**Exhibit10.11**EMPLOYMENT AGREEMENTThis Employment Agreement (“Agreement”) between Michael D. Watford (“Watford”), Ultra PetroleumCorp. (the “Company”), a Yukon Territories corporation and each of the Company’s subsidiaries; UPEnergy Corporation; Ultra Resources, Inc. and Sino-American Energy Corporation, all having theirprincipal place of business at 363 N. Sam Houston Parkway East, Suite 1200, Houston, Texas 77060,is effective as of February 1, 2004.WHEREAS, Watford and the Company have previously entered into an Employment Agreement datedeffective as of February 1, 2001 (the “February 1 Agreement”); andWHEREAS, Watford and the Company desire that this Agreement will supercede the February 1Agreement and the February 1 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, unlessearlier terminated as hereinafter provided. After the initial term of Watford’semployment, such employment shall be automatically extended for successive one-year periods,unless earlier terminated as hereinafter provided or upon ninety (90) days’ advance notice bythe Board of Directors of the Company (the “Company Board”) to Watford of its intention tonot renew. For each such extension, the terms of employment shall be subject to approval bythe Company Board and agreed to by Watford. If agreement cannot be reached, or in the eventthat the Company elects not to renew this Employment Agreement, Ultra Resources, Inc.(“Resources”) shall pay Watford in accordance with the provisions of Section 5.2. Position and Responsibilities. Watford shall serve as Chairman, CEO andPresident of the Company and each of the Company’s subsidiaries. Watford shall have theauthority, power and duty to manage the business and affairs of the Company (subject to theprovisions of applicable law) and shall have such other obligations, duties, authority andpower to do all acts and things as are customarily done by a person holding the same orequivalent position or performing duties similar to those to be performed by Watford incorporations of similar
 

 
size as the Company and shall perform such managerial duties and responsibilities for theCompany as may be assigned to him by the Company Board and, at no additional remuneration,shall serve in such other comparable positions with affiliates and associates of the Companyas the Company Board may from time to time designate.3. Compensation. A. In consideration of the services to be provided by Watford and the Company and each ofthe Company’s subsidiaries will pay Watford a salary of $425,000 per annum. Such salaryshall 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. Thissalary shall be reviewed annually by the Compensation Committee of the Company Board, whowill recommend appropriate increases, if any, to the Company Board for approval. Suchincreases shall be based on the incumbent’s performance and then-current market conditionsfor comparable positions.  B. Salary payments shall be subject to all applicable withholding, payroll and other taxes.  C. Watford shall be eligible to receive from the Company, on the basis of Company andindividual performance and assuming certain minimum performance goals are achieved, anannual incentive compensation award ranging between fifty percent of his salary and onehundred percent of his salary as determined by the Compensation Committee of the CompanyBoard. These incentive compensation awards shall be payable in lump sum at the end of theyear for which they apply. In addition, although not a component of Watford’s incentivecompensation program at this time, the Company Board may from time to time consider thegrant of options to Watford on an annual basis based upon his performance. The exerciseprice for such options shall be the fair market value of the Company’s common stock(“Common Stock”) as of the date of such option grant. The applicable performance targets,goals and corresponding salary percentages of such incentive compensation awards shall beproposed by Watford to the Compensation Committee for their review and recommendation tothe Company Board for approval on an annual basis prior to the start of the performanceyear. All incentive compensation awards shall be subject to all applicable federal andstate withholding, payroll and other taxes.  D. Watford shall be entitled to receive a one-time award of 200,000 stock options forCommon Stock, with an expiration period of ten (10) years. The exercise price for theseoptions shall be the fair market value (five day average closing price) of the CommonStock as of the market close on February 6, 2004, as determined in accordance withapplicable regulations in both the United States and Canada. These stock options shall beissued pursuant to a separate agreement between the Company and Watford and, except asexpressly set forth herein to the contrary, shall be subject to all of the terms andconditions of the Ultra Petroleum Corp. 2000 Stock Incentive Plan (the “Plan”) pursuantto which such options will be granted. Except as otherwise provided herein, these optionsshall vest in accordance with the terms of the Plan.
