exv10w2



 






EMPLOYMENT AGREEMENT




     This Employment Agreement (“Agreement”) between Michael D. Watford (“Watford”), Ultra
Petroleum Corp. (the “Company”), a Yukon Territories Corporation and each of the Company’s
subsidiaries: UP Energy Corporation, Ultra Resources, Inc. and Sino-American Energy Corporation,
all having their principal place of business at 363 N. Sam Houston Parkway East, Suite 1200,
Houston, Texas 77060, is effective as of February 1, 2007.


WHEREAS, Watford and the Company have previously entered into an Employment Agreement dated
effective as of February 1, 2004 (the “2004 Agreement”);



WHEREAS, Watford and the Company desire that this Agreement will supersede the 2004 Agreement and
the 2004 Agreement shall no longer be in force and effect;



WHEREAS, Watford is being employed as Chairman, Chief Executive Officer (“CEO”) and President of
the Company and each of the Company’s subsidiaries;



WHEREAS, the Company believes it to be to their advantage to ensure Watford continues to render
services as hereinafter provided for the Company;



NOW, THEREFORE, in consideration of the mutual covenants and obligations herein contained, it is
mutually agreed between the parties hereto as follows:





	1.	 	Employment and Term. The Company hereby agrees to continue to employ Watford and
Watford hereby agrees to serve as the Chairman, CEO and President of the Company and each of
the Company’s subsidiaries. The term of this Employment Agreement shall be effective as of
the date first above written and shall terminate three (3) years from such date (the “Initial
Term”), unless earlier terminated as hereinafter provided. After the Initial Term of
Watford’s employment, such employment shall be automatically extended for successive one-year
periods, unless earlier terminated as hereinafter provided or upon ninety (90) days advance
notice by the Board of Directors of the Company (the “Company Board”) to Watford of its
intention to not renew. For each such extension, the terms of employment shall be subject to
approval by the Company Board and agreed to by Watford. If agreement cannot be reached, or in
the event that the Company elects not to renew this Employment Agreement, Ultra Resources,
Inc. (“Resources”) shall pay Watford in accordance with the provisions of Section 4.
	 
	2.	 	Position and Responsibilities. Watford shall serve as Chairman, CEO and President of
the Company and each of the Company’s subsidiaries. Watford shall have the authority, power
and duty to manage the business and affairs of the Company (subject to the provisions of
applicable law) and shall have such other obligations, duties, authority and power to do all
acts and things as are customarily done by a person holding the same or equivalent position or
performing duties similar to those to be performed by Watford in corporations of similar size
as the Company and shall perform such managerial duties and responsibilities for the Company
as may be assigned to him by the Company Board




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	 	 	and, at no additional remuneration, shall serve in such other comparable positions with
affiliates and associates of the Company as the Company Board may from time to time
designate.
	 
	3.	 	Compensation.






	 	A.	 	In consideration of the services to be provided by Watford, the Company and
each of the Company’s subsidiaries will pay Watford a salary of $600,000 per annum.
Such salary shall be payable in conformity with the Company’s prevailing practice for
executives’ compensation as such practice shall be established or modified from time to
time. This salary shall be reviewed annually by the Compensation Committee of the
Company Board, who will recommend appropriate increases, if any, to the Company Board
for approval. Such increases shall be based on Watford’s performance and then-current
market conditions for comparable positions.
	 
	 	B.	 	Salary payments shall be subject to all applicable withholding, payroll and
other taxes.
	 
	 	C.	 	Reference is hereby made to that certain Long-Term Incentive Plan adopted by
the Company and currently in effect under which key employees, including Watford, are
given the opportunity to share in the long-term performance of the company. Any
long-term incentive plan adopted by the Company in the future shall be at least as
beneficial to Watford as is the current Long-Term Incentive Plan. The applicable
performance targets, goals and reward levels of any incentive compensation plans to be
adopted by the Company shall be proposed by Watford to the Compensation Committee for
their review and recommendation to the Company Board for approval. All incentive
compensation awards shall be subject to all applicable federal and state withholding,
payroll and other taxes.
	 
