Exhibit 10.1

EXECUTION VERSION

AMENDED AND RESTATED

PETROQUEST ENERGY, INC.

2016 LONG TERM INCENTIVE PLAN

(Effective May 16, 2018)

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TABLE OF CONTENTS

 

SECTION 1 ESTABLISHMENT; PURPOSE AND TERM OF PLAN

     1  

1.1

   Establishment      1  

1.2

   Purpose      1  

1.3

   Term of Plan      1  

SECTION 2 DEFINITIONS AND CONSTRUCTION

     1  

2.1

   Definitions      1  

2.2

   Construction      9  

SECTION 3 ADMINISTRATION

     9  

3.1

   Administration by the Committee      9  

3.2

   Authority of Officers      9  

3.3

   Powers of the Committee      9  

3.4

   Administration with Respect to Insiders      11  

3.5

   Indemnification      11  

SECTION 4 SHARES SUBJECT TO PLAN

     12  

4.1

   Maximum Number of Shares Issuable      12  

4.2

   Adjustments for Changes in Capital Structure      13  

4.3

   Shares Available for Awards and Payouts      14  

SECTION 5 ELIGIBILITY AND AWARD LIMITATIONS

     15  

5.1

   Persons Eligible for Awards      15  

5.2

   Award Agreements      15  

5.3

   Award Grant Restrictions      16  

5.4

   Fair Market Value Limitations for Incentive Stock Options      16  

5.5

   Repurchase Rights, Right of First Refusal and Other Restrictions on Stock   
  16  

5.6

   Minimum Vesting Periods      17  

SECTION 6 TERMS AND CONDITIONS OF OPTIONS

     17  

6.1

   Exercise Price      17  

6.2

   Exercisability, Vesting and Term of Options      17  

6.3

   Payment of Exercise Price      18  

SECTION 7 RESTRICTED STOCK

     19  

7.1

   Award of Restricted Stock      19  

7.2

   Restrictions      19  

7.3

   Issuance of Stock      20  

SECTION 8 OTHER STOCK-BASED AWARDS, PERFORMANCE AWARDS AND DIVIDENDS, OR
DIVIDEND EQUIVALENTS

     21  

8.1

   Grant of Other Stock-Based and Performance Awards      21  

8.2

   Other Stock-Based Award and Performance Awards Terms      21  

8.3

   Dividends or Dividend Equivalents      24  

8.4

   Limitations for Director Awards      24  

 

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SECTION 9 EFFECT OF TERMINATION OF SERVICE

     25  

9.1

   Option Exercisability and Award Vesting      25  

9.2

   Extension of Option if Exercise Prevented by Law      26  

9.3

   Extension if Participant Subject to Section 16(b)      26   SECTION 10
WITHHOLDING TAXES      26  

10.1

   Tax Withholding      26  

10.2

   Share Withholding      26  

10.3

   Incentive Stock Options      27  

SECTION 11 PROVISION OF INFORMATION

     27  

SECTION 12 COMPLIANCE WITH SECURITIES LAW, OTHER APPLICABLE LAWS AND COMPANY
POLICIES

     27  

SECTION 13 NONTRANSFERABILITY OF AWARDS AND STOCK

     28  

SECTION 14 NONCOMPETITIVE ACTIONS

     28  

SECTION 15 TERMINATION OR AMENDMENT OF PLAN

     29  

SECTION 16 STOCKHOLDER APPROVAL

     29  

SECTION 17 NO GUARANTEE OF TAX CONSEQUENCES

     29  

SECTION 18 SEVERABILITY

     30  

SECTION 19 GOVERNING LAW

     30  

SECTION 20 SUCCESSORS

     30  

SECTION 21 RIGHTS AS A STOCKHOLDER

     30  

SECTION 22 NO SPECIAL EMPLOYMENT OR SERVICE RIGHTS

     30  

SECTION 23 REORGANIZATION OF COMPANY

     31  

SECTION 24 CODE SECTION 409A

     31  

SECTION 25 ASSUMPTIONS OF AWARDS AND ADJUSTMENTS UPON A CHANGE IN CONTROL

     32  

 

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AMENDED AND RESTATED

PETROQUEST ENERGY, INC.

2016 LONG TERM INCENTIVE PLAN

SECTION 1

ESTABLISHMENT; PURPOSE AND TERM OF PLAN

 

1.1 Establishment

PetroQuest Energy, Inc. established the PetroQuest Energy, Inc. 2016 Long Term
Incentive Plan which was approved by the Company’s stockholders effective as of
May 18, 2016, and the Board has authorized the amendment and restatement of the
PetroQuest Energy, Inc. 2016 Long Term Incentive Plan, effective May 16, 2018
(the “Effective Date”) subject to the approval of the Company’s stockholders
(the “Plan”) to increase the number of shares of Stock available for grants for
Awards under the Plan and to provide such other changes as provided herein. This
Plan shall not extend the term of any Award granted prior to the Effective Date.

 

1.2 Purpose

The purpose of the Plan is to advance the interests of the Company and its
stockholders by providing an incentive to attract, retain and reward persons
performing services for the Company and by motivating such persons to contribute
to the growth and profitability of the Company.

 

1.3 Term of Plan

The Plan shall continue in effect until the earlier of its termination by the
Board or the date on which all of the shares of Stock available for issuance
under the Plan have been issued and all restrictions on such shares of Stock
under the terms of the Plan and the agreements evidencing Awards granted under
the Plan have lapsed. However, all Awards shall be granted on or before the date
which is ten (10) years from the Effective Date. No future awards will be
granted under the Company’s 2013 Incentive Plan (“2013 Plan”), but all
outstanding awards under the 2013 Plan shall continue under the 2013 Plan until
they expire according to their terms.

SECTION 2

DEFINITIONS AND CONSTRUCTION

 

2.1 Definitions

Whenever used herein, the following terms shall have their respective meanings
set forth below:

(a)    “2013 Plan” shall have the meaning described in Section 1.3.

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(b)    “Affiliate” means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person and shall include
a Subsidiary. The term “control” includes, without limitation, the possession,
directly or indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. With respect to any Award that is deferred compensation subject to
Code Section 409A, for the purposes of applying Code Section 409A to such Award
the term Affiliate shall mean all Persons with whom the Participant’s employer
would be considered a single employer under Code Section 414(b) or 414(c) as
defined and modified in Code Section 409 as determined by the Committee.
Notwithstanding the foregoing, with respect to Nonstatutory Stock Options and
Stock Appreciation Rights, if necessary for such Awards to be exempt from Code
Section 409A, as determined by the Committee, for purposes of grants of such
Awards, Affiliate shall only include an entity if the Stock would constitute
“service recipient stock” within the meaning of Code Section 409A.

(c)    “Award” shall mean a grant of an Option, Restricted Stock, Other
Stock-Based Award, including without limitation, Stock Appreciation Rights,
Performance Awards, Dividends and Dividend Equivalents or Director Awards to a
Participant under this Plan.

(d)    “Award Agreement” means a written agreement between the Company and a
Participant setting forth the terms, conditions and restrictions of the Award
granted to the Participant and any shares of Stock acquired upon the exercise
thereof, and which may be in electronic form. The Award Agreement consists of
the Award Agreement and the Notice of Grant of an Award incorporated therein by
reference, or such other form or forms as the Committee may approve from time to
time, and which may be in electronic form.

(e)    “Board” means the Board of Directors of the Company.

(f)    “Cashless Exercise” shall have the meaning set forth in Section 6.3(a)
hereto.

(g)    “Cause” shall mean, except as otherwise defined in the Participant’s
Award Agreement, when used in connection with the termination of a Participant’s
Service, the termination of the Participant’s Service by the Company or any
Company Affiliate by reason of (i) the conviction of the Participant by a court
of competent jurisdiction as to which no further appeal can be taken of a crime
involving moral turpitude or a felony; (ii) the commission by the Participant of
a material act of fraud upon the Company or any Company Affiliate, or any
customer or supplier thereof; (iii) the misappropriation of any funds or
property of the Company or any Company Affiliate, or any customer or supplier
thereof; (iv) the willful, continued and unreasonable failure by the Participant
to perform the material duties assigned to him that is not cured to the
reasonable satisfaction of the Company within 7 days after written notice of
such failure is provided to Participant by the Board or Chief Executive Officer
of the Company (the “CEO”) (or by another officer of the Company or a Company
Affiliate who has been

 

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designated by the Board or CEO for such purpose); (v) the engagement by the
Participant in any direct and material conflict of interest with the Company or
any Company Affiliate without compliance with the Company’s or Company
Affiliate’s conflict of interest policy, if any, then in effect; or (vi) the
engagement by the Participant, without the written approval of the Board or
CEO, in any material activity which competes with the business of the Company or
any Company Affiliate or which would result in a material injury to the
business, reputation or goodwill of the Company or any Company Affiliate.

(h)    A “Change in Control” shall mean any of the following events occurring
with respect to the Company:

(i)    The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty
percent (50%) or more of either (x) the then outstanding shares of Stock (the
“Outstanding Company Stock”) or (y) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided,
however, that the following acquisitions shall not constitute a Change in
Control: any acquisition directly from the Company or any Subsidiary, any
acquisition by the Company or any Subsidiary or by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary, or any
acquisition by any corporation pursuant to a reorganization, merger,
consolidation or similar business combination involving the Company (a
“Merger”), if, following such Merger, the conditions described in clauses
(x) and (y) Section 2.1(h)(iii) (below) are satisfied;

(ii)    Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company’s shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board;

(iii)    A Merger, unless immediately following such Merger, (x) substantially
all of the holders of the Outstanding Company Voting Securities immediately
prior to Merger beneficially own, directly or indirectly, more than 50% of the
common stock of the corporation resulting from such Merger (or its parent
corporation) in substantially the same proportions as their ownership of
Outstanding Company Voting Securities immediately prior to such Merger and
(y) at least a majority of the members of the board of directors of the
corporation

 

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resulting from such Merger (or its parent corporation) were members of the
Incumbent Board at the time of the execution of the initial agreement providing
for such Merger;

(iv)    The sale or other disposition of all or substantially all of the assets
of the Company, unless immediately following such sale or other disposition,
(x) substantially all of the holders of the Outstanding Company Voting
Securities immediately prior to the consummation of such sale or other
disposition beneficially own, directly or indirectly, more than 50% of the
common stock of the corporation acquiring such assets in substantially the same
proportions as their ownership of Outstanding Company Voting Securities
immediately prior to the consummation of such sale or disposition, and (y) at
least a majority of the members of the board of directors of such corporation
(or its parent corporation) were members of the Incumbent Board at the time of
execution of the initial agreement or action of the Board providing for such
sale or other disposition of assets of the Company; or

(v)    The liquidation or dissolution of the Company.

Notwithstanding the occurrence of any of the foregoing events set out in this
Section 2.1(h) which would otherwise result in a Change in Control, the Board
may determine in its discretion, if it deems it to be in the best interest of
the Company, that an event or events otherwise constituting or reasonably
leading to a Change in Control shall not be deemed a Change in Control hereunder
except with respect to any Award subject to Code Section 409A. Such
determination shall be effective only if it is made by the Board prior to the
occurrence of an event that otherwise would be, or reasonably lead to, a Change
in Control, or after such event only if made by the Board a majority of which is
composed of directors who were members of the Board immediately prior to the
event that otherwise would be, or reasonably lead to, a Change in Control.

(i)    “Code” means the Internal Revenue Code of 1986, as amended, and any
applicable notices, rulings and regulations promulgated thereunder.

(j)    “Committee” means the Board or, if so appointed by the Board, the
compensation committee of the Board or any other committee duly appointed by the
Board to administer the Plan, which such committee may consist of one or more
natural persons who are non-employee directors under the Rule 16b-3; provided
however, that during any period that the performance-based exception is still
available under Code Section 162(m) for any Award granted prior to the Effective
Date and the Company is a Publicly Held Corporation within the meaning of Code
Section 162(m) or applicable securities laws, the Committee shall consist of not
less than two directors of the Board who fulfill the “outside director”
requirements of Code Section 162(m) with respect to such Awards.

(k)    “Company” means PetroQuest Energy, Inc., a Delaware corporation, or any
successor corporation thereto.

 

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(l)    “Consultant” means an individual who is a natural person engaged to
provide consulting or advisory services (other than as an Employee or a
Director) to the Company or its Affiliates, including individuals who serve as
directors of the Company or an Affiliate of the Company but who are not a
Director, provided that the identity of such individual, the nature of such
services or the entity to which such services are provided are not in connection
with the offer or sale of securities in a capital raising transaction, and do
not directly or indirectly promote or maintain a market for the Company’s
securities or would not preclude the Company from offering or selling securities
to such individual pursuant to the Plan in reliance on either the exemption from
registration provided under the Securities Act or, if the Company is required to
file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration
on a Form S-8 Registration Statement under the Securities Act.

(m)    “Director” means a member of the Board who is not, at the time of grant
of an Award, an Employee of the Company or any Company Affiliate, Parent of the
Company or a Subsidiary (within the meaning of Rule 16b-3) and who is certified
by the Board as an independent director; provided, however, that a person who is
a control person or director of an entity that is the beneficial owner of
twenty-five percent (25%) or more of outstanding shares of Stock shall not be
deemed to be a “non-employee” director.

(n)    “Disability” means, unless otherwise defined in the Award Agreement, as
determined by the Committee in its discretion exercised in good faith, a
physical or mental condition of the Employee that would entitle him to
payment of disability income payments under the Company’s long term disability
insurance policy or plan for employees, as then effective, if any; or in the
event that the Participant is not covered, for whatever reason, under the
Company’s long-term disability insurance policy or plan, Disability means a
permanent and total disability as defined in Section 22(e)(3) of the Code. A
determination of Disability may be made by a physician selected or approved by
the Committee and, in this respect, the Participant, by accepting an Award,
agrees to submit to any reasonable examination by such physician upon request.

(o)    “Dividends or Dividend Equivalents” means an Award as specified in
Section 8.3.

(p)    “Effective Date” shall have the meaning set forth in Section 1.1 hereto.

(q)    “Employee” means any individual treated as an employee (including a
director of the Company or a Company Affiliate who is also treated as an
employee) of the Company on the records of the Company or of any of the
Company’s Affiliates on the records of such Affiliate and, with respect to any
Incentive Stock Option granted to such individual, who is an employee of the
Company or a “Parent” (which is a parent corporation of the Company within the
meaning of Section 424(e) of the Code, whether now or hereinafter existing) or a
Subsidiary of the Company for purposes of Sections 422, 424 and 3401(c) of the
Code; provided, however, that neither service as a director of the Company or of
a Company Affiliate nor payment of a director’s fee shall be sufficient to
constitute employment for purposes of the Plan. The Company shall

 

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determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of
such individual’s employment or termination of employment, as the case may be.
For purposes of an individual’s rights, if any, under the Plan as of the time of
the Company’s determination, all such determinations by the Company shall be
final, binding and conclusive, notwithstanding that the Company, the Board, the
Committee or any court of law or governmental agency subsequently makes a
contrary determination.

(r)    “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(s)    “Fair Market Value” means as follows:

If the Company is not a Publicly Held Corporation within the meaning of Code
Section 162(m), Code Section 409A or applicable securities laws at the time a
determination of the Fair Market Value of a share of Stock is required to be
made hereunder, the determination of Fair Market Value for purposes of the Plan
shall be made by the Committee in its discretion exercised in good faith, and to
the extent any Award is intended to be exempt from Code Section 409A, consistent
with Code Section 409A as it shall determine. In this respect, the Committee may
rely on such financial data, appraisals, valuations, experts, and other sources
as, in its sole and absolute discretion, it deems advisable under the
circumstances.

While the Company is a Publicly Held Corporation within the meaning of Code
Section 162(m), Code Section 409A or applicable securities laws, the Fair Market
Value of one share of Stock on the date in question is deemed to be (i) the
closing sales price on the immediately preceding trading day of a share of Stock
as reported on the New York Stock Exchange or other principal securities
exchange on which shares of Stock are then listed or admitted to trading, or
(ii) if not quoted on the New York Stock Exchange or such other principal
securities exchange, the average of the closing bid and asked prices on the
immediately preceding trading day for a share of Stock as quoted by the National
Quotation Bureau’s “pink sheets” or the National Association of Securities
Dealers’ OTC Bulletin Board System, or (iii) any other method permitted by Code
Section 409A as determined by the Committee in its discretion and consistently
applied. If there was no public trade of Stock on the date in question, Fair
Market Value shall be determined by reference to the last preceding date on
which such a trade was so reported.

Notwithstanding the foregoing, from and after the Effective Date to the extent
the performance-based exception under Code Section 162(m) is not available for a
previously granted Award or for Awards granted after the Effective Date, the
determination of Fair market Value shall not require compliance with the
performance-based exception under Code Section 162(m).

(t)    “Incentive Stock Option” means an Option intended to be (as set forth in
the Award Agreement) and which qualifies as an incentive stock option within the
meaning of Section 422(b) of the Code.

(u)    “Insider” means an Officer, a Director or other person whose transactions
in Stock are subject to Section 16 of the Exchange Act.

 

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(v)    “New Shares” shall have the meaning set forth in Section 4.2 hereto.

(w)    “Nonstatutory Stock Option” means an Option not intended to be (as set
forth in the Award Agreement) or which does not qualify as an Incentive Stock
Option.

(x)    “Notice of Grant of an Award” means the Notice of Grant of an Award
executed by the Company and the Participant on the date of the grant of the
Award. The Notice of Grant of an Award and the execution thereof may be effected
by electronic form in accordance with Company policies.

(y)    “Officer” means any person designated by the Board as an officer of the
Company.

(z)    “Option” means a right to purchase Stock pursuant to the terms and
conditions of the Plan. An Option may be either an Incentive Stock Option or a
Nonstatutory Stock Option.

(aa)    “Option Expiration Date” shall have the meaning set forth in
Section 9.1(a) hereto.

(bb)    “Other Stock-Based Awards” shall mean Awards described in Section 8 and
shall include, without limitation, Stock Appreciation Rights.

(cc)    “Participant” means an Employee, Director or Consultant who has been
granted one or more Awards hereunder.

(dd)    “Performance Awards” shall mean Awards described in Section 8.

(ee)    “Permitted Transferee” has the meaning provided such term in Section 13.

(ff)    “Person” means any individual or other natural person, partnership,
corporation, limited liability company, group, trust or other legal entity.

(gg)    “Plan” shall have the meaning set forth in Section 1.1 hereto.

(hh)    “Publicly Held Corporation” shall have the meaning of such term in Code
Section 162(m).

(ii)     “Retirement” means, unless otherwise defined in the Award Agreement,
the Participant’s termination of employment after age 65 and 10 years of service
with the Company or Company Affiliate.

(jj)    “Restricted Stock” shall mean an Award granted to a Participant pursuant
to Section 7 hereof.

 

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(kk)    “Restriction Period” means the period of time determined by the
Committee and set forth in the Award Agreement during which the transfer of
Restricted Stock by the Participant is restricted.

(ll)    “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from
time to time, or any successor rule or regulation.

(mm)    “Securities Act” means the Securities Act of 1933, as amended.

(nn)    “Section 409A Plan” shall have the meaning described in Section 24.

