer's Serial
                Numbers UE-97, UE-101, UE-204, UE-226, UE-228, UE-249 and UE-260
                (collectively and individually, the "Group A Aircraft");

        (2)     the thirty (30) 1900D Airliners having Manufacturer's Serial
                Numbers UE-94, UE-96, UE-100, UE-118, UE-122, UE-150, UE-153,
                UE-154, UE-169, UE-170, UE-179, UE-184, UE-192, UE-195, UE-201,
                UE-202, UE-208, UE-210, UE-211, UE-219, UE-220, UE-240, UE-245,
                UE-247, UE-251, UE-253, UE-254, UE-255, UE-257 and UE-261
                (collectively and individually, the "Group B Aircraft"); and

        (3)     the two (2) 1900C Airliners having Manufacturer's Serial Numbers
                UC-101 and UC-122 (collectively and individually, the "Group C
                Aircraft," and, together with the Group A Aircraft and the Group
                B Aircraft, the "Aircraft").

B.      Subject to the terms and conditions contained herein, RACC has agreed to
        (i) accept the return of the Group A Aircraft and extinguish the debt
        and or lease obligations on each Group A Aircraft upon such return, (ii)
        restructure its financing of the Group B Aircraft, and (iii) reduce the
        lease payments on the Group C Aircraft and Great Lakes has agreed to
        issue to RACC shares of Great Lakes' common stock, a deferral note, a
        senior note, and a subordinated note.

C.      This Agreement, taken together with the Transaction Documents (as
        defined herein) to be executed in connection herewith, constitute the
        entire

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                                      -2-

        agreement between RACC and Great Lakes concerning the subject matter
        hereof and supercede and merge any prior written or oral agreements
        between RACC and Great Lakes concerning the subject matter hereof.

D.      The parties hereto have reached further agreement as to certain matters
        relating to the Aircraft and certain related obligations between the
        parties, and desire to set forth the terms of such agreement herein.

                                    AGREEMENT

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Great Lakes and RACC agree as follows:

1.      Recitals Incorporated. The parties hereto hereby incorporate the
        Recitals as if fully set forth herein.

2.      Group A Aircraft. The following applies to all Group A Aircraft.

        (A)     Return Conditions. The Group A Aircraft, including engines,
                shall be returned by Great Lakes to RACC to destinations within
                the United States selected by RACC in accordance with the
                schedule attached hereto as Schedule 1. The Group A Aircraft are
                to be returned in accordance with the following terms and
                conditions (the "Return Conditions"): (i) all engines, engine
                life cycle fatigue components, propellers, airframe and other
                time/life components shall be at a minimum of half-life
                remaining, as defined in accordance with the aircraft
                manufacturer's maintenance manual or, in the case of engines, as
                set forth in Pratt & Whitney's engine overhaul recommendations.
                With regards to the half life requirement RACC may waive this
                requirement on a case by case basis in economic consideration of
                the component time remaining and for consideration that certain
                components may be returned with better than half life remaining.
                In all cases the decision of the RACC representative will be
                final. (ii) all originally installed equipment shall be in
                working order, (iii) such Group A Aircraft shall be airworthy,
                and immediately prior to return have a complete 1-6 detail
                inspection, and no structural inspections due within 5% of the
                structural inspection schedule. Any structural inspection that
                is due within 5% of the inspection schedule will be completed
                prior to the return of the aircraft. This 5% requirement may be
                waived on a case by case basis as agreed to by the GLA Director
                of Maintenance and the RACC representative. All required
                inspections shall be completed by an FAA Authorized Part 145
                Certified Repair Station. (CRS) The aircraft shall be in
                compliance with all Airworthiness Directives issued by the FAA
                pertaining to such Group

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                A Aircraft, and the manufacturers published maintenance
                specifications and Mandatory Service Bulletins (iv) such Group A
                Aircraft shall be delivered ready for Commuter use under part
                121 and/or Part 91. RACC shall promptly perform an inspection of
                each Group A Aircraft and attached engines, airframe and other
                time/life components that is returned to it so as to determine
                whether all of the Return Conditions have been satisfied. In the
                event that RACC determines that any Group A Aircraft is not in
                compliance with any of the Return Conditions, RACC shall
                promptly notify Great Lakes in writing of such determination and
                RACC shall have the option of either requesting that Great Lakes
                (1) remedy such noncompliance in a manner reasonably
                satisfactory to RACC within thirty (30) days or (2) return a
                substitute Group B Aircraft designated by RACC in compliance
                with the Return Conditions within thirty (30) days, in which
                case such substitute Group B Aircraft shall be deemed to be a
                Group A Aircraft for purposes of this Agreement and such
                noncompliant Group A Aircraft shall be deemed to be a Group B
                Aircraft for purposes of this Agreement. If RACC requests, Great
                Lakes shall store and maintain any Group A Aircraft accepted by
                RACC for a period not to exceed thirty (30) days.

        (B)     Delivery of Aircraft Records, Etc. Great Lakes shall deliver to
                RACC, as an additional Return Condition, all of the following
                items related to each of the Group A Aircraft:

                (1)     All records of maintenance, preventative maintenance,
                        alterations and repairs relating to such Group A
                        Aircraft. All major repairs and alteration documentation
                        shall be in the form of either FAA Form 337 or FR-CO
                        (FAA Approved Field Repairs).

                (2)     All airframe, engine and propeller logbooks endorsed for
                        current total time and cycles for the airframe, total
                        time and cycles for each engine and engine life cycle
                        fatigue components and an entry for total time and
                        cycles since overhaul and hot section inspection for
                        each engine, and total time since new and time since
                        overhaul for each propeller. The airframe logbook must
                        include all appropriate endorsements (i.e., maintenance
                        releases) verifying that the avionics have been
                        periodically tested and inspected in accordance with 14
                        CFR Section 91.411 and Section 91.413 and Chapters 4 and
                        5 of the Beechcraft Maintenance Manual.

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                                      -4-

                (3)     A current written summary certified by Great Lakes'
                        inspection authority listing the status of all
                        applicable airworthiness directives and service
                        bulletins for the airframe, engines, propellers and
                        appliances.

                (4)     A written summary certified by Great Lakes' authorized
                        inspection authority of the current status of life
                        limited and/or overhauled components for the airframe,
                        engines (in accordance with the Manufacturer's
                        recommended intervals), engine accessories and
                        appliances as defined in the most current revision(s) of
                        all Beechcraft maintenance publications applicable to
                        such Group A Aircraft. The aforesaid summary shall be
                        organized in the chapter order specified by the Air
                        Transport Association.

                (5)     Great Lakes must provide the following documentation and
                        data for each component having an overhaul or inspection
                        requirement or life limit, which components are
                        identified in Chapter 4 and/or Chapter 5 of Beechcraft
                        Maintenance Manual applicable to such Group A Aircraft,
                        as follows: (i) an airworthiness release certificate or
                        maintenance release tag, (ii) the vendor work order or
                        copy thereof verifying the details of each component's
                        overhauls, and (iii) an appropriate record certifying
                        the date and expended time status of the components when
                        installed (i.e., copy of log or inspection squawk card).
                        The three (3) items identified in the preceding sentence
                        must be properly organized and provided on-board such
                        Group A Aircraft.

                (6)     Great Lakes must provide written verification that Pratt
                        & Whitney has approved all of the Group A Aircraft
                        engines as being eligible for enrollment in a Pratt &
                        Whitney engine fleet maintenance program.

                (7)     For each Group A Aircraft that is not leased from RACC
                        and for each engine that is not leased but is on a Group
                        A Aircraft that is leased, Great Lakes shall deliver to
                        RACC an executed FAA Bill of Sale for such Group A
                        Aircraft or, in the case of an engine, an appropriate
                        document of conveyance.

                        Great Lakes acknowledges that each of the items
                        described above in subsections (1) through (6) must be
                        provided to RACC upon return of each Group A Aircraft
                        regardless of whether Great Lakes has conducted its
                        periodic inspections of such

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                                      -5-

                        Group A Aircraft pursuant to Chapter 5 of the Beechcraft
                        Maintenance Manual or in accordance with an inspection
                        program approved by the FAA pursuant to 14 CFR Section
                        91.4099(f).

        (C)     Suspension of Payments; Extinguishment of Debt. Payments due
                from Great Lakes to RACC under the existing aircraft lease or
                secured promissory note, as applicable (each a "Existing Finance
                Agreement" and collectively, the "Existing Finance Agreements")
                for each of the Group A Aircraft shall be suspended for the
                period commencing on the Effective Date through the applicable
                deadline for the return of such Aircraft set forth on Schedule 1
                hereto (the "Group A Cut-Off Date"). If any Group A Aircraft has
                not been returned by Great Lakes to RACC in accordance with the
                terms of this Agreement on or before the applicable Group A
                Cut-Off Date, debt and/or lease payments due on such Group A
                Aircraft will resume for the period from such Group A Cut-Off
                Date until such time as such Aircraft is so returned, with such
                payments to be made in accordance with the terms of the related
                Existing Finance Agreement without modification by this
                Agreement. Upon the return of any Group A Aircraft in accordance
                with the terms of this Agreement, all payments and other amounts
                owed at such time of return under the related Existing Finance
                Agreement shall be cancelled and extinguished, except for any
                payments that become due after the applicable Group A Cut-Off
                Date.

