Document:

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                                                                   EXHIBIT 10.31

                              TERMINATION AGREEMENT

         THIS TERMINATION AGREEMENT, dated as of the 15th day of December, 2000
is made and entered into by and between PetroQuest Energy, Inc., a Delaware
corporation with its principal office at 400 E. Kaliste Saloom Road, Suite 3000,
Lafayette, Louisiana 70508 (the "Company"), and Arthur M. Mixon ("Executive").

                                 R E C I T A L S

         A. Company desires to enter into an agreement with Executive whereby
severance benefits will be paid to Executive on a change in control of the
Company and consequent actual or constructive termination of Executive's
employment.

         B. This Agreement sets forth the severance benefits which the Company
agrees that it will pay to the Executive if Executive's employment with the
Company terminates under one of the circumstances described herein following a
Change in Control of the Company.

         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the parties hereto agree as follows:

         1. Term of Agreement. This Agreement shall be effective immediately on
January 1, 2001 and shall continue in effect through December 31, 2003;
provided, however, that commencing on January 1, 2004 and each January 1
thereafter, the term of this Agreement shall automatically be extended for one
additional year unless not later than September 30 of the preceding year, the
Company shall have given notice that it does not wish to extend this Agreement;
provided, further, that notwithstanding any such notice by the Company not to
extend, this Agreement shall automatically be extended for 24 months beyond the
term provided herein if a Change in Control, as defined in Section 3 of this
Agreement, has occurred during the term of this Agreement.

         2. Effect on Employment Rights. This Agreement is not part of any
employment agreement that the Company and Executive may have entered. Nothing in
this Agreement shall confer upon Executive any right to continue in the employ
of the Company or interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to terminate for any reason, with
or without cause.

         Executive agrees that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company (as
defined below), Executive will remain in the employ of the Company during the
pendency of any such potential change in control and for a period of one year
after the occurrence of an actual Change in Control. For this purpose, a
"potential change in control of the Company" shall be deemed to have occurred if
(a) the Company enters into an agreement the consummation of which would result
in the occurrence of a Change in Control, (b) any person (including the Company)
publicly announces an intention to take or consider taking action

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which if consummated would constitute a Change in Control or (c) the Board of
Directors of the Company (the "Board") adopts a resolution to the effect that a
potential change in control of the Company has occurred.

         3. Change in Control. For purposes of this Agreement, a "Change in
Control" of the Company shall be deemed to have occurred if any of the events
set forth in any one of the following paragraphs shall occur:

                  (a) any "person" (as defined in section 3(a)(9) of the
         Securities Exchange Act of 1934, as amended (the "Exchange Act") and as
         such term is modified in sections 13(d) and 14(d) of the Exchange Act),
         excluding the Company or any of its subsidiaries, a trustee or any
         fiduciary holding securities under an employee benefit plan of the
         Company of any of its subsidiaries, an underwriter temporarily holding
         securities pursuant to an offering of such securities or a corporation
         owned, directly or indirectly, by stockholders of the Company in
         substantially the same proportions as their ownership of the Company,
         is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
         the Exchange Act), directly or indirectly, of securities of the Company
         representing 30% or more of the combined voting power of the Company's
         then outstanding securities; or

                  (b) during any period of not more than two consecutive years,
         individuals who at the beginning of much period constitute the Board
         and any new director (other than a director designated by a Person who
         has entered into an agreement with the Company to effect a transaction
         described in clause (a), (c) or (d) of this paragraph) whose election
         by the Board or nomination for election by the Company's stockholders
         was approved by a vote of at least two-thirds (2/3) of the directors
         then still in office who either were directors at the beginning of the
         period or whose election or nomination for election was previously so
         approved, cease for any reason to constitute a majority thereof; or

                  (c) the shareholders of the Company approve a merger or
         consolidation of the Company with any other corporation, other than (i)
         a merger or consolidation which would result in the voting securities
         of the Company outstanding immediately prior thereto continuing to
         represent (either by remaining outstanding or by being converted into
         voting securities of the surviving entity), in combination with the
         ownership of any trustee or other fiduciary holder of securities under
         an employee benefit plan of the Company, at least 50% of the combined
         voting power of the voting securities of the Company or such surviving
         entity outstanding immediately after such merger or consolidation, or
         (ii) a merger or consolidation effected to implement a recapitalization
         of the Company (or similar transaction) in which no person acquires
         more than 50% of the combined voting power of the Company's then
         outstanding securities; or

                  (d) the shareholders of the Company approve a plan of complete
         liquidation of the Company or an agreement for the sale or disposition
         by the Company of all or substantially all of the Company's assets.

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         Notwithstanding the foregoing, if any transaction described under
         paragraphs (a), (c) and (d) of this Section 3 results in consideration
         to the Company or the shareholders of the Company, as the case may be,
         from such transaction with a value (as determined in good faith by the
         Compensation Committee of the Board) of less than $1.00 per share
         (subject to adjustment for stock splits and combination and stock
         dividends after the date hereof), no Change in Control will be deemed
         to occur unless such transaction is approved by persons holding not
         less than two-thirds of the combined voting power of the Company's
         voting securities entitled to vote on such transaction. In addition, no
         Change in Control shall be deemed to occur if there is consummated any
         transaction or series of integrated transactions immediately following
         which, in the judgment of the Compensation Committee of the Board, the
         holders of the Company's Common Stock immediately prior to such
         transaction or series of transactions continue to have the same
         proportionate ownership in an entity which owns all or substantially
         all of the assets of the Company immediately prior to such transaction
         or series of transactions.

         4. Termination of Employment Following a Change in Control. Executive
shall be entitled to the benefits provided in Section 5 hereof upon the
subsequent termination of Executive's employment by the Company within two years
after a Change in Control which occurs during the term of this Agreement,
provided such termination is (a) by the Company other than for cause, as defined
below, or (b) by Executive for Good Reason, as defined below. Executive shall
not be entitled to the benefits of Section 5, any other provision hereof to the
contrary notwithstanding, if Executive's employment terminates: (i) pursuant to
Executive retiring at age 65, (ii) by reason of Executive's total and permanent
disability, or (iii) by reason or Executive's death. As used herein, "total and
permanent disability" means a condition which prevents Executive from performing
to a significant degree the essential duties of his or her position and is
expected to be of long-term duration or result in death. A determination of
total and permanent disability must be based on competent medical evidence.