(oo)    “Service” means a Participant’s employment or service with the Company
or any of its Affiliates, whether in the capacity of an Employee, a Director or
a Consultant. A Participant’s Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders
Service to the Company or Affiliate (or in the case of an Incentive Stock Option
the parent or Subsidiary of the Company) or a change in the Company or Affiliate
(or in the case of an Incentive Stock Option the parent or Subsidiary of the
Company) for which the Participant renders such Service, provided that there is
no interruption or termination of the Participant’s Service. Furthermore, a
Participant’s Service with the Company or an Affiliate (or in the case of an
Incentive Stock Option the parent or Subsidiary of the Company) shall not be
deemed to have terminated if the Participant takes any military leave, temporary
illness leave, authorized vacation or other bona fide leave of absence;
provided, however, that if any such leave exceeds three (3) months, the
Participant’s Service shall be deemed to have terminated unless the
Participant’s right to return to Service with the Company is provided by either
statute or contract or Board approval. Notwithstanding the foregoing, unless
otherwise designated by the Company or provided by statute or contract, a leave
of absence shall not be treated as Service. The Participant’s Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the company for which the Participant performs Service ceasing to be the Company
or an Affiliate (or in the case of an Incentive Stock Option the parent or
Subsidiary of the Company). Subject to the foregoing, the Company, in its
discretion, shall determine whether the Participant’s Service has terminated and
the effective date of such termination, and provided further that respect to an
Incentive Stock Option Service shall be consistent with the employment
requirements of Code Sections 422 and 424 for tax treatment as an Incentive
Stock Option. Notwithstanding the foregoing, with respect to any Award that is
subject to 409A, separation from service shall be determined by the Committee
under the applicable rules of Code Section 409A.

(pp)    “Stock” means the common stock of the Company, par value $0.001 per
share, as adjusted from time to time in accordance with Section 4.2 or
Section 25 hereto.

(qq)    “Stock Appreciation Right” or “SAR” Shall mean a stock-based right
granted under Section 8.1.

 

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(rr)    “Subsidiary” means any corporation (whether now or hereafter existing)
which constitutes a “subsidiary” of the Company, as defined in Section 424(f) of
the Code.

(ss)    “Substitute Awards” shall have the meaning in Section 4.1.

(tt)    “Ten Percent Owner Participant” means a Participant who, at the time an
Option is granted to the Participant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or parent or Subsidiary within the meaning of Section 422(b)(6) of the
Code.

(uu)    “Term” shall have the meaning described in Section 15.

 

2.2 Construction

Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when
otherwise indicated by the context, the singular shall include the plural and
the plural shall include the singular. Words of the masculine gender shall
include the feminine and neuter, and vice versa. Use of the term “or” is not
intended to be exclusive, unless the context clearly requires otherwise. Section
headings as used herein are inserted solely for convenience and reference and do
not constitute any part of the interpretation or construction of the Plan.

SECTION 3

ADMINISTRATION

 

3.1 Administration by the Committee

The Plan shall be administered by the Committee. All questions of interpretation
of the Plan, construction of its terms, or of any Award shall be determined by
the Committee, and such determinations shall be final and binding upon all
persons having an interest in the Plan or such Award.

 

3.2 Authority of Officers

Any Officer shall have the authority to act on behalf of the Company with
respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the
Officer has apparent authority with respect to such matter, right, obligation,
determination or election.

 

3.3 Powers of the Committee

In addition to any other powers set forth in the Plan and subject to the
provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:

(a)    to determine the persons to whom, and the time or times at which, Awards
shall be granted and the number of shares of Stock to be subject to each Award;

 

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(b)    to designate Awards as Restricted Stock or Options or Other Stock-Based
Awards or Performance Awards or Dividends or Dividend Equivalents, and to
designate Options as Incentive Stock Options or Nonstatutory Stock Options;

(c)    to determine the Fair Market Value of shares of Stock or other property;

(d)    to determine the terms, conditions and restrictions applicable to each
Award (which need not be identical) and any shares of Stock acquired upon the
exercise and/or vesting thereof, including, without limitation, (i) the exercise
price of the Option or Stock Appreciation Right, (ii) the method of payment for
shares of Stock purchased upon the exercise and/or vesting of an Award,
(iii) the method for satisfaction of any tax withholding obligation arising in
connection with the Award or such shares of Stock, including by the withholding
or delivery of shares of Stock, (iv) the timing, terms and conditions, including
but not limited to performance goals, of the exercisability of the Award or the
vesting of any shares of Stock, (v) the time of the expiration of the Award,
(vi) the effect of the Participant’s termination of Service on any of the
foregoing, (vii) the provision for electronic delivery of Awards and/or book
entry, and (viii) all other terms, conditions and restrictions applicable to the
Award or such shares of Stock not inconsistent with the terms of the Plan;

(e)    to approve one or more forms of the Award Agreement;

(f)    to amend, modify, extend, cancel, or renew any Award, or to waive any
restrictions or conditions applicable to any Award or any shares acquired upon
the exercise thereof; provided, however, that no such amendment, modification,
extension or cancellation shall materially adversely affect a Participant’s
Award without a Participant’s consent;

(g)    to accelerate, continue, extend or defer the exercisability and/or
vesting of any Award, including with respect to the period following a
Participant’s termination of Service;

(h)    to prescribe, amend or rescind rules, guidelines and policies relating to
the Plan, or to adopt supplements to, or alternative versions of, the Plan,
including, without limitation, as the Committee deems necessary or desirable to
comply with the laws of, or to accommodate the tax policy or custom of, foreign
jurisdictions whose citizens may be granted Awards;

(i)    to correct any defect, supply any omission or reconcile any inconsistency
in the Plan or any Award Agreement and to make all other determinations and take
such other actions with respect to the Plan or any Award as the Committee may
deem advisable to the extent not inconsistent with the provisions of the Plan or
applicable law; and

(j)    notwithstanding the foregoing, except as provided in Sections 4.1, 4.2,
4.3 and Section 25, the terms of an outstanding Award may not be amended by the
Committee, without approval of the Company’s stockholders, to: reprice an Award
or otherwise (i) reduce the exercise price of an outstanding Option or to reduce
the exercise

 

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price of an outstanding Stock Appreciation Right, (ii) cancel an outstanding
Option or outstanding Stock Appreciation Right in exchange for other Options or
Stock Appreciation Rights with an exercise price that is less than the exercise
price of the cancelled Option or the cancelled Stock Appreciation Right, as
applicable, or (iii) cancel an outstanding Option with an exercise price that is
greater than the Fair Market Value of a share of Stock on the date of
cancellation or cancel an outstanding Stock Appreciation Right with an exercise
price that is greater than the Fair Market Value of a share of Stock on the date
of cancellation in exchange for cash or another Award. In addition, no Option
reloading will be permitted.

 

3.4 Administration with Respect to Insiders

With respect to participation by Insiders in the Plan, at any time that any
class of equity security of the Company is registered pursuant to Section 12 of
the Exchange Act, the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3 and all other applicable laws, including any
required blackout periods. At any time the Company is required to comply with
Securities Regulation BTR, all transactions under this Plan respecting the
Company’s securities shall comply with Securities Regulation BTR and the
Company’s insider trading policies, as revised from time to time, or such other
similar Company policies, including but not limited to policies relating to
blackout periods. Any ambiguities or inconsistencies in the construction of an
Award shall be interpreted to give effect to such limitation. To the extent any
provision of the Plan or Award Agreement or action by the Committee or Company
fails to so comply, such provision or action shall be deemed null and void to
the extent permitted by law and deemed advisable by the Committee in its
discretion.

 

3.5 Indemnification

EACH PERSON WHO IS OR WAS A MEMBER OF THE BOARD OR THE COMMITTEE SHALL BE
INDEMNIFIED BY THE COMPANY AGAINST AND FROM ANY DAMAGE, LOSS, LIABILITY, COST
AND EXPENSE THAT MAY BE IMPOSED UPON OR REASONABLY INCURRED BY HIM IN CONNECTION
WITH OR RESULTING FROM ANY CLAIM, ACTION, SUIT, OR PROCEEDING TO WHICH HE MAY BE
A PARTY OR IN WHICH HE MAY BE INVOLVED BY REASON OF ANY ACTION TAKEN OR FAILURE
TO ACT UNDER THE PLAN (INCLUDING SUCH INDEMNIFICATION FOR A PERSON’S OWN, SOLE,
CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY), EXCEPT FOR ANY SUCH ACT OR
OMISSION CONSTITUTING WILLFUL OR INTENTIONAL MISCONDUCT, FRAUD OR GROSS
NEGLIGENCE. SUCH PERSON SHALL BE INDEMNIFIED BY THE COMPANY FOR ALL AMOUNTS PAID
BY HIM IN SETTLEMENT THEREOF, WITH THE COMPANY’S APPROVAL, OR PAID BY HIM IN
SATISFACTION OF ANY JUDGMENT IN ANY SUCH ACTION, SUIT, OR PROCEEDING AGAINST
HIM, PROVIDED HE SHALL GIVE THE COMPANY AN OPPORTUNITY, AT ITS OWN EXPENSE, TO
HANDLE AND DEFEND THE SAME BEFORE HE UNDERTAKES TO HANDLE AND DEFEND IT ON HIS
OWN BEHALF. THE FOREGOING RIGHT OF INDEMNIFICATION SHALL NOT BE EXCLUSIVE OF ANY
OTHER RIGHTS OF INDEMNIFICATION TO WHICH SUCH PERSONS MAY BE ENTITLED UNDER THE
COMPANY’S CERTIFICATE OF INCORPORATION OR BYLAWS, AS A MATTER OF LAW, OR
OTHERWISE, OR ANY POWER THAT THE COMPANY MAY HAVE TO INDEMNIFY THEM OR HOLD THEM
HARMLESS.

