-----Original Message-----
From: 	Office of the Chief Executive  
Sent:	Friday, March 29, 2002 11:19 AM
To:	DL-GA-all_Enron_Domestic
Subject:	Retention & Severance Plan


To:  All US Domestic Employees
From:  Office of the Chief Executive

Earlier this week, we reached final resolution with the Creditors' Committee on a comprehensive retention and severance plan for employees of debtor companies, or those parts of Enron in bankruptcy.  Later this morning, we will file the plan with the bankruptcy court.  It will be public and posted on the court's website, but we have posted the plan on <http://home.enron.com>.  (See link below).  Other creditors and interested parties are allowed to review and comment on the plan.  After that, the court may approve or modify it.  We have asked the court to expedite a hearing date to consider the plan and we anticipate a hearing will be scheduled as early as the middle of April.

We want you to know that this plan is the result of much negotiation and compromise between Enron and our Creditors' Committee.  To be viable for approval by the bankruptcy court, a plan has to preserve or generate the greatest value for the estate and its creditors.  This plan meets that criterion.

We know all of you are interested in the plan's details so you can have some degree of financial certainty and make educated decisions for your future.  To help you fully understand how the retention and severance plan will work, we should first explain some near-term restructuring goals.

As we work to secure the most value for our creditors and other stakeholders, restructuring requires us to determine which assets or businesses provide greater value by being sold, as well as which assets or businesses provide greater value by generating ongoing cash flows.  We do have businesses and assets that are capable of emerging from bankruptcy.  We intend to separate those businesses from the liabilities and litigation facing the estate so they can succeed as part of a viable reorganized entity.

This will require us to identify employees best suited to liquidate non-core assets or wind down the estate, as well as employees best suited to support an emerging business.  Given the inherent uncertainty of restructuring, the retention and severance plan offers some measure of financial assurance to all employees of debtor companies regardless of their role within the organization.

The proposed plan is retroactive to March 1, 2002, and has a maximum value up to $130 million depending on the value of asset sales and other cash collections.  It includes the following components:
Severance benefits valued up to $7 million,
Retention payments valued at $40 million, and
Liquidation incentive pool, which is a variable pool tied to the amount of cash collected by the estate, with a minimum value of $7.4 million and a maximum value of up to $90 million, one percent of the estate's cash collection target of $9 billion.

SEVERANCE BENEFITS
A primary component of the proposed retention and severance plan is a new severance program for employees of debtor companies not currently participating in another plan.  Under the proposed plan, employees will be eligible for two weeks base pay for every full or partial year of service, with a maximum of eight weeks base pay and a minimum of $4,500.  If an employee resigns voluntarily or is terminated for cause, he or she is not eligible for severance benefits.

Some non-debtor companies were able to recently institute separate severance plans for their employees.  This was possible because their plans do not require the approval of the bankruptcy court.  The details of those plans have been shared with employees of non-debtor companies.

RETENTION
Under the proposed plan, retention payments will be made to many employees in debtor companies whose skills or knowledge are required indefinitely, or for a predetermined duration of the restructuring.  Regrettably, not all employees will receive retention.

An eligible employee's retention will be a percentage of his or her quarterly base salary.  At the beginning of each quarter, or three-month period, eligible employees will be informed of their projected range of retention compensation for the period by their supervisors.  The actual quarterly payout an employee earns will be decided at the end of the quarter based on performance and achievements during the period.

An employee participating in the retention program will receive 25 percent of the earned quarterly retention at the end of each period, with payouts as soon as practical after May 31, August 31, November 30, 2002, and February 28, 2003.  The remaining 75 percent of the earned retention for a period is non-vested, deferred, and will be paid to an employee after February 28, 2003.

If involuntarily terminated without cause prior to February 28, 2003, an employee will receive all deferred retention, plus retention based on the actual earned salary for the quarter in which he or she is terminated.  Employees' earned and deferred retention payments are considered post-petition administrative claims that take precedent over other obligations owed by the estate.

An employee involuntarily terminated without cause is eligible for the greater of severance benefits or earned retention, with the total amount of retention payments received offsetting the amount of severance received.  Depending on an employee's personal circumstances, a participant in the retention program may wish to consider setting aside some portion of retention as a financial safety net in the event he or she is involuntarily terminated.

If an employee receiving retention voluntarily resigns prior to February 28, 2003, or is terminated for cause, he or she does not earn a retention payment for that quarter and forfeits all deferred retention.  He or she would not be eligible for severance.

Any amounts not paid out are returned to the retention fund and could be reallocated to current or new participants of the program.

LIQUIDATION INCENTIVE POOL
Under the proposed plan, employees identified as critical to the sale of non-core assets and businesses will be eligible to participate in the liquidation incentive pool (LIP).  The amount of money in the pool will be directly tied to the amount of cash collected by the estate.

Enron's management committee will have discretion to assign incentive payments to participants in the liquidation pool after each $500 million dollars is collected, also called a "collection milestone".  Fifty percent of an employee's earned liquidation incentive for a collection period will be distributed at the time a milestone is reached.  The remaining 50 percent of the earned liquidation incentive is non-vested and deferred.

If a collection milestone is not reached in a given quarter, but progress has been made, a quarterly advance may be allocated among participants of the program based on a quarterly floor amount of $1.85 million.  Fifty percent of an employee's quarterly advance will be paid as soon as practical after May 31, August 31, November 30, 2002, and February 28, 2003.  The remaining 50 percent of an earned advance will be non-vested and deferred, and will offset against future incentive payments.

All accrued and deferred liquidation will be paid at the earlier of the following events:
1.		Enron's reorganization is complete; or
2.	the employee is involuntarily terminated without cause, or
3.	upon specified dates related to incremental cash collections.

Employees' earned and deferred liquidation incentives are considered post-petition administrative claims that take precedent over other obligations owed by the estate.

Employees participating in the liquidation incentive pool are not eligible for severance benefits.  If an employee receiving liquidation incentives voluntarily resigns prior to February 28, 2003, or is terminated for cause, he or she will forfeit any deferred liquidation incentive payment and any minimum liquidation payment for the quarter in which he or she resigns.

Any amounts not paid out are returned to the liquidation incentive pool and could be reallocated to current or new participants of the program.

OTHER ITEMS
Bankruptcy law allows creditors to claim as fraudulent any significant payments made by a company in the 90-day period prior to its bankruptcy's filing.  To that end, creditors may attempt to reclaim retention payments made prior to Enron's bankruptcy filing that they perceive were inappropriate or have not returned adequate value to the estate.  The Creditors' Committee has agreed to forego its right to pursue claims against any current employee who agrees to release claims against the company, and stays with the company through August 31, 2002, or until he or she is involuntarily terminated without cause, whichever comes first.

All debtor company employees will be required to sign a general release to receive their final severance benefits, deferred quarterly retention payments, or deferred liquidation payments.

We know how long you have waited for details about this plan.  We will instruct supervisors to begin communicating projected participation to each individual employee next week.  Although the Creditors' Committee has approved it, this proposed plan is not final until approved by the bankruptcy court.  Therefore, it is possible an employee's status could change depending on the final plan approved by the court.  Supervisors will hold follow up meetings with each employee to confirm his or her individual participation after the bankruptcy court rules on the plan.

To review the plan in its entirety, click on the following link:  <http://home.enron.com/updates/retsevplan.html>