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                                                                    EXHIBIT 10.1

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This Amended and Restated Employment Agreement (this "Agreement") by and
between Plains Resources Inc., a Delaware corporation ("Company"), and James C.
Flores ("Employee") is entered into as of September 19, 2002, but shall not be
effective until the date (the "Effective Date") on which all the shares of the
common stock of Plains Exploration & Production Company, a company to be formed
by the conversion of Plains Exploration & Production Company, L.P. into a
Delaware corporation ("PXP"), held by Company are distributed to Company's
stockholders (the "Distribution"); provided, however, that if the Distribution
does not take place on or before May 23, 2003, this Agreement shall not become
effective and the Agreement between Company and Employee effective as of May 8,
2001 (the "Original Agreement") shall remain in full force and effect.

     WHEREAS, Company desires to employ Employee in a different capacity and
Employee desires to be employed by Company in such capacity;

     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. Contingent on the Distribution occurring no later than May
23, 2003, Company agrees to employ Employee, and Employee hereby agrees to be
employed by 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
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
Executive Chairman of the Company's Board of Directors, 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. Employee agrees to
serve without additional compensation, if elected or appointed thereto, in one
or more offices or a director of any of Company's Subsidiaries. For purposes of
this Agreement, a "Subsidiary" shall mean any entity in which 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.

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         Employee agrees to use reasonable best efforts to perform faithfully
and efficiently his duties and responsibilities hereunder. Company understands
and acknowledges that Employee shall be an employee, executive officer and
director of PXP, and therefore, Employee will not be able to devote all of his
attention and time during normal business hours to Company. Accordingly, Company
agrees that the performance of Employee's duties on behalf of PXP shall not be a
breach of this Agreement or the Original Agreement. Notwithstanding the
foregoing, during 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 Company's conflicts policy as in effect from time to time,
(b) Employee informs the Board of any conflicts of interest (whether actual or
apparent) with Company and any of its Subsidiaries, including any event
reasonably likely to raise the appearance of conflicts, and (c) Employee
notifies 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 Company or its Subsidiaries.
Notwithstanding the foregoing, Company agrees that Employee's management of his
current personal investments, as disclosed to Company prior to the Effective
Date, shall not be deemed to materially interfere with his duties hereunder.

     Company agrees to (a) nominate Employee as a director of 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 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 Company and is permitted by 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) Base Compensation. For services rendered by Employee under this
     Agreement Company shall pay to Employee a base salary ("Base Compensation")
     of $100,000 per annum payable in accordance with Company's customary
     payroll practice for its senior executive officers. The amount of Base
     Compensation shall be reviewed periodically by the Board and may be
     increased from time to time as the Board may deem


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     appropriate. Base Compensation, as in effect at any time, may not be
     decreased without the prior written consent of Employee.

          (b) Annual Bonus. In addition to his Base Compensation, Employee shall
     be eligible to receive each year during the Term, a cash incentive payment
     in an amount equal to 100% of Employee's Base Compensation (the "Target
     Bonus"). The amount of the Target Bonus earned for any year shall be
     determined by the Compensation Committee of the Board based on Employee's
     individual performance and the performance of Company.

          (c) Performance Option and Second Option. The terms of the Performance
     Option (as defined in the Original Agreement) granted to Employee pursuant
     to Section 4(b) of the Original Agreement, as adjusted for the Distribution
     as of the Effective Date, and the stock option covering 125,000 shares of
     Company common stock granted to Employee in February 2002 (the "Second
     Option") shall remain in full force and effect in accordance with the terms
     of the agreements evidencing the Performance Option and the Second Option,
     as the case may be, except for appropriate adjustments that shall be made
     due to the Distribution in accordance with the Employee Matters Agreement
     dated July 3, 2002, between the Company and PXP, as amended (the "Employee
     Matters Agreement"), including, without limitation, adjusting the exercise
     prices for the Performance Option and the Second Option and the issuance by
     PXP of stock appreciation rights (the "PXP SARs") having the same terms and
     conditions as the Performance Option and the Second Option, as the case may
     be, with a strike price and a number of PXP SARs calculated in accordance
     with the Employee Matters Agreement. The agreement representing the
     Performance Option shall be amended to reflect these adjustments, and PXP
     and Employee shall execute an agreement reflecting the PXP SARs.
     Notwithstanding anything contained in this Agreement or otherwise, the
     parties hereto agree that no actions under this Agreement or related
     hereto, including, without limitation, the fact that Employee will not be
     Chief Executive Officer of Company subsequent to the Distribution, shall be
     deemed to be a termination of Employee or a resignation by Employee for
     Good Reason and the Distribution shall not be a Change in Control.

