**EMPLOYMENT AGREEMENT**     This Employment Agreement (“Agreement”) between Michael D. Watford (“Watford”), UltraPetroleum Corp. (the “Company”), a Yukon Territories Corporation and each of the Company’ssubsidiaries: 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 datedeffective as of February 1, 2004 (the “2004 Agreement”);WHEREAS, Watford and the Company desire that this Agreement will supersede the 2004 Agreement andthe 2004 Agreement shall no longer be in force and effect;WHEREAS, Watford is being employed as Chairman, Chief Executive Officer (“CEO”) and President ofthe Company and each of the Company’s subsidiaries;WHEREAS, the Company believes it to be to their advantage to ensure Watford continues to renderservices as hereinafter provided for the Company;NOW, THEREFORE, in consideration of the mutual covenants and obligations herein contained, it ismutually agreed between the parties hereto as follows:1. Employment and Term. The Company hereby agrees to continue to employ Watford andWatford hereby agrees to serve as the Chairman, CEO and President of the Company and each ofthe Company’s subsidiaries. The term of this Employment Agreement shall be effective as ofthe date first above written and shall terminate three (3) years from such date (the “InitialTerm”), unless earlier terminated as hereinafter provided. After the Initial Term ofWatford’s employment, such employment shall be automatically extended for successive one-yearperiods, unless earlier terminated as hereinafter provided or upon ninety (90) days advancenotice by the Board of Directors of the Company (the “Company Board”) to Watford of itsintention to not renew. For each such extension, the terms of employment shall be subject toapproval by the Company Board and agreed to by Watford. If agreement cannot be reached, or inthe 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 ofthe Company and each of the Company’s subsidiaries. Watford shall have the authority, powerand duty to manage the business and affairs of the Company (subject to the provisions ofapplicable law) and shall have such other obligations, duties, authority and power to do allacts and things as are customarily done by a person holding the same or equivalent position orperforming duties similar to those to be performed by Watford in corporations of similar sizeas the Company and shall perform such managerial duties and responsibilities for the Companyas 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 withaffiliates and associates of the Company as the Company Board may from time to timedesignate. 3. Compensation. A. In consideration of the services to be provided by Watford, the Company andeach 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 forexecutives’ compensation as such practice shall be established or modified from time totime. This salary shall be reviewed annually by the Compensation Committee of theCompany Board, who will recommend appropriate increases, if any, to the Company Boardfor approval. Such increases shall be based on Watford’s performance and then-currentmarket conditions for comparable positions.  B. Salary payments shall be subject to all applicable withholding, payroll andother taxes.  C. Reference is hereby made to that certain Long-Term Incentive Plan adopted bythe Company and currently in effect under which key employees, including Watford, aregiven the opportunity to share in the long-term performance of the company. Anylong-term incentive plan adopted by the Company in the future shall be at least asbeneficial to Watford as is the current Long-Term Incentive Plan. The applicableperformance targets, goals and reward levels of any incentive compensation plans to beadopted by the Company shall be proposed by Watford to the Compensation Committee fortheir review and recommendation to the Company Board for approval. All incentivecompensation 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 byWatford in connection with his performance of his duties under this Agreement. Watfordmay also use the Automobile for reasonable personal use. Watford agrees to pay alloperating costs of the Automobile, and the Company agrees to reimburse to Watford theactual operating costs (including without limitation costs of insurance andregistration) of the Automobile upon the submission by Watford to the Company ofreceipts evidencing such operating costs. Watford shall be provided with a newAutomobile every two years.  E. Watford shall be entitled to reimbursement of reasonable business expensesincurred while performing his duties for the Company.  F. Watford shall be entitled to participate in and to receive all rights andbenefits under any life insurance, disability, medical and dental, health and accidentplans 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 andbenefits under any program adopted by Resources or the Company for any group ofsenior employees of the Company, including without limitation, the rights andbenefits under the directors’ and officers’ liability insurance currently in placeunder 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 hisemployment hereunder in accordance with the vacation policy adopted by the Company, butshall not take more than ten (10) consecutive business days at any given time. Suchvacations shall be taken at such times as are consistent with the reasonable businessneeds of the Company.4. Termination. The company shall be entitled to terminate this Agreement and Watford’semployment with the Company, subject to Sections 4.B, 4.C, 4.D, 4.E, 4.G and 4.H, at any timeand 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 “justcause” if such Termination is for one or more of the following reasons: (i) the willfulfailure or refusal of Watford to render services to the Company in accordance with hisobligations under this Employment Agreement, which failure or refusal remains uncured andcontinuing for a period of not less than 30 days after written notice detailing the situationis given by the Company to Watford; (ii) the commission by Watford of an act of fraud orembezzlement against the Company or the commission by Watford of any other action which ismaterially and demonstrably injurious to the Company; or (iii) Watford has been convicted of afelony. In the event that Watford’s employment is terminated for any such reason, Watfordshall be entitled to no severance or other termination benefit. A. Watford shall be entitled to terminate this Agreement and his employment withthe Company within, but not after two years following, any of the following events (a“Terminating Event”, or collectively, the “Terminating Events”): (i) Watford isassigned 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 asof the date of this Agreement, as the same may be augmented pursuant to Section 2hereof, 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 compensationto 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 orpurchase plan in which Watford was entitled to participate as of the date of thisAgreement, or the Company takes any action which does or may adversely affect Watford’sparticipation in, or materially reduce his rights or benefits under or pursuant to anysuch plan, or the failure by the Company to increase or improve such rights or benefitson a basis consistent with practices in effect prior to the date of this Agreement withrespect
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   to the senior executives of the Company generally, whichever is more favorable toWatford; (iv) the Company requires Watford to relocate to any city or communityother than the City of Houston, Texas, except for required travel on the Company’sbusiness to an extent substantially consistent with Watford’s business obligationsunder this agreement; or (v) there is any material breach by the Company of anyprovision in this Agreement.   “Change in Control” shall mean any of the following: (1) any consolidation or merger of the Company in which the Companyis not the continuing or surviving corporation or pursuant to which shares ofthe common stock of the Company would be converted into cash, securities, orother property, other than a merger of the Company in which the holders of thecommon stock immediately prior to the merger have the same proportionateownership of common stock of the surviving corporation immediately after themerger;  (2) any sale, lease, exchange or other transfer (in one transactionor a series of related transactions) of all or substantially all of the assetsof the Company;  (3) any approval by the stockholders of the Company of any plan orproposal for the liquidation or dissolution of the Company;  (4) the cessation of control (by virtue of their not constituting amajority of directors) of the Company Board by the individuals (the “ContinuingDirectors”) who (x) at the date of this Agreement were directors or (y) becomedirectors after the date of this Agreement and whose election or nomination forelection by the Company’s stockholders was approved by a vote of at leasttwo-thirds of the directors then in office who were directors at the date ofthis Agreement or whose election or nomination for election was previously soapproved; or  (5) (A) the acquisition of beneficial ownership (within the meaningof Rule 13d-3 under the Securities Exchange Act of 1934, as amended(“Beneficial Ownership”)) of an aggregate of 20% of the voting power of theCompany’s outstanding voting securities by any person or group (as such term isused in Rule 13d-5 under such Act) who Beneficially Owned less than 10% of thevoting power of the Company’s outstanding voting securities on the date hereof,(B) the acquisition of Beneficial Ownership of an additional 5% of the votingpower of the Company’s outstanding voting securities by any person or group whoBeneficially Owned at least 10% of the voting power of the Company’soutstanding voting securities on the date hereof, or (C) the execution by theCompany and a stockholder of a contract that by its terms grants suchstockholder (in its, her or his
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   capacity as a stockholder) or such stockholder’s Affiliate (as defined inRule 405 promulgated under the Securities Act of 1933 (an “Affiliate”))including, without limitation, such stockholder’s nominee to the Board ofDirectors (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 describedin items (A) or (B) above shall not constitute a Change in Control hereunderif the security holder is any other person whose acquisition of shares ofvoting securities is approved in advance by a majority of the ContinuingDirectors.  (6) subject to applicable law, in a Chapter 11 bankruptcyproceeding, the appointment of a trustee or the conversion of a case involvingthe Company to a case under Chapter 7. B. Subject to Sections 4.G and 4.H, if an agreement cannot be reached as to theterms of any extension of this Agreement, or in the event that the Company elects notto 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 oftermination, 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 withholdingsor deductions required by law.  C. Subject to Sections 4.G and 4.H, the termination by the Company of thisAgreement and Watford’s employment with the Company other than for just cause, or thetermination by Watford of this Agreement and Watford’s employment for any TerminatingEvent other than a Change of Control, shall entitle Watford to receive from theCompany, within 30 days after the date of termination, a one-time severance paymentequal to the sum of the following (i) 100% of Watford’s salary for the 12 monthsimmediately preceding the termination, plus (ii) an amount equal to the most recentannual 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 theCompany of this Agreement and Watford’s employment with the Company following a Changeof Control shall entitle Watford to receive from the Company, within 30 days after thedate of termination, a one-time severance payment equal to two and a half (2.5) timesthe sum of the following: (i) 100% of Watford’s salary for the 12 months immediatelypreceding the termination, plus (ii) an amount equal to the most recent annual bonuspaid 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 ineffect, upon the termination by the Company of this Agreement and Watford’s employmentwith the Company for any reason other than for just cause, or upon the termination byWatford of this Agreement and Watford’s employment for a Terminating Event, all stockoptions theretofore awarded to Watford which have not previously vested shall vestimmediately in full; provided, however, that upon a Change in Control, all outstandingBest In Class stock awards shall become 150% vested, and awards payable under theLong-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 damageswhich would occur to Watford as a result of the termination of his employment, suchpayments which are contemplated in Section 4.B, 4.C and 4.D shall be deemed toconstitute liquidated damages and not a penalty and the Company agrees that Watfordshall not be required to mitigate his damages.  G. In addition to the payments required to be made pursuant to Section 4.B, 4.Cand 4.D., upon termination of this Agreement by the Company pursuant to Section 4 or byWatford pursuant to Section 4.A or 4.I, the salary otherwise payable to and earned byWatford shall be prorated to the date of termination and shall become due and payablewithin 30 days after the date of termination and all other forms of compensationpayable to Watford pursuant to Section 3 shall, except as expressly provided herein, inany 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 reimburseWatford 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 oneyear from the date of termination to exercise any stock options that have been awardedand vested to him as of the date of termination, provided that in the event alloutstanding options of the Company are cancelled in connection with an extraordinarycorporate transaction, Watford shall be given the same opportunity to exercise hisstock options as is given to each other option holder prior to cancellation of hisoptions; and further provided that the Company shall continue to make available toWatford the benefits set forth in Section 3.F. herein for a period of not less than 24months, provided that such benefits shall cease upon Watford obtaining re-employmentwith group benefits at least as favorable to Watford; and further provided that theCompany shall, within thirty (30) days of the date of termination, transfer titleownership of the Automobile, free and clear of any liens thereon, with theunderstanding that Watford shall be responsible for ongoing operating expenses for saidAutomobile thereafter. The Company shall also pay all indemnity payments as set forthin this Agreement, and all legal fees and expenses incurred by Watford as a result ofsuch termination (including all such fees and expenses, if any, incurred in contestingor disputing such termination or in seeking to obtain or enforce any right or benefitprovided 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 Watfordin 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 oragreement with the Company, any person whose actions result in a Change of Control or any person affiliated withthe 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 byWatford, 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 rateof 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 localityof 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 ofsuch 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-UpPayment, shall be made by the independent accounting firm which the Change or Control, Watford may appoint another nationally recognized public accounting firmto 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 tothe 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 Companyand 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, itshall furnish Watford with an opinion that he has substantial authority not toreport any Excise Tax on his federal income tax return. As a result of theuncertainty in the application of Section 4999 of the Code at the time of theinitial determination by the Accounting Firm hereunder, it is possible that aGross-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 eventthat the Company exhausts its remedies pursuant to Section 4.H(3) and Watfordthereafter is required to make a Payment of any Excise Tax, the Accounting Firmshall determine the amount of the Underpayment that has occurred and any suchUnderpayment 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 Companyof the Gross-Up Payment. Such notification shall be given as soon as practicablebut no later than ten (10) business days after Watford knows of such claim andshall apprise the Company of the nature of such claim and the date on which suchclaim is required to be paid. Watford shall not pay such claim prior to theexpiration of the thirty (30) day period following the date on which he gives suchnotice to the Company (or such shorter period ending on the date that any payment oftaxes with respect to such claim is due). If the Company notifies Watford inwriting prior to the expiration of such period that it desires to contest suchclaim, Watford shall:  (i) give the Company any information reasonably requested by theCompany relating to such claim,  (ii) take such action in connection with contesting such claim asthe Company shall reasonably request in writing from time to time, including,without limitation, accepting legal representation with respect to such claimby an attorney reasonably selected by the Company,  (iii) cooperate with the Company in good faith in order toeffectively contest such claim, and  (iv) permit the Company to participate in any proceedings relatingto such claim,    provided, however, that the Company shall bear and pay directly all costs andexpenses (including additional interest and penalties) incurred in connection withsuch 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 respectthereto, imposed as a result of such representation and payment of cost andexpenses. 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 suchclaim 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 permissiblemanner, and Watford agrees to prosecute such contest to a determination before anyadministrative tribunal, in a court of initial jurisdiction and in one or moreappellate courts, as the Company shall determine; provided, however, that if theCompany directs Watford to pay such claim and sue for a refund, the Company shalladvance the amount of such payment to Watford, on an interest-free basis and shallindemnify and hold Watford harmless, on an after-tax basis, from any Excise Tax orincome tax, including interest or penalties with respect thereto, imposed withrespect to such advance or with respect to any imputed income with respect to suchadvance; and further provided that any extension of the statute of limitationsrelating to payment of taxes for the taxable year of Watford with respect to suchcontested 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 withrespect to which a Gross-Up Payment would be payable hereunder and Watford shall beentitled to settle or contest, as the case may be, any other issue raised by theInternal Revenue Service or any other taxing authority. (4) If, after the receipt by Watford of an amount advanced by theCompany pursuant to Section 4.H.(3), Watford becomes entitled to receive anyrefund with respect to such claim, Watford shall (subject to the Company’scomplying with the requirements of Section 4.H.(3)) promptly pay to the Companythe amount of such refund (together with any interest paid or credited thereonafter taxes applicable thereto). If, after the receipt by Watford of an amountadvanced by the Company pursuant to Section 4.H.(3), a determination is madethat Watford shall not be entitled to any refund with respect to such claim andthe Company does not notify Watford in writing of its intent to contest suchdenial of refund prior to the expiration of thirty days after suchdetermination, then such advance shall be forgiven and shall not be required tobe 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 toterminate 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 entitledto any further compensation except as set forth in Section 4.G. The Companyacknowledges and agrees that the Company shall have no remedy against Watford, in lawor otherwise, upon the termination of this Agreement and Watford’s employment with theCompany in accordance with this Section 4.I. J. In the event that Watford’s employment with the Company as described herein isterminated for whatever reason, Watford will also resign from the Company Board and theBoards of all its subsidiaries, effective on the date of termination.
