Mark G. Papa

 

                         EXECUTIVE EMPLOYMENT AGREEMENT

 

         This Employment Agreement ("Agreement"), including the attached

Exhibit "A," is entered into between Enron Oil & Gas Company., a Delaware

corporation, having offices at 1400 Smith Street, Houston, Texas 77002

("Employer"), and Mark G. Papa, an individual currently residing at 3731

Panorama, Missouri City, Texas 77459 ("Employee"), to be effective as of

November 1, 1997 (the "Effective Date").

 

                                  WITNESSETH:

 

         WHEREAS, Employer is desirous of employing Employee pursuant to the

terms and conditions and for the consideration set forth in this Agreement, and

Employee is desirous of entering the employ of Employer pursuant to such terms

and conditions and for such consideration.

 

         NOW, THEREFORE, for and in consideration of the mutual promises,

covenants, and obligations contained herein, Employer and Employee agree as

follows:

 

ARTICLE 1:       EMPLOYMENT AND DUTIES:

 

         1.1     Employer agrees to employ Employee, and Employee agrees to be

employed by Employer, beginning as of the Effective Date and continuing until

the date set forth on Exhibit "A" (the "Term"), subject to the terms and

conditions of this Agreement.

 

         1.2     Employee initially shall be employed in the position set forth

on Exhibit A, provided however, if at the earlier of four years from the

Effective Date of this Agreement or Forrest E. Hoglund vacating the position of

Chief Executive Officer of the Employer, Employee is not promoted into the

position of Chief Executive Officer, then for a period of six (6) months

following notification to Employee of such decision, Employee shall have the

option to resign and said resignation shall be treated as described in Article

3, Section 3.10.  Employee agrees to serve in the assigned position and to

perform diligently and to the best of Employee's abilities the duties and

services appertaining to such position as determined by Employer, as well as

such additional or different duties and services appropriate to such position

which Employee from time to time may be reasonably directed to perform by

Employer.  Employee shall at all times comply with and be subject to such

policies and procedures as Employer may establish from time to time.

 

         1.3     Employee shall, during the period of Employee's employment by

Employer, devote Employee's full business time, energy, and best efforts to the

business and affairs of Employer.  Employee may not 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 Employer or Enron, or requires any significant portion of

Employee's business time.

<PAGE>   2

         1.4     In connection with Employee's employment by Employer, Employer

shall endeavor to provide Employee access to such confidential information

pertaining to the business and services of Employer as is appropriate for

Employee's employment responsibilities.  Employer also shall endeavor to

provide to Employee the opportunity to develop business relationships with

those of Employer's clients and potential clients that are appropriate for

Employee's employment responsibilities.

 

         1.5     Employee acknowledges and agrees that, at all times during the

employment relationship Employee owes fiduciary duties to Employer, including

but not limited to the fiduciary duties of the highest loyalty, fidelity and

allegiance to act at all times in the best interests of the Employer, to make

full disclosure to Employer of all information that pertains to Employer's

business and interests, to do no act which would injure Employer's business,

its interests, or its reputation, and to refrain from using for Employee's own

benefit or for the benefit of others any information or opportunities

pertaining to Employer's business or interests that are entrusted to Employee

or that he learned while employed by Employer.  Employee acknowledges and

agrees that upon termination of the employment relationship, Employee shall

continue to refrain from using for his own benefit or the benefit of others any

information or opportunities pertaining to Employer's business or interests

that were entrusted to Employee during the employment relationship or that he

learned while employed by Employer.  Employee agrees that while employed by

Employer and thereafter he shall not knowingly take any action which interferes

with the internal relationships between Employer and its employees or

representatives or interferes with the external relationships between Employer

and third parties.

 

         1.6     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

Employer or any of its affiliates, involves a possible conflict of interest.

In keeping with Employee's fiduciary duties to Employer, Employee agrees that

during the employment relationship Employee shall not knowingly become involved

in a conflict of interest with Employer or its affiliates, or upon discovery

thereof, allow such a conflict to continue.  Moreover, Employee agrees that

Employee shall disclose to Employer's Chairman any facts which might involve

such a conflict of interest that has not been approved by Employer's Chairman.

