<PAGE>

                                                                    Exhibit 10.3

                                                                  EXECUTION COPY


                         PENSION AND EMPLOYEE BENEFITS
                         -----------------------------
                      ASSUMPTION AND TRANSITION AGREEMENT
                      -----------------------------------

          THIS PENSION AND EMPLOYEE BENEFITS ASSUMPTION AND TRANSITION
AGREEMENT, dated as of June 8, 2001 (this "Agreement"), is entered into by and
between Plains Resources Inc., a Delaware corporation ("Parent"), Plains All
American Inc., a Delaware corporation and wholly-owned subsidiary of Parent
("PAAI") and Plains All American GP LLC, a Delaware limited liability company
(the "Successor GP").  Capitalized terms used herein, unless otherwise defined
herein, shall have the meanings assigned to them in the Contribution Agreement
(defined below).

                                  WITNESSETH
                                  ----------

          WHEREAS, pursuant to multiple Unit Transfer and Contribution
Agreements, dated as of May 8, 2001 or thereafter, each as amended from time to
time (collectively, the "Contribution Agreement"), by and among Parent, PAAI and
                         ----------------------
certain purchasers ("Buyers"), Buyers are purchasing certain subordinated units,
a portion of the general partner interest and incentive distribution rights of
Plains All American Pipeline, L.P. (the "MLP"), effective as of the Closing Date
of the Contribution Agreement;

          WHEREAS, prior to the Closing Date, PAAI was the sole general partner
of the MLP and certain affiliates of the MLP;

          WHEREAS, prior to the Closing Date, PAAI has, among other actions,
formed the Successor GP pursuant to the Delaware Limited Liability Company Act
and in connection with the Contribution Agreement, all of the property used in
the trade or business of PAAI as general partner of the MLP will be transferred
to the Successor GP;

          WHEREAS, in connection with the Contribution Agreement, all of the
property used in the trade or business associated with the headquarter employees
described in Section 1(a)(ii) of this Agreement will be transferred by Parent to
the Successor GP;

          WHEREAS, in connection with the Contribution Agreement, the Successor
GP will succeed to the management and business activities formerly performed by
PAAI;

          WHEREAS, pursuant to Section 5.10(a) of the Contribution Agreement, as
of the Closing Date, Parent, PAAI and the Successor GP shall (i) identify the
headquarter employees of Parent engaged in the business of managing the MLP that
will be transferred to the Successor GP and (ii) provide for the immediate
transfer of employment of such headquarter employees and the immediate transfer
of all of the current employees of PAAI to the Successor GP (collectively, the
"Transferred Employees") and make such arrangements as are necessary with
respect to compensation and employee benefit plans for Transferred Employees,
all as immediately as practicable;

                                       1
<PAGE>

          WHEREAS, pursuant to Section 5.10(a) of the Contribution Agreement, as
of the Closing Date, Parent, PAAI and the Successor GP are to determine the
treatment of obligations and liabilities under certain employee benefit plans in
which Transferred Employees participate and enter into any transition services
arrangements deemed necessary by the parties for a period of no more than three
months following the Closing Date;

          WHEREAS, Parent, PAAI and the Successor GP desire to set forth their
obligations and liabilities with respect to Transferred Employees and to
establish necessary transition services arrangements for Transferred Employees;
and

          WHEREAS, this Agreement is being executed simultaneously with the
Closing of the Contribution Agreement.

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:

          Section 1.     Transferred Employees' Covenants.
                         --------------------------------

          (a)  Transferred Employees.  The Transferred Employees shall include
               ---------------------
     (i) all of the employees employed by PAAI immediately prior to the Closing
     Date and (ii) the headquarter employees employed by Parent immediately
     prior to the Closing Date who perform services related to the business of
     managing the MLP and are identified on Schedule A attached hereto.
                                            ----------

          (b)  Employment Agreements.  Effective as of the Closing Date, the
               ---------------------
     Successor GP will assume the obligations under the employment agreements
     between Parent and Greg Armstrong dated March 1, 1993, as amended, and
     between Parent and Harry Pefanis dated November 23, 1998, in accordance
     with the amendment and restatement of such employment agreements as
     approved by the Board of Directors of PAAI as sole member of the Successor
     GP.

