Document:

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                                                                   Exhibit 10.16

                     Plains Exploration & Production Company

September 19, 2002

Timothy T. Stephens
3263 Reba Drive
Houston, Texas 77019

             Re: Terms of Employment with the Company

Dear Tim,

I am pleased to offer you the position of General Counsel, Executive Vice
President and Secretary of Plains Exploration & Production Company (the
"Company"). This offer letter shall outline the terms of your employment with
the Company.

Contingent on the distribution (the "Distribution") of all shares of Company
common stock held by Plains Resources Inc. ("PLX") to the PLX stockholders, and
subject to earlier termination by either you or the Company, you will be
employed by the Company for a term of five years which shall begin on the date
of the Distribution (the "Effective Date"). If the Distribution does not occur
on or before May 23, 2003, this letter shall have no force or effect. The term
of your employment will automatically be extended one year and again for
successive one-year periods on each anniversary thereof, if you and the Company
have agreed to new compensation terms at least ninety days prior to the end of
the initial five-year period and any additional one-year extensions (the initial
five-year term and any additional years are hereinafter referred to as the
"Term"). Your annual salary shall be $275,000, and you shall be eligible for an
annual target bonus of 100% of your annual salary, subject to attainment of
goals set forth by the Company's Board of Directors (the "Board"). The Company
will reimburse you for your initial and monthly downtown luncheon club fees.

If the Company terminates your employment during the Term for any reason other
than cause or if a "change in control" as defined in the Company 2002 stock
incentive plan occurs or if your employment terminates due to your death during
the Term, you will receive a severance payment equal to two times the sum of
your base salary and last earned annual bonus (provided, however, that if such
termination shall take place prior to the end of the first full calendar year of
employment (i.e., prior to December 31 of the year following the year in which
the Distribution takes place), the bonus amount used for the severance
calculation shall be the target bonus), and any Options or stock appreciation
rights ("SARs") covering shares of Company common stock or grants of restricted
Company common stock shall immediately vest. In addition, you will be entitled
to health benefits for up to two years, subject to mitigation should you become
entitled to health benefits under another plan.

During the Term and for any period thereafter, you shall not, without the
written consent of the Board or a person authorized by the Board, disclose to
any person, other than an employee of the

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September 19, 2002
Page 2 of 3

Company or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance of your duties as an executive of the Company,
any confidential information obtained by you while in the employ of the Company
with respect to the Company's business, including but not limited to technology,
know-how, processes, maps, geological and geophysical data, other proprietary
information and any information whatsoever of a confidential nature, the
disclosure of which you know or should know will be damaging to the Company;
provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by you) or any information which you may be required to
disclose by any applicable law, order, or judicial or administrative proceeding.

During the Term, you shall not in North America, directly or indirectly engage
in or become interested financially in as a principal, employee, partner,
shareholder, agent, manager, owner, advisor, lender, or guarantor of any person
engaged in any business substantially identical to the Business (defined below);
provided, however, that you may invest in stock, bonds or other securities in
any such business (without participating in such business) if: (i)(A) such
stock, bonds or other securities are listed on any United States securities
exchange or are publicly traded in an over the counter market and (B) your
investment does not exceed, in the case of any capital stock of any one issuer,
5% of the issued and outstanding capital stock, or in the case of bonds or other
securities, 5% of the aggregate principal amount thereof issued and outstanding,
or (ii) such investment is completely passive and no control or influence over
the management or policies of such business is exercised. The term "Business"
shall mean the exploration, development and production of crude petroleum and
natural gas.