 

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SECTION 4

SHARES SUBJECT TO PLAN

 

4.1 Maximum Number of Shares Issuable

Subject to adjustment as provided in Section 4.2, Section 4.3 and Section 25,
the maximum aggregate number of shares of Stock that may be issued with respect
to Awards under the Plan shall be four million nine hundred fifty thousand
(4,950,000) and may consist of any of the following: shares of Stock held in
treasury of the Company, shares of Stock authorized but unissued or shares of
Stock reacquired by the Company or any combination of the foregoing. The maximum
aggregate number of such shares of Stock authorized for issuance in the
foregoing sentence that may be issued as Incentive Stock Options shall be four
million (4,000,000) shares of Stock. Shares of Stock of an outstanding Award
that for any reason expire or are terminated, forfeited or canceled shall again
be available for issuance under the Plan; provided, however, that amounts
withheld for taxes or are withheld for the purchase price for Options or SARs
shall not again be available for issuance under the Plan, but shares withheld
for the purchase price or for taxes for Restricted Stock, Performance Awards or
Other Stock-Based Awards (other than an Option or SAR) shall be available for
issuance under the Plan. Awards that by their terms are to be settled solely in
cash shall not be counted against the number of shares of Stock available for
the issuance of Awards under the Plan. Shares of stock issued under Awards
granted in assumption, substitution or exchange for previously granted awards of
a company acquired by the Company (“Substitute Awards”) do not reduce the shares
of Stock available under the Plan and available shares under a stockholder
approved plan of an acquired company (as appropriately adjusted to reflect the
transaction) may be used for Awards under the Plan and do not reduce the Plan’s
shares of Stock reserved as provided herein (subject to New York Stock Exchange
listing requirements, as long as the Stock is listed on this exchange or the
applicable other exchange requirements on which the Stock is listed).

Solely for the purposes of the performance-based exception under Code
Section 162(m), and subject to the maximum number of shares of Stock available
for Awards under the Plan as provided in the preceding paragraph of this
Section 4.1, the following rules shall apply to grants of Awards that are
intended to meet the performance-based exception under Code Section 162(m) and
for which the performance-based exception under Code Section 162(m) is still
available for Awards granted prior to the effective date of changes in Code
Section 162(m) under the Tax Cuts and Jobs Act:

(a)    Subject to adjustment as provided in Section 4.2, Section 4.3 and
Section 25, the maximum aggregate number of shares of Stock that may be subject
to Options and Stock Appreciation Rights with respect to Awards granted in any
calendar year to any Participant shall be one million seven hundred fifty
thousand (1,750,000) shares of Stock, and the exercise price per share of Stock
for an Option or Stock Appreciation Right shall be equal to at least the Fair
Market Value per share of Stock on the grant date of the Award. If such an Award
may be settled in cash as permitted under the terms of the Award, the number of
shares of Stock for the cash amount shall be counted toward the individual share
limit provided in this subsection (a) calculated as of the date of grant.

 

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(b)    Subject to adjustment as provided in Section 4.2, Section 4.3 and
Section 25, the maximum aggregate number of shares of Stock subject to Awards,
other than Options and Stock Appreciation Rights, that may be settled in Stock
including, without limitation, Restricted Stock or any Other Stock-Based Award
with respect to Awards granted in any calendar year to any Participant shall be
one million seven hundred fifty thousand (1,750,000). If such an Award is to be
settled in cash rather than Stock pursuant to its terms, the number of shares of
Stock that could be issued for the cash amount shall be counted toward the
individual share limit in this subsection (b) calculated as of the date of
grant.

(c)    Subject to adjustment as permitted under Section 4.2, Section 4.3 or
Section 25, the maximum aggregate cash subject to Awards, including, without
limitation, Performance Awards intended to meet the performance-based exception
under Code Section 162(m) to be settled solely in cash with respect to Awards
granted in any calendar year that may be made to any Participant shall be one
million two hundred fifty thousand dollars ($1,250,000) calculated as of the
date of grant.

(d)    With respect to any Option or Stock Appreciation Right granted to a
Participant that is canceled or repriced, the number of shares of Stock subject
to such Option or Stock Appreciation Right shall continue to count against the
maximum number of shares of Stock that may be the subject of Options or Stock
Appreciation Rights granted to such Participant hereunder but only to the extent
such is required in accordance with Section 162(m) of the Code.

(e)    The limitations of subsections (a), (b), (c) and (d) above shall be
construed and administered so as to comply with the performance-based exception
in Code Section 162(m) for Awards granted prior to the Effective Date and shall
only apply to the extent required to meet the performance-based exception under
Code Section 162(m) for Awards intended by the Committee to meet the
performance-based exception under Code Section 162(m) to the extent it is still
available for such Awards.

 

4.2 Adjustments for Changes in Capital Structure

In the event of any stock dividend or extraordinary cash dividend, stock split,
reverse stock split, recapitalization, combination, reclassification or similar
change in the capital structure of the Company, appropriate adjustments shall be
made in the number and class of shares of Stock subject to the Plan and to any
outstanding Awards, and in the exercise price per share of any outstanding
Awards and with respect to Options, if applicable, in accordance with Code
Sections 424 and 409A. If a majority of the shares of Stock, which are of the
same class as the shares of Stock that are subject to outstanding Awards, are
exchanged for, converted into, or otherwise become (whether or not pursuant to a
change in control) shares of another company (the “New Shares”), the Committee
may, in its sole discretion, unilaterally amend the outstanding Awards to
provide that such Awards are exercisable for New Shares. In the event of any
such amendment, the number of shares subject to, and the exercise price per
share of, the

 

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outstanding Awards shall be adjusted in a fair and equitable manner as
determined by the Committee, in its discretion, and with respect to Options in
accordance with Code Sections 424 and 409A and the regulations thereunder.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 4.2 shall be rounded down to the nearest whole number,
and in no event may the exercise price of any Award be decreased to an amount
less than the par value, if any, of the stock subject to the Award. The
adjustments determined by the Committee pursuant to this Section 4.2 shall be
final, binding and conclusive.

 

4.3 Shares Available for Awards and Payouts

(a)    The following Awards and payouts shall reduce, on a one share for one
share basis, the number of shares of Stock authorized for issuance under
Section 4.1 of the Plan:

(i)    Options; and

(ii)    SARs (except a tandem SAR).

(b)    The following Awards and payouts shall reduce, on a 1.2 share for one
share basis, the number of shares of Stock authorized for issuance under
Section 4.1 of the Plan:

(i)    Restricted Stock;

(ii)    A payout of an Other Stock-Based Award in shares of Stock (other than
for a SAR or Option);

(iii)    A payout of Performance Awards in shares of Stock; and

(iv)    A payout of Dividends or Dividend Equivalents in Stock.

Notwithstanding the foregoing, any Award that is payable solely in cash shall
not reduce the number of shares of Stock authorized under Section 4.1.

(c)    Shares of Stock shall be restored to the Plan on the same basis for which
the type of Award reduced the number of shares of Stock authorized for issuance
under Section 4.1 as follows:

(i)    A payout of a SAR, tandem SAR, Restricted Stock Award, Performance Award
or Other Stock-Based Award in the form of cash;

(ii)    Except as expressly provided in Section 4.1, a cancellation,
termination, expiration, forfeiture, or lapse for any reason (with the exception
of the termination of a tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding tandem SAR)
of any shares of Stock subject to an Award;

(iii)    Payment for the purchase price or the withholding of shares of Stock
for taxes under a Restricted Stock Award, Performance Award or Other Stock-Based
Award (other than an Option or a SAR); and

 

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(iv)    Notwithstanding the foregoing, shares of Stock not issued or delivered
as a result of net settlement of an Award that is a SAR or Option or shares used
to pay the exercise price or withholding taxes related to an outstanding SAR or
Option or shares of Stock repurchased on the open market with the proceeds of an
exercise price for a SAR or Option shall not be restored to the Plan or made
available for issuance for Awards under the Plan.

SECTION 5

ELIGIBILITY AND AWARD LIMITATIONS

 

5.1 Persons Eligible for Awards

Awards may be granted only to Employees, Consultants, and Directors. For
purposes of the foregoing sentence, “Employees,” “Consultants,” and “Directors”
shall include prospective Employees, prospective Consultants and prospective
Directors to whom Awards are granted in connection with written offers of
employment or other service relationships with the Company subject to their
actual commencement of Service. Eligible Persons may be granted more than one
(1) Award. Eligibility in accordance with this Section shall not entitle any
Person to be granted an Award, or, having been granted an Award, to be granted
an additional Award.

 

5.2 Award Agreements

Each Participant to whom an Award is granted shall be required to enter into an
Award Agreement with the Company, in such a form as is provided by the
Committee. The Award Agreement shall contain specific terms as determined by the
Committee, in its discretion, with respect to the Participant’s particular
Award. Such terms need not be uniform among all Participants or any similarly
situated Participants. The Award Agreement may include, without limitation,
vesting, forfeiture and other provisions specific to the particular
Participant’s Award, as well as, for example, provisions to the effect that the
Participant (i) shall not disclose any confidential information acquired during
employment with the Company or while providing service to the Company,
(ii) shall abide by all the terms and conditions of the Plan and such other
terms and conditions as may be imposed by the Committee, (iii) shall not
interfere with the employment or other Service of any Employee or service
provider of the Company, (iv) shall not compete with the Company or become
involved in a conflict of interest with the interests of the Company, (v) shall
forfeit an Award if terminated for Cause, (vi) shall not be permitted to make an
election under Section 83(b) of the Code when applicable, (vii) shall be subject
to transfer restrictions respecting the Award or Stock, (viii) shall be subject
to any other agreement between the Participant and the Company regarding shares
of Stock that may be acquired under an Award including, without limitation, an
agreement restricting the transferability of the Award or shares of Stock by
Participant or any other restrictions or requirements of any stockholders’
agreement that is in effect from time to time, or (ix) shall abide by any
Company clawback policies as may be in effect from time to time, or that the
Award shall be subject to any provisions or definitions the Committee deems
necessary or desirable to comply with Code Section 409A. An Award Agreement
shall include such terms and conditions as are determined by the Committee, in
its discretion, to be appropriate with respect to any individual Participant.