          (d) Share Grant. The obligations of the Company under Section 4(c) of
     the Original Agreement shall remain in full force and effect and shall not
     be affected by this Agreement or by the Employee Matters Agreement.

          (e) New Grants. On the first trading day following the Effective Date,
     Company will grant Employee 60,000 restricted shares of Company common
     stock with respect to which restrictions will lapse pro rata over a
     three-year period beginning on the first anniversary of the Effective Date
     and under such other terms and conditions as provided in the agreement
     evidencing such award, and an option covering 350,000 shares of Company
     common stock having an exercise price equal to the closing price of the
     Company common stock on the first trading day following the Effective Date,
     vesting pro


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     rata over five years beginning on the first anniversary of the Effective
     Date with a ten-year term, and under such other terms and conditions as
     provided in the agreement evidencing such option.

     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 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 Company in general, subject to the
     regular eligibility requirements with respect to each of such benefit plans
     or programs, and such other benefits or perquisites 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
     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) 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 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 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 Company in which Employee may be a
     participant and the terms of any outstanding equity grants and for salary
     accrued but unpaid through the date of resignation and reimbursement of
     expenses prior to such date.

          (b) Death. If Employee's employment is terminated due to his death,
     this Agreement shall terminate and 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, salary accrued but
     unpaid through the date of termination, reimbursement of expenses prior to
     such date, and benefits under the terms of any outstanding equity grants.


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     (c) Discharge.

          (i) Company may terminate this Agreement and Employee's employment for
     any reason deemed sufficient by Company upon notice as provided in Section
     10. However, in the event that Employee's employment is terminated during
     the Term by 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) 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),
     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 Company (or any successor) during such
     36-month period to any senior executive officer of Company; provided,
     further, to the extent the coverage or benefits received are taxable to
     Employee, 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) on the Date of Termination all then
     outstanding Company stock-based awards of Employee, whether under this
     Agreement, a Company stock plan or otherwise, shall become immediately
     exercisable and payable in full, as the case may be, with any performance
     goals associated therewith being deemed to have been achieved at the
     maximum levels and all restrictions removed with respect thereto (including
     without limitation with respect to any options that would otherwise vest in
     accordance with performance goals and any grants of restricted stock that
     shall have been granted prior to the Effective Date); (D) the remainder of
     the share grant listed in Section 4(c) of the Original Agreement 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 if
     the fair market value of a share on the Date of Termination is less than
     the amount equal to the product of $22 and the Plains Price Adjustment
     Factor as defined in the Employee Matters Agreement, 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; and (E) Company shall reimburse Employee for expenses incurred
     prior to the Date of Termination.

          (ii) Notwithstanding the foregoing provisions of this Section 6, in
     the event Employee is terminated because of Cause, 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 Company, (B) the engaging by Employee in conduct which
     is demonstrably


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     and materially injurious to Company and its Subsidiaries 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, fraud, perjury or embezzlement, or (D) failure to notify 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) Company
     must provide Employee with reasonable notice detailing the failure or
     conduct which the Board believes to constitute Cause, (Y) 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 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 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 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 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 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 Company to continue in effect any compensation
     plan in which Employee participates that is material to Employee's total


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     compensation unless an equitable arrangement (embodied in an ongoing
     substitute or alternative plan) has been made with respect to such plan, or
     the failure by 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 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 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 Company's principal executive offices outside
     the greater Houston, Texas metropolitan area, or Company's requiring
     Employee to relocate anywhere other than the location of Company's
     principal executive offices, except for required travel on 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 Company or to
     use best efforts to cause Employee to be elected or appointed, or
     re-elected or re-appointed, as a director of 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 Company or any
     successor who has assumed this Agreement in accordance with Section 12
     hereof within the 30-day period following the first anniversary of a Change
     in Control of 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 Company or by Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 10 hereof. For
purposes


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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
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 Company, or otherwise.

     (i) Full Tax Gross-Up of Parachute Payments. (i) In the event that any
payment, award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) made or provided to or for the benefit of
Employee in connection with this Agreement, or Employee's employment with
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 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 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 Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by 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 Company of the nature of such claim and the date on
which such claim is requested to be paid. Employee shall not pay such


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claim prior to the expiration of the thirty (30) day period following the date
on which he gives such notice to Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If Company
notifies Employee in writing prior to the expiration of such period that it
desires to contest such claim, Employee shall:

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

          (B) take such action in connection with contesting such claim as
     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 Company,

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

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

     provided, however, that 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, 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 Company shall determine; provided, however, that if Company directs
Employee to pay such claim and seek a refund, 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, 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 shall be entitled to settle or


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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
     Company pursuant to the foregoing, Employee becomes entitled to receive any
     refund with respect to such claim, Employee shall (subject to Company's
     complying with the requirements of the foregoing) promptly pay to 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 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 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 Company
     which generally entitles the holder thereof to vote for the election of
     directors of 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 Company's then outstanding Voting Securities or
     having the ability to elect fifty percent (50%) or more of 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 Company which, by reducing
     the number of Voting Securities outstanding, increases the proportional
     number of shares Beneficially Owned by such Person; (b) is 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
     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
     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 Company (a "Business Combination"), unless (1) the stockholders
     of 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) 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 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 Company; or

          (v) The sale or other disposition of all or substantially all of the
     assets of 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


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who effectuates a Change in Control or (y) otherwise occurred in 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 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 Company in substantially the same proportion
as their ownership of stock in Company immediately prior to such acquisition.

     7. Restrictive Covenants.

     (a) Employer Covenants. Company agrees that during the Term, Company shall
disclose to Employee or provide Employee with access to trade secrets or
confidential information of Company or its Subsidiaries; or place Employee in a
position to develop business goodwill on behalf of Company or its Subsidiaries;
or entrust Employee with business opportunities of 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 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 Company,
any confidential information obtained by him while in the employ of Company with
respect to 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 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 Company or its Subsidiaries that have been and will
in the future be disclosed or entrusted to Employee, the business good will of
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 Employee by Company or its Subsidiaries, and as an
additional incentive for Company to


                                       12

<PAGE>

enter into this Agreement, 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 PXP,
Plains All American GP LLC, Plains AAP LP, Plains All American Pipeline, L.P.,
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 marketing, gathering,
transporting, terminalling and storing of crude oil and natural gas.
Notwithstanding the foregoing provisions of this Section 7(c), in the event of a
termination of Employee's employment by 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 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 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 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 Company or any of its Subsidiaries to terminate,
in whole or in part, its business relations with 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, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated


                                       13

<PAGE>

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, 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 Company from pursuing any other remedies available for
such breach or threatened breach or any other breach of this Agreement.

     (g) The parties hereto understand and acknowledge that Employee will serve
in various capacities (including, without limitation, stockholder, employee,
executive officer and director) of PXP. Company acknowledges that no actions by
Employee in any or all of his capacities with PXP shall be a violation of the
provisions of this Section 7.

     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 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 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 Company at its principal office address
and facsimile number, directed to the attention of the Board with a copy to the
Secretary of Company, and to Employee at Employee's residence address and
facsimile number on the records of 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.


                                       14

<PAGE>

     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.

     12. Successors; Binding Agreement.

          (a) 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 Company ("Successor") or any corporation
     which becomes the ultimate parent corporation of 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 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. The provisions of Section 12 of the Original Agreement
     shall not be applicable to the Distribution.

          (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, 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 Company or service in other
capacities at the request of 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 Company (or any successor). In addition, to the maximum extent
permitted by the by-laws of Company in effect from time to time and applicable
law, during the Term and for a period of six years thereafter, 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 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


                                       15

<PAGE>

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,
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 including but not limited to the Original
Agreement, except to the extent this Agreement specifically provides that
portions of the Original Agreement are to continue.

                           - SIGNATURE PAGE FOLLOWS -


                                       16

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of
September ___, 2002 effective for all purposes as provided above on the
Effective Date.

                                PLAINS RESOURCES INC.


                                By:  /s/ John T. Raymond
                                    -------------------------------------------
                                    John T. Raymond
                                    President

                                EMPLOYEE


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

                                       17