                  (a)      Cause.

                           (i) Definition. Termination by the Company of
                  Executive's employment for Cause shall mean termination upon
                  Executive's willful engaging in misconduct which is
                  demonstrably and materially injurious to the Company and its
                  subsidiaries taken as a whole. No act, or failure to act, on
                  Executive's part shall be considered "willful" unless done, or
                  omitted to be done, by Executive not in good faith and without
                  reasonable belief that Executive's action or omission was in
                  the best interest of the Company or its subsidiaries.
                  Notwithstanding the foregoing, Executive shall not be deemed
                  to have been terminated for Cause unless and until there shall
                  have been delivered to Executive a copy of a resolution duly
                  adopted by the affirmative vote of not less than three
                  quarters of the entire membership of the Board at a meeting of
                  the Board called and held for the purpose of making a
                  determination of whether Cause for termination exists (after
                  reasonable notice to Executive and an opportunity for
                  Executive to be heard before the Board), finding that in the
                  good faith opinion of

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                  the Board Executive was guilty of misconduct as set forth
                  above in this subsection 4(a)(i) and specifying the
                  particulars thereof in detail.

                           (ii) Remedy by Executive. If the Company gives
                  Executive a Notice of Termination which states that the basis
                  for terminating Executive's employment is Cause, Executive
                  shall have ten days after receipt of such Notice to remedy the
                  facts and circumstances which provided Cause. The Board (or
                  any duly authorized Committee thereof) shall make a good faith
                  reasonable determination immediately after such ten-day period
                  whether such facts and circumstances have been remedied and
                  shall communicate such determination in writing to Executive.
                  If the Board determines that an adequate remedy has not
                  occurred, then the initial Notice of Termination shall remain
                  in effect.

                  (b) Good Reason. After a Change in Control, Executive may
         terminate employment with the Company at any time during the term of
         this Agreement if Executive has made a good faith reasonable
         determination that Good Reason exists for this termination.

                           (i) Definition. For purposes of this Agreement, "Good
                  Reason" shall mean any of the following actions, if taken
                  without the express written consent of Executive:

                                    A. any material change by the Company in
                           Executive's functions, duties, or responsibilities
                           which change would cause Executive's position with
                           the Company to become of less dignity,
                           responsibility, importance, or scope from the
                           position and attributes that applied to Executive
                           immediately prior to the Change in Control;

                                    B. any significant reduction in Executive's
                           base salary, other than a reduction effected as part
                           of an across-the-board reduction affecting all
                           executive employees of the Company;

                                    C. any material failure by the Company to
                           comply with any of the provisions of this Agreement
                           (or of any employment agreement between the parties);

                                    D. the Company's requiring Executive to be
                           based at any office or location more than 45 miles
                           from the home at which the Executive resides on the
                           date immediately preceding the Change in Control,
                           except for travel reasonably required in the
                           performance of Executive's responsibilities and
                           commensurate with the amount of travel required of
                           Executive prior to the Change in Control; or

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                                    E. any failure by the Company to obtain the
                           express assumption of this Agreement by any successor
                           or assign of the Company.

                                    Executive's right to terminate employment
                           for Good Reason pursuant to this subsection 4(b)(I)
                           shall not be affected by Executive's incapacity due
                           to physical or mental illness.

                           (ii) Remedy by Company. If Executive gives the
                  Company a Notice of Termination which states that the basis
                  for Executive's termination of employment is Good Reason, the
                  Company shall have ten days after receipt of such Notice to
                  remedy the facts and circumstances which provided Good Reason.
                  Executive shall make a good faith reasonable determination
                  immediately after such ten-day period whether such facts and
                  circumstances have been remedied and shall communicate such
                  determination in writing to the Company. If Executive
                  determines that adequate remedy has not occurred, then the
                  initial Notice of Termination shall remain in effect.

                           (iii) Determination by Executive Presumed Correct.
                  Any determination by Executive pursuant to this Section 4(b)
                  that Good Reason exists for Executive's termination of
                  employment and that adequate remedy has not occurred shall be
                  presumed correct and shall govern unless the party contesting
                  the determination shows by a clear preponderance of the
                  evidence that it was not a good faith reasonable
                  determination.

                           (iv) Severance Payment Made Notwithstanding Dispute.
                  Notwithstanding any dispute concerning whether Good Reason
                  exists for termination of employment or whether adequate
                  remedy has occurred, the Company shall immediately pay to
                  Executive, as specified in Section 5, any amounts otherwise
                  due under this Agreement. Executive may be required to repay
                  such amounts to the Company if any such dispute is finally
                  determined adversely to Executive.

                  (c) Notice of Termination. Any termination of Executive's
         employment by the Company or by Executive hereunder shall be
         communicated by a Notice of Termination to the other party hereto. For
         purposes of this Agreement, a "Notice of Termination" shall mean a
         written notice which shall indicate the specific termination provisions
         in this Agreement relied upon any which sets forth (i) in reasonable
         detail the facts and circumstances claimed to provide a basis for
         termination of Executive's employment under the provision so indicated
         and (ii) the date of Executive's termination of employment, which shall
         be no earlier than 10 days after such Notice is received by the other
         party. Any purported termination of the Executive's employment by the
         Company which is not effected pursuant to a Notice of Termination
         satisfying the requirements of this Agreement shall not be effective.
         In the case of a termination for Cause, the Notice of Termination shall
         also satisfy the requirements set forth in Section 4(a)(i).

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         5. Severance Payment Upon Termination of Employment. If Executive's
employment with the Company is terminated during the term of this Agreement and
after a Change in Control (a) by the Company other than for Cause, or (b) by
Executive for Good Reason, then Executive shall be entitled to the following:

                  (a) Lump-Sum Severance Payment. In lieu of any further salary
         payments to the Executive for periods subsequent to the Date of
         Termination, the Company shall pay to the Executive a lump sum
         severance payment, in cash, equal to two (2) (or, if less, the number
         of years, including fractions, from the date of Termination until the
         Executive would have reached age sixty-five (65)) times the sum of (a)
         the Executive's Annual Base Salary in effect on date of termination and
         (b) the Executive's most recent Annual Bonus. If the most recent Annual
         Bonus was a stock option or a stock grant, the value of the bonus will
         be deemed to be the number of option shares times the closing price of
         the Company's Common Stock for the 20 trading days prior to
         Termination.

