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Form of Employment Agreement, Chief Executive Officer.

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EXHIBIT 10.3


PLAINS EXPLORATION & PRODUCTION COMPANY


FORM OF EMPLOYMENT AGREEMENT


CHIEF EXECUTIVE OFFICER

This Employment Agreement (" Agreement" ) by and between Plains Exploration & Production Company, a Delaware corporation (" Company" ), and (" Employee" ) is entered into effective as of June 9, 2004 (the " Effective Date" ).


WHEREAS, Company desires to employ Employee and Employee desires to be employed by 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-at-will. Company agrees to employ Employee, and Employee hereby agrees to be employed by Company. Employment of Employee shall be at will and may be terminated by either party on the terms and conditions set forth in this Agreement.

2. Term of Employment. Subject to the provisions for termination provided in the Agreement, the term of this Agreement (the " Term" ) shall commence on the Effective Date and shall continue through the fifth anniversary of the Effective Date. The Term shall be automatically renewed and extended for a period of twenty-four (24) months commencing on the third annual anniversary of the Effective Date and on each successive day thereafter.


3. Employee' s Duties. During the Term, Employee shall serve as the Chairman of the Board and the Chief Executive Officer of Company, with such customary duties and responsibilities as may from time to time be assigned to him by the Board of Directors of the Company (the " Board" ), provided that such duties are at all times consistent with the duties of such position. Employee shall report directly to the Board. All other employees of the Company shall report directly 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 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. Company understands and acknowledges that Employee shall be an employee, executive officer and director of Plains Resources Inc. (" PLX" ), 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 PLX shall not be a breach of this Agreement. 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. In addition, Employee shall be permitted to manage his personal investments 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 discusses 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, other than the Compensation Committee, 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 $800,000.00 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 Compensation Committee of the Board of Directors (the " Committee" ) and may be increased from time to time as the Committee may deem 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 (" Bonus" ) in an amount determined by the Committee based on Employee' s individual performance and the performance of Company. The Target Bonus shall be an amount equal to 100% of Employee' s Base Compensation.


(c) Equity Compensation . In addition to any equity-based compensation heretofore issued to Employee by the Company or PLX, Employee shall be eligible to participate in any equity compensation arrangement or plan offered by the Company to senior executives on such terms and conditions as the Compensation Committee of the Board shall determine. Nothing herein shall be construed to give Employee any rights to any amount or type of awards, or rights as a shareholder pursuant to any such plan, grant


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or award except as provided in such award or grant to Employee provided in writing and authorized by the Compensation Committee of the Board.

(d) Long-term Retention . Effective as of June 9, 2004, Employee shall receive a grant of three hundred thousand (300,000) Restricted Stock Units pursuant to the Plains Exploration & Production Company 2004 Stock Incentive Plan and fifty thousand (50,000) Restricted Stock Units pursuant to the Plains Exploration & Production Company 2002 Stock Incentive Plan. Effective as of January 1, 2005, Employee shall receive a grant of one hundred fifty thousand (150,000) Restricted Stock Units pursuant to the Plains Exploration & Production Company 2004 Stock Incentive Plan. The Restricted Stock Units granted to Employee pursuant to this section shall be collectively referred to herein as the " LSIP."


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, short-term and long-term disability insurance, parking 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 Committee 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. Company shall reimburse Employee for monthly country or golf and luncheon club dues and one club initiation fee.

(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. Employee shall be entitled to personal use of Company aircraft in accordance with Company policy for such use by senior executives.

6. Termination. Employee' s employment may be terminated 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.


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(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 and salary 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.

(c) Other Termination .

(i) Company may terminate this Agreement and Employee' s employment for any reason deemed sufficient by Company upon notice as provided in Section 10. For purposes of this Agreement, acceptance by the Company of the Employee' s resignation upon request or by mutual agreement shall be deemed to be a termination by the Company. In the event that Employee' s employment is terminated by Company for any reason other than Cause, in the event of Employee' s death or Disability, or if Employee resigns for Good Reason, then in addition to any compensation or benefits to which Employee may be entitled through the Date of Termination (as defined below): (A) Company shall pay Employee immediately upon termination of Employee' s employment a lump sum equal to one times the sum of the Base Compensation and the Target Bonus; and (B) for the 36-month period after the Date of Termination, 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. To the extent the health care coverage or benefits received by Employee after termination are taxable to Employee, Company shall make Employee " whole" on a net after tax basis; provided, however, that such coverage shall cease if Employee obtains comparable replacement coverage (although Employee shall have no obligation to pursue such coverage).


(ii) In the event of Employee' s termination or resignation under the circumstances described in Sections 6(b) or 6(c) all then outstanding Company stock-based awards of Employee, all equity compensation described in Section 4(c) 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) Termination for Cause .

(i) 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,


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" Cause" means (A) the failure by Employee to perform reasonably assigned duties with Company, (B) the engaging by Employee in conduct which is demonstrably 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).


(ii) Company shall reimburse Employee for business expenses properly incurred prior to the Date of Termination, regardless of the circumstances of termination.

(e) Resignation for Good Reason . If Employee resigns his employment for Good Reason, Employee shall be entitled to the compensation and benefits provided in Section 6(c) 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, without Employee' s written consent:


(i) the assignment to Employee by the Board 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 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 the
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