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                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

     This Employment Agreement ("AGREEMENT") is entered into effective as of
May 8, 2001 (the "EFFECTIVE DATE") by and between Plains Resources Inc., a
Delaware corporation ("COMPANY"), and James C. Flores ("EMPLOYEE").

     WHEREAS, the Company desires to employ Employee and Employee desires to be
employed by the Company;

     NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties, and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:

     1.  Employment.  The Company hereby employs Employee, and Employee hereby
accepts employment by the Company, on the terms and conditions set forth in this
Agreement.

     2.  Term of Employment.  Subject to the provisions for earlier termination
provided in the Agreement, the term of this Agreement (the "TERM") shall
commence on the Effective Date and shall terminate on the fifth anniversary of
the Effective Date; provided, however, that following the fifth anniversary of
the Effective Date, the Term shall automatically be extended one year and again
for successive one-year periods on each anniversary thereof, if Employee and the
Company shall 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.  Notwithstanding any provision of this Agreement to the contrary,
termination of this Agreement shall not alter or impair any rights or benefits
of Employee (or Employee's estate or beneficiaries) that have arisen under this
Agreement on or prior to such termination.

     3. Employee's Duties. During the Term, Employee shall serve as the Chairman
and Chief Executive Officer of the Company, with such customary duties and
responsibilities as may from time to time be assigned to him by the Board,
provided that such duties are at all times consistent with the duties of such
positions. Employee shall report directly to the Board. All other employees of
the Company shall report to Employee. Employee agrees to serve without
additional compensation, if elected or appointed thereto, in one or more offices
or a director of any of the Company's Subsidiaries. For purposes of this
Agreement, a "Subsidiary" shall mean any entity in which the Company owns a
majority of the voting stock of the class of securities (or other interests in
the case of a limited liability company or partnership) that may vote in the
election of the members of the governing body of such entity.

          Employee agrees to devote his full attention and time during normal
business hours to the business and affairs of the Company and to use reasonable
best efforts to perform faithfully and efficiently such duties and
responsibilities.  Notwithstanding the foregoing, during
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the Term, Employee may engage in the following activities so long as they do not
interfere in any material respect with the performance of Employee's duties and
responsibilities hereunder: (i) serve on corporate, civic or charitable boards
or committees, (ii) deliver lectures, fulfill speaking engagements or teach on a
part-time basis at educational institutions but not more than 20 hours per
month, and (iii) manage his personal investments; provided, however, that in no
event shall the conduct of any such activities by Employee be deemed to
materially interfere with Employee's duties hereunder until Employee has been
notified in writing thereof by the Board and given a reasonable period in which
to cure such interference; and further provided that Employee shall notify and
obtain approval of the Board prior to accepting any of the positions described
in clause (i) above, which approval shall not be unreasonably withheld. In
addition, Employee shall be permitted to manage his personal investments
described in clause (iii) above in accordance with the preceding sentence
provided that (a) such management shall not interfere in any material respect
with the performance of Employee's duties and responsibilities hereunder or
violate the Company's conflicts policy as in effect from time to time, (b)
Employee inform the Board of any conflicts of interest (whether actual or
apparent) with the Business (as defined in Section 7(c) hereof) of the Company
and any of its Subsidiaries, including any event reasonably likely to raise the
appearance of conflicts, and (c) Employee notify the Board of, and discuss with
the Board with respect to, any opportunities presented to Employee or any of the
entities in which Employee owns a majority interest in connection with such
continued ownership and management that should be offered to the Company or its
Subsidiaries. Notwithstanding the foregoing, the Company agrees that Employee's
management of his current personal investments, as disclosed to the Company
prior to the Effective Date, shall not be deemed to materially interfere with
his duties hereunder.

     The Company agrees to (a) nominate Employee as a director of the Company
during the Term and (b) use its best efforts to cause Employee to be elected or
appointed, or re-elected or re-appointed, as a director of the Company during
the Term, and (c) use its reasonable best efforts to appoint Employee a member
of each committee of the Board to the extent such membership does not create any
conflicts of interest with respect to the Company and is permitted by the
Company's certificate of incorporation or by-laws as in effect from time to time
or applicable federal, state or local laws, regulations or rules, including, but
not limited to, rules of any stock exchange.

     4.  Compensation.

         (a) General. Employee shall be entitled to receive base salary, bonus
     and any other incentive compensation in the amounts as determined by the
     Board from time to time in its sole discretion.

         (b)  Performance Option.

