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EXHIBIT 10.2




PetroQuest Energy, Inc.




INCENTIVE STOCK OPTION AGREEMENT




Optionee:                                         




     1. Grant of Stock Option. As of the Grant Date (identified in Section 19 below),
PetroQuest Energy, Inc., a Delaware corporation (the “Company”), hereby grants an Incentive Stock
Option (the “Option”) to the Optionee (identified above), an employee of the Company, to purchase
the number of shares of the Company’s common stock, $.001 par value per share (the “Common Stock”),
identified in Section 19 below (the “Shares”), subject to the terms and conditions of this
agreement (the “Agreement”) and the Company’s 1998 Incentive Plan, as Amended and Restated
effective March 16, 2006 (the “Plan”) which is hereby incorporated herein in its entirety by
reference. The Shares, when issued to Optionee upon the exercise of the Option, shall be fully paid
and nonassessable. The Option is an incentive stock option” as defined in Section 422 of the
Internal Revenue Code.



     2. Definitions. All capitalized terms used herein shall have the meanings set forth
in the Plan unless otherwise specifically provided herein. Section 19 below sets forth meanings for
various capitalized terms used in this Agreement.



     3. Option Term. The Option shall commence on the Grant Date (identified in Section 19
below) and terminate on the date immediately prior to the tenth (10th) anniversary of
the Grant Date. The period during which the Option is in effect and may be exercised is referred to
herein as the “Option Period”.



     4. Option Price. The Option Price per Share is identified in Section 19 below.



     5. Vesting. The total number of Shares subject to this Option shall vest in accordance
with the Vesting Schedule (identified in Section 19 below). The Shares may be purchased at any time
after they become vested, in whole or in part, during the Option Period; provided, however, the
Option may only be exercisable to acquire whole Shares. The right of exercise provided herein shall
be cumulative so that if the Option is not exercised to the maximum extent permissible after
vesting, the vested portion of the Option shall be exercisable, in whole or in part, at any time
during the Option Period.



     6. Method of Exercise. The Option is exercisable by delivery of a written notice to
the attention of the Secretary of the Company at the address for notices to the Company provided
below, signed by the Optionee, specifying the number of Shares to be acquired on, and the effective
date of, such exercise. The Optionee may withdraw notice of exercise of this Option, in writing, at
any time prior to the close of business on the business day preceding the proposed exercise date.



     7. Method of Payment. The Option Price upon exercise of the Option shall be payable to the
Company in full either: (i) in cash or its equivalent, or (ii) subject to prior approval by the
Committee in its discretion, by tendering previously acquired Shares having an aggregate Fair
Market Value (as defined in the Plan) at the time of exercise equal to the total



 









 




Option Price (provided that the Shares must have been held by the Optionee for at least six
(6) months prior to their tender to satisfy the Option Price), or (iii) subject to prior approval
by the Committee in its discretion, by withholding Shares which otherwise would be acquired on
exercise having an aggregate Fair Market Value at the time of exercise equal to the total Option
Price (as determined pursuant to Section 2.3 of the Plan), or (iv) subject to prior approval by the
Committee in its discretion, by a combination of (i), (ii), and (iii) above. Any payment in shares
of Common Stock shall be effected by the delivery of such shares to the Secretary of the Company,
duly endorsed in blank or accompanied by stock powers duly executed in blank, together with any
other documents as the Secretary may require. If the payment of the Option Price is remitted partly
in Shares, the balance of the payment of the Option Price shall be paid in either cash, certified
check, bank cashiers’ check, or by wire transfer.




     The Committee, in its discretion, may allow (i) a “cashless exercise” as permitted under
Federal Reserve Board’s Regulation T, 12 CFR Part 220 (or its successor), and subject to applicable
securities law restrictions and tax withholdings, or (ii) any other means of exercise which the
Committee, in its discretion, determines to be consistent with the Plan’s purpose and applicable
law.



     As soon as practicable after receipt of a written notification of exercise and full payment,
the Company shall deliver to or on behalf of the Optionee, in the name of the Optionee or other
appropriate recipient, Share certificates for the number of Shares purchased under the Option. Such
delivery shall be effected for all purposes when a stock transfer agent of the Company shall have
deposited such certificates in the United States mail, addressed to Optionee or other appropriate
recipient.