          (c)  Transition and Retention Bonuses.  The transition bonuses
               --------------------------------
     approved by the Compensation Committee of Parent on May 7, 2001 for certain
     Transferred Employees will be paid by Parent to each such Transferred
     Employee for the account of the Successor GP as soon as practicable
     following the date such bonuses are earned. In addition, any portion of the
     retention bonus under the Parent's retention bonus program announced to
     employees in December 2000 with respect to a Transferred Employee that is
     unpaid as of the Closing Date will be paid by Parent to each such
     Transferred Employee for the account of the Successor GP as soon as
     practicable following the date such bonus is earned in accordance with the
     retention bonus program. Parent shall grant each Transferred Employee
     credit for service with the Successor GP for all purposes under the
     Parent's retention bonus program.

          (d)  1996 Stock Incentive Plan.
               -------------------------

                    (i)   With respect to options granted to Transferred
          Employees (who are not key employees described in Section 1(d)(ii)
          below) under Parent's 1996 Stock Incentive Plan that are unvested and
          forfeitable as of the Closing Date, each

                                       2
<PAGE>

          such Transferred Employee shall receive an amount of cash equal to the
          difference between (A) the average of the closing sales prices on the
          American Stock Exchange of the Parent stock for the five trading days
          immediately preceding the date hereof and (B) the option exercise
          price of such options, multiplied by the number of unvested shares
          subject to such options. Such amount shall be paid by Parent as soon
          as practicable following the Closing Date.

                    (ii)   With respect to options granted to certain key
          Transferred Employees (identified on Schedule D attached hereto) under
                                               ----------
          Parent's 1996 Stock Incentive Plan that are unvested on the Closing
          Date, PAAI shall grant, and the Successor GP shall assume
          administrative responsibility for, phantom equity awards (payable in
          subordinated units of the MLP or, to the extent all subordinated units
          outstanding have been converted into common units, payable in common
          units) comparable in value to such options and subject to the same
          vesting schedule as such options. The number of subordinated units of
          the MLP subject to such phantom equity awards shall be determined
          for each such Transferred Employee by (A) multiplying the difference
          between (1) the average of the closing sales prices on the American
          Stock Exchange of the Parent stock for the five trading days
          immediately preceding the date hereof and (2) the option exercise
          price of such options, by the number of unvested shares subject to
          such options, and (B) dividing the result in clause (A) by $22.00,
          rounded up to the nearest whole unit. Such phantom equity awards shall
          provide for distribution equivalent rights ("DERs"), i.e., the right
          to receive the cash equivalent of any distributions made with respect
          to a subordinated unit during the period from the Closing Date and
          prior to the vesting of such phantom equity award, that shall be
          payable in cash on the vesting of the applicable phantom equity award.
          Parent shall, or shall cause its Affiliates to, deliver to each such
          Transferred Employee for the account of the Successor GP on or prior
          to vesting such number of subordinated units of the MLP subject to
          phantom equity awards and cash equal to the DERs as determined above
          in accordance with the vesting schedule of such phantom equity awards.
          Documents evidencing such grants shall be delivered as soon as
          practicable after the Closing Date.

          (e)  Officers' Retirement Plan.  The vesting service for each of the
               -------------------------
     Transferred Employees with a Deferred Compensation Agreement on the date
     hereof is set forth in Schedule C attached hereto. With respect to the
                            ----------
     vested portion of his Deferred Compensation Agreement, each such
     Transferred Employee shall have the option to receive (X) (i) such number
     of subordinated units of the MLP valued at $22.00 equal to the Present
     Value of such obligation on the date hereof rounded up to the nearest whole
     unit, or (ii) cash equal in value to the Present Value of such obligation
     on the date hereof (provided such Transferred Employee applies such cash
     (net of taxes required under (Y) below) to the purchase of an interest in
     PAA Management LLC and PAA Management, L.P.) (Y) less applicable tax
     withholding. Present Value for this purpose shall have the meaning set
     forth in the applicable Deferred Compensation Agreement. Parent hereby
     agrees that it shall pay or deliver such amounts with respect to each such
     Transferred Employee's Deferred Compensation Agreement as soon as
     practicable on or following the date hereof in accordance with the
     Transferred Employee's instructions. In

                                       3
<PAGE>

     consideration of the receipt of the amounts described in the foregoing
     provisions of this clause (e), each Transferred Employee shall agree to
     relinquish all rights with respect to such Transferred Employee's Deferred
     Compensation Agreement.

          (f)  Long-Term Incentive Plan.  Effective as of the Closing Date, the
               ------------------------
     Successor GP shall assume the PAAI 1998 Long-Term Incentive Plan and all
     outstanding awards granted thereunder that are unvested as of the Closing
     Date on the same terms and conditions. All non-employee director awards
     will vest on the date hereof in accordance with their terms. Such director
     awards shall be paid by PAAI or its Affiliates in accordance with the terms
     of the plan as soon as practicable following the date hereof and PAAI shall
     be reimbursed by the MLP for such payments in accordance with the MLP
     Partnership Agreement. Except with respect to such director awards, Parent
     and PAAI shall have no future liability with respect to such plan and such
     unvested awards; provided, however, that the parties hereto acknowledge
                      --------  -------
     that the Successor GP, upon vesting of such awards, may seek to satisfy
     such awards by the purchase of common units of the MLP directly or
     indirectly from Parent or PAAI.

          (g)  Qualified Retirement Plans.
               --------------------------

                    (i)  Parent 401(k) Plan.
                         ------------------

                    (A)  As soon as practicable after the date hereof, the
          Successor GP shall establish or designate, and maintain, a qualified
          defined contribution plan (the "Successor 401(k) Plan") to provide
          benefits to the Transferred Employees who, on the Closing Date, are
          participants in the Parent 401(k) Plan ("Plan Participants") which are
          substantially equivalent to the benefits provided to participants
          under the Parent 401(k) Plan (provided, however, that all matching
          contributions may be paid in cash).  The Successor 401(k) Plan shall
          be qualified under Sections 401(a) and 401(k) of the Code and shall
          provide the Plan Participants credit for service with Parent and its
          affiliates (including PAAI) and their respective predecessors prior to
          the Closing Date for all purposes for which service was recognized
          under the Parent 401(k) Plan.

                    (B)  As soon as practicable after the filing of the
          determination letter request described in clause (C) below, Parent
          shall cause the trustee of the Parent 401(k) Plan to transfer to the
          trust forming a part of the Successor 401(k) Plan cash or assets in
          which Plan Participants are currently invested (or with respect to
          participant loans granted prior to the Closing Date, if any, such
          loans and any promissory notes or other documents evidencing such
          loans) in an amount equal to the account balances of Plan Participants
          as of a valuation date (the "Valuation Date") not more than 60 days
          preceding the date of transfer, increased by any contributions due for
          periods prior to the Closing Date and not made as of the Valuation
          Date, reduced by any benefits paid during the period following such
          Valuation Date to the date of transfer, and adjusted for any
          investment earnings or losses during the period following such
          Valuation Date to the date of transfer (the "Account Balances").

                                       4
<PAGE>

                    (C)  No later than 60 days after the Closing Date, the
          Successor GP shall file a request for a determination letter with the
          IRS that the Successor 401(k) Plan and related trust satisfy the
          requirements for qualification under Sections 401(a) and 401(k) of the
          Code.  The Successor GP agrees that it shall amend the Successor
          401(k) Plan in any respect as may be required by the IRS in order to
          receive a favorable determination letter from the IRS that the
          Successor 401(k) Plan and related trust satisfy the requirements for
          qualification under Sections 401(a) and 401(k) of the Code.  No
          transfer shall be made unless the Successor GP files with the IRS the
          request for determination letter referred to in this clause (C).

                    (D)  In consideration of the agreements of Parent contained
          in clauses (B) and (C) of this Section 1(g)(i), the Successor GP
          shall, effective as of the Closing Date, assume all of the liabilities
          and obligations of Parent and its affiliates in respect of the Plan
          Participants and their beneficiaries under the Parent 401(k) Plan, and
          Parent and its affiliates and the Parent 401(k) Plan shall, except to
          the extent set forth in this Agreement, be relieved of all liabilities
          and obligations to the Plan Participants and their beneficiaries
          arising out of the Parent 401(k) Plan.