              (i) For services rendered by Employee under this Agreement and in
         lieu of base salary and bonus, the Company shall grant the Employee as
         of the

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         Effective Date a performance option to purchase 1,000,000 shares
         of Common Stock of the Company ("PERFORMANCE OPTION"), substantially in
         the form attached hereto as Exhibit A, under the Company's 2001 Stock
         Incentive Plan ("2001 PLAN"). The Performance Option shall be granted
         at an exercise price equal to the "fair market value" of a share (as
         defined in the 2001 Plan) as of the Effective Date. In addition, the
         Performance Option granted hereunder shall be subject to shareholder
         approval of the 2001 Plan, it being understood that the parties will
         cooperate and use reasonable best efforts to obtain voting agreements
         or other indications of support for passage and approval of the 2001
         Plan from shareholders mutually agreed to by Employee and the Company.
         The Company agrees to hold a shareholder meeting at which the 2001 Plan
         will be presented to shareholders for their approval no later than 90
         days following the Effective Date. If the 2001 Plan does not receive
         requisite shareholder approval, the Company shall pay Employee a salary
         of $500,000 per year for five years, retroactive to the Effective Date
         and an annual bonus of $500,000 for each of the first five years of the
         Term in lieu of the Performance Option. The salary shall be payable in
         accordance with the Company's normal payroll schedule and the bonus
         shall be payable on each anniversary of the Effective Date.

              (ii) The Performance Option granted hereunder shall vest on the
         first to occur of the following: (A) day prior to the fifth anniversary
         of the date of grant, (B) with respect to 50% of the shares subject to
         the Performance Option, a period of 10 trading days during a period of
         20 consecutive trading days upon which the closing price of the Common
         Stock equals or exceeds 150% of the exercise price of the Performance
         Option, (C) with respect to 100% of the shares subject to the
         Performance Option, a period of 10 trading days during a period of 20
         consecutive trading days upon which the closing price of the Common
         Stock equals or exceeds 200% of the exercise price of the Performance
         Option, (D) termination of the Employee's employment: (1) by the
         Company for any reason other than Cause (as defined below), (2) due to
         the death of Employee or (3) upon the Employee's resignation for Good
         Reason (as defined below), (E) a Change in Control (as defined below),
         or if earlier, a "change in control" (as defined in the 2001 Plan), or
         (F) at any such time that Employee is not a member of the Board.

              (iii) If any portion of the Performance Option vests in accordance
         with clause (A) of the preceding paragraph, such portion of the
         Performance Option shall be exercisable until the eighth anniversary of
         the Effective

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         Date; provided, however, that if Employee's employment is terminated
         for any reason (other than Cause) prior to such eighth anniversary, the
         Performance Option shall remain exercisable only until the first
         anniversary of the Date of Termination. If any portion of the
         Performance Option vests in accordance with clauses (B) or (C) of the
         preceding paragraph, or if any portion vests under clause (F) of the
         preceding paragraph and the performance goals under either clause (B)
         or (C) are later met during the Term, the Performance Option, to the
         extent that the performance goals have been met under either such
         clause, shall remain exercisable for a period of ten years from the
         Effective Date, notwithstanding termination of Employee's employment
         for any reason (other than Cause) or the earlier vesting of the
         Performance Option in accordance with clause (F) of the preceding
         paragraph. If the Company terminates Employee's employment during the
         Term for any reason other than Cause or Disability, or if Employee
         resigns for Good Reason, any portion of the Performance Option that has
         vested due to such termination shall be exercisable until the later of
         (A) the fifth anniversary of the Effective Date or (B) one year from
         the Date of Termination plus six months for each anniversary that has
         occurred coincident with or prior to the Date of Termination. Upon
         termination of Employee's employment due to death or termination by the
         Company due to Disability, any portion of the Performance Option that
         has vested due to such termination shall be exercisable until the later
         of (A) the fifth anniversary of the Effective Date or (B) one year from
         the Date of Termination. If any portion of the Performance Option vests
         under clause (E) of the preceding paragraph, or under clause (F) of the
         preceding paragraph and the performance goals under clauses (A) or (B)
         are not later met during the Term, such portion shall remain
         outstanding until the later of (A) the fifth anniversary of the
         Effective Date or (B) one year from the Date of Termination for any
         reason (other than Cause). Notwithstanding the foregoing, the
         Performance Option shall in no event remain outstanding for a period
         greater than ten years from the Effective Date. Upon a termination of
         employment for Cause, the Performance Option shall immediately
         terminate and be forfeited unless otherwise provided by the Board upon
         termination of employment.

         (c) Share Grant. Employee will be entitled to receive an amount equal
     to the excess of the "fair market value" (as defined in the 2001 Plan) of a
     share of Common Stock on the Effective Date and $22, multiplied by
     1,000,000. Such amount shall be payable in five installment payments as of
     each anniversary of the Effective Date occurring during the Term in the
     form of a direct grant of shares of Common Stock, the number of which is
     determined by dividing the annual installment payment by the fair

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     market value of a share on the applicable anniversary date, rounded down to
     the nearest whole share. Notwithstanding the foregoing, the first
     installment payment shall be payable on the day following the first
     anniversary of the Effective Date. As of the Effective Date, the Company
     and Employee shall enter into a registration rights agreement,
     substantially in the form attached hereto as Exhibit B.

     5.  Other Benefits; Business Expenses.

         (a) Employee shall be entitled to participate in all incentive
     compensation plans and to receive all fringe benefits and perquisites
     offered by the Company to any of its senior executive officers, including,
     without limitation, participation in the various health, retirement, life
     insurance, disability insurance and other employee benefit plans or
     programs provided to the employees of the Company in general, subject to
     the regular eligibility requirements with respect to each of such benefit
     plans or programs, and such other benefits or prerequisites as may be
     approved by the Board during the Term, all on a basis at least as favorable
     to Employee as may be provided to similarly situated senior executive
     officers of the Company.  Employee shall be entitled to take appropriate
     and reasonable annual vacation time provided that such vacation time does
     not interfere with his duties hereunder.

         (b) The Company shall reimburse Employee for all reasonable business
     expenses incurred by Employee in the performance of his duties; which
     expenses will be subject to the oversight of the Company's audit committee
     in the normal course.  It is understood that Employee is authorized to
     incur reasonable business expenses for promoting the business of the
     Company, including reasonable expenditures for travel, lodging, meals and
     client or business associate entertainment.  Request for reimbursement for
     such expenses must be accompanied by appropriate documentation.

     6. Termination. This Agreement may be terminated prior to the end of its
Term as set forth below.

        (a) Resignation.  Employee may resign his position at any time.  In
     the event of such resignation, except in the case of resignation for Good
     Reason (as defined below), Employee shall not be entitled to further
     compensation pursuant to this Agreement except as may be provided by the
     terms of any benefit plans of the Company in which Employee may be a
     participant.

        (b) Death.  If Employee's employment is terminated due to his death,
     this Agreement shall terminate and the Company shall have no obligations to
     his legal representatives with respect to this Agreement other than the
     payment of benefits as described in Section 6(c)(i) below.

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        (c)  Discharge.

             (i) The Company may terminate this Agreement and Employee's
        employment for any reason deemed sufficient by the Company upon notice
        as provided in Section 10. However, in the event that Employee's
        employment is terminated during the Term by the Company for any reason
        other than Cause, in the event of Employee's death or Disability, or if
        Employee's employment is terminated for Good Reason, then: (A) the
        Company shall pay Employee immediately upon termination of Employee's
        employment a lump sum equal to $2,500,000; (B) for the 36-month period
        after the Date of Termination (as defined below), the Company shall
        provide or arrange to provide Employee (and Employee's dependents) with
        health insurance benefits no less favorable than the health plan
        benefits provided by the Company (or any successor) during such 36-month
        period to any senior executive officer of the Company; provided,
        further, to the extent the coverage or benefits received are taxable to
        Employee, the Company shall make Employee "whole" on a net after tax
        basis; and provided, however, that such coverage shall cease if Employee
        obtains comparable replacement coverage (although Employee shall have no
        obligation to pursue such coverage); (C) the Performance Option shall
        become immediately vested and exercisable in full in accordance with
        Section 4 hereof; and (D) the remainder of the share grant listed in
        Section 4(c) hereof shall be payable in full provided that the number of
        shares to be paid to Employee or his estate, as the case may be, shall
        be determined by dividing the amount equal to the aggregate unpaid
        annual installments divided by the fair market value of a share on the
        Date of Termination, provided that in the event the share price is less
        than $22 on the Date of Termination, payment of the remaining share
        grant shall be in the form of cash; payment of the remaining share grant
        shall be made within 30 days of the Date of Termination.

             (ii) Notwithstanding the foregoing provisions of this Section 6, in
        the event Employee is terminated because of Cause, the Company shall
        have no obligations pursuant to this Agreement after the Date of
        Termination other than reimbursement of expenses incurred prior to such
        date. For purposes herein, "Cause" means (A) the failure by Employee to
        perform reasonably assigned duties with the Company, (B) the engaging by
        Employee in conduct which is demonstrably and materially injurious to
        the Company and its Subsidiares taken as a whole, (C) Employee's having
        been convicted of, or entered a plea of nolo contendere to burglary,
        larceny, murder or arson or a crime involving deceit,

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        fraud, perjury or embezzlement, or (D) failure to notify the Company of
        any actual or apparent conflicts of interest relating to Employee's
        management of personal investments in accordance with Section 3 of this
        Agreement. Notwithstanding the foregoing, prior to any termination for
        Cause under clauses (A), (B) or (D) of the preceding sentence, (X) the
        Company must provide Employee with reasonable notice detailing the
        failure or conduct which the Board believes to constitute Cause, (Y) the
        Company must provide Employee a reasonable opportunity to cure such
        failure or conduct, and (Z) after such notice and an opportunity to
        cure, a majority of the Board must reasonably determine that Employee
        has not cured such failure or conduct. Notwithstanding the foregoing
        provisions, Employee shall not be deemed to have been terminated for
        Cause unless and until Employee shall have been provided an opportunity
        to be heard in person by the Board (with the assistance of Employee's
        counsel if Employee so desires).

             (d) Disability. If Employee shall have been absent from the full-
        time performance of Employee's duties with the Company for six
        consecutive months as a result of Employee's incapacity due to physical
        or mental illness as determined by Employee's physician ("DISABILITY"),
        Employee's employment may be terminated by the Company for Disability.
        If Employee's employment is terminated for Disability, Employee shall be
        entitled to the compensation and benefits provided in Section 6(c)(i)
        hereof. If Employee fails during any period during the Term to perform
        Employee's full-time duties with the Company as a result of incapacity
        due to physical or mental illness, as determined by Employee's
        physician, Employee shall continue to receive his benefits under this
        Agreement during such period until this Agreement is terminated for
        Disability by the Company.

             (e) Resignation for Good Reason. Employee shall be entitled to
        terminate his employment for Good Reason as defined herein. If Employee
        terminates his employment for Good Reason, Employee shall be entitled to
        the compensation and benefits provided in Section 6(c)(i) hereof. "GOOD
        REASON" shall mean (1) the material breach of any of the Company's
        obligations under this Agreement without Employee's written consent or
        (2) the occurrence of any of the following circumstances, as the case
        may be, without Employee's written consent:

                 (i) the assignment by the Board to Employee of any duties that
             materially adversely alter the nature or status of Employee's
             office, title, responsibilities, including reporting
             responsibilities, from those in effect immediately prior to such
             assignment;

                 (ii) the failure by the Company to continue in effect any
             compensation plan in which Employee participates that is material
             to Employee's total compensation unless an equitable arrangement
             (embodied in an ongoing substitute

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             or alternative plan) has been made with respect to such plan, or
             the failure by the Company to continue Employee's participation
             therein (or in such substitute or alternative plan) on a basis not
             materially less favorable to Employee, unless any such failure to
             continue in effect any compensation plan or participation relates
             to a discontinuance of such plans or participation on a management-
             wide or Company-wide basis;

                 (iii) the taking of any action by the Company which would
             directly or indirectly materially reduce or deprive Employee of any
             material pension, welfare or fringe benefit then enjoyed by
             Employee, unless such action relates to a discontinuance of
             benefits on a management-wide or Company-wide basis;

                 (iv) the failure of the Company to obtain a satisfactory
             agreement from any successor to assume and agree to perform this
             Agreement, as contemplated in Section 12 hereof;

                 (v) the relocation of the Company's principal executive offices
             outside the greater Houston, Texas metropolitan area, or the
             Company's requiring Employee to relocate anywhere other than the
             location of the Company's principal executive offices, except for
             required travel on the Company's business to an extent
             substantially consistent with Employee's obligations under this
             Agreement;

                 (vi) the failure to nominate Employee as a director of the
             Company or to use best efforts to cause Employee to be elected or
             appointed, or re-elected or re-appointed, as a director of the
             Company or to use reasonable best efforts to appoint Employee a
             member of a committee in accordance with, and to the extent
             provided in, Section 3 hereof; or

                 (vii) the Employee's termination of his employment with the
             Company or any successor who has assumed this Agreement in
             accordance with Section 12 hereof within the 30-day period
             following the anniversary of a Change in Control of the Company.

             Employee's right to terminate employment pursuant to this
     subsection shall not be affected by Employee's incapacity due to physical
     or mental illness. In addition, Employee's continued employment following
     any event, act or omission, regardless of the length of such continued
     employment, shall not constitute Employee's consent to, or a waiver of
     Employee's rights with respect to, such event, act or omission constituting
     a Good Reason circumstance hereunder.