     8. Restrictions on Exercise. The Option may not be exercised if the issuance of such
Shares or the method of payment of the consideration for such Shares would constitute a violation
of any applicable federal or state securities or other laws or regulations, including any such laws
or regulations or Company policies respecting blackout periods, or any rules or regulations of any
stock exchange on which the Common Stock may be listed.



     9. Termination of Employment. Voluntary or involuntary termination of Employment and
the death or Disability of Optionee shall affect Optionee’s rights under the Option as follows:




     (a) Termination for Cause. The vested and non-vested portions of the Option
shall expire on 12:01 am. (CST) on the date of termination of Employment and shall not be
exercisable to any extent if Optionee’s Employment with the Company is terminated for Cause
(as defined in the Plan at the time of such termination of Employment).




     (b) Other Involuntary Termination or Voluntary Termination. If Optionee’s
Employment with the Company is terminated for any reason other than for Cause, retirement,
death or Disability (as defined in the Plan at the time of termination of Employment), then
(i) the non-vested portion of the Option shall immediately expire on the termination date
(ii) the vested portion of the Option shall expire to the extent not exercised within three
(3) months after the date of such termination of Employment. In



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no event may the Option be exercised by anyone after the earlier of (i) the expiration
of the Option Period or (ii) three (3) months after termination of Employment.




     (c) Death or Disability. If Optionee’s Employment with the Company is
terminated by death or Disability, then the vesting of the Option will be accelerated and
the entire Option shall be 100% vested on the date of termination of Employment and shall
expire 365 calendar days after the date of such termination of Employment to the extent not
exercised by Optionee or, in the case of death, by the person or persons to whom Optionee’s
rights under the Option have passed by will or by the laws of descent and distribution or,
in the case of Disability, by Optionee’s legal representative. In no event may the Option be
exercised by anyone after the earlier of(i) the expiration of the Option Period or (ii) 365
days after Optionee’s death or termination of Employment due to Disability.




     (d) Retirement. In the event of termination due to retirement, the vested
portion of the Option shall expire on the earlier of (A) the Option Period or (B) three (3)
months after the date of retirement, and the unvested portion of the Option shall expire.




     (e) Change of Control. In the event of a “Change in Control” of the Company
(as defined below) the vesting of the Option will be accelerated and the entire Option shall
be 100% vested as of the date immediately preceding a Change in Control and the Option may
be accelerated and the Option shall otherwise be affected as provided in the Plan at such
time. For the purposes of this Agreement, a “Change in Control” of the Company shall
include any event as defined in the Plan, and the Board has determined that pursuant to
Section 6.7(f) of the Plan, a “Change in Control” of the Company shall also include any
other event that constitutes a “Change in Control” of the Company as defined in the
Optionee’s Termination Agreement with the Company.



     10. Qualification as an Incentive Stock Option. The Optionee understands that the
Option is intended to qualify as an “incentive stock option” within the meaning of Section 422 of
the Code. The Optionee must meet certain holding periods under Section 422(a) of the Code to
obtain the federal income tax treatment applicable to the exercise of incentive stock options and
the disposition of Shares acquired thereby. The Optionee further understands that the exercise
price of Shares subject to this Option has been set by the Committee at a price that the Committee
determined to be not less than 100% (or, if the Optionee, at the Grant Date, owned more than 10% of
the total combined voting power of the Company’s outstanding voting securities, 110%) of the Fair
Market Value, as determined in accordance with the Plan, of a share of Common Stock on the Grant
Date. The Optionee further understands and agrees, however, that neither the Company nor the
Committee shall be liable or responsible for any additional tax liability incurred by the Optionee
in the event that the Internal Revenue Service for any reason determines that this Option does not
qualify as an “incentive stock option” within the meaning of the Code.



     11. Independent Legal and Tax Advice. Optionee acknowledges that the Company has
advised Optionee to obtain independent legal and tax advice regarding the grant and exercise of the
Option and the disposition of any Shares acquired thereby.



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     12. Reorganization of Company. The existence of the Option 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 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.



