ex10_9.htm


    
      

    

    Exhibit
10.9

    


    Employment
Agreement

     

    This
Employment Agreement (the “Agreement”) is made and entered into this 31st day of
December, 2008, effective as of January 1, 2008, by and between Petroleum
Development Corporation, a Nevada Corporation (the “Company”), and Richard W.
McCullough (the “Employee”).

     

    WHEREAS,
on the Effective Date (hereinafter defined), the Company employed Employee in
the capacity of Chief Financial Officer and, effective as of March 9, 2008, in
the capacity of President;

     

    WHEREAS,
upon the retirement of Steven R. Williams as Chief Executive Officer on June 23,
2008, the Company employed Employee in the additional capacity of Chief
Executive Officer;

     

    WHEREAS,
Employee ceased to be Chief Financial Officer effective as of November 11, 2008
when his successor became Chief Financial Officer;

     

    WHEREAS,
the Company desires to employ the Employee to perform the duties and services
incident to such positions for the Company, and the Employee wishes to be so
employed by the Company, all upon the terms and conditions set forth in this
Agreement;

     

    NOW
THEREFORE, in consideration of the premises and mutual covenants and obligations
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and accepted, the parties hereto,
intending to be legally bound, agree as follows:

     

    
      	
              1.  

            	
              Effective Date and
      Term

            


    

     

    
      	
              a.  

            	
              Initial
      Term.  The effective date of this Agreement will be
      January 1, 2008 (the “Effective Date”), and the initial term will be for
      the period beginning on the Effective Date and ending December 31,
      2009.

            


    

     

    
      	
              b.  

            	
              Automatic
      Extensions.  The Term of this Agreement will be extended
      for an additional twelve (12) months beginning on December 31, 2008 and on
      each successive December 31 unless either party provides the other with at
      least thirty (30) days prior written notice, or unless the contract has
      been terminated by the parties in accordance with the provisions of
      Section 7 of this Agreement.  The period of time from the
      Effective Date until the Termination Date, as defined in Section 7.b.,
      will be the “Term.”

            


    

     

    
      	
              c.  

            	
              Change of
      Control.  In the event of a Change of Control, the Term
      of this Agreement will automatically be extended to the date that is
      twenty-four (24) months after the date of the Change of Control without
      any action on the part of the Company or the
      Employee.  Thereafter, the date of the Change of Control will be
      treated as the Effective Date for purposes of further automatic 12-month
      extensions of the Agreement under this


            


    

    
       

         

        
          
            
            

          

          
            1

            
              

            

          

          
            
            

          

        

      

       

      
        	
                 

              	
                section.  “Change
      of Control” of the Company will occur on the earliest of the following
      events:

              


      

       

    

    
      	
              (i)  

            	
              Change in
      Ownership:  A change in ownership of the Company occurs
      on the date that any one person, or more than one person acting as a
      group, acquires ownership of stock of the Company that, together with
      stock held by such person or group, constitutes more than 50% of the total
      fair market value or total voting power of the stock of the Company,
      excluding the acquisition of additional stock by a person or more than one
      person acting as a group who is considered to own more than 50% of the
      total fair market value or total voting power of the stock of the
      Company.

            


    

     

    
      	
              (ii)  

            	
              Change in Effective
      Control:  A change in effective control of the Company
      occurs on the date that either:

            


    

     

    
      	
              (A)  

            	
              Any
      one person, or more than one person acting as a group, acquires (or has
      acquired during the l2-month period ending on the date of the most recent
      acquisition by such person or persons) ownership of stock of the Company
      possessing 30% or more of the total voting power of the stock of the
      Company; or

            


    

     

    
      	
              (B)  

            	
              A
      majority of the members of the Board of Directors of the Company (the
      “Board”) is replaced during any l2-month period by directors whose
      appointment or election is not endorsed by a majority of the members of
      the board of directors prior to the date of the appointment or election;
      provided, that this paragraph (B) will apply only to the Company if no
      other corporation is a majority
shareholder.

            


    

     

    
      	
              (iii)  

            	
              Change in Ownership of
      Substantial Assets:  A change in the ownership of a
      substantial portion of the Company's assets occurs on the date that any
      one person, or more than one person acting as a group, acquires (or has
      acquired during the l2-month period ending on the date of the most recent
      acquisition by such person or persons) assets from the Company that have a
      total gross fair market value equal to or more than 40% of the total gross
      fair market value of the assets of the Company immediately prior to such
      acquisition or acquisitions. For this purpose, “gross fair market value”
      means the value of the assets of the Company, or the value of the assets
      being disposed of, determined without regard to any liabilities associated
      with such assets. It is the intent that this definition be construed
      consistent with the definition of “Change of Control” as defined under
      Internal Revenue Code Section 409A and the applicable Treasury
      Regulations, as amended from time to
time.

            


    

     

    
      
        
        

      

      
        2

        
          

        

      

    

     

    
      	
              2.  

            	
              Place of
      Employment

            


       

    

    The place
of employment will be the Company’s headquarters building in Bridgeport, West
Virginia or Denver, Colorado unless the Employee and the Company agree to an
alternative location.

     

    
      	
              3.  

            	
              Position and
      Responsibilities

            


    

     

    
      	
              a.  

            	
              Position.  As
      of the Effective Date, the Employee will serve as the Chief Financial
      Officer and, as of March 9, 2008, President, and in such positions shall
      report to the Chief Executive Officer of the Company and be under the
      general direction and control of the Chief Executive
      Officer.  Upon the retirement of Steven R. Williams as Chief
      Executive Officer, Employee will also serve as the Chief Executive Officer
      of the Company and will report to the
Board.

            


    

     

    
      	
              b.  

            	
              Responsibilities.  The
      Employee will have obligations, duties, authority and power to do such
      acts as are customarily done by a person holding the same or equivalent
      positions in corporations of similar size to the Company.  The
      Employee shall perform such managerial duties and responsibilities for the
      Company as may be reasonably be assigned to him by the Chief Executive
      Officer (while serving in the capacity of Chief Financial Officer or in
      the capacity of Chief Financial Officer and President), the Chairman of
      the Board (while serving in the added capacity of Chief Executive Officer)
      and the Board (while serving in the capacity of Chief Executive Officer
      and Chairman of the Board), at no additional compensation, shall serve on
      the Board and in other such positions with any subsidiary corporation of
      the Company, or any partnership, limited liability company or other entity
      in which the Company has an interest (herein collectively called
      “Affiliates”), as the Chief Executive Officer or the Chairman of the Board
      or the Board as applicable, may from time to time
    determine.

            


    

     

    
      	
              c.  

            	
              Dedication of
      Professional Services.  The Employee shall devote
      substantially all of his business time, best efforts and attention to
      promote and advance the business of the Company and its Affiliates to
      perform diligently and faithfully all the duties, responsibilities and
      obligations of his positions with the Company.  Employee shall
      not be employed in any other business activity, other than with the
      Company and its Affiliates, during the Term, whether or not such activity
      is pursued for gain, profit or other pecuniary advantage without approval
      by the Compensation Committee of the Board (“Compensation Committee”);
      provided, however, that this restriction will not be construed as
      preventing Employee from investing his or her personal assets in a
      business which does not compete with the Company or its Affiliates, where
      the form or manner of such investment will not require services of any
      significance on the part of Employee in the operation of the
      affairs of the business in 

            


    

    
       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                 which
      such investment is made and in which his participation is solely that of a
      passive investor.

              


      

       

    

    
      	
              d.  

            	
              Adherence to
      Standards.  Employee shall comply with the written
      policies, standards, rules and regulations of the Company from time to
      time established for all executive officers of the Company consistent with
      Employee's position and level of
authority.

            


    

     

    
      	
              e.  

            	
              Minimum Stock
      Ownership.  Employee shall comply with the minimum stock
      ownership requirements for executive officers of the Company by the fifth
      anniversary of the effective date of his employment by the Company
      (November 13, 2011 being the fifth anniversary of the effective date of
      his employment) and until his Termination Date.  These
      requirements are, for a Chief Financial Officer, a minimum stock ownership
      equal to two (2) times the Employee’s Base Salary, as defined in Section
      4.a. (or such level as adjusted from time to time) and, for a Chief
      Executive Officer, a minimum stock ownership equal to three (3) times the
      Employee’s Base Salary (or such level as adjusted from time to
      time).

            


    

     

    
      	
              4.  

            	
              Compensation

            


    

     

    
      	
              a.  

            	
              Base
      Salary.  The Company shall pay the Employee an annual
      base salary of $340,000 (the “Base Salary”) commencing on the Effective
      Date and ending on the Termination Date.  The Base Salary will
      be payable in accordance with the ordinary payroll practices of the
      Company.  The Compensation Committee shall review the Base
      Salary annually, and the Base Salary may be changed by the Compensation
      Committee in its sole discretion, taking into account the base salaries,
      aggregate annual cash compensation, and other compensation of individuals
      holding similar positions at other comparable companies and the
      performance of the Employee and the
Company.

            


    

     

    
      	
              b.  

            	
              Performance
      Bonus.  In addition to his Base Salary, the Employee will
      be eligible to earn an annual performance bonus (the “Bonus”) during the
      Term based on the achievement of corporate performance objectives as
      determined by the Compensation Committee in its sole
      discretion.  The “Target Bonus” will be a specified percentage
      of the Base Salary, as set forth in the Petroleum Development Corporation
      Short-Term Incentive Compensation Plan for a given year which may be
      earned if the Employee meets all of the criteria established by the
      Compensation Committee.  However, the Bonus may be less than or
      more than the Target Bonus based on the level of performance of the
      Employee and the criteria established by and at the sole discretion of,
      the Compensation Committee.  For 2008, the Target Bonus will be
      equal to 90% of the Employee’s Base Salary and the maximum percentage will
      be 180% of the Employee’s Base Salary.  The Bonus will be paid
      in cash no later than March 15 of the


            


    

    
       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                 following
      year.  To the extent practicable, the Bonus will meet the
      requirements for qualified performance-based compensation under Internal
      Revenue Code Section 162(m).

              


      

       

    

    
      	
              c.  

            	
              Retirement
      Compensation.  For each complete year worked by the
      Employee beginning from the effective date of his employment with the
      Company (November 13, 2006) and each anniversary thereof, the Employee
      will earn and be entitled to receive an annual retirement payment equal to
      $7,500 (such annual retirement payment being the “Retirement Payment”) for
      each of the ten years noted below.  For example, (i) if the
      Employee is employed for four years and three months, the annual
      Retirement Payment would be 4 x $7,500 = $30,000, and (ii) if the Employee
      is employed for five years and eight months, the annual Retirement Payment
      would be 5 x $7,500 = $37,500.  The annual Retirement Payment
      will be payable to the Employee, or in the event of the Employee’s death,
      to his estate, beneficiaries, or designees, on each of the first ten
      anniversary dates following the date the Employee leaves the service of
      the Company.  The Retirement Payment will be in addition to any
      deferred compensation, pension, or other payments the Employee has earned
      under this and any other previous and subsequent agreements with the
      Company and any other payments he may be due under the Company’s employee
      benefit plans.  The Retirement Payment is payable to the
      Employee even if the Employee's termination is for Just Cause pursuant to
      Section 7.c.

            


    

     

    
      	
              d.  

            	
              Equity Compensation
      Grant.  In addition to cash compensation, the Employee
      will be eligible to earn equity compensation during the
      Term.  The amounts and form of all equity compensation awards
      shall be determined at the sole discretion of the Board or its designee
      and only in accordance with shareholder approved stock compensation
      plans.  As of the Effective Date, under the Company’s Long-Term
      Equity Compensation Plan, the Employee will receive an award equal in
      value to $510,000, 50% of which will be awarded as restricted stock and
      50% of which will be awarded as long-term incentive performance (“LTIP”)
      shares.  For this purpose, the value of the restricted stock and
      the LTIP shares will be determined by the Company’s compensation
      consultants and will be based on the average closing price of the stock of
      the Company for the month of December, 2007.  The restricted
      stock will vest at the rate of 25% for each complete year worked by the
      Employee under this Agreement, beginning on March 7, 2008 and vesting at
      the rate of 25% on each anniversary thereof.  The performance
      shares will vest in accordance with the timing and performance targets set
      forth in the documentation for such LTIP shares.  Future awards
      will vest on the schedule specified by the Board or its designee at the
      time of the award.

            


    

     

    
      	
              e.  

            	
              Succession-Related
      Grant.  On the date that Employee assumes the position of
      Chief Executive Officer of the Company, the Employee will
  

            


    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 

              	
                receive
      a one-time award of restricted stock equal in value to
      $700,000.  For this purpose, the value of the restricted stock
      will be determined by the Company’s compensation consultants and will be
      based on the average closing price of the stock of the Company for the
      month of December, 2007.  The restricted stock will vest at the
      rate of 20% for each complete year worked by the Employee under this
      Agreement, beginning from the Effective
Date.

              


      

       

    

     

    
      	
              f.  

            	
              Other
      Compensation.  The Employee will continue to be eligible
      to participate in all other cash or stock compensation plans or programs
      maintained by the Company, as in effect from time to time, in which other
      senior executives of the Company are allowed to
    participate.

            


    

     

    
      	
              g.  

            	
              Recoupment of Certain
      Compensation.  If the Company has to restate all or a
      portion of its financial statements due to the material noncompliance of
      the Company with any financial reporting requirement under the securities
      laws, the Employee shall, for the affected years, reimburse the Company
      for any excess bonus paid to the Employee pursuant to Section
      4.b.  The reimbursements shall be equal to the difference
      between the bonus paid to him for the affected years and the bonus that
      would have been paid to the Employee had the financial results been
      properly reported.  Such reimbursement shall be paid to the
      Company within ninety days after the Company notifies the Employee of the
      amount owed to the Company.

            


    

     

    
      	
              5.  

            	
              Employee
      Benefits

            


    

     

    
      	
              a.  

            	
              Participation in
      Company Benefit Plans.  During the Term, the Company
      shall provide the Employee with coverage under all employee pension and
      welfare benefit programs, plans and practices commensurate with his
      positions in the Company and to the extent permitted under the respective
      employee benefit plan.

            


    

     

    
      	
              b.  

            	
              Vacation.  The
      Employee will be entitled to twenty (20) days of paid vacation in each
      calendar year, to be taken at such times as is reasonably determined by
      the Employee to be consistent with the Employee’s responsibilities under
      this Agreement.

            


    

     

    
      	
              c.  

            	
              Expense
      Reimbursement.  The Employee is authorized to incur
      reasonable expenses in carrying out his duties and responsibilities under
      this Agreement, including, without limitation, expenses related to travel,
      meals, entertaining, and similar items related to such duties and
      responsibilities.  The Company shall reimburse the Employee for
      all such expenses on presentation by Employee from time to time of
      appropriately itemized and approved (consistent with the Company’s policy)
      accounts of such expenditures.  The Company shall reimburse the
      Employee for reasonable dues and expenses of membership in such club or
      clubs as the 

            


    

     

    
       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                Board
      reasonably deems necessary for the Employee to entertain on behalf of the
      Company and for costs associated with continuing education and
      professional dues if approved in advance by the Chief Executive Officer
      (by the Board after Employee becomes Chief Executive
      Officer).  All expense reimbursements for a calendar year will
      be paid in the normal course, but no later than March 15 of the following
      calendar year.

              


      

       

    

     

    
      	
              d.  

            	
              Life and Disability
      Insurance.  The Company will reimburse the Employee for
      the cost of life insurance on the Employee in the face amount of one
      million dollars ($1,000,000) with a person or persons named by the
      Employee as either the owner or the beneficiary as the Employee directs,
      and for the cost of a disability policy consistent with what is provided
      to other executive officers of the Company.  All reimbursements
      for a calendar year will be paid in the normal course, but no later than
      March 15 of the following calendar
year.

            


    

     

    
      	
              e.  

            	
              Health
      Insurance.  The Company agrees that it will include the
      Employee under any hospital, surgical, or group health plan or policy
      adopted generally for the benefit of its employees.  The payment
      of the premiums for the Employee and his dependents will be determined in
      accordance with the rules and regulations adopted by the Company for its
      employees.  In addition to including the Employee and his
      dependents in such plan, the Company shall pay all reasonable hospital,
      surgical, medical, dental, and prescription expenses of the Employee and
      his dependents not covered by such a plan.  In the event the
      Company has no group health plan, the Company agrees to pay all reasonable
      premiums on any health insurance policy obtained by the Employee to
      provide such coverage.

            


    

     

    
      	
              f.  

            	
              Automobile.  During
      the Term, the Employee will be entitled to use of a Company automobile or
      payment of a car allowance in accordance with a plan approved by the Board
      or its designee.

            


    

     

    
      	
              6.  

            	
              Confidential Material
      and Employee Obligations.

            


    

     

    
      	
              a.  