        (D)     Financing of Costs of Return Conditions. RACC agrees to provide
                financing to Great Lakes with respect to each Group A Aircraft
                in the form of advances (the "Advances") in an amount not to
                exceed seventy-five percent (75%) of the reasonable
                out-of-pocket costs incurred by Great Lakes (exclusive of any
                costs associated with the labor of any Great Lakes' employees)
                in refurbishing and repairing such Group A Aircraft so as to
                meet the Return Conditions for which (1) the nature of the work
                to be done, estimated cost and identity of the service provider
                have been pre-approved by RACC in writing and (2) copies of the
                related purchase orders and invoices have been provided to RACC,
                provided that the aggregate amount of the Advances to be
                provided with respect to all of the Group A Aircraft shall not
                exceed $3,000,000. The Advances shall be evidenced by a
                promissory note executed by Great Lakes payable to RACC (the
                "Group A Return Conditions Note," the form of which is attached
                hereto as Exhibit A), which shall have a bullet maturity on the
                fourth anniversary of issue (December 31, 2006) and bear
                interest at the rate of LIBOR plus 500 basis points. "LIBOR"
                shall mean the rate of interest determined by RACC at which
                Dollar deposits for ninety (90) days are offered based on
                information provided

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                                      -6-

                in The Wall Street Journal on the second business day prior to
                the date of the issuance of the Group A Return Conditions Note
                or the first day of January, April, July and October, as
                applicable, provided, however, that if the rate described above
                does not appear in The Wall Street Journal on any applicable
                interest determination date, LIBOR shall be the rate determined
                by RACC in good faith based on the offered rates for deposits in
                Dollars for ninety (90) days that are then offered by major
                banks in the London interbank market. LIBOR shall be adjusted on
                the first business day of each calendar quarter to reflect any
                increase or decrease in LIBOR as of that date.

3.      Group B Aircraft. The Existing Finance Agreements on the Group B
        Aircraft and all amounts owed thereunder as of the Effective Date shall
        be restructured in their entirety by the issuance of amended and
        restated promissory notes or, with respect to the Existing Finance
        Agreements that are aircraft leases, promissory notes executed by Great
        Lakes payable to RACC (each "Group B Note" and collectively, the "Group
        B Notes," the form of which is attached hereto as Exhibit B). In
        addition, with respect to Existing Finance Agreements that are aircraft
        leases, RACC shall transfer title of the related Group B Aircraft to
        Great Lakes and Great Lakes shall execute and deliver to RACC aircraft
        security agreements and, with respect to Existing Finance Agreements
        that are promissory notes, Great Lakes shall execute and deliver to RACC
        amended and restated aircraft security agreements (each such aircraft
        security agreement or amended and restated aircraft security agreement
        to be executed and delivered by Great Lakes is referred to herein as a
        "Group B Security Agreement" and are collectively referred to as the
        "Group B Security Agreements"), the form of which is attached as Exhibit
        C. Each of the Group B Notes shall bear interest at LIBOR plus 375 basis
        points (subject to adjustment as set forth below), shall have an
        original principal amount of $2,500,000 and provide for initial monthly
        payments as set forth on Schedule 2 hereto payable in arrears starting
        on January 31, 2003, with the amount of the monthly payment to be
        adjusted quarterly, on the first day of each calendar quarter as
        described in Section 2(D), based on changes in the underlying interest
        rate. The principal balances of the Group B Notes shall amortize as set
        forth on Schedule 2 hereto, with a final maturity on December 31, 2012.
        Schedule 1 to the Group B Notes shall incorporate a credit pricing
        matrix to reduce the interest rate upon Great Lakes' meeting specific
        debt service coverage targets. The Group B Notes shall be fully
        assignable and Great Lakes agrees to cooperate with RACC to facilitate
        any such assignment, with RACC agreeing to pay Great Lakes' actual
        reasonable out-of-pocket costs of such assignment.

4.      Group C Aircraft. RACC agrees, as of the Effective Date, to reduce the
        monthly rental payments due from Great Lakes pursuant to each of the

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                                      -7-

        airliner lease agreements for the Group C Aircraft (the "Group C
        Leases") from $22,000 per month to $17,000 per month pursuant to an
        amendment to each of the Group C Leases (each a "Group C Lease
        Amendment", and collectively, the "Group C Lease Amendments"), the form
        of which is attached hereto as Exhibit D, to reflect this change in
        rental payments. In addition, all unpaid monetary lease obligations on
        the Group C Aircraft will be extinguished provided that the payment
        referred to in Section 14(B)(23) has been made pursuant to the letter
        dated November 25, 2002 from RACC to Great Lakes, and all such payments
        not addressed in the letter are current as of the Effective Date.

5.      Intentionally Omitted.

6.      Deferral Note. The (i) $800,000 payment that was due to paid by Great
        Lakes to RACC on October 15, 2002 and (ii) the $400,000 balance of the
        payment that was due to paid by Great Lakes to RACC on November 15,
        2002, both of which were not paid and deferred by RACC, shall be the
        subject of a promissory note (the "Deferral Note"), the form of which is
        attached hereto as Exhibit E. The interest rate on the Deferral Note
        shall be LIBOR plus 375 basis points. Interest on the Deferral Note
        shall be payable quarterly in arrears on the last day of each calendar
        quarter commencing on March 31, 2003. Amortization of the Deferral Note
        shall be in quarterly payments on the last day of each calendar quarter
        beginning on June 30, 2003. In 2003, there will be three principal
        payments on June 30, September 30 and December 31 of $133,333.33 each,
        in 2004, there shall be four quarterly payments of $125,000 each and in
        2005, there shall be four quarterly payments of $75,000 each.

7.      Extinguishment of Non-Aircraft Debt; Certain Deposits. The indebtedness
        owing from Great Lakes to RACC and evidenced by certain Negotiable
        Promissory Notes dated November 1, 2000, June 29, 2001 and December 1,
        2001 issued by Great Lakes to RACC (the "Existing Promissory Notes")
        shall be extinguished and cancelled by RACC as of the "Effective Date"
        (as hereinafter defined in Section 14). The outstanding principal amount
        of this indebtedness as of the Effective Date is approximately
        $13,750,000, and the amount of the past due interest obligation will be
        approximately $1,000,000, for a total approximate obligation of
        $14,750,000. Great Lakes acknowledges that $1,100,000 that it previously
        has paid to RACC as lease deposits for certain leased aircraft has been
        applied in connection with the restructuring pursuant to this Agreement
        and that Great Lakes no longer has any rights to such funds.

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                                      -8-

8.      Receipt of Equity.

        (A)     Grant of Shares. In partial consideration of RACC's
                extinguishing and restructuring certain indebtedness owing to it
                from Great Lakes, RACC shall obtain equity in Great Lakes. On
                the Effective Date, Great Lakes shall deliver to RACC a stock
                certificate issued in the name of RACC evidencing 5,371,980
                shares (the "RACC Shares") of common stock, par value $.01 per
                share, of Great Lakes (the "Common Stock"), representing 36% of
                outstanding post-restructuring shares of Common Stock on a
                fully-diluted, as if fully exercised, basis. Such shares of
                Common Stock shall be duly authorized, fully paid and
                nonassessable.

        (B)     Anti-Dilution. Except for (i) the issuance of options to
                purchase up to 1,000,000 shares of Common Stock pursuant to
                Great Lakes' 1993 Stock Option Plan, (ii) the issuance of
                options to purchase up to 300,000 shares of Common Stock
                pursuant to Great Lakes' 1993 Director Stock Option Plan, (iii)
                the issuance of options for new management of Great Lakes hired
                subsequent to the effectiveness of this Agreement to purchase up
                to 400,000 shares of Common Stock pursuant to an additional
                equity incentive plan to be implemented in the near future
                provided that all recipients of options pursuant to such
                additional equity incentive plan sign lockup agreements as set
                forth in Section 14(B)(31), (iv) the issuance of up to 2,300,000
                shares of Common Stock in connection with the exercise of any of
                the foregoing options, and (v) the issuance of up to 150,000
                shares of Common Stock pursuant to Great Lakes' Employee Stock
                Purchase Plan, if, at any time or from time to time Great Lakes
                issues any shares of, or options or warrants to purchase or
                other securities convertible into, Common Stock (an "Additional
                Issuance"), Great Lakes shall provide not less than five (5)
                days' prior written notice of such Additional Issuance to RACC,
                and RACC shall be entitled to receive, on the date of each such
                issuance (an "Additional Issuance Date"), by giving Great Lakes
                notice within thirty (30) days of its receipt of Great Lakes'
                notice of such Additional Issuance, at a price per share equal
                to the price per share payable in connection with such
                Additional Issuance or, in the case of an option or warrant to
                purchase Common Stock, at a price per share equal to the price
                per option, if any, payable in connection with such Additional
                Issuance plus the per share exercise price thereunder, a number
                of additional shares of Common Stock (the "Anti-Dilution
                Shares") as is equal to the product of (i) fifty-six and 25/100
                (56.25) multiplied by (ii) the number of shares of Common Stock
                issued or issuable in connection with such Additional Issuance,
                determined on a fully-diluted basis. The Anti-Dilution Shares,
                when issued, shall be duly authorized, fully paid and
                nonassessable shares of Common Stock. The certificates for the
                Anti-Dilution Shares shall be issued in

