Plains Resources Inc.
700 Milam, Suite 3100
Pennzoil North Tower
Houston, Texas 77002 Exhibit 10.1

September 8, 2003

Stephen A. Thorington
6623 Westchester
Houston, TX 77005

               Re: Terms of Employment with the Company

Dear Steve:

I am pleased to offer you the position of Executive Vice President and Chief
Financial Officer of Plains Resources Inc. (the “Company”). This offer letter
shall outline the terms of your employment with the Company.

Subject to earlier termination by either you or the Company, you will be
employed by the Company for a term of five years which shall begin effective as
of December 18, 2002 (the “Effective Date”). The term of your employment will
automatically be extended one year and again for successive one-year periods on
each anniversary thereof, if you and the Company have agreed to new compensation
terms at least ninety days prior to the end of the initial five-year period and
any additional one-year extensions (the initial five-year term and any
additional years are hereinafter referred to as the “Term”). Your annual salary
shall be $100,000, and you shall be eligible for an annual target bonus of 100%
of your annual salary, subject to attainment of goals set forth by the Company’s
Board of Directors (the “Board”).

Since the majority of your professional time will be devoted to your duties at
Plains Exploration & Production Company (“PXP”), you will not be entitled to any
benefits from the Company other than participation in bonus, equity incentive
and similar plans.

You agree to use reasonable best efforts to perform faithfully and sufficiently
your responsibilities and duties hereunder. The Company understands and
acknowledges that you shall be an employee of PXP, and therefore, you will not
be able to devote all of your attention and time during normal business hours to
the Company. Accordingly, the Company agrees that the performance of your duties
on behalf of PXP shall not be a breach of this Agreement.

If the Company terminates your employment during the Term for any reason other
than cause, or if a “change in control” as defined in the Company’s 2001 Stock
Incentive Plan occurs, or if your employment terminates due to your death during
the Term, you will receive a severance payment equal to two times the sum of
your base salary and last earned annual bonus (provided, however, that if such
termination shall take place prior to December 31, 2003, the bonus amount used
for the severance calculation shall be the target bonus), and any options or
grants of restricted

 

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September 8, 2003
Page 2 of 3

Company common stock shall immediately vest. In addition, you will be entitled
to health benefits for up to two years, subject to mitigation should you become
entitled to health benefits under another plan.

During the Term and for any period thereafter, you shall not, without the
written consent of the Board or a person authorized by the Board, disclose to
any person, other than an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance of
your duties as an executive of the Company, any confidential information
obtained by you while in the employ of the Company with respect to the Company’s
business, including but not limited to technology, know-how, processes, maps,
geological and geophysical data, other proprietary information and any
information whatsoever of a confidential nature, the disclosure of which you
know or should know will be damaging to the Company; provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by you) or any
information which you may be required to disclose by any applicable law, order,
or judicial or administrative proceeding.

During the Term, you shall not in North America directly or indirectly engage in
or become interested financially in as a principal, employee, partner,
shareholder, agent, manager, owner, advisor, lender or guarantor of any person
engaged in any business substantially identical to the Business (defined below);
provided, however, that you may invest in stock, bonds or other securities in
any such business (without participating in such business) if: (i)(A) such
stock, bonds or other securities are listed on any United States securities
exchange or are publicly traded in an over the counter market and (B) your
investment does not exceed, in the case of any capital stock of any one issuer,
5% of the issued and outstanding capital stock, or in the case of bonds or other
securities, 5% of the aggregate principal amount thereof issued and outstanding,
or (ii) such investment is completely passive and no control or influence over
the management or policies of such business is exercised. The term “Business”
shall mean (1) marketing, gathering, transporting, terminalling, and storage of
oil and investments in companies conducting such activities and (2) acquiring,
exploiting, developing, exploring for and producing oil in Florida.

Further, during the Term and for a period of one year thereafter, you shall not
solicit or hire, directly or indirectly, in any manner whatsoever (except in
response to a general solicitation), in the capacity of employee, consultant or
in any other capacity whatsoever, one or more of the employees, directors or
officers or other persons (hereinafter collectively referred to as “Employees”)
who at the time of solicitation or hire, or in the 90-day period prior thereto,
are working full-time or part-time for the Company or any of its subsidiaries
and you shall not endeavor, directly or indirectly, in any manner whatsoever, to
encourage any Employee to leave his or her job with the Company or any of its
subsidiaries and you shall not endeavor, directly or indirectly, and in any
manner whatsoever, to incite or induce any client of the Company or any of its
subsidiaries to terminate, in whole or in part, its business relations with the
Company or any of its subsidiaries.

[The next page is the signature page.]

 

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September 8, 2003
Page 3 of 3

If you agree with the terms as set forth herein, please sign both copies of this
letter and return one copy to me at the above address.

Sincerely,

/s/ John T. Raymond

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John T. Raymond
President and Chief Executive Officer

Agreed to and accepted this 8th day of September 2003.

/s/ Stephen A. Thorington

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Stephen A. Thorington