Employment Agreement - Enron Corp. and Kenneth L. Lay


                                                            
                      EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT AGREEMENT ('Agreement') is made by and
between ENRON CORP. ('Company') and KENNETH L. LAY
('Employee').

                      W I T N E S S E T H:

     WHEREAS, Company presently employs Employee pursuant to
an Employment Agreement made effective as of September 1,
1989, as the same has heretofore been amended from time to
time (the 'Prior Employment Agreement'); and

     WHEREAS, Company is desirous of continuing to employ
Employee in an executive capacity on the terms and
conditions, and for the consideration, hereinafter set forth
and Employee is desirous of continuing in the employ of
Company on such terms and conditions and for such
consideration;

     NOW, THEREFORE, for and in consideration of the mutual
promises, covenants and obligations contained herein,
Company and Employee agree as follows:

ARTICLE 1:  EMPLOYMENT AND DUTIES

     1.1  Employment; Effective Date.  Company agrees to
employ Employee and Employee agrees to be employed by
Company, beginning as of December 9, 1996 (the 'Effective
Date'), and continuing for the period of time set forth in
Article 2 of this Agreement, subject to the terms and
conditions of this Agreement.

     1.2  Position.  During the term of employment under
this Agreement, Company shall employ Employee in the
position of Chairman and Chief Executive Officer of Company,
or in such other executive positions as the parties mutually
may agree.

     1.3  Duties and Services.  Employee agrees to serve in
the position referred to in paragraph 1.2 and to perform
diligently and to the best of his abilities the duties and
services appertaining to such office as reasonably directed
by Company.  Employee's employment shall also be subject to
the policies contained in Company's Conduct of Business
Affairs booklet and other similar documents, all as amended
from time to time.

     1.4  Other Interests.  Employee agrees, during the
period of his employment by Company, to devote his full
business time, energy and best efforts to the business and
affairs of Company and its affiliates and not to engage,
directly or indirectly, in any other business, investment,
or activity that interferes with Employee's performance of
Employee's duties hereunder, is contrary to the interests of
Company or any of its affiliates, or requires any
significant portion of Employee's business time.

     1.5  Duty of Loyalty.  Employee acknowledges and agrees
that Employee owes a fiduciary duty of loyalty, fidelity and
allegiance to act at all times in the best interests of
Company and to do no act which would injure the business,
interests, or reputation of Company or any of its
subsidiaries or affiliates.  In keeping with these duties,
Employee shall make full disclosure to Company of all
business opportunities pertaining to Company's business and
shall not appropriate for Employee's own benefit business
opportunities concerning the subject matter of the fiduciary
relationship.

     1.6  Conflicts of Interest.  It is agreed that any
direct or indirect interest in, connection with, or benefit
from any outside activities, particularly commercial
activities, which interest might in any way adversely affect
Company or any of its affiliates, involves a possible
conflict of interest.  In keeping with Employee's fiduciary
duties to Company, Employee agrees that Employee shall not
knowingly become involved in a conflict of interest with
Company or any of its affiliates, or upon discovery thereof,
allow such a conflict to continue.  Moreover, Employee
agrees that Employee shall disclose to Company's General
Counsel any facts which might involve such a conflict of
interest that has not been approved by Company's Board of
Directors (the 'Board of Directors').  Company and Employee
recognize that it is impossible to provide an exhaustive
list of actions or interests which constitute a 'conflict of
interest.'  Moreover, Company and Employee recognize there
are many borderline situations.  In some instances, full
disclosure of facts by Employee to Company's General Counsel
may be all that is necessary to enable Company or its
affiliates to protect its interests.  In others, if no
improper motivation appears to exist and the interests of
Company or its affiliates have not suffered, prompt
elimination of the outside interest will suffice.  In still
others, it may be necessary for Company to terminate the
employment relationship.  Employee agrees that Company's
determination as to whether a conflict of interest exists
shall be conclusive.  Company reserves the right to take
such action as, in its judgment, will end the conflict.

ARTICLE 2:  TERM AND TERMINATION OF EMPLOYMENT

     2.1  Term.  Unless sooner terminated pursuant to other
provisions hereof, Company agrees to employ Employee for the
period (the 'Term') beginning on the Effective Date and
ending on December 31, 2001, and thereafter for such period,
if any, as may be agreed upon in writing by Employee and
Company.

     2.2  Company's Right to Terminate.  Notwithstanding the
provisions of paragraph 2.1, Company shall have the right to
terminate Employee's employment under this Agreement at any
time prior to the expiration of the Term for any of the
following reasons:

          (i)  upon Employee's death;

          (ii) upon Employee becoming 'Permanently
     Disabled,' which, for purposes of this Agreement, shall
     mean Employee's becoming disabled so as to entitle him
     to benefits beyond 18 months of disability under
     Company's Long-Term Disability Plan;
          
          (iii)     for 'Cause,' which, for purposes of this
     Agreement, shall mean termination by action of the
     Board of Directors because of Employee's (A) conviction
     of a felony, (B) willful refusal without proper legal
     cause to perform Employee's duties and responsibilities
     which remains uncorrected for seven days following
     written notice to Employee by Company of such breach,
     (C) willfully engaging in conduct that he knows or
     should know may be materially injurious to Company or
     any of its affiliates, (D) involvement in a conflict of
     interest as referenced in paragraph 1.6 for which
     Company makes a determination to terminate the
     employment of Employee which remains uncorrected for 30
     days following written notice to Employee by Company of
     such breach, (E) material breach of any material
     provision of this Agreement or corporate code or policy
     which remains uncorrected for 30 days following written
     notice to Employee by Company of such breach, or (F)
     violation of the Foreign Corrupt Practices Act or other
     applicable United States law as proscribed by paragraph
     6.2; or

          (iv) for any other reason whatsoever, in the sole
     discretion of the Board of Directors.

     2.3  Employee's Right to Terminate.  Notwithstanding
the provisions of paragraph 2.1, Employee shall have the
right to terminate his employment under this Agreement at
any time prior to the expiration of the Term for any of the
following reasons:

          (i)  for 'Good Reason,' which for purposes of this
     Agreement shall mean termination by Employee within 60
     days of and in connection with or based upon (A) a
     transfer or assignment from Employee's present position
     to a position which involves an overall substantial and
     material reduction in the nature or scope of Employee's
     duties and responsibilities, (B) a reduction in
     Employee's annual base salary as established pursuant
     to paragraph 3.1 (including subsequent increases) or
     the failure to continue Employee's participation in any
     incentive compensation or employee benefit plan or
     program (except a compensation or benefit plan or
     program that is substantially comparable to an existing
     compensation or benefit plan or program) in which
     Employee is participating or is eligible to participate
     prior to such reduction (other than as a result of the
     expiration of such plan or program), in each case other
     than as part of a general program to reduce
     compensation or employee benefits on a proportional
     basis relative to other employees of Company, (C) a
     permanent change and relocation of Employee from the
     city in which Employee was serving immediately prior to
     the time of such change to a place which is more than
     50 miles away from such location, (D) a Change of
     Control (as such term is defined in paragraph 7.6
     hereof), or (E) a material breach by Company of any
     material provision of this Agreement which remains
     uncorrected for 30 days following written notice of
     such breach by Employee to Company; or

          (ii) for any other reason whatsoever, in the sole
     discretion of Employee.