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                                      -9-

                the name of RACC (or RACC's transferee or designee), and
                delivered to such person within three (3) business days after
                the Additional Issuance Date. Issuance of certificates for
                Anti-Dilution Shares shall be made without charge to RACC (or
                RACC's transferee or designee) for any issue or transfer taxes
                or other incidental expenses in respect of the issuance of such
                certificates, all of which taxes and expenses shall be paid by
                Great Lakes. This Section 8(B) shall expire upon the earlier of
                (1) the Debt Service Ratio (as defined in Section 15(A)) as at
                the end of any two consecutive fiscal quarters being greater
                than or equal to 3.0:1.0 or (2) the Free Cash Flow (as defined
                on Schedule 5) as at the end of any fiscal year is greater than
                or equal to $15,000,000 (the date of such earlier occurrence is
                referred to as the "Limited Termination Date") provided that
                Great Lakes is in compliance with this Agreement, each of the
                other Transaction Documents (as defined below) and any other
                agreement between itself and RACC.

        (C)     Restrictions on Transfers to Competitors. Great Lakes shall have
                the right of first refusal with respect to any proposed sale by
                RACC of all or any portion of the RACC Shares or any
                Anti-Dilution Shares received by RACC (collectively, the
                "Shares") to any regional commuter airline that competes
                directly with Great Lakes and is listed on Schedule 3 hereto.
                Prior to accepting any bona fide offer for purchase of any
                Shares, RACC shall give to Great Lakes notice in writing (the
                "Offer Notice") disclosing the price and the terms at which RACC
                proposes to sell such Shares pursuant to such bona fide offer,
                and within twenty (20) days after such notice has been given
                Great Lakes shall give RACC notice (the "Reply Notice") of its
                intention to purchase or not to purchase at the price and on the
                terms specified in the Offer Notice accompanied by a bona fide
                third party lender's proposal for the financing of any such
                purchase (a "Financing Proposal"). Within thirty (30) days after
                providing the Reply Notice and Financing Proposal, Great Lakes
                shall provide RACC with evidence of such lender's firm
                commitment to provide the financing referenced in the Financing
                Proposal (the "Financing Commitment"). Upon receipt of a
                Financing Commitment, Great Lakes shall pay to RACC a good faith
                purchase deposit in an amount mutually acceptable to each of
                RACC and Great Lakes. If Great Lakes gives notice of its
                intention to purchase in the Reply Notice and provides RACC with
                the Financing Proposal and the Financing Commitment in
                accordance with the terms hereof, RACC will sell to Great Lakes
                or its nominee such Shares on the same terms and conditions set
                forth in the Offer Notice. If (i) Great Lakes notifies RACC in
                the Reply Notice of its intention not to purchase at such price
                and on such terms, (ii) or if no Reply Notice, Financing
                Proposal or Financing Commitment is given by Great Lakes in
                accordance with the

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                                      -10-

                terms hereof or (iii) if Great Lakes fails to close the purchase
                of such Shares within twenty (20) days after its delivery of a
                Financing Commitment, RACC shall be free to sell such Shares
                described in the Offer Notice, within 120 days after the Offer
                Notice has been given, to the competitor named in the Offer
                Notice free and clear of Great Lakes' right of first refusal as
                provided in this Agreement, but at a price not lower than, and
                on terms not substantially different from, the price and terms
                specified in the Offer Notice. However, no sale to the
                competitor named in the Offer Notice shall be made after 180
                days following the date of the Offer Notice without Great Lakes
                having again given RACC an Offer Notice and again complied in
                full with the terms of this Section 8(C).

9.      Additional Notes. In partial consideration of RACC's extinguishing and
        restructuring certain indebtedness owing to it from Great Lakes:

        (A)     Senior Note. RACC shall receive from Great Lakes a senior
                promissory note with a face amount of $5,000,000 (the "Senior
                Note"), the form of which is attached hereto as Exhibit F. The
                interest rate on the Senior Note shall be eight and one quarter
                percent (8.25%) per annum. Interest shall accrue on the
                outstanding principal amount under the Senior Note and shall be
                capitalized and added to principal on the last day of each
                calendar quarter commencing on March 31, 2003. Commencing on
                March 31, 2005, interest on the Senior Note shall be payable
                quarterly in arrears on the last day of each calendar quarter.
                The outstanding principal balance of the Senior Note outstanding
                on March 31, 2005 shall amortize in equal quarterly payments
                payable on the last day of each calendar quarter beginning on
                March 31, 2005 with a final maturity on December 31, 2009.

        (B)     Subordinated Note. RACC shall receive from Great Lakes a
                subordinated promissory note with a face amount of $5,000,000
                (the "Subordinated Note" and, collectively with the Group A
                Return Conditions Note, the Group B Notes, the Deferral Note,
                and the Senior Note, the "Notes"), the form of which is attached
                hereto as Exhibit G. The interest rate on the Subordinated Note
                shall be six percent (6%) per annum. For the first three years
                after the date of issuance of the Subordinated Note, interest
                shall accrue on the outstanding principal amount under the
                Subordinated Note and shall be capitalized and added to
                principal on the last day of each calendar quarter commencing on
                March 31, 2003. Interest shall be payable in cash quarterly in
                arrears on the last day of each calendar quarter commencing on
                March 31, 2006 with a bullet maturity of the outstanding
                principal on September 30, 2007. The Subordinated Note

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                                      -11-

                shall contain covenants (financial and otherwise) and other
                terms and conditions typical for debt of this type.

10.     Engine Fleet Maintenance Program.

        (A)     Subject to (i) the establishment of the engine management team
                as set forth in Section 10(B) below, and (ii) the EMP
                requirement set forth in Section 10(C) below, RACC hereby
                consents to Great Lakes continued operation of the engines on
                the Aircraft on an "On Condition" basis. In the event that the
                FAA withdraws its approval of Great Lakes' "On Condition"
                TBO/CBO, then RACC's consent given hereunder shall automatically
                terminate.

        (B)     On or before January 30, 2003, Great Lakes agrees to establish
                an engine management team comprised of qualified maintenance
                personnel approved by RAAS, in its reasonable discretion, to
                manage Great Lakes' "On Condition" TBO/CBO program currently
                approved by the FAA. The engine management team shall consist of
                no less than two (2) persons. The engine management team shall
                be exclusively responsible for making all maintenance decisions
                with respect to the engines, including the necessity or
                frequency of hot section inspections and overhauls. The engine
                management team shall be responsible for timely providing to
                RACC any and all information RACC may request with respect to
                the engines.

        (C)     On or before April 30, 2003, Great Lakes will enter into an
                engine maintenance plan with a third-party vendor approved by
                RACC ("EMP"), which EMP shall include at least the following
                requirements:

                (1)     Each individual engine shall be enrolled in the EMP
                        immediately following its next scheduled or unscheduled
                        overhaul. Great Lakes shall be responsible to cause a
                        complete engine (both a gas generator module and a power
                        section module) to be overhauled simultaneously, so as
                        to produce a complete zero (0) time/cycle engine to be
                        enrolled in the EMP.

                (2)     The EMP shall be a "mature rate" plan. As such, (i) the
                        EMP shall be tracked on an individual engine basis, (ii)
                        the EMP shall require that EMP payments are made for
                        each engine sufficient to pay to the vendor for parts
                        and labor to complete the next overhaul.

                (3)     The EMP, and any engine balances within the EMP, shall
                        be fully assignable and transferable with the engine. As
                        such, the

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                                      -12-

                        party succeeding in interest to the engine (including,
                        without limitation, RACC) shall be entitled to the full
                        benefit of any EMP engine balances, without claim by
                        Great Lakes.

                (4)     Any default by Great Lakes of the terms and conditions
                        of the EMP shall constitute a default under all
                        applicable promissory notes, security agreements,
                        finance leases and/or operating leases. Great Lakes
                        agrees to execute appropriate amendments or other
                        agreements evidencing the addition of this requirement
                        to the promissory notes, security agreements, finance
                        leases and operating leases.

11.     Prepayments.

        (A)     Mandatory Prepayments. Not later than the earlier of ninety (90)
                days after the end of each fiscal year end of Great Lakes or the
                filing of Great Lakes' Form 10-K with the Securities and
                Exchange Commission ("Form 10-K") for such fiscal year, Great
                Lakes shall prepay amounts outstanding under the Notes in an
                aggregate amount equal to fifty percent (50%) of the Excess Cash
                Flow for such fiscal year, accompanied by a certificate of the
                chief financial officer of Great Lakes setting forth in
                reasonable detail the calculation of Excess Cash Flow for such
                fiscal year. "Excess Cash Flow" shall mean cash flow from
                operations as determined in accordance with generally accepted
                accounting principles less capital expenditures less all
                payments in respect of funded indebtedness of Great Lakes for or
                made during such fiscal year less $250,000.

        (B)     Voluntary Prepayment. Great Lakes may prepay its obligations in
                whole or in part under this Agreement or any of the Transaction
                Documents (as defined below) at any time without penalty.

        (C)     Application of Prepayments. All prepayments made pursuant to
                Section 11(A) or 11(B) shall be applied in the following order:
                first, to the Group A Return Conditions Note until such time as
                it has been paid in full, with such prepayments being applied to
                principal, interest and other amounts owing under the Group A
                Return Conditions Note in such order or preference as RACC may
                determine; second, to the Deferral Note until such time as it
                has been paid in full, with such prepayments being applied to
                principal, interest and other amounts owing under the Deferral
                Note in such order or preference as RACC may determine; third,
                to the Senior Note until such time as it has been paid in full,
                with such prepayments being applied to principal, interest and
                other amounts owing under the Senior Note in such order or

<PAGE>

                                      -13-

                preference as RACC may determine; fourth, to the Subordinated
                Note until such time as it has been paid in full, with such
                prepayments being applied to principal, interest and other
                amounts owing under the Subordinated Note in such order or
                preference as RACC may determine; and fifth, to the Group B
                Notes until such time as they have been paid in full, with such
                prepayments being applied to principal, interest and other
                amounts owing under the Group B Notes in such order or
                preference as RACC may determine; with all such prepayments to
                be applied to reduce the then-remaining installments due
                thereunder in the inverse order of scheduled maturity and, in
                the case of prepayments in respect of the Group B Notes, applied
                thereto on a pro rata basis.

12.     Other Agreements.

        (A)     Management. On or before the Effective Date (i) Douglas G. Voss
                shall assume the role of traditional Chairman of the Board of
                Directors of Great Lakes, (ii) Charles R. Howell shall have been
                appointed Chief Executive Officer of Great Lakes, (iii) James B.
                Glennon shall assume the duties of Chief Financial Officer for
                at least one hundred twenty (120) days following the Effective
                Date or until an appropriate replacement has been hired and
                given an opportunity to transition into the position, (iv)
                within one hundred twenty (120) days following the Effective
                Date, Great Lakes shall have found and have in place a qualified
                Chief Financial Officer with demonstrated experience and airline
                expertise and (v) Great Lakes shall have entered into management
                contracts in form and substance reasonably acceptable to RACC
                for a period of not less than twenty-four months with
                appropriate incentives with Mr. Howell and, within one hundred
                twenty (120) days following the Effective Date, with the new
                Chief Financial Officer described in clause (iv).

        (B)     Board Observer Rights. RACC shall have unlimited observer rights
                for the Great Lakes Board of Directors, subject only to being
                excused if either Great Lakes or RACC reasonably believes that
                participation would involve a conflict of interest for RACC.
                These observer rights shall not allow RACC to vote or enter into
                any discussions at any Board of Directors meeting. Without in
                any way limiting the foregoing, Great Lakes agrees to provide
                RACC with prior written notice (consistent with the notice given
                other directors) of the time, place and subject matter of any
                proposed meeting (or action by written consent) of the Board of
                Directors of Great Lakes, such notice to include true and
                complete copies of all documents furnished to any director in
                connection with such meeting or consent, provided there is

<PAGE>

                                      -14-

                no conflict of interest as provided above. Any two (2) of RACC's
                officers or authorized representatives will be entitled to
                attend as an observer at any such meeting or, if a meeting is
                held by telephone conference, to participate therein. Great
                Lakes also agrees to provide RACC with copies of the official
                minutes of every meeting of the Great Lakes Board of Directors
                or of resolutions taken by unanimous written consent within
                fifteen (15) days following such meeting or unanimous written
                consent, provided there is no conflict of interest as provided
                above. This Section 12(B) shall expire on the Limited
                Termination Date provided that Great Lakes is in compliance with
                this Agreement, each of the other Transaction Documents (as
                defined below) and any other agreement between itself and RACC.
                Great Lakes also agrees to hold actual shareholder meetings at
                least annually at such time and at such location as the Great
                Lakes Board of Directors may determine.

        (C)     Independent Directors. Great Lakes agrees to cause two new
                independent directors who are unaffiliated with RACC and Great
                Lakes and reasonably acceptable to RACC to be appointed to the
                Great Lakes Board of Directors by no later than March 15, 2003.
                RACC acknowledges that Mr. John Reardon is acceptable to it as
                one of the two directors.

13.     Collateral Security of Borrower. All indebtedness, obligations and
        liabilities of Great Lakes to RACC, existing on the Effective Date or
        arising thereafter, direct or indirect, joint or several, absolute or
        contingent, matured or unmatured, liquidated or unliquidated, secured or
        unsecured, arising by contract, operation of law or otherwise, arising
        or incurred under this Agreement, the Corporate Security Documents (as
        defined below), the Notes, the Group C Leases as amended by the Group C
        Lease Amendments, the Group B Security Agreements and any other notes,
        security agreements, leases or other agreements in favor of RACC or to
        which RACC is a party (such documents, as amended and in effect from
        time to time, are referred to collectively as the "Transaction
        Documents"), including, without limitation, all such indebtedness,
        obligations and liabilities that would become due but for the operation
        of the automatic stay pursuant to section 362(a) of the Federal
        Bankruptcy Code and the operation of sections 502(b) and 506(b) of the
        Federal Bankruptcy Code and including, without limitation, post-petition
        interest (such indebtedness, obligations and liabilities are
        collectively referred to as the "Obligations") shall be secured by a
        first priority perfected lien on all accounts receivable, inventory and
        (subject only to historic liens and liens entitled to priority under
        applicable law) other assets, including, without limitation, real
        estate, of Great Lakes, whether now owned or hereafter acquired,
        pursuant to the terms of a security agreement (the "Security
        Agreement"), the form of which is attached as Exhibit H hereto, the

<PAGE>

                                      -15-

        Security Agreement and Encumbrance Against Aircraft Carrier Engines,
        Propellers, Appliances and Spare Parts dated August 21, 1997, as amended
        and as to be further amended pursuant to a Third Amendment to Security
        Agreement (the "Security Agreement Amendment"; such Security Agreement
        as amended and to be amended by the Security Agreement Amendment is
        referred to as the "FAA Security Agreement"), the form of which is
        attached as Exhibit I hereto, the Amended and Restated Security
        Agreement for the Embraer model EMB-120ER aircraft with manufacturer's
        serial number 120-071 (the "120-071 Security Agreement"), the form of
        which is attached as Exhibit J hereto, and all other instruments and
        documents, including without limitation Uniform Commercial Code
        financing statements, required to be executed or delivered pursuant to
        the Security Agreement or any other document to which Great Lakes is a
        party (collectively, the "Corporate Security Documents"). The Corporate
        Security Documents shall terminate on the Limited Termination Date
        provided that Great Lakes is in compliance with this Agreement, each of
        the other Transaction Documents and any other agreement between itself
        and RACC.

14.     Effective Date; Conditions to Effectiveness.

        (A)     Effective Date. This Agreement shall become effective if, and
                only if, on or before 5:00 P.M. Eastern time on December 31,
                2002, each of the conditions precedent contained in this section
                has been satisfied (the first date as of which all of these
                conditions precedent shall have been satisfied is referred to
                herein as the "Effective Date").

        (B)     Conditions to Effectiveness. The effectiveness of this Agreement
                as a contract shall be subject to the occurrence or delivery of
                the following:

                (1)     This Agreement, executed by Great Lakes and RACC;

                (2)     The Group A Return Conditions Note, executed by Great
                        Lakes;

                (3)     The thirty (30) Group B Notes, executed by Great Lakes;

                (4)     The thirty (30) Group B Security Agreements, executed by
                        Great Lakes and RACC for the Group B Aircraft;

                (5)     FAA Bills of Sale, executed by RACC for the nine (9)
                        Group B Aircraft (UE-169, UE-170, UE-201, UE-202,
                        UE-204, UE-208, UE-210, UE-211 and UE-254) that are
                        currently subject to Existing Finance Agreements that
                        are leases;

<PAGE>

                                      -16-

                (6)     FAA Bill of Sale, executed by Iowa Great Lakes Flyers,
                        Inc. ("IGLF") for UE-225;

                (7)     The Deferral Note, executed by Great Lakes;

                (8)     The Senior Note, executed by Great Lakes;

                (9)     The Subordinated Note, executed by Great Lakes;

                (10)    A stock certificate in the name of RACC evidencing the
                        RACC Shares;

                (11)    The two (2) Group C Lease Amendments, executed by each
                        of Great Lakes and RACC;

                (12)    Security Agreement, executed by Great Lakes and RACC;

                (13)    The Security Agreement Amendment, executed by Great
                        Lakes and RACC;

                (14)    The 120-071 Security Agreement, executed by Great Lakes
                        and RACC;

                (15)    All UCC-1 Financing Statements required by the Corporate
                        Security Documents, naming Great Lakes as Debtor and
                        RACC as Secured Party;

                (16)    A copy of the resolutions of the Board of Directors of
                        Great Lakes approving this Agreement and the other
                        Transaction Documents (as defined below) to be delivered
                        by it hereunder and the transactions contemplated
                        thereby, certified by an officer to be true and correct
                        and in full force and effect as of the Effective Date;

                (17)    A copy of (i) the charter and (ii) the by-laws of Great
                        Lakes, each certified by an officer to be true and
                        correct and in full force and effect as of the Effective
                        Date;

                (18)    Corporate and tax good standing certificates for Great
                        Lakes in (i) its jurisdiction of incorporation, (ii) the
                        jurisdiction where its chief operating office is
                        located, and (iii) any jurisdiction where its material
                        assets are located;

<PAGE>

                                      -17-

                (19)    Legal opinions of Briggs and Morgan, P.A., counsel to
                        Great Lakes, and of Davis, Brown, Koehn, Shors &
                        Roberts, P.C., special Iowa counsel to Great Lakes, with
                        respect to corporate authority, enforceability,
                        perfection (UCC and FAA) and such other matters as
                        RACC's counsel may reasonably request;

                (20)    Perfection certificate, executed by Great Lakes;

                (21)    Copies of the executed employment agreements between
                        Great Lakes and each of Messrs. Charles Howell and
                        Douglas Voss;

                (22)    Great Lakes shall have paid all of RACC's legal and
                        out-of-pocket expenses incurred through the Effective
                        Date as set forth on Schedule 4 hereto;

                (23)    All outstanding amounts that are then due and payable on
                        or before the Effective Date by Great Lakes under the
                        Existing Finance Agreements relating to the Aircraft,
                        including, without limitation, the $800,000 payment that
                        is due on December 15, 2002 and a $400,000 payment for
                        the period from December 15, 2002 until the Effective
                        Date (provided that such $400,000 payment may be paid by
                        not later than January 15, 2003);

                (24)    Great Lakes shall provide to RACC reasonably
                        satisfactory evidence that UCC-3 termination statements
                        have been filed with respect to Coast Business Credit;
                        and

                (25)    Letters substantially in the form of Exhibit K attached
                        hereto executed and delivered to RACC by each of Douglas
                        G. Voss, Gayle R. Brandt, Charles R. Howell and IGLF
                        confirming that such shareholder or option holder agrees
                        (i) not to transfer any of its Common Stock or any
                        options to purchase Common Stock or (ii) purchase any
                        additional shares of Common Stock or exercise any
                        options to purchase shares, whether now in existence or
                        hereafter granted, for a period of three (3) years
                        commencing on the Effective Date; provided, however,
                        that Mr. Howell shall be permitted to purchase publicly
                        traded shares of Common Stock on the open market so long
                        as such purchase does not result in such purchaser
                        becoming a five percent (5%) owner of Great Lakes. Such
                        letter shall further provide for that the lockup
                        agreements shall be released upon the earlier to occur
                        of (y) an ownership change of Great Lakes for purposes
                        of Section 382 of the Internal Revenue Code of 1986 such
                        that the utilization of its Net Operating Loss (as
                        defined in Section

<PAGE>

                                      -18-

                        16(A)(6)) is restricted for tax purposes or (z) delivery
                        by Great Lakes of an opinion issued by KPMG LLP or other
                        tax advisers mutually acceptable to RACC and Great Lakes
                        in form and substance reasonably acceptable to RACC
                        stating that release of the lockup agreements will not
                        jeopardize the ability of Great Lakes to utilize its Net
                        Operating Loss or have the potential to jeopardize the
                        ability of Great Lakes to utilize its Net Operating
                        Loss; provided, however, that the letter executed and
                        delivered by Gayle R. Brandt shall also permit sale of
                        $50,000 worth of Common Stock per year, consistent with
                        the terms of her and Mr. Voss' divorce decree.

15.     Great Lakes Covenants. As partial consideration for the settlements and
        agreements of RACC contained herein, until such time as all Obligations
        shall be paid in full in cash, Great Lakes agrees as follows:

        (A)     Great Lakes Indebtedness. Great Lakes will not create, incur,
                assume, guarantee or be or remain liable, contingently or
                otherwise, with respect to any Indebtedness other than: (1) the
                Obligations; (2) Indebtedness existing on the Effective Date and
                described on Schedule 5; and (3) other Indebtedness incurred in
                the ordinary course of business provided that at the time of the
                incurrence of any such Indebtedness the aggregate amount of
                Indebtedness outstanding pursuant to this clause (4) shall not
                exceed the Permitted Amount then in effect. The "Permitted
                Amount" at any time shall be the amount based on the most recent
                financial statements of Great Lakes delivered pursuant to
                Section 15(D) and calculated quarterly based on the Debt Service
                Ratio as follows, provided, however, that on and after the
                occurrence of the Limited Termination Date, the Permitted Amount
                shall be $5,000,000:

                                                    PERMITTED AMOUNT OF
                  DEBT SERVICE RATIO                INDEBTEDNESS
                  -----------------------------------------------------
                  Less than 2.2:1.0                      $    1,500,000
                  -----------------------------------------------------
                  Greater than 2.2:1.0 but less
                   than or equal to 2.5:1.0              $    2,500,000
                  -----------------------------------------------------
                  Greater than 2.5:1.0                   $    3,500,000
                  -----------------------------------------------------

                "Indebtedness" means, whether on or off balance sheet for
                purposes of with generally accepted accounting principles
                ("GAAP"): (a) all obligations for borrowed money or other
                extensions of credit, whether secured or unsecured, absolute or
                contingent, including, without limitation, unmatured
                reimbursement obligations with respect to letters of credit or
                guarantees issued for the account of or on behalf of

<PAGE>

                                      -19-

                Great Lakes, all obligations representing the deferred purchase
                price of property, other than accounts payable arising in the
                ordinary course of business, and all obligations arising under
                capitalized leases, synthetic leases, operating leases and
                securitization transactions, (b) all obligations evidenced by
                bonds, notes, debentures or other similar instruments, (c) all
                obligations secured by liens on property owned or acquired by
                Great Lakes whether or not the obligations secured thereby shall
                have been assumed, and (d) all guaranties by such entity of any
                of the foregoing for the benefit of another person. "Debt
                Service Ratio" shall be defined as provided in the attached
                Schedule 6.

        (B)     Payment of Dividends and Distributions. Great Lakes shall not
                declare or make any dividend or other distributions to any
                holder of any Common Stock or any other capital stock of Great
                Lakes, except for dividends declared or made in the form of
                Common Stock, redeem or purchase any Common Stock or any other
                capital stock of Great Lakes or make any loan or other payments
                to any affiliate or holder of Common Stock or any other capital
                stock of Great Lakes, at any time during the period from and
                after the Effective Date to and including December 31, 2005.
                Thereafter, payment of dividends or other distributions shall be
                permitted provided that no Event of Default shall then exist or
                arise as a result of any such dividend or distribution.

        (C)     Cost Reduction Program. Great Lakes shall fully implement by not
                later than March 31, 2003 a cost reduction program (the "Cost
                Reduction Program"). For fiscal year 2003, the Cost Reduction
                Program shall result in a an overall annual cost reduction of
                not less than $550,000. For fiscal year 2004 and beyond, the
                Cost Reduction Program shall result in an overall annual cost
                reduction of not less than $730,000. Evidence of the overall
                annual cost reduction under the Cost Reduction Program shall be
                set forth in reasonable detail as part of Great Lakes' annual
                officer's certificate to be delivered pursuant to Section
                15(D)(3). Great Lakes also agrees to provide evidence reasonably
                satisfactory to RACC of the closing of Great Lakes' Chicago hub
                by not later than January 30, 2003.

        (D)     Provision of Financial Statements.

                (1)     Quarterly Financial Statements. As soon as available
                        and, in any event, within forty-five (45) days after the
                        end of each of the first three (3) quarters of each
                        fiscal year, Great Lakes shall furnish to RACC copies of
                        its financial statements, consisting of at least a
                        balance sheet as at the close of such quarter and

<PAGE>

                                      -20-

                        statements of earnings for such quarter and for the
                        period from the beginning of the fiscal year to the
                        close of such quarter, in each case in conformity with
                        GAAP, duly certified by the principal financial officer
                        of Great Lakes.

                (2)     Annual Financial Statements. As soon as available and,
                        in any event, within ninety (90) days after the end of
                        each fiscal year, Great Lakes shall furnish to RACC
                        copies of its audited financial statements, consisting
                        of at least a balance sheet of Great Lakes for such year
                        and statements of earnings and cash flows, in each case
                        in conformity with GAAP setting forth in each case in
                        comparative form corresponding figures from the
                        preceding fiscal year, with all such financial
                        statements to be certified without qualification, except
                        for any qualifications so given in the past, by Great
                        Lakes' certified public accountants.