 

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5.3 Award Grant Restrictions

Any person who is not an Employee on the effective date of the grant of an Award
to such person may be granted only a Nonstatutory Stock Option, Restricted Stock
or Other Stock-Based Award. An Incentive Stock Option Award granted to an
Employee of the Company, or its Parent or Subsidiary as defined in Code
Section 424(f), or to a prospective Employee of the Company, or its Parent or
its Subsidiary as defined in Code Section 424(f) upon the condition that such
person become an Employee shall be deemed granted effective on the date such
person commences service as an Employee with the Company, with an exercise price
determined as of such date in accordance with Section 6.1.

 

5.4 Fair Market Value Limitations for Incentive Stock Options

To the extent that Options designated as Incentive Stock Options (granted under
all stock option plans of the Company or Parent or Subsidiary as defined in Code
Section 422, including the Plan) become exercisable by a Participant for the
first time during any calendar year for Stock having an aggregate Fair Market
Value greater than one hundred thousand dollars ($100,000), the portion of such
options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.4, Options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of Stock shall be determined as of the time the Option
with respect to such Stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.4, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 5.4, the Company at the request of the Participant may designate which
portion of such Option the Participant is exercising. In the absence of such
designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first. Separate shares of Stock representing
each such portion shall be issued upon the exercise of the Option.

 

5.5 Repurchase Rights, Right of First Refusal and Other Restrictions on Stock

Shares of Stock under the Plan may be subject to a right of first refusal, one
or more repurchase options, or other conditions and restrictions pursuant to a
contract entered into by the Company and its stockholders or otherwise as
determined by the Committee or as provided in the Award Agreement, in the
Committee’s discretion. The Company shall have the right to assign at any time
any repurchase right it may have, whether or not such right is then exercisable,
to one or more persons as may be selected by the Company. Upon request by the
Company, each Participant shall execute any agreement, including but not limited
to, the Award Agreement evidencing such transfer restrictions prior to the
receipt of shares of Stock hereunder and shall promptly present to the Company
any and all shares of Stock acquired hereunder for the placement of appropriate
legends evidencing any such transfer restrictions, if applicable.

 

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5.6 Minimum Vesting Periods

All Awards shall have a minimum of a one (1) year of Service vesting period for
exercise and/or payment whether based on the Participant’s provision of Services
or performance criteria; provided however, that the Committee in its discretion
may provide that such minimum one (1) year period may lapse or be waived in
connection with or following a Participant’s death, Disability or termination of
service, and provided further that with respect to Director Awards such minimum
vesting shall be the earlier of one (1) year of Service or the date of Company’s
next annual stockholders’ meeting following the date of the grant of the Award.

SECTION 6

TERMS AND CONDITIONS OF OPTIONS

Options shall be evidenced by Award Agreements specifying the number of shares
of Stock covered thereby, in such form as the Committee shall from time to time
establish. No Option or purported Option shall be a valid and binding obligation
of the Company unless evidenced by an Award Agreement. Award Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:

 

6.1 Exercise Price

The exercise price for each Option shall be established in the discretion of the
Committee; provided, however, that (a) subject to adjustments permitted under
the Plan under Section 4.2 and Section 25, and other than with respect to
Substitute Awards, the exercise price per share for an Option shall be not less
than the Fair Market Value of a share of Stock on the effective date of grant of
the Option, (b) no Incentive Stock Option granted to a Ten Percent Owner
Participant shall have an exercise price per share of Stock less than one
hundred ten percent (110%) of the Fair Market Value of a share of Stock on the
effective date of grant of the Option. Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Sections 424 and
409A of the Code.

 

6.2 Exercisability, Vesting and Term of Options

(a)    Exercisability. Options shall be exercisable at such time or times, or
upon such event or events, and subject to such terms, conditions, performance
criteria and restrictions as shall be determined by the Committee and set forth
in the Award Agreement evidencing such Option; provided, however, that (i) no
Option shall be exercisable after the expiration of ten (10) years after the
effective date of grant of such Option provided that an Option, that is not an
Incentive Stock Option, may be exercised for the thirty (30)-day period after
the expiration of a limitation on the Participant’s ability to exercise due to
Section 16(b), the Company’s insider trading policy or other applicable law
which may extend beyond the ten (10)-year term for this limited purpose,

 

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(ii) no Incentive Stock Option granted to a Ten Percent Owner Participant shall
be exercisable after the expiration of five (5) years after the effective date
of grant of such Option, and (iii) no Option granted to a prospective Employee,
prospective Consultant or prospective Director may become exercisable prior to
the date on which such person commences Service. Subject to the foregoing,
unless otherwise specified by the Committee in the grant of an Option, any
Option granted hereunder shall terminate ten (10) years after the effective date
of grant of the Option, unless earlier terminated in accordance with its
provisions.

(b)    Vesting. The Committee shall specify the vesting schedule, if any, in the
applicable Award Agreement.

(c)    Incentive Stock Options. Unless otherwise provided in the Option
Agreement with respect to death or Disability of the Participant, the Incentive
Stock Options may only be exercised within three (3) months after the
Participant’s termination of Service.

 

6.3 Payment of Exercise Price

(a)    Forms of Consideration Authorized. Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made in cash, by check or cash equivalent or
upon approval by the Committee in its sole discretion by any of the following
(i) subject to Section 6.3(b)(i) below, by tender to the Company, or attestation
to the ownership, of shares of Stock owned by the Participant having a Fair
Market Value not less than the exercise price; (ii) subject to the Company’s
rights set forth in Section 6.3(b)(ii) below, by causing the Company to withhold
from the shares of Stock issuable upon the exercise of the Option the number of
whole shares of Stock having a Fair Market Value, as determined by the Company,
not less than the exercise price (a “Cashless Exercise”); (iii) by such other
consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law; or (iv) by any combination of cash or any of
the foregoing or any combination of (i-iii) thereof. The Committee may at any
time or from time to time grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the exercise price or which
otherwise restrict one or more forms of consideration.

(b)    Limitations on Forms of Consideration.

(i)    Tender of Stock. Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock to the extent such tender or attestation would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption
of the Company’s stock.

(ii)    Cashless Exercise. The Company reserves, at any and all times, the
right, in the Company’s sole and absolute discretion, to establish, decline to
approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise in order to comply with applicable law.

 

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SECTION 7

RESTRICTED STOCK

 

7.1 Award of Restricted Stock

(a)    Grant. In consideration of the performance of Service by any Participant
who is an Employee, Consultant or Director, Stock may be awarded under the Plan
by the Committee as Restricted Stock with such restrictions during the
Restriction Period as the Committee may designate in its discretion, any of
which restrictions may differ with respect to each particular Participant.
Restricted Stock may also be awarded as an Other Stock-Based Award subject to
performance goals under Section 8.2. Restricted Stock shall be awarded for no
additional consideration or such additional consideration as the Committee may
determine, which consideration may be equal to or more than the Fair Market
Value of the shares of Restricted Stock on the grant date. The terms and
conditions of each grant of Restricted Stock shall be evidenced by an Award
Agreement.

(b)    Immediate Transfer Without Immediate Delivery of Restricted Stock. Unless
otherwise specified in the Participant’s Award Agreement, each Restricted Stock
Award shall constitute an immediate transfer of the record and beneficial
ownership of the shares of Restricted Stock to the Participant in consideration
of the performance of Service as an Employee, Consultant or Director, as
applicable, entitling such Participant to all voting, dividends and other
ownership rights in such shares of Stock.

As specified in the Award Agreement, a Restricted Stock Award may limit the
Participant’s dividend and voting rights during the Restriction Period in which
the shares of Restricted Stock are subject to a “substantial risk of forfeiture”
(within the meaning given to such term under Code Section 83) and restrictions
on transfer. In the Award Agreement, the Committee may apply any restrictions to
the dividends that the Committee deems appropriate.

 

7.2 Restrictions

(a)    Forfeiture of Restricted Stock. Restricted Stock awarded to a Participant
may be subject to the following restrictions until the expiration of the
Restriction Period: (i) a restriction that constitutes a substantial risk of
forfeiture (as defined in Code Section 83), and a restriction on
transferability; and (ii) any other restrictions, including restrictions that do
not constitute a substantial risk of forfeiture restriction or a restriction on
transferability that the Committee determines in advance are appropriate, and
may include, without limitation, rights of repurchase or first refusal in the
Company or provisions subjecting the Restricted Stock to a continuing
substantial risk of forfeiture in the hands of any transferee. Any such
restrictions shall be set forth in the particular Participant’s Award Agreement.
Unless otherwise specified by the Committee in the Award Agreement, the
Restricted Stock that is subject to restrictions which are not satisfied shall
be forfeited and all rights of the Participant to such Stock shall terminate.

 

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(b)    Issuance of Restricted Stock. Reasonably promptly after the date of grant
with respect to shares of Restricted Stock, the Company shall take the actions
as it determines necessary in its sole discretion to cause the Stock to be
issued subject to the forfeiture provisions and other requirements as the
Committee determines necessary. Stock awarded pursuant to a grant of Restricted
Stock may be evidenced in a manner as the Committee shall deem appropriate,
including without limitation book entry, shares of Restricted Stock issued in
the name of the Participant and held, together with a stock power endorsed in
blank, by the Committee or Company (or their delegates), or in trust or in
escrow pursuant to an agreement satisfactory to the Committee, as determined by
the Committee, until such time as the restrictions on transfer have expired or
the Committee may provide for the transfer of the shares of the Restricted Stock
to a transfer agent on behalf of the Participant pursuant to terms as determined
by the Committee to maintain the restricted status of the shares until vested.
If the Company issues a Stock certificate, registered in the name of the
Participant to whom such shares of Restricted Stock were granted, evidencing
such shares, the Company shall not cause to be issued such a Stock certificate
unless it has received a stock power duly endorsed in blank with respect to such
shares of Stock. Each such Stock certificate shall bear the following legend or
any other legend approved by the Company:

The transferability of this certificate and the shares of stock represented
hereby are subject to the restrictions, terms and conditions (including
forfeiture and restrictions against transfer) contained in the Plan and an Award
Agreement entered into between the registered owner of such shares and
PetroQuest Energy, Inc. A copy of the Plan and Award Agreement are on file in
the corporate offices of PetroQuest Energy, Inc.

