Document:

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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT
BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL
APPLICABLE STATE SECURITIES LAWS.

                                  RENTECH, INC.

                    OPTION TO PURCHASE SHARES OF COMMON STOCK

                                       OF

                                  RENTECH, INC.

         FOR VALUE RECEIVED, FOREST OIL CORPORATION ("Optionee"), is entitled
to purchase, subject to the provisions of this Option, from RENTECH, INC., a
Colorado corporation ("Company"), at any time not later than 5.00 P.M.,
Denver time, on December 31, 2004 (the "Expiration Date"), 1,000,000 shares
of common stock, having $.01 par value per share, of the Company ("Common
Stock") at an exercise price, subject to adjustment as set forth below, of
$5.00 per share. The number of shares of Common Stock to be received upon the
exercise of this Option and the price to be paid for a share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.

1.       OPTION PRICE; FAIR MARKET VALUE.

         (a) The option price is $5.00 for each share of Common Stock., as
the same may be adjusted from time to time in accordance with Section 4
hereof; provided, however, that the maximum aggregate option price for all
shares of Common Stock issuable upon the exercise of this Option (or the
aggregate of all Options resulting from the subdivision of this Option) shall
not exceed $5,000,000.00.

         (b) For purposes of this Option, but only if and to the extent
applicable, the fair market value of such Common Stock (the "Fair Market
Value") shall be determined as follows: (i) if the Common Stock is listed on
a national securities exchange or admitted to unlisted trading privileges on
such exchange, then the Fair Market Value shall be the last reported sale
price of the Common Stock on the composite tape of such exchange, or, if no
such sale is made on any trading day, the average closing bid and asked
prices for such day on the composite tape of such exchange; or (ii) if the
Common Stock is not so listed or admitted to unlisted trading privileges, the
Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Association of Securities Dealers Quotation
System (or if not quoted on NASDAQ, by the National Quotation Bureau, Inc. or
other reporting medium, including the Over the Counter Bulletin Board); or
(iii) otherwise the Fair Market Value shall be an amount not less than book
value determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company (the "Board"). If an Optionee disagrees with the
Fair Market Value as determined by the Board pursuant to clause (iii) of the
preceding sentence, such Optionee may provide written notice of such
disagreement to the Company that states in reasonable detail the basis of the
disagreement and such Optionee's determination of the Fair Market Value (a
"Dispute Notice"). The Board and the Optionee shall attempt to resolve the
disagreement as to the Fair Market Value within ten days after the Dispute
Notice is given to the Company, and if they are unable to do so within such
time period, the Board and/or the Optionee may submit the dispute to a "big
five" independent accounting firm (that directly represents neither the
Company nor the Optionee and the selection of which shall be mutually agreed
upon) (the "Accountant") in Denver, Colorado. The determination of the
Accountant as to the Fair Market Value shall be conclusive and binding upon
the Optionee and the Company. The Company and the Optionee shall bear equally
the fees and expenses of the Accountant unless the determination of the
Accountant results in a net increase of the Fair Market Value of more than
five percent over the amount determined by the Board, in which case the
Company shall be solely responsible for the payment of such fees and expenses.

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         2. OPTION PERIOD. This Option may be exercised not later than 5:00
P.M., Denver time, on December 31, 2004. The Option granted shall be void if
not exercised during the option period.

         3. EXERCISE OF OPTION. Unless the Option is terminated as provided
pursuant to this Option, an Optionee may exercise this option for up to, but
not in excess of, the amounts of shares subject to the Option. The Option may
be exercised, in whole or in part, and at any time and from time to time
within its term.

         (a) METHOD OF EXERCISE. This Option shall be exercisable by a
written notice delivered to the Company (the "Notice of Exercise") which
shall:

                  (i) State the election to exercise the Option, the number
of shares of Common Stock in respect of which it is being exercised (which
must be in multiples of one hundred shares), and the entity in whose name the
stock certificate or certificates for such shares of Common Stock is to be
registered, with that entity's address and taxpayer identification number; and

                  (ii) Be signed by the person or persons entitled to
exercise the Option and, if the Option is being exercised by any entity or
entities other than the Optionee, be accompanied by proof, satisfactory to
counsel for the Company, of the right of such entity or entities to exercise
the Option.

         (b) PAYMENT OF OPTION PRICE. Payment of the option price for any
shares of Common Stock with respect to which the Option is being exercised
shall be by wire transfer, cash, certified check or other means acceptable to
the Company, and shall be delivered with the Notice of Exercise. The
certificate or certificates for shares of Common Stock as to which the Option
shall be exercised shall be registered in the name of the entity or entities
indicated in the notice of exercise in accordance with Section 3(a)(i).

         (c) RESTRICTIONS ON EXERCISE. As a condition to exercise of this
Option, the Company may require the person or entity exercising this Option
to make any representation and warranty as may be required by any applicable
law or regulation.

         4. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In order to prevent
dilution of the rights granted under this Option, the option price and the
number of shares purchasable hereunder shall be subject to adjustment from
time to time as follows:

         (a) ADJUSTMENT OF NUMBER OF SHARES OF COMMON STOCK UPON ISSUANCE OF
COMMON STOCK OR COMMON STOCK EQUIVALENTS. If and whenever the Company issues
or sells, or in accordance with paragraph (b) is deemed to have issued or
sold, any Common Stock for a consideration per share less than the Fair
Market Value per share at the time of such issue or sale (not including the
issuance of the Permitted Stock (as defined below)) then forthwith upon such
issue or sale, the shares of Common Stock subject to this Option (the
"Subject Shares") will be increased by multiplying such number by a fraction,
(A) the numerator of which is the Fair Market Value per share at the time of
such issue or sale and (B) the denominator of which is the amount determined
by dividing (a) the sum of (1) the product derived by multiplying the Fair
Market Value per share at the time of such issue or sale times the number of
shares of Common Stock outstanding on a Fully-Diluted Basis immediately prior
to such issue or sale, plus (2) the aggregate consideration, if any, received
by the Company upon such issue or sale, by (b) the number of shares of Common
Stock outstanding on a Fully-Diluted Basis immediately after such issue or
sale.

         (b) EFFECT ON SUBJECT SHARES OF CERTAIN EVENTS. For purposes of
determining the adjusted Subject Shares under paragraph (a) above, the
following will be applicable:

                  (i) ISSUANCE OF COMMON STOCK EQUIVALENTS. If the Company in
         any manner grants any Common Stock Equivalent (as defined below) (other
         than Permitted Stock) and the lowest price per share for which any one
         share of Common Stock of the Company is issuable upon the exercise of
         any such Common Stock Equivalent is less than the Fair Market Value of
         the Common Stock at the time of the granting of such

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         Common Stock Equivalent, then all of such shares of Common Stock will
         be deemed to have been issued and sold by the Company for such price
         per share (other than pursuant to antidilutive adjustments to the
         Options). For purposes of this paragraph, the "lowest price per share
         for which any one share is issuable" will be equal to the sum of the
         lowest amounts of consideration (if any) received or receivable by the
         Company with respect to any one share upon the exercise of the Common
         Stock Equivalent (whether by conversion, exchange or otherwise) or
         other similar indication of the price per share as of the time of
         granting (such as the floor value for stock appreciation rights). No
         further adjustment of the Subject Shares will be made upon the actual
         issue of such shares of Common Stock or upon the exercise of any right
         under the Common Stock Equivalents.

                  (ii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the
         purchase price provided for in any Common Stock Equivalent (other than
         Permitted Stock), the additional consideration, if any, payable upon
         the issue, conversion or exchange of any Common Stock Equivalent, or
         the rate at which any Common Stock Equivalent is convertible into or
         exchangeable for shares of Common Stock changes at any time, the
         Subject Shares in effect at the time of such change will be readjusted
         to the Subject Shares which would have been in effect at such time had
         such Common Stock Equivalent still outstanding provided for such
         changed purchase price, additional consideration or changed conversion
         rate, as the case may be, at the time initially granted, issued or
         sold.

                  (iii) TREATMENT OF EXPIRED AND UNEXERCISED COMMON STOCK
         EQUIVALENTS. Upon the expiration of any Common Stock Equivalent or the
         termination of any right to convert or exchange any Common Stock
         Equivalent without the exercise of such Common Stock Equivalent, the
         Subject Shares then in effect will be adjusted to the Subject Shares
         which would have been in effect at the time of such expiration or
         termination had such Common Stock Equivalent, to the extent outstanding
         immediately prior to such expiration or termination, never been issued.

                  (iv) CALCULATION OF CONSIDERATION RECEIVED. If any Common
         Stock or Common Stock Equivalents (other than Permitted Stock) are
         issued or sold or deemed to have been issued or sold for cash, the
         consideration received therefor will be deemed to be the net amount
         received by the Company. In case any Common Stock or Common Stock
         Equivalents (other than Permitted Stock) are issued or sold for a
         consideration other than cash, the amount of the consideration other
         than cash received by the Company will be the fair market value of such
         consideration. In case any Common Stock or Common Stock Equivalents
         (other than Permitted Stock) are issued to the owners of the
         non-surviving entity in connection with any merger in which the Company
         is the surviving entity, the amount of consideration therefor will be
         deemed to be the fair market value of such portion of the net assets
         and business of the nonsurviving entity as is attributable to such
         Common Stock or Common Stock Equivalents, as the case may be.