     13. Adjustment of Shares. In the event of stock dividends, spin-offs of assets or
other extraordinary dividends, stock splits, combinations of shares, recapitalizations, mergers,
consolidations, reorganizations, liquidations, issuances of rights or warrants and similar
transactions or events involving Company, appropriate adjustments shall be made to the terms and
provisions of this Option as provided in the Plan.



     14. No Rights in Shares. Optionee shall have no rights as a stockholder in respect of
the Shares until the Optionee becomes the record holder of such Shares.



     15. Investment Representation. Optionee will enter into such written representations,
warranties and agreements as Company may reasonably request in order to comply with any federal or
state securities law. Moreover, any stock certificate for any Shares issued to Optionee hereunder
may contain a legend restricting their transferability as determined by the Company in its
discretion. Optionee agrees that Company shall not be obligated to take any affirmative action in
order to cause the issuance or transfer of Shares hereunder to comply with any law, rule or
regulation that applies to the Shares subject to the Option.



     16. No Guarantee of Employment. The Option shall not confer upon Optionee any right
to continued Employment with the Company or any subsidiary or affiliate thereof.



     17. Withholding of Taxes. This Option is subject to and the Company shall have the
right to take any action as may be necessary or appropriate to satisfy any federal, state, or local
tax withholding obligations, including at the Committee’s discretion, to make deductions from the
number of Shares otherwise deliverable upon exercise of the Option in an amount sufficient to
satisfy withholding of any federal, state or local taxes required by law.



     18. General.




     (a) Notices. All notices under this Agreement shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their signatures below
or at such other address as may be designated in writing by either of the parties to one
another. Notices shall be effective upon receipt.




     (b) Shares Reserved. Company shall at all times during the Option Period
reserve and keep available under the Plan such number of Shares as shall be sufficient to
satisfy the requirements of this Option.




     (c) Nontransferability of Option. The Option granted pursuant to this Agreement
is not transferable other than by will, the laws of descent and distribution or by a
qualified domestic relations order (as defined in Section 414(p) of the Internal



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Revenue Code). The Option will be exercisable during Optionee’s lifetime only by
Optionee or by Optionee’s legal representative in the event of Optionee’s Disability. No
right or benefit hereunder shall in any manner be liable for or subject to any debts,
contracts, liabilities, obligations or torts of Optionee.





     (d) Amendment and Termination. No amendment, modification or termination of
the Option or this Agreement shall be made at any time without the written consent of
Optionee and Company.




     (e) No Guarantee of Tax Consequences. The Company and the Committee make no
commitment or guarantee that any federal or state tax treatment will apply or be available
to any person eligible for benefits under the Option. The Optionee has been advised and been
provided the opportunity to obtain independent legal and tax advice regarding the grant and
exercise of the Option and the disposition of any Shares acquired thereby.




     (f) Severability. In the event that any provision of this Agreement 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 Agreement, and the Agreement
shall be construed and enforced as if the illegal, invalid, or unenforceable provision had
not been included herein.




     (g) Supersedes Prior Agreements. This Agreement shall supersede and replace
all prior agreements and understandings, oral or written, between the Company and the
Optionee regarding the grant of the Options covered hereby.




     (h) Governing Law. The Option shall be construed in accordance with the laws
of the State of Louisiana without regard to its conflict of law provisions, to the extent
federal law does not supersede and preempt Louisiana law.



     19. Definitions and Other Terms. The following capitalized terms shall have those
meanings set forth opposite them:




(a) Optionee:                                         




(b) Grant Date:                                         




(c) Shares:                      of the Company’s Common Stock.




(d)
Option Price: US $___ Dollars ($___) per Share.




(e) Vesting Schedule: Options for Shares shall vest as follows:




Date
        Options Vesting



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     IN
WITNESS WHEREOF, the Company has, as of ___, caused this Agreement to be executed on
its behalf by its duly authorized officer, and Optionee has hereunto executed this Agreement as of
the same date.



	 	 	 	 	 	 	 
	 	 	PETROQUEST ENERGY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Charles T. Goodson	 	 
	 

	 	 	 	Chairman and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	400 E. Kaliste Saloom Road	 	 
	 	 	Suite 6000	 	 
	 	 	Lafayette, Louisiana 70508	 	 
	 
	 	 	 	 	 	 
	 	 	OPTIONEE	 	 






	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Printed Name:  	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices: