Exhibit
10.2


 


[FORM OF] SEVERANCE
AGREEMENT


 


 


dated as of October 23, 2009,




 


between


 


 


COBALT INTERNATIONAL ENERGY,
INC.,

(the
Company)


 


and


 


 


[·],

(Employee)


 

















 


TABLE OF CONTENTS


 






 


	
   

  	
  PAGE

  
	
   

  	
   

  
	
  ARTICLE 1

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  Section 1.01. Definitions

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  
	
  EFFECTIVENESS; TERM OF AGREEMENT; PRIOR SEVERANCE
  AGREEMENT

  	
   

  
	
   

  	
   

  
	
  Section 2.01. Effectiveness; Term of
  Agreement; Prior Severance Agreement

  	
  7

  
	
   

  	
   

  
	
  ARTICLE 3

  	
   

  
	
  CERTAIN EMPLOYEE REPRESENTATIONS AND AGREEMENTS; IPO
  EQUITY GRANT

  	
   

  
	
   

  	
   

  
	
  Section 3.01. Services

  	
  8

  
	
  Section 3.02. Accredited Investor
  Representations

  	
  8

  
	
  Section 3.03. Transfer Restrictions

  	
  8

  
	
  Section 3.04. Life Insurance

  	
  8

  
	
  Section 3.05. IPO Equity Grant

  	
  8

  
	
   

  	
   

  
	
  ARTICLE 4

  
	
  CONFIDENTIAL INFORMATION, INVENTIONS, BUSINESS

  
	
  OPPORTUNITIES AND GOODWILL

  
	
   

  	
   

  
	
  Section 4.01. Confidential
  Information, Inventions, Business Opportunities and Goodwill

  	
  9

  
	
   

  	
   

  
	
  ARTICLE 5

  
	
  TERMINATION OF EMPLOYMENT AND NOTICE OF TERMINATION OF EMPLOYMENT

  
	
   

  	
   

  
	
  Section 5.01. Termination of
  Employment

  	
  9

  
	
  Section 5.02. Notice of Termination
  of Employment

  	
  9

  
	
  Section 5.03. Deemed Resignations

  	
  10

  
	
   

  	
   

  
	
  ARTICLE 6

  
	
  SEVERANCE BENEFITS

  
	
   

  	
   

  
	
  Section 6.01. Death, Disability,
  Termination for Cause or Resignation Without Good Reason

  	
  10

  
	
  Section 6.02. Involuntary
  Termination

  	
  11

  



 


i

















 


	
  Section 6.03. Death, Disability or
  Involuntary Termination After Agreement Termination Date

  	
  12

  
	
   

  	
   

  
	
  ARTICLE 7

  
	
  INTEREST ON LATE PAYMENTS

  
	
   

  	
   

  
	
  Section 7.01. Interest on Late
  Payments

  	
  12

  
	
   

  	
   

  
	
  ARTICLE 8

  
	
  CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY

  
	
   

  	
   

  
	
  Section 8.01. Gross-up Payment

  	
  13

  
	
  Section 8.02. Disposition of Claims

  	
  14

  
	
   

  	
   

  
	
  ARTICLE 9

  
	
  COMPETITION

  
	
   

  	
   

  
	
  Section 9.01. Competition

  	
  14

  
	
   

  	
   

  
	
  ARTICLE 10

  
	
  NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY
  INFORMATION

  
	
   

  	
   

  
	
  Section 10.01. Nondisclosure of
  Confidential and Proprietary Information

  	
  16

  
	
   

  	
   

  
	
  ARTICLE 11

  
	
  INVENTIONS

  
	
   

  	
   

  
	
  Section 11.01. Inventions

  	
  18

  
	
   

  	
   

  
	
  ARTICLE 12

  
	
  INJUNCTIVE RELIEF

  
	
   

  	
   

  
	
  Section 12.01. Injunctive Relief

  	
  18

  
	
   

  	
   

  
	
  ARTICLE 13

  
	
  NON-DISPARAGEMENT

  
	
   

  	
   

  
	
  Section 13.01. Non-disparagement

  	
  18

  
	
   

  	
   

  
	
  ARTICLE 14

  
	
  GENERAL

  
	
   

  	
   

  
	
  Section 14.01. Survivorship

  	
  19

  
	
  Section 14.02. Arbitration

  	
  19

  
	
  Section 14.03. Payment Obligations
  Absolute

  	
  20

  
	
  Section 14.04. Successors

  	
  20

  
	
  Section 14.05. Severability

  	
  20

  
	
  Section 14.06. Non-alienation

  	
  20

  



 


ii

















 


	
  Section 14.07. Notices

  	
  20

  
	
  Section 14.08. Controlling Law and
  Waiver of Jury Trial

  	
  20

  
	
  Section 14.09. Release and Delayed
  Payment Restriction

  	
  21

  
	
  Section 14.10. Full Settlement

  	
  22

  
	
  Section 14.11. Unfunded Obligation

  	
  22

  
	
  Section 14.12. Not a Contract of
  Employment

  	
  22

  
	
  Section 14.13. Withholding of Taxes
  and Other Employee Deductions

  	
  22

  
	
  Section 14.14. Number and Gender

  	
  22

  
	
  Section 14.15. Entire Agreement

  	
  22

  
	
   

  	
   

  
	
  Annexes
  and Exhibits

  	
   

  
	
   

  	
   

  
	
  Annex
  I

  	
  Accredited
  Investor Representations

  	
   

  
	
  Annex
  II

  	
  Transfer
  Restrictions

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of
  Restricted Stock Award Agreement — Class C Interests

  	
   

  
	
  Exhibit B

  	
  [Form of
  Restricted Stock Award Agreement — Class D Interests]

  	
   

  
	
  Exhibit C

  	
  Form of
  Release

  	
   

  



 


iii

















 


[FORM OF] SEVERANCE
AGREEMENT


 


This SEVERANCE AGREEMENT (this “Agreement”)
dated as of October 23, 2009, is made by and between COBALT INTERNATIONAL
ENERGY, INC., a Delaware corporation (the “Company”), and
[·] (“Employee”) and, for the limited purpose of Article 2,
Cobalt International Energy, L.P. (the “Partnership”).


 


RECITALS


 


WHEREAS, the Company desires to attract and retain
certain key employee personnel and, accordingly, the Board of Directors of the
Company has approved the Company’s entering into this Agreement with Employee
to encourage Employee’s continued service to Cobalt;


 


WHEREAS, the terms and conditions set forth in this
Agreement are similar to the terms and conditions set forth in an existing
severance agreement between Employee and the Partnership dated as of April 20,
2009 (the “Prior Severance Agreement”);


 


WHEREAS, upon the closing of the IPO (as defined
below), the Prior Severance Agreement shall be terminated, and this Agreement
shall become effective.


 


AGREEMENT


 


NOW, THEREFORE, in consideration of the foregoing
and for other good and valuable consideration, the Company and Employee agree
as follows:


 


ARTICLE 1

DEFINITIONS


 


Section 1.01.  Definitions.


 


“Accrued Obligations”
shall mean Employee’s base salary through the Date of Termination of Employment
not theretofore paid, any expenses owed to Employee under the Company’s expense
reimbursement policy as in effect from time to time, any accrued vacation pay
owed to Employee pursuant to the Company’s vacation policy as in effect from
time to time, any earned but unpaid annual performance bonus with respect to a
calendar year that has ended on or before the Date of Termination of Employment
(it being understood that a bonus will not be considered to have been unearned
merely because Employee has not remained employed through the payment date so
long as Employee has remained


 

















 


employed through the end of the calendar year
that has ended on or before the Date of Termination of Employment), any amount
accrued and arising from Employee’s participation in, or benefits accrued
under, any employee benefit plans, programs or arrangements maintained by the
Company which amounts shall be payable in accordance with the terms and
conditions of such employee benefit plans, programs or arrangements, and such
other or additional benefits as may be, or become, due to Employee under the
applicable terms of applicable plans, programs, agreements, corporate
governance documents and other arrangements of the Company and its subsidiaries.


 


“Affiliate”
shall mean any entity that owns or controls, is owned or controlled by, or is
under common control with, the Company.


 


“Agreement Termination Date”
shall mean the [·] anniversary of the closing of the IPO.