            	
              Confidential
      Material.  The Employee shall not, directly or
      indirectly, either during the Term or thereafter, disclose to anyone
      (except in the regular course of the Company's business or as required by
      law), or use in any manner, any information acquired by the Employee
      during his employment by the Company with respect to any clients or
      customers of the Company or any confidential, proprietary or secret aspect
      of the Company's operations or affairs unless such information has become
      public knowledge other than by reason of actions, direct or indirect, of
      the Employee. Information subject to the provisions of this paragraph will
      include, without limitation:

            


    

     

    
      	
              (i)  

            	
              Brokers,
      broker/dealer firms, law firms used to prepare Company and partnership
      registration statements, due diligence


            


    

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 

              	
                investigations,
      or other parties involved with the registration, review, or offering of
      the Company’s securities and drilling
programs;

              


      

       

    

     

    
      	
              (ii)  

            	
              Names,
      addresses, and other information regarding investors in the Company’s
      drilling programs;

            


    

     

    
      	
              (iii)  

            	
              Names,
      addresses and other information regarding investors who participate with
      the Company in the drilling, completion or operation of oil and gas wells
      as joint venture partners, working interest owners, or in any other form
      of ownership;

            


    

     

    
      	
              (iv)  

            	
              Lists
      of or information about personnel seeking employment with or who are
      currently employed by the Company;

            


    

     

    
      	
              (v)  

            	
              Maps,
      logs, drilling reports and any other information regarding past, planned
      or possible future leasing, drilling, acquisition, or other operations
      that the Company has completed or is investigating or has investigated for
      possible inclusion in future
activities;

            


    

     

    
      	
              (vi)  

            	
              Any
      other information or contacts relating to the Company's drilling,
      development, fund-raising, purchasing, engineering, marketing,
      merchandising, and selling
activities.

            


    

     

    
      	
              b.  

            	
              Return of Confidential
      Material.  All maps, logs, data, drawings and other
      records and written and digital material prepared or compiled by the
      Employee or furnished to the Employee during the Term will be the sole and
      exclusive property of the Company and none of such material may be
      retained by the Employee upon termination of his
      employment.  The aforementioned materials include materials on
      the Employee’s personal computer.  Employee shall return to the
      Company or destroy all such materials on or prior to the Termination
      Date.  Notwithstanding the foregoing, the Employee will be under
      no obligation to return or destroy public
  information.

            


    

     

    
      	
              c.  

            	
              Non-Compete.  The
      Employee shall not directly, either during the Term or for a period of one
      (1) year thereafter, engage in any Competitive Business in West Virginia,
      Pennsylvania, Colorado, Utah, Wyoming, North Dakota, Michigan, Ohio,
      Kentucky, Texas and Tennessee; provided, however, that the ownership of
      less than five percent (5%) of the outstanding capital stock of a
      corporation whose shares are traded on a national securities exchange or
      on the over-the-counter market shall not be deemed engaging any
      Competitive Business.  "Competitive Business" shall mean the oil
      and natural gas industry, including oil and gas leasing, drilling, and
      other operations, syndication and marketing of partnership or other
      investments related to oil and natural gas operations, or any other
      business activities that are the same as or similar to the Company’s
      business operations as its business exists on the Effective Date or on the
      Termination Date.

            


    

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              d.  

            	
              No
      Solicitation.  The Employee shall not, directly or
      indirectly, either during the Term or for a period of one (1) year
      thereafter (i) solicit,
      directly or indirectly, the services of any person who was a full-time
      employee of the Company, its subsidiaries, divisions, or affiliates, or
      otherwise induce such employee to terminate or reduce employment, or (ii) solicit
      the business of any person who was a client or customer of the Company,
      its subsidiaries, divisions, or affiliates, in each case at any time
      during the last year of the Term. For purposes of this Agreement, the term
      “person” includes natural persons, corporations, business trusts,
      associations, sole proprietorships, unincorporated organizations,
      partnerships, joint ventures, limited liability companies or partnerships,
      and governments, or any agencies, instrumentalities, or political
      subdivisions thereof.

            


    

     

    
      	
              e.  

            	
              Remedies.  Employee
      acknowledges and agrees that the Company's remedy at law for a breach or a
      threatened breach of the provisions herein would be inadequate, and in
      recognition of this fact, in the event of a breach or threatened breach by
      Employee of any of the provisions of this Agreement, it is agreed that the
      Company will be entitled to equitable relief in the form of specific
      performance, a temporary restraining order, a temporary or permanent
      injunction or any other equitable remedy which may then be available,
      without posting bond or other security.  Employee acknowledges
      that the granting of a temporary injunction, a temporary restraining order
      or other permanent injunction merely prohibiting Employee from engaging in
      any business activities would not be an adequate remedy upon breach or
      threatened breach of this Agreement, and consequently agrees upon any such
      breach or threatened breach to the granting of injunctive relief
      prohibiting Employee from engaging in any activities prohibited by this
      Agreement.  No remedy herein conferred is intended to be
      exclusive of any other remedy, and each and every such remedy will be
      cumulative and will be in addition to any other remedy given hereunder now
      or hereinafter existing at law or in equity or by statute or
      otherwise.

            


    

     

    
      	
              7.  

            	
              Termination of the
      Agreement

            


    

     

    
      	
              a.  

            	
              Notice of
      Termination.  Either the Employee or the Board may
      terminate this Agreement at any time and in his or their sole discretion
      upon no less than thirty (30) days written Notice of Termination to the
      other party.  “Notice of Termination” means a written notice
      which shall indicate the specified termination provision in this Agreement
      relied upon (Section 7.c., Section 7.d., Section 7.e., Section 7.f,
      Section 7.g. or Section 7.h.) and shall set forth in reasonable detail the
      facts and circumstances claimed to provide a basis for termination of
      Employee's employment under the provision so indicated; provided, however,
      no such purported termination will be effective without such Notice of
      Termination; provided further, however, any purported termination by the
      Company or by Employee

            


    

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 

              	
                must
      be communicated by a Notice of Termination to the other party hereto in
      accordance with  Section 9 (“Notices”) of this
      Agreement.

              


      

       

    

    
      	
              b.  

            	
              Termination
      Date.  The “Termination Date” means the date specified in
      the Notice of Termination. The Termination Date may not be less than
      thirty (30) days after the date such Notice of Termination is
      given.

            


    

     

    
      	
              c.  

            	
              Termination by the
      Company for Just Cause.

            


    

     

    
      	
              (i)  

            	
              The
      Company may terminate the Employee for “Just Cause” (as defined in Section
      7.c.ii), provided that the Company
shall:

            


    

     

    
      	
              (A)  

            	
              Give
      the Employee Notice of Termination as specified in Section 7.a.,
      and

            


    

     

    
      	
              (B)  

            	
              Pay
      the Employee, within thirty (30) days after his Termination Date, his Base
      Salary through the Termination Date at the rate in effect at the time the
      Notice of Termination is given plus any Bonus(only for periods completed
      and accrued, but not paid), incentive, deferred, or other compensation,
      and provide any other benefits, which have been earned or become payable
      as of the Termination Date, pursuant to the terms of this or any other
      agreement, or compensation or benefit plan, but which have not yet been
      paid or provided.

            


    

     

    
      	
              (ii)  

            	
              For
      purposes of this Agreement “Just Cause” means a good faith determination
      of the Board that the Employee:

            


    

     

    
      	
              (A)  

            	
              Failed
      to substantially perform his duties with the Company (other than a failure
      resulting from his incapacity due to physical or mental illness) after a
      written demand for substantial performance has been delivered to him by
      the Board, which demand specifically identifies the manner in which the
      Board believes he has not substantially performed his duties, and the
      Employee has failed to cure such deficiency within thirty (30) days of the
      receipt of such notice;

            


    

     

    
      	
              (B)  

            	
              Has
      engaged in conduct the consequences of which are materially adverse to the
      Company, monetarily or otherwise;
or

            


    

     

    
      	
              (C)  

            	
              Has
      pleaded guilty to or been convicted of a felony or a crime involving moral
      turpitude or dishonesty;

            


    

     

    
      	
              (D)  

            	
              Has
      engaged in conduct which demonstrates Employee’s gross unfitness to serve
      the Company as Chief Financial 

            


    

     

    
       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                Officer,
      President or Chief Executive Officer, as the case may be;
    or

              


      

       

    

    
      	
              (E)  

            	
              Has
      materially breached the terms of this
Agreement.

            


    

     

    
      	
              (iii)  

            	
              (A)No
      act, or failure to act, on the Employee's part shall be grounds for
      termination with Just Cause unless he has acted or failed to act with an
      absence of good faith or without a reasonable belief that his action or
      failure to act was in or at least not opposed to the best interests of the
      Company.

            


    

     

    
      	
               
      

            	
              (B)

            	
              The
      Employee will not be deemed to have been terminated with Just Cause under
      (ii)(B), (C), (D) or (E), unless there will have been delivered to the
      Employee a letter setting forth the reasons for the Company’s termination
      of the Employee for Just Cause.

            


    

     

    
      	
              d.  

            	
              Termination by the
      Company Without Just Cause.  If the Company terminates
      this Agreement prior to its expiration (including extensions as provided
      in Section 1.b.) for any reason other than for Just Cause or the death or
      Disability (as defined in Section 7.e.) of the Employee, the Company
      shall:

            


    

     

    
      	
              (i)  

            	
              Within
      thirty (30) days after the Termination Date, pay to the Employee a lump
      sum severance payment equal to three times the sum of: a) the Employee's
      highest Base Salary during the previous two years of employment
      immediately preceding the Termination Date, plus b) the highest Bonus paid
      or payable to the Employee for a year within the same two year period of
      employment immediately preceding the Termination
  Date,

            


    

     

    
      	
              (ii)  

            	
              Pay
      to the Employee any unpaid expense reimbursement upon presentation by the
      Employee of an accounting of such expenses in accordance with normal
      Company practices, but no later than March 15 of the year following the
      year of termination,

            


    

     

    
      	
              (iii)  

            	
              Immediately
      vest any unvested Company stock options and restricted stock (excluding
      all LTIP shares),

            


    

     

    
      	
              (iv)  

            	
              Pay
      any deferred income or Retirement Compensation (under Section 4.c.) or
      other benefit payments due under this or any other agreements or plans,
      provided such payments shall be made under the schedule originally
      contemplated in the agreement under which they were
    granted,

            


    

     

    
      	
              (v)  

            	
              Make
      any other payments or provide any benefits earned under this or any other
      employment agreement or plan, including the Company’s Long-Term Incentive
      Plan, and

            


    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              (vi)  

            	
              Continue
      coverage of the Employee and any dependents covered at the time of
      termination under the Company’s group health plans at the Company’s cost
      for a period equal to the lesser of (i) 18 months or (ii) such period as
      the Employee is eligible to participate in another employer’s health
      plan.

            


    

     

    
      	
              e.  

            	
              Termination in the
      Event of Death or Disability.  This Agreement will be
      terminated by the Company in the event of the death of Employee and may be
      terminated by the Company in the event of the Disability (as hereinafter
      defined) of the Employee upon proper notification to the Employee (or his
      estate in the event of his death), provided the Company shall pay to the
      Employee (or to the estate of the Employee in the event of termination due
      to the death of the Employee) the compensation and other benefits
      described in Section 4.a. of this Agreement which would have been earned
      for (6) months after the Termination Date and any amounts earned under
      Section 4.b. of this Agreement prorated for the period up to the
      Termination Date.  “Disability” means being eligible to receive
      a disability benefit under the Federal Social Security Act.  All
      amounts payable under this Section 7.e. will be paid in a lump sum as soon
      as practicable, but no later than two and one-half (2-1/2) months
      following the close of the calendar year in which the death or Disability
      occurred.

            


    

     

    
      	
              f.  

            	
              Termination by the
      Employee for Good Reason.

            


    

     

    
      	
              (i)  

            	
              If
      the Employee terminates this Agreement for Good Reason (as defined in
      Section 7.f.ii.), provided that such Employee’s termination of employment
      occurs within ninety days of the Good Reason, the Company
      shall:

            


    

     

    
      	
              (A)  

            	
              Within
      thirty (30) days after the Termination Date, pay to the Employee a lump
      sum severance payment equal to three times the sum of: a) the Employee's
      highest Base Salary during the previous two years of employment
      immediately preceding the Termination Date, plus b) the highest Bonus paid
      or payable to the Employee for a year within the same two year period of
      employment immediately preceding the Termination
  Date.

            


    

     

    
      	
              (B)  

            	
              Pay
      to the Employee any unpaid expense reimbursement upon presentation by the
      Employee of an accounting of such expenses in accordance with normal
      Company practices, but no later than March 15 of the year following the
      year of termination,

            


    

     

    
      	
              (C)  

            	
              Immediately
      vest any unvested Company stock options and restricted stock (excluding
      all LTIP shares),

            


    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              (D)  

            	
              Pay
      any deferred income or Retirement Compensation (under Section 4.c.) or
      other benefit payments due under this or any other agreements or plans,
      provided such payments shall be made under the schedule originally
      contemplated in the agreement under which they were
    granted,

            


    

     

    
      	
              (E)  

            	
              Make
      any other payments or provide any benefits earned under this or any other
      employment agreement or plan, including the Company’s Long-Term Incentive
      Plan, and

            


    

     

    
      	
              (F)  

            	
              Continue
      coverage of the Employee and any dependents covered at the time of
      termination under the Company’s group health plans at the Company’s cost
      for a period equal to the lesser of (i) 18 months or (ii) such period as
      the Employee is eligible to participate in another employer’s health
      plan.

            


    

     

    
      	
              (ii)  

            	
              “Good
      Reason” means the occurrence of any of the following events without
      Employee's prior express written
consent:

            


    

     

    
      	
              (A)  

            	
              A
      material diminution in the Employee’s Base
  Salary;

            


    

     

    
      	
              (B)  

            	
              A
      material diminution in the Employee’s authority, duties, or
      responsibilities;

            


    

     

    
      	
              (C)  

            	
              A
      material diminution in the authority, duties, or responsibilities of the
      supervisor to whom the Employee is required to report, including a
      requirement that the Employee report to a corporate officer or employee
      instead of reporting directly to the board of directors of a corporation
      (or similar governing body with respect to an entity other than a
      corporation);

            


    

     

    
      	
              (D)  

            	
              A
      material diminution in the budget over which the Employee retains
      authority;

            


    

     

    
      	
              (E)  

            	
              A
      material diminution in reward opportunities under the annual Performance
      Bonus of Section 4.b. of this
Agreement;

            


    

     

    
      	
              (F)  

            	
              A
      material change in the geographic location at which the Employee must
      perform the services; or

            


    

     

    
      	
              (G)  

            	
              Any
      other action or inaction that constitutes a material breach by the Company
      of this Agreement.

            


    

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Employee
must provide notice to the Company of the condition described in paragraphs
(A)-(G) of this section within ninety (90) days, upon the notice of which the
Company will have a period of thirty (30) days during which it may remedy the
condition and not be required to pay the amount

     

    
      	
              g.  

            	
              Termination by the
      Employee for other than Good Reason.  The Employee may
      terminate this Agreement for other than Good Reason upon proper
      notification as provided in Section 7.a.  In such event the
      Company shall pay to the Employee:

            


    

     

    
      	
              (i)  

            	
              Within
      thirty (30) days after his Termination Date, in a lump sum, the
      compensation provided in Section 4 at the rate in effect at the time of
      the Notice of Termination.  The Base Salary and Bonus will be
      prorated for the portion of the year that the Employee is employed by the
      Company; provided, however, that if the Employee’s termination occurs
      prior to March 31 of the year the Employee will not be entitled to a
      prorated Bonus for the year;

            


    

     

    
      	
              (ii)  

            	
              Any
      incentive, deferred or other compensation which has been earned or has
      become payable pursuant to the terms of this or any other agreement or
      compensation or benefit plan as of the Termination Date, but which has not
      yet been paid, provided such payments will be made under the schedule
      originally contemplated in the agreement under which they were
      granted;

            


    

     

    
      	
              (iii)  

            	
              Any
      unpaid expense reimbursement upon presentation by the Employee of an
      accounting of such expenses in accordance with normal Company practices
      but not later than March 15 of the year following the year of termination;
      and

            


    

     

    
      	
              (iv)  

            	
              Any
      other payments for benefits earned under this or any other employment
      agreement or plan.

            


    

     

    
      	
              h.  

            	
              Termination by the
      Employee following Change of
Control.

            


    

     

    
      	
              (i)  

            	
              If
      the Employee terminates this Agreement within two years following a Change
      of Control of the Company (as defined in Section 1.c.) the Company
      shall:

            


    

     

    
      	
              (A)  

            	
              Within
      thirty (30) days after the Termination Date, pay to the Employee a lump
      sum severance payment equal to three times the sum of: a) the Employee's
      highest Base Salary during the previous two years of employment
      immediately preceding the Termination Date, plus b) the highest Bonus paid
      or payable to the Employee for a year within the same two year period of
      employment immediately preceding the Termination Date, provided,
      

            


    

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 

              	
                however,
      if the Agreement is terminated before March 15, 2009, the "highest Bonus"
      amount to be used for this provision will be the maximum performance bonus
      in effect for 2008 (180% of the Employee's Base
  Salary).

              


      

       

    

    
      	
              (B)  

            	
              Pay
      to the Employee any unpaid reimbursement upon presentation by the Employee
      of an accounting of such expenses in accordance with normal Company
      practices, but not later than March 15 of the year following the year of
      termination,

            


    

     

    
      	
              (C)  

            	
              Immediately
      vest any unvested Company stock options and restricted stock (excluding
      all LTIP shares),

            


    

     

    
      	
              (D)  

            	
              Pay
      any deferred income or Retirement Compensation (under Section 4.c.) or
      retirement payment or other benefit payments due under this or any other
      agreements or plans, provided such payments will be made under the
      schedule originally contemplated in the agreement under which they were
      granted,

            


    

     

    
      	
              (E)  

            	
              Make
      any other payments or provide any benefits earned under this or any other
      employment agreement or plan, including the Company’s Long-Term Incentive
      Plan, and

            


    

     

    
      	
              (F)  

            	
              Continue
      coverage of the Employee under the Company’s group health plans at the
      Company’s cost for a period equal to the lesser of (i) 18 months or (ii)
      such period as the Employee is receiving COBRA health continuation
      coverage from the Company.

            


    

     

    
      	
              i.  

            	
              Code Section 409A
      Compliance.

            


    

     

    Except
with respect to amounts paid pursuant to a schedule in a plan or arrangement
outside of this Employment Agreement, it is intended that amounts payable under
this Section 7 not be considered non-qualified deferred compensation subject to
Internal Revenue Code Section 409A.  Employee is a Specified Employee
under Internal Revenue Code Section 409A, therefore, to the extent such amounts
are considered non-qualified deferred compensation payable upon a separation
from service under Internal Revenue Code Section 409A, payment of those amounts
so deferred under Internal Revenue Code Section 409A may not be made until at
least six (6) months following the Employee’s separation from service of the
Company (or, if earlier, the date of death of Employee).

     

    
      	
              8.  

            	
              Life
      Insurance.  The Company may, at any time after the
      execution of this Agreement, maintain any outstanding life insurance
      policies and apply for and procure as owner and for its own benefit new
      life insurance on Employee, in such

            


    

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              amounts
      and in such form or forms as the Company may
      determine.  Employee shall, at the request of the Company,
      submit to such medical examinations, supply such information, and execute
      such documents as may be required by the insurance company or companies to
      whom the Company has applied for such insurance.  Employee
      hereby represents that to his knowledge he is in excellent physical and
      mental condition.

            


       

    

     

     

    
      	
              9.  

            	
              Notices. For
      the purposes of this Agreement, notices and all other communications
      provided for in the Agreement shall be in writing and will be deemed to
      have been duly given when personally delivered, by facsimile transmission
      or sent by certified mail, return receipt requested, postage prepaid, or
      by expedited  (overnight) courier with established national
      reputation, shipping prepaid or billed to sender, in either case addressed
      to the respective addresses last given by each party to the
      other  (provided that all notices to the Company must be
      directed to the attention of the Secretary of the Company ) or to such
      other address as either party may have furnished  to the other
      in
      writing  in  accordance  herewith.  All
      notices and communication will be deemed to have been received on the date
      of delivery thereof, or on the second day after deposit thereof with an
      expedited courier service, except that notice of change of address will be
      effective only upon receipt.

            


    

     

    
      
        
          
            
              
                
                  	
                           

                        	 Company
      at:	 
      	
                          Petroleum
      Development Corporation

                        
	 
      	 	 
      	
                          Attention:  Secretary

                        
	 
      	 	 
      	
                          120
      Genesis Boulevard

                        
	 
      	 	 
      	
                          P.O.
      Box 26

                        
	 
      	 	 
      	
                          Bridgeport
      WV 26330

                        
	 
      	 	 
      	 
      
	
                           

                        	 Employee
      at:	 
      	
                          Richard
      McCullough

                        
	 
      	 	 
      	
                          218
      Aaron Smith Drive

                        
	 
      	 	 
      	
                          Bridgeport,
      WV
26330

                        


                

              

            

          

        

      

    

    


    
      	
              10.  

            	
              Successors.
      This Agreement will be binding on the Company and any successor to
      any of its businesses or assets.  Without limiting the effect of
      the prior sentence, the Company shall use its best efforts to require any
      successor or assign (whether direct or indirect, by purchase, merger,
      consolidation or otherwise) to all or substantially all of the business
      and/or assets of the Company to expressly assume and agree to perform this
      Agreement in the same manner and to the same extent that the Company would
      be required to perform it if no such succession or assignment had taken
      place. As used in this Agreement, “Company” means the Company as
      hereinbefore defined and any successor or assign to its business and/or
      assets as aforesaid which assumes and agrees to perform this Agreement or
      which is otherwise obligated under this Agreement by the first sentence of
      this Section, entitled Successors, by operation of law or
      otherwise.

            


    

     

    
      	
              11.  

            	
              Binding
      Effect.  This Agreement will inure to the benefit of and
      be enforceable by Employee's personal and legal representatives,
      executors, administrators, successors, heirs, distributees, devisees and
      legatees.  If Employee should die


            


    

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              while
      any amounts would still be payable to him hereunder if he had continued to
      live, all such amounts, unless otherwise provided herein, will be paid in
      accordance with the terms of this Agreement to Employee's
      estate.

            


       

    

    
      	
              12.  

            	
              Integration,
      Modification and Waiver.  This Agreement constitutes the
      sole employment agreement between the parties, and any prior employment
      agreement, written or oral, is terminated.  No provision of this
      Agreement may be modified, waived or discharged unless such waiver,
      modification or discharge is agreed to in writing and signed by Employee
      and such officer of the Company as may be specifically designated by the
      Board.  No waiver by either party hereto at any time of any
      breach by the other party hereto of, or compliance with, any condition or
      provision of this Agreement to be performed by such other party will be
      deemed a waiver of similar or dissimilar provisions or conditions at the
      same or at any prior or subsequent
time.

            


    

     

    
      	
              13.  

            	
              Headings.  Headings
      used in this Agreement are for convenience only and will not be used to
      interpret or construe its
provisions.

            


    

     

    
      	
              14.  

            	
              Waiver of
      Breach.  The waiver of either the Company or Employee of
      a breach of any provision of this Agreement will not operate or be
      construed as a waiver of any subsequent breach by either the Company or
      Employee.