                    (ii) Permian Plans.  Effective as of the Closing Date, the
                         -------------
          Successor GP acknowledges and agrees that it shall take all actions
          necessary to assume the responsibilities and activities formerly
          performed by Parent and PAAI with respect to the administration of the
          Permian Corporation Savings Plan and Permian Corporation Retirement
          Plan. Parent and PAAI shall have no future liability with respect to
          such responsibilities and activities.

          (h)  W-2 Matters.  Pursuant to IRS Revenue Procedure 96-60, the
               -----------
     Successor GP shall assume Parent's and PAAI's respective obligations to
     furnish Forms W-2 to Transferred Employees for the calendar year in which
     the Closing Date occurs. Parent and PAAI will provide the Successor GP with
     any information relating to periods ending on the Closing Date necessary
     for the Successor GP to prepare and distribute Forms W-2 to Transferred
     Employees for the calendar year in which the Closing Date occurs, which
     Forms W-2 will include all remuneration earned by Transferred Employees
     from Parent, PAAI and the Successor GP during such year, and the Successor
     GP will prepare and distribute such forms.

          (i)  The Successor GP Plans.  No later than the end of the Transition
               ----------------------
     Period (as defined below): (i) the Successor GP shall establish, for the
     benefit of the Transferred Employees, employee benefit plans (the
     "Successor GP Plans") that will provide benefits comparable to those
     provided to the Transferred Employees under the Parent Plans identified in
     Schedule D hereto, and (ii) the Transferred Employees will be participants
     in the Successor GP Plans to the extent that any such Transferred Employees
     were participants in the Parent Plans during the Transition Period.
     Further, (i) the Transferred Employees who are participants in the
     Successor GP Plans shall receive credit for service with Parent and PAAI to
     the same extent service was counted under similar Parent Plans; (ii) with
     respect to medical, dental and health plans established by the Successor
     GP, any

                                       5
<PAGE>

     such plans (a) shall not include pre-existing conditions exclusions except
     to the extent that such exclusions were applicable under the similar Parent
     Plan immediately prior to the end of the Transition Period, and (b) shall
     provide credit in the current year for any deductibles and co-payments
     applied or made with respect to each Transferred Employee.

          Section 2.   Transition Period.  Except as otherwise provided herein,
                       -----------------
     during the period commencing after the close of business on the Closing
     Date and ending on June 30, 2001, or such earlier date as mutually agreed
     upon by the parties hereto (the "Transition Period"), the Transferred
     Employees will continue to be provided with the benefits under certain
     employee benefits plans of Parent and PAAI as set forth herein. For
     purposes of Section 1 of this Agreement, the Closing Date shall be the last
     day of the Transition Period.

          Section 3.   Services.
                       --------

          (a)  Transition Services.  During the Transition Period, Parent shall
               -------------------
     provide (or cause its Affiliates to provide) the following services (the
     "Transition Services") to the Successor GP on behalf of the Transferred
     Employees:

                    (i)    payroll processing, payroll deduction, tax
          withholding and tax reporting services.

                    (ii)   maintenance and administration of the plans of Parent
          and PAAI identified on Schedule D hereto (the "Parent Plans") for the
                                 ----------              ------------
          benefit of the Transferred Employees in accordance with and subject to
          the terms of the Parent Plans. All employee contributions of
          Transferred Employees under the Parent Plans shall be deducted in
          accordance with the payroll deduction processes maintained by Parent
          consistent with past practice and paid by Parent to the Parent Plans
          in accordance with the terms of the Parent Plans.

          (b)  For twelve months following the date hereof (and for such longer
     period as to which the parties may hereafter agree), Parent shall provide
     the services of the Parent's Environmental Health and Safety Manager to the
     Successor GP on the same basis that such services were provided to PAAI.

          Section 4.   Standard of Services.
                       --------------------

          (a)  Parent shall perform the Transition Services at comparable levels
     of performance, completeness, care and attention and in accordance with
     service standards- and operating procedures, that are consistent with the
     practices of Parent in performing such services prior to the Closing Date
     of the Contribution Agreement.

          (b)  The Successor GP shall make available to Parent on a timely basis
     all data, information and other materials within its control that are
     reasonably necessary for Parent to perform, or cause to be performed, the
     Transition Services. The parties hereto agree that Parent shall have no
     liability for any failure to perform or for the late performance of any of
     the Transition Services to the extent such non-performance or late
     performance

                                       6
<PAGE>

     results from having failed to provide, or cause be provided to, Parent, the
     data, information or other materials required to perform the Transition
     Services.

          (c)  Parent shall (i) maintain records regarding Transition Services
     in the same manner that it has kept records for itself prior to the date
     hereof, and (ii) provide the Successor GP with reasonable access to such
     records.

          Section 5.   Employee Benefits Costs and Reimbursements.  Parent shall
                       ------------------------------------------
     invoice the Successor GP for, and Successor GP shall pay or cause to be
     paid, all employee benefits and compensation costs and reimbursements in
     amounts and in time periods consistent with past practice utilized by
     Parent and PAAI in connection with employee services provided to the MLP.
     In addition, employee benefits and compensation costs and reimbursements
     with respect to services provided by Parent's Environmental Health and
     Safety Manager to the Successor GP shall be payable by the Successor GP
     under this Agreement consistent with past practice of such employee's
     provision of services to PAAI.

          Section 6.   Covenants.  Notwithstanding anything in this Agreement to
                       ---------
     the contrary, in the event that, following the date hereof, Parent, PAAI
     and the Successor GP determine any additional transition services not
     described in this Agreement exist, Parent, PAAI and the Successor GP hereby
     agree to cooperate and negotiate in good faith with respect to the
     provision of any such transition services for a period of up to three
     months following the Closing Date.

          Section 7.   Independent Contractor.  Parent shall not have any
                       ----------------------
     responsibility with respect to the management or operation of the business
     being transferred to Successor GP, and its responsibilities shall be
     limited to providing the Transition Services described herein. Parent shall
     provide the Transition Services as an independent contractor only, and this
     Agreement does not and shall not be construed as creating a joint venture,
     partnership or agency relationship between the parties. No employee of one
     party shall be considered an employee of the other party for any purpose.

          Section 8.   Indemnification.
                       ---------------

          (a)  Indemnification by Parent and PAAI.  Notwithstanding any other
               ----------------------------------
     provisions of this Agreement, each of Parent and PAAI hereby agrees to
     indemnify and hold harmless: (i) the Successor GP, (ii) each of the
     Successor GP's Subsidiaries and Affiliates (each as defined in the
     Contribution Agreement), and (iii) each of their respective directors,
     officers, employees, agents, representatives, successors and assigns, from
     and against, any liability, loss, damage, cost or expense (including
     reasonable attorneys' fees and disbursements), incurred or suffered by any
     such indemnified person with respect to, (1) any claims or suits brought by
     any third party against any such indemnified person with respect to, or
     arising out of, any action (or omission) by a Transferred Employee
     identified on Schedule A attached hereto on or before the last day of the
     Transition Period; or (2) any claims or suits brought by any Transferred
     Employee identified on Schedule A attached hereto (or his or her
     beneficiary, representative or estate) against any such indemnified person
     (X) with respect to, or arising out of, any