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

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

                           - SIGNATURE PAGE FOLLOWS -

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September 19, 2002
Page 3 of 3

Sincerely,

/s/ James C. Flores
_________________________
James C. Flores
Chairman and Chief Executive Officer

Agreed to and accepted by on this 19th day of September, 2002

/s/ Timothy T. Stephens
_________________________
Timothy T. Stephens<PAGE>

                                                                   Exhibit 10.17

                     PLAINS EXPLORATION & PRODUCTION COMPANY
                        RESTRICTED STOCK AWARD AGREEMENT

     This Restricted Stock Award Agreement (the "Agreement"), executed as of the
25th day of September, 2002, by and between Plains Exploration & Production
Company (the "Company") and James C. Flores (the "Grantee"), evidences the grant
by the Company of a stock award (the "Award") of restricted shares of common
stock, $.01 par value, of the Company (the "Shares") to the Grantee, to be
effective on the effective date of the initial public offering of the Company's
common stock in the public securities market (the "Grant Date"), and the
Grantee's acceptance of the Award in accordance with the provisions of the
Company's 2002 Stock Incentive Plan, as amended or restated from time to time
(the "Plan"). The Company and the Grantee agree as follows:

     1. Basis for Award. This Award is made under the Plan pursuant to Section 9
thereof for services to be rendered to the Company by the Grantee and for the
consideration the Company received as a result of Grantee entering into an
employment agreement with the Company.

     2. Stock Awarded.

        (a) The Company hereby awards to the Grantee, in the aggregate, 75,000
Shares ("Restricted Stock"), which shall be subject to the restrictions and
conditions set forth in the Plan and in this Agreement.

        (b) Each certificate issued in respect of the Restricted Stock shall be
registered in the Grantee's name and deposited by him, together with a share
power endorsed in blank, with the Company and shall bear the following (or a
similar) legend:

        "THE TRANSFERABILITY OF THIS CERTIFICATE AND THE COMMON STOCK
        REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING
        FORFEITURE) CONTAINED IN THE RESTRICTED STOCK AWARD AGREEMENT EXECUTED
        ON SEPTEMBER __, 2002, ENTERED INTO BETWEEN THE REGISTERED OWNER AND
        PLAINS EXPLORATION & PRODUCTION COMPANY"

At the expiration of the restrictions, the Company shall redeliver to the
Grantee (or his legal representative, beneficiary or heir) certificates for the
Shares deposited with it without any legend except as otherwise provided by the
Plan, this Agreement or as otherwise required by applicable law. The Grantee
shall have the right to receive dividends on and to vote the Restricted Stock
while it is held in custody except as otherwise provided by the Plan.
Notwithstanding the foregoing, the Company shall retain custody of all Retained
Distributions made or declared with respect to the Restricted Stock and such
Retained Distributions shall be subject to the same restrictions on terms and
conditions as are applicable to the Restricted Stock.

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          (c) Except as provided in the Plan or this Agreement, the Restricted
Stock shall be forfeited by the Grantee and all of the Grantee's rights to such
stock shall immediately terminate without any payment or consideration by the
Company in the event of any sale, assignment, transfer, hypothecation, pledge or
other alienation of such Restricted Stock made or attempted by or on behalf of
the Grantee, whether voluntary or involuntary, and if involuntary whether by
process of law in any civil or criminal suit, action or proceeding, whether in
the nature of an insolvency or bankruptcy proceeding or otherwise, without the
written consent of the Committee, excluding the Grantee if he so serves on the
Committee.

     3.   Vesting. The restrictions described in Section 2 of this Agreement
will lapse with respect to one-third (1/3) of the Restricted Stock on the first
anniversary of the Grant Date and with respect to an additional one-third (1/3)
of the Restricted Stock on each of the second and third anniversaries of the
Grant Date, provided the Grantee is still employed by the Company (or any Parent
or Subsidiary) on such vesting dates. All restrictions will lapse with respect
to 100% of the Restricted Stock upon (a) Grantee's death, separation from
service due to Disability, termination of employment by the Company without
Cause (as defined in Grantee's employment agreement), or termination of
employment by the Grantee for Good Reason provided that the Grantee's employment
agreement with the Company provides for a termination of employment by the
Grantee for Good Reason (as defined in such employment agreement), or (b) a
Change in Control of the Company. If the Grantee ceases to be employed by the
Company (or any Parent or Subsidiary) for any other reason at any time prior to
the vesting dates, the unvested Restricted Stock shall automatically be
forfeited upon such cessation of service.

     4.   Compliance with Laws and Regulations. The issuance and transfer of
Shares shall be subject to compliance by the Company and the Grantee with all
applicable requirements of securities laws and with all applicable requirements
of any stock exchange on which the Shares may be listed at the time of such
issuance or transfer. The Grantee understands that the Company is under no
obligation to register or qualify the Shares with the Securities and Exchange
Commission ("SEC"), any state securities commission or any stock exchange to
effect such compliance.