                  (v) INTEGRATED TRANSACTIONS. In case any Common Stock
         Equivalent (other than Permitted Stock) is issued in connection with
         the issue or sale of other securities of the Company, together
         comprising one integrated transaction in which no specific
         consideration is allocated to such Common Stock Equivalent by the
         parties thereto, the Common Stock Equivalent will be deemed to have
         been issued without consideration.

                  (vi) RECORD DATE. If the Company takes a record of the holders
         of Common Stock for the purpose of entitling them (A) to receive a
         dividend or other distribution payable in Common Stock or Common Stock
         Equivalents or (B) to subscribe for or purchase Common Stock or Common
         Stock Equivalents, then such record date will be deemed to be the date
         of the issue or sale of the Common Stock deemed to have been issued or
         sold upon the declaration of such dividend or the making of such other
         distribution or the date of the granting of such right of subscription
         or purchase, as the case may be.

         (c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding Common Stock into a greater

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number of shares of Common Stock, the Subject Shares in effect immediately
prior to such subdivision will be proportionately increased. If the Company
at any time combines (by reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock, the Subject Shares in
effect immediately prior to such combination will be proportionately
decreased.

         (d) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
person or entity or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change." Prior to
the consummation of any Organic Change, the Company will make appropriate
provision (in form and substance reasonably satisfactory to the Optionees
holding Options representing a majority of the Subject Shares issuable under
all Options then outstanding) to insure that each of the Optionees will
thereafter have the right to acquire in lieu of the Subject Shares
immediately theretofore acquirable and receivable upon the exercise of such
Optionee's Option, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the Subject Shares
immediately theretofore acquirable and receivable upon exercise of such
Optionee's Option had such Organic Change not taken place. In any such case,
the Company will make appropriate provision (in form and substance
satisfactory to the Optionees holding Options representing a majority of the
Subject Shares issuable under all Options then outstanding) with respect to
such Optionees' rights and interests to insure that the provisions of this
Section 4 will thereafter be applicable to the Options (including, in the
case of any such consolidation, merger or sale in which the successor entity
or purchasing entity is other than the Company, an immediate adjustment of
the option price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment
in the Subject Shares, if the value so reflected is less than the option
price in effect immediately prior to such consolidation, merger or sale). The
Company will not effect any such consolidation, merger or sale, unless prior
to the consummation thereof, the successor entity (if other than the Company)
resulting from consolidation or merger or the corporation purchasing such
assets assumes by written instrument (in form and substance satisfactory to
the Optionees), the obligation to deliver to each such Optionee such shares
of stock, securities or assets as, in accordance with the foregoing
provisions, such Optionee may be entitled to acquire.

         (e)      NOTICES.

                  (i) Immediately upon any adjustment of the Subject Shares, the
         Company will give written notice thereof to the Optionee, setting forth
         in reasonable detail and certifying the calculation of such adjustment.

                  (ii) The Company will give written notice to the Optionee at
         least twenty (20) days prior to the date on which the Company closes
         its books or takes a record (A) with respect to any dividend or
         distribution upon the Common Stock, (B) with respect to any pro rata
         subscription offer to holders of Common Stock or (C) for determining
         rights to vote with respect to any Organic Change, dissolution or
         liquidation.

                  (iii) The Company will also give written notice to the
         Optionees at least twenty (20) days prior to the date on which any
         Organic Change, dissolution or liquidation will take place.

         (f) LIQUIDATING DIVIDENDS. If the Company declares or pays a
dividend or makes a distribution upon the Common Stock payable otherwise than
in cash out of earnings or earned surplus (determined in accordance with
generally accepted accounting principles) except for a dividend payable in
Common Stock (a "Liquidating Dividend"), then the Company will pay to each
Optionee at the time of payment thereof the Liquidating Dividend which would
have been paid to such Optionee on the Common Stock had the Options been
fully exercised immediately prior to the date on which a record is taken for
such Liquidating Dividend, or, if no record is taken, the date as of which
the record holders of Common Stock entitled to such dividends are to be
determined.

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         (g) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the option price for the number of shares of Common Stock or
other securities issuable upon exercise of the Options, if the Option is then
exercisable pursuant to this Section 4, the Company, at its expense, shall
compute such adjustment or readjustment in accordance with the provisions
hereof and prepare a certificate showing such adjustment or readjustment, and
shall mail such certificate, by first class mail, postage prepaid, to each
registered Optionee at the Optionee's address as shown in the Company's
books. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (i) the consideration received or deemed to
be received by the Company for any additional shares of Common Stock issued
or sold or deemed to have been issued or sold, (ii) the option price at the
time in effect, (iii) the number of additional shares of Common Stock, and
(iv) the type and amount, if any, of other property which at the time would
be received upon exercise of Options.

         (h) CERTAIN DEFINITIONS. As used in this Section 4, the following
terms shall have the meanings ascribed to them:

                  (i) "Common Stock Equivalent" means any option, warrant, right
         or similar security exercisable into, exchangeable for, or convertible
         to Common Stock or the economic equivalent value of Common Stock, other
         than any Permitted Stock.

                  (ii) "Control Basis" means the valuation of securities by
         determining on an aggregate basis the fair market value of all
         securities of such type on the basis of the securities being sold in
         the aggregate to a third party buyer in an arm's length transaction
         with conveyance of control, without discount for minority interests,
         illiquidity or restrictions on transfer, and then dividing such amount
         by the number of all securities of such type on a Fully-Diluted Basis.

                  (v) "fair market value" means (a) as to securities regularly
         traded in the organized securities markets, the average of the Closing
         Price for the security in question for the thirty (30) trading days
         immediately preceding the date of determination; and (b) as to all
         securities not regularly traded in the securities markets and other
         property, the fair market value of such securities, on a Control Basis,
         or property as of the date of the delivery of a notice from a Optionee
         necessitating the determination of fair market value (unless some other
         date of valuation is provided herein) as determined in good faith by
         the Board (provided that any such determination by the Board shall be
         subject to the same rights of dispute and resolution on the part of the
         Optionee as set forth in Section 1(b) hereof). Notwithstanding the
         foregoing, the Fair Market Value of any shares of Common Stock shall be
         as determined in accordance with Section 1(b).

                  (vi) "Fully-Diluted Basis" when used means including as
         outstanding all Common Stock and Common Stock Equivalents including,
         without limitation, the Common Stock issuable upon exercise of Options.

                  (vii) "Permitted Stock" shall include all shares of Common
         Stock or Common Stock Equivalents issued or issuable on or prior to the
         date of this Option.

         5. NOTICES. Each notice relating to this Option shall be in writing
and delivered in person or by certified mail to the proper address. Each
notice shall be deemed to have been given on the date it is received. Each
notice to the Company shall be addressed to it at its principal office,
attention of the Secretary. Each Optionee or other person or persons then
entitled to exercise the Option shall be addressed to the Optionee at the
Optionee's address set forth below the Optionee's signature. Anyone to whom a
notice may be given under this Option may designate a new address by notice
to that effect.

         6. BENEFITS OF OPTION. All obligations imposed upon the Company and
all rights granted to the Optionee under this Option shall be binding upon
the Company's successors. All obligations imposed upon the Optionee and all

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rights granted to the Company under this Option shall be binding upon the
Optionee's successors or assignees. This Option shall be the sole and
exclusive source of any and all rights which the Optionee, and successors or
assignees of Optionee, may have in respect to any options for purchase of
shares of Common Stock granted hereunder.

7.       TRANSFER OF OPTION.

         (a) OPTION REGISTER. The Company will maintain a register (the
"Option Register") containing the names and addresses of the Optionee or
Optionees. Any Optionee of this Option or any portion thereof may change his
or her address as shown on the Option Register by written notice to the
Company requesting such change. Any notice or written communication required
or permitted to be given to the Optionee may be delivered or given by mail to
such Optionee as shown on the Option Register and at the address shown on the
Option Register. Until this Option is transferred on the Option Register of
the Company, the Company may treat the holder as shown on the Option Register
as the absolute owner of this Option for all purposes, notwithstanding any
notice to the contrary.

         (b) OPTION AGENT. The Company may, by written notice to the
Optionee, appoint an agent for the purpose of maintaining the Option Register
referred to in Section 7(a) above, issuing the Common Stock or other
securities then issuable upon the exercise of this Option, exchanging this
Option, replacing this Option, or any or all of the foregoing. Thereafter,
any such registration, issuance, exchange, or replacement, as the case may
be, shall be made at the office of such agent.

         (c) TRANSFERABILITY AND NON-NEGOTIABILITY OF OPTION. This Option may
not be transferred or assigned, in whole or in part, without compliance with
all applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company's outside counsel, if
such are requested by the Company) and without the prior written consent of
the Company (which consent shall not be unreasonably withheld or delayed)
except that the Optionee may assign its rights hereunder in whole or in part,
to (i) any entity or person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Optionee (an "Affiliate") or (ii) any director, officer, employee,
representative or agent of Optionee or any of its Affiliates. Subject to the
provisions of this Option, title to this Option may be transferred by
endorsement and delivery in the same manner as a negotiable instrument
transferable by endorsement and delivery.

         (d) EXCHANGE OF OPTION UPON A TRANSFER. On surrender of this Option
for exchange, properly endorsed and subject to the provisions of this Option
with respect to compliance with the Securities Act of 1933, as amended (the
"Act"), and with the limitations on assignments and transfers contained in
this Section 7, the Company at its expense shall issue to or on the order of
the Optionee a new Option or Options of like tenor, in the name of the
Optionee or as the Optionee (on payment by the Optionee of any applicable
transfer taxes) may direct, for the number of shares of Common Stock issuable
upon exercise hereof.

         (e) COMPLIANCE WITH SECURITIES LAWS.

             (i) The Optionee of this Option, by acceptance hereof,
acknowledges that this Option and the shares of Common Stock to be issued
upon exercise hereof or conversion thereof are being acquired solely for the
Optionee's own account and not as a nominee for any other party, and for
investment, and that the Optionee will not offer, sell or otherwise dispose
of this Option or any shares of Common Stock to be issued upon exercise
hereof or conversion thereof except under circumstances that will not result
in a violation of the Act or any state securities laws. Upon exercise of this
Option, the Optionee shall, if requested by the Company, confirm in writing,
in a form reasonably satisfactory to the Company, that the shares of Common
Stock so purchased are being acquired solely for the Optionee's own account
and not as a nominee for any other party, for investment, and not with a view
toward distribution or resale.

                                       6
<PAGE>

              (ii) This Option and all shares of Common Stock issued upon
exercise hereof or conversion thereof shall be stamped or imprinted with a
legend in substantially the following form (in addition to any legend
required by state securities laws):

       THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
       SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
       NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE
       DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH
       ACT AND ALL APPLICABLE STATE SECURITIES LAWS.

The Company may place an appropriate stop transfer order with the Company's
transfer agent with respect to the shares of Common Stock represented by such
certificates.

         8.  REPLACEMENT OF OPTION. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the
Company or, in the case of mutilation, on surrender and cancellation of this
Option, the Company at its expense shall execute and deliver, in lieu of this
Option, a new option of like tenor and amount.

         9.  AMENDMENTS.

         (a) Any term of this Option may be amended only with the written
consent of the Board and the Optionee.

         (b) No waivers of, or exceptions to, any term, condition or
provision of this Option, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term,
condition or provision.

         10. GOVERNING LAW. This Option shall be governed by and construed in
accordance with the laws of the State of Colorado (without giving effect to
the choice of law principles thereof).

                            [SIGNATURE PAGE FOLLOWS]

                                       7
<PAGE>

         IN WITNESS WHEREOF, the Company and the Optionee have caused this
Option to be executed as of March 18, 2000.

OPTIONEE:

FOREST OIL CORPORATION                      RENTECH, INC.

By:/s/ David H. Keyte                      By:/s/ Dennis L. Yakobson
   ----------------------------------         ---------------------------------
     David H. Keyte, Executive                    Dennis L. Yakobson,
     Vice President                               President
     1600 Broadway, Suite 2200
     Denver, Colorado 80202

<PAGE>

                                  RENTECH, INC.

                    NOTICE OF EXERCISE OF STOCK OPTION ISSUED

To:      Rentech, Inc.
         1331 17th Street, Suite 720
         Denver, CO 80202

         I hereby exercise my Option dated ______________________________ to
purchase ____________________ shares of $.01 par value common stock of the
Company at the option exercise price of $_______________ per share. Enclosed
is a certified or cashier's check in the total amount of $_______________, or
payment in such other form as the Company has specified and agreed to accept,
which is described at the bottom of this notice.

         I represent to you that I am acquiring said shares for investment
purposes and not with a view to any distribution thereof. I understand that
my stock certificate may bear an appropriate legend restricting the transfer
of my shares and that a stop transfer order may be placed with the Company's
transfer agent with respect to such shares.

         I request that my shares be issued in the name of:

_______________________________________________________________________________
                 (Print your name in the form in which you wish
                         to have the shares registered)

_______________________________________________________________________________
                            (Social Security Number)

_______________________________________________________________________________
                               (Street and Number)

_______________________________________________________________________________
(City)                          (State)                    (Zip Code)

                                       Optionee:

Dated: ________________, 20____.       _______________________________________

Signature:                                    By:_____________________________
                                                 Authorized Agent<PAGE>

                                                                    Exhibit 10.4

                                                                  Execution Copy
                              AMENDED AND RESTATED

                              GOVERNANCE AGREEMENT

            This Amended and Restated Governance Agreement, dated as of February
8, 2000, among Continental Airlines, Inc., a Delaware corporation (the
"Company"), Northwest Airlines Corporation, a Delaware corporation formerly
named Newbridge Parent Corporation (the "Stockholder"), and Northwest Airlines
Holdings Corporation, a Delaware corporation formerly named Northwest Airlines
Corporation ("Parent").

            WHEREAS, the Company, the Stockholder and the Parent have entered
into that certain Governance Agreement, dated as of January 25, 1998 (the
"Original Governance Agreement"), as amended by the First Amendment dated as of
March 2, 1998, and by the Second Amendment dated as of November 20, 1998 (such
agreement, as so amended, the "Governance Agreement");

            WHEREAS, the Company, the Stockholder and the Parent wish to restate
the Governance Agreement to incorporate into a single document amendments to the
Original Governance Agreement and to amend further the Governance Agreement as
set forth herein;

            WHEREAS, this Amended and Restated Governance Agreement has been
approved by a Majority Vote (as defined herein).

            NOW, THEREFORE, the Company, the Stockholder and the Parent,
intending to be legally bound, hereby agree as follows:

                                    SECTION 1
                              STANDSTILL AND VOTING

            Section 1.01. Acquisition of Voting Securities.

            (a) Until the Standstill Termination Date, the Parent and the
Stockholder each covenant and agree that they and their respective Affiliates
will not Beneficially Own any Voting Securities in excess of the Permitted
Percentage; provided that if any of the following events shall occur: (A) it is
publicly disclosed that Voting Securities representing 15% or more of the Total
Voting Power have been acquired subsequent to the date hereof by any Person or
13D Group (other than (1) any Subsidiary of the Company, any employee benefit
plan of the Company or of any of its Subsidiaries or any Person holding Voting
Securities for or pursuant to the terms of any such employee benefit plan or (2)
the Parent or the Stockholder, or an Affiliate of, or any Person acting in
concert with, the Parent or the Stockholder, or any Person that has been
induced, in whole or in part, directly or indirectly, by the Parent, the
Stockholder or the Voting Trust to make such acquisition or (3) an Institutional
Investor (while an Institutional Investor)), or (B) a bona fide tender or
exchange offer is made by any Person (other than the Company, the Parent, the
Stockholder, or an Affiliate of, or any Person acting in concert with, or
induced by, directly or indirectly, any of them) to purchase outstanding shares
of Voting Securities representing 15% or more of the Total Voting Power and such
offer is not withdrawn or terminated prior to the Stockholder acquiring
additional Voting Securities, or (C) the Board of Directors shall approve the
acquisition by any Person or 13D Group of Voting Securities that would otherwise
trigger the adverse consequences of any stockholder rights plan of the Company
that may at the time be in effect, then in any event referred to in clauses (A),
(B) or (C) above,
<PAGE>

notwithstanding the foregoing provisions of this Section 1.01(a) or any other
provisions of this Agreement, the Parent, the Stockholder and their Affiliates
may acquire additional Voting Securities in any manner, whether in market
purchases, privately negotiated transactions, a tender or exchange offer on any
terms or in any other manner, and the Parent or the Stockholder may submit a
competing proposal or a proposal for a merger or any other type of business
combination.

            (b) Notwithstanding the provisions of Section 1.01(a), following the
Closing and until the Standstill Termination Date, the Stockholder may purchase
shares of Voting Securities in any manner in order to maintain at the Permitted
Percentage its percentage of the Fully Diluted Voting Power.

            (c) Except as expressly provided herein, the Parent and the
Stockholder shall not permit any Affiliate to Beneficially Own any Voting
Securities in excess of the Permitted Percentage.

            (d) (i) Except as otherwise set forth in this subsection (d), if at
any time the Parent or the Stockholder becomes aware that it and its Affiliates
Beneficially Own more than the Permitted Percentage, then the Parent shall
promptly notify the Company, and the Parent and the Stockholder, as appropriate,
shall promptly take all action necessary to reduce the amount of Voting
Securities Beneficially Owned by such Persons to an amount not greater than the
Permitted Percentage.

                  (ii) If the Voting Securities Beneficially Owned by the
Stockholder and its Affiliates exceed the Permitted Percentage (A) solely by
reason of repurchases of Voting Securities by the Company or (B) as a result of
the transactions otherwise permitted by the terms of this Agreement, then the
Stockholder shall not be required to reduce the amount of Voting Securities
Beneficially Owned by such Persons and the percentage of the Fully Diluted
Voting Power represented by the Voting Securities Beneficially Owned by such
Persons shall become the Permitted Percentage.

                  (iii) Notwithstanding the provisions of Section 1.01(a), if
the Voting Securities Beneficially Owned by the Stockholder and its Affiliates
exceed the Permitted Percentage solely by reason of the Parent's and the
Stockholder's entering into (A) the Purchase Agreement dated as of March 2, 1998
(the "Barlow Agreement") among the Parent, the Stockholder, Barlow Investors
III, LLC, a California limited liability company ("Barlow"), and the guarantors
signatory thereto, respecting the sale by Barlow of 979,000 shares of Class A
Common Stock to the Stockholder, and (B) the Investment Agreement, and the
purchase of (C) the 979,000 shares of Class A Common Stock pursuant to the
Barlow Agreement, and (D) Voting Securities pursuant to the Investment
Agreement, the Stockholder and its Affiliates shall not be required to reduce
the amount of Voting Securities Beneficially Owned by such Persons; provided
that the Permitted Percentage shall not be changed as a result thereof, and, if
the Fully Diluted Voting Power of the Voting Securities Beneficially Owned by
the Stockholder and its Affiliates is subsequently reduced to or below the
Permitted Percentage, neither the Stockholder, the Parent, nor any of their
respective Affiliates shall Beneficially Own any Voting Securities in excess of
the Permitted Percentage after such reduction.

                                       2
<PAGE>

                  (iv) Notwithstanding the provisions of Section 1.01(a), if the
Voting Securities Beneficially Owned by the Stockholder and its Affiliates
exceed the Permitted Percentage solely by reason of the conversion of shares of
Class A Common Stock into shares of Class B Common Stock by the holders thereof,
the Stockholder and its Affiliates shall not be required to reduce the amount of
Voting Securities Beneficially Owned by such Persons; provided that, the
Permitted Percentage shall not be changed as a result of any such conversion,
and if the Fully Diluted Voting Power of the Voting Securities Beneficially
Owned by the Stockholder and its Affiliates is subsequently reduced to or below
the Permitted Percentage, neither the Stockholder, the Parent, nor any of their
respective Affiliates shall Beneficially Own any Voting Securities in excess of
the Permitted Percentage after such reduction.

            Section 1.02. Restrictions on Transfer. Prior to the Standstill
Termination Date, neither the Stockholder nor the Parent will Transfer or permit
any of their respective Affiliates to Transfer any Voting Securities except for:
(i) Transfers of Voting Securities pursuant to any tender or exchange offer to
acquire Voting Securities approved and recommended by the Company's Board of
Directors (which recommendation has not been withdrawn); (ii) Transfers of
Voting Securities to the Stockholder provided that such Voting Securities are
immediately transferred to the public stockholders of the Stockholder by means
of a pro rata dividend or other pro rata distribution; (iii) Transfers of Voting
Securities by the Stockholder to any of its controlled Affiliates, provided that
such Affiliate agrees to be bound by the provisions of this Agreement applicable
to the Stockholder; (iv) Transfers of the Shares by the Voting Trust to the
Stockholder upon termination of the Voting Trust; (v) Transfers of Voting
Securities by the Stockholder pursuant to Section 4.1(d) of the Investment
Agreement or Section 5 of this Agreement; (vi) Transfers of Voting Securities to
the B/C/P Group; and (vii) Transfers of Voting Securities by the Stockholder to
any transferee who, together with its Affiliates and Associates, would not, to
the knowledge of Parent or the Stockholder, Beneficially Own in excess of 10% of
the Total Voting Power as a result of such Transfer; provided that no such
Transfers under clauses (i) or (iii) of this Section 1.02 may be made to any
Person (including such Person's Affiliates and any Person or entities which are
part of any 13D Group which includes such transferee or any of its Affiliates)
that, after giving effect to such Transfer, would to the knowledge of Parent or
the Stockholder Beneficially Own Voting Securities representing more than 10% of
the Total Voting Power.

            Section 1.03. Voting Trust. Immediately following the Closing, the
Stockholder and the Parent shall cause AP to deposit the Shares, and the
Stockholder and the Parent shall deposit any other shares of Voting Securities
Beneficially Owned by either of them or any of their Affiliates, into a voting
trust (the "Voting Trust") to be established pursuant to a voting trust
agreement (the "Voting Trust Agreement") with an independent voting trustee in a
form reasonably satisfactory to Parent and the Company and which shall include
the following provisions for the voting of the shares of Voting Securities
deposited therein: until the Standstill Termination Date, all such shares shall
(a) be voted or consented on all matters submitted to a vote of the Company's
stockholders, other than the election of directors, either (i) in the case of
votes at a stockholders meeting, in the same proportion as the votes cast by
other holders of Voting Securities, or (ii) in the case of consents, so that the
percentage of Stockholder Voting Power consented to on any matter equals the
percentage of all other outstanding Voting Securities so consented; provided,
that with respect to (x) any vote on a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or

                                       3
<PAGE>

similar transaction involving the Company, any sale of all or substantially all
of the Company's assets or any issuance of Voting Securities that would
represent in excess of 20% of the Total Voting Power prior to such issuance,
including any of the foregoing involving the Stockholder or the Parent, or (y)
any amendment to the Company's amended and restated certificate of incorporation
or by-laws that would materially and adversely affect the Stockholder (including
through its effect on the Alliance Agreement and the rights of the Voting
Securities Beneficially Owned by the Stockholder), such shares may be voted as
directed by the Stockholder and (b) in the election of directors, for the
election of the Independent Directors nominated by the Board of Directors of the
Company determined by a Majority Vote; provided, that with respect to any
election of directors in respect of which any Person other than the Company is
soliciting proxies, the Stockholder and the Parent shall cause all such shares
to be voted, at the option of the Stockholder, either (i) as recommended by the
Board of Directors or (ii) in the same proportion as the votes cast by the other
holders of Voting Securities. The Voting Trust Agreement shall also provide that
the Voting Trust shall not issue voting trust certificates or any interest in
the Voting Trust to a Person other than the Stockholder or any of its
Affiliates.

            Section 1.04. Further Restrictions on Conduct. The Parent and the
Stockholder, as applicable, covenant and agree that until the Standstill
Termination Date:

            (a) except in connection with the performance of the Alliance
Agreement and the subsequent negotiations and agreements contemplated thereby,
neither the Parent, the Stockholder nor any of their respective Affiliates will
otherwise act, alone or in concert with others, to seek to affect or influence
the Board of Directors or the control of the management of the Company or the
businesses, operations, affairs, financial matters or policies of the Company
(it being agreed that this paragraph shall not prohibit the Parent and its
Subsidiaries, and their respective directors, officers and employees, from
engaging in ordinary course business activities with the Company or having
periodic discussions with directors, officers and employees of the Company
regarding the Company's business, it being understood that such matters shall
not include matters that, under applicable antitrust laws, could not be
discussed among competitors);

            (b) other than in connection with the deposit of the Shares and
other Voting Securities into the Voting Trust as required by Section 1.03, the
Stockholder shall not deposit any Voting Securities into any voting trust or
subject any Voting Securities to any proxy (other than any revocable proxy to
vote the Shares in a manner consistent with Sections 1.03 and 2.01 hereof),
arrangement or agreement with respect to the voting or consenting with respect
to such Voting Securities or other agreement having similar effect;

            (c) neither the Parent, the Stockholder nor any of their respective
Affiliates shall initiate or propose any stockholder proposal or action or make,
or in any way participate in or encourage, directly or indirectly, any
"solicitation" of "proxies" to vote or written consents, or seek to influence
any Person with respect to the voting of or consenting with respect to, any
Voting Securities, or become a "participant" in a "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act, as in effect on the date
hereof) in any election contest with respect to the election or removal of the
Independent Directors or in opposition to the recommendation of the majority of
the directors of the Company with respect to any other matter;

                                       4
<PAGE>

            (d) other than as is contemplated by this Agreement, neither the
Parent, the Stockholder, the Voting Trust nor any of their respective Affiliates
shall join a partnership, limited partnership, syndicate or other group, or
otherwise act in concert with any other Person, for the purpose of acquiring,
holding, voting or disposing of Voting Securities, or, otherwise become a
"person" within the meaning of Section 13(d)(3) of the Exchange Act;

            (e) neither the Parent nor the Stockholder shall transfer its
partnership interests in AP, nor cause or permit AP to admit new partners;

            (f) each of the Parent and the Stockholder shall, and shall cause
its Affiliates to, deposit into the Voting Trust such additional shares of
Voting Securities as they may acquire after the Closing; and

            (g) neither the Parent nor the Stockholder nor any of their
respective Affiliates shall take any action inconsistent with the foregoing;

provided that the restrictions set forth in Sections 1.04 (a), (b), (c) and (d)
of this Agreement shall not apply to (i) any vote by the Parent or the
Stockholder described in clauses (x), (y) or (z) of Section 1.03 of this
Agreement, (ii) [intentionally omitted], (iii) Northwest Airlines, Inc. acting
as an alliance partner pursuant to the Alliance Agreement, (iv) the Parent or
the Stockholder seeking a merger with the Company following the Company's
delivery of a Termination Notice pursuant to Section 21 of the Alliance
Agreement or (v) any action taken as permitted by Section 1.01(a).

            Section 1.05 Reports. During the term of this Agreement, the
Stockholder shall deliver to the Company, promptly after any Transfer of Voting
Securities by the Stockholder, the Voting Trust or their respective Affiliates,
an accurate written report specifying the amount and class of Voting Securities
so Transferred and the amount of each class of Voting Securities owned by them
after giving effect to such Transfer; provided, however, that such reporting
obligation may be satisfied with respect to any such Transfer that is reported
in a statement on Schedule 13D pursuant to the Exchange Act and the rules
thereunder by delivering promptly to the Company a copy of such Schedule 13D
statement. The Company shall be entitled to rely on such reports and statements
on Schedule 13D for all purposes of this Agreement.

                                    SECTION 2
                     BOARD OF DIRECTORS AND RELATED MATTERS

            Section 2.01. Composition of Board of Directors.

            (a) The individuals listed on Exhibit 2.01 hereto shall, for
purposes of this Agreement, constitute the Independent Directors immediately
after the consummation of the Stock Purchase (the "Closing").

                  (b) Following the Closing, and until the Standstill
Termination Date, the Company, the Parent, the Stockholder and their respective
Affiliates shall take all such actions as are required under applicable law to
cause Independent Directors to constitute at all times at least a majority of
the Board of Directors. At each annual meeting of stockholders of the Company
following the Closing, or at any time that a vacancy in a seat previously
occupied

                                       5
<PAGE>

by an Independent Director on the Board of Directors is to be filled, the
identity of the Independent Director or Directors to stand for election to the
Board of Directors or to fill the vacancy, as the case may be, shall be
determined by a Majority Vote.

                  (c) Without the prior written consent of the Parent, the
Company shall not amend, alter or repeal its amended and restated certificate of
incorporation or by-laws so as to eliminate or diminish the ability of
stockholders of the Company to act by written consent or Section 1.10 of the
Company's by-laws.

            Section 2.02. Transactions Involving the Stockholder. The parties
agree that any material transaction between the Company and the Parent, the
Stockholder or any of their respective Affiliates, or relating to this Agreement
or the Alliance Agreement, including without limitation, any amendment,
modification or waiver of any provision hereof or thereof, shall not be taken
without the prior approval thereof by a Majority Vote.

            Section 2.03. Significant Actions. Promptly following the Closing,
the Company shall amend its by-laws to provide that no action described in
Exhibit 2.03 hereto may be taken without prior approval thereof by a Majority
Vote.

            Section 2.04. Management of the Business. Following the Closing and
until the Standstill Termination Date, except as indicated in Section 2.02
above, management of the Company will continue to have full authority to operate
the day-to-day business affairs of the Company to the same extent as prior to
the Closing. In this regard, the Chief Executive Officer of the Company shall
continue to be in charge of all matters within his authority on the date hereof,
subject, as required by Delaware law, to the requirement that the business and
affairs of the Company shall be managed by or under the direction of the Board
of Directors.

            Section 2.05. Executive Committee. Prior to the Closing, the Company
shall cause the authority of the Executive Committee of the Company's Board of
Directors to be modified to the reasonable satisfaction of the Parent, to permit
such committee to approve only ordinary course transactions in which the Company
engages from time to time, but which nonetheless require approval by the Board
of Directors.

                                    SECTION 3
                                    COVENANTS

            Section 3.01. Legends. The Company shall cooperate and instruct its
transfer agent and registrar to place legends on all shares of Class A Common
Stock (and the Warrants) held by AP or any of its Affiliates to reflect that
such shares are subject to the restrictions on voting and transfer set forth in
the Investment Agreement and in this Agreement.

            Section 3.02. Issuance of Class A Common Stock. The Company shall
not issue any additional shares of Class A Common Stock (except upon exercise of
the Warrants outstanding as of the date hereof) or securities convertible into
or exercisable or exchangeable for shares of Class A Common Stock or enter into
any agreement or arrangement to do the same without giving the Stockholder
pre-emptive rights which shall permit the Stockholder to acquire shares of Class
A Common Stock concurrently with any such issuance.

                                       6
<PAGE>

            Section 3.03. Issuance of Class B Common Stock. The Company shall
not, without giving the Stockholder pre-emptive rights, issue shares of Class B
Common Stock, par value $.01 per share, of the Company (the "Class B Common
Stock"), or securities convertible into or exercisable or exchangeable for
shares of Class B Common Stock except to the extent that such shares (including
underlying shares, in the case of securities convertible into or exercisable or
exchangeable for shares of Class B Common Stock) (a) in the case of such shares
or convertible securities issued for the purpose of fulfillment of the Company's
obligations under any present or future stock option plan, do not exceed the
number of shares issued under such plans consistent with past practices, (b) in
the case of such shares or convertible securities issued for any other purpose,
do not exceed in the aggregate 5% of the outstanding shares of Class B Common
Stock on the date of the Investment Agreement or (c) are issued pursuant to
options, warrants or convertible securities issued and outstanding on, or
commitments to issue such shares that are in effect on, the date hereof and
which are disclosed in Section 4.01(b).

            Section 3.04. Conversion; Interested Stockholders. The Company shall
not seek a vote of its stockholders, approving any amendment to the Company's
amended and restated certificate of incorporation or by-laws, nor shall it take
any other action, that would, without the consent of the Parent, (a) eliminate
AP's right in Section 2(e) of the Company's amended and restated certificate of
incorporation to convert shares of Class A Common Stock into shares of Class D
Common Stock, par value $.01 per share, (b) cause Section 203 of the Delaware
General Corporation laws to be applicable to the Company or (c) adopt an
"interested stockholders" provision.

            Section 3.05. Transfer of Voting Trust Certificates. Prior to the
Standstill Termination Date, the Stockholder shall not Transfer the voting trust
certificates issued to it by the Voting Trust or any interest in the Voting
Trust represented thereby.

            Section 3.06. Conduct. Each of the Company, the Parent and the
Stockholder agrees that from the date hereof until the Closing, except as
otherwise contemplated by this Agreement or with the prior written consent of
the other, it and its subsidiaries shall not (a) change its principal line of
business, (b) change the fundamental nature of its business or (c) dispose of
any substantial portion of its assets.

            Section 3.07. No Solicitation.

            (a) From the date hereof until the Closing, the Company and its
subsidiaries, and the officers, directors, financial or legal advisors of the
Company and its subsidiaries will not, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Acquisition Proposal or (ii) engage
in negotiations with, or disclose any nonpublic information relating to the
Company or any of its subsidiaries or afford access to the properties, books or
records of the Company or any of its subsidiaries to, any person that may be
considering making, or has made, an Acquisition Proposal; provided that, the
Company may, in response to an unsolicited written proposal from a third party
regarding an Acquisition Proposal engage in the activities specified in clause
(ii), if the Board of Directors of the Company determines in good faith, after
obtaining and taking into account the advice of outside counsel, that such
action is required for the Board of Directors of the Company to comply with its
fiduciary duties under applicable law. The Company will promptly (and in no
event later than 24 hours after having received the relevant Acquisition
Proposal) notify the Parent (which notice shall be provided orally and in
writing and

                                       7
<PAGE>

shall identify the person making the Acquisition Proposal and set forth the
material terms thereof) after having received any Acquisition Proposal, or
request for nonpublic information relating to the Company or any of its
subsidiaries or for access to the properties, books or records of the Company or
any of its subsidiaries by any person who is considering making or has made an
Acquisition Proposal. The Company will, to the extent consistent with the
fiduciary duties of the Company's Board of Directors under applicable law, keep
the Parent fully informed of the status and details of any such Acquisition
Proposal or request. The Company shall, and shall cause its subsidiaries, and
shall instruct the directors, officers and financial and legal advisors of the
Company and its subsidiaries to, cease immediately and cause to be terminated
all activities, discussions or negotiations, if any, with any persons conducted
heretofore with respect to any Acquisition Proposal. Notwithstanding any
provision of this Section, nothing in this Section shall prohibit the Company or
its Board of Directors from taking and disclosing to the Company's stockholders
a position with respect to an Acquisition Proposal by a third party to the
extent required under the Exchange Act or from making such disclosure to the
Company's stockholders which, in the judgment of the Board of Directors, taking
into account the advice of outside counsel, is required under applicable law;
provided that nothing in this sentence shall affect the obligations of the
Company and its Board of Directors under any other provision of this Agreement.

            (b) From the date hereof until the Closing, the Parent and its
subsidiaries, and the officers, directors, financial or legal advisors of the
Parent and its subsidiaries will not, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Acquisition Proposal or (ii) engage
in negotiations with, or disclose any nonpublic information relating to the
Parent or any of its subsidiaries or afford access to the properties, books or
records of the Parent or any of its subsidiaries to, any person that may be
considering making, or has made, an Acquisition Proposal; provided that, the
Parent may, in response to an unsolicited written proposal from a third party
regarding an Acquisition Proposal engage in the activities specified in clause
(ii), if the Board of Directors of the Parent determines in good faith, after
obtaining and taking into account the advice of outside counsel, that such
action is required for the Board of Directors of the Parent to comply with its
fiduciary duties under applicable law. The Parent will promptly (and in no event
later than 24 hours after having received the relevant Acquisition Proposal)
notify the Company (which notice shall be provided orally and in writing and
shall identify the person making the Acquisition Proposal and set forth the
material terms thereof) after having received any Acquisition Proposal, or
request for nonpublic information relating to the Parent or any of its
subsidiaries or for access to the properties, books or records of the Parent or
any of its subsidiaries by any person who is considering making or has made an
Acquisition Proposal. The Parent will, to the extent consistent with the
fiduciary duties of the Parent's Board of Directors under applicable law, keep
the Company fully informed of the status and details of any such Acquisition
Proposal or request. The Parent shall, and shall cause its subsidiaries, and
shall instruct the directors, officers and financial and legal advisors of the
Parent and its subsidiaries to, cease immediately and cause to be terminated all
activities, discussions or negotiations, if any, with any persons conducted
heretofore with respect to any Acquisition Proposal. Notwithstanding any
provision of this Section, nothing in this Section shall prohibit the Parent or
its Board of Directors from taking and disclosing to the Parent's stockholders a
position with respect to an Acquisition Proposal by a third party to the extent
required under the Exchange Act or from making such disclosure to the Parent's
stockholders which, in the judgment of the Board of Directors, taking into
account the advice of outside counsel, is required under applicable law;

                                       8
<PAGE>

provided that nothing in this sentence shall affect the obligations of the
Parent and its Board of Directors under any other provision of this Agreement.

                                    SECTION 4
                         REPRESENTATIONS AND WARRANTIES

            Section 4.01. Representations and Warranties of the Company. (a) The
Company represents and warrants to the Parent and the Stockholder that (i) the
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, (ii) the execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the transactions contemplated
hereby, and (iii) this Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company, and is
enforceable against the Company in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including concepts of
materiality, reasonableness, good faith and fair dealing, regardless of whether
in a proceeding at equity or at law).

            (b) Company Capitalization. The authorized capital stock of the
Company consists of (i) 10,000,000 shares of Preferred Stock, par value $.01 per
share ("Company Preferred Stock"), and (ii) (x) 50,000,000 shares of Class A
Common Stock, (y) 200,000,000 shares of Class B Common Stock and (z) 50,000,000
shares of Class D Common Stock. As of the close of business on December 31,
1997, there were (i) no shares of Company Preferred Stock, 8,379,464 shares of
Class A Common Stock, 50,512,010 shares of Class B Common Stock and no shares of
Class D Common Stock issued and outstanding; (ii) no shares of capital stock of
the Company held in the treasury of the Company; (iii) 5,991,472 shares of Class
B Common Stock reserved for issuance upon exercise of outstanding stock options
of the Company pursuant to the Company's employee stock option and similar
plans; (iv) 7,617,155 shares of Class B Common Stock reserved for issuance upon
the conversion of the Company's outstanding 6-3/4% Convertible Subordinated
Notes due 2006; (v) 10,311,208 shares of Class B Common Stock reserved for
issuance upon the conversion of the Company's outstanding 8-1/2% Convertible
Subordinated Deferrable Interest Debentures due 2020; (vi) 3,039,468 shares of
Class A Common Stock issuable upon exercise of the Warrants; and (vii) 308,343
shares of Class B Common Stock issuable upon exercise of the Warrants. Except as
described in the immediately preceding sentence, there are no securities of the
Company (or any of its affiliates) currently outstanding that are convertible
into or exercisable or exchangeable for shares of Company Common Stock other
than (a) options to purchase shares of Class B Common Stock granted in
accordance with past practice pursuant to stock option and similar plans, (b)
options to purchase shares of Class B Common Stock granted pursuant to the
Company's 1997 Employee Stock Purchase Plan, (c) shares of Class A Common Stock,
which are convertible into shares of Class B Common Stock or Class D Common
Stock on a one-for-one basis and (d) commitments to issue not in excess of
25,000 shares of Class B Common Stock to correct record-keeping errors in
connection with the Company's 1994 Employee Stock Purchase Plan. All outstanding

                                       9
<PAGE>

shares of the Company's capital stock are duly authorized, validly issued, fully
paid and non-assessable.

            Section 4.02. Representations and Warranties of the Parent. The
Parent represents and warrants to the Company that (a) it and the Stockholder
are corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and each has the power and authority to enter into
this Agreement and to carry out its respective obligations hereunder, (b) the
execution and delivery of this Agreement by the Parent and the Stockholder and
the consummation thereby of the transactions contemplated hereby have been duly
authorized by all necessary action on their parts and no other proceedings on
their parts are necessary to authorize this Agreement or any of the transactions
contemplated hereby, and (c) this Agreement has been duly executed and delivered
by the Parent and the Stockholder and constitutes a valid and binding obligation
of each of them, and is enforceable against each of them in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including
concepts of materiality, reasonableness, good faith and fair dealing, regardless
of whether in a proceeding at equity or at law).

                                    SECTION 5
                        TERMINATION OF ALLIANCE AGREEMENT

            Section 5.01. Stockholder's Election. Within thirty (30) days
following the delivery by the Company of a Termination Notice pursuant to
Section 21(a) of the Alliance Agreement, the Parent shall make an election (an
"Election") of either the merger procedures specified in Section 5.02 (the
"Merger Procedures") or the stock sale procedure specified in Section 5.03 (the
"Stock Sale Procedure") by delivering to the Company a Notice of Election. If
the Stockholder initially elects the Merger Procedure (a "Merger Election"), it
may at any time prior to the execution by the Parent and the Company of a
definitive agreement for a merger transaction, upon written notice to the
Company, irrevocably elect to abandon the Merger Procedure and elect the Stock
Sale Procedure, in which latter event the Parent shall have 18 months following
its election of the Stock Sale Procedure to consummate the sale of its shares.
If the Stockholder initially elects the Stock Sale Procedure (the "Stock Sale
Election"), it may not, at any time thereafter, make a Merger Election. If the
Stockholder fails timely to make an Election, it shall be deemed to have made a
Stock Sale Election.

            Section 5.02. Merger Procedure. (a) If the Stockholder makes a
Merger Election, it shall within 30 days after doing so submit a notice to the
Company setting forth the material terms and conditions upon which it would
propose to acquire the Voting Securities not Beneficially Owned by it and its
Affiliates (the "Merger Proposal"). After the Merger Election, the Company shall
promptly establish a committee of the Board of Directors (the "Special
Committee") composed of only, and at least three (3), Independent Directors as
determined by a Majority Vote, which shall have the authority to consider,
review, and negotiate the terms of, and to make a recommendation to the full
Board of Directors regarding, the Merger Proposal, and to retain, at the
Company's expense, counsel, financial advisors and other advisors, and to take
such other actions customarily delegated to a committee of independent directors
in similar circumstances. If the Stockholder submits a Merger Proposal, the
Stockholder and the Special

                                       10
<PAGE>

Committee shall negotiate in good faith and use their best efforts to agree upon
the terms of a merger at the earliest practicable date consistent with the
Special Committee's fiduciary duties.

            (b) (i) If the Stockholder and the Company do not enter into a
definitive merger agreement within six (6) months of the establishment of the
Special Committee, on the third day after the six month anniversary of the
establishment of the Special Committee (the "Initiation Date"), the Company will
designate an investment banking firm of recognized national standing (the
"Company's Appraiser") and the Stockholder will designate an investment banking
firm of recognized national standing (the "Parent's Appraiser"), in each case to
determine the "Merger Value". The Stockholder acknowledges and agrees that the
consideration that would constitute the Merger Value is the price per share of
Voting Securities that an unrelated third party would pay if it were to acquire
all outstanding shares of Voting Securities (other than the shares held by the
Stockholder and its Affiliates) in one or more arm's-length transactions,
assuming that the Shares were being sold in a manner designed to attract all
possible participants. Each of the investment banking firms referred to herein
will be instructed to determine the Merger Value in this manner.

            (ii) Within thirty (30) days after the Initiation Date, the
Company's Appraiser and the Parent's Appraiser will each determine its initial
view as to the Merger Value and consult with one another with respect thereto.
By the 45th day after the Initiation Date, the Company's Appraiser and the
Parent's Appraiser will each have determined its final view as to the Merger
Value. At that point, if the Higher Appraised Amount (as defined below) is not
more than 110% of the Lower Appraised Amount (as defined below), the Merger
Value will be the average of those two views. Otherwise, the Company's Appraiser
and the Parent's Appraiser will agree upon and jointly designate a third
investment banking firm of recognized national standing (the "Mutually
Designated Appraiser") to determine its view of the Merger Value. The Mutually
Designated Appraiser will not be permitted to see or otherwise have access to,
or be informed of, the results of the appraisals of Merger Value by the
Company's Appraiser and the Parent's Appraiser, or any component of either
appraiser's analysis which led to its conclusions, and each of the Parent and
the Company agree to comply with the foregoing provision. The Mutually
Designated appraiser will, no later than the 65th day after the Initiation Date,
determine the Merger Value (the "Mutually Appraised Amount"). The Merger Value
will be (x) the Mutually Appraised Amount, if such amount falls within the range
of values that is between the Lower Appraised Amount and the Higher Appraised
Amount, (y) the Lower Appraised Amount if such amount is below the Lower
Appraised Amount, and (z) the Higher Appraised Amount if such amount is above
the Higher Appraised Amount.

            As used herein, "Lower Appraised Amount" means the lower of the
respective final views of the Company's Appraiser and the Parent's Appraiser as
to the Merger Value and "Higher Appraised Amount" means the higher of such
respective final views.

            The Company and the Parent shall be responsible for the payment of
fees and expenses to the respective investment banking firms designated by them,
and shall each be responsible for 50% of the fees and expenses payable to the
Mutually Designated Appraiser.

            (iii) If, within fifteen (15) days of the determination of the
Merger Value as provided above (such fifteenth day being referred to as the
"Trigger Date"), (A) the Stockholder is unwilling to enter into a definitive
merger agreement at the Merger Value, then the

                                       11
<PAGE>

Stockholder shall be required to dispose of the shares of Voting Securities
Beneficially Owned by it and its Affiliates pursuant to the Stock Sale Procedure
within eighteen (18) months of the Trigger Date or (B) the Company's Board of
Directors and the Special Committee are unwilling to approve and recommend a
definitive merger agreement at the Merger Value, then the provisions of this
Agreement (other than Section 7) shall terminate in all respects.

            5.03. Stock Election Procedure. (a) If the Stockholder makes a Stock
Sale Election, then it shall, within twenty-four (24) months of the delivery of
the Termination Notice, sell the shares of Voting Securities Beneficially Owned
by it and its Affiliates (the "Selling Stockholders"), at its option, either (i)
in one or a series of privately negotiated sales of 15% or more of Voting
Securities Beneficially Owned by the Selling Stockholders (each, a "Private
Sale" and together, "Private Sales") or (ii) in any other manner that the
Selling Stockholders elect in their sole discretion.

            (b) Each Selling Stockholder shall give the Company fifteen (15)
days' prior written notice of its intention to effect a Private Sale, which
notice (a "Sales Notice") shall include the material terms and conditions of the
Private Sale, the date that the sale is expected to close, and the proposed
purchaser or purchasers. A Sales Notice given with respect to a Private Sale
shall also include a certification by such Stockholder that the Private Sale
described therein is to a bona fide purchaser who such Stockholder reasonably
believes has the financial resources to complete the sale and would not be
prohibited by law or regulation from doing so.

            (c) The Company may, by action of its Board of Directors upon a
Majority Vote, by notice to such Stockholder given not more than twenty (20)
days after the Sales Notice, reject a Private Sale (or a series of
contemporaneous Private Sales) based upon its good faith determination that the
sale or sales to such prospective purchaser (or purchasers) would be injurious
to the interests of the Company and the holders of the Company's Voting
Securities (other than such Stockholder and its Affiliates) by virtue of the
prior business practices of such prospective purchaser or purchasers, it being
understood in that regard that the fact that such purchaser is an airline or is
affiliated with an airline shall not be the basis for any such determination nor
shall the fact that the Board of Directors concludes that wide dispersal of the
ownership of Voting Securities is in the best interests of the Company's
stockholders. Upon receiving notice of such determination, the Stockholder and
its Affiliates shall terminate discussions with such prospective purchaser or
purchasers. The Company's right to reject a purchaser (or purchasers) under this
Section shall be exercised only once and, upon its exercise, the Company shall
have no such further rights.

                                    SECTION 6
                                  MISCELLANEOUS

            Section 6.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy)
and shall be given,

            if to the Company, to:

            Continental Airlines, Inc.
            1600 Smith Street

                                       12
<PAGE>

            Dept. HQSEO
            Houston, Texas 77002
            Fax: (713) 324-2687
            Attention: General Counsel

            with a copy to:

            Morris, Nichols, Arsht & Tunnell
            1201 N. Market Street
            P.O. Box 1347
            Wilmington, DE 19899-1347
            Fax: (302) 658-3989
            Attention: A. Gilchrist Sparks, III

            if to the Parent, to:

            Northwest Airlines Holdings Corporation
            5101 Northwest Drive
            St. Paul, Minnesota 55111
            Fax: (612) 726-7123
            Attention: General Counsel

            with a copy to:

            Simpson Thacher & Bartlett
            425 Lexington Avenue
            New York, New York 10017-3954
            Attention: Caroline B. Gottschalk
            Fax: (212) 455-2502

            if to the Stockholder, to:

            Northwest Airlines Corporation
            5101 Northwest Drive
            St. Paul, Minnesota 55111
            Attention: General Counsel
            Fax: (612) 726-7123

            with a copy to:

            Simpson Thacher & Bartlett
            425 Lexington Avenue
            New York, New York 10017-3954
            Attention: Caroline B. Gottschalk
            Fax: (212) 455-2502

or such address or telecopy number as such party may hereafter specify for the
purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective

                                       13
<PAGE>

when delivered personally, telegraphed, or telecopies, or, if mailed, five
business days after the date of the mailing.

            Section 6.02. Amendments; No Waivers.

            (a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver has been approved pursuant to Section 2.02 and
is in writing and signed, in the case of an amendment, by the parties hereto, or
in the case of a waiver, by the party against whom the waiver is to be
effective.

            (b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

            Section 6.03. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.

            Section 6.04. Governing Law; Consent to Jurisdiction. (a) This
Agreement shall be construed in accordance with and governed by the internal
laws of the State of Delaware.

            (b) Any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this Agreement
or the transactions contemplated hereby may be brought in any federal court
located in the State of Delaware or any Delaware state court, and each of the
parties hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is being brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 6.01 shall be deemed
effective service of process on such party.

            Section 6.05. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts thereof signed by the other party hereto.

            Section 6.06. Specific Performance. The parties hereto each
acknowledge and agree that the parties' respective remedies at law for a breach
or threatened breach of any of the provisions of this Agreement would be
inadequate and, in recognition of that fact, agrees that, in the event of a
breach or threatened breach by any of them of the provisions of this Agreement,
in addition to any remedies at law, the aggrieved party, without posting any
bond and without any showing of irreparable injury shall be entitled to obtain
equitable relief in the form of specific

                                       14
<PAGE>

performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy which may then be available.

            Section 6.07. Termination.

            (a) If, prior to the Closing, the Investment Agreement shall have
been terminated or abandoned pursuant to Section 7.1 of the Investment
Agreement, this Agreement shall terminate.

            (b) If, after Closing, the Stockholder and its Affiliates cease to
Beneficially Own Voting Securities representing at least 10% of the Fully
Diluted Voting Power, this Agreement shall terminate.

            (c) If the sixth anniversary of the Closing shall have occurred and
this Agreement shall not have already been terminated pursuant to (a) or (b)
above, the parties' obligations under this Agreement shall terminate.

            Section 6.08. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, provided that
the parties hereto shall negotiate in good faith to attempt to place the parties
in the same position as they would have been in had such provision not been held
to be invalid, void or unenforceable.

            Section 6.09. Non-Exclusivity. No action or transaction taken in
accordance with the express provisions of, and as expressly permitted by, any
provision of this Agreement shall be treated as a breach of any other provision
of this Agreement, notwithstanding that such action or transaction shall not
have been expressly excepted from such latter provision.

                                    SECTION 7
                                 CLOSING EVENTS

            Section 7.01. Agreements. At Closing: (a) the Company shall enter
into an amendment to the Registration Rights Agreement with AP, which amendment
shall extend the benefits of such agreement, including "demand" registration
rights, to the Stockholder in respect of all shares of Voting Securities owned
directly or indirectly by the Stockholder and all shares of Company Class A
Common Stock and any other Voting Securities held by AP or distributed to the
partners of AP;

            (b) The Parent and the Stockholder shall enter into the Voting Trust
Agreement; and

            (c) The Company shall have adopted an "Eligible Rights Plan" and the
rights issued thereunder shall have been distributed to the holders of Voting
Securities. For purposes of this Section 7.01, an "Eligible Rights Plan" shall
mean a shareholder rights plan, with reasonably customary terms and conditions,
with an "acquiring person" threshold of 15%; provided that the threshold for an
Institutional Investor shall be 20%, and further provided that the definition of
acquiring person shall exclude the Stockholder and the Parent (a) prior to the
termination of the Parent's and the Stockholder's obligations hereunder, if and
to the extent they take any action

                                       15
<PAGE>

permitted by and in compliance with the terms of this Agreement and (b) after
the termination of the Parent's and the Stockholder's obligations hereunder with
respect to any and all transfers of Voting Securities owned by them in any
manner. The Company covenants and agrees that, so long as the Parent
Beneficially Owns Voting Securities representing no less than 15% of the Total
Voting Power, it shall not (a) amend an existing Eligible Rights Plan so as to
cause such plan not to constitute an Eligible Rights Plan or (b) adopt a
shareholder rights plan that is not an Eligible Rights Plan. Parent agrees and
acknowledges that the Rights Agreement is an Eligible Rights Plan.

                                    SECTION 8
                                   DEFINITIONS

            For purposes of this Agreement, the following terms shall have the
following meanings:

            "Acquisition Proposal" means any offer or proposal for, or any
indication of interest in, a merger, consolidation or other business combination
involving a Person or any of its subsidiaries or the acquisition of any equity
interest in, or a substantial portion of the assets of, a Person or any of its
subsidiaries, other than the transactions contemplated by this Agreement.

            "Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement).

            "Alliance Agreement" shall mean that certain Master Alliance
Agreement dated as of January 25, 1998 between Northwest Airlines, Inc., an
indirect wholly owned subsidiary of Parent, and the Company.

            "AP" shall mean Air Partners, L.P., a Texas limited partnership.

            "Associate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement).

            "B/C/P Group" shall mean David Bonderman, James Coulter or William
S. Price, III, or any Person with respect to which one or more of them (i)
directly or indirectly controls at least 50.1% of the voting power, (ii)
directly or indirectly controls at least 50.1% of the equity, or (iii) directly
or indirectly controls in a manner substantially similar to the control that the
general partner of AP has over AP pursuant to and as provided in the
"Partnership Agreement" (as defined in the Investment Agreement), which Persons
described in clause (iii) shall include 1998 CAI Partners, L.P., a Texas limited
partnership, under its partnership agreement and ownership structure in effect
on November 20, 1998.

            "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing; for the
avoidance of doubt, securities with respect to which the Stockholder or the
Parent has been granted a proxy pursuant to the Investment Agreement shall be
deemed to be beneficially owned by the Stockholder or the Parent.

                                       16
<PAGE>

            "Board of Directors" shall mean the board of directors of the
Company. Without limiting the foregoing, any Securities owned by the Voting
Trust shall be deemed to be Beneficially Owned by the Stockholder and the
Parent.

            "Class A Common Stock" shall mean shares of Class A Common Stock,
par value $.01 per share, of the Company.

            "Closing" shall have the meaning specified in Section 2.01 of this
Agreement.

            "Company Common Stock" shall mean Class A Common Stock, Class B
Common Stock or Class D Common Stock.

            "Exchange Act" shall mean the Securities Exchange Act of 1934.

            "Fully Diluted Voting Power" of any Person shall be calculated by
dividing (i) the sum of (A) ten times the aggregate number of shares of Company
Class A Common Stock beneficially owned by such Person (assuming exercise of the
Warrants, in the case of the Partnership, and exercise of any other outstanding
securities held by such Person that are convertible into or exercisable or
exchangeable for shares of Company Class A Common Stock) and (B) the number of
shares of Company Class B Common Stock beneficially owned by such Person
(assuming exercise of any outstanding securities held by such Person that are
convertible into or exercisable or exchangeable for shares of Company Class B
Common Stock) by (ii) the sum of (A) ten times the aggregate number of
outstanding shares of Company Class A Common Stock (assuming the exercise of all
outstanding securities convertible into or exercisable or exchangeable for
shares of Company Class A Common Stock) and (B) the aggregate number of
outstanding shares of Company Class B Common Stock (assuming the exercise of all
outstanding securities convertible into or exercisable or exchangeable for
shares of Company Class B Common Stock).

            "Independent Director" shall mean any person listed on Exhibit 2.01
to this Agreement, (ii) and any other person selected as an Independent Director
in accordance with Section 2.01(b) of this Agreement and (iii) any other person,
who is elected to the Board of Directors in an election of directors in respect
of which any Person other than the Company is soliciting proxies; provided that
any such other person so selected shall be independent of and otherwise
unaffiliated with the Parent or the Company (other than as an Independent
Director), and shall not be an officer or an employee, consultant or advisor
(financial, legal or other) of the Parent or the Company or any of their
respective Affiliates, or any person who shall have served in any such capacity
within the three-year period immediately preceding the date such determination
is made.

            "Institutional Investor" shall mean (i) a Person who is an
"Institutional Investor," as that term is defined in the Rights Agreement,
provided that such Person has not also become an "Acquiring Person," as that
term is defined in the Rights Agreement or (ii) a Person who was an
Institutional Investor, as that term is defined in the Rights Agreement, but
ceased to be an Institutional Investor pursuant to the second to last sentence
of the definition of "Acquiring Person" set forth in the Rights Agreement,
provided that such Person has not (x) become an Acquiring Person as the result
of a determination made by the Board of Directors in accordance

                                       17
<PAGE>

with the last sentence of the definition of "Acquiring Person" set forth in the
Rights Agreement or (y) otherwise become an "Acquiring Person" under the Rights
Agreement.

            "Investment Agreement" shall mean that certain Investment Agreement
dated as of January 25, 1998, as amended by Amendment No. 1 dated February 27,
1998 and Amendment No. 2 dated as of November 20, 1998, among the Parent, the
Stockholder, AP, the partners of AP signatory thereto, Bonderman Family Limited
Partnership, 1992 Air, Inc. and Air Saipan, Inc..

            "Majority Vote" shall mean the affirmative vote of a majority of the
Board of Directors, including the affirmative vote of a majority of the
Independent Directors.

            "Permitted Percentage" shall mean 50.1% of the Fully Diluted Voting
Power or such percentage as shall hereafter become the Permitted Percentage in
accordance with Section 1.01(d).

            "Person" shall mean any individual partnership (limited or general),
joint venture, limited liability company, corporation, trust, business trust,
unincorporated organization, government or department or agency of a government.

            "Rights Agreement" shall mean that certain Rights Agreement dated as
of November 20, 1998, as amended by the First Amendment dated as of February 8,
2000 by and between the Company and Harris Trust and Savings Bank.

            "Standstill Termination Date" shall mean the earlier of (i) the
sixth anniversary of the Closing and (ii) the date on which the Stockholder and
its Affiliates cease to Beneficially Own Voting Securities representing at least
10% of the Fully Diluted Voting Power.

            "Stockholder Voting Power" at any time shall mean the aggregate
voting power in the general election of directors of all Voting Securities then
Beneficially Owned by the Stockholder and its Affiliates.

            "Stock Purchase" shall mean the Stockholder's acquisition of the
shares of Class A Common Stock held by certain affiliates of AP pursuant to the
terms of the Investment Agreement.

            "Subsidiary" shall mean, as to any Person, any Person at least a
majority of the shares of stock or other equity interests of which having
general voting power under ordinary circumstances to elect a majority of the
board of directors (or comparable governing body) thereof (irrespective of
whether or not at the time stock or equity of any other class or classes shall
have or might have voting power by reason of the happening of any contingency)
is, at the time as of which the determination is being made, owned by such
Person, or one or more of its Subsidiaries or by such Person and one or more of
its Subsidiaries.

            "13D Group" shall mean any group of Persons acquiring, holding,
voting or disposing of Voting Securities which would be required under Section
13(d) of the Exchange Act and the rules and regulations thereunder (as in
effect, and based on legal interpretations thereof existing, on the date hereof)
to file a statement on Schedule 13D with the Securities and Exchange Commission
as a "person" within the meaning of Section 13(d)(3) of the Exchange

                                       18
<PAGE>

Act if such group beneficially owned Voting Securities representing more than 5%
of any class of Voting Securities then outstanding.

            "Total Voting Power" at any time shall mean the total combined
voting power in the general election of directors of all the Voting Securities
then outstanding.

            "Transfer" shall mean any sale, exchange, transfer, pledge,
encumbrance or other disposition, and "to Transfer" shall mean to sell,
exchange, transfer, pledge, encumber or otherwise dispose of.

            "Voting Securities" shall mean at any time shares of any class of
capital stock of the Company which are then entitled to vote generally in the
election of directors including, without limitation, the Class A Common Stock
and the Class B Common Stock.

            "Voting Trust" shall have the meaning set forth in Section 1.03.

            "Warrants" shall have the meaning set forth in the Investment
Agreement.

                [Remainder of this page intentionally left blank]

                                       19
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first referred to above.

                                    NORTHWEST AIRLINES CORPORATION

                                    By:/s/ Douglas M. Steenland
                                       ------------------------
                                       Douglas M. Steenland
                                       Executive Vice President, General Counsel
                                          and Secretary

                                    NORTHWEST AIRLINES HOLDINGS CORPORATION

                                    By: /s/ Douglas M. Steenland
                                       -------------------------
                                       Douglas M. Steenland
                                       Executive Vice President, General Counsel
                                          and Secretary

                                    CONTINENTAL AIRLINES, INC.

                                    By:/s/ Jeffery A. Smisek
                                       ---------------------
                                       Jeffery A. Smisek
                                       Executive Vice President, General Counsel
                                          and Secretary
<PAGE>

                      EXHIBIT 2.01 TO GOVERNANCE AGREEMENT

                              Lloyd M. Bentsen, Jr.

                              Douglas H. McCorkindale

                              George G.C. Parker

                              Richard W. Pogue

                              Karen Hastie Williams

                              Charles A. Yamarone

                              Donald L. Sturm

                              Patrick Foley
<PAGE>

                      EXHIBIT 2.03 TO GOVERNANCE AGREEMENT
                              (Significant Actions)

            1. Any amendment to the certificate of incorporation or by-laws of
the Company.

            2. Any reclassification, combination, split, subdivision,
redemption, purchase or other acquisition, directly or indirectly, of any debt
or equity security of the Company or any Subsidiary of the Company (other than
pursuant to existing stock option plans or agreements or by or on behalf of any
existing employee benefit plan of the Company).

            3. Any sale, lease, transfer or other disposition (other than in the
ordinary course of business consistent with past practice), in one or more
related transactions, of the assets of the Company or any Subsidiary, the book
value of which assets exceeds 5% of the consolidated assets of the Company and
its Subsidiaries.

            4. Any merger, consolidation, liquidation or dissolution of the
Company or any Subsidiary of the Company, other than any such merger or
consolidation of any Subsidiary of the Company with and into the Company or
another wholly-owned Subsidiary of the Company.

            5. Any acquisition of any other business which would constitute a
"Significant Subsidiary" (as defined in Section 1.02 of Regulation S-X under the
Exchange Act) of the Company.

            6. Any acquisition by the Company or any Subsidiary of the Company
of assets (not in the ordinary course of business consistent with past practice)
in one or more related transactions which assets have a value which exceeds 5%
of the consolidated assets of the Company and its Subsidiaries.

            7. Any issuance or sale of any capital stock of the Company or any
Subsidiary of the Company, other than issuance of capital stock of the Company
authorized for issuance pursuant to stock plans or agreements in effect, or
securities issued and outstanding, at the date of Closing.

            8. Any declaration or payment of any dividend or distribution with
respect to shares of the capital stock of the Company or any Subsidiary (other
than wholly-owned Subsidiaries of the Company).

            9. Any incurrence, assumption or issuance by the Company or its
Subsidiaries of any indebtedness for money borrowed, not in the ordinary course
of business consistent with past practice, if, immediately after giving effect
thereto and the application of proceeds therefrom, the aggregate amount of such
indebtedness of the Company and its Subsidiaries would exceed $500 million.

            10. Establishment of, or continued existence of, any committee of
the Board of Directors with the power to approve any of the foregoing.

                                       1
<PAGE>

            11. The termination or election or appointment of executive officers
of the Company.

                                       2

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