Such legend shall not be removed from the certificate evidencing such shares of
Restricted Stock until such shares vest pursuant to the terms of the Award
Agreement.

(c)    Vesting. The Award Agreement shall specify the vesting schedule.

(d)    Removal of Restrictions. The Committee, in its discretion, shall have the
authority to remove any or all of the restrictions on the Restricted Stock if it
determines that, by reason of a change in applicable law or another change in
circumstance arising after the grant date of the Restricted Stock, such action
is appropriate.

 

7.3 Issuance of Stock

Subject to withholding taxes under Section 10 and to the terms of the Award
Agreement, upon the lapse of the forfeiture restrictions as set forth in the
Agreement, the unrestricted shares of Stock shall be evidenced in such manner as
determined by the Committee and shall be issued to the Participant promptly
after the restrictions have lapsed in a manner as determined by the Committee in
its sole discretion.

 

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SECTION 8

OTHER STOCK-BASED AWARDS, PERFORMANCE AWARDS AND DIVIDENDS, OR DIVIDEND
EQUIVALENTS

 

8.1 Grant of Other Stock-Based and Performance Awards

Other Stock-Based Awards may be awarded by the Committee to selected
Participants that are denominated or payable in, valued in whole or in part by
reference to, or otherwise related to, shares of Stock, as deemed by the
Committee to be consistent with the purposes of the Plan and the goals of the
Company. Performance Awards may be granted by the Committee in its sole
discretion awarding cash or Stock (including Restricted Stock) or a combination
thereof based upon the achievement of goals as determined by the Committee.
Types of Other Stock-Based Awards or Performance Awards include, without
limitation, purchase rights, phantom stock, Stock Appreciation Rights,
restricted Stock units, performance units, Restricted Stock or Stock subject to
performance goals, shares of Stock awarded that are not subject to any
restrictions or conditions, convertible or exchangeable debentures related to
the Stock, other rights convertible into shares of Stock, Awards valued by
reference to the value of Stock or the performance of the Company or a specified
Subsidiary, Affiliate division or department, Awards based upon performance
goals established by the Committee and settlement in cancellation of rights of
any person with a vested interest in any other plan, fund, program or
arrangement that is or was sponsored, maintained or participated in by the
Company or any Subsidiary. Stock Appreciation Rights will be subject to the same
terms respecting Nonstatutory Stock Options as provided in Sections 6.2 and 6.3
hereof unless otherwise provided in the Award Agreement. Other Stock-Based
Awards may be awarded either alone or in addition to or in tandem with any other
Awards. Other Stock Based Awards and Performance Awards may be paid in Stock,
cash or a combination thereof.

 

8.2 Other Stock-Based Award and Performance Awards Terms

(a)    Written Agreement. The terms and conditions of each grant of an Other
Stock-Based Award or Performance Award shall be evidenced by an Award Agreement.

(b)    Purchase Price. To the extent that a Stock Appreciation Right is intended
to be exempt from Code Section 409A, or for Awards granted prior to the
Effective Date if the Company is a Publicly Held Corporation and the Stock
Appreciation Right is intended to meet the performance-based exception in Code
Section 162(m) and such exception is still available for such Awards, the
exercise price per share of Stock shall not be less than one hundred percent
(100%) of Fair Market Value of a share of Stock on the date of the grant of the
Stock Appreciation Right and shall otherwise comply with Code Section 409A
and/or, for Awards prior to the Effective Date, Code Section 162(m) with respect
to Awards intended to meet the performance-based exception and such exception is
still available.

(c)    Performance Goals and Other Terms. In its discretion, the Committee may
specify such criteria, periods or performance goals for vesting in Other
Stock-Based Awards or Performance Awards and payment thereof to the Participant
as it shall

 

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determine; and the extent to which such criteria, periods or goals have been met
shall be determined by the Committee. All terms and conditions of Other
Stock-Based Awards and Performance Awards shall be determined by the Committee
and set forth in the Award Agreement.

If any Other Stock-Based Award or Performance Award granted prior to the
Effective Date is intended by the Committee to meet the performance-based
exception in Code Section 162(m) and such exception is still available under
Code Section 162(m), the following shall apply:

(i)    Performance Period. The Committee shall establish a performance period
which shall be a period of time, as may be determined in the discretion of the
Committee and set out in the Award Agreement, over which performance is measured
for the purpose of determining a Participant’s right to and the payment value of
an Other Stock-Based Award or Performance Award in accordance with Code
Section 162(m). For each performance period, the Committee shall establish the
number of Other Stock-Based Awards or Performance Awards and their contingent
values which may vary depending on the degree to which performance criteria
established by the Committee are met and shall establish the Awards and
performance criteria within the time period required under Code Section 162(m)
if such Awards are intended to meet the performance-based exception under Code
Section 162(m).

(ii)    Performance Criteria. The Committee may establish performance goals
applicable to Other Stock-Based Awards or Performance Awards based upon
performance criteria specified in item (iii) below in one or more of the
following categories: (x) performance of the Company as a whole and/or any
Company Affiliate, (y) performance of a segment of the Company’s or its
Affiliates’ business, business unit or division, and (z) individual performance.
Performance criteria for the Company shall relate to the achievement of
predetermined financial, operational or strategic objectives for the Company, as
a whole and/or a Company Affiliate, and performance criteria for a segment of
the Company’s business or business unit or division shall relate to the
achievement of financial, operational or strategic objectives of the segment for
which the Participant is accountable. The performance criteria in
Section 8.2(c)(iii) may be used on an absolute or relative basis to measure the
performance of the Company as a whole and/or a Company Affiliate or any business
unit, division or segment of the Company and/or an Affiliate or any combination
thereof as determined by the Committee or as compared to the performance of a
group of comparable companies or published or special index or as compared to
various stock market indices as the Committee may determine appropriate in its
sole discretion.

(iii)    Performance criteria shall include any of the following (alone or in
any combination): pre-tax or after tax profit levels, earnings per share,
earnings before interest and taxes, earnings before interest, taxes,
depreciation and amortization, gross profit or gross profit growth, net
operating profits before or after tax, and net income; share price, including,
without limitation, growth

 

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measures and total stockholder return; return on assets, equity, capital or
investment; return on capital; align cash flows with expenditures, maintain
liquidity, reduce debt, cash flow and cash flow return on investment; economic
value added and economic profit; growth in earnings per share; stock price
performance, sales, costs, gross revenue, net revenue or revenue growth,
margins, maintain reserve life index, growth in oil inventory and production,
growth in production reserves or production volumes or reserves added, (and any
of the foregoing as compared to a peer group as established by the Committee in
its discretion); improvement in capital structure, levels of operating
efficiency or expense, maintenance expense, productivity ratios, economic value
or other added value, working capital targets, enterprise value, safety records;
completion of acquisitions or business expansion or measures of customer
satisfaction and customer service as determined from time to time including the
relative improvement therein; and merger and acquisitions for value added
opportunities. Individual performance criteria shall relate to a Participant’s
overall performance, taking into account, among other measures of performance,
the attainment of individual goals and objectives. The performance goals may
differ among Participants and shall be established in accordance with Code
Section 162(m) to the extent an Award is intended to comply with Code
Section 162(m). To the extent permitted under Code Section 162(m) with respect
to Awards intended to meet the performance-based exception under Code
Section 162(m), the Committee is authorized at any time during the first ninety
(90) days of a performance period (or, if longer or shorter, within the maximum
period allowed under Section 162(m) of the Code), or at any time thereafter (but
only to the extent the exercise of such authority after such period would not
cause the Awards granted to any Participant for the performance period to fail
to qualify as “performance-based compensation” under Section 162(m) of the
Code), in its sole and absolute discretion, to adjust or modify the calculation
of a performance goal for such performance period to the extent permitted under
Section 162(m) of the Code in order to prevent the dilution or enlargement of
the rights of Participants based on the following events: asset write-downs;
litigation or claim judgments or settlements; the effect of changes in tax laws,
accounting principles, or other laws or regulatory rules affecting reported
results; any reorganization and restructuring programs; extraordinary, unusual
or infrequently occurring items as described in Accounting Principles Board
Opinion No. 30 (or any successor or pronouncement thereto) and/or in
management’s discussion and analysis of financial condition and results of
operations appearing in the Company’s annual report to stockholders for the
applicable year; acquisitions or divestitures; any other specific unusual or
nonrecurring events, or objectively determinable category thereof; and a change
in the Company’s fiscal year. The Committee may also specify the application of
any of the foregoing in the Award if necessary to comply with Code
Section 162(m).

(iv)    Modification. If the Committee determines, in its discretion exercised
in good faith, that the established performance measures or objectives are no
longer suitable to the Company’s objectives because of a change in the Company’s
business, operations, corporate structure, capital structure, or other

 

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conditions the Committee deems to be appropriate, the Committee may modify the
performance measures and objectives to the extent it considers such modification
to be necessary, provided, however, that with respect to Awards granted prior to
the Effective Date intended to qualify for the performance-based exception of
Code Section 162(m) and for which the performance-based exception is still
available under Code Section 162(m), the Committee shall not permit any such
modification that would cause the Awards to fail to qualify for the
performance-based exception.

(v)    Compliance with Code Section 162(m). With respect to Awards granted prior
to the Effective Date intended to meet the performance-based exception of Code
Section 162(m) and if the Code Section 162(m) performance-based pay exception is
still available under Code Section 162(m), the Committee shall administer the
Awards and take all action that it determines are necessary, including but not
limited to certifying that performance goals have been met, so that Awards
intended to meet the performance-based exception comply with Code
Section 162(m).

(d)    Payment. Other Stock-Based Awards or Performance Awards may be paid in
shares of Stock, cash or other consideration or a combination thereof related to
such shares, in a single payment or in installments on such dates as determined
by the Committee, all as specified in the Award Agreement.

 

8.3 Dividends or Dividend Equivalents.

The terms of any Award granted under the Plan shall be set forth in an Award
Agreement, as determined by the Committee in its sole discretion, whether such
Awards (other than Options and Stock Appreciation Rights) shall receive
dividends or amounts equivalent to cash, Stock or other property as dividends on
Stock (“Dividend Equivalents”) with respect to the number of shares of Stock
covered by the Award; provided, however, any Dividends or Dividend Equivalents
with respect to shares of Stock covered by an Award shall be subject to
restrictions and risk of forfeiture to the same extent as those shares of Stock
covered by the Award with respect to such Dividends or Dividend Equivalents.
Notwithstanding the foregoing, in no event will Dividends or Dividend
Equivalents be awarded with respect to an Option or Stock Appreciation Rights.

 

8.4 Limitations for Director Awards.

Subject to adjustments pursuant to Sections 4.2, 4.3 and 25, the amount of an
Award granted to each Director in a calendar year shall not exceed five hundred
thousand dollars ($500,000) in value of the aggregate of Stock and cash Awards.

 

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SECTION 9

EFFECT OF TERMINATION OF SERVICE

 

9.1 Option Exercisability and Award Vesting

Subject to earlier termination of the Option or other Award as otherwise
provided herein and unless otherwise provided by the Committee in the Award
Agreement, an Award and Option shall be vested and an Option shall be
exercisable after a Participant’s termination of Service only during the
applicable time period determined in accordance with this Section 9.1 and
thereafter shall terminate:

(a)    Disability or Death. If the Participant’s Service terminates because of
the Disability or death of the Participant, the unvested portion of any Award
shall be forfeited and terminated and the vested portion of an Option may be
exercised by the Participant or the applicable of his guardian or legal
representative or estate for a period of three (3) months after the date on
which the Participant’s Service terminated due to Disability or one (1) year
after the date on which the Participant’s Service terminated due to death,
respectively, but in any event no later than the date of expiration of the
Option’s term, which in no event shall exceed ten (10) years from the date of
grant, as set forth in the Award Agreement evidencing such Option, except as
provided in Section 6.2(a)(i) for a Nonstatutory Stock Option or SAR (the
“Option Expiration Date”).

(b)    Change in Control. Upon a Change in Control then (i) the vested portion
of the Option, to the extent unexercised and exercisable on the date on which
the Participant’s Service terminated, may be exercised by the Participant (or
the Participant’s guardian or legal representative) at any time prior to the
expiration of three (3) months after the date on which the Participant’s Service
terminated without Cause, but in any event no later than the Option Expiration
Date, and (ii) the exercisability and vesting of the Option or other Award and
any shares of Stock acquired upon the exercise thereof may otherwise be
accelerated effective as of the date on which the Participant’s Service
terminated to such extent, if any, as shall have been determined by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Option or other Award.

(c)    Termination for Cause. The effect of a termination for Cause shall be
specified in the Award Agreement.

(d)    Other Termination of Service. If the Participant’s Service terminates for
any other reason (including Retirement), except Disability, death, termination
after a Change in Control, or Cause, any Award or Option, to the extent unvested
shall be forfeited by the Participant on the date on which the Participant’s
Service is terminated, and any vested Option may be exercised by the Participant
at any time prior to the expiration of three (3) months after the date on which
the Participant’s Service terminated, but in any event no later than the Option
Expiration Date.

 

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9.2 Extension of Option if Exercise Prevented by Law

Notwithstanding the foregoing, other than termination for Cause, if the exercise
of an Option within the applicable time periods set forth in Section 9.1 is
prevented by the provisions of Section 12 below, the Option shall remain
exercisable until thirty (30) days (or such longer period of time as determined
by the Committee, in its discretion) after the date the Participant is notified
by the Company that the Option is exercisable, but in any event no later than
the Option Expiration Date subject to the limited mandatory extension as
provided in Section 6.2(a)(i).

 

9.3 Extension if Participant Subject to Section 16(b)

Notwithstanding the foregoing, other than termination for Cause, if a sale
within the applicable time periods set forth in Section 9.1 of shares of Stock
acquired upon the exercise of the Option would subject the Participant to
liability under Section 16(b) of the Exchange Act, the Option (if exercisable)
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would no
longer be subject to such liability, (ii) three (3) months after the
Participant’s termination of Service, or (iii) the Option Expiration Date
subject to the limited mandatory extension as provided in Section 6.2(a)(i).

SECTION 10

WITHHOLDING TAXES

 

10.1 Tax Withholding

All Awards are subject to, and the Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of the Plan or an Award hereunder and all Awards are subject
to the Company’s right hereunder.

 

10.2 Share Withholding

With respect to tax withholding required upon the exercise of Options, upon the
lapse of restrictions on Restricted Stock, or upon any other taxable event
arising as a result of any Awards, the Committee in its discretion, may elect to
satisfy the withholding requirement, in whole or in part, by having the Company
withhold shares of Stock having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction (or such higher amount if consistent with the equity treatment
of the Award under the applicable accounting rules). All such elections shall be
subject to any restrictions or limitations that the Committee, in its
discretion, deems appropriate. Any fraction of a share of Stock required to
satisfy such obligation shall be disregarded and the amount due shall instead be
paid in cash by the Participant or rounded up as determined by the Committee to
the extent consistent with accounting rules.

 

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10.3 Incentive Stock Options

With respect to shares of Stock received by a Participant pursuant to the
exercise of an Incentive Stock Option, if such Participant disposes of any such
shares within (i) two (2) years from the date of grant of such Option or
(ii) one (1) year after the transfer of such shares to the Participant, the
Company shall have the right to withhold from any salary, wages or other
compensation payable by the Company to the Participant an amount sufficient to
satisfy federal, state and local tax withholding requirements attributable to
such disqualifying disposition.

SECTION 11

PROVISION OF INFORMATION

Each Participant shall be given access to information concerning the Company
equivalent to that information generally made available to the Company’s common
stockholders.

SECTION 12

COMPLIANCE WITH SECURITIES LAW,

OTHER APPLICABLE LAWS AND COMPANY POLICIES

The Plan, Award Agreements, the grant of Awards and the issuance of shares of
Stock shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to securities and all other
applicable laws, regulations and requirements of any stock exchange or market
system upon which the stock is listed or traded. Options may not be exercised
and Stock may not be issued if the issuance of shares of Stock would constitute
a violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may be exercised
and no shares of Stock may be issued unless (a) a registration statement under
the Securities Act shall at the time be in effect with respect to the shares
issuable or (b) in the opinion of legal counsel to the Company, the shares
issuable may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. If the shares of Stock
issuable pursuant to an Award are not registered under the Securities Act, the
Company may imprint on the certificate for such shares the following legend or
any other legend which legal counsel for the Company considers necessary or
advisable to comply with the Securities Act:

THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY
THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED FOR
SUCH SALE OR TRANSFER.

 

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The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the exercise of any Option or the issuance of shares of Stock, the
Company may require the Participant to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

Unless otherwise specifically provided in an Award Agreement, all Awards and all
shares of stock issued and any payments are subject to the Company’s clawback
policies adopted by the Company at any time and as amended from time to time.

SECTION 13

NONTRANSFERABILITY OF AWARDS AND STOCK

During the lifetime of the Participant, an Award shall be exercisable only by
the Participant or the Participant’s guardian or legal representative. Subject
to the provisions in this Section 13, an Award may be assignable or transferable
by the Participant only by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in Section 414(p) of
the Code, and only if it is so specified in the Award Agreement; provided,
however, that an Incentive Stock Option may only be assignable or transferable
by will or by the laws of descent and distribution. Notwithstanding the
foregoing, to the extent permitted by the Committee in the Award Agreement, and
in accordance with applicable law, in its discretion, and set forth in the Award
Agreement evidencing such Option, a Nonstatutory Stock Option shall be
assignable or transferable subject to the applicable limitations, if any, under
the Securities Act, and the General Instructions to Form S-8 Registration
Statement under the Securities Act. However, the transferee or transferees must
be any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, in each case with respect to the Participant, any person sharing
the Participant’s household (other than a tenant or employee of the Company), a
trust in which these persons have more than fifty percent (50%) of the
beneficial interest, a foundation in which these persons (or the Participant)
control the management of assets, or any other entity in which these persons (or
the Participant) own more than fifty percent (50%) of the voting interests
(collectively, “Permitted Transferees”); provided further that, (a) there may be
no consideration for any such transfer and (b) subsequent transfers of Options
transferred as provided above shall be prohibited except subsequent transfers
back to the original holder of the Option and transfers to other Permitted
Transferees of the original holder.

SECTION 14

NONCOMPETITIVE ACTIONS

The Committee may provide in an Award Agreement a requirement to enter into a
noncompetition agreement in connection with the Award or the effect of a
violation of a noncompetition agreement on an Award.

 

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SECTION 15

TERMINATION OR AMENDMENT OF PLAN

The Committee may terminate or amend the Plan at any time. However, no grant of
Awards shall be made after the tenth (10th) anniversary of the Effective Date
(the “Term”). Subject to changes in applicable law, regulations or rules that
would permit otherwise, without the approval of the Company’s stockholders
within the time required, there shall be (a) no increase in the maximum
aggregate number of shares of Stock that may be issued under the Plan (except by
operation of the provisions of Section 4 and Section 25), (b) no change in the
class of persons eligible to receive Awards or purchase Stock under the Plan or
to extend the Term of the Plan, (c) no repricing of an Option or SAR or other
amendment as provided in Section 3.3(j) (except by operation of Sections 4 or 25
hereof) and (d) no other amendment of the Plan that would require approval of
the Company’s stockholders under any applicable law, regulation or rule or the
stock exchange or market system on which the Stock is traded. No termination or
amendment of the Plan shall affect any then outstanding Award unless expressly
provided by the Committee or otherwise provided in the Plan. In any event, no
termination or amendment of the Plan may materially adversely affect any then
outstanding Award without the consent of the Participant, unless such
termination or amendment is required to enable an Award designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is necessary
to comply with any applicable law, regulation or rule, including Code
Section 409A or as otherwise permitted under the Plan, including upon a Change
in Control.