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 E. Watford shall be entitled to employment retention bonuses under the condition and in theevent that he continues his employment and duties with the Company as described herein for theperiods set forth below. For these retention bonuses, Watford shall be entitled to receive anaggregate of 60,000 Performance Shares of Common Stock under the Plan. These PerformanceShares shall be issued pursuant to a separate agreement between the Company and Watford and,except as expressly set forth herein to the contrary, shall be ‘ subject to all of the termsand conditions of the Plan. These shares shall vest in three equal parts at twelve-monthintervals, with the first portion vesting at the completion of twelve months into the firstyear of employment, and the remaining shares vesting at the completion of each twelve-monthperiod thereafter. Any remaining unvested shares will vest in full upon a Change of Control(as defined below) of the Company. Upon the vesting of any shares, the Company shall forthwithissue certificates representing such shares to Watford, subject to all applicable federal andstate withholding, payroll and other taxes.  F. Resources will provide Watford with an automobile (the “Automobile”) for use by Watfordin connection with the performance of his duties under this Agreement. Watford may also usethe Automobile for reasonable personal use. Watford agrees to pay all operating costs ofthe Automobile, and Resources agrees to reimburse to Watford the actual operating costs ofthe Automobile upon the submission by Watford to the Company of receipts evidencing suchoperating costs. Watford shall be provided with a new Automobile every two years.  G. Watford shall be entitled to reimbursement of reasonable business expenses incurred whileperforming his duties for the Company.  H. Watford shall be entitled to participate in and to receive all rights and benefitsunder any life insurance, disability, medical and dental, health and accident plans orplans as may be implemented by Resources under the terms of this Agreement. Watford shallalso be entitled to participate in and to receive all rights and benefits under anyprogram adopted by Resources for any other or group of other senior employees of theCompany, including without limitation, the rights and benefits under the directors’ andofficers’ liability insurance currently in place under the Company’s insurance program forthe directors and officers of the Company.  I. Watford shall be entitled to paid vacation during each full year of his employmenthereunder in accordance with the vacation policy adopted by the Company, but shall nottake more than ten consecutive business days at any given time. Such vacations shall betaken at such times as are consistent with the reasonable business needs of the Company.4. Understandings. The Company and Watford have agreed on several Understandingsregarding certain specific aspects of the Company’s business that will take effect uponWatford’s employment with the Company. Exhibit A provides the list ofsaid Understandings.5. Termination. The Company shall be entitled to terminate this Agreement and Watford’s
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employment with the Company subject to Sections 5.B, 5.C, 5.D, 5.E, 5.G and 5.H at any time andfor whatever reason; or at any time for just cause by written notice to Watford. Termination ofWatford’s employment by the Company shall constitute “for just cause” if such termination is forone or more of the following reasons: (i) the willful failure or refusal of Watford to renderservices to the Company in accordance with his obligations under this Employment Agreement; suchfailure or refusal to be uncured and continuing for a period of not less than 15 days afternotice outlining the situation is given by the Company to Watford; (ii) the commission by Watfordof an act of fraud or embezzlement against the Company or the commission by Watford of any otheraction with the intent to injure the Company or (iii) Watford having been convicted of a felony.In such event, Watford shall be entitled to no severance or other termination benefit. A. Watford shall be entitled to terminate this Agreement and his employment with theCompany within, but not after six months following any of the following events (a“Terminating Event”, or collectively, the “Terminating Events”): (i) Watford is assignedany responsibilities or duties materially inconsistent with his position,duties, responsibilities and status with the Company as in effect at the date of this Agreement oras may be assigned to Watford pursuant to Section 2 hereof, or his title or offices as ineffect at the date of this Agreement or as Watford may be appointed or elected to inaccordance with Section 2 are materially changed; (ii) there is a Change of Control of theCompany; (iii) any failure by the Company to continue to provide Watford any benefit,bonus, profit sharing, incentive, remuneration or compensation plan, stock ownership orpurchase plan in which Watford was entitled to participate in as of the date of thisAgreement, or the taking