     2.4  Notice of Termination; Delegation to Board of
Directors.  If Company or Employee desires to terminate
Employee's employment hereunder at any time prior to
expiration of the Term pursuant to paragraph 2.2 or 2.3,
respectively, it or he shall do so by giving written notice
to the other party that it or he has elected to terminate
Employee's employment hereunder and stating the effective
date and reason for such termination; provided that no such
action shall alter or amend any other provisions hereof or
rights arising hereunder; and, provided further, that
Company shall consult in good faith with Employee and
provide a reasonable opportunity for Employee to be heard
prior to terminating Employee's employment hereunder for
Cause.  It is expressly acknowledged and agreed that the
decision as to whether Cause exists for termination of the
employment relationship by Company is delegated to the Board
of Directors for determination. If Employee disagrees with
the decision reached by the Board of Directors, then the
dispute will be limited to whether the Board of Directors
reached its decision in good faith.

ARTICLE 3:  COMPENSATION

     3.1  Base Salary.  During the period beginning on the
Effective Date and ending on December 31, 1996, Employee
shall receive an annual base salary equal to $990,000.
Thereafter, during the period of this Agreement, Employee
shall receive a minimum annual base salary equal to
$1,200,000.  Employee's base salary shall be reviewed
annually and may be increased annually and from time to time
by the Board of Directors (or the Compensation Committee of
such Board) in its sole discretion and, after any such
change, Employee's new level of base salary shall be
Employee's base salary for purposes of this Agreement until
the effective date of any subsequent change.  Employee's
annual base salary shall be paid in equal installments in
accordance with Company's standard policy regarding payment
of compensation to executives; provided, however, that
Employee hereby irrevocably elects and agrees that any base
salary payable to Employee pursuant to this paragraph 3.1 in
excess of $1,000,000 during any taxable year of Company
shall be deferred under Company's 1994 Deferral Plan.  Any
amounts deferred under Company's 1994 Deferral Plan pursuant
to this paragraph 3.1 shall be subject to all of the terms
and conditions of such plan, including, without limitation,
the time of payment provisions thereof.

     3.2  Incentive Compensation.  While Employee is
actively employed under this Agreement, Employee shall be
entitled to participate in the long term and annual
incentive plans under Company's Executive Compensation
Program, as the same is currently or hereinafter maintained
by Company for its executives.  As of the Effective Date,
such program includes the award of stock options, awards
under Company's Performance Unit Plan, and bonus
opportunities under Company's Annual Incentive Plan.

     3.3  Other Employee Benefits.  While employed by
Company, Employee shall be allowed to participate, on the
same basis generally as other employees of Company, in all
general employee benefit plans and programs, including
improvements or modifications of the same, which on the
Effective Date or thereafter are made available by Company
to Company's employees of Employee's office.  Such benefits
plans, and programs may include, without limitation,
medical, health, and dental care, life insurance, disability
protection, and pension plans.  Nothing in this Agreement is
to be construed or interpreted to provide greater rights,
participation, coverage, or benefits under such benefit
plans or programs than provided to similarly situated
employees pursuant to the terms and conditions of such
benefit plans and programs.

     3.4  Changes Permitted.  Company shall not by reason of
paragraphs 3.2 and 3.3 be obligated to institute, maintain,
or refrain from changing, amending, or discontinuing, any of
such benefit plans or programs, so long as such actions are
similarly applicable to covered employees generally.  Unless
specifically provided for in a written plan document adopted
by the Board of Directors, none of the benefits or
arrangements described in this Article shall be secured or
funded in any way, and each shall instead constitute an
unfunded and unsecured promise to pay money in the future
exclusively from the general assets of Company.

     3.5  Stock Option Grant Agreements.  Contemporaneously
with the execution of this Agreement, Company shall issue to
Employee a Stock Option Grant Agreement substantially in the
form attached hereto as Exhibit A pursuant to which Employee
shall be awarded as of the Effective Date an option under
Company's 1991 Stock Plan (the '1991 Stock Plan') to
purchase 637,500 shares of Company's common stock at a
purchase price per share equal to the Fair Market Value (as
such term is defined in the 1991 Stock Plan) of a share of
such stock on the Effective Date.  On January 3, 1997,
Company shall issue to Employee a Stock Option Grant
Agreement substantially in the form attached hereto as
Exhibit A pursuant to which Employee shall be awarded on
such date an option under the 1991 Stock Plan to purchase
637,500 shares of Company's common stock at a purchase price
per share equal to the Fair Market Value (as such term is
defined in the 1991 Stock Plan) of a share of such stock on
such date.

     3.6  Split Dollar Agreement.  Contemporaneously with
the execution of this Agreement, Company, Employee, and the
KLL & LPL Family Partnership, Ltd. shall execute and enter
into the Split Dollar Agreement attached to this Agreement
as Exhibit B.

ARTICLE 4:  PROTECTION OF INFORMATION

     4.1  Disclosure to Employee.  Company shall disclose to
Employee, or place Employee in a position to have access to
or develop, trade secrets or confidential information of
Company or its affiliates; and/or shall entrust Employee
with business opportunities of Company or its affiliates;
and/or shall place Employee in a position to develop
business good will on behalf of Company or its affiliates.

     4.2  Disclosure to and Property of Company.  All
information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived,
made, developed, or acquired by Employee, individually or in
conjunction with others, during Employee's employment by
Company (whether during business hours or otherwise and
whether on Company's premises or otherwise) which relate to
Company's business, products, or services (including,
without limitation, all such information relating to
corporate opportunities, research, financial and sales data,
pricing terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their
requirements, the identity of key contacts within the
customer's organizations or within the organization of
acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed
to Company and are and shall be the sole and exclusive
property of Company.  Moreover, all documents drawings,
memoranda, notes, records, files, correspondence, manuals,
models, specifications, computer programs, E-mail, voice
mail, electronic databases, maps and all other writings or
materials of any type embodying any of such information,
ideas, concepts, improvements, discoveries, and inventions
are and shall be the sole and exclusive property of Company.
Upon termination of Employee's employment by Company, for
any reason, Employee promptly shall deliver the same, and
all copies thereof, to Company.
     
     4.3  No Unauthorized Use or Disclosure.  Employee will
not, at any time during or after Employee's employment by
Company, make any unauthorized disclosure of any
confidential business information or trade secrets of
Company or its affiliates, or make any use thereof, except
in the carrying out of Employee's employment
responsibilities hereunder.  Affiliates of the Company shall
be third party beneficiaries of Employee's obligations under
this paragraph.  As a result of Employee's employment by
Company, Employee may also from time to time have access to,
or knowledge of, confidential business information or trade
secrets of third parties, such as customers, suppliers,
partners, joint venturers, and the like, of Company and its
affiliates.  Employee also agrees to preserve and protect
the confidentiality of such third party confidential
information and trade secrets to the same extent, and on the
same basis, as Company's confidential business information
and trade secrets.

     4.4  Ownership by Company.  If, during Employee's
employment by Company, Employee creates any work of
authorship fixed in any tangible medium of expression which
is the subject matter of copyright (such as videotapes,
written presentations, or acquisitions, computer programs, E-
mail, voice mail, electronic databases, drawings, maps,
architectural renditions, models, manuals, brochures, or the
like) relating to Company's business, products, or services,
whether such work is created solely by Employee or jointly
with others (whether during business hours or otherwise and
whether on Company's premises or otherwise), Company shall
be deemed the author of such work if the work is prepared by
Employee in the scope of Employee's employment; or, if the
work is not prepared by Employee within the scope of
Employee's employment but is specially ordered by Company as
a contribution to a collective work, as a part of a motion
picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional
text, then the work shall be considered to be work made for
hire and Company shall be the author of the work.  If such
work is neither prepared by Employee within the scope of
Employee's employment nor a work specially ordered that is
deemed to be a work made for hire, then Employee hereby
agrees to assign, and by these presents does assign, to
Company all of Employee's worldwide right, title, and
interest in and to such work and all rights of copyright
therein.

