Document:

Exhibit 4.2

 

 

REORGANIZATION
AGREEMENT

dated as of

                        ,
2009

among

COBALT INTERNATIONAL ENERGY, L.P.,

COBALT INTERNATIONAL ENERGY, INC.,

[COBALT MERGER SUBSIDIARY]

and

THE OTHER PARTIES SIGNATORY HERETO

 

 

TABLE OF
CONTENTS

 

	
   

  	
  PAGE

  
	
   

  
	
  ARTICLE 1

  
	
  DEFINITIONS

  
	
   

  
	
  Section 1.01.
  Definitions

  	
  1

  
	
  Section 1.02.
  Other Definitional and Interpretative Provisions

  	
  3

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  
	
  PRE-IPO GRANT OF
  CLASS C AND D INTERESTS

  	
   

  
	
   

  	
   

  
	
  Section 2.01.
  Outstanding Class B and C Interests

  	
  3

  
	
  Section 2.02.
  Class C and D Interests to be Granted in Connection with IPO

  	
  4

  
	
  Section 2.03.
  Grant of Class C and D Interests

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 3

  
	
  THE CORPORATE
  REORGANIZATION

  
	
   

  	
   

  
	
  Section 3.01.
  The Contribution

  	
  5

  
	
  Section 3.02. The
  Exchange

  	
  5

  
	
  Section 3.03.
  The Merger

  	
  6

  
	
  Section 3.04.
  Newco Charter and Bylaws

  	
  7

  
	
  Section 3.05.
  Termination of Rig Guarantees

  	
  7

  
	
  Section 3.06.
  PEP, L.P.

  	
  8

  
	
  Section 3.07. Newco
  LTIP

  	
  8

  
	
  Section 3.08. Other
  Agreements

  	
  8

  
	
  Section 3.09. Post-IPO
  Exchanges

  	
  8

  
	
  Section 3.10. Tax
  Withholdings

  	
  9

  
	
   

  	
   

  
	
  ARTICLE 4

  
	
  REPRESENTATIONS
  AND WARRANTIES

  
	
   

  	
   

  
	
  Section 4.01.
  Existence and Power

  	
  9

  
	
  Section 4.02.
  Binding Agreement

  	
  9

  
	
  Section 4.03.
  Governmental Authorization

  	
  9

  
	
  Section 4.04.
  Non-contravention

  	
  10

  
	
  Section 4.05. Additional
  Representations and Warranties

  	
  10

  
	
   

  	
   

  
	
  ARTICLE 5

  
	
  COVENANTS

  
	
   

  	
   

  
	
  Section 5.01.
  Reasonable Best Efforts

  	
  11

  
	
  Section 5.02.
  Public Announcements

  	
  12

  
	
  Section 5.03.
  Further Assurances

  	
  12

  
	
  Section 5.04. Intended
  Tax Treatment

  	
  12

  

 

 

	
  ARTICLE 6

  
	
  CONDITIONS TO
  THE MERGER; TERMINATION

  
	
   

  	
   

  
	
  Section 6.01.
  Conditions to the Obligations of Each Party

  	
  13

  
	
  Section 6.02.
  Termination

  	
  13

  
	
  Section 6.03.
  Effect of Termination

  	
  13

  
	
   

  	
   

  
	
  ARTICLE 7

  
	
  MISCELLANEOUS

  
	
   

  	
   

  
	
  Section 7.01.
  Notices

  	
  13

  
	
  Section 7.02.
  Amendments and Waivers

  	
  14

  
	
  Section 7.03.
  Binding Effect; Benefit; Assignment

  	
  15

  
	
  Section 7.04.
  Governing Law

  	
  15

  
	
  Section 7.05.
  Jurisdiction

  	
  15

  
	
  Section 7.06.
  WAIVER OF JURY TRIAL

  	
  15

  
	
  Section 7.07.
  Counterparts; Effectiveness

  	
  16

  
	
  Section 7.08.
  Entire Agreement

  	
  16

  
	
  Section 7.09.
  Severability

  	
  16

  
	
  Section 7.10.
  Specific Performance

  	
  16

  
	
  Section 7.11. Expenses

  	
  16

  
	
   

  	
   

  
	
  Schedules and Exhibits

  	
   

  
	
   

  	
   

  
	
  Schedule 2.03 Pre-IPO Grants and Locked Shares

  	
   

  
	
  Schedule 3.01 Pre-IPO Capital Contribution

  	
   

  
	
  Schedule 3.02 Pre-IPO Exchange

  	
   

  
	
  Schedule 3.03 Example Calculation of IPO Waterfall

  	
   

  
	
   

  	
   

  
	
  Exhibit A

  	
  Forms of Restricted Stock Award Agreements and
  Deferred Compensation Plan

  	
   

  
	
  Exhibit B

  	
  Partnership Agreement

  	
   

  
	
  Exhibit C

  	
  Certificate of Incorporation and Bylaws

  	
   

  
	
  Exhibit D

  	
  Guarantee Release Agreement

  	
   

  
	
  Exhibit E

  	
  Long Term Incentive Plan

  	
   

  
	
  Exhibit F

  	
  Forms of Employment, Severance and Lock up
  Agreements

  	
   

  
	
  Exhibit G

  	
  Stockholders Agreement

  	
   

  
	
  Exhibit H

  	
  Registration Rights Agreement

  	
   

  
	
  Exhibit I

  	
  Directors’ Indemnification Agreement

  	
   

  
	
  Exhibit J

  	
  Contribution Agreement

  	
   

  
				

 

ii

 

REORGANIZATION AGREEMENT

 

REORGANIZATION AGREEMENT (this “Agreement”) dated as of
                        ,
2009(1) among Cobalt International Energy, L.P., a Delaware limited
partnership (the “Partnership”),
Cobalt International Energy, Inc., a Delaware corporation and wholly-owned
subsidiary of the Partnership (“Newco”),
[Cobalt Merger Subsidiary], a Delaware corporation and wholly-owned subsidiary
of Newco (“Merger Subsidiary”),
and the other parties signatory hereto.

 

W I T N E S S E T H :

 

WHEREAS, the parties hereto intend that (i) the
exchange contemplated by Section 3.02, (ii) the receipt of Newco
common stock pursuant to the merger contemplated by Section 3.03 (other
than restricted shares as to which an election under Section 83(b) of
the Code will not be made) and (iii) the issuance of Newco common stock in
the IPO shall be treated as exchanges qualifying under Section 351 of the
Code;

 

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Section 1.01.  Definitions. 
(a) As used herein, the following terms have the
following meanings:

 

“affiliate”
means, with respect to any person, any other person directly or indirectly
controlling, controlled by or under common control with such person.

 

“Code”
means the Internal Revenue Code of 1986.

 

“Delaware Law”
means the General Corporation Law of the State of Delaware and/or the Delaware
Revised Uniform Limited Partnership Act, as applicable.

 

“Governmental
Authority” means any government, court, tribunal, regulatory or
administrative agency, commission or authority or other governmental
instrumentality, whether domestic or foreign, federal, state or local,
multinational or supranational.

 

(1) This agreement will be executed prior
to printing the preliminary prospectus and the beginning of the road show.

 

[Pursuant to the Partnership Agreement, this
Agreement will require the approval of the Investor Majority, the Board of
Directors and the Executive Board.]

 

 

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

 

“Law” means all laws (including common and civil law),
statutes, ordinances, codes, rules and regulations of any Governmental
Authority.

 

“Lien”
means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, encumbrance or other adverse claim of any kind in
respect of such property or asset.

 

“Partnership
Agreement” means the Fourth Amended and Restated Agreement of
Limited Partnership of Cobalt International Energy, L.P. dated as of February 6,
2009.

 

“person” means an individual,
corporation, partnership, limited liability company, association, trust or
other entity or organization, including a Governmental Authority.

