Split Dollar Life Insurance Agreement - Enron Corp. and Kenneth L. Lay


                     THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

         This Agreement, made and entered into on this ____ day of __________,
_____, and made effective as of August 13, 2001, by and between ENRON CORP.,
(Company") and KENNETH L. LAY ("Employee"), is an amendment to that certain
Employment Agreement between the parties entered into and made effective on
December 9, 1996 (the "Employment Agreement").

         WHEREAS, the parties desire to amend the Employment Agreement as
provided herein;

         NOW, THEREFORE, for and in consideration of the covenants contained
herein, and for other good and valuable considerations, the parties agree as
follows:

         1.       Article 1, paragraph 1.2 shall be deleted in its entirety and
                  the following inserted in its place:

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

         2.       Article 2, paragraph 2.1 shall be deleted in its entirety and
                  the following inserted in its place:

                           "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
                  December 31, 2005, and thereafter for such period, if any, as
                  may be agreed upon in writing by Employee and Company."

         3.       Article 3, Section 3.1 is hereby amended in its entirety and
                  the following is inserted in its place:

                           "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, which
                  increased to 1.2 million dollars on May 1, 1997 and then
                  increased to 1.3 million dollars on May 1, 1998 through
                  January 31, 2001. For the period beginning February 1, 2001
                  and ending August 12, 2001, Employee shall receive a minimum
                  annual base salary equal to $975,000. Effective August 13,
                  2001, Employee's minimum annual base salary shall be increased
                  to $1,000,000.00. 




                  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 and Management Development
                  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 irrevocable 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."

         4.       Article 8, paragraph 8.14 shall be deleted in its entirety and
                  the following inserted in its place:

                           "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, 2005" 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, 2005 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."

         This Agreement is the Third Amendment to the Employment Agreement, and
the parties agree that all other terms, conditions and stipulations contained in
the Employment Agreement shall remain in full force and effect and without any
change or modification, except as provided herein.

         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.

KENNETH L. LAY                              ENRON CORP.


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