by the Company of any action adversely affecting Watford’sparticipation in or materially reducing his rights or benefits under or pursuant to any suchplan or the failure by the Company to increase or improve such rights or benefits on abasis consistent with practices in effect prior to the date of this Agreement with respect tothe 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 theCity of Houston, Texas except for required travel on the Company’s business to an extentsubstantially 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 thecontinuing or surviving corporation or pursuant to which shares of the Common Stock wouldbe converted into cash, securities or other property, other than a mergerof the Company in which the holders of the Common Stock immediately prior tothe merger have the same proportionate ownership of common stock of the survivingcorporation immediately after the merger;     (2) any sale, lease, exchange or other transfer (in one transaction or a series ofrelated 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
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for the liquidation or dissolution of the Company;     (4) the cessation of control (by virtue of their not constituting a majority ofdirectors) of the Company Board by the individuals (the “Continuing Directors”) who (x) atthe date of this Agreement were directors or (y) become directors after the date of thisAgreement and whose election or nomination for election by the Company’s stockholders, wasapproved by a vote of at least two-thirds of the directors then in office who were directorsat the date of this Agreement or whose election or nomination for election was previously soapproved; or     (5) (A) the acquisition of beneficial ownership (within the meaning of Rule 13d-3under 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 byany person or group (as such term is used in Rule 13d-5 under such Act) who BeneficiallyOwned less than 10% of the voting power of the Company’s outstanding voting securities on thedate 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 who BeneficiallyOwned at least 10% of the voting power of the Company’s outstanding voting securities on thedate hereof, or (C) the execution by the Company and a stockholder of a contract that by itsterms grants such stockholder (in its, her or his capacity as a stockholder) or suchstockholder’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 ofDirectors (in its, her or his capacity as an Affiliate of such stockholder), the right toveto or block decisions or actions of the Board of Directors; provided, however, thatnotwithstanding the foregoing, the events described in items (A) or (B) above shall notconstitute a Change in Control hereunder if the security holder is any other person whoseacquisition of shares of voting securities is approved in advance by a majority of theContinuing Directors.     (6) subject to applicable law, in-a Chapter 11 bankruptcy proceeding, the appointmentof a trustee or the conversion of a case involving the Company to a case under Chapter 7. B. Subject to Sections 5.G and 5.H, if an agreement cannot be reached as to the terms of anyextension of this Agreement, or in the event that the Company elects not to renew thisEmployment Agreement at the end of its initial term or any extended term, Watford shall beentitled to receive from the Company, within 30 days after the date of termination, aone-time severance payment equal to the sum of the following: (i) 100% of Watford’s salaryfor the 12 months immediately preceding the termination; plus (ii) an incentive compensationaward equal to the most recent annual bonus, less any withholdings or deductions required bylaw.  C. Subject to Sections 5.G and 5.H, the termination by the Company of this Agreement andWatford’s employment with the Company, other than for just cause, or termination by Watford ofthis Agreement and Watford’s employment for any Terminating Event other
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than a Change of Control, shall entitle Watford to receive from the Company, within 30 daysafter the date of termination, a one-time severance payment equal to the sum of thefollowing: (i) 100% of Watford’s salary for the 12 months immediately preceding thetermination; plus (ii) an incentive compensation award equal to the most recent bonus, lessany withholdings or deductions required by law. D. Subject to Sections 5.G and 5.H, the termination by the Company of this Agreement andWatford’s employment with the Company following a Change of Control, other than for justcause, or termination by Watford of this Agreement and Watford’s employment for a Change ofControl, shall entitle Watford to receive from the Company, within 30 days after the date oftermination, a one-time severance payment equal to two and a half (2.5) times the sum of thefollowing: (i) 100% of Watford’s salary for the 12 months immediately preceding thetermination; plus (ii) an incentive compensation award equal to the most recent bonus, lessany withholdings or deductions required by law.  