                (3)     Officer's Certificate. At the time of delivery of the
                        financial statements of Great Lakes provided for in
                        Section 15(D)(1) and (2), a certificate of the Chief
                        Financial Officer of Great Lakes (I) to the effect that
                        no Default or Event of Default exists or, if any Default
                        or Event of Default does exist, specifying the nature
                        and extent thereof and what action Great Lakes proposes
                        to take with respect thereto; (II) calculating the
                        Permitted Amount, the Debt Service Ratio, Quarterly Free
                        Cash Flow and its various components as set forth on
                        Schedule 6 as at the end of such fiscal period; (III)
                        setting forth a detailed variance analysis showing how
                        such financial statements differ from the business plan
                        delivered by Great Lakes to RACC on December 12, 2002
                        (the "Financial Plan"); and (IV) outline in reasonable
                        detail, and accompanied by supporting documentation, in
                        a manner reasonably satisfactory to RACC, demonstrating
                        Great Lakes' compliance with the Cost Reduction Program
                        requirements set forth in Section 15(C).

        (E)     Confidentiality and Non-Disclosure. This Agreement is
                confidential between the parties. Great Lakes agrees not to
                disclose the provisions of this Agreement to any person without
                the prior written consent of RACC, except (i) as may be required
                by Great Lakes in order to restructure its current debt with
                existing aircraft creditors, provided that Great Lakes may
                disclose solely the fact that its obligations to RACC are being
                restructured and the terms of the restructured debt, including,
                without limitation, RACC's receipt of the RACC Shares, but Great
                Lakes may not disclose any other details of this Agreement, (ii)
                to its legal and financial advisers and its

<PAGE>

                                      -21-

                independent public accountants (on the condition that they agree
                not to disclose such provisions) and (iii) as may be required by
                applicable law, including applicable securities law.

        (F)     No Material Transactions. Great Lakes shall not become a party
                to or agree to or effect any merger, amalgamation or
                consolidation, asset acquisition, stock acquisition, disposition
                of any of its assets or create or permit to exist any subsidiary
                unless, as a result of such disposition, all Obligations shall
                be contemporaneously paid in full in cash. This Section 15(F)
                shall expire on the Limited Termination Date provided that Great
                Lakes is in compliance with this Agreement, each of the other
                Transaction Documents and any other agreement between itself and
                RACC.

        (G)     Affiliate Transactions. Great Lakes shall not engage in any
                transaction with any affiliate, including any contract,
                agreement or other arrangement providing for the furnishing of
                services to or by, providing for rental of real or personal
                property to or from, or otherwise requiring payments to or from
                any such affiliate or, to the knowledge of Great Lakes, any
                corporation, partnership, trust or other entity in which any
                such affiliate has a substantial interest or is an officer,
                director, trustee or partner, on terms more favorable to such
                person than would have been obtainable on an arm's-length basis
                in the ordinary course of business.

        (H)     Equity Issuances. Except for issuances pursuant to the equity
                incentive plans as described in Section 8(B) above and the
                issuance of Common Stock dividends pursuant to Section 15(B)
                above, Great Lakes shall not issue any capital stock or any
                warrants, options or other rights to acquire any of its capital
                stock or any other form of equity capital unless the terms of
                each such issuance are reasonably acceptable to RACC. Capital
                stock does not include preferred stock as described in Section
                1504(a)(4) of the Internal Revenue Code of 1986 and regulations
                thereunder, interpretations thereof and rulings applying or
                interpreting such Section.

        (I)     Further Assurances. Great Lakes will promptly furnish such
                information and execute and deliver such further documents, and
                do all other such acts as RACC may reasonably request to further
                implement the provisions contained in this Agreement, including,
                without limitation, its obligation to cooperate with RACC to
                facilitate any assignment of any of the Group B Notes pursuant
                to Section 3.

<PAGE>

                                      -22-

        (J)     Shelf Registration. Great Lakes shall, simultaneously with the
                completion of its Form 10-K for its 2002 fiscal year, file with
                the Securities and Exchange Commission a Shelf Registration as
                to the RACC Shares and any Anti-Dilution Shares and shall use
                its best efforts thereafter to obtain and maintain the
                effectiveness of the Shelf Registration. "Shelf Registration"
                means the shelf registration pursuant to Rule 145 promulgated
                under the Securities Act of 1933, as amended, by Great Lakes of
                the sale by RACC (which sale, at the option of RACC in its sole
                and absolute discretion, may be through an underwriter) of the
                RACC Shares and any Anti-Dilution Shares held by RACC. In the
                event of the issuance of any Anti-Dilution Shares, Great Lakes
                will promptly either (i) amend the Shelf Registration to include
                such Anti-Dilution Shares or (ii) or file an additional Shelf
                Registration with respect to such Anti-Dilution Shares. Great
                Lakes shall not allow the effectiveness of the Shelf
                Registration to lapse at any time after its initial
                effectiveness as a result of events within Great Lakes' control.
                If, at any time after its initial effectiveness, the Shelf
                Registration shall cease to be effective as the result of events
                beyond Great Lakes' control, Great Lakes shall at all times
                thereafter use its best efforts to reinstate the effectiveness
                of the Shelf Registration.

        (K)     Incentive Compensation Plan. Great Lakes shall not adopt any
                incentive compensation plan for any of its officers that
                provides for the possibility of aggregate payments thereunder to
                any officers in any fiscal year in excess of such officer's
                current annual base salary without the prior written approval of
                RACC.

        (L)     Press Release. On or about the Effective Date, Great Lakes shall
                have issued a press release relating to the transactions
                contemplated hereby substantially in the form of Exhibit L
                attached hereto.

        (M)     Quarterly Free Cash Flow. Quarterly Free Cash Flow shall not be
                less than $(500,000).

        (N)     Debt Service Threshold. The Debt Service Threshold shall be
                calculated and maintained as set forth on Schedule 6 to this
                Agreement.

        (O)     Net Debt to EBITDA. The Net Debt to EBITDA Threshold shall be
                calculated and maintained as set forth on Schedule 6 to this
                Agreement. "Net Debt" means on balance sheet Indebtedness of
                Great Lakes, including current maturities, minus cash on hand.
                "EBITDA" means with respect to any rolling four quarter period,
                an amount equal

<PAGE>

                                      -23-

                to the sum of (a) net income of Great Lakes for such fiscal
                period, plus (b) in each case to the extent deducted in the
                calculation of Great Lakes' net income and without duplication,
                (i) depreciation and amortization for such period, plus (ii)
                income tax expense for such period, plus (iii) the aggregate
                amount of interest required to be paid or accrued by Great Lakes
                during such period on all Indebtedness of the Great Lakes and
                its subsidiaries outstanding during all or any part of such
                period, whether such interest was or is required to be reflected
                as an item of expense or capitalized, including payments
                consisting of interest in respect of any capitalized lease or
                any synthetic lease, and including commitment fees, agency fees,
                facility fees, balance deficiency fees and similar fees or
                expenses in connection with the borrowing of money, plus (iv)
                other noncash charges for such period, all as determined in
                accordance with GAAP.

        (P)     Capital Expenditures. Great Lakes shall not make Capital
                Expenditures that exceed, in the aggregate, $1,000,000 for its
                2003 fiscal year and $800,000 for each fiscal year thereafter,
                provided, however, that for each fiscal year commencing after
                the occurrence of the Limited Termination Date, Great Lakes
                shall be allowed up to $1,100,000 in Capital Expenditures per
                year. "Capital Expenditures" means amounts paid or Indebtedness
                incurred by Great Lakes in connection with the purchase or lease
                by Great Lakes of fixed assets, both tangible (such as land,
                buildings, fixtures, machinery and equipment) and intangible
                (such as patents, copyrights, trademarks, franchises and good
                will), that would be required to be capitalized and shown on its
                balance sheet in accordance with GAAP, provided that this
                Section 15(P) shall not include any item customarily charged
                directly to expense or depreciated over a useful life of twelve
                (12) months or less in accordance with GAAP.

        (Q)     Restructuring of Other Aircraft Indebtedness. As a condition to
                the effectiveness of this Agreement, Great Lakes was to have
                delivered to RACC written evidence reasonably satisfactory to
                RACC that Great Lakes' Indebtedness owing to other similarly
                situated aircraft creditors (specifically, Finova Capital, CIT
                and Boeing Capital) shall have been restructured such that none
                of these creditors shall be paid more than RACC (on a relative
                basis). Great Lakes has entered into term sheets with regard to
                restructuring its Indebtedness and other obligations with each
                of its aircraft creditors, copies of which were provided to RACC
                on December 26, 2002, the terms of which are acceptable to RACC.
                Great Lakes agrees to implement such restructurings pursuant to
                the term sheets provided to RACC, and RACC agrees to allow Great
                Lakes to implement such restructurings so long as such

<PAGE>

                                      -24-

                restructurings follow, in a manner reasonably satisfactory to
                RACC, the term sheets provided to RACC on December 26, 2002. The
                failure of Great Lakes to enter into restructurings that follow
                these term sheets in a manner reasonably satisfactory to RACC
                shall constitute an Event of Default, as set forth in Section
                17(A)(3).

