ETS Year-end Performance Evaluation Process

The year-end performance evaluation process is a great opportunity for=20
employees and their supervisors to review accomplishments for the year and=
=20
identify opportunities for personal growth. Additionally, it is an=20
opportunity for each of us to provide meaningful performance feedback to he=
lp=20
others. This memo is intended to summarize the major elements of this=20
important process and clarify the timeline for year-end 2001.

(Note: ETS employees on self-directed work teams that participate in the=20
Skill-based Pay program will complete team and peer performance reviews as=
=20
they have in the past and are exempted from the discussion that follows.)

Feedback and Evaluation
Employees will solicit 360=15 feedback on their performance via the PEP sys=
tem.=20
The supervisor will use this feedback, along with other performance data=20
about the employee, to prepare a written evaluation of the employee=01,s=20
performance for the year. The employee and supervisor will then meet and=
=20
discuss this evaluation which provides an objective measure of the employee=
=01,s=20
performance against expectations. The performance evaluation is an=20
opportunity to discuss accomplishments, areas for improvement and goals for=
=20
the next year. No overall performance rating will be designated.

? PEP System open for feedback November 19 - December 7
? Performance discussions with supervisor December 10 - January 14
? Written evaluations due to HR January 15

Training for all employees on how to use the PEP system will be available v=
ia=20
online tutorials.

Compensation
Increases in an employee=01,s base pay for merit, promotion or equity can b=
e=20
recommended by an individual supervisor based on the employee=01,s performa=
nce,=20
current responsibilities and salary. Division Head approval is required.

As always, incentive awards are paid at the discretion of the Enron Board=
=20
Compensation Committee and the Enron Office of the Chairman based on compan=
y=20
and business unit performance. Once bonus pools are approved, individual=20
bonuses will be determined by division and department heads based on employ=
ee=20
performance.

Relative Talent Reviews
Relative talent reviews will occur beginning January 16, 2002 and will=20
include discussions of Managers and above. The focus is not on relative=20
ranking but on identifying employees who best demonstrate the performance,=
=20
skills and behaviors that are valued at Enron. Each Division will identify=
=20
its top 10% and discuss the utilization of its top talent. Employees who m=
ay=20
be ready to assume greater responsibilities will be discussed. =20
Recommendations for promotions will be considered up through Senior Directo=
r.=20
EGS executive management will review Vice Presidents and Managing Director=
s=20
and identify the top 10% in this officer group. Nomination for promotions =
to=20
Vice President and Managing Director levels will be made to the Enron=20
Management Committee, which will make final decisions on these promotions.

If you have any questions about any aspect of this year-end process, I=20
encourage you to contact your HR representative.

Gary