E. Upon the termination by the Company of this Agreement and Watford’s employment with theCompany, other than for just cause, or termination by Watford of this Agreement and Watford’semployment for a Terminating Event, all previously awarded stock options which have notpreviously vested shall vest immediately in full.  F. The parties agree that, because there can be no exact measure of the damages which wouldoccur to Watford as a result of termination of employment, such payments which arecontemplated in Sections 5.B., 5.C. and 5.D. shall be deemed to constitute liquidated damagesand not a penalty and the Company agrees that Watford shall not be required to mitigate hisdamages.  G. In addition to the payments required to be made pursuant to Sections 5.B., 5.C. or 5.D., upontermination of this Agreement by the Company pursuant to Section 5 or by Watford pursuant toSection 5.A. or 5.I., the salary otherwise payable to and earned by Watford to the date oftermination 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 compensation payable toWatford pursuant to Section 3 shall, except as expressly provided herein or in any Schedulehereto, terminate on the date of the termination; provided that as expeditiously as possibleafter the termination Resources shall pay or reimburse Watford for all reasonable businessexpenses incurred prior to the termination. Notwithstanding the foregoing, unless terminatedfor just cause, Watford shall have a period of one year from the date of termination toexercise any stock options that have been awarded and vested to him as of the date oftermination, provided that in the event all outstanding-options of the Company are to becancelled in connection with an extraordinary corporate transaction, Watford shall be giventhe same opportunity to exercise his stock options as is given to each other option holderprior to cancellation of his options; and further provided that Resources shall continue tomake available to Watford the benefits set forth in Section 3.H. herein for a period of notless than 18 months as defined under COBRA Continuation (Public Law 99-272); and furtherprovided that Resources shall, within thirty (30) days of the date of termination, transfertitle ownership of the Automobile, free and clear of any liens thereon, with the
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title ownership of the Automobile, free and clear of any liens thereon, with the understandingthat Watford shall be responsible for ongoing operating expenses for said automobilethereafter. 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 (includingall such fees and expenses, if any, incurred in contesting or disputing any such terminationor in seeking to obtain or enforce any right or benefit provided by this Agreement). H. Limitation on Payments.  (1) If any of the payments or benefits received or to be received by Watford in connection witha Change of Control or Watford’s termination of employment (whether pursuant to the terms ofthis Agreement or any other plan, arrangement or agreement with the Company, any person whoseactions result in a Change of Control or any person affiliated with the Company or suchperson) (such payments or benefits, excluding the Gross-Up Payment, being hereinafterreferred to as the “Total Payments”) would be subject to the excise tax (the “Excise Tax”)imposed under Section 4999 of the Internal Revenue Code of 1986 (the “Code”), the Companyshall pay to Watford an additional amount (the “Gross-Up Payment”) such that the net amountretained 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, shallbe equal to the Total Payments. For purposes of determining the amount of the Gross-UpPayment, Watford shall be deemed to pay federal income taxes at the highest marginal rate offederal income taxation in the calendar year in which the Gross-Up Payment is to be made andstate and local income taxes at the highest marginal rates of taxation in the state andlocality 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 deductionof such state and local taxes.  (2) All determinations required to be made under this Section 5.H, including whether aGross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by theindependent accounting firm which served as the Company’s auditor immediately prior to theChange of Control (the “Accounting Firm”), which shall provide detailed supportingcalculations both to the Company and Watford within fifteen (15) business days after thedate of the termination of Watford’s employment. In the event that the Accounting Firm isalso serving as accountant or auditor for the individual, entity, or group effecting theChange of Control, Watford may appoint another nationally recognized public accounting firmto make the determinations required hereunder (which accounting firm shall then be referredto as the Accounting Firm hereunder), by giving written notice of such appointment to theCompany within five (5) business days after the date of the termination of Watford’semployment. All fees and expenses of the Accounting Firm shall be borne solely by theCompany and it shall be the Company’s obligation to cause the Accounting Firm to take anyactions required hereby.    If the Accounting Firm determines that no Excise Tax is payable by Watford, it shall furnishWatford with an opinion that he has substantial authority not to report any Excise