16.     Representations and Warranties.

        (A)     By Great Lakes. Great Lakes represents and warrants to RACC as
                of the date hereof that:

                (1)     Authority and Enforceability. Great Lakes has the full
                        power to enter into and perform its respective
                        obligations under this Agreement, including, without
                        limitation, the issuance of the RACC Shares and any
                        issuance of Anti-Dilution Shares that may be required by
                        Great Lakes to RACC and all other Transaction Documents
                        contemplated hereby or executed pursuant hereto to which
                        Great Lakes is a party. The execution and delivery of
                        this Agreement, the Notes, the Group B Security
                        Agreements, the Security Agreement, the Security
                        Agreement Amendment and all other Transaction Documents
                        contemplated hereby or executed pursuant hereto to which
                        Great Lakes is a party and the performance and
                        observance of their terms, conditions and obligations
                        have been duly authorized by all necessary action on the
                        part of Great Lakes. This Agreement, the Notes, the
                        Group B Security Agreements, the Security Agreement, the
                        Security Agreement Amendment and all other Transaction
                        Documents contemplated hereby or executed pursuant
                        hereto constitute, when executed and delivered by Great
                        Lakes to RACC, will be valid and binding obligations of
                        Great Lakes enforceable in accordance with their terms
                        (subject to bankruptcy, insolvency, reorganization,
                        moratorium or similar laws relating to or affecting
                        creditors' rights generally and general principles of
                        equity).

                (2)     No Conflict. The execution, delivery and performance of
                        this Agreement, the Notes, the Group B Security
                        Agreements, the Security Agreement, the Security
                        Agreement Amendment and all other Transaction Documents
                        to which Great Lakes is a party and the consummation of
                        the transactions herein contemplated on the part of
                        Great Lakes, including, without limitation, the issuance
                        to RACC of the RACC Shares and any Anti-Dilution Shares,
                        will not result in a breach or violation of any of the
                        terms or provisions of, or constitute a default under,

<PAGE>

                                      -25-

                        any statute, rule or regulation applicable to, or order
                        of any governmental body or agency or any court having
                        jurisdiction over Great Lakes or any of its properties,
                        or any agreement or instrument to which Great Lakes is a
                        party or by which Great Lakes is bound or to which any
                        of the properties of Great Lakes is subject, or the
                        charter or by-laws of Great Lakes.

                (3)     Capitalization. As of the Effective Date, the authorized
                        capital stock of Great Lakes consists solely of
                        50,000,000 shares of Common Stock and 25,000,000 shares
                        of preferred stock, par value $.01 per share (the
                        "Preferred Stock"), of Great Lakes. On the Effective
                        Date, Great Lakes will have no outstanding capital stock
                        other than 8,680,186 shares of Common Stock, all of
                        which shall be owned as set forth in Schedule 7 hereto
                        and shall be duly authorized, validly issued, fully paid
                        and non-assessable. Upon the issuance of any RACC Shares
                        in accordance with the terms of Section 8, such shares
                        of Common Stock shall be duly authorized, validly
                        issued, fully paid and non-assessable.

                (4)     Options, Etc. Other than as disclosed on Schedule 8
                        hereto, there are no outstanding rights (either
                        preemptive or other) or options to subscribe for or
                        purchase from Great Lakes and no warrants or other
                        agreements providing for or requiring the issuance by
                        Great Lakes of any capital stock of Great Lakes. The
                        issuance of the RACC Shares or any Anti-Dilution Shares
                        shall not be subject to pre-emptive rights in favor of
                        any present or future stockholders of Great Lakes.

                (5)     Litigation. Except as set forth on Schedule 9 hereto,
                        there are no actions, suits, proceedings or
                        investigations of any kind pending or threatened against
                        Great Lakes before any governmental authority, that, (a)
                        if adversely determined, might, either in any case or in
                        the aggregate, (i) have a material adverse effect on the
                        business, properties, prospects, condition (financial or
                        otherwise), assets, operations or income of Great Lakes,
                        or (ii) materially impair the right of Great Lakes to
                        carry on business substantially as now conducted by
                        them, or result in any substantial liability not
                        adequately covered by insurance, or for which adequate
                        reserves are not maintained on the consolidated balance
                        sheet of Great Lakes, or (b) which question the validity
                        of this Agreement or any of the other Transaction
                        Documents, or any action taken or to be taken pursuant
                        hereto or thereto.

<PAGE>

                                      -26-

                (6)     Net Operating Loss. The net operating loss carryover
                        ("Net Operating Loss Carryover" or "Net Operating
                        Loss"), as that term is defined by section 172 of the
                        Internal Revenue Code of 1986 as currently in effect
                        (the "Code"), of Great Lakes available for use by Great
                        Lakes (subject to adjustment upon audit) in computing
                        its federal income tax liability for the year ending
                        December 31, 2002, calculated as of the beginning of
                        such year based on the tax provision for the year ended
                        December 31, 2001, is $80,308,934. Based on the
                        reasonable judgment of Great Lakes' management, the
                        amount of the Net Operating Loss for the year ended
                        December 31, 2002, after taking into account the
                        transactions contemplated under this Agreement, is
                        projected to be at least $70,000,000 (subject to
                        adjustment upon audit), but this amount cannot be
                        determined with certainty as of the date hereof because
                        of certain unknown variables, including (1) the fact
                        that the accounting and tax operating results for the
                        year ending December 31, 2002 are not finalized and (2)
                        the impact of Great Lakes restructuring its indebtedness
                        with other creditors is not known.

        (B)     By RACC. RACC represents and warrants to Great Lakes that it has
                the full power to enter into and perform its obligations under
                this Agreement and all other documents contemplated hereby or
                executed pursuant hereto. The execution and delivery of this
                Agreement and all other Transaction Documents contemplated
                hereby or executed pursuant hereto and the performance and
                observance of their terms, conditions and obligations have been
                duly authorized by all necessary action on the part of RACC.
                This Agreement and all other Transaction Documents contemplated
                hereby or executed pursuant hereto constitute, when executed and
                delivered by RACC to Great Lakes, valid and binding obligations
                of RACC, respectively, enforceable in accordance with their
                terms (subject to bankruptcy, insolvency, reorganization,
                moratorium or similar laws relating to or affecting creditors'
                rights generally and general principles of equity).

17.     Events of Default and Remedies.

        (A)     The following events shall constitute "Events of Default" under
                this Agreement:

                (1)     The failure by any party to perform any promise,
                        agreement, obligation, warranty or covenant made by it
                        herein or in any other Transaction Document, if such
                        default is not cured by Great Lakes, on the one hand, or
                        RACC, on the other, within

<PAGE>

                                      -27-

                        thirty (30) calendar days of receipt of notice from any
                        party specifying such default; provided, however, that
                        (i) there shall be no cure period, except as otherwise
                        specifically set forth in the applicable Transaction
                        Document, with respect to any payment default by Great
                        Lakes in respect of any of the Obligations and (ii)
                        there shall be no notice or cure period with respect to
                        failure to comply with Section 12(A)(iv) and (v) of this
                        Agreement;

                (2)     Any "Event of Default" as defined in any of the
                        Transaction Documents shall have occurred; or

                (3)     If Great Lakes fails to implement restructurings with
                        each of its aircraft creditors (Finova Capital, Boeing
                        Capital and CIT) on final terms that, in a manner
                        reasonably satisfactory to RACC, implement the financial
                        and other terms set forth in the term sheets provided to
                        RACC on December 26, 2002.

        (B)     Remedies. Upon the occurrence of any Event of Default, a
                non-defaulting party may proceed with every remedy available at
                law or equity or provided for herein, or, in the case of RACC
                upon the occurrence of any Event of Default by Great Lakes, in
                any Transaction Document or document executed in connection
                herewith. No delay or failure of any party in the exercise of
                any right or remedy provided for hereunder shall be deemed a
                waiver of the right by such party, and no exercise or partial
                exercise or waiver of any right or remedy shall be deemed a
                waiver of any further exercise of such right or remedy or of any
                other right or remedy that RACC may have. The rights and
                remedies herein expressed are cumulative and not exclusive of
                any right or remedy that any party shall otherwise have.
                Further, nothing contained herein shall obligate any party to
                undertake any action unless required by law.

        (C)     Default Interest Rate. Upon the occurrence and during the
                continuance of any Event of Default, the outstanding principal
                under each of the Notes shall bear interest at the Default
                Interest Rate. The "Default Interest Rate" is defined as LIBOR
                plus 600 basis points.