     4.5  Assistance by Employee.  Both during the period of
Employee's employment by Company and thereafter, Employee
shall assist Company and its nominee, at any time, in the
protection of Company's worldwide right, title, and interest
in and to information, ideas, concepts, improvements,
discoveries, and inventions, and its copyrighted works,
including without limitation, the execution of all formal
assignment documents requested by Company or its nominee and
the execution of all lawful oaths and applications for
applications for patents and registration of copyright in
the United States and foreign countries.

     4.6  Remedies.  Employee acknowledges that money
damages would not be sufficient remedy for any breach of
this Article by Employee, and Company shall be entitled to
enforce the provisions of this Article by specific
performance and injunctive relief as remedies for such
breach or any threatened breach.  Such remedies shall not be
deemed the exclusive remedies for a breach of this Article,
but shall be in addition to all remedies available at law or
in equity to Company, including the recovery of damages from
Employee and his agents involved in such breach and remedies
available to Company pursuant to other agreements with
Employee.

ARTICLE 5:  NON-COMPETITION OBLIGATIONS

     5.1  In General.  As part of the consideration for the
compensation and benefits to be paid to Employee hereunder;
to protect the trade secrets and confidential information of
Company and its affiliates that have been and will in the
future be disclosed or entrusted to Employee, the business
good will of Company and its affiliates that has been and
will in the future be developed in Employee, or the business
opportunities that have been and will in the future be
disclosed or entrusted to Employee by Company and its
affiliates; and as an additional incentive for Company to
enter into this Agreement, Company and Employee agree to the
non-competition obligations hereunder:  Employee will not,
directly or indirectly for Employee or for others, in any
geographic area or market where Company or any of its
affiliates are conducting any business as of the date of
termination of the employment relationship or have during
the previous 12 months conducted such business:

          (i)  engage in any business similar or related to
     or competitive with the business conducted by Company
     or any of its affiliates as described under Company's
     'Business Unit Highlights' on page one of the Enron
     Corp. 1995 Annual Report to Shareholders and Customers
     (the 'Core Business of Company');

          (ii) render advice or services to, or otherwise
     assist, any other person, association, or entity who is
     engaged, directly or indirectly, in any business
     similar or related to or competitive with the Core
     Business of Company;

          (iii) transact any business in any manner
     pertaining to suppliers or customers of Company or any
     of its affiliates which, in any manner, would have, or
     is likely to have, an adverse effect upon Company or
     any of its affiliates; or

          (iv) induce any employee of Company or any of its
     affiliates to terminate his or her employment with
     Company or any of its affiliates, or hire or assist in
     the hiring of any such employee by any person,
     association, or entity not affiliated with Company.

These non-competition obligations shall extend until (A) the
expiration of the Term if termination of the employment
relationship is by Employee for Good Reason or by Company
for any reason whatsoever other than death, Cause or
Employee's becoming Permanently Disabled  or (B) two years
after termination of the employment relationship if such
relationship is terminated for any reason not encompassed by
clause (A) of this sentence.  If Company abandons a
particular aspect of the Core Business of Company, that is,
ceases such aspect of its business with the intention to
permanently refrain from such aspect of its business, then
this post-employment non-competition covenant shall not
apply to such former aspect of Company's business.

     5.2  Enforcement and Remedies.  Employee understands
that the restrictions set forth in paragraph 5.1 may limit
Employee's ability to engage in certain businesses anywhere
in the world during the period provided for above, but
acknowledges that Employee will receive sufficiently high
remuneration and other benefits under this Agreement to
justify such restriction.  Employee acknowledges that money
damages would not be sufficient remedy for any breach of
this Article by Employee, and Company shall be entitled to
enforce the provisions of this Article by terminating any
payments then owing to Employee under this Agreement and/or
to specific performance and injunctive relief as remedies
for such breach or any threatened breach.  Such remedies
shall not be deemed the exclusive remedies for a breach of
this Article, but shall be in addition to all remedies
available at law or in equity to Company, including, without
limitation, the recovery of damages from Employee and
Employee's agents involved in such breach and remedies
available to Company pursuant to other agreements with
Employee.

     5.3  Reformation.  It is expressly understood and
agreed that Company and Employee consider the restrictions
contained in this Article to be reasonable and necessary to
protect the proprietary information of Company.
Nevertheless, if any of the aforesaid restrictions are found
by a court having jurisdiction to be unreasonable, or overly
broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions
therein set forth to be modified by such courts so as to be
reasonable and enforceable and, as so modified by the court,
to be fully enforced.

ARTICLE 6:    STATEMENTS CONCERNING COMPANY; UNITED STATES
               FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS

     6.1  Statements Concerning Company.  Employee shall
refrain, both during the employment relationship and after
the employment relationship terminates, from publishing any
oral or written statements about Company, any of its
affiliates, or any of such entities' officers, employees,
agents or representatives that are slanderous, libelous, or
defamatory; or that disclose private or confidential
information about Company, any of its affiliates, or any of
such entities' business affairs, officers, employees,
agents, or representatives; or that constitute an intrusion
into the seclusion or private lives of Company, any of its
affiliates, or any of such entities' officers, employees,
agents, or representatives; or that give rise to
unreasonable publicity about the private lives of Company,
any of its affiliates, or any of such entities' officers,
employees, agents, or representatives; or that place
Company, any of  its affiliates, or any of such entities'
officers, employees, agents, or representatives in a false
light before the public; or that constitute a
misappropriation of the name or likeness of Company, any of
its affiliates, or any of such entities' officers,
employees, agents, or representatives.  A violation or
threatened violation of this prohibition may be enjoined by
the courts.  The rights afforded the Company and its
affiliates under this provision are in addition to any and
all rights and remedies otherwise afforded by law.

     6.2  United States Foreign Corrupt Practices Act and
Other Laws.  Employee shall at all times comply with United
States laws applicable to Employee's actions on behalf of
Company, including specifically, without limitation, the
United States Foreign Corrupt Practices Act, generally
codified in 15 U.S.C. 78 (the 'FCPA'), as the FCPA may
hereafter be amended, and/or its successor statutes.  If
Employee pleads guilty to or nolo contendere or admits civil
or criminal liability under the FCPA or other applicable
United States law, or if a court finds that Employee has
personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that
Employee committed an action resulting in Company or any of
its affiliates having civil or criminal liability or
responsibility under the FCPA or other applicable United
States law with knowledge of the activities giving rise to
such liability or knowledge of facts from which Employee
should have reasonably inferred the activities giving rise
to liability had occurred or were likely to occur, such
action or finding shall constitute 'Cause' for termination
under this Agreement unless the Board of Directors
determines that the actions found to be in violation of the
FCPA or other applicable United States law were taken in
good faith and in compliance with all applicable policies of
Company.