 


“Annualized Base Salary”
shall mean an amount equal to the greater of:


 


(i)            Employee’s annualized base salary at
the rate in effect on the date of his Involuntary Termination or termination by
reason of death or Disability, as applicable;


 


(ii)           Employee’s annualized base salary at
the rate in effect 90 days prior to the date of his Involuntary Termination or
termination by reason of death or Disability, as applicable; or


 


(iii)          Employee’s annualized base salary at
the rate in effect immediately prior to a Change in Control if, on the date upon
which such Change in Control occurs or within two years thereafter, Employee’s
employment shall be subject to an Involuntary Termination or be terminated by
reason of death or Disability.


 


For the avoidance of doubt, for all purposes of this
Agreement, base salary specifically does not include any (A) bonuses, (B) incentive
compensation or (C) equity-based compensation.


 


“Board” shall
mean the Board of Directors of the Company.


 


“Cause” shall
mean (i) the willful failure of Employee to substantially perform Employee’s
duties as an employee of the Company (other than any such failure resulting
from Employee’s physical or mental incapacity), (ii) Employee’s having
engaged in willful misconduct, gross negligence or a breach of fiduciary duty
that results in material and demonstrable harm to the Company or any of its
Affiliates, (iii) Employee’s willful and material breach of this Agreement
(as amended from time to time) that results in material and demonstrable harm
to the Company or any of its Affiliates, (iv) Employee’s having been
convicted of, or having entered a plea bargain or settlement admitting guilt or
the imposition of


 


2

















 


unadjudicated probation for, any felony under
the laws of the United States, any state or the District of Columbia, where
such felony involves moral turpitude or where, as a result of such felony, the
continued employment of Employee would have, or would reasonably be expected to
have, a material adverse impact on the Company’s or any of its Affiliates’
reputations, (v) Employee’s having been the subject of any order, judicial
or administrative, obtained or issued by the Securities and Exchange
Commission, for any securities violation involving fraud including, for
example, any such order consented to by Employee in which findings of facts or
any legal conclusions establishing liability are neither admitted nor denied, (vi) Employee’s
unlawful use (including being under the influence of) or possession of illegal
drugs on the Company’s premises or while performing Employee’s duties and
responsibilities as an employee of the Company, or (vii) Employee’s
commission of an act of fraud, embezzlement, or misappropriation, in each case,
against the Company or any of its Affiliates. 
If the Company desires to terminate Employee’s employment for Cause in
accordance herewith, it shall provide Employee with a Notice of Termination of
Employment in accordance with Section 5.02 and allow Employee 30 days
following the date of such notice to fully remedy, cure or rectify, if
possible, the situation giving rise to the Company’s allegations of Cause.  For purposes of this definition, no act, or
failure to act, on the part of Employee shall be considered “willful” unless it is done, or omitted to be done, by
Employee in bad faith or without reasonable belief that Employee’s action or
omission was in the best interests of the Company.  Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Employee Officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by Employee in good faith and in the best interests of the
Company.  The cessation of employment of
Employee shall not be deemed to be for Cause unless and until there shall have
been delivered to Employee a copy of a resolution duly adopted by the
affirmative vote of a majority of the entire membership of the Board at a
meeting of the Board at which at least a quorum is present (after reasonable
notice is provided to Employee and Employee is given an opportunity, together
with counsel for Employee, to be heard before the Board) finding that, in the
good faith opinion of the Board, Employee is guilty of the conduct described in
this definition, and specifying the particulars thereof in detail.


 


(a)           “Change in Control”
means the occurrence of any one or more of the following events:


 


(i)            any “person” (as
defined in Section 13(d) of the Securities Exchange Act of 1934 (the “Act”)),  other than (A) an
employee benefit plan or trust maintained by the Company or (B) any of the
Sponsors (as defined in the Amended and Restated Certificate of Incorporation
of the Company as in effect immediately following the closing of the IPO) or
their respective Affiliates, becomes the “beneficial owner” (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the Company’s
outstanding securities entitled to vote generally in the


 


3

















 


election
of directors;


 


(ii)           at any time during a period of 12  consecutive months, individuals who at the beginning of
such period constituted the Board and any new member of the Board whose
election or nomination for election was approved by a vote of at least  a majority of the directors then still in office who either
were directors at the beginning of such period or whose election or nomination
for election was so approved, cease for any reason to constitute a majority of
members of the Board; or


 


(iii)          the consummation of (A) a merger
or consolidation of the Company or any of its subsidiaries with any other
corporation or entity, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by remaining
outstanding or being converted into voting securities of the surviving entity
or, if applicable, the ultimate parent thereof) at least 50% of the combined
voting power and total fair market value of the securities of the Company or
such surviving entity or parent outstanding immediately after such merger or
consolidation, or (B) any sale, lease, exchange or other transfer to any
Person (other than an Affiliate (as defined in the Company Long Term Incentive
Plan)) of assets of the Company and/or any of its subsidiaries, in one
transaction or a series of related transactions, having an aggregate fair
market value of more than 50% of the fair market value of the Company and its
subsidiaries (the “Company Value”)
immediately prior to such transaction(s), but only to the extent that, in
connection with such transaction(s) or within a reasonable period
thereafter, the Company’s stockholders receive distributions of cash and/or
assets having a fair market value that is greater than 50% of the Company Value
immediately prior to such transaction(s).


 


Notwithstanding the foregoing, in no event
shall a Change in Control be deemed to have occurred with respect to Employee
if Employee is part of a “group” within the meaning of Section 13(d)(3) of
the Act that consummates the Change in Control transaction.  In addition, for purposes of the definition
of Change in Control, a person engaged in business as an underwriter of
securities shall not be deemed to be the beneficial owner of, or to
beneficially own, any securities acquired through such person’s participation
in good faith in a firm commitment underwriting until the expiration of 40 days
after the date of such acquisition.


 


“Cobalt Equity Payment”
means the issuance of an equity interest in Cobalt to Employee, the accelerated
vesting of any such equity interest or any other benefit conferred to Employee
in connection with any such equity interest that, in any such case, could
potentially be subject to the Excise Tax.


 


“Code” shall
mean the Internal Revenue Code of 1986, as amended.


 


4

















 


“Date of Termination of
Employment” shall mean (i) if Employee’s employment with the
Company is terminated by his death, the date of Employee’s death, or (ii) if
Employee’s employment with the Company is terminated for any reason whatsoever
other than Employee’s death, the earlier of the date indicated in the Notice of
Termination of Employment or the date specified by the Company pursuant to Section 5.02.


 


“Disability”
shall mean, at any time the Company or any Affiliate sponsors a long-term
disability plan that covers Employee and other Employee employees of the
Company, “disability” as defined in such
long-term disability plan for the purpose of determining a participant’s
eligibility for benefits; provided, however, if the long-term disability plan contains multiple
definitions of disability, then “Disability”
shall refer to that definition of disability which, if Employee qualified for
such disability benefits, would provide coverage for the longest period of
time.  The determination of whether
Employee has a Disability shall be made by the person or persons required to
make final disability determinations under the long-term disability plan.  At any time the Company or any Affiliate does
not sponsor such a long-term disability plan, Disability shall mean Employee’s
inability to perform, with or without reasonable accommodation, the essential
functions of his position with the Company for a total of three months during
any six-month period as a result of incapacity due to mental or physical
illness, as determined by a physician selected by the Company or its insurers
and acceptable to Employee or Employee’s legal representative, such agreement
as to acceptability not to be unreasonably withheld or delayed.  Any refusal by Employee to submit to a
medical examination for the purpose of determining Disability shall be deemed
to constitute conclusive evidence of Employee’s Disability.


 


“Excise Tax”
shall have the meaning assigned to such term in Section 8.01.


 


“Good Reason”
shall mean the occurrence of any of the following events: (i) a material
diminution in Employee’s base salary; or (ii) relocation of the geographic
location of Employee’s principal place of employment by more than 75 miles from
Houston, Texas.


 


Notwithstanding the preceding provisions of this definition
or any other provision in this Agreement to the contrary, any assertion by
Employee of a termination of employment for “Good Reason”
shall not be effective unless all of the following conditions are satisfied: (A) the
condition described in clauses (i) or (ii) of this definition giving
rise to Employee’s termination of employment must have arisen without Employee’s
consent; (B) Employee must provide written notice to the Company of such
condition in accordance with Section 14.07 within 45 days of the initial
existence of the condition; (C) the condition specified in such notice
must remain uncorrected for 30 days after receipt of such notice by the
Company; and (D) the date of Employee’s termination of employment must


 


5

















 


occur within 90 days after the initial
existence of the condition specified in such notice.


