INCENTIVE STOCK OPTION
AGREEMENT
1. Grant of Stock Option
. As of the Grant Date
(identified in the award notice provided to the Optionee
electronically with this Agreement (the “ Award Notice
”)), PetroQuest Energy, Inc., a Delaware corporation (the
“ Company ”), hereby grants an Incentive Stock
Option (the “ Option ”) to the Optionee
(identified in the Award Notice), an employee of the Company, to
purchase the number of shares of the Company’s common stock,
$.001 par value per share (the “ Common Stock
”), identified in the Award Notice (the “ Shares
”), subject to the terms and conditions of this agreement
(the “ Agreement ”) and the Company’s 1998
Incentive Plan, as Amended and Restated effective March 16,
2006 (the “ Plan ”) which is hereby incorporated
herein in its entirety by reference. The Shares, when issued to
Optionee upon the exercise of the Option, shall be fully paid and
nonassessable. The Option is an “incentive stock
option” as defined in Section 422 of the Internal
Revenue Code. The Optionee’s electronic acceptance of the
Award Notice shall be Optionee’s agreement to be bound by the
terms of the Award Notice, this Agreement and Plan with respect to
the Option.
2. Definitions
. All capitalized terms used herein
shall have the meanings set forth in the Plan unless otherwise
specifically provided herein. The Optionee’s Award Notice
sets forth meanings for various capitalized terms used in this
Agreement.
3. Option Term
. The Option shall commence on the
Grant Date (identified in the Award Notice) and terminate on the
date immediately prior to the tenth (10 th )
anniversary of the Grant Date. The period during which the Option
is in effect and may be exercised is referred to herein as the
“ Option Period. ”
4. Option
Price . The Option
Price per Share is identified in the Award Notice.
5. Vesting . The total number of Shares subject to this
Option shall vest in accordance with the Vesting Schedule as
follows: 33.3% on the first anniversary of the Grant Date, 33.3% on
the second anniversary of the Grant Date and 33.4% on the third
anniversary of the Grant Date. The Shares may be purchased at any
time after they become vested, in whole or in part, during the
Option Period; provided, however, the Option may only be
exercisable to acquire whole Shares. The right of exercise provided
herein shall be cumulative so that if the Option is not exercised
to the maximum extent permissible after vesting, the vested portion
of the Option shall be exercisable, in whole or in part, at any
time during the Option Period.
6. Method of Exercise
. The Option is exercisable by
delivery of a written notice to the attention of the Secretary of
the Company at the address for notices to the Company provided
below, signed by the Optionee, specifying the number of Shares to
be acquired on, and the effective date of, such exercise. The
Optionee may withdraw notice of exercise of this Option, in
writing, at any time prior to the close of business on the business
day preceding the proposed exercise date.
7. Method of Payment
. The Option Price upon exercise of
the Option shall be payable to the Company in full either:
(i) in cash or its equivalent, or (ii) subject to prior
approval by the Committee in its discretion, by tendering
previously acquired Shares having an aggregate Fair Market Value
(as defined in the Plan) at the time of exercise equal to the total
Option Price (provided that the Shares must have been held by the
Optionee for at least six (6) months prior to their tender to
satisfy the Option Price), or (iii) subject to prior approval
by the Committee in its discretion, by withholding Shares which
otherwise would be acquired on exercise having an aggregate Fair
Market Value at the time of exercise equal to the total Option
Price (as determined pursuant to Section 2.3 of the Plan), or
(iv) subject to prior approval by the Committee in its
discretion, by a combination of (i), (ii), and (iii) above.
Any payment in shares of Common Stock shall be effected by the
delivery of such shares to the Secretary of the Company, duly
endorsed in blank or accompanied by stock powers duly executed in
blank, together with any other documents as the Secretary may
require. If the payment of the Option Price is remitted partly in
Shares, the balance of the payment of the Option Price shall be
paid in either cash, certified check, bank cashiers’ check,
or by wire transfer.
The Committee, in its discretion, may allow
(i) a “cashless exercise” as permitted under
Federal Reserve Board’s Regulation T, 12 CFR
Part 220 (or its successor), and subject to applicable
securities law restrictions and tax withholdings, or (ii) any
other means of exercise which the Committee, in its discretion,
determines to be consistent with the Plan’s purpose and
applicable law.
As soon as practicable after receipt of a
written notification of exercise and full payment, the Company
shall deliver to or on behalf of the Optionee, in the name of the
Optionee or other appropriate recipient, Share certificates for the
number of Shares purchased under the Option. Such delivery shall be
effected for all purposes when a stock transfer agent of the
Company shall have deposited such certificates in the United States
mail, addressed to Optionee or other appropriate
recipient.
8. Restrictions on
Exercise . The Option
may not be exercised if the issuance of such Shares or the method
of payment of the consideration for such Shares would constitute a
violation of any applicable federal or state securities or other
laws or regulations, including any such laws or regulations or
Company policies respecting blackout periods, or any rules or
regulations of any stock exchange on which the Common Stock may be
listed.
9. Termination of
Employment .
Voluntary or involuntary termination of Employment and the death or
Disability of Optionee shall affect Optionee’s rights under
the Option as follows:
(a) Termination for Cause . The vested
and non-vested portions of the Option shall expire on 12:01 am.
(CST) on the date of termination of Employment and shall not
be exercisable to any extent if Optionee’s Employment with
the Company is terminated for Cause (as defined in the Plan at the
time of such termination of Employment).
(b) Other Involuntary Termination or
Voluntary Termination . If Optionee’s Employment with the
Company is terminated for any reason other than for Cause,
retirement, death or Disability (as defined in the Plan at the time
of termination of Employment), then (i) the
non-veste
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