ARTICLE 7:  EFFECT OF TERMINATION ON COMPENSATION

     7.1  In General.  If Employee's employment hereunder
shall terminate upon expiration of the Term or if such
employment shall be terminated by Employee or by Company
prior to the expiration of the Term for any reason
whatsoever, then, upon such termination, regardless of the
reason therefor, all compensation and all benefits to
Employee hereunder shall terminate contemporaneously with
the termination of such employment, except that if
Employee's employment is Involuntarily Terminated (as such
term is defined in paragraph 7.6 hereof) prior to the
expiration of the Term, then Employee shall be entitled to
receive the following benefits although Employee's active
employment shall cease:

          (i)  All payments of the annual base salary under
     paragraph 3.1 (in the amount in effect on the date
     Employee's employment is Involuntarily Terminated) and
     bonus payments under Company's Annual Incentive Plan
     (based upon Employee's most recent bonus payment amount
     received prior to the date Employee's employment is
     Involuntarily Terminated) at such time and in such
     manner as if Employee's employment had continued
     through the Term;

          (ii) Employee may participate in the incentive
     compensation programs provided for in paragraph 3.2
     (excluding Company's Annual Incentive Plan, which is
     covered in clause (i) above) as if Employee's
     employment had continued through the Term;

          (iii) Employee shall be provided coverage for
     the remainder of the Term essentially equivalent to
     that under Company's Contributory and Non-Contributory
     Life Insurance, Health and long-term disability plans
     for active employees (using Employee's annual base
     salary pursuant to paragraph 3.1 as the compensation
     base where relevant); and

          (iv) Employee or Employee's surviving spouse shall
     be provided additional pension payments in the amount
     that Employee or his surviving spouse would have
     received under Company's Retirement Plan, Supplemental
     Retirement Plan, and Pension Plan for Deferral Plan
     Participants had Employee's employment continued
     through the Term.

Company reserves the right to provide the benefits and
payments referred to in paragraphs 7.1(ii), 7.1(iii), and
7.1(iv) by making substantially equivalent payments to or
purchasing substantially equivalent benefits for Employee
under arrangements other than the plans referred to in said
paragraphs if, in Company's sole discretion, the tax or
compliance status of such plans may otherwise be
jeopardized.  Such equivalent payments shall be a liability
of Company, shall be paid exclusively from the general
assets of Company, and shall be an unfunded and unsecured
promise to pay money in the future, unless Company elects to
otherwise fund or secure such payments.

     7.2  Certain Additional Payments by Company.
Notwithstanding anything to the contrary in this Agreement,
in the event that any payment or distribution by Company to
or for the benefit of Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (a 'Payment'), would be subject to
the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended, or any interest or
penalties with respect to such excise tax (such excise tax,
together with any such interest or penalties, are
hereinafter collectively referred to as the 'Excise Tax'),
Company shall pay to Employee an additional payment (a
'Gross-up Payment') in an amount such that after payment by
Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise
Tax imposed on any Gross-up Payment, Employee retains an
amount of the Gross-up Payment equal to the Excise Tax
imposed upon the Payments.  Company and Employee shall make
an initial determination as to whether a Gross-up Payment is
required and the amount of any such Gross-up Payment.
Employee shall notify Company immediately in writing of any
claim by the Internal Revenue Service which, if successful,
would require Company to make a Gross-up Payment (or a Gross-
up Payment in excess of that, if any, initially determined
by Company and Employee) within five days of the receipt of
such claim.  Company shall notify Employee in writing at
least five days prior to the due date of any response
required with respect to such claim if it plans to contest
the claim.  If Company decides to contest such claim,
Employee shall cooperate fully with Company in such action;
provided, however, Company shall bear and pay directly or
indirectly all costs and expenses (including additional
interest and penalties) incurred in connection with such
action and shall indemnify and hold Employee harmless, on an
after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a
result of Company's action.  If, as a result of Company's
action with respect to a claim, Employee receives a refund
of any amount paid by Company with respect to such claim,
Employee shall promptly pay such refund to Company.  If
Company fails to timely notify Employee whether it will
contest such claim or Company determines not to contest such
claim, then Company shall immediately pay to Employee the
portion of such claim, if any, which it has not previously
paid to Employee.

     7.3  Offset of Severance Benefits.  Any amount payable
to Employee pursuant to this Article shall be offset against
any amounts to which Employee may otherwise be entitled
under any and all severance plans and policies of Company or
its affiliates presently in effect or which may be hereafter
adopted or amended.

     7.4   No Duty to Mitigate Losses.  Employee shall have
no duty to find new employment following the termination of
his employment under circumstances which require Company to
pay any amount to Employee pursuant to this Article.  Any
salary or remuneration received by Employee from a third
party for the providing of personal services (whether by
employment or by functioning as an independent contractor)
following the termination of his employment under
circumstances pursuant to which paragraphs 7.1 or 7.2 apply
shall not reduce Company's obligation to make a payment to
Employee (or the amount of such payment) pursuant to the
terms of any such paragraph.

     7.5  Incentive and Deferred Compensation.  This
Agreement governs the rights and obligations of Employee and
Company with respect to Employee's base salary and certain
perquisites of employment.  Employee's rights and
obligations both during the term of his employment and
thereafter with respect to stock options, restricted stock,
performance units, life insurance policies insuring the life
of Employee, and other benefits under the plans maintained
by Company shall be governed by the separate agreements,
plans and other documents and instruments governing such
matters; provided, however, that upon Employee's termination
of employment hereunder for any reason whatsoever, the
benefits payable to Employee under Company's 1988 Deferral
Plan and the HNG Deferral Plan shall be paid, when
distributable to Employee in accordance with the provisions
of said plans, as if Employee had retired from Company.

     7.6  Certain Defined Terms.  For purposes of this
Agreement, the following terms shall have the meanings
ascribed to them below:

          (i)  'Beneficial Owner' shall be defined by
     reference to Rule 13(d)-3 under the Securities Exchange
     Act of 1934, as in effect on September 1, 1989;
     provided, however, and without limitation, any
     individual, corporation, partnership, group,
     association or other person or entity which has the
     right to acquire any Voting Stock at any time in the
     future, whether such right is contingent or absolute,
     pursuant to any agreement, arrangement or understanding
     or upon exercise of conversion rights, warrants or
     options, or otherwise, shall be the Beneficial Owner of
     such Voting Stock.

          (ii) 'Change of Control' shall mean (A) Company
     merges or consolidates with any other corporation
     (other than one of Company's wholly owned subsidiaries)
     and is not the surviving corporation (or survives only
     as the subsidiary of another corporation), (B) Company
     sells all or substantially all of its assets to any
     other person or entity, (C) Company  is dissolved, (D)
     any third person or entity (other than the trustee or
     committee of any qualified employee benefit plan of
     Company) together with its affiliates and associates
     shall become, directly or indirectly, the Beneficial
     Owner of at least 30% of the Voting Stock of Company,
     or (E) the individuals who constitute the members of
     the Board of Directors (the 'Incumbent Board') cease
     for any reason to constitute at least a majority
     thereof, provided that any person becoming a director
     whose election or nomination for election by Company
     stockholders was approved by a vote of at least 80% of
     the directors comprising the Incumbent Board (either by
     a specific vote or by approval of the proxy statement
     of Company in which such person is named as a nominee
     for director, without objection to such nomination)
     shall be, for purposes of this clause (E), considered
     as though such person were a member of the Incumbent
     Board.

          (iii) 'Involuntarily Terminated' shall mean
     termination of Employee's employment with Company (A)
     by Company for any reason whatsoever except for Cause
     or upon Employee's death or becoming Permanently
     Disabled or (B) by Employee for Good Reason.

          (iv) 'Voting Stock' shall mean all outstanding
     shares of capital stock of Company entitled to vote
     generally in elections for directors, considered as one
     class; provided, however, that if Company has shares of
     Voting Stock entitled to more or less than one vote for
     any such share, such reference to a proportion of
     shares of Voting Stock shall be deemed to refer to such
     proportion of the votes entitled to be cast by such
     shares.
          