                  (b) Continued Benefits. For a twenty-four (24) month period
         (or, if less, the number of months from the Date of Termination until
         the Executive would have reached age sixty-five (65)) after the Date of
         Termination, the Company shall provide the Executive with life
         insurance, health, disability and other welfare benefits ("Welfare
         Benefits") substantially similar in all respects to those which the
         Executive is receiving immediately prior to the Notice of Termination
         (without giving effect to any reduction in such benefits subsequent to
         the Potential Change in Control preceding the Change in Control or the
         Change in Control which reduction constitutes or may constitute God
         Reason). Benefits otherwise receivable by an Executive pursuant to this
         Section shall be reduced to the extent substantially similar benefits
         are actually received by or made available to the Executive by any
         other employer during the same time period for which such benefits
         would be provided pursuant to this Section at a cost to the Executive
         that is commensurate with the cost incurred by the Executive
         immediately prior to the Executive's Date of Termination (without
         giving effect to any increase in costs paid by the Executive after the
         Potential Change in Control preceding the Change in Control or the
         Change in Control which constitutes or may constitute Good Reason);
         provided, however, that if the Executive becomes employed by a new
         employer which maintains a medical plan that either (i) does not cover
         the Executive or a family member or dependent with respect to a
         preexisting condition which was covered under the applicable Company
         medical plan, or (ii) does not cover the Executive or a family member
         or dependent for a designated waiting period, the Executive's coverage
         under the applicable Company medical plan shall continue (but shall be
         limited in the event of noncoverage due to a preexisting condition, to
         such preexisting condition) until the earlier of the end of the
         applicable period of noncoverage under the new employer's plan or the
         second anniversary of the Executive's Date of Termination. The
         Executive agrees to report to the Company any coverage and benefits
         actually received by the Executive or made available to the Executive
         from such other employer(s). The Executive shall be entitled to elect
         to change his level of coverage and/or his choice of coverage options
         (such as Executive only or family medical coverage) with respect to the
         Welfare Benefits to be provided by the Company to the

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         Executive to the same extent that actively employed senior executives
         of the Company are permitted to make such changes; provided, however,
         that in the event of any such changes the Executive shall pay the
         amount of any cost increase that would actually be paid by an actively
         employed executive of the Company by reason of making the same change
         in his level of coverage or coverage options.

                  (c) Gross-Up Payment. In the event that the Executive becomes
         entitled to the Severance Benefits or any other benefits or payments
         under this Agreement (other than pursuant to this Section) by reason of
         the accelerated vesting of stock options thereunder (together, the
         "Total Benefits"), and in the event that any of the Total Benefits will
         be subject to the Excise Tax, the Company shall pay to the Executive an
         additional amount (the "Gross-Up Payment") such that the net amount
         retained by the Executive, after deduction of any Excise Tax on the
         Total Benefits and any federal, state and local income tax, Excise Tax
         and FICA and Medicare withholding taxes upon the payment provided for
         by this Section, shall be equal to the Total Benefits.

                  For purposes of determining whether any of the Total Benefits
         will be subject to the Excise Tax and the amount of such Excise Tax,
         (i) any other payments or benefits received or to be received by the
         Executive in connection with a Change in Control or the Executive's
         termination of employment (whether pursuant to the terms of this
         Agreement or any other agreement, plan or arrangement with the Company,
         any Person whose actions result in a Change in Control or any Person
         affiliated with the Company or such Person) shall be treated as
         "parachute payments" within the meaning of Section 280G(b)(2) of the
         Cod, and all "excess parachute payments" within the meaning the Section
         280G(b)(1) shall be treated as subject to the Excise Tax, unless in the
         opinion of tax counsel ("Tax Counsel") selected by the Company's
         independent auditors and acceptable to the Executive, such other
         payments or benefits (in whole or in part) do not constitute parachute
         payments, or such excess parachute payments (in whole or in part)
         represent reasonable compensation for services actually rendered within
         the meaning of Section 280G(b)(4) of the Code in excess of the Base
         Amount, or are otherwise not subject to the Excise Tax, (ii) the amount
         of the Total Benefits which shall be treated as subject to the Excise
         Tax shall be equal to the lesser of (A) the total amount of the Total
         Benefits reduced by the amount of such Total Benefits that in the
         opinion of Tax Counsel are not parachute payments, or (B) the amount of
         excess parachute payments within the meaning of Section 280G(b)(1)
         (after applying clause (i), above), and (iii) the value of any non-cash
         benefits or any deferred payment or benefit shall be determined by the
         Company's independent auditors in accordance with the principles of
         sections 280G(d)(3) and (4) of the Code. For purposes of determining
         the amount of the Gross-Up Payment, the Executive shall be deemed to
         pay federal income taxes at the highest marginal rate of federal income
         taxation in the calendar year in which the Gross-Up Payment is to be
         made and state and local income taxes at the highest marginal rate of
         taxation in the state and locality of the Executive's residence on the
         Date of Termination, net of the reduction in federal income taxes which
         could be obtained from deduction of such state and local taxes
         (calculated by assuming that any reduction under Section 68 of the Code
         in the amount of itemized deductions

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         allowable to the Executive applies first to reduce the amount of such
         state and local income taxes that would otherwise be deductible by the
         Executive).

         In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax, federal, state
and local income taxes and FICA and Medicare withholding taxes imposed on the
portion of the Gross-Up Payment being repaid by the Executive to the extent that
such repayment results in a reduction in Excise Tax, FICA and Medicare
withholding taxes and/or federal, state or local income taxes) plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment, determined as previously described, to the
Executive in respect to such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined.

                  (d) Timing of Payments. The payments provided for in Sections
         5(a) and 5(c) shall be made not later than the fifth (5th) day
         following the Date of Termination; provided, however, that if the
         amounts of such payments cannot be finally determined on or before such
         day, the Company shall pay to the Executive on such day an estimate, as
         determined in good faith by the Company, of the minimum amount of such
         payments and shall pay the remainder of such payments (together with
         interest at the rate provided in Section 1274(b)(2)(B) of the Code from
         the firth (5th) day following the Date of Termination to the payment of
         such remainder) as soon as the amount thereof can be determined but in
         no event later than the thirtieth (30th) day after the Date of
         Termination. In the event that the amount of the estimated payments
         exceeds the amount subsequently determined to have been due, such
         excess shall constitute a loan by the Company to the Executive, payable
         on the fifth (5th) business day after demand by the Company (together
         with interest at the rate provided in Section 1274(b)(2)(B) of the Code
         from the fifth (5th) day following the Date of Termination to the
         repayment of such excess).

         6. Reimbursement of Legal Costs. The Company shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to any payments under this Agreement
including all such fees and expenses, if any, incurred in contesting or
disputing any Notice of Intent to Terminate under Section 4(a) hereof or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit provide
hereunder. Such payments shall be made within five (5) business days after
delivery of the Executive's respective written requests for payment accompanied
by such evidence of fees and expenses incurred as the Company reasonably may
require.

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         7. Damages. Executive shall not be required to mitigate damages with
respect to the amount of any payment provided under this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment provided
under this Agreement be reduced by retirement benefits, deferred compensation or
any compensation earned by Executive as a result of employment by another
employer.

         8. Successor to Company. The Company shall require any successor or
assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. A
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor or assign to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this section or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.

         9. Heirs of Executive. This Agreement shall inure to the benefit of and
be enforceable by Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amounts are still payable to Executive hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legatee, or other
designee or, if there be so much designee, to Executive's estate.

         10. Arbitration. Any dispute, controversy or claim arising under or in
connection with this Agreement, or the breach thereof, shall be settled
exclusively by arbitration in accordance with the Rules of the American
Arbitration Association then in effect. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction. Any
arbitration held pursuant to this section in connection with Executive's
termination of employment shall take place in Houston, Texas at the earliest
possible date. If any proceeding is necessary to enforce or interpret the terms
of this Agreement, or to recover damages for breach thereof, the prevailing
party shall be entitled to reasonable attorneys' fees and necessary costs and
disbursements, not to exceed in the aggregate one percent (1%) of the net worth
of the other party, in addition to any other relief to which he or it may be
entitled.

         11. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by messenger or in person, or when
mailed by United States registered mail, return receipt requested, postage
prepaid, as follows:

         If to the Company:         400 E. Kaliste Saloom Road
                                    Suite 3000
                                    Lafayette, Louisiana 70508
                                    Attention: President

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         If to the Executive:       Arthur M. Mixon
                                    400 E. Kaliste Saloom Road
                                    Suite 3000
                                    Lafayette, Louisiana 70508

or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

         12. General Provisions.

                  (a) Executive's rights and obligations under this Agreement
         shall not be transferable by assignment or otherwise, nor shall
         Executive's rights be subject to encumbrance or subject to the claims
         of the Company's creditors. Nothing in this Agreement shall prevent the
         consolidation of the Company with, or its merger into, any other
         corporation, or the sale by the Company of all or substantially all of
         its properties or assets; and this Agreement shall inure to the benefit
         of, be binding upon and be enforceable by, any successor surviving or
         resulting corporation, or other entity to which such assets shall be
         transferred. This Agreement shall not be terminated by the voluntary or
         involuntary dissolution of the Company.

                  (b) This Agreement and any Employment Agreement with Executive
         plus terms of any stock option plans or grants constitutes the entire
         agreement between the parties hereto in respect to the rights and
         obligations of the parties following a Change in Control. This
         Agreement supersedes and replaces all prior oral and written
         agreements, understandings, commitments, and practices between the
         parties (whether or not fully performed by Executive prior to the date
         hereof), which shall be of no further force or effect.

                  (c) The provisions of this Agreement shall be regarded as
         divisible, and if any of said provisions or any part thereof are
         declared invalid or unenforceable by a court of competent jurisdiction,
         the validity and enforceability of the remainder of such provisions or
         parts thereof and the applicability thereof shall not be affected
         thereby.

                  (d) This Agreement may not be amended or modified except by a
         written instrument executed by the Company and Executive.

                  (e) This Agreement and the rights and obligations hereunder
         shall be governed by and construed in accordance with the laws of the
         State of Texas.

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         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                         PETROQUEST ENERGY, INC.,
                                         a Delaware Corporation

                                         By:    /s/ ALFRED J. THOMAS, II
                                            ------------------------------------

                                         Name:  Alfred J. Thomas, II
                                              ----------------------------------

                                         Title: President
                                               ---------------------------------

                                         EXECUTIVE:

                                          /s/ ARTHUR M. MIXON
                                         ---------------------------------------
                                         Arthur M. Mixon

                                       11<PAGE>   1
                                                                   EXHIBIT 10.42

                            INDEMNIFICATION AGREEMENT

         This Indemnification Agreement is entered into March 26, 2001 and
effective as of the 1st day of January, 2001 ("Agreement"), by and between
PetroQuest Energy, Inc., a Delaware corporation ("Company"), and Arthur M. Mixon
("Indemnitee"):

         WHEREAS, highly competent persons have become more reluctant to serve
corporations as directors, executive officers or in other capacities unless they
are provided, with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, the corporation;

         WHEREAS, the Board of Directors of the Company (the "Board") has
determined that, in order to attract and retain qualified individuals, the
Company will attempt to maintain on an ongoing basis, at its sole expense,
liability insurance to protect persons' serving the Company and its subsidiaries
from certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the corporation or business enterprise itself;

         WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons;

         WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future;

         WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and

         WHEREAS, Indemnitee is willing to serve, continue to serve and to take
on additional service for or on behalf of the Company on the condition that he
be so indemnified;

         NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:

         SECTION 1. Services by Indemnitee. Indemnitee agrees to serve as an
executive officer of the Company and, as mutually agreed by Indemnitee and the
Company, as a director, officer, employee, agent or fiduciary of other
corporations, partnerships, joint ventures, trusts or other enterprises
(including, without limitation, employee benefit plans). Indemnitee may at any
time and

<PAGE>   2

for any reason resign from any such position (subject to any other contractual
obligation or any obligation imposed by operation of law), in which event the
Company shall have no obligation under this Agreement to continue Indemnitee in
that position. This Agreement shall not be deemed an employment contract between
the Company (or any of its subsidiaries) and Indemnitee. Indemnitee specifically
acknowledges that Indemnitee's employment with the Company (or any of its
subsidiaries), if any, is at will, and the Indemnitee may be discharged at any
time for any reason, with or without cause, except as may be otherwise provided
in any written employment contract between Indemnitee and the Company (or any of
its subsidiaries), other applicable formal severance policies duly adopted by
the Board or, with respect to service as a director of the Company, by the
Company's Certificate of incorporation, Bylaws and the General Corporation Law
of the State of Delaware. Notwithstanding, the foregoing, this Agreement shall
continue in force after Indemnitee has ceased to serve as an officer or director
of the Company and no longer serves at the request of the Company as a director,
officer, employee or agent of the Company or any subsidiary of the Company.

         SECTION 2. Indemnification--General. The Company shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this
Agreement and (b) to the fullest extent permitted by applicable law in effect on
the date hereof and as amended from time to time. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of this Agreement.

         SECTION 3. Proceedings Other than Proceedings by or in the Right of the
Company. Indemnitee shall be entitled to the rights of indemnification provided
in Section 2 and this Section 3 if, by reason of his Corporate Status (as
hereinafter defined), he is, or is threatened to be made, a party to or a
participant in any threatened, pending, or completed Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the Company. Pursuant to
this Section 3, the Company shall indemnify Indemnitee against, and shall hold
Indemnitee harmless from and in respect of, all Expenses, judgments, penalties,
fines (including excise taxes) and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses, judgments, fines, penalties or amounts paid in
settlement) actually and reasonably incurred by him or on his behalf in
connection with such Proceeding or any claim, issue or matter therein, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and, with respect to any criminal
Proceeding, had no reasonable cause to believe his conduct was unlawful.

         SECTION 4. Proceedings by or in the Right of the Company. Indemnitee
shall be entitled to the rights of indemnification provided in Section 2 and
this Section 4 if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to or a participant in any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment in
its favor. Pursuant to this Section 4, the Company shall indemnify Indemnitee
against, and shall hold Indemnitee harmless from and in respect of, all Expenses
actually and reasonably incurred by him or on his behalf in connection with, and
any amounts paid in settlement of, such Proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company. Notwithstanding the foregoing, no indemnification against such
Expenses shall be made in respect of any claim, issue or matter in such
Proceeding as to which Indemnitee shall have

                                       2
<PAGE>   3

been adjudged to be liable to the Company if applicable law prohibits such
indemnification; provided, however, if applicable law so permits,
indemnification against such Expenses shall nevertheless be made by the Company
in such event if and only to the extent that the Court of Chancery of the State
of Delaware, or the court in which such Proceeding shall have been brought or is
pending, shall determine.

         SECTION 5. Indemnification for Expenses of a Party Who Is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a party to (or a
participant in) and is successful, on the merits or otherwise, in defense of any
Proceeding, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith. If Indemnitee is not
wholly successful in defense of such Proceeding but is successful, on the merits
or otherwise, as to one or more but less than all claims, issues or matters in
such Proceeding, the Company shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this Section and
without limitation, the termination of any claim, issue or matter in such a
Proceeding by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.

         SECTION 6. Indemnification for Expenses as a Witness. Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee is, by
reason of his Corporate Status, a witness in any Proceeding to which Indemnitee
is not a party, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.

         SECTION 7. Advancement of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within ten (10) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it ultimately shall
be determined, in accordance with this Agreement, that Indemnitee is not
entitled to be indemnified against such Expenses.

         SECTION 8. Procedure for Determination of Entitlement to
Indemnification.

         (a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.

         (b) On written request by Indemnitee for indemnification pursuant to
the first sentence of Section 8(a), a determination, if required by applicable
law, with respect to Indemnitee's entitlement thereto shall be made in the
specific case: (I) if a Change in Control (as hereinafter defined) shall have
occurred within two (2) years prior to the date of such written request, by

                                       3
<PAGE>   4

Independent Counsel (as hereinafter defined) in a written opinion to the Board,
a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control
shall not have occurred within two (2) years prior to the date of such written
request, (A) by a majority vote of the Disinterested Directors (as hereinafter
defined), even though less than a quorum of the Board, or (B) if there are no
such Disinterested Directors, or if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee; and, if it is so determined that Indemnitee is entitled
to indemnification, payment to Indemnitee shall be made within ten (10) days
after such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity on
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.

         (c) In the event the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b), the Independent
Counsel shall be selected as provided in this Section 8(c). If a Change of
Control shall not have occurred within two (2) years prior to the date of
Indemnitee's written request for indemnification pursuant to Section 8(a), the
Independent Counsel shall be selected by the Board, and the Company shall give
written notice to Indemnitee advising him of the identity of the Independent
Counsel so selected. If a Change of Control shall have occurred within two (2)
years prior to the date of Indemnitee's written request for indemnification
pursuant to Section 8(a), the Independent Counsel shall be selected by
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board, in which event the preceding sentence shall apply), and Indemnitee shall
give written notice to the Company advising it of the identity of the
Independent Counsel so selected in either event, Indemnitee or the Company, as
the case may be, may, within ten (10) days after such written notice of
selection shall have been given, deliver to the Company or to Indemnitee, as the
case may be, a written objection to such selection. Such objection may be
asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of "Independent Counsel" as defined in section 17, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is so made and substantiated, the
Independent Counsel so selected may not serve as Independent Counsel unless and
until such objection is withdrawn or a court has determined that such objection
is without merit. If, within twenty (20) days after submission by Indemnitee of
a written request for indemnification pursuant to Section 8(a), no Independent
Counsel shall have been selected and not objected to, either the Company or
Indemnitee may petition the Court of Chancery or other court of competent
jurisdiction for resolution of any objection which shall have been made by the
Company or Indemnitee to the other's selection of Independent Counsel and/or for
the appointment as Independent Counsel of a person selected by the petitioned
court or by such other person as the petitioned court shall designate, and the
person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 8(b). The Company shall
pay any and all reasonable fees and expenses of Independent Counsel incurred by
such Independent Counsel in connection with acting pursuant to Section 8(b), and
the Company shall pay all reasonable fees and

                                       4
<PAGE>   5

expenses incident to the procedures of this Section 8(c), regardless of the
manner in which such Independent Counsel was selected and appointed. If (I)
Independent Counsel does not make any determination respecting Indemnitee's
entitlement to indemnification hereunder within ninety (90) days after receipt
by the Company of a written request therefor and (ii) any judicial proceeding or
arbitration pursuant to Section 10(a)(iii) hereof is then commenced, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional conduct then
prevailing).

         SECTION 9. Presumptions and Effect of Certain Proceedings.

         (a) In making a determination with respect to entitlement to
indemnification hereunder, the Person, Persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 8(a), and the Company shall have the burden of proof to
overcome that presumption in connection with the making by any person, persons
or entity of any determination contrary to that presumption.

         (b) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or on a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.

         (c) Any action taken by Indemnitee in connection with any employee
benefit plan shall, if taken in good faith by Indemnitee and in a manner
Indemnitee reasonably believed to be in the interest of the participants in or
beneficiaries of that plan, be deemed to have been taken in a manner "not
opposed to the best interests of the Company" for all purposes of this
Agreement.

         SECTION 10. Remedies of Indemnitee.

         (a) In the event that (I) a determination is made pursuant to Section 8
that Indemnitee is not entitled to indemnification hereunder, (ii) advancement
of Expenses is not timely made pursuant to Section 7, (iii) Independent Counsel
is to determine Indemnitee's entitlement to indemnification hereunder, but does
not make that determination within ninety (90) days after receipt by the Company
of the request for that indemnification, (iv) payment of indemnification is not
made pursuant to section 5 or 6 within ten (10) days after receipt by the
Company of a written request therefor or (v) payment of indemnification is not
made within ten (10) days after a determination has been made that Indemnitee is
entitled to indemnification, Indemnitee shall be entitled to an adjudication
from the Court of Chancery of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. Indemnitee
shall commence such Proceeding seeking an adjudication or an award in
arbitration within one hundred eighty (180) days following the date on which
Indemnitee first has the right to

                                       5
<PAGE>   6

commence such proceeding pursuant to this Section 10(a); provided, however, that
the foregoing clause shall not apply in respect of a proceeding brought by
Indemnitee to enforce his rights under Section 5.

         (b) In the event that a determination shall have been made pursuant to
Section 8(b) that Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to this Section 10 shall be
conducted in all respects as a de novo trial, or arbitration, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination. In
any judicial proceeding or arbitration commenced pursuant to this section 10,
the Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.

         (c) If a determination shall have been made pursuant to Section 8(b)
that Indemnitee is entitled to indemnification, the Company shall be bound by
such determination in any judicial proceeding or arbitration commenced pursuant
to this Section 10, absent (I) a misstatement by Indemnitee of a material fact,
or an omission by Indemnitee of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law.

         (d) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17) actually and reasonably incurred by him in such judicial
adjudication or arbitration, but only if he prevails therein. If it shall be
determined in said judicial adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.

         SECTION 11. Non-Exclusivity; Survival of Rights; Insurance;
Subrogation.

         (a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action
taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal. To the extent that a change in Delaware law
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change.

         (b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees, or
agents of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such

                                       6
<PAGE>   7

person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, Officer, employee or agent
under such policy or policies.

         (c) In the event of any payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.

         (d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.

         (e) The Company's obligation to indemnify or advance Expenses hereunder
to Indemnitee with respect to Indemnitee's service at the request of the Company
as a director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced
by any amount Indemnitee has actually received as indemnification or advancement
of Expenses from such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.

         SECTION 12. Duration of Agreement. This Agreement shall continue until
and terminate upon the later of: (a) ten (10) years after the date that
Indemnitee shall have ceased to serve as a director or officer of the Company or
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which Indemnitee served on behalf of the Company; or
(b) the final termination of any Proceeding then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of expenses
hereunder and of any Proceeding commenced by Indemnitee pursuant to Section 10
relating thereto. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his
spouse (if Indemnitee resides in Texas or another community property state),
heirs, executors and administrators, and this Agreement does not, and shall not
be construed to confer any rights on any person that is not a party to this
Agreement, other than Indemnitee's spouse, and his heirs, executors and assigns.

         SECTION 13. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable which is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; (b) such provision or
provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of this Agreement
(including. without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable which
is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested thereby.

                                       7
<PAGE>   8

         SECTION 14. Exception to Right of Indemnification or Advancement of
Expenses. Notwithstanding any other provision hereof, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding brought by Indemnitee or any claim therein prior to a
Change in Control, unless the bringing of such Proceeding or making of such
claim shall have been approved by the Board of Directors.

         SECTION 15. Identical Counterparts. This Agreement may be executed in
one or more counterparts by means of original or facsimile signatures, each of
which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same Agreement. Only one such counterpart
signed by the party against whom enforceability is sought needs to be produced
to evidence the existence of this Agreement.

         SECTION 16. Headings. The headings of the Sections hereof are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.

         SECTION 17. Definitions. For purposes of this Agreement:

                  (a) "Acquiring Person" means any Person who or which, together
         with all Affiliates and Associates of such Person, is or are the
         Beneficial Owner of twenty-five percent (25%) or more of the shares of
         Common Stock then outstanding, but does not include any Exempt Person;
         provided, however, that a Person shall not be or become an Acquiring
         Person if such Person, together with its Affiliates and Associates,
         shall become the Beneficial Owner of twenty-five percent (25%) or more
         of the shares of Common Stock then outstanding solely as a result of a
         reduction in the number of shares of Common Stock outstanding due to
         the repurchase of Common Stock by the Company, unless and until such
         time as such Person or any Affiliate or Associate of such Person shall
         purchase or otherwise become the Beneficial Owner of additional shares
         of Common Stock constituting one percent (1%) or more of the then
         outstanding shares of Common Stock or any other Person (or Persons) who
         is (or collectively are) the Beneficial Owner of shares of Common Stock
         constituting one percent (1%) or more of the then outstanding shares of
         Common Stock shall become an Affiliate or Associate of such Person,
         unless, in either such case, such Person, together with all Affiliates
         and Associates of such Person, is not then the Beneficial Owner of
         twenty-five percent (25%) or more of the shares of Common Stock then
         outstanding.

                  (b) "Affiliate" has the meaning ascribed to that term in
         Exchange Act Rule 12b-2.

                  (c) "Associate" means, with reference to any Person, (I) any
         corporation, firm, partnership, association, unincorporated
         organization or other entity (other than the Company or a subsidiary of
         the Company) of which that Person is an officer or general partner (or
         officer or general partner of a general partner) or is, directly or
         indirectly, the Beneficial owner of 10% or more of any class of its
         equity securities, (ii) any trust or other estate in which that Person
         has a substantial beneficial interest

                                       8
<PAGE>   9

         or for or of which that Person serves as trustee or in a similar
         fiduciary capacity and (iii) any relative or spouse of that Person, or
         any relative of that spouse, who has the same home as that Person.

                  (d)A specified Person is deemed the "Beneficial Owner" of, and
         is deemed to "beneficially own," any securities:

                           (I) of which that Person or any of that Person's
                  Affiliates or Associates, directly or indirectly, is the
                  "beneficial owner" (as determined pursuant to Exchange Act
                  Rule 13d-3) or otherwise has the right to vote or dispose of,
                  including pursuant to any agreement, arrangement or
                  understanding (whether or not in writing); provided, however,
                  that a Person shall not be deemed the "Beneficial Owner" of,
                  or to "beneficially own," any security under this subparagraph
                  as a result of an agreement, arrangement or understanding to
                  vote that security if that agreement, arrangement or
                  understanding: (A) arises solely from a revocable proxy or
                  consent given in response to a public (that is, not including
                  a solicitation exempted by Exchange Act Rule 14a-2(b)(2))
                  proxy or consent solicitation made pursuant to, and in
                  accordance with, the applicable provisions of the Exchange
                  Act; and (B) is not then reportable by such Person on Exchange
                  Act Schedule 13D (or any comparable or successor report);

                           (ii) which that Person or any of that Person's
                  Affiliates or Associates, directly or indirectly, has the
                  right or obligation to acquire (whether that right or
                  obligation is exercisable or effective immediately or only
                  after the passage of time or the occurrence of an event)
                  pursuant to any agreement, arrangement or understanding
                  (whether or not in writing) or on the exercise of conversion
                  rights, exchange rights, other rights, warrants or options, or
                  otherwise; provided, however, that a Person shall not be
                  deemed the "Beneficial Owner" of, or to "beneficially own,"
                  securities tendered pursuant to a tender or exchange offer
                  made by that Person or any of that Person's Affiliates or
                  Associates until those tendered securities are accepted for
                  purchase or exchange; or

                           (iii) which are beneficially owned, directly or
                  indirectly, by (A) any other Person (or any Affiliate or
                  Associate thereof) with which the specified Person or any of
                  the specified Person's Affiliates or Associates has any
                  agreement, arrangement or understanding (whether or not in
                  writing) for the purpose of acquiring, holding, voting (except
                  pursuant to a revocable proxy or consent as described in the
                  proviso to subparagraph (I) of this definition) or disposing
                  of any voting securities of the Company or (B) any group (as
                  that term is used in Exchange Act Rule 13d-5(b)) of which that
                  specified Person is a member;

                                       9
<PAGE>   10

PROVIDED, HOWEVER, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) days after the date of that acquisition. For purposes
of this Agreement, "voting" a security shall include voting, granting a proxy,
acting by consent, making a request or demand relating to corporate action
(including, without limitation, calling a stockholder meeting) or otherwise
giving an authorization (within the meaning of Section 14(a) of the Exchange
Act) in respect of such security.

                  (e) "Change of Control" means the occurrence of any of the
         following events that occurs after the effective date of this
         Agreement: (I) any Person becomes an Acquiring Person; (ii) at any time
         the then Continuing Directors cease to constitute a majority of the
         members of the Board; (iii) a merger of the Company with or into, or a
         sale by the Company of its properties and assets substantially as an
         entirety to, another Person occurs and, immediately after that
         occurrence, any Person, other than an Exempt Person, together with all
         Affiliates and Associates of such Person, shall be the Beneficial Owner
         of twenty-five percent (25%) or more of the total voting power of the
         then outstanding Voting Shares of the Person surviving that transaction
         (in the case or a merger or consolidation) or the Person acquiring
         those properties and assets substantially as an entirety.

                  (f) "Common Stock" means the common stock, par value $.001 per
         share, of the Company.

                  (g) "Continuing Director" means at any time any individual who
         then (I) is a member of the Board and was a member of the Board as of
         the effective date of this Agreement or whose nomination for his first
         election, or that first election, to the Board following that date was
         recommended or approved by a majority of the then Continuing Directors
         (acting separately or as a part of any action taken by the Board or any
         committee thereof) and (ii) is not an Acquiring Person, an Affiliate or
         Associate of an Acquiring Person or a nominee or representative of an
         Acquiring Person or of any such Affiliate or Associate.

                  (h) "Corporate Status" describes the status of a Person who is
         or was a director, officer, employee or agent of the Company or of any
         other corporation, partnership, joint venture, trust, employee benefit
         plan or other enterprise which such person is or was serving at the
         request of the Company. For purposes of this Agreement, "serving at the
         request of the Company" includes any service by Indemnitee which
         imposes duties on, or involves services by, Indemnitee with respect to
         any employee benefit plan or its participants or beneficiaries.

                  (i) "Court of Chancery" means the Court of Chancery of the
         State of Delaware.

                                       10
<PAGE>   11

                  (j) "Disinterested Director" means a director of the Company
         who is not and was not a party to the Proceeding in respect of which
         indemnification is sought by Indemnitee hereunder.

                  (k) "Exchange Act" means the Securities Exchange Act of 1934,
         as amended.