 


“Gross-up Payment”
shall have the meaning assigned to such term in Section 8.01.


 


“Inventions”
shall have the meaning assigned to such term in Section 11.01.


 


“IPO” shall mean
the underwritten public offering of shares of the Company’s common stock
pursuant to Registration Statement No. 333-161734 on Form S-1 filed
with the Securities and Exchange Commission.


 


“Involuntary Termination”
shall mean any termination of Employee’s employment with the Company (i) by
the Company without Cause or (ii) by Employee for Good Reason.  For the avoidance of doubt, the term “Involuntary Termination” does not include a termination of
Employee’s employment with the Company for any other reason whatsoever,
including, without limitation, (A) by the Company for Cause, (B) by
Employee without Good Reason or (C) as a result of Employee’s death or
Disability.


 


“Non-Compete Period”
shall have the meaning assigned to such term in Section 9.01(b).


 


“Notice of Termination of
Employment” shall have the meaning assigned to such term in Section 5.02.


 


“Parachute Value”
of a Payment shall mean the present value as of the date of the change in
ownership or effective control for purposes of Section 280G of the Code of
the portion of such Payment that constitutes a “parachute
payment” under Section 280G(b)(2) of the Code, as
determined for purposes of determining whether and to what extent the Excise
Tax will apply to such Payment.


 


“Partnership Agreement”
shall mean the Fourth Amended and Restated Agreement of Limited Partnership of
Cobalt International Energy, L.P., as amended.


 


“Payment” shall
have the meaning assigned to such term in Section 8.01.


 


“Pro Rata Bonus”
shall mean an amount equal to the product of (i) the actual annual bonus
Employee would have been entitled to receive, based on the Company’s actual
performance through the end of the calendar year in which Employee’s
termination of employment with the Company occurred, determined as if he had
continued his employment with the Company through the end of such calendar year
and (ii) a fraction, the numerator of which is the number of days


 


6














 


during the calendar year through the date of
Employee’s termination of employment with the Company and the denominator of
which is 365.


 


“Pro Rata Bonus Payment
Date” shall mean, with respect to a Pro Rata Bonus for a particular
calendar year, the date on which annual bonuses for such calendar year are
generally paid to employees of the Company who have not terminated employment
with the Company, but in no event earlier than January 1 of the year
following such calendar year nor later than December 31 of the year
following such calendar year.


 


“Reorganization Agreement”
shall mean the Reorganization Agreement to be entered into prior to the IPO
among the Partnership, the Company and the other parties signatory thereto.


 


“Restricted Stock”
shall mean the shares of restricted stock issued to Employee in connection with
the IPO.


 


“Safe Harbor Amount”
shall mean 2.99 times Employee’s “base amount,”
within the meaning of Section 280G(b)(3) of the Code.


 


“Separation from Service”
means, with respect to Employee, the (i) cessation of all services
performed by Employee for the Company or (ii) permanent decrease in the
level of services performed by Employee for the Company (whether as an employee
or as an independent contractor) to no more than 20 percent of the average
level of services performed (whether as an employee or an independent
contractor) over the immediately preceding 36-month period (or the full period
of services to the Company, if Employee has been providing services to the
Company for less than 36 months).


 


“Severance Amount”
shall mean (i) if Employee incurs an Involuntary Termination prior to a
Change in Control or on or after the second anniversary of the Change in
Control (to the extent applicable), 50% of Annualized Base Salary and (ii) if
Employee incurs an Involuntary Termination on the date of the Change in Control
or prior to the second anniversary of the Change in Control, 50% of Annualized
Base Salary


 


ARTICLE 2

EFFECTIVENESS; TERM OF AGREEMENT; PRIOR SEVERANCE AGREEMENT


 


Section 2.01.  Effectiveness; Term of Agreement; Prior
Severance Agreement.  This Agreement
shall become effective upon the closing of the IPO.  Subject to an earlier termination of Employee’s
employment with the Company pursuant to Article 5, this Agreement shall
terminate and be of no further force or effect on the Agreement Termination
Date.  Upon the effectiveness of this
Agreement, the Prior Severance Agreement shall terminate and be of no further
force or effect.  If the IPO does not
close by March 31, 2010, this Agreement shall


 


7

















 


be void ab initio and
the Prior Severance Agreement shall remain in full force and effect in
accordance with its terms as of such date.


 


ARTICLE 3

CERTAIN EMPLOYEE REPRESENTATIONS AND AGREEMENTS; IPO EQUITY GRANT.


 


Section 3.01.  Services. 
Employee agrees that he will render services to the Company (as well as
any subsidiary thereof or successor thereto) during the period of his
employment to the best of his ability, in a prudent and businesslike manner and
consistent with the standards expected by the Company of an Employee-level
employee.  Employee also agrees that he
will devote substantially the same time, efforts and dedication to his duties
as heretofore devoted.


 


Section 3.02.  Accredited Investor Representations.  Employee hereby represents
to the Company that the representations set forth in Annex I to this Agreement (i) are
true and correct as of the date of this Agreement and (ii) shall be true
and correct as of the date of the closing of the IPO.


 


Section 3.03.  Transfer Restrictions.  Employee hereby represents
to the Company that he has read and understands, and agrees to be bound by, the
transfer restrictions set forth in Annex II to this Agreement.


 


Section 3.04.  Life Insurance.  This Agreement constitutes
written notice to Employee that (a) the Company or an Affiliate may insure
Employee’s life, (b) the Company or an Affiliate shall have the right to
determine the amount of insurance and the type of policies, and (c) the
Company or an Affiliate will be the beneficiaries of any proceeds payable under
such policies upon the death of Employee. 
Employee hereby irrevocably consents to being insured under the policies
described in the preceding sentence and to the coverage under such policies
continuing after the termination of this Agreement and/or Employee’s
termination of employment with the Company and its Affiliates.  Employee agrees and acknowledges that
Employee shall not have the right to designate the beneficiary or beneficiaries
of the death benefit payable pursuant to such policies, and neither Employee
nor any other person claiming through Employee shall have any interest in such
policies.  Employee shall (i) furnish
any and all information reasonably requested by the Company, any Affiliate or
the insurer to facilitate the issuance of the life insurance policy or policies
described in this paragraph or any adjustment to any such policy, and (ii) take
such physical examinations as the Company, any Affiliate or the insurer deems
necessary.  Employee shall incur no
financial obligation by executing any required document pursuant to this Section 3.04,
and shall have no interest in any such policy.


 


Section 3.05.  IPO Equity Grant.  Immediately prior to the
Effective Time (as defined in the Reorganization Agreement), Employee received
[X] units of


 


8

















 


Class C Interests (as defined in the
Partnership Agreement) [and [X] units of Class D Interests (as defined in
the Partnership Agreement)](1), which will at the Effective Time convert to
restricted shares of the Company’s common stock subject to the terms and
conditions of the Company Long Term Incentive Plan and the forms of Restricted
Stock Award Agreements attached as Exhibit A [and Exhibit B](2) to
this Agreement.


 


ARTICLE 4

CONFIDENTIAL INFORMATION, INVENTIONS, BUSINESS

OPPORTUNITIES AND GOODWILL


 


Section 4.01.  Confidential Information, Inventions,
Business Opportunities and Goodwill.  The Company
shall (a) disclose to Employee, and place Employee in a position to have
access to or develop, confidential or proprietary information and Inventions of
the Company (or its Affiliates); (b) entrust Employee with business
opportunities of the Company (or its Affiliates); and (c) place Employee in
a position to develop business good will on behalf of the Company (or its
Affiliates).


 


ARTICLE 5

TERMINATION OF EMPLOYMENT AND NOTICE OF TERMINATION OF EMPLOYMENT


 


Section 5.01.  Termination of Employment.  Employee’s employment with
the Company may be terminated by the Company or Employee under the following
circumstances: (a) Employee’s death; (b) Employee’s Disability; (c) termination
by the Company for Cause; (d) termination by the Company without Cause; (e) resignation
by Employee for Good Reason; or (f) resignation by Employee without Good
Reason.  For all purposes of this
Agreement, Employee shall be considered to have terminated employment with the
Company when Employee incurs a Separation from Service.


 


Section 5.02.  Notice of Termination of Employment.  Any termination of Employee’s
employment by the Company or by Employee (other than termination by reason of
Employee’s death) shall be communicated by a written notice to the other party
hereto indicating the specific termination provision in the first sentence of Section 5.01
relied upon, setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee’s employment under the
provision so indicated, and specifying a Date of Termination of Employment
which, if submitted by Employee, shall be at least 30


 






(1)  If applicable.