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Tax on his federal income tax return. As a result of the uncertainty in the applicationof Section 4999 of the Code at the time of the initial determination by the Accounting Firmhereunder, it is possible that a Gross-Up Payment which will not have been made by the Companyshould have been made (“Underpayment”), consistent with the calculations required to be madehereunder. In the event that the Company exhausts its remedies pursuant to Section 5.H(3) andWatford thereafter is required to make a payment of any Excise Tax, the Accounting Firm shalldetermine the amount of the Underpayment that has occurred and any such Underpayment shall bepromptly 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 Servicethat, if successful, would require the payment by the Company of the Gross-Up Payment. Suchnotification shall be given as soon as practicable but no later than ten (10) business daysafter Watford knows of such claim and shall apprise the Company of the nature of such claimand the date on which such claim is requested to be paid. Watford shall not pay such claimprior to the expiration of the thirty-(30) day period following the date on which he or shegives such notice to the Company (or such shorter period ending on the date that any paymentof taxes with respect to such claim is due). If the Company notifies Watford in writingprior 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 Companyrelating to such claim,  (ii) take such action in connection with contesting such claim as the Companyshall reasonably request in writing from time to time, including, without limitation,accepting legal representation with respect to such claim by an attorney reasonablyselected by the Company,  (iii) cooperate with the Company in good faith in order to effectively contest such claim,  (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 suchcontest and shall indemnify and hold Watford harmless, on an after-tax basis, for anyExcise Tax or income tax, including interest and penalties with respect thereto,imposed as a result of such representation and payment of costs and expenses. Withoutlimitation on the foregoing provisions of this Section 5.H(3), the Company shallcontrol all proceedings taken in connection with such contest and, at its soleoption, may pursue or forgo any and all administrative appeals, proceedings, hearingsand conferences with the taxing authority in respect of such claim and may, at itssole option, either direct Watford to pay the tax claimed and sue for a refund, orcontest the claim in any permissible manner, and Watford agrees to prosecute suchcontest to a determination before any administrative tribunal, in a court of initialjurisdiction and in one or more
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appellate 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 whichsuch contested amount is claimed to be due is limited solely to such contestedamount. Furthermore, the Company’s control of the contest shall be limited to issueswith respect to which a Gross-Up Payment would be payable hereunder and Watfordshall be entitled to settle or contest, as the case may be, any other issue raisedby the Internal Revenue Service or any other taxing authority.(4) If, after the receipt by Watford of an amount advanced by the Company pursuant toSection 5.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 5.H(3))promptly pay to the Company the amount of such refund (together with any interest paid orcredited thereon after taxes applicable thereto). If, after the receipt by Watford of anamount advanced by the Company pursuant to Section 5.H(3), a determination is made thatWatford shall not be entitled to any refund with respect to such claim and the Company doesnot notify Watford in writing of its intent to contest such denial of refund prior to theexpiration of thirty days after such determination, then such advance shall be forgiven andshall not be required to be repaid and the amount of such advance shall offset, to theextent thereof, the amount of Gross-Up Payment required to be paid. I. Notwithstanding anything to the contrary herein, Watford shall be entitled to terminatethis Agreement and his employment with the Company at his pleasure upon sixty (60) dayswritten notice to such effect. In such event, Watford shall not be entitled to any furthercompensation except as set forth in Section 5.G. The Company acknowledges and agrees thatthe Company shall have no remedy against Watford, in law or otherwise, upon the terminationof this Agreement and Watford’s employment with the Company in accordance with this Section5.1.  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.  K. Notwithstanding the termination of this Agreement under Section 5, the provisions ofSections 5, 11, 12 and 13, and all other provisions hereof which by their terms are to beperformed following termination hereof shall survive such termination and be continuingthereafter.