18.     Notices. Any notice pertaining to or required by this Agreement shall be
        deemed sufficiently given if personally delivered or sent by registered
        or certified mail, return receipt requested, to the party to whom said
        notice is to be given, or sent via telecopier with oral confirmation
        from a person at the receiving office that the transmission has been
        received, or sent via overnight carrier. Notices sent by registered or
        certified mail shall be deemed given on the third day after the date of
        postmark. Notices hand-delivered shall be

<PAGE>

                                      -28-

        deemed given on the date delivered. Notices forwarded by telecopier
        shall be deemed given upon the foregoing oral confirmation that the
        transmission has been received. Notices sent by overnight carrier shall
        be deemed delivered the day after being forwarded. Until changed by
        written notice given by any of the noted parties, the addresses of the
        parties shall be as follows:

                Great Lakes:      Great Lakes Aviation, Limited
                                  Attention:  President
                                  1022 Airport Parkway
                                  Cheyenne, Wyoming  82001
                                  Telephone:  (307) 432-7000
                                  Telecopier: (307) 432-7001

                with a copy to:   Briggs and Morgan, P.A.
                                  Attention:  Timothy R. Thornton
                                  2400 IDS Center
                                  Minneapolis, Minnesota  55402
                                  Telephone:  (612) 334-8400
                                  Telecopier: (612) 334-8650

<PAGE>

                                      -29-

                RACC:             Raytheon Aircraft Credit Corporation
                                  Attention: President
                                  10511 E. Central Avenue
                                  Wichita, Kansas 67206
                                  Telephone:  (316) 676-7673
                                  Telecopier: (316) 676-6975

                with a copy to:   Raytheon Company
                                  Attention: Richard A. Goglia
                                  Vice President and Treasurer
                                  141 Spring Street
                                  Lexington, Massachusetts 02421
                                  Telephone:  (781) 860-2240
                                              (781) 860-2341

                and               Peter D. Schellie, Esq.
                                  Bingham McCutchen LLP
                                  1120 20th Street, NW, Suite 800
                                  Washington, DC  20036
                                  Telephone:  (202) 778-6150
                                  Telecopier: (202) 778-6155

19.     Miscellaneous.

        (A)     Amendments. No provision or term of this Agreement may be
                amended, modified, revoked, supplemented, waived or otherwise
                changed except by a written instrument duly executed by Great
                Lakes and RACC and designated as an amendment, supplement or
                waiver.

        (B)     Counterparts. This Agreement may be executed in two (2) or more
                counterparts, each of which shall be deemed an original.

        (C)     Headings. The paragraph headings herein are for convenience only
                and shall not affect the construction hereof.

        (D)     Use of Terms. As used herein, words in any gender shall be
                deemed to include the other gender and the singular shall be
                deemed to include the plural, and vice versa.

        (E)     Severability. If any provision in this Agreement shall be held
                invalid, illegal or unenforceable in any jurisdiction, the
                validity, legality and enforceability of the remaining
                provisions of this Agreement shall not be impaired thereby, nor
                shall the validity, legality or enforceability of

<PAGE>

                                      -30-

                any such defective provision be in any way affected or impaired
                in any other jurisdiction.

        (F)     Governing Law and Informed Choice. THIS AGREEMENT WAS MADE AND
                ENTERED INTO IN THE STATE OF KANSAS AND THE LAW GOVERNING THIS
                TRANSACTION SHALL BE THAT OF THE STATE OF KANSAS AS IT MAY FROM
                TIME TO TIME EXIST. THE LAWS OF THE STATE OF KANSAS SHALL APPLY
                TO ANY AND ALL MATTERS ARISING FROM OR RELATED TO THIS
                AGREEMENT. THE PARTIES AGREE THAT ANY LEGAL PROCEEDING BASED
                UPON THE PROVISIONS OF THIS AGREEMENT OR, UNLESS OTHERWISE
                EXPRESSLY PROVIDED THEREIN, ANY OTHER TRANSACTION DOCUMENT,
                SHALL BE BROUGHT EXCLUSIVELY IN EITHER THE UNITED STATES
                DISTRICT COURT OF THE DISTRICT OF KANSAS AT WICHITA, KANSAS OR
                IN THE EIGHTEENTH JUDICIAL DISTRICT COURT OF SEDGWICK COUNTY,
                KANSAS TO THE EXCLUSION OF ALL OTHER COURTS AND TRIBUNALS.
                NOTWITHSTANDING THE ABOVE, RACC (AT ITS SOLE OPTION) MAY
                INSTITUTE A LEGAL PROCEEDING IN ANY JURISDICTION AS MAY BE
                APPROPRIATE IN ORDER FOR RACC TO OBTAIN POSSESSION OF AND
                FORECLOSE UPON THE PROPERTY OR ASSET IN WHICH IT HAS A SECURED
                OR OWNERSHIP INTEREST. THE PARTIES CONSENT AND AGREE TO BE
                SUBJECT TO THE JURISDICTION OF THE AFORESAID COURTS IN SUCH
                PROCEEDING.

        (G)     Damages. To the extent that any party hereto is subject to
                liability for any breach under this Agreement or any of the
                other Transaction Documents, the liability of such party shall
                be limited to the actual and direct monetary damages caused by
                such breach. In no event shall any party hereto be liable for
                indirect, special, consequential, multiple or punitive damages,
                or any damage deemed to be of an indirect or consequential
                nature arising out of or related to its performance hereunder,
                whether based upon breach of contract, warranty, negligence and
                whether grounded in tort, contract, civil law or other theories
                of liability, including strict liability. To the extent that
                this limitation of liability conflicts with any other
                provision(s) in this Agreement or any of the other Transaction
                Documents, said provision(s) shall be regarded as amended to
                whatever extent required to make such provision(s) consistent
                with this Section 19(G).

        (H)     Successors and Assigns. This Agreement shall be binding upon and
                enure to the benefit of RACC and Great Lakes and their
                respective successors and assigns, provided that Great Lakes may
                not assign any

<PAGE>

                                      -31-

                rights, duties or obligations hereunder. Each of the Notes and
                related Transaction Documents may be fully transferred by RACC
                at any time to any person.

        (I)     Exhibits and Schedules. All exhibits and schedules referred to
                herein and attached hereto are hereby incorporated by reference
                as an integral part of this Agreement, subject to the terms and
                conditions set forth herein.

        (J)     Entire Agreement. This Agreement, taken together with the
                additional Transaction Documents to be executed in connection
                herewith (as set forth herein), constitute the entire agreement
                between RACC and Great Lakes concerning the subject matter
                hereof and supersede and merge any prior written or oral
                agreements between RACC and Great Lakes concerning the subject
                matter hereof. The parties hereby acknowledge and agree that the
                Limited Recourse Guaranty of Douglas G. Voss, the Limited
                Recourse Guaranty of IGLF, the Stock Pledge Agreement by and
                among Douglas G. Voss, IGLF and RACC, and the Irrevocable Proxy
                of Douglas G. Voss in favor of RACC, each dated as of May 14,
                2002, are terminated in their entirety.

        (K)     Time of Essence. Time is of the essence with respect to all of
                the provisions of this Agreement.

        (L)     Termination of Agreement. This Agreement shall terminate upon
                the indefeasible payment in full in cash of all of the
                Obligations.

             [The remainder of this page intentionally left blank.]

<PAGE>

                                      -32-

In witness of the mutual promises, covenants and agreements set forth herein,
the parties have caused their duly authorized officers to execute this Agreement
on the day and year set forth beneath their signatures hereto.

                                     GREAT LAKES AVIATION, LTD., an Iowa
                                     corporation

                                     By:  /s/ Charles R. Howell IV
                                         -----------------------------
                                     Its   CEO
                                         -----------------------------
                                     Date:   12-31-02
                                           ---------------------------

                                     RAYTHEON AIRCRAFT CREDIT CORPORATION,
                                     a Kansas corporation

                                     By:  /s/ Andrew A. Mathews
                                         -----------------------------
                                     Its   President
                                         -----------------------------
                                     Date:   12/31/02
                                           ---------------------------

<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A             Form of Group A Return Conditions Note

Exhibit B             Form of Group B Note

Exhibit C             Form of Group B Security Agreement

Exhibit D             Form of Group C Lease Amendment

Exhibit E             Form of Deferral Note

Exhibit F             Form of Senior Note

Exhibit G             Form of Subordinated Note

Exhibit H             Form of Security Agreement

Exhibit I             Form of Security Agreement Amendment

Exhibit J             Form of 120-071 Security Agreement

Exhibit K             Form of Shareholder or Option Holder Letter

Exhibit L             Form of Press Release


Schedule 1            Group A Aircraft Return Schedule

Schedule 2            Group B Notes Payment and Amortization Schedule

Schedule 3            List of Great Lakes' Direct Competitors

Schedule 4            RACC's Legal and Out-of-Pocket Expenses

Schedule 5            Existing Indebtedness of Great Lakes

Schedule 6            Debt Service Covenant

Schedule 7            Great Lakes Capitalization

Schedule 8            Outstanding Rights and Options to Purchase Capital Stock
                      of Great Lakes

Schedule 9            Litigation