                                       7
<PAGE>

     action (or omission) by such indemnified person occurring or deemed
     incurred on or before the last day of the Transition Period, or (Y) with
     respect to, or arising out of, or relating to all claims under the
     applicable Parent Plans, occurring or deemed incurred on or before the last
     day of the Transition Period. In addition, each of Parent and PAAI hereby
     agrees to indemnify and hold harmless: (i) the Successor GP, (ii) each of
     the Successor GP's Subsidiaries and Affiliates (each as defined in the
     Contribution Agreement), and (iii) each of their respective directors,
     officers, employees, agents, representatives, successors and assigns, from
     and against any liability, loss, damage, cost or expense (including
     reasonable attorney's fees and disbursements), incurred or suffered by any
     such indemnified person with respect to, (i) any claim for health benefits
     (including, without limitation, claims for medical, prescription drug,
     dental or vision care expenses), (ii) any claim for medical or disability
     benefits and (iii) any claim for benefits other than health benefits (e.g.,
     life insurance benefits or any claim relating to employment laws), to which
     any Transferred Employee (or his or her beneficiary, representative or
     estate) is entitled under the Parent Plans. For purposes of this Agreement,
     (i) a claim for health benefits (including, without limitation, claims for
     medical, prescription drug, dental and vision care expenses) will be deemed
     to have been incurred on the date on which the related medical service or
     benefit was rendered or received, (ii) a claim for medical, or disability
     benefits will be deemed to have been incurred upon the occurrence of the
     event giving rise to such claims, and (iii) in the case of any claim for
     benefits other than health benefits (e.g., life insurance benefits or any
     claim relating to employment laws), a claim will be deemed to have been
     incurred upon the occurrence of the event giving rise to such claims.

          (b)  Indemnification by the Successor GP.  Notwithstanding any other
               -----------------------------------
     provision of this Agreement, the Successor GP hereby agrees to indemnify
     and hold harmless: (i) each of Parent and PAAI, (ii) each of Parent and
     PAAI's Subsidiaries and Affiliates (each as defined in the Contribution
     Agreement), and (iii) each of their respective directors, officers,
     employees, agents, representatives, successors and assigns, from and
     against, any liability, loss, damage, cost or expense (including reasonable
     attorneys' fees and disbursements), incurred or suffered by any such
     indemnified person with respect to, (A) any claims or suits brought by any
     third party against any such indemnified person with respect to, or arising
     out of, any action (or omission) by a Transferred Employee (except that,
     with respect to a Transferred Employee identified on Schedule A attached
     hereto, such indemnification shall relate to any action or omission by such
     Transferred Employee after the last day of the Transition Period), (B) any
     claims or suits brought by any Transferred Employee (or his or her
     beneficiary, representative or estate) against any such indemnified person
     (X) with respect to, or arising out of, any action (or omission) by the
     Successor GP, occurring or deemed incurred after the last day of the
     Transition Period, or (Y) to the extent not indemnified pursuant to the
     second sentence of Section 8(a), with respect to, or arising out of, or
     relating to all claims under the applicable Parent Plans or any other claim
     arising out of or related to a Transferring Employee's employment (except
     that, with respect to a Transferred Employee identified on Schedule A
     attached hereto, such indemnification shall relate to any such claim
     occurring or deemed incurred after the last day of the Transition Period)
     or (C) with respect to or arising out of, or relating to any claims by
     third parties in connection with the provision by Parent of the Transition
     Services if Parent shall have complied with the

                                       8
<PAGE>

     standard of service set forth in Section 4(a) in connection with the event
     giving rise to the claim.

          Section 9.   Notices.  All notices which are required or may be given
                       -------
     pursuant to the terms of this Agreement shall be deemed to have been duly
     given if such notice is given in accordance with the terms of the
     Contribution Agreement or to such other address as either party may, from
     time to time, designate by written notice given in like manner.

          Section 10.  Waiver.  Any waiver of any term of this Agreement must be
                       ------
     in writing and signed by the party against whom enforcement of the waiver
     is sought. No waiver of any condition, or of the breach of any provision
     hereof, in any one or more instances, shall be deemed to be a further or
     continuing waiver of such condition or breach. Delay or failure to exercise
     any right or remedy shall not be deemed the waiver hereof.

          Section 11.  Entire Agreement.  This Agreement and the schedules
                       ----------------
     attached hereto constitute the entire agreement between the parties hereto
     with respect to the subject matter hereof and supersedes all prior
     agreements and understandings, oral and written between the parties hereto
     with respect to the subject matter hereof. No representation, warranty,
     promise, inducement or statement of intention has been made by either party
     which is not embodied in this Agreement or such other documents, and
     neither party shall be bound by, or be liable for, any alleged
     representation, warranty, promise, inducement or statement of intention not
     embodied herein or therein.