Employer and Employee recognize that it is impossible to provide an exhaustive

list of actions or interests which constitute a "conflict of interest."

Moreover, Employer and Employee recognize there are many borderline situations.

In some instances, full disclosure of facts by the Employee to Employer's

Chairman may be all that is necessary to enable Employer or its affiliates to

protect its interests.  In others, if no improper motivation appears to exist

and the interests of Employer or its affiliates have not suffered, prompt

elimination of the outside interest will suffice.  In still others, it may be

necessary for Employer to terminate the employment relationship.  Employer and

Employee agree that Employer's determination as to whether a conflict of

interest exists shall be conclusive.  Employer reserves the right to take such

action as, in its judgment, will end the conflict.

 

ARTICLE 2:       COMPENSATION AND BENEFITS:

 

         2.1     Employee's monthly base salary during the Term shall be not

less than the amount set forth under the heading "Monthly Base Salary" on

Exhibit A, subject to increase at the sole discretion of the Employer, which

shall be paid in semimonthly installments in accordance with

<PAGE>   3

Employer's standard payroll practice.  Any calculation to be made under this

Agreement with respect to Employee's Monthly Base Salary shall be made using

the then current Monthly Base Salary in effect at the time of the event for

which such calculation is made.

 

         2.2     While employed by Employer (both during the Term and

thereafter), Employee shall be allowed to participate, on the same basis

generally as other employees of Employer, 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 Employer to all or

substantially all of Employer's employees.  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.

 

         2.3     Employer shall not by reason of this Article 2 be obligated to

institute, maintain, or refrain from changing, amending, or discontinuing, any

such incentive compensation or employee benefit program or plan, so long as

such actions are similarly applicable to covered employees generally.

Moreover, unless specifically provided for in a written plan document adopted

by the Board of Directors of either Employer or Enron, none of the benefits or

arrangements described in this Article 2 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 Employer.

 

         2.4     Employer may withhold from any compensation, benefits, or

amounts payable under this Agreement all federal, state, city, or other taxes

as may be required pursuant to any law or governmental regulation or ruling.

 

ARTICLE 3:       TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH

TERMINATION:

 

         3.1     Notwithstanding any other provisions of this Agreement,

Employer 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)     For "cause" upon the good faith determination by the

                 Employer's management committee (or, if there is no management

                 committee, the highest applicable level of management) of

                 Employer that "cause" exists for the termination of the

                 employment relationship.  As used in this Section 3.1(i), the

                 term "cause" shall mean [a] Employee's gross negligence or

                 willful misconduct in the performance of the duties and

                 services required of Employee pursuant to this Agreement; or

                 [b] Employee's final conviction of a felony or of a

                 misdemeanor involving moral turpitude; [c] Employee's

                 involvement in a conflict of interest as referenced in

                 Sections 1.5-1.6 for which Employer makes a determination to

                 terminate the employment of Employee; or [d] Employee's

                 material breach of any material

<PAGE>   4

                 provision of this Agreement which remains uncorrected for

                 thirty (30) days following written notice to Employee by

                 Employer of such breach.  It is expressly acknowledged and

                 agreed that the decision as to whether "cause" exists for

                 termination of the employment relationship by Employer is

                 delegated to the management committee (or, if there is no

                 management committee, the highest applicable level of

                 management) of Employer for determination.  If Employee

                 disagrees with the decision reached by Employer, the dispute

                 will be limited to whether the management committee (or, if

                 there is no management committee, the highest applicable level

                 of management) of Employer reached its decision in good faith;

 

         (ii)    for any other reason whatsoever, with or without cause, in the

                 sole discretion of the management committee (or, if there is

                 no management committee, the highest applicable level of

                 management) of Employer;

 

         (iii)   upon Employee's death; or

 

         (iv)    upon Employee's becoming disabled so as to entitle Employee to

                 benefits under Enron's long-term disability plan or, if

                 Employee is not eligible to participate in such plan, then

                 Employee is permanently and totally unable to perform

                 Employee's duties for Employer as a result of any medically

                 determinable physical or mental impairment as supported by a

                 written medical opinion to the foregoing effect by a physician

                 selected by Employer.