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 K. Notwithstanding the termination of this Agreement under Section 4, theprovisions of Sections 4, 10, 11 and 12 shall survive such termination and becontinuing thereafter, as shall all other provisions hereof which by their terms are tobe performed following termination hereof.6. Confidentiality and Non-Solicitation. A. Acknowledgment. Watford agrees and acknowledges that in the course ofrendering services to the Company and its subsidiaries he will have access to and willbecome acquainted with confidential information about the professional, business andfinancial affairs of the Company, the Company’s direct or indirect subsidiaries (forpurpose of Section 6, herein, the term Company shall include any of the Company’sdirect or indirect subsidiaries), and the Company’s strategy and procedures, and mayhave contributed to or may in the future contribute to such information. Watfordfurther recognizes that he is employed as a key employee, the Company is engaged in ahighly competitive business, and that the success of the Company in the marketplacedepends upon its good will and reputation, its innovative, aggressive, cutting-edgeand/or novel methods of exploiting oil and gas reserves, and the marketing of such oiland gas. Watford recognizes that in order to guard the legitimate interest of theCompany 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, butnot limited to: the identity of proposed transactions or the parties thereto, thestatus of negotiations concerning proposed transactions, results of drilling orexploration, forecasts, budgets, pricing information, Company developed methods ofoperation, 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, qualificationsand/or salary scale of any consultant or other Company employee, and other informationgenerated by the Company or arising in connection with the Company’s business thedisclosure of which would give an advantage to the Company’s competitors. Suchinformation shall hereinafter be called “Proprietary Information” and shall include anyand all items enumerated in the preceding sentence which come within the scope of thebusiness activities of the Company as to which Watford has had or may have access,whether previously existing, now existing or arising hereafter, whether or notconceived or developed by others or by Watford alone or with others during the periodof his service to the Company, and whether or not conceived or developed during regularworking hours. “Proprietary Information” shall not include (a) any information whichis in the public domain during the period of service by Watford, provided suchinformation 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 whowas contractually obligated not to disclose such information and (b) any informationnot considered confidential information by similar enterprises operating in the oiland gas industry.  C. Fiduciary Obligations. Watford agrees and acknowledges thatProprietary Information belongs solely to the Company and is of critical importance tothe Company and that a use or disclosure of the Proprietary Information in violation ofthis Section 6 may seriously and irreparably impair and damage the Company’sbusinesses. Watford therefore agrees, while he is an employee of the Company and atall times thereafter, (a) to keep all Proprietary Information in a fiduciary capacityfor the sole benefit of the Company and (b) not to use the Proprietary Information forthe 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 beenauthorized to receive such information, (c) such other persons to whom Watford has beeninstructed to make disclosure by the Company Board, or (d) Watford’s counsel so long assuch counsel agrees to keep all Proprietary Information confidential (in the case ofclause (b) only to the extent required in the course of Watford’s service to theCompany). At the termination of employment hereunder, Watford shall deliver to theCompany all notes, letters, documents and records which may contain ProprietaryInformation which are then in his possession or control and shall not retain or use anycopies or summaries thereof.  E. Non-Solicitation of Employees. Watford further agrees that during theperiod commencing on the date hereof and continuing until the first anniversary of thetermination 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 employeeof or a consultant to the Company at any time during the last twelve months ofWatford’s employment with the Company, or hire such employee or engage as a consultantany such person, unless in each case Watford obtains the prior written consent of theCompany.7. Consent and Waivers by Third Parties. Watford hereby represents and warrants that hehas obtained all necessary waivers and/or consents from third parties as to enable him toaccept employment with the Company on the terms and conditions set forth herein and to executeand 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 rightsand remedies of any provision hereof may be waived, only in accordance with this Section 8. Nomodification or waiver by the Company shall be effective without the consent of at least a majorityof the Compensation Committee of the Company Board then in office at the time of such modificationwaiver. No waiver by either party of any breach by the other or any provision hereof shall bedeemed to be a waiver of any later or other breach thereof or as a waiver of any other provision ofthis Employment Agreement. This Employment Agreement sets forth all of the terms of theunderstandings between the parties with reference to the subject matter set forth herein and maynot be waived, changed, discharged or terminated orally or by any course of dealing between theparties, 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 thelaws of the State of Texas. 