          Section 12.  Governing Law.  This Agreement shall be governed by, and
                       -------------
     construed in accordance with, the laws of the State of Texas applicable to
     contracts executed in and to be performed in that state and without regard
     to any applicable conflicts of law. All actions and proceedings arising out
     of or relating to this Agreement shall be heard and determined in any Texas
     state or federal Court located in Houston, Texas. In connection with the
     foregoing, each of the parties to this Agreement irrevocably (i) consents
     to submit itself to the personal jurisdiction of the state and federal
     Courts of competent jurisdiction located in Houston, Texas, (ii) agrees
     that it will not attempt to deny or defeat such personal jurisdiction by
     motion or other request for leave from any such Court, and (iii) hereby
     consents to service of process pursuant to the notice provisions set forth
     in Section 9 of this Agreement.

          Section 13.  Headings.  The headings appearing at the beginning of
                       --------
     sections contained herein have been inserted for identification and
     reference purposes and shall not be used to determine the construction or
     interpretation of this Agreement.

          Section 14.  Counterparts.  This Agreement may be executed in
                       ------------
     counterpart copies, all of which when taken together shall be deemed to
     constitute one and the same original instruments.

          Section 15.  Binding Effect.  This Agreement shall inure to the
                       --------------
     benefit of and be binding upon the parties hereto and their respective
     successors and assigns.

                                       9
<PAGE>

     Notwithstanding anything contained in this Agreement to the contrary,
     nothing in this Agreement, expressed or implied, is intended to confer on
     any person other than the parties hereto or their respective successors and
     assigns any rights, remedies, obligations, or liabilities under or any
     reason of this Agreement.

          Section 16.  Assignability.  Neither this Agreement nor any of the
                       -------------
     parties' rights hereunder shall be assignable by any party hereto without
     the prior written consent of the other party hereto, which consent shall
     not be unreasonably withheld.

          Section 17.  Contribution Agreement.  This Agreement and the
                       ----------------------
     obligations of the parties hereunder shall be conditioned upon the closing
     of the Contribution Agreement. If the closing of the Contribution Agreement
     does not occur, or if the Contribution Agreement is terminated or
     abandoned, this Agreement shall become null and void.

                                       10
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.


                                      PLAINS RESOURCES INC.


                                      By: ___________________________
                                      Name:
                                      Title:

                                      PLAINS ALL AMERICAN INC.


                                      By: ___________________________
                                      Name:
                                      Title:

                                      PLAINS ALL AMERICAN GP LLC


                                      By: ___________________________
                                      Name:
                                      Title:

                                       11
<PAGE>

                                 Schedule A to
                         Pension and Employee Benefits
                      Assumption and Transition Agreement



Greg L. Armstrong

Monya Churchill

Mary Denton

A. Pat Diamond

Linda Kennedy

Philip D. Kramer

Tim Moore

Harry N. Pefanis

Al Swanson

Carolyn Tice

                                       i
<PAGE>

                                 Schedule B to
                         Pension and Employee Benefits
                      Assumption and Transition Agreement



Greg L. Armstrong

A. Pat Diamond

Philip D. Kramer

Tim Moore

Harry N. Pefanis

Al Swanson

                                      ii
<PAGE>

                                 Schedule C to
                         Pension and Employee Benefits
                      Assumption and Transition Agreement


Employee                                Years of Service
--------                                ----------------

Greg L. Armstrong                                     15

Philip D. Kramer                                      15

Tim Moore                                              5

Harry N. Pefanis                                      15

                                     iii
<PAGE>

                                 Schedule D to
                         Pension and Employee Benefits
                      Assumption and Transition Agreement

                                  Parent Plans



1)   Plains Resources, Inc. Group Health, Dental and Drug Plan
2)   Plains Resources, Inc. 401k Savings Plan
3)   Plains Resources, Inc. Life and Accidental Death and Dismemberment Plan
4)   Plains Resources, Inc. Voluntary Life and Accidental Death and
     Dismemberment Plan
5)   Plains Resources Inc. Section 125 Cafeteria Plan
6)   Plains Resources, Inc. Long Term Disability Plan
7)   The Permian Corporation Savings Plan
8)   The Permian Corporation Retirement Plan

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