 

The termination of Employee's employment by Employer prior to the expiration of

the Term shall constitute a "Termination for Cause" if made pursuant to Section

3.1(i); the effect of such termination is specified in Section 3.4.  The

termination of Employee's employment by Employer prior to the expiration of the

Term shall constitute an "Involuntary Termination" if made pursuant to Section

3.1(ii); the effect of such termination is specified in Section 3.5.  The

effect of the employment relationship being terminated pursuant to Section

3.1(iii) as a result of Employee's death is specified in Section 3.6.  The

effect of the employment relationship being terminated pursuant to Section

3.1(iv) as a result of the Employee becoming incapacitated is specified in

Section 3.7.

 

         3.2     Notwithstanding any other provisions of this Agreement except

Section 7.5, Employee shall have the right to terminate the employment

relationship under this Agreement at any time prior to the expiration of the

Term of employment for any of the following reasons:

 

         (i)     a material breach by Employer of any material provision of

                 this Agreement which remains uncorrected for 30 days following

                 written notice of such breach by Employee to Employer; or

 

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

                 Employee.

 

The termination of Employee's employment by Employee prior to the expiration of

the Term shall constitute an "Involuntary Termination" if made pursuant to

Section 3.2(i); the effect of such

<PAGE>   5

termination is specified in Section 3.5.  The termination of Employee's

employment by Employee prior to the expiration of the Term shall constitute a

"Voluntary Termination" if made pursuant to Section 3.2(ii); the effect of such

termination is specified in Section 3.3.

 

         3.3     Upon a "Voluntary Termination" of the employment relationship

by Employee prior to expiration of the Term, all future compensation to which

Employee is entitled and all future benefits for which Employee is eligible

shall cease and terminate as of the date of termination.  Employee shall be

entitled to pro rata salary through the date of such termination, but Employee

shall not be entitled to any individual bonuses or individual incentive

compensation not yet paid at the date of such termination.

 

         3.4     If Employee's employment hereunder shall be terminated by

Employer for Cause prior to expiration of the Term, all future compensation to

which Employee is entitled and all future benefits for which Employee is

eligible shall cease and terminate as of the date of termination.  Employee

shall be entitled to pro rata salary through the date of such termination, but

Employee shall not be entitled to any individual bonuses or individual

incentive compensation not yet paid at the date of such termination.

 

         3.5     Upon an Involuntary Termination of the employment relationship

by either Employer or Employee prior to the expiration of the Term, Employee

shall be entitled, in consideration of Employee's continuing obligations

hereunder after such termination (including, without limitation, Employee's

non-competition obligations), to receive the then current Monthly Base Salary

as if Employee's employment (which shall cease on the date of such Involuntary

Termination) had continued for the full Term of this Agreement. Employee shall

not be under any duty or obligation to seek or accept other employment

following Involuntary Termination and the amounts due Employee hereunder shall

not be reduced or suspended if Employee accepts subsequent employment.

Employee's rights under this Section 3.5 are Employee's sole and exclusive

rights against Employer, Enron, or their affiliates, and Employer's sole and

exclusive liability to Employee under this Agreement, in contract, tort, or

otherwise, for any Involuntary Termination of the employment relationship.

Employee covenants not to sue or lodge any claim, demand or cause of action

against Employer for any sums for Involuntary Termination other than those sums

specified in this Section 3.5.  If Employee breaches this covenant, Employer

shall be entitled to recover from Employee all sums expended by Employer

(including costs and attorneys fees) in connection with such suit, claim,

demand or cause of action.

 

         3.6     Upon termination of the employment relationship as a result of

Employee's death, Employee's heirs, administrators, or legatees shall be

entitled to Employee's pro rata salary through the date of such termination,

but Employee's heirs, administrators, or legatees shall not be entitled to any

individual bonuses or individual incentive compensation not yet paid to

Employee at the date of such termination.

 

         3.7     Upon termination of the employment relationship as a result of

Employee's incapacity, Employee shall be entitled to his or her pro rata salary

through the date of such termination, but Employee shall not be entitled to any

individual bonuses or individual incentive compensation not yet paid to

Employee at the date of such termination.

<PAGE>   6

 

         3.8     In all cases, the compensation and benefits payable to

Employee under this Agreement upon termination of the employment relationship

shall be offset against any amounts to which Employee may otherwise be entitled

under any and all severance plans, and policies of Employer, Enron, or its

affiliates.

 

         3.9     Termination of the employment relationship does not terminate

those obligations imposed by this Agreement which are continuing obligations,

including, without limitation, Employee's obligations under Articles 5 and 6.

 

         3.10    In the event of Employee's termination as a result of

Employer's failure to promote Employee into the position of Chief Executive

Officer upon the earlier of four years from the Effective Date of this

Agreement or the departure of Forrest E. Hoglund from the position of Chief

Executive Officer of Employer, for a period of six (6) months following

notification to Employee of such decision, Employee shall have the option to

resign and receive the following:

 

                 a)       one year's annual base salary;

 

                 b)       immediate vesting of all unvested options and

                          treatment as involuntary termination;

 

                 c)       immediate vesting and release of all unvested

                          restricted stock;

 

                 d)       treatment under the 1985 Enron Corp. Deferral Plan as

                          an Involuntary termination; and

 

                 e)       the non-competition obligations described at Section

                          6.1 (i) and (ii) shall be waived by Employer and

                          Employee agrees that the non-competition obligations

                          described at Section 6.1(iii) shall extend for a

                          period of two years after the date of termination.

 

ARTICLE 4:       CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND

                 EFFECTS OF TERMINATION:

 

         4.1     Should Employee remain employed by Employer beyond the

expiration of the Term specified on Exhibit "A," such employment shall convert

to a month-to-month relationship terminable at any time by either Employer or

Employee for any reason whatsoever, with or without cause.  Upon such

termination of the employment relationship by either Employer or Employee for

any reason whatsoever, all future compensation to which Employee is entitled

and all future benefits for which Employee is eligible shall cease and

terminate.  Employee shall be entitled to pro rata salary through the date of

such termination, but Employee shall not be entitled to any individual bonuses

or individual incentive compensation not yet paid at the date of such

termination.

<PAGE>   7

ARTICLE 5:       OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

 

         5.1     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 Employer (whether during business hours or otherwise

and whether on Employer's premises or otherwise) which relate to Employer's

business, products or services (including, without limitation, all such

information relating to corporate opportunities, research, financial and sales

data, pricing and trading 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 Employer and

are and shall be the sole and exclusive property of Employer.  Moreover, all

drawings, memoranda, notes, records, files, correspondence, drawings, manuals,

models, specifications, computer programs, 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 Employer.

 

         5.2     Employee acknowledges that the business of Employer, Enron,

and their affiliates is highly competitive and that their strategies, methods,

books, records, and documents, their technical information concerning their

products, equipment, services, and processes, procurement procedures and

pricing techniques, the names of and other information (such as credit and

financial data) concerning their customers and business affiliates, all

comprise confidential business information and trade secrets which are

valuable, special, and unique assets which Employer, Enron, or their affiliates

use in their business to obtain a competitive advantage over their competitors.

Employee further acknowledges that protection of such confidential business

information and trade secrets against unauthorized disclosure and use is of

critical importance to Employer, Enron, and their affiliates in maintaining

their competitive position.  Employee hereby agrees that Employee will not, at

any time during or after his or her employment by Employer, make any

unauthorized disclosure of any confidential business information or trade

secrets of Employer, Enron, or their affiliates, or make any use thereof,

except in the carrying out of his or her employment responsibilities hereunder.

Enron and its affiliates shall be third party beneficiaries of Employee's

obligations under this Section.  As a result of Employee's employment by

Employer, 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 Employer,

Enron, and their 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 Employer's confidential business

information and trade secrets.  Employee acknowledges that money damages would

not be sufficient remedy for any breach of this Article 5 by Employee, and

Employer shall be entitled to enforce the provisions of this Article 5 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 5, but shall be in addition to all remedies

available at law or in equity to

<PAGE>   8

Employer, including the recovery of damages from Employee and his or her agents

involved in such breach.

 

         5.3     All written materials, records, and other documents made by,

or coming into the possession of, Employee during the period of Employee's

employment by Employer which contain or disclose confidential business

information or trade secrets of Employer, Enron, or their affiliates shall be

and remain the property of Employer, Enron, or their affiliates, as the case

may be.  Upon termination of Employee's employment by Employer, for any reason,

Employee promptly shall deliver the same, and all copies thereof, to Employer.

 

         5.4     If, during Employee's employment by Employer, Employee creates

any original work of authorship fixed in any tangible medium of expression

which is the subject matter of copyright (such as videotapes, written

presentations on acquisitions, computer programs, drawings, maps, architectural

renditions, models, manuals, brochures, or the like) relating to Employer'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 Employer's premises or otherwise), Employee shall disclose such work

to Employer.  Employer shall be deemed the author of such work if the work is

prepared by Employee in the scope of his or her employment; or, if the work is

not prepared by Employee within the scope of his or her employment but is

specially ordered by Employer 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 Employer shall be the

author of the work.  If such work is neither prepared by the Employee within

the scope of his or her employment nor a work specially ordered and is deemed

to be a work made for hire, then Employee hereby agrees to assign, and by these

presents does assign, to Employer all of Employee's worldwide right, title, and

interest in and to such work and all rights of copyright therein.

 

         5.5     Both during the period of Employee's employment by Employer

and thereafter, Employee shall assist Employer and its nominee, at any time, in

the protection of Employer'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 Employer 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.

 

ARTICLE 6:       POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:

 

         6.1     As part of the consideration for the compensation and benefits

to be paid to Employee hereunder, in keeping with Employee's duties as a

fiduciary and in order to protect Employer's interests in the confidential

information of Employer and the business relationships developed by Employee

with the clients and potential clients of Employer, and as an additional

incentive for Employer to enter into this Agreement, Employer and Employee

agree to the non-competition provisions of this Article 6.  Employee agrees

that during the period of Employee's non-competition obligations hereunder,

Employee will not, directly or indirectly for Employee or

<PAGE>   9

for others, in any geographic area or market where Employer or Enron or any of

their affiliated companies are conducting any business as of the date of

termination of the employment relationship or have during the previous twelve

months conducted any business:

 

         (i)     engage in any business competitive with the business conducted

by Employer;

 

         (ii)    render advice or services to, or otherwise assist, any other

person, association, or entity who is engaged, directly or indirectly, in any

business competitive with the business conducted by Employer;

 

         (iii)   induce any employee of Employer or Enron or any of their

affiliates to terminate his or her employment with Employer, Enron, or their

affiliates, or hire or assist in the hiring of any such employee by person,

association, or entity not affiliated with Enron.

 

These non-competition obligations shall extend until the earlier of (a)

expiration of the Term, or (b) one year after the termination of the employment

relationship unless the termination is a Voluntary Termination as defined at

Section 3.2 (ii).  In the event of a Voluntary Termination, these

non-competition obligations shall extend for a period of one (1) year after

Employee's Voluntary Termination.

 

         6.2     Employee understands that the foregoing restrictions may limit

his or her 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 (e.g., the right to receive

compensation under Section 3.5 for the remainder of the Term upon Involuntary

Termination) under this Agreement to justify such restriction.  Employee

acknowledges that money damages would not be sufficient remedy for any breach

of this Article 6 by Employee, and Employer shall be entitled to enforce the

provisions of this Article 6 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 6, but shall be in

addition to all remedies available at law or in equity to Employer, including,

without limitation, the recovery of damages from Employee and his or her agents

involved in such breach.