10. Severability. In case any one or more of the provisions contained in this EmploymentAgreement 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 EmploymentAgreement, but the Employment Agreement shall be construed as if such invalid, illegal orunenforceable 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 bindshis 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 withothers, during the term of his employment by the Company, whether during or outside of usualworking hours and whether on the Company’s premises or not, that relate in any manner to thepast, present or anticipated business of the Company or any subsidiary. All works ofauthorship created by Watford, solely or jointly with others, shall be considered works madefor hire under the Copyright Act of 1976, as amended, and shall be owned entirely by theCompany. Any and all such Developments shall be the sole and exclusive property of theCompany, whether patentable, copyrightable, or neither, and Watford shall assist and fullycooperate in every way, at the Company’s expense, in securing, maintaining, and enforcing, forthe benefit of the Company or its designee, patents, copyrights or other types of proprietaryor intellectual property protection for such Developments in any and all countries. Withinone year following the term of this Agreement and without limiting the generality of theforegoing, any Development of Watford relating to any subject matter on which Watford workedor was informed during this employment by the Company shall be conclusively presumed to havebeen conceived and made prior to the termination of his employment (unless Watford clearlyproves that such Development was conceived and made following the termination of hisemployment), and shall accordingly belong and be assigned to the Company and shall be subjectto this Agreement.
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12. Indemnification. (a) Indemnity. If Watford was, is or becomes a party to or a witness orother participant in, or is threatened to be made a party to or witness or otherparticipant in, a Claim (defined below) by reason of (or arising in part out of) anIndemnifiable Event (defined below), the Company shall indemnify Watford to the fullestextent permitted by law, as soon as practicable but in any event not later than thirtydays after written demand is presented to the Company, against any and all Expenses(defined below), judgments, fines, penalties and amounts paid in settlement (includingall interest, assessments and other charges actually incurred and paid or payable inconnection with or in respect of such Expenses, judgments, fines, penalties or amountspaid in settlement) of such Claim. If so requested by Watford, the Company shalladvance (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 todeliver to the Company an undertaking by or on behalf of Watford to repay such ExpenseAdvance if it shall ultimately be determined that he is not entitled to be indemnifiedby the Company.  (b) Conditions. Notwithstanding the foregoing, (i) the obligations of theCompany 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 whichthe special, independent counsel referred to in Section 12(c) hereof is involved) thatWatford would not be permitted to be indemnified under applicable law, and (ii) theobligation of the Company to make an Expense Advance pursuant to Section 12(a) shall besubject to the condition that, if, when and to the extent that the Reviewing Partydetermined that Watford would not be permitted to be so indemnified under applicablelaw, the Company shall be entitled to be reimbursed by Watford (who hereby agrees toreimburse the Company) for all such amounts theretofore paid; provided, however, thatif Watford commences legal proceedings in a court of competent jurisdiction to secure adetermination that Watford should be indemnified under applicable law, anydetermination made by the Reviewing Party that Watford would not be permitted to beindemnified under applicable law shall not be binding and Watford shall not be requiredto reimburse the Company of any Expense Advance until a final judicial determination ismade with respect thereto (as to which all rights of appeal therefrom have beenexhausted or lapsed). If there has been no determination by the Reviewing Party, orif the Reviewing Party determines that Watford substantively would not be permitted tobe indemnified in whole or in part under applicable law, Watford shall have the rightto commence litigation in any court in the State of Texas having subject materjurisdiction thereof and in which venue is proper seeking an initial determination bythe court to challenge any suchdetermination 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. Anydetermination by the Reviewing Party otherwise shall be conclusive and binding onthe Company and Watford.  (c) Independent Counsel. If the determination of entitlement toindemnification is to be made by Independent Counsel (defined below), the IndependentCounsel shall be selected as provided in this Section 12(c). The Independent Counselshall be selected by the majority vote of a quorum of Disinterested Directors (definedbelow), and the Company shall give written notice to Watford advising him of theidentity of the Independent Counsel so selected. Watford may, within seven days afterreceipt of the written notice, deliver to the Company a written objection to theselection. His objection may be asserted only on the grounds that the IndependentCounsel so selected does not meet the requirements of Independent Counsel as defined inSection 12(h) below, and the objection shall set forth with particularity the factualbasis of the assertion. If written objection is made, the Independent Counsel soselected shall be disqualified. If within twenty (20) days after submission by Watfordof a demand for indemnification pursuant to Section 12(a) of this Agreement, noIndependent Counsel shall have been selected, or if selected shall have been objectedto, in accordance with this Section 12(c), either the Company or Watford may petition acourt of competent jurisdiction in the State of Texas for the appointment asIndependent Counsel of a person selected by the court or by any other person that courtshall designate, and the person so appointed shall act as Independent Counsel. TheCompany shall pay all reasonable fees and expense incident to the procedures of thisSection 12(c), regardless of the manner in which the Independent Counsel was selectedor appointed. The Company shall pay the reasonable fees and expenses of theIndependent Counsel and shall indemnify fully the Independent Counsel against any andall expenses (including attorneys’ fees) claims, liabilities and damages arising out ofor 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 whetherconducted by the Company or any other party, that Watford in good faith believes mightlead 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 oroccurrence related to the fact that Watford is or was serving the Company in somecapacity, 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 byWatford in any such capacity.  (f) Expenses. “Expenses” shall include attorneys’ fees and all othercosts, expenses and obligations actually incurred and paid in connection withinvestigating,
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   defending, being a witness in or participating in (including on appeal), orpreparing to defend, be a witness in or participate in any Claim relating to anyIndemnifiable Event.  (g) Reviewing Party. “Reviewing Party” shall mean a quorum of the Board ofDirectors consisting of Disinterested Directors or, if such a quorum is not obtainableor if such a quorum so directs, Independent Counsel. Any decision by such a quorummust be by a majority vote of the quorum.  (h) Independent Counsel. “Independent Counsel” shall mean a law firm, or amember of a law firm, that is experienced in matters of Delaware corporate law andneither is, nor in the past five years has been, retained to represent the Company orWatford in any matter material to either such party or any other party to the Claimrelating to an Indemnifiable Event. Notwithstanding the foregoing, the term“Independent Counsel” shall not include any person who, under the applicable standardsof professional conduct then prevailing, would have a conflict of interest inrepresenting either the Company or Watford in an action to determine Watford’s rightsunder this Agreement.  (i) Disinterested Director. “Disinterested Director” shall mean a directorof the Company who is not and was not at any time a party to a Claim relating to anIndemnifiable 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, asamended (the “Code”), and the deferral of the commencement of any payments or benefitsotherwise payable hereunder as a result of such termination of employment is necessary inorder to prevent any accelerated or additional tax under Section 409A of the Code, then theCompany 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 theCompany (or the earliest date as is permitted under Section 409A of the Code) and (ii) if anyother payments of money or other benefits due to Watford hereunder could cause the applicationof an accelerated or additional tax under Section 409A of the Code, such payments or otherbenefits shall be deferred if deferral will make such payment or other benefits compliantunder Section 409A of the Code, or otherwise such payment or other benefits shall berestructured, to the extent possible, in a manner, determined by the Company’s Board ofDirectors, that does not cause such an accelerated or additional tax.14. Guaranty. The Company hereby absolutely and unconditionally guarantees the promptand punctual payment and performance when due by Resources of all Resources’ obligationshereunder.
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          IN WITNESS WHEREOF, each of the parties hereto has executed this Employment Agreement underseal as of the date and year first above written.      Ultra Petroleum Corp., and its Subsidiaries