     5.   Tax Withholding.

          (a) The Grantee agrees that, subject to clause 5(b) below, no later
than the date as of which the restrictions on the Restricted Stock shall lapse
with respect to all or any of the Restricted Stock covered by this Agreement,
the Grantee shall pay to the Company (in cash or to the extent permitted by the
Committee, Shares held by the Grantee whose Fair Market Value on the day
preceding the date the Restricted Stock vests is equal to the amount of the
Grantee's tax withholding liability) any federal, state or local taxes of any
kind required by law to be withheld, if any, with respect to the Restricted
Stock for which the restrictions shall lapse. The Company or its affiliates
shall, to the extent permitted by law, have the right to deduct from any payment
of any kind otherwise due to the Grantee any federal, state or local taxes of
any kind required by law to be withheld with respect to the Shares of Restricted
Stock.

          (b) If the Grantee properly elects, within thirty (30) days of the
Grant Date, to include in gross income for federal income tax purposes an amount
equal to the Fair Market

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Value as of the Grant Date of the Restricted Stock granted hereunder pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended, the Grantee
shall pay to the Company, or make other arrangements satisfactory to the
Committee to pay to the Company in the year of such grant, any federal, state or
local taxes required to be withheld with respect to such Shares. If the Grantee
fails to make such payments, the Company or its affiliates shall, to the extent
permitted by law, have the right to deduct from any payment of any kind
otherwise due to the Grantee any federal, state or local taxes of any kind
required by law to be withheld with respect to such Shares.

     6.   No Right to Continued Employment. Nothing in this Agreement shall be
deemed by implication or otherwise to impose any limitation on any right of the
Company or any of its affiliates to terminate the Grantee's employment at any
time, in the absence of a specific written agreement to the contrary.

     7.   Representations and Warranties of Grantee. The Grantee represents and
warrants to the Company that:

          (a) Agrees to Terms of the Plan. The Grantee has received a copy of
the Plan and has read and understands the terms of the Plan and this Agreement,
and agrees to be bound by their terms and conditions. The Grantee acknowledges
that there may be adverse tax consequences upon the vesting of Restricted Stock
or disposition of the Shares once vested, and that the Grantee should consult a
tax adviser prior to such time.

          (b) Cooperation. The Grantee agrees to sign such additional
documentation as may reasonably be required from time to time by the Company.

     8.   Adjustment Upon Changes in Capitalization. In the event of a Change in
Capitalization, the Committee may make appropriate adjustments to the number and
class of Shares relating to Restricted Stock as it deems appropriate, in its
sole discretion, to preserve the value of this Award. The Committee's adjustment
shall be made in accordance with the provisions of Section 13 of the Plan and
shall be effective and final, binding and conclusive for all purposes of the
Plan and this Agreement.

     9.   Governing Law; Modification. This Agreement shall be governed by the
laws of the State of Delaware without regard to the conflict of law principles.
The Agreement may not be modified except in writing signed by both parties.

     10.  Defined Terms. Except as otherwise provided herein, or unless the
context clearly indicates otherwise, capitalized terms used but not defined
herein have the definitions as provided in the Plan. The terms and provisions of
the Plan are incorporated herein by reference, and the Grantee hereby
acknowledges receiving a copy of the Plan. In the event of a conflict or
inconsistency between the discretionary terms and provisions of the Plan and the
provisions of this Agreement, this Agreement shall govern and control.

     11.  Miscellaneous. The masculine pronoun shall be deemed to include the
feminine, and the singular number shall be deemed to include the plural unless a
different meaning is plainly required by the context.

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     IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above written.

                                    PLAINS EXPLORATION & PRODUCTION
                                    COMPANY

                                        /s/ John T. Raymond
                                    By:_________________________________________
                                    Name:  John T. Raymond
                                    Title: President and Chief Operating Officer

                                    /s/ James C. Flores
                                    ____________________________________________
                                    James C. Flores

                                       S-1

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