 


(2)  If applicable.


 


9

















 


days following the date of such notice (a “Notice of Termination of Employment”); provided,
however, that in the case of any Notice
of Termination of Employment submitted by Employee, the Company may, in its
sole discretion, advance the Date of Termination of Employment to any date
following the Company’s receipt of the Notice of Termination of Employment
(and, if the Date of Termination of Employment is so advanced, it shall not
change the basis for Employee’s termination nor be construed or interpreted as
a termination of Employee’s employment by the Company for any reason
whatsoever).  A Notice of Termination of
Employment submitted by the Company may provide for a Date of Termination of
Employment on the date Employee receives the Notice of Termination of
Employment, or any date thereafter elected by the Company in its sole
discretion.  The failure by Employee or
the Company to set forth in the Notice of Termination of Employment any fact or
circumstance which contributes to a showing of Cause or Good Reason shall not
waive any right of Employee or the Company hereunder or preclude Employee or
the Company from asserting such fact or circumstance in enforcing Employee’s or
the Company’s rights hereunder.


 


Section 5.03.  Deemed Resignations.  Unless otherwise agreed to
in writing by the Company and Employee prior to the termination of Employee’s
employment, any termination of Employee’s employment shall constitute an
automatic resignation of Employee: (i) as an officer of the Company and
each Affiliate; (ii) as a member of the Board (if applicable); (iii) from
the board of directors or similar governing body of any Affiliate; and (iv) from
the board of directors or similar governing body of any corporation, limited
liability entity or other entity in which the Company or any Affiliate holds an
equity interest and with respect to which board or similar governing body
Employee serves as the Company’s or such Affiliate’s designee or other
representative.


 


ARTICLE 6

SEVERANCE BENEFITS


 


Section 6.01.  Death, Disability, Termination for Cause or
Resignation Without Good Reason.  If Employee’s
employment with the Company is terminated by the Company for Cause or by
Employee without Good Reason, or if such employment terminates by reason of
Employee’s death or Disability, then, upon such termination, Employee (or
Employee’s estate) shall be entitled to receive the Accrued Obligations (other
than in the case of a termination by the Company for Cause, any bonus or
incentive compensation that under the applicable plan requires Employee to be
employed on the date of payment).  If Employee’s
employment with the Company terminates by reason of death or Disability, then
the Company shall also pay to Employee (or Employee’s estate or legal
representatives, as applicable) on the Pro Rata Bonus Payment Date an amount in
cash equal to the Pro Rata Bonus.


 


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Section 6.02.  Involuntary Termination.  If Employee’s employment
with the Company shall be subject to an Involuntary Termination, Employee shall
be entitled to receive the Accrued Obligations and, subject to the provisions
of Section 14.09, the Company will, as additional compensation for
services rendered to the Company (including its Affiliates), pay to Employee
the following amounts and take the following actions after the last day of
Employee’s employment with the Company:


 


(a)        if the Involuntary Termination occurs prior to a
Change in Control or on or after the second anniversary of the Change in
Control (to the extent applicable), pay to Employee in equal monthly
installments an amount in cash equal to the Severance Amount, the first
installment to be paid on the date that is 60 days after the date of Employee’s
termination of employment with the Company and subsequent installments to be
paid on the first day of each of the next 11 calendar months thereafter or such
lesser number of installments such that no installment is paid after March 1st
of the year following the year in which Employee’s employment was terminated,
with each installment equal to the Severance Amount divided by the total number
of such installments to be paid;


 


(b)        if the Involuntary Termination occurs on the date of
a Change in Control or before the second anniversary of the Change in Control,
pay to Employee on the date that is 60 days after the date of Employee’s
termination of employment with the Company a lump sum cash payment in an amount
equal to the Severance Amount;


 


(c)        pay to Employee on the Pro Rata Bonus Payment Date
an amount in cash equal to the Pro Rata Bonus; provided,
however, that if this paragraph applies
with respect to a Pro Rata Bonus for a calendar year beginning on or after January 1,
2010 and is intended to constitute performance-based compensation within the
meaning of, and for purposes of, Section 162(m) of the Code, then
this paragraph shall apply with respect to such Pro Rata Bonus only to the
extent the applicable performance criteria have been satisfied as certified by
a committee of the Board as required under Section 162(m) of the
Code; and


 


(d)        during the portion, if any, of the 18-month period
following the date of Employee’s termination of employment with the Company
that Employee elects to continue coverage for Employee and Employee’s eligible
dependents under the Company’s group health plans under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, and/or Sections 601
through 608 of the Employee Retirement Income Security Act of 1974, as amended,
the Company shall promptly reimburse Employee on a monthly basis for the
difference, if any, between (i) the amount Employee pays to effect and
continue such coverage and (ii) the amount charged to a similarly situated
active employee of the Company for similar coverage.


 


Notwithstanding the foregoing, if Employee is
entitled to receive severance payments under Section 6.02 (a) or (b),
as applicable, and under


 


11

















 


Section 6.02(c), the aggregate amount
payable pursuant to Sections 6.02 (a) or (b), as applicable, and Section 6.02(c) (the
“Aggregate Severance Amount”) shall be
reduced (but not below zero) by the fair market value, as of the Employee’s
Date of Termination of Employment, of the Restricted Stock held by Employee
that has then vested, or that may vest at any time after the Employee’s Date of
Termination of Employment (the “Carried Amount”).  If the Carried Amount exceeds the Aggregate
Severance Amount prior to the commencement of payment of any of the severance
benefits described in Section 6.02(a) or (b), as applicable, and Section 6.02(c),
then Executive shall not be entitled to receive any payments pursuant to 6.02(a) or
(b), as applicable, or Section 6.02(c). 
If the Carried Amount does not exceed the Aggregate Severance Amount
prior to the commencement of payment of any of the severance benefits described
in Sections 6.02(a) or (b), as applicable, and Section 6.02(c), then
the reduction shall be effected as follows: first, the payment provided for in Section 6.02(c) shall
be reduced by the Carried Amount if the Carried Amount or any portion thereof
has been paid prior to the payment date provided for in Section 6.02(c),
and if necessary, payments of the amounts provided for in Section 6.02(a) or
(b), as applicable, shall be reduced pro rata by any additional Carried
Amount.   If at any time after the
commencement of payment of the severance benefits described in Section 6.02(a) or
(b), as applicable, and Section 6.02(c), the Carried Amount not yet
applied as a reduction in the severance benefits exceeds the remaining
severance benefits to be paid, the Company shall cease to make any further
payments in respect of either severance benefit, but no amount previously paid
to Executive pursuant to Section 6.02(a) or (b), as applicable, and Section 6.02(c) shall
be repaid to the Company.


 


Section 6.03.  Death, Disability or Involuntary Termination
After Agreement Termination Date.  If, after the
Agreement Termination Date but prior to the payment date of the annual bonus
for the calendar year in which the Agreement Termination Date occurs, Employee’s
employment with the Company terminates by reason of the Employee’s death or by
reason of what would have otherwise qualified as Disability or Involuntary
Termination under this Agreement if this Agreement was still in effect at the
time of such termination of employment, the Company shall pay to Employee (or
Employee’s estate or legal representatives, as applicable), subject to the
provisions of Section 14.09, on the Pro Rata Bonus Payment Date an amount
in cash equal to the Pro Rata Bonus.


 


ARTICLE 7

INTEREST ON LATE PAYMENTS


 


Section 7.01.  Interest on Late Payments. If any payment
provided for in Section 6.02(a), (b) or (c) or Section 6.03
is not made when due, then the Company shall pay to Employee interest on the
amount payable from the date that such payment should have been made under such
Section until such payment is made, which interest shall be calculated at
5% plus the prime rate of interest


 


12

















 


announced by JPMorgan Chase Bank (or any
successor thereto) at its principal office in New York, and shall change when and
as any such change in such prime rate shall be announced by such bank.