 

         6.3     It is expressly understood and agreed that Employer and

Employee consider the restrictions contained in this Article 6 to be reasonable

and necessary to protect the proprietary information of Employer.

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 7:       MISCELLANEOUS:

 

         7.1     For purposes of this Agreement the terms "affiliates" or

"affiliated" means an entity who directly, or indirectly through one or more

intermediaries, controls, is controlled by,

<PAGE>   10

or is under common control with Enron or Employer.  In the event Employer has

not adopted a Change of Control Severance Plan, and if during the Term of this

Agreement Enron Corp. elects to sell its interest in Employer such that

Employer ceases to be an affiliate of Enron Corp., Employee shall be entitled

to benefits identical to those described in the Enron Corp. Change of Control

Severance Plan.

 

         7.2     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 Employer, to:

 

                 Enron Oil & Gas Company

                 1400 Smith Street

                 Houston, Texas 77002

                 Attention:  Corporate Secretary

 

         If to Employee, to the address shown on the first page hereof.

 

Either Employer or Employee may furnish a change of address to the other in

writing in accordance herewith, except that notices of changes of address shall

be effective only upon receipt.

 

         7.3     This Agreement shall be governed in all respects by the laws

of the State of Texas, excluding any conflict-of-law rule or principle that

might refer the construction of the Agreement to the laws of another State or

country.

 

         7.4     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.

 

         7.5     If a dispute arises out of or related to this Agreement, other

than a dispute regarding Employee's obligations under Sections 5.2, Article 5,

or Section 6.1, and if the dispute cannot be settled through direct

discussions, then Employer and Employee agree to first endeavor to settle the

dispute in an amicable manner by mediation, before having recourse to any other

proceeding or forum.  Thereafter, if either party to this Agreement brings

legal action to enforce the terms of this Agreement, the party who prevails in

such legal action, whether plaintiff or defendant, in addition to the remedy or

relief obtained in such legal action shall be entitled to recover its, his, or

her expenses incurred in connection with such legal action, including, without

limitation, costs of Court and attorneys fees.

 

         7.6     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

<PAGE>   11

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.

 

         7.7     This Agreement shall be binding upon and inure to the benefit

of Employer and any other person, association, or entity which may hereafter

acquire or succeed to all or substantially all of the business or assets of

Employer by any means whether direct or indirect, by purchase, merger,

consolidation, or otherwise.  Employee's rights and obligations under Agreement

hereof are personal and such rights, benefits, and obligations of Employee

shall not be voluntarily or involuntarily assigned, alienated, or transferred,

whether by operation of law or otherwise, without the prior written consent of

Employer.

 

         7.8     There exist other agreements between Employer and Employee

relating to the employment relationship between them, e.g., the agreement with

respect to company policies contained in Employer's Conduct of Business Affairs

booklet and agreements with respect to benefit plans.  This Agreement replaces

and merges previous agreements and discussions pertaining to the following

subject matters covered herein: the nature of Employee's employment

relationship with Employer and the term and termination of such relationship.

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

such subject matters.  Each party to this Agreement acknowledges that no

representation, inducement, promise, or agreement, oral or written, has been

made by either party with respect to such subject matters, which is not

embodied herein, and that no agreement, statement, or promise relating to the

employment of Employee by Employer that 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 each party whose rights

hereunder are affected thereby, provided that any such modification must be

authorized or approved by the Board of Directors of Employer.

<PAGE>   12

         IN WITNESS WHEREOF, Employer and Employee have duly executed this

Agreement in multiple originals to be effective on the date first stated above.

 

                                           ENRON OIL & GAS COMPANY

 

 

                                           By:     /s/ Patricia Edwards      

                                                   ----------------------------

                                           Name:   Patricia Edwards

                                           Title:  VP Human Resources & Admin.

                                                   ----------------------------

                                           This 14th day of January, 1998      

 

 

 

                                           MARK G. PAPA

 

 

                                             /s/ Mark G. Papa                 

                                           ------------------------------------

                                           This 14th day of January, 1998