     7.7  Liquidated Damages.  In light of the difficulties
in estimating the damages for an early termination of this
Agreement, Company and Employee hereby agree that the
payments, if any, to be received by Employee pursuant to
paragraph 7.1 or paragraph 7.2 shall be received by Employee
as liquidated damages.


ARTICLE 8:  MISCELLANEOUS

     8.1  Notices.  For purposes of this Agreement, notices
and all other communications provided for herein shall be in
writing and shall be deemed to have been duly given when
personally delivered or when mailed by United States
registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:

     If to Company to: Enron Corp.
                       1400 Smith Street
                       Houston, Texas  77002
                       Attention:  Corporate Secretary

     If to Employee to: Mr. Kenneth L. Lay
                        2121 Kirby Drive, #137
                        Houston, Texas  77019

or to such other address as either party may furnish to the
other in writing in accordance herewith, except that notices
of changes of address shall be effective only upon receipt.

     8.2  Applicable Law.  This Agreement is entered into
under, and shall be governed for all purposes by, the laws
of the State of Texas, excluding any conflict-of-law rule or
principle that might refer the construction of this
Agreement to the laws of another State or country.  The
parties agree that this Agreement is to be at least
partially performed in Houston, Harris County, Texas.

     8.3  No Waiver.  No failure by either party hereto at
any time to give notice of any breach by the other party of,
or to require compliance with, any condition or provision of
this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any
prior or subsequent time.

     8.4  Severability.  It is a desire and intent of the
parties that the terms, provisions, covenants and remedies
contained in this Agreement shall be enforceable to the
fullest extent permitted by law.  If any such term,
provision, covenant, or remedy of this Agreement or the
application thereof to any person, association, or entity or
circumstances shall, to any extent, be construed to be
invalid or unenforceable in whole or in part, then such
term, provision, covenant, or remedy shall be construed in a
manner so as to permit its enforceability under the
applicable law to the fullest extent permitted by law.  In
any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or
circumstances other than those to which they have been held
invalid or unenforceable, shall remain in full force and
effect.

     8.5  Counterparts.  This Agreement may be executed in
one or more counterparts, each of which shall be deemed to
be an original, but all of which together will constitute
one and the same Agreement.

     8.6  Withholding of Taxes and Other Employee
Deductions.  Company may withhold from any benefits and
payments made pursuant to this Agreement all federal, state,
city and other taxes as may be required pursuant to any law
or governmental regulation or ruling and all other normal
employee deductions made with respect to Company's employees
generally.

     8.7  Headings.  The paragraph headings have been
inserted for purposes of convenience and shall not be used
for interpretive purposes.

     8.8  Gender and Plurals.  Wherever the context so
requires, the masculine gender includes the feminine or
neuter, and the singular number includes the plural and
conversely.

     8.9  Affiliate.  As used in this Agreement, the term
'affiliate' shall mean any entity which owns or controls, is
owned or controlled by, or is under common ownership or
control with, Company.

     8.10 Cooperation by Employee.  Employee shall cooperate
with Company by furnishing any and all information requested
by Company, taking such physical examinations as Company may
deem necessary, and taking such other relevant action as may
be requested by Company in order to facilitate the
acquisition and maintenance of the life insurance policy on
the life of Employee that is subject to the Split Dollar
Agreement referenced in paragraph 3.6.

     8.11 Assignment.  This Agreement shall be binding upon
and inure to the benefit of Company and any successor of
Company, by merger or otherwise.  Except as provided in the
preceding sentence, this Agreement, and the rights and
obligations of the parties hereunder, are personal and
neither this Agreement, nor any right, benefit, or
obligation of either party hereto, shall be subject to
voluntary or involuntary assignment, alienation or transfer,
whether by operation of law or otherwise, without the prior
written consent of the other party.

     8.12 Term.  This Agreement has a term co-extensive with
the Term as provided in paragraph 2.1.  Termination shall
not affect any right or obligation of any party which is
accrued or vested prior to such termination.  Without
limiting the scope of the preceding sentence, the provisions
of Articles 4, 5, and 6 shall survive any termination of the
employment relationship and/or of this Agreement.

     8.13 Entire Agreement.  Except as provided in (i)
written company policies promulgated by Company dealing with
issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting
fees, commissions or other payments, compliance with law,
investments and outside business interests as officers and
employees, reporting responsibilities, administrative
compliance, and the like, (ii) the written benefits, plans,
and programs referenced in paragraphs 3.2 and 3.3, and
(iii) any signed written agreements contemporaneously or
hereafter executed by Company and Employee (including, but
not limited to, the Split Dollar Agreement and the Stock
Option Grant Agreements referenced in Article 3), this
Agreement constitutes the entire agreement of the parties
with regard to such subject matters, and contains all of the
covenants, promises, representations, warranties, and
agreements between the parties with respect to Employee's
employment relationship with Employer and the term and
termination of such relationship, and replaces and merges
previous agreements and discussions pertaining to the
employment relationship between Employer and Employee.
Specifically, but not by way of limitation, the Prior
Employment Agreement is hereby canceled and Employee hereby
irrevocably waives and renounces all of Employee's rights
and claims under the Prior Employment Agreement.
Notwithstanding the preceding provisions of this paragraph
8.13, except as provided in paragraph 8.14, the execution of
this Agreement shall not affect the rights of the parties
pursuant to (A) the stock options and restricted stock
previously awarded to Employee and currently outstanding
under any and all stock plans maintained by Company, (B) the
previous awards to Employee that are currently outstanding
under Company's Performance Unit Plan, (C) that certain
Split Dollar Life Insurance Agreement and related Collateral
Agreement between Company and the KLL & LPL Family
Partnership, Ltd. dated as of April 22, 1994, (D) that
certain Loan Commitment Agreement between Company and
Employee made effective as of September 1, 1989, as amended
from time to time by amendments to the Prior Employment
Agreement (the 'Loan Commitment Agreement'), and (E) Section
2 of the Houston Natural Gas Corporation and Subsidiaries
Executive Supplemental Benefit Agreement between Employee
and Houston Natural Gas Corporation dated November 12, 1984
(the 'HNG ESBA'.  Further, the execution of this Agreement
shall not affect Employee's previous waiver, renouncement,
and forfeiture of any and all of his rights to benefits
under the Enron Executive Supplemental Survivor Benefits
Plan, the Houston Natural Gas Corporation and Subsidiaries
Executive Post-Retirement Salary Continuation Agreement
between Employee and Houston Natural Gas Corporation dated
July 1, 1985, and the HNG ESBA (excluding all rights as
described under the terms and provisions of Section 2 of the
HNG ESBA).  Each party to this Agreement acknowledges that
no representation, inducement, promise or agreement, oral or
written, has been made by either party, or by anyone acting
on behalf of either party, which is not embodied herein, and
that no agreement, statement, or promise relating to the
employment of Employee by Company, which is not contained in
this Agreement, shall be valid or binding.  Any modification
of this Agreement will be effective only if it is in writing
and signed by the party to be charged.

     8.14 Amendment to Loan Commitment Agreement.  Effective
as of the Effective Date, the Loan Commitment Agreement
shall be and is hereby amended as follows:  (i) the date
'December 31, 2001' shall be substituted for the date
'August 31, 1994' in each place such latter date appears in
Sections 1.01 and 2.04 of the Loan Commitment Agreement;
(ii) the date 'January 1, 2001' shall be substituted for the
dates 'February 8, 1999,' and  'January 1, 1994' in each
place such latter dates appear in Sections 2.01 and 2.03 of
the Loan Commitment Agreement; and (iii) all references to
the Prior Employment Agreement in the Loan Commitment
Agreement shall be deleted and references to this Agreement
shall be substituted therefor.

     IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the 18th day of December, 1996, to be
effective as of the Effective Date.

                              ENRON CORP.


                              By:    CHARLES A. LeMAISTRE
                              Name:  Charles A. LeMaistre
                              Title: Chairman, Compensation
                                     Committee of Board of
                                     Directors
                                            'COMPANY'


                              KENNETH L. LAY
                              KENNETH L. LAY
                                             'EMPLOYEE'



                           EXHIBIT A

                          ENRON CORP.
                  STOCK OPTION GRANT AGREEMENT


GRANTEE:  Kenneth L. Lay
          2121 Kirby Drive, #137
          Houston, Texas  77019

I.   AWARD

Congratulations!  You have been granted an Option ('Option')
to purchase shares of $.10 par value common stock ('Stock')
of Enron Corp. (the 'Company') as follows:

     Employee I.D.:                          [redacted]
     Non-Qualified Stock Option Grant No.:   ________________
     Stock Plan:                             Enron Corp. 1991 Stock Plan
     Date of Grant:                          ________________
     Purchase Price per Share Subject to Option:  $_______________
     Total Number of Shares Subject to Option:     637,500

II.  DEFINITIONS

For purposes of this Stock Option Grant Agreement (this
'Agreement'), the following terms shall have the following
meanings:

     'Adjusted Average S&P 500 Return' means, with respect
     to a specified period, 120% of the Average S&P 500
     Return for such period.

     'Average S&P 500 Return' means, with respect to a
     specified period, the average of the Total Shareholder
     Returns during such period for the common stocks
     comprising the Standard & Poor's 500 Composite Stock
     Price Index.

     'Cause' shall have the meaning assigned to such term in
     the Employment Agreement.

     'Employee' shall mean Kenneth L. Lay.

     'Employment Agreement' shall mean that certain
     Employment Agreement between Employee and the Company
     made effective as of December 9, 1996.

     'Involuntarily Terminated' shall have the meaning
     assigned to such term in the Employment Agreement.

     'Measurement Period' shall mean the period beginning on
     January 1, 1997, and ending on the last day of any
     subsequent Year.
     
     'Nonvested Shares' shall mean 80% of the aggregate
     number of shares of Stock offered by this Option.

     'Plan' shall mean the Enron Corp. 1991 Stock Plan, as
     amended from time to time.

     'Retirement' shall mean the termination of Employee's
     employment with the Company  on or after December 31,
     2001, provided that Employee has remained continuously
     employed by the Company from the date of grant hereof
     through such termination date pursuant to the terms of
     the Employment Agreement.

     'Total Enron Shareholder Return' means, with respect to
     a specified period, the Total Shareholder Return during
     such period for a share of Stock.

     'Total Shareholder Return' means, with respect to a
     specified period, the sum during such period of the
     appreciation or depreciation in the price of a share of
     a company's common stock and the dividends paid,
     expressed on a percentage basis, as calculated by the
     Committee in a manner consistent with that used to
     calculate 'Total Shareholder Return' under the
     Company's Performance Unit Plan as of the date of grant
     of this Option.

     'Year' shall mean the 12-month period beginning on
     January 1 and ending on December 31.

Capitalized terms used in this Agreement but not defined
herein are defined in the Plan and are used herein with the
meanings ascribed to them in the Plan.

III. EXERCISE OF OPTION

Subject to the earlier expiration of this Option as herein
provided and subject to the provisions of the Plan providing
for the disposition of this Option upon the occurrence of
certain transactions, this Option may be exercised, by
written notice to the Company at its principal executive
office addressed to the attention of such officer as is then
responsible for administering agreements of this nature, at
any time and from time to time after the date of grant
hereof, but, except as otherwise provided below, this Option
shall not be exercisable for more than a percentage of the
aggregate number of shares offered by this Option determined
in accordance with the following schedule:
          
          
          
          
          
                                         Percentage of Shares
          Exercise Date                  That May Be Purchased

          Prior to November 1, 2003               20%
          On or After November 1, 2003           100%
     
Notwithstanding the foregoing, this Option shall become
exercisable with respect to 100% of the  shares offered by
this Option if Employee's employment with the Company is
Involuntarily Terminated or if such employment is terminated
by reason of Employee's death, Disability, or Retirement.
Further,  this Option shall become exercisable with respect
to the Nonvested Shares prior to the occurrence of the dates
or events set forth above as follows:

          (1)  As soon as practicable (but in no event more
     than 60 days) after the last day of December of each
     Year (beginning with December 31, 1997), the Committee
     shall determine whether the Total Enron Shareholder
     Return for such Year equaled or exceeded the Adjusted
     Average S&P 500 Return for such Year.

          (2)  If the Total Enron Shareholder Return for
     such Year equaled or exceeded the Adjusted Average S&P
     500 Return for such Year, then this Option shall become
     exercisable as of the last day of December of such Year
     with respect to one-third of the Nonvested Shares.  If
     the Total Enron Shareholder Return for such Year was
     less than the Adjusted Average S&P 500 Return for such
     Year, then the one-third of the Nonvested Shares that
     did not become exercisable for such Year pursuant to
     the preceding sentence shall become exercisable as of
     the last day of such Year or any subsequent Year so
     long as the cumulative Total Enron Shareholder Return
     for the applicable Measurement Period equaled or
     exceeded the cumulative Adjusted Average S&P 500 Return
     for such Measurement Period.  The Committee shall
     determine the cumulative  Total Enron Shareholder
     Return and the cumulative Adjusted Average S&P 500
     Return for any applicable Measurement Period.

This Option is not transferable by Employee otherwise than
pursuant to Section 5.4(iii) of the Plan.  This Option may
be exercised only while Employee remains an employee of the
Company, except that if Employee's employment with the
Company is terminated for any reason whatsoever other than
by the Company for Cause, then this Option may be exercised
following such termination, but only as to the number of
shares Employee was entitled to purchase hereunder as of the
date Employee's employment so terminates (which shall be
determined after giving effect to the provisions of the
preceding paragraph that provide that this Option shall be
exercisable with respect to 100% of the shares offered
hereunder in the event Employee's employment is
Involuntarily Terminated or such termination is by reason of
Employee's death, Disability, or Retirement).

Notwithstanding any provision herein to the contrary, (a)
this Option shall not be exercisable in any event after
December 31, 2003, and (b) this Option shall not become
exercisable with respect to any additional shares offered by
this Option after the termination of Employee's employment
with the Company.

IV.      MISCELLANEOUS

This Option is governed by the terms and conditions of the
Plan,  which is attached hereto and made a part of this
Agreement.  This Option shall not constitute an incentive
stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986.
               