 


ARTICLE 8

CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY


 


Section 8.01.  Gross-up Payment.  Notwithstanding anything to
the contrary in this Agreement (but subject to the remaining provisions of this
Section 8.01), in the event that any payment, benefit or distribution by
the Company to or for the benefit of Employee, whether paid, payable, provided,
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a “Payment”), would 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 or penalties, are hereinafter collectively referred to as the “Excise Tax”), the Company shall pay to Employee an
additional payment (a “Gross-up Payment”)
in an amount such that after payment by Employee of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax imposed on any Gross-up Payment, Employee retains an amount of the Gross-up
Payment equal to the Excise Tax imposed upon all Payments except for the Cobalt
Equity Payments.  Notwithstanding the
provisions of the preceding sentence, if it shall be determined that Employee
is entitled to the Gross-up Payment, but that the Parachute Value of all
Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-up
Payment shall be made to Employee and the amounts payable under Article 6
shall be reduced so that the Parachute Value of all Payments, in the aggregate,
equals the Safe Harbor Amount.  The
reduction of the amounts payable under Article 6, if applicable, shall be
made by reducing Payments payable hereunder (including reducing a Payment to
zero) in the order in which such Payments would be made (beginning with such
Payment that would be made first in time and continuing, to the extent
necessary, through to such Payment that would be made last in time).  For purposes of reducing the Payments to the
Safe Harbor Amount, only amounts payable under Article 6 (and no other
Payments) shall be reduced.  If the
reduction of the amount payable under Article 6 would not result in a
reduction of the Parachute Value of all Payments to the Safe Harbor Amount,
then no amounts payable under Article 6 shall be reduced pursuant to this Section 8.01.  The Company’s obligation to make a Gross-up
Payment under this Section 8.01 shall not be conditioned upon Employee’s
termination of employment.  The Gross-up
Payment attributable to a particular Payment shall be made at the time such
Payment is made; provided, however, that in no
event shall the Gross-up Payment be made later than the end of Employee’s
taxable year next following Employee’s taxable year in which Employee remits
the related taxes.  The Company and
Employee shall make an initial determination as to whether a Gross-up Payment
is required and the amount of any such Gross-up Payment.


 


13

















 


Section 8.02.  Disposition of Claims.  Employee shall notify the
Company immediately in writing of any claim by the Internal Revenue Service
which, if successful, would require the Company to make a Gross-up Payment (or
a Gross-up Payment in excess of that, if any, initially determined by the
Company and Employee) within five days of the receipt of such claim.  The Company shall notify Employee in writing
at least five days prior to the due date of any response required with respect
to such claim if it plans to contest the claim. 
If the Company decides to contest such claim, Employee shall cooperate
fully with the Company in such action; provided, however,
the Company shall bear and pay directly or indirectly all costs and expenses
(including additional interest and penalties) incurred in connection with such
action 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 the Company’s action.  If, as a result of the Company’s action with
respect to a claim, Employee receives a refund of any amount paid by the
Company with respect to such claim, Employee shall promptly pay such refund to
the Company.  If the Company fails to
timely notify Employee whether it will contest such claim or the Company
determines not to contest such claim, then the Company shall immediately pay to
Employee the portion of such claim, if any, which it has not previously paid to
Employee.


 


ARTICLE 9

COMPETITION


 


Section 9.01.  Competition. 
(a) Employee and the Company agree to the restrictive covenants of
this Article 9: (i) in consideration for the confidential information
provided by the Company to Employee pursuant to Section 4.01 or otherwise
during the course of his employment; (ii) as part of the consideration for
the compensation and benefits to be paid to Employee by the Company; (iii) to
protect the (A) trade secrets and confidential information of the Company
disclosed or entrusted to Employee by the Company and (B) business goodwill
of the Company developed through the efforts of Employee and/or the business
opportunities disclosed or entrusted to Employee by the Company; and (iv) as
an additional incentive for the Company to enter into this Agreement.


 


(b)        Subject to the exceptions set forth in the last
sentence of this Section 9.01(b), Employee shall not at any time while
employed by the Company and for a 6-month period following the Date of
Termination of Employment (the “Non-Compete Period”),
directly or indirectly engage in, have any equity interest in, be affiliated
with, or manage or operate any person, firm, corporation, partnership, entity
or business (whether as director, officer, employee, agent, representative,
partner, member, security holder, consultant or otherwise) that engages in any
business that competes with any Business (as defined below) of the Company in
the states within the United States (or District of Columbia, if applicable)
and in the geographic regions outside of the United States (i) in which the
Company


 


14

















 


conducts operations or (ii) with
respect to which the Company devotes more than de minimis
resources in the furtherance of the Business; provided,
however, that Employee shall be
permitted to acquire a passive stock interest in such a business if the stock
acquired is publicly traded and is not more than two percent of the outstanding
interest in such business. 
Notwithstanding the foregoing or anything to the contrary in this
Agreement, it shall not be a violation of this Article 9 for Employee to (A) provide
services to any person or entity engaged in the Business if Employee is not
involved, directly or indirectly, in the management, supervision or operations
of the Business (including by reason of any individual reporting to Employee)
and the gross revenues generated by the Business do not constitute more than
33% of the consolidated gross revenues of such person or entity and its
affiliates and (B) provide services to or otherwise be affiliated with a venture
capital or private equity firm that holds investments in entities engaged in
the Business if Employee is not involved, directly or indirectly, in the
identification, evaluation, recommendation, acquisition, management, operation,
supervision or disposition of such investments, and the gross revenues
generated by such Business do not constitute more than the 33% of the
consolidated gross revenues of such firm and its affiliates.


 


(c)        During the Non-Compete Period, Employee shall not,
directly or indirectly, recruit or otherwise solicit or induce any employee of
the Company, except on behalf of the Company, (i) to terminate his or her
employment with the Company or (ii) to establish any relationship with
Employee or any of his affiliates for any business purpose competitive with the
Business of the Company, provided, however, that a general solicitation of the public for
employment shall not constitute a solicitation hereunder so long as such
general solicitation is not designed to target any employee of the Company.


 


(d)        Employee and the Company agree that the foregoing
restrictions are reasonable under the circumstances, are necessary to protect
the Company’s legitimate business interests and that any breach of such
restrictions would cause irreparable injury to the Company.  Employee understands that the foregoing
restrictions may limit Employee’s ability to engage in certain businesses
anywhere in the United States and outside the United States during the
Non-Compete Period but acknowledges that he will receive sufficiently high
remuneration and other benefits from the Company to justify such
restrictions.  Further, Employee
acknowledges that his skills are such that he can be gainfully employed in
non-competitive employment, and that the agreement not to compete will not
prevent him from earning a living. 
Nevertheless, in the event the terms of this Article 9 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a
geographical area or by reason of its being too extensive in any other respect,
it will be interpreted to extend only over the maximum period of time for which
it may be enforceable, over the maximum geographical area as to which it may be
enforceable, or to the maximum extent in all other respects as to which it may
be enforceable, all as determined by such court in such action.


 


15

















 


(e)        Employee hereby represents to the Company that he
has read and understands, and agrees to be bound by, the terms of this Article 9.  Employee acknowledges that the geographic
scope and duration of the covenants contained in this Article 9 are the
result of arm’s-length bargaining and are fair and reasonable in light of (i) the
nature and wide geographic scope of the Company’s operations of, and in, the
Business, (ii) Employee’s level of control over and contact with the
Company’s operations of, and in, the Business in all jurisdictions in which it
is conducted, (iii) the geographic breadth in which the Company conducts
the Business and (iv) the amount of consideration (including confidential
information and trade secrets) that Employee is receiving from the Company.


 


(f)         As used in this Article 9, (i) the term “Company” shall include the Company and its subsidiaries and (ii) the
term “Business” shall mean the exploration
for, and the development and production of, oil and natural gas and the
acquisition of leases and other real property in connection therewith, as such
business may be expanded or altered by the Company during the period of
Employee’s employment by the Company; provided, that
any business or endeavor shall cease to be the “Business”
if the Company is not or ceases to be engaged in such business or endeavor.


 


(g)        In consideration of the Company’s promises herein,
during the Non-Compete Period, Employee promises to disclose to the Company any
employment, consulting, or other service relationship that Employee enters into
after the termination of Employee’s employment with the Company for any
reason.  Such disclosure shall be made
within seven business days after Employee enters into such employment,
consulting or other service relationship. 
Employee expressly consents to and authorizes the Company to disclose
both the existence and terms of this Agreement to any future employer or
recipient of Employee’s services and to take any steps the Company deems
necessary to enforce this Agreement.


 


ARTICLE 10

NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION


 


Section 10.01.  Nondisclosure of Confidential and Proprietary
Information.  (a) Except
in connection with the faithful performance of Employee’s duties for the
Company or pursuant to Section 10.01(c) or (e), Employee shall, in
perpetuity, maintain in confidence and shall not directly, indirectly or
otherwise, (i) use, disseminate, disclose or publish, or use for his
benefit or the benefit of any person, firm, corporation or other entity, any (A) confidential
or proprietary information or trade secrets of or relating to the Company
(including, without limitation, intellectual property in the form of patents,
trademarks and copyrights and applications therefor, ideas, inventions, works,
discoveries, improvements, information, documents, formulae, practices,
processes, methods, developments, source code, modifications, technology,
techniques, data, programs, other know-


 


16














 


how or materials, in each case, that are
confidential and/or proprietary and owned, developed or possessed by the
Company, whether in tangible or intangible form) or (B) confidential or
proprietary information with respect to the Company’s operations, processes,
products, inventions, business practices, strategies, business plans, finances,
principals, vendors, suppliers, customers, potential customers, marketing
methods, costs, prices, contractual relationships, regulatory status, prospects
and compensation paid to employees or other terms of employment or (ii) 
deliver to any person, firm, corporation or other entity any document, record,
notebook, computer program or similar repository of or containing any such
confidential or proprietary information or trade secrets.  The parties hereby stipulate and agree that
as between them the foregoing matters are important, material and confidential
proprietary information and trade secrets and materially affect the successful
conduct of the businesses of the Company (and any successor or assignee of the
Company).


 


(b)                       Upon the
termination of Employee’s employment with the Company for any reason, Employee
will promptly deliver to the Company all correspondence, drawings, manuals,
letters, notes, notebooks, reports, programs, plans, proposals, financial
documents and electronically stored information, in each case, that are
confidential or proprietary to the Company, or any other confidential or
proprietary documents (including electronically stored information) concerning
the Company’s customers, business plans, strategies, products or processes.


 


(c)                        Employee may
respond to a lawful and valid subpoena or other legal process relating to the
business of the Company or the performance of his duties on behalf of the Company
but shall (i) give the Company prompt notice thereof, (ii) make
available to the Company and its counsel the documents and other information
sought that are not subject to a binding confidentiality agreement and (iii) assist
such counsel at Company’s expense in resisting or otherwise responding to such
process.


 


(d)                       As used in this
Article 10 and Article 11, the term “Company”
shall include the Company and its subsidiaries.


 


(e)                        Nothing in this
Agreement shall prohibit Employee from (i) disclosing information and
documents when required by law, subpoena, court order or legal process, (ii) disclosing
information and documents to his immediate family members or, for the purpose
of securing legal or tax advice, attorney or tax adviser (provided that the persons
to whom such disclosures are made shall be informed of their obligation to
maintain the strict confidentiality of any information provided to them), (iii) disclosing
the post-employment restrictions in this Agreement in confidence to any
potential new employer or person or entity to whom he may provide consulting
services, or (iv) retaining, at any time, his personal correspondence and
rolodex or address book and documents related to his own personal benefits,
entitlements and obligations.


 


17

















 


ARTICLE 11

INVENTIONS


 


Section 11.01.  Inventions. 
All rights to discoveries, inventions, improvements and innovations
(including all data and records pertaining thereto) related to the business of
the Company, whether or not patentable, copyrightable, registrable as a
trademark, or reduced to writing, that Employee may discover, invent or
originate during the period of his employment with the Company, either alone or
with others and whether or not during working hours or by the use of the
facilities of the Company (“Inventions”),
shall be the exclusive property of the Company. 
Employee shall promptly disclose all Inventions to the Company, shall
execute at the request of the Company any assignments or other documents the
Company may deem reasonably necessary to protect or perfect its rights therein,
and shall assist the Company, upon reasonable request and at the Company’s
expense, in obtaining, defending and enforcing the Company’s rights
therein.  Employee hereby appoints the
Company as his attorney-in-fact to execute on his behalf any assignments or
other documents reasonably deemed necessary by the Company to protect or
perfect its rights to any Inventions.


 


ARTICLE 12

INJUNCTIVE RELIEF


 


Section 12.01.  Injunctive Relief.   It is recognized and acknowledged by Employee
that a breach of the covenants contained in Articles 9, 10, 11 and 13 will
cause irreparable damage to Company and its Affiliates and their goodwill, the
exact amount of which will be difficult or impossible to ascertain, and that
the remedies at law for any such breach will be inadequate.  Accordingly, Employee agrees that in the
event of a breach of any of the covenants contained in Articles 9, 10, 11 and
13, in addition to any other remedy which may be available at law or in equity,
the Company will be entitled to specific performance and injunctive relief.


 


ARTICLE 13

NON-DISPARAGEMENT


 


Section 13.01.  Non-disparagement.  During Employee’s employment
with the Company and following termination of his employment with the Company
for any reason, (a) Employee agrees not to disparage in any material
respect the Company, its subsidiaries, any of their products or practices, or
any of their directors, officers, agents, representatives, members, partners or
stockholders, (b) either orally or in writing and (c) the Company
agrees that it and its subsidiaries will (i) not make any formal
statements that disparage in any material respect Employee and (ii) use
commercially reasonable efforts to advise its directors and officers not to
disparage in any material respect Employee.


 


18

















 


ARTICLE 14

GENERAL


 


Section 14.01.  Survivorship. 
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations.


 


Section 14.02.  Arbitration. 
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before an
arbitrator in Houston, Texas in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect.  Judgment may be entered on
the arbitration award in any court having jurisdiction; provided,
however, that the Company shall be
entitled to seek a restraining order or injunction in any court of competent
jurisdiction to prevent any violation or continuation of any violation of the
provisions of Articles 9, 10, 11 or 13 of this Agreement and Employee hereby
consents that such restraining order or injunction may be granted without
requiring the Company to post a bond. 
Only individuals who are on the AAA register of arbitrators shall be
selected as an arbitrator.  Within 20
days of the conclusion of the arbitration hearing, the arbitrator(s) shall
prepare written findings of fact and conclusions of law.  It is mutually agreed that the written
decision of the arbitrator(s) shall be valid, binding, final and non-appealable;
provided however, that the parties hereto agree that the arbitrator shall not
be empowered to award punitive damages against any party to such
arbitration.  The Company shall bear all
administrative fees and expenses of the arbitration and each party shall bear
its own counsel fees and expenses except as otherwise provided in this
paragraph.  If Employee makes a claim
against the Company relating to the performance of, or the rights and
obligations of, the Company arising under, relating to or in connection with
this Agreement (a “Covered Claim by the
Employee”), the arbitrators shall award Employee his reasonable
legal fees and expenses if Employee prevails on one material Covered Claim by
the Employee (as determined by the arbitrator). 
If a claim is made by the Company against Employee relating to the
performance of, or the rights and obligations of, Employee arising under,
relating to or in connection with this Agreement (a “Covered
Claim by the Company”), the arbitrators shall award Employee his
reasonable legal fees and expenses; provided that
if such Covered Claim by the Company relates to Employee’s performance or
obligations under Articles 9, 10, 11 or 13, the arbitrators shall award
Employee his legal fees and expenses only if the Company does not prevail on
any Covered Claim by the Company relating to any such Section (as
determined by the arbitrator).  Any
reimbursement of reasonable legal fees and expenses required under this Section 14.02
and any reimbursement of expenses included in the Accrued Obligations payable
to Employee under Article 6 shall be made not later than the close of
Employee’s taxable year following the taxable year in which Employee incurs the
expense; provided, however,
that, upon Employee’s termination of employment with the Company, in no event
shall any additional reimbursement be made prior


 


19

















 


to the date that is six months after the date
of Employee’s termination of employment to the extent such payment delay is required
under Section 409A(a)(2)(B)(i) of the Code.  In no event shall any reimbursement be made
to Employee for such fees and expenses incurred after the date that is 10 years
after the date of Employee’s termination of employment with the Company.


 


Section 14.03.  Payment Obligations Absolute.  The Company’s obligation to
pay Employee the amounts and to make the arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company (including its subsidiaries) may have against
him or anyone else.  All amounts payable
by the Company shall be paid without notice or demand.  Employee shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and the obtaining of any such other employment
shall in no event effect any reduction of the Company’s obligations to make (or
cause to be made) the payments and arrangements required to be made under this
Agreement.


 


Section 14.04.  Successors. 
This Agreement shall be binding upon and inure to the benefit of the
Company and any successor of the Company, by merger or otherwise.  This Agreement shall also be binding upon and
inure to the benefit of Employee and his estate.  If Employee shall die prior to full payment
of amounts due pursuant to this Agreement, such amounts shall be payable
pursuant to the terms of this Agreement to his estate.