 

“subsidiary” means, with respect to
any person, (i) any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are directly or
indirectly owned by such person and (ii) any entity that does not have a
board of directors or other persons performing similar functions in which such
person owns directly or indirectly general partnership interests, management
rights or other interests that permit such person to control such entity.

 

(b)        Each of the following terms is defined in the Section set
forth opposite such term:

 

	
  Term

  	
   

  	
  Section

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Class D
  Interests

  	
   

  	
  2.02

  
	
  Contribution

  	
   

  	
  3.01

  
	
  Effective
  Time

  	
   

  	
  3.03

  
	
  Exchange

  	
   

  	
  3.02

  
	
  Guarantee
  Release Agreement

  	
   

  	
  3.05

  
	
  LTIP

  	
   

  	
  3.07

  
	
  Merger

  	
   

  	
  3.03

  
	
  Merger
  Subsidiary

  	
   

  	
  Preamble

  
	
  Newco

  	
   

  	
  Preamble

  
	
  Partnership

  	
   

  	
  Preamble

  
	
  Public
  Offering Price

  	
   

  	
  3.02

  
	
  Special
  Purpose Holdco

  	
   

  	
  3.02

  
	
  Surviving
  Entity

  	
   

  	
  3.03

  

 

2

 

(c)        Capitalized terms defined in the Partnership Agreement and
used but not otherwise defined herein are used as therein defined.

 

Section 1.02.  Other Definitional and
Interpretative Provisions.  The
words “hereof”, “herein” and “hereunder” and words of like import used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.  The
captions herein are included for convenience of reference only and shall be ignored
in the construction or interpretation hereof. 
References to Articles, Sections, Exhibits and Schedules are to
Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise
specified.  All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein.  All terms defined in this Agreement and used
but not otherwise defined in any Exhibit or Schedule or any other document
made or delivered pursuant hereto shall have the meaning as defined in this
Agreement.  Any singular term in this
Agreement shall be deemed to include the plural, and any plural term the
singular.  Whenever the words “include”,
“includes” or “including” are used in this Agreement, they shall be deemed to
be followed by the words “without limitation”, whether or not they are in fact
followed by those words or words of like import.  “Writing”, “written” and comparable terms
refer to printing, typing and other means of reproducing words (including
electronic media) in a visible form. 
References to any statute shall be deemed to refer to such statute as
amended from time to time and to any rules or regulations promulgated
thereunder.  References to any agreement
or contract are to that agreement or contract as amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof;
provided that with respect to any
agreement or contract listed on any schedules hereto, all such amendments,
modifications or supplements must also be listed in the appropriate
schedule.  References to any person
include the successors and permitted assigns of that person.

 

ARTICLE 2

PRE-IPO GRANT OF CLASS C AND D INTERESTS

 

Section 2.01.  Outstanding Class B and C
Interests.  All of the Class B
Interests consisting of 100,000 Class B Units and 25% of the Class C
Interests consisting of 25,000 of the 100,000 Class C Units (after giving
effect to a split of each existing Unit into 100 Units effective as of the date
hereof) have been granted prior to the date hereof.  All shares or restricted shares issued with
respect to such Partnership Interests in the Merger that are vested at the
Effective Time or become vested at any time thereafter will not, from and after
the date of vesting, be subject to forfeiture (including in the case of a
termination by Newco for cause).  All
such Partnership Interests that are unvested as of the Effective Time will, as
of the Effective Time, be modified so that the terms and conditions to be
applicable to the restricted shares to be issued with respect to such
Partnership 

 

3

 

Interests in the Merger will be as set forth
on Exhibit A-1 in the case of the Class B Interests and Exhibit A-2
in the case of the Class C Interests.

 

Section 2.02.  Class C and D Interests
to be Granted in Connection with IPO.  The
Partnership Agreement is hereby amended

 

(a)        to amend the terms and conditions of the Class C
Interests that have not been granted prior to the date hereof so that the terms
and conditions to be applicable to the restricted shares to be issued with
respect to such Partnership Interests in the Merger will be as set forth on Exhibit A-2,

 

(b)        to create a new class of limited partnership interests (the “Class D Interests”), which shall be subject to the same
terms and conditions as the Class C Interests as set forth in the
Partnership Agreement as in effect immediately prior to the date hereof, except
that

 

(i)    the
total number of Class D Units shall be 100,000;

 

(ii)   the
term “Tier 3 Promote Fraction” as used with respect to the Class D
Interests shall mean a fraction, the numerator of which is the aggregate amount
of the “Total Capital Call” as set forth on Schedule II, and the
denominator of which is the aggregate Capital Contributions;

 

(iii)  the
definition of “Tier 4 Promote Fraction” shall be revised to read as
follows:  “Tier 4 Promote Fraction” means
a fraction, the numerator of which is the amount by which the aggregate Capital
Contributions exceed the sum of (a) $1,021,171,276.85 plus (b) all
amounts contributed to the Partnership pursuant to the Equity Commitment Letter
plus (c) the aggregate amount of the “Total Capital Call” as set forth on Schedule
II of the Reorganization Agreement, and the denominator of which is the
aggregate Capital Contributions; and

 

(iv)  the
terms and conditions to be applicable to the restricted shares to be issued
with respect to such Partnership Interests in the Merger will be as set forth
on Exhibit A-3.

 

(c)        to provide that all restricted shares issued with respect to Class C
or D Interests in the Merger that become vested at any time after the Effective
Time will not, from and after the date of vesting, be subject to forfeiture
(including in the case of a termination by Newco for cause).

 

Section 2.03.  Grant of Class C and D
Interests.  (a) The Class C
Interests that have not been granted prior to the date hereof (or 75,000 Class C
Units) and [    ]%(2) of the Class D Interests
(or [      ] Class D Units) will be granted
by the 

 

(2) This percentage
will be determined when the number of Class D units to be issued pre-IPO
has been resolved.

 

4

 

Partnership immediately prior to the
Effective Time to the individuals listed on Schedule 2.03 in the
amounts set forth opposite the name of each such individual.  The grants will be deemed made immediately
prior to the Effective Time without any further action on the part of any
person.

 

(b)        Each of the individuals listed on Schedule 2.03
has entered into an agreement restricting the right to transfer or otherwise
sell the shares of Newco common stock issued to such individual upon conversion
of the Class A and B or C Interests pursuant to the Merger for such period
and, in the case of the shares issued upon conversion of the Class B or C
Interests, in such amount as is set forth opposite such individual’s name on
such schedule.

 

ARTICLE 3

THE CORPORATE REORGANIZATION

 

Section 3.01.  The Contribution.  Immediately prior to the Exchange, (a) each
Class A Limited Partner shall make a Capital Contribution, pursuant to Section 4.2(e) of
the Partnership Agreement, to the Partnership in the amount set forth opposite
the name of such partner in the “Total Capital Call” column on Schedule 3.01
(such amounts will be paid in cash except for the amounts set forth in the
“Deferred” column which have previously been deducted from the individual’s
compensation pursuant to the Partnership’s deferred compensation plan and will
be treated for all purposes of the Partnership Agreement as part of the
individual’s Capital Contribution pursuant to this Section and deducted
from the individual’s deferred compensation account as provided in Schedule
3.01), and (b) the Class A Limited Partners that hold the shares of
CIP GP Corp., a Delaware corporation and the general partner of the
Partnership, shall transfer all of such shares to Newco for no consideration
(collectively, the “Contribution”).