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6. Confidentiality and Non-Solicitation. A. Acknowledgment. Watford agrees and acknowledges that in the course of rendering servicesto the Company and its subsidiaries he will have access to and will become acquainted withconfidential information about the professional, business and financial affairs of theCompany, the Company’s direct or indirect subsidiaries (for purpose of Section 6 herein, theterm Company shall include any of the Company’s direct or indirect subsidiaries), and theCompany’s strategy and procedures, and may have contributed to or may in the futurecontribute to such information. Watford further recognizes that he is employed as a keyemployee, that the Company is engaged in a highly competitive business, and that the successof 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 themarketing such oil and gas. Watford recognizes that in order to guard the legitimateinterests of the Company it is necessary for the Company to protect all such confidentialinformation, good will and reputation. B. Proprietary Information. In the course of his service to the Company, Watford mayhave 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 negotiationsconcerning proposed transactions, results of drilling or exploration, forecasts, budgets,pricing information, Company developed methods of operation, oil and gas marketing and riskmanagement strategies and procedures, specialized know-how developed by the Company, businessdocuments or information, marketing data, trade secrets, personnel roster, including theidentity, qualifications and/or salary scale of any consultant or other Company employee, andother information generated by the Company or arising in connection with the Company’sbusiness the disclosure of which would give an advantage to the Company’s competitors.Such information shall hereinafter be called “Proprietary Information” and shall includeany and 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, whetherpreviously existing, now existing or arising hereafter, whether or not conceived or developedby 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. “ProprietaryInformation” shall not include (a) any information which is in the public domain during theperiod of service by Watford, provided such information is not in the public domain as aconsequence 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 information notconsidered confidential information by similar enterprises operating in the oil and gasindustry.  C. Fiduciary Obligations. Watford agrees and acknowledges that ProprietaryInformation belongs solely to the Company and is of critical importance to the Company andthat a use or disclosure of the Proprietary Information in violation of this Section 6 mayseriously and irreparably impair and damage the Company’s businesses. Watford thereforeagrees, while he is an employee of the Company and at all times thereafter, (a) to keep allProprietary 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 orany
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  otherperson or entity.  D. Non-Disclosure. Watford shall not disclose, directly or indirectly (except asrequired 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 toreceive such information, (c) such other persons to whom Watford has been instructed to makedisclosure by the Company Board, or (d) Watford’s counsel so long as such counsel agrees tokeep all Proprietary Information confidential (in the case of clause (b) only to the extentrequired in the course of Watford’s service to the Company). At the termination ofemployment hereunder, Watford shall deliver to the Company all notes, letters, documents andrecords which may contain Proprietary Information which are then in his possession orcontrol and shall not retain or use any copies or summaries thereof.  E. Non-Solicitation of Employees. Watford further agrees that duringthe period 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 employee of ora consultant to the Company at any time during the last twelve months of Watford’semployment with the Company, or hire such employee or engage as a consultant any suchperson, 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 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.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 amajority of the Compensation Committee of the Company Board then in office at the time of suchmodification or waiver. No waiver by either party of any breach by the other or any provisionhereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver ofany other provision of this Employment Agreement. This Employment Agreement sets forth all ofthe terms of the understandings between the parties with reference to the subject matter setforth herein and may not be waived, changed, discharged or terminated orally or by any courseof dealing between the parties, but only by an instrument in writing signed by the partyagainst whom any waiver, change, discharge or termination is sought.9. Governing Law. This Employment Agreement shall be construed in accordance with the laws ofthe state of Texas.10. Severability. In case any one or more of the provisions contained in thisEmployment Agreement for any reason shall be held to be invalid, illegal or unenforceable inany respect, such an invalidity or unenforceability shall not affect any other provision ofthis Employment
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Agreement, but this Employment Agreement shall be construed as if such invalid, illegal orunenforceable provisions had never been contained herein.11. Intellectual Property. Watford shall hold in trust for the benefit of the Company, andshall disclose promptly and fully to the Company in writing, and hereby assigns, and binds hisheirs, 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 end of the term of this Agreement and without limiting the generalityof the foregoing, any Development of Watford relating to any subject matter on which Watfordworked or was informed during his employment by the Company shall be conclusively presumed tohave been conceived and made prior to the termination of his employment (unless Watfordclearly proves that such Development was conceived and made following the termination of hisemployment), and shall accordingly belong and be assigned to the Company and shall besubject to this Agreement.12. Indemnification. (a) Indemnity. If Watford was, is or becomes a party to or witness or otherparticipant in, or is threatened to be made a party to or witness or other participantin, a Claim (defined below) by reason of (or arising in part out of) an IndemnifiableEvent (defined below), the Company shall indemnify Watford to the fullest extentpermitted by law, as soon as practicable but in any event no later than thirty days afterwritten 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 orin 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 businessdays of such request) any and all Expenses to Watford (an “Expense Advance”); provided,however, that the Company may require Watford first to deliver to the Company anundertaking by or on behalf of Watford to repay such Expense Advance if it shallultimately be determined that he is not entitled to be indemnified by 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 which thespecial,