 


Section 14.05.  Severability. 
Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction by reason of applicable law shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating or affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.


 


Section 14.06.  Non-alienation.  Employee shall not have any
right to pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.


 


Section 14.07.  Notices. 
Any notices or other communications provided for in this Agreement
shall be sufficient if in writing.  In
the case of Employee, such notices or communications shall be effectively
delivered if hand-delivered to Employee at his principal place of employment or
if sent by registered or certified mail to Employee at the last address he has
filed with the Company.  In the case of
the Company, such notices or communications shall be effectively delivered if
sent by registered or certified mail to the Company at its principal Employee
offices.


 


Section 14.08.  Controlling Law and Waiver of Jury
Trial.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of


 


20

















 


Texas. 
With respect to any claim or dispute related to or arising under this
Agreement, Employee and the Company hereby consent to the exclusive
jurisdiction, forum and venue of the state and federal courts located in Harris
County, Texas.  Notwithstanding the
foregoing, Section 3.03 and the transfer restrictions set forth in Annex
II shall be governed by, and construed in accordance with, the laws of the
State of Delaware.  Furthermore, with
respect to any claim or dispute related to or arising under Section 3.03
and the transfer restrictions set forth in Annex II, Employee and the Company
hereby consent to the exclusive jurisdiction, forum and venue of the Court of
Chancery of the State of Delaware.  Each
of the parties hereto hereby irrevocably waives any and all right to trial by
jury in any legal proceeding arising out of or related to this Agreement or the
transactions contemplated hereby.


 


Section 14.09.  Release and Delayed Payment Restriction.  (a) As a condition to
the receipt of any benefit under Article 6 hereof (except in the case of
the termination of Employee’s employment with the Company by reason of Employee’s
death or Disability and except for the Accrued Obligations), Employee shall
first execute a release in the form attached hereto as Exhibit B (with
such changes therein as the Company may reasonably require to reflect changes
in applicable law and the circumstances relating to the termination of Employee’s
employment), releasing the Company and certain other persons and entities from
certain claims and other liabilities.


 


(b)                       The release
described in Section 14.09(a) hereof must be effective and
irrevocable within 55 days after the date of the termination of Employee’s
employment with the Company. 
Notwithstanding any provision in this Agreement to the contrary, if the
payment of any amount or benefit under this Agreement would be subject to
additional taxes and interest under Section 409A of the Code because the
timing of such payment is not delayed as provided in Section 409A(a)(2)(B)(i) of
the Code and the regulations thereunder, then any such payment or benefit that
Employee would otherwise be entitled to during the first six months following
the date of Employee’s termination of employment shall be accumulated and paid
or provided, as applicable, on the date that is six months after the date of
Employee’s termination of employment (or if such date does not fall on a
business day of the Company, the next following business day of the Company),
or such earlier date upon which such amount can be paid or provided under Section 409A
of the Code without being subject to such additional taxes and interest.  If this Section 14.09(b) becomes
applicable such that the payment of any amount is delayed, any payments that
are so delayed shall accrue interest on a non-compounded basis, from the date
such payment would have been made had this Section 14.09(b) not
applied to the actual date of payment, at the prime rate of interest announced
by JPMorgan Chase Bank (or any successor thereto) at its principal office in
New York on the date of Employee’s termination of employment (or the first
business day following such date if such termination does not occur on a
business day) and shall be paid in a lump sum on the actual date of payment of
the delayed payment amount.  Employee
hereby agrees to be


 


21

















 


bound by the Company’s
determination of its “specified employees”
(as such term is defined in Section 409A of the Code) in accordance with
any of the methods permitted under the regulations issued under Section 409A
of the Code.


 


Section 14.10.  Full Settlement.  If Employee is entitled to
and receives the benefits provided hereunder, performance of the obligations of
the Company hereunder will constitute full settlement of all claims that
Employee might otherwise assert against the Company on account of his
termination of employment.


 


Section 14.11.  Unfunded Obligation.  The obligation to pay
amounts under this Agreement is an unfunded obligation of the Company, and no
such obligation shall create a trust or be deemed to be secured by any pledge
or encumbrance on any property of the Company.


 


Section 14.12.  Not a Contract of Employment.  This Agreement shall not be
deemed to constitute a contract of employment and shall in no way change the
at-will nature of Employee’s employment. 
Employee and the Company thus recognize and agree that subject to the
notice provisions of Section 5.02, (a) the Company may terminate
Employee’s employment at any time, for any reason or no reason at all; and (b) Employee
may terminate his employment at any time, for any reason or no reason at all.


 


Section 14.13.  Withholding of Taxes and Other Employee
Deductions.  The Company may
withhold from any benefits and payments made pursuant to this Agreement
(whether actually or constructively made to Employee or treated as included in
Employee’s income under Section 409A of the Code) all federal, state,
city, foreign and other applicable taxes and withholdings as may be required
pursuant to any law or governmental regulation or ruling and all other
customary deductions made with respect to the Company’s employees generally.


 


Section 14.14.  Number and Gender.  Wherever appropriate herein,
words used in the singular shall include the plural and the plural shall
include the singular.  The masculine
gender where appearing herein shall be deemed to include the feminine gender.


 


Section 14.15.  Entire Agreement.  This Agreement, including
the Annexes and Exhibits attached hereto, constitutes the entire agreement of
the parties with regard to the subject matter hereof and supersedes any and all
prior understandings, agreements or correspondence between the parties.  Any modification of this Agreement will be
effective only if it is in writing and signed by the party to be charged.


 


22

















 


IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date and year first written above.


 


	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Name]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COBALT
  INTERNATIONAL ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COBALT
  INTERNATIONAL ENERGY, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


23














 


ANNEX
I


 


ACCREDITED INVESTOR
REPRESENTATIONS


 


Employee hereby represents and warrants that he
qualifies as an “accredited investor” (as defined
in Regulation D of the Securities Act of 1933) by satisfying one or more of the
following criteria:


 


(i)                                     Employee’s
individual net worth or joint net worth with Employee’s spouse exceeds
$1,000,000; or


 


(ii)                                  Employee has
individual income in excess of $200,000 in each of the two most recent years or
joint income with Employee’s spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same income level in the
current year.


 


Employee is acquiring interests in the Partnership
and / or shares of Company common stock for investment for his own account and
not with a view to, or for sale in connection with, any distribution thereof
and hereby agrees not to sell any shares of Company common stock in violation
of the Federal securities laws.


 


1

















 


ANNEX
II


 


TRANSFER RESTRICTIONS


 


Employee agrees not to Transfer prior to the
Termination Date the Specified Number of the shares of Company common stock
issued to the Employee upon conversion of Class A and Class B
Interests (as defined in the Partnership Agreement) in connection with the IPO.  Employee will have the discretion to
determine, from time to time, which specific shares of Company common stock are
subject to this limitation.


 


For purposes of this agreement, the following terms
have the following meanings:


 


“Specified Number”
means, as of any date, a number of shares equal to the sum of


 


(a) the product of 80% (or on or after a Change in
Control, the lesser of 80% and the remainder set forth in (x) below) and the
aggregate number of shares of Company common stock issued to Employee upon
conversion of Class B Interests in connection with the IPO, plus


 


(b) the product of (x) one minus a fraction,
the numerator of which is the aggregate number of shares of Company common
stock owned by the Sponsors immediately after the closing of the IPO and sold
by the Sponsors after the closing of the IPO and prior to such date (other than
with respect to any shares of common stock sold by any Sponsor to any of its
Affiliates), and the denominator of which is the aggregate number of shares of
Company common stock owned by the Sponsors immediately after the closing of the
IPO, and (y) the aggregate number of shares of Company common stock issued
to Employee upon conversion of Class A Interests in connection with the
IPO.


 


If,
at any time prior to the Termination Date, the outstanding shares of Company
common stock shall be changed into a different number of shares or a different
class (including by reason of any reclassification, recapitalization, stock
split (including reverse stock split) or combination, exchange or readjustment
of shares, or any stock dividend or distribution paid in stock thereon with a
record date during such period or any similar transaction), the calculation of
the Specified Number shall be appropriately adjusted.


 


“Sponsors” shall have the meaning as set forth in the Company’s
certificate of incorporation as of the closing of the IPO.