	 	D.	 	Resources will provide Watford with an automobile (the “Automobile”) for use by
Watford in connection with his performance of his duties under this Agreement. Watford
may also use the Automobile for reasonable personal use. Watford agrees to pay all
operating costs of the Automobile, and the Company agrees to reimburse to Watford the
actual operating costs (including without limitation costs of insurance and
registration) of the Automobile upon the submission by Watford to the Company of
receipts evidencing such operating costs. Watford shall be provided with a new
Automobile every two years.
	 
	 	E.	 	Watford shall be entitled to reimbursement of reasonable business expenses
incurred while performing his duties for the Company.
	 
	 	F.	 	Watford shall be entitled to participate in and to receive all rights and
benefits under any life insurance, disability, medical and dental, health and accident
plans or plans as may be implemented by Resources under the terms of this Agreement.




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	 	 	 	Watford shall also be entitled to participate in and to receive all rights and
benefits under any program adopted by Resources or the Company for any group of
senior employees of the Company, including without limitation, the rights and
benefits under the directors’ and officers’ liability insurance currently in place
under the Company’s insurance program for the directors and officers of the Company.
	 
	 	G.	 	Watford shall be entitled to paid vacation during each full year of his
employment hereunder in accordance with the vacation policy adopted by the Company, but
shall not take more than ten (10) consecutive business days at any given time. Such
vacations shall be taken at such times as are consistent with the reasonable business
needs of the Company.






	4.	 	Termination. The company shall be entitled to terminate this Agreement and Watford’s
employment with the Company, subject to Sections 4.B, 4.C, 4.D, 4.E, 4.G and 4.H, at any time
and for whatever reason; or at any time for just cause by written notice to Watford.
Termination of Watford’s employment by the Company shall be deemed to have been for “just
cause” if such Termination is for one or more of the following reasons: (i) the willful
failure or refusal of Watford to render services to the Company in accordance with his
obligations under this Employment Agreement, which failure or refusal remains uncured and
continuing for a period of not less than 30 days after written notice detailing the situation
is given by the Company to Watford; (ii) the commission by Watford of an act of fraud or
embezzlement against the Company or the commission by Watford of any other action which is
materially and demonstrably injurious to the Company; or (iii) Watford has been convicted of a
felony. In the event that Watford’s employment is terminated for any such reason, Watford
shall be entitled to no severance or other termination benefit.






	 	A.	 	Watford shall be entitled to terminate this Agreement and his employment with
the Company within, but not after two years following, any of the following events (a
“Terminating Event”, or collectively, the “Terminating Events”): (i) Watford is
assigned any responsibilities or duties materially inconsistent with his position,
duties, responsibilities and status with the Company as of the date of this Agreement,
as the same may be augmented pursuant to Section 2 hereof, or his title or offices as
of the date of this Agreement, as the same may be augmented pursuant to Section 2
hereof, are materially changed; (ii) there is a Change of Control of the Company;
(iii) the Company fails to continue to provide Watford with the level of compensation
to which he is entitled as of the date of this Agreement, or with any benefit, bonus,
profit sharing, incentive, remuneration or compensation plan, stock ownership or
purchase plan in which Watford was entitled to participate as of the date of this
Agreement, or the Company takes any action which does or may adversely affect Watford’s
participation in, or materially reduce his rights or benefits under or pursuant to any
such plan, or the failure by the Company to increase or improve such rights or benefits
on a basis consistent with practices in effect prior to the date of this Agreement with
respect




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	 	 	 	to the senior executives of the Company generally, whichever is more favorable to
Watford; (iv) the Company requires Watford to relocate to any city or community
other than the City of Houston, Texas, except for required travel on the Company’s
business to an extent substantially consistent with Watford’s business obligations
under this agreement; or (v) there is any material breach by the Company of any
provision in this Agreement.