                                   Administrative Committee
                                   Enron Corp. 1991 Stock
Plan


                           EXHIBIT B

                     SPLIT DOLLAR AGREEMENT


     THIS SPLIT DOLLAR AGREEMENT (this 'Agreement') is made
and entered into effective as of December 13, 1996, by and
among ENRON CORP., a Delaware corporation, with principal
offices and place of business in Houston, Texas (hereinafter
referred to as the 'Company'), KENNETH L. LAY, an individual
residing in Houston, Texas (hereinafter referred to as the
'Employee'),  and KLL & LPL FAMILY PARTNERSHIP, LTD., a
Texas limited partnership with principal offices and place
of business in Houston, Texas (hereinafter referred to as
the 'Partnership'),

     WITNESSETH THAT:

     WHEREAS, the Employee is currently employed by the
Company; and

     WHEREAS, the Partnership is the owner of a policy of
life insurance insuring the life of the Employee in the
event of the Employee's death (hereinafter referred to as
the 'Policy'), which is described in Exhibit A attached
hereto and by this reference made a part hereof, and which
was issued by Transamerica Occidental Life Insurance Company
(hereinafter referred to as the 'Insurer'); and

     WHEREAS, the Policy was obtained on October  14, 1996,
by the Partnership upon conversion of another life insurance
policy on the life of the Employee that was owned by the
Partnership and in which the Partnership had an economic
interest valued at $200,112;

     WHEREAS, the Company is willing to pay a portion of the
premiums due on the Policy as an additional employment
benefit for the Employee, on the terms and conditions
hereinafter set forth; and

     WHEREAS, the Partnership is the owner of the Policy
and, as such, possesses all incidents of ownership in and to
the Policy; and

     WHEREAS, the Company wishes to have the Policy
collaterally assigned to it by the Partnership, in order to
secure the repayment of the amounts which it will pay toward
the premiums on the Policy and certain other amounts;

     NOW, THEREFORE, in consideration of the premises and of
the mutual promises contained herein, the parties hereto
agree as follows:

     1.    Acquisition of Policy.  The Partnership has
acquired the Policy from the Insurer in the total face
amount of $11,887,900.  The parties hereto have taken all
necessary action to cause the Insurer to issue the Policy,
and shall take any further action which may be necessary to
cause the Policy to conform to the provisions of this
Agreement.  The parties hereto agree that the Policy shall
be subject to the terms and conditions of this Agreement and
of the collateral assignment filed with the Insurer relating
to the Policy.

     2.   Ownership of Policy.  The Partnership shall be the
sole and absolute owner of the Policy, and may exercise all
ownership rights granted to the owner thereof by the terms
of the Policy, except as may otherwise be provided herein.

     3.   Payment of Premiums; Provision of Information.

          a.   Except to the extent required for the
Partnership to satisfy its obligations pursuant to section 5
below, the Partnership shall not be required to make any
premium payments with respect to the Policy.

          b.   On or before the due date of each annual
Policy premium, or within the grace period provided therein,
the Company shall pay $250,000 to the Insurer, and shall,
upon request, promptly furnish the Partnership evidence of
timely payment of such premium.  Except with the consent of
the Partnership, the Company shall not pay less than the
amount provided in the preceding sentence, but it may, in
its discretion, at any time and from time to time, subject
to acceptance of such amount by the Insurer, pay more than
such amount or make other premium payments on the Policy.
Notwithstanding any provision herein to the contrary, the
Company shall have no obligation (1) to make more than five
annual premium payments in the amount specified in the
preceding provisions of this paragraph or (2) to make any
premium payments on or after the date the Employee's
employment with the Company terminates for any reason
whatsoever.

          c.   The Company shall annually furnish to the
Employee a statement of the amount of income reportable by
the Employee for federal and state income tax purposes as a
result of the insurance protection provided the
Partnership's Policy beneficiary.  The Partnership and the
Employee shall promptly furnish the Company with (1) copies
of any information or notices provided by the Insurer from
time to time with respect to the Policy and (2) any other
material or information relating to the Policy and
reasonably requested by the Company from time to time.

     4.   Collateral Assignment.  To secure the repayment to
the Company of the amount of the premiums on the Policy paid
by it hereunder and the other amounts due to the Company
hereunder, the Partnership has, contemporaneously herewith,
assigned the Policy to the Company as collateral under a
separate assignment instrument.  The collateral assignment
of the Policy to the Company shall not be terminated,
altered or amended by the Partnership, without the express
written consent of the Company.  The parties hereto agree to
take all action necessary to cause such collateral
assignment to conform to the provisions of this Agreement
and to be accepted by the Insurer.  Without limiting the
scope of the preceding provisions of this section, the
parties hereto agree that the Company shall have an interest
in the cash surrender value of the Policy to secure the
amounts due to the Company hereunder, which interest shall
in no event be less than the aggregate premium payments made
with respect to the Policy by the Company pursuant to
section 3(b) above.

     5.   Limitations on Partnership's Rights in Policy.
The Partnership shall not sell, assign, transfer, borrow
against or withdraw from the cash surrender value of the
Policy, surrender, or cancel the Policy without, in any such
case, the express written consent of the Company.  Further,
the Partnership shall not change the beneficiary designation
provision of the Policy, change the elected death benefit
option provisions thereof, decrease or increase the face
amount of insurance, fail to make premium payments, take any
other action, or fail to take any action if, as a result of
any such action or inaction, (a) the aggregate death
benefits payable under the Policy at any given time would be
less than the portion of the death benefits payable to the
Company pursuant to the first sentence of section 6(b) below
if the Employee's death was to occur at such time or (b) the
projected cash surrender value of the Policy upon Employee's
attainment of 100 years of age (determined based upon the
Insurer's assumptions prevailing at the time of any such
action or inaction) would be less than $250,000.

     6.   Collection of Death Proceeds.

          a.   Upon the death of the Employee prior to the
termination of this Agreement during the Employee's
lifetime, the Company and the Partnership shall cooperate
with the beneficiary or beneficiaries designated by the
Partnership to take whatever action is necessary to collect
the death benefit provided under the Policy.  When such
benefit has been collected and paid as provided herein, this
Agreement shall thereupon terminate.

          b.   Upon the death of the Employee prior to the
termination of this Agreement during the Employee's
lifetime, the Company shall have the unqualified right to
receive $1,250,000 of such death benefit in a single lump
sum cash payment; provided, however, that if the Employee's
employment with the Company has terminated for any reason
whatsoever (other than death) prior to the date upon which
the Company has paid all five of the annual premium payments
provided for in section 3(b) above, then the amount of the
death benefit payable to the Company shall be reduced to an
amount equal to the aggregate premium payments made by the
Company pursuant to section 3(b) above on or before the date
of such termination.  The balance of the death benefit
provided under the Policy, if any, shall be paid directly to
the beneficiary or beneficiaries designated by the
Partnership, in the manner and in the amount or amounts
provided in the beneficiary designation provision of the
Policy.  In no event shall the amount payable to the Company
hereunder exceed the insurance benefits payable at the death
of the Employee. No amount shall be paid from such insurance
benefits to the beneficiary or beneficiaries designated by
the Partnership until the full amount due the Company
hereunder has been paid.  The parties hereto agree that the
beneficiary designation provision of the Policy shall
conform to the provisions hereof.

          c.   Notwithstanding any provision hereof to the
contrary, in the event that, for any reason whatsoever, no
death benefit is payable under the Policy upon the death of
the Employee prior to the termination of this Agreement
during the Employee's lifetime and in lieu thereof the
Insurer refunds all or any part of the premiums paid for the
Policy, the Company and the Partnership's designated
beneficiary or beneficiaries shall have the unqualified
right to share such premiums based on the respective
cumulative contributions by the Company and the Partnership
thereto.  For purposes of the preceding sentence, the
Partnership shall be deemed to have made a premium payment
with respect to the Policy on the effective date of this
Agreement in an amount equal to $200,112.