 


A-1

















 


“Termination Date” means the earliest of (i) the
     anniversary of the closing of the IPO, (ii) the
date of termination of employment with the Company other than a termination by
the Company for Cause, (iii) the first date on which a Change in Control
occurs; provided that if prior to the date of
such Change in Control, the Company or the acquiror requests in writing that
Employee continue to provide services to the Company (or the successor or
surviving entity) for a specified period not to exceed 12 months after the
Change in Control, the Termination Date shall not expire on the date of the Change
in Control but shall expire on the earliest of (x) the last day of the
requested period, (y) the date provided in clause (i) or (z) the
date, if any, of the termination of employment by the Company (or the successor
or surviving entity) without Cause, by Employee for Good Reason or due to
Employee’s death or Disability or (iv) the first date on which the
Sponsors have sold a number of shares of Company common stock equal to the
aggregate number owned by the Sponsors immediately after the closing of the IPO
(other than with respect to any shares of common stock sold by any Sponsor to
any of its Affiliates).


 


“Transfer” means (a) offer, sell, pledge, or hypothecate
any legal or beneficial interest, including the grant of an option or other
right or otherwise transfer or enter into an agreement to do so or (b) entry
into any hedge, swap or any other agreement that transfers, in whole or in
part, any of the economic consequences of ownership (whether such transaction
is settled by delivery of cash, shares or otherwise).


 


All capitalized terms defined in the agreement to
which this Annex is attached and used but not otherwise defined herein are used
as therein defined.


 


Notwithstanding the foregoing, Employee may
Transfer:


 


(i)                                                         any shares of
Company common stock issued to Employee upon conversion of Class A and Class B
Interests in connection with the IPO in excess of the Specified Number, so long
as such shares are not Restricted Shares (as defined in the Award Agreement).


 


(ii)                                                      any shares of
Company common stock issued to Employee upon conversion of Class A and Class B
Interests in connection with the IPO (including all or a portion of the
Specified Number of such shares):


 


(a) by will or the laws of descent and distribution,


 


(b) by gift to a spouse, former spouse, lineal ancestor, lineal
descendant, legally adopted child, sibling or lineal descendant or legally
adopted child of a sibling of Employee or a trust or other entity for the
primary benefit


 


2

















 


of Employee or any such persons if the transferee agrees in writing to
be bound by the provisions of this agreement, or


 


(c) to any institution qualified as tax-exempt under Section 501(c)(3) of
the Internal Revenue Code of 1986 if the institution agrees in writing to be
bound by the provisions of this agreement.


 


(iii)                                                   with the
consent of the Compensation Committee of the Company’s board of directors
(which consent will not be unreasonably withheld), a number of shares of
Company common stock, in addition to the shares otherwise transferable pursuant
to (i) above, necessary to pay income taxes arising from the vesting of
any Restricted Shares issued to Employee upon conversion of Class B
Interests in connection with the IPO.


 


(iv)                                                  if the Company’s
board of directors (or a committee thereof) in its reasonable judgment makes a
good faith determination that Employee has incurred an unforeseeable emergency
resulting in severe financial hardship, then Employee may sell a number of
shares of Company common stock reasonably necessary to satisfy the emergency
need (which may include amounts necessary to pay Federal, state, local or
foreign income and employment taxes reasonably anticipated to result from the
sale), such number to be determined through the good faith consultation of the
Company’s board of directors and Employee; provided that,
in all cases, any such sale shall be made only from shares of Company common
stock with respect to which Employee has a 100% vested and nonforfeitable
interest.


 


3

















 


EXHIBIT
A


 


[FORM OF RESTRICTED
STOCK AWARD AGREEMENT — 

CLASS C INTERESTS]


 


4

















 


EXHIBIT
B


 


[FORM OF RESTRICTED
STOCK AWARD AGREEMENT — 

CLASS D INTERESTS]

(if applicable)


 


5

















 


EXHIBIT
C


 


FORM OF RELEASE


 


For and in consideration of certain payments and
other benefits due to [·] (“Employee”) pursuant to the Severance Agreement (the “Severance Agreement”) dated as of [·], 20    , between Cobalt
International Energy, Inc., (the “Company”) and
Employee, and for other good and valuable consideration, Employee hereby
agrees, for Employee, Employee’s spouse and child or children (if any),
Employee’s heirs, beneficiaries, devisees, executors, administrators,
attorneys, personal representatives, successors and assigns, to forever
release, discharge and covenant not to sue the Company and its divisions,
affiliates, subsidiaries, parents, branches, predecessors, successors, assigns,
and, with respect to such entities, their officers, directors, trustees,
employees, agents, shareholders, administrators, general or limited partners,
members, representatives, attorneys, insurers and fiduciaries, past, present
and future (the “Released Parties”) from any and
all claims of any kind arising out of, or related to, his employment with the
Company, its affiliates or subsidiaries (collectively, with the Company, the “Affiliated Entities”) or Employee’s separation from
employment with the Affiliated Entities, which Employee now has or may have
against the Released Parties, whether known or unknown to Employee, by reason
of facts which have occurred on or prior to the date that Employee has signed
this Release.  Such released claims
include, without limitation, any and all claims relating to the foregoing under
federal, state or local laws pertaining to employment, including, without
limitation, the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et. seq., the Fair
Labor Standards Act, as amended, 29 U.S.C. Section 201 et. seq., the
Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et.
seq. the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981
et. seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701
et. seq., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601
et. seq., and any and all state or local laws regarding employment
discrimination, the payment of wages and/or federal, state or local laws of any
type or description regarding employment, including but not limited to any
claims arising from or derivative of Employee’s employment with the Affiliated
Entities, as well as any and all such claims under state contract or tort law.  By signing this Release, Employee is bound by
it.   Anyone who succeeds to Employee’s
rights and responsibilities, such as heirs or the executor of Employee’s
estate, is also bound by this Release. 
This Release also applies to any claims brought by any person or agency
or class action under which Employee may have a right or benefit.  Notwithstanding this release of liability,
nothing in this Release prevents Employee from filing any non-legally waivable
claim (including a challenge to the validity of this Release) with the Equal
Employment Opportunity Commission (the “EEOC”) or
comparable state or local agency or participating in any


 


B-1

















 


investigation or proceeding conducted by the
EEOC or comparable state or local agency; however, Employee understands and
agrees that Employee is waiving any and all rights to recover any monetary or
personal relief or recovery as a result of such EEOC or comparable state or
local agency proceeding or subsequent legal actions.


 


Employee has read this Release carefully,
acknowledges that Employee has been given at least [21] [45] days to consider
all of its terms and has been and is hereby advised to consult with an attorney
and any other advisors of Employee’s choice prior to executing this Release,
and Employee fully understands that by signing below Employee is voluntarily
giving up any right which Employee may have to sue or bring any other claims
against the Released Parties, including any rights and claims under the Age
Discrimination in Employment Act. 
Employee also understands that Employee has a period of seven days after
signing this Release within which to revoke his agreement, and that neither the
Company nor any other person is obligated to make any payments or provide any
other benefits to Employee pursuant to the Severance Agreement until eight days
have passed since Employee’s signing of this Release without Employee’s
signature having been revoked other than any accrued obligations or other
benefits payable pursuant to the terms of the Company’s normal payroll
practices or employee benefit plans. 
Finally, Employee expressly represents that he has not been forced or
pressured in any manner whatsoever to sign this Release, and Employee agrees to
all of its terms voluntarily.


 


Notwithstanding anything else herein to the
contrary, this Release shall not affect: (i) the Company’s obligations
under any compensation or employee benefit plan, program or arrangement
(including, without limitation, obligations to Employee under the Severance
Agreement or any stock option, stock award or agreements or obligations under
any pension, deferred compensation or retention plan) provided by the
Affiliated Entities where Employee’s compensation or benefits are intended to
continue or Employee is to be provided with compensation or benefits, in
accordance with the express written terms of such plan, program or arrangement,
beyond the date of Employee’s termination and (ii) rights to
indemnification Employee may have under (A) applicable law, (B) any
other agreement between Employee and a Released Party and (C) as an
insured under any director’s and officer’s liability insurance policy now or
previously in force.


 


B-2

















 


This Release is final and binding and may not be
changed or modified except in a writing signed by both parties.


 


	
   

  	
   

  	
   

  
	
  [Name]

  	
   

  	
  [Employee]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cobalt
  International Energy, Inc. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
   

  
	
  [Name]

  	
   

  	
   

  	
  Name:
  

  
	
   

  	
   

  	
   

  	
  Title:

  



 


B-3