	 	 	 	“Change in Control” shall mean any of the following:






	 	(1)	 	any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the common stock of the Company would be converted into cash, securities, or
other property, other than a merger of the Company in which the holders of the
common stock immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger;
	 
	 	(2)	 	any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the assets
of the Company;
	 
	 	(3)	 	any approval by the stockholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company;
	 
	 	(4)	 	the cessation of control (by virtue of their not constituting a
majority of directors) of the Company Board by the individuals (the “Continuing
Directors”) who (x) at the date of this Agreement were directors or (y) become
directors after the date of this Agreement and whose election or nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then in office who were directors at the date of
this Agreement or whose election or nomination for election was previously so
approved; or
	 
	 	(5)	 	(A) the acquisition of beneficial ownership (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(“Beneficial Ownership”)) of an aggregate of 20% of the voting power of the
Company’s outstanding voting securities by any person or group (as such term is
used in Rule 13d-5 under such Act) who Beneficially Owned less than 10% of the
voting power of the Company’s outstanding voting securities on the date hereof,
(B) the acquisition of Beneficial Ownership of an additional 5% of the voting
power of the Company’s outstanding voting securities by any person or group who
Beneficially Owned at least 10% of the voting power of the Company’s
outstanding voting securities on the date hereof, or (C) the execution by the
Company and a stockholder of a contract that by its terms grants such
stockholder (in its, her or his




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	 	 	 	capacity as a stockholder) or such stockholder’s Affiliate (as defined in
Rule 405 promulgated under the Securities Act of 1933 (an “Affiliate”))
including, without limitation, such stockholder’s nominee to the Board of
Directors (in its, her or his capacity as an Affiliate of such stockholder),
the right to veto or block decisions or actions of the Board of Directors;
provided, however, that notwithstanding the foregoing, the events described
in items (A) or (B) above shall not constitute a Change in Control hereunder
if the security holder is any other person whose acquisition of shares of
voting securities is approved in advance by a majority of the Continuing
Directors.
	 
	 	(6)	 	subject to applicable law, in a Chapter 11 bankruptcy
proceeding, the appointment of a trustee or the conversion of a case involving
the Company to a case under Chapter 7.






	 	B.	 	Subject to Sections 4.G and 4.H, if an agreement cannot be reached as to the
terms of any extension of this Agreement, or in the event that the Company elects not
to renew this Employment Agreement at the end of the Initial Term or any extended term,
Watford shall be entitled to receive from the Company, within 30 days after the date of
termination, a one-time severance payment equal to the sum of the following: (i) 100%
of Watford’s salary for the 12 months immediately preceding the termination, plus (ii)
an amount equal to the most recent annual bonus paid to Watford, less any withholdings
or deductions required by law.
	 
	 	C.	 	Subject to Sections 4.G and 4.H, the termination by the Company of this
Agreement and Watford’s employment with the Company other than for just cause, or the
termination by Watford of this Agreement and Watford’s employment for any Terminating
Event other than a Change of Control, shall entitle Watford to receive from the
Company, within 30 days after the date of termination, a one-time severance payment
equal to the sum of the following (i) 100% of Watford’s salary for the 12 months
immediately preceding the termination, plus (ii) an amount equal to the most recent
annual bonus paid to Watford, less any withholdings or deductions required by law.
	 
	 	D.	 	Subject to Sections 4.G and 4.H, the termination by either Watford or the
Company of this Agreement and Watford’s employment with the Company following a Change
of Control shall entitle Watford to receive from the Company, within 30 days after the
date of termination, a one-time severance payment equal to two and a half (2.5) times
the sum of the following: (i) 100% of Watford’s salary for the 12 months immediately
preceding the termination, plus (ii) an amount equal to the most recent annual bonus
paid to Watford, less any withholdings or deductions required by law.




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	 	E.	 	Notwithstanding any contrary provision herein or in any benefit plan then in
effect, upon the termination by the Company of this Agreement and Watford’s employment
with the Company for any reason other than for just cause, or upon the termination by
Watford of this Agreement and Watford’s employment for a Terminating Event, all stock
options theretofore awarded to Watford which have not previously vested shall vest
immediately in full; provided, however, that upon a Change in Control, all outstanding
Best In Class stock awards shall become 150% vested, and awards payable under the
Long-Term Incentive Plan shall vest and be payable at the maximum award level.
	 
	 	F.	 	The parties agree that, because there can be no exact measure of the damages
which would occur to Watford as a result of the termination of his employment, such
payments which are contemplated in Section 4.B, 4.C and 4.D shall be deemed to
constitute liquidated damages and not a penalty and the Company agrees that Watford
shall not be required to mitigate his damages.
	 
	 	G.	 	In addition to the payments required to be made pursuant to Section 4.B, 4.C
and 4.D., upon termination of this Agreement by the Company pursuant to Section 4 or by
Watford pursuant to Section 4.A or 4.I, the salary otherwise payable to and earned by
Watford shall be prorated to the date of termination and shall become due and payable
within 30 days after the date of termination and all other forms of compensation
payable to Watford pursuant to Section 3 shall, except as expressly provided herein, in
any Schedule hereto or in any benefit plan, terminate on the date of the termination.
As expeditiously as possible after the termination, the Company shall pay or reimburse
Watford for all reasonable business expenses incurred prior to the termination.
Notwithstanding any contrary provision herein or in any benefit plan then in effect,
unless his employment is terminated for just cause, Watford shall have a period of one
year from the date of termination to exercise any stock options that have been awarded
and vested to him as of the date of termination, provided that in the event all
outstanding options of the Company are cancelled in connection with an extraordinary
corporate transaction, Watford shall be given the same opportunity to exercise his
stock options as is given to each other option holder prior to cancellation of his
options; and further provided that the Company shall continue to make available to
Watford the benefits set forth in Section 3.F. herein for a period of not less than 24
months, provided that such benefits shall cease upon Watford obtaining re-employment
with group benefits at least as favorable to Watford; and further provided that the
Company shall, within thirty (30) days of the date of termination, transfer title
ownership of the Automobile, free and clear of any liens thereon, with the
understanding that Watford shall be responsible for ongoing operating expenses for said
Automobile thereafter. The Company shall also pay all indemnity payments as set forth
in this Agreement, and all legal fees and expenses incurred by Watford as a result of
such termination (including all such fees and expenses, if any, incurred in contesting
or disputing such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement).




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	 	H.	 	Limitation on Payments.






	 	(1)	 	If any of the payments or benefits received or to be received by Watford
in connection with a Change of Control or Watford’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a Change of Control or any person affiliated with
the Company or such person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the “Total Payments”)
of the Internal Revenue Code of 1986 (the “Code”), the Company shall pay to Watford an additional amount (the “Gross-up Payment”) such that the net amount retained by
Watford, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-up Payment,
shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, Watford 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 rates of taxation in the state and locality
of the residence of Watford on the date of the termination of Watford’s employment, net of the maximum reduction in federal income taxes which could be obtained from deduction of
such state and local taxes.
	 
	 	(2)	 	All determinations required to be made under this Section 4.H, including whether a Gross-Up Payment is required and the amount of such Gross-Up
Payment, shall be made by the independent accounting firm which the Change or Control, Watford may appoint another nationally recognized public accounting firm
to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder), by giving written notice of such appointment to
the Company within five (5) business days after the date of the termination of Watford’s employment. All fees and expense of the Accounting Firm shall be borne solely by the Company
and it shall be the Company’s obligation to cause the Accounting Firm to take actions required hereby.
	 
	 	 	 	If the Accounting Firm determines that no Excise Tax is payable by Watford, it
shall furnish Watford with an opinion that he has substantial authority not to
report any Excise Tax on his federal income tax return. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that a
Gross-Up Payment which will not have been made by the Company should have been made
(“Underpayment”),




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	 	 	 	consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.H(3) and Watford
thereafter is required to make a Payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of Watford.
	 
	 	(3)	 	Watford shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company
of the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten (10) business days after Watford knows of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is required to be paid. Watford shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which he gives such
notice to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies Watford in
writing prior to the expiration of such period that it desires to contest such
claim, Watford shall:
	 
	 	(i)	 	give the Company any information reasonably requested by the
Company relating to such claim,
	 
	 	(ii)	 	take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company,
	 
	 	(iii)	 	cooperate with the Company in good faith in order to
effectively contest such claim, and
	 
	 	(iv)	 	permit the Company to participate in any proceedings relating
to such claim,
	 
	 	 	 	provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with
such contest and shall indemnify and hold Watford harmless on an after-tax basis,
for any Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of cost and
expenses. Without limitation on the foregoing provisions of this Section 4.H(3),
the Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct Watford to pay the




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	 	 	 	tax claimed and sue for a refund, or contest the claim in any permissible
manner, and Watford agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs Watford to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Watford, on an interest-free basis and shall
indemnify and hold Watford harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Watford with respect to such
contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and Watford shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.






	 	(4)	 	If, after the receipt by Watford of an amount advanced by the
Company pursuant to Section 4.H.(3), Watford becomes entitled to receive any
refund with respect to such claim, Watford shall (subject to the Company’s
complying with the requirements of Section 4.H.(3)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Watford of an amount
advanced by the Company pursuant to Section 4.H.(3), a determination is made
that Watford shall not be entitled to any refund with respect to such claim and
the Company does not notify Watford in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.






	 	I.	 	Notwithstanding anything to the contrary herein, Watford shall be entitled to
terminate this Agreement and his employment with the Company at his pleasure upon sixty
(60) days written notice to such effect. In such event, Watford shall not be entitled
to any further compensation except as set forth in Section 4.G. The Company
acknowledges and agrees that the Company shall have no remedy against Watford, in law
or otherwise, upon the termination of this Agreement and Watford’s employment with the
Company in accordance with this Section 4.I.






	 	J.	 	In the event that Watford’s employment with the Company as described herein is
terminated for whatever reason, Watford will also resign from the Company Board and the
Boards of all its subsidiaries, effective on the date of termination.




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	 	K.	 	Notwithstanding the termination of this Agreement under Section 4, the
provisions of Sections 4, 10, 11 and 12 shall survive such termination and be
continuing thereafter, as shall all other provisions hereof which by their terms are to
be performed following termination hereof.






	6.	 	Confidentiality and Non-Solicitation.






	 	A.	 	Acknowledgment. Watford agrees and acknowledges that in the course of
rendering services to the Company and its subsidiaries he will have access to and will
become acquainted with confidential information about the professional, business and
financial affairs of the Company, the Company’s direct or indirect subsidiaries (for
purpose of Section 6, herein, the term Company shall include any of the Company’s
direct or indirect subsidiaries), and the Company’s strategy and procedures, and may
have contributed to or may in the future contribute to such information. Watford
further recognizes that he is employed as a key employee, the Company is engaged in a
highly competitive business, and that the success of the Company in the marketplace
depends upon its good will and reputation, its innovative, aggressive, cutting-edge
and/or novel methods of exploiting oil and gas reserves, and the marketing of such oil
and gas. Watford recognizes that in order to guard the legitimate interest of the
Company it is necessary for the Company to protect all such confidential information,
good will and reputation.
	 
	 	B.	 	Proprietary Information. In the course of his service to the Company,
Watford may have access to and may help create confidential information, including, but
not limited to: the identity of proposed transactions or the parties thereto, the
status of negotiations concerning proposed transactions, results of drilling or
exploration, forecasts, budgets, pricing information, Company developed methods of
operation, oil and gas marketing and risk management strategies and procedures,
specialized know-how developed by the Company, business documents or information,
marketing data, trade secrets, personnel roster, including the identity, qualifications
and/or salary scale of any consultant or other Company employee, and other information
generated by the Company or arising in connection with the Company’s business the
disclosure of which would give an advantage to the Company’s competitors. Such
information shall hereinafter be called “Proprietary Information” and shall include any
and all items enumerated in the preceding sentence which come within the scope of the
business activities of the Company as to which Watford has had or may have access,
whether previously existing, now existing or arising hereafter, whether or not
conceived or developed by others or by Watford alone or with others during the period
of his service to the Company, and whether or not conceived or developed during regular
working hours. “Proprietary Information” shall not include (a) any information which
is in the public domain during the period of service by Watford, provided such
information is not in the public domain as a consequence




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	 	 	 	of disclosure by Watford in violation of this Agreement or by any other person who
was contractually obligated not to disclose such information and (b) any information
not considered confidential information by similar enterprises operating in the oil
and gas industry.
	 
	 	C.	 	Fiduciary Obligations. Watford agrees and acknowledges that
Proprietary Information belongs solely to the Company and is of critical importance to
the Company and that a use or disclosure of the Proprietary Information in violation of
this Section 6 may seriously and irreparably impair and damage the Company’s
businesses. Watford therefore agrees, while he is an employee of the Company and at
all times thereafter, (a) to keep all Proprietary Information in a fiduciary capacity
for the sole benefit of the Company and (b) not to use the Proprietary Information for
the benefit of Watford or any other person or entity.
	 
	 	D.	 	Non-Disclosure. Watford shall not disclose, directly or indirectly
(except as required by law), any Proprietary Information to any person other than (a)
the Company, (b) employees of the Company that Watford reasonably believes have been
authorized to receive such information, (c) such other persons to whom Watford has been
instructed to make disclosure by the Company Board, or (d) Watford’s counsel so long as
such counsel agrees to keep all Proprietary Information confidential (in the case of
clause (b) only to the extent required in the course of Watford’s service to the
Company). At the termination of employment hereunder, Watford shall deliver to the
Company all notes, letters, documents and records which may contain Proprietary
Information which are then in his possession or control and shall not retain or use any
copies or summaries thereof.
	 
	 	E.	 	Non-Solicitation of Employees. Watford further agrees that during the
period commencing on the date hereof and continuing until the first anniversary of the
termination of Watford’s employment by the Company, he will not directly or indirectly,
solicit the employment or engagement as a consultant of any person who was an employee
of or a consultant to the Company at any time during the last twelve months of
Watford’s employment with the Company, or hire such employee or engage as a consultant
any such person, unless in each case Watford obtains the prior written consent of the
Company.






	7.	 	Consent and Waivers by Third Parties. Watford hereby represents and warrants that he
has obtained all necessary waivers and/or consents from third parties as to enable him to
accept employment with the Company on the terms and conditions set forth herein and to execute
and perform this Employment Agreement without being in conflict with any agreement,
obligations or understanding with any such third party.




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	8.	 	Waivers and Modifications. This Employment Agreement may be modified, and the rights
and remedies of any provision hereof may be waived, only in accordance with this Section 8. No
modification or waiver by the Company shall be effective without the consent of at least a majority
of the Compensation Committee of the Company Board then in office at the time of such modification
waiver. No waiver by either party of any breach by the other or any provision hereof shall be
deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of
this Employment Agreement. This Employment Agreement sets forth all of the terms of the
understandings between the parties with reference to the subject matter set forth herein and may
not be waived, changed, discharged or terminated orally or by any course of dealing between the
parties, but only by an instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
	 
	9.	 	Governing Law. This Employment Agreement shall be construed in accordance with the
laws of the State of Texas.
	 
	10.	 	Severability. In case any one or more of the provisions contained in this Employment
Agreement for any reason shall be held to be invalid, illegal or unenforceable in any respect,
such an invalidity or unenforceability shall not affect any other provision of this Employment
Agreement, but the Employment Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
	 
	11.	 	Intellectual Property. Watford shall hold in trust for the benefit of the Company,
and shall disclose promptly and fully to the Company in writing, and hereby assigns, and binds
his heirs, executors, and administrators to assign, to the Company any and all inventions,
discoveries, ideas, concepts, improvements, copyrightable works, and other developments (the
“Developments”) conceived, made, discovered or developed by him, solely or jointly with
others, during the term of his employment by the Company, whether during or outside of usual
working hours and whether on the Company’s premises or not, that relate in any manner to the
past, present or anticipated business of the Company or any subsidiary. All works of
authorship created by Watford, solely or jointly with others, shall be considered works made
for hire under the Copyright Act of 1976, as amended, and shall be owned entirely by the
Company. Any and all such Developments shall be the sole and exclusive property of the
Company, whether patentable, copyrightable, or neither, and Watford shall assist and fully
cooperate in every way, at the Company’s expense, in securing, maintaining, and enforcing, for
the benefit of the Company or its designee, patents, copyrights or other types of proprietary
or intellectual property protection for such Developments in any and all countries. Within
one year following the term of this Agreement and without limiting the generality of the
foregoing, any Development of Watford relating to any subject matter on which Watford worked
or was informed during this employment by the Company shall be conclusively presumed to have
been conceived and made prior to the termination of his employment (unless Watford clearly
proves that such Development was conceived and made following the termination of his
employment), and shall accordingly belong and be assigned to the Company and shall be subject
to this Agreement.




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	12.	 	Indemnification.






	 	(a)	 	Indemnity. If Watford was, is or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, a Claim (defined below) by reason of (or arising in part out of) an
Indemnifiable Event (defined below), the Company shall indemnify Watford to the fullest
extent permitted by law, as soon as practicable but in any event not later than thirty
days after written demand is presented to the Company, against any and all Expenses
(defined below), judgments, fines, penalties and amounts paid in settlement (including
all interest, assessments and other charges actually incurred and paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties or amounts
paid in settlement) of such Claim. If so requested by Watford, the Company shall
advance (within two business days of such request) any and all expense to Watford (an
“Expense Advance”); provided, however, that the Company may require Watford first to
deliver to the Company an undertaking by or on behalf of Watford to repay such Expense
Advance if it shall ultimately be determined that he is not entitled to be indemnified
by the Company.
	 
	 	(b)	 	Conditions. Notwithstanding the foregoing, (i) the obligations of the
Company under Section 12(a) shall be subject to the condition that the Reviewing Party
(defined below) shall not have determined (in a written opinion, in any case in which
the special, independent counsel referred to in Section 12(c) hereof is involved) that
Watford would not be permitted to be indemnified under applicable law, and (ii) the
obligation of the Company to make an Expense Advance pursuant to Section 12(a) shall be
subject to the condition that, if, when and to the extent that the Reviewing Party
determined that Watford would not be permitted to be so indemnified under applicable
law, the Company shall be entitled to be reimbursed by Watford (who hereby agrees to
reimburse the Company) for all such amounts theretofore paid; provided, however, that
if Watford commences legal proceedings in a court of competent jurisdiction to secure a
determination that Watford should be indemnified under applicable law, any
determination made by the Reviewing Party that Watford would not be permitted to be
indemnified under applicable law shall not be binding and Watford shall not be required
to reimburse the Company of any Expense Advance until a final judicial determination is
made with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). If there has been no determination by the Reviewing Party, or
if the Reviewing Party determines that Watford substantively would not be permitted to
be indemnified in whole or in part under applicable law, Watford shall have the right
to commence litigation in any court in the State of Texas having subject mater
jurisdiction thereof and in which venue is proper seeking an initial determination by
the court to challenge any such
determination by the Reviewing Party or any aspect thereof, and the Company




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	 	 	 	hereby consents to service of process and to appear in any such proceeding. Any
determination by the Reviewing Party otherwise shall be conclusive and binding on
the Company and Watford.
	 
	 	(c)	 	Independent Counsel. If the determination of entitlement to
indemnification is to be made by Independent Counsel (defined below), the Independent
Counsel shall be selected as provided in this Section 12(c). The Independent Counsel
shall be selected by the majority vote of a quorum of Disinterested Directors (defined
below), and the Company shall give written notice to Watford advising him of the
identity of the Independent Counsel so selected. Watford may, within seven days after
receipt of the written notice, deliver to the Company a written objection to the
selection. His objection may be asserted only on the grounds that the Independent
Counsel so selected does not meet the requirements of Independent Counsel as defined in
Section 12(h) below, and the objection shall set forth with particularity the factual
basis of the assertion. If written objection is made, the Independent Counsel so
selected shall be disqualified. If within twenty (20) days after submission by Watford
of a demand for indemnification pursuant to Section 12(a) of this Agreement, no
Independent Counsel shall have been selected, or if selected shall have been objected
to, in accordance with this Section 12(c), either the Company or Watford may petition a
court of competent jurisdiction in the State of Texas for the appointment as
Independent Counsel of a person selected by the court or by any other person that court
shall designate, and the person so appointed shall act as Independent Counsel. The
Company shall pay all reasonable fees and expense incident to the procedures of this
Section 12(c), regardless of the manner in which the Independent Counsel was selected
or appointed. The Company shall pay the reasonable fees and expenses of the
Independent Counsel and shall indemnify fully the Independent Counsel against any and
all expenses (including attorneys’ fees) claims, liabilities and damages arising out of
or relating to this Agreement or its engagement pursuant hereto.
	 
	 	(d)	 	Claim. “Claim” shall mean any threatened, pending or completed action,
suit or proceeding, any inquiry or investigation, or any appeal therefrom whether
conducted by the Company or any other party, that Watford in good faith believes might
lead to the institution of any such action, suit or proceeding, whether civil,
criminal, administrative, investigative or other.
	 
	 	(e)	 	Indemnifiable Event. “Indemnifiable Event” shall mean any event or
occurrence related to the fact that Watford is or was serving the Company in some
capacity, including, without limitation, as a director, officer, employee, agent
(including trustee) or fiduciary of the Company or of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of anything done or not done by
Watford in any such capacity.
	 
	 	(f)	 	Expenses. “Expenses” shall include attorneys’ fees and all other
costs, expenses and obligations actually incurred and paid in connection with
investigating,




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	 	 	 	defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
	 
	 	(g)	 	Reviewing Party. “Reviewing Party” shall mean a quorum of the Board of
Directors consisting of Disinterested Directors or, if such a quorum is not obtainable
or if such a quorum so directs, Independent Counsel. Any decision by such a quorum
must be by a majority vote of the quorum.
	 
	 	(h)	 	Independent Counsel. “Independent Counsel” shall mean a law firm, or a
member of a law firm, that is experienced in matters of Delaware corporate law and
neither is, nor in the past five years has been, retained to represent the Company or
Watford in any matter material to either such party or any other party to the Claim
relating to an Indemnifiable Event. 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 Watford in an action to determine Watford’s rights
under this Agreement.
	 
	 	(i)	 	Disinterested Director. “Disinterested Director” shall mean a director
of the Company who is not and was not at any time a party to a Claim relating to an
Indemnifiable Event.






	13.	 	Compliance with IRC Section 409A. Notwithstanding anything herein to the contrary,
(i) if at the time of Watford’s termination of employment with the Company Watford is a
“specified employee” as defined in Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), and the deferral of the commencement of any payments or benefits
otherwise payable hereunder as a result of such termination of employment is necessary in
order to prevent any accelerated or additional tax under Section 409A of the Code, then the
Company will defer the commencement of the payment of any such payments or benefits hereunder
(without any reduction in such payments or benefits ultimately paid or provided to Watford)
until the date that is six months following Watford’s termination of employment with the
Company (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any
other payments of money or other benefits due to Watford hereunder could cause the application
of an accelerated or additional tax under Section 409A of the Code, such payments or other
benefits shall be deferred if deferral will make such payment or other benefits compliant
under Section 409A of the Code, or otherwise such payment or other benefits shall be
restructured, to the extent possible, in a manner, determined by the Company’s Board of
Directors, that does not cause such an accelerated or additional tax.






	14.	 	Guaranty. The Company hereby absolutely and unconditionally guarantees the prompt
and punctual payment and performance when due by Resources of all Resources’ obligations
hereunder.




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          IN WITNESS WHEREOF, each of the parties hereto has executed this Employment Agreement under
seal as of the date and year first above written.




	 	 	 	 	 
	 	Ultra Petroleum Corp., and its Subsidiaries

For the Company Board
 	 
	Witness:
 	

 	 	 	 
	By:  /s/ Rebecca Townsend             	By:  	 /s/ Dr. Charles Helton
 	 
	 	 	      Dr. Wm. Charles Helton 	 
	 	 	      Title:  	Chairman, Compensation Committee 	 
	 
	 	 	 
	 	By:  	/s/ Michael D. Watford
 	 
	 	 	      Michael D. Watford 	 
	 	 	 	 
	 




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