IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re:
Chapter l

PACIFIC ENERGY RESOURCES LTD., et al.,l

Case No. 09-10785 (KJC)

(Jointly Administered)
Related Docket No. 1560

4 ibAL

Debtors.

AGREED ORDER AUTHORIZING ABANDONMENT OF COOK INLET PIPE LINE COMPANY STOCK
This matter came before the Court on the motion (the "Motion")2 of Pacific Energy Alaska Holdings, LLC (.'PEAH"), one of the above-captioned debtors and debtors in possession
(together with PEAH, the "Debtors"), for entry of an order, pursuant to section 554 of the

Bankruptcy Code, authorizing PEAH to abandon nunc pro tunc to the Petition Date its stock (the

"Stock") in Cook Inlet Pipe Line Company ("CIPL"). PEAH submits that the Stock is
burdensome and of inconsequential value or benefit to PEAH's estate.

Having reviewed the Motion, the Court finds that:

(a) (b) (c)

The Court has jurisdiction over this matter pursuant to 28 U.S.C. $$ 157 and

r334:
This is a core proceeding pursuant to 28 U.S'C. $ 157(bX2XA) and (L); Venue of these chapter 11 cases in this District is proper pursuant to 28 U.S.C. $$ 1408 and 1409;

Th" D.btors in these cases, along with the last four digits of each of the Debtors' federal tax identification number, are: Pacific Energy Resources Ltd. (3442); Petrocal Acquisition Corp. (62_49I Pacific Fngtgy Alaska _ _ ^ Holdings, LLC (tax LO. #-not available); Carneros Acquisition Corp. (5366); Pacifrc EnergY Alaska Operating LLC (712t\icameroi Energy, Inc. (9487); and Gotland Oil,Inc. (5463). The mailing address for all of the Debtors is it t W. Ocean Boulevard, Suite 1240, Long Beach, CA 90802. 2 Capitalizedterms not otherwise defined herein shall have the meanings set forth in the Motion.

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DOCS_SF:72130.

(d)
(e)

Notice of the Motion was sufficient under the circumstances;

No written objections to the Motion were filed; however, Union Oil Company of California ("Union Oil") raised informal objections with PEAH. Subsequently, Union Oil agreed not to file an objection in exchange for PEAH's agreement to
execute the Option and Irrevocable Proxy Agreement (the "Agreement"), a form

of which is attached to this Order. as a condition to abandonment;

(0

The DIP Lenders and Prepetition Secured Lenders3 have consented to PEAH's
execution of the Agreement and to CIPL's issuance of two new stock certificates,
one representing 19,999 shares of the common stock of CIPL (the "Non-Option

Certificate") and one representing

share of the common stock of CIPL ("the 20,000

Option Certificate"),

in

exchange

for the one certificate representing

shares that PEAH currently holds;

(e)

PEAH has consented to the delivery of the Non-Option Certificate directly to

Silver Point Finance,LLC, as collateral agent, and to the delivery of the Option
Certificate directly to Union Oil; and

The Court, having determined that the legal and factual bases set forth in the Motion establish cause for the relief sought therein, and it appearing that the relief requested, as modified

by this Order, is in the best interest of PEAH, its estate, creditors, and other parties in interest; it
is hereby ORDERED as follows:

The Motion is Granted.

Both terms as defined in that certain Final Order Pursuant To I t U.S.C. Eg 10S, 361, 362, 363, 364, 365 And 507: (l) Approving Senior Secured Superpriority Postpetition Financing; (2) Authorizing Use Of Cash_ Cotlateratj (, Crqnt@ Liens And ProvidingSuperpriority Administrative Expense Status; (4) Granting Adequate Protection; And (5) Modifying Automatic.Stql [Docket No' 415]'

HUI-l 26999v7 DOCS SF:72130.1

.,

2.

PEAH is authorized to abandon and is deemed to have abandoned the Stock effective
nunc

pro tunc

as of the Petition Date pursuant to section 554 of the Bankruptcy Code.

J.

PEAH is authorized to execute the Agreement in the form attached hereto. PEAH is authorized to grant to Union Oil the option to purchase one share of the CIPL stock currently held by PEAH, and such one share is no longer subject to any
liens, security interests, or other encumbrances held by the DIP Lenders or Prepetition
Secured Lenders;

4.

5.

CIPL shall have the authority to deliver the Non-Option Certificate directly to Silver
Point Finance, LLC, as collateral agent, and to deliver the Option Certificate directly to Union Oil.

6.

Nothing in this Order shall determine the party or parties who will gain title to the
Stock, or may be responsible for any obligations arising under or in connection with the Stock, upon abandonment by PEAH's estate, provided, however, that title in the Stock shall not vest in any of the DIP Lenders or Prepetition Secured Lenders.

7.

Nothing in this Order shall determine or affect the rights and obligations of Union

Oil, PEAH, or any third party, including, but not limited to the rights and obligations
arising out of the Funding Agreement and the Guaranty Agreement, each effective
January
assigns.
8.

I,

1995, by and among the stockholders of CIPL and their successors and

The automatic stay and all stays against lien or contract enforcement are hereby dissolved with respect to PEAH's abandoned equity interest in CIpL.

9.

Paragraph

3,4

and 5 of this

order shall be effective immediately. within one

business day of PEAH's execution of the Agreement and delivery therof to Union

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DOCS SF:72130.1

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Oil, Union Oil shall file on the Docket

a notice

of execution of the Agreement

whereupon the remainder of this Order shall become effective.

Dated:

May 21,2010

in J. Carey

AGREED:

By: /s/ James E. O'Neill Ira D. Kharashch James E. O'Neil (ID No. 4042) Maxim B. Litvak Robert M. Saunders PACHULSKI STANG ZIEL & JONES LLP 919 North Market Street, 17th Floor Wilminglon, Delaware I 9801 Telephone: (302) 652-4100 Facsimile: (302) 652-4400

Attorneys for Debtors and Debtors in Possession

HUl-126999v7
DOCS_SF:72130.1

/s/ Norman M. Monhait Norman M. Monhait (ID No. 1040) Rosenthal, Monhait & Goddess, P'A. 919 North Market Street, Suite 1401 P.O. Box 1070 Wilmington, DE 19899-1 070 Telephone: (302) 656-4433 Facsimile: (302) 658-7 567
and James S. Teater

By:

Tom A. HowleY JONES DAY 7I7 Texas, Suite 3300 Houston, Texas 77002 Telephone: (832) 239 -3939 Facsimile: (832) 239-3600 Attorneys for Union Oil Company of California

/s/ Ian S' Fredericl<s Ian S. Fredericks (ID No. 4626 LLP STNPNPN, ARPS, SLATE, MEAGHER & FLOM One RodneY Square P.O. Box 636 Wilminglon, DE I 9899-0636 (302) 6s1-3000
and

By:

Chris L. Dickerson T. Kellan Grant LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM 333 West Wacker Drive Chicago, Illinois 60606-1285 (3r2) 407-o7oo Attorneys for Silver Point Finance, LLC

HUI-I.26999v7
DOCS-SF:72130. I

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By:

/s/ Don A, Beslcrone Don A. Beskrone (ID #4380) Amanda M. Winfree (ID #4615) ASHBY & GEDDES, P.A. 500 Delaware Avenue, 8th Floor Wilmington, DE 19801 (302) 6s4-1888
and

Jeffrey Sabin Steven WilamowskY Scott K. Seamon BINGHAM MCCUTCHEN LLP 399 Park Avenue New York, NY 10022 Attorneys for J. Aron & ComPanY

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DOCS SF:72130.1

OPTION AND IRREVOCABLE PROXY AGREEMENT

This Option and Irrevocable Proxy Agreement (this "Agreement"), dated May _, 2010 (the "Effective Date"), is hereby entered into by and between Union Oil Company of Califomia, a California corporation ("Union Oil"), and Pacific Energy Alaska Holdings, LLC, a Delaware Iimited liability company ("Pacific Energy," and together with Union Oil, the "Parties"). WHEREAS, Pacific Energy is the record and beneficial owner of 20,000 shares (the "Pacific Shares") of the common stock, par value $100.00 per share (the "Common Stock"), of Cook Inlet Pipe Line Company, a Delaware corporation (the "Company"), which Pacific Shares currently constitute fifty percent (50%) of the issued and outstanding Common Stock of the
Company;

WHEREAS, Union Oil is the record and beneficial owner of 20,000 shares of the Common Stock of the Company, which shares currently constitute the remaining fifty percent (50%) of the issued and outstanding Common Stock of the Company; WHEREAS, Pacific Energy is currently the subject of Chapter 1l bankruptcy cases, and has moved to abandon the Pacific Shares pursuant to Section 554 of the Bankruptcy Code; WHEREAS, Union Oil has informed Pacific Energy that Union Oil intended to file an objection with the bankruptcy court to Pacific Energy's attempt to abandon the Pacific Shares this Agreement is not agreed and executed and, therefore, the Parties acknowledge that this Agreement shall be approved by the bankruptcy court as part of, and in consideration of the resolution of, Union oil's objection to the abandonment of the pacific Shares; WHEREAS, Pacific Energy and Union business and afTairs of the Company;

if

Oil desire the efficient and orderlv conduct of the

WHEREAS, Pacific Energy desires to grant, as set forth herein, to Union Oil, an option to acquire one share of Common Stock (the "Option Share") out of the Pacific Shares (the

"Option");

and

WHEREAS, Pacif,rc Energy desires to grant, as set forth herein, to Union Oil, an irrevocable proxy (the "Proxy") with respect to the Pacific Shares relating to all matters subject to the vote, consent or approval of the holders of shares of the Common Stock.

NOW THEREFORE, in consideration of the premises and the covenants contained herein and fbr other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: ARTICLE I OPTION
Section l.l. Grant of Option. Pacific Energy hereby grants to Union Oil the Option, which may be exercised at any time in accordance with the terms of this Agreement.

HUI-r26992W

Section 1.2. Option Price. Subject to the other terms and conditions of this Agreement, the option price shall be $100.00 (the "Option Price"). Section 1.3. Term of Option. The term of the Option commences on the Effective Date and expires twenty-five years from the Effective Date (the "Term"). Section I .4. Risht to Exercise. Subject to expiration or earlier termination of the Option in accordance with this Agreement and subject to the other terms and conditions of this Agreement, the Option is exercisable, in the sole and absolute discretion of Union Oil, at any time during the Term. Section

1.5.

Notice of Exercise: Payment: Security.

The Option may be exercised by written notice from Union Oil to Pacific Energy delivered to the address listed for Pacific Energy on the corporate records of the Company, and shall be effective without further action of the Parties upon the posting of such notice to the United States mail. The exercise notice shall be accompanied by a check in the amount of the Option Price. As security for Pacific Energy's obligation to sell the Option Share to Union Oil upon its exercise of the Option, Pacific Energy shall, on the Effective Date, deliver to Union Oil a certificate representing the Option Share accompanied by stock powers duly executed in blank (the "Security"). The Security shall be in the form attached hereto as Exhibit "A". In the event that PEAH is unable to provide a certificate representing the Option Share, (i) PEAH shall execute an affidavit in the form attached hereto as Exhibit "B", and (ii) Union Oil shall be authorized take any actions to cause CIPL to cancel the certificate representing the Pacific Shares and to reissue one certificate representing the Option Share and one certificate representing the remainder of the Pacific Shares. Union Oil will hold the Security untilthe earlier to occur of (i) its exercise of the Option, and (ii) the termination of this Agreement in accordance with its terms. Section 1.6. Automatic Exercise. The Option shall be deemed exercised without the giving of notice or payment of the Option Price and without any further action of the Parties in the event of (i) the dissolution, liquidation, termination or other winding up of the business and af-fairs of Pacific Energy, or (ii) the termination (by any means) of the Proxy other than in accordance with the terms of this Agreement.

(a)

(b)

ARTICLE II IRREVOCABLE PROXY

Section 2.1. Proxy. In accordance with Section 2I2 of the General Corporation Law of the State of Delaware, Pacific Energy hereby irrevocably grants to, and appoints, Union Oil as its proxy and attorney-in-fact (with full power of substitution and resubstitution) to vote, or cause to be voted (including by written consent), in Union Oil's sole and absolute discretion, all of the Pacific Shares (i) at any meeting (whether annual or special) of the Company's stockholders, or (ii) in connection with any written consent of the Company's stockholders, in each case for any or all of the following purposes:

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To call a meeting of the stockholders of the Company and to vote the Pacific Shares, to seek the consent of such stockholders, to remove the directors of the Company, or any of them, and to elect new directors of the Company, who thereafter shall manage the affairs of the Company, operate its properties and carry on its business, and otherwise take any action with respect to the business, properties and affairs of the Company that such new directors shall deem necessary or appropriate;

(a)

(b) (c)

To vote or consent to any and all actions by or with respect to the Company for which approval or consent of the stockholders of the Company is or may be necessary or appropriate; and

Without limitation, to do all things that Pacific Energy can do or could do as stockholder of the Company, giving Union Oil full power of substitution and revocation.
Section 2.2. Proxy Irrevocable: No Other Proxies. The Proxy is coupled with an interest sufficient in law to support an irrevocable power and shall be irrevocable, and the Parties agree and confirm the foregoing in all respects. Pacific Energy hereby revokes any proxy or proxies heretofore given to any person or persons and agrees not to give any other proxies in derogation hereof until such time as this Agreement is no longer in full force and effect. The Parties shall take such further action or execute or cause to be executed such other instruments as may be necessary to effectuate the intent of the Proxy. Section 2.3. Termination. The Proxy shall terminate at the end of the Term, regardless of whether the Option has been exercised, unless earlier terminated by the express, written agreement of the Parties. Section 2.4. Effect of Termination. Upon termination of the Proxy in accordance with the terms of this Agreement, the covenants, agreements and obligations of the Parties under the Proxy shall terminate and become void without further action by either Party, except for the provisions of this Section 2.4 , Section 3.2 and Article IV, which shall survive such termination.

ARTICLE III INDEMNITY

Section 3.1, Union Oil, effective as of the date upon which the Order Authorizing Abandonment of Cook Inlet Pipeline Company Stock (the "Abandonment Order") becomes a final, non-appealable order, agrees to indemnify, defend and hold harmless Pacific Energy and its Chapter 1l bankruptcy estate from and against any and all losses, damages, actions, lawsuits, demands and/or claims, including without limitation administrative priority claims, made or asserted against, or incurred by, Pacific Energy or its Chapter I I bankruptcy estate arising in any way from Pacific Energy's execution or performance under this Agreement or Pacific Energy's grant of the Option and/or the Proxy hereunder. Union Oil and Pacific Energy agree that the indemnity provided by this Article III shall not release or discharge, nor be interpreted to release or discharge, any party (including Pacific Energy) from any right, duty, liability or obligation that arises or exists independent of this Agreement, the Option or the Proxy, including but not limited to any obligations or liabilities of any person or entity (including Pacific Energy) under the funding agreement (the "Funding Agreement") or the guaranty agreement (the "Guarant-y-

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Agreement", and together with the Funding Agreement, the "support Agreements"), each effective January l, 1995, by and among the stockholders of the Company and their successors and assigns, or any document or instrument entered into in connection therewith or related thereto, nor create any rights in any third parties to challenge the Support Agreements or the transactions contemplated thereby or the liabilities, duties or obligations created thereunder. For the avoidance of doubt, indemnity pursuant to this Article III does not extend to, among other things, Pacific Energy's or any other person's or entity's obligations or liabilities under the Support Agreements.
Section 3.2. The indemnity obligations of Union Oil under this Article III shall survive the termination of this Agreement only as to claims arising prior to the termination of this Agreement. Union Oil shall not have any indemnity obligation for claims arising after the termination of the Asreement.

ARTICLE IV GENERAL
Section 4.1. Bankruptcy Court Approval. This Agreement shall not be binding until the Abandonment Order becomes a final, non-appealable order. Such Abandonment Order shall specifically approve Pacific Energy's execution of this Agreement as a resolution of Union Oil's objections to the request to abandon the Pacific Shares. For avoidance of doubt, it is agreed that the act of signing this Agreement will be effectively consummated, with bankruptcy court approval, immediately prior to the act of abandoning the Pacific Shares. Section 4.2. Riehts: Powers: Remedies. All rights, powers and remedies granted Union Oil herein, or otherwise available to Union Oil, are for the sole benefit and protection of Union Oil, and Union Oil may exercise any such right, power or remedy at its option and in its sole and absolute discretion without any obligation to do so. In addition, if, under the terms hereof, Union Oil is given two or more alternative courses of action, Union Oil may elect any alternative or combination of alternatives at its option and in its sole and absolute discretion. Section 4.3. Certain Transactigns. The Option and the Proxy cover and relate to the Common Stock of the Company, together with all additions thereto, all substitutions therefor, and all securities issued with respect thereto as a result of any stock dividend, stock split, warrants or other rights, reclassification, readjustment, conversion, reorganization or other change in the capital structure or organizational form of the Company, and the securities of any corporation or other properties received upon the conversion or exchange thereofpursuant to any ."ig.r, consolidation, conversion, reorganization, sale of assets or other agreement or received upon any liquidation of the Company or such other corporation (all hereinafter called the "Covered Securities") so as to preserve intact in all respects the rights granted to Union Oil and its successors and assigns pursuant to this Agreement, and the Option and the Proxy shall cover fully and relate in all respects to all such Covered Securities and correlative and derivative rights arising in connection therewith. Section 4.4. Goveming Law. This Agreement and the other documents delivered pursuant hereto and the legal relations between the Parties shall be governed and construed in

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accordance with the laws of the State of Delaware, without giving effect to principles of conflict of laws.

Section 4.5. Assignment, This Agreement and the rights and obligations hereunder, including the Option and the Proxy, may be freely assigned by Union Oil without the consent of Pacific Energy to any transferee of Union Oil's ownership interest in the Company. This Agreement shall be binding upon, and shall inure to the benefit of, the Parties hereto and their heirs, personal representatives, successors and assigns. The term "Union Oil" shall include not only Union Oil as defined herein but also any future owner and holder of Union Oil's ownership interest in the Company. Section 4.6. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall become effective upon execution by both Parties.

IREMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the duly authorized representatives of the Parties have this Asreement to be executed as of the date first written above.

caused

LINION OIL COMPANY OF CALIFORNIA. a California corporation

By:
Name:

Title:

PACIFIC ENERGY ALASKA HOLDINGS, LLC, a Delaware limited liability company

By:
Name:

Title:

Signature Page to Option qnd lrrevocable Proxy Agreement

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EXHIBIT A
FORM OF STOCK POWER

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DOCS_SF:72131.1

STOCK POWER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

)a
$100.00 per share,

, one share

of the common stock, par value Delaware corporation (the

records

of Cook Inlet Pipe Line Company, a

"Corporation"), standing

in the name of the undersigned on the books and

of

the

Corporation represented by Certificate No. constitute and appoinl

attached herewith, and does hereby irrevocably

attorney to transfer the said share on the books

of

the Corporation with full power of substitution in the premises.

IN WITNESS WHEREOF, the undersigned

has executed this Stock Power this

day

of

,20-

PACIFIC ENERGY ALASKA HOLDINGS, LLC, a Delaware limited liability company

By: Name: Title:

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26992v9

EXHIBIT

FORM OF AFFIDAVIT

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AFFIDAVIT
STATE OF
COLTNTY OF
)

) ss.
)

,4S Before me, the undersigned notary public, on this day personally appeared , of Pacific Energy Alaska Holdings, LLC, a Delaware limited liability company (the "stockholder"), of lawful age, who being duly sworn by me, deposes and says that:

l.
2.

My full name

is

I am an authorized officer of the Stockholder.

The Stockholder is the owner of 20,000 shares of common stock, par value $100.00 per share, of Cook Inlet Pipe Line Company, a Delaware corporation (the "Corporation"), issued on , and represented by Certificate No. registered in the name of the Stockholder on the books of the Corporation (the "Certificate").
The Stockholder does not have the Certificate in its possession.

3. 4.

This affidavit is made for the purpose of inducing the Corporation, its representatives, successors and assigns, (collectively the "Qb.!iggg!"), to issue two new certificates, one representing 19,999 shares of the common stock of the Corporation (the "Non-Option Shares") and one certificate representing one share of the common stock of the Corporation ("the Option Share"), in exchange for the Certificate without the surrender thereof for cancellation; and in consideration thereof, the Stockholder agrees that in case the Certificate comes into the hands or power of the Stockholder, its successors or assigns, said Certificate shall be delivered to any one of the Obligees in order to be
cancelled.

5.

The Non-Option Shares have been pledged to Silver Point Finance, LLC, as collateral
agent.

6.

The Stockholder has not sold, assigned, pledged, transferred, deposited under any
agreement, or hypothecated the Option Share or any interest therein, or signed any power of attorney or other authorization regarding the Option Share which is now outstanding and in force or otherwise disposed of the same; and no person, firm, corporation, agency, government or other entity other than the Stockholder has or has asserted any right, title, claim, equity, or interest in, to, or respecting the Option Share or the proceeds therefrom.

7.

The Stockholder is entitled to the full and exclusive possession of the Option Share and its interests in the Corporation represented thereby.

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DATED this

day of May, 2010.

By:
Name:

STATE OF COLINTY

OF

) ss.
)

SUBSCRIBED AND swoRN to before me

this

day of Mav. 2010.

Notary Public in and for My Commission expires

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