            


    

     

    
      	
              15.  

            	
              Amendments.  No
      amendments or variations of the terms and conditions of this Agreement
      will be valid unless the same is in writing and signed by all of the
      parties hereto.

            


    

     

    
      	
              16.  

            	
              Survival of
      Obligations.  The provisions of Section 6 of this
      Agreement will continue to be binding upon the Employee and Company in
      accordance with their terms, notwithstanding the termination of the
      Employee’s employment with the Company for any reason or the expiration of
      this Agreement.

            


    

     

    
      	
              17.  

            	
              Severability.  The
      invalidity or unenforceability of any provision of this Agreement, whether
      in whole or in part, shall not in any way affect the validity and/or
      enforceability of any other provision contained herein.  Any
      invalid or unenforceable provision shall be deemed severable to the extent
      of any such invalidity or unenforceability.  It is expressly
      understood and agreed that while the Company and Employee consider the
      restrictions contained in this Agreement reasonable for the purpose of
      preserving for the Company the good will, other proprietary rights and
      intangible business value of the Company, if a final judicial
      determination is made by a court having jurisdiction that the time or
      territory or any other restriction contained in this Agreement is an
      unreasonable or otherwise unenforceable restriction against Employee, the
      provisions of such clause will not be rendered void but will be deemed
      amended to apply as to maximum time and territory and to such other extent
      as such court may judicially determine or indicate to be
      reasonable.

            


    

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      	
              18.  

            	
              Governing
      Law.  This Agreement will be construed and enforced
      pursuant to the laws of the State of West Virginia giving effect to its
      conflict of laws.

            


    

     

    
      	
              19.  

            	
              Arbitration.  Any
      controversy or claim arising out of or relating to this Agreement or any
      transactions provided for herein, or the breach thereof, other than a
      claim for injunctive relief, will be settled by arbitration in accordance
      with the commercial Arbitration Rules of the American Arbitration
      Association (the “Rules”) in effect at the time demand for arbitration is
      made by any party.  The evidentiary and procedural rules in such
      proceedings will be kept to the minimum level of formality that is
      consistent with the Rules. The Company shall name one arbitrator, Employee
      shall name a second and the two arbitrators so chosen shall name a
      neutral, third arbitrator, who will serve as the sole arbitrator of the
      controversy or claim.  The third arbitrator must be experienced
      in the matters in dispute.  If the third and sole arbitrator is
      not agreed upon, the American Arbitration Association will name him or
      her.  Arbitration will occur in Bridgeport, West Virginia, or
      such other location agreed to by the Company and Employee.  The
      award made by the third arbitrator will be final and binding, and judgment
      may be entered in any court of law having competent jurisdiction. The
      award is subject to confirmation, modification, correction, or vacation
      only as explicitly provided in Title 9 of the United States
      Code.  The prevailing party will be entitled to an award of pre-
      and post-award interest as well as reasonable attorneys' fees incurred in
      connection with the arbitration and any judicial proceedings related
      thereto.

            


    

     

    
      	
              20.  

            	
              Executive Officer
      Status.  Employee acknowledges that he may be deemed to
      be an “executive officer” of the Company for purposes of the Securities
      Act of 1933, as amended (the “1933 Act”), and the Securities Exchange Act
      of 1934, as amended (the “1934 Act”) and, if so, he shall comply in all
      respects with all the rules and regulations under the 1933 Act and the
      1934 Act applicable to him in a timely and non-delinquent manner. In order
      to assist the Company in complying with its obligations under the 1933 Act
      and 1934 Act, Employee shall provide to the Company such information about
      Employee as the Company shall reasonably request including, but not
      limited to, information relating to personal history and
      stockholdings.  Employee shall immediately report to the General
      Counsel of the Company or other designated officer of the Company all
      changes in beneficial ownership of any shares of the Company Common Stock
      deemed to be beneficially owned by Employee and/or any members of
      Employee's immediate family.

            


    

     

    
      	
              21.  

            	
              Pronouns.  All
      pronouns and any variations thereof will be deemed to refer to the
      masculine, feminine, neuter, singular, or plural, as the identity of the
      person or entity may require. As used in this Agreement: (1) words of the
      masculine gender shall mean and include corresponding neuter words or
      words of the feminine gender, (2) words in the singular shall mean and
      include the plural and vice versa, and (3) the word “may” gives sole
      discretion without any obligation to take any
  action.

            


    

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
      	
              22.  

            	
              Counterparts.   This
      Agreement may be executed in one or more counterparts, each of which shall
      be deemed to be an original, but all of which together will constitute but
      one document.

            


    

     

    
      	
              23.  

            	
              Exhibits.  Any
      Exhibits attached hereto are incorporated herein by reference and are an
      integral part of this Agreement.

            


    

     

    IN
WITNESS WHEREOF, the Company and the Employee have duly executed this Employment
Agreement as of the date first above written.

     

     

    
      
        
          
            	 	 
      	 
      	 
      	 
      	 
      
	 	
                    Company

                  	 
      	 
      	
                    Executive

                  	 
      
	 	 
      	
                    Petroleum
      Development Corporation

                  	 
      	 
      	 
      
	 	 
      	 
      	 
      	 
      	 
      
	 	 
      	 
      	 
      	 
      	 
      
	 	 
      	 
      	 
      	 
      	 
      
	 	
                    By:

                  	
                    /s/
      Kimberly Wakim 

                  	 
      	 
      	
                    /s/
      Richard W. McCullough

                  
	 	 
      	
                    Kimberly
      Wakim

                  	 
      	 
      	
                    Richard
      W. McCullough

                  
	 	
                    Position:

                  	
                    Chair
      of the

                  	 
      	 
      	 
      
	 	 
      	
                    Compensation
      Committee

                  	 
      	 
      	 
      


          

        

      

    

    


     

    19