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independent counsel referred to in Section 12(c) hereof is involved) that Watford would not bepermitted to be indemnified under applicable law, and (ii) the obligation of the Company to makean Expense Advance pursuant to Section 12(a) shall be subject to the condition that, if, when andto the extent that the Reviewing Party determines that Watford would not be permitted to be soindemnified under applicable law, the Company shall be entitled to be reimbursed by Watford (whohereby 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 tosecure a determination that Watford should be indemnified under applicable law,any determination 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 required toreimburse the Company for any Expense Advance until a final judicial determination is made withrespect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Ifthere has been no determination by the Reviewing Party or if the Reviewing Party determines thatWatford substantively would not be permitted to be indemnified in whole or in part underapplicable law, Watford shall have the right to commence litigation in any court in the State ofTexas having subject matter jurisdiction thereof and in which venue is proper seeking an initialdetermination by the court or challenging any such determination by the Reviewing Party or anyaspect thereof, and the Company hereby consents to service of process and to appear in any suchproceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding onthe Company and Watford. (c) Independent Counsel. If the determination of entitlement to indemnification is tobe made by Independent Counsel (defined below), the Independent Counsel shall be selected asprovided in this Section 12(c). The Independent Counsel shall be selected by majority vote ofa quorum of Disinterested Directors (defined below), and the Company shall give written noticeto Watford advising him of the identity of the Independent Counsel soselected. Watford may, within seven days after receipt of the written notice, deliver to the Company a writtenobjection to the selection. His objection may be asserted only on the ground that theIndependent Counsel so selected does not meet the requirements of Independent Counsel asdefined in Section 12(h) below, and the objection shall set forth with particularity thefactual basis of the assertion. If written objection is made, the Independent Counsel soselected shall be disqualified. If, within 20 days after submission by Watford of ademand for indemnification pursuant to Section 12(a) of this Agreement, no Independent Counselshall have been selected, or if selected shall have been objected to, in accordance with thisSection 12(c), either the Company or Watford may petition a court of competent jurisdiction inthe State of Texas for the appointment as Independent Counsel of a person selected by thatcourt or by any other person that court shall designate, and the person so appointed shall actas Independent Counsel. The Company shall pay all reasonable fees and expenses incident to theprocedures of this Section 12(c), regardless of the manner in which the Independent Counselwas selected or appointed. The Company shall pay the reasonable fees and expenses of theIndependent Counsel and shall indemnify fully the Independent Counsel against any and allexpenses (including attorneys’ fees) claims, liabilities and damages arising out of orrelating to this Agreement or its engagement pursuant hereto.
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 (d) Claim. “Claim” shall mean any threatened, pending or completed action, suit orproceeding, any inquiry or investigation, or any appeal therefrom whether conducted by theCompany or any other party, that Watford in good faith believes might lead to the institutionof any such action, suit or proceeding, whether civil, criminal, administrative, investigativeor other.  (e) Indemnifiable Event. “Indemnifiable Event” shall mean any event or occurrencerelated to the fact that Watford is or was serving the Company in some capacity, includingwithout limitation, as a director, officer, employee, agent (including trustee) or fiduciaryof the Company or of another corporation, partnership, joint venture, trust or otherenterprise, 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,defending, being a witness in or participating in (including on appeal), or preparing todefend, 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 ofDirectors consisting of Disinterested Directors or, if such a quorum is not obtainable or ifsuch a quorum so directs, Independent Counsel. Any decision by such a quorum must be by amajority vote of the quorum.  (h) Independent Counsel. “Independent Counsel” shall mean a law firm, or a memberof 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 anymatter material to either such party or any other party to the Claim relating to anIndemnifiable Event. Notwithstanding the foregoing, the term “Independent Counsel” shallnot include any person who, under the applicable standards of professional conduct thenprevailing, would have a conflict of interest in representing either the Company orWatford in an action to determine Watford’s rights under this Agreement.  (i) Disinterested Director. “Disinterested Director” shall mean a director of theCompany who is not and was not at any time a party to a Claim relating to an IndemnifiableEvent.13. Guaranty. The Company hereby absolutely and unconditionally guarantees the prompt andpunctual payment and performance when due by Resources of all of 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      For the Company Board