 

Section 3.02.  The Exchange.  Immediately after the Contribution and prior
to the Effective Time, each person listed on Schedule 3.02 will
transfer or cause to be transferred to Newco the Class A Interests set
forth opposite its name on such schedule or all of the equity or other
ownership interests in each Special Purpose Holdco that holds Class A
Interests as set forth opposite its name on such schedule so that Newco will
become the owner directly or indirectly of all such Class A Interests; provided that only entities that are signatories to this
Agreement may directly transfer Class A Interests or ownership interests
in Special Purpose Holdcos to Newco.  The
Class A Interests transferred directly or indirectly to Newco will be
exchanged (the “Exchange”) for the number of
shares of Newco common stock (rounded to the nearest whole share) that such Class A
Interests would be converted into in connection with a Qualified Public
Offering as provided in Section 8.14 of the Partnership Agreement based on
the price to public (the “Public Offering Price”)
as set forth on the cover page of the final prospectus in connection with
the IPO.  The transfer to Newco will be
made pursuant to a Contribution Agreement substantially in the form set forth
on 

 

5

 

Exhibit J.  For purposes of this Agreement, “Special Purpose Holdco” means an entity the sole assets of
which are Class A Interests (or in the case of Section 3.09, Newco
common stock) held directly by such entity or indirectly by a wholly-owned
subsidiary of such entity.

 

Section 3.03.  The Merger.  (a) Immediately after the
Exchange and simultaneously with the closing of the IPO, Merger Subsidiary
shall merge (the “Merger”) with
and into the Partnership in accordance with Delaware Law, whereupon the
separate existence of Merger Subsidiary shall cease, and the Partnership shall
be the surviving entity (the “Surviving
Entity”).  The Merger shall
become effective at such time (the “Effective
Time”) as the certificate of merger is duly filed with the Delaware
Secretary of State or at such later time as is specified in such certificate,
which shall be done so that the Effective Time shall be simultaneous with the
closing of the IPO.  From and after the
Effective Time, the Surviving Entity shall possess all the rights, powers,
privileges and franchises and be subject to all of the obligations,
liabilities, restrictions and disabilities of the Partnership and Merger
Subsidiary, all as provided under Delaware Law.

 

(b)        At the Effective Time:

 

(i)            Except
as otherwise provided in (ii) below, each Class A, B, C and D
Interest outstanding at the Effective Time shall be converted into the right to
receive the number of shares of Newco common stock (rounded to the nearest
whole share) that such Partnership Interests would be converted into in
connection with a Qualified Public Offering as provided in Section 8.14 of
the Partnership Agreement based on the Public Offering Price (an example
calculation of the shares to be issued in connection with Section 3.02 and
this Section 3.03 is included herein as Schedule 3.03 for
illustrative purposes); provided that

 

(x)            the holders of Class D
Interests shall be entitled to receive [    ](3)% of the
number of shares otherwise attributable to the Class D Interests as
provided above, and the remaining shares attributable to the Class D
Interests shall not be issued and shall be reserved for issuance under the
LTIP;

 

(y)           the shares issuable upon conversion
of unvested Class B, C and D Interests shall (i), to the extent unvested
as of the Effective Time, be restricted shares issued pursuant to awards under
the LTIP, subject to the terms set forth on Exhibits A-1 through A-3 and (ii) shall
be subject to the terms of any applicable employment agreement, severance
agreement or lock up agreement in the forms 

 

(3) To
be inserted per footnote 2.

 

6

 

set
forth on Exhibits F-1 through F-3 as provided in Schedule 2.03;
and

 

(z)            the shares otherwise issuable upon
conversion of Class A Interests attributable to the amounts set forth on Schedule
3.01 under the “Deferred” column that are treated as part of the
individual’s Capital Contribution pursuant to Section 3.01 shall be issued
pursuant to the terms of the Deferred Compensation Plan set forth on Exhibit A-4.

 

As
of the Effective Time, all such Partnership Interests shall no longer be
outstanding, shall automatically be canceled and retired, shall cease to exist
and shall thereafter represent only the right to receive the shares as provided
above.

 

(ii)           Each
Class A Interest owned directly or indirectly by Newco at the Effective
Time after giving effect to the transactions contemplated by Section 3.02
shall be canceled and converted into new limited partnership interests in the
Surviving Entity.  Each such new limited
partnership interest shall represent the same economic ownership interest in
the Surviving Entity as the corresponding canceled Class A Interests
represented in the Partnership immediately prior to the Effective Time.

 

(iii)          Each
share of Merger Subsidiary common stock outstanding at the Effective Time shall
be canceled and converted into new limited partnership interests in the
Surviving Entity.  Such new limited
partnership interests shall represent the same economic ownership interest in the
Surviving Entity as the partnership interests canceled pursuant to (i) above
represented in the Partnership immediately prior to the Effective Time.

 

(iv)          Each
share of stock of Newco outstanding at the Effective Time (other than the
shares of Newco common stock issued pursuant to Section 3.02 or 3.03)
shall be canceled, and no consideration shall be paid with respect thereto.

 

(c)   At the Effective Time, the Partnership Agreement shall be amended
and restated in its entirety as set forth on Exhibit B.

 

Section 3.04.  Newco Charter and Bylaws.
 Prior to the closing of the IPO, the
certificate of incorporation and bylaws of Newco shall be amended and restated
in their entirety as set forth on Exhibits C-1 and C-2.

 

Section 3.05.  Termination of Rig Guarantees.  The Guarantee
Release Agreement between ENSCO Offshore Company and the Class A Limited
Partners (or their respective affiliates) (the “Guarantee
Release Agreement”) in the form

 

7

 

set forth on Exhibit D, which
provides for the unconditional release, effective simultaneously with the
closing of the IPO, of the obligations of the guarantors pursuant to the
Irrevocable Contract Guarantee dated as of May 5, 2008 shall be executed
and delivered simultaneously with the closing of the IPO.  Simultaneously with and conditional on the
closing of the IPO and the effectiveness of the Guarantee Release Agreement,
the Equity Commitment Letter dated as of December 12, 2008 between the Class A
Limited Partners and the Partnership shall be automatically terminated and be
of no further force or effect.

 

Section 3.06.  PEP, L.P.  Promptly after the closing of the
IPO, the shares or restricted shares of Newco common stock issued in connection
with the conversion of the Class B Interests held by PEP, L.P. shall be
distributed to the individuals holding limited partnership interests in PEP, L.P.,
and PEP, L.P. shall be terminated.

 

Section 3.07.  Newco LTIP.  The Long Term Incentive Plan of Newco (the “LTIP”) in the form set forth on Exhibit E has
been duly adopted and approved by the directors and stockholders of Newco.

 

Section 3.08.  Other Agreements.  Prior to and conditional upon the closing of the
IPO, Newco shall enter into

 

(a)                                  an employment agreement substantially
in the form set forth on Exhibit F-1, severance agreement substantially
in the form set forth on Exhibit F-2 or lock up letter agreement
substantially in the form set forth on Exhibit F-3, with each of
the individuals listed on Schedule 2.03 as set forth opposite the name
of such individual;

 

(b)                                 a stockholders agreement
substantially in the form set forth on Exhibit G with certain
former Class A Limited Partners;

 

(c)                                  a registration rights
agreement substantially in the form set forth on Exhibit H with the
former Class A Limited Partners and/or certain affiliates of such persons;
and

 

(d)                                 an indemnification agreement
substantially in the form set forth on Exhibit I with each of the
individuals who will be directors of Newco immediately after the closing of the
IPO.

 

Section 3.09.  Post-IPO Exchanges.  Each person that is a signatory or an
affiliate of a signatory to this Agreement and owns a Special Purpose Holdco
that holds Newco common stock received in the Exchange may, upon 10 business days
written notice to the Company, transfer to Newco at any time after the
Effective Time all of the equity or other ownerships interests in such Special
Purpose Holdco in exchange for the number of shares of Newco common stock held
by such Special Purpose Holdco at such time, provided
that (i) Newco reasonably determines that such transfer will not have a
more than de minimis

 

8

 

adverse effect on Newco and its subsidiaries
(taking into account the likelihood of any circumstances that may give rise to
such adverse effect and any indemnities or other similar agreements provided by
the transferor or an affiliate) and (ii) at the time of such transfer,
such transferor or an affiliate enters into agreements with Newco that are
reasonably satisfactory to Newco, including making representations
substantially to the effect set forth in Article 4 of this Agreement at
the time of such transfer.  Newco shall
be entitled to withhold from the shares of Newco common stock that it is
required to deliver pursuant to this Section 3.09 such number of shares as
it is required to deduct and withhold with respect thereto under any provision
of federal, state or foreign tax law.  In
the event that Newco intends to withhold any shares under this Section 3.09,
it shall notify the transferor as promptly as practicable after making such
determination.  If Newco so withholds any
shares, such shares shall be treated for purposes of this Section 3.09 as
having been delivered to the person in respect of which such deduction and
withholding were made.