                  (l) "Exempt Person" means (I), (A) the Company, any subsidiary
         of the Company, any employee benefit plan of the Company or of any
         subsidiary of the Company and (B) any Person organized, appointed or
         established by the Company for or pursuant to the terms of any such
         plan or for the purpose of funding any such plan or funding other
         employee benefits for employees of the Company or any subsidiary of the
         Company and (ii) Indemnitee, any Affiliate or Associate of Indemnitee
         or any group (as that term is used in Exchange Act Rule 13d-5(b)) of
         which Indemnitee or any Affiliate or Associate of Indemnitee is a
         member.

                  (m) "Expenses" include all attorneys' fees, retainers, court
         costs, transcript costs, fees of experts, witness fees, travel
         expenses, duplicating costs, printing and binding costs, telephone
         charges, postage, delivery service fees, all other disbursements or
         expenses of the types customarily incurred in connection with
         prosecuting, defending, preparing to prosecute or defend,
         investigating, being or preparing to be a witness in, or otherwise
         participating in, a Proceeding and all interest or finance charges
         attributable to any thereof. Should any payments by the Company under
         this Agreement be determined to be subject to any federal, state or
         local income or excise tax, "Expenses" also shall include such amounts
         as are necessary to place Indemnitee in the same after-tax position
         (after giving effect to all applicable taxes) he would have been in had
         no such tax been determined to apply to such payments.

                  (n) "Independent Counsel" means a law firm, or a member of a
         law firm, that is experienced in matters of corporation law and neither
         presently is, nor in the past five (5) years has been, retained to
         represent: (I) the Company, its Affiliates or Indemnitee in any matter
         material to either such party; or (ii) any other Party to the
         Proceeding giving rise to a claim for indemnification hereunder.
         Notwithstanding the foregoing. the term "Independent Counsel" shall not
         include any person who, under the applicable standards of professional
         conduct then prevailing, would have a conflict of interest in
         representing either the Company or Indemnitee in an action to determine
         Indemnitee's rights under this Agreement.

                  (o) "Person" means any natural person, sole proprietorship,
         corporation, partnership of any kind having a separate legal status,
         limited liability company, business trust, unincorporated organization
         or association, mutual company, joint stock company, joint venture,
         estate, trust, union or employee organization or governmental
         authority.

                                       11
<PAGE>   12

                  (p) "Proceeding" includes any action, suit, alternate dispute
         resolution mechanism, hearing or any other proceeding, whether civil,
         criminal, administrative, arbitrative, investigative or mediative, any
         appeal in any such action, suit, alternate dispute resolution
         mechanism, hearing or other proceeding and any inquiry or investigation
         that could lead to any such action, suit, alternate dispute resolution
         mechanism, hearing or other proceeding, except one (I) initiated by an
         Indemnitee pursuant to Section 10 to enforce his rights hereunder or
         (ii) pending on or before the date of this Agreement.

                  (q) "Voting Shares" means: (I) in the case of any corporation,
         stock of that corporation of the class or classes having general voting
         power under ordinary circumstances to elect a majority of that
         corporation's board of directors; and (ii) in the case of any other
         entity, equity interests of the class or classes having general voting
         power under ordinary circumstances equivalent to the Voting Shares of a
         corporation.

         SECTION 18. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.

         SECTION 19. Notice by Indemnitee. Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder; provided, however, failure to give such notice shall not
deprive Indemnitee of his rights to indemnification and advancement of Expenses
under this Agreement unless the Company is actually and materially prejudiced
thereby.

         SECTION 20. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (a) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed or (b) mailed by
certified or registered mail with postage prepaid, on the third (3rd) business
day after the date on which it is so mailed:

            (a)  If to Indemnitee, to:     Arthur M. Mixon
                                           400 E. Kaliste Saloom Rd., Suite 3000
                                           Lafayette, Louisiana 70508

                                       12
<PAGE>   13

            (b)  If to the Company, to:    PetroQuest Energy, Inc.
                                           400 E. Kaliste Saloom Rd., Suite 3000
                                           Lafayette, Louisiana 70508
                                           Attention: Corporate Secretary

or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case way be.

         SECTION 21. Contribution. To the fullest extent permissible under
applicable law, if the indemnification provided for in this Agreement is
unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of
indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be
paid in settlement and/or for Expenses, in connection with any claim relating to
an indemnifiable event under this Agreement, in such proportion as is deemed
fair and reasonable in light of all the circumstances of such Proceeding in
order to reflect: (a) the relative benefits received by the Company and
Indemnitee as a result of the event(s) and/or transaction(s) giving cause to
such Proceeding; and/or (b) the relative fault of the Company (and its
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s).

         SECTION 22. Governing Law; Submission to Jurisdiction. This Agreement
and the legal relations among the parties shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware, without
regard to its conflict of laws rules. Except with respect to any arbitration
commenced by Indemnitee pursuant to Section 10(a), the Company and Indemnitee
hereby irrevocably and unconditionally (a) agree that any action or proceeding
arising out of or in connection with this Agreement shall be brought only in the
Court of Chancery and not in any other state or federal court in the United
States of America or any court in any other country, (b) consent to submit to
the exclusive jurisdiction of the Court of Chancery for purposes of any action
or proceeding arising out of or in connection with this Agreement, (c) waive any
objection to the laying of venue of any such action or proceeding in the Court
of Chancery, and (d) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Court of Chancery has been brought
in an improper or otherwise inconvenient forum.

         SECTION 23. Miscellaneous. Use of the masculine pronoun shall be deemed
to include usage of the feminine pronoun where appropriate. When used in this
Agreement, the words "herein," "hereof" and words of similar import shall refer
to this Agreement as a whole and not to any provision of this Agreement, and the
word "Section" refers to a Section of this Agreement, unless otherwise
specified.

                                       13
<PAGE>   14

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

                                   PETROQUEST ENERGY, INC.

                                   /s/ Charles T. Goodson
                                   ---------------------------------------------
                                   Charles T. Goodson, Chief Executive Officer

                                   INDEMNITEE

                                   /s/ Arthur M. Mixon
                                   ---------------------------------------------
                                   Arthur M. Mixon

                                       14

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