     7.   Termination of the Agreement During the Employee's
Lifetime.

          a.   This Agreement may be terminated by the
Partnership at any time during the Employee's lifetime upon
written notice to the Company and payment to the Company by
the Partnership at the time of such notice of a single lump
sum cash payment in the amount of $1,250,000; provided,
however, that if the Employee's employment with the Company
has terminated for any reason whatsoever (other than death)
prior to the date upon which the Company has paid all five
of the annual premium payments provided for in section 3(b)
above, then the amount of such required payment to the
Company by the Partnership shall be reduced to an amount
equal to the aggregate premium payments made by the Company
pursuant to section 3(b) above on or before the date of such
termination.  Upon receipt of such amount, the Company shall
release the collateral assignment of the Policy by the
execution and delivery of an appropriate instrument of
release.

          b.   This Agreement shall automatically terminate,
during the Employee's lifetime, without notice, upon the
occurrence of any of the following events: (1) total
cessation of the Company's business; (2) bankruptcy,
receivership or dissolution of the Company; or (3) mutual
written consent of the parties.  If this Agreement
terminates for a reason described in the preceding sentence,
then for sixty (60) days after the date of the termination
of this Agreement, the Partnership shall have the option of
obtaining the release of the collateral assignment of the
Policy to the Company.  To obtain such release, the
Partnership shall repay to the Company the total amount of
the premium payments made by the Company hereunder, less any
indebtedness secured by the Policy which was incurred by the
Company and remains outstanding as of the date of such
termination, including any interest due on such
indebtedness.  Upon receipt of such amount, the Company
shall release the collateral assignment of the Policy by the
execution and delivery of an appropriate instrument of
release.  If the Partnership fails to exercise such option
within such sixty (60) day period, then, at the request of
the Company, the Partnership shall execute any document or
documents required by the Insurer to transfer the interest
of the Partnership in the Policy to the Company.
Alternatively, the Company may enforce its right to be
repaid the amount of the premiums on the Policy paid by it
from the cash surrender value of the Policy under the
collateral assignment of the Policy; provided that in the
event the cash surrender value of the Policy exceeds the
amount due the Company, such excess shall be paid to the
Partnership.  Thereafter, neither the Partnership nor any
person claiming under the Partnership shall have any further
interest in and to the Policy, either under the terms
thereof or under this Agreement.

     8.   Insurer Not a Party.  The Insurer shall be fully
discharged from its obligations under the Policy by payment
of the Policy death benefit to the beneficiary or
beneficiaries named in the Policy, subject to the terms and
conditions of the Policy.  In no event shall the Insurer be
considered a party to this Agreement, or any modification or
amendment hereof.  No provision of this Agreement, nor of
any modification or amendment hereof, shall in any way be
construed as enlarging, changing, varying, or in any other
way affecting the obligations of the Insurer as expressly
provided in the Policy, except insofar as the provisions
hereof are made a part of the Policy by the collateral
assignment executed by the Partnership and filed with the
Insurer in connection herewith.

     9.   Named Fiduciary. Determination of Benefits, Claims
Procedure and Administration.

          a.   The Company is hereby designated as the named
fiduciary under this Agreement.  The named fiduciary shall
have authority to control and manage the operation and
administration of this Agreement, and it shall be
responsible for establishing and carrying out a funding
policy and method consistent with the objectives of this
Agreement.
          b.   (1)  Claim.  A person who believes that he or
she is being denied a benefit to which he or she is entitled
under this Agreement (hereinafter referred to as a
'Claimant') may file a written request for such benefit with
the Company, setting forth his or her claim.  The request
must be addressed to the Company at its then principal place
of business.

               (2)  Claim Decision.  Upon receipt of a
claim, the Company shall advise the Claimant that a reply
will be forthcoming within ninety (90) days and shall, in
fact, deliver such reply within such period.  The Company
may, however, extend the reply period for an additional
ninety (90) days for reasonable cause.

                    If the claim is denied in whole or in
part, the Company shall adopt a written opinion, using
language calculated to be understood by the Claimant,
setting forth: (i) the specific reason or reasons for such
denial; (ii) the specific reference to pertinent provisions
of this Agreement on which such denial is based; (iii) a
description of any additional material or information
necessary for the Claimant to perfect his or her claim and
an explanation why such material or such information is
necessary; (iv) appropriate information as to the steps to
be taken if the Claimant wishes to submit the claim for
review; and (v) the time limits for requesting a review
under subsection (3) and for review under subsection (4)
hereof.

               (3)  Request for Review.  With sixty (60)
days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing
that the Company review its determination.  Such request
must be addressed to the Company, at its then principal
place of business.  The Claimant or his or her duly
authorized representative may, but need not, review the
pertinent documents and submit issues and comments in
writing for consideration by the Company.  If the Claimant
does not request a review of the Company's determination
within such sixty (60) day period, he or she shall be barred
and estopped from challenging the Company's determination.

               (4)  Review of Decision.  Within sixty (60)
days after the Company's receipt of a request for review, it
will review the determination. After considering all
materials presented by the Claimant, the Company will render
a written opinion, written in a manner calculated to be
understood by the Claimant, setting forth the specific
reasons for the decision and containing specific references
to the pertinent provisions of this Agreement on which the
decision is based.  If special circumstances require that
the sixty (60) day time period be extended, the Company will
so notify the Claimant and will render the decision as soon
as possible, but no later than one hundred twenty (120) days
after receipt of the request for review.

     10.  Amendment.  This Agreement may not be amended,
altered or modified, except by a written instrument signed
by the parties hereto, or their respective successors or
assigns, and may not be otherwise terminated except as
provided herein.

     11.  Binding Effect.  This Agreement shall be binding
upon and inure to the benefit of the Company and its
successors and assigns, and the Employee, the Partnership,
and their respective  successors,  assigns, heirs,
executors, administrators, and beneficiaries.

     12.  Notice.   Any notice, consent or demand required
or permitted to be given under the provisions of this
Agreement shall be in writing, and shall be signed by the
party giving or making the same.  If such notice, consent or
demand is mailed to a party hereto, it shall be sent by
United States certified mail, postage prepaid, addressed to
such party's last known address as shown on the records of
the Company.  The date of such mailing shall be deemed the
date of notice, consent or demand.

     13.  Taxes.  The Company makes no guarantees and
assumes no obligations or responsibilities with respect to
the Employee's or the Partnership's federal, state, or local
income, estate, inheritance, and gift tax obligations, if
any, under this Agreement, the Policy, or the collateral
assignment of the Policy to the Company.

     13.  Governing Law.  This Agreement, and the rights of
the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of Texas.

     IN WITNESS WHEREOF, the parties hereto have executed
this Agreement in triplicate on this the 18th day of
December, 1996, effective as of December 13, 1996.

                     ENRON CORP.
                     
                     
                     By:CHARLES A. LeMAISTRE
                     Name: Charles A. LeMaistre
                     Title: Chairman, Compensation Committee
                     of Board of Directors
                                                 'COMPANY'
                        
                        
                        
                     KENNETH L. LAY
                     Kenneth L. Lay
                                                 'EMPLOYEE'
                        
                        
                        
                     KLL & LPL FAMILY PARTNERSHIP, LTD.
                        
                        
                     By:KENNETH L. LAY
                     Name:   Kenneth L. Lay
                     Title:  Managing Partner
                        
                                    'PARTNERSHIP'

                           EXHIBIT A


     The following life insurance policy is subject to the
attached Split Dollar Agreement:


Insurer:            Transamerica Occidental Life Insurance Company

Insured:            Kenneth L. Lay

Policy Number:      92539069

Face Amount:        $11,887,900

Effective Date of Policy:  October 14, 1996