             (f) Notice of Termination.  Any purported termination of Employee's
     employment by the Company or by Employee shall be communicated by written
     Notice

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     of Termination to the other party hereto in accordance with Section 10
     hereof. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall
     mean a notice which shall set forth in reasonable detail the reason for
     termination of Employee's employment, or in the case of resignation for
     Good Reason, said notice must specify in reasonable detail the basis for
     such resignation. No purported termination which is not effected pursuant
     to this Section 6(f) shall be effective.

          (g) Date of Termination, Etc.  "DATE OF TERMINATION" shall mean in the
     case of Employee's death, his date of death, and in all other cases, the
     date specified in the Notice of Termination.  If no notice is given by
     Employee, termination shall be effective on the last date Employee reported
     for work with the Company, and shall be deemed to be a voluntary
     termination without Good Reason.

          (h) Mitigation.  Employee shall not be required to mitigate the amount
     of any payment or benefit provided for in this Section 6 by seeking other
     employment or otherwise, nor, except as provided in clause (B) of Section
     6(c)(1), shall the amount of any payment or benefit provided for in this
     Agreement be reduced by any compensation or benefit earned by Employee as a
     result of employment by another employer, self-employment earnings, by
     retirement benefits, by offset against any amount claimed to be owing by
     Employee to the Company, or otherwise.

          (i) Full Tax Gross-Up of Parachute Payments.  (i)  In the event that
     any payments or benefits made or provided to or for the benefit of Employee
     in connection with this Agreement, or Employee's employment with the
     Company or the termination thereof (the "PAYMENTS") are determined to be
     subject to the excise tax imposed by Section 4999 of the Code or any
     interest or penalties with respect to such excise tax (such excise tax,
     together with any such interest and penalties, are collectively referred to
     as the "EXCISE TAX"), then the Employee shall be entitled to receive an
     additional payment (a "GROSS-UP PAYMENT") from the Company in an amount
     equal to the Excise Tax (excluding any income tax or employment tax imposed
     upon the Gross Up Payment).  The determination of whether the Payments are
     subject to the Excise Tax and, if so, the amount of the Gross-Up Payment,
     shall be made by a nationally recognized United States public accounting
     firm that has not, during the two years preceding the date of its
     selection, acted in any way on behalf of the Company or any of its
     affiliates; provided, however, that if the accounting firm has determined
     that Section 4999 does not apply, and the Internal Revenue Service claims
     that Section 4999 applies to the Payments (or any portion thereof), then
     paragraph (ii) below of this Section 6(i) shall be applicable.

               (ii) Employee shall notify the Company in writing of any claim by
     the Internal Revenue Service that, if successful, would require the payment
     by the Company of a Gross-Up Payment.  Such notification shall be given as
     soon as practicable but no later than ten (10) business days after Employee
     is informed in writing of such claim and shall apprise the Company of the
     nature of such claim and the date on which

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     such claim is requested to be paid. Employee shall not pay such claim prior
     to the expiration of the thirty (30) day period following the date on which
     he gives such notice to the Company (or such shorter period ending on the
     date that any payment of taxes with respect to such claim is due). If the
     Company notifies Employee in writing prior to the expiration of such period
     that it desires to contest such claim, Employee shall:

                    (A) give the Company any information reasonably requested by
          the Company relating to such claim,

                    (B) take such action in connection with contesting such
          claim as the Company shall reasonably request in writing from time to
          time, including, without limitation, accepting legal representation
          with respect to such claim by an attorney reasonably selected by the
          Company,

                    (C) cooperate with the Company in good faith in order
          effectively to contest such claim, and

                    (D) permit the Company to participate in any proceedings
          relating to such claim;

               provided, however, that the Company shall bear and pay directly
     all costs and expenses (including additional interest, penalties,
     accountant's and legal fees) incurred in connection with such contest and
     shall indemnify and hold Employee harmless, on an after-tax basis, for any
     Excise Tax or income tax (including interest and penalties with respect
     thereto) imposed as a result of such representation and payment of costs
     and expenses.  Without limitation on the foregoing provisions of this
     subsection, the Company shall control all proceedings taken in connection
     with such contest and, at its sole option, may pursue or forgo any and all
     administrative appeals, proceedings, hearings and conferences with the
     taxing authority in respect of such claim and may, at its sole option,
     either direct Employee to pay the tax claimed and commence a proceeding to
     obtain a refund or contest the claim in any permissible manner, and
     Employee agrees to prosecute such contest to a determination before any
     administrative tribunal, in a court of initial jurisdiction and in one or
     more appellate courts, as the Company shall determine; provided, however,
     that if the Company directs Employee to pay such claim and seek a refund,
     the Company shall advance the amount of such payment to Employee, on an
     interest-free basis, and shall indemnify and hold Employee harmless, on an
     after-tax basis, from any Excise Tax or income tax (including interest or
     penalties with respect thereto) imposed with respect to such advance or
     with respect to any imputed income with respect to such advance; and
     further provided that any extension of the statute of limitations relating
     to payment of taxes for the taxable year of Employee with respect to which
     such contested amount is claimed to be due is limited solely to such
     contested amount.  Furthermore, the Company's control of the contest shall
     be limited to issues with respect to which a Gross-Up Payment would be
     payable hereunder, and Employee

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     shall be entitled to settle or contest, as the case may be, any other issue
     raised by the Internal Revenue Service or any other taxing authority.

               (iii)  If, after the receipt by Employee of an amount advanced by
     the Company pursuant to the foregoing, Employee becomes entitled to receive
     any refund with respect to such claim, Employee shall (subject to the
     Company's complying with the requirements of the foregoing) promptly pay to
     the Company the amount of such refund (together with any interest paid or
     credited thereon after taxes applicable thereto).  If, after the receipt by
     Employee of an amount advanced by the Company pursuant to the previous
     subsection, a determination is made that Employee shall not be entitled to
     any refund with respect to such claim and the Company does not notify
     Employee in writing of its intent to contest such denial of refund prior to
     the expiration of thirty (30) days after such determination, such advance
     shall be forgiven and shall not be required to be repaid and the amount of
     such advance shall offset, to the extent thereof, the amount of Gross-Up
     Payment required to be paid.

          (j) Change in Control.  For purposes of this Agreement, a Change in
     Control shall mean an occurrence of the following during the Term:

               (i) The "acquisition" by any "Person" (as the term person is used
     for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of
     1934, as amended (the "1934 Act")) of "Beneficial Ownership" (within the
     meaning of Rule 13d-3 promulgated under the 1934 Act) of any securities of
     the Company which generally entitles the holder thereof to vote for the
     election of directors of the Company (the "Voting Securities") which, when
     added to the Voting Securities then "Beneficially Owned" by such Person,
     would result in such Person either "Beneficially Owning" fifty percent
     (50%) or more of the combined voting power of the Company's then
     outstanding Voting Securities or having the ability to elect fifty percent
     (50%) or more of the Company's directors; provided, however, that for
     purposes of this paragraph (i) of Section 6(j), a Person shall not be
     deemed to have made an acquisition of Voting Securities if such Person: (a)
     becomes the Beneficial Owner of more than the permitted percentage of
     Voting Securities solely as a result of [open market] acquisition of Voting
     Securities by the Company which, by reducing the number of Voting
     Securities outstanding, increases the proportional number of shares
     Beneficially Owned by such Person; (b) is the Company or any corporation or
     other Person of which a majority of its voting power or its equity
     securities or equity interest is owned directly or indirectly by the
     Company (a "Controlled Entity"); (c) acquires Voting Securities in
     connection with a "Non-Control Transaction" (as defined in paragraph (iii)
     of this Section 6(j)); or (d) becomes the Beneficial Owner of more than the
     permitted percentage of Voting Securities as a result of a transaction
     approved by a majority of the Incumbent Board (as defined in paragraph (ii)
     below); or

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               (ii) The individuals who, as of the Effective Date, are members
     of the Board (the "Incumbent Board"), cease for any reason to constitute at
     least a majority of the Board; provided, however, that if either the
     election of any new director or the nomination for election of any new
     director by the Company's stockholders was approved by a vote of at least a
     majority of the Incumbent Board, such new director shall be considered as a
     member of the Incumbent Board; provided further, however, that no
     individual shall be considered a member of the Incumbent Board if such
     individual initially assumed office as a result of either an actual or
     threatened "Election Contest" (as described in Rule 14a-11 promulgated
     under the 1934 Act) or other actual or threatened solicitation of proxies
     or consents by or on behalf of a Person other than the Board (a "Proxy
     Contest") including by reason of any agreement intended to avoid or settle
     any Election Contest or Proxy Contest; or

               (iii)  The consummation of a merger, consolidation or
     reorganization involving the Company (a "Business Combination"), unless (1)
     the stockholders of the Company, immediately before the Business
     Combination, own, directly or indirectly immediately following the Business
     Combination, at least fifty percent (50%) of the combined voting power of
     the outstanding voting securities of the corporation resulting from the
     Business Combination (the "Surviving Corporation") in substantially the
     same proportion as their ownership of the Voting Securities immediately
     before the Business Combination, and (2) the individuals who were members
     of the Incumbent Board immediately prior to the execution of the agreement
     providing for the Business Combination constitute at least a majority of
     the members of the Board of Directors of the Surviving Corporation, and (3)
     no Person (other than (x) the Company or any Controlled Entity, (y) a
     trustee or other fiduciary holding securities under one or more employee
     benefit plans or arrangements (or any trust forming a part thereof)
     maintained by the Company, the Surviving Corporation or any Controlled
     Entity, or (z) any Person who, immediately prior to the Business
     Combination, had Beneficial Ownership of fifty percent (50%) or more of the
     then outstanding Voting Securities) has Beneficial Ownership of fifty
     percent (50%) or more of the combined voting power of the Surviving
     Corporation's then outstanding voting securities (a Business Combination
     described in clauses (1), (2) and (3) of this paragraph shall be referred
     to as a "Non-Control Transaction");

               (iv) A complete liquidation or dissolution of the Company; or

               (v) The sale or other disposition of all or substantially all of
     the assets of the Company to any Person (other than a transfer to a
     Controlled Entity).

          Notwithstanding the foregoing, if Employee's employment is terminated
     and Employee reasonably demonstrates that such termination (x) was at the
     request of a third party who has indicated an intention or has taken steps
     reasonably calculated to effect a Change in Control and who effectuates a
     Change in Control or (y) otherwise occurred in

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<PAGE>

     connection with, or in anticipation of, a Change in Control which actually
     occurs, then for all purposes hereof, the date of a Change in Control with
     respect to Employee shall mean the date immediately prior to the date of
     such termination of employment.

          A Change in Control shall not be deemed to occur solely because fifty
     percent (50%) or more of the then outstanding Voting Securities is
     Beneficially Owned by (x) a trustee or other fiduciary holding securities
     under one or more employee benefit plans or arrangements (or any trust
     forming a part thereof) maintained by the Company or any Controlled Entity
     or (y) any corporation which, immediately prior to its acquisition of such
     interest, is owned directly or indirectly by the stockholders of the
     Company in substantially the same proportion as their ownership of stock in
     the Company immediately prior to such acquisition.

     7.  Restrictive Covenants.

         (a) Employer Covenants. The Company agrees that during the Term, the
     Company shall disclose to Employee or provide Employee with access to trade
     secrets or confidential information of the Company or its Subsidiaries; or
     place Employee in a position to develop business goodwill on behalf of the
     Company or its Subsidiaries; or entrust Employee with business
     opportunities of the Company or its Subsidiaries.

         (b) Confidential Information; Unauthorized Disclosure. During the
     period of his employment hereunder and for any period following the
     termination of employment, the Employee shall not, whether during the
     period of his employment hereunder or thereafter, without the written
     consent of the Board or a person authorized thereby, 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 by the Employee of his duties as an executive of the Company,
     any confidential information obtained by him 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 he knows 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 the Employee) or any
     information which the Employee may be required to disclose by any
     applicable law, order, or judicial or administrative proceeding.

         (c) Non-Competition. As part of the consideration for the compensation
     and benefits to be paid to Employee hereunder; to protect the trade secrets
     and confidential information of the Company or its Subsidiaries that have
     been and will in the future be disclosed or entrusted to Employee, the
     business good will of the Company or its Subsidiaries that has been and
     will in the future be developed by Employee or the business opportunities
     that have been and will in the future be disclosed or entrusted to

                                       13
<PAGE>

     Employee by the Company or its Subsidiaries, and as an additional incentive
     for the Company to enter into this Agreement, the Company and Employee
     agree to the following competition provisions:

     During the Term and for a period of one year thereafter, Employee 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, guarantor of any person engaged in any
     business substantially identical to the Business (defined below); provided,
     however, that (a) Employee 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) its 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, or (b) any such business shall be deemed to exclude
     (i) ownership by Employee or any affiliated entity of interests in Plains
     All American GP LLC, Plains AAP LP and any of their respective subsidiaries
     and any board positions with respect to such entities, and (ii) the
     business of Sable Minerals, Inc. as it exists on the date hereof.  The term
     "Business" shall mean the exploration, development and production of crude
     petroleum and natural gas.  Notwithstanding the foregoing provisions of
     this Section 7(c), in the event of a termination of Employee's employment
     by the Company without Cause or in the event of Employee's resignation for
     Good Reason, Employee shall have no further obligations under this Section
     7(c).

         (d) Non-Solicitation. Employee undertakes toward the Company and is
     obligated, during the Term and for a period of one year thereafter, not to
     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 not to endeavour, directly or
     indirectly, in any manner whatsoever, to encourage any of said Employees to
     leave his or her job with the Company or any of its Subsidiaries and not to
     endeavour, 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.