 

Section 3.10.  Tax Withholdings.  Notwithstanding any provision contained
herein to the contrary, each of the Surviving Entity and Newco shall be
entitled to deduct and withhold from the consideration otherwise payable to any
person pursuant to Section 3.02 or 3.03 such amounts as it is required to
deduct and withhold with respect thereto under any provision of federal, state,
local or foreign tax law; provided that, if the Surviving Entity or
Newco, as the case may be, intends to withhold an amount under this Section 3.10,
it shall notify the applicable person as promptly as practicable after making
such determination.  If the Surviving
Entity or Newco, as the case may be, so withholds amounts, such amounts shall
be treated for all purposes of this Agreement as having been paid to the person
in respect of which such deduction and withholding was made.

 

ARTICLE
4

REPRESENTATIONS
AND WARRANTIES

 

Each of the parties signatory hereto represents and
warrants that:

 

Section 4.01.  Existence and Power.  If such party is not an
individual, such party is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has all requisite powers
and all material governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted.

 

Section 4.02.  Binding Agreement.  This Agreement has been duly
executed and delivered and constitutes a valid and binding agreement of such
party.

 

Section 4.03.  Governmental
Authorization.  The execution,
delivery and performance by such party of this Agreement and the consummation
by such party of the transactions contemplated hereby require no action by or
in respect

 

9

 

of, or filing with, any Governmental
Authority other than (i) the filing of a certificate of merger with
respect to the Merger with the Delaware Secretary of State, (ii) compliance
with any applicable requirements of the Securities Act of 1933 and any other
applicable state or federal securities laws and (iii) any actions or
filings the absence of which would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on such party.

 

Section 4.04.  Non-contravention.  The execution, delivery and
performance by such party of this Agreement and the consummation by such party of
the transactions contemplated hereby do not and will not (i) violate the organizational
documents of such party if such party is not an individual, (ii) assuming
compliance with the matters referred to in Section 4.03, violate any applicable
Law or any judgment, injunction, order or decree of any Governmental Authority with
competent jurisdiction, (iii) require any consent or other action by any person
under, constitute a default (or an event that, with or without notice or lapse
of time or both, would constitute a default) under, or cause or permit the
termination, cancellation, acceleration or other change of any right or
obligation or the loss of any benefit to which such party is entitled under any
provision of any agreement or other instrument binding upon such party or (iv) result
in the creation or imposition of any Lien on any asset of such party or any of
its subsidiaries, with only such exceptions, in the case of each of clauses (ii) through
(iv), as would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on such party.

 

Section 4.05.  Additional
Representations and Warranties. 
(a) Each person contributing Class A Interests directly to
Newco in the exchange contemplated by Section 3.02 represents and warrants
that:

 

(i)                                     Each such person has good
and valid title in and to the Class A Interests held by such person, free
and clear of all Liens; and

 

(ii)                                  Upon consummation of the exchange,
Newco will have acquired good and valid title in and to such Class A
Interests, free and clear of all Liens.

 

(b)                   Each person that indirectly owns Class A
Interests through a Special Purpose Holdco and is transferring all of the
equity or other ownership interests in one or more such Special Purpose Holdcos
to Newco pursuant to Section 3.02 represents and warrants that:

 

(i)                                     Each such Special Purpose
Holdco and each of its subsidiaries, if any, is duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all powers and all material governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted;

 

10

 

(ii)                                  Other than pursuant to the
Partnership Agreement, the Equity Commitment Letter and the Rig Guarantee,
there are no liabilities with respect to any such Special Purpose Holdco or any
of its subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability;

 

(iii)                               Such Special Purpose Holdco
has no assets other than Class A Interests directly held or the equity or
other ownership interests in one or more wholly-owned subsidiaries, which
subsidiaries have no assets other than Class A Interests;

 

(iv)                              Each such Special Purpose
Holdco is a domestic corporation for U.S. federal income tax purposes, and each
subsidiary thereof is a domestic wholly-owned entity that is disregarded for
U.S. federal income tax purposes;

 

(v)                                 Each such Special Purpose
Holdco that directly owns Class A Interests has good and valid title in
and to the Class A Interests held by such entity, free and clear of all
Liens;

 

(vi)                              With respect to each Special
Purpose Holdco that indirectly owns Class A Interests through one or more subsidiaries,
(i) such Special Purpose Holdco has good and valid title in and to all of
the equity or other ownership interests of such subsidiary or subsidiaries,
free and clear of all Liens and (ii) such subsidiary holding Class A
Interests has good and valid title in and to the Class A Interests held by
such entity, free and clear of all Liens; and

 

(vii)                           Upon consummation of the
exchange, Newco will have acquired good and valid title in and to all of the
outstanding equity or other ownership interests in any such Special Purpose
Holdco and its subsidiaries, if any, free and clear of all Liens.

 

ARTICLE
5

COVENANTS

 

The parties hereto agree that:

 

Section 5.01.  Reasonable Best Efforts.  Subject to the terms and
conditions of this Agreement, the parties hereto shall use their reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under applicable Law to
consummate the transactions contemplated by this Agreement, including (i) preparing
and filing as promptly as practicable with any Governmental Authority or other
third party all 

 

11

 

documentation to effect all necessary
filings, notices, petitions, statements, registrations, submissions of
information, applications and other documents and (ii) obtaining and
maintaining all approvals, consents, registrations, permits, authorizations and
other confirmations required to be obtained from any Governmental Authority or
other third party that are necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.

 

Section 5.02.  Public Announcements.  The parties hereto shall consult
with each other before issuing any press release or making any other public
statement with respect to this Agreement or the transactions contemplated
hereby and, except in respect of any public statement or press release as may be
required by applicable Law or any listing agreement with or rule of any
national securities exchange or association, shall not issue any such press
release or make any such other public statement before such consultation.

 

Section 5.03.  Further Assurances.  At and after the Effective Time,
the officers and directors of the Surviving Entity shall be authorized to
execute and deliver, in the name and on behalf of the Partnership or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Partnership or Merger Subsidiary, any
other actions and things to vest, perfect or confirm of record or otherwise in
the Surviving Entity any and all right, title and interest in, to and under any
of the rights, properties or assets of the Partnership acquired or to be
acquired by the Surviving Entity as a result of, or in connection with, the
Merger.

 

Section 5.04.  Intended Tax Treatment.  (a) Each party agrees that (i) the
exchange contemplated by Section 3.02, (ii) the receipt of shares of
Newco common stock pursuant to the Merger (other than restricted shares as to
which an election under Section 83(b) of the Code will not be made)
and (iii) the issuance of shares of Newco common stock in the IPO are
intended collectively to be treated as exchanges qualifying under Section 351
of the Code, and that it will not take any position on any tax return or other
action inconsistent with such intended treatment.

 

(a)                                  Newco agrees that it will
comply with the reporting requirements of Treasury Regulation Section 1.351-3(b) with
respect to the transactions described herein.

 

(b)                                 Newco and the Surviving
Entity each hereby acknowledge that a Class A Limited Partner or an
affiliate of such Class A Limited Partner may be required to make certain
tax filings with respect to Section 897 of the Code and related provisions
to receive nonrecognition treatment with respect to a transfer of Class A
Interests or an entity by such person to Newco pursuant to Section 3.02 or
3.09 of this Agreement, and each of Newco and the Surviving Entity agree to
reasonably cooperate with such person in the making of such tax filings.