SECTION 16

STOCKHOLDER APPROVAL

The PetroQuest Energy, Inc. 2016 Long Term Incentive Plan was originally adopted
by the Board as of May 18, 2016 and approved by the stockholders of the Company
on said date. The Plan as hereby amended and restated was approved by the Board
effective as of the Effective Date subject to Company stockholder approval on
the Effective Date. Options or Awards in excess of the Stock previously approved
by the stockholders on May 18, 2016 shall not become exercisable and otherwise
shall not be paid or payable, and no Stock shall be issued with respect thereto
earlier than the date of stockholder approval of this amended and restated Plan.

SECTION 17

NO GUARANTEE OF TAX CONSEQUENCES

Neither the Company, the Board nor the Committee makes any commitment or
guarantee that any federal, state or local tax treatment will apply or be
available to any person participating or eligible to participate hereunder.

 

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SECTION 18

SEVERABILITY

In the event that any provision of this Plan shall be held illegal, invalid or
unenforceable for any reason, such provision shall be fully severable, but shall
not affect the remaining provisions of the Plan, and the Plan shall be construed
and enforced as if the illegal, invalid, or unenforceable provision was not
included herein.

SECTION 19

GOVERNING LAW

The Plan and Awards shall be interpreted, construed and constructed in
accordance with the laws of the State of Delaware without regard to its
conflicts of law provisions, except as may be superseded by applicable laws of
the United States.

SECTION 20

SUCCESSORS

All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

SECTION 21

RIGHTS AS A STOCKHOLDER

The holder of an Award shall have no rights as a stockholder with respect to any
shares of Stock covered by the Award until the date the stock is issued to him
or her for such shares. Except as otherwise expressly provided in the Plan, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock is issued.

SECTION 22

NO SPECIAL EMPLOYMENT OR SERVICE RIGHTS

Nothing contained in the Plan or Award Agreement shall confer upon any
Participant receiving a grant of any Award any right with respect to the
continuation of his or her Service or interfere in any way with the right of the
Company (or a Company Affiliate), subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such Service or
to increase or decrease the compensation of the Participant from the rate in
existence at the time of the grant of any Award.

 

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SECTION 23

REORGANIZATION OF COMPANY

The existence of an Award shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in Company’s capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the shares of Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

SECTION 24

CODE SECTION 409A

To the extent that any Award is deferred compensation subject to Code
Section 409A, the Award Agreement shall comply and all such Awards shall be
interpreted to comply with the requirements of Code Section 409A including,
without limitation, to the extent required using applicable definitions from
Code Section 409A, and to the extent required by Code Section 409A, using a more
restrictive definition of Change in Control to comply with Code Section 409A or
a more restrictive definition of Disability as provided in Code Section 409A. To
the extent an Award is deferred compensation subject to Code Section 409A, the
Award shall specify a time and form of payment schedule. In addition if any
Award constitutes deferred compensation under Section 409A of the Code (a
“Section 409A Plan”), then the Award shall be subject to the following
requirements, if and to the extent required to comply with Code Section 409A,
and as determined by the Committee and specified in the Award Agreement:

(a)    Payments under the Section 409A Plan may not be made earlier than (i) the
Participant’s separation from service, (ii) the date of the Participant’s
Disability, (iii) the Participant’s death, (iv) a specified time (or pursuant to
a fixed schedule) specified in the Award Notice at the date of the deferral of
such compensation, (v) a change in the ownership or effective control of the
Company, or in the ownership of a substantial portion of the assets of the
Company, or (vi) the occurrence of an unforeseeable emergency;

(b)    The time or schedule for any payment of the deferred compensation may not
be accelerated, except to the extent provided in applicable Treasury Regulations
or other applicable guidance issued by the Internal Revenue Service; and

(c)    Any elections with respect to the deferral of such compensation or the
time and form of distribution of such deferred compensation shall comply with
the requirements of Section 409A(a)(4) of the Code.

With respect to any Award that is subject to Code Section 409A, in the case of
any Participant who is specified employee, a distribution on account of a
separation from service may not be made before the date which is six (6) months
after the date of the Participant’s

 

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separation from service (or, if earlier, the date of the Participant’s death).
For purposes of the foregoing, the terms “separation from service” and
“specified employee”, all shall be defined in the same manner as those terms are
defined for purposes of Section 409A of the Code, and the limitations set forth
herein shall be applied in such manner (and only to the extent) as shall be
necessary to comply with any requirements of Section 409A of the Code that are
applicable to the Award as determined by the Committee. If an Award is subject
to Code Section 409A, as determined by the Committee, the Committee may
interpret or amend any Award to comply with Code Section 409A without a
Participant’s consent even if such amendment would have an adverse effect on a
Participant’s Award. With respect to an Award that is subject to Code
Section 409A, the Board may amend or interpret the Plan as it deems necessary to
comply with Section 409A, including, without limitation, limiting the
Committee’s or Company’s discretion with respect to an Award that constitutes
deferred compensation to the extent it would violate Code Section 409A, and no
Participant consent shall be required even if such an amendment would have an
adverse effect on a Participant’s Award. Notwithstanding the foregoing, none of
the Company, the Committee, any Company Affiliate or their directors, members,
officers, employees or agents of any of the foregoing guarantee or are
responsible for the tax consequences to a Participant for an Award including,
without limitation, an excise tax under Code Section 409A.

SECTION 25

ASSUMPTIONS OF AWARDS AND ADJUSTMENTS

UPON A CHANGE IN CONTROL

(a)    Assumption under the Plan of Outstanding Substitute Awards.
Notwithstanding any other provision of the Plan, the Committee, in its absolute
discretion, may authorize the assumption and continuation under the Plan of
outstanding and unexercised stock options or other types of stock-based
Substitute Awards. Any such action shall be upon such terms and conditions as
the Committee, in its discretion, may deem appropriate, including provisions to
preserve the holder’s rights under the previously granted and unexercised option
or other stock-based Substitute Award, such as, for example, retaining the
treatment as an Option under this Plan.

(b)    Assumption of Awards by a Successor. Subject to the accelerated vesting
in any Award Agreement that applies in the event of a Change in Control, in the
event of a Corporate Event (defined below), each Participant shall be entitled
to receive, in lieu of the number of shares of Stock subject to Awards, such
shares of capital stock or other securities or property as may be issuable or
payable with respect to or in exchange for the number of shares of Stock which
Participant would have received had he exercised the Award immediately prior to
such Corporate Event, together with any adjustments (including, without
limitation, adjustments to the option price and the number of Shares issuable on
exercise of outstanding Options). For this purpose, shares of Restricted Stock
shall be treated the same as unrestricted outstanding shares of Stock. A
“Corporate Event” means any of the following: (i) a dissolution or liquidation
of the Company, (ii) a sale of all or substantially all of the Company’s assets,
(iii) a merger, consolidation or combination involving the Company (other than a
merger, consolidation or combination (A) in which the Company is the continuing
or surviving corporation and (B) which does

 

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not result in the outstanding shares of Stock being converted into or exchanged
for different securities, cash or other property, or any combination thereof),
or (iv) if so determined by the Committee, any other “corporate transaction” as
defined in Code Sections 424 or Code Section 409A. The Committee shall take
whatever other action it deems appropriate to preserve the rights of
Participants holding outstanding Awards, including, without limitation, to
continue the exemption from deferred compensation treatment under Code
Section 409A.

(c)    Notwithstanding Section 25(b) if a Change in Control occurs, except a
Change in Control solely on account of Section 2.1(h)(ii), then the Committee,
at its sole discretion, shall have the power and right to (but subject to any
accelerated vesting specified in an Award Agreement).

(i)    cancel, effective immediately prior to the occurrence of the Change in
Control, each outstanding Award (whether or not then exercisable) (including the
cancellation of any Options for which the exercise price is greater than the
consideration to be received), and with respect to Options and SARs that
currently have an exercise price less than the consideration to be received
immediately prior to the Change in Control, pay to the Participant an amount in
cash equal to the excess of (i) the value, as determined by the Committee, of
the property (including cash) received by the holders of Stock as a result of
such Change in Control over (ii) the exercise price of such Award, if any;
provided, however, this subsection shall be inapplicable to an Award granted
within six (6) months before the occurrence of the Change in Control but only if
the Participant is an Insider and such disposition is not exempt under Rule
16b-3 (or other rules preventing liability of the Insider under Section 16(b) of
the Exchange Act) and, in that event, the provisions hereof shall be applicable
to such Award after the expiration of six (6) months from the date of grant; or

(ii)    provide for the exchange or substitution of each Award outstanding
immediately prior to such Change in Control (whether or not then exercisable)
for another award with respect to the Stock or other property for which such
Award is exchangeable and, incident thereto, make an equitable adjustment as
determined by the Committee, in its discretion, in the exercise price of the
Award, if any, or in the number of shares of Stock or amount of property
(including cash) subject to the Award; or

(iii)    provide for assumption of the Plan and such outstanding Awards by the
surviving entity or its parent.

The Committee, in its discretion, shall have the authority to take whatever
action it deems to be necessary or appropriate to effectuate the provisions of
this Section 25.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the undersigned Officer of the Company certifies that the
foregoing sets forth the Amended and Restated PetroQuest Energy, Inc. 2016 Long
Term Incentive Plan effective as of the Effective Date as duly adopted by the
Board.

 

PETROQUEST ENERGY, INC. By:  

/s/ Charles T. Goodson

Name:   Charles T. Goodson Title:   President and Chief Executive Officer

[SIGNATURE PAGE TO PETROQUEST AMENDED AND RESTATED 2016 LONG TERM INCENTIVE
PLAN]