         (e)  Enforcement.  It is the desire and intent of the parties that the
     provisions of this Section 7 shall be enforced to the fullest extent
     permissible under the laws and public policies applied in each jurisdiction
     in which enforcement is sought.  Accordingly, if any particular provision
     of this Section 7 shall be adjudicated to be invalid or unenforceable,

                                       14
<PAGE>

     such provision shall be deemed amended to delete therefrom the portion thus
     adjudicated to be invalid or unenforceable. Such deletion shall apply only
     with respect to the operation of such provisions of this Section 7 in the
     particular jurisdiction in which such adjudication is made. In addition, if
     the scope of any restriction contained in this Section 7 is too broad to
     permit enforcement thereof to its fullest extent, then such restriction
     shall be enforced to the maximum extent permitted by law, and the Executive
     hereby consents and agrees that such scope may be judicially modified in
     any proceeding brought to enforce such restriction.

         (f) Remedies. In the event of a breach or threatened breach by the
     Executive of the provisions of this Section 7, the Company shall be
     entitled to an injunction and such other equitable relief as may be
     necessary or desirable to enforce the restrictions contained herein.
     Nothing herein contained shall be construed as prohibiting the Company from
     pursuing any other remedies available for such breach or threatened breach
     or any other breach of this Agreement.

     8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
affiliated companies and for which Employee may qualify, nor shall anything
herein limit or otherwise adversely affect such rights as Employee may have
under any stock option or other agreements with the Company or any of its
affiliated companies.

     9. Assignability. The obligations of Employee hereunder are personal and
may not be assigned or delegated by him or transferred in any manner whatsoever,
nor are such obligations subject to involuntary alienation, assignment or
transfer, except by will or the laws of descent and distribution.

     10.  Notice.  For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by overnight
courier or by facsimile with confirmation of receipt or on the third business
day after being mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to the Company at its principal office
address and facsimile number, directed to the attention of the Board with a copy
to the Secretary of the Company, and to Employee at Employee's residence address
and facsimile number on the records of the Company or to such other address as
either party may have furnished to the other in writing in accordance herewith
except that notice of change of address shall be effective only upon receipt.

     11.  Validity.  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

                                       15
<PAGE>

     12.  Successors; Binding Agreement.

     (a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and assets of the Company ("SUCCESSOR") or any corporation which
becomes the ultimate parent corporation of the Company or any such Successor
("ULTIMATE PARENT") to expressly assume and agree in writing satisfactory to the
Employee to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place; provided, however, that express assumption shall not be required where
this agreement is assumed by operation of law.  As used in this Agreement,
including, without limitation, in Section 3, the term "COMPANY" shall include
any Successor and Ultimate Parent which executes and delivers the Agreement as
provided for in this Section 12 or which otherwise becomes bound by all terms
and provisions of this Agreement by operation of law.

     (b) After the death or Disability of Employee, this Agreement and all
rights of Employee hereunder shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

     13. Indemnification. During the Term and for a period of six years
thereafter, the Company shall cause Employee to be covered by and named as an
insured under any policy or contract of insurance obtained by it to insure its
directors and officers against personal liability for acts or omissions in
connection with service as an officer or director of the Company or service in
other capacities at the request of the Company. The coverage provided to
Employee pursuant to this Section 13 shall be of a scope and on terms and
conditions at least as favorable as the most favorable coverage provided to any
other officer or director of the Company (or any successor). In addition, to the
maximum extent permitted by the by-laws of the Company in effect from time to
time and applicable law, during the Term and for a period of six years
thereafter, the Company shall indemnify Employee against and hold Employee
harmless from any costs, liabilities, losses and exposures for Employee's
services as an employee, officer and director of the Company (or any successor).

     14. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Employee and such officer as may be specifically
authorized by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or in compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement is an integration of the parties'
agreement; no agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. Employee represents
and warrants that the execution of this Agreement will not result in any breach
of any prior or existing agreement executed by Employee with respect to any
third party. The validity,

                                       16
<PAGE>

interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas.

     15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

     16. Entire Agreement. This Agreement contains the entire understanding of
the parties in respect of the subject matter and supersedes and replaces in full
all prior written or oral agreements and understandings between the parties with
respect to such subject matters.

                                       17
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of May 8,
2001 effective for all purposes as provided above.

                                    PLAINS RESOURCES INC.



                                    By: /s/ Tim Moore
                                        ----------------------------
                                        Tim Moore



                                    EMPLOYEE

                                    /s/ James C. Flores
                                    --------------------------------
                                    James C. Flores

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