 

12

 

ARTICLE
6

CONDITIONS
TO THE MERGER; TERMINATION

 

Section 6.01.  Conditions to the Obligations
of Each Party.  The
obligations of the parties to consummate the transactions contemplated by Article 2
and Article 3 are subject to the satisfaction of the following conditions:

 

(a)                                  the closing of the IPO will
be completed simultaneously with the consummation of the transactions
contemplated by Article 2 and Article 3 that are to be consummated
simultaneously with the IPO; and

 

(b)                                 there is no applicable Law or
judgment, injunction, order or decree of any Governmental Authority with
competent jurisdiction prohibiting or otherwise making illegal the consummation
of the transactions contemplated hereby.

 

Section 6.02.  Termination.  This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to
the Effective Time by the Partnership with the approval of the Investor
Majority and Executive Board Approval and shall be terminated if the IPO is
abandoned or has not been closed within three months after the date hereof.

 

Section 6.03.  Effect of Termination.  If this Agreement is terminated
pursuant to Section 6.02, this Agreement shall become void and of no
effect without liability of any party (or any limited partner, stockholder,
director, officer, employee, agent, consultant or representative of such party)
to the other parties hereto.  The
provisions of this Section 6.03 and Sections 7.04, 7.05 and 7.06
shall survive any termination hereof pursuant to Section 6.02.

 

ARTICLE
7

MISCELLANEOUS

 

Section 7.01.  Notices.  All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission and electronic mail (“e-mail”) transmission, so long as a receipt
of such e-mail is requested and received) and shall be given,

 

if to the Partnership, Newco or Merger Subsidiary, to:

 

Cobalt International Energy,
L.P.

Two Post Oak Central

1980 Post Oak Blvd., Suite 1200

Houston, TX 77056

Attention: Joseph H. Bryant

Facsimile No.: (713) 579-9184

E-mail: joe.bryant@cobaltintl.com

 

13

 

with a copy to:

 

	
  Davis
  Polk & Wardwell LLP

  
	
  450
  Lexington Avenue

  
	
  New
  York, New York 10017

  
	
  Attention:

  	
  Christopher
  Mayer

  
	
   

  	
  Richard
  D. Truesdell, Jr.

  
	
  Facsimile
  No.:

  	
  (212)
  701-5338

  
	
   

  	
  (212)
  701-5674

  
	
  E-mail:

  	
  chris.mayer@davispolk.com

  
	
   

  	
  richard.truesdell@davispolk.com

  

 

if to a Class A Limited Partner, to such address(es) as set forth
in the Partnership Agreement.

 

with a copy to:

 

	
  Fried,
  Frank, Harris, Shriver & Jacobson LLP

  
	
  One
  New York Plaza

  
	
  New
  York, New York 10004

  
	
  Attention:

  	
  Robert
  C. Schwenkel

  
	
   

  	
  Murray
  Goldfarb

  
	
  Facsimile
  No.:

  	
  (212)
  859-4000

  
	
  E-mail:

  	
  robert.schwenkel@friedfrank.com

  
	
   

  	
  murray.goldfarb@friedfrank.com

  

 

or
to such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto.  All such notices, requests and other
communications shall be deemed received on the date of receipt by the recipient
thereof if received prior to 5:00 p.m. on a business day in the place of
receipt.  Otherwise, any such notice,
request or communication shall be deemed to have been received on the next
succeeding business day in the place of receipt.

 

Section 7.02.  Amendments and Waivers.  (a) Prior to the Effective
Time, any provision of this Agreement may be amended or waived by the
Partnership with the written approval of the Investor Majority and Executive
Board Approval.  Following the Effective
Time, any provision of this Agreement may be amended or waived with the written
approval of Newco and each party hereto that would be adversely affected by
such amendment or waiver.

 

(a)                        No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  The rights
and remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by applicable Law.

 

14

 

Section 7.03.  Binding Effect; Benefit;
Assignment.  (a) The
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.  No provision of this Agreement is intended to
confer any rights, benefits, remedies, obligations or liabilities hereunder
upon any person other than the parties hereto and their respective successors
and assigns.

 

(a)                                  No party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except that (i) Newco
or Merger Subsidiary may transfer or assign its rights and obligations under
this Agreement, in whole or from time to time in part, to one or more of their
affiliates at any time; provided that
such transfer or assignment shall not relieve Newco or Merger Subsidiary of its
obligations hereunder or enlarge, alter or change any obligation of any other
party hereto and (ii) any Investor can may transfer or assign its rights
and obligations under this Agreement, in whole or from time to time in part, to
any person that the Investor is permitted to assign any portion of its
Partnership Interests pursuant to the terms of the Partnership Agreement; provided that such transfer or assignment shall not relieve
such Investor of its obligations hereunder or enlarge, alter or change any
obligation of any other party hereto.

 

Section 7.04.  Governing Law.  This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware, without
regard to the conflicts of law rules of such state.

 

Section 7.05.  Jurisdiction.  The parties hereto agree that any
suit, action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby (whether brought by any party or any of its affiliates or
against any party or any of its affiliates) shall be brought in the Delaware
Chancery Court or, if such court shall not have jurisdiction, any federal court
located in the State of Delaware or other Delaware state court, and each of the
parties hereby irrevocably consents to the jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum.  Process in any such suit, action
or proceeding may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court. 
Without limiting the foregoing, each party agrees that service of
process on such party as provided in Section 7.01 shall be deemed
effective service of process on such party.

 

Section 7.06.  WAIVER OF JURY TRIAL. 
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR 

 

15

 

RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

Section 7.07.  Counterparts;
Effectiveness.  This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by all of the other
parties hereto.  Until and unless each
party has received a counterpart hereof signed by the other party hereto, this
Agreement shall have no effect and no party shall have any right or obligation
hereunder (whether by virtue of any other oral or written agreement or other
communication).

 

Section 7.08.  Entire Agreement.  This Agreement and the agreements
referenced herein constitute the entire agreement between the parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement.

 

Section 7.09.  Severability.  If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
or other Governmental Authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.  Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as possible
in an acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.

 

Section 7.10.  Specific Performance.  The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof,
in addition to any other remedy to which they are entitled at law or in equity.

 

Section 7.11.  Expenses.  The Investors and their affiliates have
incurred and will incur out-of-pocket expenses for legal fees and expenses for
counsel in connection with the IPO and the negotiation of this Agreement and
the agreements to be entered into in connection with the IPO.  Newco and the Partnership agree to pay to
reimburse each Investor (together with its affiliates) for the reasonable
amount of all such expenses.

 

16

 

[The remainder of this page has been intentionally left blank; the
next 

page is the signature page.]

 

17

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective authorized officers as
of the date set forth on the cover page of this Agreement.

 

	
   

  	
   

  	
  COBALT
  INTERNATIONAL ENERGY, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  COBALT
  INTERNATIONAL ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [COBALT
  MERGER SUBSIDIARY]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INVESTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C/R COBALT INVESTMENT
  PARTNERSHIP, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CARLYLE/RIVERSTONE ENERGY
  PARTNERS II, L.P.,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  C/R ENERGY GP II, LLC,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Pierre F.
  Lapeyre, Jr.

  
	
   

  	
   

  	
   

  	
  Title: Authorized Person

  

 

 

	
   

  	
   

  	
  C/R
  ENERGY COINVESTMENT II, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CARLYLE/RIVERSTONE
  ENERGY PARTNERS II, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  C/R
  ENERGY GP II, LLC,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Pierre F. Lapeyre, Jr.

  
	
   

  	
   

  	
   

  	
  Title:
  Authorized Person

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RIVERSTONE
  ENERGY COINVESTMENT  III, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  RIVERSTONE
  COINVESTMENT GP, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  RIVERSTONE
  HOLDINGS, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Pierre F. Lapeyre, Jr.

  
	
   

  	
   

  	
   

  	
  Title:
  Authorized Person

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CARLYLE
  ENERGY COINVESTMENT  III, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CARLYLE
  ENERGY COINVESTMENT III GP, L.L.C.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  TCG
  HOLDINGS, L.L.C.

  
	
   

  	
   

  	
   

  	
  its
  sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
   

  	
  C/R
  ENERGY III COBALT PARTNERSHIP, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CARLYLE/RIVERSTONE
  ENERGY PARTNERS III, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  C/R
  ENERGY GP III, LLC,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Pierre F. Lapeyre, Jr.

  
	
   

  	
   

  	
   

  	
  Title: Authorized Person

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CARLYLE/RIVERSTONE
  GLOBAL ENERGY AND POWER FUND III, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CARLYLE/RIVERSTONE
  ENERGY PARTNERS III, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  C/R
  ENERGY GP III, LLC,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Pierre F.
  Lapeyre, Jr.

  
	
   

  	
   

  	
   

  	
  Title: Authorized Person

  

 

 

	
   

  	
   

  	
  GSCP
  V COBALT HOLDINGS, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GS
  CAPITAL PARTNERS V FUND, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GSCP
  V ADVISORS, L.L.C.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GSCP
  V OFFSHORE COBALT HOLDINGS, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GSCP
  V OFFSHORE COBALT HOLDINGS, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GS
  CAPITAL PARTNERS V OFFSHORE FUND, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GSCP
  V OFFSHORE ADVISORS, L.L.C.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

	
   

  	
   

  	
  GSCP
  V INSTITUTIONAL COBALT HOLDINGS, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GSCP
  V INSTITUTIONAL COBALT HOLDINGS, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GS
  CAPITAL PARTNERS V INSTITUTIONAL, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GS
  ADVISORS V, L.L.C.,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GSCP
  V GMBH COBALT HOLDINGS, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GSCP
  V GmbH Cobalt Holdings, L.P.,

  
	
   

  	
   

  	
   

  	
  its
  sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  GSCP
  V GmbH Cobalt Holdings,

  
	
   

  	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

	
   

  	
  GSCP VI COBALT HOLDINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GS CAPITAL PARTNERS VI
  FUND, L.P.,

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GSCP VI ADVISORS,
  L.L.C.,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GSCP VI OFFSHORE COBALT  HOLDINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GSCP VI OFFSHORE COBALT
  HOLDINGS, L.P.,

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GS CAPITAL PARTNERS VI
  OFFSHORE FUND, L.P.,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GSCP VI OFFSHORE
  ADVISORS, L.L.C.,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

	
   

  	
  GSCP VI PARALLEL COBALT
  HOLDINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GSCP VI PARALLEL COBALT
  HOLDINGS, L.P.,

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GS CAPITAL PARTNERS VI PARALLEL,
  L.P.,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GS ADVISORS VI, L.L.C.,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GSCP VI GMBH COBALT HOLDINGS,
  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  GSCP VI GmbH Cobalt
  Holdings, L.P.,

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  GSCP VI GmbH Cobalt
  Holdings,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

	
   

  	
  KERN
  COBALT CO-INVEST PARTNERS LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  KERN
  Cobalt Group LLC,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  KERN
  COBALT CO-INVEST PARTNERS II LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  KERN
  Cobalt Group II LLC,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  KERN
  COBALT CO-INVEST PARTNERS III LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  KERN
  Cobalt Group III LLC,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  KERN
  COBALT CO-INVEST PARTNERS IV LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  KERN
  Cobalt Group IV LLC,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

 

	
   

  	
  FIRST
  RESERVE FUND XI, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  First
  Reserve GP XI, L.P.,

  its general partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  First
  Reserve GP XI, Inc.,

  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FR
  COBALT HOLDINGS LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  First
  Reserve GP XI, L.P.,

  its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  First
  Reserve GP XI, Inc.,

  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

 

	
   

  	
  EXECUTIVE
  MANAGEMENT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Joseph
  H. Bryant

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Samuel
  H. Gillespie, III

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  James
  W. Farnsworth

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  James
  H. Painter

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Van
  P. Whitfield

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Richard
  A. Smith

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  John
  P. Wilkirson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Rodney L. Gray

  

 

 

Schedule 2.03

 

Pre-IPO Grants and Locked Shares

 

 

Schedule 3.01

 

 

Schedule 3.02

 

Pre-IPO Exchange

 

Class A Interests

 

	
  Name
  of Class A Limited Partner

  	
   

  	
  Class A Interests

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

Schedule  3.09

 

Special Purpose Holdco

 

	
   

  	
   

  	
  Special Purpose Holdco

  
	
  Name
  of Transferor

  	
   

  	
  Name

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Outstanding

  Shares

  	
   

  	
  Wholly-owned

  Subsidiary (if any)

  	
   

  	
  Class A Interests

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule 3.03

 

Example Calculation of IPO Waterfall

 

 

Schedule  3.09Exhibit 10.1

 

[FORM OF]
EMPLOYMENT 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; TERMINATION OF
  SEVERANCE AGREEMENT

  
	
   

  	
   

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

  	
  8

  
	
   

  	
   

  
	
  Article 3

  
	
  POSITIONS AND DUTIES

  
	
   

  	
   

  
	
  Section 3.01. Employment; Positions

  	
  8

  
	
  Section 3.02. Duties and Services

  	
  8

  
	
  Section 3.03. Other Interests

  	
  8

  
	
   

  	
   

  
	
  Article 4

  
	
  CERTAIN EMPLOYEE REPRESENTATIONS AND AGREEMENTS; IPO
  EQUITY GRANT[S]

  
	
   

  	
   

  
	
  Section 4.01. Accredited Investor
  Representations

  	
  9

  
	
  Section 4.02. Transfer Restrictions

  	
  9

  
	
  Section 4.03. Life Insurance

  	
  9

  
	
  Section 4.04. IPO Equity Grants

  	
  9

  
	
   

  	
   

  
	
  Article 5

  
	
  CONFIDENTIAL INFORMATION, INVENTIONS,

  
	
  BUSINESS OPPORTUNITIES AND GOODWILL

  
	
   

  	
   

  
	
  Section 5.01. Confidential
  Information, Inventions, Business Opportunities and Goodwill

  	
  10

  
	
   

  	
   

  
	
  Article 6

  
	
  COMPENSATION AND BENEFITS

  
	
   

  	
   

  
	
  Section 6.01. Base Salary

  	
  10

  
	
  Section 6.02. Bonuses

  	
  10

  
	
  Section 6.03. Other Benefits

  	
  11

  
	
  Section 6.04. Expenses

  	
  11

  

 

 

	
  Section 6.05. Vacation and Sick
  Leave

  	
  11

  
	
  Section 6.06. Offices

  	
  12

  
	
   

  	
   

  
	
  Article 7

  
	
  TERMINATION OF EMPLOYMENT AND NOTICE OF TERMINATION
  OF EMPLOYMENT

  
	
   

  	
   

  
	
  Section 7.01. Termination of
  Employment

  	
  12

  
	
  Section 7.02. Notice of Termination
  of Employment

  	
  12

  
	
  Section 7.03. Deemed Resignations

  	
  13

  
	
   

  	
   

  
	
  Article 8

  
	
  SEVERANCE BENEFITS

  
	
   

  	
   

  
	
  Section 8.01. Death, Disability,
  Termination for Cause or Resignation Without Good Reason

  	
  13

  
	
  Section 8.02. Involuntary
  Termination

  	
  13

  
	
  Section 8.03. Death, Disability or
  Involuntary Termination After Agreement Termination Date

  	
  15

  
	
   

  	
   

  
	
  Article 9

  
	
  INTEREST ON LATE PAYMENTS

  
	
   

  	
   

  
	
  Section 9.01. Interest on Late
  Payments

  	
  15

  
	
   

  	
   

  
	
  Article 10

  
	
  CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY

  
	
   

  	
   

  
	
  Section 10.01. Gross-up Payment

  	
  15

  
	
  Section 10.02. Disposition of Claims

  	
  16

  
	
   

  	
   

  
	
  Article 11

  
	
  COMPETITION.

  
	
   

  	
   

  
	
  Section 11.01. Competition.

  	
  17

  
	
   

  	
   

  
	
  Article 12

  
	
  NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY
  INFORMATION

  
	
   

  	
   

  
	
  Section 12.01. Nondisclosure of
  Confidential and Proprietary Information

  	
  19

  
	
   

  	
   

  
	
  Article 13

  
	
  INVENTIONS

  
	
   

  	
   

  
	
  Section 13.01. Inventions

  	
  21

  

 

ii

 

	
  Article 14

  
	
  INJUNCTIVE RELIEF

  
	
   

  	
   

  
	
  Section 14.01. Injunctive Relief

  	
  21

  
	
   

  	
   

  
	
  Article 15

  
	
  NON-DISPARAGEMENT

  
	
   

  	
   

  
	
  Section 15.01. Non-Disparagement

  	
  21

  
	
   

  	
   

  
	
  Article 16

  
	
  GENERAL

  
	
   

  	
   

  
	
  Section 16.01. Survivorship

  	
  22

  
	
  Section 16.02. Arbitration

  	
  22

  
	
  Section 16.03. Payment Obligations
  Absolute

  	
  23

  
	
  Section 16.04. Successors

  	
  23

  
	
  Section 16.05. Severability

  	
  23

  
	
  Section 16.06. Non-alienation

  	
  23

  
	
  Section 16.07. Notices

  	
  23

  
	
  Section 16.08. Controlling Law and
  Waiver of Jury Trial

  	
  24

  
	
  Section 16.09. Release and Delayed
  Payment Restriction

  	
  24

  
	
  Section 16.10. Full Settlement

  	
  25

  
	
  Section 16.11. Unfunded Obligation

  	
  25

  
	
  Section 16.12. No Right to Continued
  Employment

  	
  25

  
	
  Section 16.13. Withholding of Taxes
  and Other Employee Deductions

  	
  25

  
	
  Section 16.14. Number and Gender

  	
  25

  
	
  Section 16.15. Entire
  Agreement

  	
  26

  

 

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]
EMPLOYMENT AGREEMENT

 

This EMPLOYMENT 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 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 fifth anniversary of the closing of the IPO.

 

“Annual Bonus”
shall have the meaning assigned to such term in Section 6.02.

 

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

 

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;

 

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

 

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.

 

“Base Salary” shall
have assigned to such term in Section 6.01.

 

“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

 

2

 

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 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 (other than Employee if he is serving in such
capacity) 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 (excluding Employee, if Employee is a member 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:

 

3

 

(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 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

 

4

 

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.

 

“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 7.02.

 

“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.

 

“Effective Time”
shall have the meaning assigned such term in the Reorganization Agreement.

 

“Excise Tax”
shall have the meaning assigned to such term in Section 10.01.

 

5

 

“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 16.07 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
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 10.01.

 

“Inventions”
shall have the meaning assigned to such term in Article 13.

 

“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 11.01(b).

 

“Notice of Termination of
Employment” shall have the meaning assigned to such term in Section 7.02.

 

“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

 

6

 

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 10.01.

 

“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 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).

 

7

 

“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), 100% 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, 100% of Annualized
Base Salary.

 

ARTICLE
2

EFFECTIVENESS; TERM OF AGREEMENT; TERMINATION OF SEVERANCE AGREEMENT

 

Section 2.01.  Effectiveness; Term of Agreement; Termination
of 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 7, this Agreement shall
terminate and be of no further force or effect on the Agreement Termination
Date.  Upon the effectiveness of this
Agreement, the 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 be void ab initio and
the Severance Agreement shall remain in full force and effect in accordance
with its terms as of such date.

 

ARTICLE
3

POSITIONS AND DUTIES

 

Section 3.01.  Employment; Positions.  Employee initially shall be
employed as
                              
of the Company.  The Company may
subsequently assign Employee to a different position with the Company or any
Affiliate of the Company or modify Employee’s duties, responsibilities and
reporting relationship.  Moreover, the
Company may assign this Agreement and Employee’s employment to any Affiliate of
the Company.

 

Section 3.02.  Duties and Services.  Employee agrees to serve in
the position(s) assigned pursuant to Section 3.02 and to perform
diligently and to the best of Employee’s abilities the duties and services
pertaining to such position(s), as well as such additional duties and services
that Employee from time to time may be reasonably directed to perform by the
Company. Employee’s employment shall also be subject to the policies maintained
and established by the Company that are of general applicability to the Company’s
Employees, as such policies may be amended from time to time.

 

Section 3.03.  Other Interests.  Employee agrees, during the
period of Employee’s employment by the Company, to devote substantially all of
Employee’s business time, energy and best efforts to the business and affairs
of 

 

8

 

the Company and its
Affiliates.  Notwithstanding the
foregoing, the parties acknowledge and agree that Employee may (a) engage
in and manage Employee’s passive personal investments and (b) engage in
charitable and civic activities; provided, however,
that such activities shall be permitted so long as such activities do not
conflict with the business and affairs of the Company or interfere with
Employee’s performance of Employee’s duties hereunder.

 

ARTICLE
4

CERTAIN EMPLOYEE REPRESENTATIONS AND AGREEMENTS; IPO EQUITY GRANTS

 

Section 4.01.  Accredited Investor Representations.  Employee hereby represents
to the Company that the representations set forth in Annex I to this Agreement (a) are
true and correct as of the date of this Agreement and (b) shall be true
and correct as of the date of the closing of the IPO.

 

Section 4.02.  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 4.03.  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 4.03,
and shall have no interest in any such policy.

 

Section 4.04.  IPO Equity Grants.  Immediately prior to the
Effective Time, Employee received [[X] units of Class C Interests (as
defined in the Partnership

 

9

 

Agreement) and](1) [X]
units of Class D Interests (as defined in the Partnership Agreement), 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](2) Exhibit B to this Agreement.

 

ARTICLE
5

CONFIDENTIAL INFORMATION, INVENTIONS,

BUSINESS OPPORTUNITIES AND GOODWILL

 

Section 5.01.  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
6

COMPENSATION AND BENEFITS

 

Section 6.01.  Base Salary. 
During the term of this Agreement, Employee shall receive a minimum,
annualized base salary of
$                      
(the “Base Salary”).  Employee’s Base Salary shall be reviewed
periodically by the Board (or a committee thereof) and, in the sole discretion
of the Board (or a committee thereof), the Base Salary may be increased (but
not decreased) effective as of any date determined by the Board (or a committee
thereof).  Employee’s Base Salary shall
be paid in equal installments in accordance with the Company’s standard policy
regarding payment of compensation to Employees but no less frequently than
monthly.

 

Section 6.02.  Bonuses. 
Employee shall be eligible to receive an annual, calendar-year bonus
(payable in a single lump sum) based on criteria determined in the discretion
of the Board (or a committee thereof) (the “Annual Bonus”),
it being understood that (a) the target bonus at planned or targeted
levels of performance shall equal 100% of Employee’s Base Salary and (b) the
actual amount of each Annual Bonus shall be determined in the discretion of the
Board

 

(1) 
If applicable.

 

(2) 
If applicable.

 

10

 

(or a committee
thereof).  The Company shall use
commercially reasonable efforts to pay each Annual Bonus with respect to a
calendar year on or before March 15 of the following calendar year (and in
no event shall an Annual Bonus be paid after December 31 of the following
calendar year).  If the Effective Time
occurs after January 1, 2010, then the Annual Bonus for calendar year 2010
shall be determined as if Employee’s employment with the Company commenced on January 1,
2010.

 

Section 6.03.  Other Benefits.  During Employee’s employment
hereunder, Employee shall be permitted to participate in all benefit plans and
programs of the Company, including improvements or modifications of the same,
which are now, or may hereafter be, available to other senior Employees of the
Company.  The Company shall not, however,
by reason of this Section 6.03, be obligated to institute, maintain, or
refrain from changing, amending, or discontinuing, any such benefit plan or
program, so long as such changes are similarly applicable to other senior
employees generally.

 

Section 6.04.  Expenses. 
The Company shall reimburse Employee for all reasonable business
expenses incurred by Employee in performing services hereunder, including all
expenses of travel and living expenses while away from home on business or at
the request of and in the service of the Company; provided, in each case, that
such expenses are incurred and accounted for in accordance with the policies
and procedures established by the Company. 
Any such reimbursement of expenses shall be made by the Company upon or
as soon as practicable following receipt of supporting documentation reasonably
satisfactory to the Company (but in any event not later than the close of Employee’s
taxable year following the taxable year in which the expense is incurred by
Employee); provided, however, that, upon Employee’s
termination of employment with the Company, in no event shall any additional
reimbursement be made prior to the date that is six months after Employee’s
termination of employment with the Company to the extent such payment delay is
required under section 409A(a)(2)(B)(i) of the Code.

 

Section 6.05.  Vacation and Sick Leave.  During Employee’s employment
hereunder, Employee shall be entitled to (a) sick leave in accordance with
the Company’s policies applicable to its senior Employees and (b) five
weeks paid vacation each calendar year (none of which may be carried forward to
a succeeding year except to the extent permitted under the Company’s vacation
policy generally applicable to its salaried employees).  For the calendar year during which the
Effective Time occurs, Employee’s sick leave and vacation entitlement for the
portion of such year from and after the effective date of this Agreement shall
be equal to the entitlements described in the preceding sentence but reduced by
the amount of sick leave and vacation Employee used during the portion of such
year preceding the Effective Time while employed by the Partnership.

 

11

 

Section 6.06.  Offices. 
Subject to Articles 3 and 6, Employee agrees to serve without
additional compensation, if elected or appointed thereto, as a director of the
Company or any Affiliate and as a member of any committees of the board of
directors of any such entities, and in one or more Employee positions of any
Affiliate.

 

ARTICLE
7

TERMINATION OF EMPLOYMENT AND NOTICE OF TERMINATION OF EMPLOYMENT

 

Section 7.01.  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 7.02.  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 7.02
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 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.

 

12

 

Section 7.03.  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
8

SEVERANCE BENEFITS

 

Section 8.01.  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.

 

Section 8.02.  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 16.09, 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, 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

 

13

 

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 8.02(a) or (b),
as applicable, and under Section 8.02(c), the aggregate amount payable
pursuant to Sections 8.02(a) or (b), as applicable, and Section 8.02(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 8.02(a) or (b), as applicable, and Section 8.02(c),
then Executive shall not be entitled to receive any payments pursuant to 8.02(a) or
(b), as applicable, or Section 8.02(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 8.02(a) or (b), as applicable, and Section 8.02(c), then
the reduction shall be effected as follows: first, the payment provided for in Section 8.02(c) shall
be

 

14

 

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 8.02(c), and if necessary, payments
of the amounts provided for in Section 8.02(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 8.02(a) or
(b), as applicable, and Section 8.02(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 8.02(a) or (b), as applicable, and Section 8.02(c) shall
be repaid to the Company.

 

Section 8.03.  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 16.09, on the Pro Rata Bonus Payment Date an amount
in cash equal to the Pro Rata Bonus.

 

ARTICLE
9

INTEREST ON LATE PAYMENTS

 

Section 9.01.  Interest on Late Payments.  If any payment provided for
in Section 8.02(a), (b) or (c) or Section 8.03 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 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
10

CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY

 

Section 10.01.  Gross-up Payment.  Notwithstanding anything to
the contrary in this Agreement (but subject to the remaining provisions of this
Article 10), 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

 

15

 

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 8, 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 8 (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 8 shall be
reduced pursuant to this Section 10.01. 
The Company’s obligation to make a Gross-up Payment under this Article 10
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.

 

Section 10.02.  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

 

16

 

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 11

COMPETITION.

 

Section 11.01.  Competition.

 

(a)        Employee and the Company agree to the restrictive
covenants of this Article 11:  (i) in
consideration for the confidential information provided by the Company to
Employee pursuant to Article 5 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 or its
subsidiaries 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 11.01(b), Employee shall not at any time while
employed by the Company and for a 1-year 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 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 11
for Employee to (A) provide services to any person or entity engaged in
the Business 

 

17

 

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 11 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.

 

(e)        Employee hereby represents to the Company that he
has read and understands, and agrees to be bound by, the terms of this Article 11.  Employee acknowledges that the geographic
scope and duration of the covenants contained in this Article 11 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 

 

18

 

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 11, (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 12

NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION

 

Section 12.01.  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 12.01(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-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 

 

19

 

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 12 and Article 13,
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.

 

20

 

ARTICLE 13

INVENTIONS

 

Section 13.01.  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 14

INJUNCTIVE RELIEF

 

Section 14.01.  Injunctive Relief.  It is recognized and acknowledged
by Employee that a breach of the covenants contained in Articles 11, 12, 13 and
15 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 11,
12 ,13 and 15, 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 15

NON-DISPARAGEMENT

 

Section 15.01.  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, either orally or in writing, and (b) the Company agrees that
it and its subsidiaries will (i) not make any formal statements that
disparage in any material respect 

 

21

 

Employee and (ii) use commercially
reasonable efforts to advise its directors and officers not to disparage in any
material respect Employee.

 

ARTICLE 16

GENERAL

 

Section 16.01.  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 16.02.  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 11,
12, 13 or 15 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 11, 12, 13 or 15, 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 

 

22

 

reimbursement of reasonable legal fees and
expenses required under this Section 16.02 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 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 16.03.  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 16.04.  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 16.05.  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 16.06.  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 16.07.  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 

 

23

 

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 16.08.  Controlling Law and Waiver of Jury
Trial.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
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 4.02 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 4.02 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 16.09.  Release and Delayed Payment Restriction.

 

(a)        As a condition to the receipt of any benefit under Article 5
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 C (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 16.09(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 

 

24

 

provided under Section 409A
of the Code without being subject to such additional taxes and interest.  If this Section 16.09(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 16.09(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 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 16.10.  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 16.11.  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 16.12.  No Right to Continued Employment.  Employee and the Company
recognize and agree that subject to the terms of this Agreement (including the
notice provisions of Section 7.02), (i) the Company may terminate
Employee’s employment at any time, for any reason or no reason at all and (ii) Employee
may terminate his employment at any time, for any reason or no reason at all.

 

Section 16.13.  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 16.14.  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.

 

25

 

Section 16.15.  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.

 

26

 

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

 

	
   

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  COBALT
  INTERNATIONAL ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  COBALT
  INTERNATIONAL ENERGY, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

27

 

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.

 

I-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][Class C]
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][Class C] 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.

 

II-1

 

“Termination Date” means the earliest of (i) the fifth
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][Class C]
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][Class C]
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 

 

2

 

descendant or legally adopted child of a sibling of Employee or a trust
or other entity for the primary benefit 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][Class C] 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

(if applicable)

 

A-1

 

EXHIBIT B

 

FORM OF RESTRICTED STOCK AWARD AGREEMENT
— CLASS D INTERESTS

 

B-1

 

EXHIBIT C

 

FORM OF RELEASE

 

For and in consideration of certain payments and
other benefits due to [·] (“Employee”) pursuant to the Employment Agreement (the “Employment 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 

 

C-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 Employment
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.

 

C-2

 

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

 

	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  [Employee]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cobalt
  International Energy, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

C-3

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